Annual report pursuant to Section 13 and 15(d)

Business Segment Information

v2.4.0.6
Business Segment Information
 12 Months Ended
Dec. 31, 2012
Business Segment Information [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 Banking, Global Markets and Global Wealth & Investment Management (GWIM), 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 that stretches coast to coast through 32 states and the District of Columbia. The franchise network includes approximately 5,500 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. CBB results are impacted by the migration of clients and their deposit and loan balances between CBB and other 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 clients migrated.
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, HELOC and home equity loans. First mortgage products are either sold into the secondary mortgage market to investors, while generally retaining MSRs and the Bank of America customer relationships, or are held on the Corporation’s Consolidated Balance Sheet in All Other for ALM purposes. HELOC 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. CRES also includes the impact of transferring customers and their related loan balances between GWIM and CRES based on client segmentation thresholds. Subsequent to the date of transfer, the associated net interest income and noninterest expense are recorded in the business segment to which loans were transferred.
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 along with various product partners. Global Banking’s lending products and services include commercial loans, leases, commitment facilities, trade finance, real estate lending, asset-based lending and direct/indirect consumer loans. 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 certain investment banking and underwriting activities are shared primarily between Global Banking and Global Markets based on the contribution by, and involvement of each segment. Global Banking clients include middle-market companies, commercial real estate firms, auto dealerships, not-for-profit companies, federal and state governments, municipalities, 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 government securities, equity and equity-linked securities, high-grade and high-yield corporate debt securities, commercial paper, MBS, commodities and ABS. The economics of certain investment banking and underwriting activities are shared primarily between Global Markets and Global Banking based on the activities performed by each segment.
Global Wealth & Investment Management
GWIM provides comprehensive wealth management solutions to a broad base of clients from emerging affluent to the ultra-wealthy. 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. GWIM results are impacted by the migration of clients and their deposit and loan balances between GWIM and other 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 clients migrated. In 2012, the Corporation entered into an agreement to sell the GWIM IWM businesses based outside of the U.S. and sold its Japanese brokerage joint venture. As a result of these actions, the IWM businesses and the Japanese brokerage joint venture results were moved to All Other and prior periods have been reclassified.
All Other
All Other consists of ALM activities, equity investments, liquidating businesses 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, and the impact of certain allocation methodologies and accounting hedge ineffectiveness. Additionally, All Other includes certain residential mortgage and discontinued real estate loans that are managed by CRES. In 2012, the IWM businesses and the Japanese brokerage joint venture results were moved to All Other from GWIM and prior periods have been reclassified.
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 the Corporation’s ALM activities.
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 majority of the Corporation’s ALM activities are allocated to the business segments and fluctuate based on performance. 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 total revenue, net of interest expense, on a FTE basis, and net income (loss) for 2012, 2011 and 2010, and total assets at December 31, 2012 and 2011 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)
2012
2011
2010
 
2012
2011
2010
 
2012
2011
2010
Net interest income (FTE basis)
$
41,557

$
45,588

$
52,693

 
$
19,125

$
21,378

$
24,299

 
$
2,959

$
3,207

$
4,662

Noninterest income (loss)
42,678

48,838

58,697

 
9,898

11,502

13,888

 
5,800

(6,361
)
5,667

Total revenue, net of interest expense (FTE basis)
84,235

94,426

111,390

 
29,023

32,880

38,187

 
8,759

(3,154
)
10,329

Provision for credit losses
8,169

13,410

28,435

 
3,941

3,490

11,647

 
1,442

4,524

8,490

Amortization of intangibles
1,264

1,509

1,731

 
626

759

870

 
—

11

38

Goodwill impairment
—

3,184

12,400

 
—

—

10,400

 
—

2,603

2,000

Other noninterest expense
70,829

75,581

68,977

 
16,167

16,960

17,316

 
17,306

19,177

12,762

Income (loss) before income taxes
3,973

742

(153
)
 
8,289

11,671

(2,046
)
 
(9,989
)
(29,469
)
(12,961
)
Income tax expense (benefit) (FTE basis)
(215
)
(704
)
2,085

 
2,968

4,224

3,089

 
(3,482
)
(10,004
)
(4,068
)
Net income (loss)
$
4,188

$
1,446

$
(2,238
)
 
$
5,321

$
7,447

$
(5,135
)
 
$
(6,507
)
$
(19,465
)
$
(8,893
)
Year-end total assets
$
2,209,974

$
2,129,046

 

 
$
554,878

$
521,097

 

 
$
132,388

$
163,712

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global Banking
 
Global Markets
 
 
 
 
 
2012
2011
2010
 
2012
2011
2010
Net interest income (FTE basis)
 
 
 
 
$
9,225

$
9,490

$
10,062

 
$
3,310

$
3,682

$
4,332

Noninterest income
 
 
 
 
7,982

7,822

7,682

 
10,209

11,116

14,799

Total revenue, net of interest expense (FTE basis)
 
 
 
 
17,207

17,312

17,744

 
13,519

14,798

19,131

Provision for credit losses
 
 
 
 
(103
)
(1,118
)
1,298

 
3

(56
)
30

Amortization of intangibles
 
 
 
 
79

102

121

 
64

66

66

Other noninterest expense
 
 
 
 
8,229

8,782

8,548

 
10,775

12,178

11,708

Income before income taxes
 
 
 
 
9,002

9,546

7,777

 
2,677

2,610

7,327

Income tax expense (FTE basis)
 
 
 
 
3,277

3,500

2,887

 
1,623

1,622

3,076

Net income
 
 
 
 
$
5,725

$
6,046

$
4,890

 
$
1,054

$
988

$
4,251

Year-end total assets
 
 
 
 
$
362,797

$
348,773

 

 
$
615,297

$
501,867

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global Wealth &
Investment Management
 
All Other
 
 
 
 
 
2012
2011
2010
 
2012
2011
2010
Net interest income (FTE basis)
 
 
 
 
$
5,827

$
5,885

$
5,547

 
$
1,111

$
1,946

$
3,791

Noninterest income (loss)
 
 
 
 
10,690

10,610

9,836

 
(1,901
)
14,149

6,825

Total revenue, net of interest expense (FTE basis)
 
 
 
 
16,517

16,495

15,383

 
(790
)
16,095

10,616

Provision for credit losses
 
 
 
 
266

398

646

 
2,620

6,172

6,324

Amortization of intangibles
 
 
 
 
414

438

458

 
81

133

178

Goodwill impairment
 
 
 
 
—

—

—

 
—

581

—

Other noninterest expense
 
 
 
 
12,341

12,945

11,861

 
6,011

5,539

6,782

Income (loss) before income taxes
 
 
 
 
3,496

2,714

2,418

 
(9,502
)
3,670

(2,668
)
Income tax expense (benefit) (FTE basis)
 
 
 
 
1,273

996

1,076

 
(5,874
)
(1,042
)
(3,975
)
Net income (loss)
 
 
 
 
$
2,223

$
1,718

$
1,342

 
$
(3,628
)
$
4,712

$
1,307

Year-end total assets
 
 
 
 
$
297,330

$
273,106

 

 
$
247,284

$
320,491

 


(1) 
There were no material intersegment revenues.

The following tables present a reconciliation of the five business segments’ total revenue, net of interest expense, on a FTE basis, and net income (loss) to the Corporation’s Consolidated Statement of Income, and total assets to the Corporation’s Consolidated Balance Sheet. The adjustments presented in the following tables include consolidated income, expense and asset amounts not specifically allocated to individual business segments.
 
 
 
 
 
 
Business Segment Reconciliations
 
 
 
 
 
 
 
 
 
 
 
(Dollars in millions)
2012
 
2011
 
2010
Segments’ total revenue, net of interest expense (FTE basis)
$
85,025

 
$
78,331

 
$
100,774

Adjustments:
 

 
 

 
 

ALM activities (1)
(2,412
)
 
7,576

 
1,872

Equity investment income
1,135

 
7,105

 
4,629

Liquidating businesses
2,279

 
3,526

 
6,005

FTE basis adjustment
(901
)
 
(972
)
 
(1,170
)
Other
(1,792
)
 
(2,112
)
 
(1,890
)
Consolidated revenue, net of interest expense
$
83,334

 
$
93,454

 
$
110,220

Segments’ net income (loss)
$
7,816

 
$
(3,266
)
 
$
(3,545
)
Adjustments, net of taxes:
 

 
 

 
 

ALM activities
(4,088
)
 
513

 
(2,480
)
Equity investment income
715

 
4,476

 
2,916

Liquidating businesses
226

 
(263
)
 
635

Merger and restructuring charges
—

 
(402
)
 
(1,146
)
Other
(481
)
 
388

 
1,382

Consolidated net income (loss)
$
4,188

 
$
1,446

 
$
(2,238
)
 
 
 
 
 
 
 
 
 
December 31
 
 
 
2012
 
2011
Segments’ total assets
 
 
$
1,962,690

 
$
1,808,555

Adjustments:
 
 
 

 
 

ALM activities, including securities portfolio
 
 
622,722

 
611,793

Equity investments
 
 
5,508

 
7,098

Liquidating businesses
 
 
32,597

 
37,570

Elimination of segment excess asset allocations to match liabilities
 
 
(554,426
)
 
(492,251
)
Other
 
 
140,883

 
156,281

Consolidated total assets
 
 
$
2,209,974

 
$
2,129,046

(1)  
Includes negative fair value adjustments on structured liabilities of $5.1 billion in 2012 and positive fair value adjustments on structured liabilities of $3.3 billion and $18 million in 2011 and 2010.