Quarterly report pursuant to Section 13 or 15(d)

Business Segment Information

v2.4.0.6
Business Segment Information
 6 Months Ended
Jun. 30, 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 the 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. 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 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 products include deposits, treasury management, credit card, foreign exchange, short-term investment and custody solutions. 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. 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 commercial customers, broadly 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, broadly 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-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.

All Other

All Other consists of equity investment activities as well as liquidating businesses, ALM activities such as the residential mortgage portfolio and investment securities, 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 and six months ended June 30, 2012 and 2011, and total assets at June 30, 2012 and 2011 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)
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Net interest income (FTE basis)
$
9,782

 
$
11,493

 
$
4,704

 
$
5,549

 
$
714

 
$
579

Noninterest income (loss)
12,420

 
1,990

 
2,622

 
3,132

 
1,807

 
(11,894
)
Total revenue, net of interest expense (FTE basis)
22,202

 
13,483

 
7,326

 
8,681

 
2,521

 
(11,315
)
Provision for credit losses
1,773

 
3,255

 
1,131

 
400

 
186

 
1,507

Amortization of intangibles
321

 
382

 
158

 
191

 
—

 
4

Goodwill impairment
—

 
2,603

 
—

 
—

 
—

 
2,603

Other noninterest expense
16,727

 
19,871

 
4,201

 
4,186

 
3,556

 
6,018

Income (loss) before income taxes
3,381

 
(12,628
)
 
1,836

 
3,904

 
(1,221
)
 
(21,447
)
Income tax expense (benefit) (FTE basis)
918

 
(3,802
)
 
680

 
1,402

 
(453
)
 
(6,941
)
Net income (loss)
$
2,463

 
$
(8,826
)
 
$
1,156

 
$
2,502

 
$
(768
)
 
$
(14,506
)
Period-end total assets
$
2,160,854

 
$
2,261,319

 
$
537,647

 
$
521,823

 
$
147,638

 
$
185,398

 
 
 
 
 
 
 
 
 
 
 
Global Banking
 
Global Markets
 
 
 
 
 
2012
 
2011
 
2012
 
2011
Net interest income (FTE basis)
 
 
 
 
$
2,184

 
$
2,375

 
$
650

 
$
874

Noninterest income
 
 
 
 
2,101

 
2,284

 
2,715

 
3,539

Total revenue, net of interest expense (FTE basis)
 
 
 
 
4,285

 
4,659

 
3,365

 
4,413

Provision for credit losses
 
 
 
 
(113
)
 
(557
)
 
(14
)
 
(8
)
Amortization of intangibles
 
 
 
 
20

 
25

 
16

 
16

Other noninterest expense
 
 
 
 
2,145

 
2,196

 
2,695

 
3,247

Income before income taxes
 
 
 
 
2,233

 
2,995

 
668

 
1,158

Income tax expense (FTE basis)
 
 
 
 
827

 
1,074

 
206

 
247

Net income
 
 
 
 
$
1,406

 
$
1,921

 
$
462

 
$
911

Period-end total assets
 
 
 
 
$
340,559

 
$
340,535

 
$
561,815

 
$
561,361

 
 
 
 
 
 
 
 
 
 
 
Global Wealth &
Investment Management
 
All Other
 
 
 
 
 
2012
 
2011
 
2012
 
2011
Net interest income (FTE basis)
 
 
 
 
$
1,446

 
$
1,573

 
$
84

 
$
543

Noninterest income
 
 
 
 
2,871

 
2,922

 
304

 
2,007

Total revenue, net of interest expense (FTE basis)
 
 
 
 
4,317

 
4,495

 
388

 
2,550

Provision for credit losses
 
 
 
 
47

 
72

 
536

 
1,841

Amortization of intangibles
 
 
 
 
106

 
112

 
21

 
34

Other noninterest expense
 
 
 
 
3,302

 
3,512

 
828

 
712

Income (loss) before income taxes
 
 
 
 
862

 
799

 
(997
)
 
(37
)
Income tax expense (benefit) (FTE basis)
 
 
 
 
319

 
286

 
(661
)
 
130

Net income (loss)
 
 
 
 
$
543

 
$
513

 
$
(336
)
 
$
(167
)
Period-end total assets
 
 
 
 
$
277,988

 
$
284,504

 
$
295,207

 
$
367,698

(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)
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Net interest income (FTE basis)
$
20,835

 
$
23,890

 
$
9,784

 
$
11,150

 
$
1,489

 
$
1,475

Noninterest income (loss)
23,852

 
16,688

 
4,964

 
5,997

 
3,706

 
(10,727
)
Total revenue, net of interest expense (FTE basis)
44,687

 
40,578

 
14,748

 
17,147

 
5,195

 
(9,252
)
Provision for credit losses
4,191

 
7,069

 
2,008

 
1,061

 
693

 
2,605

Amortization of intangibles
640

 
767

 
316

 
382

 
—

 
11

Goodwill impairment
—

 
2,603

 
—

 
—

 
—

 
2,603

Other noninterest expense
35,549

 
39,769

 
8,290

 
8,556

 
7,461

 
10,788

Income (loss) before income taxes
4,307

 
(9,630
)
 
4,134

 
7,148

 
(2,959
)
 
(25,259
)
Income tax expense (benefit) (FTE basis)
1,191

 
(2,853
)
 
1,523

 
2,604

 
(1,046
)
 
(8,353
)
Net income (loss)
$
3,116

 
$
(6,777
)
 
$
2,611

 
$
4,544

 
$
(1,913
)
 
$
(16,906
)
Period-end total assets
$
2,160,854

 
$
2,261,319

 
$
537,647

 
$
521,823

 
$
147,638

 
$
185,398

 
 
 
 
 
 
 
 
 
 
 
Global Banking
 
Global Markets
 
 
 
 
 
2012
 
2011
 
2012
 
2011
Net interest income (FTE basis)
 
 
 
 
$
4,583

 
$
4,858

 
$
1,448

 
$
1,894

Noninterest income
 
 
 
 
4,152

 
4,502

 
6,110

 
7,791

Total revenue, net of interest expense (FTE basis)
 
 
 
 
8,735

 
9,360

 
7,558

 
9,685

Provision for credit losses
 
 
 
 
(351
)
 
(681
)
 
(34
)
 
(41
)
Amortization of intangibles
 
 
 
 
40

 
50

 
31

 
33

Other noninterest expense
 
 
 
 
4,302

 
4,481

 
5,756

 
6,343

Income before income taxes
 
 
 
 
4,744

 
5,510

 
1,805

 
3,350

Income tax expense (FTE basis)
 
 
 
 
1,748

 
2,006

 
545

 
1,044

Net income
 
 
 
 
$
2,996

 
$
3,504

 
$
1,260

 
$
2,306

Period-end total assets
 
 
 
 
$
340,559

 
$
340,535

 
$
561,815

 
$
561,361

 
 
 
 
 
 
 
 
 
 
 
Global Wealth &
Investment Management
 
All Other
 
 
 
 
 
2012
 
2011
 
2012
 
2011
Net interest income (FTE basis)
 
 
 
 
$
3,024

 
$
3,143

 
$
507

 
$
1,370

Noninterest income (loss)
 
 
 
 
5,653

 
5,848

 
(733
)
 
3,277

Total revenue, net of interest expense (FTE basis)
 
 
 
 
8,677

 
8,991

 
(226
)
 
4,647

Provision for credit losses
 
 
 
 
93

 
118

 
1,782

 
4,007

Amortization of intangibles
 
 
 
 
212

 
223

 
41

 
68

Other noninterest expense
 
 
 
 
6,646

 
6,990

 
3,094

 
2,611

Income (loss) before income taxes
 
 
 
 
1,726

 
1,660

 
(5,143
)
 
(2,039
)
Income tax expense (benefit) (FTE basis)
 
 
 
 
636

 
605

 
(2,215
)
 
(759
)
Net income (loss)
 
 
 
 
$
1,090

 
$
1,055

 
$
(2,928
)
 
$
(1,280
)
Period-end total assets
 
 
 
 
$
277,988

 
$
284,504

 
$
295,207

 
$
367,698

(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 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
 
 
 
 
 
 
Three Months Ended June 30
 
Six Months Ended June 30
(Dollars in millions)
 
2012
 
2011
 
2012
 
2011
Segments’ total revenue, net of interest expense (FTE basis)
 
$
21,814

 
$
10,933

 
$
44,913

 
$
35,931

Adjustments:
 
 
 
 
 
 
 
 
ALM activities
 
477

 
1,144

 
(692
)
 
908

Equity investment income (loss)
 
(63
)
 
1,139

 
354

 
2,554

Liquidating businesses
 
539

 
746

 
902

 
1,765

FTE basis adjustment
 
(234
)
 
(247
)
 
(441
)
 
(465
)
Other
 
(565
)
 
(479
)
 
(790
)
 
(580
)
Consolidated revenue, net of interest expense
 
$
21,968

 
$
13,236

 
$
44,246

 
$
40,113

 
 
 
 
 
 
 
 
 
Segments’ net income (loss)
 
$
2,799

 
$
(8,659
)
 
$
6,044

 
$
(5,497
)
Adjustments, net-of-taxes:
 
 
 
 
 
 
 
 
ALM activities
 
(229
)
 
(540
)
 
(2,053
)
 
(1,954
)
Equity investment income (loss)
 
(40
)
 
718

 
223

 
1,609

Liquidating businesses
 
153

 
68

 
211

 
175

Merger and restructuring charges
 
—

 
(101
)
 
—

 
(228
)
Other
 
(220
)
 
(312
)
 
(1,309
)
 
(882
)
Consolidated net income (loss)
 
$
2,463

 
$
(8,826
)
 
$
3,116

 
$
(6,777
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30
 
 
 
 
 
 
2012
 
2011
Segments’ total assets
 
 
 
 
 
$
1,865,647

 
$
1,893,621

Adjustments:
 
 
 
 
 
 
 
 
ALM activities, including securities portfolio
 
 
 
 
 
628,228

 
643,037

Equity investments
 
 
 
 
 
5,451

 
31,055

Liquidating businesses
 
 
 
 
 
27,259

 
41,208

Elimination of segment excess asset allocations to match liabilities
 
 
 
 
 
(526,363
)
 
(502,284
)
Other
 
 
 
 
 
160,632

 
154,682

Consolidated total assets
 
 
 
 
 
$
2,160,854

 
$
2,261,319