UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2019

☐ 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:

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	BAC	New York Stock Exchange
Depositary Shares, each representing a 1/1,000th interest in a share	BAC PrE	New York Stock Exchange
of Floating Rate Non-Cumulative Preferred Stock, Series E
Depositary Shares, each representing a 1/1,000th interest in a share	BAC PrY	New York Stock Exchange
of 6.500% Non-Cumulative Preferred Stock, Series Y
Depositary Shares, each representing a 1/1,000th interest in a share	BAC PrC	New York Stock Exchange
of 6.200% Non-Cumulative Preferred Stock, Series CC
Depositary Shares, each representing a 1/1,000th interest in a share	BAC PrA	New York Stock Exchange
of 6.000% Non-Cumulative Preferred Stock, Series EE
Depositary Shares, each representing a 1/1,000th interest in a share	BAC PrB	New York Stock Exchange
of 6.000% Non-Cumulative Preferred Stock, Series GG
Depositary Shares, each representing a 1/1,000th interest in a share	BAC PrK	New York Stock Exchange
of 5.875% Non-Cumulative Preferred Stock, Series HH
7.25% Non-Cumulative Perpetual Convertible Preferred Stock, Series L	BAC PrL	New York Stock Exchange
Depositary Shares, each representing a 1/1,200th interest in a share	BML PrG	New York Stock Exchange
of Bank of America Corporation Floating Rate
Non-Cumulative Preferred Stock, Series 1



1 Bank of America



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Depositary Shares, each representing a 1/1,200th interest in a share	BML PrH	New York Stock Exchange
of Bank of America Corporation Floating Rate
Non-Cumulative Preferred Stock, Series 2
Depositary Shares, each representing a 1/1,200th interest in a share	BML PrJ	New York Stock Exchange
of Bank of America Corporation Floating Rate
Non-Cumulative Preferred Stock, Series 4
Depositary Shares, each representing a 1/1,200th interest in a share	BML PrL	New York Stock Exchange
of Bank of America Corporation Floating Rate
Non-Cumulative Preferred Stock, Series 5
Floating Rate Preferred Hybrid Income Term Securities of BAC Capital	BAC/PF	New York Stock Exchange
Trust XIII (and the guarantee related thereto)
5.63% Fixed to Floating Rate Preferred Hybrid Income Term Securities	BAC/PG	New York Stock Exchange
of BAC Capital Trust XIV (and the guarantee related thereto)
Income Capital Obligation Notes initially due December 15, 2066 of	MER PrK	New York Stock Exchange
Bank of America Corporation
Senior Medium-Term Notes, Series A, Step Up Callable Notes, due	BAC/31B	New York Stock Exchange
November 28, 2031 of BofA Finance LLC (and the guarantee
of the Registrant with respect thereto)
Depositary Shares, each representing a 1/1,000th interest in a share of	BAC PrM	New York Stock Exchange
5.375% Non-Cumulative Preferred Stock, Series KK
Depositary Shares, each representing a 1/1,000th interest in a share	BAC PrN	New York Stock Exchange
5.000% Non-Cumulative Preferred Stock, Series LL

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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

Yes ☑ No ☐

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



Large accelerated filer	☑	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Yes ☐ No ☑

On October 25, 2019, there were 8,995,107,401 shares of Bank of America Corporation Common Stock outstanding.



		Bank of America 2

Bank of America Corporation and Subsidiaries

September 30, 2019

Form 10-Q

INDEX

Part I. Financial Information



Item 1. Financial Statements		Page
Consolidated Statement of Income		46
Consolidated Statement of Comprehensive Income		46
Consolidated Balance Sheet		47
Consolidated Statement of Changes in Shareholders’ Equity		48
Consolidated Statement of Cash Flows		49
Notes to Consolidated Financial Statements		50
Note 1 – Summary of Significant Accounting Principles		50
Note 2 – Net Interest Income and Noninterest Income		51
Note 3 – Derivatives		52
Note 4 – Securities		59
Note 5 – Outstanding Loans and Leases		62
Note 6 – Allowance for Credit Losses		70
Note 7 – Securitizations and Other Variable Interest Entities		71
Note 8 – Goodwill and Intangible Assets		75
Note 9 – Leases		75
Note 10 – Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings and Restricted Cash		76
Note 11 – Commitments and Contingencies		77
Note 12 – Shareholders’ Equity		80
Note 13 – Earnings Per Common Share		80
Note 14 – Accumulated Other Comprehensive Income (Loss)		81
Note 15 – Fair Value Measurements		81
Note 16 – Fair Value Option		89
Note 17 – Fair Value of Financial Instruments		89
Note 18 – Business Segment Information		90
Glossary		94
Acronyms		95



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Executive Summary		3
Recent Developments		3
Financial Highlights		4
Supplemental Financial Data		6
Business Segment Operations		10
Consumer Banking		10
Global Wealth & Investment Management		13
Global Banking		15
Global Markets		17
All Other		19
Off-Balance Sheet Arrangements and Contractual Obligations		20
Managing Risk		20
Capital Management		20
Liquidity Risk		23
Credit Risk Management		26
Consumer Portfolio Credit Risk Management		26
Commercial Portfolio Credit Risk Management		33
Non-U.S. Portfolio		38
Provision for Credit Losses		39
Allowance for Credit Losses		39
Market Risk Management		41
Trading Risk Management		41
Interest Rate Risk Management for the Banking Book		43
Mortgage Banking Risk Management		45
Complex Accounting Estimates		45
Non-GAAP Reconciliations		45

Item 3. Quantitative and Qualitative Disclosures about Market Risk		45
Item 4. Controls and Procedures		45



1 Bank of America

Part II. Other Information



Item 1. Legal Proceedings		96
Item 1A. Risk Factors		96
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		96
Item 6. Exhibits		97
Signature		97

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Bank of America Corporation (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, strategy, 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 under Item 1A. Risk Factors of our 2018 Annual Report on Form 10-K and in any of the Corporation’s subsequent Securities and Exchange Commission filings: the Corporation’s potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions; the possibility that the Corporation’s future liabilities may be in excess of its recorded liability and estimated range of possible loss for litigation, regulatory, and representations and warranties exposures; the possibility that the Corporation could face increased servicing, fraud, indemnity, contribution or other claims from one or more counterparties, including trustees, purchasers of loans, underwriters, issuers, monolines, private-label and other investors, or other parties involved in securitizations; the Corporation’s ability to resolve representations and warranties repurchase and related claims, including claims brought by investors or trustees seeking to avoid the statute of limitations for repurchase claims; the risks related to the discontinuation of the London InterBank Offered Rate and other reference rates, including increased expenses and litigation and the effectiveness of hedging strategies; 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, inflation, currency exchange rates, economic conditions, trade policies and tensions, including tariffs,

and potential geopolitical instability; the impact of the interest rate environment on the Corporation’s business, financial condition and results of operations; the possibility that future credit losses may be higher than currently expected due to changes in economic assumptions, customer behavior, adverse developments with respect to U.S. or global economic conditions and other uncertainties; the Corporation’s ability to achieve its expense targets and expectations regarding net interest income, net charge-offs, effective tax rate, loan growth or other projections; adverse changes to the Corporation’s credit ratings from the major credit rating agencies; an inability to access capital markets or maintain deposits or borrowing costs; estimates of the fair value and other accounting values, subject to impairment assessments, of certain of the Corporation’s assets and liabilities; the estimated or actual impact of changes in accounting standards or assumptions in applying those standards, including the new credit loss accounting standard; uncertainty regarding the content, timing and impact of regulatory capital and liquidity requirements; the impact of adverse changes to total loss-absorbing capacity requirements and/or global systemically important bank surcharges; the potential impact of actions of the Board of Governors of the Federal Reserve System on the Corporation’s capital plans; the effect of regulations, other guidance or additional information on the impact from the Tax Cuts and Jobs Act; 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, Federal Deposit Insurance Corporation assessments, the Volcker Rule, fiduciary standards and derivatives regulations; a failure or disruption 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 planned exit of the United Kingdom from the European Union; the impact of any future federal government shutdown and uncertainty regarding the federal government’s debt limit; and other 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 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.



		Bank of America 2

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, 2019, the Corporation had $2.4 trillion in assets and a headcount of approximately 209,000 employees.

As of September 30, 2019, we served clients through operations across the U.S., its territories and approximately 35 countries. Our retail banking footprint covers approximately 90 percent of the U.S. population, and we serve approximately 66 million consumer and small business clients with approximately 4,300 retail financial centers, approximately 16,600 ATMs, and leading digital banking platforms (www.bankofamerica.com) with nearly 38 million active users, including approximately 29 million active mobile users. We offer industry-leading support to approximately three million small business owners. Our wealth management businesses, with client balances of $2.9 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.

Recent Developments

Capital Management

During the third quarter of 2019, we repurchased $7.6 billion of common stock pursuant to the Board of Directors’ (the Board) 2019 repurchase authorization of approximately $30.9 billion announced on June 27, 2019. For additional information, see Capital Management on page 20. On July 25, 2019, the Board declared a quarterly common stock dividend of $0.18 per share, payable on September 27, 2019 to shareholders of record as of September 6, 2019. Additionally, on October 22, 2019, the Board declared a quarterly common stock dividend of $0.18 per share, payable on December 27, 2019 to shareholders of record as of December 6, 2019.

Merchant Services Joint Venture

As previously disclosed in the Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, a significant portion of our merchant processing activity is performed by a joint venture, formed in 2009, in which we own a 49 percent ownership

interest. The joint venture is accounted for as an equity method investment. On July 29, 2019, we gave notice to the joint venture partner of the termination of the joint venture upon the conclusion of its current term, after which we expect to pursue our own merchant services strategy. In addition, the Corporation and the joint venture partner have an agreement to provide uninterrupted delivery of products and services to the joint venture merchants through at least June 2023. As a result of the above actions, we incurred a non-cash, pretax impairment charge of $2.1 billion included in other general operating expense in the three months ended September 30, 2019. We anticipate accounting for the joint venture as an equity method investment until June 2020. For additional information, see Note 11 – Commitments and Contingencies to the Consolidated Financial Statements.

U.K. Exit from the EU

On October 28, 2019, the EU agreed to extend the deadline for the U.K.’s withdrawal from the EU to January 31, 2020. The final outcome of negotiations between the U.K. and the EU regarding the terms and conditions of the withdrawal of the U.K. from the EU remains uncertain.

We conduct business in Europe, the Middle East and Africa primarily through our subsidiaries in the U.K., Ireland and France. For information on the changes we have implemented to enable us to continue to operate in the region, including establishing a bank and broker-dealer in the EU, see the Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019. While we have taken measures to minimize operational disruption and prepare for various potential outcomes of the U.K.’s withdrawal from the EU, the preparedness of our counterparties and the relevant financial markets infrastructure remain outside our control. The global economic impact of the U.K.’s withdrawal from the EU remains uncertain and could result in regional and global financial market disruptions. In preparation for the withdrawal, we will continue to assess potential risks, including operational, regulatory and legal risks.

LIBOR and Other Benchmark Rates

As previously disclosed, to facilitate an orderly transition from Interbank Offered Rates and other benchmark rates to alternative reference rates (ARRs), the Corporation has established an enterprise-wide initiative led by senior management to identify, assess and monitor risks associated with the expected discontinuation or unavailability of benchmarks, including the London InterBank Offered Rate (LIBOR), achieve operational readiness and engage impacted clients in connection with the transition to ARRs. Additionally, the Corporation continues to monitor the development and usage of ARRs, including the Secured Overnight Financing Rate. For more information on the expected replacement of LIBOR and other benchmark rates, see Executive Summary - Recent Developments - LIBOR and Other Benchmark Rates in the MD&A of the Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30 2019, and Item 1A. Risk Factors - Other and Executive Summary - Recent Developments - LIBOR and Other Benchmark Rates in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.



3 Bank of America

Financial Highlights




Table 1	Summary Income Statement and Selected Financial Data

		Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions, except per share information)		2019			2018			2019			2018
Income statement
Net interest income		$	12,187		$	12,061		$	36,751		$	35,658
Noninterest income		10,620			10,663			32,144			32,685
Total revenue, net of interest expense		22,807			22,724			68,895			68,343
Provision for credit losses		779			716			2,649			2,377
Noninterest expense		15,169			13,014			41,661			40,080
Income before income taxes		6,859			8,994			24,585			25,886
Income tax expense		1,082			1,827			4,149			5,017
Net income		5,777			7,167			20,436			20,869
Preferred stock dividends		505			466			1,186			1,212
Net income applicable to common shareholders		$	5,272		$	6,701		$	19,250		$	19,657

Per common share information
Earnings		$	0.57		$	0.67		$	2.02		$	1.93
Diluted earnings		0.56			0.66			2.01			1.91
Dividends paid		0.18			0.15			0.48			0.39
Performance ratios
Return on average assets		0.95		%	1.23		%	1.14		%	1.20		%
Return on average common shareholders’ equity		8.48			10.99			10.49			10.86
Return on average tangible common shareholders’ equity ⁽¹⁾		11.84			15.48			14.67			15.30
Efficiency ratio		66.51			57.27			60.47			58.65

								September 30 2019			December 31 2018
Balance sheet
Total loans and leases								$	972,910		$	946,895
Total assets								2,426,330			2,354,507
Total deposits								1,392,836			1,381,476
Total liabilities								2,157,943			2,089,182
Total common shareholders’ equity								244,781			242,999
Total shareholders’ equity								268,387			265,325


⁽¹⁾	Return on average tangible common shareholders’ equity is a non-GAAP financial measure. For more information and a corresponding reconciliation to the most closely related financial measures defined by accounting principles generally accepted in the United States of America (GAAP), see Non-GAAP Reconciliations on page 45.

Net income was $5.8 billion and $20.4 billion, or $0.56 and $2.01 per diluted share, for the three and nine months ended September 30, 2019 compared to $7.2 billion and $20.9 billion, or $0.66 and $1.91 per diluted share, for the same periods in 2018. The decrease in net income for the three and nine months ended September 30, 2019 was primarily driven by an increase in noninterest expense as a result of a $2.1 billion pretax impairment charge related to the notice of termination of the merchant services joint venture at the conclusion of its current term. Also contributing to the decrease in net income were higher provision for credit losses and lower noninterest income, partially offset by an increase in net interest income.

Total assets increased $71.8 billion from December 31, 2018 to $2.4 trillion primarily driven by higher trading account assets in Global Markets due to increased client balances in Equities and increased levels of inventory in Fixed-Income, Currencies and Commodities (FICC) to facilitate expected client demand, higher loans and leases primarily due to continued residential mortgage and commercial loan growth, and increases in federal funds sold and securities borrowed or purchased under agreements to resell driven by short-term reinvestments of excess cash.

Total liabilities increased $68.8 billion from December 31, 2018 to $2.2 trillion driven by higher federal funds purchased and securities loaned or sold under agreements to repurchase primarily driven by funding needs in the FICC businesses within Global Markets, an increase in long-term debt due to valuation adjustments, higher deposits as a result of continued growth in our Consumer Banking and Global Banking businesses, higher trading account liabilities in FICC to facilitate expected client

demand, and an increase in other short-term borrowings as a result of higher Federal Home Loan Bank (FHLB) advances. Shareholders’ equity increased $3.1 billion from December 31, 2018 primarily due to net income, market value increases on debt securities and issuances of preferred stock, partially offset by returns of capital to shareholders through common stock repurchases and common and preferred stock dividends, and the redemption of preferred stock.

Net Interest Income

Net interest income increased $126 million to $12.2 billion, and $1.1 billion to $36.8 billion for the three and nine months ended September 30, 2019 compared to the same periods in 2018. Net interest yield on a fully taxable-equivalent (FTE) basis decreased 4 basis points (bps) to 2.41 percent, and increased 2 bps to 2.45 percent for the same periods. The increase in net interest income for both periods was primarily driven by loan and deposit growth, and for the three-month period, partially offset by lower interest rates. The increase in the nine-month period was also due to higher short-end interest rates. Both long- and short-term interest rates have declined during 2019. We expect net interest income for 2019 to grow approximately one percent as compared to 2018. This reflects the expectation for another short-end rate cut in the fourth quarter of 2019, that long-end interest rates remain flat compared to September 30, 2019 and economic conditions remain stable. For more information on net interest yield and the FTE basis, see Supplemental Financial Data on page 6, and for more information on interest rate risk management, see Interest Rate Risk Management for the Banking Book on page 43.



		Bank of America 4

Noninterest Income




Table 2	Noninterest Income

		Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)		2019		2018		2019		2018
Fees and commissions:
Card income		$	1,465	$	1,417	$	4,286	$	4,302
Service charges		1,975		1,961		5,717		5,836
Investment and brokerage services		3,494		3,494		10,324		10,616
Investment banking fees		1,533		1,204		4,168		3,979
Total fees and commissions		8,467		8,076		24,495		24,733
Trading account income		1,707		1,717		6,390		6,421
Other income		446		870		1,259		1,531
Total noninterest income		$	10,620	$	10,663	$	32,144	$	32,685

Noninterest income decreased $43 million to $10.6 billion, and decreased $541 million to $32.1 billion for the three and nine months ended September 30, 2019 compared to the same periods in 2018. The following highlights the significant changes.


●	Service charges were relatively unchanged for the three-month period and decreased $119 million for the nine-month period primarily driven by lower treasury fees in Global Banking as well as lower fees due to policy changes and lower ATM volume in Consumer Banking.


•	Investment and brokerage services income was unchanged for the three-month period and decreased $292 million for the nine-month period. The decline was primarily due to lower transactional revenue and a decrease in assets under management (AUM) pricing, partially offset by the positive impact of AUM flows.


●	Investment banking fees increased $329 million for the three-month period due to increases in advisory and debt underwriting fees, and increased $189 million for the nine-month period due to increases in advisory and equity underwriting fees, partially offset by decreases in debt underwriting.

●

Other income decreased $424 million and $272 million for the three- and nine-month periods primarily due to an equity investment gain in the prior-year period and lower gains on sales of debt securities. Also, the prior-year nine-month period included a $729 million charge related to the redemption of certain trust preferred securities, partially offset by a $572 million gain from the sale of certain non-core mortgage loans.

Provision for Credit Losses

The provision for credit losses increased $63 million to $779 million, and $272 million to $2.6 billion for the three and nine months ended September 30, 2019 compared to the same periods in 2018. The increases were driven by commercial, primarily as a result of energy reserve releases in the prior-year periods, partially offset by a decrease in consumer, primarily driven by the impact of recoveries recorded in connection with sales of previously charged-off non-core consumer real estate loans. For more information on the provision for credit losses, see Provision for Credit Losses on page 39.

Noninterest Expense




Table 3	Noninterest Expense

		Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)		2019		2018		2019		2018
Compensation and benefits		$	7,779	$	7,721	$	24,000	$	24,145
Occupancy and equipment		1,663		1,589		4,908		4,787
Information processing and communications		1,163		1,113		3,484		3,399
Product delivery and transaction related		696		687		2,067		2,149
Marketing		440		421		1,410		1,161
Professional fees		386		439		1,155		1,219
Other general operating		3,042		1,044		4,637		3,220
Total noninterest expense		$	15,169	$	13,014	$	41,661	$	40,080

Noninterest expense increased $2.2 billion to $15.2 billion and $1.6 billion to $41.7 billion for the three and nine months ended September 30, 2019 compared to the same periods in 2018. The increase in both periods was primarily due to the aforementioned impairment charge of $2.1 billion, increased costs associated with investment in the businesses, including brand-related marketing costs, and higher litigation expense, partially offset by efficiency savings, lower Federal Deposit Insurance Corporation (FDIC) expense and lower amortization of intangibles expense.



5 Bank of America

Income Tax Expense




Table 4	Income Tax Expense

		Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)		2019			2018			2019			2018
Income before income taxes		$	6,859		$	8,994		$	24,585		$	25,886
Income tax expense		1,082			1,827			4,149			5,017
Effective tax rate		15.8		%	20.3		%	16.9		%	19.4		%

The effective tax rates for the three and nine months ended September 30, 2019 reflect the impact of our recurring tax preference benefits and discrete tax benefits primarily related to the resolution of various tax matters. The nine-month effective rate also included tax benefits related to stock-based compensation.

The effective tax rates for the three and nine months ended September 30, 2018 reflect the impact of our recurring tax preference benefits. The nine-month effective rate also included tax benefits related to stock-based compensation.

We expect the effective tax rate for the fourth quarter of 2019 to be approximately 19 percent, absent unusual items.

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 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 21 percent and a representative state tax rate. Net interest yield, which measures the basis points we earn over the cost of funds, utilizes net interest income (and thus total revenue) on an FTE basis. 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., debit valuation adjustment (DVA) gains (losses)) which result in non-GAAP financial measures. We believe that the presentation of measures that exclude these items

is useful because such measures 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 shareholders’ equity or common shareholders’ equity reduced by goodwill and intangible assets (excluding mortgage servicing rights (MSRs)), net of related deferred tax liabilities ("adjusted" shareholders' equity or common shareholders' equity). 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 net income applicable to common shareholders as a percentage of adjusted average common shareholders’ equity. The tangible common equity ratio represents adjusted ending common shareholders’ equity divided by total tangible assets.


●	Return on average tangible shareholders' equity measures our net income as a percentage of adjusted average total shareholders’ equity. The tangible equity ratio represents adjusted ending shareholders’ equity divided by total tangible assets.


●	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 common 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 5.

For more information on the reconciliation of these non-GAAP financial measures to the corresponding GAAP financial measures, see Non-GAAP Reconciliations on page 45.



		Bank of America 6




Table 5	Selected Financial Data

		2019 Quarters									2018 Quarters						Nine-Month Period
(In millions, except per share information)		Third			Second			First			Fourth			Third			2019			2018
Income statement
Net interest income		$	12,187		$	12,189		$	12,375		$	12,504		$	12,061		$	36,751		$	35,658
Noninterest income		10,620			10,895			10,629			10,173			10,663			32,144			32,685
Total revenue, net of interest expense		22,807			23,084			23,004			22,677			22,724			68,895			68,343
Provision for credit losses		779			857			1,013			905			716			2,649			2,377
Noninterest expense		15,169			13,268			13,224			13,074			13,014			41,661			40,080
Income before income taxes		6,859			8,959			8,767			8,698			8,994			24,585			25,886
Income tax expense		1,082			1,611			1,456			1,420			1,827			4,149			5,017
Net income		5,777			7,348			7,311			7,278			7,167			20,436			20,869
Net income applicable to common shareholders		5,272			7,109			6,869			7,039			6,701			19,250			19,657
Average common shares issued and outstanding		9,303.6			9,523.2			9,725.9			9,855.8			10,031.6			9,516.2			10,177.5
Average diluted common shares issued and outstanding		9,353.0			9,559.6			9,787.3			9,996.0			10,170.8			9,565.7			10,317.9
Performance ratios
Return on average assets		0.95		%	1.23		%	1.26		%	1.24		%	1.23		%	1.14		%	1.20		%
Four-quarter trailing return on average assets⁽¹⁾		1.17			1.24			1.22			1.21			1.00			n/a			n/a
Return on average common shareholders’ equity		8.48			11.62			11.42			11.57			10.99			10.49			10.86
Return on average tangible common shareholders’ equity⁽²⁾		11.84			16.24			16.01			16.29			15.48			14.67			15.30
Return on average shareholders’ equity		8.48			11.00			11.14			10.95			10.74			10.19			10.52
Return on average tangible shareholders’ equity ⁽²⁾		11.43			14.88			15.10			14.90			14.61			13.78			14.31
Total ending equity to total ending assets		11.06			11.33			11.23			11.27			11.21			11.06			11.21
Total average equity to total average assets		11.21			11.17			11.28			11.30			11.42			11.22			11.42
Dividend payout		31.48			19.95			21.20			20.90			22.35			23.56			20.10
Per common share data
Earnings		$	0.57		$	0.75		$	0.71		$	0.71		$	0.67		2.02			1.93
Diluted earnings		0.56			0.74			0.70			0.70			0.66			2.01			1.91
Dividends paid		0.18			0.15			0.15			0.15			0.15			0.48			0.39
Book value		26.96			26.41			25.57			25.13			24.33			26.96			24.33
Tangible book value ⁽²⁾		19.26			18.92			18.26			17.91			17.23			19.26			17.23
Market capitalization, at period end		$	264,842		$	270,935		$	263,992		$	238,251		$	290,424		$	264,842		$	290,424
Average balance sheet
Total loans and leases		$	964,733		$	950,525		$	944,020		$	934,721		$	930,736
Total assets		2,412,223			2,399,051			2,360,992			2,334,586			2,317,829
Total deposits		1,375,052			1,375,450			1,359,864			1,344,951			1,316,345
Long-term debt		202,620			201,007			196,726			201,056			203,239
Common shareholders’ equity		246,630			245,438			243,891			241,372			241,812
Total shareholders’ equity		270,430			267,975			266,217			263,698			264,653
Asset quality
Allowance for credit losses ⁽³⁾		$	10,242		$	10,333		$	10,379		$	10,398		$	10,526
Nonperforming loans, leases and foreclosed properties ⁽⁴⁾		3,723			4,452			5,145			5,244			5,449
Allowance for loan and lease losses as a percentage of total loans and leases outstanding ⁽⁴⁾		0.98		%	1.00		%	1.02		%	1.02		%	1.05		%
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases ⁽⁴⁾		271			228			197			194			189
Net charge-offs		$	811		$	887		$	991		$	924		$	932
Annualized net charge-offs as a percentage of average loans and leases outstanding ⁽⁴⁾		0.34		%	0.38		%	0.43		%	0.39		%	0.40		%
Capital ratios at period end ⁽⁵⁾
Common equity tier 1 capital		11.4		%	11.7		%	11.6		%	11.6		%	11.4		%
Tier 1 capital		12.9			13.3			13.1			13.2			12.9
Total capital		15.1			15.4			15.2			15.1			14.7
Tier 1 leverage		8.2			8.4			8.4			8.4			8.3
Supplementary leverage ratio		6.6			6.8			6.8			6.8			6.7
Tangible equity⁽²⁾		8.4			8.7			8.5			8.6			8.5
Tangible common equity ⁽²⁾		7.4			7.6			7.6			7.6			7.5
Total loss-absorbing capacity and long-term debt metrics ⁽⁶⁾
Total loss-absorbing capacity to risk-weighted assets		24.8		%	25.5		%	24.8		%
Total loss-absorbing capacity to supplementary leverage exposure		12.7			13.0			12.8
Eligible long-term debt to risk-weighted assets		11.4			11.8			11.4
Eligible long-term debt to supplementary leverage exposure		5.8			6.0			5.9


⁽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, see Supplemental Financial Data on page 6 and for corresponding reconciliations to the most closely related financial measures defined by GAAP, see Non-GAAP Reconciliations on page 45.


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

⁽⁴⁾

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 32 and corresponding Table 27 and Commercial Portfolio Credit Risk Management – Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity on page 35 and corresponding Table 34.


⁽⁵⁾	For additional information, including which approach is used to assess capital adequacy, see Capital Management on page 20.


⁽⁶⁾	Effective January 1, 2019, the Corporation became subject to minimum total loss-absorbing capacity and long-term debt requirements. For more information, see Capital Management on page 20.

n/a = not applicable



7 Bank of America




Table 6	Quarterly Average Balances and Interest Rates - FTE Basis

(Dollars in millions)		Average Balance		Interest Income/ Expense ⁽¹⁾		Yield/ Rate		Average Balance		Interest Income/ Expense ⁽¹⁾		Yield/ Rate
		Third Quarter 2019						Third Quarter 2018
Earning assets
Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks		$	122,033	$	453	1.47	%	$	144,411	$	523	1.44	%
Time deposits placed and other short-term investments		9,863		47		1.87		8,328		48		2.26
Federal funds sold and securities borrowed or purchased under agreements to resell		269,129		1,242		1.83		241,426		799		1.31
Trading account assets		157,818		1,338		3.37		128,896		1,195		3.68
Debt securities		447,126		2,856		2.56		445,813		3,014		2.66
Loans and leases ⁽²⁾:
Residential mortgage		224,084		1,937		3.46		209,460		1,857		3.54
Home equity		43,616		552		5.03		53,050		656		4.91
U.S. credit card		94,370		2,581		10.85		94,710		2,435		10.20
Direct/Indirect and other consumer ⁽³⁾		90,813		824		3.59		91,828		787		3.40
Total consumer		452,883		5,894		5.18		449,048		5,735		5.08
U.S. commercial		324,436		3,279		4.01		303,680		3,034		3.97
Non-U.S. commercial		105,003		905		3.42		96,019		831		3.43
Commercial real estate ⁽⁴⁾		62,185		687		4.38		60,754		682		4.45
Commercial lease financing		20,226		182		3.58		21,235		173		3.25
Total commercial		511,850		5,053		3.92		481,688		4,720		3.89
Total loans and leases		964,733		10,947		4.51		930,736		10,455		4.46
Other earning assets		68,018		1,181		6.90		72,827		1,082		5.91
Total earning assets		2,038,720		18,064		3.52		1,972,437		17,116		3.45
Cash and due from banks		25,588						25,639
Other assets, less allowance for loan and lease losses		347,915						319,753
Total assets		$	2,412,223					$	2,317,829
Interest-bearing liabilities
U.S. interest-bearing deposits:
Savings		$	51,277	$	1	0.01	%	$	53,929	$	1	0.01	%
NOW and money market deposit accounts		741,602		1,172		0.63		680,285		737		0.43
Consumer CDs and IRAs		49,811		136		1.08		39,160		40		0.41
Negotiable CDs, public funds and other deposits		63,936		354		2.19		54,192		275		2.01
Total U.S. interest-bearing deposits		906,626		1,663		0.73		827,566		1,053		0.50
Non-U.S. interest-bearing deposits:
Banks located in non-U.S. countries		1,721		5		1.13		2,353		12		2.06
Governments and official institutions		188		—		0.02		709		—		0.01
Time, savings and other		70,234		212		1.20		63,179		165		1.04
Total non-U.S. interest-bearing deposits		72,143		217		1.19		66,241		177		1.07
Total interest-bearing deposits		978,769		1,880		0.76		893,807		1,230		0.55
Federal funds purchased, securities loaned or sold under agreements to repurchase, short-term borrowings and other interest-bearing liabilities		280,123		1,876		2.66		264,168		1,526		2.30
Trading account liabilities		45,750		303		2.63		50,904		335		2.60
Long-term debt		202,620		1,670		3.28		203,239		1,813		3.55
Total interest-bearing liabilities		1,507,262		5,729		1.51		1,412,118		4,904		1.38
Noninterest-bearing sources:
Noninterest-bearing deposits		396,283						422,538
Other liabilities ⁽⁵⁾		238,248						218,520
Shareholders’ equity		270,430						264,653
Total liabilities and shareholders’ equity		$	2,412,223					$	2,317,829
Net interest spread						2.01	%					2.07	%
Impact of noninterest-bearing sources						0.40						0.38
Net interest income/yield on earning assets ⁽⁶⁾				$	12,335	2.41	%			$	12,212	2.45	%


⁽¹⁾	Includes the impact of interest rate risk management contracts. For additional information, see Interest Rate Risk Management for the Banking Book on page 43.


⁽²⁾	Nonperforming loans are included in the respective average loan balances. Income on these nonperforming loans is generally recognized on a cost recovery basis.


⁽³⁾	Includes non-U.S. consumer loans of $2.9 billion and $2.8 billion for the third quarter of 2019 and 2018.


⁽⁴⁾	Includes U.S. commercial real estate loans of $57.6 billion and $56.8 billion, and non-U.S. commercial real estate loans of $4.5 billion and $4.0 billion for the third quarter of 2019 and 2018.


⁽⁵⁾	Includes $38.1 billion and $30.3 billion of structured notes and liabilities for the third quarter of 2019 and 2018.


⁽⁶⁾	Net interest income includes FTE adjustments of $148 million and $151 million for the third quarter of 2019 and 2018.



		Bank of America 8




Table 7	Year-to-Date Average Balances and Interest Rates - FTE Basis

		Average Balance		Interest Income/ Expense ⁽¹⁾		Yield/ Rate		Average Balance		Interest Income/ Expense ⁽¹⁾		Yield/ Rate
		Nine Months Ended September 30
(Dollars in millions)		2019						2018
Earning assets
Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks		$	126,416	$	1,454	1.54	%	$	143,229	$	1,432	1.34	%
Time deposits placed and other short-term investments		9,377		167		2.38		9,700		157		2.16
Federal funds sold and securities borrowed or purchased under agreements to resell		274,822		3,746		1.82		247,183		2,130		1.15
Trading account assets		148,368		4,016		3.62		130,931		3,574		3.65
Debt securities		445,104		9,051		2.71		436,080		8,729		2.62
Loans and leases ⁽²⁾:
Residential mortgage		216,744		5,698		3.51		206,808		5,437		3.51
Home equity		45,735		1,732		5.06		54,941		1,939		4.72
U.S. credit card		94,333		7,622		10.80		94,222		7,046		10.00
Direct/Indirect and other consumer ⁽³⁾		90,567		2,475		3.65		93,568		2,281		3.26
Total consumer		447,379		17,527		5.23		449,539		16,703		4.96
U.S. commercial		319,621		10,010		4.19		302,981		8,734		3.85
Non-U.S. commercial		103,625		2,685		3.46		98,246		2,385		3.25
Commercial real estate ⁽⁴⁾		61,612		2,109		4.58		60,218		1,915		4.25
Commercial lease financing		20,932		550		3.50		21,501		516		3.20
Total commercial		505,790		15,354		4.06		482,946		13,550		3.75
Total loans and leases		953,169		32,881		4.61		932,485		30,253		4.34
Other earning assets		67,431		3,445		6.83		78,431		3,113		5.31
Total earning assets		2,024,687		54,760		3.61		1,978,039		49,388		3.34
Cash and due from banks		25,787						25,746
Other assets, less allowance for loan and lease losses		340,469						318,314
Total assets		$	2,390,943					$	2,322,099
Interest-bearing liabilities
U.S. interest-bearing deposits:
Savings		$	52,604	$	4	0.01	%	$	54,800	$	4	0.01	%
NOW and money market deposit accounts		736,613		3,557		0.65		667,851		1,679		0.34
Consumer CDs and IRAs		45,688		315		0.92		40,134		109		0.36
Negotiable CDs, public funds and other deposits		66,618		1,129		2.27		46,507		629		1.81
Total U.S. interest-bearing deposits		901,523		5,005		0.74		809,292		2,421		0.40
Non-U.S. interest-bearing deposits:
Banks located in non-U.S. countries		2,044		16		1.03		2,309		32		1.88
Governments and official institutions		182		—		0.06		990		—		0.01
Time, savings and other		67,740		619		1.22		65,264		480		0.98
Total non-U.S. interest-bearing deposits		69,966		635		1.21		68,563		512		1.00
Total interest-bearing deposits		971,489		5,640		0.78		877,855		2,933		0.45
Federal funds purchased, securities loaned or sold under agreements to repurchase, short-term borrowings and other interest-bearing liabilities		274,550		5,725		2.79		272,192		4,123		2.03
Trading account liabilities		46,122		967		2.80		52,815		1,040		2.63
Long-term debt		200,139		5,227		3.49		200,178		5,179		3.45
Total interest-bearing liabilities		1,492,300		17,559		1.57		1,403,040		13,275		1.26
Noninterest-bearing sources:
Noninterest-bearing deposits		398,689						426,972
Other liabilities ⁽⁵⁾		231,731						226,985
Shareholders’ equity		268,223						265,102
Total liabilities and shareholders’ equity		$	2,390,943					$	2,322,099
Net interest spread						2.04	%					2.08	%
Impact of noninterest-bearing sources						0.41						0.35
Net interest income/yield on earning assets ⁽⁶⁾				$	37,201	2.45	%			$	36,113	2.43	%


⁽¹⁾	Includes the impact of interest rate risk management contracts. For additional information, see Interest Rate Risk Management for the Banking Book on page 43.


⁽²⁾	Nonperforming loans are included in the respective average loan balances. Income on these nonperforming loans is generally recognized on a cost recovery basis.


⁽³⁾	Includes non-U.S. consumer loans of $2.9 billion for both the nine months ended September 30, 2019 and 2018.


⁽⁴⁾	Includes U.S. commercial real estate loans of $57.0 billion and $56.2 billion, and non-U.S. commercial real estate loans of $4.6 billion and $4.0 billion for the nine months ended September 30, 2019 and 2018.


⁽⁵⁾	Includes $34.9 billion and $30.6 billion of structured notes and liabilities for the nine months ended September 30, 2019 and 2018.


⁽⁶⁾	Net interest income includes FTE adjustments of $450 million and $455 million for the nine months ended September 30, 2019 and 2018.



9 Bank of America

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. We manage our segments and report their results on an FTE basis. We periodically review capital allocated to our businesses and allocate 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. Our 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 20. The capital allocated to the business segments is referred to as allocated capital. Allocated equity in the reporting units is comprised of allocated capital plus capital for the portion of goodwill and intangibles specifically assigned to the reporting unit. For more information, see Note 8 – Goodwill and Intangible Assets to the Consolidated Financial Statements.

For more information on our presentation of financial information on an FTE basis, see Supplemental Financial Data on page 6, and for reconciliations to consolidated total revenue, net income and period-end total assets, see Note 18 – Business Segment Information to the Consolidated Financial Statements.

Consumer Banking




	Deposits						Consumer Lending						Total Consumer Banking
	Three Months Ended September 30
(Dollars in millions)	2019			2018			2019			2018			2019			2018			% Change
Net interest income	$	4,197		$	4,052		$	2,834		$	2,792		$	7,031		$	6,844		3	%
Noninterest income:
Card income	(11		)	(10		)	1,300			1,247			1,289			1,237			4
Service charges	1,096			1,098			1			—			1,097			1,098			—
All other income	233			189			74			74			307			263			17
Total noninterest income	1,318			1,277			1,375			1,321			2,693			2,598			4
Total revenue, net of interest expense	5,515			5,329			4,209			4,113			9,724			9,442			3

Provision for credit losses	84			48			833			822			917			870			5
Noninterest expense	2,651			2,620			1,742			1,705			4,393			4,325			2
Income before income taxes	2,780			2,661			1,634			1,586			4,414			4,247			4
Income tax expense	681			678			400			404			1,081			1,082			—
Net income	$	2,099		$	1,983		$	1,234		$	1,182		$	3,333		$	3,165		5

Effective tax rate ⁽¹⁾													24.5		%	25.5		%

Net interest yield	2.37		%	2.34		%	3.76		%	3.95		%	3.77			3.77
Return on average allocated capital	69			66			20			19			36			34
Efficiency ratio	48.08			49.17			41.38			41.45			45.18			45.81

Balance Sheet
	Three Months Ended September 30
Average	2019			2018			2019			2018			2019			2018			% Change
Total loans and leases	$	5,405		$	5,269		$	298,428		$	279,725		$	303,833		$	284,994		7	%
Total earning assets⁽²⁾	703,889			685,653			299,041			280,637			739,765			720,643			3
Total assets ⁽²⁾	735,844			713,942			308,991			291,370			781,670			759,665			3
Total deposits	703,562			681,726			5,711			5,804			709,273			687,530			3
Allocated capital	12,000			12,000			25,000			25,000			37,000			37,000			—


⁽¹⁾	Estimated at the segment level only.


⁽²⁾	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.



		Bank of America 10




	Deposits						Consumer Lending						Total Consumer Banking
	Nine Months Ended September 30
(Dollars in millions)	2019			2018			2019			2018			2019			2018			% Change
Net interest income	$	12,867		$	11,658		$	8,386		$	8,256		$	21,253		$	19,914		7	%
Noninterest income:
Card income	(24		)	(25		)	3,778			3,788			3,754			3,763			—
Service charges	3,162			3,213			1			1			3,163			3,214			(2	)
All other income	673			510			230			255			903			765			18
Total noninterest income	3,811			3,698			4,009			4,044			7,820			7,742			1
Total revenue, net of interest expense	16,678			15,356			12,395			12,300			29,073			27,656			5

Provision for credit losses	173			135			2,665			2,614			2,838			2,749			3
Noninterest expense	7,956			7,986			5,201			5,255			13,157			13,241			(1	)
Income before income taxes	8,549			7,235			4,529			4,431			13,078			11,666			12
Income tax expense	2,094			1,845			1,110			1,130			3,204			2,975			8
Net income	$	6,455		$	5,390		$	3,419		$	3,301		$	9,874		$	8,691		14

Effective tax rate ⁽¹⁾													24.5		%	25.5		%

Net interest yield	2.46		%	2.29		%	3.83		%	3.98		%	3.87			3.72
Return on average allocated capital	72			60			18			18			36			31
Efficiency ratio	47.70			52.01			41.97			42.72			45.26			47.88

Balance Sheet
	Nine Months Ended September 30
Average	2019			2018			2019			2018			2019			2018			% Change
Total loans and leases	$	5,351		$	5,211		$	292,188		$	276,556		$	297,539		$	281,767		6	%
Total earning assets⁽²⁾	699,907			681,914			292,641			277,295			734,976			716,467			3
Total assets ⁽²⁾	731,528			709,997			302,862			288,224			776,818			755,479			3
Total deposits	699,217			677,684			5,242			5,595			704,459			683,279			3
Allocated capital	12,000			12,000			25,000			25,000			37,000			37,000			—

Period end	September 30 2019			December 31 2018			September 30 2019			December 31 2018			September 30 2019			December 31 2018			% Change
Total loans and leases	$	5,447		$	5,470		$	302,478		$	288,865		$	307,925		$	294,335		5	%
Total earning assets ⁽²⁾	711,024			694,672			303,195			289,249			747,251			728,813			3
Total assets⁽²⁾	742,583			724,019			313,128			299,970			788,743			768,881			3
Total deposits	710,149			691,666			5,566			4,480			715,715			696,146			3

See page 10 for footnotes.

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. For more information about Consumer Banking, including our Deposits and Consumer Lending businesses, see Business Segment Operations in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.

Consumer Banking Results

Three-Month Comparison

Net income for Consumer Banking increased $168 million to $3.3 billion primarily driven by higher revenue, partially offset by higher noninterest expense. Net interest income increased $187 million to $7.0 billion primarily due to growth in deposits and loans. Noninterest income increased $95 million to $2.7 billion driven by higher results from asset and liability management (ALM) activities and higher card income.

The provision for credit losses increased $47 million to $917 million. Noninterest expense increased $68 million to $4.4 billion primarily driven by continued investment in the business, including increases in primary sales professionals, combined with investments in new and renovated financial centers and digital capabilities. These increases were largely offset by operating efficiencies and lower FDIC expense.

The return on average allocated capital was 36 percent, up from 34 percent, driven by higher net income. For additional information on capital allocations, see Business Segment Operations on page 10.

Nine-Month Comparison

Net income for Consumer Banking increased $1.2 billion to $9.9 billion primarily driven by higher revenue and lower noninterest expense. Net interest income increased $1.3 billion to $21.3 billion primarily due to growth in deposits and loans. Noninterest income increased $78 million to $7.8 billion driven by higher results from ALM activities, largely offset by lower mortgage banking income and lower service charges.

The provision for credit losses increased $89 million to $2.8 billion due primarily to portfolio seasoning in the U.S. credit card portfolio. Noninterest expense decreased $84 million to $13.2 billion primarily driven by lower FDIC expense and operating efficiencies, largely offset by continued investment in the business.

The return on average allocated capital was 36 percent, up from 31 percent, driven by higher net income.

Deposits

Three-Month Comparison

Net income for Deposits increased $116 million to $2.1 billion driven by higher revenue. Net interest income increased $145 million to $4.2 billion primarily due to growth in deposits and pricing discipline. Noninterest income of $1.3 billion increased $41 million driven by higher results from ALM activities.

The provision for credit losses increased $36 million to $84 million. Noninterest expense increased $31 million to $2.7 billion primarily driven by continued investment in the business largely offset by lower FDIC expense and operating efficiencies.



11 Bank of America

Average deposits increased $21.8 billion to $703.6 billion driven by strong organic growth. Growth in checking and time deposits of $27.4 billion was partially offset by a decline in money market savings and traditional savings of $5.4 billion.

Nine-Month Comparison

Net income for Deposits increased $1.1 billion to $6.5 billion driven by higher revenue. Net interest income increased $1.2 billion to $12.9 billion primarily driven by the same factors as described in the three-month discussion. Noninterest income increased $113 million to $3.8 billion primarily driven by higher

results from ALM activities, partially offset by lower service charges.

The provision for credit losses increased $38 million to $173 million. Noninterest expense decreased $30 million to $8.0 billion primarily driven by lower FDIC expense and operating efficiencies, partially offset by continued investment in the business.

Average deposits increased $21.5 billion to $699.2 billion driven by strong organic growth. Growth in checking and time deposits of $24.6 billion was partially offset by a decline in traditional savings and money market savings of $2.9 billion.




Key Statistics – Deposits

	Three Months Ended September 30				Nine Months Ended September 30
	2019		2018		2019			2018
Total deposit spreads (excludes noninterest costs) ⁽¹⁾	2.35	%	2.19	%	2.38		%	2.10		%

Period end
Consumer investment assets (in millions) ⁽²⁾					$	223,199		$	203,882
Active digital banking users (units in thousands) ⁽³⁾					37,981			36,174
Active mobile banking users (units in thousands)					28,703			25,990
Financial centers					4,302			4,385
ATMs					16,626			16,089


⁽¹⁾	Includes deposits held in Consumer Lending.


⁽²⁾	Includes client brokerage assets, certain deposit sweep balances and AUM in Consumer Banking.


⁽³⁾	Active digital banking users represents mobile and/or online users.

Consumer investment assets increased $19.3 billion driven by strong client flows, partially offset by market declines. Active mobile banking users increased 2.7 million reflecting continuing changes in our customers’ banking preferences. The number of financial centers declined by a net 83 reflecting 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

Three-Month Comparison

Net income for Consumer Lending increased $52 million to $1.2 billion driven by higher revenue, partially offset by higher noninterest expense. Net interest income increased $42 million to $2.8 billion driven by loan growth. Noninterest income increased $54 million to $1.4 billion driven by higher card income.

The provision for credit losses increased $11 million to $833 million. Noninterest expense increased $37 million to $1.7 billion primarily driven by continued investment in the business.

Average loans increased $18.7 billion to $298.4 billion primarily driven by an increase in residential mortgages, partially offset by lower home equity loans.

Nine-Month Comparison

Net income for Consumer Lending increased $118 million to $3.4 billion driven by higher net interest income and lower noninterest expense, partially offset by lower noninterest income. Net interest income increased $130 million to $8.4 billion driven by loan growth. Noninterest income decreased $35 million to $4.0 billion primarily driven by lower mortgage banking income and lower card income.

The provision for credit losses increased $51 million to $2.7 billion primarily driven by portfolio seasoning in the U.S. credit card portfolio. Noninterest expense decreased $54 million to $5.2 billion primarily driven by operating efficiencies.

Average loans increased $15.6 billion to $292.2 billion primarily driven by increases in residential mortgages and U.S. credit card, partially offset by lower home equity loans.




Key Statistics – Consumer Lending

	Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)	2019			2018			2019			2018
Total U.S. credit card ⁽¹⁾
Gross interest yield	10.85		%	10.20		%	10.80		%	10.00		%
Risk-adjusted margin	8.46			8.08			8.14			8.09
New accounts (in thousands)	1,172			1,116			3,274			3,496
Purchase volumes	$	71,096		$	66,490		$	204,135		$	194,658
Debit card purchase volumes ⁽²⁾	$	90,942		$	85,529		$	267,204		$	250,715


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

⁽²⁾ Historical information has been restated for Original Credit Transaction volume.

During the three and nine months ended September 30, 2019, total U.S. credit card risk-adjusted margin increased 38 bps and 5 bps compared to the same periods in 2018, primarily driven by a portfolio shift away from promotional-rate loans. During the three and nine months ended September 30, 2019, total U.S.

credit card purchase volumes increased $4.6 billion to $71.1 billion and $9.5 billion to $204.1 billion compared to the same periods in 2018, and debit card purchase volumes increased $5.4 billion to $90.9 billion and $16.5 billion to $267.2 billion, reflecting higher levels of consumer spending.



		Bank of America 12




Key Statistics – Loan Production ⁽¹⁾

	Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	2019		2018		2019		2018
Total ⁽²⁾:
First mortgage	$	20,664	$	10,682	$	50,353	$	31,778
Home equity	2,539		3,399		8,132		11,229
Consumer Banking:
First mortgage	$	13,622	$	7,208	$	34,534	$	21,053
Home equity	2,219		3,053		7,109		10,042


⁽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 $6.4 billion and $10.0 billion for the three months ended September 30, 2019 compared to the same period in 2018 primarily driven by a lower interest rate environment driving higher first-lien mortgage refinances. First mortgage loan originations in Consumer Banking and for the total Corporation increased $13.5 billion and $18.6 billion for the nine months ended September 30, 2019 compared to the same period

in 2018 primarily driven by the same factor as described in the three-month discussion.

Home equity production in Consumer Banking and for the total Corporation decreased $834 million and $860 million for the three months ended September 30, 2019 and $2.9 billion and $3.1 billion for the nine months ended September 30, 2019 primarily driven by lower demand.

Global Wealth & Investment Management




	Three Months Ended September 30								Nine Months Ended September 30
(Dollars in millions)	2019			2018			% Change		2019			2018			% Change
Net interest income	$	1,609		$	1,531		5	%	$	4,917		$	4,653		6	%
Noninterest income:
Investment and brokerage services	3,001			3,004			—		8,805			8,981			(2	)
All other income	294			282			4		902			780			16
Total noninterest income	3,295			3,286			—		9,707			9,761			(1	)
Total revenue, net of interest expense	4,904			4,817			2		14,624			14,414			1

Provision for credit losses	37			13			n/m		63			63			—
Noninterest expense	3,413			3,443			(1	)	10,300			10,451			(1	)
Income before income taxes	1,454			1,361			7		4,261			3,900			9
Income tax expense	356			347			3		1,044			994			5
Net income	$	1,098		$	1,014		8		$	3,217		$	2,906		11

Effective tax rate	24.5		%	25.5		%			24.5		%	25.5		%

Net interest yield	2.30			2.37					2.35			2.41
Return on average allocated capital	30			28					30			27
Efficiency ratio	69.60			71.48					70.43			72.50

Balance Sheet
	Three Months Ended September 30								Nine Months Ended September 30
Average	2019			2018			% Change		2019			2018			% Change
Total loans and leases	$	170,414		$	161,869		5	%	$	167,069		$	160,609		4	%
Total earning assets	277,349			256,286			8		279,790			258,046			8
Total assets	289,447			273,582			6		292,102			275,183			6
Total deposits	254,449			238,291			7		256,708			239,176			7
Allocated capital	14,500			14,500			—		14,500			14,500			—

Period end									September 30 2019			December 31 2018			% Change
Total loans and leases									$	172,677		$	164,854		5	%
Total earning assets									275,884			287,199			(4	)
Total assets									288,317			305,907			(6	)
Total deposits									252,466			268,700			(6	)

n/m = not meaningful



13 Bank of America

GWIM consists of two primary businesses: Merrill Lynch Global Wealth Management (MLGWM) and Bank of America Private Bank. For more information about GWIM, see Business Segment Operations in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.

Three-Month Comparison

Net income for GWIM increased $84 million to $1.1 billion due to higher revenue and lower noninterest expense. The operating margin was 30 percent compared to 28 percent a year ago.

Net interest income increased $78 million to $1.6 billion due to growth in deposits and loans.

Noninterest income, which primarily includes investment and brokerage services income, increased $9 million to $3.3 billion. The increase was driven by the impact of positive AUM flows and higher average market valuations compared to the same period in 2018, largely offset by lower AUM pricing and transactional revenue.

Noninterest expense decreased $30 million to $3.4 billion, as investments for business growth were more than offset by lower amortization of intangibles and FDIC expense.

The return on average allocated capital was 30 percent, up from 28 percent, due to higher net income. For more information on capital allocated to the business segments, see Business Segment Operations on page 10.

MLGWM revenue of $4.1 billion increased three percent, reflecting higher net interest income and asset management fees.

Bank of America Private Bank revenue of $851 million decreased two percent primarily due to lower net interest income.

Nine-Month Comparison

Net income for GWIM increased $311 million to $3.2 billion due to higher revenue and lower noninterest expense. The operating margin was 29 percent compared to 27 percent a year ago.

Net interest income increased $264 million to $4.9 billion due to the same factors as described in the three-month discussion.

Noninterest income, which primarily includes investment and brokerage services income, decreased $54 million to $9.7 billion. The decrease was primarily driven by declines in AUM pricing and transactional revenue, partially offset by the impact of positive AUM flows.

Noninterest expense decreased $151 million to $10.3 billion due to the same factors as described in the three-month section.

The return on average allocated capital was 30 percent, up from 27 percent, due to higher net income.

MLGWM revenue of $12.1 billion increased two percent primarily driven by higher net interest income and the impact of higher AUM flows, partially offset by lower transactional volumes and AUM pricing.

Bank of America Private Bank revenue of $2.6 billion decreased one percent due to the same factor as described in the three-month section.




Key Indicators and Metrics

	Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions, except as noted)	2019		2018		2019			2018
Revenue by Business
Merrill Lynch Global Wealth Management	$	4,053	$	3,951	$	12,065		$	11,834
Bank of America Private Bank	851		866		2,559			2,580
Total revenue, net of interest expense	$	4,904	$	4,817	$	14,624		$	14,414

Client Balances by Business, at period end
Merrill Lynch Global Wealth Management					$	2,443,614		$	2,385,479
Bank of America Private Bank					462,347			455,894
Total client balances					$	2,905,961		$	2,841,373

Client Balances by Type, at period end
Assets under management⁽¹⁾					$	1,212,120		$	1,182,504
Brokerage and other assets					1,305,926			1,292,219
Deposits					252,466			239,654
Loans and leases ⁽²⁾					175,579			165,125
Less: Managed deposits in assets under management ⁽¹⁾					(40,130		)	(38,129		)
Total client balances					$	2,905,961		$	2,841,373

Assets Under Management Rollforward ⁽¹⁾
Assets under management, beginning of period	$	1,203,783	$	1,138,500	$	1,072,234		$	1,121,383
Net client flows	5,529		8,202		16,721			40,080
Market valuation/other	2,808		35,802		123,165			21,041
Total assets under management, end of period	$	1,212,120	$	1,182,504	$	1,212,120		$	1,182,504

Associates, at period end
Number of financial advisors					17,657			17,456
Total wealth advisors, including financial advisors					19,672			19,343
Total primary sales professionals, including financial advisors and wealth advisors					20,775			20,466

Merrill Lynch Global Wealth Management Metric
Financial advisor productivity (in thousands)	$	1,096	$	1,035	$	1,073		$	1,030

Bank of America Private Bank Metric, at period end
Primary sales professionals					1,811			1,711


⁽¹⁾	AUM includes deposits that are managed within investment accounts.


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

Client Balances

Client balances increased $64.6 billion, or two percent, to $2.9 trillion at September 30, 2019 compared to September 30, 2018. The increase in client balances was primarily due to positive net flows over the last year and higher market valuations.



		Bank of America 14

Global Banking




	Three Months Ended September 30								Nine Months Ended September 30
(Dollars in millions)	2019			2018			% Change		2019			2018			% Change
Net interest income	$	2,617		$	2,726		(4	%)	$	8,116		$	8,144		—%
Noninterest income:
Service charges	763			753			1		2,225			2,285			(3	)
Investment banking fees	902			644			40		2,328			2,130			9
All other income	930			700			33		2,673			2,273			18
Total noninterest income	2,595			2,097			24		7,226			6,688			8
Total revenue, net of interest expense	5,212			4,823			8		15,342			14,832			3

Provision for credit losses	120			(70		)	n/m		356			(77		)	n/m
Noninterest expense	2,220			2,142			4		6,697			6,618			1
Income before income taxes	2,872			2,751			4		8,289			8,291			—
Income tax expense	775			714			9		2,238			2,154			4
Net income	$	2,097		$	2,037		3		$	6,051		$	6,137		(1	)

Effective tax rate	27.0		%	26.0		%			27.0		%	26.0		%

Net interest yield	2.69			2.99					2.84			3.00
Return on average allocated capital	20			20					20			20
Efficiency ratio	42.58			44.42					43.65			44.62

Balance Sheet
	Three Months Ended September 30								Nine Months Ended September 30
Average	2019			2018			% Change		2019			2018			% Change
Total loans and leases	$	377,109		$	352,712		7	%	$	373,275		$	353,167		6	%
Total earning assets	385,999			362,316			7		382,711			362,910			5
Total assets	441,186			423,643			4		437,570			423,355			3
Total deposits	360,457			337,685			7		357,413			328,484			9
Allocated capital	41,000			41,000			—		41,000			41,000			—

Period end									September 30 2019			December 31 2018			% Change
Total loans and leases									$	377,658		$	365,717		3	%
Total earning assets									397,589			377,812			5
Total assets									452,642			442,330			2
Total deposits									371,887			360,248			3

n/m = not meaningful

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, and underwriting and advisory services through our network of offices and client relationship teams. For more information about Global Banking, see Business Segment Operations in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.

Three-Month Comparison

Net income for Global Banking increased $60 million to $2.1 billion primarily driven by higher revenue partially offset by higher provision for credit losses and noninterest expense.

Revenue increased $389 million to $5.2 billion driven by higher noninterest income offset in part by a modest decline in net interest income. Net interest income decreased $109 million to $2.6 billion as the impact of deposit and loan growth was more than offset by the allocation of ALM activities and loan spread compression.

Noninterest income increased $498 million to $2.6 billion driven by growth in investment banking fees and leasing-related revenues. The provision for credit losses increased $190 million to $120 million due to reserve releases in the prior-year period, primarily from energy exposures. Noninterest expense increased $78 million to $2.2 billion primarily due to continued investment in the business.

The return on average allocated capital was 20 percent for both periods. For more information on capital allocated to the business segments, see Business Segment Operations on page 10.

Nine-Month Comparison

Net income for Global Banking decreased $86 million to $6.1 billion primarily driven by higher provision for credit losses and noninterest expense partially offset by higher revenue.

Revenue increased $510 million to $15.3 billion driven by higher noninterest income. Net interest income decreased $28 million to $8.1 billion primarily due to the allocation of ALM activities and loan spread compression more than offsetting the benefit from higher loan and deposit balances.



15 Bank of America

Noninterest income increased $538 million to $7.2 billion primarily due to higher leasing-related revenue and investment banking fees. The provision for credit losses increased $433 million to $356 million primarily driven by energy reserve releases in the prior-year period. Noninterest expense increased $79 million

primarily due to continued investment in the business partially offset by lower FDIC expense.

The return on average allocated capital was 20 percent for both periods. For more information on capital allocated to the business segments, see Business Segment Operations on page 10.

Global Corporate, Global Commercial and Business Banking

The table below and following discussion present a summary of the results, which exclude certain investment banking activities in Global Banking.




Global Corporate, Global Commercial and Business Banking

	Global Corporate Banking				Global Commercial Banking				Business Banking				Total
	Three Months Ended September 30
(Dollars in millions)	2019		2018		2019		2018		2019		2018		2019		2018
Revenue
Business Lending	$	1,024	$	908	$	1,020	$	1,095	$	91	$	108	$	2,135	$	2,111
Global Transaction Services	967		951		862		832		267		248		2,096		2,031
Total revenue, net of interest expense	$	1,991	$	1,859	$	1,882	$	1,927	$	358	$	356	$	4,231	$	4,142

Balance Sheet
Average
Total loans and leases	$	179,191	$	162,249	$	183,031	$	174,315	$	14,868	$	16,127	$	377,090	$	352,691
Total deposits	175,914		165,522		143,835		134,486		40,707		37,703		360,456		337,711

	Global Corporate Banking				Global Commercial Banking				Business Banking				Total
	Nine Months Ended September 30
	2019		2018		2019		2018		2019		2018		2019		2018
(Dollars in millions)
Revenue
Business Lending	$	2,992	$	2,940	$	3,100	$	3,188	$	275	$	324	$	6,367	$	6,452
Global Transaction Services	2,979		2,828		2,642		2,474		800		721		6,421		6,023
Total revenue, net of interest expense	$	5,971	$	5,768	$	5,742	$	5,662	$	1,075	$	1,045	$	12,788	$	12,475

Balance Sheet

Average
Total loans and leases	$	177,071	$	162,652	$	181,091	$	173,788	$	15,108	$	16,720	$	373,270	$	353,160
Total deposits	175,239		159,500		142,665		132,115		39,522		36,889		357,426		328,504

Period end
Total loans and leases	$	179,291	$	162,004	$	183,314	$	174,452	$	14,919	$	15,880	$	377,524	$	352,336
Total deposits	183,678		174,709		147,119		138,425		41,089		37,640		371,886		350,774

Business Lending revenue increased $24 million for the three months ended September 30, 2019 compared to the same period in 2018 driven by higher leasing-related revenue partly offset by lower ALM results. For the nine-month period, revenue decreased $85 million as lower ALM results were partly offset by higher leasing-related revenue.

Global Transaction Services revenue increased $65 million and $398 million for the three and nine months ended September 30, 2019 primarily driven by higher deposit balances and rates.

Average loans and leases increased seven percent and six percent for the three and nine months ended September 30, 2019 compared to the same periods in 2018 driven by growth in the commercial and industrial portfolio. Average deposits increased seven percent and nine percent for the three and nine months ended September 30, 2019 due to growth in domestic and international interest-bearing balances.

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. Global Banking originates certain deal-related transactions with our corporate and commercial clients that are executed and distributed by Global Markets. 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.



		Bank of America 16




Investment Banking Fees

	Global Banking						Total Corporation						Global Banking						Total Corporation
	Three Months Ended September 30												Nine Months Ended September 30
(Dollars in millions)	2019			2018			2019			2018			2019			2018			2019			2018
Products
Advisory	$	427		$	237		$	452		$	262		$	984		$	782		$	1,083		$	861
Debt issuance	356			295			816			684			1,007			1,017			2,310			2,385
Equity issuance	119			112			308			307			337			331			937			911
Gross investment banking fees	902			644			1,576			1,253			2,328			2,130			4,330			4,157
Self-led deals	(11		)	(15		)	(43		)	(49		)	(54		)	(63		)	(162		)	(178		)
Total investment banking fees	$	891		$	629		$	1,533		$	1,204		$	2,274		$	2,067		$	4,168		$	3,979

Total Corporation investment banking fees, excluding self-led deals, of $1.5 billion and $4.2 billion, which are primarily included within Global Banking and Global Markets, increased 27 percent and five percent for the three and nine months ended September 30, 2019 compared to the same periods in 2018 due to increases in Advisory fees, primarily M&A activity.

Global Markets




	Three Months Ended September 30								Nine Months Ended September 30
(Dollars in millions)	2019			2018			% Change		2019			2018			% Change
Net interest income	$	1,016		$	933		9	%	$	2,780		$	2,922		(5	)%
Noninterest income:
Investment and brokerage services	419			388			8		1,296			1,306			(1	)
Investment banking fees	585			522			12		1,707			1,783			(4	)
Trading account income	1,580			1,551			2		5,623			6,129			(8	)
All other income	264			479			(45	)	783			795			(2	)
Total noninterest income	2,848			2,940			(3	)	9,409			10,013			(6	)
Total revenue, net of interest expense	3,864			3,873			—		12,189			12,935			(6	)

Provision for credit losses	—			(2		)	n/m		(18		)	(6		)	n/m
Noninterest expense	2,679			2,633			2		8,109			8,283			(2	)
Income before income taxes	1,185			1,242			(5	)	4,098			4,658			(12	)
Income tax expense	338			323			5		1,168			1,211			(4	)
Net income	$	847		$	919		(8	)	$	2,930		$	3,447		(15	)

Effective tax rate	28.5		%	26.0		%			28.5		%	26.0		%

Return on average allocated capital	10			10					11			13
Efficiency ratio	69.32			68.00					66.53			64.04

Balance Sheet
	Three Months Ended September 30								Nine Months Ended September 30
Average	2019			2018			% Change		2019			2018			% Change
Trading-related assets:
Trading account securities	$	261,182		$	215,397		21	%	$	246,077		$	211,668		16	%
Reverse repurchases	110,907			124,842			(11	)	117,087			127,019			(8	)
Securities borrowed	80,641			74,648			8		82,772			80,073			3
Derivative assets	46,061			45,392			1		43,920			46,754			(6	)
Total trading-related assets	498,791			460,279			8		489,856			465,514			5
Total loans and leases	71,589			71,231			1		70,757			73,340			(4	)
Total earning assets	476,919			459,073			4		474,481			478,455			(1	)
Total assets	687,393			652,481			5		679,038			669,684			1
Total deposits	30,155			30,721			(2	)	30,878			31,253			(1	)
Allocated capital	35,000			35,000			—		35,000			35,000			—

Period end									September 30 2019			December 31 2018			% Change
Total trading-related assets									$	497,206		$	447,998		11	%
Total loans and leases									74,979			73,928			1
Total earning assets									478,303			457,224			5
Total assets									689,023			641,923			7
Total deposits									30,885			37,841			(18	)

n/m = not meaningful

Global Markets offers sales and trading services and research services 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. For more information about Global Markets, see Business Segment Operations in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.



17 Bank of America

Three-Month Comparison

Net income for Global Markets decreased $72 million to $847 million. Net DVA losses were $15 million compared to losses of $99 million, and excluding net DVA, net income decreased $136 million to $858 million. These decreases were primarily driven by a decline in revenue and an increase in noninterest expense.

Revenue declined $9 million to $3.9 billion as higher sales and trading revenue and investment banking fees were more than offset by a gain on the sale of an equity investment in the prior-year quarter. Sales and trading revenue increased $217 million, and excluding net DVA, increased $133 million primarily driven by an increase in Equities revenue.

Noninterest expense increased $46 million to $2.7 billion primarily driven by higher revenue-related expenses and continued investment in technology.

Average total assets increased $34.9 billion to $687.4 billion driven by increased levels of inventory in FICC to facilitate expected client demand and higher client balances in Equities.

The return on average allocated capital remained unchanged at 10 percent. For more information on capital allocated to the business segments, see Business Segment Operations on page 10.

Nine-Month Comparison

Net income for Global Markets decreased $517 million to $2.9 billion. Net DVA losses were $136 million compared to losses of $214 million. Excluding net DVA, net income decreased $577 million to $3.0 billion, primarily driven by a decrease in revenue, partially offset by lower noninterest expense.

Revenue declined $746 million to $12.2 billion as sales and trading revenue decreased $677 million, and excluding net DVA, decreased $755 million due to declines in both FICC and Equities revenue.

Noninterest expense decreased $174 million to $8.1 billion primarily driven by lower revenue-related expenses.

Average total assets increased $9.4 billion to $679.0 billion primarily due to increased levels of inventory in FICC to facilitate expected client demand. Period-end total assets increased $47.1 billion from December 31, 2018 to $689.0 billion due to increased levels of inventory in FICC to facilitate expected client demand and higher client balances in Equities.

The return on average allocated capital was 11 percent, down from 13 percent, reflecting lower net income.

Sales and Trading Revenue

For a description of sales and trading revenue, see Business Segment Operations in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K. The following table 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 following table and related discussion present sales and trading revenue, excluding net DVA, which is a non-GAAP financial measure. For more information on net DVA, see Supplemental Financial Data on page 6.




Sales and Trading Revenue ^{(1, 2, 3)}

	Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	2019		2018		2019		2018
Sales and trading revenue ⁽²⁾
Fixed-income, currencies and commodities	$	2,056	$	1,989	$	6,433	$	6,754
Equities	1,148		998		3,473		3,829
Total sales and trading revenue	$	3,204	$	2,987	$	9,906	$	10,583

Sales and trading revenue, excluding net DVA ⁽⁴⁾
Fixed-income, currencies and commodities	$	2,074	$	2,069	$	6,560	$	6,941
Equities	1,145		1,017		3,482		3,856
Total sales and trading revenue, excluding net DVA	$	3,219	$	3,086	$	10,042	$	10,797


⁽¹⁾	For more information on sales and trading revenue, see Note 3 – Derivatives to the Consolidated Financial Statements.


⁽²⁾	Includes FTE adjustments of $52 million and $132 million for the three and nine months ended September 30, 2019 compared to $54 million and $200 million for the same periods in 2018.


⁽³⁾	Includes Global Banking sales and trading revenue of $147 million and $390 million for the three and nine months ended September 30, 2019 compared to $51 million and $297 million for the same periods in 2018.

⁽⁴⁾

FICC and Equities sales and trading revenue, excluding net DVA, is a non-GAAP financial measure. FICC net DVA losses were $18 million and $127 million for the three and nine months ended September 30, 2019 compared to losses of $80 million and $187 million for the same periods in 2018. Equities net DVA gains were $3 million and losses of $9 million for the three and nine months ended September 30, 2019 compared to losses of $19 million and $27 million for the same periods in 2018.

The following explanations for period-over-period changes in sales and trading, FICC and Equities revenue exclude net DVA, but would be the same if net DVA was included.

Three-Month Comparison

FICC revenue increased $5 million primarily driven by an improvement in mortgage and municipal products, largely offset by weaker trading performance in foreign exchange and credit

products. Equities revenue increased $128 million driven by growth in client financing activities.

Nine-Month Comparison

FICC revenue decreased $381 million due to a generally weaker trading environment. Equities revenue decreased $374 million driven by under performance in derivatives compared to a strong prior-year period which benefited from higher client activity and elevated market volatility.



		Bank of America 18

All Other




	Three Months Ended September 30								Nine Months Ended September 30
(Dollars in millions)	2019			2018			% Change		2019			2018			% Change
Net interest income	$	62		$	178		(65	)%	$	135		$	480		(72	)%
Noninterest income (loss)	(811		)	(258		)	n/m		(2,018		)	(1,519		)	33
Total revenue, net of interest expense	(749		)	(80		)	n/m		(1,883		)	(1,039		)	81

Provision for credit losses	(295		)	(95		)	n/m		(590		)	(352		)	68
Noninterest expense	2,464			471			n/m		3,398			1,487			129
Loss before income taxes	(2,918		)	(456		)	n/m		(4,691		)	(2,174		)	116
Income tax benefit	(1,320		)	(488		)	n/m		(3,055		)	(1,862		)	64
Net income (loss)	$	(1,598	)	$	32		n/m		$	(1,636	)	$	(312	)	n/m

Balance Sheet
	Three Months Ended September 30								Nine Months Ended September 30
Average	2019			2018			% Change		2019			2018			% Change
Total loans and leases	$	41,788		$	59,930		(30	)%	$	44,529		$	63,602		(30	)%
Total assets ⁽¹⁾	212,527			208,458			2		205,415			198,398			4
Total deposits	20,718			22,118			(6	)	20,720			22,635			(8	)

Period end									September 30 2019			December 31 2018			% Change
Total loans and leases									$	39,671		$	48,061		(17	)%
Total assets ⁽¹⁾									207,605			195,466			6
Total deposits									21,883			18,541			18

⁽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. Average allocated assets were $536.8 billion and $540.9 billion for the three and nine months ended September 30, 2019 compared to $516.3 billion and $516.8 billion for the same periods in 2018, and period-end allocated assets were $546.5 billion and $540.8 billion at September 30, 2019 and December 31, 2018.

n/m = not meaningful

All Other consists of ALM activities, equity investments, non-core mortgage loans and servicing activities, liquidating businesses and certain expenses not otherwise allocated to a business segment. ALM activities encompass certain residential mortgages, debt securities, and interest rate and foreign currency risk management activities. Substantially all of the results of ALM activities are allocated to our business segments. Equity investments include our merchant services joint venture, as well as a portfolio of equity, real estate and other alternative investments. For information on our merchant services joint venture, see Note 11 – Commitments and Contingencies to the Consolidated Financial Statements. For additional information about All Other, see Business Segment Operations in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.

Residential mortgage loans that are held for ALM purposes, including interest rate or liquidity risk management, are classified as core and are presented on the balance sheet of All Other. During the nine months ended September 30, 2019, residential mortgage loans held for ALM activities decreased $2.4 billion to $22.5 billion primarily as a result of payoffs and paydowns. Non-core residential mortgage and home equity loans, which are principally runoff portfolios, are also held in All Other. During the nine months ended September 30, 2019, total non-core loans decreased $6.5 billion to $17.0 billion due primarily to sales, payoffs and paydowns as well as Federal Housing Administration (FHA) loan conveyances, offset by repurchases. For more information on the composition of the core and non-core portfolios, see Consumer Portfolio Credit Risk Management on page 26.

Three-Month Comparison

The net loss for All Other was $1.6 billion compared to net income of $32 million for the prior-year period. The current-year period included a $2.1 billion pretax impairment charge related to the notice of termination of the merchant services joint venture at the conclusion of its current term.

Revenue decreased $669 million due to lower net interest income and an increase in the loss in noninterest income. Net

interest income decreased $116 million driven by lower loan balances due to non-core consumer real estate loan sales and portfolio run-off. The loss in noninterest income increased $553 million driven by the results of certain ALM and other treasury activities, an increase in the reserve for payment protection insurance and lower gains on sales of debt securities.

The benefit in the provision for credit losses increased $200 million to $295 million primarily due to recoveries from sales of previously charged-off non-core consumer real estate loans. Noninterest expense increased $2.0 billion to $2.5 billion due to the $2.1 billion impairment charge and higher legacy mortgage-related litigation expense.

The income tax benefit was $1.3 billion compared to an income tax benefit of $488 million in the same period in 2018. The increase in the tax benefit was primarily related to the tax impact of the impairment charge and discrete tax benefits from the resolution of various tax matters. Both periods included income tax benefit adjustments to eliminate the FTE treatment of certain tax credits recorded in Global Banking.

Nine-Month Comparison

The net loss for All Other increased $1.3 billion to a loss of $1.6 billion due to the same factor as described in the three-month discussion.

Revenue decreased $844 million due to the same factors as described in the three-month discussion.

The benefit in the provision for credit losses increased $238 million to $590 million primarily driven by the same factor as described in the three-month discussion. Noninterest expense increased $1.9 billion to $3.4 billion due to the same factors as described in the three-month discussion.

The income tax benefit was $3.1 billion compared to a benefit of $1.9 billion in the same period in 2018 driven by the same factors as described in the three-month discussion. Both periods included income tax benefit adjustments to eliminate the FTE treatment of certain tax credits recorded in Global Banking.



19 Bank of America

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 11 – Commitments and Contingencies to the Consolidated Financial Statements herein, as well as Off-Balance Sheet Arrangements and Contractual Obligations in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K, and Note 11 – Long-term Debt and Note 12 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.

Representations and Warranties Obligations

For information on representations and warranties obligations in connection with the sale of mortgage loans, see Note 12 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K. For more information related to the sensitivity of the assumptions used to estimate our reserve for representations and warranties, see Complex Accounting Estimates – Representations and Warranties Liability in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.

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. 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 and the Board.

Our Risk Framework is the foundation for consistent and effective management of 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 and is aligned with the Corporation’s strategic, capital and financial operating plans. Our line of business strategies and risk appetite are also similarly aligned.

For more information on our Risk Framework, our risk management activities and the key types of risk faced by the Corporation, see the Managing Risk through Reputational Risk sections in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.

Capital Management

The Corporation manages its capital position so that its capital is more than adequate to support its business activities and aligns with risk, risk appetite and strategic planning. For more information

on capital management, including related regulatory requirements, see Capital Management in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.

CCAR and Capital Planning

The Board of Governors of the Federal Reserve System (Federal Reserve) requires BHCs to submit a capital plan and requests for capital actions on an annual basis, consistent with the rules governing the Comprehensive Capital Analysis and Review (CCAR) capital plan.

On June 27, 2019, following the Federal Reserve’s non-objection to our 2019 CCAR capital plan, the Board authorized the repurchase of approximately $30.9 billion in common stock from July 1, 2019 through June 30, 2020, which includes approximately $900 million to offset shares awarded under equity-based compensation plans during the same period. During the third quarter of 2019, we repurchased $7.6 billion of common stock pursuant to the Board's 2019 repurchase authorization.

Our stock repurchases are 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 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 amended (Exchange Act). As a well-capitalized BHC, we may notify the Federal Reserve of our intention to make additional capital distributions not to exceed 0.25 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, including Basel 3, issued by U.S. banking regulators. The Corporation's depository institution subsidiaries are also subject to the Prompt Corrective Action (PCA) framework. The Corporation and its primary affiliated banking entity, BANA, are Advanced approaches institutions under Basel 3 and 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. As of September 30, 2019, the Common equity tier 1 (CET1) and Tier 1 capital ratios for the Corporation were lower under the Standardized approach whereas the Advanced approaches yielded a lower Total capital ratio.

Minimum Capital Requirements

Minimum capital requirements and related buffers were fully phased in as of January 1, 2019. In order to avoid restrictions on capital distributions and discretionary bonus payments, the Corporation must meet risk-based capital ratio requirements that include a capital conservation buffer greater than 2.5 percent, plus any applicable countercyclical capital buffer and a global systemically important bank (G-SIB) surcharge. The buffers and surcharge must be comprised solely of CET1 capital.

The Corporation is also required to maintain a minimum supplementary leverage ratio (SLR) of 3.0 percent plus a leverage buffer of 2.0 percent in order to avoid certain restrictions on capital distributions and discretionary bonus payments. Our insured depository institution subsidiaries are required to maintain a minimum 6.0 percent SLR to be considered well capitalized under the PCA framework.



		Bank of America 20

Capital Composition and Ratios

Table 8 presents Bank of America Corporation’s capital ratios and related information in accordance with Basel 3 Standardized and Advanced approaches as measured at September 30, 2019 and December 31, 2018. As of the periods presented herein, the Corporation met the definition of well capitalized under current regulatory requirements.




Table 8	Bank of America Corporation Regulatory Capital under Basel 3

		Standardized Approach			Advanced Approaches			Regulatory Minimum ⁽¹⁾
(Dollars in millions, except as noted)		September 30, 2019
Risk-based capital metrics:
Common equity tier 1 capital		$	169,203		$	169,203
Tier 1 capital		192,029			192,029
Total capital ⁽²⁾		225,430			217,247
Risk-weighted assets (in billions)		1,484			1,440
Common equity tier 1 capital ratio		11.4		%	11.7		%	9.5	%
Tier 1 capital ratio		12.9			13.3			11.0
Total capital ratio		15.2			15.1			13.0

Leverage-based metrics:
Adjusted quarterly average assets (in billions) ⁽³⁾		$	2,336		$	2,336
Tier 1 leverage ratio		8.2		%	8.2		%	4.0

SLR leverage exposure (in billions)					$	2,898
SLR					6.6		%	5.0

		December 31, 2018
Risk-based capital metrics:
Common equity tier 1 capital		$	167,272		$	167,272
Tier 1 capital		189,038			189,038
Total capital ⁽²⁾		221,304			212,878
Risk-weighted assets (in billions)		1,437			1,409
Common equity tier 1 capital ratio		11.6		%	11.9		%	8.25	%
Tier 1 capital ratio		13.2			13.4			9.75
Total capital ratio		15.4			15.1			11.75

Leverage-based metrics:
Adjusted quarterly average assets (in billions) ⁽³⁾		$	2,258		$	2,258
Tier 1 leverage ratio		8.4		%	8.4		%	4.0

SLR leverage exposure (in billions)					$	2,791
SLR					6.8		%	5.0


⁽¹⁾	The capital conservation buffer and G-SIB surcharge were both 2.5 percent at September 30, 2019 and 1.875 percent at December 31, 2018. The countercyclical capital buffer for both periods was zero. The SLR minimum includes a leverage buffer of 2.0 percent.


⁽²⁾	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.


⁽³⁾	Reflects total average assets adjusted for certain Tier 1 capital deductions.

CET1 capital was $169.2 billion at September 30, 2019, an increase of $1.9 billion from December 31, 2018, driven by earnings and net unrealized gains on available-for-sale (AFS) debt securities included in accumulated other comprehensive income (OCI), partially offset by common stock repurchases and dividends. During the nine months ended September 30, 2019, Total capital under the Advanced approaches increased $4.4 billion primarily driven by the same factors as CET1 capital and a net increase in

preferred stock. Risk-weighted assets under the Standardized approach, which yielded the lower CET1 capital ratio at September 30, 2019, increased $46.6 billion during the nine months ended September 30, 2019 to $1,484 billion primarily due to increased client activity in Global Markets and Global Banking and an increase in other assets.

Table 9 shows the capital composition at September 30, 2019 and December 31, 2018.




Table 9	Capital Composition under Basel 3

(Dollars in millions)		September 30 2019			December 31 2018
Total common shareholders’ equity		$	244,781		$	242,999
Goodwill, net of related deferred tax liabilities		(68,571		)	(68,572		)
Deferred tax assets arising from net operating loss and tax credit carryforwards		(5,210		)	(5,981		)
Intangibles, other than mortgage servicing rights and goodwill, net of related deferred tax liabilities		(1,335		)	(1,294		)
Other		(462		)	120
Common equity tier 1 capital		169,203			167,272
Qualifying preferred stock, net of issuance cost		23,400			22,326
Other		(574		)	(560		)
Tier 1 capital		192,029			189,038
Tier 2 capital instruments		23,160			21,887
Eligible credit reserves included in Tier 2 capital		2,059			1,972
Other		(1		)	(19		)
Total capital under the Advanced approaches		$	217,247		$	212,878



21 Bank of America

Table 10 shows the components of risk-weighted assets as measured under Basel 3 at September 30, 2019 and December 31, 2018.




Table 10	Risk-weighted Assets under Basel 3

		Standardized Approach		Advanced Approaches		Standardized Approach		Advanced Approaches
(Dollars in billions)		September 30, 2019				December 31, 2018
Credit risk		$	1,433	$	854	$	1,384	$	827
Market risk		51		50		53		52
Operational risk		n/a		500		n/a		500
Risks related to credit valuation adjustments		n/a		36		n/a		30
Total risk-weighted assets		$	1,484	$	1,440	$	1,437	$	1,409

n/a = not applicable

Bank of America, N.A. Regulatory Capital

Table 11 presents regulatory capital information for BANA in accordance with Basel 3 Standardized and Advanced approaches as measured at September 30, 2019 and December 31, 2018. BANA met the definition of well capitalized under the PCA framework for both periods.




Table 11	Bank of America, N.A. Regulatory Capital under Basel 3

		Standardized Approach			Advanced Approaches			Regulatory Minimum ⁽¹⁾
(Dollars in millions, except as noted)		September 30, 2019
Risk-based capital metrics:
Common equity tier 1 capital		$	154,045		$	154,045
Tier 1 capital		154,045			154,045
Total capital ⁽²⁾		166,062			158,158
Risk-weighted assets (in billions)		1,229			982
Common equity tier 1 capital ratio		12.5		%	15.7		%	7.0	%
Tier 1 capital ratio		12.5			15.7			8.5
Total capital ratio		13.5			16.1			10.5

Leverage-based metrics:
Adjusted quarterly average assets (in billions) ⁽³⁾		1,741			1,741
Tier 1 leverage ratio		8.8		%	8.8		%	5.0

SLR leverage exposure (in billions)					2,137
SLR					7.2		%	6.0

		December 31, 2018
Risk-based capital metrics:
Common equity tier 1 capital		$	149,824		$	149,824
Tier 1 capital		149,824			149,824
Total capital ⁽²⁾		161,760			153,627
Risk-weighted assets (in billions)		1,195			959
Common equity tier 1 capital ratio		12.5		%	15.6		%	6.5	%
Tier 1 capital ratio		12.5			15.6			8.0
Total capital ratio		13.5			16.0			10.0

Leverage-based metrics:
Adjusted quarterly average assets (in billions) ⁽³⁾		1,719			1,719
Tier 1 leverage ratio		8.7		%	8.7		%	5.0

SLR leverage exposure (in billions)					2,112
SLR					7.1		%	6.0


⁽¹⁾	Risk-based capital regulatory minimums at September 30, 2019 are the minimum ratios under Basel 3 including a capital conservation buffer of 2.5 percent. The regulatory minimums for the leverage ratios as of both period ends and risk-based capital ratios as of December 31, 2018 are the percent required to be considered well capitalized under the PCA framework.


⁽²⁾	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.


⁽³⁾	Reflects total average assets adjusted for certain Tier 1 capital deductions.

Total Loss-Absorbing Capacity Requirements

Effective January 1, 2019, the Corporation is subject to the Federal Reserve’s final rule requiring G-SIBs to maintain minimum levels of total loss-absorbing capacity (TLAC) and long-term debt. TLAC consists of the Corporation’s Tier 1 capital and eligible long-term debt issued directly by the Corporation. Eligible long-term debt for TLAC ratios is comprised of unsecured debt that has a remaining maturity of at least one year and satisfies additional requirements

as prescribed in the TLAC final rule. As with the risk-based capital ratios and SLR, the Corporation is required to maintain TLAC ratios in excess of minimum requirements plus applicable buffers in order to avoid restrictions on capital distributions and discretionary bonus payments. Table 12 presents the Corporation's TLAC and long-term debt ratios and related information as of September 30, 2019.



		Bank of America 22




Table 12	Bank of America Corporation Total Loss-Absorbing Capacity and Long-Term Debt

		TLAC			Regulatory Minimum ⁽¹⁾		Long-term Debt			Regulatory Minimum ⁽²⁾
(Dollars in millions)		September 30, 2019
Total eligible balance		$	368,490				$	168,864
Percentage of risk-weighted assets ⁽³⁾		24.8		%	22.0	%	11.4		%	8.5	%
Percentage of SLR leverage exposure		12.7			9.5		5.8			4.5

⁽¹⁾

The TLAC risk-weighted assets regulatory minimum consists of 18.0 percent plus a TLAC risk-weighted assets buffer comprised of 2.5 percent plus the method 1 G-SIB surcharge of 1.5 percent. The countercyclical buffer is zero for this period. The TLAC SLR leverage exposure regulatory minimum consists of 7.5 percent plus a 2.0 percent TLAC leverage buffer. The TLAC risk-weighted assets and leverage buffers must be comprised solely of CET1 capital and Tier 1 capital, respectively.


⁽²⁾	The long-term debt risk-weighted assets regulatory minimum is comprised of 6.0 percent plus an additional 2.5 percent requirement based on the Corporation’s method 2 G-SIB surcharge.


⁽³⁾	The approach that yields the higher risk-weighted assets is used to calculate TLAC and long-term debt ratios, which was the Standardized approach as of September 30, 2019.

Regulatory Developments

The following supplements the disclosure in Capital Management – Regulatory Developments in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K and in the Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.

Broker-dealer Regulatory Capital and Securities Regulation

The Corporation’s principal U.S. broker-dealer subsidiaries are BofA Securities, Inc. (BofAS), Merrill Lynch Professional Clearing Corp (MLPCC) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S). As previously disclosed in the Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, BofAS was formed as a result of the reorganization of MLPF&S which was completed in May 2019. The Corporation's principal European broker-dealer subsidiaries are Merrill Lynch International (MLI) and BofA Securities Europe SA (BofASE).

The U.S. broker-dealer subsidiaries are subject to the net capital requirements of Rule 15c3-1 under the Exchange Act. BofAS computes its minimum capital requirements as an alternative net capital broker-dealer under Rule 15c3-1, and MLPCC and MLPF&S compute their minimum capital requirements in accordance with the alternative standard under Rule 15c3-1. BofAS and MLPCC are also registered as futures commission merchants and are subject to U.S. Commodity Futures Trading Commission (CFTC) Regulation 1.17.

BofAS provides institutional services and is required to maintain tentative net capital in excess of $1.0 billion and net capital in excess of the greater of $500 million or a certain percentage of its reserve requirement. BofAS is also required to hold a certain percentage of its risk-based margin in order to meet its CFTC minimum net capital requirement. At September 30, 2019, BofAS had tentative net capital of $13.3 billion. BofAS also had regulatory net capital of $11.1 billion which exceeded the minimum requirement of $2.3 billion by $8.8 billion.

MLPCC is a fully-guaranteed subsidiary of BofAS and provides clearing and settlement services. At September 30, 2019, MLPCC’s regulatory net capital of $4.8 billion exceeded the minimum requirement of $1.2 billion by $3.7 billion.

MLPF&S provides retail services. At September 30, 2019, MLPF&S' regulatory net capital was $3.3 billion which exceeded the minimum requirement of $104 million by $3.2 billion

Our European broker-dealers are regulated by non-U.S. regulators. 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, 2019, MLI’s capital resources were $35.0 billion, which exceeded the minimum Pillar 1 requirement of $14.8 billion by $20.2 billion. BofASE, a French investment firm, is regulated by the Autorité de Contrôle Prudentiel et de Résolution and the Autorité des Marchés Financiers, and is subject to certain regulatory capital requirements. At September 30, 2019, BofASE's

capital resources were $5.0 billion which exceeded the minimum Pillar 1 requirement of $1.3 billion by $3.7 billion.

Liquidity Risk

Funding and Liquidity Risk Management

Our primary liquidity risk management objective is to meet expected or unexpected cash flow and collateral needs while continuing to support our businesses and customers under a range of economic conditions. 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 ALM 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 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, as well as our liquidity sources, liquidity arrangements, contingency planning and credit ratings discussed below, see Liquidity Risk in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.

NB Holdings Corporation

We have intercompany arrangements with certain key subsidiaries under which we transferred certain assets of Bank of America Corporation, as the parent company, which is a separate and distinct legal entity from our banking and nonbank subsidiaries, and agreed to transfer certain additional parent company assets not needed to satisfy anticipated near-term expenditures, to NB Holdings Corporation, 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. 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.

Global Liquidity Sources and Other Unencumbered Assets

Table 13 presents average Global Liquidity Sources (GLS) for the three months ended September 30, 2019 and December 31, 2018.



23 Bank of America




Table 13	Average Global Liquidity Sources

		Three Months Ended
(Dollars in billions)		September 30 2019		December 31 2018
Parent company and NB Holdings		$	65	$	76
Bank subsidiaries		426		420
Other regulated entities		61		48
Total Average Global Liquidity Sources		$	552	$	544

We maintain liquidity available to the Corporation, including the parent company and selected subsidiaries, in the form of cash and high-quality, liquid, unencumbered securities. Typically, parent company and NB Holdings liquidity is in the form of cash deposited with BANA.

Our bank subsidiaries’ liquidity is primarily driven by deposit and lending activity, as well as securities valuation and net debt activity. 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 FHLBs and the Federal Reserve Discount Window. The cash we could have obtained by borrowing against this pool of specifically-identified eligible assets was $356 billion and $344 billion at September 30, 2019 and December 31, 2018. 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 transfers to the parent company or nonbank subsidiaries may be subject to prior regulatory approval.

Liquidity held in other regulated entities, comprised primarily of broker-dealer subsidiaries, 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. Our other regulated entities also hold unencumbered investment-grade securities and equities that we believe could be used to generate additional liquidity.

Table 14 presents the composition of average GLS for the three months ended September 30, 2019 and December 31, 2018.




Table 14	Average Global Liquidity Sources Composition

		Three Months Ended
(Dollars in billions)		September 30 2019		December 31 2018
Cash on deposit		$	103	$	113
U.S. Treasury securities		81		81
U.S. agency securities and mortgage-backed securities		353		340
Non-U.S. government securities		15		10
Total Average Global Liquidity Sources		$	552	$	544

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. However, HQLA for purposes of calculating LCR is not reported at market value, but at a lower value that incorporates regulatory deductions and the exclusion of excess liquidity held at certain subsidiaries. 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. Our average consolidated HQLA, on

a net basis, was $454 billion and $446 billion for the three months ended September 30, 2019 and December 31, 2018. For the same periods, the average consolidated LCR was 116 percent and 118 percent. Our LCR will fluctuate due to normal business flows from customer activity.

Liquidity Stress Analysis

We utilize liquidity stress analysis to assist us in determining the appropriate amounts of liquidity to maintain at the parent company and our subsidiaries to meet contractual and contingent cash outflows under a range of scenarios. For more information on our liquidity stress analysis, see Liquidity Risk – Liquidity Stress Analysis in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.

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 diversified across products, programs, markets, currencies and investor groups. We fund a substantial portion of our lending activities through our deposits, which were $1.39 trillion and $1.38 trillion at September 30, 2019 and December 31, 2018.

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.

Long-term Debt

During the nine months ended September 30, 2019, we issued $45.2 billion of long-term debt consisting of $24.3 billion for Bank of America Corporation, substantially all of which was TLAC eligible, $10.9 billion for Bank of America, N.A. and $10.0 billion of other debt. Substantially all of the long-term, TLAC-eligible senior notes issued by Bank of America Corporation since late 2016 are callable, at our option, at least one year before each stated maturity date. The call features give us the flexibility to retire long-term notes before their final year outstanding, when they are no longer eligible to count toward TLAC requirements, and replace them with new TLAC-eligible debt, should we choose to do so.

During the nine months ended September 30, 2019, we had total long-term debt maturities and redemptions in the aggregate of $42.8 billion consisting of $16.6 billion for Bank of America Corporation, $19.8 billion for Bank of America, N.A. and $6.4 billion of other debt. Table 15 presents the carrying value of aggregate annual contractual maturities of long-term debt at September 30, 2019.



		Bank of America 24




Table 15	Long-term Debt by Maturity

(Dollars in millions)		Remainder of 2019		2020		2021		2022		2023		Thereafter		Total
Bank of America Corporation
Senior notes ⁽¹⁾		$	1,739	$	10,191	$	15,826	$	14,733	$	23,077	$	94,266	$	159,832
Senior structured notes		1,115		814		503		2,045		283		12,628		17,388
Subordinated notes		—		—		336		378		—		22,198		22,912
Junior subordinated notes		—		—		—		—		—		736		736
Total Bank of America Corporation		2,854		11,005		16,665		17,156		23,360		129,828		200,868
Bank of America, N.A.
Senior notes		—		3,000		3,448		—		511		20		6,979
Subordinated notes		—		—		—		—		—		1,812		1,812
Advances from Federal Home Loan Banks		3		2,510		2		3		1		99		2,618
Securitizations and other Bank VIEs ⁽²⁾		—		3,099		3,957		1,249		—		—		8,305
Other		235		40		78		—		134		99		586
Total Bank of America, N.A.		238		8,649		7,485		1,252		646		2,030		20,300
Other debt
Structured liabilities		1,531		4,637		1,662		905		1,337		11,909		21,981
Nonbank VIEs ⁽²⁾		—		—		—		—		1		255		256
Total other debt		1,531		4,637		1,662		905		1,338		12,164		22,237
Total long-term debt		$	4,623	$	24,291	$	25,812	$	19,313	$	25,344	$	144,022	$	243,405

⁽¹⁾

Total includes $106.0 billion of outstanding notes that are both TLAC eligible and callable at least one year before their stated maturities, including $1.0 billion that will be callable and become TLAC ineligible during the remainder of 2019, and $7.3 billion, $11.6 billion, $14.8 billion and $10.7 billion that will do so during each of 2020 through 2023, respectively, and $60.6 billion thereafter.


⁽²⁾	Represents the total long-term debt included in the liabilities of consolidated variable interest entities (VIEs) on the Consolidated Balance Sheet.

Table 16 presents our long-term debt by major currency at September 30, 2019 and December 31, 2018.




Table 16	Long-term Debt by Major Currency

(Dollars in millions)		September 30 2019		December 31 2018
U.S. dollar		$	193,583	$	180,724
Euro		32,866		34,328
British pound		5,345		5,450
Japanese yen		4,325		3,038
Canadian dollar		3,805		2,936
Australian dollar		1,878		1,722
Other		1,603		1,194
Total long-term debt		$	243,405	$	229,392

Total long-term debt increased $14.0 billion during the nine months ended September 30, 2019 primarily due to debt issuances and valuation adjustments, partially offset by maturities and redemptions. We may, from time to time, purchase outstanding debt instruments in various transactions, depending on market conditions, liquidity and other factors. Our other regulated entities may also 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 2018 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 more information on our ALM activities, see Interest Rate Risk Management for the Banking Book on page 43.

We may issue unsecured debt in the form of structured notes for client purposes, certain of which qualify as TLAC-eligible debt. During the nine months ended September 30, 2019, we issued $7.4 billion of structured notes, which 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.

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 17 presents the Corporation’s current long-term/short-term senior debt ratings and outlooks expressed by the rating agencies.

The ratings from Moody’s Investors Service and Fitch Ratings for the Corporation and its subsidiaries have not changed from those disclosed in the Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.

The ratings from Standard & Poor’s Global Ratings (S&P) for the Corporation and its subsidiaries did not change from those disclosed in the Corporation’s 2018 Annual Report on Form 10-K.

The long-term and short-term debt ratings of BofAS and BofASE, which were initially rated by S&P and Fitch during the first quarter of 2019, also remained unchanged for the third quarter of 2019.

For more information on additional collateral and termination payments that could be required in connection with certain over-the-counter derivative contracts and other trading agreements as a result of a credit rating downgrade, see Note 3 – Derivatives to the Consolidated Financial Statements herein and Item 1A. Risk Factors of the Corporation’s 2018 Annual Report on Form 10-K.



25 Bank of America

Table 17

Senior Debt Ratings

Moody’s Investors Service

Standard & Poor’s Global Ratings

Fitch Ratings

Long-term

Short-term

Outlook

Long-term

Short-term

Outlook

Long-term

Short-term

Outlook

Bank of America Corporation

P-1

Stable

A-

A-2

Stable

A+

Stable

Bank of America, N.A.

Aa2

P-1

Stable

A+

A-1

Stable

AA-

F1+

Stable

Bank of America Merrill Lynch International Designated Activity Company

A+

A-1

Stable

AA-

F1+

Stable

Merrill Lynch, Pierce, Fenner & Smith Incorporated

A+

A-1

Stable

AA-

F1+

Stable

BofA Securities, Inc.

A+

A-1

Stable

AA-

F1+

Stable

Merrill Lynch International

A+

A-1

Stable

A+

Stable

BofA Securities Europe SA

A+

A-1

Stable

A+

Stable

NR = not rated

Credit Risk Management

For information on our credit risk management activities, see Consumer Portfolio Credit Risk Management below, Commercial Portfolio Credit Risk Management on page 33, Non-U.S. Portfolio on page 38, Provision for Credit Losses on page 39, Allowance for Credit Losses on page 39, and Note 5 – Outstanding Loans and Leases and Note 6 – Allowance for Credit Losses to the Consolidated Financial Statements. For information on the new accounting standard on credit losses that is effective on January 1, 2020 and the potential impact on our allowance for credit losses, see Note 1 – Summary of Significant Accounting Principles 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 and are a component of our consumer credit risk management process. These models 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.

Consumer Credit Portfolio

Improvement in home prices continued during the nine months ended September 30, 2019 resulting in improved credit quality compared to the same period in 2018. Additionally, lower credit losses in the consumer real estate portfolio due primarily to non-core loan sales were partially offset by seasoning in the U.S. credit card portfolio compared to the same period in 2018.

Improved credit quality and continued loan balance runoff primarily in the non-core consumer real estate portfolio, partially offset by seasoning within the U.S. credit card portfolio, drove a $226 million decrease in the consumer allowance for loan and lease losses during the nine months ended September 30, 2019 to $4.6 billion. For additional information, see Allowance for Credit Losses on page 39.

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 and Note 5 – Outstanding Loans and Leases to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.

Table 18 presents our outstanding consumer loans and leases, consumer nonperforming loans and accruing consumer loans past due 90 days or more. For more information regarding nonperforming loans and accruing consumer loans past 90 days or more, see the Consumer Portfolio Credit Risk Management Section in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.



		Bank of America 26




Table 18	Consumer Credit Quality

		Outstandings				Nonperforming						Accruing Past Due 90 Days or More
(Dollars in millions)		September 30 2019		December 31 2018		September 30 2019			December 31 2018			September 30 2019			December 31 2018
Residential mortgage⁽¹⁾		$	227,472	$	208,557	$	1,551		$	1,893		$	1,203		$	1,884
Home equity		41,574		48,286		585			1,893			—			—
U.S. credit card		94,946		98,338		n/a			n/a			960			994
Direct/Indirect consumer ⁽²⁾		90,836		91,166		53			56			29			38
Other consumer		208		202		—			—			—			—
Consumer loans excluding loans accounted for under the fair value option		$	455,036	$	446,549	$	2,189		$	3,842		$	2,192		$	2,916
Loans accounted for under the fair value option ⁽³⁾		640		682
Total consumer loans and leases		$	455,676	$	447,231
Percentage of outstanding consumer loans and leases ⁽⁴⁾		n/a		n/a		0.48		%	0.86		%	0.48		%	0.65		%
Percentage of outstanding consumer loans and leases, excluding fully-insured loan portfolios ⁽⁴⁾		n/a		n/a		0.50			0.90			0.23			0.24

⁽¹⁾

Residential mortgage loans accruing past due 90 days or more are fully-insured loans. At September 30, 2019 and December 31, 2018, residential mortgage includes $858 million and $1.4 billion of loans on which interest had been curtailed by the FHA, and therefore were no longer accruing interest, although principal was still insured, and $345 million and $498 million of loans on which interest was still accruing.


⁽²⁾	Outstandings include auto and specialty lending loans and leases of $50.3 billion and $50.1 billion, unsecured consumer lending loans of $328 million and $383 million, U.S. securities-based lending loans of $36.5 billion and $37.0 billion, non-U.S. consumer loans of $3.0 billion and $2.9 billion and other consumer loans of $694 million and $746 million at September 30, 2019 and December 31, 2018.


⁽³⁾	Consumer loans accounted for under the fair value option include residential mortgage loans of $275 million and $336 million and home equity loans of $365 million and $346 million at September 30, 2019 and December 31, 2018. For more information on the fair value option, see Note 16 – Fair Value Option to the Consolidated Financial Statements.


⁽⁴⁾	Excludes consumer loans accounted for under the fair value option. At September 30, 2019 and December 31, 2018, $7 million and $12 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 19 presents net charge-offs and related ratios for consumer loans and leases.




Table 19	Consumer 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)		2019			2018			2019			2018		2019		2018		2019		2018
Residential mortgage		$	(38	)	$	12		$	(51	)	$	13	(0.07	)%	0.02	%	(0.03	)%	0.01	%
Home equity		(202		)	(20		)	(346		)	13		(1.85	)	(0.15	)	(1.02	)	0.03
U.S. credit card		717			698			2,224			2,138		3.01		2.92		3.15		3.03
Direct/Indirect consumer		76			42			170			142		0.33		0.18		0.25		0.20
Other consumer		69			44			151			130		n/m		n/m		n/m		n/m
Total		$	622		$	776		$	2,148		$	2,436	0.55		0.69		0.64		0.73


⁽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.

n/m = not meaningful

Table 20 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 portfolios within the consumer real estate portfolio. We categorize consumer real estate loans as core and 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 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. All

other loans are generally characterized as non-core loans and represent runoff portfolios. Core loans as reported in Table 20 include loans held in the Consumer Banking and GWIM segments, as well as loans held for ALM activities in All Other.

As shown in Table 20, outstanding core consumer real estate loans increased $18.6 billion during the nine months ended September 30, 2019 driven by an increase of $22.5 billion in residential mortgage, partially offset by a $3.9 billion decrease in home equity.

During the three and nine months ended September 30, 2019, we sold $2.3 billion and $4.2 billion of consumer real estate loans, primarily non-core.



27 Bank of America




Table 20	Consumer Real Estate Portfolio ⁽¹⁾

		Outstandings				Nonperforming				Net Charge-offs
		September 30 2019		December 31 2018		September 30 2019		December 31 2018		Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)										2019			2018			2019			2018
Core portfolio
Residential mortgage		$	216,223	$	193,695	$	930	$	1,010	$	(6	)	$	—		$	(2	)	$	13
Home equity		36,116		40,010		380		955		8			15			39			52
Total core portfolio		252,339		233,705		1,310		1,965		2			15			37			65
Non-core portfolio
Residential mortgage		11,249		14,862		621		883		(32		)	12			(49		)	—
Home equity		5,458		8,276		205		938		(210		)	(35		)	(385		)	(39		)
Total non-core portfolio		16,707		23,138		826		1,821		(242		)	(23		)	(434		)	(39		)
Consumer real estate portfolio
Residential mortgage		227,472		208,557		1,551		1,893		(38		)	12			(51		)	13
Home equity		41,574		48,286		585		1,893		(202		)	(20		)	(346		)	13
Total consumer real estate portfolio		$	269,046	$	256,843	$	2,136	$	3,786	$	(240	)	$	(8	)	$	(397	)	$	26

						Allowance for Loan and Lease Losses				Provision for Loan and Lease Losses
						September 30 2019		December 31 2018		Three Months Ended September 30						Nine Months Ended September 30
										2019			2018			2019			2018
Core portfolio
Residential mortgage						$	219	$	214	$	(4	)	$	(2	)	$	3		$	7
Home equity						135		228		(19		)	(27		)	(52		)	(51		)
Total core portfolio						354		442		(23		)	(29		)	(49		)	(44		)
Non-core portfolio
Residential mortgage						122		208		(39		)	22			(91		)	(103		)
Home equity						115		278		(250		)	(112		)	(481		)	(221		)
Total non-core portfolio						237		486		(289		)	(90		)	(572		)	(324		)
Consumer real estate portfolio
Residential mortgage						341		422		(43		)	20			(88		)	(96		)
Home equity						250		506		(269		)	(139		)	(533		)	(272		)
Total consumer real estate portfolio						$	591	$	928	$	(312	)	$	(119	)	$	(621	)	$	(368	)

⁽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 $275 million and $336 million and home equity loans of $365 million and $346 million at September 30, 2019 and December 31, 2018. For additional information, see Note 16 – Fair Value Option to the Consolidated Financial Statements.

We believe that the presentation of information adjusted to exclude the impact of 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 tables and discussions of the residential mortgage and home equity portfolios, we exclude loans accounted for under the fair value option and provide information that excludes the impact of the fully-insured loan portfolio in certain credit quality statistics.

Residential Mortgage

The residential mortgage portfolio made up the largest percentage of our consumer loan portfolio at 50 percent of consumer loans and leases at September 30, 2019. Approximately 49 percent of the residential mortgage portfolio was in Consumer Banking and 36 percent was in GWIM. The remaining portion was in All Other and was comprised of originated loans, purchased loans used in

our overall ALM activities, delinquent FHA loans repurchased pursuant to our servicing agreements with the Government National Mortgage Association as well as loans repurchased related to our representations and warranties.

Outstanding balances in the residential mortgage portfolio increased $18.9 billion during the nine months ended September 30, 2019 as retention of new originations was partially offset by loan sales of $2.3 billion and runoff.

At September 30, 2019 and December 31, 2018, the residential mortgage portfolio included $18.7 billion and $20.1 billion of outstanding fully-insured loans, of which $11.7 billion and $14.0 billion had FHA insurance with the remainder protected by long-term standby agreements.

Table 21 presents certain residential mortgage key credit statistics on both a reported basis and excluding the fully-insured loan portfolio. The following discussion presents the residential mortgage portfolio excluding the fully-insured loan portfolio.



		Bank of America 28




Table 21	Residential Mortgage – Key Credit Statistics

		Reported Basis ⁽¹⁾						Excluding Fully-insured Loans⁽¹⁾
(Dollars in millions)		September 30 2019			December 31 2018			September 30 2019			December 31 2018
Outstandings		$	227,472		$	208,557		$	208,781		$	188,427
Accruing past due 30 days or more		2,989			3,945			1,070			1,155
Accruing past due 90 days or more		1,203			1,884			—			—
Nonperforming loans		1,551			1,893			1,551			1,893
Percent of portfolio
Refreshed LTV greater than 90 but less than or equal to 100		2		%	2		%	2		%	2		%
Refreshed LTV greater than 100		1			1			1			1
Refreshed FICO below 620		3			4			2			2
2006 and 2007 vintages ⁽²⁾		4			6			4			6


⁽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 accounted for $396 million, or 26 percent, and $536 million, or 28 percent, of nonperforming residential mortgage loans at September 30, 2019 and December 31, 2018.

Nonperforming residential mortgage loans decreased $342 million during the nine months ended September 30, 2019 primarily driven by sales. Of the nonperforming residential mortgage loans at September 30, 2019, $586 million, or 38 percent, were current on contractual payments. Loans accruing past due 30 days or more decreased $85 million due to continued improvement in credit quality as well as loan sales in the non-core portfolio.

Net charge-offs decreased $50 million to a net recovery of $38 million and $64 million to a net recovery of $51 million for the three and nine months ended September 30, 2019 compared to the same periods in 2018 primarily due to continued improvement in credit quality and recoveries from the sales of previously charged-off loans.

Of the $208.8 billion in total residential mortgage loans outstanding at September 30, 2019, as shown in Table 21, 27 percent were originated as interest-only loans. The outstanding balance of interest-only residential mortgage loans that have entered the amortization period was $7.9 billion, or 14 percent, at September 30, 2019. 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, 2019, $156 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 $1.1 billion, or one percent, for the entire residential mortgage portfolio. In addition, at September 30, 2019, $301 million, or four percent, of outstanding interest-only residential mortgage loans that had entered the amortization period were nonperforming, of which $97 million were contractually current, compared to $1.6 billion, or one percent, for the entire residential mortgage portfolio. 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. Approximately 93 percent of these loans that have yet to enter the amortization period will not be required to make a fully-amortizing payment until 2022 or later.

Table 22 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 16 percent of outstandings at both September 30, 2019 and December 31, 2018. In the New York area, the New York-Northern New Jersey-Long Island MSA made up 13 percent of outstandings at both September 30, 2019 and December 31, 2018.




Table 22	Residential Mortgage State Concentrations

		Outstandings⁽¹⁾				Nonperforming ⁽¹⁾				Net Charge-offs
		September 30 2019		December 31 2018		September 30 2019		December 31 2018		Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)		September 30 2019		December 31 2018		September 30 2019		December 31 2018		2019			2018			2019			2018
California		$	85,308	$	76,323	$	294	$	314	$	(12	)	$	(1	)	$	(22	)	$	(18	)
New York ⁽²⁾		21,444		19,219		186		222		1			4			2			10
Florida ⁽²⁾		12,494		11,624		157		221		(8		)	(2		)	(12		)	(7		)
Texas		8,593		7,820		76		102		—			—			(1		)	3
New Jersey ⁽²⁾		8,289		7,051		83		98		(2		)	—			(4		)	5
Other		72,653		66,390		755		936		(17		)	11			(14		)	20
Residential mortgage loans ⁽³⁾		$	208,781	$	188,427	$	1,551	$	1,893	$	(38	)	$	12		$	(51	)	$	13
Fully-insured loan portfolio		18,691		20,130
Total residential mortgage loan portfolio		$	227,472	$	208,557


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


⁽²⁾	In these states, foreclosure requires a court order following a legal proceeding (judicial states).


⁽³⁾	Amounts exclude the fully-insured loan portfolio.



29 Bank of America

Home Equity

At September 30, 2019, the home equity portfolio made up nine percent of the consumer portfolio and was comprised of home equity lines of credit (HELOCs), home equity loans and reverse mortgages.

At September 30, 2019, our HELOC portfolio had an outstanding balance of $38.7 billion, or 93 percent of the total home equity portfolio, compared to $44.3 billion, or 92 percent, at December 31, 2018. HELOCs generally have an initial draw period of 10 years, and after the initial draw period ends, the loans generally convert to 15- or 20-year amortizing loans.

At September 30, 2019, our home equity loan portfolio had an outstanding balance of $1.3 billion, or three percent of the total home equity portfolio, compared to $1.8 billion, or four percent, at December 31, 2018. Home equity loans are almost all fixed-rate loans with amortizing payment terms of 10 to 30 years, and of the $1.3 billion at September 30, 2019, 71 percent have 25- to 30-year terms. At September 30, 2019, our reverse mortgage portfolio had an outstanding balance of $1.6 billion, or four percent of the total home equity portfolio, compared to $2.2 billion, also four percent, at December 31, 2018. We no longer originate home equity loans or reverse mortgages.

At September 30, 2019, 79 percent of the home equity portfolio was in Consumer Banking, 13 percent was in All Other and the remainder of the portfolio was primarily in GWIM. Outstanding balances in the home equity portfolio decreased $6.7 billion during the nine months ended September 30, 2019 primarily due to paydowns and loan sales of $1.9 billion outpacing new originations and draws on existing lines. Of the total home equity portfolio at September 30, 2019 and December 31, 2018, $15.3 billion, or 37 percent, and $17.3 billion, or 36 percent, were in first-lien positions. At September 30, 2019, 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 $7.1 billion, or 17 percent of our total home equity portfolio.

Unused HELOCs totaled $43.3 billion at September 30, 2019 compared to $43.1 billion at December 31, 2018. The increase was primarily driven by the impact of lower utilization of open lines and new production partially offset by customers choosing to close accounts. The HELOC utilization rate was 47 percent and 51 percent at September 30, 2019 and December 31, 2018.

Table 23 presents certain home equity portfolio key credit statistics.




Table 23	Home Equity – Key Credit Statistics ⁽¹⁾

(Dollars in millions)		September 30 2019			December 31 2018
Outstandings		$	41,574		$	48,286
Accruing past due 30 days or more ⁽²⁾		224			363
Nonperforming loans ⁽²⁾		585			1,893
Percent of portfolio
Refreshed CLTV greater than 90 but less than or equal to 100		2		%	2		%
Refreshed CLTV greater than 100		2			3
Refreshed FICO below 620		3			5
2006 and 2007 vintages ⁽³⁾		19			22


⁽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 include $32 million and $48 million and nonperforming loans include $61 million and $218 million of loans where we serviced the underlying first lien at September 30, 2019 and December 31, 2018.


⁽³⁾	These vintages of loans have higher refreshed combined loan-to-value (CLTV) ratios and accounted for 35 percent and 49 percent of nonperforming home equity loans at September 30, 2019 and December 31, 2018.

Nonperforming outstanding balances in the home equity portfolio decreased $1.3 billion during the nine months ended September 30, 2019 as outflows, primarily sales, outpaced new inflows. Of the nonperforming home equity loans at September 30, 2019, $266 million, or 45 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. We estimate that approximately $67 million of junior-lien loans had first-lien loans that were 90 days or more past due. In addition, $172 million, or 29 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 $139 million during the nine months ended September 30, 2019.

Net charge-offs decreased $182 million to a net recovery of $202 million, and $359 million to a net recovery of $346 million for the three and nine months ended September 30, 2019 compared to the same periods in 2018 primarily driven by recoveries from the sales of previously charged off non-core home equity loans.

Of the $41.6 billion in total home equity portfolio outstandings at September 30, 2019, as shown in Table 23, 17 percent require interest-only payments. The outstanding balance of HELOCs that have reached the end of their draw period and have entered the amortization period was $12.3 billion at September 30, 2019. 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, 2019, $162 million, or one percent, of outstanding HELOCs that had entered the amortization period were accruing past due 30 days or more. In addition, at September 30, 2019, $518 million, or four percent, were nonperforming. For more information on HELOC amortization, see Consumer Portfolio Credit Risk Management in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.

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. During the three months ended September 30, 2019, 26 percent of these customers with an outstanding balance did not pay any principal on their HELOCs.



		Bank of America 30

Table 24 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, 2019 and December 31, 2018. The Los Angeles-Long Beach-Santa Ana MSA within California made up 11 percent of the outstanding home equity portfolio at both September 30, 2019 and December 31, 2018.




Table 24	Home Equity State Concentrations

		Outstandings ⁽¹⁾				Nonperforming ⁽¹⁾				Net Charge-offs
		September 30 2019		December 31 2018		September 30 2019		December 31 2018		Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)		September 30 2019		December 31 2018		September 30 2019		December 31 2018		2019			2018			2019			2018
California		$	11,627	$	13,515	$	110	$	536	$	(54	)	$	(20	)	$	(109	)	$	(41	)
Florida ⁽²⁾		4,487		5,418		77		315		(30		)	(4		)	(72		)	9
New Jersey ⁽²⁾		3,337		3,871		64		150		(13		)	6			(11		)	20
New York ⁽²⁾		3,018		3,590		95		194		(10		)	8			(4		)	16
Massachusetts		2,102		2,400		35		65		(6		)	(1		)	(6		)	2
Other		17,003		19,492		204		633		(89		)	(9		)	(144		)	7
Total home equity loan portfolio		$	41,574	$	48,286	$	585	$	1,893	$	(202	)	$	(20	)	$	(346	)	$	13


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


⁽²⁾	In these states, foreclosure requires a court order following a legal proceeding (judicial states).

U.S. Credit Card

At September 30, 2019, 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 $3.4 billion during the nine months ended September 30, 2019 to $94.9 billion due to a seasonal decline in purchase volumes. Net charge-offs increased $19 million to $717 million and $86 million to $2.2 billion during the three and nine months ended September 30, 2019 compared to the same periods in 2018 due to portfolio seasoning. U.S. credit card loans 30 days or more past due and still accruing interest decreased $52 million during the nine

months ended September 30, 2019 and 90 days or more past due and still accruing interest decreased $34 million, driven by seasonal declines.

Unused lines of credit for U.S. credit card totaled $339.7 billion and $334.8 billion at September 30, 2019 and December 31, 2018. The increase in unused lines was driven by seasonally lower purchase volumes, as well as account growth and lines of credit increases.

Table 25 presents certain state concentrations for the U.S. credit card portfolio.




Table 25	U.S. Credit Card State Concentrations

		Outstandings				Accruing Past Due 90 Days or More				Net Charge-offs
		September 30 2019		December 31 2018		September 30 2019		December 31 2018		Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)		September 30 2019		December 31 2018		September 30 2019		December 31 2018		2019		2018		2019		2018
California		$	15,623	$	16,062	$	164	$	163	$	132	$	119	$	398	$	357
Florida		8,708		8,840		121		119		90		80		272		248
Texas		7,575		7,730		84		84		58		54		180		169
New York		5,866		6,066		79		81		63		66		183		208
Washington		4,504		4,558		25		24		17		15		53		47
Other		52,670		55,082		487		523		357		364		1,138		1,109
Total U.S. credit card portfolio		$	94,946	$	98,338	$	960	$	994	$	717	$	698	$	2,224	$	2,138

Direct/Indirect Consumer

At September 30, 2019, 56 percent of the direct/indirect portfolio was included in Consumer Banking (consumer auto and specialty lending – automotive, recreational vehicle, marine, aircraft and consumer personal loans) and 44 percent was included in GWIM (principally securities-based lending loans).

Outstandings in the direct/indirect portfolio decreased $330 million during the nine months ended September 30, 2019 to

$90.8 billion primarily due to declines in securities-based lending driven by repayments and lower draws. Net charge-offs increased $34 million to $76 million, and $28 million to $170 million for the three and nine months ended September 30, 2019 compared to the same periods in 2018.

Table 26 presents certain state concentrations for the direct/indirect consumer loan portfolio.



31 Bank of America




Table 26	Direct/Indirect State Concentrations

		Outstandings				Accruing Past Due 90 Days or More				Net Charge-offs
		September 30 2019		December 31 2018		September 30 2019		December 31 2018		Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)		September 30 2019		December 31 2018		September 30 2019		December 31 2018		2019		2018		2019		2018
California		$	11,942	$	11,734	$	3	$	4	$	32	$	5	$	44	$	16
Florida		10,099		10,240		4		4		5		9		21		28
Texas		9,600		9,876		4		6		8		6		23		22
New York		6,302		6,296		1		2		3		2		9		7
New Jersey		3,405		3,308		1		1		1		—		3		2
Other		49,488		49,712		16		21		27		20		70		67
Total direct/indirect loan portfolio		$	90,836	$	91,166	$	29	$	38	$	76	$	42	$	170	$	142

Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity

Table 27 presents nonperforming consumer loans, leases and foreclosed properties activity for the three and nine months ended September 30, 2019 and 2018. During the nine months ended September 30, 2019, nonperforming consumer loans decreased $1.7 billion to $2.2 billion primarily driven by loan sales of $1.4 billion.

At September 30, 2019, $678 million, or 31 percent, of nonperforming loans were 180 days or more past due and had been written down to their estimated property value less costs to sell. In addition, at September 30, 2019, $902 million, or 41

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 $56 million during the nine months ended September 30, 2019 to $188 million as liquidations outpaced additions.

Nonperforming loans also include certain loans that have been modified in TDRs where economic concessions have been granted to borrowers experiencing financial difficulties. Nonperforming TDRs are included in Table 27.




Table 27	Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity

		Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)		2019			2018			2019			2018
Nonperforming loans and leases, beginning of period		$	3,027		$	4,639		$	3,842		$	5,166
Additions		335			484			1,116			1,895
Reductions:
Paydowns and payoffs		(197		)	(238		)	(580		)	(744		)
Sales		(748		)	(145		)	(1,414		)	(531		)
Returns to performing status ⁽¹⁾		(185		)	(309		)	(623		)	(1,009		)
Charge-offs		(23		)	(89		)	(80		)	(350		)
Transfers to foreclosed properties		(20		)	(36		)	(72		)	(119		)
Transfers to loans held-for-sale		—			—			—			(2		)
Total net reductions to nonperforming loans and leases		(838		)	(333		)	(1,653		)	(860		)
Total nonperforming loans and leases, September 30		2,189			4,306			2,189			4,306
Foreclosed properties, September 30 ⁽²⁾		188			265			188			265
Nonperforming consumer loans, leases and foreclosed properties, September 30		$	2,377		$	4,571		$	2,377		$	4,571
Nonperforming consumer loans and leases as a percentage of outstanding consumer loans and leases ⁽³⁾		0.48		%	0.97		%
Nonperforming consumer loans, leases and foreclosed properties as a percentage of outstanding consumer loans, leases and foreclosed properties ⁽³⁾		0.52			1.03


⁽¹⁾	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.


⁽²⁾	Foreclosed property balances do not include properties insured by certain government-guaranteed loans, principally FHA-insured, of $275 million and $500 million at September 30, 2019 and 2018.


⁽³⁾	Outstanding consumer loans and leases exclude loans accounted for under the fair value option.

Table 28 presents TDRs for the consumer real estate portfolio. Performing TDR balances are excluded from nonperforming loans and leases in Table 27.




Table 28	Consumer Real Estate Troubled Debt Restructurings

		September 30, 2019						December 31, 2018
(Dollars in millions)		Nonperforming		Performing		Total		Nonperforming		Performing		Total
Residential mortgage ^{(1, 2)}		$	956	$	4,066	$	5,022	$	1,209	$	4,988	$	6,197
Home equity ⁽³⁾		272		1,023		1,295		1,107		1,252		2,359
Total consumer real estate troubled debt restructurings		$	1,228	$	5,089	$	6,317	$	2,316	$	6,240	$	8,556


⁽¹⁾	At September 30, 2019 and December 31, 2018, residential mortgage TDRs deemed collateral dependent totaled $1.3 billion and $1.6 billion, and included $787 million and $960 million of loans classified as nonperforming and $487 million and $605 million of loans classified as performing.


⁽²⁾	Residential mortgage performing TDRs include $2.2 billion and $2.8 billion of loans that were fully-insured at September 30, 2019 and December 31, 2018.


₍₃₎	At September 30, 2019 and December 31, 2018, home equity TDRs deemed collateral dependent totaled $478 million and $1.3 billion, and include $229 million and $961 million of loans classified as nonperforming and $249 million and $322 million of loans classified as performing.



		Bank of America 32

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).

Modifications of credit card and other consumer loans are made through renegotiation programs utilizing direct customer contact, but may also utilize external renegotiation programs. The renegotiated TDR portfolio is excluded in large part from Table 27 as substantially all of the loans remain on accrual status until either charged off or paid in full. At September 30, 2019 and December 31, 2018, our renegotiated TDR portfolio was $657 million and $566 million, of which $558 million and $481 million were current or less than 30 days past due under the modified terms. The increase in the renegotiated TDR portfolio was primarily driven by new renegotiated enrollments outpacing runoff of existing portfolios.

Commercial Portfolio Credit Risk Management

Commercial credit risk is evaluated and managed with the goal that concentrations of credit exposure continue to be aligned with our risk appetite. 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 33, 36 and 39 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, see Commercial Portfolio Credit Risk Management – Industry Concentrations on page 36 and Table 36.

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 2018 Annual Report on Form 10-K.

Commercial Credit Portfolio

During the nine months ended September 30, 2019, credit quality among large corporate and middle-market borrowers in our commercial and industrial portfolio remained strong. Credit quality of commercial real estate borrowers in most sectors remained stable with conservative LTV ratios. However, some of the real estate markets experienced slowing tenant demand and decelerating rental income.

Total commercial utilized credit exposure increased $16.2 billion during the nine months ended September 30, 2019 to $637.2 billion driven by higher loans and leases. The utilization rate for loans and leases, standby letters of credit (SBLCs) and financial guarantees, and commercial letters of credit, in the aggregate, was 58 percent at September 30, 2019 and 59 percent at December 31, 2018.

Table 29 presents commercial credit exposure by type for utilized, unfunded and total binding committed credit exposure. Commercial utilized credit exposure includes SBLCs and financial guarantees and commercial letters of credit that have been issued and for which we are legally bound to advance funds under prescribed conditions during a specified time period, and excludes exposure related to trading account assets. Although funds have not yet been advanced, these exposure types are considered utilized for credit risk management purposes.




Table 29	Commercial Credit Exposure by Type

		Commercial Utilized ⁽¹⁾				Commercial Unfunded ^{(2, 3, 4)}				Total Commercial Committed
(Dollars in millions)		September 30 2019		December 31 2018		September 30 2019		December 31 2018		September 30 2019		December 31 2018
Loans and leases		$	517,234	$	499,664	$	393,361	$	369,282	$	910,595	$	868,946
Derivative assets ⁽⁵⁾		45,123		43,725		—		—		45,123		43,725
Standby letters of credit and financial guarantees		34,281		34,941		593		491		34,874		35,432
Debt securities and other investments		23,897		25,425		5,322		4,250		29,219		29,675
Loans held-for-sale		8,191		9,090		11,221		14,812		19,412		23,902
Operating leases		6,476		6,060		—		—		6,476		6,060
Commercial letters of credit		1,003		1,210		408		168		1,411		1,378
Other		965		898		—		—		965		898
Total		$	637,170	$	621,013	$	410,905	$	389,003	$	1,048,075	$	1,010,016


⁽¹⁾	Commercial utilized exposure includes loans of $7.0 billion and $3.7 billion and issued letters of credit with a notional amount of $115 million and $100 million accounted for under the fair value option at September 30, 2019 and December 31, 2018.


⁽²⁾	Commercial unfunded exposure includes commitments accounted for under the fair value option with a notional amount of $4.7 billion and $3.0 billion at September 30, 2019 and December 31, 2018.


⁽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 (i.e., syndicated or participated) to other financial institutions. The distributed amounts were $10.9 billion and $10.7 billion at September 30, 2019 and December 31, 2018.

⁽⁵⁾

Derivative assets are carried at fair value, reflect the effects of legally enforceable master netting agreements and have been reduced by cash collateral of $40.7 billion and $32.4 billion at September 30, 2019 and December 31, 2018. Not reflected in utilized and committed exposure is additional non-cash derivative collateral held of $35.1 billion and $33.0 billion at September 30, 2019 and December 31, 2018, which consists primarily of other marketable securities.

Outstanding commercial loans and leases increased $17.6 billion during the nine months ended September 30, 2019 primarily in the commercial and industrial portfolio. The allowance for loan and lease losses for the commercial portfolio increased $58 million to $4.9 billion at September 30, 2019. For additional information, see Allowance for Credit Losses on page 39. Table 30 presents our commercial loans and leases portfolio and related credit quality information at September 30, 2019 and December 31, 2018.



33 Bank of America




Table 30	Commercial Credit Quality

		Outstandings				Nonperforming				Accruing Past Due 90 Days or More
(Dollars in millions)		September 30 2019		December 31 2018		September 30 2019		December 31 2018		September 30 2019		December 31 2018
Commercial and industrial:
U.S. commercial		$	310,982	$	299,277	$	966	$	794	$	338	$	197
Non-U.S. commercial		101,084		98,776		51		80		10		—
Total commercial and industrial		412,066		398,053		1,017		874		348		197
Commercial real estate ⁽¹⁾		62,798		60,845		185		156		3		4
Commercial lease financing		20,107		22,534		35		18		22		29
		494,971		481,432		1,237		1,048		373		230
U.S. small business commercial ⁽²⁾		15,229		14,565		50		54		94		84
Commercial loans excluding loans accounted for under the fair value option		510,200		495,997		1,287		1,102		467		314
Loans accounted for under the fair value option ⁽³⁾		7,034		3,667		—		—		—		—
Total commercial loans and leases		$	517,234	$	499,664	$	1,287	$	1,102	$	467	$	314


⁽¹⁾	Includes U.S. commercial real estate of $58.1 billion and $56.6 billion and non-U.S. commercial real estate of $4.7 billion and $4.2 billion at September 30, 2019 and December 31, 2018.


⁽²⁾	Includes card-related products.


⁽³⁾	Commercial loans accounted for under the fair value option include U.S. commercial of $4.7 billion and $2.5 billion and non-U.S. commercial of $2.4 billion and $1.1 billion at September 30, 2019 and December 31, 2018. For more information on the fair value option, see Note 16 – Fair Value Option to the Consolidated Financial Statements.

Table 31 presents net charge-offs and related ratios for our commercial loans and leases for the three and nine months ended September 30, 2019 and 2018.




Table 31	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)		2019			2018		2019		2018		2019		2018		2019		2018
Commercial and industrial:
U.S. commercial		$	53		$	70	$	202	$	172	0.07	%	0.10	%	0.09	%	0.08	%
Non-U.S. commercial		67			25		115		48		0.26		0.10		0.15		0.07
Total commercial and industrial		120			95		317		220		0.12		0.10		0.11		0.08
Commercial real estate		(1		)	2		8		3		—		0.02		0.02		0.01
Commercial lease financing		1			—		14		—		0.02		—		0.09		—
		120			97		339		223		0.10		0.08		0.09		0.06
U.S. small business commercial		69			59		202		180		1.83		1.67		1.83		1.72
Total commercial		$	189		$	156	$	541	$	403	0.15		0.13		0.15		0.11


⁽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 32 presents commercial reservable criticized utilized exposure by loan type. Criticized exposure corresponds to the Special Mention, Substandard and Doubtful asset categories as defined by regulatory authorities. Total commercial reservable criticized utilized exposure increased $774 million, or seven percent, during the nine months ended September 30, 2019 driven by a small number of client downgrades across various industries and was not indicative of broader issues in the portfolio. At September 30, 2019 and December 31, 2018, 90 percent and 91 percent of commercial reservable criticized utilized exposure was secured.




Table 32	Commercial Reservable Criticized Utilized Exposure ^{(1, 2)}

(Dollars in millions)		September 30, 2019				December 31, 2018
Commercial and industrial:
U.S. commercial		$	8,789	2.59	%	$	7,986	2.43	%
Non-U.S. commercial		1,063		0.99		1,013		0.97
Total commercial and industrial		9,852		2.21		8,999		2.08
Commercial real estate		897		1.39		936		1.50
Commercial lease financing		349		1.74		366		1.62
		11,098		2.09		10,301		1.99
U.S. small business commercial		737		4.84		760		5.22
Total commercial reservable criticized utilized exposure ⁽¹⁾		$	11,835	2.17		$	11,061	2.08


⁽¹⁾	Total commercial reservable criticized utilized exposure includes loans and leases of $11.1 billion and $10.3 billion and commercial letters of credit of $763 million and $781 million at September 30, 2019 and December 31, 2018.


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



		Bank of America 34

Commercial and Industrial

Commercial and industrial loans include U.S. commercial and non-U.S. commercial portfolios.

U.S. Commercial

At September 30, 2019, 69 percent of the U.S. commercial loan portfolio, excluding small business, was managed in Global Banking, 16 percent in Global Markets, 13 percent in GWIM (generally business-purpose loans for high net worth clients) and the remainder primarily in Consumer Banking. U.S. commercial loans increased $11.7 billion during the nine months ended September 30, 2019, across lines of business. Nonperforming U.S. commercial loans increased $172 million and reservable criticized utilized exposure increased $803 million, or 10 percent, driven by a small number of client downgrades across various industries.

Non-U.S. Commercial

At September 30, 2019, 84 percent of the non-U.S. commercial loan portfolio was managed in Global Banking and 16 percent in Global Markets. Non-U.S. commercial loans increased $2.3 billion during the nine months ended September 30, 2019, primarily in Global Banking. For more information on the non-U.S. commercial portfolio, see Non-U.S. Portfolio on page 38.

Commercial Real Estate

Commercial real estate primarily includes commercial loans 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. Outstanding loans increased $2.0 billion, or three percent, during the nine months ended September 30, 2019 to $62.8 billion due to new originations slightly outpacing paydowns. The portfolio remains diversified across property types and geographic regions. California represented the largest state concentration at 24 percent and 23 percent of the commercial real estate portfolio at September 30, 2019 and December 31, 2018. 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.

For the three and nine months ended September 30, 2019, 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.

Table 33 presents outstanding commercial real estate loans by geographic region, based on the geographic location of the collateral, and by property type.




Table 33	Outstanding Commercial Real Estate Loans

(Dollars in millions)		September 30 2019		December 31 2018
By Geographic Region
California		$	15,227	$	14,002
Northeast		11,558		10,895
Southwest		7,585		7,339
Southeast		5,727		5,726
Florida		4,075		3,680
Midsouth		3,300		2,919
Midwest		3,187		3,772
Illinois		2,917		2,989
Northwest		1,847		2,178
Non-U.S.		4,661		4,240
Other ⁽¹⁾		2,714		3,105
Total outstanding commercial real estate loans		$	62,798	$	60,845
By Property Type
Non-residential
Office		$	17,470	$	17,246
Shopping centers / Retail		8,418		8,798
Multi-family rental		8,035		7,762
Industrial / Warehouse		7,495		5,379
Hotels / Motels		7,012		7,248
Unsecured		2,937		2,956
Multi-use		1,973		2,848
Other		7,853		7,029
Total non-residential		61,193		59,266
Residential		1,605		1,579
Total outstanding commercial real estate loans		$	62,798	$	60,845


⁽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.

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 53 percent and 51 percent of the U.S. small business commercial portfolio at September 30, 2019 and December 31, 2018. Of the U.S. small business commercial net charge-offs, 92 percent and 95 percent were credit card-related products for the three and nine months ended September 30, 2019 compared to 95 percent and 94 percent for same periods in 2018.

Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity

Table 34 presents the nonperforming commercial loans, leases and foreclosed properties activity during the three and nine months ended September 30, 2019 and 2018. Nonperforming loans do not include loans accounted for under the fair value option. During the nine months ended September 30, 2019, nonperforming commercial loans and leases increased $185 million to $1.3 billion. At September 30, 2019, 93 percent of commercial nonperforming loans, leases and foreclosed properties were



35 Bank of America

secured and 56 percent were contractually current. Commercial nonperforming loans were carried at 90 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 collateral value less costs to sell.




Table 34	Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity ^{(1, 2)}

		Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)		2019			2018			2019			2018
Nonperforming loans and leases, beginning of period		$	1,160		$	1,258		$	1,102		$	1,304
Additions		492			235			1,521			915
Reductions:
Paydowns		(161		)	(287		)	(479		)	(649		)
Sales		(33		)	(130		)	(193		)	(204		)
Returns to performing status ⁽³⁾		(48		)	(95		)	(105		)	(213		)
Charge-offs		(123		)	(116		)	(371		)	(276		)
Transfers to foreclosed properties		—			(12		)	(7		)	(12		)
Transfers to loans held-for-sale		—			(5		)	(181		)	(17		)
Total net reductions to nonperforming loans and leases		127			(410		)	185			(456		)
Total nonperforming loans and leases, September 30		1,287			848			1,287			848
Foreclosed properties, September 30		59			30			59			30
Nonperforming commercial loans, leases and foreclosed properties, September 30		$	1,346		$	878		$	1,346		$	878
Nonperforming commercial loans and leases as a percentage of outstanding commercial loans and leases ⁽⁴⁾		0.25		%	0.18		%
Nonperforming commercial loans, leases and foreclosed properties as a percentage of outstanding commercial loans, leases and foreclosed properties ⁽⁴⁾		0.26			0.18


⁽¹⁾	Balances do not include nonperforming loans held-for-sale of $237 million and $177 million at September 30, 2019 and 2018.


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

Table 35 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 5 – Outstanding Loans and Leases to the Consolidated Financial Statements.




Table 35	Commercial Troubled Debt Restructurings

		September 30, 2019						December 31, 2018
(Dollars in millions)		Nonperforming		Performing		Total		Nonperforming		Performing		Total
Commercial and industrial:
U.S. commercial		$	379	$	1,135	$	1,514	$	306	$	1,092	$	1,398
Non-U.S. commercial		51		226		277		78		162		240
Total commercial and industrial		430		1,361		1,791		384		1,254		1,638
Commercial real estate		109		79		188		114		6		120
Commercial lease financing		17		35		52		3		68		71
		556		1,475		2,031		501		1,328		1,829
U.S. small business commercial		3		25		28		3		18		21
Total commercial troubled debt restructurings		$	559	$	1,500	$	2,059	$	504	$	1,346	$	1,850

Industry Concentrations

Table 36 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 exposure increased $38.1 billion, or four percent, during the nine months ended September 30, 2019 to $1.0 trillion. The increase in commercial committed exposure was concentrated in the Real estate, Financial markets infrastructure, and Capital goods industry sectors. Increases were partially offset by decreased exposure to the Global commercial banks, Insurance, and Commercial services and supplies industry sectors.

For information on industry limits, see Commercial Portfolio Credit Risk Management - Industry Concentrations in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.

Asset managers and funds, our largest industry concentration with committed exposure of $109.8 billion, increased $2.0 billion,

or two percent, during the nine months ended September 30, 2019.

Real estate, our second largest industry concentration with committed exposure of $93.6 billion, increased $7.1 billion, or eight percent, during the nine months ended September 30, 2019. This growth occurred primarily in the category of property developers and owners, partially offset by declines in REITs and multiple-use and all other property types.

Capital goods, our third largest industry concentration with committed exposure of $79.3 billion, increased $4.2 billion, or six percent, during the nine months ended September 30, 2019 with the growth largely occurring in the machinery and trading companies and distributors industry categories, partially offset by a decrease in large conglomerates. For more information on the commercial real estate and related portfolios, see Commercial Portfolio Credit Risk Management – Commercial Real Estate on page 35.



		Bank of America 36




Table 36	Commercial Credit Exposure by Industry ⁽¹⁾

		Commercial Utilized				Total Commercial Committed ⁽²⁾
(Dollars in millions)		September 30 2019		December 31 2018		September 30 2019			December 31 2018
Asset managers and funds		$	73,822	$	71,756	$	109,841		$	107,888
Real estate ⁽³⁾		70,643		65,328		93,625			86,514
Capital goods		41,651		39,192		79,308			75,080
Finance companies		37,502		36,662		59,923			56,659
Healthcare equipment and services		34,563		35,763		56,649			56,489
Government and public education		42,802		43,675		54,177			54,749
Materials		27,647		27,347		52,293			51,865
Retailing		27,354		25,333		48,874			47,507
Consumer services		25,959		25,702		46,335			43,298
Food, beverage and tobacco		23,587		23,586		44,609			42,745
Commercial services and supplies		22,328		22,623		37,855			39,349
Energy		15,660		13,727		35,750			32,279
Transportation		25,440		22,814		34,638			31,523
Utilities		11,938		12,035		28,899			27,623
Pharmaceuticals and biotechnology		6,261		7,430		27,051			23,634
Individuals and trusts		18,887		18,643		26,303			25,019
Global commercial banks		23,602		26,583		25,687			28,627
Technology hardware and equipment		11,287		13,014		25,379			26,228
Media		13,285		12,132		23,645			24,502
Consumer durables and apparel		10,174		9,904		21,459			20,199
Vehicle dealers		17,332		17,603		20,580			20,446
Software and services		10,257		8,809		20,098			19,172
Telecommunication services		8,580		8,686		15,980			14,166
Automobiles and components		8,033		7,131		15,176			13,893
Financial markets infrastructure (clearinghouses)		11,864		8,317		14,316			10,042
Insurance		6,966		8,674		13,804			15,807
Food and staples retailing		5,642		4,787		9,871			9,093
Religious and social organizations		4,104		3,757		5,950			5,620
Total commercial credit exposure by industry		$	637,170	$	621,013	$	1,048,075		$	1,010,016
Net credit default protection purchased on total commitments ⁽⁴⁾						$	(3,858	)	$	(2,663	)


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


⁽²⁾	Includes the notional amount of unfunded legally binding lending commitments net of amounts distributed (i.e., syndicated or participated) to other financial institutions. The distributed amounts were $10.9 billion and $10.7 billion at September 30, 2019 and December 31, 2018.


⁽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 primary business activity of the borrowers or counterparties using operating cash flows and primary source of repayment as key factors.


⁽⁴⁾	Represents net notional credit protection purchased to hedge funded and unfunded exposures for which we elected the fair value option, as well as certain other credit exposures. For additional information, see Commercial Portfolio Credit Risk Management – Risk Mitigation.

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, 2019 and December 31, 2018, 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 $3.9 billion and $2.7 billion. We recorded net losses on these positions of $15 million and $93 million for the three and nine months ended September 30, 2019 compared to net losses of $33 million and $43 million for the same periods in 2018 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 42. For additional information, see Trading Risk Management on page 41.

Tables 37 and 38 present the maturity profiles and the credit exposure debt ratings of the net credit default protection portfolio at September 30, 2019 and December 31, 2018.




Table 37	Net Credit Default Protection by Maturity

		September 30 2019		December 31 2018
Less than or equal to one year		37	%	20	%
Greater than one year and less than or equal to five years		42		78
Greater than five years		21		2
Total net credit default protection		100	%	100	%



37 Bank of America




Table 38	Net Credit Default Protection by Credit Exposure Debt Rating

		Net Notional ⁽¹⁾			Percent of Total		Net Notional ⁽¹⁾			Percent of Total
(Dollars in millions)		September 30, 2019					December 31, 2018
Ratings ^{(2, 3)}
A		$	(612	)	15.9	%	$	(700	)	26.3	%
BBB		(1,177		)	30.5		(501		)	18.8
BB		(800		)	20.7		(804		)	30.2
B		(523		)	13.6		(422		)	15.8
CCC and below		(85		)	2.2		(205		)	7.7
NR ⁽⁴⁾		(661		)	17.1		(31		)	1.2
Total net credit default protection		$	(3,858	)	100.0	%	$	(2,663	)	100.0	%


⁽¹⁾	Represents net credit default protection purchased.


⁽²⁾	Ratings are refreshed on a quarterly basis.


⁽³⁾	Ratings of BBB- or higher are considered to meet the definition of investment grade.


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

For more information on credit derivatives and counterparty credit risk valuation adjustments, see Note 3 – Derivatives to the Consolidated Financial Statements herein and Note 3 – Derivatives to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.

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 39 presents our 20 largest non-U.S. country exposures at September 30, 2019. These exposures accounted for 89 percent of our total non-U.S. exposure at both September 30, 2019 and December 31, 2018. Net country exposure for these 20 countries increased $10.9 billion in the nine months ended September 30, 2019, primarily driven by increased sovereign and corporate exposure across multiple countries. For more information on the top 20 non-U.S. countries exposure, see Non-U.S. Portfolio in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.




Table 39	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 2019		Hedges and Credit Default Protection			Net Country Exposure at September 30 2019		Increase (Decrease) from December 31 2018
United Kingdom		$	32,387	$	16,610	$	7,154	$	2,506	$	58,657	$	(3,107	)	$	55,550	$	696
Germany		21,600		7,190		1,992		1,133		31,915		(5,826		)	26,089		(2,568		)
Japan		18,774		879		1,591		1,441		22,685		(1,403		)	21,282		1,259
Canada		7,774		7,829		1,298		3,336		20,237		(680		)	19,557		42
France		7,631		7,386		1,255		2,802		19,074		(2,650		)	16,424		3,773
China		12,167		495		1,304		919		14,885		(357		)	14,528		(113		)
India		7,786		538		467		4,058		12,849		(224		)	12,625		1,513
Brazil		7,610		663		201		3,689		12,163		(420		)	11,743		1,494
Australia		6,031		3,024		603		1,735		11,393		(377		)	11,016		1,086
Netherlands		6,510		3,435		498		1,193		11,636		(992		)	10,644		(933		)
Switzerland		5,627		3,051		331		237		9,246		(644		)	8,602		838
South Korea		6,018		604		389		1,762		8,773		(196		)	8,577		(593		)
Hong Kong		5,645		257		327		1,218		7,447		(32		)	7,415		179
Singapore		4,031		223		456		2,591		7,301		(53		)	7,248		1,731
Mexico		4,023		1,876		260		1,041		7,200		(185		)	7,015		779
Belgium		4,556		1,093		216		215		6,080		(214		)	5,866		288
Spain		4,076		1,314		155		796		6,341		(950		)	5,391		741
United Arab Emirates		3,082		226		130		102		3,540		(33		)	3,507		(142		)
Italy		2,310		1,486		589		542		4,927		(1,450		)	3,477		396
Sweden		1,572		705		268		245		2,790		(274		)	2,516		476
Total top 20 non-U.S. countries exposure		$	169,210	$	58,884	$	19,484	$	31,561	$	279,139	$	(20,067	)	$	259,072	$	10,942

A number of economic conditions and geopolitical events have given rise to risk aversion in certain emerging markets. Additionally, in light of ongoing trade tensions, we continue to closely monitor our exposures to tariff-sensitive regions and industries, particularly to countries that account for a large percentage of U.S. trade, such as China.

Our largest emerging market country exposure at September 30, 2019 was China, with net exposure of $14.5 billion, concentrated in large state-owned companies, subsidiaries of multinational corporations and commercial banks.

The outlook for policy direction and therefore economic performance in the EU remains uncertain as a consequence of

reduced political cohesion among EU countries. Additionally, we believe that the uncertainty in the U.K.’s ability to negotiate a favorable exit from the EU will further weigh on economic performance. For additional information, see Executive Summary – Recent Developments – U.K. Exit from the EU on page 3. Our largest EU country exposure at September 30, 2019 was the U.K. with net exposure of $55.6 billion, which represents a $696 million increase from December 31, 2018. Our second largest EU exposure was Germany with net exposure of $26.1 billion, which represents a $2.6 billion decrease from December 31, 2018. The decrease in Germany was primarily driven by a reduction in sovereign exposure.



		Bank of America 38

Provision for Credit Losses

The provision for credit losses increased $63 million to $779 million, and $272 million to $2.6 billion for the three and nine months ended September 30, 2019 compared to the same periods in 2018. The provision for credit losses was $32 million and $40 million lower than net charge-offs for the three and nine months ended September 30, 2019, resulting in a decrease in the allowance for credit losses. This compared to a decrease of $216 million and $462 million in the allowance for credit losses for the three and nine months ended September 30, 2018.

Net charge-offs for the three and nine months ended September 30, 2019 were $811 million and $2.7 billion compared to $932 million and $2.8 billion for the same periods in 2018.

The provision for credit losses for the consumer portfolio decreased $146 million to $564 million and $181 million to $2.0 billion for the three and nine months ended September 30, 2019 compared to the same periods in 2018. The decrease was primarily driven by consumer real estate loan sales.

The provision for credit losses for the commercial portfolio, including unfunded lending commitments, increased $209 million to $215 million and $453 million to $615 million for the three and nine months ended September 30, 2019 compared to the same periods in 2018. The increase was due in part to energy releases in the prior-year periods.

Allowance for Credit Losses

Allowance for Loan and Lease Losses

During the three and nine months ended September 30, 2019, the factors that impacted the allowance for loan and lease losses included improvement in the credit quality of the consumer real estate portfolios driven by continuing improvements in the U.S. economy and strong labor markets, proactive credit risk management initiatives and the impact of high credit quality originations. Evidencing the improvements in the U.S. economy and strong labor markets are low levels of unemployment and increases in home prices. In addition to these improvements, in the consumer portfolio, nonperforming consumer loans decreased $1.7 billion during the nine months ended September 30, 2019 as loan sales, returns to performing status and paydowns continued to outpace new nonaccrual loans.

The allowance for loan and lease losses for the consumer portfolio, as presented in Table 41, was $4.6 billion at September 30, 2019, a decrease of $226 million from December 31, 2018. The decrease was primarily in the consumer real estate portfolio, partially offset by an increase in the U.S. credit card portfolio. The reduction in the allowance for the consumer real estate portfolio was due to improved home prices, lower nonperforming loans and a decrease in loan balances in our non-core portfolio. The increase in the allowance for the U.S. credit card portfolio was driven primarily by continued portfolio seasoning.

The allowance for loan and lease losses for the commercial portfolio, as presented in Table 41, was $4.9 billion at September 30, 2019, an increase of $58 million from December 31, 2018.

Commercial reservable criticized utilized exposure increased to $11.8 billion at September 30, 2019 from $11.1 billion (to 2.17 percent from 2.08 percent of total commercial reservable utilized exposure) at December 31, 2018, and nonperforming commercial loans increased to $1.3 billion at September 30, 2019 from $1.1 billion (to 0.25 percent from 0.22 percent of outstanding commercial loans excluding loans accounted for under the fair value option) at December 31, 2018 with the increases spread across multiple industries. See Tables 30, 31 and 32 for more details on key commercial credit statistics.

The allowance for loan and lease losses as a percentage of total loans and leases outstanding was 0.98 percent at September 30, 2019 compared to 1.02 percent at December 31, 2018. For more information on the allowance for loan and lease losses, see Allowance for Credit Losses in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.

The Financial Accounting Standards Board issued a new accounting standard regarding the measurement of the allowance for credit losses that will be effective for the Corporation on January 1, 2020. Upon adoption of the standard on January 1, 2020, we expect that, based on current expectations of future economic conditions, our allowance for credit losses on loans and leases may increase up to approximately 30 percent from our allowance for credit losses as of September 30, 2019, as disclosed herein, with a large portion of that increase driven by the U.S. credit card portfolio. The increase from the previously disclosed expectation of up to 20 percent was driven by refinements to certain models and methodologies along with the third-quarter 2019 loan sales, which reduced the expected recoveries on previously charged-off loans as the recoveries were realized upon sale. The ultimate impact upon adoption will depend on the characteristics of the Corporation’s portfolios, macroeconomic conditions and forecasts, and the finalized validation of models and methodologies, as well as other management judgments. For additional information regarding this new accounting standard, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements.

Reserve for Unfunded Lending Commitments

In addition to the allowance for loan and lease losses, we also estimate probable losses related to unfunded lending commitments such as letters of credit, financial guarantees, unfunded bankers’ acceptances and binding loan commitments, excluding commitments accounted for under the fair value option. For more information on the reserve for unfunded lending commitments, see Allowance for Credit Losses in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.

The reserve for unfunded lending commitments was $809 million at September 30, 2019 compared to $797 million at December 31, 2018.

Table 40 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, 2019 and 2018.



39 Bank of America




Table 40	Allowance for Credit Losses

		Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)		2019			2018			2019			2018
Allowance for loan and lease losses, beginning of period		$	9,527		$	10,050		$	9,601		$	10,393
Loans and leases charged off
Residential mortgage		(28		)	(45		)	(69		)	(137		)
Home equity		(171		)	(110		)	(386		)	(329		)
U.S. credit card		(865		)	(826		)	(2,659		)	(2,515		)
Direct/Indirect consumer		(157		)	(120		)	(403		)	(376		)
Other consumer		(71		)	(46		)	(163		)	(140		)
Total consumer charge-offs		(1,292		)	(1,147		)	(3,680		)	(3,497		)
U.S. commercial ⁽¹⁾		(151		)	(161		)	(486		)	(437		)
Non-U.S. commercial		(66		)	(25		)	(115		)	(61		)
Commercial real estate		—			(2		)	(10		)	(9		)
Commercial lease financing		(3		)	(1		)	(19		)	(6		)
Total commercial charge-offs		(220		)	(189		)	(630		)	(513		)
Total loans and leases charged off		(1,512		)	(1,336		)	(4,310		)	(4,010		)
Recoveries of loans and leases previously charged off
Residential mortgage		66			33			120			124
Home equity		373			130			732			316
U.S. credit card		148			128			435			377
Direct/Indirect consumer		81			78			233			234
Other consumer		2			2			12			10
Total consumer recoveries		670			371			1,532			1,061
U.S. commercial ⁽²⁾		29			32			82			85
Non-U.S. commercial		(1		)	—			—			13
Commercial real estate		1			—			2			6
Commercial lease financing		2			1			5			6
Total commercial recoveries		31			33			89			110
Total recoveries of loans and leases previously charged off		701			404			1,621			1,171
Net charge-offs		(811		)	(932		)	(2,689		)	(2,839		)
Provision for loan and lease losses		776			711			2,637			2,362
Other ⁽³⁾		(59		)	(95		)	(116		)	(182		)
Allowance for loan and lease losses, September 30		9,433			9,734			9,433			9,734
Reserve for unfunded lending commitments, beginning of period		806			787			797			777
Provision for unfunded lending commitments		3			5			12			15
Reserve for unfunded lending commitments, September 30		809			792			809			792
Allowance for credit losses, September 30		$	10,242		$	10,526		$	10,242		$	10,526

Loan and allowance ratios:
Loans and leases outstanding at September 30 ⁽⁴⁾		$	965,236		$	924,070		$	965,236		$	924,070
Allowance for loan and lease losses as a percentage of total loans and leases outstanding at September 30⁽⁴⁾		0.98		%	1.05		%	0.98		%	1.05		%
Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases outstanding at September 30 ⁽⁵⁾		1.01			1.12			1.01			1.12
Commercial allowance for loan and lease losses as a percentage of total commercial loans and leases outstanding at September 30 ⁽⁶⁾		0.95			0.99			0.95			0.99
Average loans and leases outstanding ⁽⁴⁾		$	956,850		$	925,091		$	946,546		$	926,664
Annualized net charge-offs as a percentage of average loans and leases outstanding ⁽⁴⁾		0.34		%	0.40		%	0.38		%	0.41		%
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases at September 30 ⁽⁴⁾		271			189			271			189
Ratio of the allowance for loan and lease losses at September 30 to annualized net charge-offs		2.93			2.63			2.62			2.56
Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases at September 30 ⁽⁷⁾		$	4,144		$	4,027		$	4,144		$	4,027
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 at September 30 ^{(4, 7)}		152		%	111		%	152		%	111		%


⁽¹⁾	Includes U.S. small business commercial charge-offs of $79 million and $239 million for the three and nine months ended September 30, 2019 compared to $72 million and $215 million for the same periods in 2018.


⁽²⁾	Includes U.S. small business commercial recoveries of $10 million and $37 million for the three and nine months ended September 30, 2019 compared to $13 million and $35 million for the same periods in 2018.


⁽³⁾	Primarily represents write-offs of purchased credit-impaired (PCI) loans, the net impact of portfolio sales, and transfers to held for sale.


⁽⁴⁾	Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of $7.7 billion and $5.7 billion at September 30, 2019 and 2018. Average loans accounted for under the fair value option were $7.9 billion and $6.6 billion for the three and nine months ended September 30, 2019 compared to $5.6 billion and $5.8 billion for the same periods in 2018.


⁽⁵⁾	Excludes consumer loans accounted for under the fair value option of $640 million and $755 million at September 30, 2019 and 2018.


⁽⁶⁾	Excludes commercial loans accounted for under the fair value option of $7.0 billion and $5.0 billion at September 30, 2019 and 2018.


⁽⁷⁾	Primarily includes amounts allocated to U.S. credit card and unsecured consumer lending portfolios in Consumer Banking and PCI loans in All Other.



		Bank of America 40




Table 41	Allocation of the Allowance for Credit Losses by Product Type

		Amount		Percent of Total		Percent of Loans and Leases Outstanding ⁽¹⁾		Amount		Percent of Total		Percent of Loans and Leases Outstanding ⁽¹⁾
(Dollars in millions)		September 30, 2019						December 31, 2018
Allowance for loan and lease losses
Residential mortgage		$	341	3.61	%	0.15	%	$	422	4.40	%	0.20	%
Home equity		250		2.65		0.60		506		5.27		1.05
U.S. credit card		3,709		39.32		3.91		3,597		37.47		3.66
Direct/Indirect consumer		234		2.48		0.26		248		2.58		0.27
Other consumer		42		0.45		n/m		29		0.30		n/m
Total consumer		4,576		48.51		1.01		4,802		50.02		1.08
U.S. commercial ⁽²⁾		3,038		32.21		0.93		3,010		31.35		0.96
Non-U.S. commercial		669		7.09		0.66		677		7.05		0.69
Commercial real estate		992		10.52		1.58		958		9.98		1.57
Commercial lease financing		158		1.67		0.79		154		1.60		0.68
Total commercial		4,857		51.49		0.95		4,799		49.98		0.97
Allowance for loan and lease losses		9,433		100.00	%	0.98		9,601		100.00	%	1.02
Reserve for unfunded lending commitments		809						797
Allowance for credit losses		$	10,242					$	10,398

⁽¹⁾

Ratios are calculated as allowance for loan and lease losses as a percentage of loans and leases outstanding excluding loans accounted for under the fair value option. Consumer loans accounted for under the fair value option include residential mortgage loans of $275 million and $336 million and home equity loans of $365 million and $346 million at September 30, 2019 and December 31, 2018. Commercial loans accounted for under the fair value option include U.S. commercial loans of $4.7 billion and $2.5 billion and non-U.S. commercial loans of $2.4 billion and $1.1 billion at September 30, 2019 and December 31, 2018.


⁽²⁾	Includes allowance for loan and lease losses for U.S. small business commercial loans of $518 million and $474 million at September 30, 2019 and December 31, 2018.

n/m = not meaningful

Market Risk Management

For more information on our market risk management process, see Market Risk Management in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.

Trading Risk Management

To evaluate risks in our trading activities, we focus on the actual and potential volatility of revenues generated by individual positions as well as portfolios of positions. VaR is a common statistic used to measure market risk. Our primary VaR statistic is equivalent to a 99 percent confidence level, which means that for a VaR with a one-day holding period, there should not be losses in excess of VaR, on average, 99 out of 100 trading days.

Table 42 presents the total market-based portfolio VaR which is the combination of the total covered positions (and less liquid trading positions) portfolio and the fair value option portfolio. For more information on our trading risk management process and on the market risk VaR for trading activities, see Trading Risk Management in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.

The total market-based portfolio VaR results in Table 42 include market risk to which we are exposed from all business segments, excluding credit valuation adjustment (CVA), DVA and related hedges. The majority of this portfolio is within the Global Markets segment.

Table 42 presents period-end, average, high and low daily trading VaR for the three months ended September 30, 2019, June 30, 2019 and September 30, 2018, as well as average daily trading VaR for the nine months ended September 30, 2019 and 2018 using a 99 percent confidence level. The amounts disclosed in Table 42 and Table 43 align to the view of covered positions used in the Basel 3 capital calculations. Foreign exchange and commodity positions are always considered covered positions, regardless of trading or banking treatment for the trade, except for structural foreign currency positions that are excluded with prior regulatory approval.

The average total covered positions and less liquid trading positions portfolio VaR increased for the three months ended September 30, 2019 compared to the same period in 2018 due to an increase in equity risk, partially offset by a decrease in interest rate risk.




Table 42	Market Risk VaR for Trading Activities

		Three Months Ended																														Nine Months Ended September 30
		September 30, 2019										June 30, 2019										September 30, 2018
(Dollars in millions)		Period End			Average			High⁽¹⁾		Low⁽¹⁾		Period End			Average			High ⁽¹⁾		Low ⁽¹⁾		Period End			Average			High⁽¹⁾		Low⁽¹⁾		2019 Average			2018 Average
Foreign exchange		$	3		$	6		$	11	$	3	$	6		$	5		$	11	$	4	$	3		$	7		$	12	$	2	$	6		$	8
Interest rate		22			20			26		14		20			26			38		18		22			26			36		16		25			24
Credit		26			24			27		20		26			22			27		16		24			24			30		20		22			25
Equity		24			23			29		17		21			20			25		15		17			18			27		13		21			18
Commodities		4			6			31		4		6			6			8		4		7			6			8		5		6			7
Portfolio diversification		(50		)	(48		)	—		—		(45		)	(48		)	—		—		(47		)	(52		)	—		—		(48		)	(52		)
Total covered positions portfolio		29			31			36		24		34			31			37		28		26			29			36		21		32			30
Impact from less liquid exposures		2			3			—		—		1			3			—		—		2			2			—		—		3			4
Total covered positions and less liquid trading positions portfolio		31			34			38		27		35			34			40		29		28			31			38		23		35			34
Fair value option loans		11			11			13		9		10			9			11		7		10			13			15		10		9			12
Fair value option hedges		10			11			13		9		10			7			11		4		6			9			11		6		9			9
Fair value option portfolio diversification		(6		)	(10		)	—		—		(11		)	(9		)	—		—		(8		)	(13		)	—		—		(9		)	(11		)
Total fair value option portfolio		15			12			16		9		9			7			10		5		8			9			11		8		9			10
Portfolio diversification		(12		)	(9		)	—		—		(7		)	(5		)	—		—		(6		)	(6		)	—		—		(6		)	(6		)
Total market-based portfolio		$	34		$	37		44		28		$	37		$	36		42		31		$	30		$	34		44		26		$	38		$	38


⁽¹⁾	The high and low for each portfolio may have occurred on different trading days than the high and low for the components. Therefore the impact from less liquid exposures and the amount of portfolio diversification, which is the difference between the total portfolio and the sum of the individual components, is not relevant.



41 Bank of America

The graph below presents the daily covered positions and less liquid trading positions portfolio VaR for the previous five quarters, corresponding to the data in Table 42.

Line graph displaying the daily total covered positions and less liquid trading portfolio VR History for the previous 5 quarters. The X axis represents the date and the Y axis represents the dollars in millions.

Additional VaR statistics produced within our single VaR model are provided in Table 43 at the same level of detail as in Table 42. Evaluating VaR with additional statistics allows for an increased understanding of the risks in the portfolio as the historical market data used in the VaR calculation does not necessarily follow a predefined statistical distribution. Table 43 presents average trading VaR statistics at 99 percent and 95 percent confidence levels for the three months ended September 30, 2019, June 30, 2019 and September 30, 2018.




Table 43	Average Market Risk VaR for Trading Activities – 99 percent and 95 percent VaR Statistics

		Three Months Ended
		September 30, 2019						June 30, 2019						September 30, 2018
(Dollars in millions)		99 percent			95 percent			99 percent			95 percent			99 percent			95 percent
Foreign exchange		$	6		$	4		$	5		$	3		$	7		$	4
Interest rate		20			13			26			16			26			16
Credit		24			16			22			13			24			14
Equity		23			12			20			10			18			10
Commodities		6			3			6			3			6			3
Portfolio diversification		(48		)	(31		)	(48		)	(28		)	(52		)	(31		)
Total covered positions portfolio		31			17			31			17			29			16
Impact from less liquid exposures		3			2			3			2			2			1
Total covered positions and less liquid trading positions portfolio		34			19			34			19			31			17
Fair value option loans		11			6			9			5			13			7
Fair value option hedges		11			7			7			5			9			6
Fair value option portfolio diversification		(10		)	(7		)	(9		)	(6		)	(13		)	(8		)
Total fair value option portfolio		12			6			7			4			9			5
Portfolio diversification		(9		)	(4		)	(5		)	(3		)	(6		)	(4		)
Total market-based portfolio		$	37		$	21		$	36		$	20		$	34		$	18

Backtesting

The accuracy of the VaR methodology is evaluated by backtesting, which compares the daily VaR results, utilizing a one-day holding period, against a comparable subset of trading revenue. For more information on our backtesting process, see Trading Risk Management – Backtesting in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.

During the three and nine months ended September 30, 2019, there were no days in which there was a backtesting excess for our total covered portfolio VaR, utilizing a one-day holding period.

Total Trading-related Revenue

Total trading-related revenue, excluding brokerage fees, and CVA, DVA and funding valuation adjustment gains (losses), represents the total amount earned from trading positions, including market-based net interest income, which are taken in a diverse range of

financial instruments and markets. For additional information, see Trading Risk Management – Total Trading-related Revenue in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.

The following histogram is a graphic depiction of trading volatility and illustrates the daily level of trading-related revenue for the three months ended September 30, 2019 compared to the three months ended June 30, 2019 and March 31, 2019. During the three months ended September 30, 2019, positive trading-related revenue was recorded for 92 percent of the trading days, of which 70 percent were daily trading gains of over $25 million and the largest loss was $35 million. This compares to the three months ended June 30, 2019 where positive trading-related revenue was recorded for 100 percent of the trading days, of which 91 percent were daily trading gains of over $25 million. During the three months ended March 31, 2019, positive trading-related revenue was recorded for 100 percent of the trading days of which 89 percent were daily trading gains of over $25 million.



		Bank of America 42

Histogram that is a graphic depiction of trading volatility and illustrates the daily level of trading-related revenue for the three months ended September 30, 2019 compared to the three months ended June 30, 2019, and March 31, 2019. The X axis represents the revenue (dollars in millions) and the Y axis represents the number of days.

Trading Portfolio Stress Testing

Because the very nature of a VaR model suggests results can exceed our estimates and it is dependent on a limited historical window, we also stress test our portfolio using scenario analysis. This analysis estimates the change in the value of our trading portfolio that may result from abnormal market movements. For additional information, see Trading Risk Management – Trading Portfolio Stress Testing in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.

Interest Rate Risk Management for the Banking Book

The following discussion presents net interest income for banking book activities. For additional information, see Interest Rate Risk Management for the Banking Book in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.

Table 44 presents the spot and 12-month forward rates used in our baseline forecasts at September 30, 2019 and December 31, 2018.




Table 44	Forward Rates

		September 30, 2019
		Federal Funds		Three-month LIBOR		10-Year Swap
Spot rates		2.00	%	2.09	%	1.56	%
12-month forward rates		1.50		1.47		1.56

		December 31, 2018
Spot rates		2.50	%	2.81	%	2.71	%
12-month forward rates		2.50		2.64		2.75

Table 45 shows the pretax impact to forecasted net interest income over the next 12 months from September 30, 2019 and December 31, 2018, resulting from instantaneous parallel and non-parallel shocks to the market-based forward curve. Periodically we evaluate the scenarios presented so that they are meaningful in the context of the current rate environment.

In the nine months ended September 30, 2019, the asset sensitivity of our balance sheet increased primarily due to decreases in interest rates. We continue to be asset sensitive to a parallel move in interest rates with the majority of that impact coming from the short end of the yield curve. Additionally, higher interest rates impact the fair value of debt securities and, accordingly, for debt securities classified as AFS, may adversely affect accumulated OCI and thus capital levels under the Basel 3 capital rules. Under instantaneous upward parallel shifts, the near-term adverse impact to Basel 3 capital is reduced over time by offsetting positive impacts to net interest income. For more information on Basel 3, see Capital Management – Regulatory Capital on page 20.




Table 45	Estimated Banking Book Net Interest Income Sensitivity to Curve Changes

		Short Rate (bps)	Long Rate (bps)
				September 30 2019			December 31 2018
(Dollars in millions)
Parallel Shifts
+100 bps instantaneous shift		+100	+100	$	4,576		$	2,833
-100 bps instantaneous shift		-100	-100	(6,479		)	(4,280		)
Flatteners
Short-end instantaneous change		+100	—	2,696			2,158
Long-end instantaneous change		—	-100	(3,050		)	(1,618		)
Steepeners
Short-end instantaneous change		-100	—	(3,343		)	(2,648		)
Long-end instantaneous change		—	+100	1,917			675

The sensitivity analysis in Table 45 assumes that we take no action in response to these rate shocks and does not assume any change in other macroeconomic variables normally correlated with changes in interest rates. As part of our ALM activities, we use securities, certain residential mortgages, and interest rate and foreign exchange derivatives in managing interest rate sensitivity.

The behavior of our deposit portfolio in the baseline forecast and in alternate interest rate scenarios is a key assumption in our projected estimates of net interest income. The sensitivity analysis in Table 45 assumes no change in deposit portfolio size or mix from the baseline forecast in alternate rate environments. In higher rate scenarios, any customer activity resulting in the replacement of low-cost or noninterest-bearing deposits with higher yielding deposits or market-based funding would reduce our benefit in those scenarios.

Interest Rate and Foreign Exchange Derivative Contracts

Interest rate and foreign exchange derivative contracts are utilized in our ALM activities and serve as an efficient tool to manage our interest rate and foreign exchange risk. We use derivatives to hedge the variability in cash flows or changes in fair value on our balance sheet due to interest rate and foreign exchange components. For more information on our hedging activities, see Note 3 – Derivatives to the Consolidated Financial Statements. For more information on interest rate contracts and risk management, see Interest Rate Risk Management for the Banking Book in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.

We use interest rate derivative instruments to hedge the variability in the cash flows of our assets and liabilities and other forecasted transactions (collectively referred to as cash flow hedges). The net losses on both open and terminated cash flow hedge derivative instruments recorded in accumulated OCI were $452 million and $1.3 billion, on a pretax basis, at September 30, 2019 and December 31, 2018. These net losses are expected to be reclassified into earnings in the same period as the hedged cash flows affect earnings and will decrease income or increase expense on the respective hedged cash flows. Assuming no change in open cash flow derivative hedge positions and no changes in prices or interest rates beyond what is implied in forward yield curves at September 30, 2019, the pretax net losses are expected to be reclassified into earnings as follows: 21 percent within the next year, 33 percent in years two through five and 26 percent in years six through ten, with the remaining 20 percent



43 Bank of America

thereafter. For more information on derivatives designated as cash flow hedges, see Note 3 – Derivatives to the Consolidated Financial Statements.

We hedge our net investment in non-U.S. operations determined to have functional currencies other than the U.S. dollar using forward foreign exchange contracts that typically settle in less than 180 days, cross-currency basis swaps and foreign exchange options. We recorded net after-tax losses on derivatives in accumulated OCI associated with net investment hedges which were offset by gains on our net investments in consolidated non-U.S. entities at September 30, 2019.

Table 46 presents derivatives utilized in our ALM activities and shows the notional amount, fair value, weighted-average receive-fixed and pay-fixed rates, expected maturity and average estimated durations of our open ALM derivatives at September 30, 2019 and December 31, 2018. These amounts do not include derivative hedges on our MSRs. During the nine months ended September 30, 2019, the fair value of receive-fixed interest rate swaps increased while pay-fixed interest rates swaps decreased, driven by lower swap rates.




Table 46	Asset and Liability Management Interest Rate and Foreign Exchange Contracts

					September 30, 2019
					Expected Maturity
(Dollars in millions, average estimated duration in years)		Fair Value			Total			Remainder of 2019			2020			2021			2022			2023			Thereafter			Average Estimated Duration
Receive-fixed interest rate swaps ⁽¹⁾		$	17,416																							6.86
Notional amount					$	218,014		$	4,738		$	16,347		$	14,642		$	21,616		$	36,356		$	124,315
Weighted-average fixed-rate					2.72		%	1.74		%	2.68		%	3.17		%	2.48		%	2.36		%	2.86		%
Pay-fixed interest rate swaps ⁽¹⁾		(5,089		)																						7.45
Notional amount					$	72,949		$	1,210		$	4,344		$	2,117		$	—		$	13,993		$	51,285
Weighted-average fixed-rate					2.47		%	2.07		%	2.16		%	2.15		%	—		%	2.52		%	2.51		%
Same-currency basis swaps⁽²⁾		21
Notional amount					$	142,128		$	1,898		$	17,293		$	18,008		$	4,306		$	2,017		$	98,606
Foreign exchange basis swaps ^{(1, 3, 4)}		(1,685		)
Notional amount					115,945			6,552			22,415			24,026			14,461			7,056			41,435
Option products		1
Notional amount					1,176			1,161			—			—			—			15			—
Foreign exchange contracts ^{(1, 4, 5)}		2,127
Notional amount ⁽⁶⁾					(98,175		)	(118,122		)	(4,072		)	3,845			2,608			2,283			15,283
Net ALM contracts		$	12,791



				December 31, 2018
				Expected Maturity
(Dollars in millions, average estimated duration in years)	Fair Value			Total			2019			2020			2021			2022			2023			Thereafter			Average Estimated Duration
Receive-fixed interest rate swaps ⁽¹⁾	$	2,128																							5.17
Notional amount				$	198,914		$	27,176		$	16,347		$	14,640		$	19,866		$	36,215		$	84,670
Weighted-average fixed-rate				2.66		%	1.87		%	2.68		%	3.17		%	2.56		%	2.37		%	2.97		%
Pay-fixed interest rate swaps ⁽¹⁾	295																								6.30
Notional amount				$	49,275		$	1,210		$	4,344		$	1,616		$	—		$	10,801		$	31,304
Weighted-average fixed-rate				2.50		%	2.07		%	2.16		%	2.22		%	—		%	2.59		%	2.55		%
Same-currency basis swaps ⁽²⁾	21
Notional amount				$	101,203		$	7,628		$	15,097		$	15,493		$	2,586		$	2,017		$	58,382
Foreign exchange basis swaps ^{(1, 3, 4)}	(1,716		)
Notional amount				106,742			13,946			21,448			19,241			10,239			6,260			35,608
Option products	2
Notional amount				587			572			—			—			—			15			—
Foreign exchange contracts ^{(1, 4, 5)}	82
Notional amount ⁽⁶⁾				(8,447		)	(27,823		)	13			4,196			2,741			2,448			9,978
Net ALM contracts	$	812


⁽¹⁾	Does not include basis adjustments on either fixed-rate debt issued by the Corporation or AFS debt securities, which are hedged using derivatives designated as fair value hedging instruments, that substantially offset the fair values of these derivatives.


⁽²⁾	At September 30, 2019 and December 31, 2018, the notional amount of same-currency basis swaps included $142.1 billion and $101.2 billion in both foreign currency and U.S. dollar-denominated basis swaps in which both sides of the swap are in the same currency.


⁽³⁾	Foreign exchange basis swaps consisted of cross-currency variable interest rate swaps used separately or in conjunction with receive-fixed interest rate swaps.


⁽⁴⁾	Does not include foreign currency translation adjustments on certain non-U.S. debt issued by the Corporation that substantially offset the fair values of these derivatives.

⁽⁵⁾

The notional amount of foreign exchange contracts of $(98.2) billion at September 30, 2019 was comprised of $28.6 billion in foreign currency-denominated and cross-currency receive-fixed swaps, $(125.5) billion in net foreign currency forward rate contracts, $(2.0) billion in foreign currency-denominated interest rate swaps and $697 million in net foreign currency futures contracts. Foreign exchange contracts of $(8.4) billion at December 31, 2018 were comprised of $25.2 billion in foreign currency-denominated and cross-currency receive-fixed swaps, $(32.7) billion in net foreign currency forward rate contracts, $(1.8) billion in foreign currency-denominated interest rate swaps and $814 million in foreign currency futures contracts.


⁽⁶⁾	Reflects the net of long and short positions. Amounts shown as negative reflect a net short position.



		Bank of America 44

Mortgage Banking Risk Management

We originate, fund and service mortgage loans, which subject us to credit, liquidity and interest rate risks, among others. We determine whether loans will be held for investment or held for sale at the time of commitment and manage credit and liquidity risks by selling or securitizing a portion of the loans we originate.

Changes in interest rates impact the value of interest rate lock commitments (IRLCs) and the related residential mortgage loans held for sale (LHFS), as well as the value of the MSRs. Because the interest rate risks of these hedged items offset, we combine them into one overall hedged item with one combined economic hedge portfolio consisting of derivative contracts and securities. For more information on IRLCs and the related residential mortgage LHFS, see Mortgage Banking Risk Management in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.

During the three and nine months ended September 30, 2019, we recorded gains of $78 million and $217 million related to the change in fair value of the MSRs, IRLCs and LHFS, net of gains

and losses on the hedge portfolio, compared to gains of $61 million and $190 million for the same periods in 2018. For more information on MSRs, see Note 15 – Fair Value Measurements to the Consolidated Financial Statements.

Complex Accounting Estimates

Our significant accounting principles are essential in understanding the MD&A. Many of our significant accounting principles require complex judgments to estimate the values of assets and liabilities. We have procedures and processes in place to facilitate making these judgments. For additional information, see Complex Accounting Estimates in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K and Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.

Non-GAAP Reconciliations

Table 47 provides reconciliations of certain non-GAAP financial measures to the most closely related GAAP financial measures.




Table 47	Period-end and Average Supplemental Financial Data and Reconciliations to GAAP Financial Measures ⁽¹⁾

		Period-end						Average
		September 30 2019			December 31 2018			Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)								2019			2018			2019			2018
Shareholders’ equity		$	268,387		$	265,325		$	270,430		$	264,653		$	268,223		$	265,102
Goodwill		(68,951		)	(68,951		)	(68,951		)	(68,951		)	(68,951		)	(68,951		)
Intangible assets (excluding MSRs)		(1,690		)	(1,774		)	(1,707		)	(1,992		)	(1,735		)	(2,125		)
Related deferred tax liabilities		734			858			752			896			787			917
Tangible shareholders’ equity		$	198,480		$	195,458		$	200,524		$	194,606		$	198,324		$	194,943
Preferred stock		(23,606		)	(22,326		)	(23,800		)	(22,841		)	(22,894		)	(23,159		)
Tangible common shareholders’ equity		$	174,874		$	173,132		$	176,724		$	171,765		$	175,430		$	171,784

Total assets		$	2,426,330		$	2,354,507
Goodwill		(68,951		)	(68,951		)
Intangible assets (excluding MSRs)		(1,690		)	(1,774		)
Related deferred tax liabilities		734			858
Tangible assets		$	2,356,423		$	2,284,640


⁽¹⁾	Presents reconciliations of non-GAAP financial measures to the most closely related GAAP financial measures. For more information on non-GAAP financial measures and ratios we use in assessing the results of the Corporation, see Supplemental Financial Data on page 6.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

See Market Risk Management on page 41 in the MD&A and the sections referenced therein for Quantitative and Qualitative Disclosures about Market Risk.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this report, the Corporation’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness and design of the Corporation’s disclosure controls and procedures (as that term is defined in Rule 13a-15(e) of the Exchange Act). Based upon that evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures were effective, as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Corporation’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the three months ended September 30, 2019, that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.



45 Bank of America

Part I. Financial Information

Item 1. Financial Statements

Bank of America Corporation and Subsidiaries




Consolidated Statement of Income

	Three Months Ended September 30				Nine Months Ended September 30
(In millions, except per share information)	2019		2018		2019		2018
Net interest income
Interest income	$	17,916	$	16,965	$	54,310	$	48,933
Interest expense	5,729		4,904		17,559		13,275
Net interest income	12,187		12,061		36,751		35,658

Noninterest income
Fees and commissions	8,467		8,076		24,495		24,733
Trading account income	1,707		1,717		6,390		6,421
Other income	446		870		1,259		1,531
Total noninterest income	10,620		10,663		32,144		32,685
Total revenue, net of interest expense	22,807		22,724		68,895		68,343

Provision for credit losses	779		716		2,649		2,377

Noninterest expense
Compensation and benefits	7,779		7,721		24,000		24,145
Occupancy and equipment	1,663		1,589		4,908		4,787
Information processing and communications	1,163		1,113		3,484		3,399
Product delivery and transaction related	696		687		2,067		2,149
Marketing	440		421		1,410		1,161
Professional fees	386		439		1,155		1,219
Other general operating	3,042		1,044		4,637		3,220
Total noninterest expense	15,169		13,014		41,661		40,080
Income before income taxes	6,859		8,994		24,585		25,886
Income tax expense	1,082		1,827		4,149		5,017
Net income	$	5,777	$	7,167	$	20,436	$	20,869
Preferred stock dividends	505		466		1,186		1,212
Net income applicable to common shareholders	$	5,272	$	6,701	$	19,250	$	19,657

Per common share information
Earnings	$	0.57	$	0.67	$	2.02	$	1.93
Diluted earnings	0.56		0.66		2.01		1.91
Average common shares issued and outstanding	9,303.6		10,031.6		9,516.2		10,177.5
Average diluted common shares issued and outstanding	9,353.0		10,170.8		9,565.7		10,317.9




Consolidated Statement of Comprehensive Income

	Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)	2019			2018			2019			2018
Net income	$	5,777		$	7,167		$	20,436		$	20,869
Other comprehensive income (loss), net-of-tax:
Net change in debt securities	1,538			(1,172		)	6,231			(6,166		)
Net change in debit valuation adjustments	229			(269		)	(272		)	183
Net change in derivatives	118			21			651			(346		)
Employee benefit plan adjustments	26			31			83			91
Net change in foreign currency translation adjustments	(51		)	(114		)	(99		)	(303		)
Other comprehensive income (loss)	1,860			(1,503		)	6,594			(6,541		)
Comprehensive income	$	7,637		$	5,664		$	27,030		$	14,328

See accompanying Notes to Consolidated Financial Statements.



		Bank of America 46

Bank of America Corporation and Subsidiaries




Consolidated Balance Sheet
		September 30			December 31
(Dollars in millions)		2019			2018
Assets
Cash and due from banks		$	26,939		$	29,063
Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks		130,155			148,341
Cash and cash equivalents		157,094			177,404
Time deposits placed and other short-term investments		7,557			7,494
Federal funds sold and securities borrowed or purchased under agreements to resell (includes $50,298 and $56,399 measured at fair value)		271,595			261,131
Trading account assets (includes $131,008 and $119,363 pledged as collateral)		263,684			214,348
Derivative assets		45,123			43,725
Debt securities:
Carried at fair value		254,342			238,101
Held-to-maturity, at cost (fair value – $194,274 and $200,435)		190,252			203,652
Total debt securities		444,594			441,753
Loans and leases (includes $7,674 and $4,349 measured at fair value)		972,910			946,895
Allowance for loan and lease losses		(9,433		)	(9,601		)
Loans and leases, net of allowance		963,477			937,294
Premises and equipment, net		10,493			9,906
Goodwill		68,951			68,951
Loans held-for-sale (includes $5,011 and $2,942 measured at fair value)		9,811			10,367
Customer and other receivables		52,560			65,814
Other assets (includes $22,952 and $19,739 measured at fair value)		131,391			116,320
Total assets		$	2,426,330		$	2,354,507

Liabilities
Deposits in U.S. offices:
Noninterest-bearing		$	394,379		$	412,587
Interest-bearing (includes $626 and $492 measured at fair value)		917,401			891,636
Deposits in non-U.S. offices:
Noninterest-bearing		13,138			14,060
Interest-bearing		67,918			63,193
Total deposits		1,392,836			1,381,476
Federal funds purchased and securities loaned or sold under agreements to repurchase (includes $21,963 and $28,875 measured at fair value)		202,067			186,988
Trading account liabilities		78,642			68,220
Derivative liabilities		38,025			37,891
Short-term borrowings (includes $3,458 and $1,648 measured at fair value)		30,682			20,189
Accrued expenses and other liabilities (includes $23,512 and $20,075 measured at fair value and $809 and $797 of reserve for unfunded lending commitments)		172,286			165,026
Long-term debt (includes $36,773 and $27,689 measured at fair value)		243,405			229,392
Total liabilities		2,157,943			2,089,182
Commitments and contingencies (Note 7 – Securitizations and Other Variable Interest Entities and Note 11 – Commitments and Contingencies)
Shareholders’ equity
Preferred stock, $0.01 par value; authorized – 100,000,000 shares; issued and outstanding – 3,895,685 and 3,843,140 shares		23,606			22,326
Common stock and additional paid-in capital, $0.01 par value; authorized – 12,800,000,000 shares; issued and outstanding – 9,079,264,535 and 9,669,286,370 shares		99,215			118,896
Retained earnings		151,183			136,314
Accumulated other comprehensive income (loss)		(5,617		)	(12,211		)
Total shareholders’ equity		268,387			265,325
Total liabilities and shareholders’ equity		$	2,426,330		$	2,354,507

	Assets of consolidated variable interest entities included in total assets above (isolated to settle the liabilities of the variable interest entities)
	Trading account assets	$	5,758		$	5,798
	Loans and leases	39,387			43,850
	Allowance for loan and lease losses	(835		)	(912		)
	Loans and leases, net of allowance	38,552			42,938
	All other assets	555			337
	Total assets of consolidated variable interest entities	$	44,865		$	49,073
	Liabilities of consolidated variable interest entities included in total liabilities above
	Short-term borrowings	$	2,274		$	742
	Long-term debt (includes $8,559 and $10,943 of non-recourse debt)	8,560			10,944
	All other liabilities (includes $23 and $27 of non-recourse liabilities)	26			30
	Total liabilities of consolidated variable interest entities	$	10,860		$	11,716

See accompanying Notes to Consolidated Financial Statements.



47 Bank of America

Bank of America Corporation and Subsidiaries




Consolidated Statement of Changes in Shareholders’ Equity

	Preferred Stock			Common Stock and Additional Paid-in Capital					Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
(In millions)				Shares		Amount
Balance, June 30, 2019	$	24,689		9,342.6		$	106,619		$	147,577		$	(7,477	)	$	271,408
Net income									5,777						5,777
Net change in debt securities												1,538			1,538
Net change in debit valuation adjustments												229			229
Net change in derivatives												118			118
Employee benefit plan adjustments												26			26
Net change in foreign currency translation adjustments												(51		)	(51		)
Dividends declared:
Common									(1,659		)				(1,659		)
Preferred									(505		)				(505		)
Issuance of preferred stock	1,280														1,280
Redemption of preferred stock	(2,363		)												(2,363		)
Common stock issued under employee plans, net, and other				4.3		222			(7		)				215
Common stock repurchased				(267.6	)	(7,626		)							(7,626		)
Balance, September 30, 2019	$	23,606		9,079.3		$	99,215		$	151,183		$	(5,617	)	$	268,387
Balance, December 31, 2018	$	22,326		9,669.3		$	118,896		$	136,314		$	(12,211	)	$	265,325
Cumulative adjustment for adoption of lease accounting standard									165						165
Net income									20,436						20,436
Net change in debt securities												6,231			6,231
Net change in debit valuation adjustments												(272		)	(272		)
Net change in derivatives												651			651
Employee benefit plan adjustments												83			83
Net change in foreign currency translation adjustments												(99		)	(99		)
Dividends declared:
Common									(4,535		)				(4,535		)
Preferred									(1,186		)				(1,186		)
Issuance of preferred stock	3,643														3,643
Redemption of preferred stock	(2,363		)												(2,363		)
Common stock issued under employee plans, net, and other				123.4		715			(11		)				704
Common stock repurchased				(713.4	)	(20,396		)							(20,396		)
Balance, September 30, 2019	$	23,606		9,079.3		$	99,215		$	151,183		$	(5,617	)	$	268,387
Balance, June 30, 2018	$	23,181		10,012.7		$	128,822		$	125,546		$	(13,333	)	$	264,216
Net income									7,167						7,167
Net change in debt securities												(1,172		)	(1,172		)
Net change in debit valuation adjustments												(269		)	(269		)
Net change in derivatives												21			21
Employee benefit plan adjustments												31			31
Net change in foreign currency translation adjustments												(114		)	(114		)
Dividends declared:
Common									(1,497		)				(1,497		)
Preferred									(466		)				(466		)
Issuance of preferred stock	844														844
Redemption of preferred stock	(1,699		)												(1,699		)
Common stock issued under employee plans, net, and other				9.1		139			(3		)				136
Common stock repurchased				(163.5	)	(5,040		)							(5,040		)
Balance, September 30, 2018	$	22,326		9,858.3		$	123,921		$	130,747		$	(14,836	)	$	262,158
Balance, December 31, 2017	$	22,323		10,287.3		$	138,089		$	113,816		$	(7,082	)	$	267,146
Cumulative adjustment for adoption of hedge accounting standard									(32		)	57			25
Adoption of accounting standard related to certain tax effects stranded in accumulated other comprehensive income (loss)									1,270			(1,270		)	—
Net income									20,869						20,869
Net change in debt securities												(6,166		)	(6,166		)
Net change in debit valuation adjustments												183			183
Net change in derivatives												(346		)	(346		)
Employee benefit plan adjustments												91			91
Net change in foreign currency translation adjustments												(303		)	(303		)
Dividends declared:
Common									(3,952		)				(3,952		)
Preferred									(1,212		)				(1,212		)
Issuance of preferred stock	4,515														4,515
Redemption of preferred stock	(4,512		)												(4,512		)
Common stock issued under employee plans, net, and other				52.8		695			(12		)				683
Common stock repurchased				(481.8	)	(14,863		)							(14,863		)
Balance, September 30, 2018	$	22,326		9,858.3		$	123,921		$	130,747		$	(14,836	)	$	262,158

See accompanying Notes to Consolidated Financial Statements.



		Bank of America 48

Bank of America Corporation and Subsidiaries




Consolidated Statement of Cash Flows

	Nine Months Ended September 30
(Dollars in millions)	2019			2018
Operating activities
Net income	$	20,436		$	20,869
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	2,649			2,377
Gains on sales of debt securities	(116		)	(76		)
Depreciation and amortization	1,290			1,539
Net amortization of premium/discount on debt securities	1,419			1,411
Deferred income taxes	1,789			2,845
Stock-based compensation	1,495			1,323
Impairment of equity method investment	2,072			—
Loans held-for-sale:
Originations and purchases	(18,732		)	(16,830		)
Proceeds from sales and paydowns of loans originally classified as held for sale and instruments from related securitization activities	19,350			23,221
Net change in:
Trading and derivative assets/liabilities	(30,541		)	(13,347		)
Other assets	613			13,648
Accrued expenses and other liabilities	(4,053		)	18,266
Other operating activities, net	5,003			(1,804		)
Net cash provided by operating activities	2,674			53,442
Investing activities
Net change in:
Time deposits placed and other short-term investments	(63		)	3,288
Federal funds sold and securities borrowed or purchased under agreements to resell	(10,464		)	(35,490		)
Debt securities carried at fair value:
Proceeds from sales	43,845			3,070
Proceeds from paydowns and maturities	57,868			56,458
Purchases	(110,658		)	(54,923		)
Held-to-maturity debt securities:
Proceeds from paydowns and maturities	22,832			13,566
Purchases	(9,825		)	(35,215		)
Loans and leases:
Proceeds from sales of loans originally classified as held for investment and instruments from related securitization activities	9,757			13,600
Purchases	(4,016		)	(3,323		)
Other changes in loans and leases, net	(34,439		)	(6,432		)
Other investing activities, net	(2,188		)	(1,750		)
Net cash used in investing activities	(37,351		)	(47,151		)
Financing activities
Net change in:
Deposits	11,360			36,104
Federal funds purchased and securities loaned or sold under agreements to repurchase	15,079			(5,313		)
Short-term borrowings	10,493			(3,631		)
Long-term debt:
Proceeds from issuance	45,149			60,873
Retirement	(42,842		)	(44,817		)
Preferred stock:
Proceeds from issuance	3,643			4,515
Redemption	(2,363		)	(4,512		)
Common stock repurchased	(20,396		)	(14,863		)
Cash dividends paid	(4,086		)	(5,150		)
Other financing activities, net	(794		)	(644		)
Net cash provided by financing activities	15,243			22,562
Effect of exchange rate changes on cash and cash equivalents	(876		)	(1,429		)
Net increase (decrease) in cash and cash equivalents	(20,310		)	27,424
Cash and cash equivalents at January 1	177,404			157,434
Cash and cash equivalents at September 30	$	157,094		$	184,858

See accompanying Notes to Consolidated Financial Statements.



49 Bank of America

Bank of America Corporation and Subsidiaries

Notes to Consolidated Financial Statements

NOTE 1 Summary of Significant Accounting Principles

Bank of America Corporation, a bank holding company and a financial holding company, provides a diverse range of financial services and products throughout the U.S. and in certain international markets. The term “the Corporation” as used herein 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.

Principles of Consolidation and Basis of Presentation

The Consolidated Financial Statements include the accounts of the Corporation and its majority-owned subsidiaries and those variable interest entities (VIEs) where the Corporation is the primary beneficiary. Intercompany accounts and transactions have been eliminated. Results of operations of acquired companies are included from the dates of acquisition, and for VIEs, from the dates that the Corporation became the primary beneficiary. Assets held in an agency or fiduciary capacity are not included in the Consolidated Financial Statements. The Corporation accounts for investments in companies for which it owns a voting interest and for which it has the ability to exercise significant influence over operating and financing decisions using the equity method of accounting. These investments are included in other assets. Equity method investments are subject to impairment testing, and the Corporation’s proportionate share of income or loss is included in other income.

The preparation of the Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could materially differ from those estimates and assumptions.

These unaudited Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.

The nature of the Corporation’s business is such that the results of any interim period are not necessarily indicative of results for a full year. In the opinion of management, all adjustments, which consist of normal recurring adjustments necessary for a fair statement of the interim period results, have been made. The Corporation evaluates subsequent events through the date of filing with the Securities and Exchange Commission. Certain prior-period amounts have been reclassified to conform to current period presentation.

Accounting Standards Issued and Not Yet Adopted

Accounting for Financial Instruments -- Credit Losses

The Financial Accounting Standards Board issued a new accounting standard that will be effective for the Corporation on January 1, 2020. This standard replaces the existing measurement of the allowance for credit losses that is based on management’s best estimate of probable incurred credit losses inherent in the Corporation’s lending activities with management’s best estimate of lifetime expected credit losses inherent in the Corporation’s relevant financial assets. The lifetime expected credit losses will be determined using macroeconomic forecast assumptions and management judgments applicable to and through the expected life of the portfolios and is required to be

determined net of expected recoveries on loans that were previously charged off. The standard will also expand credit quality disclosures. While the standard changes the measurement of the allowance for credit losses, it does not change the Corporation’s credit risk of its lending portfolios or the ultimate losses in those portfolios.

Significant progress has been made in the implementation efforts, which include model development and validation, data acquisition for model estimation and new disclosures, and the establishment of formal policies supporting all aspects of the standard. The Corporation is running parallel processes encompassing the functionality of the models, internal controls over the estimation process and all other governance activities as well as continuing to review and refine its models and methodologies.

Upon adoption of the standard on January 1, 2020, the Corporation expects that, based on current expectations of future economic conditions, its allowance for credit losses on loans and leases may increase up to approximately 30 percent from its allowance for credit losses as of September 30, 2019, as disclosed herein, with a large portion of that increase driven by the U.S. credit card portfolio. The increase from the previously disclosed expectation of up to 20 percent was driven by refinements to certain models and methodologies along with the third-quarter 2019 loan sales, which reduced the expected recoveries on previously charged-off loans as the recoveries were realized upon sale. The ultimate impact upon adoption will depend on the characteristics of the Corporation’s portfolios, macroeconomic conditions and forecasts, and the finalized validation of models and methodologies, as well as other management judgments.

New Accounting Standards

Lease Accounting

On January 1, 2019, the Corporation adopted the new accounting standards that require lessees to recognize operating leases on the balance sheet as right-of-use assets and lease liabilities based on the value of the discounted future lease payments. Lessor accounting is largely unchanged. Expanded disclosures about the nature and terms of lease agreements are required prospectively and are included in Note 9 – Leases. The Corporation elected to retain prior determinations of whether an existing contract contains a lease and how the lease should be classified. The Corporation elected to recognize leases existing on January 1, 2019 through a cumulative-effect adjustment which increased retained earnings by $165 million, with no adjustment to prior periods presented. Upon adoption, the Corporation also recognized right-of-use assets and lease liabilities of $9.7 billion. Adoption of the standards did not have a significant effect on the Corporation’s regulatory capital measures.

Lease Accounting Principles

Lessor Arrangements

The Corporation provides equipment financing to its customers through a variety of lessor arrangements. Direct financing leases and sales-type leases are carried at the aggregate of lease payments receivable plus the estimated residual value of the leased property less unearned income, which is accreted to interest income over the lease terms using methods that approximate the interest method. Operating lease income is recognized on a straight-line basis. Leases generally do not contain non-lease components.



		Bank of America 50

Lessee Arrangements

Substantially all of the Corporation’s lessee arrangements are operating leases. Under these arrangements, the Corporation records right-of-use assets and lease liabilities at lease commencement. Right-of-use assets are reported in other assets on the Consolidated Balance Sheet, and the related lease liabilities are reported in accrued expenses and other liabilities. All leases are recorded on the Consolidated Balance Sheet except leases with an initial term less than 12 months for which the Corporation made the short-term lease election. Lease expense is recognized on a straight-line basis over the lease term and is recorded in occupancy and equipment expense in the Consolidated Statement of Income.

The Corporation made an accounting policy election not to separate lease and non-lease components of a contract that is or contains a lease for its real estate and equipment leases. As such, lease payments represent payments on both lease and non-lease components. At lease commencement, lease liabilities are

recognized based on the present value of the remaining lease payments and discounted using the Corporation’s incremental borrowing rate. Right-of-use assets initially equal the lease liability, adjusted for any lease payments made prior to lease commencement and for any lease incentives.

NOTE 2 Net Interest Income and Noninterest Income

The table below presents the Corporation’s net interest income and noninterest income disaggregated by revenue source for the three and nine months ended September 30, 2019 and 2018. For more information, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K. For a disaggregation of noninterest income by business segment and All Other, see Note 18 – Business Segment Information.




	Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	2019		2018		2019		2018
Net interest income
Interest income
Loans and leases	$	10,894	$	10,401	$	32,721	$	30,095
Debt securities	2,829		2,986		8,965		8,646
Federal funds sold and securities borrowed or purchased under agreements to resell	1,242		799		3,746		2,130
Trading account assets	1,319		1,172		3,962		3,506
Other interest income	1,632		1,607		4,916		4,556
Total interest income	17,916		16,965		54,310		48,933

Interest expense
Deposits	1,880		1,230		5,640		2,933
Short-term borrowings	1,876		1,526		5,725		4,123
Trading account liabilities	303		335		967		1,040
Long-term debt	1,670		1,813		5,227		5,179
Total interest expense	5,729		4,904		17,559		13,275
Net interest income	$	12,187	$	12,061	$	36,751	$	35,658

Noninterest income
Fees and commissions
Card income
Interchange fees ⁽¹⁾	$	963	$	925	$	2,827	$	2,850
Other card income	502		492		1,459		1,452
Total card income	1,465		1,417		4,286		4,302
Service charges
Deposit-related fees	1,690		1,682		4,908		5,008
Lending-related fees	285		279		809		828
Total service charges	1,975		1,961		5,717		5,836
Investment and brokerage services
Asset management fees	2,597		2,576		7,591		7,653
Brokerage fees	897		918		2,733		2,963
Total investment and brokerage services	3,494		3,494		10,324		10,616
Investment banking fees
Underwriting income	740		701		2,198		2,160
Syndication fees	341		241		887		958
Financial advisory services	452		262		1,083		861
Total investment banking fees	1,533		1,204		4,168		3,979
Total fees and commissions	8,467		8,076		24,495		24,733
Trading account income	1,707		1,717		6,390		6,421
Other income	446		870		1,259		1,531
Total noninterest income	$	10,620	$	10,663	$	32,144	$	32,685

⁽¹⁾

Gross interchange fees were $2.6 billion and $2.4 billion for the three months ended September 30, 2019 and 2018, and are presented net of $1.6 billion and $1.5 billion of expenses for rewards and partner payments. For the nine months ended September 30, 2019 and 2018, gross interchange fees were $7.4 billion and $7.0 billion and are presented net of $4.6 billion and $4.2 billion of expenses for rewards and partner payments.



51 Bank of America

NOTE 3 Derivatives

Derivative Balances

Derivatives are entered into on behalf of customers, for trading or to support risk management activities. Derivatives used in risk management activities include derivatives that may or may not be designated in qualifying hedge accounting relationships. Derivatives that are not designated in qualifying hedge accounting relationships are referred to as other risk management derivatives. For more information on the Corporation’s derivatives and hedging activities, see Note 1 – Summary of Significant Accounting

Principles to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K. The following tables present derivative instruments included on the Consolidated Balance Sheet in derivative assets and liabilities at September 30, 2019 and December 31, 2018. Balances are presented on a gross basis, prior to the application of counterparty and cash collateral netting. Total derivative assets and liabilities are adjusted on an aggregate basis to take into consideration the effects of legally enforceable master netting agreements and have been reduced by cash collateral received or paid.




			September 30, 2019
			Gross Derivative Assets							Gross Derivative Liabilities
(Dollars in billions)	Contract/ Notional ⁽¹⁾		Trading and Other Risk Management Derivatives		Qualifying Accounting Hedges		Total			Trading and Other Risk Management Derivatives		Qualifying Accounting Hedges		Total
Interest rate contracts
Swaps	$	19,994.7	$	184.3	$	12.6	$	196.9		$	194.3	$	0.3	$	194.6
Futures and forwards	5,564.1		1.4		—		1.4			1.3		—		1.3
Written options	1,777.5		—		—		—			42.1		—		42.1
Purchased options	1,841.9		47.9		—		47.9			—		—		—
Foreign exchange contracts
Swaps	1,821.8		34.8		1.3		36.1			38.5		1.8		40.3
Spot, futures and forwards	5,037.1		41.8		0.6		42.4			42.0		0.2		42.2
Written options	305.5		—		—		—			4.4		—		4.4
Purchased options	322.0		4.8		—		4.8			—		—		—
Equity contracts
Swaps	282.4		5.4		—		5.4			6.0		—		6.0
Futures and forwards	122.2		0.3		—		0.3			0.9		—		0.9
Written options	784.4		—		—		—			32.1		—		32.1
Purchased options	734.5		39.1		—		39.1			—		—		—
Commodity contracts
Swaps	41.2		2.1		—		2.1			4.0		—		4.0
Futures and forwards	63.3		3.3		—		3.3			0.6		—		0.6
Written options	36.2		—		—		—			1.9		—		1.9
Purchased options	36.8		1.8		—		1.8			—		—		—
Credit derivatives ⁽²⁾
Purchased credit derivatives:
Credit default swaps	403.4		3.5		—		3.5			5.5		—		5.5
Total return swaps/options	64.2		0.2		—		0.2			1.7		—		1.7
Written credit derivatives:
Credit default swaps	363.0		5.3		—		5.3			2.5		—		2.5
Total return swaps/options	58.3		0.9		—		0.9			0.4		—		0.4
Gross derivative assets/liabilities			$	376.9	$	14.5	$	391.4		$	378.2	$	2.3	$	380.5
Less: Legally enforceable master netting agreements							(305.6		)					(305.6		)
Less: Cash collateral received/paid							(40.7		)					(36.9		)
Total derivative assets/liabilities							$	45.1						$	38.0


⁽¹⁾	Represents the total contract/notional amount of derivative assets and liabilities outstanding.


⁽²⁾	The net derivative asset (liability) and notional amount of written credit derivatives for which the Corporation held purchased credit derivatives with identical underlying referenced names were $2.3 billion and $342.9 billion at September 30, 2019.



		Bank of America 52




			December 31, 2018
			Gross Derivative Assets							Gross Derivative Liabilities
(Dollars in billions)	Contract/ Notional ⁽¹⁾		Trading and Other Risk Management Derivatives		Qualifying Accounting Hedges		Total			Trading and Other Risk Management Derivatives		Qualifying Accounting Hedges		Total
Interest rate contracts
Swaps	$	15,977.9	$	141.0	$	3.2	$	144.2		$	138.9	$	2.0	$	140.9
Futures and forwards	3,656.6		4.7		—		4.7			5.0		—		5.0
Written options	1,584.9		—		—		—			28.6		—		28.6
Purchased options	1,614.0		30.8		—		30.8			—		—		—
Foreign exchange contracts
Swaps	1,704.8		38.8		1.4		40.2			42.2		2.3		44.5
Spot, futures and forwards	4,276.0		39.8		0.4		40.2			39.3		0.3		39.6
Written options	256.7		—		—		—			5.0		—		5.0
Purchased options	240.4		4.6		—		4.6			—		—		—
Equity contracts
Swaps	253.6		7.7		—		7.7			8.4		—		8.4
Futures and forwards	100.0		2.1		—		2.1			0.3		—		0.3
Written options	597.1		—		—		—			27.5		—		27.5
Purchased options	549.4		36.0		—		36.0			—		—		—
Commodity contracts
Swaps	43.1		2.7		—		2.7			4.5		—		4.5
Futures and forwards	51.7		3.2		—		3.2			0.5		—		0.5
Written options	27.5		—		—		—			2.2		—		2.2
Purchased options	23.4		1.7		—		1.7			—		—		—
Credit derivatives ⁽²⁾
Purchased credit derivatives:
Credit default swaps	408.1		5.3		—		5.3			4.9		—		4.9
Total return swaps/options	84.5		0.4		—		0.4			1.0		—		1.0
Written credit derivatives:
Credit default swaps	371.9		4.4		—		4.4			4.3		—		4.3
Total return swaps/options	87.3		0.6		—		0.6			0.6		—		0.6
Gross derivative assets/liabilities			$	323.8	$	5.0	$	328.8		$	313.2	$	4.6	$	317.8
Less: Legally enforceable master netting agreements							(252.7		)					(252.7		)
Less: Cash collateral received/paid							(32.4		)					(27.2		)
Total derivative assets/liabilities							$	43.7						$	37.9


⁽¹⁾	Represents the total contract/notional amount of derivative assets and liabilities outstanding.


⁽²⁾	The net derivative asset (liability) and notional amount of written credit derivatives for which the Corporation held purchased credit derivatives with identical underlying referenced names were $(185) million and $342.8 billion at December 31, 2018.

Offsetting of Derivatives

The Corporation enters into International Swaps and Derivatives Association, Inc. (ISDA) master netting agreements or similar agreements with substantially all of the Corporation’s derivative counterparties. For additional information, see Note 3 – Derivatives to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.

The following table presents derivative instruments included in derivative assets and liabilities on the Consolidated Balance Sheet at September 30, 2019 and December 31, 2018 by primary risk (e.g., interest rate risk) and the platform, where applicable,

on which these derivatives are transacted. Balances are presented on a gross basis, prior to the application of counterparty and cash collateral netting. Total gross derivative assets and liabilities are adjusted on an aggregate basis to take into consideration the effects of legally enforceable master netting agreements which include reducing the balance for counterparty netting and cash collateral received or paid.

For more information on offsetting of securities financing agreements, see Note 10 – Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings and Restricted Cash.



53 Bank of America




Offsetting of Derivatives ⁽¹⁾

	Derivative Assets			Derivative Liabilities			Derivative Assets			Derivative Liabilities
(Dollars in billions)	September 30, 2019						December 31, 2018
Interest rate contracts
Over-the-counter	$	237.1		$	229.7		$	174.2		$	169.4
Exchange-traded	—			0.1			—			—
Over-the-counter cleared	7.0			6.5			4.8			4.0
Foreign exchange contracts
Over-the-counter	80.8			84.3			82.5			86.3
Over-the-counter cleared	0.6			0.6			0.9			0.9
Equity contracts
Over-the-counter	19.8			14.6			24.6			14.6
Exchange-traded	16.8			16.7			16.1			15.1
Commodity contracts
Over-the-counter	3.2			4.4			3.5			4.5
Exchange-traded	0.9			0.8			1.0			0.9
Over-the-counter cleared	0.1			0.1			—			—
Credit derivatives
Over-the-counter	6.7			7.3			7.7			8.2
Over-the-counter cleared	2.7			2.3			2.5			2.3
Total gross derivative assets/liabilities, before netting
Over-the-counter	347.6			340.3			292.5			283.0
Exchange-traded	17.7			17.6			17.1			16.0
Over-the-counter cleared	10.4			9.5			8.2			7.2
Less: Legally enforceable master netting agreements and cash collateral received/paid
Over-the-counter	(323.8		)	(320.3		)	(264.4		)	(259.2		)
Exchange-traded	(12.7		)	(12.7		)	(13.5		)	(13.5		)
Over-the-counter cleared	(9.8		)	(9.5		)	(7.2		)	(7.2		)
Derivative assets/liabilities, after netting	29.4			24.9			32.7			26.3
Other gross derivative assets/liabilities ⁽²⁾	15.7			13.1			11.0			11.6
Total derivative assets/liabilities	45.1			38.0			43.7			37.9
Less: Financial instruments collateral ⁽³⁾	(15.0		)	(12.7		)	(16.3		)	(8.6		)
Total net derivative assets/liabilities	$	30.1		$	25.3		$	27.4		$	29.3


⁽¹⁾	Over-the-counter (OTC) derivatives include bilateral transactions between the Corporation and a particular counterparty. OTC-cleared derivatives include bilateral transactions between the Corporation and a counterparty where the transaction is cleared through a clearinghouse. Exchange-traded derivatives include listed options transacted on an exchange.


⁽²⁾	Consists of derivatives entered into under master netting agreements where the enforceability of these agreements is uncertain under bankruptcy laws in some countries or industries.

⁽³⁾

Amounts are limited to the derivative asset/liability balance and, accordingly, do not include excess collateral received/pledged. Financial instruments collateral includes securities collateral received or pledged and cash securities held and posted at third-party custodians that are not offset on the Consolidated Balance Sheet but shown as a reduction to derive net derivative assets and liabilities.

Transfers of Financial Assets with Risk Retained through Derivatives

The Corporation enters into certain transactions involving the transfer of financial assets that are accounted for as sales where substantially all of the economic exposure to the transferred financial assets is retained through derivatives (e.g., interest rate and/or credit), but the Corporation does not retain control over the assets transferred. As of September 30, 2019 and December 31, 2018, the Corporation had transferred $5.4 billion and $5.8 billion of non-U.S. government-guaranteed mortgage-backed securities (MBS) to a third-party trust and retained economic exposure to the transferred assets through derivative contracts. In connection with these transfers, the Corporation received gross cash proceeds of $5.4 billion and $5.8 billion at the transfer dates. At September 30, 2019 and December 31, 2018, the fair value of the transferred securities was $5.3 billion and $5.5 billion.

ALM and Risk Management Derivatives

The Corporation’s asset and liability management (ALM) and risk management activities include the use of derivatives to mitigate

risk to the Corporation including derivatives designated in qualifying hedge accounting relationships and derivatives used in other risk management activities. For additional information, see Note 3 – Derivatives to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.

Derivatives Designated as Accounting Hedges

The Corporation uses various types of interest rate and foreign exchange derivative contracts to protect against changes in the fair value of its assets and liabilities due to fluctuations in interest rates and exchange rates (fair value hedges). The Corporation also uses these types of contracts to protect against changes in the cash flows of its assets and liabilities, and other forecasted transactions (cash flow hedges). The Corporation hedges its net investment in consolidated non-U.S. operations determined to have functional currencies other than the U.S. dollar using forward exchange contracts and cross-currency basis swaps, and by issuing foreign currency-denominated debt (net investment hedges).



		Bank of America 54

Fair Value Hedges

The table below summarizes information related to fair value hedges for the three and nine months ended September 30, 2019 and 2018.




Gains and Losses on Derivatives Designated as Fair Value Hedges

	Three Months Ended September 30, 2019						Three Months Ended September 30, 2018
(Dollars in millions)	Derivative			Hedged Item			Derivative			Hedged Item
Interest rate risk on long-term debt ⁽¹⁾	$	3,328		$	(3,342	)	$	(1,129	)	$	1,122
Interest rate and foreign currency risk on long-term debt ⁽²⁾	(110		)	111			(182		)	207
Interest rate risk on available-for-sale securities ⁽³⁾	(33		)	30			12			(12		)
Total	$	3,185		$	(3,201	)	$	(1,299	)	$	1,317

	Nine Months Ended September 30, 2019						Nine Months Ended September 30, 2018
	Derivative			Hedged Item			Derivative			Hedged Item
Interest rate risk on long-term debt ⁽¹⁾	$	9,373		$	(9,392	)	$	(4,303	)	$	4,179
Interest rate and foreign currency risk on long-term debt ⁽²⁾	(12		)	31			(927		)	795
Interest rate risk on available-for-sale securities ⁽³⁾	(133		)	128			(20		)	19
Total	$	9,228		$	(9,233	)	$	(5,250	)	$	4,993


⁽¹⁾	Amounts are recorded in interest expense in the Consolidated Statement of Income.

⁽²⁾

For the three and nine months ended September 30, 2019, the derivative amount includes gains (losses) of $(59) million and $108 million in interest expense, $(53) million and $(142) million in other income and $2 million and $22 million in accumulated other comprehensive income (OCI). For the same periods in 2018, the derivative amount includes gains (losses) of $(117) million and $(156) million in interest expense, $(96) million and $(672) million in other income, and $31 million and $(99) million in accumulated OCI. Line item totals are in the Consolidated Statement of Income and in the Consolidated Balance Sheet.


⁽³⁾	Amounts are recorded in interest income in the Consolidated Statement of Income.

The table below summarizes the carrying value of hedged assets and liabilities that are designated and qualifying in fair value hedging relationships along with the cumulative amount of fair value hedging adjustments included in the carrying value that have been recorded in the current hedging relationships. These fair value hedging adjustments are open basis adjustments that are not subject to amortization as long as the hedging relationship remains designated.




Designated Fair Value Hedged Assets (Liabilities)

	September 30, 2019						December 31, 2018
(Dollars in millions)	Carrying Value			Cumulative Fair Value Adjustments ⁽¹⁾			Carrying Value			Cumulative Fair Value Adjustments⁽¹⁾
Long-term debt ⁽²⁾	$	(165,021	)	$	(11,932	)	$	(138,682	)	$	(2,117	)
Available-for-sale debt securities ⁽²⁾	1,684			92			981			(29		)


⁽¹⁾	For assets, increase (decrease) to carrying value and for liabilities, (increase) decrease to carrying value.

⁽²⁾

At September 30, 2019 and December 31, 2018, the cumulative fair value adjustments remaining on long-term debt and available-for-sale (AFS) debt securities from discontinued hedging relationships resulted in a decrease in the related liability of $1.4 billion and $1.6 billion and an increase (decrease) in the related asset of $5 million and $(29) million, which are being amortized over the remaining contractual life of the de-designated hedged items.

Cash Flow and Net Investment Hedges

The following table summarizes certain information related to cash flow hedges and net investment hedges for the three and nine months ended September 30, 2019 and 2018. Of the $365 million after-tax net loss ($479 million pretax) on derivatives in accumulated OCI at September 30, 2019, $78 million after-tax ($103 million pretax) is expected to be reclassified into earnings

in the next 12 months. These net losses reclassified into earnings are expected to primarily reduce net interest income related to the respective hedged items. For terminated cash flow hedges, the time period over which the majority of the forecasted transactions are hedged is approximately 3 years, with a maximum length of time for certain forecasted transactions of 16 years.




Gains and Losses on Derivatives Designated as Cash Flow and Net Investment Hedges

	Gains (Losses) Recognized in Accumulated OCI on Derivatives			Gains (Losses) in Income Reclassified from Accumulated OCI			Gains (Losses) Recognized in Accumulated OCI on Derivatives			Gains (Losses) in Income Reclassified from Accumulated OCI
(Dollars in millions, amounts pretax)	Three Months Ended September 30, 2019						Nine Months Ended September 30, 2019
Cash flow hedges
Interest rate risk on variable-rate assets ⁽¹⁾	$	125		$	(27	)	$	743		$	(78	)
Net investment hedges
Foreign exchange risk ⁽²⁾	$	786		$	362		$	590		$	363

	Three Months Ended September 30, 2018						Nine Months Ended September 30, 2018
Cash flow hedges
Interest rate risk on variable-rate assets ⁽¹⁾	$	(54	)	$	(51	)	$	(553	)	$	(134	)
Price risk on certain restricted stock awards ⁽³⁾	—			—			4			27
Total	$	(54	)	$	(51	)	$	(549	)	$	(107	)
Net investment hedges
Foreign exchange risk ⁽²⁾	$	181		$	383		$	860		$	382


⁽¹⁾	Amounts reclassified from accumulated OCI are recorded in interest income in the Consolidated Statement of Income.

⁽²⁾

Amounts reclassified from accumulated OCI are recorded in other income in the Consolidated Statement of Income. For the three and nine months ended September 30, 2019, amounts excluded from effectiveness testing and recognized in other income were gains of $32 million and $109 million. For the same periods in 2018, amounts excluded from effectiveness testing and recognized in other income were gains of $3 million and $32 million.


⁽³⁾	Amounts reclassified from accumulated OCI are recorded in compensation and benefits expense in the Consolidated Statement of Income.



55 Bank of America

Other Risk Management Derivatives

Other risk management derivatives are used by the Corporation to reduce certain risk exposures by economically hedging various assets and liabilities. The gains and losses on these derivatives are recognized in other income. The table below presents gains (losses) on these derivatives for the three and nine months ended September 30, 2019 and 2018. These gains (losses) are largely offset by the income or expense recorded on the hedged item.




Gains and Losses on Other Risk Management Derivatives

	Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)	2019			2018			2019			2018
Interest rate risk on mortgage activities ⁽¹⁾	$	110		$	(45	)	$	361		$	(206	)
Credit risk on loans	(8		)	(2		)	(48		)	(7		)
Interest rate and foreign currency risk on ALM activities ⁽²⁾	2,517			487			3,337			1,050

⁽¹⁾

Primarily related to hedges of interest rate risk on mortgage servicing rights (MSRs) and interest rate lock commitments (IRLCs) to originate mortgage loans that will be held for sale. The net gains on IRLCs, which are not included in the table but are considered derivative instruments, were $20 million and $56 million for the three and nine months ended September 30, 2019 compared to $8 million and $36 million for the same periods in 2018.


⁽²⁾	Primarily related to hedges of debt securities carried at fair value and hedges of foreign currency-denominated debt.

Sales and Trading Revenue

The Corporation enters into trading derivatives to facilitate client transactions and to manage risk exposures arising from trading account assets and liabilities. It is the Corporation’s policy to include these derivative instruments in its trading activities which include derivatives and non-derivative cash instruments. The resulting risk from these derivatives is managed on a portfolio basis as part of the Corporation’s Global Markets business segment. For more information on sales and trading revenue, see Note 3 – Derivatives to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.

The table below, which includes both derivatives and non-derivative cash instruments, identifies the amounts in the respective income statement line items attributable to the Corporation’s sales and trading revenue in Global Markets, categorized by primary risk, for the three and nine months ended September 30, 2019 and 2018. The difference between total trading account income in the following table and in the Consolidated Statement of Income represents trading activities in business segments other than Global Markets. This table includes debit valuation adjustment (DVA) and funding valuation adjustment (FVA) gains (losses). Global Markets results in Note 18 – Business Segment Information are presented on a fully taxable-equivalent (FTE) basis. The table below is not presented on an FTE basis.




Sales and Trading Revenue

	Trading Account Income		Net Interest Income			Other ⁽¹⁾		Total		Trading Account Income		Net Interest Income			Other ⁽¹⁾		Total
(Dollars in millions)	Three Months Ended September 30, 2019									Nine Months Ended September 30, 2019
Interest rate risk	$	5	$	480		$	217	$	702	$	595	$	1,289		$	362	$	2,246
Foreign exchange risk	325		14			9		348		965		42			19		1,026
Equity risk	907		(122		)	364		1,149		2,886		(563		)	1,159		3,482
Credit risk	286		451			136		873		1,092		1,341			400		2,833
Other risk	57		11			12		80		83		61			43		187
Total sales and trading revenue	$	1,580	$	834		$	738	$	3,152	$	5,621	$	2,170		$	1,983	$	9,774

	Three Months Ended September 30, 2018									Nine Months Ended September 30, 2018
Interest rate risk	$	76	$	418		$	141	$	635	$	789	$	1,242		$	228	$	2,259
Foreign exchange risk	373		3			3		379		1,163		(2		)	10		1,171
Equity risk	823		(183		)	356		996		3,015		(449		)	1,218		3,784
Credit risk	268		458			113		839		1,091		1,407			408		2,906
Other risk	10		64			10		84		68		152			43		263
Total sales and trading revenue	$	1,550	$	760		$	623	$	2,933	$	6,126	$	2,350		$	1,907	$	10,383


⁽¹⁾	Represents amounts in investment and brokerage services and other income that are recorded in Global Markets and included in the definition of sales and trading revenue. Includes investment and brokerage services revenue of $410 million and $1.3 billion for the three and nine months ended September 30, 2019 compared to $378 million and $1.3 billion for the same periods in 2018.

Credit Derivatives

The Corporation enters into credit derivatives primarily to facilitate client transactions and to manage credit risk exposures. Credit derivatives are classified as investment and non-investment grade based on the credit quality of the underlying referenced obligation. The Corporation considers ratings of BBB- or higher as investment grade. Non-investment grade includes non-rated credit derivative instruments. The Corporation discloses internal categorizations of investment grade and non-investment grade consistent with how

risk is managed for these instruments. For more information on credit derivatives, see Note 3 – Derivatives to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.

Credit derivative instruments where the Corporation is the seller of credit protection and their expiration at September 30, 2019 and December 31, 2018 are summarized in the following table.



		Bank of America 56




Credit Derivative Instruments

	Less than One Year		One to Three Years		Three to Five Years		Over Five Years		Total
	September 30, 2019
(Dollars in millions)	Carrying Value
Credit default swaps:
Investment grade	$	—	$	10	$	90	$	249	$	349
Non-investment grade	69		264		738		1,086		2,157
Total	69		274		828		1,335		2,506
Total return swaps/options:
Investment grade	20		—		—		—		20
Non-investment grade	365		12		—		—		377
Total	385		12		—		—		397
Total credit derivatives	$	454	$	286	$	828	$	1,335	$	2,903
Credit-related notes:
Investment grade	$	—	$	3	$	—	$	646	$	649
Non-investment grade	12		2		1		1,402		1,417
Total credit-related notes	$	12	$	5	$	1	$	2,048	$	2,066
	Maximum Payout/Notional
Credit default swaps:
Investment grade	$	48,416	$	82,184	$	102,206	$	30,639	$	263,445
Non-investment grade	17,211		27,707		36,737		17,887		99,542
Total	65,627		109,891		138,943		48,526		362,987
Total return swaps/options:
Investment grade	29,218		—		61		74		29,353
Non-investment grade	28,306		511		51		61		28,929
Total	57,524		511		112		135		58,282
Total credit derivatives	$	123,151	$	110,402	$	139,055	$	48,661	$	421,269

	December 31, 2018
	Carrying Value
Credit default swaps:
Investment grade	$	2	$	44	$	436	$	488	$	970
Non-investment grade	132		636		914		1,691		3,373
Total	134		680		1,350		2,179		4,343
Total return swaps/options:
Investment grade	105		—		—		—		105
Non-investment grade	472		21		—		—		493
Total	577		21		—		—		598
Total credit derivatives	$	711	$	701	$	1,350	$	2,179	$	4,941
Credit-related notes:
Investment grade	$	—	$	—	$	4	$	532	$	536
Non-investment grade	1		1		1		1,500		1,503
Total credit-related notes	$	1	$	1	$	5	$	2,032	$	2,039
	Maximum Payout/Notional
Credit default swaps:
Investment grade	$	53,758	$	95,699	$	95,274	$	20,054	$	264,785
Non-investment grade	24,297		33,881		34,530		14,426		107,134
Total	78,055		129,580		129,804		34,480		371,919
Total return swaps/options:
Investment grade	60,042		822		59		72		60,995
Non-investment grade	24,524		1,649		39		70		26,282
Total	84,566		2,471		98		142		87,277
Total credit derivatives	$	162,621	$	132,051	$	129,902	$	34,622	$	459,196

The notional amount represents the maximum amount payable by the Corporation for most credit derivatives. However, the Corporation does not monitor its exposure to credit derivatives based solely on the notional amount because this measure does not take into consideration the probability of occurrence. As such, the notional amount is not a reliable indicator of the Corporation’s exposure to these contracts. Instead, a risk framework is used to define risk tolerances and establish limits so that certain credit risk-related losses occur within acceptable, predefined limits.

Credit-related notes in the table above include investments in securities issued by collateralized debt obligation (CDO), collateralized loan obligation and credit-linked note vehicles. These instruments are primarily classified as trading securities. The carrying value of these instruments equals the Corporation’s maximum exposure to loss. The Corporation is not obligated to make any payments to the entities under the terms of the securities owned.



57 Bank of America

Credit-related Contingent Features and Collateral

A majority of the Corporation’s derivative contracts contain credit risk-related contingent features, primarily in the form of ISDA master netting agreements and credit support documentation that enhance the creditworthiness of these instruments compared to other obligations of the respective counterparty with whom the Corporation has transacted. These contingent features may be for the benefit of the Corporation as well as its counterparties with respect to changes in the Corporation’s creditworthiness and the mark-to-market exposure under the derivative transactions. At September 30, 2019 and December 31, 2018, the Corporation held cash and securities collateral of $91.0 billion and $81.6 billion and posted cash and securities collateral of $73.6 billion and $56.5 billion in the normal course of business under derivative agreements, excluding cross-product margining agreements where clients are permitted to margin on a net basis for both derivative and secured financing arrangements.

In connection with certain OTC derivative contracts and other trading agreements, the Corporation can be required to provide additional collateral or to terminate transactions with certain counterparties in the event of a downgrade of the senior debt ratings of the Corporation or certain subsidiaries. The amount of

additional collateral required depends on the contract and is usually a fixed incremental amount and/or the market value of the exposure. For more information on credit-related contingent features and collateral, see Note 3 – Derivatives to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.

At September 30, 2019, the amount of collateral, calculated based on the terms of the contracts, that the Corporation and certain subsidiaries could be required to post to counterparties but had not yet posted to counterparties was $2.0 billion, including $1.0 billion for Bank of America, National Association.

Some counterparties are currently able to unilaterally terminate certain contracts, or the Corporation or certain subsidiaries may be required to take other action such as find a suitable replacement or obtain a guarantee. At September 30, 2019 and December 31, 2018, the liability recorded for these derivative contracts was not significant.

The following table presents the amount of additional collateral that would have been contractually required by derivative contracts and other trading agreements at September 30, 2019 if the rating agencies had downgraded their long-term senior debt ratings for the Corporation or certain subsidiaries by one incremental notch and by an additional second incremental notch.




Additional Collateral Required to be Posted Upon Downgrade at September 30, 2019

(Dollars in millions)	One incremental notch		Second incremental notch
Bank of America Corporation	$	571	$	510
Bank of America, N.A. and subsidiaries ⁽¹⁾	240		422


⁽¹⁾	Included in Bank of America Corporation collateral requirements in this table.

The following table presents the derivative liabilities that would be subject to unilateral termination by counterparties and the amounts of collateral that would have been contractually required at September 30, 2019 if the long-term senior debt ratings for the Corporation or certain subsidiaries had been lower by one incremental notch and by an additional second incremental notch.




Derivative Liabilities Subject to Unilateral Termination Upon Downgrade at September 30, 2019

(Dollars in millions)	One incremental notch		Second incremental notch
Derivative liabilities	$	12	$	1,127
Collateral posted	4		785

Valuation Adjustments on Derivatives

The table below presents credit valuation adjustment (CVA), DVA and FVA gains (losses) on derivatives, which are recorded in trading account income, on a gross and net of hedge basis for the three and nine months ended September 30, 2019 and 2018. For more information on the valuation adjustments on derivatives, see Note 3 – Derivatives to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.




Valuation Adjustments Gains (Losses) on Derivatives ⁽¹⁾

	Three Months Ended September 30
	2019						2018
(Dollars in millions)	Gross			Net			Gross			Net
Derivative assets (CVA)	$	(41	)	$	16		$	71		$	27
Derivative assets/liabilities (FVA)	(60		)	(4		)	45			35
Derivative liabilities (DVA)	17			8			(69		)	(79		)

	Nine Months Ended September 30
	2019						2018
Derivative assets (CVA)	$	(39	)	$	38		$	186		$	172
Derivative assets/liabilities (FVA)	(27		)	35			36			16
Derivative liabilities (DVA)	(56		)	(64		)	(112		)	(132		)


⁽¹⁾	At September 30, 2019 and December 31, 2018, cumulative CVA reduced the derivative assets balance by $639 million and $600 million, cumulative FVA reduced the net derivatives balance by $178 million and $151 million, and cumulative DVA reduced the derivative liabilities balance by $376 million and $432 million, respectively.



		Bank of America 58

NOTE 4 Securities

The table below presents the amortized cost, gross unrealized gains and losses, and fair value of AFS debt securities, other debt securities carried at fair value and held-to-maturity (HTM) debt securities at September 30, 2019 and December 31, 2018.




Debt Securities

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
(Dollars in millions)	September 30, 2019
Available-for-sale debt securities
Mortgage-backed securities:
Agency	$	133,973	$	1,250	$	(274	)	$	134,949
Agency-collateralized mortgage obligations	4,877		103		(18		)	4,962
Commercial	14,301		380		(4		)	14,677
Non-agency residential ⁽¹⁾	1,725		227		(9		)	1,943
Total mortgage-backed securities	154,876		1,960		(305		)	156,531
U.S. Treasury and agency securities	55,746		1,364		(163		)	56,947
Non-U.S. securities	11,074		7		(2		)	11,079
Other taxable securities, substantially all asset-backed securities	3,806		77		—			3,883
Total taxable securities	225,502		3,408		(470		)	228,440
Tax-exempt securities	16,263		203		(34		)	16,432
Total available-for-sale debt securities	241,765		3,611		(504		)	244,872
Other debt securities carried at fair value ⁽²⁾	9,284		205		(19		)	9,470
Total debt securities carried at fair value	251,049		3,816		(523		)	254,342
Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities	190,252		4,358		(336		)	194,274
Total debt securities ^{(3, 4)}	$	441,301	$	8,174	$	(859	)	$	448,616

	December 31, 2018
Available-for-sale debt securities
Mortgage-backed securities:
Agency	$	125,116	$	138	$	(3,428	)	$	121,826
Agency-collateralized mortgage obligations	5,621		19		(110		)	5,530
Commercial	14,469		11		(402		)	14,078
Non-agency residential ⁽¹⁾	1,792		136		(11		)	1,917
Total mortgage-backed securities	146,998		304		(3,951		)	143,351
U.S. Treasury and agency securities	56,239		62		(1,378		)	54,923
Non-U.S. securities	9,307		5		(6		)	9,306
Other taxable securities, substantially all asset-backed securities	4,387		29		(6		)	4,410
Total taxable securities	216,931		400		(5,341		)	211,990
Tax-exempt securities	17,349		99		(72		)	17,376
Total available-for-sale debt securities	234,280		499		(5,413		)	229,366
Other debt securities carried at fair value ⁽²⁾	8,595		172		(32		)	8,735
Total debt securities carried at fair value	242,875		671		(5,445		)	238,101
Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities	203,652		747		(3,964		)	200,435
Total debt securities ^{(3, 4)}	$	446,527	$	1,418	$	(9,409	)	$	438,536


⁽¹⁾	At September 30, 2019 and December 31, 2018, the underlying collateral type included approximately 66 percent and 68 percent prime, five percent and four percent Alt-A and 29 percent and 28 percent subprime.


⁽²⁾	Primarily includes non-U.S. securities used to satisfy certain international regulatory requirements. Any changes in value are reported in other income. For detail on the components, see Note 15 – Fair Value Measurements.


⁽³⁾	Includes securities pledged as collateral of $42.8 billion and $40.6 billion at September 30, 2019 and December 31, 2018.

⁽⁴⁾

The Corporation held debt securities from Fannie Mae (FNMA) and Freddie Mac (FHLMC) that each exceeded 10 percent of shareholders’ equity, with an amortized cost of $153.2 billion and $49.5 billion, and a fair value of $156.6 billion and $50.6 billion at September 30, 2019, and an amortized cost of $161.2 billion and $52.2 billion, and a fair value of $158.5 billion and $51.4 billion at December 31, 2018.

At September 30, 2019, the accumulated net unrealized gain on AFS debt securities, excluding the amount related to debt securities previously transferred to held to maturity, included in accumulated OCI was $2.3 billion, net of the related income tax expense of $761 million. The Corporation had nonperforming AFS debt securities of $11 million at both September 30, 2019 and December 31, 2018.

At September 30, 2019, the Corporation held equity securities at an aggregate fair value of $853 million and other equity securities, as valued under the measurement alternative, at cost of $183 million, both of which are included in other assets. At

September 30, 2019, the Corporation also held equity securities at fair value of $1.4 billion included in time deposits placed and other short-term investments.

Sales of AFS debt securities during the three months ended September 30, 2019 were not significant. In the nine months ended September 30, 2019, the Corporation recorded gross realized gains on sales of AFS debt securities of $228 million and gross realized losses of $112 million, resulting in net gains of $116 million, with $28 million of income taxes attributable to the realized net gains on sales of these AFS debt securities. For the same periods in 2018, gross gains and losses were not significant.



59 Bank of America

The table below presents the fair value and the associated gross unrealized losses on AFS debt securities and whether these securities have had gross unrealized losses for less than 12 months or for 12 months or longer at September 30, 2019 and December 31, 2018.




Temporarily Impaired and Other-than-temporarily Impaired AFS Debt Securities

	Less than Twelve Months					Twelve Months or Longer					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
(Dollars in millions)	September 30, 2019
Temporarily impaired AFS debt securities
Mortgage-backed securities:
Agency	$	7,409	$	(10	)	$	28,226	$	(264	)	$	35,635	$	(274	)
Agency-collateralized mortgage obligations	64		—			1,014		(18		)	1,078		(18		)
Commercial	928		(3		)	114		(1		)	1,042		(4		)
Non-agency residential	33		(1		)	1		—			34		(1		)
Total mortgage-backed securities	8,434		(14		)	29,355		(283		)	37,789		(297		)
U.S. Treasury and agency securities	4,193		(18		)	18,628		(145		)	22,821		(163		)
Non-U.S. securities	1,234		(2		)	140		—			1,374		(2		)
Other taxable securities, substantially all asset-backed securities	354		—			280		—			634		—
Total taxable securities	14,215		(34		)	48,403		(428		)	62,618		(462		)
Tax-exempt securities	233		—			1,039		(34		)	1,272		(34		)
Total temporarily impaired AFS debt securities	14,448		(34		)	49,442		(462		)	63,890		(496		)
Other-than-temporarily impaired AFS debt securities ⁽¹⁾
Non-agency residential mortgage-backed securities	118		(4		)	28		(4		)	146		(8		)
Total temporarily impaired and other-than-temporarily impaired AFS debt securities	$	14,566	$	(38	)	$	49,470	$	(466	)	$	64,036	$	(504	)

	December 31, 2018
Temporarily impaired AFS debt securities
Mortgage-backed securities:
Agency	$	14,771	$	(49	)	$	99,211	$	(3,379	)	$	113,982	$	(3,428	)
Agency-collateralized mortgage obligations	3		—			4,452		(110		)	4,455		(110		)
Commercial	1,344		(8		)	11,991		(394		)	13,335		(402		)
Non-agency residential	106		(8		)	49		(3		)	155		(11		)
Total mortgage-backed securities	16,224		(65		)	115,703		(3,886		)	131,927		(3,951		)
U.S. Treasury and agency securities	288		(1		)	51,374		(1,377		)	51,662		(1,378		)
Non-U.S. securities	773		(5		)	21		(1		)	794		(6		)
Other taxable securities, substantially all asset-backed securities	183		(1		)	185		(5		)	368		(6		)
Total taxable securities	17,468		(72		)	167,283		(5,269		)	184,751		(5,341		)
Tax-exempt securities	232		(2		)	2,148		(70		)	2,380		(72		)
Total temporarily impaired AFS debt securities	17,700		(74		)	169,431		(5,339		)	187,131		(5,413		)
Other-than-temporarily impaired AFS debt securities ⁽¹⁾
Non-agency residential mortgage-backed securities	131		—			3		—			134		—
Total temporarily impaired and other-than-temporarily impaired AFS debt securities	$	17,831	$	(74	)	$	169,434	$	(5,339	)	$	187,265	$	(5,413	)


⁽¹⁾	Includes other-than-temporarily impaired AFS debt securities on which an OTTI loss, primarily related to changes in interest rates, remains in accumulated OCI.

The Corporation had $12 million and $23 million of credit-related other-than-temporary impairment (OTTI) losses on AFS debt securities which were recognized in other income for the three and nine months ended September 30, 2019 and 2018. The amount of noncredit-related OTTI losses for these AFS debt securities, which is recognized in OCI, was not significant for the periods presented.

The cumulative OTTI credit losses that have been recognized in income on AFS debt securities that the Corporation does not

intend to sell were $135 million at both September 30, 2019 and 2018.

For more information on OTTI losses and significant assumptions used for the Corporation’s underlying collateral, see Note 4 – Securities to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K. Significant assumptions used in estimating the expected cash flows for measuring credit losses on non-agency residential mortgage-backed securities (RMBS) were as follows at September 30, 2019.



		Bank of America 60




Significant Assumptions

			Range ⁽¹⁾
	Weighted average		10th Percentile ⁽²⁾		90th Percentile ⁽²⁾
Prepayment speed	16.2	%	4.9	%	28.1	%
Loss severity	15.5		8.0		32.3
Life default rate	12.6		0.8		41.1


⁽¹⁾	Represents the range of inputs/assumptions based upon the underlying collateral.


⁽²⁾	The value of a variable below which the indicated percentile of observations will fall.

Annual constant prepayment speed and loss severity rates are projected considering collateral characteristics such as loan-to-value (LTV), creditworthiness of borrowers as measured using Fair Isaac Corporation (FICO) scores, and geographic concentrations. The weighted-average severity by collateral type was 12.5 percent for prime, 11.5 percent for Alt-A and 20.2 percent for subprime at September 30, 2019. Default rates are projected by considering collateral characteristics including, but not limited to, LTV, FICO and geographic concentration. Weighted-average life default rates

by collateral type were 8.8 percent for prime, 11.3 percent for Alt-A and 15.4 percent for subprime at September 30, 2019.

The remaining contractual maturity distribution and yields of the Corporation’s debt securities carried at fair value and HTM debt securities at September 30, 2019 are summarized in the table below. Actual duration and yields may differ as prepayments on the loans underlying the mortgages or other asset-backed securities (ABS) are passed through to the Corporation.




Maturities of Debt Securities Carried at Fair Value and Held-to-maturity Debt Securities

	Due in One Year or Less				Due after One Year through Five Years				Due after Five Years through Ten Years				Due after Ten Years				Total
(Dollars in millions)	Amount		Yield ⁽¹⁾		Amount		Yield ⁽¹⁾		Amount		Yield ⁽¹⁾		Amount		Yield ⁽¹⁾		Amount		Yield ⁽¹⁾
Amortized cost of debt securities carried at fair value
Mortgage-backed securities:
Agency	$	—	—	%	$	120	2.37	%	$	1,715	2.42	%	$	132,139	3.29	%	$	133,974	3.28	%
Agency-collateralized mortgage obligations	—		—		—		—		27		2.56		4,850		3.17		4,877		3.17
Commercial	—		—		3,326		2.28		10,100		2.60		888		2.99		14,314		2.55
Non-agency residential	—		—		—		—		12		—		3,083		10.49		3,095		10.46
Total mortgage-backed securities	—		—		3,446		2.28		11,854		2.57		140,960		3.44		156,260		3.35
U.S. Treasury and agency securities	482		0.33		36,446		1.65		18,803		2.50		18		2.54		55,749		1.92
Non-U.S. securities	18,097		1.07		762		1.50		11		4.38		101		6.24		18,971		1.12
Other taxable securities, substantially all asset-backed securities	520		3.36		2,175		3.20		436		3.29		675		3.61		3,806		3.31
Total taxable securities	19,099		1.12		42,829		1.78		31,104		2.54		141,754		3.44		234,786		2.83
Tax-exempt securities	724		1.98		7,169		2.22		5,483		2.20		2,887		2.33		16,263		2.23
Total amortized cost of debt securities carried at fair value	$	19,823	1.16		$	49,998	1.84		$	36,587	2.49		$	144,641	3.42		$	251,049	2.79
Amortized cost of HTM debt securities⁽²⁾	$	354	3.96		$	50	3.80		$	1,112	2.53		$	188,736	3.24		$	190,252	3.24

Debt securities carried at fair value
Mortgage-backed securities:
Agency	$	—			$	120			$	1,719			$	133,111			$	134,950
Agency-collateralized mortgage obligations	—				—				28				4,934				4,962
Commercial	—				3,364				10,395				931				14,690
Non-agency residential	—				—				26				3,459				3,485
Total mortgage-backed securities	—				3,484				12,168				142,435				158,087
U.S. Treasury and agency securities	483				36,629				19,820				18				56,950
Non-U.S. securities	18,099				772				12				104				18,987
Other taxable securities, substantially all asset-backed securities	527				2,214				463				682				3,886
Total taxable securities	19,109				43,099				32,463				143,239				237,910
Tax-exempt securities	724				7,186				5,608				2,914				16,432
Total debt securities carried at fair value	$	19,833			$	50,285			$	38,071			$	146,153			$	254,342
Fair value of HTM debt securities ⁽²⁾	$	354			$	50			$	1,139			$	192,731			$	194,274


⁽¹⁾	The weighted-average yield is computed based on a constant effective interest rate over the contractual life of each security. The average yield considers the contractual coupon and the amortization of premiums and accretion of discounts, excluding the effect of related hedging derivatives.


⁽²⁾	Substantially all U.S. agency MBS.



61 Bank of America

NOTE 5 Outstanding Loans and Leases

The following tables present total outstanding loans and leases and an aging analysis for the Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments, by class of financing receivables, at September 30, 2019 and December 31, 2018.




	30-59 Days Past Due ⁽¹⁾			60-89 Days Past Due ⁽¹⁾			90 Days or More Past Due ⁽²⁾			Total Past Due 30 Days or More			Total Current or Less Than 30 Days Past Due ⁽³⁾			Loans Accounted for Under the Fair Value Option			Total Outstandings
(Dollars in millions)	September 30, 2019
Consumer real estate
Core portfolio
Residential mortgage	$	1,156		$	232		$	665		$	2,053		$	214,170					$	216,223
Home equity	145			63			202			410			35,706						36,116
Non-core portfolio
Residential mortgage	491			211			1,390			2,092			9,157						11,249
Home equity	41			19			88			148			5,310						5,458
Credit card and other consumer
U.S. credit card	564			413			960			1,937			93,009						94,946
Direct/Indirect consumer ⁽⁴⁾	271			80			31			382			90,454						90,836
Other consumer	—			—			—			—			208						208
Total consumer	2,668			1,018			3,336			7,022			448,014						455,036
Consumer loans accounted for under the fair value option ⁽⁵⁾																$	640		640
Total consumer loans and leases	2,668			1,018			3,336			7,022			448,014			640			455,676
Commercial
U.S. commercial	589			222			624			1,435			309,547						310,982
Non-U.S. commercial	60			9			10			79			101,005						101,084
Commercial real estate ⁽⁶⁾	135			12			23			170			62,628						62,798
Commercial lease financing	31			14			47			92			20,015						20,107
U.S. small business commercial	84			52			102			238			14,991						15,229
Total commercial	899			309			806			2,014			508,186						510,200
Commercial loans accounted for under the fair value option ⁽⁵⁾																7,034			7,034
Total commercial loans and leases	899			309			806			2,014			508,186			7,034			517,234
Total loans and leases ⁽⁷⁾	$	3,567		$	1,327		$	4,142		$	9,036		$	956,200		$	7,674		$	972,910
Percentage of outstandings	0.37		%	0.14		%	0.42		%	0.93		%	98.28		%	0.79		%	100.00		%


⁽¹⁾	Consumer real estate loans 30-59 days past due includes fully-insured loans of $510 million and nonperforming loans of $149 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $206 million and nonperforming loans of $116 million.


⁽²⁾	Consumer real estate includes fully-insured loans of $1.2 billion.


⁽³⁾	Consumer real estate includes $852 million and direct/indirect consumer includes $51 million of nonperforming loans.


⁽⁴⁾	Total outstandings includes auto and specialty lending loans and leases of $50.3 billion, unsecured consumer lending loans of $328 million, U.S. securities-based lending loans of $36.5 billion, non-U.S. consumer loans of $3.0 billion and other consumer loans of $694 million.

⁽⁵⁾

Consumer loans accounted for under the fair value option includes residential mortgage loans of $275 million and home equity loans of $365 million. Commercial loans accounted for under the fair value option includes U.S. commercial loans of $4.7 billion and non-U.S. commercial loans of $2.4 billion. For additional information, see Note 15 – Fair Value Measurements and Note 16 – Fair Value Option.


⁽⁶⁾	Total outstandings includes U.S. commercial real estate loans of $58.1 billion and non-U.S. commercial real estate loans of $4.7 billion.


⁽⁷⁾	Total outstandings includes loans and leases pledged as collateral of $29.6 billion. The Corporation also pledged $165.1 billion of loans with no related outstanding borrowings to secure potential borrowing capacity with the Federal Reserve Bank and Federal Home Loan Bank (FHLB).



		Bank of America 62




	30-59 Days Past Due ⁽¹⁾			60-89 Days Past Due ⁽¹⁾			90 Days or More Past Due ⁽²⁾			Total Past Due 30 Days or More			Total Current or Less Than 30 Days Past Due ⁽³⁾			Loans Accounted for Under the Fair Value Option			Total Outstandings
(Dollars in millions)	December 31, 2018
Consumer real estate
Core portfolio
Residential mortgage	$	1,188		$	249		$	793		$	2,230		$	191,465					$	193,695
Home equity	200			85			387			672			39,338						40,010
Non-core portfolio
Residential mortgage	757			309			2,201			3,267			11,595						14,862
Home equity	139			69			339			547			7,729						8,276
Credit card and other consumer
U.S. credit card	577			418			994			1,989			96,349						98,338
Direct/Indirect consumer ⁽⁴⁾	317			90			40			447			90,719						91,166
Other consumer ⁽⁵⁾	—			—			—			—			202						202
Total consumer	3,178			1,220			4,754			9,152			437,397						446,549
Consumer loans accounted for under the fair value option ⁽⁶⁾																$	682		682
Total consumer loans and leases	3,178			1,220			4,754			9,152			437,397			682			447,231
Commercial
U.S. commercial	594			232			573			1,399			297,878						299,277
Non-U.S. commercial	1			49			—			50			98,726						98,776
Commercial real estate ⁽⁷⁾	29			16			14			59			60,786						60,845
Commercial lease financing	124			114			37			275			22,259						22,534
U.S. small business commercial	83			54			96			233			14,332						14,565
Total commercial	831			465			720			2,016			493,981						495,997
Commercial loans accounted for under the fair value option ⁽⁶⁾																3,667			3,667
Total commercial loans and leases	831			465			720			2,016			493,981			3,667			499,664
Total loans and leases ⁽⁸⁾	$	4,009		$	1,685		$	5,474		$	11,168		$	931,378		$	4,349		$	946,895
Percentage of outstandings	0.42		%	0.18		%	0.58		%	1.18		%	98.36		%	0.46		%	100.00		%


⁽¹⁾	Consumer real estate loans 30-59 days past due includes fully-insured loans of $637 million and nonperforming loans of $217 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $269 million and nonperforming loans of $146 million.


⁽²⁾	Consumer real estate includes fully-insured loans of $1.9 billion.


⁽³⁾	Consumer real estate includes $1.8 billion and direct/indirect consumer includes $53 million of nonperforming loans.


⁽⁴⁾	Total outstandings includes auto and specialty lending loans and leases of $50.1 billion, unsecured consumer lending loans of $383 million, U.S. securities-based lending loans of $37.0 billion, non-U.S. consumer loans of $2.9 billion and other consumer loans of $746 million.


⁽⁵⁾	Substantially all of other consumer is consumer overdrafts.

⁽⁶⁾

Consumer loans accounted for under the fair value option includes residential mortgage loans of $336 million and home equity loans of $346 million. Commercial loans accounted for under the fair value option includes U.S. commercial loans of $2.5 billion and non-U.S. commercial loans of $1.1 billion. For additional information, see Note 15 – Fair Value Measurements and Note 16 – Fair Value Option.


⁽⁷⁾	Total outstandings includes U.S. commercial real estate loans of $56.6 billion and non-U.S. commercial real estate loans of $4.2 billion.


⁽⁸⁾	Total outstandings includes loans and leases pledged as collateral of $36.7 billion. The Corporation also pledged $166.1 billion of loans with no related outstanding borrowings to secure potential borrowing capacity with the Federal Reserve Bank and FHLB.

The Corporation categorizes consumer real estate loans as core and non-core based on loan and customer characteristics such as origination date, product type, LTV, FICO score and delinquency status consistent with its current consumer and mortgage servicing strategy. Generally, loans that were originated after January 1, 2010, qualified under government-sponsored enterprise (GSE) underwriting guidelines, or otherwise met the Corporation’s underwriting guidelines in place in 2015 are characterized as core loans. All other loans are generally characterized as non-core loans and represent runoff portfolios.

The Corporation has entered into long-term credit protection agreements with FNMA and FHLMC on loans totaling $7.0 billion and $6.1 billion at September 30, 2019 and December 31, 2018, providing full credit protection on residential mortgage loans that become severely delinquent. All of these loans are individually insured and therefore the Corporation does not record an allowance for credit losses related to these loans.

During the three and nine months ended September 30, 2019, the Corporation sold $2.3 billion and $4.2 billion of consumer real

estate compared to $3.9 billion and $6.5 billion for the same periods in 2018.

Nonperforming Loans and Leases

The Corporation classifies consumer real estate loans that have been discharged in Chapter 7 bankruptcy and not reaffirmed by the borrower as troubled debt restructurings (TDRs), irrespective of payment history or delinquency status, even if the repayment terms for the loans have not been otherwise modified. The Corporation continues to have a lien on the underlying collateral. At September 30, 2019, nonperforming loans discharged in Chapter 7 bankruptcy with no change in repayment terms were $112 million of which $56 million were current on their contractual payments, while $46 million were 90 days or more past due. Of the contractually current nonperforming loans, 61 percent were discharged in Chapter 7 bankruptcy over 12 months ago, and 50 percent were discharged 24 months or more ago.



63 Bank of America

The table below presents the Corporation’s nonperforming loans and leases including nonperforming TDRs, and loans accruing past due 90 days or more at September 30, 2019 and December 31, 2018. Nonperforming loans held-for-sale (LHFS) are excluded from nonperforming loans and leases as they are recorded at either fair value or the lower of cost or fair value. For more information on the criteria for classification as nonperforming, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.




Credit Quality

	Nonperforming Loans and Leases				Accruing Past Due 90 Days or More
(Dollars in millions)	September 30 2019		December 31 2018		September 30 2019		December 31 2018
Consumer real estate
Core portfolio
Residential mortgage ⁽¹⁾	$	930	$	1,010	$	186	$	274
Home equity	380		955		—		—
Non-core portfolio
Residential mortgage⁽¹⁾	621		883		1,017		1,610
Home equity	205		938		—		—
Credit card and other consumer
U.S. credit card	n/a		n/a		960		994
Direct/Indirect consumer	53		56		29		38
Total consumer	2,189		3,842		2,192		2,916
Commercial
U.S. commercial	966		794		338		197
Non-U.S. commercial	51		80		10		—
Commercial real estate	185		156		3		4
Commercial lease financing	35		18		22		29
U.S. small business commercial	50		54		94		84
Total commercial	1,287		1,102		467		314
Total loans and leases	$	3,476	$	4,944	$	2,659	$	3,230

⁽¹⁾

Residential mortgage loans in the core and non-core portfolios accruing past due 90 days or more are fully-insured loans. At September 30, 2019 and December 31, 2018, residential mortgage includes $858 million and $1.4 billion of loans on which interest has been curtailed by the Federal Housing Administration (FHA) and therefore are no longer accruing interest, although principal is still insured, and $345 million and $498 million of loans on which interest is still accruing.

n/a = not applicable

Credit Quality Indicators

The Corporation monitors credit quality within its Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments based on primary credit quality indicators. For more information on the portfolio segments and their related credit quality indicators, see Note 1 – Summary of Significant Accounting Principles and Note 5 – Outstanding Loans and Leases to the

Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.

The following tables present certain credit quality indicators for the Corporation’s Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments, by class of financing receivables, at September 30, 2019 and December 31, 2018.




Consumer Real Estate – Credit Quality Indicators ⁽¹⁾

	Core Residential Mortgage		Non-core Residential Mortgage		Core Home Equity		Non-core Home Equity		Core Residential Mortgage		Non-core Residential Mortgage		Core Home Equity		Non-core Home Equity
(Dollars in millions)	September 30, 2019								December 31, 2018
Refreshed LTV
Less than or equal to 90 percent	$	195,967	$	7,952	$	35,548	$	4,415	$	173,911	$	10,272	$	39,246	$	6,478
Greater than 90 percent but less than or equal to 100 percent	3,142		346		267		413		2,349		533		354		715
Greater than 100 percent	1,041		333		301		630		817		545		410		1,083
Fully-insured loans ⁽²⁾	16,073		2,618						16,618		3,512
Total consumer real estate	$	216,223	$	11,249	$	36,116	$	5,458	$	193,695	$	14,862	$	40,010	$	8,276
Refreshed FICO score
Less than 620	$	2,040	$	1,306	$	782	$	627	$	2,125	$	1,974	$	1,064	$	1,503
Greater than or equal to 620 and less than 680	4,716		1,160		1,581		885		4,538		1,719		2,008		1,720
Greater than or equal to 680 and less than 740	25,555		2,198		6,157		1,550		23,841		3,042		7,008		2,188
Greater than or equal to 740	167,839		3,967		27,596		2,396		146,573		4,615		29,930		2,865
Fully-insured loans ⁽²⁾	16,073		2,618						16,618		3,512
Total consumer real estate	$	216,223	$	11,249	$	36,116	$	5,458	$	193,695	$	14,862	$	40,010	$	8,276


⁽¹⁾	Excludes $640 million and $682 million of loans accounted for under the fair value option at September 30, 2019 and December 31, 2018.


⁽²⁾	Credit quality indicators are not reported for fully-insured loans as principal repayment is insured.



		Bank of America 64




Credit Card and Other Consumer – Credit Quality Indicators

	U.S. Credit Card		Direct/Indirect Consumer		Other Consumer		U.S. Credit Card		Direct/Indirect Consumer		Other Consumer
(Dollars in millions)	September 30, 2019						December 31, 2018
Refreshed FICO score
Less than 620	$	4,970	$	1,470			$	5,016	$	1,719
Greater than or equal to 620 and less than 680	11,908		2,757				12,415		3,124
Greater than or equal to 680 and less than 740	34,652		8,490				35,781		8,921
Greater than or equal to 740	43,416		37,953				45,126		36,709
Other internal credit metrics ^{(1, 2)}			40,166		$	208			40,693		$	202
Total credit card and other consumer	$	94,946	$	90,836	$	208	$	98,338	$	91,166	$	202


⁽¹⁾	Other internal credit metrics may include delinquency status, geography or other factors.


⁽²⁾	Direct/indirect consumer includes $39.5 billion and $39.9 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk at September 30, 2019 and December 31, 2018.




Commercial – Credit Quality Indicators ⁽¹⁾

	U.S. Commercial		Non-U.S. Commercial		Commercial Real Estate		Commercial Lease Financing		U.S. Small Business Commercial ⁽²⁾
(Dollars in millions)	September 30, 2019
Risk ratings
Pass rated	$	302,826	$	100,152	$	61,901	$	19,757	$	235
Reservable criticized	8,156		932		897		350		21
Refreshed FICO score
Less than 620									293
Greater than or equal to 620 and less than 680									738
Greater than or equal to 680 and less than 740									2,229
Greater than or equal to 740									4,767
Other internal credit metrics ⁽³⁾									6,946
Total commercial	$	310,982	$	101,084	$	62,798	$	20,107	$	15,229

	December 31, 2018
Risk ratings
Pass rated	$	291,918	$	97,916	$	59,910	$	22,168	$	389
Reservable criticized	7,359		860		935		366		29
Refreshed FICO score
Less than 620									264
Greater than or equal to 620 and less than 680									684
Greater than or equal to 680 and less than 740									2,072
Greater than or equal to 740									4,254
Other internal credit metrics ⁽³⁾									6,873
Total commercial	$	299,277	$	98,776	$	60,845	$	22,534	$	14,565


⁽¹⁾	Excludes $7.0 billion and $3.7 billion of loans accounted for under the fair value option at September 30, 2019 and December 31, 2018.

⁽²⁾

At September 30, 2019 and December 31, 2018, U.S. small business commercial includes $716 million and $731 million of criticized business card and small business loans which are evaluated using refreshed FICO scores or internal credit metrics, including delinquency status, rather than risk ratings. Refreshed FICO score and other internal credit metrics are applicable only to the U.S. small business commercial portfolio.


⁽³⁾	Other internal credit metrics may include delinquency status, application scores, geography or other factors. At both September 30, 2019 and December 31, 2018, 99 percent of the balances where internal credit metrics are used were current or less than 30 days past due.

Impaired Loans and Troubled Debt Restructurings

A loan is considered impaired when, based on current information, it is probable that the Corporation will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. For additional information, see Note 1 – Summary of Significant Accounting Principles and Note 5 – Outstanding Loans and Leases to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.

Consumer Real Estate

Impaired consumer real estate loans within the Consumer Real Estate portfolio segment consist entirely of TDRs. Most modifications of consumer real estate loans meet the definition of TDRs when a binding offer is extended to a borrower. For more information on impaired consumer real estate loans, see Note 5 – Outstanding Loans and Leases to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.

Consumer real estate loans of $671 million that have been discharged in Chapter 7 bankruptcy with no change in repayment terms and not reaffirmed by the borrower were included in TDRs at September 30, 2019, of which $112 million were classified as nonperforming and $290 million were loans fully insured by the FHA. For more information on loans discharged in Chapter 7 bankruptcy, see Nonperforming Loans and Leases in this Note.

At September 30, 2019 and December 31, 2018, remaining commitments to lend additional funds to debtors whose terms have been modified in a consumer real estate TDR were not significant. Consumer real estate foreclosed properties totaled $188 million and $244 million at September 30, 2019 and December 31, 2018. The carrying value of consumer real estate loans, including fully-insured loans, for which formal foreclosure proceedings were in process at September 30, 2019 was $1.7 billion. During the three and nine months ended September 30, 2019, the Corporation reclassified $128 million and $427 million of consumer real estate loans to foreclosed properties or, for properties acquired upon foreclosure of certain government-



65 Bank of America

guaranteed loans (principally FHA-insured loans), to other assets. The reclassifications represent non-cash investing activities and, accordingly, are not reflected in the Consolidated Statement of Cash Flows.

The following table provides the unpaid principal balance, carrying value and related allowance at September 30, 2019 and December 31, 2018 and the average carrying value and interest

income recognized for the three and nine months ended September 30, 2019 and 2018 for impaired loans in the Corporation’s Consumer Real Estate portfolio segment. Certain impaired consumer real estate loans do not have a related allowance as the current valuation of these impaired loans exceeded the carrying value, which is net of previously recorded charge-offs.




Impaired Loans – Consumer Real Estate

					Unpaid Principal Balance		Carrying Value		Related Allowance		Unpaid Principal Balance		Carrying Value		Related Allowance
(Dollars in millions)					September 30, 2019						December 31, 2018
With no recorded allowance
Residential mortgage					$	4,436	$	3,534	$	—	$	5,396	$	4,268	$	—
Home equity					1,262		756		—		2,948		1,599		—
With an allowance recorded
Residential mortgage					$	1,516	$	1,488	$	74	$	1,977	$	1,929	$	114
Home equity					560		539		71		812		760		144
Total
Residential mortgage					$	5,952	$	5,022	$	74	$	7,373	$	6,197	$	114
Home equity					1,822		1,295		71		3,760		2,359		144

	Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾
	Three Months Ended September 30								Nine Months Ended September 30
	2019				2018				2019				2018
With no recorded allowance
Residential mortgage	$	3,746	$	37	$	5,056	$	52	$	3,955	$	122	$	5,685	$	167
Home equity	1,041		16		1,908		27		1,368		64		1,937		79
With an allowance recorded
Residential mortgage	$	1,551	$	13	$	2,330	$	22	$	1,696	$	47	$	2,508	$	71
Home equity	591		5		864		7		670		17		879		19
Total
Residential mortgage	$	5,297	$	50	$	7,386	$	74	$	5,651	$	169	$	8,193	$	238
Home equity	1,632		21		2,772		34		2,038		81		2,816		98


⁽¹⁾	Interest income recognized includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing impaired loans for which the principal is considered collectible.

The table below presents the September 30, 2019 and 2018 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of consumer real estate loans that were modified in TDRs during the three and nine months ended September 30, 2019 and 2018. The following Consumer Real Estate portfolio segment tables include loans that were initially classified as TDRs during the period and also loans that had previously been classified as TDRs and were modified again during the period.




Consumer Real Estate – TDRs Entered into During the Three and Nine Months Ended September 30, 2019 and 2018

	Unpaid Principal Balance		Carrying Value		Pre-Modification Interest Rate		Post-Modification Interest Rate ⁽¹⁾		Unpaid Principal Balance		Carrying Value		Pre-Modification Interest Rate		Post-Modification Interest Rate ⁽¹⁾
(Dollars in millions)	Three Months Ended September 30, 2019								Nine Months Ended September 30, 2019
Residential mortgage	$	148	$	125	4.29	%	4.25	%	$	368	$	301	4.24	%	4.22	%
Home equity	34		27		5.28		5.27		129		94		5.19		4.60
Total	$	182	$	152	4.48		4.44		$	497	$	395	4.49		4.32

	Three Months Ended September 30, 2018								Nine Months Ended September 30, 2018
Residential mortgage	$	226	$	195	4.27	%	4.12	%	$	747	$	635	4.22	%	4.03	%
Home equity	120		90		4.67		4.60		482		356		4.42		3.78
Total	$	346	$	285	4.41		4.29		$	1,229	$	991	4.30		3.94


⁽¹⁾	The post-modification interest rate reflects the interest rate applicable only to permanently completed modifications, which exclude loans that are in a trial modification period.

The table below presents the September 30, 2019 and 2018 carrying value for consumer real estate loans that were modified in a TDR during the three and nine months ended September 30, 2019 and 2018, by type of modification.



		Bank of America 66




Consumer Real Estate – Modification Programs

	TDRs Entered into During the
	Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	2019		2018		2019		2018
Modifications under government programs ⁽¹⁾	$	8	$	12	$	32	$	48
Modifications under proprietary programs ⁽¹⁾	18		33		125		446
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	16		39		54		121
Trial modifications	110		201		184		376
Total modifications	$	152	$	285	$	395	$	991


⁽¹⁾	Includes other modifications such as term or payment extensions and repayment plans. During the nine months ended September 30, 2018, this included $197 million of modifications that met the definition of a TDR related to the 2017 hurricanes. These modifications had been written down to their net realizable value less costs to sell or were fully insured as of September 30, 2018.


⁽²⁾	Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.

The table below presents the carrying value of consumer real estate loans that entered into payment default during the three and nine months ended September 30, 2019 and 2018 that were modified in a TDR during the 12 months preceding payment default. A payment default for consumer real estate TDRs is recognized when a borrower has missed three monthly payments (not necessarily consecutively) since modification.




Consumer Real Estate – TDRs Entering Payment Default that were Modified During the Preceding 12 Months

	Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	2019		2018		2019		2018
Modifications under government programs	$	7	$	8	$	20	$	32
Modifications under proprietary programs	19		43		68		130
Loans discharged in Chapter 7 bankruptcy ⁽¹⁾	8		12		26		51
Trial modifications ⁽²⁾	13		18		40		85
Total modifications	$	47	$	81	$	154	$	298


⁽¹⁾	Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.


⁽²⁾	Includes trial modification offers to which the customer did not respond.

Credit Card and Other Consumer

Impaired loans within the Credit Card and Other Consumer portfolio segment consist entirely of loans that have been modified in TDRs. The Corporation seeks to assist customers that are experiencing financial difficulty by modifying loans while ensuring compliance with federal and local laws and guidelines. Credit card and other consumer loan modifications generally involve reducing the interest rate on the account, placing the customer on a fixed payment plan not exceeding 60 months and canceling the customer’s available line of credit, all of which are considered TDRs. The Corporation makes loan modifications directly with borrowers for debt held only by the Corporation (internal programs).

Additionally, the Corporation makes loan modifications for borrowers working with third-party renegotiation agencies that provide solutions to customers’ entire unsecured debt structures (external programs). The Corporation classifies other secured consumer loans that have been discharged in Chapter 7 bankruptcy as TDRs which are written down to collateral value and placed on nonaccrual status no later than the time of discharge.

The following table provides the unpaid principal balance, carrying value and related allowance at September 30, 2019 and December 31, 2018 and the average carrying value for the three and nine months ended September 30, 2019 and 2018 for TDRs within the Credit Card and Other Consumer portfolio segment.




Impaired Loans – Credit Card and Other Consumer

	Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance		Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance
	Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance		Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance
(Dollars in millions)	September 30, 2019						December 31, 2018
With no recorded allowance
Direct/Indirect consumer	$	74	$	33	$	—	$	72	$	33	$	—
With an allowance recorded
U.S. credit card	$	610	$	624	$	179	$	522	$	533	$	154
Total
U.S. credit card	$	610	$	624	$	179	$	522	$	533	$	154
Direct/Indirect consumer	74		33		—		72		33		—

					Average Carrying Value ⁽²⁾
					Three Months Ended September 30				Nine Months Ended September 30
					2019		2018		2019		2018
With no recorded allowance
Direct/Indirect consumer					$	33	$	30	$	33	$	29
With an allowance recorded
U.S. credit card					$	609	$	498	$	579	$	481


⁽¹⁾	Includes accrued interest and fees.


⁽²⁾	The related interest income recognized, which includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing impaired loans for which the principal was considered collectible, was not significant for the three and nine months ended September 30, 2019 and 2018.



67 Bank of America

The table below provides information on the Corporation’s primary modification programs for the Credit Card and Other Consumer TDR portfolio at September 30, 2019 and December 31, 2018.




Credit Card and Other Consumer – TDRs by Program Type

	U.S. Credit Card						Direct/Indirect Consumer						Total TDRs by Program Type
(Dollars in millions)	September 30 2019			December 31 2018			September 30 2019			December 31 2018			September 30 2019			December 31 2018
Internal programs	$	322		$	259		$	—		$	—		$	322		$	259
External programs	301			273			—			—			301			273
Other	1			1			33			33			34			34
Total	$	624		$	533		$	33		$	33		$	657		$	566
Percent of balances current or less than 30 days past due	85		%	85		%	80		%	81		%	85		%	85		%

The table below provides information on the Corporation’s Credit Card and Other Consumer TDR portfolio including the September 30, 2019 and 2018 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of loans that were modified in TDRs during the three and nine months ended September 30, 2019 and 2018.




Credit Card and Other Consumer – TDRs Entered into During the Three and Nine Months Ended September 30, 2019 and 2018

	Unpaid Principal Balance		Carrying Value ⁽¹⁾		Pre-Modification Interest Rate		Post-Modification Interest Rate		Unpaid Principal Balance		Carrying Value ⁽¹⁾		Pre-Modification Interest Rate		Post-Modification Interest Rate
(Dollars in millions)	Three Months Ended September 30, 2019								Nine Months Ended September 30, 2019
U.S. credit card	$	100	$	107	19.62	%	5.36	%	$	267	$	281	19.50	%	5.35	%
Direct/Indirect consumer	19		11		5.32		5.32		35		19		5.23		5.22
Total	$	119	$	118	18.36		5.36		$	302	$	300	18.62		5.34

	Three Months Ended September 30, 2018								Nine Months Ended September 30, 2018
U.S. credit card	$	84	$	91	19.45	%	5.19	%	$	212	$	224	19.30	%	5.24	%
Direct/Indirect consumer	18		10		4.61		4.50		33		19		4.77		4.58
Total	$	102	$	101	17.94		5.12		$	245	$	243	18.16		5.19


⁽¹⁾	Includes accrued interest and fees.

Credit card and other consumer loans are deemed to be in payment default during the quarter in which a borrower misses the second of two consecutive payments. Payment defaults are one of the factors considered when projecting future cash flows in the calculation of the allowance for loan and lease losses for impaired credit card and other consumer loans. Based on historical experience, the Corporation estimates that 14 percent of new U.S. credit card TDRs and 16 percent of new direct/indirect consumer TDRs may be in payment default within 12 months after modification.

Commercial Loans

Impaired commercial loans include nonperforming loans and leases and TDRs (both performing and nonperforming). For more information on impaired commercial loans, see Note 5 – Outstanding Loans and Leases to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.

At September 30, 2019 and December 31, 2018, remaining commitments to lend additional funds to debtors whose terms have been modified in a commercial loan TDR were $425 million and $297 million. The balance of commercial TDRs in payment default was not significant at September 30, 2019 and December 31, 2018.

The table below provides information on impaired loans in the Commercial loan portfolio segment including the unpaid principal balance, carrying value and related allowance at September 30, 2019 and December 31, 2018, and the average carrying value for the three and nine months ended September 30, 2019 and 2018. Certain impaired commercial loans do not have a related allowance because the valuation of these impaired loans exceeded the carrying value, which is net of previously recorded charge-offs.



		Bank of America 68




Impaired Loans – Commercial

	Unpaid Principal Balance		Carrying Value		Related Allowance		Unpaid Principal Balance		Carrying Value		Related Allowance
	Unpaid Principal Balance		Carrying Value		Related Allowance		Unpaid Principal Balance		Carrying Value		Related Allowance
(Dollars in millions)	September 30, 2019						December 31, 2018
With no recorded allowance
U.S. commercial	$	620	$	606	$	—	$	638	$	616	$	—
Non-U.S. commercial	24		24		—		93		93		—
Commercial real estate	22		22		—		—		—		—
Commercial lease financing	13		13		—		—		—		—
With an allowance recorded
U.S. commercial	$	1,659	$	1,495	$	144	$	1,437	$	1,270	$	121
Non-U.S. commercial	254		253		10		155		149		30
Commercial real estate	319		242		59		247		162		16
Commercial lease financing	58		57		3		71		71		—
U.S. small business commercial ⁽¹⁾	84		75		28		83		72		29
Total
U.S. commercial	$	2,279	$	2,101	$	144	$	2,075	$	1,886	$	121
Non-U.S. commercial	278		277		10		248		242		30
Commercial real estate	341		264		59		247		162		16
Commercial lease financing	71		70		3		71		71		—
U.S. small business commercial ⁽¹⁾	84		75		28		83		72		29

					Average Carrying Value ⁽²⁾
					Three Months Ended September 30				Nine Months Ended September 30
					2019		2018		2019		2018
With no recorded allowance
U.S. commercial					$	612	$	640	$	659	$	659
Non-U.S. commercial					57		9		81		35
Commercial real estate					65		68		115		72
Commercial lease financing					7		3		2		4
With an allowance recorded
U.S. commercial					$	1,296	$	1,159	$	1,242	$	1,168
Non-U.S. commercial					251		287		230		381
Commercial real estate					158		10		118		19
Commercial lease financing					72		58		80		32
U.S. small business commercial⁽¹⁾					74		74		74		74
Total
U.S. commercial					$	1,908	$	1,799	$	1,901	$	1,827
Non-U.S. commercial					308		296		311		416
Commercial real estate					223		78		233		91
Commercial lease financing					79		61		82		36
U.S. small business commercial⁽¹⁾					74		74		74		74


⁽¹⁾	Includes U.S. small business commercial renegotiated TDR loans and related allowance.


⁽²⁾	The related interest income recognized, which includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing impaired loans for which the principal was considered collectible, was not significant for the three and nine months ended September 30, 2019 and 2018.

Loans Held-for-sale

The Corporation had LHFS of $9.8 billion and $10.4 billion at September 30, 2019 and December 31, 2018. Cash and non-cash proceeds from sales and paydowns of loans originally classified as LHFS were $19.6 billion and $23.4 billion for the nine months ended September 30, 2019 and 2018. Cash used for originations and purchases of LHFS totaled $18.7 billion and $16.8 billion for the nine months ended September 30, 2019 and 2018.



69 Bank of America

NOTE 6 Allowance for Credit Losses

The table below summarizes the changes in the allowance for credit losses by portfolio segment for the three and nine months ended September 30, 2019 and 2018.




	Consumer Real Estate			Credit Card and Other Consumer			Commercial			Total
(Dollars in millions)	Three Months Ended September 30, 2019
Allowance for loan and lease losses, July 1	$	719		$	3,970		$	4,838		$	9,527
Loans and leases charged off	(199		)	(1,093		)	(220		)	(1,512		)
Recoveries of loans and leases previously charged off	439			231			31			701
Net charge-offs	240			(862		)	(189		)	(811		)
Provision for loan and lease losses	(312		)	876			212			776
Other ⁽¹⁾	(56		)	1			(4		)	(59		)
Allowance for loan and lease losses, September 30	591			3,985			4,857			9,433
Reserve for unfunded lending commitments, July 1	—			—			806			806
Provision for unfunded lending commitments	—			—			3			3
Reserve for unfunded lending commitments, September 30	—			—			809			809
Allowance for credit losses, September 30	$	591		$	3,985		$	5,666		$	10,242

	Three Months Ended September 30, 2018
Allowance for loan and lease losses, July 1	$	1,366		$	3,774		$	4,910		$	10,050
Loans and leases charged off	(155		)	(992		)	(189		)	(1,336		)
Recoveries of loans and leases previously charged off	163			208			33			404
Net charge-offs	8			(784		)	(156		)	(932		)
Provision for loan and lease losses	(119		)	829			1			711
Other ⁽¹⁾	(97		)	3			(1		)	(95		)
Allowance for loan and lease losses, September 30	1,158			3,822			4,754			9,734
Reserve for unfunded lending commitments, July 1	—			—			787			787
Provision for unfunded lending commitments	—			—			5			5
Reserve for unfunded lending commitments, September 30	—			—			792			792
Allowance for credit losses, September 30	$	1,158		$	3,822		$	5,546		$	10,526

(Dollars in millions)	Nine Months Ended September 30, 2019
Allowance for loan and lease losses, January 1	$	928		$	3,874		$	4,799		$	9,601
Loans and leases charged off	(455		)	(3,225		)	(630		)	(4,310		)
Recoveries of loans and leases previously charged off	852			680			89			1,621
Net charge-offs	397			(2,545		)	(541		)	(2,689		)
Provision for loan and lease losses	(621		)	2,655			603			2,637
Other ⁽¹⁾	(113		)	1			(4		)	(116		)
Allowance for loan and lease losses, September 30	591			3,985			4,857			9,433
Reserve for unfunded lending commitments, January 1	—			—			797			797
Provision for unfunded lending commitments	—			—			12			12
Reserve for unfunded lending commitments, September 30	—			—			809			809
Allowance for credit losses, September 30	$	591		$	3,985		$	5,666		$	10,242

	Nine Months Ended September 30, 2018
Allowance for loan and lease losses, January 1	$	1,720		$	3,663		$	5,010		$	10,393
Loans and leases charged off	(466		)	(3,031		)	(513		)	(4,010		)
Recoveries of loans and leases previously charged off	440			621			110			1,171
Net charge-offs	(26		)	(2,410		)	(403		)	(2,839		)
Provision for loan and lease losses	(368		)	2,583			147			2,362
Other ⁽¹⁾	(168		)	(14		)	—			(182		)
Allowance for loan and lease losses, September 30	1,158			3,822			4,754			9,734
Reserve for unfunded lending commitments, January 1	—			—			777			777
Provision for unfunded lending commitments	—			—			15			15
Reserve for unfunded lending commitments, September 30	—			—			792			792
Allowance for credit losses, September 30	$	1,158		$	3,822		$	5,546		$	10,526


⁽¹⁾	Primarily represents write-offs of purchased credit-impaired loans, the net impact of portfolio sales, and transfers to LHFS.



		Bank of America 70

The table below presents the allowance and the carrying value of outstanding loans and leases by portfolio segment at September 30, 2019 and December 31, 2018.




	Consumer Real Estate			Credit Card and Other Consumer			Commercial			Total
(Dollars in millions)	September 30, 2019
Impaired loans and troubled debt restructurings ⁽¹⁾
Allowance for loan and lease losses	$	145		$	179		$	244		$	568
Carrying value ⁽²⁾	6,317			657			2,787			9,761
Allowance as a percentage of carrying value	2.30		%	27.25		%	8.75		%	5.82		%
Loans collectively evaluated for impairment
Allowance for loan and lease losses	$	446		$	3,806		$	4,613		$	8,865
Carrying value ^{(2, 3)}	262,729			185,333			507,413			955,475
Allowance as a percentage of carrying value ⁽³⁾	0.17		%	2.05		%	0.91		%	0.93		%
Total
Allowance for loan and lease losses	$	591		$	3,985		$	4,857		$	9,433
Carrying value ^{(2, 3)}	269,046			185,990			510,200			965,236
Allowance as a percentage of carrying value ⁽³⁾	0.22		%	2.14		%	0.95		%	0.98		%

	December 31, 2018
Impaired loans and troubled debt restructurings ⁽¹⁾
Allowance for loan and lease losses	$	258		$	154		$	196		$	608
Carrying value ⁽²⁾	8,556			566			2,433			11,555
Allowance as a percentage of carrying value	3.02		%	27.21		%	8.06		%	5.26		%
Loans collectively evaluated for impairment
Allowance for loan and lease losses	$	670		$	3,720		$	4,603		$	8,993
Carrying value ^{(2, 3)}	248,287			189,140			493,564			930,991
Allowance as a percentage of carrying value ⁽³⁾	0.27		%	1.97		%	0.93		%	0.97		%
Total
Allowance for loan and lease losses	$	928		$	3,874		$	4,799		$	9,601
Carrying value ^{(2, 3)}	256,843			189,706			495,997			942,546
Allowance as a percentage of carrying value ⁽³⁾	0.36		%	2.04		%	0.97		%	1.02		%


⁽¹⁾	Impaired loans include nonperforming commercial loans and leases, as well as all TDRs, including both commercial and consumer TDRs. Impaired loans exclude nonperforming consumer loans unless they are TDRs, and all consumer and commercial loans accounted for under the fair value option.


⁽²⁾	Amounts are presented gross of the allowance for loan and lease losses.


⁽³⁾	Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of $7.7 billion and $4.3 billion at September 30, 2019 and December 31, 2018.

NOTE 7 Securitizations and Other Variable Interest Entities

The Corporation utilizes VIEs in the ordinary course of business to support its own and its customers’ financing and investing needs. The tables in this Note present the assets, liabilities and maximum loss exposure of consolidated and unconsolidated VIEs at September 30, 2019 and December 31, 2018 in situations where the Corporation has continuing involvement with transferred assets or if the Corporation otherwise has a variable interest in the VIE. For more information on the Corporation’s use of VIEs and related maximum loss exposure, see Note 1 – Summary of Significant Accounting Principles and Note 7 – Securitizations and Other Variable Interest Entities to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.

The Corporation invests in ABS issued by third-party VIEs with which it has no other form of involvement and enters into certain commercial lending arrangements that may also incorporate the use of VIEs, for example to hold collateral. These securities and loans are included in Note 4 – Securities or Note 5 – Outstanding Loans and Leases.

The Corporation did not provide financial support to consolidated or unconsolidated VIEs during the nine months ended September 30, 2019 or the year ended December 31, 2018 that it was not previously contractually required to provide, nor does it intend to do so.

The Corporation had liquidity commitments, including written put options and collateral value guarantees, with certain unconsolidated VIEs of $1.0 billion and $218 million at September 30, 2019 and December 31, 2018.

First-lien Mortgage Securitizations

As part of its mortgage banking activities, the Corporation securitizes a portion of the first-lien residential mortgage loans it originates or purchases from third parties. Except as described in Note 11 – Commitments and Contingencies, the Corporation does not provide guarantees or recourse to the securitization trusts other than standard representations and warranties.

The following table summarizes select information related to first-lien mortgage securitizations for the three and nine months ended September 30, 2019 and 2018.



71 Bank of America




First-lien Mortgage Securitizations

	Residential Mortgage - Agency								Commercial Mortgage
	Three Months Ended September 30				Nine Months Ended September 30				Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	2019		2018		2019		2018		2019		2018		2019		2018
Proceeds from loan sales ⁽¹⁾	$	2,718	$	1,650	$	6,020	$	4,800	$	1,360	$	1,868	$	4,541	$	4,146
Gains on securitizations ⁽²⁾	8		13		23		54		28		29		73		68
Repurchases from securitization trusts ⁽³⁾	209		357		695		1,215		—		—		—		—


⁽¹⁾	The Corporation transfers residential mortgage loans to securitizations sponsored primarily by the GSEs or Government National Mortgage Association (GNMA) in the normal course of business and primarily receives RMBS in exchange. Substantially all of these securities are classified as Level 2 within the fair value hierarchy and are sold shortly after receipt.

⁽²⁾

A majority of the first-lien residential mortgage loans securitized are initially classified as LHFS and accounted for under the fair value option. Gains recognized on these LHFS prior to securitization, which totaled $19 million and $38 million, net of hedges, during the three and nine months ended September 30, 2019 compared to $15 million and $60 million for the same periods in 2018, are not included in the table above.


⁽³⁾	The Corporation may have the option to repurchase delinquent loans out of securitization trusts, which reduces the amount of servicing advances it is required to make. The Corporation may also repurchase loans from securitization trusts to perform modifications. Repurchased loans include FHA-insured mortgages collateralizing GNMA securities.

The Corporation recognizes consumer MSRs from the sale or securitization of consumer real estate loans. The unpaid principal balance of loans serviced for investors, including residential mortgage and home equity loans, totaled $201.3 billion and $234.4 billion at September 30, 2019 and 2018. Servicing fee and ancillary fee income on serviced loans was $144 million and $436 million during the three and nine months ended September 30, 2019 compared to $168 million and $546 million for the same periods in 2018. Servicing advances on serviced loans, including loans serviced for others and loans held for investment, were $2.5 billion and $3.3 billion at September 30, 2019 and December 31,

2018. For more information on MSRs, see Note 15 – Fair Value Measurements.

During the three and nine months ended September 30, 2019, the Corporation deconsolidated agency residential mortgage securitization trusts with total assets of $65 million and $1.2 billion. There were no significant deconsolidations during the three and nine months ended September 30, 2018.

The following table summarizes select information related to first-lien mortgage securitization trusts in which the Corporation held a variable interest at September 30, 2019 and December 31, 2018.




First-lien Mortgage VIEs

	Residential Mortgage
					Non-agency
	Agency				Prime				Subprime				Alt-A				Commercial Mortgage
(Dollars in millions)	Sept 30 2019		December 31 2018		Sept 30 2019		December 31 2018		Sept 30 2019		December 31 2018		Sept 30 2019		December 31 2018		Sept 30 2019		December 31 2018
Unconsolidated VIEs
Maximum loss exposure ⁽¹⁾	$	15,446	$	16,011	$	362	$	448	$	1,825	$	1,897	$	150	$	217	$	959	$	767
On-balance sheet assets
Senior securities:
Trading account assets	$	1,221	$	460	$	8	$	30	$	56	$	36	$	30	$	90	$	141	$	97
Debt securities carried at fair value	8,608		9,381		207		246		1,397		1,470		118		125		—		—
Held-to-maturity securities	5,617		6,170		—		—		—		—		—		—		642		528
All other assets	—		—		3		3		34		37		2		2		56		40
Total retained positions	$	15,446	$	16,011	$	218	$	279	$	1,487	$	1,543	$	150	$	217	$	839	$	665
Principal balance outstanding ⁽²⁾	$	167,502	$	187,512	$	7,696	$	8,954	$	8,512	$	8,719	$	20,769	$	23,467	$	50,128	$	43,593

Consolidated VIEs
Maximum loss exposure ⁽¹⁾	$	11,321	$	13,296	$	5	$	7	$	—	$	—	$	—	$	—	$	—	$	76
On-balance sheet assets
Trading account assets	$	718	$	1,318	$	126	$	150	$	—	$	—	$	—	$	—	$	—	$	76
Loans and leases, net	10,426		11,858		—		—		—		—		—		—		—		—
All other assets	178		143		—		—		—		—		—		—		—		—
Total assets	$	11,322	$	13,319	$	126	$	150	$	—	$	—	$	—	$	—	$	—	$	76
Total liabilities	$	4	$	26	$	121	$	143	$	—	$	—	$	—	$	—	$	—	$	—

⁽¹⁾

Maximum loss exposure includes obligations under loss-sharing reinsurance and other arrangements for non-agency residential mortgage and commercial mortgage securitizations, but excludes the reserve for representations and warranties obligations and corporate guarantees and also excludes servicing advances and other servicing rights and obligations. For additional information, see Note 11 – Commitments and Contingencies and Note 15 – Fair Value Measurements.


⁽²⁾	Principal balance outstanding includes loans where the Corporation was the transferor to securitization VIEs with which it has continuing involvement, which may include servicing the loans.

Other Asset-backed Securitizations

The following table summarizes select information related to home equity, credit card and other asset-backed VIEs in which the Corporation held a variable interest at September 30, 2019 and December 31, 2018.



		Bank of America 72




Home Equity Loan, Credit Card and Other Asset-backed VIEs

	Home Equity ⁽¹⁾						Credit Card ^{(2, 3)}						Resecuritization Trusts				Municipal Bond Trusts
(Dollars in millions)	Sept 30 2019			December 31 2018			Sept 30 2019			December 31 2018			Sept 30 2019		December 31 2018		Sept 30 2019		December 31 2018
Unconsolidated VIEs
Maximum loss exposure	$	661		$	908		$	—		$	—		$	6,979	$	7,647	$	3,424	$	2,150
On-balance sheet assets
Senior securities ⁽⁴⁾:
Trading account assets	$	—		$	—		$	—		$	—		$	1,368	$	1,419	$	—	$	26
Debt securities carried at fair value	23			27			—			—			1,204		1,337		—		—
Held-to-maturity securities	—			—			—			—			4,407		4,891		—		—
Total retained positions	$	23		$	27		$	—		$	—		$	6,979	$	7,647	$	—	$	26
Total assets of VIEs ⁽⁵⁾	$	1,102		$	1,813		$	—		$	—		$	17,713	$	16,949	$	4,120	$	2,829

Consolidated VIEs
Maximum loss exposure	$	68		$	85		$	17,983		$	18,800		$	122	$	128	$	2,780	$	1,540
On-balance sheet assets
Trading account assets	$	—		$	—		$	—		$	—		$	141	$	366	$	2,603	$	1,553
Loans and leases	130			133			27,024			29,906			—		—		—		—
Allowance for loan and lease losses	(1		)	(5		)	(829		)	(901		)	—		—		—		—
All other assets	4			4			114			136			—		—		177		1
Total assets	$	133		$	132		$	26,309		$	29,141		$	141	$	366	$	2,780	$	1,554
On-balance sheet liabilities
Short-term borrowings	$	—		$	—		$	—		$	—		$	—	$	—	$	2,274	$	742
Long-term debt	70			55			8,305			10,321			19		238		—		12
All other liabilities	—			—			21			20			—		—		—		—
Total liabilities	$	70		$	55		$	8,326		$	10,341		$	19	$	238	$	2,274	$	754

⁽¹⁾

For unconsolidated home equity loan VIEs, the maximum loss exposure includes outstanding trust certificates issued by trusts in rapid amortization, net of recorded reserves. For both consolidated and unconsolidated home equity loan VIEs, the maximum loss exposure excludes the reserve for representations and warranties obligations and corporate guarantees. For additional information, see Note 11 – Commitments and Contingencies.


⁽²⁾	At September 30, 2019 and December 31, 2018, loans and leases in the consolidated credit card trust included $10.5 billion and $11.0 billion of seller’s interest.


⁽³⁾	At September 30, 2019 and December 31, 2018, all other assets in the consolidated credit card trust included certain short-term investments and unbilled accrued interest and fees.


⁽⁴⁾	The retained senior securities were valued using quoted market prices or observable market inputs (Level 2 of the fair value hierarchy).


⁽⁵⁾	Total assets of VIEs includes loans the Corporation transferred with which it has continuing involvement, which may include servicing the loan.

Home Equity Loans

The Corporation retains interests, primarily senior securities, in home equity securitization trusts to which it transferred home equity loans. In addition, the Corporation may be obligated to provide subordinate funding to the trusts during a rapid amortization event. This obligation is included in the maximum loss exposure in the table above. The charges that will ultimately be recorded as a result of the rapid amortization events depend on the undrawn portion of the home equity lines of credit, performance of the loans, the amount of subsequent draws and the timing of related cash flows.

Credit Card Securitizations

The Corporation securitizes originated and purchased credit card loans. The Corporation’s continuing involvement with the securitization trust includes servicing the receivables, retaining an undivided interest (seller’s interest) in the receivables, and holding certain retained interests including subordinate interests in accrued interest and fees on the securitized receivables and cash reserve accounts.

During the nine months ended September 30, 2019 and 2018, there were $1.3 billion and $4.0 billion of new senior debt securities issued to third-party investors from the credit card securitization trust.

At September 30, 2019 and December 31, 2018, the Corporation held subordinate securities issued by the credit card securitization trust with a notional principal amount of $7.4 billion and $7.7 billion. These securities serve as a form of credit enhancement to the senior debt securities and have a stated interest rate of zero percent. There were $202 million and $650 million of these subordinate securities issued during the nine months ended September 30, 2019 and 2018.

Resecuritization Trusts

The Corporation transfers securities, typically MBS, into resecuritization VIEs at the request of customers seeking securities with specific characteristics. Generally, there are no significant ongoing activities performed in a resecuritization trust, and no single investor has the unilateral ability to liquidate the trust.

The Corporation resecuritized $5.2 billion and $13.7 billion of securities during the three and nine months ended September 30, 2019 compared to $7.7 billion and $21.3 billion for the same periods in 2018. Securities transferred into resecuritization VIEs were measured at fair value with changes in fair value recorded in trading account income prior to the resecuritization and, accordingly, no gain or loss on sale was recorded. Resecuritization proceeds included securities with an initial fair value of $750 million and $3.5 billion during the three and nine months ended September 30, 2019 compared to $1.5 billion and $3.7 billion for the same periods in 2018. Substantially all of the other securities received as resecuritization proceeds were classified as trading securities and were categorized as Level 2 within the fair value hierarchy.

Municipal Bond Trusts

The Corporation administers municipal bond trusts that hold highly-rated, long-term, fixed-rate municipal bonds. The trusts obtain financing by issuing floating-rate trust certificates that reprice on a weekly or other short-term basis to third-party investors.

The Corporation’s liquidity commitments to unconsolidated municipal bond trusts, including those for which the Corporation was transferor, totaled $3.4 billion and $2.1 billion at September 30, 2019 and December 31, 2018. The weighted-average remaining life of bonds held in the trusts at September 30, 2019 was 10.8 years. There were no significant write-downs or downgrades of assets or issuers during the nine months ended September 30, 2019 and 2018.



73 Bank of America

Other Variable Interest Entities

The table below summarizes select information related to other VIEs in which the Corporation held a variable interest at September 30, 2019 and December 31, 2018.




Other VIEs

	Consolidated			Unconsolidated			Total			Consolidated			Unconsolidated			Total
(Dollars in millions)	September 30, 2019									December 31, 2018
Maximum loss exposure	$	4,009		$	25,706		$	29,715		$	4,177		$	24,498		$	28,675
On-balance sheet assets
Trading account assets	$	2,170		$	715		$	2,885		$	2,335		$	860		$	3,195
Debt securities carried at fair value	—			76			76			—			84			84
Loans and leases	1,804			3,416			5,220			1,949			3,940			5,889
Allowance for loan and lease losses	(2		)	(34		)	(36		)	(2		)	(30		)	(32		)
All other assets	82			18,944			19,026			53			18,885			18,938
Total	$	4,054		$	23,117		$	27,171		$	4,335		$	23,739		$	28,074
On-balance sheet liabilities
Long-term debt	$	44		$	—		$	44		$	152		$	—		$	152
All other liabilities	2			4,652			4,654			7			4,231			4,238
Total	$	46		$	4,652		$	4,698		$	159		$	4,231		$	4,390
Total assets of VIEs	$	4,054		$	96,045		$	100,099		$	4,335		$	94,746		$	99,081

Customer VIEs

Customer VIEs include credit-linked, equity-linked and commodity-linked note VIEs, repackaging VIEs and asset acquisition VIEs, which are typically created on behalf of customers who wish to obtain market or credit exposure to a specific company, index, commodity or financial instrument.

The Corporation’s maximum loss exposure to consolidated and unconsolidated customer VIEs totaled $2.2 billion and $2.1 billion at September 30, 2019 and December 31, 2018, including the notional amount of derivatives to which the Corporation is a counterparty, net of losses previously recorded, and the Corporation’s investment, if any, in securities issued by the VIEs.

Collateralized Debt Obligation VIEs

The Corporation receives fees for structuring CDO VIEs, which hold diversified pools of fixed-income securities, typically corporate debt or ABS, which the CDO VIEs fund by issuing multiple tranches of debt and equity securities. CDOs are generally managed by third-party portfolio managers. The Corporation typically transfers assets to these CDOs, holds securities issued by the CDOs and may be a derivative counterparty to the CDOs. The Corporation’s maximum loss exposure to consolidated and unconsolidated CDOs totaled $275 million and $421 million at September 30, 2019 and December 31, 2018.

Investment VIEs

The Corporation sponsors, invests in or provides financing, which may be in connection with the sale of assets, to a variety of investment VIEs that hold loans, real estate, debt securities or other financial instruments and are designed to provide the desired investment profile to investors or the Corporation. At September 30, 2019 and December 31, 2018, the Corporation’s consolidated investment VIEs had total assets of $105 million and $270 million. The Corporation also held investments in unconsolidated VIEs with total assets of $34.5 billion and $37.7 billion at September 30, 2019 and December 31, 2018. The Corporation’s maximum loss exposure associated with both consolidated and unconsolidated investment VIEs totaled $7.0 billion and $7.2 billion at September 30, 2019 and December 31, 2018 comprised primarily of on-balance sheet assets less non-recourse liabilities.

Leveraged Lease Trusts

The Corporation’s net investment in consolidated leveraged lease trusts totaled $1.7 billion and $1.8 billion at September 30, 2019

and December 31, 2018. The trusts hold long-lived equipment such as rail cars, power generation and distribution equipment, and commercial aircraft. The Corporation structures the trusts and holds a significant residual interest. The net investment represents the Corporation’s maximum loss exposure to the trusts in the unlikely event that the leveraged lease investments become worthless. Debt issued by the leveraged lease trusts is non-recourse to the Corporation.

Tax Credit VIEs

The Corporation holds investments in unconsolidated limited partnerships and similar entities that construct, own and operate affordable housing, wind and solar projects. An unrelated third party is typically the general partner or managing member and has control over the significant activities of the VIE. The Corporation earns a return primarily through the receipt of tax credits allocated to the projects. The maximum loss exposure included in the Other VIEs table was $17.2 billion and $17.0 billion at September 30, 2019 and December 31, 2018. The Corporation’s risk of loss is generally mitigated by policies requiring that the project qualify for the expected tax credits prior to making its investment.

The Corporation’s investments in affordable housing partnerships, which are reported in other assets on the Consolidated Balance Sheet, totaled $9.1 billion and $8.9 billion, including unfunded commitments to provide capital contributions of $3.9 billion and $3.8 billion at September 30, 2019 and December 31, 2018. The unfunded commitments are expected to be paid over the next five years. The Corporation recognized tax credits and other tax benefits from investments in affordable housing partnerships of $276 million and $847 million and reported pretax losses in other income of $250 million and $732 million for the three and nine months ended September 30, 2019. For the same periods in 2018, the Corporation recognized tax credits and other tax benefits of $265 million and $750 million and pretax losses in other income of $215 million and $640 million. Tax credits are recognized as part of the Corporation’s annual effective tax rate used to determine tax expense in a given quarter. Accordingly, the portion of a year’s expected tax benefits recognized in any given quarter may differ from 25 percent. The Corporation may from time to time be asked to invest additional amounts to support a troubled affordable housing project. Such additional investments have not been and are not expected to be significant.



		Bank of America 74

NOTE 8 Goodwill and Intangible Assets

Goodwill

The table below presents goodwill balances by business segment and All Other at September 30, 2019 and December 31, 2018. The reporting units utilized for goodwill impairment testing are the operating segments or one level below.




Goodwill

(Dollars in millions)	September 30 2019		December 31 2018
Consumer Banking	$	30,123	$	30,123
Global Wealth & Investment Management	9,677		9,677
Global Banking	23,923		23,923
Global Markets	5,182		5,182
All Other	46		46
Total goodwill	$	68,951	$	68,951

Intangible Assets

At September 30, 2019 and December 31, 2018, the net carrying value of intangible assets was $1.7 billion and $1.8 billion. Both period ends included $1.6 billion of intangible assets associated with trade names, substantially all of which had an indefinite life and, accordingly, is not being amortized. Amortization of intangibles expense was $29 million and $84 million for the three and nine months ended September 30, 2019 compared to $134 million and $404 million for the same periods in 2018.

NOTE 9 Leases

The Corporation enters into both lessor and lessee arrangements. For more information on lease accounting, see Note 1 – Summary of Significant Accounting Principles and on lease financing receivables, see Note 5 – Outstanding Loans and Leases.

Lessor Arrangements

The Corporation’s lessor arrangements primarily consist of operating, sales-type and direct financing leases for equipment. Lease agreements may include options to renew and for the lessee to purchase the leased equipment at the end of the lease term.

At September 30, 2019, the total net investment in sales-type and direct financing leases was $22.0 billion, comprised of $19.5 billion in lease receivables and $2.5 billion in unguaranteed residuals. In certain cases, the Corporation obtains third-party residual value insurance to reduce its residual asset risk. The carrying value of residual assets with third-party residual value insurance for at least a portion of the asset value was $5.7 billion.

For the three and nine months ended September 30, 2019, total lease income was $425 million and $1.3 billion, consisting of $198 million and $601 million from sales-type and direct financing leases and $227 million and $663 million from operating leases.

Lessee Arrangements

The Corporation’s lessee arrangements predominantly consist of operating leases for premises and equipment; the Corporation’s financing leases are not significant. Right-of-use assets were $9.8 billion and lease liabilities were $10.1 billion at September 30, 2019. The weighted-average discount rate used to calculate the present value of future minimum lease payments was four percent.

Lease terms may contain renewal and extension options and early termination features. Generally, these options do not impact the lease term because the Corporation is not reasonably certain that it will exercise the options. The weighted-average lease term was 8.2 years at September 30, 2019.

The table below provides the components of lease cost and supplemental information for the three and nine months ended September 30, 2019.




Lease Cost and Supplemental Information

(Dollars in millions)	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease cost	$	522	$	1,561
Variable lease cost ⁽¹⁾	124		364
Total lease cost⁽²⁾	$	646	$	1,925

Right-of-use assets obtained in exchange for new operating lease liabilities ⁽³⁾	$	108	$	756
Operating cash flows from operating leases ⁽⁴⁾	507		1,507


⁽¹⁾	Primarily consists of payments for common area maintenance and property taxes.


⁽²⁾	Amounts are recorded in occupancy and equipment expense in the Consolidated Statement of Income.


⁽³⁾	Represents non-cash activity and, accordingly, is not reflected in the Consolidated Statement of Cash Flows.


⁽⁴⁾	Represents cash paid for amounts included in the measurement of lease liabilities.

Maturity Analysis

The maturities of lessor and lessee arrangements outstanding at September 30, 2019 are presented in the table below based on undiscounted cash flows.




Maturities of Lessor and Lessee Arrangements

	Lessor				Lessee ⁽¹⁾
	Operating Leases		Sales-type and Direct Financing Leases ⁽²⁾		Operating Leases
(Dollars in millions)	September 30, 2019
Remainder of 2019	$	204	$	1,540	$	503
2020	775		5,810		1,944
2021	672		4,858		1,722
2022	578		3,674		1,464
2023	466		1,654		1,202
Thereafter	1,369		3,432		5,036
Total undiscounted cash flows	$	4,064	$	20,968	$	11,871
Less: Net present value adjustment			1,510		1,741
Total ⁽³⁾			$	19,458	$	10,130


⁽¹⁾	Excludes $1.7 billion in commitments under lessee arrangements that have not yet commenced with lease terms that will begin later in 2019.


⁽²⁾	Includes $15.5 billion in commercial lease financing receivables and $4.0 billion in direct/indirect consumer lease financing receivables.


⁽³⁾	Represents lease receivables for lessor arrangements and lease liabilities for lessee arrangements.

At December 31, 2018, operating lease commitments under lessee arrangements were $2.4 billion, $2.2 billion, $2.0 billion, $1.7 billion and $1.3 billion for 2019 through 2023, respectively, and $6.2 billion in the aggregate for all years thereafter. These amounts include variable lease payments and commitments under leases that have not yet commenced, both of which are excluded from the lessee maturity analysis presented in the table above.



75 Bank of America

NOTE 10 Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings and Restricted Cash

The table below presents federal funds sold or purchased, securities financing agreements (which include securities borrowed or purchased under agreements to resell and securities loaned or sold under agreements to repurchase) and short-term borrowings. The Corporation elects to account for certain securities financing agreements and short-term borrowings under the fair value option. For more information on the fair value option, see Note 16 – Fair Value Option.




	Amount		Rate		Amount		Rate		Amount		Rate		Amount		Rate
	Three Months Ended September 30								Nine Months Ended September 30
(Dollars in millions)	2019				2018				2019				2018
Federal funds sold and securities borrowed or purchased under agreements to resell
Average during period	$	269,129	1.83	%	$	241,426	1.31	%	$	274,822	1.82	%	$	247,183	1.15	%
Maximum month-end balance during period	278,514		n/a		267,989		n/a		280,562		n/a		267,989		n/a
Federal funds purchased and securities loaned or sold under agreements to repurchase
Average during period	$	203,702	2.35	%	$	191,693	1.88	%	$	202,632	2.43	%	$	193,854	1.71	%
Maximum month-end balance during period	202,208		n/a		189,206		n/a		203,063		n/a		199,419		n/a
Short-term borrowings
Average during period	26,579		2.29		33,410		2.89		21,728		2.62		40,048		2.49
Maximum month-end balance during period	30,682		n/a		36,043		n/a		30,682		n/a		52,480		n/a

n/a = not applicable

Offsetting of Securities Financing Agreements

The Corporation enters into securities financing agreements to accommodate customers (also referred to as “matched-book transactions”), obtain securities to cover short positions and finance inventory positions. For more information on securities financing agreements and the offsetting of securities financing transactions, see Note 10 – Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings and Restricted Cash to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.

The Securities Financing Agreements table presents securities financing agreements included on the Consolidated Balance Sheet in federal funds sold and securities borrowed or purchased under agreements to resell, and in federal funds purchased and securities loaned or sold under agreements to repurchase at September 30, 2019 and December 31, 2018. Balances are presented on a gross basis, prior to the application of counterparty netting. Gross assets and liabilities are adjusted on an aggregate basis to take into consideration the effects of legally enforceable master netting agreements. For more information on the offsetting of derivatives, see Note 3 – Derivatives.




Securities Financing Agreements

	Gross Assets/Liabilities ⁽¹⁾		Amounts Offset			Net Balance Sheet Amount		Financial Instruments ⁽²⁾			Net Assets/Liabilities
(Dollars in millions)	September 30, 2019
Securities borrowed or purchased under agreements to resell ⁽³⁾	$	436,856	$	(165,261	)	$	271,595	$	(246,906	)	$	24,689
Securities loaned or sold under agreements to repurchase	$	367,328	$	(165,261	)	$	202,067	$	(180,143	)	$	21,924
Other ⁽⁴⁾	23,399		—			23,399		(23,399		)	—
Total	$	390,727	$	(165,261	)	$	225,466	$	(203,542	)	$	21,924

	December 31, 2018
Securities borrowed or purchased under agreements to resell ⁽³⁾	$	366,274	$	(106,865	)	$	259,409	$	(240,790	)	$	18,619
Securities loaned or sold under agreements to repurchase	$	293,853	$	(106,865	)	$	186,988	$	(176,740	)	$	10,248
Other ⁽⁴⁾	19,906		—			19,906		(19,906		)	—
Total	$	313,759	$	(106,865	)	$	206,894	$	(196,646	)	$	10,248


⁽¹⁾	Includes activity where uncertainty exists as to the enforceability of certain master netting agreements under bankruptcy laws in some countries or industries.

⁽²⁾

Includes securities collateral received or pledged under repurchase or securities lending agreements where there is a legally enforceable master netting agreement. These amounts are not offset on the Consolidated Balance Sheet, but are shown as a reduction to derive a net asset or liability. Securities collateral received or pledged where the legal enforceability of the master netting agreements is uncertain is excluded from the table.


⁽³⁾	Excludes repurchase activity of $14.2 billion and $11.5 billion reported in loans and leases on the Consolidated Balance Sheet at September 30, 2019 and December 31, 2018.

⁽⁴⁾

Balance is reported in accrued expenses and other liabilities on the Consolidated Balance Sheet and relates to transactions where the Corporation acts as the lender in a securities lending agreement and receives securities that can be pledged as collateral or sold. In these transactions, the Corporation recognizes an asset at fair value, representing the securities received, and a liability, representing the obligation to return those securities.

Repurchase Agreements and Securities Loaned Transactions Accounted for as Secured Borrowings

The following tables present securities sold under agreements to repurchase and securities loaned by remaining contractual term to maturity and class of collateral pledged. Included in “Other” are transactions where the Corporation acts as the lender in a securities lending agreement and receives securities that can be pledged as collateral or sold. Certain agreements contain a right

to substitute collateral and/or terminate the agreement prior to maturity at the option of the Corporation or the counterparty. Such agreements are included in the table below based on the remaining contractual term to maturity. For more information on collateral requirements, see Note 10 – Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings and Restricted Cash to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.



		Bank of America 76




Remaining Contractual Maturity

	Overnight and Continuous		30 Days or Less		After 30 Days Through 90 Days		Greater than 90 Days ⁽¹⁾		Total
(Dollars in millions)	September 30, 2019
Securities sold under agreements to repurchase	$	193,237	$	80,022	$	31,557	$	45,706	$	350,522
Securities loaned	11,925		1,212		364		3,305		16,806
Other	23,399		—		—		—		23,399
Total	$	228,561	$	81,234	$	31,921	$	49,011	$	390,727

	December 31, 2018
Securities sold under agreements to repurchase	$	139,017	$	81,917	$	34,204	$	21,476	$	276,614
Securities loaned	7,753		4,197		1,783		3,506		17,239
Other	19,906		—		—		—		19,906
Total	$	166,676	$	86,114	$	35,987	$	24,982	$	313,759


⁽¹⁾	No agreements have maturities greater than three years.




Class of Collateral Pledged

	Securities Sold Under Agreements to Repurchase		Securities Loaned		Other		Total
(Dollars in millions)	September 30, 2019
U.S. government and agency securities	$	207,348	$	31	$	—	$	207,379
Corporate securities, trading loans and other	11,976		3,485		232		15,693
Equity securities	15,542		10,313		23,116		48,971
Non-U.S. sovereign debt	111,371		2,977		51		114,399
Mortgage trading loans and ABS	4,285		—		—		4,285
Total	$	350,522	$	16,806	$	23,399	$	390,727

	December 31, 2018
U.S. government and agency securities	$	164,664	$	—	$	—	$	164,664
Corporate securities, trading loans and other	11,400		2,163		287		13,850
Equity securities	14,090		10,869		19,572		44,531
Non-U.S. sovereign debt	81,329		4,207		47		85,583
Mortgage trading loans and ABS	5,131		—		—		5,131
Total	$	276,614	$	17,239	$	19,906	$	313,759

Restricted Cash

At September 30, 2019 and December 31, 2018, the Corporation held restricted cash included within cash and cash equivalents on the Consolidated Balance Sheet of $20.4 billion and $22.6 billion, predominantly related to cash held on deposit with the Federal Reserve Bank and non-U.S. central banks to meet reserve requirements and cash segregated in compliance with securities regulations.

NOTE 11 Commitments and Contingencies

In the normal course of business, the Corporation enters into a number of off-balance sheet commitments. These commitments expose the Corporation to varying degrees of credit and market risk and are subject to the same credit and market risk limitation reviews as those instruments recorded on the Consolidated Balance Sheet. For more information on commitments and contingencies, see Note 12 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.

Credit Extension Commitments

The Corporation enters into commitments to extend credit such as loan commitments, standby letters of credit (SBLCs) and commercial letters of credit to meet the financing needs of its customers. The following table includes the notional amount of unfunded legally binding lending commitments net of amounts

distributed (i.e., syndicated or participated) to other financial institutions. The distributed amounts were $10.9 billion and $10.7 billion at September 30, 2019 and December 31, 2018. At September 30, 2019, the carrying value of these commitments, excluding commitments accounted for under the fair value option, was $826 million, including deferred revenue of $17 million and a reserve for unfunded lending commitments of $809 million. At December 31, 2018, the comparable amounts were $813 million, $16 million and $797 million, respectively. The carrying value of these commitments is classified in accrued expenses and other liabilities on the Consolidated Balance Sheet.

Legally binding commitments to extend credit generally have specified rates and maturities. Certain of these commitments have adverse change clauses that help to protect the Corporation against deterioration in the borrower’s ability to pay.

The table below also includes the notional amount of commitments of $4.8 billion and $3.1 billion at September 30, 2019 and December 31, 2018 that are accounted for under the fair value option. However, the table excludes cumulative net fair value of $116 million and $169 million at September 30, 2019 and December 31, 2018 on these commitments, which is classified in accrued expenses and other liabilities. For more information regarding the Corporation’s loan commitments accounted for under the fair value option, see Note 16 – Fair Value Option.



77 Bank of America




Credit Extension Commitments

	Expire in One Year or Less		Expire After One Year Through Three Years		Expire After Three Years Through Five Years		Expire After Five Years		Total
(Dollars in millions)	September 30, 2019
Notional amount of credit extension commitments
Loan commitments ⁽¹⁾	$	90,401	$	150,634	$	166,467	$	20,344	$	427,846
Home equity lines of credit	1,379		1,854		5,459		34,601		43,293
Standby letters of credit and financial guarantees ⁽²⁾	20,206		10,530		3,365		1,179		35,280
Letters of credit ⁽³⁾	1,060		246		60		45		1,411
Legally binding commitments	113,046		163,264		175,351		56,169		507,830
Credit card lines ⁽⁴⁾	377,392		—		—		—		377,392
Total credit extension commitments	$	490,438	$	163,264	$	175,351	$	56,169	$	885,222

	December 31, 2018
Notional amount of credit extension commitments
Loan commitments ⁽¹⁾	$	84,910	$	142,271	$	155,298	$	22,683	$	405,162
Home equity lines of credit	2,578		2,249		3,530		34,702		43,059
Standby letters of credit and financial guarantees ⁽²⁾	22,571		9,702		2,457		1,074		35,804
Letters of credit ⁽³⁾	1,168		84		69		57		1,378
Legally binding commitments	111,227		154,306		161,354		58,516		485,403
Credit card lines ⁽⁴⁾	371,658		—		—		—		371,658
Total credit extension commitments	$	482,885	$	154,306	$	161,354	$	58,516	$	857,061


⁽¹⁾	At September 30, 2019 andDecember 31, 2018, $5.3 billion and $4.3 billion of these loan commitments are held in the form of a security.

⁽²⁾

The notional amounts of SBLCs and financial guarantees classified as investment grade and non-investment grade based on the credit quality of the underlying reference name within the instrument were $26.6 billion and $8.3 billion at September 30, 2019, and $28.3 billion and $7.1 billion at December 31, 2018. Amounts in the table include consumer SBLCs of $406 million and $372 million at September 30, 2019 and December 31, 2018.


⁽³⁾	At September 30, 2019 and December 31, 2018, included are letters of credit of $1.1 billion and $422 million related to certain liquidity commitments of VIEs. For additional information, see Note 7 – Securitizations and Other Variable Interest Entities.


⁽⁴⁾	Includes business card unused lines of credit.

Other Commitments

At September 30, 2019 and December 31, 2018, the Corporation had commitments to purchase loans (e.g., residential mortgage and commercial real estate) of $135 million and $329 million, which upon settlement will be included in loans or LHFS, and commitments to purchase commercial loans of $464 million and $463 million, which upon settlement will be included in trading account assets.

At September 30, 2019 and December 31, 2018, the Corporation had commitments to purchase commodities, primarily liquefied natural gas, of $976 million and $1.3 billion, which upon settlement will be included in trading account assets.

At September 30, 2019 and December 31, 2018, the Corporation had commitments to enter into resale and forward-dated resale and securities borrowing agreements of $119.7 billion and $59.7 billion, and commitments to enter into forward-dated repurchase and securities lending agreements of $64.4 billion and $21.2 billion. These commitments expire primarily within the next 15 months.

At September 30, 2019 and December 31, 2018, the Corporation had a commitment to originate or purchase up to $3.2 billion and $3.0 billion on a rolling 12-month basis, of auto loans and leases from a strategic partner. This commitment extends through November 2022 and can be terminated with 12 months prior notice.

Other Guarantees

Bank-owned Life Insurance Book Value Protection

The Corporation sells products that offer book value protection to insurance carriers who offer group life insurance policies to corporations, primarily banks. At September 30, 2019 and December 31, 2018, the notional amount of these guarantees totaled $7.2 billion and $9.8 billion. At September 30, 2019 and December 31, 2018, the Corporation’s maximum exposure related to these guarantees totaled $1.1 billion and $1.5 billion, with estimated maturity dates between 2033 and 2039.

Merchant Services

In accordance with credit and debit card association rules, the Corporation sponsors merchant processing servicers that process credit and debit card transactions on behalf of various merchants. If a merchant processor fails to meet its obligation regarding disputed transactions, then the Corporation could be held liable. For the three and nine months ended September 30, 2019, the sponsored entities processed $229.4 billion and $670.6 billion of transactions and recorded losses of $6 million and $17 million. For the same periods in 2018, the sponsored entities processed $220.0 billion and $646.9 billion of transactions and recorded losses of $6 million and $23 million.

At September 30, 2019 and December 31, 2018, the maximum potential exposure for sponsored transactions totaled $375.7 billion and $348.1 billion. However, the Corporation believes that the maximum potential exposure is not representative of the actual potential loss exposure and does not expect to make material payments in connection with these guarantees.

A significant portion of the Corporation's merchant processing activity is performed by a joint venture, formed in 2009, in which the Corporation holds a 49 percent ownership interest. The carrying value of the Corporation’s investment was $652 million and $2.8 billion at September 30, 2019 and December 31, 2018. The joint venture is accounted for as an equity method investment and reported in All Other. On July 29, 2019, the Corporation gave notice to the joint venture partner of the termination of the joint venture upon the conclusion of its current term in June 2020. As a result, the Corporation incurred a non-cash, pretax impairment charge in the three months ended September 30, 2019 of $2.1 billion, included in other general operating expense.

Representations and Warranties Obligations and Corporate Guarantees

For more information on representations and warranties obligations and corporate guarantees, and the related reserve and estimated range of possible loss, see Note 12 – Commitments and



		Bank of America 78

Contingencies to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.

The reserve for representations and warranties obligations and corporate guarantees was $1.8 billion and $2.0 billion at September 30, 2019 and December 31, 2018 and is included in accrued expenses and other liabilities on the Consolidated Balance Sheet and the related provision is included in other income in the Consolidated Statement of Income. The representations and warranties reserve represents the Corporation’s best estimate of probable incurred losses. It is reasonably possible that future representations and warranties losses may occur in excess of the amounts recorded for these exposures. See Litigation and Regulatory Matters below for the Corporation’s combined range of possible loss in excess of the reserve for representations and warranties and the accrued liability for litigation.

Other Guarantees

The Corporation has entered into additional guarantee agreements and commitments, including sold risk participation swaps, liquidity facilities, lease-end obligation agreements, partial credit guarantees on certain leases, real estate joint venture guarantees, divested business commitments and sold put options that require gross settlement. The maximum potential future payment under these agreements was approximately $8.1 billion and $5.9 billion at September 30, 2019 and December 31, 2018. The Corporation has made no material payments under these guarantees. For more information on maximum potential future payments under VIE-related liquidity commitments, see Note 7 – Securitizations and Other Variable Interest Entities.

During the three months ended September 30, 2019, the Corporation recognized a loss of $135 million in other income under its indemnity obligation in connection with the sale of its non-U.S. consumer credit card business (payment protection insurance). For additional information, see Note 12 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.

In the normal course of business, the Corporation periodically guarantees the obligations of its affiliates in a variety of transactions including ISDA-related transactions and non-ISDA related transactions such as commodities trading, repurchase agreements, prime brokerage agreements and other transactions.

Guarantees of Certain Long-term Debt

The Corporation, as the parent company, fully and unconditionally guarantees the securities issued by BofA Finance LLC, a 100 percent owned finance subsidiary of the Corporation, and effectively provides for the full and unconditional guarantee of trust securities issued by certain statutory trust companies that are 100 percent owned finance subsidiaries of the Corporation.

Litigation and Regulatory Matters

The following disclosure supplements the disclosure in Note 12 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K (the prior commitments and contingencies disclosure).

In the ordinary course of business, the Corporation and its subsidiaries are routinely defendants in or parties to many pending and threatened legal, regulatory and governmental actions and proceedings. In view of the inherent difficulty of predicting the outcome of such matters, particularly where the claimants seek very large or indeterminate damages or where the matters present novel legal theories or involve a large number of parties, the Corporation generally cannot predict the eventual outcome of the pending matters, the timing of the ultimate resolution of these

matters, or any eventual loss, fines or penalties related to each pending matter.

In accordance with applicable accounting guidance, the Corporation establishes an accrued liability when those matters present loss contingencies that are both probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. Excluding expenses of internal and external legal service providers, litigation-related expense of $352 million and $539 million was recognized for the three and nine months ended September 30, 2019 compared to $90 million and $292 million for the same periods in 2018.

For a limited number of the matters disclosed in this Note, and in the prior commitments and contingencies disclosure, for which a loss, whether in excess of a related accrued liability or where there is no accrued liability, is reasonably possible in future periods, the Corporation is able to estimate a range of possible loss. With respect to such matters, in cases in which the Corporation possesses sufficient appropriate information to estimate a range of possible loss, that estimate is aggregated and disclosed below. There may be other disclosed matters for which a loss is probable or reasonably possible but such an estimate of the range of possible loss may not be possible. For those disclosed matters where an estimate of the range of possible loss is possible, as well as for representations and warranties exposures, management currently estimates the aggregate range of reasonably possible loss for these exposures is $0 to $1.8 billion in excess of the accrued liability, if any. This estimated range of possible loss is based upon currently available information and is subject to significant judgment and a variety of assumptions, and known and unknown uncertainties. The matters underlying the estimated range will change from time to time, and actual results may vary significantly from the current estimate. Therefore, this estimated range of possible loss represents what the Corporation believes to be an estimate of possible loss only for certain matters meeting these criteria. It does not represent the Corporation’s maximum loss exposure.

Information is provided below, or in the prior commitments and contingencies disclosure regarding the nature of the litigation contingencies and, where specified, the amount of the claim associated with these loss contingencies. Based on current knowledge, management does not believe that loss contingencies arising from pending matters, including the matters described below, and in the prior commitments and contingencies disclosure, will have a material adverse effect on the consolidated financial position or liquidity of the Corporation. However, in light of the inherent uncertainties involved in these matters, some of which are beyond the Corporation’s control, and the very large or indeterminate damages sought in some of these matters, an adverse outcome in one or more of these matters could be material to the Corporation’s results of operations or liquidity for any particular reporting period.

Investigations of Precious Metals Trading

In connection with the U.S. Commodity Futures Trading Commission's (CFTC) and U.S. Department of Justice's (DoJ) investigations of precious metals market trading practices, on June 25, 2019, Merrill Lynch Commodities, Inc. (MLCI), an indirect wholly-owned subsidiary of the Corporation, entered into a civil settlement with the CFTC and a non-prosecution agreement with the DoJ. Those resolutions resulted in settlement payments totaling $36.5 million and require MLCI and the Corporation to undertake certain remedial measures and other obligations.



79 Bank of America

Mortgage Appraisal Litigation

The District Court has scheduled the cases for trial beginning January 14, 2020.

Mortgage Repurchase Litigation

U.S. Bank - SURF/OWNIT Repurchase Litigation

On July 19, 2019, a settlement regarding one of the seven securitization trusts (the Trusts) became final. For the remaining six Trusts, the defendants and certain certificate-holders agreed to settle the respective litigations in amounts not material to the Corporation, subject to acceptance by U.S. Bank.

NOTE 12 Shareholders’ Equity

Common Stock




Declared Quarterly Cash Dividends on Common Stock ⁽¹⁾

Declaration Date	Record Date	Payment Date	Dividend Per Share
October 22, 2019	December 6, 2019	December 27, 2019	$	0.18
July 25, 2019	September 6, 2019	September 27, 2019	0.18
April 24, 2019	June 7, 2019	June 28, 2019	0.15
January 30, 2019	March 1, 2019	March 29, 2019	0.15


⁽¹⁾	In 2019, and through October 28, 2019.

During the three and nine months ended September 30, 2019, the Corporation repurchased and retired 268 million and 713 million shares of common stock, which reduced shareholders’ equity by $7.6 billion and $20.4 billion.

During the nine months ended September 30, 2019, in connection with employee stock plans, the Corporation issued 91 million shares of its common stock and, to satisfy tax withholding obligations, repurchased 35 million shares of its common stock. At September 30, 2019, the Corporation had reserved 586 million unissued shares of common stock for future issuances under employee stock plans, convertible notes and preferred stock.

Preferred Stock

During the three months ended March 31, 2019, June 30, 2019 and September 30, 2019, the Corporation declared $442 million, $239 million and $505 million of cash dividends on preferred stock, or a total of $1.2 billion for the nine months ended September 30, 2019. On September 17, 2019, the Corporation issued 52,400 shares of 5.000% Non-Cumulative Preferred Stock, Series LL for $1.3 billion. Dividends are paid quarterly commencing on December 17, 2019. The Series LL preferred stock has a liquidation preference of $25,000 per share and is subject to certain restrictions in the event the Corporation fails to declare and pay full dividends. During the three months ended September 30, 2019, the Corporation fully redeemed Series W for $1.1 billion, and partially redeemed Series V for $1.3 billion. On October 28, 2019, the Corporation redeemed the remaining outstanding shares of Series V preferred stock. For more information on the Corporation's preferred stock, including liquidation preference, dividend requirements and redemption period, see Note 13 – Shareholders’ Equity to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.

NOTE 13 Earnings Per Common Share

The calculation of earnings per common share (EPS) and diluted EPS for the three and nine months ended September 30, 2019 and 2018 is presented below. For more information on the calculation of EPS, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.




	Three Months Ended September 30						Nine Months Ended September 30
(In millions, except per share information)	2019			2018			2019			2018
Earnings per common share
Net income	$	5,777		$	7,167		$	20,436		$	20,869
Preferred stock dividends	(505		)	(466		)	(1,186		)	(1,212		)
Net income applicable to common shareholders	$	5,272		$	6,701		$	19,250		$	19,657
Average common shares issued and outstanding	9,303.6			10,031.6			9,516.2			10,177.5
Earnings per common share	$	0.57		$	0.67		$	2.02		$	1.93

Diluted earnings per common share
Net income applicable to common shareholders	$	5,272		$	6,701		$	19,250		$	19,657
Average common shares issued and outstanding	9,303.6			10,031.6			9,516.2			10,177.5
Dilutive potential common shares ⁽¹⁾	49.4			139.2			49.5			140.4
Total diluted average common shares issued and outstanding	9,353.0			10,170.8			9,565.7			10,317.9
Diluted earnings per common share	$	0.56		$	0.66		$	2.01		$	1.91


⁽¹⁾	Includes incremental dilutive shares from restricted stock units, restricted stock and warrants.

For both the three and nine months ended September 30, 2019 and 2018, 62 million average dilutive potential common shares associated with the Series L preferred stock were not included in the diluted share count because the result would have been antidilutive under the “if-converted” method. For the three and nine months ended September 30, 2018, average options to purchase two million and five million shares of common stock were outstanding but not included in the computation of EPS because the result would have been antidilutive under the treasury stock method. For both the three and nine months ended September

30, 2018, average warrants to purchase 122 million shares of common stock were outstanding but not included in the computation of EPS because the result would have been antidilutive under the treasury stock method. These warrants expired on October 29, 2018. For the three and nine months ended September 30, 2018, average warrants to purchase 135 million and 139 million shares of common stock were included in the diluted EPS calculation under the treasury stock method. Substantially all of these warrants were exercised on or before their expiration date of January 16, 2019.



		Bank of America 80

NOTE 14 Accumulated Other Comprehensive Income (Loss)

The table below presents the changes in accumulated OCI after-tax for the nine months ended September 30, 2019 and 2018.




(Dollars in millions)	Debt Securities			Debit Valuation Adjustments			Derivatives			Employee Benefit Plans			Foreign Currency			Total
Balance, December 31, 2017	$	(1,206	)	$	(1,060	)	$	(831	)	$	(3,192	)	$	(793	)	$	(7,082	)
Accounting change related to certain tax effects ⁽¹⁾	(393		)	(220		)	(189		)	(707		)	239			(1,270		)
Cumulative adjustment for hedge accounting change ⁽²⁾	—			—			57			—			—			57
Net change	(6,166		)	183			(346		)	91			(303		)	(6,541		)
Balance, September 30, 2018	$	(7,765	)	$	(1,097	)	$	(1,309	)	$	(3,808	)	$	(857	)	$	(14,836	)

Balance, December 31, 2018	$	(5,552	)	$	(531	)	$	(1,016	)	$	(4,304	)	$	(808	)	$	(12,211	)
Net change	6,231			(272		)	651			83			(99		)	6,594
Balance, September 30, 2019	$	679		$	(803	)	$	(365	)	$	(4,221	)	$	(907	)	$	(5,617	)


⁽¹⁾	Effective January 1, 2018, the Corporation adopted the accounting standard on tax effects in accumulated OCI related to the Tax Act. Accordingly, certain tax effects were reclassified from accumulated OCI to retained earnings.


⁽²⁾	Effective January 1, 2018, the Corporation adopted the hedge accounting standard.

The table below presents the net change in fair value recorded in accumulated OCI, net realized gains and losses reclassified into earnings and other changes for each component of OCI pre- and after-tax for the nine months ended September 30, 2019 and 2018.




	Pretax			Tax effect			After- tax			Pretax			Tax effect			After- tax
	Nine Months Ended September 30
(Dollars in millions)	2019									2018
Debt securities:
Net increase (decrease) in fair value	$	8,388		$	(2,087	)	$	6,301		$	(8,198	)	$	2,075		$	(6,123	)
Net realized (gains) losses reclassified into earnings ⁽¹⁾	(93		)	23			(70		)	(55		)	12			(43		)
Net change	8,295			(2,064		)	6,231			(8,253		)	2,087			(6,166		)
Debit valuation adjustments:
Net increase (decrease) in fair value	(368		)	83			(285		)	220			(52		)	168
Net realized (gains) losses reclassified into earnings ⁽¹⁾	16			(3		)	13			20			(5		)	15
Net change	(352		)	80			(272		)	240			(57		)	183
Derivatives:
Net increase (decrease) in fair value	765			(173		)	592			(601		)	174			(427		)
Reclassifications into earnings:
Net interest income	78			(19		)	59			134			(33		)	101
Compensation and benefits expense	—			—			—			(27		)	7			(20		)
Net realized (gains) losses reclassified into earnings	78			(19		)	59			107			(26		)	81
Net change	843			(192		)	651			(494		)	148			(346		)
Employee benefit plans:
Net actuarial losses and other reclassified into earnings ⁽²⁾	109			(26		)	83			119			(28		)	91
Net change	109			(26		)	83			119			(28		)	91
Foreign currency:
Net increase (decrease) in fair value	114			(185		)	(71		)	(87		)	(165		)	(252		)
Net realized (gains) losses reclassified into earnings ⁽³⁾	(117		)	89			(28		)	(143		)	92			(51		)
Net change	(3		)	(96		)	(99		)	(230		)	(73		)	(303		)
Total other comprehensive income (loss)	$	8,892		$	(2,298	)	$	6,594		$	(8,618	)	$	2,077		$	(6,541	)


⁽¹⁾	Reclassifications of pretax debt securities and DVA are recorded in other income in the Consolidated Statement of Income.


⁽²⁾	Reclassifications of pretax employee benefit plan costs are recorded in other general operating expense in the Consolidated Statement of Income.


⁽³⁾	Reclassifications of pretax debt securities, DVA and foreign currency (gains) losses are recorded in other income in the Consolidated Statement of Income.

NOTE 15 Fair Value Measurements

Under applicable accounting standards, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Corporation determines the fair values of its financial instruments under applicable accounting standards and conducts a review of its fair value hierarchy classifications on a quarterly basis. Transfers into or out of fair value hierarchy classifications are made if the significant inputs used in the financial models measuring the fair values of the assets and liabilities become unobservable or observable in the current marketplace. During the

nine months ended September 30, 2019, there were no changes to valuation approaches or techniques that had, or are expected to have, a material impact on the Corporation’s consolidated financial position or results of operations.

For more information regarding the fair value hierarchy, how the Corporation measures fair value and valuation techniques, see Note 1 – Summary of Significant Accounting Principles and Note 20 – Fair Value Measurements to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K. The Corporation accounts for certain financial instruments under the fair value option. For additional information, see Note 16 – Fair Value Option.



81 Bank of America

Recurring Fair Value

Assets and liabilities carried at fair value on a recurring basis at September 30, 2019 and December 31, 2018, including financial instruments that the Corporation accounts for under the fair value option, are summarized in the following tables.




	September 30, 2019
	Fair Value Measurements
(Dollars in millions)	Level 1		Level 2		Level 3		Netting Adjustments ⁽¹⁾			Assets/Liabilities at Fair Value
Assets
Time deposits placed and other short-term investments	$	1,356	$	—	$	—	$	—		$	1,356
Federal funds sold and securities borrowed or purchased under agreements to resell	—		50,298		—		—			50,298
Trading account assets:
U.S. Treasury and agency securities ⁽²⁾	46,103		1,952		—		—			48,055
Corporate securities, trading loans and other	—		29,625		1,591		—			31,216
Equity securities	77,822		31,823		279		—			109,924
Non-U.S. sovereign debt	11,554		27,237		465		—			39,256
Mortgage trading loans, MBS and ABS:
U.S. government-sponsored agency guaranteed ⁽²⁾	—		25,268		—		—			25,268
Mortgage trading loans, ABS and other MBS	—		8,402		1,563		—			9,965
Total trading account assets ⁽³⁾	135,479		124,307		3,898		—			263,684
Derivative assets	15,501		372,583		3,370		(346,331		)	45,123
AFS debt securities:
U.S. Treasury and agency securities	55,704		1,243		—		—			56,947
Mortgage-backed securities:
Agency	—		134,949		—		—			134,949
Agency-collateralized mortgage obligations	—		4,962		—		—			4,962
Non-agency residential	—		1,435		508		—			1,943
Commercial	—		14,677		—		—			14,677
Non-U.S. securities	—		11,077		2		—			11,079
Other taxable securities	—		3,880		3		—			3,883
Tax-exempt securities	—		16,432		—		—			16,432
Total AFS debt securities	55,704		188,655		513		—			244,872
Other debt securities carried at fair value:
U.S. Treasury and agency securities	3		—		—		—			3
Non-agency residential MBS	—		1,235		308		—			1,543
Commercial	—		13		—		—			13
Non-U.S. securities	2,531		5,377		—		—			7,908
Other taxable securities	—		3		—		—			3
Total other debt securities carried at fair value	2,534		6,628		308		—			9,470
Loans and leases	—		7,273		401		—			7,674
Loans held-for-sale	—		4,625		386		—			5,011
Other assets ⁽⁴⁾	18,471		2,081		2,400		—			22,952
Total assets⁽⁵⁾	$	229,045	$	756,450	$	11,276	$	(346,331	)	$	650,440
Liabilities
Interest-bearing deposits in U.S. offices	$	—	$	626	$	—	$	—		$	626
Federal funds purchased and securities loaned or sold under agreements to repurchase	—		21,963		—		—			21,963
Trading account liabilities:
U.S. Treasury and agency securities	13,948		195		—		—			14,143
Equity securities	34,161		3,930		2		—			38,093
Non-U.S. sovereign debt	9,995		9,011		—		—			19,006
Corporate securities and other	—		7,387		13		—			7,400
Total trading account liabilities	58,104		20,523		15		—			78,642
Derivative liabilities	14,741		361,185		4,602		(342,503		)	38,025
Short-term borrowings	—		3,458		—		—			3,458
Accrued expenses and other liabilities	21,210		2,302		—		—			23,512
Long-term debt	—		35,909		864		—			36,773
Total liabilities ⁽⁵⁾	$	94,055	$	445,966	$	5,481	$	(342,503	)	$	202,999


⁽¹⁾	Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.


⁽²⁾	Includes $25.8 billion of GSE obligations.


⁽³⁾	Includes securities with a fair value of $14.9 billion that were segregated in compliance with securities regulations or deposited with clearing organizations. This amount is included in the parenthetical disclosure on the Consolidated Balance Sheet.


⁽⁴⁾	Includes MSRs of $1.6 billion which are classified as Level 3 assets.


⁽⁵⁾	Total recurring Level 3 assets were 0.46 percent of total consolidated assets, and total recurring Level 3 liabilities were 0.25 percent of total consolidated liabilities.



		Bank of America 82




	December 31, 2018
	Fair Value Measurements
(Dollars in millions)	Level 1		Level 2		Level 3		Netting Adjustments ⁽¹⁾			Assets/Liabilities at Fair Value
Assets
Time deposits placed and other short-term investments	$	1,214	$	—	$	—	$	—		$	1,214
Federal funds sold and securities borrowed or purchased under agreements to resell	—		56,399		—		—			56,399
Trading account assets:
U.S. Treasury and agency securities ⁽²⁾	53,131		1,593		—		—			54,724
Corporate securities, trading loans and other	—		24,630		1,558		—			26,188
Equity securities	53,840		23,163		276		—			77,279
Non-U.S. sovereign debt	5,818		19,210		465		—			25,493
Mortgage trading loans, MBS and ABS:
U.S. government-sponsored agency guaranteed ⁽²⁾	—		19,586		—		—			19,586
Mortgage trading loans, ABS and other MBS	—		9,443		1,635		—			11,078
Total trading account assets ⁽³⁾	112,789		97,625		3,934		—			214,348
Derivative assets	9,967		315,413		3,466		(285,121		)	43,725
AFS debt securities:
U.S. Treasury and agency securities	53,663		1,260		—		—			54,923
Mortgage-backed securities:
Agency	—		121,826		—		—			121,826
Agency-collateralized mortgage obligations	—		5,530		—		—			5,530
Non-agency residential	—		1,320		597		—			1,917
Commercial	—		14,078		—		—			14,078
Non-U.S. securities	—		9,304		2		—			9,306
Other taxable securities	—		4,403		7		—			4,410
Tax-exempt securities	—		17,376		—		—			17,376
Total AFS debt securities	53,663		175,097		606		—			229,366
Other debt securities carried at fair value:
U.S. Treasury and agency securities	1,282		—		—		—			1,282
Non-agency residential MBS	—		1,434		172		—			1,606
Non-U.S. securities	490		5,354		—		—			5,844
Other taxable securities	—		3		—		—			3
Total other debt securities carried at fair value	1,772		6,791		172		—			8,735
Loans and leases	—		4,011		338		—			4,349
Loans held-for-sale	—		2,400		542		—			2,942
Other assets ⁽⁴⁾	15,032		1,775		2,932		—			19,739
Total assets ⁽⁵⁾	$	194,437	$	659,511	$	11,990	$	(285,121	)	$	580,817
Liabilities
Interest-bearing deposits in U.S. offices	$	—	$	492	$	—	$	—		$	492
Federal funds purchased and securities loaned or sold under agreements to repurchase	—		28,875		—		—			28,875
Trading account liabilities:
U.S. Treasury and agency securities	7,894		761		—		—			8,655
Equity securities	33,739		4,070		—		—			37,809
Non-U.S. sovereign debt	7,452		9,182		—		—			16,634
Corporate securities and other	—		5,104		18		—			5,122
Total trading account liabilities	49,085		19,117		18		—			68,220
Derivative liabilities	9,931		303,441		4,401		(279,882		)	37,891
Short-term borrowings	—		1,648		—		—			1,648
Accrued expenses and other liabilities	18,096		1,979		—		—			20,075
Long-term debt	—		26,872		817		—			27,689
Total liabilities ⁽⁵⁾	$	77,112	$	382,424	$	5,236	$	(279,882	)	$	184,890


⁽¹⁾	Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.


⁽²⁾	Includes $20.2 billion of GSE obligations.


⁽³⁾	Includes securities with a fair value of $16.6 billion that were segregated in compliance with securities regulations or deposited with clearing organizations. This amount is included in the parenthetical disclosure on the Consolidated Balance Sheet.


⁽⁴⁾	Includes MSRs of $2.0 billion which are classified as Level 3 assets.


⁽⁵⁾	Total recurring Level 3 assets were 0.51 percent of total consolidated assets, and total recurring Level 3 liabilities were 0.25 percent of total consolidated liabilities.



83 Bank of America

The following tables present a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three and nine months ended September 30, 2019 and 2018, including net realized and unrealized gains (losses) included in earnings and accumulated OCI. Transfers into Level 3 occur primarily due to

decreased price observability, and transfers out of Level 3 occur primarily due to increased price observability. Transfers occur on a regular basis for long-term debt instruments due to changes in the impact of unobservable inputs on the value of the embedded derivative in relation to the instrument as a whole.




Level 3 – Fair Value Measurements ⁽¹⁾

	Balance July 1			Total Realized/Unrealized Gains (Losses) in Net Income ⁽²⁾			Gains (Losses) in OCI ⁽³⁾			Gross												Gross Transfers into Level 3			Gross Transfers out of Level 3			Balance September 30			Change in Unrealized Gains (Losses) in Net Income Related to Financial Instruments Still Held ⁽²⁾
(Dollars in millions)										Purchases			Sales			Issuances			Settlements
Three Months Ended September 30, 2019
Trading account assets:
Corporate securities, trading loans and other	$	1,393		$	28		$	—		$	158		$	(153	)	$	—		$	(143	)	$	356		$	(48	)	$	1,591		$	—
Equity securities	296			(8		)	—			17			(81		)	—			(1		)	66			(10		)	279			(31		)
Non-U.S. sovereign debt	481			9			(28		)	—			—			—			(36		)	39			—			465			10
Mortgage trading loans, ABS and other MBS	1,389			(8		)	—			91			(156		)	—			(48		)	316			(21		)	1,563			(24		)
Total trading account assets	3,559			21			(28		)	266			(390		)	—			(228		)	777			(79		)	3,898			(45		)
Net derivative assets ⁽⁴⁾	(1,114		)	73			—			81			(270		)	—			(36		)	—			34			(1,232		)	52
AFS debt securities:
Non-agency residential MBS	568			—			(13		)	—			—			—			(8		)	—			(39		)	508			—
Non-U.S. securities	2			—			—			—			—			—			—			—			—			2			—
Other taxable securities	3			—			—			—			—			—			—			—			—			3			—
Total AFS debt securities	573			—			(13		)	—			—			—			(8		)	—			(39		)	513			—
Other debt securities carried at fair value – Non-agency residential MBS	273			(8		)	—			—			—			—			(5		)	48			—			308			(8		)
Loans and leases ^(5,6)	355			8			—			27			(17		)	44			(16		)	—			—			401			8
Loans held-for-sale ⁽⁵⁾	486			5			(11		)	2			—			—			(96		)	—			—			386			(7		)
Other assets ^{(6, 7)}	2,551			(40		)	(5		)	—			—			53			(163		)	4			—			2,400			(82		)
Trading account liabilities – Equity securities	(2		)	—			—			—			—			—			—			—			—			(2		)	—
Trading account liabilities – Corporate securities and other	(13		)	1			—			(1		)	—			—			—			—			—			(13		)	(1		)
Long-term debt ⁽⁵⁾	(902		)	16			1			(27		)	—			—			49			(1		)	—			(864		)	16

Three Months Ended September 30, 2018
Trading account assets:
Corporate securities, trading loans and other	$	1,638		$	14		$	—		$	54		$	(87	)	$	—		$	(175	)	$	269		$	(179	)	$	1,534		$	(14	)
Equity securities	228			8			—			21			—			—			—			43			(10		)	290			8
Non-U.S. sovereign debt	368			10			(13		)	—			—			—			—			109			(5		)	469			11
Mortgage trading loans, ABS and other MBS	1,523			16			(1		)	75			(184		)	—			(29		)	191			(112		)	1,479			8
Total trading account assets	3,757			48			(14		)	150			(271		)	—			(204		)	612			(306		)	3,772			13
Net derivative assets ⁽⁴⁾	(1,588		)	(53		)	—			23			(66		)	—			111			20			983			(570		)	(51		)
AFS debt securities:
Non-agency residential MBS	453			31			(28		)	—			(72		)	—			—			235			(75		)	544			—
Non-U.S. securities	3			—			—			—			—			—			—			—			—			3			—
Other taxable securities	99			(1		)	(3		)	—			(22		)	—			—			—			(66		)	7			—
Tax-exempt securities	1			—			—			—			—			—			—			—			—			1			—
Total AFS debt securities	556			30			(31		)	—			(94		)	—			—			235			(141		)	555			—
Other debt securities carried at fair value – Non-agency residential MBS	287			(23		)	—			—			—			—			—			60			(28		)	296			(10		)
Loans and leases ⁽⁵⁾	493			—			—			—			(62		)	—			(21		)	—			—			410			(1		)
Loans held-for-sale ⁽⁵⁾	577			12			(4		)	39			—			—			(82		)	12			(28		)	526			9
Other assets ^{(6, 7)}	3,184			121			—			—			(22		)	31			(174		)	—			—			3,140			55
Trading account liabilities – Corporate securities and other	(35		)	9			—			9			—			—			—			—			—			(17		)	(6		)
Long-term debt ⁽⁵⁾	(1,225		)	11			(1		)	—			—			(11		)	106			(106		)	303			(923		)	13


⁽¹⁾	Assets (liabilities). For assets, increase (decrease) to Level 3 and for liabilities, (increase) decrease to Level 3.

⁽²⁾

Includes gains (losses) reported in earnings in the following income statement line items: Trading account assets/liabilities - predominantly trading account income; Net derivative assets - trading account income and other income; Other debt securities carried at fair value - other income; Loans and leases - other income; Loans held-for-sale - other income; Other assets - primarily other income related to MSRs; Long-term debt - primarily trading account income.


⁽³⁾	Includes unrealized gains (losses) in OCI on AFS debt securities, foreign currency translation adjustments and the impact of changes in the Corporation’s credit spreads on long-term debt accounted for under the fair value option. Total gains (losses) in OCI include net unrealized losses of $53 million related to financial instruments still held at September 30, 2019.


⁽⁴⁾	Net derivative assets include derivative assets of $3.4 billion and $4.4 billion and derivative liabilities of $4.6 billion and $5.0 billion at September 30, 2019 and 2018.


⁽⁵⁾	Amounts represent instruments that are accounted for under the fair value option.


⁽⁶⁾	Issuances represent loan originations and MSRs recognized following securitizations or whole-loan sales.


⁽⁷⁾	Settlements primarily represent the net change in fair value of the MSR asset due to the recognition of modeled cash flows and the passage of time.



		Bank of America 84




Level 3 – Fair Value Measurements ⁽¹⁾

	Balance January 1			Total Realized/Unrealized Gains (Losses) in Net Income ⁽²⁾			Gains (Losses) in OCI ⁽³⁾			Gross												Gross Transfers into Level 3			Gross Transfers out of Level 3			Balance September 30			Change in Unrealized Gains (Losses) in Net Income Related to Financial Instruments Still Held ⁽²⁾
(Dollars in millions)										Purchases			Sales			Issuances			Settlements
Nine Months Ended September 30, 2019
Trading account assets:
Corporate securities, trading loans and other	$	1,558		$	86		$	—		$	352		$	(305	)	$	—		$	(349	)	$	602		$	(353	)	$	1,591		$	33
Equity securities	276			14			—			38			(87		)	—			(4		)	69			(27		)	279			(14		)
Non-U.S. sovereign debt	465			36			(24		)	1			—			—			(47		)	39			(5		)	465			37
Mortgage trading loans, ABS and other MBS	1,635			80			(2		)	488			(817		)	—			(172		)	583			(232		)	1,563			13
Total trading account assets	3,934			216			(26		)	879			(1,209		)	—			(572		)	1,293			(617		)	3,898			69
Net derivative assets ⁽⁴⁾	(935		)	(43		)	—			248			(676		)	—			(124		)	139			159			(1,232		)	(110		)
AFS debt securities:
Non-agency residential MBS	597			—			77			—			—			—			(29		)	206			(343		)	508			—
Non-U.S. securities	2			—			—			—			—			—			—			—			—			2			—
Other taxable securities	7			—			—			—			—			—			(4		)	—			—			3			—
Total AFS debt securities	606			—			77			—			—			—			(33		)	206			(343		)	513			—
Other debt securities carried at fair value – Non-agency residential MBS	172			41			—			—			—			—			(13		)	155			(47		)	308			38
Loans and leases ^(5,6)	338			12			—			27			(32		)	97			(41		)	—			—			401			11
Loans held-for-sale ^(5,6)	542			43			(11		)	12			(71		)	11			(199		)	59			—			386			13
Other assets ^{(6, 7)}	2,932			(194		)	11			—			(10		)	161			(504		)	4			—			2,400			(342		)
Trading account liabilities – Equity securities	—			(2		)	—			—			—			—			—			—			—			(2		)	(2		)
Trading account liabilities – Corporate securities and other	(18		)	8			—			—			(3		)	—			—			—			—			(13		)	(1		)
Long-term debt ⁽⁵⁾	(817		)	(71		)	—			(27		)	—			(13		)	125			(62		)	1			(864		)	(64		)

Nine Months Ended September 30, 2018
Trading account assets:
Corporate securities, trading loans and other	$	1,864		$	(14	)	$	(1	)	$	328		$	(298	)	$	—		$	(388	)	$	517		$	(474	)	$	1,534		$	(88	)
Equity securities	235			17			—			29			(11		)	—			(4		)	73			(49		)	290			17
Non-U.S. sovereign debt	556			39			(55		)	7			(50		)	—			(8		)	117			(137		)	469			40
Mortgage trading loans, ABS and other MBS	1,498			157			2			392			(760		)	—			(136		)	541			(215		)	1,479			92
Total trading account assets	4,153			199			(54		)	756			(1,119		)	—			(536		)	1,248			(875		)	3,772			61
Net derivative assets ⁽⁴⁾	(1,714		)	203			—			371			(919		)	—			488			87			914			(570		)	(138		)
AFS debt securities:
Non-agency residential MBS	—			39			(42		)	—			(72		)	—			—			694			(75		)	544			—
Non-U.S. securities	25			—			(1		)	—			(10		)	—			(14		)	3			—			3			—
Other taxable securities	509			1			(5		)	—			(22		)	—			(10		)	60			(526		)	7			—
Tax-exempt securities	469			—			—			—			—			—			—			1			(469		)	1			—
Total AFS debt securities ⁽⁸⁾	1,003			40			(48		)	—			(104		)	—			(24		)	758			(1,070		)	555			—
Other debt securities carried at fair value – Non-agency residential MBS	—			(27		)	—			—			(7		)	—			—			358			(28		)	296			(5		)
Loans and leases ⁽⁵⁾	571			(20		)	—			—			(71		)	—			(70		)	—			—			410			(17		)
Loans held-for-sale ⁽⁵⁾	690			24			(31		)	51			—			—			(160		)	12			(60		)	526			18
Other assets ^(6,7,8)	2,425			389			—			2			(68		)	83			(585		)	929			(35		)	3,140			188
Trading account liabilities – Corporate securities and other	(24		)	11			—			9			(11		)	(2		)	—			—			—			(17		)	(7		)
Accrued expenses and other liabilities ⁽⁵⁾	(8		)	—			—			—			—			—			8			—			—			—			—
Long-term debt ⁽⁵⁾	(1,863		)	97			2			9			—			(131		)	429			(253		)	787			(923		)	87


⁽¹⁾	Assets (liabilities). For assets, increase (decrease) to Level 3 and for liabilities, (increase) decrease to Level 3.

⁽²⁾


⁽³⁾	Includes unrealized gains (losses) in OCI on AFS debt securities, foreign currency translation adjustments and the impact of changes in the Corporation’s credit spreads on long-term debt accounted for under the fair value option. Total gains (losses) in OCI include net unrealized gains of $47 million related to financial instruments still held at September 30, 2019.


⁽⁴⁾	Net derivative assets include derivative assets of $3.4 billion and $4.4 billion and derivative liabilities of $4.6 billion and $5.0 billion at September 30, 2019 and 2018.


⁽⁵⁾	Amounts represent instruments that are accounted for under the fair value option.


⁽⁶⁾	Issuances represent loan originations and MSRs recognized following securitizations or whole-loan sales.


⁽⁷⁾	Settlements primarily represent the net change in fair value of the MSR asset due to the recognition of modeled cash flows and the passage of time.


⁽⁸⁾	Transfers out of AFS debt securities and into other assets primarily relate to the reclassification of certain securities.



85 Bank of America

The following tables present information about significant unobservable inputs related to the Corporation’s material categories of Level 3 financial assets and liabilities at September 30, 2019 and December 31, 2018.




Quantitative Information about Level 3 Fair Value Measurements at September 30, 2019

(Dollars in millions)					Inputs
Financial Instrument	Fair Value			Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted Average ⁽¹⁾
Loans and Securities ⁽²⁾
Instruments backed by residential real estate assets	$	1,515		Discounted cash flow, Market comparables	Yield	0% to 25%	6%
Trading account assets – Mortgage trading loans, ABS and other MBS	287				Prepayment speed	1% to 28% CPR	18% CPR
Loans and leases	401				Default rate	0% to 3% CDR	1% CDR
Loans held-for-sale	6				Loss severity	0% to 48%	15%
AFS debt securities, primarily non-agency residential	513				Price	$0 to $680	$92
Other debt securities carried at fair value - Non-agency residential	308
Instruments backed by commercial real estate assets	$	183		Discounted cash flow	Yield	0% to 25%	18%
Trading account assets – Corporate securities, trading loans and other	158				Price	$0 to $100	$60
Trading account assets – Mortgage trading loans, ABS and other MBS	23
Loans held-for-sale	2
Commercial loans, debt securities and other	$	3,529		Discounted cash flow, Market comparables	Yield	1% to 15%	6%
Trading account assets – Corporate securities, trading loans and other	1,433				Prepayment speed	10% to 20%	17%
Trading account assets – Non-U.S. sovereign debt	465				Default rate	3% to 4%	4%
Trading account assets – Mortgage trading loans, ABS and other MBS	1,253				Loss severity	35% to 40%	37%
Loans held-for-sale	378				Price	$0 to $158	$70
Other assets, primarily auction rate securities	$	844		Discounted cash flow, Market comparables	Price	$10 to $100	$96


MSRs	$	1,556		Discounted cash flow	Weighted-average life, fixed rate ⁽⁵⁾	0 to 14 years	4 years
					Weighted-average life, variable rate ⁽⁵⁾	0 to 9 years	3 years
					Option-adjusted spread, fixed rate	9% to 14%	9%
					Option-adjusted spread, variable rate	9% to 15%	11%
Structured liabilities
Long-term debt	$	(864	)	Discounted cash flow, Market comparables, Industry standard derivative pricing ⁽³⁾	Equity correlation	16% to 97%	69%
					Long-dated equity volatilities	4% to 80%	32%
					Price	$0 to $113	$76

Net derivative assets
Credit derivatives	$	(9	)	Discounted cash flow, Stochastic recovery correlation model	Yield	5%	n/a
					Upfront points	0 to 100 points	69 points
					Prepayment speed	15% to 100% CPR	32% CPR
					Default rate	1% to 4% CDR	2% CDR
					Loss severity	35%	n/a
					Price	$0 to $138	$81
Equity derivatives	$	(1,107	)	Industry standard derivative pricing ⁽³⁾	Equity correlation	16% to 97%	69%
				Industry standard derivative pricing ⁽³⁾	Long-dated equity volatilities	4% to 80%	32%
Commodity derivatives	$	18		Discounted cash flow, Industry standard derivative pricing ⁽³⁾	Natural gas forward price	$1/MMBtu to $7/MMBtu	$3/MMBtu
					Correlation	30% to 69%	68%
					Volatilities	15% to 62%	33%
Interest rate derivatives	$	(134	)	Industry standard derivative pricing ⁽⁴⁾	Correlation (IR/IR)	15% to 97%	51%
					Correlation (FX/IR)	0% to 46%	3%
					Long-dated inflation rates	-15% to 148%	84%
					Long-dated inflation volatilities	0% to 1%	1%
Total net derivative assets	$	(1,232	)


⁽¹⁾	For loans and securities, structured liabilities and net derivative assets, the weighted average is calculated based upon the absolute fair value of the instruments.

⁽²⁾

The categories are aggregated based upon product type which differs from financial statement classification. The following is a reconciliation to the line items in the table on page 82: Trading account assets – Corporate securities, trading loans and other of $1.6 billion, Trading account assets – Non-U.S. sovereign debt of $465 million, Trading account assets – Mortgage trading loans, ABS and other MBS of $1.6 billion, AFS debt securities of $513 million, Other debt securities carried at fair value - Non-agency residential of $308 million, Other assets, including MSRs, of $2.4 billion, Loans and leases of $401 million and LHFS of $386 million.


⁽³⁾	Includes models such as Monte Carlo simulation and Black-Scholes.


⁽⁴⁾	Includes models such as Monte Carlo simulation, Black-Scholes and other methods that model the joint dynamics of interest, inflation and foreign exchange rates.


⁽⁵⁾	The weighted-average life is a product of changes in market rates of interest, prepayment rates and other model and cash flow assumptions.

CPR = Constant Prepayment Rate

CDR = Constant Default Rate

MMBtu = Million British thermal units

IR = Interest Rate

FX = Foreign Exchange

n/a = not applicable



		Bank of America 86




Quantitative Information about Level 3 Fair Value Measurements at December 31, 2018

(Dollars in millions)					Inputs
Financial Instrument	Fair Value			Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted Average ⁽¹⁾
Loans and Securities ⁽²⁾
Instruments backed by residential real estate assets	$	1,536		Discounted cash flow, Market comparables	Yield	0% to 25%	8%
Trading account assets – Mortgage trading loans, ABS and other MBS	419				Prepayment speed	0% to 21% CPR	12% CPR
Loans and leases	338				Default rate	0% to 3% CDR	1% CDR
Loans held-for-sale	1				Loss severity	0% to 51%	17%
AFS debt securities, primarily non-agency residential	606				Price	$0 to $128	$72
Other debt securities carried at fair value - Non-agency residential	172
Instruments backed by commercial real estate assets	$	291		Discounted cash flow	Yield	0% to 25%	7%
Trading account assets – Corporate securities, trading loans and other	200				Price	$0 to $100	$79
Trading account assets – Mortgage trading loans, ABS and other MBS	91
Commercial loans, debt securities and other	$	3,489		Discounted cash flow, Market comparables	Yield	1% to 18%	13%
Trading account assets – Corporate securities, trading loans and other	1,358				Prepayment speed	10% to 20%	15%
Trading account assets – Non-U.S. sovereign debt	465				Default rate	3% to 4%	4%
Trading account assets – Mortgage trading loans, ABS and other MBS	1,125				Loss severity	35% to 40%	38%
Loans held-for-sale	541				Price	$0 to $141	$68
Other assets, primarily auction rate securities	$	890		Discounted cash flow, Market comparables	Price	$10 to $100	$95


MSRs	$	2,042		Discounted cash flow	Weighted-average life, fixed rate ⁽⁵⁾	0 to 14 years	5 years
					Weighted-average life, variable rate ⁽⁵⁾	0 to 10 years	3 years
					Option-adjusted spread, fixed rate	7% to 14%	9%
					Option-adjusted spread, variable rate	9% to 15%	12%
Structured liabilities
Long-term debt	$	(817	)	Discounted cash flow, Market comparables, Industry standard derivative pricing ⁽³⁾	Equity correlation	11% to 100%	67%
					Long-dated equity volatilities	4% to 84%	32%
					Yield	7% to 18%	16%
					Price	$0 to $100	$72
Net derivative assets
Credit derivatives	$	(565	)	Discounted cash flow, Stochastic recovery correlation model	Yield	0% to 5%	4%
					Upfront points	0 points to 100 points	70 points
					Credit correlation	70%	n/a
					Prepayment speed	15% to 20% CPR	15% CPR
					Default rate	1% to 4% CDR	2% CDR
					Loss severity	35%	n/a
					Price	$0 to $138	$93
Equity derivatives	$	(348	)	Industry standard derivative pricing ⁽³⁾	Equity correlation	11% to 100%	67%
				Industry standard derivative pricing ⁽³⁾	Long-dated equity volatilities	4% to 84%	32%
Commodity derivatives	$	10		Discounted cash flow, Industry standard derivative pricing ⁽³⁾	Natural gas forward price	$1/MMBtu to $12/MMBtu	$3/MMBtu
					Correlation	38% to 87%	71%
					Volatilities	15% to 132%	38%
Interest rate derivatives	$	(32	)	Industry standard derivative pricing⁽⁴⁾	Correlation (IR/IR)	15% to 70%	61%
					Correlation (FX/IR)	0% to 46%	1%
					Long-dated inflation rates	-20% to 38%	2%
					Long-dated inflation volatilities	0% to 1%	1%
Total net derivative assets	$	(935	)


⁽¹⁾	For loans and securities, structured liabilities and net derivative assets, the weighted average is calculated based upon the absolute fair value of the instruments.

⁽²⁾

The categories are aggregated based upon product type which differs from financial statement classification. The following is a reconciliation to the line items in the table on page 83: Trading account assets – Corporate securities, trading loans and other of $1.6 billion, Trading account assets – Non-U.S. sovereign debt of $465 million, Trading account assets – Mortgage trading loans, ABS and other MBS of $1.6 billion, AFS debt securities of $606 million, Other debt securities carried at fair value - Non-agency residential of $172 million, Other assets, including MSRs, of 2.9 billion, Loans and leases of $338 million and LHFS of $542 million.


⁽³⁾	Includes models such as Monte Carlo simulation and Black-Scholes.


⁽⁴⁾	Includes models such as Monte Carlo simulation, Black-Scholes and other methods that model the joint dynamics of interest, inflation and foreign exchange rates.


⁽⁵⁾	The weighted-average life is a product of changes in market rates of interest, prepayment rates and other model and cash flow assumptions.

CPR = Constant Prepayment Rate

CDR = Constant Default Rate

MMBtu = Million British thermal units

IR = Interest Rate

FX = Foreign Exchange

n/a = not applicable

Uncertainty of Fair Value Measurements from Unobservable Inputs

For information on the types of instruments, valuation approaches and the impact of changes in unobservable inputs used in Level 3 measurements, see Note 20 – Fair Value Measurements to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.



87 Bank of America

Nonrecurring Fair Value

The Corporation holds certain assets that are measured at fair value only in certain situations (e.g., the impairment of an asset), and these measurements are referred to herein as nonrecurring. The amounts below represent assets still held as of the reporting date for which a nonrecurring fair value adjustment was recorded during the three and nine months ended September 30, 2019 and

2018. In the tables below, other assets includes the measurement of the Corporation's merchant services equity method investment on which the Corporation recorded an impairment charge of $2.1 billion during the three months ended September 30, 2019. For additional information, see Note 11 – Commitments and Contingencies.




Assets Measured at Fair Value on a Nonrecurring Basis

	September 30, 2019				Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019
(Dollars in millions)	Level 2		Level 3		Gains (Losses)
Assets
Loans held-for-sale	$	5	$	111	$	(7	)	$	(18	)
Loans and leases ⁽¹⁾	—		232		(21		)	(62		)
Foreclosed properties ^{(2, 3)}	—		19		(7		)	(10		)
Other assets	165		658		(2,085		)	(2,104		)

	September 30, 2018				Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
Assets
Loans held-for-sale	$	45	$	12	$	(2	)	$	(2	)
Loans and leases ⁽¹⁾	—		492		(63		)	(194		)
Foreclosed properties ^{(2, 3)}	—		87		(8		)	(22		)
Other assets	294		3		(22		)	(58		)


⁽¹⁾	Includes $8 million and $25 million of losses on loans that were written down to a collateral value of zero during the three and nine months ended September 30, 2019 compared to losses of $24 million and $76 million for the same periods in 2018.


⁽²⁾	Amounts are included in other assets on the Consolidated Balance Sheet and represent the carrying value of foreclosed properties that were written down subsequent to their initial classification as foreclosed properties. Losses on foreclosed properties include losses recorded during the first 90 days after transfer of a loan to foreclosed properties.


⁽³⁾	Excludes $275 million and $500 million of properties acquired upon foreclosure of certain government-guaranteed loans (principally FHA-insured loans) at September 30, 2019 and 2018^.

The table below presents information about significant unobservable inputs at September 30, 2019 and December 31, 2018.




Quantitative Information about Nonrecurring Level 3 Fair Value Measurements

				Inputs
Financial Instrument	Fair Value		Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted Average ⁽¹⁾
(Dollars in millions)	September 30, 2019
Loans held-for-sale	$	111	Discounted cash flow	Price	$77 to $100	$86
Loans and leases ⁽²⁾	232		Market comparables	OREO discount	13% to 59%	24	%
				Costs to sell	8% to 26%	9	%
Other assets ⁽³⁾	652		Discounted cash flow	Customer attrition	0% to 19%	5	%
				Costs to service	11% to 19%	15	%
	December 31, 2018
Loans and leases ⁽²⁾	$	474	Market comparables	OREO discount	13% to 59%	25	%
				Costs to sell	8% to 26%	9	%


⁽¹⁾	The weighted average is calculated based upon the fair value of the loans.


⁽²⁾	Represents residential mortgages where the loan has been written down to the fair value of the underlying collateral.


⁽³⁾	The fair value of the merchant services joint venture was measured using a discounted cash flow method in which the two primary drivers of fair value were the customer attrition rate and certain costs to service the customers. The weighted averages are calculated based on variations of the attrition rates and costs to service the customers.



		Bank of America 88

NOTE 16 Fair Value Option

The Corporation elects to account for certain financial instruments under the fair value option. For more information on the primary financial instruments for which the fair value option elections have been made, see Note 21 – Fair Value Option to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K. The following tables provide information about the fair

value carrying amount and the contractual principal outstanding of assets and liabilities accounted for under the fair value option at September 30, 2019 and December 31, 2018, and information about where changes in the fair value of assets and liabilities accounted for under the fair value option are included in the Consolidated Statement of Income for the three and nine months ended September 30, 2019 and 2018.




Fair Value Option Elections

	September 30, 2019							December 31, 2018
(Dollars in millions)	Fair Value Carrying Amount		Contractual Principal Outstanding		Fair Value Carrying Amount Less Unpaid Principal			Fair Value Carrying Amount		Contractual Principal Outstanding		Fair Value Carrying Amount Less Unpaid Principal
Federal funds sold and securities borrowed or purchased under agreements to resell	$	50,298	$	50,238	$	60		$	56,399	$	56,376	$	23
Loans reported as trading account assets ⁽¹⁾	5,362		12,390		(7,028		)	6,195		13,088		(6,893		)
Trading inventory – other	17,989		n/a		n/a			13,778		n/a		n/a
Consumer and commercial loans	7,674		7,738		(64		)	4,349		4,399		(50		)
Loans held-for-sale ⁽¹⁾	5,011		6,119		(1,108		)	2,942		4,749		(1,807		)
Other assets	1		n/a		n/a			3		n/a		n/a
Long-term deposits	626		599		27			492		454		38
Federal funds purchased and securities loaned or sold under agreements to repurchase	21,963		21,966		(3		)	28,875		28,881		(6		)
Short-term borrowings	3,458		3,458		—			1,648		1,648		—
Unfunded loan commitments	116		n/a		n/a			169		n/a		n/a
Long-term debt ⁽²⁾	36,773		36,626		147			27,689		29,198		(1,509		)


⁽¹⁾	A significant portion of the loans reported as trading account assets and LHFS are distressed loans that were purchased at a deep discount to par, and the remainder are loans with a fair value near contractual principal outstanding.


⁽²⁾	Includes structured liabilities with a fair value of $36.4 billion and $27.3 billion, and contractual principal outstanding of $36.2 billion and $28.8 billion at September 30, 2019 and December 31, 2018.

n/a = not applicable




Gains (Losses) Relating to Assets and Liabilities Accounted for Under the Fair Value Option

	Three Months Ended September 30
	2019									2018
(Dollars in millions)	Trading Account Income			Other Income			Total			Trading Account Income		Other Income			Total
Loans reported as trading account assets ⁽¹⁾	$	4		$	—		$	4		$	74	$	—		$	74
Trading inventory – other ⁽²⁾	(156		)	—			(156		)	1,693		—			1,693
Consumer and commercial loans ⁽¹⁾	81			(6		)	75			176		8			184
Loans held-for-sale ⁽¹⁾	—			28			28			—		8			8
Long-term debt ^{(3, 4)}	(127		)	(20		)	(147		)	143		(19		)	124
Other ⁽⁵⁾	(1		)	(1		)	(2		)	2		52			54
Total	$	(199	)	$	1		$	(198	)	$	2,088	$	49		$	2,137

	Nine Months Ended September 30
	2019									2018
Loans reported as trading account assets ⁽¹⁾	$	167		$	—		$	167		$	145	$	—		$	145
Trading inventory – other ⁽²⁾	4,211			—			4,211			3,649		—			3,649
Consumer and commercial loans ⁽¹⁾	98			11			109			301		(24		)	277
Loans held-for-sale ⁽¹⁾	—			110			110			1		12			13
Long-term debt ^{(3, 4)}	(1,412		)	(65		)	(1,477		)	1,497		(75		)	1,422
Other ⁽⁵⁾	8			20			28			15		75			90
Total	$	3,072		$	76		$	3,148		$	5,608	$	(12	)	$	5,596


⁽¹⁾	Gains (losses) related to borrower-specific credit risk were not significant.


⁽²⁾	The gains (losses) in trading account income are primarily offset by (losses) gains on trading liabilities that hedge these assets.


⁽³⁾	The net gains (losses) in trading account income relate to the embedded derivatives in structured liabilities and are typically offset by (losses) gains on derivatives and securities that hedge these liabilities.

⁽⁴⁾

For the cumulative impact of changes in the Corporation’s own credit spreads and the amount recognized in accumulated OCI, see Note 14 – Accumulated Other Comprehensive Income (Loss). For more information on how the Corporation’s own credit spread is determined, see Note 20 – Fair Value Measurements to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.


⁽⁵⁾	Includes gains (losses) on federal funds sold and securities borrowed or purchased under agreements to resell, long-term deposits, federal funds purchased and securities loaned or sold under agreements to repurchase, short-term borrowings and unfunded loan commitments.

NOTE 17 Fair Value of Financial Instruments

The following disclosures include financial instruments that are not carried at fair value or only a portion of the ending balance is carried at fair value on the Consolidated Balance Sheet. Certain loans, deposits, long-term debt and unfunded lending commitments are accounted for under the fair value option. For additional information, see Note 21 – Fair Value Option to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.



89 Bank of America

Fair Value of Financial Instruments

The carrying values and fair values by fair value hierarchy of certain financial instruments where only a portion of the ending balance was carried at fair value at September 30, 2019 and December 31, 2018 are presented in the following table.




Fair Value of Financial Instruments

			Fair Value
	Carrying Value		Level 2		Level 3		Total
(Dollars in millions)	September 30, 2019
Financial assets
Loans	$	939,548	$	63,448	$	904,921	$	968,369
Loans held-for-sale	9,811		9,028		783		9,811
Financial liabilities
Deposits ⁽¹⁾	1,392,836		1,392,934		—		1,392,934
Long-term debt	243,405		246,781		864		247,645
Commercial unfunded lending commitments ⁽²⁾	925		116		4,752		4,868

	December 31, 2018
Financial assets
Loans	$	911,520	$	58,228	$	859,160	$	917,388
Loans held-for-sale	10,367		9,592		775		10,367
Financial liabilities
Deposits ⁽¹⁾	1,381,476		1,381,239		—		1,381,239
Long-term debt	229,392		230,019		817		230,836
Commercial unfunded lending commitments ⁽²⁾	966		169		5,558		5,727


⁽¹⁾	Includes demand deposits of $532.9 billion and $531.9 billion with no stated maturities at September 30, 2019 and December 31, 2018.

⁽²⁾

The carrying value of commercial unfunded lending commitments is included in accrued expenses and other liabilities on the Consolidated Balance Sheet. The Corporation does not estimate the fair value of consumer unfunded lending commitments because, in many instances, the Corporation can reduce or cancel these commitments by providing notice to the borrower. For more information on commitments, see Note 11 – Commitments and Contingencies.

NOTE 18 Business Segment Information

The Corporation reports its results of operations through the following four business segments: Consumer Banking, Global Wealth & Investment Management, Global Banking and Global Markets, with the remaining operations recorded in All Other. For additional information, see Note 23 – Business Segment Information to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K. The following tables present net income (loss) and the components thereto (with

net interest income on an FTE basis for the business segments, All Other and the total Corporation) for the three and nine months ended September 30, 2019 and 2018, and total assets at September 30, 2019 and 2018 for each business segment, as well as All Other, including a reconciliation of the four business segments’ total revenue, net of interest expense, on an FTE basis, and net income to the Consolidated Statement of Income, and total assets to the Consolidated Balance Sheet.




Results of Business Segments and All Other

At and for the three months ended September 30	Total Corporation⁽¹⁾					Consumer Banking					Global Wealth & Investment Management
(Dollars in millions)	2019		2018			2019		2018			2019			2018
Net interest income	$	12,335	$	12,212		$	7,031	$	6,844		$	1,609		$	1,531
Noninterest income	10,620		10,663			2,693		2,598			3,295			3,286
Total revenue, net of interest expense	22,955		22,875			9,724		9,442			4,904			4,817
Provision for credit losses	779		716			917		870			37			13
Noninterest expense	15,169		13,014			4,393		4,325			3,413			3,443
Income before income taxes	7,007		9,145			4,414		4,247			1,454			1,361
Income tax expense	1,230		1,978			1,081		1,082			356			347
Net income	$	5,777	$	7,167		$	3,333	$	3,165		$	1,098		$	1,014
Period-end total assets	$	2,426,330	$	2,338,833		$	788,743	$	765,498		$	288,317		$	276,146

	Global Banking					Global Markets					All Other
	2019		2018			2019		2018			2019			2018
Net interest income	$	2,617	$	2,726		$	1,016	$	933		$	62		$	178
Noninterest income	2,595		2,097			2,848		2,940			(811		)	(258		)
Total revenue, net of interest expense	5,212		4,823			3,864		3,873			(749		)	(80		)
Provision for credit losses	120		(70		)	—		(2		)	(295		)	(95		)
Noninterest expense	2,220		2,142			2,679		2,633			2,464			471
Income before income taxes	2,872		2,751			1,185		1,242			(2,918		)	(456		)
Income tax expense	775		714			338		323			(1,320		)	(488		)
Net income	$	2,097	$	2,037		$	847	$	919		$	(1,598	)	$	32
Period-end total assets	$	452,642	$	430,846		$	689,023	$	646,359		$	207,605		$	219,984


⁽¹⁾	There were no material intersegment revenues.



		Bank of America 90




Results of Business Segments and All Other

At and for the nine months ended September 30	Total Corporation⁽¹⁾					Consumer Banking						Global Wealth & Investment Management
(Dollars in millions)	2019		2018			2019			2018			2019			2018
Net interest income	$	37,201	$	36,113		$	21,253		$	19,914		$	4,917		$	4,653
Noninterest income	32,144		32,685			7,820			7,742			9,707			9,761
Total revenue, net of interest expense	69,345		68,798			29,073			27,656			14,624			14,414
Provision for credit losses	2,649		2,377			2,838			2,749			63			63
Noninterest expense	41,661		40,080			13,157			13,241			10,300			10,451
Income before income taxes	25,035		26,341			13,078			11,666			4,261			3,900
Income tax expense	4,599		5,472			3,204			2,975			1,044			994
Net income	$	20,436	$	20,869		$	9,874		$	8,691		$	3,217		$	2,906
Period-end total assets	$	2,426,330	$	2,338,833		$	788,743		$	765,498		$	288,317		$	276,146

	Global Banking					Global Markets						All Other
	2019		2018			2019			2018			2019			2018
Net interest income	$	8,116	$	8,144		$	2,780		$	2,922		$	135		$	480
Noninterest income	7,226		6,688			9,409			10,013			(2,018		)	(1,519		)
Total revenue, net of interest expense	15,342		14,832			12,189			12,935			(1,883		)	(1,039		)
Provision for credit losses	356		(77		)	(18		)	(6		)	(590		)	(352		)
Noninterest expense	6,697		6,618			8,109			8,283			3,398			1,487
Income before income taxes	8,289		8,291			4,098			4,658			(4,691		)	(2,174		)
Income tax expense	2,238		2,154			1,168			1,211			(3,055		)	(1,862		)
Net income	$	6,051	$	6,137		$	2,930		$	3,447		$	(1,636	)	$	(312	)
Period-end total assets	$	452,642	$	430,846		$	689,023		$	646,359		$	207,605		$	219,984


⁽¹⁾	There were no material intersegment revenues.




Business Segment Reconciliations

	Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)	2019			2018			2019			2018
Segments’ total revenue, net of interest expense	$	23,704		$	22,955		$	71,228		$	69,837
Adjustments ⁽¹⁾:
ALM activities	(221		)	32			(175		)	(450		)
Liquidating businesses, eliminations and other	(528		)	(112		)	(1,708		)	(589		)
FTE basis adjustment	(148		)	(151		)	(450		)	(455		)
Consolidated revenue, net of interest expense	$	22,807		$	22,724		$	68,895		$	68,343
Segments’ total net income	7,375			7,135			22,072			21,181
Adjustments, net-of-tax ⁽¹⁾:
ALM activities	(158		)	29			(112		)	(323		)
Liquidating businesses, eliminations and other	(1,440		)	3			(1,524		)	11
Consolidated net income	$	5,777		$	7,167		$	20,436		$	20,869

							September 30
							2019			2018
Segments’ total assets							$	2,218,725		$	2,118,849
Adjustments ⁽¹⁾:
ALM activities, including securities portfolio							686,301			674,426
Elimination of segment asset allocations to match liabilities							(546,529		)	(529,830		)
Other							67,833			75,388
Consolidated total assets							$	2,426,330		$	2,338,833


⁽¹⁾	Adjustments include consolidated income, expense and asset amounts not specifically allocated to individual business segments.



91 Bank of America

The tables below present noninterest income and the components thereto for the three and nine months ended September 30, 2019 and 2018 for each business segment, All Other and the total Corporation. For more information, see Note 2 – Net Interest Income and Noninterest Income.




Noninterest Income by Business Segment and All Other

	Total Corporation				Consumer Banking				Global Wealth & Investment Management
	Three Months Ended September 30
(Dollars in millions)	2019		2018		2019		2018		2019			2018
Fees and commissions:
Card income
Interchange fees	$	963	$	925	$	802	$	757	$	15		$	23
Other card income	502		492		487		480		11			11
Total card income	1,465		1,417		1,289		1,237		26			34
Service charges
Deposit-related fees	1,690		1,682		1,097		1,098		16			19
Lending-related fees	285		279		—		—		—			—
Total service charges	1,975		1,961		1,097		1,098		16			19
Investment and brokerage services
Asset management fees	2,597		2,576		36		38		2,572			2,538
Brokerage fees	897		918		39		42		429			466
Total investment and brokerage services	3,494		3,494		75		80		3,001			3,004
Investment banking fees
Underwriting income	740		701		—		—		88			86
Syndication fees	341		241		—		—		—			—
Financial advisory services	452		262		—		—		1			1
Total investment banking fees	1,533		1,204		—		—		89			87
Total fees and commissions	8,467		8,076		2,461		2,415		3,132			3,144
Trading account income	1,707		1,717		1		2		26			24
Other income	446		870		231		181		137			118
Total noninterest income	$	10,620	$	10,663	$	2,693	$	2,598	$	3,295		$	3,286

	Global Banking				Global Markets				All Other ⁽¹⁾
	Three Months Ended September 30
	2019		2018		2019		2018		2019			2018
Fees and commissions:
Card income
Interchange fees	$	129	$	122	$	19	$	21	$	(2	)	$	2
Other card income	3		2		—		—		1			(1		)
Total card income	132		124		19		21		(1		)	1
Service charges
Deposit-related fees	533		520		37		41		7			4
Lending-related fees	230		233		55		45		—			1
Total service charges	763		753		92		86		7			5
Investment and brokerage services
Asset management fees	—		—		—		—		(11		)	—
Brokerage fees	10		27		419		388		—			(5		)
Total investment and brokerage services	10		27		419		388		(11		)	(5		)
Investment banking fees
Underwriting income	312		289		383		374		(43		)	(48		)
Syndication fees	163		118		178		124		—			(1		)
Financial advisory services	427		237		24		24		—			—
Total investment banking fees	902		644		585		522		(43		)	(49		)
Total fees and commissions	1,807		1,548		1,115		1,017		(48		)	(48		)
Trading account income	84		60		1,580		1,551		16			80
Other income	704		489		153		372		(779		)	(290		)
Total noninterest income	$	2,595	$	2,097	$	2,848	$	2,940	$	(811	)	$	(258	)


⁽¹⁾	All Other includes eliminations of intercompany transactions.



		Bank of America 92




Noninterest Income by Business Segment and All Other

	Total Corporation				Consumer Banking				Global Wealth & Investment Management
	Nine Months Ended September 30
(Dollars in millions)	2019		2018		2019		2018		2019			2018
Fees and commissions:
Card income
Interchange fees	$	2,827	$	2,850	$	2,334	$	2,349	$	43		$	59
Other card income	1,459		1,452		1,420		1,414		30			33
Total card income	4,286		4,302		3,754		3,763		73			92
Service charges
Deposit-related fees	4,908		5,008		3,163		3,214		50			55
Lending-related fees	809		828		—		—		—			—
Total service charges	5,717		5,836		3,163		3,214		50			55
Investment and brokerage services
Asset management fees	7,591		7,653		107		111		7,510			7,541
Brokerage fees	2,733		2,963		116		131		1,295			1,440
Total investment and brokerage services	10,324		10,616		223		242		8,805			8,981
Investment banking fees
Underwriting income	2,198		2,160		—		—		295			243
Syndication fees	887		958		—		—		—			—
Financial advisory services	1,083		861		—		—		1			1
Total investment banking fees	4,168		3,979		—		—		296			244
Total fees and commissions	24,495		24,733		7,140		7,219		9,224			9,372
Trading account income	6,390		6,421		5		6		90			81
Other income	1,259		1,531		675		517		393			308
Total noninterest income	$	32,144	$	32,685	$	7,820	$	7,742	$	9,707		$	9,761

	Global Banking				Global Markets				All Other ⁽¹⁾
	Nine Months Ended September 30
	2019		2018		2019		2018		2019			2018
Fees and commissions:
Card income
Interchange fees	$	390	$	377	$	61	$	63	$	(1	)	$	2
Other card income	8		5		—		—		1			—
Total card income	398		382		61		63		—			2
Service charges
Deposit-related fees	1,557		1,598		120		126		18			15
Lending-related fees	668		687		141		140		—			1
Total service charges	2,225		2,285		261		266		18			16
Investment and brokerage services
Asset management fees	—		—		—		—		(26		)	1
Brokerage fees	26		71		1,296		1,306		—			15
Total investment and brokerage services	26		71		1,296		1,306		(26		)	16
Investment banking fees
Underwriting income	917		876		1,147		1,220		(161		)	(179		)
Syndication fees	427		472		461		486		(1		)	—
Financial advisory services	984		782		99		77		(1		)	1
Total investment banking fees	2,328		2,130		1,707		1,783		(163		)	(178		)
Total fees and commissions	4,977		4,868		3,325		3,418		(171		)	(144		)
Trading account income	190		184		5,623		6,129		482			21
Other income	2,059		1,636		461		466		(2,329		)	(1,396		)
Total noninterest income	$	7,226	$	6,688	$	9,409	$	10,013	$	(2,018	)	$	(1,519	)


⁽¹⁾	All Other includes eliminations of intercompany transactions.



93 Bank of America

Glossary

Alt-A Mortgage – A type of U.S. mortgage that is considered riskier than A-paper, or “prime,” and less risky than “subprime,” the riskiest category. Typically, Alt-A mortgages are characterized by borrowers with less than full documentation, lower credit scores and higher LTVs.

Assets Under Management (AUM) – The total market value of assets under the investment advisory and/or discretion of GWIM which generate asset management fees based on a percentage of the assets’ market values. AUM reflects assets that are generally managed for institutional, high net worth and retail clients, and are distributed through various investment products including mutual funds, other commingled vehicles and separate accounts.

Banking Book – All on- and off-balance sheet financial instruments of the Corporation except for those positions that are held for trading purposes.

Brokerage and Other Assets – Non-discretionary client assets which are held in brokerage accounts or held for safekeeping.

Committed Credit Exposure – Any funded portion of a facility plus the unfunded portion of a facility on which the lender is legally bound to advance funds during a specified period under prescribed conditions.

Credit Derivatives – Contractual agreements that provide protection against a specified credit event on one or more referenced obligations.

Credit Valuation Adjustment (CVA) – A portfolio adjustment required to properly reflect the counterparty credit risk exposure as part of the fair value of derivative instruments.

Debit Valuation Adjustment (DVA) – A portfolio adjustment required to properly reflect the Corporation’s own credit risk exposure as part of the fair value of derivative instruments and/or structured liabilities.

Funding Valuation Adjustment (FVA) – A portfolio adjustment required to include funding costs on uncollateralized derivatives and derivatives where the Corporation is not permitted to use the collateral it receives.

Interest Rate Lock Commitment (IRLC) – Commitment with a loan applicant in which the loan terms are guaranteed for a designated period of time subject to credit approval.

Letter of Credit – A document issued on behalf of a customer to a third party promising to pay the third party upon presentation of specified documents. A letter of credit effectively substitutes the issuer’s credit for that of the customer.

Loan-to-value (LTV) – A commonly used credit quality metric. LTV is calculated as the outstanding carrying value of the loan divided by the estimated value of the property securing the loan.

Margin Receivable – An extension of credit secured by eligible securities in certain brokerage accounts.

Matched Book – Repurchase and resale agreements or securities borrowed and loaned transactions where the overall asset and liability position is similar in size and/or maturity. Generally, these are entered into to accommodate customers where the Corporation earns the interest rate spread.

Mortgage Servicing Rights (MSR) – The right to service a mortgage loan when the underlying loan is sold or securitized. Servicing includes collections for principal, interest and escrow payments from borrowers and accounting for and remitting principal and interest payments to investors.

Net Interest Yield – Net interest income divided by average total interest-earning assets.

Nonperforming Loans and Leases – Includes loans and leases that have been placed on nonaccrual status, including nonaccruing loans whose contractual terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties.

Operating Margin – Income before income taxes divided by total revenue, net of interest expense.

Prompt Corrective Action (PCA) – A framework established by the U.S. banking regulators requiring banks to maintain certain levels of regulatory capital ratios, comprised of five categories of capitalization: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” Insured depository institutions that fail to meet certain of these capital levels are subject to increasingly strict limits on their activities, including their ability to make capital distributions, pay management compensation, grow assets and take other actions.

Subprime Loans – Although a standard industry definition for subprime loans (including subprime mortgage loans) does not exist, the Corporation defines subprime loans as specific product offerings for higher risk borrowers.

Troubled Debt Restructurings (TDRs) – Loans whose contractual terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties. Certain consumer loans for which a binding offer to restructure has been extended are also classified as TDRs.

Value-at-Risk (VaR) – VaR is a model that simulates the value of a portfolio under a range of hypothetical scenarios in order to generate a distribution of potential gains and losses. VaR represents the loss the portfolio is expected to experience with a given confidence level based on historical data. A VaR model is an effective tool in estimating ranges of potential gains and losses on our trading portfolios.



		Bank of America 94

Acronyms



ABS	Asset-backed securities
AFS	Available-for-sale
ALM	Asset and liability management
ARR	Alternative reference rates
AUM	Assets under management
BANA	Bank of America, National Association
BHC	Bank holding company
BofAS	BofA Securities, Inc.
BofASE	BofA Securities Europe SA
bps	basis points
CCAR	Comprehensive Capital Analysis and Review
CDO	Collateralized debt obligation
CET1	Common equity tier 1
CFTC	Commodity Futures Trading Commission
CLTV	Combined loan-to-value
CVA	Credit valuation adjustment
DVA	Debit valuation adjustment
EPS	Earnings per common share
EU	European Union
FDIC	Federal Deposit Insurance Corporation
FHA	Federal Housing Administration
FHLB	Federal Home Loan Bank
FHLMC	Freddie Mac
FICC	Fixed-income, currencies and commodities
FICO	Fair Isaac Corporation (credit score)
FNMA	Fannie Mae
FTE	Fully taxable-equivalent
FVA	Funding valuation adjustment
GAAP	Accounting principles generally accepted in the United States of America
GLS	Global Liquidity Sources
GNMA	Government National Mortgage Association
GSE	Government-sponsored enterprise
G-SIB	Global systemically important bank



GWIM	Global Wealth & Investment Management
HELOC	Home equity line of credit
HQLA	High Quality Liquid Assets
HTM	Held-to-maturity
IRLC	Interest rate lock commitment
ISDA	International Swaps and Derivatives Association, Inc.
LCR	Liquidity Coverage Ratio
LHFS	Loans held-for-sale
LIBOR	London InterBank Offered Rate
LTV	Loan-to-value
MBS	Mortgage-backed securities
MD&A	Management’s Discussion and Analysis of Financial Condition and Results of Operations
MLGWM	Merrill Lynch Global Wealth Management
MLI	Merrill Lynch International
MLPCC	Merrill Lynch Professional Clearing Corp
MLPF&S	Merrill Lynch, Pierce, Fenner & Smith Incorporated
MSA	Metropolitan Statistical Area
MSR	Mortgage servicing right
OCI	Other comprehensive income
OREO	Other real estate owned
OTC	Over-the-counter
OTTI	Other-than-temporary impairment
PCA	Prompt Corrective Action
PCI	Purchased credit-impaired
RMBS	Residential mortgage-backed securities
SBLC	Standby letter of credit
SLR	Supplementary leverage ratio
TDR	Troubled debt restructurings
TLAC	Total loss-absorbing capacity
VaR	Value-at-Risk
VIE	Variable interest entity



95 Bank of America

Part II. Other Information

Bank of America Corporation and Subsidiaries

Item 1. Legal Proceedings

See Litigation and Regulatory Matters in Note 11 – Commitments and Contingencies to the Consolidated Financial Statements, which is incorporated by reference in this Item 1, for litigation and regulatory disclosure that supplements the disclosure in Note 12 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.

Item 1A. Risk Factors

There are no material changes from the risk factors set forth under Part 1, Item 1A. Risk Factors of the Corporation’s 2018 Annual Report on Form 10-K.

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

The table below presents share repurchase activity for the three months ended September 30, 2019. The primary source of funds for cash distributions by the Corporation to its shareholders is dividends received from its banking subsidiaries. Each of the banking subsidiaries is subject to various regulatory policies and requirements relating to the payment of dividends, including requirements to maintain capital above regulatory minimums. All of the Corporation’s preferred stock outstanding has preference over the Corporation’s common stock with respect to payment of dividends.




(Dollars in millions, except per share information; shares in thousands)	Total Common Shares Repurchased ⁽¹⁾	Weighted-Average Per Share Price		Total Shares Purchased as Part of Publicly Announced Programs	Remaining Buyback Authority Amounts ⁽²⁾
July 1 - 31, 2019	43,183	$	30.34	43,183	$	29,635
August 1 - 31, 2019	129,976	27.68		126,469	26,129
September 1 - 30, 2019	97,365	28.89		97,281	23,319
Three months ended September 30, 2019	270,524	28.54		266,933


⁽¹⁾	Includes shares of the Corporation’s common stock acquired by the Corporation in connection with satisfaction of tax withholding obligations on vested restricted stock or restricted stock units and certain forfeitures and terminations of employment-related awards and for potential re-issuance to certain employees under equity incentive plans.

⁽²⁾

On June 27, 2019, following the Board of Governors of the Federal Reserve System's non-objection to the Corporation's 2019 Comprehensive Capital Analysis and Review capital plan, the Board of Directors (Board) authorized the repurchase of approximately $30.9 billion in common stock from July 1, 2019 through June 30, 2020, which includes approximately $900 million to offset shares awarded under equity-based compensation plans during the same period. During the three months ended September 30, 2019, pursuant to the Board’s authorization, the Corporation repurchased $7.6 billion of common stock, which included common stock to offset equity-based compensation awards. For additional information, see Capital Management - CCAR and Capital Planning in the MD&A on page 20 and Note 12 – Shareholders’ Equity to the Consolidated Financial Statements.

The Corporation did not have any unregistered sales of equity securities during the three months ended September 30, 2019.



		Bank of America 96

Item 6. Exhibits




Exhibit No.	Description	Notes

3(a)	Amended and Restated Certificate of Incorporation as in effect on the date hereof	1

3(b)	Amended Bylaws of the Corporation as in effect on the date hereof	1

31(a)	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	1

31(b)	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	1

32(a)	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	1

32(b)	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	1

101.INS	XBRL Instance Document	2

101.SCH	XBRL Taxonomy Extension Schema Document	1

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	1

101.LAB	XBRL Taxonomy Extension Label Linkbase Document	1

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	1

101.DEF	XBRL Taxonomy Extension Definitions Linkbase Document	1

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

⁽¹⁾Filed herewith.

⁽²⁾ The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		Bank of America Corporation Registrant

Date:	October 28, 2019		/s/ Rudolf A. Bless
			Rudolf A. Bless Chief Accounting Officer



97 Bank of America

FORM 10-Q

INDEX

Part I. Financial Information

Part II. Other Information

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Summary

Recent Developments

Financial Highlights

Supplemental Financial Data

Business Segment Operations

Consumer Banking

Global Wealth & Investment Management

Global Banking

Global Markets

All Other

Off-Balance Sheet Arrangements and Contractual Obligations

Managing Risk

Capital Management

Liquidity Risk

Credit Risk Management

Consumer Portfolio Credit Risk Management

Commercial Portfolio Credit Risk Management

Non-U.S. Portfolio

Provision for Credit Losses

Allowance for Credit Losses

Market Risk Management

Trading Risk Management

Interest Rate Risk Management for the Banking Book

Mortgage Banking Risk Management

Complex Accounting Estimates

Non-GAAP Reconciliations

Part I. Financial Information

Item 1. Financial Statements

Consolidated Statement of Income

Consolidated Statement of Comprehensive Income

Consolidated Balance Sheet

Consolidated Statement of Changes in Shareholders’ Equity

Consolidated Statement of Cash Flows

Notes to Consolidated Financial Statements

Part II. Other Information

Item 1. Legal Proceedings

Item 1A. Risk Factors

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

Item 6. Exhibits

Signature