Quarterly report pursuant to Section 13 or 15(d)

Business Segment Information

v2.4.0.6
Business Segment Information
 3 Months Ended
Mar. 31, 2013
Segment Reporting [Abstract]  
Business Segment Information
NOTE 20 – 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.

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 32 states and the District of Columbia. The franchise network includes approximately 5,400 banking centers, 16,300 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. 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 generally retaining MSRs and the Bank of America customer relationships, or are held on the 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, 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, asset-based lending and direct/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 activities performed by each segment. Global Banking clients 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 government securities, equity and equity-linked securities, high-grade and high-yield corporate debt securities, 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 primarily 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, 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, gains/losses on structured liabilities, the impact of certain allocation methodologies and accounting hedge ineffectiveness. Additionally, All Other includes certain residential mortgage 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 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.

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 total revenue, net of interest expense, on a FTE basis, and net income (loss) for the three months ended March 31, 2013 and 2012, and total assets at March 31, 2013 and 2012 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)
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Net interest income (FTE basis)
$
10,875

 
$
11,053

 
$
4,820

 
$
5,070

 
$
743

 
$
768

Noninterest income
12,533

 
11,432

 
2,394

 
2,352

 
1,569

 
1,896

Total revenue, net of interest expense (FTE basis)
23,408

 
22,485

 
7,214

 
7,422

 
2,312

 
2,664

Provision for credit losses
1,713

 
2,418

 
906

 
877

 
335

 
507

Amortization of intangibles
276

 
319

 
127

 
158

 
—

 
—

Other noninterest expense
19,224

 
18,822

 
3,981

 
4,105

 
5,407

 
3,884

Income (loss) before income taxes
2,195

 
926

 
2,200

 
2,282

 
(3,430
)
 
(1,727
)
Income tax expense (benefit) (FTE basis)
712

 
273

 
818

 
837

 
(1,273
)
 
(589
)
Net income (loss)
$
1,483

 
$
653

 
$
1,382

 
$
1,445

 
$
(2,157
)
 
$
(1,138
)
Period-end total assets
$
2,174,819

 
$
2,181,449

 
$
589,410

 
$
541,578

 
$
129,116

 
$
157,027

 
 
 
 
 
 
 
 
 
 
 
Global Banking
 
Global Markets
 
 
 
 
 
2013
 
2012
 
2013
 
2012
Net interest income (FTE basis)
 
 
 
 
$
2,351

 
$
2,296

 
$
1,111

 
$
910

Noninterest income
 
 
 
 
1,874

 
1,940

 
3,761

 
3,501

Total revenue, net of interest expense (FTE basis)
 
 
 
 
4,225

 
4,236

 
4,872

 
4,411

Provision for credit losses
 
 
 
 
195

 
(245
)
 
5

 
(13
)
Amortization of intangibles
 
 
 
 
16

 
20

 
16

 
15

Other noninterest expense
 
 
 
 
1,884

 
1,977

 
3,060

 
3,224

Income before income taxes
 
 
 
 
2,130

 
2,484

 
1,791

 
1,185

Income tax expense (FTE basis)
 
 
 
 
792

 
911

 
622

 
357

Net income
 
 
 
 
$
1,338

 
$
1,573

 
$
1,169

 
$
828

Period-end total assets
 
 
 
 
$
340,281

 
$
314,681

 
$
625,434

 
$
563,130

 
 
 
 
 
 
 
 
 
 
 
Global Wealth &
Investment Management
 
All Other
 
 
 
 
 
2013
 
2012
 
2013
 
2012
Net interest income (FTE basis)
 
 
 
 
$
1,596

 
$
1,531

 
$
254

 
$
478

Noninterest income (loss)
 
 
 
 
2,825

 
2,616

 
110

 
(873
)
Total revenue, net of interest expense (FTE basis)
 
 
 
 
4,421

 
4,147

 
364

 
(395
)
Provision for credit losses
 
 
 
 
22

 
46

 
250

 
1,246

Amortization of intangibles
 
 
 
 
99

 
105

 
18

 
21

Other noninterest expense
 
 
 
 
3,154

 
3,127

 
1,738

 
2,505

Income (loss) before income taxes
 
 
 
 
1,146

 
869

 
(1,642
)
 
(4,167
)
Income tax expense (benefit) (FTE basis)
 
 
 
 
426

 
319

 
(673
)
 
(1,562
)
Net income (loss)
 
 
 
 
$
720

 
$
550

 
$
(969
)
 
$
(2,605
)
Period-end total assets
 
 
 
 
$
268,263

 
$
263,500

 
$
222,315

 
$
341,533

(1) 
There were no material intersegment revenues.
 
 
 
 
 
 
 
 
 
 
 
 

The following tables 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)
 
2013
 
2012
Segments' total revenue, net of interest expense (FTE basis)
 
$
23,044

 
$
22,880

Adjustments:
 
 
 
 
ALM activities (1)
 
(316
)
 
(1,170
)
Equity investment income
 
520

 
429

Liquidating businesses
 
529

 
569

FTE basis adjustment
 
(211
)
 
(207
)
Other
 
(369
)
 
(223
)
Consolidated revenue, net of interest expense
 
$
23,197

 
$
22,278

 
 
 
 
 
Segments' net income
 
$
2,452

 
$
3,258

Adjustments, net-of-taxes:
 
 
 
 
ALM activities
 
(512
)
 
(1,823
)
Equity investment income
 
328

 
270

Liquidating businesses
 
2

 
44

Other
 
(787
)
 
(1,096
)
Consolidated net income
 
$
1,483

 
$
653

 
 
 
 
 
 
 
March 31
 
 
2013
 
2012
Segments' total assets
 
$
1,952,504

 
$
1,839,916

Adjustments:
 
 
 
 
ALM activities, including securities portfolio
 
693,498

 
641,385

Equity investments
 
4,858

 
6,182

Liquidating businesses
 
29,496

 
35,954

Elimination of segment asset allocations to match liabilities
 
(552,838
)
 
(496,391
)
Other
 
47,301

 
154,403

Consolidated total assets
 
$
2,174,819

 
$
2,181,449


(1) 
Includes negative fair value adjustments on structured liabilities of $90 million and $3.3 billion for the three months ended March 31, 2013 and 2012.