Quarterly report pursuant to Section 13 or 15(d)

Business Segment Information

v2.4.0.8
Business Segment Information
 6 Months Ended
Jun. 30, 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 5,300 banking centers, 16,350 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. During the second quarter of 2013, consumer Dealer Financial Services results were moved to CBB from Global Banking to align this business more closely with the Corporation's consumer lending activity and better serve the needs of its customers. Prior periods were reclassified to conform to current period presentation.

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 generally 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 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 migrating customers and their related loan balances between GWIM and CRES. Subsequent to the date of migration, 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 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 include middle-market companies, commercial real estate firms, auto dealerships, not-for-profit companies, large global corporations, financial institutions and leasing clients. During the second quarter of 2013, the results of consumer Dealer Financial Services, previously reported in Global Banking, were moved into CBB and prior periods have been reclassified to conform to current period presentation.

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 most 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, 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, 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 and six months ended June 30, 2013 and 2012, and total assets at June 30, 2013 and 2012 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)
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Net interest income (FTE basis)
$
10,771

 
$
9,782

 
$
5,034

 
$
4,878

 
$
699

 
$
713

Noninterest income
12,178

 
12,420

 
2,400

 
2,617

 
1,416

 
1,816

Total revenue, net of interest expense (FTE basis)
22,949

 
22,202

 
7,434

 
7,495

 
2,115

 
2,529

Provision for credit losses
1,211

 
1,773

 
967

 
1,157

 
291

 
187

Amortization of intangibles
274

 
321

 
127

 
158

 
—

 
—

Other noninterest expense
15,744

 
16,727

 
4,056

 
4,262

 
3,394

 
3,524

Income (loss) before income taxes
5,720

 
3,381

 
2,284

 
1,918

 
(1,570
)
 
(1,182
)
Income tax expense (benefit) (FTE basis)
1,708

 
918

 
892

 
710

 
(633
)
 
(438
)
Net income (loss)
$
4,012

 
$
2,463

 
$
1,392

 
$
1,208

 
$
(937
)
 
$
(744
)
Period-end total assets
$
2,123,320

 
$
2,160,854

 
$
587,576

 
$
537,946

 
$
124,031

 
$
146,386

 
 
 
 
 
 
 
 
 
 
 
Global Banking
 
Global Markets
 
 
 
 
 
2013
 
2012
 
2013
 
2012
Net interest income (FTE basis)
 
 
 
 
$
2,252

 
$
1,940

 
$
1,013

 
$
721

Noninterest income
 
 
 
 
1,887

 
1,968

 
3,176

 
2,857

Total revenue, net of interest expense (FTE basis)
 
 
 
 
4,139

 
3,908

 
4,189

 
3,578

Provision for credit losses
 
 
 
 
163

 
(152
)
 
(16
)
 
(1
)
Amortization of intangibles
 
 
 
 
16

 
20

 
17

 
16

Other noninterest expense
 
 
 
 
1,843

 
1,947

 
2,752

 
2,839

Income before income taxes
 
 
 
 
2,117

 
2,093

 
1,436

 
724

Income tax expense (FTE basis)
 
 
 
 
826

 
775

 
477

 
227

Net income
 
 
 
 
$
1,291

 
$
1,318

 
$
959

 
$
497

Period-end total assets
 
 
 
 
$
334,820

 
$
310,933

 
$
607,050

 
$
576,175

 
 
 
 
 
 
 
 
 
 
 
 
 
Global Wealth &
Investment Management
 
All Other
 
 
 
 
 
2013
 
2012
 
2013
 
2012
Net interest income (FTE basis)
 
 
 
 
$
1,505

 
$
1,393

 
$
268

 
$
137

Noninterest income
 
 
 
 
2,994

 
2,701

 
305

 
461

Total revenue, net of interest expense (FTE basis)
 
 
 
 
4,499

 
4,094

 
573

 
598

Provision for credit losses
 
 
 
 
(15
)
 
47

 
(179
)
 
535

Amortization of intangibles
 
 
 
 
99

 
105

 
15

 
22

Other noninterest expense
 
 
 
 
3,173

 
3,072

 
526

 
1,083

Income (loss) before income taxes
 
 
 
 
1,242

 
870

 
211

 
(1,042
)
Income tax expense (benefit) (FTE basis)
 
 
 
 
484

 
322

 
(338
)
 
(678
)
Net income (loss)
 
 
 
 
$
758

 
$
548

 
$
549

 
$
(364
)
Period-end total assets
 
 
 
 
$
263,867

 
$
263,006

 
$
205,976

 
$
326,408

(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)
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Net interest income (FTE basis)
$
21,646

 
$
20,835

 
$
10,047

 
$
10,160

 
$
1,442

 
$
1,481

Noninterest income
24,711

 
23,852

 
4,799

 
4,968

 
2,985

 
3,712

Total revenue, net of interest expense (FTE basis)
46,357

 
44,687

 
14,846

 
15,128

 
4,427

 
5,193

Provision for credit losses
2,924

 
4,191

 
1,919

 
2,064

 
626

 
694

Amortization of intangibles
550

 
640

 
254

 
316

 
—

 
—

Other noninterest expense
34,968

 
35,549

 
8,099

 
8,409

 
8,800

 
7,404

Income (loss) before income taxes
7,915

 
4,307

 
4,574

 
4,339

 
(4,999
)
 
(2,905
)
Income tax expense (benefit) (FTE basis)
2,420

 
1,191

 
1,743

 
1,599

 
(1,905
)
 
(1,026
)
Net income (loss)
$
5,495

 
$
3,116

 
$
2,831

 
$
2,740

 
$
(3,094
)
 
$
(1,879
)
Period-end total assets
$
2,123,320

 
$
2,160,854

 
$
587,576

 
$
537,946

 
$
124,031

 
$
146,386

 
 
 
 
 
 
 
 
 
 
 
Global Banking
 
Global Markets
 
 
 
 
 
2013
 
2012
 
2013
 
2012
Net interest income (FTE basis)
 
 
 
 
$
4,412

 
$
4,027

 
$
2,122

 
$
1,628

Noninterest income
 
 
 
 
3,757

 
3,910

 
6,936

 
6,357

Total revenue, net of interest expense (FTE basis)
 
 
 
 
8,169

 
7,937

 
9,058

 
7,985

Provision for credit losses
 
 
 
 
312

 
(427
)
 
(11
)
 
(14
)
Amortization of intangibles
 
 
 
 
32

 
40

 
33

 
31

Other noninterest expense
 
 
 
 
3,664

 
3,888

 
5,809

 
6,059

Income before income taxes
 
 
 
 
4,161

 
4,436

 
3,227

 
1,909

Income tax expense (FTE basis)
 
 
 
 
1,586

 
1,634

 
1,099

 
583

Net income
 
 
 
 
$
2,575

 
$
2,802

 
$
2,128

 
$
1,326

Period-end total assets
 
 
 
 
$
334,820

 
$
310,933

 
$
607,050

 
$
576,175

 
 
 
 
 
 
 
 
 
 
 
Global Wealth &
Investment Management
 
All Other
 
 
 
 
 
2013
 
2012
 
2013
 
2012
Net interest income (FTE basis)
 
 
 
 
$
3,101

 
$
2,924

 
$
522

 
$
615

Noninterest income (loss)
 
 
 
 
5,819

 
5,317

 
415

 
(412
)
Total revenue, net of interest expense (FTE basis)
 
 
 
 
8,920

 
8,241

 
937

 
203

Provision for credit losses
 
 
 
 
7

 
93

 
71

 
1,781

Amortization of intangibles
 
 
 
 
198

 
210

 
33

 
43

Other noninterest expense
 
 
 
 
6,327

 
6,199

 
2,269

 
3,590

Income (loss) before income taxes
 
 
 
 
2,388

 
1,739

 
(1,436
)
 
(5,211
)
Income tax expense (benefit) (FTE basis)
 
 
 
 
910

 
641

 
(1,013
)
 
(2,240
)
Net income (loss)
 
 
 
 
$
1,478

 
$
1,098

 
$
(423
)
 
$
(2,971
)
Period-end total assets
 
 
 
 
$
263,867

 
$
263,006

 
$
205,976

 
$
326,408

(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)
 
2013
 
2012
 
2013
 
2012
Segments' total revenue, net of interest expense (FTE basis)
 
$
22,376

 
$
21,604

 
$
45,420

 
$
44,484

Adjustments:
 
 
 
 
 
 
 
 
ALM activities (1)
 
(94
)
 
477

 
(410
)
 
(692
)
Equity investment income (loss)
 
576

 
(36
)
 
1,096

 
394

Liquidating businesses and other
 
91

 
157

 
251

 
501

FTE basis adjustment
 
(222
)
 
(234
)
 
(433
)
 
(441
)
Consolidated revenue, net of interest expense
 
$
22,727

 
$
21,968

 
$
45,924

 
$
44,246

 
 
 
 
 
 
 
 
 
Segments' net income
 
$
3,463

 
$
2,827

 
$
5,918

 
$
6,087

Adjustments, net-of-taxes:
 
 
 
 
 
 
 
 
ALM activities
 
(166
)
 
(229
)
 
(677
)
 
(2,052
)
Equity investment income (loss)
 
363

 
(23
)
 
690

 
248

Liquidating businesses and other
 
352

 
(112
)
 
(436
)
 
(1,167
)
Consolidated net income
 
$
4,012

 
$
2,463

 
$
5,495

 
$
3,116

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30
 
 
 
 
 
 
2013
 
2012
Segments' total assets
 
 
 
 
 
$
1,917,344

 
$
1,834,446

Adjustments:
 
 
 
 
 
 
 
 
ALM activities, including securities portfolio
 
 
 
 
 
659,623

 
641,210

Equity investments
 
 
 
 
 
4,172

 
5,546

Liquidating businesses and other
 
 
 
 
 
72,508

 
181,802

Elimination of segment asset allocations to match liabilities
 
 
 
 
 
(530,327
)
 
(502,150
)
Consolidated total assets
 
 
 
 
 
$
2,123,320

 
$
2,160,854


(1) 
Includes positive fair value adjustments on structured liabilities of $10 million and negative adjustments of $80 million for the three and six months ended June 30, 2013 compared to negative adjustments of $62 million and $3.4 billion for the same periods in 2012.