Quarterly report pursuant to Section 13 or 15(d)

Business Segment Information

v2.4.0.6
Business Segment Information
 9 Months Ended
Sep. 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, 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, underwriting and advisory services 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, and 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 middle-market companies, commercial real estate firms, auto dealerships, federal and state governments and municipalities, leasing clients, and large global corporations.

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 ALM activities, equity investments, liquidating businesses 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, and 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 nine months ended September 30, 2012 and 2011, and total assets at September 30, 2012 and 2011 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)
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Net interest income (FTE basis)
$
10,167

 
$
10,739

 
$
4,651

 
$
5,149

 
$
729

 
$
922

Noninterest income
10,490

 
17,963

 
2,419

 
2,978

 
2,367

 
1,900

Total revenue, net of interest expense (FTE basis)
20,657

 
28,702

 
7,070

 
8,127

 
3,096

 
2,822

Provision for credit losses
1,774

 
3,407

 
970

 
1,132

 
264

 
918

Amortization of intangibles
315

 
377

 
156

 
191

 
—

 
—

Other noninterest expense
17,229

 
17,236

 
3,905

 
4,156

 
4,224

 
3,826

Income (loss) before income taxes
1,339

 
7,682

 
2,039

 
2,648

 
(1,392
)
 
(1,922
)
Income tax expense (benefit) (FTE basis)
999

 
1,450

 
754

 
984

 
(515
)
 
(801
)
Net income (loss)
$
340

 
$
6,232

 
$
1,285

 
$
1,664

 
$
(877
)
 
$
(1,121
)
Period-end total assets
$
2,166,162

 
$
2,219,628

 
$
540,260

 
$
520,125

 
$
139,366

 
$
188,769

 
 
 
 
 
 
 
 
 
 
 
Global Banking
 
Global Markets
 
 
 
 
 
2012
 
2011
 
2012
 
2011
Net interest income (FTE basis)
 
 
 
 
$
2,264

 
$
2,323

 
$
846

 
$
925

Noninterest income
 
 
 
 
1,883

 
1,628

 
2,260

 
2,369

Total revenue, net of interest expense (FTE basis)
 
 
 
 
4,147

 
3,951

 
3,106

 
3,294

Provision (benefit) for credit losses
 
 
 
 
68

 
(182
)
 
21

 
3

Amortization of intangibles
 
 
 
 
20

 
29

 
16

 
16

Other noninterest expense
 
 
 
 
2,003

 
2,188

 
2,529

 
2,950

Income before income taxes
 
 
 
 
2,056

 
1,916

 
540

 
325

Income tax expense (FTE basis)
 
 
 
 
761

 
710

 
899

 
878

Net income (loss)
 
 
 
 
$
1,295

 
$
1,206

 
$
(359
)
 
$
(553
)
Period-end total assets
 
 
 
 
$
355,417

 
$
341,100

 
$
583,203

 
$
552,772

 
 
 
 
 
 
 
 
 
 
 
Global Wealth &
Investment Management
 
All Other
 
 
 
 
 
2012
 
2011
 
2012
 
2011
Net interest income (FTE basis)
 
 
 
 
$
1,458

 
$
1,412

 
$
219

 
$
8

Noninterest income (loss)
 
 
 
 
2,820

 
2,826

 
(1,259
)
 
6,262

Total revenue, net of interest expense (FTE basis)
 
 
 
 
4,278

 
4,238

 
(1,040
)
 
6,270

Provision for credit losses
 
 
 
 
61

 
162

 
390

 
1,374

Amortization of intangibles
 
 
 
 
102

 
108

 
21

 
33

Other noninterest expense
 
 
 
 
3,253

 
3,392

 
1,315

 
724

Income (loss) before income taxes
 
 
 
 
862

 
576

 
(2,766
)
 
4,139

Income tax expense (benefit) (FTE basis)
 
 
 
 
320

 
214

 
(1,220
)
 
(535
)
Net income (loss)
 
 
 
 
$
542

 
$
362

 
$
(1,546
)
 
$
4,674

Period-end total assets
 
 
 
 
$
283,949

 
$
280,897

 
$
263,967

 
$
335,965

(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)
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Net interest income (FTE basis)
$
31,002

 
$
34,629

 
$
14,436

 
$
16,299

 
$
2,218

 
$
2,398

Noninterest income (loss)
34,342

 
34,651

 
7,383

 
8,975

 
6,073

 
(8,828
)
Total revenue, net of interest expense (FTE basis)
65,344

 
69,280

 
21,819

 
25,274

 
8,291

 
(6,430
)
Provision for credit losses
5,965

 
10,476

 
2,978

 
2,193

 
957

 
3,523

Amortization of intangibles
955

 
1,144

 
472

 
573

 
—

 
11

Goodwill impairment
—

 
2,603

 
—

 
—

 
—

 
2,603

Other noninterest expense
52,778

 
57,005

 
12,200

 
12,718

 
11,678

 
14,608

Income (loss) before income taxes
5,646

 
(1,948
)
 
6,169

 
9,790

 
(4,344
)
 
(27,175
)
Income tax expense (benefit) (FTE basis)
2,190

 
(1,403
)
 
2,276

 
3,586

 
(1,558
)
 
(9,152
)
Net income (loss)
$
3,456

 
$
(545
)
 
$
3,893

 
$
6,204

 
$
(2,786
)
 
$
(18,023
)
Period-end total assets
$
2,166,162

 
$
2,219,628

 
$
540,260

 
$
520,125

 
$
139,366

 
$
188,769

 
 
 
 
 
 
 
 
 
 
 
Global Banking
 
Global Markets
 
 
 
 
 
2012
 
2011
 
2012
 
2011
Net interest income (FTE basis)
 
 
 
 
$
6,847

 
$
7,181

 
$
2,294

 
$
2,819

Noninterest income
 
 
 
 
6,035

 
6,130

 
8,370

 
10,161

Total revenue, net of interest expense (FTE basis)
 
 
 
 
12,882

 
13,311

 
10,664

 
12,980

Provision (benefit) for credit losses
 
 
 
 
(283
)
 
(862
)
 
(13
)
 
(38
)
Amortization of intangibles
 
 
 
 
61

 
79

 
48

 
49

Other noninterest expense
 
 
 
 
6,303

 
6,669

 
8,285

 
9,294

Income before income taxes
 
 
 
 
6,801

 
7,425

 
2,344

 
3,675

Income tax expense (FTE basis)
 
 
 
 
2,509

 
2,716

 
1,444

 
1,922

Net income
 
 
 
 
$
4,292

 
$
4,709

 
$
900

 
$
1,753

Period-end total assets
 
 
 
 
$
355,417

 
$
341,100

 
$
583,203

 
$
552,772

 
 
 
 
 
 
 
 
 
 
 
Global Wealth &
Investment Management
 
All Other
 
 
 
 
 
2012
 
2011
 
2012
 
2011
Net interest income (FTE basis)
 
 
 
 
$
4,482

 
$
4,555

 
$
725

 
$
1,377

Noninterest income (loss)
 
 
 
 
8,472

 
8,674

 
(1,991
)
 
9,539

Total revenue, net of interest expense (FTE basis)
 
 
 
 
12,954

 
13,229

 
(1,266
)
 
10,916

Provision for credit losses
 
 
 
 
154

 
280

 
2,172

 
5,380

Amortization of intangibles
 
 
 
 
313

 
331

 
61

 
101

Other noninterest expense
 
 
 
 
9,888

 
10,371

 
4,424

 
3,345

Income (loss) before income taxes
 
 
 
 
2,599

 
2,247

 
(7,923
)
 
2,090

Income tax expense (benefit) (FTE basis)
 
 
 
 
960

 
823

 
(3,441
)
 
(1,298
)
Net income (loss)
 
 
 
 
$
1,639

 
$
1,424

 
$
(4,482
)
 
$
3,388

Period-end total assets
 
 
 
 
$
283,949

 
$
280,897

 
$
263,967

 
$
335,965

(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 September 30
 
Nine Months Ended September 30
(Dollars in millions)
 
2012
 
2011
 
2012
 
2011
Segments’ total revenue, net of interest expense (FTE basis)
 
$
21,697

 
$
22,432

 
$
66,610

 
$
58,364

Adjustments:
 
 
 
 
 
 
 
 
ALM activities
 
(930
)
 
5,286

 
(1,623
)
 
6,193

Equity investment income
 
165

 
1,380

 
519

 
3,935

Liquidating businesses
 
271

 
521

 
1,173

 
2,285

FTE basis adjustment
 
(229
)
 
(249
)
 
(670
)
 
(714
)
Other
 
(546
)
 
(917
)
 
(1,335
)
 
(1,497
)
Consolidated revenue, net of interest expense
 
$
20,428

 
$
28,453

 
$
64,674

 
$
68,566

 
 
 
 
 
 
 
 
 
Segments’ net income (loss)
 
$
1,886

 
$
1,558

 
$
7,938

 
$
(3,933
)
Adjustments, net-of-taxes:
 
 
 
 
 
 
 
 
ALM activities
 
(1,157
)
 
2,578

 
(3,210
)
 
632

Equity investment income
 
104

 
869

 
327

 
2,479

Liquidating businesses
 
8

 
(241
)
 
219

 
(67
)
Merger and restructuring charges
 
—

 
(111
)
 
—

 
(338
)
Other
 
(501
)
 
1,579

 
(1,818
)
 
682

Consolidated net income (loss)
 
$
340

 
$
6,232

 
$
3,456

 
$
(545
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30
 
 
 
 
 
 
2012
 
2011
Segments’ total assets
 
 
 
 
 
$
1,902,195

 
$
1,883,663

Adjustments:
 
 
 
 
 
 
 
 
ALM activities, including securities portfolio
 
 
 
 
 
634,209

 
653,131

Equity investments
 
 
 
 
 
5,521

 
14,737

Liquidating businesses
 
 
 
 
 
27,166

 
38,136

Elimination of segment excess asset allocations to match liabilities
 
 
 
 
 
(538,980
)
 
(489,548
)
Other
 
 
 
 
 
136,051

 
119,509

Consolidated total assets
 
 
 
 
 
$
2,166,162

 
$
2,219,628