UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2019

☐ 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

Securities registered pursuant to section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	BAC	New York Stock Exchange
Depositary Shares, each representing a 1/1,000th interest in a share	BAC PrE	New York Stock Exchange
of Floating Rate Non-Cumulative Preferred Stock, Series E
Depositary Shares, each representing a 1/1,000th interest in a share	BAC PrC	New York Stock Exchange
of 6.200% Non-Cumulative Preferred Stock, Series CC
Depositary Shares, each representing a 1/1,000th interest in a share	BAC PrA	New York Stock Exchange
of 6.000% Non-Cumulative Preferred Stock, Series EE
Depositary Shares, each representing a 1/1,000th interest in a share	BAC PrB	New York Stock Exchange
of 6.000% Non-Cumulative Preferred Stock, Series GG
Depositary Shares, each representing a 1/1,000th interest in a share	BAC PrK	New York Stock Exchange
of 5.875% Non-Cumulative Preferred Stock, Series HH
7.25% Non-Cumulative Perpetual Convertible Preferred Stock, Series L	BAC PrL	New York Stock Exchange
Depositary Shares, each representing a 1/1,200th interest in a share	BML PrG	New York Stock Exchange
of Bank of America Corporation Floating Rate
Non-Cumulative Preferred Stock, Series 1



1 Bank of America



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Depositary Shares, each representing a 1/1,200th interest in a share	BML PrH	New York Stock Exchange
of Bank of America Corporation Floating Rate
Non-Cumulative Preferred Stock, Series 2
Depositary Shares, each representing a 1/1,200th interest in a share	BML PrJ	New York Stock Exchange
of Bank of America Corporation Floating Rate
Non-Cumulative Preferred Stock, Series 4
Depositary Shares, each representing a 1/1,200th interest in a share	BML PrL	New York Stock Exchange
of Bank of America Corporation Floating Rate
Non-Cumulative Preferred Stock, Series 5
Floating Rate Preferred Hybrid Income Term Securities of BAC Capital	BAC/PF	New York Stock Exchange
Trust XIII (and the guarantee related thereto)
5.63% Fixed to Floating Rate Preferred Hybrid Income Term Securities	BAC/PG	New York Stock Exchange
of BAC Capital Trust XIV (and the guarantee related thereto)
Income Capital Obligation Notes initially due December 15, 2066 of	MER PrK	New York Stock Exchange
Bank of America Corporation
Senior Medium-Term Notes, Series A, Step Up Callable Notes, due	BAC/31B	New York Stock Exchange
November 28, 2031 of BofA Finance LLC (and the guarantee
of the Registrant with respect thereto)
Depositary Shares, each representing a 1/1,000th interest in a share	BAC PrM	New York Stock Exchange
of 5.375% Non-Cumulative Preferred Stock, Series KK
Depositary Shares, each representing a 1/1,000th interest in a share	BAC PrN	New York Stock Exchange
of 5.000% Non-Cumulative Preferred Stock, Series LL

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑

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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☑ No ☐

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



Large accelerated filer	☑	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑

As of June 30, 2019, the aggregate market value of the registrant’s common stock (“Common Stock”) held by non-affiliates was approximately $270,935,450,750. At February 18, 2020, there were 8,728,530,308 shares of Common Stock outstanding.

Documents incorporated by reference: Portions of the definitive proxy statement relating to the registrant’s 2020 annual meeting of stockholders are incorporated by reference in this Form 10-K in response to Items 10, 11, 12, 13 and 14 of Part III.



		Bank of America 2

Bank of America Corporation and Subsidiaries



Part I		Page

Item 1.	Business	2

Item 1A.	Risk Factors	5

Item 1B.	Unresolved Staff Comments	19

Item 2.	Properties	19

Item 3.	Legal Proceedings	19

Item 4.	Mine Safety Disclosures	19

Part II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	20

Item 6.	Selected Financial Data	20

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	85

Item 8.	Financial Statements and Supplementary Data	85

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	164

Item 9A.	Controls and Procedures	164

Item 9B.	Other Information	164

Part III

Item 10.	Directors, Executive Officers and Corporate Governance	164

Item 11.	Executive Compensation	164

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	165

Item 13.	Certain Relationships and Related Transactions, and Director Independence	165

Item 14.	Principal Accounting Fees and Services	165

Part IV

Item 15.	Exhibits, Financial Statement Schedules	166

Item 16.	Form 10-K Summary	170



1 Bank of America

Part I

Bank of America Corporation and Subsidiaries

Item 1. Business

Bank of America Corporation is a Delaware corporation, a bank holding company (BHC) and a financial holding company. When used in this report, “the Corporation,” “we,” “us” and “our” 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. As part of our efforts to streamline the Corporation’s organizational structure and reduce complexity and costs, the Corporation has reduced and intends to continue to reduce the number of its corporate subsidiaries, including through intercompany mergers.

Bank of America is one of the world’s largest financial institutions, serving individual consumers, small- and middle-market businesses, institutional investors, large corporations and governments with a full range of banking, investing, asset management and other financial and risk management products and services. Our principal executive offices are located in the Bank of America Corporate Center, 100 North Tryon Street, Charlotte, North Carolina 28255.

Bank of America’s website is www.bankofamerica.com and the Investor Relations portion of our website is http://investor.bankofamerica.com. We use our website to distribute company information, including as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. We routinely post and make accessible financial and other information regarding the Corporation on our website. Accordingly, investors should monitor the Investor Relations portion of our website, in addition to our press releases, U.S. Securities and Exchange Commission (SEC) filings, public conference calls and webcasts. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) are available on the Investor Relations portion of our website under the heading Financial Information (accessible by clicking on the SEC Filings link) as soon as reasonably practicable after we electronically file such reports with, or furnish them to, the SEC and at the SEC’s website, www.sec.gov. Notwithstanding the foregoing, the information contained on our website as referenced in this paragraph is not incorporated by reference into this Annual Report on Form 10-K. Also, we make available on the Investor Relations portion of our website under the heading Corporate Governance: (i) our Code of Conduct; (ii) our Corporate Governance Guidelines (accessible by clicking on the Governance Highlights link); and (iii) the charter of each active committee of our Board of Directors (the Board) (accessible by clicking on the committee names under the Committee Composition link). We also intend to disclose any amendments to our Code of Conduct and waivers of our Code of Conduct required to be disclosed by the rules of the SEC and the New York Stock Exchange on the Investor Relations portion of our website. All of these corporate governance materials are also available free of charge in print to shareholders who request them in writing to: Bank of America Corporation, Attention: Office of the Corporate Secretary, Bank of America Corporate Center, 100 North Tryon Street, NC1-007-56-06, Charlotte, North Carolina 28255.

Segments

Through our banking and various nonbank subsidiaries throughout the U.S. and in international markets, we provide a diversified range of banking and nonbank financial services and products through four business segments: Consumer Banking, Global

Wealth & Investment Management (GWIM), Global Banking and Global Markets, with the remaining operations recorded in All Other. Additional information related to our business segments and the products and services they provide is included in the information set forth on pages 32 through 41 of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) and Note 24 – Business Segment Information to the Consolidated Financial Statements.

Competition

We operate in a highly competitive environment. Our competitors include banks, thrifts, credit unions, investment banking firms, investment advisory firms, brokerage firms, investment companies, insurance companies, mortgage banking companies, credit card issuers, mutual fund companies, hedge funds, private equity firms, and e-commerce and other internet-based companies. We compete with some of these competitors globally and with others on a regional or product specific basis.

Competition is based on a number of factors including, among others, customer service, quality and range of products and services offered, price, reputation, interest rates on loans and deposits, lending limits and customer convenience. Our ability to continue to compete effectively also depends in large part on our ability to attract new employees and retain and motivate our existing employees, while managing compensation and other costs.

Employees

At December 31, 2019, we had approximately 208,000 employees. None of our domestic employees are subject to a collective bargaining agreement. Management considers our employee relations to be good.

Government Supervision and Regulation

The following discussion describes, among other things, elements of an extensive regulatory framework applicable to BHCs, financial holding companies, banks and broker-dealers, including specific information about Bank of America.

We are subject to an extensive regulatory framework applicable to BHCs, financial holding companies and banks and other financial services entities. U.S. federal regulation of banks, BHCs and financial holding companies is intended primarily for the protection of depositors and the Deposit Insurance Fund (DIF) rather than for the protection of shareholders and creditors.

As a registered financial holding company and BHC, the Corporation is subject to the supervision of, and regular inspection by, the Board of Governors of the Federal Reserve System (Federal Reserve). Our U.S. bank subsidiaries (the Banks), organized as national banking associations, are subject to regulation, supervision and examination by the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve. U.S. financial holding companies, and the companies under their control, are permitted to engage in activities considered “financial in nature” as defined by the Gramm-Leach-Bliley Act and related Federal Reserve interpretations. The Corporation's status as a financial holding company is conditioned upon maintaining certain eligibility requirements for both the Corporation and its U.S. depository institution subsidiaries, including minimum capital ratios, supervisory ratings and, in the case of the depository institutions, at least satisfactory Community Reinvestment Act ratings. Failure to be an eligible financial holding company could result in the



		Bank of America 2

Federal Reserve limiting Bank of America's activities, including potential acquisitions.

The scope of the laws and regulations and the intensity of the supervision to which we are subject have increased over the past several years, beginning with the response to the financial crisis, as well as other factors such as technological and market changes. In addition, the banking and financial services sector is subject to substantial regulatory enforcement and fines. Many of these changes have occurred as a result of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (the Financial Reform Act). We cannot assess whether there will be any additional major changes in the regulatory environment and expect that our business will remain subject to continuing and extensive regulation and supervision.

We are also subject to various other laws and regulations, as well as supervision and examination by other regulatory agencies, all of which directly or indirectly affect our operations and management and our ability to make distributions to shareholders. For instance, our broker-dealer subsidiaries are subject to both U.S. and international regulation, including supervision by the SEC, Financial Industry Regulatory Authority and New York Stock Exchange, among others; our commodities businesses in the U.S. are subject to regulation by and supervision of the U.S. Commodity Futures Trading Commission (CFTC); our U.S. derivatives activity is subject to regulation and supervision of the CFTC, National Futures Association and SEC, and in the case of the Banks, certain banking regulators; our insurance activities are subject to licensing and regulation by state insurance regulatory agencies; and our consumer financial products and services are regulated by the Consumer Financial Protection Bureau (CFPB).

Our non-U.S. businesses are also subject to extensive regulation by various non-U.S. regulators, including governments, securities exchanges, prudential regulators, central banks and other regulatory bodies, in the jurisdictions in which those businesses operate. For example, our financial services operations in the United Kingdom (U.K.), Ireland and France are subject to regulation by the Prudential Regulatory Authority and Financial Conduct Authority (FCA), the European Central Bank and Central Bank of Ireland, and the Autorité de Contrôle Prudentiel et de Résolution and Autorité des Marchés Financiers, respectively.

Source of Strength

Under the Financial Reform Act and Federal Reserve policy, BHCs are expected to act as a source of financial strength to each subsidiary bank and to commit resources to support each such subsidiary. Similarly, under the cross-guarantee provisions of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA), in the event of a loss suffered or anticipated by the FDIC, either as a result of default of a bank subsidiary or related to FDIC assistance provided to such a subsidiary in danger of default, the affiliate banks of such a subsidiary may be assessed for the FDIC’s loss, subject to certain exceptions.

Transactions with Affiliates

Pursuant to Section 23A and 23B of the Federal Reserve Act, as implemented by the Federal Reserve’s Regulation W, the Banks are subject to restrictions that limit certain types of transactions between the Banks and their nonbank affiliates. In general, U.S. banks are subject to quantitative and qualitative limits on extensions of credit, purchases of assets and certain other transactions involving its nonbank affiliates. Additionally, transactions between U.S. banks and their nonbank affiliates are required to be on arm’s length terms and must be consistent with standards of safety and soundness.

Deposit Insurance

Deposits placed at U.S. domiciled banks are insured by the FDIC, subject to limits and conditions of applicable law and the FDIC’s regulations. Pursuant to the Financial Reform Act, FDIC insurance coverage limits are $250,000 per customer. All insured depository institutions are required to pay assessments to the FDIC in order to fund the DIF.

The FDIC is required to maintain at least a designated minimum ratio of the DIF to insured deposits in the U.S. The FDIC adopted regulations that establish a long-term target DIF ratio of greater than two percent. As of the date of this report, the DIF ratio is below this required target and the FDIC has adopted a restoration plan that may result in increased deposit insurance assessments. Deposit insurance assessment rates are subject to change by the FDIC and will be impacted by the overall economy and the stability of the banking industry as a whole. For more information regarding deposit insurance, see Item 1A. Risk Factors – Regulatory, Compliance and Legal on page 14.

Capital, Liquidity and Operational Requirements

As a financial holding company, we and our bank subsidiaries are subject to the regulatory capital and liquidity guidelines issued by the Federal Reserve and other U.S. banking regulators, including the FDIC and the OCC. These rules are complex and are evolving as U.S. and international regulatory authorities propose and enact enhanced capital and liquidity rules. The Corporation seeks to manage its capital position to maintain sufficient capital to meet these regulatory guidelines and to support our business activities. These evolving rules are likely to influence our planning processes and may require additional regulatory capital and liquidity, as well as impose additional operational and compliance costs on the Corporation. In addition, the Federal Reserve and the OCC have adopted guidelines that establish minimum standards for the design, implementation and board oversight of BHCs’ and national banks’ risk governance frameworks. The Federal Reserve also issued a final rule, which became effective January 1, 2019, that includes minimum external total loss-absorbing capacity (TLAC) and long-term debt requirements.

For more information on regulatory capital rules, capital composition and pending or proposed regulatory capital changes, see Capital Management – Regulatory Capital in the MD&A on page 46, and Note 17 – Regulatory Requirements and Restrictions to the Consolidated Financial Statements, which are incorporated by reference in this Item 1.

Distributions

We are subject to various regulatory policies and requirements relating to capital actions, including payment of dividends and common stock repurchases. For instance, Federal Reserve regulations require major U.S. BHCs to submit a capital plan as part of an annual Comprehensive Capital Analysis and Review (CCAR). The purpose of the CCAR for the Federal Reserve is to assess the capital planning process of the BHC, including any planned capital actions, such as payment of dividends and common stock repurchases.

Our ability to pay dividends is also affected by the various minimum capital requirements and the capital and non-capital standards established under the FDICIA. The right of the Corporation, our shareholders and our creditors to participate in any distribution of the assets or earnings of our subsidiaries is further subject to the prior claims of creditors of the respective subsidiaries.

If the Federal Reserve finds that any of our Banks are not “well-capitalized” or “well-managed,” we would be required to enter into an agreement with the Federal Reserve to comply with all



3 Bank of America

applicable capital and management requirements, which may contain additional limitations or conditions relating to our activities. Additionally, the applicable federal regulatory authority is authorized to determine, under certain circumstances relating to the financial condition of a bank or BHC, that the payment of dividends would be an unsafe or unsound practice and to prohibit payment thereof.

For more information regarding the requirements relating to the payment of dividends, including the minimum capital requirements, see Note 14 – Shareholders’ Equity and Note 17 – Regulatory Requirements and Restrictions to the Consolidated Financial Statements.

Resolution Planning

As a BHC with greater than $50 billion of assets, the Corporation is required by the Federal Reserve and the FDIC to periodically submit a plan for a rapid and orderly resolution in the event of material financial distress or failure.

Such resolution plan is intended to be a detailed roadmap for the orderly resolution of the BHC and its material entities pursuant to the U.S. Bankruptcy Code and other applicable resolution regimes under one or more hypothetical scenarios assuming no extraordinary government assistance.

If both the Federal Reserve and the FDIC determine that the BHC’s plan is not credible, the Federal Reserve and the FDIC may jointly impose more stringent capital, leverage or liquidity requirements or restrictions on growth, activities or operations. A summary of our plan is available on the Federal Reserve and FDIC websites.

The FDIC also requires the submission of a resolution plan for Bank of America, National Association, which must describe how the insured depository institution would be resolved under the bank resolution provisions of the Federal Deposit Insurance Act. A description of this plan is available on the FDIC’s website.

We continue to make substantial progress to enhance our resolvability, including simplifying our legal entity structure and business operations, and increasing our preparedness to implement our resolution plan, both from a financial and operational standpoint.

Across international jurisdictions, resolution planning is the responsibility of national resolution authorities (RA). Among those, the jurisdictions of most impact to the Corporation are the requirements associated with subsidiaries in the U.K., Ireland and France, where rules have been issued requiring the submission of significant information about locally-incorporated subsidiaries (including information on intra-group dependencies, legal entity separation and barriers to resolution) as well as the Corporation’s banking branches located in those jurisdictions that are deemed to be material for resolution planning purposes. As a result of the RA's review of the submitted information, we could be required to take certain actions over the next several years which could increase operating costs and potentially result in the restructuring of certain businesses and subsidiaries.

For more information regarding our resolution plan, see Item 1A. Risk Factors – Liquidity on page 7.

Insolvency and the Orderly Liquidation Authority

Under the Federal Deposit Insurance Act, the FDIC may be appointed receiver of an insured depository institution if it is insolvent or in certain other circumstances. In addition, under the

Financial Reform Act, when a systemically important financial institution (SIFI) such as the Corporation is in default or danger of default, the FDIC may be appointed receiver in order to conduct an orderly liquidation of such institution. In the event of such appointment, the FDIC could, among other things, invoke the orderly liquidation authority, instead of the U.S. Bankruptcy Code, if the Secretary of the Treasury makes certain financial distress and systemic risk determinations. The orderly liquidation authority is modeled in part on the Federal Deposit Insurance Act, but also adopts certain concepts from the U.S. Bankruptcy Code.

The orderly liquidation authority contains certain differences from the U.S. Bankruptcy Code. For example, in certain circumstances, the FDIC could permit payment of obligations it determines to be systemically significant (e.g., short-term creditors or operating creditors) in lieu of paying other obligations (e.g., long-term creditors) without the need to obtain creditors’ consent or prior court review. The insolvency and resolution process could also lead to a large reduction or total elimination of the value of a BHC’s outstanding equity, as well as impairment or elimination of certain debt.

Under the FDIC’s “single point of entry” strategy for resolving SIFIs, the FDIC could replace a distressed BHC with a bridge holding company, which could continue operations and result in an orderly resolution of the underlying bank, but whose equity is held solely for the benefit of creditors of the original BHC.

Furthermore, the Federal Reserve requires that BHCs maintain minimum levels of long-term debt required to provide adequate loss absorbing capacity in the event of a resolution.

For more information regarding our resolution, see Item 1A. Risk Factors – Liquidity on page 7.

Limitations on Acquisitions

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 permits a BHC to acquire banks located in states other than its home state without regard to state law, subject to certain conditions, including the condition that the BHC, after and as a result of the acquisition, controls no more than 10 percent of the total amount of deposits of insured depository institutions in the U.S. and no more than 30 percent or such lesser or greater amount set by state law of such deposits in that state. At June 30, 2019, we held greater than 10 percent of the total amount of deposits of insured depository institutions in the U.S.

In addition, the Financial Reform Act restricts acquisitions by a financial institution if, as a result of the acquisition, the total liabilities of the financial institution would exceed 10 percent of the total liabilities of all financial institutions in the U.S. At June 30, 2019, our liabilities did not exceed 10 percent of the total liabilities of all financial institutions in the U.S.

The Volcker Rule

The Volcker Rule prohibits insured depository institutions and companies affiliated with insured depository institutions (collectively, banking entities) from engaging in short-term proprietary trading of certain securities, derivatives, commodity futures and options for their own account. The Volcker Rule also imposes limits on banking entities’ investments in, and other relationships with, hedge funds and private equity funds. The Volcker Rule provides exemptions for certain activities, including market-making, underwriting, hedging, trading in government obligations, insurance company activities and organizing and offering hedge funds and private equity funds. The Volcker Rule also clarifies that certain activities are not prohibited, including acting as agent, broker or custodian. A banking entity with significant trading operations, such as the Corporation, is required



		Bank of America 4

to maintain a detailed compliance program to comply with the restrictions of the Volcker Rule.

Derivatives

Our derivatives operations are subject to extensive regulation globally. These operations are subject to regulation under the Financial Reform Act, the European Union (EU) Markets in Financial Instruments Directive and Regulation, the European Market Infrastructure Regulation and similar regulatory regimes in other jurisdictions, that regulate or will regulate the derivatives markets in which we operate by, among other things: requiring clearing and exchange trading of certain derivatives; imposing new capital, margin, reporting, registration and business conduct requirements for certain market participants; imposing position limits on certain over-the-counter (OTC) derivatives; and imposing derivatives trading transparency requirements. Regulations of derivatives are already in effect in many markets in which we operate.

In addition, many G-20 jurisdictions, including the U.S., U.K., Germany and Japan, have adopted resolution stay regulations to address concerns that the close-out of derivatives and other financial contracts in resolution could impede orderly resolution of global systemically important banks (G-SIBs), and additional jurisdictions are expected to follow suit. Generally, these resolution stay regulations require amendment of certain financial contracts to provide for contractual recognition of stays of termination rights under various statutory resolution regimes and a stay on the exercise of cross-default rights based on an affiliate’s entry into insolvency proceedings. As resolution stay regulations of a particular jurisdiction applicable to us go into effect, we amend impacted financial contracts in compliance with such regulations either as a regulated entity or as a counterparty facing a regulated entity in such jurisdiction.

Consumer Regulations

Our consumer businesses are subject to extensive regulation and oversight by federal and state regulators. Certain federal consumer finance laws to which we are subject, including the Equal Credit Opportunity Act, Home Mortgage Disclosure Act, Electronic Fund Transfer Act, Fair Credit Reporting Act, Real Estate Settlement Procedures Act, Truth in Lending Act and Truth in Savings Act, are enforced by the CFPB. Other federal consumer finance laws, such as the Servicemembers Civil Relief Act, are enforced by the OCC.

Privacy and Information Security

We are subject to many U.S. federal, state and international laws and regulations governing requirements for maintaining policies and procedures regarding the disclosure, use and protection of the non-public confidential information of our customers and employees. The Gramm-Leach-Bliley Act requires us to periodically disclose Bank of America’s privacy policies and practices relating to sharing such information and enables retail customers to opt out of our ability to share information with unaffiliated third parties, under certain circumstances. The Gramm-Leach-Bliley Act and other laws also require us to implement a comprehensive information security program that includes administrative, technical and physical safeguards to provide the security and confidentiality of customer records and information. Security and privacy policies and procedures for the protection of personal and confidential information are in effect across all businesses and geographic locations.

Other laws and regulations, at the international, federal and state level, impact our ability to share certain information with affiliates and non-affiliates for marketing and/or non-marketing purposes, or contact customers with marketing offers and establish certain rights of consumers in connection with their personal information. For example, California’s Consumer Privacy

Act (CCPA), which went into effect in January 2020, provides consumers with the right to know what personal data is being collected, know whether their personal data is sold or disclosed and to whom and opt out of the sale of their personal data, among other rights. In addition, in the EU, the General Data Protection Regulation (GDPR) replaced the Data Protection Directive and related implementing national laws in its member states. The CCPA's and GDPR’s impact on the Corporation was assessed and addressed through comprehensive compliance implementation programs. These existing and evolving legal requirements in the U.S. and abroad, as well as court proceedings with respect to the validity of cross-border data transfer mechanisms from the EU, continue to lend uncertainty to privacy compliance globally.

Item 1A. Risk Factors

In the course of conducting our business operations, we are exposed to a variety of risks, some of which are inherent in the financial services industry and others of which are more specific to our own businesses. The discussion below addresses the most significant factors, of which we are currently aware, that could affect our businesses, results of operations and financial condition. Additional factors that could affect our businesses, results of operations and financial condition are discussed in Forward-looking Statements in the MD&A on page 22. However, other factors not discussed below or elsewhere in this Annual Report on Form 10-K could also adversely affect our businesses, results of operations and financial condition. Therefore, the risk factors below should not be considered a complete list of potential risks that we may face. For more information on how we manage risks, see Managing Risk in the MD&A on page 42.

Any risk factor described in this Annual Report on Form 10-K or in any of our other SEC filings could by itself, or together with other factors, materially adversely affect our liquidity, competitive position, business, reputation, results of operations, capital position or financial condition, including by materially increasing our expenses or decreasing our revenues, which could result in material losses.

Market

Our business and results of operations may be adversely affected by the U.S. and international financial markets, U.S. and non-U.S. fiscal, monetary, and regulatory policies, and economic conditions generally.

General economic, political and social conditions in the U.S. and in one or more countries abroad affect markets in the U.S. and abroad and our business. In particular, markets in the U.S. or abroad may be affected by the level and volatility of interest rates, availability and market conditions of financing, unexpected changes in gross domestic product (GDP), economic growth or its sustainability, inflation, consumer spending, employment levels, wage stagnation, federal government shutdowns, energy prices, home prices, bankruptcies, a default by a significant market participant, fluctuations or other significant changes in both debt and equity capital markets and currencies, liquidity of the global financial markets, the growth of global trade and commerce, trade policies, the availability and cost of capital and credit, disruption of communication, transportation or energy infrastructure and investor sentiment and confidence. Additionally, global markets may be adversely affected by natural disasters, the emergence of widespread health emergencies or pandemics, cyber attacks or campaigns, military conflict, terrorism or other geopolitical events. Market fluctuations may impact our margin requirements and affect our business liquidity. Also, any sudden or prolonged market downturn in the U.S. or abroad, as a result of the above factors or otherwise could result in a decline in revenue and adversely



5 Bank of America

affect our results of operations and financial condition, including capital and liquidity levels.

In the U.S. and abroad, uncertainties surrounding fiscal and monetary policies present economic challenges. Actions taken by the Federal Reserve, including changes in its target funds rate and balance sheet management, and other central banks are beyond our control and difficult to predict and can affect interest rates and the value of financial instruments and other assets and liabilities, and impact our borrowers. A continued protracted period of lower interest rates, or a move to negative interest rates in the U.S., could result in lower revenue, and maintain or increase pressure on net-interest income, which may adversely affect our results of operations. Uncertainty or ongoing developments in connection with the future relationship between the U.K. and the EU, and the resulting impact on the financial markets and regulations in relevant jurisdictions, could negatively impact our revenues and ongoing operations in Europe and beyond.

Changes to existing U.S. laws and regulatory policies, including those related to financial regulation, taxation, international trade, fiscal policy and healthcare, may adversely impact U.S. or global economic activity and our customers', counterparties' and the Corporation's earnings and operations. For example, significant fiscal policy initiatives may increase uncertainty surrounding the formulation and direction of U.S. monetary policy and volatility of interest rates. Higher U.S. interest rates relative to other major economies could increase the likelihood of a more volatile and appreciating U.S. dollar. Changes, or proposed changes, to certain U.S. trade policies, particularly with important trading partners, including China and the EU, have negatively impacted and may continue to negatively impact financial markets, disrupt world trade and commerce and lead to trade retaliation, including through the use of tariffs, foreign exchange measures or the large-scale sale of U.S. Treasury Bonds. Further, the use of tariffs among countries not directly involving the U.S. could spread and could damage our customers directly and indirectly.

Any of these developments could adversely affect our consumer and commercial businesses, our customers, our securities and derivatives portfolios, our level of charge-offs and provision for credit losses, the carrying value of our deferred tax assets, our capital levels, liquidity and our results of operations. Additionally, events and ongoing uncertainty related to the U.K.'s exit from the EU and the uncertainty related to the transition from Interbank Offered Rates (IBORs) and other benchmark rates to alternative reference rates (ARRs) could negatively impact markets in the U.S. and abroad and our business and/or magnify any negative impact of the above referenced developments on our business, customers and results of operations.

Increased market volatility and adverse changes in other financial or capital market conditions may increase our market risk.

Our liquidity, competitive position, business, results of operations and financial condition are affected by market risks such as changes in interest and currency exchange rates, fluctuations in equity and futures prices, lower trading volumes and prices of securitized products, the implied volatility of interest rates and credit spreads and other economic and business factors. These market risks may adversely affect, among other things, (i) the value of our on- and off-balance sheet securities, trading assets and other financial instruments, (ii) the cost of debt capital and our access to credit markets, (iii) the value of assets under management (AUM), (iv) fee income relating to AUM, (v) customer allocation of capital among investment alternatives, (vi) the volume of client activity in our trading operations, (vii) investment banking fees, (viii) the general profitability and risk level of the transactions in which we engage and (ix) our competitiveness with respect to

deposit pricing. For example, the value of certain of our assets is sensitive to changes in market interest rates. If the Federal Reserve or a non-U.S. central bank changes or signals a change in monetary policy, market interest rates could be affected, which could adversely impact the value of such assets. In addition, the low interest rate environment and a flat or inverted yield curve could negatively impact our financial condition or results of operations, including future revenue and earnings growth.

We use various models and strategies to assess and control our market risk exposures but those are subject to inherent limitations. For more information regarding models and strategies, see Item 1A. Risk Factors – Other on page 17. In times of market stress or other unforeseen circumstances, previously uncorrelated indicators may become correlated and vice versa. These types of market movements may limit the effectiveness of our hedging strategies and cause us to incur significant losses. These changes in correlation can be exacerbated where other market participants are using risk or trading models with assumptions or algorithms similar to ours. In these and other cases, it may be difficult to reduce our risk positions due to activity of other market participants or widespread market dislocations, including circumstances where asset values are declining significantly or no market exists for certain assets. To the extent that we own securities that do not have an established liquid trading market or are otherwise subject to restrictions on sale or hedging, we may not be able to reduce our positions and therefore reduce our risk associated with such positions. In addition, challenging market conditions may also adversely affect our investment banking fees.

For more information about market risk and our market risk management policies and procedures, see Market Risk Management in the MD&A on page 71.

We may incur losses if the value of certain assets declines, including due to changes in interest rates and prepayment speeds.

We have a large portfolio of financial instruments, including certain loans and loan commitments, loans held-for-sale, securities financing agreements, asset-backed secured financings, long-term deposits, long-term debt, trading account assets and liabilities, derivative assets and liabilities, available-for-sale (AFS) debt and marketable equity securities, other debt securities, equity method investments and certain other assets and liabilities that we measure at fair value and other accounting values, subject to impairment assessments. We determine these values based on applicable accounting guidance, which for financial instruments measured at fair value, requires an entity to base fair value on exit price and to maximize the use of observable inputs and minimize the use of unobservable inputs in fair value measurements. The fair values of these financial instruments include adjustments for market liquidity, credit quality, funding impact on certain derivatives and other transaction-specific factors, where appropriate.

Gains or losses on these instruments can have a direct impact on our results of operations, including higher or lower mortgage banking income and earnings, unless we have effectively hedged our exposures. Increases in interest rates may result in a decrease in residential mortgage loan originations. In addition, increases in interest rates may adversely impact the fair value of debt securities and, accordingly, for debt securities classified as AFS, may adversely affect accumulated other comprehensive income and, thus, capital levels.

Fair values may be impacted by declining values of the underlying assets or the prices at which observable market transactions occur and the continued availability of these transactions or indices. The financial strength of counterparties, with whom we have economically hedged some of our exposure to these assets, also will affect the fair value of these assets.



		Bank of America 6

Sudden declines and volatility in the prices of assets may curtail or eliminate trading activities in these assets, which may make it difficult to sell, hedge or value these assets. The inability to sell or effectively hedge assets reduces our ability to limit losses in such positions and the difficulty in valuing assets may increase our risk-weighted assets, which requires us to maintain additional capital and increases our funding costs. Asset values also directly impact revenues in our wealth management and related advisory businesses. We receive asset-based management fees based on the value of our clients’ portfolios or investments in funds managed by us and, in some cases, we also receive performance fees based on increases in the value of such investments. Declines in asset values can reduce the value of our clients’ portfolios or fund assets, which in turn can result in lower fees earned for managing such assets.

For more information on fair value measurements, see Note 21 – Fair Value Measurements to the Consolidated Financial Statements. For more information on our asset management businesses, see GWIM in the MD&A on page 35. For more information on interest rate risk management, see Interest Rate Risk Management for the Banking Book in the MD&A on page 74.

Liquidity

If we are unable to access the capital markets or continue to maintain deposits, or our borrowing costs increase, our liquidity and competitive position will be negatively affected.

Liquidity is essential to our businesses. We fund our assets primarily with globally sourced deposits in our bank entities, as well as secured and unsecured liabilities transacted in the capital markets. We rely on certain secured funding sources, such as repo markets, which are typically short-term and credit-sensitive in nature. We also engage in asset securitization transactions, including with the government-sponsored enterprises (GSEs), to fund consumer lending activities. Our liquidity could be adversely affected by any inability to access the capital markets, illiquidity or volatility in the capital markets, the decrease in value of eligible collateral or increased collateral requirements, including as a result of credit concerns for short-term borrowing, changes to our relationships with our funding providers based on real or perceived changes in our risk profile, prolonged federal government shutdowns, or changes in regulations, guidance or GSE status that impact our funding avenues or ability to access certain funding sources. Additionally, the unwillingness or inability of the Federal Reserve to act as lender of last resort, unexpected simultaneous draws on lines of credit, restricted access to the assets of prime brokerage clients, the withdrawal of customer deposits, which could result from customer attrition for higher yields or the desire for more conservative alternatives, increased regulatory liquidity, capital and margin requirements for our U.S. or international banks and their nonbank subsidiaries, changes in patterns of intraday liquidity usage resulting from a counterparty or technology failure or other idiosyncratic event, failure by a significant market participant or third party, such as a clearing agent or custodian, reputational issues, or negative perceptions about our short- or long-term business prospects, including downgrades of our credit ratings may adversely affect our liquidity.

Several of these factors may arise due to circumstances beyond our control, such as general market volatility, disruption, shock or stress, Federal Reserve policy decisions, including fluctuations in interest rates or Federal Reserve balance sheet composition, negative views about the Corporation or financial services industry generally or due to a specific news event, changes in the regulatory environment or governmental fiscal or monetary policies, actions by credit rating agencies or an operational problem that affects third parties or us. The impact of these events, whether within our

control or not, could include an inability to sell assets or redeem investments, unforeseen outflows of cash, the need to draw on liquidity facilities, the reduction of financing balances and the loss of equity secured funding, debt repurchases to support the secondary market or meet client requests and the need for additional funding for commitments and contingencies, as well as unexpected collateral calls, among other things, the result of which could be a liquidity shortfall and/or impact on our liquidity coverage ratio.

Our cost of obtaining funding is directly related to prevailing market conditions, including changes in interest and currency exchange rates, and to our credit spreads. Credit spreads are the amount in excess of the interest rate of U.S. Treasury securities, or other benchmark securities, of a similar maturity that we need to pay to our funding providers. Increases in interest rates and our credit spreads can increase the cost of our funding and result in mark-to-market or credit valuation adjustment exposures. Changes in our credit spreads are market-driven and may be influenced by market perceptions of our creditworthiness. Changes to interest rates and our credit spreads occur continuously and may be unpredictable and highly volatile. We may also experience spread compression as a result of offering higher than expected deposit rates in order to attract and maintain deposits due to increased marketplace rate competition. Additionally, concentrations within our funding profile, such as maturities, currencies or counterparties, can reduce our funding efficiency.

For more information about our liquidity position and other liquidity matters, including credit ratings and outlooks and the policies and procedures we use to manage our liquidity risks, see Liquidity Risk in the MD&A on page 50.

Adverse changes to our credit ratings from the major credit rating agencies could significantly limit our access to funding or the capital markets, increase our borrowing costs or trigger additional collateral or funding requirements.

Our borrowing costs and ability to raise funds are directly impacted by our credit ratings. In addition, credit ratings may be important to customers or counterparties when we compete in certain markets and seek to engage in certain transactions, including OTC derivatives. 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 asset securitizations. Our credit ratings are subject to ongoing review by rating agencies, which consider a number of factors, including our own financial strength, performance, prospects and operations as well as factors not under our control such as the current economic and geopolitical environment, and to a lesser extent, the likelihood of the U.S. government providing meaningful support to us or our subsidiaries in a crisis.

Rating agencies could make adjustments to our credit ratings at any time, and there can be no assurance as to when and whether downgrades will occur. A reduction in certain of our credit ratings could result in a wider credit spread and negatively affect our liquidity, access to credit markets, the related cost of funds, our businesses and certain trading revenues, particularly in those businesses where counterparty creditworthiness is critical. If the short-term credit ratings of our parent company, or bank or broker-dealer subsidiaries, were downgraded by one or more levels, we may suffer the potential loss of access to short-term funding sources such as repo financing, and/or incur increased cost of funds and increased collateral requirements. Under the terms of certain OTC derivative contracts and other trading agreements, if our or our subsidiaries’ credit ratings are downgraded, the counterparties may require additional collateral or terminate these contracts or agreements.



7 Bank of America

While certain potential impacts are contractual and quantifiable, the full consequences of a credit rating downgrade to a financial institution are inherently uncertain, as they depend upon numerous dynamic, complex and inter-related factors and assumptions, including whether any downgrade of a firm’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 the amount of additional collateral required and derivative liabilities that would be subject to unilateral termination at December 31, 2019, if the rating agencies had downgraded their long-term senior debt ratings for the Corporation or certain subsidiaries by each of two incremental notches, see Credit-related Contingent Features and Collateral in Note 3 – Derivatives to the Consolidated Financial Statements.

For more information about our credit ratings and their potential effects to our liquidity, see Liquidity Risk – Credit Ratings in the MD&A on page 52 and Note 3 – Derivatives to the Consolidated Financial Statements.

Bank of America Corporation is a holding company and we depend upon our subsidiaries for liquidity, including the ability to pay dividends to shareholders and to fund payments on other obligations. Applicable laws and regulations, including capital and liquidity requirements, and actions taken pursuant to our resolution plan could restrict our ability to transfer funds from subsidiaries to Bank of America Corporation or to other subsidiaries, which could adversely affect our cash flow and financial condition.

Bank of America Corporation, as the parent company, is a separate and distinct legal entity from our banking and nonbank subsidiaries. We evaluate and manage liquidity on a legal entity basis. Legal entity liquidity is an important consideration as there are legal, regulatory, contractual and other limitations on our ability to utilize liquidity from one legal entity to satisfy the liquidity requirements of another, including the parent company, which could result in adverse liquidity events. The parent company depends on dividends, distributions, loans, advances and other payments from our banking and nonbank subsidiaries to fund dividend payments on our common stock and preferred stock and to fund all payments on our other obligations, including debt obligations. Any inability of our subsidiaries to pay dividends or make payments to us may adversely affect our cash flow and financial condition.

Many of our subsidiaries, including our bank and broker-dealer subsidiaries, are subject to laws that restrict dividend payments, or authorize regulatory bodies to block or reduce the flow of funds from those subsidiaries to the parent company or other subsidiaries. Our bank and broker-dealer subsidiaries are subject to restrictions on their ability to lend or transact with affiliates and to minimum regulatory capital and liquidity requirements, as well as restrictions on their ability to use funds deposited with them in bank or brokerage accounts to fund their businesses. Intercompany arrangements we entered into in connection with our resolution planning submissions could restrict the amount of funding available to the parent company from our subsidiaries under certain adverse conditions.

Additional restrictions on related party transactions, increased capital and liquidity requirements and additional limitations on the use of funds on deposit in bank or brokerage accounts, as well as lower earnings, can reduce the amount of funds available to meet the obligations of the parent company and even require the parent company to provide additional funding to such subsidiaries. Also, regulatory action that requires additional liquidity at each of our subsidiaries could impede access to funds we need to pay our obligations or pay dividends. In addition, our right to participate in

a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to prior claims of the subsidiary’s creditors. For more information regarding our ability to pay dividends, see Capital Management in the MD&A on page 45 and Note 14 – Shareholders’ Equity to the Consolidated Financial Statements.

In the event of a resolution, whether in a bankruptcy proceeding or under the orderly liquidation authority of the FDIC, such resolution could materially adversely affect our liquidity and financial condition, and the ability to pay dividends to shareholders and to pay obligations.

Bank of America Corporation, our parent holding company, is required to periodically submit a plan to the FDIC and Federal Reserve describing its resolution strategy under the U.S. Bankruptcy Code in the event of material financial distress or failure. In the current plan, Bank of America Corporation’s preferred resolution strategy is a “single point of entry” strategy. This strategy provides that only the parent holding company files for resolution under the U.S. Bankruptcy Code and contemplates providing certain key operating subsidiaries with sufficient capital and liquidity to operate through severe stress and to enable such subsidiaries to continue operating or be wound down in a solvent manner following a bankruptcy of the parent holding company. Bank of America Corporation has entered into intercompany arrangements resulting in the contribution of most of its capital and liquidity to key subsidiaries. Pursuant to these arrangements, if Bank of America Corporation’s liquidity resources deteriorate so severely that resolution becomes imminent, Bank of America Corporation will no longer be able to draw liquidity from its key subsidiaries, and will be required to contribute its remaining financial assets to a wholly-owned holding company subsidiary, which could materially and adversely affect our liquidity and financial condition and the ability to pay dividends to shareholders and meet our payment obligations.

If the FDIC and Federal Reserve jointly determine that Bank of America Corporation’s resolution plan is not credible, they could impose more stringent capital, leverage or liquidity requirements or restrictions on our growth, activities or operations. Further, we could be required to take certain actions that could impose operating costs and could potentially result in the divestiture or restructuring of certain businesses and subsidiaries.

Additionally, under the Financial Reform Act, when a G-SIB such as Bank of America Corporation is in default or danger of default, the FDIC may be appointed receiver in order to conduct an orderly liquidation of such institution. In the event of such appointment, the FDIC could, among other things, invoke the orderly liquidation authority, instead of the U.S. Bankruptcy Code, if the Secretary of the Treasury makes certain financial distress and systemic risk determinations. In 2013, the FDIC issued a notice describing its preferred “single point of entry” strategy for resolving a G-SIB. Under this approach, the FDIC could replace Bank of America Corporation with a bridge holding company, which could continue operations and result in an orderly resolution of the underlying bank, but whose equity would be held solely for the benefit of our creditors. The FDIC’s “single point of entry” strategy may result in our security holders suffering greater losses than would have been the case under a bankruptcy proceeding or a different resolution strategy.

For more information about resolution planning, see Item 1. Business – Resolution Planning on page 4. For more information about the FDIC’s orderly liquidation, see Item 1. Business – Insolvency and the Orderly Liquidation Authority on page 4.



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Credit

Economic or market disruptions, insufficient credit loss reserves or concentrations of credit risk may result in an increase in the provision for credit losses, which could have an adverse effect on our financial condition and results of operations.

A number of our products expose us to credit risk, including loans, letters of credit, derivatives, debt securities, trading account assets and assets held-for-sale. A deterioration in the financial condition of our consumer and commercial borrowers, counterparties or underlying collateral could adversely affect our financial condition and results of operations.

Global and U.S. economic conditions and macroeconomic or market events and disruptions, including a continuing slowdown in global GDP growth, a decline in consumer spending, a decline in property values or an asset price correction, increasing consumer and corporate leverage, as well as rising unemployment, fluctuations in foreign exchange or interest rates, widespread health emergencies or pandemics and/or natural disasters, may impact our credit portfolios. In addition, significant economic or market stresses and disruptions could have a negative impact on the business environment and financial markets, increasing the risk that borrowers or counterparties would default or become delinquent in their obligations to us, which could lead to recessionary conditions and/or increase our credit losses and provision for credit losses, which could have a negative impact on our results of operations.

In particular, increases in delinquencies and default rates could adversely affect our consumer credit card, home equity and residential mortgage portfolios through increased charge-offs and provision for credit losses. A deteriorating economic environment in the U.S. or globally could also adversely affect our consumer and commercial loan portfolios with weakened client and collateral positions. Simultaneous drawdowns on lines of credit and/or an increase in a borrower’s leverage in a weakening economic environment could result in deterioration in our credit portfolio, should borrowers be unable to fulfill competing financial obligations. The impact of this could also be magnified by lending to leveraged borrowers, elevated asset prices and/or declining property or collateral values unrelated to macroeconomic stress.

We estimate and establish an allowance for credit losses for losses inherent in our lending activities (including unfunded lending commitments), excluding those measured at fair value, through a charge to earnings. The process for determining the amount of the allowance requires us to make difficult and complex judgments, including forecasting how borrowers will react to changing economic conditions. The ability of our borrowers or counterparties to repay their obligations will likely be impacted by changes in future economic conditions, which in turn could impact the accuracy of our loss forecasts and allowance estimates. There is also the possibility that we will fail to accurately identify the appropriate economic indicators or that we will fail to accurately estimate their impacts to our borrowers and the reserves that we hold.

We may suffer unexpected losses if the models and assumptions we use to establish reserves and make judgments in extending credit to our borrowers or counterparties prove inaccurate in predicting future events. In addition, external factors, such as the macroeconomic or market events disclosed above can also negatively impact our recognition of credit losses in our portfolios and impact our allowance for credit losses. As of January 1, 2020, we implemented a new accounting standard to estimate our allowance for credit losses. For more information, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements. Although we believe that the allowance for credit losses is in compliance with the new accounting standard

at January 1, 2020, there is no guarantee that it will be sufficient to address credit losses, particularly if economic conditions deteriorate quickly and/or significantly. In such an event, we may increase the size of our allowance which would reduce our earnings.

In the ordinary course of our business, we also may be subject to concentrations of credit risk because of a common characteristic or common sensitivity to economic, financial or business developments. For example, concentrations in credit risk may result in a particular industry, geographic location, product, asset class, counterparty, individual exposure or within any pool of exposures with a common risk characteristic. A deterioration in the financial condition or prospects of a particular industry, geographic location, product or asset class, or a failure or downgrade of, or default by, any particular entity or group of entities could negatively affect our businesses and it is possible our limits and credit monitoring exposure controls will not function as anticipated.

While our activities expose us to many different industries and counterparties, we routinely execute a high volume of transactions with counterparties in the financial services industry, including broker-dealers, commercial banks, investment banks, insurers, mutual funds and hedge funds, central counterparties and other institutional clients. This has resulted in significant credit concentration with respect to this industry. Financial services institutions and other counterparties are inter-related because of trading, funding, clearing or other relationships. As a result, defaults by, or even market uncertainty about the financial stability of one or more financial services institutions, or the financial services industry generally, could lead to market-wide liquidity disruptions, losses and defaults.

Many of these transactions expose us to credit risk and, in some cases, disputes and litigation in the event of default of a counterparty. In addition, our credit risk may be heightened by market risk when the collateral held by us cannot be liquidated or is liquidated at prices not sufficient to recover the full amount of the loan or derivatives exposure due to us, which may occur as a result of fraud or other events that impact the value of the collateral. Further, disputes with obligors as to the valuation of collateral could increase in times of significant market stress, volatility or illiquidity, and we could suffer losses during such periods if we are unable to realize the fair value of the collateral or manage declines in the value of collateral.

In the ordinary course of business, we also enter into transactions with sovereign nations, U.S. states and U.S. municipalities. Unfavorable economic or political conditions, disruptions to capital markets, currency fluctuations, changes in oil prices, social instability and changes in government or monetary policies could impact the operating budgets or credit ratings of these government entities and expose us to credit risk.

We also have concentrations of credit risk with respect to our consumer real estate, auto, consumer credit card and commercial real estate portfolios, which represent a significant percentage of our overall credit portfolio. Additionally, decreases in home price valuations or commercial real estate valuations in certain markets where we have large concentrations, including as a result of climate change or natural disasters (e.g., rising sea levels, hurricanes and fires), as well as more broadly within the U.S. or globally, could result in increased defaults, delinquencies or credit loss. For more information, see Consumer Portfolio Credit Risk Management in the MD&A on page 54.

Furthermore, our commercial portfolios include exposures to certain industries, including asset managers and funds, real estate, capital goods and finance companies. For more information, see Commercial Portfolio Credit Risk Management in



9 Bank of America

the MD&A on page 60. Economic weaknesses, adverse business conditions, market disruptions, rising interest or capitalization rates, the collapse of speculative bubbles, greater volatility in areas where we have concentrated credit risk or deterioration in real estate values or household incomes may cause us to experience a decrease in cash flow and higher credit losses in either our consumer or commercial portfolios or cause us to write down the value of certain assets.

Liquidity disruptions in the financial markets may result in our inability to sell, syndicate or realize the value of our positions, leading to increased concentrations, which could increase the credit and market risk associated with our positions, as well as increase our risk-weighted assets.

For more information on our credit risk and credit risk management policies and procedures, see Credit Risk Management in the MD&A on page 53, Note 1 – Summary of Significant Accounting Principles, Note 5 – Outstanding Loans and Leases and Note 6 – Allowance for Credit Losses to the Consolidated Financial Statements.

If the U.S. housing market weakens or home prices decline, our consumer loan portfolios, credit quality, credit losses, representations and warranties exposures and earnings may be adversely affected.

While U.S. home prices continued to generally increase in 2019, the rate of increase has slowed compared to recent periods. We remain conscious of geographic markets where housing price growth has slowed or decreased and other geographic markets where housing prices have declined, as further declines in future periods may negatively impact the demand for many of our products. Additionally, our mortgage loan production volume is generally influenced by the rate of growth in residential mortgage debt outstanding and the size of the residential mortgage market, both of which may be adversely affected by rising interest rates. Conditions in the U.S. housing market during the most recent financial crisis resulted in both significant write-downs of asset values in several asset classes, notably mortgage-backed securities, and exposure to monolines. If the U.S. housing market were to weaken, the value of real estate could decline, which could result in increased credit losses and delinquent servicing expenses and negatively affect our representations and warranties exposures, which could have an adverse effect on our financial condition and results of operations.

Our derivatives businesses may expose us to unexpected risks and potential losses.

We are party to a large number of derivatives transactions that may expose us to unexpected market, credit and operational risks that could cause us to suffer unexpected losses. Severe declines in asset values, unanticipated credit events or unforeseen circumstances that may cause previously uncorrelated factors to become correlated and vice versa, may create losses resulting from risks not appropriately taken into account or anticipated in the development, structuring or pricing of a derivative instrument. Certain OTC derivative contracts and other trading agreements provide that upon the occurrence of certain specified events, such as a change in the credit rating of a particular Bank of America entity or entities, we may be required to provide additional collateral or take other remedial actions and could experience increased difficulty obtaining funding or hedging risks. In some cases our counterparties may have the right to terminate or otherwise diminish our rights under these contracts or agreements.

We are also a member of various central counterparties (CCPs) in part due to regulatory requirements for mandatory clearing of derivative transactions, which potentially increases our credit risk exposures to CCPs. In the event that one or more members of the CCP defaults on its obligations, we may be required to pay a portion

of any losses incurred by the CCP as a result of that default. A CCP may modify, in its discretion, the margin we are required to post, which could mean unexpected and increased exposure to the CCP. As a clearing member, we are exposed to the risk of non-performance by our clients for which we clear transactions, which may not be covered by available collateral. Additionally, any default by a significant market participant may result in further risk and potential losses.

For more information on our derivatives exposure, see Note 3 – Derivatives to the Consolidated Financial Statements.

Geopolitical

We are subject to numerous political, economic, market, reputational, operational, legal, regulatory and other risks in the jurisdictions in which we operate.

We do business throughout the world including in emerging markets. Economic or geopolitical stress in one or more countries could have a negative impact regionally or globally, resulting in, among other things, market volatility, reduced market value and economic output. Our businesses and revenues derived from non-U.S. jurisdictions are subject to risk of loss from currency fluctuations, financial, social or judicial instability, changes in government leadership, including as a result of electoral outcomes or otherwise, changes in governmental policies or policies of central banks, expropriation, nationalization and/or confiscation of assets, price controls, high inflation, natural disasters, the emergence of widespread health emergencies or pandemics, capital controls, currency redenomination risk, exchange controls, unfavorable political and diplomatic developments, oil price fluctuations and changes in legislation. Additionally, protectionist trade policies and continued trade tensions between the U.S. and important trading partners, particularly China and the EU, including the risk that tariffs continue to rise and other restrictive actions are taken that weigh heavily on regional trade volumes and domestic demand through falling business sentiment and lower consumer confidence, could adversely affect our businesses and revenues. These risks are especially elevated in emerging markets.

A number of non-U.S. jurisdictions in which we do business have been or may be negatively impacted by slowing growth or recessionary conditions, market volatility and/or political unrest. In Europe, the political and economic environment remains challenging due to slowing GDP growth, debt concerns of certain EU countries and elevated recessionary risks, including in Germany and the U.K. The current degree of European political and economic uncertainty could increase and create additional market volatility and negatively impact our business and results of operations. Significant market volatility and geopolitical unrest could also result from ongoing uncertainty related to the U.K.'s exit from the EU and the transition period during which the terms of such exit will be negotiated, which could adversely affect us.

Potential risks of default on or devaluation of sovereign debt in some non-U.S. jurisdictions could expose us to substantial losses. Risks in one nation can limit our opportunities for portfolio growth and negatively affect our operations in other nations, including our U.S. operations. Market and economic disruptions of all types may affect consumer confidence levels and spending, corporate investment and job creation, bankruptcy rates, levels of incurrence and default on consumer and corporate debt, economic growth rates and asset values, among other factors. Any such unfavorable conditions or developments could have an adverse impact on the Corporation.

We also invest or trade in the securities of corporations and governments located in non-U.S. jurisdictions, including emerging markets. Revenues from the trading of non-U.S. securities may be



		Bank of America 10

subject to negative fluctuations as a result of the above factors. Furthermore, the impact of these fluctuations could be magnified because non-U.S. trading markets, particularly in emerging markets, are generally smaller, less liquid and more volatile than U.S. trading markets.

Our non-U.S. businesses are also subject to extensive regulation by governments, securities exchanges and regulators, central banks and other regulatory bodies. In many countries, the laws and regulations applicable to the financial services and securities industries are uncertain and evolving, and it may be difficult for us to determine the exact requirements of local laws in every market or manage our relationships with multiple regulators in various jurisdictions. Our potential inability to remain in compliance with local laws in a particular market and manage our relationships with regulators could result in increased expenses and changes to our organizational structure and have an adverse effect on our businesses and results of operations in that market, as well as our reputation in general.

In addition to non-U.S. legislation, our international operations are also subject to U.S. legal requirements. For example, our operations are subject to U.S. and non-U.S. laws and regulations relating to bribery and corruption, anti-money laundering, and economic sanctions, which can vary by jurisdiction. The increasing speed and novel ways in which funds circulate could make it more challenging to track the movement of funds and heightens financial crimes risk. Our ability to comply with these legal requirements depends on our ability to continually improve detection and reporting and analytic capabilities.

In the U.S., debt ceiling and budget deficit concerns, which have increased the possibility of U.S. government defaults on its debt and/or downgrades to its credit ratings, and prolonged government shutdowns could negatively impact the global economy and banking system and adversely affect our financial condition, including our liquidity. Additionally, changes in fiscal, monetary or regulatory policy could increase our compliance costs and adversely affect our business operations, organizational structure and results of operations. We are also subject to geopolitical risks, including acts or threats of terrorism, actions taken by the U.S. or other governments in response thereto, state-sponsored cyber attacks or campaigns and/or military conflicts, which could adversely affect business and economic conditions abroad, as well as in the U.S.

For more information on our non-U.S. credit and trading portfolios, see Non-U.S. Portfolio in the MD&A on page 66.

The U.K. Referendum, and the planned exit of the U.K. from the EU, could adversely affect us.

We conduct business in Europe, the Middle East and Africa primarily through our subsidiaries in the U.K. France and Ireland. For the year ended December 31, 2019, our operations in Europe, the Middle East and Africa, including the U.K., represented approximately six percent of our total revenue, net of interest expense.

On January 31, 2020, the U.K. formally exited the EU. Upon exit, a transition period began during which time the U.K. and the EU expect to negotiate a trade agreement and other terms associated with their future relationship. The transition period is scheduled to end on December 31, 2020. The ultimate impact and terms of such negotiation and any trade or other agreements remain unclear, and short- and long-term global economic and market volatility and disruptions to regional and global financial markets may occur, including as a result of currency fluctuations and trade relations. There can be no guarantee that the U.K. and EU will reach an agreement on trade or any other matters during the transition period or that the transition period will be extended if agreements are not reached. Additionally, there may be

heightened geopolitical uncertainty and/or market volatility if a trade and other agreements are not reached by the end of the transition period, including with regard to cross-border conduct of financial services and the treatment of existing financial transactions and contracts. If uncertainty resulting from the U.K.’s exit or the end to the transition period negatively impacts economic conditions, financial markets, including currency markets and consumer confidence, or clients, counterparties, and financial markets are not prepared for the trade and other agreements that are ultimately agreed upon or the transition period ends without a trade or other agreements, our business, results of operations, financial position and/or operational model could be adversely affected.

We are also subject to different laws, regulations and regulatory authorities and may incur additional costs and/or experience negative tax consequences as a result of establishing our principal EU banking and broker-dealer operations outside of the U.K., which could adversely impact our EU business, results of operations and operational model. Additionally, changes to the legal and regulatory framework under which our subsidiaries will continue to provide products and services in the U.K. and in the EU following the transition period may result in additional compliance costs and have negative tax consequences or an adverse impact on our results of operations. For more information on our EU operations outside of the U.K., see Executive Summary – Recent Developments – U.K. Exit from the EU in the MD&A on page 23.

Business Operations

A failure in or breach of our operational or security systems or infrastructure, or those of third parties, including their downstream service providers and the financial services industry, could disrupt our critical business operations and customer services, result in regulatory, market, privacy, liquidity and operational risk exposures, and adversely impact our results of operations and financial condition, as well as cause legal or reputational harm.

The potential for operational risk exposure exists throughout our organization and as a result of our interactions with, and reliance on, third parties, including their downstream service providers, and the financial services industry infrastructure. Our operational and security systems infrastructure, including our computer systems, emerging technologies, data management and internal processes, as well as those of third parties, are integral to our performance. We rely on our employees and third parties in our day-to-day and ongoing operations, who may, as a result of human error, misconduct, malfeasance or a failure or breach of systems or infrastructure, expose us to risk.

Additionally, our financial, accounting, data processing and transmission, storage, backup or other operating or security systems and infrastructure or those of third parties with whom we interact or upon whom we rely may fail to operate properly or become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our or such third party’s control, which could adversely affect our ability to process transactions or provide services. We could also experience prolonged computer and network outages resulting in disruptions to our critical business operations and customer services, including abuse or failure of our electronic trading and algorithmic platforms. We may experience electrical, telecommunications or other major physical infrastructure outages, newly identified vulnerabilities in key hardware or software, failure of aging infrastructure, technology project implementation challenges, natural disasters such as earthquakes, tornadoes, hurricanes and floods, widespread health emergencies or pandemics and events arising from local or larger



11 Bank of America

scale political or social matters, including terrorist acts, which could result in prolonged operational outages.

Regardless of the measures we have taken to implement training, procedures, backup systems and other safeguards to support our operations and bolster our operational resilience, our ability to conduct business may be adversely affected by any significant disruptions to us or to third parties, including their downstream service providers, with whom we interact or upon whom we rely, including a systematic cyber campaign that results in system outages and unavailability of part or all of the financial services industry infrastructure. Our ability to implement backup systems and other safeguards with respect to third-party systems and the financial services industry infrastructure is more limited than with respect to our own systems.

In the event that backup systems are available and utilized, they may not process data as quickly as our primary systems and some data might not have been backed up. We continuously update the systems on which we rely to support our operations and growth and to remain compliant with all applicable laws, rules and regulations globally. This updating entails significant costs and creates risks associated with implementing new systems and integrating them with existing ones, including business interruptions. A failure or breach of our operational or security systems or infrastructure resulting in disruption to our critical business operations and customer services could expose us to regulatory, market, privacy and liquidity risk, and adversely impact our results of operations and financial condition, as well as cause legal or reputational harm.

A cyber attack, information or security breach, or a technology failure of ours or of a third party could adversely affect our ability to conduct our business, manage our exposure to risk or expand our businesses, result in the disclosure or misuse of confidential or proprietary information, increase our costs to maintain and update our operational and security systems and infrastructure, and adversely impact our results of operations, liquidity and financial condition, as well as cause legal or reputational harm.

Our business is highly dependent on the security, controls and efficacy of our infrastructure, computer and data management systems, as well as those of our customers, suppliers, counterparties and other third parties, including their downstream service providers, the financial services industry and financial data aggregators, with whom we interact, on whom we rely or who have access to our customers' personal or account information. Our business relies on effective access management and the secure collection, processing, transmission, storage and retrieval of confidential, proprietary, personal and other information in our computer and data management systems and networks, and in the computer and data management systems and networks of third parties. In addition, to access our network, products and services, our employees, customers, suppliers, counterparties and other third parties increasingly use personal mobile devices or computing devices that are outside of our network and control environments and are subject to their own cybersecurity risks.

We, our employees and customers, regulators and other third parties are regularly the target of cyber attacks and are likely to continue to be the target of cyber attacks. These cyber attacks are pervasive and evolving and include computer viruses, malicious or destructive code (such as ransomware), phishing attacks, denial of service or information or other security breach tactics that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction or theft of confidential, proprietary and other information, including intellectual property, of ours, our employees, our customers or of third parties, damages to systems, or otherwise material disruption to our or our customers’ or other third parties’ network access or business

operations, both domestically and internationally. As cyber threats continue to evolve, we may be required to expend significant additional resources to modify or enhance our protective measures, investigate and remediate any information security vulnerabilities or incidents and develop our capabilities to respond and recover. Cyber threats are rapidly changing, and despite substantial efforts to protect the integrity of our systems and implement controls, processes, policies and other protective measures, we may not be able to anticipate cyber attacks or information or security breaches, nor may we be able to implement effective preventive or defensive measures to address such attacks or breaches. Even the most advanced internal control environment is vulnerable to compromise. Internal access management failures could result in the compromise or unauthorized exposure of confidential data. Targeted social engineering attacks are becoming more sophisticated and are extremely difficult to prevent.

Our cybersecurity risk and exposure remains heightened because of, among other things, the evolving nature and pervasiveness of cyber threats, our prominent size and scale, our role in the financial services industry and the broader economy. The financial services industry is particularly at risk because of the proliferation of new and emerging technologies, including third-party financial data aggregators, and the use of the Internet and telecommunications technologies to conduct financial transactions. For example, our plans to continue our use of automation, artificial intelligence and robotics, increase our internet and mobile banking products, including mobile payment and other web- and cloud-based products and applications, and develop additional remote connectivity solutions to serve our customers when and how they want to be served, increase our cybersecurity risks and exposure.

Additionally, our continuous transmission of sensitive information to, and storage of such information by, third parties, including our vendors and regulators, our geographic footprint and international presence, the outsourcing of some of our business operations, threats of cyber terrorism, external extremist parties, including state-sponsored actors, in some circumstances as a means to promote political ends, and system and customer account updates and conversions result in heightened risk exposure. As a result, cybersecurity and the continued development and enhancement of our controls, processes and practices designed to protect our systems, computers, intellectual property and proprietary information, software, data and networks from attack, damage or unauthorized access remain a critical priority. Cybersecurity risks have also significantly increased in recent years in part due to the increasingly sophisticated activities of organized crime groups, hackers, terrorist organizations, hostile foreign governments, disgruntled employees or vendors, activists and other external parties, including those involved in corporate espionage. The techniques used in cyber attacks change frequently, and these attacks or ensuing security breaches could persist for an extended period of time before being detected. It could take considerable additional time for us to determine the scope, extent, amount, and type of information compromised, at which time the impact on the Corporation and measures to recover and restore to a business as usual state may be difficult to assess.

We also face indirect technology, cybersecurity and operational risks relating to the customers, clients and other third parties, including their downstream service providers and the financial services industry, with whom we do business, upon whom we rely to facilitate or enable our business activities or upon whom our customers rely. Such third parties also include financial counterparties, financial data aggregators, financial intermediaries, such as clearing agents, exchanges and clearing



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houses, vendors, regulators, providers of critical infrastructure, such as internet access and electrical power, and retailers for whom we process transactions. As a result of increasing consolidation, interdependence and complexity of financial entities and technology systems, a technology failure, cyber attack or other information or security breach that significantly degrades, deletes or compromises the systems or data of one or more financial entities or third-party or their downstream service providers could have a material impact on counterparties or other market participants, including us. This consolidation, interconnectivity and complexity increases the risk of operational failure, on both individual and industry-wide bases, as disparate systems need to be integrated, often on an accelerated basis. Any technology failure, cyber attack or other information or security breach, termination or constraint of any third party, including their downstream service providers, the financial services industry infrastructure or financial data aggregators, could, among other things, adversely affect our ability to conduct day-to-day business activities, effect transactions, service our clients, manage our exposure to risk or expand our businesses, result in the misappropriation or destruction of the personal, proprietary or confidential information of our employees, customers, suppliers, counterparties and other third parties or result in fraudulent or unauthorized transactions. Further, any such event may not be disclosed to us in a timely manner.

Although to date we have not experienced any material losses or other material consequences relating to technology failure, cyber attacks or other information or security breaches, whether directed at us or third parties, there can be no assurance that our controls and procedures in place to monitor and mitigate the risks of cyber threats will be sufficient and that we will not suffer material losses or consequences in the future. Cyber attacks or other information or security breaches, whether directed at us or third parties, may result in significant lost revenue, give rise to losses or have other negative consequences. Furthermore, the public perception that a cyber attack on our systems has been successful, whether or not this perception is correct, may damage our reputation with customers and third parties with whom we do business. Although we maintain cyber insurance, there can be no assurance that liabilities or losses we may incur will be covered under such policies or that the amount of insurance will be adequate.

Also, successful penetration or circumvention of system security could result in negative consequences, including loss of customers and business opportunities, the withdrawal of customer deposits, prolonged computer and network outages resulting in disruptions to our critical business operations and customer services, misappropriation or destruction of our intellectual property, proprietary information or confidential information and/or the confidential, proprietary or personal information of certain parties, such as our employees, customers, suppliers, counterparties and other third parties, or damage to their computers or systems. This could result in a violation of applicable privacy and other laws in the U.S. and abroad, litigation exposure, regulatory fines, penalties or intervention, loss of confidence in our security measures, reputational damage, reimbursement or other compensatory costs, additional compliance costs and our internal controls or disclosure controls being rendered ineffective. The occurrence of any of these events could adversely impact our results of operations, liquidity and financial condition.

Our mortgage loan repurchase obligations or claims from third parties could result in additional losses.

We and our legacy companies have sold significant amounts of residential mortgage loans. In connection with these sales, we or certain of our subsidiaries or legacy companies made various

representations and warranties, breaches of which may result in a requirement that we repurchase the mortgage loans, or otherwise make whole or provide other remedies to counterparties. At December 31, 2019, we had $10.7 billion of unresolved repurchase claims, net of duplicate claims and excluding claims where the statute of limitations has expired without litigation being commenced.

At December 31, 2019, our liability for obligations under representations and warranties exposures was $1.8 billion. We also have an estimated range of possible loss (RPL) for representations and warranties exposures that is combined with the litigation RPL, which we disclose in Note 13 – Commitments and Contingencies to the Consolidated Financial Statements. The recorded liability and estimated RPL are based on currently available information, significant judgment and a number of assumptions that are subject to change. There can be no assurance that the Corporation will reach future settlements or, if it does, that the terms of past settlements can be relied upon to predict the terms of future settlements. Future representations and warranties losses may occur in excess of our recorded liability and estimated RPL, and such losses could have a material adverse effect on our results of operations.

Additionally, our recorded liability for representations and warranties exposures and the corresponding estimated RPL do not consider certain losses related to servicing, including foreclosure and related costs, fraud, indemnity or claims (including for residential mortgage-backed securities) related to securities law. Losses with respect to one or more of these matters could be material to our results of operations.

For more information about our representations and warranties exposure, see Off-Balance Sheet Arrangements and Contractual Obligations – Representations and Warranties in the MD&A on page 42 and Note 13 – Commitments and Contingencies to the Consolidated Financial Statements.

Failure to satisfy our obligations as servicer for residential mortgage securitizations and residential mortgage loans owned by other entities, along with other losses we could incur in our capacity as servicer, could harm our reputation, increase servicing costs or adversely impact our results of operations.

We and our legacy companies service mortgage loans on behalf of third-party securitization vehicles and other investors. If we commit a material breach of our obligations as servicer or master servicer, we may be subject to termination if the breach is not cured within a specified period of time following notice, which could cause us to lose servicing income. In addition, we may have liability for any failure by us, as a servicer or master servicer, for any act or omission on our part that involves willful misfeasance, bad faith, gross negligence or reckless disregard of our duties. If any such breach was found to have occurred, it may harm our reputation, increase our servicing costs or adversely impact our results of operations. Additionally, with respect to foreclosures, we may incur costs or losses due to irregularities in the underlying documentation, or if the validity of a foreclosure action is challenged by a borrower or overturned by a court because of errors or deficiencies in the foreclosure process. We may also incur costs or losses relating to delays or alleged deficiencies in processing documents necessary to comply with state law governing foreclosure.

Changes in the structure of the GSEs and the relationship among the GSEs, the government and the private markets could result in changes to our business operations and may adversely impact our business.

During 2019, we sold approximately $3.5 billion of loans to Fannie Mae (FNMA) and Freddie Mac (FHLMC). Each is currently in a conservatorship with its primary regulator, the Federal Housing



13 Bank of America

Finance Agency (FHFA), acting as conservator. In September 2019, the Treasury Department published a proposal to recapitalize FNMA and FHLMC and remove them from conservatorship as well as reduce GSEs' role in the marketplace. There can be no assurance that these proposals will be fully adopted, and it is not possible to predict when the conservatorships will end. If GSEs were to take a reduced role in the marketplace, including by limiting the mortgage products they offer, we could be required to seek alternative funding sources, retain additional loans on our balance sheet, secure funding through the Federal Home Loan Bank system, or securitize the loans through Private Label Securitization. Although the Treasury Department has released an administrative proposal and the FHFA has taken steps to unify underwriting parameters and create a common securitization platform, we cannot predict the prospects for the enactment, timing of the recapitalization or release from conservatorship or content of legislative or rulemaking proposals regarding the future status of the GSEs in the housing market. Accordingly, uncertainty regarding their future continues to exist.

Any of these developments could adversely affect the value of our securities portfolios, capital levels and liquidity and results of operations.

Our risk management framework may not be effective in mitigating risk and reducing the potential for losses.

Our risk management framework is designed to minimize risk and loss to us. We seek to effectively and consistently identify, measure, monitor, report and control the types of risk to which we are subject, including strategic, credit, market, liquidity, compliance, operational and reputational risks. While we employ a broad and diversified set of controls and risk mitigation techniques, including modeling and forecasting, hedging strategies and techniques that seek to balance our ability to profit from trading positions with our exposure to potential losses, our ability to control and mitigate risks that result in losses is inherently limited by our ability to identify all risks, including emerging and unknown risks, anticipate the timing of risks, apply effective hedging strategies, make correct assumptions, manage and aggregate data correctly and efficiently, and develop risk management models to assess and control risk.

Our ability to manage risk is limited by our ability to consistently execute all elements of our risk management program and develop and maintain a culture of managing risk well throughout the Corporation and manage risks associated with third parties, their downstream service providers, and vendors, to enable effective risk management and ensure that risks are appropriately considered, evaluated and responded to in a timely manner. Uncertain economic conditions, heightened legislative and regulatory scrutiny of and change within the financial services industry, the pace of technological changes, accounting and market developments, the failure of employees to comply with policies, values and our risk framework and the overall complexity of our operations, among other developments, may result in a heightened level of risk for us. Accordingly, we could suffer losses as a result of our failure to manage change or properly anticipate, manage, control or mitigate risks.

For more information about our risk management policies and procedures, see Managing Risk in the MD&A on page 42.

Regulatory, Compliance and Legal

We are subject to comprehensive government legislation and regulations, both domestically and internationally, which impact our operating costs and could require us to make changes to our operations. Additionally, we are subject to certain settlements, orders and agreements with government authorities from time to

time, which could increase our compliance and operational risks and costs.

We are subject to comprehensive regulation under federal and state laws in the U.S. and the laws of the various jurisdictions in which we operate, including increasing and complex economic sanctions regimes. These laws and regulations significantly affect and have the potential to restrict the scope of our existing businesses, limit our ability to pursue certain business opportunities, including the products and services we offer, reduce certain fees and rates or make our products and services more expensive for clients and customers.

We continue to make adjustments to our business and operations, legal entity structure and capital and liquidity management policies, procedures and controls to comply with currently effective laws and regulations, as well as final rulemaking, guidance and interpretation by regulatory authorities, including the Department of Treasury, Federal Reserve, OCC, CFPB, Financial Stability Oversight Council, FDIC, Department of Labor, SEC and CFTC in the U.S. and foreign regulators and other government authorities. Further, we could become subject to future regulatory requirements beyond those currently proposed, adopted or contemplated, including rulemaking related to the Financial Reform Act and the U.K.'s exit from the EU. The cumulative effect of all of the legislation and regulations on our business, operations and profitability remains uncertain. This uncertainty necessitates that in our business planning we make certain assumptions with respect to the scope and requirements of the proposed rules. If these assumptions prove incorrect, we could be subject to increased regulatory and compliance risks and costs as well as potential reputational harm. In addition, U.S. and international regulatory initiatives may overlap, and non-U.S. regulations and initiatives may be inconsistent or may conflict with current or proposed U.S. regulations, which could lead to compliance risks and increased costs.

Our regulators’ prudential and supervisory authority gives them broad power and discretion to direct our actions, and they have assumed an active oversight, inspection and investigatory role across the financial services industry. However, regulatory focus is not limited to laws and regulations applicable to the financial services industry specifically, but also extends to other significant laws and regulations that apply across industries and jurisdictions,

including those related to data management and privacy, anti-money laundering, anti-corruption and economic sanctions. Additionally, we are subject to laws, rules and regulations in the U.S. and abroad, including GDPR and CCPA, regarding compliance with our privacy policies and the disclosure, collection, use, sharing and safeguarding of personal identifiable information of certain parties, such as our employees, customers, suppliers, counterparties and other third parties, the violation of which could result in litigation, regulatory fines and enforcement actions. Additionally, we will likely be subject to new and evolving data privacy laws in the U.S. and abroad, which could result in additional costs of compliance, litigation, regulatory fines and enforcement actions.

As part of their enforcement authority, our regulators and other government authorities have the authority to, among other things, assess significant civil or criminal monetary penalties or restitution and issue cease and desist or removal orders and initiate injunctive actions. The amounts paid by us and other financial institutions to settle proceedings or investigations have, in some instances, been substantial and may increase. In some cases, governmental authorities have required criminal pleas or other extraordinary terms as part of such resolutions, which could have significant consequences, including reputational harm, loss of customers, restrictions on the ability to access capital markets, and the



		Bank of America 14

inability to operate certain businesses or offer certain products for a period of time.

The Corporation and the conduct of its employees and representatives are subject to regulatory scrutiny across jurisdictions. Additionally, the complexity of the federal and state regulatory and enforcement regimes in the U.S., coupled with the global scope of our operations and the aggressiveness of the regulatory environment worldwide also means that a single event or practice or a series of related events or practices may give rise to a significant number of overlapping investigations and regulatory proceedings, either by multiple federal and state agencies in the U.S. or by multiple regulators and other governmental entities in different jurisdictions. Additionally, actions by other members of the financial services industry related to business activities in which we participate may result in investigations by regulators or other government authorities. Responding to inquiries, investigations, lawsuits and proceedings, regardless of the ultimate outcome of the matter, is time-consuming and expensive and can divert the attention of our senior management from our business. The outcome of such proceedings, which may last a number of years, may be difficult to predict or estimate until late in the proceedings.

We are currently subject to the terms of settlements, orders and agreements that we have entered into with government entities and regulatory authorities and may become subject to additional settlements, orders or agreements in the future. Such settlements, orders or agreements can impose significant operational and compliance costs on us as they typically require us to enhance our procedures and controls, expand our risk and control functions within our lines of business, invest in technology and hire significant numbers of additional risk, control and compliance personnel. Moreover, if we fail to meet the requirements of the regulatory settlements, orders or agreements to which we are subject, or, more generally, fail to maintain risk and control procedures and processes that meet the heightened standards established by our regulators and other government authorities, we could be required to enter into further settlements, orders or agreements and pay additional fines, penalties or judgments, or accept material regulatory restrictions on our businesses.

While we believe that we have adopted appropriate risk management and compliance programs to identify, assess, monitor and report on applicable laws, policies and procedures, compliance risks will continue to exist, particularly as we adapt to new and evolving laws, rules and regulations. Additionally, changing U.S. fiscal, monetary and regulatory policies arising from potential changes to the U.S. presidential administration and Congress result in ongoing regulatory uncertainties. There is no guarantee that our risk management and compliance programs will be consistently executed to successfully manage compliance risk. We also rely upon third parties who may expose us to compliance and legal risk. Future legislative or regulatory actions, and any required changes to our business or operations, or those of third parties, including their downstream providers, upon whom we rely, resulting from such developments and actions could result in a significant loss of revenue, impose additional compliance and other costs or otherwise reduce our profitability, limit the products and services that we offer or our ability to pursue certain business opportunities, require us to dispose of or curtail certain businesses, affect the value of assets that we hold, require us to increase our prices and therefore reduce demand for our products, or otherwise adversely affect our businesses. In addition, legal and regulatory proceedings and other contingencies will arise from time to time that may result in fines, regulatory sanctions, penalties, equitable relief and changes to our business practices. As a result, we are and will continue to be subject to heightened

compliance and operating costs that could adversely affect our results of operations.

We are subject to significant financial and reputational risks from potential liability arising from lawsuits and regulatory and government action.

We face significant legal risks in our business, and the volume of claims and amount of damages, penalties and fines claimed in litigation and other disputes, and regulatory and government proceedings against us and other financial institutions continue to be high. Greater than expected litigation and investigation costs, substantial legal liability or significant regulatory or government action against us could have adverse effects on our business, financial condition, including liquidity, and results of operations, and/or cause significant reputational harm to us. We continue to experience a significant volume of litigation and other disputes, including claims for contractual indemnification with counterparties regarding relative rights and responsibilities. Consumers, clients and other counterparties continue to be litigious. Among other things, financial institutions, including us, continue to be the subject of claims alleging anti-competitive conduct with respect to various products and markets, including U.S. antitrust class actions claiming joint and several liability for treble damages. In addition, regulatory authorities have had a supervisory focus on enforcement, including in connection with alleged violations of law and customer harm. For example, U.S. regulators and government agencies have pursued claims against financial institutions under the Financial Institutions Reform, Recovery, and Enforcement Act, False Claims Act, Equal Credit Opportunity Act, Fair Housing Act and antitrust laws. Such claims may carry significant and, in certain cases, treble damages. The global environment of extensive regulation, regulatory compliance burdens, litigation and regulatory and government enforcement, combined with uncertainty related to the continually evolving regulatory environment, may affect operational and compliance costs and risks, which may limit or cease our ability to continue providing certain products and services.

Additionally, misconduct by employees, including improper or illegal conduct, or other unfair, deceptive, abusive or discriminatory business practices, can cause significant reputational harm as well as litigation and regulatory government enforcement action.

For more information on litigation and regulatory matters, see Note 13 – Commitments and Contingencies to the Consolidated Financial Statements.

U.S. federal banking agencies may require us to increase our regulatory capital, TLAC, long-term debt or liquidity requirements, which could result in the need to issue additional qualifying securities or to take other actions, such as to sell company assets.

We are subject to U.S. regulatory capital and liquidity rules. These rules, among other things, establish minimum requirements to qualify as a well-capitalized institution. If any of our subsidiary insured depository institutions fails to maintain its status as well capitalized under the applicable regulatory capital rules, the Federal Reserve will require us to agree to bring the insured depository institution back to well-capitalized status. For the duration of such an agreement, the Federal Reserve may impose restrictions on our activities. If we were to fail to enter into or comply with such an agreement, or fail to comply with the terms of such agreement, the Federal Reserve may impose more severe restrictions on our activities, including requiring us to cease and desist activities permitted under the Bank Holding Company Act of 1956.

Capital and liquidity requirements are frequently introduced and amended. It is possible that regulators may increase regulatory capital requirements including TLAC and long-term debt requirements, change how regulatory capital is calculated or



15 Bank of America

increase liquidity requirements. Our G-SIB surcharge may increase from current estimates, and we are also subject to a countercyclical capital buffer which, while currently set at zero, may be increased by regulators. In 2018, the Federal Reserve issued a proposal to implement a stress capital buffer into its capital requirements, which may increase our regulatory capital requirements, if adopted. A significant component of regulatory capital ratios is calculating our risk-weighted assets and our leverage exposure, which may increase. The Basel Committee on Banking Supervision has also revised several key methodologies for measuring risk-weighted assets, including a standardized approach for credit risk, standardized approach for operational risk and constraints on the use of internal models, as well as a capital floor based on the revised standardized approaches. U.S. banking regulators may update the U.S. Basel 3 rules to incorporate the Basel Committee revisions.

Additionally, Net Stable Funding Ratio requirements have been proposed, which would apply to us and our subsidiary depository institutions, and target longer term liquidity risk. While the impact of these proposals remains uncertain, they could have a negative impact on our capital and liquidity positions. In 2019, U.S. banking regulators published a final rule outlining a standardized approach for counterparty credit risk, which updates the calculation of the exposure amount for derivative contracts under the regulatory capital rule. The final rule will be effective on April 1, 2020, with a mandatory compliance date of January 1, 2022. This rule could have a negative impact on our capital position upon final implementation.

As part of its annual CCAR, the Federal Reserve conducts stress testing on parts of our business using hypothetical economic scenarios prepared by the Federal Reserve. Those scenarios may affect our CCAR stress test results, which may have an effect on our projected regulatory capital amounts in the annual CCAR submission, including the CCAR capital plan affecting our dividends and stock repurchases. Such ability to return capital to our shareholders substantially depends on the Federal Reserve's response to our annual CCAR submission. To the extent that the Federal Reserve objects to our annual CCAR submission or objects to the amount of dividends or stock repurchases proposed, our shareholder returns could decrease.

Changes to and compliance with the regulatory capital and liquidity requirements may impact our operations by requiring us to liquidate assets, increase borrowings, issue additional equity or other securities, cease or alter certain operations, sell company assets or hold highly liquid assets, which may adversely affect our results of operations. We may be prohibited from taking capital actions such as paying or increasing dividends, or repurchasing securities if the Federal Reserve objects to our CCAR capital plan.

For more information, see Capital Management – Regulatory Capital in the MD&A on page 46 and Note 17 – Regulatory Requirements and Restrictions to the Consolidated Financial Statements.

Changes in accounting standards or assumptions in applying accounting policies could adversely affect us.

Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Some of these policies require use of estimates and assumptions that may affect the reported value of our assets or liabilities and results of operations and are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain. If those assumptions, estimates or judgments were incorrectly made, we could be required to correct and restate prior-period financial statements. Accounting standard-setters and those who interpret the accounting standards, the SEC, banking regulators and our

independent registered public accounting firm may also amend or even reverse their previous interpretations or positions on how various standards should be applied. These changes may be difficult to predict and could impact how we prepare and report our financial statements. In some cases, we could be required to apply a new or revised standard retrospectively, resulting in us revising prior-period financial statements. For more information on some of our critical accounting policies and recent accounting changes, see Complex Accounting Estimates in the MD&A on page 77 and Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements.

We may be adversely affected by changes in U.S. and non-U.S. tax laws and regulations.

In December 2017, the President signed into law the Tax Cuts and Jobs Act (the Tax Act) which made significant changes to federal income tax law including, among other things, reducing the statutory corporate income tax rate to 21 percent from 35 percent and changing the taxation of our non-U.S. business activities.

In addition, we have U.K. net deferred tax assets which consist primarily of net operating losses that are expected to be realized by certain subsidiaries over an extended number of years. Adverse developments with respect to tax laws or to other material factors, such as prolonged worsening of Europe’s capital markets or changes in the ability of our U.K. subsidiaries to conduct business in the EU, could lead our management to reassess and/or change its current conclusion that no valuation allowance is necessary with respect to our U.K. net deferred tax assets.

It is possible that governmental authorities in the U.S. and/or other countries could further amend tax laws in a way that would adversely affect us, including the possibility that aspects of the Tax Act could be amended in the future.

Reputation

Damage to our reputation could harm our businesses, including our competitive position and business prospects.

Our ability to attract and retain customers, clients, investors and employees is impacted by our reputation. Harm to our reputation can arise from various sources, including officer, director or employee misconduct, unethical behavior, security breaches, litigation or regulatory outcomes, compensation practices, the suitability or reasonableness of recommending particular trading or investment strategies, including the reliability of our research and models, and prohibiting clients from engaging in certain transactions and sales practices. Additionally, our reputation may be harmed by failing to deliver products, subpar standards of service and quality expected by our customers, clients and the community, compliance failures, the inability to manage technology change or maintain effective data management, cyber incidents, inadequacy of responsiveness to internal controls, unintended disclosure of personal, proprietary or confidential information, perception of our environmental, social and governance practices and disclosures, conflicts of interest and breach of fiduciary obligations, and the activities of our clients, customers, counterparties and third parties, including vendors. Actions by the financial services industry generally or by certain members or individuals in the industry also can adversely affect our reputation. In addition, adverse publicity or negative information posted on social media by employees, the media or otherwise, whether or not factually correct, may adversely impact our business prospects or financial results.

We are subject to complex and evolving laws and regulations regarding privacy, know-your-customer requirements, data protection, including the GDPR and CCPA, cross-border data movement and other matters. Principles concerning the appropriate scope of consumer and commercial privacy vary



		Bank of America 16

considerably in different jurisdictions, and regulatory and public expectations regarding the definition and scope of consumer and commercial privacy may remain fluid. It is possible that these laws may be interpreted and applied by various jurisdictions in a manner inconsistent with our current or future practices, or that is inconsistent with one another. If personal, confidential or proprietary information of customers or clients in our possession, or in the possession of third parties, including their downstream service providers or financial data aggregators, is mishandled, misused or mismanaged, or if we do not timely or adequately address such information, we may face regulatory, reputational and operational risks which could have an adverse effect on our financial condition and results of operations.

We could suffer reputational harm if we fail to properly identify and manage potential conflicts of interest. Management of potential conflicts of interests has become increasingly complex as we expand our business activities through more numerous transactions, obligations and interests with and among our clients.

The failure to adequately address, or the perceived failure to adequately address, conflicts of interest could affect the willingness of clients to use our products and services, or give rise to litigation or enforcement actions, which could adversely affect our business.

Our actual or perceived failure to address these and other issues, such as operational risks, gives rise to reputational risk that could harm us and our business prospects. Failure to appropriately address any of these issues could also give rise to additional regulatory restrictions, legal risks and reputational harm, which could, among other consequences, increase the size and number of litigation claims and damages asserted or subject us to enforcement actions, fines and penalties, and cause us to incur related costs and expenses. For more information on reputational risk, see Reputational Risk Management in the MD&A on page 77.

Other

We face significant and increasing competition in the financial services industry.

We operate in a highly competitive environment and experience intense competition from local and global financial institutions as well as new entrants, in both domestic and foreign markets, in which we compete on the basis of a number of factors, including customer service, quality and range of products and services offered, technology, price, reputation, interest rates on loans and deposits, lending limits and customer convenience. Additionally, the changing regulatory environment may create competitive disadvantages for us given geography-driven capital and liquidity requirements. For example, U.S. regulators have in certain instances adopted stricter capital and liquidity requirements than those applicable to non-U.S. institutions. To the extent we expand into new business areas and new geographic regions, we may face competitors with more experience and more established relationships with clients, regulators and industry participants in the relevant market, which could adversely affect our ability to compete.

In addition, emerging technologies and advances and the growth of e-commerce have lowered geographic and monetary barriers of other financial institutions, made it easier for non-depository institutions to offer products and services that traditionally were banking products and allowed non-traditional financial service providers and technology companies to compete with traditional financial service companies in providing electronic and internet-based financial solutions and services, including electronic securities trading, marketplace lending, financial data aggregation and payment processing, including real-time payment

platforms. Further, clients may choose to conduct business with other market participants who engage in business or offer products in areas we deem speculative or risky, such as cryptocurrencies. Increased competition may negatively affect our earnings by creating pressure to lower prices or credit standards on our products and services requiring additional investment to improve the quality and delivery of our technology and/or reducing our market share, or affecting the willingness of our clients to do business with us.

Our inability to adapt our products and services to evolving industry standards and consumer preferences could harm our business.

Our business model is based on a diversified mix of businesses that provide a broad range of financial products and services, delivered through multiple distribution channels. Our success depends on our, and our third-party vendors', ability to adapt and develop products, services and technology to rapidly evolving industry standards and consumer preferences. There is increasing pressure by competitors to provide products and services on more attractive terms, including higher interest rates on deposits, and offer lower cost investment strategies, which may impact our ability to grow revenue and/or effectively compete. Additionally, legislative and regulatory developments may affect the competitive landscape. Further, the competitive landscape may be impacted by the growth of non-depository institutions that offer traditional banking products at higher rates or with no fees, or otherwise offer alternative products. This can reduce our net interest margin and revenues from our fee-based products and services, either from a decrease in the volume of transactions or through a compression of spreads.

In addition, the widespread adoption and rapid evolution of new technologies, including analytic capabilities, self-service digital trading platforms, internet services, distributed ledgers, such as the blockchain system, cryptocurrencies and payment systems, could require substantial expenditures to modify or adapt our existing products and services as we grow and develop our online and mobile banking channel strategies in addition to remote connectivity solutions. We may not be as timely or successful in developing or introducing new products and services, integrating new products or services into our existing offerings, responding or adapting to changes in consumer behavior, preferences, spending, investing and/or saving habits, achieving market acceptance of our products and services, reducing costs in response to pressures to deliver products and services at lower prices or sufficiently developing and maintaining loyal customers. Our or our third-party vendors' inability to adapt products and services to evolving industry standards and consumer preferences could harm our business and adversely affect our results of operations and reputation.

Our ability to attract and retain qualified employees is critical to the success of our business and failure to do so could hurt our business prospects and competitive position.

Our performance is heavily dependent on the talents and efforts of highly skilled individuals. Competition for qualified personnel within the financial services industry and from businesses outside the financial services industry is intense. Our competitors include non-U.S. based institutions and institutions subject to different compensation and hiring regulations than those imposed on U.S. institutions and financial institutions.

In order to attract and retain qualified personnel, we must provide market-level compensation. As a large financial and banking institution, we may be subject to limitations on compensation practices (which may or may not affect our competitors) by the Federal Reserve, the OCC, the FDIC and other regulators around the world. EU and U.K. rules limit and subject



17 Bank of America

to clawback certain forms of variable compensation for senior employees. Current and potential future limitations on executive compensation imposed by legislation or regulation could adversely affect our ability to attract and maintain qualified employees. Furthermore, a substantial portion of our annual incentive compensation paid to our senior employees has in recent years taken the form of long-term equity-based awards. Therefore, the ultimate value of this compensation depends on the price of our common stock when the awards vest. If we are unable to continue to attract and retain qualified individuals, our business prospects and competitive position could be adversely affected.

We could suffer operational, reputational and financial harm if our models and strategies fail to properly anticipate and manage risk.

We use proprietary models and strategies extensively to forecast losses, project revenue, measure and assess capital requirements for credit, country, market, operational and strategic risks and assess and control our operations and financial condition. These models require oversight, including independent validation before initial use, ongoing monitoring through outcomes analysis and benchmarking, and periodic revalidation. Models are subject to inherent limitations due to the use of historical trends and simplifying assumptions, uncertainty regarding economic and financial outcomes, and emerging risks from the use of applications that rely on artificial intelligence.

Our models and strategies may not be sufficiently predictive of future results due to limited historical patterns, extreme or unanticipated market movements or customer behavior and illiquidity, especially during severe market downturns or stress events, which could limit their effectiveness. The models that we use to assess and control our market risk exposures also reflect assumptions about the degree of correlation among prices of various asset classes or other market indicators, which may not be representative of the next downturn and would magnify the limitations inherent in using historical data to manage risk. Our models may not be effective if we fail to properly oversee them and detect their flaws during our review and monitoring processes, they contain erroneous data, assumptions, valuations, formulas or algorithms or our applications running the models do not perform as expected. Regardless of the steps we take to ensure effective controls, governance, monitoring and testing, and implement new technology and automated processes, we could suffer operational, reputational and financial harm if models and strategies fail to properly anticipate and manage current and evolving risks.

Failure to properly manage and aggregate data may result in our inability to manage risk and business needs, errors in our day-to-day operations, critical reporting and strategic decision-making and inaccurate financial, regulatory and operational reporting.

We rely on our ability to manage, aggregate, interpret and use data in an accurate, timely and complete manner for effective risk reporting and management. Our policies, programs, processes and practices govern how data is managed, aggregated, interpreted and used. While we continuously update our policies, programs, processes and practices and implement emerging technologies, such as automation, artificial intelligence and robotics, our data management and aggregation processes are subject to failure, including human error, system failure or failed controls. Failure to maintain and manage data and information effectively and to aggregate data and information in an accurate, timely and complete manner may impact its quality and reliability and limit our ability to manage current and emerging risk, to produce accurate financial, regulatory and operational reporting, as well as to manage changing business needs, strategic decision-making and day-to-day operations. The failure to establish and maintain

effective, efficient and controlled data management could have an adverse impact on our ability to develop our products and relationships with our customers and damage our reputation.

Reforms to and uncertainty regarding IBORs, including the London Interbank Offered Rate (LIBOR), and certain other rates or indices may adversely affect our business, financial condition and results of operations and could result in reputational harm to the Corporation.

In 2017, the U.K. FCA announced that it will no longer persuade or require participating banks to submit rates for LIBOR after 2021. The continuation of LIBOR on the current basis cannot be guaranteed after 2021, and there is substantial risk that LIBOR will be modified by 2021 or discontinued thereafter. This announcement, in conjunction with financial benchmark reforms and changes in short-term interbank lending markets more generally, have resulted in significant uncertainty about the potential or actual discontinuation of IBORs, including LIBOR, and certain other rates or indices that serve as “benchmarks.” Such benchmarks are used extensively in the global financial markets and in our business. In particular, LIBOR is used in many of our products and contracts, including mortgages, consumer, commercial and corporate loans, derivatives, floating-rate notes and other adjustable-rate products and financial instruments. The aggregate notional amount of these products and contracts is material to our business. These reforms and actions may result in significant uncertainty as to future rules or methodologies used to calculate benchmarks, cause new or reformed benchmarks to perform differently from the discontinued benchmarks they are replacing, cause existing benchmarks to disappear or become unavailable or unrepresentative, or have other consequences that cannot be fully anticipated, which expose us to various financial, operational and legal risks.

Certain ARRs have been proposed to replace LIBOR and other IBORs. For example, the Alternative Reference Rates Committee, a group of private-market participants and official-sector entities convened by the Federal Reserve Board and the Federal Reserve Bank of New York, has recommended that the Secured Overnight Financing Rate (SOFR) replace U.S. dollar LIBOR. However, the market transition from IBORs to ARRs is complex and pervasive throughout a number of different types of products and global financial markets. There can be no assurance that ARRs will be adequate alternatives to IBORs, that existing assets and liabilities based on or linked to IBORs will transition successfully to ARRs, of the timing of adoption and degree of integration and acceptance of such ARRs in the global financial markets, or of the future availability or representativeness of such ARRs. Our products and contracts that reference IBORs, in particular LIBOR, may contain language that determines when a successor rate including the ARR and/or the applicable spread adjustment to the designated rate (including IBORs) would be selected or determined. If a trigger is satisfied, our products and contracts may give the calculation agent (which may be us) discretion over the successor rate to be selected. The considerable uncertainty as to how the financial services industry will address the discontinuation of IBORs and/or such IBORs ceasing to be acceptable reference rates in financial instruments could ultimately result in client disputes and litigation surrounding the proper interpretation of our IBOR-based products and contracts. Accordingly, uncertainty regarding ARRs may continue to impact our business, operations and financial condition repeatedly and indefinitely.

The discontinuation of IBORs, including LIBOR, will require us to remediate IBOR-based products and contracts, including related hedging arrangements, that mature after the discontinuation date of the IBOR. These changes may adversely affect the yield on loans or securities held by us, amounts paid on securities we have



		Bank of America 18

issued, amounts received and paid on derivatives we have entered into, the value of such loans, securities or derivative instruments, the trading market for such products and contracts, and our ability to effectively use hedging instruments to manage risk. While some of these outstanding IBOR-based products and contracts include fallback provisions to ARRs, some of our outstanding IBOR-based products and contracts do not include fallback provisions or adequate fallback mechanisms requiring remediation to modify their terms. Additionally, some outstanding IBOR-based products and contracts are particularly challenging to modify due to the requirement that all impacted parties consent to such modification.

In light of the extensive use of IBOR-based products and contracts by us and other market participants, there can be no assurance that we and other market participants will be able to successfully modify all outstanding IBOR-based products and contracts or be adequately prepared for a discontinuation of an IBOR at the time such IBOR may cease to be published or otherwise discontinued. Also, there can be no assurance that existing or new provisions for successor rates in our IBOR-based products and contracts will include adequate methodologies for adjustments between the applicable IBOR and the corresponding successor rate or that the characteristics of the successor rates will be similar to or produce the economic equivalent of the benchmarks they seek to replace. For example, SOFR and other ARRs have compositions and characteristics that differ significantly from the benchmarks they may replace, have limited history, and may demonstrate less predictable performance over time than the benchmarks they replace.

Changes or uncertainty resulting from the market transition from IBORs to ARRs could adversely affect the return on and pricing, liquidity and value of outstanding IBOR-based products and contracts, cause significant market dislocations and

disruptions that are relevant to our business segments, particularly Global Banking and Global Markets, potentially increase the cost of and access to capital, increase the risk of litigation or other disputes, including in connection with the interpretation and enforceability of, or our historical marketing practices or disclosures with respect to, outstanding IBOR-based products and contracts with counterparties, and/or increase expenses related to the transition to ARRs, among other adverse consequences. Additionally, the process of transitioning to ARRs may result in increased costs and may also divert management time and attention from other areas of our business.

The market transition from IBORs to ARRs may also alter our risk profile and risk management strategies, including derivatives and hedging strategies, modeling and analytics, valuation tools, product design and systems, controls, procedures and operational infrastructure. This may prove challenging given the limited history of many of the proposed ARRs and may increase the costs and risks related to potential regulatory compliance, requirements or inquiries. Among other risks, various products and contracts may transition to ARRs at different times or in different manners, with the result that we may face significant unexpected interest rate, pricing or other exposures across business or product lines. Reforms to and uncertainty regarding market transition from current IBORs to ARRs and other factors, including the pace of the transition to ARRs, the specific terms and parameters for market acceptance of any ARRs, prices of and liquidity of trading markets for products based on ARRs, and our ability to transition and develop appropriate systems and analytics for one or more ARRs, may adversely affect our business, including the ability to serve customers and maintain market share, financial condition or results of operations and could result in reputational harm to the Corporation.

Item 1B. Unresolved Staff Comments

None

Item 2. Properties

As of December 31, 2019, certain principal offices and other materially important properties consisted of the following:




Facility Name	Location	General Character of the Physical Property	Primary Business Segment	Property Status	Property Square Feet ⁽¹⁾
Bank of America Corporate Center	Charlotte, NC	60 Story Building	Principal Executive Offices	Owned	1,212,177
Bank of America Tower at One Bryant Park	New York, NY	55 Story Building	GWIM, Global Banking and Global Markets	Leased ⁽²⁾	1,836,575
Bank of America Financial Centre	London, UK	4 Building Campus	Global Banking and Global Markets	Leased	562,595
Cheung Kong Center	Hong Kong	62 Story Building	Global Banking and Global Markets	Leased	149,790


⁽¹⁾	For leased properties, property square feet represents the square footage occupied by the Corporation.


⁽²⁾	The Corporation has a 49.9 percent joint venture interest in this property.

We own or lease approximately 76.3 million square feet in over 20,000 facility and ATM locations globally, including approximately 70.7 million square feet in the U.S. (all 50 states and the District of Columbia, the U.S. Virgin Islands, Puerto Rico and Guam) and approximately 5.6 million square feet in more than 35 countries.

We believe our owned and leased properties are adequate for our business needs and are well maintained. We continue to evaluate our owned and leased real estate and may determine from time to time that certain of our premises and facilities, or ownership structures, are no longer necessary for our operations. In connection therewith, we are evaluating the sale or sale/leaseback of certain properties and we may incur costs in connection with any such transactions.

Item 3. Legal Proceedings

See Litigation and Regulatory Matters in Note 13 – Commitments and Contingencies to the Consolidated Financial Statements, which is incorporated herein by reference.

Item 4. Mine Safety Disclosures

None



19 Bank of America

Part II

Bank of America Corporation and Subsidiaries

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The principal market on which our common stock is traded is the New York Stock Exchange under the symbol “BAC.” As of February 18, 2020, there were 161,882 registered shareholders of common stock.

The table below presents share repurchase activity for the three months ended December 31, 2019. The primary source of funds for cash distributions by the Corporation to its shareholders is

dividends received from its bank subsidiaries. Each of the bank subsidiaries is subject to various regulatory policies and requirements relating to the payment of dividends, including requirements to maintain capital above regulatory minimums. All of the Corporation’s preferred stock outstanding has preference over the Corporation’s common stock with respect to payment of dividends.




(Dollars in millions, except per share information; shares in thousands)	Total Common Shares Purchased ⁽¹⁾	Weighted-Average Per Share Price		Total Shares Purchased as Part of Publicly Announced Programs	Remaining Buyback Authority Amounts ⁽²⁾
October 1 - 31, 2019	97,540	$	29.50	97,538	$	20,442
November 1 - 30, 2019	74,649	32.75		74,649	17,997
December 1 - 31, 2019	70,943	34.19		70,940	15,571
Three months ended December 31, 2019	243,132	31.87		243,127


⁽¹⁾	Includes shares of the Corporation’s common stock acquired by the Corporation in connection with satisfaction of tax withholding obligations on vested restricted stock or restricted stock units and certain forfeitures and terminations of employment-related awards and for potential re-issuance to certain employees under equity incentive plans.

⁽²⁾

On June 27, 2019, following the Board of Governors of the Federal Reserve System's non-objection to the Corporation's 2019 Comprehensive Capital Analysis and Review capital plan, the Corporation's Board of Directors (Board) authorized the repurchase of approximately $30.9 billion in common stock from July 1, 2019 through June 30, 2020, which includes approximately $900 million to offset shares awarded under equity-based compensation plans during the same period. During the three months ended December 31, 2019, pursuant to the Board’s authorization, the Corporation repurchased $7.7 billion of common stock, which included common stock to offset equity-based compensation awards. For more information, see Capital Management - CCAR and Capital Planning in the MD&A on page 45 and Note 14 – Shareholders’ Equity to the Consolidated Financial Statements.

The Corporation did not have any unregistered sales of equity securities during the three months ended December 31, 2019.

Item 6. Selected Financial Data

See Tables 6 and 7 in the MD&A beginning on page 28, which are incorporated herein by reference.



		Bank of America 20



Item 7. Bank of America Corporation and Subsidiaries
Management’s Discussion and Analysis of Financial Condition and Results of Operations



Table of Contents
		Page
Executive Summary		22
Recent Developments		23
Financial Highlights		23
Balance Sheet Overview		25
Supplemental Financial Data		26
Business Segment Operations		32
Consumer Banking		33
Global Wealth & Investment Management		34
Global Banking		36
Global Markets		39
All Other		40
Off-Balance Sheet Arrangements and Contractual Obligations		41
Managing Risk		42
Strategic Risk Management		45
Capital Management		45
Liquidity Risk		50
Credit Risk Management		53
Consumer Portfolio Credit Risk Management		54
Commercial Portfolio Credit Risk Management		60
Non-U.S. Portfolio		66
Provision for Credit Losses		68
Allowance for Credit Losses		68
Market Risk Management		70
Trading Risk Management		72
Interest Rate Risk Management for the Banking Book		74
Mortgage Banking Risk Management		76
Compliance and Operational Risk Management		76
Reputational Risk Management		77
Complex Accounting Estimates		77
Non-GAAP Reconciliations		79
Statistical Tables		81



21 Bank of America

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Bank of America Corporation (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,” “goals,” “believes,” “continue” and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.” Forward-looking statements represent the Corporation’s current expectations, plans or forecasts of its future results, revenues, expenses, efficiency ratio, capital measures, strategy and future business and economic conditions more generally, and other future matters. These statements are not guarantees of future results or performance and involve certain known and unknown 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 under Item 1A. Risk Factors of this Annual Report on Form 10-K: the Corporation’s potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions; the possibility that the Corporation's future liabilities may be in excess of its recorded liability and estimated range of possible loss for litigation, regulatory and representations and warranties exposures; the possibility that the Corporation could face increased servicing, fraud, indemnity, contribution or other claims from one or more counterparties, including trustees, purchasers of loans, underwriters, issuers, monolines, private-label and other investors, or other parties involved in securitizations; the Corporation’s ability to resolve representations and warranties repurchase and related claims, including claims brought by investors or trustees seeking to avoid the statute of limitations for repurchase claims; the risks related to the discontinuation of the London Interbank Offered Rate and other reference rates, including increased expenses and litigation and the effectiveness of hedging strategies; uncertainties about the financial stability and growth rates 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; the impact of U.S. and global interest rates, inflation, currency exchange rates, economic conditions, trade policies and tensions, including tariffs, and potential geopolitical instability; the impact of the interest rate environment on the Corporation’s business, financial condition and results of operations; the possibility that future credit losses may be higher than currently expected due to changes in economic assumptions, customer behavior, adverse developments with respect to U.S. or global economic conditions and other uncertainties; the Corporation’s ability to achieve its expense targets and expectations regarding net interest income, provision for credit losses, net charge-offs, effective tax rate, loan growth or other projections; adverse changes to the Corporation’s credit ratings from the major credit rating agencies; an inability to access capital markets or maintain deposits or borrowing costs; estimates of the fair value and other accounting values, subject to impairment assessments, of certain of the Corporation’s assets and liabilities; the estimated or actual impact of changes in accounting standards or assumptions in applying those standards; uncertainty regarding the content, timing and

impact of regulatory capital and liquidity requirements; the impact of adverse changes to total loss-absorbing capacity requirements and/or global systemically important bank surcharges; the potential impact of actions of the Board of Governors of the Federal Reserve System on the Corporation’s capital plans; the effect of regulations, other guidance or additional information on the impact from the Tax Cuts and Jobs Act; the impact of implementation and compliance with U.S. and international laws, regulations and regulatory interpretations, including, but not limited to, recovery and resolution planning requirements, Federal Deposit Insurance Corporation assessments, the Volcker Rule, fiduciary standards and derivatives regulations; a failure or disruption in or breach of the Corporation’s operational or security systems or infrastructure, or those of third parties, including as a result of cyber attacks or campaigns; the impact on the Corporation’s business, financial condition and results of operations from the United Kingdom's exit from the European Union; the impact of any future federal government shutdown and uncertainty regarding the federal government’s debt limit; the impact of natural disasters, the emergence of widespread health emergencies or pandemics, military conflict, terrorism or other geopolitical events; and other 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-year amounts have been reclassified to conform to current-year presentation. Throughout the MD&A, the Corporation uses certain acronyms and abbreviations which are defined in the Glossary.

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,” “we,” “us” and “our” 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 nonbank subsidiaries throughout the U.S. and in international markets, we provide a diversified range of banking and nonbank financial services and products through four business segments: Consumer Banking, 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 the Bank of America, National Association (Bank of America, N.A. or BANA) charter. At December 31, 2019, the Corporation had $2.4 trillion in assets and a headcount of approximately 208,000 employees.

As of December 31, 2019, we served clients through operations across the U.S., its territories and approximately 35 countries. Our retail banking footprint covers approximately 90 percent of the U.S. population, and we serve approximately 66 million consumer and small business clients with approximately 4,300 retail financial centers, approximately 16,800 ATMs, and leading digital banking platforms (www.bankofamerica.com) with more than 38 million active users, including over 29 million active mobile users. We offer industry-leading support to approximately



		Bank of America 22

three million small business owners. Our wealth management businesses, with client balances of $3.0 trillion, provide tailored solutions to meet client needs through a full set of investment management, brokerage, banking, trust and retirement products. 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.

Recent Developments

Capital Management

During 2019, we repurchased $28.1 billion of common stock pursuant to the Corporation's Board of Directors’ (the Board) repurchase authorizations. For more information, see Capital Management on page 45.

Merchant Services Joint Venture

A significant portion of our merchant processing activity is performed by a joint venture, formed in 2009, in which we own a 49 percent ownership interest. The joint venture is accounted for as an equity method investment. As previously disclosed in the Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, we gave notice on July 29, 2019 to the joint venture partner of the termination of the joint venture upon the conclusion of its current term, after which we expect to pursue our own merchant services strategy. In addition, the Corporation and the joint venture partner have an agreement to provide uninterrupted delivery of products and services to the joint venture merchants through at least June 2023. As a result of the above actions, we incurred a non-cash, pretax impairment charge of $2.1 billion included in other general operating expense in the three months ended September 30, 2019. As stated above, the Corporation expects to pursue its own merchant services strategy, which is expected to begin in the third quarter of 2020. Under this strategy, we will begin to record the revenues and expenses from those operations in the Consolidated Statement of Income instead of recognizing our proportionate share of the joint venture's income under the equity method. For more information, see Note 13 – Commitments and Contingencies to the Consolidated Financial Statements.

U.K. Exit from the EU

On January 31, 2020, the U.K. formally exited the European Union (EU). Upon exit, a transition period began during which time the U.K. and the EU expect to negotiate a trade agreement and other terms associated with their future relationship. The transition period is scheduled to end on December 31, 2020.

We conduct business in Europe, the Middle East and Africa primarily through our subsidiaries in the U.K., Ireland and France. For information on the changes we have implemented to enable us to continue to operate in the region, including establishing a bank and broker-dealer in the EU, see the Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019. While we have taken measures to minimize operational disruption and prepare for various potential outcomes of the U.K.’s withdrawal from the EU, the preparedness of our counterparties and the relevant financial markets infrastructure remain outside our control. The global economic impact of the U.K.’s withdrawal from

the EU remains uncertain and could result in regional and global

financial market disruptions. We continue to assess potential risks, including operational, regulatory and legal risks.

LIBOR and Other Benchmark Rates

Following the 2017 announcement by the U.K.’s Financial Conduct Authority (FCA) that it will no longer persuade or require participating banks to submit rates for the London Interbank Offered Rate (LIBOR) after 2021, central banks and regulators around the world have commissioned working groups to find suitable replacements for Interbank Offered Rates (IBOR), including LIBOR, and other benchmark rates and to implement financial benchmark reforms more generally. The future discontinuance of IBORs is a complex process that has resulted in significant uncertainty regarding the transition to suitable alternative reference rates (ARRs) and could cause disruptions in a variety of global financial markets, as well as adversely impact our business, operations and financial results.

IBORs, including LIBOR, are used in many of the Corporation’s products and contracts, including mortgages, consumer, commercial and corporate loans, derivatives, floating-rate notes and other adjustable-rate products and financial instruments. The aggregate notional amount of these products and contracts is material to our business. As previously disclosed, to facilitate an orderly transition from IBORs and other benchmark rates to ARRs, the Corporation has established an enterprise-wide initiative led by senior management. As part of this initiative, the Corporation continues to identify, assess and monitor risks associated with the expected discontinuation or unavailability of LIBOR and other benchmarks and evaluate and address documentation and contractual mechanics of outstanding IBOR-based products and contracts that mature after 2021 and new and potential future ARR-based products and contracts to achieve operational readiness. Additionally, the Corporation is continuing to evaluate potential regulatory, tax and accounting impacts of the transition, including guidance published and/or proposed by the Internal Revenue Service and Financial Accounting Standards Board, engage impacted clients in connection with the transition to ARRs and work actively with global regulators, industry working groups and trade associations to develop strategies for an effective transition to ARRs.

The Corporation is also modifying its operational models, systems, procedures and internal infrastructure to transition to ARRs. In 2019, the Corporation launched capabilities to support issuance and trading in products indexed to the new Secured Overnight Financing Rate (SOFR), which is the alternative benchmark rate to U.S. dollar LIBOR recommended by the Alternative Reference Rates Committee, a group of private-market participants and official-sector entities convened by the Board of Governors of the Federal Reserve System (Federal Reserve) and the Federal Reserve Bank of New York, and a broad measure of the cost of borrowing cash overnight collateralized by U.S. Treasury securities. Also, in 2019, the Corporation issued debt linked to SOFR, and the Corporation co-arranged one of the first credit facilities linked to SOFR and has implemented fallback provisions into certain new IBOR-based products and contracts. The Corporation continues to monitor the development and usage of ARRs, including SOFR. For more information on the expected replacement of LIBOR and other benchmark rates, see Item 1A. Risk Factors - Other on page 17.



23 Bank of America

Financial Highlights

In the Consolidated Statement of Income, amounts related to certain asset and liability management (ALM) activities have been reclassified from other income to market making and similar activities, which was previously referred to as trading account income. All prior periods presented reflect this change, which has no impact on the Corporation's total noninterest income or net income, and has no impact on business segment results. For more information, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements.




Table 1	Summary Income Statement and Selected Financial Data

(Dollars in millions, except per share information)		2019			2018
Income statement
Net interest income		$	48,891		$	48,162
Noninterest income		42,353			42,858
Total revenue, net of interest expense		91,244			91,020
Provision for credit losses		3,590			3,282
Noninterest expense		54,900			53,154
Income before income taxes		32,754			34,584
Income tax expense		5,324			6,437
Net income		27,430			28,147
Preferred stock dividends		1,432			1,451
Net income applicable to common shareholders		$	25,998		$	26,696

Per common share information
Earnings		$	2.77		$	2.64
Diluted earnings		2.75			2.61
Dividends paid		0.66			0.54
Performance ratios
Return on average assets		1.14		%	1.21		%
Return on average common shareholders’ equity		10.62			11.04
Return on average tangible common shareholders’ equity ⁽¹⁾		14.86			15.55
Efficiency ratio		60.17			58.40
Balance sheet at year end
Total loans and leases		$	983,426		$	946,895
Total assets		2,434,079			2,354,507
Total deposits		1,434,803			1,381,476
Total liabilities		2,169,269			2,089,182
Total common shareholders’ equity		241,409			242,999
Total shareholders’ equity		264,810			265,325


⁽¹⁾	Return on average tangible common shareholders’ equity is a non-GAAP financial measure. For more information and a corresponding reconciliation to the most closely related financial measures defined by accounting principles generally accepted in the United States of America, see Non-GAAP Reconciliations on page 80.

Net income was $27.4 billion or $2.75 per diluted share in 2019 compared to $28.1 billion, or $2.61 per diluted share in 2018. The decrease in net income was primarily driven by an increase in noninterest expense as a result of the $2.1 billion pretax impairment charge related to the notice of termination of the merchant services joint venture at the conclusion of its current term. Also contributing to the decrease in net income were higher provision for credit losses and lower noninterest income, partially offset by an increase in net interest income.

For discussion and analysis of our consolidated and business segment results of operations for 2018 compared to 2017, see

the Financial Highlights and Business Segment Operations sections in the MD&A of the Corporation's 2018 Annual Report on Form 10-K.

Net Interest Income

Net interest income increased $729 million to $48.9 billion in 2019 compared 2018. Net interest yield on a fully taxable-equivalent (FTE) basis decreased two basis points (bps) to 2.43 percent for 2019. The increase in net interest income was primarily driven by loan and deposit growth, partially offset by lower long-end rates. Assuming a stable economic and interest rate environment compared to December 31, 2019, we expect quarterly net interest income for the first two quarters of 2020 to be lower compared to the fourth quarter of 2019 driven by the impact of rates and one fewer day of interest accruals. Quarterly net interest income is expected to rise modestly in the second half of 2020 due to one additional day of interest accruals and expected loan and deposit growth. For more information on net interest yield and the FTE basis, see Supplemental Financial Data on page 27, and for more information on interest rate risk management, see Interest Rate Risk Management for the Banking Book on page 74.

Noninterest Income




Table 2	Noninterest Income

(Dollars in millions)		2019		2018
Fees and commissions:
Card income		$	5,797	$	5,824
Service charges		7,674		7,767
Investment and brokerage services		13,902		14,160
Investment banking fees		5,642		5,327
Total fees and commissions		33,015		33,078
Market making and similar activities		9,034		9,008
Other income		304		772
Total noninterest income		$	42,353	$	42,858

Noninterest income decreased $505 million to $42.4 billion in 2019 compared to 2018. The following highlights the significant changes.


●	Service charges decreased $93 million primarily driven by lower fees due to policy changes in 2018 and lower ATM volume in Consumer Banking.


●	Investment and brokerage services income decreased $258 million primarily due to lower transactional revenue and a decrease in assets under management (AUM) pricing, partially offset by the positive impact of AUM flows and higher market valuations.


●	Investment banking fees increased $315 million due to increases in advisory fees and equity and debt underwriting fees.


●	Other income decreased $468 million primarily due to lower gains on sales of non-core consumer loans and higher partnership losses associated with an increase in tax-advantaged investments, partially offset by higher gains on sales of debt securities.



		Bank of America 24

Provision for Credit Losses

The provision for credit losses increased $308 million to $3.6 billion in 2019 compared to 2018. The increase was primarily due to the energy reserve releases in the commercial portfolio in 2018, partially offset by the impact of recoveries recorded in connection with sales of previously charged-off non-core consumer real estate loans. For more information on the provision for credit losses, see Provision for Credit Losses on page 68.

Noninterest Expense




Table 3	Noninterest Expense

(Dollars in millions)		2019		2018
Compensation and benefits		$	31,977	$	31,880
Occupancy and equipment		6,588		6,380
Information processing and communications		4,646		4,555
Product delivery and transaction related		2,762		2,857
Marketing		1,934		1,674
Professional fees		1,597		1,699
Other general operating		5,396		4,109
Total noninterest expense		$	54,900	$	53,154

Noninterest expense increased $1.7 billion to $54.9 billion in 2019 compared to 2018. The increase was primarily due to the

aforementioned impairment charge related to our merchant services joint venture of $2.1 billion as well as increased costs associated with investment in the businesses, including brand-related marketing costs, and higher litigation expense. These were partially offset by efficiency savings, lower Federal Deposit Insurance Corporation (FDIC) expense and lower amortization of intangibles expense.

Income Tax Expense




Table 4	Income Tax Expense

(Dollars in millions)		2019			2018
Income before income taxes		$	32,754		$	34,584
Income tax expense		5,324			6,437
Effective tax rate		16.3		%	18.6		%

The effective tax rates for 2019 and 2018 reflect the impact of our recurring tax preference benefits. The 2019 effective rate also included net tax benefits primarily related to the resolution of various tax controversy matters.

We expect the effective tax rate for 2020 to be approximately 18 percent, absent unusual items.

Balance Sheet Overview




Table 5	Selected Balance Sheet Data

		December 31
(Dollars in millions)		2019			2018			% Change
Assets
Cash and cash equivalents		$	161,560		$	177,404		(9	)%
Federal funds sold and securities borrowed or purchased under agreements to resell		274,597			261,131			5
Trading account assets		229,826			214,348			7
Debt securities		472,197			441,753			7
Loans and leases		983,426			946,895			4
Allowance for loan and lease losses		(9,416		)	(9,601		)	(2	)
All other assets		321,889			322,577			—
Total assets		$	2,434,079		$	2,354,507		3
Liabilities
Deposits		$	1,434,803		$	1,381,476		4
Federal funds purchased and securities loaned or sold under agreements to repurchase		165,109			186,988			(12	)
Trading account liabilities		83,270			68,220			22
Short-term borrowings		24,204			20,189			20
Long-term debt		240,856			229,392			5
All other liabilities		221,027			202,917			9
Total liabilities		2,169,269			2,089,182			4
Shareholders’ equity		264,810			265,325			—
Total liabilities and shareholders’ equity		$	2,434,079		$	2,354,507		3

Assets

At December 31, 2019, total assets were approximately $2.4 trillion, up $79.6 billion from December 31, 2018. The increase in assets was primarily due to higher loans and leases and debt securities primarily funded by deposit growth.

Cash and Cash Equivalents

Cash and cash equivalents decreased $15.8 billion driven by investment of short-term excess cash into securities purchased under agreements to resell, debt securities and growth in loans and leases.

Federal Funds Sold and Securities Borrowed or Purchased Under Agreements to Resell

Federal funds transactions involve lending reserve balances on a short-term basis. Securities borrowed or purchased under agreements to resell are collateralized lending transactions utilized to accommodate customer transactions, earn interest rate spreads, and obtain securities for settlement and for collateral. Federal funds sold and securities borrowed or purchased under agreements to resell increased $13.5 billion due to investment of excess cash levels.



25 Bank of America

Trading Account Assets

Trading account assets consist primarily of long positions in equity and fixed-income securities including U.S. government and agency securities, corporate securities and non-U.S. sovereign debt. Trading account assets increased $15.5 billion primarily driven by additional inventory in Global Markets to facilitate client demand.

Debt Securities

Debt securities primarily include U.S. Treasury and agency securities, mortgage-backed securities (MBS), principally agency MBS, non-U.S. bonds, corporate bonds and municipal debt. We use the debt securities portfolio primarily to manage interest rate and liquidity risk and to take advantage of market conditions that create economically attractive returns on these investments. Debt securities increased $30.4 billion primarily driven by the deployment of deposit inflows. For more information on debt securities, see Note 4 – Securities to the Consolidated Financial Statements.

Loans and Leases

Loans and leases increased $36.5 billion primarily due to net loan growth driven by client demand for commercial loans and increases in residential mortgage. For more information on the loan portfolio, see Credit Risk Management on page 53.

Allowance for Loan and Lease Losses

The allowance for loan and lease losses decreased $185 million primarily due to the impact of improvements in credit quality from a stronger economy and continued runoff and sales in the non-core consumer real estate portfolio. For more information, see Allowance for Credit Losses on page 68.

Liabilities

At December 31, 2019, total liabilities were approximately $2.2 trillion, up $80.1 billion from December 31, 2018, primarily due to deposit growth.

Deposits

Deposits increased $53.3 billion primarily due to increases in both retail and wholesale deposits.

Federal Funds Purchased and Securities Loaned or Sold Under Agreements to Repurchase

Federal funds transactions involve borrowing reserve balances on a short-term basis. Securities loaned or sold under agreements to repurchase are collateralized borrowing transactions utilized to accommodate customer transactions, earn interest rate spreads and finance assets on the balance sheet. Federal funds purchased and securities loaned or sold under agreements to repurchase decreased $21.9 billion primarily driven by balance sheet efficiencies within Global Markets.

Trading Account Liabilities

Trading account liabilities consist primarily of short positions in equity and fixed-income securities including U.S. Treasury and agency securities, corporate securities and non-U.S. sovereign debt. Trading account liabilities increased $15.1 billion primarily due to higher levels of short positions in government and corporate bonds driven by client demand within Global Markets.

Short-term Borrowings

Short-term borrowings provide an additional funding source and primarily consist of Federal Home Loan Bank (FHLB) short-term borrowings, notes payable and various other borrowings that generally have maturities of one year or less. Short-term borrowings increased $4.0 billion primarily due to an increase in short-term FHLB advances to manage liquidity needs. For more information on short-term borrowings, see Note 11 – Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings and Restricted Cash to the Consolidated Financial Statements.

Long-term Debt

Long-term debt increased $11.5 billion primarily driven by debt issuances and valuation adjustments, partially offset by maturities and redemptions. For more information on long-term debt, see Note 12 – Long-term Debt to the Consolidated Financial Statements.

All Other Liabilities

All other liabilities increased $18.1 billion primarily driven by an increase in broker-dealer payables within Global Markets due to timing of unsettled trades and an increase in lease liabilities due to implementation of the new lease accounting standard.

Shareholders’ Equity

Shareholders’ equity decreased $515 million driven by returns of capital to shareholders through share repurchases, common and preferred stock dividends of $35.7 billion, as well as redemption of preferred stock, largely offset by earnings, market value increases on debt securities and issuances of preferred stock.

Cash Flows Overview

The Corporation’s operating assets and liabilities support our global markets and lending activities. We believe that cash flows from operations, available cash balances and our ability to generate cash through short- and long-term debt are sufficient to fund our operating liquidity needs. Our investing activities primarily include the debt securities portfolio and loans and leases. Our financing activities reflect cash flows primarily related to customer deposits, securities financing agreements and long-term debt. For more information on liquidity, see Liquidity Risk on page 50.



		Bank of America 26

Supplemental Financial Data

In this Form 10-K, we present certain non-GAAP financial measures. Non-GAAP financial measures exclude certain items or otherwise include components that differ from the most directly comparable measures calculated in accordance with accounting principles generally accepted in the United States of America (GAAP). Non-GAAP financial measures are provided as additional useful information to assess our financial condition, results of operations (including period-to-period operating performance) or compliance with prospective regulatory requirements. These non-GAAP financial measures are not intended as a substitute for GAAP financial measures and may not be defined or calculated the same way as non-GAAP financial measures used by other companies.

We view net interest income and related ratios and analyses on an FTE basis, which when presented on a consolidated basis are non-GAAP financial measures. 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 21 percent for 2019 and 2018 (35 percent for 2017) and a representative state tax rate. Net interest yield, which measures the basis points we earn over the cost of funds, utilizes net interest income on an FTE basis. We believe that presentation of these items on an FTE basis allows for comparison of amounts from both taxable and tax-exempt sources and is consistent with industry practices.

We may present certain key performance indicators and ratios excluding certain items (e.g., debit valuation adjustment (DVA) gains (losses)) which result in non-GAAP financial measures. We believe that the presentation of measures that exclude these items

is useful because such measures provide additional information to assess the underlying operational performance and trends of our businesses and to allow better comparison of period-to-period operating performance.

We also evaluate our business based on certain ratios that utilize tangible equity, a non-GAAP financial measure. Tangible equity represents shareholders’ equity or common shareholders’

equity reduced by goodwill and intangible assets (excluding mortgage servicing rights (MSRs)), net of related deferred tax liabilities ("adjusted" shareholders' equity or common shareholders' equity). 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 net income applicable to common shareholders as a percentage of adjusted average common shareholders’ equity. The tangible common equity ratio represents adjusted ending common shareholders’ equity divided by total tangible assets.


●	Return on average tangible shareholders' equity measures our net income as a percentage of adjusted average total shareholders’ equity. The tangible equity ratio represents adjusted ending shareholders’ equity divided by total tangible assets.


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

We believe that the use of ratios that utilize tangible equity provides additional useful information because they present measures of those assets that can generate income. Tangible book value per common share provides additional useful information about the level of tangible assets in relation to outstanding shares of common stock.

The aforementioned supplemental data and performance measures are presented in Tables 6 and 7.

For more information on the reconciliation of these non-GAAP financial measures to the corresponding GAAP financial measures, see Non-GAAP Reconciliations on page 80.



27 Bank of America




Table 6	Five-year Summary of Selected Financial Data

(In millions, except per share information)		2019			2018			2017			2016			2015
Income statement
Net interest income		$	48,891		$	48,162		$	45,239		$	41,486		$	38,958
Noninterest income		42,353			42,858			41,887			42,012			44,007
Total revenue, net of interest expense		91,244			91,020			87,126			83,498			82,965
Provision for credit losses		3,590			3,282			3,396			3,597			3,161
Noninterest expense		54,900			53,154			54,517			54,880			57,617
Income before income taxes		32,754			34,584			29,213			25,021			22,187
Income tax expense		5,324			6,437			10,981			7,199			6,277
Net income		27,430			28,147			18,232			17,822			15,910
Net income applicable to common shareholders		25,998			26,696			16,618			16,140			14,427
Average common shares issued and outstanding		9,390.5			10,096.5			10,195.6			10,248.1			10,462.3
Average diluted common shares issued and outstanding		9,442.9			10,236.9			10,778.4			11,046.8			11,236.2
Performance ratios
Return on average assets		1.14		%	1.21		%	0.80		%	0.81		%	0.74		%
Return on average common shareholders’ equity		10.62			11.04			6.72			6.69			6.28
Return on average tangible common shareholders’ equity ⁽¹⁾		14.86			15.55			9.41			9.51			9.16
Return on average shareholders’ equity		10.24			10.63			6.72			6.70			6.33
Return on average tangible shareholders’ equity ⁽¹⁾		13.85			14.46			9.08			9.17			8.88
Total ending equity to total ending assets		10.88			11.27			11.71			12.17			11.92
Total average equity to total average assets		11.14			11.39			11.96			12.14			11.64
Dividend payout		23.65			20.31			24.24			15.94			14.49
Per common share data
Earnings		$	2.77		$	2.64		$	1.63		$	1.57		$	1.38
Diluted earnings		2.75			2.61			1.56			1.49			1.31
Dividends paid		0.66			0.54			0.39			0.25			0.20
Book value		27.32			25.13			23.80			23.97			22.48
Tangible book value ⁽¹⁾		19.41			17.91			16.96			16.89			15.56
Market capitalization		$	311,209		$	238,251		$	303,681		$	222,163		$	174,700
Average balance sheet
Total loans and leases		$	958,416		$	933,049		$	918,731		$	900,433		$	876,787
Total assets		2,405,830			2,325,246			2,268,633			2,190,218			2,160,536
Total deposits		1,380,326			1,314,941			1,269,796			1,222,561			1,155,860
Long-term debt		201,623			200,399			194,882			204,826			240,059
Common shareholders’ equity		244,853			241,799			247,101			241,187			229,576
Total shareholders’ equity		267,889			264,748			271,289			265,843			251,384
Asset quality⁽²⁾
Allowance for credit losses ⁽³⁾		$	10,229		$	10,398		$	11,170		$	11,999		$	12,880
Nonperforming loans, leases and foreclosed properties ⁽⁴⁾		3,837			5,244			6,758			8,084			9,836
Allowance for loan and lease losses as a percentage of total loans and leases outstanding ⁽⁴⁾		0.97		%	1.02		%	1.12		%	1.26		%	1.37		%
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases ⁽⁴⁾		265			194			161			149			130
Net charge-offs		$	3,648		$	3,763		$	3,979		$	3,821		$	4,338
Net charge-offs as a percentage of average loans and leases outstanding ⁽⁴⁾		0.38		%	0.41		%	0.44		%	0.43		%	0.50		%
Capital ratios at year end ⁽⁵⁾
Common equity tier 1 capital		11.2		%	11.6		%	11.5		%	10.8		%	9.8		%
Tier 1 capital		12.6			13.2			13.0			12.4			11.2
Total capital		14.7			15.1			14.8			14.2			12.8
Tier 1 leverage		7.9			8.4			8.6			8.8			8.4
Supplementary leverage ratio		6.4			6.8			n/a			n/a			n/a
Tangible equity ⁽¹⁾		8.2			8.6			8.9			9.2			8.9
Tangible common equity ⁽¹⁾		7.3			7.6			7.9			8.0			7.8


⁽¹⁾	Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures. For more information on these ratios and corresponding reconciliations to GAAP financial measures, see Supplemental Financial Data on page 27 and Non-GAAP Reconciliations on page 80.


⁽²⁾	Asset quality metrics include $75 million of non-U.S. consumer credit card net charge-offs in 2017 and $243 million of non-U.S. consumer credit card allowance for loan and lease losses, $9.2 billion of non-U.S. consumer credit card loans and $175 million of non-U.S. consumer credit card net charge-offs in 2016. The non-U.S. consumer credit card business was sold in 2017.


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

⁽⁴⁾

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 59 and corresponding Table 29 and Commercial Portfolio Credit Risk Management – Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity on page 63 and corresponding Table 36.


⁽⁵⁾	Basel 3 transition provisions for regulatory capital adjustments and deductions were fully phased-in as of January 1, 2018. Prior periods are presented on a fully phased-in basis. For more information, including which approach is used to assess capital adequacy, see Capital Management on page 45.

n/a = not applicable



		Bank of America 28




Table 7	Selected Quarterly Financial Data

		2019 Quarters												2018 Quarters
(In millions, except per share information)		Fourth			Third			Second			First			Fourth			Third			Second			First
Income statement
Net interest income		$	12,140		$	12,187		$	12,189		$	12,375		$	12,504		$	12,061		$	11,828		$	11,769
Noninterest income		10,209			10,620			10,895			10,629			10,173			10,663			10,721			11,301
Total revenue, net of interest expense		22,349			22,807			23,084			23,004			22,677			22,724			22,549			23,070
Provision for credit losses		941			779			857			1,013			905			716			827			834
Noninterest expense		13,239			15,169			13,268			13,224			13,074			13,014			13,224			13,842
Income before income taxes		8,169			6,859			8,959			8,767			8,698			8,994			8,498			8,394
Income tax expense		1,175			1,082			1,611			1,456			1,420			1,827			1,714			1,476
Net income		6,994			5,777			7,348			7,311			7,278			7,167			6,784			6,918
Net income applicable to common shareholders		6,748			5,272			7,109			6,869			7,039			6,701			6,466			6,490
Average common shares issued and outstanding		9,017.1			9,303.6			9,523.2			9,725.9			9,855.8			10,031.6			10,181.7			10,322.4
Average diluted common shares issued and outstanding		9,079.5			9,353.0			9,559.6			9,787.3			9,996.0			10,170.8			10,309.4			10,472.7
Performance ratios
Return on average assets		1.13		%	0.95		%	1.23		%	1.26		%	1.24		%	1.23		%	1.17		%	1.21		%
Four-quarter trailing return on average assets⁽¹⁾		1.14			1.17			1.24			1.22			1.21			1.00			0.93			0.86
Return on average common shareholders’ equity		11.00			8.48			11.62			11.42			11.57			10.99			10.75			10.85
Return on average tangible common shareholders’ equity⁽²⁾		15.43			11.84			16.24			16.01			16.29			15.48			15.15			15.26
Return on average shareholders’ equity		10.40			8.48			11.00			11.14			10.95			10.74			10.26			10.57
Return on average tangible shareholders’ equity⁽²⁾		14.09			11.43			14.88			15.10			14.90			14.61			13.95			14.37
Total ending equity to total ending assets		10.88			11.06			11.33			11.23			11.27			11.21			11.53			11.43
Total average equity to total average assets		10.89			11.21			11.17			11.28			11.30			11.42			11.42			11.41
Dividend payout		23.90			31.48			19.95			21.20			20.90			22.35			18.83			19.06
Per common share data
Earnings		$	0.75		$	0.57		$	0.75		$	0.71		$	0.71		$	0.67		$	0.64		$	0.63
Diluted earnings		0.74			0.56			0.74			0.70			0.70			0.66			0.63			0.62
Dividends paid		0.18			0.18			0.15			0.15			0.15			0.15			0.12			0.12
Book value		27.32			26.96			26.41			25.57			25.13			24.33			24.07			23.74
Tangible book value ⁽²⁾		19.41			19.26			18.92			18.26			17.91			17.23			17.07			16.84
Market capitalization		$	311,209		$	264,842		$	270,935		$	263,992		$	238,251		$	290,424		$	282,259		$	305,176
Average balance sheet
Total loans and leases		$	973,986		$	964,733		$	950,525		$	944,020		$	934,721		$	930,736		$	934,818		$	931,915
Total assets		2,450,005			2,412,223			2,399,051			2,360,992			2,334,586			2,317,829			2,322,678			2,325,878
Total deposits		1,410,439			1,375,052			1,375,450			1,359,864			1,344,951			1,316,345			1,300,659			1,297,268
Long-term debt		206,026			202,620			201,007			196,726			201,056			203,239			199,448			197,787
Common shareholders’ equity		243,439			246,630			245,438			243,891			241,372			241,812			241,313			242,713
Total shareholders’ equity		266,900			270,430			267,975			266,217			263,698			264,653			265,181			265,480
Asset quality
Allowance for credit losses ⁽³⁾		$	10,229		$	10,242		$	10,333		$	10,379		$	10,398		$	10,526		$	10,837		$	11,042
Nonperforming loans, leases and foreclosed properties ⁽⁴⁾		3,837			3,723			4,452			5,145			5,244			5,449			6,181			6,694
Allowance for loan and lease losses as a percentage of total loans and leases outstanding ⁽⁴⁾		0.97		%	0.98		%	1.00		%	1.02		%	1.02		%	1.05		%	1.08		%	1.11		%
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases ⁽⁴⁾		265			271			228			197			194			189			170			161
Net charge-offs		$	959		$	811		$	887		$	991		$	924		$	932		$	996		$	911
Annualized net charge-offs as a percentage of average loans and leases outstanding ⁽⁴⁾		0.39		%	0.34		%	0.38		%	0.43		%	0.39		%	0.40		%	0.43		%	0.40		%
Capital ratios at period end
Common equity tier 1 capital		11.2		%	11.4		%	11.7		%	11.6		%	11.6		%	11.4		%	11.4		%	11.3		%
Tier 1 capital		12.6			12.9			13.3			13.1			13.2			12.9			13.0			13.0
Total capital		14.7			15.1			15.4			15.2			15.1			14.7			14.8			14.8
Tier 1 leverage		7.9			8.2			8.4			8.4			8.4			8.3			8.4			8.4
Supplementary leverage ratio		6.4			6.6			6.8			6.8			6.8			6.7			6.7			6.8
Tangible equity⁽²⁾		8.2			8.4			8.7			8.5			8.6			8.5			8.7			8.7
Tangible common equity ⁽²⁾		7.3			7.4			7.6			7.6			7.6			7.5			7.7			7.6
Total loss-absorbing capacity and long-term debt metrics ⁽⁵⁾
Total loss-absorbing capacity to risk-weighted assets		24.6		%	24.8		%	25.5		%	24.8		%
Total loss-absorbing capacity to supplementary leverage exposure		12.5			12.7			13.0			12.8
Eligible long-term debt to risk-weighted assets		11.5			11.4			11.8			11.4
Eligible long-term debt to supplementary leverage exposure		5.8			5.8			6.0			5.9


⁽¹⁾	Calculated as total net income for four consecutive quarters divided by annualized average assets for four consecutive quarters.


⁽²⁾	Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures. For more information on these ratios and corresponding reconciliations to GAAP financial measures, see Supplemental Financial Data on page 27 and Non-GAAP Reconciliations on page 80.


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

⁽⁴⁾


⁽⁵⁾	Effective January 1, 2019, we became subject to minimum total loss-absorbing capacity and long-term debt requirements. For more information, see Capital Management on page 45.



29 Bank of America




Table 8	Average Balances and Interest Rates - FTE Basis

		Average Balance		Interest Income/ Expense ⁽¹⁾		Yield/ Rate		Average Balance		Interest Income/ Expense ⁽¹⁾		Yield/ Rate		Average Balance		Interest Income/ Expense ⁽¹⁾		Yield/ Rate
(Dollars in millions)		2019						2018						2017
Earning assets
Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks		$	125,555	$	1,823	1.45	%	$	139,848	$	1,926	1.38	%	$	127,431	$	1,122	0.88	%
Time deposits placed and other short-term investments		9,427		207		2.19		9,446		216		2.29		12,112		241		1.99
Federal funds sold and securities borrowed or purchased under agreements to resell		279,610		4,843		1.73		251,328		3,176		1.26		222,818		1,806		0.81
Trading account assets		148,076		5,269		3.56		132,724		4,901		3.69		129,007		4,618		3.58
Debt securities		450,090		11,917		2.65		437,312		11,837		2.66		435,005		10,626		2.44
Loans and leases ⁽²⁾:
Residential mortgage		220,552		7,651		3.47		207,523		7,294		3.51		197,766		6,831		3.45
Home equity		44,600		2,194		4.92		53,886		2,573		4.77		62,260		2,608		4.19
Credit card		94,488		10,166		10.76		94,612		9,579		10.12		91,068		8,791		9.65
Non-U.S. credit card ⁽³⁾		—		—		—		—		—		—		3,929		358		9.12
Direct/Indirect and other consumer ⁽⁴⁾		90,656		3,261		3.60		93,036		3,104		3.34		96,002		2,734		2.85
Total consumer		450,296		23,272		5.17		449,057		22,550		5.02		451,025		21,322		4.73
U.S. commercial		321,467		13,016		4.05		304,387		11,937		3.92		292,452		9,765		3.34
Non-U.S. commercial		103,918		3,547		3.41		97,664		3,220		3.30		95,005		2,566		2.70
Commercial real estate ⁽⁵⁾		62,044		2,741		4.42		60,384		2,618		4.34		58,502		2,116		3.62
Commercial lease financing		20,691		718		3.47		21,557		698		3.24		21,747		706		3.25
Total commercial		508,120		20,022		3.94		483,992		18,473		3.82		467,706		15,153		3.24
Total loans and leases ⁽³⁾		958,416		43,294		4.52		933,049		41,023		4.40		918,731		36,475		3.97
Other earning assets		69,089		4,478		6.48		76,524		4,300		5.62		76,957		3,224		4.19
Total earning assets		2,040,263		71,831		3.52		1,980,231		67,379		3.40		1,922,061		58,112		3.02
Cash and due from banks		26,193						25,830						27,995
Other assets, less allowance for loan and lease losses		339,374						319,185						318,577
Total assets		$	2,405,830					$	2,325,246					$	2,268,633
Interest-bearing liabilities
U.S. interest-bearing deposits:
Savings		$	52,020	$	5	0.01	%	$	54,226	$	6	0.01	%	$	53,783	$	5	0.01	%
NOW and money market deposit accounts		741,126		4,471		0.60		676,382		2,636		0.39		628,647		873		0.14
Consumer CDs and IRAs		47,577		471		0.99		39,823		157		0.39		44,794		121		0.27
Negotiable CDs, public funds and other deposits		66,866		1,407		2.11		50,593		991		1.96		36,782		354		0.96
Total U.S. interest-bearing deposits		907,589		6,354		0.70		821,024		3,790		0.46		764,006		1,353		0.18
Non-U.S. interest-bearing deposits:
Banks located in non-U.S. countries		1,936		20		1.04		2,312		39		1.69		2,442		21		0.85
Governments and official institutions		181		—		0.05		810		—		0.01		1,006		10		0.95
Time, savings and other		69,351		814		1.17		65,097		666		1.02		62,386		547		0.88
Total non-U.S. interest-bearing deposits		71,468		834		1.17		68,219		705		1.03		65,834		578		0.88
Total interest-bearing deposits		979,057		7,188		0.73		889,243		4,495		0.51		829,840		1,931		0.23
Federal funds purchased, securities loaned or sold under agreements to repurchase, short-term borrowings and other interest-bearing liabilities		276,432		7,208		2.61		269,748		5,839		2.17		274,975		3,146		1.14
Trading account liabilities		45,449		1,249		2.75		50,928		1,358		2.67		45,518		1,204		2.64
Long-term debt		201,623		6,700		3.32		200,399		6,915		3.45		194,882		5,667		2.91
Total interest-bearing liabilities		1,502,561		22,345		1.49		1,410,318		18,607		1.32		1,345,215		11,948		0.89
Noninterest-bearing sources:
Noninterest-bearing deposits		401,269						425,698						439,956
Other liabilities ⁽⁶⁾		234,111						224,482						212,173
Shareholders’ equity		267,889						264,748						271,289
Total liabilities and shareholders’ equity		$	2,405,830					$	2,325,246					$	2,268,633
Net interest spread						2.03	%					2.08	%					2.13	%
Impact of noninterest-bearing sources						0.40						0.37						0.27
Net interest income/yield on earning assets ⁽⁷⁾				$	49,486	2.43	%			$	48,772	2.45	%			$	46,164	2.40	%


⁽¹⁾	Includes the impact of interest rate risk management contracts. For more information, see Interest Rate Risk Management for the Banking Book on page 74.


⁽²⁾	Nonperforming loans are included in the respective average loan balances. Income on these nonperforming loans is generally recognized on a cost recovery basis.


⁽³⁾	Includes assets of the Corporation's non-U.S. consumer credit card business, which was sold during the second quarter of 2017.


⁽⁴⁾	Includes non-U.S. consumer loans of $2.9 billion, $2.8 billion and $2.9 billion for 2019, 2018 and 2017, respectively.


⁽⁵⁾	Includes U.S. commercial real estate loans of $57.3 billion, $56.4 billion and $55.0 billion, and non-U.S. commercial real estate loans of $4.7 billion, $4.0 billion and $3.5 billion for 2019, 2018 and 2017, respectively.


⁽⁶⁾	Includes $35.5 billion, $30.4 billion and $30.3 billion of structured notes and liabilities for 2019, 2018 and 2017, respectively.


⁽⁷⁾	Net interest income includes FTE adjustments of $595 million, $610 million and $925 million for 2019, 2018 and 2017, respectively.



		Bank of America 30




Table 9	Analysis of Changes in Net Interest Income - FTE Basis

		Due to Change in ⁽¹⁾						Net Change			Due to Change in ⁽¹⁾						Net Change
		Volume			Rate						Volume			Rate
(Dollars in millions)		From 2018 to 2019									From 2017 to 2018
Increase (decrease) in interest income
Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks		$	(193	)	$	90		$	(103	)	$	109		$	695		$	804
Time deposits placed and other short-term investments		—			(9		)	(9		)	(53		)	28			(25		)
Federal funds sold and securities borrowed or purchased under agreements to resell		347			1,320			1,667			230			1,140			1,370
Trading account assets		563			(195		)	368			134			149			283
Debt securities		135			(55		)	80			44			1,167			1,211
Loans and leases:
Residential mortgage		447			(90		)	357			329			134			463
Home equity		(446		)	67			(379		)	(350		)	315			(35		)
Credit card		(17		)	604			587			339			449			788
Non-U.S. credit card ⁽²⁾		—			—			—			(358		)	—			(358		)
Direct/Indirect and other consumer		(76		)	233			157			(82		)	452			370
Total consumer								722									1,228
U.S. commercial		665			414			1,079			402			1,770			2,172
Non-U.S. commercial		209			118			327			71			583			654
Commercial real estate		75			48			123			70			432			502
Commercial lease financing		(28		)	48			20			(5		)	(3		)	(8		)
Total commercial								1,549									3,320
Total loans and leases								2,271									4,548
Other earning assets		(417		)	595			178			(18		)	1,094			1,076
Total interest income								$	4,452								$	9,267
Increase (decrease) in interest expense
U.S. interest-bearing deposits:
Savings		$	(1	)	$	—		$	(1	)	$	—		$	1		$	1
NOW and money market deposit accounts		254			1,581			1,835			74			1,689			1,763
Consumer CDs and IRAs		29			285			314			(13		)	49			36
Negotiable CDs, public funds and other deposits		320			96			416			132			505			637
Total U.S. interest-bearing deposits								2,564									2,437
Non-U.S. interest-bearing deposits:
Banks located in non-U.S. countries		(6		)	(13		)	(19		)	(1		)	19			18
Governments and official institutions		—			—			—			(2		)	(8		)	(10		)
Time, savings and other		41			107			148			26			93			119
Total non-U.S. interest-bearing deposits								129									127
Total interest-bearing deposits								2,693									2,564
Federal funds purchased, securities loaned or sold under agreements to repurchase, short-term borrowings and other interest-bearing liabilities		160			1,209			1,369			(71		)	2,764			2,693
Trading account liabilities		(145		)	36			(109		)	140			14			154
Long-term debt		41			(256		)	(215		)	165			1,083			1,248
Total interest expense								3,738									6,659
Net increase in net interest income ⁽³⁾								$	714								$	2,608


⁽¹⁾	The changes for each category of interest income and expense are divided between the portion of change attributable to the variance in volume and the portion of change attributable to the variance in rate for that category. The unallocated change in rate or volume variance is allocated between the rate and volume variances.


⁽²⁾	The Corporation sold its non-U.S. credit card business in the second quarter of 2017.


⁽³⁾	Includes decreases in FTE basis adjustments of $15 million from 2018 to 2019 and $315 million from 2017 to 2018.



31 Bank of America

Business Segment Operations

Segment Description and Basis of Presentation

We report our results of operations through the following four business segments: Consumer Banking, GWIM, Global Banking and Global Markets, with the remaining operations recorded in All Other. We manage our segments and report their results on an FTE basis. The primary activities, products and businesses of the business segments and All Other are shown below.

Flow chart of the Bank of America Corporation operations through four business segments, Consumer Banking, Global Wealth & Investment Management, Global Banking, Global Markets, and All Others . Consumer Banking consists of deposits, which are consumer deposits, Merrill Edge, and small business client management. Also included in Consumer Banking is Consumer Lending which is Consumer and Small Business Credit Cards, Debit Cards, Core Consumer Real Estate Loans, and Consumer Vehicle Lending. Global Wealth & Investment Management consists of Merrill Lynch Global Wealth Management and Bank of America Private Bank. Global Banking which consists of global investment banking, global corporate banking, global commercial banking, and business banking. Global Markets which consists of fixed income, currencies, and commodities markets and equity markets. All others consist of ALM activities, non-core mortgage loans, MSR Valuations, liquidating businesses, equity investments, corporate activities and residual expense allocations, and accounting reclassifications and eliminations.

We periodically review capital allocated to our businesses and allocate 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. Our 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 on page 42. The capital allocated to the business segments is referred to as allocated capital. 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 more information, including the definition of a reporting unit, see Note 8 – Goodwill and Intangible Assets to the Consolidated Financial Statements.

For more information on our presentation of financial information on an FTE basis, see Supplemental Financial Data on page 27, and for reconciliations to consolidated total revenue, net income and year-end total assets, see Note 24 – Business Segment Information to the Consolidated Financial Statements.



		Bank of America 32

Consumer Banking




	Deposits						Consumer Lending						Total Consumer Banking
(Dollars in millions)	2019			2018			2019			2018			2019			2018			% Change
Net interest income	$	16,904		$	15,939		$	11,254		$	11,086		$	28,158		$	27,025		4	%
Noninterest income:
Card income	(33		)	(33		)	5,117			5,135			5,084			5,102			—
Service charges	4,217			4,298			2			2			4,219			4,300			(2	)
All other income	832			762			294			429			1,126			1,191			(5	)
Total noninterest income	5,016			5,027			5,413			5,566			10,429			10,593			(2	)
Total revenue, net of interest expense	21,920			20,966			16,667			16,652			38,587			37,618			3

Provision for credit losses	269			195			3,503			3,469			3,772			3,664			3
Noninterest expense	10,682			10,657			6,936			7,015			17,618			17,672			—
Income before income taxes	10,969			10,114			6,228			6,168			17,197			16,282			6
Income tax expense	2,687			2,578			1,526			1,572			4,213			4,150			2
Net income	$	8,282		$	7,536		$	4,702		$	4,596		$	12,984		$	12,132		7

Effective tax rate ⁽¹⁾													24.5		%	25.5		%

Net interest yield	2.40		%	2.34		%	3.80		%	3.97		%	3.81			3.77
Return on average allocated capital	69			63			19			18			35			33
Efficiency ratio	48.73			50.83			41.61			42.12			45.66			46.98

Balance Sheet

Average
Total loans and leases	$	5,373		$	5,233		$	295,562		$	278,574		$	300,935		$	283,807		6	%
Total earning assets⁽²⁾	703,444			682,592			296,051			279,217			738,770			717,189			3
Total assets ⁽²⁾	735,232			710,925			306,169			290,068			780,676			756,373			3
Total deposits	702,908			678,640			5,368			5,533			708,276			684,173			4
Allocated capital	12,000			12,000			25,000			25,000			37,000			37,000			—

Year end
Total loans and leases	$	5,472		$	5,470		$	311,942		$	288,865		$	317,414		$	294,335		8	%
Total earning assets ⁽²⁾	724,536			694,672			312,684			289,249			760,137			728,813			4
Total assets⁽²⁾	758,385			724,019			322,717			299,970			804,019			768,881			5
Total deposits	725,598			691,666			5,080			4,480			730,678			696,146			5


⁽¹⁾	Estimated at the segment level only.


⁽²⁾	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 Consumer Banking.

Consumer Banking, which is comprised of Deposits and Consumer Lending, offers a diversified range of credit, banking and investment products and services to consumers and small businesses. Deposits and Consumer Lending include the net impact of migrating customers and their related deposit, brokerage asset and loan balances between Deposits, Consumer Lending and GWIM, as well as other client-managed businesses. Our customers and clients have access to a coast to coast network including financial centers in 38 states and the District of Columbia. Our network includes approximately 4,300 financial centers, approximately 16,800 ATMs, nationwide call centers, and leading digital banking platforms with more than 38 million active users, including over 29 million active mobile users.

Consumer Banking Results

Net income for Consumer Banking increased $852 million to $13.0 billion in 2019 compared to 2018 primarily driven by higher net interest income and lower noninterest expense, partially offset by lower noninterest income. Net interest income increased $1.1 billion to $28.2 billion primarily due to growth in deposits and loans. Noninterest income decreased $164 million to $10.4 billion driven by lower service charges and lower mortgage banking income, largely offset by higher results from ALM activities.

The provision for credit losses increased $108 million to $3.8 billion driven by overdrafts and portfolio seasoning in the credit card portfolio. Noninterest expense decreased $54 million to

$17.6 billion primarily driven by lower FDIC expense and operating efficiencies, partially offset by continued investment in the business.

The return on average allocated capital was 35 percent, up from 33 percent, driven by higher net income. For information on capital allocated to the business segments, see Business Segment Operations on page 32.

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, and noninterest- and interest-bearing checking accounts, as well as investment accounts and products. Net interest income 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 financial centers and ATMs.



33 Bank of America

Net income for Deposits increased $746 million to $8.3 billion driven by higher net interest income. Net interest income increased $965 million to $16.9 billion primarily due to growth in deposits and pricing discipline. Noninterest income decreased $11 million to $5.0 billion primarily driven by lower service charges, largely offset by higher results from ALM activities.

The provision for credit losses increased $74 million to $269 million in 2019. Noninterest expense increased $25 million to $10.7 billion driven by continued investment in the business, partially offset by lower FDIC expense and operating efficiencies.

Average deposits increased $24.3 billion to $702.9 billion in 2019 driven by strong organic growth. Growth in checking and time deposits of $27.0 billion was partially offset by a decline in traditional savings and money market savings of $2.5 billion.




Key Statistics – Deposits

	2019			2018
Total deposit spreads (excludes noninterest costs) ⁽¹⁾	2.34		%	2.14		%

Year end
Consumer investment assets (in millions) ⁽²⁾	$	240,132		$	185,881
Active digital banking users (units in thousands) ⁽³⁾	38,266			36,264
Active mobile banking users (units in thousands)	29,174			26,433
Financial centers	4,300			4,341
ATMs	16,788			16,255


⁽¹⁾	Includes deposits held in Consumer Lending.


⁽²⁾	Includes client brokerage assets, deposit sweep balances and AUM in Consumer Banking.


⁽³⁾	Active digital banking users represents mobile and/or online users.

Consumer investment assets increased $54 billion in 2019 driven by strong market performance and client flows. Active mobile banking users increased 3 million reflecting continuing changes in our customers’ banking preferences. The number of financial centers declined by a net 41 reflecting changes in customer preferences to self-service options as we continue to optimize our consumer banking network and improve our cost to serve.

Consumer Lending

Consumer Lending offers products to consumers and small businesses across the U.S. The products offered include credit and debit cards, residential mortgages and home equity loans, and direct and indirect loans such as automotive, 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, late fees, cash advance fees, annual credit card fees, mortgage banking fee income and other miscellaneous fees. Consumer Lending products are available to our customers through our retail network, direct telephone, and online and mobile channels. Consumer Lending results also include the impact of servicing residential mortgages and home equity loans in the core portfolio, including loans held on the balance sheet of Consumer Lending and loans serviced for others.

Net income for Consumer Lending increased $106 million to $4.7 billion driven by higher net interest income and lower noninterest expense, partially offset by lower noninterest income. Net interest income increased $168 million to $11.3 billion driven by loan growth. Noninterest income decreased $153 million to $5.4 billion primarily driven by lower mortgage banking income and lower card income.

The provision for credit losses increased $34 million to $3.5 billion primarily driven by portfolio seasoning in the credit card portfolio. Noninterest expense decreased $79 million to $6.9 billion primarily driven by operating efficiencies.

Average loans increased $17.0 billion to $295.6 billion primarily driven by increases in residential mortgages and credit card, partially offset by lower home equity loans.




Key Statistics – Consumer Lending

(Dollars in millions)	2019			2018
Total credit card ⁽¹⁾
Gross interest yield	10.76		%	10.12		%
Risk-adjusted margin	8.28			8.25
New accounts (in thousands)	4,320			4,544
Purchase volumes	$	277,852		$	264,706
Debit card purchase volumes	$	360,672		$	338,810


⁽¹⁾	Includes GWIM's credit card portfolio.

During 2019, the total credit card risk-adjusted margin increased 3 bps compared to 2018, primarily driven by a portfolio shift away from promotional-rate loans. Total credit card purchase volumes increased $13.1 billion to $277.9 billion, and debit card purchase volumes increased $21.9 billion to $360.7 billion, reflecting higher levels of consumer spending.




Key Statistics – Loan Production ⁽¹⁾

(Dollars in millions)	2019		2018
Total ⁽²⁾:
First mortgage	$	72,467	$	41,195
Home equity	11,131		14,869
Consumer Banking:
First mortgage	$	49,179	$	27,280
Home equity	9,755		13,251


⁽¹⁾	The loan production amounts represent the unpaid principal balance of loans and, in the case of home equity, the principal amount of the total line of credit.


⁽²⁾	In addition to loan production in Consumer Banking, there is also first mortgage and home equity loan production in GWIM.

First mortgage loan originations in Consumer Banking and for the total Corporation increased $21.9 billion and $31.3 billion in 2019 primarily driven by a lower interest rate environment driving higher first-lien mortgage refinances.

Home equity production in Consumer Banking and for the total Corporation decreased $3.5 billion and $3.7 billion in 2019 primarily driven by lower demand.



		Bank of America 34

Global Wealth & Investment Management




(Dollars in millions)	2019			2018			% Change
Net interest income	$	6,504		$	6,265		4	%
Noninterest income:
Investment and brokerage services	11,870			11,959			(1	)
All other income	1,163			1,229			(5	)
Total noninterest income	13,033			13,188			(1	)
Total revenue, net of interest expense	19,537			19,453			—

Provision for credit losses	82			86			(5	)
Noninterest expense	13,823			14,015			(1	)
Income before income taxes	5,632			5,352			5
Income tax expense	1,380			1,364			1
Net income	$	4,252		$	3,988		7

Effective tax rate	24.5		%	25.5		%

Net interest yield	2.33			2.41
Return on average allocated capital	29			28
Efficiency ratio	70.75			72.04

Balance Sheet

Average
Total loans and leases	$	168,910		$	161,342		5	%
Total earning assets	279,684			259,808			8
Total assets	292,003			277,220			5
Total deposits	256,505			241,256			6
Allocated capital	14,500			14,500			—

Year end
Total loans and leases	$	176,600		$	164,854		7	%
Total earning assets	287,212			287,199			—
Total assets	299,756			305,907			(2	)
Total deposits	263,103			268,700			(2	)

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

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 clients’ needs through a full set of investment management, brokerage, banking and retirement products.

Bank of America Private Bank, together with MLGWM’s Private Wealth Management business, 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.

Net income for GWIM increased $264 million to $4.3 billion due to lower noninterest expense and higher revenue. The operating margin was 29 percent compared to 28 percent in 2018.

Net interest income increased $239 million to $6.5 billion due to the impact of growth in deposits and loans.

Noninterest income, which primarily includes investment and brokerage services income, decreased $155 million to $13.0 billion. The decrease was primarily driven by declines in AUM pricing and transactional revenue, partially offset by the impact of positive AUM flows and higher market valuations.

Noninterest expense decreased $192 million to $13.8 billion, as investments for business growth were more than offset by lower amortization of intangibles and FDIC expense.

The return on average allocated capital was 29 percent, up from 28 percent, due to higher net income.

MLGWM revenue of $16.1 billion increased one percent primarily driven by higher net interest income and the impact of positive AUM flows and higher market valuations, partially offset by lower transactional volumes and AUM pricing.

Bank of America Private Bank revenue of $3.4 billion decreased one percent primarily due to lower net interest income.



35 Bank of America




Key Indicators and Metrics

(Dollars in millions, except as noted)	2019			2018
Revenue by Business
Merrill Lynch Global Wealth Management	$	16,111		$	15,998
Bank of America Private Bank	3,426			3,455
Total revenue, net of interest expense	$	19,537		$	19,453

Client Balances by Business, at year end
Merrill Lynch Global Wealth Management	$	2,558,102		$	2,193,562
Bank of America Private Bank	489,690			427,294
Total client balances	$	3,047,792		$	2,620,856

Client Balances by Type, at year end
Assets under management	$	1,275,555		$	1,072,234
Brokerage and other assets	1,372,733			1,162,997
Deposits	263,103			268,700
Loans and leases ⁽¹⁾	179,296			167,938
Less: Managed deposits in assets under management	(42,895		)	(51,013		)
Total client balances	$	3,047,792		$	2,620,856

Assets Under Management Rollforward
Assets under management, beginning of year	$	1,072,234		$	1,121,383
Net client flows	24,865			44,607
Market valuation/other	178,456			(93,756		)
Total assets under management, end of year	$	1,275,555		$	1,072,234

Associates, at year end
Number of financial advisors	17,458			17,518
Total wealth advisors, including financial advisors	19,440			19,459
Total primary sales professionals, including financial advisors and wealth advisors	20,586			20,586

Merrill Lynch Global Wealth Management Metric
Financial advisor productivity (in thousands)	$	1,082		$	1,034

Bank of America Private Bank Metric, at year end
Primary sales professionals	1,766			1,748


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

Client Balances

Client balances managed under advisory and/or discretion of GWIM are AUM and are typically held in diversified portfolios. Fees earned on AUM are calculated as a percentage of clients’ AUM balances. The asset management fees charged to clients per year depend on various factors, but are commonly driven by the breadth of the client’s relationship. The net client AUM flows represent the

net change in clients’ AUM balances over a specified period of time, excluding market appreciation/depreciation and other adjustments.

Client balances increased $426.9 billion, or 16 percent, to $3.0 trillion at December 31, 2019 compared to December 31, 2018. The increase in client balances was primarily due to higher market valuations and positive net flows over the last year.



		Bank of America 36

Global Banking




(Dollars in millions)	2019			2018			% Change
Net interest income	$	10,675		$	10,993		(3	)%
Noninterest income:
Service charges	3,015			3,027			—
Investment banking fees	3,137			2,891			9
All other income	3,656			3,090			18
Total noninterest income	9,808			9,008			9
Total revenue, net of interest expense	20,483			20,001			2

Provision for credit losses	414			8			n/m
Noninterest expense	9,017			8,745			3
Income before income taxes	11,052			11,248			(2	)
Income tax expense	2,984			2,923			2
Net income	$	8,068		$	8,325		(3	)

Effective tax rate	27.0		%	26.0		%

Net interest yield	2.75			3.01
Return on average allocated capital	20			20
Efficiency ratio	44.02			43.72

Balance Sheet

Average
Total loans and leases	$	374,304		$	354,236		6	%
Total earning assets	388,152			364,748			6
Total assets	443,083			425,675			4
Total deposits	362,731			336,337			8
Allocated capital	41,000			41,000			—

Year end
Total loans and leases	$	379,268		$	365,717		4	%
Total earning assets	407,180			377,812			8
Total assets	464,032			442,330			5
Total deposits	383,180			360,248			6

n/m = not meaningful

Global Banking, which includes Global Corporate Banking, Global Commercial Banking, Business Banking and Global Investment Banking, provides a wide range of lending-related products and services, integrated working capital management and treasury solutions, 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, commercial real estate lending and asset-based lending. Our treasury solutions business includes treasury management, foreign exchange and short-term investing options. We also provide investment banking products to our clients 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 and not-for-profit companies. Global Corporate Banking clients generally include large global corporations, financial institutions and leasing clients. Business Banking clients include mid-sized U.S.-based businesses requiring customized and integrated financial advice and solutions.

Net income for Global Banking decreased $257 million to $8.1 billion in 2019 compared to 2018 primarily driven by higher provision for credit losses and noninterest expense partially offset by higher revenue.

Revenue increased $482 million to $20.5 billion driven by higher noninterest income, partially offset by lower net interest income. Net interest income decreased $318 million to $10.7 billion primarily due to the allocation of ALM results and credit spread compression, partly offset by growth in loan and deposit balances.

Noninterest income increased $800 million to $9.8 billion primarily due to higher leasing-related revenue and investment banking fees. The provision for credit losses increased $406 million to $414 million primarily driven by reserve releases in 2018 primarily from energy exposures. Noninterest expense increased $272 million primarily due to continued investment in the business partially offset by lower FDIC expense.

The return on average allocated capital was 20 percent in 2019 and 2018. For information on capital allocated to the business segments, see Business Segment Operations on page 32.

Global Corporate, Global Commercial and Business Banking

Global Corporate, Global Commercial and Business Banking each include Business Lending and Global Transaction Services activities. Business Lending includes various lending-related products and services, and related hedging activities, 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 products.



37 Bank of America

The table below and following discussion present a summary of the results, which exclude certain investment banking activities in Global Banking.




Global Corporate, Global Commercial and Business Banking

	Global Corporate Banking				Global Commercial Banking				Business Banking				Total
(Dollars in millions)	2019		2018		2019		2018		2019		2018		2019		2018
Revenue
Business Lending	$	3,994	$	3,904	$	4,132	$	4,330	$	363	$	431	$	8,489	$	8,665
Global Transaction Services	3,994		3,832		3,499		3,346		1,064		987		8,557		8,165
Total revenue, net of interest expense	$	7,988	$	7,736	$	7,631	$	7,676	$	1,427	$	1,418	$	17,046	$	16,830

Balance Sheet

Average
Total loans and leases	$	177,713	$	163,516	$	181,485	$	174,279	$	15,058	$	16,432	$	374,256	$	354,227
Total deposits	177,924		163,559		144,620		135,337		40,196		37,462		362,740		336,358

Year end
Total loans and leases	$	181,409	$	174,378	$	182,727	$	175,937	$	15,152	$	15,402	$	379,288	$	365,717
Total deposits	185,352		173,183		157,322		149,118		40,504		37,973		383,178		360,274

Business Lending revenue decreased $176 million in 2019 compared to 2018. The decrease was primarily driven by the allocation of ALM results, partly offset by higher leasing-related revenue.

Global Transaction Services revenue increased $392 million in 2019 compared to 2018 driven by the impact of higher deposit balances.

Average loans and leases increased six percent in 2019 compared to 2018 driven by growth in the commercial and industrial portfolio. Average deposits increased eight percent due to growth in domestic and international interest-bearing balances.

Global 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 certain investment banking and underwriting activities are shared primarily between Global Banking and Global Markets under an internal revenue-sharing arrangement. Global Banking originates certain deal-related transactions with our corporate and commercial clients that are executed and distributed by Global Markets. To provide a complete discussion of our consolidated investment

banking fees, the following table presents total Corporation investment banking fees and the portion attributable to Global Banking.




Investment Banking Fees

	Global Banking						Total Corporation
(Dollars in millions)	2019			2018			2019			2018
Products
Advisory	$	1,336		$	1,153		$	1,460		$	1,258
Debt issuance	1,348			1,326			3,107			3,084
Equity issuance	453			412			1,259			1,183
Gross investment banking fees	3,137			2,891			5,826			5,525
Self-led deals	(62		)	(68		)	(184		)	(198		)
Total investment banking fees	$	3,075		$	2,823		$	5,642		$	5,327

Total Corporation investment banking fees, excluding self-led deals, of $5.6 billion, which are primarily included within Global Banking and Global Markets, increased six percent due to increases in advisory fees as well as higher equity issuance fees.



		Bank of America 38

Global Markets




(Dollars in millions)	2019			2018			% Change
Net interest income	$	3,915		$	3,857		2	%
Noninterest income:
Investment and brokerage services	1,738			1,780			(2	)
Investment banking fees	2,288			2,296			—
Market making and similar activities	7,065			7,260			(3	)
All other income	608			990			(39	)
Total noninterest income	11,699			12,326			(5	)
Total revenue, net of interest expense	15,614			16,183			(4	)

Provision for credit losses	(9		)	—			n/m
Noninterest expense	10,722			10,835			(1	)
Income before income taxes	4,901			5,348			(8	)
Income tax expense	1,397			1,390			1
Net income	$	3,504		$	3,958		(11	)

Effective tax rate	28.5		%	26.0		%

Return on average allocated capital	10			11
Efficiency ratio	68.67			66.96

Balance Sheet
Average
Trading-related assets:
Trading account securities	$	246,335		$	215,112		15	%
Reverse repurchases	116,883			125,084			(7	)
Securities borrowed	83,216			78,889			5
Derivative assets	43,271			46,047			(6	)
Total trading-related assets	489,705			465,132			5
Total loans and leases	71,334			72,651			(2	)
Total earning assets	476,225			473,383			1
Total assets	679,297			666,000			2
Total deposits	31,380			31,209			1
Allocated capital	35,000			35,000			—

Year end
Total trading-related assets	$	452,496		$	447,998		1	%
Total loans and leases	72,993			73,928			(1	)
Total earning assets	471,701			457,224			3
Total assets	641,806			641,923			—
Total deposits	34,676			37,841			(8	)

n/m = not meaningful

Global Markets offers sales and trading services and research services 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, MBS, commodities and asset-backed securities. The economics of certain investment banking and underwriting activities are shared primarily between Global Markets and Global Banking under an internal revenue-sharing arrangement. Global Banking originates certain deal-related transactions with our corporate and commercial clients that are executed and distributed by Global Markets. For information on investment banking fees on a consolidated basis, see page 38.

The following explanations for year-over-year changes in results for Global Markets, including those disclosed under Sales and Trading Revenue, exclude net DVA, but the explanations would be the same if net DVA was included.

Net income for Global Markets decreased $454 million to $3.5 billion in 2019 compared to 2018. Net DVA losses were $222 million compared to losses of $162 million in 2018. Excluding net DVA, net income decreased $408 million to $3.7 billion. These decreases were primarily driven by a decrease in revenue, partially offset by lower noninterest expense.

Revenue declined $569 million to $15.6 billion as sales and trading revenue decreased $492 million, and excluding net DVA, decreased $432 million. These decreases were primarily driven by a decline in Equities revenue. Noninterest expense decreased $113 million to $10.7 billion, primarily driven by lower revenue-related expenses.

Average total assets increased $13.3 billion to $679.3 billion, primarily due to increased levels of inventory in fixed-income, currencies and commodities (FICC) to facilitate expected client demand. Year-end total assets were largely unchanged at $641.8 billion.

The return on average allocated capital was 10 percent, down from 11 percent, reflecting lower net income. For information on



39 Bank of America

capital allocated to the business segments, see Business Segment Operations on page 32.

Sales and Trading Revenue

Sales and trading revenue includes unrealized and realized gains and losses on trading and other assets which are included in market making and similar activities, 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 MBS, residential mortgage-backed securities, collateralized loan obligations, 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 following table 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 following table and related discussion present sales and trading revenue, excluding net DVA, which is a non-GAAP financial measure. For more information on net DVA, see Supplemental Financial Data on page 27.




Sales and Trading Revenue ^{(1, 2, 3)}

(Dollars in millions)	2019		2018
Sales and trading revenue ⁽²⁾
Fixed-income, currencies and commodities	$	8,188	$	8,271
Equities	4,491		4,900
Total sales and trading revenue	$	12,679	$	13,171

Sales and trading revenue, excluding net DVA ⁽⁴⁾
Fixed-income, currencies and commodities	$	8,396	$	8,413
Equities	4,505		4,920
Total sales and trading revenue, excluding net DVA	$	12,901	$	13,333


⁽¹⁾	For more information on sales and trading revenue, see Note 3 – Derivatives to the Consolidated Financial Statements.


⁽²⁾	Includes FTE adjustments of $189 million and $248 million for 2019 and 2018.


⁽³⁾	Includes Global Banking sales and trading revenue of $533 million and $421 million for 2019 and 2018.


⁽⁴⁾	FICC and Equities sales and trading revenue, excluding net DVA, is a non-GAAP financial measure. FICC net DVA losses were $208 million and $142 million for 2019 and 2018. Equities net DVA losses were $14 million and $20 million for 2019 and 2018.

FICC revenue decreased $17 million. Equities revenue decreased $415 million driven by under performance in equity derivatives compared to a strong prior year which benefited from higher client activity and a more volatile market environment.

All Other




(Dollars in millions)	2019			2018			% Change
Net interest income	$	234		$	632		(63	)%
Noninterest income (loss)	(2,616		)	(2,257		)	16
Total revenue, net of interest expense	(2,382		)	(1,625		)	47

Provision for credit losses	(669		)	(476		)	41
Noninterest expense	3,720			1,887			97
Loss before income taxes	(5,433		)	(3,036		)	79
Income tax benefit	(4,055		)	(2,780		)	46
Net loss	$	(1,378	)	$	(256	)	n/m

Balance Sheet

Average
Total loans and leases	$	42,933		$	61,013		(30	)%
Total assets ⁽¹⁾	210,771			199,978			5
Total deposits	21,434			21,966			(2	)

Year end
Total loans and leases	$	37,151		$	48,061		(23	)%
Total assets ⁽¹⁾	224,466			195,466			15
Total deposits	23,166			18,541			25

⁽¹⁾

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. Average allocated assets were 544.2 billion and $517.0 billion for 2019 and 2018, and year-end allocated assets were $565.3 billion and $540.8 billion at December 31, 2019 and 2018.

n/m = not meaningful

All Other consists of ALM activities, equity investments, non-core mortgage loans and servicing activities, liquidating businesses and certain expenses not otherwise allocated to a business segment. ALM activities encompass certain residential mortgages, debt securities, and interest rate and foreign currency risk management activities. Substantially all of the results of ALM activities are allocated to our business segments. For more information on our ALM activities, see Note 24 – Business Segment Information to the Consolidated Financial Statements. Equity investments include our merchant services joint venture, as well as a portfolio of equity, real estate and other alternative investments. For information on our merchant services joint venture, see Note 13 – Commitments and Contingencies to the Consolidated Financial Statements.

Residential mortgage loans that are held for ALM purposes, including interest rate or liquidity risk management, are classified as core and are presented on the balance sheet of All Other. During 2019, residential mortgage loans held for ALM activities decreased $3.2 billion to $21.7 billion primarily as a result of payoffs and paydowns. Non-core residential mortgage and home equity loans, which are principally runoff portfolios, are also held in All Other. During 2019, total non-core loans decreased $7.8 billion to $15.7 billion due primarily to payoffs, paydowns and sales, as well as Federal Housing Administration (FHA) loan conveyances, partially offset by repurchases. For more information on the composition of the core and non-core portfolios, see Consumer Portfolio Credit Risk Management on page 54.



		Bank of America 40

The net loss for All Other increased $1.1 billion to a net loss of $1.4 billion, primarily driven by the $2.1 billion pretax impairment charge disclosed in Executive Summary – Recent Developments – Merchant Services Joint Venture, as well as lower revenue, partially offset by a higher benefit in the provision for credit losses.

Revenue decreased $757 million due to lower net interest income and an increase in the loss in noninterest income. Net interest income decreased $398 million due to the impact of non-core consumer real estate loan sales and portfolio run-off. The loss in noninterest income increased $359 million primarily due to lower gains on sales of non-core consumer loans and higher partnership losses associated with an increase in tax-advantaged investments, partially offset by a $729 million charge related to the redemption of certain trust preferred securities in 2018.

Noninterest expense increased $1.8 billion to $3.7 billion primarily due to the aforementioned $2.1 billion pretax impairment charge.

The income tax benefit was $4.1 billion compared to a benefit of $2.8 billion in 2018. The increase in the tax benefit was primarily driven by the tax effect of the higher pretax loss, the positive impact from the resolution of various tax controversy matters and a higher level of income tax credits. Both years included income tax benefit adjustments to eliminate the FTE treatment of certain tax credits recorded in Global Banking.

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. Purchase obligations are defined as obligations that are legally binding agreements whereby we agree

to purchase products or services with a specific minimum quantity at a fixed, minimum or variable price over a specified period of time. Included in purchase obligations are vendor contracts, the most significant of which include communication services, processing services and software contracts. Debt, lease and other obligations are more fully discussed in Note 12 – Long-term Debt and Note 13 – Commitments and Contingencies to the Consolidated Financial Statements.

Other long-term liabilities include our contractual funding obligations related to the Non-U.S. Pension Plans and Nonqualified and Other Pension Plans (together, the Plans). Obligations to the Plans are based on the current and projected obligations of the Plans, performance of the Plans’ assets, and any participant contributions, if applicable. During 2019 and 2018, we contributed $135 million and $156 million to the Plans, and we expect to make $128 million of contributions during 2020. The Plans are more fully discussed in Note 18 – Employee Benefit Plans to the Consolidated Financial Statements.

We enter into commitments to extend credit such as loan commitments, standby letters of credit (SBLCs) and commercial letters of credit to meet the financing needs of our customers. For a summary of the total unfunded, or off-balance sheet, credit extension commitment amounts by expiration date, see Credit Extension Commitments in Note 13 – Commitments and Contingencies to the Consolidated Financial Statements.

We also utilize variable interest entities (VIEs) in the ordinary course of business to support our financing and investing needs as well as those of our customers. For more information on our involvement with unconsolidated VIEs, see Note 7 – Securitizations and Other Variable Interest Entities to the Consolidated Financial Statements.

Table 10 includes certain contractual obligations at December 31, 2019 and 2018.




Table 10	Contractual Obligations

		December 31, 2019										December 31 2018
(Dollars in millions)		Due in One Year or Less		Due After One Year Through Three Years		Due After Three Years Through Five Years		Due After Five Years		Total		Total
Long-term debt		$	24,151	$	46,049	$	47,096	$	123,560	$	240,856	$	229,392
Operating lease obligations		1,966		3,265		2,338		4,225		11,794		15,770
Purchase obligations		1,272		1,126		401		731		3,530		4,048
Time deposits		68,351		4,612		1,463		247		74,673		61,039
Other long-term liabilities		1,670		1,056		714		659		4,099		3,933
Estimated interest expense on long-term debt and time deposits⁽¹⁾		5,571		8,073		6,870		23,871		44,385		56,852
Total contractual obligations		$	102,981	$	64,181	$	58,882	$	153,293	$	379,337	$	371,034


⁽¹⁾	Represents forecasted net interest expense on long-term debt and time deposits based on interest rates at December 31, 2019 and 2018. Forecasts are based on the contractual maturity dates of each liability, and are net of derivative hedges, where applicable.



41 Bank of America

Representations and Warranties Obligations

For information on representations and warranties obligations in connection with the sale of mortgage loans, see Note 13 – Commitments and Contingencies to the Consolidated Financial Statements.

Managing Risk

Overview

Risk is inherent in all our business activities. Sound risk management enables us to serve our customers and deliver for our shareholders. If not managed well, risks can result in financial loss, regulatory sanctions and penalties, and damage to our reputation, each of which may adversely impact our ability to execute our business strategies. We take a comprehensive approach to risk management with a defined Risk Framework and an articulated Risk Appetite Statement which are approved annually by the Enterprise Risk Committee (ERC) and the Board.

The seven key types of risk faced by the Corporation are strategic, credit, market, liquidity, compliance, operational and reputational.


●	Strategic risk is the risk resulting from incorrect assumptions about external or internal factors, inappropriate business plans, ineffective business strategy execution, or failure to respond in a timely manner to changes in the regulatory, macroeconomic or competitive environments in the geographic locations in which we operate.


●	Credit risk is the risk of loss arising from the inability or failure of a borrower or counterparty to meet its obligations.


●	Market risk is the risk that changes in market conditions may adversely impact the value of assets or liabilities, or otherwise negatively impact earnings.


●	Liquidity risk is the inability to meet expected or unexpected cash flow and collateral needs while continuing to support our businesses and customers under a range of economic conditions.


●	Compliance risk is the risk of legal or regulatory sanctions, material financial loss or damage to the reputation of the Corporation arising from the failure of the Corporation to comply with the requirements of applicable laws, rules and regulations and our internal policies and procedures.


●	Operational risk is the risk of loss resulting from inadequate or failed processes, people and systems, or from external events.


●	Reputational risk is the risk that negative perceptions of the Corporation’s conduct or business practices may adversely impact its profitability or operations.

The following sections address in more detail the specific procedures, measures and analyses of the major categories of risk. This discussion of managing risk focuses on the current Risk Framework that, as part of its annual review process, was approved by the ERC and the Board.

As set forth in our Risk Framework, a culture of managing risk well is fundamental to fulfilling our purpose and our values and delivering responsible growth. It requires us to focus on risk in all activities and encourages the necessary mindset and behavior to enable effective risk management, and promotes sound risk-taking within our risk appetite. Sustaining a culture of managing risk well

throughout the organization is critical to our success and is a clear expectation of our executive management team and the Board.

Our Risk Framework serves as the foundation for the consistent and effective management of risks facing the Corporation. The Risk Framework sets forth clear roles, responsibilities and accountability for the management of risk and provides a blueprint for how the Board, through delegation of authority to committees and executive officers, establishes risk appetite and associated limits for our activities.

Executive management assesses, with Board oversight, the risk-adjusted returns of each business. Management reviews and approves the strategic and financial operating plans, as well as the capital plan and Risk Appetite Statement, and recommends them annually to the Board for approval. Our strategic plan takes into consideration return objectives and financial resources, which must align with risk capacity and risk appetite. Management sets financial objectives for each business by allocating capital and setting a target for return on capital for each business. Capital allocations and operating limits are regularly evaluated as part of our overall governance processes as the businesses and the economic environment in which we operate continue to evolve. For more information regarding capital allocations, see Business Segment Operations on page 32.

The Corporation’s risk appetite indicates the amount of capital, earnings or liquidity we are willing to put at risk to achieve our strategic objectives and business plans, consistent with applicable regulatory requirements. Our risk appetite provides a common and comparable set of measures for senior management and the Board to clearly indicate our aggregate level of risk and to monitor whether the Corporation’s risk profile remains in alignment with our strategic and capital plans. Our risk appetite is formally articulated in the Risk Appetite Statement, which includes both qualitative components and quantitative limits.

Our overall capacity to take risk is limited; therefore, we prioritize the risks we take in order to maintain a strong and flexible financial position so we can withstand challenging economic conditions and take advantage of organic growth opportunities. Therefore, we set objectives and targets for capital and liquidity that are intended to permit us to continue to operate in a safe and sound manner, including during periods of stress.

Our lines of business operate with risk limits (which may include credit, market and/or operational limits, as applicable) that align with the Corporation’s risk appetite. Executive management is responsible for tracking and reporting performance measurements as well as any exceptions to guidelines or limits. The Board, and its committees when appropriate, oversee financial performance, execution of the strategic and financial operating plans, adherence to risk appetite limits and the adequacy of internal controls.

For a more detailed discussion of our risk management activities, see the discussion below and pages 45 through 77.

Risk Management Governance

The Risk Framework describes delegations of authority whereby the Board and its committees may delegate authority to management-level committees or executive officers. Such delegations may authorize certain decision-making and approval functions, which may be evidenced in, for example, committee charters, job descriptions, meeting minutes and resolutions.



		Bank of America 42

The chart below illustrates the inter-relationship among the Board, Board committees and management committees that have the majority of risk oversight responsibilities for the Corporation.

Flow chart illustrating the inter-relationship among the Board, Board committees, and management committees. On top of the chart is the Board of Directors. Below the Board of Directors is the Board of Committees which consists of the Audit Committee, Enterprise Risk Committee, Corporate Governance Committee, and the Compensation and Benefits Committee. Below the Board Committees are the Management Committees which consists of the Disclosure Committee, Management Risk Committee, Reg O Committee, Environmental, Social, and Governance Committee, Corporate Benefits Committee, and Management Compensation Committee.

⁽¹⁾Reports to the CEO and CFO with oversight by the Audit Committee

Board of Directors and Board Committees

The Board is composed of 17 directors, all but one of whom are independent. The Board authorizes management to maintain an effective Risk Framework, and oversees compliance with safe and sound banking practices. In addition, the Board or its committees conduct inquiries of, and receive reports from management on risk-related matters to assess scope or resource limitations that could impede the ability of Independent Risk Management (IRM) and/or Corporate Audit to execute its responsibilities. The Board committees discussed below have the principal responsibility for enterprise-wide oversight of our risk management activities. Through these activities, the Board and applicable committees are provided with information on our risk profile and oversee executive management addressing key risks we face. Other Board committees, as described below, provide additional oversight of specific risks.

Each of the committees shown on the above chart regularly reports to the Board on risk-related matters within the committee’s responsibilities, which is intended to collectively provide the Board with integrated insight about our management of enterprise-wide risks.

Audit Committee

The Audit Committee oversees the qualifications, performance and independence of the Independent Registered Public Accounting Firm, the performance of our corporate audit function, the integrity of our consolidated financial statements, our compliance with legal and regulatory requirements, and makes inquiries of management or the Chief Audit Executive (CAE) to determine whether there are scope or resource limitations that impede the ability of Corporate Audit to execute its responsibilities. The Audit Committee is also responsible for overseeing compliance risk pursuant to the New York Stock Exchange listing standards.

Enterprise Risk Committee

The ERC has primary responsibility for oversight of the Risk Framework and key risks we face and of the Corporation’s overall risk appetite. It approves the Risk Framework and the Risk Appetite Statement and further recommends these documents to the Board for approval. The ERC oversees senior management’s responsibilities for the identification, measurement, monitoring and control of key risks we face. The ERC may consult with other Board committees on risk-related matters.

Other Board Committees

Our Corporate Governance, ESG, and Sustainability Committee oversees our Board’s governance processes, identifies and reviews the qualifications of potential Board members, recommends nominees for election to our Board, recommends committee appointments for Board approval and reviews our Environmental, Social and Governance and stockholder engagement activities.

Our Compensation and Human Capital Committee oversees establishing, maintaining and administering our compensation programs and employee benefit plans, including approving and recommending our Chief Executive Officer’s (CEO) compensation to our Board for further approval by all independent directors; reviewing and approving all of our executive officers’ compensation, as well as compensation for non-management directors; and reviewing certain other human capital management topics.

Management Committees

Management committees may receive their authority from the Board, a Board committee, another management committee or from one or more executive officers. Our primary management-level risk committee is the Management Risk Committee (MRC). Subject to Board oversight, the MRC is responsible for management oversight of key risks facing the Corporation. This includes providing management oversight of our compliance and operational risk programs, balance sheet and capital management, funding activities and other liquidity activities, stress testing, trading activities, recovery and resolution planning, model risk, subsidiary governance and activities between member banks and their nonbank affiliates pursuant to Federal Reserve rules and regulations, among other things.

Lines of Defense

We have clear ownership and accountability across three lines of defense: Front Line Units (FLUs), IRM and Corporate Audit. We also have control functions outside of FLUs and IRM (e.g., Legal and Global Human Resources). The three lines of defense are integrated into our management-level governance structure. Each of these functional roles is described in more detail below.



43 Bank of America

Executive Officers

Executive officers lead various functions representing the functional roles. Authority for functional roles may be delegated to executive officers from the Board, Board committees or management-level committees. Executive officers, in turn, may further delegate responsibilities, as appropriate, to management-level committees, management routines or individuals. Executive officers review our activities for consistency with our Risk Framework, Risk Appetite Statement and applicable strategic, capital and financial operating plans, as well as applicable policies, standards, procedures and processes. Executive officers and other employees make decisions individually on a day-to-day basis, consistent with the authority they have been delegated. Executive officers and other employees may also serve on committees and participate in committee decisions.

Front Line Units

FLUs, which include the lines of business as well as the Global Technology and Operations Group, are responsible for appropriately assessing and effectively managing all of the risks associated with their activities.

Three organizational units that include FLU activities and control function activities, but are not part of IRM are first, the Chief Financial Officer (CFO) Group; second, Environmental, Social and Governance (ESG), Capital Deployment (CD) and Public Policy (PP); and third, the Chief Administrative Officer (CAO) Group.

Independent Risk Management

IRM is part of our control functions and includes Global Risk Management. We have other control functions that are not part of IRM (other control functions may also provide oversight to FLU activities), including Legal, Global Human Resources and certain activities within the CFO Group; ESG, CD and PP; and CAO Group. IRM, led by the Chief Risk Officer (CRO), is responsible for independently assessing and overseeing risks within FLUs and other control functions. IRM establishes written enterprise policies and procedures that include concentration risk limits, where appropriate. Such policies and procedures outline how aggregate risks are identified, measured, monitored and controlled.

The CRO has the stature, authority and independence to develop and implement a meaningful risk management framework. The CRO has unrestricted access to the Board and reports directly to both the ERC and to the CEO. Global Risk Management is organized into horizontal risk teams that cover a specific risk area and vertical CRO teams that cover a particular front line unit or control function. These teams work collaboratively in executing their respective duties.

Corporate Audit

Corporate Audit and the CAE maintain their independence from the FLUs, IRM and other control functions by reporting directly to the Audit Committee or the Board. The CAE administratively reports to the CEO. Corporate Audit provides independent assessment and validation through testing of key processes and controls across the Corporation. Corporate Audit includes Credit Review which periodically tests and examines credit portfolios and processes.

Risk Management Processes

The Risk Framework requires that strong risk management practices are integrated in key strategic, capital and financial planning processes and in day-to-day business processes across the Corporation, with a goal of ensuring risks are appropriately considered, evaluated and responded to in a timely manner.

We employ our risk management process, referred to as Identify, Measure, Monitor and Control, as part of our daily activities.

Identify – To be effectively managed, risks must be clearly defined and proactively identified. Proper risk identification focuses on recognizing and understanding key risks inherent in our business activities or key risks that may arise from external factors. Each employee is expected to identify and escalate risks promptly. Risk identification is an ongoing process, incorporating input from FLUs and control functions, designed to be forward looking and capture relevant risk factors across all of our lines of business.

Measure – Once a risk is identified, it must be prioritized and accurately measured through a systematic risk quantification process including quantitative and qualitative components. Risk is measured at various levels including, but not limited to, risk type, FLU, legal entity and on an aggregate basis. This risk quantification process helps to capture changes in our risk profile due to changes in strategic direction, concentrations, portfolio quality and the overall economic environment. Senior management considers how risk exposures might evolve under a variety of stress scenarios.

Monitor – We monitor risk levels regularly to track adherence to risk appetite, policies, standards, procedures and processes. We also regularly update risk assessments and review risk exposures. Through our monitoring, we can determine our level of risk relative to limits and can take action in a timely manner. We also can determine when risk limits are breached and have processes to appropriately report and escalate exceptions. This includes requests for approval to managers and alerts to executive management, management-level committees or the Board (directly or through an appropriate committee).

Control – We establish and communicate risk limits and controls through policies, standards, procedures and processes that define the responsibilities and authority for risk-taking. The limits and controls can be adjusted by the Board or management when conditions or risk tolerances warrant. These limits may be absolute (e.g., loan amount, trading volume) or relative (e.g., percentage of loan book in higher-risk categories). Our lines of business are held accountable to perform within the established limits.

The formal processes used to manage risk represent a part of our overall risk management process. We instill a strong and comprehensive culture of managing risk well through communications, training, policies, procedures and organizational roles and responsibilities. Establishing a culture reflective of our purpose to help make our customers’ financial lives better and delivering our responsible growth strategy is also critical to effective risk management. We understand that improper actions, behaviors or practices that are illegal, unethical or contrary to our core values could result in harm to the Corporation, our shareholders or our customers, damage the integrity of the financial markets, or negatively impact our reputation, and have established protocols and structures so that such conduct risk is governed and reported across the Corporation. Specifically, our Code of Conduct provides a framework for all of our employees to conduct themselves with the highest integrity. Additionally, we continue to strengthen the link between the employee performance management process and individual compensation to encourage employees to work toward enterprise-wide risk goals.



		Bank of America 44

Corporation-wide Stress Testing

Integral to our Capital Planning, Financial Planning and Strategic Planning processes, we conduct capital scenario management and stress forecasting on a periodic basis to better understand balance sheet, earnings and capital sensitivities to certain economic and business scenarios, including economic and market conditions that are more severe than anticipated. These stress forecasts provide an understanding of the potential impacts from our risk profile on the balance sheet, earnings and capital, and serve as a key component of our capital and risk management practices. The intent of stress testing is to develop a comprehensive understanding of potential impacts of on- and off-balance sheet risks at the Corporation and how they impact financial resiliency, which provides confidence to management, regulators and our investors.

Contingency Planning

We have developed and maintain contingency plans that are designed to prepare us in advance to respond in the event of potential adverse economic, financial or market stress. These contingency plans include our Capital Contingency Plan and Financial Contingency and Recovery Plan, which provide monitoring, escalation, actions and routines designed to enable us to increase capital, access funding sources and reduce risk through consideration of potential options that include asset sales, business sales, capital or debt issuances, or other de-risking strategies. We also maintain a Resolution Plan to limit adverse systemic impacts that could be associated with a potential resolution of Bank of America.

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. This risk results from incorrect assumptions about external or internal factors, inappropriate business plans, ineffective business strategy execution, or failure to respond in a timely manner to changes in the regulatory, macroeconomic or competitive environments, in the geographic locations in which we operate, such as competitor actions, changing customer preferences, product obsolescence and technology developments. Our strategic plan is consistent with our risk appetite, capital plan and liquidity requirements, and specifically addresses strategic risks.

On an annual basis, the Board reviews and approves the strategic plan, capital plan, financial operating plan and Risk Appetite Statement. With oversight by the Board, executive management directs the lines of business to execute our strategic plan consistent with our core operating principles and risk appetite. The executive management team monitors business performance throughout the year and provides the Board with regular progress reports on whether strategic objectives and timelines are being met, including reports on strategic risks and if additional or alternative actions need to be considered or implemented. The regular executive reviews focus on assessing forecasted earnings and returns on capital, the current risk profile, current capital and liquidity requirements, staffing levels and changes required to support the strategic plan, stress testing results, and other qualitative factors such as market growth rates and peer analysis.

Significant strategic actions, such as capital actions, material acquisitions or divestitures, and resolution plans are reviewed and approved by the Board. At the business level, processes are in place to discuss the strategic risk implications of new, expanded or modified businesses, products or services and other strategic initiatives, and to provide formal review and approval where required. With oversight by the Board and the ERC, executive

management performs similar analyses throughout the year, and evaluates changes to the financial forecast or the risk, capital or liquidity positions as deemed appropriate to balance and optimize achieving the targeted risk appetite, shareholder returns and maintaining the targeted financial strength. Proprietary models are used to measure the capital requirements for credit, country, market, operational and strategic risks. The allocated capital assigned to each business is based on its unique risk profile. With oversight by the Board, executive management assesses the risk-adjusted returns of each business in approving strategic and financial operating plans. The businesses use allocated capital to define business strategies, and price products and transactions.

Capital Management

The Corporation manages its capital position so that its capital is more than adequate to support its business activities and aligns with risk, risk appetite and strategic planning. Additionally, we seek to maintain safety and soundness at all times, even under adverse scenarios, take advantage of organic growth opportunities, meet obligations to creditors and counterparties, 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 our strategic plan, risk appetite and risk limits.

We conduct an Internal Capital Adequacy Assessment Process (ICAAP) on a periodic basis. 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 periodic stress tests to assess the potential impacts to our balance sheet, earnings, regulatory capital and liquidity under a variety of stress scenarios. We perform qualitative risk assessments to identify and assess material risks not fully captured in our forecasts or stress tests. We assess the potential capital impacts of proposed changes to regulatory capital requirements. Management assesses ICAAP results and provides documented quarterly assessments of the adequacy of our capital guidelines and capital position to the Board or its committees.

We periodically review capital allocated to our businesses and allocate capital annually during the strategic and capital planning processes. For more information, see Business Segment Operations on page 32.

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.

On June 27, 2019, following the Federal Reserve’s non-objection to our 2019 CCAR capital plan, the Board authorized the repurchase of approximately $30.9 billion in common stock from July 1, 2019 through June 30, 2020, which includes approximately $900 million to offset shares awarded under equity-based compensation plans during the same period. During 2019, pursuant to the Board’s authorizations, including those related to our 2018 CCAR capital plan that expired June 30, 2019, we repurchased $28.1 billion of common stock, which includes common stock repurchases to offset equity-based compensation awards. At December 31, 2019, our remaining stock repurchase authorization was $15.6 billion.

Our stock repurchases are subject to various factors, including the Corporation’s capital position, liquidity, financial performance and alternative uses of capital, stock trading price and general



45 Bank of America

market conditions, and may be suspended at any time. The repurchases may be effected through open market purchases or privately negotiated transactions, including repurchase plans that satisfy the conditions of Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (Exchange Act).

Regulatory Capital

As a financial services holding company, we are subject to regulatory capital rules, including Basel 3, issued by U.S. banking regulators. Basel 3 established minimum capital ratios and buffer requirements and outlined two methods of calculating risk-weighted assets, the Standardized approach and the Advanced approaches. The Standardized approach relies primarily on supervisory risk weights based on exposure type, and the Advanced approaches determine risk weights based on internal models.

The Corporation's depository institution subsidiaries are also subject to the Prompt Corrective Action (PCA) framework. The Corporation and its primary affiliated banking entity, BANA, are Advanced approaches institutions under Basel 3 and are required to report regulatory risk-based capital ratios and risk-weighted assets under both the Standardized and Advanced approaches. The approach that yields the lower ratio is used to assess capital adequacy including under the PCA framework. As of December 31, 2019, the Common equity tier 1 (CET1) and Tier 1 capital ratios for the Corporation were lower under the Standardized approach whereas the Advanced approaches yielded a lower Total capital ratio.

Minimum Capital Requirements

Minimum capital requirements and related buffers were fully phased in as of January 1, 2019. The PCA framework established categories of capitalization, including well capitalized, based on

the Basel 3 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 organizations.

In order to avoid restrictions on capital distributions and discretionary bonus payments, the Corporation must meet risk-based capital ratio requirements that include a capital conservation buffer greater than 2.5 percent, plus any applicable countercyclical capital buffer and a global systemically important bank (G-SIB) surcharge. The buffers and surcharge must be comprised solely of CET1 capital.

The Corporation is also required to maintain a minimum supplementary leverage ratio (SLR) of 3.0 percent plus a leverage buffer of 2.0 percent in order to avoid certain restrictions on capital distributions and discretionary bonus payments. Our insured depository institution subsidiaries are required to maintain a minimum 6.0 percent SLR to be considered well capitalized under the PCA framework. The numerator of the SLR is quarter-end Basel 3 Tier 1 capital. The denominator is total leverage exposure based on the daily average of the sum of on-balance sheet exposures less permitted Tier 1 deductions, as well as the simple average of certain off-balance sheet exposures, as of the end of each month in a quarter.

Capital Composition and Ratios

Table 11 presents Bank of America Corporation’s capital ratios and related information in accordance with Basel 3 Standardized and Advanced approaches as measured at December 31, 2019 and 2018. As of the periods presented herein, the Corporation met the definition of well capitalized under current regulatory requirements.



		Bank of America 46




Table 11	Bank of America Corporation Regulatory Capital under Basel 3

		Standardized Approach			Advanced Approaches			Regulatory Minimum ⁽¹⁾
(Dollars in millions, except as noted)		December 31, 2019
Risk-based capital metrics:
Common equity tier 1 capital		$	166,760		$	166,760
Tier 1 capital		188,492			188,492
Total capital ⁽²⁾		221,230			213,098
Risk-weighted assets (in billions)		1,493			1,447
Common equity tier 1 capital ratio		11.2		%	11.5		%	9.5	%
Tier 1 capital ratio		12.6			13.0			11.0
Total capital ratio		14.8			14.7			13.0

Leverage-based metrics:
Adjusted quarterly average assets (in billions) ⁽³⁾		$	2,374		$	2,374
Tier 1 leverage ratio		7.9		%	7.9		%	4.0

SLR leverage exposure (in billions)					$	2,946
SLR					6.4		%	5.0

		December 31, 2018
Risk-based capital metrics:
Common equity tier 1 capital		$	167,272		$	167,272
Tier 1 capital		189,038			189,038
Total capital ⁽²⁾		221,304			212,878
Risk-weighted assets (in billions)		1,437			1,409
Common equity tier 1 capital ratio		11.6		%	11.9		%	8.25	%
Tier 1 capital ratio		13.2			13.4			9.75
Total capital ratio		15.4			15.1			11.75

Leverage-based metrics:
Adjusted quarterly average assets (in billions) ⁽³⁾		$	2,258		$	2,258
Tier 1 leverage ratio		8.4		%	8.4		%	4.0

SLR leverage exposure (in billions)					$	2,791
SLR					6.8		%	5.0


⁽¹⁾	The capital conservation buffer and G-SIB surcharge were 2.5 percent at December 31, 2019 and 1.875 percent at December 31, 2018. The countercyclical capital buffer for both periods was zero. The SLR minimum includes a leverage buffer of 2.0 percent.


⁽²⁾	Total capital under the Advanced approaches differs from the Standardized approach due to differences in the amount permitted in Tier 2 capital related to the qualifying allowance for credit losses.


⁽³⁾	Reflects total average assets adjusted for certain Tier 1 capital deductions.

At December 31, 2019, CET1 capital and Total capital under the Advanced approaches were relatively unchanged compared to December 31, 2018. Risk-weighted assets under the Standardized approach, which yielded the lower CET1 capital ratio at December 31, 2019, increased $56.3 billion during 2019 to $1,493 billion

primarily due to loan growth and increased client activity in Global Markets and Global Banking.

Table 12 shows the capital composition at December 31, 2019 and 2018.




Table 12	Capital Composition under Basel 3

		December 31
(Dollars in millions)		2019			2018
Total common shareholders’ equity		$	241,409		$	242,999
Goodwill, net of related deferred tax liabilities		(68,570		)	(68,572		)
Deferred tax assets arising from net operating loss and tax credit carryforwards		(5,193		)	(5,981		)
Intangibles, other than mortgage servicing rights and goodwill, net of related deferred tax liabilities		(1,328		)	(1,294		)
Other		442			120
Common equity tier 1 capital		166,760			167,272
Qualifying preferred stock, net of issuance cost		22,329			22,326
Other		(597		)	(560		)
Tier 1 capital		188,492			189,038
Tier 2 capital instruments		22,538			21,887
Eligible credit reserves included in Tier 2 capital		2,097			1,972
Other		(29		)	(19		)
Total capital under the Advanced approaches		$	213,098		$	212,878



47 Bank of America

Table 13 shows the components of risk-weighted assets as measured under Basel 3 at December 31, 2019 and 2018.




Table 13	Risk-weighted Assets under Basel 3

		Standardized Approach		Advanced Approaches		Standardized Approach		Advanced Approaches
		December 31
(Dollars in billions)		2019				2018
Credit risk		$	1,437	$	858	$	1,384	$	827
Market risk		56		55		53		52
Operational risk		n/a		500		n/a		500
Risks related to credit valuation adjustments		n/a		34		n/a		30
Total risk-weighted assets		$	1,493	$	1,447	$	1,437	$	1,409

n/a = not applicable

Bank of America, N.A. Regulatory Capital

Table 14 presents regulatory capital information for BANA in accordance with Basel 3 Standardized and Advanced approaches as measured at December 31, 2019 and 2018. BANA met the definition of well capitalized under the PCA framework at both year ends.




Table 14	Bank of America, N.A. Regulatory Capital under Basel 3

		Standardized Approach			Advanced Approaches			Regulatory Minimum ⁽¹⁾
(Dollars in millions, except as noted)		December 31, 2019
Risk-based capital metrics:
Common equity tier 1 capital		$	154,626		$	154,626
Tier 1 capital		154,626			154,626
Total capital ⁽²⁾		166,567			158,665
Risk-weighted assets (in billions)		1,241			991
Common equity tier 1 capital ratio		12.5		%	15.6		%	7.0	%
Tier 1 capital ratio		12.5			15.6			8.5
Total capital ratio		13.4			16.0			10.5

Leverage-based metrics:
Adjusted quarterly average assets (in billions) ⁽³⁾		$	1,780		$	1,780
Tier 1 leverage ratio		8.7		%	8.7		%	5.0

SLR leverage exposure (in billions)					$	2,177
SLR					7.1		%	6.0

		December 31, 2018
Risk-based capital metrics:
Common equity tier 1 capital		$	149,824		$	149,824
Tier 1 capital		149,824			149,824
Total capital ⁽²⁾		161,760			153,627
Risk-weighted assets (in billions)		1,195			959
Common equity tier 1 capital ratio		12.5		%	15.6		%	6.5	%
Tier 1 capital ratio		12.5			15.6			8.0
Total capital ratio		13.5			16.0			10.0

Leverage-based metrics:
Adjusted quarterly average assets (in billions) ⁽³⁾		$	1,719		$	1,719
Tier 1 leverage ratio		8.7		%	8.7		%	5.0

SLR leverage exposure (in billions)					$	2,112
SLR					7.1		%	6.0


⁽¹⁾	Risk-based capital regulatory minimums at December 31, 2019 are the minimum ratios under Basel 3 including a capital conservation buffer of 2.5 percent. The regulatory minimums for the leverage ratios as of both period ends and risk-based capital ratios as of December 31, 2018 are the percent required to be considered well capitalized under the PCA framework.


⁽²⁾	Total capital under the Advanced approaches differs from the Standardized approach due to differences in the amount permitted in Tier 2 capital related to the qualifying allowance for credit losses.


⁽³⁾	Reflects total average assets adjusted for certain Tier 1 capital deductions.

Total Loss-Absorbing Capacity Requirements

Effective January 1, 2019, the Corporation is subject to the Federal Reserve’s final rule requiring G-SIBs to maintain minimum levels of total loss-absorbing capacity (TLAC) and long-term debt. TLAC consists of the Corporation’s Tier 1 capital and eligible long-term debt issued directly by the Corporation. Eligible long-term debt for TLAC ratios is comprised of unsecured debt that has a remaining

maturity of at least one year and satisfies additional requirements as prescribed in the TLAC final rule. As with the risk-based capital ratios and SLR, the Corporation is required to maintain TLAC ratios in excess of minimum requirements plus applicable buffers to avoid restrictions on capital distributions and discretionary bonus payments. Table 15 presents the Corporation's TLAC and long-term debt ratios and related information as of December 31, 2019.



		Bank of America 48




Table 15	Bank of America Corporation Total Loss-Absorbing Capacity and Long-Term Debt

		TLAC			Regulatory Minimum ⁽¹⁾		Long-term Debt			Regulatory Minimum ⁽²⁾
(Dollars in millions)		December 31, 2019
Total eligible balance		$	367,449				$	171,349
Percentage of risk-weighted assets ⁽³⁾		24.6		%	22.0	%	11.5		%	8.5	%
Percentage of SLR leverage exposure		12.5			9.5		5.8			4.5

⁽¹⁾

The TLAC risk-weighted assets regulatory minimum consists of 18.0 percent plus a TLAC risk-weighted assets buffer comprised of 2.5 percent plus the method 1 G-SIB surcharge of 1.5 percent. The countercyclical buffer is zero for this period. The TLAC SLR leverage exposure regulatory minimum consists of 7.5 percent plus a 2.0 percent TLAC leverage buffer. The TLAC risk-weighted assets and leverage buffers must be comprised solely of CET1 capital and Tier 1 capital, respectively.


⁽²⁾	The long-term debt risk-weighted assets regulatory minimum is comprised of 6.0 percent plus an additional 2.5 percent requirement based on the Corporation’s method 2 G-SIB surcharge. The long-term debt leverage exposure regulatory minimum is 4.5 percent.


⁽³⁾	The approach that yields the higher risk-weighted assets is used to calculate TLAC and long-term debt ratios, which was the Standardized approach as of December 31, 2019.

Regulatory Capital and Securities Regulation

The Corporation’s principal U.S. broker-dealer subsidiaries are BofA Securities, Inc. (BofAS), Merrill Lynch Professional Clearing Corp. (MLPCC) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S). BofAS was formed as a result of the reorganization of MLPF&S which was completed in May 2019. The Corporation's principal European broker-dealer subsidiaries are Merrill Lynch International (MLI) and BofA Securities Europe SA (BofASE).

The U.S. broker-dealer subsidiaries are subject to the net capital requirements of Rule 15c3-1 under the Exchange Act. BofAS computes its minimum capital requirements as an alternative net capital broker-dealer under Rule 15c3-1, and MLPCC and MLPF&S compute their minimum capital requirements in accordance with the alternative standard under Rule 15c3-1. BofAS and MLPCC are also registered as futures commission merchants and are subject to U.S. Commodity Futures Trading Commission (CFTC) Regulation 1.17.

BofAS provides institutional services, and in accordance with the alternative net capital requirements, is required to maintain tentative net capital in excess of $1.0 billion and net capital in excess of the greater of $500 million or a certain percentage of its reserve requirement. BofAS must also notify the Securities and Exchange Commission (SEC) in the event its tentative net capital is less than $5.0 billion. BofAS is also required to hold a certain percentage of its risk-based margin in order to meet its CFTC minimum net capital requirement. At December 31, 2019, BofAS had tentative net capital of $12.5 billion. BofAS also had regulatory net capital of $10.4 billion which exceeded the minimum requirement of $2.4 billion.

MLPCC is a fully-guaranteed subsidiary of BofAS and provides clearing and settlement services. At December 31, 2019, MLPCC’s regulatory net capital of $5.3 billion exceeded the minimum requirement of $1.3 billion.

MLPF&S provides retail services. At December 31, 2019, MLPF&S' regulatory net capital was $4.1 billion which exceeded the minimum requirement of $102 million.

Our European broker-dealers are regulated by non-U.S. regulators. MLI, a U.K. investment firm, is regulated by the Prudential Regulation Authority and the FCA and is subject to certain regulatory capital requirements. At December 31, 2019, MLI’s capital resources were $34.8 billion, which exceeded the minimum Pillar 1 requirement of $13.9 billion. BofASE, a French investment firm, is regulated by the Autorité de Contrôle Prudentiel et de Résolution and the Autorité des Marchés Financiers, and is subject to certain regulatory capital requirements. At December 31, 2019, BofASE's capital resources were $5.5 billion which exceeded the minimum Pillar 1 requirement of $1.3 billion.

Regulatory Developments

Revisions to Basel 3 to Address Current Expected Credit Loss Accounting

On January 1, 2020, the Corporation adopted the new accounting standard that requires the measurement of the allowance for credit losses to be based on management’s best estimate of lifetime expected credit losses inherent in the Corporation's relevant financial assets. For more information, see Note 1 - Summary of Significant Accounting Principles to the Consolidated Financial Statements. Our adoption of the standard resulted in a decrease to the CET1 capital ratio of 17 bps, which will be phased in evenly, or approximately four bps per year, at the beginning of each year from January 1, 2020 through January 1, 2023 in accordance with transition provisions issued by the U.S. banking regulators.

Security-Based Swap Dealer Capital, Margin and Segregation Requirements

On June 21, 2019, the SEC published a final rule establishing capital, margin and segregation requirements for security-based swap dealers (SBSDs). The final rule increases the minimum net capital requirements for broker-dealers authorized to use internal models to compute alternative net capital (ANC broker-dealers). For ANC broker-dealers, the minimum tentative net capital requirement increased from $1.0 billion to $5.0 billion, and the net capital requirement was raised to the greater of $1.0 billion or two percent of the applicable risk-margin amount (initial margin maintained for cleared and non-cleared security-based swaps) plus two percent of certain customer-related assets. For stand-alone SBSDs that use models to calculate haircuts, the minimum tentative net capital requirement is $100 million and the minimum net capital requirement is the greater of $20 million or two percent of the risk-margin amount.

Capital Requirements for Swap Dealers

On December 10, 2019, the CFTC re-opened the comment period on its 2016 proposal to establish capital requirements for swap dealers and major swap participants that are not subject to existing U.S. prudential regulation. Under the proposal, applicable subsidiaries of the Corporation would be permitted to elect one of two approaches to compute their regulatory capital. The first approach is a bank-based capital approach which requires that firms maintain CET1 capital greater than or equal to the larger of 8.0 percent of the entity’s RWA as calculated under Basel 3, or 8.0 percent of the margin of the entity’s cleared and uncleared swaps, security-based swaps, futures and foreign futures positions. The second approach is based on net liquid assets and requires that a firm maintain net capital greater than or equal to 8.0 percent of the margin as described above. The proposal also includes liquidity and reporting requirements.



49 Bank of America

Single-Counterparty Credit Limits

The Federal Reserve established single-counterparty credit limits (SCCL) for BHCs with total consolidated assets of $250 billion or more. The SCCL rule is designed to ensure that the maximum possible loss that a BHC could incur due to the default of a single counterparty or a group of connected counterparties would not endanger the BHC’s survival, thereby reducing the probability of future financial crises. Beginning January 1, 2020, G-SIBs must calculate SCCL on a daily basis by dividing the aggregate net credit exposure to a given counterparty by the G-SIB’s Tier 1 capital, ensuring that exposures to other G-SIBs and nonbank financial institutions regulated by the Federal Reserve do not breach 15 percent of Tier 1 capital and exposures to most other counterparties do not breach 25 percent of Tier 1 capital. Certain exposures, including exposures to the U.S. government, U.S. government-sponsored entities and qualifying central counterparties, are exempt from the credit limits.

Liquidity Risk

Funding and Liquidity Risk Management

Our primary liquidity risk management objective is to meet expected or unexpected cash flow and collateral needs while continuing to support our businesses and customers under a range of economic conditions. To achieve that objective, we analyze and monitor our liquidity risk under expected and stressed conditions, maintain liquidity and access to diverse funding sources, including our stable deposit base, and seek to align liquidity-related incentives and risks.

We define liquidity as readily available assets, limited to cash and high-quality, liquid, unencumbered securities that we can use to meet our contractual and contingent financial obligations as those obligations arise. We manage our liquidity position through line of business and ALM activities, as well as through our legal entity funding strategy, on both a forward and current (including intraday) basis under both expected and stressed conditions. We believe that a centralized approach to funding and liquidity management enhances our ability to monitor liquidity requirements, maximizes access to funding sources, minimizes borrowing costs and facilitates timely responses to liquidity events.

The Board approves our liquidity risk policy and the Financial Contingency and Recovery Plan. The ERC establishes our liquidity risk tolerance levels. The MRC is responsible for overseeing liquidity risks and directing management to maintain exposures within the established tolerance levels. The MRC reviews and monitors our liquidity position and stress testing results, approves certain liquidity risk limits and reviews the impact of strategic decisions on our liquidity. For more information, see Managing Risk on page 42. Under this governance framework, we have developed certain funding and liquidity risk management practices which include: maintaining liquidity at the parent company and selected subsidiaries, including our bank subsidiaries and other regulated entities; determining what amounts of liquidity are appropriate for these entities based on analysis of debt maturities and other potential cash outflows, including those that we may experience during stressed market conditions; diversifying funding sources, considering our asset profile and legal entity structure; and performing contingency planning.

NB Holdings Corporation

We have intercompany arrangements with certain key subsidiaries under which we transferred certain assets of Bank of America Corporation, as the parent company, which is a separate and distinct legal entity from our banking and nonbank subsidiaries,

and agreed to transfer certain additional parent company assets not needed to satisfy anticipated near-term expenditures, to NB Holdings Corporation, a wholly-owned holding company subsidiary (NB Holdings). The parent company is expected to continue to have access to the same flow of dividends, interest and other amounts of cash necessary to service its debt, pay dividends and perform other obligations as it would have had if it had not entered into these arrangements and transferred any assets.

In consideration for the transfer of assets, NB Holdings issued a subordinated note to the parent company in a principal amount equal to the value of the transferred assets. The aggregate principal amount of the note will increase by the amount of any future asset transfers. NB Holdings also provided the parent company with a committed line of credit that allows the parent company to draw funds necessary to service near-term cash needs. These arrangements support our preferred single point of entry resolution strategy, under which only the parent company would be resolved under the U.S. Bankruptcy Code. These arrangements include provisions to terminate the line of credit, forgive the subordinated note and require the parent company to transfer its remaining financial assets to NB Holdings if our projected liquidity resources deteriorate so severely that resolution of the parent company becomes imminent.

Global Liquidity Sources and Other Unencumbered Assets

We maintain liquidity available to the Corporation, including the parent company and selected subsidiaries, in the form of cash and high-quality, liquid, unencumbered securities. Our liquidity buffer, referred to as Global Liquidity Sources (GLS), is comprised of assets that are readily available to the parent company and selected subsidiaries, including holding company, bank and broker-dealer subsidiaries, even during stressed market conditions. Our cash is primarily on deposit with the Federal Reserve Bank and, to a lesser extent, 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 securities. We can quickly obtain cash for these securities, even in stressed conditions, through repurchase agreements or outright sales. We hold our GLS in legal 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.

Table 16 presents average GLS for the three months ended December 31, 2019 and 2018.




Table 16	Average Global Liquidity Sources

		Three Months Ended December 31
(Dollars in billions)		2019		2018
Parent company and NB Holdings		$	59	$	76
Bank subsidiaries		454		420
Other regulated entities		63		48
Total Average Global Liquidity Sources		$	576	$	544

Typically, parent company and NB Holdings liquidity is in the form of cash deposited with BANA.

Our bank subsidiaries’ liquidity is primarily driven by deposit and lending activity, as well as securities valuation and net debt activity. Liquidity at bank subsidiaries excludes the cash deposited by the parent company and NB Holdings. Our bank subsidiaries can also generate incremental liquidity by pledging a range of unencumbered loans and securities to certain FHLBs and the Federal Reserve Discount Window. The cash we could have



		Bank of America 50

obtained by borrowing against this pool of specifically-identified eligible assets was $372 billion and $344 billion at December 31, 2019 and 2018. 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 in guidelines from 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 generally be used only to fund obligations within the bank subsidiaries, and transfers to the parent company or nonbank subsidiaries may be subject to prior regulatory approval.

Liquidity held in other regulated entities, comprised primarily of broker-dealer subsidiaries, 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. Our other regulated entities also hold unencumbered investment-grade securities and equities that we believe could be used to generate additional liquidity.

Table 17 presents the composition of average GLS for the three months ended December 31, 2019 and 2018.




Table 17	Average Global Liquidity Sources Composition

		Three Months Ended December 31
(Dollars in billions)		2019		2018
Cash on deposit		$	103	$	113
U.S. Treasury securities		98		81
U.S. agency securities and mortgage-backed securities		358		340
Non-U.S. government securities		17		10
Total Average Global Liquidity Sources		$	576	$	544

Our GLS are substantially the same in composition to what qualifies as High Quality Liquid Assets (HQLA) under the final U.S. Liquidity Coverage Ratio (LCR) rules. However, HQLA for purposes of calculating LCR is not reported at market value, but at a lower value that incorporates regulatory deductions and the exclusion of excess liquidity held at certain subsidiaries. The LCR is calculated as the amount of a financial institution’s unencumbered HQLA relative to the estimated net cash outflows the institution could encounter over a 30-day period of significant liquidity stress, expressed as a percentage. Our average consolidated HQLA, on a net basis, was $464 billion and $446 billion for the three months ended December 31, 2019 and 2018. For the same periods, the average consolidated LCR was 116 percent and 118 percent. Our LCR fluctuates due to normal business flows from customer activity.

Liquidity Stress Analysis

We utilize liquidity stress analysis to assist us in determining the appropriate amounts of liquidity to maintain at the parent company and our subsidiaries to meet contractual and contingent cash outflows under a range of scenarios. 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 more severe events including potential resolution scenarios. The scenarios are based on our historical experience, experience of distressed and failed financial institutions, 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; 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 and liability profile and establish limits and guidelines on certain funding sources and businesses.

Net Stable Funding Ratio

U.S. banking regulators issued a proposal for a Net Stable Funding Ratio (NSFR) requirement applicable to U.S. financial institutions following the Basel Committee’s final standard. The proposed U.S. NSFR would apply to the Corporation on a consolidated basis and to our insured depository institutions. While the final requirement remains pending and is subject to change, if finalized as proposed, we expect to be in compliance within the regulatory timeline. The standard is intended to reduce funding risk over a longer time horizon. The NSFR is designed to provide an appropriate amount of stable funding, generally capital and liabilities maturing beyond one year, given the mix of assets and off-balance sheet items.

Diversified Funding Sources

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

The primary benefits of our centralized funding approach 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 $1.43 trillion and $1.38 trillion at December 31, 2019 and 2018. Deposits are primarily generated by our Consumer Banking, 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 government-sponsored enterprises (GSE), the FHA and private-label investors, as well as FHLB loans.

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



51 Bank of America

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 11 – Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings and Restricted Cash to the Consolidated Financial Statements.

We issue long-term unsecured debt in a variety of maturities and currencies to achieve cost-efficient funding and to maintain an appropriate maturity profile. 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.

Table 18 presents our long-term debt by major currency at December 31, 2019 and 2018.




Table 18	Long-term Debt by Major Currency

		December 31
(Dollars in millions)		2019		2018
U.S. dollar		$	191,284	$	180,724
Euro		32,781		34,328
British pound		5,067		5,450
Japanese yen		4,310		3,038
Canadian dollar		3,857		2,936
Australian dollar		1,957		1,722
Other		1,600		1,194
Total long-term debt		$	240,856	$	229,392

Total long-term debt increased $11.5 billion during 2019, primarily due to debt issuances and valuation adjustments, partially offset by maturities and redemptions. We may, from time to time, purchase outstanding debt instruments in various transactions, depending on market conditions, liquidity and other factors. Our other regulated entities may also make markets in our debt instruments to provide liquidity for investors.

During 2019, the Corporation issued $52.5 billion of long-term debt consisting of $29.3 billion of notes issued by Bank of America Corporation, substantially all of which was TLAC compliant, $10.9 billion of notes issued by Bank of America, N.A. and $12.3 billion of other debt, substantially all of which was structured liabilities. During 2018, the Corporation issued $64.4 billion of long-term debt consisting of $30.7 billion of notes issued by Bank of America Corporation, substantially all of which was TLAC compliant, $18.7 billion of notes issued by Bank of America, N.A. and $15.0 billion of other debt, substantially all of which was structured liabilities.

During 2019, the Corporation had total long-term debt maturities and redemptions in the aggregate of $50.6 billion consisting of $21.1 billion for Bank of America Corporation, $19.9 billion for Bank of America, N.A. and $9.6 billion of other debt. During 2018, the Corporation had total long-term debt maturities and redemptions in the aggregate of $53.3 billion consisting of $29.8 billion for Bank of America Corporation, $11.2 billion for Bank of America, N.A. and $12.3 billion of other debt.

At December 31, 2019, Bank of America Corporation's senior notes of $159.8 billion included $107.7 billion of outstanding notes that are both TLAC eligible and callable at least one year before their stated maturities. Of these senior notes, $7.4 billion will be callable and become TLAC ineligible during 2020, and $11.7

billion, $14.8 billion, $10.7 billion and $9.2 billion will do so during each of 2021 through 2024, respectively, and $53.9 billion thereafter.

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 more information on our ALM activities, see Interest Rate Risk Management for the Banking Book on page 74.

We may issue unsecured debt in the form of structured notes for client purposes, certain of which qualify as TLAC-eligible debt. During 2019, we issued $9.6 billion of structured notes, 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 derivatives 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 note 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.

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. For more information on long-term debt funding, including issuances and maturities and redemptions, see Note 12 – Long-term Debt to the Consolidated Financial Statements.

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 over-the-counter (OTC) derivatives. Thus, it is our objective to maintain high-quality credit ratings, and management maintains an active dialogue with the major 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



		Bank of America 52

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 relative positions in the markets in which we compete; our various risk exposures and risk management policies and activities; pending litigation and other contingencies or potential tail risks; our reputation; our liquidity position, diversity of funding sources and funding costs; the current and expected level and volatility of our earnings; our capital position and capital management practices; our corporate governance; the sovereign credit ratings of the U.S. government; current or future regulatory and legislative initiatives; and the agencies’ views on whether the U.S. government would provide meaningful support to the Corporation or its subsidiaries in a crisis.

On June 12, 2019, Fitch Ratings (Fitch) completed its periodic review of the 12 large, complex securities trading and universal banks, including Bank of America Corporation. The agency affirmed the long-term and short-term senior debt ratings of the Corporation and all of its rated subsidiaries, except Bank of America Merrill

Lynch International Designated Activity Company, which Fitch upgraded by one notch to AA-/F1+. The rating outlook for all long-term ratings is currently stable.

On March 6, 2019, Moody’s Investors Service (Moody’s) upgraded the long-term and short-term ratings of the Corporation by one notch to A2/P-1 from A3/P-2 for senior debt, as well as the long-term ratings of its rated subsidiaries, including BANA, which the agency upgraded to Aa2 from Aa3 for senior debt. Moody’s concurrently affirmed the short-term ratings of the Corporation’s rated subsidiaries, including BANA. Moody’s cited the Corporation’s strengthening profitability, continued adherence to a conservative risk profile and stable capital ratios as rationale for the upgrade. The rating outlook for all long-term ratings is currently stable.

The ratings from Standard & Poor’s Global Ratings (S&P) for the Corporation and its subsidiaries did not change during 2019. The long-term and short-term debt ratings of BofAS and BofASE, which were initially rated by S&P during the first quarter 2019, also remained unchanged during the rest of 2019.

Table 19 presents the Corporation’s current long-term/short-term senior debt ratings and outlooks expressed by the rating agencies.

Table 19

Senior Debt Ratings

Moody’s Investors Service

Standard & Poor’s Global Ratings

Fitch Ratings

Long-term

Short-term

Outlook

Long-term

Short-term

Outlook

Long-term

Short-term

Outlook

Bank of America Corporation

P-1

Stable

A-

A-2

Stable

A+

Stable

Bank of America, N.A.

Aa2

P-1

Stable

A+

A-1

Stable

AA-

F1+

Stable

Bank of America Merrill Lynch International Designated Activity Company

A+

A-1

Stable

AA-

F1+

Stable

Merrill Lynch, Pierce, Fenner & Smith Incorporated

A+

A-1

Stable

AA-

F1+

Stable

BofA Securities, Inc.

A+

A-1

Stable

AA-

F1+

Stable

Merrill Lynch International

A+

A-1

Stable

A+

Stable

BofA Securities Europe SA

A+

A-1

Stable

A+

Stable

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 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.

While certain potential impacts are contractual and quantifiable, the full scope of the consequences of a credit rating 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 – Liquidity Stress Analysis on page 51.

For more information on 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 3 – Derivatives to the Consolidated Financial Statements and Item 1A. Risk Factors.

Common Stock Dividends

For a summary of our declared quarterly cash dividends on common stock during 2019 and through February 19, 2020, see Note 14 – Shareholders’ Equity to the Consolidated Financial Statements.

Credit Risk Management

Credit risk is the risk of loss arising from the inability or failure of a borrower or counterparty to meet its obligations. Credit risk can also arise from operational failures that result in an erroneous advance, commitment or investment of funds. We define the credit exposure to a borrower or counterparty as the loss potential arising from all product classifications including loans and leases, deposit overdrafts, derivatives, assets held-for-sale and unfunded lending commitments which include loan commitments, letters of credit and financial guarantee

10-K: Annual report pursuant to Section 13 and 15(d)

FORM 10-K

Table of Contents

Part I

Part II

Part III

Part IV

Part I

Item 1. Business

Item 1A. Risk Factors

Market

Credit

Geopolitical

Business Operations

Regulatory, Compliance and Legal

Reputation

Other

Item 1B. Unresolved Staff Comments

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Mine Safety Disclosures

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Item 6. Selected Financial Data

Item 7. Bank of America Corporation and Subsidiaries

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Table of Contents

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Summary

Recent Developments

Financial Highlights

Balance Sheet Overview

Supplemental Financial Data

Business Segment Operations

Consumer Banking

Global Wealth & Investment Management

Global Banking

Global Markets

Off-Balance Sheet Arrangements and Contractual Obligations

Managing Risk

Strategic Risk Management

Capital Management

Liquidity Risk

Credit Risk Management