10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on October 29, 2021
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2021
or
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number:
Exact name of registrant as specified in its charter:
State or other jurisdiction of incorporation or organization:
IRS Employer Identification No.:
Address of principal executive offices:
Bank of America Corporate Center
Registrant’s telephone number, including area code:
(704 ) 386-5681
Former name, former address and former fiscal year, if changed since last report:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| of Floating Rate Non-Cumulative Preferred Stock, Series E | ||||||||
| of 6.000% Non-Cumulative Preferred Stock, Series GG | ||||||||
| of 5.875% Non-Cumulative Preferred Stock, Series HH | ||||||||
| of Bank of America Corporation Floating Rate | ||||||||
| Non-Cumulative Preferred Stock, Series 1 | ||||||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| of Bank of America Corporation Floating Rate | ||||||||
| Non-Cumulative Preferred Stock, Series 2 | ||||||||
| of Bank of America Corporation Floating Rate | ||||||||
| Non-Cumulative Preferred Stock, Series 4 | ||||||||
| of Bank of America Corporation Floating Rate | ||||||||
| Non-Cumulative Preferred Stock, Series 5 | ||||||||
| Trust XIII (and the guarantee related thereto) | ||||||||
| of BAC Capital Trust XIV (and the guarantee related thereto) | ||||||||
| Bank of America Corporation | ||||||||
| November 28, 2031 of BofA Finance LLC (and the guarantee | ||||||||
| of the Registrant with respect thereto) | ||||||||
| 5.375% Non-Cumulative Preferred Stock, Series KK | ||||||||
| of 5.000% Non-Cumulative Preferred Stock, Series LL | ||||||||
| 4.375% Non-Cumulative Preferred Stock, Series NN | ||||||||
| 4.125% Non-Cumulative Preferred Stock, Series PP | ||||||||
| 4.250% Non-Cumulative Preferred Stock, Series QQ | ||||||||
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.
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).
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.
| ☑ | 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 Exchange Act Rule 12b-2).
Yes ☐ No ☑
On October 28, 2021, there were 8,184,084,032 shares of Bank of America Corporation Common Stock outstanding.
Bank of America Corporation and Subsidiaries
September 30, 2021
Form 10-Q
INDEX
Part I. Financial Information
Item 1. Financial Statements |
Page | |||||||
Note 5 – Outstanding Loans and Leases and Allowance for Credit Losses |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Part II. Other Information
Item 2. 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, provision for credit losses, 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 the Corporation’s 2020 Annual Report on Form 10-K and in any of the Corporation’s subsequent Securities and Exchange Commission filings: the Corporation’s potential judgments, damages, penalties, fines and reputational damage resulting from pending or future litigation and regulatory investigations, proceedings and enforcement actions, including as a result of our participation in and execution of government programs related to the Coronavirus Disease 2019 (COVID-19) pandemic; the possibility that the Corporation's future liabilities may be in excess of its recorded liability and estimated range of possible loss for litigation, and regulatory and government actions; the possibility that the Corporation could face increased claims from one or more parties involved in mortgage securitizations; the Corporation's ability to resolve representations and warranties repurchase and related 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 and inflationary 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, including the impact of supply chain disruptions and inflationary pressures on the economic recovery; the Corporation’s concentration of credit risk; the Corporation's ability to achieve its expense targets and expectations regarding revenue, 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, stress capital buffer 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 changes in or interpretations of income tax laws and regulations; 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, derivatives regulations and the Coronavirus Aid, Relief, and Economic Security Act and any similar or related rules and 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 climate change; the ability to achieve environmental, social and governance goals and commitments; the impact of any future federal government shutdown and uncertainty regarding the federal government’s debt limit or changes in fiscal, monetary or regulatory policy; the emergence of widespread health emergencies or pandemics, including the magnitude and duration of the COVID-19 pandemic and its impact on the U.S. and/or global financial market conditions and our business, results of operations, financial condition and prospects; the impact of natural disasters, extreme weather events, 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 Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) are incorporated by reference into the MD&A. Certain prior-period amounts have been reclassified to conform to current-period presentation.
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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 various bank and 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 September 30, 2021, the Corporation had $3.1 trillion in assets and a headcount of approximately 209,000 employees.
As of September 30, 2021, we served clients through operations across the U.S., its territories and approximately 35 countries. Our retail banking footprint covers all major markets in the U.S., and we serve approximately 66 million consumer and small business clients with approximately 4,200 retail financial centers, approximately 17,000 ATMs, and leading digital banking platforms (www.bankofamerica.com) with approximately 41 million active users, including approximately 32 million active mobile users. We offer industry-leading support to approximately three million small business households. Our GWIM businesses, with client balances of $3.7 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.
The Corporation’s website is www.bankofamerica.com, and the Investor Relations portion of our website is https://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, including environmental, social and governance (ESG) information, regarding the Corporation on our website. 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. Notwithstanding the foregoing, the information contained on our website as referenced in this paragraph is not incorporated by reference into this Quarterly Report on Form 10-Q.
Recent Developments
Capital Management
In June 2021, the Board of Governors of the Federal Reserve System (Federal Reserve) notified BHCs of their 2021 Comprehensive Capital Analysis and Review (CCAR) stress test results, which included a preliminary stress capital buffer (SCB) that was finalized in August 2021. Based on our results, we are
subject to a 2.5 percent SCB effective October 1, 2021 through September 30, 2022, unchanged from the prior level. Our minimum Basel 3 Common equity tier 1 (CET1) capital ratio requirement also remained unchanged at 9.5 percent.
On October 20, 2021, the Corporation announced that the Board of Directors (the Board) renewed the Corporation’s $25 billion common stock repurchase program previously announced in April 2021. The Board’s authorization replaces the previous program. As with the April authorization, the Board also authorized common stock repurchases to offset shares awarded under the Corporation’s equity-based compensation plans. The Board also declared a quarterly cash common stock dividend of $0.21 per share, payable on December 31, 2021 to shareholders of record as of December 3, 2021.
For more information on our capital resources and regulatory developments, see Capital Management on page 22.
Organizational Changes
During the third quarter of 2021, we announced certain changes to the Corporation’s senior management team. For more information, see the Corporation’s Current Reports on Form 8-K filed on August 26, September 10, September 14 and October 20, 2021.
COVID-19 Pandemic
The Coronavirus Disease 2019 (COVID-19) pandemic (the pandemic) has impacted the Corporation and may continue to do so, as uncertainty remains about the duration of the pandemic and the timing and strength of the global economic recovery. As the pandemic continues to evolve, we regularly evaluate protocols and processes in place to execute our business continuity plans. In conjunction with our efforts to support clients affected by the pandemic, we have cumulatively originated $35.4 billion in loans under the Paycheck Protection Program (PPP) with amounts outstanding of $8.4 billion and $15.7 billion at September 30, 2021 and June 30, 2021. For more information on PPP loans, see Commercial Portfolio Credit Risk Management on page 35.
The future direct and indirect impact of the pandemic on our businesses, results of operations and financial condition remains uncertain. Should current economic conditions deteriorate or if the pandemic worsens due to various factors, including through the spread of more easily communicable variants of COVID-19, such conditions could have an adverse effect on our businesses and results of operations and could adversely affect our financial condition.
For more information on the pandemic, see Executive Summary – Recent Developments – COVID-19 Pandemic in the MD&A and Item 1A. Risk Factors – Coronavirus Disease of the Corporation’s 2020 Annual Report on Form 10-K.
LIBOR and Other Benchmark Rates
Following the 2017 announcement by the U.K.’s Financial Conduct Authority (FCA) that it would no longer compel participating banks to submit rates for the London Interbank Offered Rate (LIBOR) after 2021, regulators, trade associations and financial industry working groups have identified recommended replacement rates for LIBOR, as well as other Interbank Offered Rates (IBORs), and have published recommended conventions to allow new and existing products to incorporate fallbacks or reference these alternative reference rates (ARRs). Additionally, as previously disclosed, the FCA announced the dates that all LIBOR benchmark settings currently published by the ICE Benchmark Administration will cease or become no longer representative of the underlying market the rates seek to measure (i.e., non-representative),
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subject to the continued publication of certain non-representative LIBOR benchmark settings based on a modified calculation (i.e., on a “synthetic” basis).
The Corporation continues to execute its enterprise-wide IBOR transition program, and is particularly focused on contracts that reference certain IBORs that are expected to cease or become non-representative immediately after December 31, 2021. As of September 30, 2021, a significant majority of the Corporation’s notional contractual exposure to LIBOR currencies that will cease or become non-representative on December 31, 2021 has been remediated, and the Corporation is continuing to remediate the remaining exposure. For any residual exposure after the end of 2021, the Corporation is assessing and planning to leverage relevant contractual and statutory solutions to transition such exposure to ARRs, including the previously disclosed New York legislation adopted in April 2021 for contracts that are governed by New York law and have no fallback provisions or a fallback provision based on LIBOR. Additionally, as part of this transition program, the Corporation continues to decrease initiation of new U.S. dollar (USD) LIBOR-linked consumer and commercial loans that mature after June 30, 2023, subject to certain exceptions, and continues to increase the usage of ARRs in its USD consumer and commercial lending products and contracts. As previously disclosed, the Corporation has ceased initiation of GBP LIBOR-linked derivatives, subject to certain exceptions, and is prioritizing interdealer trading in the Secured Overnight Financing Rate (SOFR) rather than LIBOR for certain USD interest rate swaps in accordance with recommendations by the Commodity
Futures Trading Commission (CFTC). The Corporation continues to update its operational models, systems, processes and internal infrastructure.
While the Corporation continues to work towards meeting the regulatory and industry-wide recommended milestones on cessation of LIBOR, the market and client replacement of IBORs and adoption of ARRs continue to evolve and, as a result, could impact the ability of market participants and the Corporation to transition activity across or within categories of contracts, products, services and markets. Accordingly, the Corporation continues to monitor a variety of market scenarios as part of its transition efforts, including risks associated with insufficient preparation by individual market participants or the overall market ecosystem, ability of market participants to meet regulatory and industry-wide recommended milestones, development and adoption of SOFR, credit-sensitive and other rates, access and demand by clients and market participants to liquidity in certain products, including LIBOR products, and IBOR continuity. Furthermore, banking regulators in the U.S. and globally have increased regulatory scrutiny and intensified supervisory focus of financial institution LIBOR transition plans, preparations and readiness, including the use of credit-sensitive rates.
For more information on the expected replacement of LIBOR and other benchmark rates, see Executive Summary – Recent Developments – LIBOR and Other Benchmark Rates in the MD&A and Item 1A. Risk Factors – Other of the Corporation’s 2020 Annual Report on Form 10-K.
Financial Highlights
| Table 1 | Summary Income Statement and Selected Financial Data | |||||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 |
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| (Dollars in millions, except per share information) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
| Income statement | ||||||||||||||||||||||||||
| Net interest income | $ | 11,094 | $ | 10,129 | $ | 31,524 | $ | 33,107 | ||||||||||||||||||
| Noninterest income | 11,672 | 10,207 | 35,529 | 32,322 | ||||||||||||||||||||||
| Total revenue, net of interest expense | 22,766 | 20,336 | 67,053 | 65,429 | ||||||||||||||||||||||
| Provision for credit losses | (624) | 1,389 | (4,105) | 11,267 | ||||||||||||||||||||||
| Noninterest expense | 14,440 | 14,401 | 45,000 | 41,286 | ||||||||||||||||||||||
| Income before income taxes | 8,950 | 4,546 | 26,158 | 12,876 | ||||||||||||||||||||||
| Income tax expense | 1,259 | (335) | 1,193 | 452 | ||||||||||||||||||||||
| Net income | 7,691 | 4,881 | 24,965 | 12,424 | ||||||||||||||||||||||
| Preferred stock dividends | 431 | 441 | 1,181 | 1,159 | ||||||||||||||||||||||
Net income applicable to common shareholders |
$ | 7,260 | $ | 4,440 | $ | 23,784 | $ | 11,265 | ||||||||||||||||||
| Per common share information | ||||||||||||||||||||||||||
| Earnings | $ | 0.86 | $ | 0.51 | $ | 2.77 | $ | 1.29 | ||||||||||||||||||
| Diluted earnings | 0.85 | 0.51 | 2.75 | 1.28 | ||||||||||||||||||||||
| Dividends paid | 0.21 | 0.18 | 0.57 | 0.54 | ||||||||||||||||||||||
| Performance ratios | ||||||||||||||||||||||||||
Return on average assets (1)
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0.99 | % | 0.71 | % | 1.12 | % | 0.63 | % | ||||||||||||||||||
Return on average common shareholders’ equity (1)
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11.43 | 7.24 | 12.67 | 6.20 | ||||||||||||||||||||||
Return on average tangible common shareholders’ equity (2)
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15.85 | 10.16 | 17.61 | 8.71 | ||||||||||||||||||||||
Efficiency ratio (1)
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63.43 | 70.81 | 67.11 | 63.10 | ||||||||||||||||||||||
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September 30
2021
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December 31
2020
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| Balance sheet | ||||||||||||||||||||||||||
| Total loans and leases | $ | 927,736 | $ | 927,861 | ||||||||||||||||||||||
| Total assets | 3,085,446 | 2,819,627 | ||||||||||||||||||||||||
| Total deposits | 1,964,804 | 1,795,480 | ||||||||||||||||||||||||
| Total liabilities | 2,812,982 | 2,546,703 | ||||||||||||||||||||||||
| Total common shareholders’ equity | 249,023 | 248,414 | ||||||||||||||||||||||||
| Total shareholders’ equity | 272,464 | 272,924 | ||||||||||||||||||||||||
(1)For definitions, see Key Metrics on page 102.
(2)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 (GAAP), see Non-GAAP Reconciliations on page 48.
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Net income was $7.7 billion and $25.0 billion, or $0.85 and $2.75 per diluted share, for the three and nine months ended September 30, 2021 compared to $4.9 billion and $12.4 billion, or $0.51 and $1.28 per diluted share, for the same periods in 2020. The increase in net income was due to improvement in the provision for credit losses and higher revenue, partially offset by higher noninterest expense.
Total assets increased $265.8 billion from December 31, 2020 to $3.1 trillion primarily due to the deployment of cash from continued deposit inflows into debt securities, as well as higher trading account assets due to an increase in inventory in Global Markets.
Total liabilities increased $266.3 billion from December 31, 2020 to $2.8 trillion primarily driven by an increase in deposits due to continued government stimulus measures as well as seasonally higher deposits, an increase in trading account liabilities resulting from higher levels of short positions in Global Markets and higher federal funds purchased and securities loaned or sold under agreements to repurchase due to client activity in Global Markets.
Shareholders’ equity decreased $460 million from December 31, 2020 primarily due to returns of capital to shareholders
through common stock repurchases and common and preferred stock dividends, as well as market value decreases on debt securities and derivatives, partially offset by net income.
Net Interest Income
Net interest income increased $965 million to $11.1 billion, and decreased $1.6 billion to $31.5 billion for the three and nine months ended September 30, 2021 compared to the same periods in 2020. Net interest yield on a fully taxable-equivalent (FTE) basis decreased 4 basis points (bps) to 1.68 percent, and 30 bps to 1.66 percent for the same periods. The increase in net interest income for the three-month period was primarily due to deposit growth and related investment of liquidity and the accelerated recognition of capitalized loan fees due to PPP loan forgiveness, partially offset by lower loan balances. The decrease in the nine-month period was primarily driven by lower interest rates and loan balances, partially offset by higher balances of debt securities. For more information on net interest yield and the FTE basis, see Supplemental Financial Data on page 7, and for more information on interest rate risk management, see Interest Rate Risk Management for the Banking Book on page 46.
Noninterest Income
| Table 2 | Noninterest Income | |||||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 |
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| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
| Fees and commissions: | ||||||||||||||||||||||||||
| Card income | $ | 1,583 | $ | 1,568 | $ | 4,604 | $ | 4,089 | ||||||||||||||||||
| Service charges | 1,928 | 1,817 | 5,594 | 5,282 | ||||||||||||||||||||||
| Investment and brokerage services | 4,236 | 3,623 | 12,422 | 10,803 | ||||||||||||||||||||||
| Investment banking fees | 2,168 | 1,769 | 6,536 | 5,316 | ||||||||||||||||||||||
| Total fees and commissions | 9,915 | 8,777 | 29,156 | 25,490 | ||||||||||||||||||||||
| Market making and similar activities | 2,005 | 1,689 | 7,360 | 6,983 | ||||||||||||||||||||||
| Other income | (248) | (259) | (987) | (151) | ||||||||||||||||||||||
| Total noninterest income | $ | 11,672 | $ | 10,207 | $ | 35,529 | $ | 32,322 | ||||||||||||||||||
Noninterest income increased $1.5 billion to $11.7 billion and increased $3.2 billion to $35.5 billion for the three and nine months ended September 30, 2021 compared to the same periods in 2020. The following highlights the significant changes.
● Card income increased $515 million for the nine-month period primarily driven by increased client activity and merchant services revenue.
● Service charges increased $111 million and $312 million primarily due to increased client activity in the three-month period and higher treasury and credit service charges in the nine-month period.
● Investment and brokerage services increased $613 million and $1.6 billion primarily driven by higher market valuations and assets under management (AUM) flows, partially offset by declines in AUM pricing.
● Investment banking fees increased $399 million and $1.2 billion primarily due to higher advisory and debt issuance fees and increased equity issuance fees in the nine-month period.
● Market making and similar activities increased $316 million and $377 million primarily driven by strong sales and trading performance in Equities. The increase in the nine-month period was partially offset by a weaker performance in Fixed Income, Currencies and Commodities (FICC), which benefited from market-related gains in the prior-year period.
● Other income decreased $836 million for the nine-month period primarily due to a $704 million gain on sales of certain mortgage loans in the prior year, as well as higher partnership losses on tax credit investments.
Provision for Credit Losses
The provision for credit losses improved $2.0 billion to a benefit of $624 million and $15.4 billion to a benefit of $4.1 billion for the three and nine months ended September 30, 2021 compared to the same periods in 2020. The benefit in the three-month period was primarily due to credit quality improvements. The benefit in the nine-month period was primarily driven by improvements in the macroeconomic outlook and credit quality. For more information on the provision for credit losses, see Allowance for Credit Losses on page 42.
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Noninterest Expense
| Table 3 | Noninterest Expense | |||||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 |
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| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
| Compensation and benefits | $ | 8,714 | $ | 8,200 | $ | 27,103 | $ | 24,535 | ||||||||||||||||||
| Occupancy and equipment | 1,764 | 1,798 | 5,353 | 5,302 | ||||||||||||||||||||||
| Information processing and communications | 1,416 | 1,333 | 4,289 | 3,807 | ||||||||||||||||||||||
| Product delivery and transaction related | 987 | 930 | 2,940 | 2,518 | ||||||||||||||||||||||
| Marketing | 347 | 308 | 1,528 | 1,238 | ||||||||||||||||||||||
| Professional fees | 434 | 450 | 1,263 | 1,206 | ||||||||||||||||||||||
| Other general operating | 778 | 1,382 | 2,524 | 2,680 | ||||||||||||||||||||||
| Total noninterest expense | $ | 14,440 | $ | 14,401 | $ | 45,000 | $ | 41,286 | ||||||||||||||||||
Noninterest expense increased $39 million to $14.4 billion, and $3.7 billion to $45.0 billion for the three and nine months ended September 30, 2021 compared to the same periods in 2020. Noninterest expense in the three-month period was relatively flat, as higher revenue-related expenses were largely offset by lower litigation expense and COVID-19 related costs.
The increase in the nine-month period was primarily due to higher compensation and benefits expense, a contribution to the Bank of America Foundation, higher costs associated with processing transactional card claims related to state unemployment benefits and an impairment charge for real estate rationalization.
Income Tax Expense
| Table 4 | Income Tax Expense | |||||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 |
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| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
| Income before income taxes | $ | 8,950 | $ | 4,546 | $ | 26,158 | $ | 12,876 | ||||||||||||||||||
| Income tax expense | 1,259 | (335) | 1,193 | 452 | ||||||||||||||||||||||
| Effective tax rate | 14.1 | % | (7.4) | % | 4.6 | % | 3.5 | % | ||||||||||||||||||
Changes in the effective tax rates for the three and nine months ended September 30, 2021 compared to the same periods a year ago were driven by the impact of our recurring tax preference benefits on higher levels of pretax income and the impact of the 2020 U.K. tax law change. Also included in the nine months ended September 30, 2021 was the impact of the 2021 U.K. tax law change further discussed in this section. Our recurring tax preference benefits primarily consist of tax credits from ESG investments in affordable housing and renewable energy, aligning with our responsible growth strategy to address global sustainability challenges. Absent these tax credits and the impact of the U.K. tax law changes, the effective tax rate would have been approximately 25 percent for the three and nine months ended September 30, 2021 compared to 27 percent and 26 percent for the same periods a year ago.
On June 10, 2021, the U.K. enacted the 2021 Finance Act, which included an increase in the U.K. corporation income tax rate to 25 percent from 19 percent. This change is effective April 1, 2023 and unfavorably affects income tax expense on future U.K. earnings. As a result, during the nine months ended September 30, 2021, the Corporation recorded a write-up of U.K. net deferred tax assets of approximately $2.0 billion, with a corresponding positive income tax adjustment. This write-up is a reversal of previously recorded write-downs of net deferred tax assets for prior changes in the U.K. corporation income tax rate.
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Supplemental Financial Data
Non-GAAP Financial Measures
In this Form 10-Q, 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 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 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 objectives. 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 ratios utilizing tangible equity provide 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 Table 5 on page 8.
For more information on the reconciliation of these non-GAAP financial measures to the corresponding GAAP financial measures, see Non-GAAP Reconciliations on page 48.
Key Performance Indicators
We present certain key financial and nonfinancial performance indicators (key performance indicators) that management uses when assessing our consolidated and/or segment results. We believe they are useful to investors because they provide additional information about our underlying operational performance and trends. These key performance indicators (KPIs) may not be defined or calculated in the same way as similar KPIs used by other companies. For information on how these metrics are defined, see Key Metrics on page 102.
Our consolidated key performance indicators, which include various equity and credit metrics, are presented in Table 1 on page 4 and Table 5 on page 8.
For information on key segment performance metrics, see Business Segment Operations on page 11.
7 Bank of America
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| Table 5 | Selected Quarterly Financial Data | |||||||||||||||||||||||||||||||||||||||||||
| 2021 Quarters | 2020 Quarters | Nine Months Ended September 30 |
||||||||||||||||||||||||||||||||||||||||||
| (In millions, except per share information) | Third | Second | First | Fourth | Third | 2021 | 2020 | |||||||||||||||||||||||||||||||||||||
| Income statement | ||||||||||||||||||||||||||||||||||||||||||||
| Net interest income | $ | 11,094 | $ | 10,233 | $ | 10,197 | $ | 10,253 | $ | 10,129 | $ | 31,524 | $ | 33,107 | ||||||||||||||||||||||||||||||
| Noninterest income | 11,672 | 11,233 | 12,624 | 9,846 | 10,207 | 35,529 | 32,322 | |||||||||||||||||||||||||||||||||||||
| Total revenue, net of interest expense | 22,766 | 21,466 | 22,821 | 20,099 | 20,336 | 67,053 | 65,429 | |||||||||||||||||||||||||||||||||||||
| Provision for credit losses | (624) | (1,621) | (1,860) | 53 | 1,389 | (4,105) | 11,267 | |||||||||||||||||||||||||||||||||||||
| Noninterest expense | 14,440 | 15,045 | 15,515 | 13,927 | 14,401 | 45,000 | 41,286 | |||||||||||||||||||||||||||||||||||||
| Income before income taxes | 8,950 | 8,042 | 9,166 | 6,119 | 4,546 | 26,158 | 12,876 | |||||||||||||||||||||||||||||||||||||
| Income tax expense | 1,259 | (1,182) | 1,116 | 649 | (335) | 1,193 | 452 | |||||||||||||||||||||||||||||||||||||
| Net income | 7,691 | 9,224 | 8,050 | 5,470 | 4,881 | 24,965 | 12,424 | |||||||||||||||||||||||||||||||||||||
| Net income applicable to common shareholders | 7,260 | 8,964 | 7,560 | 5,208 | 4,440 | 23,784 | 11,265 | |||||||||||||||||||||||||||||||||||||
Average common shares issued and outstanding |
8,430.7 | 8,620.8 | 8,700.1 | 8,724.9 | 8,732.9 | 8,583.1 | 8,762.6 | |||||||||||||||||||||||||||||||||||||
Average diluted common shares issued and outstanding |
8,492.8 | 8,735.5 | 8,755.6 | 8,785.0 | 8,777.5 | 8,702.2 | 8,800.5 | |||||||||||||||||||||||||||||||||||||
| Performance ratios | ||||||||||||||||||||||||||||||||||||||||||||
Return on average assets (1)
|
0.99 | % | 1.23 | % | 1.13 | % | 0.78 | % | 0.71 | % | 1.12 | % | 0.63 | % | ||||||||||||||||||||||||||||||
Four-quarter trailing return on average assets (2)
|
1.04 | 0.97 | 0.79 | 0.67 | 0.75 | n/a | n/a | |||||||||||||||||||||||||||||||||||||
Return on average common shareholders’ equity (1)
|
11.43 | 14.33 | 12.28 | 8.39 | 7.24 | 12.67 | 6.20 | |||||||||||||||||||||||||||||||||||||
Return on average tangible common shareholders’ equity (3)
|
15.85 | 19.90 | 17.08 | 11.73 | 10.16 | 17.61 | 8.71 | |||||||||||||||||||||||||||||||||||||
Return on average shareholders’ equity (1)
|
11.08 | 13.47 | 11.91 | 8.03 | 7.26 | 12.15 | 6.24 | |||||||||||||||||||||||||||||||||||||
Return on average tangible shareholders’ equity (3)
|
14.87 | 18.11 | 16.01 | 10.84 | 9.84 | 16.33 | 8.46 | |||||||||||||||||||||||||||||||||||||
| Total ending equity to total ending assets | 8.83 | 9.15 | 9.23 | 9.68 | 9.82 | 8.83 | 9.82 | |||||||||||||||||||||||||||||||||||||
| Total average equity to total average assets | 8.95 | 9.11 | 9.52 | 9.71 | 9.76 | 9.19 | 10.05 | |||||||||||||||||||||||||||||||||||||
| Dividend payout | 24.10 | 17.25 | 20.68 | 30.11 | 35.36 | 20.43 | 41.90 | |||||||||||||||||||||||||||||||||||||
| Per common share data | ||||||||||||||||||||||||||||||||||||||||||||
| Earnings | $ | 0.86 | $ | 1.04 | $ | 0.87 | $ | 0.60 | $ | 0.51 | $ | 2.77 | $ | 1.29 | ||||||||||||||||||||||||||||||
| Diluted earnings | 0.85 | 1.03 | 0.86 | 0.59 | 0.51 | 2.75 | 1.28 | |||||||||||||||||||||||||||||||||||||
| Dividends paid | 0.21 | 0.18 | 0.18 | 0.18 | 0.18 | 0.57 | 0.54 | |||||||||||||||||||||||||||||||||||||
Book value (1)
|
30.22 | 29.89 | 29.07 | 28.72 | 28.33 | 30.22 | 28.33 | |||||||||||||||||||||||||||||||||||||
Tangible book value (3)
|
21.69 | 21.61 | 20.90 | 20.60 | 20.23 | 21.69 | 20.23 | |||||||||||||||||||||||||||||||||||||
| Market capitalization | $ | 349,841 | $ | 349,925 | $ | 332,337 | $ | 262,206 | $ | 208,656 | $ | 349,841 | $ | 208,656 | ||||||||||||||||||||||||||||||
| Average balance sheet | ||||||||||||||||||||||||||||||||||||||||||||
| Total loans and leases | $ | 920,509 | $ | 907,900 | $ | 907,723 | $ | 934,798 | $ | 974,018 | ||||||||||||||||||||||||||||||||||
| Total assets | 3,076,452 | 3,015,113 | 2,879,221 | 2,791,874 | 2,739,684 | |||||||||||||||||||||||||||||||||||||||
| Total deposits | 1,942,705 | 1,888,834 | 1,805,747 | 1,737,139 | 1,695,488 | |||||||||||||||||||||||||||||||||||||||
| Long-term debt | 248,988 | 232,034 | 220,836 | 225,423 | 224,254 | |||||||||||||||||||||||||||||||||||||||
| Common shareholders’ equity | 252,043 | 250,948 | 249,648 | 246,840 | 243,896 | |||||||||||||||||||||||||||||||||||||||
| Total shareholders’ equity | 275,484 | 274,632 | 274,047 | 271,020 | 267,323 | |||||||||||||||||||||||||||||||||||||||
| Asset quality | ||||||||||||||||||||||||||||||||||||||||||||
Allowance for credit losses (4)
|
$ | 14,693 | $ | 15,782 | $ | 17,997 | $ | 20,680 | $ | 21,506 | ||||||||||||||||||||||||||||||||||
Nonperforming loans, leases and foreclosed properties (5)
|
4,831 | 5,031 | 5,299 | 5,116 | 4,730 | |||||||||||||||||||||||||||||||||||||||
Allowance for loan and lease losses as a percentage of total loans and leases outstanding (5)
|
1.43 | % | 1.55 | % | 1.80 | % | 2.04 | % | 2.07 | % | ||||||||||||||||||||||||||||||||||
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases (5)
|
279 | 287 | 313 | 380 | 431 | |||||||||||||||||||||||||||||||||||||||
| Net charge-offs | $ | 463 | $ | 595 | $ | 823 | $ | 881 | $ | 972 | ||||||||||||||||||||||||||||||||||
Annualized net charge-offs as a percentage of average loans and leases outstanding (5)
|
0.20 | % | 0.27 | % | 0.37 | % | 0.38 | % | 0.40 | % | ||||||||||||||||||||||||||||||||||
Capital ratios at period end (6)
|
||||||||||||||||||||||||||||||||||||||||||||
Common equity tier 1 capital |
11.1 | % | 11.5 | % | 11.8 | % | 11.9 | % | 11.9 | % | ||||||||||||||||||||||||||||||||||
Tier 1 capital |
12.6 | 13.0 | 13.3 | 13.5 | 13.5 | |||||||||||||||||||||||||||||||||||||||
Total capital |
14.7 | 15.1 | 15.6 | 16.1 | 16.1 | |||||||||||||||||||||||||||||||||||||||
Tier 1 leverage |
6.6 | 6.9 | 7.2 | 7.4 | 7.4 | |||||||||||||||||||||||||||||||||||||||
Supplementary leverage ratio |
5.6 | 5.9 | 7.0 | 7.2 | 6.9 | |||||||||||||||||||||||||||||||||||||||
Tangible equity (3)
|
6.7 | 7.0 | 7.0 | 7.4 | 7.4 | |||||||||||||||||||||||||||||||||||||||
Tangible common equity (3)
|
5.9 | 6.2 | 6.2 | 6.5 | 6.6 | |||||||||||||||||||||||||||||||||||||||
| Total loss-absorbing capacity and long-term debt metrics | ||||||||||||||||||||||||||||||||||||||||||||
| Total loss-absorbing capacity to risk-weighted assets | 27.7 | % | 27.7 | % | 26.8 | % | 27.4 | % | 26.9 | % | ||||||||||||||||||||||||||||||||||
| Total loss-absorbing capacity to supplementary leverage exposure | 12.4 | 12.5 | 14.1 | 14.5 | 13.7 | |||||||||||||||||||||||||||||||||||||||
| Eligible long-term debt to risk-weighted assets | 14.4 | 14.1 | 13.0 | 13.3 | 12.9 | |||||||||||||||||||||||||||||||||||||||
| Eligible long-term debt to supplementary leverage exposure | 6.4 | 6.3 | 6.8 | 7.1 | 6.6 | |||||||||||||||||||||||||||||||||||||||
(1)For definitions, see Key Metrics on page 102.
(2)Calculated as total net income for four consecutive quarters divided by annualized average assets for four consecutive quarters.
(3)Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures. For more information on these ratios and corresponding reconciliations to GAAP financial measures, see Supplemental Financial Data on page 7 and Non-GAAP Reconciliations on page 48.
(4)Includes the allowance for loan and lease losses and the reserve for unfunded lending commitments.
(5)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 34 and corresponding Table 25 and Commercial Portfolio Credit Risk Management – Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity on page 39 and corresponding Table 32.
(6)For more information, including which approach is used to assess capital adequacy, see Capital Management on page 22.
n/a = not applicable
Bank of America 8
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| Table 6 | Quarterly Average Balances and Interest Rates - FTE Basis | |||||||||||||||||||||||||||||||||||||
| Average Balance |
Interest
Income/
Expense (1)
|
Yield/ Rate |
Average Balance |
Interest
Income/
Expense (1)
|
Yield/ Rate |
|||||||||||||||||||||||||||||||||
| (Dollars in millions) | Third Quarter 2021 | Third Quarter 2020 | ||||||||||||||||||||||||||||||||||||
| Earning assets | ||||||||||||||||||||||||||||||||||||||
|
Interest-bearing deposits with the Federal Reserve, non-U.S. central
banks and other banks
|
$ | 240,054 | $ | 50 | 0.08 | % | $ | 245,682 | $ | 10 | 0.02 | % | ||||||||||||||||||||||||||
| Time deposits placed and other short-term investments | 6,419 | 4 | 0.24 | 7,686 | (4) | (0.25) | ||||||||||||||||||||||||||||||||
|
Federal funds sold and securities borrowed or purchased under
agreements to resell
|
270,094 | 6 | 0.01 | 384,221 | 55 | 0.06 | ||||||||||||||||||||||||||||||||
| Trading account assets | 147,196 | 979 | 2.64 | 146,972 | 960 | 2.60 | ||||||||||||||||||||||||||||||||
| Debt securities | 949,009 | 3,296 | 1.39 | 533,261 | 2,147 | 1.63 | ||||||||||||||||||||||||||||||||
Loans and leases (2)
|
||||||||||||||||||||||||||||||||||||||
| Residential mortgage | 215,652 | 1,487 | 2.76 | 237,414 | 1,811 | 3.05 | ||||||||||||||||||||||||||||||||
| Home equity | 30,069 | 263 | 3.47 | 37,897 | 284 | 2.99 | ||||||||||||||||||||||||||||||||
| Credit card | 75,569 | 1,952 | 10.25 | 81,309 | 2,086 | 10.20 | ||||||||||||||||||||||||||||||||
Direct/Indirect and other consumer (3)
|
98,148 | 578 | 2.34 | 89,559 | 593 | 2.63 | ||||||||||||||||||||||||||||||||
| Total consumer | 419,438 | 4,280 | 4.06 | 446,179 | 4,774 | 4.26 | ||||||||||||||||||||||||||||||||
| U.S. commercial | 323,659 | 2,315 | 2.84 | 343,533 | 2,165 | 2.51 | ||||||||||||||||||||||||||||||||
| Non-U.S. commercial | 101,967 | 446 | 1.73 | 102,938 | 465 | 1.80 | ||||||||||||||||||||||||||||||||
Commercial real estate (4)
|
59,881 | 378 | 2.51 | 63,262 | 393 | 2.47 | ||||||||||||||||||||||||||||||||
| Commercial lease financing | 15,564 | 116 | 2.98 | 18,106 | 138 | 3.04 | ||||||||||||||||||||||||||||||||
| Total commercial | 501,071 | 3,255 | 2.58 | 527,839 | 3,161 | 2.38 | ||||||||||||||||||||||||||||||||
| Total loans and leases | 920,509 | 7,535 | 3.25 | 974,018 | 7,935 | 3.25 | ||||||||||||||||||||||||||||||||
| Other earning assets | 120,734 | 567 | 1.86 | 83,086 | 497 | 2.39 | ||||||||||||||||||||||||||||||||
| Total earning assets | 2,654,015 | 12,437 | 1.86 | 2,374,926 | 11,600 | 1.95 | ||||||||||||||||||||||||||||||||
| Cash and due from banks | 30,101 | 32,714 | ||||||||||||||||||||||||||||||||||||
| Other assets, less allowance for loan and lease losses | 392,336 | 332,044 | ||||||||||||||||||||||||||||||||||||
| Total assets | $ | 3,076,452 | $ | 2,739,684 | ||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities | ||||||||||||||||||||||||||||||||||||||
| U.S. interest-bearing deposits | ||||||||||||||||||||||||||||||||||||||
| Demand and money market deposits | $ | 931,964 | $ | 79 | 0.03 | % | $ | 842,987 | $ | 93 | 0.04 | % | ||||||||||||||||||||||||||
| Time and savings deposits | 162,337 | 41 | 0.10 | 164,648 | 116 | 0.28 | ||||||||||||||||||||||||||||||||
| Total U.S. interest-bearing deposits | 1,094,301 | 120 | 0.04 | 1,007,635 | 209 | 0.08 | ||||||||||||||||||||||||||||||||
| Non-U.S. interest-bearing deposits | 84,098 | 13 | 0.06 | 75,485 | 18 | 0.09 | ||||||||||||||||||||||||||||||||
| Total interest-bearing deposits | 1,178,399 | 133 | 0.04 | 1,083,120 | 227 | 0.08 | ||||||||||||||||||||||||||||||||
Federal funds purchased, securities loaned or sold under agreements to repurchase, short-term borrowings and other interest-bearing liabilities |
324,582 | (41) | (0.05) | 286,582 | (24) | (0.03) | ||||||||||||||||||||||||||||||||
| Trading account liabilities | 56,496 | 285 | 2.00 | 39,689 | 212 | 2.13 | ||||||||||||||||||||||||||||||||
| Long-term debt | 248,988 | 865 | 1.37 | 224,254 | 942 | 1.67 | ||||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 1,808,465 | 1,242 | 0.27 | 1,633,645 | 1,357 | 0.33 | ||||||||||||||||||||||||||||||||
| Noninterest-bearing sources | ||||||||||||||||||||||||||||||||||||||
| Noninterest-bearing deposits | 764,306 | 612,368 | ||||||||||||||||||||||||||||||||||||
Other liabilities (5)
|
228,197 | 226,348 | ||||||||||||||||||||||||||||||||||||
| Shareholders’ equity | 275,484 | 267,323 | ||||||||||||||||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 3,076,452 | $ | 2,739,684 | ||||||||||||||||||||||||||||||||||
| Net interest spread | 1.59 | % | 1.62 | % | ||||||||||||||||||||||||||||||||||
| Impact of noninterest-bearing sources | 0.09 | 0.10 | ||||||||||||||||||||||||||||||||||||
Net interest income/yield on earning assets (6)
|
$ | 11,195 | 1.68 | % | $ | 10,243 | 1.72 | % | ||||||||||||||||||||||||||||||
(1)Includes the impact of interest rate risk management contracts. For more information, see Interest Rate Risk Management for the Banking Book on page 46.
(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 non-U.S. consumer loans of $2.9 billion for both the third quarter of 2021 and 2020.
(4)Includes U.S. commercial real estate loans of $56.0 billion and $59.6 billion, and non-U.S. commercial real estate loans of $3.9 billion and $3.7 billion for the third quarter of 2021 and 2020.
(5)Includes $29.6 billion and $34.2 billion of structured notes and liabilities for the third quarter of 2021 and 2020.
(6)Net interest income includes FTE adjustments of $101 million and $114 million for the third quarter of 2021 and 2020.
9 Bank of America
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| Table 7 | Year-to-Date Average Balances and Interest Rates - FTE Basis | |||||||||||||||||||||||||||||||||||||
| Average Balance |
Interest Income/ Expense (1) |
Yield/ Rate |
Average Balance |
Interest Income/ Expense (1) |
Yield/ Rate |
|||||||||||||||||||||||||||||||||
| Nine Months Ended September 30 | ||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||
| Earning assets | ||||||||||||||||||||||||||||||||||||||
| Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks |
$ | 255,136 | $ | 106 | 0.06 | % | $ | 230,265 | $ | 311 | 0.18 | % | ||||||||||||||||||||||||||
| Time deposits placed and other short-term investments | 7,738 | 8 | 0.14 | 9,070 | 31 | 0.45 | ||||||||||||||||||||||||||||||||
| Federal funds sold and securities borrowed or purchased under agreements to resell |
263,581 | (43) | (0.02) | 325,356 | 900 | 0.37 | ||||||||||||||||||||||||||||||||
| Trading account assets | 148,205 | 2,831 | 2.55 | 149,002 | 3,247 | 2.91 | ||||||||||||||||||||||||||||||||
| Debt securities | 878,437 | 8,875 | 1.36 | 491,664 | 7,477 | 2.05 | ||||||||||||||||||||||||||||||||
Loans and leases (2)
|
||||||||||||||||||||||||||||||||||||||
| Residential mortgage | 216,239 | 4,514 | 2.78 | 239,623 | 5,678 | 3.16 | ||||||||||||||||||||||||||||||||
| Home equity | 31,761 | 811 | 3.41 | 39,078 | 1,013 | 3.46 | ||||||||||||||||||||||||||||||||
| Credit card | 74,383 | 5,775 | 10.38 | 87,302 | 6,690 | 10.24 | ||||||||||||||||||||||||||||||||
Direct/Indirect and other consumer (3)
|
94,658 | 1,698 | 2.40 | 89,824 | 1,962 | 2.92 | ||||||||||||||||||||||||||||||||
| Total consumer | 417,041 | 12,798 | 4.10 | 455,827 | 15,343 | 4.49 | ||||||||||||||||||||||||||||||||
U.S. commercial (4)
|
322,773 | 6,415 | 2.66 | 349,616 | 7,601 | 2.90 | ||||||||||||||||||||||||||||||||
Non-U.S. commercial (4)
|
96,445 | 1,284 | 1.78 | 110,096 | 1,781 | 2.16 | ||||||||||||||||||||||||||||||||
Commercial real estate (5)
|
59,632 | 1,114 | 2.50 | 64,062 | 1,406 | 2.93 | ||||||||||||||||||||||||||||||||
| Commercial lease financing | 16,200 | 356 | 2.94 | 18,872 | 427 | 3.02 | ||||||||||||||||||||||||||||||||
| Total commercial | 495,050 | 9,169 | 2.48 | 542,646 | 11,215 | 2.76 | ||||||||||||||||||||||||||||||||
| Total loans and leases | 912,091 | 21,967 | 3.22 | 998,473 | 26,558 | 3.55 | ||||||||||||||||||||||||||||||||
| Other earning assets | 106,978 | 1,696 | 2.12 | 81,079 | 1,986 | 3.27 | ||||||||||||||||||||||||||||||||
| Total earning assets | 2,572,166 | 35,440 | 1.84 | 2,284,909 | 40,510 | 2.37 | ||||||||||||||||||||||||||||||||
| Cash and due from banks | 31,886 | 30,663 | ||||||||||||||||||||||||||||||||||||
| Other assets, less allowance for loan and lease losses | 386,932 | 331,035 | ||||||||||||||||||||||||||||||||||||
| Total assets | $ | 2,990,984 | $ | 2,646,607 | ||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities | ||||||||||||||||||||||||||||||||||||||
| U.S. interest-bearing deposits | ||||||||||||||||||||||||||||||||||||||
| Demand and money market deposits | $ | 912,547 | $ | 234 | 0.03 | % | $ | 821,324 | $ | 898 | 0.15 | % | ||||||||||||||||||||||||||
| Time and savings deposits | 161,156 | 132 | 0.11 | 175,275 | 658 | 0.50 | ||||||||||||||||||||||||||||||||
| Total U.S. interest-bearing deposits | 1,073,703 | 366 | 0.05 | 996,599 | 1,556 | 0.21 | ||||||||||||||||||||||||||||||||
| Non-U.S. interest-bearing deposits | 82,743 | 28 | 0.04 | 76,438 | 228 | 0.40 | ||||||||||||||||||||||||||||||||
| Total interest-bearing deposits | 1,156,446 | 394 | 0.05 | 1,073,037 | 1,784 | 0.22 | ||||||||||||||||||||||||||||||||
| Federal funds purchased, securities loaned or sold under agreements to repurchase, short-term borrowings and other interest-bearing liabilities |
312,826 | (205) | (0.09) | 295,483 | 1,024 | 0.46 | ||||||||||||||||||||||||||||||||
| Trading account liabilities | 52,797 | 824 | 2.09 | 42,838 | 764 | 2.38 | ||||||||||||||||||||||||||||||||
| Long-term debt | 234,056 | 2,581 | 1.48 | 218,766 | 3,445 | 2.10 | ||||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 1,756,125 | 3,594 | 0.27 | 1,630,124 | 7,017 | 0.58 | ||||||||||||||||||||||||||||||||
| Noninterest-bearing sources | ||||||||||||||||||||||||||||||||||||||
| Noninterest-bearing deposits | 723,151 | 524,994 | ||||||||||||||||||||||||||||||||||||
Other liabilities (6)
|
236,982 | 225,427 | ||||||||||||||||||||||||||||||||||||
| Shareholders’ equity | 274,726 | 266,062 | ||||||||||||||||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 2,990,984 | $ | 2,646,607 | ||||||||||||||||||||||||||||||||||
| Net interest spread | 1.57 | % | 1.79 | % | ||||||||||||||||||||||||||||||||||
| Impact of noninterest-bearing sources | 0.09 | 0.17 | ||||||||||||||||||||||||||||||||||||
Net interest income/yield on earning assets (7)
|
$ | 31,846 | 1.66 | % | $ | 33,493 | 1.96 | % | ||||||||||||||||||||||||||||||
(1)Includes the impact of interest rate risk management contracts. For more information, see Interest Rate Risk Management for the Banking Book on page 46.
(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 non-U.S. consumer loans of $3.0 billion and $2.9 billion for the nine months ended September 30, 2021 and 2020.
(4)Certain prior-period amounts have been reclassified to conform to current-period presentation.
(5)Includes U.S. commercial real estate loans of $56.2 billion and $60.4 billion, and non-U.S. commercial real estate loans of $3.4 billion and $3.7 billion for the nine months ended September 30, 2021 and 2020.
(6)Includes $30.5 billion and $35.1 billion of structured notes and liabilities for the nine months ended September 30, 2021 and 2020.
(7)Net interest income includes FTE adjustments of $322 million and $386 million for the nine months ended September 30, 2021 and 2020.
Bank of America 10
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Business Segment Operations
Segment Description and Basis of Presentation
We report our results of operations through 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. For more information, see Business Segment Operations in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K.
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 22. 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 7 – 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 7, and for reconciliations to consolidated total revenue, net income and period-end total assets, see Note 17 – Business Segment Information to the Consolidated Financial Statements.
Key Performance Indicators
We present certain key financial and nonfinancial performance indicators that management uses when evaluating segment results. We believe they are useful to investors because they provide additional information about our segments’ operational performance, customer trends and business growth.
Consumer Banking
| Deposits | Consumer Lending | Total Consumer Banking | |||||||||||||||||||||||||||||||||
| Three Months Ended September 30 | |||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | % Change | ||||||||||||||||||||||||||||
| Net interest income | $ | 3,731 | $ | 3,245 | $ | 2,762 | $ | 2,645 | $ | 6,493 | $ | 5,890 | 10 | % | |||||||||||||||||||||
| Noninterest income: | |||||||||||||||||||||||||||||||||||
| Card income | (7) | (4) | 1,324 | 1,224 | 1,317 | 1,220 | 8 | ||||||||||||||||||||||||||||
| Service charges | 935 | 837 | — | — | 935 | 837 | 12 | ||||||||||||||||||||||||||||
| All other income | 56 | 84 | 37 | 8 | 93 | 92 | 1 | ||||||||||||||||||||||||||||
| Total noninterest income | 984 | 917 | 1,361 | 1,232 | 2,345 | 2,149 | 9 | ||||||||||||||||||||||||||||
Total revenue, net of interest expense |
4,715 | 4,162 | 4,123 | 3,877 | 8,838 | 8,039 | 10 | ||||||||||||||||||||||||||||
| Provision for credit losses | 53 | 59 | 194 | 420 | 247 | 479 | (48) | ||||||||||||||||||||||||||||
| Noninterest expense | 2,725 | 2,937 | 1,833 | 1,905 | 4,558 | 4,842 | (6) | ||||||||||||||||||||||||||||
| Income before income taxes | 1,937 | 1,166 | 2,096 | 1,552 | 4,033 | 2,718 | 48 | ||||||||||||||||||||||||||||
| Income tax expense | 474 | 286 | 514 | 380 | 988 | 666 | 48 | ||||||||||||||||||||||||||||
| Net income | $ | 1,463 | $ | 880 | $ | 1,582 | $ | 1,172 | $ | 3,045 | $ | 2,052 | 48 | ||||||||||||||||||||||
Effective tax rate (1)
|
24.5 | % | 24.5 | % | |||||||||||||||||||||||||||||||
| Net interest yield | 1.49 | % | 1.52 | % | 3.95 | % | 3.35 | % | 2.49 | 2.61 | |||||||||||||||||||||||||
| Return on average allocated capital | 48 | 29 | 24 | 18 | 31 | 21 | |||||||||||||||||||||||||||||
| Efficiency ratio | 57.75 | 70.60 | 44.48 | 49.13 | 51.56 | 60.24 | |||||||||||||||||||||||||||||
| Balance Sheet | |||||||||||||||||||||||||||||||||||
| Three Months Ended September 30 | |||||||||||||||||||||||||||||||||||
| Average | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | % Change | ||||||||||||||||||||||||||||
| Total loans and leases | $ | 4,387 | $ | 5,046 | $ | 276,993 | $ | 313,705 | $ | 281,380 | $ | 318,751 | (12) | % | |||||||||||||||||||||
Total earning assets (2)
|
991,186 | 849,190 | 277,491 | 314,079 | 1,034,471 | 896,867 | 15 | ||||||||||||||||||||||||||||
Total assets (2)
|
1,026,811 | 886,406 | 283,631 | 316,107 | 1,076,236 | 936,112 | 15 | ||||||||||||||||||||||||||||
| Total deposits | 993,624 | 853,452 | 7,141 | 7,547 | 1,000,765 | 860,999 | 16 | ||||||||||||||||||||||||||||
| Allocated capital | 12,000 | 12,000 | 26,500 | 26,500 | 38,500 | 38,500 | — | ||||||||||||||||||||||||||||
(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.
11 Bank of America
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| Deposits | Consumer Lending | Total Consumer Banking | |||||||||||||||||||||||||||||||||
| Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | % Change | ||||||||||||||||||||||||||||
| Net interest income | $ | 10,489 | $ | 10,491 | $ | 7,897 | $ | 8,252 | $ | 18,386 | $ | 18,743 | (2) | % | |||||||||||||||||||||
| Noninterest income: | |||||||||||||||||||||||||||||||||||
| Card income | (19) | (15) | 3,837 | 3,399 | 3,818 | 3,384 | 13 | ||||||||||||||||||||||||||||
| Service charges | 2,615 | 2,537 | 2 | 1 | 2,617 | 2,538 | 3 | ||||||||||||||||||||||||||||
| All other income | 151 | 244 | 121 | 111 | 272 | 355 | (23) | ||||||||||||||||||||||||||||
| Total noninterest income | 2,747 | 2,766 | 3,960 | 3,511 | 6,707 | 6,277 | 7 | ||||||||||||||||||||||||||||
Total revenue, net of interest expense |
13,236 | 13,257 | 11,857 | 11,763 | 25,093 | 25,020 | — | ||||||||||||||||||||||||||||
| Provision for credit losses | 174 | 328 | (1,241) | 5,433 | (1,067) | 5,761 | (119) | ||||||||||||||||||||||||||||
| Noninterest expense | 8,789 | 8,532 | 5,759 | 5,542 | 14,548 | 14,074 | 3 | ||||||||||||||||||||||||||||
| Income before income taxes | 4,273 | 4,397 | 7,339 | 788 | 11,612 | 5,185 | 124 | ||||||||||||||||||||||||||||
| Income tax expense | 1,047 | 1,077 | 1,798 | 193 | 2,845 | 1,270 | 124 | ||||||||||||||||||||||||||||
| Net income | $ | 3,226 | $ | 3,320 | $ | 5,541 | $ | 595 | $ | 8,767 | $ | 3,915 | 124 | ||||||||||||||||||||||
Effective tax rate (1)
|
24.5 | % | 24.5 | % | |||||||||||||||||||||||||||||||
| Net interest yield | 1.46 | % | 1.76 | % | 3.76 | % | 3.51 | % | 2.45 | 2.98 | |||||||||||||||||||||||||
| Return on average allocated capital | 36 | 37 | 28 | 3 | 30 | 14 | |||||||||||||||||||||||||||||
| Efficiency ratio | 66.40 | 64.36 | 48.57 | 47.11 | 57.97 | 56.25 | |||||||||||||||||||||||||||||
| Balance Sheet | |||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||||
| Average | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | % Change | ||||||||||||||||||||||||||||
| Total loans and leases | $ | 4,479 | $ | 5,264 | $ | 280,165 | $ | 313,820 | $ | 284,644 | $ | 319,084 | (11) | % | |||||||||||||||||||||
Total earning assets (2)
|
957,561 | 794,371 | 280,617 | 314,275 | 1,001,590 | 838,792 | 19 | ||||||||||||||||||||||||||||
Total assets (2)
|
994,562 | 829,505 | 285,813 | 318,214 | 1,043,787 | 877,866 | 19 | ||||||||||||||||||||||||||||
| Total deposits | 961,266 | 796,591 | 7,006 | 6,411 | 968,272 | 803,002 | 21 | ||||||||||||||||||||||||||||
| Allocated capital | 12,000 | 12,000 | 26,500 | 26,500 | 38,500 | 38,500 | — | ||||||||||||||||||||||||||||
| Period end | September 30 2021 |
December 31 2020 |
September 30 2021 |
December 31 2020 |
September 30 2021 |
December 31 2020 |
% Change | ||||||||||||||||||||||||||||
| Total loans and leases | $ | 4,345 | $ | 4,673 | $ | 276,458 | $ | 295,261 | $ | 280,803 | $ | 299,934 | (6) | % | |||||||||||||||||||||
Total earning assets (2)
|
1,006,593 | 899,951 | 277,056 | 295,627 | 1,050,331 | 945,343 | 11 | ||||||||||||||||||||||||||||
Total assets (2)
|
1,041,487 | 939,629 | 283,262 | 299,185 | 1,091,431 | 988,580 | 10 | ||||||||||||||||||||||||||||
| Total deposits | 1,008,051 | 906,092 | 7,225 | 6,560 | 1,015,276 | 912,652 | 11 | ||||||||||||||||||||||||||||
See page 11 for footnotes.
Consumer Banking, comprised of Deposits and Consumer Lending, offers a diversified range of credit, banking and investment products and services to consumers and small businesses. For more information about Consumer Banking, see Business Segment Operations in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K.
Consumer Banking Results
Three-Month Comparison
Net income for Consumer Banking increased $993 million to $3.0 billion due to higher revenue, lower noninterest expense and lower provision for credit losses. Net interest income increased $603 million to $6.5 billion primarily due to the benefit of higher deposit balances, the allocation of asset and liability management (ALM) results and the recognition of capitalized loan fees due to PPP loan forgiveness, partially offset by lower residential mortgage and card balances. Noninterest income increased $196 million to $2.3 billion driven by higher service charges and card income due to increased client activity.
The provision for credit losses decreased $232 million to $247 million primarily due to credit quality improvements. Noninterest expense decreased $284 million to $4.6 billion primarily driven by lower COVID-19 related costs.
The return on average allocated capital was 31 percent, up from 21 percent, driven by higher net income. For more
information on capital allocated to the business segments, see Business Segment Operations on page 11.
Nine-Month Comparison
Net income for Consumer Banking increased $4.9 billion to $8.8 billion primarily due to lower provision for credit losses, partially offset by higher noninterest expense. Net interest income decreased $357 million to $18.4 billion primarily due to lower interest rates and loan balances and the allocation of ALM results, partially offset by the benefit of higher deposit balances and the recognition of capitalized loan fees due to PPP loan forgiveness. Noninterest income increased $430 million to $6.7 billion primarily due to the same factors as described in the three-month discussion.
The provision for credit losses improved $6.8 billion to a benefit of $1.1 billion primarily driven by reserve releases due to improvements in the macroeconomic outlook and credit quality. Noninterest expense increased $474 million to $14.5 billion primarily driven by an impairment charge for real estate rationalization, the contribution to the Bank of America Foundation, cost of increased client activity and continued investments for business growth, including the merchant services platform, partially offset by lower COVID-19 related costs.
The return on average allocated capital was 30 percent, up from 14 percent, driven by higher net income.
Bank of America 12
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Deposits
Three-Month Comparison
Net income for Deposits increased $583 million to $1.5 billion primarily driven by higher revenue and lower noninterest expense. Net interest income increased $486 million to $3.7 billion primarily due to the benefit of higher deposit balances and the allocation of ALM results. Noninterest income increased $67 million to $984 million primarily driven by higher service charges due to increased client activity.
Noninterest expense decreased $212 million to $2.7 billion primarily driven by lower COVID-19 related costs.
Average deposits increased $140.2 billion to $993.6 billion primarily due to net inflows of $74.7 billion in checking and time deposits and $65.0 billion in traditional savings and money market savings driven by strong organic growth.
Nine-Month Comparison
Net income for Deposits decreased $94 million to $3.2 billion
primarily due to higher noninterest expense, partially offset by lower provision for credit losses.
The provision for credit losses decreased $154 million to $174 million due to an improved macroeconomic outlook. Noninterest expense increased $257 million to $8.8 billion primarily driven by an impairment charge for real estate rationalization, and the cost of increased client activity and continued investments for business growth, partially offset by lower COVID-19 related costs.
Average deposits increased $164.7 billion to $961.3 billion primarily due to net inflows of $93.8 billion in checking and time deposits and $70.1 billion in traditional savings and money market savings driven by strong organic growth and continued government stimulus measures.
The table below provides key performance indicators for Deposits. Management uses these metrics, and we believe they are useful to investors because they provide additional information to evaluate our deposit profitability and digital/mobile trends.
| Key Statistics – Deposits | |||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Total deposit spreads (excludes noninterest costs) (1)
|
1.68% | 1.87% | 1.70% | 1.98% | |||||||||||||||||||
| Period End | |||||||||||||||||||||||
Consumer investment assets (in millions) (2)
|
$ | 353,280 | $ | 266,733 | |||||||||||||||||||
Active digital banking users (in thousands) (3)
|
40,911 | 39,267 | |||||||||||||||||||||
Active mobile banking users (in thousands) (4)
|
32,455 | 30,601 | |||||||||||||||||||||
| Financial centers | 4,215 | 4,309 | |||||||||||||||||||||
| ATMs | 16,513 | 16,962 | |||||||||||||||||||||
(1)Includes deposits held in Consumer Lending.
(2)Includes client brokerage assets, deposit sweep balances and AUM in Consumer Banking.
(3)Represents mobile and/or online active users over the past 90 days.
(4)Represents mobile active users over the past 90 days.
Consumer investment assets increased $86.5 billion to $353.3 billion driven by market performance and client flows. Active mobile banking users increased approximately two million, reflecting continuing changes in our customers’ banking preferences. We had a net decrease of 94 financial centers as we continue to optimize our consumer banking network.
Consumer Lending
Three-Month Comparison
Net income for Consumer Lending was $1.6 billion, an increase of $410 million, primarily due to higher revenue and lower provision for credit losses. Net interest income increased $117 million to $2.8 billion primarily driven by the recognition of capitalized loan fees due to PPP loan forgiveness. Noninterest income increased $129 million to $1.4 billion primarily driven by higher card income due to increased client activity.
The provision for credit losses decreased $226 million to $194 million primarily due to credit quality improvements. Noninterest expense decreased $72 million to $1.8 billion primarily driven by lower COVID-19 related costs.
Average loans decreased $36.7 billion to $277.0 billion primarily driven by a decline in residential mortgage, PPP and credit card loans.
Nine-Month Comparison
Net income for Consumer Lending was $5.5 billion, an increase of $4.9 billion, primarily due to improvement in the provision for credit losses. Net interest income declined $355 million to $7.9 billion primarily due to lower interest rates and loan balances. Noninterest income increased $449 million to $4.0 billion primarily due to the same factor as described in the three-month discussion.
The provision for credit losses improved $6.7 billion to a benefit of $1.2 billion primarily driven by reserve releases due to improvements in the macroeconomic outlook and credit quality. Noninterest expense increased $217 million to $5.8 billion primarily driven by continued investments for business growth, partially offset by lower COVID-19 related costs.
Average loans decreased $33.7 billion to $280.2 billion primarily driven by a decline in residential mortgage and credit card loans.
13 Bank of America
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The table below provides key performance indicators for Consumer Lending. Management uses these metrics, and we believe they are useful to investors because they provide additional information about loan growth and profitability.
| Key Statistics – Consumer Lending | |||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
Total credit card (1)
|
|||||||||||||||||||||||
Gross interest yield (2)
|
10.10 | % | 10.16 | % | 10.24 | % | 10.21 | % | |||||||||||||||
Risk-adjusted margin (3)
|
10.70 | 9.66 | 9.93 | 8.66 | |||||||||||||||||||
| New accounts (in thousands) | 1,049 | 487 | 2,654 | 1,991 | |||||||||||||||||||
| Purchase volumes | $ | 80,925 | $ | 64,060 | $ | 223,900 | $ | 182,133 | |||||||||||||||
Debit card purchase volumes |
$ | 119,680 | $ | 102,004 | $ | 349,492 | $ | 280,222 | |||||||||||||||
(1)Includes GWIM's credit card portfolio.
(2)Calculated as the effective annual percentage rate divided by average loans.
(3)Calculated as the difference between total revenue, net of interest expense, and net credit losses divided by average loans.
During the three and nine months ended September 30, 2021, the total risk-adjusted margin increased 104 bps and 127 bps primarily driven by lower net credit losses, higher net interest margin, and higher fee income. During the three and nine months ended September 30, 2021, total credit card purchase volumes increased $16.9 billion to $80.9 billion, and $41.8 billion to $223.9 billion as spending continued to
recover, with improvements across all categories, primarily in retail and travel. During the three and nine months ended September 30, 2021, debit card purchase volumes increased $17.7 billion to $119.7 billion, and $69.3 billion to $349.5 billion due to continued retail growth from the pandemic recovery, as well as the impact of government stimulus measures, and tax refunds.
Key Statistics – Residential Mortgage Loan Production (1)
| |||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Consumer Banking: | |||||||||||||||||||||||
| First mortgage | $ | 12,510 | $ | 7,298 | $ | 33,194 | $ | 35,228 | |||||||||||||||
| Home equity | 1,262 | 738 | 2,579 | 6,555 | |||||||||||||||||||
Total (2):
|
|||||||||||||||||||||||
| First mortgage | $ | 21,232 | $ | 13,360 | $ | 56,731 | $ | 55,422 | |||||||||||||||
| Home equity | 1,523 | 984 | 3,192 | 7,691 | |||||||||||||||||||
(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 for Consumer Banking and the total Corporation increased $5.2 billion and $7.9 billion during the three months ended September 30, 2021 primarily due to higher demand driven by lower interest rates. During the nine months ended September 30, 2021, Consumer Banking decreased $2.0 billion and the total Corporation increased $1.3 billion, primarily driven by changes in demand.
Home equity production in Consumer Banking and for the total Corporation increased $524 million and $539 million during the three months ended September 30, 2021 primarily driven by higher demand. Consumer Banking and the total Corporation decreased $4.0 billion and $4.5 billion during the nine months ended September 30, 2021, primarily driven by lower demand due to increased borrower liquidity.
Bank of America 14
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Global Wealth & Investment Management
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | % Change | 2021 | 2020 | % Change | ||||||||||||||||||||||||||||||||
| Net interest income | $ | 1,451 | $ | 1,237 | 17 | % | $ | 4,137 | $ | 4,186 | (1) | % | ||||||||||||||||||||||||||
| Noninterest income: | ||||||||||||||||||||||||||||||||||||||
| Investment and brokerage services | 3,683 | 3,105 | 19 | 10,610 | 9,081 | 17 | ||||||||||||||||||||||||||||||||
| All other income | 176 | 204 | (14) | 599 | 640 | (6) | ||||||||||||||||||||||||||||||||
| Total noninterest income | 3,859 | 3,309 | 17 | 11,209 | 9,721 | 15 | ||||||||||||||||||||||||||||||||
| Total revenue, net of interest expense | 5,310 | 4,546 | 17 | 15,346 | 13,907 | 10 | ||||||||||||||||||||||||||||||||
| Provision for credit losses | (58) | 24 | n/m | (185) | 349 | n/m | ||||||||||||||||||||||||||||||||
| Noninterest expense | 3,745 | 3,533 | 6 | 11,425 | 10,596 | 8 | ||||||||||||||||||||||||||||||||
| Income before income taxes | 1,623 | 989 | 64 | 4,106 | 2,962 | 39 | ||||||||||||||||||||||||||||||||
| Income tax expense | 398 | 242 | 64 | 1,006 | 726 | 39 | ||||||||||||||||||||||||||||||||
| Net income | $ | 1,225 | $ | 747 | 64 | $ | 3,100 | $ | 2,236 | 39 | ||||||||||||||||||||||||||||
| Effective tax rate | 24.5 | % | 24.5 | % | 24.5 | % | 24.5 | % | ||||||||||||||||||||||||||||||
| Net interest yield | 1.54 | 1.53 | 1.51 | 1.81 | ||||||||||||||||||||||||||||||||||
| Return on average allocated capital | 30 | 20 | 25 | 20 | ||||||||||||||||||||||||||||||||||
| Efficiency ratio | 70.51 | 77.70 | 74.45 | 76.19 | ||||||||||||||||||||||||||||||||||
| Balance Sheet | ||||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||||||
| Average | 2021 | 2020 | % Change | 2021 | 2020 | % Change | ||||||||||||||||||||||||||||||||
| Total loans and leases | $ | 199,664 | $ | 185,587 | 8 | % | $ | 194,090 | $ | 182,138 | 7 | % | ||||||||||||||||||||||||||
| Total earning assets | 373,691 | 321,410 | 16 | 367,239 | 309,240 | 19 | ||||||||||||||||||||||||||||||||
| Total assets | 386,346 | 333,794 | 16 | 379,802 | 321,565 | 18 | ||||||||||||||||||||||||||||||||
| Total deposits | 339,357 | 291,845 | 16 | 333,119 | 280,828 | 19 | ||||||||||||||||||||||||||||||||
| Allocated capital | 16,500 | 15,000 | 10 | 16,500 | 15,000 | 10 | ||||||||||||||||||||||||||||||||
| September 30 | December 31 | |||||||||||||||||||||||||||||||||||||
| Period end | 2021 | 2020 | % Change | |||||||||||||||||||||||||||||||||||
| Total loans and leases | $ | 202,268 | $ | 188,562 | 7 | % | ||||||||||||||||||||||||||||||||
| Total earning assets | 380,857 | 356,873 | 7 | |||||||||||||||||||||||||||||||||||
| Total assets | 393,708 | 369,736 | 6 | |||||||||||||||||||||||||||||||||||
| Total deposits | 345,590 | 322,157 | 7 | |||||||||||||||||||||||||||||||||||
n/m = not meaningful
GWIM consists of two primary businesses: Merrill Lynch Global Wealth Management (MLGWM) and Bank of America Private Bank. For more information about GWIM, see Business Segment Operations in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K.
Three-Month Comparison
Net income for GWIM increased $478 million to $1.2 billion primarily driven by higher revenue, partially offset by higher noninterest expense. The operating margin was 31 percent compared to 22 percent a year ago.
Net interest income increased $214 million to $1.5 billion primarily due to the benefits of loan and deposit growth.
Noninterest income, which primarily includes investment and brokerage services income, increased $550 million to $3.9 billion primarily due to higher market valuations and positive AUM flows, partially offset by declines in AUM pricing.
The provision for credit losses improved $82 million to a benefit of $58 million primarily due to credit quality improvements. Noninterest expense increased $212 million to $3.7 billion primarily driven by higher revenue-related incentives.
The return on average allocated capital was 30 percent, up from 20 percent, due to higher net income, partially offset by an increase in allocated capital. For more information on capital allocated to the business segments, see Business Segment Operations on page 11.
Average loans increased $14.1 billion to $199.7 billion primarily driven by securities-based lending, custom lending and
residential mortgage. Average deposits increased $47.5 billion to $339.4 billion primarily driven by inflows from new accounts and client responses to market volatility.
MLGWM revenue of $4.5 billion increased 19 percent primarily driven by the benefits of higher market valuations and positive AUM flows.
Bank of America Private Bank revenue of $839 million increased five percent primarily driven by the benefits of higher market valuations and AUM flows, partially offset by the realignment of certain business results to MLGWM.
Nine-Month Comparison
Net income for GWIM increased $864 million to $3.1 billion due to the same factors as described in the three-month discussion. The operating margin was 27 percent compared to 21 percent a year ago.
Net interest income decreased $49 million to $4.1 billion due to lower interest rates, partially offset by the benefits of deposit and loan growth.
Noninterest income, which primarily includes investment and brokerage services income, increased $1.5 billion to $11.2 billion due to the same factors as described in the three-month discussion.
The provision for credit losses improved $534 million to a benefit of $185 million primarily due to improvements in the macroeconomic outlook and credit quality. Noninterest expense increased $829 million to $11.4 billion, primarily due to the same factor as described in the three-month discussion.
15 Bank of America
|
||||||||
The return on average allocated capital was 25 percent, up from 20 percent, due to the same factors as described in the three-month discussion.
Average loans increased $12.0 billion to $194.1 billion, and average deposits increased $52.3 billion to $333.1 billion. The changes in average loans and deposits were both primarily due to the same factors as described in the three-month discussion.
MLGWM revenue of $12.9 billion increased 13 percent primarily driven by the benefits of higher market valuations,
positive AUM flows and loan and deposit growth, partially offset by the impact of lower interest rates.
Bank of America Private Bank revenue of $2.4 billion decreased one percent primarily driven by the realignment of certain business results to MLGWM and lower interest rates, partially offset by the benefits of higher market valuations and AUM flows.
Key Indicators and Metrics |
|||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Revenue by Business | |||||||||||||||||||||||
| Merrill Lynch Global Wealth Management | $ | 4,471 | $ | 3,748 | $ | 12,916 | $ | 11,446 | |||||||||||||||
Bank of America Private Bank |
839 | 798 | 2,430 | 2,461 | |||||||||||||||||||
| Total revenue, net of interest expense | $ | 5,310 | $ | 4,546 | $ | 15,346 | $ | 13,907 | |||||||||||||||
| Client Balances by Business, at period end | |||||||||||||||||||||||
| Merrill Lynch Global Wealth Management | $ | 3,108,358 | $ | 2,570,252 | |||||||||||||||||||
Bank of America Private Bank |
584,475 | 496,369 | |||||||||||||||||||||
| Total client balances | $ | 3,692,833 | $ | 3,066,621 | |||||||||||||||||||
| Client Balances by Type, at period end | |||||||||||||||||||||||
| Assets under management | $ | 1,578,630 | $ | 1,286,145 | |||||||||||||||||||
| Brokerage and other assets | 1,612,472 | 1,344,538 | |||||||||||||||||||||
| Deposits | 345,590 | 295,893 | |||||||||||||||||||||
Loans and leases (1)
|
205,055 | 189,952 | |||||||||||||||||||||
| Less: Managed deposits in assets under management | (48,914) | (49,907) | |||||||||||||||||||||
| Total client balances | $ | 3,692,833 | $ | 3,066,621 | |||||||||||||||||||
| Assets Under Management Rollforward | |||||||||||||||||||||||
| Assets under management, beginning of period | $ | 1,549,069 | $ | 1,219,748 | $ | 1,408,465 | $ | 1,275,555 | |||||||||||||||
| Net client flows | 14,776 | 1,385 | 44,698 | 11,993 | |||||||||||||||||||
Market valuation/other
|
14,785 | 65,012 | 125,467 | (1,403) | |||||||||||||||||||
| Total assets under management, end of period | $ | 1,578,630 | $ | 1,286,145 | $ | 1,578,630 | $ | 1,286,145 | |||||||||||||||
Total wealth advisors, at period end (2)
|
18,855 | 20,487 | |||||||||||||||||||||
(1)Includes margin receivables which are classified in customer and other receivables on the Consolidated Balance Sheet.
(2)Includes advisors across all wealth management businesses in GWIM and Consumer Banking. Prior period has been revised to conform to current-period presentation.
Client Balances
Client balances increased $626.2 billion, or 20 percent, to $3.7 trillion at September 30, 2021 compared to September 30, 2020. The increase in client balances was primarily due to higher market valuations and positive client flows.
Bank of America 16
|
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Global Banking
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | % Change | 2021 | 2020 | % Change | ||||||||||||||||||||||||||||||||
| Net interest income | $ | 2,186 | $ | 2,028 | 8 | % | $ | 6,150 | $ | 7,003 | (12) | % | ||||||||||||||||||||||||||
| Noninterest income: | ||||||||||||||||||||||||||||||||||||||
| Service charges | 890 | 846 | 5 | 2,637 | 2,379 | 11 | ||||||||||||||||||||||||||||||||
| Investment banking fees | 1,297 | 970 | 34 | 3,642 | 2,912 | 25 | ||||||||||||||||||||||||||||||||
| All other income | 871 | 673 | 29 | 2,538 | 1,914 | 33 | ||||||||||||||||||||||||||||||||
| Total noninterest income | 3,058 | 2,489 | 23 | 8,817 | 7,205 | 22 | ||||||||||||||||||||||||||||||||
| Total revenue, net of interest expense | 5,244 | 4,517 | 16 | 14,967 | 14,208 | 5 | ||||||||||||||||||||||||||||||||
| Provision for credit losses | (781) | 883 | n/m | (2,738) | 4,849 | n/m | ||||||||||||||||||||||||||||||||
| Noninterest expense | 2,534 | 2,365 | 7 | 7,915 | 6,910 | 15 | ||||||||||||||||||||||||||||||||
| Income before income taxes | 3,491 | 1,269 | n/m | 9,790 | 2,449 | n/m | ||||||||||||||||||||||||||||||||
| Income tax expense | 942 | 343 | n/m | 2,643 | 661 | n/m | ||||||||||||||||||||||||||||||||
| Net income | $ | 2,549 | $ | 926 | n/m | $ | 7,147 | $ | 1,788 | n/m | ||||||||||||||||||||||||||||
| Effective tax rate | 27.0 | % | 27.0 | % | 27.0 | % | 27.0 | % | ||||||||||||||||||||||||||||||
| Net interest yield | 1.55 | 1.61 | 1.53 | 1.96 | ||||||||||||||||||||||||||||||||||
| Return on average allocated capital | 24 | 9 | 22 | 6 | ||||||||||||||||||||||||||||||||||
| Efficiency ratio | 48.31 | 52.36 | 52.88 | 48.63 | ||||||||||||||||||||||||||||||||||
| Balance Sheet | ||||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||||||
| Average | 2021 | 2020 | % Change | 2021 | 2020 | % Change | ||||||||||||||||||||||||||||||||
Total loans and leases
|
$ | 324,736 | $ | 373,118 | (13) | % | $ | 326,632 | $ | 394,331 | (17) | % | ||||||||||||||||||||||||||
| Total earning assets | 560,181 | 501,572 | 12 | 537,037 | 477,606 | 12 | ||||||||||||||||||||||||||||||||
| Total assets | 621,699 | 557,889 | 11 | 597,947 | 534,061 | 12 | ||||||||||||||||||||||||||||||||
| Total deposits | 534,166 | 471,288 | 13 | 509,445 | 449,273 | 13 | ||||||||||||||||||||||||||||||||
| Allocated capital | 42,500 | 42,500 | — | 42,500 | 42,500 | — | ||||||||||||||||||||||||||||||||
| Period end | September 30 2021 |
December 31 2020 |
% Change | |||||||||||||||||||||||||||||||||||
| Total loans and leases | $ | 328,893 | $ | 339,649 | (3) | % | ||||||||||||||||||||||||||||||||
| Total earning assets | 561,239 | 522,650 | 7 | |||||||||||||||||||||||||||||||||||
| Total assets | 623,640 | 580,561 | 7 | |||||||||||||||||||||||||||||||||||
| Total deposits | 536,476 | 493,748 | 9 | |||||||||||||||||||||||||||||||||||
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. For more information about Global Banking, see Business Segment Operations in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K.
Three-Month Comparison
Net income for Global Banking increased $1.6 billion to $2.5 billion driven by improvement in the provision for credit losses and higher revenue, partially offset by higher noninterest expense.
Net interest income increased $158 million to $2.2 billion primarily due to the allocation of ALM results and the benefit of higher deposit balances, partially offset by a decline in loan balances and lower deposit spreads.
Noninterest income increased $569 million to $3.1 billion primarily due to higher investment banking fees and higher income from ESG investment activities.
The provision for credit losses improved $1.7 billion to a benefit of $781 million primarily driven by a reserve release due to credit quality improvements, whereas the reserve build in the prior-year period was driven by COVID-19 impacted industries, such as travel and entertainment.
Noninterest expense increased $169 million primarily due to higher compensation and benefits expense, as well as higher operating costs.
The return on average allocated capital was 24 percent, up from nine percent, due to higher net income. For more information on capital allocated to the business segments, see Business Segment Operations on page 11.
Nine-Month Comparison
Net income for Global Banking increased $5.4 billion to $7.1 billion primarily due to the same factors as described in the three-month discussion.
Net interest income decreased $853 million to $6.2 billion primarily due to the impact of lower loan balances, lower deposit spreads and the allocation of ALM results, partially offset by the benefits of higher deposit balances and credit spreads.
Noninterest income increased $1.6 billion to $8.8 billion driven by higher investment banking fees, higher valuation-driven adjustments on the fair value loan portfolio, debt securities and leveraged loans, as well as higher treasury and credit service charges.
The provision for credit losses improved $7.6 billion to a benefit of $2.7 billion primarily driven by a reserve release due to improvements in the macroeconomic outlook and credit quality.
17 Bank of America
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Noninterest expense increased $1.0 billion to $7.9 billion, primarily due to higher revenue-related incentives and an acceleration in expenses from incentive compensation award changes, as well as higher operating costs.
The return on average allocated capital was 22 percent, up from six percent, due to higher net income.
Global Corporate, Global Commercial and Business Banking
The table below and following discussion present a summary of the results, which exclude certain investment banking, merchant services and PPP activities in Global Banking.
| Global Corporate, Global Commercial and Business Banking | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Global Corporate Banking | Global Commercial Banking | Business Banking | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Lending | $ | 886 | $ | 791 | $ | 924 | $ | 953 | $ | 55 | $ | 59 | $ | 1,865 | $ | 1,803 | ||||||||||||||||||||||||||||||||||
| Global Transaction Services | 821 | 658 | 819 | 745 | 227 | 209 | 1,867 | 1,612 | ||||||||||||||||||||||||||||||||||||||||||
Total revenue, net of interest expense |
$ | 1,707 | $ | 1,449 | $ | 1,743 | $ | 1,698 | $ | 282 | $ | 268 | $ | 3,732 | $ | 3,415 | ||||||||||||||||||||||||||||||||||
| Balance Sheet | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Average | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total loans and leases | $ | 147,906 | $ | 174,235 | $ | 159,986 | $ | 175,536 | $ | 12,635 | $ | 13,972 | $ | 320,527 | $ | 363,743 | ||||||||||||||||||||||||||||||||||
| Total deposits | 261,951 | 218,593 | 213,319 | 201,523 | 56,891 | 50,946 | 532,161 | 471,062 | ||||||||||||||||||||||||||||||||||||||||||
| Global Corporate Banking | Global Commercial Banking | Business Banking | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Lending | $ | 2,529 | $ | 2,658 | $ | 2,689 | $ | 2,815 | $ | 166 | $ | 207 | $ | 5,384 | $ | 5,680 | ||||||||||||||||||||||||||||||||||
| Global Transaction Services | 2,245 | 2,314 | 2,334 | 2,432 | 653 | 682 | 5,232 | 5,428 | ||||||||||||||||||||||||||||||||||||||||||
Total revenue, net of interest expense |
$ | 4,774 | $ | 4,972 | $ | 5,023 | $ | 5,247 | $ | 819 | $ | 889 | $ | 10,616 | $ | 11,108 | ||||||||||||||||||||||||||||||||||
| Balance Sheet | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Average | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total loans and leases
|
$ | 148,101 | $ | 186,220 | $ | 158,939 | $ | 188,147 | $ | 12,778 | $ | 14,721 | $ | 319,818 | $ | 389,088 | ||||||||||||||||||||||||||||||||||
| Total deposits | 245,483 | 214,327 | 207,520 | 188,271 | 55,331 | 46,599 | 508,334 | 449,197 | ||||||||||||||||||||||||||||||||||||||||||
| Period end | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total loans and leases | $ | 150,797 | $ | 165,498 | $ | 162,371 | $ | 168,385 | $ | 12,640 | $ | 13,665 | $ | 325,808 | $ | 347,548 | ||||||||||||||||||||||||||||||||||
| Total deposits | 255,981 | 212,564 | 220,738 | 200,591 | 57,766 | 51,889 | 534,485 | 465,044 | ||||||||||||||||||||||||||||||||||||||||||
Business Lending revenue increased $62 million for the three months ended September 30, 2021 compared to the same period in 2020 primarily due to higher income from ESG investment activities and credit spreads, partially offset by the impact of lower loan balances. Business Lending revenue decreased $296 million for the nine months ended September 30, 2021 primarily due to the impact of lower loan balances and interest rates, partially offset by higher credit spreads.
Global Transaction Services revenue increased $255 million for the three months ended September 30, 2021 driven by the allocation of ALM results and the benefit of higher deposit balances, partially offset by lower deposit spreads. Global Transaction Services revenue decreased $196 million for the nine months ended September 30, 2021 driven by lower interest rates, partially offset by the benefit of higher deposit balances.
Average loans and leases decreased 12 percent and 18 percent for the three and nine months ended September 30, 2021 driven by client paydowns and lower demand.
Average deposits increased 13 percent for both the three and nine months ended September 30, 2021 primarily driven by elevated balances from prior-year inflows on client responses to market volatility and government stimulus measures.
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.
Bank of America 18
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| Investment Banking Fees | |||||||||||||||||||||||||||||||||||||||||||||||
| Global Banking | Total Corporation | Global Banking | Total Corporation | ||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||||||||||||
| Products | |||||||||||||||||||||||||||||||||||||||||||||||
| Advisory | $ | 608 | $ | 356 | $ | 654 | $ | 397 | $ | 1,341 | $ | 948 | $ | 1,461 | $ | 1,072 | |||||||||||||||||||||||||||||||
| Debt issuance | 401 | 320 | 933 | 740 | 1,306 | 1,247 | 3,031 | 2,725 | |||||||||||||||||||||||||||||||||||||||
| Equity issuance | 288 | 294 | 637 | 664 | 995 | 717 | 2,239 | 1,687 | |||||||||||||||||||||||||||||||||||||||
Gross investment banking fees |
1,297 | 970 | 2,224 | 1,801 | 3,642 | 2,912 | 6,731 | 5,484 | |||||||||||||||||||||||||||||||||||||||
| Self-led deals | (23) | (13) | (56) | (32) | (85) | (73) | (195) | (168) | |||||||||||||||||||||||||||||||||||||||
Total investment banking fees |
$ | 1,274 | $ | 957 | $ | 2,168 | $ | 1,769 | $ | 3,557 | $ | 2,839 | $ | 6,536 | $ | 5,316 | |||||||||||||||||||||||||||||||
Total Corporation investment banking fees, excluding self-led deals, which are primarily included within Global Banking and Global Markets, were $2.2 billion and $6.5 billion for the three and nine months ended September 30, 2021. The three-month period increased 23 percent compared to the same period in 2020 primarily driven by higher advisory and debt issuance fees. The nine-month period increased 23 percent primarily driven by higher equity issuance fees as well as advisory and debt issuance fees.
Global Markets
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | % Change | 2021 | 2020 | % Change | ||||||||||||||||||||||||||||||||
| Net interest income | $ | 1,000 | $ | 1,108 | (10) | % | $ | 2,980 | $ | 3,558 | (16) | % | ||||||||||||||||||||||||||
| Noninterest income: | ||||||||||||||||||||||||||||||||||||||
| Investment and brokerage services | 470 | 439 | 7 | 1,504 | 1,487 | 1 | ||||||||||||||||||||||||||||||||
| Investment banking fees | 844 | 738 | 14 | 2,784 | 2,280 | 22 | ||||||||||||||||||||||||||||||||
| Market making and similar activities | 2,014 | 1,725 | 17 | 7,448 | 7,059 | 6 | ||||||||||||||||||||||||||||||||
| All other income | 191 | 273 | (30) | 721 | 475 | 52 | ||||||||||||||||||||||||||||||||
| Total noninterest income | 3,519 | 3,175 | 11 | 12,457 | 11,301 | 10 | ||||||||||||||||||||||||||||||||
| Total revenue, net of interest expense | 4,519 | 4,283 | 6 | 15,437 | 14,859 | 4 | ||||||||||||||||||||||||||||||||
| Provision for credit losses | 16 | 21 | (24) | 33 | 233 | (86) | ||||||||||||||||||||||||||||||||
| Noninterest expense | 3,252 | 3,102 | 5 | 10,150 | 8,598 | 18 | ||||||||||||||||||||||||||||||||
| Income before income taxes | 1,251 | 1,160 | 8 | 5,254 | 6,028 | (13) | ||||||||||||||||||||||||||||||||
| Income tax expense | 325 | 302 | 8 | 1,366 | 1,567 | (13) | ||||||||||||||||||||||||||||||||
| Net income | $ | 926 | $ | 858 | 8 | $ | 3,888 | $ | 4,461 | (13) | ||||||||||||||||||||||||||||
| Effective tax rate | 26.0 | % | 26.0 | % | 26.0 | % | 26.0 | % | ||||||||||||||||||||||||||||||
| Return on average allocated capital | 10 | 9 | 14 | 17 | ||||||||||||||||||||||||||||||||||
| Efficiency ratio | 71.94 | 72.42 | 65.75 | 57.86 | ||||||||||||||||||||||||||||||||||
| Balance Sheet | ||||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | % Change | 2021 | 2020 | % Change | |||||||||||||||||||||||||||||||||
| Average | ||||||||||||||||||||||||||||||||||||||
| Trading-related assets: | ||||||||||||||||||||||||||||||||||||||
| Trading account securities | $ | 304,133 | $ | 251,735 | 21 | % | $ | 291,500 | $ | 241,753 | 21 | % | ||||||||||||||||||||||||||
| Reverse repurchases | 117,486 | 100,395 | 17 | 111,330 | 106,968 | 4 | ||||||||||||||||||||||||||||||||
| Securities borrowed | 101,086 | 86,508 | 17 | 97,205 | 88,734 | 10 | ||||||||||||||||||||||||||||||||
| Derivative assets | 41,010 | 46,676 | (12) | 44,308 | 47,687 | (7) | ||||||||||||||||||||||||||||||||
| Total trading-related assets | 563,715 | 485,314 | 16 | 544,343 | 485,142 | 12 | ||||||||||||||||||||||||||||||||
| Total loans and leases | 97,148 | 72,319 | 34 | 87,535 | 72,702 | 20 | ||||||||||||||||||||||||||||||||
| Total earning assets | 557,333 | 476,182 | 17 | 528,113 | 485,448 | 9 | ||||||||||||||||||||||||||||||||
| Total assets | 804,938 | 680,983 | 18 | 775,552 | 685,685 | 13 | ||||||||||||||||||||||||||||||||
| Total deposits | 54,650 | 56,475 | (3) | 54,699 | 45,002 | 22 | ||||||||||||||||||||||||||||||||
| Allocated capital | 38,000 | 36,000 | 6 | 38,000 | 36,000 | 6 | ||||||||||||||||||||||||||||||||
| Period end | September 30 2021 |
December 31 2020 |
% Change | |||||||||||||||||||||||||||||||||||
| Total trading-related assets | $ | 536,125 | $ | 421,698 | 27 | % | ||||||||||||||||||||||||||||||||
| Total loans and leases | 98,892 | 78,415 | 26 | |||||||||||||||||||||||||||||||||||
| Total earning assets | 526,585 | 447,350 | 18 | |||||||||||||||||||||||||||||||||||
| Total assets | 776,929 | 616,609 | 26 | |||||||||||||||||||||||||||||||||||
| Total deposits | 54,941 | 53,925 | 2 | |||||||||||||||||||||||||||||||||||
19 Bank of America
|
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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. For more information about Global Markets, see Business Segment Operations in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K.
The following explanations for current period-over-period changes for Global Markets, including those disclosed under Sales and Trading Revenue, are the same for amounts including and excluding net DVA. Amounts excluding net DVA are a non-GAAP financial measure. For more information on net DVA, see Supplemental Financial Data on page 7.
Three-Month Comparison
Net income for Global Markets increased $68 million to $926 million primarily due to higher revenue (net of lower net DVA losses), partially offset by higher noninterest expense. Net DVA losses were $20 million compared to $116 million in the prior-year period. Excluding net DVA, net income decreased $5 million to $941 million. The decrease was primarily driven by higher noninterest expense, largely offset by higher revenue.
Revenue increased $236 million to $4.5 billion primarily driven by higher sales and trading revenue and investment banking income. Sales and trading revenue increased $390 million, and excluding net DVA, increased $294 million. These increases were driven by higher revenue in Equities, partially offset by lower revenue in FICC.
Noninterest expense increased $150 million to $3.3 billion driven by higher activity-based expenses for sales and trading.
Average total assets increased $124.0 billion to $804.9 billion driven by higher client balances in Equities, and higher levels of inventory and loan growth in FICC.
The return on average allocated capital was 10 percent, up from 9 percent, reflecting higher net income, partially offset by an increase in allocated capital. For more information on capital allocated to the business segments, see Business Segment Operations on page 11.
Nine-Month Comparison
Net income for Global Markets decreased $573 million to $3.9 billion. Net DVA losses were $56 million compared to $77 million in the prior-year period. Excluding net DVA, net income decreased $589 million to $3.9 billion. These decreases were primarily driven by higher noninterest expense.
Revenue increased $578 million to $15.4 billion primarily driven by higher investment banking income and sales and trading revenue. Sales and trading revenue increased $243 million, and excluding net DVA, increased $222 million driven by higher revenue in Equities, partially offset by a decline in FICC revenue. Noninterest expense increased $1.6 billion to $10.2 billion, primarily driven by higher costs associated with processing transactional card claims related to state unemployment benefits, activity-based expenses for sales and trading, and an acceleration in expenses from incentive compensation award changes.
The provision for credit losses decreased $200 million primarily due to an improved macroeconomic outlook.
Average total assets increased $89.9 billion to $775.6 billion, primarily due to higher client balances in Equities and higher levels of inventory and loan growth in FICC. Period-end total assets increased $160.3 billion since December 31, 2020 to $776.9 billion driven by higher client balances and increased hedging of client activity with stock positions relative to derivatives in Equities, and higher levels of inventory and loan growth in FICC.
The return on average allocated capital was 14 percent, down from 17 percent, reflecting lower net income and an increase in allocated capital.
Sales and Trading Revenue
For a description of sales and trading revenue, see Business Segment Operations in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K. 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 7.
Sales and Trading Revenue (1, 2, 3)
| |||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Sales and trading revenue | |||||||||||||||||||||||
Fixed income, currencies and commodities |
$ | 2,009 | $ | 2,019 | $ | 7,188 | $ | 7,905 | |||||||||||||||
| Equities | 1,605 | 1,205 | 5,065 | 4,105 | |||||||||||||||||||
| Total sales and trading revenue | $ | 3,614 | $ | 3,224 | $ | 12,253 | $ | 12,010 | |||||||||||||||
Sales and trading revenue, excluding net DVA (4)
|
|||||||||||||||||||||||
Fixed income, currencies and commodities |
$ | 2,025 | $ | 2,126 | $ | 7,241 | $ | 7,983 | |||||||||||||||
| Equities | 1,609 | 1,214 | 5,068 | 4,104 | |||||||||||||||||||
Total sales and trading revenue, excluding net DVA |
$ | 3,634 | $ | 3,340 | $ | 12,309 | $ | 12,087 | |||||||||||||||
(1)For more information on sales and trading revenue, see Note 3 – Derivatives to the Consolidated Financial Statements.
(2)Includes FTE adjustments of $99 million and $232 million for the three and nine months ended September 30, 2021 compared to $38 million and $138 million for the same periods in 2020.
(3) Includes Global Banking sales and trading revenue of $138 million and $412 million for the three and nine months ended September 30, 2021 compared to $85 million and $378 million for the same periods in 2020.
(4) FICC and Equities sales and trading revenue, excluding net DVA, is a non-GAAP financial measure. FICC net DVA losses were $16 million and $53 million for the three and nine months ended September 30, 2021 compared to losses of $107 million and $78 million for the same periods in 2020. Equities net DVA losses were $4 million and $3 million for the three and nine months ended September 30, 2021 compared to losses of $9 million and gains of $1 million for the same periods in 2020.
Bank of America 20
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Three-Month Comparison
FICC revenue decreased $101 million driven by a weaker trading environment for mortgage and interest rate products, partially offset by improved client flows in foreign exchange. Equities revenue increased $395 million driven by growth in client financing activities, a stronger trading performance and increased client activity.
Nine-Month Comparison
FICC revenue decreased $742 million driven by reduced activity in macro products, partially offset by stronger performance in credit and municipal products, and gains in commodities (partially offset by related losses in another segment) from market volatility driven by a weather-related event. Equities revenue increased $964 million due to the same factors as described in the three-month discussion.
All Other
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | % Change | 2021 | 2020 | % Change | ||||||||||||||||||||||||||||||||
| Net interest income | $ | 65 | $ | (20) | n/m | $ | 193 | $ | 3 | n/m | ||||||||||||||||||||||||||||
| Noninterest income (loss) | (1,109) | (915) | 21 | % | (3,661) | (2,182) | 68 | % | ||||||||||||||||||||||||||||||
| Total revenue, net of interest expense | (1,044) | (935) | 12 | (3,468) | (2,179) | 59 | ||||||||||||||||||||||||||||||||
| Provision for credit losses | (48) | (18) | n/m | (148) | 75 | n/m | ||||||||||||||||||||||||||||||||
| Noninterest expense | 351 | 559 | (37) | 962 | 1,108 | (13) | ||||||||||||||||||||||||||||||||
| Loss before income taxes | (1,347) | (1,476) | (9) | (4,282) | (3,362) | 27 | ||||||||||||||||||||||||||||||||
| Income tax benefit | (1,293) | (1,774) | (27) | (6,345) | (3,386) | 87 | ||||||||||||||||||||||||||||||||
| Net income (loss) | $ | (54) | $ | 298 | (118) | $ | 2,063 | $ | 24 | n/m | ||||||||||||||||||||||||||||
| Balance Sheet | ||||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||||||
| Average | 2021 | 2020 | % Change | 2021 | 2020 | % Change | ||||||||||||||||||||||||||||||||
| Total loans and leases | $ | 17,581 | $ | 24,243 | (27) | % | $ | 19,190 | $ | 30,218 | (36) | % | ||||||||||||||||||||||||||
Total assets (1)
|
187,233 | 230,906 | (19) | 193,896 | 227,430 | (15) | ||||||||||||||||||||||||||||||||
| Total deposits | 13,767 | 14,881 | (7) | 14,062 | 19,926 | (29) | ||||||||||||||||||||||||||||||||
| Period end | September 30 2021 |
December 31 2020 |
% Change | |||||||||||||||||||||||||||||||||||
| Total loans and leases | $ | 16,880 | $ | 21,301 | (21) | % | ||||||||||||||||||||||||||||||||
Total assets (1)
|
199,738 | 264,141 | (24) | |||||||||||||||||||||||||||||||||||
| Total deposits | 12,521 | 12,998 | (4) | |||||||||||||||||||||||||||||||||||
(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 $1.1 trillion for both the three and nine months ended September 30, 2021 compared to $828.3 billion and $714.2 billion for the same periods in 2020, and period-end allocated assets were $1.2 trillion and $977.7 billion at September 30, 2021 and December 31, 2020.
n/m = not meaningful
All Other primarily consists of ALM activities, liquidating businesses and certain expenses not otherwise allocated to a business segment. ALM activities encompass interest rate and foreign currency risk management activities for which substantially all of the results are allocated to our business segments. For more information on our ALM activities, see Note 17 – Business Segment Information to the Consolidated Financial Statements.
Three-Month Comparison
Net income decreased $352 million to a loss of $54 million driven by a decrease in the income tax benefit and lower revenue, partially offset by lower noninterest expense.
Revenue decreased $109 million primarily due to higher partnership losses for ESG investments.
Noninterest expense decreased $208 million primarily due to lower litigation expense.
The income tax benefit decreased $481 million primarily due to the impact of the 2020 U.K. tax law change in the prior year. Both periods included income tax benefit adjustments to eliminate the FTE treatment of certain tax credits recorded in Global Banking.
Nine-Month Comparison
Net income increased $2.0 billion to $2.1 billion primarily due to a higher income tax benefit, partially offset by lower revenue.
Revenue decreased $1.3 billion primarily due to a $704 million gain on sales of certain mortgage loans in the prior-year period, higher partnership losses for ESG investments and lower market making and similar activities.
The provision for credit losses improved $223 million to a benefit of $148 million primarily due to an improved macroeconomic outlook.
Noninterest expense decreased $146 million primarily due to the same factor as described in the three-month discussion.
The income tax benefit increased $3.0 billion primarily due to the impact of the U.K. tax law changes, and higher levels of income tax credits from increased ESG investment activities. For more information on U.K. tax law changes, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements. Both periods included income tax benefit adjustments to eliminate the FTE treatment of certain tax credits recorded in Global Banking.
21 Bank of America
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Off-Balance Sheet Arrangements and Contractual Obligations
We have contractual obligations to make future payments on debt and lease agreements. Additionally, in the normal course of business, we enter into contractual arrangements whereby we commit to future purchases of products or services from unaffiliated parties. For more information on obligations and commitments, see Note 10 – Commitments and Contingencies to the Consolidated Financial Statements herein, as well as Off-Balance Sheet Arrangements and Contractual Obligations in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K, and Note 11 – Long-term Debt and Note 12 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
Representations and Warranties Obligations
For more information on representations and warranties obligations in connection with the sale of mortgage loans, see Note 12 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
Managing Risk
Risk is inherent in all our business activities. The seven key types of risk faced by the Corporation are strategic, credit, market, liquidity, compliance, operational and reputational. 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 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.
Our Risk Appetite Statement is intended to ensure that the Corporation maintains an acceptable risk profile by providing a common framework and a comparable set of measures for senior management and the Board to clearly indicate the level of risk the Corporation is willing to accept. Risk appetite is set at least annually and is aligned with the Corporation’s strategic, capital and financial operating plans. Our line-of-business strategies and risk appetite are also similarly aligned.
For more information about the Corporation’s risks related to the pandemic, see Item 1A. Risk Factors – Coronavirus Disease of the Corporation’s 2020 Annual Report on Form 10-K. These pandemic-related risks are being managed within our Risk Framework and supporting risk management programs.
For more information on our Risk Framework, our risk management activities and the key types of risk faced by the Corporation, see the Managing Risk section in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K.
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. For more
information, including related regulatory requirements, see Capital Management in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K.
CCAR and Capital Planning
The Federal Reserve requires BHCs to submit a capital plan and planned capital actions on an annual basis, consistent with the rules governing the CCAR capital plan. Based on the results of our 2021 CCAR capital plan and related supervisory stress tests submitted in the second quarter of 2021, we are subject to a 2.5 percent SCB, unchanged from the prior level, effective October 1, 2021 to September 30, 2022. Our CET1 capital ratio under the Standardized approach must remain above 9.5 percent during this period in order to avoid restrictions on capital distributions and discretionary bonus payments.
Due to uncertainty resulting from the pandemic, the Federal Reserve imposed various restrictions on share repurchase programs and dividends. In conjunction with its release of 2021 CCAR supervisory stress test results, the Federal Reserve announced those restrictions would end as of July 1, 2021 for large banks, including the Corporation, and large banks would be subject to the normal restrictions under the Federal Reserve's SCB framework. Pursuant to the Board’s authorization on April 15, 2021, during the third quarter of 2021, we repurchased $9.9 billion of common stock, including repurchases to offset shares awarded under equity-based compensation plans during the period. On October 20, 2021, the Corporation announced that the Board renewed the Corporation’s $25 billion common stock repurchase program previously announced in April 2021. The Board’s authorization replaces the previous program. As with the April authorization, the Board also authorized common stock repurchases to offset shares awarded under the Corporation’s equity-based compensation plans.
The timing and amount of common stock repurchases made pursuant to our stock repurchase program are subject to various factors, including the Corporation’s capital position, liquidity, financial performance and alternative uses of capital, stock trading price, regulatory requirements and general market conditions, and may be suspended at any time. Such 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. 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 (RWA) 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 September 30, 2021, the CET1, Tier 1 capital and Total capital ratios for the Corporation were lower under the Standardized approach.
Minimum Capital Requirements
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 or SCB, plus any applicable countercyclical capital buffer and a global systemically important bank (G-SIB)
Bank of America 22
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surcharge. The buffers and surcharge must be comprised solely of CET1 capital. The Corporation's CET1 capital ratio must be a minimum of 9.5 percent under both the Standardized and Advanced approaches.
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.
Capital Composition and Ratios
Table 8 presents Bank of America Corporation’s capital ratios and related information in accordance with Basel 3 Standardized and Advanced approaches as measured at September 30, 2021 and December 31, 2020. For the periods presented herein, the Corporation met the definition of well capitalized under current regulatory requirements.
| Table 8 | Bank of America Corporation Regulatory Capital under Basel 3 | |||||||||||||||||||
Standardized Approach (1) |
Advanced Approaches (1) |
Regulatory Minimum (2) |
||||||||||||||||||
| (Dollars in millions, except as noted) | September 30, 2021 | |||||||||||||||||||
| Risk-based capital metrics: | ||||||||||||||||||||
| Common equity tier 1 capital | $ | 174,407 | $ | 174,407 | ||||||||||||||||
| Tier 1 capital | 197,842 | 197,842 | ||||||||||||||||||
Total capital (3)
|
230,506 | 223,997 | ||||||||||||||||||
| Risk-weighted assets (in billions) | 1,568 | 1,380 | ||||||||||||||||||
| Common equity tier 1 capital ratio | 11.1 | % | 12.6 | % | 9.5 | % | ||||||||||||||
| Tier 1 capital ratio | 12.6 | 14.3 | 11.0 | |||||||||||||||||
| Total capital ratio | 14.7 | 16.2 | 13.0 | |||||||||||||||||
| Leverage-based metrics: | ||||||||||||||||||||
Adjusted quarterly average assets (in billions) (4)
|
$ | 3,000 | $ | 3,000 | ||||||||||||||||
| Tier 1 leverage ratio | 6.6 | % | 6.6 | % | 4.0 | |||||||||||||||
Supplementary leverage exposure (in billions) (5)
|
$ | 3,516 | ||||||||||||||||||
| Supplementary leverage ratio | 5.6 | % | 5.0 | |||||||||||||||||
| December 31, 2020 | ||||||||||||||||||||
| Risk-based capital metrics: | ||||||||||||||||||||
| Common equity tier 1 capital | $ | 176,660 | $ | 176,660 | ||||||||||||||||
| Tier 1 capital | 200,096 | 200,096 | ||||||||||||||||||
Total capital (3)
|
237,936 | 227,685 | ||||||||||||||||||
| Risk-weighted assets (in billions) | 1,480 | 1,371 | ||||||||||||||||||
| Common equity tier 1 capital ratio | 11.9 | % | 12.9 | % | 9.5 | % | ||||||||||||||
| Tier 1 capital ratio | 13.5 | 14.6 | 11.0 | |||||||||||||||||
| Total capital ratio | 16.1 | 16.6 | 13.0 | |||||||||||||||||
| Leverage-based metrics: | ||||||||||||||||||||
Adjusted quarterly average assets (in billions) (4)
|
$ | 2,719 | $ | 2,719 | ||||||||||||||||
| Tier 1 leverage ratio | 7.4 | % | 7.4 | % | 4.0 | |||||||||||||||
Supplementary leverage exposure (in billions) (5)
|
$ | 2,786 | ||||||||||||||||||
| Supplementary leverage ratio | 7.2 | % | 5.0 | |||||||||||||||||
(1)As of September 30, 2021 and December 31, 2020, capital ratios are calculated using the regulatory capital rule that allows a five-year transition period related to the adoption of the current expected credit losses (CECL) accounting standard.
(2)The capital conservation buffer and G-SIB surcharge were 2.5 percent at both September 30, 2021 and December 31, 2020. At September 30, 2021 and December 31, 2020, the Corporation's SCB of 2.5 percent was applied in place of the capital conservation buffer under the Standardized approach. The countercyclical capital buffer for both periods was zero. The CET1 capital regulatory minimum is the sum of the CET1 capital ratio minimum of 4.5 percent, our G-SIB surcharge of 2.5 percent and our SCB or the capital conservation buffer, as applicable, of 2.5 percent. The SLR regulatory minimum includes a leverage buffer of 2.0 percent.
(3)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.
(4)Reflects total average assets adjusted for certain Tier 1 capital deductions.
(5)Supplementary leverage exposure at December 31, 2020 reflects the temporary exclusion of U.S. Treasury securities and deposits at Federal Reserve Banks. The temporary relief expired after March 31, 2021 and is not reflected in supplementary leverage exposure at September 30, 2021.
23 Bank of America
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At September 30, 2021, CET1 capital was $174.4 billion, a decrease of $2.3 billion from December 31, 2020, driven by common stock repurchases, dividends and lower net unrealized gains on available-for-sale (AFS) debt securities included in accumulated other comprehensive income (OCI), partially offset by earnings. Tier 1 capital decreased $2.3 billion primarily driven by the same factors as CET1 capital. Total capital under the Standardized approach decreased $7.4 billion primarily due to the same factors driving the decrease in CET1 capital, and a decrease in the adjusted allowance for credit losses included in Tier 2 capital. RWA under the Standardized approach, which yielded the lower CET1 capital ratio at September 30, 2021,
increased $88.3 billion during the nine months ended September 30, 2021 to $1,568 billion primarily due to strong client activity in Global Markets and an increase in debt securities resulting from the deployment of cash received from deposit inflows. Supplementary leverage exposure at September 30, 2021 increased $729.9 billion during the nine months ended September 30, 2021 primarily due to the expiration of the Federal Reserve’s temporary relief to exclude U.S. Treasury securities and deposits at Federal Reserve Banks and an increase in debt securities resulting from the deployment of cash received from deposit inflows.
Table 9 shows the capital composition at September 30, 2021 and December 31, 2020.
| Table 9 | Capital Composition under Basel 3 | |||||||||||||
| (Dollars in millions) | September 30 2021 |
December 31 2020 |
||||||||||||
| Total common shareholders’ equity | $ | 249,023 | $ | 248,414 | ||||||||||
CECL transitional amount (1)
|
2,722 | 4,213 | ||||||||||||
| Goodwill, net of related deferred tax liabilities | (68,638) | (68,565) | ||||||||||||
| Deferred tax assets arising from net operating loss and tax credit carryforwards | (7,638) | (5,773) | ||||||||||||
| Intangibles, other than mortgage servicing rights, net of related deferred tax liabilities | (1,644) | (1,617) | ||||||||||||
| Defined benefit pension plan net assets | (1,223) | (1,164) | ||||||||||||
| Cumulative unrealized net (gain) loss related to changes in fair value of financial liabilities attributable to own creditworthiness, net-of-tax |
1,477 | 1,753 | ||||||||||||
| Other | 328 | (601) | ||||||||||||
| Common equity tier 1 capital | 174,407 | 176,660 | ||||||||||||
| Qualifying preferred stock, net of issuance cost | 23,440 | 23,437 | ||||||||||||
| Other | (5) | (1) | ||||||||||||
| Tier 1 capital | 197,842 | 200,096 | ||||||||||||
| Tier 2 capital instruments | 21,756 | 22,213 | ||||||||||||
Qualifying allowance for credit losses (2)
|
11,177 | 15,649 | ||||||||||||
| Other | (269) | (22) | ||||||||||||
| Total capital under the Standardized approach | 230,506 | 237,936 | ||||||||||||
Adjustment in qualifying allowance for credit losses under the Advanced approaches (2)
|
(6,509) | (10,251) | ||||||||||||
| Total capital under the Advanced approaches | $ | 223,997 | $ | 227,685 | ||||||||||
(1)Includes the impact of the Corporation's adoption of the CECL accounting standard on January 1, 2020 and 25 percent of the increase in reserves since the initial adoption.
(2)Includes the impact of transition provisions related to the CECL accounting standard.
Table 10 shows the components of RWA as measured under Basel 3 at September 30, 2021 and December 31, 2020.
| Table 10 | Risk-weighted Assets under Basel 3 | |||||||||||||||||||||||||
| Standardized Approach | Advanced Approaches | Standardized Approach | Advanced Approaches | |||||||||||||||||||||||
| (Dollars in billions) |
September 30, 2021 | December 31, 2020 | ||||||||||||||||||||||||
| Credit risk | $ | 1,506 | $ | 901 | $ | 1,420 | $ | 896 | ||||||||||||||||||
| Market risk | 62 | 62 | 60 | 60 | ||||||||||||||||||||||
| Operational risk | n/a | 375 | n/a | 372 | ||||||||||||||||||||||
| Risks related to credit valuation adjustments | n/a | 42 | n/a | 43 | ||||||||||||||||||||||
| Total risk-weighted assets | $ | 1,568 | $ | 1,380 | $ | 1,480 | $ | 1,371 | ||||||||||||||||||
n/a = not applicable
Bank of America 24
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Bank of America, N.A. Regulatory Capital
Table 11 presents regulatory capital information for BANA in accordance with Basel 3 Standardized and Advanced approaches as measured at September 30, 2021 and December 31, 2020. BANA met the definition of well capitalized under the PCA framework for both periods.
| Table 11 | Bank of America, N.A. Regulatory Capital under Basel 3 | |||||||||||||||||||
Standardized Approach (1) |
Advanced Approaches (1) |
Regulatory Minimum (2) |
||||||||||||||||||
| (Dollars in millions, except as noted) | September 30, 2021 | |||||||||||||||||||
| Risk-based capital metrics: | ||||||||||||||||||||
Common equity tier 1 capital |
$ | 173,710 | $ | 173,710 | ||||||||||||||||
| Tier 1 capital | 173,710 | 173,710 | ||||||||||||||||||
Total capital (3)
|
186,588 | 179,901 | ||||||||||||||||||
| Risk-weighted assets (in billions) | 1,288 | 1,012 | ||||||||||||||||||
| Common equity tier 1 capital ratio | 13.5 | % | 17.2 | % | 7.0 | % | ||||||||||||||
| Tier 1 capital ratio | 13.5 | 17.2 | 8.5 | |||||||||||||||||
| Total capital ratio | 14.5 | 17.8 | 10.5 | |||||||||||||||||
| Leverage-based metrics: | ||||||||||||||||||||
Adjusted quarterly average assets (in billions) (4)
|
$ | 2,329 | $ | 2,329 | ||||||||||||||||
| Tier 1 leverage ratio | 7.5 | % | 7.5 | % | 5.0 | |||||||||||||||
| Supplementary leverage exposure (in billions) | $ | 2,736 | ||||||||||||||||||
| Supplementary leverage ratio | 6.3 | % | 6.0 | |||||||||||||||||
| December 31, 2020 | ||||||||||||||||||||
| Risk-based capital metrics: | ||||||||||||||||||||
Common equity tier 1 capital |
$ | 164,593 | $ | 164,593 | ||||||||||||||||
| Tier 1 capital | 164,593 | 164,593 | ||||||||||||||||||
Total capital (3)
|
181,370 | 170,922 | ||||||||||||||||||
| Risk-weighted assets (in billions) | 1,221 | 1,014 | ||||||||||||||||||
| Common equity tier 1 capital ratio | 13.5 | % | 16.2 | % | 7.0 | % | ||||||||||||||
| Tier 1 capital ratio | 13.5 | 16.2 | 8.5 | |||||||||||||||||
| Total capital ratio | 14.9 | 16.9 | 10.5 | |||||||||||||||||
| Leverage-based metrics: | ||||||||||||||||||||
Adjusted quarterly average assets (in billions) (4)
|
$ | 2,143 | $ | 2,143 | ||||||||||||||||
| Tier 1 leverage ratio | 7.7 | % | 7.7 | % | 5.0 | |||||||||||||||
| Supplementary leverage exposure (in billions) | $ | 2,525 | ||||||||||||||||||
| Supplementary leverage ratio | 6.5 | % | 6.0 | |||||||||||||||||
(1)Capital ratios for both September 30, 2021 and December 31, 2020 are calculated using the regulatory capital rule that allows a five-year transition period related to the adoption of CECL.
(2)Risk-based capital regulatory minimums at September 30, 2021 and December 31, 2020 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 are the percent required to be considered well capitalized under the PCA framework.
(3)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.
(4)Reflects total average assets adjusted for certain Tier 1 capital deductions.
Total Loss-Absorbing Capacity Requirements
Total loss-absorbing capacity (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 12 presents the Corporation's TLAC and long-term debt ratios and related information as of September 30, 2021 and December 31, 2020.
25 Bank of America
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| Table 12 | Bank of America Corporation Total Loss-Absorbing Capacity and Long-Term Debt | |||||||||||||||||||||||||
|
TLAC (1)
|
Regulatory Minimum (2)
|
Long-term Debt |
Regulatory Minimum (3)
|
|||||||||||||||||||||||
| (Dollars in millions) | September 30, 2021 | |||||||||||||||||||||||||
| Total eligible balance | $ | 434,224 | $ | 226,431 | ||||||||||||||||||||||
Percentage of risk-weighted assets (4)
|
27.7 | % | 22.0 | % | 14.4 | % | 8.5 | % | ||||||||||||||||||
Percentage of supplementary leverage exposure (5)
|
12.4 | 9.5 | 6.4 | 4.5 | ||||||||||||||||||||||
| December 31, 2020 | ||||||||||||||||||||||||||
| Total eligible balance | $ | 405,153 | $ | 196,997 | ||||||||||||||||||||||
Percentage of risk-weighted assets (4)
|
27.4 | % | 22.0 | % | 13.3 | % | 8.5 | % | ||||||||||||||||||
Percentage of supplementary leverage exposure (5)
|
14.5 | 9.5 | 7.1 | 4.5 | ||||||||||||||||||||||
(1)As of September 30, 2021 and December 31, 2020, TLAC ratios are calculated using the regulatory capital rule that allows a five-year transition period related to the adoption of CECL.
(2)The TLAC RWA regulatory minimum consists of 18.0 percent plus a TLAC RWA buffer comprised of 2.5 percent plus the Method 1 G-SIB surcharge of 1.5 percent. The countercyclical buffer is zero for both periods. The TLAC supplementary leverage exposure regulatory minimum consists of 7.5 percent plus a 2.0 percent TLAC leverage buffer. The TLAC RWA and leverage buffers must be comprised solely of CET1 capital and Tier 1 capital, respectively.
(3)The long-term debt RWA 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.
(4)The approach that yields the higher RWA is used to calculate TLAC and long-term debt ratios, which was the Standardized approach as of September 30, 2021 and December 31, 2020.
(5)Supplementary leverage exposure at December 31, 2020 reflects the temporary exclusion of U.S. Treasury Securities and deposits at Federal Reserve Banks. The temporary relief expired after March 31, 2021 and is not reflected in supplementary leverage exposure at September 30, 2021.
Regulatory Developments
The following supplements the disclosure in Capital Management – Regulatory Developments in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K.
Supplementary Leverage Ratio
On March 19, 2021, U.S. banking regulators announced that the temporary change to the SLR for BHCs and depository institutions issued in 2020 would expire as scheduled after March 31, 2021. While the temporary relief automatically applied to the Corporation, the Corporation’s lead depository institution, Bank of America, N.A., did not opt to take advantage of the SLR relief offered by the Office of the Comptroller of the Currency. At September 30, 2021, the Corporation’s SLR was 5.6 percent, which exceeds the 5.0 percent minimum required by the Federal Reserve.
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). 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 15c3-1e, 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 CFTC Regulation 1.17. The U.S. broker-dealer subsidiaries are also registered with the Financial Industry Regulatory Authority, Inc. (FINRA). Pursuant to FINRA Rule 4110, FINRA may impose higher net capital requirements than Rule 15c3-1 under the Exchange Act with respect to each of the broker-dealers.
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 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 customers' and affiliates' risk-based margin in order to meet its CFTC minimum net capital requirement. At September 30, 2021, BofAS had
tentative net capital of $19.2 billion. BofAS also had regulatory net capital of $16.6 billion, which exceeded the minimum requirement of $3.1 billion.
MLPCC is a fully-guaranteed subsidiary of BofAS and provides clearing and settlement services as well as prime brokerage and arranged financing services for institutional clients. At September 30, 2021, MLPCC’s regulatory net capital of $5.0 billion exceeded the minimum requirement of $1.5 billion.
MLPF&S provides retail services. At September 30, 2021, MLPF&S' regulatory net capital was $4.8 billion, which exceeded the minimum requirement of $189 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 September 30, 2021, MLI’s capital resources were $33.7 billion, which exceeded the minimum Pillar 1 requirement of $14.2 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 September 30, 2021, BofASE's capital resources were $7.0 billion, which exceeded the minimum Pillar 1 requirement of $3.1 billion.
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. These liquidity risk management practices have allowed us to effectively manage the market stress from the pandemic that began in the first quarter of 2020. For more information on the effects of the pandemic, see Executive Summary – Recent Developments – COVID-19 Pandemic on page 3 herein and Item 1A. Risk Factors – Coronavirus Disease of the Corporation’s 2020 Annual Report on Form 10-K.
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
Bank of America 26
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obligations as they 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. For more information regarding global funding and liquidity risk management, as well as liquidity sources, liquidity arrangements, contingency planning and credit ratings discussed below, see Liquidity Risk in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K.
NB Holdings Corporation
The parent company, which is a separate and distinct legal entity from our bank and nonbank subsidiaries, has an intercompany arrangement with our wholly-owned holding company subsidiary, NB Holdings Corporation (NB Holdings). We have transferred, and agreed to transfer, additional parent company assets not required to satisfy anticipated near-term expenditures to 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 our debt, pay dividends and perform other obligations as it would have had we not entered into these arrangements and transferred any assets. 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.
Global Liquidity Sources and Other Unencumbered Assets
Table 13 presents average Global Liquidity Sources (GLS) for the three months ended September 30, 2021 and December 31, 2020.
| Table 13 | Average Global Liquidity Sources | |||||||||||||
| Three Months Ended | ||||||||||||||
| (Dollars in billions) | September 30 2021 |
December 31 2020 |
||||||||||||
| Bank entities | $ | 960 | $ | 773 | ||||||||||
Nonbank and other entities (1)
|
160 | 170 | ||||||||||||
Total Average Global Liquidity Sources |
$ | 1,120 | $ | 943 | ||||||||||
(1) Nonbank includes Parent, NB Holdings and other regulated entities.
Our bank subsidiaries’ liquidity is primarily driven by deposit and lending activity, as well as securities valuation and net debt activity. Bank subsidiaries can also generate incremental liquidity by pledging a range of unencumbered loans and securities to certain Federal Home Loan Banks (FHLBs) and the Federal Reserve Discount Window. The cash we could have obtained by borrowing against this pool of specifically-identified eligible assets was $318 billion and $306 billion at September 30, 2021 and December 31, 2020. 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 is also held in nonbank entities, including the Parent, NB Holdings and other regulated entities. Parent
company and NB Holdings liquidity is typically in the form of cash deposited at BANA, which is excluded from the liquidity at bank subsidiaries, and high-quality, liquid, unencumbered securities. 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 14 presents the composition of average GLS for the three months ended September 30, 2021 and December 31, 2020.
| Table 14 | Average Global Liquidity Sources Composition | ||||||||||
| Three Months Ended | |||||||||||
| (Dollars in billions) | September 30 2021 |
December 31 2020 |
|||||||||
| Cash on deposit | $ | 241 | $ | 322 | |||||||
| U.S. Treasury securities | 265 | 141 | |||||||||
U.S. agency securities, mortgage-backed securities, and other investment-grade securities |
596 | 462 | |||||||||
Non-U.S. government securities |
18 | 18 | |||||||||
| Total Average Global Liquidity Sources | $ | 1,120 | $ | 943 | |||||||
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 $612 billion and $584 billion for the three months ended September 30, 2021 and December 31, 2020. For the same periods, the average consolidated LCR was 117 percent and 122 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. For more information on liquidity stress analysis, see Liquidity Risk – Liquidity Stress Analysis in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K.
Net Stable Funding Ratio Final Rule
On October 20, 2020, the U.S. Agencies finalized the Net Stable Funding Ratio (NSFR), a rule requiring large banks to maintain a minimum level of stable funding over a one-year period. The final rule is intended to support the ability of banks to lend to households and businesses in both normal and adverse economic conditions and is complementary to the LCR rule, which focuses on short-term liquidity risks. The final rule was effective July 1, 2021. The U.S. NSFR applies to the Corporation on a consolidated basis and to our insured depository institutions. The Corporation is in compliance with
27 Bank of America
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the final NSFR rule in the regulatory timeline provided, and there have not been any significant impacts to the Corporation.
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. We fund a substantial portion of our lending activities through our deposits, which were $1.96 trillion and $1.80 trillion at September 30, 2021 and December 31, 2020.
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.
Long-term Debt
During the nine months ended September 30, 2021, we issued $65.5 billion of long-term debt consisting of $49.8 billion of notes issued by Bank of America Corporation, substantially all of which was TLAC compliant, $6.2 billion of notes issued by Bank of America, N.A. and $9.5 billion of other debt.
During the nine months ended September 30, 2021, we had total long-term debt maturities and redemptions in the aggregate of $38.5 billion consisting of $21.3 billion for Bank of America Corporation, $8.0 billion for Bank of America, N.A. and $9.2 billion of other debt. Table 15 presents the carrying value of aggregate annual contractual maturities of long-term debt at September 30, 2021.
| Table 15 | Long-term Debt by Maturity | |||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Remainder of 2021 |
2022 | 2023 | 2024 | 2025 | Thereafter | Total | |||||||||||||||||||||||||||||||||||||
| Bank of America Corporation | ||||||||||||||||||||||||||||||||||||||||||||
Senior notes (1)
|
$ | — | $ | 5,759 | $ | 23,451 | $ | 23,642 | $ | 19,800 | $ | 138,303 | $ | 210,955 | ||||||||||||||||||||||||||||||
| Senior structured notes | 80 | 1,937 | 594 | 292 | 412 | 11,384 | 14,699 | |||||||||||||||||||||||||||||||||||||
| Subordinated notes | 354 | — | — | 3,300 | 5,434 | 16,064 | 25,152 | |||||||||||||||||||||||||||||||||||||
| Junior subordinated notes | — | — | — | — | — | 741 | 741 | |||||||||||||||||||||||||||||||||||||
| Total Bank of America Corporation | 434 | 7,696 | 24,045 | 27,234 | 25,646 | 166,492 | 251,547 | |||||||||||||||||||||||||||||||||||||
| Bank of America, N.A. | ||||||||||||||||||||||||||||||||||||||||||||
| Senior notes | — | 3,245 | 504 | — | — | 1 | 3,750 | |||||||||||||||||||||||||||||||||||||
| Subordinated notes | — | — | — | — | — | 1,775 | 1,775 | |||||||||||||||||||||||||||||||||||||
| Advances from Federal Home Loan Banks | 500 | 203 | 1 | — | 16 | 72 | 792 | |||||||||||||||||||||||||||||||||||||
Securitizations and other Bank VIEs (2)
|
— | 1,249 | 999 | 999 | — | 84 | 3,331 | |||||||||||||||||||||||||||||||||||||
| Other | 7 | 67 | 316 | 66 | 153 | 21 | 630 | |||||||||||||||||||||||||||||||||||||
| Total Bank of America, N.A. | 507 | 4,764 | 1,820 | 1,065 | 169 | 1,953 | 10,278 | |||||||||||||||||||||||||||||||||||||
| Other debt | ||||||||||||||||||||||||||||||||||||||||||||
| Structured Liabilities | 1,105 | 3,777 | 2,507 | 1,733 | 671 | 6,503 | 16,296 | |||||||||||||||||||||||||||||||||||||
Nonbank VIEs (2)
|
1 | — | — | — | — | 499 | 500 | |||||||||||||||||||||||||||||||||||||
| Total other debt | 1,106 | 3,777 | 2,507 | 1,733 | 671 | 7,002 | 16,796 | |||||||||||||||||||||||||||||||||||||
| Total long-term debt | $ | 2,047 | $ | 16,237 | $ | 28,372 | $ | 30,032 | $ | 26,486 | $ | 175,447 | $ | 278,621 | ||||||||||||||||||||||||||||||
(1) Total includes $177.2 billion of outstanding notes that are both TLAC eligible and callable one year before their stated maturities, including $2.5 billion during the remainder of 2021, and $15.1 billion, $17.0 billion, $16.0 billion and $15.2 billion during each year of 2022 through 2025, respectively, and $111.4 billion thereafter. For more information on our TLAC eligible and callable outstanding notes, see Liquidity Risk – Diversified Funding Sources in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K.
(2) Represents liabilities of consolidated variable interest entities (VIEs) included in total long-term debt on the Consolidated Balance Sheet.
Total long-term debt increased $15.7 billion to $278.6 billion during the nine months ended September 30, 2021, primarily due to debt issuances, partially offset by debt maturities and redemptions and valuation adjustments. 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 the nine months ended September 30, 2021, we issued $4.3 billion of structured notes, which are unsecured debt obligations that pay investors returns linked to other debt or equity securities, indices, currencies or commodities. These structured notes are typically issued to meet client demand, and notes with certain attributes may also be TLAC eligible. 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 11 – Long-term Debt to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
We use derivative transactions to manage 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 46.
Credit Ratings
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. Table 16 presents the Corporation’s current long-term/short-term senior debt ratings and outlooks expressed by the rating agencies.
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The ratings from Standard & Poor’s Global Ratings (S&P) and Fitch Ratings (Fitch) for the Corporation and its subsidiaries have not changed from those disclosed in the Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021.
The ratings from Moody's Investors Service for the Corporation and its subsidiaries have not changed from those disclosed in the Corporation's 2020 Annual Report on Form 10-K.
For more information on additional collateral and termination payments that could be required in connection with certain over-the-counter derivative contracts and other trading agreements in the event of a credit rating downgrade, see Note 3 – Derivatives to the Consolidated Financial Statements herein and Item 1A. Risk Factors of the Corporation’s 2020 Annual Report on Form 10-K.
| Table 16 | 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 | A2 | P-1 | Stable | A- | A-2 | Positive | AA- | F1+ | Stable | |||||||||||||||||||||||||||||||||||||||||||||||
| Bank of America, N.A. | Aa2 | P-1 | Stable | A+ | A-1 | Positive | AA | F1+ | Stable | |||||||||||||||||||||||||||||||||||||||||||||||
| Bank of America Europe Designated Activity Company | NR | NR | NR | A+ | A-1 | Positive | AA | F1+ | Stable | |||||||||||||||||||||||||||||||||||||||||||||||
| Merrill Lynch, Pierce, Fenner & Smith Incorporated | NR | NR | NR | A+ | A-1 | Positive | AA | F1+ | Stable | |||||||||||||||||||||||||||||||||||||||||||||||
| BofA Securities, Inc. | NR | NR | NR | A+ | A-1 | Positive | AA | F1+ | Stable | |||||||||||||||||||||||||||||||||||||||||||||||
| Merrill Lynch International | NR | NR | NR | A+ | A-1 | Positive | AA | F1+ | Stable | |||||||||||||||||||||||||||||||||||||||||||||||
| BofA Securities Europe SA | NR | NR | NR | A+ | A-1 | Positive | AA | F1+ | Stable | |||||||||||||||||||||||||||||||||||||||||||||||
NR = not rated
Finance Subsidiary Issuers and Parent Guarantor
BofA Finance LLC, a Delaware limited liability company, is a consolidated finance subsidiary of the Corporation that has issued and sold, and is expected to continue to issue and sell, its senior unsecured debt securities. In addition, each of BAC Capital Trust XIII, BAC Capital Trust XIV and BAC Capital Trust XV, Delaware statutory trusts, is a 100 percent owned finance subsidiary of the Corporation that has issued and sold trust preferred securities or capital securities, as applicable, that remained outstanding at September 30, 2021. The Corporation has fully and unconditionally guaranteed (or effectively provided for the full and unconditional guarantee of) all such securities issued by such finance subsidiaries. For more information regarding such guarantees by the Corporation, see Liquidity Risk – Finance Subsidiary Issuers and Parent Guarantor in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K. For purposes of the discussion in such section in the Corporation’s 2020 Annual Report on Form 10-K, the term “Trusts” shall be deemed to include BAC Capital Trust XV, and the term “Trust Preferred Securities” shall be deemed to include the capital securities issued and sold by BAC Capital Trust XV that remained outstanding at September 30, 2021.
Credit Risk Management
For information on our credit risk management activities, see Consumer Portfolio Credit Risk Management below, Commercial Portfolio Credit Risk Management on page 35, Non-U.S. Portfolio on page 41, Allowance for Credit Losses on page 42, and Note 5 – Outstanding Loans and Leases and Allowance for Credit Losses to the Consolidated Financial Statements.
During the nine months ended September 30, 2021, the economy gained momentum as unemployment continued to decline from double-digit highs during 2020 and the economy continued to open as vaccination rates increased and restrictions began to ease. Individuals and businesses in the U.S. have benefited from various forms of government support through economic stimulus packages enacted in 2020 and 2021. While there has been significant economic improvement in comparison to 2020, uncertainty remains about the timing and strength of the economy's recovery, which may also be hampered by supply chain disruptions and inflationary pressures
that could lead to adverse impacts to credit quality metrics in future periods. For more information on how the pandemic may affect our operations, see Executive Summary – Recent Developments – COVID-19 Pandemic on page 3 and Item 1A. Risk Factors – Coronavirus Disease of the Corporation’s 2020 Annual Report on Form 10-K.
Consumer Portfolio Credit Risk Management
Credit risk management for the consumer portfolio begins with initial underwriting and continues throughout a borrower’s credit cycle. Statistical techniques in conjunction with experiential judgment are used in all aspects of portfolio management including underwriting, product pricing, risk appetite, setting credit limits, and establishing operating processes and metrics to quantify and balance risks and returns. Statistical models are built using detailed behavioral information from external sources such as credit bureaus and/or internal historical experience and are a component of our consumer credit risk management process. These models are used in part to assist in making both new and ongoing credit decisions, as well as portfolio management strategies, including authorizations and line management, collection practices and strategies, and determination of the allowance for loan and lease losses and allocated capital for credit risk.
Consumer Credit Portfolio
The economic environment improved during the nine months ended September 30, 2021, with the U.S. unemployment rate continuing to decline and home prices increasing. During the three and nine months ended September 30, 2021, net charge-offs decreased $235 million and $635 million to $329 million and $1.5 billion primarily due to lower credit card losses, as balance declines and the impact of government stimulus measures were partially offset by charge-offs associated with deferrals that expired in 2020. During the nine months ended September 30, 2021, nonperforming loans increased due to deferral activity.
The consumer allowance for loan and lease losses decreased $2.9 billion during the nine months ended September 30, 2021 to $7.2 billion primarily due to improvements in the economic outlook and credit quality. For
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more information, see Allowance for Credit Losses on page 42.
For more information on our accounting policies regarding delinquencies, nonperforming status, charge-offs and troubled debt restructurings (TDRs) for the consumer portfolio, as well as interest accrual policies and delinquency status for loan modifications related to the pandemic, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial
Statements of the Corporation’s 2020 Annual Report on Form 10-K and Note 5 – Outstanding Loans and Leases and Allowance for Credit Losses to the Consolidated Financial Statements.
Table 17 presents our outstanding consumer loans and leases, consumer nonperforming loans and accruing consumer loans past due 90 days or more.
| Table 17 | Consumer Credit Quality | |||||||||||||||||||||||||||||||||||||
Outstandings (1)
|
Nonperforming | Accruing Past Due 90 Days or More |
||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | September 30 2021 |
December 31 2020 |
September 30 2021 |
December 31 2020 |
September 30 2021 |
December 31 2020 |
||||||||||||||||||||||||||||||||
Residential mortgage (2)
|
$ | 216,940 | $ | 223,555 | $ | 2,296 | $ | 2,005 | $ | 648 | $ | 762 | ||||||||||||||||||||||||||
| Home equity | 29,000 | 34,311 | 676 | 649 | — | — | ||||||||||||||||||||||||||||||||
| Credit card | 76,869 | 78,708 | n/a | n/a | 450 | 903 | ||||||||||||||||||||||||||||||||
Direct/Indirect consumer (3)
|
99,845 | 91,363 | 45 | 71 | 8 | 33 | ||||||||||||||||||||||||||||||||
| Other consumer | 202 | 124 | — | — | — | — | ||||||||||||||||||||||||||||||||
Consumer loans excluding loans accounted for under the fair value option |
$ | 422,856 | $ | 428,061 | $ | 3,017 | $ | 2,725 | $ | 1,106 | $ | 1,698 | ||||||||||||||||||||||||||
Loans accounted for under the fair value option (4)
|
616 | 735 | ||||||||||||||||||||||||||||||||||||
| Total consumer loans and leases | $ | 423,472 | $ | 428,796 | ||||||||||||||||||||||||||||||||||
Percentage of outstanding consumer loans and leases (5)
|
n/a | n/a | 0.71 | % | 0.64 | % | 0.26 | % | 0.40 | % | ||||||||||||||||||||||||||||
Percentage of outstanding consumer loans and leases, excluding fully-insured loan portfolios (5)
|
n/a | n/a | 0.74 | 0.65 | 0.11 | 0.22 | ||||||||||||||||||||||||||||||||
(1)Outstandings include non-core residential mortgage of $6.7 billion and $8.3 billion and home equity of $3.4 billion and $4.0 billion at September 30, 2021 and December 31, 2020. For more information on non-core loans, see Consumer Credit Risk Management in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K.
(2)Residential mortgage loans accruing past due 90 days or more are fully-insured loans. At September 30, 2021 and December 31, 2020, residential mortgage includes $466 million and $537 million of loans on which interest had been curtailed by the Federal Housing Administration (FHA), and therefore were no longer accruing interest, although principal was still insured, and $182 million and $225 million of loans on which interest was still accruing.
(3)Outstandings primarily include auto and specialty lending loans and leases of $47.2 billion and $46.4 billion, U.S. securities-based lending loans of $48.7 billion and $41.1 billion and non-U.S. consumer loans of $3.0 billion and $3.0 billion at September 30, 2021 and December 31, 2020.
(4)Consumer loans accounted for under the fair value option include residential mortgage loans of $241 million and $298 million and home equity loans of $375 million and $437 million at September 30, 2021 and December 31, 2020. For more information on the fair value option, see Note 15 – Fair Value Option to the Consolidated Financial Statements.
(5)Excludes consumer loans accounted for under the fair value option. At September 30, 2021 and December 31, 2020, $13 million and $11 million of loans accounted for under the fair value option were past due 90 days or more and not accruing interest.
n/a = not applicable
Table 18 presents net charge-offs and related ratios for consumer loans and leases.
| Table 18 | Consumer Net Charge-offs and Related Ratios | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net Charge-offs |
Net Charge-off Ratios (1)
|
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| Three Months Ended September 30 | Nine Months Ended September 30 | Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | $ | (7) | $ | (6) | $ | (17) | $ | (27) | (0.01) | % | (0.01) | % | (0.01) | % | (0.02) | % | ||||||||||||||||||||||||||||||||||
| Home equity | (34) | (20) | (93) | (45) | (0.46) | (0.21) | (0.40) | (0.16) | ||||||||||||||||||||||||||||||||||||||||||
| Credit card | 321 | 509 | 1,443 | 1,944 | 1.69 | 2.49 | 2.59 | 2.97 | ||||||||||||||||||||||||||||||||||||||||||
| Direct/Indirect consumer | (18) | 18 | 4 | 84 | (0.07) | 0.08 | 0.01 | 0.13 | ||||||||||||||||||||||||||||||||||||||||||
| Other consumer | 67 | 63 | 198 | 214 | n/m | n/m | n/m | n/m | ||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 329 | $ | 564 | $ | 1,535 | $ | 2,170 | 0.31 | 0.50 | 0.49 | 0.64 | ||||||||||||||||||||||||||||||||||||||
(1)Net charge-off ratios are calculated as annualized net charge-offs divided by average outstanding loans and leases excluding loans accounted for under the fair value option.
n/m = not meaningful
We believe that the presentation of information adjusted to exclude the impact of the fully-insured loan portfolio and loans accounted for under the fair value option is more representative of the ongoing operations and credit quality of the business. As a result, in the following tables and discussions of the residential mortgage and home equity portfolios, we exclude loans accounted for under the fair value option and provide information that excludes the impact of the fully-insured loan portfolio in certain credit quality statistics.
Residential Mortgage
The residential mortgage portfolio made up the largest percentage of our consumer loan portfolio at 51 percent of consumer loans and leases at September 30, 2021. Approximately 51 percent of the residential mortgage portfolio
was in Consumer Banking and 42 percent was in GWIM. The remaining portion was in All Other and was comprised of loans used in our overall ALM activities, delinquent FHA loans repurchased pursuant to our servicing agreements with the Government National Mortgage Association, as well as loans repurchased related to our representations and warranties.
Outstanding balances in the residential mortgage portfolio decreased $6.6 billion during the nine months ended September 30, 2021 as paydowns were partially offset by originations.
At September 30, 2021 and December 31, 2020, the residential mortgage portfolio included $12.6 billion and $11.8 billion of outstanding fully-insured loans, of which $2.3 billion and $2.8 billion had FHA insurance, with the remainder protected by Fannie Mae long-term standby agreements.
Bank of America 30
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Table 19 presents certain residential mortgage key credit statistics on both a reported basis and excluding the fully-insured loan portfolio. The following discussion presents the residential mortgage portfolio excluding the fully-insured loan portfolio.
| Table 19 | Residential Mortgage – Key Credit Statistics | |||||||||||||||||||||||||||||||||||||||||||
Reported Basis (1)
|
Excluding Fully-insured Loans (1)
|
|||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | September 30 2021 |
December 31 2020 |
September 30 2021 |
December 31 2020 |
||||||||||||||||||||||||||||||||||||||||
| Outstandings | $ | 216,940 | $ | 223,555 | $ | 204,316 | $ | 211,737 | ||||||||||||||||||||||||||||||||||||
| Accruing past due 30 days or more | 1,752 | 2,314 | 822 | 1,224 | ||||||||||||||||||||||||||||||||||||||||
| Accruing past due 90 days or more | 648 | 762 | — | — | ||||||||||||||||||||||||||||||||||||||||
Nonperforming loans (2)
|
2,296 | 2,005 | 2,296 | 2,005 | ||||||||||||||||||||||||||||||||||||||||
| Percent of portfolio | ||||||||||||||||||||||||||||||||||||||||||||
| Refreshed LTV greater than 90 but less than or equal to 100 | 1 | % | 2 | % | 1 | % | 1 | % | ||||||||||||||||||||||||||||||||||||
| Refreshed LTV greater than 100 | — | 1 | — | 1 | ||||||||||||||||||||||||||||||||||||||||
| Refreshed FICO below 620 | 2 | 2 | 1 | 1 | ||||||||||||||||||||||||||||||||||||||||
(1)Outstandings, accruing past due, nonperforming loans and percentages of portfolio exclude loans accounted for under the fair value option. For information on our interest accrual policies and delinquency status for loan modifications related to the pandemic, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
(2)Includes loans that are contractually current which primarily consist of collateral-dependent TDRs, including those that have been discharged in Chapter 7 bankruptcy and loans that have not yet demonstrated a sustained period of payment performance following a TDR.
Nonperforming outstanding balances in the residential mortgage portfolio increased $291 million during the nine months ended September 30, 2021 primarily driven by deferral activity. Of the nonperforming residential mortgage loans at September 30, 2021, $1.3 billion, or 55 percent, were current on contractual payments. Loans accruing past due 30 days or more decreased $402 million driven by continued improvement in credit quality.
Net recoveries of $7 million and $17 million for the three and nine months ended September 30, 2021 remained relatively unchanged compared to the same periods in the prior year.
Of the $204.3 billion in total residential mortgage loans outstanding at September 30, 2021, as shown in Table 20, 28 percent were originated as interest-only loans. The outstanding balance of interest-only residential mortgage loans that have entered the amortization period was $5.1 billion, or nine percent, at September 30, 2021. Residential mortgage loans that have entered the amortization period generally experienced a higher rate of early stage delinquencies and nonperforming status compared to the residential mortgage portfolio as a whole. At September 30, 2021, $61 million, or one percent, of outstanding interest-only residential mortgages that had entered the amortization period were accruing past due 30 days or more
compared to $822 million, or less than one percent, for the entire residential mortgage portfolio. In addition, at September 30, 2021, $287 million, or six percent, of outstanding interest-only residential mortgage loans that had entered the amortization period were nonperforming, of which $107 million were contractually current, compared to $2.3 billion, or one percent, for the entire residential mortgage portfolio. Loans that have yet to enter the amortization period in our interest-only residential mortgage portfolio are primarily well-collateralized loans to our wealth management clients and have an interest-only period of three to ten years. Approximately 97 percent of these loans that have yet to enter the amortization period will not be required to make a fully-amortizing payment until 2022 or later.
Table 20 presents outstandings, nonperforming loans and net charge-offs by certain state concentrations for the residential mortgage portfolio. The Los Angeles-Long Beach-Santa Ana Metropolitan Statistical Area (MSA) within California represented 15 percent and 16 percent of outstandings at September 30, 2021 and December 31, 2020. In the New York area, the New York-Northern New Jersey-Long Island MSA made up 15 percent and 14 percent of outstandings at September 30, 2021 and December 31, 2020.
| Table 20 | Residential Mortgage State Concentrations | |||||||||||||||||||||||||||||||||||||||||||||||||
Outstandings (1)
|
Nonperforming (1)
|
Net Charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||
| September 30 2021 |
December 31 2020 |
September 30 2021 |
December 31 2020 |
Three Months Ended September 30 | Nine Months Ended September 30 |
|||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| California | $ | 75,884 | $ | 83,185 | $ | 708 | $ | 570 | $ | (3) | $ | (5) | $ | (10) | $ | (16) | ||||||||||||||||||||||||||||||||||
| New York | 24,402 | 23,832 | 351 | 272 | — | 1 | 2 | 2 | ||||||||||||||||||||||||||||||||||||||||||
| Florida | 13,524 | 13,017 | 160 | 175 | (1) | (1) | (5) | (4) | ||||||||||||||||||||||||||||||||||||||||||
| Texas | 8,810 | 8,868 | 91 | 78 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| New Jersey | 8,526 | 8,806 | 108 | 98 | — | (1) | — | (1) | ||||||||||||||||||||||||||||||||||||||||||
| Other | 73,170 | 74,029 | 878 | 812 | (3) | — | (4) | (8) | ||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage loans | $ | 204,316 | $ | 211,737 | $ | 2,296 | $ | 2,005 | $ | (7) | $ | (6) | $ | (17) | $ | (27) | ||||||||||||||||||||||||||||||||||
| Fully-insured loan portfolio | 12,624 | 11,818 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total residential mortgage loan portfolio |
$ | 216,940 | $ | 223,555 | ||||||||||||||||||||||||||||||||||||||||||||||
(1)Outstandings and nonperforming loans exclude loans accounted for under the fair value option.
31 Bank of America
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Home Equity
At September 30, 2021, the home equity portfolio made up seven percent of the consumer portfolio and was comprised of home equity lines of credit (HELOCs), home equity loans and reverse mortgages. HELOCs generally have an initial draw period of 10 years, and after the initial draw period ends, the loans generally convert to 15- or 20-year amortizing loans. We no longer originate home equity loans or reverse mortgages.
At September 30, 2021, 80 percent of the home equity portfolio was in Consumer Banking, 12 percent was in All Other and the remainder of the portfolio was primarily in GWIM. Outstanding balances in the home equity portfolio decreased $5.3 billion during the nine months ended September 30, 2021 primarily due to paydowns outpacing new
originations and draws on existing lines. Of the total home equity portfolio at September 30, 2021 and December 31, 2020, $12.4 billion, or 43 percent, and $13.8 billion, or 40 percent, were in first-lien positions. At September 30, 2021, outstanding balances in the home equity portfolio that were in a second-lien or more junior-lien position and where we also held the first-lien loan totaled $4.8 billion, or 17 percent of our total home equity portfolio.
Unused HELOCs totaled $40.8 billion and $42.3 billion at September 30, 2021 and December 31, 2020. The HELOC utilization rate was 40 percent and 43 percent at September 30, 2021 and December 31, 2020.
Table 21 presents certain home equity portfolio key credit statistics.
| Table 21 |
Home Equity – Key Credit Statistics (1)
|
||||||||||||||||
| (Dollars in millions) | September 30 2021 |
December 31 2020 |
|||||||||||||||
| Outstandings | $ | 29,000 | $ | 34,311 | |||||||||||||
Accruing past due 30 days or more (2)
|
165 | 186 | |||||||||||||||
Nonperforming loans (2, 3)
|
676 | 649 | |||||||||||||||
| Percent of portfolio | |||||||||||||||||
| Refreshed CLTV greater than 90 but less than or equal to 100 | 1 | % | 1 | % | |||||||||||||
| Refreshed CLTV greater than 100 | 1 | 1 | |||||||||||||||
| Refreshed FICO below 620 | 3 | 3 | |||||||||||||||
(1)Outstandings, accruing past due, nonperforming loans and percentages of the portfolio exclude loans accounted for under the fair value option. For information on our interest accrual policies and delinquency status for loan modifications related to the pandemic, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
(2)Accruing past due 30 days or more include $26 million and $25 million and nonperforming loans include $86 million and $88 million of loans where we serviced the underlying first lien at September 30, 2021 and December 31, 2020.
(3)Includes loans that are contractually current which primarily consist of collateral-dependent TDRs, including those that have been discharged in Chapter 7 bankruptcy, junior-lien loans where the underlying first lien is 90 days or more past due, as well as loans that have not yet demonstrated a sustained period of payment performance following a TDR.
Nonperforming outstanding balances in the home equity portfolio increased $27 million during the nine months ended September 30, 2021, as new additions outpaced returns to performing status and paydowns. Of the nonperforming home equity loans at September 30, 2021, $273 million, or 40 percent were current on contractual payments. In addition, $256 million, or 38 percent of nonperforming home equity loans were 180 days or more past due and had been written down to the estimated fair value of the collateral, less costs to sell. Accruing loans that were 30 days or more past due decreased $21 million during the nine months ended September 30, 2021.
Net recoveries increased $14 million to $34 million and $48 million to $93 million for the three and nine months ended September 30, 2021 compared to the same periods in 2020. The increase was driven by favorable portfolio trends due in part to improvement in home prices.
Of the $29.0 billion in total home equity portfolio outstandings at September 30, 2021, as shown in Table 21, 14 percent require interest-only payments. The outstanding balance of HELOCs that have reached the end of their draw period and have entered the amortization period was $7.4 billion at September 30, 2021. The HELOCs that have entered the amortization period have experienced a higher percentage of early stage delinquencies and nonperforming status when compared to the HELOC portfolio as a whole. At September 30, 2021, $103 million, or one percent, of outstanding HELOCs that had entered the amortization period were accruing past due 30
days or more. In addition, at September 30, 2021, $484 million, or seven percent, were nonperforming. Loans that have yet to enter the amortization period in our interest-only portfolio are primarily post-2008 vintages and generally have better credit quality than the previous vintages that had entered the amortization period. We communicate to contractually current customers more than a year prior to the end of their draw period to inform them of the potential change to the payment structure before entering the amortization period, and provide payment options to customers prior to the end of the draw period.
Although we do not actively track how many of our home equity customers pay only the minimum amount due on their home equity loans and lines, we can infer some of this information through a review of our HELOC portfolio that we service and that is still in its revolving period. During the three months ended September 30, 2021, 20 percent of these customers with an outstanding balance did not pay any principal on their HELOCs.
Table 22 presents outstandings, nonperforming balances and net charge-offs by certain state concentrations for the home equity portfolio. In the New York area, the New York-Northern New Jersey-Long Island MSA made up 13 percent of the outstanding home equity portfolio at both September 30, 2021 and December 31, 2020. The Los Angeles-Long Beach-Santa Ana MSA within California made up 11 percent of the outstanding home equity portfolio at both September 30, 2021 and December 31, 2020.
Bank of America 32
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| Table 22 | Home Equity State Concentrations | |||||||||||||||||||||||||||||||||||||||||||||||||
Outstandings (1)
|
Nonperforming (1)
|
Net Charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||
| September 30 2021 |
December 31 2020 |
September 30 2021 |
December 31 2020 |
Three Months Ended September 30 | Nine Months Ended September 30 |
|||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| California | $ | 7,886 | $ | 9,488 | $ | 149 | $ | 143 | $ | (9) | $ | (8) | $ | (31) | $ | (17) | ||||||||||||||||||||||||||||||||||
| Florida | 3,113 | 3,715 | 83 | 80 | (5) | (2) | (16) | (7) | ||||||||||||||||||||||||||||||||||||||||||
| New Jersey | 2,346 | 2,749 | 72 | 67 | (1) | — | (3) | (1) | ||||||||||||||||||||||||||||||||||||||||||
| New York | 2,157 | 2,495 | 101 | 103 | (2) | (1) | (3) | — | ||||||||||||||||||||||||||||||||||||||||||
| Massachusetts | 1,484 | 1,719 | 33 | 32 | (2) | — | (2) | 1 | ||||||||||||||||||||||||||||||||||||||||||
| Other | 12,014 | 14,145 | 238 | 224 | (15) | (9) | (38) | (21) | ||||||||||||||||||||||||||||||||||||||||||
| Total home equity loan portfolio | $ | 29,000 | $ | 34,311 | $ | 676 | $ | 649 | $ | (34) | $ | (20) | $ | (93) | $ | (45) | ||||||||||||||||||||||||||||||||||
(1)Outstandings and nonperforming loans exclude loans accounted for under the fair value option.
Credit Card
At September 30, 2021, 97 percent of the credit card portfolio was managed in Consumer Banking with the remainder in GWIM. Outstandings in the credit card portfolio decreased $1.8 billion during the nine months ended September 30, 2021 to $76.9 billion as increased payments more than offset higher purchase volumes as spending continued to recover. Net charge-offs decreased $188 million to $321 million and $501 million to $1.4 billion during the three and nine months ended September 30, 2021 compared to the same periods in 2020 due to balance declines and the impact of government stimulus
measures, partially offset by charge-offs of certain loans with deferrals that expired in 2020. Credit card loans 30 days or more past due and still accruing interest decreased $755 million, and loans 90 days or more past due and still accruing interest decreased $453 million primarily due to charge-offs of certain loans with deferrals that expired in 2020 and the impact of government stimulus measures.
Unused lines of credit for credit card increased to $359.0 billion at September 30, 2021 from $342.4 billion at December 31, 2020.
Table 23 presents certain state concentrations for the credit card portfolio.
| Table 23 | Credit Card State Concentrations | |||||||||||||||||||||||||||||||||||||||||||||||||
| Outstandings |
Accruing Past Due
90 Days or More (1)
|
Net Charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||
| September 30 2021 |
December 31 2020 |
September 30 2021 |
December 31 2020 |
Three Months Ended September 30 | Nine Months Ended September 30 |
|||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| California | $ | 12,248 | $ | 12,543 | $ | 81 | $ | 166 | $ | 60 | $ | 92 | $ | 273 | $ | 347 | ||||||||||||||||||||||||||||||||||
| Florida | 7,504 | 7,666 | 64 | 135 | 46 | 66 | 205 | 252 | ||||||||||||||||||||||||||||||||||||||||||
| Texas | 6,483 | 6,499 | 44 | 87 | 30 | 45 | 132 | 166 | ||||||||||||||||||||||||||||||||||||||||||
| New York | 4,488 | 4,654 | 32 | 76 | 24 | 43 | 116 | 154 | ||||||||||||||||||||||||||||||||||||||||||
| Washington | 3,840 | 3,685 | 12 | 21 | 7 | 12 | 32 | 47 | ||||||||||||||||||||||||||||||||||||||||||
| Other | 42,306 | 43,661 | 217 | 418 | 154 | 251 | 685 | 978 | ||||||||||||||||||||||||||||||||||||||||||
| Total credit card portfolio | $ | 76,869 | $ | 78,708 | $ | 450 | $ | 903 | $ | 321 | $ | 509 | $ | 1,443 | $ | 1,944 | ||||||||||||||||||||||||||||||||||
(1)For information on our interest accrual policies and delinquency status for loan modifications related to the pandemic, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
Direct/Indirect Consumer
At September 30, 2021, 48 percent of the direct/indirect portfolio was included in Consumer Banking (consumer auto and recreational vehicle lending) and 52 percent was included in GWIM (principally securities-based lending loans). Outstandings
in the direct/indirect portfolio increased by $8.5 billion during the nine months ended September 30, 2021 to $99.8 billion driven by client demand for liquidity and high asset values in the securities-based lending portfolio.
33 Bank of America
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Table 24 presents certain state concentrations for the direct/indirect consumer loan portfolio.
| Table 24 | Direct/Indirect State Concentrations | |||||||||||||||||||||||||||||||||||||||||||||||||
| Outstandings |
Accruing Past Due 90 Days or More (1) |
Net Charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||
| September 30 2021 |
December 31 2020 |
September 30 2021 |
December 31 2020 |
Three Months Ended September 30 | Nine Months Ended September 30 |
|||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| California | $ | 14,225 | $ | 12,248 | $ | 1 | $ | 6 | $ | (2) | $ | 2 | $ | 3 | $ | 13 | ||||||||||||||||||||||||||||||||||
| Florida | 12,590 | 10,891 | 1 | 4 | (2) | 3 | — | 14 | ||||||||||||||||||||||||||||||||||||||||||
| Texas | 9,402 | 8,981 | 1 | 6 | (4) | 4 | 2 | 13 | ||||||||||||||||||||||||||||||||||||||||||
| New York | 7,511 | 6,609 | 1 | 2 | 1 | 2 | 4 | 6 | ||||||||||||||||||||||||||||||||||||||||||
| New Jersey | 3,988 | 3,572 | — | — | — | — | (1) | 1 | ||||||||||||||||||||||||||||||||||||||||||
| Other | 52,129 | 49,062 | 4 | 15 | (11) | 7 | (4) | 37 | ||||||||||||||||||||||||||||||||||||||||||
| Total direct/indirect loan portfolio | $ | 99,845 | $ | 91,363 | $ | 8 | $ | 33 | $ | (18) | $ | 18 | $ | 4 | $ | 84 | ||||||||||||||||||||||||||||||||||
(1)For information on our interest accrual policies and delinquency status for loan modifications related to the pandemic, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity
Table 25 presents nonperforming consumer loans, leases and foreclosed properties activity for the three and nine months ended September 30, 2021 and 2020. During the nine months ended September 30, 2021, nonperforming consumer loans increased $292 million to $3.0 billion primarily driven by consumer real estate deferral activity.
At September 30, 2021, $857 million, or 28 percent of nonperforming loans were 180 days or more past due and had been written down to their estimated property value less costs
to sell. In addition, at September 30, 2021, $1.6 billion, or 52 percent of nonperforming consumer loans were modified and are now current after successful trial periods, or are current loans classified as nonperforming loans in accordance with applicable policies.
Foreclosed properties decreased $36 million during the nine months ended September 30, 2021 to $87 million. Nonperforming loans also include certain loans that have been modified in TDRs where economic concessions have been granted to borrowers experiencing financial difficulties. Nonperforming TDRs are included in Table 25.
| Table 25 | Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity | |||||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 |
|||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
| Nonperforming loans and leases, beginning of period | $ | 3,044 | $ | 2,191 | $ | 2,725 | $ | 2,053 | ||||||||||||||||||
| Additions | 353 | 587 | 1,635 | 1,418 | ||||||||||||||||||||||
| Reductions: | ||||||||||||||||||||||||||
| Paydowns and payoffs | (163) | (113) | (446) | (303) | ||||||||||||||||||||||
| Sales | (1) | — | (3) | (31) | ||||||||||||||||||||||
Returns to performing status (1)
|
(201) | (291) | (839) | (689) | ||||||||||||||||||||||
| Charge-offs | (12) | (13) | (49) | (62) | ||||||||||||||||||||||
| Transfers to foreclosed properties | (3) | (4) | (6) | (29) | ||||||||||||||||||||||
| Total net additions/(reductions) to nonperforming loans and leases | (27) | 166 | 292 | 304 | ||||||||||||||||||||||
Total nonperforming loans and leases, September 30 |
3,017 | 2,357 | 3,017 | 2,357 | ||||||||||||||||||||||
Foreclosed properties, September 30 (2)
|
87 | 135 | 87 | 135 | ||||||||||||||||||||||
Nonperforming consumer loans, leases and foreclosed properties, September 30 |
$ | 3,104 | $ | 2,492 | $ | 3,104 | $ | 2,492 | ||||||||||||||||||
Nonperforming consumer loans and leases as a percentage of outstanding consumer loans and leases (3)
|
0.71 | % | 0.54 | % | ||||||||||||||||||||||
Nonperforming consumer loans, leases and foreclosed properties as a percentage of outstanding consumer loans, leases and foreclosed properties (3)
|
0.73 | 0.57 | ||||||||||||||||||||||||
(1)Consumer loans may be returned to performing status when all principal and interest is current and full repayment of the remaining contractual principal and interest is expected, or when the loan otherwise becomes well-secured and is in the process of collection.
(2)Foreclosed property balances do not include properties insured by certain government-guaranteed loans, principally FHA-insured, of $55 million and $131 million at September 30, 2021 and 2020.
(3)Outstanding consumer loans and leases exclude loans accounted for under the fair value option.
Bank of America 34
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Table 26 presents TDRs for the consumer real estate portfolio. Performing TDR balances are excluded from nonperforming loans and leases in Table 25.
| Table 26 | Consumer Real Estate Troubled Debt Restructurings | |||||||||||||||||||||||||||||||||||||
| September 30, 2021 | December 31, 2020 | |||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Nonperforming | Performing | Total | Nonperforming | Performing | Total | ||||||||||||||||||||||||||||||||
Residential mortgage (1, 2)
|
$ | 1,530 | $ | 2,422 | $ | 3,952 | $ | 1,195 | $ | 2,899 | $ | 4,094 | ||||||||||||||||||||||||||
Home equity (3)
|
265 | 692 | 957 | 248 | 836 | 1,084 | ||||||||||||||||||||||||||||||||
| Total consumer real estate troubled debt restructurings | $ | 1,795 | $ | 3,114 | $ | 4,909 | $ | 1,443 | $ | 3,735 | $ | 5,178 | ||||||||||||||||||||||||||
(1)At September 30, 2021 and December 31, 2020, residential mortgage TDRs deemed collateral dependent totaled $1.7 billion and $1.4 billion, and included $1.4 billion and $1.0 billion of loans classified as nonperforming and $297 million and $361 million of loans classified as performing.
(2)At September 30, 2021 and December 31, 2020, residential mortgage performing TDRs include $1.3 billion and $1.5 billion of loans that were fully-insured.
(3)At September 30, 2021 and December 31, 2020, home equity TDRs deemed collateral dependent totaled $390 million and $407 million, and include $232 million and $216 million of loans classified as nonperforming and $158 million and $191 million of loans classified as performing.
In addition to modifying consumer real estate loans, we work with customers who are experiencing financial difficulty by modifying credit card and other consumer loans. Credit card and other consumer loan modifications generally involve a reduction in the customer’s interest rate on the account and placing the customer on a fixed payment plan not exceeding 60 months.
Modifications of credit card and other consumer loans are made through programs utilizing direct customer contact, but may also utilize external programs. At September 30, 2021 and December 31, 2020, our credit card and other consumer TDR portfolio was $654 million and $701 million, of which $590 million and $614 million were current or less than 30 days past due under the modified terms.
Commercial Portfolio Credit Risk Management
Commercial credit risk is evaluated and managed with the goal that concentrations of credit exposure continue to be aligned with our risk appetite. We review, measure and manage concentrations of credit exposure by industry, product, geography, customer relationship and loan size. We also review, measure and manage commercial real estate loans by geographic location and property type. In addition, within our non-U.S. portfolio, we evaluate exposures by region and by country. Tables 31, 34 and 37 summarize our concentrations. We also utilize syndications of exposure to third parties, loan sales, hedging and other risk mitigation techniques to manage the size and risk profile of the commercial credit portfolio. For more information on our industry concentrations, see Table 34 and Commercial Portfolio Credit Risk Management – Industry Concentrations on page 39.
For more information on our accounting policies regarding delinquencies, nonperforming status, net charge-offs and TDRs for the commercial portfolio as well as interest accrual policies and delinquency status for loan modifications related to the pandemic, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
Commercial Credit Portfolio
During the nine months ended September 30, 2021, commercial credit quality improved as the economic recovery gained momentum amid COVID-19 containment and vaccination progress. Accordingly, charge-offs, nonperforming commercial
loans and reservable criticized utilized exposure declined during this period. Outstanding commercial loans and leases increased $5.2 billion during the nine months ended September 30, 2021 due to growth in commercial and industrial, primarily in Global Markets with most of the increase in investment grade exposures. This increase was largely offset by lower U.S. small
business commercial loans due to PPP forgiveness. For more information on PPP loans, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
Credit quality of commercial real estate borrowers has begun to stabilize in many sectors as economies have reopened. However, certain sectors, including hospitality, while showing signs of improvement, continue to be negatively impacted due to the pandemic. Moreover, many real estate markets, while improving, are still experiencing some disruptions in demand, supply chain challenges and tenant difficulties. Current and future office demand is uncertain as companies evaluate space needs with employment models that utilize a mix of remote and conventional office use.
The commercial allowance for loan and lease losses decreased $2.8 billion during the nine months ended September 30, 2021 to $6.0 billion driven by improvements in the macroeconomic outlook and credit quality. For more information, see Allowance for Credit Losses on page 42.
Total commercial utilized credit exposure decreased $4.9 billion during the nine months ended September 30, 2021 to $615.4 billion primarily driven by lower derivative assets. The utilization rate for loans and leases, standby letters of credit (SBLCs) and financial guarantees, and commercial letters of credit, in the aggregate, was 55 percent at September 30, 2021 and 57 percent at December 31, 2020.
Table 27 presents commercial credit exposure by type for utilized, unfunded and total binding committed credit exposure. Commercial utilized credit exposure includes SBLCs and financial guarantees and commercial letters of credit that have been issued and for which we are legally bound to advance funds under prescribed conditions during a specified time period, and excludes exposure related to trading account assets. Although funds have not yet been advanced, these exposure types are considered utilized for credit risk management purposes.
35 Bank of America
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| Table 27 | Commercial Credit Exposure by Type | |||||||||||||||||||||||||||||||||||||
Commercial Utilized (1)
|
Commercial Unfunded (2, 3, 4)
|
Total Commercial Committed | ||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | September 30 2021 |
December 31 2020 |
September 30 2021 |
December 31 2020 |
September 30 2021 |
December 31 2020 |
||||||||||||||||||||||||||||||||
| Loans and leases | $ | 504,264 | $ | 499,065 | $ | 446,891 | $ | 404,740 | $ | 951,155 | $ | 903,805 | ||||||||||||||||||||||||||
Derivative assets (5)
|
40,829 | 47,179 | — | — | 40,829 | 47,179 | ||||||||||||||||||||||||||||||||
| Standby letters of credit and financial guarantees | 33,766 | 34,616 | 829 | 538 | 34,595 | 35,154 | ||||||||||||||||||||||||||||||||
| Debt securities and other investments | 20,738 | 22,618 | 5,448 | 4,827 | 26,186 | 27,445 | ||||||||||||||||||||||||||||||||
| Loans held-for-sale | 7,440 | 8,378 | 24,674 | 9,556 | 32,114 | 17,934 | ||||||||||||||||||||||||||||||||
| Operating leases | 5,885 | 6,424 | — | — | 5,885 | 6,424 | ||||||||||||||||||||||||||||||||
| Commercial letters of credit | 1,299 | 855 | 511 | 280 | 1,810 | 1,135 | ||||||||||||||||||||||||||||||||
| Other | 1,146 | 1,168 | — | — | 1,146 | 1,168 | ||||||||||||||||||||||||||||||||
| Total | $ | 615,367 | $ | 620,303 | $ | 478,353 | $ | 419,941 | $ | 1,093,720 | $ | 1,040,244 | ||||||||||||||||||||||||||
(1)Commercial utilized exposure includes loans of $7.0 billion and $5.9 billion and issued letters of credit with a notional amount of $86 million and $89 million accounted for under the fair value option at September 30, 2021 and December 31, 2020.
(2)Commercial unfunded exposure includes commitments accounted for under the fair value option with a notional amount of $4.9 billion and $3.9 billion at September 30, 2021 and December 31, 2020.
(3)Excludes unused business card lines, which are not legally binding.
(4)Includes the notional amount of unfunded legally binding lending commitments net of amounts distributed (i.e., syndicated or participated) to other financial institutions. The distributed amounts were $10.3 billion and $10.5 billion at September 30, 2021 and December 31, 2020.
(5)Derivative assets are carried at fair value, reflect the effects of legally enforceable master netting agreements and have been reduced by cash collateral of $31.2 billion and $42.5 billion at September 30, 2021 and December 31, 2020. Not reflected in utilized and committed exposure is additional non-cash derivative collateral held of $39.9 billion and $39.3 billion at September 30, 2021 and December 31, 2020, which consists primarily of other marketable securities.
Nonperforming commercial loans decreased $530 million and commercial reservable criticized utilized exposure decreased $14.5 billion, which was broad-based across industries. Table 28 presents our commercial loans and leases portfolio and related credit quality information at September 30, 2021 and December 31, 2020.
| Table 28 | Commercial Credit Quality | |||||||||||||||||||||||||||||||||||||
| Outstandings | Nonperforming | Accruing Past Due 90 Days or More |
||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | September 30 2021 |
December 31 2020 |
September 30 2021 |
December 31 2020 |
September 30 2021 |
December 31 2020 |
||||||||||||||||||||||||||||||||
| Commercial and industrial: | ||||||||||||||||||||||||||||||||||||||
| U.S. commercial | $ | 295,927 | $ | 288,728 | $ | 909 | $ | 1,243 | $ | 84 | $ | 228 | ||||||||||||||||||||||||||
| Non-U.S. commercial | 102,850 | 90,460 | 272 | 418 | 60 | 10 | ||||||||||||||||||||||||||||||||
| Total commercial and industrial | 398,777 | 379,188 | 1,181 | 1,661 | 144 | 238 | ||||||||||||||||||||||||||||||||
| Commercial real estate | 60,723 | 60,364 | 414 | 404 | 5 | 6 | ||||||||||||||||||||||||||||||||
| Commercial lease financing | 15,044 | 17,098 | 70 | 87 | 11 | 25 | ||||||||||||||||||||||||||||||||
| 474,544 | 456,650 | 1,665 | 2,152 | 160 | 269 | |||||||||||||||||||||||||||||||||
U.S. small business commercial (1)
|
22,770 | 36,469 | 32 | 75 | 64 | 115 | ||||||||||||||||||||||||||||||||
| Commercial loans excluding loans accounted for under the fair value option | 497,314 | 493,119 | $ | 1,697 | $ | 2,227 | $ | 224 | $ | 384 | ||||||||||||||||||||||||||||
Loans accounted for under the fair value option (2)
|
6,950 | 5,946 | ||||||||||||||||||||||||||||||||||||
| Total commercial loans and leases | $ | 504,264 | $ | 499,065 | ||||||||||||||||||||||||||||||||||
(1)Includes card-related products.
(2)Commercial loans accounted for under the fair value option include U.S. commercial of $4.5 billion and $2.9 billion and non-U.S. commercial of $2.4 billion and $3.0 billion at September 30, 2021 and December 31, 2020. For more information on the fair value option, see Note 15 – Fair Value Option to the Consolidated Financial Statements.
Table 29 presents net charge-offs and related ratios for our commercial loans and leases for the three and nine months ended September 30, 2021 and 2020.
| Table 29 | Commercial Net Charge-offs and Related Ratios | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net Charge-offs |
Net Charge-off Ratios (1)
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. commercial | $ | 15 | $ | 154 | $ | (4) | $ | 536 | 0.02 | % | 0.20 | % | — | % | 0.23 | % | ||||||||||||||||||||||||||||||||||
| Non-U.S. commercial | 1 | 57 | 41 | 90 | — | 0.23 | 0.06 | 0.11 | ||||||||||||||||||||||||||||||||||||||||||
| Total commercial and industrial | 16 | 211 | 37 | 626 | 0.02 | 0.21 | 0.01 | 0.20 | ||||||||||||||||||||||||||||||||||||||||||
| Commercial real estate | — | 106 | 28 | 169 | — | 0.66 | 0.06 | 0.35 | ||||||||||||||||||||||||||||||||||||||||||
| Commercial lease financing | (1) | 24 | (1) | 60 | — | 0.53 | — | 0.43 | ||||||||||||||||||||||||||||||||||||||||||
| 15 | 341 | 64 | 855 | 0.01 | 0.28 | 0.02 | 0.23 | |||||||||||||||||||||||||||||||||||||||||||
| U.S. small business commercial | 119 | 67 | 282 | 215 | 1.76 | 0.69 | 1.16 | 1.01 | ||||||||||||||||||||||||||||||||||||||||||
| Total commercial | $ | 134 | $ | 408 | $ | 346 | $ | 1,070 | 0.11 | 0.31 | 0.09 | 0.27 | ||||||||||||||||||||||||||||||||||||||
(1)Net charge-off ratios are calculated as annualized net charge-offs divided by average outstanding loans and leases excluding loans accounted for under the fair value option.
Bank of America 36
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Table 30 presents commercial reservable criticized utilized exposure by loan type. Criticized exposure corresponds to the Special Mention, Substandard and Doubtful asset categories as defined by regulatory authorities. Total commercial reservable criticized utilized exposure decreased $14.5 billion during the nine months ended September 30, 2021, which was broad-based across industries. At September 30, 2021 and December 31, 2020, 85 percent and 79 percent of commercial reservable criticized utilized exposure was secured.
| Table 30 |
Commercial Reservable Criticized Utilized Exposure (1, 2)
|
|||||||||||||||||||||||||
| (Dollars in millions) | September 30, 2021 | December 31, 2020 | ||||||||||||||||||||||||
| Commercial and industrial: | ||||||||||||||||||||||||||
| U.S. commercial | $ | 12,275 | 3.78 | % | $ | 21,388 | 6.83 | % | ||||||||||||||||||
| Non-U.S. commercial | 2,904 | 2.69 | 5,051 | 5.03 | ||||||||||||||||||||||
| Total commercial and industrial | 15,179 | 3.51 | 26,439 | 6.40 | ||||||||||||||||||||||
| Commercial real estate | 7,933 | 12.70 | 10,213 | 16.42 | ||||||||||||||||||||||
| Commercial lease financing | 404 | 2.68 | 714 | 4.18 | ||||||||||||||||||||||
| 23,516 | 4.61 | 37,366 | 7.59 | |||||||||||||||||||||||
| U.S. small business commercial | 626 | 2.75 | 1,300 | 3.56 | ||||||||||||||||||||||
| Total commercial reservable criticized utilized exposure | $ | 24,142 | 4.53 | $ | 38,666 | 7.31 | ||||||||||||||||||||
(1)Total commercial reservable criticized utilized exposure includes loans and leases of $22.9 billion and $36.6 billion and commercial letters of credit of $1.2 billion and $2.1 billion at September 30, 2021 and December 31, 2020.
(2)Percentages are calculated as commercial reservable criticized utilized exposure divided by total commercial reservable utilized exposure for each exposure category.
Commercial and Industrial
Commercial and industrial loans include U.S. commercial and non-U.S. commercial portfolios.
U.S. Commercial
At September 30, 2021, 62 percent of the U.S. commercial loan portfolio, excluding small business, was managed in Global Banking, 21 percent in Global Markets, 16 percent in GWIM (loans that provide financing for asset purchases, business investments and other liquidity needs for high net worth clients) and the remainder primarily in Consumer Banking. U.S. commercial loans increased $7.2 billion during the nine months ended September 30, 2021 driven by Global Markets. Reservable criticized utilized exposure decreased $9.1 billion, which was broad-based across industries.
Non-U.S. Commercial
At September 30, 2021, 71 percent of the non-U.S. commercial loan portfolio was managed in Global Banking and 29 percent in Global Markets. Non-U.S. commercial loans increased $12.4 billion during the nine months ended September 30, 2021 primarily in Global Markets. For information on the non-U.S. commercial portfolio, see Non-U.S. Portfolio on page 41.
Commercial Real Estate
Commercial real estate primarily includes commercial loans secured by non-owner-occupied real estate and is dependent on the sale or lease of the real estate as the primary source of repayment. Outstanding loans remained relatively unchanged at $60.7 billion as of September 30, 2021. The portfolio remains diversified across property types and geographic regions. California represented the largest state concentration at 22 percent and 23 percent of the commercial real estate portfolio at September 30, 2021 and December 31, 2020. The commercial real estate portfolio is predominantly managed in Global Banking and consists of loans made primarily to public and private developers, and commercial real estate firms.
For the three and nine months ended September 30, 2021 and 2020, we continued to see low default rates and varying degrees of improvement in the portfolio. We use a number of proactive risk mitigation initiatives to reduce adversely rated exposure in the commercial real estate portfolio, including transfers of deteriorating exposures for management by independent special asset officers and the pursuit of loan restructurings or asset sales to achieve the best results for our customers and the Corporation.
37 Bank of America
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Table 31 presents outstanding commercial real estate loans by geographic region, based on the geographic location of the collateral, and by property type.
| Table 31 | Outstanding Commercial Real Estate Loans | |||||||||||||
| (Dollars in millions) | September 30 2021 |
December 31 2020 |
||||||||||||
| By Geographic Region | ||||||||||||||
| California | $ | 13,559 | $ | 14,028 | ||||||||||
| Northeast | 13,057 | 11,628 | ||||||||||||
| Southwest | 7,762 | 8,551 | ||||||||||||
| Southeast | 6,630 | 6,588 | ||||||||||||
| Florida | 4,316 | 4,294 | ||||||||||||
| Illinois | 2,906 | 2,594 | ||||||||||||
| Midwest | 2,487 | 3,483 | ||||||||||||
| Midsouth | 2,265 | 2,370 | ||||||||||||
| Northwest | 1,574 | 1,634 | ||||||||||||
| Non-U.S. | 4,101 | 3,187 | ||||||||||||
| Other | 2,066 | 2,007 | ||||||||||||
Total outstanding commercial real estate loans |
$ | 60,723 | $ | 60,364 | ||||||||||
| By Property Type | ||||||||||||||
| Non-residential | ||||||||||||||
| Office | $ | 18,327 | $ | 17,667 | ||||||||||
| Industrial / Warehouse | 9,292 | 8,330 | ||||||||||||
| Multi-family rental | 7,780 | 7,051 | ||||||||||||
| Shopping centers /Retail | 6,642 | 7,931 | ||||||||||||
| Hotel / Motels | 6,364 | 7,226 | ||||||||||||
| Unsecured | 3,137 | 2,336 | ||||||||||||
| Multi-use | 1,294 | 1,460 | ||||||||||||
| Other | 6,700 | 7,146 | ||||||||||||
| Total non-residential | 59,536 | 59,147 | ||||||||||||
| Residential | 1,187 | 1,217 | ||||||||||||
Total outstanding commercial real estate loans |
$ | 60,723 | $ | 60,364 | ||||||||||
U.S. Small Business Commercial
The U.S. small business commercial loan portfolio is comprised of small business card loans and small business loans primarily managed in Consumer Banking, and includes $8.4 billion and $22.7 billion of PPP loans outstanding at September 30, 2021 and December 31, 2020. The decline of $14.3 billion in PPP loans during the nine months ended September 30, 2021 was due to repayment of the loans by the Small Business
Administration under the terms of the program. Excluding PPP, credit card-related products were 51 percent and 50 percent of the U.S. small business commercial portfolio at September 30, 2021 and December 31, 2020 and represented 100 percent and 96 percent of net charge-offs for the three and nine months ended September 30, 2021 compared to 93 percent for the three and nine months ended September 30, 2020.
Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity
Table 32 presents the nonperforming commercial loans, leases and foreclosed properties activity during the three and nine months ended September 30, 2021 and 2020. Nonperforming loans do not include loans accounted for under the fair value option. During the nine months ended September 30, 2021, nonperforming commercial loans and leases decreased $530 million to $1.7 billion. At September 30, 2021, 82 percent of commercial nonperforming loans, leases and foreclosed properties were secured and 65 percent were contractually current. Commercial nonperforming loans were carried at 87 percent of their unpaid principal balance, as the carrying value of these loans has been reduced to the estimated collateral value less costs to sell.
Bank of America 38
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| Table 32 |
Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity (1, 2)
|
|||||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
| Nonperforming loans and leases, beginning of period | $ | 1,863 | $ | 2,202 | $ | 2,227 | $ | 1,499 | ||||||||||||||||||
| Additions | 275 | 656 | 1,250 | 2,326 | ||||||||||||||||||||||
| Reductions: | ||||||||||||||||||||||||||
| Paydowns | (297) | (216) | (873) | (605) | ||||||||||||||||||||||
| Sales | (29) | (50) | (128) | (76) | ||||||||||||||||||||||
Returns to performing status (3)
|
(82) | (21) | (169) | (45) | ||||||||||||||||||||||
| Charge-offs | (33) | (367) | (219) | (895) | ||||||||||||||||||||||
| Transfers to loans held-for-sale | — | (11) | (391) | (11) | ||||||||||||||||||||||
| Total net additions (reductions) to nonperforming loans and leases | (166) | (9) | (530) | 694 | ||||||||||||||||||||||
| Total nonperforming loans and leases, September 30 | 1,697 | 2,193 | 1,697 | 2,193 | ||||||||||||||||||||||
| Foreclosed properties, September 30 | 30 | 45 | 30 | 45 | ||||||||||||||||||||||
| Nonperforming commercial loans, leases and foreclosed properties, September 30 | $ | 1,727 | $ | 2,238 | $ | 1,727 | $ | 2,238 | ||||||||||||||||||
Nonperforming commercial loans and leases as a percentage of outstanding commercial loans and leases (4)
|
0.34 | % | 0.43 | % | ||||||||||||||||||||||
Nonperforming commercial loans, leases and foreclosed properties as a percentage of outstanding commercial loans, leases and foreclosed properties (4)
|
0.35 | 0.44 | ||||||||||||||||||||||||
(1)Balances do not include nonperforming loans held-for-sale of $279 million and $184 million at September 30, 2021 and 2020.
(2)Includes U.S. small business commercial activity. Small business card loans are excluded as they are not classified as nonperforming.
(3)Commercial loans and leases may be returned to performing status when all principal and interest is current and full repayment of the remaining contractual principal and interest is expected, or when the loan otherwise becomes well-secured and is in the process of collection. TDRs are generally classified as performing after a sustained period of demonstrated payment performance.
(4)Outstanding commercial loans exclude loans accounted for under the fair value option.
Table 33 presents our commercial TDRs by product type and performing status. U.S. small business commercial TDRs are comprised of renegotiated small business card loans and small business loans. The renegotiated small business card loans are
not classified as nonperforming as they are charged off no later than the end of the month in which the loan becomes 180 days past due.
| Table 33 | Commercial Troubled Debt Restructurings | |||||||||||||||||||||||||||||||||||||
| September 30, 2021 | December 31, 2020 | |||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Nonperforming | Performing | Total | Nonperforming | Performing | Total | ||||||||||||||||||||||||||||||||
| Commercial and industrial: | ||||||||||||||||||||||||||||||||||||||
| U.S. commercial | $ | 377 | $ | 776 | $ | 1,153 | $ | 509 | $ | 850 | $ | 1,359 | ||||||||||||||||||||||||||
| Non-U.S. commercial | 65 | 30 | 95 | 49 | 119 | 168 | ||||||||||||||||||||||||||||||||
| Total commercial and industrial | 442 | 806 | 1,248 | 558 | 969 | 1,527 | ||||||||||||||||||||||||||||||||
| Commercial real estate | 158 | 440 | 598 | 137 | — | 137 | ||||||||||||||||||||||||||||||||
| Commercial lease financing | 34 | 8 | 42 | 42 | 2 | 44 | ||||||||||||||||||||||||||||||||
| 634 | 1,254 | 1,888 | 737 | 971 | 1,708 | |||||||||||||||||||||||||||||||||
| U.S. small business commercial | — | 35 | 35 | — | 29 | 29 | ||||||||||||||||||||||||||||||||
Total commercial troubled debt restructurings |
$ | 634 | $ | 1,289 | $ | 1,923 | $ | 737 | $ | 1,000 | $ | 1,737 | ||||||||||||||||||||||||||
Industry Concentrations
Table 34 presents commercial committed and utilized credit exposure by industry. For information on net notional credit protection purchased to hedge funded and unfunded exposures for which we elected the fair value option, as well as certain other credit exposures, see Commercial Portfolio Credit Risk Management – Risk Mitigation.
Our commercial credit exposure is diversified across a broad range of industries. Total commercial committed exposure increased $53.5 billion, or five percent, during the nine months ended September 30, 2021 to $1.1 trillion. The increase in commercial committed exposure was concentrated in Asset managers and funds, Finance companies, Capital goods and Individuals and trusts industry sectors. Increases were partially offset by decreased exposure to the Government and public education and Automobiles and components industry sectors.
For information on industry limits, see Commercial Portfolio Credit Risk Management – Industry Concentrations in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K.
Asset managers and funds, our largest industry concentration with committed exposure of $132.2 billion, increased $31.9 billion, or 32 percent, during the nine months
ended September 30, 2021, which was primarily driven by secured investment grade exposures.
Real estate, our second largest industry concentration with committed exposure of $94.5 billion, increased $2.7 billion, or three percent, during the nine months ended September 30, 2021. For more information on the commercial real estate and related portfolios, see Commercial Portfolio Credit Risk Management – Commercial Real Estate on page 37.
Capital goods, our third largest industry concentration with committed exposure of $87.0 billion, increased $6.2 billion, or eight percent, during the nine months ended September 30, 2021 with the growth largely occurring in building products, machinery and trading companies and distributors.
Given the widespread impact of the pandemic on the U.S.
and global economy, a number of industries have been and may continue to be adversely impacted. We continue to monitor all industries, particularly higher risk industries that are experiencing or could experience a more significant impact to their financial condition. For more information on the pandemic, see Executive Summary – Recent Developments – COVID-19 Pandemic on page 3.
39 Bank of America
|
||||||||
| Table 34 |
Commercial Credit Exposure by Industry (1)
|
|||||||||||||||||||||||||
| Commercial Utilized |
Total Commercial
Committed (2)
|
|||||||||||||||||||||||||
| (Dollars in millions) | September 30 2021 |
December 31 2020 |
September 30 2021 |
December 31 2020 |
||||||||||||||||||||||
| Asset managers & funds | $ | 84,420 | $ | 67,360 | $ | 132,205 | $ | 100,296 | ||||||||||||||||||
Real estate (3)
|
67,925 | 68,967 | 94,462 | 91,730 | ||||||||||||||||||||||
| Capital goods | 40,501 | 39,807 | 87,011 | 80,815 | ||||||||||||||||||||||
| Finance companies | 49,979 | 46,948 | 78,110 | 70,004 | ||||||||||||||||||||||
| Healthcare equipment and services | 30,442 | 33,488 | 59,632 | 57,540 | ||||||||||||||||||||||
| Materials | 24,629 | 24,516 | 53,967 | 50,757 | ||||||||||||||||||||||
| Government & public education | 37,468 | 41,669 | 49,730 | 56,212 | ||||||||||||||||||||||
| Consumer services | 27,856 | 31,993 | 48,559 | 47,997 | ||||||||||||||||||||||
| Retailing | 22,882 | 23,700 | 47,037 | 48,306 | ||||||||||||||||||||||
| Food, beverage and tobacco | 21,813 | 22,755 | 44,508 | 44,417 | ||||||||||||||||||||||
| Commercial Services And Supplies | 19,192 | 21,107 | 38,222 | 38,092 | ||||||||||||||||||||||
| Individuals And Trusts | 28,379 | 24,727 | 38,119 | 34,036 | ||||||||||||||||||||||
| Energy | 14,850 | 13,930 | 33,378 | 32,974 | ||||||||||||||||||||||
| Utilities | 14,475 | 12,387 | 32,975 | 29,234 | ||||||||||||||||||||||
| Transportation | 21,862 | 23,126 | 32,753 | 33,082 | ||||||||||||||||||||||
| Media | 12,450 | 12,632 | 26,521 | 24,120 | ||||||||||||||||||||||
| Technology hardware and equipment | 9,866 | 9,935 | 25,520 | 24,196 | ||||||||||||||||||||||
| Software and services | 9,553 | 10,853 | 24,549 | 22,524 | ||||||||||||||||||||||
| Global commercial banks | 19,017 | 20,544 | 21,168 | 22,595 | ||||||||||||||||||||||
| Consumer durables and apparel | 9,028 | 9,232 | 20,243 | 20,223 | ||||||||||||||||||||||
| Telecommunication services | 8,435 | 9,411 | 19,072 | 15,605 | ||||||||||||||||||||||
| Pharmaceuticals and biotechnology | 4,534 | 4,830 | 17,672 | 15,901 | ||||||||||||||||||||||
| Automobiles and components | 9,104 | 10,792 | 16,967 | 20,575 | ||||||||||||||||||||||
| Vehicle dealers | 9,282 | 15,028 | 15,247 | 18,696 | ||||||||||||||||||||||
| Insurance | 4,977 | 5,772 | 13,381 | 13,277 | ||||||||||||||||||||||
| Food and staples retailing | 5,322 | 5,209 | 11,424 | 11,795 | ||||||||||||||||||||||
| Financial markets infrastructure (clearinghouses) | 3,680 | 4,939 | 5,905 | 8,648 | ||||||||||||||||||||||
| Religious and social organizations | 3,446 | 4,646 | 5,383 | 6,597 | ||||||||||||||||||||||
| Total commercial credit exposure by industry | $ | 615,367 | $ | 620,303 | $ | 1,093,720 | $ | 1,040,244 | ||||||||||||||||||
(1)Includes U.S. small business commercial exposure.
(2)Includes the notional amount of unfunded legally binding lending commitments net of amounts distributed (i.e., syndicated or participated) to other financial institutions. The distributed amounts were $10.3 billion and $10.5 billion at September 30, 2021 and December 31, 2020.
(3)Industries are viewed from a variety of perspectives to best isolate the perceived risks. For purposes of this table, the real estate industry is defined based on the primary business activity of the borrowers or counterparties using operating cash flows and primary source of repayment as key factors.
Risk Mitigation
We purchase credit protection to cover the funded portion as well as the unfunded portion of certain credit exposures. To lower the cost of obtaining our desired credit protection levels, we may add credit exposure within an industry, borrower or counterparty group by selling protection.
At September 30, 2021 and December 31, 2020, net notional credit default protection purchased in our credit derivatives portfolio to hedge our funded and unfunded exposures for which we elected the fair value option, as well as certain other credit exposures, was $3.7 billion and $4.2 billion. For these same positions, we recorded net losses of $18 million and $86 million for the three and nine months ended September 30, 2021 compared to net losses of $104 million and $106 million for the same periods in 2020. The gains and losses on these instruments were offset by gains and
losses on the related exposures. The Value-at-Risk (VaR) results for these exposures are included in the fair value option portfolio information in Table 40. For more information, see Trading Risk Management on page 44.
Tables 35 and 36 present the maturity profiles and the credit exposure debt ratings of the net credit default protection portfolio at September 30, 2021 and December 31, 2020.
| Table 35 | Net Credit Default Protection by Maturity | |||||||||||||
| September 30 2021 |
December 31 2020 |
|||||||||||||
| Less than or equal to one year | 37 | % | 65 | % | ||||||||||
Greater than one year and less than or equal to five years |
60 | 34 | ||||||||||||
| Greater than five years | 3 | 1 | ||||||||||||
| Total net credit default protection | 100 | % | 100 | % | ||||||||||
Bank of America 40
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| Table 36 | Net Credit Default Protection by Credit Exposure Debt Rating | |||||||||||||||||||||||||
Net Notional (1) |
Percent of Total |
Net Notional (1) |
Percent of Total |
|||||||||||||||||||||||
| (Dollars in millions) | September 30, 2021 | December 31, 2020 | ||||||||||||||||||||||||
Ratings (2, 3)
|
||||||||||||||||||||||||||
| A | $ | (350) | 9.4 | % | $ | (250) | 6.0 | % | ||||||||||||||||||
| BBB | (1,423) | 38.3 | (1,856) | 44.5 | ||||||||||||||||||||||
| BB | (854) | 23.0 | (1,363) | 32.7 | ||||||||||||||||||||||
| B | (650) | 17.5 | (465) | 11.2 | ||||||||||||||||||||||
| CCC and below | (138) | 3.7 | (182) | 4.4 | ||||||||||||||||||||||
NR (4)
|
(303) | 8.1 | (54) | 1.2 | ||||||||||||||||||||||
|
Total net credit
default protection
|
$ | (3,718) | 100.0 | % | $ | (4,170) | 100.0 | % | ||||||||||||||||||
(1)Represents net credit default protection purchased.
(2)Ratings are refreshed on a quarterly basis.
(3)Ratings of BBB- or higher are considered to meet the definition of investment grade.
(4)NR is comprised of index positions held and any names that have not been rated.
For more information on credit derivatives and counterparty credit risk valuation adjustments, see Note 3 – Derivatives to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
Non-U.S. Portfolio
Our non-U.S. credit and trading portfolios are subject to country risk. We define country risk as the risk of loss from unfavorable economic and political conditions, currency fluctuations, social instability and changes in government policies. A risk management framework is in place to measure, monitor and manage non-U.S. risk and exposures. In addition to the direct risk of doing business in a country, we also are exposed to indirect country risks (e.g., related to the collateral received on secured financing transactions or related to client clearing activities). These indirect exposures are managed in the normal course of business through credit, market and operational risk governance rather than through country risk governance. For more information on our non-U.S. credit and trading portfolios, see Non-U.S. Portfolio in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K.
Table 37 presents our 20 largest non-U.S. country exposures at September 30, 2021. These exposures accounted for 91 percent and 90 percent of our total non-U.S. exposure at September 30, 2021 and December 31, 2020. Net country exposure for these 20 countries increased $26.1 billion during the nine months ended September 30, 2021. The majority of the increase was due to higher deposits with central banks in Japan and Ireland, and increased corporate exposure in Canada, Spain and Sweden.
| Table 37 | Top 20 Non-U.S. Countries Exposure | |||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Funded Loans and Loan Equivalents |
Unfunded Loan Commitments |
Net Counterparty Exposure |
Securities/ Other Investments |
Country Exposure at September 30 2021 |
Hedges and Credit Default Protection | Net Country Exposure at September 30 2021 |
Increase (Decrease) from December 31 2020 |
||||||||||||||||||||||||||||||||||||||||||
| United Kingdom | $ | 31,193 | $ | 17,767 | $ | 6,891 | $ | 2,903 | $ | 58,754 | $ | (1,135) | $ | 57,619 | $ | (1,853) | ||||||||||||||||||||||||||||||||||
| Germany | 23,506 | 11,439 | 1,404 | 1,704 | 38,053 | (1,775) | 36,278 | (8,625) | ||||||||||||||||||||||||||||||||||||||||||
| Canada | 8,249 | 12,936 | 1,853 | 3,641 | 26,679 | (363) | 26,316 | 5,182 | ||||||||||||||||||||||||||||||||||||||||||
| Japan | 19,811 | 1,412 | 2,663 | 1,921 | 25,807 | (704) | 25,103 | 7,607 | ||||||||||||||||||||||||||||||||||||||||||
| France | 12,673 | 8,668 | 1,211 | 3,012 | 25,564 | (871) | 24,693 | 3,902 | ||||||||||||||||||||||||||||||||||||||||||
| Australia | 8,139 | 6,462 | 717 | 2,767 | 18,085 | (176) | 17,909 | 4,822 | ||||||||||||||||||||||||||||||||||||||||||
| China | 10,103 | 225 | 954 | 1,009 | 12,291 | (372) | 11,919 | (1,501) | ||||||||||||||||||||||||||||||||||||||||||
| Brazil | 6,188 | 1,005 | 446 | 4,123 | 11,762 | (180) | 11,582 | 1,289 | ||||||||||||||||||||||||||||||||||||||||||
| Netherlands | 6,006 | 3,412 | 861 | 1,007 | 11,286 | (446) | 10,840 | 1,156 | ||||||||||||||||||||||||||||||||||||||||||
| Singapore | 3,923 | 503 | 302 | 5,443 | 10,171 | (54) | 10,117 | 835 | ||||||||||||||||||||||||||||||||||||||||||
| Switzerland | 5,167 | 3,084 | 240 | 392 | 8,883 | (258) | 8,625 | 1,730 | ||||||||||||||||||||||||||||||||||||||||||
| South Korea | 5,536 | 861 | 678 | 1,414 | 8,489 | (141) | 8,348 | (203) | ||||||||||||||||||||||||||||||||||||||||||
| Ireland | 6,765 | 1,021 | 152 | 191 | 8,129 | (45) | 8,084 | 3,919 | ||||||||||||||||||||||||||||||||||||||||||
| Spain | 2,715 | 4,233 | 461 | 931 | 8,340 | (393) | 7,947 | 3,131 | ||||||||||||||||||||||||||||||||||||||||||
| India | 5,596 | 171 | 464 | 1,739 | 7,970 | (190) | 7,780 | (31) | ||||||||||||||||||||||||||||||||||||||||||
| Hong Kong | 5,656 | 225 | 450 | 1,143 | 7,474 | (18) | 7,456 | 919 | ||||||||||||||||||||||||||||||||||||||||||
| Sweden | 1,163 | 5,355 | 212 | 322 | 7,052 | (142) | 6,910 | 4,354 | ||||||||||||||||||||||||||||||||||||||||||
| Mexico | 4,247 | 1,374 | 119 | 778 | 6,518 | (296) | 6,222 | (65) | ||||||||||||||||||||||||||||||||||||||||||
| Italy | 2,564 | 1,688 | 515 | 1,492 | 6,259 | (563) | 5,696 | 4 | ||||||||||||||||||||||||||||||||||||||||||
| Belgium | 2,643 | 1,291 | 355 | 364 | 4,653 | (202) | 4,451 | (516) | ||||||||||||||||||||||||||||||||||||||||||
Total top 20 non-U.S. countries exposure |
$ | 171,843 | $ | 83,132 | $ | 20,948 | $ | 36,296 | $ | 312,219 | $ | (8,324) | $ | 303,895 | $ | 26,056 | ||||||||||||||||||||||||||||||||||
In light of the global pandemic and considerations related to the ongoing economic recovery, including supply chain disruptions and inflationary pressures, we continue to manage our non-U.S. exposure closely in impacted regions while supporting the needs of our clients. While vaccines have become more widely available in certain countries, the
magnitude and duration of the pandemic and its full impact on the global economy continue to be highly uncertain. For more information on the pandemic, see Item 1A. Risk Factors – Coronavirus Disease and Executive Summary – Recent Developments – COVID-19 Pandemic of the Corporation’s 2020 Annual Report on Form 10-K.
41 Bank of America
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||||||||
Allowance for Credit Losses
The allowance for credit losses decreased $6.0 billion from December 31, 2020 to $14.7 billion at September 30, 2021, which included a $3.1 billion reserve decrease related to the commercial portfolio and a $2.9 billion reserve decrease related to the consumer portfolio. The decreases were primarily driven
by improvements in the macroeconomic outlook and credit quality.
Table 38 presents an allocation of the allowance for credit losses by product type for September 30, 2021 and December 31, 2020.
| Table 38 | Allocation of the Allowance for Credit Losses by Product Type | |||||||||||||||||||||||||||||||||||||
| Amount | Percent of Total |
Percent of
Loans and Leases
Outstanding (1)
|
Amount | Percent of Total |
Percent of
Loans and Leases
Outstanding (1)
|
|||||||||||||||||||||||||||||||||
| (Dollars in millions) | September 30, 2021 | December 31, 2020 | ||||||||||||||||||||||||||||||||||||
| Allowance for loan and lease losses | ||||||||||||||||||||||||||||||||||||||
| Residential mortgage | $ | 353 | 2.68 | % | 0.16 | % | $ | 459 | 2.44 | % | 0.21 | % | ||||||||||||||||||||||||||
| Home equity | 202 | 1.54 | 0.70 | 399 | 2.12 | 1.16 | ||||||||||||||||||||||||||||||||
| Credit card | 6,055 | 46.04 | 7.88 | 8,420 | 44.79 | 10.70 | ||||||||||||||||||||||||||||||||
| Direct/Indirect consumer | 541 | 4.11 | 0.54 | 752 | 4.00 | 0.82 | ||||||||||||||||||||||||||||||||
| Other consumer | 43 | 0.33 | n/m | 41 | 0.22 | n/m | ||||||||||||||||||||||||||||||||
| Total consumer | 7,194 | 54.70 | 1.70 | 10,071 | 53.57 | 2.35 | ||||||||||||||||||||||||||||||||
U.S. commercial (2)
|
3,235 | 24.59 | 1.02 | 5,043 | 26.82 | 1.55 | ||||||||||||||||||||||||||||||||
| Non-U.S. commercial | 1,032 | 7.84 | 1.00 | 1,241 | 6.60 | 1.37 | ||||||||||||||||||||||||||||||||
| Commercial real estate | 1,621 | 12.32 | 2.67 | 2,285 | 12.15 | 3.79 | ||||||||||||||||||||||||||||||||
| Commercial lease financing | 73 | 0.55 | 0.48 | 162 | 0.86 | 0.95 | ||||||||||||||||||||||||||||||||
| Total commercial | 5,961 | 45.30 | 1.20 | 8,731 | 46.43 | 1.77 | ||||||||||||||||||||||||||||||||
| Allowance for loan and lease losses | 13,155 | 100.00 | % | 1.43 | 18,802 | 100.00 | % | 2.04 | ||||||||||||||||||||||||||||||
| Reserve for unfunded lending commitments | 1,538 | 1,878 | ||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | $ | 14,693 | $ | 20,680 | ||||||||||||||||||||||||||||||||||
(1)Ratios are calculated as allowance for loan and lease losses as a percentage of loans and leases outstanding excluding loans accounted for under the fair value option.
(2)Includes allowance for loan and lease losses for U.S. small business commercial loans of $1.4 billion and $1.5 billion at September 30, 2021 and December 31, 2020.
n/m = not meaningful
Net charge-offs for the three and nine months ended September 30, 2021 were $463 million and $1.9 billion compared to $972 million and $3.2 billion for the same periods in 2020 driven by decreases across most products. The provision for credit losses decreased $2.0 billion to a $624 million benefit, and $15.4 billion to a $4.1 billion benefit, for the three and nine months ended September 30, 2021 compared to the same periods in 2020. The allowance for credit losses had a reserve release of $6.0 billion for the nine months ended September 30, 2021, primarily driven by improvements in the macroeconomic outlook and credit quality. The provision for credit losses for the consumer portfolio, including unfunded lending commitments, decreased $214 million to an expense of $81 million and $6.4 billion to a benefit of $1.4 billion for the three and nine months ended September 30, 2021 compared
to the same periods in 2020. The provision for credit losses for the commercial portfolio, including unfunded lending commitments, decreased $1.8 billion to a $705 million benefit and $9.0 billion to a $2.7 billion benefit for the three and nine months ended September 30, 2021 compared to the same periods in 2020.
Table 39 presents a rollforward of the allowance for credit losses, including certain loan and allowance ratios for the three and nine months ended September 30, 2021 and 2020. For more information on the Corporation’s credit loss accounting policies and activity related to the allowance for credit losses, see Note 1 – Summary of Significant Accounting Principles of the Corporation's 2020 Annual Report on Form 10-K and Note 5 – Outstanding Loans and Leases and Allowance for Credit Losses to the Consolidated Financial Statements.
Bank of America 42
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| Table 39 | Allowance for Credit Losses | |||||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
Allowance for loan and lease losses, January 1 |
$ | 14,095 | $ | 19,389 | $ | 18,802 | $ | 12,358 | ||||||||||||||||||
| Loans and leases charged off | ||||||||||||||||||||||||||
| Residential mortgage | (7) | (5) | (27) | (28) | ||||||||||||||||||||||
| Home equity | (8) | (8) | (33) | (47) | ||||||||||||||||||||||
| Credit card | (495) | (665) | (1,956) | (2,407) | ||||||||||||||||||||||
| Direct/Indirect consumer | (59) | (75) | (229) | (277) | ||||||||||||||||||||||
| Other consumer | (72) | (70) | (217) | (232) | ||||||||||||||||||||||
| Total consumer charge-offs | (641) | (823) | (2,462) | (2,991) | ||||||||||||||||||||||
U.S. commercial (1)
|
(159) | (279) | (509) | (870) | ||||||||||||||||||||||
| Non-U.S. commercial | (2) | (57) | (44) | (91) | ||||||||||||||||||||||
| Commercial real estate | (4) | (106) | (38) | (170) | ||||||||||||||||||||||
| Commercial lease financing | — | (28) | — | (68) | ||||||||||||||||||||||
| Total commercial charge-offs | (165) | (470) | (591) | (1,199) | ||||||||||||||||||||||
| Total loans and leases charged off | (806) | (1,293) | (3,053) | (4,190) | ||||||||||||||||||||||
| Recoveries of loans and leases previously charged off | ||||||||||||||||||||||||||
| Residential mortgage | 14 | 11 | 44 | 55 | ||||||||||||||||||||||
| Home equity | 42 | 28 | 126 | 92 | ||||||||||||||||||||||
| Credit card | 174 | 156 | 513 | 463 | ||||||||||||||||||||||
| Direct/Indirect consumer | 77 | 57 | 225 | 193 | ||||||||||||||||||||||
| Other consumer | 5 | 7 | 19 | 18 | ||||||||||||||||||||||
| Total consumer recoveries | 312 | 259 | 927 | 821 | ||||||||||||||||||||||
U.S. commercial (2)
|
25 | 58 | 231 | 119 | ||||||||||||||||||||||
| Non-U.S. commercial | 1 | — | 3 | 1 | ||||||||||||||||||||||
| Commercial real estate | 4 | — | 10 | 1 | ||||||||||||||||||||||
| Commercial lease financing | 1 | 4 | 1 | 8 | ||||||||||||||||||||||
| Total commercial recoveries | 31 | 62 | 245 | 129 | ||||||||||||||||||||||
| Total recoveries of loans and leases previously charged off | 343 | 321 | 1,172 | 950 | ||||||||||||||||||||||
| Net charge-offs | (463) | (972) | (1,881) | (3,240) | ||||||||||||||||||||||
| Provision for loan and lease losses | (475) | 1,180 | (3,766) | 10,480 | ||||||||||||||||||||||
| Other | (2) | (1) | — | (2) | ||||||||||||||||||||||
Allowance for loan and lease losses, September 30 |
13,155 | 19,596 | 13,155 | 19,596 | ||||||||||||||||||||||
Reserve for unfunded lending commitments, January 1 |
1,687 | 1,702 | 1,878 | 1,123 | ||||||||||||||||||||||
| Provision for unfunded lending commitments | (149) | 209 | (339) | 787 | ||||||||||||||||||||||
| Other | — | (1) | (1) | — | ||||||||||||||||||||||
Reserve for unfunded lending commitments, September 30 |
1,538 | 1,910 | 1,538 | 1,910 | ||||||||||||||||||||||
Allowance for credit losses, September 30 |
$ | 14,693 | $ | 21,506 | $ | 14,693 | $ | 21,506 | ||||||||||||||||||
Loan and allowance ratios (3):
|
||||||||||||||||||||||||||
Loans and leases outstanding at September 30 |
$ | 920,170 | $ | 947,938 | $ | 920,170 | $ | 947,938 | ||||||||||||||||||
Allowance for loan and lease losses as a percentage of total loans and leases outstanding at September 30 |
1.43 | % | 2.07 | % | 1.43 | % | 2.07 | % | ||||||||||||||||||
Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases outstanding at September 30 |
1.70 | 2.43 | 1.70 | 2.43 | ||||||||||||||||||||||
Commercial allowance for loan and lease losses as a percentage of total commercial loans and leases outstanding at September 30 |
1.20 | 1.75 | 1.20 | 1.75 | ||||||||||||||||||||||
| Average loans and leases outstanding | $ | 913,113 | $ | 965,836 | $ | 905,214 | $ | 989,839 | ||||||||||||||||||
| Annualized net charge-offs as a percentage of average loans and leases outstanding | 0.20 | % | 0.40 | % | 0.28 | % | 0.44 | % | ||||||||||||||||||
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases at September 30 |
279 | 431 | 279 | 431 | ||||||||||||||||||||||
Ratio of the allowance for loan and lease losses at September 30 to net charge-offs |
7.16 | 5.07 | 5.23 | 4.53 | ||||||||||||||||||||||
Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases at September 30 (4)
|
$ | 7,375 | $ | 10,331 | $ | 7,375 | $ | 10,331 | ||||||||||||||||||
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases, excluding the allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases at September 30 (4)
|
123 | % | 204 | % | 123 | % | 204 | % | ||||||||||||||||||
(1)Includes U.S. small business commercial charge-offs of $137 million and $343 million for the three and nine months ended September 30, 2021 compared to $77 million and $247 million for the same periods in 2020.
(2)Includes U.S. small business commercial recoveries of $18 million and $61 million for the three and nine months ended September 30, 2021 compared to $10 million and $32 million for the same periods in 2020.
(3)Ratios are calculated as allowance for loan and lease losses as a percentage of loans and leases outstanding excluding loans accounted for under the fair value option.
(4)Primarily includes amounts related to credit card and unsecured consumer lending portfolios in Consumer Banking.
Market Risk Management
For more information on our market risk management process, see Market Risk Management in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K.
Market risk is the risk that changes in market conditions may adversely impact the value of assets or liabilities, or
otherwise negatively impact earnings. This risk is inherent in the financial instruments associated with our operations, primarily
within our Global Markets segment. We are also exposed to these risks in other areas of the Corporation (e.g., our ALM activities). In the event of market stress, these risks could have a material impact on our results.
43 Bank of America
|
||||||||
We have been affected, and may continue to be affected, by market stress resulting from the pandemic that began in the first quarter of 2020. For more information, see Executive Summary – Recent Developments – COVID-19 Pandemic on page 3 and Item 1A. Risk Factors – Coronavirus Disease of the Corporation’s 2020 Annual Report on Form 10-K.
Trading Risk Management
To evaluate risks in our trading activities, we focus on the actual and potential volatility of revenues generated by individual positions as well as portfolios of positions. VaR is a common statistic used to measure market risk. Our primary VaR statistic is equivalent to a 99 percent confidence level, which means that for a VaR with a one-day holding period, there should not be losses in excess of VaR, on average, 99 out of 100 trading days.
Table 40 presents the total market-based portfolio VaR, which is the combination of the total covered positions (and less liquid trading positions) portfolio and the fair value option
portfolio. For more information on the market risk VaR for trading activities, see Trading Risk Management in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K.
The total market-based portfolio VaR results in Table 40 include market risk to which we are exposed from all business segments, excluding credit valuation adjustment (CVA), DVA and related hedges. The majority of this portfolio is within the Global Markets segment.
Table 40 presents period-end, average, high and low daily trading VaR for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020 using a 99 percent confidence level, as well as average daily trading VaR for the nine months ended September 30, 2021 and 2020. The amounts disclosed in Table 40 and Table 41 align to the view of covered positions used in the Basel 3 capital calculations. Foreign exchange and commodity positions are always considered covered positions, regardless of trading or banking treatment for the trade, except for structural foreign currency positions that are excluded with prior regulatory approval.
The average of total covered positions and less liquid trading positions portfolio VaR decreased for the three months ended September 30, 2021 compared to the prior-year period primarily due to an increase in diversification benefit between asset classes.
| Table 40 | Market Risk VaR for Trading Activities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| September 30, 2021 | June 30, 2021 | September 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Period End |
Average |
High (1)
|
Low (1)
|
Period End |
Average |
High (1)
|
Low (1)
|
Period End | Average |
High (1)
|
Low (1)
|
2021 Average | 2020 Average | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign exchange | $ | 12 | $ | 13 | $ | 21 | $ | 9 | $ | 15 | $ | 16 | $ | 20 | $ | 10 | $ | 7 | $ | 7 | $ | 25 | $ | 5 | $ | 13 | $ | 7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate | 33 | 32 | 48 | 20 | 37 | 58 | 80 | 30 | 14 | 18 | 27 | 13 | 42 | 18 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Credit | 72 | 66 | 80 | 54 | 77 | 73 | 84 | 58 | 61 | 62 | 68 | 54 | 68 | 54 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity | 32 | 24 | 32 | 19 | 23 | 23 | 27 | 20 | 16 | 17 | 22 | 12 | 24 | 26 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commodities | 6 | 8 | 11 | 5 | 9 | 8 | 12 | 4 | 4 | 6 | 10 | 4 | 8 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Portfolio diversification | (94) | (91) | — | — | (106) | (119) | — | — | (71) | (56) | — | — | (101) | (58) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total covered positions portfolio | 61 | 52 | 71 | 41 | 55 | 59 | 73 | 47 | 31 | 54 | 96 | 31 | 54 | 53 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Impact from less liquid exposures | 40 | 26 | — | — | 23 | 18 | — | — | 50 | 55 | — | — | 22 | 26 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total covered positions and less liquid trading positions portfolio |
101 | 78 | 123 | 51 | 78 | 77 | 119 | 52 | 81 | 109 | 149 | 55 | 76 | 79 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value option loans | 50 | 45 | 54 | 31 | 50 | 50 | 55 | 42 | 71 | 62 | 72 | 54 | 50 | 48 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value option hedges | 18 | 17 | 20 | 14 | 14 | 16 | 17 | 14 | 11 | 13 | 15 | 11 | 15 | 13 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value option portfolio diversification | (44) | (36) | — | — | (34) | (37) | — | — | (27) | (32) | — | — | (32) | (24) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total fair value option portfolio | 24 | 26 | 33 | 23 | 30 | 29 | 31 | 24 | 55 | 43 | 58 | 34 | 33 | 37 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Portfolio diversification | (21) | (12) | — | — | (14) | (9) | — | — | (10) | (18) | — | — | (7) | (14) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total market-based portfolio | $ | 104 | $ | 92 | 141 | 60 | $ | 94 | $ | 97 | 146 | 64 | $ | 126 | $ | 134 | 160 | 99 | $ | 102 | $ | 102 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)The high and low for each portfolio may have occurred on different trading days than the high and low for the components. Therefore the impact from less liquid exposures and the amount of portfolio diversification, which is the difference between the total portfolio and the sum of the individual components, is not relevant.
The graph below presents the daily covered positions and less liquid trading positions portfolio VaR for the previous five quarters, corresponding to the data in Table 40.
Bank of America 44
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Additional VaR statistics produced within our single VaR model are provided in Table 41 at the same level of detail as in Table 40. Evaluating VaR with additional statistics allows for an increased understanding of the risks in the portfolio, as the historical market data used in the VaR calculation does not
necessarily follow a predefined statistical distribution. Table 41 presents average trading VaR statistics at 99 percent and 95
percent confidence levels for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020.
| Table 41 | Average Market Risk VaR for Trading Activities – 99 percent and 95 percent VaR Statistics | ||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||||||||||||||||||||
| September 30, 2021 | June 30, 2021 | September 30, 2020 | |||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 99 percent | 95 percent | 99 percent | 95 percent | 99 percent | 95 percent | |||||||||||||||||||||||||||||||||||
| Foreign exchange | $ | 13 | $ | 9 | $ | 16 | $ | 9 | $ | 7 | $ | 4 | |||||||||||||||||||||||||||||
| Interest rate | 32 | 16 | 58 | 28 | 18 | 8 | |||||||||||||||||||||||||||||||||||
| Credit | 66 | 20 | 73 | 21 | 62 | 18 | |||||||||||||||||||||||||||||||||||
| Equity | 24 | 11 | 23 | 12 | 17 | 9 | |||||||||||||||||||||||||||||||||||
| Commodities | 8 | 4 | 8 | 4 | 6 | 3 | |||||||||||||||||||||||||||||||||||
| Portfolio diversification | (91) | (35) | (119) | (44) | (56) | (25) | |||||||||||||||||||||||||||||||||||
| Total covered positions portfolio | 52 | 25 | 59 | 30 | 54 | 17 | |||||||||||||||||||||||||||||||||||
| Impact from less liquid exposures | 26 | 3 | 18 | 2 | 55 | 5 | |||||||||||||||||||||||||||||||||||
Total covered positions and less liquid trading positions portfolio |
78 | 28 | 77 | 32 | 109 | 22 | |||||||||||||||||||||||||||||||||||
| Fair value option loans | 45 | 10 | 50 | 11 | 62 | 14 | |||||||||||||||||||||||||||||||||||
| Fair value option hedges | 17 | 9 | 16 | 9 | 13 | 6 | |||||||||||||||||||||||||||||||||||
| Fair value option portfolio diversification | (36) | (9) | (37) | (10) | (32) | (7) | |||||||||||||||||||||||||||||||||||
| Total fair value option portfolio | 26 | 10 | 29 | 10 | 43 | 13 | |||||||||||||||||||||||||||||||||||
| Portfolio diversification | (12) | (6) | (9) | (6) | (18) | (7) | |||||||||||||||||||||||||||||||||||
| Total market-based portfolio | $ | 92 | $ | 32 | $ | 97 | $ | 36 | $ | 134 | $ | 28 | |||||||||||||||||||||||||||||
Backtesting
The accuracy of the VaR methodology is evaluated by backtesting, which compares the daily VaR results, utilizing a one-day holding period, against a comparable subset of trading revenue. For more information on our backtesting process, see Trading Risk Management – Backtesting in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K.
During the three and nine months ended September 30, 2021, there was one day where this subset of trading revenue had losses that exceeded our total covered portfolio VaR, utilizing a one-day holding period.
Total Trading-related Revenue
Total trading-related revenue, excluding brokerage fees, and CVA, DVA and funding valuation adjustment gains (losses), represents the total amount earned from trading positions, including market-based net interest income, which are taken in a diverse range of financial instruments and markets. For more information, see Trading Risk Management – Total Trading-related Revenue in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K.
The following histogram is a graphic depiction of trading volatility and illustrates the daily level of trading-related revenue for the three months ended September 30, 2021 compared to the three months ended June 30, 2021 and March 31, 2021. During the three months ended September 30, 2021, positive trading-related revenue was recorded for 95 percent of the trading days, of which 82 percent were daily trading gains of over $25 million. This compares to the three months ended June 30, 2021 where positive trading-related revenue was recorded for 100 percent of the trading days, of which 77
percent were daily trading gains of over $25 million. During the three months ended March 31, 2021, positive trading-related revenue was recorded for 98 percent of the trading days, of which 94 percent were daily trading gains over $25 million.
Trading Portfolio Stress Testing
Because the very nature of a VaR model suggests results can exceed our estimates and it is dependent on a limited historical window, we also stress test our portfolio using scenario analysis. This analysis estimates the change in the value of our trading portfolio that may result from abnormal market movements. For more information, see Trading Risk Management – Trading Portfolio Stress Testing in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K.
45 Bank of America
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Interest Rate Risk Management for the Banking Book
The following discussion presents net interest income for banking book activities. For more information, see Interest Rate Risk Management for the Banking Book in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K.
Table 42 presents the spot and 12-month forward rates used in our baseline forecasts at September 30, 2021 and December 31, 2020.
| Table 42 | Forward Rates | |||||||||||||||||||
| September 30, 2021 | ||||||||||||||||||||
| Federal Funds |
Three-month LIBOR |
10-Year Swap |
||||||||||||||||||
| Spot rates | 0.25 | % | 0.13 | % | 1.51 | % | ||||||||||||||
| 12-month forward rates | 0.25 | 0.30 | 1.67 | |||||||||||||||||
| December 31, 2020 | ||||||||||||||||||||
| Spot rates | 0.25 | % | 0.24 | % | 0.93 | % | ||||||||||||||
| 12-month forward rates | 0.25 | 0.19 | 1.06 | |||||||||||||||||
Table 43 shows the pretax impact to forecasted net interest income over the next 12 months from September 30, 2021 and December 31, 2020 resulting from instantaneous parallel and non-parallel shocks to the market-based forward curve. Periodically, we evaluate the scenarios presented so that they are meaningful in the context of the current rate environment. The interest rate scenarios also assume U.S. dollar rates are floored at zero.
During the nine months ended September 30, 2021, the decrease in asset sensitivity of our balance sheet to Up-rate and Down-rate scenarios was primarily due to ALM activity and an increase in long-end rates. We continue to be asset sensitive to a parallel upward move in interest rates with the majority of that impact coming from the short end of the yield curve. Additionally, higher interest rates impact the fair value of debt securities and, accordingly, for debt securities classified as AFS, may adversely affect accumulated OCI and thus capital levels under the Basel 3 capital rules. Under instantaneous upward parallel shifts, the near-term adverse impact to Basel 3 capital is reduced over time by offsetting positive impacts to net interest income. For more information on Basel 3, see Capital Management – Regulatory Capital on page 22.
| Table 43 | Estimated Banking Book Net Interest Income Sensitivity to Curve Changes | |||||||||||||||||||||||||
| Short Rate (bps) |
Long Rate (bps) |
|||||||||||||||||||||||||
| (Dollars in millions) | September 30 2021 |
December 31 2020 |
||||||||||||||||||||||||
| Parallel Shifts | ||||||||||||||||||||||||||
|
+100 bps
instantaneous shift
|
+100 | +100 | $ | 7,163 | $ | 10,468 | ||||||||||||||||||||
|
-25 bps
instantaneous shift
|
-25 | -25 | (2,031) | (2,766) | ||||||||||||||||||||||
| Flatteners | ||||||||||||||||||||||||||
|
Short-end
instantaneous change
|
+100 | — | 4,931 | 6,321 | ||||||||||||||||||||||
|
Long-end
instantaneous change
|
— | -25 | (1,064) | (1,686) | ||||||||||||||||||||||
| Steepeners | ||||||||||||||||||||||||||
|
Short-end
instantaneous change
|
-25 | — | (942) | (1,084) | ||||||||||||||||||||||
|
Long-end
instantaneous change
|
— | +100 | 2,440 | 4,333 | ||||||||||||||||||||||
The sensitivity analysis in Table 43 assumes that we take no action in response to these rate shocks and does not assume any change in other macroeconomic variables normally correlated with changes in interest rates. As part of our ALM activities, we use securities, certain residential mortgages, and interest rate and foreign exchange derivatives in managing interest rate sensitivity.
The behavior of our deposits portfolio in the baseline forecast and in alternate interest rate scenarios is a key assumption in our projected estimates of net interest income. The sensitivity analysis in Table 43 assumes no change in deposit portfolio size or mix from the baseline forecast in alternate rate environments. In higher rate scenarios, any customer activity resulting in the replacement of low-cost or noninterest-bearing deposits with higher yielding deposits or market-based funding would reduce our benefit in those scenarios.
Interest Rate and Foreign Exchange Derivative Contracts
We use interest rate and foreign exchange derivative contracts in our ALM activities to manage our interest rate and foreign exchange risks. Specifically, we use those derivatives to manage both the variability in cash flows and changes in fair value of various assets and liabilities arising from those risks. Our interest rate derivative contracts are generally non-leveraged swaps tied to various benchmark interest rates and foreign exchange basis swaps, options, futures and forwards, and our foreign exchange contracts include cross-currency interest rate swaps, foreign currency futures contracts, foreign currency forward contracts and options.
The derivatives used in our ALM activities can be split into two broad categories: designated accounting hedges and other risk management derivatives. Designated accounting hedges are primarily used to manage our exposure to interest rates as described in the Interest Rate Risk Management for the Banking Book section and are included in the sensitivities presented in Table 43. The Corporation also uses foreign currency derivatives in accounting hedges to manage substantially all of the foreign exchange risk of our foreign operations. By hedging the foreign exchange risk of our foreign operations, the Corporation's market risk exposure in this area is insignificant.
Risk management derivatives are predominantly used to hedge foreign exchange risks related to various foreign currency-denominated assets and liabilities and eliminate substantially all foreign currency exposures in the cash flows of the Corporation’s non-trading foreign currency-denominated financial instruments. These foreign exchange derivatives are sensitive to other market risk exposures such as cross-currency basis spreads and interest rate risk. However, as these features are not a significant component of these foreign exchange derivatives, the market risk related to this exposure is insignificant. For more information on the accounting for derivatives, see Note 3 – Derivatives to the Consolidated Financial Statements.
Mortgage Banking Risk Management
We originate, fund and service mortgage loans, which subject us to credit, liquidity and interest rate risks, among others. We determine whether loans will be held for investment or held for sale at the time of commitment and manage credit and liquidity risks by selling or securitizing a portion of the loans we originate.
Bank of America 46
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Changes in interest rates impact the value of interest rate lock commitments (IRLCs) and the related residential first mortgage loans held-for-sale (LHFS), as well as the value of the MSRs. Because the interest rate risks of these hedged items offset, we combine them into one overall hedged item with one combined economic hedge portfolio consisting of derivative contracts and securities. For more information on IRLCs and the related residential mortgage LHFS, see Mortgage Banking Risk Management in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K.
During the three and nine months ended September 30, 2021, we recorded gains of $13 million and $35 million related to the change in fair value of the MSRs, IRLCs and LHFS, net of gains and losses on the hedge portfolio, compared to gains of $85 million and $313 million for the same periods in 2020. For more information on MSRs, see Note 14 – Fair Value Measurements to the Consolidated Financial Statements.
Climate Risk Management
Climate-related risks consist of two major categories: (1) risks related to the transition to a low-carbon economy, and (2) risks related to the physical impacts of climate change. The financial effects of transition risk can lead to and amplify credit risk. Physical risk can also lead to increased credit risk by diminishing borrowers’ repayment capacity or collateral values. As climate risk is interconnected with all key risk types, we have developed and continue to enhance processes to embed climate risk considerations into our Risk Framework and risk management programs established for strategic, credit, market, liquidity, compliance, operational and reputational risks. For more information on our governance framework and climate risk process, see the Managing Risk and Climate Risk Management sections in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K. For additional information on climate risk, see Item 1A. Risk Factors of the Corporation’s 2020 Annual Report on Form 10-K. For information on our climate-related metrics that align with Stakeholder Capitalism Metrics published by the International Business Council of the World Economic Forum, see our Annual Report 2020 on the Bank of America website (the content of which is not incorporated by reference into this Quarterly Report on Form 10-Q).
Our Environmental and Social Risk Policy (ESRP) Framework aligns with our Risk Framework and provides additional clarity and transparency regarding our approach to environmental and social risks, inclusive of climate risk. Effective management of
climate risk requires coordinated governance, clearly defined roles and responsibilities, and well-developed processes to identify, measure, monitor and control that risk appropriately and in a timely manner, all of which remain key areas of focus, as we continue to build out and enhance our capabilities in this area.
As outlined in our ESRP Framework, we are focused on supporting and financing areas critical to the transition to a low-carbon society. Accordingly, we have a goal, publicly announced in early 2021, to achieve net-zero greenhouse gas emissions in our financing activities, operations and supply chain before 2050. More broadly, achieving this goal will require technological advances, clearly defined roadmaps for industry sectors, public policies, including those that improve cost of capital for net-zero transition and better emissions data reporting, as well as ongoing, strong and active engagement with clients, suppliers, investors, government officials and other stakeholders. In 2021, we also announced a goal to deploy and mobilize $1 trillion by 2030 to accelerate the transition to a low-carbon, sustainable economy by providing lending, capital raising, advisory and investment services, and by developing other client driven financial solutions. This latter commitment anchors a broader $1.5 trillion sustainable finance goal to support both environmental transition and social inclusive development, which spans business activities across the globe. These goals are intended to help drive business opportunities and enhance risk management related to the transition to a low-carbon economy. Given the extended period of these goals, our initiatives have not resulted in a significant effect on our results of operations or financial condition in the relevant periods presented herein, and are not expected to have a significant effect in the near term.
The foregoing discussion regarding our goals and commitments with respect to climate risk management, including environmental transition considerations, includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. 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.
Complex Accounting Estimates
Our significant accounting principles are essential in understanding the MD&A. Many of our significant accounting principles require complex judgments to estimate the values of assets and liabilities. We have procedures and processes in place to facilitate making these judgments. For more
information, see Complex Accounting Estimates in the MD&A of the Corporation’s 2020 Annual Report on Form 10-K and Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
47 Bank of America
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Non-GAAP Reconciliations
Table 44 provides reconciliations of certain non-GAAP financial measures to the most closely related GAAP financial measures.
| Table 44 |
Period-end and Average Supplemental Financial Data and Reconciliations to GAAP Financial Measures (1)
|
|||||||||||||||||||||||||||||||||||||
| Period-end | Average | |||||||||||||||||||||||||||||||||||||
| September 30 2021 |
December 31 2020 |
Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||
| Shareholders’ equity | $ | 272,464 | $ | 272,924 | $ | 275,484 | $ | 267,323 | $ | 274,726 | $ | 266,062 | ||||||||||||||||||||||||||
| Goodwill | (69,023) | (68,951) | (69,023) | (68,951) | (68,999) | (68,951) | ||||||||||||||||||||||||||||||||
| Intangible assets (excluding MSRs) | (2,172) | (2,151) | (2,185) | (1,976) | (2,181) | (1,758) | ||||||||||||||||||||||||||||||||
| Related deferred tax liabilities | 913 | 920 | 915 | 855 | 916 | 791 | ||||||||||||||||||||||||||||||||
| Tangible shareholders’ equity | $ | 202,182 | $ | 202,742 | $ | 205,191 | $ | 197,251 | $ | 204,462 | $ | 196,144 | ||||||||||||||||||||||||||
| Preferred stock | (23,441) | (24,510) | (23,441) | (23,427) | (23,837) | (23,437) | ||||||||||||||||||||||||||||||||
| Tangible common shareholders’ equity | $ | 178,741 | $ | 178,232 | $ | 181,750 | $ | 173,824 | $ | 180,625 | $ | 172,707 | ||||||||||||||||||||||||||
| Total assets | $ | 3,085,446 | $ | 2,819,627 | ||||||||||||||||||||||||||||||||||
| Goodwill | (69,023) | (68,951) | ||||||||||||||||||||||||||||||||||||
| Intangible assets (excluding MSRs) | (2,172) | (2,151) | ||||||||||||||||||||||||||||||||||||
| Related deferred tax liabilities | 913 | 920 | ||||||||||||||||||||||||||||||||||||
| Tangible assets | $ | 3,015,164 | $ | 2,749,445 | ||||||||||||||||||||||||||||||||||
(1)For more information on non-GAAP financial measures and ratios we use in assessing the results of the Corporation, see Supplemental Financial Data on page 7.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
See Market Risk Management on page 43 in the MD&A and the sections referenced therein for Quantitative and Qualitative Disclosures about Market Risk.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
As of the end of the period covered by this report, the Corporation’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness and design of the Corporation’s disclosure controls and procedures (as that term is defined in Rule 13a-15(e) of the Exchange Act). Based upon that evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures were effective, as of the end of the period covered by this report.
Changes in Internal Control Over Financial Reporting
There have been no changes in the Corporation’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the three months ended September 30, 2021, that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.
Bank of America 48
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Part I. Financial Information
Item 1. Financial Statements
Bank of America Corporation and Subsidiaries
Consolidated Statement of Income | |||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| (In millions, except per share information) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Net interest income | |||||||||||||||||||||||
| Interest income | $ |
|
$ | $ |
|
$ | |||||||||||||||||
| Interest expense |
|
|
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| Net interest income |
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| Noninterest income | |||||||||||||||||||||||
| Fees and commissions |
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| Market making and similar activities |
|
|
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| Other income | ( |
( |
( |
( |
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| Total noninterest income |
|
|
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| Total revenue, net of interest expense |
|
|
|||||||||||||||||||||
| Provision for credit losses | ( |
( |
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| Noninterest expense | |||||||||||||||||||||||
| Compensation and benefits |
|
|
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| Occupancy and equipment |
|
|
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| Information processing and communications |
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| Product delivery and transaction related |
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| Marketing |
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| Professional fees |
|
|
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| Other general operating |
|
|
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| Total noninterest expense |
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|
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| Income before income taxes |
|
|
|||||||||||||||||||||
| Income tax expense |
|
( |
|
||||||||||||||||||||
| Net income | $ |
|
$ | $ |
|
$ | |||||||||||||||||
| Preferred stock dividends |
|
|
|||||||||||||||||||||
| Net income applicable to common shareholders | $ |
|
$ | $ |
|
$ | |||||||||||||||||
| Per common share information | |||||||||||||||||||||||
| Earnings | $ |
|
$ | $ |
|
$ | |||||||||||||||||
| Diluted earnings |
|
|
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| Average common shares issued and outstanding |
|
|
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| Average diluted common shares issued and outstanding |
|
|
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Consolidated Statement of Comprehensive Income |
|||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Net income | $ |
|
$ | $ |
|
$ | |||||||||||||||||
| Other comprehensive income (loss), net-of-tax: | |||||||||||||||||||||||
| Net change in debt securities | ( |
( |
|||||||||||||||||||||
| Net change in debit valuation adjustments |
|
( |
|
( |
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| Net change in derivatives | ( |
( |
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| Employee benefit plan adjustments |
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| Net change in foreign currency translation adjustments | ( |
( |
( |
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| Other comprehensive income (loss) | ( |
( |
|||||||||||||||||||||
| Comprehensive income | $ |
|
$ | $ |
|
$ | |||||||||||||||||
See accompanying Notes to Consolidated Financial Statements.
49 Bank of America
|
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Bank of America Corporation and Subsidiaries
Consolidated Balance Sheet | ||||||||||||||
| September 30 | December 31 | |||||||||||||
| (Dollars in millions) | 2021 | 2020 | ||||||||||||
| Assets | ||||||||||||||
| Cash and due from banks | $ |
|
$ | |||||||||||
| Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks |
|
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| Cash and cash equivalents |
|
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| Time deposits placed and other short-term investments |
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|
Federal funds sold and securities borrowed or purchased under agreements to resell
(includes $
|
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Trading account assets (includes $ |
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| Derivative assets |
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| Debt securities: | ||||||||||||||
| Carried at fair value |
|
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Held-to-maturity, at cost (fair value – $ |
|
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| Total debt securities |
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Loans and leases (includes $ |
|
|||||||||||||
| Allowance for loan and lease losses | ( |
( |
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| Loans and leases, net of allowance |
|
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| Premises and equipment, net |
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| Goodwill |
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Loans held-for-sale (includes $ |
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| Customer and other receivables |
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Other assets (includes $ |
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| Total assets | $ |
|
$ | |||||||||||
| Liabilities | ||||||||||||||
| Deposits in U.S. offices: | ||||||||||||||
| Noninterest-bearing | $ |
|
$ | |||||||||||
Interest-bearing (includes $ |
|
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| Deposits in non-U.S. offices: | ||||||||||||||
| Noninterest-bearing |
|
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| Interest-bearing |
|
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| Total deposits |
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|
Federal funds purchased and securities loaned or sold under agreements to repurchase
(includes $
|
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| Trading account liabilities |
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| Derivative liabilities |
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Short-term borrowings (includes $ |
|
|||||||||||||
|
Accrued expenses and other liabilities (includes $
and $
|
|
|||||||||||||
Long-term debt (includes $ |
|
|||||||||||||
| Total liabilities |
|
|||||||||||||
|
Commitments and contingencies (Note 6 – Securitizations and Other Variable Interest Entities
and Note 10 – Commitments and Contingencies)
|
||||||||||||||
| Shareholders’ equity | ||||||||||||||
Preferred stock, $ |
|
|||||||||||||
|
Common stock and additional paid-in capital, $
issued and outstanding –
|
|
|||||||||||||
| Retained earnings |
|
|||||||||||||
| Accumulated other comprehensive income (loss) | ( |
( |
||||||||||||
| Total shareholders’ equity |
|
|||||||||||||
| Total liabilities and shareholders’ equity | $ |
|
$ | |||||||||||
| Assets of consolidated variable interest entities included in total assets above (isolated to settle the liabilities of the variable interest entities) | ||||||||||||||
| Trading account assets | $ |
|
$ | |||||||||||
| Loans and leases |
|
|||||||||||||
| Allowance for loan and lease losses | ( |
( |
||||||||||||
| Loans and leases, net of allowance |
|
|||||||||||||
| All other assets |
|
|||||||||||||
| Total assets of consolidated variable interest entities | $ |
|
$ | |||||||||||
| Liabilities of consolidated variable interest entities included in total liabilities above | ||||||||||||||
Short-term borrowings (includes $ |
$ |
|
$ | |||||||||||
Long-term debt (includes $ |
|
|||||||||||||
All other liabilities (includes $ |
|
|||||||||||||
| Total liabilities of consolidated variable interest entities | $ |
|
$ | |||||||||||
See accompanying Notes to Consolidated Financial Statements.
Bank of America 50
|
||||||||
Bank of America Corporation and Subsidiaries
ment of Changes in Shareholders’ Equity | |||||||||||||||||||||||||||||||||||
| Preferred Stock |
Common Stock and Additional Paid-in Capital |
Retained Earnings |
Accumulated Other Comprehensive Income (Loss) |
Total Shareholders’ Equity |
|||||||||||||||||||||||||||||||
| (In millions) | Shares | Amount | |||||||||||||||||||||||||||||||||
| Balance, June 30, 2021 | $ |
|
|
$ |
|
$ |
|
$ | ( |
$ |
|
||||||||||||||||||||||||
| Net income |
|
|
|||||||||||||||||||||||||||||||||
| Net change in debt securities | ( |
( |
|||||||||||||||||||||||||||||||||
| Net change in debit valuation adjustments |
|
|
|||||||||||||||||||||||||||||||||
| Net change in derivatives | ( |
( |
|||||||||||||||||||||||||||||||||
| Employee benefit plan adjustments |
|
|
|||||||||||||||||||||||||||||||||
| Net change in foreign currency translation adjustments | ( |
( |
|||||||||||||||||||||||||||||||||
| Dividends declared: | |||||||||||||||||||||||||||||||||||
| Common | ( |
( |
|||||||||||||||||||||||||||||||||
| Preferred | ( |
( |
|||||||||||||||||||||||||||||||||
| Common stock issued under employee plans, net, and other |
|
|
( |
|
|||||||||||||||||||||||||||||||
| Common stock repurchased | ( |
( |
( |
||||||||||||||||||||||||||||||||
| Balance, September 30, 2021 | $ |
|
|
$ |
|
$ |
|
$ | ( |
$ |
|
||||||||||||||||||||||||
| Balance, December 31, 2020 | $ |
|
|
$ |
|
$ |
|
$ | ( |
$ |
|
||||||||||||||||||||||||
| Net income |
|
|
|||||||||||||||||||||||||||||||||
| Net change in debt securities | ( |
( |
|||||||||||||||||||||||||||||||||
| Net change in debit valuation adjustments |
|
|
|||||||||||||||||||||||||||||||||
| Net change in derivatives | ( |
( |
|||||||||||||||||||||||||||||||||
| Employee benefit plan adjustments |
|
|
|||||||||||||||||||||||||||||||||
| Net change in foreign currency translation adjustments | ( |
( |
|||||||||||||||||||||||||||||||||
| Dividends declared: | |||||||||||||||||||||||||||||||||||
| Common | ( |
( |
|||||||||||||||||||||||||||||||||
| Preferred | ( |
( |
|||||||||||||||||||||||||||||||||
| Issuance of preferred stock |
|
|
|||||||||||||||||||||||||||||||||
| Redemption of preferred stock | ( |
( |
|||||||||||||||||||||||||||||||||
| Common stock issued under employee plans, net, and other |
|
|
( |
|
|||||||||||||||||||||||||||||||
| Common stock repurchased | ( |
( |
( |
||||||||||||||||||||||||||||||||
| Balance, September 30, 2021 | $ |
|
|
$ |
|
$ |
|
$ | ( |
$ |
|
||||||||||||||||||||||||
| Balance, June 30, 2020 | $ | $ | $ | $ | ( |
$ | |||||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||
| Net change in debt securities | |||||||||||||||||||||||||||||||||||
| Net change in debit valuation adjustments | ( |
( |
|||||||||||||||||||||||||||||||||
| Net change in derivatives | |||||||||||||||||||||||||||||||||||
| Employee benefit plan adjustments | |||||||||||||||||||||||||||||||||||
| Net change in foreign currency translation adjustments | |||||||||||||||||||||||||||||||||||
| Dividends declared: | |||||||||||||||||||||||||||||||||||
| Common | ( |
( |
|||||||||||||||||||||||||||||||||
| Preferred | ( |
( |
|||||||||||||||||||||||||||||||||
| Common stock issued under employee plans, net, and other | |||||||||||||||||||||||||||||||||||
| Common stock repurchased | ( |
( |
( |
||||||||||||||||||||||||||||||||
| Balance, September 30, 2020 | $ | $ | $ | $ | ( |
$ | |||||||||||||||||||||||||||||
| Balance, December 31, 2019 | $ | $ | $ | $ | ( |
$ | |||||||||||||||||||||||||||||
| ( |
( |
||||||||||||||||||||||||||||||||||
| Net income | |||||||||||||||||||||||||||||||||||
| Net change in debt securities | |||||||||||||||||||||||||||||||||||
| Net change in debit valuation adjustments | ( |
( |
|||||||||||||||||||||||||||||||||
| Net change in derivatives | |||||||||||||||||||||||||||||||||||
| Employee benefit plan adjustments | |||||||||||||||||||||||||||||||||||
| Net change in foreign currency translation adjustments | ( |
( |
|||||||||||||||||||||||||||||||||
| Dividends declared: | |||||||||||||||||||||||||||||||||||
| Common | ( |
( |
|||||||||||||||||||||||||||||||||
| Preferred | ( |
( |
|||||||||||||||||||||||||||||||||
| Issuance of preferred stock | |||||||||||||||||||||||||||||||||||
| Redemption of preferred stock | ( |
( |
|||||||||||||||||||||||||||||||||
| Common stock issued under employee plans, net, and other | ( |
||||||||||||||||||||||||||||||||||
| Common stock repurchased | ( |
( |
( |
||||||||||||||||||||||||||||||||
| Balance, September 30, 2020 | $ | $ | $ | $ | ( |
$ | |||||||||||||||||||||||||||||
See accompanying Notes to Consolidated Financial Statements.
51 Bank of America
|
||||||||
Bank of America Corporation and Subsidiaries
Consolidated Statement of Cash Flows |
|||||||||||
| Nine Months Ended September 30 | |||||||||||
| (Dollars in millions) | 2021 | 2020 | |||||||||
| Operating activities | |||||||||||
| Net income | $ |
|
$ | ||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Provision for credit losses | ( |
||||||||||
| Gains on sales of debt securities | ( |
( |
|||||||||
| Depreciation and amortization |
|
||||||||||
| Net amortization of premium/discount on debt securities |
|
||||||||||
| Deferred income taxes | ( |
( |
|||||||||
| Stock-based compensation |
|
||||||||||
| Loans held-for-sale: | |||||||||||
| Originations and purchases | ( |
( |
|||||||||
|
Proceeds from sales and paydowns of loans originally classified as held for sale and instruments
from related securitization activities
|
|
||||||||||
| Net change in: | |||||||||||
| Trading and derivative assets/liabilities | ( |
( |
|||||||||
| Other assets | ( |
( |
|||||||||
| Accrued expenses and other liabilities |
|
( |
|||||||||
| Other operating activities, net |
|
||||||||||
| Net cash used in operating activities | ( |
( |
|||||||||
| Investing activities | |||||||||||
| Net change in: | |||||||||||
| Time deposits placed and other short-term investments |
|
||||||||||
| Federal funds sold and securities borrowed or purchased under agreements to resell |
|
( |
|||||||||
| Debt securities carried at fair value: | |||||||||||
| Proceeds from sales |
|
||||||||||
| Proceeds from paydowns and maturities |
|
||||||||||
| Purchases | ( |
( |
|||||||||
| Held-to-maturity debt securities: | |||||||||||
| Proceeds from paydowns and maturities |
|
||||||||||
| Purchases | ( |
( |
|||||||||
| Loans and leases: | |||||||||||
|
Proceeds from sales of loans originally classified as held for investment and instruments
from related securitization activities
|
|
||||||||||
| Purchases | ( |
( |
|||||||||
| Other changes in loans and leases, net | ( |
||||||||||
| Other investing activities, net | ( |
( |
|||||||||
| Net cash used in investing activities | ( |
( |
|||||||||
| Financing activities | |||||||||||
| Net change in: | |||||||||||
| Deposits |
|
||||||||||
| Federal funds purchased and securities loaned or sold under agreements to repurchase |
|
||||||||||
| Short-term borrowings |
|
( |
|||||||||
| Long-term debt: | |||||||||||
| Proceeds from issuance |
|
||||||||||
| Retirement | ( |
( |
|||||||||
| Preferred stock: | |||||||||||
| Proceeds from issuance |
|
||||||||||
| Redemption | ( |
( |
|||||||||
| Common stock repurchased | ( |
( |
|||||||||
| Cash dividends paid | ( |
( |
|||||||||
| Other financing activities, net | ( |
( |
|||||||||
| Net cash provided by financing activities |
|
||||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( |
||||||||||
| Net increase (decrease) in cash and cash equivalents | ( |
||||||||||
| Cash and cash equivalents at January 1 |
|
||||||||||
| Cash and cash equivalents at September 30 | $ |
|
$ | ||||||||
See accompanying Notes to Consolidated Financial Statements.
Bank of America 52
|
||||||||
Bank of America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
NOTE 1 Summary of Significant Accounting Principles
Bank of America Corporation, a bank holding company and a financial holding company, provides a diverse range of financial services and products throughout the U.S. and in certain international markets. The term “the Corporation” as used herein 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.
Principles of Consolidation and Basis of Presentation
The Consolidated Financial Statements include the accounts of the Corporation and its majority-owned subsidiaries and those variable interest entities (VIEs) where the Corporation is the primary beneficiary. Intercompany accounts and transactions have been eliminated. Results of operations of acquired companies are included from the dates of acquisition, and for VIEs, from the dates that the Corporation became the primary beneficiary. Assets held in an agency or fiduciary capacity are not included in the Consolidated Financial Statements. The Corporation accounts for investments in companies for which it owns a voting interest and for which it has the ability to exercise significant influence over operating and financing decisions using the equity method of accounting. These investments are included in other assets. Equity method investments are subject to impairment testing, and the Corporation’s proportionate share of income or loss is included in other income.
These unaudited Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements, and related notes thereto, of the Corporation’s 2020 Annual Report on Form 10-K.
The nature of the Corporation’s business is such that the results of any interim period are not necessarily indicative of results for a full year. In the opinion of management, all adjustments, which consist of normal recurring adjustments necessary for a fair statement of the interim period results, have been made. The Corporation evaluates subsequent events through the date of filing with the Securities and Exchange Commission. Certain prior-period amounts have been reclassified to conform to current-period presentation.
NOTE 2 Net Interest Income and Noninterest Income
53 Bank of America
|
||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Net interest income | |||||||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Loans and leases | $ |
|
$ | $ |
|
$ | |||||||||||||||||
| Debt securities |
|
|
|||||||||||||||||||||
| Federal funds sold and securities borrowed or purchased under agreements to resell |
|
( |
|||||||||||||||||||||
| Trading account assets |
|
|
|||||||||||||||||||||
| Other interest income |
|
|
|||||||||||||||||||||
| Total interest income |
|
|
|||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Deposits |
|
|
|||||||||||||||||||||
| Short-term borrowings | ( |
( |
( |
||||||||||||||||||||
| Trading account liabilities |
|
|
|||||||||||||||||||||
| Long-term debt |
|
|
|||||||||||||||||||||
| Total interest expense |
|
|
|||||||||||||||||||||
| Net interest income | $ |
|
$ | $ |
|
$ | |||||||||||||||||
| Noninterest income | |||||||||||||||||||||||
| Fees and commissions | |||||||||||||||||||||||
| Card income | |||||||||||||||||||||||
Interchange fees (1)
|
$ |
|
$ | $ |
|
$ | |||||||||||||||||
| Other card income |
|
|
|||||||||||||||||||||
| Total card income |
|
|
|||||||||||||||||||||
| Service charges | |||||||||||||||||||||||
| Deposit-related fees |
|
|
|||||||||||||||||||||
| Lending-related fees |
|
|
|||||||||||||||||||||
| Total service charges |
|
|
|||||||||||||||||||||
| Investment and brokerage services | |||||||||||||||||||||||
| Asset management fees |
|
|
|||||||||||||||||||||
| Brokerage fees |
|
|
|||||||||||||||||||||
| Total investment and brokerage services |
|
|
|||||||||||||||||||||
| Investment banking fees | |||||||||||||||||||||||
| Underwriting income |
|
|
|||||||||||||||||||||
| Syndication fees |
|
|
|||||||||||||||||||||
| Financial advisory services |
|
|
|||||||||||||||||||||
| Total investment banking fees |
|
|
|||||||||||||||||||||
| Total fees and commissions |
|
|
|||||||||||||||||||||
| Market making and similar activities |
|
|
|||||||||||||||||||||
| Other income (loss) | ( |
( |
( |
( |
|||||||||||||||||||
| Total noninterest income | $ |
|
$ | $ |
|
$ | |||||||||||||||||
Bank of America 54
|
||||||||
NOTE 3 Derivatives
Derivative Balances
Derivatives are entered into on behalf of customers, for trading or to support risk management activities. Derivatives used in risk management activities include derivatives that may or may not be designated in qualifying hedge accounting relationships. Derivatives that are not designated in qualifying hedge accounting relationships are referred to as other risk management derivatives. For more information on the Corporation’s derivatives and hedging activities, see Note 1 – Summary of Significant Accounting Principles and Note 3 –
| September 30, 2021 | |||||||||||||||||||||||||||||||||||||||||
| Gross Derivative Assets | Gross Derivative Liabilities | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in billions) |
Contract/
Notional (1)
|
Trading and Other Risk Management Derivatives | Qualifying Accounting Hedges |
Total | Trading and Other Risk Management Derivatives | Qualifying Accounting Hedges |
Total | ||||||||||||||||||||||||||||||||||
| Interest rate contracts | |||||||||||||||||||||||||||||||||||||||||
| Swaps | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||
| Futures and forwards |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Written options |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Purchased options |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Foreign exchange contracts | |||||||||||||||||||||||||||||||||||||||||
| Swaps |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Spot, futures and forwards |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Written options |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Purchased options |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Equity contracts | |||||||||||||||||||||||||||||||||||||||||
| Swaps |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Futures and forwards |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Written options |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Purchased options |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Commodity contracts | |||||||||||||||||||||||||||||||||||||||||
| Swaps |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Futures and forwards |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Written options |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Purchased options |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
Credit derivatives (2)
|
|||||||||||||||||||||||||||||||||||||||||
| Purchased credit derivatives: | |||||||||||||||||||||||||||||||||||||||||
| Credit default swaps |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total return swaps/options |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Written credit derivatives: | |||||||||||||||||||||||||||||||||||||||||
| Credit default swaps |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Total return swaps/options |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Gross derivative assets/liabilities | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||||
| Less: Legally enforceable master netting agreements | ( |
( |
|||||||||||||||||||||||||||||||||||||||
| Less: Cash collateral received/paid | ( |
( |
|||||||||||||||||||||||||||||||||||||||
| Total derivative assets/liabilities | $ |
|
$ |
|
|||||||||||||||||||||||||||||||||||||
(1)Represents the total contract/notional amount of derivative assets and liabilities outstanding.
(2)The net derivative asset and notional amount of written credit derivatives for which the Corporation held purchased credit derivatives with identical underlying referenced names were $3.2 billion and $326.9 billion at September 30, 2021.
55 Bank of America
|
||||||||
| December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||
| Gross Derivative Assets | Gross Derivative Liabilities | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in billions) |
Contract/
Notional (1)
|
Trading and Other Risk Management Derivatives | Qualifying Accounting Hedges |
Total | Trading and Other Risk Management Derivatives | Qualifying Accounting Hedges |
Total | ||||||||||||||||||||||||||||||||||
| Interest rate contracts | |||||||||||||||||||||||||||||||||||||||||
| Swaps | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Futures and forwards | |||||||||||||||||||||||||||||||||||||||||
| Written options | |||||||||||||||||||||||||||||||||||||||||
| Purchased options | |||||||||||||||||||||||||||||||||||||||||
| Foreign exchange contracts | |||||||||||||||||||||||||||||||||||||||||
| Swaps | |||||||||||||||||||||||||||||||||||||||||
| Spot, futures and forwards | |||||||||||||||||||||||||||||||||||||||||
| Written options | |||||||||||||||||||||||||||||||||||||||||
| Purchased options | |||||||||||||||||||||||||||||||||||||||||
| Equity contracts | |||||||||||||||||||||||||||||||||||||||||
| Swaps | |||||||||||||||||||||||||||||||||||||||||
| Futures and forwards | |||||||||||||||||||||||||||||||||||||||||
| Written options | |||||||||||||||||||||||||||||||||||||||||
| Purchased options | |||||||||||||||||||||||||||||||||||||||||
| Commodity contracts | |||||||||||||||||||||||||||||||||||||||||
| Swaps | |||||||||||||||||||||||||||||||||||||||||
| Futures and forwards | |||||||||||||||||||||||||||||||||||||||||
| Written options | |||||||||||||||||||||||||||||||||||||||||
| Purchased options | |||||||||||||||||||||||||||||||||||||||||
Credit derivatives (2)
|
|||||||||||||||||||||||||||||||||||||||||
| Purchased credit derivatives: | |||||||||||||||||||||||||||||||||||||||||
| Credit default swaps | |||||||||||||||||||||||||||||||||||||||||
| Total return swaps/options | |||||||||||||||||||||||||||||||||||||||||
| Written credit derivatives: | |||||||||||||||||||||||||||||||||||||||||
| Credit default swaps | |||||||||||||||||||||||||||||||||||||||||
| Total return swaps/options | |||||||||||||||||||||||||||||||||||||||||
| Gross derivative assets/liabilities | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| Less: Legally enforceable master netting agreements | ( |
( |
|||||||||||||||||||||||||||||||||||||||
| Less: Cash collateral received/paid | ( |
( |
|||||||||||||||||||||||||||||||||||||||
| Total derivative assets/liabilities | $ | $ | |||||||||||||||||||||||||||||||||||||||
(1)Represents the total contract/notional amount of derivative assets and liabilities outstanding.
(2)The net derivative asset and notional amount of written credit derivatives for which the Corporation held purchased credit derivatives with identical underlying referenced names were $2.2 billion and $269.8 billion at December 31, 2020.
Offsetting of Derivatives
The Corporation enters into International Swaps and Derivatives Association, Inc. (ISDA) master netting agreements or similar agreements with substantially all of the Corporation’s derivative counterparties. For more information, see Note 3 – Derivatives to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
applicable, on which these derivatives are transacted. Balances are presented on a gross basis, prior to the application of counterparty and cash collateral netting. Total gross derivative assets and liabilities are adjusted on an aggregate basis to take into consideration the effects of legally enforceable master netting agreements, which include reducing the balance for counterparty netting and cash collateral received or paid.
For more information on offsetting of securities financing agreements, see Note 9 – Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings and Restricted Cash.
Bank of America 56
|
||||||||
Offsetting of Derivatives (1)
|
|||||||||||||||||||||||
| Derivative Assets |
Derivative Liabilities |
Derivative Assets |
Derivative Liabilities |
||||||||||||||||||||
| (Dollars in billions) | September 30, 2021 | December 31, 2020 | |||||||||||||||||||||
| Interest rate contracts | |||||||||||||||||||||||
| Over-the-counter | $ |
|
$ |
|
$ | $ | |||||||||||||||||
| Exchange-traded |
|
|
|||||||||||||||||||||
| Over-the-counter cleared |
|
|
|||||||||||||||||||||
| Foreign exchange contracts | |||||||||||||||||||||||
| Over-the-counter |
|
|
|||||||||||||||||||||
| Over-the-counter cleared |
|
|
|||||||||||||||||||||
| Equity contracts | |||||||||||||||||||||||
| Over-the-counter |
|
|
|||||||||||||||||||||
| Exchange-traded |
|
|
|||||||||||||||||||||
| Commodity contracts | |||||||||||||||||||||||
| Over-the-counter |
|
|
|||||||||||||||||||||
| Exchange-traded |
|
|
|||||||||||||||||||||
| Over-the-counter cleared |
|
|
|||||||||||||||||||||
| Credit derivatives | |||||||||||||||||||||||
| Over-the-counter |
|
|
|||||||||||||||||||||
| Over-the-counter cleared |
|
|
|||||||||||||||||||||
| Total gross derivative assets/liabilities, before netting | |||||||||||||||||||||||
| Over-the-counter |
|
|
|||||||||||||||||||||
| Exchange-traded |
|
|
|||||||||||||||||||||
| Over-the-counter cleared |
|
|
|||||||||||||||||||||
| Less: Legally enforceable master netting agreements and cash collateral received/paid | |||||||||||||||||||||||
| Over-the-counter | ( |
( |
( |
( |
|||||||||||||||||||
| Exchange-traded | ( |
( |
( |
( |
|||||||||||||||||||
| Over-the-counter cleared | ( |
( |
( |
( |
|||||||||||||||||||
| Derivative assets/liabilities, after netting |
|
|
|||||||||||||||||||||
Other gross derivative assets/liabilities (2)
|
|
|
|||||||||||||||||||||
| Total derivative assets/liabilities |
|
|
|||||||||||||||||||||
Less: Financial instruments collateral (3)
|
( |
( |
( |
( |
|||||||||||||||||||
| Total net derivative assets/liabilities | $ |
|
$ |
|
$ | $ | |||||||||||||||||
(1)Over-the-counter derivatives include bilateral transactions between the Corporation and a particular counterparty. Over-the-counter cleared derivatives include bilateral transactions between the Corporation and a counterparty where the transaction is cleared through a clearinghouse. Exchange-traded derivatives include listed options transacted on an exchange.
(2)Consists of derivatives entered into under master netting agreements where the enforceability of these agreements is uncertain under bankruptcy laws in some countries or industries.
(3)Amounts are limited to the derivative asset/liability balance and, accordingly, do not include excess collateral received/pledged. Financial instruments collateral includes securities collateral received or pledged and cash securities held and posted at third-party custodians that are not offset on the Consolidated Balance Sheet but shown as a reduction to derive net derivative assets and liabilities.
Derivatives Designated as Accounting Hedges
The Corporation uses various types of interest rate and foreign exchange derivative contracts to protect against changes in the fair value of its assets and liabilities due to fluctuations in interest rates and exchange rates (fair value hedges). The Corporation also uses these types of contracts to protect against changes in the cash flows of its assets and liabilities, and other forecasted transactions (cash flow hedges). The Corporation hedges its net investment in consolidated non-U.S.
operations determined to have functional currencies other than the U.S. dollar using forward exchange contracts and cross-currency basis swaps, and by issuing foreign currency-denominated debt (net investment hedges).
Fair Value Hedges
| Gains and Losses on Derivatives Designated as Fair Value Hedges | |||||||||||||||||||||||
| Three Months Ended September 30, 2021 | Three Months Ended September 30, 2020 | ||||||||||||||||||||||
| (Dollars in millions) | Derivative | Hedged Item | Derivative | Hedged Item | |||||||||||||||||||
Interest rate risk on long-term debt (1)
|
$ | ( |
$ |
|
$ | ( |
$ | ||||||||||||||||
Interest rate and foreign currency risk on long-term debt (2)
|
( |
|
( |
||||||||||||||||||||
Interest rate risk on available-for-sale securities (3)
|
|
( |
( |
||||||||||||||||||||
| Total | $ | ( |
$ |
|
$ | ( |
$ | ||||||||||||||||
| ` | Nine Months Ended September 30, 2021 | Nine Months Ended September 30, 2020 | |||||||||||||||||||||
| Derivative | Hedged Item | Derivative | Hedged Item | ||||||||||||||||||||
Interest rate risk on long-term debt (1)
|
$ | ( |
$ |
|
$ | $ | ( |
||||||||||||||||
Interest rate and foreign currency risk on long-term debt (2)
|
( |
|
( |
||||||||||||||||||||
Interest rate risk on available-for-sale securities (3)
|
|
( |
( |
||||||||||||||||||||
| Total | $ | ( |
$ |
|
$ | $ | ( |
||||||||||||||||
(1)Amounts are recorded in interest expense in the Consolidated Statement of Income.
(2)For the three and nine months ended September 30, 2021, the derivative amount includes gains (losses) of $(11 ) million and $(62 ) million in interest expense, $(33 ) million and $(2 ) million in market making and similar activities, and $(5 ) million and $(8 ) million in accumulated other comprehensive income (OCI). For the same periods in 2020, the derivative amount includes gains (losses) of $(13 ) million and $718 million in interest expense, $95 million and $(83 ) million in market making and similar activities, and $(3 ) million and $9 million in accumulated OCI. Line item totals are in the Consolidated Statement of Income and on the Consolidated Balance Sheet.
(3)Amounts are recorded in interest income in the Consolidated Statement of Income.
57 Bank of America
|
||||||||
The table below summarizes the carrying value of hedged assets and liabilities that are designated and qualifying in fair value hedging relationships along with the cumulative amount of fair value hedging adjustments included in the carrying value that have been recorded in the current hedging relationships. These fair value hedging adjustments are open basis adjustments that are not subject to amortization as long as the hedging relationship remains designated.
| Designated Fair Value Hedged Assets and Liabilities | |||||||||||||||||||||||
| September 30, 2021 | December 31, 2020 | ||||||||||||||||||||||
| (Dollars in millions) | Carrying Value |
Cumulative
Fair Value
Adjustments (1)
|
Carrying Value |
Cumulative
Fair Value
Adjustments (1)
|
|||||||||||||||||||
Long-term debt (2)
|
$ |
|
$ |
|
$ | $ | |||||||||||||||||
Available-for-sale debt securities (2, 3, 4)
|
|
( |
|||||||||||||||||||||
Trading account assets (5)
|
|
|
|||||||||||||||||||||
(1)Increase (decrease) to carrying value.
(2)At September 30, 2021 and December 31, 2020, the cumulative fair value adjustments remaining on long-term debt and available-for-sale debt securities from discontinued hedging relationships resulted in an increase in the related liability of $1.2 billion and $3.7 billion and a decrease in the related asset of $240 million and $69 million, which are being amortized over the remaining contractual life of the de-designated hedged items.
(3)These amounts include the amortized cost of the prepayable financial assets used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship (i.e. last-of-layer hedging relationship). At September 30, 2021 and December 31, 2020, the amortized cost of the closed portfolios used in these hedging relationships was $23.7 billion and $34.6 billion, of which $6.9 billion and $7.0 billion was designated in the last-of-layer hedging relationship. At September 30, 2021, the cumulative adjustment associated with these hedging relationships was a decrease of $103 million. At December 31, 2020, the cumulative adjustment was insignificant.
(4)Carrying value represents amortized cost.
(5)Represents hedging activities related to certain commodities inventory.
Cash Flow and Net Investment Hedges
| Gains and Losses on Derivatives Designated as Cash Flow and Net Investment Hedges | |||||||||||||||||||||||
| Gains (Losses) Recognized in Accumulated OCI on Derivatives |
Gains (Losses) in Income Reclassified from Accumulated OCI |
Gains (Losses) Recognized in Accumulated OCI on Derivatives |
Gains (Losses) in Income Reclassified from Accumulated OCI |
||||||||||||||||||||
| (Dollars in millions, amounts pretax) | Three Months Ended September 30, 2021 | Nine Months Ended September 30, 2021 | |||||||||||||||||||||
| Cash flow hedges | |||||||||||||||||||||||
Interest rate risk on variable-rate assets (1)
|
$ | ( |
$ |
|
$ | ( |
$ |
|
|||||||||||||||
Price risk on forecasted MBS purchases (1)
|
|
|
( |
|
|||||||||||||||||||
Price risk on certain compensation plans (2)
|
( |
|
|
|
|||||||||||||||||||
| Total | $ | ( |
$ |
|
$ | ( |
$ |
|
|||||||||||||||
| Net investment hedges | |||||||||||||||||||||||
Foreign exchange risk (3)
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Three Months Ended September 30, 2020 | Nine Months Ended September 30, 2020 | ||||||||||||||||||||||
| Cash flow hedges | |||||||||||||||||||||||
Interest rate risk on variable-rate assets (1)
|
$ | ( |
$ | $ | $ | ( |
|||||||||||||||||
Price risk on forecasted MBS purchases (1)
|
|||||||||||||||||||||||
Price risk on certain compensation plans (2)
|
|||||||||||||||||||||||
| Total | $ | $ | $ | $ | ( |
||||||||||||||||||
| Net investment hedges | |||||||||||||||||||||||
Foreign exchange risk (3)
|
$ | ( |
$ | $ | $ | ||||||||||||||||||
(1)Amounts reclassified from accumulated OCI are recorded in interest income in the Consolidated Statement of Income.
(2)Amounts reclassified from accumulated OCI are recorded in compensation and benefits expense in the Consolidated Statement of Income.
(3)Amounts reclassified from accumulated OCI are recorded in other income in the Consolidated Statement of Income. For the three and nine months ended September 30, 2021, amounts excluded from effectiveness testing and recognized in market making and similar activities were losses of $36 million and $86 million. For the same periods in 2020 amounts excluded from effectiveness testing and recognized in other income were gains of $10 million and $115 million.
Bank of America 58
|
||||||||
Other Risk Management Derivatives
Other risk management derivatives are used by the Corporation to reduce certain risk exposures by economically hedging various assets and liabilities. The table below presents gains (losses) on these derivatives for the three and nine months ended September 30, 2021 and 2020. These gains (losses) are largely offset by the income or expense recorded on the hedged item.
| Gains and Losses on Other Risk Management Derivatives | |||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
Interest rate risk on mortgage activities (1, 2)
|
$ |
|
$ | $ | ( |
$ | |||||||||||||||||
Credit risk on loans (2)
|
( |
( |
( |
( |
|||||||||||||||||||
Interest rate and foreign currency risk on asset and liability management activities (3)
|
|
( |
|
( |
|||||||||||||||||||
Price risk on certain compensation plans (4)
|
( |
|
|||||||||||||||||||||
(1)Includes hedges of interest rate risk on mortgage servicing rights (MSRs) and interest rate lock commitments (IRLCs) to originate mortgage loans that will be held for sale.
(2)Gains (losses) on these derivatives are recorded in other income.
(3)Gains (losses) on these derivatives are recorded in market making and similar activities.
(4)Gains (losses) on these derivatives are recorded in compensation and benefits expense.
Transfers of Financial Assets with Risk Retained through Derivatives
The Corporation enters into certain transactions involving the transfer of financial assets that are accounted for as sales where substantially all of the economic exposure to the transferred financial assets is retained through derivatives (e.g., interest rate and/or credit), but the Corporation does not retain control over the assets transferred. At September 30, 2021 and December 31, 2020, the Corporation had transferred $4.9 billion and $5.2 billion of non-U.S. government-guaranteed mortgage-backed securities (MBS) to a third-party trust and retained economic exposure to the transferred assets through derivative contracts. In connection with these transfers, the Corporation received gross cash proceeds of $4.9 billion and $5.2 billion at the transfer dates. At September 30, 2021 and December 31, 2020, the fair value of the transferred securities was $5.1 billion and $5.5 billion.
Sales and Trading Revenue
The Corporation enters into trading derivatives to facilitate client transactions and to manage risk exposures arising from trading
account assets and liabilities. It is the Corporation’s policy to include these derivative instruments in its trading activities, which include derivatives and non-derivative cash instruments. The resulting risk from these derivatives is managed on a portfolio basis as part of the Corporation’s Global Markets business segment. For more information on sales and trading revenue, see Note 3 – Derivatives to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
The table below, which includes both derivatives and non-derivative cash instruments, identifies the amounts in the respective income statement line items attributable to the Corporation’s sales and trading revenue in Global Markets, categorized by primary risk, for the three and nine months ended September 30, 2021 and 2020. This table includes debit valuation adjustment (DVA) and funding valuation adjustment (FVA) gains (losses). Global Markets results in Note 17 – Business Segment Information are presented on a fully taxable-equivalent (FTE) basis. The table below is not presented on an FTE basis.
| Sales and Trading Revenue | |||||||||||||||||||||||||||||||||||||||||||||||
| Market making and similar activities | Net Interest Income |
Other (1)
|
Total | Market making and similar activities | Net Interest Income |
Other (1)
|
Total | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Three Months Ended September 30, 2021 | Nine Months Ended September 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||
| Interest rate risk | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||||||
| Foreign exchange risk |
|
( |
|
|
|
( |
|
|
|||||||||||||||||||||||||||||||||||||||
| Equity risk |
|
( |
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Credit risk |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
Other risk (2)
|
|
( |
|
|
|
( |
|
|
|||||||||||||||||||||||||||||||||||||||
Total sales and trading revenue |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||||||
| Three Months Ended September 30, 2020 | Nine Months Ended September 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate risk | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Foreign exchange risk | ( |
( |
( |
||||||||||||||||||||||||||||||||||||||||||||
| Equity risk | ( |
( |
|||||||||||||||||||||||||||||||||||||||||||||
| Credit risk | |||||||||||||||||||||||||||||||||||||||||||||||
Other risk (2)
|
( |
||||||||||||||||||||||||||||||||||||||||||||||
Total sales and trading revenue |
$ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
(1)Represents amounts in investment and brokerage services and other income that are recorded in Global Markets and included in the definition of sales and trading revenue. Includes investment and brokerage services revenue of $460 million and $1.5 billion for the three and nine months ended September 30, 2021 compared to $430 million and $1.5 billion for the same periods in 2020.
(2)Includes commodity risk.
59 Bank of America
|
||||||||
Credit Derivatives
The Corporation enters into credit derivatives primarily to facilitate client transactions and to manage credit risk exposures. Credit derivatives are classified as investment and non-investment grade based on the credit quality of the underlying referenced obligation. The Corporation considers ratings of BBB- or higher as investment grade. Non-investment grade includes non-rated credit derivative instruments. The Corporation discloses internal categorizations of investment
grade and non-investment grade consistent with how risk is managed for these instruments. For more information on credit derivatives, see Note 3 – Derivatives to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
| Credit Derivative Instruments | |||||||||||||||||||||||||||||
| Less than One Year |
One to Three Years |
Three to Five Years |
Over Five Years |
Total | |||||||||||||||||||||||||
| September 30, 2021 | |||||||||||||||||||||||||||||
| (Dollars in millions) | Carrying Value | ||||||||||||||||||||||||||||
| Credit default swaps: | |||||||||||||||||||||||||||||
| Investment grade | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||
| Non-investment grade |
|
|
|
|
|
||||||||||||||||||||||||
| Total |
|
|
|
|
|
||||||||||||||||||||||||
| Total return swaps/options: | |||||||||||||||||||||||||||||
| Investment grade |
|
|
|
|
|
||||||||||||||||||||||||
| Non-investment grade |
|
|
|
|
|
||||||||||||||||||||||||
| Total |
|
|
|
|
|
||||||||||||||||||||||||
| Total credit derivatives | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||
| Credit-related notes: | |||||||||||||||||||||||||||||
| Investment grade | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||
| Non-investment grade |
|
|
|
|
|
||||||||||||||||||||||||
| Total credit-related notes | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||
| Maximum Payout/Notional | |||||||||||||||||||||||||||||
| Credit default swaps: | |||||||||||||||||||||||||||||
| Investment grade | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||
| Non-investment grade |
|
|
|
|
|
||||||||||||||||||||||||
| Total |
|
|
|
|
|
||||||||||||||||||||||||
| Total return swaps/options: | |||||||||||||||||||||||||||||
| Investment grade |
|
|
|
|
|
||||||||||||||||||||||||
| Non-investment grade |
|
|
|
|
|
||||||||||||||||||||||||
| Total |
|
|
|
|
|
||||||||||||||||||||||||
| Total credit derivatives | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||
| December 31, 2020 | |||||||||||||||||||||||||||||
| Carrying Value | |||||||||||||||||||||||||||||
| Credit default swaps: | |||||||||||||||||||||||||||||
| Investment grade | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Non-investment grade | |||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||
| Total return swaps/options: | |||||||||||||||||||||||||||||
| Investment grade | |||||||||||||||||||||||||||||
| Non-investment grade | |||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||
| Total credit derivatives | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Credit-related notes: | |||||||||||||||||||||||||||||
| Investment grade | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Non-investment grade | |||||||||||||||||||||||||||||
| Total credit-related notes | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Maximum Payout/Notional | |||||||||||||||||||||||||||||
| Credit default swaps: | |||||||||||||||||||||||||||||
| Investment grade | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Non-investment grade | |||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||
| Total return swaps/options: | |||||||||||||||||||||||||||||
| Investment grade | |||||||||||||||||||||||||||||
| Non-investment grade | |||||||||||||||||||||||||||||
| Total | |||||||||||||||||||||||||||||
| Total credit derivatives | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Bank of America 60
|
||||||||
The notional amount represents the maximum amount payable by the Corporation for most credit derivatives. However, the Corporation does not monitor its exposure to credit derivatives based solely on the notional amount because this measure does not take into consideration the probability of occurrence. As such, the notional amount is not a reliable indicator of the Corporation’s exposure to these contracts. Instead, a risk framework is used to define risk tolerances and establish limits so that certain credit risk-related losses occur within acceptable, predefined limits.
Credit-related notes in the table above include investments in securities issued by collateralized debt obligation (CDO), collateralized loan obligation (CLO) and credit-linked note vehicles. These instruments are primarily classified as trading securities. The carrying value of these instruments equals the Corporation’s maximum exposure to loss. The Corporation is not obligated to make any payments to the entities under the terms of the securities owned.
Credit-related Contingent Features and Collateral
Certain of the Corporation’s derivative contracts contain credit risk-related contingent features, primarily in the form of ISDA master netting agreements and credit support documentation that enhance the creditworthiness of these instruments compared to other obligations of the respective counterparty with whom the Corporation has transacted. These contingent features may be for the benefit of the Corporation as well as its counterparties with respect to changes in the Corporation’s creditworthiness and the mark-to-market exposure under the derivative transactions. At September 30, 2021 and December 31, 2020, the Corporation held cash and securities collateral of $87.2 billion and $96.5 billion and posted cash and securities collateral of $73.7 billion and $88.6 billion in the normal course of business under derivative agreements, excluding cross-product margining agreements where clients are permitted to margin on a net basis for both derivative and secured financing arrangements.
In connection with certain over-the-counter derivative contracts and other trading agreements, the Corporation can be required to provide additional collateral or to terminate transactions with certain counterparties in the event of a downgrade of the senior debt ratings of the Corporation or certain subsidiaries. The amount of additional collateral required depends on the contract and is usually a fixed incremental amount and/or the market value of the exposure. For more information on credit-related contingent features and collateral, see Note 3 – Derivatives to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
At September 30, 2021, the amount of collateral, calculated based on the terms of the contracts, that the Corporation and certain subsidiaries could be required to post to counterparties but had not yet posted to counterparties was $2.4 billion, including $1.1 billion for Bank of America, National Association.
Some counterparties are currently able to unilaterally terminate certain contracts, or the Corporation or certain
subsidiaries may be required to take other action such as find a suitable replacement or obtain a guarantee. At September 30, 2021 and December 31, 2020, the liability recorded for these derivative contracts was not significant.
The table below presents the amount of additional collateral that would have been contractually required by derivative contracts and other trading agreements at September 30, 2021 if the rating agencies had downgraded their long-term senior debt ratings for the Corporation or certain subsidiaries by one incremental notch and by an additional second incremental notch. The table also presents derivative liabilities that would be subject to unilateral termination by counterparties upon downgrade of the Corporation's or certain subsidiaries' long-term senior debt ratings.
| Additional Collateral Required to be Posted and Derivative Liabilities Subject to Unilateral Termination Upon Downgrade at September 30, 2021 | |||||||||||
| (Dollars in millions) | One incremental notch |
Second incremental notch |
|||||||||
| Additional collateral required to be posted upon downgrade | |||||||||||
| Bank of America Corporation | $ | $ | |||||||||
Bank of America, N.A. and subsidiaries (1)
|
|||||||||||
| Derivative liabilities subject to unilateral termination upon downgrade | |||||||||||
| Derivative liabilities | $ | $ | |||||||||
| Collateral posted | |||||||||||
(1)Included in Bank of America Corporation collateral requirements in this table.
Valuation Adjustments on Derivatives
The table below presents credit valuation adjustment (CVA), DVA and FVA gains (losses) on derivatives (excluding the effect of any related hedge activities), which are recorded in market making and similar activities, for the three and nine months ended September 30, 2021 and 2020. For more information on the valuation adjustments on derivatives, see Note 3 – Derivatives to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
Valuation Adjustments Gains (Losses) on Derivatives (1)
| |||||||||||
| Three Months Ended September 30 | |||||||||||
| (Dollars in millions) | 2021 | 2020 | |||||||||
| Derivative assets (CVA) | $ |
|
$ | ||||||||
Derivative assets/liabilities (FVA) |
|
||||||||||
| Derivative liabilities (DVA) | ( |
( |
|||||||||
| Nine Months Ended September 30 | |||||||||||
| (Dollars in millions) | 2021 | 2020 | |||||||||
| Derivative assets (CVA) | $ |
|
$ | ( |
|||||||
Derivative assets/liabilities (FVA) |
|
( |
|||||||||
| Derivative liabilities (DVA) | ( |
||||||||||
(1)At September 30, 2021 and December 31, 2020, cumulative CVA reduced the derivative assets balance by $434 million and $646 million, cumulative FVA reduced the net derivatives balance by $143 million and $177 million, and cumulative DVA reduced the derivative liabilities balance by $296 million and $309 million.
61 Bank of America
|
||||||||
NOTE 4 Securities
The table below presents the amortized cost, gross unrealized gains and losses, and fair value of available-for-sale (AFS) debt securities, other debt securities carried at fair value and held-to-maturity (HTM) debt securities at September 30, 2021 and December 31, 2020.
| Debt Securities | |||||||||||||||||||||||||||||||||||||||||||||||
| Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | September 30, 2021 | December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||
| Available-for-sale debt securities | |||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage-backed securities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Agency | $ |
|
$ |
|
$ | ( |
$ |
|
$ | $ | $ | ( |
$ | ||||||||||||||||||||||||||||||||||
| Agency-collateralized mortgage obligations |
|
|
( |
|
( |
||||||||||||||||||||||||||||||||||||||||||
| Commercial |
|
|
( |
|
( |
||||||||||||||||||||||||||||||||||||||||||
Non-agency residential (1)
|
|
|
( |
|
( |
||||||||||||||||||||||||||||||||||||||||||
| Total mortgage-backed securities |
|
|
( |
|
( |
||||||||||||||||||||||||||||||||||||||||||
| U.S. Treasury and government agencies |
|
|
( |
|
( |
||||||||||||||||||||||||||||||||||||||||||
| Non-U.S. securities |
|
|
|
|
( |
||||||||||||||||||||||||||||||||||||||||||
| Other taxable securities |
|
|
( |
|
( |
||||||||||||||||||||||||||||||||||||||||||
| Tax-exempt securities |
|
|
( |
|
( |
||||||||||||||||||||||||||||||||||||||||||
| Total available-for-sale debt securities |
|
|
( |
|
( |
||||||||||||||||||||||||||||||||||||||||||
Other debt securities carried at fair value (2)
|
|
|
( |
|
( |
||||||||||||||||||||||||||||||||||||||||||
| Total debt securities carried at fair value |
|
|
( |
|
( |
||||||||||||||||||||||||||||||||||||||||||
| Held-to-maturity debt securities | |||||||||||||||||||||||||||||||||||||||||||||||
| Agency mortgage-backed securities |
|
|
( |
|
( |
||||||||||||||||||||||||||||||||||||||||||
| U.S. Treasury and government agencies |
|
|
( |
|
( |
||||||||||||||||||||||||||||||||||||||||||
| Other taxable securities |
|
|
( |
|
( |
||||||||||||||||||||||||||||||||||||||||||
| Total held-to-maturity debt securities |
|
|
( |
|
( |
||||||||||||||||||||||||||||||||||||||||||
Total debt securities (3,4)
|
$ |
|
$ |
|
$ | ( |
$ |
|
$ | $ | $ | ( |
$ | ||||||||||||||||||||||||||||||||||
(1)At both September 30, 2021 and December 31, 2020, the underlying collateral type included approximately 37 2 61
(2)Primarily includes non-U.S. securities used to satisfy certain international regulatory requirements. Any changes in value are reported in market making and similar activities. For detail on the components, see Note 14 – Fair Value Measurements.
(3)Includes securities pledged as collateral of $76.4 billion and $65.5 billion at September 30, 2021 and December 31, 2020.
(4)The Corporation held debt securities from Fannie Mae (FNMA) and Freddie Mac (FHLMC) that each exceeded 10 percent of shareholders’ equity, with an amortized cost of $348.6 billion and $205.7 billion, and a fair value of $348.4 billion and $204.1 billion at September 30, 2021, and an amortized cost of $260.1 billion and $118.1 billion, and a fair value of $267.5 billion and $120.7 billion at December 31, 2020.
At September 30, 2021, the accumulated net unrealized gain on AFS debt securities, excluding the amount related to debt securities previously transferred to held to maturity, included in accumulated OCI was $3.3 billion, net of the related income tax expense of $1.1 billion. The Corporation had nonperforming AFS debt securities of $18 million and $20 million at September 30, 2021 and December 31, 2020.
At September 30, 2021 and December 31, 2020, the Corporation had $244.0 billion and $200.0 billion in AFS debt securities, which were primarily U.S. agency and U.S. Treasury securities that have a zero credit loss assumption. For the remaining $31.3 billion and $34.5 billion in AFS debt securities at September 30, 2021 and December 31, 2020, the amount of expected credit losses was insignificant. Substantially all of the Corporation's HTM debt securities consist of U.S. agency and U.S. Treasury securities and have a zero credit loss assumption.
At September 30, 2021 and December 31, 2020, the Corporation held equity securities at an aggregate fair value of $611 million and $769 million and other equity securities, as valued under the measurement alternative, at a carrying value of $268 million and $240 million, both of which are included in other assets. At September 30, 2021 and December 31, 2020, the Corporation also held money market investments at a fair value of $336 million and $1.6 billion, which are included in time deposits placed and other short-term investments.
During the three and nine months ended September 30, 2021, sales of AFS securities were not significant. For the same periods in 2020, the Corporation recorded gross realized gains of $4 million and $383 million and gross realized losses of $2 million and $4 million, resulting in net gains of $2 million and $379 million, with $1 million and $95 million of income taxes attributable to the realized net gains on sales of these AFS debt securities.
Bank of America 62
|
||||||||
The table below presents the fair value and the associated gross unrealized losses on AFS debt securities and whether these securities have had gross unrealized losses for less than 12 months or for 12 months or longer at September 30, 2021 and December 31, 2020.
| Total AFS Debt Securities in a Continuous Unrealized Loss Position | |||||||||||||||||||||||||||||||||||
| Less than Twelve Months | Twelve Months or Longer | Total | |||||||||||||||||||||||||||||||||
| Fair Value |
Gross Unrealized Losses |
Fair Value |
Gross Unrealized Losses |
Fair Value |
Gross Unrealized Losses |
||||||||||||||||||||||||||||||
| (Dollars in millions) | September 30, 2021 | ||||||||||||||||||||||||||||||||||
| Continuously unrealized loss-positioned AFS debt securities | |||||||||||||||||||||||||||||||||||
| Mortgage-backed securities: | |||||||||||||||||||||||||||||||||||
| Agency | $ |
|
$ | ( |
$ |
|
$ | ( |
$ |
|
$ | ( |
|||||||||||||||||||||||
| Agency-collateralized mortgage obligations |
|
( |
|
( |
|
( |
|||||||||||||||||||||||||||||
| Commercial |
|
( |
|
( |
|
( |
|||||||||||||||||||||||||||||
| Non-agency residential |
|
( |
|
( |
|
( |
|||||||||||||||||||||||||||||
| Total mortgage-backed securities |
|
( |
|
( |
|
( |
|||||||||||||||||||||||||||||
| U.S. Treasury and government agencies |
|
( |
|
( |
|
( |
|||||||||||||||||||||||||||||
| Other taxable securities |
|
( |
|
|
|
( |
|||||||||||||||||||||||||||||
| Tax-exempt securities |
|
( |
|
( |
|
( |
|||||||||||||||||||||||||||||
| Total AFS debt securities in a continuous unrealized loss position |
$ |
|
$ | ( |
$ |
|
$ | ( |
$ |
|
$ | ( |
|||||||||||||||||||||||
| December 31, 2020 | |||||||||||||||||||||||||||||||||||
| Continuously unrealized loss-positioned AFS debt securities | |||||||||||||||||||||||||||||||||||
| Mortgage-backed securities: | |||||||||||||||||||||||||||||||||||
| Agency | $ | $ | ( |
$ | $ | $ | $ | ( |
|||||||||||||||||||||||||||
| Agency-collateralized mortgage obligations | ( |
( |
( |
||||||||||||||||||||||||||||||||
| Commercial | ( |
( |
|||||||||||||||||||||||||||||||||
| Non-agency residential | ( |
( |
( |
||||||||||||||||||||||||||||||||
| Total mortgage-backed securities | ( |
( |
( |
||||||||||||||||||||||||||||||||
| U.S. Treasury and government agencies | ( |
( |
( |
||||||||||||||||||||||||||||||||
| Non-U.S. securities | ( |
( |
( |
||||||||||||||||||||||||||||||||
| Other taxable securities | ( |
( |
( |
||||||||||||||||||||||||||||||||
| Tax-exempt securities | ( |
( |
( |
||||||||||||||||||||||||||||||||
| Total AFS debt securities in a continuous unrealized loss position |
$ | $ | ( |
$ | $ | ( |
$ | $ | ( |
||||||||||||||||||||||||||
63 Bank of America
|
||||||||
The remaining contractual maturity distribution and yields of the Corporation’s debt securities carried at fair value and HTM debt securities at September 30, 2021 are summarized in the table below. Actual duration and yields may differ as prepayments on the loans underlying the MBS or other asset-backed securities (ABS) are passed through to the Corporation.
| Maturities of Debt Securities Carried at Fair Value and Held-to-maturity Debt Securities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Due in One Year or Less |
Due after One Year through Five Years |
Due after Five Years through Ten Years |
Due after Ten Years |
Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Amount |
Yield (1)
|
Amount |
Yield (1)
|
Amount |
Yield (1)
|
Amount |
Yield (1)
|
Amount |
Yield (1)
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Amortized cost of debt securities carried at fair value | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage-backed securities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Agency | $ | % | $ | % | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||||||||||||||||||||||
| Agency-collateralized mortgage obligations | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-agency residential | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total mortgage-backed securities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Treasury and government agencies | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-U.S. securities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other taxable securities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tax-exempt securities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total amortized cost of debt securities carried at fair value |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Amortized cost of HTM debt securities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Agency mortgage-backed securities | $ | % | $ | % | $ | % | $ | % | $ | % | |||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Treasury and government agencies | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other taxable securities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total amortized cost of HTM debt securities | $ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||||||||||||||||||||||||||||||||||||||||||
| Debt securities carried at fair value | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage-backed securities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Agency | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Agency-collateralized mortgage obligations | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-agency residential | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total mortgage-backed securities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Treasury and government agencies | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-U.S. securities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other taxable securities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tax-exempt securities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total debt securities carried at fair value | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value of HTM debt securities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Agency mortgage-backed securities | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Treasury and government agencies | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other taxable securities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total fair value of HTM debt securities | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||||||||||||||||||||||||
(1)The weighted-average yield is computed based on a constant effective interest rate over the contractual life of each security. The average yield considers the contractual coupon and the amortization of premiums and accretion of discounts, excluding the effect of related hedging derivatives.
Bank of America 64
|
||||||||
NOTE 5 Outstanding Loans and Leases and Allowance for Credit Losses
The following tables present total outstanding loans and leases and an aging analysis for the Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments, by class of financing receivables, at September 30, 2021 and December 31, 2020.
|
30-59 Days
Past Due (1)
|
60-89 Days
Past Due (1)
|
90 Days or
More
Past Due (1)
|
Total Past Due 30 Days or More |
Total
Current or
Less Than
30 Days
Past Due (1)
|
Loans Accounted for Under the Fair Value Option |
Total Outstandings |
|||||||||||||||||||||||||||||||||||
| (Dollars in millions) | September 30, 2021 | ||||||||||||||||||||||||||||||||||||||||
| Consumer real estate | |||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||||
| Home equity |
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
| Credit card and other consumer | |||||||||||||||||||||||||||||||||||||||||
| Credit card |
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
Direct/Indirect consumer (2)
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
| Other consumer |
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
| Total consumer |
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
Consumer loans accounted for under the fair value option (3)
|
$ |
|
|
||||||||||||||||||||||||||||||||||||||
| Total consumer loans and leases |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||||||||
| U.S. commercial |
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
| Non-U.S. commercial |
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
Commercial real estate (4)
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
| Commercial lease financing |
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
U.S. small business commercial (5)
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
| Total commercial |
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
Commercial loans accounted for under the fair value option (3)
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Total commercial loans and leases |
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||||||
Total loans and leases (6)
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||||||||||
| Percentage of outstandings |
|
% |
|
% |
|
% |
|
% |
|
% |
|
% |
|
% | |||||||||||||||||||||||||||
(1)Consumer real estate loans 30-59 days past due includes fully-insured loans of $185 million and nonperforming loans of $116 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $97 million and nonperforming loans of $102 million. Consumer real estate loans 90 days or more past due includes fully-insured loans of $648 million. Consumer real estate loans current or less than 30 days past due includes $1.5 billion and direct/indirect consumer includes $29 million of nonperforming loans. For information on the Corporation's interest accrual policies and delinquency status for loan modifications related to the pandemic, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
(2)Total outstandings primarily includes auto and specialty lending loans and leases of $47.2 billion, U.S. securities-based lending loans of $48.7 billion and non-U.S. consumer loans of $3.0 billion.
(3)Consumer loans accounted for under the fair value option includes residential mortgage loans of $241 million and home equity loans of $375 million. Commercial loans accounted for under the fair value option includes U.S. commercial loans of $4.5 billion and non-U.S. commercial loans of $2.4 billion. For more information, see Note 14 – Fair Value Measurements and Note 15 – Fair Value Option.
(4)Total outstandings includes U.S. commercial real estate loans of $56.6 billion and non-U.S. commercial real estate loans of $4.1 billion.
(5)Includes Paycheck Protection Program loans.
(6)Total outstandings includes loans and leases pledged as collateral of $12.8 billion. The Corporation also pledged $150.2 billion of loans with no related outstanding borrowings to secure potential borrowing capacity with the Federal Reserve Bank and Federal Home Loan Bank.
65 Bank of America
|
||||||||
30-59 Days Past Due (1) |
60-89 Days
Past Due (1)
|
90 Days or More Past Due (1) |
Total Past Due 30 Days or More |
Total
Current or
Less Than
30 Days
Past Due (1)
|
Loans Accounted for Under the Fair Value Option |
Total Outstandings | |||||||||||||||||||||||||||||||||||
| (Dollars in millions) | December 31, 2020 | ||||||||||||||||||||||||||||||||||||||||
| Consumer real estate | |||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| Home equity | |||||||||||||||||||||||||||||||||||||||||
| Credit card and other consumer | |||||||||||||||||||||||||||||||||||||||||
| Credit card | |||||||||||||||||||||||||||||||||||||||||
Direct/Indirect consumer (2)
|
|||||||||||||||||||||||||||||||||||||||||
| Other consumer | |||||||||||||||||||||||||||||||||||||||||
| Total consumer | |||||||||||||||||||||||||||||||||||||||||
Consumer loans accounted for under the fair value option (3)
|
$ | ||||||||||||||||||||||||||||||||||||||||
| Total consumer loans and leases | |||||||||||||||||||||||||||||||||||||||||
| Commercial | |||||||||||||||||||||||||||||||||||||||||
| U.S. commercial | |||||||||||||||||||||||||||||||||||||||||
| Non-U.S. commercial | |||||||||||||||||||||||||||||||||||||||||
Commercial real estate (4)
|
|||||||||||||||||||||||||||||||||||||||||
| Commercial lease financing | |||||||||||||||||||||||||||||||||||||||||
U.S. small business commercial (5)
|
|||||||||||||||||||||||||||||||||||||||||
| Total commercial | |||||||||||||||||||||||||||||||||||||||||
Commercial loans accounted for under the fair value option (3)
|
|||||||||||||||||||||||||||||||||||||||||
Total commercial loans and leases |
|||||||||||||||||||||||||||||||||||||||||
Total loans and leases (6)
|
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Percentage of outstandings | % | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||||
(1)Consumer real estate loans 30-59 days past due includes fully-insured loans of $225 million and nonperforming loans of $126 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $103 million and nonperforming loans of $95 million. Consumer real estate loans 90 days or more past due includes fully-insured loans of $762 million. Consumer real estate loans current or less than 30 days past due includes $1.2 billion and direct/indirect consumer includes $66 million of nonperforming loans. For information on the Corporation's interest accrual policies and delinquency status for loan modifications related to the pandemic, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
(2)Total outstandings primarily includes auto and specialty lending loans and leases of $46.4 billion, U.S. securities-based lending loans of $41.1 billion and non-U .S. consumer loans of $3.0 billion.
(3)Consumer loans accounted for under the fair value option includes residential mortgage loans of $298 million and home equity loans of $437 million. Commercial loans accounted for under the fair value option includes U.S. commercial loans of $2.9 billion and non-U.S. commercial loans of $3.0 billion. For more information, see Note 14 – Fair Value Measurements and Note 15 – Fair Value Option.
(4)Total outstandings includes U.S. commercial real estate loans of $57.2 billion and non-U.S. commercial real estate loans of $3.2 billion.
(5)Includes Paycheck Protection Program loans.
(6)Total outstandings includes loans and leases pledged as collateral of $15.5 billion. The Corporation also pledged $153.1 billion of loans with no related outstanding borrowings to secure potential borrowing capacity with the Federal Reserve Bank and Federal Home Loan Bank.
The Corporation has entered into long-term credit protection agreements with FNMA and FHLMC on loans totaling $10.3 billion and $9.0 billion at September 30, 2021 and December 31, 2020, providing full credit protection on residential mortgage loans that become severely delinquent. All of these loans are individually insured, and therefore the Corporation does not record an allowance for credit losses related to these loans.
Nonperforming Loans and Leases
Commercial nonperforming loans decreased to $1.7 billion at September 30, 2021 from $2.2 billion at December 31, 2020. Consumer nonperforming loans increased to $3.0 billion at September 30, 2021 from $2.7 billion at December 31, 2020 driven by consumer real estate deferral activity.
Bank of America 66
|
||||||||
| Credit Quality | |||||||||||||||||||||||
| Nonperforming Loans and Leases |
Accruing Past Due
90 Days or More (1)
|
||||||||||||||||||||||
| (Dollars in millions) | September 30 2021 |
December 31 2020 |
September 30 2021 |
December 31 2020 |
|||||||||||||||||||
Residential mortgage (2)
|
$ |
|
$ | $ |
|
$ | |||||||||||||||||
With no related allowance (3)
|
|
|
|||||||||||||||||||||
Home equity (2)
|
|
|
|||||||||||||||||||||
With no related allowance (3)
|
|
|
|||||||||||||||||||||
| Credit Card | n/a | n/a |
|
||||||||||||||||||||
| Direct/indirect consumer |
|
|
|||||||||||||||||||||
| Total consumer |
|
|
|||||||||||||||||||||
| U.S. commercial |
|
|
|||||||||||||||||||||
| Non-U.S. commercial |
|
|
|||||||||||||||||||||
| Commercial real estate |
|
|
|||||||||||||||||||||
| Commercial lease financing |
|
|
|||||||||||||||||||||
| U.S. small business commercial |
|
|
|||||||||||||||||||||
| Total commercial |
|
|
|||||||||||||||||||||
| Total nonperforming loans | $ |
|
$ | $ |
|
$ | |||||||||||||||||
Percentage of outstanding loans and leases |
% | % | |||||||||||||||||||||
(1)For information on the Corporation's interest accrual policies and delinquency status for loan modifications related to the pandemic, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
(2)Residential mortgage loans accruing past due 90 days or more are fully-insured loans. At September 30, 2021 and December 31, 2020 residential mortgage includes $466 million and $537 million of loans on which interest had been curtailed by the Federal Housing Administration (FHA), and therefore were no longer accruing interest, although principal was still insured, and $182 million and $225 million of loans on which interest was still accruing.
(3)Primarily relates to loans for which the estimated fair value of the underlying collateral less any costs to sell is greater than the amortized cost of the loans as of the reporting date.
Credit Quality Indicators
The Corporation monitors credit quality within its Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments based on primary credit quality indicators. For more information on the portfolio segments, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K. Within the Consumer Real Estate portfolio segment, the primary credit quality indicators are refreshed loan-to-value (LTV) and refreshed Fair Isaac Corporation (FICO) score. Refreshed LTV measures the carrying value of the loan as a percentage of the value of the property securing the loan, refreshed quarterly. Home equity loans are evaluated using combined loan-to-value (CLTV), which measures the carrying value of the Corporation’s loan and available line of credit combined with any outstanding senior liens against the property as a percentage of the value of the property securing the loan, refreshed quarterly. FICO score measures the creditworthiness of the borrower based on the financial obligations of the borrower and the borrower’s credit history. FICO scores are typically refreshed quarterly or more frequently. Certain borrowers (e.g., borrowers that have had debts discharged in a
bankruptcy proceeding) may not have their FICO scores updated. FICO scores are also a primary credit quality indicator for the Credit Card and Other Consumer portfolio segment and the business card portfolio within U.S. small business commercial. Within the Commercial portfolio segment, loans are evaluated using the internal classifications of pass rated or reservable criticized as the primary credit quality indicators. The term reservable criticized refers to those commercial loans that are internally classified or listed by the Corporation as Special Mention, Substandard or Doubtful, which are asset quality categories defined by regulatory authorities. These assets have an elevated level of risk and may have a high probability of default or total loss. Pass rated refers to all loans not considered reservable criticized. In addition to these primary credit quality indicators, the Corporation uses other credit quality indicators for certain types of loans.
67 Bank of America
|
||||||||
Residential Mortgage – Credit Quality Indicators By Vintage | |||||||||||||||||||||||||||||||||||||||||
| Term Loans by Origination Year | |||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Total as of September 30, 2021 |
2021 | 2020 | 2019 | 2018 | 2017 | Prior | ||||||||||||||||||||||||||||||||||
| Total Residential Mortgage | |||||||||||||||||||||||||||||||||||||||||
Refreshed LTV
|
|||||||||||||||||||||||||||||||||||||||||
| Less than or equal to 90 percent | $ |
|
$ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
Greater than 90 percent but less than or equal to 100 percent |
|
||||||||||||||||||||||||||||||||||||||||
Greater than 100 percent |
|
||||||||||||||||||||||||||||||||||||||||
Fully-insured loans |
|
||||||||||||||||||||||||||||||||||||||||
| Total Residential Mortgage | $ |
|
$ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Total Residential Mortgage | |||||||||||||||||||||||||||||||||||||||||
| Refreshed FICO score | |||||||||||||||||||||||||||||||||||||||||
| Less than 620 | $ |
|
$ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
Greater than or equal to 620 and less than 680 |
|
||||||||||||||||||||||||||||||||||||||||
Greater than or equal to 680 and less than 740 |
|
||||||||||||||||||||||||||||||||||||||||
Greater than or equal to 740 |
|
||||||||||||||||||||||||||||||||||||||||
Fully-insured loans |
|
||||||||||||||||||||||||||||||||||||||||
| Total Residential Mortgage | $ |
|
$ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Home Equity - Credit Quality Indicators | |||||||||||||||||||||||
| Total |
Home Equity Loans and Reverse Mortgages (1)
|
Revolving Loans | Revolving Loans Converted to Term Loans | ||||||||||||||||||||
| (Dollars in millions) | September 30, 2021 | ||||||||||||||||||||||
| Total Home Equity | |||||||||||||||||||||||
Refreshed LTV
|
|||||||||||||||||||||||
| Less than or equal to 90 percent | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
Greater than 90 percent but less than or equal to 100 percent |
|
|
|
|
|||||||||||||||||||
Greater than 100 percent |
|
|
|
|
|||||||||||||||||||
| Total Home Equity | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Total Home Equity | |||||||||||||||||||||||
| Refreshed FICO score | |||||||||||||||||||||||
| Less than 620 | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
Greater than or equal to 620 and less than 680 |
|
|
|
|
|||||||||||||||||||
Greater than or equal to 680 and less than 740 |
|
|
|
|
|||||||||||||||||||
Greater than or equal to 740 |
|
|
|
|
|||||||||||||||||||
| Total Home Equity | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
(1)Includes reverse mortgages of $1.3 billion and home equity loans of $646 million which are no longer originated.
| Credit Card and Direct/Indirect Consumer – Credit Quality Indicators By Vintage | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Direct/Indirect | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans by Origination Year | Credit Card | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Total Direct/ Indirect as of September 30, 2021 |
Revolving Loans | 2021 | 2020 | 2019 | 2018 | 2017 | Prior | Total Credit Card as of September 30, 2021 |
Revolving Loans |
Revolving Loans Converted to Term Loans (1)
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Refreshed FICO score | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less than 620 | $ |
|
$ | $ | $ | $ | $ | $ | $ | $ |
|
$ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Greater than or equal to 620 and less than 680 |
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Greater than or equal to 680 and less than 740 |
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Greater than or equal to 740 |
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Other internal credit
metrics (2,3)
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total credit card and other consumer |
$ |
|
$ | $ | $ | $ | $ | $ | $ | $ |
|
$ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)Represents TDRs that were modified into term loans.
(2)Other internal credit metrics may include delinquency status, geography or other factors.
(3)Direct/indirect consumer includes $51.7 billion of securities-based lending which is typically supported by highly liquid collateral with market value greater than or equal to the outstanding loan balance and therefore has minimal credit risk at September 30, 2021.
Bank of America 68
|
||||||||
Commercial – Credit Quality Indicators By Vintage (1, 2)
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans | |||||||||||||||||||||||||||||||||||||||||||||||
| Amortized Cost Basis by Origination Year | |||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Total as of September 30, 2021 |
2021 | 2020 | 2019 | 2018 | 2017 | Prior | Revolving Loans | |||||||||||||||||||||||||||||||||||||||
| U.S. Commercial | |||||||||||||||||||||||||||||||||||||||||||||||
| Risk ratings | |||||||||||||||||||||||||||||||||||||||||||||||
| Pass rated | $ |
|
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Reservable criticized |
|
||||||||||||||||||||||||||||||||||||||||||||||
Total U.S. Commercial |
$ |
|
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Non-U.S. Commercial | |||||||||||||||||||||||||||||||||||||||||||||||
| Risk ratings | |||||||||||||||||||||||||||||||||||||||||||||||
| Pass rated | $ |
|
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Reservable criticized |
|
||||||||||||||||||||||||||||||||||||||||||||||
Total Non-U.S. Commercial |
$ |
|
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Commercial Real Estate | |||||||||||||||||||||||||||||||||||||||||||||||
| Risk ratings | |||||||||||||||||||||||||||||||||||||||||||||||
| Pass rated | $ |
|
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Reservable criticized |
|
||||||||||||||||||||||||||||||||||||||||||||||
Total Commercial Real Estate |
$ |
|
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Commercial Lease Financing | |||||||||||||||||||||||||||||||||||||||||||||||
| Risk ratings | |||||||||||||||||||||||||||||||||||||||||||||||
| Pass rated | $ |
|
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Reservable criticized |
|
||||||||||||||||||||||||||||||||||||||||||||||
Total Commercial Lease Financing |
$ |
|
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
U.S. Small Business Commercial (3)
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Risk ratings | |||||||||||||||||||||||||||||||||||||||||||||||
| Pass rated | $ |
|
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Reservable criticized |
|
||||||||||||||||||||||||||||||||||||||||||||||
Total U.S. Small Business Commercial |
$ |
|
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Total | $ |
|
$ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
(1) Excludes $7.0 billion of loans accounted for under the fair value option at September 30, 2021.
(2) Includes $18 million of loans that converted from revolving to term loans.
(3) Excludes U.S. Small Business Card loans of $7.1 billion. Refreshed FICO scores for this portfolio are $188 million for less than 620; $572 million for greater than or equal to 620 and less than 680; $1.8 billion for greater than or equal to 680 and less than 740; and $4.5 billion greater than or equal to 740.
69 Bank of America
|
||||||||
The following tables present certain credit quality indicators for the Corporation's Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments by class of financing receivables and year of origination for term loan balances at December 31, 2020, including revolving loans that converted to term loans without an additional credit decision after origination or through a TDR.
Residential Mortgage – Credit Quality Indicators By Vintage | |||||||||||||||||||||||||||||||||||||||||
| Term Loans by Origination Year | |||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Total as of December 31, 2020 |
2020 | 2019 | 2018 | 2017 | 2016 | Prior | ||||||||||||||||||||||||||||||||||
| Total Residential Mortgage | |||||||||||||||||||||||||||||||||||||||||
Refreshed LTV
|
|||||||||||||||||||||||||||||||||||||||||
| Less than or equal to 90 percent | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
Greater than 90 percent but less than or equal to 100 percent |
|||||||||||||||||||||||||||||||||||||||||
Greater than 100 percent |
|||||||||||||||||||||||||||||||||||||||||
Fully-insured loans |
|||||||||||||||||||||||||||||||||||||||||
| Total Residential Mortgage | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Total Residential Mortgage | |||||||||||||||||||||||||||||||||||||||||
| Refreshed FICO score | |||||||||||||||||||||||||||||||||||||||||
| Less than 620 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
Greater than or equal to 620 and less than 680 |
|||||||||||||||||||||||||||||||||||||||||
Greater than or equal to 680 and less than 740 |
|||||||||||||||||||||||||||||||||||||||||
| Greater than or equal to 740 | |||||||||||||||||||||||||||||||||||||||||
Fully-insured loans |
|||||||||||||||||||||||||||||||||||||||||
| Total Residential Mortgage | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
| Home Equity - Credit Quality Indicators | |||||||||||||||||||||||
| Total |
Home Equity Loans and Reverse Mortgages (1)
|
Revolving Loans | Revolving Loans Converted to Term Loans | ||||||||||||||||||||
| (Dollars in millions) | December 31, 2020 | ||||||||||||||||||||||
| Total Home Equity | |||||||||||||||||||||||
Refreshed LTV
|
|||||||||||||||||||||||
| Less than or equal to 90 percent | $ | $ | $ | $ | |||||||||||||||||||
Greater than 90 percent but less than or equal to 100 percent |
|||||||||||||||||||||||
Greater than 100 percent |
|||||||||||||||||||||||
| Total Home Equity | $ | $ | $ | $ | |||||||||||||||||||
| Total Home Equity | |||||||||||||||||||||||
| Refreshed FICO score | |||||||||||||||||||||||
| Less than 620 | $ | $ | $ | $ | |||||||||||||||||||
Greater than or equal to 620 and less than 680 |
|||||||||||||||||||||||
Greater than or equal to 680 and less than 740 |
|||||||||||||||||||||||
Greater than or equal to 740 |
|||||||||||||||||||||||
| Total Home Equity | $ | $ | $ | $ | |||||||||||||||||||
(1)Includes reverse mortgages of $1.3 billion and home equity loans of $885 million which are no longer originated.
Bank of America 70
|
||||||||
| Credit Card and Direct/Indirect Consumer – Credit Quality Indicators By Vintage | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Direct/Indirect | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans by Origination Year | Credit Card | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Total Direct/Indirect as of December 31, 2020 | Revolving Loans | 2020 | 2019 | 2018 | 2017 | 2016 | Prior | Total Credit Card as of December 31, 2020 | Revolving Loans |
Revolving Loans Converted to Term Loans (1)
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Refreshed FICO score | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less than 620 | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Greater than or equal to 620 and less than 680 |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Greater than or equal to 680 and less than 740 |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Greater than or equal to 740 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Other internal credit
metrics (2, 3)
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total credit card and other consumer |
$ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)Represents TDRs that were modified into term loans.
(2)Other internal credit metrics may include delinquency status, geography or other factors.
(3)Direct/indirect consumer includes $44.1 billion of securities-based lending which is typically supported by highly liquid collateral with market value greater than or equal to the outstanding loan balance and therefore has minimal credit risk at December 31, 2020.
Commercial – Credit Quality Indicators By Vintage (1, 2)
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans | |||||||||||||||||||||||||||||||||||||||||||||||
| Amortized Cost Basis by Origination Year | |||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Total as of December 31, 2020 | 2020 | 2019 | 2018 | 2017 | 2016 | Prior | Revolving Loans | |||||||||||||||||||||||||||||||||||||||
| U.S. Commercial | |||||||||||||||||||||||||||||||||||||||||||||||
| Risk ratings | |||||||||||||||||||||||||||||||||||||||||||||||
| Pass rated | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Reservable criticized | |||||||||||||||||||||||||||||||||||||||||||||||
Total U.S. Commercial |
$ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Non-U.S. Commercial | |||||||||||||||||||||||||||||||||||||||||||||||
| Risk ratings | |||||||||||||||||||||||||||||||||||||||||||||||
| Pass rated | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Reservable criticized | |||||||||||||||||||||||||||||||||||||||||||||||
Total Non-U.S. Commercial |
$ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Commercial Real Estate | |||||||||||||||||||||||||||||||||||||||||||||||
| Risk ratings | |||||||||||||||||||||||||||||||||||||||||||||||
| Pass rated | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Reservable criticized | |||||||||||||||||||||||||||||||||||||||||||||||
Total Commercial Real Estate |
$ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Commercial Lease Financing | |||||||||||||||||||||||||||||||||||||||||||||||
| Risk ratings | |||||||||||||||||||||||||||||||||||||||||||||||
| Pass rated | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Reservable criticized | |||||||||||||||||||||||||||||||||||||||||||||||
Total Commercial Lease Financing |
$ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
U.S. Small Business Commercial (3)
|
|||||||||||||||||||||||||||||||||||||||||||||||
| Risk ratings | |||||||||||||||||||||||||||||||||||||||||||||||
| Pass rated | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Reservable criticized | |||||||||||||||||||||||||||||||||||||||||||||||
Total U.S. Small Business Commercial |
$ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
(1) Excludes $5.9 billion of loans accounted for under the fair value option at December 31, 2020.
(2) Includes $58 million of loans that converted from revolving to term loans.
(3) Excludes U.S. Small Business Card loans of $6.5 billion. Refreshed FICO scores for this portfolio are $265 million for less than 620; $582 million for greater than or equal to 620 and less than 680; $1.7 billion for greater than or equal to 680 and less than 740; and $3.9 billion greater than or equal to 740.
71 Bank of America
|
||||||||
Troubled Debt Restructurings
The Corporation has been entering into loan modifications with borrowers in response to the pandemic, most of which are not classified as TDRs and therefore are not included in the following discussion. For more information on the criteria for classifying loans as TDRs, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
Consumer Real Estate
Modifications of consumer real estate loans are classified as TDRs when the borrower is experiencing financial difficulties and a concession has been granted. Concessions may include reductions in interest rates, capitalization of past due amounts, principal and/or interest forbearance, payment extensions, principal and/or interest forgiveness, or combinations thereof. Prior to permanently modifying a loan, the Corporation may enter into trial modifications with certain borrowers under both government and proprietary programs. Trial modifications generally represent a three- to four-month period during which the borrower makes monthly payments under the anticipated modified payment terms. Upon successful completion of the trial period, the Corporation and the borrower enter into a permanent modification. Binding trial modifications are classified as TDRs when the trial offer is made and continue to be classified as TDRs regardless of whether the borrower enters into a permanent modification.
Consumer real estate loans of $323 million that have been discharged in Chapter 7 bankruptcy with no change in repayment terms and not reaffirmed by the borrower were included in TDRs at September 30, 2021, of which $95 million were classified as nonperforming and $57 million were loans fully insured.
Consumer real estate TDRs are measured primarily based on the net present value of the estimated cash flows discounted at
the loan’s original effective interest rate. If the carrying value of a TDR exceeds this amount, a specific allowance is recorded as a component of the allowance for loan and lease losses. Alternatively, consumer real estate TDRs that are considered to be dependent solely on the collateral for repayment (e.g., due to the lack of income verification) are measured based on the estimated fair value of the collateral, and a charge-off is recorded if the carrying value exceeds the fair value of the collateral. Consumer real estate loans that reach 180 days past due prior to modification are charged off to their net realizable value, less costs to sell, before they are modified as TDRs in accordance with established policy. Subsequent declines in the fair value of the collateral after a loan has reached 180 days past due are recorded as charge-offs. Fully-insured loans are protected against principal loss, and therefore, the Corporation does not record an allowance for loan and lease losses on the outstanding principal balance, even after they have been modified in a TDR.
At September 30, 2021 and December 31, 2020, remaining commitments to lend additional funds to debtors whose terms have been modified in a consumer real estate TDR were not significant. Consumer real estate foreclosed properties totaled $87 million and $123 million at September 30, 2021 and December 31, 2020. The carrying value of consumer real estate loans, including fully-insured loans, for which formal foreclosure proceedings were in process at September 30, 2021 was $1.1 billion. During the nine months ended September 30, 2021, the Corporation reclassified $33 million of consumer real estate loans, to foreclosed properties or, for properties acquired upon foreclosure of certain government-guaranteed loans (principally FHA-insured loans), to other assets. The reclassifications represent non-cash investing activities and, accordingly, are not reflected in the Consolidated Statement of Cash Flows.
| Consumer Real Estate – TDRs Entered into During the Three and Nine Months Ended September 30, 2021 and 2020 | |||||||||||||||||||||||||||||||||||||||||||||||
| Unpaid Principal Balance | Carrying Value |
Pre-Modification Interest Rate |
Post-Modification Interest Rate (1)
|
Unpaid Principal Balance | Carrying Value |
Pre-Modification Interest Rate |
Post-Modification Interest Rate (1)
|
||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Three Months Ended September 30, 2021 | Nine Months Ended September 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | $ |
|
$ |
|
|
% |
|
% | $ |
|
$ |
|
|
% |
|
% | |||||||||||||||||||||||||||||||
| Home equity |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
|
|
$ |
|
$ |
|
|
|
|||||||||||||||||||||||||||||||||||
| Three Months Ended September 30, 2020 | Nine Months Ended September 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | $ | $ | % | % | $ | $ | % | % | |||||||||||||||||||||||||||||||||||||||
| Home equity | |||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
(1)The post-modification interest rate reflects the interest rate applicable only to permanently completed modifications, which exclude loans that are in a trial modification period.
Bank of America 72
|
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The table below presents the September 30, 2021 and 2020 carrying value for consumer real estate loans that were modified in a TDR during the three and nine months ended September 30, 2021 and 2020, by type of modification.
| Consumer Real Estate – Modification Programs | |||||||||||||||||||||||
| TDRs Entered into During the | |||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Modifications under government programs | $ |
|
$ | $ |
|
$ | |||||||||||||||||
| Modifications under proprietary programs |
|
|
|||||||||||||||||||||
Loans discharged in Chapter 7 bankruptcy (1)
|
|
|
|||||||||||||||||||||
| Trial modifications |
|
|
|||||||||||||||||||||
| Total modifications | $ |
|
$ | $ |
|
$ | |||||||||||||||||
(1)Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.
The table below presents the carrying value of consumer real estate loans that entered into payment default during the three and nine months ended September 30, 2021 and 2020 that were modified in a TDR during the 12 months preceding payment default. A payment default for consumer real estate TDRs is recognized when a borrower has missed three monthly payments (not necessarily consecutively) since modification.
| Consumer Real Estate – TDRs Entering Payment Default that were Modified During the Preceding 12 Months | |||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Modifications under government programs | $ |
|
$ | $ |
|
$ | |||||||||||||||||
| Modifications under proprietary programs |
|
|
|||||||||||||||||||||
Loans discharged in Chapter 7 bankruptcy (1)
|
|
|
|||||||||||||||||||||
Trial modifications (2)
|
|
|
|||||||||||||||||||||
| Total modifications | $ |
|
$ | $ |
|
$ | |||||||||||||||||
(1)Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.
(2)Includes trial modification offers to which the customer did not respond.
Credit Card and Other Consumer
The Corporation seeks to assist customers who are experiencing financial difficulty by modifying loans while ensuring compliance with federal and local laws and guidelines. Credit card and other consumer loan modifications generally involve reducing the interest rate on the account, placing the customer on a fixed payment plan not exceeding 60 months and canceling the customer’s available line of credit, all of which are considered TDRs. The Corporation makes loan modifications directly with borrowers for debt held only by the Corporation (internal programs). Additionally, the Corporation makes loan modifications for borrowers working with third-party renegotiation
agencies that provide solutions to customers’ entire unsecured debt structures (external programs). The Corporation classifies other secured consumer loans that have been discharged in Chapter 7 bankruptcy as TDRs, which are written down to collateral value and placed on nonaccrual status no later than the time of discharge.
| Credit Card and Other Consumer – TDRs Entered into During the Three and Nine Months Ended September 30, 2021 and 2020 | |||||||||||||||||||||||||||||||||||||||||||||||
| Unpaid Principal Balance |
Carrying
Value (1)
|
Pre-Modification Interest Rate | Post-Modification Interest Rate | Unpaid Principal Balance |
Carrying Value (1) |
Pre-Modification Interest Rate | Post-Modification Interest Rate | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Three Months Ended September 30, 2021 | Nine Months Ended September 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||
| Credit card | $ |
|
$ |
|
|
% |
|
% | $ |
|
$ |
|
|
% | |||||||||||||||||||||||||||||||||
| Direct/Indirect consumer |
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
|
|
$ |
|
$ |
|
|
|
|||||||||||||||||||||||||||||||||||
| Three Months Ended September 30, 2020 | Nine Months Ended September 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| Credit card | $ | $ | % | % | $ | $ | % | % | |||||||||||||||||||||||||||||||||||||||
| Direct/Indirect consumer | |||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
(1)Includes accrued interest and fees.
73 Bank of America
|
||||||||
The table below presents the September 30, 2021 and 2020 carrying value for Credit Card and Other Consumer loans that were modified in a TDR during the three and nine months ended September 30, 2021 and 2020, by program type.
| Credit Card and Other Consumer – TDRs by Program Type | |||||||||||||||||||||||
| TDRs Entered into During the Three Months Ended September 30 |
TDRs Entered into During the Nine Months Ended September 30 |
||||||||||||||||||||||
(Dollars in millions) |
2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Internal programs | $ |
|
$ | $ |
|
$ | |||||||||||||||||
External programs |
|
|
|||||||||||||||||||||
Other |
|
|
|||||||||||||||||||||
| Total | $ |
|
$ | $ |
|
$ | |||||||||||||||||
Commercial Loans
Modifications of loans to commercial borrowers that are experiencing financial difficulty are designed to reduce the Corporation’s loss exposure while providing the borrower with an opportunity to work through financial difficulties, often to avoid foreclosure or bankruptcy. Each modification is unique and reflects the individual circumstances of the borrower. Modifications that result in a TDR may include extensions of maturity at a concessionary (below market) rate of interest, payment forbearances or other actions designed to benefit the borrower while mitigating the Corporation’s risk exposure. Reductions in interest rates are rare. Instead, the interest rates are typically increased, although the increased rate may not represent a market rate of interest. Infrequently, concessions may also include principal forgiveness in connection with foreclosure, short sale or other settlement agreements leading to termination or sale of the loan.
At the time of restructuring, the loans are remeasured to reflect the impact, if any, on projected cash flows resulting from the modified terms. If a portion of the loan is deemed to be uncollectible, a charge-off may be recorded at the time of restructuring. Alternatively, a charge-off may have already been recorded in a previous period such that no charge-off is required at the time of modification.
During the three and nine months ended September 30, 2021, the carrying value of the Corporation’s commercial loans that were modified as TDRs was $213 million and $1.1 billion compared to $588 million and $1.5 billion for the same periods in 2020. At September 30, 2021 and December 31, 2020, the Corporation had commitments to lend $272 million and $402 million to commercial borrowers whose loans are classified as
TDRs. The balance of commercial TDRs in payment default was $168 million and $218 million at September 30, 2021 and December 31, 2020.
Loans Held-for-sale
The Corporation had LHFS of $9.4 billion and $9.2 billion at September 30, 2021 and December 31, 2020. Cash and non-cash proceeds from sales and paydowns of loans originally classified as LHFS were $27.0 billion and $16.1 billion for the nine months ended September 30, 2021 and 2020. Cash used for originations and purchases of LHFS totaled approximately $27.0 billion and $11.1 billion for the nine months ended September 30, 2021 and 2020.
Accrued Interest Receivable
Accrued interest receivable for loans and leases and loans held-for-sale at September 30, 2021 and December 31, 2020 was $2.2 billion and $2.4 billion and is reported in customer and other receivables on the Consolidated Balance Sheet.
Outstanding credit card loan balances include unpaid principal, interest and fees. Credit card loans are not classified as nonperforming but are charged off no later than the end of the month in which the account becomes 180 days past due, within 60 days after receipt of notification of death or bankruptcy, or upon confirmation of fraud. During the three and nine months ended September 30, 2021, the Corporation reversed $87 million and $369 million of interest and fee income against the income statement line item in which it was originally recorded upon charge-off of the principal balance of the loan.
For the outstanding residential mortgage, home equity, direct/indirect consumer and commercial loan balances classified as nonperforming during the three and nine months ended September 30, 2021, interest and fee income reversed at the time the loans were classified as nonperforming was not significant. For more information on the Corporation's nonperforming loan policies, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
Bank of America 74
|
||||||||
Allowance for Credit Losses
The allowance for credit losses is estimated using quantitative and qualitative methods that consider a variety of factors, such as historical loss experience, the current credit quality of the portfolio and an economic outlook over the life of the loan. Qualitative reserves cover losses that are expected but, in the Corporation's assessment, may not be adequately reflected in the quantitative methods or the economic assumptions. The Corporation incorporates forward-looking information through the use of several macroeconomic scenarios in determining the weighted economic outlook over the forecasted life of the assets. These scenarios include key macroeconomic variables such as gross domestic product, unemployment rate, real estate prices and corporate bond spreads. The scenarios that are chosen each quarter and the weighting given to each scenario depend on a variety of factors including recent economic events, leading economic indicators, internal and third-party economist views, and industry trends. For more information on the Corporation's credit loss accounting policies including the allowance for credit losses, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
The September 30, 2021 estimate for allowance for credit losses was based on various economic outlooks that included consensus estimates, a downside scenario that assumed a significantly longer period until economic recovery, a tail risk scenario similar to the severely adverse scenario used in stress testing, a scenario to account for inflationary risk and higher interest rates and an upside scenario to consider the potential for improvement in the consensus outlooks. The weighted economic outlook assumes that the U.S. unemployment rate will be just above five 1.8 percent and 1.9 percent year-over-year in the fourth quarters of 2022 and 2023. The allowance for credit losses considered the impact of enacted government stimulus measures and continued to factor in the uncertainty resulting from the
unprecedented nature of the current health crisis and risks that may prevent a full economic recovery.
While there has been improvement across the economy, the Corporation continues to factor into its allowance for credit losses an estimated impact from higher-risk segments that included leveraged loans and industries such as travel and entertainment, which have been adversely impacted by the effects of the pandemic.
The allowance for credit losses at September 30, 2021 was $14.7 billion, a decrease of $6.0 billion compared to December 31, 2020. The decrease in the allowance for credit losses was primarily driven by improvements in the macroeconomic outlook and credit quality. The change in the allowance for credit losses was comprised of a net decrease of $5.6 billion in the allowance for loan and lease losses and a $340 million decrease in the reserve for unfunded lending commitments. The decrease in the allowance for credit losses was attributed to $342 million in the consumer real estate portfolio, $2.6 billion in the credit card and other consumer portfolio, and $3.1 billion in the commercial portfolio. Similarly, the provision for credit losses improved $2.0 billion to a benefit of $624 million and $15.4 billion to a benefit of $4.1 billion for the three and nine months ended September 30, 2021 compared to the same periods in 2020. The benefit in the three-month period was primarily due to credit quality improvements. The benefit in the nine-month period was primarily driven by improvements in the macroeconomic outlook and credit quality.
Outstanding loans and leases excluding loans accounted for under the fair value option decreased $1.0 billion in the nine months ended September 30, 2021 driven by consumer loans, which decreased $5.2 billion primarily due to a decline in consumer real estate due to prepayments in a low rate environment. However, outstanding commercial loans and leases, excluding small business, increased $17.9 billion during the nine months ended September 30, 2021, primarily driven by Global Markets.
75 Bank of America
|
||||||||
| Consumer Real Estate |
Credit Card and Other Consumer |
Commercial | Total | ||||||||||||||||||||
| (Dollars in millions) | Three Months Ended September 30, 2021 | ||||||||||||||||||||||
| Allowance for loan and lease losses, July 1 | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Loans and leases charged off | ( |
( |
( |
( |
|||||||||||||||||||
| Recoveries of loans and leases previously charged off |
|
|
|
|
|||||||||||||||||||
| Net charge-offs |
|
( |
( |
( |
|||||||||||||||||||
| Provision for loan and lease losses | ( |
|
( |
( |
|||||||||||||||||||
| Other |
|
( |
( |
( |
|||||||||||||||||||
Allowance for loan and lease losses, September 30 |
|
|
|
|
|||||||||||||||||||
| Reserve for unfunded lending commitments, July 1 |
|
|
|
|
|||||||||||||||||||
| Provision for unfunded lending commitments | ( |
|
( |
( |
|||||||||||||||||||
Reserve for unfunded lending commitments, September 30 |
|
|
|
|
|||||||||||||||||||
Allowance for credit losses, September 30 |
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Three Months Ended September 30, 2020 | |||||||||||||||||||||||
| Allowance for loan and lease losses, July 1 | $ | $ | $ | $ | |||||||||||||||||||
| Loans and leases charged off | ( |
( |
( |
( |
|||||||||||||||||||
| Recoveries of loans and leases previously charged off | |||||||||||||||||||||||
| Net charge-offs | ( |
( |
( |
||||||||||||||||||||
| Provision for loan and lease losses | ( |
||||||||||||||||||||||
| Other | ( |
( |
|||||||||||||||||||||
Allowance for loan and lease losses, September 30 |
|||||||||||||||||||||||
| Reserve for unfunded lending commitments, July 1 | |||||||||||||||||||||||
| Provision for unfunded lending commitments | ( |
||||||||||||||||||||||
| Other | ( |
( |
|||||||||||||||||||||
Reserve for unfunded lending commitments, September 30 |
|||||||||||||||||||||||
Allowance for credit losses, September 30 |
$ | $ | $ | $ | |||||||||||||||||||
| (Dollars in millions) | Nine Months Ended September 30, 2021 | ||||||||||||||||||||||
| Allowance for loan and lease losses, January 1 | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Loans and leases charged off | ( |
( |
( |
( |
|||||||||||||||||||
| Recoveries of loans and leases previously charged off |
|
|
|
|
|||||||||||||||||||
| Net charge-offs |
|
( |
( |
( |
|||||||||||||||||||
| Provision for loan and lease losses | ( |
( |
( |
( |
|||||||||||||||||||
| Other |
|
|
( |
|
|||||||||||||||||||
Allowance for loan and lease losses, September 30 |
|
|
|
|
|||||||||||||||||||
| Reserve for unfunded lending commitments, January 1 |
|
|
|
|
|||||||||||||||||||
| Provision for unfunded lending commitments | ( |
|
( |
( |
|||||||||||||||||||
| Other |
|
|
( |
( |
|||||||||||||||||||
Reserve for unfunded lending commitments, September 30 |
|
|
|
|
|||||||||||||||||||
Allowance for credit losses, September 30 |
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Nine Months Ended September 30, 2020 | |||||||||||||||||||||||
| Allowance for loan and lease losses, January 1 | $ | $ | $ | $ | |||||||||||||||||||
| Loans and leases charged off | ( |
( |
( |
( |
|||||||||||||||||||
| Recoveries of loans and leases previously charged off | |||||||||||||||||||||||
| Net charge-offs | ( |
( |
( |
||||||||||||||||||||
| Provision for loan and lease losses | |||||||||||||||||||||||
| Other | ( |
( |
|||||||||||||||||||||
Allowance for loan and lease losses, September 30 |
|||||||||||||||||||||||
| Reserve for unfunded lending commitments, January 1 | |||||||||||||||||||||||
| Provision for unfunded lending commitments | |||||||||||||||||||||||
Reserve for unfunded lending commitments, September 30 |
|||||||||||||||||||||||
Allowance for credit losses, September 30 |
$ | $ | $ | $ | |||||||||||||||||||
NOTE 6 Securitizations and Other Variable Interest Entities
unconsolidated VIEs in which the Corporation holds a variable interest. For more information on the Corporation's use of VIEs and related maximum loss exposure, see Note 1 – Summary of Significant Accounting Principles and Note 6 – Securitizations and Other Variable Interest Entities to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
The Corporation invests in ABS issued by third-party VIEs with which it has no other form of involvement and enters into certain commercial lending arrangements that may also incorporate the use of VIEs, for example to hold collateral. These securities and loans are included in Note 4 – Securities or Note 5 – Outstanding Loans and Leases and Allowance for Credit
Bank of America 76
|
||||||||
Losses. In addition, the Corporation has used VIEs in connection with its funding activities.
The Corporation did not provide financial support to consolidated or unconsolidated VIEs during the nine months ended September 30, 2021 or the year ended December 31, 2020 that it was not previously contractually required to provide, nor does it intend to do so.
The Corporation had liquidity commitments, including written put options and collateral value guarantees, with certain unconsolidated VIEs of $968 million and $929 million at September 30, 2021 and December 31, 2020.
First-lien Mortgage Securitizations
As part of its mortgage banking activities, the Corporation securitizes a portion of the first-lien residential mortgage loans it originates or purchases from third parties. Except as described in Note 10 – Commitments and Contingencies, the Corporation does not provide guarantees or recourse to the securitization trusts other than standard representations and warranties.
| First-lien Mortgage Securitizations | |||||||||||||||||||||||||||||||||||||||||||||||
| Residential Mortgage - Agency | Commercial Mortgage | ||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||||||||||||
Proceeds from loan sales (1)
|
$ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | |||||||||||||||||||||||||||||||||||
Gains on securitizations (2)
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
Repurchases from securitization trusts (3)
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||
(1)The Corporation transfers residential mortgage loans to securitizations sponsored primarily by the Government-sponsored enterprise (GSEs) or Government National Mortgage Association (GNMA) in the normal course of business and primarily receives RMBS in exchange. Substantially all of these securities are classified as Level 2 within the fair value hierarchy and are typically sold shortly after receipt.
(2)A majority of the first-lien residential mortgage loans securitized are initially classified as LHFS and accounted for under the fair value option. Gains recognized on these LHFS prior to securitization, which totaled $24 million and $97 million, net of hedges, during the three and nine months ended September 30, 2021 compared to $44 million and $105 million for the same periods in 2020, are not included in the table above.
(3)The Corporation may have the option to repurchase delinquent loans out of securitization trusts, which reduces the amount of servicing advances it is required to make. The Corporation may also repurchase loans from securitization trusts to perform modifications. Repurchased loans include FHA-insured mortgages collateralizing GNMA securities.
The Corporation recognizes consumer MSRs from the sale or securitization of consumer real estate loans. The unpaid principal balance of loans serviced for investors, including residential mortgage and home equity loans, totaled $129.6 billion and $172.5 billion at September 30, 2021 and 2020. Servicing fee and ancillary fee income on serviced loans was $101 million and $318 million during the three and nine months ended September 30, 2021 compared to $101 million and $353 million for the same periods in 2020. Servicing advances on serviced loans, including loans serviced for others and loans held for investment, were $2.1 billion and $2.2 billion at September 30, 2021 and December 31, 2020. For more information on MSRs, see Note 14 – Fair Value Measurements.
During the nine months ended September 30, 2020, the Corporation completed the sale of $9.3 billion of consumer real estate loans through GNMA loan securitizations. As part of the securitizations, the Corporation retained $8.4 billion of mortgage-backed securities, which are classified as debt securities carried at fair value on the Consolidated Balance Sheet. Total gains on loan sales of $704 million were recorded in other income in the Consolidated Statement of Income.
77 Bank of America
|
||||||||
| First-lien Mortgage VIEs | ||||||||||||||||||||||||||||||||||||||||||||
| Residential Mortgage | ||||||||||||||||||||||||||||||||||||||||||||
| Non-agency | ||||||||||||||||||||||||||||||||||||||||||||
| Agency | Prime | Subprime | Alt-A | Commercial Mortgage | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Sep 30 2021 |
December 31 2020 |
Sep 30 2021 |
December 31 2020 |
Sep 30 2021 |
December 31 2020 |
Sep 30 2021 |
December 31 2020 |
Sep 30 2021 |
December 31 2020 |
||||||||||||||||||||||||||||||||||
| Unconsolidated VIEs | ||||||||||||||||||||||||||||||||||||||||||||
Maximum loss exposure (1)
|
$ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | |||||||||||||||||||||||||||||
On-balance sheet assets |
||||||||||||||||||||||||||||||||||||||||||||
Senior securities: |
||||||||||||||||||||||||||||||||||||||||||||
Trading account assets |
$ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | |||||||||||||||||||||||||||||
Debt securities carried at fair value |
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
Held-to-maturity securities |
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
| All other assets |
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
Total retained positions |
$ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | |||||||||||||||||||||||||||||
Principal balance outstanding (2)
|
$ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | |||||||||||||||||||||||||||||
| Consolidated VIEs | ||||||||||||||||||||||||||||||||||||||||||||
Maximum loss exposure (1)
|
$ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | |||||||||||||||||||||||||||||
On-balance sheet assets |
||||||||||||||||||||||||||||||||||||||||||||
Trading account assets |
$ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | |||||||||||||||||||||||||||||
| Total assets | $ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | |||||||||||||||||||||||||||||
| Total liabilities | $ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | |||||||||||||||||||||||||||||
(1)Maximum loss exposure includes obligations under loss-sharing reinsurance and other arrangements for non-agency residential mortgage and commercial mortgage securitizations, but excludes the reserve for representations and warranties obligations and corporate guarantees and also excludes servicing advances and other servicing rights and obligations. For more information, see Note 10 – Commitments and Contingencies and Note 14 – Fair Value Measurements.
(2)Principal balance outstanding includes loans where the Corporation was the transferor to securitization VIEs with which it has continuing involvement, which may include servicing the loans.
Other Asset-backed Securitizations
The table below summarizes select information related to home equity, credit card and other asset-backed VIEs in which the Corporation held a variable interest at September 30, 2021 and December 31, 2020.
| Home Equity Loan, Credit Card and Other Asset-backed VIEs | |||||||||||||||||||||||||||||||||||
Home Equity (1)
|
Credit Card (2)
|
Resecuritization Trusts | Municipal Bond Trusts | ||||||||||||||||||||||||||||||||
| (Dollars in millions) | Sep 30 2021 |
December 31 2020 |
Sep 30 2021 |
December 31 2020 |
Sep 30 2021 |
December 31 2020 |
Sep 30 2021 |
December 31 2020 |
|||||||||||||||||||||||||||
| Unconsolidated VIEs | |||||||||||||||||||||||||||||||||||
| Maximum loss exposure | $ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | |||||||||||||||||||||||
| On-balance sheet assets | |||||||||||||||||||||||||||||||||||
Securities (3):
|
|||||||||||||||||||||||||||||||||||
| Trading account assets | $ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | |||||||||||||||||||||||
Debt securities carried at fair value |
|
|
|
|
|||||||||||||||||||||||||||||||
| Held-to-maturity securities |
|
|
|
|
|||||||||||||||||||||||||||||||
| Total retained positions | $ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | |||||||||||||||||||||||
| Total assets of VIEs | $ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | |||||||||||||||||||||||
| Consolidated VIEs | |||||||||||||||||||||||||||||||||||
| Maximum loss exposure | $ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | |||||||||||||||||||||||
| On-balance sheet assets | |||||||||||||||||||||||||||||||||||
| Trading account assets | $ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | |||||||||||||||||||||||
| Loans and leases |
|
|
|
|
|||||||||||||||||||||||||||||||
Allowance for loan and lease losses |
|
( |
( |
|
|
||||||||||||||||||||||||||||||
| All other assets |
|
|
|
|
|||||||||||||||||||||||||||||||
| Total assets | $ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | |||||||||||||||||||||||
| On-balance sheet liabilities | |||||||||||||||||||||||||||||||||||
Short-term borrowings |
$ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | |||||||||||||||||||||||
| Long-term debt |
|
|
|
|
|||||||||||||||||||||||||||||||
| All other liabilities |
|
|
|
|
|||||||||||||||||||||||||||||||
| Total liabilities | $ |
|
$ | $ |
|
$ | $ |
|
$ | $ |
|
$ | |||||||||||||||||||||||
(1)For unconsolidated home equity loan VIEs, the maximum loss exposure includes outstanding trust certificates issued by trusts in rapid amortization, net of recorded reserves. For both consolidated and unconsolidated home equity loan VIEs, the maximum loss exposure excludes the reserve for representations and warranties obligations and corporate guarantees. For more information, see Note 10 – Commitments and Contingencies.
(2)At September 30, 2021 and December 31, 2020, loans and leases in the consolidated credit card trust included $4.0 billion and $7.6 billion of seller’s interest.
Home Equity Loans
The Corporation retains interests, primarily senior securities, in home equity securitization trusts to which it transferred home equity loans. In addition, the Corporation may be obligated to provide subordinate funding to the trusts during a rapid
amortization event. This obligation is included in the maximum loss exposure in the table above. The charges that will ultimately be recorded as a result of the rapid amortization events depend on the undrawn portion of the home equity lines of credit, performance of the loans, the amount of subsequent draws and the timing of related cash flows.
Bank of America 78
|
||||||||
Credit Card Securitizations
The Corporation securitizes originated and purchased credit card loans. The Corporation’s continuing involvement with the securitization trust includes servicing the receivables, retaining an undivided interest (seller’s interest) in the receivables, and holding certain retained interests, including subordinate interests in accrued interest and fees on the securitized receivables and cash reserve accounts.
During the nine months ended September 30, 2021, there were $1.0 billion of new senior debt securities issued to third-party investors from the credit card securitization trust. No new senior debt securities were issued to third-party investors from the credit card securitization trust during the nine months ended September 30, 2020.
At September 30, 2021 and December 31, 2020, the Corporation held subordinate securities issued by the credit card securitization trust with a notional principal amount of $6.5 billion and $6.8 billion. These securities serve as a form of credit enhancement to the senior debt securities and have a stated interest rate of zero 161 million of these subordinate securities issued by the credit card securitization trust during the nine months ended September 30, 2021. No subordinate securities were issued by the credit card securitization trust during the nine months ended September 30, 2020.
Resecuritization Trusts
The Corporation transfers securities, typically MBS, into resecuritization VIEs generally at the request of customers seeking securities with specific characteristics. Generally, there are no significant ongoing activities performed in a resecuritization trust, and no single investor has the unilateral ability to liquidate the trust.
The Corporation resecuritized $5.9 billion and $20.6 billion of securities during the three and nine months ended September 30, 2021 compared to $8.3 billion and $26.4 billion for the same periods in 2020. Securities transferred into resecuritization VIEs were measured at fair value with changes
in fair value recorded in market making and similar activities prior to the resecuritization and, accordingly, no gain or loss on sale was recorded. During the three and nine months ended September 30, 2021 and 2020, resecuritization proceeds included securities with an initial fair value of $1.0 billion and $1.6 billion compared to $598 million and $5.5 billion, of which substantially all of the securities in the current-year period were classified as trading account assets. All of the securities received as resecuritization proceeds during the three months ended September 30, 2020 were classified as trading account assets. Of the securities received as resecuritization proceeds during the nine months ended September 30, 2020, $1.8 billion, $2.1 billion and $1.7 billion were classified as trading account assets, debt securities carried at fair value and HTM securities, respectively. Substantially all of the trading account securities carried at fair value were categorized as Level 2 within the fair value hierarchy.
Municipal Bond Trusts
The Corporation administers municipal bond trusts that hold highly-rated, long-term, fixed-rate municipal bonds. The trusts obtain financing by issuing floating-rate trust certificates that reprice on a weekly or other short-term basis to third-party investors.
The Corporation’s liquidity commitments to unconsolidated municipal bond trusts, including those for which the Corporation was transferor, totaled $3.9 billion and $3.5 billion at September 30, 2021 and December 31, 2020. The weighted-average remaining life of bonds held in the trusts at September 30, 2021 was 6.4 years. There were no significant write-downs or downgrades of assets or issuers during the nine months ended September 30, 2021 and 2020.
Other Variable Interest Entities
| Other VIEs | |||||||||||||||||||||||||||||||||||
| Consolidated | Unconsolidated | Total | Consolidated | Unconsolidated | Total | ||||||||||||||||||||||||||||||
| (Dollars in millions) | September 30, 2021 | December 31, 2020 | |||||||||||||||||||||||||||||||||
| Maximum loss exposure | $ |
|
$ |
|
$ |
|
$ | $ | $ | ||||||||||||||||||||||||||
| On-balance sheet assets | |||||||||||||||||||||||||||||||||||
| Trading account assets | $ |
|
$ |
|
$ |
|
$ | $ | $ | ||||||||||||||||||||||||||
| Debt securities carried at fair value |
|
|
|
||||||||||||||||||||||||||||||||
| Loans and leases |
|
|
|
||||||||||||||||||||||||||||||||
| Allowance for loan and lease losses | ( |
( |
( |
( |
( |
( |
|||||||||||||||||||||||||||||
| All other assets |
|
|
|
||||||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ | $ | $ | ||||||||||||||||||||||||||
| On-balance sheet liabilities | |||||||||||||||||||||||||||||||||||
| Short-term borrowings | $ |
|
$ |
|
$ |
|
$ | $ | $ | ||||||||||||||||||||||||||
| Long-term debt |
|
|
|
||||||||||||||||||||||||||||||||
| All other liabilities |
|
|
|
||||||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ | $ | $ | ||||||||||||||||||||||||||
| Total assets of VIEs | $ |
|
$ |
|
$ |
|
$ | $ | $ | ||||||||||||||||||||||||||
Customer VIEs
Customer VIEs include credit-linked, equity-linked and commodity-linked note VIEs, repackaging VIEs and asset acquisition VIEs, which are typically created on behalf of customers who wish to obtain market or credit exposure to a specific company, index, commodity or financial instrument.
The Corporation’s maximum loss exposure to consolidated and unconsolidated customer VIEs totaled $2.8 billion and $2.3 billion at September 30, 2021 and December 31, 2020, including the notional amount of derivatives to which the Corporation is a counterparty, net of losses previously recorded, and the Corporation’s investment, if any, in securities issued by the VIEs.
79 Bank of America
|
||||||||
Collateralized Debt Obligation VIEs
The Corporation receives fees for structuring CDO VIEs, which hold diversified pools of fixed-income securities, typically corporate debt or ABS, which the CDO VIEs fund by issuing multiple tranches of debt and equity securities. CDOs are generally managed by third-party portfolio managers. The Corporation typically transfers assets to these CDOs, holds securities issued by the CDOs and may be a derivative counterparty to the CDOs. The Corporation’s maximum loss exposure to consolidated and unconsolidated CDOs totaled $258 million and $298 million at September 30, 2021 and December 31, 2020.
Investment VIEs
The Corporation sponsors, invests in or provides financing, which may be in connection with the sale of assets, to a variety of investment VIEs that hold loans, real estate, debt securities or other financial instruments and are designed to provide the desired investment profile to investors or the Corporation. At September 30, 2021 and December 31, 2020, the Corporation’s consolidated investment VIEs had total assets of $1.0 billion and $494 million. The Corporation also held investments in unconsolidated VIEs with total assets of $6.6 billion and $5.4 billion at September 30, 2021 and December 31, 2020. The Corporation’s maximum loss exposure associated with both consolidated and unconsolidated investment VIEs totaled $2.0 billion and $1.5 billion at September 30, 2021 and December 31, 2020 comprised primarily of on-balance sheet assets less non-recourse liabilities.
Leveraged Lease Trusts
The Corporation’s net investment in consolidated leveraged lease trusts totaled $1.5 billion and $1.7 billion at September 30, 2021 and December 31, 2020. The trusts hold long-lived equipment such as rail cars, power generation and distribution equipment, and commercial aircraft. The Corporation structures the trusts and holds a significant residual interest. The net investment represents the Corporation’s maximum loss exposure to the trusts in the unlikely event that the leveraged lease investments become worthless. Debt issued by the leveraged lease trusts is non-recourse to the Corporation.
Tax Credit VIEs
The Corporation holds investments in unconsolidated limited partnerships and similar entities that construct, own and operate affordable housing, wind and solar projects. An unrelated third party is typically the general partner or managing member and has control over the significant activities of the VIE. The Corporation earns a return primarily through the receipt of tax credits allocated to the projects. The maximum loss exposure included in the Other VIEs table was $23.5 billion and $22.0 billion at September 30, 2021 and December 31, 2020. The Corporation’s risk of loss is generally mitigated by policies requiring that the project qualify for the expected tax credits prior to making its investment.
The Corporation’s investments in affordable housing partnerships, which are reported in other assets on the Consolidated Balance Sheet, totaled $11.7 billion and $11.2 billion, including unfunded commitments to provide capital contributions of $5.3 billion and $5.0 billion, at September 30, 2021 and December 31, 2020. The unfunded commitments are
NOTE 7 Goodwill and Intangible Assets
Goodwill
The table below presents goodwill balances by business segment at September 30, 2021 and December 31, 2020. The reporting units utilized for goodwill impairment testing are the operating segments or one level below.
| Goodwill | |||||||||||
| September 30 | December 31 | ||||||||||
| (Dollars in millions) | 2021 | 2020 | |||||||||
| Consumer Banking | $ |
|
$ | ||||||||
| Global Wealth & Investment Management |
|
||||||||||
Global Banking (1)
|
|
||||||||||
| Global Markets |
|
||||||||||
| Total goodwill | $ |
|
$ | ||||||||
Intangible Assets
At both September 30, 2021 and December 31, 2020, the net carrying value of intangible assets was $2.2 1.6 19 million and $56 million for the three and nine months ended September 30, 2021 compared to $30 million and $62 million for the same periods in 2020.
NOTE 8 Leases
The Corporation enters into both lessor and lessee arrangements. For more information on lease accounting, see Note 1 – Summary of Significant Accounting Principles and Note 8 – Leases to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K. For more information on lease financing receivables, see Note 5 – Outstanding Loans and Leases and Allowance for Credit Losses.
Lessor Arrangements
The Corporation’s lessor arrangements primarily consist of operating, sales-type and direct financing leases for equipment. Lease agreements may include options to renew and for the lessee to purchase the leased equipment at the end of the lease term.
Bank of America 80
|
||||||||
The table below presents the net investment in sales-type and direct financing leases at September 30, 2021 and December 31, 2020.
Net Investment (1)
|
|||||||||||
| September 30 | December 31 | ||||||||||
| (Dollars in millions) | 2021 | 2020 | |||||||||
| Lease receivables | $ |
|
$ | ||||||||
| Unguaranteed residuals |
|
||||||||||
| Total net investment in sales-type and direct financing leases |
$ |
|
$ | ||||||||
(1)In certain cases, the Corporation obtains third-party residual value insurance to reduce its residual asset risk. The carrying value of residual assets with third-party residual value insurance for at least a portion of the asset value was $7.2 billion and $6.9 billion at September 30, 2021 and December 31, 2020.
The table below presents lease income for the three and nine months ended September 30, 2021 and 2020.
| Lease Income | |||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Sales-type and direct financing leases |
$ |
|
$ | $ |
|
$ | |||||||||||||||||
| Operating leases |
|
|
|||||||||||||||||||||
| Total lease income | $ |
|
$ | $ |
|
$ | |||||||||||||||||
Lessee Arrangements
The Corporation's lessee arrangements predominantly consist of operating leases for premises and equipment; the Corporation's financing leases are not significant.
The table below provides information on the right-of-use assets and lease liabilities at September 30, 2021 and December 31, 2020.
| Lessee Arrangements | |||||||||||
| September 30 | December 31 | ||||||||||
| (Dollars in millions) | 2021 | 2020 | |||||||||
| Right-of-use asset | $ |
|
$ | ||||||||
| Lease liabilities |
|
||||||||||
NOTE 9 Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings and Restricted Cash
| Amount | Rate | Amount | Rate | Amount | Rate | Amount | Rate | ||||||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||||||||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell |
|||||||||||||||||||||||||||||||||||||||||||||||
| Average during period | $ |
|
|
% | $ | % | $ |
|
( |
% | $ | % | |||||||||||||||||||||||||||||||||||
| Maximum month-end balance during period |
|
n/a | n/a |
|
n/a | n/a | |||||||||||||||||||||||||||||||||||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase |
|||||||||||||||||||||||||||||||||||||||||||||||
| Average during period | $ |
|
|
% | $ | % | $ |
|
|
% | $ | % | |||||||||||||||||||||||||||||||||||
| Maximum month-end balance during period |
|
n/a | n/a |
|
n/a | n/a | |||||||||||||||||||||||||||||||||||||||||
| Short-term borrowings | |||||||||||||||||||||||||||||||||||||||||||||||
| Average during period |
|
( |
|
( |
|||||||||||||||||||||||||||||||||||||||||||
| Maximum month-end balance during period |
|
n/a | n/a |
|
n/a | n/a | |||||||||||||||||||||||||||||||||||||||||
n/a = not applicable
Offsetting of Securities Financing Agreements
The Corporation enters into securities financing agreements to accommodate customers (also referred to as “matched-book transactions”), obtain securities to cover short positions and finance inventory positions. For more information on the securities financing agreements and the offsetting of securities financing transactions, see Note 10 – Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings and Restricted Cash to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
81 Bank of America
|
||||||||
| Securities Financing Agreements | |||||||||||||||||||||||||||||
Gross Assets/Liabilities (1)
|
Amounts Offset | Net Balance Sheet Amount |
Financial Instruments (2)
|
Net Assets/Liabilities | |||||||||||||||||||||||||
| (Dollars in millions) | September 30, 2021 | ||||||||||||||||||||||||||||
Securities borrowed or purchased under agreements to resell (3)
|
$ |
|
$ | ( |
$ |
|
$ | ( |
$ |
|
|||||||||||||||||||
| Securities loaned or sold under agreements to repurchase | $ |
|
$ | ( |
$ |
|
$ | ( |
$ |
|
|||||||||||||||||||
Other (4)
|
|
|
|
( |
|
||||||||||||||||||||||||
| Total | $ |
|
$ | ( |
$ |
|
$ | ( |
$ |
|
|||||||||||||||||||
| December 31, 2020 | |||||||||||||||||||||||||||||
Securities borrowed or purchased under agreements to resell (3)
|
$ | $ | ( |
$ | $ | ( |
$ | ||||||||||||||||||||||
| Securities loaned or sold under agreements to repurchase | $ | $ | ( |
$ | $ | ( |
$ | ||||||||||||||||||||||
Other (4)
|
( |
||||||||||||||||||||||||||||
| Total | $ | $ | ( |
$ | $ | ( |
$ | ||||||||||||||||||||||
(1)Includes activity where uncertainty exists as to the enforceability of certain master netting agreements under bankruptcy laws in some countries or industries.
(2)Includes securities collateral received or pledged under repurchase or securities lending agreements where there is a legally enforceable master netting agreement. These amounts are not offset on the Consolidated Balance Sheet, but are shown as a reduction to derive a net asset or liability. Securities collateral received or pledged where the legal enforceability of the master netting agreements is uncertain is excluded from the table.
(3)Excludes repurchase activity of $18.8 billion and $14.7 billion reported in loans and leases on the Consolidated Balance Sheet at September 30, 2021 and December 31, 2020.
(4)Balance is reported in accrued expenses and other liabilities on the Consolidated Balance Sheet and relates to transactions where the Corporation acts as the lender in a securities lending agreement and receives securities that can be pledged as collateral or sold. In these transactions, the Corporation recognizes an asset at fair value, representing the securities received, and a liability, representing the obligation to return those securities.
Repurchase Agreements and Securities Loaned Transactions Accounted for as Secured Borrowings
| Remaining Contractual Maturity | |||||||||||||||||||||||||||||
| Overnight and Continuous | 30 Days or Less | After 30 Days Through 90 Days |
Greater than
90 Days (1)
|
Total | |||||||||||||||||||||||||
| (Dollars in millions) | September 30, 2021 | ||||||||||||||||||||||||||||
| Securities sold under agreements to repurchase | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||
| Securities loaned |
|
|
|
|
|
||||||||||||||||||||||||
| Other |
|
|
|
|
|
||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||
| December 31, 2020 | |||||||||||||||||||||||||||||
| Securities sold under agreements to repurchase | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Securities loaned | |||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
(1)No three years
Bank of America 82
|
||||||||
| Class of Collateral Pledged | |||||||||||||||||||||||
| Securities Sold Under Agreements to Repurchase | Securities Loaned |
Other | Total | ||||||||||||||||||||
| (Dollars in millions) | September 30, 2021 | ||||||||||||||||||||||
| U.S. government and agency securities | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Corporate securities, trading loans and other |
|
|
|
|
|||||||||||||||||||
| Equity securities |
|
|
|
|
|||||||||||||||||||
| Non-U.S. sovereign debt |
|
|
|
|
|||||||||||||||||||
| Mortgage trading loans and ABS |
|
|
|
|
|||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| December 31, 2020 | |||||||||||||||||||||||
| U.S. government and agency securities | $ | $ | $ | $ | |||||||||||||||||||
| Corporate securities, trading loans and other | |||||||||||||||||||||||
| Equity securities | |||||||||||||||||||||||
| Non-U.S. sovereign debt | |||||||||||||||||||||||
| Mortgage trading loans and ABS | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
Restricted Cash
At September 30, 2021 and December 31, 2020, the Corporation held restricted cash included within cash and cash equivalents on the Consolidated Balance Sheet of $5.6 billion and $7.0 billion, predominantly related to cash segregated in compliance with securities regulations and cash held on deposit with central banks to meet reserve requirements.
NOTE 10 Commitments and Contingencies
In the normal course of business, the Corporation enters into a number of off-balance sheet commitments. These commitments expose the Corporation to varying degrees of credit and market risk and are subject to the same credit and market risk limitation reviews as those instruments recorded on the Consolidated Balance Sheet. For more information on commitments and contingencies, see Note 12 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
Credit Extension Commitments
The Corporation enters 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 its customers. The following table includes the notional amount of unfunded legally binding lending commitments net of amounts
distributed (i.e., syndicated or participated) to other financial institutions. The distributed amounts were $10.3 billion and $10.5 billion at September 30, 2021 and December 31, 2020. The carrying value of these commitments at September 30, 2021 and December 31, 2020, excluding commitments accounted for under the fair value option, was $1.5 billion and $1.9 billion, which predominantly related to the reserve for unfunded lending commitments. The carrying value of these commitments is classified in accrued expenses and other liabilities on the Consolidated Balance Sheet.
Legally binding commitments to extend credit generally have specified rates and maturities. Certain of these commitments have adverse change clauses that help to protect the Corporation against deterioration in the borrower’s ability to pay.
83 Bank of America
|
||||||||
| Credit Extension Commitments | |||||||||||||||||||||||||||||
| Expire in One Year or Less |
Expire After One Year Through Three Years |
Expire After Three Years Through Five Years |
Expire After Five Years |
Total | |||||||||||||||||||||||||
| (Dollars in millions) | September 30, 2021 | ||||||||||||||||||||||||||||
| Notional amount of credit extension commitments | |||||||||||||||||||||||||||||
Loan commitments (1)
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||
| Home equity lines of credit |
|
|
|
|
|
||||||||||||||||||||||||
Standby letters of credit and financial guarantees (2)
|
|
|
|
|
|
||||||||||||||||||||||||
| Letters of credit |
|
|
|
|
|
||||||||||||||||||||||||
| Legally binding commitments |
|
|
|
|
|
||||||||||||||||||||||||
Credit card lines (3)
|
|
|
|
|
|
||||||||||||||||||||||||
| Total credit extension commitments | $ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||||||
| December 31, 2020 | |||||||||||||||||||||||||||||
| Notional amount of credit extension commitments | |||||||||||||||||||||||||||||
Loan commitments (1)
|
$ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Home equity lines of credit | |||||||||||||||||||||||||||||
Standby letters of credit and financial guarantees (2)
|
|||||||||||||||||||||||||||||
| Letters of credit | |||||||||||||||||||||||||||||
| Legally binding commitments | |||||||||||||||||||||||||||||
Credit card lines (3)
|
|||||||||||||||||||||||||||||
| Total credit extension commitments | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
(1) At September 30, 2021 and December 31, 2020, $5.4 billion and $4.8 billion of these loan commitments were held in the form of a security.
(2) The notional amounts of SBLCs and financial guarantees classified as investment grade and non-investment grade based on the credit quality of the underlying reference name within the instrument were $25.7 billion and $8.9 billion at September 30, 2021, and $25.0 billion and $10.2 billion at December 31, 2020. Amounts in the table include consumer SBLCs of $495 million and $500 million at September 30, 2021 and December 31, 2020.
Other Commitments
At September 30, 2021 and December 31, 2020, the Corporation had commitments to purchase loans (e.g., residential mortgage and commercial real estate) of $102 million and $93 million, which upon settlement will be included in trading account assets, loans or LHFS, and commitments to purchase commercial loans of $484 million and $645 million, which upon settlement will be included in trading account assets.
At September 30, 2021 and December 31, 2020, the Corporation had commitments to purchase commodities, primarily liquefied natural gas, of $1.1 billion and $582 million, which upon settlement will be included in trading account assets.
At September 30, 2021 and December 31, 2020, the Corporation had commitments to enter into resale and forward-dated resale and securities borrowing agreements of $129.9 billion and $66.5 billion, and commitments to enter into forward-dated repurchase and securities lending agreements of $68.9 billion and $32.1 billion. These commitments generally expire within the next 12 months.
At September 30, 2021 and December 31, 2020, the Corporation had a commitment to originate or purchase up to $4.0 billion and $3.9 billion on a rolling 12-month basis, of auto loans and leases from a strategic partner. This commitment extends through November 2022 and can be terminated with 12 months prior notice.
At September 30, 2021 and December 31, 2020, the Corporation had unfunded equity investment commitments of $392 million and $213 million.
Other Guarantees
Bank-owned Life Insurance Book Value Protection
The Corporation sells products that offer book value protection to insurance carriers who offer group life insurance policies to corporations, primarily banks. At September 30, 2021 and December 31, 2020, the notional amount of these guarantees
totaled $6.3 billion and $7.1 billion. At September 30, 2021 and December 31, 2020, the Corporation’s maximum exposure related to these guarantees totaled $927 million and $1.1 billion, with estimated maturity dates between 2033 and 2039.
Merchant Services
The Corporation in its role as merchant acquirer or as a sponsor of other merchant acquirers may be held liable for any reversed charges that cannot be collected from the merchants, due to, among other things, merchant fraud or insolvency. If charges are properly reversed after a purchase and cannot be collected from either the merchants or merchant acquirers, the Corporation may be held liable for these reversed charges. The ability to reverse a charge is primarily governed by the applicable regulatory and card network rules, which include, but are not limited to, the type of charge, type of payment used and time limits. The total amount of transactions processed for the preceding six-month period, which was $450.7 billion, is an estimate of the Corporation’s maximum potential exposure as of September 30, 2021. The Corporation’s risk in this area primarily relates to circumstances where a cardholder has purchased goods or services for future delivery. The Corporation mitigates this risk by requiring cash deposits, guarantees, letters of credit or other types of collateral from certain merchants. The Corporation’s reserves for contingent losses and the losses incurred related to the merchant processing activity were not significant. The Corporation continues to monitor its exposure in this area due to the potential economic impacts of the pandemic.
Representations and Warranties Obligations and Corporate Guarantees
For more information on representations and warranties obligations and corporate guarantees, see Note 12 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
Bank of America 84
|
||||||||
The reserve for representations and warranties obligations and corporate guarantees was $1.2 billion and $1.3 billion at September 30, 2021 and December 31, 2020 and is included in accrued expenses and other liabilities on the Consolidated Balance Sheet, and the related provision is included in other income in the Consolidated Statement of Income. The representations and warranties reserve represents the Corporation’s best estimate of probable incurred losses, is based on its experience in previous negotiations, and is subject to judgment, a variety of assumptions, and known or unknown uncertainties. Future representations and warranties losses may occur in excess of the amounts recorded for these exposures; however, the Corporation does not expect such amounts to be material to the Corporation's financial condition and liquidity. See Litigation and Regulatory Matters below for the Corporation's combined range of possible loss in excess of the reserve for representations and warranties and the accrued liability for litigation.
Fixed Income Clearing Corporation Sponsored Member Repo Program
The Corporation acts as a sponsoring member in a repo program whereby the Corporation clears certain eligible resale and repurchase agreements through the Government Securities Division of the Fixed Income Clearing Corporation on behalf of clients that are sponsored members in accordance with the Fixed Income Clearing Corporation’s rules. As part of this program, the Corporation guarantees the payment and performance of its sponsored members to the Fixed Income Clearing Corporation. The Corporation’s guarantee obligation is secured by a security interest in cash or high-quality securities collateral placed by clients with the clearinghouse and therefore, the potential for the Corporation to incur significant losses under this arrangement is remote. The Corporation’s maximum potential exposure, without taking into consideration the related collateral, was $34.7 billion and $22.5 billion at September 30, 2021 and December 31, 2020.
Other Guarantees
The Corporation has entered into additional guarantee agreements and commitments, including sold risk participation swaps, liquidity facilities, lease-end obligation agreements, partial credit guarantees on certain leases, real estate joint venture guarantees, divested business commitments and sold put options that require gross settlement. The maximum potential future payments under these agreements are approximately $10.5 billion and $8.8 billion at September 30, 2021 and December 31, 2020. The estimated maturity dates of these obligations extend up to 2049. The Corporation has made no material payments under these guarantees. For more information on maximum potential future payments under VIE-related liquidity commitments, see Note 6 – Securitizations and Other Variable Interest Entities.
In the normal course of business, the Corporation periodically guarantees the obligations of its affiliates in a variety of transactions including ISDA-related transactions and non-ISDA related transactions such as commodities trading, repurchase
agreements, prime brokerage agreements and other transactions.
Guarantees of Certain Long-term Debt
The Corporation, as the parent company, fully and unconditionally guarantees the securities issued by BofA Finance LLC, a consolidated finance subsidiary of the Corporation, and effectively provides for the full and unconditional guarantee of trust securities issued by certain statutory trust companies that are 100 percent owned finance subsidiaries of the Corporation.
Litigation and Regulatory Matters
The following disclosures supplement the disclosure in Note 12 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K (the prior commitments and contingencies disclosure).
In the ordinary course of business, the Corporation and its subsidiaries are routinely defendants in or parties to many pending and threatened legal, regulatory and governmental actions and proceedings. In view of the inherent difficulty of predicting the outcome of such matters, particularly where the claimants seek very large or indeterminate damages or where the matters present novel legal theories or involve a large number of parties, the Corporation generally cannot predict the eventual outcome of the pending matters, timing of the ultimate resolution of these matters, or eventual loss, fines or penalties related to each pending matter.
As a matter develops, the Corporation, in conjunction with any outside counsel handling the matter, evaluates whether such matter presents a loss contingency that is probable and estimable, and, for the matters described below and the matters disclosed in the prior commitments and contingencies disclosure, whether a loss in excess of any accrued liability is reasonably possible in future periods. Once the loss contingency is deemed to be both probable and estimable, the Corporation will establish an accrued liability and record a corresponding amount of litigation-related expense. The Corporation continues to monitor the matter for further developments that could affect the amount of the accrued liability that has been previously established. Excluding expenses of internal and external legal service providers, litigation-related expense of $66 million and $155 million was recognized for the three and nine months ended September 30, 2021 compared to $636 million and $717 million for the same periods in 2020.
For any matter disclosed in this Note and in the prior commitments and contingencies disclosure, for which a loss in future periods is reasonably possible and estimable (whether in excess of an accrued liability or where there is no accrued liability) and for representations and warranties exposures, the Corporation’s estimated range of possible loss is $0 to $1.1 billion in excess of the accrued liability, if any, as of September 30, 2021.
The accrued liability and estimated range of possible loss are based upon currently available information and subject to significant judgment, a variety of assumptions and known and
85 Bank of America
|
||||||||
unknown uncertainties. The matters underlying the accrued liability and estimated range of possible loss are unpredictable and may change from time to time, and actual losses may vary significantly from the current estimate and accrual. The estimated range of possible loss does not represent the Corporation’s maximum loss exposure.
Information is provided below, or in the prior commitments and contingencies disclosure regarding the nature of the litigation and, where specified, associated claimed damages. Based on current knowledge, and taking into account accrued liabilities, management does not believe that loss contingencies arising from pending matters, including the matters described below, and in the prior commitments and contingencies disclosure, will have a material adverse effect on the consolidated financial condition or liquidity of the Corporation. However, in light of the significant judgment, variety of assumptions and uncertainties involved in those matters, some of which are beyond the Corporation’s control, and the very large or indeterminate damages sought in some of those matters, an adverse outcome in one or more of these matters could be material to the Corporation’s business or results of operations for any particular reporting period, or cause significant reputational harm.
Ambac Bond Insurance Litigation
Ambac v. Countrywide I
On May 11, 2021, the First Department, a New York State appellate court, affirmed the dismissal of Ambac’s fraudulent inducement claim.
LIBOR, Other Reference Rates, Foreign Exchange and Bond Trading Matters
On April 28, 2021, the European Commission concluded its investigation regarding trading by various financial institutions in sovereign, supranational, and agency bonds by issuing a fine in an amount not material to the Corporation.
On May 20, 2021, the European Commission concluded its investigation regarding trading by various financial institutions in European government bonds. Although it found that the respondent financial institutions violated European competition rules, it did not fine the Corporation because the conduct at issue occurred beyond the statute of limitations. On August 2, 2021, the Corporation filed an appeal seeking an annulment of the European Commission’s decision as it relates to the Corporation.
NOTE 11 Shareholders’ Equity
Common Stock
Declared Quarterly Cash Dividends on Common Stock (1)
| ||||||||||||||||||||
| Declaration Date | Record Date | Payment Date | Dividend Per Share | |||||||||||||||||
| October 20, 2021 | December 3, 2021 | December 31, 2021 | $ | |||||||||||||||||
| July 21, 2021 | September 3, 2021 | September 24, 2021 | ||||||||||||||||||
| April 22, 2021 | June 4, 2021 | June 25, 2021 | ||||||||||||||||||
| January 19, 2021 | March 5, 2021 | March 26, 2021 | ||||||||||||||||||
During the three and nine months ended September 30, 2021, the Corporation repurchased and retired 248 million and 452 million shares of common stock, which reduced shareholders’ equity by $9.9 billion and $17.6 billion.
During the nine months ended September 30, 2021, in connection with employee stock plans, the Corporation issued 66 million shares of its common stock and, to satisfy tax withholding obligations, repurchased 26 million shares of its common stock. At September 30, 2021, the Corporation had reserved 562 million unissued shares of common stock for future issuances under employee stock plans, convertible notes and preferred stock.
On October 20, 2021, the Board of Directors declared a quarterly common stock dividend of $0.21
Preferred Stock
During the three months ended March 31, 2021, June 30, 2021 and September 30, 2021, the Corporation declared $490 million, $260 million and $431 million of cash dividends on preferred stock, or a total of $1.2 billion for the nine months ended September 30, 2021. For more information on the Corporation's preferred stock, including liquidation preference, dividend requirements and redemption period, see Note 13 – Shareholders’ Equity to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
On October 26, 2021, the Corporation issued 52,000 shares of 4.250 % Non-Cumulative Preferred Stock, Series QQ for $1.3 billion, with quarterly dividends commencing in February 2022. The Series QQ preferred stock has a liquidation preference of $25,000 per share and is subject to certain restrictions in the event the Corporation fails to declare and pay full dividends.
NOTE 12 Accumulated Other Comprehensive Income (Loss)
The table below presents the changes in accumulated OCI after-tax for the nine months ended September 30, 2021 and 2020.
| (Dollars in millions) | Debt Securities | Debit Valuation Adjustments | Derivatives | Employee Benefit Plans |
Foreign Currency |
Total | |||||||||||||||||||||||||||||
| Balance, December 31, 2019 | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
$ | ( |
||||||||||||||||||||||||
| Net change | ( |
( |
|||||||||||||||||||||||||||||||||
| Balance, September 30, 2020 | $ | $ | ( |
$ | $ | ( |
$ | ( |
$ | ( |
|||||||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | ( |
$ | $ | ( |
$ | ( |
$ | ( |
|||||||||||||||||||||||||
| Net change | ( |
|
( |
|
( |
( |
|||||||||||||||||||||||||||||
| Balance, September 30, 2021 | $ |
|
$ | ( |
$ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||||||||||
Bank of America 86
|
||||||||
| Pretax | Tax effect |
After- tax |
Pretax | Tax effect |
After- tax |
||||||||||||||||||||||||||||||
| Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | |||||||||||||||||||||||||||||||||
| Debt securities: | |||||||||||||||||||||||||||||||||||
| Net increase (decrease) in fair value | $ | ( |
$ |
|
$ | ( |
$ | $ | ( |
$ | |||||||||||||||||||||||||
Net realized gains reclassified into earnings (1)
|
( |
|
( |
( |
( |
||||||||||||||||||||||||||||||
| Net change | ( |
|
( |
( |
|||||||||||||||||||||||||||||||
| Debit valuation adjustments: | |||||||||||||||||||||||||||||||||||
| Net increase (decrease) in fair value |
|
( |
|
( |
( |
||||||||||||||||||||||||||||||
Net realized losses reclassified into earnings (1)
|
|
( |
|
( |
|||||||||||||||||||||||||||||||
| Net change |
|
( |
|
( |
( |
||||||||||||||||||||||||||||||
| Derivatives: | |||||||||||||||||||||||||||||||||||
| Net increase (decrease) in fair value | ( |
|
( |
( |
|||||||||||||||||||||||||||||||
Reclassifications into earnings: |
|||||||||||||||||||||||||||||||||||
| Net interest income | ( |
|
( |
( |
|||||||||||||||||||||||||||||||
| Compensation and benefits expense | ( |
|
( |
( |
( |
||||||||||||||||||||||||||||||
| Net realized (gains) losses reclassified into earnings | ( |
|
( |
( |
|||||||||||||||||||||||||||||||
| Net change | ( |
|
( |
( |
|||||||||||||||||||||||||||||||
| Employee benefit plans: | |||||||||||||||||||||||||||||||||||
Net actuarial losses and other reclassified into earnings (2)
|
|
( |
|
( |
|||||||||||||||||||||||||||||||
| Net change |
|
( |
|
( |
|||||||||||||||||||||||||||||||
| Foreign currency: | |||||||||||||||||||||||||||||||||||
| Net decrease in fair value |
|
( |
( |
( |
( |
( |
|||||||||||||||||||||||||||||
| Net change |
|
( |
( |
( |
( |
( |
|||||||||||||||||||||||||||||
| Total other comprehensive income (loss) | $ | ( |
$ |
|
$ | ( |
$ | $ | ( |
$ | |||||||||||||||||||||||||
(1) Reclassifications of pretax debt securities, DVA and foreign currency (gains) losses are recorded in other income in the Consolidated Statement of Income.
(2) Reclassifications of pretax employee benefit plan costs are recorded in other general operating expense in the Consolidated Statement of Income.
NOTE 13 Earnings Per Common Share
The calculation of earnings per common share (EPS) and diluted EPS for the three and nine months ended September 30, 2021 and 2020 is presented below. For more information on the calculation of EPS, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| (In millions, except per share information) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Earnings per common share | |||||||||||||||||||||||
| Net income | $ |
|
$ | $ |
|
$ | |||||||||||||||||
| Preferred stock dividends | ( |
( |
( |
( |
|||||||||||||||||||
| Net income applicable to common shareholders | $ |
|
$ | $ |
|
$ | |||||||||||||||||
| Average common shares issued and outstanding |
|
|
|||||||||||||||||||||
| Earnings per common share | $ |
|
$ | $ |
|
$ | |||||||||||||||||
| Diluted earnings per common share | |||||||||||||||||||||||
| Net income applicable to common shareholders | $ |
|
$ | $ |
|
$ | |||||||||||||||||
| Add preferred stock dividends due to assumed conversions |
|
|
|||||||||||||||||||||
| Net income allocated to common shareholders | $ |
|
$ | $ |
|
$ | |||||||||||||||||
| Average common shares issued and outstanding |
|
|
|||||||||||||||||||||
Dilutive potential common shares (1)
|
|
|
|||||||||||||||||||||
| Total diluted average common shares issued and outstanding |
|
|
|||||||||||||||||||||
| Diluted earnings per common share | $ |
|
$ | $ |
|
$ | |||||||||||||||||
(1)Includes incremental dilutive shares from preferred stock, restricted stock units, restricted stock and warrants.
NOTE 14 Fair Value Measurements
87 Bank of America
|
||||||||
For more information regarding the fair value hierarchy, how the Corporation measures fair value and valuation techniques, see Note 1 – Summary of Significant Accounting Principles and Note 20 – Fair Value Measurements to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K. The Corporation accounts for certain financial instruments under the fair value option. For more information, see Note 15 – Fair Value Option.
Recurring Fair Value
| September 30, 2021 | |||||||||||||||||||||||||||||
| Fair Value Measurements | |||||||||||||||||||||||||||||
| (Dollars in millions) | Level 1 | Level 2 | Level 3 |
Netting Adjustments (1)
|
Assets/Liabilities at Fair Value | ||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||
Time deposits placed and other short-term investments |
$ |
|
$ |
|
$ |
|
$ | — | $ |
|
|||||||||||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell |
|
|
|
— |
|
||||||||||||||||||||||||
| Trading account assets: | |||||||||||||||||||||||||||||
| U.S. Treasury and government agencies |
|
|
|
— |
|
||||||||||||||||||||||||
| Corporate securities, trading loans and other |
|
|
|
— |
|
||||||||||||||||||||||||
| Equity securities |
|
|
|
— |
|
||||||||||||||||||||||||
| Non-U.S. sovereign debt |
|
|
|
— |
|
||||||||||||||||||||||||
| Mortgage trading loans, MBS and ABS: | |||||||||||||||||||||||||||||
| U.S. government-sponsored agency guaranteed |
|
|
|
— |
|
||||||||||||||||||||||||
| Mortgage trading loans, ABS and other MBS |
|
|
|
— |
|
||||||||||||||||||||||||
Total trading account assets (2)
|
|
|
|
— |
|
||||||||||||||||||||||||
| Derivative assets |
|
|
|
( |
|
||||||||||||||||||||||||
| AFS debt securities: | |||||||||||||||||||||||||||||
| U.S. Treasury and government agencies |
|
|
|
— |
|
||||||||||||||||||||||||
| Mortgage-backed securities: | |||||||||||||||||||||||||||||
| Agency |
|
|
|
— |
|
||||||||||||||||||||||||
| Agency-collateralized mortgage obligations |
|
|
|
— |
|
||||||||||||||||||||||||
| Non-agency residential |
|
|
|
— |
|
||||||||||||||||||||||||
| Commercial |
|
|
|
— |
|
||||||||||||||||||||||||
| Non-U.S. securities |
|
|
|
— |
|
||||||||||||||||||||||||
| Other taxable securities |
|
|
|
— |
|
||||||||||||||||||||||||
| Tax-exempt securities |
|
|
|
— |
|
||||||||||||||||||||||||
| Total AFS debt securities |
|
|
|
— |
|
||||||||||||||||||||||||
| Other debt securities carried at fair value: | |||||||||||||||||||||||||||||
| U.S. Treasury and government agencies |
|
|
|
— |
|
||||||||||||||||||||||||
| Non-agency residential MBS |
|
|
|
— |
|
||||||||||||||||||||||||
Non-U.S. and other securities |
|
|
|
— |
|
||||||||||||||||||||||||
| Total other debt securities carried at fair value |
|
|
|
— |
|
||||||||||||||||||||||||
| Loans and leases |
|
|
|
— |
|
||||||||||||||||||||||||
| Loans held-for-sale |
|
|
|
— |
|
||||||||||||||||||||||||
Other assets (3)
|
|
|
|
— |
|
||||||||||||||||||||||||
Total assets (4)
|
$ |
|
$ |
|
$ |
|
$ | ( |
$ |
|
|||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||
| Interest-bearing deposits in U.S. offices | $ |
|
$ |
|
$ |
|
$ | — | $ |
|
|||||||||||||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase |
|
|
|
— |
|
||||||||||||||||||||||||
| Trading account liabilities: | |||||||||||||||||||||||||||||
| U.S. Treasury and government agencies |
|
|
|
— |
|
||||||||||||||||||||||||
| Equity securities |
|
|
|
— |
|
||||||||||||||||||||||||
| Non-U.S. sovereign debt |
|
|
|
— |
|
||||||||||||||||||||||||
| Corporate securities and other |
|
|
|
— |
|
||||||||||||||||||||||||
| Total trading account liabilities |
|
|
|
— |
|
||||||||||||||||||||||||
| Derivative liabilities |
|
|
|
( |
|
||||||||||||||||||||||||
| Short-term borrowings |
|
|
|
— |
|
||||||||||||||||||||||||
| Accrued expenses and other liabilities |
|
|
|
— |
|
||||||||||||||||||||||||
| Long-term debt |
|
|
|
— |
|
||||||||||||||||||||||||
Total liabilities (4)
|
$ |
|
$ |
|
$ |
|
$ | ( |
$ |
|
|||||||||||||||||||
(1)Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.
(2)Includes securities with a fair value of $10.8 billion that were segregated in compliance with securities regulations or deposited with clearing organizations. This amount is included in the parenthetical disclosure on the Consolidated Balance Sheet. Trading account assets also includes certain commodities inventory of $1.6 billion that is accounted for at the lower of cost or net realizable value, which is the current selling price less any costs to sell.
(3)Includes MSRs of $940 million which are classified as Level 3 assets.
(4)Total recurring Level 3 assets were 0.37 percent of total consolidated assets, and total recurring Level 3 liabilities were 0.26 percent of total consolidated liabilities.
Bank of America 88
|
||||||||
| December 31, 2020 | |||||||||||||||||||||||||||||
| Fair Value Measurements | |||||||||||||||||||||||||||||
| (Dollars in millions) | Level 1 | Level 2 | Level 3 |
Netting Adjustments (1)
|
Assets/Liabilities at Fair Value | ||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||
Time deposits placed and other short-term investments |
$ | $ | $ | $ | — | $ | |||||||||||||||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell |
— | ||||||||||||||||||||||||||||
| Trading account assets: | |||||||||||||||||||||||||||||
| U.S. Treasury and government agencies | — | ||||||||||||||||||||||||||||
| Corporate securities, trading loans and other | — | ||||||||||||||||||||||||||||
| Equity securities | — | ||||||||||||||||||||||||||||
| Non-U.S. sovereign debt | — | ||||||||||||||||||||||||||||
| Mortgage trading loans, MBS and ABS: | |||||||||||||||||||||||||||||
| U.S. government-sponsored agency guaranteed | — | ||||||||||||||||||||||||||||
| Mortgage trading loans, ABS and other MBS | — | ||||||||||||||||||||||||||||
Total trading account assets (2)
|
— | ||||||||||||||||||||||||||||
| Derivative assets | ( |
||||||||||||||||||||||||||||
| AFS debt securities: | |||||||||||||||||||||||||||||
| U.S. Treasury and government agencies | — | ||||||||||||||||||||||||||||
| Mortgage-backed securities: | |||||||||||||||||||||||||||||
| Agency | — | ||||||||||||||||||||||||||||
| Agency-collateralized mortgage obligations | — | ||||||||||||||||||||||||||||
| Non-agency residential | — | ||||||||||||||||||||||||||||
| Commercial | — | ||||||||||||||||||||||||||||
| Non-U.S. securities | — | ||||||||||||||||||||||||||||
| Other taxable securities | — | ||||||||||||||||||||||||||||
| Tax-exempt securities | — | ||||||||||||||||||||||||||||
| Total AFS debt securities | — | ||||||||||||||||||||||||||||
| Other debt securities carried at fair value: | |||||||||||||||||||||||||||||
| U.S. Treasury and government agencies | — | ||||||||||||||||||||||||||||
| Non-agency residential MBS | — | ||||||||||||||||||||||||||||
| Non-U.S. and other securities | — | ||||||||||||||||||||||||||||
| Total other debt securities carried at fair value | — | ||||||||||||||||||||||||||||
| Loans and leases | — | ||||||||||||||||||||||||||||
| Loans held-for-sale | — | ||||||||||||||||||||||||||||
Other assets (3)
|
— | ||||||||||||||||||||||||||||
Total assets (4)
|
$ | $ | $ | $ | ( |
$ | |||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||||||||
| Interest-bearing deposits in U.S. offices | $ | $ | $ | $ | — | $ | |||||||||||||||||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase |
— | ||||||||||||||||||||||||||||
| Trading account liabilities: | |||||||||||||||||||||||||||||
| U.S. Treasury and government agencies | — | ||||||||||||||||||||||||||||
| Equity securities | — | ||||||||||||||||||||||||||||
| Non-U.S. sovereign debt | — | ||||||||||||||||||||||||||||
| Corporate securities and other | — | ||||||||||||||||||||||||||||
| Total trading account liabilities | — | ||||||||||||||||||||||||||||
| Derivative liabilities | ( |
||||||||||||||||||||||||||||
| Short-term borrowings | — | ||||||||||||||||||||||||||||
| Accrued expenses and other liabilities | — | ||||||||||||||||||||||||||||
| Long-term debt | — | ||||||||||||||||||||||||||||
Total liabilities (5)
|
$ | $ | $ | $ | ( |
$ | |||||||||||||||||||||||
(1)Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.
(2)Includes securities with a fair value of $16.8 billion that were segregated in compliance with securities regulations or deposited with clearing organizations. This amount is included in the parenthetical disclosure on the Consolidated Balance Sheet. Trading account assets also includes certain commodities inventory of $576 million that is accounted for at the lower of cost or net realizable value, which is the current selling price less any costs to sell.
(3)Includes MSRs of $1.0 billion which are classified as Level 3 assets.
(4)Total recurring Level 3 assets were 0.35 percent of total consolidated assets, and total recurring Level 3 liabilities were 0.29 percent of total consolidated liabilities.
89 Bank of America
|
||||||||
The following tables present a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three and nine months ended September 30, 2021 and 2020, including net realized and unrealized gains (losses) included in earnings and accumulated OCI. Transfers into Level 3 occur primarily due
to decreased price observability, and transfers out of Level 3 occur primarily due to increased price observability. Transfers occur on a regular basis for long-term debt instruments due to changes in the impact of unobservable inputs on the value of the embedded derivative in relation to the instrument as a whole.
Level 3 – Fair Value Measurements (1)
| |||||||||||||||||||||||||||||||||||
| Balance July 1 |
Total
Realized/Unrealized Gains
(Losses) in Net
Income (2)
|
Gains (Losses) in OCI (3) |
Gross | Gross Transfers into Level 3 |
Gross Transfers out of Level 3 |
Balance September 30 |
Change in Unrealized Gains (Losses) in Net Income Related to Financial Instruments Still Held (2)
|
||||||||||||||||||||||||||||
| (Dollars in millions) | Purchases | Sales | Issuances | Settlements | |||||||||||||||||||||||||||||||
| Three Months Ended September 30, 2021 | |||||||||||||||||||||||||||||||||||
| Trading account assets: | |||||||||||||||||||||||||||||||||||
Corporate securities, trading loans and other |
$ |
|
$ | ( |
$ |
|
$ |
|
$ | ( |
$ |
|
$ | ( |
$ |
|
$ | ( |
$ |
|
$ | ( |
|||||||||||||
| Equity securities |
|
( |
|
|
( |
|
|
|
( |
|
( |
||||||||||||||||||||||||
| Non-U.S. sovereign debt |
|
|
( |
|
|
|
( |
|
|
|
|
||||||||||||||||||||||||
| Mortgage trading loans, MBS and ABS |
|
( |
|
|
( |
|
( |
|
( |
|
( |
||||||||||||||||||||||||
| Total trading account assets |
|
( |
( |
|
( |
|
( |
|
( |
|
( |
||||||||||||||||||||||||
Net derivative assets (liabilities) (4)
|
( |
|
|
|
( |
|
|
|
( |
( |
|
||||||||||||||||||||||||
| AFS debt securities: | |||||||||||||||||||||||||||||||||||
| Non-agency residential MBS |
|
( |
( |
|
|
|
( |
|
|
|
( |
||||||||||||||||||||||||
| Non-U.S. securities |
|
( |
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
| Other taxable securities |
|
|
( |
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
| Tax-exempt securities |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
| Total AFS debt securities |
|
( |
( |
|
|
|
( |
|
|
|
( |
||||||||||||||||||||||||
Other debt securities carried at fair value – Non-agency residential MBS |
|
( |
|
|
|
|
( |
|
|
|
( |
||||||||||||||||||||||||
Loans and leases (5,6)
|
|
( |
|
|
|
|
( |
|
( |
|
( |
||||||||||||||||||||||||
Loans held-for-sale (5,6)
|
|
|
( |
|
( |
|
( |
|
|
|
|
||||||||||||||||||||||||
Other assets (6,7)
|
|
|
( |
|
|
|
( |
|
|
|
|
||||||||||||||||||||||||
|
Trading account liabilities – Corporate securities
and other
|
( |
|
|
|
|
|
|
|
|
( |
( |
||||||||||||||||||||||||
Long-term debt (5)
|
( |
( |
|
|
|
( |
|
( |
|
( |
( |
||||||||||||||||||||||||
| Three Months Ended September 30, 2020 | |||||||||||||||||||||||||||||||||||
| Trading account assets: | |||||||||||||||||||||||||||||||||||
Corporate securities, trading loans and other |
$ | $ | ( |
$ | $ | $ | ( |
$ | $ | ( |
$ | $ | ( |
$ | $ | ( |
|||||||||||||||||||
| Equity securities | ( |
( |
|||||||||||||||||||||||||||||||||
| Non-U.S. sovereign debt | ( |
( |
( |
( |
|||||||||||||||||||||||||||||||
| Mortgage trading loans, MBS and ABS | ( |
( |
( |
||||||||||||||||||||||||||||||||
| Total trading account assets | ( |
( |
( |
( |
( |
( |
|||||||||||||||||||||||||||||
Net derivative assets (liabilities) (4)
|
( |
( |
( |
( |
( |
||||||||||||||||||||||||||||||
| AFS debt securities: | |||||||||||||||||||||||||||||||||||
| Non-agency residential MBS | ( |
( |
|||||||||||||||||||||||||||||||||
| Non-U.S. securities | ( |
||||||||||||||||||||||||||||||||||
| Other taxable securities | |||||||||||||||||||||||||||||||||||
| Tax-exempt securities | ( |
( |
|||||||||||||||||||||||||||||||||
| Total AFS debt securities | ( |
( |
|||||||||||||||||||||||||||||||||
Other debt securities carried at fair value – Non-agency residential MBS |
( |
||||||||||||||||||||||||||||||||||
Loans and leases (5,6)
|
( |
( |
( |
( |
|||||||||||||||||||||||||||||||
Loans held-for-sale (5,6)
|
( |
( |
( |
( |
( |
||||||||||||||||||||||||||||||
Other assets (6,7)
|
( |
||||||||||||||||||||||||||||||||||
Trading account liabilities – Equity securities |
( |
( |
|||||||||||||||||||||||||||||||||
|
Trading account liabilities – Corporate securities
and other
|
( |
( |
( |
||||||||||||||||||||||||||||||||
Long-term debt (5)
|
( |
( |
( |
( |
( |
||||||||||||||||||||||||||||||
(1)Assets (liabilities). For assets, increase (decrease) to Level 3 and for liabilities, (increase) decrease to Level 3.
(2)Includes gains (losses) reported in earnings in the following income statement line items: Trading account assets/liabilities - predominantly market making and similar activities; Net derivative assets (liabilities) - market making and similar activities and other income; AFS debt securities - other income; Other debt securities carried at fair value - other income; Loans and leases - market making and similar activities and other income; Loans held-for-sale - other income; Other assets - primarily market making and similar activities and other income related to MSRs; Long-term debt - market making and similar activities.
(3)Includes unrealized gains (losses) in OCI on AFS debt securities, foreign currency translation adjustments and the impact of changes in the Corporation’s credit spreads on long-term debt accounted for under the fair value option. Amounts include net unrealized losses of $38 million and $8 million related to financial instruments still held at September 30, 2021 and 2020.
(4)Net derivative assets (liabilities) include derivative assets of $3.8 billion and $2.5 billion and derivative liabilities of $6.2 billion and $6.0 billion at September 30, 2021 and 2020.
(5)Amounts represent instruments that are accounted for under the fair value option.
(6)Issuances represent loan originations and MSRs recognized following securitizations or whole-loan sales.
(7)Settlements primarily represent the net change in fair value of the MSR asset due to the recognition of modeled cash flows and the passage of time.
Bank of America 90
|
||||||||
Level 3 – Fair Value Measurements (1)
| |||||||||||||||||||||||||||||||||||
| Balance January 1 |
Total Realized/Unrealized Gains (Losses) in Net
Income (2)
|
Gains (Losses) in OCI (3) |
Gross | Gross Transfers into Level 3 |
Gross Transfers out of Level 3 |
Balance September 30 |
Change in Unrealized Gains (Losses) in Net Income Related to Financial Instruments Still Held (2)
|
||||||||||||||||||||||||||||
| (Dollars in millions) |
Purchases | Sales | Issuances | Settlements | |||||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2021 | |||||||||||||||||||||||||||||||||||
| Trading account assets: | |||||||||||||||||||||||||||||||||||
Corporate securities, trading loans and other |
$ |
|
$ |
|
$ |
|
$ |
|
$ | ( |
$ |
|
$ | ( |
$ |
|
$ | ( |
$ |
|
$ | ( |
|||||||||||||
Equity securities |
|
|
|
|
( |
|
|
|
( |
|
( |
||||||||||||||||||||||||
Non-U.S. sovereign debt |
|
|
( |
|
|
|
( |
|
|
|
|
||||||||||||||||||||||||
Mortgage trading loans, ABS and other MBS |
|
( |
|
|
( |
|
( |
|
( |
|
( |
||||||||||||||||||||||||
| Total trading account assets |
|
|
( |
|
( |
|
( |
|
( |
|
( |
||||||||||||||||||||||||
Net derivative assets (liabilities) (4)
|
( |
|
|
|
( |
|
|
( |
|
( |
|
||||||||||||||||||||||||
| AFS debt securities: | |||||||||||||||||||||||||||||||||||
| Non-agency residential MBS |
|
( |
( |
|
|
|
( |
|
( |
|
( |
||||||||||||||||||||||||
Non-U.S. securities |
|
( |
|
|
|
|
( |
|
|
|
|
||||||||||||||||||||||||
Other taxable securities |
|
|
( |
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
| Tax-exempt securities |
|
|
|
|
|
|
|
|
( |
|
|
||||||||||||||||||||||||
| Total AFS debt securities |
|
( |
( |
|
|
|
( |
|
( |
|
|
||||||||||||||||||||||||
Other debt securities carried at fair value – Non-agency residential MBS |
|
|
|
|
|
|
( |
|
|
|
|
||||||||||||||||||||||||
Loans and leases (5,6)
|
|
|
|
|
|
|
( |
|
( |
|
|
||||||||||||||||||||||||
Loans held-for-sale (5,6)
|
|
|
( |
|
( |
|
( |
|
( |
|
|
||||||||||||||||||||||||
Other assets (6,7)
|
|
|
|
|
( |
|
( |
|
|
|
|
||||||||||||||||||||||||
|
Trading account liabilities – Corporate securities
and other
|
( |
|
|
|
|
( |
|
|
|
( |
|
||||||||||||||||||||||||
Long-term debt (5)
|
( |
( |
|
|
|
( |
|
( |
|
( |
( |
||||||||||||||||||||||||
| Nine Months Ended September 30, 2020 | |||||||||||||||||||||||||||||||||||
| Trading account assets: | |||||||||||||||||||||||||||||||||||
Corporate securities, trading loans and other |
$ | $ | ( |
$ | ( |
$ | $ | ( |
$ | $ | ( |
$ | $ | ( |
$ | $ | ( |
||||||||||||||||||
| Equity securities | ( |
( |
( |
( |
|||||||||||||||||||||||||||||||
| Non-U.S. sovereign debt | ( |
( |
( |
( |
|||||||||||||||||||||||||||||||
Mortgage trading loans, ABS and other MBS |
( |
( |
( |
( |
( |
( |
|||||||||||||||||||||||||||||
| Total trading account assets | ( |
( |
( |
( |
( |
( |
|||||||||||||||||||||||||||||
Net derivative assets (liabilities) (4)
|
( |
( |
( |
( |
( |
( |
( |
||||||||||||||||||||||||||||
| AFS debt securities: | |||||||||||||||||||||||||||||||||||
| Non-agency residential MBS | ( |
( |
( |
( |
( |
||||||||||||||||||||||||||||||
| Non-U.S. securities | ( |
( |
|||||||||||||||||||||||||||||||||
| Other taxable securities | ( |
||||||||||||||||||||||||||||||||||
| Tax-exempt securities | ( |
( |
( |
( |
|||||||||||||||||||||||||||||||
| Total AFS debt securities | ( |
( |
( |
( |
( |
( |
|||||||||||||||||||||||||||||
Other debt securities carried at fair value – Non-agency residential MBS |
( |
( |
( |
||||||||||||||||||||||||||||||||
Loans and leases (5,6)
|
( |
( |
( |
( |
|||||||||||||||||||||||||||||||
Loans held-for-sale (5,6)
|
( |
( |
( |
( |
( |
||||||||||||||||||||||||||||||
Other assets (6,7)
|
( |
( |
( |
( |
( |
||||||||||||||||||||||||||||||
Trading account liabilities – Equity securities |
( |
( |
|||||||||||||||||||||||||||||||||
|
Trading account liabilities – Corporate securities
and other
|
( |
( |
( |
( |
|||||||||||||||||||||||||||||||
Long-term debt (5)
|
( |
( |
( |
( |
( |
||||||||||||||||||||||||||||||
(1)Assets (liabilities). For assets, increase (decrease) to Level 3 and for liabilities, (increase) decrease to Level 3.
(2)Includes gains (losses) reported in earnings in the following income statement line items: Trading account assets/liabilities - predominantly market making and similar activities; Net derivative assets (liabilities) - market making and similar activities and other income; AFS debt securities - other income; Other debt securities carried at fair value - other income; Loans and leases - market making and similar activities and other income; Loans held-for-sale - other income; Other assets - primarily market making and similar activities and other income related to MSRs; Long-term debt - market making and similar activities.
(3)Includes unrealized gains (losses) in OCI on AFS debt securities, foreign currency translation adjustments and the impact of changes in the Corporation’s credit spreads on long-term debt accounted for under the fair value option. Amounts include net unrealized losses of $45 million and $47 million related to financial instruments still held at September 30, 2021 and 2020.
(4)Net derivative assets (liabilities) include derivative assets of $3.8 billion and $2.5 billion and derivative liabilities of $6.2 billion and $6.0 billion at September 30, 2021 and 2020.
(5)Amounts represent instruments that are accounted for under the fair value option.
(6)Issuances represent loan originations and MSRs recognized following securitizations or whole-loan sales.
(7)Settlements primarily represent the net change in fair value of the MSR asset due to the recognition of modeled cash flows and the passage of time.
91 Bank of America
|
||||||||
The following tables present information about significant unobservable inputs related to the Corporation’s material categories of Level 3 financial assets and liabilities at September 30, 2021 and December 31, 2020.
| Quantitative Information about Level 3 Fair Value Measurements at September 30, 2021 | |||||||||||||||||
| (Dollars in millions) | Inputs | ||||||||||||||||
| Financial Instrument | Fair Value |
Valuation Technique |
Significant Unobservable Inputs |
Ranges of Inputs |
Weighted Average (1)
|
||||||||||||
Loans and Securities (2)
|
|||||||||||||||||
| Instruments backed by residential real estate assets | $ |
|
Discounted cash flow, Market comparables | Yield | % | ||||||||||||
Trading account assets – Mortgage trading loans, ABS and other MBS |
Prepayment speed | ||||||||||||||||
| Loans and leases | Default rate | ||||||||||||||||
| AFS debt securities – Non-agency residential | Price | $ |
$ |
||||||||||||||
| Other debt securities carried at fair value – Non-agency residential | Loss severity | % | |||||||||||||||
| Instruments backed by commercial real estate assets | $ |
|
Discounted cash flow |
Yield | % | ||||||||||||
| Trading account assets – Corporate securities, trading loans and other | Price | $ |
$ |
||||||||||||||
| Trading account assets – Mortgage trading loans, ABS and other MBS | |||||||||||||||||
| AFS debt securities, primarily other taxable securities | |||||||||||||||||
| Loans held-for-sale | |||||||||||||||||
| Commercial loans, debt securities and other | $ |
|
Discounted cash flow, Market comparables | Yield | % | ||||||||||||
Trading account assets – Corporate securities, trading loans and other |
Prepayment speed | % | |||||||||||||||
| Trading account assets – Non-U.S. sovereign debt | Default rate | % | |||||||||||||||
| Trading account assets – Mortgage trading loans, ABS and other MBS | Loss severity | % | |||||||||||||||
| AFS debt securities – Tax-exempt securities | Price | $ |
$ |
||||||||||||||
| Loans and leases | Long-dated equity volatilities | n/a | |||||||||||||||
| Loans held-for-sale | |||||||||||||||||
| Other assets, primarily auction rate securities | $ |
|
Discounted cash flow, Market comparables | Price | $ |
$ |
|||||||||||
| Discount rate | % | n/a | |||||||||||||||
| MSRs | $ |
|
Discounted cash flow |
Weighted-average life, fixed rate (5)
|
|||||||||||||
Weighted-average life, variable rate (5)
|
|||||||||||||||||
| Option-adjusted spread, fixed rate | % | ||||||||||||||||
| Option-adjusted spread, variable rate | % | ||||||||||||||||
| Structured liabilities | |||||||||||||||||
| Long-term debt | $ | ( |
Discounted cash flow, Market comparables, Industry standard derivative pricing (3)
|
Yield | % | ||||||||||||
| Equity correlation | % | ||||||||||||||||
| Long-dated equity volatilities | % | ||||||||||||||||
| Price | $ |
$ |
|||||||||||||||
| Natural gas forward price | $ |
$ |
|||||||||||||||
| Net derivative assets (liabilities) | |||||||||||||||||
| Credit derivatives | $ | ( |
Discounted cash flow, Stochastic recovery correlation model | Credit spreads | |||||||||||||
| Upfront points | |||||||||||||||||
| Prepayment speed | n/a | ||||||||||||||||
| Default rate | n/a | ||||||||||||||||
| Credit correlation | % | ||||||||||||||||
| Price | $ |
$ |
|||||||||||||||
| Equity derivatives | $ | ( |
Industry standard derivative pricing (3)
|
Equity correlation | % | ||||||||||||
| Long-dated equity volatilities | % | ||||||||||||||||
| Commodity derivatives | $ | ( |
Discounted cash flow, Industry standard derivative pricing (3)
|
Natural gas forward price | $ |
$ |
|||||||||||
| Correlation | % | ||||||||||||||||
| Power forward price | $ |
$ |
|||||||||||||||
| Volatilities | % | ||||||||||||||||
| Interest rate derivatives | $ |
|
Industry standard derivative pricing (4)
|
Correlation (IR/IR) | ( |
% | |||||||||||
| Correlation (FX/IR) | % | ||||||||||||||||
| Long-dated inflation rates |
( |
% | |||||||||||||||
| Long-dated inflation volatilities | % | ||||||||||||||||
| Interest rate volatilities | % | ||||||||||||||||
| Total net derivative assets (liabilities) | $ | ( |
|||||||||||||||
(1)For loans and securities, structured liabilities and net derivative assets (liabilities), the weighted average is calculated based upon the absolute fair value of the instruments.
(2)The categories are aggregated based upon product type which differs from financial statement classification. The following is a reconciliation to the line items in the table on page 88: Trading account assets – Corporate securities, trading loans and other of $1.6 billion, Trading account assets – Non-U.S. sovereign debt of $399 million, Trading account assets – Mortgage trading loans, MBS and ABS of $1.6 billion, AFS debt securities of $534 million, Other debt securities carried at fair value - Non-agency residential of $296 million, Other assets, including MSRs, of $1.7 billion, Loans and leases of $718 million and LHFS of $340 million.
(3)Includes models such as Monte Carlo simulation and Black-Scholes.
(4)Includes models such as Monte Carlo simulation, Black-Scholes and other methods that model the joint dynamics of interest, inflation and foreign exchange rates.
(5)The weighted-average life is a product of changes in market rates of interest, prepayment rates and other model and cash flow assumptions.
CPR = Constant Prepayment Rate
CDR = Constant Default Rate
MMBtu = Million British thermal units
IR = Interest Rate
FX = Foreign Exchange
n/a = not applicable
Bank of America 92
|
||||||||
| Quantitative Information about Level 3 Fair Value Measurements at December 31, 2020 | |||||||||||||||||
| (Dollars in millions) | Inputs | ||||||||||||||||
| Financial Instrument | Fair Value |
Valuation Technique |
Significant Unobservable Inputs |
Ranges of Inputs |
Weighted Average (1)
|
||||||||||||
Loans and Securities (2)
|
|||||||||||||||||
| Instruments backed by residential real estate assets | $ |
|
Discounted cash flow, Market comparables |
Yield | ( |
% | |||||||||||
Trading account assets – Mortgage trading loans, ABS and other MBS |
Prepayment speed |
||||||||||||||||
| Loans and leases | Default rate | ||||||||||||||||
| AFS debt securities - Non-agency residential | Price | $ |
$ |
||||||||||||||
| Other debt securities carried at fair value - Non-agency residential | Loss severity | % | |||||||||||||||
| Instruments backed by commercial real estate assets | $ |
|
Discounted cash flow |
Yield | % | ||||||||||||
| Trading account assets – Corporate securities, trading loans and other | Price | $ |
$ |
||||||||||||||
| Trading account assets – Mortgage trading loans, ABS and other MBS | |||||||||||||||||
| AFS debt securities, primarily other taxable securities | |||||||||||||||||
| Loans held-for-sale | |||||||||||||||||
| Commercial loans, debt securities and other | $ |
|
Discounted cash flow, Market comparables | Yield | % | ||||||||||||
Trading account assets – Corporate securities, trading loans and other |
Prepayment speed |
% | |||||||||||||||
| Trading account assets – Non-U.S. sovereign debt | Default rate | % | |||||||||||||||
| Trading account assets – Mortgage trading loans, ABS and other MBS | Loss severity | % | |||||||||||||||
| AFS debt securities – Tax-exempt securities | Price | $ |
$ |
||||||||||||||
| Loans and leases | Long-dated equity volatilities | n/a | |||||||||||||||
| Loans held-for-sale | |||||||||||||||||
| Other assets, primarily auction rate securities | $ |
|
Discounted cash flow, Market comparables | Price |
$ |
$ |
|||||||||||
| Discount rate | n/a | ||||||||||||||||
| MSRs | $ |
|
Discounted cash flow |
Weighted-average life, fixed rate (5)
|
|||||||||||||
Weighted-average life, variable rate (5)
|
|||||||||||||||||
| Option-adjusted spread, fixed rate | % | ||||||||||||||||
| Option-adjusted spread, variable rate | % | ||||||||||||||||
| Structured liabilities | |||||||||||||||||
| Long-term debt | $ | ( |
Discounted cash flow, Market comparables, Industry standard derivative pricing (3)
|
Yield | % | ||||||||||||
| Equity correlation | % | ||||||||||||||||
| Long-dated equity volatilities | % | ||||||||||||||||
| Price | $ |
$ |
|||||||||||||||
| Natural gas forward price | $ |
$ |
|||||||||||||||
| Net derivative assets (liabilities) | |||||||||||||||||
Credit derivatives |
$ | ( |
Discounted cash flow, Stochastic recovery correlation model | Yield |
n/a | ||||||||||||
Upfront points |
|||||||||||||||||
Prepayment speed |
|||||||||||||||||
Default rate |
n/a |
||||||||||||||||
| Credit correlation | % | ||||||||||||||||
Price |
$ |
$ |
|||||||||||||||
Equity derivatives |
$ | ( |
Industry standard derivative pricing (3)
|
Equity correlation |
% | ||||||||||||
Long-dated equity volatilities |
% | ||||||||||||||||
Commodity derivatives |
$ | ( |
Discounted cash flow, Industry standard derivative pricing (3)
|
Natural gas forward price |
$ |
$ |
|||||||||||
Correlation |
% | ||||||||||||||||
Volatilities |
% | ||||||||||||||||
Interest rate derivatives |
$ | ( |
Industry standard derivative pricing (4)
|
Correlation (IR/IR) |
% | ||||||||||||
Correlation (FX/IR) |
% | ||||||||||||||||
Long-dated inflation rates |
G( |
% | |||||||||||||||
Long-dated inflation volatilities |
% | ||||||||||||||||
| Interest rates volatilities | % | ||||||||||||||||
| Total net derivative assets (liabilities) | $ | ( |
|||||||||||||||
(1)For loans and securities, structured liabilities and net derivative assets (liabilities), the weighted average is calculated based upon the absolute fair value of the instruments.
(2)The categories are aggregated based upon product type which differs from financial statement classification. The following is a reconciliation to the line items in the table on page 89: Trading account assets – Corporate securities, trading loans and other of $1.4 billion, Trading account assets – Non-U.S. sovereign debt of $354 million, Trading account assets – Mortgage trading loans, MBS and ABS of $1.4 billion, AFS debt securities of $643 million, Other debt securities carried at fair value - Non-agency residential of $267 million, Other assets, including MSRs, of $2.0 billion, Loans and leases of $717 million and LHFS of $236 million.
(3)Includes models such as Monte Carlo simulation and Black-Scholes.
(4)Includes models such as Monte Carlo simulation, Black-Scholes and other methods that model the joint dynamics of interest, inflation and foreign exchange rates.
(5)The weighted-average life is a product of changes in market rates of interest, prepayment rates and other model and cash flow assumptions.
CPR = Constant Prepayment Rate
CDR = Constant Default Rate
MMBtu = Million British thermal units
IR = Interest Rate
FX = Foreign Exchange
n/a = not applicable
Uncertainty of Fair Value Measurements from Unobservable Inputs
For information on the types of instruments, valuation approaches and the impact of changes in unobservable inputs used in Level 3 measurements, see Note 20 – Fair Value Measurements to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
93 Bank of America
|
||||||||
Nonrecurring Fair Value
The Corporation holds certain assets that are measured at fair value only in certain situations (e.g., the impairment of an asset), and these measurements are referred to herein as nonrecurring. The amounts below represent assets still held as of the reporting date for which a nonrecurring fair value adjustment was recorded during the three and nine months ended September 30, 2021 and 2020.
Assets Measured at Fair Value on a Nonrecurring Basis | |||||||||||||||||||||||
| September 30, 2021 | Three Months Ended September 30, 2021 | Nine Months Ended September 30, 2021 | |||||||||||||||||||||
| (Dollars in millions) | Level 2 | Level 3 | Gains (Losses) | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Loans held-for-sale | $ |
|
$ |
|
$ | ( |
$ |
|
|||||||||||||||
Loans and leases (1)
|
|
|
( |
( |
|||||||||||||||||||
Foreclosed properties (2, 3)
|
|
|
( |
( |
|||||||||||||||||||
| Other assets |
|
|
( |
( |
|||||||||||||||||||
| September 30, 2020 | Three Months Ended September 30, 2020 | Nine Months Ended September 30, 2020 | |||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Loans held-for-sale | $ | $ | $ | ( |
$ | ( |
|||||||||||||||||
Loans and leases (1)
|
( |
( |
|||||||||||||||||||||
Foreclosed properties (2, 3)
|
( |
( |
|||||||||||||||||||||
| Other assets | ( |
( |
|||||||||||||||||||||
(1)Includes $7 million and $18 million of losses on loans that were written down to a collateral value of zero during the three and nine months ended September 30, 2021 compared to losses of $9 million and $26 million for the same periods in 2020.
(2)Amounts are included in other assets on the Consolidated Balance Sheet and represent the carrying value of foreclosed properties that were written down subsequent to their initial classification as foreclosed properties. Losses on foreclosed properties include losses recorded during the first 90 days after transfer of a loan to foreclosed properties.
(3)Excludes $55 million and $131 million of properties acquired upon foreclosure of certain government-guaranteed loans (principally FHA-insured loans) at September 30, 2021 and 2020.
The table below presents information about significant unobservable inputs utilized in the Corporation's nonrecurring Level 3 fair value measurements at September 30, 2021 and December 31, 2020.
Quantitative Information about Nonrecurring Level 3 Fair Value Measurements | |||||||||||||||||
| Inputs | |||||||||||||||||
| Financial Instrument | Fair Value | Valuation Technique |
Significant Unobservable Inputs |
Ranges of Inputs |
Weighted
Average (1)
|
||||||||||||
| (Dollars in millions) | Nine Months Ended September 30, 2021 | ||||||||||||||||
Loans and leases (2)
|
$ |
|
Market comparables | OREO discount | % | ||||||||||||
| Costs to sell | % | ||||||||||||||||
Other assets (3)
|
|
Discounted cash flow | Discount rate | % | n/a | ||||||||||||
|
|
Market comparables | Estimated appraisal value | n/a | n/a | |||||||||||||
| Year Ended December 31, 2020 | |||||||||||||||||
| Loans held-for-sale | $ | Discounted cash flow | Price | $ |
$ |
||||||||||||
Loans and leases (2)
|
Market comparables | OREO discount | % | ||||||||||||||
| Costs to sell | % | ||||||||||||||||
Other assets (4)
|
Discounted cash flow | Revenue attrition | % | ||||||||||||||
| Discount rate | % | ||||||||||||||||
(1)The weighted average is calculated based upon the fair value of the loans.
(2)Represents residential mortgages where the loan has been written down to the fair value of the underlying collateral.
(3)Represents the fair value of certain impaired renewable energy investments and impaired assets related to the Corporation’s real estate rationalization.
(4)Represents the fair value of the intangible asset related to the merchant contracts received from the dissolution of the Corporation's merchant services joint venture.
n/a = not applicable
NOTE 15 Fair Value Option
Bank of America 94
|
||||||||
Fair Value Option Elections | |||||||||||||||||||||||||||||||||||
| September 30, 2021 | December 31, 2020 | ||||||||||||||||||||||||||||||||||
(Dollars in millions) |
Fair Value Carrying Amount |
Contractual Principal Outstanding |
Fair Value Carrying Amount Less Unpaid Principal |
Fair Value Carrying Amount |
Contractual Principal Outstanding |
Fair Value Carrying Amount Less Unpaid Principal |
|||||||||||||||||||||||||||||
Federal funds sold and securities borrowed or purchased under agreements to resell |
$ |
|
$ |
|
$ |
|
$ | $ | $ | ||||||||||||||||||||||||||
Loans reported as trading account assets (1)
|
|
|
( |
( |
|||||||||||||||||||||||||||||||
| Trading inventory – other |
|
n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||
| Consumer and commercial loans |
|
|
( |
( |
|||||||||||||||||||||||||||||||
Loans held-for-sale (1)
|
|
|
( |
( |
|||||||||||||||||||||||||||||||
| Other assets |
|
n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||
| Long-term deposits |
|
|
|
||||||||||||||||||||||||||||||||
Federal funds purchased and securities loaned or sold under agreements to repurchase |
|
|
( |
||||||||||||||||||||||||||||||||
| Short-term borrowings |
|
|
( |
||||||||||||||||||||||||||||||||
| Unfunded loan commitments |
|
n/a | n/a | n/a | n/a | ||||||||||||||||||||||||||||||
| Long-term debt |
|
|
( |
( |
|||||||||||||||||||||||||||||||
(1)A significant portion of the loans reported as trading account assets and LHFS are distressed loans that were purchased at a deep discount to par, and the remainder are loans with a fair value near contractual principal outstanding.
n/a = not applicable
| Gains (Losses) Related to Assets and Liabilities Accounted for Under the Fair Value Option | |||||||||||||||||||||||||||||||||||
| Three Months Ended September 30 | |||||||||||||||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||||||||||||||
| (Dollars in millions) | Market making and similar activities |
Other Income |
Total | Market making and similar activities |
Other Income |
Total | |||||||||||||||||||||||||||||
| Loans reported as trading account assets | $ |
|
$ |
|
$ |
|
$ | $ | $ | ||||||||||||||||||||||||||
Trading inventory – other (1)
|
( |
|
( |
||||||||||||||||||||||||||||||||
| Consumer and commercial loans | ( |
( |
( |
( |
|||||||||||||||||||||||||||||||
Loans held-for-sale (2)
|
|
|
|
||||||||||||||||||||||||||||||||
| Short-term borrowings |
|
|
|
( |
( |
||||||||||||||||||||||||||||||
| Unfunded loan commitments |
|
|
|
( |
( |
||||||||||||||||||||||||||||||
Long-term debt (3)
|
|
( |
|
( |
( |
( |
|||||||||||||||||||||||||||||
Other (4)
|
|
|
|
||||||||||||||||||||||||||||||||
| Total | $ | ( |
$ |
|
$ | ( |
$ | $ | $ | ||||||||||||||||||||||||||
| Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||||||||||||||
| Loans reported as trading account assets | $ |
|
$ |
|
$ |
|
$ | ( |
$ | $ | ( |
||||||||||||||||||||||||
Trading inventory – other (1)
|
|
|
|
||||||||||||||||||||||||||||||||
| Consumer and commercial loans |
|
|
|
( |
( |
( |
|||||||||||||||||||||||||||||
Loans held-for-sale (2)
|
|
|
|
||||||||||||||||||||||||||||||||
| Short-term borrowings |
|
|
|
||||||||||||||||||||||||||||||||
| Unfunded loan commitments |
|
|
|
( |
( |
||||||||||||||||||||||||||||||
Long-term debt (3)
|
( |
( |
( |
( |
( |
( |
|||||||||||||||||||||||||||||
Other (4)
|
|
( |
( |
( |
( |
||||||||||||||||||||||||||||||
| Total | $ |
|
$ |
|
$ |
|
$ | $ | ( |
$ | ( |
||||||||||||||||||||||||
(1) The gains (losses) in market making and similar activities are primarily offset by (losses) gains on trading liabilities that hedge these assets.
(2) Includes the value of IRLCs on funded loans, including those sold during the period.
(3) The net gains (losses) in market making and similar activities relate to the embedded derivatives in structured liabilities and are typically offset by (losses) gains on derivatives and securities that hedge these liabilities. For the cumulative impact of changes in the Corporation’s own credit spreads and the amount recognized in accumulated OCI, see Note 12 – Accumulated Other Comprehensive Income (Loss). For more information on how the Corporation’s own credit spread is determined, see Note 20 – Fair Value Measurements to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
(4) Includes gains (losses) on federal funds sold and securities borrowed or purchased under agreements to resell, other assets, long-term deposits and federal funds purchased and securities loaned or sold under agreements to repurchase.
Gains (Losses) Related to Borrower-specific Credit Risk for Assets and Liabilities Accounted for Under the Fair Value Option | |||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Loans reported as trading account assets | $ | ( |
$ | $ |
|
$ | ( |
||||||||||||||||
| Consumer and commercial loans | ( |
|
( |
||||||||||||||||||||
| Loans held-for-sale |
|
( |
|
( |
|||||||||||||||||||
| Unfunded loan commitments |
|
( |
|
( |
|||||||||||||||||||
95 Bank of America
|
||||||||
NOTE 16 Fair Value of Financial Instruments
The following disclosures include financial instruments that are not carried at fair value or only a portion of the ending balance is carried at fair value on the Consolidated Balance Sheet. Certain loans, deposits, long-term debt, unfunded lending commitments and other financial instruments are accounted for under the fair value option. For more information, see Note 21 – Fair Value Option to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
Fair Value of Financial Instruments
The carrying values and fair values by fair value hierarchy of certain financial instruments where only a portion of the ending balance was carried at fair value at September 30, 2021 and December 31, 2020 are presented in the table below.
Fair Value of Financial Instruments | |||||||||||||||||||||||
| Fair Value | |||||||||||||||||||||||
| Carrying Value | Level 2 | Level 3 | Total | ||||||||||||||||||||
| (Dollars in millions) | September 30, 2021 | ||||||||||||||||||||||
| Financial assets | |||||||||||||||||||||||
Loans |
$ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Loans held-for-sale |
|
|
|
|
|||||||||||||||||||
| Financial liabilities | |||||||||||||||||||||||
Deposits (1)
|
|
|
|
|
|||||||||||||||||||
| Long-term debt |
|
|
|
|
|||||||||||||||||||
Commercial unfunded lending commitments (2)
|
|
|
|
|
|||||||||||||||||||
| December 31, 2020 | |||||||||||||||||||||||
| Financial assets | |||||||||||||||||||||||
Loans |
$ | $ | $ | $ | |||||||||||||||||||
| Loans held-for-sale | |||||||||||||||||||||||
| Financial liabilities | |||||||||||||||||||||||
Deposits (1)
|
|||||||||||||||||||||||
| Long-term debt | |||||||||||||||||||||||
Commercial unfunded lending commitments (2)
|
|||||||||||||||||||||||
(1) Includes demand deposits of $962.9 billion and $799.0 billion with no
(2) The carrying value of commercial unfunded lending commitments is included in accrued expenses and other liabilities on the Consolidated Balance Sheet. The Corporation does not estimate the fair value of consumer unfunded lending commitments because, in many instances, the Corporation can reduce or cancel these commitments by providing notice to the borrower. For more information on commitments, see Note 10 – Commitments and Contingencies.
NOTE 17 Business Segment Information
Bank of America 96
|
||||||||
| Results of Business Segments and All Other | |||||||||||||||||||||||||||||||||||
| At and for the three months ended September 30 |
Total Corporation (1)
|
Consumer Banking | Global Wealth & Investment Management | ||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||
| Net interest income | $ |
|
$ | $ |
|
$ | $ |
|
$ | ||||||||||||||||||||||||||
| Noninterest income |
|
|
|
||||||||||||||||||||||||||||||||
| Total revenue, net of interest expense |
|
|
|
||||||||||||||||||||||||||||||||
| Provision for credit losses | ( |
|
( |
||||||||||||||||||||||||||||||||
| Noninterest expense |
|
|
|
||||||||||||||||||||||||||||||||
| Income before income taxes |
|
|
|
||||||||||||||||||||||||||||||||
| Income tax expense |
|
( |
|
|
|||||||||||||||||||||||||||||||
| Net income | $ |
|
$ | $ |
|
$ | $ |
|
$ | ||||||||||||||||||||||||||
| Period-end total assets | $ |
|
$ | $ |
|
$ | $ |
|
$ | ||||||||||||||||||||||||||
| Global Banking | Global Markets | All Other | |||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||
| Net interest income | $ |
|
$ | $ |
|
$ | $ |
|
$ | ( |
|||||||||||||||||||||||||
| Noninterest income |
|
|
( |
( |
|||||||||||||||||||||||||||||||
| Total revenue, net of interest expense |
|
|
( |
( |
|||||||||||||||||||||||||||||||
| Provision for credit losses | ( |
|
( |
( |
|||||||||||||||||||||||||||||||
| Noninterest expense |
|
|
|
||||||||||||||||||||||||||||||||
| Income before income taxes |
|
|
( |
( |
|||||||||||||||||||||||||||||||
| Income tax expense |
|
|
( |
( |
|||||||||||||||||||||||||||||||
| Net income | $ |
|
$ | $ |
|
$ | $ | ( |
$ | ||||||||||||||||||||||||||
| Period-end total assets | $ |
|
$ | $ |
|
$ | $ |
|
$ | ||||||||||||||||||||||||||
(1)There were no material intersegment revenues.
| Results of Business Segments and All Other | |||||||||||||||||||||||||||||||||||
| At and for the nine months ended September 30 |
Total Corporation (1)
|
Consumer Banking | Global Wealth & Investment Management | ||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||
| Net interest income | $ |
|
$ | $ |
|
$ | $ |
|
$ | ||||||||||||||||||||||||||
| Noninterest income |
|
|
|
||||||||||||||||||||||||||||||||
| Total revenue, net of interest expense |
|
|
|
||||||||||||||||||||||||||||||||
| Provision for credit losses | ( |
( |
( |
||||||||||||||||||||||||||||||||
| Noninterest expense |
|
|
|
||||||||||||||||||||||||||||||||
| Income before income taxes |
|
|
|
||||||||||||||||||||||||||||||||
| Income tax expense |
|
|
|
||||||||||||||||||||||||||||||||
| Net income | $ |
|
$ | $ |
|
$ | $ |
|
$ | ||||||||||||||||||||||||||
| Period-end total assets | $ |
|
$ | $ |
|
$ | $ |
|
$ | ||||||||||||||||||||||||||
| Global Banking | Global Markets | All Other | |||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||
| Net interest income | $ |
|
$ | $ |
|
$ | $ |
|
$ | ||||||||||||||||||||||||||
| Noninterest income |
|
|
( |
( |
|||||||||||||||||||||||||||||||
| Total revenue, net of interest expense |
|
|
( |
( |
|||||||||||||||||||||||||||||||
| Provision for credit losses | ( |
|
( |
||||||||||||||||||||||||||||||||
| Noninterest expense |
|
|
|
||||||||||||||||||||||||||||||||
| Income before income taxes |
|
|
( |
( |
|||||||||||||||||||||||||||||||
| Income tax expense |
|
|
( |
( |
|||||||||||||||||||||||||||||||
| Net income | $ |
|
$ | $ |
|
$ | $ |
|
$ | ||||||||||||||||||||||||||
| Period-end total assets | $ |
|
$ | $ |
|
$ | $ |
|
$ | ||||||||||||||||||||||||||
(1)There were no material intersegment revenues
97 Bank of America
|
||||||||
The tables below present noninterest income and the associated components for the three and nine months ended September 30, 2021 and 2020 for each business segment, All Other and the total Corporation. For more information, see Note 2 – Net Interest Income and Noninterest Income.
| Noninterest Income by Business Segment and All Other | |||||||||||||||||||||||||||||||||||
| Total Corporation | Consumer Banking | Global Wealth & Investment Management |
|||||||||||||||||||||||||||||||||
| Three Months Ended September 30 | |||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||
| Fees and commissions: | |||||||||||||||||||||||||||||||||||
| Card income | |||||||||||||||||||||||||||||||||||
| Interchange fees | $ |
|
$ | $ |
|
$ | $ |
|
$ | ||||||||||||||||||||||||||
| Other card income |
|
|
|
||||||||||||||||||||||||||||||||
| Total card income |
|
|
|
||||||||||||||||||||||||||||||||
| Service charges | |||||||||||||||||||||||||||||||||||
| Deposit-related fees |
|
|
|
||||||||||||||||||||||||||||||||
| Lending-related fees |
|
|
|
||||||||||||||||||||||||||||||||
| Total service charges |
|
|
|
||||||||||||||||||||||||||||||||
| Investment and brokerage services | |||||||||||||||||||||||||||||||||||
| Asset management fees |
|
|
|
||||||||||||||||||||||||||||||||
| Brokerage fees |
|
|
|
||||||||||||||||||||||||||||||||
Total investment and brokerage services |
|
|
|
||||||||||||||||||||||||||||||||
| Investment banking fees | |||||||||||||||||||||||||||||||||||
| Underwriting income |
|
|
|
||||||||||||||||||||||||||||||||
| Syndication fees |
|
|
|
||||||||||||||||||||||||||||||||
| Financial advisory services |
|
|
|
||||||||||||||||||||||||||||||||
| Total investment banking fees |
|
|
|
||||||||||||||||||||||||||||||||
| Total fees and commissions |
|
|
|
||||||||||||||||||||||||||||||||
| Market making and similar activities |
|
|
|
||||||||||||||||||||||||||||||||
| Other income (loss) | ( |
( |
|
|
|||||||||||||||||||||||||||||||
| Total noninterest income | $ |
|
$ | $ |
|
$ | $ |
|
$ | ||||||||||||||||||||||||||
| Global Banking | Global Markets |
All Other (1)
|
|||||||||||||||||||||||||||||||||
| Three Months Ended September 30 | |||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||
| Fees and commissions: | |||||||||||||||||||||||||||||||||||
| Card income | |||||||||||||||||||||||||||||||||||
| Interchange fees | $ |
|
$ | $ |
|
$ | $ | ( |
$ | ( |
|||||||||||||||||||||||||
| Other card income |
|
|
|
||||||||||||||||||||||||||||||||
| Total card income |
|
|
|
||||||||||||||||||||||||||||||||
| Service charges | |||||||||||||||||||||||||||||||||||
| Deposit-related fees |
|
|
|
||||||||||||||||||||||||||||||||
| Lending-related fees |
|
|
( |
( |
|||||||||||||||||||||||||||||||
| Total service charges |
|
|
|
||||||||||||||||||||||||||||||||
| Investment and brokerage services | |||||||||||||||||||||||||||||||||||
| Asset management fees |
|
|
( |
( |
|||||||||||||||||||||||||||||||
| Brokerage fees |
|
|
( |
( |
|||||||||||||||||||||||||||||||
Total investment and brokerage services |
|
|
( |
( |
|||||||||||||||||||||||||||||||
| Investment banking fees | |||||||||||||||||||||||||||||||||||
| Underwriting income |
|
|
( |
( |
|||||||||||||||||||||||||||||||
| Syndication fees |
|
|
( |
||||||||||||||||||||||||||||||||
| Financial advisory services |
|
|
|
||||||||||||||||||||||||||||||||
| Total investment banking fees |
|
|
( |
( |
|||||||||||||||||||||||||||||||
| Total fees and commissions |
|
|
( |
( |
|||||||||||||||||||||||||||||||
| Market making and similar activities |
|
|
( |
( |
|||||||||||||||||||||||||||||||
| Other income (loss) |
|
|
( |
( |
( |
||||||||||||||||||||||||||||||
| Total noninterest income | $ |
|
$ | $ |
|
$ | $ | ( |
$ | ( |
|||||||||||||||||||||||||
(1)All Other includes eliminations of intercompany transactions.
Bank of America 98
|
||||||||
| Noninterest Income by Business Segment and All Other | |||||||||||||||||||||||||||||||||||
| Total Corporation | Consumer Banking | Global Wealth & Investment Management |
|||||||||||||||||||||||||||||||||
| Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||
| Fees and commissions: | |||||||||||||||||||||||||||||||||||
| Card income | |||||||||||||||||||||||||||||||||||
| Interchange fees | $ |
|
$ | $ |
|
$ | $ |
|
$ | ||||||||||||||||||||||||||
| Other card income |
|
|
|
||||||||||||||||||||||||||||||||
| Total card income |
|
|
|
||||||||||||||||||||||||||||||||
| Service charges | |||||||||||||||||||||||||||||||||||
| Deposit-related fees |
|
|
|
||||||||||||||||||||||||||||||||
| Lending-related fees |
|
|
|
||||||||||||||||||||||||||||||||
| Total service charges |
|
|
|
||||||||||||||||||||||||||||||||
| Investment and brokerage services | |||||||||||||||||||||||||||||||||||
| Asset management fees |
|
|
|
||||||||||||||||||||||||||||||||
| Brokerage fees |
|
|
|
||||||||||||||||||||||||||||||||
Total investment and brokerage services |
|
|
|
||||||||||||||||||||||||||||||||
| Investment banking fees | |||||||||||||||||||||||||||||||||||
| Underwriting income |
|
|
|
||||||||||||||||||||||||||||||||
| Syndication fees |
|
|
|
||||||||||||||||||||||||||||||||
| Financial advisory services |
|
|
|
|
|||||||||||||||||||||||||||||||
| Total investment banking fees |
|
|
|
||||||||||||||||||||||||||||||||
| Total fees and commissions |
|
|
|
||||||||||||||||||||||||||||||||
| Market making and similar activities |
|
|
|
||||||||||||||||||||||||||||||||
| Other income (loss) | ( |
( |
|
|
|||||||||||||||||||||||||||||||
| Total noninterest income | $ |
|
$ | $ |
|
$ | $ |
|
$ | ||||||||||||||||||||||||||
| Global Banking | Global Markets |
All Other (1)
|
|||||||||||||||||||||||||||||||||
| Nine Months Ended September 30 | |||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||
| Fees and commissions: | |||||||||||||||||||||||||||||||||||
| Card income | |||||||||||||||||||||||||||||||||||
| Interchange fees | $ |
|
$ | $ |
|
$ | $ |
|
$ | ||||||||||||||||||||||||||
| Other card income |
|
|
|
||||||||||||||||||||||||||||||||
| Total card income |
|
|
|
||||||||||||||||||||||||||||||||
| Service charges | |||||||||||||||||||||||||||||||||||
| Deposit-related fees |
|
|
|
||||||||||||||||||||||||||||||||
| Lending-related fees |
|
|
|
( |
|||||||||||||||||||||||||||||||
| Total service charges |
|
|
|
||||||||||||||||||||||||||||||||
| Investment and brokerage services | |||||||||||||||||||||||||||||||||||
| Asset management fees |
|
|
|
( |
|||||||||||||||||||||||||||||||
| Brokerage fees |
|
|
( |
||||||||||||||||||||||||||||||||
Total investment and brokerage services |
|
|
( |
( |
|||||||||||||||||||||||||||||||
| Investment banking fees | |||||||||||||||||||||||||||||||||||
| Underwriting income |
|
|
( |
( |
|||||||||||||||||||||||||||||||
| Syndication fees |
|
|
|
( |
|||||||||||||||||||||||||||||||
| Financial advisory services |
|
|
|
||||||||||||||||||||||||||||||||
| Total investment banking fees |
|
|
( |
( |
|||||||||||||||||||||||||||||||
| Total fees and commissions |
|
|
( |
( |
|||||||||||||||||||||||||||||||
| Market making and similar activities |
|
|
( |
( |
|||||||||||||||||||||||||||||||
| Other income (loss) |
|
|
( |
( |
( |
||||||||||||||||||||||||||||||
| Total noninterest income | $ |
|
$ | $ |
|
$ | $ | ( |
$ | ( |
|||||||||||||||||||||||||
(1)All Other includes eliminations of intercompany transactions.
99 Bank of America
|
||||||||
The table below presents a reconciliation of the four business segments' total revenue, net of interest expense, on an FTE basis, and net income to the Consolidated Statement of Income, and total assets to the Consolidated Balance Sheet.
| Business Segment Reconciliations | ||||||||||||||||||||||||||
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
| Segments’ total revenue, net of interest expense | $ |
|
$ | $ |
|
$ | ||||||||||||||||||||
Adjustments (1):
|
||||||||||||||||||||||||||
| Asset and liability management activities |
|
( |
( |
|||||||||||||||||||||||
| Liquidating businesses, eliminations and other | ( |
( |
( |
( |
||||||||||||||||||||||
| FTE basis adjustment | ( |
( |
( |
( |
||||||||||||||||||||||
| Consolidated revenue, net of interest expense | $ |
|
$ | $ |
|
$ | ||||||||||||||||||||
| Segments’ total net income |
|
|
||||||||||||||||||||||||
Adjustments, net-of-tax (1):
|
||||||||||||||||||||||||||
| Asset and liability management activities |
|
( |
( |
|||||||||||||||||||||||
| Liquidating businesses, eliminations and other | ( |
|
( |
|||||||||||||||||||||||
| Consolidated net income | $ |
|
$ | $ |
|
$ | ||||||||||||||||||||
| September 30 | ||||||||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||||||||
| Segments’ total assets | $ |
|
$ | |||||||||||||||||||||||
Adjustments (1):
|
||||||||||||||||||||||||||
| Asset and liability management activities, including securities portfolio |
|
|||||||||||||||||||||||||
| Elimination of segment asset allocations to match liabilities | ( |
( |
||||||||||||||||||||||||
| Other |
|
|||||||||||||||||||||||||
| Consolidated total assets | $ |
|
$ | |||||||||||||||||||||||
(1)Adjustments include consolidated income, expense and asset amounts not specifically allocated to individual business segments.
Bank of America 100
|
||||||||
Glossary
Alt-A Mortgage – A type of U.S. mortgage that is considered riskier than A-paper, or “prime,” and less risky than “subprime,” the riskiest category. Typically, Alt-A mortgages are characterized by borrowers with less than full documentation, lower credit scores and higher LTVs.
Assets Under Management (AUM) – The total market value of assets under the investment advisory and/or discretion of GWIM which generate asset management fees based on a percentage of the assets’ market values. AUM reflects assets that are generally managed for institutional, high net worth and retail clients, and are distributed through various investment products including mutual funds, other commingled vehicles and separate accounts.
Banking Book – All on- and off-balance sheet financial instruments of the Corporation except for those positions that are held for trading purposes.
Brokerage and Other Assets – Non-discretionary client assets which are held in brokerage accounts or held for safekeeping.
Committed Credit Exposure – Any funded portion of a facility plus the unfunded portion of a facility on which the lender is legally bound to advance funds during a specified period under prescribed conditions.
Credit Derivatives – Contractual agreements that provide protection against a specified credit event on one or more referenced obligations.
Credit Valuation Adjustment (CVA) – A portfolio adjustment required to properly reflect the counterparty credit risk exposure as part of the fair value of derivative instruments.
Debit Valuation Adjustment (DVA) – A portfolio adjustment required to properly reflect the Corporation’s own credit risk exposure as part of the fair value of derivative instruments and/or structured liabilities.
Funding Valuation Adjustment (FVA) – A portfolio adjustment required to include funding costs on uncollateralized derivatives and derivatives where the Corporation is not permitted to use the collateral it receives.
Interest Rate Lock Commitment (IRLC) – Commitment with a loan applicant in which the loan terms are guaranteed for a designated period of time subject to credit approval.
Letter of Credit – A document issued on behalf of a customer to a third party promising to pay the third party upon presentation of specified documents. A letter of credit effectively substitutes the issuer’s credit for that of the customer.
Loan-to-value (LTV) – A commonly used credit quality metric. LTV is calculated as the outstanding carrying value of the loan divided by the estimated value of the property securing the loan.
Margin Receivable – An extension of credit secured by eligible securities in certain brokerage accounts.
Matched Book – Repurchase and resale agreements or securities borrowed and loaned transactions where the overall asset and liability position is similar in size and/or maturity. Generally, these are entered into to accommodate customers where the Corporation earns the interest rate spread.
Mortgage Servicing Rights (MSR) – The right to service a mortgage loan when the underlying loan is sold or securitized. Servicing includes collections for principal, interest and escrow payments from borrowers and accounting for and remitting principal and interest payments to investors.
Nonperforming Loans and Leases – Includes loans and leases that have been placed on nonaccrual status, including nonaccruing loans whose contractual terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties.
Prompt Corrective Action (PCA) – A framework established by the U.S. banking regulators requiring banks to maintain certain levels of regulatory capital ratios, comprised of five categories of capitalization: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” Insured depository institutions that fail to meet certain of these capital levels are subject to increasingly strict limits on their activities, including their ability to make capital distributions, pay management compensation, grow assets and take other actions.
Subprime Loans – Although a standard industry definition for subprime loans (including subprime mortgage loans) does not exist, the Corporation defines subprime loans as specific product offerings for higher risk borrowers.
Troubled Debt Restructurings (TDRs) – Loans whose contractual terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties. Certain consumer loans for which a binding offer to restructure has been extended are also classified as TDRs.
Value-at-Risk (VaR) – VaR is a model that simulates the value of a portfolio under a range of hypothetical scenarios in order to generate a distribution of potential gains and losses. VaR represents the loss the portfolio is expected to experience with a given confidence level based on historical data. A VaR model is an effective tool in estimating ranges of potential gains and losses on our trading portfolios.
101 Bank of America
|
||||||||
Key Metrics
Active Digital Banking Users – Mobile and/or online users with activity at period end.
Active Mobile Banking Users – Mobile users with activity at period end.
Book Value – Ending common shareholders’ equity divided by ending common shares outstanding.
Deposit Spread – Annualized net interest income divided by average deposits.
Efficiency Ratio – Noninterest expense divided by total revenue, net of interest expense.
Gross Interest Yield – Effective annual percentage rate divided by average loans.
Net Interest Yield – Net interest income divided by average total interest-earning assets.
Operating Margin – Income before income taxes divided by total revenue, net of interest expense.
Return on Average Allocated Capital – Adjusted net income divided by allocated capital.
Return on Average Assets – Net income divided by total average assets.
Return on Average Common Shareholders’ Equity – Net income applicable to common shareholders divided by average common shareholders’ equity.
Return on Average Shareholders’ Equity – Net income divided by average shareholders’ equity.
Risk-adjusted Margin – Difference between total revenue, net of interest expense, and net credit losses divided by average loans.
Acronyms
| ABS | Asset-backed securities | ||||
| AFS | Available-for-sale | ||||
| ALM | Asset and liability management | ||||
| ARR | Alternative reference rates | ||||
| AUM | Assets under management | ||||
| BANA | Bank of America, National Association | ||||
| BHC | Bank holding company | ||||
| BofAS | BofA Securities, Inc. | ||||
| BofASE | BofA Securities Europe SA | ||||
| bps | Basis points | ||||
| CCAR | Comprehensive Capital Analysis and Review | ||||
| CDO | Collateralized debt obligation | ||||
| CECL | Current expected credit losses | ||||
| CET1 | Common equity tier 1 | ||||
| CFTC | Commodity Futures Trading Commission | ||||
| CLTV | Combined loan-to-value | ||||
| CVA | Credit valuation adjustment | ||||
| DVA | Debit valuation adjustment | ||||
| EPS | Earnings per common share | ||||
| ESG | Environmental, social and governance | ||||
| FCA | Financial Conduct Authority | ||||
| FHA | Federal Housing Administration | ||||
| FHLB | Federal Home Loan Bank | ||||
| FHLMC | Freddie Mac | ||||
| FICC | Fixed income, currencies and commodities | ||||
| FICO | Fair Isaac Corporation (credit score) | ||||
| FINRA | Financial Industry Regulatory Authority, Inc. | ||||
| FNMA | Fannie Mae | ||||
| FTE | Fully taxable-equivalent | ||||
| FVA | Funding valuation adjustment | ||||
| GAAP | Accounting principles generally accepted in the United States of America |
||||
| GLS | Global Liquidity Sources |
||||
| GNMA | Government National Mortgage Association |
||||
| GSE | Government-sponsored enterprise |
||||
| G-SIB | Global systemically important bank |
||||
| GWIM | Global Wealth & Investment Management |
||||
| HELOC | Home equity line of credit | ||||
| HQLA | High Quality Liquid Assets | ||||
| HTM | Held-to-maturity | ||||
| IBOR | Interbank Offered Rates |
||||
| IRLC | Interest rate lock commitment |
||||
| ISDA | International Swaps and Derivatives Association, Inc. |
||||
| LCR | Liquidity Coverage Ratio | ||||
| LHFS | Loans held-for-sale | ||||
| LIBOR | London Interbank Offered Rate | ||||
| LTV | Loan-to-value | ||||
| MBS | Mortgage-backed securities | ||||
| MD&A | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
||||
| MLGWM | Merrill Lynch Global Wealth Management |
||||
| MLI | Merrill Lynch International |
||||
| MLPCC | Merrill Lynch Professional Clearing Corp | ||||
| MLPF&S | Merrill Lynch, Pierce, Fenner & Smith Incorporated |
||||
| MSA | Metropolitan Statistical Area | ||||
| MSR | Mortgage servicing right | ||||
| NSFR | Net Stable Funding Ratio | ||||
| OCI | Other comprehensive income | ||||
| OREO | Other real estate owned | ||||
| PCA | Prompt Corrective Action | ||||
| PPP | Paycheck Protection Program | ||||
| RWA | Risk-weighted assets | ||||
| SBLC | Standby letter of credit | ||||
| SCB | Stress capital buffer | ||||
| SEC | Securities and Exchange Commission | ||||
| SLR | Supplementary leverage ratio | ||||
| SOFR | Secured Overnight Financing Rate | ||||
| TDR | Troubled debt restructurings | ||||
| TLAC | Total loss-absorbing capacity | ||||
| VaR | Value-at-Risk | ||||
| VIE | Variable interest entity | ||||
Bank of America 102
|
||||||||
Part II. Other Information
Bank of America Corporation and Subsidiaries
Item 1. Legal Proceedings
See Litigation and Regulatory Matters in Note 10 – Commitments and Contingencies to the Consolidated Financial Statements, which is incorporated by reference in this Item 1, for litigation and regulatory disclosure that supplements the disclosure in Note 12 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s 2020 Annual Report on Form 10-K.
Item 1A. Risk Factors
There are no material changes from the risk factors set forth under Part 1, Item 1A. Risk Factors of the Corporation’s 2020 Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The table below presents share repurchase activity for the three months ended September 30, 2021. The primary source of funds for cash distributions by the Corporation to its shareholders is dividends received from its banking subsidiaries. Each of the banking 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 Repurchased (1,2)
|
Weighted-Average Per Share Price |
Total Shares
Purchased as
Part of Publicly
Announced Programs (2)
|
Remaining Buyback
Authority Amounts (3)
|
|||||||||||||||||||
| July 1 - 31, 2021 | 77,529 | $ | 38.66 | 77,529 | $ | 17,892 | |||||||||||||||||
| August 1 - 31, 2021 | 133,677 | 40.55 | 131,990 | 12,709 | |||||||||||||||||||
| September 1 - 30, 2021 | 38,045 | 41.18 | 38,043 | 11,191 | |||||||||||||||||||
| Three months ended September 30, 2021 | 249,251 | 40.06 | 247,562 | ||||||||||||||||||||
(1)Includes 1.7 million 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 April 15, 2021, the Corporation announced the Board has authorized the repurchase of up to $25 billion of common stock over time. The Board also authorized repurchases to offset shares awarded under equity-based compensation plans. During the three months ended September 30, 2021, the Corporation repurchased 248 million shares, or $9.9 billion, of its common stock, including to offset shares awarded under the equity-based compensation plans. For more information, see Capital Management - CCAR and Capital Planning in the MD&A on page 22 and Note 11 – Shareholders’ Equity to the Consolidated Financial Statements.
(3)Excludes repurchases to offset shares awarded under equity-based compensation plans. On October 20, 2021, the Board renewed the Corporation’s $25 billion common stock repurchase program previously announced in April 2021. The Board’s authorization replaces the previous program.
The Corporation did not have any unregistered sales of equity securities during the three months ended September 30, 2021.
Item 5. Other Information
Pursuant to Section 13(r) of the Securities Exchange Act of 1934, as amended (Exchange Act), an issuer is required to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with individuals or entities designated pursuant to certain Executive Orders. Disclosure may be required even where the activities, transactions or dealings were conducted in compliance with applicable law. Except as set forth below, as of the date of this Quarterly Report on Form 10-Q, the Corporation is not aware of any other activity, transaction or dealing by any of its affiliates during the quarter ended September 30, 2021 that requires disclosure under Section 13(r) of the Exchange Act.
Pursuant to a specific license from the U.S. Treasury Department’s Office of Foreign Assets Control issued on May 28, 2021, during the third quarter of 2021, Bank of America, National Association (BANA), a U.S. subsidiary of Bank of America Corporation, processed four authorized wire deposits totaling $1.2 million on behalf of a U.S. client into its account at BANA. The wire deposits settled invoices owed to the U.S. client and were unblocked funds belonging to Jammal Trust Bank, which at the time of the deposits was designated pursuant to Executive Order 13224. There was no measurable gross revenue or net profit to the Corporation relating to these transactions. The Corporation may in the future engage in similar transactions for its clients to the extent permitted by U.S. law.
103 Bank of America
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Item 6. Exhibits
| Exhibit No. | Description | Notes | Form | Exhibit | Filing Date | File No. | ||||||||||||||
| 3.1 | 1 | |||||||||||||||||||
| 3.2 | 10-Q | 3.2 | 10/30/20 | 1-6523 | ||||||||||||||||
| 22 | 1 | |||||||||||||||||||
| 31.1 | 1 | |||||||||||||||||||
| 31.2 | 1 | |||||||||||||||||||
| 32.1 | 1 | |||||||||||||||||||
| 32.2 | 1 | |||||||||||||||||||
| 101.INS | Inline XBRL Instance Document | 2 | ||||||||||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | 1 | ||||||||||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | 1 | ||||||||||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | 1 | ||||||||||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | 1 | ||||||||||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definitions Linkbase Document | 1 | ||||||||||||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||||||||||||||||||
(2) The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Bank of America Corporation
Registrant
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| Date: | October 29, 2021 | /s/ Rudolf A. Bless | |||||||||||||||
| Rudolf A. Bless Chief Accounting Officer |
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Bank of America 104
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