Quarterly report pursuant to Section 13 or 15(d)

Business Segment Information

v2.4.0.8
Business Segment Information
 6 Months Ended
Jun. 30, 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 to consumers and small businesses in the U.S. 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 5,000 banking centers, 16,000 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 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 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. On January 1, 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. On January 1, 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. 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 and six months ended June 30, 2014 and 2013, and total assets at June 30, 2014 and 2013 for each business segment, as well as All Other.

Business Segments
 
 
 
 
At and for the Three Months Ended June 30
 
 
 
 
 
Total Corporation (1)
 
Consumer & Business Banking
 
Consumer Real Estate Services
(Dollars in millions)
2014
 
2013
 
2014
 
2013
 
2014
 
2013
Net interest income (FTE basis)
$
10,226

 
$
10,771

 
$
4,929

 
$
5,034

 
$
697

 
$
699

Noninterest income
11,734

 
12,178

 
2,444

 
2,400

 
693

 
1,416

Total revenue, net of interest expense (FTE basis)
21,960

 
22,949

 
7,373

 
7,434

 
1,390

 
2,115

Provision for credit losses
411

 
1,211

 
534

 
967

 
(20
)
 
291

Amortization of intangibles
235

 
274

 
98

 
127

 
—

 
—

Other noninterest expense
18,306

 
15,744

 
3,902

 
4,057

 
5,902

 
3,383

Income (loss) before income taxes
3,008

 
5,720

 
2,839

 
2,283

 
(4,492
)
 
(1,559
)
Income tax expense (benefit) (FTE basis)
717

 
1,708

 
1,051

 
892

 
(1,690
)
 
(629
)
Net income (loss)
$
2,291

 
$
4,012

 
$
1,788

 
$
1,391

 
$
(2,802
)
 
$
(930
)
Period-end total assets
$
2,170,557

 
$
2,123,320

 
$
612,200

 
$
587,655

 
$
107,650

 
$
124,032

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

 
$
1,505

 
$
2,239

 
$
2,252

Noninterest income
 
 
 
 
3,104

 
2,994

 
1,940

 
1,886

Total revenue, net of interest expense (FTE basis)
 
 
 
 
4,589

 
4,499

 
4,179

 
4,138

Provision for credit losses
 
 
 
 
(8
)
 
(15
)
 
132

 
163

Amortization of intangibles
 
 
 
 
94

 
99

 
12

 
16

Other noninterest expense
 
 
 
 
3,353

 
3,171

 
1,887

 
1,833

Income before income taxes
 
 
 
 
1,150

 
1,244

 
2,148

 
2,126

Income tax expense (FTE basis)
 
 
 
 
426

 
485

 
795

 
829

Net income
 
 
 
 
$
724

 
$
759

 
$
1,353

 
$
1,297

Period-end total assets
 
 
 
 
$
265,581

 
$
263,867

 
$
407,367

 
$
334,167

 
 
 
 
 
 
 
 
 
 
 
 
 
Global Markets
 
All Other
 
 
 
 
 
2014
 
2013
 
2014
 
2013
Net interest income (FTE basis)
 
 
 
 
$
952

 
$
1,009

 
$
(76
)
 
$
272

Noninterest income
 
 
 
 
3,631

 
3,185

 
(78
)
 
297

Total revenue, net of interest expense (FTE basis)
 
 
 
 
4,583

 
4,194

 
(154
)
 
569

Provision for credit losses
 
 
 
 
19

 
(16
)
 
(246
)
 
(179
)
Amortization of intangibles
 
 
 
 
16

 
16

 
15

 
16

Other noninterest expense
 
 
 
 
2,846

 
2,754

 
416

 
546

Income (loss) before income taxes
 
 
 
 
1,702

 
1,440

 
(339
)
 
186

Income tax expense (benefit) (FTE basis)
 
 
 
 
601

 
478

 
(466
)
 
(347
)
Net income
 
 
 
 
$
1,101

 
$
962

 
$
127

 
$
533

Period-end total assets
 
 
 
 
$
610,395

 
$
608,760

 
$
167,364

 
$
204,839

(1) 
There were no material intersegment revenues.
Business Segments
 
 
 
 
At and for the Six Months Ended June 30
 
 
 
 
 
Total Corporation (1)
 
Consumer & Business Banking
 
Consumer Real Estate Services
(Dollars in millions)
2014
 
2013
 
2014
 
2013
 
2014
 
2013
Net interest income (FTE basis)
$
20,512

 
$
21,646

 
$
9,880

 
$
10,047

 
$
1,398

 
$
1,442

Noninterest income
24,215

 
24,711

 
4,931

 
4,799

 
1,184

 
2,985

Total revenue, net of interest expense (FTE basis)
44,727

 
46,357

 
14,811

 
14,846

 
2,582

 
4,427

Provision for credit losses
1,420

 
2,924

 
1,346

 
1,919

 
5

 
626

Amortization of intangibles
474

 
550

 
199

 
254

 
—

 
—

Other noninterest expense
40,305

 
34,968

 
7,764

 
8,095

 
14,031

 
8,788

Income (loss) before income taxes
2,528

 
7,915

 
5,502

 
4,578

 
(11,454
)
 
(4,987
)
Income tax expense (benefit) (FTE basis)
513

 
2,420

 
2,048

 
1,745

 
(3,625
)
 
(1,901
)
Net income (loss)
$
2,015

 
$
5,495

 
$
3,454

 
$
2,833

 
$
(7,829
)
 
$
(3,086
)
Period-end total assets
$
2,170,557

 
$
2,123,320

 
$
612,200

 
$
587,655

 
$
107,650

 
$
124,032

 
 
 
 
 
 
 
 
 
 
 
Global Wealth &
Investment Management
 
Global Banking
 
 
 
 
 
2014
 
2013
 
2014
 
2013
Net interest income (FTE basis)
 
 
 
 
$
2,970

 
$
3,101

 
$
4,541

 
$
4,411

Noninterest income
 
 
 
 
6,166

 
5,819

 
3,907

 
3,757

Total revenue, net of interest expense (FTE basis)
 
 
 
 
9,136

 
8,920

 
8,448

 
8,168

Provision for credit losses
 
 
 
 
15

 
7

 
397

 
312

Amortization of intangibles
 
 
 
 
188

 
198

 
24

 
32

Other noninterest expense
 
 
 
 
6,618

 
6,325

 
3,903

 
3,653

Income before income taxes
 
 
 
 
2,315

 
2,390

 
4,124

 
4,171

Income tax expense (FTE basis)
 
 
 
 
862

 
911

 
1,535

 
1,590

Net income
 
 
 
 
$
1,453

 
$
1,479

 
$
2,589

 
$
2,581

Period-end total assets
 
 
 
 
$
265,581

 
$
263,867

 
$
407,367

 
$
334,167

 
 
 
 
 
 
 
 
 
 
 
Global Markets
 
All Other
 
 
 
 
 
2014
 
2013
 
2014
 
2013
Net interest income (FTE basis)
 
 
 
 
$
1,949

 
$
2,117

 
$
(226
)
 
$
528

Noninterest income
 
 
 
 
7,646

 
6,856

 
381

 
495

Total revenue, net of interest expense (FTE basis)
 
 
 
 
9,595

 
8,973

 
155

 
1,023

Provision for credit losses
 
 
 
 
38

 
(11
)
 
(381
)
 
71

Amortization of intangibles
 
 
 
 
32

 
33

 
31

 
33

Other noninterest expense
 
 
 
 
5,907

 
5,810

 
2,082

 
2,297

Income (loss) before income taxes
 
 
 
 
3,618

 
3,141

 
(1,577
)
 
(1,378
)
Income tax expense (benefit) (FTE basis)
 
 
 
 
1,209

 
1,067

 
(1,516
)
 
(992
)
Net income (loss)
 
 
 
 
$
2,409

 
$
2,074

 
$
(61
)
 
$
(386
)
Period-end total assets
 
 
 
 
$
610,395

 
$
608,760

 
$
167,364

 
$
204,839

(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 June 30
 
Six Months Ended June 30
(Dollars in millions)
2014
 
2013
 
2014
 
2013
Segments' total revenue, net of interest expense (FTE basis)
$
22,114

 
$
22,380

 
$
44,572

 
$
45,334

Adjustments:
 
 
 
 
 
 
 
ALM activities
175

 
(103
)
 
258

 
(332
)
Equity investment income
56

 
576

 
730

 
1,096

Liquidating businesses and other
(385
)
 
96

 
(833
)
 
259

FTE basis adjustment
(213
)
 
(222
)
 
(414
)
 
(433
)
Consolidated revenue, net of interest expense
$
21,747

 
$
22,727

 
$
44,313

 
$
45,924

 
 
 
 
 
 
 
 
Segments' net income
$
2,164

 
$
3,479

 
$
2,076

 
$
5,881

Adjustments, net of taxes:
 
 
 
 
 
 
 
ALM activities
(6
)
 
(172
)
 
307

 
(629
)
Equity investment income
35

 
363

 
456

 
690

Liquidating businesses and other
98

 
342

 
(824
)
 
(447
)
Consolidated net income
$
2,291

 
$
4,012

 
$
2,015

 
$
5,495

 
 
 
 
 
 
 
 
 
 
 
 
 
June 30
 
 
 
 
 
2014
 
2013
Segments' total assets
 
 
 
 
$
2,003,193

 
$
1,918,481

Adjustments:
 
 
 
 
 
 
 
ALM activities, including securities portfolio
 
 
 
 
694,042

 
656,243

Equity investments
 
 
 
 
1,963

 
4,187

Liquidating businesses and other
 
 
 
 
80,145

 
73,413

Elimination of segment asset allocations to match liabilities
 
 
 
 
(608,786
)
 
(529,004
)
Consolidated total assets
 
 
 
 
$
2,170,557

 
$
2,123,320

[1]
[1] There were no material intersegment revenues.