Annual report pursuant to Section 13 and 15(d)

Business Segment Information

v2.4.1.9
Business Segment Information
 12 Months Ended
Dec. 31, 2014
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. Effective January 1, 2015, to align the segments with how the Corporation manages the businesses in 2015, the Corporation changed its basis of segment presentation as follows: the Home Loans subsegment within CRES was moved to CBB, and Legacy Assets & Servicing became a separate segment. Also, a portion of the Business Banking business, based on the size of the client relationship, was moved from CBB to Global Banking. Prior periods will be restated to conform to the new segment alignment.
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 to consumers and small businesses in the U.S. Customers and clients have access to a franchise network that stretches coast to coast through 32 states and the District of Columbia. The franchise network includes approximately 4,800 banking centers, 15,800 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 to clients 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.
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, home equity lines of credit (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 Home Loans or 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 segment that owns the loans or in 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 provides investment banking products to clients 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.
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. In addition, 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, the impact of certain allocation methodologies and accounting hedge ineffectiveness. Additionally, certain residential mortgage loans that are managed by CRES are held in All Other. The results of certain ALM activities are allocated to the business segments.
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 an FTE basis and noninterest income. The adjustment of net interest income to an 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. 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, loan and brokerage balances between client-managed businesses. 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 table below presents net income (loss) and the components thereto (with net interest income on an FTE basis) for 2014, 2013 and 2012, and total assets at December 31, 2014 and 2013 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)
2014
2013
2012
 
2014
2013
2012
 
2014
2013
2012
Net interest income (FTE basis)
$
40,821

$
43,124

$
41,557

 
$
19,685

$
20,050

$
19,853

 
$
2,831

$
2,890

$
2,928

Noninterest income
44,295

46,677

42,678

 
10,177

9,814

9,932

 
2,017

4,825

5,821

Total revenue, net of interest expense (FTE basis)
85,116

89,801

84,235

 
29,862

29,864

29,785

 
4,848

7,715

8,749

Provision for credit losses
2,275

3,556

8,169

 
2,633

3,107

4,148

 
160

(156
)
1,442

Amortization of intangibles
936

1,086

1,264

 
398

505

626

 
—

—

—

Other noninterest expense
74,181

68,128

70,829

 
15,513

15,755

16,295

 
23,226

15,815

16,968

Income (loss) before income taxes (FTE basis)
7,724

17,031

3,973

 
11,318

10,497

8,716

 
(18,538
)
(7,944
)
(9,661
)
Income tax expense (benefit) (FTE basis)
2,891

5,600

(215
)
 
4,222

3,850

3,126

 
(5,143
)
(2,913
)
(3,360
)
Net income (loss)
$
4,833

$
11,431

$
4,188

 
$
7,096

$
6,647

$
5,590

 
$
(13,395
)
$
(5,031
)
$
(6,301
)
Year-end total assets
$
2,104,534

$
2,102,273

 

 
$
622,378

$
593,014

 

 
$
103,730

$
113,391

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global Wealth &
Investment Management
 
Global Banking
 
 
 
 
 
2014
2013
2012
 
2014
2013
2012
Net interest income (FTE basis)
 
 
 
 
$
5,836

$
6,064

$
5,827

 
$
8,999

$
8,914

$
8,131

Noninterest income
 
 
 
 
12,568

11,726

10,691

 
7,599

7,565

7,538

Total revenue, net of interest expense (FTE basis)
 
 
 
 
18,404

17,790

16,518

 
16,598

16,479

15,669

Provision for credit losses
 
 
 
 
14

56

266

 
336

1,075

(342
)
Amortization of intangibles
 
 
 
 
367

387

410

 
45

62

79

Other noninterest expense
 
 
 
 
13,280

12,646

12,312

 
7,636

7,489

7,538

Income before income taxes (FTE basis)
 
 
 
 
4,743

4,701

3,530

 
8,581

7,853

8,394

Income tax expense (FTE basis)
 
 
 
 
1,769

1,724

1,286

 
3,146

2,880

3,052

Net income
 
 
 
 
$
2,974

$
2,977

$
2,244

 
$
5,435

$
4,973

$
5,342

Year-end total assets
 
 
 
 
$
276,587

$
274,113

 

 
$
379,513

$
378,659

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global Markets
 
All Other
 
 
 
 
 
2014
2013
2012
 
2014
2013
2012
Net interest income (FTE basis)
 
 
 
 
$
3,986

$
4,224

$
3,667

 
$
(516
)
$
982

$
1,151

Noninterest income
 
 
 
 
12,133

11,166

5,507

 
(199
)
1,581

3,189

Total revenue, net of interest expense (FTE basis)
 
 
 
 
16,119

15,390

9,174

 
(715
)
2,563

4,340

Provision for credit losses
 
 
 
 
110

140

34

 
(978
)
(666
)
2,621

Amortization of intangibles
 
 
 
 
65

65

64

 
61

67

85

Other noninterest expense
 
 
 
 
11,706

11,931

11,221

 
2,820

4,492

6,495

Income (loss) before income taxes (FTE basis)
 
 
 
 
4,238

3,254

(2,145
)
 
(2,618
)
(1,330
)
(4,861
)
Income tax expense (benefit) (FTE basis)
 
 
 
 
1,519

2,101

(161
)
 
(2,622
)
(2,042
)
(4,158
)
Net income (loss)
 
 
 
 
$
2,719

$
1,153

$
(1,984
)
 
$
4

$
712

$
(703
)
Year-end total assets
 
 
 
 
$
579,514

$
575,472

 

 
$
142,812

$
167,624

 


(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 an 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)
2014
 
2013
 
2012
Segments’ total revenue, net of interest expense (FTE basis)
$
85,831

 
$
87,238

 
$
79,895

Adjustments:
 

 
 

 
 

ALM activities
(804
)
 
(545
)
 
2,266

Equity investment income
601

 
2,610

 
1,136

Liquidating businesses and other
(512
)
 
498

 
938

FTE basis adjustment
(869
)
 
(859
)
 
(901
)
Consolidated revenue, net of interest expense
$
84,247

 
$
88,942

 
$
83,334

Segments’ total net income
$
4,829

 
$
10,719

 
$
4,891

Adjustments, net of taxes:
 

 
 

 
 

ALM activities
(343
)
 
(929
)
 
(1,144
)
Equity investment income
376

 
1,644

 
716

Liquidating businesses and other
(29
)
 
(3
)
 
(275
)
Consolidated net income
$
4,833

 
$
11,431

 
$
4,188

 
 
 
 
 
 
 
 
 
December 31
 
 
 
2014
 
2013
Segments’ total assets
 
 
$
1,961,722

 
$
1,934,649

Adjustments:
 
 
 

 
 

ALM activities, including securities portfolio
 
 
658,319

 
664,530

Equity investments
 
 
1,770

 
2,426

Liquidating businesses and other
 
 
72,638

 
70,470

Elimination of segment asset allocations to match liabilities
 
 
(589,915
)
 
(569,802
)
Consolidated total assets
 
 
$
2,104,534

 
$
2,102,273