Bank of America Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Derivatives (Tables)

Derivatives (Tables)

3 Months Ended

Mar. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The following tables present derivative instruments included on the Consolidated Balance Sheet in derivative assets and liabilities at March 31, 2020 and December 31, 2019. 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.




			March 31, 2020
			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	$	19,058.4	$	199.6	$	21.0	$	220.6		$	217.2	$	0.5	$	217.7
Futures and forwards	6,585.6		13.4		—		13.4			13.0		—		13.0
Written options	1,782.9		—		—		—			56.3		—		56.3
Purchased options	1,768.8		60.6		—		60.6			—		—		—
Foreign exchange contracts
Swaps	1,617.0		47.9		1.2		49.1			53.6		1.5		55.1
Spot, futures and forwards	4,566.2		68.5		1.0		69.5			66.8		0.2		67.0
Written options	314.1		—		—		—			6.8		—		6.8
Purchased options	309.6		7.5		—		7.5			—		—		—
Equity contracts
Swaps	241.8		22.0		—		22.0			19.8		—		19.8
Futures and forwards	95.8		1.2		0.1		1.3			0.4		—		0.4
Written options	601.7		—		—		—			50.0		—		50.0
Purchased options	576.1		56.4		—		56.4			—		—		—
Commodity contracts
Swaps	41.3		5.9		—		5.9			6.3		—		6.3
Futures and forwards	48.2		1.9		—		1.9			0.6		—		0.6
Written options	33.0		—		—		—			5.6		—		5.6
Purchased options	37.0		5.2		—		5.2			—		—		—
Credit derivatives ⁽²⁾
Purchased credit derivatives:
Credit default swaps	354.2		8.1		—		8.1			2.1		—		2.1
Total return swaps/options	98.3		2.1		—		2.1			1.5		—		1.5
Written credit derivatives:
Credit default swaps	332.0		1.7		—		1.7			6.5		—		6.5
Total return swaps/options	97.8		1.0		—		1.0			1.9		—		1.9
Gross derivative assets/liabilities			$	503.0	$	23.3	$	526.3		$	508.4	$	2.2	$	510.6
Less: Legally enforceable master netting agreements							(415.2		)					(415.2		)
Less: Cash collateral received/paid							(53.4		)					(40.7		)
Total derivative assets/liabilities							$	57.7						$	54.7


⁽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 $(4.5) billion and $279.4 billion at March 31, 2020.




			December 31, 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	$	15,074.4	$	162.0	$	9.7	$	171.7		$	168.5	$	0.4	$	168.9
Futures and forwards	3,279.8		1.0		—		1.0			1.0		—		1.0
Written options	1,767.7		—		—		—			32.5		—		32.5
Purchased options	1,673.6		37.4		—		37.4			—		—		—
Foreign exchange contracts
Swaps	1,657.7		30.3		0.7		31.0			31.7		0.9		32.6
Spot, futures and forwards	3,792.7		35.9		0.1		36.0			38.7		0.3		39.0
Written options	274.3		—		—		—			3.8		—		3.8
Purchased options	261.6		4.0		—		4.0			—		—		—
Equity contracts
Swaps	315.0		6.5		—		6.5			8.1		—		8.1
Futures and forwards	125.1		0.3		—		0.3			1.1		—		1.1
Written options	731.1		—		—		—			34.6		—		34.6
Purchased options	668.6		42.4		—		42.4			—		—		—
Commodity contracts
Swaps	42.0		2.1		—		2.1			4.4		—		4.4
Futures and forwards	61.3		1.7		—		1.7			0.4		—		0.4
Written options	33.2		—		—		—			1.4		—		1.4
Purchased options	37.9		1.4		—		1.4			—		—		—
Credit derivatives ⁽²⁾
Purchased credit derivatives:
Credit default swaps	321.6		2.7		—		2.7			5.6		—		5.6
Total return swaps/options	86.6		0.4		—		0.4			1.3		—		1.3
Written credit derivatives:
Credit default swaps	300.2		5.4		—		5.4			2.0		—		2.0
Total return swaps/options	86.2		0.8		—		0.8			0.4		—		0.4
Gross derivative assets/liabilities			$	334.3	$	10.5	$	344.8		$	335.5	$	1.6	$	337.1
Less: Legally enforceable master netting agreements							(270.4		)					(270.4		)
Less: Cash collateral received/paid							(33.9		)					(28.5		)
Total derivative assets/liabilities							$	40.5						$	38.2


⁽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 $2.8 billion and $309.7 billion at December 31, 2019.

Derivative [Line Items]

Gains and Losses on Derivatives Designated as Fair Value Hedges

The table below summarizes information related to fair value hedges for the three months ended March 31, 2020 and 2019.




Gains and Losses on Derivatives Designated as Fair Value Hedges

	Three Months Ended March 31, 2020
	2020						2019
(Dollars in millions)	Derivative			Hedged Item			Derivative			Hedged Item
Interest rate risk on long-term debt ⁽¹⁾	$	10,334		$	(10,276	)	$	1,913		$	(1,929	)
Interest rate and foreign currency risk on long-term debt ⁽²⁾	505			(491		)	57			(48		)
Interest rate risk on available-for-sale securities ⁽³⁾	(350		)	342			(45		)	43
Total	$	10,489		$	(10,425	)	$	1,925		$	(1,934	)


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


⁽²⁾	For the three months ended March 31, 2020 and 2019, the derivative amount includes gains (losses) of $734 million and $170 million in interest expense, $(241) million and $(121) million in market making and similar activities, and $12 million and $8 million in accumulated OCI. Line item totals are in the Consolidated Statement of Income and on the Consolidated Balance Sheet.

⁽³⁾

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

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

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)

	March 31, 2020						December 31, 2019
(Dollars in millions)	Carrying Value			Cumulative Fair Value Adjustments ⁽¹⁾			Carrying Value			Cumulative Fair Value Adjustments⁽¹⁾
Long-term debt ⁽²⁾	$	(186,490	)	$	(19,542	)	$	(162,389	)	$	(8,685	)
Available-for-sale debt securities ^{(2, 3)}	4,157			314			1,654			64


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

⁽²⁾

At March 31, 2020 and December 31, 2019, the cumulative fair value adjustments remaining on long-term debt and AFS debt securities from discontinued hedging relationships resulted in a decrease in the related liability of $1.2 billion and $1.3 billion and an increase in the related asset of $22 million and $8 million, which are being amortized over the remaining contractual life of the de-designated hedged items.

⁽³⁾

Carrying value represents amortized cost.

Cash Flow and Net Investment Hedges

The following table summarizes certain information related to cash flow hedges and net investment hedges for the three months ended March 31, 2020 and 2019. Of the $17 million after-tax net gain ($23 million pretax) on derivatives in accumulated OCI at March 31, 2020, gains of $77 million after-tax ($102 million pretax) related to open cash flow hedges are expected to be

reclassified into earnings in the next 12 months. These net gains reclassified into earnings are expected to primarily increase 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 three 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

	Three Months Ended March 31
	2020						2019
(Dollars in millions, amounts pretax)	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
Cash flow hedges
Interest rate risk on variable-rate assets ⁽¹⁾	$	591		$	(26	)	$	254	$	(23	)
Price risk on certain compensation plans ⁽²⁾	(82		)	—			—		—
Total	$	509		$	(26	)	$	254	$	(23	)
Net investment hedges
Foreign exchange risk ⁽³⁾	$	1,368		$	—		$	6	$	1


⁽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 compensation and benefits expense in the Consolidated Statement of Income.

⁽³⁾

Amounts reclassified from accumulated OCI are recorded in other income in the Consolidated Statement of Income. For the three months ended March 31, 2020 and 2019, amounts excluded from effectiveness testing and recognized in market making and similar activities were gains of $30 million and $53 million.

Other Risk Management Derivatives

The following table presents gains (losses) on these derivatives for the three months ended March 31, 2020 and 2019. 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 March 31
(Dollars in millions)	2020			2019
Interest rate risk on mortgage activities ^{(1, 2)}	$	379		$	104
Credit risk on loans ⁽²⁾	88			(26		)
Interest rate and foreign currency risk on ALM activities ⁽³⁾	1,528			1,229
Price risk on certain compensation plans ⁽⁴⁾	(757		)	511


⁽¹⁾	Primarily related to hedges of interest rate risk on mortgage servicing rights and interest rate lock commitments to originate mortgage loans that will be held for sale. The net gains on interest rate lock commitments which are not included in the table but are considered derivative instruments, were $48 million and $12 million for the three months ended March 31, 2020 and 2019.


⁽²⁾	Gains (losses) on these derivatives are recorded in other income.


⁽³⁾	Gains (losses) on these derivatives are recorded in market making and similar activities.

⁽⁴⁾

Gains (losses) on these derivatives are recorded in compensation and benefits expense.

Schedule of Derivative Instruments Included in Trading Activities

This table includes debit valuation adjustment (DVA) and funding valuation adjustment (FVA) gains (losses). Global Markets results in Note 17 – 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

	Market making and similar activities			Net Interest Income			Other ⁽¹⁾		Total
(Dollars in millions)	Three Months Ended March 31, 2020
Interest rate risk	$	1,568		$	619		$	68	$	2,255
Foreign exchange risk	446			5			5		456
Equity risk	1,261			(123		)	519		1,657
Credit risk	(406		)	441			39		74
Other risk	103			21			7		131
Total sales and trading revenue	$	2,972		$	963		$	638	$	4,573

	Three Months Ended March 31, 2019
Interest rate risk	$	300		$	410		$	86	$	796
Foreign exchange risk	318			19			6		343
Equity risk	969			(175		)	396		1,190
Credit risk	487			430			134		1,051
Other risk	7			18			10		35
Total sales and trading revenue	$	2,081		$	702		$	632	$	3,415

⁽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 $557 million and $433 million for the three months ended March 31, 2020 and 2019.

Disclosure of Credit Derivatives

Credit derivative instruments where the Corporation is the seller of credit protection and their expiration at March 31, 2020 and December 31, 2019 are summarized in the following table.




Credit Derivative Instruments

	Less than One Year		One to Three Years		Three to Five Years		Over Five Years		Total
	March 31, 2020
(Dollars in millions)	Carrying Value
Credit default swaps:
Investment grade	$	9	$	87	$	620	$	532	$	1,248
Non-investment grade	192		1,021		1,945		2,054		5,212
Total	201		1,108		2,565		2,586		6,460
Total return swaps/options:
Investment grade	578		—		—		—		578
Non-investment grade	1,301		10		—		—		1,311
Total	1,879		10		—		—		1,889
Total credit derivatives	$	2,080	$	1,118	$	2,565	$	2,586	$	8,349
Credit-related notes:
Investment grade	$	—	$	—	$	—	$	1,156	$	1,156
Non-investment grade	6		2		—		1,075		1,083
Total credit-related notes	$	6	$	2	$	—	$	2,231	$	2,239
	Maximum Payout/Notional
Credit default swaps:
Investment grade	$	48,868	$	75,071	$	77,467	$	26,226	$	227,632
Non-investment grade	19,106		30,941		39,604		14,694		104,345
Total	67,974		106,012		117,071		40,920		331,977
Total return swaps/options:
Investment grade	65,869		—		126		—		65,995
Non-investment grade	27,272		4,476		6		5		31,759
Total	93,141		4,476		132		5		97,754
Total credit derivatives	$	161,115	$	110,488	$	117,203	$	40,925	$	429,731

	December 31, 2019
	Carrying Value
Credit default swaps:
Investment grade	$	—	$	5	$	60	$	164	$	229
Non-investment grade	70		292		561		808		1,731
Total	70		297		621		972		1,960
Total return swaps/options:
Investment grade	35		—		—		—		35
Non-investment grade	344		—		—		—		344
Total	379		—		—		—		379
Total credit derivatives	$	449	$	297	$	621	$	972	$	2,339
Credit-related notes:
Investment grade	$	—	$	3	$	1	$	639	$	643
Non-investment grade	6		2		1		1,125		1,134
Total credit-related notes	$	6	$	5	$	2	$	1,764	$	1,777
	Maximum Payout/Notional
Credit default swaps:
Investment grade	$	55,827	$	67,838	$	71,320	$	17,708	$	212,693
Non-investment grade	19,049		26,521		29,618		12,337		87,525
Total	74,876		94,359		100,938		30,045		300,218
Total return swaps/options:
Investment grade	56,488		—		62		76		56,626
Non-investment grade	28,707		657		104		60		29,528
Total	85,195		657		166		136		86,154
Total credit derivatives	$	160,071	$	95,016	$	101,104	$	30,181	$	386,372

Additional Collateral Required to be Posted Upon Downgrade

The following table presents the amount of additional collateral that would have been contractually required by derivative contracts and other trading agreements at March 31, 2020 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 March 31, 2020

(Dollars in millions)	One incremental notch		Second incremental notch
Bank of America Corporation	$	519	$	724
Bank of America, N.A. and subsidiaries ⁽¹⁾	257		495

⁽¹⁾

Included in Bank of America Corporation collateral requirements in this table.

Derivative Liability Subject to Unilateral Termination Upon Downgrade

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 March 31, 2020 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 March 31, 2020

(Dollars in millions)	One incremental notch		Second incremental notch
Derivative liabilities	$	161	$	1,498
Collateral posted	144		1,098

Valuation Adjustments on Derivatives

The table below presents credit valuation adjustment (CVA), DVA and FVA gains (losses) on derivatives (excluding the effect of any related hedge activities), which are recorded in market making and similar activities, for the three months ended March 31, 2020 and 2019. For more information on the valuation adjustments on derivatives, see Note 3 – Derivatives to the Consolidated Financial Statements of the Corporation’s 2019 Annual Report on Form 10-K.




Valuation Adjustments Gains (Losses) on Derivatives ⁽¹⁾

	Three Months Ended March 31
	2020			2019
Derivative assets (CVA)	$	(784	)	$	66
Derivative assets/liabilities (FVA)	(156		)	7
Derivative liabilities (DVA)	414			(81		)

⁽¹⁾

At March 31, 2020 and December 31, 2019, cumulative CVA reduced the derivative assets balance by $1.3 billion and $528 million, cumulative FVA reduced the net derivatives balance by $309 million and $153 million, and cumulative DVA reduced the derivative liabilities balance by $699 million and $285 million, respectively.

Derivative

Derivative [Line Items]

Offsetting Assets

The following table presents derivative instruments included in derivative assets and liabilities on the Consolidated Balance Sheet at March 31, 2020 and December 31, 2019 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 9 – Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings and Restricted Cash.




Offsetting of Derivatives ⁽¹⁾

	Derivative Assets			Derivative Liabilities			Derivative Assets			Derivative Liabilities
(Dollars in billions)	March 31, 2020						December 31, 2019
Interest rate contracts
Over-the-counter	$	277.6		$	271.1		$	203.1		$	196.6
Exchange-traded	0.3			0.3			0.1			0.1
Over-the-counter cleared	15.2			13.4			6.0			5.3
Foreign exchange contracts
Over-the-counter	121.5			124.4			69.2			73.1
Over-the-counter cleared	2.1			2.1			0.5			0.5
Equity contracts
Over-the-counter	32.3			24.4			21.3			17.8
Exchange-traded	43.7			42.2			26.4			22.8
Commodity contracts
Over-the-counter	9.0			9.1			2.8			4.2
Exchange-traded	2.5			2.2			0.8			0.8
Over-the-counter cleared	—			0.1			—			0.1
Credit derivatives
Over-the-counter	11.5			10.6			6.4			6.6
Over-the-counter cleared	1.2			1.2			2.5			2.2
Total gross derivative assets/liabilities, before netting
Over-the-counter	451.9			439.6			302.8			298.3
Exchange-traded	46.5			44.7			27.3			23.7
Over-the-counter cleared	18.5			16.8			9.0			8.1
Less: Legally enforceable master netting agreements and cash collateral received/paid
Over-the-counter	(413.4		)	(400.7		)	(274.7		)	(269.3		)
Exchange-traded	(40.5		)	(40.5		)	(21.5		)	(21.5		)
Over-the-counter cleared	(14.7		)	(14.7		)	(8.1		)	(8.1		)
Derivative assets/liabilities, after netting	48.3			45.2			34.8			31.2
Other gross derivative assets/liabilities ⁽²⁾	9.4			9.5			5.7			7.0
Total derivative assets/liabilities	57.7			54.7			40.5			38.2
Less: Financial instruments collateral ⁽³⁾	(16.7		)	(21.4		)	(14.6		)	(16.1		)
Total net derivative assets/liabilities	$	41.0		$	33.3		$	25.9		$	22.1


⁽¹⁾	Over-the-counter derivatives include bilateral transactions between the Corporation and a particular counterparty. Over-the-counter-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.

Offsetting Liabilities

For more information on offsetting of securities financing agreements, see Note 9 – Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings and Restricted Cash.




Offsetting of Derivatives ⁽¹⁾

	Derivative Assets			Derivative Liabilities			Derivative Assets			Derivative Liabilities
(Dollars in billions)	March 31, 2020						December 31, 2019
Interest rate contracts
Over-the-counter	$	277.6		$	271.1		$	203.1		$	196.6
Exchange-traded	0.3			0.3			0.1			0.1
Over-the-counter cleared	15.2			13.4			6.0			5.3
Foreign exchange contracts
Over-the-counter	121.5			124.4			69.2			73.1
Over-the-counter cleared	2.1			2.1			0.5			0.5
Equity contracts
Over-the-counter	32.3			24.4			21.3			17.8
Exchange-traded	43.7			42.2			26.4			22.8
Commodity contracts
Over-the-counter	9.0			9.1			2.8			4.2
Exchange-traded	2.5			2.2			0.8			0.8
Over-the-counter cleared	—			0.1			—			0.1
Credit derivatives
Over-the-counter	11.5			10.6			6.4			6.6
Over-the-counter cleared	1.2			1.2			2.5			2.2
Total gross derivative assets/liabilities, before netting
Over-the-counter	451.9			439.6			302.8			298.3
Exchange-traded	46.5			44.7			27.3			23.7
Over-the-counter cleared	18.5			16.8			9.0			8.1
Less: Legally enforceable master netting agreements and cash collateral received/paid
Over-the-counter	(413.4		)	(400.7		)	(274.7		)	(269.3		)
Exchange-traded	(40.5		)	(40.5		)	(21.5		)	(21.5		)
Over-the-counter cleared	(14.7		)	(14.7		)	(8.1		)	(8.1		)
Derivative assets/liabilities, after netting	48.3			45.2			34.8			31.2
Other gross derivative assets/liabilities ⁽²⁾	9.4			9.5			5.7			7.0
Total derivative assets/liabilities	57.7			54.7			40.5			38.2
Less: Financial instruments collateral ⁽³⁾	(16.7		)	(21.4		)	(14.6		)	(16.1		)
Total net derivative assets/liabilities	$	41.0		$	33.3		$	25.9		$	22.1


⁽¹⁾	Over-the-counter derivatives include bilateral transactions between the Corporation and a particular counterparty. Over-the-counter-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⁾