Quarterly report pursuant to Section 13 or 15(d)

Business Segment Information

v2.4.0.8
Business Segment Information
 3 Months Ended
Mar. 31, 2014
Segment Reporting [Abstract]  
Business Segment Information
NOTE 18 – 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, 16,200 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.

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 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.

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. During the three months ended March 31, 2014, the results for structured liabilities including DVA were moved into Global Markets from All Other to better align the performance and risk management of these instruments. As such, net DVA in Global Markets represents the combined total of net DVA on derivatives and structured liabilities. Prior periods have been reclassified to conform to current period presentation.

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. 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. During the three months ended March 31, 2014, the results for structured liabilities including DVA (previously referred to as fair value adjustments on structured liabilities) were moved from All Other into Global Markets to better align the performance and risk management of these instruments. Prior periods have been reclassified to conform to current period presentation.

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 the three months ended March 31, 2014 and 2013, and total assets at March 31, 2014 and 2013 for each business segment, as well as All Other.

Business Segments
 
 
 
 
At and for the Three Months Ended March 31
 
 
 
 
 
Total Corporation (1)
 
Consumer & Business Banking
 
Consumer Real Estate Services
(Dollars in millions)
2014
 
2013
 
2014
 
2013
 
2014
 
2013
Net interest income (FTE basis)
$
10,286

 
$
10,875

 
$
4,951

 
$
5,013

 
$
701

 
$
743

Noninterest income
12,481

 
12,533

 
2,487

 
2,399

 
491

 
1,569

Total revenue, net of interest expense (FTE basis)
22,767

 
23,408

 
7,438

 
7,412

 
1,192

 
2,312

Provision for credit losses
1,009

 
1,713

 
812

 
952

 
25

 
335

Amortization of intangibles
239

 
276

 
101

 
127

 
—

 
—

Other noninterest expense
21,999

 
19,224

 
3,874

 
4,028

 
8,129

 
5,405

Income (loss) before income taxes
(480
)
 
2,195

 
2,651

 
2,305

 
(6,962
)
 
(3,428
)
Income tax expense (benefit) (FTE basis)
(204
)
 
712

 
993

 
857

 
(1,935
)
 
(1,272
)
Net income (loss)
$
(276
)
 
$
1,483

 
$
1,658

 
$
1,448

 
$
(5,027
)
 
$
(2,156
)
Period-end total assets
$
2,149,851

 
$
2,174,819

 
$
613,244

 
$
593,338

 
$
112,264

 
$
129,118

 
 
 
 
 
 
 
 
 
 
 
Global Wealth &
Investment Management
 
Global Banking
 
 
 
 
 
2014
 
2013
 
2014
 
2013
Net interest income (FTE basis)
 
 
 
 
$
1,485

 
$
1,596

 
$
2,301

 
$
2,159

Noninterest income
 
 
 
 
3,062

 
2,825

 
1,968

 
1,871

Total revenue, net of interest expense (FTE basis)
 
 
 
 
4,547

 
4,421

 
4,269

 
4,030

Provision for credit losses
 
 
 
 
23

 
22

 
265

 
149

Amortization of intangibles
 
 
 
 
94

 
99

 
12

 
16

Other noninterest expense
 
 
 
 
3,265

 
3,153

 
2,016

 
1,826

Income before income taxes
 
 
 
 
1,165

 
1,147

 
1,976

 
2,039

Income tax expense (FTE basis)
 
 
 
 
436

 
426

 
740

 
758

Net income
 
 
 
 
$
729

 
$
721

 
$
1,236

 
$
1,281

Period-end total assets
 
 
 
 
$
274,234

 
$
268,266

 
$
396,952

 
$
321,169

 
 
 
 
 
 
 
 
 
 
 
 
 
Global Markets
 
All Other
 
 
 
 
 
2014
 
2013
 
2014
 
2013
Net interest income (FTE basis)
 
 
 
 
$
1,000

 
$
1,110

 
$
(152
)
 
$
254

Noninterest income
 
 
 
 
4,015

 
3,670

 
458

 
199

Total revenue, net of interest expense (FTE basis)
 
 
 
 
5,015

 
4,780

 
306

 
453

Provision for credit losses
 
 
 
 
19

 
5

 
(135
)
 
250

Amortization of intangibles
 
 
 
 
16

 
16

 
16

 
18

Other noninterest expense
 
 
 
 
3,062

 
3,058

 
1,653

 
1,754

Income (loss) before income taxes
 
 
 
 
1,918

 
1,701

 
(1,228
)
 
(1,569
)
Income tax expense (benefit) (FTE basis)
 
 
 
 
608

 
589

 
(1,046
)
 
(646
)
Net income (loss)
 
 
 
 
$
1,310

 
$
1,112

 
$
(182
)
 
$
(923
)
Period-end total assets
 
 
 
 
$
594,936

 
$
626,798

 
$
158,221

 
$
236,130

(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 March 31
(Dollars in millions)
 
2014
 
2013
Segments' total revenue, net of interest expense (FTE basis)
 
$
22,461

 
$
22,955

Adjustments:
 
 
 
 
ALM activities
 
80

 
(230
)
Equity investment income
 
674

 
520

Liquidating businesses and other
 
(448
)
 
163

FTE basis adjustment
 
(201
)
 
(211
)
Consolidated revenue, net of interest expense
 
$
22,566

 
$
23,197

 
 
 
 
 
Segments' net income (loss)
 
$
(94
)
 
$
2,406

Adjustments, net of taxes:
 
 
 
 
ALM activities
 
311

 
(457
)
Equity investment income
 
421

 
328

Liquidating businesses and other
 
(914
)
 
(794
)
Consolidated net income (loss)
 
$
(276
)
 
$
1,483

 
 
 
 
 
 
 
March 31
 
 
2014
 
2013
Segments' total assets
 
$
1,991,630

 
$
1,938,689

Adjustments:
 
 
 
 
ALM activities, including securities portfolio
 
685,136

 
690,741

Equity investments
 
2,118

 
4,858

Liquidating businesses and other
 
80,176

 
77,548

Elimination of segment asset allocations to match liabilities
 
(609,209
)
 
(537,017
)
Consolidated total assets
 
$
2,149,851

 
$
2,174,819