Quarterly report pursuant to Section 13 or 15(d)

Business Segment Information

v2.4.0.6
Business Segment Information
 3 Months Ended
Mar. 31, 2012
Segment Reporting [Abstract]  
Business Segment Information
NOTE 19 – 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. Effective January 1, 2012, the Corporation changed the basis of presentation from six to the above five segments. The former Deposits and Card Services segments, as well as Business Banking which was included in the former Global Commercial Banking segment, are now reflected in CBB. The former Global Commercial Banking segment was combined with the Global Corporate and Investment Banking business, which was included in the former Global Banking & Markets (GBAM) segment, to form Global Banking. The remaining global markets business of GBAM is now reported as a separate Global Markets segment. In addition, certain management accounting methodologies and related allocations were refined. Prior period results have been reclassified to conform to current period presentation.

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. 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 (HELOC) and home equity loans. First mortgage products are either sold into the secondary mortgage market to investors, while 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 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 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, merger-related and other advisory services. Underwriting debt and equity issuances, fixed-income and equity research, and certain market-based activities are executed through Global Banking's global broker/dealer affiliates which are its primary dealers in several countries. The economics of certain 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 include commercial customers, generally defined as companies with annual sales up to $2 billion, which include middle-market companies, commercial real estate firms, federal and state governments and municipalities, and large corporations, generally defined as companies with annual sales greater than $2 billion.
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-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. GWIM results are impacted by the migration of clients and their related deposit and loan balances to or from CBB, CRES and the ALM portfolio. 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 equity investment activities. All Other also includes liquidating businesses, ALM activities such as the residential mortgage portfolio and investment securities, and activities including economic hedges, gains/losses on structured liabilities, 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.

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 fully taxable-equivalent (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 interest rate contracts to manage fluctuations in earnings 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 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 months ended March 31, 2012 and 2011, and total assets at March 31, 2012 and 2011 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)
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Net interest income (FTE basis)
$
11,053

 
$
12,397

 
$
5,079

 
$
5,600

 
$
775

 
$
896

Noninterest income
11,432

 
14,698

 
2,341

 
2,864

 
1,899

 
1,167

Total revenue, net of interest expense (FTE basis)
22,485

 
27,095

 
7,420

 
8,464

 
2,674

 
2,063

Provision for credit losses
2,418

 
3,814

 
877

 
661

 
507

 
1,098

Amortization of intangibles
319

 
385

 
158

 
191

 
—

 
6

Other noninterest expense
18,822

 
19,898

 
4,088

 
4,370

 
3,905

 
4,771

Income (loss) before income taxes
926

 
2,998

 
2,297

 
3,242

 
(1,738
)
 
(3,812
)
Income tax expense (benefit) (FTE basis)
273

 
949

 
843

 
1,201

 
(593
)
 
(1,412
)
Net income (loss)
$
653

 
$
2,049

 
$
1,454

 
$
2,041

 
$
(1,145
)
 
$
(2,400
)
Period-end total assets
$
2,181,449

 
$
2,274,532

 
$
543,189

 
$
526,848

 
$
158,207

 
$
204,484

 
 
 
 
 
 
 
 
 
 
 
Global Banking
 
Global Markets
 
 
 
 
 
2012
 
2011
 
2012
 
2011
Net interest income (FTE basis)
 
 
 
 
$
2,399

 
$
2,482

 
$
798

 
$
1,020

Noninterest income
 
 
 
 
2,052

 
2,220

 
3,395

 
4,252

Total revenue, net of interest expense (FTE basis)
 
 
 
 
4,451

 
4,702

 
4,193

 
5,272

Provision for credit losses
 
 
 
 
(238
)
 
(123
)
 
(20
)
 
(33
)
Amortization of intangibles
 
 
 
 
20

 
25

 
15

 
16

Other noninterest expense
 
 
 
 
2,158

 
2,284

 
3,061

 
3,098

Income before income taxes
 
 
 
 
2,511

 
2,516

 
1,137

 
2,191

Income tax expense (FTE basis)
 
 
 
 
921

 
932

 
339

 
797

Net income
 
 
 
 
$
1,590

 
$
1,584

 
$
798

 
$
1,394

Period-end total assets
 
 
 
 
$
341,984

 
$
326,936

 
$
548,612

 
$
577,162

 
 
 
 
 
 
 
 
 
 
 
Global Wealth &
Investment Management
 
All Other
 
 
 
 
 
2012
 
2011
 
2012
 
2011
Net interest income (FTE basis)
 
 
 
 
$
1,578

 
$
1,571

 
$
424

 
$
828

Noninterest income (loss)
 
 
 
 
2,782

 
2,925

 
(1,037
)
 
1,270

Total revenue, net of interest expense (FTE basis)
 
 
 
 
4,360

 
4,496

 
(613
)
 
2,098

Provision for credit losses
 
 
 
 
46

 
46

 
1,246

 
2,165

Amortization of intangibles
 
 
 
 
106

 
112

 
20

 
35

Other noninterest expense
 
 
 
 
3,344

 
3,477

 
2,266

 
1,898

Income (loss) before income taxes
 
 
 
 
864

 
861

 
(4,145
)
 
(2,000
)
Income tax expense (benefit) (FTE basis)
 
 
 
 
317

 
319

 
(1,554
)
 
(888
)
Net income (loss)
 
 
 
 
$
547

 
$
542

 
$
(2,591
)
 
$
(1,112
)
Period-end total assets
 
 
 
 
$
278,185

 
$
285,690

 
$
311,272

 
$
353,412

(1) 
There were no material intersegment revenues.

The tables below present 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 following tables 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)
2012
 
2011
Segments’ total revenue, net of interest expense (FTE basis)
$
23,098

 
$
24,997

Adjustments:
 
 
 
ALM activities
(1,170
)
 
(236
)
Equity investment income
417

 
1,415

Liquidating businesses
363

 
1,019

FTE basis adjustment
(207
)
 
(218
)
Other
(223
)
 
(100
)
Consolidated revenue, net of interest expense
$
22,278

 
$
26,877

 
 
 
 
Segments’ net income
$
3,244

 
$
3,161

Adjustments, net-of-taxes:
 
 
 
ALM activities
(1,823
)
 
(1,415
)
Equity investment income
263

 
891

Liquidating businesses
52

 
133

Merger and restructuring charges
—

 
(127
)
Other
(1,083
)
 
(594
)
Consolidated net income
$
653

 
$
2,049

 
 
 
 
 
March 31
 
2012
 
2011
Segments’ total assets
$
1,870,177

 
$
1,921,120

Adjustments:
 
 
 
ALM activities, including securities portfolio
625,704

 
641,975

Equity investments
6,080

 
35,146

Liquidating businesses
29,205

 
42,706

Elimination of segment excess asset allocations to match liabilities
(519,910
)
 
(495,772
)
Other
170,193

 
129,357

Consolidated total assets
$
2,181,449

 
$
2,274,532