Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[ü] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2016

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from to

Commission file number:

1-6523

Exact name of registrant as specified in its charter:

Bank of America Corporation

State or other jurisdiction of incorporation or organization:

Delaware

IRS Employer Identification No.:

56-0906609

Address of principal executive offices:

Bank of America Corporate Center

100 N. Tryon Street

Charlotte, North Carolina 28255

Registrant's telephone number, including area code:

(704) 386-5681

Former name, former address and former fiscal year, if changed since last report:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ü No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ü No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act (check one).



Large accelerated filer ü	Accelerated filer	Non-accelerated filer (do not check if a smaller reporting company)	Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).

Yes No ü

On October 31, 2016, there were 10,105,046,654 shares of Bank of America Corporation Common Stock outstanding.



Bank of America Corporation
September 30, 2016
Form 10-Q

INDEX		Page

Part I. Financial Information

	Item 1. Financial Statements
	Consolidated Statement of Income	94
	Consolidated Statement of Comprehensive Income	95
	Consolidated Balance Sheet	96
	Consolidated Statement of Changes in Shareholders' Equity	98
	Consolidated Statement of Cash Flows	99
	Notes to Consolidated Financial Statements	100
	1 - Summary of Significant Accounting Principles	100
	2 - Derivatives	103
	3 - Securities	114
	4 - Outstanding Loans and Leases	119
	5 - Allowance for Credit Losses	138
	6 - Securitizations and Other Variable Interest Entities	140
	7 - Representations and Warranties Obligations and Corporate Guarantees	147
	8 - Goodwill and Intangible Assets	150
	9 - Federal Funds Sold or Purchased, Securities Financing Agreements and Short-term Borrowings	151
	10 - Commitments and Contingencies	154
	11 - Shareholders' Equity	158
	12 - Accumulated Other Comprehensive Income (Loss)	159
	13 - Earnings Per Common Share	161
	14 - Fair Value Measurements	162
	15 - Fair Value Option	177
	16 - Fair Value of Financial Instruments	180
	17 - Mortgage Servicing Rights	181
	18 - Business Segment Information	182
	Glossary	185

	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	3
	Executive Summary	4
	Recent Events	5
	Financial Highlights	6
	Supplemental Financial Data	13
	Business Segment Operations	17
	Consumer Banking	18
	Global Wealth & Investment Management	25
	Global Banking	29
	Global Markets	33
	All Other	36
	Off-Balance Sheet Arrangements and Contractual Obligations	37
	Managing Risk	39
	Capital Management	39
	Liquidity Risk	47
	Credit Risk Management	52
	Consumer Portfolio Credit Risk Management	52
	Commercial Portfolio Credit Risk Management	67
	Non-U.S. Portfolio	78



	Provision for Credit Losses	79
	Allowance for Credit Losses	80
	Market Risk Management	84
	Trading Risk Management	84
	Interest Rate Risk Management for the Banking Book	89
	Mortgage Banking Risk Management	92
	Complex Accounting Estimates	92

	Item 3. Quantitative and Qualitative Disclosures about Market Risk	93

	Item 4. Controls and Procedures	93


Part II. Other Information		188

	Item 1. Legal Proceedings	188

	Item 1A. Risk Factors	188

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	188

	Item 6. Exhibits	189

	Signature	190

	Index to Exhibits	191

Table of Contents

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report on Form 10-Q, the documents that it incorporates by reference and the documents into which it may be incorporated by reference may contain, and from time to time Bank of America Corporation (collectively with certain of its subsidiaries and affiliates, the Corporation) and its management may make certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as "anticipates," "targets," "expects," "hopes," "estimates," "intends," "plans," "goals," "believes," "continue" and other similar expressions or future or conditional verbs such as "will," "may," "might," "should," "would" and "could." Forward-looking statements represent the Corporation's current expectations, plans or forecasts of its future results, revenues, expenses, efficiency ratio, capital measures, and future business and economic conditions more generally, and other future matters. These statements are not guarantees of future results or performance and involve certain known and unknown risks, uncertainties and assumptions that are difficult to predict and are often beyond the Corporation's control. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements.

You should not place undue reliance on any forward-looking statement and should consider the following uncertainties and risks, as well as the risks and uncertainties more fully discussed elsewhere in this report, including under Item 1A. Risk Factors of the Corporation's 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 seeking to distinguish certain aspects of the New York Court of Appeals' ACE Securities Corp v. DB Structured Products, Inc. (ACE) decision or to assert other claims seeking to avoid the impact of the ACE decision; the possibility that the Corporation could face increased servicing, securities, fraud, indemnity, contribution or other claims from one or more counterparties, including trustees, purchasers of loans, underwriters, issuers, other parties involved in securitizations, monolines or private-label and other investors; the possibility that future representations and warranties losses may occur in excess of the Corporation's recorded liability and estimated range of possible loss for its representations and warranties exposures; potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation and regulatory proceedings, including the possibility that amounts may be in excess of the Corporation's recorded liability and estimated range of possible loss for litigation exposures; the possible outcome of LIBOR, other reference rate, financial instrument and foreign exchange inquiries, investigations and litigation; uncertainties about the financial stability and growth rates of non-U.S. jurisdictions, the risk that those jurisdictions may face difficulties servicing their sovereign debt, and related stresses on financial markets, currencies and trade, and the Corporation's exposures to such risks, including direct, indirect and operational; the impact of U.S. and global interest rates (including negative or continued low interest rates), currency exchange rates and economic conditions; the possibility that future credit losses may be higher than currently expected due to changes in economic assumptions, customer behavior and other uncertainties; the impact on the Corporation's business, financial condition and results of operations of a potential higher interest rate environment; the impact on the Corporation's business, financial condition and results of operations from a protracted period of lower oil prices or ongoing volatility with respect to oil prices; our ability to achieve our expense targets; adverse changes to the Corporation's credit ratings from the major credit rating agencies; estimates of the fair value of certain of the Corporation's assets and liabilities; uncertainty regarding the content, timing and impact of regulatory capital and liquidity requirements, including the potential adoption of total loss-absorbing capacity requirements; the potential for payment protection insurance exposure to increase as a result of Financial Conduct Authority actions; the impact of Federal Reserve actions on the Corporation's capital plans; the possible impact of the Corporation's failure to remediate deficiencies and shortcomings identified by banking regulators in the Corporation's Recovery and Resolution plans; the impact of implementation and compliance with U.S. and international laws, regulations and regulatory interpretations, including, but not limited to, recovery and resolution planning requirements, FDIC assessments, the Volcker Rule, fiduciary standards and derivatives regulations; a failure in or breach of the Corporation's operational or security systems or infrastructure, or those of third parties, including as a result of cyber attacks; the impact on the Corporation's business, financial condition and results of operations from the potential exit of the United Kingdom from the European Union; and other similar matters.

Forward-looking statements speak only as of the date they are made, and the Corporation undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.

Notes to the Consolidated Financial Statements referred to in the Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) are incorporated by reference into the MD&A. Certain prior-period amounts have been reclassified to conform to current period presentation. Throughout the MD&A, the Corporation uses certain acronyms and abbreviations which are defined in the Glossary.

The Corporation's Annual Report on Form 10-K for the year ended December 31, 2015 as supplemented by a Current Report on Form 8-K filed on August 1, 2016 to reflect reclassified business segment information is referred to herein as the 2015 Annual Report on Form 10-K.

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Executive Summary

Business Overview

The Corporation is a Delaware corporation, a bank holding company (BHC) 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 Charlotte, North Carolina. Through our banking and various nonbank subsidiaries throughout the U.S. and in international markets, we provide a diversified range of banking and nonbank financial services and products through four business segments: Consumer Banking, Global Wealth & Investment Management (GWIM), Global Banking and Global Markets, with the remaining operations recorded in All Other. We operate our banking activities primarily under the Bank of America, National Association (Bank of America, N.A. or BANA) charter. At September 30, 2016, the Corporation had approximately $2.2 trillion in assets and approximately 209,000 full-time equivalent employees.

At September 30, 2016, we operated in all 50 states, the District of Columbia, the U.S. Virgin Islands, Puerto Rico and more than 35 countries. Our retail banking footprint covers approximately 80 percent of the U.S. population, and we serve approximately 47 million consumer and small business relationships with approximately 4,600 retail financial centers, approximately 16,000 ATMs, and leading online (www.bankofamerica.com) and mobile banking platforms with approximately 34 million active accounts and more than 21 million mobile active users. We offer industry-leading support to approximately three million small business owners. Our wealth management businesses, with client balances of approximately $2.5 trillion, provide tailored solutions to meet client needs through a full set of investment management, brokerage, banking, trust and retirement products. We are a global leader in corporate and investment banking and trading across a broad range of asset classes, serving corporations, governments, institutions and individuals around the world.

Third-Quarter 2016 Economic and Business Environment

In the third quarter of 2016, the macroeconomic environment in the U.S. was mixed. Continued strengthening in the labor market and a rebound in gross domestic product (GDP) growth were offset by continued weakness in certain sectors. The unemployment rate remained slightly below five percent, close to what is generally regarded as the natural rate of unemployment. However, retail sales and industrial production declined. Manufacturing output was weak, and businesses remained reluctant to invest in equipment and software. The economic pick-up during the quarter stemmed from continued moderate growth in domestic demand, largely reflecting consumption gains, along with a rebound in exports and signs that businesses may have passed the peak of their inventory reductions. Overall, these were minimal changes in the U.S. macroeconomic environment in comparison to the prior quarter.

Oil prices were generally stable over the quarter. Core inflation maintained the momentum gained early in the year, but remained below the Board of Governors of the Federal Reserve System's (Federal Reserve) longer-term annual target of two percent. Treasury yields fell during the quarter, reaching their lows in mid-July. Corporate spreads narrowed on the perception of an improving U.S. economy and strong international demand due to negative rates in Europe and Japan. U.S. equities rose moderately.

The Federal Open Market Committee (FOMC) cited continued improvement in the labor market and progress toward meeting the requirements for another interest rate hike. However, the low level of inflation and weak spots in the economy kept the FOMC on hold regarding the increase in rates.

Following the U.K.'s Referendum on exiting the European Union (EU) (U.K. Referendum) in June, economic indicators in the U.K. proved resilient despite the risk of negative growth during the third quarter. The unemployment rate in the U.K., for instance, remained below five percent. Economic momentum in the eurozone was sustained despite the U.K. Referendum, with available indicators pointing to moderate expansion in the third quarter. However, political uncertainty remained elevated and continued to impact financial markets. The European Central Bank maintained accommodative conditions, but did not commit to a possible extension of quantitative easing beyond March 2017. Government bond yields remained low, with German 10-year Bund yields remaining in negative territory.

Amid persistently low inflation, the Bank of Japan introduced a new policy focusing on maintaining the 10-year government bond yield near zero percent. In early July, a coup attempt in Turkey increased political instability, although the current government remained in power and financial market reaction outside of Turkey was minimal. The Chinese economy was stable during the quarter, but real estate remained a major concern.

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Recent Events

Change in Accounting Method Related to Certain Debt Securities

Effective July 1, 2016, the Corporation changed its accounting method for the amortization of premiums and accretion of discounts related to certain debt securities under the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 310-20, Nonrefundable fees and other costs, from the prepayment method (also referred to as the retrospective method), to the contractual method. All prior periods presented herein have been restated to conform to current period presentation. Under the applicable bank regulatory rules, we are not required to and, accordingly, will not restate previously-filed capital metrics and ratios. The cumulative impact of the change in accounting method would have resulted in an insignificant pro forma change to our capital metrics and ratios. For additional information, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements.

Capital Management

Our 2016 Comprehensive Capital Analysis and Review (CCAR) capital plan included requests (i) to repurchase $5.0 billion of common stock over four quarters beginning in the third quarter of 2016, (ii) to repurchase common stock to offset the dilution resulting from certain equity-based compensation awards and (iii) to increase the quarterly common stock dividend from $0.05 per share to $0.075 per share. On June 29, 2016, following the Federal Reserve's non-objection to our 2016 CCAR capital plan, the Board of Directors (the Board) authorized the common stock repurchases described above. The common stock repurchase authorization includes both common stock and warrants. During the three months ended September 30, 2016, pursuant to the Board's authorization, we repurchased $1.4 billion of common stock, which includes common stock to offset equity-based compensation awards. On July 27, 2016, the Board declared a quarterly common stock dividend of $0.075 per share, payable on September 23, 2016 to shareholders of record as of September 2, 2016. For additional information, see the Corporation's Current Report on Form 8-K as filed on June 29, 2016.

Selected Financial Data

Table 1 provides selected consolidated financial data for the three and nine months ended September 30, 2016 and 2015, and at September 30, 2016 and December 31, 2015.



Table 1
Selected Financial Data
	Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions, except per share information)	2016			2015			2016			2015
Income statement
Revenue, net of interest expense	$	21,635		$	20,992		$	63,711		$	63,383
Net income	4,955			4,619			13,210			12,552
Diluted earnings per common share	0.41			0.38			1.10			1.03
Dividends paid per common share	0.075			0.05			0.175			0.15
Performance ratios
Return on average assets	0.90		%	0.84		%	0.81		%	0.78		%
Return on average common shareholders' equity	7.27			7.16			6.61			6.67
Return on average tangible common shareholders' equity ⁽¹⁾	10.28			10.40			9.40			9.74
Efficiency ratio	62.31			66.40			65.59			68.98

							September 30 2016			December 31 2015
Balance sheet
Total loans and leases							$	905,008		$	896,983
Total assets							2,195,314			2,144,287
Total deposits							1,232,895			1,197,259
Total common shareholders' equity							244,863			233,903
Total shareholders' equity							270,083			256,176


⁽¹⁾	Return on average tangible common shareholders' equity is a non-GAAP financial measure. For more information and a corresponding reconciliation to GAAP financial measures, see Supplemental Financial Data on page 13.

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Financial Highlights

Net income was $5.0 billion, or $0.41 per diluted share, and $13.2 billion, or $1.10 per diluted share for the three and nine months ended September 30, 2016 compared to $4.6 billion, or $0.38, and $12.6 billion, or $1.03 for the same periods in 2015. The results for the three months ended September 30, 2016 compared to the prior-year period were primarily driven by increased revenue and lower noninterest expense. The results for the nine months ended September 30, 2016 compared to the prior-year period were primarily driven by lower noninterest expense and increased revenue, offset by higher provision for credit losses.

Total assets increased $51.0 billion from December 31, 2015 to $2.2 trillion at September 30, 2016 primarily driven by higher securities borrowed or purchased under agreements to resell due to increased customer financing activity, an increase in debt securities driven by the deployment of deposit inflows, higher trading account assets, and an increase in loans and leases driven by demand for commercial loans outpacing consumer loan sales and run-off. Total liabilities increased $37.1 billion from December 31, 2015 to $1.9 trillion at September 30, 2016 primarily driven by increases in deposits and trading account liabilities, partially offset by a decrease in long-term debt. Shareholders' equity increased $13.9 billion from December 31, 2015 driven by earnings, an increase in accumulated other comprehensive income (OCI) due to a positive net change in the fair value of available-for-sale (AFS) debt securities as a result of lower interest rates, and preferred stock issuances, partially offset by returns of capital to shareholders of $6.9 billion through common and preferred stock dividends and common stock repurchases.



Table 2
Summary Income Statement
	Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	2016		2015		2016		2015
Net interest income	$	10,201	$	9,900	$	30,804	$	29,272
Noninterest income	11,434		11,092		32,907		34,111
Total revenue, net of interest expense	21,635		20,992		63,711		63,383
Provision for credit losses	850		806		2,823		2,351
Noninterest expense	13,481		13,939		41,790		43,724
Income before income taxes	7,304		6,247		19,098		17,308
Income tax expense	2,349		1,628		5,888		4,756
Net income	4,955		4,619		13,210		12,552
Preferred stock dividends	503		441		1,321		1,153
Net income applicable to common shareholders	$	4,452	$	4,178	$	11,889	$	11,399

Per common share information
Earnings	$	0.43	$	0.40	$	1.15	$	1.09
Diluted earnings	0.41		0.38		1.10		1.03

Net Interest Income

Net interest income increased $301 million to $10.2 billion, and $1.5 billion to $30.8 billion for the three and nine months ended September 30, 2016 compared to the same periods in 2015. The net interest yield increased four basis points (bps) to 2.18 percent, and six bps to 2.21 percent. The increases for the three- and nine- month periods were primarily driven by growth in commercial loans, the impact from higher short-end interest rates and increased debt securities balances.

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Noninterest Income



Table 3
Noninterest Income
	Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	2016		2015		2016		2015
Card income	$	1,455	$	1,510	$	4,349	$	4,381
Service charges	1,952		1,898		5,660		5,519
Investment and brokerage services	3,160		3,336		9,543		10,101
Investment banking income	1,458		1,287		4,019		4,300
Trading account profits	2,141		1,616		5,821		5,510
Mortgage banking income	589		407		1,334		2,102
Gains on sales of debt securities	51		437		490		886
Other income	628		601		1,691		1,312
Total noninterest income	$	11,434	$	11,092	$	32,907	$	34,111

Noninterest income increased $342 million to $11.4 billion, and decreased $1.2 billion to $32.9 billion for the three and nine months ended September 30, 2016 compared to the same periods in 2015. The following highlights the significant changes.


•	Investment and brokerage services income decreased $176 million and $558 million driven by lower market valuations and lower transactional revenue, partially offset by the impact of long-term assets under management (AUM) flows.


•	Investment banking income increased $171 million for the three-month period primarily driven by an increase in debt and equity issuance fees, partially offset by lower advisory fees. Investment banking income decreased $281 million for the nine-month period driven by lower equity issuance and advisory fees due to a decline in market fee pools.


•	Trading account profits increased $525 million and $311 million for the three and nine months ended September 30, 2016 compared to the same periods in 2015 primarily due to a stronger performance globally across credit products led by mortgages and continued strength in rates products, partially offset by reduced client activity in equities.

•

Mortgage banking income increased $182 million for the three-month period primarily due to favorable mortgage servicing rights (MSR) results, net of the related hedge performance, partially offset by a decline in production income. Mortgage banking income decreased $768 million for the nine-month period primarily driven by a decline in production revenue, a provision for representations and warranties in the current-year period compared to a benefit in the prior-year period, as well as lower servicing fees, partially offset by favorable MSR results, net of the related hedge performance.

•

Other income increased $27 million and $379 million primarily due to lower debit valuation adjustment (DVA) losses on structured liabilities, as well as improved results from loans and the related hedging activities in the fair value option portfolio, partially offset by lower gains on asset sales. DVA losses related to structured liabilities were $24 million and $77 million for the three and nine months ended September 30, 2016 compared to $54 million and $604 million in the same periods in 2015.

Provision for Credit Losses

The provision for credit losses increased $44 million to $850 million, and $472 million to $2.8 billion for the three and nine months ended September 30, 2016 compared to the same periods in 2015 due to a slower pace of credit quality improvement and, for the nine-month period, an increase in energy sector reserves for the higher risk energy sub-sectors. For more information on the provision for credit losses, see Provision for Credit Losses on page 79. For more information on our energy sector exposure, see Commercial Portfolio Credit Risk Management – Industry Concentrations on page 74.

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Noninterest Expense



Table 4
Noninterest Expense
	Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	2016		2015		2016		2015
Personnel	$	7,704	$	7,829	$	24,278	$	25,333
Occupancy	1,005		1,028		3,069		3,082
Equipment	443		499		1,357		1,511
Marketing	410		445		1,243		1,330
Professional fees	536		673		1,433		1,588
Amortization of intangibles	181		207		554		632
Data processing	685		731		2,240		2,298
Telecommunications	189		210		551		583
Other general operating	2,328		2,317		7,065		7,367
Total noninterest expense	$	13,481	$	13,939	$	41,790	$	43,724

Noninterest expense decreased $458 million to $13.5 billion, and $1.9 billion to $41.8 billion for the three and nine months ended September 30, 2016 compared to the same periods in 2015. Personnel expense decreased $125 million and $1.1 billion as we continue to manage headcount and achieve cost savings. Continued expense management, as well as the expiration of certain advisor retention awards, more than offset the increases in client-facing professionals. Other general operating expense decreased $302 million for the nine-month period compared to the same period in 2015 primarily driven by lower foreclosed properties expense and lower brokerage fees, partially offset by higher FDIC expense.

Income Tax Expense



Table 5
Income Tax Expense
	Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)	2016			2015			2016			2015
Income before income taxes	$	7,304		$	6,247		$	19,098		$	17,308
Income tax expense	2,349			1,628			5,888			4,756
Effective tax rate	32.2		%	26.1		%	30.8		%	27.5		%

The effective tax rates for the three and nine months ended September 30, 2016 were driven by our recurring tax preference benefits, and included the $350 million charge for the impact of the U.K. tax law changes discussed below. The effective tax rates for the three and nine months ended September 30, 2015 were driven by our recurring tax preference benefits, as well as benefits related to certain non-U.S. restructurings.

The U.K. Finance Bill 2016 was enacted on September 15, 2016. The changes include reducing the U.K. corporate income tax rate by one percent to 17 percent, effective April 1, 2020. This reduction favorably affects income tax expense on future U.K. earnings, but required a remeasurement of our U.K. net deferred tax assets using the lower tax rate. Accordingly, upon enactment, we recorded an income tax charge of approximately $350 million. In addition, for banking companies, the portion of U.K. taxable income that can be reduced by existing net operating loss carryforwards in any one taxable year has been reduced from 50 percent to 25 percent retroactive to April 1, 2016.

The majority of our U.K. deferred tax assets, which consist primarily of net operating losses, are expected to be realized by certain subsidiaries over a number of years. Significant changes to management's earnings forecasts for those subsidiaries, such as changes caused by a substantial and prolonged worsening of the condition of Europe's capital markets, changes in applicable laws, further changes in tax laws or changes in the ability of our U.K. subsidiaries to conduct business in the EU, could lead management to reassess our ability to realize the U.K. deferred tax assets.

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Table 6
Selected Quarterly Financial Data
	2016 Quarters									2015 Quarters
(In millions, except per share information)	Third			Second			First			Fourth			Third
Income statement
Net interest income	$	10,201		$	10,118		$	10,485		$	9,686		$	9,900
Noninterest income	11,434			11,168			10,305			9,896			11,092
Total revenue, net of interest expense	21,635			21,286			20,790			19,582			20,992
Provision for credit losses	850			976			997			810			806
Noninterest expense	13,481			13,493			14,816			14,010			13,939
Income before income taxes	7,304			6,817			4,977			4,762			6,247
Income tax expense	2,349			2,034			1,505			1,478			1,628
Net income	4,955			4,783			3,472			3,284			4,619
Net income applicable to common shareholders	4,452			4,422			3,015			2,954			4,178
Average common shares issued and outstanding	10,250			10,328			10,370			10,399			10,444
Average diluted common shares issued and outstanding	11,000			11,059			11,100			11,153			11,197
Performance ratios
Return on average assets	0.90		%	0.88		%	0.64		%	0.60		%	0.84		%
Four quarter trailing return on average assets ⁽¹⁾	0.76			0.74			0.73			0.73			0.74
Return on average common shareholders' equity	7.27			7.40			5.11			4.99			7.16
Return on average tangible common shareholders' equity ⁽²⁾	10.28			10.54			7.33			7.19			10.40
Return on average shareholders' equity	7.33			7.25			5.36			5.07			7.22
Return on average tangible shareholders' equity ⁽²⁾	9.98			9.93			7.40			7.04			10.08
Total ending equity to total ending assets	12.30			12.23			12.03			11.95			11.88
Total average equity to total average assets	12.28			12.13			11.98			11.79			11.70
Dividend payout	17.32			11.73			17.13			17.57			12.48
Per common share data
Earnings	$	0.43		$	0.43		$	0.29		$	0.28		$	0.40
Diluted earnings	0.41			0.41			0.28			0.27			0.38
Dividends paid	0.075			0.05			0.05			0.05			0.05
Book value	24.19			23.71			23.14			22.53			22.40
Tangible book value ⁽²⁾	17.14			16.71			16.19			15.62			15.50
Market price per share of common stock
Closing	$	15.65		$	13.27		$	13.52		$	16.83		$	15.58
High closing	16.19			15.11			16.43			17.95			18.45
Low closing	12.74			12.18			11.16			15.38			15.26
Market capitalization	$	158,438		$	135,577		$	139,427		$	174,700		$	162,457


⁽¹⁾	Calculated as total net income for four consecutive quarters divided by annualized average assets for four consecutive quarters.


⁽²⁾	Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures. For more information on these ratios and for corresponding reconciliations to GAAP financial measures, see Supplemental Financial Data on page 13.


⁽³⁾	For more information on the impact of the purchased credit-impaired (PCI) loan portfolio on asset quality, see Consumer Portfolio Credit Risk Management on page 52.


⁽⁴⁾	Includes the allowance for loan and lease losses and the reserve for unfunded lending commitments.

⁽⁵⁾

Balances and ratios do not include loans accounted for under the fair value option. For additional exclusions from nonperforming loans, leases and foreclosed properties, see Consumer Portfolio Credit Risk Management – Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity on page 65 and corresponding Table 35, and Commercial Portfolio Credit Risk Management – Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity on page 73 and corresponding Table 42.


⁽⁶⁾	Primarily includes amounts allocated to the U.S. credit card and unsecured consumer lending portfolios in Consumer Banking, PCI loans and the non-U.S. credit card portfolio in All Other.


⁽⁷⁾	Net charge-offs exclude $83 million, $82 million, $105 million, $82 million and $148 million of write-offs in the PCI loan portfolio in the third, second and first quarters of 2016 and in the fourth and third quarters of 2015, respectively. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 62.


⁽⁸⁾	Risk-based capital ratios reported under Basel 3 Advanced - Transition beginning in the fourth quarter of 2015. Prior to the fourth quarter of 2015, we were required to report risk-based capital ratios under Basel 3 Standardized - Transition only. For additional information, see Capital Management on page 39.

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Table 6
Selected Quarterly Financial Data (continued)
	2016 Quarters									2015 Quarters
(Dollars in millions)	Third			Second			First			Fourth			Third
Average balance sheet
Total loans and leases	$	900,594		$	899,670		$	892,984		$	886,156		$	877,429
Total assets	2,189,490			2,188,241			2,173,922			2,180,507			2,168,930
Total deposits	1,227,186			1,213,291			1,198,455			1,186,051			1,159,231
Long-term debt	227,269			233,061			233,654			237,384			240,520
Common shareholders' equity	243,679			240,376			237,229			234,800			231,524
Total shareholders' equity	268,899			265,354			260,423			257,074			253,798
Asset quality ⁽³⁾
Allowance for credit losses ⁽⁴⁾	$	12,459		$	12,587		$	12,696		$	12,880		$	13,318
Nonperforming loans, leases and foreclosed properties ⁽⁵⁾	8,737			8,799			9,281			9,836			10,336
Allowance for loan and lease losses as a percentage of total loans and leases outstanding ⁽⁵⁾	1.30		%	1.32		%	1.35		%	1.37		%	1.45		%
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases ⁽⁵⁾	140			142			136			130			129
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases, excluding the PCI loan portfolio ⁽⁵⁾	135			135			129			122			120
Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases ⁽⁶⁾	$	4,068		$	4,087		$	4,138		$	4,518		$	4,682
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases, excluding the allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases ^{(5, 6)}	91		%	93		%	90		%	82		%	81		%
Net charge-offs ⁽⁷⁾	$	888		$	985		$	1,068		$	1,144		$	932
Annualized net charge-offs as a percentage of average loans and leases outstanding ^{(5, 7)}	0.40		%	0.44		%	0.48		%	0.52		%	0.43		%
Annualized net charge-offs as a percentage of average loans and leases outstanding, excluding the PCI loan portfolio ⁽⁵⁾	0.40			0.45			0.49			0.53			0.43
Annualized net charge-offs and PCI write-offs as a percentage of average loans and leases outstanding ⁽⁵⁾	0.43			0.48			0.53			0.55			0.49
Nonperforming loans and leases as a percentage of total loans and leases outstanding ⁽⁵⁾	0.93			0.94			0.99			1.05			1.12
Nonperforming loans, leases and foreclosed properties as a percentage of total loans, leases and foreclosed properties ⁽⁵⁾	0.97			0.98			1.04			1.10			1.18
Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs ⁽⁷⁾	3.31			2.99			2.81			2.70			3.42
Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs, excluding the PCI loan portfolio	3.18			2.85			2.67			2.52			3.18
Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs and PCI write-offs	3.03			2.76			2.56			2.52			2.95
Capital ratios at period end
Risk-based capital:⁽⁸⁾
Common equity tier 1 capital	11.0		%	10.6		%	10.3		%	10.2		%	11.6		%
Tier 1 capital	12.4			12.0			11.5			11.3			12.9
Total capital	14.2			13.9			13.4			13.2			15.8
Tier 1 leverage	9.1			8.9			8.7			8.6			8.5
Tangible equity ⁽²⁾	9.4			9.3			9.1			8.9			8.8
Tangible common equity⁽²⁾	8.2			8.1			7.9			7.8			7.8

For footnotes see page 9.

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Table 7
Selected Year-to-Date Financial Data
	Nine Months Ended September 30
(In millions, except per share information)	2016			2015
Income statement
Net interest income	$	30,804		$	29,272
Noninterest income	32,907			34,111
Total revenue, net of interest expense	63,711			63,383
Provision for credit losses	2,823			2,351
Noninterest expense	41,790			43,724
Income before income taxes	19,098			17,308
Income tax expense	5,888			4,756
Net income	13,210			12,552
Net income applicable to common shareholders	11,889			11,399
Average common shares issued and outstanding	10,313			10,483
Average diluted common shares issued and outstanding	11,047			11,234
Performance ratios
Return on average assets	0.81		%	0.78		%
Return on average common shareholders' equity	6.61			6.67
Return on average tangible common shareholders' equity ⁽¹⁾	9.40			9.74
Return on average shareholders' equity	6.66			6.71
Return on average tangible shareholders' equity ⁽¹⁾	9.13			9.42
Total ending equity to total ending assets	12.30			11.88
Total average equity to total average assets	12.13			11.62
Dividend payout	15.19			13.78
Per common share data
Earnings	$	1.15		$	1.09
Diluted earnings	1.10			1.03
Dividends paid	0.175			0.15
Book value	24.19			22.40
Tangible book value ⁽¹⁾	17.14			15.50
Market price per share of common stock
Closing	$	15.65		$	15.58
High closing	16.43			18.45
Low closing	11.16			15.15
Market capitalization	$	158,438		$	162,457


⁽¹⁾	Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures. For more information on these ratios and for corresponding reconciliations to GAAP financial measures, see Supplemental Financial Data on page 13.


⁽²⁾	For more information on the impact of the PCI loan portfolio on asset quality, see Consumer Portfolio Credit Risk Management on page 52.


⁽³⁾	Includes the allowance for loan and lease losses and the reserve for unfunded lending commitments.

⁽⁴⁾


⁽⁵⁾	Primarily includes amounts allocated to the U.S. credit card and unsecured consumer lending portfolios in Consumer Banking, PCI loans and the non-U.S. credit card portfolio in All Other.


⁽⁶⁾	Net charge-offs exclude $270 million and $726 million of write-offs in the PCI loan portfolio for the nine months ended September 30, 2016 and 2015. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 62.

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Table 7
Selected Year-to-Date Financial Data (continued)
	Nine Months Ended September 30
(Dollars in millions)	2016			2015
Average balance sheet
Total loans and leases	$	897,760		$	873,630
Total assets	2,183,905			2,153,353
Total deposits	1,213,029			1,145,686
Long-term debt	231,313			240,960
Common shareholders' equity	240,440			228,614
Total shareholders' equity	264,907			250,265
Asset quality ⁽²⁾
Allowance for credit losses ⁽³⁾	$	12,459		$	13,318
Nonperforming loans, leases and foreclosed properties ⁽⁴⁾	8,737			10,336
Allowance for loan and lease losses as a percentage of total loans and leases outstanding ⁽⁴⁾	1.30		%	1.45		%
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases ⁽⁴⁾	140			129
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases, excluding the PCI loan portfolio ⁽⁴⁾	135			120
Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases ⁽⁵⁾	$	4,068		$	4,682
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases, excluding the allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases ^{(4, 5)}	91		%	81		%
Net charge-offs ⁽⁶⁾	$	2,941		$	3,194
Annualized net charge-offs as a percentage of average loans and leases outstanding ^{(4, 6)}	0.44		%	0.49		%
Annualized net charge-offs as a percentage of average loans and leases outstanding, excluding the PCI loan portfolio ⁽⁴⁾	0.45			0.50
Annualized net charge-offs and PCI write-offs as a percentage of average loans and leases outstanding ⁽⁴⁾	0.48			0.61
Nonperforming loans and leases as a percentage of total loans and leases outstanding ⁽⁴⁾	0.93			1.12
Nonperforming loans, leases and foreclosed properties as a percentage of total loans, leases and foreclosed properties ⁽⁴⁾	0.97			1.18
Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs ⁽⁶⁾	2.98			2.96
Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs, excluding the PCI loan portfolio	2.86			2.76
Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs and PCI write-offs	2.73			2.41

For footnotes see page 11.

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Supplemental Financial Data

In this Form 10-Q, we present certain non-GAAP financial measures. Non-GAAP financial measures exclude certain items or otherwise include components that differ from the most directly comparable measures calculated in accordance with GAAP. Non-GAAP financial measures are provided as additional useful information to assess our financial condition, results of operations (including period-to-period operating performance) or compliance with prospective regulatory requirements. These non-GAAP financial measures are not intended as a substitute for GAAP financial measures and may not be defined or calculated the same way as non-GAAP financial measures used by other companies.

We view net interest income and related ratios and analyses on an fully taxable-equivalent (FTE) basis, which when presented on a consolidated basis, are non-GAAP financial measures. 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 and a representative state tax rate. In addition, 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 believe that presentation of these items on an FTE basis allows for comparison of amounts from both taxable and tax-exempt sources and is consistent with industry practices.

We may present certain key performance indicators and ratios excluding certain items (e.g., DVA) which result in non-GAAP financial measures. We believe that the presentation of measures that exclude these items are useful because they provide additional information to assess the underlying operational performance and trends of our businesses and to allow better comparison of period-to-period operating performance.

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 certain acquired intangible assets (excluding 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 certain acquired 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 certain acquired 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.

We believe that the use of ratios that utilize tangible equity provides additional useful information because they present measures of those assets that can generate income. Tangible book value per share provides additional useful information about the level of tangible assets in relation to outstanding shares of common stock.

The aforementioned supplemental data and performance measures are presented in Tables 6 and 7.

Table 8 presents certain non-GAAP financial measures and performance measurements on an FTE basis.



Table 8
Supplemental Financial Data
	Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)	2016			2015			2016			2015
Fully taxable-equivalent basis data
Net interest income	$	10,429		$	10,127		$	31,470		$	29,936
Total revenue, net of interest expense	21,863			21,219			64,377			64,047
Net interest yield	2.23		%	2.19		%	2.26		%	2.20		%
Efficiency ratio	61.66			65.70			64.91			68.27

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Tables 9 and 10 provide reconciliations of these non-GAAP financial measures to GAAP financial measures.



Table 9
Quarterly and Year-to-Date Supplemental Financial Data and Reconciliations to GAAP Financial Measures
	Three Months Ended September 30
	2016						2015
(Dollars in millions)	As Reported		Fully taxable-equivalent adjustment		Fully taxable-equivalent basis		As Reported		Fully taxable-equivalent adjustment		Fully taxable-equivalent basis
Net interest income	$	10,201	$	228	$	10,429	$	9,900	$	227	$	10,127
Total revenue, net of interest expense	21,635		228		21,863		20,992		227		21,219
Income tax expense	2,349		228		2,577		1,628		227		1,855

	Nine Months Ended September 30
	2016						2015
Net interest income	$	30,804	$	666	$	31,470	$	29,272	$	664	$	29,936
Total revenue, net of interest expense	63,711		666		64,377		63,383		664		64,047
Income tax expense	5,888		666		6,554		4,756		664		5,420



Table 10
Period-end and Average Supplemental Financial Data and Reconciliations to GAAP Financial Measures
							Average
	Period-end						Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)	September 30 2016			December 31 2015			2016			2015			2016			2015
Common shareholders' equity	$	244,863		$	233,903		$	243,679		$	231,524		$	240,440		$	228,614
Goodwill	(69,744		)	(69,761		)	(69,744		)	(69,774		)	(69,752		)	(69,775		)
Intangible assets (excluding MSRs)	(3,168		)	(3,768		)	(3,276		)	(4,099		)	(3,480		)	(4,307		)
Related deferred tax liabilities	1,588			1,716			1,628			1,811			1,666			1,885
Tangible common shareholders' equity	$	173,539		$	162,090		$	172,287		$	159,462		$	168,874		$	156,417

Shareholders' equity	$	270,083		$	256,176		$	268,899		$	253,798		$	264,907		$	250,265
Goodwill	(69,744		)	(69,761		)	(69,744		)	(69,774		)	(69,752		)	(69,775		)
Intangible assets (excluding MSRs)	(3,168		)	(3,768		)	(3,276		)	(4,099		)	(3,480		)	(4,307		)
Related deferred tax liabilities	1,588			1,716			1,628			1,811			1,666			1,885
Tangible shareholders' equity	$	198,759		$	184,363		$	197,507		$	181,736		$	193,341		$	178,068

Total assets	$	2,195,314		$	2,144,287
Goodwill	(69,744		)	(69,761		)
Intangible assets (excluding MSRs)	(3,168		)	(3,768		)
Related deferred tax liabilities	1,588			1,716
Tangible assets	$	2,123,990		$	2,072,474

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Table 11
Quarterly Average Balances and Interest Rates – FTE Basis
	Third Quarter 2016						Third Quarter 2015
(Dollars in millions)	Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate
Earning assets
Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks	$	133,866	$	148	0.44	%	$	145,174	$	96	0.26	%
Time deposits placed and other short-term investments	9,336		34		1.45		11,503		38		1.32
Federal funds sold and securities borrowed or purchased under agreements to resell	214,254		267		0.50		210,127		275		0.52
Trading account assets	128,879		1,111		3.43		140,484		1,170		3.31
Debt securities	423,182		2,169		2.07		394,265		2,282		2.32
Loans and leases ⁽¹⁾:
Residential mortgage	188,234		1,612		3.42		193,791		1,690		3.49
Home equity	70,603		681		3.84		79,715		730		3.64
U.S. credit card	88,210		2,061		9.30		88,201		2,033		9.15
Non-U.S. credit card	9,256		231		9.94		10,244		267		10.34
Direct/Indirect consumer ⁽²⁾	92,870		585		2.51		85,975		515		2.38
Other consumer ⁽³⁾	2,358		18		2.94		1,980		15		3.01
Total consumer	451,531		5,188		4.58		459,906		5,250		4.54
U.S. commercial	276,833		2,040		2.93		251,908		1,744		2.75
Commercial real estate ⁽⁴⁾	57,606		452		3.12		53,605		384		2.84
Commercial lease financing	21,194		153		2.88		20,013		153		3.07
Non-U.S. commercial	93,430		599		2.55		91,997		514		2.22
Total commercial	449,063		3,244		2.87		417,523		2,795		2.66
Total loans and leases	900,594		8,432		3.73		877,429		8,045		3.65
Other earning assets	59,951		677		4.50		62,848		717		4.52
Total earning assets⁽⁵⁾	1,870,062		12,838		2.73		1,841,830		12,623		2.73
Cash and due from banks	27,361						27,730
Other assets, less allowance for loan and lease losses	292,067						299,370
Total assets	$	2,189,490					$	2,168,930
Interest-bearing liabilities
U.S. interest-bearing deposits:
Savings	$	49,885	$	2	0.01	%	$	46,297	$	2	0.02	%
NOW and money market deposit accounts	592,907		73		0.05		545,741		67		0.05
Consumer CDs and IRAs	48,695		33		0.27		53,174		38		0.29
Negotiable CDs, public funds and other deposits	32,023		43		0.54		30,631		26		0.33
Total U.S. interest-bearing deposits	723,510		151		0.08		675,843		133		0.08
Non-U.S. interest-bearing deposits:
Banks located in non-U.S. countries	4,294		9		0.87		4,196		7		0.71
Governments and official institutions	1,391		3		0.61		1,654		1		0.33
Time, savings and other	59,340		103		0.70		53,793		73		0.53
Total non-U.S. interest-bearing deposits	65,025		115		0.71		59,643		81		0.54
Total interest-bearing deposits	788,535		266		0.13		735,486		214		0.12
Federal funds purchased, securities loaned or sold under agreements to repurchase and short-term borrowings	207,634		569		1.09		257,323		597		0.92
Trading account liabilities	73,452		244		1.32		77,443		342		1.75
Long-term debt	227,269		1,330		2.33		240,520		1,343		2.22
Total interest-bearing liabilities ⁽⁵⁾	1,296,890		2,409		0.74		1,310,772		2,496		0.76
Noninterest-bearing sources:
Noninterest-bearing deposits	438,651						423,745
Other liabilities	185,050						180,615
Shareholders' equity	268,899						253,798
Total liabilities and shareholders' equity	$	2,189,490					$	2,168,930
Net interest spread					1.99	%					1.97	%
Impact of noninterest-bearing sources					0.24						0.22
Net interest income/yield on earning assets			$	10,429	2.23	%			$	10,127	2.19	%


⁽¹⁾	Nonperforming loans are included in the respective average loan balances. Income on these nonperforming loans is generally recognized on a cost recovery basis. PCI loans were recorded at fair value upon acquisition and accrete interest income over the estimated life of the loan.


⁽²⁾	Includes non-U.S. consumer loans of $3.2 billion and $4.0 billion for the three months ended September 30, 2016 and 2015.


⁽³⁾	Includes consumer finance loans of $501 million and $605 million, consumer leases of $1.7 billion and $1.2 billion, and consumer overdrafts of $187 million and $177 million for the three months ended September 30, 2016 and 2015.


⁽⁴⁾	Includes U.S. commercial real estate loans of $54.3 billion and $49.8 billion, and non-U.S. commercial real estate loans of $3.3 billion and $3.8 billion for the three months ended September 30, 2016 and 2015.

⁽⁵⁾

Interest income includes the impact of interest rate risk management contracts, which decreased interest income on the underlying assets by $64 million and $8 million for the three months ended September 30, 2016 and 2015. Interest expense includes the impact of interest rate risk management contracts, which decreased interest expense on the underlying liabilities by $560 million and $590 million for the three months ended September 30, 2016 and 2015. For additional information, see Interest Rate Risk Management for the Banking Book on page 89.

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Table 12
Year-to-Date Average Balances and Interest Rates – FTE Basis
	Nine Months Ended September 30
	2016						2015
(Dollars in millions)	Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate
Earning assets
Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks	$	135,910	$	460	0.45	%	$	132,445	$	261	0.26	%
Time deposits placed and other short-term investments	8,784		101		1.54		9,366		105		1.50
Federal funds sold and securities borrowed or purchased under agreements to resell	215,476		803		0.50		212,781		774		0.49
Trading account assets	130,785		3,432		3.50		138,861		3,406		3.28
Debt securities	414,115		6,990		2.27		387,988		6,763		2.34
Loans and leases ⁽¹⁾:
Residential mortgage	187,325		4,867		3.46		205,315		5,323		3.46
Home equity	73,015		2,095		3.83		82,404		2,269		3.68
U.S. credit card	87,362		6,065		9.27		88,117		6,040		9.17
Non-U.S. credit card	9,687		734		10.12		10,087		793		10.51
Direct/Indirect consumer ⁽²⁾	91,291		1,698		2.48		83,481		1,510		2.42
Other consumer ⁽³⁾	2,240		50		2.99		1,904		45		3.14
Total consumer	450,920		15,509		4.59		471,308		15,980		4.53
U.S. commercial	274,669		5,982		2.91		243,849		5,093		2.79
Commercial real estate ⁽⁴⁾	57,550		1,320		3.06		50,792		1,113		2.93
Commercial lease financing	21,049		482		3.05		19,592		473		3.22
Non-U.S. commercial	93,572		1,748		2.50		88,089		1,478		2.24
Total commercial	446,840		9,532		2.85		402,322		8,157		2.71
Total loans and leases	897,760		25,041		3.72		873,630		24,137		3.69
Other earning assets	58,189		2,031		4.66		62,366		2,142		4.59
Total earning assets⁽⁵⁾	1,861,019		38,858		2.79		1,817,437		37,588		2.76
Cash and due from banks	28,041						28,726
Other assets, less allowance for loan and lease losses	294,845						307,190
Total assets	$	2,183,905					$	2,153,353
Interest-bearing liabilities
U.S. interest-bearing deposits:
Savings	$	49,281	$	4	0.01	%	$	46,634	$	6	0.02	%
NOW and money market deposit accounts	584,896		216		0.05		537,974		205		0.05
Consumer CDs and IRAs	48,920		101		0.28		55,883		125		0.30
Negotiable CDs, public funds and other deposits	32,212		107		0.45		29,784		70		0.32
Total U.S. interest-bearing deposits	715,309		428		0.08		670,275		406		0.08
Non-U.S. interest-bearing deposits:
Banks located in non-U.S. countries	4,218		28		0.90		4,633		24		0.70
Governments and official institutions	1,468		7		0.60		1,426		3		0.31
Time, savings and other	58,866		273		0.62		54,364		217		0.53
Total non-U.S. interest-bearing deposits	64,552		308		0.64		60,423		244		0.54
Total interest-bearing deposits	779,861		736		0.13		730,698		650		0.12
Federal funds purchased, securities loaned or sold under agreements to repurchase and short-term borrowings	215,131		1,808		1.12		251,231		1,868		0.99
Trading account liabilities	73,176		778		1.42		77,996		1,071		1.84
Long-term debt	231,313		4,066		2.35		240,960		4,063		2.25
Total interest-bearing liabilities ⁽⁵⁾	1,299,481		7,388		0.76		1,300,885		7,652		0.79
Noninterest-bearing sources:
Noninterest-bearing deposits	433,168						414,988
Other liabilities	186,349						187,215
Shareholders' equity	264,907						250,265
Total liabilities and shareholders' equity	$	2,183,905					$	2,153,353
Net interest spread					2.03	%					1.97	%
Impact of noninterest-bearing sources					0.23						0.23
Net interest income/yield on earning assets			$	31,470	2.26	%			$	29,936	2.20	%


⁽¹⁾	Nonperforming loans are included in the respective average loan balances. Income on these nonperforming loans is generally recognized on a cost recovery basis. PCI loans were recorded at fair value upon acquisition and accrete interest income over the estimated life of the loan.


⁽²⁾	Includes non-U.S. consumer loans of $3.5 billion and $4.0 billion for the nine months ended September 30, 2016 and 2015.


⁽³⁾	Includes consumer finance loans of $526 million and $633 million, consumer leases of $1.5 billion and $1.1 billion, and consumer overdrafts of $171 million and $150 million for the nine months ended September 30, 2016 and 2015.


⁽⁴⁾	Includes U.S. commercial real estate loans of $54.1 billion and $47.7 billion, and non-U.S. commercial real estate loans of $3.4 billion and $3.1 billion for the nine months ended September 30, 2016 and 2015.

⁽⁵⁾

Interest income includes the impact of interest rate risk management contracts, which decreased interest income on the underlying assets by $155 million and $27 million for the nine months ended September 30, 2016 and 2015. Interest expense includes the impact of interest rate risk management contracts, which decreased interest expense on the underlying liabilities by $1.7 billion and $1.7 billion for the nine months ended September 30, 2016 and 2015. For additional information, see Interest Rate Risk Management for the Banking Book on page 89.

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Business Segment Operations

Segment Description and Basis of Presentation

We report our results of operations through the following four business segments: Consumer Banking, GWIM, Global Banking, and Global Markets, with the remaining operations recorded in All Other.

The Corporation periodically reviews capital allocated to its businesses and allocates capital annually during the strategic and capital 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, business and operational risk components. For more information on the nature of these risks, see Managing Risk on page 39.

The change in accounting method for certain debt securities, as described in Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements, impacted the amount of residual net interest income that is allocated to the business segments.

For more information on the basis of presentation for business segments and reconciliations to consolidated total revenue, net income and period-end total assets, see Note 18 – Business Segment Information to the Consolidated Financial Statements.

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Consumer Banking



	Three Months Ended September 30
	Deposits						Consumer Lending						Total Consumer Banking
(Dollars in millions)	2016			2015			2016			2015			2016			2015			% Change
Net interest income (FTE basis)	$	2,630		$	2,397		$	2,660		$	2,696		$	5,290		$	5,093		4	%
Noninterest income:
Card income	2			2			1,216			1,246			1,218			1,248			(2	)
Service charges	1,071			1,057			1			—			1,072			1,057			1
Mortgage banking income	—			—			297			290			297			290			2
All other income (loss)	98			132			(7		)	161			91			293			(69	)
Total noninterest income	1,171			1,191			1,507			1,697			2,678			2,888			(7	)
Total revenue, net of interest expense (FTE basis)	3,801			3,588			4,167			4,393			7,968			7,981			<(1)

Provision for credit losses	43			58			655			465			698			523			33
Noninterest expense	2,395			2,501			1,976			2,210			4,371			4,711			(7	)
Income before income taxes (FTE basis)	1,363			1,029			1,536			1,718			2,899			2,747			6
Income tax expense (FTE basis)	511			370			575			620			1,086			990			10
Net income	$	852		$	659		$	961		$	1,098		$	1,813		$	1,757		3

Net interest yield (FTE basis)	1.73		%	1.72		%	4.31		%	4.64		%	3.30		%	3.46		%
Return on average allocated capital	28			22			17			21			21			21
Efficiency ratio (FTE basis)	63.03			69.69			47.40			50.31			54.86			59.02

Balance Sheet
	Three Months Ended September 30
Average	2016			2015			2016			2015			2016			2015			% Change
Total loans and leases	$	4,837		$	4,662		$	243,846		$	228,441		$	248,683		$	233,103		7	%
Total earning assets ⁽¹⁾	604,223			552,534			245,540			230,523			636,838			583,368			9
Total assets ⁽¹⁾	630,394			579,604			257,167			243,409			674,636			623,324			8
Total deposits	598,117			547,727			7,591			8,260			605,708			555,987			9
Allocated capital	12,000			12,000			22,000			21,000			34,000			33,000			3


⁽¹⁾	In segments and businesses where the total of liabilities and equity exceeds assets, we allocate assets from All Other to match the segments' and businesses' liabilities and allocated shareholders' equity. As a result, total earning assets and total assets of the businesses may not equal total Consumer Banking.

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	Nine Months Ended September 30
	Deposits						Consumer Lending						Total Consumer Banking
(Dollars in millions)	2016			2015			2016			2015			2016			2015			% Change
Net interest income (FTE basis)	$	7,940		$	7,083		$	7,885		$	8,116		$	15,825		$	15,199		4	%
Noninterest income:
Card income	7			8			3,638			3,615			3,645			3,623			1
Service charges	3,079			3,055			1			1			3,080			3,056			1
Mortgage banking income	—			—			754			1,117			754			1,117			(32	)
All other income	312			355			4			163			316			518			(39	)
Total noninterest income	3,398			3,418			4,397			4,896			7,795			8,314			(6	)
Total revenue, net of interest expense (FTE basis)	11,338			10,501			12,282			13,012			23,620			23,513			<1

Provision for credit losses	132			145			1,823			1,517			1,955			1,662			18
Noninterest expense	7,227			7,354			6,097			6,725			13,324			14,079			(5	)
Income before income taxes (FTE basis)	3,979			3,002			4,362			4,770			8,341			7,772			7
Income tax expense (FTE basis)	1,473			1,103			1,615			1,756			3,088			2,859			8
Net income	$	2,506		$	1,899		$	2,747		$	3,014		$	5,253		$	4,913		7

Net interest yield (FTE basis)	1.79		%	1.74		%	4.39		%	4.74		%	3.39		%	3.53		%
Return on average allocated capital	28			21			17			19			21			20
Efficiency ratio (FTE basis)	63.74			70.02			49.64			51.69			56.41			59.88

Balance Sheet
	Nine Months Ended September 30
Average	2016			2015			2016			2015			2016			2015			% Change
Total loans and leases	$	4,787		$	4,733		$	238,404		$	226,666		$	243,191		$	231,399		5	%
Total earning assets ⁽¹⁾	591,913			545,708			239,870			228,681			623,840			576,309			8
Total assets ⁽¹⁾	618,466			572,723			251,610			241,916			662,133			616,559			7
Total deposits	586,334			540,850			7,170			8,363			593,504			549,213			8
Allocated capital	12,000			12,000			22,000			21,000			34,000			33,000			3

Period end	September 30 2016			December 31 2015			September 30 2016			December 31 2015			September 30 2016			December 31 2015			% Change
Total loans and leases	$	4,810		$	4,735		$	246,315		$	234,116		$	251,125		$	238,851		5	%
Total earning assets ⁽¹⁾	616,853			576,108			248,233			235,496			648,978			605,012			7
Total assets ⁽¹⁾	643,025			603,448			260,330			248,571			687,247			645,427			6
Total deposits	610,752			571,467			7,278			6,365			618,030			577,832			7

For footnote see page 18.

Consumer Banking, which is comprised of Deposits and Consumer Lending, offers a diversified range of credit, banking and investment products and services to consumers and small businesses. Our customers and clients have access to a franchise network that stretches coast to coast through 33 states and the District of Columbia. The franchise network includes approximately 4,600 financial centers, 16,000 ATMs, nationwide call centers, and online and mobile platforms.

Consumer Banking Results

Three Months Ended September 30, 2016 Compared to Three Months Ended September 30, 2015

Net income for Consumer Banking increased $56 million to $1.8 billion primarily driven by lower noninterest expense, partially offset by higher provision for credit losses. Revenue remained relatively unchanged at $8.0 billion. Net interest income increased $197 million to $5.3 billion primarily due to the beneficial impact of an increase in investable assets as a result of higher deposits. Noninterest income decreased $210 million to $2.7 billion as the prior-year period included gains on certain divestitures.

The provision for credit losses increased $175 million to $698 million primarily driven by a slower pace of improvement in the credit card portfolio. Noninterest expense decreased $340 million to $4.4 billion primarily driven by improved operating efficiencies and lower fraud costs, partially offset by higher FDIC expense.

The return on average allocated capital remained unchanged at 21 percent. For more information on capital allocations, see Business Segment Operations on page 17.

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Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015

Net income for Consumer Banking increased $340 million to $5.3 billion. Net interest income increased $626 million to $15.8 billion primarily driven by the same factor as described in the three-month discussion above. Noninterest income decreased $519 million to $7.8 billion due to lower mortgage banking income and gains in the prior-year period on certain divestitures, partially offset by higher service charges and higher card income.

The provision for credit losses increased $293 million to $2.0 billion and noninterest expense decreased $755 million to $13.3 billion, both primarily driven by the same factors as described in the three-month discussion above.

The return on average allocated capital was 21 percent, up from 20 percent, reflecting higher net income.

Deposits

Deposits includes the results of consumer deposit activities which consist of a comprehensive range of products provided to consumers and small businesses. Our deposit products include traditional savings accounts, money market savings accounts, CDs and IRAs, noninterest- and interest-bearing checking accounts, as well as investment accounts and products. The revenue is allocated to the deposit products using our funds transfer pricing process that matches assets and liabilities with similar interest rate sensitivity and maturity characteristics. Deposits generates fees such as account service fees, non-sufficient funds fees, overdraft charges and ATM fees, as well as investment and brokerage fees from Merrill Edge accounts. Merrill Edge is an integrated investing and banking service targeted at customers with less than $250,000 in investable assets. Merrill Edge provides investment advice and guidance, client brokerage asset services, a self-directed online investing platform and key banking capabilities including access to the Corporation's network of financial centers and ATMs.

Deposits includes the net impact of migrating customers and their related deposit and brokerage asset balances between Deposits and GWIM as well as other client-managed businesses. For more information on the migration of customer balances to or from GWIM, see GWIM on page 25.

Three Months Ended September 30, 2016 Compared to Three Months Ended September 30, 2015

Net income for Deposits increased $193 million to $852 million driven by higher revenue and lower noninterest expense. Net interest income increased $233 million to $2.6 billion primarily due to the beneficial impact of an increase in investable assets as a result of higher deposits. Noninterest income decreased $20 million to $1.2 billion due to gains in the prior-year period on certain divestitures, partially offset by higher service charges.

The provision for credit losses decreased $15 million to $43 million. Noninterest expense decreased $106 million to $2.4 billion primarily driven by improved operating efficiencies, partially offset by higher FDIC expense.

Average deposits increased $50.4 billion to $598.1 billion driven by a continuing customer shift to more liquid products in the low rate environment. Growth in checking, traditional savings and money market savings of $55.6 billion was partially offset by a decline in time deposits of $5.2 billion. As a result of our continued pricing discipline and the shift in the mix of deposits, the rate paid on average deposits declined by one bp to four bps.

Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015

Net income for Deposits increased $607 million to $2.5 billion driven by higher revenue and lower noninterest expense. Net interest income increased $857 million to $7.9 billion primarily due to the same factor as described in the three-month discussion above. Noninterest income of $3.4 billion remained relatively unchanged.

The provision for credit losses decreased $13 million to $132 million. Noninterest expense decreased $127 million to $7.2 billion driven by the same factors as described in the three-month discussion above.

Average deposits increased $45.5 billion to $586.3 billion driven by a continuing customer shift to more liquid products in the low rate environment.

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Key Statistics – Deposits
	Three Months Ended September 30				Nine Months Ended September 30
	2016		2015		2016			2015
Total deposit spreads (excludes noninterest costs) ⁽¹⁾	1.64	%	1.62	%	1.65		%	1.61		%

Period end
Client brokerage assets (in millions)					$	137,985		$	117,210
Online banking active accounts (units in thousands)					33,722			31,627
Mobile banking active users (units in thousands)					21,305			18,398
Financial centers					4,629			4,741
ATMs					15,959			16,062

⁽¹⁾ Includes deposits held in Consumer Lending.

Client brokerage assets increased $20.8 billion driven by underlying client flows and strong market performance. Mobile banking active users increased 2.9 million reflecting continuing changes in our customers' banking preferences. The number of financial centers declined 112 driven by changes in customer preferences to self-service options as we continue to optimize our consumer banking network and improve our cost-to-serve.

Consumer Lending

Consumer Lending offers products to consumers and small businesses across the U.S. The products offered include credit and debit cards, residential mortgages and home equity loans, and direct and indirect loans such as automotive, 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 and other miscellaneous fees. Consumer Lending products are available to our customers through our retail network, direct telephone, and online and mobile channels. Consumer Lending results also include the impact of servicing residential mortgages and home equity loans in the core portfolio, including loans held on the balance sheet of Consumer Lending and loans serviced for others.

The Corporation classifies consumer real estate loans as core or non-core based on loan and customer characteristics such as origination date, product type, loan-to-value (LTV), Fair Isaac Corporation (FICO) score and delinquency status. At September 30, 2016, total owned loans in the core portfolio held in Consumer Lending were $97.8 billion, up $9.1 billion from September 30, 2015 primarily driven by higher residential mortgage balances, partially offset by a decline in home equity balances. For more information on the core and non-core portfolios, see Consumer Portfolio Credit Risk Management on page 52.

Consumer Lending includes the net impact of migrating customers and their related loan balances between Consumer Lending and GWIM. For more information on the migration of customer balances to or from GWIM, see GWIM on page 25.

Three Months Ended September 30, 2016 Compared to Three Months Ended September 30, 2015

Net income for Consumer Lending decreased $137 million to $961 million driven by a decline in noninterest income and higher provision for credit losses, partially offset by lower noninterest expense. Net interest income remained relatively unchanged at $2.7 billion. Noninterest income decreased $190 million to $1.5 billion due to gains in the prior-year period on certain divestitures and lower card income.

The provision for credit losses increased $190 million to $655 million primarily driven by a slower pace of improvement in the credit card portfolio. Noninterest expense decreased $234 million to $2.0 billion primarily driven by improved operating efficiencies and lower fraud costs due to the benefit of the Europay, MasterCard and Visa (EMV) chip implementation.

Average loans increased $15.4 billion to $243.8 billion primarily driven by increases in residential mortgages and consumer vehicle loans, partially offset by lower home equity loans.

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Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015

Net income for Consumer Lending decreased $267 million to $2.7 billion. Net interest income decreased $231 million to $7.9 billion primarily driven by higher funding costs, partially offset by the impact of an increase in consumer auto lending balances. Noninterest income decreased $499 million to $4.4 billion driven by lower mortgage banking income and gains in the prior-year period on certain divestitures, partially offset by higher card income.

The provision for credit losses increased $306 million to $1.8 billion primarily driven by the same factor as described in the three-month discussion above. Noninterest expense decreased $628 million to $6.1 billion primarily driven by the same factors as described in the three-month discussion above, as well as lower personnel expense.

Average loans increased $11.7 billion to $238.4 billion primarily driven by the same factors as described in the three-month discussion above.



Key Statistics – Consumer Lending
	Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)	2016			2015			2016			2015
Total U.S. credit card ⁽¹⁾
Gross interest yield	9.30		%	9.15		%	9.27		%	9.17		%
Risk-adjusted margin	9.11			9.51			8.99			9.14
New accounts (in thousands)	1,324			1,257			3,845			3,713
Purchase volumes	$	57,591		$	56,472		$	165,412		$	162,625
Debit card purchase volumes	$	71,049		$	69,288		$	212,316		$	206,941


⁽¹⁾	In addition to the U.S. credit card portfolio in Consumer Banking, the remaining U.S. credit card portfolio is in GWIM.

During the three and nine months ended September 30, 2016, the total U.S. credit card risk-adjusted margin decreased 40 bps and 15 bps compared to the same periods in 2015. The decrease for the three-month period was primarily driven by the impact of a gain on a divestiture in the prior-year period, which was included in the risk-adjusted margin. Total U.S. credit card purchase volumes increased $1.1 billion to $57.6 billion, and $2.8 billion to $165.4 billion, and debit card purchase volumes increased $1.8 billion to $71.0 billion, and $5.4 billion to $212.3 billion, reflecting higher levels of consumer spending. The increases in total U.S. credit card purchase volumes were partially offset by the impact of certain divestitures.

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Mortgage Banking Income

Mortgage banking income is earned primarily in Consumer Banking and All Other. Total production income within mortgage banking income is comprised primarily of revenue from the fair value gains and losses recognized on our interest rate lock commitments (IRLCs) and loans held-for-sale (LHFS), the related secondary market execution, and costs related to representations and warranties in the sales transactions along with other obligations incurred in the sales of mortgage loans. Servicing income within mortgage banking income includes income earned in connection with servicing activities and MSR valuation adjustments, net of results from risk management activities used to hedge certain market risks of the MSRs. Servicing income for the core portfolio is recorded in Consumer Banking. Servicing income for the non-core portfolio, including hedge ineffectiveness on MSR hedges, is recorded in All Other. The costs associated with our servicing activities are included in noninterest expense.

The table below summarizes the components of mortgage banking income. Amounts for other mortgage banking income are included in this Consumer Banking table to show the components of consolidated mortgage banking income.



Mortgage Banking Income
	Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)	2016			2015			2016			2015
Mortgage banking income
Consumer Banking mortgage banking income
Total production income	$	212		$	223		$	532		$	801
Net servicing income
Servicing fees	179			204			542			655
Amortization of expected cash flows ⁽¹⁾	(139		)	(159		)	(439		)	(506		)
Fair value changes of MSRs, net of risk management activities used to hedge certain market risks ⁽²⁾	45			22			119			167
Total net servicing income	85			67			222			316
Total Consumer Banking mortgage banking income	297			290			754			1,117
Other mortgage banking income
Other production income ⁽³⁾	4			34			112			58
Representations and warranties provision	(102		)	(77		)	(168		)	37
Net servicing income
Servicing fees	106			109			343			415
Amortization of expected cash flows ⁽¹⁾	(18		)	(20		)	(55		)	(58		)
Fair value changes of MSRs, net of risk management activities used to hedge certain market risks ⁽²⁾	363			62			478			359
Total net servicing income	451			151			766			716
Eliminations ⁽⁴⁾	(61		)	9			(130		)	174
Total other mortgage banking income	292			117			580			985
Total consolidated mortgage banking income	$	589		$	407		$	1,334		$	2,102


⁽¹⁾	Represents the net change in fair value of the MSR asset due to the recognition of modeled cash flows.


⁽²⁾	Includes changes in fair value of MSRs due to changes in inputs and assumptions, net of risk management activities, and gains (losses) on sales of MSRs. For additional information see Note 17 – Mortgage Servicing Rights to the Consolidated Financial Statements.


⁽³⁾	Consists primarily of revenue from sales of repurchased loans that had returned to performing status.


⁽⁴⁾	Includes the effect of transfers of mortgage loans from Consumer Banking to the asset and liability management (ALM) portfolio included in All Other and net gains or losses on intercompany trades related to MSR risk management.

Total production income for Consumer Banking for the three and nine months ended September 30, 2016 decreased $11 million to $212 million, and $269 million to $532 million compared to the same periods in 2015 due to a decrease in production volume to be sold, resulting from a decision to retain certain residential mortgage loans in Consumer Banking.

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Servicing

The costs associated with servicing activities related to the residential mortgage and home equity loan portfolios, including owned loans and loans serviced for others (collectively, the mortgage serviced portfolio) are allocated to the business segment that owns the loans or MSRs, or All Other.

Servicing activities include collecting cash for principal, interest and escrow payments from borrowers, disbursing customer draws for lines of credit, accounting for and remitting principal and interest payments to investors and escrow payments to third parties, and responding to customer inquiries. Our home retention efforts, including single point of contact resources, are also part of our servicing activities, along with supervision of foreclosures and property dispositions. Prior to foreclosure, we evaluate various workout options in an effort to help our customers avoid foreclosure.

Consumer Banking servicing income for the three months ended September 30, 2016 increased $18 million to $85 million due to improved MSR results, net of the related hedge performance, partially offset by lower servicing fees due to a smaller servicing portfolio. Servicing income for the nine months ended September 30, 2016 decreased $94 million to $222 million compared to the same period in 2015 driven by lower servicing fees due to a smaller servicing portfolio, partially offset by improved MSR results, net of the related hedge performance. Servicing fees for the three and nine months ended September 30, 2016 declined 12 percent to $179 million and 17 percent to $542 million compared to the same periods in 2015 reflecting the decline in the size of the servicing portfolio.

Mortgage Servicing Rights

At September 30, 2016, the core MSR portfolio, held within Consumer Lending, was $1.8 billion compared to $2.3 billion at September 30, 2015. The decrease was primarily driven by the amortization of expected cash flows, which exceeded new additions, as well as changes in fair value due to changes in inputs and assumptions. For more information on MSRs, see Note 17 – Mortgage Servicing Rights to the Consolidated Financial Statements.



Key Statistics – Mortgage Banking Income
	Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	2016		2015		2016		2015
Loan production ⁽¹⁾:
Total ⁽²⁾:
First mortgage	$	16,865	$	13,712	$	45,802	$	43,386
Home equity	3,541		3,140		11,649		9,566
Consumer Banking:
First mortgage	$	11,588	$	10,026	$	32,207	$	31,146
Home equity	3,139		2,840		10,535		8,797


⁽¹⁾	The loan production amounts represent the unpaid principal balance of loans and in the case of home equity, the principal amount of the total line of credit.


⁽²⁾	In addition to loan production in Consumer Banking, there is also first mortgage and home equity loan production in GWIM.

First mortgage loan originations in Consumer Banking and for the total Corporation increased $1.6 billion and $3.2 billion for the three months ended September 30, 2016 compared to the same period in 2015 driven by higher refinance activity due to the low rate environment. First mortgage loan originations in Consumer Banking and for the total Corporation increased $1.1 billion and $2.4 billion for the nine months ended September 30, 2016 compared to the same period in 2015 driven by higher purchase activity.

Home equity production for the total Corporation was $3.5 billion and $11.6 billion for the three and nine months ended September 30, 2016 compared to $3.1 billion and $9.6 billion for the same periods in 2015, with the increases due to a higher demand in the market based on improving housing trends, as well as improved financial center engagement with customers and more competitive pricing.

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Global Wealth & Investment Management



	Three Months Ended September 30								Nine Months Ended September 30
(Dollars in millions)	2016			2015			% Change		2016			2015			% Change
Net interest income (FTE basis)	$	1,394		$	1,360		3	%	$	4,310		$	4,081		6	%
Noninterest income:
Investment and brokerage services	2,584			2,682			(4	)	7,718			8,154			(5	)
All other income	401			411			(2	)	1,245			1,321			(6	)
Total noninterest income	2,985			3,093			(3	)	8,963			9,475			(5	)
Total revenue, net of interest expense (FTE basis)	4,379			4,453			(2	)	13,273			13,556			(2	)

Provision for credit losses	7			(2		)	n/m		46			36			28
Noninterest expense	3,257			3,470			(6	)	9,822			10,446			(6	)
Income before income taxes (FTE basis)	1,115			985			13		3,405			3,074			11
Income tax expense (FTE basis)	418			353			18		1,267			1,130			12
Net income	$	697		$	632		10		$	2,138		$	1,944		10

Net interest yield (FTE basis)	2.03		%	2.10		%			2.09		%	2.14		%
Return on average allocated capital	21			21					22			22
Efficiency ratio (FTE basis)	74.36			77.92					74.00			77.06

Balance Sheet
	Three Months Ended September 30								Nine Months Ended September 30
Average	2016			2015			% Change		2016			2015			% Change
Total loans and leases	$	143,207		$	134,319		7	%	$	141,169		$	130,975		8	%
Total earning assets	273,568			257,424			6		275,675			255,572			8
Total assets	288,821			274,272			5		291,383			272,790			7
Total deposits	253,812			243,980			4		256,356			242,507			6
Allocated capital	13,000			12,000			8		13,000			12,000			8

Period end									September 30 2016			December 31 2015			% Change
Total loans and leases									$	144,980		$	139,039		4	%
Total earning assets									274,289			279,597			(2	)
Total assets									289,795			296,271			(2	)
Total deposits									252,962			260,893			(3	)

n/m = not meaningful

GWIM consists of two primary businesses: Merrill Lynch Global Wealth Management (MLGWM) and U.S. Trust, Bank of America Private Wealth Management (U.S. Trust).

MLGWM's advisory business provides a high-touch client experience through a network of financial advisors focused on clients with over $250,000 in total investable assets. MLGWM provides tailored solutions to meet our clients' needs through a full set of investment management, brokerage, banking and retirement products.

U.S. Trust, together with MLGWM's Private Banking & Investments Group, provides comprehensive wealth management solutions targeted to high net worth and ultra high net worth clients, as well as customized solutions to meet clients' wealth structuring, investment management, trust and banking needs, including specialty asset management services.

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Client assets managed under advisory and/or discretion of GWIM are AUM and are typically held in diversified portfolios. The majority of client AUM have an investment strategy with a duration of greater than one year and are, therefore, considered long-term AUM. Fees earned on long-term AUM are calculated as a percentage of total AUM. The asset management fees charged to clients per year are dependent on various factors, but are generally driven by the breadth of the client's relationship and generally range from 50 to 150 bps on their total AUM. The net client long-term AUM flows represent the net change in clients' long-term AUM balances over a specified period of time, excluding market appreciation/depreciation and other adjustments.

Client assets under advisory and/or discretion of GWIM in which the investment strategy seeks current income, while maintaining liquidity and capital preservation, are considered liquidity AUM. The duration of these strategies is primarily less than one year. The change in AUM balances from the prior-year periods is primarily the net client flows for liquidity AUM.

Three Months Ended September 30, 2016 Compared to Three Months Ended September 30, 2015

Net income for GWIM increased $65 million to $697 million driven by a decrease in noninterest expense, partially offset by a decrease in revenue. Net interest income of $1.4 billion remained relatively unchanged. Noninterest income, which primarily includes investment and brokerage services income, decreased $108 million to $3.0 billion driven by lower transactional revenue. Noninterest expense decreased $213 million to $3.3 billion primarily due to the expiration of certain advisor retention awards and lower operating and support costs, partially offset by higher FDIC expense.

Return on average allocated capital remained unchanged at 21 percent. For more information on capital allocated to the business segments, see Business Segment Operations on page 17.

Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015

Net income for GWIM increased $194 million to $2.1 billion driven by a decrease in noninterest expense, partially offset by a decrease in revenue. Net interest income increased $229 million to $4.3 billion driven by the impact of growth in deposit and loan balances. Noninterest income, which primarily includes investment and brokerage services income, decreased $512 million to $9.0 billion driven by the impact of lower market valuations and lower transactional revenue, partially offset by the impact of long-term AUM flows. Noninterest expense decreased $624 million to $9.8 billion driven by the same factors as described in the three-month discussion above.

Return on average allocated capital remained unchanged at 22 percent.

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Key Indicators and Metrics
	Three Months Ended September 30					Nine Months Ended September 30
(Dollars in millions, except as noted)	2016		2015			2016			2015
Revenue by Business
Merrill Lynch Global Wealth Management	$	3,617	$	3,683		$	10,886		$	11,235
U.S. Trust	761		752			2,300			2,268
Other ⁽¹⁾	1		18			87			53
Total revenue, net of interest expense (FTE basis)	$	4,379	$	4,453		$	13,273		$	13,556

Client Balances by Business, at period end
Merrill Lynch Global Wealth Management						$	2,089,683		$	1,943,798
U.S. Trust						400,538			375,751
Other ⁽¹⁾						—			78,110
Total client balances						$	2,490,221		$	2,397,659

Client Balances by Type, at period end
Long-term assets under management						$	871,026		$	798,887
Liquidity assets under management ⁽¹⁾						—			78,106
Assets under management						871,026			876,993
Brokerage assets						1,095,635			1,026,355
Assets in custody						122,804			109,196
Deposits						252,962			246,172
Loans and leases ⁽²⁾						147,794			138,943
Total client balances						$	2,490,221		$	2,397,659

Assets Under Management Rollforward
Assets under management, beginning balance	$	832,394	$	930,360		$	900,863		$	902,872
Net long-term client flows	10,182		4,448			19,638			27,695
Net liquidity client flows	—		(3,210		)	(7,990		)	1,320
Market valuation/other ⁽¹⁾	28,450		(54,605		)	(41,485		)	(54,894		)
Total assets under management, ending balance	$	871,026	$	876,993		$	871,026		$	876,993

Associates, at period end ^{(3, 4)}
Number of financial advisors						16,731			16,522
Total wealth advisors, including financial advisors						18,248			17,967
Total client-facing professionals, including financial advisors and wealth advisors						20,683			20,446

Merrill Lynch Global Wealth Management Metric ⁽⁴⁾
Financial advisor productivity ⁽⁵⁾ (in thousands)	$	983	$	1,007		$	984		$	1,033

U.S. Trust Metric, at period end ⁽⁴⁾
Client-facing professionals						2,223			2,182


⁽¹⁾	Includes the results of BofA Global Capital Management, the cash management division of Bank of America, and certain administrative items. Also includes the transfer of approximately $80 billion of BofA Global Capital Management's AUM during the three months ended June 30, 2016.


⁽²⁾	Includes margin receivables which are classified in customer and other receivables on the Consolidated Balance Sheet.


⁽³⁾	Includes financial advisors in the Consumer Banking segment of 2,179 and 2,050 at September 30, 2016 and 2015.


⁽⁴⁾	Headcount computation is based upon full-time equivalents.


⁽⁵⁾	Financial advisor productivity is defined as annualized MLGWM total revenue, excluding the allocation of certain ALM activities, divided by the total number of financial advisors (excluding financial advisors in the Consumer Banking segment).

Client balances increased $92.6 billion, or four percent, from a year ago to nearly $2.5 trillion primarily driven by higher market valuations and net inflows, partially offset by the impact of the transfer of approximately $80 billion of BofA Global Capital Management's AUM. The number of wealth advisors increased two percent, due to continued investment in the advisor development programs, competitive recruiting and near historic low levels of advisor attrition.

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Three Months Ended September 30, 2016 Compared to Three Months Ended September 30, 2015

Revenue from MLGWM decreased $66 million to $3.6 billion driven by a decline in noninterest income, partially offset by an increase in net interest income. Noninterest income decreased driven by lower transactional revenue. Net interest income increased driven by the impact of growth in deposit and loan balances.

Revenue from U.S. Trust increased $9 million to $761 million driven by an increase in net interest income, partially offset by a decrease in noninterest income.

Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015

Revenue from MLGWM decreased $349 million to $10.9 billion driven by a decline in noninterest income, partially offset by an increase in net interest income. Noninterest income decreased driven by lower market valuations and lower transactional revenue, partially offset by the impact of long-term AUM flows. Net interest income increased driven by the impact of growth in deposit and loan balances.

Revenue from U.S. Trust increased $32 million to $2.3 billion driven by an increase in net interest income primarily driven by the impact of growth in loan balances, partially offset by a decrease in noninterest income driven by lower market valuations, partially offset by the impact of long-term AUM flows.

Net Migration Summary

GWIM results are impacted by the net migration of clients and their corresponding deposit, loan and brokerage balances primarily to or from Consumer Banking, as presented in the table below. Migrations result from the movement of clients between business segments to better align with client needs.



Net Migration Summary ⁽¹⁾
	Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)	2016			2015			2016			2015
Total deposits, net – to (from) GWIM	$	17		$	697		$	(1,040	)	$	169
Total loans, net – to (from) GWIM	(15		)	(15		)	—			(69		)
Total brokerage, net – to (from) GWIM	(264		)	(446		)	(830		)	(1,703		)

⁽¹⁾ Migration occurs primarily between GWIM and Consumer Banking.

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Global Banking



	Three Months Ended September 30								Nine Months Ended September 30
(Dollars in millions)	2016			2015			% Change		2016			2015			% Change
Net interest income (FTE basis)	$	2,470		$	2,315		7	%	$	7,439		$	6,788		10	%
Noninterest income:
Service charges	780			746			5		2,284			2,184			5
Investment banking fees	795			752			6		2,230			2,381			(6	)
All other income	703			523			34		1,943			1,707			14
Total noninterest income	2,278			2,021			13		6,457			6,272			3
Total revenue, net of interest expense (FTE basis)	4,748			4,336			10		13,896			13,060			6

Provision for credit losses	118			181			(35	)	870			454			92
Noninterest expense	2,151			2,161			<(1)		6,449			6,396			1
Income before income taxes (FTE basis)	2,479			1,994			24		6,577			6,210			6
Income tax expense (FTE basis)	926			716			29		2,435			2,286			7
Net income	$	1,553		$	1,278		22		$	4,142		$	3,924		6

Net interest yield (FTE basis)	2.83		%	2.87		%			2.88		%	2.89		%
Return on average allocated capital	17			14					15			15
Efficiency ratio (FTE basis)	45.30			49.86					46.41			48.97

Balance Sheet
	Three Months Ended September 30								Nine Months Ended September 30
Average	2016			2015			% Change		2016			2015			% Change
Total loans and leases	$	334,363		$	308,710		8	%	$	332,474		$	298,923		11	%
Total earning assets	347,462			320,307			8		345,406			314,580			10
Total assets	395,423			370,246			7		394,402			364,659			8
Total deposits	306,198			296,321			3		300,732			290,327			4
Allocated capital	37,000			35,000			6		37,000			35,000			6

Period end									September 30 2016			December 31 2015			% Change
Total loans and leases									$	334,120		$	323,687		3	%
Total earning assets									349,993			334,766			5
Total assets									397,795			386,132			3
Total deposits									301,061			296,162			2

Global Banking, which includes Global Corporate Banking, Global 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 teams. Our lending products and services include commercial loans, leases, commitment facilities, trade finance, real estate lending and asset-based lending. Our treasury solutions business includes treasury management, foreign exchange and short-term investing options. We also provide investment banking products to our clients such as debt and equity underwriting and distribution, and merger-related and other advisory services. Underwriting debt and equity issuances, fixed-income and equity research, and certain market-based activities are executed through our global broker-dealer affiliates which are our primary dealers in several countries. Within Global Banking, Global Commercial Banking clients generally include middle-market companies, commercial real estate firms and not-for-profit companies. Global Corporate Banking clients generally include large global corporations, financial institutions and leasing clients. Business Banking clients include mid-sized U.S.-based businesses requiring customized and integrated financial advice and solutions.

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Three Months Ended September 30, 2016 Compared to Three Months Ended September 30, 2015

Net income for Global Banking increased $275 million to $1.6 billion primarily driven by higher revenue and lower provision for credit losses.

Revenue increased $412 million to $4.7 billion due to higher net interest income and noninterest income. Net interest income increased $155 million to $2.5 billion driven by the impact of growth in loans and leases. Noninterest income increased $257 million to $2.3 billion primarily due to the impact from loans and related loan hedging activities in the fair value option portfolio, as well as higher investment banking fees and treasury-related revenues.

The provision for credit losses decreased $63 million to $118 million driven by a slower pace of loan growth. Noninterest expense remained relatively unchanged at $2.2 billion as lower operating and support costs were largely offset by higher revenue-related incentive compensation and FDIC expense.

The return on average allocated capital was 17 percent, up from 14 percent, due to higher net income, partially offset by increased capital allocations. For more information on capital allocated to the business segments, see Business Segment Operations on page 17.

Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015

Net income for Global Banking of $4.1 billion increased $218 million as higher revenue more than offset increases in the provision for credit losses and noninterest expense.

Revenue increased $836 million to $13.9 billion driven by higher net interest income, which increased $651 million to $7.4 billion driven by the same factors as described in the three-month discussion above. Noninterest income increased $185 million to $6.5 billion primarily due to the impact from loans and the related loan hedging activities in the fair value option portfolio, as well as higher treasury-related revenues and card income, partially offset by lower investment banking fees.

The provision for credit losses increased $416 million to $870 million driven by increases in energy-related reserves. For more information on our energy exposure, see Commercial Portfolio Credit Risk Management – Industry Concentrations on page 74. Noninterest expense increased $53 million to $6.4 billion as investments in client-facing professionals in Commercial and Business Banking, higher severance costs and an increase in FDIC expense were largely offset by lower support costs and incentive compensation.

Return on average allocated capital remained unchanged at 15 percent.

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Global Corporate, Global Commercial and Business Banking

Global Corporate, Global Commercial and Business Banking each include Business Lending and Global Transaction Services activities. Business Lending includes various lending-related products and services, and related hedging activities, including 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 products. The table below presents a summary of the results, which exclude certain investment banking activities in Global Banking.



Global Corporate, Global Commercial and Business Banking
	Three Months Ended September 30
	Global Corporate Banking				Global Commercial Banking				Business Banking				Total
(Dollars in millions)	2016		2015		2016		2015		2016		2015		2016		2015
Revenue
Business Lending	$	1,113	$	983	$	1,069	$	978	$	91	$	91	$	2,273	$	2,052
Global Transaction Services	741		705		671		668		182		179		1,594		1,552
Total revenue, net of interest expense	$	1,854	$	1,688	$	1,740	$	1,646	$	273	$	270	$	3,867	$	3,604

Balance Sheet
Average
Total loans and leases	$	153,249	$	141,311	$	163,483	$	150,000	$	17,621	$	17,166	$	334,353	$	308,477
Total deposits	143,604		138,019		127,161		123,840		35,433		34,468		306,198		296,327

	Nine Months Ended September 30
	2016		2015		2016		2015		2016		2015		2016		2015
Revenue
Business Lending	$	3,269	$	2,925	$	3,129	$	2,891	$	280	$	269	$	6,678	$	6,085
Global Transaction Services	2,171		2,063		2,036		1,955		549		515		4,756		4,533
Total revenue, net of interest expense	$	5,440	$	4,988	$	5,165	$	4,846	$	829	$	784	$	11,434	$	10,618

Balance Sheet
Average
Total loans and leases	$	152,772	$	135,732	$	162,235	$	146,037	$	17,438	$	17,055	$	332,445	$	298,824
Total deposits	140,373		136,271		125,676		121,083		34,685		32,977		300,734		290,331

Period end
Total loans and leases	$	151,825	$	142,954	$	164,563	$	153,310	$	17,716	$	17,298	$	334,104	$	313,562
Total deposits	140,401		139,259		124,995		123,562		35,656		34,827		301,052		297,648

Business Lending revenue increased $221 million and $593 million for the three and nine months ended September 30, 2016 compared to the same periods in 2015 driven by the impact of growth in loans and leases, as well as the impact from loans and the related loan hedging activities in the fair value option portfolio.

Global Transaction Services revenue increased $42 million and $223 million for the three and nine months ended September 30, 2016 compared to the same periods in 2015 primarily due to higher net interest income driven by the beneficial impact of an increase in investable assets as a result of higher deposits, and growth in treasury-related revenues.

Average loans and leases increased eight percent and 11 percent for the three and nine months ended September 30, 2016 compared to the same periods in 2015 driven by growth in the commercial and industrial, and leasing portfolios. Average deposits increased three percent and four percent for the three and nine months ended September 30, 2016 compared to the same periods in 2015 due to continued portfolio growth with new and existing clients.

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Global Investment Banking

Client teams and product specialists underwrite and distribute debt, equity and loan products, and provide advisory services and tailored risk management solutions. The economics of certain investment banking and underwriting activities are shared primarily between Global Banking and Global Markets under an internal revenue-sharing arrangement. To provide a complete discussion of our consolidated investment banking fees, the following table presents total Corporation investment banking fees and the portion attributable to Global Banking.



Investment Banking Fees
	Three Months Ended September 30												Nine Months Ended September 30
	Global Banking						Total Corporation						Global Banking						Total Corporation
(Dollars in millions)	2016			2015			2016			2015			2016			2015			2016			2015
Products
Advisory	$	295		$	365		$	328		$	391		$	913		$	999		$	1,007		$	1,095
Debt issuance	405			325			908			748			1,060			1,031			2,466			2,416
Equity issuance	95			62			261			188			257			351			681			950
Gross investment banking fees	795			752			1,497			1,327			2,230			2,381			4,154			4,461
Self-led deals	(10		)	(11		)	(39		)	(40		)	(36		)	(50		)	(135		)	(161		)
Total investment banking fees	$	785		$	741		$	1,458		$	1,287		$	2,194		$	2,331		$	4,019		$	4,300

Total Corporation investment banking fees of $1.5 billion, excluding self-led deals, for the three months ended September 30, 2016 primarily included within Global Banking and Global Markets, increased 13 percent compared to the same period in 2015 driven by higher debt and equity issuance fees, partially offset by lower advisory fees. Total Corporation investment banking fees of $4.0 billion, excluding self-led deals, for the nine months ended September 30, 2016 decreased seven percent compared to the same period in 2015 driven by lower equity issuance fees and advisory fees due to a decline in market fee pools.

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Global Markets



	Three Months Ended September 30								Nine Months Ended September 30
(Dollars in millions)	2016			2015			% Change		2016			2015			% Change
Net interest income (FTE basis)	$	1,119		$	1,094		2	%	$	3,391		$	3,059		11	%
Noninterest income:
Investment and brokerage services	490			574			(15	)	1,583			1,703			(7	)
Investment banking fees	645			521			24		1,742			1,869			(7	)
Trading account profits	1,934			1,471			31		5,401			5,312			2
All other income (loss)	171			90			90		501			(47		)	n/m
Total noninterest income	3,240			2,656			22		9,227			8,837			4
Total revenue, net of interest expense (FTE basis)	4,359			3,750			16		12,618			11,896			6

Provision for credit losses	19			42			(55	)	23			69			(67	)
Noninterest expense	2,658			2,697			(1	)	7,690			8,606			(11	)
Income before income taxes (FTE basis)	1,682			1,011			66		4,905			3,221			52
Income tax expense (FTE basis)	608			211			188		1,746			968			80
Net income	$	1,074		$	800		34		$	3,159		$	2,253		40

Return on average allocated capital	12		%	9		%			11		%	9		%
Efficiency ratio (FTE basis)	60.94			71.93					60.94			72.34

Balance Sheet
	Three Months Ended September 30								Nine Months Ended September 30
Average	2016			2015			% Change		2016			2015			% Change
Trading-related assets:
Trading account securities	$	185,785		$	196,685		(6	)%	$	183,928		$	195,775		(6	)%
Reverse repurchases	89,435			103,312			(13	)	89,218			109,219			(18	)
Securities borrowed	87,872			75,786			16		86,159			78,520			10
Derivative assets	52,325			55,389			(6	)	52,164			55,489			(6	)
Total trading-related assets ⁽¹⁾	415,417			431,172			(4	)	411,469			439,003			(6	)
Total loans and leases	69,043			66,349			4		69,315			61,625			12
Total earning assets ⁽¹⁾	422,636			436,809			(3	)	421,221			434,004			(3	)
Total assets	584,069			594,142			(2	)	582,006			596,568			(2	)
Total deposits	32,840			36,818			(11	)	34,409			38,376			(10	)
Allocated capital	37,000			35,000			6		37,000			35,000			6

Period end									September 30 2016			December 31 2015			% Change
Total trading-related assets ⁽¹⁾									$	417,517		$	373,926		12	%
Total loans and leases									72,144			73,208			(1	)
Total earning assets ⁽¹⁾									435,112			384,046			13
Total assets									595,165			548,790			8
Total deposits									31,692			37,038			(14	)


⁽¹⁾	Trading-related assets include derivative assets, which are considered non-earning assets.

n/m = not meaningful

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Global Markets offers sales and trading services, including research, to institutional clients across fixed-income, credit, currency, commodity and equity businesses. Global Markets product coverage includes securities and derivative products in both the primary and secondary markets. Global Markets provides market-making, financing, securities clearing, settlement and custody services globally to our 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 products. As a result of our market-making activities in these products, we may be required to manage risk in a broad range of financial products including government securities, equity and equity-linked securities, high-grade and high-yield corporate debt securities, syndicated loans, mortgage-backed securities (MBS), commodities and asset-backed securities (ABS). The economics of certain investment banking and underwriting activities are shared primarily between Global Markets and Global Banking under an internal revenue-sharing arrangement. Global Banking originates certain deal-related transactions with our corporate and commercial clients that are executed and distributed by Global Markets. For more information on investment banking fees on a consolidated basis, see page 32.

Three Months Ended September 30, 2016 Compared to Three Months Ended September 30, 2015

Net income for Global Markets increased $274 million to $1.1 billion. Net DVA losses were $127 million compared to gains of $12 million. Excluding net DVA, net income increased $360 million to $1.2 billion primarily driven by higher sales and trading revenue, increased investment banking income and lower noninterest expense. Sales and trading revenue, excluding net DVA, increased $581 million primarily driven by stronger performance globally across credit products led by mortgages, and continued strength in rates products. Noninterest expense decreased $39 million to $2.7 billion primarily due to lower operating and support costs, partially offset by higher revenue-related compensation.

Average earning assets decreased $14.2 billion to $422.6 billion primarily driven by a decrease in trading inventory and match book financing activity, partially offset by higher loans and other customer financing.

The return on average allocated capital was 12 percent, up from nine percent, reflecting an increase in net income, partially offset by an increase in allocated capital. For more information on capital allocated to the business segments, see Business Segment Operations on page 17.

Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015

Net income for Global Markets increased $906 million to $3.2 billion. Net DVA losses were $137 million compared to losses of $588 million. Excluding net DVA, net income increased $626 million to $3.2 billion primarily driven by higher sales and trading revenue and lower noninterest expense, partially offset by lower investment banking fees. Sales and trading revenue, excluding net DVA, increased $359 million primarily due to a stronger performance globally across credit products led by mortgages and continued strength in rates products, partially offset by challenging credit market conditions in early 2016 as well as reduced client activity in equities, most notably in Asia, and in derivatives. Noninterest expense decreased $916 million to $7.7 billion primarily due to lower litigation expense and lower revenue-related expenses.

Average earning assets decreased $12.8 billion to $421.2 billion primarily driven by a decrease in match book financing activity and a reduction in trading inventory, partially offset by higher loans and other customer financing. Period-end trading-related assets increased $43.6 billion from December 31, 2015 primarily driven by higher securities borrowed or purchased under agreements to resell due to increased customer financing activity.

The return on average allocated capital was 11 percent, up from nine percent, reflecting an increase in net income, partially offset by an increase in allocated capital.

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Sales and Trading Revenue

Sales and trading revenue includes unrealized and realized gains and losses on trading and other assets, net interest income, and fees primarily from commissions on equity securities. Sales and trading revenue is segregated into fixed-income (government debt obligations, investment and non-investment grade corporate debt obligations, commercial MBS, residential mortgage-backed securities (RMBS), collateralized loan obligations (CLOs), interest rate and credit derivative contracts), currencies (interest rate and foreign exchange contracts), commodities (primarily futures, forwards, swaps and options) and equities (equity-linked derivatives and cash equity activity). The table below and related discussion present sales and trading revenue, substantially all of which is in Global Markets, with the remainder in Global Banking. In addition, the table below and related discussion present sales and trading revenue excluding the impact of net DVA, which is a non-GAAP financial measure. We believe the use of this non-GAAP financial measure provides additional useful information to assess the underlying performance of these businesses and to allow better comparison of period-to-period operating performance.



Sales and Trading Revenue ^{(1, 2)}
	Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	2016		2015		2016		2015
Sales and trading revenue
Fixed-income, currencies and commodities	$	2,646	$	2,010	$	7,507	$	6,307
Equities	954		1,148		3,072		3,462
Total sales and trading revenue	$	3,600	$	3,158	$	10,579	$	9,769

Sales and trading revenue, excluding net DVA ⁽³⁾
Fixed-income, currencies and commodities	$	2,767	$	1,992	$	7,647	$	6,881
Equities	960		1,154		3,069		3,476
Total sales and trading revenue, excluding net DVA ⁽³⁾	$	3,727	$	3,146	$	10,716	$	10,357


⁽¹⁾	Includes FTE adjustments of $47 million and $135 million for the three and nine months ended September 30, 2016 compared to $46 million and $141 million for the same periods in 2015. For more information on sales and trading revenue, see Note 2 – Derivatives to the Consolidated Financial Statements.


⁽²⁾	Includes Global Banking sales and trading revenue of $56 million and $336 million for the three and nine months ended September 30, 2016 compared to $86 million and $295 million for the same periods in 2015.

⁽³⁾

Fixed-income, currencies and commodities (FICC) and Equities sales and trading revenue, excluding net DVA, is a non-GAAP financial measure. FICC net DVA losses were $121 million and $140 million for the three and nine months ended September 30, 2016 compared to net DVA gains of $18 million and losses of $574 million for the same periods in 2015. Equities net DVA losses were $6 million and gains were $3 million for the three and nine months ended September 30, 2016 compared to net DVA losses of $6 million and $14 million for the same periods in 2015.

The explanations for period-over-period changes in sales and trading, FICC and Equities revenue, as set forth below, are the same whether or not net DVA is included.

Three Months Ended September 30, 2016 Compared to Three Months Ended September 30, 2015

FICC revenue, excluding net DVA, increased $775 million to $2.8 billion, due to stronger performance globally across credit products, particularly in mortgages due to strong asset demand as investors sought yield. The credit market environment improved with spreads tightening and rising high-yield and bank loan prices supported by strong inflows to credit related funds. In addition, we saw continued strength in rates products and client financing due to increased customer activity, while currencies and commodities were down reflecting weaker client demand. Equities revenue, excluding net DVA, decreased $194 million to $1.0 billion due to lower levels of client activity in derivatives compared with a strong year-ago period, which benefited from higher levels of market volatility, and lower client volumes in swaps and cash secondary.

Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015

FICC revenue, excluding net DVA, increased $766 million as rates products improved on increased customer flow, and mortgages recorded strong results particularly during the three months ended September 30, 2016. This was partially offset by weaker performance in G10 currencies, which benefited from a particularly favorable trading environment in the first half of 2015, as well as commodities, where lower volatility dampened client activity. Equities revenue, excluding net DVA, decreased $407 million to $3.1 billion primarily driven by lower levels of client activity in Asia which benefited from increased market volumes relating to stock markets rallies in the region in 2015, as well as weaker trading performance in derivatives.

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All Other



	Three Months Ended September 30								Nine Months Ended September 30
(Dollars in millions)	2016			2015			% Change		2016			2015			% Change
Net interest income (FTE basis)	$	156		$	265		(41	)%	$	505		$	809		(38	)%
Noninterest income:
Card income	46			68			(32	)	145			201			(28	)
Mortgage banking income	291			115			153		577			978			(41	)
Gains on sales of debt securities	51			436			(88	)	490			875			(44	)
All other loss	(135		)	(185		)	(27	)	(747		)	(841		)	(11	)
Total noninterest income	253			434			(42	)	465			1,213			(62	)
Total revenue, net of interest expense (FTE basis)	409			699			(41	)	970			2,022			(52	)

Provision for credit losses	8			62			(87	)	(71		)	130			n/m
Noninterest expense	1,044			900			16		4,505			4,197			7
Loss before income taxes (FTE basis)	(643		)	(263		)	144		(3,464		)	(2,305		)	50
Income tax benefit (FTE basis)	(461		)	(415		)	11		(1,982		)	(1,823		)	9
Net income (loss)	$	(182	)	$	152		n/m		$	(1,482	)	$	(482	)	n/m

Balance Sheet
	Three Months Ended September 30								Nine Months Ended September 30
Average	2016			2015			% Change		2016			2015			% Change
Total loans and leases	$	105,298		$	134,948		(22	)%	$	111,611		$	150,708		(26	)%
Total assets ⁽¹⁾	246,541			306,946			(20	)	253,981			302,777			(16	)
Total deposits	28,628			26,125			10		28,028			25,263			11

Period end									September 30 2016			December 31 2015			% Change
Total loans and leases									$	102,639		$	122,198		(16	)%
Total assets ⁽¹⁾									225,312			267,667			(16	)
Total deposits									29,150			25,334			15

⁽¹⁾

In segments where the total of liabilities and equity exceeds assets, which are generally deposit-taking segments, we allocate assets from All Other to those segments to match liabilities (i.e., deposits) and allocated shareholders' equity. Such allocated assets were $500.4 billion and $497.8 billion for the three and nine months ended September 30, 2016 compared to $458.5 billion and $459.8 billion for the same periods in 2015, and $508.5 billion and $489.0 billion at September 30, 2016 and December 31, 2015.

n/m = not meaningful

All Other consists of ALM activities, equity investments, the international consumer card business, non-core mortgage loans and servicing activities, the net impact of periodic revisions to the MSR valuation model for both core and non-core MSRs, liquidating businesses, residual expense allocations and other. ALM activities encompass certain residential mortgages, debt securities, interest rate and foreign currency risk management activities, the impact of certain allocation methodologies and accounting hedge ineffectiveness. The results of certain ALM activities are allocated to our business segments. For more information on our ALM activities, see Note 18 – Business Segment Information to the Consolidated Financial Statements. Equity investments include our merchant services joint venture as well as Global Principal Investments (GPI) which is comprised of a portfolio of equity, real estate and other alternative investments. For more information on our merchant services joint venture, see Note 10 – Commitments and Contingencies to the Consolidated Financial Statements.

The Corporation classifies consumer real estate loans as core or non-core based on loan and customer characteristics such as origination date, product type, LTV, FICO score and delinquency status. Residential mortgage loans that are held for interest rate or liquidity risk management purposes are presented on the balance sheet of All Other. For more information on our interest rate and liquidity risk management activities, see Liquidity Risk on page 47 and Interest Rate Risk Management for the Banking Book on page 89. During the nine months ended September 30, 2016, residential mortgage loans held for ALM activities decreased $6.9 billion to $36.3 billion at September 30, 2016 primarily as a result of payoffs and paydowns as well as loan sales. Non-core residential mortgage and home equity loans, which are principally run-off portfolios, including certain loans accounted for under the fair value option and MSRs pertaining to

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non-core loans serviced for others, are also held in All Other. During the nine months ended September 30, 2016, total non-core loans decreased $11.8 billion to $57.0 billion at September 30, 2016 due largely to payoffs and paydowns, as well as loan sales.

Three Months Ended September 30, 2016 Compared to Three Months Ended September 30, 2015

Net income for All Other decreased $334 million to a net loss of $182 million due to lower net interest income, lower gains on sales of consumer real estate loans, lower gains on sales of debt securities and an increase in noninterest expense, partially offset by favorable MSR results, net of the related hedge performance, which includes a net $282 million increase in MSR fair value due to a revision of certain MSR valuation assumptions and a decrease in the provision for credit losses. Gains on the sales of loans, including nonperforming and other delinquent loans, net of hedges, were $36 million compared to gains of $358 million in the prior-year period. For more information on MSR valuation assumptions, see Note 17 – Mortgage Servicing Rights to the Consolidated Financial Statements.

The provision for credit losses decreased $54 million to $8 million primarily driven by lower loan and lease balances from continued run-off of non-core mortgages. Noninterest expense increased $144 million to $1.0 billion driven by litigation expense. The income tax benefit was $461 million compared to a benefit of $415 million.

Included in the three months ended September 30, 2016 was a $350 million tax charge related to the change in the U.K. corporate tax rate. In addition, both periods included income tax benefit adjustments to eliminate the FTE treatment of certain tax credits recorded in Global Banking.

Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015

The net loss for All Other increased $1.0 billion to $1.5 billion due to lower net interest income, lower mortgage banking income, lower gains on sales of consumer real estate loans and an increase in noninterest expense, partially offset by an improvement in the provision for credit losses. Gains on the sales of loans, including nonperforming and other delinquent loans, net of hedges, were $214 million compared to gains of $934 million in the prior-year period.

The provision for credit losses improved $201 million to a benefit of $71 million primarily driven by the same factors as described in the three-month discussion above.

Noninterest expense increased $308 million to $4.5 billion driven by the same factors as described in the three-month discussion above. The income tax benefit was $2.0 billion compared to a benefit of $1.8 billion driven by the change in the pretax loss, partially offset by the $350 million tax charge mentioned in the three-month discussion above. In addition, both periods included income tax benefit adjustments to eliminate the FTE treatment in noninterest income of certain tax credits recorded in Global Banking.

Off-Balance Sheet Arrangements and Contractual Obligations

We have contractual obligations to make future payments on debt and lease agreements. Additionally, in the normal course of business, we enter into contractual arrangements whereby we commit to future purchases of products or services from unaffiliated parties. For more information on obligations and commitments, see Note 10 – Commitments and Contingencies to the Consolidated Financial Statements, Off-Balance Sheet Arrangements and Contractual Obligations in the MD&A of the Corporation's 2015 Annual Report on Form 10-K, as well as Note 11 – Long-term Debt and Note 12 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation's 2015 Annual Report on Form 10-K.

Representations and Warranties

We securitize first-lien residential mortgage loans generally in the form of RMBS guaranteed by the government-sponsored enterprises (GSEs), which include Freddie Mac (FHLMC) and Fannie Mae (FNMA), or by the Government National Mortgage Association (GNMA) in the case of Federal Housing Administration (FHA)-insured, U.S. Department of Veterans Affairs-guaranteed and Rural Housing Service-guaranteed mortgage loans, and sell pools of first-lien residential mortgage loans in the form of whole loans. In addition, in prior years, legacy companies and certain subsidiaries sold pools of first-lien residential mortgage loans and home equity loans as private-label securitizations or in the form of whole loans. In connection with these transactions, we or certain of our subsidiaries or legacy companies made various representations and warranties. Breaches of these representations and warranties have resulted in and may continue to result in the requirement to repurchase mortgage loans or to otherwise make whole or provide other remedies to investors, guarantors, insurers or other parties (collectively, repurchases).

We have vigorously contested any request for repurchase where we have concluded that a valid basis for repurchase does not exist and will continue to do so in the future. However, in an effort to resolve legacy mortgage-related issues, we have reached settlements,

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certain of which have been for significant amounts, in lieu of a loan-by-loan review process, including with the GSEs, four monoline insurers and Bank of New York Mellon (BNY Mellon), as trustee for certain securitization trusts.

For more information on accounting for and other information related to representations and warranties, repurchase claims and related exposures, see Note 7 – Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial Statements, Off-balance Sheet Arrangements and Contractual Obligations in the MD&A of the Corporation's 2015 Annual Report on Form 10-K, Note 7 – Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial Statements of the Corporation's 2015 Annual Report on Form 10-K and Item 1A. Risk Factors of the Corporation's 2015 Annual Report on Form 10-K.

Unresolved Repurchase Claims

Unresolved representations and warranties repurchase claims represent the notional amount of repurchase claims made by counterparties, typically the outstanding principal balance or the unpaid principal balance at the time of default. In the case of first-lien mortgages, the claim amount is often significantly greater than the expected loss amount due to the benefit of collateral and, in some cases, mortgage insurance (MI) or mortgage guarantee payments. Claims received from a counterparty remain outstanding until the underlying loan is repurchased, the claim is rescinded by the counterparty, we determine that the applicable statute of limitations has expired, or representations and warranties claims with respect to the applicable trust are settled, and fully and finally released. We do not include duplicate claims in the amounts disclosed.

At September 30, 2016, we had $18.3 billion of unresolved repurchase claims, predominantly related to subprime and pay option first-lien loans, and home equity loans, compared to $18.4 billion at December 31, 2015. The notional amount of unresolved repurchase claims at both September 30, 2016 and December 31, 2015 included $3.5 billion of claims related to loans in specific private-label securitization groups or tranches where we own substantially all of the outstanding securities. At both September 30, 2016 and December 31, 2015, for loans originated from 2004 through 2008, the notional amount of unresolved repurchase claims submitted by private-label securitization trustees, whole-loan investors, including third-party securitization sponsors, and others was $16.7 billion. At September 30, 2016 and December 31, 2015, the notional amount of unresolved repurchase claims submitted by the GSEs for loans originated prior to 2009 was $8 million and $14 million. During the nine months ended September 30, 2016, we continued to have limited loan-level representations and warranties repurchase claims experience with the monoline insurers due to bulk settlements in prior years and ongoing litigation with a single monoline insurer. For more information on unresolved repurchase claims, see Off-Balance Sheet Arrangements and Contractual Obligations – Unresolved Repurchase Claims in the MD&A of the Corporation's 2015 Annual Report on Form 10-K.

Liability for Representations and Warranties and Corporate Guarantees

The liability for representations and warranties and corporate guarantees is included in accrued expenses and other liabilities on the Consolidated Balance Sheet and the related provision is included in mortgage banking income in the Consolidated Statement of Income. At September 30, 2016 and December 31, 2015, the liability for representations and warranties was $2.8 billion and $11.3 billion. The reduction in the liability was primarily the result of an $8.5 billion cash payment in February 2016 to BNY Mellon as part of the settlement with BNY Mellon. For the three and nine months ended September 30, 2016, the representations and warranties provision was $99 million and $158 million compared to a provision of $75 million and a benefit of $46 million for the same periods in 2015.

Our liability for representations and warranties is necessarily dependent on, and limited by, a number of factors including for private-label securitizations, the implied repurchase experience based on the settlement with BNY Mellon, as well as certain other assumptions and judgmental factors. Where relevant, we also consider more recent experience, such as claim activity, notification of potential indemnification obligations, our experience with various counterparties, the New York Court of Appeals' ACE Securities Corp. v. DB Structured Products, Inc. (ACE) decision, other recent court decisions related to the statute of limitations, and other facts and circumstances, such as bulk settlements, as we believe appropriate. Accordingly, future provisions associated with obligations under representations and warranties may be materially impacted if future experiences are different from historical experience or our understandings, interpretations or assumptions. For more information on the settlement with BNY Mellon, and the ACE decision and its impact on unresolved repurchase claims, see Note 7 – Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial Statements of the Corporation's 2015 Annual Report on Form 10-K.

Estimated Range of Possible Loss

We currently estimate that the range of possible loss for representations and warranties exposures could be up to $2 billion over existing accruals at September 30, 2016. We treat claims that are time-barred as resolved and do not consider such claims in the estimated range of possible loss. The estimated range of possible loss reflects principally exposures related to loans in private-label securitization trusts. It represents a reasonably possible loss, but does not represent a probable loss, and is based on currently available information, significant judgment and a number of assumptions that are subject to change.

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For more information on the methodology used to estimate the representations and warranties liability, the corresponding estimated range of possible loss and the types of losses not considered in such estimates, see Note 7 – Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial Statements and Item 1A. Risk Factors of the Corporation's 2015 Annual Report on Form 10-K and, for more information related to the sensitivity of the assumptions used to estimate our liability for representations and warranties, see Complex Accounting Estimates – Representations and Warranties Liability in the MD&A of the Corporation's 2015 Annual Report on Form 10-K.

Other Mortgage-related Matters

We continue to be subject to additional mortgage-related litigation and disputes, as well as governmental and regulatory scrutiny and investigations, related to our past and current origination, servicing, transfer of servicing and servicing rights, servicing compliance obligations, foreclosure activities, indemnification obligations, and MI and captive reinsurance practices with mortgage insurers. The ongoing environment of additional regulation, increased regulatory compliance obligations, and enhanced regulatory enforcement, combined with ongoing uncertainty related to the continuing evolution of the regulatory environment, has resulted in increased operational and compliance costs and may limit our ability to continue providing certain products and services. For more information on management's estimate of the aggregate range of possible loss for certain litigation matters and on regulatory investigations, see Note 10 – Commitments and Contingencies to the Consolidated Financial Statements.

Managing Risk

Risk is inherent in all our business activities. The seven key types of risk faced by the Corporation are strategic, credit, market, liquidity, compliance, operational and reputational risks. Sound risk management enables us to serve our customers and deliver for our shareholders. If not managed well, risks can result in financial loss, regulatory sanctions and penalties, and damage to our reputation, each of which may adversely impact our ability to execute our business strategies. The Corporation takes a comprehensive 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 Board.

Our Risk Framework is the foundation for comprehensive management of the risks facing the Corporation. The Risk Framework sets forth clear roles, responsibilities and accountability for the management of risk and provides a blueprint for how the Board, through delegation of authority to committees and executive officers, establishes risk appetite and associated limits for our activities.

Our Risk Appetite Statement is intended to ensure that the Corporation maintains an acceptable risk profile by providing a common framework and a comparable set of measures for senior management and the Board to clearly indicate the level of risk the Corporation is willing to accept. Risk appetite is set at least annually in conjunction with the strategic, capital and financial operating plans to align risk appetite with the Corporation's strategy and financial resources. Our line of business strategies and risk appetite are also similarly aligned.

For more information on our risk management activities, including our Risk Framework, and the key types of risk faced by the Corporation, see the Managing Risk through the Reputational Risk sections in the MD&A of the Corporation's 2015 Annual Report on Form 10-K.

Capital Management

The Corporation manages its capital position to ensure capital is more than adequate to support its business activities and to maintain capital, risk and risk appetite commensurate with one another. Additionally, we seek to maintain safety and soundness at all times, even under adverse scenarios, take advantage of organic growth opportunities, ensure obligations to creditors and counterparties are met, maintain ready access to financial markets, continue to serve as a credit intermediary, remain a source of strength for our subsidiaries, and satisfy current and future regulatory capital requirements. Capital management is integrated into our risk and governance processes, as capital is a key consideration in the development of our strategic plan, risk appetite and risk limits.

Effective July 1, 2016, we changed our accounting method for the amortization of premiums and accretion of discounts related to certain debt securities. Under the applicable bank regulatory rules, we are not required to and, accordingly, will not restate previously-filed capital metrics and ratios in connection with the change in accounting method related to certain debt securities. The cumulative impact of this change would have resulted in an insignificant pro forma change of the Corporation's capital metrics and ratios. For additional information, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements.

The Corporation periodically reviews capital allocated to its businesses and allocates capital annually during the strategic and capital planning processes. For additional information, see Business Segment Operations on page 17.

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CCAR and Capital Planning

The Federal Reserve requires BHCs to submit a capital plan and requests for capital actions on an annual basis, consistent with the rules governing the CCAR capital plan.

In April 2016, we submitted our 2016 CCAR capital plan and related supervisory stress tests. The 2016 CCAR capital plan included requests (i) to repurchase $5.0 billion of common stock over four quarters beginning in the third quarter of 2016, (ii) to repurchase common stock to offset the dilution resulting from certain equity-based compensation awards and (iii) to increase the quarterly common stock dividend from $0.05 per share to $0.075 per share. On June 29, 2016, following the Federal Reserve's non-objection to our 2016 CCAR capital plan, the Board authorized the common stock repurchase beginning July 1, 2016. The common stock repurchase authorization includes both common stock and warrants.

During the three months ended September 30, 2016, pursuant to the Board's authorization, we repurchased $1.4 billion of common stock, which includes common stock to offset equity-based compensation awards. The timing and amount of common stock repurchases will be subject to various factors, including the Corporation's capital position, liquidity, financial performance and alternative uses of capital, stock trading price, and general market conditions, and may be suspended at any time. The common stock repurchases may be effected through open market purchases or privately negotiated transactions, including repurchase plans that satisfy the conditions of Rule 10b5-1 of the Securities Exchange Act of 1934. As a "well-capitalized" BHC, we may notify the Federal Reserve of our intention to make additional capital distributions not to exceed one percent of Tier 1 capital and which were not contemplated in our capital plan, subject to the Federal Reserve's non-objection.

Regulatory Capital

As a financial services holding company, we are subject to regulatory capital rules issued by U.S. banking regulators. On January 1, 2014, we became subject to Basel 3, which includes certain transition provisions through January 1, 2019. The Corporation and its primary affiliated banking entity, BANA, are Advanced approaches institutions under Basel 3.

Basel 3 updated the composition of capital and established a Common equity tier 1 capital ratio. Common equity tier 1 capital primarily includes common stock, retained earnings and accumulated OCI, net of certain deductions and adjustments primarily related to goodwill, deferred tax assets, intangibles, MSRs and defined benefit pension assets. Basel 3 revised minimum capital ratios and buffer requirements, added a supplementary leverage ratio (SLR), and addressed the adequately capitalized minimum requirements under the Prompt Corrective Action (PCA) framework. Basel 3 also established two methods of calculating risk-weighted assets, the Standardized approach and the Advanced approaches. As an Advanced approaches institution, we are required to report regulatory risk-based capital ratios and risk-weighted assets under both the Standardized and Advanced approaches. The approach that yields the lower ratio is used to assess capital adequacy including under the PCA framework.

On January 1, 2016, we became subject to a capital conservation buffer, a countercyclical capital buffer and a global systemically important bank (G-SIB) surcharge which will be phased in over a three-year period ending January 1, 2019. Once fully phased in, the Corporation's risk-based capital ratio requirements will include a capital conservation buffer greater than 2.5 percent, plus any applicable countercyclical capital buffer and G-SIB surcharge in order to avoid restrictions on capital distributions and discretionary bonus payments. The buffers and surcharge must be composed solely of Common equity tier 1 capital. Under the phase-in provisions, in 2016 we must maintain a capital conservation buffer greater than 0.625 percent plus a G-SIB surcharge of 0.75 percent. The countercyclical capital buffer is currently set at zero. We estimate that our fully phased-in G-SIB surcharge will be 3.0 percent. The G-SIB surcharge may differ from this estimate over time.

For additional information, see Capital Management in the MD&A of the Corporation's 2015 Annual Report on Form 10-K.

Capital Composition and Ratios

Under the applicable bank regulatory rules, we are not required to and, accordingly, did not restate previously-filed regulatory capital metrics and ratios in connection with the change in accounting method related to certain debt securities. Therefore, the December 31, 2015 amounts in Tables 13 through 16 are as originally reported. The cumulative impact of this change in accounting method would have resulted in an immaterial pro forma decrease in the Corporation's Common equity tier 1 capital of approximately one basis point at December 31, 2015. The September 30, 2016 amounts in those tables reflect the change in accounting method. For additional information, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements.

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Table 13 presents Bank of America Corporation's transition and fully phased-in capital ratios and related information in accordance with Basel 3 Standardized and Advanced approaches as measured at September 30, 2016 and December 31, 2015. Fully phased-in estimates are non-GAAP financial measures that the Corporation considers to be useful measures in evaluating compliance with new regulatory capital requirements that are not yet effective. For reconciliations to GAAP financial measures, see Table 16. As of September 30, 2016 and December 31, 2015, the Corporation meets the definition of "well capitalized" under current regulatory requirements.



Table 13
Bank of America Corporation Regulatory Capital under Basel 3^{(1, 2)}
	September 30, 2016
	Transition								Fully Phased-in
(Dollars in millions)	Standardized Approach			Advanced Approaches			Regulatory Minimum^{(3, 4)}		Standardized Approach			Advanced Approaches⁽⁵⁾			Regulatory Minimum⁽⁶⁾
Risk-based capital metrics:
Common equity tier 1 capital	$	169,925		$	169,925				$	165,875		$	165,875
Tier 1 capital	191,435			191,435					190,734			190,734
Total capital⁽⁷⁾	229,132			219,878					226,108			216,855
Risk-weighted assets (in billions)	1,396			1,547					1,411			1,524
Common equity tier 1 capital ratio	12.2		%	11.0		%	5.875	%	11.8		%	10.9		%	10.0	%
Tier 1 capital ratio	13.7			12.4			7.375		13.5			12.5			11.5
Total capital ratio	16.4			14.2			9.375		16.0			14.2			13.5

Leverage-based metrics:
Adjusted quarterly average assets (in billions) ⁽⁸⁾	$	2,111		$	2,111				$	2,112		$	2,112
Tier 1 leverage ratio	9.1		%	9.1		%	4.0		9.0		%	9.0		%	4.0

SLR leverage exposure (in billions)												$	2,704
SLR												7.1		%	5.0

	December 31, 2015
Risk-based capital metrics:
Common equity tier 1 capital	$	163,026		$	163,026				$	154,084		$	154,084
Tier 1 capital	180,778			180,778					175,814			175,814
Total capital⁽⁷⁾	220,676			210,912					211,167			201,403
Risk-weighted assets (in billions)	1,403			1,602					1,427			1,575
Common equity tier 1 capital ratio	11.6		%	10.2		%	4.5	%	10.8		%	9.8		%	10.0	%
Tier 1 capital ratio	12.9			11.3			6.0		12.3			11.2			11.5
Total capital ratio	15.7			13.2			8.0		14.8			12.8			13.5

Leverage-based metrics:
Adjusted quarterly average assets (in billions)⁽⁸⁾	$	2,103		$	2,103				$	2,102		$	2,102
Tier 1 leverage ratio	8.6		%	8.6		%	4.0		8.4		%	8.4		%	4.0

SLR leverage exposure (in billions)												$	2,727
SLR												6.4		%	5.0


⁽¹⁾	As an Advanced approaches institution, we are required to report regulatory capital risk-weighted assets and ratios under both the Standardized and Advanced approaches. The approach that yields the lower ratio is to be used to assess capital adequacy, and was the Advanced approaches at September 30, 2016 and December 31, 2015.


⁽²⁾	Under the applicable bank regulatory rules, we are not required to and, accordingly, did not restate previously-filed regulatory capital metrics and ratios in connection with the change in accounting method related to certain debt securities. As such, the December 31, 2015 amounts in the Table are as originally reported.


⁽³⁾	The September 30, 2016 amount includes a transition capital conservation buffer of 0.625 percent and a transition G-SIB surcharge of 0.75 percent. The 2016 countercyclical capital buffer is zero.


⁽⁴⁾	To be "well capitalized" under the current U.S. banking regulatory agency definitions, we must maintain a higher Total capital ratio of 10 percent.


⁽⁵⁾	Basel 3 fully phased-in Advanced approaches estimates assume approval by U.S. banking regulators of our internal analytical models, including approval of the internal models methodology (IMM). As of September 30, 2016, we did not have regulatory approval for the IMM model.

⁽⁶⁾

Fully phased-in regulatory capital minimums assume a capital conservation buffer of 2.5 percent and estimated G-SIB surcharge of 3.0 percent. The estimated fully phased-in countercyclical capital buffer is zero. We will be subject to fully phased-in regulatory minimums on January 1, 2019. The fully phased-in SLR minimum assumes a leverage buffer of 2.0 percent and is applicable on January 1, 2018.


⁽⁷⁾	Total capital under the Advanced approaches differs from the Standardized approach due to differences in the amount permitted in Tier 2 capital related to the qualifying allowance for credit losses.


⁽⁸⁾	Reflects adjusted average total assets for the three months ended September 30, 2016 and December 31, 2015.

Table of Contents

Common equity tier 1 capital under Basel 3 Advanced – Transition was $169.9 billion at September 30, 2016, an increase of $6.9 billion compared to December 31, 2015 driven by earnings and an increase in accumulated OCI, partially offset by dividends, common stock repurchases and the impact of certain transition provisions under the Basel 3 rules. During the nine months ended September 30, 2016, Total capital increased $9.0 billion primarily driven by the same factors that drove the increase in Common equity tier 1 capital as well as issuances of preferred stock and subordinated debt.

Risk-weighted assets decreased $55 billion during the nine months ended September 30, 2016 to $1,547 billion primarily due to lower market risk, and lower exposures and improved credit quality on legacy retail products.

Table 14 presents the capital composition as measured under Basel 3 – Transition at September 30, 2016 and December 31, 2015.



Table 14
Capital Composition under Basel 3 – Transition^{(1, 2, 3)}
(Dollars in millions)	September 30 2016			December 31 2015
Total common shareholders' equity	$	244,863		$	233,932
Goodwill	(69,192		)	(69,215		)
Deferred tax assets arising from net operating loss and tax credit carryforwards	(4,715		)	(3,434		)
Unamortized net periodic benefit costs recorded in accumulated OCI, net-of-tax	1,171			1,774
Net unrealized (gains) losses on debt and equity securities and net (gains) losses on derivatives recorded in accumulated OCI, net-of-tax	(560		)	1,220
Intangibles, other than mortgage servicing rights and goodwill	(1,279		)	(1,039		)
DVA related to liabilities and derivatives	252			204
Other	(615		)	(416		)
Common equity tier 1 capital	169,925			163,026
Qualifying preferred stock, net of issuance cost	25,220			22,273
Deferred tax assets arising from net operating loss and tax credit carryforwards	(3,143		)	(5,151		)
Trust preferred securities	—			1,430
Defined benefit pension fund assets	(375		)	(568		)
DVA related to liabilities and derivatives under transition	168			307
Other	(360		)	(539		)
Total Tier 1 capital	191,435			180,778
Long-term debt qualifying as Tier 2 capital	22,985			22,579
Eligible credit reserves included in Tier 2 capital	3,205			3,116
Nonqualifying capital instruments subject to phase out from Tier 2 capital	2,271			4,448
Other	(18		)	(9		)
Total Basel 3 capital	$	219,878		$	210,912


⁽¹⁾	As an Advanced approaches institution, we are required to report regulatory capital risk-weighted assets and ratios under both the Standardized and Advanced approaches. The approach that yields the lower ratio is to be used to assess capital adequacy, and was the Advanced approaches at September 30, 2016 and December 31, 2015.


⁽²⁾	Deductions from and adjustments to regulatory capital subject to transition provisions under Basel 3 are generally recognized in 20 percent annual increments, and will be fully recognized as of January 1, 2018. Any assets that are a direct deduction from the computation of capital are excluded from risk-weighted assets and adjusted average total assets.

⁽³⁾

Under the applicable bank regulatory rules, we are not required to and, accordingly, did not restate previously-filed regulatory capital metrics and ratios in connection with the change in accounting method related to certain debt securities. Therefore, the December 31, 2015 amounts in the Table are as originally reported. The cumulative impact of this change in accounting method would have resulted in an immaterial pro forma decrease in the Corporation's Common equity tier 1 capital of approximately one basis point at December 31, 2015. The September 30, 2016 amounts in the Table reflect the change in accounting method. For additional information, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements.

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Table 15 presents the components of our risk-weighted assets as measured under Basel 3 – Transition at September 30, 2016 and December 31, 2015.



Table 15
Risk-weighted assets under Basel 3 – Transition⁽¹⁾
	September 30, 2016				December 31, 2015
(Dollars in billions)	Standardized Approach		Advanced Approaches		Standardized Approach		Advanced Approaches
Credit risk	$	1,332	$	912	$	1,314	$	940
Market risk	64		62		89		86
Operational risk	n/a		500		n/a		500
Risks related to CVA	n/a		73		n/a		76
Total risk-weighted assets	$	1,396	$	1,547	$	1,403	$	1,602


⁽¹⁾	See Table 13, footnote 2.

n/a = not applicable

Table 16 presents a reconciliation of regulatory capital in accordance with Basel 3 Standardized – Transition to the Basel 3 Standardized approach fully phased-in estimates and Basel 3 Advanced approaches fully phased-in estimates at September 30, 2016 and December 31, 2015.



Table 16
Regulatory Capital Reconciliations between Basel 3 Transition to Fully Phased-in ^{(1, 2)}
(Dollars in millions)	September 30 2016			December 31 2015
Common equity tier 1 capital (transition)	$	169,925		$	163,026
Deferred tax assets arising from net operating loss and tax credit carryforwards phased in during transition	(3,143		)	(5,151		)
Accumulated OCI phased in during transition	188			(1,917		)
Intangibles phased in during transition	(853		)	(1,559		)
Defined benefit pension fund assets phased in during transition	(375		)	(568		)
DVA related to liabilities and derivatives phased in during transition	168			307
Other adjustments and deductions phased in during transition	(35		)	(54		)
Common equity tier 1 capital (fully phased-in)	165,875			154,084
Additional Tier 1 capital (transition)	21,510			17,752
Deferred tax assets arising from net operating loss and tax credit carryforwards phased out during transition	3,143			5,151
Trust preferred securities phased out during transition	—			(1,430		)
Defined benefit pension fund assets phased out during transition	375			568
DVA related to liabilities and derivatives phased out during transition	(168		)	(307		)
Other transition adjustments to additional Tier 1 capital	(1		)	(4		)
Additional Tier 1 capital (fully phased-in)	24,859			21,730
Tier 1 capital (fully phased-in)	190,734			175,814
Tier 2 capital (transition)	28,443			30,134
Nonqualifying capital instruments phased out during transition	(2,271		)	(4,448		)
Other adjustments to Tier 2 capital	9,202			9,667
Tier 2 capital (fully phased-in)	35,374			35,353
Basel 3 Standardized approach Total capital (fully phased-in)	226,108			211,167
Change in Tier 2 qualifying allowance for credit losses	(9,253		)	(9,764		)
Basel 3 Advanced approaches Total capital (fully phased-in)	$	216,855		$	201,403

Risk-weighted assets – As reported to Basel 3 (fully phased-in)
Basel 3 Standardized approach risk-weighted assets as reported	$	1,395,541		$	1,403,293
Changes in risk-weighted assets from reported to fully phased-in	15,587			24,089
Basel 3 Standardized approach risk-weighted assets (fully phased-in)	$	1,411,128		$	1,427,382

Basel 3 Advanced approaches risk-weighted assets as reported	$	1,547,221		$	1,602,373
Changes in risk-weighted assets from reported to fully phased-in	(23,502		)	(27,690		)
Basel 3 Advanced approaches risk-weighted assets (fully phased-in)⁽³⁾	$	1,523,719		$	1,574,683


⁽¹⁾	As an Advanced approaches institution, we are required to report regulatory capital risk-weighted assets and ratios under both the Standardized and Advanced approaches. The approach that yields the lower ratio is to be used to assess capital adequacy, and was the Advanced approaches at September 30, 2016 and December 31, 2015.


⁽²⁾	See Table 13, footnote 2.


⁽³⁾	Basel 3 fully phased-in Advanced approaches estimates assume approval by U.S. banking regulators of our internal analytical models, including approval of the IMM. As of September 30, 2016, we did not have regulatory approval for the IMM model.

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Bank of America, N.A. Regulatory Capital

Table 17 presents transition regulatory capital information for BANA in accordance with Basel 3 Standardized and Advanced approaches as measured at September 30, 2016 and December 31, 2015. As of September 30, 2016, BANA meets the definition of "well capitalized" under the PCA framework.



Table 17
Bank of America, N.A. Regulatory Capital under Basel 3
	September 30, 2016
	Standardized Approach						Advanced Approaches
(Dollars in millions)	Ratio		Amount		Minimum Required ⁽¹⁾		Ratio		Amount		Minimum Required ⁽¹⁾
Common equity tier 1 capital	13.1	%	$	152,976	6.5	%	14.5	%	$	152,976	6.5	%
Tier 1 capital	13.1		152,976		8.0		14.5		152,976		8.0
Total capital	14.3		167,037		10.0		15.1		158,345		10.0
Tier 1 leverage	9.6		152,976		5.0		9.6		152,976		5.0

	December 31, 2015
Common equity tier 1 capital	12.2	%	$	144,869	6.5	%	13.1	%	$	144,869	6.5	%
Tier 1 capital	12.2		144,869		8.0		13.1		144,869		8.0
Total capital	13.5		159,871		10.0		13.6		150,624		10.0
Tier 1 leverage	9.2		144,869		5.0		9.2		144,869		5.0


⁽¹⁾	Percent required to meet guidelines to be considered "well capitalized" under the PCA framework.

Regulatory Developments

Minimum Total Loss-Absorbing Capacity

On October 30, 2015, the Federal Reserve issued a notice of proposed rulemaking (NPR) to establish external total loss-absorbing capacity (TLAC) requirements to improve the resolvability and resiliency of large, interconnected BHCs. Under the proposal, U.S. G-SIBs would be required to maintain a minimum external TLAC of the greater of: (1) 16 percent of risk-weighted assets in 2019, increasing to 18 percent of risk-weighted assets in 2022 (plus additional TLAC equal to enough Common equity tier 1 capital as a percentage of risk-weighted assets to cover the capital conservation buffer, any applicable countercyclical capital buffer plus the applicable method 1 G-SIB surcharge), or (2) 9.5 percent of the denominator of the SLR. In addition, U.S. G-SIBs must meet a minimum long-term debt requirement equal to the greater of: 6.0 percent of risk-weighted assets plus the applicable method 2 G-SIB surcharge, or 4.5 percent of the denominator of the SLR.

Revisions to Approaches for Measuring Risk-weighted Assets

The Basel Committee has several open proposals to revise key methodologies for measuring risk-weighted assets. The proposals include a standardized approach for credit risk, standardized approach for operational risk, revisions to the credit valuation adjustment (CVA) risk framework and constraints on the use of internal models. The Basel Committee has also finalized a revised standardized model for counterparty credit risk, revisions to the securitization framework and its fundamental review of the trading book, which updates both modeled and standardized approaches for market risk measurement. These revisions are to be coupled with a proposed capital floor framework to limit the extent to which banks can reduce risk-weighted asset levels through the use of internal models, both at the input parameter and aggregate risk-weighted asset level. The Basel Committee expects to finalize the outstanding proposals by early 2017. Once the proposals are finalized, U.S. banking regulators may update the U.S. Basel 3 rules to incorporate the Basel Committee revisions.

Single-Counterparty Credit Limits

On March 4, 2016, the Federal Reserve issued an NPR to establish Single-Counterparty Credit Limits (SCCL) for large U.S. BHCs. The SCCL rule is designed to complement and serve as a backstop to risk-based capital requirements to ensure that the maximum possible loss that a bank could incur due to a single counterparty's default would not endanger the bank's survival. Under the proposal, U.S. BHCs must calculate SCCL by dividing the net aggregate credit exposure to a given counterparty by a bank's eligible Tier 1 capital base, ensuring that exposure to G-SIBs and other nonbank systemically important financial institutions does not breach 15 percent and exposures to other counterparties do not breach 25 percent.

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Broker-dealer Regulatory Capital and Securities Regulation

The Corporation's principal U.S. broker-dealer subsidiaries are Merrill Lynch, Pierce, Fenner & Smith, Incorporated (MLPF&S) and Merrill Lynch Professional Clearing Corp (MLPCC). MLPCC is a fully-guaranteed subsidiary of MLPF&S and provides clearing and settlement services. Both entities are subject to the net capital requirements of SEC Rule 15c3-1. Both entities are also registered as futures commission merchants and are subject to the Commodity Futures Trading Commission Regulation 1.17.

MLPF&S has elected to compute the minimum capital requirement in accordance with the Alternative Net Capital Requirement as permitted by SEC Rule 15c3-1. At September 30, 2016, MLPF&S's regulatory net capital as defined by Rule 15c3-1 was $12.2 billion and exceeded the minimum requirement of $1.6 billion by $10.6 billion. MLPCC's net capital of $3.1 billion exceeded the minimum requirement of $451 million by $2.7 billion.

In accordance with the Alternative Net Capital Requirements, MLPF&S is required to maintain tentative net capital in excess of $1.0 billion, net capital in excess of $500 million and notify the Securities and Exchange Commission in the event its tentative net capital is less than $5.0 billion. At September 30, 2016, MLPF&S had tentative net capital and net capital in excess of the minimum and notification requirements.

Merrill Lynch International (MLI), a U.K. investment firm, is regulated by the Prudential Regulation Authority and the Financial Conduct Authority, and is subject to certain regulatory capital requirements. At September 30, 2016, MLI's capital resources were $34.9 billion which exceeded the minimum requirement of $15.6 billion.

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Common and Preferred Stock Dividends

Table 18 is a summary of our cash dividend declarations on preferred stock during the third quarter of 2016 and through November 1, 2016. During the third quarter of 2016, we declared $503 million of cash dividends on preferred stock. For more information on preferred stock and a summary of our declared quarterly cash dividends on common stock, see Note 11 – Shareholders' Equity to the Consolidated Financial Statements.



Table 18
Preferred Stock Cash Dividend Summary
Preferred Stock	Outstanding Notional Amount (in millions)		Declaration Date	Record Date	Payment Date	Per Annum Dividend Rate		Dividend Per Share
Series B ⁽¹⁾	$	1	July 27, 2016	October 11, 2016	October 25, 2016	7.00	%	$	1.75
			October 27, 2016	January 11, 2017	January 25, 2017	7.00		1.75
Series D ⁽²⁾	$	654	July 7, 2016	August 31, 2016	September 14, 2016	6.204	%	$	0.38775
			October 10, 2016	November 30, 2016	December 14, 2016	6.204		0.38775
Series E ⁽²⁾	$	317	July 7, 2016	July 29, 2016	August 15, 2016	Floating		$	0.25556
			October 10, 2016	October 31, 2016	November 15, 2016	Floating		0.25556
Series F	$	141	July 7, 2016	August 31, 2016	September 15, 2016	Floating		$	1,022.22222
			October 10, 2016	November 30, 2016	December 15, 2016	Floating		1,011.11111
Series G	$	493	July 7, 2016	August 31, 2016	September 15, 2016	Adjustable		$	1,022.22222
			October 10, 2016	November 30, 2016	December 15, 2016	Adjustable		1,011.11111
Series I ⁽²⁾	$	365	July 7, 2016	September 15, 2016	October 3, 2016	6.625	%	$	0.4140625
			October 10, 2016	December 15, 2016	January 3, 2017	6.625		0.4140625
Series K ^{(3, 4)}	$	1,544	July 7, 2016	July 15, 2016	August 1, 2016	Fixed-to-floating		$	40.00
Series L	$	3,080	September 16, 2016	October 1, 2016	October 31, 2016	7.25	%	$	18.125
Series M ^{(3, 4)}	$	1,310	October 10, 2016	October 31, 2016	November 15, 2016	Fixed-to-floating		$	40.625
Series T	$	5,000	July 27, 2016	September 25, 2016	October 11, 2016	6.00	%	$	1,500.00
			October 27, 2016	December 26, 2016	January 10, 2017	6.00		1,500.00
Series U ^{(3, 4)}	$	1,000	October 10, 2016	November 15, 2016	December 1, 2016	Fixed-to-floating		$	26.00
Series V ^{(3, 4)}	$	1,500	October 10, 2016	December 1, 2016	December 19, 2016	Fixed-to-floating		$	25.625
Series W ⁽²⁾	$	1,100	July 7, 2016	August 15, 2016	September 9, 2016	6.625	%	$	0.4140625
			October 10, 2016	November 15, 2016	December 9, 2016	6.625		0.4140625
Series X ^{(3, 4)}	$	2,000	July 7, 2016	August 15, 2016	September 6, 2016	Fixed-to-floating		$	31.25
Series Y ⁽²⁾	$	1,100	September 16, 2016	October 1, 2016	October 27, 2016	6.50	%	$	0.40625
Series Z ^{(3, 4)}	$	1,400	September 16, 2016	October 1, 2016	October 24, 2016	Fixed-to-floating		$	32.50
Series AA ^{(3, 4)}	$	1,900	July 7, 2016	September 1, 2016	September 19, 2016	Fixed-to-floating		$	30.50
Series CC ⁽²⁾	$	1,100	September 16, 2016	October 1, 2016	October 31, 2016	6.20	%	$	0.3875
Series DD ^{(3, 4)}	$	1,000	July 7, 2016	August 15, 2016	September 12, 2016	Fixed-to-floating		$	31.50
Series EE ⁽²⁾	$	900	September 16, 2016	October 1, 2016	October 25, 2016	6.00	%	$	0.375
Series 1 ⁽⁵⁾	$	98	July 7, 2016	August 15, 2016	August 30, 2016	Floating		$	0.18750
			October 10, 2016	November 15, 2016	November 28, 2016	Floating		0.18750
Series 2 ⁽⁵⁾	$	299	July 7, 2016	August 15, 2016	August 30, 2016	Floating		$	0.19167
			October 10, 2016	November 15, 2016	November 28, 2016	Floating		0.19167
Series 3 ⁽⁵⁾	$	653	July 7, 2016	August 15, 2016	August 29, 2016	6.375	%	$	0.3984375
			October 10, 2016	November 15, 2016	November 28, 2016	6.375		0.3984375
Series 4 ⁽⁵⁾	$	210	July 7, 2016	August 15, 2016	August 30, 2016	Floating		$	0.25556
			October 10, 2016	November 15, 2016	November 28, 2016	Floating		0.25556
Series 5 ⁽⁵⁾	$	422	July 7, 2016	August 1, 2016	August 22, 2016	Floating		$	0.25556
			October 10, 2016	November 1, 2016	November 21, 2016	Floating		0.25556


⁽¹⁾	Dividends are cumulative.


⁽²⁾	Dividends per depositary share, each representing a 1/1,000^th interest in a share of preferred stock.


⁽³⁾	Initially pays dividends semi-annually.


⁽⁴⁾	Dividends per depositary share, each representing a 1/25^th interest in a share of preferred stock.


⁽⁵⁾	Dividends per depositary share, each representing a 1/1,200^th interest in a share of preferred stock.

Table of Contents

Liquidity Risk

Funding and Liquidity Risk Management

Liquidity risk is the potential inability to meet expected or unexpected cash flow and collateral needs while continuing to support our businesses and customers with the appropriate funding sources under a range of economic conditions. Our primary liquidity risk management objective is to meet all contractual and contingent financial obligations at all times, including during periods of stress. To achieve that objective, we analyze and monitor our liquidity risk under expected and stressed conditions, maintain liquidity and access to diverse funding sources, including our stable deposit base, and seek to align liquidity-related incentives and risks.

We define liquidity as readily available assets, limited to cash and high-quality, liquid, unencumbered securities that we can use to meet our contractual and contingent financial obligations as those obligations arise. We manage our liquidity position through line of business and asset-liability management activities, as well as through our legal entity funding strategy, on both a forward and current (including intraday) basis under both expected and stressed conditions. We believe that a centralized approach to funding and liquidity management within Corporate Treasury enhances our ability to monitor liquidity requirements, maximizes access to funding sources, minimizes borrowing costs and facilitates timely responses to liquidity events. For more information regarding global funding and liquidity risk management, see Liquidity Risk – Funding and Liquidity Risk Management in the MD&A of the Corporation's 2015 Annual Report on Form 10-K.

Global Liquidity Sources and Other Unencumbered Assets

We maintain liquidity available to Bank of America Corporation, including the parent company and selected subsidiaries, in the form of cash and high-quality, liquid, unencumbered securities. Our liquidity buffer, referred to as Global Liquidity Sources (GLS), formerly GELS, is comprised of assets that are readily available to the parent company and selected subsidiaries, including holding company, bank and broker-dealer subsidiaries, even during stressed market conditions. Our cash is primarily on deposit with the Federal Reserve and, to a lesser extent, central banks outside of the U.S. We limit the composition of high-quality, liquid, unencumbered securities to U.S. government securities, U.S. agency securities, U.S. agency MBS and a select group of non-U.S. government and supranational securities. We believe we can quickly obtain cash for these securities, even in stressed conditions, through repurchase agreements or outright sales. We hold our GLS in legal entities that allow us to meet the liquidity requirements of our global businesses, and we consider the impact of potential regulatory, tax, legal and other restrictions that could limit the transferability of funds among entities.

Pursuant to the Federal Reserve and FDIC request disclosed in our Current Report on Form 8-K dated April 13, 2016, we provided our resolution plan submission on September 30, 2016. In connection with our resolution planning activities, in the third quarter, we entered into intercompany arrangements with certain key subsidiaries under which we have transferred certain of our parent company assets (and have agreed to transfer certain additional parent company assets) to NB Holdings, Inc., a wholly-owned holding company subsidiary (NB Holdings). The parent company is expected to continue to have access to the same flow of dividends, interest, and other amounts of cash necessary to service its debt, pay dividends, and perform other obligations as it would have had if it had not entered into these arrangements and transferred any assets.

In consideration for the transfer of assets, NB Holdings issued a subordinated note to the parent company in a principal amount equal to the value of the transferred assets; the aggregate principal amount of the note will increase by the amount of any future asset transfers. The note will pay quarterly interest in excess of any interest payable on any intercompany loans transferred to NB Holdings. NB Holdings also provided the parent company with a committed line of credit that allows the parent company to draw funds necessary to service near-term cash needs. These arrangements support our preferred single point of entry resolution strategy, under which only the parent company would be resolved under the U.S Bankruptcy Code. These arrangements include provisions to terminate the line of credit, forgive the subordinated note and require the parent company to transfer its remaining financial assets to NB Holdings if our projected liquidity resources deteriorate so severely that resolution of the parent company becomes imminent.

Our GLS are substantially the same in composition to what qualifies as High Quality Liquid Assets (HQLA) under the final U.S. Liquidity Coverage Ratio (LCR) rules. For more information on the final LCR rules, see Liquidity Risk – Basel 3 Liquidity Standards on page 49.

Table of Contents

Our GLS were $522 billion and $504 billion at September 30, 2016 and December 31, 2015 and were as shown in Table 19.



Table 19
Global Liquidity Sources
(Dollars in billions)	September 30 2016		December 31 2015		Average for Three Months Ended September 30, 2016
Parent company and NB Holdings	$	80	$	96	$	85
Bank subsidiaries	394		361		392
Other regulated entities	48		47		46
Total Global Liquidity Sources	$	522	$	504	$	523

As shown in Table 19, parent company and NB Holdings liquidity totaled $80 billion and $96 billion at September 30, 2016 and December 31, 2015. The decrease in parent company and NB Holdings liquidity was primarily due to the BNY Mellon settlement payment in the first quarter of 2016. Typically, parent company and NB Holdings liquidity is in the form of cash deposited with BANA.

Liquidity held at our bank subsidiaries totaled $394 billion and $361 billion at September 30, 2016 and December 31, 2015. The increase in bank subsidiaries' liquidity was primarily due to deposit inflows. Liquidity at bank subsidiaries excludes the cash deposited by the parent company and NB Holdings. Our bank subsidiaries can also generate incremental liquidity by pledging a range of unencumbered loans and securities to certain Federal Home Loan Banks (FHLBs) and the Federal Reserve Discount Window. The cash we could have obtained by borrowing against this pool of specifically-identified eligible assets was $294 billion and $252 billion at September 30, 2016 and December 31, 2015. We have established operational procedures to enable us to borrow against these assets, including regularly monitoring our total pool of eligible loans and securities collateral. Eligibility is defined in guidelines from the FHLBs and the Federal Reserve and is subject to change at their discretion. Due to regulatory restrictions, liquidity generated by the bank subsidiaries can generally be used only to fund obligations within the bank subsidiaries and can only be transferred to the parent company or nonbank subsidiaries with prior regulatory approval.

Liquidity held at our other regulated entities, comprised primarily of broker-dealer subsidiaries, totaled $48 billion and $47 billion at September 30, 2016 and December 31, 2015. Our other regulated entities also held unencumbered investment-grade securities and equities that we believe could be used to generate additional liquidity. Liquidity held in an other regulated entity is primarily available to meet the obligations of that entity and transfers to the parent company or to any other subsidiary may be subject to prior regulatory approval due to regulatory restrictions and minimum requirements.

Table 20 presents the composition of GLS at September 30, 2016 and December 31, 2015.



Table 20
Global Liquidity Sources Composition
(Dollars in billions)	September 30 2016		December 31 2015
Cash on deposit	$	111	$	119
U.S. Treasury securities	62		38
U.S. agency securities and mortgage-backed securities	331		327
Non-U.S. government and supranational securities	18		20
Total Global Liquidity Sources	$	522	$	504

Table of Contents

Time-to-required Funding and Liquidity Stress Analysis

We use a variety of metrics to determine the appropriate amounts of liquidity to maintain at the parent company and our subsidiaries. One metric we use to evaluate the appropriate level of liquidity at the parent company and NB Holdings is "time-to-required funding (TTF)." This debt coverage measure indicates the number of months the parent company can continue to meet its unsecured contractual obligations as they come due using only the parent company and NB Holdings' liquidity sources without issuing any new debt or accessing any additional liquidity sources. We define unsecured contractual obligations for purposes of this metric as maturities of senior or subordinated 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. Prior to the third quarter of 2016, the TTF metric incorporated only the liquidity of the parent company. During the third quarter of 2016, the TTF metric was expanded to include the liquidity of NB Holdings, following changes in the Corporation's liquidity management practices, initiated in connection with the Corporation's resolution planning activities, that include maintaining at NB Holdings certain liquidity previously held solely at the parent company. Our time-to-required funding was 38 months at September 30, 2016.

We also utilize liquidity stress analysis to assist us in determining the appropriate amounts of liquidity to maintain at the parent company and our subsidiaries. The liquidity stress testing process is an integral part of analyzing our potential contractual and contingent cash outflows. We evaluate the liquidity requirements under a range of scenarios with varying levels of severity and time horizons. The scenarios we consider and utilize incorporate market-wide and Corporation-specific events, including potential credit rating downgrades for the parent company and our subsidiaries, and more severe events including potential resolution scenarios. The scenarios are based on historical experience of the Corporation, experience of distressed and failed financial firms, regulatory guidance, and both expected and unexpected future events.

The types of potential contractual and contingent cash outflows we consider in our scenarios may include, but are not limited to, upcoming contractual maturities of unsecured debt and reductions in new debt issuance; diminished access to secured financing markets; potential deposit withdrawals; increased draws on loan commitments, liquidity facilities and letters of credit; additional collateral that counterparties could call if our credit ratings were downgraded; collateral and margin requirements arising from market value changes; and potential liquidity required to maintain businesses and finance customer activities. Changes in certain market factors including, but not limited to, credit rating downgrades, could negatively impact potential contractual and contingent outflows and the related financial instruments, and in some cases these impacts could be material to our financial results.

We consider all sources of funds that we could access during each stress scenario and focus particularly on matching available sources with corresponding liquidity requirements by legal entity. We also use the stress modeling results to manage our asset-liability profile and establish limits and guidelines on certain funding sources and businesses.

Basel 3 Liquidity Standards

There are two liquidity risk-related standards that are considered part of the Basel 3 liquidity standards: the LCR and the Net Stable Funding Ratio (NSFR).

The LCR is calculated as the amount of a financial institution's unencumbered HQLA relative to the estimated net cash outflows the institution could encounter over a 30-day period of significant liquidity stress, expressed as a percentage. An initial minimum LCR of 80 percent was required as of January 2015, increased to 90 percent as of January 2016 and will increase to 100 percent in January 2017. These minimum requirements are applicable to the Corporation on a consolidated basis and to our insured depository institutions. As of September 30, 2016, we estimate that the consolidated Corporation was above the 2017 LCR requirements. The Corporation's LCR may fluctuate from period to period due to normal business flows from customer activity.

In 2014, the Basel Committee issued a final standard for the NSFR, the standard that is intended to reduce funding risk over a longer time horizon. The NSFR is designed to ensure an appropriate amount of stable funding, generally capital and liabilities maturing beyond one year, given the mix of assets and off-balance sheet items. In April 2016, U.S. banking regulators issued a proposal for an NSFR requirement applicable to U.S. financial institutions. The U.S. NSFR would apply to the Corporation on a consolidated basis and to our insured depository institutions beginning on January 1, 2018. We expect to meet the NSFR requirement within the regulatory timeline.

Diversified Funding Sources

We fund our assets primarily with a mix of deposits and secured and unsecured liabilities through a centralized, globally coordinated funding approach. We diversify our funding globally across products, programs, markets, currencies and investor groups.

The primary benefits of our centralized funding approach include greater control, reduced funding costs, wider name recognition by investors and greater flexibility to meet the variable funding requirements of subsidiaries. Where regulations, time zone differences or other business considerations make parent company funding impractical, certain other subsidiaries may issue their own debt.

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We fund a substantial portion of our lending activities through our deposits, which were $1.23 trillion and $1.20 trillion at September 30, 2016 and December 31, 2015. Deposits are primarily generated by our Consumer Banking, GWIM and Global Banking segments. These deposits are diversified by clients, product type and geography, and the majority of our U.S. deposits are insured by the FDIC. We consider a substantial portion of our deposits to be a stable, low-cost and consistent source of funding. We believe this deposit funding is generally less sensitive to interest rate changes, market volatility or changes in our credit ratings than wholesale funding sources. Our lending activities may also be financed through secured borrowings, including credit card securitizations and securitizations with GSEs, the FHA and private-label investors, as well as FHLB loans.

Our trading activities in other regulated entities are primarily funded on a secured basis through securities lending and repurchase agreements and these amounts will vary based on customer activity and market conditions. We believe funding these activities in the secured financing markets is more cost-efficient and less sensitive to changes in our credit ratings than unsecured financing. Repurchase agreements are generally short-term and often overnight. Disruptions in secured financing markets for financial institutions have occurred in prior market cycles which resulted in adverse changes in terms or significant reductions in the availability of such financing. We manage the liquidity risks arising from secured funding by sourcing funding globally from a diverse group of counterparties, providing a range of securities collateral and pursuing longer durations, when appropriate. For more information on secured financing agreements, see Note 9 – 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 to maintain an appropriate maturity profile. While the cost and availability of unsecured funding may be negatively impacted by general market conditions or by matters specific to the financial services industry or the Corporation, we seek to mitigate refinancing risk by actively managing the amount of our borrowings that we anticipate will mature within any month or quarter.

During the three and nine months ended September 30, 2016, we issued $8.9 billion and $24.8 billion of long-term debt, consisting of $7.2 billion and $18.7 billion for Bank of America Corporation, $35 million and $966 million for Bank of America, N.A. and $1.7 billion and $5.1 billion of other debt.

Table 21 presents the carrying value of aggregate annual contractual maturities of long-term debt as of September 30, 2016. During the nine months ended September 30, 2016, we had total long-term debt maturities and purchases of $41.3 billion consisting of $25.6 billion for Bank of America Corporation, $9.1 billion for Bank of America, N.A. and $6.6 billion of other debt.



Table 21
Long-term Debt By Maturity
	Remainder of
(Dollars in millions)	2016		2017		2018		2019		2020		Thereafter		Total
Bank of America Corporation
Senior notes	$	3,042	$	18,336	$	20,007	$	18,290	$	11,594	$	52,751	$	124,020
Senior structured notes	802		3,941		2,950		1,422		980		8,200		18,295
Subordinated notes	352		5,024		2,770		1,498		—		21,078		30,722
Junior subordinated notes	—		—		—		—		—		3,830		3,830
Total Bank of America Corporation	4,196		27,301		25,727		21,210		12,574		85,859		176,867
Bank of America, N.A.
Senior notes	2,499		3,649		5,790		—		—		21		11,959
Subordinated notes	—		3,359		—		1		—		1,831		5,191
Advances from Federal Home Loan Banks	—		9		9		14		12		120		164
Securitizations and other Bank VIEs ⁽¹⁾	11		3,477		2,300		3,199		—		134		9,121
Other	—		2,718		107		111		14		133		3,083
Total Bank of America, N.A.	2,510		13,212		8,206		3,325		26		2,239		29,518
Other debt
Structured liabilities	920		3,834		1,212		1,418		1,059		8,168		16,611
Nonbank VIEs ⁽¹⁾	451		244		29		16		—		1,348		2,088
Other	—		1		—		—		—		51		52
Total other debt	1,371		4,079		1,241		1,434		1,059		9,567		18,751
Total long-term debt	$	8,077	$	44,592	$	35,174	$	25,969	$	13,659	$	97,665	$	225,136


⁽¹⁾	Represents the total long-term debt included in the liabilities of consolidated variable interest entities (VIEs) on the Consolidated Balance Sheet.

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Table 22 presents our long-term debt by major currency at September 30, 2016 and December 31, 2015.



Table 22
Long-term Debt By Major Currency
(Dollars in millions)	September 30 2016		December 31 2015
U.S. Dollar	$	175,874	$	190,381
Euro	30,839		29,797
British Pound	7,504		7,080
Japanese Yen	4,468		3,099
Australian Dollar	3,083		2,534
Canadian Dollar	1,095		1,428
Other	2,273		2,445
Total long-term debt	$	225,136	$	236,764

Total long-term debt decreased $11.6 billion, or five percent, during the nine months ended September 30, 2016 primarily due to maturities outpacing issuances. We may, from time to time, purchase outstanding debt instruments in various transactions, depending on prevailing market conditions, liquidity and other factors. In addition, our other regulated 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 of the Corporation's 2015 Annual Report on Form 10-K and for more information regarding funding and liquidity risk management, see Liquidity Risk – Time-to-required Funding and Stress Modeling in the MD&A of the Corporation's 2015 Annual Report on Form 10-K.

We use derivative transactions to manage the duration, interest rate and currency risks of our borrowings, considering the characteristics of the assets they are funding. For further details on our ALM activities, see Interest Rate Risk Management for the Banking Book on page 89.

We may also issue unsecured debt in the form of structured notes for client purposes. During the three and nine months ended September 30, 2016, we issued $1.7 billion and $5.2 billion of structured notes, a majority of which were issued by Bank of America Corporation. Structured notes are debt obligations that pay investors returns linked to other debt or equity securities, indices, currencies or commodities. We typically hedge the returns we are obligated to pay on these liabilities with derivatives and/or investments in the underlying instruments, so that from a funding perspective, the cost is similar to our other unsecured long-term debt. We could be required to settle certain structured note obligations for cash or other securities prior to maturity under certain circumstances, which we consider for liquidity planning purposes. We believe, however, that a portion of such borrowings will remain outstanding beyond the earliest put or redemption date.

Substantially all of our senior and subordinated debt obligations contain no provisions that could trigger a requirement for an early repayment, require additional collateral support, result in changes to terms, accelerate maturity or create additional financial obligations upon an adverse change in our credit ratings, financial ratios, earnings, cash flows or stock price.

Contingency Planning

We maintain contingency funding plans that outline our potential responses to liquidity stress events at various levels of severity. These policies and plans are based on stress scenarios and include potential funding strategies and communication and notification procedures that we would implement in the event we experienced stressed liquidity conditions. We periodically review and test the contingency funding plans to validate efficacy and assess readiness.

Our U.S. bank subsidiaries can access contingency funding through the Federal Reserve Discount Window. Certain non-U.S. subsidiaries have access to central bank facilities in the jurisdictions in which they operate. While we do not rely on these sources in our liquidity modeling, we maintain the policies, procedures and governance processes that would enable us to access these sources if necessary.

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Credit Ratings

Credit ratings and outlooks are opinions expressed by rating agencies on our creditworthiness and that of our obligations or securities, including long-term debt, short-term borrowings, preferred stock and other securities, including asset securitizations. Table 23 presents the Corporation's current long-term/short-term senior debt ratings and outlooks expressed by the rating agencies. These ratings have not changed from those disclosed in the Corporation's 2015 Annual Report on Form 10-K. For more information on credit ratings, see Liquidity Risk – Credit Ratings in the MD&A of the Corporation's 2015 Annual Report on Form 10-K.

Table 23

Senior Debt Ratings

Moody's Investors Service

Standard & Poor's

Fitch Ratings

Long-term

Short-term

Outlook

Long-term

Short-term ⁽¹⁾

Outlook

Long-term

Short-term

Outlook

Bank of America Corporation

Baa1

P-2

Stable

BBB+

A-2

Stable

Bank of America, N.A.

P-1

Stable

A-1

CreditWatch Positive

A+

Stable

Merrill Lynch, Pierce, Fenner &
Smith, Incorporated

A-1

CreditWatch Positive

A+

Stable

Merrill Lynch International

A-1

CreditWatch Positive

Positive


⁽¹⁾	Standard & Poor's Ratings Services short-term ratings are not on CreditWatch.

NR = not rated

For 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 2 – Derivatives to the Consolidated Financial Statements herein and Item 1A. Risk Factors of the Corporation's 2015 Annual Report on Form 10-K.

Credit Risk Management

For more information on our credit risk management activities, see Consumer Portfolio Credit Risk Management below, Commercial Portfolio Credit Risk Management on page 67, Non-U.S. Portfolio on page 78, Provision for Credit Losses on page 79, Allowance for Credit Losses on page 80, and Note 4 – Outstanding Loans and Leases and Note 5 – Allowance for Credit Losses to the Consolidated Financial Statements.

Consumer Portfolio Credit Risk Management

Credit risk management for the consumer portfolio begins with initial underwriting and continues throughout a borrower's credit cycle. Statistical techniques in conjunction with experiential judgment are used in all aspects of portfolio management including underwriting, product pricing, risk appetite, setting credit limits, and establishing operating processes and metrics to quantify and balance risks and returns. Statistical models are built using detailed behavioral information from external sources such as credit bureaus and/or internal historical experience. These models are a component of our consumer credit risk management process and are used in part to assist in making both new and ongoing credit decisions, as well as portfolio management strategies, including authorizations and line management, collection practices and strategies, and determination of the allowance for loan and lease losses and allocated capital for credit risk.

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Consumer Credit Portfolio

Improvement in the U.S. unemployment rate and home prices continued during the three and nine months ended September 30, 2016 resulting in improved credit quality and lower credit losses across most major consumer portfolios compared to the same periods in 2015. The 30 and 90 days or more past due balances declined across nearly all consumer loan portfolios during the nine months ended September 30, 2016 as a result of improved delinquency trends.

Improved credit quality, continued loan balance run-off and sales across the consumer portfolio drove a $1.0 billion decrease in the consumer allowance for loan and lease losses during the nine months ended September 30, 2016 to $6.4 billion at September 30, 2016. For additional information, see Allowance for Credit Losses on page 80.

For more information on our accounting policies regarding delinquencies, nonperforming status, charge-offs and troubled debt restructurings (TDRs) for the consumer portfolio, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation's 2015 Annual Report on Form 10-K.

Table 24 presents our outstanding consumer loans and leases, and the PCI loan portfolio. In addition to being included in the "Outstandings" columns in Table 24, PCI loans are also shown separately in the "Purchased Credit-impaired Loan Portfolio" columns. The impact of the PCI loan portfolio on certain credit statistics is reported where appropriate. For more information on PCI loans, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 62 and Note 4 – Outstanding Loans and Leases to the Consolidated Financial Statements.



Table 24
Consumer Loans and Leases
	Outstandings				Purchased Credit-impaired Loan Portfolio
(Dollars in millions)	September 30 2016		December 31 2015		September 30 2016		December 31 2015
Residential mortgage ⁽¹⁾	$	187,968	$	187,911	$	10,614	$	12,066
Home equity	68,997		75,948		3,854		4,619
U.S. credit card	88,789		89,602		n/a		n/a
Non-U.S. credit card	9,258		9,975		n/a		n/a
Direct/Indirect consumer ⁽²⁾	93,294		88,795		n/a		n/a
Other consumer ⁽³⁾	2,389		2,067		n/a		n/a
Consumer loans excluding loans accounted for under the fair value option	450,695		454,298		14,468		16,685
Loans accounted for under the fair value option ⁽⁴⁾	1,768		1,871		n/a		n/a
Total consumer loans and leases	$	452,463	$	456,169	$	14,468	$	16,685


⁽¹⁾	Outstandings include pay option loans of $1.9 billion and $2.3 billion at September 30, 2016 and December 31, 2015. We no longer originate pay option loans.

⁽²⁾

Outstandings include auto and specialty lending loans of $47.8 billion and $42.6 billion, unsecured consumer lending loans of $630 million and $886 million, U.S. securities-based lending loans of $40.1 billion and $39.8 billion, non-U.S. consumer loans of $3.1 billion and $3.9 billion, student loans of $514 million and $564 million and other consumer loans of $1.1 billion and $1.0 billion at September 30, 2016 and December 31, 2015.


⁽³⁾	Outstandings include consumer finance loans of $489 million and $564 million, consumer leases of $1.7 billion and $1.4 billion and consumer overdrafts of $151 million and $146 million at September 30, 2016 and December 31, 2015.


⁽⁴⁾	Consumer loans accounted for under the fair value option include residential mortgage loans of $1.4 billion and $1.6 billion and home equity loans of $340 million and $250 million at September 30, 2016 and December 31, 2015. For more information on the fair value option, see Note 15 – Fair Value Option to the Consolidated Financial Statements.

n/a = not applicable

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Table 25 presents consumer nonperforming loans and accruing consumer loans past due 90 days or more. Nonperforming loans do not include past due consumer credit card loans, other unsecured loans and in general, consumer loans not secured by real estate (loans discharged in Chapter 7 bankruptcy are included) as these loans are typically charged off no later than the end of the month in which the loan becomes 180 days past due. Real estate-secured past due consumer loans that are insured by the FHA or individually insured under long-term standby agreements with FNMA and FHLMC (collectively, the fully-insured loan portfolio) are reported as accruing as opposed to nonperforming since the principal repayment is insured. Fully-insured loans included in accruing past due 90 days or more are primarily from our repurchases of delinquent FHA loans pursuant to our servicing agreements with GNMA. Additionally, nonperforming loans and accruing balances past due 90 days or more do not include the PCI loan portfolio or loans accounted for under the fair value option even though the customer may be contractually past due.



Table 25
Consumer Credit Quality
	Nonperforming						Accruing Past Due 90 Days or More
(Dollars in millions)	September 30 2016			December 31 2015			September 30 2016			December 31 2015
Residential mortgage ⁽¹⁾	$	3,341		$	4,803		$	5,117		$	7,150
Home equity	2,982			3,337			—			—
U.S. credit card	n/a			n/a			702			789
Non-U.S. credit card	n/a			n/a			65			76
Direct/Indirect consumer	26			24			29			39
Other consumer	1			1			3			3
Total ⁽²⁾	$	6,350		$	8,165		$	5,916		$	8,057
Consumer loans and leases as a percentage of outstanding consumer loans and leases ⁽²⁾	1.41		%	1.80		%	1.31		%	1.77		%
Consumer loans and leases as a percentage of outstanding loans and leases, excluding PCI and fully-insured loan portfolios ⁽²⁾	1.56			2.04			0.20			0.23

⁽¹⁾

Residential mortgage loans accruing past due 90 days or more are fully-insured loans. At September 30, 2016 and December 31, 2015, residential mortgage included $3.3 billion and $4.3 billion of loans on which interest has been curtailed by the FHA, and therefore are no longer accruing interest, although principal is still insured, and $1.8 billion and $2.9 billion of loans on which interest was still accruing.


⁽²⁾	Balances exclude consumer loans accounted for under the fair value option. At September 30, 2016 and December 31, 2015, $222 million and $293 million of loans accounted for under the fair value option were past due 90 days or more and not accruing interest.

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
	Net Charge-offs ⁽¹⁾								Net Charge-off Ratios ^{(1, 2)}
	Three Months Ended September 30				Nine Months Ended September 30				Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	2016		2015		2016		2015		2016		2015		2016		2015
Residential mortgage	$	4	$	26	$	129	$	400	0.01	%	0.05	%	0.09	%	0.26	%
Home equity	97		120		335		443		0.55		0.60		0.61		0.72
U.S. credit card	543		546		1,703		1,751		2.45		2.46		2.60		2.66
Non-U.S. credit card	43		47		134		142		1.83		1.83		1.84		1.88
Direct/Indirect consumer	34		25		91		83		0.14		0.12		0.13		0.13
Other consumer	57		57		152		139		9.74		11.21		9.09		9.72
Total	$	778	$	821	$	2,544	$	2,958	0.69		0.71		0.76		0.84


⁽¹⁾	Net charge-offs exclude write-offs in the PCI loan portfolio. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 62.


⁽²⁾	Net charge-off ratios are calculated as annualized net charge-offs divided by average outstanding loans and leases excluding loans accounted for under the fair value option.

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Net charge-off ratios, excluding the PCI and fully-insured loan portfolios, were 0.01 percent and 0.12 percent for residential mortgage, 0.58 percent and 0.65 percent for home equity, and 0.77 percent and 0.85 percent for the total consumer portfolio for the three and nine months ended September 30, 2016, respectively. Net charge-off ratios, excluding the PCI and fully-insured loan portfolios, were 0.08 percent and 0.39 percent for residential mortgage, 0.64 percent and 0.77 percent for home equity, and 0.82 percent and one percent for the total consumer portfolio for the three and nine months ended September 30, 2015, respectively. These are the only product classifications that include PCI and fully-insured loans.

Net charge-offs, as shown in Tables 26 and 27, exclude write-offs in the PCI loan portfolio of $33 million and $109 million in residential mortgage for the three and nine months ended September 30, 2016 compared to $128 million and $580 million for the same periods in 2015. Net charge-offs, as shown in Tables 26 and 27, exclude write-offs in the PCI loan portfolio of $50 million and $161 million in home equity for the three and nine months ended September 30, 2016 compared to $20 million and $146 million for the same periods in 2015. Net charge-off ratios including the PCI write-offs were 0.08 percent and 0.17 percent for residential mortgage for the three and nine months ended September 30, 2016 compared to 0.32 percent and 0.64 percent for the same periods in 2015. Net charge-off ratios including the PCI write-offs were 0.83 percent and 0.91 percent for home equity for the three and nine months ended September 30, 2016 compared to 0.70 percent and 0.96 percent for the same periods in 2015. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 62.

Table 27 presents outstandings, nonperforming balances, net charge-offs, allowance for loan and lease losses and provision for loan and lease losses for the core and non-core portfolio within the consumer real estate portfolio.

We categorize consumer real estate loans as core and non-core on the basis of loan and customer characteristics such as origination date, product type, LTV, FICO score and delinquency status consistent with our current consumer and mortgage servicing strategy. Generally, loans that were originated after January 1, 2010, qualified under government-sponsored enterprise underwriting guidelines, or otherwise met our underwriting guidelines in place in 2015 are characterized as core loans. Loans held in legacy private-label securitizations, government-insured loans originated prior to 2010, loan products no longer originated, and loans originated prior to 2010 and classified as nonperforming or modified in a TDR prior to 2016 are generally characterized as non-core loans, and are principally run-off portfolios. Core loans as reported within Table 27 include loans held in the Consumer Banking and GWIM segments, as well as loans held for ALM activities in All Other. For more information on core and non-core loans, see Note 4 – Outstanding Loans and Leases to the Consolidated Financial Statements.

As shown in Table 27, outstanding core consumer real estate loans increased $4.7 billion during the nine months ended September 30, 2016 driven by an increase of $8.7 billion in residential mortgage, partially offset by a $4.0 billion decrease in home equity. The increase in residential mortgage was primarily driven by increased originations in Consumer Banking and GWIM. The decrease in home equity was driven by paydowns outpacing new originations and draws on existing lines.

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Table 27
Consumer Real Estate Portfolio ⁽¹⁾
	Outstandings				Nonperforming				Net Charge-offs ⁽²⁾
	September 30 2016		December 31 2015		September 30 2016		December 31 2015		Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)									2016			2015			2016			2015
Core portfolio
Residential mortgage	$	150,491	$	141,795	$	1,394	$	1,825	$	(12	)	$	11		$	(23	)	$	77
Home equity	50,924		54,917		956		974		35			37			81			117
Total core portfolio	201,415		196,712		2,350		2,799		23			48			58			194
Non-core portfolio
Residential mortgage	37,477		46,116		1,947		2,978		16			15			152			323
Home equity	18,073		21,031		2,026		2,363		62			83			254			326
Total non-core portfolio	55,550		67,147		3,973		5,341		78			98			406			649
Consumer real estate portfolio
Residential mortgage	187,968		187,911		3,341		4,803		4			26			129			400
Home equity	68,997		75,948		2,982		3,337		97			120			335			443
Total consumer real estate portfolio	$	256,965	$	263,859	$	6,323	$	8,140	$	101		$	146		$	464		$	843

					Allowance for Loan and Lease Losses				Provision for Loan and Lease Losses
					September 30 2016		December 31 2015		Three Months Ended September 30						Nine Months Ended September 30
									2016			2015			2016			2015
Core portfolio
Residential mortgage					$	261	$	319	$	(33	)	$	(15	)	$	(86	)	$	(19	)
Home equity					593		664		2			(44		)	10			(40		)
Total core portfolio					854		983		(31		)	(59		)	(76		)	(59		)
Non-core portfolio
Residential mortgage					827		1,181		(34		)	(73		)	(88		)	(146		)
Home equity					1,308		1,750		29			120			(27		)	273
Total non-core portfolio					2,135		2,931		(5		)	47			(115		)	127
Consumer real estate portfolio
Residential mortgage					1,088		1,500		(67		)	(88		)	(174		)	(165		)
Home equity					1,901		2,414		31			76			(17		)	233
Total consumer real estate portfolio					$	2,989	$	3,914	$	(36	)	$	(12	)	$	(191	)	$	68

⁽¹⁾

Outstandings and nonperforming loans exclude loans accounted for under the fair value option. Consumer loans accounted for under the fair value option include residential mortgage loans of $1.4 billion and $1.6 billion and home equity loans of $340 million and $250 million at September 30, 2016 and December 31, 2015. For more information on the fair value option, see Note 15 – Fair Value Option to the Consolidated Financial Statements.


⁽²⁾	Net charge-offs exclude write-offs in the PCI loan portfolio. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 62.

We believe that the presentation of information adjusted to exclude the impact of the PCI loan portfolio, the fully-insured loan portfolio and loans accounted for under the fair value option is more representative of the ongoing operations and credit quality of the business. As a result, in the following discussions of the residential mortgage and home equity portfolios, we provide information that excludes the impact of the PCI loan portfolio, the fully-insured loan portfolio and loans accounted for under the fair value option in certain credit quality statistics. We separately disclose information on the PCI loan portfolio on page 62.

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Residential Mortgage

The residential mortgage portfolio makes up the largest percentage of our consumer loan portfolio at 42 percent of consumer loans and leases at September 30, 2016. Approximately 40 percent of the residential mortgage portfolio is in All Other and is comprised of originated loans, purchased loans used 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 33 percent of the residential mortgage portfolio is in GWIM and represents residential mortgages originated for the home purchase and refinancing needs of our wealth management clients and the remaining portion of the portfolio is primarily in Consumer Banking.

Outstanding balances in the residential mortgage portfolio, excluding loans accounted for under the fair value option, remained relatively unchanged at $188.0 billion for the nine months ended September 30, 2016 compared to December 31, 2015 as retention of new originations was offset by loan sales of $5.4 billion and runoff. Loan sales primarily included $3.1 billion of loans in consolidated agency residential mortgage securitization vehicles and $1.6 billion of nonperforming and other delinquent loans.

At September 30, 2016 and December 31, 2015, the residential mortgage portfolio included $30.1 billion and $37.1 billion of outstanding fully-insured loans. On this portion of the residential mortgage portfolio, we are protected against principal loss as a result of either FHA insurance or long-term standby agreements that provide for the transfer of credit risk to FNMA and FHLMC. At September 30, 2016 and December 31, 2015, $24.1 billion and $33.4 billion had FHA insurance with the remainder protected by long-term standby agreements. At September 30, 2016 and December 31, 2015, $8.0 billion and $11.2 billion of the FHA-insured loan population were repurchases of delinquent FHA loans pursuant to our servicing agreements with GNMA.

Table 28 presents certain residential mortgage key credit statistics on both a reported basis excluding loans accounted for under the fair value option, and excluding the PCI loan portfolio, our fully-insured loan portfolio and loans accounted for under the fair value option. Additionally, in the "Reported Basis" columns in the table below, accruing balances past due and nonperforming loans do not include the PCI loan portfolio, in accordance with our accounting policies, even though the customer may be contractually past due. As such, the following discussion presents the residential mortgage portfolio excluding the PCI loan portfolio, the fully-insured loan portfolio and loans accounted for under the fair value option. For more information on the PCI loan portfolio, see page 62.



Table 28
Residential Mortgage – Key Credit Statistics
									Reported Basis ⁽¹⁾						Excluding Purchased Credit-impaired and Fully-insured Loans
(Dollars in millions)									September 30 2016			December 31 2015			September 30 2016			December 31 2015
Outstandings									$	187,968		$	187,911		$	147,294		$	138,768
Accruing past due 30 days or more									8,295			11,423			1,451			1,568
Accruing past due 90 days or more									5,117			7,150			—			—
Nonperforming loans									3,341			4,803			3,341			4,803
Percent of portfolio
Refreshed LTV greater than 90 but less than or equal to 100									5		%	7		%	4		%	5		%
Refreshed LTV greater than 100									5			8			3			4
Refreshed FICO score below 620									9			13			4			6
2006 and 2007 vintages ⁽²⁾									15			17			13			17

	Reported Basis								Excluding Purchased Credit-impaired and Fully-insured Loans
	Three Months Ended September 30				Nine Months Ended September 30				Three Months Ended September 30						Nine Months Ended September 30
	2016		2015		2016		2015		2016			2015			2016			2015
Net charge-off ratio ⁽³⁾	0.01	%	0.05	%	0.09	%	0.26	%	0.01		%	0.08		%	0.12		%	0.39		%


⁽¹⁾	Outstandings, accruing past due, nonperforming loans and percentages of portfolio exclude loans accounted for under the fair value option.

⁽²⁾

These vintages of loans account for $1.0 billion, or 31 percent, and $1.6 billion, or 34 percent of nonperforming residential mortgage loans at September 30, 2016 and December 31, 2015. For the three and nine months ended September 30, 2016, these vintages accounted for $6 million of recoveries and $10 million, or eight percent of total residential mortgage net charge-offs. For the three and nine months ended September 30, 2015, these vintages accounted for $4 million of recoveries, and $114 million, or 29 percent of total residential mortgage net charge-offs.


⁽³⁾	Net charge-off ratios are calculated as annualized net charge-offs divided by average outstanding loans excluding loans accounted for under the fair value option.

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Nonperforming residential mortgage loans decreased $1.5 billion during the nine months ended September 30, 2016 as outflows, including sales of $1.2 billion, outpaced new inflows. Of the nonperforming residential mortgage loans at September 30, 2016, $1.1 billion, or 32 percent, were current on contractual payments.

Net charge-offs decreased $22 million to $4 million and decreased $271 million to $129 million for the three and nine months ended September 30, 2016 compared to the same periods in 2015. These decreases in net charge-offs were primarily driven by charge-offs related to the consumer relief portion of the settlement with the DoJ of $49 million and $379 million in the prior-year periods. Net charge-offs also included recoveries of $7 million and charge-offs of $35 million related to nonperforming loan sales during the three and nine months ended September 30, 2016 compared to recoveries of $57 million and $119 million for the same periods in 2015. Additionally, net charge-offs declined driven by favorable portfolio trends and decreased write-downs on loans greater than 180 days past due, which were written down to the estimated fair value of the collateral, less costs to sell, due in part to improvement in home prices and the U.S. economy.

Loans with a refreshed LTV greater than 100 percent represented three percent and four percent of the residential mortgage loan portfolio at September 30, 2016 and December 31, 2015. Of the loans with a refreshed LTV greater than 100 percent, 98 percent were performing at both September 30, 2016 and December 31, 2015. Loans with a refreshed LTV greater than 100 percent reflect loans where the outstanding carrying value of the loan is greater than the most recent valuation of the property securing the loan. The majority of these loans have a refreshed LTV greater than 100 percent primarily due to home price deterioration since 2006, partially offset by subsequent appreciation.

Of the $147.3 billion in total residential mortgage loans outstanding at September 30, 2016, as shown in Table 29, 38 percent were originated as interest-only loans. The outstanding balance of interest-only residential mortgage loans that have entered the amortization period was $11.1 billion, or 20 percent, at September 30, 2016. Residential mortgage loans that have entered the amortization period generally have experienced a higher rate of early stage delinquencies and nonperforming status compared to the residential mortgage portfolio as a whole. At September 30, 2016, $219 million, or two percent of outstanding interest-only residential mortgages that had entered the amortization period were accruing past due 30 days or more compared to $1.5 billion, or one percent for the entire residential mortgage portfolio. In addition, at September 30, 2016, $535 million, or five percent of outstanding interest-only residential mortgage loans that had entered the amortization period were nonperforming, of which $268 million were contractually current, compared to $3.3 billion, or two percent for the entire residential mortgage portfolio, of which $1.1 billion were contractually current. Loans that have yet to enter the amortization period in our interest-only residential mortgage portfolio are primarily well-collateralized loans to our wealth management clients and have an interest-only period of three to ten years. More than 80 percent of these loans that have yet to enter the amortization period will not be required to make a fully-amortizing payment until 2019 or later.

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Table 29 presents outstandings, nonperforming loans and net charge-offs by certain state concentrations for the residential mortgage portfolio. The Los Angeles-Long Beach-Santa Ana Metropolitan Statistical Area (MSA) within California represented 15 percent and 14 percent of outstandings at September 30, 2016 and December 31, 2015. For the three and nine months ended September 30, 2016, loans within this MSA contributed net recoveries of $5 million and $6 million within the residential mortgage portfolio compared to net recoveries of $6 million and $10 million for the same periods in 2015. In the New York area, the New York-Northern New Jersey-Long Island MSA made up 12 percent and 11 percent of outstandings at September 30, 2016 and December 31, 2015. For the three and nine months ended September 30, 2016, loans within this MSA contributed net charge-offs of $4 million and $31 million within the residential mortgage portfolio compared to net charge-offs of $13 million and $86 million for the same periods in 2015.



Table 29
Residential Mortgage State Concentrations
	Outstandings ⁽¹⁾				Nonperforming ⁽¹⁾				Net Charge-offs ⁽²⁾
	September 30 2016		December 31 2015		September 30 2016		December 31 2015		Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)	September 30 2016		December 31 2015		September 30 2016		December 31 2015		2016			2015			2016			2015
California	$	55,236	$	48,865	$	638	$	977	$	(21	)	$	(30	)	$	(51	)	$	(37	)
New York ⁽³⁾	13,707		12,696		324		399		(1		)	11			17			46
Florida ⁽³⁾	10,051		10,001		351		534		2			5			19			51
Texas	6,401		6,208		144		185		—			—			8			9
Massachusetts	5,115		4,799		84		118		—			—			4			6
Other U.S./Non-U.S.	56,784		56,199		1,800		2,590		24			40			132			325
Residential mortgage loans ⁽⁴⁾	$	147,294	$	138,768	$	3,341	$	4,803	$	4		$	26		$	129		$	400
Fully-insured loan portfolio	30,060		37,077
Purchased credit-impaired residential mortgage loan portfolio ⁽⁵⁾	10,614		12,066
Total residential mortgage loan portfolio	$	187,968	$	187,911


⁽¹⁾	Outstandings and nonperforming loans exclude loans accounted for under the fair value option.


⁽²⁾	Net charge-offs exclude $33 million and $109 million of write-offs in the residential mortgage PCI loan portfolio for the three and nine months ended September 30, 2016 compared to $128 million and $580 million for the same periods in 2015. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 62.


⁽³⁾	In these states, foreclosure requires a court order following a legal proceeding (judicial states).


⁽⁴⁾	Amounts exclude the PCI residential mortgage and fully-insured loan portfolios.


⁽⁵⁾	At September 30, 2016 and December 31, 2015, 48 percent and 47 percent of PCI residential mortgage loans were in California. There were no other significant single state concentrations.

Home Equity

At September 30, 2016, the home equity portfolio made up 15 percent of the consumer portfolio and is comprised of home equity lines of credit (HELOCs), home equity loans and reverse mortgages.

At September 30, 2016, our HELOC portfolio had an outstanding balance of $60.4 billion, or 87 percent of the total home equity portfolio compared to $66.1 billion, or 87 percent, at December 31, 2015. HELOCs generally have an initial draw period of 10 years and the borrowers typically are only required to pay the interest due on the loans on a monthly basis. After the initial draw period ends, the loans generally convert to 15-year amortizing loans.

At September 30, 2016, our home equity loan portfolio had an outstanding balance of $6.6 billion, or 10 percent of the total home equity portfolio compared to $7.9 billion, or 10 percent, at December 31, 2015. Home equity loans are almost all fixed-rate loans with amortizing payment terms of 10 to 30 years and of the $6.6 billion at September 30, 2016, 55 percent have 25- to 30-year terms. At both September 30, 2016 and December 31, 2015, our reverse mortgage portfolio had an outstanding balance, excluding loans accounted for under the fair value option, of $2.0 billion, or three percent of the total home equity portfolio. We no longer originate reverse mortgages.

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At September 30, 2016, approximately 67 percent of the home equity portfolio was included in Consumer Banking, 26 percent was included in All Other and the remainder of the portfolio was primarily in GWIM. Outstanding balances in the home equity portfolio, excluding loans accounted for under the fair value option, decreased $7.0 billion during the nine months ended September 30, 2016 primarily due to paydowns and charge-offs outpacing new originations and draws on existing lines. Of the total home equity portfolio at September 30, 2016 and December 31, 2015, $19.9 billion and $20.3 billion, or 29 percent and 27 percent, were in first-lien positions (30 percent and 28 percent excluding the PCI home equity portfolio). At September 30, 2016, outstanding balances in the home equity portfolio that were in a second-lien or more junior-lien position and where we also held the first-lien loan totaled $11.4 billion, or 18 percent of our total home equity portfolio excluding the PCI loan portfolio.

Unused HELOCs totaled $47.7 billion at September 30, 2016 compared to $50.3 billion at December 31, 2015. The decrease was primarily due to accounts reaching the end of their draw period, which automatically eliminates open line exposure, as well as customers choosing to close accounts. Both of these more than offset customer paydowns of principal balances and the impact of new production. The HELOC utilization rate was 56 percent at September 30, 2016 compared to 57 percent at December 31, 2015.

Table 30 presents certain home equity portfolio key credit statistics on both a reported basis excluding loans accounted for under the fair value option, and excluding the PCI loan portfolio and loans accounted for under the fair value option. Additionally, in the "Reported Basis" columns in the table below, accruing balances past due 30 days or more and nonperforming loans do not include the PCI loan portfolio, in accordance with our accounting policies, even though the customer may be contractually past due. As such, the following discussion presents 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 62.



Table 30
Home Equity – Key Credit Statistics
									Reported Basis ⁽¹⁾						Excluding Purchased Credit-impaired Loans
(Dollars in millions)									September 30 2016			December 31 2015			September 30 2016			December 31 2015
Outstandings									$	68,997		$	75,948		$	65,143		$	71,329
Accruing past due 30 days or more ⁽²⁾									565			613			565			613
Nonperforming loans ⁽²⁾									2,982			3,337			2,982			3,337
Percent of portfolio
Refreshed CLTV greater than 90 but less than or equal to 100									6		%	6		%	5		%	6		%
Refreshed CLTV greater than 100									10			12			8			11
Refreshed FICO score below 620									7			7			6			7
2006 and 2007 vintages ⁽³⁾									39			43			36			41

	Reported Basis								Excluding Purchased Credit-impaired Loans
	Three Months Ended September 30				Nine Months Ended September 30				Three Months Ended September 30						Nine Months Ended September 30
	2016		2015		2016		2015		2016			2015			2016			2015
Net charge-off ratio ⁽⁴⁾	0.55	%	0.60	%	0.61	%	0.72	%	0.58		%	0.64		%	0.65		%	0.77		%


⁽¹⁾	Outstandings, accruing past due, nonperforming loans and percentages of the portfolio exclude loans accounted for under the fair value option.


⁽²⁾	Accruing past due 30 days or more includes $74 million and $89 million and nonperforming loans include $350 million and $396 million of loans where we serviced the underlying first-lien at September 30, 2016 and December 31, 2015.


⁽³⁾	These vintages of loans have higher refreshed combined LTV ratios and accounted for 48 percent and 45 percent of nonperforming home equity loans at September 30, 2016 and December 31, 2015, and 57 percent and 47 percent of net charge-offs for the three and nine months ended September 30, 2016 and 52 percent and 56 percent for the three and nine months ended September 30, 2015.


⁽⁴⁾	Net charge-off ratios are calculated as annualized 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 $355 million during the nine months ended September 30, 2016 as outflows, including sales of $163 million, outpaced new inflows. Of the nonperforming home equity portfolio at September 30, 2016, $1.5 billion, or 49 percent, were current on contractual payments. Nonperforming loans that are contractually current primarily consist of collateral-dependent TDRs, including those that have been discharged in Chapter 7 bankruptcy, junior-lien loans where the underlying first-lien is 90 days or more past due, as well as loans that have not yet demonstrated a sustained period of payment performance following a TDR. In addition, $950 million, or 32 percent of nonperforming home equity loans were 180 days or more past due and had been written down to the estimated fair value of the collateral, less costs to sell. Accruing loans that were 30 days or more past due decreased $48 million during the nine months ended September 30, 2016.

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In some cases, the junior-lien home equity outstanding balance that we hold is performing, but the underlying first-lien is not. For outstanding balances in the home equity portfolio on which we service the first-lien loan, we are able to track whether the first-lien loan is in default. For loans where the first-lien is serviced by a third party, we utilize credit bureau data to estimate the delinquency status of the first-lien. Given that the credit bureau database we use does not include a property address for the mortgages, we are unable to identify with certainty whether a reported delinquent first-lien mortgage pertains to the same property for which we hold a junior-lien loan. For certain loans, we utilize a third-party vendor to combine credit bureau and public record data to better link a junior-lien loan with the underlying first-lien mortgage. At September 30, 2016, we estimate that $991 million of current and $144 million of 30 to 89 days past due junior-lien loans were behind a delinquent first-lien loan. We service the first-lien loans on $168 million of these combined amounts, with the remaining $967 million serviced by third parties. Of the $1.1 billion of current to 89 days past due junior-lien loans, based on available credit bureau data and our own internal servicing data, we estimate that approximately $432 million had first-lien loans that were 90 days or more past due.

Net charge-offs decreased $23 million to $97 million and decreased $108 million to $335 million for the three and nine months ended September 30, 2016 compared to the same periods in 2015. These decreases in net charge-offs were partly attributable to charge-offs of $4 million and $70 million related to the consumer relief portion of the settlement with the DoJ in the prior-year periods. Additionally, net charge-offs declined driven by favorable portfolio trends due in part to improvement in home prices and the U.S. economy.

Outstanding balances with a refreshed combined loan-to-value (CLTV) greater than 100 percent comprised eight percent and 11 percent of the home equity portfolio at September 30, 2016 and December 31, 2015. Outstanding balances in the home equity portfolio with a refreshed CLTV greater than 100 percent reflect loans where our loan and available line of credit combined with any outstanding senior liens against the property are equal to or greater than the most recent valuation of the property securing the loan. Depending on the value of the property, there may be collateral in excess of the first-lien that is available to reduce the severity of loss on the second-lien. Of those outstanding balances with a refreshed CLTV greater than 100 percent, 96 percent of the customers were current on their home equity loan and 92 percent of second-lien loans with a refreshed CLTV greater than 100 percent were current on both their second-lien and underlying first-lien loans at September 30, 2016.

Of the $65.1 billion in total home equity portfolio outstandings at September 30, 2016, as shown in Table 31, 56 percent require interest-only payments. The outstanding balance of HELOCs that have entered the amortization period was $13.6 billion at September 30, 2016. The HELOCs that have entered the amortization period have experienced a higher percentage of early stage delinquencies and nonperforming status when compared to the HELOC portfolio as a whole. At September 30, 2016, $277 million, or two percent of outstanding HELOCs that had entered the amortization period were accruing past due 30 days or more. In addition, at September 30, 2016, $1.7 billion, or 12 percent of outstanding HELOCs that had entered the amortization period were nonperforming, of which $802 million were contractually current. Loans in our HELOC portfolio generally have an initial draw period of 10 years and 28 percent of these loans will enter the amortization period in the remainder of 2016 and 2017 and will be required to make fully-amortizing payments. We communicate to contractually current customers more than a year prior to the end of their draw period to inform them of the potential change to the payment structure before entering the amortization period, and provide payment options to customers prior to the end of the draw period.

Although we do not actively track how many 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 are generally only required to pay interest on a monthly basis). During the three months ended September 30, 2016, approximately 45 percent of these customers with an outstanding balance did not pay any principal on their HELOCs.

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Table 31 presents outstandings, nonperforming balances and net charge-offs by certain state concentrations for the home equity portfolio. In the New York area, the New York-Northern New Jersey-Long Island MSA made up 13 percent of the outstanding home equity portfolio at both September 30, 2016 and December 31, 2015. For the three and nine months ended September 30, 2016, loans within this MSA contributed 15 percent and 16 percent of net charge-offs within the home equity portfolio compared to 11 percent and 13 percent of net charge-offs for the same periods in 2015. The Los Angeles-Long Beach-Santa Ana MSA within California made up 11 percent and 12 percent of the outstanding home equity portfolio at September 30, 2016 and December 31, 2015. For both the three and nine months ended September 30, 2016, loans within this MSA contributed zero percent of net charge-offs within the home equity portfolio compared to zero percent and two percent of net charge-offs for the same periods in 2015.



Table 31
Home Equity State Concentrations
	Outstandings ⁽¹⁾				Nonperforming ⁽¹⁾				Net Charge-offs ⁽²⁾
	September 30 2016		December 31 2015		September 30 2016		December 31 2015		Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	September 30 2016		December 31 2015		September 30 2016		December 31 2015		2016		2015		2016		2015
California	$	18,361	$	20,356	$	848	$	902	$	3	$	7	$	12	$	44
Florida ⁽³⁾	7,585		8,474		449		518		18		27		59		89
New Jersey ⁽³⁾	5,246		5,570		204		230		12		11		37		36
New York ⁽³⁾	4,847		5,249		274		316		11		9		37		34
Massachusetts	3,185		3,378		104		115		2		2		10		11
Other U.S./Non-U.S.	25,919		28,302		1,103		1,256		51		64		180		229
Home equity loans ⁽⁴⁾	$	65,143	$	71,329	$	2,982	$	3,337	$	97	$	120	$	335	$	443
Purchased credit-impaired home equity portfolio ⁽⁵⁾	3,854		4,619
Total home equity loan portfolio	$	68,997	$	75,948


⁽¹⁾	Outstandings and nonperforming loans exclude loans accounted for under the fair value option.


⁽²⁾	Net charge-offs exclude $50 million and $161 million of write-offs in the home equity PCI loan portfolio for the three and nine months ended September 30, 2016 compared to $20 million and $146 million for the same periods in 2015. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 62.


⁽³⁾	In these states, foreclosure requires a court order following a legal proceeding (judicial states).


⁽⁴⁾	Amount excludes the PCI home equity portfolio.


⁽⁵⁾	At both September 30, 2016 and December 31, 2015, 29 percent of PCI home equity loans were in California. There were no other significant single state concentrations.

Purchased Credit-impaired Loan Portfolio

Loans acquired with evidence of credit quality deterioration since origination and for which it is probable at purchase that we will be unable to collect all contractually required payments are accounted for under the accounting guidance for PCI loans, which addresses accounting for differences between contractual and expected cash flows to be collected from the purchaser's initial investment in loans if those differences are attributable, at least in part, to credit quality. For more information on PCI loans, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation's 2015 Annual Report on Form 10-K.

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Table 32 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.



Table 32
Purchased Credit-impaired Loan Portfolio
	September 30, 2016
(Dollars in millions)	Unpaid Principal Balance		Gross Carrying Value		Related Valuation Allowance		Carrying Value Net of Valuation Allowance		Percent of Unpaid Principal Balance
Residential mortgage	$	10,832	$	10,614	$	191	$	10,423	96.22	%
Home equity	3,930		3,854		262		3,592		91.40
Total purchased credit-impaired loan portfolio	$	14,762	$	14,468	$	453	$	14,015	94.94

	December 31, 2015
Residential mortgage	$	12,350	$	12,066	$	338	$	11,728	94.96	%
Home equity	4,650		4,619		466		4,153		89.31
Total purchased credit-impaired loan portfolio	$	17,000	$	16,685	$	804	$	15,881	93.42

The total PCI unpaid principal balance decreased $2.2 billion, or 13 percent, during the nine months ended September 30, 2016 primarily driven by payoffs, sales, paydowns and write-offs. During the nine months ended September 30, 2016, we sold PCI loans with a carrying value of $435 million compared to sales of $1.2 billion for the same period in 2015.

Of the unpaid principal balance of $14.8 billion at September 30, 2016, $13.0 billion, or 88 percent, was current based on the contractual terms, $959 million, or six percent, was in early stage delinquency, and $587 million was 180 days or more past due, including $509 million of first-lien mortgages and $78 million of home equity loans.

During the nine months ended September 30, 2016, we recorded a provision benefit of $81 million for the PCI loan portfolio which included a benefit of $43 million for home equity and $38 million for residential mortgage. This compared to a total provision benefit of $68 million and $40 million for the three and nine months ended September 30, 2015. The provision benefit for the nine months ended September 30, 2016 was primarily driven by lower default estimates on second-lien loans and continued home price improvement.

The PCI valuation allowance declined $351 million during the nine months ended September 30, 2016 due to write-offs in the PCI loan portfolio of $109 million in residential mortgage and $161 million in home equity, combined with a provision benefit of $81 million.

Purchased Credit-impaired Residential Mortgage Loan Portfolio

The PCI residential mortgage loan portfolio represented 73 percent of the total PCI loan portfolio at September 30, 2016. Those loans to borrowers with a refreshed FICO score below 620 represented 28 percent of the PCI residential mortgage loan portfolio at September 30, 2016. Loans with a refreshed LTV greater than 90 percent, after consideration of purchase accounting adjustments and the related valuation allowance, represented 25 percent of the PCI residential mortgage loan portfolio and 28 percent based on the unpaid principal balance at September 30, 2016.

Pay option adjustable-rate mortgages, which are included in the PCI residential mortgage portfolio, have interest rates that adjust monthly and minimum required payments that adjust annually. During an initial five- or ten-year period, minimum required payments may increase by no more than 7.5 percent. If payments are insufficient to pay all of the monthly interest charges, unpaid interest is added to the loan balance (i.e., negative amortization) until the loan balance increases to a specified limit at which time a new monthly payment amount adequate to repay the loan over its remaining contractual life is established.

At September 30, 2016, the unpaid principal balance of pay option loans was $2.0 billion, with a carrying value of $1.9 billion. This includes $1.7 billion of loans that were credit-impaired upon acquisition and $223 million of loans that are 90 days or more past due. The total unpaid principal balance of pay option loans with accumulated negative amortization was $341 million, including $18 million of negative amortization. We believe the majority of borrowers that are now making scheduled payments are able to do so primarily because the low rate environment has caused the fully indexed rates to be affordable to more borrowers. We continue to evaluate our exposure to payment resets on the acquired negative-amortizing loans and have taken into consideration several assumptions including prepayment and default rates.

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Purchased Credit-impaired Home Equity Loan Portfolio

The PCI home equity portfolio represented 27 percent of the total PCI loan portfolio at September 30, 2016. Those loans with a refreshed FICO score below 620 represented 15 percent of the PCI home equity portfolio at September 30, 2016. Loans with a refreshed CLTV greater than 90 percent, after consideration of purchase accounting adjustments and the related valuation allowance, represented 52 percent of the PCI home equity portfolio and 55 percent based on the unpaid principal balance at September 30, 2016.

U.S. Credit Card

At September 30, 2016, 97 percent of the U.S. credit card portfolio was managed in Consumer Banking with the remainder in GWIM. Outstandings in the U.S. credit card portfolio decreased $813 million during the nine months ended September 30, 2016 due to a seasonal decline in retail transaction volume. Net charge-offs decreased $3 million to $543 million and $48 million to $1.7 billion during the three and nine months ended September 30, 2016 compared to the same periods in 2015 due to improvements in delinquencies and bankruptcies as a result of an improved economic environment and the impact of higher credit quality originations. During the nine months ended September 30, 2016, U.S. credit card loans 30 days or more past due and still accruing interest decreased $116 million to $1.5 billion, and loans 90 days or more past due and still accruing interest decreased $87 million to $702 million at September 30, 2016 as a result of the factors mentioned above that contributed to lower net charge-offs.

Unused lines of credit for U.S. credit card totaled $323.9 billion and $312.5 billion at September 30, 2016 and December 31, 2015. The $11.4 billion increase was driven by account growth and lines of credit increases.

Table 33 presents certain state concentrations for the U.S. credit card portfolio.



Table 33
U.S. Credit Card State Concentrations
	Outstandings				Accruing Past Due 90 Days or More				Net Charge-offs
	September 30 2016		December 31 2015		September 30 2016		December 31 2015		Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	September 30 2016		December 31 2015		September 30 2016		December 31 2015		2016		2015		2016		2015
California	$	13,651	$	13,658	$	106	$	115	$	86	$	85	$	269	$	269
Florida	7,467		7,420		74		81		60		58		184		186
Texas	6,737		6,620		56		58		40		37		122		117
New York	5,507		5,547		52		57		39		38		120		121
Washington	3,944		3,907		18		19		13		13		42		45
Other U.S.	51,483		52,450		396		459		305		315		966		1,013
Total U.S. credit card portfolio	$	88,789	$	89,602	$	702	$	789	$	543	$	546	$	1,703	$	1,751

Non-U.S. Credit Card

Outstandings in the non-U.S. credit card portfolio, which are recorded in All Other, decreased $717 million during the nine months ended September 30, 2016 primarily driven by weakening of the British Pound against the U.S. Dollar. For the three and nine months ended September 30, 2016, net charge-offs decreased $4 million to $43 million and $8 million to $134 million compared to the same periods in 2015. During the nine months ended September 30, 2016, non-U.S. credit card loans 30 days or more past due and still accruing interest decreased $21 million to $125 million, and loans 90 days or more past due and still accruing interest decreased $11 million to $65 million at September 30, 2016.

Unused lines of credit for non-U.S. credit card totaled $25.5 billion and $27.9 billion at September 30, 2016 and December 31, 2015. The $2.4 billion decrease was driven by weakening of the British Pound against the U.S. Dollar, partially offset by account growth and increases in lines of credit.

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Direct/Indirect Consumer

At September 30, 2016, approximately 52 percent of the direct/indirect portfolio was included in Consumer Banking (consumer auto and specialty lending – automotive, marine, aircraft, recreational vehicle loans, and consumer personal loans), 47 percent was included in GWIM (principally securities-based lending loans) and the remainder was primarily student loans in All Other.

Outstandings in the direct/indirect portfolio increased $4.5 billion during the nine months ended September 30, 2016 primarily in the consumer auto loan portfolio, partially offset by lower outstandings in the securities-based lending and the unsecured consumer lending portfolios.

Table 34 presents certain state concentrations for the direct/indirect consumer loan portfolio.



Table 34
Direct/Indirect State Concentrations
	Outstandings				Accruing Past Due 90 Days or More				Net Charge-offs
	September 30 2016		December 31 2015		September 30 2016		December 31 2015		Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	September 30 2016		December 31 2015		September 30 2016		December 31 2015		2016		2015		2016		2015
California	$	11,231	$	10,735	$	3	$	3	$	4	$	1	$	9	$	5
Texas	9,334		8,514		3		4		6		4		14		12
Florida	9,036		8,835		3		3		7		6		20		14
New York	5,341		5,077		1		1		—		1		1		2
Georgia	3,095		2,869		4		4		4		1		7		5
Other U.S./Non-U.S.	55,257		52,765		15		24		13		12		40		45
Total direct/indirect loan portfolio	$	93,294	$	88,795	$	29	$	39	$	34	$	25	$	91	$	83

Other Consumer

At September 30, 2016, approximately 73 percent of the $2.4 billion other consumer portfolio was consumer auto leases included in Consumer Banking. The remainder is primarily associated with certain consumer finance businesses that we previously exited.

Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity

Table 35 presents nonperforming consumer loans, leases and foreclosed properties activity for the three and nine months ended September 30, 2016 and 2015. For more information on nonperforming loans, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation's 2015 Annual Report on Form 10-K. During the nine months ended September 30, 2016, nonperforming consumer loans declined $1.8 billion to $6.4 billion primarily driven by loan sales of $1.3 billion. Excluding these sales, nonperforming loans declined as outflows outpaced new inflows.

The outstanding balance of a real estate-secured loan that is in excess of the estimated property value less costs to sell is charged off no later than the end of the month in which the loan becomes 180 days past due unless repayment of the loan is fully insured. At September 30, 2016, $2.8 billion, or 42 percent of nonperforming consumer real estate loans and foreclosed properties had been written down to their estimated property value less costs to sell, including $2.4 billion of nonperforming loans 180 days or more past due and $372 million of foreclosed properties. In addition, at September 30, 2016, $2.5 billion, or 38 percent of nonperforming consumer loans were modified and are now current after successful trial periods, or are current loans classified as nonperforming loans in accordance with applicable policies.

Foreclosed properties decreased $72 million during the nine months ended September 30, 2016 as liquidations outpaced additions. PCI loans are excluded from nonperforming loans as these loans were written down to fair value at the acquisition date; however, once the underlying real estate is acquired by the Corporation upon foreclosure of the delinquent PCI loan, it is included in foreclosed properties. PCI-related foreclosed properties decreased $72 million during the nine months ended September 30, 2016. Not included in foreclosed properties at September 30, 2016 was $1.3 billion of real estate that was acquired upon foreclosure of certain delinquent government-guaranteed loans (principally FHA-insured loans). We exclude these amounts from our nonperforming loans and foreclosed properties activity as we expect we will be reimbursed once the property is conveyed to the guarantor for principal and, up to certain limits, costs incurred during the foreclosure process and interest incurred during the holding period.

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Nonperforming loans also include certain loans that have been modified in TDRs where economic concessions have been granted to borrowers experiencing financial difficulties. These concessions typically result from the Corporation's loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructuring and may only be returned to performing status after considering the borrower's sustained repayment performance for a reasonable period, generally six months. Nonperforming TDRs, excluding those modified loans in the PCI loan portfolio, are included in Table 35.



Table 35
Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity⁽¹⁾
	Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)	2016			2015			2016			2015
Nonperforming loans and leases, beginning of period	$	6,705		$	9,575		$	8,165		$	10,819
Additions to nonperforming loans and leases:
New nonperforming loans and leases	831			1,029			2,581			3,922
Reductions to nonperforming loans and leases:
Paydowns and payoffs	(220		)	(262		)	(605		)	(804		)
Sales	(237		)	(447		)	(1,331		)	(1,360		)
Returns to performing status ⁽²⁾	(383		)	(722		)	(1,220		)	(2,220		)
Charge-offs	(279		)	(375		)	(1,008		)	(1,319		)
Transfers to foreclosed properties ⁽³⁾	(67		)	(101		)	(232		)	(341		)
Total net reductions to nonperforming loans and leases	(355		)	(878		)	(1,815		)	(2,122		)
Total nonperforming loans and leases, September 30 ⁽⁴⁾	6,350			8,697			6,350			8,697
Foreclosed properties, beginning of period	416			553			444			630
Additions to foreclosed properties:
New foreclosed properties ⁽³⁾	88			132			328			485
Reductions to foreclosed properties:
Sales	(114		)	(182		)	(350		)	(552		)
Write-downs	(18		)	(24		)	(50		)	(84		)
Total net reductions to foreclosed properties	(44		)	(74		)	(72		)	(151		)
Total foreclosed properties, September 30 ⁽⁵⁾	372			479			372			479
Nonperforming consumer loans, leases and foreclosed properties, September 30	$	6,722		$	9,176		$	6,722		$	9,176
Nonperforming consumer loans and leases as a percentage of outstanding consumer loans and leases ⁽⁶⁾	1.41		%	1.92		%
Nonperforming consumer loans, leases and foreclosed properties as a percentage of outstanding consumer loans, leases and foreclosed properties ⁽⁶⁾	1.49			2.02


⁽¹⁾	Balances do not include nonperforming LHFS of $12 million and $8 million and nonaccruing TDRs removed from the PCI loan portfolio prior to January 1, 2010 of $27 million and $49 million at September 30, 2016 and 2015 as well as loans accruing past due 90 days or more as presented in Table 25 and Note 4 – Outstanding Loans and Leases to the Consolidated Financial Statements.


⁽²⁾	Consumer loans may be returned to performing status when all principal and interest is current and full repayment of the remaining contractual principal and interest is expected, or when the loan otherwise becomes well-secured and is in the process of collection.

⁽³⁾

New foreclosed properties represents transfers of nonperforming loans to foreclosed properties net of charge-offs taken during the first 90 days after transfer of a loan to foreclosed properties. New foreclosed properties also includes properties obtained upon foreclosure of delinquent PCI loans, properties repurchased due to representations and warranties exposure and properties acquired with newly consolidated subsidiaries.


⁽⁴⁾	At September 30, 2016, 38 percent of nonperforming loans were 180 days or more past due.


⁽⁵⁾	Foreclosed property balances do not include properties insured by certain government-guaranteed loans, principally FHA-insured loans, of $1.3 billion at both September 30, 2016 and 2015.


⁽⁶⁾	Outstanding consumer loans and leases exclude loans accounted for under the fair value option.

Our policy is to record any losses in the value of foreclosed properties as a reduction in the allowance for loan and lease losses during the first 90 days after transfer of a loan to foreclosed properties. Thereafter, further losses in value as well as gains and losses on sale are recorded in noninterest expense. New foreclosed properties included in Table 35 are net of $18 million and $60 million of charge-offs and write-offs of PCI loans for the three and nine months ended September 30, 2016 compared to $51 million and $127 million for the same periods in 2015, recorded during the first 90 days after transfer.

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We classify junior-lien home equity loans as nonperforming when the first-lien loan becomes 90 days past due even if the junior-lien loan is performing. At September 30, 2016 and December 31, 2015, $432 million and $484 million of such junior-lien home equity loans were included in nonperforming loans and leases.

Table 36 presents TDRs for the consumer real estate portfolio. Performing TDR balances are excluded from nonperforming loans and leases in Table 35.



Table 36
Consumer Real Estate Troubled Debt Restructurings
	September 30, 2016						December 31, 2015
(Dollars in millions)	Total		Nonperforming		Performing		Total		Nonperforming		Performing
Residential mortgage ^{(1, 2)}	$	13,704	$	2,199	$	11,505	$	18,372	$	3,284	$	15,088
Home equity ⁽³⁾	2,803		1,606		1,197		2,686		1,649		1,037
Total consumer real estate troubled debt restructurings	$	16,507	$	3,805	$	12,702	$	21,058	$	4,933	$	16,125


⁽¹⁾	Residential mortgage TDRs deemed collateral dependent totaled $3.7 billion and $4.9 billion, and included $1.7 billion and $2.7 billion of loans classified as nonperforming and $2.0 billion and $2.2 billion of loans classified as performing at September 30, 2016 and December 31, 2015.


⁽²⁾	Residential mortgage performing TDRs included $5.9 billion and $8.7 billion of loans that were fully-insured at September 30, 2016 and December 31, 2015.


⁽³⁾	Home equity TDRs deemed collateral dependent totaled $1.7 billion and $1.6 billion, and included $1.3 billion of loans classified as nonperforming at both September 30, 2016 and December 31, 2015. Loans classified as performing totaled $303 million and $290 million at September 30, 2016 and December 31, 2015.

In addition to modifying consumer real estate loans, we work with customers who are experiencing financial difficulty by modifying credit card and other consumer loans. Credit card and other consumer loan modifications generally involve a reduction in the customer's interest rate on the account and placing the customer on a fixed payment plan not exceeding 60 months, all of which are considered TDRs (the renegotiated TDR portfolio). In addition, the accounts of non-U.S. credit card customers who do not qualify for a fixed payment plan may have their interest rates reduced, as required by certain local jurisdictions. These modifications, which are also TDRs, tend to experience higher payment default rates given that the borrowers may lack the ability to repay even with the interest rate reduction. In all cases, the customer's available line of credit is canceled.

Modifications of credit card and other consumer loans are primarily made through internal renegotiation programs utilizing direct customer contact, but may also utilize external renegotiation programs. The renegotiated TDR portfolio is excluded in large part from Table 35 as substantially all of the loans remain on accrual status until either charged off or paid in full. At September 30, 2016 and December 31, 2015, our renegotiated TDR portfolio was $637 million and $779 million, of which $520 million and $635 million were current or less than 30 days past due under the modified terms. The decline in the renegotiated TDR portfolio was primarily driven by paydowns and charge-offs as well as lower program enrollments. For more information on the renegotiated TDR portfolio, see Note 4 – Outstanding Loans and Leases to the Consolidated Financial Statements.

Commercial Portfolio Credit Risk Management

Commercial credit risk is evaluated and managed with the goal that concentrations of credit exposure do not result in undesirable levels of risk. We review, measure and manage concentrations of credit exposure by industry, product, geography, customer relationship and loan size. We also review, measure and manage commercial real estate loans by geographic location and property type. In addition, within our non-U.S. portfolio, we evaluate exposures by region and by country. Tables 41, 44 and 49 summarize our concentrations. We also utilize syndications of exposure to third parties, loan sales, hedging and other risk mitigation techniques to manage the size and risk profile of the commercial credit portfolio. For more information on our industry concentrations, including our utilized exposure to the energy sector which was four percent of total commercial utilized exposure at both September 30, 2016 and December 31, 2015, see Commercial Portfolio Credit Risk Management – Industry Concentrations on page 74 and Table 44.

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 of the Corporation's 2015 Annual Report on Form 10-K.

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Commercial Credit Portfolio

During the nine months ended September 30, 2016, other than in the higher risk energy sub-sectors, credit quality among large corporate borrowers was strong. While we experienced some deterioration in the energy sector in the three months ended March 31, 2016, oil prices have stabilized which contributed to a modest improvement in energy-related exposure. Credit quality of commercial real estate borrowers continued to be strong with conservative loan-to-value ratios, stable market rents in most sectors and vacancy rates remaining low.

Outstanding commercial loans and leases increased $11.7 billion during the nine months ended September 30, 2016, primarily in U.S. commercial. Nonperforming commercial loans and leases increased $845 million during the nine months ended September 30, 2016. Nonperforming commercial loans and leases as a percentage of outstanding loans and leases, excluding loans accounted for under the fair value option, increased during the nine months ended September 30, 2016 to 0.45 percent from 0.28 percent at December 31, 2015. Reservable criticized balances increased $1.0 billion to $16.9 billion during the nine months ended September 30, 2016 as a result of net downgrades outpacing paydowns, primarily in the energy sector. The increase in nonperforming loans was primarily due to energy and metals and mining exposure. The allowance for loan and lease losses for the commercial portfolio increased $464 million to $5.3 billion at September 30, 2016 compared to December 31, 2015. For additional information, see Allowance for Credit Losses on page 80.

Table 37 presents our commercial loans and leases portfolio, and related credit quality information at September 30, 2016 and December 31, 2015.



Table 37
Commercial Loans and Leases
	Outstandings				Nonperforming				Accruing Past Due 90 Days or More
(Dollars in millions)	September 30 2016		December 31 2015		September 30 2016		December 31 2015		September 30 2016		December 31 2015
U.S. commercial	$	267,019	$	252,771	$	1,439	$	867	$	40	$	113
Commercial real estate ⁽¹⁾	57,303		57,199		60		93		—		3
Commercial lease financing	21,309		21,352		35		12		28		15
Non-U.S. commercial	87,497		91,549		400		158		3		1
	433,128		422,871		1,934		1,130		71		132
U.S. small business commercial ⁽²⁾	13,077		12,876		65		82		63		61
Commercial loans excluding loans accounted for under the fair value option	446,205		435,747		1,999		1,212		134		193
Loans accounted for under the fair value option ⁽³⁾	6,340		5,067		71		13		—		—
Total commercial loans and leases	$	452,545	$	440,814	$	2,070	$	1,225	$	134	$	193


⁽¹⁾	Includes U.S. commercial real estate loans of $53.9 billion and $53.6 billion and non-U.S. commercial real estate loans of $3.4 billion and $3.5 billion at September 30, 2016 and December 31, 2015.


⁽²⁾	Includes card-related products.


⁽³⁾	Commercial loans accounted for under the fair value option include U.S. commercial loans of $2.6 billion and $2.3 billion and non-U.S. commercial loans of $3.7 billion and $2.8 billion at September 30, 2016 and December 31, 2015. For more information on the fair value option, see Note 15 – Fair Value Option to the Consolidated Financial Statements.

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Table 38 presents net charge-offs and related ratios for our commercial loans and leases for the three and nine months ended September 30, 2016 and 2015. The increase in net charge-offs of $161 million for the nine months ended September 30, 2016 compared to the same period in 2015 was primarily due to higher energy sector related losses.



Table 38
Commercial Net Charge-offs and Related Ratios
	Net Charge-offs												Net Charge-off Ratios ⁽¹⁾
	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	2016			2015			2016			2015			2016		2015		2016		2015
U.S. commercial	$	62		$	52		$	155		$	58		0.10	%	0.09	%	0.08	%	0.03	%
Commercial real estate	(23		)	(10		)	(31		)	(9		)	(0.16	)	(0.08	)	(0.07	)	(0.02	)
Commercial lease financing	6			3			19			8			0.11		0.07		0.12		0.06
Non-U.S. commercial	10			9			97			9			0.04		0.04		0.14		0.01
	55			54			240			66			0.05		0.05		0.08		0.02
U.S. small business commercial	55			57			157			170			1.67		1.72		1.62		1.73
Total commercial	$	110		$	111		$	397		$	236		0.10		0.11		0.12		0.08


⁽¹⁾	Net charge-off ratios are calculated as annualized net charge-offs divided by average outstanding loans and leases excluding loans accounted for under the fair value option.

Table 39 presents commercial credit exposure by type for utilized, unfunded and total binding committed credit exposure. Commercial utilized credit exposure includes standby letters of credit (SBLCs) and financial guarantees, bankers' acceptances and commercial letters of credit for which we are legally bound to advance funds under prescribed conditions, during a specified time period. Although funds have not yet been advanced, these exposure types are considered utilized for credit risk management purposes.

Total commercial utilized credit exposure increased $13.3 billion during the nine months ended September 30, 2016 primarily driven by growth in loans and leases. The utilization rate for loans and leases, SBLCs and financial guarantees, commercial letters of credit and bankers' acceptances, in the aggregate, was 57 percent and 56 percent at September 30, 2016 and December 31, 2015.



Table 39
Commercial Credit Exposure by Type
	Commercial Utilized ⁽¹⁾				Commercial Unfunded ^{(2, 3, 4)}				Total Commercial Committed
(Dollars in millions)	September 30 2016		December 31 2015		September 30 2016		December 31 2015		September 30 2016		December 31 2015
Loans and leases ⁽⁵⁾	$	458,416	$	446,832	$	366,792	$	376,478	$	825,208	$	823,310
Derivative assets ⁽⁶⁾	47,896		49,990		—		—		47,896		49,990
Standby letters of credit and financial guarantees	33,973		33,236		617		690		34,590		33,926
Debt securities and other investments	22,856		21,709		6,293		4,173		29,149		25,882
Loans held-for-sale	7,429		5,456		278		1,203		7,707		6,659
Commercial letters of credit	1,702		1,725		127		390		1,829		2,115
Bankers' acceptances	169		298		—		—		169		298
Other	374		317		—		—		374		317
Total	$	572,815	$	559,563	$	374,107	$	382,934	$	946,922	$	942,497


⁽¹⁾	Total commercial utilized exposure includes loans of $6.3 billion and $5.1 billion and issued letters of credit with a notional amount of $279 million and $290 million accounted for under the fair value option at September 30, 2016 and December 31, 2015.


⁽²⁾	Total commercial unfunded exposure includes loan commitments accounted for under the fair value option with a notional amount of $7.4 billion and $10.6 billion at September 30, 2016 and December 31, 2015.


⁽³⁾	Excludes unused business card lines which are not legally binding.


⁽⁴⁾	Includes the notional amount of unfunded legally binding lending commitments net of amounts distributed (e.g., syndicated or participated) to other financial institutions. The distributed amounts were $12.4 billion and $14.3 billion at September 30, 2016 and December 31, 2015.


⁽⁵⁾	Includes credit risk exposure associated with assets under operating lease arrangements of $5.9 billion and $6.0 billion at September 30, 2016 and December 31, 2015.

⁽⁶⁾

Derivative assets are carried at fair value, reflect the effects of legally enforceable master netting agreements and have been reduced by cash collateral of $46.5 billion and $41.9 billion at September 30, 2016 and December 31, 2015. Not reflected in utilized and committed exposure is additional non-cash derivative collateral held of $25.3 billion and $23.3 billion which consists primarily of other marketable securities.

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Table 40 presents commercial utilized reservable criticized exposure by loan type. Criticized exposure corresponds to the Special Mention, Substandard and Doubtful asset categories as defined by regulatory authorities. Total commercial utilized reservable criticized exposure increased $1.0 billion, or seven percent, during the nine months ended September 30, 2016 driven by downgrades primarily related to our energy exposure outpacing paydowns and upgrades. Approximately 75 percent and 78 percent of commercial utilized reservable criticized exposure was secured at September 30, 2016 and December 31, 2015.



Table 40
Commercial Utilized Reservable Criticized Exposure
	September 30, 2016				December 31, 2015
(Dollars in millions)	Amount ⁽¹⁾		Percent ⁽²⁾		Amount ⁽¹⁾		Percent ⁽²⁾
U.S. commercial	$	11,046	3.74	%	$	9,965	3.56	%
Commercial real estate	302		0.51		513		0.87
Commercial lease financing	778		3.65		708		3.31
Non-U.S. commercial	4,007		4.30		3,944		4.04
	16,133		3.44		15,130		3.30
U.S. small business commercial	805		6.16		766		5.95
Total commercial utilized reservable criticized exposure	$	16,938	3.52		$	15,896	3.38


⁽¹⁾	Total commercial utilized reservable criticized exposure includes loans and leases of $15.5 billion and $14.5 billion and commercial letters of credit of $1.5 billion and $1.4 billion at September 30, 2016 and December 31, 2015.


⁽²⁾	Percentages are calculated as commercial utilized reservable criticized exposure divided by total commercial utilized reservable exposure for each exposure category.

U.S. Commercial

At September 30, 2016, 71 percent of the U.S. commercial loan portfolio, excluding small business, was managed in Global Banking, 17 percent in Global Markets, 10 percent in GWIM (generally business-purpose loans for high net worth clients) and the remainder primarily in Consumer Banking. U.S. commercial loans, excluding loans accounted for under the fair value option, increased $14.2 billion, or six percent, during the nine months ended September 30, 2016 due to growth across all of the commercial businesses. Energy exposure largely drove increases in reservable criticized balances of $1.1 billion, or 11 percent, and nonperforming loans and leases of $572 million, or 66 percent, during the nine months ended September 30, 2016, as well as increases in net charge-offs of $10 million and $97 million for the three and nine months ended September 30, 2016 compared to the same periods in 2015.

Commercial Real Estate

Commercial real estate primarily includes commercial loans and leases secured by non-owner-occupied real estate and is dependent on the sale or lease of the real estate as the primary source of repayment. The portfolio remains diversified across property types and geographic regions. California represented the largest state concentration at 24 percent and 21 percent of the commercial real estate loans and leases portfolio at September 30, 2016 and December 31, 2015. The commercial real estate portfolio is predominantly managed in Global Banking and consists of loans made primarily to public and private developers, and commercial real estate firms. Outstanding loans remained relatively unchanged with new originations slightly outpacing paydowns during the nine months ended September 30, 2016.

For the three and nine months ended September 30, 2016, we continued to see low default rates and solid credit quality in both the residential and non-residential 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 to achieve the best results for our customers and the Corporation.

Nonperforming commercial real estate loans and foreclosed properties decreased $32 million, or 30 percent, and reservable criticized balances decreased $211 million, or 41 percent, during the nine months ended September 30, 2016. The decrease in reservable criticized balances was primarily due to loan resolutions and strong commercial real estate fundamentals in most sectors. Net recoveries were $23 million and $31 million for the three and nine months ended September 30, 2016 compared to net recoveries of $10 million and $9 million for the same periods in 2015.

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Table 41 presents outstanding commercial real estate loans by geographic region, based on the geographic location of the collateral, and by property type.



Table 41
Outstanding Commercial Real Estate Loans
(Dollars in millions)	September 30 2016		December 31 2015
By Geographic Region
California	$	13,523	$	12,063
Northeast	9,712		10,292
Southwest	7,743		7,789
Southeast	5,883		6,066
Midwest	4,406		3,780
Florida	3,120		3,330
Illinois	2,569		2,536
Northwest	2,097		2,327
Midsouth	2,068		2,435
Non-U.S.	3,359		3,549
Other ⁽¹⁾	2,823		3,032
Total outstanding commercial real estate loans	$	57,303	$	57,199
By Property Type
Non-residential
Office	$	16,173	$	15,246
Multi-family rental	9,064		8,956
Shopping centers/retail	8,645		8,594
Hotels/motels	5,461		5,415
Industrial/warehouse	4,922		5,501
Multi-use	2,920		3,003
Unsecured	1,731		2,056
Land and land development	380		539
Other	5,907		5,791
Total non-residential	55,203		55,101
Residential	2,100		2,098
Total outstanding commercial real estate loans	$	57,303	$	57,199


⁽¹⁾	Includes unsecured loans to real estate investment trusts and national home builders whose portfolios of properties span multiple geographic regions and properties in the states of Colorado, Utah, Hawaii, Wyoming and Montana.

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At September 30, 2016, total committed non-residential exposure was $77.3 billion compared to $81.0 billion at December 31, 2015, of which $55.2 billion and $55.1 billion were funded loans. Non-residential nonperforming loans and foreclosed properties decreased $24 million, or 26 percent, to $70 million at September 30, 2016 compared to December 31, 2015 due to decreases across most property types. The non-residential nonperforming loans and foreclosed properties represented 0.13 percent and 0.17 percent of total non-residential loans and foreclosed properties at September 30, 2016 and December 31, 2015. Non-residential utilized reservable criticized exposure decreased $203 million, or 40 percent, to $299 million at September 30, 2016 compared to $502 million at December 31, 2015, which represented 0.53 percent and 0.89 percent of non-residential utilized reservable exposure. For the non-residential portfolio, net recoveries increased $13 million to $23 million and increased $20 million to $30 million for the three and nine months ended September 30, 2016 compared to the same periods in 2015.

At September 30, 2016, total committed residential exposure was $4.0 billion compared to $4.1 billion at December 31, 2015, of which $2.1 billion were funded secured loans for both periods. The residential nonperforming loans and foreclosed properties and residential utilized reservable criticized exposure decreased $8 million, or 57 percent, to $6 million and $8 million, or 73 percent, to $3 million for the nine months ended September 30, 2016. The nonperforming loans, leases and foreclosed properties and the utilized reservable criticized ratios for the residential portfolio were 0.30 percent and 0.15 percent at September 30, 2016 compared to 0.66 percent and 0.52 percent at December 31, 2015.

At September 30, 2016 and December 31, 2015, the commercial real estate loan portfolio included $6.6 billion and $7.6 billion of funded construction and land development loans that were originated to fund the construction and/or rehabilitation of commercial properties. Reservable criticized construction and land development loans totaled $100 million and $108 million, and nonperforming construction and land development loans and foreclosed properties totaled $25 million and $44 million at September 30, 2016 and December 31, 2015. During a property's construction phase, interest income is typically paid from interest reserves that are established at the inception of the loan. As construction is completed and the property is put into service, these interest reserves are depleted and interest payments from operating cash flows begin. We do not recognize interest income on nonperforming loans regardless of the existence of an interest reserve.

Non-U.S. Commercial

At September 30, 2016, 78 percent of the non-U.S. commercial loan portfolio was managed in Global Banking and 22 percent in Global Markets. Outstanding loans, excluding loans accounted for under the fair value option, decreased $4.1 billion during the nine months ended September 30, 2016 primarily due to increased payoffs. Net charge-offs increased $88 million for the nine months ended September 30, 2016 compared to the same period in 2015. The increase was primarily due to higher energy sector related losses in the first half of 2016. For more information on the non-U.S. commercial portfolio, see Non-U.S. Portfolio on page 78.

U.S. Small Business Commercial

The U.S. small business commercial loan portfolio is comprised of small business card loans and small business loans managed in Consumer Banking. Credit card-related products were 48 percent and 45 percent of the U.S. small business commercial portfolio at September 30, 2016 and December 31, 2015. Net charge-offs decreased $2 million to $55 million and $13 million to $157 million for the three and nine months ended September 30, 2016 compared to the same periods in 2015, primarily driven by portfolio improvement. Of the U.S. small business commercial net charge-offs, 79 percent and 85 percent were credit card-related products for the three and nine months ended September 30, 2016 compared to 78 percent and 82 percent for the same periods in 2015.

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Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity

Table 42 presents the nonperforming commercial loans, leases and foreclosed properties activity during the three and nine months ended September 30, 2016 and 2015. Nonperforming loans do not include loans accounted for under the fair value option. During the three and nine months ended September 30, 2016, nonperforming commercial loans and leases increased $340 million and $787 million to $2.0 billion primarily due to energy and metals and mining exposure. Approximately 80 percent of commercial nonperforming loans, leases and foreclosed properties were secured and approximately 76 percent were contractually current. Commercial nonperforming loans were carried at approximately 88 percent of their unpaid principal balance before consideration of the allowance for loan and lease losses as the carrying value of these loans has been reduced to the estimated property value less costs to sell.



Table 42
Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity ^{(1, 2)}
	Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)	2016			2015			2016			2015
Nonperforming loans and leases, beginning of period	$	1,659		$	1,172		$	1,212		$	1,113
Additions to nonperforming loans and leases:
New nonperforming loans and leases	890			205			2,076			911
Advances	2			11			13			28
Reductions to nonperforming loans and leases:
Paydowns	(267		)	(145		)	(598		)	(358		)
Sales	(73		)	—			(166		)	(81		)
Returns to performing status ⁽³⁾	(101		)	(47		)	(177		)	(98		)
Charge-offs	(102		)	(93		)	(350		)	(200		)
Transfers to foreclosed properties ⁽⁴⁾	—			(1		)	(2		)	(213		)
Transfers to loans held-for-sale	(9		)	—			(9		)	—
Total net additions/(reductions) to nonperforming loans and leases	340			(70		)	787			(11		)
Total nonperforming loans and leases, September 30	1,999			1,102			1,999			1,102
Foreclosed properties, beginning of period	19			265			15			67
Additions to foreclosed properties:
New foreclosed properties ⁽⁴⁾	—			—			22			207
Reductions to foreclosed properties:
Sales	(3		)	(207		)	(21		)	(214		)
Write-downs	—			—			—			(2		)
Total net additions/(reductions) to foreclosed properties	(3		)	(207		)	1			(9		)
Total foreclosed properties, September 30	16			58			16			58
Nonperforming commercial loans, leases and foreclosed properties, September 30	$	2,015		$	1,160		$	2,015		$	1,160
Nonperforming commercial loans and leases as a percentage of outstanding commercial loans and leases ⁽⁵⁾	0.45		%	0.26		%
Nonperforming commercial loans, leases and foreclosed properties as a percentage of outstanding commercial loans, leases and foreclosed properties ⁽⁵⁾	0.45			0.27


⁽¹⁾	Balances do not include nonperforming LHFS of $262 million and $266 million at September 30, 2016 and 2015.


⁽²⁾	Includes U.S. small business commercial activity. Small business card loans are excluded as they are not classified as nonperforming.


⁽³⁾	Commercial loans and leases may be returned to performing status when all principal and interest is current and full repayment of the remaining contractual principal and interest is expected, or when the loan otherwise becomes well-secured and is in the process of collection. TDRs are generally classified as performing after a sustained period of demonstrated payment performance.


⁽⁴⁾	New foreclosed properties represents transfers of nonperforming loans to foreclosed properties net of charge-offs recorded during the first 90 days after transfer of a loan to foreclosed properties.


⁽⁵⁾	Outstanding commercial loans exclude loans accounted for under the fair value option.

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Table 43 presents our commercial TDRs by product type and performing status. U.S. small business commercial TDRs are comprised of renegotiated small business card loans and small business loans. The renegotiated small business card loans are not classified as nonperforming 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 43
Commercial Troubled Debt Restructurings
	September 30, 2016						December 31, 2015
(Dollars in millions)	Total		Non-performing		Performing		Total		Non-performing		Performing
U.S. commercial	$	1,947	$	724	$	1,223	$	1,225	$	394	$	831
Commercial real estate	102		27		75		118		27		91
Commercial lease financing	4		2		2		—		—		—
Non-U.S. commercial	268		58		210		363		136		227
	2,321		811		1,510		1,706		557		1,149
U.S. small business commercial	17		3		14		29		10		19
Total commercial troubled debt restructurings	$	2,338	$	814	$	1,524	$	1,735	$	567	$	1,168

Industry Concentrations

Table 44 presents commercial committed and utilized credit exposure by industry and the total net credit default protection purchased to cover the funded and unfunded portions of certain credit exposures. Our commercial credit exposure is diversified across a broad range of industries. Total commercial committed credit exposure increased $4.4 billion, during the nine months ended September 30, 2016 to $946.9 billion. Increases in commercial committed exposure were concentrated in pharmaceuticals and biotechnology, healthcare equipment and services, and commercial services and supplies, partially offset by lower exposure to banking, diversified financials and energy.

Industry limits are used internally to manage industry concentrations and are based on committed exposures and capital usage that are allocated on an industry-by-industry basis. A risk management framework is in place to set and approve industry limits as well as to provide ongoing monitoring. The Management Risk Committee oversees industry limit governance.

Diversified financials, our largest industry concentration with committed exposure of $122.8 billion, decreased $5.6 billion, or four percent, during the nine months ended September 30, 2016. The decrease was primarily due to a reduction in bridge financing exposure and other commitments.

Real estate, our second largest industry concentration with committed exposure of $84.1 billion, decreased $3.6 billion, or four percent, during the nine months ended September 30, 2016. Real estate construction and land development exposure represented 12 percent and 14 percent of the total real estate industry committed exposure at September 30, 2016 and December 31, 2015. For more information on the commercial real estate and related portfolios, see Commercial Portfolio Credit Risk Management – Commercial Real Estate on page 70.

The decline in oil prices has impacted and may continue to impact the financial performance of energy producers as well as energy equipment and service providers within the energy sector. Our energy-related committed exposure decreased $5.1 billion to $38.7 billion during the nine months ended September 30, 2016. Within the higher risk sub-sectors of exploration and production and oil field services, total committed exposure declined $2.7 billion to $15.4 billion, or 40 percent of total committed energy exposure, during the nine months ended September 30, 2016. Total utilized exposure to these sub-sectors declined approximately $1.4 billion to $6.9 billion during the nine months ended September 30, 2016. Of the total utilized exposure to the higher risk sub-sectors, 56 percent was criticized at September 30, 2016. Energy sector net charge-offs increased $211 million to $226 million for the nine months ended September 30, 2016 compared to the same period in 2015 and energy sector reservable criticized exposure increased $1.3 billion to $5.9 billion during the nine months ended September 30, 2016 due to sustained low oil prices. The energy allowance for credit losses increased to $1.0 billion during the nine months ended September 30, 2016 primarily due to increased allowance coverage for the higher risk sub-sectors.

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Table 44
Commercial Credit Exposure by Industry ⁽¹⁾
	Commercial Utilized				Total Commercial Committed ⁽²⁾
(Dollars in millions)	September 30 2016		December 31 2015		September 30 2016			December 31 2015
Diversified financials	$	76,639	$	79,496	$	122,795		$	128,436
Real estate ⁽³⁾	61,522		61,759		84,057			87,650
Healthcare equipment and services	37,553		35,134		65,780			57,901
Retailing	40,633		37,675		63,782			63,975
Capital goods	34,364		30,790		63,478			58,583
Government and public education	45,244		44,835		54,600			53,133
Banking	39,533		45,952		46,644			53,825
Materials	23,135		24,012		44,508			46,013
Consumer services	26,778		24,084		41,982			37,058
Food, beverage and tobacco	19,771		18,316		39,181			43,164
Energy	19,741		21,257		38,746			43,811
Commercial services and supplies	23,830		19,552		38,202			32,045
Utilities	12,408		11,396		28,154			27,849
Transportation	20,428		19,369		27,760			27,371
Media	13,171		12,833		25,587			24,194
Pharmaceuticals and biotechnology	6,037		6,302		25,162			16,472
Individuals and trusts	16,775		17,992		22,341			23,176
Technology hardware and equipment	8,564		6,337		19,965			24,734
Software and services	8,193		6,617		18,344			18,362
Automobiles and components	5,252		4,804		12,897			11,329
Insurance, including monolines	6,041		5,095		12,250			10,728
Telecommunication services	5,952		4,717		11,372			10,645
Consumer durables and apparel	5,804		6,053		10,965			11,165
Food and staples retailing	4,899		4,351		8,848			9,439
Religious and social organizations	4,662		4,526		6,429			5,929
Other	5,886		6,309		13,093			15,510
Total commercial credit exposure by industry	$	572,815	$	559,563	$	946,922		$	942,497
Net credit default protection purchased on total commitments ⁽⁴⁾					$	(4,586	)	$	(6,677	)


⁽¹⁾	Includes U.S. small business commercial exposure.


⁽²⁾	Includes the notional amount of unfunded legally binding lending commitments net of amounts distributed (e.g., syndicated or participated) to other financial institutions of $12.4 billion and $14.3 billion at September 30, 2016 and December 31, 2015.


⁽³⁾	Industries are viewed from a variety of perspectives to best isolate the perceived risks. For purposes of this table, the real estate industry is defined based on the borrowers' or counterparties' primary business activity using operating cash flows and primary source of repayment as key factors.


⁽⁴⁾	Represents net notional credit protection purchased. For additional information, see Commercial Portfolio Credit Risk Management – Risk Mitigation on page 76.

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Risk Mitigation

We purchase credit protection to cover the funded portion as well as the unfunded portion of certain credit exposures. To lower the cost of obtaining our desired credit protection levels, we may add credit exposure within an industry, borrower or counterparty group by selling protection.

At September 30, 2016 and December 31, 2015, net notional credit default protection purchased in our credit derivatives portfolio to hedge our funded and unfunded exposures for which we elected the fair value option, as well as certain other credit exposures, was $4.6 billion and $6.7 billion. We recorded net losses of $80 million and $408 million for the three and nine months ended September 30, 2016 compared to net gains of $191 million and $78 million for the same periods in 2015 on these positions. The gains and losses on these instruments were offset by gains and losses on the related exposures. The Value-at-Risk (VaR) results for these exposures are included in the fair value option portfolio information in Table 52. For additional information, see Trading Risk Management on page 84.

Tables 45 and 46 present the maturity profiles and the credit exposure debt ratings of the net credit default protection portfolio at September 30, 2016 and December 31, 2015.



Table 45
Net Credit Default Protection by Maturity
	September 30 2016		December 31 2015
Less than or equal to one year	53	%	39	%
Greater than one year and less than or equal to five years	44		59
Greater than five years	3		2
Total net credit default protection	100	%	100	%



Table 46
Net Credit Default Protection by Credit Exposure Debt Rating
(Dollars in millions)	September 30, 2016					December 31, 2015
Ratings ^{(1, 2)}	Net Notional ⁽³⁾			Percent of Total		Net Notional ⁽³⁾			Percent of Total
A	$	(393	)	8.6	%	$	(752	)	11.3	%
BBB	(2,401		)	52.4		(3,030		)	45.4
BB	(1,105		)	24.1		(2,090		)	31.3
B	(632		)	13.8		(634		)	9.5
CCC and below	(24		)	0.5		(139		)	2.1
NR ⁽⁴⁾	(31		)	0.6		(32		)	0.4
Total net credit default protection	$	(4,586	)	100.0	%	$	(6,677	)	100.0	%


⁽¹⁾	Ratings are refreshed on a quarterly basis.


⁽²⁾	Ratings of BBB- or higher are considered to meet the definition of investment grade.


⁽³⁾	Represents net credit default protection purchased.


⁽⁴⁾	NR is comprised of index positions held and any names that have not been rated.

In addition to our net notional credit default protection purchased to cover the funded and unfunded portion of certain credit exposures, credit derivatives are used for market-making activities for clients and establishing positions intended to profit from directional or relative value changes. We execute the majority of our credit derivative trades in the OTC market with large, multinational financial institutions, including broker-dealers and, to a lesser degree, with a variety of other investors. Because these transactions are executed in the OTC market, we are subject to settlement risk. We are also subject to credit risk in the event that these counterparties fail to perform under the terms of these contracts. In most cases, credit derivative transactions are executed on a daily margin basis. Therefore, events such as a credit downgrade, depending on the ultimate rating level, or a breach of credit covenants would typically require an increase in the amount of collateral required by the counterparty, where applicable, and/or allow us to take additional protective measures such as early termination of all trades.

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Table 47 presents the total contract/notional amount of credit derivatives outstanding and includes both purchased and written credit derivatives. The credit risk amounts are measured as net asset exposure by counterparty, taking into consideration all contracts with the counterparty. For more information on our written credit derivatives, see Note 2 – Derivatives to the Consolidated Financial Statements.

The credit risk amounts discussed above and presented in Table 47 take into consideration the effects of legally enforceable master netting agreements while amounts disclosed in Note 2 – Derivatives to the Consolidated Financial Statements are shown on a gross basis. Credit risk reflects the potential benefit from offsetting exposure to non-credit derivative products with the same counterparties that may be netted upon the occurrence of certain events, thereby reducing our overall exposure.



Table 47
Credit Derivatives
	September 30, 2016				December 31, 2015
(Dollars in millions)	Contract/ Notional		Credit Risk		Contract/ Notional		Credit Risk
Purchased credit derivatives:
Credit default swaps	$	811,805	$	2,805	$	928,300	$	3,677
Total return swaps/other	31,502		391		26,427		1,596
Total purchased credit derivatives	$	843,307	$	3,196	$	954,727	$	5,273
Written credit derivatives:
Credit default swaps	$	803,211	n/a		$	924,143	n/a
Total return swaps/other	43,228		n/a		39,658		n/a
Total written credit derivatives	$	846,439	n/a		$	963,801	n/a

n/a = not applicable

Counterparty Credit Risk Valuation Adjustments

We record counterparty credit risk valuation adjustments on certain derivative assets, including our credit default protection purchased, in order to properly reflect the credit risk of the counterparty, as presented in Table 48. 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 enforceable master netting agreements and collateral. For additional information, see Note 2 – Derivatives to the Consolidated Financial Statements.

We enter into risk management activities to offset market driven exposures. We often hedge the counterparty spread risk in CVA with credit default swaps (CDS). We hedge other market risks in CVA primarily with currency and interest rate swaps. In certain instances, the net-of-hedge amounts in the table below move in the same direction as the gross amount or may move in the opposite direction. This is a consequence of the complex interaction of the risks being hedged resulting in limitations in the ability to perfectly hedge all of the market exposures at all times.



Table 48
Credit Valuation Gains and Losses
Gains (Losses)	Three Months Ended September 30														Nine Months Ended September 30
	2016							2015							2016						2015
(Dollars in millions)	Gross		Hedge			Net		Gross			Hedge		Net		Gross		Hedge		Net		Gross		Hedge		Net
Credit valuation	$	280	$	(214	)	$	66	$	(138	)	$	205	$	67	$	45	$	106	$	151	$	85	$	89	$	174

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Non-U.S. Portfolio

Our non-U.S. credit and trading portfolios are subject to country risk. We define country risk as the risk of loss from unfavorable economic and political conditions, currency fluctuations, social instability and changes in government policies. A risk management framework is in place to measure, monitor and manage non-U.S. risk and exposures. In addition to the direct risk of doing business in a country, we also are exposed to indirect country risks (e.g., related to the collateral received on secured financing transactions 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 49 presents our 20 largest non-U.S. country exposures at September 30, 2016. These exposures accounted for 87 percent and 86 percent of our total non-U.S. exposure at September 30, 2016 and December 31, 2015. Net country exposure for these 20 countries increased $18.3 billion from December 31, 2015 primarily driven by increases in Germany, and to a lesser extent Canada and France. On a product basis, the increase was driven by an increase in funded loans and loan equivalents in Germany and Canada, higher unfunded commitments in Germany, and an increase in securities in France and Canada.

Non-U.S. exposure is presented on an internal risk management basis and includes sovereign and non-sovereign credit exposure, securities and other investments issued by or domiciled in countries other than the U.S. The risk assignments by country can be adjusted for external guarantees and certain collateral types. Exposures that are subject to external guarantees are reported under the country of the guarantor. Exposures with tangible collateral are reflected in the country where the collateral is held. For securities received, other than cross-border resale agreements, outstandings are assigned to the domicile of the issuer of the securities.

Funded loans and loan equivalents include loans, leases, and other extensions of credit and funds, including letters of credit and due from placements, which have not been reduced by collateral, hedges or credit default protection. Funded loans and loan equivalents are reported net of charge-offs but prior 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 CDS, and secured financing transactions. Derivatives exposures are presented net of collateral, which is predominantly cash, pledged under legally enforceable master netting agreements. Secured financing transaction exposures are presented net of eligible cash or securities pledged as collateral.

Securities and other investments are carried at fair value and long securities exposures are netted against short exposures with the same underlying issuer to, but not below, zero (i.e., negative issuer exposures are reported as zero). Other investments include our GPI portfolio and strategic investments.

Net country exposure represents country exposure less hedges and credit default protection purchased, net of credit default protection sold. We hedge certain of our country exposures with credit default protection primarily in the form of single-name, as well as indexed and tranched CDS. The exposures associated with these hedges represent the amount that would be realized upon the isolated default of an individual issuer in the relevant country assuming a zero recovery rate for that individual issuer, and are calculated based on the CDS notional amount adjusted for any fair value receivable or payable. Changes in the assumption of an isolated default can produce different results in a particular tranche.

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Table 49
Top 20 Non-U.S. Countries Exposure
(Dollars in millions)	Funded Loans and Loan Equivalents		Unfunded Loan Commitments		Net Counterparty Exposure		Securities/ Other Investments		Country Exposure at September 30 2016		Hedges and Credit Default Protection			Net Country Exposure at September 30 2016		Increase (Decrease) from December 31 2015
United Kingdom	$	31,206	$	12,695	$	8,589	$	4,076	$	56,566	$	(4,153	)	$	52,413	$	(833	)
Germany	11,254		17,622		1,585		2,841		33,302		(4,316		)	28,986		15,582
Canada	6,851		7,297		2,000		3,857		20,005		(1,560		)	18,445		3,713
Japan	14,042		629		1,260		1,879		17,810		(1,833		)	15,977		1,613
Brazil	9,378		293		765		4,196		14,632		(297		)	14,335		(1,315		)
France	3,317		4,813		2,553		6,165		16,848		(3,921		)	12,927		4,241
China	8,428		733		1,106		1,661		11,928		(389		)	11,539		1,065
India	6,033		319		415		2,390		9,157		(218		)	8,939		(1,415		)
Australia	3,962		2,648		362		1,809		8,781		(353		)	8,428		(1,117		)
Hong Kong	6,231		221		822		555		7,829		(32		)	7,797		208
Netherlands	3,066		2,719		567		2,707		9,059		(1,389		)	7,670		36
Switzerland	4,226		2,823		368		583		8,000		(1,301		)	6,699		436
South Korea	4,200		682		781		1,451		7,114		(526		)	6,588		(270		)
Italy	2,896		893		748		1,430		5,967		(905		)	5,062		(246		)
Mexico	3,432		995		249		492		5,168		(228		)	4,940		(114		)
Singapore	2,472		144		727		1,657		5,000		(63		)	4,937		208
United Arab Emirates	2,254		159		720		25		3,158		(116		)	3,042		16
Turkey	2,899		48		65		14		3,026		(48		)	2,978		(162		)
Belgium	846		1,774		166		242		3,028		(416		)	2,612		(2,856		)
Spain	1,802		664		243		843		3,552		(1,004		)	2,548		(515		)
Total top 20 non-U.S. countries exposure	$	128,795	$	58,171	$	24,091	$	38,873	$	249,930	$	(23,068	)	$	226,862	$	18,275

Weakening of commodity prices, signs of slowing growth in China, a recession in Brazil and recent political events in Turkey are driving risk aversion in emerging markets. At September 30, 2016, net exposure to China was $11.5 billion, concentrated in large state-owned companies, subsidiaries of multinational corporations and commercial banks. At September 30, 2016, net exposure to Brazil was $14.3 billion, concentrated in sovereign securities, oil and gas companies and commercial banks. At September 30, 2016, net exposure to Turkey was $3.0 billion, concentrated in commercial banks.

The U.K. Referendum to leave the EU has led to political and economic uncertainty that may continue over the next several years. At September 30, 2016, net exposure to the U.K. was $52.4 billion, concentrated in multinational corporations and sovereign clients. For additional information, see Executive Summary – Third Quarter 2016 Economic and Business Environment on page 4.

Provision for Credit Losses

The provision for credit losses increased $44 million to $850 million, and $472 million to $2.8 billion for the three and nine months ended September 30, 2016 compared to the same periods in 2015. The provision for credit losses was $38 million and $118 million lower than net charge-offs for the three and nine months ended September 30, 2016, resulting in a reduction in the allowance for credit losses. This compared to a reduction of $126 million and $843 million in the allowance for credit losses for the three and nine months ended September 30, 2015.

The provision for credit losses for the consumer portfolio increased $163 million to $705 million, and $126 million to $1.8 billion for the three and nine months ended September 30, 2016 compared to the same periods in 2015 due to a slower pace of credit quality improvement. Included in the provision is expense of $8 million and a benefit of $81 million related to the PCI loan portfolio for the three and nine months ended September 30, 2016 compared to a benefit of $68 million and $40 million for the same periods in 2015.

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The provision for credit losses for the commercial portfolio, including unfunded lending commitments, decreased $119 million to $145 million, and increased $346 million to $983 million for the three and nine months ended September 30, 2016 compared to the same periods in 2015. The three-month decrease was driven by a slower pace of loan growth and the nine-month increase was primarily driven by an increase in energy sector reserves for the higher risk energy sub-sectors. Although energy prices have shown improvement during the last six months, they have not fully recovered to the pre-energy crisis levels.

Allowance for Credit Losses

Allowance for Loan and Lease Losses

The allowance for loan and lease losses is comprised of two components. The first component covers nonperforming commercial loans and TDRs. The second component covers loans and leases on which there are incurred losses that are not yet individually identifiable, as well as incurred losses that may not be represented in the loss forecast models. We evaluate the adequacy of the allowance for loan and lease losses based on the total of these two components. The allowance for loan and lease losses excludes LHFS and loans accounted for under the fair value option as the fair value reflects a credit risk component. For more information on the allowance for loan and lease losses, see Allowance for Credit Losses in the MD&A of the Corporation's 2015 Annual Report on Form 10-K.

During the three and nine months ended September 30, 2016, the factors that impacted the allowance for loan and lease losses included overall improvements in the credit quality of the portfolios driven by continuing improvements in the U.S. economy and labor markets, continuing proactive credit risk management initiatives and the impact of recent higher credit quality originations. Additionally, the resolution of uncertainties through current recognition of net charge-offs has impacted the amount of reserve needed in certain portfolios. Evidencing the improvements in the U.S. economy and labor markets are modest growth in consumer spending, improvements in unemployment levels, increases in home prices and a decrease in the absolute level of national consumer bankruptcy filings. In addition to these improvements, in the consumer portfolio, loan sales, returns to performing status, paydowns and charge-offs continued to outpace new nonaccrual loans. During the nine months ended September 30, 2016, the allowance for loan and lease losses in the commercial portfolio reflected increased coverage for the energy sector due to sustained low oil prices which impacted the financial performance of energy clients and contributed to an increase in reservable criticized balances.

The allowance for loan and lease losses for the consumer portfolio, as presented in Table 51, was $6.4 billion at September 30, 2016, a decrease of $1.0 billion from December 31, 2015. The decrease was primarily in the home equity, residential mortgage and credit card portfolios. Reductions in the residential mortgage and home equity portfolios were due to improved home prices, lower delinquencies and a decrease in consumer loan balances, as well as write-offs in our PCI loan portfolio.

The decrease in the allowance related to the U.S. credit card and unsecured consumer lending portfolios was primarily due to improvement in delinquencies and more generally in unemployment levels. For example, in the U.S. credit card portfolio, accruing loans 30 days or more past due decreased to $1.5 billion at September 30, 2016 from $1.6 billion (to 1.64 percent from 1.76 percent of outstanding U.S. credit card loans) at December 31, 2015, and accruing loans 90 days or more past due decreased to $702 million at September 30, 2016 from $789 million (to 0.79 percent from 0.88 percent of outstanding U.S. credit card loans) at December 31, 2015. See Tables 25, 26 and 33 for additional details on key credit statistics for the credit card and other unsecured consumer lending portfolios.

The allowance for loan and lease losses for the commercial portfolio, as presented in Table 51, was $5.3 billion at September 30, 2016, an increase of $464 million from December 31, 2015 driven by increased allowance coverage for the higher risk energy sub-sectors as a result of sustained low oil prices. Commercial utilized reservable criticized exposure increased to $16.9 billion at September 30, 2016 from $15.9 billion (to 3.52 percent from 3.38 percent of total commercial utilized reservable exposure) at December 31, 2015, largely due to downgrades in the energy portfolio. Nonperforming commercial loans increased to $2.0 billion at September 30, 2016 from $1.2 billion (to 0.45 percent from 0.28 percent of outstanding commercial loans excluding loans accounted for under the fair value option) at December 31, 2015 with the increase primarily in the energy and metals and mining sectors. Commercial loans and leases outstanding increased to $452.5 billion at September 30, 2016 from $440.8 billion at December 31, 2015. See Tables 37, 38 and 40 for additional details on key commercial credit statistics.

The allowance for loan and lease losses as a percentage of total loans and leases outstanding was 1.30 percent at September 30, 2016 compared to 1.37 percent at December 31, 2015. The decrease in the ratio was primarily due to improved credit quality in the consumer portfolios driven by improved economic conditions and write-offs in the PCI loan portfolio. The September 30, 2016 and December 31, 2015 ratios above include the PCI loan portfolio. Excluding the PCI loan portfolio, the allowance for loan and lease losses as a percentage of total loans and leases outstanding was 1.27 percent and 1.31 percent at September 30, 2016 and December 31, 2015.

Table of Contents

Table 50 presents a rollforward of the allowance for credit losses, which includes the allowance for loan and lease losses and the reserve for unfunded lending commitments, for the three and nine months ended September 30, 2016 and 2015.



Table 50
Allowance for Credit Losses
	Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)	2016			2015			2016			2015
Allowance for loan and lease losses, beginning of period	$	11,837		$	13,068		$	12,234		$	14,419
Loans and leases charged off
Residential mortgage	(66		)	(146		)	(339		)	(716		)
Home equity	(180		)	(199		)	(589		)	(714		)
U.S. credit card	(648		)	(652		)	(2,021		)	(2,072		)
Non-U.S. credit card	(59		)	(67		)	(183		)	(210		)
Direct/Indirect consumer	(98		)	(91		)	(287		)	(289		)
Other consumer	(63		)	(63		)	(173		)	(162		)
Total consumer charge-offs	(1,114		)	(1,218		)	(3,592		)	(4,163		)
U.S. commercial ⁽¹⁾	(141		)	(136		)	(423		)	(358		)
Commercial real estate	(1		)	(3		)	(9		)	(21		)
Commercial lease financing	(9		)	(7		)	(26		)	(17		)
Non-U.S. commercial	(12		)	(11		)	(101		)	(14		)