July 29, 2014 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[ü] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2014

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from to

Commission file number:

1-6523

Exact name of registrant as specified in its charter:

Bank of America Corporation

State or other jurisdiction of incorporation or organization:

Delaware

IRS Employer Identification No.:

56-0906609

Address of principal executive offices:

Bank of America Corporate Center

100 N. Tryon Street

Charlotte, North Carolina 28255

Registrant's telephone number, including area code:

(704) 386-5681

Former name, former address and former fiscal year, if changed since last report:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ü No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ü No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act (check one).



Large accelerated filer ü	Accelerated filer	Non-accelerated filer (do not check if a smaller reporting company)	Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).

Yes No ü

On July 28, 2014, there were 10,515,862,599 shares of Bank of America Corporation Common Stock outstanding.



Bank of America Corporation
June 30, 2014
Form 10-Q

INDEX		Page

Part I. Financial Information

	Item 1. Financial Statements
	Consolidated Statement of Income	140
	Consolidated Statement of Comprehensive Income	141
	Consolidated Balance Sheet	142
	Consolidated Statement of Changes in Shareholders' Equity	144
	Consolidated Statement of Cash Flows	145
	Notes to Consolidated Financial Statements	146
	1 - Summary of Significant Accounting Principles	146
	2 - Derivatives	148
	3 - Securities	160
	4 - Outstanding Loans and Leases	165
	5 - Allowance for Credit Losses	185
	6 - Securitizations and Other Variable Interest Entities	187
	7 - Representations and Warranties Obligations and Corporate Guarantees	196
	8 - Goodwill and Intangible Assets	204
	9 - Federal Funds Sold or Purchased, Securities Financing Agreements and Short-term Borrowings	206
	10 - Commitments and Contingencies	208
	11 - Shareholders' Equity	214
	12 - Accumulated Other Comprehensive Income (Loss)	215
	13 - Earnings Per Common Share	217
	14 - Fair Value Measurements	218
	15 - Fair Value Option	235
	16 - Fair Value of Financial Instruments	238
	17 - Mortgage Servicing Rights	240
	18 - Business Segment Information	242

	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	3
	Executive Summary	4
	Recent Events	5
	Financial Highlights	7
	Balance Sheet Overview	10
	Supplemental Financial Data	16
	Business Segment Operations	28
	Consumer & Business Banking	30
	Consumer Real Estate Services	35
	Global Wealth & Investment Management	43
	Global Banking	45
	Global Markets	49
	All Other	52
	Off-Balance Sheet Arrangements and Contractual Obligations	55
	Regulatory Matters	63
	Managing Risk	64
	Strategic Risk Management	64
	Capital Management	64
	Liquidity Risk	75
	Credit Risk Management	81



	Consumer Portfolio Credit Risk Management	82
	Commercial Portfolio Credit Risk Management	102
	Non-U.S. Portfolio	113
	Provision for Credit Losses	117
	Allowance for Credit Losses	117
	Market Risk Management	122
	Trading Risk Management	122
	Interest Rate Risk Management for Nontrading Activities	128
	Mortgage Banking Risk Management	132
	Compliance Risk Management	133
	Operational Risk Management	133
	Complex Accounting Estimates	134
	Glossary	136

	Item 3. Quantitative and Qualitative Disclosures about Market Risk	139

	Item 4. Controls and Procedures	139


Part II. Other Information		247

	Item 1. Legal Proceedings	247

	Item 1A. Risk Factors	247

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	247

	Item 6. Exhibits	248

	Signature	249

	Index to Exhibits	250

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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report on Form 10-Q, the documents that it incorporates by reference and the documents into which it may be incorporated by reference may contain, and from time to time Bank of America Corporation (collectively with its subsidiaries, the Corporation) and its management may make certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as "anticipates," "targets," "expects," "hopes," "estimates," "intends," "plans," "goal," "believes," "continue" and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.” The forward-looking statements made represent the Corporation's current expectations, plans or forecasts of its future results and revenues, and future business and economic conditions more generally, and other matters. These statements are not guarantees of future results or performance and involve certain risks, uncertainties and assumptions that are difficult to predict and are often beyond the Corporation’s control. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements.

You should not place undue reliance on any forward-looking statement and should consider the following uncertainties and risks, as well as the risks and uncertainties more fully discussed elsewhere in this report, under Item 1A. Risk Factors of the Corporation's 2013 Annual Report on Form 10-K, and in any of the Corporation's subsequent Securities and Exchange Commission filings: the potential negative impacts of the Corporation’s prior adjustment to its regulatory capital ratios, including, without limitation, the results of the Federal Reserve's review of the information pursuant to the Comprehensive Capital Analysis and Review, or the revised capital actions that have been submitted to the Federal Reserve; the Corporation’s ability to resolve representations and warranties repurchase claims made by monolines and private-label and other investors, including as a result of any adverse court rulings, and the chance that the Corporation could face related servicing, securities, fraud, indemnity or other claims from one or more counterparties, including monolines or private-label and other investors; the possibility that final court approval of negotiated settlements is not obtained; the possibility that the court decision with respect to the BNY Mellon Settlement is overturned on appeal in whole or in part; potential claims, damages, penalties and fines resulting from pending or future litigation, governmental proceedings or inquiries, and regulatory proceedings, including proceedings instituted by the U.S. Department of Justice, state Attorneys General and other members of the RMBS Working Group of the Financial Fraud Enforcement Task Force concerning mortgage-related matters; the possibility that the European Commission will impose remedial measures in relation to its investigation of the Corporation’s competitive practices; the possible outcome of LIBOR, other reference rate and foreign exchange inquiries and investigations; the possibility that future representations and warranties losses may occur in excess of the Corporation’s recorded liability and estimated range of possible loss for its representations and warranties exposures; the possibility that the Corporation may not collect mortgage insurance claims; the possibility that future claims, damages, penalties and fines may occur in excess of the Corporation's recorded liability and estimated range of possible losses for litigation exposures; uncertainties about the financial stability, growth rates and the geopolitical environment of non-U.S. jurisdictions, the risk that those jurisdictions may face difficulties servicing their sovereign debt, and related stresses on financial markets, currencies and trade, and the Corporation’s exposures to such risks, including direct, indirect and operational; uncertainties related to the timing and pace of Federal Reserve tapering of quantitative easing, and the impact on global interest rates, currency exchange rates, and economic conditions in a number of countries; the possibility of future inquiries or investigations regarding pending or completed foreclosure activities; the possibility that unexpected foreclosure delays could impact the rate of decline of default-related servicing costs; uncertainty regarding timing and the potential impact of regulatory capital and liquidity requirements (including Basel 3); the negative impact of the Financial Reform Act on the Corporation’s businesses and earnings, including as a result of additional regulatory interpretation and rulemaking and the success of the Corporation’s actions to mitigate such impacts; the potential impact of implementing and conforming to the Volcker Rule; the potential impact of future derivative regulations; adverse changes to the Corporation’s credit ratings from the major credit rating agencies; estimates of the fair value of certain of the Corporation’s assets and liabilities; reputational damage that may result from negative publicity, fines and penalties from regulatory violations and judicial proceedings; the Corporation’s ability to fully realize the anticipated cost savings in Legacy Assets & Servicing and the anticipated cost savings and other benefits from Project New BAC, including in accordance with currently anticipated timeframes; a failure in or breach of the Corporation’s operational or security systems or infrastructure, or those of third parties with which we do business, including as a result of cyber attacks; the impact on the Corporation’s business, financial condition and results of operations of a potential higher interest rate environment; and other similar matters.

Forward-looking statements speak only as of the date they are made, and the Corporation undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.

Notes to the Consolidated Financial Statements referred to in the Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) are incorporated by reference into the MD&A. Certain prior-period amounts have been reclassified to conform to current period presentation. Throughout the MD&A, the Corporation uses certain acronyms and abbreviations which are defined in the Glossary.

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Executive Summary

Business Overview

The Corporation is a Delaware corporation, a bank holding company (BHC) and a financial holding company. When used in this report, "the Corporation" may refer to Bank of America Corporation individually, Bank of America Corporation and its subsidiaries, or certain of Bank of America Corporation's subsidiaries or affiliates. Our principal executive offices are located in Charlotte, North Carolina. Through our banking and various nonbanking subsidiaries throughout the U.S. and in international markets, we provide a diversified range of banking and nonbanking financial services and products through five business segments: Consumer & Business Banking (CBB), Consumer Real Estate Services (CRES), Global Wealth & Investment Management (GWIM), Global Banking and Global Markets, with the remaining operations recorded in All Other. We operate our banking activities primarily under two national bank charters: Bank of America, National Association (Bank of America, N.A. or BANA) and FIA Card Services, National Association (FIA Card Services, N.A. or FIA). On April 16, 2014, FIA and BANA filed an application with the Office of the Comptroller of the Currency (OCC) for consent to merge FIA into BANA and, if approved, we expect to complete the merger on October 1, 2014. At June 30, 2014, the Corporation had approximately $2.2 trillion in assets and approximately 233,000 full-time equivalent employees.

As of June 30, 2014, we operated in all 50 states, the District of Columbia and more than 40 countries. Our retail banking footprint covers approximately 80 percent of the U.S. population and we serve approximately 49 million consumer and small business relationships with approximately 5,000 banking centers, 16,000 ATMs, nationwide call centers, and leading online (www.bankofamerica.com) and mobile banking platforms. We offer industry-leading support to more than three million small business owners. We are a global leader in corporate and investment banking and trading across a broad range of asset classes serving corporations, governments, institutions and individuals around the world.

Second Quarter 2014 Economic and Business Environment

In the U.S., economic growth rebounded in the second quarter of 2014 following contraction in the first quarter of 2014. Improved weather conditions positively impacted manufacturing, housing activity and retail spending. Exports continued to increase, while the trade deficit continued to widen. Employment gains strengthened during the quarter and the unemployment rate dropped to 6.1 percent at quarter end. Inflation, while moving slightly higher during the quarter due to higher transportation, food and housing costs, remained below the Board of Governors of the Federal Reserve System's (Federal Reserve) longer-term target of two percent.

Amid expectations that accommodative monetary policy would be only gradually removed, longer-term U.S. Treasury yields continued to decline over the quarter, while equity markets increased. The Federal Reserve continued to reduce its securities purchases, bringing targeted monthly purchases to $35 billion in July. The Federal Reserve also indicated that it would likely end its securities purchases in October.

Internationally, modest economic growth continued in the Eurozone in the second quarter of 2014, while healthy expansion continued in the U.K. The economy slowed in Japan following accelerated gains ahead of a consumption tax increase in the first quarter of 2014. China’s economy stabilized in the second quarter of 2014 after slowing modestly in recent quarters. For more information on our international exposure, see Non-U.S. Portfolio on page 113.

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Recent Events

AIG Settlement

On July 15, 2014, the Corporation and certain of its subsidiaries entered into a settlement agreement with American International Group, Inc. (AIG) to resolve all outstanding residential mortgage-backed securities (RMBS) litigation claims between the parties in exchange for a payment to AIG of $650 million. The settlement also provides for the withdrawal by AIG of its objection in the Bank of New York Mellon Settlement (BNY Mellon Settlement) court approval proceeding, including its participation in all pending appeals. Separately, on July 15, 2014, certain of our subsidiaries entered into a settlement agreement to resolve all outstanding mortgage insurance (MI) disputes brought by the Corporation against three AIG subsidiaries (the United Guaranty entities). This settlement will resolve all of the Corporation's pending MI litigation with the United Guaranty entities regarding legacy first- and second-lien mortgages originated or acquired by certain of our subsidiaries prior to 2009. The settlement with the United Guaranty entities with respect to policies related to first-lien mortgages is subject to the consent of the GSEs; and the inclusion of loans other than GSE-insured loans is subject to obtaining any other necessary consents.

For additional information, see Note 7 – Representations and Warranties Obligations and Corporate Guarantees and Note 10 – Commitments and Contingencies to the Consolidated Financial Statements.

Capital Management

On April 28, 2014, we announced the revision of certain regulatory capital amounts and ratios that had previously been reported, and suspended our previously announced 2014 capital actions stating that we would resubmit information pursuant to the 2014 Comprehensive Capital Analysis and Review (CCAR) to the Federal Reserve. On May 27, 2014, subsequent to a third-party review, we updated and resubmitted our requested capital actions and certain 2014 CCAR schedules to the Federal Reserve and we addressed the quantitative adjustments to our original capital plan as part of that resubmission. The requested capital actions contained in the resubmission are less than the 2014 capital actions previously submitted to the Federal Reserve. Pursuant to CCAR capital plan rules, the Federal Reserve has until August 10, 2014 to respond to our resubmitted 2014 CCAR items, including the requested capital actions.

Until the Federal Reserve acts on our 2014 CCAR resubmission, we must obtain the Federal Reserve's approval prior to any capital distributions. However, the Federal Reserve approved certain capital actions, including continued payment of a quarterly common stock dividend of $0.01 per share, subject to declaration by the Corporation's Board of Directors (the Board), the amendment to the terms of the Corporation’s 6% Cumulative Perpetual Preferred Stock, Series T (Series T Preferred Stock) as described below and the redemption or repurchase of a limited amount of trust preferred securities and subordinated debt. Additional common share buybacks were not included in this approval. In April 2014, prior to the suspension of our previously announced 2014 capital actions, we repurchased and retired 14.4 million common shares for an aggregate purchase price of approximately $233 million.

For additional information, see Capital Management on page 64.

Regulatory and Governmental Investigations

We are subject to inquiries and investigations, and may be subject to litigation, penalties and fines by the U.S. Department of Justice (DOJ), state Attorneys General and other members of the RMBS Working Group of the Financial Fraud Enforcement Task Force (collectively, the Governmental Authorities) regarding our RMBS and other mortgage-related matters. We are also a party to civil litigation proceedings brought by the DOJ and certain other Governmental Authorities regarding our RMBS. We continue to cooperate with and have had discussions about a potential resolution of these matters with certain Governmental Authorities. There can be no assurances that these discussions will lead to a resolution of any or all of these matters and additional litigation may be filed by the DOJ or certain other Governmental Authorities regarding our RMBS. For additional information regarding the risks associated with matters of this nature, see Note 10 – Commitments and Contingencies to the Consolidated Financial Statements herein, Item 1A. Risk Factors of the Corporation's 2013 Annual Report on Form 10-K and Note 12 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation's 2013 Annual Report on Form 10-K.

Series T Preferred Stock

At the Corporation's annual meeting of stockholders on May 7, 2014, our stockholders approved an amendment to our Series T Preferred Stock such that it qualifies as Tier 1 capital, and the amendment became effective during the three months ended June 30, 2014. This resulted in a Tier 1 capital increase of approximately $2.9 billion, which benefited our Tier 1 capital and leverage ratios. For additional information on the Series T Preferred Stock, see Capital Management – Regulatory Capital on page 65.

Table of Contents

Selected Financial Data

Table 1 provides selected consolidated financial data for the three and six months ended June 30, 2014 and 2013, and at June 30, 2014 and December 31, 2013.



Table 1
Selected Financial Data
	Three Months Ended June 30						Six Months Ended June 30
(Dollars in millions, except per share information)	2014			2013			2014			2013
Income statement
Revenue, net of interest expense (FTE basis) ⁽¹⁾	$	21,960		$	22,949		$	44,727		$	46,357
Net income	2,291			4,012			2,015			5,495
Diluted earnings per common share	0.19			0.32			0.14			0.42
Dividends paid per common share	0.01			0.01			0.02			0.02
Performance ratios
Return on average assets	0.42		%	0.74		%	0.19		%	0.50		%
Return on average tangible shareholders' equity ⁽¹⁾	5.64			9.98			2.49			6.84
Efficiency ratio (FTE basis) ⁽¹⁾	84.43			69.80			91.17			76.62
Asset quality
Allowance for loan and lease losses at period end							$	15,811		$	21,235
Allowance for loan and lease losses as a percentage of total loans and leases outstanding at period end ⁽²⁾							1.75		%	2.33		%
Nonperforming loans, leases and foreclosed properties at period end ⁽²⁾							$	15,300		$	21,280
Net charge-offs ⁽³⁾	$	1,073		$	2,111		2,461			4,628
Annualized net charge-offs as a percentage of average loans and leases outstanding ^{(2, 3)}	0.48		%	0.94		%	0.55		%	1.04		%
Annualized net charge-offs as a percentage of average loans and leases outstanding, excluding the purchased credit-impaired loan portfolio ⁽²⁾	0.49			0.97			0.56			1.07
Annualized net charge-offs and purchased credit-impaired write-offs as a percentage of average loans and leases outstanding ⁽²⁾	0.55			1.07			0.67			1.29
Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs ⁽³⁾	3.67			2.51			3.19			2.28
Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs, excluding the purchased credit-impaired loan portfolio	3.25			2.04			2.82			1.85
Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs and purchased credit-impaired write-offs	3.20			2.18			2.60			1.82

							June 30 2014			December 31 2013
Balance sheet
Total loans and leases							$	911,899		$	928,233
Total assets							2,170,557			2,102,273
Total deposits							1,134,329			1,119,271
Total common shareholders' equity							222,565			219,333
Total shareholders' equity							237,411			232,685
Capital ratios ⁽⁴⁾
Common equity tier 1 capital							12.0		%	n/a
Tier 1 common capital							n/a			10.9		%
Tier 1 capital							12.5			12.2
Total capital							15.3			15.1
Tier 1 leverage							7.7			7.7


⁽¹⁾	Fully taxable-equivalent basis (FTE), return on average tangible shareholders' equity and the efficiency ratio are non-GAAP financial measures. Other companies may define or calculate these measures differently. For more information on these measures and ratios, and a corresponding reconciliation to GAAP financial measures, see Supplemental Financial Data on page 16.

⁽²⁾

Balances and ratios do not include loans accounted for under the fair value option. For additional exclusions from nonperforming loans, leases and foreclosed properties, see Consumer Portfolio Credit Risk Management – Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity on page 99 and corresponding Table 46, and Commercial Portfolio Credit Risk Management – Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity on page 108 and corresponding Table 55.

⁽³⁾

Net charge-offs exclude $160 million and $551 million of write-offs in the purchased credit-impaired loan portfolio for the three and six months ended June 30, 2014 compared to $313 million and $1.2 billion for the same periods in 2013. These write-offs decreased the purchased credit-impaired valuation allowance included as part of the allowance for loan and lease losses. For more information on purchased credit-impaired write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 93.


⁽⁴⁾	On January 1, 2014, the Basel 3 rules became effective, subject to transition provisions primarily related to regulatory deductions and adjustments impacting common equity tier 1 capital and Tier 1 capital. We reported under Basel 1 (which included the Market Risk Final Rules) at December 31, 2013.

n/a = not applicable

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Financial Highlights

Net income was $2.3 billion, or $0.19 per diluted share and $2.0 billion, or $0.14 per diluted share for the three and six months ended June 30, 2014 compared to $4.0 billion, or $0.32 and $5.5 billion, or $0.42 for the same periods in 2013. Although the establishment of additional reserves primarily for previously disclosed legacy mortgage-related matters resulted in increases of $3.5 billion and $7.3 billion in litigation expense compared to the same periods in 2013, our capital and liquidity levels remained strong, credit quality continued to improve, and we continue to focus on streamlining processes and achieving cost savings.



Table 2
Summary Income Statement
	Three Months Ended June 30				Six Months Ended June 30
(Dollars in millions)	2014		2013		2014		2013
Net interest income (FTE basis)⁽¹⁾	$	10,226	$	10,771	$	20,512	$	21,646
Noninterest income	11,734		12,178		24,215		24,711
Total revenue, net of interest expense (FTE basis)⁽¹⁾	21,960		22,949		44,727		46,357
Provision for credit losses	411		1,211		1,420		2,924
Noninterest expense	18,541		16,018		40,779		35,518
Income before income taxes	3,008		5,720		2,528		7,915
Income tax expense (FTE basis)⁽¹⁾	717		1,708		513		2,420
Net income	2,291		4,012		2,015		5,495
Preferred stock dividends	256		441		494		814
Net income applicable to common shareholders	$	2,035	$	3,571	$	1,521	$	4,681

Per common share information
Earnings	$	0.19	$	0.33	$	0.14	$	0.43
Diluted earnings	0.19		0.32		0.14		0.42


⁽¹⁾	FTE basis is a non-GAAP financial measure. For more information on this measure and for a corresponding reconciliation to GAAP financial measures, see Supplemental Financial Data on page 16.

Net Interest Income

Net interest income on a fully taxable-equivalent (FTE) basis decreased $545 million to $10.2 billion, and $1.1 billion to $20.5 billion for the three and six months ended June 30, 2014 compared to the same periods in 2013. The decreases were primarily due to the negative impact of market-related premium amortization expense on debt securities, lower consumer loan balances as well as lower loan yields, and decreased trading-related net interest income, partially offset by reductions in long-term debt balances and yields, higher commercial loan balances and lower rates paid on deposits. The net interest yield on a FTE basis decreased 13 basis points (bps) to 2.22 percent, and 10 bps to 2.26 percent for the three and six months ended June 30, 2014 compared to the same periods in 2013 due to the same factors as described above. Given the additional liquidity during the first half of 2014, coupled with the average balance impact of lower consumer loan balances, we expect that net interest income in the second half of 2014 will improve modestly from the second quarter of 2014 level, excluding market-related adjustments. For more information on our liquidity position, see Liquidity Risk on page 75.

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Noninterest Income



Table 3
Noninterest Income
	Three Months Ended June 30					Six Months Ended June 30
(Dollars in millions)	2014		2013			2014		2013
Card income	$	1,441	$	1,469		$	2,834	$	2,879
Service charges	1,866		1,837			3,692		3,636
Investment and brokerage services	3,291		3,143			6,560		6,170
Investment banking income	1,631		1,556			3,173		3,091
Equity investment income	357		680			1,141		1,243
Trading account profits	1,832		1,938			4,299		4,927
Mortgage banking income	527		1,178			939		2,441
Gains on sales of debt securities	382		457			759		525
Other income (loss)	407		(80		)	818		(201		)
Total noninterest income	$	11,734	$	12,178		$	24,215	$	24,711

Noninterest income decreased $444 million to $11.7 billion, and $496 million to $24.2 billion for the three and six months ended June 30, 2014 compared to the same periods in 2013. The following highlights the significant changes.


•	Investment and brokerage services income increased $148 million and $390 million primarily driven by higher market levels and the impact of long-term assets under management (AUM) inflows.

•

Equity investment income decreased $323 million and $102 million. The three-month decline was due to gains on the sales of portions of an equity investment in All Other in the prior-year period, partially offset by a gain in the current-year period related to an initial public offering of an equity investment in Global Markets. The six-month decline was due to lower Global Principal Investments (GPI) gains compared to the prior-year period, partially offset by the gain in Global Markets.


•	Trading account profits decreased $106 million and $628 million primarily due to declines in market volumes and reduced volatility.


•	Mortgage banking income decreased $651 million and $1.5 billion primarily driven by lower core production revenue and servicing income, partially offset by lower representations and warranties provision.

•

Other income increased to $407 million from a loss of $80 million, and to $818 million from a loss of $201 million compared to the prior-year periods. The first quarter of 2013 included a write-down of $450 million on a monoline receivable. Other income included positive debit valuation adjustments (DVA) on structured liabilities of $68 million and $265 million in the current-year periods compared to positive DVA of $10 million and negative DVA of $80 million for the same periods in 2013.

Provision for Credit Losses

The provision for credit losses decreased $800 million to $411 million, and $1.5 billion to $1.4 billion for the three and six months ended June 30, 2014 compared to the same periods in 2013. The provision for credit losses was $662 million and $1.0 billion lower than net charge-offs resulting in reductions in the allowance for credit losses. The reductions in provision were driven by portfolio improvement, including increased home prices in the home loans portfolio, as well as lower levels of delinquencies in the consumer lending portfolio within CBB. This was partially offset by higher provision for credit losses in the commercial portfolio due to reserve increases.

Net charge-offs totaled $1.1 billion, or 0.48 percent, and $2.5 billion, or 0.55 percent of average loans and leases for the three and six months ended June 30, 2014 compared to $2.1 billion, or 0.94 percent, and $4.6 billion, or 1.04 percent for the same periods in 2013. The decreases in net charge-offs were due to credit quality improvement across all major portfolios.

If the economy and our asset quality continue to improve, we expect net charge-offs to continue to show modest improvement from the second quarter amount of $1.3 billion, which excludes recoveries of $185 million on the nonperforming loan sales. We would also expect reserve releases to decline modestly through the balance of 2014. For more information on the provision for credit losses, see Provision for Credit Losses on page 117.

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Noninterest Expense



Table 4
Noninterest Expense
	Three Months Ended June 30				Six Months Ended June 30
(Dollars in millions)	2014		2013		2014		2013
Personnel	$	8,306	$	8,531	$	18,055	$	18,422
Occupancy	1,079		1,109		2,194		2,263
Equipment	534		532		1,080		1,082
Marketing	450		437		892		866
Professional fees	626		694		1,184		1,343
Amortization of intangibles	235		274		474		550
Data processing	761		779		1,594		1,591
Telecommunications	324		411		694		820
Other general operating	6,226		3,251		14,612		8,581
Total noninterest expense	$	18,541	$	16,018	$	40,779	$	35,518

Noninterest expense increased $2.5 billion to $18.5 billion, and $5.3 billion to $40.8 billion for the three and six months ended June 30, 2014 compared to the same periods in 2013 primarily driven by higher other general operating expense. These increases in other general operating expense reflected increases in litigation expense, primarily related to previously disclosed legacy mortgage-related matters, of $3.5 billion to $4.0 billion for the three months ended June 30, 2014, and $7.3 billion to $10.0 billion for the six months ended June 30, 2014 compared to the same periods in 2013, partially offset by a decline in other general operating expenses in Legacy Assets & Servicing. Personnel expense decreased $225 million and $367 million as we continued to streamline processes and achieve cost savings.

In connection with Project New BAC, which was first announced in the third quarter of 2011, we continue to achieve cost savings in certain noninterest expense categories as we further streamline workflows, simplify processes and align expenses with our overall strategic plan and operating principles. We expect total cost savings from Project New BAC, since inception of the project, to reach $8 billion on an annualized basis, or $2 billion per quarter. Our New BAC expense program is ahead of schedule, and we now expect to reach a quarterly level of $2 billion in cost savings in the fourth quarter of 2014, as opposed to mid-2015.

Income Tax Expense



Table 5
Income Tax Expense
	Three Months Ended June 30						Six Months Ended June 30
(Dollars in millions)	2014			2013			2014			2013
Income before income taxes	$	2,795		$	5,498		$	2,114		$	7,482
Income tax expense	504			1,486			99			1,987
Effective tax rate	18.0		%	27.0		%	4.7		%	26.6		%

The effective tax rates for the three and six months ended June 30, 2014 were driven by the impact of recurring tax preference benefits on the lower level of pre-tax income. Also reflected in the effective tax rate for the six months ended June 30, 2014 were discrete tax benefits, principally from the resolution of certain tax matters, offset by the impact of certain accruals estimated to be nondeductible. We expect an effective tax rate of approximately 31 percent, absent any unusual items, for the remainder of 2014.

The effective tax rates for the three and six months ended June 30, 2013 were primarily driven by our recurring tax preference benefits and an increase in tax benefits from the 2012 non-U.S. restructurings.

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Balance Sheet Overview

Table 6
Selected Balance Sheet Data
									Average Balance
	June 30 2014			December 31 2013			% Change		Three Months Ended June 30						% Change		Six Months Ended June 30						% Change
(Dollars in millions)	June 30 2014			December 31 2013			% Change		2014			2013			% Change		2014			2013			% Change
Assets
Cash and cash equivalents	$	152,899		$	131,322		16	%	$	150,959		$	104,486		44	%	$	145,921		$	98,698		48	%
Federal funds sold and securities borrowed or purchased under agreements to resell	229,449			190,328			21		235,393			233,394			1		224,012			235,417			(5	)
Trading account assets	196,952			200,993			(2	)	201,113			227,241			(11	)	202,467			233,568			(13	)
Debt securities	352,883			323,945			9		345,889			343,260			1		337,845			349,794			(3	)
Loans and leases	911,899			928,233			(2	)	912,580			914,234			—		916,012			910,269			1
Allowance for loan and lease losses	(15,811		)	(17,428		)	(9	)	(16,392		)	(22,060		)	(26	)	(16,766		)	(22,822		)	(27	)
All other assets	342,286			344,880			(1	)	340,013			384,055			(11	)	345,003			393,519			(12	)
Total assets	$	2,170,557		$	2,102,273		3		$	2,169,555		$	2,184,610		(1	)	$	2,154,494		$	2,198,443		(2	)
Liabilities
Deposits	$	1,134,329		$	1,119,271		1		$	1,128,563		$	1,079,956		5		$	1,123,399		$	1,077,631		4
Federal funds purchased and securities loaned or sold under agreements to repurchase	217,829			198,106			10		222,525			270,790			(18	)	213,714			285,781			(25	)
Trading account liabilities	88,342			83,469			6		95,153			94,349			1		92,813			93,204			—
Short-term borrowings	45,873			45,999			—		48,722			47,238			3		48,447			42,001			15
Long-term debt	257,071			249,674			3		259,825			270,198			(4	)	256,768			272,088			(6	)
All other liabilities	189,702			173,069			10		178,970			187,016			(4	)	183,180			191,714			(4	)
Total liabilities	1,933,146			1,869,588			3		1,933,758			1,949,547			(1	)	1,918,321			1,962,419			(2	)
Shareholders' equity	237,411			232,685			2		235,797			235,063			—		236,173			236,024			—
Total liabilities and shareholders' equity	$	2,170,557		$	2,102,273		3		$	2,169,555		$	2,184,610		(1	)	$	2,154,494		$	2,198,443		(2	)

Period-end balance sheet amounts may vary from average balance sheet amounts due to liquidity and balance sheet management activities, primarily involving our portfolios of highly liquid assets. These portfolios are designed to ensure the adequacy of capital while enhancing our ability to manage liquidity requirements for the Corporation and our customers, and to position the balance sheet in accordance with the Corporation's risk appetite. The execution of these activities requires the use of balance sheet and capital-related limits including spot, average and risk-weighted asset limits, particularly within the market-making activities of our trading businesses. One of our key regulatory metrics, Tier 1 leverage ratio, is calculated based on adjusted quarterly average total assets.

Assets

At June 30, 2014, total assets were approximately $2.2 trillion, up $68.3 billion from December 31, 2013. The key drivers were higher securities borrowed or purchased under agreements to resell to cover client and firm short positions, higher matched-book trading activity, higher debt securities driven by purchases of U.S. treasuries and fair value increases due to rates, and an increase in cash and cash equivalents primarily due to higher interest-bearing deposits with the Federal Reserve and non-U.S. central banks in connection with anticipated Basel 3 Liquidity Coverage Ratio (LCR) requirements. These increases were partially offset by a decline in consumer loan balances due to paydowns, net charge-offs and nonperforming loan sales outpacing new originations and repurchases of certain consumer loans.

Average total assets decreased $15.1 billion for the three months ended June 30, 2014 compared to the same period in 2013. The decrease was driven by a decline in all other assets primarily due to decreases in customer and other receivables, other earning assets, derivative dealer assets and loans held-for-sale (LHFS). The decrease in average total assets was also driven by decreased trading account assets due to a reduction in U.S. treasuries inventory and agency pass-throughs as well as consumer loans due to run-off, payoffs and nonperforming loan sales outpacing new originations. The decrease in average total assets was partially offset by increases in cash and cash equivalents primarily driven by higher interest-bearing deposits with the Federal Reserve and non-U.S. central banks, and commercial loans driven by higher customer demand.

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Average total assets decreased $43.9 billion for the six months ended June 30, 2014 compared to the same period in 2013. The decrease was driven by declines in all other assets primarily due to decreases in other earning assets, customer and other receivables, derivative dealer assets and LHFS. The decrease in average total assets was also driven by a decline in trading account assets due to a reduction in U.S. treasuries inventory and agency pass-throughs, a decline in consumer loans due to run-off and paydowns outpacing originations, lower debt securities from sales of securities in 2013 and paydowns outpacing new purchases, and a decline in securities borrowed or purchased under agreements to resell due to covering short positions and a lower matched-book. The decrease in average total assets was partially offset by increases in cash and cash equivalents primarily driven by higher interest-bearing deposits with the Federal Reserve and non-U.S. central banks, and commercial loans driven by higher customer demand.

Liabilities and Shareholders' Equity

At June 30, 2014, total liabilities were approximately $1.9 trillion, up $63.6 billion from December 31, 2013 primarily driven by higher securities loaned or sold under agreements to repurchase due to an increase in matched-book trading activity, an increase in all other liabilities primarily due to higher dealer payables, and growth in deposits. The increase in total liabilities was also driven by higher long-term debt due to new issuances outpacing maturities, and higher trading account liabilities.

Average total liabilities decreased $15.8 billion for the three months ended June 30, 2014 compared to the same period in 2013. The decrease was primarily driven by a decline in securities loaned or sold under agreements to repurchase due to a decrease in funding of long positions and a lower matched-book, planned reductions in long-term debt and maturities outpacing new issuances, and lower derivative liabilities, partially offset by growth in deposits.

Average total liabilities decreased $44.1 billion for the six months ended June 30, 2014 compared to the same period in 2013. The decrease was due to the same factors as described in the three-month discussion above.

Shareholders' equity of $237.4 billion at June 30, 2014 increased $4.7 billion from December 31, 2013 driven by a positive net change in the fair value of available-for-sale (AFS) debt securities due to decreases in rates, which is recorded in accumulated other comprehensive income (OCI), issuance of preferred stock and earnings, partially offset by capital returns.

Average shareholders' equity of $235.8 billion and $236.2 billion for the three and six months ended June 30, 2014 remained relatively unchanged compared to the same periods in 2013 as increases in earnings were partially offset by common and preferred stock repurchases and changes in unrealized gains and losses on AFS debt securities, which are recorded in accumulated OCI.

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Table 7
Selected Quarterly Financial Data
	2014 Quarters						2013 Quarters
(In millions, except per share information)	Second			First			Fourth			Third			Second
Income statement
Net interest income	$	10,013		$	10,085		$	10,786		$	10,266		$	10,549
Noninterest income	11,734			12,481			10,702			11,264			12,178
Total revenue, net of interest expense	21,747			22,566			21,488			21,530			22,727
Provision for credit losses	411			1,009			336			296			1,211
Noninterest expense	18,541			22,238			17,307			16,389			16,018
Income (loss) before income taxes	2,795			(681		)	3,845			4,845			5,498
Income tax expense (benefit)	504			(405		)	406			2,348			1,486
Net income (loss)	2,291			(276		)	3,439			2,497			4,012
Net income (loss) applicable to common shareholders	2,035			(514		)	3,183			2,218			3,571
Average common shares issued and outstanding	10,519			10,561			10,633			10,719			10,776
Average diluted common shares issued and outstanding ⁽¹⁾	11,265			10,561			11,404			11,482			11,525
Performance ratios
Return on average assets	0.42		%	n/m			0.64		%	0.47		%	0.74		%
Four quarter trailing return on average assets ⁽²⁾	0.37			0.45		%	0.53			0.40			0.30
Return on average common shareholders' equity	3.68			n/m			5.74			4.06			6.55
Return on average tangible common shareholders' equity ⁽³⁾	5.47			n/m			8.61			6.15			9.88
Return on average tangible shareholders' equity ⁽³⁾	5.64			n/m			8.53			6.32			9.98
Total ending equity to total ending assets	10.94			10.79			11.07			10.92			10.88
Total average equity to total average assets	10.87			11.06			10.93			10.85			10.76
Dividend payout	5.16			n/m			3.33			4.82			3.01
Per common share data
Earnings (loss)	$	0.19		$	(0.05	)	$	0.30		$	0.21		$	0.33
Diluted earnings (loss) ⁽¹⁾	0.19			(0.05		)	0.29			0.20			0.32
Dividends paid	0.01			0.01			0.01			0.01			0.01
Book value	21.16			20.75			20.71			20.50			20.18
Tangible book value ⁽³⁾	14.24			13.81			13.79			13.62			13.32
Market price per share of common stock
Closing	$	15.37		$	17.20		$	15.57		$	13.80		$	12.86
High closing	17.34			17.92			15.88			14.95			13.83
Low closing	14.51			16.10			13.69			12.83			11.44
Market capitalization	$	161,628		$	181,117		$	164,914		$	147,429		$	138,156


⁽¹⁾	The diluted earnings (loss) per common share excluded the effect of any equity instruments that are antidilutive to earnings per share. There were no potential common shares that were dilutive in the first quarter of 2014 because of the net loss.


⁽²⁾	Calculated as total net income for four consecutive quarters divided by annualized average assets for four consecutive quarters.


⁽³⁾	Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures. Other companies may define or calculate these measures differently. For more information on these ratios and for corresponding reconciliations to GAAP financial measures, see Supplemental Financial Data on page 16.


⁽⁴⁾	For more information on the impact of the purchased credit-impaired loan portfolio on asset quality, see Consumer Portfolio Credit Risk Management on page 82.


⁽⁵⁾	Includes the allowance for loan and lease losses and the reserve for unfunded lending commitments.

⁽⁶⁾


⁽⁷⁾	Primarily includes amounts allocated to the U.S. credit card and unsecured consumer lending portfolios in CBB, purchased credit-impaired loans and the non-U.S. credit card portfolio in All Other.

⁽⁸⁾

Net charge-offs exclude $160 million, $391 million, $741 million, $443 million and $313 million of write-offs in the purchased credit-impaired loan portfolio in the second and first quarters of 2014 and in the fourth, third and second quarters of 2013, respectively. These write-offs decreased the purchased credit-impaired valuation allowance included as part of the allowance for loan and lease losses. For more information on purchased credit-impaired write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 93.


⁽⁹⁾	On January 1, 2014, the Basel 3 rules became effective, subject to transition provisions primarily related to regulatory deductions and adjustments impacting common equity tier 1 capital and Tier 1 capital. We reported under Basel 1 (which included the Market Risk Final Rules) for 2013.

n/a = not applicable; n/m = not meaningful

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Table 7
Selected Quarterly Financial Data (continued)
	2014 Quarters						2013 Quarters
(Dollars in millions)	Second			First			Fourth			Third			Second
Average balance sheet
Total loans and leases	$	912,580		$	919,482		$	929,777		$	923,978		$	914,234
Total assets	2,169,555			2,139,266			2,134,875			2,123,430			2,184,610
Total deposits	1,128,563			1,118,178			1,112,674			1,090,611			1,079,956
Long-term debt	259,825			253,678			251,055			258,717			270,198
Common shareholders' equity	222,215			223,201			220,088			216,766			218,790
Total shareholders' equity	235,797			236,553			233,415			230,392			235,063
Asset quality ⁽⁴⁾
Allowance for credit losses ⁽⁵⁾	$	16,314		$	17,127		$	17,912		$	19,912		$	21,709
Nonperforming loans, leases and foreclosed properties ⁽⁶⁾	15,300			17,732			17,772			20,028			21,280
Allowance for loan and lease losses as a percentage of total loans and leases outstanding ⁽⁶⁾	1.75		%	1.84		%	1.90		%	2.10		%	2.33		%
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases ⁽⁶⁾	108			97			102			100			103
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases, excluding the PCI loan portfolio ⁽⁶⁾	95			85			87			84			84
Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases ⁽⁷⁾	$	6,488		$	7,143		$	7,680		$	8,972		$	9,919
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases, excluding the allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases ^{(6, 7)}	64		%	55		%	57		%	54		%	55		%
Net charge-offs ⁽⁸⁾	$	1,073		$	1,388		$	1,582		$	1,687		$	2,111
Annualized net charge-offs as a percentage of average loans and leases outstanding ^{(6, 8)}	0.48		%	0.62		%	0.68		%	0.73		%	0.94		%
Annualized net charge-offs as a percentage of average loans and leases outstanding, excluding the PCI loan portfolio ⁽⁶⁾	0.49			0.64			0.70			0.75			0.97
Annualized net charge-offs and PCI write-offs as a percentage of average loans and leases outstanding ⁽⁶⁾	0.55			0.79			1.00			0.92			1.07
Nonperforming loans and leases as a percentage of total loans and leases outstanding ⁽⁶⁾	1.63			1.89			1.87			2.10			2.26
Nonperforming loans, leases and foreclosed properties as a percentage of total loans, leases and foreclosed properties ⁽⁶⁾	1.70			1.96			1.93			2.17			2.33
Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs ⁽⁸⁾	3.67			2.95			2.78			2.90			2.51
Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs, excluding the PCI loan portfolio	3.25			2.58			2.38			2.42			2.04
Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs and PCI write-offs	3.20			2.30			1.89			2.30			2.18
Capital ratios at period end ⁽⁹⁾
Risk-based capital:
Common equity tier 1 capital	12.0		%	11.8		%	n/a			n/a			n/a
Tier 1 common capital	n/a			n/a			10.9		%	10.8		%	10.6		%
Tier 1 capital	12.5			11.9			12.2			12.1			11.9
Total capital	15.3			14.8			15.1			15.1			15.0
Tier 1 leverage	7.7			7.4			7.7			7.6			7.4
Tangible equity ⁽³⁾	7.85			7.65			7.86			7.73			7.67
Tangible common equity⁽³⁾	7.14			7.00			7.20			7.08			6.98

For footnotes see page 12.

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Table 8
Selected Year-to-Date Financial Data
	Six Months Ended June 30
(In millions, except per share information)	2014			2013
Income statement
Net interest income	$	20,098		$	21,213
Noninterest income	24,215			24,711
Total revenue, net of interest expense	44,313			45,924
Provision for credit losses	1,420			2,924
Noninterest expense	40,779			35,518
Income before income taxes	2,114			7,482
Income tax expense	99			1,987
Net income	2,015			5,495
Net income applicable to common shareholders	1,521			4,681
Average common shares issued and outstanding	10,540			10,787
Average diluted common shares issued and outstanding	10,600			11,550
Performance ratios
Return on average assets	0.19		%	0.50		%
Return on average common shareholders' equity	1.38			4.32
Return on average tangible common shareholders' equity ⁽¹⁾	2.05			6.53
Return on average tangible shareholders' equity ⁽¹⁾	2.49			6.84
Total ending equity to total ending assets	10.94			10.88
Total average equity to total average assets	10.96			10.74
Dividend payout	13.83			4.61
Per common share data
Earnings	$	0.14		$	0.43
Diluted earnings	0.14			0.42
Dividends paid	0.02			0.02
Book value	21.16			20.18
Tangible book value ⁽¹⁾	14.24			13.32
Market price per share of common stock
Closing	$	15.37		$	12.86
High closing	17.92			13.83
Low closing	14.51			11.03
Market capitalization	$	161,628		$	138,156


⁽¹⁾	Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures. Other companies may define or calculate these measures differently. For more information on these ratios and for corresponding reconciliations to GAAP financial measures, see Supplemental Financial Data on page 16.


⁽²⁾	For more information on the impact of the purchased credit-impaired loan portfolio on asset quality, see Consumer Portfolio Credit Risk Management on page 82.


⁽³⁾	Includes the allowance for loan and lease losses and the reserve for unfunded lending commitments.

⁽⁴⁾


⁽⁵⁾	Primarily includes amounts allocated to the U.S. credit card and unsecured consumer lending portfolios in CBB, purchased credit-impaired loans and the non-U.S. credit card portfolio in All Other.

⁽⁶⁾

Net charge-offs exclude $551 million and $1.2 billion of write-offs in the purchased credit-impaired loan portfolio for the six months ended June 30, 2014 and 2013. These write-offs decreased the purchased credit-impaired valuation allowance included as part of the allowance for loan and lease losses. For more information on purchased credit-impaired write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 93.

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Table 8
Selected Year-to-Date Financial Data (continued)
	Six Months Ended June 30
(Dollars in millions)	2014			2013
Average balance sheet
Total loans and leases	$	916,012		$	910,269
Total assets	2,154,494			2,198,443
Total deposits	1,123,399			1,077,631
Long-term debt	256,768			272,088
Common shareholders' equity	222,705			218,509
Total shareholders' equity	236,173			236,024
Asset quality ⁽²⁾
Allowance for credit losses ⁽³⁾	$	16,314		$	21,709
Nonperforming loans, leases and foreclosed properties ⁽⁴⁾	15,300			21,280
Allowance for loan and lease losses as a percentage of total loans and leases outstanding ⁽⁴⁾	1.75		%	2.33		%
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases ⁽⁴⁾	108			103
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases, excluding the PCI loan portfolio ⁽⁴⁾	95			84
Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases ⁽⁵⁾	$	6,488		$	9,919
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases, excluding the allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases ^{(4, 5)}	64		%	55		%
Net charge-offs ⁽⁶⁾	$	2,461		$	4,628
Annualized net charge-offs as a percentage of average loans and leases outstanding ^{(4, 6)}	0.55		%	1.04		%
Annualized net charge-offs as a percentage of average loans and leases outstanding, excluding the PCI loan portfolio ⁽⁴⁾	0.56			1.07
Annualized net charge-offs and PCI write-offs as a percentage of average loans and leases outstanding ⁽⁴⁾	0.67			1.29
Nonperforming loans and leases as a percentage of total loans and leases outstanding ⁽⁴⁾	1.63			2.26
Nonperforming loans, leases and foreclosed properties as a percentage of total loans, leases and foreclosed properties ⁽⁴⁾	1.70			2.33
Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs ⁽⁶⁾	3.19			2.28
Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs, excluding the PCI loan portfolio	2.82			1.85
Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs and PCI write-offs	2.60			1.82

For footnotes see page 14.

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Supplemental Financial Data

We view net interest income and related ratios and analyses on a FTE basis, which when presented on a consolidated basis, are non-GAAP financial measures. We believe managing the business with net interest income on a FTE basis provides a more accurate picture of the interest margin for comparative purposes. To derive the FTE basis, net interest income is adjusted to reflect tax-exempt income on an equivalent before-tax basis with a corresponding increase in income tax expense. For purposes of this calculation, we use the federal statutory tax rate of 35 percent. This measure ensures comparability of net interest income arising from taxable and tax-exempt sources.

Certain performance measures including the efficiency ratio and net interest yield utilize net interest income (and thus total revenue) on a FTE basis. The efficiency ratio measures the costs expended to generate a dollar of revenue, and net interest yield measures the bps we earn over the cost of funds.

We also evaluate our business based on certain ratios that utilize tangible equity, a non-GAAP financial measure. Tangible equity represents an adjusted shareholders' equity or common shareholders' equity amount which has been reduced by goodwill and intangible assets (excluding mortgage servicing rights (MSRs)), net of related deferred tax liabilities. These measures are used to evaluate our use of equity. In addition, profitability, relationship and investment models use both return on average tangible common shareholders' equity and return on average tangible shareholders' equity as key measures to support our overall growth goals. These ratios are as follows:


•	Return on average tangible common shareholders' equity measures our earnings contribution as a percentage of adjusted common shareholders' equity. The tangible common equity ratio represents adjusted ending common shareholders' equity divided by total assets less goodwill and intangible assets (excluding MSRs), net of related deferred tax liabilities.


•	Return on average tangible shareholders' equity measures our earnings contribution as a percentage of adjusted average total shareholders' equity. The tangible equity ratio represents adjusted ending shareholders' equity divided by total assets less goodwill and intangible assets (excluding MSRs), net of related deferred tax liabilities.


•	Tangible book value per common share represents adjusted ending common shareholders' equity divided by ending common shares outstanding.

The aforementioned supplemental data and performance measures are presented in Tables 7 and 8.

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We evaluate our business segment results based on measures that utilize average allocated capital. Return on average allocated capital is calculated as net income adjusted for cost of funds and earnings credits and certain expenses related to intangibles, divided by average allocated capital. Allocated capital and the related return both represent non-GAAP financial measures. In addition, for purposes of goodwill impairment testing, the Corporation utilizes allocated equity as a proxy for the carrying value of its reporting units. Allocated equity in the reporting units is comprised of allocated capital plus capital for the portion of goodwill and intangibles specifically assigned to the reporting unit. For additional information, see Business Segment Operations on page 28 and Note 8 – Goodwill and Intangible Assets to the Consolidated Financial Statements.

Tables 9, 10 and 11 provide reconciliations of these non-GAAP financial measures to GAAP financial measures. We believe the use of these non-GAAP financial measures provides additional clarity in assessing the results of the Corporation and our segments. Other companies may define or calculate these measures and ratios differently.



Table 9
Quarterly Supplemental Financial Data and Reconciliations to GAAP Financial Measures
	2014 Quarters						2013 Quarters
(Dollars in millions)	Second			First			Fourth			Third			Second
Fully taxable-equivalent basis data
Net interest income	$	10,226		$	10,286		$	10,999		$	10,479		$	10,771
Total revenue, net of interest expense	21,960			22,767			21,701			21,743			22,949
Net interest yield ⁽¹⁾	2.22		%	2.29		%	2.44		%	2.33		%	2.35		%
Efficiency ratio	84.43			97.68			79.75			75.38			69.80


⁽¹⁾	Beginning in 2014, interest-bearing deposits placed with the Federal Reserve and certain non-U.S. central banks are included in earning assets. Prior period yields have been reclassified to conform to current period presentation.

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Table 9
Quarterly Supplemental Financial Data and Reconciliations to GAAP Financial Measures (continued)
	2014 Quarters						2013 Quarters
(Dollars in millions)	Second			First			Fourth			Third			Second
Reconciliation of net interest income to net interest income on a fully taxable-equivalent basis
Net interest income	$	10,013		$	10,085		$	10,786		$	10,266		$	10,549
Fully taxable-equivalent adjustment	213			201			213			213			222
Net interest income on a fully taxable-equivalent basis	$	10,226		$	10,286		$	10,999		$	10,479		$	10,771
Reconciliation of total revenue, net of interest expense to total revenue, net of interest expense on a fully taxable-equivalent basis
Total revenue, net of interest expense	$	21,747		$	22,566		$	21,488		$	21,530		$	22,727
Fully taxable-equivalent adjustment	213			201			213			213			222
Total revenue, net of interest expense on a fully taxable-equivalent basis	$	21,960		$	22,767		$	21,701		$	21,743		$	22,949
Reconciliation of income tax expense (benefit) to income tax expense (benefit) on a fully taxable-equivalent basis
Income tax expense (benefit)	$	504		$	(405	)	$	406		$	2,348		$	1,486
Fully taxable-equivalent adjustment	213			201			213			213			222
Income tax expense (benefit) on a fully taxable-equivalent basis	$	717		$	(204	)	$	619		$	2,561		$	1,708
Reconciliation of average common shareholders' equity to average tangible common shareholders' equity
Common shareholders' equity	$	222,215		$	223,201		$	220,088		$	216,766		$	218,790
Goodwill	(69,822		)	(69,842		)	(69,864		)	(69,903		)	(69,930		)
Intangible assets (excluding MSRs)	(5,235		)	(5,474		)	(5,725		)	(5,993		)	(6,270		)
Related deferred tax liabilities	2,100			2,165			2,231			2,296			2,360
Tangible common shareholders' equity	$	149,258		$	150,050		$	146,730		$	143,166		$	144,950
Reconciliation of average shareholders' equity to average tangible shareholders' equity
Shareholders' equity	$	235,797		$	236,553		$	233,415		$	230,392		$	235,063
Goodwill	(69,822		)	(69,842		)	(69,864		)	(69,903		)	(69,930		)
Intangible assets (excluding MSRs)	(5,235		)	(5,474		)	(5,725		)	(5,993		)	(6,270		)
Related deferred tax liabilities	2,100			2,165			2,231			2,296			2,360
Tangible shareholders' equity	$	162,840		$	163,402		$	160,057		$	156,792		$	161,223
Reconciliation of period-end common shareholders' equity to period-end tangible common shareholders' equity
Common shareholders' equity	$	222,565		$	218,536		$	219,333		$	218,967		$	216,791
Goodwill	(69,810		)	(69,842		)	(69,844		)	(69,891		)	(69,930		)
Intangible assets (excluding MSRs)	(5,099		)	(5,337		)	(5,574		)	(5,843		)	(6,104		)
Related deferred tax liabilities	2,078			2,100			2,166			2,231			2,297
Tangible common shareholders' equity	$	149,734		$	145,457		$	146,081		$	145,464		$	143,054
Reconciliation of period-end shareholders' equity to period-end tangible shareholders' equity
Shareholders' equity	$	237,411		$	231,888		$	232,685		$	232,282		$	231,032
Goodwill	(69,810		)	(69,842		)	(69,844		)	(69,891		)	(69,930		)
Intangible assets (excluding MSRs)	(5,099		)	(5,337		)	(5,574		)	(5,843		)	(6,104		)
Related deferred tax liabilities	2,078			2,100			2,166			2,231			2,297
Tangible shareholders' equity	$	164,580		$	158,809		$	159,433		$	158,779		$	157,295
Reconciliation of period-end assets to period-end tangible assets
Assets	$	2,170,557		$	2,149,851		$	2,102,273		$	2,126,653		$	2,123,320
Goodwill	(69,810		)	(69,842		)	(69,844		)	(69,891		)	(69,930		)
Intangible assets (excluding MSRs)	(5,099		)	(5,337		)	(5,574		)	(5,843		)	(6,104		)
Related deferred tax liabilities	2,078			2,100			2,166			2,231			2,297
Tangible assets	$	2,097,726		$	2,076,772		$	2,029,021		$	2,053,150		$	2,049,583

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Table 10
Year-to-Date Supplemental Financial Data and Reconciliations to GAAP Financial Measures
	Six Months Ended June 30
(Dollars in millions, except per share information)	2014			2013
Fully taxable-equivalent basis data
Net interest income	$	20,512		$	21,646
Total revenue, net of interest expense	44,727			46,357
Net interest yield ⁽¹⁾	2.26		%	2.36		%
Efficiency ratio	91.17			76.62
Reconciliation of net interest income to net interest income on a fully taxable-equivalent basis
Net interest income	$	20,098		$	21,213
Fully taxable-equivalent adjustment	414			433
Net interest income on a fully taxable-equivalent basis	$	20,512		$	21,646
Reconciliation of total revenue, net of interest expense to total revenue, net of interest expense on a fully taxable-equivalent basis
Total revenue, net of interest expense	$	44,313		$	45,924
Fully taxable-equivalent adjustment	414			433
Total revenue, net of interest expense on a fully taxable-equivalent basis	$	44,727		$	46,357
Reconciliation of income tax expense to income tax expense on a fully taxable-equivalent basis
Income tax expense	$	99		$	1,987
Fully taxable-equivalent adjustment	414			433
Income tax expense on a fully taxable-equivalent basis	$	513		$	2,420
Reconciliation of average common shareholders' equity to average tangible common shareholders' equity
Common shareholders' equity	$	222,705		$	218,509
Goodwill	(69,832		)	(69,937		)
Intangible assets (excluding MSRs)	(5,354		)	(6,409		)
Related deferred tax liabilities	2,132			2,393
Tangible common shareholders' equity	$	149,651		$	144,556
Reconciliation of average shareholders' equity to average tangible shareholders' equity
Shareholders' equity	$	236,173		$	236,024
Goodwill	(69,832		)	(69,937		)
Intangible assets (excluding MSRs)	(5,354		)	(6,409		)
Related deferred tax liabilities	2,132			2,393
Tangible shareholders' equity	$	163,119		$	162,071


⁽¹⁾	Beginning in 2014, interest-bearing deposits placed with the Federal Reserve and certain non-U.S. central banks are included in earning assets. Prior period yields have been reclassified to conform to current period presentation.

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Table 11
Segment Supplemental Financial Data Reconciliations to GAAP Financial Measures ⁽¹⁾
	Three Months Ended June 30						Six Months Ended June 30
(Dollars in millions)	2014			2013			2014			2013

Consumer & Business Banking
Reported net income	$	1,788		$	1,391		$	3,454		$	2,833
Adjustment related to intangibles ⁽²⁾	1			2			2			4
Adjusted net income	$	1,789		$	1,393		$	3,456		$	2,837

Average allocated equity ⁽³⁾	$	61,460		$	62,050		$	61,468		$	62,063
Adjustment related to goodwill and a percentage of intangibles	(31,960		)	(32,050		)	(31,968		)	(32,063		)
Average allocated capital	$	29,500		$	30,000		$	29,500		$	30,000

Deposits
Reported net income	$	743		$	485		$	1,375		$	886
Adjustment related to intangibles ⁽²⁾	—			—			—			—
Adjusted net income	$	743		$	485		$	1,375		$	886

Average allocated equity ⁽³⁾	$	36,486		$	35,395		$	36,484		$	35,397
Adjustment related to goodwill and a percentage of intangibles	(19,986		)	(19,995		)	(19,984		)	(19,997		)
Average allocated capital	$	16,500		$	15,400		$	16,500		$	15,400

Consumer Lending
Reported net income	$	1,045		$	906		$	2,079		$	1,947
Adjustment related to intangibles ⁽²⁾	1			2			2			4
Adjusted net income	$	1,046		$	908		$	2,081		$	1,951

Average allocated equity ⁽³⁾	$	24,974		$	26,655		$	24,984		$	26,666
Adjustment related to goodwill and a percentage of intangibles	(11,974		)	(12,055		)	(11,984		)	(12,066		)
Average allocated capital	$	13,000		$	14,600		$	13,000		$	14,600

Global Wealth & Investment Management
Reported net income	$	724		$	759		$	1,453		$	1,479
Adjustment related to intangibles ⁽²⁾	4			4			7			9
Adjusted net income	$	728		$	763		$	1,460		$	1,488

Average allocated equity ⁽³⁾	$	22,222		$	20,300		$	22,233		$	20,311
Adjustment related to goodwill and a percentage of intangibles	(10,222		)	(10,300		)	(10,233		)	(10,311		)
Average allocated capital	$	12,000		$	10,000		$	12,000		$	10,000

Global Banking
Reported net income	$	1,353		$	1,297		$	2,589		$	2,581
Adjustment related to intangibles ⁽²⁾	1			1			1			1
Adjusted net income	$	1,354		$	1,298		$	2,590		$	2,582

Average allocated equity ⁽³⁾	$	53,405		$	45,416		$	53,406		$	45,411
Adjustment related to goodwill and a percentage of intangibles	(22,405		)	(22,416		)	(22,406		)	(22,411		)
Average allocated capital	$	31,000		$	23,000		$	31,000		$	23,000

Global Markets
Reported net income	$	1,101		$	962		$	2,409		$	2,074
Adjustment related to intangibles ⁽²⁾	3			2			5			4
Adjusted net income	$	1,104		$	964		$	2,414		$	2,078

Average allocated equity ⁽³⁾	$	39,373		$	35,357		$	39,374		$	35,364
Adjustment related to goodwill and a percentage of intangibles	(5,373		)	(5,357		)	(5,374		)	(5,364		)
Average allocated capital	$	34,000		$	30,000		$	34,000		$	30,000


⁽¹⁾	There are no adjustments to reported net income (loss) or average allocated equity for CRES.


⁽²⁾	Represents cost of funds, earnings credits and certain expenses related to intangibles.


⁽³⁾	Average allocated equity is comprised of average allocated capital plus capital for the portion of goodwill and intangibles specifically assigned to the business segment. For more information on allocated capital, see Business Segment Operations on page 28 and Note 8 – Goodwill and Intangible Assets to the Consolidated Financial Statements.

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Net Interest Income Excluding Trading-related Net Interest Income

We manage net interest income on a FTE basis and excluding the impact of trading-related activities. As discussed in Global Markets on page 49, we evaluate our sales and trading results and strategies on a total market-based revenue approach by combining net interest income and noninterest income for Global Markets. An analysis of net interest income, average earning assets and net interest yield on earning assets, all of which adjust for the impact of trading-related net interest income from reported net interest income on a FTE basis, is shown below. We believe the use of this non-GAAP presentation in Table 12 provides additional clarity in assessing our results.



Table 12
Net Interest Income Excluding Trading-related Net Interest Income
	Three Months Ended June 30						Six Months Ended June 30
(Dollars in millions)	2014			2013			2014			2013
Net interest income (FTE basis)
As reported	$	10,226		$	10,771		$	20,512		$	21,646
Impact of trading-related net interest income	(858		)	(914		)	(1,758		)	(1,923		)
Net interest income excluding trading-related net interest income ⁽¹⁾	$	9,368		$	9,857		$	18,754		$	19,723
Average earning assets ⁽²⁾
As reported	$	1,840,850		$	1,833,541		$	1,822,177		$	1,845,651
Impact of trading-related earning assets	(463,395		)	(487,288		)	(453,105		)	(492,443		)
Average earning assets excluding trading-related earning assets ⁽¹⁾	$	1,377,455		$	1,346,253		$	1,369,072		$	1,353,208
Net interest yield contribution (FTE basis) ^{(2, 3)}
As reported	2.22		%	2.35		%	2.26		%	2.36		%
Impact of trading-related activities	0.50			0.58			0.49			0.57
Net interest yield on earning assets excluding trading-related activities ⁽¹⁾	2.72		%	2.93		%	2.75		%	2.93		%


⁽¹⁾	Represents a non-GAAP financial measure.


⁽²⁾	Beginning in 2014, interest-bearing deposits placed with the Federal Reserve and certain non-U.S. central banks are included in earning assets. In prior periods, these balances were included with cash and due from banks in the cash and cash equivalents line, consistent with the Consolidated Balance Sheet presentation. Prior periods have been reclassified to conform to current period presentation.


⁽³⁾	Calculated on an annualized basis.

For the three and six months ended June 30, 2014, net interest income excluding trading-related net interest income decreased $489 million to $9.4 billion, and $969 million to $18.8 billion compared to the same periods in 2013. The decreases were primarily due to the negative impact of market-related premium amortization expense on debt securities, lower consumer loan balances as well as lower loan yields, partially offset by reductions in long-term debt balances and yields, higher commercial loan balances and lower rates paid on deposits. For more information on the impact of interest rates, see Interest Rate Risk Management for Nontrading Activities on page 128.

Average earning assets excluding trading-related earning assets for the three and six months ended June 30, 2014 increased $31.2 billion to $1,377.5 billion, and $15.9 billion to $1,369.1 billion compared to the same periods in 2013. The increases were primarily in interest-bearing deposits with the Federal Reserve and commercial loans, partially offset by declines in other earning assets and consumer loans.

For the three and six months ended June 30, 2014, net interest yield on earning assets excluding trading-related activities decreased 21 bps to 2.72 percent, and 18 bps to 2.75 percent compared to the same periods in 2013 due to the same factors as described above.

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Table 13
Quarterly Average Balances and Interest Rates – FTE Basis
	Second Quarter 2014						First Quarter 2014
(Dollars in millions)	Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate
Earning assets
Interest-bearing deposits with the Federal Reserve and non-U.S. central banks ⁽¹⁾	$	123,582	$	85	0.28	%	$	112,570	$	72	0.26	%
Time deposits placed and other short-term investments	10,509		39		1.51		13,880		49		1.43
Federal funds sold and securities borrowed or purchased under agreements to resell	235,393		297		0.51		212,504		265		0.51
Trading account assets	147,798		1,214		3.29		147,583		1,213		3.32
Debt securities ⁽²⁾	345,889		2,134		2.46		329,711		2,005		2.41
Loans and leases ⁽³⁾:
Residential mortgage ⁽⁴⁾	243,405		2,195		3.61		247,556		2,240		3.62
Home equity	90,729		842		3.72		92,759		851		3.71
U.S. credit card	88,058		2,042		9.30		89,545		2,092		9.48
Non-U.S. credit card	11,759		308		10.51		11,554		308		10.79
Direct/Indirect consumer ⁽⁵⁾	82,102		524		2.56		81,728		530		2.63
Other consumer ⁽⁶⁾	2,012		17		3.60		1,962		18		3.66
Total consumer	518,065		5,928		4.58		525,104		6,039		4.64
U.S. commercial	230,487		1,672		2.91		228,058		1,651		2.93
Commercial real estate ⁽⁷⁾	48,315		357		2.97		48,753		368		3.06
Commercial lease financing	24,409		193		3.16		24,727		234		3.78
Non-U.S. commercial	91,304		570		2.50		92,840		543		2.37
Total commercial	394,515		2,792		2.84		394,378		2,796		2.87
Total loans and leases	912,580		8,720		3.83		919,482		8,835		3.88
Other earning assets	65,099		665		4.09		67,568		697		4.18
Total earning assets⁽⁸⁾	1,840,850		13,154		2.86		1,803,298		13,136		2.93
Cash and due from banks ⁽¹⁾	27,377						28,258
Other assets, less allowance for loan and lease losses	301,328						307,710
Total assets	$	2,169,555					$	2,139,266


⁽¹⁾	Beginning in 2014, interest-bearing deposits placed with the Federal Reserve and certain non-U.S. central banks are included in earning assets. In prior periods, these balances were included with cash and due from banks in the cash and cash equivalents line, consistent with the Consolidated Balance Sheet presentation. Prior periods have been reclassified to conform to current period presentation.


⁽²⁾	Beginning in 2014, yields on debt securities carried at fair value are calculated on the cost basis. Prior to 2014, yields on debt securities carried at fair value were calculated based on fair value rather than the cost basis. The use of fair value does not have a material impact on net interest yield.


⁽³⁾	Nonperforming loans are included in the respective average loan balances. Income on these nonperforming loans is generally recognized on a cost recovery basis. PCI loans were recorded at fair value upon acquisition and accrete interest income over the remaining life of the loan.


⁽⁴⁾	Includes non-U.S. residential mortgage loans of $2 million and $0 in the second and first quarters of 2014, and $56 million, $83 million and $86 million in the fourth, third and second quarters of 2013, respectively.


⁽⁵⁾	Includes non-U.S. consumer loans of $4.4 billion and $4.6 billion in the second and first quarters of 2014, and $5.1 billion, $6.7 billion and $7.5 billion in the fourth, third and second quarters of 2013, respectively.

⁽⁶⁾

Includes consumer finance loans of $1.1 billion and $1.2 billion in the second and first quarters of 2014, and $1.2 billion, $1.3 billion and $1.3 billion in the fourth, third and second quarters of 2013, respectively; consumer leases of $762 million and $656 million in the second and first quarters of 2014, and $549 million, $431 million and $291 million in the fourth, third and second quarters of 2013, respectively; consumer overdrafts of $137 million and $140 million in the second and first quarters of 2014, and $163 million, $172 million and $136 million in the fourth, third and second quarters of 2013, respectively; and other non-U.S. consumer loans of $3 million and $5 million in the second and first quarters of 2014, and $5 million for each of the quarters of 2013.

⁽⁷⁾

Includes U.S. commercial real estate loans of $46.7 billion and $47.0 billion in the second and first quarters of 2014, and $44.5 billion, $41.5 billion and $39.1 billion in the fourth, third and second quarters of 2013, respectively; and non-U.S. commercial real estate loans of $1.6 billion and $1.8 billion in the second and first quarters of 2014, and $1.8 billion, $1.7 billion and $1.5 billion in the fourth, third and second quarters of 2013, respectively.

⁽⁸⁾

Interest income includes the impact of interest rate risk management contracts, which decreased interest income on the underlying assets by $13 million and $5 million in the second and first quarters of 2014, and $0, $1 million and $63 million in the fourth, third and second quarters of 2013, respectively. Interest expense includes the impact of interest rate risk management contracts, which decreased interest expense on the underlying liabilities by $621 million and $592 million in the second and first quarters of 2014, and $588 million, $556 million and $660 million in the fourth, third and second quarters of 2013, respectively. For more information on interest rate contracts, see Interest Rate Risk Management for Nontrading Activities on page 128.

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Table 13
Quarterly Average Balances and Interest Rates – FTE Basis (continued)
	Fourth Quarter 2013						Third Quarter 2013						Second Quarter 2013
(Dollars in millions)	Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate
Earning assets
Interest-bearing deposits with the Federal Reserve and non-U.S. central banks ⁽¹⁾	$	90,196	$	59	0.26	%	$	78,360	$	50	0.26	%	$	64,205	$	40	0.25	%
Time deposits placed and other short-term investments	15,782		48		1.21		17,256		47		1.07		15,088		46		1.21
Federal funds sold and securities borrowed or purchased under agreements to resell	203,415		304		0.59		223,434		291		0.52		233,394		319		0.55
Trading account assets	156,194		1,182		3.01		144,502		1,093		3.01		181,620		1,224		2.70
Debt securities ⁽²⁾	325,119		2,455		3.02		327,493		2,211		2.70		343,260		2,557		2.98
Loans and leases ⁽³⁾:
Residential mortgage ⁽⁴⁾	253,974		2,374		3.74		256,297		2,359		3.68		257,275		2,246		3.49
Home equity	95,388		953		3.97		98,172		930		3.77		101,708		951		3.74
U.S. credit card	90,057		2,125		9.36		90,005		2,226		9.81		89,722		2,192		9.80
Non-U.S. credit card	11,171		310		11.01		10,633		317		11.81		10,613		315		11.93
Direct/Indirect consumer ⁽⁵⁾	82,990		565		2.70		83,773		587		2.78		82,485		598		2.90
Other consumer ⁽⁶⁾	1,929		17		3.73		1,876		19		3.88		1,756		17		4.17
Total consumer	535,509		6,344		4.72		540,756		6,438		4.74		543,559		6,319		4.66
U.S. commercial	225,596		1,700		2.99		221,542		1,704		3.05		217,464		1,741		3.21
Commercial real estate ⁽⁷⁾	46,341		374		3.20		43,164		352		3.24		40,612		340		3.36
Commercial lease financing	24,468		206		3.37		23,860		204		3.41		23,579		205		3.48
Non-U.S. commercial	97,863		544		2.20		94,656		528		2.22		89,020		543		2.45
Total commercial	394,268		2,824		2.84		383,222		2,788		2.89		370,675		2,829		3.06
Total loans and leases	929,777		9,168		3.92		923,978		9,226		3.97		914,234		9,148		4.01
Other earning assets	78,214		709		3.61		74,022		677		3.62		81,740		713		3.50
Total earning assets⁽⁸⁾	1,798,697		13,925		3.08		1,789,045		13,595		3.02		1,833,541		14,047		3.07
Cash and due from banks ⁽¹⁾	35,063						34,704						40,281
Other assets, less allowance for loan and lease losses	301,115						299,681						310,788
Total assets	$	2,134,875					$	2,123,430					$	2,184,610

For footnotes see page 22.

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Table 13
Quarterly Average Balances and Interest Rates – FTE Basis (continued)
	Second Quarter 2014						First Quarter 2014
(Dollars in millions)	Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate
Interest-bearing liabilities
U.S. interest-bearing deposits:
Savings	$	47,450	$	—	—	%	$	45,196	$	1	0.01	%
NOW and money market deposit accounts	519,399		79		0.06		523,237		83		0.06
Consumer CDs and IRAs	68,706		70		0.41		71,141		84		0.48
Negotiable CDs, public funds and other deposits	33,412		29		0.35		29,826		27		0.37
Total U.S. interest-bearing deposits	668,967		178		0.11		669,400		195		0.12
Non-U.S. interest-bearing deposits:
Banks located in non-U.S. countries	10,538		19		0.72		11,071		21		0.75
Governments and official institutions	1,754		—		0.14		1,857		1		0.14
Time, savings and other	64,091		85		0.53		60,506		74		0.50
Total non-U.S. interest-bearing deposits	76,383		104		0.55		73,434		96		0.53
Total interest-bearing deposits	745,350		282		0.15		742,834		291		0.16
Federal funds purchased, securities loaned or sold under agreements to repurchase and short-term borrowings	271,247		763		1.13		252,971		609		0.98
Trading account liabilities	95,153		398		1.68		90,448		435		1.95
Long-term debt	259,825		1,485		2.29		253,678		1,515		2.41
Total interest-bearing liabilities ⁽⁸⁾	1,371,575		2,928		0.86		1,339,931		2,850		0.86
Noninterest-bearing sources:
Noninterest-bearing deposits	383,213						375,344
Other liabilities	178,970						187,438
Shareholders' equity	235,797						236,553
Total liabilities and shareholders' equity	$	2,169,555					$	2,139,266
Net interest spread					2.00	%					2.07	%
Impact of noninterest-bearing sources					0.22						0.22
Net interest income/yield on earning assets			$	10,226	2.22	%			$	10,286	2.29	%

For footnotes see page 22.

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Table 13
Quarterly Average Balances and Interest Rates – FTE Basis (continued)
	Fourth Quarter 2013						Third Quarter 2013						Second Quarter 2013
(Dollars in millions)	Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate
Interest-bearing liabilities
U.S. interest-bearing deposits:
Savings	$	43,665	$	5	0.05	%	$	43,968	$	5	0.05	%	$	44,897	$	6	0.05	%
NOW and money market deposit accounts	514,220		89		0.07		508,136		100		0.08		500,628		107		0.09
Consumer CDs and IRAs	74,635		96		0.51		78,161		113		0.57		81,887		127		0.63
Negotiable CDs, public funds and other deposits	29,060		29		0.39		27,108		28		0.41		25,835		30		0.45
Total U.S. interest-bearing deposits	661,580		219		0.13		657,373		246		0.15		653,247		270		0.17
Non-U.S. interest-bearing deposits:
Banks located in non-U.S. countries	13,902		22		0.62		12,797		17		0.54		10,840		20		0.72
Governments and official institutions	1,750		1		0.18		1,580		1		0.19		1,528		—		0.19
Time, savings and other	58,513		72		0.49		54,899		70		0.51		55,049		76		0.55
Total non-U.S. interest-bearing deposits	74,165		95		0.51		69,276		88		0.50		67,417		96		0.57
Total interest-bearing deposits	735,745		314		0.17		726,649		334		0.18		720,664		366		0.20
Federal funds purchased, securities loaned or sold under agreements to repurchase and short-term borrowings	271,538		682		1.00		279,425		683		0.97		318,028		809		1.02
Trading account liabilities	82,393		364		1.75		84,648		375		1.76		94,349		427		1.82
Long-term debt	251,055		1,566		2.48		258,717		1,724		2.65		270,198		1,674		2.48
Total interest-bearing liabilities ⁽⁸⁾	1,340,731		2,926		0.87		1,349,439		3,116		0.92		1,403,239		3,276		0.94
Noninterest-bearing sources:
Noninterest-bearing deposits	376,929						363,962						359,292
Other liabilities	183,800						179,637						187,016
Shareholders' equity	233,415						230,392						235,063
Total liabilities and shareholders' equity	$	2,134,875					$	2,123,430					$	2,184,610
Net interest spread					2.21	%					2.10	%					2.13	%
Impact of noninterest-bearing sources					0.23						0.23						0.22
Net interest income/yield on earning assets			$	10,999	2.44	%			$	10,479	2.33	%			$	10,771	2.35	%

For footnotes see page 22.

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Table 14
Year-to-Date Average Balances and Interest Rates – FTE Basis
	Six Months Ended June 30
	2014						2013
(Dollars in millions)	Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate
Earning assets
Interest-bearing deposits with the Federal Reserve and non-U.S. central banks ⁽¹⁾	$	118,106	$	157	0.27	%	$	60,676	$	73	0.24	%
Time deposits placed and other short-term investments	12,185		88		1.46		15,606		92		1.19
Federal funds sold and securities borrowed or purchased under agreements to resell	224,012		562		0.51		235,417		634		0.54
Trading account assets	147,691		2,427		3.31		187,957		2,604		2.79
Debt securities ⁽²⁾	337,845		4,139		2.43		349,794		5,113		2.92
Loans and leases ⁽³⁾:
Residential mortgage ⁽⁴⁾	245,469		4,435		3.61		257,949		4,586		3.56
Home equity	91,738		1,693		3.71		103,812		1,948		3.77
U.S. credit card	88,797		4,134		9.39		90,712		4,441		9.87
Non-U.S. credit card	11,657		616		10.65		10,819		644		12.01
Direct/Indirect consumer ⁽⁵⁾	81,916		1,054		2.59		82,425		1,218		2.98
Other consumer ⁽⁶⁾	1,988		35		3.63		1,710		36		4.26
Total consumer	521,565		11,967		4.61		547,427		12,873		4.73
U.S. commercial	229,279		3,323		2.92		214,103		3,407		3.21
Commercial real estate ⁽⁷⁾	48,533		725		3.01		39,899		666		3.37
Commercial lease financing	24,567		427		3.47		23,556		441		3.75
Non-U.S. commercial	92,068		1,113		2.44		85,284		1,010		2.39
Total commercial	394,447		5,588		2.85		362,842		5,524		3.07
Total loans and leases	916,012		17,555		3.85		910,269		18,397		4.07
Other earning assets	66,326		1,362		4.14		85,932		1,446		3.39
Total earning assets⁽⁸⁾	1,822,177		26,290		2.90		1,845,651		28,359		3.09
Cash and due from banks ⁽¹⁾	27,815						38,022
Other assets, less allowance for loan and lease losses	304,502						314,770
Total assets	$	2,154,494					$	2,198,443


⁽¹⁾	Beginning in 2014, interest-bearing deposits placed with the Federal Reserve and certain non-U.S. central banks are included in earning assets. In prior periods, these balances were included with cash and due from banks in the cash and cash equivalents line, consistent with the Consolidated Balance Sheet presentation. Prior periods have been reclassified to conform to current period presentation.


⁽²⁾	Beginning in 2014, yields on debt securities carried at fair value are calculated on the cost basis. Prior to 2014, yields on debt securities carried at fair value were calculated based on fair value rather than the cost basis. The use of fair value does not have a material impact on net interest yield.


⁽³⁾	Nonperforming loans are included in the respective average loan balances. Income on these nonperforming loans is generally recognized on a cost recovery basis. PCI loans were recorded at fair value upon acquisition and accrete interest income over the remaining life of the loan.


⁽⁴⁾	Includes non-U.S. residential mortgage loans of $1 million and $88 million for the six months ended June 30, 2014 and 2013.


⁽⁵⁾	Includes non-U.S. consumer loans of $4.5 billion and $7.6 billion for the six months ended June 30, 2014 and 2013.


⁽⁶⁾	Includes consumer finance loans of $1.1 billion and $1.4 billion, consumer leases of $709 million and $215 million, consumer overdrafts of $138 million and $139 million, and other non-U.S. consumer loans of $3 million and $5 million for the six months ended June 30, 2014 and 2013.


⁽⁷⁾	Includes U.S. commercial real estate loans of $46.8 billion and $38.4 billion, and non-U.S. commercial real estate loans of $1.7 billion and $1.5 billion for the six months ended June 30, 2014 and 2013.

⁽⁸⁾

Interest income includes the impact of interest rate risk management contracts, which decreased interest income on the underlying assets by $18 million and $204 million for the six months ended June 30, 2014 and 2013. Interest expense includes the impact of interest rate risk management contracts, which decreased interest expense on the underlying liabilities by $1.2 billion and $1.3 billion for the six months ended June 30, 2014 and 2013. For more information on interest rate contracts, see Interest Rate Risk Management for Nontrading Activities on page 128.

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Table 14
Year-to-Date Average Balances and Interest Rates – FTE Basis (continued)
	Six Months Ended June 30
	2014						2013
(Dollars in millions)	Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate
Interest-bearing liabilities
U.S. interest-bearing deposits:
Savings	$	46,329	$	1	0.01	%	$	43,921	$	12	0.05	%
NOW and money market deposit accounts	521,307		162		0.06		500,901		224		0.09
Consumer CDs and IRAs	69,917		154		0.44		83,489		262		0.63
Negotiable CDs, public funds and other deposits	31,629		56		0.36		24,996		59		0.47
Total U.S. interest-bearing deposits	669,182		373		0.11		653,307		557		0.17
Non-U.S. interest-bearing deposits:
Banks located in non-U.S. countries	10,803		40		0.74		11,498		41		0.72
Governments and official institutions	1,805		1		0.14		1,537		1		0.18
Time, savings and other	62,309		159		0.51		54,499		149		0.55
Total non-U.S. interest-bearing deposits	74,917		200		0.54		67,534		191		0.57
Total interest-bearing deposits	744,099		573		0.16		720,841		748		0.21
Federal funds purchased, securities loaned or sold under agreements to repurchase and short-term borrowings	262,161		1,372		1.06		327,782		1,558		0.96
Trading account liabilities	92,813		833		1.81		93,204		899		1.95
Long-term debt	256,768		3,000		2.34		272,088		3,508		2.59
Total interest-bearing liabilities ⁽⁸⁾	1,355,841		5,778		0.86		1,413,915		6,713		0.96
Noninterest-bearing sources:
Noninterest-bearing deposits	379,300						356,790
Other liabilities	183,180						191,714
Shareholders' equity	236,173						236,024
Total liabilities and shareholders' equity	$	2,154,494					$	2,198,443
Net interest spread					2.04	%					2.13	%
Impact of noninterest-bearing sources					0.22						0.23
Net interest income/yield on earning assets			$	20,512	2.26	%			$	21,646	2.36	%

For footnotes see page 26.

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Business Segment Operations

Segment Description and Basis of Presentation

We report the results of our operations through five business segments: CBB, CRES, GWIM, Global Banking and Global Markets, with the remaining operations recorded in All Other. We prepare and evaluate segment results using certain non-GAAP financial measures. For additional information, see Supplemental Financial Data on page 16. Table 15 provides selected summary financial data for our business segments and All Other for the three and six months ended June 30, 2014 compared to the same periods in 2013. For additional detailed information on these results, see the business segment and All Other discussions which follow.



Table 15
Business Segment Results
	Three Months Ended June 30
	Total Revenue ⁽¹⁾						Provision for Credit Losses						Noninterest Expense				Net Income (Loss)
(Dollars in millions)	2014			2013			2014			2013			2014		2013		2014			2013
Consumer & Business Banking	$	7,373		$	7,434		$	534		$	967		$	4,000	$	4,184	$	1,788		$	1,391
Consumer Real Estate Services	1,390			2,115			(20		)	291			5,902		3,383		(2,802		)	(930		)
Global Wealth & Investment Management	4,589			4,499			(8		)	(15		)	3,447		3,270		724			759
Global Banking	4,179			4,138			132			163			1,899		1,849		1,353			1,297
Global Markets	4,583			4,194			19			(16		)	2,862		2,770		1,101			962
All Other	(154		)	569			(246		)	(179		)	431		562		127			533
Total FTE basis	21,960			22,949			411			1,211			18,541		16,018		2,291			4,012
FTE adjustment	(213		)	(222		)	—			—			—		—		—			—
Total Consolidated	$	21,747		$	22,727		$	411		$	1,211		$	18,541	$	16,018	$	2,291		$	4,012

	Six Months Ended June 30
	2014			2013			2014			2013			2014		2013		2014			2013
Consumer & Business Banking	$	14,811		$	14,846		$	1,346		$	1,919		$	7,963	$	8,349	$	3,454		$	2,833
Consumer Real Estate Services	2,582			4,427			5			626			14,031		8,788		(7,829		)	(3,086		)
Global Wealth & Investment Management	9,136			8,920			15			7			6,806		6,523		1,453			1,479
Global Banking	8,448			8,168			397			312			3,927		3,685		2,589			2,581
Global Markets	9,595			8,973			38			(11		)	5,939		5,843		2,409			2,074
All Other	155			1,023			(381		)	71			2,113		2,330		(61		)	(386		)
Total FTE basis	44,727			46,357			1,420			2,924			40,779		35,518		2,015			5,495
FTE adjustment	(414		)	(433		)	—			—			—		—		—			—
Total Consolidated	$	44,313		$	45,924		$	1,420		$	2,924		$	40,779	$	35,518	$	2,015		$	5,495


⁽¹⁾	Total revenue is net of interest expense and is on a FTE basis which for consolidated revenue is a non-GAAP financial measure. For more information on this measure and for a corresponding reconciliation to a GAAP financial measure, see Supplemental Financial Data on page 16.

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, we allocate assets to match liabilities. Net interest income of the business segments also includes an allocation of net interest income generated by certain of our asset and liability management (ALM) activities.

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Our 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. Our 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 our 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 our 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 Corporation periodically reviews capital allocated to its businesses and allocates capital annually during the strategic and capital planning processes. We utilize a methodology that considers the effect of regulatory capital requirements in addition to internal risk-based capital models. The Corporation’s internal risk-based capital models use a risk-adjusted methodology incorporating each segment’s credit, market, interest rate, business and operational risk components. For more information on the nature of these risks, see Managing Risk and Strategic Risk Management on page 64. The capital allocated to the business segments is referred to as allocated capital, which represents a non-GAAP financial measure. For purposes of goodwill impairment testing, the Corporation utilizes allocated equity as a proxy for the carrying value of its reporting units. Allocated equity in the reporting units is comprised of allocated capital plus capital for the portion of goodwill and intangibles specifically assigned to the reporting unit. For additional information, see Note 8 – Goodwill and Intangible Assets to the Consolidated Financial Statements.

During the latest annual planning process, we made refinements to the amount of capital allocated to each of our businesses based on multiple considerations that included, but were not limited to, Basel 3 Standardized and Advanced risk-weighted assets, business segment exposures and risk profile, and strategic plans. As a result of this process, in 2014, we adjusted the amount of capital being allocated to our business segments. This change resulted in a reduction of unallocated capital, which is included in All Other, and an aggregate increase in the amount of capital being allocated to the business segments, of which the more significant increases were in Global Banking and Global Markets. Prior periods were not restated.

For more information on the business segments and reconciliations to consolidated total revenue, net income (loss) and period-end total assets, see Note 18 – Business Segment Information to the Consolidated Financial Statements.

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Consumer & Business Banking



	Three Months Ended June 30
	Deposits						Consumer Lending						Total Consumer & Business Banking
(Dollars in millions)	2014			2013			2014			2013			2014			2013			% Change
Net interest income (FTE basis)	$	2,599		$	2,472		$	2,330		$	2,562		$	4,929		$	5,034		(2	)%
Noninterest income:
Card income	17			15			1,149			1,171			1,166			1,186			(2	)
Service charges	1,090			1,035			1			—			1,091			1,035			5
All other income	134			117			53			62			187			179			4
Total noninterest income	1,241			1,167			1,203			1,233			2,444			2,400			2
Total revenue, net of interest expense (FTE basis)	3,840			3,639			3,533			3,795			7,373			7,434			(1	)

Provision for credit losses	53			35			481			932			534			967			(45	)
Noninterest expense	2,607			2,810			1,393			1,374			4,000			4,184			(4	)
Income before income taxes	1,180			794			1,659			1,489			2,839			2,283			24
Income tax expense (FTE basis)	437			309			614			583			1,051			892			18
Net income	$	743		$	485		$	1,045		$	906		$	1,788		$	1,391		29

Net interest yield (FTE basis)	1.90		%	1.88		%	6.75		%	7.26		%	3.50		%	3.72		%
Return on average allocated capital	18.06			12.63			32.29			24.93			24.33			18.62
Efficiency ratio (FTE basis)	67.86			77.23			39.43			36.20			54.24			56.29

Balance Sheet
	Three Months Ended June 30
Average	2014			2013			2014			2013			2014			2013			% Change
Total loans and leases	$	22,482		$	22,434		$	137,758		$	141,159		$	160,240		$	163,593		(2	)%
Total earning assets ⁽¹⁾	548,313			526,459			138,304			141,599			565,738			542,814			4
Total assets ⁽¹⁾	581,102			559,221			147,630			150,240			607,853			584,217			4
Total deposits	542,796			521,782			n/m			n/m			543,566			522,244			4
Allocated capital	16,500			15,400			13,000			14,600			29,500			30,000			(2	)


⁽¹⁾	For presentation purposes, in segments and businesses where the total of liabilities and equity exceeds assets, we allocate assets from All Other to match the segments' and businesses' liabilities and allocated shareholders' equity. As a result, total earning assets and total assets of the businesses may not equal total CBB.

n/m = not meaningful

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	Six Months Ended June 30
	Deposits						Consumer Lending						Total Consumer & Business Banking
(Dollars in millions)	2014			2013			2014			2013			2014			2013			% Change
Net interest income (FTE basis)	$	5,144		$	4,859		$	4,736		$	5,188		$	9,880		$	10,047		(2	)%
Noninterest income:
Card income	33			30			2,295			2,363			2,328			2,393			(3	)
Service charges	2,135			2,048			1			—			2,136			2,048			4
All other income	248			219			219			139			467			358			30
Total noninterest income	2,416			2,297			2,515			2,502			4,931			4,799			3
Total revenue, net of interest expense (FTE basis)	7,560			7,156			7,251			7,690			14,811			14,846			—

Provision for credit losses	133			98			1,213			1,821			1,346			1,919			(30	)
Noninterest expense	5,237			5,626			2,726			2,723			7,963			8,349			(5	)
Income before income taxes	2,190			1,432			3,312			3,146			5,502			4,578			20
Income tax expense (FTE basis)	815			546			1,233			1,199			2,048			1,745			17
Net income	$	1,375		$	886		$	2,079		$	1,947		$	3,454		$	2,833		22

Net interest yield (FTE basis)	1.91		%	1.90		%	6.85		%	7.33		%	3.56		%	3.80		%
Return on average allocated capital	16.81			11.62			32.29			26.94			23.63			19.08
Efficiency ratio (FTE basis)	69.26			78.61			37.60			35.41			53.76			56.23

Balance Sheet
	Six Months Ended June 30
Average	2014			2013			2014			2013			2014			2013			% Change
Total loans and leases	$	22,509		$	22,525		$	138,636		$	142,188		$	161,145		$	164,713		(2	)%
Total earning assets ⁽¹⁾	543,882			516,634			139,350			142,629			559,636			533,098			5
Total assets ⁽¹⁾	576,632			549,395			148,667			151,222			601,703			574,452			5
Total deposits	538,337			511,977			n/m			n/m			539,087			512,424			5
Allocated capital	16,500			15,400			13,000			14,600			29,500			30,000			(2	)

Period end	June 30 2014			December 31 2013			June 30 2014			December 31 2013			June 30 2014			December 31 2013			% Change
Total loans and leases	$	22,420		$	22,578		$	138,722		$	142,516		$	161,142		$	165,094		(2	)%
Total earning assets ⁽¹⁾	550,546			535,131			139,162			143,917			570,208			550,777			4
Total assets ⁽¹⁾	582,935			567,988			148,765			153,381			612,200			593,099			3
Total deposits	544,689			530,920			n/m			n/m			545,530			531,668			3

For footnotes see page 30.

CBB, which is comprised of Deposits and Consumer Lending, offers a diversified range of credit, banking and investment products and services to consumers and businesses. Our customers and clients have access to a franchise network that stretches coast to coast through 31 states and the District of Columbia. The franchise network includes approximately 5,000 banking centers, 16,000 ATMs, nationwide call centers, and online and mobile platforms.

CBB Results

Three Months Ended June 30, 2014 Compared to Three Months Ended June 30, 2013

Net income for CBB increased $397 million to $1.8 billion primarily driven by lower provision for credit losses, lower noninterest expense and higher noninterest income, partially offset by lower net interest income. Net interest income decreased $105 million to $4.9 billion due to lower average loan balances and card yields, partially offset by higher deposit balances. Noninterest income increased $44 million to $2.4 billion primarily due to higher deposit service charges.

The provision for credit losses decreased $433 million to $534 million primarily as a result of continued improvement in credit quality, due in part to lower delinquencies. Noninterest expense decreased $184 million to $4.0 billion primarily driven by lower operating and litigation expenses.

The return on average allocated capital was 24.33 percent, up from 18.62 percent, reflecting an increase in net income combined with a small decrease in allocated capital. For more information on capital allocated to the business segments, see Business Segment Operations on page 28.

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Six Months Ended June 30, 2014 Compared to Six Months Ended June 30, 2013

Net income for CBB increased $621 million to $3.5 billion primarily driven by lower provision for credit losses, lower noninterest expense and higher noninterest income, partially offset by lower net interest income. Net interest income decreased $167 million to $9.9 billion and noninterest income increased $132 million to $4.9 billion primarily due to portfolio divestiture gains and higher service charges, partially offset by the impact of the exit of consumer protection products.

The provision for credit losses decreased $573 million to $1.3 billion and noninterest expense decreased $386 million to $8.0 billion primarily driven by the same factors as described in the three-month discussion above.

The return on average allocated capital was 23.63 percent, up from 19.08 percent, reflecting an increase in net income combined with a small decrease in allocated capital.

Deposits

Deposits includes the results of consumer deposit activities which consist of a comprehensive range of products provided to consumers and small businesses. Our deposit products include traditional savings accounts, money market savings accounts, CDs and IRAs, noninterest- and interest-bearing checking accounts, as well as investment accounts and products. The revenue is allocated to the deposit products using our funds transfer pricing process that matches assets and liabilities with similar interest rate sensitivity and maturity characteristics. Deposits generates fees such as account service fees, non-sufficient funds fees, overdraft charges and ATM fees, as well as investment and brokerage fees from Merrill Edge accounts. Merrill Edge is an integrated investing and banking service targeted at customers with less than $250,000 in investable assets. Merrill Edge provides investment advice and guidance, client brokerage asset services, a self-directed online investing platform and key banking capabilities including access to the Corporation's network of banking centers and ATMs.

Business Banking within Deposits provides a wide range of lending-related products and services, integrated working capital management and treasury solutions to clients through our network of offices and client relationship teams along with various product partners. Our clients include U.S.-based companies generally with annual sales of $1 million to $50 million. Our lending products and services include commercial loans, lines of credit and real estate lending. Our capital management and treasury solutions include treasury management, foreign exchange and short-term investing options. Deposits also includes the results of our merchant services joint venture.

Deposits includes the net impact of migrating customers and their related deposit balances between Deposits and GWIM as well as other client-managed businesses. For more information on the migration of customer balances to or from GWIM, see GWIM on page 43.

Three Months Ended June 30, 2014 Compared to Three Months Ended June 30, 2013

Net income for Deposits increased $258 million to $743 million driven by lower noninterest expense and higher revenue, partially offset by an increase in the provision for credit losses. Net interest income increased $127 million to $2.6 billion primarily driven by a combination of pricing discipline and the beneficial impact of an increase in investable assets as a result of higher deposit balances. Noninterest income increased $74 million to $1.2 billion primarily due to higher deposit service charges.

The provision for credit losses increased $18 million to $53 million as credit quality stabilized. Noninterest expense decreased $203 million to $2.6 billion due to lower operating and personnel expenses.

Average deposits increased $21.0 billion to $542.8 billion driven by a continuing customer shift to more liquid products in the low rate environment. Growth in checking, traditional savings and money market savings of $32.3 billion was partially offset by a decline in time deposits of $11.3 billion. As a result of our continued pricing discipline and the shift in the mix of deposits, the rate paid on average deposits declined by six bps to six bps.

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Six Months Ended June 30, 2014 Compared to Six Months Ended June 30, 2013

Net income for Deposits increased $489 million to $1.4 billion driven by higher revenue and a decrease in noninterest expense, partially offset by an increase in the provision for credit losses. Net interest income increased $285 million to $5.1 billion primarily driven by the same factors as described in the three-month discussion above. Noninterest income increased $119 million to $2.4 billion primarily due to higher deposit service charges and investment and brokerage income.

The provision for credit losses increased $35 million to $133 million as credit quality stabilized. Noninterest expense decreased $389 million to $5.2 billion due to lower operating, personnel, Federal Deposit Insurance Corporation (FDIC) and litigation expenses.

Average deposits increased $26.4 billion to $538.3 billion driven by a continuing customer shift to more liquid products in the low rate environment. Additionally, $5.4 billion of the increase in average deposits was due to net transfers from other businesses, largely GWIM.



Key Statistics
	Three Months Ended June 30				Six Months Ended June 30
	2014		2013		2014			2013
Total deposit spreads (excludes noninterest costs)	1.59	%	1.51	%	1.58		%	1.51		%

Period end
Client brokerage assets (in millions)					$	105,926		$	84,182
Online banking active accounts (units in thousands)					30,429			29,867
Mobile banking active accounts (units in thousands)					15,475			13,214
Banking centers					5,023			5,328
ATMs					15,976			16,354

Client brokerage assets increased $21.7 billion driven by increased market valuations and account flows. Mobile banking customers increased 2.3 million reflecting continuing changes in our customers' banking preferences. The number of banking centers declined 305 and ATMs declined 378 as we continue to optimize our consumer banking network and improve our cost-to-serve.

Consumer Lending

Consumer Lending is one of the leading issuers of credit and debit cards to consumers and small businesses in the U.S. Our lending products and services also include direct and indirect consumer loans such as automotive, marine, aircraft, recreational vehicle and consumer personal loans. In addition to earning net interest spread revenue on its lending activities, Consumer Lending generates interchange revenue from credit and debit card transactions as well as annual credit card fees and other miscellaneous fees.

Consumer Lending includes the net impact of migrating customers and their related credit card loan balances between Consumer Lending and GWIM.

Three Months Ended June 30, 2014 Compared to Three Months Ended June 30, 2013

Net income for Consumer Lending increased $139 million to $1.0 billion primarily driven by lower provision for credit losses, partially offset by lower revenue and higher noninterest expense. Net interest income decreased $232 million to $2.3 billion driven by the impact of lower average loan balances and card yields. Noninterest income decreased $30 million to $1.2 billion driven by lower card income.

The provision for credit losses decreased $451 million to $481 million due to continued improvement in credit quality, due in part to lower delinquencies. Noninterest expense increased $19 million to $1.4 billion primarily driven by higher operating expenses, largely offset by lower litigation expense.

Average loans decreased $3.4 billion to $137.8 billion primarily driven by the net migration of credit card loan balances to GWIM as described above, continued run-off of non-core portfolios and portfolio divestitures, partially offset by an increase in consumer auto loans.

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Six Months Ended June 30, 2014 Compared to Six Months Ended June 30, 2013

Net income for Consumer Lending increased $132 million to $2.1 billion primarily due to lower provision for credit losses, partially offset by lower net interest income. Net interest income decreased $452 million to $4.7 billion driven by the same factors as described in the three-month discussion above. Noninterest income of $2.5 billion remained relatively unchanged as portfolio divestiture gains were offset by lower card income.

The provision for credit losses decreased $608 million to $1.2 billion due to the same factors as described in the three-month discussion above. Noninterest expense of $2.7 billion remained relatively unchanged.

Average loans decreased $3.6 billion to $138.6 billion primarily driven by the same factors as described in the three-month discussion above.



Key Statistics
	Three Months Ended June 30						Six Months Ended June 30
(Dollars in millions)	2014			2013			2014			2013
Total U.S. credit card ⁽¹⁾
Gross interest yield	9.30		%	9.80		%	9.39		%	9.87		%
Risk-adjusted margin	8.97			8.41			9.23			8.46
New accounts (in thousands)	1,128			957			2,155			1,863
Purchase volumes	$	53,584		$	51,945		$	102,447		$	98,577
Debit card purchase volumes	$	69,492		$	67,740		$	135,382		$	132,375


⁽¹⁾	In addition to the U.S. credit card portfolio in CBB, the remaining U.S. credit card portfolio is in GWIM.

During the three and six months ended June 30, 2014, the total U.S. credit card risk-adjusted margin increased 56 bps and 77 bps compared to the same periods in 2013 due to an improvement in credit quality, and for the six months ended June 30, 2014, portfolio divestiture gains. Total U.S. credit card purchase volumes increased $1.6 billion to $53.6 billion, and $3.9 billion to $102.4 billion and debit card purchase volumes increased $1.8 billion to $69.5 billion, and $3.0 billion to $135.4 billion compared to the same periods in 2013, reflecting higher levels of consumer spending.

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Consumer Real Estate Services



	Three Months Ended June 30
	Home Loans						Legacy Assets & Servicing						Total Consumer Real Estate Services
(Dollars in millions)	2014			2013			2014			2013			2014			2013			% Change
Net interest income (FTE basis)	$	335		$	344		$	362		$	355		$	697		$	699		—
Noninterest income:
Mortgage banking income	237			654			369			757			606			1,411			(57	)%
All other income	18			5			69			—			87			5			n/m
Total noninterest income	255			659			438			757			693			1,416			(51	)
Total revenue, net of interest expense (FTE basis)	590			1,003			800			1,112			1,390			2,115			(34	)

Provision for credit losses	19			64			(39		)	227			(20		)	291			n/m
Noninterest expense	660			862			5,242			2,521			5,902			3,383			74
Income (loss) before income taxes	(89		)	77			(4,403		)	(1,636		)	(4,492		)	(1,559		)	n/m
Income tax expense (benefit) (FTE basis)	(33		)	30			(1,657		)	(659		)	(1,690		)	(629		)	n/m
Net income (loss)	$	(56	)	$	47		$	(2,746	)	$	(977	)	$	(2,802	)	$	(930	)	n/m

Net interest yield (FTE basis)	2.49		%	2.57		%	3.65		%	2.94		%	2.98		%	2.75		%
Efficiency ratio (FTE basis)	n/m			85.92			n/m			n/m			n/m			n/m

Balance Sheet
	Three Months Ended June 30
Average	2014			2013			2014			2013			2014			2013			% Change
Total loans and leases	$	51,553		$	46,870		$	36,704		$	43,244		$	88,257		$	90,114		(2	)%
Total earning assets	53,934			53,739			39,863			48,347			93,797			102,086			(8	)
Total assets	53,962			54,000			55,626			68,276			109,588			122,276			(10	)
Allocated capital	6,000			6,000			17,000			18,000			23,000			24,000			(4	)

n/m = not meaningful

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	Six Months Ended June 30
	Home Loans						Legacy Assets & Servicing						Total Consumer Real Estate Services
(Dollars in millions)	2014			2013			2014			2013			2014			2013			% Change
Net interest income (FTE basis)	$	659		$	691		$	739		$	751		$	1,398		$	1,442		(3	)%
Noninterest income:
Mortgage banking income	415			1,351			660			1,547			1,075			2,898			(63	)
All other income (loss)	22			(58		)	87			145			109			87			25
Total noninterest income	437			1,293			747			1,692			1,184			2,985			(60	)
Total revenue, net of interest expense (FTE basis)	1,096			1,984			1,486			2,443			2,582			4,427			(42	)

Provision for credit losses	32			156			(27		)	470			5			626			(99	)
Noninterest expense	1,375			1,684			12,656			7,104			14,031			8,788			60
Income (loss) before income taxes	(311		)	144			(11,143		)	(5,131		)	(11,454		)	(4,987		)	130
Income tax expense (benefit) (FTE basis)	(116		)	55			(3,509		)	(1,956		)	(3,625		)	(1,901		)	91
Net income (loss)	$	(195	)	$	89		$	(7,634	)	$	(3,175	)	$	(7,829	)	$	(3,086	)	n/m

Net interest yield (FTE basis)	2.48		%	2.59		%	3.73		%	3.02		%	3.01		%	2.80		%
Efficiency ratio (FTE basis)	n/m			84.85			n/m			n/m			n/m			n/m

Balance Sheet
	Six Months Ended June 30
Average	2014			2013			2014			2013			2014			2013			% Change
Total loans and leases	$	51,183		$	47,048		$	37,401		$	44,483		$	88,584		$	91,531		(3	)%
Total earning assets	53,601			53,743			39,944			50,147			93,545			103,890			(10	)
Total assets	53,565			54,252			56,508			71,039			110,073			125,291			(12	)
Allocated capital	6,000			6,000			17,000			18,000			23,000			24,000			(4	)

Period end	June 30 2014			December 31 2013			June 30 2014			December 31 2013			June 30 2014			December 31 2013			% Change
Total loans and leases	$	52,172		$	51,021		$	35,984		$	38,732		$	88,156		$	89,753		(2	)%
Total earning assets	55,058			54,071			37,233			43,092			92,291			97,163			(5	)
Total assets	55,002			53,927			52,648			59,459			107,650			113,386			(5	)

n/m = not meaningful

CRES operations include Home Loans and Legacy Assets & Servicing. Home Loans is responsible for ongoing residential first mortgage and home equity loan production activities and the CRES home equity loan portfolio not selected for inclusion in the Legacy Assets & Servicing owned portfolio. Legacy Assets & Servicing is responsible for all of our mortgage servicing activities related to loans serviced for others and loans held by the Corporation, including loans that have been designated as the Legacy Assets & Servicing Portfolios. The Legacy Assets & Servicing Portfolios (both owned and serviced), herein referred to as the Legacy Owned and Legacy Serviced Portfolios, respectively (together, the Legacy Portfolios), and as further defined below, include those loans originated prior to January 1, 2011 that would not have been originated under our established underwriting standards as of December 31, 2010. For more information on our Legacy Portfolios, see page 38. In addition, Legacy Assets & Servicing is responsible for managing legacy exposures related to CRES (e.g., litigation, representations and warranties). This alignment allows CRES management to lead the ongoing Home Loans business while also providing focus on legacy mortgage issues and servicing activities.

CRES, primarily through its Home Loans operations, generates revenue by providing an extensive line of consumer real estate products and services to customers nationwide. CRES products offered by Home Loans include fixed- and adjustable-rate first-lien mortgage loans for home purchase and refinancing needs, home equity lines of credit (HELOCs) and home equity loans. First mortgage products are generally either sold into the secondary mortgage market to investors, while we retain MSRs (which are on the balance sheet of Legacy Assets & Servicing) and the Bank of America customer relationships, or are held on the balance sheet in Home Loans or in All Other for ALM purposes. Home Loans is compensated for loans held for ALM purposes on a management accounting basis with the corresponding offset in All Other. Newly originated HELOCs and home equity loans are retained on the CRES balance sheet in Home Loans.

CRES includes the impact of migrating certain customers and their related loan balances from GWIM to CRES.

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CRES Results

Three Months Ended June 30, 2014 Compared to Three Months Ended June 30, 2013

The net loss for CRES increased $1.9 billion to a net loss of $2.8 billion primarily driven by higher noninterest expense, resulting from higher litigation expense, and lower mortgage banking income, partially offset by lower provision for credit losses. Mortgage banking income decreased $805 million due to both lower core production revenue and lower servicing income, partially offset by lower representations and warranties provision. The provision for credit losses decreased $311 million to a benefit of $20 million primarily driven by continued improvement in portfolio trends including increased home prices. Noninterest expense increased $2.5 billion due to a $3.6 billion increase in litigation expense for previously disclosed legacy mortgage-related matters, partially offset by lower operating expenses.

Six Months Ended June 30, 2014 Compared to Six Months Ended June 30, 2013

The net loss for CRES increased $4.7 billion to a net loss of $7.8 billion driven by the same factors as described in the three-month discussion above. Mortgage banking income decreased $1.8 billion, and the provision for credit losses decreased $621 million to $5 million driven by the same factors as described in the three-month discussion above. Noninterest expense increased $5.2 billion primarily due to a $7.4 billion increase in litigation expense as a result of the Federal Housing Finance Agency (FHFA) Settlement and for previously disclosed legacy mortgage-related matters, partially offset by the same factors as described in the three-month discussion above.

Home Loans

Home Loans products are available to our customers through our retail network, direct telephone and online access delivered by a sales force of approximately 2,700 mortgage loan officers, including over 1,500 banking center mortgage loan officers covering nearly 2,800 banking centers, and a 750-person centralized sales force based in five call centers.

Three Months Ended June 30, 2014 Compared to Three Months Ended June 30, 2013

Results for Home Loans decreased $103 million to a net loss of $56 million driven by lower revenue, partially offset by a decrease in noninterest expense and lower provision for credit losses. Noninterest income decreased $404 million due to lower mortgage banking income driven by a decline in core production revenue as a result of lower origination volumes combined with continued industry-wide margin compression. The provision for credit losses decreased $45 million primarily driven by continued improvement in portfolio trends including increased home prices. Noninterest expense decreased $202 million primarily due to lower personnel expenses resulting from lower loan originations.

Six Months Ended June 30, 2014 Compared to Six Months Ended June 30, 2013

Results for Home Loans decreased $284 million to a net loss of $195 million driven by the same factors as described in the three-month discussion above. Noninterest income decreased $856 million, the provision for credit losses decreased $124 million and noninterest expense decreased $309 million. These changes were driven by the same factors as described in the three-month discussion above.

Legacy Assets & Servicing

Legacy Assets & Servicing is responsible for all of our servicing activities related to the residential mortgage and home equity loan portfolios, including owned loans and loans serviced for others (collectively, the mortgage serviced portfolio). A portion of this portfolio has been designated as the Legacy Serviced Portfolio, which represented 29 percent and 34 percent of the total mortgage serviced portfolio, as measured by unpaid principal balance, at June 30, 2014 and 2013.

Legacy Assets & Servicing results reflect the net cost of legacy exposures that are included in the results of CRES, including representations and warranties provision, litigation expense, financial results of the CRES home equity portfolio selected as part of the Legacy Owned Portfolio, the financial results of the servicing operations and the results of MSR activities, including net hedge results. The financial results of the servicing operations reflect certain revenues and expenses on loans serviced for others, including owned loans serviced for Home Loans, GWIM and All Other.

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Servicing activities include collecting cash for principal, interest and escrow payments from borrowers, disbursing customer draws for lines of credit, accounting for and remitting principal and interest payments to investors and escrow payments to third parties, and responding to customer inquiries. Our home retention efforts, including single point of contact resources, are also part of our servicing activities, along with supervision of foreclosures and property dispositions. In an effort to help our customers avoid foreclosure, Legacy Assets & Servicing evaluates various workout options prior to foreclosure which, combined with legislative changes at the state level and ongoing foreclosure delays in states where foreclosure requires a court order following a legal proceeding (judicial states), have resulted in elongated default timelines. For more information on our servicing activities, including the impact of foreclosure delays, see Off-Balance Sheet Arrangements and Contractual Obligations – Servicing, Foreclosure and Other Mortgage Matters on page 57 of the MD&A of the Corporation's 2013 Annual Report on Form 10-K.

Three Months Ended June 30, 2014 Compared to Three Months Ended June 30, 2013

The net loss for Legacy Assets & Servicing increased $1.8 billion to a net loss of $2.7 billion driven by an increase in noninterest expense, primarily litigation expense, and lower noninterest income, partially offset by lower provision for credit losses. Noninterest income decreased $319 million driven by a decline in servicing income due to a smaller servicing portfolio and less favorable MSR net-of-hedge performance. The provision for credit losses decreased $266 million to a benefit of $39 million primarily due to continued improvement in portfolio trends including increased home prices.

Noninterest expense increased $2.7 billion due to a $3.6 billion increase in litigation expense as discussed in CRES results above, partially offset by a decrease in default-related servicing expenses and lower mortgage-related assessments, waivers and similar costs related to foreclosure delays. Excluding litigation, noninterest expense decreased $871 million to $1.4 billion. Regarding LAS non-litigation costs, compliance with applicable mortgage programs and governance guidelines may delay the expected timing of achieving our $1.1 billion quarterly expense goal until the first quarter of 2015 as opposed to the fourth quarter of 2014.

Six Months Ended June 30, 2014 Compared to Six Months Ended June 30, 2013

The net loss for Legacy Assets & Servicing increased $4.5 billion to a net loss of $7.6 billion driven by an increase of $5.6 billion in noninterest expense as discussed in CRES results above and lower noninterest income, partially offset by lower provision for credit losses. Noninterest income decreased $945 million and the provision for credit losses decreased $497 million to a benefit of $27 million due to the same factors as described in three-month discussion above.

Noninterest expense increased $5.6 billion due to the same factors as described in three-month discussion above. Excluding litigation, noninterest expense decreased $1.8 billion to $3.0 billion.

Legacy Portfolios

The Legacy Portfolios (both owned and serviced) include those loans originated prior to January 1, 2011 that would not have been originated under our established underwriting standards in place as of December 31, 2010. The purchased credit-impaired (PCI) portfolio as well as certain loans that met a pre-defined delinquency status or probability of default threshold as of January 1, 2011 are also included in the Legacy Portfolios. Since determining the pool of loans to be included in the Legacy Portfolios as of January 1, 2011, the criteria have not changed for these portfolios, but will continue to be evaluated over time.

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Legacy Owned Portfolio

The Legacy Owned Portfolio includes those loans that met the criteria as described above and are on the balance sheet of the Corporation. The home equity loan portfolio is held on the balance sheet of Legacy Assets & Servicing, and the residential mortgage loan portfolio is held on the balance sheet of All Other. The financial results of the on-balance sheet loans are reported in the segment that owns the loans or in All Other. Total loans in the Legacy Owned Portfolio decreased $10.8 billion during the six months ended June 30, 2014 to $101.3 billion, of which $36.0 billion were held on the Legacy Assets & Servicing balance sheet and the remainder was held on the balance sheet of All Other. The decrease was primarily related to paydowns, loan sales, PCI write-offs and charge-offs.

Legacy Serviced Portfolio

The Legacy Serviced Portfolio includes the Legacy Owned Portfolio and those loans serviced for outside investors that met the criteria as described above. The table below summarizes the balances of the residential mortgage loans included in the Legacy Serviced Portfolio (the Legacy Residential Mortgage Serviced Portfolio) representing 27 percent and 33 percent of the total residential mortgage serviced portfolio of $672 billion and $887 billion, as measured by unpaid principal balance, at June 30, 2014 and 2013. The decline in the Legacy Residential Mortgage Serviced Portfolio was primarily due to MSR sales, loan sales and other servicing transfers, paydowns and payoffs.



Legacy Residential Mortgage Serviced Portfolio, a subset of the Residential Mortgage Serviced Portfolio ⁽¹⁾
	June 30
(Dollars in billions)	2014		2013
Unpaid principal balance
Residential mortgage loans
Total	$	181	$	289
60 days or more past due	38		96

Number of loans serviced (in thousands)
Residential mortgage loans
Total	987		1,468
60 days or more past due	202		404


⁽¹⁾	Excludes $37 billion and $45 billion of home equity loans and HELOCs at June 30, 2014 and 2013.

Non-Legacy Portfolio

As previously discussed, Legacy Assets & Servicing is responsible for all of our servicing activities. The table below summarizes the balances of the residential mortgage loans that are not included in the Legacy Serviced Portfolio (the Non-Legacy Residential Mortgage Serviced Portfolio) representing 73 percent and 67 percent of the total residential mortgage serviced portfolio, as measured by unpaid principal balance, at June 30, 2014 and 2013. The decline in the Non-Legacy Residential Mortgage Serviced Portfolio was primarily due to MSR sales and other servicing transfers, paydowns and payoffs.



Non-Legacy Residential Mortgage Serviced Portfolio, a subset of the Residential Mortgage Serviced Portfolio ⁽¹⁾
	June 30
(Dollars in billions)	2014		2013
Unpaid principal balance
Residential mortgage loans
Total	$	491	$	598
60 days or more past due	10		16

Number of loans serviced (in thousands)
Residential mortgage loans
Total	3,121		3,790
60 days or more past due	61		88


⁽¹⁾	Excludes $51 billion and $54 billion of home equity loans and HELOCs at June 30, 2014 and 2013.

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Mortgage Banking Income

CRES mortgage banking income is categorized into production and servicing income. Core production income is comprised primarily of revenue from the fair value gains and losses recognized on our interest rate lock commitments (IRLCs) and LHFS, the related secondary market execution, costs related to representations and warranties in the sales transactions along with other obligations incurred in the sales of mortgage loans, and revenue earned in production-related ancillary businesses. Ongoing costs related to representations and warranties and other obligations that were incurred in the sales of mortgage loans in prior periods are also included in production income.

Servicing income includes income earned in connection with servicing activities and MSR valuation adjustments, net of results from risk management activities used to hedge certain market risks of the MSRs. The costs associated with our servicing activities are included in noninterest expense.

The table below summarizes the components of mortgage banking income.



Mortgage Banking Income
	Three Months Ended June 30						Six Months Ended June 30
(Dollars in millions)	2014			2013			2014			2013
Production income:
Core production revenue	$	318		$	860		$	591		$	1,675
Representations and warranties provision	(87		)	(197		)	(265		)	(447		)
Total production income	231			663			326			1,228
Servicing income:
Servicing fees	476			785			990			1,701
Amortization of expected cash flows ⁽¹⁾	(209		)	(260		)	(419		)	(574		)
Fair value changes of MSRs, net of risk management activities used to hedge certain market risks ⁽²⁾	105			215			171			526
Other servicing-related revenue	3			8			7			17
Total net servicing income	375			748			749			1,670
Total CRES mortgage banking income	606			1,411			1,075			2,898
Eliminations ⁽³⁾	(79		)	(233		)	(136		)	(457		)
Total consolidated mortgage banking income	$	527		$	1,178		$	939		$	2,441


⁽¹⁾	Represents the net change in fair value of the MSR asset due to the recognition of modeled cash flows.


⁽²⁾	Includes gains on sales of MSRs.


⁽³⁾	Includes the effect of transfers of mortgage loans from CRES to the ALM portfolio included in All Other.

Three Months Ended June 30, 2014 Compared to Three Months Ended June 30, 2013

Core production revenue decreased $542 million due to lower origination volumes as described below, combined with industry-wide margin compression. The representations and warranties provision decreased $110 million to $87 million. The provision was related to non-government-sponsored enterprises exposures.

Net servicing income decreased $373 million driven by lower servicing fees due to a smaller servicing portfolio and less favorable MSR net-of-hedge performance, partially offset by lower amortization of expected cash flows. The decline in the size of our servicing portfolio was driven by strategic sales of MSRs during 2013 as well as loan prepayment activity, which exceeded new originations primarily due to our exit from non-retail channels.

Six Months Ended June 30, 2014 Compared to Six Months Ended June 30, 2013

Core production revenue decreased $1.1 billion due to the same factors as described in the three-month discussion above. The representations and warranties provision decreased $182 million to $265 million. The provision included $103 million related to the FHFA Settlement and $162 million primarily related to non-government-sponsored enterprises exposures.

Net servicing income decreased $921 million driven by the same factors as described in the three-month discussion above.

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Key Statistics
	Three Months Ended June 30				Six Months Ended June 30
(Dollars in millions, except as noted)	2014		2013		2014			2013
Loan production ⁽¹⁾
Total ⁽²⁾:
First mortgage	$	11,099	$	25,276	$	19,949		$	49,196
Home equity	2,602		1,497		4,587			2,615
CRES:
First mortgage	$	8,461	$	20,509	$	15,163		$	39,778
Home equity	2,396		1,283		4,187			2,225

Period end					June 30 2014			December 31 2013
Mortgage serviced portfolio (in billions) ^{(1, 3)}					$	760		$	810
Mortgage loans serviced for investors (in billions) ⁽¹⁾					505			550
Mortgage servicing rights:
Balance ⁽⁴⁾					4,134			5,042
Capitalized mortgage servicing rights (% of loans serviced for investors)					82		bps	92		bps


⁽¹⁾	The above loan production and period-end servicing portfolio and mortgage loans serviced for investors represent the unpaid principal balance of loans.


⁽²⁾	In addition to loan production in CRES, the remaining first mortgage and home equity loan production is primarily in GWIM.


⁽³⁾	Servicing of residential mortgage loans, HELOCs and home equity loans.


⁽⁴⁾	At June 30, 2014, excludes $234 million of certain non-U.S. residential mortgage MSR balances that are recorded in Global Markets.

Reflecting a decline in the overall mortgage market because of higher interest rates driving a decline in refinances, first mortgage loan originations in CRES declined $12.0 billion, or 59 percent, to $8.5 billion for the three months ended June 30, 2014, and for the total Corporation, decreased $14.2 billion, or 56 percent, to $11.1 billion compared to same period in 2013. First mortgage loan originations in CRES declined $24.6 billion, or 62 percent, to $15.2 billion for the six months ended June 30, 2014, and for the total Corporation, decreased $29.2 billion, or 59 percent, to $19.9 billion compared to the same period in 2013. The increase in interest rates also had an adverse impact on our mortgage loan applications, particularly for refinance mortgage loans compared to the same period in 2013.

During the three months ended June 30, 2014, 53 percent of our first mortgage production volume was for refinance originations and 47 percent was for purchase originations compared to 83 percent and 17 percent for the same period in 2013. Home Affordable Refinance Program (HARP) refinance originations were eight percent of all refinance originations as compared to 24 percent for the same period in 2013. Making Home Affordable non-HARP refinance originations were 19 percent of all refinance originations as compared to 21 percent for the same period in 2013. The remaining 73 percent of refinance originations was conventional refinances as compared to 55 percent for the same period in 2013.

During the six months ended June 30, 2014, 59 percent of our first mortgage production volume was for refinance originations and 41 percent was for purchase originations compared to 87 percent and 13 percent for the same period in 2013. HARP refinance originations were eight percent of all refinance originations as compared to 26 percent for the same period in 2013. Making Home Affordable non-HARP refinance originations were 20 percent of all refinance originations for both periods. The remaining 72 percent of refinance originations was conventional refinances as compared to 54 percent for the same period in 2013.

Home equity production for the total Corporation was $2.6 billion and $4.6 billion for the three and six months ended June 30, 2014 compared to $1.5 billion and $2.6 billion for the same periods in 2013 with the increase due to a higher demand in the market based on improving housing trends, and increased market share driven by improved banking center engagement with customers and more competitive pricing.

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Mortgage Servicing Rights

At June 30, 2014, the balance of consumer MSRs managed within CRES, which excludes $234 million of certain non-U.S. residential mortgage MSRs recorded in Global Markets, was $4.1 billion, which represented 82 bps of the related unpaid principal balance compared to $5.0 billion, or 92 bps of the related unpaid principal balance at December 31, 2013. The consumer MSR balance managed within CRES decreased $908 million in the six months ended June 30, 2014 primarily driven by a decrease in value due to lower mortgage rates compared to December 31, 2013, which resulted in higher forecasted prepayment speeds, and the recognition of modeled cash flows. For more information on our servicing activities, see Off-Balance Sheet Arrangements and Contractual Obligations – Servicing, Foreclosure and Other Mortgage Matters on page 61. For more information on MSRs, see Note 17 – Mortgage Servicing Rights to the Consolidated Financial Statements.

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Global Wealth & Investment Management



	Three Months Ended June 30								Six Months Ended June 30
(Dollars in millions)	2014			2013			% Change		2014			2013			% Change
Net interest income (FTE basis)	$	1,485		$	1,505		(1	)%	$	2,970		$	3,101		(4	)%
Noninterest income:
Investment and brokerage services	2,642			2,441			8		5,246			4,772			10
All other income	462			553			(16	)	920			1,047			(12	)
Total noninterest income	3,104			2,994			4		6,166			5,819			6
Total revenue, net of interest expense (FTE basis)	4,589			4,499			2		9,136			8,920			2

Provision for credit losses	(8		)	(15		)	(47	)	15			7			114
Noninterest expense	3,447			3,270			5		6,806			6,523			4
Income before income taxes	1,150			1,244			(8	)	2,315			2,390			(3	)
Income tax expense (FTE basis)	426			485			(12	)	862			911			(5	)
Net income	$	724		$	759		(5	)	$	1,453		$	1,479		(2	)

Net interest yield (FTE basis)	2.38		%	2.47		%			2.38		%	2.46		%
Return on average allocated capital	24.33			30.59					24.53			30.00
Efficiency ratio (FTE basis)	75.11			72.70					74.50			73.12

Balance Sheet
	Three Months Ended June 30								Six Months Ended June 30
Average	2014			2013			% Change		2014			2013			% Change
Total loans and leases	$	118,512		$	109,589		8	%	$	117,235		$	107,845		9	%
Total earning assets	249,892			244,860			2		251,705			254,155			(1	)
Total assets	268,294			263,735			2		270,674			272,966			(1	)
Total deposits	240,042			235,344			2		241,409			244,329			(1	)
Allocated capital	12,000			10,000			20		12,000			10,000			20

Period end									June 30 2014			December 31 2013			% Change
Total loans and leases									$	120,187		$	115,846		4	%
Total earning assets									247,179			254,031			(3	)
Total assets									265,581			274,112			(3	)
Total deposits									237,046			244,901			(3	)

GWIM consists of two primary businesses: Merrill Lynch Global Wealth Management (MLGWM) and U.S. Trust, Bank of America Private Wealth Management (U.S. Trust).

MLGWM's advisory business provides a high-touch client experience through a network of financial advisors focused on clients with over $250,000 in total investable assets. MLGWM provides tailored solutions to meet our clients' needs through a full set of brokerage, banking and retirement products.

U.S. Trust, together with MLGWM's Private Banking & Investments Group, provides comprehensive wealth management solutions targeted to high net-worth and ultra-high net-worth clients, as well as customized solutions to meet clients' wealth structuring, investment management, trust and banking needs, including specialty asset management services.

Three Months Ended June 30, 2014 Compared to Three Months Ended June 30, 2013

Net income decreased $35 million to $724 million driven by higher noninterest expense, partially offset by higher noninterest income. Noninterest income increased $110 million to $3.1 billion primarily driven by higher market valuation and long-term AUM flows, partially offset by lower transactional activity. Noninterest expense increased $177 million to $3.4 billion primarily due to higher revenue-related

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incentive compensation and other volume-related expenses, and additional investments in technology and other areas to support business growth.

Revenue from MLGWM was $3.8 billion, up one percent, and revenue from U.S. Trust was $783 million, up six percent, both driven by an increase in asset management fees related to higher market valuation and long-term AUM flows.

Return on average allocated capital was 24.3 percent, down from 30.6 percent as relatively stable earnings were more than offset by increased capital allocations. For more information on capital allocated to the business segments, see Business Segment Operations on page 28.

Six Months Ended June 30, 2014 Compared to Six Months Ended June 30, 2013

Net income decreased $26 million to $1.5 billion driven by higher noninterest expense and lower net interest income, partially offset by higher noninterest income. Noninterest income increased $347 million to $6.2 billion and noninterest expense increased $283 million to $6.8 billion. These changes were driven by the same factors as described in the three-month discussion above.

Revenue from MLGWM was $7.6 billion, up two percent, and revenue from U.S. Trust was $1.6 billion, up six percent, both driven by the same factors as described in the three-month discussion above.

Return on average allocated capital was 24.5 percent, down from 30.0 percent driven by the same factors as described in the three-month discussion above.

Net Migration Summary

GWIM results are impacted by the net migration of clients and their related deposit and loan balances to or from CBB, Global Banking, CRES and the ALM portfolio, as presented in the table below. We move clients between business segments to better meet their needs. During the first quarter of 2013, GWIM identified and transferred deposit balances of approximately $19 billion to CBB. Additionally, beginning in March 2013, the revenue and expense associated with GWIM clients who hold credit cards are included in GWIM; prior periods are in CBB.



Net Migration Summary
	Three Months Ended June 30						Six Months Ended June 30
(Dollars in millions)	2014			2013			2014			2013
Total deposits, net – GWIM from / (to) CBB and Global Banking	$	691		$	660		$	1,835		$	(17,888	)
Total loans, net – GWIM from / (to) CBB, CRES and the ALM portfolio	(18		)	(30		)	(18		)	(59		)

Client Balances

The table below presents client balances which consist of AUM, brokerage assets, assets in custody, deposits, and loans and leases.



Client Balances by Type
(Dollars in millions)	June 30 2014		December 31 2013
Assets under management	$	878,741	$	821,449
Brokerage assets	1,091,558		1,045,122
Assets in custody	137,391		136,190
Deposits	237,046		244,901
Loans and leases ⁽¹⁾	123,432		118,776
Total client balances	$	2,468,168	$	2,366,438


⁽¹⁾	Includes margin receivables which are classified in customer and other receivables on the Consolidated Balance Sheet.

The increase of $101.7 billion, or four percent, in client balances was driven by higher market valuation and long-term AUM flows.

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Global Banking



	Three Months Ended June 30								Six Months Ended June 30
(Dollars in millions)	2014			2013			% Change		2014			2013			% Change
Net interest income (FTE basis)	$	2,239		$	2,252		(1	)%	$	4,541		$	4,411		3	%
Noninterest income:
Service charges	680			701			(3	)	1,367			1,387			(1	)
Investment banking fees	834			792			5		1,656			1,582			5
All other income	426			393			8		884			788			12
Total noninterest income	1,940			1,886			3		3,907			3,757			4
Total revenue, net of interest expense (FTE basis)	4,179			4,138			1		8,448			8,168			3

Provision for credit losses	132			163			(19	)	397			312			27
Noninterest expense	1,899			1,849			3		3,927			3,685			7
Income before income taxes	2,148			2,126			1		4,124			4,171			(1	)
Income tax expense (FTE basis)	795			829			(4	)	1,535			1,590			(3	)
Net income	$	1,353		$	1,297		4		$	2,589		$	2,581		—

Net interest yield (FTE basis)	2.58		%	3.17		%			2.63		%	3.18		%
Return on average allocated capital	17.51			22.62					16.85			22.64
Efficiency ratio (FTE basis)	45.44			44.71					46.48			45.13

Balance Sheet
	Three Months Ended June 30								Six Months Ended June 30
Average	2014			2013			% Change		2014			2013			% Change
Total loans and leases	$	271,417		$	255,674		6	%	$	271,446		$	249,903		9	%
Total earning assets	347,661			285,000			22		347,793			280,143			24
Total assets	390,997			326,775			20		392,030			322,036			22
Total deposits	258,937			226,912			14		257,692			224,132			15
Allocated capital	31,000			23,000			35		31,000			23,000			35

Period end									June 30 2014			December 31 2013			% Change
Total loans and leases									$	270,683		$	269,469		—	%
Total earning assets									363,713			336,607			8
Total assets									407,367			378,659			8
Total deposits									270,268			265,171			2

Global Banking, which includes Global Corporate and Global Commercial Banking, and Investment 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 our network of offices and client relationship teams. Our lending products and services include commercial loans, leases, commitment facilities, trade finance, real estate lending and asset-based lending. Our treasury solutions business includes treasury management, foreign exchange and short-term investing options. We also work with our clients to provide investment banking products such as debt and equity underwriting and distribution, and merger-related and other advisory services. Underwriting debt and equity issuances, fixed-income and equity research, and certain market-based activities are executed through our global broker/dealer affiliates which are our primary dealers in several countries. Within Global Banking, Global Commercial Banking clients generally include middle-market companies, commercial real estate firms, auto dealerships and not-for-profit companies. Global Corporate Banking includes large global corporations, financial institutions and leasing clients.

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Three Months Ended June 30, 2014 Compared to Three Months Ended June 30, 2013

Net income for Global Banking increased $56 million to $1.4 billion primarily driven by a decrease in the provision for credit losses, partially offset by higher noninterest expense. Revenue of $4.2 billion remained relatively unchanged.

The provision for credit losses decreased $31 million to $132 million. Noninterest expense increased $50 million to $1.9 billion primarily due to higher litigation expense.

Return on average allocated capital was 17.5 percent, down from 22.6 percent as modest earnings improvement was more than offset by increased capital allocations. For more information on capital allocated to the business segments, see Business Segment Operations on page 28.

Six Months Ended June 30, 2014 Compared to Six Months Ended June 30, 2013

Net income for Global Banking of $2.6 billion remained relatively unchanged as higher revenue was offset by higher noninterest expense and an increase in the provision for credit losses. Revenue increased $280 million to $8.4 billion driven by higher net interest income from loan growth and higher investment banking fees.

The provision for credit losses increased $85 million to $397 million. Noninterest expense increased $242 million to $3.9 billion primarily from technology investments in our Global Transaction Services and lending platforms, additional client-facing personnel and higher litigation expense.

Return on average allocated capital was 16.9 percent, down from 22.6 percent driven by the same factors as described in the three-month discussion above.

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Global Corporate and Global Commercial Banking

Global Corporate and Global Commercial Banking each include Business Lending and Global Transaction Services (formerly Global Treasury Services) activities. Business Lending includes various lending-related products and services including commercial loans, leases, commitment facilities, trade finance, real estate lending and asset-based lending. Global Transaction Services includes deposits, treasury management, credit card, foreign exchange, and short-term investment and custody solutions to corporate and commercial banking clients. The table below presents a summary of Global Corporate and Global Commercial Banking results, which exclude certain capital markets activity in Global Banking.



Global Corporate and Global Commercial Banking
	Three Months Ended June 30
	Global Corporate Banking				Global Commercial Banking				Total
(Dollars in millions)	2014		2013		2014		2013		2014		2013
Revenue
Business Lending	$	820	$	855	$	1,005	$	1,050	$	1,825	$	1,905
Global Transaction Services	766		702		719		733		1,485		1,435
Total revenue, net of interest expense	$	1,586	$	1,557	$	1,724	$	1,783	$	3,310	$	3,340

Balance Sheet
Average
Total loans and leases	$	129,836	$	126,734	$	141,559	$	128,910	$	271,395	$	255,644
Total deposits	143,420		123,482		115,518		103,385		258,938		226,867

	Six Months Ended June 30
	2014		2013		2014		2013		2014		2013
Revenue
Business Lending	$	1,724	$	1,706	$	2,014	$	2,001	$	3,738	$	3,707
Global Transaction Services	1,506		1,368		1,454		1,446		2,960		2,814
Total revenue, net of interest expense	$	3,230	$	3,074	$	3,468	$	3,447	$	6,698	$	6,521

Balance Sheet
Average
Total loans and leases	$	130,519	$	122,768	$	140,912	$	127,115	$	271,431	$	249,883
Total deposits	141,948		121,348		115,745		102,741		257,693		224,089

Period end
Total loans and leases	$	129,974	$	127,348	$	140,684	$	131,126	$	270,658	$	258,474
Total deposits	150,938		124,646		119,330		104,242		270,268		228,888

Global Corporate and Global Commercial Banking revenue decreased $30 million for the three months ended June 30, 2014 compared to the same period in 2013 due to lower revenue in Business Lending, partially offset by higher revenue in Global Transaction Services. Global Corporate and Global Commercial Banking revenue increased $177 million for the six months ended June 30, 2014 compared to the same period in 2013 due to higher revenue in both Business Lending and Global Transaction Services.

Business Lending revenue in Global Corporate Banking declined $35 million for the three months ended June 30, 2014 compared to the same period in 2013 primarily due to lower credit service charges and declined $45 million in Global Commercial Banking due to prior-year accretion on acquired portfolios. Business Lending revenue in Global Corporate Banking and Global Commercial Banking increased $18 million and $13 million for the six months ended June 30, 2014 compared to the same period in 2013 due to the impact of higher loan balances, partially offset by lower loan spreads and prior-year accretion on acquired portfolios in Global Commercial Banking.

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Global Transaction Services revenue in Global Corporate Banking increased $64 million and $138 million for the three and six months ended June 30, 2014 compared to the same periods in 2013 driven by the impact of growth in U.S. and non-U.S. deposit balances, partially offset by the impact of the low rate environment. Global Transaction Services revenue in Global Commercial Banking remained relatively unchanged for the three and six months ended June 30, 2014 compared to the same periods in 2013.

Average loans and leases in Global Corporate and Global Commercial Banking increased six percent and nine percent for the three and six months ended June 30, 2014 compared to the same periods in 2013 driven by growth in the commercial and industrial, commercial real estate and commercial leasing portfolios. Average deposits in Global Corporate and Global Commercial Banking increased 14 percent and 15 percent for the three and six months ended June 30, 2014 compared to the same periods in 2013 due to client liquidity, international growth and new client acquisitions.

Investment Banking

Client teams and product specialists underwrite and distribute debt, equity and loan products, and provide advisory services and tailored risk management solutions. 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. To provide a complete discussion of our consolidated investment banking fees, the table below presents total Corporation investment banking fees as well as the portion attributable to Global Banking.



Investment Banking Fees
	Three Months Ended June 30												Six Months Ended June 30
	Global Banking						Total Corporation						Global Banking						Total Corporation
(Dollars in millions)	2014			2013			2014			2013			2014			2013			2014			2013
Products
Advisory	$	234		$	240		$	265		$	262		$	491		$	473		$	551		$	519
Debt issuance	388			405			891			987			835			833			1,916			2,009
Equity issuance	212			147			514			356			330			276			827			679
Gross investment banking fees	834			792			1,670			1,605			1,656			1,582			3,294			3,207
Self-led deals	(16		)	(7		)	(39		)	(49		)	(51		)	(35		)	(121		)	(116		)
Total investment banking fees	$	818		$	785		$	1,631		$	1,556		$	1,605		$	1,547		$	3,173		$	3,091

Total Corporation investment banking fees of $1.6 billion and $3.2 billion, excluding self-led deals, included within Global Banking and Global Markets, increased five percent and three percent for the three and six months ended June 30, 2014 compared to the same periods in 2013 as strong equity underwriting, investment-grade underwriting and advisory fees were partially offset by lower underwriting fees for other debt products.

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Global Markets



	Three Months Ended June 30								Six Months Ended June 30
(Dollars in millions)	2014			2013			% Change		2014			2013			% Change
Net interest income (FTE basis)	$	952		$	1,009		(6	)%	$	1,949		$	2,117		(8	)%
Noninterest income:
Investment and brokerage services	540			549			(2	)	1,101			1,077			2
Investment banking fees	760			668			14		1,496			1,347			11
Trading account profits	1,768			1,848			(4	)	4,135			4,738			(13	)
All other income (loss)	563			120			n/m		914			(306		)	n/m
Total noninterest income	3,631			3,185			14		7,646			6,856			12
Total revenue, net of interest expense (FTE basis)	4,583			4,194			9		9,595			8,973			7

Provision for credit losses	19			(16		)	n/m		38			(11		)	n/m
Noninterest expense	2,862			2,770			3		5,939			5,843			2
Income before income taxes	1,702			1,440			18		3,618			3,141			15
Income tax expense (FTE basis)	601			478			26		1,209			1,067			13
Net income	$	1,101		$	962		14		$	2,409		$	2,074		16

Return on average allocated capital	13.01		%	12.89		%			14.32		%	13.97		%
Efficiency ratio (FTE basis)	62.45			66.05					61.90			65.12

Balance Sheet
	Three Months Ended June 30								Six Months Ended June 30
Average	2014			2013			% Change		2014			2013			% Change
Total trading-related assets ⁽¹⁾	$	459,938		$	490,972		(6	)%	$	448,596		$	497,582		(10	)%
Total loans and leases	63,579			56,354			13		63,637			54,529			17
Total earning assets ⁽¹⁾	478,192			499,338			(4	)	467,594			504,450			(7	)
Total assets	617,103			656,109			(6	)	609,315			663,021			(8	)
Allocated capital	34,000			30,000			13		34,000			30,000			13

Period end									June 30 2014			December 31 2013			% Change
Total trading-related assets ⁽¹⁾									$	443,386		$	411,080		8	%
Total loans and leases									66,260			67,381			(2	)
Total earning assets ⁽¹⁾									465,383			432,807			8
Total assets									610,395			575,584			6


⁽¹⁾	Trading-related assets include derivative assets, which are considered non-earning assets.

n/m = not meaningful

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 our institutional investor clients in support of their investing and trading activities. We also work with our 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 our market-making activities in these products, we may be required to manage risk in a broad range of financial products including government securities, equity and equity-linked securities, high-grade and high-yield corporate debt securities, syndicated loans, mortgage-backed securities (MBS), commodities and asset-backed securities (ABS). In addition, 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 Banking originates certain deal-related transactions with our corporate and commercial clients that are executed and distributed by Global Markets. For more information on investment banking fees on a consolidated basis, see page 48. On January 1, 2014, the results for structured liabilities including DVA were moved into Global Markets from All Other to better align the performance and risk management of these instruments. As such, net DVA in Global Markets

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represents the combined total of net DVA on derivatives and structured liabilities. Prior periods have been reclassified to conform to current period presentation.

Three Months Ended June 30, 2014 Compared to Three Months Ended June 30, 2013

Net income for Global Markets increased $139 million to $1.1 billion primarily driven by higher equity investment gains, which included a $240 million gain related to the initial public offering of an equity investment, and increased investment banking fees. Net DVA gains were $69 million compared to gains of $49 million. Noninterest expense increased $92 million to $2.9 billion due to higher technology and staff support costs as well as increased personnel expense and professional fees.

Average earning assets decreased $21.1 billion to $478.2 billion largely driven by a lower matched-book and trading related securities.

The return on average allocated capital was 13.01 percent, up from 12.89 percent, reflecting increased net income, partially offset by an increase in allocated capital. For more information on capital allocated to the business segments, see Business Segment Operations on page 28.

Six Months Ended June 30, 2014 Compared to Six Months Ended June 30, 2013

Net income for Global Markets increased $335 million to $2.4 billion primarily driven by the same factors as described in the three-month discussion above, as well as a first quarter 2013 write-down of a monoline receivable due to the settlement of a legacy matter. This was offset by a decrease in trading account profits due to declines in market volumes and reduced volatility. Net DVA gains were $181 million compared to losses of $96 million. Noninterest expense increased $96 million to $5.9 billion due to higher technology costs and professional fees, partially offset by decreased personnel expense.

Average earning assets decreased $36.9 billion to $467.6 billion largely driven by the same factors as described in the three-month discussion above.

The return on average allocated capital was 14.32 percent, up from 13.97 percent, largely driven by the same factors as described in the three-month discussion above.

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Sales and Trading Revenue

Sales and trading revenue includes unrealized and realized gains and losses on trading and other assets, net interest income, and fees primarily from commissions on equity securities. Sales and trading revenue is segregated into fixed income (government debt obligations, investment and non-investment grade corporate debt obligations, commercial mortgage-backed securities, RMBS, collateralized loan obligations (CLOs), interest rate and credit derivative contracts), currencies (interest rate and foreign exchange contracts), commodities (primarily futures, forwards, swaps and options) and equities (equity-linked derivatives and cash equity activity). The table below and related discussion present sales and trading revenue, substantially all of which is in Global Markets, with the remainder in Global Banking. In addition, the table below and related discussion present sales and trading revenue excluding the impact of net DVA, which is a non-GAAP financial measure. We believe the use of this non-GAAP financial measure provides clarity in assessing the underlying performance of these businesses.



Sales and Trading Revenue ^{(1, 2)}
	Three Months Ended June 30				Six Months Ended June 30
(Dollars in millions)	2014		2013		2014		2013
Sales and trading revenue
Fixed income, currencies and commodities	$	2,426	$	2,216	$	5,452	$	5,067
Equities	1,045		1,280		2,230		2,433
Total sales and trading revenue	$	3,471	$	3,496	$	7,682	$	7,500

Sales and trading revenue, excluding net DVA ⁽³⁾
Fixed income, currencies and commodities	$	2,370	$	2,253	$	5,316	$	5,252
Equities	1,032		1,194		2,185		2,344
Total sales and trading revenue, excluding net DVA	$	3,402	$	3,447	$	7,501	$	7,596


⁽¹⁾	Includes FTE adjustments of $51 million and $88 million for the three and six months ended June 30, 2014 compared to $47 million and $93 million for the same periods in 2013. For more information on sales and trading revenue, see Note 2 – Derivatives to the Consolidated Financial Statements.


⁽²⁾	Includes Global Banking sales and trading revenue of $68 million and $153 million for the three and six months ended June 30, 2014 compared to $143 million and $210 million for the same periods in 2013.

⁽³⁾

FICC and Equities sales and trading revenue, excluding the impact of net DVA, is a non-GAAP financial measure. FICC net DVA gains were $56 million and $136 million for the three and six months ended June 30, 2014 compared to net DVA losses of $37 million and $185 million for the same periods in 2013. Equities net DVA gains were $13 million and $45 million for the three and six months ended June 30, 2014 compared to net DVA gains of $86 million and $89 million for the same periods in 2013.

Three Months Ended June 30, 2014 Compared to Three Months Ended June 30, 2013

Fixed-income, currency and commodities (FICC) revenue, excluding net DVA, increased $117 million to $2.4 billion primarily due to improved performance in mortgage and municipal products, partially offset by declines in foreign exchange and commodities. Equities revenue, excluding net DVA, decreased $162 million to $1.0 billion due to lower market volumes and reduced client activity. Sales and trading revenue included total commissions and brokerage fee revenue of $540 million, substantially all from equities, which remained relatively unchanged.

Six Months Ended June 30, 2014 Compared to Six Months Ended June 30, 2013

FICC revenue, excluding net DVA, increased $64 million to $5.3 billion as the prior-year period included a $450 million write-down of a monoline receivable related to the settlement of a legacy matter. Equities revenue, excluding net DVA, decreased $159 million to $2.2 billion due to the same factors as described in the three-month discussion above. Sales and trading revenue included total commissions and brokerage fee revenue of $1.1 billion, substantially all from equities, which remained relatively unchanged.

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All Other



	Three Months Ended June 30								Six Months Ended June 30
(Dollars in millions)	2014			2013			% Change		2014			2013			% Change
Net interest income (FTE basis)	$	(76	)	$	272		n/m		$	(226	)	$	528		n/m
Noninterest income:
Card income	88			81			9	%	174			166			5	%
Equity investment income	56			576			(90	)	730			1,096			(33	)
Gains on sales of debt securities	382			452			(15	)	739			519			42
All other loss	(604		)	(812		)	(26	)	(1,262		)	(1,286		)	(2	)
Total noninterest income	(78		)	297			n/m		381			495			(23	)
Total revenue, net of interest expense (FTE basis)	(154		)	569			n/m		155			1,023			(85	)

Provision for credit losses	(246		)	(179		)	37		(381		)	71			n/m
Noninterest expense	431			562			(23	)	2,113			2,330			(9	)
Income (loss) before income taxes	(339		)	186			n/m		(1,577		)	(1,378		)	14
Income tax benefit (FTE basis)	(466		)	(347		)	34		(1,516		)	(992		)	53
Net income (loss)	$	127		$	533		(76	)	$	(61	)	$	(386	)	(84	)

Balance Sheet
	Three Months Ended June 30								Six Months Ended June 30
Average	2014			2013			% Change		2014			2013			% Change
Loans and leases:
Residential mortgage	$	187,854		$	211,137		(11	)%	$	190,904		$	213,156		(10	)%
Non-U.S. credit card	11,759			10,613			11		11,657			10,819			8
Other	10,962			17,160			(36	)	11,404			17,773			(36	)
Total loans and leases	210,575			238,910			(12	)	213,965			241,748			(11	)
Total assets ⁽¹⁾	175,720			231,498			(24	)	170,699			240,677			(29	)
Total deposits	35,851			34,017			5		35,119			34,883			1

Period end									June 30 2014			December 31 2013			% Change
Loans and leases:
Residential mortgage									$	182,221		$	197,061		(8	)%
Non-U.S. credit card									11,999			11,541			4
Other									11,251			12,088			(7	)
Total loans and leases									205,471			220,690			(7	)
Total assets ⁽¹⁾									167,364			167,433			—
Total deposits									31,999			27,851			15

⁽¹⁾

For presentation purposes, in segments where the total of liabilities and equity exceeds assets, which are generally deposit-taking segments, we allocate assets from All Other to those segments to match liabilities (i.e., deposits) and allocated shareholders' equity. Such allocated assets were $593.1 billion and $589.2 billion for the three and six months ended June 30, 2014 compared to $524.5 billion and $525.3 billion for the same periods in 2013, and $608.8 billion and $569.9 billion at June 30, 2014 and December 31, 2013.

n/m = not meaningful

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, the impact of certain allocation methodologies and accounting hedge ineffectiveness. The results of certain ALM activities are allocated to our business segments. For more information on our ALM activities, see Interest Rate Risk Management for Nontrading Activities on page 128. Equity investments include GPI which is comprised of a portfolio of equity, real estate and other alternative investments. These investments are made either directly in a company or held through a fund with related income recorded in equity investment income. Additionally, certain residential mortgage loans that are managed by Legacy Assets & Servicing are held in All Other.

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On January 1, 2014, the results for structured liabilities including DVA (previously referred to as fair value adjustments on structured liabilities) were moved from All Other into Global Markets to better align the performance and risk management of these instruments. Prior periods have been reclassified to conform to current period presentation.

Three Months Ended June 30, 2014 Compared to Three Months Ended June 30, 2013

Net income for All Other decreased $406 million to $127 million primarily due to a decrease in equity investment income of $520 million, the negative impact of market-related premium amortization expense on debt securities and a decrease of $70 million in gains on sales of debt securities, partially offset by an improvement in the provision for credit losses and lower noninterest expense. The bulk sales of $2.1 billion in nonperforming residential mortgage loans also had a positive impact of approximately $350 million, including the gains on the sale of approximately $150 million with the remainder primarily reflected as recoveries through the provision for credit losses as noted in the paragraph below.

The provision for credit losses improved $67 million to a benefit of $246 million primarily driven by $185 million of recoveries on the bulk sales.

Noninterest expense decreased $131 million to $431 million primarily due to a decline in other general operating expenses. The income tax benefit was $466 million compared to a benefit of $347 million, with the increase primarily driven by the change in pre-tax earnings.

Six Months Ended June 30, 2014 Compared to Six Months Ended June 30, 2013

The net loss for All Other decreased $325 million to a net loss of $61 million primarily due to the same factors as described in the three-month discussion above, partially offset by an increase of $220 million in gains on sales of debt securities.

The provision for credit losses improved $452 million to a benefit of $381 million primarily driven by the same factor as described in the three-month discussion above as well as continued improvement in residential mortgage portfolio trends including increased home prices.

Noninterest expense decreased $217 million to $2.1 billion driven by a decline in foreclosed properties expense. The income tax benefit was $1.5 billion compared to a benefit of $992 million, with the increase primarily driven by the same factor as described in the three-month discussion above as well as the resolution of certain tax matters and recurring tax preference items.

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Equity Investment Activity

The tables below present the components of equity investments included in All Other at June 30, 2014 and December 31, 2013, and also a reconciliation to the total consolidated equity investment income for the three and six months ended June 30, 2014 and 2013.



Equity Investments
(Dollars in millions)						June 30 2014		December 31 2013
Global Principal Investments						$	1,136	$	1,604
Strategic and other investments						827		822
Total equity investments included in All Other						$	1,963	$	2,426

Equity Investment Income
	Three Months Ended June 30					Six Months Ended June 30
(Dollars in millions)	2014			2013		2014		2013
Global Principal Investments	$	71		$	52	$	43	$	156
Strategic and other investments	(15		)	524		687		940
Total equity investment income included in All Other	56			576		730		1,096
Total equity investment income included in the business segments	301			104		411		147
Total consolidated equity investment income	$	357		$	680	$	1,141	$	1,243

Equity investments included in All Other decreased $463 million to $2.0 billion at June 30, 2014 compared to December 31, 2013, with the decrease due to sales in the GPI portfolio. GPI had unfunded equity commitments of $54 million at June 30, 2014 compared to $127 million at December 31, 2013.

Equity investment income included in All Other was $56 million and $730 million for the three and six months ended June 30, 2014, a decrease of $520 million and $366 million compared to the same periods in 2013. The decrease for the three-month period was due to gains on the sales of portions of an equity investment in the prior-year period. The six-month decline was due to the same factors as described in the three-month discussion as well as lower GPI results. Total Corporation equity investment income was $357 million and $1.1 billion for the three and six months ended June 30, 2014, a decrease of $323 million and $102 million from the same periods in 2013, due to the same factors as described above, partially offset by a gain related to the initial public offering of an equity investment in Global Markets.

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Off-Balance Sheet Arrangements and Contractual Obligations

We have contractual obligations to make future payments on debt and lease agreements. Additionally, in the normal course of business, we enter into contractual arrangements whereby we commit to future purchases of products or services from unaffiliated parties. For more information on obligations and commitments, see Note 10 – Commitments and Contingencies to the Consolidated Financial Statements, Off-Balance Sheet Arrangements and Contractual Obligations on page 52 of the MD&A of the Corporation's 2013 Annual Report on Form 10-K, as well as Note 11 – Long-term Debt and Note 12 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation's 2013 Annual Report on Form 10-K.

Representations and Warranties

We securitize first-lien residential mortgage loans generally in the form of RMBS guaranteed by the government-sponsored enterprises (GSEs) or by the Government National Mortgage Association (GNMA) in the case of Federal Housing Administration (FHA)-insured, U.S. Department of Veterans Affairs (VA)-guaranteed and Rural Housing Service-guaranteed mortgage loans. In addition, in prior years, legacy companies and certain subsidiaries sold pools of first-lien residential mortgage loans and home equity loans as private-label securitizations (in certain of these securitizations, monolines or financial guarantee providers insured all or some of the securities) or in the form of whole loans. In connection with these transactions, we or certain of our subsidiaries or legacy companies make or have made various representations and warranties. Breaches of these representations and warranties have resulted in and may continue to result in the requirement to repurchase mortgage loans or to otherwise make whole or provide other remedies to the GSEs, U.S. Department of Housing and Urban Development with respect to FHA-insured loans, VA, whole-loan investors, securitization trusts, monoline insurers or other financial guarantors (collectively, repurchases). In all such cases, we would be exposed to any credit loss on the repurchased mortgage loans after accounting for any mortgage insurance (MI) or mortgage guarantee payments that we may receive.

For more information on accounting for representations and warranties and our representations and warranties repurchase claims and exposures, see Note 7 – Representations and Warranties Obligations and Corporate Guarantees and Note 12 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation's 2013 Annual Report on Form 10-K and Item 1A. Risk Factors of the Corporation's 2013 Annual Report on Form 10-K.

We have vigorously contested any request for repurchase when we conclude that a valid basis for repurchase does not exist and will continue to do so in the future. However, in an effort to resolve these legacy mortgage-related issues, we have reached bulk settlements, certain of which have been for significant amounts in lieu of a loan-by-loan review process, including with the GSEs, with four monoline insurers and with the Bank of New York Mellon (BNY Mellon), as trustee (the Trustee) for certain trusts. As a result of various settlements with the GSEs, we have resolved substantially all outstanding and potential representations and warranties repurchase claims on whole loans sold by legacy Bank of America and Countrywide Financial Corporation (Countrywide) to Fannie Mae (FNMA) and Freddie Mac (FHLMC) through June 30, 2012 and December 31, 2009, respectively.

We may reach other settlements in the future if opportunities arise on terms we believe to be advantageous. However, there can be no assurance that we will reach future settlements or, if we do, that the terms of past settlements can be relied upon to predict the terms of future settlements. These bulk settlements generally did not cover all transactions with the relevant counterparties or all potential claims that may arise, including in some instances securities law, fraud and servicing claims. For example, we are currently involved in RMBS litigation including purported class action suits, actions brought by individual RMBS purchasers and actions by Governmental Authorities. Our liability in connection with the transactions and claims not covered by these settlements could be material. For more information on our exposure to RMBS matters involving securities law, fraud or related claims, see Note 12 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation's 2013 Annual Report on Form 10-K.

BNY Mellon Settlement

The settlement with Bank of New York Mellon (BNY Mellon Settlement) remains subject to final court approval and certain other conditions. It is not currently possible to predict the ultimate outcome or timing of the court approval process, which includes appeals and could take a substantial period of time. The court approval hearing began in the New York Supreme Court, New York County, on June 3, 2013 and concluded on November 21, 2013. On January 31, 2014, the court issued a decision, order and judgment approving the BNY Mellon Settlement. The court overruled the objections to the settlement, holding that the Trustee, BNY Mellon, acted in good faith, within its discretion and within the bounds of reasonableness in determining that the settlement agreement was in the best interests of the covered trusts. The court declined to approve the Trustee's conduct only with respect to the Trustee's consideration of a potential claim that a loan must be repurchased if the servicer modifies its terms. On February 21, 2014, final judgment was entered and the Trustee filed a notice of appeal regarding the court's ruling on loan modification claims in the settlement. Certain objectors to the settlement have filed cross-appeals appealing the court's approval of the settlement. Pursuant to our settlement with AIG on July 15, 2014, AIG withdrew its objection to the BNY Mellon Settlement, including its participation in all pending appeals and cross-appeals. Under the current schedule,

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all appeals will be fully briefed by September 22, 2014. The court's January 31, 2014 decision, order and judgment remain subject to these appeals, as well as a motion to reargue to be heard on September 24, 2014, and it is not possible at this time to predict when the court approval process will be completed.

Although we are not a party to the proceeding, certain of our rights and obligations under the settlement agreement are conditioned on final court approval of the settlement. There can be no assurance final court approval will be obtained, that all conditions to the BNY Mellon Settlement will be satisfied, or if certain conditions to the BNY Mellon Settlement permitting withdrawal are met, that we and Countrywide will not withdraw from the settlement. If final court approval is not obtained, or if we and Countrywide withdraw from the BNY Mellon Settlement in accordance with its terms, our future representations and warranties losses could be substantially different from existing accruals and the estimated range of possible loss over existing accruals.

FGIC Settlement

On April 7, 2014, the Corporation entered into a settlement with Financial Guaranty Insurance Company (FGIC) for certain second-lien RMBS trusts for which FGIC provided financial guarantee insurance. In addition, on April 11, 2014, separate settlements were entered into with BNY Mellon as trustee with respect to seven of those trusts; settlements on two additional trusts with BNY Mellon as trustee were entered into on May 15, 2014 and May 28, 2014. The agreements resolve all outstanding litigation between FGIC and the Corporation, as well as outstanding and potential claims by FGIC and the trustee related to alleged representations and warranties breaches and other claims involving certain second-lien RMBS trusts for which FGIC provided financial guarantee insurance.

For additional information on the FGIC Settlement, and for a summary of the larger settlement actions and the related impact on the representations and warranties provision and liability, see Note 7 – Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial Statements.

Unresolved Repurchase Claims

Repurchase claims received from a counterparty are considered unresolved repurchase claims until the underlying loan is repurchased or the claim is rescinded by the counterparty. Unresolved repurchase claims represent the notional amount of repurchase claims made by counterparties, typically the outstanding principal balance or the unpaid principal balance at the time of default. In the case of first-lien mortgages, the claim amount is often significantly greater than the expected loss amount due to the benefit of collateral and, in some cases, MI or mortgage guarantee payments. When a claim is denied and we do not receive a response from the counterparty, the claim remains in the unresolved repurchase claims balance until resolution. Table 16 presents unresolved repurchase claims by counterparty at June 30, 2014 and December 31, 2013.



Table 16
Unresolved Repurchase Claims by Counterparty ⁽¹⁾
(Dollars in millions)	June 30 2014		December 31 2013
Private-label securitization trustees, whole-loan investors, including third-party securitization sponsors and other ^{(2, 3)}	$	20,551	$	17,953
Monolines ⁽⁴⁾	1,085		1,532
GSEs	76		170
Total unresolved repurchase claims ⁽³⁾	$	21,712	$	19,655


⁽¹⁾	At both June 30, 2014 and December 31, 2013, unresolved repurchase claims did not include repurchase demands of $1.2 billion where the Corporation believes that these demands are procedurally or substantively invalid.


⁽²⁾	The total notional amount of unresolved repurchase claims does not include repurchase claims related to the trusts covered by the BNY Mellon Settlement.


⁽³⁾	Includes $13.7 billion and $13.8 billion of claims based on individual file reviews and $6.8 billion and $4.1 billion of claims submitted without individual file reviews at June 30, 2014 and December 31, 2013.


⁽⁴⁾	At June 30, 2014, substantially all of the unresolved monoline claims pertain to second-lien loans and are currently the subject of litigation with a single monoline insurer.

During the three months ended June 30, 2014, we received $2.4 billion in new repurchase claims, including $1.9 billion of claims submitted without individual loan file reviews and $258 million of claims based on individual loan file reviews submitted by private-label securitization trustees, $88 million submitted by the GSEs for both Countrywide and legacy Bank of America originations not covered by the bulk settlements with the GSEs and $168 million submitted by whole-loan investors. During the three months ended June 30, 2014, $964 million in claims were resolved. Of the claims resolved, $469 million were resolved through settlements, including $450 million related to the FGIC Settlement, $255 million were resolved through rescissions and $240 million were resolved through mortgage repurchases and make-whole payments with private-label securitization trustees, whole-loan investors and the GSEs.

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During the six months ended June 30, 2014, we received $3.7 billion in new repurchase claims, including $2.8 billion of claims submitted without an individual loan file review and $449 million of claims based on individual loan file reviews submitted by private-label securitization trustees and a financial guarantee provider, $241 million submitted by the GSEs for both Countrywide and legacy Bank of America originations not covered by the bulk settlements with the GSEs and $198 million submitted by whole-loan investors. During the six months ended June 30, 2014, $1.7 billion in claims were resolved. Of the claims resolved, $856 million were resolved through settlement, including $450 million related to the FGIC Settlement and $387 million related to the FHFA Settlement, $417 million were resolved through rescissions and $417 million were resolved through mortgage repurchases and make-whole payments with private-label securitization trustees, whole-loan investors and the GSEs.

The increase in the notional amount of unresolved repurchase claims during the three and six months ended June 30, 2014 is primarily due to: (1) continued submission of claims by private-label securitization trustees, (2) the level of detail, support and analysis accompanying such claims, which impact overall claim quality and, therefore, claims resolution, and (3) the lack of an established process to resolve disputes related to these claims. For example, claims submitted without individual file reviews generally lack the level of detail and analysis of individual loans found in other claims that is necessary to support a claim. We expect unresolved repurchase claims related to private-label securitizations to increase as such claims continue to be submitted and there is not an established process for the ultimate resolution of such claims on which there is a disagreement.

In addition to, and not included in, the total unresolved repurchase claims of $21.7 billion at June 30, 2014, are repurchase demands we have received from private-label securitization investors and a master servicer where we believe that these demands are procedurally or substantively invalid. The total amount outstanding of such demands was $1.2 billion at both June 30, 2014 and December 31, 2013, comprised of $931 million of demands received during 2012 and $272 million of demands related to trusts covered by the BNY Mellon Settlement. We do not believe that the demands outstanding at June 30, 2014 are valid repurchase claims and, therefore, it is not possible to predict the resolution with respect to such demands.

Representations and Warranties Liability

The liability for representations and warranties and corporate guarantees is included in accrued expenses and other liabilities on the Consolidated Balance Sheet and the related provision is included in mortgage banking income in the Consolidated Statement of Income. For additional discussion of the representations and warranties liability and the corresponding estimated range of possible loss, see Off-Balance Sheet Arrangements and Contractual Obligations – Estimated Range of Possible Loss on page 60.

At June 30, 2014 and December 31, 2013, the liability for representations and warranties was $12.1 billion and $13.3 billion. For the three and six months ended June 30, 2014, the representations and warranties provision was $87 million and $265 million compared to $197 million and $447 million for the same periods in 2013. The provision for the six months ended June 30, 2014 included $103 million related to the FHFA Settlement and $162 million primarily for our remaining non-GSE exposures.

Our estimated liability at June 30, 2014 for obligations under representations and warranties is necessarily dependent on, and limited by, a number of factors, including for private-label securitizations, the implied repurchase experience based on the BNY Mellon Settlement, as well as certain other assumptions and judgmental factors. Accordingly, future provisions associated with obligations under representations and warranties may be materially impacted if actual experiences are different from historical experience or our understandings, interpretations or assumptions. Although we have not recorded any representations and warranties liability for certain potential private-label securitization and whole-loan exposures where we have had little to no claim activity, or where the applicable statute of limitations has expired, these exposures are included in the estimated range of possible loss.

Experience with Government-sponsored Enterprises

As a result of various settlements with the GSEs, we have resolved substantially all outstanding and potential representations and warranties repurchase claims on whole loans sold by legacy Bank of America and Countrywide to FNMA and FHLMC through June 30, 2012 and December 31, 2009, respectively. After these settlements, our exposure to representations and warranties liability for loans originated prior to 2009 and sold to the GSEs is limited to loans with an original principal balance of $14.0 billion and loans with certain defects excluded from the settlements that we do not believe will be material, such as title defects and certain specified violations of the GSEs' charters. As of June 30, 2014, of the $14.0 billion, approximately $11.3 billion in principal has been paid, $942 million in principal has defaulted or was severely delinquent, and the notional amount of unresolved repurchase claims submitted by the GSEs was $63 million related to these vintages.

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Experience with Investors Other than Government-sponsored Enterprises

In prior years, legacy companies and certain subsidiaries sold pools of first-lien residential mortgage loans and home equity loans as private-label securitizations or in the form of whole loans originated from 2004 through 2008 with an original principal balance of $965 billion to investors other than GSEs (although the GSEs are investors in certain private-label securitizations), including $781 billion to private-label and whole-loan investors without monoline insurance and $184 billion with monoline insurance. Of the $965 billion, $562 billion in principal has been paid, $195 billion in principal has defaulted, $50 billion in principal was severely delinquent, and $158 billion in principal was current or less than 180 days past due at June 30, 2014.

Table 17 details the population of loans originated between 2004 and 2008 and sold in non-agency securitizations or as whole loans by entity and product together with the defaulted and severely delinquent loans stratified by the number of payments the borrower made prior to default or becoming severely delinquent as of June 30, 2014.



Table 17
Overview of Non-Agency Securitization and Whole-Loan Balances
	Principal Balance				Defaulted or Severely Delinquent
(Dollars in billions)	Original Principal Balance		Outstanding Principal Balance June 30 2014		Outstanding Principal Balance 180 Days or More Past Due		Defaulted Principal Balance		Defaulted or Severely Delinquent		Borrower Made Less than 13 Payments		Borrower Made 13 to 24 Payments		Borrower Made 25 to 36 Payments		Borrower Made More than 36 Payments
By Entity
Bank of America	$	100	$	17	$	3	$	7	$	10	$	1	$	2	$	2	$	5
Countrywide	716		163		40		147		187		24		45		44		74
Merrill Lynch	67		14		3		16		19		3		4		3		9
First Franklin	82		14		4		25		29		5		6		5		13
Total ^{(1, 2)}	$	965	$	208	$	50	$	195	$	245	$	33	$	57	$	54	$	101
By Product
Prime	$	302	$	60	$	7	$	27	$	34	$	2	$	6	$	7	$	19
Alt-A	172		47		10		39		49		7		12		11		19
Pay option	150		34		11		43		54		5		13		15		21
Subprime	247		52		17		67		84		17		20		15		32
Home equity	88		10		—		18		18		2		5		4		7
Other	6		5		5		1		6		—		1		2		3
Total	$	965	$	208	$	50	$	195	$	245	$	33	$	57	$	54	$	101


⁽¹⁾	Excludes transactions sponsored by Bank of America and Merrill Lynch where no representations or warranties were made.


⁽²⁾	Includes exposures on third-party sponsored transactions related to legacy entity originations.

As it relates to private-label securitizations, a contractual liability to repurchase mortgage loans generally arises only if counterparties prove there is a breach of representations and warranties that materially and adversely affects the interest of the investor or all the investors in a securitization trust or of the monoline insurer or other financial guarantor (as applicable). We believe many of the loan defaults observed in these securitizations and whole-loan balances were driven by external factors like the substantial depreciation in home prices, persistently high unemployment and other negative economic trends, diminishing the likelihood that any loan defect (assuming one exists at all) was the cause of a loan's default. As of June 30, 2014, approximately 25 percent of the loans sold to non-GSEs that were originated between 2004 and 2008 have defaulted or are severely delinquent. Of the original principal balance for Countrywide, $409 billion is included in the BNY Mellon Settlement and, of this amount, $110 billion was defaulted or severely delinquent at June 30, 2014.

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Experience with Private-label Securitizations and Whole Loans

Legacy entities, and to a lesser extent Bank of America, sold loans to investors via private-label securitizations or as whole loans. The majority of the loans sold were included in private-label securitizations, including third-party sponsored transactions. We provided representations and warranties to the whole-loan investors and these investors may retain those rights even when the whole loans were aggregated with other collateral into private-label securitizations sponsored by the whole-loan investors. The loans sold with an original total principal balance of $780.5 billion, without monoline insurance, included in Table 17, were originated between 2004 and 2008. Of the $780.5 billion, $456.4 billion have been paid in full and $191.6 billion were defaulted or severely delinquent at June 30, 2014. At least 25 payments have been made on approximately 64 percent of the defaulted and severely delinquent loans. We have received approximately $29.3 billion of representations and warranties repurchase claims related to these vintages, including $20.2 billion from private-label securitization trustees and a financial guarantee provider, $8.3 billion from whole-loan investors and $815 million from one private-label securitization counterparty. In private-label securitizations, certain presentation thresholds need to be met in order for investors to direct a trustee to assert repurchase claims. Continued high levels of new private-label claims are primarily related to repurchase requests received from trustees and third-party sponsors for private-label securitization transactions not included in the BNY Mellon Settlement, including claims related to first-lien third-party sponsored securitizations that include monoline insurance. Over time, there has been an increase in requests for loan files from certain private-label securitization trustees, as well as requests for tolling agreements to toll the applicable statute of limitations relating to representations and warranties repurchase claims and we believe it is likely that these requests will lead to an increase in repurchase claims from private-label securitization trustees with standing to bring such claims. In addition, private-label securitization trustees may have obtained loan files through other means, including litigation and administrative subpoenas, which may increase our total exposure.

A December 2013 decision by the New York intermediate appellate court held that, under New York law, which governs many RMBS trusts, the six-year statute of limitations starts to run at the time the representations and warranties are made (i.e., the date the transaction closed and not when the repurchase demand was denied). That decision has been applied by the state and federal courts in several RMBS lawsuits not involving the Corporation, resulting in the dismissal as untimely of claims involving representations and warranties made more than six years prior to the initiation of the lawsuit. Unless overturned by New York's highest appellate court, which has taken the case for review, this decision would apply to claims and lawsuits brought against the Corporation where New York law governs. A significant amount of representations and warranties claims and/or lawsuits that we have received or may receive involve representations and warranties claims where the statute of limitations has expired under this ruling and has not been tolled by agreement, and which we therefore believe would be untimely. The Corporation believes this ruling may have had an influence on recent activity in requests for tolling agreements and the pace of lawsuits filed by private-label securitization trustees prior to the expiration of the statute of limitations. In addition, it is possible that in response to the statute of limitations rulings, parties seeking to pursue representations and warranties claims and/or lawsuits with respect to trusts where the statute of limitations for representations and warranties claims against the sponsor and/or issuer has run, may pursue alternate legal theories of recovery and/or assert claims against other contractual parties. For example, on June 18, 2014, a group of institutional investors filed six lawsuits against six trustees covering more than 2,200 RMBS trusts alleging failure to pursue representations and warranties claims and servicer defaults based upon alleged contractual, statutory and tort theories of liability. The Corporation and its affiliates have not been named as parties to these lawsuits. The impact on the Corporation, if any, of such alternative legal theories or assertions is unclear.

We have resolved $8.8 billion of the $29.3 billion of claims received from whole-loan and private-label securitization counterparties with losses of $1.9 billion. The majority of these resolved claims were from third-party whole-loan investors. Approximately $3.5 billion of these claims were resolved through repurchase or indemnification, $5.0 billion were rescinded by the investor and $331 million were resolved through the FHFA Settlement. At June 30, 2014, for loans originated between 2004 and 2008, the notional amount of unresolved repurchase claims submitted by private-label securitization trustees, whole-loan investors, including third-party securitization sponsors, and others was $20.5 billion. We have performed an initial review with respect to substantially all of these claims and do not believe a valid basis for repurchase has been established by the claimant. Until we receive a repurchase claim, we generally do not review loan files related to private-label securitizations sponsored by third-party whole-loan investors and are not required by the governing documents to do so.

Certain whole-loan investors have engaged with us in a consistent repurchase process and we have used that and other experience to record a liability related to existing and future claims from such counterparties. The BNY Mellon Settlement and subsequent activity with certain counterparties led to the determination that we had sufficient experience to record a liability related to our exposure on certain private-label securitizations, including certain private-label securitizations sponsored by third-party whole-loan investors, however, it did not provide sufficient experience to record a liability related to other private-label securitizations sponsored by third-party whole-loan investors. As it relates to the other private-label securitizations sponsored by third-party whole-loan investors and certain other whole-loan sales, as well as certain private-label securitizations impacted by recent court rulings on the statute of limitations, it is not possible to determine whether a loss has occurred or is probable and, therefore, no representations and warranties liability has been recorded in connection with these transactions. As discussed below, our estimated range of possible loss related to representations and warranties exposures as of June 30, 2014 included possible losses related to these whole-loan sales and private-label securitizations.

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The representations and warranties, as governed by the private-label securitization agreements, generally require that counterparties have the ability to both assert a claim and to actually prove that a loan has an actionable defect under the applicable contracts. While the Corporation believes the agreements for private-label securitizations generally contain less rigorous representations and warranties and place higher burdens on claimants seeking repurchases than the express provisions of comparable agreements with the GSEs, without regard to any variations that may have arisen as a result of dealings with the GSEs, the agreements generally include a representation that underwriting practices were prudent and customary. In the case of private-label securitization trustees and third-party sponsors, there is currently no established process in place for the parties to reach a conclusion on an individual loan if there is a disagreement on the resolution of the claim. Private-label securitization investors generally do not have the contractual right to demand repurchase of loans directly or the right to access loan files.

Experience with Monoline Insurers

Legacy companies sold $184.5 billion of loans originated between 2004 and 2008 into monoline-insured securitizations, which are included in Table 17. At June 30, 2014 and December 31, 2013, for loans originated between 2004 and 2008, the unpaid principal balance of loans related to unresolved monoline repurchase claims was $1.1 billion and $1.5 billion. The FGIC Settlement resolved $450 million of these claims pertaining to certain second-lien RMBS trusts for which FGIC provided financial guarantee insurance.

Substantially all of the remaining unresolved monoline claims pertain to second-lien loans and are currently the subject of litigation with a single monoline insurer. During the three and six months ended June 30, 2014, there was minimal loan-level repurchase claim activity with the remaining monoline as well as minimal requests for loan files for review through the representations and warranties process. However, there may be additional claims or file requests in the future.

Open Mortgage Insurance Rescission Notices

In addition to repurchase claims, we receive notices from mortgage insurance companies of claim denials, cancellations or coverage rescission (collectively, MI rescission notices). Although the number of such open notices has remained elevated, they have decreased over the last several quarters as the resolution of open notices exceeded new notices.

We had approximately 91,000 and 101,000 open MI rescission notices at June 30, 2014 and December 31, 2013. The decline was primarily due to settlements with MI companies. Open MI rescission notices at June 30, 2014 included 30,000 pertaining principally to first-lien mortgages serviced for others, 8,000 pertaining to loans HFI and 53,000 pertaining to ongoing litigation for second-lien mortgages.

On July 15, 2014, certain of our subsidiaries entered into a settlement agreement to resolve all outstanding MI disputes brought by the Corporation against three United Guaranty entities. This settlement will resolve all of the Corporation's pending MI litigation with the United Guaranty entities regarding legacy first- and second-lien mortgages originated or acquired by certain of our subsidiaries prior to 2009. In addition, the settlement will resolve 14,000 rescission notices open as of June 30, 2014. The settlement with the United Guaranty entities with respect to policies related to first-lien mortgages is subject to the consent of the GSEs; and the inclusion of loans other than GSE-insured loans is subject to obtaining any other necessary consents.

For more information on open mortgage insurance rescission notices, see Note 7 – Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial Statements.

Estimated Range of Possible Loss

We currently estimate that the range of possible loss for representations and warranties exposures could be up to $4.0 billion over existing accruals at June 30, 2014. The estimated range of possible loss reflects principally non-GSE exposures. It represents a reasonably possible loss, but does not represent a probable loss, and is based on currently available information, significant judgment and a number of assumptions that are subject to change.

The liability for representations and warranties exposures and the corresponding estimated range of possible loss do not consider any losses related to litigation matters, including RMBS litigation or litigation brought by monoline insurers, nor do they include any separate foreclosure costs and related costs, assessments and compensatory fees or any other possible losses related to potential claims for breaches of performance of servicing obligations (except as such losses are included as potential costs of the BNY Mellon Settlement), potential securities law or fraud claims or potential indemnity or other claims against us, including claims related to loans insured by the FHA. We are not able to reasonably estimate the amount of any possible loss with respect to any such servicing, securities law, fraud or other claims against us, except to the extent reflected in existing accruals or the estimated range of possible loss for litigation and regulatory matters disclosed in Note 10 – Commitments and Contingencies to the Consolidated Financial Statements; however, in light of the inherent uncertainties involved in these matters and the very large or indeterminate damages sought in some of these matters, an adverse outcome in one or more of these matters could be material to our results of operations or cash flows for any particular reporting period.

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Future provisions and/or ranges of possible loss for representations and warranties may be significantly impacted if actual experiences are different from our assumptions in our predictive models, including, without limitation, ultimate resolution of the BNY Mellon Settlement, estimated repurchase rates, estimated MI rescission rates, economic conditions, estimated home prices, consumer and counterparty behavior, the applicable statute of limitations and a variety of other judgmental factors.

For more information on the methodology used to estimate the representations and warranties liability and the corresponding estimated range of possible loss, see Item 1A. Risk Factors of the Corporation's 2013 Annual Report on Form 10-K and Note 7 – Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial Statements.

Servicing, Foreclosure and Other Mortgage Matters

We service a large portion of the loans we or our subsidiaries have securitized and also service loans on behalf of third-party securitization vehicles and other investors. Our servicing obligations are set forth in servicing agreements with the applicable counterparty. These obligations may include, but are not limited to, loan repurchase requirements in certain circumstances, indemnifications, payment of fees, advances for foreclosure costs that are not reimbursable, or responsibility for losses in excess of partial guarantees for VA loans.

Servicing agreements with the GSEs generally provide the GSEs with broader rights relative to the servicer than are found in servicing agreements with private investors. The GSEs claim that they have the contractual right to demand indemnification or loan repurchase for certain servicing breaches. In addition, the GSEs' first-lien mortgage seller/servicer guides provide timelines to resolve delinquent loans through workout efforts or liquidation, if necessary, and purport to require the imposition of compensatory fees if those deadlines are not satisfied except for reasons beyond the control of the servicer. In addition, many non-agency RMBS and whole-loan servicing agreements state that the servicer may be liable for failure to perform its servicing obligations in keeping with industry standards or for acts or omissions that involve willful malfeasance, bad faith or gross negligence in the performance of, or reckless disregard of, the servicer's duties.

It is not possible to reasonably estimate our liability with respect to certain potential servicing-related claims. While we have recorded certain accruals for servicing-related claims, the amount of potential liability in excess of existing accruals could be material.

2011 OCC Consent Order and 2013 IFR Acceleration Agreement

For more information on the 2011 OCC Consent Order and 2013 IFR Acceleration Agreement, see Off-Balance Sheet Arrangements and Contractual Obligations – 2011 OCC Consent Order and 2013 IFR Acceleration Agreement on page 57 of the MD&A of the Corporation's 2013 Annual Report on Form 10-K.

National Mortgage Settlement

In March 2012, we entered into the National Mortgage Settlement with the DOJ, various federal regulatory agencies and 49 state Attorneys General to resolve federal and state investigations into certain residential mortgage origination, servicing and foreclosure practices. Our compliance with these servicing standards is subject to ongoing review by an independent monitor who has confirmed that we have fulfilled all national and state obligations with respect to borrower assistance.

For more information on the National Mortgage Settlement, see Off-Balance Sheet Arrangements and Contractual Obligations – National Mortgage Settlement on page 57 of the MD&A of the Corporation's 2013 Annual Report on Form 10-K.

Mortgage Electronic Registration Systems, Inc.

For information on Mortgage Electronic Registration Systems, Inc., see Off-Balance Sheet Arrangements and Contractual Obligations – Mortgage Electronic Registration Systems, Inc. on page 58 of the MD&A of the Corporation's 2013 Annual Report on Form 10-K.

Impact of Foreclosure Delays

Foreclosure delays impact our default-related servicing costs. We believe default-related servicing costs peaked in late 2012 and they began to decline in 2013, and this decline has continued in 2014. However, unexpected foreclosure delays could impact the rate of decline. Default-related servicing costs include costs related to resources needed for implementing new servicing standards mandated for the industry, including as part of the National Mortgage Settlement, other operational changes and operational costs due to delayed foreclosures, and do not include mortgage-related assessments, waivers and similar costs related to foreclosure delays.

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Other areas of our operations are also impacted by foreclosure delays. In the six months ended June 30, 2014, we recorded $64 million of mortgage-related assessments, waivers and similar costs related to foreclosure delays compared to $307 million in the same period in 2013. It is also possible that the delays in foreclosure sales may result in additional costs and expenses, including costs associated with the maintenance of properties or possible home price declines while foreclosures are delayed. Finally, the time to complete foreclosure sales may continue to be protracted, which may result in a greater number of nonperforming loans and increased servicing advances, and may impact the collectability of such advances and the value of our MSR asset, RMBS and real estate owned properties. Accordingly, the ultimate resolution of disagreements with counterparties, delays in foreclosure sales beyond those currently anticipated, and any issues that may arise out of alleged irregularities in our foreclosure process could significantly increase the costs associated with our mortgage operations.

Other Mortgage-related Matters

We continue to be subject to additional borrower and non-borrower litigation and governmental and regulatory scrutiny related to our past and current origination, servicing, transfer of servicing and servicing rights, and foreclosure activities, including those claims not covered by the National Mortgage Settlement. This scrutiny may extend beyond our pending foreclosure matters to issues arising out of alleged irregularities with respect to previously completed foreclosure activities. We are also subject to inquiries, investigations, actions and claims from regulators, trustees, investors and other third parties relating to other mortgage-related activities such as the purchase, sale, pooling, and origination and securitization of loans, as well as structuring, marketing, underwriting and issuance of RMBS and other securities, including claims relating to the adequacy and accuracy of disclosures in offering documents and representations and warranties made in connection with whole-loan sales or securitizations. The ongoing environment of heightened scrutiny has subjected us to governmental or regulatory inquiries and investigations, and may subject us to actions, including litigation, penalties and fines, including by the DOJ, state Attorneys General and other members of the RMBS Working Group of the Financial Fraud Enforcement Task Force (the RMBS Working Group), or by other regulators or government agencies that could significantly adversely affect our reputation and result in material costs to us in excess of current reserves and management’s estimate of the aggregate range of possible loss for litigation matters. The Corporation has previously disclosed that it is subject to inquiries and investigations, and may be subject to penalties and fines by the DOJ, state Attorneys General and other members of the RMBS Working Group, and is a party to certain litigation proceedings brought by the DOJ and certain other Governmental Authorities regarding the Corporation's RMBS and other mortgage-related matters. We continue to cooperate with and have had discussions about a potential resolution of mortgage and RMBS-related matters with certain Governmental Authorities. There can be no assurances that these discussions will lead to a resolution of any or all of these matters and additional litigation may be filed by the DOJ or certain other Governmental Authorities regarding our RMBS. For additional information regarding the risks associated with matters of this nature, see Item 1A. Risk Factors of the Corporation's 2013 Annual Report on Form 10-K.

Recent actions by regulators and government agencies indicate that they may, on an industry basis, increasingly pursue claims under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) and the False Claims Act. For example, the Civil Division of the U.S. Attorney’s office for the Eastern District of New York is conducting an investigation concerning our compliance with the requirements of the FHA’s Direct Endorsement Program. FIRREA contemplates civil monetary penalties as high as $1.1 million per violation or, if permitted by the court, based on pecuniary gain derived or pecuniary loss suffered as a result of the violation. Treble damages are potentially available for the False Claims Act claims. The ongoing environment of additional regulation, increased regulatory compliance burdens, and enhanced regulatory enforcement, combined with ongoing uncertainty related to the continuing evolution of the regulatory environment, has resulted in operational and compliance costs and may limit our ability to continue providing certain products and services. For more information on management’s estimate of the aggregate range of possible loss and on regulatory investigations, see Note 10 – Commitments and Contingencies to the Consolidated Financial Statements.

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Mortgage-related Settlements – Servicing Matters

In connection with the BNY Mellon Settlement, BANA has agreed to implement certain servicing changes related to loss mitigation activities. BANA also agreed to transfer the servicing rights related to certain high-risk loans to qualified subservicers on a schedule that began with the signing of the BNY Mellon Settlement. This servicing transfer protocol has reduced the servicing fees payable to BANA in the future. Upon final court approval of the BNY Mellon Settlement, failure to meet the established benchmarking standards for loans not in subservicing arrangements can trigger payment of agreed-upon fees. Additionally, we and Countrywide have agreed to work to resolve with the Trustee certain mortgage documentation issues related to the enforceability of mortgages in foreclosure and to reimburse the related Covered Trust for any loss if BANA is unable to foreclose on the mortgage and the Covered Trust is not made whole by a title policy because of these issues. These agreements will terminate if final court approval of the BNY Mellon Settlement is not obtained, although we could still have exposure under the pooling and servicing agreements related to the mortgages in the Covered Trusts for these issues.

In connection with the National Mortgage Settlement, BANA has agreed to implement certain additional servicing changes. The uniform servicing standards established under the National Mortgage Settlement are broadly consistent with the residential mortgage servicing practices imposed by the 2011 OCC Consent Order; however, they are more prescriptive and cover a broader range of our residential mortgage servicing activities. These standards are intended to strengthen procedural safeguards and documentation requirements associated with foreclosure, bankruptcy and loss mitigation activities, as well as addressing the imposition of fees and the integrity of documentation, with a goal of ensuring greater transparency for borrowers. These uniform servicing standards also obligate us to implement compliance processes reasonably designed to provide assurance of the achievement of these objectives. Compliance with the uniform servicing standards is being assessed by a monitor based on the measurement of outcomes with respect to these objectives. Implementation of these uniform servicing standards has contributed to elevated costs associated with the servicing process, but is not expected to result in material delays or dislocation in the performance of our mortgage servicing obligations, including the completion of foreclosures.

Regulatory Matters

Derivatives

Under Commodity Futures Trading Commission rules, swap dealers are now subject to exchange/swap execution facility trading requirements with respect to certain interest rate and index credit derivative transactions. The timing for margin and capital implementation remains unknown. The Securities and Exchange Commission (SEC) must propose and finalize many of its security-based swaps-related rules and has, to date, implemented a small number of clearing-related and definitional rules as well as portions of its cross-border rule. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Financial Reform Act) also requires banking entities to “push out” certain derivatives activity to one or more non-bank affiliates by July 2015.

Resolution Planning in the U.K.

In the U.K., the Prudential Regulation Authority (PRA) has issued rules requiring the submission of significant information about certain U.K.-incorporated subsidiaries and other financial institutions, as well as branches of non-U.K. banks located in the U.K. (including information on intra-group dependencies, legal entity separation and barriers to resolution) to allow the PRA to develop resolution plans. As a result of the PRA review, we could be required to take certain actions over the next several years which could impose operating costs and potentially result in the restructuring of certain business and subsidiaries.

Consumer

The Consumer Financial Protection Bureau has issued its final rule, effective August 1, 2015, requiring integrated disclosures under the Real Estate Settlement Procedures Act and the Truth in Lending Act.

For more information on other significant regulatory matters, see Capital Management – Regulatory Capital on page 65, Note 10 – Commitments and Contingencies to the Consolidated Financial Statements herein, Regulatory Matters on page 59 of the MD&A of the Corporation's 2013 Annual Report on Form 10-K, and Item 1A. Risk Factors of the Corporation's 2013 Annual Report on Form 10-K.

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Managing Risk

Risk is inherent in every material business activity that we undertake. Our business exposes us to strategic, credit, market, liquidity, compliance, operational and reputational risks. We must manage these risks to maximize our long-term results by ensuring the integrity of our assets and the quality of our earnings.

We take a comprehensive approach to risk management. We have a defined risk framework and articulated risk appetite which are approved annually by the Board. Risk management planning is integrated with strategic, financial and customer/client planning so that goals and responsibilities are aligned across the organization. Risk is managed in a systematic manner by focusing on the Corporation as a whole as well as managing risk across the enterprise and within individual business units, products, services and transactions, and across all geographic locations. We maintain a governance structure that delineates the responsibilities for risk management activities, as well as governance and oversight of those activities. For a more detailed discussion of our risk management activities, see pages 61 through 117 of the MD&A of the Corporation's 2013 Annual Report on Form 10-K.

Strategic Risk Management

Strategic risk is embedded in every business and is one of the major risk categories along with credit, market, liquidity, compliance, operational and reputational risks. It is the risk that results from incorrect assumptions, unsuitable business plans, ineffective strategy execution, or failure to respond in a timely manner to changes in the regulatory, macroeconomic and competitive environments, customer preferences, and technology developments in the geographic locations in which we operate.

Our appetite for strategic risk is assessed based on the strategic plan, with strategic risks selectively and carefully considered against the backdrop of the evolving marketplace. Strategic risk is managed in the context of our overall financial condition, risk appetite and stress test results, among other considerations. The Chief Executive Officer and executive management team manage and act on significant strategic actions, such as divestitures, consolidation of legal entities or capital actions subsequent to required review and approval by the Board.

For more information on our Strategic Risk Management activities, see page 65 of the MD&A of the Corporation's 2013 Annual Report on Form 10-K.

Capital Management

The Corporation manages its capital position to maintain sufficient capital to support its business activities and maintain capital, risk and risk appetite commensurate with one another. Additionally, we seek to maintain safety and soundness at all times including under adverse conditions, take advantage of potential growth opportunities, maintain ready access to financial markets, continue to serve as a credit intermediary, remain a source of strength for our subsidiaries, and satisfy current and future regulatory capital requirements. Capital management is integrated into our risk and governance processes, as capital is a key consideration in the development of the strategic plan, risk appetite and risk limits.

We set goals for capital ratios to meet key stakeholder expectations, including investors, rating agencies and regulators, and to achieve our financial performance objectives and strategic goals, while maintaining adequate capital, including during periods of stress. We assess capital adequacy to operate in a safe and sound manner and maintain adequate capital in relation to the risks associated with our business activities and strategy.

At least quarterly, we conduct an Internal Capital Adequacy Assessment Process (ICAAP). The ICAAP is a forward-looking assessment of our projected capital needs and resources, incorporating earnings, balance sheet and risk forecasts under baseline and adverse economic and market conditions. We utilize quarterly stress tests to assess the potential impacts to our balance sheet, earnings, capital and liquidity under a variety of stress scenarios. We perform qualitative risk assessments to identify and assess material risks not fully captured in the forecasts, stress tests or economic capital. We assess the capital impacts of proposed changes to regulatory capital requirements. Management assesses ICAAP results and provides documented quarterly assessments of the adequacy of the capital guidelines and capital position to the Board or its committees.

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The Corporation periodically reviews capital allocated to its businesses and allocates capital annually during the strategic and capital planning processes. We utilize a methodology that considers the effect of regulatory capital requirements in addition to internal risk-based capital models. The Corporation’s internal risk-based capital models use a risk-adjusted methodology incorporating each segment’s credit, market, interest rate, business and operational risk components. For more information on the nature of these risks, see Managing Risk and Strategic Risk Management on page 64. The capital allocated to the business segments is referred to as allocated capital, which represents a non-GAAP financial measure. During the latest annual planning process, we made refinements to the amount of capital allocated to each of our businesses based on multiple considerations that included, but were not limited to, Basel 3 Standardized and Advanced risk-weighted assets, business segment exposures and risk profile, and strategic plans. As a result of this process, in 2014, we adjusted the amount of capital being allocated to our business segments. For more information on the refined methodology, see Business Segment Operations on page 28.

CCAR and Capital Planning

The Federal Reserve requires BHCs to submit a capital plan and requests for capital actions on an annual basis, consistent with the rules governing the Comprehensive Capital Analysis and Review (CCAR) capital plan. The CCAR capital plan is the central element of the Federal Reserve's approach to ensure that large BHCs have adequate capital and robust processes for managing their capital.

In January 2014, we submitted our 2014 CCAR capital plan and received results on March 26, 2014. Based on the information in our January 2014 submission, the Federal Reserve advised us that it did not object to our 2014 capital actions. On April 28, 2014, we announced the revision of certain regulatory capital amounts and ratios that had previously been reported, and suspended our previously announced 2014 capital actions stating that we would resubmit information pursuant to the 2014 CCAR to the Federal Reserve.

A third party was engaged to perform certain procedures related to our 2014 CCAR resubmission process and controls regarding reporting and calculating regulatory capital ratios, and focused on the periods ended September 30, 2013 and March 31, 2014. The third-party review was completed and resulted in additional adjustments that had less than one basis point impact on our capital ratios for September 30, 2013 and no effect on our capital ratios for March 31, 2014. On May 27, 2014, subsequent to the third-party review, we updated and resubmitted our requested capital actions and certain 2014 CCAR schedules to the Federal Reserve and we addressed the quantitative adjustments to our original capital plan as part of that resubmission. The requested capital actions contained in the resubmission are less than the 2014 capital actions previously submitted to the Federal Reserve. Pursuant to CCAR capital plan rules, the Federal Reserve has until August 10, 2014 to respond to our resubmitted 2014 CCAR items, including the requested capital actions.

Until the Federal Reserve acts on our 2014 CCAR resubmission, we must obtain the Federal Reserve's approval prior to any capital distributions. However, the Federal Reserve approved certain capital actions, including continued payment of a quarterly common stock dividend of $0.01 per share, subject to declaration by the Board, the amendment to the terms of the Series T Preferred Stock as described below and the redemption or repurchase of a limited amount of trust preferred securities and subordinated debt. Additional common share buybacks were not included in this approval. In April 2014, prior to the suspension of our previously announced 2014 capital actions, we repurchased and retired 14.4 million common shares for an aggregate purchase price of approximately $233 million.

Regulatory Capital

As a financial services holding company, we are subject to regulatory capital rules issued by federal banking regulators. Through December 31, 2013, we were subject to the Basel 1 general risk-based capital rules which included new measures of market risk including a charge related to stressed Value-at-Risk (VaR), an incremental risk charge and the comprehensive risk measure (CRM), as well as other technical modifications to Basel 1 (the Basel 1 – 2013 Rules). On January 1, 2014, we became subject to the Basel 3 rules, which include certain transition provisions through 2018. Basel 3 generally continues to be subject to interpretation by U.S. banking regulators. The Corporation and its primary affiliated banking entities, BANA and FIA, meet the definition of an advanced approaches bank and measure regulatory capital adequacy based on the Basel 3 rules. For more information on the regulatory capital amounts and calculations, see Basel 3 below.

Basel 3

Basel 3 materially changes Tier 1 and Total capital calculations and formally establishes a common equity tier 1 capital ratio. Basel 3 introduces new minimum capital ratios and buffer requirements and a supplementary leverage ratio; changes the composition of regulatory capital; revises the adequately capitalized minimum requirements under the Prompt Corrective Action framework; expands and modifies the risk-sensitive calculation of risk-weighted assets for credit and market risk (the Advanced approaches); and introduces a Standardized approach for the calculation of risk-weighted assets. For more information on the supplementary leverage ratio, see Capital Management – Other Regulatory Capital Matters on page 72.

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As an advanced approaches bank, under Basel 3, we are required to calculate regulatory capital ratios and risk-weighted assets under both the Standardized approach and, upon notification of approval by U.S. banking regulators, the Advanced approaches. The approach that yields the lower ratio is to be used to assess capital adequacy including under the Prompt Corrective Action framework. Prior to receipt of notification of approval, we are required to assess our capital adequacy under the Standardized approach only. The Prompt Corrective Action framework establishes categories of capitalization, including “well capitalized,” based on regulatory ratio requirements. U.S. banking regulators are required to take certain mandatory actions depending on the category of capitalization, with no mandatory actions required for "well-capitalized" banking entities. On January 1, 2015, common equity tier 1 capital will be included in the "well-capitalized" category.

Under the Basel 3 transition provisions in effect through December 31, 2014, the Standardized approach uses risk-weighted assets as measured under the Basel 1 – 2013 Rules in the determination of the Basel 3 Standardized approach capital ratios (Basel 3 Standardized – Transition). For more information on how risk-weighted assets are measured under the Basel 1 – 2013 Rules, see Capital Management – Regulatory Capital on page 65 of the MD&A of the Corporation's 2013 Annual Report on Form 10-K. Effective January 1, 2015, the Prompt Corrective Action framework is amended to reflect the new capital requirements under Basel 3.

Regulatory Capital Composition – Transition

Important differences in determining the composition of regulatory capital between the Basel 1 – 2013 Rules and Basel 3 include changes in capital deductions related to our MSRs, deferred tax assets and defined benefit pension assets, and the inclusion of unrealized gains and losses on AFS debt and certain marketable equity securities recorded in accumulated OCI, each of which will be impacted by future changes in interest rates, overall earnings performance or other corporate actions.

Changes to the composition of regulatory capital under Basel 3, such as recognizing the impact of unrealized gains or losses on AFS debt securities in common equity tier 1 capital, are subject to a transition period where the impact is recognized in 20 percent annual increments. These regulatory capital adjustments and deductions will be fully implemented in 2018. The phase-in period for the new minimum capital ratio requirements and related buffers under Basel 3 is from January 1, 2014 through December 31, 2018. When presented on a fully phased-in basis, capital, risk-weighted assets and the capital ratios assume all regulatory capital adjustments and deductions are fully recognized. Table 18 summarizes how certain regulatory capital deductions and adjustments have been or will be transitioned from 2014 through 2018 for common equity tier 1 and Tier 1 capital.



Table 18
Summary of Certain Basel 3 Regulatory Capital Transition Provisions
Beginning on January 1 of each year	2014	2015	2016	2017	2018
Common equity tier 1 capital
Percent of total amount deducted from common equity tier 1 capital includes:	20%	40%	60%	80%	100%
Deferred tax assets arising from net operating loss and tax credit carryforwards; intangibles, other than mortgage servicing rights and goodwill; defined benefit pension fund net assets; net unrealized cumulative gains (losses) related to changes in own credit risk on liabilities, including derivatives, measured at fair value; direct and indirect investments in own common equity tier 1 capital instruments; certain amounts exceeding the threshold by 10 percent individually and 15 percent in aggregate
Percent of total amount used to adjust common equity tier 1 capital includes ⁽¹⁾:	80%	60%	40%	20%	0%
Net unrealized gains (losses) on AFS debt and certain marketable equity securities recorded in accumulated OCI; employee benefit plan adjustments recorded in accumulated OCI
Tier 1 capital
Percent of total amount deducted from Tier 1 capital includes:	80%	60%	40%	20%	0%
Deferred tax assets arising from net operating loss and tax credit carryforwards; defined benefit pension fund net assets; net unrealized cumulative gains (losses) related to changes in own credit risk on liabilities, including derivatives, measured at fair value


⁽¹⁾	Represents the phase-out percentage of the exclusion by year (e.g., 20 percent of net unrealized gains (losses) on AFS debt and certain marketable equity securities recorded in accumulated OCI will be included in 2014).

Additionally, Basel 3 revised the regulatory capital treatment for Trust Securities, requiring them to be partially transitioned from Tier 1 capital into Tier 2 capital in 2014 and 2015, until fully excluded from Tier 1 capital in 2016, and partially transitioned and excluded from Tier 2 capital beginning in 2016. The exclusion from Tier 2 capital starts at 40 percent on January 1, 2016, increasing 10 percent each year until the full amount is excluded from Tier 2 capital beginning on January 1, 2022. As of June 30, 2014, our qualifying Trust Securities were $2.9 billion (approximately 23 bps of Tier 1 capital) and will no longer qualify as Tier 1 capital or Tier 2 capital beginning in 2016, subject to the transition provisions.

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Standardized Approach

The Basel 3 Standardized approach measures risk-weighted assets primarily for market risk and credit risk exposures. Exposures subject to market risk, as defined under the rules, are measured on a basis generally consistent with how market risk-weighted assets were measured under the Basel 1 – 2013 Rules. Credit risk exposures are measured by applying fixed risk weights to each exposure, determined based on the characteristics of the exposure, such as type of obligor, Organization for Economic Cooperation and Development (OECD) country risk code and maturity, among others. Under the Standardized approach, no distinction is made for variations in credit quality for corporate exposures, and the economic benefit of collateral is restricted to a limited list of eligible securities and cash. Some key differences between the Standardized and Advanced approaches are that the Advanced approaches include a measure of operational risk and a credit valuation adjustment (CVA) capital charge in credit risk and rely on internal analytical models to measure credit risk-weighted assets. We estimate our common equity tier 1 capital ratio under the Basel 3 Standardized approach, on a fully phased-in basis, to be 9.5 percent at June 30, 2014. As of June 30, 2014, we estimated that our Basel 3 Standardized common equity tier 1 capital would be $137.2 billion and total risk-weighted assets would be $1,436.8 billion, on a fully phased-in basis. This does not include the benefit of the removal of the surcharge applicable to the CRM. For a reconciliation of Basel 3 Standardized – Transition to Basel 3 Standardized estimates on a fully phased-in basis for common equity tier 1 capital and risk-weighted assets, see Table 21. Our estimates under the Basel 3 Standardized approach may be refined over time as a result of further rulemaking or clarification by U.S. banking regulators or as our understanding and interpretation of the rules evolve. Realized results could differ from those estimates and assumptions.

Advanced Approaches

Under the Basel 3 Advanced approaches, risk-weighted assets are determined primarily for market risk and credit risk, similar to the Standardized approach, and also incorporate operational risk. Market risk capital measurements are consistent with the Standardized approach, except for securitization exposures, where the Supervisory Formula Approach is also permitted, and certain differences arising from the inclusion of the CVA capital charge in the credit risk capital measurement. Credit risk exposures are measured using internal ratings-based models to determine the applicable risk weight by estimating the probability of default, loss-given default (LGD) and, in certain instances, exposure at default (EAD). The analytical models primarily rely on internal historical default and loss experience. Operational risk is measured using internal models which rely on both internal and external operational loss experience and data. The Basel 3 Advanced approaches require approval by the U.S. regulatory agencies of our internal analytical models used to calculate risk-weighted assets. If these models are not approved, it would likely lead to an increase in our risk-weighted assets, which in some cases could be significant.

Under the Basel 3 Advanced approaches, we estimated our common equity tier 1 capital ratio, on a fully phased-in basis, to be 9.9 percent at June 30, 2014. As of June 30, 2014, we estimated that our Basel 3 Advanced common equity tier 1 capital would be $137.2 billion and total risk-weighted assets would be $1,387.4 billion, on a fully phased-in basis. This assumes approval by U.S. banking regulators of our internal analytical models, but does not include the benefit of the removal of the surcharge applicable to the CRM. The calculations under Basel 3 require management to make estimates, assumptions and interpretations, including the probability of future events based on historical experience. Our estimates under the Basel 3 Advanced approaches may be refined over time as a result of further rulemaking or clarification by U.S. banking regulators or as our understanding and interpretation of the rules evolve. Realized results could differ from those estimates and assumptions.

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Capital Composition and Ratios

Table 19 presents Bank of America Corporation's capital ratios and related information in accordance with Basel 3 Standardized – Transition as measured at June 30, 2014 and the Basel 1 – 2013 Rules at December 31, 2013.



Table 19
Bank of America Corporation Regulatory Capital
	June 30, 2014						December 31, 2013
(Dollars in millions)	Ratio		Amount		Minimum Required ⁽¹⁾		Ratio		Amount		Minimum Required ⁽¹⁾
Common equity tier 1 capital ⁽²⁾	12.0	%	$	153,582	4.0	%	n/a		n/a		n/a
Tier 1 common capital	n/a		n/a		n/a		10.9	%	$	141,522	n/a
Tier 1 capital	12.5		160,760		6.0		12.2		157,742		6.0		%
Total capital	15.3		197,028		10.0		15.1		196,567		10.0
Tier 1 leverage	7.7		160,760		4.0		7.7		157,742		4.0

									June 30 2014		December 31 2013
Risk-weighted assets (in billions) ⁽²⁾									$	1,285	$	1,298
Adjusted quarterly average total assets (in billions) ⁽³⁾									2,091		2,052


⁽¹⁾	Percent required to meet guidelines to be considered well capitalized under the Prompt Corrective Action framework, except for common equity tier 1 capital which reflects capital adequacy minimum requirements as an advanced approaches bank under Basel 3 during a transition period in 2014.


⁽²⁾	On a pro-forma basis, under Basel 3 Standardized – Transition, the December 31, 2013 common equity tier 1 capital and ratio would have been $152.7 billion and 11.6 percent, and risk-weighted assets would have been $1,316 billion.


⁽³⁾	Reflects adjusted average total assets for the three months ended June 30, 2014 and December 31, 2013.

n/a = not applicable

Common equity tier 1 capital under Basel 3 Standardized – Transition was $153.6 billion at June 30, 2014, an increase of $12.1 billion from Tier 1 common capital under the Basel 1 – 2013 Rules at December 31, 2013. The increase was largely attributable to the impact of certain transition provisions under Basel 3 Standardized – Transition, particularly in regard to deferred tax assets, and earnings. For more information on Basel 3 transition provisions, see Table 18. During the six months ended June 30, 2014, Total capital increased $461 million primarily driven by the increase in common equity tier 1 capital, partially offset by the impact of certain transition provisions under Basel 3 Standardized – Transition, particularly in regard to long-term debt that qualifies as Tier 2 capital. The Tier 1 leverage ratio remained relatively unchanged for the six months ended June 30, 2014 compared to December 31, 2013 as an increase in Tier 1 capital was offset by an increase in adjusted quarterly average total assets. For additional information, see Tables 19 and 20.

At June 30, 2014, an increase or decrease in our common equity tier 1, Tier 1 or Total capital ratios by one bp would require a change of $128 million in common equity tier 1, Tier 1 or Total capital. We could also increase our common equity tier 1, Tier 1 or Total capital ratios by one bp on such date by a reduction in risk-weighted assets of $1.1 billion, $1.0 billion or $837 million, respectively. An increase in our Tier 1 leverage ratio by one bp on such date would require $209 million of additional Tier 1 capital or a reduction of $2.7 billion in adjusted average assets.

Risk-weighted assets decreased $13 billion during the six months ended June 30, 2014 to $1,285 billion primarily due to decreases in residential mortgage and consumer credit card balances, partially offset by the impact of certain transition provisions under the Basel 3 Standardized – Transition and an increase in commercial loans.

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Table 20 presents the capital composition as measured under Basel 3 Standardized – Transition at June 30, 2014 and the Basel 1 – 2013 Rules at December 31, 2013.



Table 20
Capital Composition
(Dollars in millions)	June 30 2014			December 31 2013
Total common shareholders' equity	$	222,565		$	219,333
Goodwill	(69,263		)	(69,844		)
Intangibles, other than mortgage servicing rights and goodwill	(713		)	—
Nonqualifying intangible assets (includes core deposit intangibles, affinity relationships, customer relationships and other intangibles)	—			(4,263		)
Net unrealized (gains) losses on AFS debt securities and net losses on derivatives recorded in accumulated OCI, net-of-tax	1,777			5,538
Unamortized net periodic benefit costs recorded in accumulated OCI, net-of-tax	1,881			2,407
DVA related to liabilities and derivatives ⁽¹⁾	307			2,188
Deferred tax assets arising from net operating loss and tax credit carryforwards ⁽²⁾	(2,780		)	(15,391		)
Other	(192		)	1,554
Common equity tier 1 capital ⁽³⁾	153,582			141,522
Qualifying preferred stock	14,845			10,435
Deferred tax assets arising from net operating loss and tax credit carryforwards under transition	(11,118		)	—
DVA related to liabilities and derivatives under transition	1,229			—
Defined benefit pension fund assets	(658		)	—
Trust preferred securities	2,901			5,785
Other	(21		)	—
Total Tier 1 capital	160,760			157,742
Long-term debt qualifying as Tier 2 capital	14,402			21,175
Non-qualifying trust preferred securities capital instruments subject to phase out from Tier 2 capital	3,880			—
Allowance for loan and lease losses	15,811			17,428
Reserve for unfunded lending commitments	503			484
Allowance for loan and lease losses exceeding 1.25 percent of risk-weighted assets	(1,498		)	(1,637		)
Other	3,170			1,375
Total capital	$	197,028		$	196,567


⁽¹⁾	Represents loss on structured liabilities and derivatives, net-of-tax, that is excluded from common equity tier 1, Tier 1 and Total capital for regulatory capital purposes.


⁽²⁾	June 30, 2014 amount represents phase-in portion under Basel 3 Standardized – Transition. The December 31, 2013 amount represents the full Basel 1 deferred tax asset disallowance.


⁽³⁾	Tier 1 common capital under the Basel 1 – 2013 Rules at December 31, 2013.

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Table 21 presents reconciliations of our common equity tier 1 capital and risk-weighted assets in accordance with the Basel 1 – 2013 Rules and Basel 3 Standardized – Transition to the Basel 3 Standardized approach fully phased-in estimates and Basel 3 Advanced approaches fully phased-in estimates at June 30, 2014 and December 31, 2013. Basel 3 regulatory capital ratios on a fully phased-in basis are considered non-GAAP financial measures until the end of the transition period on January 1, 2018 when adopted and required by U.S. banking regulators.



Table 21
Regulatory Capital Reconciliations^{(1, 2)}
(Dollars in millions)				December 31 2013
Regulatory capital – Basel 1 to Basel 3 (fully phased-in)
Basel 1 Tier 1 capital				$	157,742
Deduction of qualifying preferred stock and trust preferred securities				(16,220		)
Basel 1 Tier 1 common capital				141,522
Deduction of defined benefit pension assets				(829		)
Deferred tax assets and threshold deductions (deferred tax asset temporary differences, MSRs and significant investments)				(5,459		)
Net unrealized losses in accumulated OCI on AFS debt and certain marketable equity securities, and employee benefit plans				(5,664		)
Other deductions, net				(1,624		)
Basel 3 common equity tier 1 capital (fully phased-in)				$	127,946

	June 30 2014
Regulatory capital – Basel 3 transition to fully phased-in
Common equity tier 1 capital (transition)	$	153,582
Adjustments and deductions recognized in Tier 1 capital during transition ⁽³⁾	(10,547		)
Other adjustments and deductions phased in during transition	(5,852		)
Common equity tier 1 capital (fully phased-in)	$	137,183

	June 30 2014			December 31 2013
Risk-weighted assets – As reported to Basel 3 (fully phased-in)
As reported risk-weighted assets	$	1,284,924		$	1,297,593
Changes in risk-weighted assets from reported to fully phased-in	151,901			162,731
Basel 3 Standardized approach risk-weighted assets (fully phased-in)	1,436,825			1,460,324
Changes in risk-weighted assets for advanced models	(49,390		)	(133,027		)
Basel 3 Advanced approaches risk-weighted assets (fully phased-in)	$	1,387,435		$	1,327,297

Regulatory capital ratios
Basel 1 Tier 1 common	n/a			10.9		%
Basel 3 Standardized approach common equity tier 1 (transition)	12.0		%	n/a
Basel 3 Standardized approach common equity tier 1 (fully phased-in)	9.5			8.8
Basel 3 Advanced approaches common equity tier 1 (fully phased-in)	9.9			9.6


⁽¹⁾	Fully phased-in Basel 3 estimates are based on our current understanding of the Standardized and Advanced approaches under the Basel 3 rules, assuming all relevant regulatory model approvals, except for the potential reduction to risk-weighted assets resulting from the removal of the Comprehensive Risk Measure surcharge.


⁽²⁾	On January 1, 2014, the Basel 3 rules became effective, subject to transition provisions primarily related to regulatory deductions and adjustments impacting common equity tier 1 capital and Tier 1 capital. We reported under the Basel 1 – 2013 Rules at December 31, 2013.


⁽³⁾	For more information on the composition of adjustments and deductions, see Table 20.

n/a = not applicable

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Bank of America, N.A. and FIA Card Services, N.A. Regulatory Capital

Table 22 presents regulatory capital information for BANA and FIA at June 30, 2014 and December 31, 2013.



Table 22
Bank of America, N.A. and FIA Card Services, N.A. Regulatory Capital
	June 30, 2014						December 31, 2013
	Actual						Actual
(Dollars in millions)	Ratio		Amount		Minimum Required ⁽¹⁾		Ratio		Amount		Minimum Required ⁽¹⁾
Common equity tier 1 capital
Bank of America, N.A.	12.6	%	$	125,964	4.0	%	n/a		n/a		n/a
FIA Card Services, N.A.	14.7		17,283		4.0		n/a		n/a		n/a
Tier 1 capital
Bank of America, N.A.	12.6		125,964		6.0		12.3	%	$	125,886	6.0	%
FIA Card Services, N.A.	15.7		18,429		6.0		16.8		20,135		6.0
Total capital
Bank of America, N.A.	14.0		140,709		10.0		13.8		141,232		10.0
FIA Card Services, N.A.	17.0		19,934		10.0		18.1		21,672		10.0
Tier 1 leverage
Bank of America, N.A.	9.1		125,964		5.0		9.2		125,886		5.0
FIA Card Services, N.A.	12.1		18,429		5.0		12.9		20,135		5.0


⁽¹⁾	Percent required to meet guidelines to be considered well capitalized under the Prompt Corrective Action framework, except for common equity tier 1 capital which reflects capital adequacy minimum requirements as an advanced approaches bank under Basel 3 during a transition period in 2014.

n/a = not applicable

BANA's Tier 1 capital ratio under Basel 3 Standardized – Transition was 12.6 percent at June 30, 2014, an increase of 22 bps from December 31, 2013 as lower risk-weighted assets and net income in excess of dividends to the parent company were partially offset by the impact of net unrealized gains and losses in accumulated OCI under the Basel 3 transition provisions. The Total capital ratio increased 19 bps to 14.0 percent at June 30, 2014 compared to December 31, 2013. The Tier 1 leverage ratio decreased 11 bps to 9.1 percent at June 30, 2014 compared to December 31, 2013. The increase in the Total capital ratio was driven by the same factors as the Tier 1 capital ratio. The decrease in the Tier 1 leverage ratio was driven by an increase in adjusted quarterly average total assets, partially offset by a slight increase in Tier 1 capital.

FIA's Tier 1 capital ratio under Basel 3 Standardized – Transition was 15.7 percent at June 30, 2014, a decrease of 115 bps from December 31, 2013. The Total capital ratio decreased 115 bps to 17.0 percent at June 30, 2014 compared to December 31, 2013. The Tier 1 leverage ratio decreased 85 bps to 12.1 percent at June 30, 2014 compared to December 31, 2013. The decreases in the Tier 1 capital and Total capital ratios were driven by returns of capital to the parent company, partially offset by earnings and a decrease in risk-weighted assets compared to December 31, 2013. The decrease in the Tier 1 leverage ratio was driven by the decrease in Tier 1 capital, partially offset by a decrease in adjusted quarterly average total assets.

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Other Regulatory Capital Matters

Series T Preferred Stock

In 2013, we entered into an agreement with Berkshire Hathaway, Inc., who (together with affiliates) holds all the outstanding shares of the Corporation's Series T Preferred Stock to amend the terms of the Corporation's Series T Preferred Stock. The material changes to the terms of the Series T Preferred Stock in the amendment were: (1) dividends will no longer be cumulative; (2) the dividend rate will be fixed at 6%; and (3) we may redeem the Series T Preferred Stock only after the fifth anniversary of the effective date of the amendment. These amendments permitted the Series T Preferred Stock to qualify as Tier 1 capital. The amendment was presented to our stockholders and approved at the Corporation's annual meeting of stockholders held on May 7, 2014. The revisions to the Series T Preferred Stock increased our Tier 1 capital by $2.9 billion, which also benefited our Tier 1 capital ratio by 23 bps and our Tier 1 leverage ratio by 14 bps. For more information on the Series T Preferred Stock, see Note 13 – Shareholders' Equity to the Consolidated Financial Statements of the Corporation's 2013 Annual Report on Form 10-K.

Supplementary Leverage Ratio

Basel 3 also will require a calculation of a supplementary leverage ratio, determined by dividing Tier 1 capital by supplementary leverage exposure for each month-end during a fiscal quarter, and then calculating the simple average. Supplementary leverage exposure is comprised of all on-balance sheet assets, plus a measure of certain off-balance sheet exposures, including among others, lending commitments, letters of credit, over-the-counter (OTC) derivatives, repo-style transactions and margin loan commitments. We will be required to disclose our supplementary leverage ratio effective January 1, 2015.

On April 8, 2014, U.S. banking regulators voted to adopt a final rule to modify the supplementary leverage ratio minimum requirements under Basel 3 effective in 2018. This only applies to BHCs with more than $700 billion in total assets or more than $10 trillion in total assets under custody. Effective January 1, 2018, the Corporation will be required to maintain a minimum supplementary leverage ratio of three percent, plus a supplementary leverage buffer of two percent, for a total of five percent. If the Corporation's supplementary leverage buffer is not greater than or equal to two percent, then the Corporation will be subject to mandatory limits on its ability to make distributions of capital to shareholders, whether through dividends, stock repurchases or otherwise. In addition, the insured depository institutions of such BHCs, which for the Corporation includes primarily BANA and FIA, are required to maintain a minimum six percent leverage ratio to be considered "well capitalized."

Also on April 8, 2014, U.S. banking regulators issued a notice of proposed rulemaking (NPR) introducing changes to the method of calculating the supplementary leverage exposure, effectively adopting provisions comparable to a final rule issued by the Basel Committee on Banking Supervision (Basel Committee) on January 12, 2014. Under the NPR, the supplementary leverage exposure would be revised to measure derivatives on a gross basis with cash variation margin reducing the exposure if certain conditions are met, include off-balance sheet commitments measured using the notional amount multiplied by conversion factors between 10 percent and 100 percent consistent with the Standardized approach, and a change to measure written credit derivatives using a notional-based approach with limited netting permitted. Also, the supplementary leverage ratio calculation formula would be modified to divide the Tier 1 capital measured on the last day of the quarter by the daily average during the quarter of the supplementary leverage exposure. The proposal is not yet final and, when finalized, could have provisions significantly different from those currently proposed. The provisions of the NPR, if finalized as currently proposed, could have an impact on certain of our businesses. We continue to evaluate the impact of the proposed NPR on us.

As of June 30, 2014, based on the proposed changes to the supplementary leverage exposure, we estimate the Corporation's supplementary leverage ratio to be in excess of five percent and our primary bank subsidiaries, BANA and FIA, to be above six percent. Our estimate uses Tier 1 capital measured as of June 30, 2014 divided by the simple average of the supplementary leverage exposure at each month end during the quarter.

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Systemically Important Financial Institution Buffer

In November 2011, the Basel Committee published a methodology to identify global systemically important banks (G-SIBs) and impose an additional loss absorbency requirement through the introduction of a buffer of up to 3.5 percent for systemically important financial institutions (SIFIs). The assessment methodology relies on an indicator-based measurement approach to determine a score relative to the global banking industry. The chosen indicators are size, complexity, cross-jurisdictional activity, interconnectedness and substitutability/financial institution infrastructure. Institutions with the highest scores are designated as G-SIBs and are assigned to one of four loss absorbency buckets from one percent to 2.5 percent, in 0.5 percent increments based on each institution's relative score and supervisory judgment. The fifth loss absorbency bucket of 3.5 percent is currently empty and serves to discourage banks from becoming more systemically important.

In July 2013, the Basel Committee updated the November 2011 methodology to recalibrate the substitutability/financial institution infrastructure indicator by introducing a cap on the weighting of that component, and requiring the annual publication by the Financial Stability Board (FSB) of key information necessary to permit each G-SIB to calculate its score and observe its position within the buckets and relative to the industry total for each indicator. Every three years, beginning on January 1, 2016, the Basel Committee will reconsider and recalibrate the bucket thresholds. The Basel Committee and FSB expect banks to change their behavior in response to the incentives of the G-SIB framework, as well as other aspects of Basel 3 and jurisdiction-specific regulations.

The SIFI buffer requirement will begin to phase in effective January 2016, with full implementation in January 2019. Data from 2013, measured as of December 31, 2013, will be used to determine the SIFI buffer that will be effective for us in 2016.

As of June 30, 2014, we estimate our SIFI buffer would be 1.5 percent, based on the publication of the key information used in the SIFI methodology by the Basel Committee in November 2013, and considering the FSB’s report, "Update of group of global systemically important banks." Our SIFI buffer could change each year based on our actions and those of our peers, as the score used to determine each G-SIB’s SIFI buffer is based on the industry total. If our score were to increase, we could be subject to a higher SIFI buffer requirement. U.S. banking regulators have not yet issued proposed or final rules related to the SIFI buffer or disclosure requirements.

For more information on regulatory capital, see Note 16 – Regulatory Requirements and Restrictions to the Consolidated Financial Statements of the Corporation's 2013 Annual Report on Form 10-K.

Broker/Dealer Regulatory Capital and Securities Regulation

The Corporation's principal U.S. broker/dealer subsidiaries are Merrill Lynch, Pierce, Fenner & Smith (MLPF&S) and Merrill Lynch Professional Clearing Corp (MLPCC). MLPCC is a fully-guaranteed subsidiary of MLPF&S and provides clearing and settlement services. Both entities are subject to the net capital requirements of SEC Rule 15c3-1. Both entities are also registered as futures commission merchants and are subject to the Commodity Futures Trading Commission Regulation 1.17.

MLPF&S has elected to compute the minimum capital requirement in accordance with the Alternative Net Capital Requirement as permitted by SEC Rule 15c3-1. At June 30, 2014, MLPF&S's regulatory net capital as defined by Rule 15c3-1 was $10.8 billion and exceeded the minimum requirement of $1.1 billion by $9.7 billion. MLPCC’s net capital of $2.0 billion exceeded the minimum requirement of $398 million by $1.6 billion.

In accordance with the Alternative Net Capital Requirements, MLPF&S is required to maintain tentative net capital in excess of $1.0 billion, net capital in excess of $500 million and notify the SEC in the event its tentative net capital is less than $5.0 billion. At June 30, 2014, MLPF&S had tentative net capital and net capital in excess of the minimum and notification requirements.

Merrill Lynch International (MLI), a U.K. investment firm, is regulated by the Prudential Regulation Authority and the Financial Conduct Authority, and is subject to certain regulatory capital requirements. At June 30, 2014, MLI’s capital resources were $32.4 billion which exceeded the minimum requirement of $19.3 billion with enough excess to cover any additional requirements as set by the regulators.

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Common and Preferred Stock Dividends

For a summary of our declared quarterly cash dividends on common stock during the second quarter of 2014 and through July 29, 2014, see Note 11 – Shareholders' Equity to the Consolidated Financial Statements.

Table 23 is a summary of our cash dividend declarations on preferred stock during the second quarter of 2014 and through July 29, 2014. During the second quarter of 2014, cash dividends declared on preferred stock were $256 million. For more information on preferred stock, see Note 11 – Shareholders' Equity to the Consolidated Financial Statements.



Table 23
Preferred Stock Cash Dividend Summary
Preferred Stock	Outstanding Notional Amount (in millions)		Declaration Date	Record Date	Payment Date	Per Annum Dividend Rate		Dividend Per Share
Series B ⁽¹⁾	$	1	June 18, 2014	July 11, 2014	July 25, 2014	7.00	%	$	1.75
Series D ⁽²⁾	$	654	April 2, 2014	May 30, 2014	June 16, 2014	6.204	%	$	0.38775
			July 9, 2014	August 29, 2014	September 15, 2014	6.204		0.38775
Series E ⁽²⁾	$	317	April 2, 2014	April 30, 2014	May 15, 2014	Floating		$	0.24722
			July 9, 2014	July 31, 2014	August 15, 2014	Floating		0.25556
Series F	$	141	April 2, 2014	May 30, 2014	June 16, 2014	Floating		$	1,022.22222
			July 9, 2014	August 29, 2014	September 15, 2014	Floating		1,022.22222
Series G	$	493	April 2, 2014	May 30, 2014	June 16, 2014	Adjustable		$	1,022.22222
			July 9, 2014	August 29, 2014	September 15, 2014	Adjustable		1,022.22222
Series I ⁽²⁾	$	365	April 2, 2014	June 15, 2014	July 1, 2014	6.625	%	$	0.4140625
			July 9, 2014	September 15, 2014	October 1, 2014	6.625		0.4140625
Series K ^{(3, 4)}	$	1,544	July 9, 2014	July 15, 2014	July 30, 2014	Fixed-to-floating		$	40.00
Series L	$	3,080	June 18, 2014	July 1, 2014	July 30, 2014	7.25	%	$	18.125
Series M ^{(3, 4)}	$	1,310	April 2, 2014	April 30, 2014	May 15, 2014	Fixed-to-floating		$	40.625
Series T ⁽⁵⁾	$	5,000	June 18, 2014	June 25, 2014	July 10, 2014	6.00	%	$	1,500.00
Series U ^{(3, 4)}	$	1,000	April 2, 2014	May 15, 2014	June 2, 2014	Fixed-to-floating		$	26.00
Series 1 ⁽⁶⁾	$	98	April 2, 2014	May 15, 2014	May 28, 2014	Floating		$	0.18750
			July 9, 2014	August 15, 2014	August 28, 2014	Floating		0.18750
Series 2 ⁽⁶⁾	$	299	April 2, 2014	May 15, 2014	May 28, 2014	Floating		$	0.18542
			July 9, 2014	August 15, 2014	August 28, 2014	Floating		0.19167
Series 3 ⁽⁶⁾	$	653	April 2, 2014	May 15, 2014	May 28, 2014	6.375	%	$	0.3984375
			July 9, 2014	August 15, 2014	August 28, 2014	6.375		0.3984375
Series 4 ⁽⁶⁾	$	210	April 2, 2014	May 15, 2014	May 28, 2014	Floating		$	0.24722
			July 9, 2014	August 15, 2014	August 28, 2014	Floating		0.25556
Series 5 ⁽⁶⁾	$	422	April 2, 2014	May 1, 2014	May 21, 2014	Floating		$	0.24722
			July 9, 2014	August 1, 2014	August 21, 2014	Floating		0.25556


⁽¹⁾	Dividends are cumulative.


⁽²⁾	Dividends per depositary share, each representing a 1/1,000^th interest in a share of preferred stock.


⁽³⁾	Initially pays dividends semi-annually.


⁽⁴⁾	Dividends per depositary share, each representing a 1/25^th interest in a share of preferred stock.


⁽⁵⁾	For more information on the amendment of the Series T Preferred Stock, see Capital Management – Other Regulatory Capital Matters on page 72.


⁽⁶⁾	Dividends per depositary share, each representing a 1/1,200^th interest in a share of preferred stock.

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Liquidity Risk

Funding and Liquidity Risk Management

We define liquidity risk as the potential inability to meet our contractual and contingent financial obligations, on- or off-balance sheet, as they come due. Our primary liquidity objective is to provide adequate funding for our businesses throughout market cycles, including periods of financial stress. To achieve that objective, we analyze and monitor our liquidity risk, maintain excess liquidity and access diverse funding sources including our stable deposit base. We define excess liquidity as readily available assets, limited to cash and high-quality, liquid, unencumbered securities that we can use to meet our funding requirements as those obligations arise.

Global funding and liquidity risk management activities are centralized within Corporate Treasury. We believe that a centralized approach to funding and liquidity risk management enhances our ability to monitor liquidity requirements, maximizes access to funding sources, minimizes borrowing costs and facilitates timely responses to liquidity events. For more information regarding global funding and liquidity risk management, see Liquidity Risk – Funding and Liquidity Risk Management on page 71 of the MD&A of the Corporation's 2013 Annual Report on Form 10-K.

Global Excess Liquidity Sources and Other Unencumbered Assets

We maintain excess liquidity available to Bank of America Corporation, or the parent company and selected subsidiaries in the form of cash and high-quality, liquid, unencumbered securities. These assets, which we call our Global Excess Liquidity Sources, serve as our primary means of liquidity risk mitigation. Our cash is primarily on deposit with the Federal Reserve and central banks outside of the U.S. We limit the composition of high-quality, liquid, unencumbered securities to U.S. government securities, U.S. agency securities, U.S. agency MBS and a select group of non-U.S. government and supranational securities. We believe we can quickly obtain cash for these securities, even in stressed market conditions, through repurchase agreements or outright sales. We hold our Global Excess Liquidity Sources in entities that allow us to meet the liquidity requirements of our global businesses, and we consider the impact of potential regulatory, tax, legal and other restrictions that could limit the transferability of funds among entities. Our Global Excess Liquidity Sources are similar in composition to what would qualify as High Quality Liquid Assets under the proposed LCR rulemaking. For more information on the proposed rulemaking, see Liquidity Risk – Basel 3 Liquidity Standards on page 76.

Our Global Excess Liquidity Sources were $431 billion and $376 billion at June 30, 2014 and December 31, 2013 and were maintained as presented in Table 24.



Table 24
Global Excess Liquidity Sources
(Dollars in billions)	June 30 2014		December 31 2013		Average for Three Months Ended June 30, 2014
Parent company	$	92	$	95	$	88
Bank subsidiaries	303		249		297
Other regulated entities	36		32		35
Total Global Excess Liquidity Sources	$	431	$	376	$	420

As shown in Table 24, parent company Global Excess Liquidity Sources totaled $92 billion and $95 billion at June 30, 2014 and December 31, 2013. The decrease in parent company liquidity was primarily due to litigation settlements, partially offset by bank subsidiary inflows. Typically, parent company cash is deposited with BANA.

Global Excess Liquidity Sources available to our bank subsidiaries totaled $303 billion and $249 billion at June 30, 2014 and December 31, 2013. The increase in bank subsidiaries' liquidity was primarily due to deposit growth, increased short-term borrowings and long-term debt, and an increase in the fair value of debt securities, partially offset by dividends and returns of capital to the parent company. Liquidity amounts at bank subsidiaries exclude the cash deposited by the parent company. Our bank subsidiaries can also generate incremental liquidity by pledging a range of other unencumbered loans and securities to certain FHLBs and the Federal Reserve Discount Window. The cash we could have obtained by borrowing against this pool of specifically-identified eligible assets was approximately $234 billion and $218 billion at June 30, 2014 and December 31, 2013. We have established operational procedures to enable us to borrow against these assets, including regularly monitoring our total pool of eligible loans and securities collateral. Eligibility is defined by guidelines outlined by the FHLBs and the Federal Reserve and is subject to change at their discretion. Due to regulatory restrictions, liquidity generated by the bank subsidiaries can only be used to fund obligations within the bank subsidiaries and can only be transferred to the parent company or non-bank subsidiaries with prior regulatory approval.

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Global Excess Liquidity Sources available to our other regulated entities totaled $36 billion and $32 billion at June 30, 2014 and December 31, 2013. Our other regulated entities also held other unencumbered investment-grade securities and equities that we believe could be used to generate additional liquidity. Liquidity held in an other regulated entity is primarily available to meet the obligations of that entity and transfers to the parent company or to any other subsidiary may be subject to prior regulatory approval due to regulatory restrictions and minimum requirements.

Table 25 presents the composition of Global Excess Liquidity Sources at June 30, 2014 and December 31, 2013.



Table 25
Global Excess Liquidity Sources Composition
(Dollars in billions)	June 30 2014		December 31 2013
Cash on deposit	$	111	$	90
U.S. Treasuries	49		20
U.S. agency securities and mortgage-backed securities	245		245
Non-U.S. government and supranational securities	26		21
Total Global Excess Liquidity Sources	$	431	$	376

Time to Required Funding and Stress Modeling

We use a variety of metrics to determine the appropriate amounts of excess liquidity to maintain at the parent company, our bank subsidiaries and other regulated entities. One metric we use to evaluate the appropriate level of excess liquidity at the parent company is "Time to Required Funding." This debt coverage measure indicates the number of months that the parent company can continue to meet its unsecured contractual obligations as they come due using only its Global Excess Liquidity Sources without issuing any new debt or accessing any additional liquidity sources. We define unsecured contractual obligations for purposes of this metric as maturities of senior or subordinated debt issued or guaranteed by Bank of America Corporation. These include certain unsecured debt instruments, primarily structured liabilities, which we may be required to settle for cash prior to maturity. Our Time to Required Funding was 38 months at June 30, 2014. For purposes of calculating Time to Required Funding, at June 30, 2014, we have included in the amount of unsecured contractual obligations the $8.6 billion liability related to the BNY Mellon Settlement. The BNY Mellon Settlement is subject to final court approval and certain other conditions, and the timing of payment is not certain.

We utilize liquidity stress models to assist us in determining the appropriate amounts of excess liquidity to maintain at the parent company and our bank subsidiaries and other regulated entities. These models are risk sensitive and have become increasingly important in analyzing our potential contractual and contingent cash outflows beyond those outflows considered in the Time to Required Funding analysis. We evaluate the liquidity requirements under a range of scenarios with varying levels of severity and time horizons. The scenarios we consider and utilize incorporate market-wide and Corporation-specific events, including potential credit rating downgrades for the parent company and our subsidiaries, and are based on historical experience, regulatory guidance, and both expected and unexpected future events.

The types of potential contractual and contingent cash outflows we consider in our scenarios may include, but are not limited to, upcoming contractual maturities of unsecured debt and reductions in new debt issuance; diminished access to secured financing markets; potential deposit withdrawals; increased draws on loan commitments, liquidity facilities and letters of credit, including Variable Rate Demand Notes; additional collateral that counterparties could call if our credit ratings were downgraded; collateral and margin requirements arising from market value changes; and potential liquidity required to maintain businesses and finance customer activities. Changes in certain market factors, including, but not limited to, credit rating downgrades, could negatively impact potential contractual and contingent outflows and the related financial instruments, and in some cases these impacts could be material to our financial results.

We consider all sources of funds that we could access during each stress scenario and focus particularly on matching available sources with corresponding liquidity requirements by legal entity. We also use the stress modeling results to manage our asset-liability profile and establish limits and guidelines on certain funding sources and businesses.

Basel 3 Liquidity Standards

The Basel Committee has issued two liquidity risk-related standards that are considered part of the Basel 3 liquidity standards: the LCR and the Net Stable Funding Ratio (NSFR). The LCR is calculated as the amount of a financial institution's unencumbered, high-quality, liquid assets relative to the net cash outflows the institution could encounter under a 30-day period of significant liquidity stress, expressed as a percentage. The Basel Committee's liquidity risk-related standards do not directly apply to U.S. financial institutions currently, and would only apply once U.S. rules are finalized by the U.S. banking regulators.

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On October 24, 2013, the U.S. banking regulators jointly proposed regulations that would implement LCR requirements for the largest U.S. financial institutions on a consolidated basis and for their subsidiary depository institutions with total assets greater than $10 billion. Under the proposal, an initial minimum LCR of 80 percent would be required in January 2015, and would thereafter increase in 10 percentage point increments annually through January 2017. These minimum requirements would be applicable to the Corporation on a consolidated basis and at our insured depository institutions, including BANA, FIA and Bank of America California, N.A. We are evaluating the proposal and the potential impact on our businesses, and we expect to meet or exceed the final LCR requirement within the regulatory timelines.

On January 12, 2014, the Basel Committee issued for comment a revised NSFR, the standard that is intended to reduce funding risk over a longer time horizon. The NSFR is designed to ensure an appropriate amount of stable funding, generally capital and liabilities maturing beyond one year, given the mix of assets and off-balance sheet items. The revised proposal would align the NSFR to some of the 2013 revisions to the LCR and give more credit to a wider range of funding. The proposal also includes adjustments to the stable funding required for certain types of assets, some of which reduce the stable funding requirement and some of which increase it. The Basel Committee expects to complete the NSFR recalibration in 2014 and have the minimum standard in place by 2018. Assuming adoption by the U.S. banking regulators, we expect to meet the final NSFR requirement within the regulatory timelines.

Diversified Funding Sources

We fund our assets primarily with a mix of deposits and secured and unsecured liabilities through a centralized, globally coordinated funding strategy. We diversify our funding globally across products, programs, markets, currencies and investor groups.

The primary benefits expected from our centralized funding strategy include greater control, reduced funding costs, wider name recognition by investors and greater flexibility to meet the variable funding requirements of subsidiaries. Where regulations, time zone differences or other business considerations make parent company funding impractical, certain other subsidiaries may issue their own debt.

We fund a substantial portion of our lending activities through our deposits, which were $1.13 trillion and $1.12 trillion at June 30, 2014 and December 31, 2013. Deposits are primarily generated by our CBB, GWIM and Global Banking segments. These deposits are diversified by clients, product type and geography, and the majority of our U.S. deposits are insured by the FDIC. We consider a substantial portion of our deposits to be a stable, low-cost and consistent source of funding. We believe this deposit funding is generally less sensitive to interest rate changes, market volatility or changes in our credit ratings than wholesale funding sources. Our lending activities may also be financed through secured borrowings, including credit card securitizations and securitizations with GSEs, the FHA and private-label investors, as well as Federal Home Loan Bank (FHLB) loans. During the three and six months ended June 30, 2014, $1.3 billion and $3.0 billion of new senior debt was issued to third-party investors from the credit card securitization trusts.

Our trading activities in other regulated entities are primarily funded on a secured basis through securities lending and repurchase agreements and these amounts will vary based on customer activity and market conditions. We believe funding these activities in the secured financing markets is more cost-efficient and less sensitive to changes in our credit ratings than unsecured financing. Repurchase agreements are generally short-term and often overnight. Disruptions in secured financing markets for financial institutions have occurred in prior market cycles which resulted in adverse changes in terms or significant reductions in the availability of such financing. We manage the liquidity risks arising from secured funding by sourcing funding globally from a diverse group of counterparties, providing a range of securities collateral and pursuing longer durations, when appropriate. For more information on secured financing agreements, see Note 9 – Federal Funds Sold or Purchased, Securities Financing Agreements and Short-term Borrowings to the Consolidated Financial Statements.

We issue the majority of our long-term unsecured debt at the parent company. During the three and six months ended June 30, 2014, we issued $11.2 billion and $18.2 billion of long-term unsecured debt, including structured liabilities of $392 million and $1.1 billion, a majority of which were issued at the parent company. We also issue long-term unsecured debt through BANA in a variety of maturities and currencies to achieve cost-efficient funding and to maintain an appropriate maturity profile. During three and six months ended June 30, 2014, we issued $750 million and $3.3 billion of unsecured long-term debt through BANA. While the cost and availability of unsecured funding may be negatively impacted by general market conditions or by matters specific to the financial services industry or the Corporation, we seek to mitigate refinancing risk by actively managing the amount of our borrowings that we anticipate will mature within any month or quarter.

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Table 26 presents the carrying value of aggregate annual contractual maturities of long-term debt at June 30, 2014. During the six months ended June 30, 2014, we had total long-term debt maturities and purchases of $31.9 billion consisting of $19.8 billion for Bank of America Corporation, $4.8 billion of other debt and $7.3 billion of consolidated variable interest entities (VIEs).



Table 26
Long-term Debt By Maturity
	Remainder of
(Dollars in millions)	2014		2015		2016		2017		2018		Thereafter		Total
Bank of America Corporation
Senior notes	$	9,734	$	15,288	$	18,054	$	18,213	$	20,378	$	53,710	$	135,377
Senior structured notes	3,005		5,842		3,126		1,735		2,000		11,448		27,156
Subordinated notes	—		1,243		5,208		5,667		3,326		8,925		24,369
Junior subordinated notes	—		—		—		—		—		7,257		7,257
Total Bank of America Corporation	12,739		22,373		26,388		25,615		25,704		81,340		194,159
Bank of America, N.A.
Senior notes	34		755		2,501		5,164		—		150		8,604
Subordinated notes	—		—		1,076		3,613		—		1,621		6,310
Advances from Federal Home Loan Banks	1,257		4,502		6,003		10		11		159		11,942
Total Bank of America, N.A.	1,291		5,257		9,580		8,787		11		1,930		26,856
Other debt
Senior notes	5		25		—		1		—		—		31
Structured liabilities	1,297		2,128		2,155		2,475		1,391		7,729		17,175
Junior subordinated notes	—		—		—		—		—		405		405
Other	200		55		932		434		48		443		2,112
Total other debt	1,502		2,208		3,087		2,910		1,439		8,577		19,723
Total long-term debt excluding consolidated VIEs	15,532		29,838		39,055		37,312		27,154		91,847		240,738
Long-term debt of consolidated VIEs	2,726		1,213		1,680		2,770		148		7,796		16,333
Total long-term debt	$	18,258	$	31,051	$	40,735	$	40,082	$	27,302	$	99,643	$	257,071

Table 27 presents our long-term debt by major currency at June 30, 2014 and December 31, 2013.



Table 27
Long-term Debt By Major Currency
(Dollars in millions)	June 30 2014		December 31 2013
U.S. Dollar	$	193,610	$	176,294
Euro	38,459		46,029
British Pound	8,997		9,772
Japanese Yen	8,288		9,115
Canadian Dollar	2,079		2,402
Australian Dollar	1,540		1,870
Swiss Franc	1,271		1,274
Other	2,827		2,918
Total long-term debt	$	257,071	$	249,674

Total long-term debt increased $7.4 billion, or three percent, during the six months ended June 30, 2014, primarily driven by increased issuances related to actions we have taken in connection with anticipated Basel 3 LCR requirements. We may, from time to time, purchase outstanding debt instruments in various transactions, depending on prevailing market conditions, liquidity and other factors. In addition, our other regulated entities may make markets in our debt instruments to provide liquidity for investors. For more information on long-term debt funding, see Note 11 – Long-term Debt to the Consolidated Financial Statements of the Corporation's 2013 Annual Report on Form 10-K and for more information regarding funding and liquidity risk management, see page 71 of the MD&A of the Corporation's 2013 Annual Report on Form 10-K.

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We use derivative transactions to manage the duration, interest rate and currency risks of our borrowings, considering the characteristics of the assets they are funding. For further details on our ALM activities, see Interest Rate Risk Management for Nontrading Activities on page 128.

We also diversify our unsecured funding sources by issuing various types of debt instruments including structured liabilities, which are debt obligations that pay investors returns linked to other debt or equity securities, indices, currencies or commodities. We typically hedge the returns we are obligated to pay on these liabilities with derivative positions and/or investments in the underlying instruments, so that from a funding perspective, the cost is similar to our other unsecured long-term debt. We could be required to settle certain structured liability obligations for cash or other securities prior to maturity under certain circumstances, which we consider for liquidity planning purposes. We believe, however, that a portion of such borrowings will remain outstanding beyond the earliest put or redemption date. We had outstanding structured liabilities with a carrying value of $44.8 billion and $48.4 billion at June 30, 2014 and December 31, 2013.

Substantially all of our senior and subordinated debt obligations contain no provisions that could trigger a requirement for an early repayment, require additional collateral support, result in changes to terms, accelerate maturity or create additional financial obligations upon an adverse change in our credit ratings, financial ratios, earnings, cash flows or stock price.

Contingency Planning

We maintain contingency funding plans that outline our potential responses to liquidity stress events at various levels of severity. These policies and plans are based on stress scenarios and include potential funding strategies and communication and notification procedures that we would implement in the event we experienced stressed liquidity conditions. We periodically review and test the contingency funding plans to validate efficacy and assess readiness.

Our U.S. bank subsidiaries can access contingency funding through the Federal Reserve Discount Window. Certain non-U.S. subsidiaries have access to central bank facilities in the jurisdictions in which they operate. While we do not rely on these sources in our liquidity modeling, we maintain the policies, procedures and governance processes that would enable us to access these sources if necessary.

Credit Ratings

Our borrowing costs and ability to raise funds are impacted by our credit ratings. In addition, credit ratings may be important to customers or counterparties when we compete in certain markets and when we seek to engage in certain transactions, including OTC derivatives. Thus, it is our objective to maintain high-quality credit ratings, and management maintains an active dialogue with the rating agencies.

Credit ratings and outlooks are opinions expressed by rating agencies on our creditworthiness and that of our obligations or securities, including long-term debt, short-term borrowings, preferred stock and other securities, including asset securitizations. Our credit ratings are subject to ongoing review by the rating agencies, and they consider a number of factors, including our own financial strength, performance, prospects and operations as well as factors not under our control. The rating agencies could make adjustments to our ratings at any time, and they provide no assurances that they will maintain our ratings at current levels.

Other factors that influence our credit ratings include changes to the rating agencies' methodologies for our industry or certain security types, the rating agencies' assessment of the general operating environment for financial services companies, our mortgage exposures (including litigation), our relative positions in the markets in which we compete, reputation, liquidity position, diversity of funding sources, funding costs, the level and volatility of earnings, corporate governance and risk management policies, capital position, capital management practices, and current or future regulatory and legislative initiatives.

All three agencies have indicated that, as a systemically important financial institution, the senior credit ratings of the Corporation and Bank of America, N.A. (or in the case of Moody's Investors Service, Inc. (Moody's), only the ratings of Bank of America, N.A.) currently reflect the expectation that, if necessary, we would receive significant support from the U.S. government, and that they will continue to assess such support in the context of sovereign financial strength and regulatory and legislative developments.

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On March 26, 2014, Fitch Ratings (Fitch) concluded their periodic review of 12 large, complex securities trading and universal banks, including Bank of America Corporation. As a part of this action, Fitch affirmed all of the Corporation’s credit ratings and revised its outlook on the ratings to negative from stable. The revised outlook reflects Fitch's expectation that the probability of the U.S. government providing support to a systemically important financial institution during a crisis is likely to decline due to the orderly liquidation provisions of the Financial Reform Act. On December 20, 2013, Standard & Poor's Ratings Services (S&P) affirmed the ratings of Bank of America Corporation. S&P continues to evaluate the possible removal of uplift for extraordinary government support in its holding company ratings for the U.S. banks that it views as having high systemic importance. Due to this ongoing evaluation and Corporation-specific factors, S&P maintained its negative outlook on the Corporation's ratings. On November 14, 2013, Moody's concluded its review of the ratings for Bank of America and certain other systemically important U.S. BHCs, affirming our current ratings and noting that those ratings no longer incorporate any uplift for government support. Concurrently, Moody's upgraded Bank of America, N.A.'s senior debt and stand-alone ratings by one notch, citing a number of positive developments at Bank of America. Moody's also moved its outlook for all of our ratings to stable.

Table 28 presents the Corporation's current long-term/short-term senior debt ratings and outlooks expressed by the rating agencies.

Table 28

Senior Debt Ratings

Moody's Investors Service

Standard & Poor's

Fitch Ratings

Long-term

Short-term

Outlook

Long-term

Short-term

Outlook

Long-term

Short-term

Outlook

Bank of America Corporation

Baa2

P-2

Stable

A-

A-2

Negative

Bank of America, N.A.

P-1

Stable

A-1

Negative

Merrill Lynch, Pierce, Fenner & Smith

A-1

Negative

Merrill Lynch International

A-1

Negative

NR = not rated

A reduction in certain of our credit ratings or the ratings of certain asset-backed securitizations may have a material adverse effect on our liquidity, potential loss of access to credit markets, the related cost of funds, our businesses and on certain trading revenues, particularly in those businesses where counterparty creditworthiness is critical. In addition, under the terms of certain OTC derivative contracts and other trading agreements, in the event of downgrades of our or our rated subsidiaries' credit ratings, the counterparties to those agreements may require us to provide additional collateral, or to terminate these contracts or agreements, which could cause us to sustain losses and/or adversely impact our liquidity. If the short-term credit ratings of our parent company, bank or broker/dealer subsidiaries were downgraded by one or more levels, the potential loss of access to short-term funding sources such as repo financing and the effect on our incremental cost of funds could be material.

Table 29 presents the amount of additional collateral contractually required by derivative contracts and other trading agreements at June 30, 2014 if the rating agencies had downgraded their long-term senior debt ratings for the Corporation or certain subsidiaries by one incremental notch and by an additional second incremental notch.



Table 29
Additional Collateral Required to be Posted Upon Downgrade
	June 30, 2014
(Dollars in millions)	One incremental notch		Second incremental notch
Bank of America Corporation	$	1,119	$	3,275
Bank of America, N.A. and subsidiaries ⁽¹⁾	778		2,218


⁽¹⁾	Included in Bank of America Corporation collateral requirements in this table.

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Table 30 presents the derivative liability that would be subject to unilateral termination by counterparties and the amounts of collateral that would have been posted at June 30, 2014 if the rating agencies had downgraded their long-term senior debt ratings for the Corporation or certain subsidiaries by one incremental notch and by an additional second incremental notch.



Table 30
Derivative Liability Subject to Unilateral Termination Upon Downgrade
	June 30, 2014
(Dollars in millions)	One incremental notch		Second incremental notch
Derivative liability	$	1,403	$	2,379
Collateral posted	1,158		1,914

While certain potential impacts are contractual and quantifiable, the full scope of the consequences of a credit ratings downgrade to a financial institution is inherently uncertain, as it depends upon numerous dynamic, complex and inter-related factors and assumptions, including whether any downgrade of a company's long-term credit ratings precipitates downgrades to its short-term credit ratings, and assumptions about the potential behaviors of various customers, investors and counterparties. For more information on potential impacts of credit rating downgrades, see Liquidity Risk – Time to Required Funding and Stress Modeling on page 76.

For more information on the additional collateral and termination payments that could be required in connection with certain OTC derivative contracts and other trading agreements as a result of such a credit rating downgrade, see Note 2 – Derivatives to the Consolidated Financial Statements and Item 1A. Risk Factors of the Corporation's 2013 Annual Report on Form 10-K.

On June 6, 2014, S&P affirmed its AA+ long-term and A-1+ short-term sovereign credit rating on the U.S. government with a stable outlook. On March 21, 2014, Fitch affirmed its AAA long-term and F1+ short-term sovereign credit rating on the U.S. government with a stable outlook. This resolved the rating watch negative that was placed on the ratings on October 15, 2013. On July 18, 2013, Moody's revised its outlook on the U.S. government to stable from negative and affirmed its Aaa long-term sovereign credit rating on the U.S. government.

Credit Risk Management

Credit quality continued to improve during the second quarter of 2014 due in part to improving economic conditions. In addition, our proactive credit risk management activities positively impacted the credit portfolio as charge-offs and delinquencies continued to improve. For additional information, see Executive Summary – Second Quarter 2014 Economic and Business Environment on page 4.

We proactively refine our underwriting and credit management practices as well as credit standards to meet the changing economic environment. To actively mitigate losses and enhance customer support in our consumer businesses, we have in place collection programs and loan modification and customer assistance infrastructures. We utilize a number of actions to mitigate losses in the commercial businesses including increasing the frequency and intensity of portfolio monitoring, hedging activity and our practice of transferring management of deteriorating commercial exposures to independent special asset officers as credits enter criticized categories.

We have non-U.S. exposure largely in Europe and Asia Pacific. Our exposure to certain European countries, including Greece, Ireland, Italy, Portugal and Spain, has experienced varying degrees of financial stress. For more information on our exposures and related risks in non-U.S. countries, see Non-U.S. Portfolio on page 113 and Item 1A. Risk Factors of the Corporation's 2013 Annual Report on Form 10-K.

For more information on our credit risk management activities, see Consumer Portfolio Credit Risk Management on page 82, Commercial Portfolio Credit Risk Management on page 102, Non-U.S. Portfolio on page 113, Provision for Credit Losses and Allowance for Credit Losses both on page 117, and Note 4 – Outstanding Loans and Leases and Note 5 – Allowance for Credit Losses to the Consolidated Financial Statements.

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Consumer Portfolio Credit Risk Management

Credit risk management for the consumer portfolio begins with initial underwriting and continues throughout a borrower's credit cycle. Statistical techniques in conjunction with experiential judgment are used in all aspects of portfolio management including underwriting, product pricing, risk appetite, setting credit limits, and establishing operating processes and metrics to quantify and balance risks and returns. Statistical models are built using detailed behavioral information from external sources such as credit bureaus and/or internal historical experience. These models are a component of our consumer credit risk management process and are used in part to assist in making both new and ongoing credit decisions, as well as portfolio management strategies, including authorizations and line management, collection practices and strategies, and determination of the allowance for loan and lease losses and allocated capital for credit risk.

From January 2008 through the second quarter of 2014, Bank of America and Countrywide have completed approximately 1.4 million loan modifications with customers. During the second quarter of 2014, we completed approximately 21,000 customer loan modifications with a total unpaid principal balance of approximately $4 billion, including approximately 12,000 permanent modifications under the U.S. government's Making Home Affordable Program. Of the loan modifications completed during the second quarter of 2014, in terms of both the volume of modifications and the unpaid principal balance associated with the underlying loans, more than half were in the Corporation's HFI portfolio. The most common types of modifications include a combination of rate reduction and/or capitalization of past due amounts which represented 67 percent of the volume of modifications completed during the quarter, while capitalization of past due amounts represented 11 percent, principal forbearance represented nine percent and principal reductions and forgiveness represented four percent. For modified loans on our balance sheet, these modification types are generally considered troubled debt restructurings (TDRs). For more information on TDRs and portfolio impacts, see Consumer Portfolio Credit Risk Management – Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity on page 99 and Note 4 – Outstanding Loans and Leases to the Consolidated Financial Statements.

Consumer Credit Portfolio

Improvement in the U.S. economy, labor markets and home prices continued during the three and six months ended June 30, 2014 resulting in improved credit quality and lower credit losses across all major consumer portfolios compared to the same periods in 2013. Consumer loans 30 days or more past due declined during the six months ended June 30, 2014 across all consumer portfolios as a result of improved delinquency trends. Although home prices have shown steady improvement since the beginning of 2012, they have not fully recovered to their 2006 levels.

Improved credit quality, increased home prices and continued loan balance run-off across the consumer portfolio drove a $2.1 billion decrease in the consumer allowance for loan and lease losses during the six months ended June 30, 2014 to $11.3 billion at June 30, 2014. For additional information, see Allowance for Credit Losses on page 117.

For more information on our accounting policies regarding delinquencies, nonperforming status, charge-offs and TDRs for the consumer portfolio, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation's 2013 Annual Report on Form 10-K. For more information on representations and warranties related to our residential mortgage and home equity portfolios, see Off-Balance Sheet Arrangements and Contractual Obligations – Representations and Warranties on page 55 and Note 7 – Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial Statements.

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Table 31 presents our outstanding consumer loans and leases, and the PCI loan portfolio. In addition to being included in the "Outstandings" columns in Table 31, PCI loans are also shown separately, net of purchase accounting adjustments, in the "Purchased Credit-impaired Loan Portfolio" columns. The impact of the PCI loan portfolio on certain credit statistics is reported where appropriate. For more information on PCI loans, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 93 and Note 4 – Outstanding Loans and Leases to the Consolidated Financial Statements.



Table 31
Consumer Loans and Leases
	Outstandings				Purchased Credit-impaired Loan Portfolio
(Dollars in millions)	June 30 2014		December 31 2013		June 30 2014		December 31 2013
Residential mortgage ⁽¹⁾	$	237,136	$	248,066	$	17,337	$	18,672
Home equity	89,499		93,672		6,067		6,593
U.S. credit card	89,020		92,338		n/a		n/a
Non-U.S. credit card	11,999		11,541		n/a		n/a
Direct/Indirect consumer ⁽²⁾	82,586		82,192		n/a		n/a
Other consumer ⁽³⁾	2,079		1,977		n/a		n/a
Consumer loans excluding loans accounted for under the fair value option	512,319		529,786		23,404		25,265
Loans accounted for under the fair value option ⁽⁴⁾	2,154		2,164		n/a		n/a
Total consumer loans and leases	$	514,473	$	531,950	$	23,404	$	25,265


⁽¹⁾	Outstandings include pay option loans of $3.7 billion and $4.4 billion at June 30, 2014 and December 31, 2013. We no longer originate pay option loans.

⁽²⁾

Outstandings include dealer financial services loans of $37.7 billion and $38.5 billion, unsecured consumer lending loans of $2.0 billion and $2.7 billion, U.S. securities-based lending loans of $33.8 billion and $31.2 billion, non-U.S. consumer loans of $4.4 billion and $4.7 billion, student loans of $3.8 billion and $4.1 billion and other consumer loans of $937 million and $1.0 billion at June 30, 2014 and December 31, 2013.


⁽³⁾	Outstandings include consumer finance loans of $1.1 billion and $1.2 billion, consumer leases of $819 million and $606 million, consumer overdrafts of $170 million and $176 million and other non-U.S. consumer loans of $3 million and $5 million at June 30, 2014 and December 31, 2013.

⁽⁴⁾

Consumer loans accounted for under the fair value option include residential mortgage loans of $2.0 billion and $2.0 billion and home equity loans of $170 million and $147 million at June 30, 2014 and December 31, 2013. For more information on the fair value option, see Consumer Portfolio Credit Risk Management – Consumer Loans Accounted for Under the Fair Value Option on page 98 and Note 15 – Fair Value Option to the Consolidated Financial Statements.

n/a = not applicable

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Table 32 presents consumer nonperforming loans and accruing consumer loans past due 90 days or more. Nonperforming loans do not include past due consumer credit card loans, other unsecured loans and in general, consumer non-real estate-secured loans (loans discharged in Chapter 7 bankruptcy are included) as these loans are typically charged off no later than the end of the month in which the loan becomes 180 days past due. Real estate-secured past due consumer loans that are insured by the FHA or individually insured under long-term stand-by agreements with FNMA and FHLMC (collectively, the fully-insured loan portfolio) are reported as accruing as opposed to nonperforming since the principal repayment is insured. Fully-insured loans included in accruing past due 90 days or more are primarily from our repurchases of delinquent FHA loans pursuant to our servicing agreements with GNMA. Additionally, nonperforming loans and accruing balances past due 90 days or more do not include the PCI loan portfolio or loans accounted for under the fair value option even though the customer may be contractually past due.



Table 32
Consumer Credit Quality
	Nonperforming						Accruing Past Due 90 Days or More
(Dollars in millions)	June 30 2014			December 31 2013			June 30 2014			December 31 2013
Residential mortgage ⁽¹⁾	$	9,235		$	11,712		$	14,137		$	16,961
Home equity	4,181			4,075			—			—
U.S. credit card	n/a			n/a			868			1,053
Non-U.S. credit card	n/a			n/a			122			131
Direct/Indirect consumer	29			35			334			408
Other consumer	15			18			1			2
Total ⁽²⁾	$	13,460		$	15,840		$	15,462		$	18,555
Consumer loans and leases as a percentage of outstanding consumer loans and leases ⁽²⁾	2.63		%	2.99		%	3.02		%	3.50		%
Consumer loans and leases as a percentage of outstanding loans and leases, excluding PCI and fully-insured loan portfolios ⁽²⁾	3.30			3.80			0.32			0.38

⁽¹⁾

Residential mortgage loans accruing past due 90 days or more are fully-insured loans. At June 30, 2014 and December 31, 2013, residential mortgage included $10.4 billion and $13.0 billion of loans on which interest has been curtailed by the FHA, and therefore are no longer accruing interest, although principal is still insured, and $3.7 billion and $4.0 billion of loans on which interest was still accruing.


⁽²⁾	Balances exclude consumer loans accounted for under the fair value option. At June 30, 2014 and December 31, 2013, $425 million and $445 million of loans accounted for under the fair value option were past due 90 days or more and not accruing interest.

n/a = not applicable

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Table 33 presents net charge-offs and related ratios for consumer loans and leases.



Table 33
Consumer Net Charge-offs and Related Ratios
	Net Charge-offs ⁽¹⁾									Net Charge-off Ratios ^{(1, 2)}
	Three Months Ended June 30					Six Months Ended June 30				Three Months Ended June 30				Six Months Ended June 30
(Dollars in millions)	2014			2013		2014		2013		2014		2013		2014		2013
Residential mortgage	$	(35	)	$	271	$	92	$	654	(0.06	)%	0.43	%	0.08	%	0.51	%
Home equity	239			486		541		1,170		1.06		1.92		1.19		2.27
U.S. credit card	683			917		1,401		1,864		3.11		4.10		3.18		4.14
Non-U.S. credit card	47			104		123		216		1.59		3.93		2.12		4.03
Direct/Indirect consumer	33			86		91		210		0.16		0.42		0.22		0.51
Other consumer	47			51		105		103		9.26		11.57		10.64		12.15
Total	$	1,014		$	1,915	$	2,353	$	4,217	0.79		1.42		0.91		1.56

⁽¹⁾

Net charge-offs exclude write-offs in the PCI loan portfolio of $70 million and $351 million in residential mortgage and $90 million and $200 million in home equity for the three and six months ended June 30, 2014 compared to $203 million and $297 million in residential mortgage and $110 million and $855 million in home equity for the three and six months ended June 30, 2013. These write-offs decreased the PCI valuation allowance included as part of the allowance for loan and lease losses. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 93.


⁽²⁾	Net charge-off ratios are calculated as annualized net charge-offs divided by average outstanding loans and leases excluding loans accounted for under the fair value option.

Net charge-off (recovery) ratios, excluding the PCI and fully-insured loan portfolios, were (0.10) percent and 0.13 percent for residential mortgage, 1.14 percent and 1.28 percent for home equity, and 0.99 percent and 1.15 percent for the total consumer portfolio for the three and six months ended June 30, 2014, respectively. Net charge-off ratios, excluding the PCI and fully-insured loan portfolios, were 0.74 percent and 0.90 percent for residential mortgage, 2.07 percent and 2.46 percent for home equity, and 1.81 percent and 1.99 percent for the total consumer portfolio for the three and six months ended June 30, 2013, respectively. These are the only product classifications that include PCI and fully-insured loans for these periods.

Net charge-offs exclude write-offs in the PCI loan portfolio of $70 million and $351 million in residential mortgage and $90 million and $200 million in home equity for the three and six months ended June 30, 2014, respectively. Net charge-offs exclude write-offs in the PCI loan portfolio of $203 million and $297 million in residential mortgage and $110 million and $855 million in home equity for the three and six months ended June 30, 2013, respectively. These write-offs decreased the PCI valuation allowance included as part of the allowance for loan and lease losses. Net charge-off ratios including the PCI write-offs were 0.06 percent and 0.37 percent for residential mortgage and 1.46 percent and 1.63 percent for home equity for the three and six months ended June 30, 2014, respectively. Net charge-off ratios including the PCI write-offs were 0.74 percent and 0.75 percent for residential mortgage and 2.35 percent and 3.93 percent for home equity for the three and six months ended June 30, 2013, respectively. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 93.

Table of Contents

Table 34 presents outstandings, nonperforming balances, net charge-offs, allowance for loan and lease losses and provision for loan and lease losses for the Core portfolio and the Legacy Assets & Servicing portfolio within the home loans portfolio. For more information on Legacy Assets & Servicing, see CRES on page 35.



Table 34
Home Loans Portfolio ⁽¹⁾
	Outstandings				Nonperforming				Net Charge-offs ⁽²⁾
	June 30 2014		December 31 2013		June 30 2014		December 31 2013		Three Months Ended June 30						Six Months Ended June 30
(Dollars in millions)									2014			2013			2014			2013
Core portfolio
Residential mortgage	$	174,566	$	177,336	$	2,951	$	3,316	$	60		$	68		$	99		$	169
Home equity	52,961		54,499		1,533		1,431		69			115			154			281
Total Core portfolio	227,527		231,835		4,484		4,747		129			183			253			450
Legacy Assets & Servicing portfolio
Residential mortgage	62,570		70,730		6,284		8,396		(95		)	203			(7		)	485
Home equity	36,538		39,173		2,648		2,644		170			371			387			889
Total Legacy Assets & Servicing portfolio	99,108		109,903		8,932		11,040		75			574			380			1,374
Home loans portfolio
Residential mortgage	237,136		248,066		9,235		11,712		(35		)	271			92			654
Home equity	89,499		93,672		4,181		4,075		239			486			541			1,170
Total home loans portfolio	$	326,635	$	341,738	$	13,416	$	15,787	$	204		$	757		$	633		$	1,824

					Allowance for loan and lease losses				Provision for loan and lease losses
					June 30 2014		December 31 2013		Three Months Ended June 30						Six Months Ended June 30
									2014			2013			2014			2013
Core portfolio
Residential mortgage					$	634	$	728	$	48		$	39		$	4		$	144
Home equity					829		965		8			40			18			147
Total Core portfolio					1,463		1,693		56			79			22			291
Legacy Assets & Servicing portfolio
Residential mortgage					2,580		3,356		(302		)	(222		)	(422		)	(188		)
Home equity					2,865		3,469		(38		)	170			(25		)	408
Total Legacy Assets & Servicing portfolio					5,445		6,825		(340		)	(52		)	(447		)	220
Home loans portfolio
Residential mortgage					3,214		4,084		(254		)	(183		)	(418		)	(44		)
Home equity					3,694		4,434		(30		)	210			(7		)	555
Total home loans portfolio					$	6,908	$	8,518	$	(284	)	$	27		$	(425	)	$	511

⁽¹⁾

Outstandings and nonperforming amounts exclude loans accounted for under the fair value option. Consumer loans accounted for under the fair value option include residential mortgage loans of $2.0 billion and $2.0 billion and home equity loans of $170 million and $147 million at June 30, 2014 and December 31, 2013. For more information on the fair value option, see Consumer Portfolio Credit Risk Management – Consumer Loans Accounted for Under the Fair Value Option on page 98 and Note 15 – Fair Value Option to the Consolidated Financial Statements.

⁽²⁾

Net charge-offs exclude write-offs in the PCI loan portfolios of $70 million and $351 million in residential mortgage and $90 million and $200 million in home equity for the three and six months ended June 30, 2014, which are included in the Legacy Assets & Servicing portfolio, compared to $203 million and $297 million in residential mortgage and $110 million and $855 million in home equity for the three and six months ended June 30, 2013. Write-offs in the PCI loan portfolio decrease the PCI valuation allowance included as part of the allowance for loan and lease losses. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 93.

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We believe that the presentation of information adjusted to exclude the impact of the PCI loan portfolio, the fully-insured loan portfolio and loans accounted for under the fair value option is more representative of the ongoing operations and credit quality of the business. As a result, in the following discussions of the residential mortgage and home equity portfolios, we provide information that excludes the impact of the PCI loan portfolio, the fully-insured loan portfolio and loans accounted for under the fair value option in certain credit quality statistics. We separately disclose information on the PCI loan portfolio on page 93.

Residential Mortgage

The residential mortgage portfolio makes up the largest percentage of our consumer loan portfolio at 46 percent of consumer loans and leases at June 30, 2014. Approximately 21 percent of the residential mortgage portfolio is in GWIM and represents residential mortgages that are originated for the home purchase and refinancing needs of our wealth management clients. The remaining portion of the portfolio is primarily in All Other and is comprised of originated loans, purchased loans used in our overall ALM activities, delinquent FHA loans repurchased pursuant to our servicing agreements with GNMA as well as loans repurchased related to our representations and warranties.

Outstanding balances in the residential mortgage portfolio, excluding loans accounted for under the fair value option, decreased $10.9 billion during the six months ended June 30, 2014 due to paydowns, sales, charge-offs and transfers to foreclosed properties. These were partially offset by new origination volume retained on our balance sheet, as well as repurchases of delinquent loans pursuant to our servicing agreements with GNMA, which are part of our mortgage banking activities.

At June 30, 2014 and December 31, 2013, the residential mortgage portfolio included $81.0 billion and $87.2 billion of outstanding fully-insured loans. On this portion of the residential mortgage portfolio, we are protected against principal loss as a result of either FHA insurance or long-term stand-by agreements with FNMA and FHLMC. At June 30, 2014 and December 31, 2013, $53.3 billion and $59.0 billion had FHA insurance with the remainder protected by long-term stand-by agreements. At June 30, 2014 and December 31, 2013, $18.8 billion and $22.5 billion of the FHA-insured loan population were repurchases of delinquent FHA loans pursuant to our servicing agreements with GNMA. All of these loans are individually insured and therefore the Corporation does not record a significant allowance for credit losses with respect to these loans.

The long-term stand-by agreements with FNMA and FHLMC reduce our regulatory risk-weighted assets due to the transfer of a portion of our credit risk to unaffiliated parties. At June 30, 2014, these programs had the cumulative effect of reducing our risk-weighted assets by $8.2 billion, increasing both our Tier 1 capital ratio and common equity tier 1 capital ratio by eight bps under the Basel 3 Standardized – Transition. This compared to reducing our risk-weighted assets by $8.4 billion, increasing our Tier 1 capital ratio by eight bps and increasing our Tier 1 common capital ratio by seven bps at December 31, 2013 under Basel 1 (which included the Market Risk Final Rules).

In addition to the long-term stand-by agreements with FNMA and FHLMC, we have mitigated a portion of our credit risk on the residential mortgage portfolio through the use of synthetic securitization vehicles as described in Note 4 – Outstanding Loans and Leases to the Consolidated Financial Statements. At June 30, 2014 and December 31, 2013, the synthetic securitization vehicles referenced principal balances of $7.9 billion and $12.5 billion of residential mortgage loans and provided loss protection up to $294 million and $339 million. At June 30, 2014 and December 31, 2013, the Corporation had a receivable of $184 million and $198 million from these vehicles for reimbursement of losses. The Corporation records an allowance for credit losses on loans referenced by the synthetic securitization vehicles. The reported net charge-offs for the residential mortgage portfolio do not include the benefit of amounts reimbursable from these vehicles.

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Table 35 presents certain residential mortgage key credit statistics on both a reported basis excluding loans accounted for under the fair value option, and excluding the PCI loan portfolio, our fully-insured loan portfolio and loans accounted for under the fair value option. Additionally, in the "Reported Basis" columns in the table below, accruing balances past due and nonperforming loans do not include the PCI loan portfolio, in accordance with our accounting policies, even though the customer may be contractually past due. As such, the following discussion presents the residential mortgage portfolio excluding the PCI loan portfolio, the fully-insured loan portfolio and loans accounted for under the fair value option. For more information on the PCI loan portfolio, see page 93.



Table 35
Residential Mortgage – Key Credit Statistics
									Reported Basis ⁽¹⁾						Excluding Purchased Credit-impaired and Fully-insured Loans
(Dollars in millions)									June 30 2014			December 31 2013			June 30 2014			December 31 2013
Outstandings									$	237,136		$	248,066		$	138,751		$	142,147
Accruing past due 30 days or more									19,220			23,052			1,873			2,371
Accruing past due 90 days or more									14,137			16,961			—			—
Nonperforming loans									9,235			11,712			9,235			11,712
Percent of portfolio
Refreshed LTV greater than 90 but less than or equal to 100									10		%	12		%	6		%	7		%
Refreshed LTV greater than 100									9			13			9			10
Refreshed FICO below 620									18			20			9			11
2006 and 2007 vintages ⁽²⁾									20			21			25			27

	Reported Basis								Excluding Purchased Credit-impaired and Fully-insured Loans
	Three Months Ended June 30				Six Months Ended June 30				Three Months Ended June 30						Six Months Ended June 30
	2014		2013		2014		2013		2014			2013			2014			2013
Net charge-off ratio ⁽³⁾	(0.06	)%	0.43	%	0.08	%	0.51	%	(0.10		)%	0.74		%	0.13		%	0.90		%


⁽¹⁾	Outstandings, accruing past due, nonperforming loans and percentages of portfolio exclude loans accounted for under the fair value option. There were $2.0 billion of residential mortgage loans accounted for

Form: 10-Q

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