Quarterly report pursuant to Section 13 or 15(d)

Business Segment Information

v2.4.0.8
Business Segment Information
 9 Months Ended
Sep. 30, 2013
Segment Reporting [Abstract]  
Business Segment Information
NOTE 20 – 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 network that stretches coast to coast through 31 states and the District of Columbia. The franchise network includes approximately 5,200 banking centers, 16,200 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. During the second quarter of 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, 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 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. CRES also includes the impact of migrating customers and their related loan balances between GWIM and CRES. Subsequent to the date of migration, 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. 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 the second quarter of 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 government securities, equity and equity-linked securities, high-grade and high-yield corporate debt securities, 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.

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 net migration of clients and their related deposit and loan balances between GWIM and other 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.

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, All Other includes certain residential mortgage loans that are managed by CRES.

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.

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 total revenue, net of interest expense, on a FTE basis, and net income (loss) for the three and nine months ended September 30, 2013 and 2012, and total assets at September 30, 2013 and 2012 for each business segment, as well as All Other.

Business Segments
 
 
 
 
At and for the Three Months Ended September 30
 
 
 
 
 
Total Corporation (1)
 
Consumer & Business Banking
 
Consumer Real Estate Services
(Dollars in millions)
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Net interest income (FTE basis)
$
10,479

 
$
10,167

 
$
5,056

 
$
4,824

 
$
733

 
$
719

Noninterest income
11,264

 
10,490

 
2,468

 
2,437

 
844

 
2,364

Total revenue, net of interest expense (FTE basis)
21,743

 
20,657

 
7,524

 
7,261

 
1,577

 
3,083

Provision for credit losses
296

 
1,774

 
761

 
1,006

 
(308
)
 
263

Amortization of intangibles
270

 
315

 
126

 
156

 
—

 
—

Other noninterest expense
16,119

 
17,229

 
3,854

 
3,955

 
3,419

 
4,180

Income (loss) before income taxes
5,058

 
1,339

 
2,783

 
2,144

 
(1,534
)
 
(1,360
)
Income tax expense (benefit) (FTE basis)
2,561

 
999

 
1,004

 
793

 
(534
)
 
(503
)
Net income (loss)
$
2,497

 
$
340

 
$
1,779

 
$
1,351

 
$
(1,000
)
 
$
(857
)
Period-end total assets
$
2,126,653

 
$
2,166,162

 
$
588,627

 
$
540,419

 
$
115,424

 
$
138,120

 
 
 
 
 
 
 
 
 
 
 
Global Banking
 
Global Markets
 
 
 
 
 
2013
 
2012
 
2013
 
2012
Net interest income (FTE basis)
 
 
 
 
$
2,201

 
$
2,009

 
$
975

 
$
929

Noninterest income
 
 
 
 
1,808

 
1,777

 
2,401

 
2,349

Total revenue, net of interest expense (FTE basis)
 
 
 
 
4,009

 
3,786

 
3,376

 
3,278

Provision for credit losses
 
 
 
 
322

 
23

 
47

 
31

Amortization of intangibles
 
 
 
 
16

 
20

 
16

 
16

Other noninterest expense
 
 
 
 
1,912

 
1,916

 
2,868

 
2,559

Income before income taxes
 
 
 
 
1,759

 
1,827

 
445

 
672

Income tax expense (FTE basis)
 
 
 
 
625

 
676

 
1,223

 
948

Net income (loss)
 
 
 
 
$
1,134

 
$
1,151

 
$
(778
)
 
$
(276
)
Period-end total assets
 
 
 
 
$
373,110

 
$
325,488

 
$
601,139

 
$
600,154

 
 
 
 
 
 
 
 
 
 
 
 
 
Global Wealth &
Investment Management
 
All Other
 
 
 
 
 
2013
 
2012
 
2013
 
2012
Net interest income (FTE basis)
 
 
 
 
$
1,478

 
$
1,413

 
$
36

 
$
273

Noninterest income (loss)
 
 
 
 
2,912

 
2,670

 
831

 
(1,107
)
Total revenue, net of interest expense (FTE basis)
 
 
 
 
4,390

 
4,083

 
867

 
(834
)
Provision for credit losses
 
 
 
 
23

 
61

 
(549
)
 
390

Amortization of intangibles
 
 
 
 
95

 
101

 
17

 
22

Other noninterest expense
 
 
 
 
3,153

 
3,014

 
913

 
1,605

Income (loss) before income taxes
 
 
 
 
1,119

 
907

 
486

 
(2,851
)
Income tax expense (benefit) (FTE basis)
 
 
 
 
400

 
336

 
(157
)
 
(1,251
)
Net income (loss)
 
 
 
 
$
719

 
$
571

 
$
643

 
$
(1,600
)
Period-end total assets
 
 
 
 
$
270,484

 
$
268,408

 
$
177,869

 
$
293,573

(1) 
There were no material intersegment revenues.
Business Segments
 
 
 
 
At and for the Nine Months Ended September 30
 
 
 
 
 
Total Corporation (1)
 
Consumer & Business Banking
 
Consumer Real Estate Services
(Dollars in millions)
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Net interest income (FTE basis)
$
32,125

 
$
31,002

 
$
15,103

 
$
14,984

 
$
2,175

 
$
2,200

Noninterest income
35,975

 
34,342

 
7,267

 
7,405

 
3,829

 
6,076

Total revenue, net of interest expense (FTE basis)
68,100

 
65,344

 
22,370

 
22,389

 
6,004

 
8,276

Provision for credit losses
3,220

 
5,965

 
2,680

 
3,069

 
318

 
957

Amortization of intangibles
820

 
955

 
380

 
472

 
—

 
—

Other noninterest expense
51,087

 
52,778

 
11,935

 
12,349

 
12,219

 
11,583

Income (loss) before income taxes
12,973

 
5,646

 
7,375

 
6,499

 
(6,533
)
 
(4,264
)
Income tax expense (benefit) (FTE basis)
4,981

 
2,190

 
2,754

 
2,398

 
(2,439
)
 
(1,529
)
Net income (loss)
$
7,992

 
$
3,456

 
$
4,621

 
$
4,101

 
$
(4,094
)
 
$
(2,735
)
Period-end total assets
$
2,126,653

 
$
2,166,162

 
$
588,627

 
$
540,419

 
$
115,424

 
$
138,120

 
 
 
 
 
 
 
 
 
 
 
Global Banking
 
Global Markets
 
 
 
 
 
2013
 
2012
 
2013
 
2012
Net interest income (FTE basis)
 
 
 
 
$
6,613

 
$
6,036

 
$
3,097

 
$
2,557

Noninterest income
 
 
 
 
5,564

 
5,686

 
9,337

 
8,707

Total revenue, net of interest expense (FTE basis)
 
 
 
 
12,177

 
11,722

 
12,434

 
11,264

Provision for credit losses
 
 
 
 
634

 
(404
)
 
36

 
17

Amortization of intangibles
 
 
 
 
48

 
61

 
49

 
48

Other noninterest expense
 
 
 
 
5,578

 
5,804

 
8,680

 
8,620

Income before income taxes
 
 
 
 
5,917

 
6,261

 
3,669

 
2,579

Income tax expense (FTE basis)
 
 
 
 
2,210

 
2,309

 
2,321

 
1,531

Net income
 
 
 
 
$
3,707

 
$
3,952

 
$
1,348

 
$
1,048

Period-end total assets
 
 
 
 
$
373,110

 
$
325,488

 
$
601,139

 
$
600,154

 
 
 
 
 
 
 
 
 
 
 
Global Wealth &
Investment Management
 
All Other
 
 
 
 
 
2013
 
2012
 
2013
 
2012
Net interest income (FTE basis)
 
 
 
 
$
4,579

 
$
4,337

 
$
558

 
$
888

Noninterest income (loss)
 
 
 
 
8,731

 
7,987

 
1,247

 
(1,519
)
Total revenue, net of interest expense (FTE basis)
 
 
 
 
13,310

 
12,324

 
1,805

 
(631
)
Provision for credit losses
 
 
 
 
30

 
154

 
(478
)
 
2,172

Amortization of intangibles
 
 
 
 
293

 
310

 
50

 
64

Other noninterest expense
 
 
 
 
9,480

 
9,214

 
3,195

 
5,208

Income (loss) before income taxes
 
 
 
 
3,507

 
2,646

 
(962
)
 
(8,075
)
Income tax expense (benefit) (FTE basis)
 
 
 
 
1,310

 
977

 
(1,175
)
 
(3,496
)
Net income (loss)
 
 
 
 
$
2,197

 
$
1,669

 
$
213

 
$
(4,579
)
Period-end total assets
 
 
 
 
$
270,484

 
$
268,408

 
$
177,869

 
$
293,573

(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
 
 
 
 
 
 
Three Months Ended September 30
 
Nine Months Ended September 30
(Dollars in millions)
 
2013
 
2012
 
2013
 
2012
Segments' total revenue, net of interest expense (FTE basis)
 
$
20,876

 
$
21,491

 
$
66,295

 
$
65,975

Adjustments:
 
 
 
 
 
 
 
 
ALM activities (1)
 
(180
)
 
(930
)
 
(590
)
 
(1,623
)
Equity investment income
 
1,121

 
172

 
2,217

 
566

Liquidating businesses and other
 
(74
)
 
(76
)
 
178

 
426

FTE basis adjustment
 
(213
)
 
(229
)
 
(646
)
 
(670
)
Consolidated revenue, net of interest expense
 
$
21,530

 
$
20,428

 
$
67,454

 
$
64,674

 
 
 
 
 
 
 
 
 
Segments' net income
 
$
1,854

 
$
1,940

 
$
7,779

 
$
8,035

Adjustments, net-of-taxes:
 
 
 
 
 
 
 
 
ALM activities
 
(71
)
 
(1,156
)
 
(748
)
 
(3,209
)
Equity investment income
 
706

 
108

 
1,397

 
357

Liquidating businesses and other
 
8

 
(552
)
 
(436
)
 
(1,727
)
Consolidated net income
 
$
2,497

 
$
340

 
$
7,992

 
$
3,456

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30
 
 
 
 
 
 
2013
 
2012
Segments' total assets
 
 
 
 
 
$
1,948,784

 
$
1,872,589

Adjustments:
 
 
 
 
 
 
 
 
ALM activities, including securities portfolio
 
 
 
 
 
662,206

 
677,585

Equity investments
 
 
 
 
 
2,625

 
5,626

Liquidating businesses and other
 
 
 
 
 
70,991

 
124,053

Elimination of segment asset allocations to match liabilities
 
 
 
 
 
(557,953
)
 
(513,691
)
Consolidated total assets
 
 
 
 
 
$
2,126,653

 
$
2,166,162


(1) 
Includes negative fair value adjustments on structured liabilities related to the improvement in the Corporation's credit spreads of $152 million and $232 million for the three and nine months ended September 30, 2013 compared to negative adjustments of $1.3 billion and $4.7 billion for the same periods in 2012.