Annual report pursuant to Section 13 and 15(d)

Business Segment Information

v2.4.0.8
Business Segment Information
 12 Months Ended
Dec. 31, 2013
Segment Reporting [Abstract]  
Segment Reporting Disclosure
Business Segment Information
The Corporation reports the results of its operations through five business segments: Consumer & Business Banking (CBB), Consumer Real Estate Services (CRES), Global Wealth & Investment Management (GWIM), Global Banking and Global Markets, with the remaining operations recorded in All Other.
Consumer & Business Banking
CBB offers a diversified range of credit, banking and investment products and services to consumers and businesses. CBB product offerings include traditional savings accounts, money market savings accounts, CDs and IRAs, noninterest- and interest-bearing checking accounts, investment accounts and products as well as credit and debit cards in the U.S. to consumers and small businesses. Customers and clients have access to a franchise network that stretches coast to coast through 31 states and the District of Columbia. The franchise network includes approximately 5,100 banking centers, 16,300 ATMs, nationwide call centers, and online and mobile platforms. CBB also offers a wide range of lending-related products and services, integrated working capital management and treasury solutions through a network of offices and client relationship teams along with various product partners to U.S.-based companies generally with annual sales of $1 million to $50 million. During 2013, consumer DFS results were moved to CBB from Global Banking to align this business more closely with the Corporation’s consumer lending activity and better serve the needs of its customers. Prior periods were reclassified to conform to current period presentation.
Consumer Real Estate Services
CRES provides an extensive line of consumer real estate products and services to customers nationwide. CRES products include fixed- and adjustable-rate first-lien mortgage loans for home purchase and refinancing needs, HELOCs and home equity loans. First mortgage products are generally either sold into the secondary mortgage market to investors, while retaining MSRs and the Bank of America customer relationships, or are held on the balance sheet in All Other for ALM purposes. Newly originated HELOCs and home equity loans are retained on the CRES balance sheet. CRES services mortgage loans, including those loans it owns, loans owned by other business segments and All Other, and loans owned by outside investors.
The financial results of the on-balance sheet loans are reported in the business segment that owns the loans or All Other. CRES is not impacted by the Corporation’s first mortgage production retention decisions as CRES is compensated for loans held for ALM purposes on a management accounting basis, with a corresponding offset recorded in All Other, and for servicing loans owned by other business segments and All Other.
Global Wealth & Investment Management
GWIM provides comprehensive wealth management solutions to a broad base of clients from emerging affluent to ultra high net-worth. These services include investment and brokerage services, estate and financial planning, fiduciary portfolio management, cash and liability management, and specialty asset management. GWIM also provides retirement and benefit plan services, philanthropic management and asset management to individual and institutional clients.
Global Banking
Global Banking provides a wide range of lending-related products and services, integrated working capital management and treasury solutions to clients, and underwriting and advisory services through the Corporation’s network of offices and client relationship teams. Global Banking’s lending products and services include commercial loans, leases, commitment facilities, trade finance, real estate lending and asset-based lending. Global Banking’s treasury solutions business includes treasury management, foreign exchange and short-term investing options. Global Banking also works with clients to provide investment banking products such as debt and equity underwriting and distribution, and merger-related and other advisory services. The economics of most investment banking and underwriting activities are shared primarily between Global Banking and Global Markets based on the activities performed by each segment. Global Banking clients generally include middle-market companies, commercial real estate firms, auto dealerships, not-for-profit companies, large global corporations, financial institutions and leasing clients. During 2013, the results of consumer DFS, previously reported in Global Banking, were moved into CBB and prior periods have been reclassified to conform to current period presentation.
Global Markets
Global Markets offers sales and trading services, including research, to institutional clients across fixed-income, credit, currency, commodity and equity businesses. Global Markets product coverage includes securities and derivative products in both the primary and secondary markets. Global Markets provides market-making, financing, securities clearing, settlement and custody services globally to institutional investor clients in support of their investing and trading activities. Global Markets also works with commercial and corporate clients to provide risk management products using interest rate, equity, credit, currency and commodity derivatives, foreign exchange, fixed-income and mortgage-related products. As a result of market-making activities in these products, Global Markets may be required to manage risk in a broad range of financial products including government securities, equity and equity-linked securities, high-grade and high-yield corporate debt securities, syndicated loans, MBS, commodities and ABS. The economics of most investment banking and underwriting activities are shared primarily between Global Markets and Global Banking based on the activities performed by each segment.
All Other
All Other consists of ALM activities, equity investments, the international consumer card business, liquidating businesses, residual expense allocations and other. ALM activities encompass the whole-loan residential mortgage portfolio and investment securities, interest rate and foreign currency risk management activities including the residual net interest income allocation, gains/losses on structured liabilities, the impact of certain allocation methodologies and accounting hedge ineffectiveness. The results of certain ALM activities are allocated to the business segments. Additionally, certain residential mortgage loans that are managed by CRES are held in All Other.
Basis of Presentation
The management accounting and reporting process derives segment and business results by utilizing allocation methodologies for revenue and expense. The net income derived for the businesses is dependent upon revenue and cost allocations using an activity-based costing model, funds transfer pricing, and other methodologies and assumptions management believes are appropriate to reflect the results of the business.
Total revenue, net of interest expense, includes net interest income on a FTE basis and noninterest income. The adjustment of net interest income to a FTE basis results in a corresponding increase in income tax expense. The segment results also reflect certain revenue and expense methodologies that are utilized to determine net income. The net interest income of the businesses includes the results of a funds transfer pricing process that matches assets and liabilities with similar interest rate sensitivity and maturity characteristics. For presentation purposes, in segments where the total of liabilities and equity exceeds assets, which are generally deposit-taking segments, the Corporation allocates assets to match liabilities. Net interest income of the business segments also includes an allocation of net interest income generated by certain of the Corporation’s ALM activities. In addition, the business segments are impacted by the migration of customers and clients and their deposit and loan balances between client-managed businesses, primarily CBB, CRES and GWIM. Subsequent to the date of migration, the associated net interest income, noninterest income and noninterest expense are recorded in the business to which the customers or clients migrated.
The Corporation’s ALM activities include an overall interest rate risk management strategy that incorporates the use of various derivatives and cash instruments to manage fluctuations in earnings and capital that are caused by interest rate volatility. The Corporation’s goal is to manage interest rate sensitivity so that movements in interest rates do not significantly adversely affect earnings and capital. The results of a majority of the Corporation’s ALM activities are allocated to the business segments and fluctuate based on the performance of the ALM activities. ALM activities include external product pricing decisions including deposit pricing strategies, the effects of the Corporation’s internal funds transfer pricing process and the net effects of other ALM activities.
Certain expenses not directly attributable to a specific business segment are allocated to the segments. The most significant of these expenses include data and item processing costs and certain centralized or shared functions. Data processing costs are allocated to the segments based on equipment usage. Item processing costs are allocated to the segments based on the volume of items processed for each segment. The costs of certain other centralized or shared functions are allocated based on methodologies that reflect utilization.

The following tables present net income and the components thereto (with net interest income on a FTE basis) for 2013, 2012 and 2011, and total assets at December 31, 2013 and 2012 for each business segment, as well as All Other.
 
 
 
 
 
 
 
 
 
 
 
 
Business Segments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At and for the Year Ended December 31
Total Corporation (1)
 
Consumer & Business Banking
 
Consumer Real Estate Services
(Dollars in millions)
2013
2012
2011
 
2013
2012
2011
 
2013
2012
2011
Net interest income (FTE basis)
$
43,124

$
41,557

$
45,588

 
$
20,051

$
19,853

$
22,249

 
$
2,890

$
2,930

$
3,209

Noninterest income (loss)
46,677

42,678

48,838

 
9,816

9,937

11,572

 
4,826

5,821

(6,310
)
Total revenue, net of interest expense (FTE basis)
89,801

84,235

94,426

 
29,867

29,790

33,821

 
7,716

8,751

(3,101
)
Provision for credit losses
3,556

8,169

13,410

 
3,107

4,148

3,677

 
(156
)
1,442

4,523

Amortization of intangibles
1,086

1,264

1,509

 
505

626

759

 
—

—

11

Goodwill impairment
—

—

3,184

 
—

—

—

 
—

—

2,603

Other noninterest expense
68,128

70,829

75,581

 
15,852

16,369

17,153

 
16,013

17,190

19,055

Income (loss) before income taxes
17,031

3,973

742

 
10,403

8,647

12,232

 
(8,141
)
(9,881
)
(29,293
)
Income tax expense (benefit) (FTE basis)
5,600

(215
)
(704
)
 
3,815

3,101

4,431

 
(2,986
)
(3,442
)
(9,939
)
Net income (loss)
$
11,431

$
4,188

$
1,446

 
$
6,588

$
5,546

$
7,801

 
$
(5,155
)
$
(6,439
)
$
(19,354
)
Year-end total assets
$
2,102,273

$
2,209,974

 

 
$
592,978

$
554,915

 

 
$
113,386

$
131,059

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global Wealth &
Investment Management
 
Global Banking
 
 
 
 
 
2013
2012
2011
 
2013
2012
2011
Net interest income (FTE basis)
 
 
 
 
$
6,064

$
5,827

$
5,885

 
$
8,914

$
8,135

$
8,233

Noninterest income
 
 
 
 
11,726

10,691

10,610

 
7,567

7,539

7,361

Total revenue, net of interest expense (FTE basis)
 
 
 
 
17,790

16,518

16,495

 
16,481

15,674

15,594

Provision for credit losses
 
 
 
 
56

266

398

 
1,075

(342
)
(1,308
)
Amortization of intangibles
 
 
 
 
387

410

437

 
62

79

101

Other noninterest expense
 
 
 
 
12,651

12,311

12,899

 
7,490

7,540

7,928

Income before income taxes
 
 
 
 
4,696

3,531

2,761

 
7,854

8,397

8,873

Income tax expense (FTE basis)
 
 
 
 
1,722

1,286

1,014

 
2,880

3,053

3,251

Net income
 
 
 
 
$
2,974

$
2,245

$
1,747

 
$
4,974

$
5,344

$
5,622

Year-end total assets
 
 
 
 
$
274,112

$
297,326

 

 
$
379,207

$
331,611

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global Markets
 
All Other
 
 
 
 
 
2013
2012
2011
 
2013
2012
2011
Net interest income (FTE basis)
 
 
 
 
$
4,239

$
3,672

$
4,068

 
$
966

$
1,140

$
1,944

Noninterest income (loss)
 
 
 
 
11,819

10,612

11,507

 
923

(1,922
)
14,098

Total revenue, net of interest expense (FTE basis)
 
 
 
 
16,058

14,284

15,575

 
1,889

(782
)
16,042

Provision for credit losses
 
 
 
 
140

34

(53
)
 
(666
)
2,621

6,173

Amortization of intangibles
 
 
 
 
65

64

66

 
67

85

135

Goodwill impairment
 
 
 
 
—

—

—

 
—

—

581

Other noninterest expense
 
 
 
 
11,948

11,231

12,824

 
4,174

6,188

5,722

Income (loss) before income taxes
 
 
 
 
3,905

2,955

2,738

 
(1,686
)
(9,676
)
3,431

Income tax expense (benefit) (FTE basis)
 
 
 
 
2,342

1,726

1,669

 
(2,173
)
(5,939
)
(1,130
)
Net income (loss)
 
 
 
 
$
1,563

$
1,229

$
1,069

 
$
487

$
(3,737
)
$
4,561

Year-end total assets
 
 
 
 
$
575,709

$
632,263

 

 
$
166,881

$
262,800

 


(1) 
There were no material intersegment revenues.

The table below presents a reconciliation of the five business segments’ total revenue, net of interest expense, on a FTE basis, and net income to the Consolidated Statement of Income, and total assets to the Consolidated Balance Sheet. The adjustments presented in the table below include consolidated income, expense and asset amounts not specifically allocated to individual business segments.
 
 
 
 
 
 
Business Segment Reconciliations
 
 
 
 
 
 
 
 
 
 
 
(Dollars in millions)
2013
 
2012
 
2011
Segments’ total revenue, net of interest expense (FTE basis)
$
87,912

 
$
85,017

 
$
78,384

Adjustments:
 

 
 

 
 

ALM activities (1)
(986
)
 
(2,412
)
 
7,576

Equity investment income
2,610

 
1,135

 
7,105

Liquidating businesses and other
265

 
495

 
1,361

FTE basis adjustment
(859
)
 
(901
)
 
(972
)
Consolidated revenue, net of interest expense
$
88,942

 
$
83,334

 
$
93,454

Segments’ net income (loss)
$
10,944

 
$
7,925

 
$
(3,115
)
Adjustments, net of taxes:
 

 
 

 
 

ALM activities
(1,207
)
 
(4,087
)
 
513

Equity investment income
1,644

 
715

 
4,476

Liquidating businesses and other
50

 
(365
)
 
(26
)
Merger and restructuring charges
—

 
—

 
(402
)
Consolidated net income
$
11,431

 
$
4,188

 
$
1,446

 
 
 
 
 
 
 
 
 
December 31
 
 
 
2013
 
2012
Segments’ total assets
 
 
$
1,935,392

 
$
1,947,174

Adjustments:
 
 
 

 
 

ALM activities, including securities portfolio
 
 
664,302

 
655,915

Equity investments
 
 
2,411

 
5,508

Liquidating businesses and other
 
 
70,435

 
138,974

Elimination of segment asset allocations to match liabilities
 
 
(570,267
)
 
(537,597
)
Consolidated total assets
 
 
$
2,102,273

 
$
2,209,974

(1)  
Includes negative fair value adjustments on structured liabilities related to changes in the Corporation’s credit spreads of $649 million and $5.1 billion in 2013 and 2012 compared to positive adjustments of $3.3 billion in 2011.