10-K 12/31/2019 Bank of America

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2019

or

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

EXCHANGE ACT OF 1934

For the transition period from to

Commission file number:

1-6523

Exact name of registrant as specified in its charter:

Bank of America Corporation

State or other jurisdiction of incorporation or organization:

Delaware

IRS Employer Identification No.:

56-0906609

Address of principal executive offices:

Bank of America Corporate Center

100 N. Tryon Street

Charlotte, North Carolina 28255

Registrant’s telephone number, including area code:

(704) 386-5681

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

Title of each class Trading Symbol(s) Name of each exchange on which registered

Common Stock, par value $0.01 per share BAC New York Stock Exchange

Depositary Shares, each representing a 1/1,000th interest in a share

of Floating Rate Non-Cumulative Preferred Stock, Series E

BAC PrE New York Stock Exchange

Depositary Shares, each representing a 1/1,000th interest in a share

of 6.200% Non-Cumulative Preferred Stock, Series CC

BAC PrC New York Stock Exchange

Depositary Shares, each representing a 1/1,000th interest in a share

of 6.000% Non-Cumulative Preferred Stock, Series EE

BAC PrA New York Stock Exchange

Depositary Shares, each representing a 1/1,000th interest in a share

of 6.000% Non-Cumulative Preferred Stock, Series GG

BAC PrB New York Stock Exchange

Depositary Shares, each representing a 1/1,000th interest in a share

of 5.875% Non-Cumulative Preferred Stock, Series HH

BAC PrK New York Stock Exchange

7.25% Non-Cumulative Perpetual Convertible Preferred Stock, Series L BAC PrL New York Stock Exchange

Depositary Shares, each representing a 1/1,200th interest in a share

of Bank of America Corporation Floating Rate

Non-Cumulative Preferred Stock, Series 1

BML PrG New York Stock Exchange

Bank of America 1

Title of each class Trading Symbol(s) Name of each exchange on which registered

Depositary Shares, each representing a 1/1,200th interest in a share

of Bank of America Corporation Floating Rate

Non-Cumulative Preferred Stock, Series 2

BML PrH New York Stock Exchange

Depositary Shares, each representing a 1/1,200th interest in a share

of Bank of America Corporation Floating Rate

Non-Cumulative Preferred Stock, Series 4

BML PrJ New York Stock Exchange

Depositary Shares, each representing a 1/1,200th interest in a share

of Bank of America Corporation Floating Rate

Non-Cumulative Preferred Stock, Series 5

BML PrL New York Stock Exchange

Floating Rate Preferred Hybrid Income Term Securities of BAC Capital

Trust XIII (and the guarantee related thereto)

BAC/PF New York Stock Exchange

5.63% Fixed to Floating Rate Preferred Hybrid Income Term Securities

of BAC Capital Trust XIV (and the guarantee related thereto)

BAC/PG New York Stock Exchange

Income Capital Obligation Notes initially due December 15, 2066 of

Bank of America Corporation

MER PrK New York Stock Exchange

Senior Medium-Term Notes, Series A, Step Up Callable Notes, due

November 28, 2031 of BofA Finance LLC (and the guarantee

of the Registrant with respect thereto)

BAC/31B New York Stock Exchange

Depositary Shares, each representing a 1/1,000th interest in a share

of 5.375% Non-Cumulative Preferred Stock, Series KK

BAC PrM New York Stock Exchange

Depositary Shares, each representing a 1/1,000th interest in a share

of 5.000% Non-Cumulative Preferred Stock, Series LL

BAC PrN New York Stock Exchange

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes

☐ No ☑

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or

for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes

☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this

chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes

☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See

the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

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

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting

standards provided pursuant to Section 13(a) of the Exchange Act.

☐

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

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

there were 8,728,530,308 shares of Common Stock outstanding.

Documents incorporated by reference: Portions of the definitive proxy statement relating to the registrant’s 2020 annual meeting of stockholders are incorporated by reference in this Form

10-K in response to Items 10, 11, 12, 13 and 14 of Part III.

Bank of America 2

Table of Contents

Bank of America Corporation and Subsidiaries

Part I Page

Item 1. Business 2

Item 1A. Risk Factors 5

Item 1B. Unresolved Staff Comments 19

Item 2. Properties 19

Item 3. Legal Proceedings 19

Item 4. Mine Safety Disclosures 19

Part II

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

Item 6. Selected Financial Data 20

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

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

Item 8. Financial Statements and Supplementary Data 85

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

Item 9A. Controls and Procedures 164

Item 9B. Other Information 164

Part III

Item 10. Directors, Executive Officers and Corporate Governance 164

Item 11. Executive Compensation 164

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

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

Item 14. Principal Accounting Fees and Services 165

Part IV

Item 15. Exhibits, Financial Statement Schedules 166

Item 16. Form 10-K Summary 170

1 Bank of America

Part I

Bank of America Corporation and Subsidiaries

Item 1. Business

Bank of America Corporation is a Delaware corporation, a bank holding company

(BHC) and a financial holding company. When used in this report, “the

Corporation,” “we,” “us” and “our” may refer to Bank of America Corporation

individually, Bank of America Corporation and its subsidiaries, or certain of Bank of

America Corporation’s subsidiaries or affiliates. As part of our efforts to streamline

the Corporation’s organizational structure and reduce complexity and costs, the

Corporation has reduced and intends to continue to reduce the number of its

corporate subsidiaries, including through intercompany mergers.

Bank of America is one of the world’s largest financial institutions, serving

individual consumers, small- and middle-market businesses, institutional investors,

large corporations and governments with a full range of banking, investing, asset

management and other financial and risk management products and services. Our

principal executive offices are located in the Bank of America Corporate Center,

100 North Tryon Street, Charlotte, North Carolina 28255.

Bank of America’s website is www.bankofamerica.com and the Investor

Relations portion of our website is http://investor.bankofamerica.com. We use our

website to distribute company information, including as a means of disclosing

material, non-public information and for complying with our disclosure obligations

under Regulation FD. We routinely post and make accessible financial and other

information regarding the Corporation on our website. Accordingly, investors

should monitor the Investor Relations portion of our website, in addition to our

press releases, U.S. Securities and Exchange Commission (SEC) filings, public

conference calls and webcasts. Our Annual Reports on Form 10-K, Quarterly

Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those

reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities

Exchange Act of 1934 (Exchange Act) are available on the Investor Relations

portion of our website under the heading Financial Information (accessible by

clicking on the SEC Filings link) as soon as reasonably practicable after we

electronically file such reports with, or furnish them to, the SEC and at the SEC’s

website,

www.sec.gov. Notwithstanding the foregoing, the information contained

on our website as referenced in this paragraph is not incorporated by reference

into this Annual Report on Form 10-K. Also, we make available on the Investor

Relations portion of our website under the heading Corporate Governance: (i) our

Code of Conduct; (ii) our Corporate Governance Guidelines (accessible by clicking

on the Governance Highlights link); and (iii) the charter of each active committee of

our Board of Directors (the Board) (accessible by clicking on the committee names

under the Committee Composition link). We also intend to disclose any

amendments to our Code of Conduct and waivers of our Code of Conduct required

to be disclosed by the rules of the SEC and the New York Stock Exchange on the

Investor Relations portion of our website. All of these corporate governance

materials are also available free of charge in print to shareholders who request

them in writing to: Bank of America Corporation, Attention: Office of the Corporate

Secretary, Bank of America Corporate Center, 100 North Tryon Street, NC1-007

-

56-06, C

harlotte, North Carolina 28255.

Segments

Through our banking and various nonbank subsidiaries throughout the U.S. and in

international markets, we provide a diversified range of banking and nonbank

financial services and products through four business segments: Consumer

Banking, Global

Wealth & Investment Management (GWIM), Global Bankingand Global Markets,

with the remaining operations recorded in All Other. Additional information related

to our business segments and the products and services they provide is included

in the information set forth on pages 32 through 41 of Item 7. Management’s

Discussion and Analysis of Financial Condition and Results of Operations (MD&A)

a n d Note 24 – Business Segment Information to the Consolidated Financial

Statements.

Competition

We operate in a highly competitive environment. Our competitors include banks,

thrifts, credit unions, investment banking firms, investment advisory firms,

brokerage firms, investment companies, insurance companies, mortgage banking

companies, credit card issuers, mutual fund companies, hedge funds, private

equity firms, and e-commerce and other internet-based companies. We compete

with some of these competitors globally and with others on a regional or product

specific basis.

Competition is based on a number of factors including, among others, customer

service, quality and range of products and services offered, price, reputation,

interest rates on loans and deposits, lending limits and customer convenience. Our

ability to continue to compete effectively also depends in large part on our ability to

attract new employees and retain and motivate our existing employees, while

managing compensation and other costs.

Employees

A t December 31, 2019, we had approximately 208,000 employees. None of our

domestic employees are subject to a collective bargaining agreement.

Management considers our employee relations to be good.

Government Supervision and Regulation

The following discussion describes, among other things, elements of an extensive

regulatory framework applicable to BHCs, financial holding companies, banks and

broker-dealers, including specific information about Bank of America.

We are subject to an extensive regulatory framework applicable to BHCs,

financial holding companies and banks and other financial services entities. U.S.

federal regulation of banks, BHCs and financial holding companies is intended

primarily for the protection of depositors and the Deposit Insurance Fund (DIF)

rather than for the protection of shareholders and creditors.

As a registered financial holding company and BHC, the Corporation is subject

to the supervision of, and regular inspection by, the Board of Governors of the

Federal Reserve System (Federal Reserve). Our U.S. bank subsidiaries (the

Banks), organized as national banking associations, are subject to regulation,

supervision and examination by the Office of the Comptroller of the Currency

(OCC), the Federal Deposit Insurance Corporation (FDIC) and the Federal

Reserve. U.S. financial holding companies, and the companies under their control,

are permitted to engage in activities considered “financial in nature” as defined by

the Gramm-Leach-Bliley Act and related Federal Reserve interpretations. The

Corporation's status as a financial holding company is conditioned upon

maintaining certain eligibility requirements for both the Corporation and its U.S.

depository institution subsidiaries, including minimum capital ratios, supervisory

ratings and, in the case of the depository institutions, at least satisfactory

Community Reinvestment Act ratings. Failure to be an eligible financial holding

company could result in the

Bank of America 2

3

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

acquisitions.

The scope of the laws and regulations and the intensity of the supervision to

which we are subject have increased over the past several years, beginning with

the response to the financial crisis, as well as other factors such as technological

and market changes. In addition, the banking and financial services sector is

subject to substantial regulatory enforcement and fines. Many of these changes

have occurred as a result of the 2010 Dodd-Frank Wall Street Reform and

Consumer Protection Act (the Financial Reform Act). We cannot assess whether

there will be any additional major changes in the regulatory environment and

expect that our business will remain subject to continuing and extensive regulation

and supervision.

We are also subject to various other laws and regulations, as well as

supervision and examination by other regulatory agencies, all of which directly or

indirectly affect our operations and management and our ability to make

distributions to shareholders. For instance, our broker-dealer subsidiaries are

subject to both U.S. and international regulation, including supervision by the SEC,

Financial Industry Regulatory Authority and New York Stock Exchange, among

others; our commodities businesses in the U.S. are subject to regulation by and

supervision of the U.S. Commodity Futures Trading Commission (CFTC); our U.S.

derivatives activity is subject to regulation and supervision of the CFTC, National

Futures Association and SEC, and in the case of the Banks, certain banking

regulators; our insurance activities are subject to licensing and regulation by state

insurance regulatory agencies; and our consumer financial products and services

are regulated by the Consumer Financial Protection Bureau (CFPB).

Our non-U.S. businesses are also subject to extensive regulation by various

non-U.S. regulators, including governments, securities exchanges, prudential

regulators, central banks and other regulatory bodies, in the jurisdictions in which

those businesses operate. For example, our financial services operations in the

United Kingdom (U.K.), Ireland and France are subject to regulation by the

Prudential Regulatory Authority and Financial Conduct Authority (FCA), the

European Central Bank and Central Bank of Ireland, and the Autorité de Contrôle

Prudentiel et de Résolution and Autorité des Marchés Financiers, respectively.

Source of Strength

Under the Financial Reform Act and Federal Reserve policy, BHCs are expected

to act as a source of financial strength to each subsidiary bank and to commit

resources to support each such subsidiary. Similarly, under the cross-guarantee

provisions of the Federal Deposit Insurance Corporation Improvement Act of 1991

(FDICIA), in the event of a loss suffered or anticipated by the FDIC, either as a

result of default of a bank subsidiary or related to FDIC assistance provided to such

a subsidiary in danger of default, the affiliate banks of such a subsidiary may be

assessed for the FDIC’s loss, subject to certain exceptions.

Transactions with Affiliates

Pursuant to Section 23A and 23B of the Federal Reserve Act, as implemented by

the Federal Reserve’s Regulation W, the Banks are subject to restrictions that limit

certain types of transactions between the Banks and their nonbank affiliates. In

general, U.S. banks are subject to quantitative and qualitative limits on extensions

of credit, purchases of assets and certain other transactions involving its nonbank

affiliates. Additionally, transactions between U.S. banks and their nonbank affiliates

are required to be on arm’s length terms and must be consistent with standards of

safety and soundness.

Bank of America

Deposit Insurance

Deposits placed at U.S. domiciled banks are insured by the FDIC, subject to limits

and conditions of applicable law and the FDIC’s regulations. Pursuant to the

Financial Reform Act, FDIC insurance coverage limits are $250,000 per customer.

All insured depository institutions are required to pay assessments to the FDIC in

order to fund the DIF.

The FDIC is required to maintain at least a designated minimum ratio of the DIF

to insured deposits in the U.S. The FDIC adopted regulations that establish a long-

term t

arget DIF ratio of greater than two percent. As of the date of this report, the

DIF ratio is below this required target and the FDIC has adopted a restoration plan

that may result in increased deposit insurance assessments. Deposit insurance

assessment rates are subject to change by the FDIC and will be impacted by the

overall economy and the stability of the banking industry as a whole. For more

information regarding deposit insurance, see Item 1A. Risk Factors – Regulatory,

Compliance and Legal on page 14.

Capital, Liquidity and Operational Requirements

As a financial holding company, we and our bank subsidiaries are subject to the

regulatory capital and liquidity guidelines issued by the Federal Reserve and other

U.S. banking regulators, including the FDIC and the OCC. These rules are

complex and are evolving as U.S. and international regulatory authorities propose

and enact enhanced capital and liquidity rules. The Corporation seeks to manage

its capital position to maintain sufficient capital to meet these regulatory guidelines

and to support our business activities. These evolving rules are likely to influence

our planning processes and may require additional regulatory capital and liquidity,

as well as impose additional operational and compliance costs on the Corporation.

In addition, the Federal Reserve and the OCC have adopted guidelines that

establish minimum standards for the design, implementation and board oversight

of BHCs’ and national banks’ risk governance frameworks. The Federal Reserve

also issued a final rule, which became effective January 1, 2019, that includes

minimum external total loss-absorbing capacity (TLAC) and long-term debt

requirements.

For more information on regulatory capital rules, capital composition and

pending or proposed regulatory capital changes, see Capital Management –

Regulatory Capital in the MD&A on page 46, and Note 17 – Regulatory

Requirements and Restrictions to the Consolidated Financial Statements, which

are incorporated by reference in this Item 1.

Distributions

We are subject to various regulatory policies and requirements relating to capital

actions, including payment of dividends and common stock repurchases. For

instance, Federal Reserve regulations require major U.S. BHCs to submit a capital

plan as part of an annual Comprehensive Capital Analysis and Review (CCAR).

The purpose of the CCAR for the Federal Reserve is to assess the capital planning

process of the BHC, including any planned capital actions, such as payment of

dividends and common stock repurchases.

Our ability to pay dividends is also affected by the various minimum capital

requirements and the capital and non-capital standards established under the

FDICIA. The right of the Corporation, our shareholders and our creditors to

participate in any distribution of the assets or earnings of our subsidiaries is further

subject to the prior claims of creditors of the respective subsidiaries.

If the Federal Reserve finds that any of our Banks are not “well-capitalized” or

“well-managed,” we would be required to enter into an agreement with the Federal

Reserve to comply with all

applicable capital and management requirements, which may contain additional

limitations or conditions relating to our activities. Additionally, the applicable federal

regulatory authority is authorized to determine, under certain circumstances

relating to the financial condition of a bank or BHC, that the payment of dividends

would be an unsafe or unsound practice and to prohibit payment thereof.

For more information regarding the requirements relating to the payment of

dividends, including the minimum capital requirements, see Note 14 –

Shareholders’ Equity and Note 17 – Regulatory Requirements and Restrictions to

the Consolidated Financial Statements.

Many of our subsidiaries, including our bank and broker-dealer subsidiaries, are

subject to laws that restrict dividend payments, or authorize regulatory bodies to

block or reduce the flow of funds from those subsidiaries to the parent company or

other subsidiaries.

Resolution Planning

As a BHC with greater than $50 billion of assets, the Corporation is required by the

Federal Reserve and the FDIC to periodically submit a plan for a rapid and orderly

resolution in the event of material financial distress or failure.

Such resolution plan is intended to be a detailed roadmap for the orderly

resolution of the BHC and its material entities pursuant to the U.S. Bankruptcy

Code and other applicable resolution regimes under one or more hypothetical

scenarios assuming no extraordinary government assistance.

If both the Federal Reserve and the FDIC determine that the BHC’s plan is not

credible, the Federal Reserve and the FDIC may jointly impose more stringent

capital, leverage or liquidity requirements or restrictions on growth, activities or

operations. A summary of our plan is available on the Federal Reserve and FDIC

websites.

The FDIC also requires the submission of a resolution plan for Bank of

America, National Association, which must describe how the insured depository

institution would be resolved under the bank resolution provisions of the Federal

Deposit Insurance Act. A description of this plan is available on the FDIC’s

website.

We continue to make substantial progress to enhance our resolvability,

including simplifying our legal entity structure and business operations, and

increasing our preparedness to implement our resolution plan, both from a

financial and operational standpoint.

Across international jurisdictions, resolution planning is the responsibility of

national resolution authorities (RA). Among those, the jurisdictions of most impact

to the Corporation are the requirements associated with subsidiaries in the U.K.,

Ireland and France, where rules have been issued requiring the submission of

significant information about locally-incorporated subsidiaries (including

information on intra-group dependencies, legal entity separation and barriers to

resolution) as well as the Corporation’s banking branches located in those

jurisdictions that are deemed to be material for resolution planning purposes. As a

result of the RA's review of the submitted information, we could be required to take

certain actions over the next several years which could increase operating costs

and potentially result in the restructuring of certain businesses and subsidiaries.

For more information regarding our resolution plan, seeItem 1A. Risk Factors –

Liquidity on page 7.

Insolvency and the Orderly Liquidation Authority

Under the Federal Deposit Insurance Act, the FDIC may be appointed receiver of

an insured depository institution if it is insolvent or in certain other circumstances.

In addition, under the

Financial Reform Act, when a systemically important financial institution (SIFI)

such as the Corporation is in default or danger of default, the FDIC may be

appointed receiver in order to conduct an orderly liquidation of such institution. In

the event of such appointment, the FDIC could, among other things, invoke the

orderly liquidation authority, instead of the U.S. Bankruptcy Code, if the Secretary

of the Treasury makes certain financial distress and systemic risk determinations.

The orderly liquidation authority is modeled in part on the Federal Deposit

Insurance Act, but also adopts certain concepts from the U.S. Bankruptcy Code.

The orderly liquidation authority contains certain differences from the U.S.

Bankruptcy Code. For example, in certain circumstances, the FDIC could permit

payment of obligations it determines to be systemically significant (e.g., short-term

creditors or operating creditors) in lieu of paying other obligations (e.g., long-term

creditors) without the need to obtain creditors’ consent or prior court review. The

insolvency and resolution process could also lead to a large reduction or total

elimination of the value of a BHC’s outstanding equity, as well as impairment or

elimination of certain debt.

Under the FDIC’s “single point of entry” strategy for resolving SIFIs, the FDIC

could replace a distressed BHC with a bridge holding company, which could

continue operations and result in an orderly resolution of the underlying bank, but

whose equity is held solely for the benefit of creditors of the original BHC.

Furthermore, the Federal Reserve requires that BHCs maintain minimum levels

of long-term debt required to provide adequate loss absorbing capacity in the

event of a resolution.

For more information regarding our resolution, seeItem 1A. Risk Factors –

Liquidity on page 7.

Limitations on Acquisitions

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 permits a

BHC to acquire banks located in states other than its home state without regard to

state law, subject to certain conditions, including the condition that the BHC, after

and as a result of the acquisition, controls no more than 10 percent of the total

amount of deposits of insured depository institutions in the U.S. and no more than

30 percent or such lesser or greater amount set by state law of such deposits in

that state. At June 30, 2019, we held greater than 10 percent of the total amount of

deposits of insured depository institutions in the U.S.

In addition, the Financial Reform Act restricts acquisitions by a financial

institution if, as a result of the acquisition, the total liabilities of the financial

institution would exceed 10 percent of the total liabilities of all financial institutions

in the U.S. At June 30, 2019, our liabilities did not exceed 10 percent of the total

liabilities of all financial institutions in the U.S.

The Volcker Rule

The Volcker Rule prohibits insured depository institutions and companies affiliated

with insured depository institutions (collectively, banking entities) from engaging in

short-term proprietary trading of certain securities, derivatives, commodity futures

and options for their own account. The Volcker Rule also imposes limits on

banking entities’ investments in, and other relationships with, hedge funds and

private equity funds. The Volcker Rule provides exemptions for certain activities,

including market-making, underwriting, hedging, trading in government obligations,

insurance company activities and organizing and offering hedge funds and private

equity funds. The Volcker Rule also clarifies that certain activities are not

prohibited, including acting as agent, broker or custodian. A banking entity with

significant trading operations, such as the Corporation, is required

Bank of America 4

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to maintain a detailed compliance program to comply with the restrictions of the

Volcker Rule.

Derivatives

Our derivatives operations are subject to extensive regulation globally. These

operations are subject to regulation under the Financial Reform Act, the European

Union (EU) Markets in Financial Instruments Directive and Regulation, the

European Market Infrastructure Regulation and similar regulatory regimes in other

jurisdictions, that regulate or will regulate the derivatives markets in which we

operate by, among other things: requiring clearing and exchange trading of certain

derivatives; imposing new capital, margin, reporting, registration and business

conduct requirements for certain market participants; imposing position limits on

certain over-the-counter (OTC) derivatives; and imposing derivatives trading

transparency requirements. Regulations of derivatives are already in effect in

many markets in which we operate.

In addition, many G-20 jurisdictions, including the U.S., U.K., Germany and

Japan, have adopted resolution stay regulations to address concerns that the

close-out of derivatives and other financial contracts in resolution could impede

orderly resolution of global systemically important banks (G-SIBs), and additional

jurisdictions are expected to follow suit. Generally, these resolution stay

regulations require amendment of certain financial contracts to provide for

contractual recognition of stays of termination rights under various statutory

resolution regimes and a stay on the exercise of cross-default rights based on an

affiliate’s entry into insolvency proceedings. As resolution stay regulations of a

particular jurisdiction applicable to us go into effect, we amend impacted financial

contracts in compliance with such regulations either as a regulated entity or as a

counterparty facing a regulated entity in such jurisdiction.

Consumer Regulations

Our consumer businesses are subject to extensive regulation and oversight by

federal and state regulators. Certain federal consumer finance laws to which we

are subject, including the Equal Credit Opportunity Act, Home Mortgage Disclosure

Act, Electronic Fund Transfer Act, Fair Credit Reporting Act, Real Estate

Settlement Procedures Act, Truth in Lending Act and Truth in Savings Act, are

enforced by the CFPB. Other federal consumer finance laws, such as the

Servicemembers Civil Relief Act, are enforced by the OCC.

Privacy and Information Security

We are subject to many U.S. federal, state and international laws and regulations

governing requirements for maintaining policies and procedures regarding the

disclosure, use and protection of the non-public confidential information of our

customers and employees. The Gramm-Leach-Bliley Act requires us to periodically

disclose Bank of America’s privacy policies and practices relating to sharing such

information and enables retail customers to opt out of our ability to share

information with unaffiliated third parties, under certain circumstances. The

Gramm-Leach-Bliley Act and other laws also require us to implement a

comprehensive information security program that includes administrative, technical

and physical safeguards to provide the security and confidentiality of customer

records and information. Security and privacy policies and procedures for the

protection of personal and confidential information are in effect across all

businesses and geographic locations.

Other laws and regulations, at the international, federal and state level,

impact our ability to share certain information with affiliates and non-affiliates for

marketing and/or non-marketing purposes, or contact customers with marketing

offers and establish certain rights of consumers in connection with their personal

information. For example, California’s Consumer Privacy

Bank of America

Act (CCPA), which went into effect in January 2020, provides consumers with the

right to know what personal data is being collected, know whether their personal

data is sold or disclosed and to whom and opt out of the sale of their personal data,

among other rights. In addition, in the EU, the General Data Protection Regulation

(GDPR) replaced the Data Protection Directive and related implementing national

laws in its member states. The CCPA's and GDPR’s impact on the Corporation

was assessed and addressed through comprehensive compliance implementation

programs. These existing and evolving legal requirements in the U.S. and abroad,

as well as court proceedings with respect to the validity of cross-border data

transfer mechanisms from the EU, continue to lend uncertainty to privacy

compliance globally.

Item 1A. Risk Factors

In the course of conducting our business operations, we are exposed to a variety

of risks, some of which are inherent in the financial services industry and others of

which are more specific to our own businesses. The discussion below addresses

the most significant factors, of which we are currently aware, that could affect our

businesses, results of operations and financial condition. Additional factors that

could affect our businesses, results of operations and financial condition are

discussed in Forward-looking Statements in the MD&A on page 22. However,

other factors not discussed below or elsewhere in this Annual Report on Form 10

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K c

ould also adversely affect our businesses, results of operations and financial

condition. Therefore, the risk factors below should not be considered a complete

list of potential risks that we may face. For more information on how we manage

risks, see Managing Risk in the MD&A on page 42.

Any risk factor described in this Annual Report on Form 10-K or in any of our

other SEC filings could by itself, or together with other factors, materially adversely

affect our liquidity, competitive position, business, reputation, results of operations,

capital position or financial condition, including by materially increasing our

expenses or decreasing our revenues, which could result in material losses.

Market

Our business and results of operations may be adversely affected by the

U.S. and international financial markets, U.S. and non-U.S. fiscal, monetary,

and regulatory policies, and economic conditions generally.

General economic, political and social conditions in the U.S. and in one or more

countries abroad affect markets in the U.S. and abroad and our business. In

particular, markets in the U.S. or abroad may be affected by the level and volatility

of interest rates, availability and market conditions of financing, unexpected

changes in gross domestic product (GDP), economic growth or its sustainability,

inflation, consumer spending, employment levels, wage stagnation, federal

government shutdowns, energy prices, home prices, bankruptcies, a default by a

significant market participant, fluctuations or other significant changes in both debt

and equity capital markets and currencies, liquidity of the global financial markets,

the growth of global trade and commerce, trade policies, the availability and cost of

capital and credit, disruption of communication, transportation or energy

infrastructure and investor sentiment and confidence. Additionally, global markets

may be adversely affected by natural disasters, the emergence of widespread

health emergencies or pandemics, cyber attacks or campaigns, military conflict,

terrorism or other geopolitical events. Market fluctuations may impact our margin

requirements and affect our business liquidity. Also, any sudden or prolonged

market downturn in the U.S. or abroad, as a result of the above factors or

otherwise could result in a decline in revenue and adversely

affect our results of operations and financial condition, including capital and

liquidity levels.

In the U.S. and abroad, uncertainties surrounding fiscal and monetary policies

present economic challenges. Actions taken by the Federal Reserve, including

changes in its target funds rate and balance sheet management, and other central

banks are beyond our control and difficult to predict and can affect interest rates

and the value of financial instruments and other assets and liabilities, and impact

our borrowers. A continued protracted period of lower interest rates, or a move to

negative interest rates in the U.S., could result in lower revenue, and maintain or

increase pressure on net-interest income, which may adversely affect our results

of operations. Uncertainty or ongoing developments in connection with the future

relationship between the U.K. and the EU, and the resulting impact on the financial

markets and regulations in relevant jurisdictions, could negatively impact our

revenues and ongoing operations in Europe and beyond.

Changes to existing U.S. laws and regulatory policies, including those related to

financial regulation, taxation, international trade, fiscal policy and healthcare, may

adversely impact U.S. or global economic activity and our customers',

counterparties' and the Corporation's earnings and operations. For example,

significant fiscal policy initiatives may increase uncertainty surrounding the

formulation and direction of U.S. monetary policy and volatility of interest rates.

Higher U.S. interest rates relative to other major economies could increase the

likelihood of a more volatile and appreciating U.S. dollar. Changes, or proposed

changes, to certain U.S. trade policies, particularly with important trading partners,

including China and the EU, have negatively impacted and may continue to

negatively impact financial markets, disrupt world trade and commerce and lead to

trade retaliation, including through the use of tariffs, foreign exchange measures or

the large-scale sale of U.S. Treasury Bonds. Further, the use of tariffs among

countries not directly involving the U.S. could spread and could damage our

customers directly and indirectly.

Any of these developments could adversely affect our consumer and

commercial businesses, our customers, our securities and derivatives portfolios,

our level of charge-offs and provision for credit losses, the carrying value of our

deferred tax assets, our capital levels, liquidity and our results of operations.

Additionally, events and ongoing uncertainty related to the U.K.'s exit from the EU

and the uncertainty related to the transition from Interbank Offered Rates (IBORs)

and other benchmark rates to alternative reference rates (ARRs) could negatively

impact markets in the U.S. and abroad and our business and/or magnify any

negative impact of the above referenced developments on our business,

customers and results of operations.

Increased market volatility and adverse changes in other financial or

capital market conditions may increase our market risk.

Our liquidity, competitive position, business, results of operations and financial

condition are affected by market risks such as changes in interest and currency

exchange rates, fluctuations in equity and futures prices, lower trading volumes

and prices of securitized products, the implied volatility of interest rates and credit

spreads and other economic and business factors. These market risks may

adversely affect, among other things, (i) the value of our on- and off-balance sheet

securities, trading assets and other financial instruments, (ii) the cost of debt

capital and our access to credit markets, (iii) the value of assets under

management (AUM), (iv) fee income relating to AUM, (v) customer allocation of

capital among investment alternatives, (vi) the volume of client activity in our

trading operations, (vii) investment banking fees, (viii) the general profitability and

risk level of the transactions in which we engage and (ix) our competitiveness with

respect to

deposit pricing. For example, the value of certain of our assets is sensitive to

changes in market interest rates. If the Federal Reserve or a non-U.S. central bank

changes or signals a change in monetary policy, market interest rates could be

affected, which could adversely impact the value of such assets. In addition, the

low interest rate environment and a flat or inverted yield curve could negatively

impact our financial condition or results of operations, including future revenue and

earnings growth.

We use various models and strategies to assess and control our market risk

exposures but those are subject to inherent limitations. For more information

regarding models and strategies, see Item 1A. Risk Factors – Other on page 17. In

times of market stress or other unforeseen circumstances, previously uncorrelated

indicators may become correlated and vice versa. These types of market

movements may limit the effectiveness of our hedging strategies and cause us to

incur significant losses. These changes in correlation can be exacerbated where

other market participants are using risk or trading models with assumptions or

algorithms similar to ours. In these and other cases, it may be difficult to reduce

our risk positions due to activity of other market participants or widespread market

dislocations, including circumstances where asset values are declining significantly

or no market exists for certain assets. To the extent that we own securities that do

not have an established liquid trading market or are otherwise subject to

restrictions on sale or hedging, we may not be able to reduce our positions and

therefore reduce our risk associated with such positions. In addition, challenging

market conditions may also adversely affect our investment banking fees.

For more information about market risk and our market risk management

policies and procedures, see Market Risk Management in the MD&A on page 71.

We may incur losses if the value of certain assets declines, including due

to changes in interest rates and prepayment speeds.

We have a large portfolio of financial instruments, including certain loans and

loan commitments, loans held-for-sale, securities financing agreements, asset-

backed secured financings, long-term deposits, long-term debt, trading account

assets and liabilities, derivative assets and liabilities, available-for-sale (AFS) debt

and marketable equity securities, other debt securities, equity method investments

and certain other assets and liabilities that we measure at fair value and other

accounting values, subject to impairment assessments. We determine these

values based on applicable accounting guidance, which for financial instruments

measured at fair value, requires an entity to base fair value on exit price and to

maximize the use of observable inputs and minimize the use of unobservable

inputs in fair value measurements. The fair values of these financial instruments

include adjustments for market liquidity, credit quality, funding impact on certain

derivatives and other transaction-specific factors, where appropriate.

Gains or losses on these instruments can have a direct impact on our results of

operations, including higher or lower mortgage banking income and earnings,

unless we have effectively hedged our exposures. Increases in interest rates may

result in a decrease in residential mortgage loan originations. In addition,

increases in interest rates may adversely impact the fair value of debt securities

and, accordingly, for debt securities classified as AFS, may adversely affect

accumulated other comprehensive income and, thus, capital levels.

Fair values may be impacted by declining values of the underlying assets or

the prices at which observable market transactions occur and the continued

availability of these transactions or indices. The financial strength of

counterparties, with whom we have economically hedged some of our exposure to

these assets, also will affect the fair value of these assets.

Bank of America 6

7

Sudden declines and volatility in the prices of assets may curtail or eliminate

trading activities in these assets, which may make it difficult to sell, hedge or value

these assets. The inability to sell or effectively hedge assets reduces our ability to

limit losses in such positions and the difficulty in valuing assets may increase our

risk-weighted assets, which requires us to maintain additional capital and

increases our funding costs. Asset values also directly impact revenues in our

wealth management and related advisory businesses. We receive asset-based

management fees based on the value of our clients’ portfolios or investments in

funds managed by us and, in some cases, we also receive performance fees

based on increases in the value of such investments. Declines in asset values can

reduce the value of our clients’ portfolios or fund assets, which in turn can result in

lower fees earned for managing such assets.

For more information on fair value measurements, seeNote 21 – Fair Value

Measurements to the Consolidated Financial Statements. For more information on

our asset management businesses, see GWIM in the MD&A on page 35. For more

information on interest rate risk management, see Interest Rate Risk Management

for the Banking Book in the MD&A on page 74.

Liquidity

If we are unable to access the capital markets or continue to maintain

deposits, or our borrowing costs increase, our liquidity and competitive

position will be negatively affected.

Liquidity is essential to our businesses. We fund our assets primarily with

globally sourced deposits in our bank entities, as well as secured and unsecured

liabilities transacted in the capital markets. We rely on certain secured funding

sources, such as repo markets, which are typically short-term and credit-sensitive

in nature. We also engage in asset securitization transactions, including with the

government-sponsored enterprises (GSEs), to fund consumer lending activities.

Our liquidity could be adversely affected by any inability to access the capital

markets, illiquidity or volatility in the capital markets, the decrease in value of

eligible collateral or increased collateral requirements, including as a result of

credit concerns for short-term borrowing, changes to our relationships with our

funding providers based on real or perceived changes in our risk profile, prolonged

federal government shutdowns, or changes in regulations, guidance or GSE status

that impact our funding avenues or ability to access certain funding sources.

Additionally, the unwillingness or inability of the Federal Reserve to act as lender of

last resort, unexpected simultaneous draws on lines of credit, restricted access to

the assets of prime brokerage clients, the withdrawal of customer deposits, which

could result from customer attrition for higher yields or the desire for more

conservative alternatives, increased regulatory liquidity, capital and margin

requirements for our U.S. or international banks and their nonbank subsidiaries,

changes in patterns of intraday liquidity usage resulting from a counterparty or

technology failure or other idiosyncratic event, failure by a significant market

participant or third party, such as a clearing agent or custodian, reputational

issues, or negative perceptions about our short- or long-term business prospects,

including downgrades of our credit ratings may adversely affect our liquidity.

Several of these factors may arise due to circumstances beyond our control,

such as general market volatility, disruption, shock or stress, Federal Reserve

policy decisions, including fluctuations in interest rates or Federal Reserve balance

sheet composition, negative views about the Corporation or financial services

industry generally or due to a specific news event, changes in the regulatory

environment or governmental fiscal or monetary policies, actions by credit rating

agencies or an operational problem that affects third parties or us. The impact of

these events, whether within our

Bank of America

control or not, could include an inability to sell assets or redeem investments,

unforeseen outflows of cash, the need to draw on liquidity facilities, the reduction of

financing balances and the loss of equity secured funding, debt repurchases to

support the secondary market or meet client requests and the need for additional

funding for commitments and contingencies, as well as unexpected collateral calls,

among other things, the result of which could be a liquidity shortfall and/or impact

on our liquidity coverage ratio.

Our cost of obtaining funding is directly related to prevailing market conditions,

including changes in interest and currency exchange rates, and to our credit

spreads. Credit spreads are the amount in excess of the interest rate of U.S.

Treasury securities, or other benchmark securities, of a similar maturity that we

need to pay to our funding providers. Increases in interest rates and our credit

spreads can increase the cost of our funding and result in mark-to-market or credit

valuation adjustment exposures. Changes in our credit spreads are market-driven

and may be influenced by market perceptions of our creditworthiness. Changes to

interest rates and our credit spreads occur continuously and may be unpredictable

and highly volatile. We may also experience spread compression as a result of

offering higher than expected deposit rates in order to attract and maintain

deposits due to increased marketplace rate competition. Additionally,

concentrations within our funding profile, such as maturities, currencies or

counterparties, can reduce our funding efficiency.

For more information about our liquidity position and other liquidity matters,

including credit ratings and outlooks and the policies and procedures we use to

manage our liquidity risks, see Liquidity Risk in the MD&A on page 50.

Adverse changes to our credit ratings from the major credit rating

agencies could significantly limit our access to funding or the capital

markets, increase our borrowing costs or trigger additional collateral or

funding requirements.

Our borrowing costs and ability to raise funds are directly impacted by our

credit ratings. In addition, credit ratings may be important to customers or

counterparties when we compete in certain markets and seek to engage in certain

transactions, including OTC derivatives. Credit ratings and outlooks are opinions

expressed by rating agencies on our creditworthiness and that of our obligations or

securities, including long-term debt, short-term borrowings, preferred stock and

asset securitizations. Our credit ratings are subject to ongoing review by rating

agencies, which consider a number of factors, including our own financial strength,

performance, prospects and operations as well as factors not under our control

such as the current economic and geopolitical environment, and to a lesser extent,

the likelihood of the U.S. government providing meaningful support to us or our

subsidiaries in a crisis.

Rating agencies could make adjustments to our credit ratings at any time, and

there can be no assurance as to when and whether downgrades will occur. A

reduction in certain of our credit ratings could result in a wider credit spread and

negatively affect our liquidity, access to credit markets, the related cost of funds,

our businesses and certain trading revenues, particularly in those businesses

where counterparty creditworthiness is critical. If the short-term credit ratings of our

parent company, or bank or broker-dealer subsidiaries, were downgraded by one

or more levels, we may suffer the potential loss of access to short-term funding

sources such as repo financing, and/or incur increased cost of funds and increased

collateral requirements. Under the terms of certain OTC derivative contracts and

other trading agreements, if our or our subsidiaries’ credit ratings are downgraded,

the counterparties may require additional collateral or terminate these contracts or

agreements.

While certain potential impacts are contractual and quantifiable, the full

consequences of a credit rating downgrade to a financial institution are inherently

uncertain, as they depend upon numerous dynamic, complex and inter-related

factors and assumptions, including whether any downgrade of a firm’s long-term

credit ratings precipitates downgrades to its short-term credit ratings, and

assumptions about the potential behaviors of various customers, investors and

counterparties.

For more information on the amount of additional collateral required and

derivative liabilities that would be subject to unilateral termination at December 31,

2019, if the rating agencies had downgraded their long-term senior debt ratings for

the Corporation or certain subsidiaries by each of two incremental notches, see

Credit-related Contingent Features and Collateral in Note 3 – Derivatives to the

Consolidated Financial Statements.

For more information about our credit ratings and their potential effects to our

liquidity, see Liquidity Risk – Credit Ratings in the MD&A on page 52 and Note 3 –

Derivatives to the Consolidated Financial Statements.

Bank of America Corporation is a holding company and we depend upon

our subsidiaries for liquidity, including the ability to pay dividends to

shareholders and to fund payments on other obligations. Applicable laws

and regulations, including capital and liquidity requirements, and actions

taken pursuant to our resolution plan could restrict our ability to transfer

funds from subsidiaries to Bank of America Corporation or to other

subsidiaries, which could adversely affect our cash flow and financial

condition.

Bank of America Corporation, as the parent company, is a separate and distinct

legal entity from our banking and nonbank subsidiaries. We evaluate and manage

liquidity on a legal entity basis. Legal entity liquidity is an important consideration

as there are legal, regulatory, contractual and other limitations on our ability to

utilize liquidity from one legal entity to satisfy the liquidity requirements of another,

including the parent company, which could result in adverse liquidity events. The

parent company depends on dividends, distributions, loans, advances and other

payments from our banking and nonbank subsidiaries to fund dividend payments

on our common stock and preferred stock and to fund all payments on our other

obligations, including debt obligations. Any inability of our subsidiaries to pay

dividends or make payments to us may adversely affect our cash flow and

financial condition.

Many of our subsidiaries, including our bank and broker-dealer subsidiaries, are

subject to laws that restrict dividend payments, or authorize regulatory bodies to

block or reduce the flow of funds from those subsidiaries to the parent company or

other subsidiaries. Our bank and broker-dealer subsidiaries are subject to

restrictions on their ability to lend or transact with affiliates and to minimum

regulatory capital and liquidity requirements, as well as restrictions on their ability

to use funds deposited with them in bank or brokerage accounts to fund their

businesses. Intercompany arrangements we entered into in connection with our

resolution planning submissions could restrict the amount of funding available to

the parent company from our subsidiaries under certain adverse conditions.

Additional restrictions on related party transactions, increased capital and

liquidity requirements and additional limitations on the use of funds on deposit in

bank or brokerage accounts, as well as lower earnings, can reduce the amount of

funds available to meet the obligations of the parent company and even require the

parent company to provide additional funding to such subsidiaries. Also, regulatory

action that requires additional liquidity at each of our subsidiaries could impede

access to funds we need to pay our obligations or pay dividends. In addition, our

right to participate in

a distribution of assets upon a subsidiary’s liquidation or reorganization is subject

to prior claims of the subsidiary’s creditors. For more information regarding our

ability to pay dividends, see Capital Management in the MD&A on page 45 and

Note 14 – Shareholders’ Equityto the Consolidated Financial Statements.

In the event of a resolution, whether in a bankruptcy proceeding or under

the orderly liquidation authority of the FDIC, such resolution could materially

adversely affect our liquidity and financial condition, and the ability to pay

dividends to shareholders and to pay obligations.

Bank of America Corporation, our parent holding company, is required to

periodically submit a plan to the FDIC and Federal Reserve describing its

resolution strategy under the U.S. Bankruptcy Code in the event of material

financial distress or failure. In the current plan, Bank of America Corporation’s

preferred resolution strategy is a “single point of entry” strategy. This strategy

provides that only the parent holding company files for resolution under the U.S.

Bankruptcy Code and contemplates providing certain key operating subsidiaries

with sufficient capital and liquidity to operate through severe stress and to enable

such subsidiaries to continue operating or be wound down in a solvent manner

following a bankruptcy of the parent holding company. Bank of America

Corporation has entered into intercompany arrangements resulting in the

contribution of most of its capital and liquidity to key subsidiaries. Pursuant to these

arrangements, if Bank of America Corporation’s liquidity resources deteriorate so

severely that resolution becomes imminent, Bank of America Corporation will no

longer be able to draw liquidity from its key subsidiaries, and will be required to

contribute its remaining financial assets to a wholly-owned holding company

subsidiary, which could materially and adversely affect our liquidity and financial

condition and the ability to pay dividends to shareholders and meet our payment

obligations.

If the FDIC and Federal Reserve jointly determine that Bank of America

Corporation’s resolution plan is not credible, they could impose more stringent

capital, leverage or liquidity requirements or restrictions on our growth, activities or

operations. Further, we could be required to take certain actions that could impose

operating costs and could potentially result in the divestiture or restructuring of

certain businesses and subsidiaries.

Additionally, under the Financial Reform Act, when a G-SIB such as Bank of

America Corporation is in default or danger of default, the FDIC may be appointed

receiver in order to conduct an orderly liquidation of such institution. In the event of

such appointment, the FDIC could, among other things, invoke the orderly

liquidation authority, instead of the U.S. Bankruptcy Code, if the Secretary of the

Treasury makes certain financial distress and systemic risk determinations. In

2013, the FDIC issued a notice describing its preferred “single point of entry”

strategy for resolving a G-SIB. Under this approach, the FDIC could replace Bank

of America Corporation with a bridge holding company, which could continue

operations and result in an orderly resolution of the underlying bank, but whose

equity would be held solely for the benefit of our creditors. The FDIC’s “single point

of entry” strategy may result in our security holders suffering greater losses than

would have been the case under a bankruptcy proceeding or a different resolution

strategy.

For more information about resolution planning, seeItem 1. Business –

Resolution Planning on page 4. For more information about the FDIC’s orderly

liquidation, see Item 1. Business – Insolvency and the Orderly Liquidation Authority

on page 4.

Bank of America 8

9

Credit

Economic or market disruptions, insufficient credit loss reserves or

concentrations of credit risk may result in an increase in the provision for

credit losses, which could have an adverse effect on our financial condition

and results of operations.

A number of our products expose us to credit risk, including loans, letters of

credit, derivatives, debt securities, trading account assets and assets held-for-sale.

A deterioration in the financial condition of our consumer and commercial

borrowers, counterparties or underlying collateral could adversely affect our

financial condition and results of operations.

Global and U.S. economic conditions and macroeconomic or market events

and disruptions, including a continuing slowdown in global GDP growth, a decline

in consumer spending, a decline in property values or an asset price correction,

increasing consumer and corporate leverage, as well as rising unemployment,

fluctuations in foreign exchange or interest rates, widespread health emergencies

or pandemics and/or natural disasters, may impact our credit portfolios. In addition,

significant economic or market stresses and disruptions could have a negative

impact on the business environment and financial markets, increasing the risk that

borrowers or counterparties would default or become delinquent in their obligations

to us, which could lead to recessionary conditions and/or increase our credit losses

and provision for credit losses, which could have a negative impact on our results

of operations.

In particular, increases in delinquencies and default rates could adversely affect

our consumer credit card, home equity and residential mortgage portfolios through

increased charge-offs and provision for credit losses. A deteriorating economic

environment in the U.S. or globally could also adversely affect our consumer and

commercial loan portfolios with weakened client and collateral positions.

Simultaneous drawdowns on lines of credit and/or an increase in a borrower’s

leverage in a weakening economic environment could result in deterioration in our

credit portfolio, should borrowers be unable to fulfill competing financial obligations.

The impact of this could also be magnified by lending to leveraged borrowers,

elevated asset prices and/or declining property or collateral values unrelated to

macroeconomic stress.

We estimate and establish an allowance for credit losses for losses inherent in

our lending activities (including unfunded lending commitments), excluding those

measured at fair value, through a charge to earnings. The process for determining

the amount of the allowance requires us to make difficult and complex judgments,

including forecasting how borrowers will react to changing economic conditions.

The ability of our borrowers or counterparties to repay their obligations will likely be

impacted by changes in future economic conditions, which in turn could impact the

accuracy of our loss forecasts and allowance estimates. There is also the

possibility that we will fail to accurately identify the appropriate economic indicators

or that we will fail to accurately estimate their impacts to our borrowers and the

reserves that we hold.

We may suffer unexpected losses if the models and assumptions we use to

establish reserves and make judgments in extending credit to our borrowers or

counterparties prove inaccurate in predicting future events. In addition, external

factors, such as the macroeconomic or market events disclosed above can also

negatively impact our recognition of credit losses in our portfolios and impact our

allowance for credit losses. As of January 1, 2020, we implemented a new

accounting standard to estimate our allowance for credit losses. For more

information, see Note 1 – Summary of Significant Accounting Principles to the

Consolidated Financial Statements. Although we believe that the allowance for

credit losses is in compliance with the new accounting standard

Bank of America

at January 1, 2020, there is no guarantee that it will be sufficient to address credit

losses, particularly if economic conditions deteriorate quickly and/or significantly. In

such an event, we may increase the size of our allowance which would reduce our

earnings.

In the ordinary course of our business, we also may be subject to

concentrations of credit risk because of a common characteristic or common

sensitivity to economic, financial or business developments. For example,

concentrations in credit risk may result in a particular industry, geographic

location, product, asset class, counterparty, individual exposure or within any pool

of exposures with a common risk characteristic. A deterioration in the financial

condition or prospects of a particular industry, geographic location, product or

asset class, or a failure or downgrade of, or default by, any particular entity or

group of entities could negatively affect our businesses and it is possible our limits

and credit monitoring exposure controls will not function as anticipated.

While our activities expose us to many different industries and counterparties,

we routinely execute a high volume of transactions with counterparties in the

financial services industry, including broker-dealers, commercial banks, investment

banks, insurers, mutual funds and hedge funds, central counterparties and other

institutional clients. This has resulted in significant credit concentration with

respect to this industry. Financial services institutions and other counterparties are

inter-related because of trading, funding, clearing or other relationships. As a

result, defaults by, or even market uncertainty about the financial stability of one or

more financial services institutions, or the financial services industry generally,

could lead to market-wide liquidity disruptions, losses and defaults.

Many of these transactions expose us to credit risk and, in some cases,

disputes and litigation in the event of default of a counterparty. In addition, our

credit risk may be heightened by market risk when the collateral held by us cannot

be liquidated or is liquidated at prices not sufficient to recover the full amount of the

loan or derivatives exposure due to us, which may occur as a result of fraud or

other events that impact the value of the collateral. Further, disputes with obligors

as to the valuation of collateral could increase in times of significant market stress,

volatility or illiquidity, and we could suffer losses during such periods if we are

unable to realize the fair value of the collateral or manage declines in the value of

collateral.

In the ordinary course of business, we also enter into transactions with

sovereign nations, U.S. states and U.S. municipalities. Unfavorable economic or

political conditions, disruptions to capital markets, currency fluctuations, changes in

oil prices, social instability and changes in government or monetary policies could

impact the operating budgets or credit ratings of these government entities and

expose us to credit risk.

We also have concentrations of credit risk with respect to our consumer real

estate, auto, consumer credit card and commercial real estate portfolios, which

represent a significant percentage of our overall credit portfolio. Additionally,

decreases in home price valuations or commercial real estate valuations in certain

markets where we have large concentrations, including as a result of climate

change or natural disasters (e.g., rising sea levels, hurricanes and fires), as well as

more broadly within the U.S. or globally, could result in increased defaults,

delinquencies or credit loss. For more information, see Consumer Portfolio Credit

Risk Management in the MD&A on page 54.

Furthermore, our commercial portfolios include exposures to certain industries,

including asset managers and funds, real estate, capital goods and finance

companies. For more information, see Commercial Portfolio Credit Risk

Management in

the MD&A on page 60. Economic weaknesses, adverse business conditions,

market disruptions, rising interest or capitalization rates, the collapse of speculative

bubbles, greater volatility in areas where we have concentrated credit risk or

deterioration in real estate values or household incomes may cause us to

experience a decrease in cash flow and higher credit losses in either our

consumer or commercial portfolios or cause us to write down the value of certain

assets.

Liquidity disruptions in the financial markets may result in our inability to sell,

syndicate or realize the value of our positions, leading to increased concentrations,

which could increase the credit and market risk associated with our positions, as

well as increase our risk-weighted assets.

For more information on our credit risk and credit risk management policies and

procedures, see Credit Risk Management in the MD&A on page 53, Note 1 –

Summary of Significant Accounting Principles, Note 5 – Outstanding Loans and

Leases and Note 6 – Allowance for Credit Losses to the Consolidated Financial

Statements.

If the U.S. housing market weakens or home prices decline, our consumer

loan portfolios, credit quality, credit losses, representations and warranties

exposures and earnings may be adversely affected.

While U.S. home prices continued to generally increase in 2019, the rate of

increase has slowed compared to recent periods. We remain conscious of

geographic markets where housing price growth has slowed or decreased and

other geographic markets where housing prices have declined, as further declines

in future periods may negatively impact the demand for many of our products.

Additionally, our mortgage loan production volume is generally influenced by the

rate of growth in residential mortgage debt outstanding and the size of the

residential mortgage market, both of which may be adversely affected by rising

interest rates. Conditions in the U.S. housing market during the most recent

financial crisis resulted in both significant write-downs of asset values in several

asset classes, notably mortgage-backed securities, and exposure to monolines. If

the U.S. housing market were to weaken, the value of real estate could decline,

which could result in increased credit losses and delinquent servicing expenses

and negatively affect our representations and warranties exposures, which could

have an adverse effect on our financial condition and results of operations.

Our derivatives businesses may expose us to unexpected risks and

potential losses.

We are party to a large number of derivatives transactions that may expose us

to unexpected market, credit and operational risks that could cause us to suffer

unexpected losses. Severe declines in asset values, unanticipated credit events or

unforeseen circumstances that may cause previously uncorrelated factors to

become correlated and vice versa, may create losses resulting from risks not

appropriately taken into account or anticipated in the development, structuring or

pricing of a derivative instrument. Certain OTC derivative contracts and other

trading agreements provide that upon the occurrence of certain specified events,

such as a change in the credit rating of a particular Bank of America entity or

entities, we may be required to provide additional collateral or take other remedial

actions and could experience increased difficulty obtaining funding or hedging

risks. In some cases our counterparties may have the right to terminate or

otherwise diminish our rights under these contracts or agreements.

We are also a member of various central counterparties (CCPs) in part due to

regulatory requirements for mandatory clearing of derivative transactions, which

potentially increases our credit risk exposures to CCPs. In the event that one or

more members of the CCP defaults on its obligations, we may be required to pay a

portion

of any losses incurred by the CCP as a result of that default. A CCP may modify,

in its discretion, the margin we are required to post, which could mean unexpected

and increased exposure to the CCP. As a clearing member, we are exposed to the

risk of non-performance by our clients for which we clear transactions, which may

not be covered by available collateral. Additionally, any default by a significant

market participant may result in further risk and potential losses.

For more information on our derivatives exposure, seeNote 3 – Derivatives to

the Consolidated Financial Statements.

Geopolitical

We are subject to numerous political, economic, market, reputational,

operational, legal, regulatory and other risks in the jurisdictions in which we

operate.

We do business throughout the world including in emerging markets. Economic

or geopolitical stress in one or more countries could have a negative impact

regionally or globally, resulting in, among other things, market volatility, reduced

market value and economic output. Our businesses and revenues derived from

non-U.S. jurisdictions are subject to risk of loss from currency fluctuations,

financial, social or judicial instability, changes in government leadership, including

as a result of electoral outcomes or otherwise, changes in governmental policies or

policies of central banks, expropriation, nationalization and/or confiscation of

assets, price controls, high inflation, natural disasters, the emergence of

widespread health emergencies or pandemics, capital controls, currency

redenomination risk, exchange controls, unfavorable political and diplomatic

developments, oil price fluctuations and changes in legislation. Additionally,

protectionist trade policies and continued trade tensions between the U.S. and

important trading partners, particularly China and the EU, including the risk that

tariffs continue to rise and other restrictive actions are taken that weigh heavily on

regional trade volumes and domestic demand through falling business sentiment

and lower consumer confidence, could adversely affect our businesses and

revenues. These risks are especially elevated in emerging markets.

A number of non-U.S. jurisdictions in which we do business have been or may

be negatively impacted by slowing growth or recessionary conditions, market

volatility and/or political unrest. In Europe, the political and economic environment

remains challenging due to slowing GDP growth, debt concerns of certain EU

countries and elevated recessionary risks, including in Germany and the U.K. The

current degree of European political and economic uncertainty could increase and

create additional market volatility and negatively impact our business and results of

operations. Significant market volatility and geopolitical unrest could also result

from ongoing uncertainty related to the U.K.'s exit from the EU and the transition

period during which the terms of such exit will be negotiated, which could

adversely affect us.

Potential risks of default on or devaluation of sovereign debt in some non-U.S.

jurisdictions could expose us to substantial losses. Risks in one nation can limit

our opportunities for portfolio growth and negatively affect our operations in other

nations, including our U.S. operations. Market and economic disruptions of all

types may affect consumer confidence levels and spending, corporate investment

and job creation, bankruptcy rates, levels of incurrence and default on consumer

and corporate debt, economic growth rates and asset values, among other factors.

Any such unfavorable conditions or developments could have an adverse impact

on the Corporation.

We also invest or trade in the securities of corporations and governments

located in non-U.S. jurisdictions, including emerging markets. Revenues from the

trading of non-U.S. securities may be

Bank of America 10

subject to negative fluctuations as a result of the above factors. Furthermore, the

impact of these fluctuations could be magnified because non-U.S. trading markets,

particularly in emerging markets, are generally smaller, less liquid and more

volatile than U.S. trading markets.

Our non-U.S. businesses are also subject to extensive regulation by

governments, securities exchanges and regulators, central banks and other

regulatory bodies. In many countries, the laws and regulations applicable to the

financial services and securities industries are uncertain and evolving, and it may

be difficult for us to determine the exact requirements of local laws in every market

or manage our relationships with multiple regulators in various jurisdictions. Our

potential inability to remain in compliance with local laws in a particular market and

manage our relationships with regulators could result in increased expenses and

changes to our organizational structure and have an adverse effect on our

businesses and results of operations in that market, as well as our reputation in

general.

In addition to non-U.S. legislation, our international operations are also subject

to U.S. legal requirements. For example, our operations are subject to U.S. and

non-U.S. laws and regulations relating to bribery and corruption, anti-money

laundering, and economic sanctions, which can vary by jurisdiction. The increasing

speed and novel ways in which funds circulate could make it more challenging to

track the movement of funds and heightens financial crimes risk. Our ability to

comply with these legal requirements depends on our ability to continually improve

detection and reporting and analytic capabilities.

In the U.S., debt ceiling and budget deficit concerns, which have increased the

possibility of U.S. government defaults on its debt and/or downgrades to its credit

ratings, and prolonged government shutdowns could negatively impact the global

economy and banking system and adversely affect our financial condition,

including our liquidity. Additionally, changes in fiscal, monetary or regulatory policy

could increase our compliance costs and adversely affect our business operations,

organizational structure and results of operations. We are also subject to

geopolitical risks, including acts or threats of terrorism, actions taken by the U.S. or

other governments in response thereto, state-sponsored cyber attacks or

campaigns and/or military conflicts, which could adversely affect business and

economic conditions abroad, as well as in the U.S.

For more information on our non-U.S. credit and trading portfolios, seeNon-

U.S. Portfolio in the MD&A on page 66.

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

adversely affect us.

We conduct business in Europe, the Middle East and Africa primarily through

our subsidiaries in the U.K. France and Ireland. For the year ended December 31,

2019, our operations in Europe, the Middle East and Africa, including the U.K.,

represented approximately six percent of our total revenue, net of interest

expense.

On January 31, 2020, the U.K. formally exited the EU. Upon exit, a transition

period began during which time the U.K. and the EU expect to negotiate a trade

agreement and other terms associated with their future relationship. The transition

period is scheduled to end on December 31, 2020. The ultimate impact and terms

of such negotiation and any trade or other agreements remain unclear, and short-

and long-term global economic and market volatility and disruptions to regional and

global financial markets may occur, including as a result of currency fluctuations

and trade relations. There can be no guarantee that the U.K. and EU will reach an

agreement on trade or any other matters during the transition period or that the

transition period will be extended if agreements are not reached. Additionally,

there may be

11 Bank of America

heightened geopolitical uncertainty and/or market volatility if a trade and other

agreements are not reached by the end of the transition period, including with

regard to cross-border conduct of financial services and the treatment of existing

financial transactions and contracts. If uncertainty resulting from the U.K.’s exit or

the end to the transition period negatively impacts economic conditions, financial

markets, including currency markets and consumer confidence, or clients,

counterparties, and financial markets are not prepared for the trade and other

agreements that are ultimately agreed upon or the transition period ends without a

trade or other agreements, our business, results of operations, financial position

and/or operational model could be adversely affected.

We are also subject to different laws, regulations and regulatory authorities and

may incur additional costs and/or experience negative tax consequences as a

result of establishing our principal EU banking and broker-dealer operations

outside of the U.K., which could adversely impact our EU business, results of

operations and operational model. Additionally, changes to the legal and regulatory

framework under which our subsidiaries will continue to provide products and

services in the U.K. and in the EU following the transition period may result in

additional compliance costs and have negative tax consequences or an adverse

impact on our results of operations. For more information on our EU operations

outside of the U.K., see Executive Summary – Recent Developments – U.K. Exit

from the EU in the MD&A on page 23.

Business Operations

A failure in or breach of our operational or security systems or

infrastructure, or those of third parties, including their downstream service

providers and the financial services industry, could disrupt our critical

business operations and customer services, result in regulatory, market,

privacy, liquidity and operational risk exposures, and adversely impact our

results of operations and financial condition, as well as cause legal or

reputational harm.

The potential for operational risk exposure exists throughout our organization

and as a result of our interactions with, and reliance on, third parties, including

their downstream service providers, and the financial services industry

infrastructure. Our operational and security systems infrastructure, including our

computer systems, emerging technologies, data management and internal

processes, as well as those of third parties, are integral to our performance. We

rely on our employees and third parties in our day-to-day and ongoing operations,

who may, as a result of human error, misconduct, malfeasance or a failure or

breach of systems or infrastructure, expose us to risk.

Additionally, our financial, accounting, data processing and transmission,

storage, backup or other operating or security systems and infrastructure or those

of third parties with whom we interact or upon whom we rely may fail to operate

properly or become disabled or damaged as a result of a number of factors

including events that are wholly or partially beyond our or such third party’s

control, which could adversely affect our ability to process transactions or provide

services. We could also experience prolonged computer and network outages

resulting in disruptions to our critical business operations and customer services,

including abuse or failure of our electronic trading and algorithmic platforms. We

may experience electrical, telecommunications or other major physical

infrastructure outages, newly identified vulnerabilities in key hardware or software,

failure of aging infrastructure, technology project implementation challenges,

natural disasters such as earthquakes, tornadoes, hurricanes and floods,

widespread health emergencies or pandemics and events arising from local or

larger

scale political or social matters, including terrorist acts, which could result in

prolonged operational outages.

Regardless of the measures we have taken to implement training, procedures,

backup systems and other safeguards to support our operations and bolster our

operational resilience, our ability to conduct business may be adversely affected by

any significant disruptions to us or to third parties, including their downstream

service providers, with whom we interact or upon whom we rely, including a

systematic cyber campaign that results in system outages and unavailability of part

or all of the financial services industry infrastructure. Our ability to implement

backup systems and other safeguards with respect to third-party systems and the

financial services industry infrastructure is more limited than with respect to our

own systems.

In the event that backup systems are available and utilized, they may not

process data as quickly as our primary systems and some data might not have

been backed up. We continuously update the systems on which we rely to support

our operations and growth and to remain compliant with all applicable laws, rules

and regulations globally. This updating entails significant costs and creates risks

associated with implementing new systems and integrating them with existing

ones, including business interruptions. A failure or breach of our operational or

security systems or infrastructure resulting in disruption to our critical business

operations and customer services could expose us to regulatory, market, privacy

and liquidity risk, and adversely impact our results of operations and financial

condition, as well as cause legal or reputational harm.

A cyber attack, information or security breach, or a technology failure of

ours or of a third party could adversely affect our ability to conduct our

business, manage our exposure to risk or expand our businesses, result in

the disclosure or misuse of confidential or proprietary information, increase

our costs to maintain and update our operational and security systems and

infrastructure, and adversely impact our results of operations, liquidity and

financial condition, as well as cause legal or reputational harm.

Our business is highly dependent on the security, controls and efficacy of our

infrastructure, computer and data management systems, as well as those of our

customers, suppliers, counterparties and other third parties, including their

downstream service providers, the financial services industry and financial data

aggregators, with whom we interact, on whom we rely or who have access to our

customers' personal or account information. Our business relies on effective

access management and the secure collection, processing, transmission, storage

and retrieval of confidential, proprietary, personal and other information in our

computer and data management systems and networks, and in the computer and

data management systems and networks of third parties. In addition, to access our

network, products and services, our employees, customers, suppliers,

counterparties and other third parties increasingly use personal mobile devices or

computing devices that are outside of our network and control environments and

are subject to their own cybersecurity risks.

We, our employees and customers, regulators and other third parties are

regularly the target of cyber attacks and are likely to continue to be the target of

cyber attacks. These cyber attacks are pervasive and evolving and include

computer viruses, malicious or destructive code (such as ransomware), phishing

attacks, denial of service or information or other security breach tactics that could

result in the unauthorized release, gathering, monitoring, misuse, loss or

destruction or theft of confidential, proprietary and other information, including

intellectual property, of ours, our employees, our customers or of third parties,

damages to systems, or otherwise material disruption to our or our customers’ or

other third parties’ network access or business

operations, both domestically and internationally. As cyber threats continue to

evolve, we may be required to expend significant additional resources to modify or

enhance our protective measures, investigate and remediate any information

security vulnerabilities or incidents and develop our capabilities to respond and

recover. Cyber threats are rapidly changing, and despite substantial efforts to

protect the integrity of our systems and implement controls, processes, policies

and other protective measures, we may not be able to anticipate cyber attacks or

information or security breaches, nor may we be able to implement effective

preventive or defensive measures to address such attacks or breaches. Even the

most advanced internal control environment is vulnerable to compromise. Internal

access management failures could result in the compromise or unauthorized

exposure of confidential data. Targeted social engineering attacks are becoming

more sophisticated and are extremely difficult to prevent.

Our cybersecurity risk and exposure remains heightened because of, among

other things, the evolving nature and pervasiveness of cyber threats, our prominent

size and scale, our role in the financial services industry and the broader economy.

The financial services industry is particularly at risk because of the proliferation of

new and emerging technologies, including third-party financial data aggregators,

and the use of the Internet and telecommunications technologies to conduct

financial transactions. For example, our plans to continue our use of automation,

artificial intelligence and robotics, increase our internet and mobile banking

products, including mobile payment and other web- and cloud-based products and

applications, and develop additional remote connectivity solutions to serve our

customers when and how they want to be served, increase our cybersecurity risks

and exposure.

Additionally, our continuous transmission of sensitive information to, and

storage of such information by, third parties, including our vendors and regulators,

our geographic footprint and international presence, the outsourcing of some of our

business operations, threats of cyber terrorism, external extremist parties,

including state-sponsored actors, in some circumstances as a means to promote

political ends, and system and customer account updates and conversions result in

heightened risk exposure. As a result, cybersecurity and the continued

development and enhancement of our controls, processes and practices designed

to protect our systems, computers, intellectual property and proprietary

information, software, data and networks from attack, damage or unauthorized

access remain a critical priority. Cybersecurity risks have also significantly

increased in recent years in part due to the increasingly sophisticated activities of

organized crime groups, hackers, terrorist organizations, hostile foreign

governments, disgruntled employees or vendors, activists and other external

parties, including those involved in corporate espionage. The techniques used in

cyber attacks change frequently, and these attacks or ensuing security breaches

could persist for an extended period of time before being detected. It could take

considerable additional time for us to determine the scope, extent, amount, and

type of information compromised, at which time the impact on the Corporation and

measures to recover and restore to a business as usual state may be difficult to

assess.

We also face indirect technology, cybersecurity and operational risks relating to

the customers, clients and other third parties, including their downstream service

providers and the financial services industry, with whom we do business, upon

whom we rely to facilitate or enable our business activities or upon whom our

customers rely. Such third parties also include financial counterparties, financial

data aggregators, financial intermediaries, such as clearing agents, exchanges and

clearing

Bank of America 12

houses, vendors, regulators, providers of critical infrastructure, such as internet

access and electrical power, and retailers for whom we process transactions. As a

result of increasing consolidation, interdependence and complexity of financial

entities and technology systems, a technology failure, cyber attack or other

information or security breach that significantly degrades, deletes or compromises

the systems or data of one or more financial entities or third-party or their

downstream service providers could have a material impact on counterparties or

other market participants, including us. This consolidation, interconnectivity and

complexity increases the risk of operational failure, on both individual and industry-

wide bases, as disparate systems need to be integrated, often on an accelerated

basis. Any technology failure, cyber attack or other information or security breach,

termination or constraint of any third party, including their downstream service

providers, the financial services industry infrastructure or financial data

aggregators, could, among other things, adversely affect our ability to conduct day

-

to-day business activities, effect transactions, service our clients, manage our

exposure to risk or expand our businesses, result in the misappropriation or

destruction of the personal, proprietary or confidential information of our

employees, customers, suppliers, counterparties and other third parties or result in

fraudulent or unauthorized transactions. Further, any such event may not be

disclosed to us in a timely manner.

Although to date we have not experienced any material losses or other material

consequences relating to technology failure, cyber attacks or other information or

security breaches, whether directed at us or third parties, there can be no

assurance that our controls and procedures in place to monitor and mitigate the

risks of cyber threats will be sufficient and that we will not suffer material losses or

consequences in the future. Cyber attacks or other information or security

breaches, whether directed at us or third parties, may result in significant lost

revenue, give rise to losses or have other negative consequences. Furthermore,

the public perception that a cyber attack on our systems has been successful,

whether or not this perception is correct, may damage our reputation with

customers and third parties with whom we do business. Although we maintain

cyber insurance, there can be no assurance that liabilities or losses we may incur

will be covered under such policies or that the amount of insurance will be

adequate.

Also, successful penetration or circumvention of system security could result in

negative consequences, including loss of customers and business opportunities,

the withdrawal of customer deposits, prolonged computer and network outages

resulting in disruptions to our critical business operations and customer services,

misappropriation or destruction of our intellectual property, proprietary information

or confidential information and/or the confidential, proprietary or personal

information of certain parties, such as our employees, customers, suppliers,

counterparties and other third parties, or damage to their computers or systems.

This could result in a violation of applicable privacy and other laws in the U.S. and

abroad, litigation exposure, regulatory fines, penalties or intervention, loss of

confidence in our security measures, reputational damage, reimbursement or other

compensatory costs, additional compliance costs and our internal controls or

disclosure controls being rendered ineffective. The occurrence of any of these

events could adversely impact our results of operations, liquidity and financial

condition.

Our mortgage loan repurchase obligations or claims from third parties

could result in additional losses.

We and our legacy companies have sold significant amounts of residential

mortgage loans. In connection with these sales, we or certain of our subsidiaries or

legacy companies made various

13 Bank of America

representations and warranties, breaches of which may result in a requirement that

we repurchase the mortgage loans, or otherwise make whole or provide other

remedies to counterparties. At December 31, 2019, we had $10.7 billion of

unresolved repurchase claims, net of duplicate claims and excluding claims where

the statute of limitations has expired without litigation being commenced.

At December 31, 2019, our liability for obligations under representations and

warranties exposures was $1.8 billion. We also have an estimated range of

possible loss (RPL) for representations and warranties exposures that is combined

with the litigation RPL, which we disclose in Note 13 – Commitments and

Contingencies to the Consolidated Financial Statements. The recorded liability and

estimated RPL are based on currently available information, significant judgment

and a number of assumptions that are subject to change. There can be no

assurance that the Corporation will reach future settlements or, if it does, that the

terms of past settlements can be relied upon to predict the terms of future

settlements. Future representations and warranties losses may occur in excess of

our recorded liability and estimated RPL, and such losses could have a material

adverse effect on our results of operations.

Additionally, our recorded liability for representations and warranties exposures

and the corresponding estimated RPL do not consider certain losses related to

servicing, including foreclosure and related costs, fraud, indemnity or claims

(including for residential mortgage-backed securities) related to securities law.

Losses with respect to one or more of these matters could be material to our

results of operations.

For more information about our representations and warranties exposure, see

Off-Balance Sheet Arrangements and Contractual Obligations – Representations

and Warranties in the MD&A on page 42 and Note 13 – Commitments and

Contingencies to the Consolidated Financial Statements.

Failure to satisfy our obligations as servicer for residential mortgage

securitizations and residential mortgage loans owned by other entities, along

with other losses we could incur in our capacity as servicer, could harm our

reputation, increase servicing costs or adversely impact our results of

operations.

We and our legacy companies service mortgage loans on behalf of third-party

securitization vehicles and other investors. If we commit a material breach of our

obligations as servicer or master servicer, we may be subject to termination if the

breach is not cured within a specified period of time following notice, which could

cause us to lose servicing income. In addition, we may have liability for any failure

by us, as a servicer or master servicer, for any act or omission on our part that

involves willful misfeasance, bad faith, gross negligence or reckless disregard of

our duties. If any such breach was found to have occurred, it may harm our

reputation, increase our servicing costs or adversely impact our results of

operations. Additionally, with respect to foreclosures, we may incur costs or losses

due to irregularities in the underlying documentation, or if the validity of a

foreclosure action is challenged by a borrower or overturned by a court because of

errors or deficiencies in the foreclosure process. We may also incur costs or losses

relating to delays or alleged deficiencies in processing documents necessary to

comply with state law governing foreclosure.

Changes in the structure of the GSEs and the relationship among the

GSEs, the government and the private markets could result in changes to

our business operations and may adversely impact our business.

During 2019, we sold approximately $3.5 billion of loans to Fannie Mae (FNMA)

and Freddie Mac (FHLMC). Each is currently in a conservatorship with its primary

regulator, the Federal Housing

Finance Agency (FHFA), acting as conservator. In September 2019, the Treasury

Department published a proposal to recapitalize FNMA and FHLMC and remove

them from conservatorship as well as reduce GSEs' role in the marketplace. There

can be no assurance that these proposals will be fully adopted, and it is not

possible to predict when the conservatorships will end. If GSEs were to take a

reduced role in the marketplace, including by limiting the mortgage products they

offer, we could be required to seek alternative funding sources, retain additional

loans on our balance sheet, secure funding through the Federal Home Loan Bank

system, or securitize the loans through Private Label Securitization. Although the

Treasury Department has released an administrative proposal and the FHFA has

taken steps to unify underwriting parameters and create a common securitization

platform, we cannot predict the prospects for the enactment, timing of the

recapitalization or release from conservatorship or content of legislative or

rulemaking proposals regarding the future status of the GSEs in the housing

market. Accordingly, uncertainty regarding their future continues to exist.

Any of these developments could adversely affect the value of our securities

portfolios, capital levels and liquidity and results of operations.

Our risk management framework may not be effective in mitigating risk

and reducing the potential for losses.

Our risk management framework is designed to minimize risk and loss to us.

We seek to effectively and consistently identify, measure, monitor, report and

control the types of risk to which we are subject, including strategic, credit, market,

liquidity, compliance, operational and reputational risks. While we employ a broad

and diversified set of controls and risk mitigation techniques, including modeling

and forecasting, hedging strategies and techniques that seek to balance our ability

to profit from trading positions with our exposure to potential losses, our ability to

control and mitigate risks that result in losses is inherently limited by our ability to

identify all risks, including emerging and unknown risks, anticipate the timing of

risks, apply effective hedging strategies, make correct assumptions, manage and

aggregate data correctly and efficiently, and develop risk management models to

assess and control risk.

Our ability to manage risk is limited by our ability to consistently execute all

elements of our risk management program and develop and maintain a culture of

managing risk well throughout the Corporation and manage risks associated with

third parties, their downstream service providers, and vendors, to enable effective

risk management and ensure that risks are appropriately considered, evaluated

and responded to in a timely manner. Uncertain economic conditions, heightened

legislative and regulatory scrutiny of and change within the financial services

industry, the pace of technological changes, accounting and market developments,

the failure of employees to comply with policies, values and our risk framework and

the overall complexity of our operations, among other developments, may result in

a heightened level of risk for us. Accordingly, we could suffer losses as a result of

our failure to manage change or properly anticipate, manage, control or mitigate

risks.

For more information about our risk management policies and procedures, see

Managing Risk in the MD&A on page 42.

Regulatory, Compliance and Legal

We are subject to comprehensive government legislation and regulations,

both domestically and internationally, which impact our operating costs and

could require us to make changes to our operations. Additionally, we are

subject to certain settlements, orders and agreements with government

authorities from time to

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

We are subject to comprehensive regulation under federal and state laws in the

U.S. and the laws of the various jurisdictions in which we operate, including

increasing and complex economic sanctions regimes. These laws and regulations

significantly affect and have the potential to restrict the scope of our existing

businesses, limit our ability to pursue certain business opportunities, including the

products and services we offer, reduce certain fees and rates or make our

products and services more expensive for clients and customers.

We continue to make adjustments to our business and operations, legal entity

structure and capital and liquidity management policies, procedures and controls to

comply with currently effective laws and regulations, as well as final rulemaking,

guidance and interpretation by regulatory authorities, including the Department of

Treasury, Federal Reserve, OCC, CFPB, Financial Stability Oversight Council,

FDIC, Department of Labor, SEC and CFTC in the U.S. and foreign regulators and

other government authorities. Further, we could become subject to future

regulatory requirements beyond those currently proposed, adopted or

contemplated, including rulemaking related to the Financial Reform Act and the

U.K.'s exit from the EU. The cumulative effect of all of the legislation and

regulations on our business, operations and profitability remains uncertain. This

uncertainty necessitates that in our business planning we make certain

assumptions with respect to the scope and requirements of the proposed rules. If

these assumptions prove incorrect, we could be subject to increased regulatory

and compliance risks and costs as well as potential reputational harm. In addition,

U.S. and international regulatory initiatives may overlap, and non-U.S. regulations

and initiatives may be inconsistent or may conflict with current or proposed U.S.

regulations, which could lead to compliance risks and increased costs.

Our regulators’ prudential and supervisory authority gives them broad power

and discretion to direct our actions, and they have assumed an active oversight,

inspection and investigatory role across the financial services industry. However,

regulatory focus is not limited to laws and regulations applicable to the financial

services industry specifically, but also extends to other significant laws and

regulations that apply across industries and jurisdictions,

including those related to data management and privacy, anti-money laundering,

anti-corruption and economic sanctions. Additionally, we are subject to laws, rules

and regulations in the U.S. and abroad, including GDPR and CCPA, regarding

compliance with our privacy policies and the disclosure, collection, use, sharing

and safeguarding of personal identifiable information of certain parties, such as our

employees, customers, suppliers, counterparties and other third parties, the

violation of which could result in litigation, regulatory fines and enforcement

actions. Additionally, we will likely be subject to new and evolving data privacy laws

in the U.S. and abroad, which could result in additional costs of compliance,

litigation, regulatory fines and enforcement actions.

As part of their enforcement authority, our regulators and other government

authorities have the authority to, among other things, assess significant civil or

criminal monetary penalties or restitution and issue cease and desist or removal

orders and initiate injunctive actions. The amounts paid by us and other financial

institutions to settle proceedings or investigations have, in some instances, been

substantial and may increase. In some cases, governmental authorities have

required criminal pleas or other extraordinary terms as part of such resolutions,

which could have significant consequences, including reputational harm, loss of

customers, restrictions on the ability to access capital markets, and the

Bank of America 14

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

The Corporation and the conduct of its employees and representatives are

subject to regulatory scrutiny across jurisdictions. Additionally, the complexity of

the federal and state regulatory and enforcement regimes in the U.S., coupled with

the global scope of our operations and the aggressiveness of the regulatory

environment worldwide also means that a single event or practice or a series of

related events or practices may give rise to a significant number of overlapping

investigations and regulatory proceedings, either by multiple federal and state

agencies in the U.S. or by multiple regulators and other governmental entities in

different jurisdictions. Additionally, actions by other members of the financial

services industry related to business activities in which we participate may result in

investigations by regulators or other government authorities. Responding to

inquiries, investigations, lawsuits and proceedings, regardless of the ultimate

outcome of the matter, is time-consuming and expensive and can divert the

attention of our senior management from our business. The outcome of such

proceedings, which may last a number of years, may be difficult to predict or

estimate until late in the proceedings.

We are currently subject to the terms of settlements, orders and agreements

that we have entered into with government entities and regulatory authorities and

may become subject to additional settlements, orders or agreements in the future.

Such settlements, orders or agreements can impose significant operational and

compliance costs on us as they typically require us to enhance our procedures and

controls, expand our risk and control functions within our lines of business, invest

in technology and hire significant numbers of additional risk, control and

compliance personnel. Moreover, if we fail to meet the requirements of the

regulatory settlements, orders or agreements to which we are subject, or, more

generally, fail to maintain risk and control procedures and processes that meet the

heightened standards established by our regulators and other government

authorities, we could be required to enter into further settlements, orders or

agreements and pay additional fines, penalties or judgments, or accept material

regulatory restrictions on our businesses.

While we believe that we have adopted appropriate risk management and

compliance programs to identify, assess, monitor and report on applicable laws,

policies and procedures, compliance risks will continue to exist, particularly as we

adapt to new and evolving laws, rules and regulations. Additionally, changing U.S.

fiscal, monetary and regulatory policies arising from potential changes to the U.S.

presidential administration and Congress result in ongoing regulatory

uncertainties. There is no guarantee that our risk management and compliance

programs will be consistently executed to successfully manage compliance risk.

We also rely upon third parties who may expose us to compliance and legal risk.

Future legislative or regulatory actions, and any required changes to our business

or operations, or those of third parties, including their downstream providers, upon

whom we rely, resulting from such developments and actions could result in a

significant loss of revenue, impose additional compliance and other costs or

otherwise reduce our profitability, limit the products and services that we offer or

our ability to pursue certain business opportunities, require us to dispose of or

curtail certain businesses, affect the value of assets that we hold, require us to

increase our prices and therefore reduce demand for our products, or otherwise

adversely affect our businesses. In addition, legal and regulatory proceedings and

other contingencies will arise from time to time that may result in fines, regulatory

sanctions, penalties, equitable relief and changes to our business practices. As a

result, we are and will continue to be subject to heightened

15 Bank of America

compliance and operating costs that could adversely affect our results of

operations.

We are subject to significant financial and reputational risks from

potential liability arising from lawsuits and regulatory and government

action.

We face significant legal risks in our business, and the volume of claims and

amount of damages, penalties and fines claimed in litigation and other disputes,

and regulatory and government proceedings against us and other financial

institutions continue to be high. Greater than expected litigation and investigation

costs, substantial legal liability or significant regulatory or government action

against us could have adverse effects on our business, financial condition,

including liquidity, and results of operations, and/or cause significant reputational

harm to us. We continue to experience a significant volume of litigation and other

disputes, including claims for contractual indemnification with counterparties

regarding relative rights and responsibilities. Consumers, clients and other

counterparties continue to be litigious. Among other things, financial institutions,

including us, continue to be the subject of claims alleging anti-competitive conduct

with respect to various products and markets, including U.S. antitrust class actions

claiming joint and several liability for treble damages. In addition, regulatory

authorities have had a supervisory focus on enforcement, including in connection

with alleged violations of law and customer harm. For example, U.S. regulators and

government agencies have pursued claims against financial institutions under the

Financial Institutions Reform, Recovery, and Enforcement Act, False Claims Act,

Equal Credit Opportunity Act, Fair Housing Act and antitrust laws. Such claims

may carry significant and, in certain cases, treble damages. The global

environment of extensive regulation, regulatory compliance burdens, litigation and

regulatory and government enforcement, combined with uncertainty related to the

continually evolving regulatory environment, may affect operational and

compliance costs and risks, which may limit or cease our ability to continue

providing certain products and services.

Additionally, misconduct by employees, including improper or illegal conduct, or

other unfair, deceptive, abusive or discriminatory business practices, can cause

significant reputational harm as well as litigation and regulatory government

enforcement action.

For more information on litigation and regulatory matters, seeNote 13 –

Commitments and Contingencies to the Consolidated Financial Statements.

U.S. federal banking agencies may require us to increase our regulatory

capital, TLAC, long-term debt or liquidity requirements, which could result in

the need to issue additional qualifying securities or to take other actions,

such as to sell company assets.

We are subject to U.S. regulatory capital and liquidity rules. These rules,

among other things, establish minimum requirements to qualify as a well-

capitalized institution. If any of our subsidiary insured depository institutions fails to

maintain its status as well capitalized under the applicable regulatory capital rules,

the Federal Reserve will require us to agree to bring the insured depository

institution back to well-capitalized status. For the duration of such an agreement,

the Federal Reserve may impose restrictions on our activities. If we were to fail to

enter into or comply with such an agreement, or fail to comply with the terms of

such agreement, the Federal Reserve may impose more severe restrictions on our

activities, including requiring us to cease and desist activities permitted under the

Bank Holding Company Act of 1956.

Capital and liquidity requirements are frequently introduced and amended. It is

possible that regulators may increase regulatory capital requirements including

TLAC and long-term debt requirements, change how regulatory capital is

calculated or

increase liquidity requirements. Our G-SIB surcharge may increase from current

estimates, and we are also subject to a countercyclical capital buffer which, while

currently set at zero, may be increased by regulators. In 2018, the Federal Reserve

issued a proposal to implement a stress capital buffer into its capital requirements,

which may increase our regulatory capital requirements, if adopted. A significant

component of regulatory capital ratios is calculating our risk-weighted assets and

our leverage exposure, which may increase. The Basel Committee on Banking

Supervision has also revised several key methodologies for measuring risk-

weighted assets, including a standardized approach for credit risk, standardized

approach for operational risk and constraints on the use of internal models, as well

as a capital floor based on the revised standardized approaches. U.S. banking

regulators may update the U.S. Basel 3 rules to incorporate the Basel Committee

revisions.

Additionally, Net Stable Funding Ratio requirements have been proposed,

which would apply to us and our subsidiary depository institutions, and target

longer term liquidity risk. While the impact of these proposals remains uncertain,

they could have a negative impact on our capital and liquidity positions. In 2019,

U.S. banking regulators published a final rule outlining a standardized approach for

counterparty credit risk, which updates the calculation of the exposure amount for

derivative contracts under the regulatory capital rule. The final rule will be effective

on April 1, 2020, with a mandatory compliance date of January 1, 2022. This rule

could have a negative impact on our capital position upon final implementation.

As part of its annual CCAR, the Federal Reserve conducts stress testing on

parts of our business using hypothetical economic scenarios prepared by the

Federal Reserve. Those scenarios may affect our CCAR stress test results, which

may have an effect on our projected regulatory capital amounts in the annual

CCAR submission, including the CCAR capital plan affecting our dividends and

stock repurchases. Such ability to return capital to our shareholders substantially

depends on the Federal Reserve's response to our annual CCAR submission. To

the extent that the Federal Reserve objects to our annual CCAR submission or

objects to the amount of dividends or stock repurchases proposed, our shareholder

returns could decrease.

Changes to and compliance with the regulatory capital and liquidity

requirements may impact our operations by requiring us to liquidate assets,

increase borrowings, issue additional equity or other securities, cease or alter

certain operations, sell company assets or hold highly liquid assets, which may

adversely affect our results of operations. We may be prohibited from taking capital

actions such as paying or increasing dividends, or repurchasing securities if the

Federal Reserve objects to our CCAR capital plan.

For more information, see Capital Management – Regulatory Capital in the

MD&A on page 46 and Note 17 – Regulatory Requirements and Restrictions to the

Consolidated Financial Statements.

Changes in accounting standards or assumptions in applying accounting

policies could adversely affect us.

Our accounting policies and methods are fundamental to how we record and

report our financial condition and results of operations. Some of these policies

require use of estimates and assumptions that may affect the reported value of our

assets or liabilities and results of operations and are critical because they require

management to make difficult, subjective and complex judgments about matters

that are inherently uncertain. If those assumptions, estimates or judgments were

incorrectly made, we could be required to correct and restate prior-period financial

statements. Accounting standard-setters and those who interpret the accounting

standards, the SEC, banking regulators and our

independent registered public accounting firm may also amend or even reverse

their previous interpretations or positions on how various standards should be

applied. These changes may be difficult to predict and could impact how we

prepare and report our financial statements. In some cases, we could be required

to apply a new or revised standard retrospectively, resulting in us revising prior-

period financial statements. For more information on some of our critical

accounting policies and recent accounting changes, see Complex Accounting

Estimates in the MD&A on page 77 and Note 1 – Summary of Significant

Accounting Principles to the Consolidated Financial Statements.

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

and regulations.

In December 2017, the President signed into law the Tax Cuts and Jobs Act

(the Tax Act) which made significant changes to federal income tax law including,

among other things, reducing the statutory corporate income tax rate to 21 percent

from 35 percent and changing the taxation of our non-U.S. business activities.

In addition, we have U.K. net deferred tax assets which consist primarily of net

operating losses that are expected to be realized by certain subsidiaries over an

extended number of years. Adverse developments with respect to tax laws or to

other material factors, such as prolonged worsening of Europe’s capital markets or

changes in the ability of our U.K. subsidiaries to conduct business in the EU, could

lead our management to reassess and/or change its current conclusion that no

valuation allowance is necessary with respect to our U.K. net deferred tax assets.

It is possible that governmental authorities in the U.S. and/or other countries

could further amend tax laws in a way that would adversely affect us, including the

possibility that aspects of the Tax Act could be amended in the future.

Reputation

Damage to our reputation could harm our businesses, including our

competitive position and business prospects.

Our ability to attract and retain customers, clients, investors and employees is

impacted by our reputation. Harm to our reputation can arise from various sources,

including officer, director or employee misconduct, unethical behavior, security

breaches, litigation or regulatory outcomes, compensation practices, the suitability

or reasonableness of recommending particular trading or investment strategies,

including the reliability of our research and models, and prohibiting clients from

engaging in certain transactions and sales practices. Additionally, our reputation

may be harmed by failing to deliver products, subpar standards of service and

quality expected by our customers, clients and the community, compliance failures,

the inability to manage technology change or maintain effective data management,

cyber incidents, inadequacy of responsiveness to internal controls, unintended

disclosure of personal, proprietary or confidential information, perception of our

environmental, social and governance practices and disclosures, conflicts of

interest and breach of fiduciary obligations, and the activities of our clients,

customers, counterparties and third parties, including vendors. Actions by the

financial services industry generally or by certain members or individuals in the

industry also can adversely affect our reputation. In addition, adverse publicity or

negative information posted on social media by employees, the media or

otherwise, whether or not factually correct, may adversely impact our business

prospects or financial results.

We are subject to complex and evolving laws and regulations regarding privacy,

know-your-customer requirements, data protection, including the GDPR and

CCPA, cross-border data movement and other matters. Principles concerning the

appropriate scope of consumer and commercial privacy vary

Bank of America 16

considerably in different jurisdictions, and regulatory and public expectations

regarding the definition and scope of consumer and commercial privacy may

remain fluid. It is possible that these laws may be interpreted and applied by

various jurisdictions in a manner inconsistent with our current or future practices,

or that is inconsistent with one another. If personal, confidential or proprietary

information of customers or clients in our possession, or in the possession of third

parties, including their downstream service providers or financial data aggregators,

is mishandled, misused or mismanaged, or if we do not timely or adequately

address such information, we may face regulatory, reputational and operational

risks which could have an adverse effect on our financial condition and results of

operations.

We could suffer reputational harm if we fail to properly identify and manage

potential conflicts of interest. Management of potential conflicts of interests has

become increasingly complex as we expand our business activities through more

numerous transactions, obligations and interests with and among our clients.

The failure to adequately address, or the perceived failure to adequately address,

conflicts of interest could affect the willingness of clients to use our products and

services, or give rise to litigation or enforcement actions, which could adversely

affect our business.

Our actual or perceived failure to address these and other issues, such as

operational risks, gives rise to reputational risk that could harm us and our

business prospects. Failure to appropriately address any of these issues could

also give rise to additional regulatory restrictions, legal risks and reputational harm,

which could, among other consequences, increase the size and number of

litigation claims and damages asserted or subject us to enforcement actions, fines

and penalties, and cause us to incur related costs and expenses. For more

information on reputational risk, see Reputational Risk Management in the MD&A

on page 77.

Other

We face significant and increasing competition in the financial services

industry.

We operate in a highly competitive environment and experience intense

competition from local and global financial institutions as well as new entrants, in

both domestic and foreign markets, in which we compete on the basis of a number

of factors, including customer service, quality and range of products and services

offered, technology, price, reputation, interest rates on loans and deposits, lending

limits and customer convenience. Additionally, the changing regulatory

environment may create competitive disadvantages for us given geography-driven

capital and liquidity requirements. For example, U.S. regulators have in certain

instances adopted stricter capital and liquidity requirements than those applicable

to non-U.S. institutions. To the extent we expand into new business areas and new

geographic regions, we may face competitors with more experience and more

established relationships with clients, regulators and industry participants in the

relevant market, which could adversely affect our ability to compete.

In addition, emerging technologies and advances and the growth of e-

commerce have lowered geographic and monetary barriers of other financial

institutions, made it easier for non-depository institutions to offer products and

services that traditionally were banking products and allowed non-traditional

financial service providers and technology companies to compete with traditional

financial service companies in providing electronic and internet-based financial

solutions and services, including electronic securities trading, marketplace lending,

financial data aggregation and payment processing, including real-time payment

17 Bank of America

platforms. Further, clients may choose to conduct business with other market

participants who engage in business or offer products in areas we deem

speculative or risky, such as cryptocurrencies. Increased competition may

negatively affect our earnings by creating pressure to lower prices or credit

standards on our products and services requiring additional investment to improve

the quality and delivery of our technology and/or reducing our market share, or

affecting the willingness of our clients to do business with us.

Our inability to adapt our products and services to evolving industry

standards and consumer preferences could harm our business.

Our business model is based on a diversified mix of businesses that provide a

broad range of financial products and services, delivered through multiple

distribution channels. Our success depends on our, and our third-party vendors',

ability to adapt and develop products, services and technology to rapidly evolving

industry standards and consumer preferences. There is increasing pressure by

competitors to provide products and services on more attractive terms, including

higher interest rates on deposits, and offer lower cost investment strategies, which

may impact our ability to grow revenue and/or effectively compete. Additionally,

legislative and regulatory developments may affect the competitive landscape.

Further, the competitive landscape may be impacted by the growth of non-

depository institutions that offer traditional banking products at higher rates or with

no fees, or otherwise offer alternative products. This can reduce our net interest

margin and revenues from our fee-based products and services, either from a

decrease in the volume of transactions or through a compression of spreads.

In addition, the widespread adoption and rapid evolution of new technologies,

including analytic capabilities, self-service digital trading platforms, internet

services, distributed ledgers, such as the blockchain system, cryptocurrencies and

payment systems, could require substantial expenditures to modify or adapt our

existing products and services as we grow and develop our online and mobile

banking channel strategies in addition to remote connectivity solutions. We may

not be as timely or successful in developing or introducing new products and

services, integrating new products or services into our existing offerings,

responding or adapting to changes in consumer behavior, preferences, spending,

investing and/or saving habits, achieving market acceptance of our products and

services, reducing costs in response to pressures to deliver products and services

at lower prices or sufficiently developing and maintaining loyal customers. Our or

our third-party vendors' inability to adapt products and services to evolving industry

standards and consumer preferences could harm our business and adversely

affect our results of operations and reputation.

Our ability to attract and retain qualified employees is critical to the

success of our business and failure to do so could hurt our business

prospects and competitive position.

Our performance is heavily dependent on the talents and efforts of highly

skilled individuals. Competition for qualified personnel within the financial services

industry and from businesses outside the financial services industry is intense. Our

competitors include non-U.S. based institutions and institutions subject to different

compensation and hiring regulations than those imposed on U.S. institutions and

financial institutions.

In order to attract and retain qualified personnel, we must provide market-level

compensation. As a large financial and banking institution, we may be subject to

limitations on compensation practices (which may or may not affect our

competitors) by the Federal Reserve, the OCC, the FDIC and other regulators

around the world. EU and U.K. rules limit and subject

to clawback certain forms of variable compensation for senior employees. Current

and potential future limitations on executive compensation imposed by legislation

or regulation could adversely affect our ability to attract and maintain qualified

employees. Furthermore, a substantial portion of our annual incentive

compensation paid to our senior employees has in recent years taken the form of

long-term equity-based awards. Therefore, the ultimate value of this compensation

depends on the price of our common stock when the awards vest. If we are unable

to continue to attract and retain qualified individuals, our business prospects and

competitive position could be adversely affected.

We could suffer operational, reputational and financial harm if our models and

strategies fail to properly anticipate and manage risk.

We use proprietary models and strategies extensively to forecast losses,

project revenue, measure and assess capital requirements for credit, country,

market, operational and strategic risks and assess and control our operations and

financial condition. These models require oversight, including independent

validation before initial use, ongoing monitoring through outcomes analysis and

benchmarking, and periodic revalidation. Models are subject to inherent limitations

due to the use of historical trends and simplifying assumptions, uncertainty

regarding economic and financial outcomes, and emerging risks from the use of

applications that rely on artificial intelligence.

Our models and strategies may not be sufficiently predictive of future results

due to limited historical patterns, extreme or unanticipated market movements or

customer behavior and illiquidity, especially during severe market downturns or

stress events, which could limit their effectiveness. The models that we use to

assess and control our market risk exposures also reflect assumptions about the

degree of correlation among prices of various asset classes or other market

indicators, which may not be representative of the next downturn and would

magnify the limitations inherent in using historical data to manage risk. Our models

may not be effective if we fail to properly oversee them and detect their flaws

during our review and monitoring processes, they contain erroneous data,

assumptions, valuations, formulas or algorithms or our applications running the

models do not perform as expected. Regardless of the steps we take to ensure

effective controls, governance, monitoring and testing, and implement new

technology and automated processes, we could suffer operational, reputational

and financial harm if models and strategies fail to properly anticipate and manage

current and evolving risks.

Failure to properly manage and aggregate data may result in our inability

to manage risk and business needs, errors in our day-to-day operations,

critical reporting and strategic decision-making and inaccurate financial,

regulatory and operational reporting.

We rely on our ability to manage, aggregate, interpret and use data in an

accurate, timely and complete manner for effective risk reporting and

management. Our policies, programs, processes and practices govern how data is

managed, aggregated, interpreted and used. While we continuously update our

policies, programs, processes and practices and implement emerging

technologies, such as automation, artificial intelligence and robotics, our data

management and aggregation processes are subject to failure, including human

error, system failure or failed controls. Failure to maintain and manage data and

information effectively and to aggregate data and information in an accurate, timely

and complete manner may impact its quality and reliability and limit our ability to

manage current and emerging risk, to produce accurate financial, regulatory and

operational reporting, as well as to manage changing business needs, strategic

decision-making and day-to-day operations. The failure to establish and maintain

effective, efficient and controlled data management could have an adverse impact

on our ability to develop our products and relationships with our customers and

damage our reputation.

Reforms to and uncertainty regarding IBORs, including the London

Interbank Offered Rate (LIBOR), and certain other rates or indices may

adversely affect our business, financial condition and results of operations

and could result in reputational harm to the Corporation.

In 2017, the U.K. FCA announced that it will no longer persuade or require

participating banks to submit rates for LIBOR after 2021. The continuation of

LIBOR on the current basis cannot be guaranteed after 2021, and there is

substantial risk that LIBOR will be modified by 2021 or discontinued thereafter.

This announcement, in conjunction with financial benchmark reforms and changes

in short-term interbank lending markets more generally, have resulted in significant

uncertainty about the potential or actual discontinuation of IBORs, including

LIBOR, and certain other rates or indices that serve as “benchmarks.” Such

benchmarks are used extensively in the global financial markets and in our

business. In particular, LIBOR is used in many of our products and contracts,

including mortgages, consumer, commercial and corporate loans, derivatives,

floating-rate notes and other adjustable-rate products and financial instruments.

The aggregate notional amount of these products and contracts is material to our

business. These reforms and actions may result in significant uncertainty as to

future rules or methodologies used to calculate benchmarks, cause new or

reformed benchmarks to perform differently from the discontinued benchmarks

they are replacing, cause existing benchmarks to disappear or become unavailable

or unrepresentative, or have other consequences that cannot be fully anticipated,

which expose us to various financial, operational and legal risks.

Certain ARRs have been proposed to replace LIBOR and other IBORs. For

example, the Alternative Reference Rates Committee, a group of private-market

participants and official-sector entities convened by the Federal Reserve Board and

the Federal Reserve Bank of New York, has recommended that the Secured

Overnight Financing Rate (SOFR) replace U.S. dollar LIBOR. However, the

market transition from IBORs to ARRs is complex and pervasive throughout a

number of different types of products and global financial markets. There can be

no assurance that ARRs will be adequate alternatives to IBORs, that existing

assets and liabilities based on or linked to IBORs will transition successfully to

ARRs, of the timing of adoption and degree of integration and acceptance of such

ARRs in the global financial markets, or of the future availability or

representativeness of such ARRs. Our products and contracts that reference

IBORs, in particular LIBOR, may contain language that determines when a

successor rate including the ARR and/or the applicable spread adjustment to the

designated rate (including IBORs) would be selected or determined. If a trigger is

satisfied, our products and contracts may give the calculation agent (which may be

us) discretion over the successor rate to be selected. The considerable uncertainty

as to how the financial services industry will address the discontinuation of IBORs

and/or such IBORs ceasing to be acceptable reference rates in financial

instruments could ultimately result in client disputes and litigation surrounding the

proper interpretation of our IBOR-based products and contracts. Accordingly,

uncertainty regarding ARRs may continue to impact our business, operations and

financial condition repeatedly and indefinitely.

The discontinuation of IBORs, including LIBOR, will require us to remediate

IBOR-based products and contracts, including related hedging arrangements, that

mature after the discontinuation date of the IBOR. These changes may adversely

affect the yield on loans or securities held by us, amounts paid on securities we

have

Bank of America 18

issued, amounts received and paid on derivatives we have entered into, the value

of such loans, securities or derivative instruments, the trading market for such

products and contracts, and our ability to effectively use hedging instruments to

manage risk. While some of these outstanding IBOR-based products and contracts

include fallback provisions to ARRs, some of our outstanding IBOR-based

products and contracts do not include fallback provisions or adequate fallback

mechanisms requiring remediation to modify their terms. Additionally, some

outstanding IBOR-based products and contracts are particularly challenging to

modify due to the requirement that all impacted parties consent to such

modification.

In light of the extensive use of IBOR-based products and contracts by us and

other market participants, there can be no assurance that we and other market

participants will be able to successfully modify all outstanding IBOR-based

products and contracts or be adequately prepared for a discontinuation of an IBOR

at the time such IBOR may cease to be published or otherwise discontinued. Also,

there can be no assurance that existing or new provisions for successor rates in

our IBOR-based products and contracts will include adequate methodologies for

adjustments between the applicable IBOR and the corresponding successor rate

or that the characteristics of the successor rates will be similar to or produce the

economic equivalent of the benchmarks they seek to replace. For example, SOFR

and other ARRs have compositions and characteristics that differ significantly from

the benchmarks they may replace, have limited history, and may demonstrate less

predictable performance over time than the benchmarks they replace.

Changes or uncertainty resulting from the market transition from IBORs to

ARRs could adversely affect the return on and pricing, liquidity and value of

outstanding IBOR-based products and contracts, cause significant market

dislocations and

Item 1B. Unresolved Staff Comments

None

Item 2. Properties

disruptions that are relevant to our business segments, particularlyGlobal Banking

and Global Markets, potentially increase the cost of and access to capital, increase

the risk of litigation or other disputes, including in connection with the interpretation

and enforceability of, or our historical marketing practices or disclosures with

respect to, outstanding IBOR-based products and contracts with counterparties,

and/or increase expenses related to the transition to ARRs, among other adverse

consequences. Additionally, the process of transitioning to ARRs may result in

increased costs and may also divert management time and attention from other

areas of our business.

The market transition from IBORs to ARRs may also alter our risk profile and

risk management strategies, including derivatives and hedging strategies,

modeling and analytics, valuation tools, product design and systems, controls,

procedures and operational infrastructure. This may prove challenging given the

limited history of many of the proposed ARRs and may increase the costs and

risks related to potential regulatory compliance, requirements or inquiries. Among

other risks, various products and contracts may transition to ARRs at different

times or in different manners, with the result that we may face significant

unexpected interest rate, pricing or other exposures across business or product

lines. Reforms to and uncertainty regarding market transition from current IBORs

to ARRs and other factors, including the pace of the transition to ARRs, the

specific terms and parameters for market acceptance of any ARRs, prices of and

liquidity of trading markets for products based on ARRs, and our ability to transition

and develop appropriate systems and analytics for one or more ARRs, may

adversely affect our business, including the ability to serve customers and

maintain market share, financial condition or results of operations and could result

in reputational harm to the Corporation.

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

Facility Name Location General Character of the Physical Property Primary Business Segment Property Status

Property Square

Feet

(1)

Bank of America Corporate

Center

Charlotte, NC 60 Story Building Principal Executive Offices Owned 1,212,177

Bank of America Tower at One

Bryant Park

Bank of America Financial

Centre

New York, NY

London, UK

55 Story Building

4 Building Campus

GWIM, Global Banking and

Global Markets

Global Banking and Global Markets

Leased

(2)

Leased

1,836,575

562,595

Cheung Kong Center Hong Kong 62 Story Building Global Banking and Global Markets Leased 149,790

(1)

For leased properties, property square feet represents the square footage occupied by the

Corporation.

(2)

The Corporation has a 49.9 percent joint venture interest in this

property.

We own or lease approximately 76.3 million square feet in over 20,000 facility

and ATM locations globally, including approximately 70.7 million square feet in the

U.S. (all 50 states and the District of Columbia, the U.S. Virgin Islands, Puerto Rico

and Guam) and approximately 5.6 million square feet in more than 35 countries.

We believe our owned and leased properties are adequate for our business

needs and are well maintained. We continue to evaluate our owned and leased

real estate and may determine from time to time that certain of our premises and

facilities, or ownership structures, are no longer necessary for our operations. In

connection therewith, we are evaluating the sale or sale/leaseback of certain

properties and we may incur costs in connection with any such transactions.

19 Bank of America

Item 3. Legal Proceedings

See Litigation and Regulatory Matters inNote 13 – Commitments and

Contingencies to the Consolidated Financial Statements, which is incorporated

herein by reference.

Item 4. Mine Safety Disclosures

None

Part II

Bank of America Corporation and Subsidiaries

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

The principal market on which our common stock is traded is the New York Stock dividends received from its bank subsidiaries. Each of the bank subsidiaries is

Exchange under the symbol “BAC.” As of February 18, 2020, there were 161,882 subject to various regulatory policies and requirements relating to the payment of

registered shareholders of common stock. dividends, including requirements to maintain capital above regulatory minimums.

The table below presents share repurchase activity for thethree months ended All of the Corporation’s preferred stock outstanding has preference over the

December 31, 2019. The primary source of funds for cash distributions by the Corporation’s common stock with respect to payment of dividends.

Corporation to its shareholders is

Total Shares

Purchased as

Total Common Shares Weighted-Average Per Part of Publicly Remaining Buyback

(Dollars in millions, except per share information; shares in thousands) Purchased

(1)

Share Price Announced Programs Authority Amounts

(2)

October 1 - 31, 2019 97,540 $ 29.50 97,538 $ 20,442

November 1 - 30, 2019 74,649 32.75 74,649 17,997

December 1 - 31, 2019 70,943 34.19 70,940 15,571

Three months ended December 31, 2019 243,132 31.87 243,127

(1)

Includes shares of the Corporation’s common stock acquired by the Corporation in connection with satisfaction of tax withholding obligations on vested restricted stock or restricted stock units and certain forfeitures and terminations of employment-related

awards and for potential re-issuance to certain employees under equity incentive plans.

(2)

On June 27, 2019, following the Board of Governors of the Federal Reserve System's non-objection to the Corporation's 2019 Comprehensive Capital Analysis and Review capital plan, the Corporation's Board of Directors (Board) authorized the

repurchase of approximately $30.9 billion in common stock from July 1, 2019 through June 30, 2020, which includes approximately $900 million to offset shares awarded under equity-based compensation plans during the same period. During the three

months ended December 31, 2019, pursuant to the Board’s authorization, the Corporation repurchased $7.7 billion of common stock, which included common stock to offset equity-based compensation awards. For more information, seeCapital Management

- CCAR and Capital Planning in the MD&A on page45 and Note 14 – Shareholders’ Equityto the Consolidated Financial Statements.

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

Item 6. Selected Financial Data

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

Bank of America 20

Item 7. Bank of America Corporation and Subsidiaries

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

Table of Contents

Page

Executive Summary 22

Recent Developments 23

Financial Highlights 23

Balance Sheet Overview 25

Supplemental Financial Data 26

Business Segment Operations 32

Consumer Banking 33

Global Wealth & Investment Management 34

Global Banking 36

Global Markets 39

All Other 40

Off-Balance Sheet Arrangements and Contractual Obligations 41

Managing Risk 42

Strategic Risk Management 45

Capital Management 45

Liquidity Risk 50

Credit Risk Management 53

Consumer Portfolio Credit Risk Management 54

Commercial Portfolio Credit Risk Management 60

Non-U.S. Portfolio 66

Provision for Credit Losses 68

Allowance for Credit Losses 68

Market Risk Management 70

Trading Risk Management 72

Interest Rate Risk Management for the Banking Book 74

Mortgage Banking Risk Management 76

Compliance and Operational Risk Management 76

Reputational Risk Management 77

Complex Accounting Estimates

77

Non-GAAP Reconciliations 79

Statistical Tables 81

21 Bank of America

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

Bank of America Corporation (the “Corporation”) and its management may make

certain statements that constitute “forward-looking statements” within the meaning

of the Private Securities Litigation Reform Act of 1995. These statements can be

identified by the fact that they do not relate strictly to historical or current facts.

Forward-looking statements often use words such as “anticipates,” “targets,”

“expects,” “hopes,” “estimates,” “intends,” “plans,” “goals,” “believes,” “continue”

and other similar expressions or future or conditional verbs such as “will,” “may,”

“might,” “should,” “would” and “could.” Forward-looking statements represent the

Corporation’s current expectations, plans or forecasts of its future results,

revenues, expenses, efficiency ratio, capital measures, strategy and future

business and economic conditions more generally, and other future matters. These

statements are not guarantees of future results or performance and involve certain

known and unknown risks, uncertainties and assumptions that are difficult to

predict and are often beyond the Corporation’s control. Actual outcomes and

results may differ materially from those expressed in, or implied by, any of these

forward-looking statements.

You should not place undue reliance on any forward-looking statement and

should consider the following uncertainties and risks, as well as the risks and

uncertainties more fully discussed under Item 1A. Risk Factors of this Annual

Report on Form 10-K: the Corporation’s potential claims, damages, penalties,

fines and reputational damage resulting from pending or future litigation, regulatory

proceedings and enforcement actions; the possibility that the Corporation's future

liabilities may be in excess of its recorded liability and estimated range of possible

loss for litigation, regulatory and representations and warranties exposures; the

possibility that the Corporation could face increased servicing, fraud, indemnity,

contribution or other claims from one or more counterparties, including trustees,

purchasers of loans, underwriters, issuers, monolines, private-label and other

investors, or other parties involved in securitizations; the Corporation’s ability to

resolve representations and warranties repurchase and related claims, including

claims brought by investors or trustees seeking to avoid the statute of limitations

for repurchase claims; the risks related to the discontinuation of the London

Interbank Offered Rate and other reference rates, including increased expenses

and litigation and the effectiveness of hedging strategies; uncertainties about the

financial stability and growth rates of non-U.S. jurisdictions, the risk that those

jurisdictions may face difficulties servicing their sovereign debt, and related

stresses on financial markets, currencies and trade, and the Corporation’s

exposures to such risks, including direct, indirect and operational; the impact of

U.S. and global interest rates, inflation, currency exchange rates, economic

conditions, trade policies and tensions, including tariffs, and potential geopolitical

instability; the impact of the interest rate environment on the Corporation’s

business, financial condition and results of operations; the possibility that future

credit losses may be higher than currently expected due to changes in economic

assumptions, customer behavior, adverse developments with respect to U.S. or

global economic conditions and other uncertainties; the Corporation’s ability to

achieve its expense targets and expectations regarding net interest income,

provision for credit losses, net charge-offs, effective tax rate, loan growth or other

projections; adverse changes to the Corporation’s credit ratings from the major

credit rating agencies; an inability to access capital markets or maintain deposits or

borrowing costs; estimates of the fair value and other accounting values, subject to

impairment assessments, of certain of the Corporation’s assets and liabilities; the

estimated or actual impact of changes in accounting standards or assumptions in

applying those standards; uncertainty regarding the content, timing and

impact of regulatory capital and liquidity requirements; the impact of adverse

changes to total loss-absorbing capacity requirements and/or global systemically

important bank surcharges; the potential impact of actions of the Board of

Governors of the Federal Reserve System on the Corporation’s capital plans; the

effect of regulations, other guidance or additional information on the impact from

the Tax Cuts and Jobs Act; the impact of implementation and compliance with U.S.

and international laws, regulations and regulatory interpretations, including, but not

limited to, recovery and resolution planning requirements, Federal Deposit

Insurance Corporation assessments, the Volcker Rule, fiduciary standards and

derivatives regulations; a failure or disruption in or breach of the Corporation’s

operational or security systems or infrastructure, or those of third parties, including

as a result of cyber attacks or campaigns; the impact on the Corporation’s

business, financial condition and results of operations from the United Kingdom's

exit from the European Union; the impact of any future federal government

shutdown and uncertainty regarding the federal government’s debt limit; the impact

of natural disasters, the emergence of widespread health emergencies or

pandemics, military conflict, terrorism or other geopolitical events; and other

matters.

Forward-looking statements speak only as of the date they are made, and the

Corporation undertakes no obligation to update any forward-looking statement to

reflect the impact of circumstances or events that arise after the date the forward-

looking statement was made.

Notes to the Consolidated Financial Statements referred to in the

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

Operations (MD&A) are incorporated by reference into the MD&A. Certain prior-

year amounts have been reclassified to conform to current-year presentation.

Throughout the MD&A, the Corporation uses certain acronyms and abbreviations

which are defined in the Glossary.

Executive Summary

Business Overview

The Corporation is a Delaware corporation, a bank holding company (BHC) and a

financial holding company. When used in this report, “the Corporation,” “we,” “us”

and “our” may refer to Bank of America Corporation individually, Bank of America

Corporation and its subsidiaries, or certain of Bank of America Corporation’s

subsidiaries or affiliates. Our principal executive offices are located in Charlotte,

North Carolina. Through our banking and various nonbank subsidiaries throughout

the U.S. and in international markets, we provide a diversified range of banking

and nonbank financial services and products through four business segments:

Consumer Banking, Global Wealth & Investment Management (GWIM), Global

Banking and Global Markets, with the remaining operations recorded inAll Other.

We operate our banking activities primarily under the Bank of America, National

Association (Bank of America, N.A. or BANA) charter. At December 31, 2019, the

Corporation had $2.4 trillion in assets and a headcount of approximately 208,000

employees.

As of December 31, 2019, we served clients through operations across the

U.S., its territories and approximately 35 countries. Our retail banking footprint

covers approximately 90 percent of the U.S. population, and we serve

approximately 66 million consumer and small business clients with approximately

4,300 retail financial centers, approximately 16,800 ATMs, and leading digital

banking platforms (

www.bankofamerica.com) with more than 38 million active

users, including over 29 million active mobile users. We offer industry-leading

support to approximately

Bank of America 22

three million small business owners. Our wealth management businesses, with

client balances of $3.0 trillion, provide tailored solutions to meet client needs

through a full set of investment management, brokerage, banking, trust and

retirement products. We are a global leader in corporate and investment banking

and trading across a broad range of asset classes serving corporations,

governments, institutions and individuals around the world.

Recent Developments

Capital Management

During 2019, we repurchased $28.1 billion of common stock pursuant to the

Corporation's Board of Directors’ (the Board) repurchase authorizations. For more

information, see Capital Management on page 45.

Merchant Services Joint Venture

A significant portion of our merchant processing activity is performed by a joint

venture, formed in 2009, in which we own a 49 percent ownership interest. The

joint venture is accounted for as an equity method investment. As previously

disclosed in the Corporation's Quarterly Report on Form 10-Q for the quarter

ended June 30, 2019, we gave notice on July 29, 2019 to the joint venture partner

of the termination of the joint venture upon the conclusion of its current term, after

which we expect to pursue our own merchant services strategy. In addition, the

Corporation and the joint venture partner have an agreement to provide

uninterrupted delivery of products and services to the joint venture merchants

through at least June 2023. As a result of the above actions, we incurred a non-

cash, pretax impairment charge of $2.1 billion included in other general operating

expense in the three months ended September 30, 2019. As stated above, the

Corporation expects to pursue its own merchant services strategy, which is

expected to begin in the third quarter of 2020. Under this strategy, we will begin to

record the revenues and expenses from those operations in the Consolidated

Statement of Income instead of recognizing our proportionate share of the joint

venture's income under the equity method. For more information, see Note 13 –

Commitments and Contingencies to the Consolidated Financial Statements.

U.K. Exit from the EU

On January 31, 2020, the U.K. formally exited the European Union (EU). Upon exit,

a transition period began during which time the U.K. and the EU expect to

negotiate a trade agreement and other terms associated with their future

relationship. The transition period is scheduled to end on December 31, 2020.

We conduct business in Europe, the Middle East and Africa primarily through

our subsidiaries in the U.K., Ireland and France. For information on the changes

we have implemented to enable us to continue to operate in the region, including

establishing a bank and broker-dealer in the EU, see the Corporation’s Quarterly

Report on Form 10-Q for the quarter ended March 31, 2019. While we have taken

measures to minimize operational disruption and prepare for various potential

outcomes of the U.K.’s withdrawal from the EU, the preparedness of our

counterparties and the relevant financial markets infrastructure remain outside our

control. The global economic impact of the U.K.’s withdrawal from

the EU remains uncertain and could result in regional and global

23 Bank of America

financial market disruptions. We continue to assess potential risks, including

operational, regulatory and legal risks.

LIBOR and Other Benchmark Rates

Following the 2017 announcement by the U.K.’s Financial Conduct Authority (FCA)

that it will no longer persuade or require participating banks to submit rates for the

London Interbank Offered Rate (LIBOR) after 2021, central banks and regulators

around the world have commissioned working groups to find suitable replacements

for Interbank Offered Rates (IBOR), including LIBOR, and other benchmark rates

and to implement financial benchmark reforms more generally. The future

discontinuance of IBORs is a complex process that has resulted in significant

uncertainty regarding the transition to suitable alternative reference rates (ARRs)

and could cause disruptions in a variety of global financial markets, as well as

adversely impact our business, operations and financial results.

IBORs, including LIBOR, are used in many of the Corporation’s products and

contracts, including mortgages, consumer, commercial and corporate loans,

derivatives, floating-rate notes and other adjustable-rate products and financial

instruments. The aggregate notional amount of these products and contracts is

material to our business. As previously disclosed, to facilitate an orderly transition

from IBORs and other benchmark rates to ARRs, the Corporation has established

an enterprise-wide initiative led by senior management. As part of this initiative, the

Corporation continues to identify, assess and monitor risks associated with the

expected discontinuation or unavailability of LIBOR and other benchmarks and

evaluate and address documentation and contractual mechanics of outstanding

IBOR-based products and contracts that mature after 2021 and new and potential

future ARR-based products and contracts to achieve operational readiness.

Additionally, the Corporation is continuing to evaluate potential regulatory, tax and

accounting impacts of the transition, including guidance published and/or proposed

by the Internal Revenue Service and Financial Accounting Standards Board,

engage impacted clients in connection with the transition to ARRs and work

actively with global regulators, industry working groups and trade associations to

develop strategies for an effective transition to ARRs.

The Corporation is also modifying its operational models, systems, procedures

and internal infrastructure to transition to ARRs. In 2019, the Corporation launched

capabilities to support issuance and trading in products indexed to the new

Secured Overnight Financing Rate (SOFR), which is the alternative benchmark

rate to U.S. dollar LIBOR recommended by the Alternative Reference Rates

Committee, a group of private-market participants and official-sector entities

convened by the Board of Governors of the Federal Reserve System (Federal

Reserve) and the Federal Reserve Bank of New York, and a broad measure of the

cost of borrowing cash overnight collateralized by U.S. Treasury securities. Also, in

2019, the Corporation issued debt linked to SOFR, and the Corporation co-

arranged one of the first credit facilities linked to SOFR and has implemented

fallback provisions into certain new IBOR-based products and contracts. The

Corporation continues to monitor the development and usage of ARRs, including

SOFR. For more information on the expected replacement of LIBOR and other

benchmark rates, see Item 1A. Risk Factors - Other on page 17.

Financial Highlights

In the Consolidated Statement of Income, amounts related to certain asset and

liability management (ALM) activities have been reclassified from other income to

market making and similar activities, which was previously referred to as trading

account income. All prior periods presented reflect this change, which has no

impact on the Corporation's total noninterest income or net income, and has no

impact on business segment results. For more information, see Note 1 – Summary

of Significant Accounting Principles to the Consolidated Financial Statements.

Table 1 Summary Income Statement and Selected Financial

Data

(Dollars in millions, except per share information) 2019 2018

Income statement

Net interest income $ 48,891 $ 48,162

Noninterest income 42,353 42,858

Total revenue, net of interest expense 91,244 91,020

Provision for credit losses 3,590 3,282

Noninterest expense 54,900 53,154

Income before income taxes 32,754 34,584

Income tax expense 5,324 6,437

Net income 27,430 28,147

Preferred stock dividends 1,432 1,451

Net income applicable to common shareholders $ 25,998 $ 26,696

Per common share information

Earnings $ 2.77 $ 2.64

Diluted earnings

2.75 2.61

Dividends paid

0.66 0.54

Performance ratios

Return on average assets

1.14 % 1.21 %

Return on average common shareholders’ equity

10.62 11.04

Return on average tangible common shareholders’

equity

(1)

14.86 15.55

Efficiency ratio

60.17 58.40

Balance sheet at year end

Total loans and leases

$ 983,426 $ 946,895

Total assets

2,434,079 2,354,507

Total deposits

1,434,803 1,381,476

Total liabilities

2,169,269 2,089,182

Total common shareholders’ equity

241,409 242,999

Total shareholders’ equity

264,810 265,325

(1)

Return on average tangible common shareholders’ equity is a non-GAAP financial measure. For more information and a

corresponding reconciliation to the most closely related financial measures defined by accounting principles generally

accepted in the United States of America, see Non-GAAP Reconciliations on page 80.

Net income was $27.4 billion or $2.75 per diluted share in 2019 compared to

$28.1 billion, or $2.61 per diluted share in 2018. The decrease in net income was

primarily driven by an increase in noninterest expense as a result of the $2.1 billion

pretax impairment charge related to the notice of termination of the merchant

services joint venture at the conclusion of its current term. Also contributing to the

decrease in net income were higher provision for credit losses and lower

noninterest income, partially offset by an increase in net interest income.

For discussion and analysis of our consolidated and business segment results

of operations for 2018 compared to 2017, see

the Financial Highlights and Business Segment Operations sections in the MD&A

of the Corporation's 2018 Annual Report on Form 10-K.

Net Interest Income

Net interest income increased $729 million to $48.9 billion in 2019 compared 2018.

Net interest yield on a fully taxable-equivalent (FTE) basis decreased two basis

points (bps) to 2.43 percent for 2019. The increase in net interest income was

primarily driven by loan and deposit growth, partially offset by lower long-end rates.

Assuming a stable economic and interest rate environment compared to

December 31, 2019, we expect quarterly net interest income for the first two

quarters of 2020 to be lower compared to the fourth quarter of 2019 driven by the

impact of rates and one fewer day of interest accruals. Quarterly net interest

income is expected to rise modestly in the second half of 2020 due to one

additional day of interest accruals and expected loan and deposit growth. For more

information on net interest yield and the FTE basis, see Supplemental Financial

Data on page 27, and for more information on interest rate risk management, see

Interest Rate Risk Management for the Banking Bookon page 74.

Noninterest Income

Table 2 Noninterest Income

(Dollars in millions) 2019 2018

Fees and commissions:

Card income $ 5,797 $ 5,824

Service charges 7,674 7,767

Investment and brokerage services 13,902 14,160

Investment banking fees 5,642 5,327

Total fees and commissions 33,015 33,078

Market making and similar activities 9,034 9,008

Other income 304 772

Total noninterest income $ 42,353 $ 42,858

Noninterest income decreased $505 million to $42.4 billion in 2019 compared to

2018. The following highlights the significant changes.

●

Service charges decreased $93 million primarily driven by lower fees due to

policy changes in 2018 and lower ATM volume in Consumer Banking.

●

Investment and brokerage services income decreased $258 million primarily

due to lower transactional revenue and a decrease in assets under

management (AUM) pricing, partially offset by the positive impact of AUM flows

and higher market valuations.

●

Investment banking fees increased $315 million due to increases in advisory

fees and equity and debt underwriting fees.

●

Other income decreased $468 million primarily due to lower gains on sales of

non-core consumer loans and higher partnership losses associated with an

increase in tax-advantaged investments, partially offset by higher gains on

sales of debt securities.

Bank of America 24

Provision for Credit Losses

aforementioned impairment charge related to our merchant services joint venture

o f $2.1 billion as well as increased costs associated with investment in the

The provision for credit losses increased $308 million to $3.6 billion in 2019

businesses, including brand-related marketing costs, and higher litigation expense.

compared to 2018. The increase was primarily due to the energy reserve releases

These were partially offset by efficiency savings, lower Federal Deposit Insurance

in the commercial portfolio in 2018, partially offset by the impact of recoveries

Corporation (FDIC) expense and lower amortization of intangibles expense.

recorded in connection with sales of previously charged-off non-core consumer real

estate loans. For more information on the provision for credit losses, see Provision

Income Tax Expense

for Credit Losses on page 68.

Noninterest Expense

Table 4 Income Tax Expense

Table 3 Noninterest Expense

(Dollars in millions) 2019 2018

Income before income taxes $ 32,754 $ 34,584

(Dollars in millions) 2019 2018

Income tax expense 5,324 6,437

Compensation and benefits $ 31,977 $ 31,880

Effective tax rate 16.3 % 18.6 %

Occupancy and equipment 6,588 6,380

The effective tax rates for 2019 and 2018 reflect the impact of our recurring tax

Information processing and communications 4,646 4,555

preference benefits. The 2019 effective rate also included net tax benefits primarily

Product delivery and transaction related 2,762 2,857

related to the resolution of various tax controversy matters.

We expect the effective tax rate for 2020 to be approximately 18 percent,

Marketing 1,934 1,674

absent unusual items.

Professional fees 1,597 1,699

Other general operating 5,396 4,109

Total noninterest expense $ 54,900 $ 53,154

Noninterest expense increased $1.7 billion to $54.9 billion in 2019 compared to

2018. The increase was primarily due to the

Balance Sheet Overview

Table 5 Selected Balance Sheet Data

December 31

(Dollars in millions) 2019 2018 % Change

Assets

Cash and cash equivalents $ 161,560 $ 177,404 (9 )%

Federal funds sold and securities borrowed or purchased under agreements to resell 274,597 261,131 5

Trading account assets 229,826 214,348 7

Debt securities 472,197 441,753 7

Loans and leases 983,426 946,895 4

Allowance for loan and lease losses (9,416) (9,601) (2 )

All other assets 321,889 322,577 —

Total assets $ 2,434,079 $ 2,354,507 3

Liabilities

Deposits $ 1,434,803 $ 1,381,476 4

Federal funds purchased and securities loaned or sold under agreements to repurchase 165,109 186,988 (12 )

Trading account liabilities 83,270 68,220 22

Short-term borrowings 24,204 20,189 20

Long-term debt 240,856 229,392 5

All other liabilities 221,027 202,917 9

Total liabilities 2,169,269 2,089,182 4

Shareholders’ equity 264,810 265,325 —

Total liabilities and shareholders’ equity $ 2,434,079 $ 2,354,507 3

Assets

Federal Funds Sold and Securities Borrowed or Purchased Under

At December 31, 2019, total assets were approximately $2.4 trillion, up $79.6 billion

Agreements to Resell

from December 31, 2018. The increase in assets was primarily due to higher loans

Federal funds transactions involve lending reserve balances on a short-term basis.

and leases and debt securities primarily funded by deposit growth.

Securities borrowed or purchased under agreements to resell are collateralized

lending transactions utilized to accommodate customer transactions, earn interest

Cash and Cash Equivalents

rate spreads, and obtain securities for settlement and for collateral. Federal funds

Cash and cash equivalents decreased $15.8 billion driven by investment of short-

sold and securities borrowed or purchased under agreements to resell increased

term excess cash into securities purchased under agreements to resell, debt

$13.5 billion due to investment of excess cash levels.

securities and growth in loans and leases.

25 Bank of America

Trading Account Assets

Trading account assets consist primarily of long positions in equity and fixed-

income securities including U.S. government and agency securities, corporate

securities and non-U.S. sovereign debt. Trading account assets increased $15.5

billion primarily driven by additional inventory inGlobal Markets to facilitate client

demand.

Debt Securities

Debt securities primarily include U.S. Treasury and agency securities, mortgage-

backed securities (MBS), principally agency MBS, non-U.S. bonds, corporate

bonds and municipal debt. We use the debt securities portfolio primarily to manage

interest rate and liquidity risk and to take advantage of market conditions that

create economically attractive returns on these investments. Debt securities

increased $30.4 billion primarily driven by the deployment of deposit inflows. For

more information on debt securities, see Note 4 – Securities to the Consolidated

Financial Statements.

Loans and Leases

Loans and leases increased $36.5 billion primarily due to net loan growth driven by

client demand for commercial loans and increases in residential mortgage. For

more information on the loan portfolio, see Credit Risk Management on page 53.

Allowance for Loan and Lease Losses

The allowance for loan and lease losses decreased$185 million primarily due to

the impact of improvements in credit quality from a stronger economy and

continued runoff and sales in the non-core consumer real estate portfolio. For more

information, see Allowance for Credit Losses on page 68.

Liabilities

A t December 31, 2019, total liabilities were approximately $2.2 trillion, up $80.1

billion from December 31, 2018, primarily due to deposit growth.

Deposits

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

wholesale deposits.

Federal Funds Purchased and Securities Loaned or Sold Under

Agreements to Repurchase

Federal funds transactions involve borrowing reserve balances on a short-term

basis. Securities loaned or sold under agreements to repurchase are collateralized

borrowing transactions utilized to accommodate customer transactions, earn

interest rate spreads and finance assets on the balance sheet. Federal funds

purchased and securities loaned or sold under agreements to repurchase

decreased $21.9 billion primarily driven by balance sheet efficiencies withinGlobal

Markets.

Trading Account Liabilities

Trading account liabilities consist primarily of short positions in equity and fixed-

income securities including U.S. Treasury and agency securities, corporate

securities and non-U.S. sovereign debt. Trading account liabilities increased $15.1

billion primarily due to higher levels of short positions in government and corporate

bonds driven by client demand within Global Markets.

Short-term Borrowings

Short-term borrowings provide an additional funding source and primarily consist

of Federal Home Loan Bank (FHLB) short-term borrowings, notes payable and

various other borrowings that generally have maturities of one year or less. Short-

term borrowings increased $4.0 billion primarily due to an increase in short-term

FHLB advances to manage liquidity needs. For more information on short-term

borrowings, see Note 11 – Federal Funds Sold or Purchased, Securities Financing

Agreements, Short-term Borrowings and Restricted Cash to the Consolidated

Financial Statements.

Long-term Debt

Long-term debt increased $11.5 billion primarily driven by debt issuances and

valuation adjustments, partially offset by maturities and redemptions. For more

information on long-term debt, see Note 12 – Long-term Debt to the Consolidated

Financial Statements.

All Other Liabilities

All other liabilities increased $18.1 billion primarily driven by an increase in broker-

dealer payables within Global Markets due to timing of unsettled trades and an

increase in lease liabilities due to implementation of the new lease accounting

standard.

Shareholders’ Equity

Shareholders’ equity decreased $515 million driven by returns of capital to

shareholders through share repurchases, common and preferred stock dividends

of $35.7 billion, as well as redemption of preferred stock, largely offset by earnings,

market value increases on debt securities and issuances of preferred stock.

Cash Flows Overview

The Corporation’s operating assets and liabilities support our global markets and

lending activities. We believe that cash flows from operations, available cash

balances and our ability to generate cash through short- and long-term debt are

sufficient to fund our operating liquidity needs. Our investing activities primarily

include the debt securities portfolio and loans and leases. Our financing activities

reflect cash flows primarily related to customer deposits, securities financing

agreements and long-term debt. For more information on liquidity, see Liquidity

Risk on page 50.

Bank of America 26

Supplemental Financial Data

In this Form 10-K, we present certain non-GAAP financial measures. Non-GAAP

financial measures exclude certain items or otherwise include components that

differ from the most directly comparable measures calculated in accordance with

accounting principles generally accepted in the United States of America (GAAP).

Non-GAAP financial measures are provided as additional useful information to

assess our financial condition, results of operations (including period-to-period

operating performance) or compliance with prospective regulatory requirements.

These non-GAAP financial measures are not intended as a substitute for GAAP

financial measures and may not be defined or calculated the same way as non-

GAAP financial measures used by other companies.

We view net interest income and related ratios and analyses on an FTE basis,

which when presented on a consolidated basis are non-GAAP financial measures.

To derive the FTE basis, net interest income is adjusted to reflect tax-exempt

income on an equivalent before-tax basis with a corresponding increase in income

tax expense. For purposes of this calculation, we use the federal statutory tax rate

of 21 percent for 2019 and 2018 (35 percent for 2017) and a representative state

tax rate. Net interest yield, which measures the basis points we earn over the cost

of funds, utilizes net interest income on an FTE basis. We believe that presentation

of these items on an FTE basis allows for comparison of amounts from both

taxable and tax-exempt sources and is consistent with industry practices.

We may present certain key performance indicators and ratios excluding

certain items (e.g., debit valuation adjustment (DVA) gains (losses)) which result in

non-GAAP financial measures. We believe that the presentation of measures that

exclude these items

is useful because such measures provide additional information to assess the

underlying operational performance and trends of our businesses and to allow

better comparison of period-to-period operating performance.

We also evaluate our business based on certain ratios that utilize tangible

equity, a non-GAAP financial measure. Tangible equity represents shareholders’

equity or common shareholders’

27 Bank of America

equity reduced by goodwill and intangible assets (excluding mortgage servicing

rights (MSRs)), net of related deferred tax liabilities ("adjusted" shareholders' equity

or common shareholders' equity). These measures are used to evaluate our use of

equity. In addition, profitability, relationship and investment models use both return

on average tangible common shareholders’ equity and return on average tangible

shareholders’ equity as key measures to support our overall growth goals. These

ratios are as follows:

●

Return on average tangible common shareholders’ equity measures our net

income applicable to common shareholders as a percentage of adjusted

average common shareholders’ equity. The tangible common equity ratio

represents adjusted ending common shareholders’ equity divided by total

tangible assets.

●

Return on average tangible shareholders' equity measures our net income as a

percentage of adjusted average total shareholders’ equity. The tangible equity

ratio represents adjusted ending shareholders’ equity divided by total tangible

assets.

●

Tangible book value per common share represents adjusted ending common

shareholders’ equity divided by ending common shares outstanding.

We believe that the use of ratios that utilize tangible equity provides additional

useful information because they present measures of those assets that can

generate income. Tangible book value per common share provides additional

useful information about the level of tangible assets in relation to outstanding

shares of common stock.

The aforementioned supplemental data and performance measures are

presented in Tables 6 and 7.

For more information on the reconciliation of these non-GAAP financial

measures to the corresponding GAAP financial measures, see Non-GAAP

Reconciliations on page 80.

Table 6 Five-year Summary of Selected Financial Data

(In millions, except per share information) 2019 2018 2017 2016 2015

Income statement

Net interest income $ 48,891 $ 48,162 $ 45,239 $ 41,486 $ 38,958

Noninterest income 42,353 42,858 41,887 42,012 44,007

Total revenue, net of interest expense 91,244 91,020 87,126 83,498 82,965

Provision for credit losses 3,590 3,282 3,396 3,597 3,161

Noninterest expense 54,900 53,154 54,517 54,880 57,617

Income before income taxes 32,754 34,584 29,213 25,021 22,187

Income tax expense 5,324 6,437 10,981 7,199 6,277

Net income 27,430 28,147 18,232 17,822 15,910

Net income applicable to common shareholders 25,998 26,696 16,618 16,140 14,427

Average common shares issued and outstanding 9,390.5 10,096.5 10,195.6 10,248.1 10,462.3

Average diluted common shares issued and outstanding 9,442.9 10,236.9 10,778.4 11,046.8 11,236.2

Performance ratios

Return on average assets 1.14 % 1.21 % 0.80 % 0.81 % 0.74 %

Return on average common shareholders’ equity 10.62 11.04 6.72 6.69 6.28

Return on average tangible common shareholders’ equity

(1)

14.86 15.55 9.41 9.51 9.16

Return on average shareholders’ equity 10.24 10.63 6.72 6.70 6.33

Return on average tangible shareholders’ equity

(1)

13.85 14.46 9.08 9.17 8.88

Total ending equity to total ending assets 10.88 11.27 11.71 12.17 11.92

Total average equity to total average assets 11.14 11.39 11.96 12.14 11.64

Dividend payout 23.65 20.31 24.24 15.94 14.49

Per common share data

Earnings $ 2.77 $ 2.64 $ 1.63 $ 1.57 $ 1.38

Diluted earnings 2.75 2.61

1.56 1.49 1.31

Dividends paid 0.66 0.54 0.39 0.25 0.20

Book value 27.32 25.13 23.80 23.97 22.48

Tangible book value

(1)

19.41 17.91 16.96 16.89 15.56

Market capitalization $ 311,209 $ 238,251 $ 303,681 $ 222,163 $ 174,700

Average balance sheet

Total loans and leases $ 958,416 $ 933,049 $ 918,731 $ 900,433 $ 876,787

Total assets 2,405,830 2,325,246 2,268,633 2,190,218 2,160,536

Total deposits 1,380,326 1,314,941 1,269,796 1,222,561 1,155,860

Long-term debt 201,623 200,399 194,882 204,826 240,059

Common shareholders’ equity 244,853 241,799 247,101 241,187 229,576

Total shareholders’ equity 267,889 264,748 271,289 265,843 251,384

Asset quality

(2)

Allowance for credit losses

(3)

$ 10,229 $ 10,398 $ 11,170 $ 11,999 $ 12,880

Nonperforming loans, leases and foreclosed properties

(4)

3,837 5,244 6,758 8,084 9,836

Allowance for loan and lease losses as a percentage of total loans and leases outstanding

(4)

0.97 % 1.02 % 1.12 % 1.26 % 1.37 %

Allowance for loan and lease losses as a percentage of total nonperforming loans and leases

(4)

265 194 161 149 130

Net charge-offs $ 3,648 $ 3,763 $ 3,979 $ 3,821 $ 4,338

Net charge-offs as a percentage of average loans and leases outstanding

(4)

0.38 % 0.41 % 0.44 % 0.43 % 0.50 %

Capital ratios at year end

(5)

Common equity tier 1 capital 11.2 % 11.6 % 11.5 % 10.8 % 9.8 %

Tier 1 capital 12.6 13.2 13.0 12.4 11.2

Total capital 14.7 15.1 14.8 14.2 12.8

Tier 1 leverage 7.9 8.4 8.6 8.8 8.4

Supplementary leverage ratio 6.4 6.8 n/a n/a n/a

Tangible equity

(1)

8.2 8.6 8.9 9.2 8.9

Tangible common equity

(1)

7.3 7.6 7.9 8.0 7.8

(1)

Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures. For more information on these ratios and corresponding reconciliations to GAAP financial measures, seeSupplemental Financial Data on

page 27 and Non-GAAP Reconciliations on page 80.

(2)

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

million of non-U.S. consumer credit card net charge-offs in 2016. The non-U.S. consumer credit card business was sold in 2017.

(3)

Includes the allowance for loan and leases losses and the reserve for unfunded lending

commitments.

(4)

Balances and ratios do not include loans accounted for under the fair value option. For additional exclusions from nonperforming loans, leases and foreclosed properties, seeConsumer Portfolio Credit Risk Management – Nonperforming Consumer

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

corresponding Table 36.

(5)

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

adequacy, see Capital Management on page 45.

n/a = not applicable

Bank of America 28

Table 7 Selected Quarterly Financial Data

2019 Quarters 2018 Quarters

(In millions, except per share information) Fourth Third Second First Fourth Third Second First

Income statement

Net interest income $ 12,140 $ 12,187 $ 12,189 $ 12,375 $ 12,504 $ 12,061 $ 11,828 $ 11,769

Noninterest income 10,209 10,620 10,895 10,629 10,173 10,663 10,721 11,301

Total revenue, net of interest expense 22,349 22,807 23,084 23,004 22,677 22,724 22,549 23,070

Provision for credit losses 941 779 857 1,013 905 716 827 834

Noninterest expense 13,239 15,169 13,268 13,224 13,074 13,014 13,224 13,842

Income before income taxes 8,169 6,859 8,959 8,767 8,698 8,994 8,498 8,394

Income tax expense 1,175 1,082 1,611 1,456 1,420 1,827 1,714 1,476

Net income 6,994 5,777 7,348 7,311 7,278 7,167 6,784 6,918

Net income applicable to common shareholders 6,748 5,272 7,109 6,869 7,039 6,701 6,466 6,490

Average common shares issued and outstanding 9,017.1 9,303.6 9,523.2 9,725.9 9,855.8 10,031.6 10,181.7 10,322.4

Average diluted common shares issued and outstanding 9,079.5 9,353.0 9,559.6 9,787.3 9,996.0 10,170.8 10,309.4 10,472.7

Performance ratios

Return on average assets 1.13 % 0.95 % 1.23 % 1.26 % 1.24 % 1.23 % 1.17 % 1.21 %

Four-quarter trailing return on average assets

(1)

1.14 1.17 1.24 1.22 1.21 1.00 0.93 0.86

Return on average common shareholders’ equity 11.00 8.48 11.62 11.42 11.57 10.99 10.75 10.85

Return on average tangible common shareholders’ equity

(2)

15.43 11.84 16.24 16.01 16.29 15.48 15.15 15.26

Return on average shareholders’ equity 10.40 8.48 11.00 11.14 10.95 10.74 10.26 10.57

Return on average tangible shareholders’ equity

(2)

14.09 11.43 14.88 15.10 14.90 14.61 13.95 14.37

Total ending equity to total ending assets 10.88 11.06 11.33 11.23 11.27 11.21 11.53 11.43

Total average equity to total average assets 10.89 11.21 11.17 11.28 11.30 11.42 11.42 11.41

Dividend payout 23.90 31.48 19.95 21.20 20.90 22.35 18.83 19.06

Per common share data

Earnings $ 0.75 $ 0.57 $ 0.75 $ 0.71 $ 0.71 $ 0.67 $ 0.64 $ 0.63

Diluted earnings 0.74 0.56 0.74 0.70 0.70 0.66 0.63 0.62

Dividends paid 0.18 0.18 0.15 0.15 0.15 0.15 0.12 0.12

Book value 27.32 26.96 26.41 25.57 25.13 24.33 24.07 23.74

Tangible book value

(2)

19.41 19.26 18.92 18.26 17.91 17.23 17.07 16.84

Market capitalization $ 311,209 $ 264,842 $ 270,935 $ 263,992 $ 238,251 $ 290,424 $ 282,259 $ 305,176

Average balance sheet

Total loans and leases $ 973,986 $ 964,733 $ 950,525 $ 944,020 $ 934,721 $ 930,736 $ 934,818 $ 931,915

Total assets 2,450,005 2,412,223 2,399,051 2,360,992 2,334,586 2,317,829 2,322,678 2,325,878

Total deposits 1,410,439 1,375,052 1,375,450 1,359,864 1,344,951 1,316,345 1,300,659 1,297,268

Long-term debt 206,026 202,620 201,007 196,726 201,056 203,239 199,448 197,787

Common shareholders’ equity 243,439 246,630 245,438 243,891 241,372 241,812 241,313 242,713

Total shareholders’ equity 266,900 270,430 267,975 266,217 263,698 264,653 265,181 265,480

Asset quality

Allowance for credit losses

(3)

$ 10,229 $ 10,242 $ 10,333 $ 10,379 $ 10,398 $ 10,526 $ 10,837 $ 11,042

Nonperforming loans, leases and foreclosed properties

(4)

3,837 3,723 4,452 5,145 5,244 5,449 6,181 6,694

Allowance for loan and lease losses as a percentage of total loans and leases

outstanding

(4)

0.97 % 0.98 % 1.00 % 1.02 % 1.02 % 1.05 % 1.08 % 1.11 %

Allowance for loan and lease losses as a percentage of total nonperforming loans and

leases

(4)

265 271 228 197 194 189 170 161

Net charge-offs $ 959 $ 811 $ 887 $ 991 $ 924 $ 932 $ 996 $ 911

Annualized net charge-offs as a percentage of average loans and leases outstanding

(4)

0.39 % 0.34 % 0.38 % 0.43 % 0.39 % 0.40 % 0.43 % 0.40 %

Capital ratios at period end

Common equity tier 1 capital 11.2 % 11.4 % 11.7 % 11.6 % 11.6 % 11.4 % 11.4 % 11.3 %

Tier 1 capital 12.6 12.9 13.3 13.1 13.2 12.9 13.0 13.0

Total capital 14.7 15.1 15.4 15.2 15.1 14.7 14.8 14.8

Tier 1 leverage 7.9 8.2 8.4 8.4 8.4 8.3 8.4 8.4

Supplementary leverage ratio 6.4 6.6 6.8 6.8 6.8 6.7 6.7 6.8

Tangible equity

(2)

8.2 8.4 8.7 8.5 8.6 8.5 8.7 8.7

Tangible common equity

(2)

7.3 7.4 7.6 7.6 7.6 7.5 7.7 7.6

Total loss-absorbing capacity and long-term debt metrics

(5)

Total loss-absorbing capacity to risk-weighted assets 24.6 % 24.8 % 25.5 % 24.8 %

Total loss-absorbing capacity to supplementary leverage exposure 12.5 12.7 13.0 12.8

Eligible long-term debt to risk-weighted assets 11.5 11.4 11.8 11.4

Eligible long-term debt to supplementary leverage exposure 5.8 5.8 6.0 5.9

(1)

Calculated as total net income for four consecutive quarters divided by annualized average assets for four consecutive

quarters.

(2)

Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures. For more information on these ratios and corresponding reconciliations to GAAP financial measures, seeSupplemental Financial Data on

page 27 and Non-GAAP Reconciliations on page 80.

(3)

Includes the allowance for loan and lease losses and the reserve for unfunded lending

commitments.

(4)

Balances and ratios do not include loans accounted for under the fair value option. For additional exclusions from nonperforming loans, leases and foreclosed properties, seeConsumer Portfolio Credit Risk Management – Nonperforming Consumer

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

corresponding Table 36.

(5)

Effective January 1, 2019, we became subject to minimum total loss-absorbing capacity and long-term debt requirements. For more information, seeCapital Management on

page 45.

29 Bank of America

Table 8 Average Balances and Interest Rates - FTE Basis

Interest Interest Interest

Average

Balance

Income/

Expense

(1)

Yield/

Rate

Average

Balance

Income/

Expense

(1)

Yield/

Rate

Average

Balance

Income/

Expense

(1)

Yield/

Rate

(Dollars in millions)

2019 2018 2017

Earning assets

Interest-bearing deposits with the Federal Reserve, non-U.S. central banks

and other banks $ 125,555 $ 1,823 1.45 % $ 139,848 $ 1,926 1.38 % $ 127,431 $ 1,122 0.88 %

Time deposits placed and other short-term investments 9,427 207 2.19 9,446 216 2.29 12,112 241 1.99

Federal funds sold and securities borrowed or purchased under agreements

to resell 279,610 4,843 1.73 251,328 3,176 1.26 222,818 1,806 0.81

Trading account assets 148,076 5,269 3.56 132,724 4,901 3.69 129,007 4,618 3.58

Debt securities 450,090 11,917 2.65 437,312 11,837 2.66 435,005 10,626 2.44

Loans and leases

(2)

:

Residential mortgage 220,552 7,651 3.47 207,523 7,294 3.51 197,766 6,831 3.45

Home equity 44,600 2,194 4.92 53,886 2,573 4.77 62,260 2,608 4.19

Credit card 94,488 10,166 10.76 94,612 9,579 10.12 91,068 8,791 9.65

Non-U.S. credit card

(3)

— — — — — — 3,929 358 9.12

Direct/Indirect and other consumer

(4)

90,656 3,261 3.60 93,036 3,104 3.34 96,002 2,734 2.85

Total consumer 450,296 23,272 5.17 449,057 22,550 5.02 451,025 21,322 4.73

U.S. commercial 321,467 13,016 4.05 304,387 11,937 3.92 292,452 9,765 3.34

Non-U.S. commercial 103,918 3,547 3.41 97,664 3,220 3.30 95,005 2,566 2.70

Commercial real estate

(5)

62,044 2,741 4.42 60,384 2,618 4.34 58,502 2,116 3.62

Commercial lease financing 20,691 718 3.47 21,557 698 3.24 21,747 706 3.25

Total commercial 508,120 20,022 3.94 483,992 18,473 3.82 467,706 15,153 3.24

Total loans and leases

(3)

958,416 43,294 4.52 933,049 41,023 4.40 918,731 36,475 3.97

Other earning assets 69,089 4,478 6.48 76,524 4,300 5.62 76,957 3,224 4.19

Total earning assets 2,040,263 71,831 3.52 1,980,231 67,379 3.40 1,922,061 58,112 3.02

Cash and due from banks 26,193 25,830 27,995

Other assets, less allowance for loan and lease losses 339,374 319,185 318,577

Total assets $ 2,405,830 $ 2,325,246 $ 2,268,633

Interest-bearing liabilities

U.S. interest-bearing deposits:

Savings $ 52,020 $ 5 0.01 % $ 54,226 $ 6 0.01 % $ 53,783 $ 5 0.01 %

NOW and money market deposit accounts 741,126 4,471 0.60 676,382 2,636 0.39 628,647 873 0.14

Consumer CDs and IRAs 47,577 471 0.99 39,823 157 0.39 44,794 121 0.27

Negotiable CDs, public funds and other deposits 66,866 1,407 2.11 50,593 991 1.96 36,782 354 0.96

Total U.S. interest-bearing deposits 907,589 6,354 0.70 821,024 3,790 0.46 764,006 1,353 0.18

Non-U.S. interest-bearing deposits:

Banks located in non-U.S. countries 1,936 20 1.04 2,312 39 1.69 2,442 21 0.85

Governments and official institutions 181 — 0.05 810 — 0.01 1,006 10 0.95

Time, savings and other 69,351 814 1.17 65,097 666 1.02 62,386 547 0.88

Total non-U.S. interest-bearing deposits 71,468 834 1.17 68,219 705 1.03 65,834 578 0.88

Total interest-bearing deposits 979,057 7,188 0.73 889,243 4,495 0.51 829,840 1,931 0.23

Federal funds purchased, securities loaned or sold under agreements to

repurchase, short-term borrowings and other interest-bearing liabilities 276,432 7,208 2.61 269,748 5,839 2.17 274,975 3,146 1.14

Trading account liabilities 45,449 1,249 2.75 50,928 1,358 2.67 45,518 1,204 2.64

Long-term debt 201,623 6,700 3.32 200,399 6,915 3.45 194,882 5,667 2.91

Total interest-bearing liabilities 1,502,561 22,345 1.49 1,410,318 18,607 1.32 1,345,215 11,948 0.89

Noninterest-bearing sources:

Noninterest-bearing deposits 401,269 425,698 439,956

Other liabilities

(6)

234,111 224,482 212,173

Shareholders’ equity 267,889 264,748 271,289

Total liabilities and shareholders’ equity $ 2,405,830 $ 2,325,246 $ 2,268,633

Net interest spread 2.03 % 2.08 % 2.13 %

Impact of noninterest-bearing sources 0.40 0.37 0.27

Net interest income/yield on earning assets

(7)

$ 49,486 2.43 % $ 48,772 2.45 % $ 46,164 2.40 %

(1)

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

page 74.

(2)

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

basis.

(3)

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

2017.

(4)

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

respectively.

(5)

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

respectively.

(6)

Includes $35.5 billion, $30.4 billion and $30.3 billion of structured notes and liabilities for 2019, 2018 and 2017,

respectively.

(7)

Net interest income includes FTE adjustments of$595 million, $610 million

respectively.

and $925 million for 2019, 2018 and 2017,

Bank of America 30

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

Due to Change in

(1)

Due to Change in

(1)

Volume Rate Net Change Volume Rate Net Change

(Dollars in millions) From 2018 to 2019 From 2017 to 2018

Increase (decrease) in interest income

Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks $ (193 ) $ 90 $ (103 ) $ 109 $ 695 $ 804

Time deposits placed and other short-term investments — (9 ) (9 ) (53 ) 28 (25 )

Federal funds sold and securities borrowed or purchased under agreements to resell 347 1,320 1,667 230 1,140 1,370

Trading account assets 563 (195 ) 368 134 149 283

Debt securities 135 (55 ) 80 44 1,167 1,211

Loans and leases:

Residential mortgage 447 (90 ) 357 329 134 463

Home equity (446 ) 67 (379 ) (350 ) 315 (35 )

Credit card (17 ) 604 587 339 449 788

Non-U.S. credit card

(2)

— — — (358 ) — (358 )

Direct/Indirect and other consumer (76 ) 233 157 (82 ) 452 370

Total consumer 722 1,228

U.S. commercial 665 414 1,079 402 1,770 2,172

Non-U.S. commercial 209 118 327 71 583 654

Commercial real estate 75 48 123 70 432 502

Commercial lease financing (28 ) 48 20 (5 ) (3 ) (8 )

Total commercial 1,549 3,320

Total loans and leases 2,271 4,548

Other earning assets (417 ) 595 178 (18 ) 1,094 1,076

Total interest income $ 4,452

$ 9,267

Increase (decrease) in interest expense

U.S. interest-bearing deposits:

Savings $ (1 ) $ — $ (1 ) $ — $ 1 $ 1

NOW and money market deposit accounts 254 1,581 1,835 74 1,689 1,763

Consumer CDs and IRAs 29 285 314 (13 ) 49 36

Negotiable CDs, public funds and other deposits 320 96 416 132 505 637

Total U.S. interest-bearing deposits 2,564 2,437

Non-U.S. interest-bearing deposits:

Banks located in non-U.S. countries (6 ) (13 ) (19 ) (1 ) 19 18

Governments and official institutions — — — (2 ) (8 ) (10 )

Time, savings and other 41 107 148 26 93 119

Total non-U.S. interest-bearing deposits 129 127

Total interest-bearing deposits 2,693 2,564

Federal funds purchased, securities loaned or sold under agreements to repurchase, short-term borrowings and

other interest-bearing liabilities 160 1,209 1,369 (71 ) 2,764 2,693

Trading account liabilities (145 ) 36 (109 ) 140 14 154

Long-term debt 41 (256 ) (215 ) 165 1,083 1,248

Total interest expense 3,738 6,659

Net increase in net interest income

(3)

$ 714 $ 2,608

(1)

The changes for each category of interest income and expense are divided between the portion of change attributable to the variance in volume and the portion of change attributable to the variance in rate for that category. The unallocated change in rate

or volume variance is allocated between the rate and volume variances.

(2)

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

2017.

(3)

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

2018.

31 Bank of America

Business Segment Operations

Segment Description and Basis of Presentation

We report our results of operations through the following four business segments:Consumer Banking, GWIM, Global Banking and Global Markets, with the remaining

operations recorded in All Other. We manage our segments and report their results on an FTE basis. The primary activities, products and businesses of the business

segments and All Other are shown below.

We periodically review capital allocated to our businesses and allocate capital

annually during the strategic and capital planning processes. We utilize a

methodology that considers the effect of regulatory capital requirements in addition

to internal risk-based capital models. Our internal risk-based capital models use a

risk-adjusted methodology incorporating each segment’s credit, market, interest

rate, business and operational risk components. For more information on the

nature of these risks, see Managing Risk on page 42. The capital allocated to the

business segments is referred to as allocated capital. Allocated equity in the

reporting

units is comprised of allocated capital plus capital for the portion of goodwill and

intangibles specifically assigned to the reporting unit. For more information,

including the definition of a reporting unit, see Note 8 – Goodwill and Intangible

Assets to the Consolidated Financial Statements.

For more information on our presentation of financial information on an FTE

basis, see Supplemental Financial Data on page 27, and for reconciliations to

consolidated total revenue, net income and year-end total assets, see Note 24 –

Business Segment Information to the Consolidated Financial Statements.

Bank of America 32

Consumer Banking

Deposits Consumer Lending Total Consumer Banking

(Dollars in millions) 2019 2018 2019 2018 2019 2018 % Change

Net interest income $ 16,904 $ 15,939 $ 11,254 $ 11,086 $ 28,158 $ 27,025 4 %

Noninterest income:

Card income (33 ) (33 ) 5,117 5,135 5,084 5,102 —

Service charges 4,217 4,298 2 2 4,219 4,300 (2 )

All other income 832 762 294 429 1,126 1,191 (5 )

Total noninterest income 5,016 5,027 5,413 5,566 10,429 10,593 (2 )

Total revenue, net of interest expense 21,920 20,966 16,667 16,652 38,587 37,618 3

Provision for credit losses 269 195 3,503 3,469 3,772 3,664 3

Noninterest expense 10,682 10,657 6,936 7,015 17,618 17,672 —

Income before income taxes 10,969 10,114 6,228 6,168 17,197 16,282 6

Income tax expense 2,687 2,578 1,526 1,572 4,213 4,150 2

Net income $ 8,282 $ 7,536 $ 4,702 $ 4,596 $ 12,984 $ 12,132 7

Effective tax rate

(1)

24.5 % 25.5 %

Net interest yield 2.40 % 2.34 % 3.80 % 3.97 % 3.81 3.77

Return on average allocated capital 69 63 19 18 35 33

Efficiency ratio 48.73 50.83 41.61 42.12 45.66 46.98

Balance

Sheet

Average

Total loans and leases $ 5,373 $ 5,233 $ 295,562 $ 278,574

$ 300,935 $ 283,807 6 %

Total earning assets

(2)

703,444 682,592 296,051 279,217 738,770 717,189 3

Total assets

(2)

735,232 710,925 306,169 290,068 780,676 756,373 3

Total deposits 702,908 678,640 5,368 5,533 708,276 684,173 4

Allocated capital 12,000 12,000 25,000 25,000 37,000 37,000 —

Year end

Total loans and leases $ 5,472 $ 5,470 $ 311,942 $ 288,865 $ 317,414 $ 294,335 8 %

Total earning assets

(2)

724,536 694,672 312,684 289,249 760,137 728,813 4

Total assets

(2)

758,385 724,019 322,717 299,970 804,019 768,881 5

Total deposits 725,598 691,666 5,080 4,480 730,678 696,146 5

(1)

Estimated at the segment level

only.

(2)

In segments and businesses where the total of liabilities and equity exceeds assets, we allocate assets fromAll Other to match the segments’ and businesses’ liabilities and allocated shareholders’ equity. As a result, total earning assets and total assets

of the businesses may not equal total Consumer Banking.

Consumer Banking, which is comprised of Deposits and Consumer Lending,offers $17.6 billion primarily driven by lower FDIC expense and operating efficiencies,

a diversified range of credit, banking and investment products and services to partially offset by continued investment in the business.

consumers and small businesses. Deposits and Consumer Lending include the net The return on average allocated capital was35 percent, up from 33 percent,

impact of migrating customers and their related deposit, brokerage asset and loan driven by higher net income. For information on capital allocated to the business

balances between Deposits, Consumer Lending and GWIM, as well as other client- segments, see Business Segment Operations on page 32.

managed businesses. Our customers and clients have access to a coast to coast

Deposits

network including financial centers in 38 states and the District of Columbia. Our

Deposits includes the results of consumer deposit activities which consist of a

network includes approximately 4,300 financial centers, approximately 16,800

comprehensive range of products provided to consumers and small businesses.

ATMs, nationwide call centers, and leading digital banking platforms with more

Our deposit products include traditional savings accounts, money market savings

than 38 million active users, including over29 million active mobile users.

accounts, CDs and IRAs, and noninterest- and interest-bearingchecking accounts,

Consumer Banking Results

as well as investment accounts and products. Net interest income is allocated to

Net income for Consumer Banking increased $852 million to $13.0 billion in 2019

the deposit products using our funds transfer pricing process that matches assets

compared to 2018 primarily driven by higher net interest income and lower

and liabilities with similar interest rate sensitivity and maturity characteristics.

noninterest expense, partially offset by lower noninterest income. Net interest

Deposits generates fees such as account service fees, non-sufficient funds fees,

income increased $1.1 billion to $28.2 billion primarily due to growth in deposits

overdraft charges and ATM fees, as well as investment and brokerage fees from

and loans. Noninterest income decreased $164 million to $10.4 billion driven by

Merrill Edge accounts. Merrill Edge is an integrated investing and banking service

lower service charges and lower mortgage banking income, largely offset by higher

targeted at customers with less than $250,000 in investable assets. Merrill Edge

results from ALM activities.

provides investment advice and guidance, client brokerage asset services, a self-

The provision for credit losses increased $108 million to $3.8 billion driven by

directed online investing platform and key banking capabilities including access to

overdrafts and portfolio seasoning in the credit card portfolio. Noninterest expense

the Corporation’s network of financial centers and ATMs.

decreased $54 million to

33 Bank of America

Net income for Deposits increased $746 million to $8.3 billion driven by higher

net interest income. Net interest income increased $965 million to $16.9 billion

primarily due to growth in deposits and pricing discipline. Noninterest income

decreased $11 million to $5.0 billion primarily driven by lower service charges,

largely offset by higher results from ALM activities.

The provision for credit losses increased $74 million to $269 million in 2019.

Noninterest expense increased $25 million to $10.7 billion driven by continued

investment in the business, partially offset by lower FDIC expense and operating

efficiencies.

Average deposits increased $24.3 billion to $702.9 billion in 2019 driven by

strong organic growth. Growth in checking and time deposits of $27.0 billion was

partially offset by a decline in traditional savings and money market savings of $2.5

billion.

Key Statistics – Deposits

2019 2018

Total deposit spreads (excludes noninterest costs)

(1)

2.34 % 2.14 %

Year end

Consumer investment assets (in millions)

(2)

$ 240,132 $ 185,881

Active digital banking users (units in thousands)

(3)

38,266 36,264

Active mobile banking users (units in thousands) 29,174 26,433

Financial centers 4,300 4,341

ATMs 16,788 16,255

(1)

Includes deposits held in Consumer

Lending.

(2)

Includes client brokerage assets, deposit sweep balances and AUM inConsumer

Banking.

(3)

Active digital banking users represents mobile and/or online

users.

Consumer investment assets increased $54 billion in 2019 driven by strong

market performance and client flows. Active mobile banking users increased 3

million reflecting continuing changes in our customers’ banking preferences. The

number of financial centers declined by a net 41 reflecting changes in customer

preferences to self-service options as we continue to optimize our consumer

banking network and improve our cost to serve.

Consumer Lending

Consumer Lending offers products to consumers and small businesses across the

U.S. The products offered include credit and debit cards, residential mortgages and

home equity loans, and direct and indirect loans such as automotive, recreational

vehicle and consumer personal loans. In addition to earning net interest spread

revenue on its lending activities, Consumer Lending generates interchange

revenue from credit and debit card transactions, late fees, cash advance fees,

annual credit card fees, mortgage banking fee income and other miscellaneous

fees. Consumer Lending products are available to our customers through our retail

network, direct telephone, and online and mobile channels. Consumer Lending

results also include the impact of servicing residential mortgages and home equity

loans in the core portfolio, including loans held on the balance sheet of Consumer

Lending and loans serviced for others.

Net income for Consumer Lending increased $106 million to $4.7 billion driven

by higher net interest income and lower noninterest expense, partially offset by

lower noninterest income. Net interest income increased $168 million to $11.3

billion driven by loan growth. Noninterest income decreased $153 million to $5.4

billion primarily driven by lower mortgage banking income and lower card income.

The provision for credit losses increased $34 million to $3.5 billion primarily

driven by portfolio seasoning in the credit card portfolio. Noninterest expense

decreased $79 million to $6.9 billion primarily driven by operating efficiencies.

Average loans increased $17.0 billion to $295.6 billion primarily driven by

increases in residential mortgages and credit card, partially offset by lower home

equity loans.

Key Statistics – Consumer Lending

(Dollars in millions) 2019 2018

Total credit card

(1)

Gross interest yield 10.76 % 10.12 %

Risk-adjusted margin 8.28 8.25

New accounts (in thousands) 4,320 4,544

Purchase volumes $ 277,852 $ 264,706

Debit card purchase volumes $ 360,672 $ 338,810

(1)

I n c l u d e s G W I M ' s credit card

portfolio.

During 2019, the total credit card risk-adjusted marginincreased 3 bps

compared to 2018, primarily driven by a portfolio shift away from promotional-rate

loans. Total credit card purchase volumes increased $13.1 billion to $277.9 billion,

and debit card purchase volumes increased $21.9 billion to $360.7 billion,

reflecting higher levels of consumer spending.

Key Statistics – Loan Production

(1)

(Dollars in millions) 2019 2018

Total

(2)

:

First mortgage $ 72,467 $ 41,195

Home equity 11,131 14,869

Consumer Banking:

First mortgage $ 49,179 $ 27,280

Home equity 9,755 13,251

(1)

The loan production amounts represent the unpaid principal balance of loans and, in the case of home equity, the

principal amount of the total line of credit.

(2)

In addition to loan production in Consumer Banking, there is also first mortgage and home equity loan production in

GWIM.

First mortgage loan originations in Consumer Banking and for the total

Corporation increased $21.9 billion and $31.3 billion in 2019 primarily driven by a

lower interest rate environment driving higher first-lien mortgage refinances.

Home equity production in Consumer Banking and for the total Corporation

decreased $3.5 billion and $3.7 billion in 2019 primarily driven by lower demand.

Bank of America 34

Global Wealth & Investment Management

(Dollars in millions) 2019 2018 % Change

Net interest income $ 6,504 $ 6,265 4 %

Noninterest income:

Investment and brokerage services 11,870 11,959 (1)

All other income 1,163 1,229 (5 )

Total noninterest income 13,033 13,188 (1)

Total revenue, net of interest expense 19,537 19,453 —

Provision for credit losses 82 86 (5)

Noninterest expense 13,823 14,015 (1)

Income before income taxes 5,632 5,352 5

Income tax expense 1,380 1,364 1

Net income $ 4,252 $ 3,988 7

Effective tax rate 24.5 % 25.5 %

Net interest yield 2.33 2.41

Return on average allocated capital 29 28

Efficiency ratio 70.75 72.04

Balance Sheet

Average

Total loans and leases $ 168,910 $ 161,342 5 %

Total earning assets 279,684 259,808 8

Total assets 292,003 277,220 5

Total deposits 256,505 241,256 6

Allocated capital 14,500 14,500 —

Year end

Total loans and leases $ 176,600 $ 164,854 7 %

Total earning assets 287,212 287,199 —

Total assets 299,756 305,907 (2 )

Total deposits 263,103 268,700 (2 )

GWIM consists of two primary businesses: Merrill Lynch Global Wealth Net interest income increased $239 million to $6.5 billion due to the impact of

Management (MLGWM) and Bank of America Private Bank. growth in deposits and loans.

MLGWM’s advisory business provides a high-touch client experience through a Noninterest income, which primarily includes investment and brokerage

network of financial advisors focused on clients with over $250,000 in total services income, decreased $155 million to $13.0 billion. The decrease was

investable assets. MLGWM provides tailored solutions to meet clients’ needs primarily driven by declines in AUM pricing and transactional revenue, partially

through a full set of investment management, brokerage, banking and retirement offset by the impact of positive AUM flows and higher market valuations.

products. Noninterest expense decreased $192 million to $13.8 billion, as investments for

Bank of America Private Bank, together with MLGWM’s Private Wealth business growth were more than offset by lower amortization of intangibles and

Management business, provides comprehensive wealth management solutions FDIC expense.

targeted to high net worth and ultra high net worth clients, as well as customized The return on average allocated capital was29 percent, up from 28 percent,

solutions to meet clients’ wealth structuring, investment management, trust and due to higher net income.

banking needs, including specialty asset management services. MLGWM revenue of $16.1 billion increased one percent primarily driven by

Net income for GWIM increased $264 million to $4.3 billion due to lower higher net interest income and the impact of positive AUM flows and higher market

noninterest expense and higher revenue. The operating margin was 29 percent valuations, partially offset by lower transactional volumes and AUM pricing.

compared to 28 percent in 2018. Bank of America Private Bank revenue of$3.4 billion decreased one percent

primarily due to lower net interest income.

35 Bank of America

Key Indicators and Metrics

(Dollars in millions, except as noted) 2019 2018

Revenue by Business

Merrill Lynch Global Wealth Management $ 16,111 $ 15,998

Bank of America Private Bank 3,426 3,455

Total revenue, net of interest expense $ 19,537 $ 19,453

Client Balances by Business, at year end

Merrill Lynch Global Wealth Management $ 2,558,102 $ 2,193,562

Bank of America Private Bank 489,690 427,294

Total client balances $ 3,047,792 $ 2,620,856

Client Balances by Type, at year end

Assets under management $ 1,275,555 $ 1,072,234

Brokerage and other assets 1,372,733 1,162,997

Deposits 263,103 268,700

Loans and leases

(1)

179,296 167,938

Less: Managed deposits in assets under management (42,895) (51,013)

Total client balances $ 3,047,792 $ 2,620,856

Assets Under Management Rollforward

Assets under management, beginning of year $ 1,072,234 $ 1,121,383

Net client flows 24,865 44,607

Market valuation/other 178,456 (93,756)

Total assets under management, end of year $ 1,275,555 $ 1,072,234

Associates, at year end

Number of financial advisors 17,458 17,518

Total wealth advisors, including financial advisors 19,440 19,459

Total primary sales professionals, including financial advisors and wealth advisors 20,586 20,586

Merrill Lynch Global Wealth Management Metric

Financial advisor productivity (in thousands) $ 1,082 $ 1,034

Bank of America Private Bank Metric, at year end

Primary sales professionals 1,766 1,748

(1)

Includes margin receivables which are classified in customer and other receivables on the Consolidated Balance

Sheet.

Client Balances

net change in clients’ AUM balances over a specified period of time, excluding

market appreciation/depreciation and other adjustments.

Client balances managed under advisory and/or discretion of GWIM are AUM and

Client balances increased $426.9 billion, or 16 percent, to $3.0 trillion at

are typically held in diversified portfolios. Fees earned on AUM are calculated as a

December 31, 2019 compared to December 31, 2018. The increase in client

percentage of clients’ AUM balances. The asset management fees charged to

balances was primarily due to higher market valuations and positive net flows over

clients per year depend on various factors, but are commonly driven by the

the last year.

breadth of the client’s relationship. The net client AUM flows represent the

Bank of America 36

Global Banking

(Dollars in millions)

Net interest income

Noninterest income:

Service charges

Investment banking fees

All other income

Total noninterest income

Total revenue, net of interest expense

Provision for credit losses

Noninterest expense

Income before income taxes

Income tax expense

Net income

Effective tax rate

Net interest yield

Return on average allocated capital

Efficiency ratio

Balance Sheet

Average

Total loans and leases

Total earning assets

Total assets

Total deposits

Allocated capital

Year end

Total loans and leases

Total earning assets

Total assets

Total deposits

n/m = not meaningful

Global Banking, which includes Global Corporate Banking, Global Commercial

Banking, Business Banking and Global Investment Banking, provides a wide range

of lending-related products and services, integrated working capital management

and treasury solutions, and underwriting and advisory services through our

network of offices and client relationship teams. Our lending products and services

include commercial loans, leases, commitment facilities, trade finance, commercial

real estate lending and asset-based lending. Our treasury solutions business

includes treasury management, foreign exchange and short-term investing options.

We also provide investment banking products to our clients such as debt and

equity underwriting and distribution, and merger-related and other advisory

services. Underwriting debt and equity issuances, fixed-income and equity

research, and certain market-based activities are executed through our global

broker-dealer affiliates, which are our primary dealers in several countries. Within

Global Banking, Global Commercial Banking clients generally include middle-

market companies, commercial real estate firms and not-for-profit companies.

Global Corporate Banking clients generally include large global corporations,

financial institutions and leasing clients. Business Banking clients include mid-

sized U.S.-based businesses requiring customized and integrated financial advice

and solutions.

Net income for Global Banking decreased $257 million to $8.1 billion in 2019

compared to 2018 primarily driven by higher provision for credit losses and

noninterest expense partially offset by higher revenue.

37 Bank of America

2019 2018 % Change

$ 10,675 $ 10,993 (3 )%

3,015 3,027 —

3,137 2,891 9

3,656 3,090 18

9,808 9,008 9

20,483 20,001 2

414 8 n/m

9,017 8,745 3

11,052 11,248 (2)

2,984 2,923 2

$ 8,068 $ 8,325 (3 )

27.0 % 26.0 %

2.75 3.01

20 20

44.02 43.72

$ 374,304 $ 354,236 6 %

388,152 364,748 6

443,083 425,675 4

362,731 336,337 8

41,000 41,000 —

$ 379,268 $ 365,717 4 %

407,180 377,812 8

464,032 442,330 5

383,180 360,248 6

Revenue increased $482 million to $20.5 billion driven by higher noninterest

income, partially offset by lower net interest income. Net interest income

decreased $318 million to $10.7 billion primarily due to the allocation of ALM

results and credit spread compression, partly offset by growth in loan and deposit

balances.

Noninterest income increased $800 million to $9.8 billion primarily due to higher

leasing-related revenue and investment banking fees. The provision for credit

losses increased $406 million to $414 million primarily driven by reserve releases

in 2018 primarily from energy exposures. Noninterest expense increased $272

million primarily due to continued investment in the business partially offset by

lower FDIC expense.

The return on average allocated capital was20 percent in 2019 and 2018. For

information on capital allocated to the business segments, see Business Segment

Operations on page 32.

Global Corporate, Global Commercial and Business Banking

Global Corporate, Global Commercial and Business Banking each include

Business Lending and Global Transaction Services activities. Business Lending

includes various lending-related products and services, and related hedging

activities, including commercial loans, leases, commitment facilities, trade finance,

real estate lending and asset-based lending. Global Transaction Services includes

deposits, treasury management, credit card, foreign exchange and short-term

investment products.

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

Global Corporate, Global Commercial and Business Banking

Global Corporate Banking Global Commercial Banking Business Banking Total

(Dollars in millions) 2019 2018 2019 2018 2019 2018 2019 2018

Revenue

Business Lending $ 3,994 $ 3,904 $ 4,132 $ 4,330 $ 363 $ 431 $ 8,489 $ 8,665

Global Transaction Services 3,994 3,832 3,499 3,346 1,064 987 8,557 8,165

Total revenue, net of interest expense $ 7,988 $ 7,736 $ 7,631 $ 7,676 $ 1,427 $ 1,418 $ 17,046 $ 16,830

Balance Sheet

Average

Total loans and leases $ 177,713 $ 163,516 $ 181,485 $ 174,279 $ 15,058 $ 16,432 $ 374,256 $ 354,227

Total deposits 177,924 163,559 144,620 135,337 40,196 37,462 362,740 336,358

Year end

Total loans and leases $ 181,409 $ 174,378 $ 182,727 $ 175,937 $ 15,152 $ 15,402 $ 379,288 $ 365,717

Total deposits 185,352 173,183 157,322 149,118 40,504 37,973 383,178 360,274

Business Lending revenue decreased $176 million in 2019 compared to 2018. banking fees, the following table presents total Corporation investment banking

The decrease was primarily driven by the allocation of ALM results, partly offset by fees and the portion attributable to Global Banking.

higher leasing-related revenue.

Global Transaction Services revenue increased $392 million in 2019 compared

to 2018 driven by the impact of higher deposit balances.

Investment Banking Fees

Average loans and leases increased six percent in 2019 compared to 2018

driven by growth in the commercial and industrial portfolio. Average deposits

Global Banking Total Corporation

increased eight percent due to growth in domestic and international interest-

(Dollars in millions) 2019 2018 2019 2018

bearing balances.

Products

Global Investment Banking

Advisory $ 1,336 $ 1,153 $ 1,460 $ 1,258

Client teams and product specialists underwrite and distribute debt, equity and loan

Debt issuance 1,348 1,326 3,107 3,084

products, and provide advisory services and tailored risk management solutions.

The economics of certain investment banking and underwriting activities are

Equity issuance 453 412 1,259 1,183

shared primarily between Global Banking and Global Markets under an internal Gross investment banking

revenue-sharing arrangement. Global Banking originates certain deal-related

fees 3,137 2,891 5,826 5,525

transactions with our corporate and commercial clients that are executed and

Self-led deals (62) (68 ) (184) (198 )

distributed by Global Markets. To provide a complete discussion of our

Total investment banking

consolidated investment

fees $ 3,075 $ 2,823 $ 5,642 $ 5,327

Total Corporation investment banking fees, excluding self-led deals, of $5.6

billion, which are primarily included within Global Banking and Global Markets,

increased six percent due to increases in advisory fees as well as higher equity

issuance fees.

Bank of America 38

Global Markets

(Dollars in millions) 2019 2018 % Change

Net interest income $ 3,915 $ 3,857 2 %

Noninterest income:

Investment and brokerage services 1,738 1,780 (2 )

Investment banking fees 2,288 2,296 —

Market making and similar activities 7,065 7,260 (3 )

All other income 608 990 (39)

Total noninterest income 11,699 12,326 (5)

Total revenue, net of interest expense 15,614 16,183 (4)

Provision for credit losses (9) — n/m

Noninterest expense 10,722 10,835 (1 )

Income before income taxes 4,901 5,348 (8 )

Income tax expense 1,397 1,390 1

Net income $ 3,504 $ 3,958 (11 )

Effective tax rate 28.5 % 26.0 %

Return on average allocated capital 10 11

Efficiency ratio 68.67 66.96

Balance Sheet

Average

Trading-related assets:

Trading account securities $ 246,335 $ 215,112 15 %

Reverse repurchases 116,883 125,084 (7 )

Securities borrowed 83,216 78,889 5

Derivative assets 43,271 46,047 (6 )

Total trading-related assets 489,705 465,132 5

Total loans and leases 71,334 72,651 (2)

Total earning assets 476,225 473,383 1

Total assets 679,297 666,000 2

Total deposits 31,380 31,209 1

Allocated capital 35,000 35,000 —

Year end

Total trading-related assets $ 452,496 $ 447,998 1 %

Total loans and leases 72,993 73,928 (1)

Total earning assets 471,701 457,224 3

Total assets 641,806 641,923 —

Total deposits 34,676 37,841 (8)

n/m = not meaningful

Global Markets offers sales and trading services and research services to The following explanations for year-over-year changes in results forGlobal

institutional clients across fixed-income, credit, currency, commodity and equity Markets, including those disclosed under Sales and Trading Revenue, exclude net

businesses. Global Markets product coverage includes securities and derivative DVA, but the explanations would be the same if net DVA was included.

products in both the primary and secondary markets. Global Markets provides Net income for Global Markets decreased $454 million to $3.5 billion in 2019

market-making, financing, securities clearing, settlement and custody services compared to 2018. Net DVA losses were $222 million compared to losses of $162

globally to our institutional investor clients in support of their investing and trading million in 2018. Excluding net DVA, net income decreased $408 million to $3.7

activities. We also work with our commercial and corporate clients to provide risk billion. These decreases were primarily driven by a decrease in revenue, partially

management products using interest rate, equity, credit, currency and commodity offset by lower noninterest expense.

derivatives, foreign exchange, fixed-income and mortgage-related products. As a Revenue declined $569 million to $15.6 billion as sales and trading revenue

result of our market-making activities in these products, we may be required to decreased $492 million, and excluding net DVA, decreased $432 million. These

manage risk in a broad range of financial products including government securities, decreases were primarily driven by a decline in Equities revenue. Noninterest

equity and equity-linked securities, high-grade and high-yield corporate debt expense decreased $113 million to $10.7 billion, primarily driven by lower revenue-

securities, syndicated loans, MBS, commodities and asset-backed securities. The related expenses.

economics of certain investment banking and underwriting activities are shared Average total assets increased $13.3 billion to $679.3 billion, primarily due to

primarily between Global Markets and Global Banking under an internal revenue- increased levels of inventory in fixed-income, currencies and commodities (FICC)

sharing arrangement. Global Banking originates certain deal-related transactions to facilitate expected client demand. Year-end total assets were largely unchanged

with our corporate and commercial clients that are executed and distributed by at $641.8 billion.

Global Markets. For information on investment banking fees on a consolidated The return on average allocated capital was10 percent, down from 11 percent,

basis, see page 38. reflecting lower net income. For information on

39 Bank of America

capital allocated to the business segments, seeBusiness Segment Operations on

page 32.

Sales and Trading Revenue

Sales and trading revenue includes unrealized and realized gains and losses on

trading and other assets which are included in market making and similar

activities, net interest income, and fees primarily from commissions on equity

securities. Sales and trading revenue is segregated into fixed-income (government

debt obligations, investment and non-investment grade corporate debt obligations,

commercial MBS, residential mortgage-backed securities, collateralized loan

obligations, interest rate and credit derivative contracts), currencies (interest rate

and foreign exchange contracts), commodities (primarily futures, forwards, swaps

and options) and equities (equity-linked derivatives and cash equity activity). The

following table and related discussion present sales and trading revenue,

substantially all of which is in Global Markets, with the remainder in Global

Banking. In addition, the following table and related discussion present sales and

trading revenue, excluding net DVA, which is a non-GAAP financial measure. For

more information on net DVA, see Supplemental Financial Data on page 27.

All Other

(Dollars in millions)

Net interest income

Noninterest income (loss)

Total revenue, net of interest expense

Provision for credit losses

Noninterest expense

Loss before income taxes

Income tax benefit

Net loss

Balance Sheet

Average

Total loans and leases

Total assets

(1)

Total deposits

Year end

Total loans and leases

Total assets

(1)

Total deposits

Sales and Trading Revenue

(1, 2, 3)

(Dollars in millions) 2019 2018

Sales and trading revenue

(2)

Fixed-income, currencies and commodities $ 8,188 $ 8,271

Equities 4,491 4,900

Total sales and trading revenue $ 12,679 $ 13,171

Sales and trading revenue, excluding net DVA

(4)

Fixed-income, currencies and commodities $ 8,396 $ 8,413

Equities 4,505 4,920

Total sales and trading revenue, excluding net DVA $ 12,901 $ 13,333

(1)

For more information on sales and trading revenue, seeNote 3 – Derivatives to the Consolidated Financial

Statements.

(2)

Includes FTE adjustments of $189 million and $248 million for 2019 and

2018.

(3)

Includes Global Banking sales and trading revenue of $533 million and $421 million for 2019 and

2018.

(4)

FICC and Equities sales and trading revenue, excluding net DVA, is a non-GAAP financial measure. FICC net DVA

losses were $208 million and $142 million for 2019 and 2018. Equities net DVA losses were $14 million and $20 million for

2019 and 2018.

FICC revenue decreased $17 million. Equities revenue decreased $415 million

driven by under performance in equity derivatives compared to a strong prior year

which benefited from higher client activity and a more volatile market environment.

2019 2018 % Change

$ 234 $ 632 (63 )%

(2,616) (2,257) 16

(2,382) (1,625) 47

(669 ) (476 ) 41

3,720 1,887 97

(5,433) (3,036) 79

(4,055) (2,780) 46

$ (1,378) $ (256 ) n/m

$ 42,933 $ 61,013 (30 )%

210,771 199,978 5

21,434 21,966 (2 )

$ 37,151 $ 48,061 (23 )%

224,466 195,466 15

23,166 18,541 25

(1)

In segments where the total of liabilities and equity exceeds assets, which are generally deposit-taking segments, we allocate assets fromAll Other to those segments to match liabilities (i.e., deposits) and allocated shareholders’ equity. Average

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

n/m = not meaningful

All Other consists of ALM activities, equity investments, non-core mortgage loans

and servicing activities, liquidating businesses and certain expenses not otherwise

allocated to a business segment. ALM activities encompass certain residential

mortgages, debt securities, and interest rate and foreign currency risk

management activities. Substantially all of the results of ALM activities are

allocated to our business segments. For more information on our ALM activities,

s e e Note 24 – Business Segment Information to the Consolidated Financial

Statements. Equity investments include ourmerchant services joint venture, as

well as a portfolio of equity, real estate and other alternative investments. For

information on our merchant services joint venture, see Note 13 – Commitments

and Contingencies to the Consolidated Financial Statements.

Residential mortgage loans that are held for ALM purposes, including interest

rate or liquidity risk management, are classified as core and are presented on the

balance sheet of All Other. During 2019, residential mortgage loans held for ALM

activities decreased $3.2 billion to $21.7 billion primarily as a result of payoffs and

paydowns. Non-core residential mortgage and home equity loans, which are

principally runoff portfolios, are also held in All Other. During 2019, total non-core

loans decreased $7.8 billion to $15.7 billion due primarily to payoffs, paydowns and

sales, as well as Federal Housing Administration (FHA) loan conveyances, partially

offset by repurchases. For more information on the composition of the core and

non-core portfolios, see Consumer Portfolio Credit Risk Managementon page 54.

Bank of America 40

The net loss for All Other increased $1.1 billion to a net loss of $1.4 billion,

primarily driven by the $2.1 billion pretax impairment charge disclosed inExecutive

Summary – Recent Developments – Merchant Services Joint Venture, as well as

lower revenue, partially offset by a higher benefit in the provision for credit losses.

Revenue decreased $757 million due to lower net interest income and an

increase in the loss in noninterest income. Net interest income decreased $398

million due to the impact of non-core consumer real estate loan sales and portfolio

run-off. The loss in noninterest income increased $359 million primarily due to

lower gains on sales of non-core consumer loans and higher partnership losses

associated with an increase in tax-advantaged investments, partially offset by a

$729 million charge related to the redemption of certain trust preferred securities in

2018.

Noninterest expense increased $1.8 billion to $3.7 billion primarily due to the

aforementioned $2.1 billion pretax impairment charge.

The income tax benefit was $4.1 billion compared to a benefit of $2.8 billion in

2018. The increase in the tax benefit was primarily driven by the tax effect of the

higher pretax loss, the positive impact from the resolution of various tax

controversy matters and a higher level of income tax credits. Both years included

income tax benefit adjustments to eliminate the FTE treatment of certain tax credits

recorded in Global Banking.

Off-Balance Sheet Arrangements and Contractual

Obligations

We have contractual obligations to make future payments on debt and lease

agreements. Additionally, in the normal course of business, we enter into

contractual arrangements whereby we commit to future purchases of products or

services from unaffiliated parties. Purchase obligations are defined as obligations

that are legally binding agreements whereby we agree

Table 10 Contractual Obligations

Due in One

(Dollars in millions) Year or Less

Long-term debt $ 24,151

Operating lease obligations 1,966

Purchase obligations 1,272

Time deposits 68,351

Other long-term liabilities 1,670

Estimated interest expense on long-term debt and time deposits

(1)

5,571

Total contractual obligations $ 102,981

to purchase products or services with a specific minimum quantity at a fixed,

minimum or variable price over a specified period of time. Included in purchase

obligations are vendor contracts, the most significant of which include

communication services, processing services and software contracts. Debt, lease

and other obligations are more fully discussed in Note 12 – Long-term Debt and

Note 13 – Commitments and Contingencies to the Consolidated Financial

Statements.

Other long-term liabilities include our contractual funding obligations related to

the Non-U.S. Pension Plans and Nonqualified and Other Pension Plans (together,

the Plans). Obligations to the Plans are based on the current and projected

obligations of the Plans, performance of the Plans’ assets, and any participant

contributions, if applicable. During 2019 and 2018, we contributed $135 million and

$156 million to the Plans, and we expect to make$128 million of contributions

during 2020. The Plans are more fully discussed inNote 18 – Employee Benefit

Plans to the Consolidated Financial Statements.

We enter into commitments to extend credit such as loan commitments, standby

letters of credit (SBLCs) and commercial letters of credit to meet the financing

needs of our customers. For a summary of the total unfunded, or off-balance

sheet, credit extension commitment amounts by expiration date, see Credit

Extension Commitments in Note 13 – Commitments and Contingencies to the

Consolidated Financial Statements.

We also utilize variable interest entities (VIEs) in the ordinary course of business

to support our financing and investing needs as well as those of our customers.

For more information on our involvement with unconsolidated VIEs, see Note 7 –

Securitizations and Other Variable Interest Entities to the Consolidated Financial

Statements.

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

2018.

December 31

December 31, 2019 2018

Due After

Due After Three Years

One Year Through

Three Years

Through

Five Years

Due After

Five Years Total Total

$ 46,049 $ 47,096 $ 123,560 $ 240,856 $ 229,392

3,265 2,338 4,225 11,794 15,770

1,126 401 731 3,530 4,048

4,612 1,463 247 74,673 61,039

1,056 714 659 4,099 3,933

8,073 6,870 23,871 44,385 56,852

$ 64,181 $ 58,882 $ 153,293 $ 379,337 $ 371,034

(1)

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

applicable.

41 Bank of America

Representations and Warranties Obligations

throughout the organization is critical to our success and is a clear expectation of

our executive management team and the Board.

For information on representations and warranties obligations in connection with

Our Risk Framework serves as the foundation for the consistent and effective

the sale of mortgage loans, see Note 13 – Commitments and Contingencies to the

management of risks facing the Corporation. The Risk Framework sets forth clear

Consolidated Financial Statements.

roles, responsibilities and accountability for the management of risk and provides a

Managing Risk

blueprint for how the Board, through delegation of authority to committees and

executive officers, establishes risk appetite and associated limits for our activities.

Overview

Executive management assesses, with Board oversight, the risk-adjusted

Risk is inherent in all our business activities. Sound risk management enables us

to serve our customers and deliver for our shareholders. If not managed well, risks

can result in financial loss, regulatory sanctions and penalties, and damage to our

reputation, each of which may adversely impact our ability to execute our business

strategies. We take a comprehensive approach to risk management with a defined

Risk Framework and an articulated Risk Appetite Statement which are approved

annually by the Enterprise Risk Committee (ERC) and the Board.

The seven key types of risk faced by the Corporation are strategic, credit,

market, liquidity, compliance, operational and reputational.

●

Strategic risk is the risk resulting from incorrect assumptions about external or

internal factors, inappropriate business plans, ineffective business strategy

execution, or failure to respond in a timely manner to changes in the regulatory,

macroeconomic or competitive environments in the geographic locations in

which we operate.

●

Credit risk is the risk of loss arising from the inability or failure of a borrower or

counterparty to meet its obligations.

●

Market risk is the risk that changes in market conditions may adversely impact

the value of assets or liabilities, or otherwise negatively impact earnings.

●

Liquidity risk is the inability to meet expected or unexpected cash flow and

collateral needs while continuing to support our businesses and customers

under a range of economic conditions.

●

Compliance risk is the risk of legal or regulatory sanctions, material financial

loss or damage to the reputation of the Corporation arising from the failure of

the Corporation to comply with the requirements of applicable laws, rules and

regulations and our internal policies and procedures.

●

Operational risk is the risk of loss resulting from inadequate or failed processes,

people and systems, or from external events.

●

Reputational risk is the risk that negative perceptions of the Corporation’s

conduct or business practices may adversely impact its profitability or

operations.

The following sections address in more detail the specific procedures,

measures and analyses of the major categories of risk. This discussion of

managing risk focuses on the current Risk Framework that, as part of its annual

review process, was approved by the ERC and the Board.

As set forth in our Risk Framework, a culture of managing risk well is

fundamental to fulfilling our purpose and our values and delivering responsible

growth. It requires us to focus on risk in all activities and encourages the necessary

mindset and behavior to enable effective risk management, and promotes sound

risk-taking within our risk appetite. Sustaining a culture of managing risk well

returns of each business. Management reviews and approves the strategic and

financial operating plans, as well as the capital plan and Risk Appetite Statement,

and recommends them annually to the Board for approval. Our strategic plan takes

into consideration return objectives and financial resources, which must align with

risk capacity and risk appetite. Management sets financial objectives for each

business by allocating capital and setting a target for return on capital for each

business. Capital allocations and operating limits are regularly evaluated as part of

our overall governance processes as the businesses and the economic

environment in which we operate continue to evolve. For more information

regarding capital allocations, see Business Segment Operations on page 32.

The Corporation’s risk appetite indicates the amount of capital, earnings or

liquidity we are willing to put at risk to achieve our strategic objectives and

business plans, consistent with applicable regulatory requirements. Our risk

appetite provides a common and comparable set of measures for senior

management and the Board to clearly indicate our aggregate level of risk and to

monitor whether the Corporation’s risk profile remains in alignment with our

strategic and capital plans. Our risk appetite is formally articulated in the Risk

Appetite Statement, which includes both qualitative components and quantitative

limits.

Our overall capacity to take risk is limited; therefore, we prioritize the risks we

take in order to maintain a strong and flexible financial position so we can

withstand challenging economic conditions and take advantage of organic growth

opportunities. Therefore, we set objectives and targets for capital and liquidity that

are intended to permit us to continue to operate in a safe and sound manner,

including during periods of stress.

Our lines of business operate with risk limits (which may include credit, market

and/or operational limits, as applicable) that align with the Corporation’s risk

appetite. Executive management is responsible for tracking and reporting

performance measurements as well as any exceptions to guidelines or limits. The

Board, and its committees when appropriate, oversee financial performance,

execution of the strategic and financial operating plans, adherence to risk appetite

limits and the adequacy of internal controls.

For a more detailed discussion of our risk management activities, see the

discussion below and pages 45 through 77.

Risk Management Governance

The Risk Framework describes delegations of authority whereby the Board and its

committees may delegate authority to management-level committees or executive

officers. Such delegations may authorize certain decision-making and approval

functions, which may be evidenced in, for example, committee charters, job

descriptions, meeting minutes and resolutions.

Bank of America 42

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

responsibilities for the Corporation.

(1)

Reports to the CEO and CFO with oversight by the Audit Committee

Board of Directors and Board Committees

The Board is composed of 17 directors, all but one of whom are independent. The

Board authorizes management to maintain an effective Risk Framework, and

oversees compliance with safe and sound banking practices. In addition, the Board

or its committees conduct inquiries of, and receive reports from management on

risk-related matters to assess scope or resource limitations that could impede the

ability of Independent Risk Management (IRM) and/or Corporate Audit to execute

its responsibilities. The Board committees discussed below have the principal

responsibility for enterprise-wide oversight of our risk management activities.

Through these activities, the Board and applicable committees are provided with

information on our risk profile and oversee executive management addressing key

risks we face. Other Board committees, as described below, provide additional

oversight of specific risks.

Each of the committees shown on the above chart regularly reports to the

Board on risk-related matters within the committee’s responsibilities, which is

intended to collectively provide the Board with integrated insight about our

management of enterprise-wide risks.

Audit Committee

The Audit Committee oversees the qualifications, performance and independence

of the Independent Registered Public Accounting Firm, the performance of our

corporate audit function, the integrity of our consolidated financial statements, our

compliance with legal and regulatory requirements, and makes inquiries of

management or the Chief Audit Executive (CAE) to determine whether there are

scope or resource limitations that impede the ability of Corporate Audit to execute

its responsibilities. The Audit Committee is also responsible for overseeing

compliance risk pursuant to the New York Stock Exchange listing standards.

Enterprise Risk Committee

The ERC has primary responsibility for oversight of the Risk Framework and key

risks we face and of the Corporation’s overall risk appetite. It approves the Risk

Framework and the Risk Appetite Statement and further recommends these

documents to the Board for approval. The ERC oversees senior management’s

responsibilities for the identification, measurement, monitoring and control of key

risks we face. The ERC may consult with other Board committees on risk-related

matters.

43 Bank of America

Other Board Committees

Our Corporate Governance, ESG, and Sustainability Committee oversees our

Board’s governance processes, identifies and reviews the qualifications of

potential Board members, recommends nominees for election to our Board,

recommends committee appointments for Board approval and reviews our

Environmental, Social and Governance and stockholder engagement activities.

Our Compensation and Human Capital Committee oversees establishing,

maintaining and administering our compensation programs and employee benefit

plans, including approving and recommending our Chief Executive Officer’s (CEO)

compensation to our Board for further approval by all independent directors;

reviewing and approving all of our executive officers’ compensation, as well as

compensation for non-management directors; and reviewing certain other human

capital management topics.

Management Committees

Management committees may receive their authority from the Board, a Board

committee, another management committee or from one or more executive

officers. Our primary management-level risk committee is the Management Risk

Committee (MRC). Subject to Board oversight, the MRC is responsible for

management oversight of key risks facing the Corporation. This includes providing

management oversight of our compliance and operational risk programs, balance

sheet and capital management, funding activities and other liquidity activities,

stress testing, trading activities, recovery and resolution planning, model risk,

subsidiary governance and activities between member banks and their nonbank

affiliates pursuant to Federal Reserve rules and regulations, among other things.

Lines of Defense

We have clear ownership and accountability across three lines of defense: Front

Line Units (FLUs), IRM and Corporate Audit. We also have control functions

outside of FLUs and IRM (e.g., Legal and Global Human Resources). The three

lines of defense are integrated into our management-level governance structure.

Each of these functional roles is described in more detail below.

Executive Officers

Executive officers lead various functions representing the functional roles.

Authority for functional roles may be delegated to executive officers from the

Board, Board committees or management-level committees. Executive officers, in

turn, may further delegate responsibilities, as appropriate, to management-level

committees, management routines or individuals. Executive officers review our

activities for consistency with our Risk Framework, Risk Appetite Statement and

applicable strategic, capital and financial operating plans, as well as applicable

policies, standards, procedures and processes. Executive officers and other

employees make decisions individually on a day-to-day basis, consistent with the

authority they have been delegated. Executive officers and other employees may

also serve on committees and participate in committee decisions.

Front Line Units

FLUs, which include the lines of business as well as the Global Technology and

Operations Group, are responsible for appropriately assessing and effectively

managing all of the risks associated with their activities.

Three organizational units that include FLU activities and control function

activities, but are not part of IRM are first, the Chief Financial Officer (CFO) Group;

second, Environmental, Social and Governance (ESG), Capital Deployment (CD)

and Public Policy (PP); and third, the Chief Administrative Officer (CAO) Group.

Independent Risk Management

IRM is part of our control functions and includes Global Risk Management. We

have other control functions that are not part of IRM (other control functions may

also provide oversight to FLU activities), including Legal, Global Human

Resources and certain activities within the CFO Group; ESG, CD and PP; and

CAO Group. IRM, led by the Chief Risk Officer (CRO), is responsible for

independently assessing and overseeing risks within FLUs and other control

functions. IRM establishes written enterprise policies and procedures that include

concentration risk limits, where appropriate. Such policies and procedures outline

how aggregate risks are identified, measured, monitored and controlled.

The CRO has the stature, authority and independence to develop and

implement a meaningful risk management framework. The CRO has unrestricted

access to the Board and reports directly to both the ERC and to the CEO. Global

Risk Management is organized into horizontal risk teams that cover a specific risk

area and vertical CRO teams that cover a particular front line unit or control

function. These teams work collaboratively in executing their respective duties.

Corporate Audit

Corporate Audit and the CAE maintain their independence from the FLUs, IRM and

other control functions by reporting directly to the Audit Committee or the Board.

The CAE administratively reports to the CEO. Corporate Audit provides

independent assessment and validation through testing of key processes and

controls across the Corporation. Corporate Audit includes Credit Review which

periodically tests and examines credit portfolios and processes.

Risk Management Processes

The Risk Framework requires that strong risk management practices are

integrated in key strategic, capital and financial planning processes and in day-to-

day b

usiness processes across the Corporation, with a goal of ensuring risks are

appropriately considered, evaluated and responded to in a timely manner.

We employ our risk management process, referred to as Identify, Measure,

Monitor and Control, as part of our daily activities.

Identify – To be effectively managed, risks must be clearly defined and proactively

identified. Proper risk identification focuses on recognizing and understanding

key risks inherent in our business activities or key risks that may arise from

external factors. Each employee is expected to identify and escalate risks

promptly. Risk identification is an ongoing process, incorporating input from

FLUs and control functions, designed to be forward looking and capture relevant

risk factors across all of our lines of business.

Measure – Once a risk is identified, it must be prioritized and accurately measured

through a systematic risk quantification process including quantitative and

qualitative components. Risk is measured at various levels including, but not

limited to, risk type, FLU, legal entity and on an aggregate basis. This risk

quantification process helps to capture changes in our risk profile due to

changes in strategic direction, concentrations, portfolio quality and the overall

economic environment. Senior management considers how risk exposures

might evolve under a variety of stress scenarios.

Monitor – We monitor risk levels regularly to track adherence to risk appetite,

policies, standards, procedures and processes. We also regularly update risk

assessments and review risk exposures. Through our monitoring, we can

determine our level of risk relative to limits and can take action in a timely

manner. We also can determine when risk limits are breached and have

processes to appropriately report and escalate exceptions. This includes

requests for approval to managers and alerts to executive management,

management-level committees or the Board (directly or through an appropriate

committee).

Control – We establish and communicate risk limits and controls through policies,

standards, procedures and processes that define the responsibilities and

authority for risk-taking. The limits and controls can be adjusted by the Board or

management when conditions or risk tolerances warrant. These limits may be

absolute (e.g., loan amount, trading volume) or relative (e.g., percentage of loan

book in higher-risk categories). Our lines of business are held accountable to

perform within the established limits.

The formal processes used to manage risk represent a part of our overall risk

management process. We instill a strong and comprehensive culture of managing

risk well through communications, training, policies, procedures and organizational

roles and responsibilities. Establishing a culture reflective of our purpose to help

make our customers’ financial lives better and delivering our responsible growth

strategy is also critical to effective risk management. We understand that improper

actions, behaviors or practices that are illegal, unethical or contrary to our core

values could result in harm to the Corporation, our shareholders or our customers,

damage the integrity of the financial markets, or negatively impact our reputation,

and have established protocols and structures so that such conduct risk is

governed and reported across the Corporation. Specifically, our Code of Conduct

provides a framework for all of our employees to conduct themselves with the

highest integrity. Additionally, we continue to strengthen the link between the

employee performance management process and individual compensation to

encourage employees to work toward enterprise-wide risk goals.

Bank of America 44

Corporation-wide Stress Testing

Integral to our Capital Planning, Financial Planning and Strategic Planning

processes, we conduct capital scenario management and stress forecasting on a

periodic basis to better understand balance sheet, earnings and capital sensitivities

to certain economic and business scenarios, including economic and market

conditions that are more severe than anticipated. These stress forecasts provide

an understanding of the potential impacts from our risk profile on the balance

sheet, earnings and capital, and serve as a key component of our capital and risk

management practices. The intent of stress testing is to develop a comprehensive

understanding of potential impacts of on- and off-balance sheet risks at the

Corporation and how they impact financial resiliency, which provides confidence to

management, regulators and our investors.

Contingency Planning

We have developed and maintain contingency plans that are designed to prepare

us in advance to respond in the event of potential adverse economic, financial or

market stress. These contingency plans include our Capital Contingency Plan and

Financial Contingency and Recovery Plan, which provide monitoring, escalation,

actions and routines designed to enable us to increase capital, access funding

sources and reduce risk through consideration of potential options that include

asset sales, business sales, capital or debt issuances, or other de-risking

strategies. We also maintain a Resolution Plan to limit adverse systemic impacts

that could be associated with a potential resolution of Bank of America.

Strategic Risk Management

Strategic risk is embedded in every business and is one of the major risk

categories along with credit, market, liquidity, compliance, operational and

reputational risks. This risk results from incorrect assumptions about external or

internal factors, inappropriate business plans, ineffective business strategy

execution, or failure to respond in a timely manner to changes in the regulatory,

macroeconomic or competitive environments, in the geographic locations in which

we operate, such as competitor actions, changing customer preferences, product

obsolescence and technology developments. Our strategic plan is consistent with

our risk appetite, capital plan and liquidity requirements, and specifically addresses

strategic risks.

On an annual basis, the Board reviews and approves the strategic plan, capital

plan, financial operating plan and Risk Appetite Statement. With oversight by the

Board, executive management directs the lines of business to execute our

strategic plan consistent with our core operating principles and risk appetite. The

executive management team monitors business performance throughout the year

and provides the Board with regular progress reports on whether strategic

objectives and timelines are being met, including reports on strategic risks and if

additional or alternative actions need to be considered or implemented. The

regular executive reviews focus on assessing forecasted earnings and returns on

capital, the current risk profile, current capital and liquidity requirements, staffing

levels and changes required to support the strategic plan, stress testing results,

and other qualitative factors such as market growth rates and peer analysis.

Significant strategic actions, such as capital actions, material acquisitions or

divestitures, and resolution plans are reviewed and approved by the Board. At the

business level, processes are in place to discuss the strategic risk implications of

new, expanded or modified businesses, products or services and other strategic

initiatives, and to provide formal review and approval where required. With

oversight by the Board and the ERC, executive

45 Bank of America

management performs similar analyses throughout the year, and evaluates

changes to the financial forecast or the risk, capital or liquidity positions as deemed

appropriate to balance and optimize achieving the targeted risk appetite,

shareholder returns and maintaining the targeted financial strength. Proprietary

models are used to measure the capital requirements for credit, country, market,

operational and strategic risks. The allocated capital assigned to each business is

based on its unique risk profile. With oversight by the Board, executive

management assesses the risk-adjusted returns of each business in approving

strategic and financial operating plans. The businesses use allocated capital to

define business strategies, and price products and transactions.

Capital Management

The Corporation manages its capital position so that its capital is more than

adequate to support its business activities and aligns with risk, risk appetite and

strategic planning. Additionally, we seek to maintain safety and soundness at all

times, even under adverse scenarios, take advantage of organic growth

opportunities, meet obligations to creditors and counterparties, maintain ready

access to financial markets, continue to serve as a credit intermediary, remain a

source of strength for our subsidiaries, and satisfy current and future regulatory

capital requirements. Capital management is integrated into our risk and

governance processes, as capital is a key consideration in the development of our

strategic plan, risk appetite and risk limits.

We conduct an Internal Capital Adequacy Assessment Process (ICAAP) on a

periodic basis. The ICAAP is a forward-looking assessment of our projected capital

needs and resources, incorporating earnings, balance sheet and risk forecasts

under baseline and adverse economic and market conditions. We utilize periodic

stress tests to assess the potential impacts to our balance sheet, earnings,

regulatory capital and liquidity under a variety of stress scenarios. We perform

qualitative risk assessments to identify and assess material risks not fully captured

in our forecasts or stress tests. We assess the potential capital impacts of

proposed changes to regulatory capital requirements. Management assesses

ICAAP results and provides documented quarterly assessments of the adequacy of

our capital guidelines and capital position to the Board or its committees.

We periodically review capital allocated to our businesses and allocate capital

annually during the strategic and capital planning processes. For more information,

see Business Segment Operations on page 32.

CCAR and Capital Planning

The Federal Reserve requires BHCs to submit a capital plan and requests for

capital actions on an annual basis, consistent with the rules governing the

Comprehensive Capital Analysis and Review (CCAR) capital plan.

On June 27, 2019, following the Federal Reserve’s non-objection to our 2019

CCAR capital plan, the Board authorized the repurchase of approximately $30.9

billion in common stock from July 1, 2019 through June 30, 2020, which includes

approximately $900 million to offset shares awarded under equity-based

compensation plans during the same period. During 2019, pursuant to the Board’s

authorizations, including those related to our 2018 CCAR capital plan that expired

June 30, 2019, we repurchased $28.1 billion of common stock, which includes

common stock repurchases to offset equity-based compensation awards. At

December 31, 2019, our remaining stock repurchase authorization was $15.6

billion.

Our stock repurchases are subject to various factors, including the

Corporation’s capital position, liquidity, financial performance and alternative uses

of capital, stock trading price and general

market conditions, and may be suspended at any time. The repurchases may be

effected through open market purchases or privately negotiated transactions,

including repurchase plans that satisfy the conditions of Rule 10b5-1 of the

Securities Exchange Act of 1934, as amended (Exchange Act).

Regulatory Capital

As a financial services holding company, we are subject to regulatory capital rules,

including Basel 3, issued by U.S. banking regulators. Basel 3 established minimum

capital ratios and buffer requirements and outlined two methods of calculating risk-

weighted assets, the Standardized approach and the Advanced approaches. The

Standardized approach relies primarily on supervisory risk weights based on

exposure type, and the Advanced approaches determine risk weights based on

internal models.

The Corporation's depository institution subsidiaries are also subject to the

Prompt Corrective Action (PCA) framework. The Corporation and its primary

affiliated banking entity, BANA, are Advanced approaches institutions under Basel

3 and are required to report regulatory risk-based capital ratios and risk-weighted

assets under both the Standardized and Advanced approaches. The approach that

yields the lower ratio is used to assess capital adequacy including under the PCA

framework. As of December 31, 2019, the Common equity tier 1 (CET1) and Tier 1

capital ratios for the Corporation were lower under the Standardized approach

whereas the Advanced approaches yielded a lower Total capital ratio.

Minimum Capital Requirements

Minimum capital requirements and related buffers were fully phased in as of

January 1, 2019. The PCA framework established categories of capitalization,

including well capitalized, based on

the Basel 3 regulatory ratio requirements. U.S. banking regulators are required to

take certain mandatory actions depending on the category of capitalization, with no

mandatory actions required for well-capitalized banking organizations.

In order to avoid restrictions on capital distributions and discretionary bonus

payments, the Corporation must meet risk-based capital ratio requirements that

include a capital conservation buffer greater than 2.5 percent, plus any applicable

countercyclical capital buffer and a global systemically important bank (G-SIB)

surcharge. The buffers and surcharge must be comprised solely of CET1 capital.

The Corporation is also required to maintain a minimum supplementary

leverage ratio (SLR) of 3.0 percent plus a leverage buffer of 2.0 percent in order to

avoid certain restrictions on capital distributions and discretionary bonus payments.

Our insured depository institution subsidiaries are required to maintain a minimum

6.0 percent SLR to be considered well capitalized under the PCA framework. The

numerator of the SLR is quarter-end Basel 3 Tier 1 capital. The denominator is

total leverage exposure based on the daily average of the sum of on-balance

sheet exposures less permitted Tier 1 deductions, as well as the simple average of

certain off-balance sheet exposures, as of the end of each month in a quarter.

Capital Composition and Ratios

Table 11 presents Bank of America Corporation’s capital ratios and related

information in accordance with Basel 3 Standardized and Advanced approaches

as measured at December 31, 2019 and 2018. As of the periods presented herein,

the Corporation met the definition of well capitalized under current regulatory

requirements.

Bank of America 46

Table 11 Bank of America Corporation Regulatory Capital under Basel 3

Standardized

Approach

Advanced

Approaches

Regulatory

Minimum

(1)

(Dollars in millions, except as noted) December 31, 2019

Risk-based capital metrics:

Common equity tier 1 capital

$ 166,760 $ 166,760

Tier 1 capital

188,492 188,492

Total capital

(2)

221,230 213,098

Risk-weighted assets (in billions)

1,493 1,447

Common equity tier 1 capital ratio

11.2 % 11.5 % 9.5 %

Tier 1 capital ratio

12.6 13.0 11.0

Total capital ratio

14.8 14.7 13.0

Leverage-based metrics:

Adjusted quarterly average assets (in billions)

(3)

$ 2,374 $ 2,374

Tier 1 leverage ratio

7.9 % 7.9 % 4.0

SLR leverage exposure (in billions)

$ 2,946

SLR

6.4 % 5.0

December 31, 2018

Risk-based capital metrics:

Common equity tier 1 capital $ 167,272 $ 167,272

Tier 1 capital 189,038 189,038

Total capital

(2)

221,304 212,878

Risk-weighted assets (in billions) 1,437 1,409

Common equity tier 1 capital ratio 11.6 % 11.9 % 8.25 %

Tier 1 capital ratio 13.2 13.4 9.75

Total capital ratio 15.4 15.1 11.75

Leverage-based metrics:

Adjusted quarterly average assets (in billions)

(3)

$ 2,258 $ 2,258

Tier 1 leverage ratio 8.4 % 8.4 % 4.0

SLR leverage exposure (in billions)

$ 2,791

SLR

6.8 % 5.0

(1)

The capital conservation buffer and G-SIB surcharge were2.5 percent at December 31, 2019 and 1.875 percent at December 31, 2018. The countercyclical capital buffer for both periods waszero. The SLR minimum includes a leverage buffer of 2.0

percent.

(2)

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

losses.

(3)

Reflects total average assets adjusted for certain Tier 1 capital

deductions.

A t December 31, 2019, CET1 capital and Total capital under the Advanced primarily due to loan growth and increased client activity inGlobal Markets and

approaches were relatively unchanged compared to December 31, 2018. Risk- Global Banking.

weighted assets under the Standardized approach, which yielded the lower CET1 Table 12 shows the capital composition at December 31, 2019 and 2018.

capital ratio at December 31, 2019, increased $56.3 billion during 2019 to $1,493

billion

Table 12 Capital Composition under Basel 3

December 31

(Dollars in millions) 2019 2018

Total common shareholders’ equity $ 241,409 $ 242,999

Goodwill, net of related deferred tax liabilities (68,570) (68,572)

Deferred tax assets arising from net operating loss and tax credit carryforwards (5,193) (5,981)

Intangibles, other than mortgage servicing rights and goodwill, net of related deferred tax liabilities (1,328) (1,294)

Other 442 120

Common equity tier 1 capital 166,760 167,272

Qualifying preferred stock, net of issuance cost 22,329 22,326

Other (597 ) (560 )

Tier 1 capital 188,492 189,038

Tier 2 capital instruments 22,538 21,887

Eligible credit reserves included in Tier 2 capital 2,097 1,972

Other (29) (19 )

Total capital under the Advanced approaches

$ 213,098 $ 212,878

47 Bank of America

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

Table 13 Risk-weighted Assets under Basel 3

Standardized Advanced Standardized Advanced

Approach Approaches Approach Approaches

December 31

(Dollars in billions) 2019 2018

Credit risk $ 1,437 $ 858 $ 1,384 $ 827

Market risk 56 55 53 52

Operational risk n/a 500 n/a 500

Risks related to credit valuation adjustments n/a 34 n/a 30

Total risk-weighted assets $ 1,493 $ 1,447 $ 1,437 $ 1,409

n/a = not applicable

Bank of America, N.A. Regulatory Capital

Table 14 presents regulatory capital information for BANA in accordance with Basel 3 Standardized and Advanced approaches as measured atDecember 31, 2019 and

2018. BANA met the definition of well capitalized under the PCA framework at both year ends.

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

Standardized Advanced Regulatory

Approach Approaches Minimum

(1)

(Dollars in millions, except as noted)

December 31, 2019

Risk-based capital metrics:

Common equity tier 1 capital $ 154,626 $ 154,626

Tier 1 capital 154,626 154,626

Total capital

(2)

166,567 158,665

Risk-weighted assets (in billions) 1,241 991

Common equity tier 1 capital ratio 12.5 % 15.6 % 7.0 %

Tier 1 capital ratio 12.5 15.6 8.5

Total capital ratio 13.4 16.0 10.5

Leverage-based metrics:

Adjusted quarterly average assets (in billions)

(3)

$ 1,780 $ 1,780

Tier 1 leverage ratio 8.7 % 8.7 % 5.0

SLR leverage exposure (in billions)

$ 2,177

SLR

7.1 % 6.0

December 31, 2018

Risk-based capital metrics:

Common equity tier 1 capital $ 149,824 $ 149,824

Tier 1 capital 149,824 149,824

Total capital

(2)

161,760 153,627

Risk-weighted assets (in billions) 1,195 959

Common equity tier 1 capital ratio 12.5 % 15.6 % 6.5 %

Tier 1 capital ratio 12.5 15.6 8.0

Total capital ratio 13.5 16.0 10.0

Leverage-based metrics:

Adjusted quarterly average assets (in billions)

(3)

$ 1,719 $ 1,719

Tier 1 leverage ratio 8.7 % 8.7 % 5.0

SLR leverage exposure (in billions)

$ 2,112

SLR 7.1 % 6.0

(1)

Risk-based capital regulatory minimums at December 31, 2019 are the minimum ratios under Basel 3 including a capital conservation buffer of2.5 percent. The regulatory minimums for the leverage ratios as of both period ends and risk-based capital ratios

as of December 31, 2018 are the percent required to be considered well capitalized under the PCA framework.

(2)

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

losses.

(3)

Reflects total average assets adjusted for certain Tier 1 capital

deductions.

Total Loss-Absorbing Capacity Requirements

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

Effective January 1, 2019, the Corporation is subject to the Federal Reserve’s final

is required to maintain TLAC ratios in excess of minimum requirements plus

rule requiring G-SIBs to maintain minimum levels of total loss-absorbing capacity

applicable buffers to avoid restrictions on capital distributions and discretionary

(TLAC) and long-term debt. TLAC consists of the Corporation’s Tier 1 capital and

bonus payments. Table 15 presents the Corporation's TLAC and long-term debt

eligible long-term debt issued directly by the Corporation. Eligible long-term debt

ratios and related information as of December 31, 2019.

for TLAC ratios is comprised of unsecured debt that has a remaining

Bank of America 48

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

TLAC

Regulatory Minimum

(1)

Long-term

Debt

Regulatory Minimum

(2)

(Dollars in millions)

December 31, 2019

Total eligible balance $ 367,449 $ 171,349

Percentage of risk-weighted assets

(3)

24.6 % 22.0 % 11.5 % 8.5 %

Percentage of SLR leverage exposure 12.5 9.5 5.8 4.5

(1)

The TLAC risk-weighted assets regulatory minimum consists of 18.0 percent plus a TLAC risk-weighted assets buffer comprised of 2.5 percent plus the method 1 G-SIB surcharge of 1.5 percent. The countercyclical buffer is zero for this period. The

TLAC SLR leverage exposure regulatory minimum consists of 7.5 percent plus a 2.0 percent TLAC leverage buffer. The TLAC risk-weighted assets and leverage buffers must be comprised solely of CET1 capital and Tier 1 capital, respectively.

(2)

The long-term debt risk-weighted assets regulatory minimum is comprised of 6.0 percent plus an additional 2.5 percent requirement based on the Corporation’s method 2 G-SIB surcharge. The long-term debt leverage exposure regulatory minimum is4.5

percent.

(3)

The approach that yields the higher risk-weighted assets is used to calculate TLAC and long-term debt ratios, which was the Standardized approach as ofDecember 31,

2019.

Regulatory Capital and Securities Regulation

The Corporation’s principal U.S. broker-dealer subsidiaries are BofA Securities,

Inc. (BofAS), Merrill Lynch Professional Clearing Corp. (MLPCC) and Merrill Lynch,

Pierce, Fenner & Smith Incorporated (MLPF&S). BofAS was formed as a result of

the reorganization of MLPF&S which was completed in May 2019. The

Corporation's principal European broker-dealer subsidiaries are Merrill Lynch

International (MLI) and BofA Securities Europe SA (BofASE).

The U.S. broker-dealer subsidiaries are subject to the net capital requirements

of Rule 15c3-1 under the Exchange Act. BofAS computes its minimum capital

requirements as an alternative net capital broker-dealer under Rule 15c3-1, and

MLPCC and MLPF&S compute their minimum capital requirements in accordance

with the alternative standard under Rule 15c3-1. BofAS and MLPCC are also

registered as futures commission merchants and are subject to U.S. Commodity

Futures Trading Commission (CFTC) Regulation 1.17.

BofAS provides institutional services, and in accordance with the alternative net

capital requirements, is required to maintain tentative net capital in excess of $1.0

billion and net capital in excess of the greater of $500 million or a certain

percentage of its reserve requirement. BofAS must also notify the Securities and

Exchange Commission (SEC) in the event its tentative net capital is less than $5.0

billion. BofAS is also required to hold a certain percentage of its risk-based margin

in order to meet its CFTC minimum net capital requirement. At December 31, 2019,

BofAS had tentative net capital of $12.5 billion. BofAS also had regulatory net

capital of $10.4 billion which exceeded the minimum requirement of $2.4 billion.

MLPCC is a fully-guaranteed subsidiary of BofAS and provides clearing and

settlement services. At December 31, 2019, MLPCC’s regulatory net capital of

$5.3 billion exceeded the minimum requirement of $1.3 billion.

MLPF&S provides retail services. At December 31, 2019, MLPF&S' regulatory

net capital was $4.1 billion which exceeded the minimum requirement of $102

million.

Our European broker-dealers are regulated by non-U.S. regulators. MLI, a U.K.

investment firm, is regulated by the Prudential Regulation Authority and the FCA

and is subject to certain regulatory capital requirements. At December 31, 2019,

MLI’s capital resources were $34.8 billion, which exceeded the minimum Pillar 1

requirement of $13.9 billion. BofASE, a French investment firm, is regulated by the

Autorité de Contrôle Prudentiel et de Résolution and the Autorité des Marchés

Financiers, and is subject to certain regulatory capital requirements. At December

31, 2019, BofASE's capital resources were $5.5 billion which exceeded the

minimum Pillar 1 requirement of $1.3 billion.

49 Bank of America

Regulatory Developments

Revisions to Basel 3 to Address Current Expected Credit Loss

Accounting

On January 1, 2020, the Corporation adopted the new accounting standard that

requires the measurement of the allowance for credit losses to be based on

management’s best estimate of lifetime expected credit losses inherent in the

Corporation's relevant financial assets. For more information, see Note 1

-

Summary of Significant Accounting Principles to the Consolidated Financial

Statements. Our adoption of the standard resulted in a decrease to the CET1

capital ratio of 17 bps, which will be phased in evenly, or approximately four bps

per year, at the beginning of each year from January 1, 2020 through January 1,

2023 in accordance with transition provisions issued by the U.S. banking

regulators.

Security-Based Swap Dealer Capital, Margin and Segregation

Requirements

On June 21, 2019, the SEC published a final rule establishing capital, margin and

segregation requirements for security-based swap dealers (SBSDs). The final rule

increases the minimum net capital requirements for broker-dealers authorized to

use internal models to compute alternative net capital (ANC broker-dealers). For

ANC broker-dealers, the minimum tentative net capital requirement increased from

$1.0 billion to $5.0 billion, and the net capital requirement was raised to the greater

of $1.0 billion or two percent of the applicable risk-margin amount (initial margin

maintained for cleared and non-cleared security-based swaps) plus two percent of

certain customer-related assets. For stand-alone SBSDs that use models to

calculate haircuts, the minimum tentative net capital requirement is $100 million

and the minimum net capital requirement is the greater of $20 million or two

percent of the risk-margin amount.

Capital Requirements for Swap Dealers

On December 10, 2019, the CFTC re-opened the comment period on its 2016

proposal to establish capital requirements for swap dealers and major swap

participants that are not subject to existing U.S. prudential regulation. Under the

proposal, applicable subsidiaries of the Corporation would be permitted to elect

one of two approaches to compute their regulatory capital. The first approach is a

bank-based capital approach which requires that firms maintain CET1 capital

greater than or equal to the larger of 8.0 percent of the entity’s RWA as calculated

under Basel 3, or 8.0 percent of the margin of the entity’s cleared and uncleared

swaps, security-based swaps, futures and foreign futures positions. The second

approach is based on net liquid assets and requires that a firm maintain net capital

greater than or equal to 8.0 percent of the margin as described above. The

proposal also includes liquidity and reporting requirements.

Single-Counterparty Credit Limits

The Federal Reserve established single-counterparty credit limits (SCCL) for

BHCs with total consolidated assets of $250 billion or more. The SCCL rule is

designed to ensure that the maximum possible loss that a BHC could incur due to

the default of a single counterparty or a group of connected counterparties would

not endanger the BHC’s survival, thereby reducing the probability of future financial

crises. Beginning January 1, 2020, G-SIBs must calculate SCCL on a daily basis

by dividing the aggregate net credit exposure to a given counterparty by the G

-

SIB’s Tier 1 capital, ensuring that exposures to other G-SIBs and nonbank financial

institutions regulated by the Federal Reserve do not breach 15 percent of Tier 1

capital and exposures to most other counterparties do not breach 25 percent of

Tier 1 capital. Certain exposures, including exposures to the U.S. government,

U.S. government-sponsored entities and qualifying central counterparties, are

exempt from the credit limits.

Liquidity Risk

Funding and Liquidity Risk Management

Our primary liquidity risk management objective is to meet expected or unexpected

cash flow and collateral needs while continuing to support our businesses and

customers under a range of economic conditions. To achieve that objective, we

analyze and monitor our liquidity risk under expected and stressed conditions,

maintain liquidity and access to diverse funding sources, including our stable

deposit base, and seek to align liquidity-related incentives and risks.

We define liquidity as readily available assets, limited to cash and high-quality,

liquid, unencumbered securities that we can use to meet our contractual and

contingent financial obligations as those obligations arise. We manage our liquidity

position through line of business and ALM activities, as well as through our legal

entity funding strategy, on both a forward and current (including intraday) basis

under both expected and stressed conditions. We believe that a centralized

approach to funding and liquidity management enhances our ability to monitor

liquidity requirements, maximizes access to funding sources, minimizes borrowing

costs and facilitates timely responses to liquidity events.

The Board approves our liquidity risk policy and the Financial Contingency and

Recovery Plan. The ERC establishes our liquidity risk tolerance levels. The MRC

is responsible for overseeing liquidity risks and directing management to maintain

exposures within the established tolerance levels. The MRC reviews and monitors

our liquidity position and stress testing results, approves certain liquidity risk limits

and reviews the impact of strategic decisions on our liquidity. For more

information, see Managing Risk on page 42. Under this governance framework,

we have developed certain funding and liquidity risk management practices which

include: maintaining liquidity at the parent company and selected subsidiaries,

including our bank subsidiaries and other regulated entities; determining what

amounts of liquidity are appropriate for these entities based on analysis of debt

maturities and other potential cash outflows, including those that we may

experience during stressed market conditions; diversifying funding sources,

considering our asset profile and legal entity structure; and performing contingency

planning.

NB Holdings Corporation

We have intercompany arrangements with certain key subsidiaries under which we

transferred certain assets of Bank of America Corporation, as the parent company,

which is a separate and distinct legal entity from our banking and nonbank

subsidiaries,

and agreed to transfer certain additional parent company assets not needed to

satisfy anticipated near-term expenditures, to NB Holdings Corporation, a wholly-

owned holding company subsidiary (NB Holdings). The parent company is

expected to continue to have access to the same flow of dividends, interest and

other amounts of cash necessary to service its debt, pay dividends and perform

other obligations as it would have had if it had not entered into these arrangements

and transferred any assets.

In consideration for the transfer of assets, NB Holdings issued a subordinated

note to the parent company in a principal amount equal to the value of the

transferred assets. The aggregate principal amount of the note will increase by the

amount of any future asset transfers. NB Holdings also provided the parent

company with a committed line of credit that allows the parent company to draw

funds necessary to service near-term cash needs. These arrangements support

our preferred single point of entry resolution strategy, under which only the parent

company would be resolved under the U.S. Bankruptcy Code. These

arrangements include provisions to terminate the line of credit, forgive the

subordinated note and require the parent company to transfer its remaining

financial assets to NB Holdings if our projected liquidity resources deteriorate so

severely that resolution of the parent company becomes imminent.

Global Liquidity Sources and Other Unencumbered Assets

We maintain liquidity available to the Corporation, including the parent company

and selected subsidiaries, in the form of cash and high-quality, liquid,

unencumbered securities. Our liquidity buffer, referred to as Global Liquidity

Sources (GLS), is comprised of assets that are readily available to the parent

company and selected subsidiaries, including holding company, bank and broker-

dealer subsidiaries, even during stressed market conditions. Our cash is primarily

on deposit with the Federal Reserve Bank and, to a lesser extent, central banks

outside of the U.S. We limit the composition of high-quality, liquid, unencumbered

securities to U.S. government securities, U.S. agency securities, U.S. agency MBS

and a select group of non-U.S. government securities. We can quickly obtain cash

for these securities, even in stressed conditions, through repurchase agreements

or outright sales. We hold our GLS in legal entities that allow us to meet the

liquidity requirements of our global businesses, and we consider the impact of

potential regulatory, tax, legal and other restrictions that could limit the

transferability of funds among entities.

Table 16 presents average GLS for the three months ended December 31,

2019 and 2018.

Table 16 Average Global Liquidity Sources

Three Months Ended

December 31

(Dollars in billions) 2019 2018

Parent company and NB Holdings $ 59 $ 76

Bank subsidiaries 454 420

Other regulated entities 63 48

Total Average Global Liquidity Sources

$ 576 $ 544

Typically, parent company and NB Holdings liquidity is in the form of cash

deposited with BANA.

Our bank subsidiaries’ liquidity is primarily driven by deposit and lending

activity, as well as securities valuation and net debt activity. Liquidity at bank

subsidiaries excludes the cash deposited by the parent company and NB Holdings.

Our bank subsidiaries can also generate incremental liquidity by pledging a range

of unencumbered loans and securities to certain FHLBs and the Federal Reserve

Discount Window. The cash we could have

Bank of America 50

obtained by borrowing against this pool of specifically-identified eligible assets was

$372 billion and $344 billion at December 31, 2019 and 2018. We have established

operational procedures to enable us to borrow against these assets, including

regularly monitoring our total pool of eligible loans and securities collateral.

Eligibility is defined in guidelines from the FHLBs and the Federal Reserve and is

subject to change at their discretion. Due to regulatory restrictions, liquidity

generated by the bank subsidiaries can generally be used only to fund obligations

within the bank subsidiaries, and transfers to the parent company or nonbank

subsidiaries may be subject to prior regulatory approval.

Liquidity held in other regulated entities, comprised primarily of broker-dealer

subsidiaries, is primarily available to meet the obligations of that entity and

transfers to the parent company or to any other subsidiary may be subject to prior

regulatory approval due to regulatory restrictions and minimum requirements. Our

other regulated entities also hold unencumbered investment-grade securities and

equities that we believe could be used to generate additional liquidity.

Table 17 presents the composition of average GLS for thethree months ended

December 31, 2019 and 2018.

Table 17 Average Global Liquidity Sources Composition

Three Months Ended

December 31

(Dollars in billions) 2019 2018

Cash on deposit $ 103 $ 113

U.S. Treasury securities 98 81

U.S. agency securities and mortgage-backed securities 358 340

Non-U.S. government securities 17 10

Total Average Global Liquidity Sources $ 576 $ 544

Our GLS are substantially the same in composition to what qualifies as High

Quality Liquid Assets (HQLA) under the final U.S. Liquidity Coverage Ratio (LCR)

rules. However, HQLA for purposes of calculating LCR is not reported at market

value, but at a lower value that incorporates regulatory deductions and the

exclusion of excess liquidity held at certain subsidiaries. The LCR is calculated as

the amount of a financial institution’s unencumbered HQLA relative to the

estimated net cash outflows the institution could encounter over a 30-day period of

significant liquidity stress, expressed as a percentage. Our average consolidated

HQLA, on a net basis, was $464 billion and $446 billion for the three months

ended December 31, 2019 and 2018. For the same periods, the average

consolidated LCR was 116 percent and 118 percent. Our LCR fluctuates due to

normal business flows from customer activity.

Liquidity Stress Analysis

We utilize liquidity stress analysis to assist us in determining the appropriate

amounts of liquidity to maintain at the parent company and our subsidiaries to meet

contractual and contingent cash outflows under a range of scenarios. The

scenarios we consider and utilize incorporate market-wide and Corporation-

specific events, including potential credit rating downgrades for the parent

company and our subsidiaries, and more severe events including potential

resolution scenarios. The scenarios are based on our historical experience,

experience of distressed and failed financial institutions, regulatory guidance, and

both expected and unexpected future events.

The types of potential contractual and contingent cash outflows we consider in

our scenarios may include, but are not limited to, upcoming contractual maturities

of unsecured debt and reductions in new debt issuance; diminished access to

secured financing

51 Bank of America

markets; potential deposit withdrawals; increased draws on loan commitments,

liquidity facilities and letters of credit; additional collateral that counterparties could

call if our credit ratings were downgraded; collateral and margin requirements

arising from market value changes; and potential liquidity required to maintain

businesses and finance customer activities. Changes in certain market factors,

including, but not limited to, credit rating downgrades, could negatively impact

potential contractual and contingent outflows and the related financial instruments,

and in some cases these impacts could be material to our financial results.

We consider all sources of funds that we could access during each stress

scenario and focus particularly on matching available sources with corresponding

liquidity requirements by legal entity. We also use the stress modeling results to

manage our asset and liability profile and establish limits and guidelines on certain

funding sources and businesses.

Net Stable Funding Ratio

U.S. banking regulators issued a proposal for a Net Stable Funding Ratio (NSFR)

requirement applicable to U.S. financial institutions following the Basel

Committee’s final standard. The proposed U.S. NSFR would apply to the

Corporation on a consolidated basis and to our insured depository institutions.

While the final requirement remains pending and is subject to change, if finalized

as proposed, we expect to be in compliance within the regulatory timeline. The

standard is intended to reduce funding risk over a longer time horizon. The NSFR

is designed to provide an appropriate amount of stable funding, generally capital

and liabilities maturing beyond one year, given the mix of assets and off-balance

sheet items.

Diversified Funding Sources

We fund our assets primarily with a mix of deposits, and secured and unsecured

liabilities through a centralized, globally coordinated funding approach diversified

across products, programs, markets, currencies and investor groups.

The primary benefits of our centralized funding approach include greater

control, reduced funding costs, wider name recognition by investors and greater

flexibility to meet the variable funding requirements of subsidiaries. Where

regulations, time zone differences or other business considerations make parent

company funding impractical, certain other subsidiaries may issue their own debt.

We fund a substantial portion of our lending activities through our deposits,

which were $1.43 trillion and $1.38 trillion at December 31, 2019 and 2018.

Deposits are primarily generated by our Consumer Banking, GWIM and Global

Banking segments. These deposits are diversified by clients, product type and

geography, and the majority of our U.S. deposits are insured by the FDIC. We

consider a substantial portion of our deposits to be a stable, low-cost and

consistent source of funding. We believe this deposit funding is generally less

sensitive to interest rate changes, market volatility or changes in our credit ratings

than wholesale funding sources. Our lending activities may also be financed

through secured borrowings, including credit card securitizations and

securitizations with government-sponsored enterprises (GSE), the FHA and

private-label investors, as well as FHLB loans.

Our trading activities in other regulated entities are primarily funded on a

secured basis through securities lending and repurchase agreements, and these

amounts will vary based on customer activity and market conditions. We believe

funding these activities in the secured financing markets is more cost-efficient and

less sensitive to changes in our credit ratings than unsecured financing.

Repurchase agreements are generally short-term and

often overnight. Disruptions in secured financing markets for financial institutions

have occurred in prior market cycles which resulted in adverse changes in terms

or significant reductions in the availability of such financing. We manage the

liquidity risks arising from secured funding by sourcing funding globally from a

diverse group of counterparties, providing a range of securities collateral and

pursuing longer durations, when appropriate. For more information on secured

financing agreements, see Note 11 – Federal Funds Sold or Purchased, Securities

Financing Agreements, Short-term Borrowings and Restricted Cash to the

Consolidated Financial Statements.

We issue long-term unsecured debt in a variety of maturities and currencies to

achieve cost-efficient funding and to maintain an appropriate maturity profile. While

the cost and availability of unsecured funding may be negatively impacted by

general market conditions or by matters specific to the financial services industry or

the Corporation, we seek to mitigate refinancing risk by actively managing the

amount of our borrowings that we anticipate will mature within any month or

quarter.

Table 18 presents our long-term debt by major currency atDecember 31, 2019

and 2018.

Table 18 Long-term Debt by Major Currency

December 31

(Dollars in millions) 2019 2018

U.S. dollar $ 191,284 $ 180,724

Euro 32,781 34,328

British pound 5,067 5,450

Japanese yen 4,310 3,038

Canadian dollar 3,857 2,936

Australian dollar 1,957 1,722

Other 1,600 1,194

Total long-term debt $ 240,856 $ 229,392

Total long-term debt increased $11.5 billion during 2019, primarily due to debt

issuances and valuation adjustments, partially offset by maturities and

redemptions. We may, from time to time, purchase outstanding debt instruments in

various transactions, depending on market conditions, liquidity and other factors.

Our other regulated entities may also make markets in our debt instruments to

provide liquidity for investors.

During 2019, the Corporation issued $52.5 billion of long-term debt consisting

of $29.3 billion of notes issued by Bank of America Corporation, substantially all of

which was TLAC compliant, $10.9 billion of notes issued by Bank of America, N.A.

and $12.3 billion of other debt, substantially all of which was structured liabilities.

During 2018, the Corporation issued $64.4 billion of long-term debt consisting of

$30.7 billion of notes issued by Bank of America Corporation, substantially all of

which was TLAC compliant, $18.7 billion of notes issued by Bank of America, N.A.

and $15.0 billion of other debt, substantially all of which was structured liabilities.

Durin g 2019, the Corporation had total long-term debt maturities and

redemptions in the aggregate of $50.6 billion consisting of $21.1 billion for Bank of

America Corporation, $19.9 billion for Bank of America, N.A. and$9.6 billion of

other debt. During 2018, the Corporation had total long-term debt maturities and

redemptions in the aggregate of $53.3 billion consisting of $29.8 billion for Bank of

America Corporation, $11.2 billion for Bank of America, N.A. and$12.3 billion of

other debt.

At December 31, 2019, Bank of America Corporation's senior notes of$159.8

billion included $107.7 billion of outstanding notes that are both TLAC eligible and

callable at least one year before their stated maturities. Of these senior notes, $7.4

billion will be callable and become TLAC ineligible during 2020, and $11.7

billion, $14.8 billion, $10.7 billion and $9.2 billion will do so during each of2021

through 2024, respectively, and $53.9 billion thereafter.

We use derivative transactions to manage the duration, interest rate and

currency risks of our borrowings, considering the characteristics of the assets they

are funding. For more information on our ALM activities, see Interest Rate Risk

Management for the Banking Book on page 74.

We may issue unsecured debt in the form of structured notes for client

purposes, certain of which qualify as TLAC-eligible debt. During 2019, we issued

$9.6 billion of structured notes, which are debt obligations that pay investors

returns linked to other debt or equity securities, indices, currencies or commodities.

We typically hedge the returns we are obligated to pay on these liabilities with

derivatives and/or investments in the underlying instruments, so that from a

funding perspective, the cost is similar to our other unsecured long-term debt. We

could be required to settle certain structured note obligations for cash or other

securities prior to maturity under certain circumstances, which we consider for

liquidity planning purposes. We believe, however, that a portion of such borrowings

will remain outstanding beyond the earliest put or redemption date.

Substantially all of our senior and subordinated debt obligations contain no

provisions that could trigger a requirement for an early repayment, require

additional collateral support, result in changes to terms, accelerate maturity or

create additional financial obligations upon an adverse change in our credit

ratings, financial ratios, earnings, cash flows or stock price. For more information

on long-term debt funding, including issuances and maturities and redemptions,

see Note 12 – Long-term Debt to the Consolidated Financial Statements.

Contingency Planning

We maintain contingency funding plans that outline our potential responses to

liquidity stress events at various levels of severity. These policies and plans are

based on stress scenarios and include potential funding strategies and

communication and notification procedures that we would implement in the event

we experienced stressed liquidity conditions. We periodically review and test the

contingency funding plans to validate efficacy and assess readiness.

Our U.S. bank subsidiaries can access contingency funding through the

Federal Reserve Discount Window. Certain non-U.S. subsidiaries have access to

central bank facilities in the jurisdictions in which they operate. While we do not

rely on these sources in our liquidity modeling, we maintain the policies,

procedures and governance processes that would enable us to access these

sources if necessary.

Credit Ratings

Our borrowing costs and ability to raise funds are impacted by our credit ratings. In

addition, credit ratings may be important to customers or counterparties when we

compete in certain markets and when we seek to engage in certain transactions,

including over-the-counter (OTC) derivatives. Thus, it is our objective to maintain

high-quality credit ratings, and management maintains an active dialogue with the

major rating agencies.

Credit ratings and outlooks are opinions expressed by rating agencies on our

creditworthiness and that of our obligations or securities, including long-term debt,

short-term borrowings, preferred stock and other securities, including asset

securitizations. Our credit ratings are subject to ongoing review by the rating

agencies, and they consider a number of factors, including our own financial

strength, performance, prospects and operations as well as factors not under our

control. The rating

Bank of America 52

agencies could make adjustments to our ratings at any time, and they provide no

assurances that they will maintain our ratings at current levels.

Other factors that influence our credit ratings include changes to the rating

agencies’ methodologies for our industry or certain security types; the rating

agencies’ assessment of the general operating environment for financial services

companies; our relative positions in the markets in which we compete; our various

risk exposures and risk management policies and activities; pending litigation and

other contingencies or potential tail risks; our reputation; our liquidity position,

diversity of funding sources and funding costs; the current and expected level and

volatility of our earnings; our capital position and capital management practices;

our corporate governance; the sovereign credit ratings of the U.S. government;

current or future regulatory and legislative initiatives; and the agencies’ views on

whether the U.S. government would provide meaningful support to the Corporation

or its subsidiaries in a crisis.

On June 12, 2019, Fitch Ratings (Fitch) completed its periodic review of the 12

large, complex securities trading and universal banks, including Bank of America

Corporation. The agency affirmed the long-term and short-term senior debt ratings

of the Corporation and all of its rated subsidiaries, except Bank of America Merrill

Table 19 Senior Debt Ratings

Moody’s Investors Service

Long-term Short-term Outlook

Bank of America Corporation A2 P-1 Stable

Bank of America, N.A. Aa2 P-1 Stable

Bank of America Merrill Lynch International Designated Activity

Company NR NR NR

Merrill Lynch, Pierce, Fenn er & Smith Incorporated NR NR NR

BofA Securities, Inc. NR NR NR

Merrill Lynch International NR NR NR

BofA Securities Europe SA NR NR NR

NR = not rated

A reduction in certain of our credit ratings or the ratings of certain asset-backed

securitizations may have a material adverse effect on our liquidity, potential loss of

access to credit markets, the related cost of funds, our businesses and on certain

revenues, particularly in those businesses where counterparty creditworthiness is

critical. In addition, under the terms of certain OTC derivative contracts and other

trading agreements, in the event of downgrades of our or our rated subsidiaries’

credit ratings, the counterparties to those agreements may require us to provide

additional collateral, or to terminate these contracts or agreements, which could

cause us to sustain losses and/or adversely impact our liquidity. If the short-term

credit ratings of our parent company, bank or broker-dealer subsidiaries were

downgraded by one or more levels, the potential loss of access to short-term

funding sources such as repo financing and the effect on our incremental cost of

funds could be material.

While certain potential impacts are contractual and quantifiable, the full scope

of the consequences of a credit rating downgrade to a financial institution is

inherently uncertain, as it depends upon numerous dynamic, complex and inter

-

related factors and assumptions, including whether any downgrade of a company’s

long-term credit ratings precipitates downgrades to its short-term credit ratings,

and assumptions about the potential behaviors of various customers, investors and

counterparties. For more information on potential impacts of credit rating

downgrades, see Liquidity Risk – Liquidity Stress Analysis on page 51.

53 Bank of America

Lynch International Designated Activity Company, which Fitch upgraded by one

notch to AA-/F1+. The rating outlook for all long-term ratings is currently stable.

On March 6, 2019, Moody’s Investors Service (Moody’s) upgraded the long-

term and short-term ratings of the Corporation by one notch to A2/P-1 from A3/P-2

for senior debt, as well as the long-term ratings of its rated subsidiaries, including

BANA, which the agency upgraded to Aa2 from Aa3 for senior debt. Moody’s

concurrently affirmed the short-term ratings of the Corporation’s rated subsidiaries,

including BANA. Moody’s cited the Corporation’s strengthening profitability,

continued adherence to a conservative risk profile and stable capital ratios as

rationale for the upgrade. The rating outlook for all long-term ratings is currently

stable.

The ratings from Standard & Poor’s Global Ratings (S&P) for the Corporation

and its subsidiaries did not change during 2019. The long-term and short-term debt

ratings of BofAS and BofASE, which were initially rated by S&P during the first

quarter 2019, also remained unchanged during the rest of2019.

Table 19 presents the Corporation’s current long-term/short-term senior debt

ratings and outlooks expressed by the rating agencies.

Standard & Poor’s Global Ratings Fitch Ratings

Long-term Short-term Outlook Long-term Short-term Outlook

A- A-2 Stable A+ F1 Stable

A+ A-1 Stable AA- F1+ Stable

A+ A-1 Stable A+ F1 Stable

For more information on additional collateral and termination payments that

could be required in connection with certain OTC derivative contracts and other

trading agreements as a result of such a credit rating downgrade, see Note 3 –

Derivatives to the Consolidated Financial Statements and Item 1A. Risk Factors.

Common Stock Dividends

For a summary of our declared quarterly cash dividends on common stock during

2019 and through February 19, 2020, see Note 14 – Shareholders’ Equity to the

Consolidated Financial Statements.

Credit Risk Management

Credit risk is the risk of loss arising from the inability or failure of a borrower or

counterparty to meet its obligations. Credit risk can also arise from operational

failures that result in an erroneous advance, commitment or investment of funds.

We define the credit exposure to a borrower or counterparty as the loss potential

arising from all product classifications including loans and leases, deposit

overdrafts, derivatives, assets held-for-sale and unfunded lending commitments

which include loan commitments, letters of credit and financial guarantees.

Derivative positions are recorded at fair value and assets held-for-sale are

recorded at either fair value or the lower of cost or fair value. Certain loans and

unfunded commitments are accounted for under the fair value option. Credit risk

for categories of assets carried at fair value is not accounted for as part of the

allowance for credit losses but as part of the fair

value adjustments recorded in earnings. For derivative positions, our credit risk is

measured as the net cost in the event the counterparties with contracts in which

we are in a gain position fail to perform under the terms of those contracts. We use

the current fair value to represent credit exposure without giving consideration to

future mark-to-market changes. The credit risk amounts take into consideration the

effects of legally enforceable master netting agreements and cash collateral. Our

consumer and commercial credit extension and review procedures encompass

funded and unfunded credit exposures. For more information on derivatives and

credit extension commitments, see Note 3 – Derivatives and Note 13 –

Commitments and Contingencies to the Consolidated Financial Statements.

We manage credit risk based on the risk profile of the borrower or counterparty,

repayment sources, the nature of underlying collateral, and other support given

current events, conditions and expectations. We classify our portfolios as either

consumer or commercial and monitor credit risk in each as discussed below.

We refine our underwriting and credit risk management practices as well as

credit standards to meet the changing economic environment. To mitigate losses

and enhance customer support in our consumer businesses, we have in place

collection programs and loan modification and customer assistance infrastructures.

We utilize a number of actions to mitigate losses in the commercial businesses

including increasing the frequency and intensity of portfolio monitoring, hedging

activity and our practice of transferring management of deteriorating commercial

exposures to independent special asset officers as credits enter criticized

categories.

For more information on our credit risk management activities, seeConsumer

Portfolio Credit Risk Management below, Commercial Portfolio Credit Risk

Management on page 60, Non-U.S. Portfolio on page 66, Provision for Credit

Losses on page 68, Allowance for Credit Losses on page 68, and Note 5 –

Outstanding Loans and Leases and Note 6 – Allowance for Credit Losses to the

Consolidated Financial Statements.

Table 20 Consumer Credit Quality

(Dollars in millions)

Residential mortgage

(1)

$

Home equity

Credit card

Direct/Indirect consumer

(2)

Other consumer

Consumer loans excluding loans accounted for under the fair value option $

Loans accounted for under the fair value option

(3)

Total consumer loans and leases $

Percentage of outstanding consumer loans and leases

(4)

Percentage of outstanding consumer loans and leases, excluding fully-insured loan portfolios

(4)

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

Improvement in home prices continued during2019 resulting in improved credit

quality compared to 2018. Net recoveries in the consumer real estate portfolio due

primarily to non-core loan sales were partially offset by seasoning in the credit card

portfolio compared to 2018.

Improved credit quality and continued loan balance runoff primarily in the non-

core consumer real estate portfolio, partially offset by seasoning within the credit

card portfolio, drove a $260 million decrease in the consumer allowance for loan

and lease losses in 2019 to $4.5 billion. For more information, seeAllowance for

Credit Losses on page 68.

For more information on our accounting policies regarding delinquencies,

nonperforming status, charge-offs and troubled debt restructurings (TDRs) for the

consumer portfolio, see Note 1 – Summary of Significant Accounting Principles

a n d Note 5 – Outstanding Loans and Leases to the Consolidated Financial

Statements.

Table 2

0 presents our outstanding consumer loans and leases, consumer

nonperforming loans and accruing consumer loans past due 90 days or more.

Accruing Past Due

Outstandings Nonperforming 90 Days or More

December 31

2019 2018 2019 2018 2019 2018

236,169 $ 208,557 $ 1,470 $ 1,893 $ 1,088 $ 1,884

40,208 48,286 536 1,893 — —

97,608 98,338 n/a n/a 1,042 994

90,998 91,166 47 56 33 38

192 202 — — — —

465,175 $ 446,549 $ 2,053 $ 3,842 $ 2,163 $ 2,916

594 682

465,769 $ 447,231

n/a n/a 0.44 % 0.86 % 0.47 % 0.65 %

n/a n/a 0.46 0.90 0.24 0.24

(1)

Residential mortgage loans accruing past due 90 days or more are fully-insured loans. AtDecember 31, 2019 and 2018, residential mortgage includes $740 million and $1.4 billion of loans on which interest had been curtailed by the FHA, and therefore were

no longer accruing interest, although principal was still insured, and $348 million and $498 million of loans on which interest was still accruing.

(2)

Outstandings primarily include auto and specialty lending loans and leases of$50.4 billion and $50.1 billion, U.S. securities-based lending loans of $36.7 billion and $37.0 billion and non-U.S. consumer loans of $2.8 billion and $2.9 billion at December 31,

2019 and 2018.

(3)

Consumer loans accounted for under the fair value option include residential mortgage loans of$257 million and $336 million and home equity loans of$337 million and $346 million at December 31, 2019 and 2018. For more information on the fair value

option, see Note 22 – Fair Value Option to the Consolidated Financial Statements.

(4)

Excludes consumer loans accounted for under the fair value option. AtDecember 31, 2019 and 2018, $6 million and $12 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

Bank of America 54

Table 21 presents net charge-offs and related ratios for consumer loans and leases.

Table

21 Consumer Net Charge-offs and Related Ratios

Net Charge-offs Net Charge-off Ratios

(1)

(Dollars in millions) 2019 2018 2019 2018

Residential mortgage $ (47 ) $ 28 (0.02)% 0.01 %

Home equity (358 ) (2) (0.81) —

Credit card 2,948 2,837 3.12 3.00

Direct/Indirect consumer 209 195 0.23 0.21

Other consumer 234 182 n/m n/m

Total $ 2,986 $ 3,240 0.66 0.72

(1)

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

option.

n/m = not meaningful

Table 22 presents outstandings, nonperforming balances, net charge-offs, as core loans. All other loans are generally characterized as non-core loans and

allowance for loan and lease losses and provision for loan and lease losses for the represent runoff portfolios. Core loans as reported in Table 22 include loans held in

core and non-core portfolios within the consumer real estate portfolio. We t h e Consumer Banking and GWIM segments, as well as loans held for ALM

categorize consumer real estate loans as core and non-core based on loan and activities in All Other.

customer characteristics such as origination date, product type, loan-to-value As shown in Table 22, outstanding core consumer real estate loans increased

(LTV), Fair Isaac Corporation (FICO) score and delinquency status consistent with $27.3 billion during 2019 driven by an increase of $32.1 billion in residential

our current consumer and mortgage servicing strategy. Generally, loans that were mortgage, partially offset by a $4.8 billion decrease in home equity.

originated after January 1, 2010, qualified under GSE underwriting guidelines, or During 2019, we sold $4.7 billion of consumer real estate loans, primarily non-

otherwise met our underwriting guidelines in place in 2015 are characterized core, compared to $11.6 billion in 2018.

Table 22 Consumer Real Estate Portfolio

(1)

Outstandings Nonperforming

December 31 Net Charge-offs

(Dollars in millions) 2019 2018 2019 2018 2019 2018

Core portfolio

Residential mortgage $ 225,770 $ 193,695 $ 883 $ 1,010 $ 7 $ 11

Home equity 35,226 40,010 363 955 51 78

Total core portfolio 260,996 233,705 1,246 1,965 58 89

Non-core portfolio

Residential mortgage 10,399 14,862 587 883 (54 ) 17

Home equity 4,982 8,276 173 938 (409 ) (80 )

Total non-core portfolio 15,381 23,138 760 1,821 (463 ) (63 )

Consumer real estate portfolio

Residential mortgage 236,169 208,557 1,470 1,893 (47 ) 28

Home equity 40,208 48,286 536 1,893 (358 ) (2 )

Total consumer real estate portfolio $ 276,377 $ 256,843 $ 2,006 $ 3,786 $ (405 ) $ 26

Allowance for Loan

and Lease Losses

Provision for Loan

December 31 and Lease Losses

2019 2018 2019 2018

Core portfolio

Residential mortgage $ 229 $ 214 $ 22 $ 7

Home equity 120 228 (58) (60 )

Total core portfolio 349 442 (36) (53 )

Non-core portfolio

Residential mortgage 96 208 (134) (104)

Home equity 101 278 (510) (335)

Total non-core portfolio 197 486 (644) (439 )

Consumer real estate portfolio

Residential mortgage 325 422 (112) (97 )

Home equity 221 506 (568 ) (395 )

Total consumer real estate portfolio $ 546 $ 928 $ (680) $ (492 )

(1)

Outstandings and nonperforming loans exclude loans accounted for under the fair value option. Consumer loans accounted for under the fair value option include residential mortgage loans of$257 million and $336 million and home equity loans of$337

million and $346 million at December 31, 2019 and 2018. For more information, see Note 22 – Fair Value Option to the Consolidated Financial Statements.

55 Bank of America

23

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 December

31, 2019. Approximately 50 percent of the residential mortgage portfolio was in

Consumer Banking and 36 percent was in GWIM. The remaining portion was in All

Other and was comprised of loans used in our overall ALM activities,

Table

Residential Mortgage – Key Credit Statistics

(Dollars in millions)

Outstandings

Accruing past due 30 days or more

Accruing past due 90 days or more

Nonperforming loans

Percent of portfolio

Refreshed LTV greater than 90 but less than or equal to 100

Refreshed LTV greater than 100

Refreshed FICO below 620

2006 and 2007 vintages

(2)

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 increased $27.6

billion in 2019 as retention of new originations was partially offset by loan sales of

$2.7 billion and runoff.

A t December 31, 2019 and 2018, the residential mortgage portfolio included

$18.7 billion and $20.1 billion of outstanding fully-insured loans, of which$11.2

billion and $14.0 billion had FHA insurance with the remainder protected by long

-

term standby agreements.

Table 23 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.

Reported Basis

(1)

Excluding Fully-insured Loans

(1)

December 31

2019 2018 2019 2018

$ 236,169 $ 208,557 $ 217,479 $ 188,427

3,108 3,945 1,296 1,155

1,088 1,884 — —

1,470 1,893 1,470 1,893

2% 2% 2% 2%

1 1 1 1

3 4 2 2

4 6 4 6

(1)

Outstandings, accruing past due, nonperforming loans and percentages of portfolio exclude loans accounted for under the fair value

option.

(2)

These vintages of loans accounted for $365 million, or 25 percent, and $536 million, or 28 percent, of nonperforming residential mortgage loans atDecember 31, 2019 and

2018.

Nonperforming residential mortgage loans decreased $423 million in 2019

primarily driven by sales. Of the nonperforming residential mortgage loans at

December 31, 2019, $616 million, or 42 percent, were current on contractual

payments. Loans accruing past due 30 days or more increased $141 million.

Net charge-offs improved $75 million to a net recovery of $47 million in 2019

compared to net charge-offs of $28 million in 2018 primarily due to recoveries from

the sales of previously charged-off loans and continued improvement in credit

quality.

Of the $217.5 billion in total residential mortgage loans outstanding at

December 31, 2019, as shown in Table 23, 26 percent were originated as interest-

only loans. The outstanding balance of interest-only residential mortgage loans that

have entered the amortization period was $7.4 billion, or 13 percent, at December

31, 2019. Residential mortgage loans that have entered the amortization period

generally have experienced a higher rate of early stage delinquencies and

nonperforming status compared to the residential mortgage portfolio as a whole. At

December 31, 2019, $124 million, or two percent, of outstanding interest-only

residential mortgages that had entered the amortization period were accruing past

due 30 days or more

compared to $1.3 billion, or one percent, for the entire residential mortgage

portfolio. In addition, at December 31, 2019, $260 million, or four percent, of

outstanding interest-only residential mortgage loans that had entered the

amortization period were nonperforming, of which $108 million were contractually

current, compared to $1.5 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 94 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 24 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 16 percent of outstandings at both December 31, 2019 and

2018. In the New York area, the New York-Northern New Jersey-Long Island MSA

made up 13 percent of outstandings at both December 31, 2019 and 2018.

Bank of America 56

Table 24 Residential Mortgage State Concentrations

Outstandings

(1)

(Dollars in millions) 2019

California $ 88,998 $

New York 22,385

Florida 12,833

Texas 8,943

New Jersey 8,734

Other 75,586

Residential mortgage loans $ 217,479 $

Fully-insured loan portfolio 18,690

Total residential mortgage loan portfolio $ 236,169 $

(1)

Outstandings and nonperforming loans exclude loans accounted for under the fair value

option.

Home Equity

A t December 31, 2019, the home equity portfolio made upnine percent of the

consumer portfolio and was comprised of home equity lines of credit (HELOCs),

home equity loans and reverse mortgages. We no longer originate home equity

loans or reverse mortgages.

A t December 31, 2019, our HELOC portfolio had an outstanding balance of

$37.5 billion, or 93 percent of the total home equity portfolio, compared to$44.3

billion, or 92 percent, at December 31, 2018. 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.

A t December 31, 2019, our home equity loan portfolio had an outstanding

balance of $1.2 billion, or three percent of the total home equity portfolio, compared

to $1.8 billion, or four percent, at December 31, 2018. At December 31, 2019, our

reverse mortgage portfolio had an outstanding balance of $1.5 billion, or four

percent of the total home equity portfolio, compared to$2.2 billion, also four

percent, at December 31, 2018.

Table

25 Home Equity – Key Credit Statistics

(1)

(Dollars in millions)

Outstandings

Accruing past due 30 days or more

(2)

Nonperforming loans

(2)

Percent of portfolio

Refreshed CLTV greater than 90 but less than or equal to 100

Refreshed CLTV greater than 100

Refreshed FICO below 620

2006 and 2007 vintages

(3)

Nonperforming

(1)

December 31 Net Charge-offs

2018 2019 2018 2019 2018

76,323 $ 274 $ 314 $ (22 ) $ (22)

19,219 196 222 5 10

11,624 143 221 (12) (6)

7,820 65 102 1 4

7,051 77 98 (4) 8

66,390 715 936 (15) 34

188,427 $ 1,470 $ 1,893 $ (47 ) $ 28

20,130

208,557

At December 31, 2019, 80 percent of the home equity portfolio was inConsumer

Banking, 12 percent was in All Other and the remainder of the portfolio was

primarily in GWIM. Outstanding balances in the home equity portfoliodecreased

$8.1 billion in 2019 primarily due to paydowns and loan sales of$2.0 billion

outpacing new originations and draws on existing lines. Of the total home equity

portfolio at December 31, 2019 and 2018, $15.0 billion, or 37 percent, and $17.3

billion, or 36 percent, were in first-lien positions. At December 31, 2019,

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 $6.9

billion, or 17 percent of our total home equity portfolio.

Unused HELOCs totaled $43.6 billion and $43.1 billion at December 31, 2019

and 2018. The increase was primarily driven by the impact of lower utilization of

open lines and new production partially offset by customers choosing to close

accounts. The HELOC utilization rate was 46 percent and 51 percent at December

31, 2019 and 2018.

Table 25 presents certain home equity portfolio key credit statistics.

December 31

2019 2018

$ 40,208 $ 48,286

218 363

536 1,893

1% 2%

2 3

3 5

18 22

(1)

Outstandings, accruing past due, nonperforming loans and percentages of the portfolio exclude loans accounted for under the fair value

option.

(2)

Accruing past due 30 days or more include$30 million and $48 million and nonperforming loans include$57 million and $218 million of loans where we serviced the underlying first lien atDecember 31, 2019 and

2018.

(3)

These vintages of loans accounted for 34 percent and 49 percent of nonperforming home equity loans atDecember 31, 2019 and

2018.

Nonperforming outstanding balances in the home equity portfoliodecreased

$1.4 billion in 2019 as outflows, primarily sales, outpaced new inflows. Of the

nonperforming home equity loans at December 31, 2019, $241 million, or 45

percent, were current on contractual payments. Nonperforming loans that are

contractually current 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. In

addition, $162 million, or 30 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

57 Bank of America

collateral, less costs to sell. Accruing loans that were 30 days or more past due

decreased $145 million in 2019.

Net charge-offs decreased $356 million to a net recovery of $358 million in 2019

compared to a net recovery of $2 million in 2018 primarily driven by recoveries

from the sales of previously charged off non-core home equity loans.

Of the $40.2 billion in total home equity portfolio outstandings atDecember 31,

2019, as shown in Table 25, 17 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 $11.5 billion at December 31, 2019.

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 loans and lines, we can infer some of this information through a review of our

December 31, 2019, $149 million, or one percent, of outstanding HELOCs that had HELOC portfolio that we service and that is still in its revolving period. During 2019,

entered the amortization period were accruing past due 30 days or more. In 13 percent of these customers with an outstanding balance did not pay any

addition, at December 31, 2019, $472 million, or four percent, were nonperforming. principal on their HELOCs.

Loans that have yet to enter the amortization period in our interest-only portfolio Table 26 presents outstandings, nonperforming balances and net charge-offs

are primarily post-2008 vintages and generally have better credit quality than the by certain state concentrations for the home equity portfolio. In the New York area,

previous vintages that had entered the amortization period. We communicate to the New York-Northern New Jersey-Long Island MSA made up 13 percent of the

contractually current customers more than a year prior to the end of their draw outstanding home equity portfolio at both December 31, 2019 and 2018. The Los

period to inform them of the potential change to the payment structure before Angeles-Long Beach-Santa Ana MSA within California made up 11 percent of the

entering the amortization period, and provide payment options to customers prior outstanding home equity portfolio at both December 31, 2019 and 2018.

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

Table 26 Home Equity State Concentrations

Outstandings

(1)

Nonperforming

(1)

December 31 Net Charge-offs

(Dollars in millions) 2019 2018 2019 2018 2019 2018

California $ 11,232 $ 13,515 $ 101 $ 536 $ (117 ) $ (54 )

Florida 4,327 5,418 71 315 (74 ) 1

New Jersey 3,216 3,871 56 150 (8 ) 25

New York 2,899 3,590 85 194 (1 ) 23

Massachusetts 2,023 2,400 29 65 (5 ) 5

Other 16,511 19,492 194 633 (153 ) (2 )

Total home equity loan portfolio $ 40,208 $ 48,286 $ 536 $ 1,893 $ (358 ) $ (2 )

(1)

Outstandings and nonperforming loans exclude loans accounted for under the fair value

option.

Credit Card

accruing interest increased $46 million and loans 90 days or more past due and

A t December 31, 2019, 97 percent of the credit card portfolio was managed in

still accruing interest increased $48 million. These increases were driven by

Consumer Banking with the remainder in GWIM. Outstandings in the credit card

portfolio seasoning.

portfolio decreased $730 million in 2019 to $97.6 billion. In 2019, net charge-offs

Unused lines of credit for credit card increased to$336.9 billion at December

31, 2019 from $334.8 billion at December 31, 2018.

increased $111 million to $2.9 billion compared to net charge-offs of$2.8 billion in

Table 27 presents certain state concentrations for the credit card portfolio.

2018. Credit card loans 30 days or more past due and still

Table

27 Credit Card State Concentrations

Accruing Past Due

Outstandings 90 Days or More

December 31 Net Charge-offs

(Dollars in millions) 2019 2018 2019 2018 2019 2018

California $ 16,135 $ 16,062 $ 178 $ 163 $ 526 $ 479

Florida 9,075 8,840 135 119 363 332

Texas 7,815 7,730 93 84 241 224

New York

5,975 6,066 80 81 243 268

Washington 4,639 4,558 26 24 71 63

Other 53,969 55,082 530 523 1,504 1,471

Total credit card portfolio $ 97,608 $ 98,338 $ 1,042 $ 994 $ 2,948 $ 2,837

Direct/Indirect Consumer

Outstandings of $91.0 billion in the direct/indirect portfolio were relatively

At December 31, 2019, 56 percent of the direct/indirect portfolio was included in

unchanged at December 31, 2019.

Consumer Banking (consumer auto and specialty lending – automotive,

Table 28 presents certain state concentrations for the direct/indirect consumer

recreational vehicle, marine, aircraft and consumer personal loans) and 44 percent

loan portfolio.

was included in GWIM (principally securities-based lending loans).

Bank of America 58

Table 28 Direct/Indirect State Concentrations

Accruing Past Due

Outstandings 90 Days or More

December 31 Net Charge-offs

(Dollars in millions) 2019 2018 2019 2018 2019 2018

California $ 11,912 $ 11,734 $ 4 $ 4 $ 49 $ 21

Florida 10,154 10,240 4 4 27 36

Texas 9,516 9,876 5 6 29 30

New York 6,394 6,296 1 2 12 9

New Jersey 3,468 3,308 1 1 4 2

Other 49,554 49,712 18 21 88 97

Total direct/indirect loan portfolio $ 90,998 $ 91,166 $ 33 $ 38 $ 209 $ 195

Nonperforming Consumer Loans, Leases and Foreclosed Properties

percent, of nonperforming consumer loans were modified and are now current after

Activity

successful trial periods, or are current loans classified as nonperforming loans in

Table 29 presents nonperforming consumer loans, leases and foreclosed

accordance with applicable policies.

properties activity during 2019 and 2018. During 2019, nonperforming consumer

Foreclosed properties decreased $15 million in 2019 to $229 million as

loans decreased $1.8 billion to $2.1 billion primarily driven by loan sales of $1.5

liquidations outpaced additions.

billion.

Nonperforming loans also include certain loans that have been modified in

At December 31, 2019, $606 million, or 29 percent, of nonperforming loans were

TDRs where economic concessions have been granted to borrowers experiencing

180 days or more past due and had been written down to their estimated property

financial difficulties. Nonperforming TDRs are included in Table 29.

value less costs to sell. In addition, at December 31, 2019, $901 million, or 44

Table 29 Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity

(Dollars in millions) 2019 2018

Nonperforming loans and leases, January 1 $ 3,842 $ 5,166

Additions 1,407 2,440

Reductions:

Paydowns and payoffs (701 ) (958 )

Sales (1,523) (969 )

Returns to performing status

(1)

(766 ) (1,283)

Charge-offs (111 ) (401 )

Transfers to foreclosed properties (95) (151 )

Transfers to loans held-for-sale — (2 )

Total net reductions to nonperforming loans and leases (1,789) (1,324)

Total nonperforming loans and leases, December 31 2,053 3,842

Foreclosed properties, December 31

(2)

229 244

Nonperforming consumer loans, leases and foreclosed properties, December 31 $ 2,282 $ 4,086

Nonperforming consumer loans and leases as a percentage of outstanding consumer loans and leases

(3)

0.44 % 0.86 %

Nonperforming consumer loans, leases and foreclosed properties as a percentage of outstanding consumer loans, leases and foreclosed properties

(3)

0.49 0.92

(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$260 million and $488 million at December 31, 2019 and

2018.

(3)

Outstanding consumer loans and leases exclude loans accounted for under the fair value

option.

Table 30 presents TDRs for the consumer real estate portfolio. Performing TDR balances are excluded from nonperforming loans and leases inTable 29.

Table 30 Consumer Real Estate Troubled Debt Restructurings

December 31, 2019 December 31, 2018

(Dollars in millions) Nonperforming Performing Total Nonperforming Performing Total

Residential mortgage

(1, 2)

$ 921 $ 3,832 $ 4,753 $ 1,209 $ 4,988 $ 6,197

Home equity

(3)

252 977 1,229 1,107 1,252 2,359

Total consumer real estate troubled debt restructurings $ 1,173 $ 4,809 $ 5,982 $ 2,316 $ 6,240 $ 8,556

(1)

At December 31, 2019 and 2018, residential mortgage TDRs deemed collateral dependent totaled$1.2 billion and $1.6 billion, and included $748 million and $960 million of loans classified as nonperforming and$468 million and $605 million of loans classified

as performing.

(2)

A t December 31, 2019 and 2018, residential mortgage performing TDRs include$2.1 billion and $2.8 billion of loans that were fully-

insured.

(3) At December 31, 2019 and 2018, home equity TDRs deemed collateral dependent totaled$442 million and $1.3 billion, and include$209 million and $961 million of loans classified as nonperforming and$233 million and $322 million of loans classified as

performing.

In addition to modifying consumer real estate loans, we work with customers in the customer’s interest rate on the account and placing the customer on a fixed

who are experiencing financial difficulty by modifying credit card and other payment plan not exceeding 60 months, all of which are considered TDRs (the

consumer loans. Credit card and other consumer loan modifications generally renegotiated TDR portfolio).

involve a reduction

59 Bank of America

Modifications of credit card and other consumer loans are made through

renegotiation programs utilizing direct customer contact, but may also utilize

external renegotiation programs. The renegotiated TDR portfolio is excluded in

large part from Table 29 as substantially all of the loans remain on accrual status

until either charged off or paid in full. At December 31, 2019 and 2018, our

renegotiated TDR portfolio was $679 million and $566 million, of which $570 million

and $481 million were current or less than 30 days past due under the modified

terms. The increase in the renegotiated TDR portfolio was primarily driven by new

renegotiated enrollments outpacing runoff of existing portfolios.

Commercial Portfolio Credit Risk Management

Credit risk management for the commercial portfolio begins with an assessment of

the credit risk profile of the borrower or counterparty based on an analysis of its

financial position. As part of the overall credit risk assessment, our commercial

credit exposures are assigned a risk rating and are subject to approval based on

defined credit approval standards. Subsequent to loan origination, risk ratings are

monitored on an ongoing basis, and if necessary, adjusted to reflect changes in

the financial condition, cash flow, risk profile or outlook of a borrower or

counterparty. In making credit decisions, we consider risk rating, collateral,

country, industry and single-name concentration limits while also balancing these

considerations with the total borrower or counterparty relationship. We use a

variety of tools to continuously monitor the ability of a borrower or counterparty to

perform under its obligations. We use risk rating aggregations to measure and

evaluate concentrations within portfolios. In addition, risk ratings are a factor in

determining the level of allocated capital and the allowance for credit losses.

As part of our ongoing risk mitigation initiatives, we attempt to work with clients

experiencing financial difficulty to modify their loans to terms that better align with

their current ability to pay. In situations where an economic concession has been

granted to a borrower experiencing financial difficulty, we identify these loans as

TDRs. For more information on our accounting policies regarding delinquencies,

nonperforming status and net charge-offs for the commercial portfolio, see Note 1 –

Summary of Significant Accounting Principles to the Consolidated Financial

Statements.

Management of Commercial Credit Risk Concentrations

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 35, 38 and 41 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 Commercial Portfolio Credit Risk

Management – Industry Concentrations on page 64 and Table 38.

We account for certain large corporate loans and loan commitments, including

issued but unfunded letters of credit which are considered utilized for credit risk

management purposes, that exceed our single-name credit risk concentration

guidelines under the fair value option. Lending commitments, both funded and

unfunded, are actively managed and monitored, and as appropriate, credit risk for

these lending relationships may be mitigated through the use of credit derivatives,

with our credit view and market perspectives determining the size and timing of the

hedging activity. In addition, we purchase credit protection to cover the funded

portion as well as the unfunded portion of certain other credit exposures. To lessen

the cost of obtaining our desired credit protection levels, credit exposure may be

added within an industry, borrower or counterparty group by selling protection.

These credit derivatives do not meet the requirements for treatment as accounting

hedges. They are carried at fair value with changes in fair value recorded in other

income.

In addition, we are a member of various securities and derivative exchanges

and clearinghouses, both in the U.S. and other countries. As a member, we may

be required to pay a pro-rata share of the losses incurred by some of these

organizations as a result of another member default and under other loss

scenarios. For more information, see Note 13 – Commitments and Contingencies

to the Consolidated Financial Statements.

Commercial Credit Portfolio

During 2019, credit quality among large corporate and middle-market borrowers in

our commercial and industrial portfolio remained strong. Credit quality of

commercial real estate borrowers in most sectors remained stable with

conservative LTV ratios. However, some of the real estate markets experienced

slowing tenant demand and decelerating rental income.

Total commercial utilized credit exposure increased $14.3 billion in 2019 to

$635.3 billion driven by higher loans and leases. The utilization rate for loans and

leases, SBLCs and financial guarantees, and commercial letters of credit, in the

aggregate, was 58 percent at December 31, 2019 and 59 percent at December 31,

2018.

Table 31 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.

Bank of America 60

31

Table

Commercial Credit Exposure by Type

Commercial Utilized

(1)

Commercial Unfunded

(2, 3, 4)

Total Commercial Committed

December 31

(Dollars in millions) 2019 2018 2019 2018 2019 2018

Loans and leases $ 517,657 $ 499,664 $ 405,834 $ 369,282 $ 923,491 $ 868,946

Derivative assets

(5)

40,485 43,725 — — 40,485 43,725

Standby letters of credit and financial guarantees 36,062 34,941 468 491 36,530 35,432

Debt securities and other investments 25,546 25,425 5,101 4,250 30,647 29,675

Loans held-for-sale 7,047 9,090 15,135 14,812 22,182 23,902

Operating leases 6,660 6,060 — — 6,660 6,060

Commercial letters of credit 1,049 1,210 451 168 1,500 1,378

Other 800 898 — — 800 898

Total $ 635,306 $ 621,013 $ 426,989 $ 389,003 $ 1,062,295 $ 1,010,016

(1)

Commercial utilized exposure includes loans of $7.7 billion and $3.7 billion and issued letters of credit with a notional amount of$170 million and $100 million accounted for under the fair value option atDecember 31, 2019 and

2018.

(2)

Commercial unfunded exposure includes commitments accounted for under the fair value option with a notional amount of$4.2 billion and $3.0 billion at December 31, 2019 and

2018.

(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$10.6 billion and $10.7 billion at December 31, 2019 and

2018.

(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$33.9 billion and $32.4 billion at December 31, 2019 and 2018. Not reflected in utilized and committed

exposure is additional non-cash derivative collateral held of $35.2 billion and $33.0 billion at December 31, 2019 and 2018, which consists primarily of other marketable securities.

Outstanding commercial loans and leases increased $18.0 billion during 2019 portfolio. The allowance for loan and lease losses for the commercial portfolio

primarily in the commercial and industrial portfolio. Nonperforming commercial increased $75 million to $4.9 billion at December 31, 2019. For more information,

loans increased $397 million and commercial reservable criticized utilized see Allowance for Credit Losses on page 68. Table 32 presents our commercial

exposure increased $391 million driven by a small number of client downgrades loans and leases portfolio and related credit quality information at December 31,

across industries which were not indicative of broader issues in the 2019 and 2018.

Table 32 Commercial Credit Quality

Accruing Past Due

Outstandings Nonperforming 90 Days or More

December 31

(Dollars in millions) 2019 2018 2019 2018 2019 2018

Commercial and industrial:

U.S. commercial $ 307,048 $ 299,277 $ 1,094 $ 794 $ 106 $ 197

Non-U.S. commercial 104,966 98,776 43 80 8 —

Total commercial and industrial 412,014 398,053 1,137 874 114 197

Commercial real estate 62,689 60,845 280 156 19 4

Commercial lease financing 19,880 22,534 32 18 20 29

494,583 481,432 1,449 1,048 153 230

U.S. small business commercial

(1)

15,333 14,565 50 54 97 84

Commercial loans excluding loans accounted for under the fair value option 509,916 495,997 1,499 1,102 250 314

Loans accounted for under the fair value option

(2)

7,741 3,667 — — — —

Total commercial loans and leases $ 517,657 $ 499,664 $ 1,499 $ 1,102 $ 250 $ 314

(1)

Includes card-related

products.

(2)

Commercial loans accounted for under the fair value option include U.S. commercial of$4.7 billion and $2.5 billion and non-U.S. commercial of $3.1 billion and $1.1 billion at December 31, 2019 and 2018. For more information on the fair value option, see

Note 22 – Fair Value Option to the Consolidated Financial Statements.

Table 33 presents net charge-offs and related ratios for our commercial loans and leases for2019 and 2018.

Table 33 Commercial Net Charge-offs and Related Ratios

Net Charge-offs Net Charge-off Ratios

(1)

(Dollars in millions) 2019 2018 2019 2018

Commercial and industrial:

U.S. commercial $ 256 $ 215 0.08 % 0.07 %

Non-U.S. commercial 84 68 0.08 0.07

Total commercial and industrial 340 283 0.08 0.07

Commercial real estate 29 1 0.05 —

Commercial lease financing 21 (1) 0.10 (0.01)

390 283 0.08 0.06

U.S. small business commercial 272 240 1.83 1.70

Total commercial

$ 662 $ 523 0.13 0.11

(1)

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

option.

61 Bank of America

Table 34 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. At December 31, 2019 and 2018, 90 percent and 91 percent of commercial reservable criticized utilized exposure was

secured.

Table 34 Commercial Reservable Criticized Utilized Exposure

(1, 2)

December 31

(Dollars in millions) 2019 2018

Commercial and industrial:

U.S. commercial $ 8,272 2.46 % $ 7,986 2.43 %

Non-U.S. commercial 989 0.89 1,013 0.97

Total commercial and industrial 9,261 2.07 8,999 2.08

Commercial real estate 1,129 1.75 936 1.50

Commercial lease financing 329 1.66 366 1.62

10,719 2.01 10,301 1.99

U.S. small business commercial 733 4.78 760 5.22

Total commercial reservable criticized utilized exposure

(1)

$ 11,452 2.09 $ 11,061 2.08

(1)

Total commercial reservable criticized utilized exposure includes loans and leases of$10.7 billion and $10.3 billion and commercial letters of credit of $715 million and $781 million at December 31, 2019 and

2018.

(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 December 31, 2019, 70 percent of the U.S. commercial loan portfolio, excluding

small business, was managed in Global Banking, 16 percent in Global Markets, 13

percent in GWIM (generally business-purpose loans for high net worth clients) and

the remainder primarily in Consumer Banking. U.S. commercial loans increased

$7.8 billion during 2019, across lines of business.

Non-U.S. Commercial

At December 31, 2019, 83 percent of the non-U.S. commercial loan portfolio was

managed in Global Banking a n d 17 percent in Global Markets. Non-U.S.

commercial loans increased $6.2 billion during 2019, primarily in Global Banking.

For information on the non-U.S. commercial portfolio, see Non-U.S. Portfolio on

page 66.

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 increased $1.8 billion, or three percent, during 2019

to $62.7 billion due to new originations slightly outpacing paydowns. The portfolio

remains diversified across property types and geographic regions. California

represented the largest state concentration at 24 percent and 23 percent of the

commercial real estate portfolio at December 31, 2019 and 2018. 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.

During 2019, we continued to see low default rates and solid credit quality in

both the residential and non-residential portfolios. 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 to 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.

Table 35 presents outstanding commercial real estate loans by geographic

region, based on the geographic location of the collateral, and by property type.

Bank of America 62

Table 35 Outstanding Commercial Real Estate Loans

December 31

(Dollars in millions) 2019 2018

By Geographic Region

California $ 14,910 $ 14,002

Northeast 12,408 10,895

Southwest 8,408 7,339

Southeast 5,937 5,726

Florida 3,984 3,680

Illinois 3,349 2,989

Midwest 3,203 3,772

Midsouth 2,468 2,919

Northwest 1,638 2,178

Non-U.S. 3,724 4,240

Other

(1)

2,660 3,105

Total outstanding commercial real estate loans $ 62,689 $ 60,845

By Property Type

Non-residential

Office $ 17,902 $ 17,246

Industrial / Warehouse 8,677 5,379

Shopping centers / Retail 8,183 8,798

Multi-family rental 7,250 7,762

Hotels / Motels 6,982 7,248

Unsecured 3,438 2,956

Multi-use 1,788 2,848

Other 6,958 7,029

Total non-residential 61,178 59,266

Residential 1,511 1,579

Total outstanding commercial real estate loans $ 62,689 $ 60,845

(1)

Includes unsecured loans to real estate investment trusts and national home builders whose portfolios of properties span multiple geographic regions and properties in the states of Colorado, Utah, Hawaii, Wyoming and

Montana.

U.S. Small Business Commercial

Nonperforming loans do not include loans accounted for under the fair value

The U.S. small business commercial loan portfolio is comprised of small business

option. During 2019, nonperforming commercial loans and leasesincreased $397

card loans and small business loans managed in Consumer Banking. Credit card-

million to $1.5 billion. At December 31, 2019, 94 percent of commercial

related products were 52 percent and 51 percent of the U.S. small business

nonperforming loans, leases and foreclosed properties were secured and 64

commercial portfolio at December 31, 2019 and 2018. Of the U.S. small business

percent were contractually current. Commercial nonperforming loans were carried

commercial net charge-offs, 94 percent and 95 percent were credit card-related

a t 88 percent of their unpaid principal balance before consideration of the

products in 2019 and 2018.

allowance for loan and lease losses as the carrying value of these loans has been

reduced to the estimated collateral value less costs to sell.

Nonperforming Commercial Loans, Leases and Foreclosed Properties

Activity

Table 36 presents the nonperforming commercial loans, leases and foreclosed

properties activity during 2019 and 2018.

Table 36 Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity

(1, 2)

(Dollars in millions) 2019 2018

Nonperforming loans and leases, January 1 $ 1,102 $ 1,304

Additions 2,048 1,415

Reductions:

Paydowns (648) (771)

Sales (215) (210 )

Returns to performing status

(3)

(120 ) (246 )

Charge-offs (478 ) (361 )

Transfers to foreclosed properties (9) (12 )

Transfers to loans held-for-sale (181) (17 )

Total net reductions to nonperforming loans and leases 397 (202 )

Total nonperforming loans and leases, December 31 1,499 1,102

Foreclosed properties, December 31 56 56

Nonperforming commercial loans, leases and foreclosed properties, December 31 $ 1,555 $ 1,158

Nonperforming commercial loans and leases as a percentage of outstanding commercial loans and leases

(4)

0.29 % 0.22 %

Nonperforming commercial loans, leases and foreclosed properties as a percentage of outstanding commercial loans, leases and foreclosed properties

(4)

0.30 0.23

(1)

Balances do not include nonperforming loans held-for-sale of$239 million and $292 million at December 31, 2019 and

2018.

(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.

63 Bank of America

Table 37 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. For more information on TDRs, see Note 5 – Outstanding Loans and Leases to the Consolidated Financial

Statements.

Table 37 Commercial Troubled Debt Restructurings

(Dollars in millions)

Commercial and industrial:

U.S. commercial

Non-U.S. commercial

Total commercial and industrial

Commercial real estate

Commercial lease financing

U.S. small business commercial

Total commercial troubled debt restructurings

Industry Concentrations

December 31, 2019 December 31, 2018

Nonperforming Performing Total Nonperforming Performing Total

$ 617 $

41

658

212

18

888

—

$ 888 $

Table 38 presents commercial committed and utilized credit exposure by industry

and the total net credit default protection purchased to cover the funded and

unfunded portions of certain credit exposures. Our commercial credit exposure is

diversified across a broad range of industries. Total commercial committed

exposure increased $52.3 billion, or five percent, during 2019 to $1.1 trillion. The

increase in commercial committed exposure was concentrated in the Real estate,

Utilities and Finance companies industry sectors. Increases were partially offset by

decreased exposure to the Pharmaceuticals and biotechnology, Technology

hardware and equipment, and Government and public education industry sectors.

Industry limits are used internally to manage industry concentrations and are

based on committed exposure that is allocated on an industry-by-industry basis. A

risk management framework is in place to set and approve industry limits as well

999 $ 1,616 $ 306 $ 1,092 $ 1,398

193 234 78 162 240

1,192 1,850 384 1,254 1,638

14 226 114 6 120

31 49 3 68 71

1,237 2,125 501 1,328 1,829

27 27 3 18 21

1,264 $ 2,152 $ 504 $ 1,346 $ 1,850

as to provide ongoing monitoring. The MRC oversees industry limit governance.

Asset managers and funds, our largest industry concentration with committed

exposure of $110.0 billion, increased $2.1 billion, or two percent, during 2019.

Real estate, our second largest industry concentration with committed exposure

o f $96.3 billion, increased $9.8 billion, or 11 percent, during 2019. This growth

occurred primarily in the category of industrial and warehouse buildings, partially

offset by declines in REITs.

Capital goods, our third largest industry concentration with committed exposure

of $80.9 billion, increased $5.8 billion, or eight percent, during 2019 with the growth

largely occurring in the trading companies and distributors industry categories,

partially offset by a decrease in industrial conglomerates. For more information on

the commercial real estate and related portfolios, see Commercial Portfolio Credit

Risk Management – Commercial Real Estate on page 62.

Bank of America 64

Table 38 Commercial Credit Exposure by Industry

(1)

Commercial Total Commercial

Utilized Committed

(2)

December 31

(Dollars in millions) 2019 2018 2019 2018

Asset managers and funds $ 71,289 $ 71,756 $ 109,972 $ 107,888

Real estate

(3)

70,341 65,328 96,349 86,514

Capital goods 41,060 39,192 80,871 75,080

Finance companies 40,171 36,662 63,940 56,659

Healthcare equipment and services 34,353 35,763 55,918 56,489

Government and public education 41,889 43,675 53,566 54,749

Materials 26,663 27,347 52,128 51,865

Consumer services 28,434 25,702 49,071 43,298

Retailing 25,868 25,333 48,317 47,507

Food, beverage and tobacco 24,163 23,586 45,956 42,745

Commercial services and supplies 23,102 22,623 38,943 39,349

Energy 16,407 13,727 36,327 32,279

Utilities 12,383 12,035 36,060 27,623

Transportation 23,448 22,814 33,027 31,523

Global commercial banks 26,492 26,583 28,670 28,627

Individuals and trusts 18,926 18,643 27,815 25,019

Technology hardware and equipment 10,645 13,014 24,071 26,228

Media 12,429 12,132 23,629 24,502

Vehicle dealers 18,013 17,603 21,435 20,446

Consumer durables and apparel 10,193 9,904 21,245 20,199

Software and services 10,432 8,809 20,556 19,172

Pharmaceuticals and biotechnology 5,962 7,430 20,203 23,634

Telecommunication services 9,144 8,686 16,103 14,166

Insurance 6,669 8,674 15,214

15,807

Automobiles and components 7,345 7,131 14,910 13,893

Financial markets infrastructure (clearinghouses) 9,351 8,317 11,851 10,042

Food and staples retailing 6,290 4,787 10,392 9,093

Religious and social organizations 3,844 3,757 5,756 5,620

Total commercial credit exposure by industry $ 635,306 $ 621,013 $ 1,062,295 $ 1,010,016

Net credit default protection purchased on total commitments

(4)

$ (3,349) $ (2,663)

(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$10.6 billion and $10.7 billion at December 31, 2019 and

2018.

(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.

(4)

Represents 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. For more information, seeCommercial Portfolio Credit Risk Management –

Risk Mitigation.

Risk Mitigation

option portfolio information in Table 45. For more information, seeTrading Risk

Management on page 72.

We purchase credit protection to cover the funded portion as well as the unfunded

Tables 39 and 40 present the maturity profiles and the credit exposure debt

portion of certain credit exposures. To lower the cost of obtaining our desired credit

ratings of the net credit default protection portfolio at December 31, 2019 and 2018.

protection levels, we may add credit exposure within an industry, borrower or

counterparty group by selling protection.

A t December 31, 2019 and 2018, net notional credit default protection

purchased in our credit derivatives portfolio to hedge our funded and unfunded

Table 39 Net Credit Default Protection by Maturity

exposures for which we elected the fair value option, as well as certain other credit

exposures, was $3.3 billion and $2.7 billion. We recorded net losses of$145 million

December 31

in 2019 compared to net losses of $2 million in 2018 on these positions. The gains

and losses on these instruments were offset by gains and losses on the related

2019 2018

exposures. The Value-at-Risk

Less than or equal to one year 54 % 20%

(VaR) results for these exposures are included in the fair value

Greater than one year and less than or equal to five years 45 78

Greater than five years 1 2

Total net credit default protection 100% 100 %

65 Bank of America

Table 40 Net Credit Default Protection by Credit Exposure Debt

Rating

Net Percent of Net Percent of

Notional

(1)

Total Notional

(1)

Total

December 31

(Dollars in millions) 2019 2018

Ratings

(2, 3)

A $ (697 ) 20.8 % $ (700 ) 26.3 %

BBB (1,089) 32.5 (501 ) 18.8

BB (766 ) 22.9 (804) 30.2

B (373 ) 11.1 (422) 15.8

CCC and below (119 ) 3.6 (205 ) 7.7

NR

(4)

(305 ) 9.1 (31 ) 1.2

Total net credit

default protection $ (3,349) 100.0 % $ (2,663) 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.

In addition to our net notional credit default protection purchased to cover the

funded and unfunded portion of certain credit exposures, credit derivatives are

used for market-making activities for clients and establishing positions intended to

profit from directional or relative value changes. We execute the majority of our

credit derivative trades in the OTC market with large, multinational financial

institutions, including broker-dealers and, to a lesser degree, with a variety of other

investors. Because these transactions are executed in the OTC market, we are

subject to settlement risk. We are also subject to credit risk in the event that these

counterparties fail to perform under the terms of these contracts. In order to

properly reflect counterparty credit risk, we record counterparty credit risk valuation

adjustments on certain derivative assets, including our purchased credit default

protection.

In most cases, credit derivative transactions are executed on a daily margin

basis. Therefore, events such as a credit downgrade, depending on the ultimate

rating level, or a breach of credit covenants would typically require an increase in

the amount of collateral required by the counterparty, where applicable, and/or

allow us to take additional protective measures such as early termination of all

trades. For more information on credit derivatives and counterparty credit risk

valuation adjustments, see Note 3 – Derivatives to the Consolidated Financial

Statements.

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.

Table 41 presents our 20 largest non-U.S. country exposures atDecember 31,

2019. These exposures accounted for88 percent and 89 percent of our total non-

U.S. exposure at December 31, 2019 and 2018. Net country exposure for these 20

countries increased $8.5 billion in 2019, primarily driven by increased sovereign

and corporate exposure across multiple countries.

Non-U.S. exposure is presented on an internal risk management basis and

includes sovereign and non-sovereign credit exposure, securities and other

investments issued by or domiciled in countries other than the U.S.

Funded loans and loan equivalents include loans, leases, and other extensions

of credit and funds, including letters of credit and due from placements. Unfunded

commitments are the undrawn portion of legally binding commitments related to

loans and loan equivalents. Net counterparty exposure includes the fair value of

derivatives, including the counterparty risk associated with credit default swaps

(CDS), and secured financing transactions. Securities and other investments are

carried at fair value and long securities exposures are netted against short

exposures with the same underlying issuer to, but not below, zero. Net country

exposure represents country exposure less hedges and credit default protection

purchased, net of credit default protection sold.

Bank of America 66

41

Table

Top 20 Non-U.S. Countries Exposure

Funded Loans and Unfunded Loan Net Counterparty

Securities/

Other

Country Exposure at

December 31 Hedges and Credit

Net Country

Exposure at

December 31

Increase (Decrease)

from December 31

(Dollars in millions) Loan Equivalents Commitments Exposure Investments 2019 Default Protection 2019 2018

United Kingdom $ 29,156 $ 17,341 $ 7,800 $ 3,545 $ 57,842 $ (1,998) $ 55,844 $ 990

Germany 21,920 7,408 1,828 1,967 33,123 (2,295) 30,828 2,171

Canada 7,967 8,255 1,690 2,879 20,791 (669) 20,122 607

France 7,243 9,208 876 969 18,296 (2,041) 16,255 3,604

China 13,304 497 1,085 949 15,835 (248) 15,587 946

India 7,817 364 398 3,660 12,239 (222 ) 12,017 905

Brazil 7,393 716 218 3,683 12,010 (238 ) 11,772 1,523

Australia 6,100 3,583 415 1,443 11,541 (439 ) 11,102 1,172

Japan 8,450 896 1,002 1,589 11,937 (1,405) 10,532 (9,491)

Netherlands 6,322 3,585 330 876 11,113 (786 ) 10,327 (1,250)

South Korea 5,981 758 386 1,762 8,887 (182 ) 8,705 (465 )

Singapore 3,749 435 172 3,528

7,884 (58 ) 7,826 2,309

Mexico 4,190 1,733 224 1,814 7,961 (150 ) 7,811 1,575

Switzerland 4,387 2,947 213 325 7,872 (487) 7,385 (379 )

Hong Kong 5,106 353 434 1,194 7,087 (31) 7,056 (180 )

Belgium 5,077 1,259 526 159 7,021 (514 ) 6,507 929

Italy 2,353 2,303 510 1,386 6,552 (1,175) 5,377 2,296

Spain 3,153 1,073 258 867 5,351 (629 ) 4,722 72

United Arab Emirates 3,267 229 119 10 3,625 (38 ) 3,587 (62 )

Ireland 2,142 979 76 201 3,398 (31) 3,367 1,206

Total top 20 non-U.S.

countries exposure $ 155,077 $ 63,922 $ 18,560 $ 32,806 $ 270,365 $ (13,636) $ 256,729 $ 8,478

A number of economic conditions and geopolitical events have given rise to risk the U.K. with net exposure of$55.8 billion, which represents a $990 million

aversion in certain emerging markets. Additionally, in light of ongoing trade increase from December 31, 2018. Our second largest EU exposure was Germany

tensions, we continue to closely monitor our exposures to tariff-sensitive regions with net exposure of $30.8 billion as of December 31, 2019, which represents a

and industries, particularly to countries that account for a large percentage of U.S. $2.2 billion increase from December 31, 2018. The increase in Germany was

trade, such as China. primarily driven by an increase in sovereign exposure.

Our largest emerging market country exposure atDecember 31, 2019 was Table 42 presents countries that had total cross-border exposure, including the

China, with net exposure of $15.6 billion, concentrated in large state-owned notional amount of cash loaned under secured financing agreements, exceeding

companies, subsidiaries of multinational corporations and commercial banks. one percent of our total assets at December 31, 2019. Local exposure, defined as

The economic performance in the EU remains uncertain, including as a result exposure booked in local offices of a respective country with clients in the same

of the uncertainty surrounding the terms of a potential trade agreement and other

country, is excluded. At December 31, 2019, the U.K. and France were the only

terms associated with the future relationship between the U.K. and the EU, which

countries where their respective total cross-border exposures exceeded one

could weigh unevenly on the economic performance of EU countries generally,

percent of our total assets. At December 31, 2019, Germany had total cross-border

exposure of $19.4 billion representing 0.80 percent of our total assets. No other

and even more heavily on that of the U.K. For more information, see Item 1A. Risk

countries had total cross-border exposure that exceeded 0.75 percent of our total

Fac tor s – Geopolitical on page 10 a n d Executive Summary – Recent

assets at December 31, 2019.

Developments – U.K. Exit from the EU on page 23. Our largest EU country

exposure at December 31, 2019 was

Table

42 Total Cross-border Exposure Exceeding One Percent of Total Assets

Exposure as a

Cross-border Percent of

(Dollars in millions) December 31 Public Sector Banks Private Sector Exposure Total Assets

United Kingdom 2019 $ 1,859 $ 3,580 $ 93,232 $ 98,671 4.05 %

2018 1,505

3,458 46,191 51,154 2.17

2017 923 2,984 47,205 51,112 2.24

France 2019 736 2,473 23,172 26,381 1.08

2018 633 2,385 29,847 32,865 1.40

2017 2,964 1,521 27,903 32,388 1.42

67 Bank of America

Provision for Credit Losses

The provision for credit losses increased $308 million to $3.6 billion in 2019

compared to 2018. The provision for credit losses was$58 million lower than net

charge-offs for 2019, resulting in a decrease in the allowance for credit losses.

This compared to a decrease of $481 million in the allowance for credit losses in

2018. Net charge-offs in 2019 were $3.6 billion compared to $3.8 billion in 2018.

The provision for credit losses for the consumer portfolio decreased $117

million to $2.8 billion in 2019 compared to 2018. The decrease was primarily driven

by consumer real estate loan sales.

The provision for credit losses for the commercial portfolio, including unfunded

lending commitments, increased $425 million to $758 million in 2019 compared to

2018. The increase was due in part to energy reserve releases in the prior-year

periods.

Assuming a stable economic environment in 2020 compared to the end of

2019, we expect net charge-offs of approximately $1 billion per quarter in 2020. In

view of the newly adopted accounting standard on the measurement of the

allowance for credit losses, we expect the provision for credit losses to be

modestly higher than net charge-offs in 2020, assuming no change in the current

economic outlook and estimates of loan growth, including product mix. For more

information regarding the new accounting standard, see Note 1 – Summary of

Significant Accounting Principles to the Consolidated Financial Statements.

Allowance for Credit Losses

Allowance for Loan and Lease Losses

The allowance for loan and lease losses is comprised of two components. The first

component covers nonperforming commercial loans and TDRs. The second

component covers loans and leases on which there are incurred losses that are

not yet individually identifiable, as well as incurred losses that may not be

represented in the loss forecast models. We evaluate the adequacy of the

allowance for loan and lease losses based on the total of these two components,

each of which is described in more detail below. The allowance for loan and lease

losses excludes loans held-for-sale (LHFS) and loans accounted for under the fair

value option as the fair value reflects a credit risk component.

The first component of the allowance for loan and lease losses covers both

nonperforming commercial loans and all TDRs within the consumer and

commercial portfolios. These loans are subject to impairment measurement based

on the present value of projected future cash flows discounted at the loan’s original

effective interest rate, or in certain circumstances, impairment may also be based

upon the collateral value or the loan’s observable market price if available.

Impairment measurement for the renegotiated consumer credit card and small

business credit card TDR portfolios is based on the present value of projected

cash flows discounted using the average portfolio contractual interest rate,

excluding promotionally priced loans, in effect prior to restructuring. For purposes

of computing this specific loss component of the allowance, larger impaired loans

are evaluated individually and smaller impaired loans are evaluated as a pool using

historical experience for the respective product types and risk ratings of the loans.

The second component of the allowance for loan and lease losses covers the

remaining consumer and commercial loans and leases that have incurred losses

that are not yet individually identifiable. The allowance for consumer (including

credit card and other consumer loans) and certain homogeneous commercial loan

and lease products is based on aggregated portfolio evaluations, which include

both quantitative and qualitative components,

generally by product type. Loss forecast models are utilized that consider a variety

of factors including, but not limited to, historical loss experience, estimated defaults

or foreclosures based on portfolio trends, delinquencies, economic trends, credit

scores and the amount of loss in the event of default. Our consumer real estate

loss forecast model estimates the portion of loans that will default based on

individual loan attributes, the most significant of which are refreshed LTV or

combined loan-to-value (CLTV), and borrower credit score as well as vintage and

geography, all of which are further broken down into current delinquency status.

Additionally, we incorporate the delinquency status of underlying first-lien loans on

our junior-lien home equity portfolio in our allowance process. Incorporating

refreshed LTV and CLTV into our probability of default allows us to factor the

impact of changes in home prices into our allowance for loan and lease losses.

These loss forecast models are updated on a quarterly basis to incorporate

information reflecting the current economic environment. As of December 31,

2019, the loss forecast process resulted in reductions in the allowance related to

the residential mortgage and home equity portfolios compared to December 31,

2018.

The allowance for commercial loan and lease losses is established by product

type after analyzing historical loss experience, internal risk rating, current

economic conditions, industry performance trends, geographic and obligor

concentrations within each portfolio and any other pertinent information. The

statistical models for commercial loans are generally updated annually and utilize

our historical database of actual defaults and other data, including external default

data. The loan risk ratings and composition of the commercial portfolios used to

calculate the allowance are updated quarterly to incorporate the most recent data

reflecting the current economic environment. For risk-rated commercial loans, we

estimate the probability of default and the loss given default (LGD) based on our

historical experience of defaults and credit losses. Factors considered when

assessing the internal risk rating include the value of the underlying collateral, if

applicable, the industry in which the obligor operates, the obligor’s liquidity and

other financial indicators, and other quantitative and qualitative factors relevant to

the obligor’s credit risk. As of December 31, 2019, the allowance for the

commercial real estate portfolio increased compared to December 31, 2018.

Also included within the second component of the allowance for loan and lease

losses are reserves to cover losses that are incurred but, in our assessment, may

not be adequately represented in the historical loss data used in the loss forecast

models. For example, factors that we consider include, among others, changes in

lending policies and procedures, changes in economic and business conditions,

changes in the nature and size of the portfolio, changes in portfolio concentrations,

changes in the volume and severity of past due loans and nonaccrual loans, the

effect of external factors such as competition, and legal and regulatory

requirements. Further, we consider the inherent uncertainty in mathematical

models that are built upon historical data.

We monitor differences between estimated and actual incurred loan and lease

losses. This monitoring process includes periodic assessments by senior

management of loan and lease portfolios and the models used to estimate incurred

losses in those portfolios.

The allowance for loan and lease losses for the consumer portfolio, as

presented in Table 43, was $4.5 billion at December 31, 2019, a decrease of $260

million from December 31, 2018. The decrease was primarily in the consumer real

estate portfolio, partially offset by an increase in the credit card portfolio. The

Bank of America 68

reduction in the allowance for the consumer real estate portfolio was driven by

improved credit quality, a decrease in loan balances in our non-core portfolio,

proactive credit risk management initiatives and high credit quality originations.

The improved credit quality was impacted by continuing improvements in the U.S.

economy and strong labor markets evidenced by low levels of unemployment and

increases in home prices. Nonperforming consumer loans decreased $1.8 billion

during 2019 as loan sales, returns to performing status and paydowns continued to

outpace additions. The increase in allowance for the credit card portfolio was

primarily driven by continued portfolio seasoning.

The allowance for loan and lease losses for the commercial portfolio, as

presented in Table 43, was $4.9 billion at December 31, 2019, an increase of $75

million from December 31, 2018. Commercial reservable criticized utilized

exposure increased to $11.5 billion at December 31, 2019 from $11.1 billion (to

2.09 percent from 2.08 percent of total commercial reservable utilized exposure) at

December 31, 2018, and nonperforming commercial loansincreased to $1.5 billion

a t December 31, 2019 from $1.1 billion (to 0.29 percent from 0.22 percent of

outstanding commercial loans excluding loans accounted for under the fair value

option) at December 31, 2018 with the increases spread across multiple industries.

See Tables 32, 33 and 34 for more details on key commercial credit statistics.

The allowance for loan and lease losses as a percentage of total loans and

leases outstanding was 0.97 percent at December 31, 2019 compared to 1.02

percent at December 31, 2018.

On January 1, 2020, the Corporation adopted the new accounting standard that

requires the measurement of the allowance for credit losses to be based on

management’s best estimate of lifetime expected credit losses inherent in the

Table 43 Allocation of the Allowance for Credit Losses by Product Type

Percent of

Amount Total

Corporation’s relevant financial assets. Upon adoption of the standard on January

1, 2020, the Corporation recorded a $3.3 billion, or 32 percent, increase to the

allowance for credit losses. After adjusting for deferred taxes and other adoption

effects, a $2.4 billion decrease was recorded in retained earnings through a

cumulative-effect adjustment. For more information regarding this new accounting

standard, see Note 1 – Summary of Significant Accounting Principles to the

Consolidated Financial Statements.

Reserve for Unfunded Lending Commitments

In addition to the allowance for loan and lease losses, we also estimate probable

losses related to unfunded lending commitments such as letters of credit, financial

guarantees, unfunded bankers’ acceptances and binding loan commitments,

excluding commitments accounted for under the fair value option. Unfunded

lending commitments are subject to the same assessment as funded loans,

including estimates of probability of default and LGD. Due to the nature of unfunded

commitments, the estimate of probable losses must also consider utilization. To

estimate the portion of these undrawn commitments that is likely to be drawn by a

borrower at the time of estimated default, analyses of our historical experience are

applied to the unfunded commitments to estimate the funded exposure at default

(EAD). The expected loss for unfunded lending commitments is the product of the

probability of default, the LGD and the EAD, adjusted for any qualitative factors

including economic uncertainty and inherent imprecision in models.

The reserve for unfunded lending commitments was$813 million at December

31, 2019 compared to $797 million at December 31, 2018.

Percent of Percent of

Loans and Loans and

Leases Percent of Leases

Outstanding

(1)

Amount Total Outstanding

(1)

(Dollars in millions) December 31, 2019 December 31, 2018

Allowance for loan and lease losses

Residential mortgage $ 325 3.45 % 0.14 % $ 422 4.40 % 0.20 %

Home equity 221 2.35 0.55 506 5.27 1.05

Credit card 3,710 39.39 3.80 3,597 37.47 3.66

Direct/Indirect consumer 234 2.49 0.26 248 2.58 0.27

Other consumer 52 0.55 n/m 29 0.30 n/m

Total consumer 4,542 48.23 0.98 4,802 50.02 1.08

U.S. commercial

(2)

3,015 32.02 0.94 3,010 31.35 0.96

Non-U.S. commercial 658 6.99 0.63 677 7.05 0.69

Commercial real estate 1,042 11.07 1.66 958 9.98 1.57

Commercial lease financing 159 1.69 0.80 154 1.60 0.68

Total commercial 4,874 51.77 0.96 4,799 49.98 0.97

Allowance for loan and lease losses 9,416 100.00 % 0.97 9,601 100.00 % 1.02

Reserve for unfunded lending commitments 813 797

Allowance for credit losses $ 10,229 $ 10,398

(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. Consumer loans accounted for under the fair value option include residential

mortgage loans of $257 million and $336 million and home equity loans of$337 million and $346 million at December 31, 2019 and 2018. Commercial loans accounted for under the fair value option include U.S. commercial loans of$4.7 billion and $2.5 billion

and non-U.S. commercial loans of $3.1 billion and $1.1 billion at December 31, 2019 and 2018.

(2)

Includes allowance for loan and lease losses for U.S. small business commercial loans of$523 million and $474 million at December 31, 2019 and

2018.

n/m = not meaningful

69 Bank of America

Table 44 presents a rollforward of the allowance for credit losses, which includes the allowance for loan and lease losses and the reserve for unfunded lending

commitments, for 2019 and 2018.

Table 44 Allowance for Credit Losses

(Dollars in millions) 2019 2018

Allowance for loan and lease losses, January 1 $ 9,601 $ 10,393

Loans and leases charged off

Residential mortgage (93 ) (207 )

Home equity (429 ) (483 )

Credit card (3,535) (3,345)

Direct/Indirect consumer (518 ) (495 )

Other consumer (249 ) (197 )

Total consumer charge-offs (4,824) (4,727)

U.S. commercial

(1)

(650 ) (575 )

Non-U.S. commercial (115 ) (82 )

Commercial real estate (31 ) (10 )

Commercial lease financing (26 ) (8 )

Total commercial charge-offs (822 ) (675 )

Total loans and leases charged off (5,646) (5,402)

Recoveries of loans and leases previously charged off

Residential mortgage 140 179

Home equity 787 485

Credit card 587 508

Direct/Indirect consumer 309 300

Other consumer 15 15

Total consumer recoveries 1,838 1,487

U.S. commercial

(2)

122 120

Non-U.S. commercial 31 14

Commercial real estate 2 9

Commercial lease financing 5 9

Total commercial recoveries 160 152

Total recoveries of loans and leases previously charged off 1,998 1,639

Net charge-offs (3,648) (3,763)

Provision for loan and lease losses 3,574 3,262

Other

(3)

(111 ) (291 )

Allowance for loan and lease losses, December 31 9,416 9,601

Reserve for unfunded lending commitments, January 1 797 777

Provision for unfunded lending commitments 16 20

Reserve for unfunded lending commitments, December 31 813 797

Allowance for credit losses, December 31 $ 10,229 $ 10,398

Loan and allowance ratios:

Loans and leases outstanding at December 31

(4)

$ 975,091 $ 942,546

Allowance for loan and lease losses as a percentage of total loans and leases outstanding at December 31

(4)

0.97 % 1.02 %

Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases outstanding at

December 31

(5)

0.98 1.08

Commercial allowance for loan and lease losses as a percentage of total commercial loans and leases outstanding at December 31

(6)

0.96 0.97

Average loans and leases outstanding

(4)

$ 951,583 $ 927,531

Net charge-offs as a percentage of average loans and leases outstanding

(4)

0.38 % 0.41 %

Allowance for loan and lease losses as a percentage of total nonperforming loans and leases at December 31 265 194

Ratio of the allowance for loan and lease losses at December 31 to net charge-offs 2.58 2.55

Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases at December 31

(7)

$ 4,151 $ 4,031

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 December 31

(7)

148 % 113 %

(1)

Includes U.S. small business commercial charge-offs of $320 million and $287 million in 2019 and

2018.

(2)

Includes U.S. small business commercial recoveries of $48 million and $47 million in 2019 and

2018.

(3)

Primarily represents write-offs of purchased credit-impaired (PCI) loans, the net impact of portfolio sales, and transfers to loans held-for-

sale.

(4)

Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of$8.3 billion and $4.3 billion at December 31, 2019 and 2018. Average loans accounted for under the fair value option were$6.8 billion and $5.5

billion in 2019 and 2018.

(5)

Excludes consumer loans accounted for under the fair value option of$594 million and $682 million at December 31, 2019 and

2018.

(6)

Excludes commercial loans accounted for under the fair value option of$7.7 billion and $3.7 billion at December 31, 2019 and

2018.

(7)

Primarily includes amounts allocated to credit card and unsecured consumer lending portfolios inConsumer

Banking.

Bank of America 70

Market Risk Management

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. For more information, see

Interest Rate Risk Management for the Banking Bookon page 74.

Our traditional banking loan and deposit products are non-trading positions and

are generally reported at amortized cost for assets or the amount owed for

liabilities (historical cost). However, these positions are still subject to changes in

economic value based on varying market conditions, with one of the primary risks

being changes in the levels of interest rates. The risk of adverse changes in the

economic value of our non-trading positions arising from changes in interest rates

is managed through our ALM activities. We have elected to account for certain

assets and liabilities under the fair value option.

Our trading positions are reported at fair value with changes reflected in

income. Trading positions are subject to various changes in market-based risk

factors. The majority of this risk is generated by our activities in the interest rate,

foreign exchange, credit, equity and commodities markets. In addition, the values

of assets and liabilities could change due to market liquidity, correlations across

markets and expectations of market volatility. We seek to manage these risk

exposures by using a variety of techniques that encompass a broad range of

financial instruments. The key risk management techniques are discussed in more

detail in the Trading Risk Management section.

Global Risk Management is responsible for providing senior management with

a clear and comprehensive understanding of the trading risks to which we are

exposed. These responsibilities include ownership of market risk policy, developing

and maintaining quantitative risk models, calculating aggregated risk measures,

establishing and monitoring position limits consistent with risk appetite, conducting

daily reviews and analysis of trading inventory, approving material risk exposures

and fulfilling regulatory requirements. Market risks that impact businesses outside

o f Global Markets are monitored and governed by their respective governance

functions.

Model risk is the potential for adverse consequences from decisions based on

incorrect or misused model outputs and reports. Given that models are used

across the Corporation, model risk impacts all risk types including credit, market

and operational risk. The Enterprise Model Risk Committee (EMRC), a

subcommittee of the MRC, is responsible for providing management oversight and

approval of model risk management and governance. The EMRC defines model

risk standards, consistent with the Corporation’s Risk Framework and risk appetite,

prevailing regulatory guidance and industry best practice. All models, including risk

management, valuation and regulatory capital models, must meet certain validation

criteria, including effective challenge of the conceptual soundness of the model,

independent model testing and ongoing monitoring through outcomes analysis and

benchmarking. The EMRC oversees that model standards are consistent with

model risk requirements and monitors the effective challenge in the model

validation process across the Corporation.

Interest Rate Risk

Interest rate risk represents exposures to instruments whose values vary with the

level or volatility of interest rates. These instruments include, but are not limited to,

loans, debt securities,

71 Bank of America

certain trading-related assets and liabilities, deposits, borrowings and derivatives.

Hedging instruments used to mitigate these risks include derivatives such as

options, futures, forwards and swaps.

Foreign Exchange Risk

Foreign exchange risk represents exposures to changes in the values of current

holdings and future cash flows denominated in currencies other than the U.S.

dollar. The types of instruments exposed to this risk include investments in non-

U.S. subsidiaries, foreign currency-denominated loans and securities, future cash

flows in foreign currencies arising from foreign exchange transactions, foreign

currency-denominated debt and various foreign exchange derivatives whose

values fluctuate with changes in the level or volatility of currency exchange rates or

non-U.S. interest rates. Hedging instruments used to mitigate this risk include

foreign exchange options, currency swaps, futures, forwards, and foreign currency-

denominated debt and deposits.

Mortgage Risk

Mortgage risk represents exposures to changes in the values of mortgage-related

instruments. The values of these instruments are sensitive to prepayment rates,

mortgage rates, agency debt ratings, default, market liquidity, government

participation and interest rate volatility. Our exposure to these instruments takes

several forms. For example, we trade and engage in market-making activities in a

variety of mortgage securities including whole loans, pass-through certificates,

commercial mortgages and collateralized mortgage obligations including

collateralized debt obligations using mortgages as underlying collateral. In

addition, we originate a variety of MBS, which involves the accumulation of

mortgage-related loans in anticipation of eventual securitization, and we may hold

positions in mortgage securities and residential mortgage loans as part of the ALM

portfolio. We also record MSRs as part of our mortgage origination activities.

Hedging instruments used to mitigate this risk include derivatives such as options,

swaps, futures and forwards as well as securities including MBS and U.S. Treasury

securities. For more information, see Mortgage Banking Risk Management on

page 76.

Equity Market Risk

Equity market risk represents exposures to securities that represent an ownership

interest in a corporation in the form of domestic and foreign common stock or other

equity-linked instruments. Instruments that would lead to this exposure include, but

are not limited to, the following: common stock, exchange-traded funds, American

Depositary Receipts, convertible bonds, listed equity options (puts and calls), OTC

equity options, equity total return swaps, equity index futures and other equity

derivative products. Hedging instruments used to mitigate this risk include options,

futures, swaps, convertible bonds and cash positions.

Commodity Risk

Commodity risk represents exposures to instruments traded in the petroleum,

natural gas, power and metals markets. These instruments consist primarily of

futures, forwards, swaps and options. Hedging instruments used to mitigate this

risk include options, futures and swaps in the same or similar commodity product,

as well as cash positions.

Issuer Credit Risk

Issuer credit risk represents exposures to changes in the creditworthiness of

individual issuers or groups of issuers. Our portfolio is exposed to issuer credit risk

where the value of an asset may be adversely impacted by changes in the levels

of credit spreads, by credit migration or by defaults. Hedging instruments

used to mitigate this risk include bonds, CDS and other credit fixed-income

instruments.

Market Liquidity Risk

Market liquidity risk represents the risk that the level of expected market activity

changes dramatically and, in certain cases, may even cease. This exposes us to

the risk that we will not be able to transact business and execute trades in an

orderly manner which may impact our results. This impact could be further

exacerbated if expected hedging or pricing correlations are compromised by

disproportionate demand or lack of demand for certain instruments. We utilize

various risk mitigating techniques as discussed in more detail in Trading Risk

Management.

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. Various techniques and procedures are utilized to enable the most

complete understanding of these risks. Quantitative measures of market risk are

evaluated on a daily basis from a single position to the portfolio of the Corporation.

These measures include sensitivities of positions to various market risk factors,

such as the potential impact on revenue from a one basis point change in interest

rates, and statistical measures utilizing both actual and hypothetical market moves,

such as VaR and stress testing. Periods of extreme market stress influence the

reliability of these techniques to varying degrees. Qualitative evaluations of market

risk utilize the suite of quantitative risk measures while understanding each of their

respective limitations. Additionally, risk managers independently evaluate the risk

of the portfolios under the current market environment and potential future

environments.

VaR is a common statistic used to measure market risk as it allows the

aggregation of market risk factors, including the effects of portfolio diversification. A

VaR model simulates the value of a portfolio under a range of scenarios in order to

generate a distribution of potential gains and losses. VaR represents the loss a

portfolio is not expected to exceed more than a certain number of times per period,

based on a specified holding period, confidence level and window of historical

data. We use one VaR model consistently across the trading portfolios and it uses

a historical simulation approach based on a three-year window of historical data.

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.

Within any VaR model, there are significant and numerous assumptions that

will differ from company to company. The accuracy of a VaR model depends on

the availability and quality of historical data for each of the risk factors in the

portfolio. A VaR model may require additional modeling assumptions for new

products that do not have the necessary historical market data or for less liquid

positions for which accurate daily prices are not consistently available. For

positions with insufficient historical data for the VaR calculation, the process for

establishing an appropriate proxy is based on fundamental and statistical analysis

of the new product or less liquid position. This analysis identifies reasonable

alternatives that replicate both the expected volatility and correlation to other

market risk factors that the missing data would be expected to experience.

VaR may not be indicative of realized revenue volatility as changes in market

conditions or in the composition of the portfolio can have a material impact on the

results. In particular, the historical data used for the VaR calculation might indicate

higher or lower levels of portfolio diversification than will be experienced.

In order for the VaR model to reflect current market conditions, we update the

historical data underlying our VaR model on a weekly basis, or more frequently

during periods of market stress, and regularly review the assumptions underlying

the model. A minor portion of risks related to our trading positions is not included in

VaR. These risks are reviewed as part of our ICAAP. For more information

regarding ICAAP, see Capital Management on page 45.

Global Risk Management continually reviews, evaluates and enhances our VaR

model so that it reflects the material risks in our trading portfolio. Changes to the

VaR model are reviewed and approved prior to implementation and any material

changes are reported to management through the appropriate management

committees.

Trading limits on quantitative risk measures, including VaR, are independently

set by Global Markets Risk Management and reviewed on a regular basis so that

trading limits remain relevant and within our overall risk appetite for market risks.

Trading limits are reviewed in the context of market liquidity, volatility and strategic

business priorities. Trading limits are set at both a granular level to allow for

extensive coverage of risks as well as at aggregated portfolios to account for

correlations among risk factors. All trading limits are approved at least annually.

Approved trading limits are stored and tracked in a centralized limits management

system. Trading limit excesses are communicated to management for review.

Certain quantitative market risk measures and corresponding limits have been

identified as critical in the Corporation’s Risk Appetite Statement. These risk

appetite limits are reported on a daily basis and are approved at least annually by

the ERC and the Board.

In periods of market stress, Global Markets senior leadership communicates

daily to discuss losses, key risk positions and any limit excesses. As a result of this

process, the businesses may selectively reduce risk.

Table 45 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. Covered positions are defined by

regulatory standards as trading assets and liabilities, both on- and off-balance

sheet, that meet a defined set of specifications. These specifications identify the

most liquid trading positions which are intended to be held for a short-term horizon

and where we are able to hedge the material risk elements in a two-way market.

Positions in less liquid markets, or where there are restrictions on the ability to

trade the positions, typically do not qualify as covered positions. Foreign exchange

and commodity positions are always considered covered positions, except for

structural foreign currency positions that are excluded with prior regulatory

approval. In addition, Table 45 presents our fair value option portfolio, which

includes substantially all of the funded and unfunded exposures for which we elect

the fair value option, and their corresponding hedges. Additionally, market risk VaR

for trading activities as presented in Table 45 differs from VaR used for regulatory

capital calculations due to the holding period being used. The holding period for

VaR used for regulatory capital calculations is 10 days, while for the market risk

VaR presented below, it is one day. Both measures utilize the same process and

methodology.

The total market-based portfolio VaR results in Table 45 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 45 presents year-end, average, high and low daily trading VaR for2019

and 2018 using a 99 percent confidence level. The amounts disclosed inTable 45

and Table 46 align to the view of covered positions used in the Basel 3 capital

calculations. Foreign

Bank of America 72

exchange and commodity positions are always considered covered positions, The annual average of total covered positions and less liquid trading positions

regardless of trading or banking treatment for the trade, except for structural portfolio VaR slightly increased during 2019 with no significant drivers.

foreign currency positions that are excluded with prior regulatory approval.

Table 45 Market Risk VaR for Trading Activities

2019 2018

(Dollars in millions) Year End Average High

(1)

Low

(1)

Year End Average High

(1)

Low

(1)

Foreign exchange $ 4 $ 6 $ 13 $ 2 $ 9 $ 8 $ 15 $ 2

Interest rate 25 24 49 14 36 25 45 15

Credit 26 23 32 16 26 25 31 20

Equity 29 22 33 14 20 20 40 11

Commodities 4 6 31 4 13 8 15 3

Portfolio diversification (47 ) (49 ) — — (59 ) (55 ) — —

Total covered positions portfolio 41 32 47 24 45 31 45 20

Impact from less liquid exposures — 3 — — 5 3 — —

Total covered positions and less liquid trading positions portfolio 41 35 53 27 50 34 51 23

Fair value option loans 8 10 13 7 8 11 18 8

Fair value option hedges 10 10 17 4 5 9 17 4

Fair value option portfolio diversification (9) (10 ) — — (7) (11 ) — —

Total fair value option portfolio 9 10 16 5 6 9 16 5

Portfolio diversification (5) (7 ) — — (3 ) (5) — —

Total market-based portfolio $ 45 $ 38 56 28 $ 53 $ 38 57 26

(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 for2019, corresponding to the data inTable 45.

Additional VaR statistics produced within our single VaR model are provided inTable 46 at the same level of detail as inTable 45. 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 46 presents average trading VaR statistics at 99 percent and 95 percent confidence levels for2019 and 2018.

Table

46 Average Market Risk VaR for Trading Activities – 99 percent and 95 percent VaR Statistics

2019 2018

(Dollars in millions) 99 percent 95 percent 99 percent 95 percent

Foreign exchange $ 6 $ 3 $ 8 $ 5

Interest rate 24 15 25 16

Credit 23 15 25 15

Equity 22 11 20 11

Commodities 6 3 8 4

Portfolio diversification (49 ) (29 ) (55 ) (33 )

Total covered positions portfolio 32 18 31 18

Impact from less liquid exposures 3 2 3 1

Total covered positions and less liquid trading positions portfolio 35 20 34 19

Fair value option loans 10 5 11 6

Fair value option hedges

10 6 9 6

Fair value option portfolio diversification (10 ) (5 ) (11 ) (7 )

Total fair value option portfolio 10 6 9 5

Portfolio diversification (7 ) (5 ) (5 ) (3 )

Total market-based portfolio $ 38 $ 21 $ 38 $ 21

73 Bank of America

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. A backtesting excess occurs when a

trading loss exceeds the VaR for the corresponding day. These excesses are

evaluated to understand the positions and market moves that produced the trading

loss with a goal to ensure that the VaR methodology accurately represents those

losses. We expect the frequency of trading losses in excess of VaR to be in line

with the confidence level of the VaR statistic being tested. For example, with a 99

percent confidence level, we expect one trading loss in excess of VaR every 100

days or between two to three trading losses in excess of VaR over the course of a

year. The number of backtesting excesses observed can differ from the statistically

expected number of excesses if the current level of market volatility is materially

different than the level of market volatility that existed during the three years of

historical data used in the VaR calculation.

The trading revenue used for backtesting is defined by regulatory agencies in

order to most closely align with the VaR component of the regulatory capital

calculation. This revenue differs from total trading-related revenue in that it

excludes revenue from trading activities that either do not generate market risk or

the market risk cannot be included in VaR. Some examples of the types of

revenue excluded for backtesting are fees, commissions, reserves, net interest

income and intra-day trading revenues.

We conduct daily backtesting on the VaR results used for regulatory capital

calculations as well as the VaR results for key legal entities, regions and risk

factors. These results are reported to senior market risk management. Senior

management regularly reviews and evaluates the results of these tests.

During 2019, there were no days in which there was a backtesting excess for

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. Trading account assets and liabilities are

reported at fair value. For more information on fair value, see Note 21 – Fair Value

Measurements to the Consolidated Financial Statements. Trading-related revenue

can be volatile and is largely driven by general market conditions and customer

demand. Also, trading-related revenue is dependent on the volume and type of

transactions, the level of risk assumed, and the volatility of price and rate

movements at any given time within the ever-changing market environment.

Significant daily revenue by business is monitored and the primary drivers of these

are reviewed.

The following histogram is a graphic depiction of trading volatility and illustrates

the daily level of trading-related revenue for 2019 and 2018. During 2019, positive

trading-related revenue was recorded for 98 percent of the trading days, of which

80 percent were daily trading gains of over $25 million, and the largest loss was

$35 million. This compares to 2018 where positive trading-related revenue was

recorded for 98 percent of the trading days, of which 79 percent were daily trading

gains of 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.

A set of scenarios, categorized as either historical or hypothetical, are

computed daily for the overall trading portfolio and individual businesses. These

scenarios include shocks to underlying market risk factors that may be well beyond

the shocks found in the historical data used to calculate VaR. Historical scenarios

simulate the impact of the market moves that occurred during a period of extended

historical market stress. Generally, a multi-week period representing the most

severe point during a crisis is selected for each historical scenario. Hypothetical

scenarios provide estimated portfolio impacts from potential future market stress

events. Scenarios are reviewed and updated in response to changing positions

and new economic or political information. In addition, new or ad hoc scenarios are

developed to address specific potential market events or particular vulnerabilities

in the portfolio. The stress tests are reviewed on a regular basis and the results are

presented to senior management.

Stress testing for the trading portfolio is integrated with enterprise-wide stress

testing and incorporated into the limits framework. The macroeconomic scenarios

used for enterprise-wide stress testing purposes differ from the typical trading

portfolio scenarios in that they have a longer time horizon and the results are

forecasted over multiple periods for use in consolidated capital and liquidity

planning. For more information, see Managing Risk on page 42.

Interest Rate Risk Management for the Banking Book

The following discussion presents net interest income for banking book activities.

Interest rate risk represents the most significant market risk exposure to our

banking book balance sheet. Interest rate risk is measured as the potential change

in net interest income caused by movements in market interest rates. Client-facing

activities, primarily lending and deposit-taking, create interest rate sensitive

positions on our balance sheet.

We prepare forward-looking forecasts of net interest income. The baseline

forecast takes into consideration expected future business growth, ALM

positioning and the direction of interest rate movements as implied by the market-

based forward curve. We then measure and evaluate the impact that alternative

interest rate scenarios have on the baseline forecast in order to assess interest

rate sensitivity under varied conditions. The net interest income forecast is

frequently updated for changing assumptions and differing outlooks based on

economic trends, market conditions and business strategies. Thus, we continually

monitor

Bank of America 74

our balance sheet position in order to maintain an acceptable level of exposure to

interest rate changes.

The interest rate scenarios that we analyze incorporate balance sheet

assumptions such as loan and deposit growth and pricing, changes in funding mix,

product repricing, maturity characteristics and investment securities premium

amortization. Our overall goal is to manage interest rate risk so that movements in

interest rates do not significantly adversely affect earnings and capital.

Table 47 presents the spot and 12-month forward rates used in our baseline

forecasts at December 31, 2019 and 2018.

Table 47 Forward Rates

December 31, 2019

Federal Three-month 10-Year

Funds LIBOR Swap

Spot rates 1.75 % 1.91 % 1.90 %

12-month forward rates 1.50 1.62 1.92

December 31, 2018

Spot rates 2.50 % 2.81 % 2.71 %

12-month forward rates 2.50 2.64 2.75

Table 48 shows the pretax impact to forecasted net interest income over the

next 12 months from December 31, 2019 and 2018, 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.

During 2019, the asset sensitivity of our balance sheet increased primarily due

to decreases in interest rates. We continue to be asset sensitive to a parallel 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 available for sale

(AFS), may adversely affect accumulated other comprehensive income (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 46.

Table 48 Estimated Banking Book Net Interest Income Sensitivity

to Curve Changes

December 31

Short Long

(Dollars in millions) Rate (bps) Rate (bps) 2019 2018

Parallel Shifts

+100 bps

instantaneous shift +100 +100 $ 4,190 $ 2,833

-100 bps

instantaneous shift -100 -100 (6,536) (4,280)

Flatteners

Short-end

instantaneous change +100 — 2,641 2,158

Long-end

instantaneous change — -100 (2,965) (1,618)

Steepeners

Short-end

instantaneous change -100 — (3,527) (2,648)

Long-end

instantaneous change — +100 1,561 675

The sensitivity analysis in Table 48 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

75 Bank of America

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 48 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

Interest rate and foreign exchange derivative contracts are utilized in our ALM

activities and serve as an efficient tool to manage our interest rate and foreign

exchange risk. We use derivatives to hedge the variability in cash flows or

changes in fair value on our balance sheet due to interest rate and foreign

exchange components. For more information on our hedging activities, see Note 3

– Derivatives to the Consolidated Financial Statements.

Our interest rate contracts are generally non-leveraged generic interest rate

and foreign exchange basis swaps, options, futures and forwards. In addition, we

use foreign exchange contracts, including cross-currency interest rate swaps,

foreign currency futures contracts, foreign currency forward contracts and options

to mitigate the foreign exchange risk associated with foreign currency-denominated

assets and liabilities.

Changes to the composition of our derivatives portfolio during2019 reflect

actions taken for interest rate and foreign exchange rate risk management. The

decisions to reposition our derivatives portfolio are based on the current

assessment of economic and financial conditions including the interest rate and

foreign currency environments, balance sheet composition and trends, and the

relative mix of our cash and derivative positions.

We use interest rate derivative instruments to hedge the variability in the cash

flows of our assets and liabilities and other forecasted transactions (collectively

referred to as cash flow hedges). The net losses on both open and terminated

cash flow hedge derivative instruments recorded in accumulated OCI were $496

million and $1.3 billion, on a pretax basis, atDecember 31, 2019 and 2018. These

net losses are expected to be reclassified into earnings in the same period as the

hedged cash flows affect earnings and will decrease income or increase expense

on the respective hedged cash flows. Assuming no change in open cash flow

derivative hedge positions and no changes in prices or interest rates beyond what

is implied in forward yield curves at December 31, 2019, the pretax net losses are

expected to be reclassified into earnings as follows: 17 percent within the next

year, 44 percent in years two through five, 22 percent in years six through ten, with

the remaining 17 percent thereafter. For more information on derivatives

designated as cash flow hedges, see Note 3 – Derivatives to the Consolidated

Financial Statements.

We hedge our net investment in non-U.S. operations determined to have

functional currencies other than the U.S. dollar using forward foreign exchange

contracts that typically settle in less than 180 days, cross-currency basis swaps

and foreign exchange options. We recorded net after-tax losses on derivatives in

accumulated OCI associated with net investment hedges which were offset by

gains on our net investments in consolidated non-U.S. entities at December 31,

2019.

Table 49 presents derivatives utilized in our ALM activities and shows the

notional amount, fair value, weighted-average receive-fixed and pay-fixed rates,

expected maturity and average estimated

durations of our open ALM derivatives at December 31, 2019 and 2018. These swaps increased while pay-fixed interest rate swaps decreased, driven by lower

amounts do not include derivative hedges on our MSRs. During 2019, the fair swap rates.

value of receive-fixed interest rate

Table 49 Asset and Liability Management Interest Rate and Foreign Exchange Contracts

December 31, 2019

Expected Maturity

Fair

Average

Estimated

(Dollars in millions, average estimated duration in years) Value Total 2020 2021 2022 2023 2024 Thereafter Duration

Receive-fixed interest rate swaps

(1)

$ 12,370 6.47

Notional amount $ 215,123 $ 16,347 $ 14,642 $ 21,616 $ 36,356 $ 21,257 $ 104,905

Weighted-average fixed-rate 2.68 % 2.68 % 3.17 % 2.48 % 2.36 % 2.55 % 2.79 %

Pay-fixed interest rate swaps

(1)

(2,669) 6.99

Notional amount $ 69,586 $ 4,344 $ 2,117 $ — $ 13,993 $ 8,194 $ 40,938

Weighted-average fixed-rate 2.36 % 2.16 % 2.15 % — % 2.52 % 2.26 % 2.35 %

Same-currency basis swaps

(2)

(290 )

Notional amount $ 152,160 $ 18,857 $ 18,590 $ 4,306 $ 2,017 $ 14,567 $ 93,823

Foreign exchange basis swaps

(1, 3, 4)

(1,258)

Notional amount 113,529 23,639 24,215 14,611 7,111 3,521 40,432

Foreign exchange contracts

(1, 4, 5)

414

Notional amount

(6)

(53,106) (79,315) 4,539 2,674 2,340 4,432 12,224

Option products —

Notional amount 15 — — — 15 — —

Net ALM contracts $ 8,567

December 31, 2018

Expected Maturity

Average

(Dollars in millions, average estimated duration in

Fair Estimated

years) Value Total 2019 2020 2021 2022 2023 Thereafter Duration

Receive-fixed interest rate swaps

(1)

$ 2,128 5.17

Notional amount $ 198,914 $ 27,176 $ 16,347 $ 14,640 $ 19,866 $ 36,215 $ 84,670

Weighted-average fixed-rate 2.66 % 1.87 % 2.68 % 3.17 % 2.56 % 2.37 % 2.97 %

Pay-fixed interest rate swaps

(1)

295 6.30

Notional amount $ 49,275 $ 1,210 $ 4,344 $ 1,616 $ — $ 10,801 $ 31,304

Weighted-average fixed-rate 2.50 % 2.07 % 2.16 % 2.22 % — % 2.59 % 2.55 %

Same-currency basis swaps

(2)

21

Notional amount $ 101,203 $ 7,628 $ 15,097 $ 15,493 $ 2,586 $ 2,017 $ 58,382

Foreign exchange basis swaps

(1, 3, 4)

(1,716)

Notional amount 106,742 13,946 21,448 19,241 10,239 6,260 35,608

Foreign exchange contracts

(1, 4, 5)

82

Notional amount

(6)

(8,447) (27,823) 13 4,196 2,741 2,448 9,978

Option products 2

Notional amount 587 572 — — — 15 —

Net ALM contracts $ 812

(1)

Does not include basis adjustments on either fixed-rate debt issued by the Corporation or AFS debt securities, which are hedged using derivatives designated as fair value hedging instruments, that substantially offset the fair values of these

derivatives.

(2)

At December 31, 2019 and 2018, the notional amount of same-currency basis swaps included $152.2 billion and $101.2 billion in both foreign currency and U.S. dollar-denominated basis swaps in which both sides of the swap are in the same

currency.

(3)

Foreign exchange basis swaps consisted of cross-currency variable interest rate swaps used separately or in conjunction with receive-fixed interest rate

swaps.

(4)

Does not include foreign currency translation adjustments on certain non-U.S. debt issued by the Corporation that substantially offset the fair values of these

derivatives.

(5)

The notional amount of foreign exchange contracts of $(53.1) billion at December 31, 2019 was comprised of $29.0 billion in foreign currency-denominated and cross-currency receive-fixed swaps, $(82.4) billion in net foreign currency forward rate

contracts, $(313) million in foreign currency-denominated interest rate swaps and $644 million in net foreign currency futures contracts. Foreign exchange contracts of $(8.4) billion at December 31, 2018 were comprised of $25.2 billion in foreign currency-

denominated and cross-currency receive-fixed swaps, $(32.7) billion in net foreign currency forward rate contracts, $(1.8) billion in foreign currency-denominated interest rate swaps and$814 million in foreign currency futures contracts.

(6)

Reflects the net of long and short positions. Amounts shown as negative reflect a net short

position.

Mortgage Banking Risk Management

rates, the value of the MSRs will increase driven by lower prepayment

expectations. Because the interest rate risks of these hedged items offset, we

We originate, fund and service mortgage loans, which subject us to credit, liquidity

combine them into one overall hedged item with one combined economic hedge

and interest rate risks, among others. We determine whether loans will be held for

portfolio consisting of derivative contracts and securities.

investment or held for sale at the time of commitment and manage credit and

During 2019, 2018 and 2017, we recorded gains of $291 million, $244 million

liquidity risks by selling or securitizing a portion of the loans we originate.

and $118 million related to the change in fair value of the MSRs, IRLCs and LHFS,

Interest rate risk and market risk can be substantial in the mortgage business.

net of gains and losses on the hedge portfolio. For more information on MSRs, see

Changes in interest rates and other market factors impact the volume of mortgage

Note 21 – Fair Value Measurements to the Consolidated Financial Statements.

originations. Changes in interest rates also impact the value of interest rate lock

commitments (IRLCs) and the related residential first mortgage LHFS between the

Compliance and Operational Risk Management

date of the IRLC and the date the loans are sold to the secondary market. An

Compliance risk is the risk of legal or regulatory sanctions, material financial loss

increase in mortgage interest rates typically leads to a decrease in the value of

or damage to the reputation of the Corporation arising from the failure of the

these instruments. Conversely, when there is an increase in interest

Corporation to comply with the

Bank of America 76

requirements of applicable laws, rules, regulations and our internal policies and

procedures (collectively, applicable laws, rules and regulations).

Operational risk is the risk of loss resulting from inadequate or failed processes,

people and systems or from external events. Operational risk may occur anywhere

in the Corporation, including third-party business processes, and is not limited to

operations functions. Effects may extend beyond financial losses and may result in

reputational risk impacts. Operational risk includes legal risk. Additionally,

operational risk is a component in the calculation of total risk-weighted assets used

in the Basel 3 capital calculation. For more information on Basel 3 calculations, see

Capital Management on page 45.

FLUs and control functions are first and foremost responsible for managing all

aspects of their businesses, including their compliance and operational risk. FLUs

and control functions are required to understand their business processes and

related risks and controls, including third-party dependencies, the related

regulatory requirements, and monitor and report on the effectiveness of the control

environment. In order to actively monitor and assess the performance of their

processes and controls, they must conduct comprehensive quality assurance

activities and identify issues and risks to remediate control gaps and weaknesses.

FLUs and control functions must also adhere to compliance and operational risk

appetite limits to meet strategic, capital and financial planning objectives. Finally,

FLUs and control functions are responsible for the proactive identification,

management and escalation of compliance and operational risks across the

Corporation.

Global Compliance and Operational Risk teams independently assess

compliance and operational risk, monitor business activities and processes,

evaluate FLUs and control functions for adherence to applicable laws, rules and

regulations, including identifying issues and risks, determining and developing tests

to be conducted by the Enterprise Independent Testing unit, and reporting on the

state of the control environment. Enterprise Independent Testing, an independent

testing function within IRM, works with Global Compliance and Operational Risk,

the FLUs and control functions in the identification of testing needs and test

design, and is accountable for test execution, reporting and analysis of results.

Corporate Audit provides independent assessment and validation through

testing of key compliance and operational risk processes and controls across the

Corporation.

The Corporation's Global Compliance Enterprise Policy and Operational Risk

Management - Enterprise Policy set the requirements for reporting compliance and

operational risk information to executive management as well as the Board or

appropriate Board-level committees in support of Global Compliance and

Operational Risk’s responsibilities for conducting independent oversight of our

compliance and operational risk management activities. The Board provides

oversight of compliance risk through its Audit Committee and the ERC, and

operational risk through the ERC.

A key operational risk facing the Corporation is information security, which

includes cybersecurity. Cybersecurity risk represents, among other things,

exposure to failures or interruptions of service or breaches of security, including as

a result of malicious technological attacks, that impact the confidentiality,

availability or integrity of our, or third parties' (including their downstream service

providers, the financial services industry and financial data aggregators)

operations, systems or data, including sensitive corporate and customer

information. The Corporation manages information security risk in accordance with

internal policies which govern our

77 Bank of America

comprehensive information security program designed to protect the Corporation

by enabling preventative, detective and responsive measures to combat

information and cybersecurity risks. The Board and the ERC provide cybersecurity

and information security risk oversight for the Corporation and our Global

Information Security Team manages the day-to-day implementation of our

information security program.

Reputational Risk Management

Reputational risk is the risk that negative perceptions of the Corporation’s conduct

or business practices may adversely impact its profitability or operations.

Reputational risk may result from many of the Corporation’s activities, including

those related to the management of our strategic, operational, compliance and

credit risks.

The Corporation manages reputational risk through established policies and

controls in its businesses and risk management processes to mitigate reputational

risks in a timely manner and through proactive monitoring and identification of

potential reputational risk events. If reputational risk events occur, we focus on

remediating the underlying issue and taking action to minimize damage to the

Corporation’s reputation. The Corporation has processes and procedures in place

to respond to events that give rise to reputational risk, including educating

individuals and organizations that influence public opinion, implementing external

communication strategies to mitigate the risk, and informing key stakeholders of

potential reputational risks. The Corporation’s organization and governance

structure provides oversight of reputational risks, and reputational risk reporting is

provided regularly and directly to management and the ERC, which provides

primary oversight of reputational risk. In addition, each FLU has a committee,

which includes representatives from Compliance, Legal and Risk, that is

responsible for the oversight of reputational risk. Such committees’ oversight

includes providing approval for business activities that present elevated levels of

reputational risks.

Complex Accounting Estimates

Our significant accounting principles, as described inNote 1 - Summary of

Significant Accounting Principles to the Consolidated Financial Statements, 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.

The more judgmental estimates are summarized in the following discussion.

We have identified and described the development of the variables most important

in the estimation processes that involve mathematical models to derive the

estimates. In many cases, there are numerous alternative judgments that could be

used in the process of determining the inputs to the models. Where alternatives

exist, we have used the factors that we believe represent the most reasonable

value in developing the inputs. Actual performance that differs from our estimates

of the key variables could materially impact our results of operations. Separate

from the possible future impact to our results of operations from input and model

variables, the value of our lending portfolio and market-sensitive assets and

liabilities may change subsequent to the balance sheet date, often significantly,

due to the nature and magnitude of future credit and market conditions. Such credit

and market conditions may change quickly and in unforeseen ways and the

resulting volatility could have a significant, negative effect on future operating

results. These fluctuations would not be indicative of deficiencies in our models or

inputs.

Allowance for Credit Losses

The allowance for credit losses, which includes the allowance for loan and lease

losses and the reserve for unfunded lending commitments, represents

management’s estimate of probable incurred credit losses in the Corporation’s

loan and lease portfolio excluding those loans accounted for under the fair value

option. The allowance for credit losses includes both quantitative and qualitative

components. The qualitative component has a higher degree of management

subjectivity, and includes factors such as concentrations, economic conditions and

other considerations. Our process for determining the allowance for credit losses is

discussed in Note 1 – Summary of Significant Accounting Principles to the

Consolidated Financial Statements.

Our estimate for the allowance for loan and lease losses is sensitive to the loss

rates and expected cash flows from our Consumer Real Estate and Credit Card

and Other Consumer portfolio segments, as well as our U.S. small business

commercial card portfolio within the Commercial portfolio segment. For each one-

percent increase in the loss rates on loans collectively evaluated for impairment in

our Consumer Real Estate portfolio segment, coupled with a one-percent decrease

in the discounted cash flows on those loans individually evaluated for impairment

within this portfolio segment, the allowance for loan and lease losses at December

31, 2019 would have increased $18 million. Within our Credit Card and Other

Consumer portfolio segment and U.S. small business commercial card portfolio, for

each one-percent increase in the loss rates on loans collectively evaluated for

impairment coupled with a one-percent decrease in the expected cash flows on

those loans individually evaluated for impairment, the allowance for loan and lease

losses at December 31, 2019 would have increased $46 million.

Our allowance for loan and lease losses is sensitive to the risk ratings assigned

to loans and leases within the Commercial portfolio segment (excluding the U.S.

small business commercial card portfolio). Assuming a downgrade of one level in

the internal risk ratings for commercial loans and leases, except loans and leases

already classified as Substandard and Doubtful as defined by regulatory

authorities, the allowance for loan and lease losses would have increased $2.6

billion at December 31, 2019.

The allowance for loan and lease losses as a percentage of total loans and

leases at December 31, 2019 was 0.97 percent and these hypothetical increases

in the allowance would raise the ratio to 1.24 percent.

These sensitivity analyses do not represent management’s expectations of the

deterioration in risk ratings or the increases in loss rates but are provided as

hypothetical scenarios to assess the sensitivity of the allowance for loan and lease

losses to changes in key inputs. We believe the risk ratings and loss severities

currently in use are appropriate and that the probability of the alternative scenarios

outlined above occurring within a short period of time is remote.

The process of determining the level of the allowance for credit losses requires

a high degree of judgment. It is possible that others, given the same information,

may at any point in time reach different reasonable conclusions.

The processes, judgments and estimates described herein relate to the

accounting standard in effect through December 31, 2019. On January 1, 2020,

the Corporation adopted the new accounting standard that requires the

measurement of the allowance for credit losses to be based on management’s

best estimate of lifetime expected credit losses inherent in the Corporation’s

relevant financial assets. The Corporation’s lifetime

expected credit losses are determined using macroeconomic forecast assumptions

and management judgments applicable to and through the expected life of the loan

portfolios. For more

information, see Note 1 – Summary of Significant Accounting Principles to the

Consolidated Financial Statements.

Fair Value of Financial Instruments

Under applicable accounting standards, we are required to maximize the use of

observable inputs and minimize the use of unobservable inputs in measuring fair

value. We classify fair value measurements of financial instruments and MSRs

based on the three-level fair value hierarchy in the accounting standards.

The fair values of assets and liabilities may include adjustments, such as

market liquidity and credit quality, where appropriate. Valuations of products using

models or other techniques are sensitive to assumptions used for the significant

inputs. Where market data is available, the inputs used for valuation reflect that

information as of our valuation date. Inputs to valuation models are considered

unobservable if they are supported by little or no market activity. In periods of

extreme volatility, lessened liquidity or in illiquid markets, there may be more

variability in market pricing or a lack of market data to use in the valuation process.

In keeping with the prudent application of estimates and management judgment in

determining the fair value of assets and liabilities, we have in place various

processes and controls that include: a model validation policy that requires review

and approval of quantitative models used for deal pricing, financial statement fair

value determination and risk quantification; a trading product valuation policy that

requires verification of all traded product valuations; and a periodic review and

substantiation of daily profit and loss reporting for all traded products. Primarily

through validation controls, we utilize both broker and pricing service inputs which

can and do include both market-observable and internally-modeled values and/or

valuation inputs. Our reliance on this information is affected by our understanding

of how the broker and/or pricing service develops its data with a higher degree of

reliance applied to those that are more directly observable and lesser reliance

applied to those developed through their own internal modeling. For example,

broker quotes in less active markets may only be indicative and therefore less

reliable. These processes and controls are performed independently of the

business. For more information, see Note 21 – Fair Value Measurements and Note

22 – Fair Value Option to the Consolidated Financial Statements.

Level 3 Assets and Liabilities

Financial assets and liabilities, and MSRs, where values are based on valuation

techniques that require inputs that are both unobservable and are significant to the

overall fair value measurement are classified as Level 3 under the fair value

hierarchy established in applicable accounting standards. The fair value of these

Level 3 financial assets and liabilities and MSRs is determined using pricing

models, discounted cash flow methodologies or similar techniques for which the

determination of fair value requires significant management judgment or

estimation.

Level 3 financial instruments may be hedged with derivatives classified as

Level 1 or 2; therefore, gains or losses associated with Level 3 financial

instruments may be offset by gains or losses associated with financial instruments

classified in other levels of the fair value hierarchy. The Level 3 gains and losses

recorded in earnings did not have a significant impact on our liquidity or capital. We

conduct a review of our fair value hierarchy classifications on

a quarterly basis. Transfers into or out of Level 3 are made if the significant inputs

used in the financial models measuring the fair values of the assets and liabilities

became unobservable or observable, respectively, in the current marketplace. For

more information on transfers into and out of Level 3 during 2019, 2018

Bank of America 78

and 2017, see Note 21 – Fair Value Measurements to the Consolidated Financial

Statements.

Accrued Income Taxes and Deferred Tax Assets

Accrued income taxes, reported as a component of either other assets or accrued

expenses and other liabilities on the Consolidated Balance Sheet, represent the

net amount of current income taxes we expect to pay to or receive from various

taxing jurisdictions attributable to our operations to date. We currently file income

tax returns in more than 100 jurisdictions and consider many factors, including

statutory, judicial and regulatory guidance, in estimating the appropriate accrued

income taxes for each jurisdiction.

Net deferred tax assets, reported as a component of other assets on the

Consolidated Balance Sheet, represent the net decrease in taxes expected to be

paid in the future because of net operating loss (NOL) and tax credit carryforwards

and because of future reversals of temporary differences in the bases of assets

and liabilities as measured by tax laws and their bases as reported in the financial

statements. NOL and tax credit carryforwards result in reductions to future tax

liabilities, and many of these attributes can expire if not utilized within certain

periods. We consider the need for valuation allowances to reduce net deferred tax

assets to the amounts that we estimate are more likely than not to be realized.

Consistent with the applicable accounting guidance, we monitor relevant tax

authorities and change our estimates of accrued income taxes and/or net deferred

tax assets due to changes in income tax laws and their interpretation by the courts

and regulatory authorities. These revisions of our estimates, which also may result

from our income tax planning and from the resolution of income tax audit matters,

may be material to our operating results for any given period.

79 Bank of America

See Note 20 – Income Taxes to the Consolidated Financial Statements for a

table of significant tax attributes and additional information. For more information,

see page 14 under Item 1A. Risk Factors – Regulatory, Compliance and Legal.

Goodwill and Intangible Assets

The nature of and accounting for goodwill and intangible assets are discussed in

Note 1 – Summary of Significant Accounting Principles, and Note 8 – Goodwill and

Intangible Assets to the Consolidated Financial Statements.

We completed our annual goodwill impairment test as ofJune 30, 2019 for all

of our reporting units that had goodwill. We performed that test by assessing

qualitative factors to determine whether it is more likely than not that the fair value

of each reporting unit is less than its respective carrying value. Factors considered

in the qualitative assessments include, among other things, macroeconomic

conditions, industry and market considerations, financial performance of the

respective reporting unit and other relevant entity- and reporting-unit specific

considerations. If based on the results of the qualitative assessment, it is more

likely than not that the fair value of a reporting unit is less than its carrying value, a

quantitative assessment is performed.

Based on our qualitative assessments, we determined that for each reporting

unit with goodwill, it was more likely than not that its respective fair value exceeded

its carrying value, indicating there was no impairment. For more information

regarding goodwill balances at June 30, 2019, see Note 8 – Goodwill and

Intangible Assets to the Consolidated Financial Statements.

Certain Contingent Liabilities

For more information on the complex judgments associated with certain contingent

liabilities, see Note 13 – Commitments and Contingencies to the Consolidated

Financial Statements.

Non-GAAP Reconciliations

Tables 50 and 51 provide reconciliations of certain non-GAAP financial measures to GAAP financial measures.

Table 50 Five-year Reconciliations to GAAP Financial Measures

(1)

(Dollars in millions, shares in thousands)

2019 2018 2017 2016 2015

Reconciliation of average shareholders’ equity to average tangible shareholders’ equity and average tangible

common shareholders’ equity

Shareholders’ equity

$ 267,889 $ 264,748 $ 271,289 $ 265,843 $ 251,384

Goodwill

(68,951) (68,951) (69,286) (69,750) (69,772)

Intangible assets (excluding MSRs)

(1,721) (2,058) (2,652) (3,382) (4,201)

Related deferred tax liabilities

773 906 1,463 1,644 1,852

Tangible shareholders’ equity

$ 197,990 $ 194,645 $ 200,814 $ 194,355 $ 179,263

Preferred stock

(23,036) (22,949) (24,188) (24,656) (21,808)

Tangible common shareholders’ equity

$ 174,954 $ 171,696 $ 176,626 $ 169,699 $ 157,455

Reconciliation of year-end shareholders’ equity to year-end tangible shareholders’ equity and year-end tangible

common shareholders’ equity

Shareholders’ equity

$ 264,810 $ 265,325 $ 267,146 $ 266,195 $ 255,615

Goodwill

(68,951) (68,951) (68,951) (69,744) (69,761)

Intangible assets (excluding MSRs)

(1,661) (1,774) (2,312) (2,989) (3,768)

Related deferred tax liabilities

713 858 943 1,545 1,716

Tangible shareholders’ equity

$ 194,911 $ 195,458 $ 196,826 $ 195,007 $ 183,802

Preferred stock

(23,401) (22,326) (22,323) (25,220) (22,272)

Tangible common shareholders’ equity

$ 171,510 $ 173,132 $ 174,503 $ 169,787 $ 161,530

Reconciliation of year-end assets to year-end tangible assets

Assets

$ 2,434,079 $ 2,354,507 $ 2,281,234 $ 2,188,067 $ 2,144,606

Goodwill

(68,951) (68,951) (68,951) (69,744) (69,761)

Intangible assets (excluding MSRs)

(1,661) (1,774) (2,312) (2,989) (3,768)

Related deferred tax liabilities

713 858 943 1,545 1,716

Tangible assets

$ 2,364,180 $ 2,284,640 $ 2,210,914 $ 2,116,879 $ 2,072,793

(1)

Presents reconciliations of non-GAAP financial measures to GAAP financial measures. For more information on non-GAAP financial measures and ratios we use in assessing the results of the Corporation, seeSupplemental Financial Data on

page 27.

Table 51 Quarterly Reconciliations to GAAP Financial Measures

(1)

2019 Quarters 2018 Quarters

(Dollars in millions) Fourth Third Second First Fourth Third Second First

Reconciliation of average shareholders’ equity to average tangible shareholders’

equity and average tangible common shareholders’ equity

Shareholders’ equity $ 266,900 $ 270,430 $ 267,975 $ 266,217 $ 263,698 $ 264,653 $ 265,181 $ 265,480

Goodwill (68,951 ) (68,951 ) (68,951 ) (68,951 ) (68,951) (68,951 ) (68,951 ) (68,951 )

Intangible assets (excluding MSRs) (1,678 ) (1,707 ) (1,736 ) (1,763 ) (1,857 ) (1,992 ) (2,126 ) (2,261 )

Related deferred tax liabilities 730 752 770 841 874 896 916 939

Tangible shareholders’ equity $ 197,001 $ 200,524 $ 198,058 $ 196,344 $ 193,764 $ 194,606 $ 195,020 $ 195,207

Preferred stock (23,461 ) (23,800 ) (22,537 ) (22,326 ) (22,326) (22,841 ) (23,868 ) (22,767 )

Tangible common shareholders’ equity $ 173,540 $ 176,724 $ 175,521 $ 174,018 $ 171,438 $ 171,765 $ 171,152 $ 172,440

Reconciliation of period-end shareholders’ equity to period-end tangible

shareholders’ equity and period-end tangible common shareholders’ equity

Shareholders’ equity $ 264,810 $ 268,387 $ 271,408 $ 267,010 $ 265,325 $ 262,158 $ 264,216 $ 266,224

Goodwill (68,951 ) (68,951 ) (68,951 ) (68,951 ) (68,951) (68,951 ) (68,951 ) (68,951 )

Intangible assets (excluding MSRs) (1,661 ) (1,690 ) (1,718 ) (1,747 ) (1,774 ) (1,908 ) (2,043 ) (2,177 )

Related deferred tax liabilities 713 734 756 773 858 878 900 920

Tangible shareholders’ equity

$ 194,911 $ 198,480 $ 201,495 $ 197,085 $ 195,458 $ 192,177 $ 194,122 $ 196,016

Preferred stock (23,401 ) (23,606 ) (24,689 ) (22,326 ) (22,326) (22,326 ) (23,181 ) (24,672 )

Tangible common shareholders’ equity $ 171,510 $ 174,874 $ 176,806 $ 174,759 $ 173,132 $ 169,851 $ 170,941 $ 171,344

Reconciliation of period-end assets to period-end tangible assets

Assets $ 2,434,079 $ 2,426,330 $ 2,395,892 $ 2,377,164 $ 2,354,507 $ 2,338,833 $ 2,291,670 $ 2,328,478

Goodwill (68,951 ) (68,951 ) (68,951 ) (68,951 ) (68,951) (68,951 ) (68,951 ) (68,951 )

Intangible assets (excluding MSRs) (1,661 ) (1,690 ) (1,718 ) (1,747 ) (1,774 ) (1,908 ) (2,043 ) (2,177 )

Related deferred tax liabilities 713 734 756 773 858 878 900 920

Tangible assets $ 2,364,180 $ 2,356,423 $ 2,325,979 $ 2,307,239 $ 2,284,640 $ 2,268,852 $ 2,221,576 $ 2,258,270

(1)

Presents reconciliations of non-GAAP financial measures to GAAP financial measures. For more information on non-GAAP financial measures and ratios we use in assessing the results of the Corporation, seeSupplemental Financial Data on

page 27.

Bank of America 80

Statistical Tables

Table of Contents

Page

Table I – Outstanding Loans and Leases 81

Table II – Nonperforming Loans, Leases and Foreclosed Properties 82

Table III – Accruing Loans and Leases Past Due 90 Days or More 82

Table IV – Selected Loan Maturity Data 83

Table V – Allowance for Credit Losses 83

Table VI – Allocation of the Allowance for Credit Losses by Product Type 84

Table I Outstanding Loans and Leases

December 31

(Dollars in millions) 2019 2018 2017 2016 2015

Consumer

Residential mortgage $ 236,169 $ 208,557 $ 203,811 $ 191,797 $ 187,911

Home equity 40,208 48,286 57,744 66,443 75,948

Credit card 97,608 98,338 96,285 92,278 89,602

Non-U.S. credit card — — — 9,214 9,975

Direct/Indirect consumer

(1)

90,998 91,166 96,342 95,962 90,149

Other consumer

(2)

192 202 166 626 713

Total consumer loans excluding loans accounted for under the fair value option 465,175 446,549 454,348 456,320 454,298

Consumer loans accounted for under the fair value option

(3)

594 682 928 1,051 1,871

Total consumer 465,769 447,231 455,276 457,371 456,169

Commercial

U.S. commercial 307,048 299,277 284,836 270,372 252,771

Non-U.S. commercial 104,966 98,776 97,792 89,397 91,549

Commercial real estate

(4)

62,689 60,845 58,298 57,355 57,199

Commercial lease financing 19,880 22,534 22,116 22,375 21,352

494,583 481,432 463,042 439,499 422,871

U.S. small business commercial

(5)

15,333 14,565 13,649 12,993 12,876

Total commercial loans excluding loans accounted for under the fair value option 509,916 495,997 476,691 452,492 435,747

Commercial loans accounted for under the fair value option

(3)

7,741 3,667 4,782 6,034 5,067

Total commercial 517,657 499,664 481,473 458,526 440,814

Less: Loans of business held for sale

(6)

— — — (9,214) —

Total loans and leases $ 983,426 $ 946,895 $ 936,749 $ 906,683 $ 896,983

(1)

Includes primarily auto and specialty lending loans and leases of$50.4 billion, $50.1 billion, $52.4 billion, $50.7 billion and $43.9 billion, U.S. securities-based lending loans of $36.7 billion, $37.0 billion, $39.8 billion, $40.1 billion and $39.8 billion and non-U.S.

consumer loans of $2.8 billion, $2.9 billion, $3.0 billion, $3.0 billion and $3.9 billion at December 31, 2019, 2018, 2017, 2016 and 2015, respectively.

(2)

Substantially all of other consumer at December 31, 2019, 2018 and 2017 is consumer overdrafts. Other consumer at December 31, 2016 and 2015 also includes consumer finance loans of $465 million and $564 million,

respectively.

(3)

Consumer loans accounted for under the fair value option include residential mortgage loans of$257 million, $336 million, $567 million, $710 million and $1.6 billion, and home equity loans of$337 million, $346 million, $361 million, $341 million and $250

million at December 31, 2019, 2018, 2017, 2016 and 2015, respectively. Commercial loans accounted for under the fair value option include U.S. commercial loans of$4.7 billion, $2.5 billion, $2.6 billion, $2.9 billion and $2.3 billion, and non-U.S. commercial

loans of $3.1 billion, $1.1 billion, $2.2 billion, $3.1 billion and $2.8 billion at December 31, 2019, 2018, 2017, 2016 and 2015, respectively.

(4)

Includes U.S. commercial real estate loans of $59.0 billion, $56.6 billion, $54.8 billion, $54.3 billion and $53.6 billion, and non-U.S. commercial real estate loans of $3.7 billion, $4.2 billion, $3.5 billion, $3.1 billion and $3.5 billion at December 31, 2019, 2018, 2017,

2016 and 2015, respectively.

(5)

Includes card-related

products.

(6)

Represents non-U.S. credit card loans, which were included in assets of business held for sale on the Consolidated Balance

Sheet.

81 Bank of America

Table II Nonperforming Loans, Leases and Foreclosed Properties

(1)

December 31

(Dollars in millions) 2019 2018 2017 2016 2015

Consumer

Residential mortgage $ 1,470 $ 1,893 $ 2,476 $ 3,056 $ 4,803

Home equity 536 1,893 2,644 2,918 3,337

Direct/Indirect consumer 47 56 46 28 24

Other consumer — — — 2 1

Total consumer

(2)

2,053 3,842 5,166 6,004 8,165

Commercial

U.S. commercial 1,094 794 814 1,256 867

Non-U.S. commercial 43 80 299 279 158

Commercial real estate 280 156 112 72 93

Commercial lease financing 32 18 24 36 12

1,449 1,048 1,249 1,643 1,130

U.S. small business commercial 50 54 55 60 82

Total commercial

(3)

1,499 1,102 1,304 1,703 1,212

Total nonperforming loans and leases 3,552 4,944 6,470 7,707 9,377

Foreclosed properties 285 300 288 377 459

Total nonperforming loans, leases and foreclosed properties $ 3,837 $ 5,244 $ 6,758 $ 8,084 $ 9,836

(1)

Balances exclude foreclosed properties insured by certain government-guaranteed loans, principally FHA-insured loans, that entered foreclosure of$260 million, $488 million, $801 million, $1.2 billion and $1.4 billion at December 31, 2019, 2018, 2017, 2016

and 2015, respectively.

(2)

In 2019, $422 million in interest income was estimated to be contractually due on$2.1 billion of consumer loans and leases classified as nonperforming atDecember 31, 2019, as presented in the table above, plus$5.5 billion of TDRs classified as performing

at December 31, 2019. Approximately $297 million of the estimated $422 million in contractual interest was received and included in interest income for2019.

(3)

I n 2019, $133 million in interest income was estimated to be contractually due on$1.5 billion of commercial loans and leases classified as nonperforming atDecember 31, 2019, as presented in the table above, plus$1.3 billion of TDRs classified as

performing at December 31, 2019. Approximately $88 million of the estimated $133 million in contractual interest was received and included in interest income for2019.

Table III Accruing Loans and Leases Past Due 90 Days or More

(1)

December 31

(Dollars in millions) 2019 2018 2017 2016 2015

Consumer

Residential mortgage

(2)

$ 1,088 $ 1,884 $ 3,230 $ 4,793 $ 7,150

Credit card 1,042 994 900 782 789

Non-U.S. credit card — — — 66 76

Direct/Indirect consumer 33 38 40 34 39

Other consumer — — — 4 3

Total consumer 2,163 2,916 4,170 5,679 8,057

Commercial

U.S. commercial 106 197 144 106 113

Non-U.S. commercial 8 — 3 5 1

Commercial real estate 19 4 4 7 3

Commercial lease financing 20 29 19 19 15

153 230 170 137 132

U.S. small business commercial 97 84 75 71 61

Total commercial 250 314 245 208 193

Total accruing loans and leases past due 90 days or more $ 2,413 $ 3,230 $ 4,415 $ 5,887 $ 8,250

(1)

Our policy is to classify consumer real estate-secured loans as nonperforming at 90 days past due, except the fully-insured loan portfolio and loans accounted for under the fair value

option.

(2)

Balances are fully-insured

loans.

Bank of America 82

Table IV Selected Loan Maturity Data

(1, 2)

December 31, 2019

Due in One Due After One Year Due After

(Dollars in millions) Year or Less Through Five Years Five Years Total

U.S. commercial $ 76,523 $ 200,298 $ 50,216 $ 327,037

U.S. commercial real estate 13,683 39,259 6,023 58,965

Non-U.S. and other

(3)

47,828 56,072 7,875 111,775

Total selected loans $ 138,034 $ 295,629 $ 64,114 $ 497,777

Percent of total 28 % 59 % 13 % 100 %

Sensitivity of selected loans to changes in interest rates for loans due after one year:

Fixed interest rates $ 21,526 $ 31,383

Floating or adjustable interest rates 274,103 32,731

Total $ 295,629 $ 64,114

(1)

Loan maturities are based on the remaining maturities under contractual

terms.

(2)

Includes loans accounted for under the fair value

option.

(3)

Loan maturities include non-U.S. commercial and commercial real estate

loans.

Table V Allowance for Credit Losses

(Dollars in millions) 2019 2018 2017 2016 2015

Allowance for loan and lease losses, January 1 $ 9,601 $ 10,393 $ 11,237 $ 12,234 $ 14,419

Loans and leases charged off

Residential mortgage (93 ) (207 ) (188 ) (403 ) (866 )

Home equity (429 ) (483 ) (582 ) (752 ) (975 )

Credit card (3,535) (3,345) (2,968) (2,691) (2,738)

Non-U.S. credit card

(1)

— — (103 ) (238 ) (275 )

Direct/Indirect consumer (518 ) (495 ) (491 ) (392 ) (383 )

Other consumer (249 ) (197 ) (212 ) (232 ) (224 )

Total consumer charge-offs (4,824) (4,727) (4,544) (4,708) (5,461)

U.S. commercial

(2)

(650 ) (575 ) (589 ) (567 ) (536 )

Non-U.S. commercial (115 ) (82 ) (446 ) (133 ) (59 )

Commercial real estate (31 ) (10 ) (24 ) (10 ) (30 )

Commercial lease financing (26 ) (8 ) (16 ) (3

0 ) (19 )

Total commercial charge-offs (822 ) (675 ) (1,075) (740 ) (644 )

Total loans and leases charged off (5,646) (5,402) (5,619) (5,448) (6,105)

Recoveries of loans and leases previously charged off

Residential mortgage 140 179 288 272 393

Home equity 787 485 369 347 339

Credit card 587 508 455 422 424

Non-U.S. credit card

(1)

— — 28 63 87

Direct/Indirect consumer 309 300 277 258 271

Other consumer 15 15 49 27 31

Total consumer recoveries 1,838 1,487 1,466 1,389 1,545

U.S. commercial

(3)

122 120 142 175 172

Non-U.S. commercial 31 14 6 13 5

Commercial real estate 2 9 15 41 35

Commercial lease financing 5 9 11 9 10

Total commercial recoveries 160 152 174 238 222

Total recoveries of loans and leases previously charged off 1,998 1,639 1,640 1,627 1,767

Net charge-offs (3,648) (3,763) (3,979) (3,821) (4,338)

Provision for loan and lease losses 3,574 3,262 3,381 3,581 3,043

Other

(4)

(111 ) (291 ) (246 ) (514 ) (890 )

Total allowance for loan and lease losses, December 31

9,416 9,601 10,393 11,480 12,234

Less: Allowance included in assets of business held for sale

(5)

— — — (243 ) —

Allowance for loan and lease losses, December 31 9,416 9,601 10,393 11,237 12,234

Reserve for unfunded lending commitments, January 1 797 777 762 646 528

P

rovision for unfunded lending commitments 16 20 15 16 118

Other

(4)

— — — 100 —

Reserve for unfunded lending commitments, December 31 813 797 777 762 646

Allowance for credit losses, December 31 $ 10,229 $ 10,398 $ 11,170 $ 11,999 $ 12,880

(1)

Represents amounts related to the non-U.S. credit card loan portfolio, which was sold in

2017.

(2)

Includes U.S. small business commercial charge-offs of $320 million, $287 million, $258 million, $253 million and $282 million in 2019, 2018, 2017, 2016 and 2015,

respectively.

(3)

Includes U.S. small business commercial recoveries of $48 million, $47 million, $43 million, $45 million and $57 million in 2019, 2018, 2017, 2016 and 2015,

respectively.

(4)

Primarily represents write-offs of PCI loans, the net impact of portfolio sales, consolidations and deconsolidations, foreign currency translation adjustments, transfers to held for sale and certain other

reclassifications.

(5)

Represents allowance related to the non-U.S. credit card loan portfolio, which was sold in

2017.

83 Bank of America

Table V Allowance for Credit Losses (continued)

(Dollars in millions) 2019 2018 2017 2016 2015

Loan and allowance ratios

(6)

:

Loans and leases outstanding at December 31

(7)

$ 975,091 $ 942,546 $ 931,039 $ 908,812 $ 890,045

Allowance for loan and lease losses as a percentage of total loans and leases outstanding at December 31

(7)

0.97 % 1.02 % 1.12 % 1.26 % 1.37 %

Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases outstanding at

December 31

(8)

0.98 1.08 1.18 1.36 1.63

Commercial allowance for loan and lease losses as a percentage of total commercial loans and leases outstanding at

December 31

(9)

0.96 0.97 1.05 1.16 1.11

Average loans and leases outstanding

(7)

$ 951,583 $ 927,531 $ 911,988 $ 892,255 $ 869,065

Net charge-offs as a percentage of average loans and leases outstanding

(7)

0.38 % 0.41 % 0.44 % 0.43 % 0.50 %

Allowance for loan and lease losses as a percentage of total nonperforming loans and leases at December 31 265 194 161 149 130

Ratio of the allowance for loan and lease losses at December 31 to net charge-offs 2.58 2.55 2.61 3.00 2.82

Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans

and leases at December 31

(10)

$ 4,151 $ 4,031 $ 3,971 $ 3,951 $ 4,518

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 December 31

(10)

148% 113 % 99 % 98 % 82 %

(6)

Loan and allowance ratios for 2016 include$243 million of non-U.S. credit card allowance for loan and lease losses and $9.2 billion of ending non-U.S. credit card loans, which were sold in

2017.

(7)

Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of$8.3 billion, $4.3 billion, $5.7 billion, $7.1 billion and $6.9 billion at December 31, 2019, 2018, 2017, 2016 and 2015, respectively. Average loans

accounted for under the fair value option were $6.8 billion, $5.5 billion, $6.7 billion, $8.2 billion and $7.7 billion in2019, 2018, 2017, 2016 and 2015, respectively.

(8)

Excludes consumer loans accounted for under the fair value option of$594 million, $682 million, $928 million, $1.1 billion and $1.9 billion atDecember 31, 2019, 2018, 2017, 2016 and 2015,

respectively.

(9)

Excludes commercial loans accounted for under the fair value option of$7.7 billion, $3.7 billion, $4.8 billion, $6.0 billion and $5.1 billion at December 31, 2019, 2018, 2017, 2016 and 2015,

respectively.

(10)

Primarily includes amounts allocated to credit card and unsecured consumer lending portfolios inConsumer Banking and, in 2016 and 2015, the non-U.S. credit card portfolio in All

Other.

Table VI Allocation of the Allowance for Credit Losses by Product Type

December 31

2019 2018 2017 2016 2015

Percent Percent Percent Percent Percent

(Dollars in millions) Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total

Allowance for loan and lease losses

Residential mortgage $ 325 3.45 % $ 422 4.40 % $ 701 6.74 % $ 1,012 8.82 % $ 1,500 12.26 %

Home equity 221 2.35 506 5.27 1,019 9.80 1,738 15.14 2,414 19.73

Credit card 3,710 39.39 3,597 37.47 3,368 32.41 2,934 25.56 2,927 23.93

Non-U.S. credit card — — — — — — 243 2.12 274 2.24

Direct/Indirect consumer 234 2.49 248 2.58 264 2.54 244 2.13 223 1.82

Other consumer 52 0.55 29 0.30 31 0.30 51 0.44 47 0.38

Total consumer 4,542 48.23 4,802 50.02 5,383 51.79 6,222 54.21 7,385 60.36

U.S. commercial

(1)

3,015 32.02 3,010 31.35 3,113 29.95 3,326 28.97 2,964 24.23

Non-U.S. commercial 658 6.99 677 7.05 803 7.73 874 7.61 754 6.17

Commercial real estate 1,042 11.07 958 9.98 935 9.00 920 8.01 967 7.90

Commercial lease financing 159 1.69 154 1.60 159 1.53 138 1.20 164 1.34

Total commercial 4,874 51.77 4,799 49.98 5,010 48.21 5,258 45.79 4,849 39.64

Total allowance for loan and lease losses 9,416 100.00 % 9,601 100.00 % 10,393 100.00 % 11,480 100.00 % 12,234 100.00 %

Less: Allowance included in assets of business held for

sale

(2)

— — — (243) —

Allowance for loan and lease losses 9,416 9,601 10,393 11,237 12,234

Reserve for unfunded lending commitments 813 797 777 762 646

Allowance for credit losses $ 10,229 $ 10,398 $ 11,170 $ 11,999 $ 12,880

(1)

Includes allowance for loan and lease losses for U.S. small business commercial loans of$523 million, $474 million, $439 million, $416 million and $507 million at December 31, 2019, 2018, 2017, 2016 and 2015,

respectively.

(2)

Represents allowance for loan and lease losses related to the non-U.S. credit card loan portfolio, which was sold in

2017.

Bank of America 84

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

See Market Risk Management on page71 in the MD&A and the sections referenced therein for Quantitative and Qualitative Disclosures about Market Risk.

Item 8. Financial Statements and Supplementary Data

Table of Contents

Page

Consolidated Statement of Income 89

Consolidated Statement of Comprehensive Income 89

Consolidated Balance Sheet 90

Consolidated Statement of Changes in Shareholders’ Equity 91

Consolidated Statement of Cash Flows 92

Note 1 – Summary of Significant Accounting Principles 93

Note 2 – Net Interest Income and Noninterest Income 101

Note 3 – Derivatives 102

Note 4 – Securities 109

Note 5 – Outstanding Loans and Leases 112

Note 6 – Allowance for Credit Losses 120

Note 7 – Securitizations and Other Variable Interest Entities 121

Note 8 – Goodwill and Intangible Assets 125

Note 9 – Leases

125

Note 10 – Deposits 126

Note 11 – Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings and Restricted Cash

126

Note 12 – Long-term Debt 128

Note 13 – Commitments and Contingencies 129

Note 14 – Shareholders’ Equity 134

Note 15 – Accumulated Other Comprehensive Income (Loss) 136

Note 16 – Earnings Per Common Share 137

Note 17 – Regulatory Requirements and Restrictions 137

Note 18 – Employee Benefit Plans 139

Note 19 – Stock-based Compensation Plans 143

Note 20 – Income Taxes 144

145

Note 21 – Fair Value Measurements

Note 22 – Fair Value Option 154

Note 23 – Fair Value of Financial Instruments 156

Note 24 – Business Segment Information 156

Note 25 – Parent Company Information 159

Note 26 – Performance by Geographical Area 161

Glossary 162

Acronyms 163

85 Bank of America

Report of Management on Internal Control Over Financial Reporting

The management of Bank of America Corporation is responsible for establishing

and maintaining adequate internal control over financial reporting.

The Corporation’s internal control over financial reporting is a process designed

to provide reasonable assurance regarding the reliability of financial reporting and

the preparation of financial statements for external purposes in accordance with

accounting principles generally accepted in the United States of America. The

Corporation’s internal control over financial reporting includes those policies and

procedures that (i) pertain to the maintenance of records that, in reasonable detail,

accurately and fairly reflect the transactions and dispositions of the assets of the

Corporation; (ii) provide reasonable assurance that transactions are recorded as

necessary to permit preparation of financial statements in accordance with

accounting principles generally accepted in the United States of America, and that

receipts and expenditures of the Corporation are being made only in accordance

with authorizations of management and directors of the Corporation; and (iii)

provide reasonable assurance regarding prevention or timely detection of

unauthorized acquisition, use, or disposition of the Corporation’s assets that could

have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may

not prevent or detect misstatements. Also, projections of any evaluation of

effectiveness to future periods are subject to the risk that controls may become

inadequate because of changes in conditions, or that the degree of compliance

with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Corporation’s internal control

over financial reporting as of December 31, 2019 based on the framework set forth

by the Committee of Sponsoring Organizations of the Treadway Commission in

Internal Control – Integrated Framework (2013). Based on that assessment,

management concluded that, as of December 31, 2019, the Corporation’s internal

control over financial reporting is effective.

The Corporation’s internal control over financial reporting as of December 31,

2019 has been audited by PricewaterhouseCoopers

, LLP, an independent

registered public accounting firm, as stated in their accompanying report which

expresses an unqualified opinion on the effectiveness of the Corporation’s internal

control over financial reporting as of December 31, 2019.

Brian T. Moynihan

Chairman, Chief Executive Officer and President

Paul M. Donofrio

Chief Financial Officer

Bank of America 86

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Bank of

America Corporation:

Opinions on the Financial Statements and Internal Control

over Financial Reporting

We have audited the accompanying consolidated balance sheets of Bank of

America Corporation and its subsidiaries (the "Corporation") as of December 31,

2019 and December 31, 2018, and the related consolidated statements of income,

comprehensive income, changes in shareholders’ equity and cash flows for each of

the three years in the period ended December 31, 2019, including the related

notes (collectively referred to as the “consolidated financial statements”). We also

have audited the Corporation’s internal control over financial reporting as of

December 31, 2019, based on criteria established inInternal Control - Integrated

Framework (2013) issued by the Committee of Sponsoring Organizations of the

Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present

fairly, in all material respects, the financial position of the Corporation as of

December 31, 2019 and December 31, 2018, and the results of its operations and

its cash flows for each of the three years in the period endedDecember 31, 2019

in conformity with accounting principles generally accepted in the United States of

America. Also in our opinion, the Corporation maintained, in all material respects,

effective internal control over financial reporting as of December 31, 2019, based

on criteria established in Internal Control - Integrated Framework (2013) issued by

the COSO.

Basis for Opinions

The Corporation’s management is responsible for these consolidated financial

statements, for maintaining effective internal control over financial reporting, and

for its assessment of the effectiveness of internal control over financial reporting,

included in the accompanying Report of Management on Internal Control Over

Financial Reporting. Our responsibility is to express opinions on the Corporation’s

consolidated financial statements and on the Corporation’s internal control over

financial reporting based on our audits. We are a public accounting firm registered

with the Public Company Accounting Oversight Board (United States) (PCAOB)

and are required to be independent with respect to the Corporation in accordance

with the U.S. federal securities laws and the applicable rules and regulations of the

Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable

assurance about whether the consolidated financial statements are free of material

misstatement, whether due to error or fraud, and whether effective internal control

over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing

procedures to assess the risks of material misstatement of the consolidated

financial statements, whether due to error or fraud, and performing procedures that

respond to those risks. Such procedures included examining, on a test basis,

evidence regarding the amounts and disclosures in the consolidated financial

statements. Our audits also included evaluating the accounting principles used and

significant estimates made by management, as well as evaluating the overall

presentation of the consolidated financial statements. Our audit of internal control

over financial reporting included obtaining an understanding of internal control over

financial reporting,

87 Bank of America

assessing the risk that a material weakness exists, and testing and evaluating the

design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered

necessary in the circumstances. We believe that our audits provide a reasonable

basis for our opinions.

Definition and Limitations of Internal Control over Financial

Reporting

A company’s internal control over financial reporting is a process designed to

provide reasonable assurance regarding the reliability of financial reporting and the

preparation of financial statements for external purposes in accordance with

generally accepted accounting principles. A company’s internal control over

financial reporting includes those policies and procedures that (i) pertain to the

maintenance of records that, in reasonable detail, accurately and fairly reflect the

transactions and dispositions of the assets of the company; (ii) provide reasonable

assurance that transactions are recorded as necessary to permit preparation of

financial statements in accordance with generally accepted accounting principles,

and that receipts and expenditures of the company are being made only in

accordance with authorizations of management and directors of the company; and

(iii) provide reasonable assurance regarding prevention or timely detection of

unauthorized acquisition, use, or disposition of the company’s assets that could

have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may

not prevent or detect misstatements. Also, projections of any evaluation of

effectiveness to future periods are subject to the risk that controls may become

inadequate because of changes in conditions, or that the degree of compliance

with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current

period audit of the consolidated financial statements that were communicated or

required to be communicated to the audit committee and that (i) relate to accounts

or disclosures that are material to the consolidated financial statements and (ii)

involved our especially challenging, subjective, or complex judgments. The

communication of critical audit matters does not alter in any way our opinion on the

consolidated financial statements, taken as a whole, and we are not, by

communicating the critical audit matters below, providing separate opinions on the

critical audit matters or on the accounts or disclosures to which they relate.

Allowance for Loan and Lease Losses

As described in Notes 1 and 6 to the consolidated financial statements, the

allowance for loan and lease losses represents management’s estimate of

probable incurred credit losses in the Corporation’s loan and lease portfolio. As of

December 31, 2019, the allowance for loan and lease losses was $9.4 billion on

total loans and leases of $975.1 billion, which excludes loans accounted for under

the fair value option. The allowance for loan and lease losses includes both

quantitative and qualitative components. The allowance for certain consumer loan

portfolios considers a variety of factors including historical loss experience,

estimated defaults or foreclosures based on portfolio trends, delinquencies,

bankruptcies, economic conditions, credit scores and the amount of loss in the

event of default. The allowance for certain commercial loans is calculated using

loss rates delineated by risk rating and product type. In addition, the qualitative

component has a higher degree of management subjectivity, and includes factors

such as concentrations, economic conditions and other considerations.

The principal considerations for our determination that performing procedures

relating to the allowance for loan and lease losses is a critical audit matter are (i)

there was significant judgment and estimation by management in determining the

allowance for loan and lease losses, which in turn led to a high degree of auditor

judgment, subjectivity and effort in performing procedures and in evaluating audit

evidence obtained relating to the allowance for loan and lease losses, including the

qualitative component, and (ii) the audit effort involved professionals with

specialized skill and knowledge to assist in evaluating certain audit evidence.

Addressing the matter involved performing procedures and evaluating audit

evidence in connection with forming our overall opinion on the consolidated

financial statements. These procedures included testing the effectiveness of

controls relating to the allowance for loan and lease losses. These procedures also

included, among others, testing management’s process for estimating the

allowance for loan and lease losses, including evaluating the appropriateness of

the loss forecast models and methodology, testing the completeness and accuracy

of certain data used in the allowance for loan and lease losses, and evaluating the

reasonableness of significant assumptions and judgments used by management to

estimate the qualitative component of the allowance for loan and lease losses

including those judgments related to the impact of concentrations, economic

conditions and other considerations. The procedures also included the involvement

of professionals with specialized skill and knowledge to assist in evaluating the

reasonableness of certain loss forecast models and methodologies, evaluating the

reasonableness of risk ratings used in the allowance for commercial loans, and

evaluating the reasonableness of certain judgments used by management in

estimating the qualitative component of the allowance for loan and lease losses.

Valuation of Certain Level 3 Financial Instruments

As described in Notes 1 and 21 to the consolidated financial statements, the

Corporation carries certain financial instruments at fair value, which includes $10.3

billion of assets and $5.9 billion

of liabilities classified as Level 3 fair value measurements for which the

determination of fair value requires significant

management judgment or estimation. The Corporation determines the fair value of

certain Level 3 financial instruments using quantitative models that utilize multiple

significant unobservable inputs, including long-dated volatility and forward price, as

applicable. As disclosed by management, estimation risk is greater for financial

instruments that are either option-based or have longer maturity dates where

observable market inputs are less readily available, or are unobservable, in which

case, quantitative-based extrapolations are used in determining fair values.

The principal considerations for our determination that performing procedures

relating to the valuation of certain Level 3 financial instruments is a critical audit

matter are the significant judgment and estimation used by management to

determine the fair value of these financial instruments. This in turn led to a high

degree of auditor judgment and effort in performing procedures, including the

involvement of professionals with specialized skill and knowledge to assist in

evaluating certain audit evidence.

Addressing the matter involved performing procedures and evaluating audit

evidence in connection with forming our overall opinion on the consolidated

financial statements. These procedures included testing the effectiveness of

controls relating to the valuation of financial instruments, including controls related

to valuation models, significant unobservable inputs, and data. These procedures

also included, among others, the involvement of professionals with specialized skill

and knowledge to assist in developing an independent estimate of fair value for a

sample of these certain financial instruments and comparison of management’s

estimate to the independently developed estimate of fair value. Developing the

independent estimate involved testing the completeness and accuracy of data

provided by management and evaluating the reasonableness of management’s

assumptions used to develop the significant unobservable inputs.

Charlotte, North Carolina

February 19, 2020

We have served as the Corporation’s auditor since 1958.

Bank of America 88

Bank of America Corporation and Subsidiaries

Consolidated Statement of Income

(In millions, except per share information)

Net interest income

Interest income

Interest expense

Net interest income

Noninterest income

Fees and commissions

Market making and similar activities

Other income

Total noninterest income

Total revenue, net of interest expense

Provision for credit losses

Noninterest expense

Compensation and benefits

Occupancy and equipment

Information processing and communications

Product delivery and transaction related

Marketing

Professional fees

Other general operating

Total noninterest expense

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

Average common shares issued and outstanding

Average diluted common shares issued and outstanding

Consolidated Statement of Comprehensive Income

(Dollars in millions)

Net income

Other comprehensive income (loss), net-of-tax:

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

Other comprehensive income (loss)

Comprehensive income

2019

$ 71,236

22,345

48,891

33,015

9,034

304

42,353

91,244

3,590

31,977

6,588

4,646

2,762

1,934

1,597

5,396

54,900

32,754

5,324

$ 27,430

1,432

$ 25,998

$ 2.77

2.75

9,390.5

9,442.9

2019

$ 27,430

5,875

(963 )

616

136

(86)

5,578

$ 33,008

2018 2017

$ 66,769

18,607

48,162

$ 57,579

12,340

45,239

33,078

9,008

772

42,858

91,020

33,341

7,102

1,444

41,887

87,126

3,282 3,396

$

31,880

6,380

4,555

2,857

1,674

1,699

4,109

53,154

34,584

6,437

28,147

1,451

26,696

$

31,931

6,264

4,530

3,041

1,746

1,888

5,117

54,517

29,213

10,981

18,232

1,614

16,618

$ 2.64

2.61

10,096.5

10,236.9

$ 1.63

1.56

10,195.6

10,778.4

2018 2017

$ 28,147 $ 18,232

(3,953 ) 61

749 (293 )

(53 ) 64

(405 ) 288

(254 ) 86

(3,916 ) 206

$ 24,231 $ 18,438

See accompanying Notes to Consolidated Financial Statements.

89 Bank of America

Bank of America Corporation and Subsidiaries

Consolidated Balance Sheet

December 31

(Dollars in millions) 2019 2018

Assets

Cash and due from banks $ 30,152 $ 29,063

Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks 131,408 148,341

Cash and cash equivalents 161,560 177,404

Time deposits placed and other short-term investments 7,107 7,494

Federal funds sold and securities borrowed or purchased under agreements to resell

(includes $50,364 and $56,399 measured at fair value) 274,597 261,131

Trading account assets (includes $90,946 and $119,363 pledged as collateral) 229,826 214,348

Derivative assets 40,485 43,725

Debt securities:

Carried at fair value 256,467 238,101

Held-to-maturity, at cost (fair value – $219,821 and $200,435) 215,730 203,652

Total debt securities 472,197 441,753

Loans and leases (includes $8,335 and $4,349 measured at fair value) 983,426 946,895

Allowance for loan and lease losses (9,416 ) (9,601 )

Loans and leases, net of allowance 974,010 937,294

Premises and equipment, net 10,561 9,906

Goodwill 68,951 68,951

Loans held-for-sale (includes $3,709 and $2,942 measured at fair value) 9,158 10,367

Customer and other receivables 55,937 65,814

Other assets (includes $15,518 and $19,739 measured at fair value) 129,690 116,320

Total assets $ 2,434,079 $ 2,354,507

Liabilities

Deposits in U.S. offices:

Noninterest-bearing $ 403,305 $ 412,587

Interest-bearing (includes $508 and $492 measured at fair value) 940,731 891,636

Deposits in non-U.S. offices:

Noninterest-bearing 13,719 14,060

Interest-bearing 77,048 63,193

Total deposits 1,434,803 1,381,476

Federal funds purchased and securities loaned or sold under agreements to repurchase

(includes $16,008 and $28,875 measured at fair value) 165,109 186,988

Trading account liabilities 83,270 68,220

Derivative liabilities 38,229 37,891

Short-term borrowings (includes $3,941 and $1,648 measured at fair value) 24,204 20,189

Accrued expenses and other liabilities (includes $15,434 and $20,075 measured at fair value

and $813 and $797 of reserve for unfunded lending commitments) 182,798 165,026

Long-term debt (includes $34,975 and $27,689 measured at fair value) 240,856 229,392

Total liabilities 2,169,269 2,089,182

Commitments and contingencies (Note 7 – Securitizations and Other Variable Interest Entities

and Note 13 – Commitments and Contingencies)

Shareholders’ equity

Preferred stock, $0.01 par value; authorized – 100,000,000 shares; issued and outstanding – 3,887,440 and 3,843,140 shares 23,401 22,326

Common stock and additional paid-in capital, $0.01 par value; authorized – 12,800,000,000 shares;

issued and outstanding – 8,836,148,954 and 9,669,286,370 shares 91,723 118,896

Retained earnings 156,319 136,314

Accumulated other comprehensive income (loss) (6,633 ) (12,211 )

Total shareholders’ equity 264,810 265,325

Total liabilities and shareholders’ equity

$ 2,434,079 $ 2,354,507

Assets of consolidated variable interest entities included in total assets above (isolated to settle the liabilities of the variable interest entities)

Trading account assets $ 5,811 $ 5,798

Loans and leases 38,837 43,850

Allowance for loan and lease losses (807) (912)

Loans and leases, net of allowance 38,030 42,938

All other assets 540 337

Total assets of consolidated variable interest entities $ 44,381 $ 49,073

Liabilities of consolidated variable interest entities included in total liabilities above

Short-term borrowings $ 2,175 $ 742

Long-term debt (includes $8,717 and $10,943 of non-recourse debt) 8,718 10,944

All other liabilities (includes $19 and $27 of non-recourse liabilities) 22 30

Total liabilities of consolidated variable interest entities $ 10,915 $ 11,716

See accompanying Notes to Consolidated Financial Statements.

Bank of America 90

Bank of America Corporation and Subsidiaries

Consolidated Statement of Changes in Shareholders’ Equity

Common Stock and Accumulated

(In millions)

Preferred

Stock

Additional Paid-in Capital

Shares Amount

Retained

Earnings

Other

Comprehensive

Income (Loss)

Total

Shareholders’

Equity

Balance, December 31, 2016 $ 25,220 10,052.6 $ 147,038 $ 101,225 $ (7,288 ) $ 266,195

Net income 18,232 18,232

Net change in debt securities 61 61

Net change in debit valuation adjustments (293 ) (293 )

Net change in derivatives 64 64

Employee benefit plan adjustments 288 288

Net change in foreign currency translation adjustments 86 86

Dividends declared:

Common (4,027 ) (4,027 )

Preferred (1,578 ) (1,578 )

Common stock issued in connection with exercise of warrants and exchange

of preferred stock (2,897 ) 700.0 2,933 (36 ) —

Common stock issued under employee plans, net, and other 43.3 932 932

Common stock repurchased (508.6 ) (12,814 ) (12,814 )

Balance, December 31, 2017 $ 22,323 10,287.3 $ 138,089 $ 113,816 $ (7,082 ) $ 267,146

Cumulative adjustment for adoption of hedge accounting standard (32 ) 57 25

Adoption of accounting standard related to certain tax effects stranded in

accumulated other comprehensive income (loss) 1,270 (1,270 ) —

Net income 28,147 28,147

Net change in debt securities (3,953 ) (3,953 )

Net change in debit valuation adjustments 749 749

Net change in derivatives (53 ) (53 )

Employee benefit plan adjustments (405 ) (405 )

Net change in foreign currency translation adjustments (254 ) (254 )

Dividends declared:

Common (5,424 ) (5,424 )

Preferred (1,451 ) (1,451 )

Issuance of preferred stock 4,515 4,515

Redemption of preferred stock (4,512 ) (4,512 )

Common stock issued under employee plans, net, and other 58.2 901 (12 ) 889

Common stock repurchased (676.2 ) (20,094 ) (20,094 )

Balance, December 31, 2018

$ 22,326 9,669.3 $ 118,896 $ 136,314 $ (12,211 ) $ 265,325

Cumulative adjustment for adoption of lease accounting standard 165 165

Net income 27,430 27,430

Net change in debt securities 5,875 5,875

Net change in debit valuation adjustments (963 ) (963 )

Net change in derivatives

616 616

Employee benefit plan adjustments 136 136

Net change in foreign currency translation adjustments (86 ) (86 )

Dividends declared:

Common (6,146 ) (6,146 )

Preferred (1,432 ) (1,432 )

Issuance of preferred stock 3,643 3,643

Redemption of preferred stock (2,568 ) (2,568 )

Common stock issued under employee plans, net, and other 123.3 971 (12 ) 959

Common stock repurchased (956.5 ) (28,144 ) (28,144 )

Balance, December 31, 2019 $ 23,401 8,836.1 $ 91,723 $ 156,319 $ (6,633 ) $ 264,810

See accompanying Notes to Consolidated Financial Statements.

91 Bank of America

Bank of America Corporation and Subsidiaries

Consolidated Statement of Cash Flows

(Dollars in millions)

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

Impairment of equity method investment

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 provided by 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 December 31

Supplemental cash flow disclosures

Interest paid

Income taxes paid, net

2019 2018 2017

$ 27,430 $ 28,147 $ 18,232

3,590

(217 )

1,729

2,066

2,435

1,974

2,072

3,282

(154 )

2,063

1,824

3,041

1,729

—

3,396

(255 )

2,103

2,251

8,175

1,649

—

(28,874 ) (28,071 ) (43,506 )

30,191 28,972 40,548

7,920

(11,113 )

16,363

6,211

61,777

(23,673 )

11,920

13,010

(2,570 )

39,520

(14,663 )

(20,090 )

4,673

7,351

9,864

387

(13,466 )

3,659

(48,384 )

(1,292 )

(14,523 )

52,006

79,114

(152,782 )

5,117

78,513

(76,640 )

73,353

93,874

(166,975 )

34,770

(37,115 )

18,789

(35,980 )

16,653

(25,088 )

12,201

(5,963 )

(46,808 )

(2,974 )

(80,630 )

21,365

(4,629 )

(31,292 )

(1,986 )

(71,468 )

11,996

(6,846 )

(41,104 )

8,411

(51,541 )

53,327

(21,879 )

4,004

71,931

10,070

(12,478 )

48,611

7,024

8,538

52,420

(50,794 )

64,278

(53,046 )

53,486

(49,480 )

$

3,643

(2,568 )

(28,144 )

(5,934 )

(698 )

3,377

(368 )

(15,844 )

177,404

161,560 $

4,515

(4,512 )

(20,094 )

(6,895 )

(651 )

53,118

(1,200 )

19,970

157,434

177,404 $

—

(12,814 )

(5,700 )

(397 )

49,268

2,105

9,696

147,738

157,434

$ 22,196

4,359

$ 19,087

2,470

$ 12,852

3,235

See accompanying Notes to Consolidated Financial Statements.

Bank of America 92

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.

The preparation of the Consolidated Financial Statements in conformity with

accounting principles generally accepted in the United States of America requires

management to make estimates and assumptions that affect reported amounts

and disclosures. Actual results could materially differ from those estimates and

assumptions. Certain prior-period amounts have been reclassified to conform to

current-period presentation.

In the Consolidated Statement of Income, amounts related to certain asset and

liability management (ALM) activities have been reclassified from other income to

market making and similar activities, which was previously referred to as trading

account income. All prior periods presented reflect this change, which has no

impact on the Corporation's total noninterest income or net income, and has no

impact on business segment results. The amounts included in market making and

similar activities related to this change in presentation are increases of $930

million, $1.1 billion and $332 million for 2019, 2018 and 2017, respectively.

New Accounting Standards

Lease Accounting

On January 1, 2019, the Corporation adopted the new accounting standards that

require lessees to recognize operating leases on the balance sheet as right-of-use

assets and lease liabilities based on the value of the discounted future lease

payments. Lessor accounting is largely unchanged. Expanded disclosures about

the nature and terms of lease agreements are required prospectively and are

included in Note 9 – Leases. The Corporation elected to retain prior determinations

of whether an existing contract contains a lease and how the lease should be

classified. The Corporation elected to recognize leases existing on January 1,

2019 through a cumulative-effect adjustment which increased retained earnings by

$165 million, with no adjustment to prior periods presented. Upon adoption, the

Corporation also recognized right-of-use assets and lease liabilities of $9.7 billion.

93 Bank of America

Adoption of the standards did not have a significant effect on the Corporation’s

regulatory capital measures.

Accounting for Financial Instruments -- Credit Losses

On January 1, 2020, the Corporation adopted the new accounting standard that

requires the measurement of the allowance for credit losses to be based on

management’s best estimate of lifetime expected credit losses inherent in the

Corporation’s relevant financial assets. The Corporation’s lifetime expected credit

losses are determined using macroeconomic forecast assumptions and

management judgments applicable to and through the expected life of the loan

portfolios, and are net of expected recoveries on loans that were previously

charged off. The standard also expands credit quality disclosures beginning in the

first quarter of 2020. While the standard changes the measurement of the

allowance for credit losses, it does not change the Corporation’s credit risk of its

lending portfolios or the ultimate losses in those portfolios. Upon adoption of the

standard on January 1, 2020, the Corporation recorded a $3.3 billion, or 32

percent, increase to the allowance for credit losses. After adjusting for deferred

taxes and other adoption effects, a $2.4 billion decrease was recorded in retained

earnings through a cumulative-effect adjustment.

Significant Accounting Principles

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, cash items in the process of

collection, cash segregated under federal and other brokerage regulations, and

amounts due from correspondent banks, the Federal Reserve Bank and certain

non-U.S. central banks. Certain cash balances are restricted as to withdrawal or

usage by legally binding contractual agreements or regulatory requirements.

Securities Financing Agreements

Securities borrowed or purchased under agreements to resell and securities

loaned or sold under agreements to repurchase (securities financing agreements)

are treated as collateralized financing transactions except in instances where the

transaction is required to be accounted for as individual sale and purchase

transactions. Generally, these agreements are recorded at acquisition or sale price

plus accrued interest, except for certain securities financing agreements that the

Corporation accounts for under the fair value option. Changes in the fair value of

securities financing agreements that are accounted for under the fair value option

are recorded in market making and similar activities in the Consolidated Statement

of Income.

The Corporation’s policy is to monitor the market value of the principal amount

loaned under resale agreements and obtain collateral from or return collateral

pledged to counterparties when appropriate. Securities financing agreements do

not create material credit risk due to these collateral provisions; therefore, an

allowance for loan losses is not necessary.

In transactions where the Corporation acts as the lender in a securities lending

agreement and receives securities that can be pledged or sold as collateral, it

recognizes an asset on the Consolidated Balance Sheet at fair value, representing

the securities received, and a liability, representing the obligation to return those

securities.

Collateral

The Corporation accepts securities and loans as collateral that it is permitted by

contract or practice to sell or repledge. At December 31, 2019 and 2018, the fair

value of this collateral was $693.0 billion and $599.0 billion, of which $593.8 billion

and $508.6

billion were sold or repledged. The primary source of this collateral is securities

borrowed or purchased under agreements to resell.

The Corporation also pledges company-owned securities and loans as

collateral in transactions that include repurchase agreements, securities loaned,

public and trust deposits, U.S. Treasury tax and loan notes, and short-term

borrowings. This collateral, which in some cases can be sold or repledged by the

counterparties to the transactions, is parenthetically disclosed on the Consolidated

Balance Sheet.

In certain cases, the Corporation has transferred assets to consolidated VIEs

where those restricted assets serve as collateral for the interests issued by the

VIEs. These assets are included on the Consolidated Balance Sheet in Assets of

Consolidated VIEs.

In addition, the Corporation obtains collateral in connection with its derivative

contracts. Required collateral levels vary depending on the credit risk rating and

the type of counterparty. Generally, the Corporation accepts collateral in the form

of cash, U.S. Treasury securities and other marketable securities. Based on

provisions contained in master netting agreements, the Corporation nets cash

collateral received against derivative assets. The Corporation also pledges

collateral on its own derivative positions which can be applied against derivative

liabilities.

Trading Instruments

Financial instruments utilized in trading activities are carried at fair value. Fair

value is generally based on quoted market prices for the same or similar assets

and liabilities. If these market prices are not available, fair values are estimated

based on dealer quotes, pricing models, discounted cash flow methodologies, or

similar techniques where the determination of fair value may require significant

management judgment or estimation. Realized gains and losses are recorded on a

trade-date basis. Realized and unrealized gains and losses are recognized in

market making and similar activities.

Derivatives and Hedging Activities

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 are both designated in qualifying accounting hedge relationships

and derivatives used to hedge market risks in relationships that are not designated

in qualifying accounting hedge relationships (referred to as other risk management

activities). The Corporation manages interest rate and foreign currency exchange

rate sensitivity predominantly through the use of derivatives. Derivatives utilized by

the Corporation include swaps, futures and forward settlement contracts, and

option contracts.

All derivatives are recorded on the Consolidated Balance Sheet at fair value,

taking into consideration the effects of legally enforceable master netting

agreements that allow the Corporation to settle positive and negative positions and

offset cash collateral held with the same counterparty on a net basis. For

exchange-traded contracts, fair value is based on quoted market prices in active or

inactive markets or is derived from observable market- based pricing parameters,

similar to those applied to over-the-counter (OTC) derivatives. For non-exchange

traded contracts, fair value is based on dealer quotes, pricing models, discounted

cash flow methodologies or similar techniques for which the determination of fair

value may require significant management judgment or estimation.

Valuations of derivative assets and liabilities reflect the value of the instrument

including counterparty credit risk. These values also take into account the

Corporation’s own credit standing.

Trading Derivatives and Other Risk Management Activities

Derivatives held for trading purposes are included in derivative assets or derivative

liabilities on the Consolidated Balance Sheet with changes in fair value included in

market making and similar activities.

Derivatives used for other risk management activities are included in derivative

assets or derivative liabilities. Derivatives used in other risk management activities

have not been designated in qualifying accounting hedge relationships because

they did not qualify or the risk that is being mitigated pertains to an item that is

reported at fair value through earnings so that the effect of measuring the

derivative instrument and the asset or liability to which the risk exposure pertains

will offset in the Consolidated Statement of Income to the extent effective. The

changes in the fair value of derivatives that serve to mitigate certain risks

associated with mortgage servicing rights (MSRs), interest rate lock commitments

(IRLCs) and first-lien mortgage loans held-for-sale (LHFS) that are originated by

the Corporation are recorded in other income. Changes in the fair value of

derivatives that serve to mitigate interest rate risk and foreign currency risk are

included in market making and similar activities. Credit derivatives are also used

by the Corporation to mitigate the risk associated with various credit exposures.

The changes in the fair value of these derivatives are included in market making

and similar activities and other income.

Derivatives Used For Hedge Accounting Purposes (Accounting

Hedges)

For accounting hedges, the Corporation formally documents at inception all

relationships between hedging instruments and hedged items, as well as the risk

management objectives and strategies for undertaking various accounting hedges.

Additionally, the Corporation primarily uses regression analysis at the inception of

a hedge and for each reporting period thereafter to assess whether the derivative

used in an accounting hedge transaction is expected to be and has been highly

effective in offsetting changes in the fair value or cash flows of a hedged item or

forecasted transaction. The Corporation discontinues hedge accounting when it is

determined that a derivative is not expected to be or has ceased to be highly

effective as a hedge, and then reflects changes in fair value of the derivative in

earnings after termination of the hedge relationship.

Fair value hedges are used to protect against changes in the fair value of the

Corporation’s assets and liabilities that are attributable to interest rate or foreign

exchange volatility. Changes in the fair value of derivatives designated as fair

value hedges are recorded in earnings, together and in the same income

statement line item with changes in the fair value of the related hedged item. If a

derivative instrument in a fair value hedge is terminated or the hedge designation

removed, the previous adjustments to the carrying value of the hedged asset or

liability are subsequently accounted for in the same manner as other components

of the carrying value of that asset or liability. For interest-earning assets and

interest-bearing liabilities, such adjustments are amortized to earnings over the

remaining life of the respective asset or liability.

Cash flow hedges are used primarily to minimize the variability in cash flows of

assets and liabilities or forecasted transactions caused by interest rate or foreign

exchange rate fluctuations. The Corporation also uses cash flow hedges to hedge

the price risk associated with deferred compensation. Changes in the fair value of

derivatives used in cash flow hedges are recorded in accumulated other

comprehensive income (OCI) and are reclassified into the line item in the income

statement in which the hedged item is recorded in the same period the hedged

item affects earnings. Components of a derivative that are excluded in

Bank of America 94

assessing hedge effectiveness are recorded in the same income statement line

item as the hedged item.

Net investment hedges are used to manage the foreign exchange rate

sensitivity arising from a net investment in a foreign operation. Changes in the spot

prices of derivatives that are designated as net investment hedges of foreign

operations are recorded as a component of accumulated OCI. The remaining

components of these derivatives are excluded in assessing hedge effectiveness

and are recorded in market making and similar activities.

Securities

Debt securities are reported on the Consolidated Balance Sheet at their trade

date. Their classification is dependent on the purpose for which the securities were

acquired. Debt securities purchased for use in the Corporation’s trading activities

are reported in trading account assets at fair value with unrealized gains and

losses included in market making and similar activities. Substantially all other debt

securities purchased are used in the Corporation’s ALM activities and are reported

on the Consolidated Balance Sheet as either debt securities carried at fair value or

as held-to-maturity (HTM) debt securities. Debt securities carried at fair value are

either available-for-sale (AFS) securities with unrealized gains and losses net-of

-

tax included in accumulated OCI or carried at fair value with unrealized gains and

losses reported in other income. HTM debt securities, which are certain debt

securities that management has the intent and ability to hold to maturity, are

reported at amortized cost.

The Corporation regularly evaluates each AFS and HTM debt security where

the value has declined below amortized cost to assess whether the decline in fair

value is other than temporary. In determining whether an impairment is other than

temporary, the Corporation considers the severity and duration of the decline in fair

value, the length of time expected for recovery, the financial condition of the issuer,

and other qualitative factors, as well as whether the Corporation either plans to sell

the security or it is more likely than not that it will be required to sell the security

before recovery of the amortized cost. For AFS debt securities the Corporation

intends to hold, an analysis is performed to determine how much of the decline in

fair value is related to the issuer’s credit and how much is related to market factors

(e.g., interest rates). If any of the decline in fair value is due to credit, an other

-

than-temporary i

mpairment (OTTI) loss is recognized in the Consolidated

Statement of Income for that amount. If any of the decline in fair value is related to

market factors, that amount is recognized in accumulated OCI. In certain

instances, the credit loss may exceed the total decline in fair value, in which case,

the difference is due to market factors and is recognized as an unrealized gain in

accumulated OCI. If the Corporation intends to sell or believes it is more likely than

not that it will be required to sell the debt security, it is written down to fair value as

an OTTI loss.

Interest on debt securities, including amortization of premiums and accretion of

discounts, is included in interest income. Premiums and discounts are amortized or

accreted to interest income at a constant effective yield over the contractual lives

of the securities. Realized gains and losses from the sales of debt securities are

determined using the specific identification method.

Equity securities with readily determinable fair values that are not held for

trading purposes are carried at fair value with unrealized gains and losses included

in other income. Equity securities that do not have readily determinable fair values

are recorded at cost less impairment, if any, plus or minus qualifying observable

price changes. These securities are reported in other assets.

95 Bank of America

Loans and Leases

Loans, with the exception of loans accounted for under the fair value option, are

measured at historical cost and reported at their outstanding principal balances net

of any unearned income, charge-offs, unamortized deferred fees and costs on

originated loans, and for purchased loans, net of any unamortized premiums or

discounts. Loan origination fees and certain direct origination costs are deferred

and recognized as adjustments to interest income over the lives of the related

loans. Unearned income, discounts and premiums are amortized to interest

income using a level yield methodology. The Corporation elects to account for

certain consumer and commercial loans under the fair value option with interest

reported in interest income and changes in fair value reported in market making

and similar activities or other income.

Under applicable accounting guidance, for reporting purposes, the loan and

lease portfolio is categorized by portfolio segment and, within each portfolio

segment, by class of financing receivables. A portfolio segment is defined as the

level at which an entity develops and documents a systematic methodology to

determine the allowance for credit losses, and a class of financing receivables is

defined as the level of disaggregation of portfolio segments based on the initial

measurement attribute, risk characteristics and methods for assessing risk. The

Corporation’s three portfolio segments are Consumer Real Estate, Credit Card and

Other Consumer, and Commercial. The classes within the Consumer Real Estate

portfolio segment are residential mortgage and home equity. The classes within the

Credit Card and Other Consumer portfolio segment are credit card, direct/indirect

consumer and other consumer. The classes within the Commercial portfolio

segment are U.S. commercial, non-U.S. commercial, commercial real estate,

commercial lease financing and U.S. small business commercial.

Leases

The Corporation provides equipment financing to its customers through a variety of

lessor arrangements. Direct financing leases and sales-type leases are carried at

the aggregate of lease payments receivable plus the estimated residual value of

the leased property less unearned income, which is accreted to interest income

over the lease terms using methods that approximate the interest method.

Operating lease income is recognized on a straight-line basis. The Corporation's

lease arrangements generally do not contain non-lease components.

Allowance for Credit Losses

The allowance for credit losses, which includes the allowance for loan and lease

losses and the reserve for unfunded lending commitments, represents

management’s estimate of probable incurred credit losses in the Corporation’s

loan and lease portfolio excluding loans and unfunded lending commitments

accounted for under the fair value option. The allowance for credit losses includes

both quantitative and qualitative components. The qualitative component has a

higher degree of management subjectivity, and includes factors such as

concentrations, economic conditions and other considerations. The allowance for

loan and lease losses represents the estimated probable credit losses on funded

consumer and commercial loans and leases while the reserve for unfunded lending

commitments, including standby letters of credit (SBLCs) and binding unfunded

loan commitments, represents estimated probable credit losses on these unfunded

credit instruments based on utilization assumptions. Lending-related credit

exposures deemed to be uncollectible, excluding loans carried at fair value, are

charged off against these accounts.

The Corporation performs periodic and systematic detailed reviews of its

lending portfolios to identify credit risks and to assess the overall collectability of

those portfolios. The allowance on certain homogeneous consumer loan portfolios,

which generally consist of consumer real estate loans within the Consumer Real

Estate portfolio segment and credit card loans within the Credit Card and Other

Consumer portfolio segment, is based on aggregated portfolio segment

evaluations generally by product type. Loss forecast models are utilized for these

portfolios which consider a variety of factors including, but not limited to, historical

loss experience, estimated defaults or foreclosures based on portfolio trends,

delinquencies, bankruptcies, economic conditions, credit scores and the amount of

loss in the event of default.

For consumer loans secured by residential real estate, using statistical

modeling methodologies, the Corporation estimates the number of loans that will

default based on the individual loan attributes aggregated into pools of

homogeneous loans with similar attributes. The attributes that are most significant

to the probability of default and are used to estimate defaults include refreshed

loan-to-value (LTV) or, in the case of a subordinated lien, refreshed combined LTV

(CLTV), borrower credit score, months since origination and geography, all of

which are further broken down by present collection status (whether the loan is

current, delinquent, in default or in bankruptcy). The severity or loss given default

is estimated based on the refreshed LTV for first-lien mortgages or CLTV for

subordinated liens. The estimates are based on the Corporation’s historical

experience with the loan portfolio, adjusted to reflect an assessment of

environmental factors not yet reflected in the historical data underlying the loss

estimates, such as changes in real estate values, local and national economies,

underwriting standards and the regulatory environment. The probability of default

models also incorporate recent experience with modification programs including

re-defaults subsequent to modification, a loan’s default history prior to modification

and the change in borrower payments post-modification. On home equity loans

where the Corporation holds only a second-lien position and foreclosure is not the

best alternative, the loss severity is estimated at 100 percent.

The allowance on certain commercial loans (except business card and certain

small business loans) is calculated using loss rates delineated by risk rating and

product type. Factors considered when assessing loss rates include the value of

the underlying collateral, if applicable, the industry of the obligor, and the obligor’s

liquidity and other financial indicators along with certain qualitative factors. These

statistical models are updated regularly for changes in economic and business

conditions. Included in the analysis of consumer and commercial loan portfolios

are qualitative estimates which are maintained to cover uncertainties that affect the

Corporation’s estimate of probable losses including domestic and global economic

uncertainty and large single-name defaults.

For individually impaired loans, which include nonperforming commercial loans

as well as consumer and commercial loans and leases modified in a troubled debt

restructuring (TDR), management measures impairment primarily based on the

present value of payments expected to be received, discounted at the loans’

original effective contractual interest rates. Credit card loans are discounted at the

portfolio average contractual annual percentage rate, excluding promotionally

priced loans, in effect prior to restructuring. Impaired loans and TDRs may also be

measured based on observable market prices, or for loans that are solely

dependent on the collateral for repayment, the estimated fair value of the collateral

less costs to sell. If the recorded investment in impaired loans exceeds this

amount, a specific allowance is established as part of the allowance for loan and

lease losses unless these are secured consumer loans that are solely dependent

on collateral for repayment, in which case the amount that exceeds the fair value of

the collateral is charged off.

Generally, the Corporation initially estimates the fair value of the collateral

securing these consumer real estate-secured loans using an automated valuation

model (AVM). An AVM is a tool that estimates the value of a property by reference

to market data including sales of comparable properties and price trends specific to

the Metropolitan Statistical Area in which the property being valued is located. In

the event that an AVM value is not available, the Corporation utilizes publicized

indices or if these methods provide less reliable valuations, the Corporation uses

appraisals or broker price opinions to estimate the fair value of the collateral. While

there is inherent imprecision in these valuations, the Corporation believes that they

are representative of the portfolio in the aggregate.

In addition to the allowance for loan and lease losses, the Corporation also

estimates probable losses related to unfunded lending commitments, such as

letters of credit, financial guarantees and binding unfunded loan commitments.

Unfunded lending commitments are subject to individual reviews and are analyzed

and segregated by risk according to the Corporation’s internal risk rating scale.

These risk classifications, in conjunction with an analysis of historical loss

experience, utilization assumptions, current economic conditions, performance

trends within the portfolio and any other pertinent information, result in the

estimation of the reserve for unfunded lending commitments.

The allowance for credit losses related to the loan and lease portfolio is

reported separately on the Consolidated Balance Sheet whereas the reserve for

unfunded lending commitments is reported on the Consolidated Balance Sheet in

accrued expenses and other liabilities. The provision for credit losses related to the

loan and lease portfolio and unfunded lending commitments is reported in the

Consolidated Statement of Income.

Nonperforming Loans and Leases, Charge-offs and Delinquencies

Nonperforming loans and leases generally include loans and leases that have been

placed on nonaccrual status. Loans accounted for under the fair value option and

LHFS are not reported as nonperforming.

In accordance with the Corporation’s policies, consumer real estate-secured

loans, including residential mortgages and home equity loans, are generally placed

on nonaccrual status and classified as nonperforming at 90 days past due unless

repayment of the loan is insured by the Federal Housing Administration (FHA) or

through individually insured long-term standby agreements with Fannie Mae

(FNMA) or Freddie Mac (FHLMC) (the fully-insured portfolio). Residential

mortgage loans in the fully-insured portfolio are not placed on nonaccrual status

and, therefore, are not reported as nonperforming. Junior-lien home equity loans

are placed on nonaccrual status and classified as nonperforming when the

underlying first-lien mortgage loan becomes 90 days past due even if the junior-lien

loan is current. The outstanding balance of real estate-secured loans that is in

excess of the estimated property value less costs to sell is charged off no later

than the end of the month in which the loan becomes 180 days past due unless the

loan is fully insured, or for loans in bankruptcy, within 60 days of receipt of

notification of filing, with the remaining balance classified as nonperforming.

Consumer loans secured by personal property, credit card loans and other

unsecured consumer loans are not placed on nonaccrual status prior to charge-off

and, therefore, are not reported as nonperforming loans, except for certain secured

consumer loans, including those that have been modified in a TDR. Personal

Bank of America 96

property-secured loans (including auto loans) are charged off to collateral value no

later than the end of the month in which the account becomes 120 days past due,

or upon repossession of an auto or, for loans in bankruptcy, within 60 days of

receipt of notification of filing. Credit card and other unsecured customer loans 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.

Commercial loans and leases, excluding business card loans, that are past due

90 days or more as to principal or interest, or where reasonable doubt exists as to

timely collection, including loans that are individually identified as being impaired,

are generally placed on nonaccrual status and classified as nonperforming unless

well-secured and in the process of collection.

Business card loans are charged off in the same manner as consumer credit

card loans. Other commercial loans and leases are generally charged off when all

or a portion of the principal amount is determined to be uncollectible.

The entire balance of a consumer loan or commercial loan or lease is

contractually delinquent if the minimum payment is not received by the specified

due date on the customer’s billing statement. Interest and fees continue to accrue

on past due loans and leases until the date the loan is placed on nonaccrual

status, if applicable. Accrued interest receivable is reversed when loans and leases

are placed on nonaccrual status. Interest collections on nonaccruing loans and

leases for which the ultimate collectability of principal is uncertain are applied as

principal reductions; otherwise, such collections are credited to income when

received. Loans and leases may be restored to accrual status when all principal

and interest is current and full repayment of the remaining contractual principal and

interest is expected.

Troubled Debt Restructurings

Consumer and commercial loans and leases whose contractual terms have been

restructured in a manner that grants a concession to a borrower experiencing

financial difficulties are classified as TDRs. Concessions could include a reduction

in the interest rate to a rate that is below market on the loan, payment extensions,

forgiveness of principal, forbearance or other actions designed to maximize

collections. Loans that are carried at fair value and LHFS are not classified as

TDRs.

Loans and leases whose contractual terms have been modified in a TDR and

are current at the time of restructuring may remain on accrual status if there is

demonstrated performance prior to the restructuring and payment in full under the

restructured terms is expected. Otherwise, the loans are placed on nonaccrual

status and reported as nonperforming, except for fully-insured consumer real

estate loans, until there is sustained repayment performance for a reasonable

period, generally six months. If accruing TDRs cease to perform in accordance

with their modified contractual terms, they are placed on nonaccrual status and

reported as nonperforming TDRs.

Secured consumer loans that have been discharged in Chapter 7 bankruptcy

and have not been reaffirmed by the borrower are classified as TDRs at the time of

discharge. Such loans are placed on nonaccrual status and written down to the

estimated collateral value less costs to sell no later than at the time of discharge. If

these loans are contractually current, interest collections are generally recorded in

interest income on a cash basis. Consumer real estate-secured loans for which a

binding offer to restructure has been extended are also classified as TDRs. Credit

card and other unsecured consumer loans that have been renegotiated in a TDR

generally remain on accrual status until the loan is either

97 Bank of America

paid in full or charged off, which occurs no later than the end of the month in which

the loan becomes 180 days past due or, for loans that have been placed on a fixed

payment plan, 120 days past due.

A loan that had previously been modified in a TDR and is subsequently

refinanced under current underwriting standards at a market rate with no

concessionary terms is accounted for as a new loan and is no longer reported as a

TDR.

Loans Held-for-sale

Loans that the Corporation intends to sell in the foreseeable future, including

residential mortgages, loan syndications, and to a lesser degree, commercial real

estate, consumer finance and other loans, are reported as LHFS and are carried at

the lower of aggregate cost or fair value. The Corporation accounts for certain

LHFS, including residential mortgage LHFS, under the fair value option with

interest recorded in interest income and changes in fair value recorded in other

income. Loan origination costs related to LHFS that the Corporation accounts for

under the fair value option are recognized in noninterest expense when incurred.

Loan origination costs for LHFS carried at the lower of cost or fair value are

capitalized as part of the carrying value of the loans and recognized as a reduction

of noninterest income upon the sale of such loans. LHFS that are on nonaccrual

status and are reported as nonperforming, as defined in the policy herein, are

reported separately from nonperforming loans and leases.

Premises and Equipment

Premises and equipment are carried at cost less accumulated depreciation and

amortization. Depreciation and amortization are recognized using the straight-line

method over the estimated useful lives of the assets. Estimated lives range up to

40 years for buildings, up to12 years for furniture and equipment, and the shorter

of lease term or estimated useful life for leasehold improvements.

Lessee Arrangements

Substantially all of the Corporation’s lessee arrangements are operating leases.

Under these arrangements, the Corporation records right-of-use assets and lease

liabilities at lease commencement. Right-of-use assets are reported in other assets

on the Consolidated Balance Sheet, and the related lease liabilities are reported in

accrued expenses and other liabilities. All leases are recorded on the

Consolidated Balance Sheet except leases with an initial term less than 12 months

for which the Corporation made the short-term lease election. Lease expense is

recognized on a straight-line basis over the lease term and is recorded in

occupancy and equipment expense in the Consolidated Statement of Income.

The Corporation made an accounting policy election not to separate lease and

non-lease components of a contract that is or contains a lease for its real estate

and equipment leases. As such, lease payments represent payments on both

lease and non-lease components. At lease commencement, lease liabilities are

recognized based on the present value of the remaining lease payments and

discounted using the Corporation’s incremental borrowing rate. Right-of-use assets

initially equal the lease liability, adjusted for any lease payments made prior to

lease commencement and for any lease incentives.

Goodwill and Intangible Assets

Goodwill is the purchase premium after adjusting for the fair value of net assets

acquired. Goodwill is not amortized but is reviewed for potential impairment on an

annual basis, or when events or circumstances indicate a potential impairment, at

the reporting

unit level. A reporting unit is a business segment or one level below a business

segment.

The Corporation assesses the fair value of each reporting unit against its

carrying value, including goodwill, as measured by allocated equity. For purposes

of goodwill impairment testing, the Corporation utilizes allocated equity as a proxy

for the carrying value of its reporting units. Allocated equity in the reporting units is

comprised of allocated capital plus capital for the portion of goodwill and

intangibles specifically assigned to the reporting unit.

In performing its goodwill impairment testing, the Corporation first assesses

qualitative factors to determine whether it is more likely than not that the fair value

of a reporting unit is less than its carrying value. Qualitative factors include, among

other things, macroeconomic conditions, industry and market considerations,

financial performance of the respective reporting unit and other relevant entity- and

reporting-unit specific considerations.

If the Corporation concludes it is more likely than not that the fair value of a

reporting unit is less than its carrying value, a quantitative assessment is

performed. If the fair value of the reporting unit exceeds its carrying value, goodwill

of the reporting unit is considered not impaired; however, if the carrying value of

the reporting unit exceeds its fair value, an additional step is performed to measure

potential impairment.

This step involves calculating an implied fair value of goodwill which is the

excess of the fair value of the reporting unit, as determined in the first step, over

the aggregate fair values of the assets, liabilities and identifiable intangibles as if

the reporting unit was being acquired in a business combination. If the implied fair

value of goodwill exceeds the goodwill assigned to the reporting unit, there is no

impairment. If the goodwill assigned to a reporting unit exceeds the implied fair

value of goodwill, an impairment charge is recorded for the excess. An impairment

loss recognized cannot exceed the amount of goodwill assigned to a reporting unit.

An impairment loss establishes a new basis in the goodwill, and subsequent

reversals of goodwill impairment losses are not permitted under applicable

accounting guidance.

For intangible assets subject to amortization, an impairment loss is recognized

if the carrying value of the intangible asset is not recoverable and exceeds fair

value. The carrying value of the intangible asset is considered not recoverable if it

exceeds the sum of the undiscounted cash flows expected to result from the use of

the asset. Intangible assets deemed to have indefinite useful lives are not subject

to amortization. An impairment loss is recognized if the carrying value of the

intangible asset with an indefinite life exceeds its fair value.

Variable Interest Entities

A VIE is an entity that lacks equity investors or whose equity investors do not have

a controlling financial interest in the entity through their equity investments. The

Corporation consolidates a VIE if it has both the power to direct the activities of the

VIE that most significantly impact the VIE’s economic performance and an

obligation to absorb losses or the right to receive benefits that could potentially be

significant to the VIE. On a quarterly basis, the Corporation reassesses its

involvement with the VIE and evaluates the impact of changes in governing

documents and its financial interests in the VIE. The consolidation status of the

VIEs with which the Corporation is involved may change as a result of such

reassessments.

The Corporation primarily uses VIEs for its securitization activities, in which the

Corporation transfers whole loans or debt securities into a trust or other vehicle.

When the Corporation is the servicer of whole loans held in a securitization trust,

including non-agency residential mortgages, home equity loans, credit cards, and

other loans, the Corporation has the power to direct the most

significant activities of the trust. The Corporation generally does not have the

power to direct the most significant activities of a residential mortgage agency trust

except in certain circumstances in which the Corporation holds substantially all of

the issued securities and has the unilateral right to liquidate the trust. The power to

direct the most significant activities of a commercial mortgage securitization trust is

typically held by the special servicer or by the party holding specific subordinate

securities which embody certain controlling rights. The Corporation consolidates a

whole-loan securitization trust if it has the power to direct the most significant

activities and also holds securities issued by the trust or has other contractual

arrangements, other than standard representations and warranties, that could

potentially be significant to the trust.

The Corporation may also transfer trading account securities and AFS

securities into municipal bond or resecuritization trusts. The Corporation

consolidates a municipal bond or resecuritization trust if it has control over the

ongoing activities of the trust such as the remarketing of the trust’s liabilities or, if

there are no ongoing activities, sole discretion over the design of the trust,

including the identification of securities to be transferred in and the structure of

securities to be issued, and also retains securities or has liquidity or other

commitments that could potentially be significant to the trust. The Corporation does

not consolidate a municipal bond or resecuritization trust if one or a limited number

of third-party investors share responsibility for the design of the trust or have

control over the significant activities of the trust through liquidation or other

substantive rights.

Other VIEs used by the Corporation include collateralized debt obligations

(CDOs), investment vehicles created on behalf of customers and other investment

vehicles. The Corporation does not routinely serve as collateral manager for CDOs

and, therefore, does not typically have the power to direct the activities that most

significantly impact the economic performance of a CDO. However, following an

event of default, if the Corporation is a majority holder of senior securities issued

by a CDO and acquires the power to manage its assets, the Corporation

consolidates the CDO.

The Corporation consolidates a customer or other investment vehicle if it has

control over the initial design of the vehicle or manages the assets in the vehicle

and also absorbs potentially significant gains or losses through an investment in

the vehicle, derivative contracts or other arrangements. The Corporation does not

consolidate an investment vehicle if a single investor controlled the initial design of

the vehicle or manages the assets in the vehicles or if the Corporation does not

have a variable interest that could potentially be significant to the vehicle.

Retained interests in securitized assets are initially recorded at fair value. In

addition, the Corporation may invest in debt securities issued by unconsolidated

VIEs. Fair values of these debt securities, which are classified as trading account

assets, debt securities carried at fair value or HTM securities, are based primarily

on quoted market prices in active or inactive markets. Generally, quoted market

prices for retained residual interests are not available; therefore, the Corporation

estimates fair values based on the present value of the associated expected future

cash flows.

Fair Value

The Corporation measures the fair values of its assets and liabilities, where

applicable, in accordance with accounting guidance that requires an entity to base

fair value on exit price. Under this guidance, an entity is required to maximize the

use of observable inputs and minimize the use of unobservable inputs in

measuring fair value. Under applicable accounting standards, fair value

measurements are categorized into one of three levels

Bank of America 98

based on the inputs to the valuation technique with the highest priority given to

unadjusted quoted prices in active markets and the lowest priority given to

unobservable inputs. The Corporation categorizes its fair value measurements of

financial instruments based on this three-level hierarchy.

Level 1

Unadjusted quoted prices in active markets for identical assets or

liabilities. Level 1 assets and liabilities include debt and equity securities

and derivative contracts that are traded in an active exchange market, as

well as certain U.S. Treasury securities that are highly liquid and are

actively traded in OTC markets.

Level 2

Observable inputs other than Level 1 prices, such as quoted prices for

similar assets or liabilities, quoted prices in markets that are not active, or

other inputs that are observable or can be corroborated by observable

market data for substantially the full term of the assets or liabilities. Level

2 assets and liabilities include debt securities with quoted prices that are

traded less frequently than exchange-traded instruments and derivative

contracts where fair value is determined using a pricing model with inputs

that are observable in the market or can be derived principally from or

corroborated by observable market data. This category generally includes

U.S. government and agency mortgage-backed (MBS) and asset-backed

securities (ABS), corporate debt securities, derivative contracts, certain

loans and LHFS.

Level 3

Unobservable inputs that are supported by little or no market activity and

that are significant to the overall fair value of the assets or liabilities. Level

3 assets and liabilities include financial instruments for which the

determination of fair value requires significant management judgment or

estimation. The fair value for such assets and liabilities is generally

determined using pricing models, discounted cash flow methodologies or

similar techniques that incorporate the assumptions a market participant

would use in pricing the asset or liability. This category generally includes

retained residual interests in securitizations, consumer MSRs, certain

ABS, highly structured, complex or long-dated derivative contracts, certain

loans and LHFS, IRLCs and certain CDOs where independent pricing

information cannot be obtained for a significant portion of the underlying

assets.

Income Taxes

There are two components of income tax expense: current and deferred. Current

income tax expense reflects taxes to be paid or refunded for the current period.

Deferred income tax expense results from changes in deferred tax assets and

liabilities between periods. These gross deferred tax assets and liabilities

represent decreases or increases in taxes expected to be paid in the future

because of future reversals of temporary differences in the bases of assets and

liabilities as measured by tax laws and their bases as reported in the financial

statements. Deferred tax assets are also recognized for tax attributes such as net

operating loss carryforwards and tax credit carryforwards. Valuation allowances

are recorded to reduce deferred tax assets to the amounts management concludes

are more likely than not to be realized.

Income tax benefits are recognized and measured based upon a two-step

model: first, a tax position must be more likely than not to be sustained based

solely on its technical merits in order to be recognized, and second, the benefit is

measured as the largest dollar amount of that position that is more likely than not

to be sustained upon settlement. The difference between the benefit

99 Bank of America

recognized and the tax benefit claimed on a tax return is referred to as an

unrecognized tax benefit. The Corporation records income tax-related interest and

penalties, if applicable, within income tax expense.

Revenue Recognition

The following summarizes the Corporation’s revenue recognition accounting

policies for certain noninterest income activities.

Card Income

Card income includes annual, late and over-limit fees as well as fees earned from

interchange, cash advances and other miscellaneous transactions and is

presented net of direct costs. Interchange fees are recognized upon settlement of

the credit and debit card payment transactions and are generally determined on a

percentage basis for credit cards and fixed rates for debit cards based on the

corresponding payment network’s rates. Substantially all card fees are recognized

at the transaction date, except for certain time-based fees such as annual fees,

which are recognized over 12 months. Fees charged to cardholders that are

estimated to be uncollectible are reserved in the allowance for loan and lease

losses. Included in direct cost are rewards and credit card partner payments.

Rewards paid to cardholders are related to points earned by the cardholder that

can be redeemed for a broad range of rewards including cash, travel and gift

cards. The points to be redeemed are estimated based on past redemption

behavior, card product type, account transaction activity and other historical card

performance. The liability is reduced as the points are redeemed. The Corporation

also makes payments to credit card partners. The payments are based on

revenue-sharing agreements that are generally driven by cardholder transactions

and partner sales volumes. As part of the revenue-sharing agreements, the credit

card partner provides the Corporation exclusive rights to market to the credit card

partner’s members or customers on behalf of the Corporation.

Service Charges

Service charges include deposit and lending-related fees. Deposit-related fees

consist of fees earned on consumer and commercial

deposit activities and are generally recognized when the transactions occur or as

the service is performed. Consumer fees are earned on consumer deposit

accounts for account maintenance and various transaction-based services, such

as ATM transactions, wire transfer activities, check and money order processing

and insufficient funds/overdraft transactions. Commercial deposit-related fees are

from the Corporation’s Global Transaction Services business and consist of

commercial deposit and treasury management services, including account

maintenance and other services, such as payroll, sweep account and other cash

management services. Lending-related fees generally represent transactional fees

earned from certain loan commitments, financial guarantees and SBLCs.

Investment and Brokerage Services

Investment and brokerage services consist of asset management and brokerage

fees. Asset management fees are earned from the management of client assets

under advisory agreements or the full discretion of the Corporation’s financial

advisors (collectively referred to as assets under management (AUM)). Asset

management fees are earned as a percentage of the client’s AUM and generally

range from 50 basis points (bps) to 150 bps of the AUM. In cases where a third

party is used to obtain a client’s investment allocation, the fee remitted to the third

party is recorded net and is not reflected in the transaction price, as the

Corporation is an agent for those services.

Brokerage fees include income earned from transaction-based services that are

performed as part of investment management services and are based on a fixed

price per unit or as a percentage of the total transaction amount. Brokerage fees

also include distribution fees and sales commissions that are primarily in the

Global Wealth & Investment Management (GWIM) segment and are earned over

time. In addition, primarily in the Global Markets segment, brokerage fees are

earned when the Corporation fills customer orders to buy or sell various financial

products or when it acknowledges, affirms, settles and clears transactions and/or

submits trade information to the appropriate clearing broker. Certain customers

pay brokerage, clearing and/or exchange fees imposed by relevant regulatory

bodies or exchanges in order to execute or clear trades. These fees are recorded

net and are not reflected in the transaction price, as the Corporation is an agent for

those services.

Investment Banking Income

Investment banking income includes underwriting income and financial advisory

services income. Underwriting consists of fees earned for the placement of a

customer’s debt or equity securities. The revenue is generally earned based on a

percentage of the fixed number of shares or principal placed. Once the number of

shares or notes is determined and the service is completed, the underwriting fees

are recognized. The Corporation incurs certain out-of-pocket expenses, such as

legal costs, in performing these services. These expenses are recovered through

the revenue the Corporation earns from the customer and are included in

operating expenses. Syndication fees represent fees earned as the agent or lead

lender responsible for structuring, arranging and administering a loan syndication.

Financial advisory services consist of fees earned for assisting clients with

transactions related to mergers and acquisitions and financial restructurings.

Revenue varies depending on the size of the transaction and scope of services

performed and is generally contingent on successful completion of the transaction.

Revenue is typically recognized once the transaction is completed and all services

have been rendered. Additionally, the Corporation may earn a fixed fee in merger

and acquisition transactions to provide a fairness opinion, with the fees recognized

when the opinion is delivered to the client.

Other Revenue Measurement and Recognition Policies

The Corporation did not disclose the value of any open performance obligations at

December 31, 2019, as its contracts with customers generally have a fixed term

that is less than one year, an open term with a cancellation period that is less than

one year, or provisions that allow the Corporation to recognize revenue at the

amount it has the right to invoice.

Earnings Per Common Share

Earnings per common share (EPS) is computed by dividing net income allocated to

common shareholders by the weighted-average common shares outstanding,

excluding unvested common shares subject to repurchase or cancellation. Net

income allocated to common shareholders is net income adjusted for preferred

stock dividends including dividends declared, accretion of discounts on preferred

stock including accelerated accretion when preferred stock is repaid early, and

cumulative dividends related to the current dividend period that have not been

declared as of period end, less income allocated to participating securities. Diluted

EPS is computed by dividing income allocated to common shareholders plus

dividends on dilutive convertible preferred stock and preferred stock that can be

tendered to exercise warrants, by the weighted-average common shares

outstanding plus amounts representing the dilutive effect of stock options

outstanding, restricted stock, restricted stock units (RSUs), outstanding warrants

and the dilution resulting from the conversion of convertible preferred stock, if

applicable.

Foreign Currency Translation

Assets, liabilities and operations of foreign branches and subsidiaries are recorded

based on the functional currency of each entity. When the functional currency of a

foreign operation is the local currency, the assets, liabilities and operations are

translated, for consolidation purposes, from the local currency to the U.S. dollar

reporting currency at period-end rates for assets and liabilities and generally at

average rates for results of operations. The resulting unrealized gains and losses

are reported as a component of accumulated OCI, net-of-tax. When the foreign

entity’s functional currency is the U.S. dollar, the resulting remeasurement gains or

losses on foreign currency-denominated assets or liabilities are included in

earnings.

Bank of America 100

NOTE 2 Net Interest Income and Noninterest Income

The table below presents the Corporation’s net interest income and noninterest income disaggregated by revenue source for2019, 2018 and 2017. For more information,

see Note 1 – Summary of Significant Accounting Principles. For a disaggregation of noninterest income by business segment andAll Other, see Note 24 – Business

Segment Information.

(Dollars in millions) 2019 2018 2017

Net interest income

Interest income

Loans and leases $ 43,086 $ 40,811 $ 36,221

Debt securities 11,806 11,724 10,471

Federal funds sold and securities borrowed or purchased under agreements to resell 4,843 3,176 2,390

Trading account assets 5,196 4,811 4,474

Other interest income 6,305 6,247 4,023

Total interest income 71,236 66,769 57,579

Interest expense

Deposits 7,188 4,495 1,931

Short-term borrowings 7,208 5,839 3,538

Trading account liabilities 1,249 1,358 1,204

Long-term debt 6,700 6,915 5,667

Total interest expense 22,345 18,607 12,340

Net interest income $ 48,891 $ 48,162 $ 45,239

Noninterest income

Fees and commissions

Card income

Interchange fees

(1)

$ 3,834 $ 3,866 $ 3,777

Other card income 1,963 1,958 1,899

Total card income 5,797 5,824 5,676

Service charges

Deposit-related fees 6,588 6,667 6,708

Lending-related fees 1,086 1,100 1,110

Total service charges 7,674 7,767 7,818

Investment and brokerage services

Asset management fees 10,241 10,189 9,310

Brokerage fees 3,661 3,971 4,526

Total investment and brokerage services 13,902 14,160 13,836

Investment banking fees

Underwriting income 2,998 2,722 2,821

Syndication fees 1,184 1,347 1,499

Financial advisory services 1,460 1,258 1,691

Total investment banking fees 5,642 5,327 6,011

Total fees and commissions 33,015 33,078 33,341

Market making and similar activities 9,034 9,008 7,102

Other income 304 772 1,444

Total noninterest income $ 42,353 $ 42,858 $ 41,887

(1)

Gross interchange fees were $10.0 billion, $9.5 billion and $8.8 billion for 2019, 2018 and 2017, respectively, and are presented net of $6.2 billion, $5.6 billion and $5.1 billion of expenses for rewards and partner payments for the same

periods.

101 Bank of America

activities, see Note 1 – Summary of Significant Accounting Principles. The

NOTE 3 Derivatives

following tables present derivative instruments included on the Consolidated

Derivative Balances

Balance Sheet in derivative assets and liabilities at December 31, 2019 and 2018.

Balances are presented on a gross basis, prior to the application of counterparty

Derivatives are entered into on behalf of customers, for trading or to support risk

and cash collateral netting. Total derivative assets and liabilities are adjusted on

management activities. Derivatives used in risk management activities include

an aggregate basis to take into consideration the effects of legally enforceable

derivatives that may or may not be designated in qualifying hedge accounting

master netting agreements and have been reduced by cash collateral received or

relationships. Derivatives that are not designated in qualifying hedge accounting

paid.

relationships are referred to as other risk management derivatives. For more

information on the Corporation’s derivatives and hedging

December 31, 2019

Gross Derivative Assets Gross Derivative Liabilities

Trading and Other Qualifying Trading and Other Qualifying

Contract/ Risk Management Accounting Risk Management Accounting

(Dollars in billions) Notional

(1)

Derivatives Hedges Total Derivatives Hedges Total

Interest rate contracts

Swaps $ 15,074.4 $ 162.0 $ 9.7 $ 171.7 $ 168.5 $ 0.4 $ 168.9

Futures and forwards 3,279.8 1.0 — 1.0 1.0 — 1.0

Written options 1,767.7 — — — 32.5 — 32.5

Purchased options 1,673.6 37.4 — 37.4 — — —

Foreign exchange contracts

Swaps 1,657.7 30.3 0.7 31.0 31.7 0.9 32.6

Spot, futures and forwards 3,792.7 35.9 0.1 36.0 38.7 0.3 39.0

Written options 274.3 — — — 3.8 — 3.8

Purchased options 261.6 4.0 — 4.0 — — —

Equity contracts

Swaps 315.0 6.5 — 6.5 8.1 — 8.1

Futures and forwards 125.1 0.3 — 0.3 1.1 — 1.1

Written options 731.1 — — — 34.6 — 34.6

Purchased options 668.6 42.4 — 42.4 — —

—

Commodity contracts

Swaps 42.0 2.1 — 2.1 4.4 — 4.4

Futures and forwards 61.3 1.7 — 1.7 0.4 — 0.4

Written options 33.2 — — — 1.4 — 1.4

Purchased options 37.9 1.4 — 1.4 — — —

Credit derivatives

(2)

Purchased credit derivatives:

Credit default swaps 321.6 2.7 — 2.7 5.6 — 5.6

Total return swaps/options 86.6 0.4 — 0.4 1.3 — 1.3

Written credit derivatives:

Credit default swaps 300.2 5.4 — 5.4 2.0 — 2.0

Total return swaps/options 86.2 0.8 — 0.8 0.4 — 0.4

Gross derivative assets/liabilities $ 334.3 $ 10.5 $ 344.8 $ 335.5 $ 1.6 $ 337.1

Less: Legally enforceable master netting agreements (270.4 ) (270.4 )

Less: Cash collateral received/paid (33.9 ) (28.5 )

Total derivative assets/liabilities $ 40.5 $ 38.2

(1)

Represents the total contract/notional amount of derivative assets and liabilities

outstanding.

(2)

The net derivative asset (liability) and notional amount of written credit derivatives for which the Corporation held purchased credit derivatives with identical underlying referenced names were$2.8 billion and $309.7 billion at December 31,

2019.

Bank of America 102

December 31, 2018

Gross Derivative Assets Gross Derivative Liabilities

Trading and Other Qualifying Trading and Other Qualifying

Contract/ Risk Management Accounting Risk Management Accounting

(Dollars in billions) Notional

(1)

Derivatives Hedges Total Derivatives Hedges Total

Interest rate contracts

Swaps $ 15,977.9 $ 141.0 $ 3.2 $ 144.2 $ 138.9 $ 2.0 $ 140.9

Futures and forwards 3,656.6 4.7 — 4.7 5.0 — 5.0

Written options 1,584.9 — — — 28.6 — 28.6

Purchased options 1,614.0 30.8 — 30.8 — — —

Foreign exchange contracts

Swaps 1,704.8 38.8 1.4 40.2 42.2 2.3 44.5

Spot, futures and forwards 4,276.0 39.8 0.4 40.2 39.3 0.3 39.6

Written options 256.7 — — — 5.0 — 5.0

Purchased options 240.4 4.6 — 4.6 — — —

Equity contracts

Swaps 253.6 7.7 — 7.7 8.4 — 8.4

Futures and forwards 100.0 2.1 — 2.1 0.3 — 0.3

Written options 597.1 — — — 27.5 — 27.5

Purchased options 549.4 36.0 — 36.0 — — —

Commodity contracts

Swaps 43.1 2.7 — 2.7 4.5 — 4.5

Futures and forwards 51.7 3.2 — 3.2 0.5 — 0.5

Written options 27.5 — — — 2.2 — 2.2

Purchased options 23.4 1.7 — 1.7 — — —

Credit derivatives

(2)

Purchased credit derivatives:

Credit default swaps 408.1 5.3 — 5.3 4.9 — 4.9

Total return swaps/options 84.5 0.4 — 0.4 1.0 — 1.0

Written credit derivatives:

Credit default swaps 371.9 4.4 — 4.4 4.3 — 4.3

Total return swaps/options 87.3 0.6 — 0.6 0.6 — 0.6

Gross derivative assets/liabilities $ 323.8 $ 5.0 $ 328.8 $ 313.2 $ 4.6 $ 317.8

Less: Legally enforceable master netting agreements (252.7 ) (252.7 )

Less: Cash collateral received/paid (32.4 ) (27.2 )

Total derivative assets/liabilities $ 43.7 $ 37.9

(1)

Represents the total contract/notional amount of derivative assets and liabilities

outstanding.

(2)

The net derivative asset (liability) and notional amount of written credit derivatives for which the Corporation held purchased credit derivatives with identical underlying referenced names were$(185) million and $342.8 billion at December 31,

2018.

Offsetting of Derivatives

Sheet at December 31, 2019 and 2018 by primary risk (e.g., interest rate risk) and

the platform, where applicable, on which these derivatives are transacted.

The Corporation enters into International Swaps and Derivatives Association, Inc.

Balances are presented on a gross basis, prior to the application of counterparty

(ISDA) master netting agreements or similar agreements with substantially all of

and cash collateral netting. Total gross derivative assets and liabilities are

the Corporation’s derivative counterparties. Where legally enforceable, these

adjusted on an aggregate basis to take into consideration the effects of legally

master netting agreements give the Corporation, in the event of default by the

enforceable master netting agreements which include reducing the balance for

counterparty, the right to liquidate securities held as collateral and to offset

counterparty netting and cash collateral received or paid.

receivables and payables with the same counterparty. For purposes of the

For more information on offsetting of securities financing agreements, seeNote

Consolidated Balance Sheet, the Corporation offsets derivative assets and

11 – Federal Funds Sold or Purchased, Securities Financing Agreements, Short-

liabilities and cash collateral held with the same counterparty where it has such a

term Borrowings and Restricted Cash.

legally enforceable master netting agreement.

The following table presents derivative instruments included in derivative

assets and liabilities on the Consolidated Balance

103 Bank of America

Offsetting of Derivatives

(1)

Derivative Derivative

Assets Derivative Liabilities Assets Derivative Liabilities

(Dollars in billions) December 31, 2019 December 31, 2018

Interest rate contracts

Over-the-counter $ 203.1 $ 196.6 $ 174.2 $ 169.4

Exchange-traded 0.1 0.1 — —

Over-the-counter cleared 6.0 5.3 4.8 4.0

Foreign exchange contracts

Over-the-counter 69.2 73.1 82.5 86.3

Over-the-counter cleared 0.5 0.5 0.9 0.9

Equity contracts

Over-the-counter 21.3 17.8 24.6 14.6

Exchange-traded 26.4 22.8 16.1 15.1

Commodity contracts

Over-the-counter 2.8 4.2 3.5 4.5

Exchange-traded 0.8 0.8 1.0 0.9

Over-the-counter cleared — 0.1 — —

Credit derivatives

Over-the-counter 6.4 6.6 7.7 8.2

Over-the-counter cleared 2.5 2.2 2.5 2.3

Total gross derivative assets/liabilities, before netting

Over-the-counter 302.8 298.3 292.5 283.0

Exchange-traded 27.3 23.7 17.1 16.0

Over-the-counter cleared 9.0 8.1 8.2 7.2

Less: Legally enforceable master netting agreements and cash collateral received/paid

Over-the-counter (274.7 ) (269.3 ) (264.4 ) (259.2 )

Exchange-traded (21.5 ) (21.5 ) (13.5 ) (13.5 )

Over-the-counter cleared (8.1 ) (8.1 ) (7.2 ) (7.2 )

Derivative assets/liabilities, after netting 34.8 31.2 32.7 26.3

Other gross derivative assets/liabilities

(2)

5.7 7.0 11.0 11.6

Total derivative assets/liabilities 40.5 38.2 43.7 37.9

Less: Financial instruments collateral

(3)

(14.6 ) (16.1 ) (16.3 ) (8.6 )

Total net derivative assets/liabilities $ 25.9 $ 22.1 $ 27.4 $ 29.3

(1)

OTC derivatives include bilateral transactions between the Corporation and a particular counterparty. OTC-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.

ALM and Risk Management Derivatives

Corporation also utilizes derivatives such as interest rate options, interest rate

swaps, forward settlement contracts and eurodollar futures to hedge certain market

The Corporation’s ALM and risk management activities include the use of

risks of MSRs.

derivatives to mitigate risk to the Corporation including derivatives designated in

The Corporation uses foreign exchange contracts to manage the foreign

qualifying hedge accounting relationships and derivatives used in other risk

exchange risk associated with certain foreign currency-denominated assets and

management activities. Interest rate, foreign exchange, equity, commodity and

liabilities, as well as the Corporation’s investments in non-U.S. subsidiaries.

credit contracts are utilized in the Corporation's ALM and risk management

Exposure to loss on these contracts will increase or decrease over their respective

activities.

lives as currency exchange and interest rates fluctuate.

The Corporation maintains an overall interest rate risk management strategy

The Corporation purchases credit derivatives to manage credit risk related to

that incorporates the use of interest rate contracts, which are generally non-

certain funded and unfunded credit exposures. Credit derivatives include credit

leveraged generic interest rate and basis swaps, options, futures and forwards, to

default swaps (CDS), total return swaps and swaptions. These derivatives are

minimize significant fluctuations in earnings caused by interest rate volatility. The

recorded on the Consolidated Balance Sheet at fair value with changes in fair

Corporation’s goal is to manage interest rate sensitivity and volatility so that

value recorded in other income.

movements in interest rates do not significantly adversely affect earnings or

capital. As a result of interest rate fluctuations, hedged fixed-rate assets and

Derivatives Designated as Accounting Hedges

liabilities appreciate or depreciate in fair value. Gains or losses on the derivative

The Corporation uses various types of interest rate and foreign exchange

instruments that are linked to the hedged fixed-rate assets and liabilities are

derivative contracts to protect against changes in the fair value of its assets and

expected to substantially offset this unrealized appreciation or depreciation.

liabilities due to fluctuations in interest rates and exchange rates (fair value

Market risk, including interest rate risk, can be substantial in the mortgage

hedges). The Corporation also uses these types of contracts to protect against

business. Market risk in the mortgage business is the risk that values of mortgage

changes in the cash flows of its assets and liabilities, and other forecasted

assets or revenues will be adversely affected by changes in market conditions

transactions (cash flow hedges). The Corporation hedges its net investment in

such as interest rate movements. To mitigate the interest rate risk in mortgage

consolidated non-U.S. operations determined to have functional currencies other

banking production income, the Corporation utilizes forward loan sale

than the U.S. dollar using forward exchange contracts and cross-currency basis

commitments and other derivative instruments, including purchased options, and

swaps, and by issuing foreign currency-denominated debt (net investment

certain debt securities. The

hedges).

Bank of America 104

Fair Value Hedges

The table below summarizes information related to fair value hedges for2019, 2018 and 2017.

Gains and Losses on Derivatives Designated as Fair Value Hedges

Derivative Hedged Item

(Dollars in millions) 2019 2018 2017 2019 2018 2017

Interest rate risk on long-term debt

(1)

$ 6,113 $ (1,538 ) $ (1,537 ) $ (6,110 ) $ 1,429 $ 1,045

Interest rate and foreign currency risk on long-term debt

(2)

119 (1,187 ) 1,811 (101 ) 1,079 (1,767 )

Interest rate risk on available-for-sale securities

(3)

(102 ) (52 ) (67 ) 98 50 35

Total $ 6,130 $ (2,777 ) $ 207 $ (6,113 ) $ 2,558 $ (687 )

(1)

Amounts are recorded in interest expense in the Consolidated Statement of

Income.

(2)

In 2019, 2018 and 2017, the derivative amount includes gains (losses) of$73 million, $(116) million and $(365) million in interest expense,$28 million, $(992) million and $2.2 billion in market making and similar activities, and$18 million and $(79) million in

accumulated OCI, respectively. Line item totals are in the Consolidated Statement of Income and in the Consolidated Balance Sheet.

(3)

Amounts are recorded in interest income in the Consolidated Statement of

Income.

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 (Liabilities)

Cumulative

Fair Value Adjustments

Cumulative

Carrying Value

(1)

Carrying Value Fair Value Adjustments

(1)

(Dollars in millions) December 31, 2019 December 31, 2018

Long-term debt

(2)

$ (162,389 ) $ (8,685 ) $ (138,682 ) $ (2,117 )

Available-for-sale debt securities

(2)

1,654 64 981 (29 )

(1)

For assets, increase (decrease) to carrying value and for liabilities, (increase) decrease to carrying

value.

(2)

At December 31, 2019 and 2018 , the cumulative fair value adjustments remaining on long-term debt and AFS debt securities from discontinued hedging relationships resulted in a decrease in the related liability of$1.3 billion and $1.6 billion and an increase

(decrease) in the related asset of $8 million and $(29) million, which are being amortized over the remaining contractual life of the de-designated hedged items.

Cash Flow and Net Investment Hedges

earnings in the next 12 months. These net losses reclassified into earnings are

The following table summarizes certain information related to cash flow hedges

expected to primarily reduce net interest income related to the respective hedged

and net investment hedges for 2019, 2018 and 2017. Of the $400 million after-tax

items. For terminated cash flow hedges, the time period over which the majority of

net loss ($526 million pretax) on derivatives in accumulated OCI atDecember 31,

the forecasted transactions are hedged is approximately 3 years, with a maximum

2019, $68 million after-tax ($90 million pretax) is expected to be reclassified into

length of time for certain forecasted transactions of 16 years.

Gains and Losses on Derivatives Designated as Cash Flow and Net Investment Hedges

Gains (Losses) in Gains (Losses) in Income

Accumulated OCI on Derivatives Reclassified from Accumulated OCI

(Dollars in millions, amounts pretax) 2019 2018 2017 2019 2018 2017

Cash flow hedges

Interest rate risk on variable-rate assets

(1)

$ 671 $ (159 ) $ (109) $ (104 ) $ (165 ) $ (327)

Price risk on certain compensation plans

(2)

34 4 59 (2 ) 27 148

Total $ 705 $ (155 ) $ (50 ) $ (106 ) $ (138 ) $ (179 )

Net investment hedges

Foreign exchange risk

(3)

$ 22 $ 989 $ (1,588 ) $ 366 $ 411 $ 1,782

(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. Amounts excluded from effectiveness testing and recognized in market making and similar activities were gains of$154 million, $47 million

and $120 million in 2019, 2018 and 2017, respectively.

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 following table

presents gains (losses) on these derivatives for 2019, 2018 and 2017. These gains (losses) are largely offset by the income or expense recorded on the hedged item.

105 Bank of America

Gains and Losses on Other Risk Management Derivatives

(Dollars in millions) 2019 2018 2017

Interest rate risk on mortgage activities

(1, 2)

$ 315 $ (107 ) $ 8

Credit risk on loans

(2)

(58) 9 (6)

Interest rate and foreign currency risk on ALM activities

(3)

1,112 3,278 (1,318 )

Price risk on certain compensation plans

(4)

943 (495) 704

(1)

Primarily related to hedges of interest rate risk on MSRs and IRLCs to originate mortgage loans that will be held for sale.

The net gains on IRLCs, which are not included in the table but are considered derivative instruments, were $73 million,

$47 million and $220 million in 2019, 2018 and 2017, respectively.

(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. Prior-period amounts have been

updated to conform to the current-period presentation.

(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. As of December 31, 2019 and 2018, the Corporation had

transferred $5.2 billion and $5.8 billion of non-U.S. government-guaranteed 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 $5.2 billion and $5.8 billion at the transfer dates.

At December 31, 2019 and 2018, the fair value of the transferred securities was

$5.3 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. The related sales and trading

revenue generated within Global Markets is recorded in various income statement

line items including market making and similar activities and net interest income as

well as other revenue categories.

Sales and trading revenue includes changes in the fair value and realized gains

and losses on the sales of trading and other assets, net interest income, and fees

primarily from commissions on equity securities. Revenue is generated by the

difference in the client price for an instrument and the price at which the trading

desk can execute the trade in the dealer market. For equity securities,

commissions related to purchases and sales are recorded in the “Other” column in

the Sales and Trading Revenue table. Changes in the fair value of these securities

are included in market making and similar activities. For debt securities, revenue,

with the exception of interest associated with the debt securities, is typically

included in market making and similar activities. Unlike commissions for equity

securities, the initial revenue related to broker-dealer services for debt securities is

typically included in the pricing of the instrument rather than being charged

through separate fee arrangements. Therefore, this revenue is recorded in market

making and similar activities as part of the initial mark to fair value. For derivatives,

the majority of revenue is included in market making and similar activities. In

transactions where the Corporation acts as agent, which include exchange-traded

futures and options, fees are recorded in other income.

The following table, 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 2019, 2018 and 2017. This table includes debit

valuation adjustment (DVA) and funding valuation adjustment (FVA) gains

(losses). Global Markets results in Note 24 – 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 Net Interest

activities Income Other

(1)

Total

(Dollars in millions) 2019

Interest rate risk $ 916 $ 1,831 $ 121 $ 2,868

Foreign exchange risk 1,300 54 43 1,397

Equity risk 3,565 (638 ) 1,574 4,501

Credit risk 1,158 1,800 511 3,469

Other risk 123 75 57 255

Total sales and trading

revenue $ 7,062 $ 3,122 $ 2,306 $ 12,490

2018

Interest rate risk $ 784 $ 1,696 $ 259 $ 2,739

Foreign exchange risk 1,486 11 14 1,511

Equity risk 3,874 (662 ) 1,644 4,856

Credit risk 1,063 1,861 588 3,512

Other risk 50 202 53 305

Total sales and trading

revenue $ 7,257 $ 3,108 $ 2,558 $ 12,923

2017

Interest rate risk $ 429 $ 1,846 $ 248 $ 2,523

Foreign exchange risk 1,409 12 9 1,430

Equity risk 2,598 (427 ) 1,904 4,075

Credit risk 1,685 1,945 578 4,208

Other risk 79 170 75 324

Total sales and trading

revenue $ 6,200 $ 3,546 $ 2,814 $ 12,560

(1)

Represents amounts in investment and brokerage services and other income that are recorded inGlobal Markets and

included in the definition of sales and trading revenue. Includes investment and brokerage services revenue of $1.7

billion, $1.7 billion and $2.0 billion in 2019, 2018 and 2017, respectively.

Credit Derivatives

The Corporation enters into credit derivatives primarily to facilitate client

transactions and to manage credit risk exposures. Credit derivatives derive value

based on an underlying third-party referenced obligation or a portfolio of

referenced obligations and generally require the Corporation, as the seller of credit

protection, to make payments to a buyer upon the occurrence of a predefined

credit event. Such credit events generally include bankruptcy of the referenced

credit entity and failure to pay under the obligation, as well as acceleration of

indebtedness and payment repudiation or moratorium. For credit derivatives based

on a portfolio of referenced credits or credit indices, the Corporation may not be

required to make payment until a specified amount of loss has occurred and/or

may only be required to make payment up to a specified amount.

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-

Bank of America 106

rated credit derivative instruments. The Corporation discloses internal Credit derivative instruments where the Corporation is the seller of credit

categorizations of investment grade and non-investment grade consistent with how protection and their expiration at December 31, 2019 and 2018 are summarized in

risk is managed for these instruments. the following table.

Credit Derivative Instruments

Less than One to Three to Over Five

One Year Three Years Five Years Years Total

December 31, 2019

(Dollars in millions) Carrying Value

Credit default swaps:

Investment grade $ — $ 5 $ 60 $ 164 $ 229

Non-investment grade 70 292 561 808 1,731

Total 70 297 621 972 1,960

Total return swaps/options:

Investment grade 35 — — — 35

Non-investment grade 344 — — — 344

Total 379 — — — 379

Total credit derivatives $ 449 $ 297 $ 621 $ 972 $ 2,339

Credit-related notes:

Investment grade $ — $ 3 $ 1 $ 639 $ 643

Non-investment grade 6 2 1 1,125 1,134

Total credit-related notes $ 6 $ 5 $ 2 $ 1,764 $ 1,777

Maximum Payout/Notional

Credit default swaps:

Investment grade $ 55,827 $ 67,838 $ 71,320 $ 17,708 $ 212,693

Non-investment grade 19,049 26,521 29,618 12,337 87,525

Total 74,876 94,359 100,938 30,045 300,218

Total return swaps/options:

Investment grade 56,488 — 62 76 56,626

Non-investment grade 28,707 657 104 60 29,528

Total 85,195 657 166 136 86,154

Total credit derivatives $ 160,071 $ 95,016 $ 101,104 $ 30,181 $ 386,372

December 31, 2018

Carrying Value

Credit default swaps:

Investment grade $ 2 $ 44 $ 436 $ 488 $ 970

Non-investment grade 132 636 914 1,691 3,373

Total 134 680 1,350 2,179 4,343

Total return swaps/options:

Investment grade 105 — — — 105

Non-investment grade 472 21 — — 493

Total 577 21 — — 598

Total credit derivatives $ 711 $ 701 $ 1,350 $ 2,179 $ 4,941

Credit-related notes:

Investment grade $ — $ — $ 4 $ 532 $ 536

Non-investment grade

1 1 1 1,500 1,503

Total credit-related notes $ 1 $ 1 $ 5 $ 2,032 $ 2,039

Maximum Payout/Notional

Credit default swaps:

Investment grade $ 53,758 $ 95,699 $ 95,274 $ 20,054 $ 264,785

Non-investment grade

24,297 33,881 34,530 14,426 107,134

Total 78,055 129,580 129,804 34,480 371,919

Total return swaps/options:

Investment grade 60,042 822 59 72 60,995

Non-investment grade 24,524 1,649 39 70 26,282

Total 84,566 2,471 98 142 87,277

Total credit derivatives $ 162,621 $ 132,051 $ 129,902 $ 34,622 $ 459,196

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 CDO, collateralized loan obligation (CLO) and credit-linked note vehicles.

These instruments are primarily classified as trading securities. The carrying value

of these

107 Bank of America

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

The Corporation executes the majority of its derivative contracts in the OTC market

with large, international financial institutions, including broker-dealers and, to a

lesser degree, with a variety of non-financial companies. A significant majority of

the derivative transactions are executed on a daily margin basis. Therefore,

events such as a credit rating downgrade (depending on the ultimate rating level)

or a breach of credit covenants would typically require an increase in the amount

of collateral required of the counterparty, where applicable, and/or allow the

Corporation to

take additional protective measures such as early termination of all trades. Further,

as previously discussed on page 103, the Corporation enters into legally

enforceable master netting agreements which reduce risk by permitting closeout

and netting of transactions with the same counterparty upon the occurrence of

certain events.

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 December 31, 2019 and 2018, the Corporation held

cash and securities collateral of $84.3 billion and $81.6 billion and posted cash and

securities collateral of $69.1 billion and $56.5 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 OTC 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.

At December 31, 2019, 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 $2.3 billion,

including $913 million for Bank of America, National Association (BANA).

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 December 31,

2019 and 2018, the liability recorded for these derivative contracts was not

significant.

The following table presents the amount of additional collateral that would have

been contractually required by derivative contracts and other trading agreements

at December 31, 2019 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.

Additional Collateral Required to be Posted Upon Downgrade at

December 31, 2019

One Second

(Dollars in millions) incremental notch incremental notch

Bank of America Corporation $ 480 $ 491

Bank of America, N.A. and subsidiaries

(1)

222 353

(1)

Included in Bank of America Corporation collateral requirements in this

table.

The following table presents the derivative liabilities that would be subject to

unilateral termination by counterparties and the amounts of collateral that would

have been contractually required at December 31, 2019 if the long-term senior

debt ratings for the Corporation or certain subsidiaries had been lower by one

incremental notch and by an additional second incremental notch.

Derivative Liabilities Subject to Unilateral Termination Upon

Downgrade at December 31, 2019

One Second

(Dollars in millions) incremental notch incremental notch

Derivative liabilities $ 57 $ 783

Collateral posted 42 411

Valuation Adjustments on Derivatives

The Corporation records credit risk valuation adjustments on derivatives in order to

properly reflect the credit quality of the counterparties and its own credit quality.

The Corporation calculates valuation adjustments on derivatives based on a

modeled expected exposure that incorporates current market risk factors. The

exposure also takes into consideration credit mitigants such as enforceable master

netting agreements and collateral. CDS spread data is used to estimate the default

probabilities and severities that are applied to the exposures. Where no observable

credit default data is available for counterparties, the Corporation uses proxies and

other market data to estimate default probabilities and severity.

Valuation adjustments on derivatives are affected by changes in market

spreads, non-credit related market factors such as interest rates and foreign

exchange rates that affect the expected exposure, and other factors like changes

in collateral arrangements and partial payments. Credit spreads and non-credit

factors can move independently. For example, for an interest rate swap, changes

in interest rates may increase the expected exposure, which would increase the

counterparty credit valuation adjustment (CVA). Independently, counterparty credit

spreads may tighten, which would result in an offsetting decrease to CVA.

The Corporation enters into risk management activities to offset market driven

exposures. The Corporation often hedges the counterparty spread risk in CVA with

CDS. The Corporation hedges other market risks in both CVA and DVA primarily

with foreign exchange and interest rate swaps. In certain instances, the net-of

-

hedge amounts in the table below move in the same direction as the gross amount

or may move in the opposite direction. This movement is a consequence of the

complex interaction of the risks being hedged, resulting in limitations in the ability

to perfectly hedge all of the market exposures at all times.

The table below presents CVA, DVA and FVA gains (losses) on derivatives,

which are recorded in market making and similar activities, on a gross and net of

hedge basis for 2019, 2018 and 2017. CVA gains reduce the cumulative CVA

thereby increasing the derivative assets balance. DVA gains increase the

cumulative DVA thereby decreasing the derivative liabilities balance. CVA and

DVA losses have the opposite impact. FVA gains related to derivative assets

reduce the cumulative FVA thereby increasing the derivative assets balance. FVA

gains related to derivative liabilities increase the cumulative FVA thereby

decreasing the derivative liabilities balance. FVA losses have the opposite impact.

Valuation Adjustments Gains (Losses) on Derivatives

(1)

Gross Net Gross Net Gross Net

2019 2018 2017

Derivative assets (CVA) $ 72 $ 45 $ 77 $ 187 $ 330 $ 98

Derivative assets/liabilities (FVA) (2) 46 (15) 14 160 178

Derivative liabilities (DVA) (147) (135 ) (19 ) (55 ) (324) (281 )

(1)

At December 31, 2019, 2018 and 2017, cumulative CVA reduced the derivative assets balance by$528 million, $600 million

and $677 million, cumulative FVA reduced the net derivatives balance by$153 million, $151 million and $136 million, and

cumulative DVA reduced the derivative liabilities balance by $285 million, $432 million and $450 million, respectively.

Bank of America 108

NOTE 4 Securities

The table below presents the amortized cost, gross unrealized gains and losses, and fair value of AFS debt securities, other debt securities carried at fair value and HTM

debt securities at December 31, 2019 and 2018.

Debt Securities

Gross Gross

Amortized Unrealized Unrealized Fair

Cost Gains Losses Value

(Dollars in millions) December 31, 2019

Available-for-sale debt securities

Mortgage-backed securities:

Agency $ 121,698 $ 1,013 $ (183 ) $ 122,528

Agency-collateralized mortgage obligations 4,587 78 (24 ) 4,641

Commercial 14,797 249 (25 ) 15,021

Non-agency residential

(1)

948 138 (9 ) 1,077

Total mortgage-backed securities 142,030 1,478 (241 ) 143,267

U.S. Treasury and agency securities 67,700 1,023 (195 ) 68,528

Non-U.S. securities 11,987 6 (2 ) 11,991

Other taxable securities, substantially all asset-backed securities 3,874 67 — 3,941

Total taxable securities 225,591 2,574 (438 ) 227,727

Tax-exempt securities 17,716 202 (6 ) 17,912

Total available-for-sale debt securities 243,307 2,776 (444 ) 245,639

Other debt securities carried at fair value

(2)

10,596 255 (23 ) 10,828

Total debt securities carried at fair value 253,903 3,031 (467 ) 256,467

Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities 215,730 4,433 (342 ) 219,821

Total debt securities

(3, 4)

$ 469,633 $ 7,464 $ (809 ) $ 476,288

December 31, 2018

Available-for-sale debt securities

Mortgage-backed securities:

Agency $ 125,116 $ 138 $ (3,428 ) $ 121,826

Agency-collateralized mortgage obligations 5,621 19 (110 ) 5,530

Commercial 14,469 11 (402) 14,078

Non-agency residential

(1)

1,792 136 (11) 1,917

Total mortgage-backed securities 146,998 304 (3,951 ) 143,351

U.S. Treasury and agency securities 56,239 62 (1,378 ) 54,923

Non-U.S. securities

9,307 5 (6 ) 9,306

Other taxable securities, substantially all asset-backed securities 4,387 29 (6) 4,410

Total taxable securities 216,931 400 (5,341 ) 211,990

Tax-exempt securities 17,349 99 (72) 17,376

Total available-for-sale debt securities 234,280 499 (5,413 ) 229,366

Other debt securities carried at fair value

(2)

8,595 172 (32) 8,735

Total debt securities carried at fair value 242,875 671 (5,445 ) 238,101

Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities 203,652 747 (3,964 ) 200,435

Total debt securities

(3, 4)

$ 446,527 $ 1,418 $ (9,409 ) $ 438,536

(1)

A t December 31, 2019 and 2018, the underlying collateral type included approximately 49 percent and 68 percent prime, six percent and four percent Alt-A and 45 percent and 28 percent

subprime.

(2)

Primarily includes non-U.S. securities used to satisfy certain international regulatory requirements. Any changes in value are reported in other income. For detail on the components, seeNote 21 – Fair Value

Measurements.

(3)

Includes securities pledged as collateral of $67.0 billion and $40.6 billion at December 31, 2019 and

2018.

(4)

The Corporation held debt securities from FNMA and FHLMC that each exceeded 10 percent of shareholders’ equity, with an amortized cost of $157.2 billion and $54.1 billion, and a fair value of$160.6 billion and $55.1 billion at December 31, 2019, and an

amortized cost of $161.2 billion and $52.2 billion, and a fair value of$158.5 billion and $51.4 billion at December 31, 2018.

A t December 31, 2019, the accumulated net unrealized gain on AFS debt The gross realized gains and losses on sales of AFS debt securities for2019,

securities, excluding the amount related to debt securities previously transferred to 2018 and 2017 are presented in the table below.

held to maturity, included in accumulated OCI was $1.8 billion, net of the related

income tax expense of $569 million. The Corporation had nonperforming AFS debt

securities of $9 million and $11 million at December 31, 2019 and 2018.

Gains and Losses on Sales of AFS Debt Securities

At December 31, 2019, the Corporation held equity securities at an aggregate

fair value of $891 million and other equity securities, as valued under the

(Dollars in millions) 2019 2018 2017

measurement alternative, at cost of $183 million, both of which are included in

other assets. At December 31, 2019, the Corporation also held equity securities at

Gross gains $ 336 $ 169 $ 352

fair value of $1.0 billion included in time deposits placed and other short-term

Gross losses (119 ) (15 ) (97)

investments.

Net gains on sales of AFS debt securities $ 217 $ 154 $ 255

Income tax expense attributable to realized net gains on

sales of AFS debt securities $ 54 $ 37 $ 97

109 Bank of America

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 December 31, 2019 and 2018.

Temporarily Impaired and Other-than-temporarily Impaired AFS Debt Securities

(Dollars in millions)

Temporarily impaired AFS debt securities

Mortgage-backed securities:

Agency

Agency-collateralized mortgage obligations

Commercial

Non-agency residential

Total mortgage-backed securities

U.S. Treasury and agency securities

Non-U.S. securities

Other taxable securities, substantially all asset-backed securities

Total taxable securities

Tax-exempt securities

Total temporarily impaired AFS debt securities

Other-than-temporarily impaired AFS debt securities

(1)

Non-agency residential mortgage-backed securities

Total temporarily impaired and other-than-temporarily impaired

AFS debt securities

Temporarily impaired AFS debt securities

Mortgage-backed securities:

Agency

Agency-collateralized mortgage obligations

Commercial

Non-agency residential

Total mortgage-backed securities

U.S. Treasury and agency securities

Non-U.S. securities

Other taxable securities, substantially all asset-backed securities

Total taxable securities

Tax-exempt securities

Total temporarily impaired AFS debt securities

Other-than-temporarily impaired AFS debt securities

(1)

Non-agency residential mortgage-backed securities

Total temporarily impaired and other-than-temporarily impaired

AFS debt securities

Less than Twelve Months

Gross

Fair Unrealized

Value Losses

$ 17,641 $ (41 )

255 (1)

2,180 (22)

19 (1)

20,095 (65 )

12,836 (71 )

851 —

938 —

34,720 (136)

4,286 (5)

39,006 (141)

103 (5)

$ 39,109 $ (146)

$ 14,771 $ (49 )

3 —

1,344 (8)

106 (8)

16,224 (65)

288 (1)

773 (5)

183 (1)

17,468 (72)

232 (2)

17,700 (74)

131 —

$ 17,831 $ (74 )

Twelve Months or Longer

Gross

Fair Unrealized

Value Losses

December 31, 2019

Fair

Value

Total

Gross

Unrealized

Losses

$ 17,238

925

442

1

18,606

18,866

837

222

38,531

190

38,721

$ (142 )

(23 )

(3 )

—

(168 )

(124 )

(2 )

—

(294 )

(1 )

(295 )

$ 34,879

1,180

2,622

20

38,701

31,702

1,688

1,160

73,251

4,476

77,727

$ (183 )

(24 )

(25 )

(1 )

(233 )

(195 )

(2 )

—

(430 )

(6 )

(436 )

21 (3 ) 124 (8 )

$ 38,742 $ (298 ) $ 77,851 $ (444 )

December 31, 2018

$ 99,211

4,452

11,991

49

115,703

51,374

21

185

167,283

2,148

$ (3,379 )

(110 )

(394 )

(3 )

(3,886 )

(1,377 )

(1 )

(5 )

(5,269 )

(70 )

$ 113,982

4,455

13,335

155

131,927

51,662

794

368

184,751

2,380

$ (3,428 )

(110 )

(402 )

(11 )

(3,951 )

(1,378 )

(6 )

(5,341 )

(72 )

169,431 (5,339 ) 187,131 (5,413 )

3 — 134 —

$ 169,434 $ (5,339 ) $ 187,265 $ (5,413 )

(1)

Includes other-than-temporarily impaired AFS debt securities on which an OTTI loss, primarily related to changes in interest rates, remains in accumulated

OCI.

In 2019, 2018 and 2017, the Corporation had $24 million, $33 million and $41 assumptions such as default rates, loss severity and prepayment rates.

million, respectively, of credit-related OTTI losses on AFS debt securities which Assumptions used for the underlying loans that support the MBS can vary widely

were recognized in other income. The amount of non-credit related OTTI losses for from loan to loan and are influenced by such factors as loan interest rate,

these AFS debt securities, which is recognized in OCI, was not significant for all geographic location of the borrower, borrower characteristics and collateral type.

periods presented. Based on these assumptions, the Corporation then determines how the underlying

The cumulative OTTI credit losses recognized in income on AFS debt collateral cash flows will be distributed to each MBS issued from the applicable

securities that the Corporation does not intend to sell were $85 million

, $120 million

special purpose entity. Expected principal and interest cash flows on an impaired

and $274 million at December 31, 2019, 2018 and 2017, respectively.

AFS debt security are discounted using the effective yield of each individual

impaired AFS debt security.

The Corporation estimates the portion of a loss on a security that is attributable

Significant assumptions used in estimating the expected cash flows for

to credit using a discounted cash flow model and estimates the expected cash

measuring credit losses on non-agency residential mortgage-backed securities

flows of the underlying collateral using internal credit, interest rate and prepayment

(RMBS) were as follows at December 31, 2019.

risk models that incorporate management’s best estimate of current key

Bank of America 110

Significant Assumptions

Range

(1)

Weighted 10th 90th

average Percentile

(2)

Percentile

(2)

Prepayment speed 16.6 % 5.5 % 27.8 %

Loss severity 14.7 8.0 30.7

Life default rate 11.9 1.0 36.5

(1)

Represents the range of inputs/assumptions based upon the underlying

collateral.

(2)

The value of a variable below which the indicated percentile of observations will

fall.

Annual constant prepayment speed and loss severity rates are projected by collateral type were 7.8 percent for prime, 11.6 percent for Alt-A and 13.6

considering collateral characteristics such as LTV, creditworthiness of borrowers percent for subprime at December 31, 2019.

as measured using Fair Isaac Corporation (FICO) scores, and geographic The remaining contractual maturity distribution and yields of the Corporation’s

concentrations. The weighted-average severity by collateral type was 12.9 percent debt securities carried at fair value and HTM debt securities at December 31, 2019

for prime, 11.1 percent for Alt-A and 18.8 percent for subprime at December 31, are summarized in the table below. Actual duration and yields may differ as

2019. Default rates are projected by considering collateral characteristics prepayments on the loans underlying the mortgages or other ABS are passed

including, but not limited to, LTV, FICO and geographic concentration. Weighted- through to the Corporation.

average life default rates

Maturities of Debt Securities Carried at Fair Value and Held-to-maturity Debt Securities

Due in One Due after One Year Due after Five Years Due after

Year or Less through Five Years through Ten Years 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 $ — — % $ 11 5.25 % $ 66 4.56 % $ 124,618 3.24 % $ 124,695 3.24 %

Agency-collateralized mortgage obligations — — — — 27 2.48 4,560 3.16 4,587 3.16

Commercial — — 3,806 2.37 10,136 2.57 868 2.99 14,810 2.54

Non-agency residential — — — — 12 — 2,157 9.26 2,169 9.22

Total mortgage-backed securities — — 3,817 2.38 10,241 2.58 132,203 3.33 146,261 3.25

U.S. Treasury and agency securities 1,350 0.92 35,544 1.67 30,789 2.25 20 2.45 67,703 1.92

Non-U.S. securities 15,648 1.17 2,598 1.03 7 4.17 96 6.74 18,349 1.18

Other taxable securities, substantially all asset-backed securities 1,189 2.80 1,650 3.02 440 3.32 595 2.91 3,874 2.97

Total taxable securities 18,187 1.26 43,609 1.74 41,477 2.34 132,914 3.34 236,187 2.70

Tax-exempt securities 2,189 1.72 7,472 2.10 4,849 2.06 3,206 2.44 17,716 2.10

Total amortized cost of debt securities carried at fair value $ 20,376 1.31 $ 51,081 1.79 $ 46,326 2.31 $ 136,120 3.32 $ 253,903 2.67

Amortized cost of HTM debt securities

(2)

$ 1,025 2.83 $ 48 3.57 $ 1,102 2.57 $ 213,555 3.19 $ 215,730 3.19

Debt securities carried at fair value

Mortgage-backed securities:

Agency $ — $ 11 $ 71 $ 125,449 $ 125,531

Agency-collateralized mortgage obligations — — 26 4,615 4,641

Commercial — 3,854 10,287 893 15,034

Non-agency residential — — 25 2,386 2,411

Total mortgage-backed securities — 3,865 10,409 133,343 147,617

U.S. Treasury and agency securities 1,347 35,686 31,478 20 68,531

Non-U.S. securities 15,751 2,606 8 98 18,463

Other taxable securities, substantially all asset-backed securities 1,196 1,687 465 596 3,944

Total taxable securities

18,294 43,844 42,360 134,057 238,555

Tax-exempt securities 2,192 7,509 4,976 3,235 17,912

Total debt securities carried at fair value $ 20,486 $ 51,353 $ 47,336 $ 137,292 $ 256,467

Fair value of HTM debt securities

(2)

$ 1,025 $ 48 $ 1,113 $ 217,635 $ 219,821

(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.

(2)

Substantially all U.S. agency

MBS.

111 Bank of America

NOTE 5 Outstanding Loans and Leases

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 December 31, 2019 and 2018.

Total Current

30-59 Days Past

Due

(1)

60-89 Days Past

Due

(1)

90 Days or

More

Past Due

(2)

Total Past

Due 30 Days

or More

or Less Than

30 Days Past

Due

(3)

Loans Accounted

for Under the Fair

Value Option

Total

Outstandings

(Dollars in millions) December 31, 2019

Consumer real estate

Core portfolio

Residential mortgage $ 1,378 $ 261 $ 565 $ 2,204 $ 223,566 $ 225,770

Home equity 135 70 198 403 34,823 35,226

Non-core portfolio

Residential mortgage 458 209 1,263 1,930 8,469 10,399

Home equity 34 16 72 122 4,860 4,982

Credit card and other consumer

Credit card 564 429 1,042 2,035 95,573 97,608

Direct/Indirect consumer

(4)

297 85 35 417 90,581 90,998

Other consumer — — — — 192 192

Total consumer 2,866 1,070 3,175 7,111 458,064 465,175

Consumer loans accounted for under the fair value option

(5)

$ 594 594

Total consumer loans and leases 2,866 1,070 3,175 7,111 458,064 594 465,769

Commercial

U.S. commercial 788 279 371 1,438 305,610 307,048

Non-U.S. commercial 35 23 8 66 104,900 104,966

Commercial real estate

(6)

144 19 119 282 62,407 62,689

Commercial lease financing 100 56 39 195 19,685 19,880

U.S. small business commercial 119 56 107 282 15,051 15,333

Total commercial 1,186 433 644 2,263 507,653 509,916

Commercial loans accounted for under the fair value option

(5)

7,741 7,741

Total commercial loans and leases 1,186 433 644 2,263 507,653 7,741 517,657

Total loans and leases

(7)

$ 4,052 $ 1,503 $ 3,819 $ 9,374 $ 965,717 $ 8,335 $ 983,426

Percentage of outstandings 0.41 % 0.15 % 0.39 % 0.95 % 98.20 % 0.85 % 100.00 %

(1)

Consumer real estate loans 30-59 days past due includes fully-insured loans of$517 million and nonperforming loans of$139 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of$206 million and nonperforming loans of

$114 million.

(2)

Consumer real estate includes fully-insured loans of$1.1

billion.

(3)

Consumer real estate includes $856 million and direct/indirect consumer includes$45 million of nonperforming

loans.

(4)

Total outstandings primarily includes auto and specialty lending loans and leases of$50.4 billion, U.S. securities-based lending loans of $36.7 billion and non-U.S. consumer loans of $2.8

billion.

(5)

Consumer loans accounted for under the fair value option includes residential mortgage loans of$257 million and home equity loans of$337 million. Commercial loans accounted for under the fair value option includes U.S. commercial loans of$4.7 billion

and non-U.S. commercial loans of $3.1 billion. For more information, see Note 21 – Fair Value Measurements and Note 22 – Fair Value Option.

(6)

Total outstandings includes U.S. commercial real estate loans of $59.0 billion and non-U.S. commercial real estate loans of $3.7

billion.

(7)

Total outstandings includes loans and leases pledged as collateral of$25.9 billion. The Corporation also pledged $168.2 billion of loans with no related outstanding borrowings to secure potential borrowing capacity with the Federal Reserve Bank and

Federal Home Loan Bank.

Bank of America 112

Total Loans

Current or Accounted

90 Days or Total Past Less Than for Under

30-59 Days 60-89 Days Past More Due 30 Days 30 Days the Fair

Past Due

(1)

Due

(1)

Past Due

(2)

or More Past Due

(3)

Value Option Total Outstandings

(Dollars in millions) December 31, 2018

Consumer real estate

Core portfolio

Residential mortgage $ 1,188 $ 249 $ 793 $ 2,230 $ 191,465 $ 193,695

Home equity 200 85 387 672 39,338 40,010

Non-core portfolio

Residential mortgage 757 309 2,201 3,267 11,595 14,862

Home equity 139 69 339 547 7,729 8,276

Credit card and other consumer

Credit card 577 418 994 1,989 96,349 98,338

Direct/Indirect consumer

(4)

317 90 40 447 90,719 91,166

Other consumer

(5)

— — — — 202 202

Total consumer 3,178 1,220 4,754 9,152 437,397 446,549

Consumer loans accounted for under the fair value option

(6)

$ 682 682

Total consumer loans and leases 3,178 1,220 4,754 9,152 437,397 682 447,231

Commercial

U.S. commercial 594 232 573 1,399 297,878 299,277

Non-U.S. commercial 1 49 — 50 98,726 98,776

Commercial real estate

(7)

29 16 14 59 60,786 60,845

Commercial lease financing 124 114 37 275 22,259 22,534

U.S. small business commercial

83 54 96 233 14,332 14,565

Total commercial 831 465 720 2,016 493,981 495,997

Commercial loans accounted for under the fair value option

(6)

3,667 3,667

Total commercial loans and leases 831 465 720 2,016 493,981 3,667 499,664

Total loans and leases

(8)

$ 4,009 $ 1,685 $ 5,474 $ 11,168 $ 931,378 $ 4,349 $ 946,895

Percentage of outstandings 0.42 % 0.18 % 0.58 % 1.18 % 98.36 % 0.46 % 100.00 %

(1)

Consumer real estate loans 30-59 days past due includes fully-insured loans of$637 million and nonperforming loans of$217 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of$269 million and nonperforming loans of

$146 million.

(2)

Consumer real estate includes fully-insured loans of$1.9

billion.

(3)

Consumer real estate includes $1.8 billion and direct/indirect consumer includes$53 million of nonperforming

loans.

(4)

Total outstandings primarily includes auto and specialty lending loans and leases of$50.1 billion, U.S. securities-based lending loans of $37.0 billion and non-U.S. consumer loans of $2.9

billion.

(5)

Substantially all of other consumer is consumer

overdrafts.

(6)

Consumer loans accounted for under the fair value option includes residential mortgage loans of$336 million and home equity loans of$346 million. Commercial loans accounted for under the fair value option includes U.S. commercial loans of$2.5 billion

and non-U.S. commercial loans of $1.1 billion. For more information, see Note 21 – Fair Value Measurements and Note 22 – Fair Value Option.

(7)

Total outstandings includes U.S. commercial real estate loans of $56.6 billion and non-U.S. commercial real estate loans of $4.2

billion.

(8)

Total outstandings includes loans and leases pledged as collateral of$36.7 billion. The Corporation also pledged $166.1 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 categorizes consumer real estate loans as core and non-core severely delinquent. All of these loans are individually insured and therefore the

based on loan and customer characteristics such as origination date, product type, Corporation does not record an allowance for credit losses related to these loans.

LTV, FICO score and delinquency status consistent with its current consumer and During 2019, the Corporation sold $4.7 billion of consumer real estate

mortgage servicing strategy. Generally, loans that were originated after January 1, compared to $11.6 billion in 2018.

2010, qualified under government-sponsored enterprise (GSE) underwriting

Nonperforming Loans and Leases

guidelines, or otherwise met the Corporation’s underwriting guidelines in place in

The Corporation classifies consumer real estate loans that have been discharged

2015 are characterized as core loans. All other loans are generally characterized

in Chapter 7 bankruptcy and not reaffirmed by the borrower as TDRs, irrespective

as non-core loans and represent runoff portfolios.

of payment history or delinquency status, even if the repayment terms for the loans

The Corporation has entered into long-term credit protection agreements with

have not been otherwise modified. The Corporation continues to have a lien on the

FNMA and FHLMC on loans totaling $7.5 billion and $6.1 billion at December 31,

underlying collateral.

2019 and 2018, providing full credit protection on residential mortgage loans that

become

113 Bank of America

The table below presents the Corporation’s nonperforming loans and leases including nonperforming TDRs, and loans accruing past due90 days or more at December

31, 2019 and 2018. Nonperforming LHFS are excluded from nonperforming loans and leases as they are recorded at either fair value or the lower of cost or fair value. For

more information on the criteria for classification as nonperforming, see Note 1 – Summary of Significant Accounting Principles.

Credit Quality

Nonperforming Loans Accruing Past Due

and Leases 90 Days or More

December 31

(Dollars in millions) 2019 2018 2019 2018

Consumer real estate

Core portfolio

Residential mortgage

(1)

$ 883 $ 1,010 $ 176 $ 274

Home equity 363 955 — —

Non-core portfolio

Residential mortgage

(1)

587 883 912 1,610

Home equity 173 938 — —

Credit card and other consumer

Credit card n/a n/a 1,042 994

Direct/Indirect consumer 47 56 33 38

Total consumer 2,053 3,842 2,163 2,916

Commercial

U.S. commercial 1,094 794 106 197

Non-U.S. commercial 43 80 8 —

Commercial real estate 280 156 19 4

Commercial lease financing 32 18 20 29

U.S. small business commercial 50 54 97 84

Total commercial 1,499 1,102 250 314

Total loans and leases $ 3,552 $ 4,944 $ 2,413 $ 3,230

(1)

Residential mortgage loans in the core and non-core portfolios accruing past due90 days or more are fully-insured loans. At December 31, 2019 and 2018, residential mortgage includes$740 million and $1.4 billion of loans on which interest has been

curtailed by the FHA and therefore are no longer accruing interest, although principal is still insured, and $348 million and $498 million of loans on which interest is still accruing.

n/a = not applicable

Credit Quality Indicators

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

The Corporation monitors credit quality within its Consumer Real Estate, Credit

within U.S. small business commercial. Within the Commercial portfolio segment,

Card and Other Consumer, and Commercial portfolio segments based on primary

loans are evaluated using the internal classifications of pass rated or reservable

credit quality indicators. For more information on the portfolio segments, see Note

criticized as the primary credit quality indicators. The term reservable criticized

1 – Summary of Significant Accounting Principles. Within the Consumer Real

refers to those commercial loans that are internally classified or listed by the

Estate portfolio segment, the primary credit quality indicators are refreshed LTV

Corporation as Special Mention, Substandard or Doubtful, which are asset quality

and refreshed FICO score. Refreshed LTV measures the carrying value of the loan

categories defined by regulatory authorities. These assets have an elevated level

as a percentage of the value of the property securing the loan, refreshed quarterly.

of risk and may have a high probability of default or total loss. Pass rated refers to

Home equity loans are evaluated using CLTV which measures the carrying value

all loans not considered reservable criticized. In addition to these primary credit

of the Corporation’s loan and available line of credit combined with any

quality indicators, the Corporation uses other credit quality indicators for certain

outstanding senior liens against the property as a percentage of the value of the

types of loans.

property securing the loan, refreshed quarterly. FICO score measures the

The following tables present certain credit quality indicators for the

creditworthiness of the borrower based on the financial obligations of the borrower

Corporation's Consumer Real Estate, Credit Card and Other Consumer, and

and the borrower’s credit history. FICO scores are typically refreshed quarterly or

Commercial portfolio segments, by class of financing receivables, at December 31,

more frequently. Certain borrowers (e.g., borrowers that have had debts

2019 and 2018.

discharged in a bankruptcy proceeding) may not have their FICO

Bank of America 114

Consumer Real Estate – Credit Quality Indicators

(1)

Core

Residential

Mortgage

Non-core

Residential

Mortgage

Core

Home Equity

Non-core Home

Equity

Core Residential

Mortgage

Non-core

Residential

Mortgage

Core

Home Equity

Non-core Home

Equity

(Dollars in millions) December 31, 2019 December 31, 2018

Refreshed LTV

Less than or equal to 90 percent $ 205,357 $ 7,433 $ 34,733 $ 4,127 $ 173,911 $ 10,272 $ 39,246 $ 6,478

Greater than 90 percent but less than or equal to 100 percent 3,100 273 226 348 2,349 533 354 715

Greater than 100 percent 1,049 267 267 507 817 545 410 1,083

Fully-insured loans

(2)

16,264 2,426 16,618 3,512

Total consumer real estate $ 225,770 $ 10,399 $ 35,226 $ 4,982 $ 193,695 $ 14,862 $ 40,010 $ 8,276

Refreshed FICO score

Less than 620 $ 2,127 $ 1,230 $ 751 $ 541 $ 2,125 $ 1,974 $ 1,064 $ 1,503

Greater than or equal to 620 and less than 680 4,821 1,053 1,550 800 4,538 1,719 2,008 1,720

Greater than or equal to 680 and less than 740 26,905 1,981 6,025 1,412 23,841 3,042 7,008 2,188

Greater than or equal to 740 175,653 3,709 26,900 2,229 146,573 4,615 29,930 2,865

Fully-insured loans

(2)

16,264 2,426 16,618 3,512

Total consumer real estate $ 225,770 $ 10,399 $ 35,226 $ 4,982 $ 193,695 $ 14,862 $ 40,010 $ 8,276

(1)

Excludes $594 million and $682 million of loans accounted for under the fair value option atDecember 31, 2019 and

2018.

(2)

Credit quality indicators are not reported for fully-insured loans as principal repayment is

insured.

Credit Card and Other Consumer – Credit Quality Indicators

Credit Direct/Indirect Credit Direct/Indirect

Card Consumer Other Consumer Card Consumer Other Consumer

(Dollars in millions) December 31, 2019 December 31, 2018

Refreshed FICO score

Less than 620 $ 5,179 $ 1,720 $ 5,016 $ 1,719

Greater than or equal to 620 and less than 680 12,277 2,734 12,415 3,124

Greater

than or equal to 680 and less than 740 35,301 8,460 35,781 8,921

Greater than or equal to 740 44,851 37,825 45,126 36,709

Other internal credit metrics

(1, 2)

40,259 $ 192 40,693 $ 202

Total credit card and other consumer $ 97,608 $ 90,998 $ 192 $ 98,338 $ 91,166 $ 202

(1)

Other internal credit metrics may include delinquency status, geography or other

factors.

(2)

Direct/indirect consumer includes $39.6 billion and $39.9 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk atDecember 31, 2019 and

2018.

Commercial – Credit Quality Indicators

(1)

Commercial U.S. Small

U.S. Non-U.S. Commercial Lease Business

Commercial Commercial Real Estate Financing Commercial

(2)

(Dollars in millions)

Risk ratings

Pass rated

Reservable criticized

Refreshed FICO score

$ 299,380

7,668

$ 104,051

915

December 31, 2019

$ 61,598

1,091

$ 19,551

329

$ 231

18

Less than 620 308

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

(3)

Total commercial $ 307,048 $ 104,966 $ 62,689 $ 19,880 $

756

2,267

4,607

7,146

15,333

Risk ratings

Pass rated

Reservable criticized

Refreshed FICO score

$ 291,918

7,359

$ 97,916

860

December 31, 2018

$ 59,910

935

$ 22,168

366

$ 389

29

Less than 620 264

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

(3)

Total commercial $ 299,277 $ 98,776 $ 60,845 $ 22,534 $

684

2,072

4,254

6,873

14,565

(1)

Excludes $7.7 billion and $3.7 billion of loans accounted for under the fair value option atDecember 31, 2019 and

2018.

(2)

At December 31, 2019 and 2018, U.S. small business commercial includes $715 million and $731 million of criticized business card and small business loans which are evaluated using refreshed FICO scores or internal credit metrics, including delinquency

status, rather than risk ratings. Refreshed FICO score and other internal credit metrics are applicable only to the U.S. small business commercial portfolio.

(3)

Other internal credit metrics may include delinquency status, application scores, geography or other factors. At bothDecember 31, 2019 and 2018, 99 percent of the balances where internal credit metrics are used were current or less than 30 days past

due.

115 Bank of America

Impaired Loans and Troubled Debt Restructurings

A loan is considered impaired when, based on current information, it is probable

that the Corporation will be unable to collect all amounts due from the borrower in

accordance with the contractual terms of the loan. For more information, see Note

1 – Summary of Significant Accounting Principles.

Consumer Real Estate

Impaired consumer real estate loans within the Consumer Real Estate portfolio

segment consist entirely of TDRs. Most modifications of consumer real estate

loans meet the definition of TDRs when a binding offer is extended to a borrower.

Modifications of consumer real estate loans are done in accordance with

government programs or the Corporation’s proprietary programs. These

modifications are considered to be TDRs if concessions have been granted to

borrowers experiencing financial difficulties. 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 $632 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 December 31, 2019, of which $101 million

were classified as nonperforming and $275 million were loans fully insured by the

FHA. For more information on loans discharged in Chapter 7 bankruptcy, see

Nonperforming Loans and Leases in this Note.

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 reached 180 days past due prior to modification had been

charged off to their net realizable value, less costs to sell, before they were

modified as TDRs in accordance with established policy. Therefore, modifications

of consumer real estate loans that are 180 or more days past due as TDRs do not

have an impact on the allowance for loan and lease losses nor are additional

charge-offs required at the time of modification. 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.

A t December 31, 2019 and 2018, 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 $229

million and $244 million at December 31, 2019 and 2018. The carrying value of

consumer real estate loans, including fully-insured loans, for which formal

foreclosure proceedings were in process at December 31, 2019 was $1.6 billion.

During 2019 and 2018, the Corporation reclassified $611 million and $670 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.

The following table provides the unpaid principal balance, carrying value and

related allowance at December 31, 2019 and 2018 and the average carrying value

and interest income recognized in 2019, 2018 and 2017 for impaired loans in the

Corporation’s Consumer Real Estate portfolio segment. Certain impaired

consumer real estate loans do not have a related allowance as the current

valuation of these impaired loans exceeded the carrying value, which is net of

previously recorded charge-offs.

Bank of America 116

Impaired Loans – Consumer Real Estate

Unpaid

Principal

Balance

Carrying

Value

Unpaid

Principal

Balance

Carrying

Value

(Dollars in millions) December 31, 2019 December 31, 2018

With no recorded allowance

Residential mortgage $ 4,224 $ 3,354 $ — $ 5,396 $ 4,268 $ —

Home equity 1,176 706 — 2,948 1,599 —

With an allowance recorded

Residential mortgage $ 1,426 $ 1,399 $ 70 $ 1,977 $ 1,929 $ 114

Home equity 543 523 69 812 760 144

Total

Residential mortgage $ 5,650 $ 4,753 $ 70 $ 7,373 $ 6,197 $ 114

Home equity 1,719 1,229 69 3,760 2,359 144

Average Interest Average Interest Average Interest

Carrying Income Carrying Income Carrying Income

Value Recognized

(1)

Value Recognized

(1)

Value Recognized

(1)

2019 2018 2017

With no recorded allowance

Residential mortgage $ 3,831 $ 155 $ 5,424 $ 207 $ 7,737 $ 311

Home equity 1,221 76 1,894 105 1,997 109

With an allowance recorded

Residential mortgage $ 1,635 $ 62 $ 2,409 $ 91 $ 3,414 $ 123

Home equity 637 22 861 25 858 24

Total

Residential mortgage $ 5,466 $ 217 $ 7,833 $ 298 $ 11,151 $ 434

Home equity 1,858 98 2,755 130 2,855 133

(1)

Interest income recognized includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing impaired loans for which the principal is considered

collectible.

The table below presents the December 31, 2019, 2018 and 2017 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of

consumer real estate loans that were modified in TDRs during 2019, 2018 and 2017. The following Consumer Real Estate portfolio segment tables include loans that were

initially classified as TDRs during the period and also loans that had previously been classified as TDRs and were modified again during the period.

Consumer Real Estate – TDRs Entered into During 2019, 2018 and 2017

Unpaid Principal Carrying Pre-Modification Post-Modification

Balance Value Interest Rate Interest Rate

(1)

(Dollars in millions) December 31, 2019

Residential mortgage $ 464 $ 377 4.19 % 4.13 %

Home equity 141 101 5.04 4.31

Total $ 605 $ 478 4.39 4.17

December 31, 2018

Residential mortgage $ 774 $ 641 4.33 % 4.21 %

Home equity 489 358 4.46 3.74

Total $ 1,263 $ 999 4.38 4.03

December 31, 2017

Residential mortgage $ 824 $ 712 4.43 % 4.16 %

Home equity 764 590 4.22 3.49

Total $ 1,588 $ 1,302 4.33 3.83

(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.

117 Bank of America

The table below presents the December 31, 2019, 2018 and 2017 carrying value for consumer real estate loans that were modified in a TDR during2019, 2018 and

2017, by type of modification.

Consumer Real Estate – Modification Programs

TDRs Entered into During

(Dollars in millions) 2019 2018 2017

Modifications under government programs

(1)

$ 35 $ 61 $ 85

Modifications under proprietary programs

(1)

174 523 437

Loans discharged in Chapter 7 bankruptcy

(2)

68 130 211

Trial modifications 201 285 569

Total modifications $ 478 $ 999 $ 1,302

(1)

Includes other modifications such as term or payment extensions and repayment plans. During2018, this included $198 million of modifications that met the definition of a TDR related to the 2017 hurricanes; there wereno such modifications in 2019 or

2017. These modifications were written down to their net realizable value less costs to sell or were fully insured as of December 31, 2018.

(2)

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 during2019, 2018 and 2017 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

(Dollars in millions) 2019 2018 2017

Modifications under government programs $ 26 $ 39 $ 81

Modifications under proprietary programs 88 158 138

Loans discharged in Chapter 7 bankruptcy

(1)

30 64 116

Trial modifications

(2)

57 107 391

Total modifications $ 201 $ 368 $ 726

(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

provide solutions to customers’ entire unsecured debt structures (external

Impaired loans within the Credit Card and Other Consumer portfolio segment

programs). The Corporation classifies other secured consumer loans that have

consist entirely of loans that have been modified in TDRs. The Corporation seeks

been discharged in Chapter 7 bankruptcy as TDRs which are written down to

to assist customers that are experiencing financial difficulty by modifying loans

collateral value and placed on nonaccrual status no later than the time of

while ensuring compliance with federal and local laws and guidelines. Credit card

discharge. For more information on the regulatory guidance on loans discharged in

and other consumer loan modifications generally involve reducing the interest rate

Chapter 7 bankruptcy, see Nonperforming Loans and Leases in this Note.

on the account, placing the customer on a fixed payment plan not exceeding 60

The following table provides the unpaid principal balance, carrying value and

months and canceling the customer’s available line of credit, all of which are

related allowance at December 31, 2019 and 2018 and the average carrying value

considered TDRs. The Corporation makes loan modifications directly with

for 2019, 2018 and 2017 on TDRs within the Credit Card and Other Consumer

borrowers for debt held only by the Corporation (internal programs). Additionally,

portfolio segment.

the Corporation makes loan modifications for borrowers working with third-party

renegotiation agencies that

Impaired Loans – Credit Card and Other Consumer

Unpaid Unpaid

Principal Carrying Related Principal Carrying Related

Balance Value

(1)

Allowance Balance Value

(1)

Allowance Average Carrying Value

(2)

(Dollars in millions) December 31, 2019 December 31, 2018 2019 2018 2017

With no recorded allowance

Direct/Indirect consumer $ 73 $ 32 $ — $ 72 $ 33 $ — $ 33 $ 30 $ 21

With an allowance recorded

Credit card

(3)

$ 633 $ 647 $ 188 $ 522 $ 533 $ 154 $ 594 $ 491 $ 511

(1)

Includes accrued interest and

fees.

(2)

The related interest income recognized, which includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing impaired loans for which the principal was considered

collectible, was not significant in 2019, 2018 and 2017.

(3)

The average carrying value in 2017 includes$47 million related to the non-U.S. credit card portfolio, which was sold in the second quarter of

2017.

Bank of America 118

The table below provides information on the Corporation’s primary modification programs for the Credit Card and Other Consumer TDR portfolio atDecember 31, 2019

and 2018.

Credit Card and Other Consumer – TDRs by Program Type at December 31

Credit Card Direct/Indirect Consumer Total TDRs by Program Type

(Dollars in millions) 2019 2018 2019 2018 2019 2018

Internal programs $ 339 $ 259 $ — $ — $ 339 $ 259

External programs 308 273 — — 308 273

Other — 1 32 33 32 34

Total $ 647 $ 533 $ 32 $ 33 $ 679 $ 566

Percent of balances current or less than 30 days past due 85% 85 % 78 % 81% 84 % 85%

The table below provides information on the Corporation’s Credit Card and Other Consumer TDR portfolio including theDecember 31, 2019, 2018 and 2017 unpaid

principal balance, carrying value, and average pre- and post-modification interest rates of loans that were modified in TDRs during 2019, 2018 and 2017.

Credit Card and Other Consumer – TDRs Entered into During 2019, 2018 and 2017

(Dollars in millions)

Credit card

Direct/Indirect consumer

Total

Credit card

Direct/Indirect consumer

Total

Credit card

Non-U.S. credit card

Total

(1)

Includes accrued interest and

fees.

Credit card and other consumer loans are deemed to be in payment default

during the quarter in which a borrower misses the second of two consecutive

payments. Payment defaults are one of the factors considered when projecting

future cash flows in the calculation of the allowance for loan and lease losses for

impaired credit card and other consumer loans. Based on historical experience,

the Corporation estimates that 14 percent of new credit card TDRs and20 percent

of new direct/indirect consumer TDRs may be in payment default within 12 months

after modification.

Commercial Loans

Impaired commercial loans include nonperforming loans and TDRs (both

performing and nonperforming). 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 customer 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

119 Bank of America

Unpaid Principal Carrying Pre-Modification Post-Modification

Balance Value

(1)

Interest Rate Interest Rate

December 31, 2019

$ 340 $ 355 19.18 % 5.35 %

40 21 5.23 5.21

$ 380 $ 376 18.42 5.34

December 31, 2018

$ 278 $ 292 19.49 % 5.24 %

42 23 5.10 4.95

$ 320 $ 315 18.45 5.22

December 31, 2017

$ 203 $ 213 18.47 % 5.32 %

37 22 4.81 4.30

$ 240 $ 235 17.17 5.22

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 there was no

forgiveness of principal and the interest rate was not decreased, the modification

may have little or no impact on the allowance established for the loan. 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. For

more information on modifications for the U.S. small business commercial portfolio,

see Credit Card and Other Consumer in this Note.

A t December 31, 2019 and 2018, remaining commitments to lend additional

funds to debtors whose terms have been modified in a commercial loan TDR were

$445 million and $297 million. The balance of commercial TDRs in payment default

was not significant at December 31, 2019 and 2018.

The table below provides information on impaired loans in the Commercial loan

portfolio segment including the unpaid principal balance, carrying value and related

allowance at December 31, 2019 and 2018, and the average carrying value for

2019, 2018 and 2017. Certain impaired commercial loans do not have a related

allowance because the valuation of these impaired loans exceeded the carrying

value, which is net of previously recorded charge-offs.

Impaired Loans – Commercial

Unpaid Unpaid

Principal

Balance

Carrying

Value

Principal

Balance

Carrying

Value

(1)

(Dollars in millions) December 31, 2019 December 31, 2018 2019 2018 2017

With no recorded allowance

U.S. commercial $ 534 $ 520 $ — $ 638 $ 616 $ — $ 635 $ 655 $ 772

Non-U.S. commercial 123 123 — 93 93 — 79 43 46

Commercial real estate 67 58 — — — — 96 44 69

Commercial lease financing 12 12 — — — — 5 3 —

With an allowance recorded

U.S. commercial $ 1,776 $ 1,574 $ 216 $ 1,437 $ 1,270 $ 121 $ 1,316 $ 1,162 $ 1,260

Non-U.S. commercial 113 113 9 155 149 30 218 327 463

Commercial real estate 322 236 64 247 162 16 149 46 73

Commercial lease financing 57 51 1 71 71 — 73 42 8

U.S. small business commercial

(2)

91 77 30 83 72 29 75 73 73

Total

U.S. commercial $ 2,310 $ 2,094 $ 216 $ 2,075 $ 1,886 $ 121 $ 1,951 $ 1,817 $ 2,032

Non-U.S. commercial 236 236 9 248 242 30 297 370 509

Commercial real estate 389 294 64 247 162 16 245 90 142

Commercial lease financing 69 63 1 71 71 — 78 45 8

U.S. small business commercial

(2)

91 77 30 83 72 29 75 73 73

(1)

The related interest income recognized, which includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing impaired loans for which the principal was considered

collectible, was not significant in 2019, 2018 and 2017.

(2)

Includes U.S. small business commercial renegotiated TDR loans and related

allowance.

Loans Held-for-sale

The Corporation had LHFS of $9.2 billion and $10.4 billion at December 31, 2019 and 2018. Cash and non-cash proceeds from sales and paydowns of loans originally

classified as LHFS were $30.6 billion, $29.2 billion and $41.3 billion for 2019, 2018 and 2017, respectively. Cash used for originations and purchases of LHFS totaled$28.9

billion, $28.1 billion and $43.5 billion for 2019, 2018 and 2017, respectively.

NOTE 6 Allowance for Credit Losses

The table below summarizes the changes in the allowance for credit losses by portfolio segment for2019, 2018 and 2017.

Consumer Credit Card and Other

Real Estate Consumer Commercial Total

(Dollars in millions) 2019

Allowance for loan and lease losses, January 1 $ 928 $ 3,874 $ 4,799 $ 9,601

Loans and leases charged off (522 ) (4,302 ) (822) (5,646 )

Recoveries of loans and leases previously charged off 927 911 160 1,998

Net charge-offs 405 (3,391 ) (662) (3,648 )

Provision for loan and lease losses (680) 3,512 742 3,574

Other

(1)

(107 ) 1 (5) (111 )

Allowance for loan and lease losses, December 31 546 3,996 4,874 9,416

Reserve for unfunded lending commitments, January 1 — — 797 797

Provision for unfunded lending commitments — — 16 16

Reserve for unfunded lending commitments, December 31 — — 813 813

Allowance for credit losses, December 31 $ 546 $ 3,996 $ 5,687 $ 10,229

2018

Allowance for loan and lease losses, January 1 $ 1,720 $ 3,663 $ 5,010 $ 10,393

Loans and leases charged off (690 ) (4,037 ) (675) (5,402 )

Recoveries of loans and leases previously charged off 664 823 152 1,639

Net charge-offs (26) (3,214 ) (523) (3,763 )

Provision for loan and lease losses (492) 3,441 313 3,262

Other

(1)

(274 ) (16) (1) (291 )

Allowance for loan and lease losses, December 31 928 3,874 4,799 9,601

Reserve for unfunded lending commitments, January 1 — — 777 777

Provision for unfunded lending commitments — — 20 20

Reserve for unfunded lending commitments, December 31 — — 797 797

Allowance for credit losses, December 31 $ 928 $ 3,874 $ 5,596 $ 10,398

2017

Allowance for loan and lease losses, January 1 $ 2,750 $ 3,229 $ 5,258 $ 11,237

Loans and leases charged off (770 ) (3,774 ) (1,075 ) (5,619 )

Recoveries of loans and leases previously charged off 657 809 174 1,640

Net charge-offs (113 ) (2,965 ) (901 ) (3,979 )

Provision for loan and lease losses

Other

(1)

Allowance for loan and lease losses, December 31

Reserve for unfunded lending commitments, January 1

Provision for unfunded lending commitments

Reserve for unfunded lending commitments, December 31

Allowance for credit losses, December 31 $

(710 )

(207 )

1,720

—

1,720 $

3,437

(38 )

3,663

—

3,663 $

654

(1 )

5,010

762

15

777

5,787

3,381

(246 )

10,393

762

15

777

$ 11,170

(1)

Primarily represents write-offs of purchased credit-impaired loans, the net impact of portfolio sales, and transfers to

LHFS.

Bank of America 120

The table below presents the allowance and the carrying value of outstanding loans and leases by portfolio segment atDecember 31, 2019 and 2018.

Consumer Credit Card and Other

(Dollars in millions)

Impaired loans and troubled debt restructurings

(1)

Allowance for loan and lease losses

Carrying value

(2)

Allowance as a percentage of carrying value

Loans collectively evaluated for impairment

Allowance for loan and lease losses

Carrying value

(2, 3)

Allowance as a percentage of carrying value

(3)

Total

Allowance for loan and lease losses

Carrying value

(2, 3)

Allowance as a percentage of carrying value

(3)

Impaired loans and troubled debt restructurings

(1)

Allowance for loan and lease losses

Carrying value

(2)

Allowance as a percentage of carrying value

Loans collectively evaluated for impairment

Allowance for loan and lease losses

Carrying value

(2, 3)

Allowance as a percentage of carrying value

(3)

Total

Allowance for loan and lease losses

Carrying value

(2, 3)

Allowance as a percentage of carrying value

(3)

Real Estate

$ 139 $

5,982

2.32 %

$ 407 $

270,395

0.15 %

$ 546 $

276,377

0.20 %

$ 258 $

8,556

3.02 %

$ 670 $

248,287

0.27 %

$ 928 $

256,843

0.36 %

Consumer Commercial Total

December 31, 2019

188 $ 320 $ 647

679 2,764 9,425

27.69 % 11.58 % 6.86 %

3,808 $ 4,554 $ 8,769

188,119 507,152 965,666

2.02 % 0.90 % 0.91 %

3,996 $ 4,874 $ 9,416

188,798 509,916 975,091

2.12 % 0.96 % 0.97 %

December 31, 2018

154 $ 196 $ 608

566 2,433 11,555

27.21 % 8.06 % 5.26 %

3,720 $ 4,603 $ 8,993

189,140 493,564 930,991

1.97 % 0.93 % 0.97 %

3,874 $ 4,799 $ 9,601

189,706 495,997 942,546

2.04 % 0.97 % 1.02 %

(1)

Impaired loans include nonperforming commercial loans and leases, as well as all TDRs, including both commercial and consumer TDRs. Impaired loans exclude nonperforming consumer loans unless they are TDRs, and all consumer and commercial

loans accounted for under the fair value option.

(2)

Amounts are presented gross of the allowance for loan and lease

losses.

(3)

Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of$8.3 billion and $4.3 billion at December 31, 2019 and

2018.

NOTE 7 Securitizations and Other Variable Interest

Entities

The Corporation utilizes VIEs in the ordinary course of business to support its own

and its customers’ financing and investing needs. The Corporation routinely

securitizes loans and debt securities using VIEs as a source of funding for the

Corporation and as a means of transferring the economic risk of the loans or debt

securities to third parties. The assets are transferred into a trust or other

securitization vehicle such that the assets are legally isolated from the creditors of

the Corporation and are not available to satisfy its obligations. These assets can

only be used to settle obligations of the trust or other securitization vehicle. The

Corporation also administers, structures or invests in other VIEs including CDOs,

investment vehicles and other entities. For more information on the Corporation’s

use of VIEs, see Note 1 – Summary of Significant Accounting Principles.

The tables in this Note present the assets and liabilities of consolidated and

unconsolidated VIEs at December 31, 2019 and 2018 in situations where the

Corporation has continuing involvement with transferred assets or if the

Corporation otherwise has a variable interest in the VIE. The tables also present

the Corporation’s maximum loss exposure at December 31, 2019 and 2018

resulting from its involvement with consolidated VIEs and unconsolidated VIEs in

which the Corporation holds a variable interest. The Corporation’s maximum loss

exposure is based on the unlikely event that all of the assets in the VIEs become

worthless and incorporates not only potential losses associated with assets

recorded on the Consolidated Balance Sheet but also potential losses associated

with off-balance sheet commitments, such as unfunded liquidity commitments and

other contractual

121 Bank of America

arrangements. The Corporation’s maximum loss exposure does not include losses

previously recognized through write-downs of assets.

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. 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 2019, 2018 and 2017 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 $1.1 billion and

$218 million at December 31, 2019 and 2018.

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, generally in the form of RMBS guaranteed by GSEs, FNMA and FHLMC

(collectively the GSEs), or the Government National Mortgage Association (GNMA)

primarily in the case of FHA-insured and U.S. Department of Veterans Affairs (VA)

-

guaranteed m

ortgage loans. Securitization usually occurs in conjunction with or

shortly after origination or purchase, and the Corporation may also securitize loans

held in its residential mortgage portfolio. In addition, the Corporation may, from

time to time, securitize commercial mortgages it originates

91

or purchases from other entities. The Corporation typically services the loans it the Corporation does not provide guarantees or recourse to the securitization

securitizes. Further, the Corporation may retain beneficial interests in the trusts other than standard representations and warranties.

securitization trusts including senior and subordinate securities and equity tranches The table below summarizes select information related to first-lien mortgage

issued by the trusts. Except as described in Note 13 – Commitments and securitizations for 2019, 2018 and 2017.

Contingencies,

First-lien Mortgage Securitizations

Residential Mortgage - Agency Commercial Mortgage

(Dollars in millions) 2019 2018 2017 2019 2018 2017

Proceeds from loan sales

(1)

$ 6,858 $ 5,801 $ 16,161 $ 8,661 $ 6,991 $ 5,887

Gains on securitizations

(2)

27 62 158 103 101

Repurchases from securitization trusts

(3)

881 1,485 2,713 — — —

(1)

The Corporation transfers residential mortgage loans to securitizations sponsored primarily by the GSEs or 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 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$64 million, $71 million and $243 million, net

of hedges, during 2019, 2018 and 2017, respectively, 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 at December 31, 2019 and 2018. For more information on MSRs, seeNote 21 –

consumer real estate loans. The unpaid principal balance of loans serviced for Fair Value Measurements.

investors, including residential mortgage and home equity loans, totaled $192.1 During 2019, the Corporation deconsolidated agency residential mortgage

billion and $226.6 billion at December 31, 2019 and 2018. Servicing fee and securitization trusts with total assets of $1.2 billion. There were no significant

ancillary fee income on serviced loans was $585 million, $710 million and $893 deconsolidations in 2018 or 2017.

million during 2019, 2018 and 2017. Servicing advances on serviced loans, The following table summarizes select information related to first-lien mortgage

including loans serviced for others and loans held for investment, were $2.4 billion securitization trusts in which the Corporation held a variable interest at December

and $3.3 billion 31, 2019 and 2018.

First-lien Mortgage VIEs

Residential Mortgage

Non-agency

Agency Prime Subprime Alt-A Commercial Mortgage

December 31

(Dollars in millions) 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018

Unconsolidated VIEs

Maximum loss exposure

(1)

$ 12,554 $ 16,011 $ 340 $ 448 $ 1,622 $ 1,897 $ 98 $ 217 $ 1,036 $ 767

On-balance sheet assets

Senior securities:

Trading account assets $ 627 $ 460 $ 5 $ 30 $ 54 $ 36 $ 24 $ 90 $ 65 $ 97

Debt securities carried at fair

value 6,392 9,381 193 246 1,178 1,470 72 125 — —

Held-to-maturity securities 5,535 6,170 — — — — — — 809 528

All other assets — — 2 3 49 37 2 2 38 40

Total retained positions $ 12,554 $ 16,011 $ 200 $ 279 $ 1,281 $ 1,543 $ 98 $ 217 $ 912 $ 665

Principal balance outstanding

(2)

$ 160,226 $ 187,512 $ 7,268 $ 8,954 $ 8,594 $ 8,719 $ 19,878 $ 23,467 $ 60,129 $ 43,593

Consolidated VIEs

Maximum loss exposure

(1)

$ 10,857 $ 13,296 $ 5 $ 7 $ 44 $ — $ — $ — $ — $ 76

On-balance sheet assets

Trading account assets $ 780 $ 1,318 $ 116 $ 150 $ 149 $ — $ — $ — $ — $ 76

Loans and leases, net 9,917 11,858 — — — — — — — —

All other assets 161 143 — — — — — — — —

Total assets $ 10,858 $ 13,319 $ 116 $ 150 $ 149 $ — $ — $ — $ — $ 76

Total liabilities $ 4 $ 26 $ 111 $ 143 $ 105 $ — $ — $ — $ — $ —

(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 13 – Commitments and Contingencies and Note 21 – 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.

Bank of America 122

Other Asset-backed Securitizations

The following table summarizes select information related to home equity, credit card and other asset-backed VIEs in which the Corporation held a variable interest at

December 31, 2019 and 2018.

Home Equity Loan, Credit Card and Other Asset-backed VIEs

Home Equity

(1)

Credit Card

(2, 3)

Resecuritization Trusts Municipal Bond Trusts

December 31

(Dollars in millions) 2019 2018 2019 2018 2019 2018 2019 2018

Unconsolidated VIEs

Maximum loss exposure $ 412 $ 908 $ — $ — $ 7,526 $ 7,647 $ 3,701 $ 2,150

On-balance sheet assets

Senior securities

(4)

:

Trading account assets $ — $ — $ — $ — $ 2,188 $ 1,419 $ — $ 26

Debt securities carried at fair value 11 27 — — 1,126 1,337 — —

Held-to-maturity securities — — — — 4,212 4,891 — —

Total retained positions $ 11 $ 27 $ — $ — $ 7,526 $ 7,647 $ — $ 26

Total assets of VIEs

(5)

$ 1,023 $ 1,813 $ — $ — $ 21,234 $ 16,949 $ 4,395 $ 2,829

Consolidated VIEs

Maximum loss exposure $ 64 $ 85 $ 17,915 $ 18,800 $ 54 $ 128 $ 2,656 $ 1,540

On-balance sheet assets

Trading account assets $ — $ — $ — $ — $ 73 $ 366 $ 2,480 $ 1,553

Loans and leases 122 133 26,985 29,906 — — — —

Allowance for loan and lease losses (2) (5) (800 ) (901) — — — —

All other assets 3 4 119 136 — — 176 1

Total assets $ 123 $ 132 $ 26,304 $ 29,141 $ 73 $ 366 $ 2,656 $ 1,554

On-balance sheet liabilities

Short-term borrowings $ — $ — $ — $ — $ — $ — $ 2,175 $ 742

Long-term debt 64 55 8,372 10,321 19 238 — 12

All other liabilities — — 17 20 — — — —

Total liabilities $ 64 $ 55 $ 8,389 $ 10,341 $ 19 $ 238 $ 2,175 $ 754

(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 13 – Commitments and Contingencies.

(2)

A t December 31, 2019 and 2018, loans and leases in the consolidated credit card trust included$10.5 billion and $11.0 billion of seller’s

interest.

(3)

At December 31, 2019 and 2018, all other assets in the consolidated credit card trust included unbilled accrued interest and

fees.

(4)

The retained senior securities were valued using quoted market prices or observable market inputs (Level 2 of the fair value

hierarchy).

(5)

Total assets of VIEs includes loans the Corporation transferred with which it has continuing involvement, which may include servicing the

loan.

Home Equity Loans Resecuritization Trusts

The Corporation retains interests, primarily senior securities, in home equity The Corporation transfers securities, typically MBS, into resecuritization VIEs at

securitization trusts to which it transferred home equity loans. In addition, the the request of customers seeking securities with specific characteristics. Generally,

Corporation may be obligated to provide subordinate funding to the trusts during a there are no significant ongoing activities performed in a resecuritization trust, and

rapid amortization event. This obligation is included in the maximum loss exposure no single investor has the unilateral ability to liquidate the trust.

in the table above. The charges that will ultimately be recorded as a result of the The Corporation resecuritized $24.4 billion, $22.8 billion and $25.1 billion of

rapid amortization events depend on the undrawn portion of the home equity lines securities during 2019, 2018 and 2017, respectively. Securities transferred into

of credit (HELOCs), performance of the loans, the amount of subsequent draws resecuritization VIEs were measured at fair value with changes in fair value

and the timing of related cash flows. recorded in market making and similar activities prior to the resecuritization and,

accordingly, no gain or loss on sale was recorded. During 2019, 2018 and 2017,

Credit Card Securitizations

resecuritization proceeds included securities with an initial fair value of $5.2 billion,

The Corporation securitizes originated and purchased credit card loans. The

$4.1 billion and $3.3 billion, respectively. Substantially all of the other securities

Corporation’s continuing involvement with the securitization trust includes servicing

received as resecuritization proceeds were classified as trading securities and

the receivables, retaining an undivided interest (seller’s interest) in the receivables,

were categorized as Level 2 within the fair value hierarchy.

and holding certain retained interests including subordinate interests in accrued

interest and fees on the securitized receivables.

Municipal Bond Trusts

During 2019, 2018 and 2017, new senior debt securities issued to third-party The Corporation administers municipal bond trusts that hold highly-rated, long-

investors from the credit card securitization trust were $1.3 billion, $4.0 billion and term, fixed-rate municipal bonds. The trusts obtain financing by issuing floating-

$3.1 b

illion, respectively. rate trust certificates that reprice on a weekly or other short-term basis to third-

At December 31, 2019 and 2018, the Corporation held subordinate securities party investors.

issued by the credit card securitization trust with a notional principal amount of The Corporation’s liquidity commitments to unconsolidated municipal bond

$7.4 billion and $7.7 billion. These securities serve as a form of credit trusts, including those for which the Corporation was transferor, totaled $3.7 billion

enhancement to the senior debt securities and have a stated interest rate of zero and $2.1 billion at December 31, 2019 and 2018. The weighted-average remaining

percent. During 2019, 2018 and 2017, the credit card securitization trust issued life of bonds held in the trusts at December 31, 2019 was 10.0 years. There were

$202 million, $650 million and $500 million, respectively, of these subordinate no significant write-downs or downgrades of assets or issuers during 2019, 2018

securities. and 2017.

123 Bank of America

Other Variable Interest Entities

The table below summarizes select information related to other VIEs in which the Corporation held a variable interest atDecember 31, 2019 and 2018.

Other VIEs

Consolidated Unconsolidated Total Consolidated Unconsolidated Total

(Dollars in millions)

Maximum loss exposure $ 4,055 $

On-balance sheet assets

Trading account assets $ 2,213 $

Debt securities carried at fair value —

Loans and leases 1,810

Allowance for loan and lease losses (2 )

All other assets 81

Total $ 4,102 $

On-balance sheet liabilities

Long-term debt $ 46 $

All other liabilities 2

Total $ 48 $

Total assets of VIEs $ 4,102 $

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 $2.2 billion and $2.1 billion at December 31, 2019 and 2018,

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.

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 $304 million and $421 million at

December 31, 2019 and 2018.

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 December

31, 2019 and 2018, the Corporation’s consolidated investment VIEs had total

assets of $104 million and $270 million. The Corporation also held investments in

unconsolidated VIEs with total assets of $32.4 billion and $37.7 billion at December

31, 2019 and 2018. The Corporation’s maximum loss exposure associated with

both consolidated and unconsolidated investment VIEs totaled $6.4 billion and

$7.2 billion at December 31, 2019 and 2018 comprised primarily of on-balance

sheet assets less non-recourse liabilities.

December 31

2019 2018

26,326 $ 30,381 $ 4,177 $ 24,498 $ 28,675

549 $ 2,762 $ 2,335 $ 860 $ 3,195

74 74 — 84 84

3,214 5,024 1,949 3,940 5,889

(38) (40 ) (2) (30) (32 )

20,547 20,628 53 18,885 18,938

24,346 $ 28,448 $ 4,335 $ 23,739 $ 28,074

— $ 46 $ 152 $ — $ 152

5,087 5,089 7 4,231 4,238

5,087 $ 5,135 $ 159 $ 4,231 $ 4,390

98,491 $ 102,593 $ 4,335 $ 94,746 $ 99,081

Leveraged Lease Trusts

The Corporation’s net investment in consolidated leveraged lease trusts totaled

$1.7 billion and $1.8 billion at December 31, 2019 and 2018. 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 $18.9 billion

and $17.0 billion at December 31, 2019 and 2018. 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 $10.0 billion

and $8.9 billion, including unfunded commitments to provide capital contributions

o f $4.3 billion and $3.8 billion at December 31, 2019 and 2018. The unfunded

commitments are expected to be paid over the next five years. During 2019, 2018

a n d 2017, the Corporation recognized tax credits and other tax benefits from

investments in affordable housing partnerships of $1.0 billion, $981 million and

$1.0 billion and reported pretax losses in other income of$882 million, $798 million

a n d $766 million, respectively. Tax credits are recognized as part of the

Corporation’s annual effective tax rate used to determine tax expense in a given

quarter. Accordingly, the portion of a year’s expected tax benefits recognized in

any given quarter may differ from 25 percent. The Corporation may from time to

time be asked to invest additional amounts to support a troubled affordable

housing project. Such additional investments have not been and are not expected

to be significant.

Bank of America 124

NOTE 8 Goodwill and Intangible Assets

Goodwill

The table below presents goodwill balances by business segment andAll Other at

December 31, 2019 and 2018. The reporting units utilized for goodwill impairment

testing are the operating segments or one level below.

Goodwill

December 31

(Dollars in millions) 2019 2018

Consumer Banking $ 30,123 $ 30,123

Global Wealth & Investment Management 9,677 9,677

Global Banking 23,923 23,923

Global Markets 5,182 5,182

All Other 46 46

Total goodwill $ 68,951 $ 68,951

During 2019, the Corporation completed its annual goodwill impairment test as

of June 30, 2019 using qualitative assessments for all applicable reporting units.

Based on the results of the annual goodwill impairment test, the Corporation

determined there was no impairment. For more information on the use of

qualitative assessments, see Note 1 – Summary of Significant Accounting

Principles.

Intangible Assets

At December 31, 2019 and 2018, the net carrying value of intangible assets was

$1.7 billion and $1.8 billion. At December 31, 2019 and 2018, intangible assets

included $1.6 billion of intangible assets associated with trade names,

substantially all of which had an indefinite life and, accordingly, are not being

amortized. Amortization of intangibles expense was $112 million, $538 million and

$621 million for 2019, 2018 and 2017, respectively.

NOTE 9 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 on lease financing receivables, seeNote 5 – Outstanding Loans

and Leases.

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.

A t December 31, 2019, the total net investment in sales-type and direct

financing leases was $21.9 billion, comprised of $19.3 billion in lease receivables

a n d $2.6 billion in unguaranteed residuals. 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 $5.8 billion.

For 2019, total lease income was $1.7 billion, consisting of $797 million from

sales-type and direct financing leases and $891 million from operating leases.

Lessee Arrangements

The Corporation’s lessee arrangements predominantly consist of operating leases

for premises and equipment; the Corporation’s

125 Bank of America

financing leases are not significant. Right-of-use assets were $9.7 billion and lease

liabilities were $10.1 billion at December 31, 2019. The weighted-average discount

rate used to calculate the present value of future minimum lease payments was

four percent.

Lease terms may contain renewal and extension options and early termination

features. Generally, these options do not impact the lease term because the

Corporation is not reasonably certain that it will exercise the options. The weighted-

average lease term was 8.2 years at December 31, 2019.

The table below provides the components of lease cost and supplemental

information for 2019.

Lease Cost and Supplemental Information for 2019

(Dollars in millions)

Operating lease cost $ 2,085

Variable lease cost

(1)

498

Total lease cost

(2)

$ 2,583

Right-of-use assets obtained in exchange for new operating lease

liabilities

(3)

$ 931

Operating cash flows from operating leases

(4)

2,009

(1)

Primarily consists of payments for common area maintenance and property

taxes.

(2)

Amounts are recorded in occupancy and equipment expense in the Consolidated Statement of

Income.

(3)

Represents non-cash activity and, accordingly, is not reflected in the Consolidated Statement of Cash

Flows.

(4)

Represents cash paid for amounts included in the measurement of lease

liabilities.

Maturity Analysis

The maturities of lessor and lessee arrangements outstanding atDecember 31,

2019 are presented in the table below based on undiscounted cash flows.

Maturities of Lessor and Lessee Arrangements

Lessor Lessee

(1)

Operating

Leases

Sales-type and

Direct Financing

Leases

(2)

Operating

Leases

(Dollars in millions) December 31, 2019

2020 $ 843 $ 4,657 $ 1,966

2021 746 4,887 1,763

2022 651 4,259 1,502

2023 530 3,416 1,240

2024 397 1,939 1,098

Thereafter 1,057 1,910 4,225

Total undiscounted

cash flows $ 4,224 21,068 11,794

Less: Net present

value adjustment 1,756 1,701

Total

(3)

$ 19,312 $ 10,093

(1)

Excludes $1.5 billion in commitments under lessee arrangements that have not yet commenced with lease terms that will

begin in 2020.

(2)

Includes $15.1 billion in commercial lease financing receivables and$4.2 billion in direct/indirect consumer lease financing

receivables.

(3)

Represents lease receivables for lessor arrangements and lease liabilities for lessee

arrangements.

A t December 31, 2018, operating lease commitments under lessee

arrangements were $2.4 billion, $2.2 billion, $2.0 billion, $1.7 billion and $1.3 billion

for 2019 through 2023, respectively, and $6.2 billion in the aggregate for all years

thereafter. These amounts include variable lease payments and commitments

under leases that have not yet commenced, both of which are excluded from the

lessee maturity analysis presented in the table above.

NOTE 10 Deposits

The table below presents information about the Corporation’s time deposits of $100 thousand or more atDecember 31, 2019 and 2018. The Corporation also had

aggregate time deposits of $15.8 billion and $16.4 billion in denominations that met or exceeded the Federal Deposit Insurance Corporation (FDIC) insurance limit at

December 31, 2019 and 2018.

Time Deposits of $100 Thousand or More

(Dollars in millions)

U.S. certificates of deposit and other time deposits

Non-U.S. certificates of deposit and other time deposits

$

Three Months

or Less

16,115

7,108

December 31, 2019

Over Three

Months to

Twelve Months Thereafter

$ 21,351 $ 2,273

4,821 1,105

$

Total

39,739

13,034

$

December 31

2018

Total

29,505

10,792

The scheduled contractual maturities for total time deposits at December 31, 2019 are presented in the table below.

Contractual Maturities of Total Time Deposits

(Dollars in millions) U.S. Non-U.S. Total

Due in 2020 $ 56,351 $ 12,000 $ 68,351

Due in 2021 3,503 101 3,604

Due in 2022 990 18 1,008

Due in 2023 280 15 295

Due in 2024 187 981 1,168

Thereafter 212 35 247

Total time deposits $ 61,523 $ 13,150 $ 74,673

NOTE 11 Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings and Restricted

Cash

The table below presents federal funds sold or purchased, securities financing agreements (which include securities borrowed or purchased under agreements to resell and

securities loaned or sold under agreements to repurchase) and short-term borrowings. The Corporation elects to account for certain securities financing agreements and

short-term borrowings under the fair value option. For more information on the fair value option, see Note 22 – Fair Value Option.

Amount Rate Amount Rate

(Dollars in millions)

Federal funds sold and securities borrowed or purchased under agreements to resell

Average during year

Maximum month-end balance during year

Federal funds purchased and securities loaned or sold under agreements to repurchase

Average during year

Maximum month-end balance during year

Short-term borrowings

Average during year

Maximum month-end balance during year

$

2019

279,610

281,684

201,797

203,063

24,301

36,538

1.73 %

n/a

2.31 %

n/a

2.42

n/a

$

2018

251,328

279,350

193,681

201,089

36,021

52,480

1.26 %

n/a

1.80 %

n/a

2.69

n/a

n/a = not applicable

Bank of America, N.A. maintains a global program to offer up to a maximum of

$75 billion outstanding at any one time, of bank notes with fixed or floating rates

and maturities of at least seven days from the date of issue. Short-term bank notes

outstanding under this program totaled $11.7 billion and $12.1 billion at December

31, 2019 and 2018. These short-term bank notes, along

with Federal Home Loan

Bank advances, U.S. Treasury tax and loan notes, and term federal funds

purchased, are included in short-term borrowings on the Consolidated Balance

Sheet.

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 an

d finance inventory positions. Substantially all of the

Corporation’s securities financing activities are transacted under legally

enforceable master repurchase agreements or legally enforceable master

securities lending agreements that give the Corporation,

in the event of default by the counterparty, the right to liquidate securities held and

to offset receivables and payables with the same counterparty. The Corporation

offsets securities financing transactions with the same counterparty on the

Consolidated Balance Sheet where it has such a legally enforceable master

netting agreement and the transactions have the same maturity date.

The Securities Financing Agreements table presents securities financing

agreements included on the Consolidated Balance Sheet in federal funds sold and

securities bor

rowed or purchased under agreements to resell, and in federal funds

purchased and securities loaned or sold under agreements to repurchase at

December 31, 2019 and 2018. Balances are presented on a gross basis, prior to

the application of counterparty netting. Gross assets and liabilities are adjusted on

an aggregate basis to take into consideration the effects of legally enforceable

master netting agr

eements. For more information on the offsetting of derivatives,

see Note 3 – Derivatives.

Bank of America 126

Securities Financing Agreements

Gross

Assets/Liabilities

(1)

Amounts Offset

Net Balance Sheet

Amount

Financial

Instruments

(2)

Net Assets/Liabilities

(Dollars in millions) December 31, 2019

Securities borrowed or purchased under agreements to resell

(3)

$ 434,257 $ (159,660 ) $ 274,597 $ (244,486 ) $ 30,111

Securities loaned or sold under agreements to repurchase $ 324,769 $ (159,660 ) $ 165,109 $ (141,482 ) $ 23,627

Other

(4)

15,346 — 15,346 (15,346 ) —

Total $ 340,115 $ (159,660 ) $ 180,455 $ (156,828 ) $ 23,627

December 31, 2018

Securities borrowed or purchased under agreements to resell

(3)

$ 366,274 $ (106,865 ) $ 259,409 $ (240,790 ) $ 18,619

Securities loaned or sold under agreements to repurchase $ 293,853 $ (106,865 ) $ 186,988 $ (176,740 ) $ 10,248

Other

(4)

19,906 — 19,906 (19,906 ) —

Total $ 313,759 $ (106,865 ) $ 206,894 $ (196,646 ) $ 10,248

(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 $12.9 billion and $11.5 billion reported in loans and leases on the Consolidated Balance Sheet atDecember 31, 2019 and

2018.

(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

securities lending agreement and receives securities that can be pledged as

collateral or sold. Certain agreements contain a right to substitute collateral and/or

Accounted for as Secured Borrowings

terminate the agreement prior to maturity at the option of the Corporation or the

The following tables present securities sold under agreements to repurchase and

counterparty. Such agreements are included in the table below based on the

securities loaned by remaining contractual term to maturity and class of collateral

remaining contractual term to maturity.

pledged. Included in “Other” are transactions where the Corporation acts as the

lender in a

Remaining Contractual Maturity

(Dollars in millions)

Securities sold under agreements to repurchase

Securities loaned

Other

$

Overnight and

Continuous

129,455

18,766

15,346

$

30 Days or Less

122,685

3,329

—

After 30 Days Through

90 Days

December 31, 2019

$ 25,322

1,241

—

$

Greater than

90 Days

(1)

21,922

2,049

—

$

Total

299,384

25,385

15,346

Total $ 163,567 $ 126,014 $ 26,563 $ 23,971 $ 340,115

December 31, 2018

Securities sold under agreements to repurchase $ 139,017 $ 81,917 $ 34,204 $ 21,476 $ 276,614

Securities loaned 7,753 4,197 1,783 3,506 17,239

Other 19,906

— —

— 19,906

Total $ 166,676 $ 86,114 $ 35,987 $ 24,982 $ 313,759

(1)

No agreements have maturities greater than three

years.

Class of Collateral Pledged

Securities Sold Under

Agreements to

Repurchase

Securities

Loaned Other Total

(Dollars in millions) December 31, 2019

U.S. government and agency securities $ 173,533 $ 1 $ — $ 173,534

Corporate securities, trading loans and other 10,467 2,014 258 12,739

Equity securities 14,933 20,026 15,024 49,983

Non-U.S. sovereign debt 96,576 3,344 64 99,984

Mortgage trading loans and ABS 3,875 — — 3,875

Total $ 299,384 $ 25,385 $ 15,346 $ 340,115

December 31, 2018

U.S. government and agency securities $ 164,664 $ — $ — $ 164,664

Corporate securities, trading loans and other 11,400 2,163 287 13,850

Equity securities 14,090 10,869 19,572 44,531

Non-U.S. sovereign debt 81,329 4,207 47 85,583

Mortgage trading loans and ABS 5,131 — — 5,131

Total $ 276,614 $ 17,239 $ 19,906 $ 313,759

127 Bank of America

Under repurchase agreements, the Corporation is required to post collateral group of counterparties, providing a range of securities collateral and pursuing

with a market value equal to or in excess of the principal amount borrowed. For longer durations, when appropriate.

securities loaned transactions, the Corporation receives collateral in the form of

cash, letters of credit or other securities. To determine whether the market value of

Restricted Cash

the underlying collateral remains sufficient, collateral is generally valued dai

ly, and

A t December 31, 2019 and 2018, the Corporation held restricted cash included

the Corporation may be required to deposit additional collateral or may receive or

within cash and cash equivalents on the Consolidated Balance Sheet of $24.4

return collateral pledged when appropriate. Repurchase agreements and securities

billion and $22.6 billion, predominantly related to cash held on deposit with the

loaned transactions are generally either overnight, continuous (i.e., no stated term)

Federal Reserve Bank and non-U.S. central banks to meet reserve req

uirements

or short-term. The Corporation manages liquidity risks related to these agreements

and cash segregated in compliance with securities regulations.

by sourcing funding from a diverse

NOTE 12 Long-term Debt

Long-term debt consists of borrowings having an original maturity of one year or more.The table below presents the balance of long-term debt atDecember 31, 2019 and

2018, and the related contractual rates and maturity dates as ofDecember 31, 2019.

(Dollars in millions)

Notes issued by Bank of America Corporation

(1)

Weighted-average

Rate Interest Rates Maturity Dates 2019

December 31

2018

Senior notes:

Fixed

Floating

Senior structured notes

Subordinated notes:

3.30 %

1.81

0.25 - 8.05

0.25 - 6.68

% 2020 - 2050

2020 - 2044

$ 140,265

19,552

16,941

$ 120,548

25,574

13,815

Fixed

Floating

Junior subordinated notes:

4.89

2.74

2.94 - 8.57

2.56 - 2.89

2021 - 2045

2022 - 2026

21,632

782

20,843

1,742

Fixed

6.71 6.45 - 8.05 2027 - 2066 736 732

Floating

(2)

2.71 2.71 2056 1 1

Total notes issued by Bank of America Corporation

Notes issued by Bank of America, N.A.

199,909 183,255

Senior notes:

Fixed

3.34 3.34 2023 508 —

Floating

Subordinated notes

Advances from Federal Home Loan Banks:

2.18

6.00

1.99 - 2.51

6.00

2020 - 2041

2036

6,519

1,744

1,770

1,617

Fixed

4.98 0.01 - 7.72 2020 - 2034 112 130

Floating

Securitizations and other BANA VIEs

(3)

Other

1.79 1.77 - 1.84 2020 2,500

8,373

402

14,751

10,326

442

Total notes issued by Bank of America, N.A.

Other debt

20,158 29,036

Structured liabilities

20,442 16,483

Nonbank VIEs

(3)

347 618

Total other debt

Total long-term debt

$

20,789

240,856 $

17,101

229,392

(1)

Includes total loss-absorbing capacity compliant

debt.

(2)

Includes amounts related to trust preferred securities. For more information, see Trust Preferred Securities in this

Note.

(3)

Represents liabilities of consolidated VIEs included in total long-term debt on the Consolidated Balance

Sheet.

During 2019, the Corporation issued $52.5 billion of long-term debt consisting

of $29.3 billion of notes issued by Bank of America Corporation, $10.9 billion of

notes issued by Bank of America, N.A. and $12.3 billion of other debt, substantially

all of which was structured liabilities. During 2018, the Corporation issued $64.4

billion of long-term debt consisting of$30.7 billion of notes issued by Bank of

America Corporation, $18.7 billion of notes issued by Bank of America, N.A. and

$15.

0 billion of other debt, substantially all of which was structured liabilities.

Durin g 2019, the Corporation had total long-term debt maturities and

redemptions in the aggregate of $50.6 billion consisting of $21.1 billion for Bank of

America Corporation, $19.9 billion for Bank of America, N.A. and$9.6 billion of

other debt. During 2018, the Corporation had total long-term debt maturities and

redempti

ons in the aggregate of $53.3 billion consisting of $29.8 billion for Bank of

America Corporation, $11.2 billion for Bank of America, N.A. and$12.3 billion of

other debt.

Bank of America Corporation and Bank of America, N.A. maintain various U.S.

and non-U.S. debt programs to offer both senior and subordinated notes. The

notes may be denominated in U.S. dollars or foreign currencies. At December 31,

2

019 and 2018, the amount of foreign currency-denominated debt translated into

U.S. dollars included in total long-term debt was $49.6 billion and $48.6 billion.

Foreign currency contracts may be used to convert certain foreign currency-

denominated debt into U.S. dollars.

At December 31, 2019, long-term debt of consolidated VIEs in the table above

included debt from credit card, residential mortgage, h

ome equity, other VIEs and

ABS of $8.4 billion, $217 million, $64 million, $46 million and $19 million,

respectively. Long-term debt of VIEs is collateralized by the assets of the VIEs. For

more information, see Note 7 – Securitizations and Other Variable Interest Entities.

Bank of America 128

The weighted-average effective interest rates for total long-term debt (excluding

senior structured notes), total fixed-rate debt and total floating-rate debt were 3.26

percent, 3.55 percent and 1.92 percent, respectively, at December 31, 2019, and

3.29 percent, 3.66 percent and 2.26 percent, respectively, at December 31, 2018.

The Corporation’s ALM activities maintain an overall interest rate risk ma

nagement

strategy that incorporates the use of interest rate contracts to manage fluctuations

in earnings that are caused by interest rate volatility. The Corporation’s goal is to

manage interest rate sensitivity so that movements in interest rates do not

significantly adversely affect earnings and capital. The weighted-average rates are

the contractual interest rates on the debt and do not reflect the

impacts of

derivative transactions.

Debt outstanding of $5.7 billion at December 31, 2019 was issued by BofA

Finance LLC, a 100 percent owned finance

subsidiary of Bank of America Corporation, the parent company, and is fully and

unconditionally guaranteed by the parent company.

The table below shows the carrying value for aggregate annual contractual

maturities of long-term debt as of December 31, 201

9. Included in the table are

certain structured notes issued by the Corporation that contain provisions whereby

the borrowings are redeemable at the option of the holder (put options) at specified

dates prior to maturity. Other structured notes have coupon or repayment terms

linked to the performance of debt or equity securities, indices, currencies or

commodities, and the maturity may be accelerated b

ased on the value of a

referenced index or security. In both cases, the Corporation or a subsidiary may be

required to settle the obligation for cash or other securities prior to the contractual

maturity date. These borrowings are reflected in the table as maturing at their

contractual maturity date.

Long-term Debt by Maturity

(Dollars in millions) 2020 2021 2022 2023 2024 Thereafter Total

Bank of America Corporation

Senior notes

$ 9,312 $ 15,978 $ 14,875 $ 23,045 $ 17,236 $ 79,371 $ 159,817

Senior structured notes

822 453 2,232 288 547 12,599 16,941

Subordinated notes

— 360 386 — 3,213 18,455 22,414

Junior subordinated notes

(1)

— — — — — 737 737

Total Bank of America Corporation 10,134 16,791 17,493 23,333 20,996 111,162 199,909

Bank of America, N.A.

Senior notes

3,000 3,499 — 509 — 19 7,027

Subordinated notes

— — — — — 1,744 1,744

Advances from Federal Home Loan Banks

2,509 2 3 1 — 97 2,612

Securitizations and other Bank VIEs

(2)

3,099 4,080 1,185 9 — — 8,373

Other

134 55 — 130 — 83 402

Total Bank of America, N.A. 8,742 7,636 1,188 649 — 1,943 20,158

Other debt

Structured liabilities

5,275 1,884 1,057 1,372 745 10,109 20,442

Nonbank VIEs

(2)

— — — 1 — 346 347

Total other debt 5,275 1,884 1,057 1,373 745 10,455 20,789

Total long-term debt $ 24,151 $ 26,311 $ 19,738 $ 25,355 $ 21,741 $ 123,560 $ 240,856

(1)

Includes amounts related to trust preferred securities. For more information, see Trust Preferred Securities in this

Note.

(2)

Represents liabilities of consolidated VIEs included in total long-term debt on the Consolidated Balance

Sheet.

Trust Preferred Securities

At December 31, 2019, trust preferred securities (Trust Securities) with a carrying

value of $1 million, issued by BAC Capital Trust XV (the Trust), a100 percent

owned, non-consolidated finance subsidiary of the Corporation, were issued and

outstanding. The Trust Securities are mandatorily redeemable preferred security

obligations of the Trust. The sole asset of the Trust is a junior subordinated

deferrable int

erest note of the Corporation (the Note).

Periodic cash payments and payments upon liquidation or redemption with

respect to Trust Securities are guaranteed by the Corporation to the extent of

funds held by the Trust (the Preferred Securities Guarantee). The Preferred

Securities Guarantee, when taken together with the Corporation’s other obligations

including its obligations under the Note, generally w

ill constitute a full and

unconditional guarantee, on a subordinated basis, by the Corporation of payments

due on the Trust Securities.

NOTE 13 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

ma

rket risk limitation

129 Bank of America

reviews as those instruments recorded on the Consolidated Balance Sheet.

Credit Extension Commitments

The Corporation enters into commitments to extend credit such as loan

commitments, 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 di

stributed (i.e., syndicated or

participated) to other financial institutions. The distributed amounts were $10.6

billion and $10.7 billion at December 31, 2019 and 2018. At December 31, 2019,

the carrying value of these commitments, excluding commitments accounted for

under the fair value option, was $829 million, including deferred revenue of$16

million and a reserve for unfunded lending commitments

of$813 million. At

December 31, 2018, the comparable amounts were $813 million, $16 million and

$797 million, respectively. 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.

The table below includes the notional amount of commitments of$4.4 billion which is classified in accrued expenses and other liabilities. For more information

and $3.1 billion at December 31, 2019 and 2018 that are accounted for under the regarding the Corporation’s loan commitments accounted for under the fair value

fair value option. However, the table excludes cumulative net fair value of $90 option, see Note 22 – Fair Value Option.

million and $169 million at December 31, 2019 and 2018 on these commitments,

Credit Extension Commitments

Expire After One Expire After Three Years

Expire in One Year Through Through Expire After

Year or Less Three Years Five Years Five Years Total

(Dollars in millions) December 31, 2019

Notional amount of credit extension commitments

Loan commitments

(1)

$ 97,454 $ 148,000 $ 173,699 $ 24,487 $ 443,640

Home equity lines of credit 1,137 1,948 6,351 34,134 43,570

Standby letters of credit and financial guarantees

(2)

21,311 11,512 3,712 408 36,943

Letters of credit

(3)

1,156 254 65 25 1,500

Legally binding commitments 121,058 161,714 183,827 59,054 525,653

Credit card lines

(4)

376,067 — — — 376,067

Total credit extension commitments $ 497,125 $ 161,714 $ 183,827 $ 59,054 $ 901,720

December 31, 2018

Notional amount of credit extension commitments

Loan commitments

(1)

$ 84,910 $ 142,271 $ 155,298 $ 22,683 $ 405,162

Home equity lines of credit 2,578 2,249 3,530 34,702 43,059

Standby letters of credit and financial guarantees

(2)

22,571 9,702 2,457 1,074 35,804

Letters of credit

(3)

1,168 84 69 57 1,378

Legally binding commitments 111,227 154,306 161,354 58,516 485,403

Credit card lines

(4)

371,658 — — — 371,658

Total credit extension commitments $ 482,885 $ 154,306 $ 161,354 $ 58,516 $ 857,061

(1)

A t December 31, 2019 and 2018, $5.1 billion and $4.3 billion of these loan commitments are 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$27.9 billion and $8.6 billion at December 31, 2019,

and $28.3 billion and $7.1 billion at December 31, 2018. Amounts in the table include consumer SBLCs of$413 million and $372 million at December 31, 2019 and 2018.

(3)

At December 31, 2019 and 2018, included are letters of credit of $1.4 billion and $422 million related to certain liquidity commitments of VIEs. For more information, seeNote 7 – Securitizations and Other Variable Interest

Entities.

(4)

Includes business card unused lines of

credit.

Other Commitments

At December 31, 2019 and 2018, the Corporation had commitments to purchase

loans (e.g., residential mortgage and commercial real estate) of $86 million and

$329 million, which upon settlement will be included in loans or LHFS, and

commitments to purchase commercial loans of $1.1 billion and $463 million, which

upon settlement will be included in tr

ading account assets.

A t December 31, 2019 and 2018, the Corporation had commitments to

purchase commodities, primarily liquefied natural gas, of $830 million and $1.3

billion, which upon settlement will be included in trading account assets.

At December 31, 2019 and 2018, the Corporation had commitments to enter

into resale and forward-dated resale and securities borrowing agreements of $97.2

billion a

nd $59.7 billion, and commitments to enter into forward-dated repurchase

and securities lending agreements of $24.9 billion and $21.2 billion. These

commitments expire primarily within the next 12 months.

A t December 31, 2019 and 2018, the Corporation had a commitment to

originate or purchase up to $3.3 billion and $3.0 billion on a rolling 12-month basis,

of auto loans and leases from a strategic part

ner. This commitment extends

through November 2022 and can be terminated with 12 months prior notice.

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

December 31, 2019 and 2018, the notional amount of these guarantees totaled

$

7.3 billion and

$9.8 billion. At December 31, 2019 and 2018, the Corporation’s maximum

exposure related to these guarantees totaled $1.1 billion and $1.5 billion, with

estimated maturity dates between 2033 and 2039.

Indemnifications

In the ordinary course of business, the Corporation enters into various agreements

that contain indemnifications, such as tax indemnifications, whereupon payment

may become

due if certain external events occur, such as a change in tax law. The

indemnification clauses are often standard contractual terms and were entered into

in the normal course of business based on an assessment that the risk of loss

would be remote. These agreements typically contain an early termination clause

that permits the Corporation to exit the agreement upon these events. The

maximum potential f

uture payment under indemnification agreements is difficult to

assess for several reasons, including the occurrence of an external event, the

inability to predict future changes in tax and other laws, the difficulty in determining

how such laws would apply to parties in contracts, the absence of exposure limits

contained in standard contract language and the timing of any early termination

clauses. His

torically, any payments made under these guarantees have been de

minimis. The Corporation has assessed the probability of making such payments

in the future as remote.

Merchant Services

In accordance with credit and debit card association rules, the Corporation

sponsors merchant processing servicers that process credit and debit card

transactions on behalf of various merchants. If a merchant processor f

ails to meet

its obligation regarding

Bank of America 130

disputed transactions, then the Corporation could be held liable. In2019 and 2018,

the sponsored entities processed $916.6 billion and $874.3 billion of transactions

and recorded losses of $24 million and $31 million.

A t December 31, 2019 and 2018, the maximum potential exposure for

sponsored transactions totaled $384.2 billion and $348.1 billion. However, the

Corporation believes that the maximum pot

ential exposure is not representative of

the actual potential loss exposure and does not expect to make material payments

in connection with these guarantees.

A significant portion of the Corporation's merchant processing activity is

performed by a joint venture, formed in 2009, in which the Corporation holds a 49

percent ownership interest. The carrying value of the Corporation’s investment was

$640 mi

llion and $2.8 billion at December 31, 2019 and 2018. The joint venture is

accounted for as an equity method investment and reported in All Other. On July

29, 2019, the Corporation gave notice to the joint venture partner of the termination

of the joint venture upon the conclusion of its current term in June 2020. As a

result, the Corporation incurred a non-cash, pretax impairment charge in 2019 of

$2.

1 billion, included in other general operating expense.

Exchange and Clearing House Member Guarantees

The Corporation is a member of various securities and derivative exchanges and

clearinghouses, both in the U.S. and other countries. As a member, the

Corporation may be required to pay a pro-rata share of the losses incurred by

some of these organizations as a result of another member default and under

other

loss scenarios. The Corporation’s potential obligations may be limited to its

membership interests in such exchanges and clearinghouses, to the amount (or

multiple) of the Corporation’s contribution to the guarantee fund or, in limited

instances, to the full pro-rata share of the residual losses after applying the

guarantee fund. The Corporation’s maximum potential exposure under these

membership

agreements is difficult to estimate; however, the Corporation has

assessed the probability of making any such payments as remote.

Prime Brokerage and Securities Clearing Services

In connection with its prime brokerage and clearing businesses, the Corporation

performs securities clearance and settlement services with other brokerage firms

and clearinghouses on behalf of its clients. Under these arrangem

ents, the

Corporation stands ready to meet the obligations of its clients with respect to

securities transactions. The Corporation’s obligations in this respect are secured

by the assets in the clients’ accounts and the accounts of their customers as well

as by any proceeds received from the transactions cleared and settled by the

Corporation on behalf of clients or their customers. The Corporation’s m

aximum

potential exposure under these arrangements is difficult to estimate; however, the

potential for the Corporation to incur material losses pursuant to these

arrangements is remote.

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 $8.7 billion and $5.9 billion at December 31, 2019

and 2018. The estimated maturity dates of these obligations extend up to 2049.

The Corporation has made

131 Bank of America

no material payments under these guarantees. For more information on maximum

potential future payments under VIE-related liquidity commitments, see Note 7 –

Securitizations and Other Variable Interest Entities.

During 2019, the Corporation recognized a loss of $210 million in other income

under its indemnity obligation in connection with the 2017 sale of its non-U.S.

consumer credit card business (payment protection insurance).

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 100 percent owned 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.

Representations and Warranties Obligations and Corporate

Guarantees

The Corporation securitizes first-lien residential mortgage loans generally in the

form of RMBS guaranteed by the GSEs or by GNMA in the case of FHA-insured,

VA-guaranteed and Rural Housing Service-guaranteed mortgage loans, and sells

pools of first-lien residential mortgage loans in the form of whole loans. In addition,

in prior years, legacy companies and certain subsidiaries sold pools of first-lien

residential mortgage loan

s and home equity loans as private-label securitizations

or in the form of whole loans. In connection with these transactions, the

Corporation or certain of its subsidiaries or legacy companies make and have

made various representations and warranties. Breaches of these representations

and warranties have resulted in and may continue to result in the requirement to

repurchase mortgage loans or to other

wise make whole or provide indemnification

or other remedies to sponsors, investors, securitization trusts, guarantors, insurers

or other parties (collectively, repurchases).

Unresolved Repurchase Claims

Unresolved representations and warranties repurchase claims represent the

notional amount of repurchase claims made by counterparties, typically the

outstanding principal balance or the unpaid principal

balance at the time of default.

In the case of first-lien mortgages, the claim amount is often significantly greater

than the expected loss amount due to the benefit of collateral and, in some cases,

mortgage insurance or mortgage guarantee payments.

The notional amount of unresolved repurchase claims atDecember 31, 2019 and

2018 was $10.7 billion and $14.4 billion. These balances included $3.7 billi

on and

$6.2 billion at December 31, 2019 and 2018 of claims related to loans in specific

private-label securitization groups or tranches where the Corporation owns

substantially all of the outstanding securities or will otherwise realize the benefit of

any repurchase claims paid. The balance for 2019 also includes $1.6 billion of

repurchase claims related to a single monoline insurer and is the subject

of

litigation.

During 2019, the Corporation received $461 million in new repurchase claims

that were not time-barred. During 2019, $4.2 billion in claims were resolved,

including $2.1 billion of claims that were deemed time-barred.

Reserve and Related Provision

The reserve for representations and warranties obligations and corporate

guarantees was $1.8 billion and $2.0 billion at December 31, 2019 and 2018 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 reser

ve represents the

Corporation’s best estimate of probable incurred losses, is based on our

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 Co

rporation's financial condition and liquidity. See Litigation and Regulatory

Matters in this Note 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.

Litigation and Regulatory Matters

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 pend

ing matters, timing of the ultimate resolution of these

matters, or eventual loss, fines or penalties related to each pending matter.

In accordance with applicable accounting guidance, the Corporation establishes

an accrued liability when those matters present loss contingencies that are both

probable and estimable. In such cases, there may be an exposure to loss in

excess of any amounts accrued. As a

matter develops, the Corporation, in

conjunction with any outside counsel handling the matter, evaluates on an

ongoing basis whether such matter presents a loss contingency that is probable

and estimable. 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 Corporat

ion 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 $681

million and $469 million was recognized in 2019 and 2018.

For a limited number of the matters disclosed in this Note for which a loss,

whether in exc

ess of a related accrued liability or where there is no accrued

liability, is reasonably possible in future periods, the Corporation is able to estimate

a range of possible loss. In determining whether it is possible to estimate a range

of possible loss, the Corporation reviews and evaluates its matters on an ongoing

basis, in conjunction with any outside counsel handling the matter, in light of

potent

ially relevant factual and legal developments. With respect to the matters

disclosed in this Note, in cases in which the Corporation possesses sufficient

appropriate information to estimate a range of possible loss, that estimate is

aggregated and disclosed below. There may be other disclosed matters for which

a loss is probable or reasonably possible but such an estimate of the range of

possible loss m

ay not be possible. For such matters disclosed in this Note, where

an estimate of the

range of possible loss is possible, as well as for representations and warranties

exposures, management currently estimates the aggregate range of reasonably

possible loss for these exposures is $0 to $1.6 billion in excess of the accrued

liability, if any.

The estimated range of possible loss, as well as the Corporat

ion's accrued

liability, is based upon currently available information and is subject to significant

judgment, a variety of assumptions and known and unknown uncertainties. The

matters underlying the estimated range of possible loss and liability accrual are

unpredictable and will change from time to time, and actual losses may vary

significantly from the current estimate and accrual. The estimated ran

ge of possible

loss does not represent the Corporation’s maximum loss exposure.

Information is provided below regarding the nature of the litigation and

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 herein, will have a

material adverse e

ffect on the consolidated financial condition or liquidity of the

Corporation. However, in light of the significant judgment, variety of assumptions

and uncertainties involved in these matters, some of which are beyond the

Corporation’s control, and the very large or indeterminate damages sought in

some of these matters, an adverse outcome in one or more of these matters could

be material to the Corpora

tion’s business or results of operations for any particular

reporting period, or cause significant reputational harm.

Ambac Bond Insurance Litigation

Ambac Assurance Corporation and the Segregated Account of Ambac Assurance

Corporation (together, Ambac) have filed four separate lawsuits against the

Corporation and its subsidiaries relating to bond insurance policies Ambac

provided on certain securitized

pools of HELOCs, first-lien subprime home equity

loans, fixed-rate second-lien mortgage loans and negative amortization pay option

adjustable-rate mortgage loans. Ambac alleges that they have paid or will pay

claims as a result of defaults in the underlying loans and asserts that the

defendants misrepresented the characteristics of the underlying loans and/or

breached certain contractual representatio

ns and warranties regarding the

underwriting and servicing of the loans. In those actions where the Corporation is

named as a defendant, Ambac contends the Corporation is liable on various

successor and vicarious liability theories. These actions are at various procedural

stages with material developments provided below.

Ambac v. Countrywide I

The Corporation, Countrywide and other Countrywide entities

are named as

defendants in an action filed on September 28, 2010 in New York Supreme Court.

Ambac asserts claims for fraudulent inducement as well as breach of contract and

seeks damages in excess of $2.2 billion, plus punitive damages.

On May 16, 2017, the First Department issued its decisions on the parties’

cross-appeals of the trial court’s October 22, 2015 summary judgment rulings.

Ambac appealed t

he First Department’s rulings requiring Ambac to prove all of the

elements of its fraudulent inducement claim, including justifiable reliance and loss

causation; restricting Ambac’s sole remedy for its breach of contract claims to the

repurchase protocol of cure, repurchase or substitution of any materially defective

loan; and dismissing Ambac’s claim for reimbursements of attorneys’ fees. On June

27,

2018, the New York Court of Appeals affirmed the First Department rulings that

Ambac appealed.

Bank of America 132

Ambac v. Countrywide II

On December 30, 2014, Ambac filed a complaint in New York Supreme Court

against the same defendants, claiming fraudulent inducement against

Countrywide, and successor and vicarious liability against the Corporation. Ambac

seeks damages in excess of $600 million, plus punitive damages. On December

19, 2016, the Court granted in part and denied in part Countrywide’s motion to

dismi

ss the complaint.

Ambac v. Countrywide IV

On July 21, 2015, Ambac filed an action in New York Supreme Court against

Countrywide asserting the same claims for fraudulent inducement that Ambac

asserted in the now-dismissed Ambac v. Countrywide III. The complaint seeks

damages in excess of $350 million, plus punitive damages.

Ambac v. First Franklin

On April 16, 2012, Ambac filed an action against BANA, Fir

st Franklin and various

Merrill Lynch entities, including Merrill Lynch, Pierce, Fenner & Smith Incorporated,

in New York Supreme Court relating to guaranty insurance Ambac provided on a

First Franklin securitization sponsored by Merrill Lynch. The complaint alleges

fraudulent inducement and breach of contract, including breach of contract claims

against BANA based upon its servicing of the loans in th

e securitization. Ambac

seeks as damages hundreds of millions of dollars that Ambac alleges it has paid or

will pay in claims.

Deposit Insurance Assessment

On January 9, 2017, the FDIC filed suit against BANA in the U.S. District Court for

the District of Columbia alleging failure to pay a December 15, 2016 invoice for

additional deposit insurance assessments and interest in the amount of $542

million fo

r the quarters ending June 30, 2013 through December 31, 2014. On April

7, 2017, the FDIC amended its complaint to add a claim for additional deposit

insurance and interest in the amount of $583 million for the quarters ending March

31, 2012 through March 31, 2013. The FDIC asserts these claims based on

BANA’s alleged underreporting of counterparty exposures that resulted in

underpayment of assessments

for those quarters and its Enforcement Section is

also conducting a parallel investigation related to the same alleged reporting error.

BANA disagrees with the FDIC’s interpretation of the regulations as they existed

during the relevant time period and is defending itself against the FDIC’s claims.

Pending final resolution, BANA has pledged security satisfactory to the FDIC

related to the disputed add

itional assessment amounts.

On March 27, 2018, the U.S. District Court for the District of Columbia denied

BANA’s partial motion to dismiss certain of the FDIC’s claims.

Interchange Litigation

In 2005, a group of merchants filed a series of putative class actions and individual

actions directed at interchange fees associated with Visa and MasterCard payment

card transactions. These actions, which were c

onsolidated in the U.S. District

Court for the Eastern District of New York under the caption In re Payment Card

Interchange Fee and Merchant Discount Anti-Trust Litigation, named Visa,

MasterCard, the Corporation, BANA and other banks as defendants. Plaintiffs

alleged antitrust claims and sought compensatory and treble damages as well as

injunctive relief.

In 2018, defendants reached a settlement of th

e putative Rule 23(b)(3)

damages class. Defendants agreed to pay an additional amount to participating

class members by contribution to the escrow fund established as part of the

settlement previously rejected by the U.S. Court of Appeals for the Second Circuit.

The

133 Bank of America

Corporation’s additional contribution was not material. The District Court granted

final approval of the settlement in December 2019. Beginning in January 2020, a

number of class members who objected to the settlement appealed to the U.S.

Court of Appeals for the Second Circuit.

LIBOR, Other Reference Rates, Foreign Exchange (FX) and Bond

Trading Matters

Government authorities in the U.S. and various international jurisdictions continue

to conduct investigations of, to make inquiries of, and to pursue proceedings

against, the Corporation a

nd its subsidiaries regarding FX and other reference

rates as well as government, sovereign, supranational and agency bonds in

connection with conduct and systems and controls. The Corporation is cooperating

with these inquiries and investigations, and responding to the proceedings.

LIBOR

The Corporation, BANA and certain Merrill Lynch entities have been named as

defendants along with most of the other

London Interbank Offered Rate (LIBOR)

panel banks in a number of individual and putative class actions by persons

alleging they sustained losses on U.S. dollar LIBOR-based financial instruments as

a result of collusion or manipulation by defendants regarding the setting of U.S.

dollar LIBOR. Plaintiffs assert a variety of claims, including antitrust, Commodity

Exchange Act, Racketeer Influenced and Cor

rupt Organizations (RICO), Securities

Exchange Act of 1934, common law fraud and breach of contract claims, and seek

compensatory, treble and punitive damages, and injunctive relief. All cases naming

the Corporation and its affiliates relating to U.S. dollar LIBOR are pending in the

U.S. District Court for the Southern District of New York.

The District Court has dismissed all RICO claims, and dismisse

d all

manipulation claims based on alleged trader conduct against Bank of America

entities. The District Court has also substantially limited the scope of antitrust,

Commodity Exchange Act and various other claims, including by dismissing in

their entirety certain individual and putative class plaintiffs’ antitrust claims for lack

of standing and/or personal jurisdiction. Plaintiffs whose antitrust clai

ms were

dismissed by the District Court are pursuing appeals in the Second Circuit. Certain

individual and putative class actions remain pending in the District Court against

the Corporation, BANA and certain Merrill Lynch entities.

On February 28, 2018, the District Court denied certification of proposed

classes of lending institutions and persons that transacted in eurodollar futures,

and the U.S. Cou

rt of Appeals for the Second Circuit subsequently denied petitions

filed by those plaintiffs for interlocutory appeals of those rulings. Also on February

28, 2018, the District Court granted certification of a class of persons that

purchased OTC swaps and notes that referenced U.S. dollar LIBOR from one of

the U.S. dollar LIBOR panel banks, limited to claims under Section 1 of the

Sherman Act. The U.S.

Court of Appeals for the Second Circuit subsequently

denied a petition filed by the defendants for interlocutory appeal of that ruling.

Mortgage Appraisal Litigation

The Corporation, Countrywide and certain affiliates are named as defendants in

two consolidated putative class action lawsuits filed in the U.S. District Court for

the Central District of California (Waldrup and Williams, et al.). Plainti

ffs allege that

Countrywide and a former Countrywide subsidiary, LandSafe Appraisal Services,

Inc., arranged for and completed appraisals that were not in compliance with

applicable laws and appraisal standards. Plaintiffs assert a RICO claim and seek,

among other forms of relief, compensatory and treble damages. On February 8,

2018,

the District Court granted plaintiffs’ motion for class certification. On May 22, 2018,

the U.S. Court of Appeals for the Ninth Circuit denied defendants’ petition for

permission to file an interlocutory appeal of the District Court’s ruling granting class

certification.

On January 21, 2020, the parties agreed to resolve the litigation for an amount

that is not material to the Corporation, and which wa

s fully accrued as of

December 31, 2019. The agreement is subject to court approval.

U.S. Bank - Harborview and SURF/OWNIT Repurchase Litigation

Beginning in 2011, U.S. Bank, National Association (U.S. Bank), as trustee for the

HarborView Mortgage Loan Trust 2005-10 and various SURF/OWNIT RMBS trusts

filed complaints against the Corporation, Countrywide entities, Merrill Lynch

entities and other affilia

tes in New York Supreme Court alleging breaches of

representations and warranties. The defendants and certain certificate-holders in

the trusts agreed to settle the respective matters in amounts not material to the

Corporation, subject to acceptance by U.S. Bank. The litigations have been stayed

pending finalization of the settlements.

NOTE 14 Shareholders’ Equity

Common Stock

Declared Quarterly Cash Dividends on Common Stock

(1)

Dividend Per

Declaration Date Record Date Payment Date Share

January 29, 2020 March 6, 2020 March 27, 2020 $ 0.18

October 22, 2019 December 6, 2019 December 27, 2019 0.18

July 25, 2019 September 6, 2019 September 27, 2019 0.18

April 24, 2019 June 7, 2019 June 28, 2019 0.15

January 30, 2019 March 1, 2019 March 29, 2019 0.15

(1)

I n 2019, and through February 19,

2020.

The cash dividends paid per share of common stock were$0.66, $0.54 and $0.39

for 2019, 2018 and 2017, respectively.

The following table summarizes common stock repurchases during 2019, 2018

and 2017.

Common Stock Repurchase Summary

(in millions)

Total share repurchases, including CCAR capital plan

repurchases

2019

956

2018

676

2017

509

Purchase price of shares repurchased and retired

CCAR capital plan repurchases

Other authorized repurchases

Total shares repurchased

$

25,644

2,500

28,144

$

16,754

3,340

20,094

$

9,347

3,467

12,814

On June 28, 2018, following the non-objection of the Board of Governors of the

Federal Reserve System (Federal Reserve) to the Corporation’s 2018

Comprehensive Capital Analysis and Review (CCAR) capital plan, the

Corporation’s Board of Directors (Board) authorized the repurchase of

approximately $20.6 billion in common stock from July 1, 2018 through June 30,

2019, which included approximately $

600 million in repurchases to offset shares

awarded under equity-based compensation plans during the same period. On

February 7, 2019, following approval by the Federal Reserve, the Board authorized

the repurchase of an additional $2.5 billion of common stock by June 30, 2019.

On June 27, 2019, following the Federal Reserve's non-objection to the

Corporation's 2019 CCAR capital plan, the Board authoriz

ed the repurchase of

approximately $30.9 billion in

common stock from July 1, 2019 through June 30, 2020, which includes

approximately $900 million in repurchases to offset shares awarded under equity-

based compensation plans during the same period.

During 2019, the Corporation repurchased 956 million shares of common stock

in connection with the Board's 2018 and 2019 repurchase authorizations, which

r

educed shareholders’ equity by $28.1 billion.

In connection with employee stock plans, in2019, the Corporation issued 91

million shares of its common stock and, to satisfy tax withholding obligations,

repurchased 35 million shares of its common stock. A t December 31, 2019, the

Corporation had reserved 579 million unissued shares of common stock for future

issuances under employee stock plans, converti

ble notes and preferred stock.

Preferred Stock

The cash dividends declared on preferred stock were$1.4 billion, $1.5 billion and

$1.6 billion for 2019, 2018 and 2017, respectively.

On June 20, 2019, the Corporation issued 40,000 shares of 5.125% Fixed-to-

Floating Rate Non-Cumulative Preferred Stock, Series JJ for $1.0 billion. On June

25, 2019, the Corporation issued 55,900 shares of 5.375% Non-Cumula

tive

Preferred Stock, Series KK for $1.4 billion. On September 17, 2019, the

Corporation issued 52,400 shares of 5.000% Non-Cumulative Preferred Stock,

Series LL for $1.3 billion. Additionally, on January 24, 2020, the Corporation issued

44,000 shares of 4.300% Fixed-to-Floating Rate Non-Cumulative Preferred Stock,

Series MM for $1.1 billion.

In 2019, the Corporation fully redeemed Series V and Series W

preferred stock

for $2.6 billion. Additionally, on January 27, 2020, the Corporation fully redeemed

Series Y preferred stock for $1.1 billion.

All series of preferred stock in the Preferred Stock Summary table have a par

value of $0.01 per share, are not subject to the operation of a sinking fund, have

no participation rights, and with the exception of the Series L Preferred Stock, are

not convertible.

The holders of the Series B Preferred Stock and Series 1 through 5

Preferred Stock have general voting rights and vote together with the common

stock. The holders of the other series included in the table have no general voting

rights. All outstanding series of preferred stock of the Corporation have preference

over the Corporation’s common stock with respect to the payment of dividends and

distributi

on of the Corporation’s assets in the event of a liquidation or dissolution.

With the exception of the Series B, F, G and T Preferred Stock, if any dividend

payable on these series is in arrears for three or more semi-annual or six or more

quarterly dividend periods, as applicable (whether consecutive or not), the holders

of these series and any other class or series of preferred stock ranking equally

as

to payment of dividends and upon which equivalent voting rights have been

conferred and are exercisable (voting as a single class) will be entitled to vote for

the election of two additional directors. These voting rights terminate when the

Corporation has paid in full dividends on these series for at least two semi-annual

or four quarterly dividend periods, as applicable, following the dividend ar

rearage.

The 7.25% Non-Cumulative Perpetual Convertible Preferred Stock, Series L

(Series L Preferred Stock) does not have early redemption/call rights. Each share

of the Series L Preferred Stock may be converted at any time, at the option of the

holder, into 20 shares of the Corporation’s common stock plus cash in lieu of

fractional shares. The Corporation may cause some or all of the Series L Preferr

ed

Stock, at its option, at any time or from time to time, to be converted into shares of

common stock at the then-applicable conversion rate if, for 20 trading days during

any period

Bank of America 134

of 30 consecutive trading days, the closing price of common stock exceeds130 record date but prior to the dividend payment date, the Corporation will still pay

percent of the then-applicable conversion price of the Series L Preferred Stock. If a any accrued dividends payable.

conversion of Series L Preferred Stock occurs at the option of the holder, The table below presents a

summary of perpetual preferred stock outstanding

subsequent to a dividend

at December 31, 2019.

Preferred Stock Summary

(Dollars in millions, except as noted)

Liquidation

Initial Total Preference Dividend per

Issuance Shares per Share Carrying Per Annum Share

Series Description Date Outstanding (in dollars) Value Dividend Rate (in dollars) Annual Dividend Redemption Period

(1)

June

Series B 7% Cumulative Redeemable 1997 7,110 $ 100 $ 1 7.00 % $ 7.00 $ — n/a

Floating Rate Non- November On or after

Series E

(2)

Cumulative 2006 12,691 25,000 317 3-mo. LIBOR + 35 bps

(3)

1.01 13 November 15, 2011

Floating Rate Non- March On or after

Series F Cumulative 2012 1,409 100,000 141 3-mo. LIBOR + 40 bps

(3)

4,055.56 6 March 15, 2012

Adjustable Rate Non- March On or after

Series G Cumulative 2012 4,926 100,000 493 3-mo. LIBOR + 40 bps

(3)

4,055.56 20 March 15, 2012

7.25% Non-Cumulative January

Series L Perpetual Convertible 2008 3,080,182 1,000 3,080 7.25 % 72.50 223 n/a

September

Series T 6% Non-cumulative 2011 354 100,000 35 6.00 % 6,000.00 2 After May 7, 2019

Fixed-to-Floating Rate Non- May 5.2% to, but excluding, 6/1/23; 3- On or after

Series U

(4)

Cumulative 2013 40,000 25,000 1,000 mo. LIBOR + 313.5 bps thereafter 52.00 52 June 1, 2023

6.250% to, but excluding, 9/5/24;

Fixed-to-Floating Rate Non- September 3-mo. LIBOR + 370.5 bps On or after

Series X

(4)

Cumulative 2014 80,000 25,000 2,000 thereafter 62.50 125 September 5, 2024

On or after

Series Y

(2)

6.500% Non-Cumulative January 2015 44,000 25,000 1,100 6.500 % 1.63 72 January 27, 2020

6.500% to, but excluding,

Fixed-to-Floating Rate Non- 10/23/24; 3-mo. LIBOR + 417.4 On or after

Series Z

(4)

Cumulative October 2014 56,000 25,000 1,400 bps thereafter 65.00 91 October 23, 2024

6.100% to, but excluding, 3/17/25;

Fixed-to-Floating Rate Non- 3-mo. LIBOR + 389.8 bps On or after

Series AA

(4)

Cumulative March 2015 76,000 25,000 1,900 thereafter 61.00 116 March 17, 2025

On or after

Series CC

(2)

6.200% Non-Cumulative January 2016 44,000 25,000 1,100 6.200 % 1.55 68 January 29, 2021

6.300% to, but excluding, 3/10/26;

Fixed-to-Floating Rate Non- 3-mo. LIBOR + 455.3 bps On or after

Series DD

(4)

Cumulative March 2016 40,000 25,000 1,000 thereafter 63.00 63 March 10, 2026

On or after

Series EE

(2)

6.000% Non-Cumulative April 2016 36,000 25,000 900 6.000 % 1.50 54 April 25, 2021

5.875% to, but excluding, 3/15/28;

Fixed-to-Floating Rate Non- 3-mo. LIBOR + 293.1 bps On or after

Series FF

(4)

Cumulative March 2018 94,000 25,000 2,350 thereafter 58.75 138 March 15, 2028

May On or after

Series GG

(2)

6.000% Non-Cumulative 2018 54,000 25,000 1,350 6.000 % 1.50 81 May 16, 2023

July On or after

Series HH

(2)

5.875% Non-Cumulative 2018 34,160 25,000 854 5.875 % 1.47 50 July 24, 2023

5.125% to, but excluding, 6/20/24;

Fixed-to-Floating Rate Non- June 3-mo. LIBOR + 329.2 bps On or after

Series JJ

(4)

Cumulative 2019 40,000 25,000 1,000 thereafter 25.63 26 June 20, 2024

June On or after

Series KK

(2)

5.375% Non-Cumulative 2019 55,900 25,000 1,398 5.375 % 0.67 38 June 25, 2024

September On or after

Series LL

(2)

5.000% Non-Cumulative 2019 52,400 25,000 1,310 5.000 % 0.31 16 September 17, 2024

Floating Rate Non- November On or after

Series 1

(5)

Cumulative 2004 3,275 30,000 98 3-mo. LIBOR + 75 bps

(6)

0.82 3 November 28, 2009

Floating Rate Non- March On or after

Series 2

(5)

Cumulative 2005 9,967 30,000 299 3-mo. LIBOR + 65 bps

(6)

0.81 10 November 28, 2009

Floating Rate Non- November On or after

Series 4

(5)

Cumulative 2005 7,010 30,000 210 3-mo. LIBOR + 75 bps

(3)

1.01 9 November 28, 2010

Floating Rate Non- March On or after

Series 5

(5)

Cumulative 2007 14,056 30,000 422 3-mo. LIBOR + 50 bps

(3)

1.01 17 May 21, 2012

Issuance costs and certain adjustments (357)

Total 3,887,440 $ 23,401

(1)

The Corporation may redeem series of preferred stock on or after the redemption date, in whole or in part, at its option, at the liquidation preference plus declared and unpaid dividends. Series B and Series L Preferred Stock do not have early

redemption/call rights.

(2)

Ownership is held in the form of depositary shares, each representing a 1/1,000th interest in a share of preferred stock, paying a quarterly cash dividend, if and when

declared.

(3)

Subject to 4.00% minimum rate per

annum.

(4)

Ownership is held in the form of depositary shares, each representing a 1/25th interest in a share of preferred stock, paying a semi-annual cash dividend, if and when declared, until the first redemption date at which time, it adjusts to a quarterly cash

dividend, if and when declared, thereafter.

(5)

Ownership is held in the form of depositary shares, each representing a 1/1,200th interest in a share of preferred stock, paying a quarterly cash dividend, if and when

declared.

(6)

Subject to 3.00% minimum rate per

annum.

n/a = not applicable

135 Bank of America

NOTE 15 Accumulated Other Comprehensive Income (Loss)

The table below presents the changes in accumulated OCI after-tax for2019, 2018 and 2017.

(Dollars in millions) Debt Securities

Debit Valuation

Adjustments Derivatives

Employee

Benefit Plans

Foreign

Currency Total

Balance, December 31, 2016 $ (1,267 ) $ (767 ) $ (895 ) $ (3,480 ) $ (879 ) $ (7,288 )

Net change 61 (293 ) 64 288 86 206

Balance, December 31, 2017 $ (1,206 ) $ (1,060 ) $ (831 ) $ (3,192 ) $ (793 ) $ (7,082 )

Accounting change related to certain tax effects (393 ) (220 ) (189 ) (707 ) 239 (1,270 )

Cumulative adjustment for hedge accounting change — — 57 — — 57

Net change (3,953 ) 749 (53 ) (405 ) (254 ) (3,916 )

Balance, December 31, 2018 $ (5,552 ) $ (531 ) $ (1,016 ) $ (4,304 ) $ (808 ) $ (12,211 )

Net change 5,875 (963 ) 616 136 (86 ) 5,578

Balance, December 31, 2019 $ 323 $ (1,494 ) $ (400 ) $ (4,168 ) $ (894 ) $ (6,633 )

The table below presents the net change in fair value recorded in accumulated OCI, net realized gains and losses reclassified into earnings and other changes for each

component of OCI pre- and after-tax for 2019, 2018 and 2017.

Pretax

Tax

effect

After-

tax Pretax

Tax

effect

After-

tax Pretax Tax effect

After-

tax

(Dollars in millions)

Debt securities:

2019 2018 2017

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:

$ 8,020

(193 )

7,827

(1,276 )

18

(1,258 )

$ (2,000 )

48

(1,952 )

289

6

295

$ 6,020

(145 )

5,875

(987 )

24

(963 )

$ (5,189 )

(123 )

(5,312 )

952

26

978

$ 1,329

30

1,359

(224 )

(5 )

(229 )

$ (3,860 )

(93 )

(3,953 )

728

21

749

$ 240

(304 )

(64 )

(490 )

42

(448 )

$ 14

111

125

171

(16 )

155

$ 254

(193 )

61

(319 )

26

(293 )

Net increase (decrease) in fair value

Reclassifications into earnings:

Net interest income

Compensation and benefits expense

Net realized losses reclassified into earnings

Net change

Employee benefit plans:

Net increase (decrease) in fair value

Net actuarial losses and other reclassified into earnings

(2)

Settlements, curtailments and other

Net change

692

104

2

106

798

41

150

3

194

(156 )

(26 )

—

(26 )

(182 )

(21 )

(36 )

(1 )

(58 )

536

78

2

80

616

20

114

2

136

(232 )

165

(27 )

138

(94 )

(703 )

171

11

(521 )

74

(40 )

7

(33 )

41

164

(46 )

(2 )

116

(158 )

125

(20 )

105

(53 )

(539 )

125

9

(405 )

(50 )

327

(148 )

179

129

223

179

3

405

1

(122 )

56

(66 )

(65 )

(55 )

(61 )

(1 )

(117 )

(49 )

205

(92 )

113

64

168

118

2

288

Foreign currency:

Net (decrease) in fair value (13 ) (52) (65) (8 ) (195 ) (203 ) (439 ) 430 (9 )

Net realized (gains) losses reclassified into earnings

(3)

(110 ) 89 (21) (149 ) 98 (51) (606 ) 701 95

Net change (123 ) 37 (86 ) (157 )

Total other comprehensive income (loss) $ 7,438 $ (1,860 ) $ 5,578 $ (5,106 )

(1)

Reclassifications of pretax debt securities and DVA 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.

(3)

Reclassifications of pretax debt securities, DVA and foreign currency (gains) losses are recorded in other income in the Consolidated Statement of

Income.

$

(97 )

1,190 $

(254 )

(3,916 ) $

(1,045 )

(1,023 )

1,131

$ 1,229 $

86

206

Bank of America 136

NOTE 16 Earnings Per Common Share

The calculation of EPS and diluted EPS for2019, 2018 and 2017 is presented below. For more information on the calculation of EPS, seeNote 1 – Summary of Significant

Accounting Principles.

(In millions, except per share information) 2019 2018 2017

Earnings per common share

Net income $ 27,430 $ 28,147 $ 18,232

Preferred stock dividends (1,432 ) (1,451 ) (1,614 )

Net income applicable to common shareholders $ 25,998 $ 26,696 $ 16,618

Average common shares issued and outstanding 9,390.5 10,096.5 10,195.6

Earnings per common share $ 2.77 $ 2.64 $ 1.63

Diluted earnings per common share

Net income applicable to common shareholders $ 25,998 $ 26,696 $ 16,618

Add preferred stock dividends due to assumed conversions

(1)

— — 186

Net income allocated to common shareholders $ 25,998 $ 26,696 $ 16,804

Average common shares issued and outstanding 9,390.5 10,096.5 10,195.6

Dilutive potential common shares

(2)

52.4 140.4 582.8

Total diluted average common shares issued and outstanding 9,442.9 10,236.9 10,778.4

Diluted earnings per common share $ 2.75 $ 2.61 $ 1.56

(1)

Represents the Series T dividends under the "If-converted" method prior to

conversion.

(2)

Includes incremental dilutive shares from RSUs, restricted stock and

warrants.

For 2019, 2018 and 2017, 62 million average dilutive potential common shares

associated with the Series L preferred stock were not included in the diluted share

count because the result would have been antidilutive under the “i

f-converted”

method. For 2018 and 2017, average options to purchasefour million and 21

million shares of common stock were outstanding but not included in the

computation of EPS because the result would have been antidilutive under the

treasury stock method. For 2017, average warrants to purchase122 million shares

of common stock were outstanding but not included in the computation of EPS

because the re

sult would have been antidilutive under the treasury stock method.

These warrants expired on October 29, 2018. For 2019, 2018 and 2017, average

warrants to purchase three million, 136 million and 143 million shares of common

stock, respectively, were included in the diluted EPS calculation under the treasury

stock method. Substantially all of these warrants were exercised on or before their

expiration

date of January 16, 2019.

NOTE 17 Regulatory Requirements and Restrictions

The Federal Reserve, Office of the Comptroller of the Currency (OCC) and FDIC

(collectively, U.S. banking regulators) jointly establish regulatory capital adequacy

guidelines, including Basel 3, for U.S. banking organizations. As a financial holding

company, the Corporation is subject to capital adequacy rules issued by the

137 Bank of America

Federal Reserve. The Corporation’s banking entity affiliates are subject to capital

adequacy rules issued by the OCC.

The Corporation and its primary banking entity affiliate, BANA, are Advanced

approaches institutions under Basel 3. As Advanced approaches institutions, the

Corporation and its banking entity affiliates are required to report regulatory risk-

based capital ratios and risk-weighted assets un

der both the Standardized and

Advanced approaches. The approach that yields the lower ratio is used to assess

capital adequacy, including under the Prompt Corrective Action (PCA) framework.

At December 31, 2019 and 2018, Common equity tier 1 and Tier 1 capital ratios

were lower under the Standardized approach whereas the Advanced approaches

yielded a lower result for the Total capital ratio.

The Corpora

tion is 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. The

Corporation’s insured depository institution subsidiaries are required to maintain a

minimum 6.0 percent SLR to be considered well capitalized under the PCA

framework.

The follo

wing table presents capital ratios and related information in accordance

with Basel 3 Standardized and Advanced approaches as measured at December

31, 2019 and 2018 for the Corporation and BANA.

Regulatory Capital under Basel 3

(Dollars in millions, except as noted)

Risk-based capital metrics:

Bank of America Corporation

Standardized Advanced Regulatory Standardized

Approach Approaches Minimum

(1)

Approach

December 31, 2019

Bank of America, N.A.

Advanced

Approaches

Regulatory

Minimum

(2)

Common equity tier 1 capital

Tier 1 capital

Total capital

(3)

Risk-weighted assets (in billions)

Common equity tier 1 capital ratio

Tier 1 capital ratio

Total capital ratio

$ 166,760

188,492

221,230

1,493

11.2 %

12.6

14.8

$ 166,760

188,492

213,098

1,447

11.5 %

13.0

14.7

9.5 %

11.0

13.0

$ 154,626

154,626

166,567

1,241

12.5 %

12.5

13.4

$ 154,626

154,626

158,665

991

15.6 %

15.6

16.0

7.0 %

8.5

10.5

Leverage-based metrics:

Adjusted quarterly average assets (in billions)

(4)

Tier 1 leverage ratio

$ 2,374

7.9 %

$ 2,374

7.9 % 4.0

$ 1,780

8.7 %

$ 1,780

8.7 % 5.0

SLR leverage exposure (in billions)

SLR

$ 2,946

6.4 % 5.0

$ 2,177

7.1 % 6.0

Risk-based capital metrics:

December 31, 2018

Common equity tier 1 capital

Tier 1 capital

Total capital

(3)

Risk-weighted assets (in billions)

Common equity tier 1 capital ratio

Tier 1 capital ratio

Total capital ratio

$ 167,272

189,038

221,304

1,437

11.6 %

13.2

15.4

$ 167,272

189,038

212,878

1,409

11.9 %

13.4

15.1

8.25 %

9.75

11.75

$ 149,824

149,824

161,760

1,195

12.5 %

12.5

13.5

$ 149,824

149,824

153,627

959

15.6 %

15.6

16.0

6.5 %

8.0

10.0

Leverage-based metrics:

Adjusted quarterly average assets (in billions)

(4)

Tier 1 leverage ratio

$ 2,258

8.4 %

$ 2,258

8.4 % 4.0

$ 1,719

8.7 %

$ 1,719

8.7 % 5.0

SLR leverage exposure (in billions)

SLR

$ 2,791

6.8 % 5.0

$ 2,112

7.1 % 6.0

(1)

The capital conservation buffer and global systemically important bank surcharge were2.5 percent at December 31, 2019 and 1.875 percent at December 31, 2018. The countercyclical capital buffer for both periods waszero. The SLR minimum includes a

leverage buffer of 2.0 percent.

(2)

Risk-based capital regulatory minimums at December 31, 2019 are the minimum ratios under Basel 3 including a capital conservation buffer of 2.5 percent. The regulatory minimums for the leverage ratios as of both period ends and risk-based capital

ratios as of December 31, 2018 are the percent required to be considered well capitalized under the PCA framework.

(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.

The capital adequacy rules issued by the U.S. banking regulators require

institutions to meet the established minimums outlined in the table above. Failure

to meet the minimum requirements can lead to certain mandatory and discretionary

actions by regulators that could have

a material adverse impact on the

Corporation’s financial position. At December 31, 2019 and 2018, the Corporation

and its banking entity affiliates were well capitalized.

Other Regulatory Matters

The Federal Reserve requires the Corporation’s bank subsidiaries to maintain

reserve requirements based on a percentage of certain deposit liabilities. The

average daily reserve balance requirements, in excess

of vault cash, maintained

by the Corporation with the Federal Reserve Bank were $14.6 billion and $11.4

billion for 2019 and 2018. At December 31, 2019 and 2018, the Corporation had

cash and cash equivalents in the amount of $6.3 billion and $5.8 billion, and

securities with a fair value of $14.7 billion and $16.6 billion that were segregated in

compliance with securities regulations. Cash held on dep

osit with the Federal

Reserve Bank to meet reserve requirements and cash and cash equivalents

segregated in compliance with securities regulations are components of restricted

cash. For more information, see Note 11 – Federal Funds Sold or Purchased,

Securities Financing Agreements, Short-term Borrowings and Restricted Cash. In

addition, at December 31, 2019 and 2018, the Corporation had cash deposited with

clearing organizations of $7.6 billion and $8.1 billion primarily recorded in other

assets on the Consolidated Balance Sheet.

Bank Subsidiary Distributions

The primary sources of funds for cash distributions by the Corporation to its

shareholders are capital distributions received from its bank subsidiaries, BANA

and Bank of America California, N.A. In 2019, the Corporation received dividends

of $

20.5 billion from BANA and $215 million from Bank of America California, N.A.

In addition, BANA returned capital of $8.0 billion to the Corporation in 2019.

The amount of dividends that a subsidiary bank may declare in a calendar year

without OCC approval is the subsidiary bank’s net profits for that year combined

with its retained net profits for the preceding two years. Retained net profits, as

defin

ed by the OCC, consist of net income less dividends declared during the

period. In 2020, BANA can declare and pay dividends of approximately$9.4 billion

to the Corporation plus an additional amount equal to its retained net profits for

2020 up to the date of any such dividend declaration. Bank of America California,

N.A. can pay dividends of $94 million in 2020 plus an additional amount equal to its

re

tained net profits for 2020 up to the date of any such dividend declaration.

Bank of America 138

NOTE 18 Employee Benefit Plans

Pension and Postretirement Plans

The Corporation sponsors a qualified noncontributory trusteed pension plan

(Qualified Pension Plan), a number of noncontributory nonqualified pension plans,

and postretirement health and life plans that cover eligible employees. Non-U.S.

pension plans sponsored by the Corporation vary based on the country and local

practices.

The Qualified P

ension Plan has a balance guarantee feature for account

balances with participant-selected investments, applied at the time a benefit

payment is made from the plan that effectively provides principal protection for

participant balances transferred and certain compensation credits. The Corporation

is responsible for funding any shortfall on the guarantee feature.

Benefits earned under the Qualified Pens

ion Plan have been frozen.

Thereafter, the cash balance accounts continue to earn investment credits or

interest credits in accordance with the terms of the plan document.

The Corporation has an annuity contract that guarantees the payment of

benefits vested under a terminated U.S. pension plan (Other Pension Plan). The

Corporation, under a supplemental agreement, may be responsible for, or benefit

from

actual experience and investment performance of the annuity assets. The

Corporation made no contribution under this agreement in 2019 or 2018.

Contributions may be required in the future under this agreement.

The Corporation’s noncontributory, nonqualified pension plans are unfunded

and provide supplemental defined pension benefits to certain eligible employees.

In addition to retirement pension bene

fits, certain benefits-eligible employees

may become eligible to continue participation as retirees in health care and/or life

insurance plans sponsored by the Corporation. These plans are referred to as the

Postretirement Health and Life Plans.

The Pension and Postretirement Plans table summarizes the changes in the fair

value of plan assets, changes in the projected benefit obligation (PBO), the fund

ed

status of both the accumulated benefit obligation (ABO) and the PBO, and the

weighted-average assumptions used to determine benefit obligations for the

pension plans and postretirement plans at December 31, 2019 and 2018. The

estimate of the Corporation’s PBO associated with these plans considers various

actuarial assumptions, including assumptions for mortality rates and discount

rates. The discount

rate assumptions are derived from a cash flow matching

technique that utilizes rates that are based on Aa-rated corporate bonds with cash

flows that match estimated benefit payments of each of the plans. The decreases

in the weighted-average discount rates in 2019 resulted in increases to the PBO of

approximately $2.2 billion at December 31, 2019. The increases in the weighted-

average discount rates

in 2018 resulted in decreases to the PBO of approximately

$1.3 billion at December 31, 2018. Significant gains and losses related to changes

in the PBO for 2019 and 2018 primarily resulted from changes in the discount rate.

Pension and Postretirement Plans

(1)

Qualified

Pension Plan

Non-U.S.

Pension Plans

Nonqualified and Other

Pension Plans

Postretirement

Health and Life Plans

(Dollars in millions) 2019 2018 2019 2018 2019 2018 2019 2018

Fair value, January 1

Actual return on plan assets

Company contributions

Plan participant contributions

Settlements and curtailments

Benefits paid

Federal subsidy on benefits paid

Foreign currency exchange rate changes

$ 18,178

3,187

—

(1,090 )

n/a

$ 19,708

(550 )

—

(980 )

n/a

$ 2,461

273

20

1

(42 )

(108 )

n/a

91

$ 2,943

(181 )

22

1

(107 )

(52 )

n/a

(165 )

$ 2,584

228

91

—

(237 )

n/a

$ 2,724

8

91

—

(239 )

n/a

$ 252

5

24

103

—

(185 )

—

n/a

$ 300

5

43

115

—

(214 )

3

n/a

Fair value, December 31 $ 20,275 $ 18,178 $ 2,696 $ 2,461 $ 2,666 $ 2,584 $ 199 $ 252

Change in projected benefit obligation

Projected benefit obligation, January 1

Service cost

$ 14,144

—

$ 15,706

—

$ 2,589

17

$ 2,814

19

$ 2,779

1

$ 3,047

1

$ 928

5

$ 1,056

6

Interest cost 593 563 65 65 113 105 38 36

Plan participant contributions

Plan amendments

—

1

2

1

13

—

103

—

115

—

Settlements and curtailments

Actuarial loss (gain)

Benefits paid

Federal subsidy on benefits paid

Foreign currency exchange rate changes

—

1,714

(1,090 )

n/a

—

(1,145 )

(980 )

n/a

(42 )

288

(108 )

n/a

75

(107 )

(29 )

(52 )

n/a

(135 )

—

263

(237 )

n/a

—

(135 )

(239 )

n/a

—

99

(185 )

—

1

—

(73 )

(214 )

3

(1)

Projected benefit obligation, December 31 $ 15,361 $ 14,144 $ 2,887 $ 2,589 $ 2,919 $ 2,779 $ 989 $ 928

Amounts recognized on Consolidated Balance Sheet

Other assets

Accrued expenses and other liabilities

$ 4,914

—

$ 4,034

—

$ 364

(555 )

$ 316

(444 )

$ 733

(986 )

$ 754

(949 )

$ —

(790 )

$ —

(676 )

Net amount recognized, December 31 $ 4,914 $ 4,034 $ (191) $ (128 ) $ (253 ) $ (195 ) $ (790) $ (676 )

Funded status, December 31

Accumulated benefit obligation

Overfunded (unfunded) status of ABO

Provision for future salaries

Projected benefit obligation

$ 15,361

4,914

—

15,361

$ 14,144

4,034

—

14,144

$ 2,841

(145 )

46

2,887

$ 2,542

(81 )

47

2,589

$ 2,919

(253 )

—

2,919

$ 2,778

(194 )

1

2,779 $

n/a

989

n/a

$ 928

Weighted-average assumptions, December 31

Discount rate 3.32 % 4.32 % 1.81 % 2.60 % 3.20 % 4.26 % 3.27 % 4.25 %

Rate of compensation increase

n/a n/a 4.10 4.49 4.00 4.00 n/a n/a

Interest-crediting rate 5.06 5.18 1.53 1.47 4.52 4.50 n/a n/a

(1)

The measurement date for all of the above plans was December 31 of each year

reported.

n/a = not applicable

139 Bank of America

The Corporation’s estimate of its contributions to be made to the Non-U.S. minimum funding amount required by the Employee Retirement Income Security

Pension Plans, Nonqualified and Other Pension Plans, and Postretirement Health Act of 1974 (ERISA).

and Life Plans in 2020 is $21 million, $92 million and $15 million, respectively. The Pension Plans with ABO and PBO in excess of plan assets as ofDecember 31,

Corporation does not expect to make a contribution to the Qualified Pension Plan 2019 and 2018 are presented in the table below. For these plans, funding

in 2020. It is the policy of the Corporation to fund no less than the strategies vary due to legal requirements and local practices.

Plans with ABO and PBO in Excess of Plan Assets

Nonqualified

Non-U.S. and Other

Pension Plans Pension Plans

(Dollars in millions) 2019 2018 2019 2018

PBO $ 744 $ 615 $ 988 $ 950

ABO 720 605 988 949

Fair value of plan assets 191 173 1 1

Components of Net Periodic Benefit Cost

Qualified Pension Plan Non-U.S. Pension Plans

(Dollars in millions) 2019 2018 2017 2019 2018 2017

Components of net periodic benefit cost (income)

Service cost $ — $ — $ — $ 17 $ 19 $ 24

Interest cost 593 563 606 65 65 72

Expected return on plan assets (1,088 ) (1,136 ) (1,068 ) (99 ) (126 ) (136 )

Amortization of net actuarial loss 135 147 154 6 10 8

Other — — — 4 12 (7 )

Net periodic benefit cost (income) $ (360 ) $ (426 ) $ (308 ) $ (7 ) $ (20 ) $ (39 )

Weighted-average assumptions used to determine net cost for years ended December 31

Discount rate 4.32 % 3.68 % 4.16 % 2.60 % 2.39 % 2.56 %

Expected return on plan assets 6.00 6.00 6.00 4.13 4.37 4.73

Rate of compensation increase n/a n/a n/a 4.49 4.31 4.51

Nonqualified and

Other Pension Plans

Postretirement Health

and Life Plans

(Dollars in millions) 2019 2018 2017 2019 2018 2017

Components of net periodic benefit cost (income)

Service cost $ 1 $ 1 $ 1 $ 5 $ 6 $ 6

Interest cost 113 105 117 38 36 43

Expected return on plan assets (95 ) (84 ) (95 ) (5 ) (6 ) —

Amortization of net actuarial loss (gain) 34 43 34 (24 ) (27 ) (21 )

Other — — — (2 ) (3 ) 4

Net periodic benefit cost (income) $ 53 $ 65 $ 57 $ 12 $ 6 $ 32

Weighted-average assumptions used to determine net cost for years ended December 31

Discount rate 4.26 % 3.58 % 4.01 % 4.25 % 3.58 % 3.99 %

Expected return on plan assets 3.73 3.19 3.50 2.00 2.00 n/a

Rate of compensation increase 4.00 4.00 4.00 n/a n/a n/a

n/a = not applicable

The asset valuation method used to calculate the expected return on plan

assets component of net periodic benefit cost for the Qualified Pension Plan

recognizes 60 percent of the prior year’s market gains or losses at the next

measurement date with the remaining 40 percent spread equally over the

subsequent four years.

Gains and losses for all benefit plans except postretirement

health care are

recognized in accordance with the standard amortization provisions of the

applicable accounting guidance. Net periodic postretirement health and life

expense was determined using the “projected unit credit” actuarial method. For the

Postretirement Health and Life Plans, 50 percent of the unrecognized gain or loss

at the beginning of the year (or at subsequent remeasurement) is recogniz

ed on a

level basis during the year.

Assumed health care cost trend rates affect the postretirement benefit

obligation and benefit cost reported for the Postretirement Health and Life Plans.

The assumed health care cost trend rate used to measure the expected cost of

benefits covered by the Postretirement Health and Life Plans is 6.50 percent for

2020, reducing in steps to 5.00 percent in 2026 and late

r years.

The Corporation’s net periodic benefit cost (income) recognized for the plans is

sensitive to the discount rate and expected return on plan assets. For the Qualified

Pension Plan, Non-U.S. Pension Plans, Nonqualified and Other Pension Plans,

and Postretirement Health and Life Plans, a 25 bp decline in discount rates and

expected return on assets would not have had a significant impact on the n

et

periodic benefit cost for 2019.

Bank of America 140

Pretax Amounts included in Accumulated OCI and OCI

Qualified

Pension Plan

Non-U.S.

Pension Plans

Nonqualified

and Other

Pension Plans

Postretirement

Health and

Life Plans Total

(Dollars in millions)

Net actuarial loss (gain)

Prior service cost (credits)

Amounts recognized in accumulated OCI

2019 2018

$ 3,865 $ 4,386

— —

$ 3,865 $ 4,386

2019 2018

$ 559 $ 454

18 18

$ 577 $ 472

2019 2018

$ 1,008 $ 912

— —

$ 1,008 $ 912

2019 2018

$ 48 $ (75 )

(6 ) (9 )

$ 42 $ (84 )

2019 2018

$ 5,480 $ 5,677

12 9

$ 5,492 $ 5,686

Current year actuarial loss (gain)

Amortization of actuarial gain (loss) and

prior service cost

Current year prior service cost (credit)

Amounts recognized in OCI

$ (385 ) $ 541

(135 ) (147 )

— —

$ (520 ) $ 394

$ 110 $ 270

(7 ) (11 )

2 13

$ 105 $ 272

$ 130 $ (59 )

(34 ) (43 )

— —

$ 96 $ (102 )

$ 99 $ (73 )

26 30

— —

$ 125 $ (43 )

$ (46 ) $ 679

(150 ) (171 )

2 13

$ (194 ) $ 521

Plan Assets

The Qualified Pension Plan has been established as a retirement vehicle for

participants, and trusts have been established to secure benefits promised under

the Qualified Pension Plan. The Corporation’s policy is to invest the trust assets in

a prudent manner for the exclusive purpose of providing benefits to participa

nts

and defraying reasonable expenses of administration. The Corporation’s

investment strategy is designed to provide a total return that, over the long term,

increases the ratio of assets to liabilities. The strategy attempts to maximize the

investment return on assets at a level of risk deemed appropriate by the

Corporation while complying with ERISA and any applicable regulations and laws.

The invest

ment strategy utilizes asset allocation as a principal determinant for

establishing the risk/return profile of the assets. Asset allocation ranges are

established, periodically reviewed and adjusted as funding levels and liability

characteristics change. Active and passive investment managers are employed to

help enhance the risk/return profile of the assets. An additional aspect of the

investment strat

egy used to minimize risk (part of the asset allocation plan)

includes matching the exposure of participant-selected investment measures.

The assets of the Non-U.S. Pension Plans are primarily attributable to a U.K.

pension plan. This U.K. pension plan’s assets are invested prudently so that the

benefits promised to members are provided with consideration given to the nature

and the duration

of the plans' liabilities. The selected asset allocation strategy is designed to

achieve a higher return than the lowest risk strategy.

The expected rate of return on plan assets assumption was developed through

analysis of historical market returns, historical asset class volatility and

correlations, current market conditions, anticipated future asset allocations, the

funds’ past experience, and expectations on

potential future market returns. The

expected return on plan assets assumption is determined using the calculated

market-related value for the Qualified Pension Plan and the Other Pension Plan

and the fair value for the Non-U.S. Pension Plans and Postretirement Health and

Life Plans. The expected return on plan assets assumption represents a long-term

average view of the performance of the assets in t

he Qualified Pension Plan, the

Non-U.S. Pension Plans, the Other Pension Plan, and Postretirement Health and

Life Plans, a return that may or may not be achieved during any one calendar year.

The Other Pension Plan is invested solely in an annuity contract which is primarily

invested in fixed-income securities structured such that asset maturities match the

duration of the plan’s obligations.

The target

allocations for 2020 by asset category for the Qualified Pension

Plan, Non-U.S. Pension Plans, and Nonqualified and Other Pension Plans are

presented in the following table. Equity securities for the Qualified Pension Plan

include common stock of the Corporation in the amounts of $315 million (1.55

percent of total plan assets) and $221 million (1.22 percent of total plan assets) at

December 31, 2019 a

nd 2018.

2020 Target Allocation

Percentage

Qualified Non-U.S.

Nonqualified

and Other

Asset Category Pension Plan Pension Plans Pension Plans

Equity securities 15 - 50% 5 - 30% 0 - 5%

Debt securities 45 - 80% 40 - 70% 95 - 100%

Real estate 0 - 10% 0 - 15% 0 - 5%

Other 0 - 5% 10 - 40% 0 - 5%

Fair Value Measurements

For more information on fair value measurements, including descriptions of Level 1, 2 and 3 of the fair value hierarchy and the valuation methods employed by the

Corporation, see Note 1 – Summary of Significant Accounting Principlesand Note 21 – Fair Value Measurements. Combined plan investment assets measured at fair value

by level and in total at December 31, 2019 and 2018 are summarized in the Fair Value Measurements table.

141 Bank of America

Fair Value Measurements

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

(Dollars in millions)

Cash and short-term investments

December 31, 2019 December 31, 2018

Money market and interest-bearing cash

Cash and cash equivalent commingled/mutual funds

Fixed income

$ 1,426

—

$ —

250

$ —

—

$ 1,426

250

$ 1,530

—

$ —

644

$ —

—

$ 1,530

644

U.S. government and agency securities

Corporate debt securities

Asset-backed securities

Non-U.S. debt securities

Fixed income commingled/mutual funds

Equity

Common and preferred equity securities

Equity commingled/mutual funds

Public real estate investment trusts

4,403

—

748

804

4,655

147

91

890

3,676

2,684

1,015

1,439

—

1,355

—

8

—

5,301

3,676

2,684

1,763

2,243

4,655

1,502

91

3,637

—

539

933

4,414

288

104

805

2,852

2,119

961

1,177

—

1,275

—

9

—

4,451

2,852

2,119

1,500

2,110

4,414

1,563

104

Real estate

Private real estate — — — — — — 5 5

Real estate commingled/mutual funds

Limited partnerships

Other investments

(1)

Total plan investment assets, at fair value $

—

11

12,285 $

18

173

390

11,890

927

90

636

$ 1,661 $

945

263

1,037

25,836 $

—

93

11,538 $

13

158

364

10,368

885

82

588

$ 1,569 $

898

240

1,045

23,475

(1)

Other investments include commodity and balanced funds of $233 million and $305 million, insurance annuity contracts of $614 million and $562 million and other various investments of $190 million and $178 million at December 31, 2019 and

2018.

The Level 3 Fair Value Measurements table presents a reconciliation of all plan investment assets measured at fair value using significant unobservable inputs (Level 3)

during 2019, 2018 and 2017.

Level 3 Fair Value Measurements

Actual Return on

Plan Assets Still

Balance Held at the Purchases, Sales and Balance

January 1 Reporting Date Settlements December 31

(Dollars in millions) 2019

Fixed income

U.S. government and agency securities $ 9 $ — $ (1 ) $ 8

Real estate

Private real estate 5 — (5 ) —

Real estate commingled/mutual funds 885 33 9 927

Limited partnerships 82 — 8 90

Other investments 588 6 42 636

Total $ 1,569 $ 39 $ 53 $ 1,661

2018

Fixed income

U.S. government and agency securities $ 9 $ — $ — $ 9

Real estate

Private real estate 93 (7 ) (81 )

5

Real estate commingled/mutual funds 831 52 2 885

Limited partnerships 85 (12 ) 9 82

Other investments 74 — 514 588

Total $ 1,092 $ 33 $ 444 $ 1,569

2017

Fixed income

U.S. government and agency securities $ 10 $ — $ (1 ) $ 9

Real estate

Private real estate 150 8 (65 ) 93

Real estate commingled/mutual funds

748

63 20 831

Limited partnerships 38 14 33 85

Other investments 83 5 (14 )

74

Total $ 1,029 $ 90 $ (27 ) $ 1,092

Bank of America 142

Projected Benefit Payments

Benefit payments projected to be made from the Qualified Pension Plan, Non-U.S. Pension Plans, Nonqualified and Other Pension Plans, and Postretirement Health and

Life Plans are presented in the table below.

Projected Benefit Payments

Qualified Non-U.S.

Nonqualified

and Other Postretirement Health and

(Dollars in millions)

Pension Plan

(1)

Pension Plans

(2)

Pension Plans

(2)

Life Plans

(3)

2020

$ 917 $ 108 $ 242 $ 83

2021

926

107 245 80

2022

927

110 232 77

2023

917

116 230 74

2024

924

126 223 72

2025 - 2029

4,409

594 1,011 313

(1)

Benefit payments expected to be made from the plan’s

assets.

(2)

Benefit payments expected to be made from a combination of the plans’ and the Corporation’s

assets.

(3)

Benefit payments (net of retiree contributions) expected to be made from a combination of the plans’ and the Corporation’s

assets.

Defined Contribution Plans

The Corporation maintains qualified and non-qualified defined contribution

retirement plans. The Corporation recorded expense of $1.0 billion in each of

2019, 2018 and 2017 related to the qualified defined contribution plans. At

December 31, 2019 and 2018, 189 million and 212 million shares of the

Corporation’s common stock were held by these plans. Payments to the plans for

dividends on common stock were $133 million, $115 million and $86 million in

2019, 2018 and 2017, res

pectively.

Certain non-U.S. employees are covered under defined contribution pension

plans that are separately administered in accordance with local laws.

NOTE 19 Stock-based Compensation Plans

The Corporation administers a number of equity compensation plans, with awards

being granted predominantly from the Bank of America Key Employee Equity Plan

(KEEP). On April 24, 2019, Bank of America's shareholde

rs approved an

amendment to the KEEP to increase the number of shares available for grant by

150 million. Subsequent to this amendment, 600 million shares of the Corporation’s

common stock are authorized to be used for grants of awards.

During 2019 and 2018, the Corporation granted 94 million and 71 million RSU

awards to certain employees under the KEEP. These RSUs were authorized to

settle predominantl

y in shares of common stock of the Corporation. Certain RSUs

will be settled in cash or contain settlement provisions that subject these awards to

variable accounting whereby compensation expense is adjusted to fair value

based on changes in the share price of the Corporation’s common stock up to the

settlement date. Of the RSUs granted in 2019 and 2018, 71 million and 63 million

will vest predominantl

y over three years with most vesting occurring in one-third

increments on each of the first three anniversaries of the grant date provided that

the employee remains continuously employed with the Corporation during that

time, and will be expensed ratably over the vesting period, net of estimated

forfeitures, for non-retirement eligible employees based on the grant-date fair value

of the shares. For RSU

s granted to employees who are retirement eligible, the

awards are deemed authorized as of the beginning of the year preceding the grant

date when the incentive award plans are generally approved. As a result, the

estimated value is expensed ratably over the year preceding the grant date.

Additionally, 23 million and eight million of the RSUs granted in 2019 and 2018 will

vest predominantly over four y

ears with most vesting occurring in one-fourth

increments on each of the first four

143 Bank of America

anniversaries of the grant date provided that the employee remains continuously

employed with the Corporation during that time, and will be expensed ratably over

the vesting period, net of estimated forfeitures, based on the grant-date fair value

of the shares.

The compensation cost for the stock-based plans was $2.1 billion, $1.8 billion

and $2.2 billion and the related income tax benefit was $511 mil

lion, $433 million

and $829 million for 2019, 2018 and 2017, respectively.

Restricted Stock/Units

The table below presents the status atDecember 31, 2019 of the share-settled

restricted stock/units and changes during 2019.

Stock-settled Restricted Stock/Units

Weighted-

average Grant Date

Shares/Units Fair Value

Outstanding at January 1, 2019 165,621,246

$ 23.22

Granted 91,164,482 27.72

Vested (92,215,549 ) 19.30

Canceled (6,660,864) 27.49

Outstanding at December 31, 2019 157,909,315

The table below presents the status at December 31, 2019 of the cash-settled

RSUs and changes during 2019.

Cash-settled Restricted Units

Units

Outstanding at January 1, 2019 2,609,122

Granted 2,455,177

Vested (3,006,707 )

Canceled (93,170 )

Outstanding at December 31, 2019 1,964,422

A t December 31, 2019, there was an estimated$1.6 billion of total

unrecognized compensation cost related to certain share-based compensation

awards that is expected to be recognized over a period of up to four years, with a

weighted-average period of 2.2 years. The to

tal fair value of restricted stock vested

in 2019, 2018 and 2017 was $2.6 billion, $2.3 billion and $1.3 billion, respectively.

In 2019, 2018 and 2017, the amount of cash paid to settle equity-based awards for

all equity compensation plans was $84 million, $1.3 billion and $1.9 billion,

respectively.

27.93

NOTE 20 Income Taxes

The components of income tax expense for2019, 2018 and 2017 are presented in

the table below.

Income Tax Expense

(Dollars in millions) 2019 2018 2017

Current income tax expense

U.S. federal $ 1,136 $ 816 $ 1,310

U.S. state and local 901 1,377 557

Non-U.S. 852 1,203 939

Total current expense 2,889 3,396 2,806

Deferred income tax expense

U.S. federal 2,001 2,579 7,238

U.S. state and local 223 240 835

Non-U.S. 211 222 102

Total deferred expense 2,435 3,041 8,175

Total income tax expense $ 5,324 $ 6,437 $ 10,981

Total income tax expense does not reflect the tax effects of items that are

included in OCI each period. For more information, see Note 15 – Accumulated

Other Comprehensive Income (Loss). Other tax effects included in OCI each

period resulted in an expense of $1.9 billion in 2019 and a benefit of$1.2 billion in

both 2018 and 2017.

Reconciliation of Income Tax Expense

(Dollars in millions)

Expected U.S. federal income tax expense $

Increase (decrease) in taxes resulting from:

State tax expense, net of federal benefit

Affordable housing/energy/other credits

Changes in prior-period UTBs, including interest

Tax-exempt income, including dividends

Stock-based compensation

Rate differential on non-U.S. earnings

Nondeductible expenses

Tax law changes

Other

Total income tax expense $

The reconciliation of the beginning unrecognized tax benefits (UTB) balance to

the ending balance is presented in the following table.

Reconciliation of the Change in Unrecognized Tax Benefits

(Dollars in millions) 2019 2018

Balance, January 1 $

Increases related to positions taken during the

current year

Increases related to positions taken during prior

years

(1)

Decreases related to positions taken during

prior years

(1)

Settlements

Expiration of statute of limitations

Balance, December 31 $

2,197 $ 1,773 $

238 395

401 406

(1,102 ) (371)

(541 ) (6)

(18) —

1,175 $ 2,197 $

2017

875

292

750

(122 )

(17)

(5)

1,773

Income tax expense for 2019, 2018 and 2017 varied from the amount computed

by applying the statutory income tax rate to income before income taxes. The

Corporation’s federal statutory tax rate was 21 percent for 2019 and 2018, and 35

percent for 2017. A reconciliation of the expected U.S. federal income tax expense,

calculated by applying the federal statutory tax rate, to the Corporation’s actual

income tax expense, and the effective tax rates for 2019, 2018 and 2017 are

presented in the table below.

On December 22, 2017, the President signed into law the Tax Act which made

significant changes to federal income tax law including, among other things,

reducing the statutory corporate income tax rate to 21 percent from 35 percent and

changing the taxation of the Corporation’s non-U.S. business activities. The impact

on net income in 2017 was $2.9 billion, driven by $2.3 billion in income tax

expense, largely from a lower valuation of certain U.S. deferred tax assets and

liabilities. The change in the statutory tax rate also impacted the Corporation’s tax-

advantaged energy investments, resulting in a downward valuation adjustment of

$946 million recorded in other income and a related income tax benefit of$347

million, which when netted against the $2.3 billion, resulted in a net impact on

income tax expense of $1.9 billion.

Amount Percent Amount Percent Amount Percent

2019 2018 2017

6,878 21.0 % $ 7,263 21.0 % $ 10,225 35.0 %

1,283 3.9 1,367 4.0 881 3.0

(2,365 ) (7.2 ) (1,888 ) (5.5 ) (1,406 ) (4.8 )

(613 ) (1.9 ) 144 0.4 133 0.5

(433 ) (1.3 ) (413) (1.2 ) (672 ) (2.3 )

(225 ) (0.7 ) (257) (0.7 ) (236 ) (0.8 )

504 1.5

98 0.3 (272) (0.9 )

290 0.9 302 0.9 97 0.3

— — — — 2,281 7.8

5 0.1 (179) (0.6 ) (50 ) (0.2 )

5,324 16.3 % $ 6,437 18.6 % $ 10,981 37.6 %

At December 31, 2019, 2018 and 2017, the balance of the Corporation’s UTBs

which would, if recognized, affect the Corporation’s effective tax rate was $814

million, $1.6 billion and $1.2 billion, respectively. Included in the UTB balance are

some items the recognition of which would not affect the effective tax rate, such as

the tax effect of certain temporary differences, the portion of gross state UTBs that

would be offset by the tax benefit of the associated federal deduction and the

portion of gross non-U.S. UTBs that would be offset by tax reductions in other

jurisdictions.

It is reasonably possible that the UTB balance may decrease by as much as

$64 million during the next 12 months, since resolved items will be removed from

the balance whether their resolution results in payment or recognition.

The Corporation recognized an interest benefit of$19 million in 2019 and

interest expense of $43 million and $1 million in 2018 and 2017. At December 31,

2019 and 2018, the Corporation’s accrual for interest and penalties that related to

income taxes, net of taxes and remittances, was $147 million and $218 million.

The Corporation files income tax returns in more than100 state and non-U.S.

jurisdictions each year. The IRS and other tax authorities in countries and states in

which the Corporation has

(1)

The sum of the positions taken during prior years differs from the $(613) million, $144 million and $133 million in the

Reconciliation of Income Tax Expense table due to temporary items, state items and jurisdictional offsets, as well as the

inclusion of interest in the Reconciliation of Income Tax Expense table.

Bank of America 144

significant business operations examine tax returns periodically (continuously in

some jurisdictions). The following table summarizes the status of examinations by

major jurisdiction for the Corporation and various subsidiaries at December 31,

2019.

Tax Examination Status

Years under Status at December 31

Examination

(1)

2019

United States 2017-2018 To begin in 2020

California 2012-2017 Field examination

New York 2016-2018 Field examination

United Kingdom 2018 Field examination

(1)

All tax years subsequent to the years shown remain subject to

examination.

Significant components of the Corporation’s net deferred tax assets and

liabilities at December 31, 2019 and 2018 are presented in the following table.

Deferred Tax Assets and Liabilities

December 31

(Dollars in millions) 2019 2018

Deferred tax assets

Net operating loss carryforwards $ 7,417 $ 7,993

Allowance for credit losses 2,354 2,400

Lease liability 2,321 —

Security, loan and debt valuations 1,860 1,818

Accrued expenses 1,719 1,875

Employee compensation and retirement benefits 1,622 1,564

Credit carryforwards 183 623

Available-for-sale securities — 1,854

Other 1,203 1,037

Gross deferred tax assets 18,679 19,164

Valuation allowance (1,989 ) (1,569 )

Total deferred tax assets, net of valuation allowance 16,690 17,595

Deferred tax liabilities

Equipment lease financing 2,933 2,684

Right-to-use asset 2,246 —

Tax credit investments 1,577 940

Fixed assets 1,505 1,104

Available-for-sale securities 100 —

Other 1,885 2,126

Gross deferred tax liabilities 10,246 6,854

Net deferred tax assets $ 6,444 $ 10,741

The table below summarizes the deferred tax assets and related valuation

allowances recognized for the net operating loss (NOL) and tax credit

carryforwards at December 31, 2019.

Net Operating Loss and Tax Credit Carryforward Deferred Tax

Assets

Net

Deferred Valuation Deferred First Year

(Dollars in millions) Tax Asset Allowance Tax Asset Expiring

Net operating losses - U.S. $ 312 $ — $ 312 After 2028

Net operating losses - U.K.

(1)

5,276 — 5,276 None

Net operating losses - other

non-U.S. 493 (423) 70 Various

Net operating losses - U.S.

states

(2)

1,336 (580 ) 756 Various

Foreign tax credits 183 (183 ) — 2028

(1)

Represents U.K. broker-dealer net operating losses that may be carried forward

indefinitely.

(2)

The net operating losses and related valuation allowances for U.S. states before considering the benefit of federal

deductions were $1.7 billion and $734 million.

145 Bank of America

Management concluded that no valuation allowance was necessary to reduce

the deferred tax assets related to the U.K. NOL carryforwards and U.S. federal and

certain state NOL carryforwards since estimated future taxable income will be

sufficient to utilize these assets prior to their expiration. The majority of the

Corporation’s U.K. net deferred tax assets, which consist primarily of NOLs, are

expected to be realized by certain subsidiaries over an extended number of years.

Management’s conclusion is supported by financial results, profit forecasts for the

relevant entities and the indefinite period to carry forward NOLs. However, a

material change in those estimates could lead management to reassess such

valuation allowance conclusions.

At December 31, 2019, U.S. federal income taxes had not been provided on

approximately $5.0 billion of temporary differences associated with investments in

non-U.S. subsidiaries that are essentially permanent in duration. If the Corporation

were to record the associated deferred tax liability, the amount would be

approximately $1.0 billion.

NOTE 21 Fair Value Measurements

Under applicable accounting standards, fair value is defined as the exchange price

that would be received for an asset or paid to transfer a liability (an exit price) in

the principal or most advantageous market for the asset or liability in an orderly

transaction between market participants on the measurement date. The

Corporation determines the fair values of its financial instruments under applicable

accounting standards that require an entity to maximize the use of observable

inputs and minimize the use of unobservable inputs. The Corporation categorizes

its financial instruments into three levels based on the established fair value

hierarchy and conducts a review of fair value hierarchy classifications on a

quarterly basis. Transfers into or out of fair value hierarchy classifications are

made if the significant inputs used in the financial models measuring the fair values

of the assets and liabilities become unobservable or observable in the current

marketplace. For more information regarding the fair value hierarchy and how the

Corporation measures fair value, see Note 1 – Summary of Significant Accounting

Principles. The Corporation accounts for certain financial instruments under the fair

value option. For more information, see Note 22 – Fair Value Option.

Valuation Techniques

The following sections outline the valuation methodologies for the Corporation’s

assets and liabilities. While the Corporation believes its valuation methods are

appropriate and consistent with other market participants, the use of different

methodologies or assumptions to determine the fair value of certain financial

instruments could result in a different estimate of fair value at the reporting date.

During 2019, there were no significant changes to valuation approaches or

techniques that had, or are expected to have, a material impact on the

Corporation’s consolidated financial position or results of operations.

Trading Account Assets and Liabilities and Debt Securities

The fair values of trading account assets and liabilities are primarily based on

actively traded markets where prices are based on either direct market quotes or

observed transactions. The fair values of debt securities are generally based on

quoted market prices or market prices for similar assets. Liquidity is a significant

factor in the determination of the fair values of trading account assets and liabilities

and debt securities. Market price quotes may not be readily available for some

positions such as positions within a market sector where trading activity has

slowed significantly or ceased. Some of these instruments are valued using a

discounted

cash flow model, which estimates the fair value of the securities using internal

credit risk, and interest rate and prepayment risk models that incorporate

management’s best estimate of current key assumptions such as default rates,

loss severity and prepayment rates. Principal and interest cash flows are

discounted using an observable discount rate for similar instruments with

adjustments that management believes a market participant would consider in

determining fair value for the specific security. Other instruments are valued using

a net asset value approach which considers the value of the underlying securities.

Underlying assets are valued using external pricing services, where available, or

matrix pricing based on the vintages and ratings. Situations of illiquidity generally

are triggered by the market’s perception of credit uncertainty regarding a single

company or a specific market sector. In these instances, fair value is determined

based on limited available market information and other factors, principally from

reviewing the issuer’s financial statements and changes in credit ratings made by

one or more rating agencies.

Derivative Assets and Liabilities

The fair values of derivative assets and liabilities traded in the OTC market are

determined using quantitative models that utilize multiple market inputs including

interest rates, prices and indices to generate continuous yield or pricing curves and

volatility factors to value the position. The majority of market inputs are actively

quoted and can be validated through external sources, including brokers, market

transactions and third-party pricing services. When third-party pricing services are

used, the methods and assumptions are reviewed by the Corporation. Estimation

risk is greater for derivative asset and liability positions that are either option-based

or have longer maturity dates where observable market inputs are less readily

available, or are unobservable, in which case, quantitative-based extrapolations of

rate, price or index scenarios are used in determining fair values. The fair values of

derivative assets and liabilities include adjustments for market liquidity,

counterparty credit quality and other instrument-specific factors, where

appropriate. In addition, the Corporation incorporates within its fair value

measurements of OTC derivatives a valuation adjustment to reflect the credit risk

associated with the net position. Positions are netted by counterparty, and fair

value for net long exposures is adjusted for counterparty credit risk while the fair

value for net short exposures is adjusted for the Corporation’s own credit risk. The

Corporation also incorporates FVA within its fair value measurements to include

funding costs on uncollateralized derivatives and derivatives where the

Corporation is not permitted to use the collateral it receives. An estimate of severity

of loss is also used in the determination of fair value, primarily based on market

data.

Loans and Loan Commitments

The fair values of loans and loan commitments are based on market prices, where

available, or discounted cash flow analyses using market-based credit spreads of

comparable debt instruments or credit derivatives of the specific borrower or

comparable borrowers. Results of discounted cash flow analyses may be adjusted,

as appropriate, to reflect other market conditions or the perceived credit risk of the

borrower.

Mortgage Servicing Rights

The fair values of MSRs are primarily determined using an option-adjusted spread

valuation approach, which factors in prepayment

risk to determine the fair value of MSRs. This approach consists of projecting

servicing cash flows under multiple interest rate scenarios and discounting these

cash flows using risk-adjusted discount rates.

Loans Held-for-sale

The fair values of LHFS are based on quoted market prices, where available, or

are determined by discounting estimated cash flows using interest rates

approximating the Corporation’s current origination rates for similar loans adjusted

to reflect the inherent credit risk. The borrower-specific credit risk is embedded

within the quoted market prices or is implied by considering loan performance

when selecting comparables.

Short-term Borrowings and Long-term Debt

The Corporation issues structured liabilities that have coupons or repayment terms

linked to the performance of debt or equity securities, interest rates, indices,

currencies or commodities. The fair values of these structured liabilities are

estimated using quantitative models for the combined derivative and debt portions

of the notes. These models incorporate observable and, in some instances,

unobservable inputs including security prices, interest rate yield curves, option

volatility, currency, commodity or equity rates and correlations among these inputs.

The Corporation also considers the impact of its own credit spread in determining

the discount rate used to value these liabilities. The credit spread is determined by

reference to observable spreads in the secondary bond market.

Securities Financing Agreements

The fair values of certain reverse repurchase agreements, repurchase agreements

and securities borrowed transactions are determined using quantitative models,

including discounted cash flow models that require the use of multiple market

inputs including interest rates and spreads to generate continuous yield or pricing

curves, and volatility factors. The majority of market inputs are actively quoted and

can be validated through external sources, including brokers, market transactions

and third-party pricing services.

Deposits

The fair values of deposits are determined using quantitative models, including

discounted cash flow models that require the use of multiple market inputs

including interest rates and spreads to generate continuous yield or pricing curves,

and volatility factors. The majority of market inputs are actively quoted and can be

validated through external sources, including brokers, market transactions and

third-party pricing services. The Corporation considers the impact of its own credit

spread in the valuation of these liabilities. The credit risk is determined by

reference to observable credit spreads in the secondary cash market.

Asset-backed Secured Financings

The fair values of asset-backed secured financings are based on external broker

bids, where available, or are determined by discounting estimated cash flows using

interest rates approximating the Corporation’s current origination rates for similar

loans adjusted to reflect the inherent credit risk.

Bank of America 146

Recurring Fair Value

Assets and liabilities carried at fair value on a recurring basis atDecember 31, 2019 and 2018, including financial instruments that the Corporation accounts for under the

fair value option, are summarized in the following tables.

December 31, 2019

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 $ 1,000 $ — $ — $ — $ 1,000

Federal funds sold and securities borrowed or purchased under agreements to resell — 50,364 — — 50,364

Trading account assets:

U.S. Treasury and agency securities

(2)

49,517 4,157 — — 53,674

Corporate securities, trading loans and other — 25,226 1,507 — 26,733

Equity securities 53,597 32,619 239 — 86,455

Non-U.S. sovereign debt 3,965 23,854 482 — 28,301

Mortgage trading loans, MBS and ABS:

U.S. government-sponsored agency guaranteed

(2)

— 24,324 — — 24,324

Mortgage trading loans, ABS and other MBS — 8,786 1,553 — 10,339

Total trading account assets

(3)

107,079 118,966 3,781 — 229,826

Derivative assets 14,079 328,442 2,226 (304,262 ) 40,485

AFS debt securities:

U.S. Treasury and agency securities 67,332 1,196 — — 68,528

Mortgage-backed securities:

Agency — 122,528 — — 122,528

Agency-collateralized mortgage obligations — 4,641 — — 4,641

Non-agency residential — 653 424 — 1,077

Commercial — 15,021 — — 15,021

Non-U.S. securities — 11,989 2 — 11,991

Other taxable securities — 3,876 65 — 3,941

Tax-exempt securities — 17,804 108 — 17,912

Total AFS debt securities 67,332 177,708 599 — 245,639

Other debt securities carried at fair value:

U.S. Treasury and agency securities 3 — — — 3

Agency MBS — 3,003 — — 3,003

Non-agency residential MBS — 1,035 299 — 1,334

Non-U.S. and other securities 400 6,088 — — 6,488

Total other debt securities carried at fair value 403 10,126 299 — 10,828

Loans and leases — 7,642 693 — 8,335

Loans held-for-sale — 3,334 375 — 3,709

Other assets

(4)

11,782 1,376 2,360 — 15,518

Total assets

(5)

$ 201,675 $ 697,958 $ 10,333 $ (304,262 ) $ 605,704

Liabilities

Interest-bearing deposits in U.S. offices $ — $ 508 $ — $ — $ 508

Federal funds purchased and securities loaned or sold under agreements to repurchase — 16,008 — — 16,008

Trading account liabilities:

U.S. Treasury and agency securities 13,140 282 — — 13,422

Equity securities 38,148 4,144 2 — 42,294

Non-U.S. sovereign debt 10,751 11,310 — — 22,061

Corporate securities and other — 5,478 15 — 5,493

Total trading account liabilities 62,039 21,214 17 — 83,270

Derivative liabilities 11,904 320,479 4,764 (298,918 ) 38,229

Short-term borrowings — 3,941 — — 3,941

Accrued expenses and other liabilities 13,927 1,507 — — 15,434

Long-term debt — 33,826 1,149 — 34,975

Total liabilities

(5)

$ 87,870 $ 397,483 $ 5,930 $ (298,918 ) $ 192,365

(1)

Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same

counterparties.

(2)

I n c l u d e s $26.7 billion of GSE

obligations.

(3)

Includes securities with a fair value of$14.7 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.

(4)

Includes MSRs of $1.5 billion which are classified as Level 3

assets.

(5)

Total recurring Level 3 assets were0.42 percent of total consolidated assets, and total recurring Level 3 liabilities were0.27 percent of total consolidated

liabilities.

147 Bank of America

December 31, 2018

Fair Value Measurements

Assets/Liabilities at Fair

(Dollars in millions) Level 1 Level 2 Level 3 Netting Adjustments

(1)

Value

Assets

Time deposits placed and other short-term investments $ 1,214 $ — $ — $ — $ 1,214

Federal funds sold and securities borrowed or purchased under agreements to resell — 56,399 — — 56,399

Trading account assets:

U.S. Treasury and agency securities

(2)

53,131 1,593 — — 54,724

Corporate securities, trading loans and other — 24,630 1,558 — 26,188

Equity securities 53,840 23,163 276 — 77,279

Non-U.S. sovereign debt 5,818 19,210 465 — 25,493

Mortgage trading loans, MBS and ABS:

U.S. government-sponsored agency guaranteed

(2)

— 19,586 — — 19,586

Mortgage trading loans, ABS and other MBS — 9,443 1,635 — 11,078

Total trading account assets

(3)

112,789 97,625 3,934 — 214,348

Derivative assets 9,967 315,413 3,466 (285,121 ) 43,725

AFS debt securities:

U.S. Treasury and agency securities 53,663 1,260 — — 54,923

Mortgage-backed securities:

Agency — 121,826 — — 121,826

Agency-collateralized mortgage obligations — 5,530 — — 5,530

Non-agency residential — 1,320 597 — 1,917

Commercial — 14,078 — — 14,078

Non-U.S. securities — 9,304 2 — 9,306

Other taxable securities — 4,403 7 — 4,410

Tax-exempt securities — 17,376 — — 17,376

Total AFS debt securities 53,663 175,097 606 — 229,366

Other debt securities carried at fair value:

U.S. Treasury and agency securities

1,282 — — — 1,282

Non-agency residential MBS — 1,434 172 — 1,606

Non-U.S. and other securities 490 5,357 — — 5,847

Total other debt securities carried at fair value 1,772 6,791 172 — 8,735

Loans and leases — 4,011 338 — 4,349

Loans held-for-sale — 2,400 542 — 2,942

Other assets

(4)

15,032 1,775 2,932 — 19,739

Total assets

(5)

$ 194,437 $ 659,511 $ 11,990 $ (285,121 ) $ 580,817

Liabilities

Interest-bearing deposits in U.S. offices $ — $ 492 $ — $ — $ 492

Federal funds purchased and securities loaned or sold under agreements to repurchase — 28,875 — — 28,875

Trading account liabilities:

U.S. Treasury and agency securities 7,894 761 — — 8,655

Equity securities 33,739 4,070 — — 37,809

Non-U.S. sovereign debt 7,452 9,182 — — 16,634

Corporate securities and other — 5,104 18 — 5,122

Total trading account liabilities 49,085 19,117 18 — 68,220

Derivative liabilities 9,931 303,441 4,401 (279,882 ) 37,891

Short-term borrowings — 1,648 — — 1,648

Accrued expenses and other liabilities 18,096 1,979 — — 20,075

Long-term debt — 26,872 817 — 27,689

Total liabilities

(5)

$ 77,112 $ 382,424 $ 5,236 $ (279,882 ) $ 184,890

(1)

Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same

counterparties.

(2)

I n c l u d e s $20.2 billion of GSE

obligations.

(3)

Includes securities with a fair value of$16.6 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.

(4)

Includes MSRs of $2.0 billion which are classified as Level 3

assets.

(5)

Total recurring Level 3 assets were0.51 percent of total consolidated assets, and total recurring Level 3 liabilities were0.25 percent of total consolidated

liabilities.

Bank of America 148

The following tables present a reconciliation of all assets and liabilities primarily due to decreased price observability, and transfers out of Level 3 occur

measured at fair value on a recurring basis using significant unobservable inputs primarily due to increased price observability. Transfers occur on a regular basis

(Level 3) during 2019, 2018 and 2017, including net realized and unrealized gains for long-term debt instruments due to changes in the impact of unobservable inputs

(losses) included in earnings and accumulated OCI. Transfers into Level 3 occur on the value of the embedded derivative in relation to the instrument as a whole.

Level 3 – Fair Value Measurements

(1)

Gross

Change in

Unrealized Gains

(Losses) in Net

Total Gross Gross Income Related

(Dollars in millions)

Balance

January 1

Realized/Unrealized

Gains (Losses) in

Net Income

(2)

Gains

(Losses)

in OCI

(3)

Purchases Sales Issuances Settlements

Transfers

into

Level 3

Transfers

out of

Level 3

Balance

December 31

to Financial

Instruments Still

Held

(2)

Year Ended December 31, 2019

Trading account assets:

Corporate securities, trading loans and other $ 1,558 $ 105 $ — $ 534 $ (390 ) $ 18 $ (578 ) $ 699 $ (439 ) $ 1,507 $ 29

Equity securities 276 (12 ) — 38 (87 ) — (9 ) 79 (46 ) 239 (18 )

Non-U.S. sovereign debt 465 46 (12 ) 1 — — (51 ) 39 (6 ) 482 47

Mortgage trading loans, ABS and other MBS 1,635 99 (2 ) 662 (899 ) — (175 ) 738 (505 ) 1,553 26

Total trading account assets 3,934 238 (14 ) 1,235 (1,376 ) 18 (813 ) 1,555 (996 ) 3,781 84

Net derivative assets (liabilities)

(4,5)

(935 ) (37 ) — 298 (837 ) — (97 ) 147 (1,077 ) (2,538 ) 228

AFS debt securities:

Non-agency residential MBS 597 13 64 — (73 ) — (40 ) 206 (343 ) 424 —

Non-U.S. securities 2 — — — — — — — — 2 —

Other taxable securities 7 2 — — — — (5 ) 61 —

65 —

Tax-exempt securities — — — — — — — 108 — 108 —

Total AFS debt securities 606 15 64 — (73 ) — (45 ) 375 (343 ) 599 —

Other debt securities carried at fair value – Non-agency

residential MBS 172 36 — — — — (17 ) 155 (47 ) 299 38

Loans and leases

(6,7)

338 — — 230 (35 ) 217 (57 ) — — 693 (1 )

Loans held-for-sale

(6,7)

542 48 (6 ) 12 (71 ) 36 (245 ) 59 — 375 22

Other assets

(7)

2,932 (81 ) 19 — (10 ) 179 (683 ) 5 (1 ) 2,360 (267 )

Trading account liabilities – Equity securities — (2 ) — — — — — — — (2 ) (2 )

Trading account liabilities – Corporate securities

and other (18 ) 8 — (1 ) (3 ) (1 ) — — — (15 ) —

Long-term debt

(5,6)

(817 ) (59 ) (64 ) — — (40 ) 180 (350 ) 1 (1,149 ) (55 )

Year Ended December 31, 2018

Trading account assets:

Corporate securities, trading loans and other $ 1,864 $ (32) $ (1 ) $ 436 $ (403 ) $ 5 $ (568) $ 804 $ (547 ) $ 1,558 $ (117 )

Equity securities 235 (17 ) — 44 (11 ) — (4) 78 (49) 276 (22 )

Non-U.S. sovereign debt 556 47 (44 ) 13 (57 ) — (30 ) 117 (137) 465 48

Mortgage trading loans, ABS and other MBS 1,498 148 3 585 (910 ) — (158) 705 (236) 1,635 97

Total trading account assets 4,153 146 (42) 1,078 (1,381 ) 5 (760) 1,704 (969 ) 3,934 6

Net derivative assets (liabilities)

(4)

(1,714 ) 106 — 531 (1,179 ) — 778 39 504 (935 ) (116)

AFS debt securities:

Non-agency residential MBS — 27 (33) — (71 ) — (25 ) 774 (75 ) 597 —

Non-U.S. securities 25 — (1 ) — (10 ) — (15 ) 3 — 2 —

Other taxable securities 509 1 (3 ) — (23 ) — (11 ) 60 (526) 7 —

Tax-exempt securities 469 — — — — — (1 ) 1 (469 ) — —

Total AFS debt securities

(8)

1,003 28 (37 ) — (104 ) — (52) 838 (1,070 ) 606 —

Other debt securities carried at fair value – Non-agency

residential MBS — (18 ) — — (8 ) — (34 ) 365 (133 ) 172 (18)

Loans and leases

(6,7)

571 (16 ) — — (134 ) — (83 ) — — 338 (9)

Loans held-for-sale

(6)

690 44 (26 ) 71 — 1 (201) 23 (60) 542 31

Other assets

(7,8)

2,425 414 (38 ) 2 (69 ) 96 (792 ) 929 (35) 2,932 149

Trading account liabilities – Corporate securities

and other (24) 11 — 9 (12) (2 ) — — — (18 ) (7 )

Accrued expenses and other liabilities

(6)

(8) — — — — — 8 — — — —

Long-term debt

(6)

(1,863 ) 103 4 9 — (141) 486 (262 ) 847 (817 ) 95

(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; Other debt securities carried at fair value - other income; Loans and leases - predominantly other income; Loans held-for-sale - other income; Other assets - primarily other income related to MSRs; Long-term debt - primarily 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 gains (losses) of $3 million and $(105) million related to financial instruments still held atDecember 31, 2019 and 2018.

(4)

Net derivative assets (liabilities) include derivative assets of$2.2 billion and $3.5 billion and derivative liabilities of $4.8 billion and $4.4 billion at December 31, 2019 and

2018.

(5)

Transfers into long-term debt include a $1.4 billion transfer in of Level 3 derivative assets to reflect the Corporation's change to present bifurcated embedded derivatives with their respective host

instruments.

(6)

Amounts represent instruments that are accounted for under the fair value

option.

(7)

Issuances represent loan originations and MSRs recognized following securitizations or whole-loan

sales.

(8)

Transfers out of AFS debt securities and into other assets primarily relate to the reclassification of certain

securities.

149 Bank of America

Level 3 – Fair Value Measurements

(1)

Gross Change in

Unrealized

Gains/(Losses) in

Total Gross Gross Net Income Related

Realized/Unrealized Gains/ Transfers Transfers to Financial

Balance Gains/(Losses) in (Losses) into out of Balance Instruments Still

(Dollars in millions) January 1 Net Income

(2)

in OCI

(3)

Purchases Sales Issuances Settlements Level 3 Level 3 December 31 Held

(2)

Year Ended December 31, 2017

Trading account assets:

Corporate securities, trading loans and other $ 2,777 $ 229 $ — $ 547 $ (702) $ 5 $ (666 ) $ 728 $ (1,054 ) $ 1,864 $ 2

Equity securities 281 18 — 55 (70 ) — (10) 146 (185 ) 235 (1 )

Non-U.S. sovereign debt 510 74 (8 ) 53 (59 ) — (73 ) 72 (13 ) 556 70

Mortgage trading loans, ABS and other MBS 1,211 165 (2 ) 1,210 (990) — (233 ) 218 (81) 1,498 72

Total trading account assets 4,779 486 (10) 1,865 (1,821 ) 5 (982) 1,164 (1,333 ) 4,153 143

Net derivative assets (liabilities)

(4)

(1,313 ) (984 ) — 664 (979) — 949 48 (99 ) (1,714 ) (409)

AFS debt securities:

Non-U.S. securities 229 2 16 49 — — (271 ) — — 25 —

Other taxable securities 594 4 8 5 — — (42 ) 34 (94 ) 509 —

Tax-exempt securities 542 1 3 14 (70) — (11 ) 35 (45 ) 469 —

Total AFS debt securities 1,365 7 27 68 (70) — (324 ) 69 (139) 1,003 —

Other debt securities carried at fair value – Non-agency

residential MBS 25 (1 ) — — (21 ) — (3) — — — —

Loans and leases

(5)

720 15 — 3 (34 ) — (126 ) — (7) 571 11

Loans held-for-sale

(5,6)

656 100 (3 ) 3 (189) — (346 ) 501 (32) 690 14

Other assets

(6)

2,986 144 (57 ) 2 (214 ) 258 (758 ) 64 — 2,425 (226)

Federal funds purchased and securities loaned or sold

under agreements to repurchase

(5)

(359 ) (5 ) — — — (12) 171 (58 ) 263 — —

Trading account liabilities – Corporate securities and other (27 ) 14 — 8 (17) (2 ) — — — (24 ) 2

Accrued expenses and other liabilities

(5)

(9) — — — — — 1 — — (8) —

Long-term debt

(5)

(1,514 ) (135 ) (31) 84 — (288 ) 514 (711 ) 218 (1,863 ) (196)

(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 - market making and similar activities; Net derivative assets (liabilities) - primarily market making and similar activities and other

income; Other debt securities carried at fair value - other income; Loans and leases - other income; Loans held-for-sale - other income; Other assets - primarily other income related to MSRs; Long-term debt - predominantly 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.

(4)

Net derivative assets (liabilities) include derivative assets of$4.1 billion and derivative liabilities of$5.8

billion.

(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.

Bank of America 150

The following tables present information about significant unobservable inputs related to the Corporation’s material categories of Level 3 financial assets and liabilities at

December 31, 2019 and 2018.

Quantitative Information about Level 3 Fair Value Measurements at December 31, 2019

(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

Trading account assets – Mortgage trading loans, ABS and other MBS

Loans and leases

Loans held-for-sale

AFS debt securities, primarily non-agency residential

Other debt securities carried at fair value - Non-agency residential

$ 1,407

332

281

4

491

299

Discounted cash flow,

Market comparables

Yield

Prepayment speed

Default rate

Loss severity

Price

0% to 25%

1% to 27% CPR

0% to 3% CDR

0% to 47%

$0 to $160

6%

17% CPR

1% CDR

14%

$94

Instruments backed by commercial real estate assets

Trading account assets – Corporate securities, trading loans and other

Trading account assets – Mortgage trading loans, ABS and other MBS

Loans held-for-sale

$ 303

201

85

17

Discounted cash flow

Yield

Price

0% to 30%

$0 to $100

14%

$55

Commercial loans, debt securities and other

Trading account assets – Corporate securities, trading loans and other

Trading account assets – Non-U.S. sovereign debt

Trading account assets – Mortgage trading loans, ABS and other MBS

AFS debt securities – Other taxable securities

Loans and leases

Loans held-for-sale

$ 3,798

1,306

482

1,136

108

412

354

Discounted cash flow,

Market comparables

Yield

Prepayment speed

Default rate

Loss severity

Price

Long-dated equity volatilities

1% to 20%

10% to 20%

3% to 4%

35% to 40%

$0 to $142

35%

6%

13%

4%

38%

$72

n/a

Other assets, primarily auction rate securities $ 815

Discounted cash flow,

Market comparables

Price

$10 to $100 $96

MSRs $ 1,545

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

0 to 14 years

0 to 9 years

7% to 14%

9% to 15%

5 years

3 years

9%

11%

Structured liabilities

Long-term debt $ (1,149 )

Discounted cash flow,

Market comparables,

Industry standard derivative

pricing

(3)

Yield

Equity correlation

Long-dated equity volatilities

Price

Natural gas forward price

2% to 6%

9% to 100%

4% to 101%

$0 to $116

$1/MMBtu to $5/MMBtu

5%

63%

32%

$74

$3/MMBtu

Net derivative assets (liabilities)

Credit derivatives $ 13

Discounted cash flow,

Stochastic recovery

correlation model

Yield

Upfront points

Prepayment speed

Default rate

Loss severity

Price

5%

0 to 100 points

15% to 100% CPR

1% to 4% CDR

35%

$0 to $104

n/a

63 points

22% CPR

2% CDR

n/a

$73

Equity derivatives $ (1,081 )

Industry standard derivative

pricing

(3)

Equity correlation

Long-dated equity volatilities

9% to 100%

4% to 101%

63%

32%

Commodity derivatives $ (1,357 )

Discounted cash flow,

Industry standard derivative

pricing

(3)

Natural gas forward price

Correlation

Volatilities

$1/MMBtu to $5/MMBtu

30% to 69%

14% to 54%

$3/MMBtu

68%

27%

Interest rate derivatives $ (113)

Industry standard derivative

pricing

(4)

Correlation (IR/IR)

Correlation (FX/IR)

Long-dated inflation rates

Long-dated inflation volatilities

15% to 94%

0% to 46%

-23% to 56%

0% to 1%

52%

2%

16%

1%

Total net derivative assets (liabilities) $ (2,538 )

(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 page147: Trading account assets – Corporate securities, trading loans and other

of $1.5 billion, Trading account assets – Non-U.S. sovereign debt of $482 million, Trading account assets – Mortgage trading loans, ABS and other MBS of$1.6 billion, AFS debt securities of $599 million, Other debt securities carried at fair value - Non-

agency residential of $299 million, Other assets, including MSRs, of$2.4 billion, Loans and leases of $693 million and LHFS of $375 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

151 Bank of America

Quantitative Information about Level 3 Fair Value Measurements at December 31, 2018

(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

Trading account assets – Mortgage trading loans, ABS and other MBS

Loans and leases

Loans held-for-sale

AFS debt securities, primarily non-agency residential

Other debt securities carried at fair value - Non-agency residential

$ 1,536

419

338

1

606

172

Discounted cash flow,

Market comparables

Yield

Prepayment speed

Default rate

Loss severity

Price

0% to 25%

0% to 21% CPR

0% to 3% CDR

0% to 51%

$0 to $128

8%

12% CPR

1% CDR

17%

$72

Instruments backed by commercial real estate assets

Trading account assets – Corporate securities, trading loans and other

Trading account assets – Mortgage trading loans, ABS and other MBS

$ 291

200

91

Discounted cash flow

Yield

Price

0% to 25%

$0 to $100

7%

$79

Commercial loans, debt securities and other

Trading account assets – Corporate securities, trading loans and other

Trading account assets – Non-U.S. sovereign debt

Trading account assets – Mortgage trading loans, ABS and other MBS

Loans held-for-sale

$ 3,489

1,358

465

1,125

541

Discounted cash flow,

Market comparables

Yield

Prepayment speed

Default rate

Loss severity

Price

1% to 18%

10% to 20%

3% to 4%

35% to 40%

$0 to $141

13%

15%

4%

38%

$68

Other assets, primarily auction rate securities $ 890

Discounted cash flow,

Market comparables

Price

$10 to $100 $95

MSRs $ 2,042

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

0 to 14 years

0 to 10 years

7% to 14%

9% to 15%

5 years

3 years

9%

12%

Structured liabilities

Long-term debt

$ (817 )

Discounted cash flow,

Market comparables,

Industry standard derivative

pricing

(3)

Equity correlation

Long-dated equity volatilities

Yield

Price

11% to 100%

4% to 84%

7% to 18%

$0 to $100

67%

32%

16%

$72

Net derivative assets (liabilities)

Credit derivatives $ (565)

Discounted cash flow,

Stochastic recovery

correlation model

Yield

Upfront points

Credit correlation

Prepayment speed

Default rate

Loss severity

Price

0% to 5%

0 points to 100 points

70%

15% to 20% CPR

1% to 4% CDR

35%

$0 to $138

4%

70 points

n/a

15% CPR

2% CDR

n/a

$93

Equity derivatives $ (348)

Industry standard derivative

pricing

(3)

Equity correlation

Long-dated equity volatilities

11% to 100%

4% to 84%

67%

32%

Commodity derivatives $ 10

Discounted cash flow,

Industry standard derivative

pricing

(3)

Natural gas forward price

Correlation

Volatilities

$1/MMBtu to $12/MMBtu

38% to 87%

15% to 132%

$3/MMBtu

71%

38%

Interest rate derivatives $ (32 )

Industry standard derivative

pricing

(4)

Correlation (IR/IR)

Correlation (FX/IR)

Long-dated inflation rates

Long-dated inflation volatilities

15% to 70%

0% to 46%

-20% to 38%

0% to 1%

61%

1%

2%

1%

Total net derivative assets (liabilities)

$ (935 )

(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 page148: Trading account assets – Corporate securities, trading loans and other

of $1.6 billion, Trading account assets – Non-U.S. sovereign debt of $465 million, Trading account assets – Mortgage trading loans, ABS and other MBS of$1.6 billion, AFS debt securities of $606 million, Other debt securities carried at fair value - Non-

agency residential of $172 million, Other assets, including MSRs, of$2.9 billion, Loans and leases of $338 million and LHFS of $542 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 152

In the previous tables, instruments backed by residential and commercial real

estate assets include RMBS, commercial MBS, whole loans and mortgage CDOs.

Commercial loans, debt securities and other include corporate CLOs and CDOs,

commercial loans and bonds, and securities backed by non-real estate assets.

Structured liabilities primarily include equity-linked notes that are accounted for

under the fair

value option.

The Corporation uses multiple market approaches in valuing certain of its Level

3 financial instruments. For example, market comparables and discounted cash

flows are used together. For a given product, such as corporate debt securities,

market comparables may be used to estimate some of the unobservable inputs

and then these inputs are incorporated into a discounted cash flow model.

Ther

efore, the balances disclosed encompass both of these techniques.

The level of aggregation and diversity within the products disclosed in the

tables result in certain ranges of inputs being wide and unevenly distributed across

asset and liability categories.

Uncertainty of Fair Value Measurements from Unobservable

Inputs

Loans and Securities

A significant increase in market yields, default rates, loss severities or duration

would have resulted in a significantly lower fair value for long positions. Short

positions would have been impacted in a directionally opposite way. The impact of

changes in prepayment speeds would have resulted in differing impacts depending

on the seniority of the instrument and, in the case of CLOs, whether prepayments

can be reinvested. A significant increase in price would ha

ve resulted in a

significantly higher fair value for long positions, and short positions would have

been impacted in a directionally opposite way.

Structured Liabilities and Derivatives

For credit derivatives, a significant increase in market yield, upfront points (i.e., a

single upfront payment made by a protection buyer at inception), credit spreads,

default rates or loss severities would

have resulted in a significantly lower fair value for protection sellers and higher fair

value for protection buyers. The impact of changes in prepayment speeds would

have resulted in differing impacts depending on the seniority of the instrument.

Structured credit derivatives are impacted by credit correlation. Default

correlation is a parameter that describes the degree of dependence among credit

default rates w

ithin a credit portfolio that underlies a credit derivative instrument.

The sensitivity of this input on the fair value varies depending on the level of

subordination of the tranche. For senior tranches that are net purchases of

protection, a significant increase in default correlation would have resulted in a

significantly higher fair value. Net short protection positions would have been

impacted in a

directionally opposite way.

For equity derivatives, commodity derivatives, interest rate derivatives and

structured liabilities, a significant change in long-dated rates and volatilities and

correlation inputs (i.e., the degree of correlation between an equity security and an

index, between two different commodities, between two different interest rates, or

between interest rates and foreign exchange r

ates) would have resulted in a

significant impact to the fair value; however, the magnitude and direction of the

impact depend on whether the Corporation is long or short the exposure. For

structured liabilities, a significant increase in yield or decrease in price would have

resulted in a significantly lower fair value.

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

2019, 2018 and 2017. In the tables below, other assets includes the measurement

of the Corporation's merchant services equity method

investment on which the

Corporation recorded an impairment charge of $2.1 billion during 2019. For more

information, see Note 13 – Commitments and Contingencies.

Assets Measured at Fair Value on a Nonrecurring Basis

December 31, 2019 December 31, 2018

(Dollars in millions)

Level 2 Level 3 Level 2 Level 3

Assets

Loans held-for-sale $ 53 $ 102 $ 274 $ —

Loans and leases

(1)

— 257 — 474

Foreclosed properties

(2, 3)

— 17 — 42

Other assets 178 646 331 14

Gains (Losses)

2019 2018 2017

Assets

Loans held-for-sale

Loans and leases

(1)

Foreclosed properties

Other assets

$ (14 )

(81 )

(9 )

(2,145 )

$ (18 )

(202 )

(24 )

(64 )

$ (6 )

(336 )

(41 )

(124 )

(1)

Includes $36 million, $83 million and $135 million of losses on loans that were written down to a collateral value of zero during2019, 2018 and 2017,

respectively.

(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 $260 million and $488 million of properties acquired upon foreclosure of certain government-guaranteed loans (principally FHA-insured loans) atDecember 31, 2019 and

2018.

153 Bank of America

The table below presents information about significant unobservable inputs atDecember 31, 2019 and 2018.

Quantitative Information about Nonrecurring Level 3 Fair Value Measurements

(Dollars in millions)

Loans held-for-sale

Financial Instrument Fair Value

$ 102

Valuation

Technique

Discounted cash flow

Significant Unobservable

Inputs

December 31, 2019

Price

Inputs

Ranges of

Inputs

$85 to $97

Weighted

Average

(1)

$88

Loans and leases

(2)

257 Market comparables OREO discount 13% to 59% 24 %

Costs to sell 8% to 26% 9 %

Other assets

(3)

640 Discounted cash flow Customer attrition 0% to 19% 5 %

Costs to service 11% to 19% 15 %

Loans and leases

(2)

$ 474

Market comparables

December 31, 2018

OREO discount 13% to 59% 25 %

9 %

Costs to sell 8% to 26%

(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)

The fair value of the merchant services joint venture was measured using a discounted cash flow method in which the two primary drivers of fair value were the customer attrition rate and certain costs to service the customers. The weighted averages are

calculated based on variations of the attrition rates and costs to service the customers.

NOTE 22 Fair Value Option

Loans and Loan Commitments

The Corporation elects to account for certain loans and loan commitments that

exceed the Corporation’s single-name credit risk concentration guidelines under

the fair value option. Lendi

ng commitments are actively managed and, as

appropriate, credit risk for these lending relationships may be mitigated through

the use of credit derivatives, with the Corporation’s public side credit view and

market perspectives determining the size and timing of the hedging activity. These

credit derivatives do not meet the requirements for designation as accounting

hedges and therefore are carried at

fair value. The fair value option allows the

Corporation to carry these loans and loan commitments at fair value, which is more

consistent with management’s view of the underlying economics and the manner

in which they are managed. In addition, the fair value option allows the Corporation

to reduce the accounting volatility that would otherwise result from the asymmetry

created by accounting for the fi

nancial instruments at historical cost and the credit

derivatives at fair value.

Loans Held-for-sale

The Corporation elects to account for residential mortgage LHFS, commercial

mortgage LHFS and certain other LHFS under the fair value option. These loans

are actively managed and monitored and, as appropriate, certain market risks of

the loans may be mitigated through the use of derivatives. The Corporat

ion has

elected not to designate the derivatives as qualifying accounting hedges, and

therefore, they are carried at fair value. The changes in fair value of the loans are

largely offset by changes in the fair value of the derivatives. The fair value option

allows the Corporation to reduce the accounting volatility that would otherwise

result from the asymmetry created by accounting for the financial i

nstruments at the

lower of cost or fair value and the derivatives at fair value. The Corporation has not

elected to account for certain other LHFS under the fair value option primarily

because these loans are floating-rate loans that are not hedged using derivative

instruments.

Loans Reported as Trading Account Assets

The Corporation elects to account for certain loans that are held for the purpose of

trading and are risk-managed on a fair value basis under the fair value option.

Other Assets

The Corporation elects to account for certain long-term fixed-rate margin loans that

are hedged with derivatives under the fair value option. Election of the fair value

option allows the Corporation to reduce the accounting volatility that would

otherwise result from the asymmetry created by accounting for the f

inancial

instruments at historical cost and the derivatives at fair value.

Securities Financing Agreements

The Corporation elects to account for certain securities financing agreements,

including resale and repurchase agreements, under the fair value option based on

the tenor of the agreements, which reflects the magnitude of the interest rate risk.

The majority of securities financing agreements collat

eralized by U.S. government

securities are not accounted for under the fair value option as these contracts are

generally short-dated and therefore the interest rate risk is not significant.

Long-term Deposits

The Corporation elects to account for certain long-term fixed-rate and rate-linked

deposits that are hedged with derivatives that do not qualify for hedge accounting

under the fair value option. E

lection of the fair value option allows the Corporation

to reduce the accounting volatility that would otherwise result from the asymmetry

created by accounting for the financial instruments at historical cost and the

derivatives at fair value. The Corporation has not elected to carry other long-term

deposits at fair value because they are not hedged using derivatives.

Short-term Borrowings

The Corporation elects to account for certain short-term borrowings, primarily

short-term structured liabilities, under the fair value option because this debt is

risk-managed on a fair value basis.

The Corporation elects to account for certain asset-backed secured financings,

which are also classified in short-term borrowings, under the fair value option.

Election of the fair value option allows the Corporation t

o reduce the accounting

volatility that would otherwise result from the asymmetry created by accounting for

the asset-backed secured financings at historical cost and the corresponding

mortgage LHFS securing these financings at fair value.

Bank of America 154

assets and liabilities accounted for under the fair value option atDecember 31,

Long-term Debt

2019 and 2018, and information about where changes in the fair value of assets

The Corporation elects to account for certain long-term debt, primarily structured

and liabilities accounted for under the fair value option are included in the

liabilities, under the fair value option. This long-term debt is either risk-managed on

Consolidated Statement of Income for 2019, 2018 and 2017.

a fair value basis or the related hedges do not qualify for hedge accounting.

Fair Value Option Elections

The following tables provide information about the fair value carrying amount and

the contractual principal outstanding of

Fair Value Option Elections

December 31, 2019 December 31, 2018

(Dollars in millions)

Federal funds sold and securities borrowed or purchased under

agreements to resell

Fair Value Carrying

Amount

$ 50,364

Contractual Principal

Outstanding

$ 50,318

Fair Value Carrying

Amount Less Unpaid

Principal

$ 46 $

Fair Value

Carrying

Amount

56,399

Contractual Principal

Outstanding

$ 56,376

Fair Value Carrying

Amount Less Unpaid

Principal

$ 23

Loans reported as trading account assets

(1)

6,989 14,703 (7,714 ) 6,195 13,088 (6,893 )

Trading inventory – other 19,574 n/a n/a 13,778 n/a n/a

Consumer and commercial loans 8,335 8,372 (37 ) 4,349 4,399 (50 )

Loans held-for-sale

(1)

3,709 4,879 (1,170 ) 2,942 4,749 (1,807 )

Other assets 4 n/a n/a 3 n/a n/a

Long-term deposits

Federal funds purchased and securities loaned or sold under

agreements to repurchase

508

16,008

496

16,029

12

(21 )

492

28,875

454

28,881

38

(6 )

Short-term borrowings 3,941 3,930 11 1,648 1,648 —

Unfunded loan commitments 90 n/a n/a 169 n/a n/a

Long-term debt

(2)

34,975 35,730 (755 ) 27,689 29,198 (1,509 )

(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.

(2)

Includes structured liabilities with a fair value of$34.6 billion and $27.3 billion, and contractual principal outstanding of$35.3 billion and $28.8 billion at December 31, 2019 and

2018.

n/a = not applicable

Gains (Losses) Relating to Assets and Liabilities Accounted for Under the Fair Value Option

Market making and

similar activities

Other

Income Total

(Dollars in millions) 2019

Loans reported as trading account assets $ 203 $ — $ 203

Trading inventory – other

(1)

5,795 — 5,795

Consumer and commercial loans 92 12 104

Loans held-for-sale

(2)

— 98 98

Long-term debt

(3)

(1,098 ) (78 ) (1,176 )

Other

(4)

(15 ) 52 37

Total

(5)

$ 4,977 $ 84 $ 5,061

2018

Loans reported as trading account assets $ 8 $ — $ 8

Trading inventory – other

(1)

1,750 — 1,750

Consumer and commercial loans (422 ) (53 ) (475 )

Loans held-for-sale

(2)

1 24 25

Long-term debt

(3)

2,157 (93 ) 2,064

Other

(4)

8 (31 ) (23 )

Total

(5)

$ 3,502 $ (153 ) $ 3,349

2017

Loans reported as trading account assets $ 318 $ — $ 318

Trading inventory – other

(1)

3,821 — 3,821

Consumer and commercial loans (9 ) 35 26

Loans held-for-sale

(2)

— 298 298

Long-term debt

(3)

(1,044 ) (146 ) (1,190 )

Other

(4)

(93 ) 49 (44 )

Total

(5)

$ 2,993 $ 236 $ 3,229

(1)

The gains in market making and similar activities are primarily offset by losses 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 15 – Accumulated Other Comprehensive Income (Loss). For more information on how the Corporation’s own credit spread is determined, seeNote 21 –

Fair Value Measurements.

(4)

Includes gains (losses) on federal funds sold and securities borrowed or purchased under agreements to resell, long-term deposits, federal funds purchased and securities loaned or sold under agreements to repurchase, short-term borrowings and

unfunded loan commitments.

(5)

Gains (losses) related to borrower-specific credit risk were$194 million, $(148) million and $38 million in 2019, 2018 and 2017,

respectively.

155 Bank of America

NOTE 23 Fair Value of Financial Instruments

Financial instruments are classified within the fair value hierarchy using the

methodologies described in Note 21 – Fair Value Measurements. Certain loans,

deposits, long-term debt and unfunded lending commitments are accounted for

under the fair value option. For more information, see Note 22 – Fair Value Option.

The following disclosures include financial i

nstruments 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.

Short-term Financial Instruments

The carrying value of short-term financial instruments, including cash and cash

equivalents, certain time deposits placed and other short-term investments, federal

funds sold and purchased, certain resale and repurchase agreemen

ts and short-

term borrowings, approximates the fair value of these instruments. These financial

instruments generally expose the Corporation to limited credit risk and have no

stated maturities or have short-term maturities and carry interest rates that

approximate market. The Corporation accounts for certain resale and repurchase

agreements under the fair value option.

Under the fair value hierarchy,

cash and cash equivalents are classified as

Level 1. Time deposits placed and other short-term investments, such as U.S.

government securities and short-term commercial paper, are classified as Level 1

or Level 2. Federal funds sold and purchased are classified as Level 2. Resale and

repurchase agreements are classified as Level 2 because they are generally

short-dated and/or variable-rate instruments

collateralized by U.S. government or

agency securities. Short-term borrowings are classified as Level 2.

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

December 31, 2019 and 2018 are presented in the following table.

Fair Value of Financial Instruments

Fair Value

Carrying Value Level 2 Level 3 Total

(Dollars in millions) December 31, 2019

Financial assets

Loans $ 950,093 $ 63,633 $ 914,597 $ 978,230

Loans held-for-sale 9,158 8,439 719 9,158

Financial liabilities

Deposits

(1)

1,434,803 1,434,809 — 1,434,809

Long-term debt

Commercial unfunded

lending commitments

(2)

240,856

903

247,376

90

1,149

4,777

248,525

4,867

December 31, 2018

Financial assets

Loans $ 911,520 $ 58,228 $ 859,160 $ 917,388

Loans held-for-sale 10,367 9,592 775 10,367

Financial liabilities

Deposits

(1)

1,381,476 1,381,239 — 1,381,239

Long-term debt 229,392 230,019 817 230,836

Commercial unfunded

lending commitments

(2)

966 169 5,558 5,727

(1)

Includes demand deposits of $545.5 billion and $531.9 billion with no stated maturities at December 31, 2019 and

2018.

(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 13 – Commitments and Contingencies.

NOTE 24 Business Segment Information

The Corporation reports its results of operations through the following four

business segments: Consumer Banking, GWIM, Global Banking and Global

Markets, with the remaining operations recorded in

All Other.

Consumer Banking

Consumer Banking offers a diversified range of credit, banking and investment

products and services to consumers and small businesses. Consumer Banking

product offerings include traditional savings accounts, money market savings

accounts, CDs and IRAs, checking accounts, and investment accounts and

products, as well as credit and debit cards, residential mortgages and home e

quity

loans, and direct and indirect loans to consumers and small businesses in the U.S.

Consumer Banking includes the impact of servicing residential mortgages and

home equity loans in the core portfolio.

Global Wealth & Investment Management

GWIM provides a high-touch client experience through a network of financial

advisors focused on clients with over $250,000 in total investable assets, including

ta

ilored solutions to meet clients’ needs through a full set of investment

management, brokerage, banking and retirement products. GWIM also provides

comprehensive wealth management solutions targeted to high net worth and ultra

high net worth clients, as well as customized solutions to meet clients’ wealth

structuring, investment management, trust and banking needs, including specialty

asset management

services.

Global Banking

Global Banking provides a wide range of lending-related products and services,

integrated working capital management and treasury solutions, and underwriting

and advisory services through the Corporation’s network of offices and client

relationship teams. Global Banking also provides investment banking products to

clients. The economics of certain investment banking and underwri

ting activities

are shared primarily between Global Banking a n d Global Markets under an

internal revenue-sharing arrangement. Global Banking clients generally include

middle-market companies, commercial real estate firms, not-for-profit companies,

large global corporations, financial institutions, leasing clients, and mid-sized U.S.-

based businesses requiring customized and integrated financial advice

and

solutions.

Global Markets

Global Markets offers sales and trading services and research services to

institutional clients across fixed-income, credit, currency, commodity and equity

businesses. Global Markets provides market-making, financing, securities clearing,

settlement and custody services globally to institutional investor clients in support

of their investing and trading activities. Global Ma

rkets product coverage includes

securities and derivative products in both the primary and secondary markets.

Global Markets also works with commercial and corporate clients to provide risk

management products. As a result of market-making activities, Global Markets

may be required to manage risk in a broad range of financial products. In addition,

the economics of certain investment banking and underw

riting activities are shared

primarily between Global Markets and Global Banking under an internal revenue-

sharing arrangement.

Bank of America 156

All Other

All Other consists of ALM activities, equity investments, non-core mortgage loans

and servicing activities, liquidating businesses and certain expenses not otherwise

allocated to business segments. ALM activities encompass certain residential

mortgages, debt securities, interest rate and foreign currency risk management

activities. Substantially all of the results of ALM activities are allocat

ed to the

business segments. Equity investments include the merchant services joint venture

as well as a portfolio of equity, real estate and other alternative investments.

Basis of Presentation

The management accounting and reporting process derives segment and business

results by utilizing allocation methodologies for revenue and expense. The net

income derived for the businesses is dependent upon rev

enue and cost allocations

using an activity-based costing model, funds transfer pricing, and other

methodologies and assumptions management believes are appropriate to reflect

the results of the business.

Total revenue, net of interest expense, includes net interest income on an FTE

basis and noninterest income. The adjustment of net interest income to an FTE

basis results in a corresponding increase in

income tax expense. The segment

results also reflect certain revenue and expense methodologies that are utilized to

determine net income. The net interest income of the businesses includes the

results of a funds transfer pricing process that matches assets and liabilities with

similar interest rate sensitivity

and maturity characteristics. In segments where the total of liabilities and equity

exceeds assets, which are generally deposit-taking segments, the Corporation

allocates assets to match liabilities. Net interest income of the business segments

also includes an allocation of net interest income generated by certain of the

Corporation’s ALM activities.

The Corporation’s ALM activities include an overall interest rate risk

management strategy that incorporates the use of various derivatives and

cash

instruments to manage fluctuations in earnings and capital that are caused by

interest rate volatility. The Corporation’s goal is to manage interest rate sensitivity

so that movements in interest rates do not significantly adversely affect earnings

and capital. The results of substantially all of the Corporation’s ALM activities are

allocated to the business segments and fluctuate based on the pe

rformance of the

ALM activities. ALM activities include external product pricing decisions including

deposit pricing strategies, the effects of the Corporation’s internal funds transfer

pricing process and the net effects of other ALM activities.

Certain expenses not directly attributable to a specific business segment are

allocated to the segments. The costs of certain centralized or shared functions

are

allocated based on methodologies that reflect utilization.

The following table presents net income (loss) and the components thereto

(with net interest income on an FTE basis for the business segments, All Other and

the total Corporation) for 2019, 2018 and 2017, and total assets at December 31,

2019 and 2018 for each business segment, as well asAll Other.

Results of Business Segments and All Other

At and for the year ended December 31 Total Corporation

(1)

Consumer Banking

(Dollars in millions) 2019 2018 2017 2019 2018 2017

Net interest income $ 49,486 $ 48,772 $ 46,164 $ 28,158 $ 27,025 $ 24,203

Noninterest income 42,353 42,858 41,887 10,429 10,593 10,101

Total revenue, net of interest expense 91,839 91,630 88,051 38,587 37,618 34,304

Provision for credit losses 3,590 3,282 3,396 3,772 3,664 3,525

Noninterest expense 54,900 53,154 54,517 17,618 17,672 17,847

Income before income taxes 33,349 35,194 30,138 17,197 16,282 12,932

Income tax expense 5,919 7,047 11,906 4,213 4,150 4,897

Net income $ 27,430 $ 28,147 $ 18,232 $ 12,984 $ 12,132 $ 8,035

Period-end total assets $ 2,434,079 $ 2,354,507 $ 804,019 $ 768,881

Global Wealth &

Investment Management Global Banking

2019 2018 2017 2019 2018 2017

Net interest income $ 6,504 $ 6,265 $ 6,152 $ 10,675 $ 10,993 $ 10,615

Noninterest income 13,033 13,188 12,447 9,808 9,008 9,510

Total revenue, net of interest expense 19,537 19,453 18,599 20,483 20,001 20,125

Provision for credit losses 82 86 56 414 8 212

Noninterest expense 13,823 14,015 13,770 9,017 8,745 8,811

Income before income taxes 5,632 5,352 4,773 11,052 11,248 11,102

Income tax expense 1,380 1,364 1,807 2,984 2,923

4,204

Net income $ 4,252 $ 3,988 $ 2,966 $ 8,068 $ 8,325 $ 6,898

Period-end total assets $ 299,756 $ 305,907 $ 464,032 $ 442,330

Global Markets All Other

2019 2018 2017 2019 2018 2017

Net interest income $ 3,915 $ 3,857 $ 4,264 $ 234 $ 632 $ 930

Noninterest income 11,699 12,326 11,698 (2,616 ) (2,257 ) (1,869 )

Total revenue, net of interest expense 15,614 16,183 15,962 (2,382 ) (1,625 ) (939 )

Provision for credit losses (9 ) — 164 (669 ) (476 ) (561 )

Noninterest expense 10,722 10,835 10,997 3,720 1,887 3,092

Income (loss) before income taxes 4,901 5,348 4,801 (5,433 ) (3,036 ) (3,470 )

Income tax expense (benefit) 1,397 1,390 1,666 (4,055 ) (2,780 ) (668 )

Net income (loss) $ 3,504 $ 3,958 $ 3,135 $ (1,378 ) $ (256 ) $ (2,802 )

Period-end total assets $ 641,806 $ 641,923 $ 224,466 $ 195,466

(1)

There were no material intersegment

revenues.

157 Bank of America

The table below presents noninterest income and the components thereto for2019, 2018 and 2017 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

Global Wealth &

Total Corporation Consumer Banking Investment Management

(Dollars in millions) 2019 2018 2017 2019 2018 2017 2019 2018 2017

Fees and commissions:

Card income

Interchange fees $ 3,834 $ 3,866 $ 3,777 $ 3,174 $ 3,196 $ 3,038 $ 60 $ 81 $ 109

Other card income 1,963 1,958 1,899 1,910 1,906 1,846 41 46 44

Total card income 5,797 5,824 5,676 5,084 5,102 4,884 101 127 153

Service charges

Deposit-related fees 6,588 6,667 6,708 4,219 4,300 4,266 68 73 77

Lending-related fees 1,086 1,100 1,110 — — — — — —

Total service charges 7,674 7,767 7,818 4,219 4,300 4,266 68 73 77

Investment and brokerage services

Asset management fees 10,241 10,189 9,310 144 147 133 10,130 10,042 9,177

Brokerage fees 3,661 3,971 4,526 149 172 184 1,740 1,917 2,217

Total investment and brokerage services 13,902 14,160 13,836 293 319 317 11,870 11,959 11,394

Investment banking fees

Underwriting income 2,998 2,722 2,821 — (1 ) — 401 335 316

Syndication fees 1,184 1,347 1,499 — — — — —

—

Financial advisory services 1,460 1,258

1,691 — — — — 2 2

Total investment banking fees 5,642 5,327 6,011 — (1 ) — 401 337 318

Total fees and commissions 33,015 33,078 33,341 9,596 9,720 9,467 12,440 12,496 11,942

Market making and similar activities 9,034 9,008 7,102 6 8 3 113 112 144

Other income 304 772 1,444 827 865 631 480 580 361

Total noninterest income $ 42,353 $ 42,858 $ 41,887 $ 10,429 $ 10,593 $ 10,101 $ 13,033 $ 13,188 $ 12,447

Global Banking Global Markets All Other

(1)

2019 2018 2017 2019 2018 2017 2019 2018 2017

Fees and commissions:

Card income

Interchange fees $ 519 $ 503 $ 478 $ 81 $ 86 $ 86 $ — $ — $ 66

Other card income 13 8 12 (1 ) (2 ) (2 ) — — (1 )

Total card income 532 511 490 80 84 84 — — 65

Service charges

Deposit-related fees 2,121 2,111 2,197 156 161 147 24 22 21

Lending-related fees 894 916 928 192 184 182 — —

—

Total service charges 3,015 3,027 3,125 348 345 329 24 22 21

Investment and brokerage services

Asset management fees — — — — — — (33 ) — —

Brokerage fees 34 94 97 1,738 1,780 2,049 — 8 (21 )

Total investment and brokerage services 34 94 97 1,738 1,780 2,049 (33 ) 8 (21 )

Investment banking fees

Underwriting income 1,227 1,090 1,172 1,555 1,495 1,588 (185 ) (197 ) (255 )

Syndication fees 574 648 742 610 698 756 — 1 1

Financial advisory services 1,336 1,153 1,557 123 103 133 1 — (1 )

Total investment banking fees

3,137 2,891 3,471 2,288 2,296 2,477 (184 ) (196 ) (255 )

Total fees and commissions 6,718 6,523 7,183 4,454 4,505 4,939 (193 ) (166 ) (190 )

Market making and similar activities 235 260 134 7,065 7,260 6,203 1,615 1,368 618

Other income 2,855 2,225 2,193 180 561 556 (4,038 ) (3,459 ) (2,297 )

Total noninterest income $ 9,808 $ 9,008 $ 9,510 $ 11,699 $ 12,326 $ 11,698 $ (2,616 ) $ (2,257 ) $ (1,869 )

(1)

All Other includes

transactions.

eliminations of intercompany

Bank of America 158

Business Segment Reconciliations

(Dollars in millions) 2019 2018 2017

Segments’ total revenue, net of interest expense $ 94,221 $ 93,255 $ 88,990

Adjustments

(1)

:

ALM activities 241 (325 ) 161

Liquidating businesses, eliminations and other (2,623 ) (1,300 ) (1,100 )

FTE basis adjustment (595 ) (610 ) (925 )

Consolidated revenue, net of interest expense $ 91,244 $ 91,020 $ 87,126

Segments’ total net income 28,808 28,403 21,034

Adjustments, net-of-tax

(1)

:

ALM activities 202 (222 ) 154

Liquidating businesses, eliminations and other (1,580 ) (34 ) (2,956 )

Consolidated net income $ 27,430 $ 28,147 $ 18,232

December 31

2019 2018

Segments’ total assets $ 2,209,613 $ 2,159,041

Adjustments

(1)

:

ALM activities, including securities portfolio 721,806 669,204

Elimination of segment asset allocations to match liabilities (565,346 ) (540,798 )

Other 68,006 67,060

Consolidated total assets $ 2,434,079 $ 2,354,507

(1)

Adjustments include consolidated income, expense and asset amounts not specifically allocated to individual business

segments.

NOTE 25 Parent Company Information

The following tables present the Parent Company-only financial information.

Condensed Statement of Income

(Dollars in millions) 2019 2018 2017

Income

Dividends from subsidiaries:

Bank holding companies and related subsidiaries $ 27,820 $ 28,575 $ 12,088

Nonbank companies and related subsidiaries — 91 202

Interest from subsidiaries 9,502 8,425 7,043

Other income (loss) 74 (1,025 ) 28

Total income 37,396 36,066 19,361

Expense

Interest on borrowed funds from related subsidiaries 451 235 189

Other interest expense 5,899 6,425 5,555

Noninterest expense 1,641 1,600 1,672

Total expense 7,991 8,260 7,416

Income before income taxes and equity in undistributed earnings of subsidiaries 29,405 27,806 11,945

Income tax expense (benefit) 341 (281 ) 950

Income before equity in undistributed earnings of subsidiaries 29,064 28,087 10,995

Equity in undistributed earnings (losses) of subsidiaries:

Bank holding companies and related subsidiaries

(1,717 )

306 8,725

Nonbank companies and related subsidiaries 83

(246 ) (1,488 )

Total equity in undistributed earnings of subsidiaries (1,634 ) 60 7,237

Net income $ 27,430 $ 28,147 $ 18,232

159 Bank of America

Condensed Balance Sheet

December 31

(Dollars in millions) 2019 2018

Assets

Cash held at bank subsidiaries

(1)

$ 5,695 $ 5,141

Securities 656 628

Receivables from subsidiaries:

Bank holding companies and related subsidiaries 173,301 152,905

Banks and related subsidiaries 51 195

Nonbank companies and related subsidiaries 391 969

Investments in subsidiaries:

Bank holding companies and related subsidiaries 297,465 293,045

Nonbank companies and related subsidiaries 3,663 3,432

Other assets 9,438 14,696

Total assets $ 490,660 $ 471,011

Liabilities and shareholders’ equity

Accrued expenses and other liabilities $ 13,381 $ 8,828

Payables to subsidiaries:

Banks and related subsidiaries 458 349

Nonbank companies and related subsidiaries 12,102 13,301

Long-term debt 199,909 183,208

Total liabilities 225,850 205,686

Shareholders’ equity 264,810 265,325

Total liabilities and shareholders’ equity $ 490,660 $ 471,011

(1)

Balance includes third-party cash held of $4 million and $389 million at December 31, 2019 and

2018.

Condensed Statement of Cash Flows

(Dollars in millions) 2019 2018 2017

Operating activities

Net income $ 27,430 $ 28,147 $ 18,232

Reconciliation of net income to net cash provided by (used in) operating activities:

Equity in undistributed (earnings) losses of subsidiaries 1,634 (60 ) (7,237 )

Other operating activities, net 16,973 (3,706 ) (2,593 )

Net cash provided by operating activities 46,037 24,381 8,402

Investing activities

Net sales (purchases) of securities (17 ) 51 312

Net payments to subsidiaries (19,121 ) (2,262 ) (7,087 )

Other investing activities, net 7 48 (1 )

Net cash used in investing activities (19,131 ) (2,163 ) (6,776 )

Financing activities

Net increase (decrease) in other advances (1,625 ) 3,867 (6,672 )

Proceeds from issuance of long-term debt 29,315 30,708 37,704

Retirement of long-term debt (21,039 ) (29,413 ) (29,645 )

Proceeds from issuance of preferred stock 3,643 4,515 —

Redemption of preferred stock (2,568 ) (4,512 ) —

Common stock repurchased (28,144 ) (20,094 )

(12,814 )

Cash dividends paid (5,934 ) (6,895 ) (5,700 )

Net cash used in financing activities (26,352 ) (21,824 ) (17,127 )

Net increase (decrease) in cash held at bank subsidiaries 554 394 (15,501 )

Cash held at bank subsidiaries at January 1 5,141 4,747 20,248

Cash held at bank subsidiaries at December 31 $ 5,695 $ 5,141 $ 4,747

Bank of America 160

requires certain judgments related to the allocation of revenue so that revenue can

NOTE 26 Performance by Geographical Area

be appropriately matched with the related capital or expense deployed in the

The Corporation’s operations are highly integrated with operations in both U.S.

region. Certain asset, liability, income and expense amounts have been allocated

and non-U.S. markets. The non-U.S. business activities are largely conducted in

to arrive at total assets, total revenue, net of interest expense, income before

Europe, the Middle East and Africa and in Asia. The Corporation identifies its

income taxes and net income by geographic area as presented below

.

geographic performance based on the business unit structure used to manage the

capital or expense deployed in the region as a

pplicable. This

Total Revenue, Net

Total Assets at Year of Interest Income Before

(Dollars in millions)

End

(1)

Expense

(2)

Income Taxes Net Income

U.S.

(3)

2019 $ 2,122,734 $ 81,236 $ 30,699 $ 25,937

2018 2,051,182 80,777 31,904 26,407

2017 74,604 25,108 15,550

Asia 2019 102,440 3,491 765 570

2018 94,865 3,507 865 520

2017 3,405 676 464

Europe, Middle East and Africa 2019 178,889 5,310 921 672

2018 185,285 5,632 1,543 1,126

2017 7,907 2,990 1,926

Latin America and the Caribbean 2019 30,016 1,207 369 251

2018 23,175 1,104 272 94

2017 1,210 439 292

Total Non-U.S. 2019 311,345 10,008 2,055 1,493

2018 303,325 10,243 2,680 1,740

2017 12,522 4,105 2,682

Total Consolidated 2019 $ 2,434,079 $ 91,244 $ 32,754 $ 27,430

2018 2,354,507 91,020 34,584 28,147

2017 87,126 29,213 18,232

(1)

Total assets include long-lived assets, which are primarily located in the

U.S.

(2)

There were no material intercompany revenues between geographic regions for any of the periods

presented.

(3)

Substantially reflects the

U.S.

161 Bank of America

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 GW

IM 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 De

rivatives – 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 Corpo

ration’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 maturit

y. 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.

N

et Interest Yield – Net interest income divided by average total interest-earning

assets.

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.

Operating Margin – Income before income taxes divi

ded by total revenue, net of

interest expense.

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 deposito

ry 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

subpr

ime 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 simula

tes 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.

Bank of America 162

Acronyms

ABS Asset-backed securities GSE Government-sponsored enterprise

AFS Available-for-sale G-SIB Global systemically important bank

ALM Asset and liability management GWIM Global Wealth & Investment Management

ARR Alternative reference rates HELOC Home equity line of credit

AUM Assets under management HQLA High Quality Liquid Assets

AVM Automated valuation model HTM Held-to-maturity

BANA Bank of America, National Association ICAAP Internal Capital Adequacy Assessment Process

BHC Bank holding company IRM Independent Risk Management

BofAS BofA Securities, Inc. IBOR Interbank Offered Rates

BofASE BofA Securities Europe SA IRLC Interest rate lock commitment

bps basis points ISDA International Swaps and Derivatives Association, Inc.

CAE Chief Audit Executive LCR Liquidity Coverage Ratio

CAO Chief Administrative Officer LGD Loss given default

CCAR Comprehensive Capital Analysis and Review LHFS Loans held-for-sale

CDO Collateralized debt obligation LIBOR London Interbank Offered Rate

CDS Credit default swap LTV Loan-to-value

CET1 Common equity tier 1 MBS Mortgage-backed securities

CFPB Consumer Financial Protection Bureau MD&A Management’s Discussion and Analysis of Financial Condition and

CLO Collateralized loan obligation

Results of Operations

CFTC Commodity Futures Trading Commission

MLGWM Merrill Lynch Global Wealth Management

CLTV Combined loan-to-value

MLI Merrill Lynch International

CRO Chief Risk Officer

MLPCC Merrill Lynch Professional Clearing Corp

CVA Credit valuation adjustment

MLPF&S Merrill Lynch, Pierce, Fenner & Smith Incorporated

DIF Deposit Insurance Fund

MRC Management Risk Committee

DVA Debit valuation adjustment

MSA Metropolitan Statistical Area

EAD Exposure at default

MSR Mortgage servicing right

EMRC Enterprise Model Risk Committee

NOL Net operating loss

EPS Earnings per common share

NSFR Net Stable Funding Ratio

ERC Enterprise Risk Committee

OCC Office of the Comptroller of the Currency

EU European Union

OCI Other comprehensive income

FCA Financial Conduct Authority

OREO Other real estate owned

FDIC Federal Deposit Insurance Corporation

OTC Over-the-counter

FDICIA Federal Deposit Insurance Corporation Improvement Act of

OTTI Other-than-temporary impairment

1991 PCA

Prompt Corrective Action

FHA Federal Housing Administration RMBS Residential mortgage-backed securities

FHFA Federal Housing Finance Agency RSU Restricted stock unit

FHLB Federal Home Loan Bank SBLC Standby letter of credit

FHLMC Freddie Mac SCCL Single-counterparty credit limits

FICC Fixed-income, currencies and commodities SBSDs Security-based swap dealers

FICO Fair Isaac Corporation (credit score) SEC Securities and Exchange Commission

FLUs Front line units SLR Supplementary leverage ratio

FNMA Fannie Mae SOFR Secured Overnight Financing Rate

FTE Fully taxable-equivalent TDR Troubled debt restructurings

FVA Funding valuation adjustment TLAC Total loss-absorbing capacity

GAAP Accounting principles generally accepted in the United States of VA U.S. Department of Veterans Affairs

America

VaR Value-at-Risk

GDPR General Data Protection Regulation

VIE Variable interest entity

GLS Global Liquidity Sources

GNMA Government National Mortgage Association

163 Bank of America

Item 9. Changes in and Disagreements with Accountants on

Accounting and Financial Disclosure

None

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this report and pursuant to Rule 13a-15 of

the Securities Exchange Act of 1934, as amended (Exchange Act), Bank of

America’s management, including the Chief Executive Officer and Chief Financial

Officer,

conducted an evaluation of the effectiveness and design of our disclosure

controls and procedures (as that term is defined in Rule 13a-15(e) of the Exchange

Act). Based upon that evaluation, Bank of America’s Chief Executive Officer and

Chief Financial Officer concluded that Bank of America’s disclosure controls and

procedures were effective, as of the end of the period covered by this report.

Report of Management on Internal Control Over Financial

Reporting

The Report of Management on Internal Control over Financial Reportingis set forth

on page 86 and incorporated herein by reference. The Report of Independent

Registered Public Accounting Firm with respect to the Corporation’s internal

control over financial reporting is set forth on pages 87 and 88 and incorporated

herein by reference.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as

defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended December

31, 2019, that materially affected, or are reasonably likely to materially affect, our

internal control over financial reporting.

Item 9B. Other Information

None

Part III

Bank of America Corporation and Subsidiaries

Item 10. Directors, Executive Officers and Corporate

Governance

Information about our Executive Officers

The name, age, position and office, and business experience during the last five

years of our current executive officers are:

Dean C. Athanasia (53) President, Retail and Preferred & Small Business

Banking since January 2019; Co-Head -- Consumer Bankingfrom September

2014 to January 2019; a

nd Preferred and Small Business Banking Executive from

April 2011 to September 2014.

Catherine P. Bessant (59) Chief Operations and Technology Officer since

July 2015; Global Technology & Operations Executive from March 2010 to July

2015.

Sheri Bronstein (51) Chief Human Resources Officersince January 2019;

Global Human Resources Executive from July 2015

to January 2019; and HR Executive for Global Banking & Markets from March

2010 to July 2015.

Paul M. Donofrio (59) Chief Financial Officersince August 2015; Strategic

Finance Executive from April 2015 to August 2015; and Head of Global Corporate

Credit and Transaction Banking from January 2012 to April 2015.

Geoffrey S. Greener (55) Chief Risk Officer since April 2014; Head of

Enterprise Capital Management from April 2011 to April 2014.

Kathleen A. K

nox (56) President, Private Banksince November 2017; Head

of Business Banking from October 2014 to November 2017; and Retail Banking &

Distribution Executive from June 2011 to October 2014.

David G. Leitch (59) Global General Counselsince January 2016; General

Counsel of Ford Motor Company from April 2005 to December 2015.

Thomas K. Montag (63) Chief Operating Officer since September 2014; Co-

Chief O

perating Officer from September 2011 to September 2014.

Brian T. Moynihan (60) Chairman of the Board since October 2014, and

President, and Chief Executive Officer and member of the Board of Directors since

January 2010.

Thong M. Nguyen (61) Vice Chairman, Bank of America Corporation since

January 2019; Co-Head -- Consumer Banking from September 2014 to January

2019; Retail Banking Executive from April

2014 to September 2014; and Retail

Strategy, and Operations & Digital Banking Executive from September 2012 to

April 2014.

Andrew M. Sieg (52) President, Merrill Lynch Wealth Managementsince

January 2017; and Head of Global Wealth & Retirement Solutions with Merrill

Lynch from October 2011 to January 2017.

Andrea B. Smith (52) Chief Administrative Officersince August 2015; Global

Head of Human Resource

s from January 2010 to August 2015.

Information included under the following captions in the Corporation’s proxy

statement relating to its 2020 annual meeting of stockholders (the 2020 Proxy

Statement) is incorporated herein by reference:

●

“Proposal 1: Electing Directors – Our Director

Nominees;”

●

“Corporate Governance – Additional Corporate Governance Information;”

and

●

“Corporate Governance – Board Meetings, Committee Membership, and

Attendance.”

Item 11. Executive Compensation

Information included under the following captions in the 2020 Proxy Statement is

incorporated herein by reference:

●

“Compensation Discussion and

Analysis;”

●

“Compensation and Human Capital Committee

Report;”

●

“Executive

Compensation;”

●

“Corporate Governance;”

and

●

“Director

Compensation.”

Bank of America 164

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

Information included under the following caption in the 2020 Proxy Statement is incorporated herein by reference:

●

“Stock Ownership of Directors, Executive Officers, and Certain Beneficial

Owners.”

The table below presents information on equity compensation plans atDecember 31, 2019:

(c) Number of Shares Remaining

(a) Number of Shares to

for Future Issuance Under Equity

be Issued Under (b) Weighted-average Exercise

Compensation Plans (excluding

Outstanding Options, Warrants Price of Outstanding Options,

securities reflected in column (a))

Plan Category

(1)

and Rights

(2)

Warrants and Rights

(3)

(4)

Plans approved by shareholders 158,954,915 — 304,904,984

Plans not approved by shareholders — — —

Total 158,954,915 — 304,904,984

(1)

This table does not include 783,282 vested restricted stock units and stock option gain deferrals atDecember 31, 2019 that were assumed by the Corporation in connection with prior acquisitions under whose plans the awards were originally

granted.

(2)

Consists of outstanding restricted stock units. Includes 1,115,166 vested restricted stock units subject to a required twelve-month holding

period.

(3)

Restricted stock units do not have an exercise price and are delivered without any payment or

consideration.

(4)

Amount represents shares of common stock available for future issuance under the Bank of America Corporation Key Employee Equity

Plan.

Item 13. Certain Relationships and Related Transactions, Item 14. Principal Accounting Fees and Services

and Director Independence

Information included under the following caption in the 2020 Proxy Statement is

incorporated herein by reference:

Information included under the following captions in the 2020 Proxy Statement is

incorporated herein by reference:

●

“Proposal 3: Ratifying the Appointment of our Independent Registered Public

Accounting Firm for 2020.”

●

“Related Person and Certain Other Transactions;”

and

●

“Corporate Governance – Director

Independence.”

165 Bank of America

Part IV

Bank of America Corporation and Subsidiaries

Item 15. Exhibits, Financial Statement Schedules

The following documents are filed as part of this report:

(1) Financial Statements:

Report of Independent Registered Public Accounting Firm

Consolidated Statement of Income for the years endedDecember 31, 2019, 2018 and 2017

Consolidated Statement of Comprehensive Income for the years endedDecember

31, 2019, 2018 and 2017

Consolidated Balance Sheet at December 31, 2019 and 2018

Consolidated Statement of Changes in Shareholders’ Equity for the years endedDecember 31, 2019, 2018 and 2017

Consolidated Statement of Cash Flows for the years endedDecember 31, 2019, 2018 and 2017

Notes to Consolidated Financial Statements

(2) Schedules:

None

(3) Index to Exhibits

With the exception of the information ex

pressly incorporated herein by reference, the2020 Proxy Statement shall not be deemed filed as part of this Annual Report on

Form 10-K.

Incorporated by Reference

Exhibit No. Description Notes Form Exhibit Filing Date File No.

3.1 Restated Certificate of Incorporation, as amended and in effect on the date hereof 1

3.2 Amended Bylaws of the Corporation as in effect on the date hereof 10-Q 3(b) 10/28/19 1-6523

4.1 Indenture dated as of January 1, 1995 between registrant (successor to NationsBank Corporation) and BankAmerica National S-3 4.1 2/1/95 33-57533

Trust Company

4.2 First Supplemental Indenture dated as of September 18, 1998 between registrant and U.S. Bank Trust National Association 8-K 4.3 11/18/98 1-6523

(successor to BankAmerica National Trust Company) to the indenture dated as of January 1, 1995 (See Exhibit 4.1)

4.3 Second Supplemental Indenture dated as of May 7, 2001 between registrant, U.S. Bank Trust National Association, as Prior 8-K 4.4 6/14/01 1-6523

Trustee, and The Bank of New York, as Successor Trustee to the indenture dated as of January 1, 1995 (See Exhibit 4.1)

4.4 Third Supplemental Indenture dated as of July 28, 2004 between registrant and The Bank of New York to the indenture dated as 8-K 4.2 8/27/04 1-6523

of January 1, 1995 (See Exhibit 4.1)

4.5 Fourth Supplemental Indenture dated as of April 28, 2006 between the registrant and The Bank of New York to the indenture S-3 4.6 5/5/06 333-133852

dated as of January 1, 1995 (See Exhibit 4.1)

4.6 Fifth Supplemental Indenture dated as of December 1, 2008 between registrant and The Bank of New York Mellon 8-K 4.1 12/5/08 1-6523

Trust Company, N.A. (successor to The Bank of New York) to the indenture dated as of January 1, 1995 (See Exhibit 4.1)

4.7 Sixth Supplemental Indenture dated as of February 23, 2011 between registrant and The Bank of New York Mellon Trust 10-K 4(ee) 2/25/11 1-6523

Company, N.A. to the indenture dated as of January 1, 1995 (See Exhibit 4.1)

4.8 Seventh Supplemental Indenture dated as of January 13, 2017 between registrant and The Bank of New York Mellon Trust 8-K 4.1 1/13/17 1-6523

Company, N.A. to the indenture dated as of January 1, 1995 (See Exhibit 4.1)

4.9 Eighth Supplemental Indenture dated as of February 23, 2017 between registrant and the Bank of New York Mellon Trust 10-K 4(a) 2/23/17 1-6523

Company, N.A. to the indenture dated as of January 1, 1995 (See Exhibit 4.1)

4.10 Successor Trustee Agreement effective December 15, 1995 between registrant (successor to NationsBank Corporation) and S-3 4.2 6/28/96 333-07229

First Trust of New York, National Association, as successor trustee to BankAmerica National Trust Company

4.11 Agreement of Appointment and Acceptance dated as of December 29, 2006 between registrant and The Bank of New York 10-K 4(aaa) 2/28/07 1-6523

Trust Company, N.A.

4.12 Form of Senior Registered Note S-3 4.12 5/1/15 333-202354

4.13 Form of Global Senior Medium-Term Note, Series L S-3 4.13 5/1/15 333-202354

4.14 Form of Master Global Senior Medium-Term Note, Series L S-3 4.14 5/1/15 333-202354

4.15 Form of Global Senior Medium-Term Note, Series M 8-K 4.2 1/13/17 1-6523

4.16 Form of Master Global Senior Medium-Term Note, Series M 8-K 4.3 1/13/17 1-6523

4.17 Indenture dated as of January 1, 1995 between registrant (successor to NationsBank Corporation) and The Bank of New York S-3 4.5 2/1/95 33-57533

4.18 First Supplemental Indenture dated as of August 28, 1998 between registrant and The Bank of New York to the indenture dated 8-K 4.8 11/18/98 1-6523

as of January 1, 1995 (See Exhibit 4.17)

Bank of America 166

Incorporated by Reference

Exhibit No. Description Notes Form Exhibit Filing Date File No.

4.19 Second Supplemental Indenture dated as of January 25, 2007 between registrant and The Bank of New York Trust Company, S-4 4.3 3/16/07 333-141361

N.A. (successor to The Bank of New York) to the indenture dated as of January 1, 1995 (See Exhibit 4.17)

4.20 Third Supplemental Indenture dated as of February 23, 2011 between registrant and The Bank of New York Mellon Trust 10-K 4(ff) 2/25/11 1-6523

Company, N.A. (formerly The Bank of New York Trust Company, N.A.) to the indenture dated as of January 1, 1995 (See Exhibit

4.17)

4.21 Fourth Supplemental Indenture dated as of February 23, 2017 between registrant and The Bank of New York Mellon Trust 10-K 4(i) 2/23/17 1-6523

Company, N.A. to the indenture dated as of January 1, 1995 (See Exhibit 4.17)

4.22 Indenture dated as of June 27, 2018 between the registrant and The Bank of New York Mellon Trust Company, N.A. S-3 4.3 6/27/18 333-224523

4.23 Form of Global Senior Medium-Term Note, Series N S-3 4.4 6/27/18 333-224523

4.24 Form of Master Global Senior Medium-Term Note, Series N S-3 4.5 6/27/18 333-224523

4.25 Indenture dated as of June 27, 2018 between the registrant and The Bank of New York Mellon Trust Company, N.A. S-3 4.6 6/27/18 333-224523

4.26 Form of Global Subordinated Medium-Term Note, Series N S-3 4.7 6/27/18 333-224523

Registrant and its subsidiaries have other long-term debt agreements, but these are omitted pursuant to Item 601(b)(4)(iii) of

Regulation S-K. Copies of these agreements will be furnished to the Commission on request

4.27 Description of the Corporation's Securities 1

10.1 Bank of America Pension Restoration Plan, as amended and restated effective January 1, 2009 (Pension Restoration Plan) 2 10-K 10(c) 2/27/09 1-6523

10.2 First Amendment to the Pension Restoration Plan dated December 18, 2009 2 10-K 10(c) 2/26/10 1-6523

10.3 Second Amendment to the Pension Restoration Plan dated June 29, 2012 2 10-K 10(a) 2/28/13 1-6523

10.4 Third Amendment to the Pension Restoration Plan dated March 26, 2013 1,2

10.5 Fourth Amendment to the Pension Restoration Plan dated August 22, 2013 1,2

10.6 Fifth Amendment to the Pension Restoration Plan dated December 5, 2014 1,2

10.7 Sixth Amendment to the Pension Restoration Plan dated December 15, 2016 1,2

10.8 NationsBank Corporation Benefit Security Trust dated as of June 27, 1990 2 10-K 10(t) 3/27/91 1-6523

10.9 First Supplement to NationsBank Corporation Benefit Security Trust dated as of 2 10-K 10(v) 3/24/93 1-6523

November 30, 1992

10.10 NationsBank Corporation Benefit Security Trust Trustee Removal/Appointment Agreement dated as of December 19, 1995 2 10-K 10(o) 3/29/96 1-6523

10.11 Bank of America Deferred Compensation Plan (formerly known as the Bank of America 401(k) Restoration Plan) as amended 2 10-K 10(c) 2/25/15 1-6523

and restated effective January 1, 2015

10.12 First Amendment to the Bank of America Deferred Compensation Plan (formerly know as the Bank of America 401(k) Restoration 2 10-K 10(vv) 2/24/16

1-6523

Plan), as amended and restated effective January 1, 2015

10.13 Second Amendment to the Bank of America Deferred Compensation Plan (formerly known as the Bank of America 401(k) 2 S-8 4(c) 11/19/19 333-234780

Restoration Plan), as amended and restated effective January 1, 2015

10.14 Third Amendment to the Bank of America Deferred Compensation Plan (formerly known as the Bank of America 401(k) 1,2

Restoration Plan), as amended and restated effective January 1, 2015

10.15 Bank of America Executive Incentive Compensation Plan, as amended and restated effective December 10, 2002 2 10-K 10(g) 3/3/03 1-6523

10.16 Amendment to Bank of America Executive Incentive Compensation Plan, dated January 23, 2013 2 10-K 10(d) 2/28/13 1-6523

10.17 Bank of America Director Deferral Plan, as amended and restated effective January 1, 2005 2 10-K 10(g) 2/28/07 1-6523

10.18 Bank of America Director Deferral Plan, as amended and restated effective January 1, 2019 2 10-K 10(f) 2/26/19 1-6523

10.19 Bank of America Corporation Directors’ Stock Plan as amended and restated effective April 26, 2006 (2006 Directors’ Stock Plan) 2 8-K 10.2 12/14/05 1-6523

10.20 Form of Restricted Stock Award Agreement to the 2006 Directors' Stock Plan 2 10-K 10(h) 3/1/05 1-6523

10.21 Form of Directors’ Stock Plan Conditional Restricted Stock Award Agreement for Non-U.S. Director to the 2006 Directors’ Stock 2 10-Q 10(a) 8/4/11 1-6523

Plan

10.22 Bank of America Corporation Key Associate Stock Plan, as amended and restated effective April 28, 2010 (2010 KASP) 2 8-K 10.2 5/3/10 1-6523

10.23 Form of Performance Restricted Stock Units Award Agreement (February 2014 and subsequent grants), including grants to 2 10-Q 10(a) 5/1/14 1-6523

named executive officers to the 2010 KASP

10.24 Bank of America Corporation Key Employee Equity Plan (formerly known as the Key Associate Stock Plan), as amended and 2 8-K 10.2 5/7/15 1-6523

restated effective May 6, 2015 (2015 KEEP)

167 Bank of America

25

30

35

40

45

50

55

60

Incorporated by Reference

Exhibit No. Description Notes Form Exhibit Filing Date File No.

10. Form of Cash-settled Restricted Stock Units Award Agreement (February 2016 and subsequent grants) to the 2015 KEEP 2 10-Q 10(a) 5/2/16 1-6523

10.26 Form of Performance Restricted Stock Units Award Agreement (February 2016) to the 2015 KEEP 2 10-Q 10(c) 5/2/16 1-6523

10.27 Form of Time-based Restricted Stock Units Award Agreement (February 2017 and February 2018) to the 2015 KEEP 2 10-Q 10(a) 5/2/17 1-6523

10.28 Form of Performance Restricted Stock Units Award Agreement (February 2017) to the 2015 KEEP 2 10-Q 10(b) 5/2/17 1-6523

10.29 Form of Performance Restricted Stock Units Award Agreement (February 2018) to the 2015 KEEP 2 10-Q 10 4/30/18 1-6523

10. Form of Restricted Stock Award Agreement for Non-Employee Directors to the 2015 KEEP 2 10-K 10(h) 2/26/19 1-6523

10.31 Form of Time-based Restricted Stock Units Award Agreement (February 2019) between the Corporation and certain executive 2 10-Q 10(a) 4/26/19 1-6523

officers of the Corporation, including certain Named Executive Officers to the 2015 KEEP

10.32 Form of Performance Restricted Stock Units Award Agreement (February 2019) between the Corporation and certain executive 2 10-Q 10(b) 4/26/19 1-6523

officers of the Corporation, including certain Named Executive Officers to the 2015 KEEP

10.33 ESA Retention Agreement dated March 15, 2004 between the Corporation and Dean C. Athanasia 2 10-Q 10(c) 4/26/19 1-6523

10.34 Amendment to various plans in connection with FleetBoston Financial Corporation merger dated October 27, 2003 2 10-K 10(v) 3/1/04 1-6523

10. FleetBoston Supplemental Executive Retirement Plan effective December 31, 2004 2 10-K 10(r) 3/1/05 1-6523

10.36 FleetBoston Executive Deferred Compensation Plan No. 2 effective December 16, 2003 2 10-K 10(u) 3/1/05 1-6523

10.37 FleetBoston Executive Supplemental Plan effective December 31, 2004 2 10-K 10(v) 3/1/05 1-6523

10.38 Retirement Income Assurance Plan for Legacy Fleet, as amended and restated effective January 1, 2009 2 10-K 10(p) 2/26/10 1-6523

10.39 Amendment thereto dated December 16, 2010, incorporated by reference to Exhibit 10(c) of the 2010 10-K 2 10-K 10(c) 2/25/11 1-6523

10. Amendment thereto dated June 29, 2012, incorporated by reference to Exhibit 10(l) of the 2012 10-K 2 10-K 10(l) 2/28/13 1-6523

10.41 Trust Agreement for the FleetBoston Executive Deferred Compensation Plans No. 1 and 2 dated December 17, 1997 2 10-K 10(x) 3/1/05 1-6523

10.42 Trust Agreement for the FleetBoston Executive Supplemental Plan dated June 19, 1996 2 10-K 10(y)

3/1/05 1-6523

10.43 Trust Agreement for the FleetBoston Retirement Income Assurance Plan and the FleetBoston Supplemental Executive 2 10-K 10(z) 3/1/05 1-6523

Retirement Plan dated June 19, 1996

10.44 FleetBoston Directors Deferred Compensation and Stock Unit Plan effective January 1, 2004 2 10-K 10(aa) 3/1/05 1-6523

10. BankBoston Corporation and its Subsidiaries Deferred Compensation Plan dated December 24, 2001 2 10-K 10(cc) 3/1/05 1-6523

10.46 BankBoston Director Stock Award Plan effective July 1, 1998 2 10-K 10(hh) 3/1/05 1-6523

10.47 BankBoston Corporation Directors’ Deferred Compensation Plan effective March 1, 1988 2 10-K 10(ii) 3/1/05 1-6523

10.48 BankBoston, N.A. Directors’ Deferred Compensation Plan effective March 1, 1988 2 10-K 10(jj) 3/1/05 1-6523

10.49 Description of BankBoston Director Retirement Benefits Exchange Program 2 10-K 10(ll) 3/1/05 1-6523

10. Global amendment to definition of “change in control” or “change of control,” together with a list of plans affected by such 2 10-K 10(oo) 3/1/05 1-6523

amendment

10.51 Employment Agreement dated October 27, 2003 between registrant and Brian T. Moynihan 2 S-4 10(d) 12/4/03 333-110924

10.52 Cancellation Agreement dated October 26, 2005 between registrant and Brian T. Moynihan 2 8-K 10.1 10/26/05 1-6523

10.53 Agreement Regarding Participation in the Fleet Boston Supplemental Executive Retirement Plan dated October 26, 2005 2 8-K 10.2 10/26/05 1-6523

between registrant and Brian T. Moynihan

10.54 Bank of America Corporation Equity Incentive Plan amended and restated effective as of January 1, 2008 2 10-K 10(zz) 2/26/10 1-6523

10. Merrill Lynch & Co., Inc. Long-Term Incentive Compensation Plan amended as of January 1, 2009 and 2008 Restricted 2 10-K 10(aaa) 2/26/10 1-6523

Units/Stock Option Grant Document for Thomas K. Montag

10.56 Employment Letter dated May 1, 2008 between Merrill Lynch & Co., Inc. and Thomas K. Montag and Summary of Agreement 2 10-K 10(bbb) 2/26/10 1-6523

with respect to Post-Employment Medical Coverage

10.57 Securities Purchase Agreement dated August 25, 2011 between registrant and Berkshire Hathaway Inc. (including forms of the 8-K 1.1 8/25/11 1-6523

Certificate of Designations, Warrant and Registration Rights Agreement)

10.58 Form of Waiver of Certain Incremental Payouts from Performance Restricted Stock Units 10-K 10(rr) 2/23/17 1-6523

10.59 Amended and Restated Aircraft Time Sharing Agreement (Multiple Aircraft) dated June 26, 2018 between Bank of America, N.A. 2 10-Q 10 7/30/18 1-6523

and Brian T. Moynihan

10. Form of Aircraft Time Sharing Agreement (Multiple Aircraft) between Bank of America, N.A. and certain executive officers of the 2 10-Q 10(b) 6/30/19 1-6523

Corporation, including certain Named Executive Officers

Bank of America 168

Incorporated by Reference

Exhibit No. Description Notes Form Exhibit Filing Date File No.

10.61

10.62

21

First Amendment to the 2015 KEEP dated December 19, 2018

Second Amendment to the 2015 KEEP dated April 24, 2019

Direct and Indirect Subsidiaries of Bank of America Corporation As of December 31, 2019

2

1

10-K

8-K

10(mm)

10.1

2/26/19

4/24/19

1-6523

23 Consent of PricewaterhouseCoopers LLP 1

24 Power of Attorney 1

31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 1

31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 1

32.1

32.2

101.INS

Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002

Inline XBRL Instance Document

1

3

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)

(1)

Filed Herewith.

(2)

Exhibit is a management contract or compensatory plan or arrangement.

(3)

The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

169 Bank of America

Item 16. Form 10-K Summary

Not applicable.

Signatures

Pursuant to the requirements of Section 13 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.

Date: February 19, 2020

Bank of America Corporation

By: /s/ Brian T. Moynihan

Brian T

. Moynihan

Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the

capacities and on the dates indicated.

Signature Title Date

/s/ Brian T. Moynihan

Brian T

. Moynihan

Chief Executive Officer, Chairman and Director

(Principal Executive Officer)

February 19, 2020

*/s/ Paul M. Donofrio

Paul M. Donofrio

Chief Financial Officer

(Principal Financial Officer)

February 19, 2020

*/s/ Rudolf A. Bless

Rudolf A. Bless

Chief Accounting Officer

(Principal Accounting Officer)

February 19, 2020

*/s/ Sharon L. Allen

Sharon L. Allen

Director February 19, 2020

*/s/ Susan S. Bies

Susan S. Bies

Director February 19, 2020

*/s/ Jack O. Bovender, Jr.

Jack O. Bovender, Jr.

Director February 19, 2020

*/s/ Frank P. Bramble, Sr.

Frank P

. Bramble, Sr.

Director February 19, 2020

*/s/ Pierre de Weck

Pierre de Weck

Director February 19, 2020

*/s/ Arnold W. Donald

Arnold W. Donald

Director February 19, 2020

*/s/ Linda P . Hudson

Linda P

. Hudson

Director February 19, 2020

*/s/ Monica C. Lozano

Monica C. Lozano

Director February 19, 2020

Bank of America 170

Signature Title Date

*/s/ Thomas J. May

Thomas J. May

Director February 19, 2020

*/s/ Lionel L. Nowell, III

Lionel L. Nowell, III

Director February 19, 2020

*/s/ Denise L. Ramos

Denise L. Ramos

Director February 19, 2020

*/s/ Clayton S. Rose

Clayton S. Rose

Director February 19, 2020

*/s/ Michael D. White

Michael D. White

Director February 19, 2020

*/s/ Thomas D. Woods

Thomas D. Woods

Director February 19, 2020

*/s/ R. David Yost

R. David Yost

Director February 19, 2020

*/s/ Maria T. Zuber

Maria T

. Zuber

Director February 19, 2020

*By /s/ Ross E. Jeffries, Jr.

Ross E. Jeffries, Jr.

Attorney-in-Fact

171 Bank of America

Exhibit 3.1

RESTATED

CERTIFICATE OF INCORPORATION

OF

BANK OF AMERICA CORPORATION

Bank of America Corporation, a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), hereby certifies that (i) the

Certificate of Incorporation of the Corporation was originally filed on July 31, 1998, (ii) the Corporation was originally incorporated under the name “NationsBank (DE)

Corporation,” which name was changed to “NationsBank Corporation” on September 25, 1998, which name was changed to “BankAmerica Corporation” on September 30,

1998, and which name was changed to “Bank of America Corporation” on April 28, 1999, (iii) this Restated Certificate of Incorporation only restates and integrates and does

not further amend the provisions of the Corporation’s Certificate of Incorporation as theretofore amended or supplemented and there is no discrepancy between the provisions

of the Certificate of Incorporation as theretofore amended and supplemented and the provisions of this Restated Certificate of Incorporation, (iv) this Restated Certificate of

Incorporation has been duly adopted in accordance with Section 245 of the General Corporation Law of the State of Delaware, and (v) the Certificate of Incorporation of the

Corporation is hereby integrated and restated to read in its entirety as follows:

1. The name of the Corporation is Bank of America Corporation.

2. The purposes for which the Corporation is organized are to engage in any lawful act or activity for which corporations may be organized and incorporated

under the General Corporation Law of the State of Delaware.

3. The number of shares, par value $.01 per share, the Corporation is authorized to issue is Twelve Billion Nine Hundred Million (12,900,000,000), divided into

the following classes:

Class

Number of Shares

Common… 12,800,000,000

Preferred…… 100,000,000.

The class of common (“Common Stock”) has unlimited voting rights and, after satisfaction of claims, if any, of the holders of preferred shares, is entitled to

receive the net assets of the Corporation upon distribution.

The Board of Directors of the Corporation shall have full power and authority to establish one or more series within the class of preferred shares (the “Preferred

Shares”), to define the designations, preferences, limitations and relative rights (including conversion rights) of shares within such class and to determine all variations

between series.

The Board of Directors of the Corporation has designated, established and authorized the following series of Preferred Shares:

(a) 7% Cumulative Redeemable Preferred Stock, Series B.

A. Designation.

The designation of this series is “7% Cumulative Redeemable Preferred Stock, Series B” (hereinafter referred to as the “Series B Preferred Stock”) and the

number of shares constituting such series is Thirty-Five Thousand Forty-Five (35,045). Shares of Series B Preferred Stock shall have a stated value of $100.00 per share.

B. Dividends.

The holders of record of the shares of the Series B Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors of the

Corporation, out of any funds legally available for such purpose, cumulative cash dividends at an annual dividend rate per share of 7% of the stated value thereof, which

amount if $7.00 per annum, per share, and no more. Such dividends shall be payable each calendar quarter at the rate of $1.75 per share on such dates as shall be fixed

1

by resolution of the Board of Directors of the Corporation. The date from which dividends on such shares shall be cumulative shall be the first day after said shares are issued.

Accumulations of dividends shall not bear interest. No cash dividend shall be declared, paid or set apart for any shares of Common Stock unless all dividends on all shares of

the Series B Preferred Stock at the time outstanding for all past dividend periods and for the then current dividend shall have been paid, or shall have been declared and a sum

sufficient for the payment thereof, shall have been set apart. Subject to the foregoing provisions of this paragraph B, cash dividends or other cash distributions as may be

determined by the Board of Directors of the Corporation may be declared and paid upon the shares of the Common Stock of the Corporation from time to time out of funds

legally available therefor, and the shares of the Series B Preferred Stock shall not be entitled to participate in any such cash dividend or other such cash distribution so

declared and paid or made on such shares of Common Stock.

C. Redemption.

From a

nd after October 31, 1988, any holder may, by written request, call upon the Corporation to redeem all or any part of said holder’s shares of said Series B

Preferred Stock at a redemption price of $100.00 per share plus accumulated unpaid dividends to the date said request for redemption is received by the Corporation and no

more (the “Redemption Price”). Any such request for redemption shall be accompanied by the certificates for which redemption is requested, duly endorsed or with

appropriate stock power attached, in either case with signature guaranteed. Upon receipt by the Corporation of any such request for redemption from any holder of the Series

B Preferred Stock, the Corporation shall forthwith redeem said stock at the Redemption Price, provided that: (i) full cumulative dividends have been paid or declared and set

apart for payment upon all shares of any series of preferred stock ranking superior to the Series B Preferred Stock as to dividends or other distributions (collectively the

“Superior Stock”); and (ii) the Corporation is not then in default or in arrears with respect to any sinking or analogous fund or call for tenders obligation or agreement for the

purchase, redemption or retirement of any shares of Superior Stock. In the event that, upon receipt of a request for redemption, either or both of the conditions set forth in

clauses (i) and (ii) above are not met, the Corporation shall forthwith return said request to the submitting shareholder along with a statement that the Corporation is unable to

honor such request

and explanation of the reasons therefor. From and after the receipt by the Corporation of a request for redemption from any holder of said Series B Preferred Stock, which

request may be honored consistent with the foregoing provisions, all rights of such holder in the Series B Preferred Stock for which redemption is requested shall cease and

terminate, except only the right to receive the Redemption Price thereof, but without interest.

D. Liquidation Preference.

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of the Series B Preferred Stock shall be

entitled to receive, subject to the provisions of paragraph G and before any payment shall be made to the holders of the shares of Common Stock, the amount of $100.00 per

share, plus accumulated dividends. After payment to the holders of the Series B Preferred Stock of the full amount as aforesaid, the holders of the Series B Preferred Stock as

such shall have no right or claim to any of the remaining assets which shall be distributed ratably to the holders of the Common Stock If, upon any such liquidation,

dissolution or winding up, the assets available therefor are not sufficient to permit payments to the holders of Series B Preferred Stock of the full amount as aforesaid, then

subject to the provisions of paragraph G, the holders of the Series B Preferred Stock then outstanding shall share ratably in the distribution of assets in accordance with the

sums which would be payable if such holders were to receive the full amounts as aforesaid.

E. Sinking Fund.

There shall be no sinking fund applicable to the shares of Series B Preferred Stock.

F. Conversion.

The shares of Series B Preferred Stock shall not be convertible into any shares of Common Stock or any other class of shares, nor exchanged for any shares of

Common Stock or any other class of shares.

G. Superior Stock.

The Corporation may issue stock with preferences superior or equal to the shares of the Series B Preferred Stock without the consent of the holders thereof.

H. Voting Rights.

Each share of the Series B Preferred Stock shall be entitled to equal voting rights, share for share, with each share of the Common Stock.

(b) ESOP Convertible Preferred Stock, Series C.

The shares of the ESOP Convertible Preferred Stock, Series C, of the Corporation shall be designated “ESOP Convertible Preferred Stock, Series C,” and the

number of shares constituting such series shall be 1,027,270. The ESOP Convertible Preferred Stock, Series C, shall hereinafter be referred to as the “ESOP Preferred Stock.”

2

A. Special Purpose Restricted Transfer Issue.

Shares of ESOP Preferred Stock shall be issued only to a trustee acting on behalf of an employee stock ownership plan or other employee benefit plan of the

Corporation or any subsidiary of the Corporation. In the event of any transfer of shares of ESOP Preferred Stock to any person other than any such plan trustee or the

Corporation, the shares of ESOP Preferred Stock so transferred, upon such transfer and without any further action by the Corporation or the holder, shall be automatically

converted into shares of Common Stock on the terms otherwise provided for the conversion of shares of ESOP Preferred Stock into shares of Common Stock pursuant to

paragraph E hereof and no such transferee shall have any of the voting powers, preferences and relative, participating, optional or special rights ascribed to the shares of ESOP

Preferred Stock hereunder but, rather, only the powers and rights pertaining to the Common Stock into which such shares of ESOP Preferred Stock shall be so converted.

Certificates representing shares of ESOP Preferred Stock shall be legended to reflect such restrictions on transfer. Notwithstanding the foregoing provisions of this paragraph

A, shares of ESOP Preferred Stock (i) may be converted into shares of Common Stock as provided by paragraph E hereof and the shares of Common Stock issued upon such

conversion may be transferred by the holder thereof as permitted by law and (ii) shall be redeemable by the Corporation upon the terms and conditions provided by paragraphs

F, G and H hereof.

B. Dividends and Distributions.

(1) Subject to the provisions for adjustment hereinafter set forth, the holders of shares of ESOP Preferred Stock shall be entitled to receive, when, as and if

declared by the Board of Directors out of funds legally available therefor, cash dividends (“Preferred Dividends”) in an amount equal to $3.30 per share per annum, and no

more, payable semi-annually, one-half on the first day of January and one-half on the first day of July of each year (each a “Dividend Payment Date”) to holders of record at

the start of business on such Dividend Payment Date. Preferred Dividends shall accrue on a daily basis whether or not the Corporation shall have earnings or surplus at the

time, but Preferred Dividends on the shares of ESOP Preferred Stock for any period less than a full semi-annual period between Dividend Payment Dates shall be computed

on the basis of a 360-day year of 30-day months. Accumulated but unpaid Preferred Dividends shall accumulate as of the Dividend Payment Date on which they first become

payable, but no interest shall accrue on accumulated but unpaid Preferred Dividends.

(2) So long as any ESOP Preferred Stock shall be outstanding, no dividend shall be declared or paid or set apart for payment on any other series of stock

ranking on a parity with the ESOP Preferred Stock as to dividends, unless there shall also be or have been declared and paid or set apart for payment on the ESOP Preferred

Stock, like dividends for all dividend payment periods of the ESOP Preferred Stock ending on or before the dividend payment date of such parity stock, ratably in proportion

to the respective amount of dividends accumulated and unpaid through such dividend payment period on the ESOP Preferred Stock and accumulated and unpaid or payable

on such parity stock through the dividend payment period on such parity stock next preceding such Dividend Payment Date. In the event that full cumulative dividends on the

ESOP Preferred Stock have not been declared and paid or set apart for payment when due, the Corporation shall not declare or pay or set apart for payment any dividends or

make any other distributions on, or make any payment on account of the purchase, redemption or other retirement

of any other class of stock or series thereof of the Corporation ranking, as to dividends or as to distributions in the event of a liquidation, dissolution or winding-up of the

Corporation, junior to the ESOP Preferred Stock until full cumulative dividends on the ESOP Preferred Stock shall have been paid or declared and provided for; provided,

however, that the foregoing shall not apply to (i) any dividend payable solely in any shares of any stock ranking, as to dividends or as to distributions in the event of the

liquidation, dissolution or winding-up of the Corporation, junior to the ESOP Preferred Stock, or (ii) the acquisition of shares of any stock ranking, as to dividends or as to

distributions in the event of a liquidation, dissolution or winding-up of the Corporation, junior to the ESOP Preferred Stock either (A) pursuant to any employee or director

incentive or benefit plan or arrangement (including any employment, severance or consulting agreement) of the Corporation or any subsidiary of the Corporation heretofore or

hereafter adopted or (B) in exchange solely for shares of any other stock ranking junior to the ESOP Preferred Stock.

C. Voting Rights.

The holders of shares of ESOP Preferred Stock shall have the following voting rights:

(1) The holders of ESOP Preferred Stock shall be entitled to vote on all matters submitted to a vote of the holders of Common Stock of the Corporation, voting

together with the holders of Common Stock as one class. Each share of the ESOP Preferred Stock shall be entitled to the number of votes equal to the number of shares of

Common Stock into which such share of ESOP Preferred Stock could be converted on the record date for determining the shareholders entitled to vote, rounded to the nearest

whole vote; it being understood that whenever the

“Conversion Ration” (as defined in paragraph E hereof) is adjusted as provided in paragraph I hereof, the voting rights of the ESOP Preferred Stock shall also be similarly

adjusted.

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(2) Except as otherwise required by the General Corporation Law of the State of Delaware or set forth in paragraph C(1), holders of ESOP Preferred Stock shall

have no special voting rights and their consent shall not be required for the taking of any corporate action.

D. Liquidation, Dissolution or Winding-Up.

(1) Upon any voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, the holders of ESOP Preferred Stock shall be entitled to receive

out of the assets of the Corporation which remain after satisfaction in full of all valid claims of creditors of the Corporation and which are available for payment to

shareholders and subject to the rights of the holders of any stock of the Corporation ranking senior to or on a parity with the ESOP Preferred Stock in respect of distributions

upon liquidation, dissolution or winding-up of the Corporation, before any amount shall be paid or distributed among the holders of Common Stock or any other shares

ranking junior to the ESOP Preferred Stock in respect of the distribution upon liquidation, dissolution or winding-up of the Corporation, liquidating distributions in the amount

of $42.50 per share, plus an amount equal to all accrued and unpaid dividends thereon to the date fixed for distribution, and no more. If upon any liquidation, dissolution or

winding-up of the Corporation, the amounts payable with respect to the ESOP Preferred Stock and any other stock ranking as to any such distribution on a parity with the

ESOP Preferred Stock are not paid in full, the holders of the ESOP Preferred Stock and such other stock shall share ratably in any distribution of assets in proportion to the

full respective preferential amounts to which they are entitled. After payment of the full amount to which they are entitled as provided by the foregoing provisions of this

paragraph D(1), the holders of shares of ESOP Preferred Stock shall not be entitled to any further right or claim to any of the remaining assets of the Corporation.

(2) Neither the merger or consolidation of the Corporation with or into any other corporation, nor the merger or consolidation of any other corporation with or

into the Corporation, nor the sale, transfer or lease of all or any portion of the assets of the Corporation, shall be deemed to be a dissolution, liquidation or winding-up of the

affairs of the Corporation for purposes of this paragraph D, but the holders of ESOP Preferred Stock shall nevertheless be entitled in the event of any such merger or

consolidation to the rights provided by paragraph H hereof.

(3) Written notice of any voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, stating the payment date or dates when, and the

place or places where, the amounts distributable to holders of ESOP Preferred Stock in such circumstances shall be payable, shall be given by first-class mail, postage

prepaid, mailed not less than twenty (20) days prior to any payment date stated therein, to the holders of ESOP Preferred Stock, at the address shown on the books of the

Corporation or any transfer agent for the ESOP Preferred Stock.

E. Conversion into Common Stock.

(1) A holder of shares of ESOP Preferred Stock shall be entitled, at any time prior to the close of business on the date fixed for redemption of such shares

pursuant to paragraph

F, G or H hereof, to cause any or all of such shares to be converted into shares of Common Stock at a conversion rate equal to the ratio of 1.0 share of ESOP Preferred Stock

to 1.68 shares of Common Stock (as adjusted as hereinafter provided, the “Conversion Ratio”). The Conversion Ratio set forth above is subject to adjustment pursuant to this

Certificate of Incorporation.

(2) Any holder of shares of ESOP Preferred Stock desiring to convert such shares into shares of Common Stock shall surrender the certificate or certificates

representing the shares of ESOP Preferred Stock being converted, duly assigned or endorsed for transfer to the Corporation (or accompanied by duly executed stock powers

relating thereto), at the principal executive office of the Corporation or the offices of the transfer agent for the ESOP Preferred Stock or such office or offices in the

continental United States of an agent for conversion as may from time to time be designated by notice to the holders of the ESOP Preferred Stock by the Corporation or the

transfer agent for the ESOP Preferred Stock, accompanied by written notice of conversion. Such notice to conversion shall specify (i) the number of shares of ESOP Preferred

Stock to be converted and the name or names in which such holder wishes the certificate or certificates for Common Stock and for any shares of ESOP Preferred Stock not to

be so converted to be issued, and (ii) the address to which such holder wishes delivery to be made of such new certificates to be issued upon such conversion.

(3) Upon surrender of a certificate representing a share or shares of ESOP Preferred Stock for conversion, the Corporation shall issue and send by hand delivery

(with receipt to be acknowledged) or by first-class mail, postage prepaid, to the holder thereof or to such holder’s designee, at the address designated by such holder, a

certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled upon conversion. In the event that there shall have been

surrendered a certificate or certificates representing shares of ESOP Preferred Stock, only part of which are to be converted, the Corporation shall issue and deliver to such

holder or such holder’s designee a new certificate or certificates representing the number of shares of ESOP Preferred Stock which shall not have been converted.

(4) The issuance by the Corporation of shares of Common Stock upon a conversion of shares of ESOP Preferred Stock into shares of Common Stock made at

the option of the holder thereof shall be effective as of the earlier of (i) the

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delivery to such holder or such holder’s designee of the certificate or certificates representing the shares of Common Stock issued upon conversion thereof or (ii) the

commencement of business on the second business day after the surrender of the certificate or certificates for the shares of ESOP Preferred Stock to be converted, duly

assigned or endorsed for transfer to the corporation (or accompanied by duly executed stock powers relating thereto) as provided hereby. On and after the effective date of

conversion, the person or persons entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such

shares of Common Stock, but no allowance or adjustment shall be made in respect of dividends payable to holders of Common Stock in respect of any period prior to such

effective date. The Corporation shall not be obligated to pay any dividends which shall have been declared and shall be payable to holders of shares of ESOP Preferred Stock

on a Dividend Payment Date if such Dividend Payment

Date for such dividend shall coincide with or be on or subsequent to the effective date of conversion of such shares.

(5) The Corporation shall not be obligated to deliver to holders of ESOP Preferred Stock any fractional share or shares of Common Stock issuable upon any

conversion of such shares of ESOP Preferred Stock, but in lieu thereof may make a cash payment in respect thereof in any manner permitted by law.

(6) The Corporation shall at all times reserve and keep available out of its authorized and unissued Common Stock, solely for issuance upon the conversion of

shares of ESOP Preferred Stock as herein provided, free for any preemptive rights, such number of shares of Common Stock as shall from time to time be issuable upon the

conversion of all shares of ESOP Preferred Stock then outstanding. The Corporation shall prepare and shall use its best efforts to obtain and keep in force such governmental

or regulatory permits or other authorizations as may be required by law, and shall comply with all requirements as to registration or qualification of the Common Stock, in

order to enable the Corporation lawfully to issue and deliver to each holder of record of ESOP Preferred Stock such number of shares of its Common Stock as shall from time

to time be sufficient to effect the conversion of all shares of ESOP Preferred Stock then outstanding and convertible into shares of Common Stock.

F. Redemption At the Option of the Corporation.

(1) The ESOP Preferred Stock shall be redeemable, in whole or in part, at the option of the Corporation at any time, at a redemption price per share (except as to

redemption pursuant to paragraph F(3))of $42.83 prior to July 1, 1999 and $42.50 thereafter, plus, in each case, an amount equal to all accrued and unpaid dividends thereon

to the date fixed for redemption. Payment of the redemption price shall be made by the Corporation in cash or shares of Common Stock, or a combination thereof, as permitted

by paragraph F(5). From and after the date fixed for redemption, dividends on shares of ESOP Preferred Stock called for redemption will cease to accrue, such shares will no

longer be deemed to be outstanding and all rights in respect of such shares of the Corporation shall cease, except the right to receive the redemption price. If less than all of

the outstanding shares of ESOP Preferred Stock are to be redeemed, the Corporation shall either redeem a portion of the shares of each holder determined pro rata based on

the number of shares held by each holder or shall select the shares to be redeemed by lot, as may be determined by the Board of Directors of the Corporation.

(2) Unless otherwise required by law, notice of redemption will be sent to the holders of ESOP Preferred Stock at the address shown on the books of the

Corporation or any transfer agent for the ESOP Preferred Stock by first-class mail, postage prepaid, mailed not less than twenty (20) days nor more than sixty (60) days prior

to the redemption date. Each such notice shall state: (i) the redemption date; (ii) the total number of shares of the ESOP Preferred Stock to be redeemed and, if fewer than all

the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where

certificates for such shares are to be surrendered for payment of the redemption price (v) that dividends on the shares to be redeemed will cease to accrue on such redemption

date; and (vi) the conversion rights of the shares to be redeemed, the period within which conversion rights may be exercised, and the Conversion Ratio and number of shares

of Common Stock issuable upon

conversion of a share of ESOP Preferred Stock at the time. These notice provisions may be supplemented if necessary in order to comply with optional redemption provisions

for preferred stock which may be required under the Internal Revenue Code of 1986, as amended, or the Employee Retirement Income Security Act of 1974, as amended

(“ERISA”). Upon surrender of the certificates for any shares so called for redemption and not previously converted (properly endorsed or assigned for transfer, if the Board of

Directors of the Corporation shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the date fixed for redemption and at the

applicable redemption price set forth in this paragraph F.

(3) In the event of a change in the federal tax law of the United States of America which has the effect of precluding the Corporation from claiming any of the

tax deductions for dividends paid on the ESOP Preferred Stock when such dividends are used as provided under Section 404(k)(2) of the Internal Revenue Code of 1986, as

amended and in effect on the date shares of ESOP Preferred Stock are initially issued, the Corporation may, within 180 days following the effective date of such tax

legislation and implementing regulations of the Internal Revenue Service, if any, in its sole discretion and notwithstanding anything to the contrary in paragraph F(1), elect to

redeem any or all such shares for the amount payable in respect of the shares upon liquidation of the Corporation pursuant to paragraph D.

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(4) In the event the C&S/Sovran Retirement Savings, ESOP and Profit Sharing Plan (as amended, together with any successor plan, the “Plan”) is terminated,

the Corporation shall, notwithstanding anything to the contrary in paragraph F(1), redeem all shares of ESOP Preferred Stock for the amount payable in respect of the shares

upon redemption of the ESOP Preferred Stock pursuant to paragraph F(1) hereof).

(5) The Corporation, at its option, may make payment of the redemption price required upon redemption of shares of ESOP Preferred Stock in case or in shares

of Common Stock, or in a combination of such shares and cash, any such shares to be valued for such purpose at their Fair Market Value (as defined in paragraph I(7) hereof.

G. Other Redemption Rights.

Shares of ESOP Preferred Stock shall be redeemed by the Corporation at a price which is the greater of the Conversion Value (as defined in paragraph I) of the

ESOP Preferred Stock on the date fixed for redemption or a redemption price of $42.50 per share plus accrued and unpaid dividends thereon to the date fixed for redemption,

for shares of Common Stock (any such shares of Common Stock to be valued for such purpose as provided by paragraph F(5) hereof), at the option of the holder, at any time

and from time to time upon notice to the Corporation given not less than five (5) business days prior to the date fixed by the Corporation in such notice for such redemption,

when and to the extent necessary (i) to provide for distributions required to be made under, or to satisfy an investment election provided to participants in accordance with, the

Plan to participants in the Plan or (ii) to make payment of principal, interest or premium due and payable (whether as scheduled or upon acceleration) on any indebtedness

incurred by the holder or Trustee under the Plan for the benefit of the Plan.

H. Consolidation, Merger, etc.

(1) In the event that the Corporation shall consummate any consolidation or merger or similar transaction, however named, pursuant to which the outstanding

shares of Common Stock are by operation of law exchanged solely for or changed, reclassified or converted solely into stock of any successor or resulting company (including

the Corporation and any company that directly or indirectly owns all of the outstanding capital stock of such successor or resulting company) that constitutes “qualifying

employer securities” with respect to a holder of ESOP Preferred Stock within the meaning of Section 409(1) of the Internal Revenue Code of 1986, as amended, and

Section 407(d)(5) of ERISA, or any successor provisions of law, and, if applicable, for a cash payment in lieu of fractional shares, if any, the shares of ESOP Preferred Stock

of such holder shall be assumed by and shall become preferred stock of such successor or resulting company, having in respect of such company insofar as possible the same

powers, preferences and relative, participating, optional or other special rights (including the redemption rights provided by paragraphs F, G and H hereof), and the

qualifications, limitations or restrictions thereon, that the ESOP Preferred Stock had immediately prior to such transaction, except that after such transaction each share of the

ESOP Preferred Stock shall be convertible, otherwise on the terms and conditions provided by paragraph E hereof, into the qualifying employer securities so receivable by a

holder of the number of shares of Common Stock into which such shares of ESOP Preferred Stock could have been converted immediately prior to such transaction if such

holder of Common Stock failed to exercise any rights of election to receive any kind or amount of stock, securities, cash or other property (other than such qualifying

employer securities and a cash payment, if applicable, in lieu of fractional shares) receivable upon such transaction (provided that, if the kind or amount of qualifying

employer securities receivable upon such transaction is not the same for each non-electing share, then the kind and amount of qualifying employer securities receivable upon

such transaction for each non-electing share shall be the kind and amount so receivable per share by a plurality of the non-electing shares). The rights of the ESOP Preferred

Stock as preferred stock of such successor or resulting company shall successively be subject to adjustments pursuant to paragraph I hereof after any such transaction as

nearly equivalent to the adjustments provided for by such paragraph prior to such transaction. The Corporation shall not consummate any such merger, consolidation or similar

transaction unless all then outstanding shares of the ESOP Preferred Stock shall be assumed and authorized by the successor or resulting company as aforesaid.

(2) In the event that the Corporation shall consummate any consolidation or merger or similar transaction, however named, pursuant to which the outstanding

shares of Common Stock are by operation of law exchanged for or changed, reclassified or converted into other stock or securities or cash or any other property, or any

combination thereof, other than any such consideration which is constituted solely of qualifying employer securities (as referred to in paragraph H(1)) and cash payments, if

applicable, in lieu of fractional shares, all outstanding shares of ESOP Preferred Stock shall, without any action on the part of the Corporation or any holder thereof (but

subject to paragraph H(3)), be deemed converted by virtue of such merger, consolidation or similar transaction immediately prior to such consummation into the number of

shares of Common Stock into which such shares of ESOP Preferred Stock could have been converted at such time, and each share of ESOP Preferred Stock shall, by virtue of

such transaction and on the same terms as apply to the holders of Common Stock, be converted into or exchanged for the aggregate amount of stock, securities, cash or other

property (payable in like kind)

receivable by a holder of the number of shares of Common Stock into which such shares of ESOP Preferred Stock could have been converted immediately prior to such

transaction if such holder of Common Stock failed to exercise any rights of election as to the kind or amount of stock, securities, cash or other property receivable upon such

transaction (provided that, if the kind

6

or amount of stock, securities, cash or other property receivable upon such transaction is not the same for each non-electing share, then the kind and amount of stock,

securities, cash or other property receivable upon such transaction for each non-electing share shall be the kind and amount so receivable per share by a plurality of the non-

electing shares).

(3) In the event the Corporation shall enter into any agreement providing for any consolidation or merger or similar transaction described in paragraph H(2), then

the Corporation shall as soon as practicable thereafter (and in any event at least ten (10) business days before consummation of such transaction) give notice of such

agreement and the material terms thereof to each holder of ESOP Preferred Stock and each such holder shall have the right to elect, by written notice to the Corporation, to

receive, upon consummation of such transaction (if and when such transaction is consummated), from the Corporation or the successor of the Corporation, in redemption and

retirement of such ESOP Preferred Stock, a cash payment equal to the amount payable in respect of shares of ESOP Preferred Stock upon redemption pursuant to paragraph

F(1) hereof. No such notice of redemption shall be effective unless given to the Corporation prior to the close of business on the second business day prior to consummation of

such transaction, unless the Corporation or the successor of the Corporation shall waive such prior notice, but any notice of redemption so given prior to such time may be

withdrawn by notice of withdrawal given to the Corporation prior to the close of business on the second business day prior to consummation of such transaction.

I. Anti-dilution Adjustments.

(1) In the event the Corporation shall, at any time or from time to time while any of the shares of the ESOP Preferred Stock are outstanding, (i) pay a dividend or

make a distribution in respect of the Common Stock in shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii) combine the outstanding

shares of Common Stock into a smaller number of shares, in each case whether by reclassification of shares, recapitalization of the Corporation (including a recapitalization

effected by a merger or consolidation to which paragraph H hereof does not apply) or otherwise, the Conversion Ratio in effect immediately prior to such action shall be

adjusted by multiplying such Conversion Ratio by the fraction the numerator of which is the number of shares of Common Stock outstanding immediately before such event

and the denominator of which is the number of shares of Common Stock outstanding immediately after such event. An adjustment made pursuant to this paragraph I(1) shall

be given effect, upon payment of such a dividend or distribution, as of the record date for the determination of shareholders entitled to receive such dividend or distribution (on

a retroactive basis) and in the case of a subdivision or combination shall become effective immediately as of the effective date thereof.

(2) In the event that the Corporation shall, at any time or from time to time while any of the shares of ESOP Preferred Stock are outstanding, issue to holders of

shares of Common Stock as a dividend or distribution, including by way of a reclassification of shares or a recapitalization of the Corporation, any right or warrant to purchase

shares of Common Stock (but

not including as such a right or warrant any security convertible into or exchangeable for shares of Common Stock) at a purchase price per share less than the Fair Market

Value (as hereinafter defined) of a share of Common Stock on the date of issuance of such right or warrant, then, subject to the provisions of paragraphs I(5) and I(6), the

Conversion Ratio shall be adjusted by multiplying such Conversion Ratio by the fraction the numerator of which shall be the number of shares of Common Stock outstanding

immediately before such issuance of rights or warrants plus the number of shares of Common Stock which could be purchased at the Fair Market Value of a share of

Common Stock at the time of such issuance for the maximum aggregate consideration payable upon exercise in full of all such rights or warrants and the denominator of

which shall be the number of shares of Common Stock outstanding immediately before such issuance of rights or warrants plus the maximum number of shares of Common

Stock that could be acquired upon exercise in full of all such rights and warrants.

(3) In the event the Corporation shall, at any time and from time to time while any of the shares of ESOP Preferred Stock are outstanding, issue, sell or exchange

shares of Common Stock (other than pursuant to any right or warrant to purchase or acquire shares of Common Stock (including as such a right or warrant any security

convertible into or exchangeable for shares of Common Stock) and other than pursuant to any dividend reinvestment plan or employee or director incentive or benefit plan or

arrangement, including any employment, severance or consulting agreement, of the Corporation or any subsidiary of the Corporation heretofore or hereafter adopted) for a

consideration having a Fair Market Value on the date of such issuance, sale or exchange less than the Fair Market Value of such shares on the date of such issuance, sale or

exchange, then, subject to the provisions of paragraphs I(5) and I(6), the Conversion Ratio shall be adjusted by multiplying such Conversion Ratio by the fraction the

numerator of which shall be the sum of (i) the Fair Market Value of all the shares of Common Stock outstanding on the day immediately preceding the first public

announcement of such issuance, sale or exchange plus (ii) the Fair Market Value of the consideration received by the Corporation in respect of such issuance, sale or exchange

of shares of Common Stock, and the denominator of which shall be the product of (i) the Fair Market Value of a share of Common Stock on the day immediately preceding

the first public announcement of such issuance, sale or exchange multiplied by (ii) the sum of the number of shares of Common Stock outstanding on such day plus the

number of shares of Common Stock so issued, sold or exchanges by the Corporation. In the event the Corporation shall, at any time or from time to time while any shares of

ESOP Preferred Stock are outstanding, issue, sell or exchange any right or warrant to purchase or acquire shares of Common Stock (including as such a right or warrant any

security convertible into or exchangeable for shares of Common Stock), other

7

than any such issuance to holders of shares of Common Stock as a dividend or distribution (including by way of a reclassification of shares or a recapitalization of the

Corporation) and other than pursuant to any dividend reinvestment plan or employee or director incentive or benefit plan or arrangement (including any employment,

severance or consulting agreement) of the Corporation or any subsidiary of the Corporation heretofore or hereafter adopted, for a consideration having a Fair Market Value of

the date of such issuance, sale or exchange less than the Non-Dilutive Amount (as hereinafter defined), then, subject to the provisions of paragraphs I(5) and (6), the

Conversion Ratio shall be adjusted by multiplying such Conversion Ratio by a fraction the numerator of which shall be the sum of (a) the Fair Market Value of all the shares

of Common Stock outstanding on the day immediately preceding the first public announcement of such issuance, sale or exchange plus (b) the Fair Market Value of the

consideration received by the Corporation in respect of such issuance, sale or exchange of such right or warrant plus (c) the Fair Market Value at the time of such issuance of

the consideration which the Corporation would receive upon exercise in full of all such rights or warrants, and the denominator of which shall be the product of (a) Fair

Market Value of a share of Common Stock on the day immediately preceding the first public announcement of such issuance, sale or exchange multiplied by (b) the sum of

the number of shares of Common Stock outstanding on such day plus the maximum number of shares of Common Stock which could be acquired pursuant to such right or

warrant at the time of the issuance, sale or exchange of such right or warrant (assuming shares of Common Stock could be acquired pursuant to such right or warrant at such

time).

(4) In the event the Corporation shall, at any time or from time to time while any of the shares of ESOP Preferred Stock are outstanding, make any Extraordinary

Distribution (as hereinafter defined) in respect of the Common Stock, whether by dividend, distribution, reclassification of shares or recapitalization of the Corporation

(including a recapitalization or reclassification effected by a merger or consolidation to which paragraph H hereof does not apply) or effect a Pro Rata Repurchase (as herein

defined) of Common Stock, the Conversion Ratio in effect immediately prior to such Extraordinary Distribution or Pro Rata Repurchase shall, subject to paragraphs I(5) and

I(6), be adjusted by multiplying such Conversion Ratio by a fraction the numerator of which shall be (a) the product of (i) the number of shares of Common Stock

outstanding immediately before such Extraordinary Distribution or Pro Rata Repurchase multiplied by (ii) the Fair Market Value (as herein defined) of a share of Common

Stock on the Valuation Date (as hereinafter defined) with respect to an Extraordinary Distribution, or on the applicable expiration date (including all extensions thereof) of any

tender offer which is a Pro Rata Repurchase, or on the date of purchase with respect to any Pro Rata Repurchase which is not a tender offer, as the case may be, minus (b) the

Fair Market Value of the Extraordinary Distribution or the aggregate purchase price of the Pro Rata Repurchase, as the case may be, and the denominator of which shall be the

product of (i) the number of shares of Common Stock outstanding immediately before such Extraordinary Distribution or Pro Rata Repurchase minus, in the case of a Pro

Rata Repurchase, the number of shares of Common Stock repurchased by the Corporation multiplied by (ii) the Fair Market Value of a share of Common Stock on the record

date with respect to an Extraordinary Distribution or on the applicable expiration date (including all extensions thereof) of any tender offer which is a Pro Rata Repurchase or

on the date of purchase with respect to any Pro Rata Repurchase which is not a tender offer, as the case may be. The Corporation shall send each holder of ESOP Preferred

Stock (x) notice of its intent to make any Extraordinary Distribution and (y) notice of any offer by the Corporation to make a Pro Rata Repurchase, in each case at the same

time as, or as soon as practicable after, such offer is first communicated (including by announcement of a record date in accordance with the rules of any stock exchange on

which the Common Stock is listed or admitted to trading) to holders of Common Stock. Such notice shall indicate the intended record date and the amount and nature of such

dividend or distribution, or the number of share subject to such offer for a Pro Rata Repurchase and the purchase price payable by the Corporation pursuant to such offer, as

well as the Conversion Ratio and the number of share of Common Stock into which a share of ESOP Preferred Stock may be converted at such time.

(5) Notwithstanding any other provision of this paragraph I, the Corporation shall not be required to make any adjustment of the Conversion Ratio unless such

adjustment would require an increase or decrease of at least one percent (1%) in the Conversion Ratio. Any lesser adjustment shall be carried forward and shall be made no

later than the time of, and together with, the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to an increase or

decrease of at least one percent (1%) in the Conversion Ratio.

(6) If the Corporation shall make any dividend or distribution on the Common Stock or issue any Common Stock, other capital stock or other security of the

Corporation or any rights or warrants to purchase or acquire any such security, which transaction does not result in an adjustment to the Conversion Ratio pursuant to the

foregoing provision of this paragraph I, the Board of Directors of the Corporation shall consider whether such action is of such a nature that an adjustment to the Conversion

Ratio should equitably be made in respect of such transaction. If in such case the Board of Directors of the Corporation determines that the adjustment to the Conversion Ratio

should be made, an adjustment shall be made effective as of such date, as determined by the Board of Directors of the Corporation. The determination of the Board of

Directors of the Corporation as to whether an adjustment to the Conversion Ratio should be made pursuant to the foregoing provisions of this paragraph I(6), and, if so, as to

what adjustment should be made and when, shall be final and binding on the Corporation and all shareholders of the Corporation. The Corporation shall be entitled to make

such additional adjustments in the Conversion Ratio, in addition to those required by the foregoing provisions of this paragraph I, as shall be necessary in order that any

8

dividend or distribution in shares of capital stock of the Corporation, subdivision, reclassification or combination of shares of stock of the Corporation or any recapitalization

of the Corporation shall not be taxable to holders of the Common Stock.

(7) For purposes of this paragraph I, the following definitions shall apply:

“Conversion Value” shall mean the Fair Market Value of the aggregate number of shares of Common Stock into which a share of ESOP Preferred Stock is

convertible.

“Extraordinary Distribution” shall mean any dividend or other distribution (effected while any of the shares of ESOP Preferred Stock are outstanding) (a) of

cash, where the aggregate amount of such cash dividend and distribution together with the amount of all cash dividends and distributions made during the

preceding period of 12 months, when combined with the aggregate amount of all Pro Rata Repurchases (for this purpose, including only that portion of the

aggregate purchase price of such Pro Rata Repurchase which is in excess of the Fair Market Value of the Common Stock repurchased as determined on the

applicable expiration date (including all extension thereof) or any tender offer or exchange offer which is a Pro Rata Repurchase, or the date of purchase with

respect to any other Pro Rata Repurchase which is not a tender offer or exchange offer made during such period), exceeds Twelve and One-Half percent (12.5%)

of the aggregate Fair Market Value of all shares of Common Stock outstanding on the record date for determining the shareholders entitled to receive such

Extraordinary Distribution and (b) any shares of capital stock of the Corporation (other than securities of the type referred to in paragraph I(2)), evidence of

indebtedness of the Corporation or any other person or any other property (including shares of any subsidiary of the Corporation), or any combination thereof. The

Fair Market Value of an Extraordinary Distribution for

purposes of paragraph I(4) shall be the sum of the Fair Market Value of such Extraordinary Distribution plus the amount of any cash dividends which are not

Extraordinary Distributions made during such twelve-month period and not previously included in the calculation of an adjustment pursuant to paragraph I(4).

“Fair Market Value” shall mean, as to shares of Common Stock or any other class of capital stock or securities of the Corporation or any other issuer which

are publicly traded, the average of the Current Market Prices (as hereinafter defined) of such shares or securities for each day of the Adjustment Period (as

hereinafter defined). “Current Market Price” of publicly traded shares of Common Stock or any other class of capital stock or other security of the Corporation or

any other issuer for a day shall mean the last reported sales price, regular way, or, in case no sale takes place on such day, the average of the reported closing bid

and asked prices, regular way, in either case as reported on the New York Stock Exchange Composite Tape or, if such security is not listed or admitted to trading

on the New York Stock Exchange, on the principal national securities exchange on which such security is listed or admitted to trading or, if not listed or admitted

to trading on any national securities exchange, on The Nasdaq National Market or, if such security is not quoted on Nasdaq, the average of the closing bid and

asked prices on each such day in the over-the-counter market as reported by Nasdaq or, if bid and asked prices for such security on each such day shall not have

been reported through Nasdaq, the average of the bid and asked prices for such day as furnished by any New York Stock Exchange member firm selected for such

purpose by the Board of Directors of the Corporation or a committee thereof on each trading day during the Adjustment Period. “Adjustment Period” shall mean

the period of five (5) consecutive trading days preceding the date as of which the Fair Market Value of a security is to be determined. The “Fair Market Value” of

any security which is not publicly traded or of any other property shall mean the fair value thereof as determined by an independent investment banking or

appraisal firm experienced in the valuation of such securities or property selected in good faith by the Board of Directors of the Corporation or a committee

thereof, or, if no such investment banking or appraisal firm is in the good faith judgment of the Board of Directors or such committee available to make such

determination, as determined in good faith by the Board of Directors of the Corporation or such committee.

“Non-Dilutive Amount” in respect of an issuance, sale or exchange by the Corporation of any right or warrant to purchase or acquire shares of Common

Stock (including any security convertible into or exchangeable for shares of Common Stock) shall mean the remainder of (a) the product of the Fair Market Value

of a share of Common Stock on the day preceding the first public announcement of such issuance, sale or exchange multiplied by the maximum number of shares

of Common Stock which could be acquired on such date upon the exercise in full of such rights and warrants (including upon the conversion or exchange of all

such convertible or exchangeable securities), whether or not exercisable (or convertible or exchangeable) at such date, minus (b) the aggregate amount payable

pursuant to such right or warrant to purchase or acquire with maximum number of shares of

Common Stock; provided, however, that in no event shall the Non-Dilutive Amount be less than zero. For purposes of the foregoing sentence, in the case of a

security convertible into or exchangeable for shares of Common Stock, the amount payable pursuant to a right or warrant to purchase or acquire shares of

Common

9

Stock shall be the Fair Market Value of such security on the date of the issuance, sale or exchange of such security by the Corporation.

“Pro Rata Repurchase” shall mean any purchase of shares of Common Stock by the Corporation or any subsidiary thereof, whether for cash, shares of

capital stock of the Corporation, other securities of the Corporation, evidences of indebtedness of the Corporation or any other person or any other property

(including shares of a subsidiary of the Corporation), or any combination thereof, effected while any of the shares of ESOP Preferred Stock are outstanding,

pursuant to any tender offer or exchange offer subject to Section 13(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or any

successor provision of law, or pursuant to any other offer available to substantially all holders of Common Stock; provided, however, that no purchase of shares

by the Corporation or any subsidiary thereof made in open market transactions shall be deemed a Pro Rata Repurchase. For purposes of this paragraph I(7), shares

shall be deemed to have been purchased by the Corporation or any subsidiary thereof “in open market transactions” if they have been purchased substantially in

accordance with the requirements or Rule 10b-18 as in effect under the Exchange Act, on the date shares of ESOP Preferred Stock are initially issued by the

Corporation or on such other terms and conditions as the Board of Directors of the Corporation or a committee thereof shall have determined are reasonably

designed to prevent such purchases from having a material effect on the trading market for the Common Stock.

“Valuation Date” with respect to an Extraordinary Distribution shall mean the date that is five (5) business days prior to the record date for such

Extraordinary Distribution.

(8) Whenever an adjustment to the Conversion Ratio is required pursuant hereto, the Corporation shall forthwith place on file with the transfer agent for the

Common Stock and the ESOP Preferred Stock if there be one, and with the Secretary of the Corporation, a statement signed by two officers of the Corporation, stating the

adjusted Conversion Ratio determined as provided herein and the voting rights (as appropriately adjusted) of the ESOP Preferred Stock. Such statement shall set forth in

reasonable detail such facts as shall be necessary to show the reason and the manner of computing such adjustment, including any determination of Fair Market Value

involved in such computation. Promptly after each adjustment to the Conversion Ratio and the related voting rights of the ESOP Preferred Stock, the Corporation shall mail a

notice thereof to each holder of shares of the ESOP Preferred Stock.

J. Ranking; Retirement of Shares.

(1) The ESOP Preferred Stock shall rank (a) senior to the Common Stock as to the payment of dividends and the distribution of assets on liquidation, dissolution

and winding-up

of the Corporation and (b) unless otherwise provided in the Articles of Incorporation of the Corporation or an amendment to such Articles of Incorporation relating to a

subsequent series of Preferred Shares, junior to all other series of Preferred Shares as to the payment of dividends and the distribution of assets on liquidation, dissolution or

winding-up.

(2) Any shares of ESOP Preferred Stock acquired by the Corporation by reason of the conversion or redemption of such shares as provided hereby, or otherwise

so acquired, shall be retired as shares of ESOP Preferred Stock and restored to the status of authorized but unissued shares of Preferred Shares, undesignated as to series, and

may thereafter be reissued as part of a new series of such Preferred Shares as permitted by law.

K. Miscellaneous.

(1) All notices referred to herein shall be in writing, and all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three

(3) business days after the mailing thereof if sent by registered mail (unless first-class mail shall be specifically permitted for such notice under the terms hereof) with postage

prepaid, addressed: (a) if to the Corporation, to its office at Bank of America Corporate Center, Charlotte, North Carolina 28255 (Attention: Treasurer) or to the transfer agent

for the ESOP Preferred Stock, or other agent of the Corporation designated as permitted hereby or (b) if to any holder of the ESOP Preferred Stock or Common Stock, as the

case may be, to such holder at the address of such holder as listed in the stock record books of the Corporation (which may include the records of any transfer agent for the

ESOP Preferred Stock or Common Stock, as the case may be) or (c) to such other address as the Corporation or any such holder, as the case may be, shall have designated by

notice similarly given.

(2) The term “Common Stock” as used herein means the Corporation’s Common Stock, as the same existed at the date of filing of the Amendment to the

Corporation’s Articles of Incorporation relating to the ESOP Preferred Stock or any other class of stock resulting from successive changes or reclassification of such Common

Stock consisting solely of changes in par value, or from par value to no par value. In the event that, at any time as a result of an adjustment made pursuant to paragraph I

hereof, the holder of any share of the ESOP Preferred Stock upon thereafter surrendering such shares for conversion shall become entitled to receive any shares or other

securities of the Corporation other than shares of Common Stock, the Conversion Ratio in respect of such other shares or securities so receivable upon conversion of shares of

ESOP Preferred Stock shall thereafter be adjusted, and shall be subject to further adjustment from time to time, in a manner and on

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terms as nearly equivalent as practicable to the provisions with respect to Common Stock contained in paragraph I hereof, and the provisions of paragraphs A through H, J,

and K hereof with respect to the Common Stock shall apply on like or similar terms to any such other shares or securities.

(3) The Corporation shall pay any and all stock transfer and documentary stamp taxes that may be payable in respect of any issuance or delivery of shares of

ESOP Preferred Stock or shares of Common Stock or other securities issued on account of ESOP Preferred Stock pursuant hereto or certificates representing such shares or

securities. The Corporation shall not, however, be required to pay any such tax which may be payable in respect of any transfer involved in the issuance or delivery of shares

of ESOP Preferred Stock or Common Stock or other securities in a

name other than that in which the shares of ESOP Preferred Stock with respect to which such shares or other securities are issued or delivered were registered, or in respect of

any payment to any person with respect to any such shares or securities other than a payment to the registered holder thereof, and shall not be required to make any such

issuance, delivery or payment unless and until the person otherwise entitled to such issuance, delivery or payment has paid to the Corporation the amount of any such tax or

has established, to the satisfaction of the Corporation, that such tax has been paid or is not payable.

(4) In the event that a holder of shares of ESOP Preferred Stock shall not by written notice designate the name in which shares of Common Stock to be issued

upon conversion of such shares should be registered or to whom payment upon redemption of shares of ESOP Preferred Stock should be made or the address to which the

certificate or certificates representing such shares, or such payment, should be sent, the Corporation shall be entitled to register such shares, and make such payment, in the

name of the holder of such ESOP Preferred Stock as shown on the records of the Corporation and to send the certificate or certificates representing such shares, or such

payment, to the address of such holder shown on the records of the Corporation.

(5) The Corporation may appoint, and from time to time discharge and change, a transfer agent for the ESOP Preferred Stock. Upon any such appointment or

discharge of a transfer agent, the Corporation shall send notice thereof by first-class mail, postage prepaid, to each holder of record of ESOP Preferred Stock.

(c) $2.50 Cumulative Convertible Preferred Stock, Series BB.

A. Designation.

The designation of this series is “$2.50 Cumulative Convertible Preferred Stock, Series BB” (hereinafter referred to as the “Series BB Preferred Stock”), and the

initial number of shares constituting such series shall be 19,993,432, which number may be increased or decreased (but not below the number of shares then outstanding)

from time to time by the Board of Directors. The Series BB Preferred Stock shall rank prior to each of the Common Stock, the Series B Preferred Stock and the ESOP

Preferred Stock with respect to the payment of dividends and the distribution of assets.

B. Dividend Rights.

(1) The holders of shares of Series BB Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, out of funds legally available

therefor, cumulative preferential cash dividends, accruing from January 1, 1998, at an annual rate of $2.50 per share, and no more, payable quarterly on the first day of

January, April, July and October of each year (each of the quarterly periods ending on the last day of March, June, September and December being hereinafter referred to as a

“dividend period”). Dividends on the Series BB Preferred Stock shall first become payable on the first day of January, April, July or October, as the case may be, next

following the date of issuance; provided, however, that if the first dividend period ends within 20 days of the date of issuance, such initial dividend shall be payable at the

completion of the first full dividend period.

(2) Dividends on shares of Series BB Preferred Stock shall be cumulative from January 1, 1998, whether or not there shall be funds legally available for the

payment thereof. Accumulations of dividends on the Series BB Preferred Stock shall not bear interest. The Corporation shall not (i) declare or pay or set apart for payment

any dividends or distributions on any stock ranking as to dividends junior to the Series BB Preferred Stock (other than dividends paid in shares of such junior stock) or

(ii) make any purchase or redemption of, or any sinking fund payment for the purchase or redemption of, any stock ranking as to dividends junior to the Series BB Preferred

Stock (other than a purchase or redemption made by issue or delivery of such junior stock) unless all dividends payable on all outstanding shares of Series BB Preferred Stock

for all past dividend periods shall have been paid in full or declared and a sufficient sum set apart for payment thereof; provided, however, that any moneys theretofore

deposited in any sinking fund with respect to any preferred stock of the Corporation in compliance with the provisions of such sinking fund may thereafter be applied to the

purchase or redemption of such preferred stock in accordance with the terms of such sinking fund regardless of whether at the time of such application all dividends payable

on all outstanding shares of Series BB Preferred Stock for all past dividend periods shall have been paid in full or declared and a sufficient sum set apart for payment thereof.

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(3) All dividends declared on shares of Series BB Preferred Stock and any other class of preferred stock or series thereof ranking on a parity as to dividends

with the Series BB Preferred Stock shall be declared pro rata, so that the amounts of dividends declared on the Series BB Preferred Stock and such other preferred stock for

the same dividend period, or for the dividend period of the Series BB Preferred Stock ending within the dividend period of such other stock, shall, in all cases, bear to each

other the same ratio that accrued dividends on the shares of Series BB Preferred Stock and such other stock bear to each other.

C. Liquidation Preference.

(1) In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, the holders of Series BB

Preferred Stock shall be entitled to receive out of the assets of the Corporation available for distribution to shareholders an amount equal to $25 per share plus an amount

equal to accrued and unpaid dividends thereon to and including the date of such distribution, and no more, before any distribution shall be made to the holders of any class of

stock of the Corporation ranking junior to the Series BB Preferred Stock as to the distribution of assets.

(2) In the event the assets of the Corporation available for distribution to shareholders upon any liquidation, dissolution or winding up of the affairs of the

Corporation, whether voluntary or involuntary, shall be insufficient to pay in full the amounts payable with respect to the Series BB Preferred Stock and any other shares of

preferred stock of the Corporation ranking on a parity with the Series BB Preferred Stock as to the distribution of assets, the holders of Series BB Preferred Stock and the

holders of such other preferred stock shall share ratably in

any distribution of assets of the Corporation in proportion to the full respective preferential amounts to which they are entitled.

(3) The merger or consolidation of the Corporation into or with any other corporation, the merger or consolidation of any other corporation into or with the

Corporation or the sale of the assets of the Corporation substantially as an entirety shall not be deemed a liquidation, dissolution or winding up of the affairs of the

Corporation within the meaning of this paragraph C.

D. Redemption.

(1) The Corporation, at its option, may redeem all or any shares of the Series BB Preferred Stock at any time at a redemption price (the “Redemption Price”)

consisting of the sum of (i) $25 per share and (ii) an amount equal to accrued and unpaid dividends thereon to and including the date of redemption.

(2) If less than all the outstanding shares of Series BB Preferred Stock are to be redeemed, the shares to be redeemed shall be selected pro rata as nearly as

practicable or by lot, as the Board of Directors may determine.

(3) Notice of any redemption shall be given by first class mail, postage prepaid, mailed not less than 60 nor more than 90 days prior to the date fixed for

redemption to the holders of record of the shares of Series BB Preferred Stock to be redeemed, at their respective addresses appearing on the books of the Corporation. Notice

so mailed shall be conclusively presumed to have been duly given whether or not actually received. Such notice shall state: (1) the date fixed for redemption; (2) the

Redemption Price; (3) the right of the holders of Series BB Preferred Stock to convert such stock into Common Stock until the close of business on the 15th day prior to the

redemption date (or the next succeeding business day, if the 15th day is not a business day); (4) if no less than all the shares held by such holder are to be redeemed, the

number of shares to be redeemed from such holder; and (5) the place(s) where certificates for such shares are to be surrendered for payment of the Redemption Price. If such

notice is mailed as aforesaid, and if on or before the date fixed for redemption funds sufficient to redeem the shares called for redemption are set aside by the Corporation in

trust for the account of the holders of the shares to be redeemed, notwithstanding the fact that any certificate for shares called for redemption shall not have been surrendered

for cancellation, on and after the redemption date the shares represented thereby so called for redemption shall be deemed to be no longer outstanding, dividends thereon shall

cease to accrue, and all rights of the holders of such shares as shareholders of the corporation shall cease, except the right to receive the Redemption Price, without interest,

upon surrender of the certificate(s) representing such shares. Upon surrender in accordance with the aforesaid notice of the certificate(s) for any shares so redeemed (duly

endorsed or accompanied by appropriate instruments of transfer, if so required by the Corporation in such notice), the holders of record of such shares shall be entitled to

receive the Redemption Price, without interest.

(4) At the option of the Corporation, if notice of redemption is mailed as aforesaid, and if prior to the date fixed for redemption funds sufficient to pay in full the

Redemption Price are deposited in trust, for the account of the holders of the shares to be redeemed, with a bank or trust company named in such notice doing business in the

Borough of Manhattan,

the City of New York, State of New York or the City of Charlotte, State of North Carolina and having capital, surplus and undivided profits of at least $3 million, which bank

or trust company also may be the Transfer Agent and/or Paying Agent for the Series BB Preferred Stock, notwithstanding the fact that any certificate for shares called for

redemption shall not have been surrendered for cancellation, on and after such date of deposit the shares represented thereby so called for redemption shall be deemed to be no

longer outstanding, and all rights of the holders of such shares as shareholders of the Corporation shall cease, except the right of the holders thereof to convert such shares in

accordance with the provisions of paragraph F at any time prior

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to the close of business on the 15th day prior to the redemption date (or the next succeeding business day, if the 15th day is not a business day), and the right of the holders

thereof to receive out of the funds so deposited in trust the Redemption Price, without interest, upon surrender of the certificate(s) representing such shares. Any funds so

deposited with such bank or trust company in respect of such shares of Series BB Preferred Stock converted before the close of business on the 15th day prior to the

redemption date (or the next succeeding business day, if the 15th day is not a business day) shall be returned to the Corporation upon such conversion. Any funds so deposited

with such a bank or trust company which shall remain unclaimed by the holders of shares called for redemption at the end of six years after the redemption date shall be repaid

to the Corporation, on demand, and thereafter the holder of any such shares shall look only to the Corporation for the payment, without interest, of the Redemption Price.

(5) Any provisions of paragraph D or E to the contrary notwithstanding, in the event that any quarterly dividend payable on the Series BB Preferred Stock shall

be in arrears and until all such dividends in arrears shall have been paid or declared and set apart for payment, the Corporation shall not redeem any shares of Series BB

Preferred Stock unless all outstanding shares of Series BB Preferred Stock are simultaneously redeemed and shall not purchase or otherwise acquire any shares of Series BB

Preferred Stock except in accordance with a purchase offer made by the Corporation on the same terms to all holders of record of Series BB Preferred Stock for the purchase

of all outstanding shares thereof.

E. Purchase by the Corporation.

(1) Except as provided in paragraph D(5), the Corporation shall be obligated to purchase shares of Series BB Preferred Stock tendered by the holder thereof for

purchase hereunder, at a purchase price consisting of the sum of (i) $25 per share and (ii) an amount equal to accrued and unpaid dividends thereon to and including the date

of purchase. In order to exercise his right to require the Corporation to purchase his shares of Series BB Preferred Stock, the holder thereof shall surrender the Certificate(s)

therefor duly endorsed if the Corporation shall so require or accompanied by appropriate instruments of transfer satisfactory to the Corporation, at the office of the Transfer

Agent(s) for the Series BB Preferred Stock, or at such other office as may be designated by the Corporation, together with written notice that such holder irrevocably elects to

sell such shares to the Corporation. Shares of Series BB Preferred Stock shall be deemed to have been purchased by the Corporation immediately prior to the close of business

on the date such shares are tendered for sale to the Corporation and notice of election to sell the same is received by the Corporation in accordance with the foregoing

provisions. As of such date the shares so tendered for sale shall be deemed to be no longer outstanding, dividends thereon shall cease to

accrue and all rights of the holder of such shares as a shareholder of the Corporation shall cease, except the right to receive the purchase price.

F. Conversion Rights.

The holders of shares of Series BB Preferred Stock shall have the right, at their option, to convert such shares into shares of Common Stock on the following

terms and conditions:

(1) Shares of Series BB Preferred Stock shall be convertible at any time into fully paid and nonassessable shares of Common Stock (calculated as to each

conversion to the nearest 1/1,000 of a share) at the initial rate of 6.17215 shares of Common Stock for each share of Series BB Preferred Stock surrendered for conversion

(the “Conversion Rate”). The Conversion Rate shall be subject to adjustment from time to time as hereinafter provided. No payment or adjustment shall be made on account

of any accrued and unpaid dividends on shares of Series BB Preferred Stock surrendered for conversion prior to the record date for the determination of shareholders entitled

to such dividends or on account of any dividends on the Common Stock issued upon such conversion subsequent to the record date for the determination of shareholders

entitled to such dividends. If any shares of Series BB Preferred Stock shall be called for redemption, the right to convert the shares designated for redemption shall terminate

at the close of business on the 15th day prior to the redemption date (or the next succeeding business day, if the 15th day is not a business day) unless default be made in the

payment of the Redemption Price. In the event of default in the payment of the Redemption Price, the right to convert the shares designated for redemption shall terminate at

the close of business on the business day immediately preceding the date that such default is cured.

(2) In order to convert shares of Series BB Preferred Stock into Common Stock, the holder thereof shall surrender the certificate(s) therefor, duly endorsed if the

Corporation shall so require, or accompanied by appropriate instruments of transfer satisfactory to the Corporation, at the office of the Transfer Agent(s) for the Series BB

Preferred Stock, or at such other office as may be designated by the Corporation, together with written notice that such holder irrevocably elects to convert such shares. Such

notice shall also state the name(s) and address(es) in which such holder wishes the certificate(s) for the shares of Common Stock issuable upon conversion to be issued. As

soon as practicable after receipt of the certificate(s) representing the shares of Series BB Preferred Stock to be converted and the notice of election to convert the same, the

Corporation shall issue and deliver at said office a certificate or certificates for the number of whole shares of Common Stock issuable upon conversion of the shares of Series

BB Preferred Stock surrendered for conversion, together with a cash payment in lieu of any fraction of a share, as hereinafter provided, to the person(s) entitled to receive the

same. Shares of Series BB Preferred Stock shall be deemed to have been converted immediately prior to the close of business on the date such shares are surrendered for

13

conversion and notice of election to convert the same is received by the Corporation in accordance with the foregoing provisions, and the person(s) entitled to receive the

Common Stock issuable upon such conversion shall be deemed for all purposes as record holder(s) of such Common Stock as of such date.

(3) No fractional shares of Common Stock shall be issued upon conversion of any shares of Series BB Preferred Stock. If more than one share of Series BB

Preferred Stock is surrendered at one time by the same holder, the number of full shares issuable upon conversion

thereof shall be computed on the basis of the aggregate number of shares so surrendered. If the conversion of any shares of Series BB Preferred Stock results in a fractional

share of Common Stock, the Corporation shall pay cash in lieu thereof in an amount equal to such fraction multiplied times the closing price of the Common Stock on the date

on which the shares of Series BB Preferred Stock were duly surrendered for conversion, or if such date is not a trading date, on the next succeeding trading date. The closing

price of the Common Stock for any day shall mean the last reported sales price regular way on such day or, in case no such sale takes place on such day, the average of the

reported closing bid and asked prices, regular way, on the New York Stock Exchange, or, if the Common Stock is not then listed on such Exchange, on the principal national

securities exchange on which the Common Stock is listed for trading, or, if not then listed for trading on any national securities exchange, the average of the closing bid and

asked prices of the Common Stock as furnished by the National Quotation Bureau, Inc., or if the National Quotation Bureau, Inc. ceases to furnish such information, by a

comparable independent securities quotation service.

(4) In the event the Corporation shall at any time (i) pay a dividend or make a distribution to holders of Common Stock in shares of Common Stock,

(ii) subdivide its outstanding shares of Common Stock into a larger number of shares, or (iii) combine its outstanding shares of Common Stock into a smaller number of

shares, the Conversion Rate in effect at the time of the record date for such dividend or distribution or the effective date of such subdivision or combination shall be adjusted

so that the holder of any shares of Series BB Preferred Stock surrendered for conversion after such record date or effective date shall be entitled to receive the number of

shares of Common Stock which he would have owned or have been entitled to receive immediately following such record date or effective date had such shares of Series BB

Preferred Stock been converted immediately prior thereto.

(5) Whenever the Conversion Rate shall be adjusted as herein provided (i) the Corporation shall forthwith keep available at the office of the Transfer Agent(s)

for the Series BB Preferred Stock a statement describing in reasonable detail the adjustment, the facts requiring such adjustment and the method of calculation used; and

(ii) the Corporation shall cause to be mailed by first class mail, postage prepaid, as soon as practicable to each holder of record of shares of Series BB Preferred Stock a notice

stating that the Conversion Rate has been adjusted and setting forth the adjusted Conversion Rate.

(6) In the event of any consolidation of the Corporation with or merger of the Corporation into any other corporation (other than a merger in which the

Corporation is the surviving corporation) or a sale of the assets of the Corporation substantially as an entirety, the holder of each share of Series BB Preferred Stock shall have

the right, after such consolidation, merger or sale to convert such share into the number and kind of shares of stock or other securities and the amount and kind of property

receivable upon such consolidation, merger or sale by a holder of the number of shares of Common Stock issuable upon conversion of such share of Series BB Preferred

Stock immediately prior to such consolidation, merger or sale. Provision shall be made for adjustments in the Conversion Rate which shall be as nearly equivalent as may be

practicable

to the adjustments provided for in paragraph F(4). The provisions of this paragraph F(6) shall similarly apply to successive consolidations, mergers and sales.

(7) The Corporation shall pay any taxes that may be payable in respect of the issuance of shares of Common Stock upon conversion of shares of Series BB

Preferred Stock, but the Corporation shall not be required to pay any taxes which may be payable in respect of any transfer involved in the issuance of shares of Common

Stock in a name other than that in which the shares of Series BB Preferred Stock so converted are registered,, and the Corporation shall not be required to issue or deliver any

such shares unless and until the person(s) requesting such issuance shall have paid to the Corporation the amount of any such taxes or shall have established to the satisfaction

of the Corporation that such taxes have been paid.

(8) The Corporation shall at all times reserve and keep available out of its authorized but unissued Common Stock the full number of shares of Common Stock

issuable upon the conversion of all shares of Series BB Preferred Stock then outstanding.

(9) In the event that:

(i) The Corporation shall declare a dividend or any other distribution on its Common Stock, payable otherwise than in cash out of retained earnings; or

(ii) The Corporation shall authorize the granting to the holders of its Common Stock of rights to subscribe for or purchase any shares of capital stock of any

class or of any other rights; or

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(iii) The Corporation shall propose to effect any consolidation of the Corporation with or merger of the Corporation with or into any other corporation or a

sale of the assets of the company substantially as an entirety which would result in an adjustment under paragraph F(6),

the Corporation shall cause to be mailed to the holders of record of Series BB Preferred Stock at least 20 days prior to the applicable date hereinafter specified a notice stating

(x) the date on which a record is to be taken for the purpose of such dividend, distribution or rights or, if a record is not to be taken, the date as of which the holders of

Common Stock of record to be entitled to such dividend, distribution or rights are to be determined or (y) the date on which such consolidation, merger or sale is expected to

become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or

other property deliverable upon such consolidation, merger or sale. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such dividend,

distribution, consolidation, merger or sale.

G. Voting Rights.

Holders of Series BB Preferred Stock shall have no voting rights except as required by law and as follows: in the event that any quarterly dividend payable on

the Series BB Preferred Stock is in arrears, the holders of Series BB Preferred Stock shall be entitled to vote together with the holders of Common Stock at the Corporation’s

next meeting of shareholders and at each

subsequent meeting of shareholders unless all dividends in arrears have been paid or declared and set apart for payment prior to the date of such meeting. For the purpose of

this paragraph G, each holder of Series BB Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which his

Series BB Preferred Stock is then convertible.

H. Reacquired Shares.

Shares of Series BB Preferred Stock converted, redeemed, or otherwise purchased or acquired by the Corporation shall be restored to the status of authorized

but unissued shares of preferred stock without designation as to series.

I. No Sinking Fund.

Shares of Series BB Preferred Stock are not subject to the operation of a sinking fund.

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(d) Pursuant to the authority conferred by this Article 3, the following series of Preferred Shares have been designated, each such series consisting of such number of shares,

with such voting powers and with such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions

thereof as are stated and expressed in the exhibit with respect to such series attached hereto as specified below and incorporated herein by reference:

Exhibit A Floating Rate Non-Cumulative Preferred Stock, Series E

Exhibit B Floating Rate Non-Cumulative Preferred Stock, Series F

Exhibit C Adjustable Rate Non-Cumulative Preferred Stock, Series G

Exhibit D 7.25% Non-Cumulative Perpetual Convertible Preferred Stock, Series L

Exhibit E Floating Rate Non-Cumulative Preferred Stock, Series 1

Exhibit F Floating Rate Non-Cumulative Preferred Stock, Series 2

Exhibit G Floating Rate Non-Cumulative Preferred Stock, Series 4

Exhibit H Floating Rate Non-Cumulative Preferred Stock, Series 5

Exhibit I Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series U

Exhibit J 6% Non-Cumulative Perpetual Preferred Stock, Series T

Exhibit K

Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series X

Exhibit L Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series Z

Exhibit M 6.500% Non-Cumulative Preferred Stock, Series Y

Exhibit N Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series AA

Exhibit O 6.200% Non-Cumulative Preferred Stock, Series CC

Exhibit P Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series DD

Exhibit Q 6.000% Non-Cumulative Preferred Stock, Series EE

Exhibit R Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series FF

Exhibit S 6.000% Non-Cumulative Preferred Stock, Series GG

Exhibit T 5.875% Non-Cumulative Preferred Stock, Series HH

Exhibit U Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series JJ

Exhibit V 5.375% Non-Cumulative Preferred Stock, Series KK

Exhibit W 5.000% Non-Cumulative Preferred Stock, Series LL

4. The address of the Corporation’s registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County

of New Castle. The name of the Corporation’s registered agent at such address is The Corporation Trust Company.

5. No holder of any stock of the Corporation of any class now or hereafter authorized shall have any preemptive right to purchase, subscribe for, or otherwise

acquire any shares of shares of stock of the Corporation of any class now or hereafter authorized, or any securities exchangeable for or convertible into any such shares, or any

warrants or other instruments evidencing rights or options to subscribe for, purchase or otherwise acquire any such shares whether such shares, securities, warrants or other

instruments be unissued, or issued and thereafter acquired by the Corporation.

6. To the fullest extent permitted by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended, a director of the

Corporation shall not be personally liable to the Corporation, its shareholders or otherwise for monetary damage for breach of his duty as a director. Any repeal or

modification of this Article shall be

16

prospective only and shall not adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such repeal or modification.

7. In furtherance and not in limitation of the powers conferred by law, the Board of Directors of the Corporation is expressly authorized and empowered to

make, alter and repeal the Bylaws of the Corporation by a majority vote at any regular or special meeting of the Board of Directors or by written consent, subject to the power

of the stockholders of the Corporation to alter or repeal any Bylaws made by the Board of Directors.

8. The Corporation reserves the right at any time from time to time to amend or repeal any provision contained in this Certificate of Incorporation, and to add

any other provisions authorized by the laws of the State of Delaware at the time in force; and all rights,

preferences and privileges conferred upon stockholders, directors or any other persons by and pursuant to this Certificate of Incorporation in its present form or as hereafter

amended are granted subject to the rights reserved in this Article.

9. Unless and except to the extent that the Bylaws of the Corporation shall so require, the election of directors of the Corporation need not be by written ballot.

10. Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of

stockholders of the Corporation or may be effected by consent in writing in lieu of a meeting of such stockholders only if consents are signed by all stockholders of the

Corporation entitled to vote on such action.

[Signature Page Follows ]

17

IN WITNESS WHEREOF, Bank of America Corporation has caused this Restated Certificate of Incorporation to be signed by its duly authorized officer this 27th

day of December, 2019.

BANK OF AMERICA CORPORATION

By: /s/ Ross E. Jeffries, Jr.

Name: Ross E. Jeffries, Jr.

Title: Deputy General Counsel and Corporate Secretary

18

Exhibit A

Floating Rate Non-Cumulative Preferred Stock, Series E

CERTIFICATE OF DESIGNATIONS

OF

FLOATING RATE NON-CUMULATIVE PREFERRED STOCK, SERIES E

OF

BANK OF AMERICA CORPORATION

Pursuant to Section 151 of the

General Corporation Law of the State of Delaware

Bank of America Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”), does hereby

certify that:

1. At a meeting duly convened and held on July 26, 2006, the Board of Directors of the Corporation (the “Board”) duly adopted resolutions (a) authorizing the issuance

and sale by the Corporation of one or more series of the Corporation’s preferred stock, and (b) appointing a Committee (the “Committee”) of the Board to act on behalf of the

Board in establishing the number of authorized shares, the dividend rate and other powers, designations, preferences and rights of the preferred stock.

2. Thereafter, on October 30, 2006, the Committee duly adopted the following resolution by written consent:

“RESOLVED, that the powers, designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions

thereof, of the Corporation’s Floating Rate Non-Cumulative Preferred Stock, Series E, including those established by the Board and the number of authorized shares and

dividend rate established hereby, are authorized and approved as set forth in Exhibit A hereto, which is incorporated herein by reference.”

IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation by its duly authorized officer this 3rd day of November, 2006.

BANK OF AMERICA CORPORATION

/s/ TERESA M. BRENNER

By:

Name: Teresa M. Brenner

Title: Associate General Counsel

19

EXHIBIT A

TO

CERTIFICATE OF DESIGNATIONS

OF

FLOATING RATE NON-CUMULATIVE PREFERRED STOCK, SERIES E

OF

BANK OF AMERICA CORPORATION

Section 1. Designation. The designation of the series of preferred stock shall be “Floating Rate Non-Cumulative Preferred Stock, Series E” (the “Series E Preferred

Stock”). Each share of Series E Preferred Stock shall be identical in all respects to every other share of Series E Preferred Stock. Series E Preferred Stock will rank equally

with Parity Stock, if any, will rank senior to Junior Stock and will rank junior to Senior Stock, if any, with respect to the payment of dividends and the distribution of assets in

the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.

Section 2. Number of Shares. The number of authorized shares of Series E Preferred Stock shall be 85,100. That number from time to time may be increased (but not

in excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series E Preferred Stock then outstanding) by

further resolution duly adopted by the Board of Directors of the Corporation, the Committee or any other duly authorized committee of the Board of Directors of the

Corporation and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the

case may be, has been so authorized. The Corporation shall have the authority to issue fractional shares of Series E Preferred Stock.

Section 3. Definitions. As used herein with respect to Series E Preferred Stock:

“Business Day” means each Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions are not authorized or obligated by law, regulation or

executive order to close in New York, New York or in Charlotte, North Carolina.

“Calculation Agent” shall mean The Bank of New York Trust Company, N.A., or such other bank or entity as may be appointed by the Corporation to act as calculation

agent for the Series E Preferred Stock.

“Depositary Company” shall have the meaning set forth in Section 6(d) hereof.

“Dividend Determination Date” shall have the meaning set forth below in the definition of “Three-Month LIBOR.”

“Dividend Payment Date” shall have the meaning set forth in Section 4(a) hereof.

“Dividend Period” shall have the meaning set forth in Section 4(a) hereof.

“DTC” means The Depository Trust Company, together with its successors and assigns.

“Junior Stock” means the Corporation’s common stock and any other class or series of stock of the Corporation now existing or hereafter authorized over which Series

E Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up

of the Corporation.

“London Banking Day” means any day on which commercial banks are open for general business (including dealings in deposits in U.S. dollars) in London, England.

“Parity Stock” means (a) the Corporation’s 7% Cumulative Redeemable Preferred Stock, Series B, (b) the Corporation’s 6.204% Non-Cumulative Preferred Stock,

Series D and (c) any other class or series of stock of the Corporation hereafter authorized that ranks on a par with the Series E Preferred Stock in the payment of dividends and

in the distribution of assets on any liquidation, dissolution or winding up of the Corporation.

“Senior Stock” means any class or series of stock of the Corporation now existing or hereafter authorized which has preference or priority over the Series E Preferred

Stock as to the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Corporation.

20

“Series E Preferred Stock” shall have the meaning set forth in Section 1 hereof.

“Telerate Page 3750” means the display page so designated on the Moneyline/Telerate Service (or any other page as may replace that page on that service, or any other

service as may be nominated as the information vendor, for the purpose of displaying rates or prices comparable to the London Interbank Offered Rate for U.S. dollar

deposits).

“T

hree-Month LIBOR” means, with respect to any Dividend Period, the offered rate (expressed as a percentage per annum) for deposits in U.S. dollars for a three-

month period commencing on the first day of that Dividend Period that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the second London Banking Day

immediately preceding the first day of that Dividend Period (the “Dividend Determination Date”). If such rate does not appear on Telerate Page 3750, Three-Month LIBOR

will be determined on the basis of the rates at which deposits in U.S. dollars for a three-month period commencing on the first day of that Dividend Period and in a principal

amount of not less than $1,000,000 are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by the

Corporation, at approximately 11:00 A.M., London time on the second London Banking Day immediately preceding the first day of that Dividend Period. The Calculation

Agent will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, Three-Month LIBOR with

respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest .00001 of 1%) of such quotations. If fewer than two quotations are

provided, Three-Month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest .00001 of 1%) of the rates quoted

by three major banks in New York City selected by the Corporation, at approximately 11:00 a.m., New York City time, on the first day of that Dividend Period for loans in

U.S. dollars to leading European banks for a three-month period commencing on the first day of that Dividend Period and in a principal amount of not less than $1,000,000.

However, if fewer than three banks selected by the Corporation to provide quotations are not quoting as described above, Three-Month LIBOR for that Dividend Period will

be the same as Three-Month LIBOR as determined for the previous Dividend Period, or in the case of the first Dividend Period, the most recent rate that could have been

determined in accordance with the first sentence of this paragraph had Series E Preferred Stock been outstanding. The calculation agent’s establishment of Three-Month

LIBOR and calculation of the amount of dividends for each Dividend Period will be on file at the principal offices of the Corporation, will be made available to any holder of

Series E Preferred Stock upon request and will be final and binding in the absence of manifest error.

Section 4. Dividends.

(a) Rate. Holders of Series E Preferred Stock shall be entitled to receive, if, as and when declared by the Board of Directors of the Corporation or any duly authorized

committee of the Board of Directors of the Corporation, but only out of assets legally available therefor, non-cumulative cash dividends on the liquidation preference of

$25,000 per share of Series E Preferred Stock, and no more, payable quarterly in arrears on each February 15, May 15, August 15 and November 15; provided, however, if

any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day, unless that

day falls in the next calendar year, in which case payment of such dividend will occur on the immediately preceding Business Day (in either case, without any interest or other

payment in respect of such delay) (each such day on which dividends are payable a “Dividend Payment Date”). The period from and including the date of issuance of the

Series E Preferred Stock or any Dividend Payment Date to but excluding the next Dividend Payment Date is a “Dividend Period.” Dividends on each share of Series E

Preferred Stock will accrue on the liquidation preference of $25,000 per share at a rate per annum equal to the greater of (i) Three-Month LIBOR plus a spread of 0.35% and

(ii) 4.00%. The record date for payment of dividends on the Series E Preferred Stock shall be the last Business Day of the calendar month immediately preceding the month

during which the Dividend Payment Date falls. The amount of dividends payable shall be computed on the basis of a 360-day year and the actual number of days elapsed in a

Dividend Period.

(b) Non-Cumulative Dividends. Dividends on shares of Series E Preferred Stock shall be non-cumulative. To the extent that any dividends payable on the shares of

Series E Preferred Stock on any Dividend Payment Date are not declared and paid, in full or otherwise, on such Dividend Payment Date, then such unpaid dividends shall not

cumulate and shall cease to accrue and be payable and the Corporation shall have no obligation to pay, and the holders of Series E Preferred Stock shall have no right to

receive, dividends accrued for such Dividend Period after the Dividend Payment Date for such Dividend Period or interest with respect to such dividends, whether or not

dividends are declared for any subsequent Dividend Period with respect to Series E Preferred Stock, Parity Stock, Junior Stock or any other class or series of authorized

preferred stock of the Corporation.

(c) Priority of Dividends. So long as any share of Series E Preferred Stock remains outstanding, (i) no dividend shall be declared or paid or set aside for payment and

no distribution shall be declared or made or set aside for payment on any Junior Stock, other than a dividend payable solely in shares of Junior Stock, (ii) no shares of Junior

Stock shall be repurchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly (other than as a result of a

21

reclassification of Junior Stock for or into other Junior Stock, or the exchange or conversion of one share of Junior Stock for or into another share of Junior Stock, and other

than through the use of the proceeds of a substantially contemporaneous sale of other shares of Junior Stock), nor shall any monies be paid to or made available for a sinking

fund for the redemption of any such Junior Stock by the Corporation and (iii) no shares of Parity Stock shall be repurchased, redeemed or otherwise acquired for consideration

by the Corporation otherwise than pursuant to pro rata offers to purchase all, or a pro rata portion, of the Series E Preferred Stock and such Parity Stock except by conversion

into or exchange for Junior Stock, in each case unless full dividends on all outstanding shares of Series E Preferred Stock for the then-current Dividend Period have been paid

in full or declared and a sum sufficient for the payment thereof set aside. The foregoing limitations do not apply to purchases or acquisitions of the Corporation’s Junior Stock

pursuant to any employee or director incentive or benefit plan or arrangement (including any employment, severance or consulting agreement) of the Corporation or any

subsidiary of the Corporation heretofore or hereafter adopted. Subject to the succeeding sentence, for so long as any shares of Series E Preferred Stock remain outstanding, no

dividends shall be declared or paid or set aside for payment on any Parity Stock for any period unless full dividends on all outstanding shares of Series E Preferred Stock for

the then-current Dividend Period have been paid in full or declared and a sum sufficient for the payment thereof set aside. To the extent the Corporation declares dividends on

the Series E Preferred Stock and on any Parity Stock but cannot make full payment of such declared dividends, the Corporation will allocate the dividend payments on a pro

rate basis among the holders of the shares of Series E Preferred Stock and the holders of any Parity Stock. For purposes of calculating the pro rata allocation of partial

dividend payments, the Corporation will allocate dividend payments based on the ratio between the then-current dividend payments due on the shares of Series E Preferred

Stock and the aggregate of the current and accrued dividends due on the Parity Stock. No interest will be payable in respect of any dividend payment on shares of Series E

Preferred Stock that may be in arrears. Subject to the foregoing, and not otherwise, such dividends (payable in cash, stock or otherwise) as may be determined by the Board of

Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may be declared and paid on any Junior Stock from time to time

out of any assets legally available therefor, and the shares of Series E Preferred Stock shall not be entitled to participate in any such dividend.

Section 5. Liquidation Rights.

(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, holders of Series E Preferred Stock

shall be entitled, out of assets legally available therefor, before any distribution or payment out of the assets of the Corporation may be made to or set aside for the holders of

any Junior Stock and subject to the rights of the holders of any class or series of securities ranking senior to or on parity with Series E Preferred Stock upon liquidation and the

rights of the Corporation’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $25,000 per share, plus any

dividends which have been declared but not yet paid, without accumulation of any undeclared dividends, to the date of liquidation. The holders of Series E Preferred Stock

shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation other than

what is expressly provided for in this Section 5.

(b) Partial Payment. If the assets of the Corporation are not sufficient to pay in full the liquidation preference plus any dividends which have been declared but not yet

paid to all holders of Series E Preferred Stock and all holders of any Parity Stock, the amounts paid to the holders of Series E Preferred Stock and to the holders of all Parity

Stock shall be pro rata in accordance with the respective aggregate liquidation preferences plus any dividends which have been declared but not yet paid of Series E Preferred

Stock and all such Parity Stock.

(c) Residual Distributions. If the liquidation preference plus any dividends which have been declared but not yet paid has been paid in full to all holders of Series E

Preferred Stock and all holders of any Parity Stock, the holders of Junior Stock shall be entitled to receive all remaining assets of the Corporation according to their respective

rights and preferences.

(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock,

securities or other consideration) of all or substantially all of the property and assets of the Corporation shall not be deemed a voluntary or involuntary dissolution, liquidation

or winding up of the affairs

of the Corporation, nor shall the merger, consolidation or any other business combination transaction of the Corporation into or with any other corporation or person or the

merger, consolidation or any other business combination transaction of any other corporation or person into or with the Corporation be deemed to be a voluntary or

involuntary dissolution, liquidation or winding up of the affairs of the Corporation.

Section 6. Redemption.

(a) Optional Redemption. The Corporation, at the option of its Board of Directors or any duly authorized committee of the Board of Directors of the Corporation, may

redeem out of funds legally available therefor, in whole or in part, the shares of Series E Preferred Stock at the time outstanding, at any time on any Dividend Payment Date

on or after the Dividend Payment

22

Date on November 15, 2011, upon notice given as provided in Section 6(b) below. The redemption price for shares of Series E Preferred Stock shall be $25,000 per share plus

dividends that have been declared but not paid.

(b) Notice of Redemption. Notice of every redemption of shares of Series E Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the

holders of record of such shares to be redeemed at their respective last addresses appearing on the stock register of the Corporation. Such mailing shall be at least 30 days and

not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given,

whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of

Series E Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series E Preferred Stock. Each

notice shall state (i) the redemption date; (ii) the number of shares of Series E Preferred Stock to be redeemed and, if fewer than all the shares held by such holder are to be

redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where the certificates for such shares are to be

surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on the redemption date. Notwithstanding the

foregoing, if the Series E Preferred Stock is held in book-entry form through DTC, the Corporation may give such notice in any manner permitted by DTC.

(c) Partial Redemption. In case of any redemption of only part of the shares of Series E Preferred Stock at the time outstanding, the shares of Series E Preferred Stock

to be redeemed shall be selected either pro rata from the holders of record of Series E Preferred Stock in proportion to the number of Series E Preferred Stock held by such

holders or by lot or in such other manner as the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may

determine to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors of the Corporation, the Committee or any duly authorized committee of

the Board of Directors shall have full power and authority to prescribe the terms and conditions upon which shares of Series E Preferred Stock shall be redeemed from time to

time.

(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the

redemption have been set aside by the Corporation, separate and apart from its other assets, in trust for the pro rata benefit of the holders of the shares called for redemption,

so as to be and continue to be available therefor, or deposited by the Corporation with a bank or trust company selected by the Board of Directors of the Corporation or any

duly authorized committee of the Board of Directors (the “Depositary Company”) in trust for the pro rata benefit of the holders of the shares called for redemption, then,

notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for

redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue after such

redemption date, and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive

the amount payable on such redemption from such bank or trust company at any time after the redemption date from the funds so deposited, without interest. The Corporation

shall be entitled to receive, from time to time, from the Depositary Company any interest accrued on such funds, and the holders of any shares called for redemption shall

have no claim to any such interest. Any funds so deposited and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released

or repaid to the Corporation, and in the event of such repayment to the Corporation, the holders of record of the shares so called for redemption shall be deemed to be

unsecured creditors of the Corporation for an amount equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Corporation,

but shall in no event be entitled to any interest.

Section 7. Voting Rights.

(a) General. The holders of Series E Preferred Stock shall not be entitled to vote on any matter except as set forth in paragraph 7(b) below or as required by Delaware

law.

(b) Special Voting Right.

(i) Voting Right. If and whenever dividends on the Series E Preferred Stock or any other class or series of preferred stock that ranks on parity with Series E

Preferred Stock as to payment of dividends, and upon which voting rights equivalent to those granted by this Section 7(b) have been conferred and are exercisable, have not

been paid in an aggregate amount equal, as to any class or series, to at least six quarterly Dividend Periods (whether consecutive or not), the number of directors constituting

the Board of Directors of the Corporation shall be increased by two, and the holders of the Series E Preferred Stock (together with holders of any class of the Corporation’s

authorized preferred stock having equivalent voting rights, whether or not the holders of the such preferred stock would be entitled to vote for the election of directors if such

default in dividends did not exist), shall have the right, voting separately as a single class without regard to series, to the exclusion of the holders of common stock, to elect

two directors of the Corporation to fill such newly created directorships (and to fill any vacancies in the terms of such directorships), provided that the election of such

directors must not cause the Corporation to violate the corporate governance requirements of the New York Stock Exchange (or other exchange on which the Corporation’s

securities may be listed) that listed companies must have a majority of independent directors and further

23

provided that the Board of Directors of the Corporation shall at no time include more than two such directors. Each such director elected by the holders of shares of Series E

Preferred Stock and any other class or series of preferred stock that ranks on parity with the Series E Preferred Stock as to payment of dividends is a “Preferred Director.”

(ii) Election. The election of the Preferred Directors will take place at any annual meeting of stockholders or any special meeting of the holders of Series E

Preferred Stock and any other class or series of our stock that ranks on parity with Series E Preferred Stock as to payment of dividends and for which dividends have not been

paid, called as provided herein. At any time after the special voting power has vested pursuant to Section 7(b)(i) above, the secretary of the Corporation may, and upon the

written request of any holder of Series E Preferred Stock (addressed to the secretary at the Corporation’s principal office) must (unless such request is received less than 90

days before the date fixed for the next annual or special meeting of the stockholders, in which event such election shall be held at such next annual or special meeting of

stockholders), call a special meeting of the holders of Series E Preferred Stock and any other class or series of preferred stock that ranks on parity with Series E Preferred

Stock as to payment of dividends and for which dividends have not been paid for the election of the two directors to be elected by them as provided in Section 7(b)(iii) below.

The Preferred Directors shall each be entitled to one vote per director on any matter.

(iii) Notice of Special Meeting. Notice for a special meeting will be given in a similar manner to that provided in the Corporation’s by-laws for a special

meeting of the stockholders. If the secretary of the Corporation does not call a special meeting within 20 days after receipt of any such request, then any holder of Series E

Preferred Stock may (at our expense) call such meeting, upon notice as provided in this Section 7(b)(iii), and for that purpose will have access to the stock register of the

Corporation. The Preferred Directors elected at any such special meeting will hold office until the next annual meeting of our stockholders unless they have been previously

terminated or removed pursuant to Section 7(b)(iv). In case any vacancy in the office of a Preferred Director occurs (other than prior to the initial election of the Preferred

Directors), the vacancy may be filled by the written consent of the Preferred Director remaining in office, or if none remains in office, by the vote of the holders of the Series

E Preferred Stock (together with holders of any other class of the Corporation’s authorized preferred stock having equivalent voting rights, whether or not the holders of such

preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) to serve until the next annual meeting of the stockholders.

(iv) Termination; Removal. Whenever full dividends have been paid regularly on the Series E Preferred Stock and any other class or series of preferred stock

that ranks on parity with Series E Preferred Stock as to payment of dividends, if any, for at least four quarterly Dividend Periods, then the right of the holders of Series E

Preferred Stock to elect the Preferred Directors will cease (but subject always to the same provisions for the vesting of the special voting rights in the case of any similar non-

payment of dividends in respect of future Dividend Periods). The terms of office of the Preferred Directors will immediately terminate and the number of directors

constituting the board of directors will be reduced accordingly. Any Preferred Director may be removed at any time without cause by the holders of record of a majority of the

outstanding shares of the Series E Preferred Stock (together with holders of any other class of the Corporation’s authorized preferred stock having equivalent voting rights,

whether or not the holders of such preferred stock would be entitled to vote for the election of directors if such default in dividends did not exist) when they have the voting

rights described in this Section 7(b).

Section 8. Preemption and Conversion. The holders of Series E Preferred Stock shall not have any rights of preemption or rights to convert such Series E Preferred

Stock into shares of any other class of capital stock of the Corporation.

Section 9. Rank. Notwithstanding anything set forth in the Certificate of Incorporation or this Certificate of Designations to the contrary, the Board of Directors of the

Corporation, the Committee or any authorized committee of the Board of Directors of the Corporation, without the vote of the holders of the Series E Preferred Stock, may

authorize and issue additional shares of Junior Stock, Parity Stock or any class or series of Senior Stock or any other securities ranking senior to the Series E Preferred Stock

as to dividends and the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.

Section 10. Repurchase. Subject to the limitations imposed herein, the Corporation may purchase and sell Series E Preferred Stock from time to time to such extent, in

such manner, and upon such terms as the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may determine;

provided, however, that the Corporation shall not use any of its funds for any such purchase when there are reasonable grounds to believe that the Corporation is, or by such

purchase would be, rendered insolvent.

Section 11. Unissued or Reacquired Shares. Shares of Series E Preferred Stock not issued or which have been issued and converted, redeemed or otherwise

purchased or acquired by the Corporation shall be restored to the status of authorized but unissued shares of preferred stock without designation as to series.

Section 12. No Sinking Fund. Shares of Series E Preferred Stock are not subject to the operation of a sinking fund.

24

Exhibit B

Floating Rate Non-Cumulative Preferred Stock, Series F

CERTIFICATE OF DESIGNATIONS

OF

FLOATING RATE NON-CUMULATIVE PREFERRED STOCK, SERIES F

OF

BANK OF AMERICA CORPORATION

Pursuant to Section 151 of the

General Corporation Law of the State of Delaware

Bank of America Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”), does hereby

certify that:

1. At a meeting duly convened and held on April 26, 2006, the Board of Directors of the Corporation (the “Board”) duly adopted resolutions (a) authorizing the issuance

and sale by the Corporation of one or more series of the Corporation’s preferred stock, and (b) appointing a Committee (the “Committee”) of the Board to act on behalf of the

Board in establishing the number of authorized shares, the dividend rate and other powers, designations, preferences and rights of the preferred stock.

2. Thereafter, on February 12, 2007, the Committee duly adopted the following resolution by written consent: “RESOLVED, that the powers, designations, preferences

and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the Corporation’s Floating Rate Non-Cumulative

Preferred Stock, Series F, including those established by the Board and the number of authorized shares and dividend rate established hereby, are authorized and approved

as set forth in Exhibit A hereto, which is incorporated herein by reference.”

IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation by its duly authorized officer this 15th day of February, 2007.

BANK OF AMERICA CORPORATION

/s/ TERESA M. BRENNER

By:

Name: Teresa M. Brenner

Title: Associate General Counsel

25

EXHIBIT A

TO

CERTIFICATE OF DESIGNATIONS

OF

FLOATING RATE NON-CUMULATIVE PREFERRED STOCK, SERIES F

OF

BANK OF AMERICA CORPORATION

Section 1. Designation. The designation of the series of preferred stock shall be “Floating Rate Non-Cumulative Preferred Stock, Series F” (the “Series F Preferred

Stock”). Each share of Series F Preferred Stock shall be identical in all respects to every other share of Series F Preferred Stock. Series F Preferred Stock will rank equally

with Parity Stock, if any, will rank senior to Junior Stock and will rank junior to Senior Stock, if any, with respect to the payment of dividends and the distribution of assets in

the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.

Section 2. Number of Shares. The number of authorized shares of Series F Preferred Stock shall be 7,001. That number from time to time may be increased (but not in

excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series F Preferred Stock then outstanding) by further

resolution duly adopted by the Board of Directors of the Corporation, the Committee or any other duly authorized committee of the Board of Directors of the Corporation and

by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has

been so authorized. The Corporation shall have the authority to issue fractional shares of Series F Preferred Stock.

Section 3. Definitions. As used herein with respect to Series F Preferred Stock:

“Business Day” means each Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions are not authorized or obligated by law, regulation or

executive order to close in New York, New York or in Charlotte, North Carolina.

“Calculation Agent” shall mean The Bank of New York Trust Company, N.A., or such other bank or entity as may be appointed by the Corporation to act as calculation

agent for the Series F Preferred Stock.

“Depositary Company” shall have the meaning set forth in Section 6(d) hereof.

“Dividend Determination Date” shall have the meaning set forth below in the definition of “Three-Month LIBOR.”

“Dividend Payment Date” shall have the meaning set forth in Section 4(a) hereof.

“Dividend Period” shall have the meaning set forth in Section 4(a) hereof.

“DTC” means The Depository Trust Company, together with its successors and assigns.

“Junior Stock” means the Corporation’s common stock and any other class or series of stock of the Corporation now existing or hereafter authorized over which Series F

Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of

the Corporation.

“London Banking Day” means any day on which commercial banks are open for general business (including dealings in deposits in U.S. dollars) in London, England.

“Parity Stock” means (a) the Corporation’s 7% Cumulative Redeemable Preferred Stock, Series B, (b) the Corporation’s 6.204% Non-Cumulative Preferred Stock,

Series D, (c) the Corporation’s Floating Rate Non-Cumulative Preferred Stock, Series E, (d) the Corporation’s Adjustable Rate Non-Cumulative Preferred Stock, Series G

and (e) any other class or series of stock of the Corporation hereafter authorized that ranks on a par with the Series F Preferred Stock in the payment of dividends or in the

distribution of assets on any liquidation, dissolution or winding up of the Corporation.

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“Senior Stock” means any class or series of stock of the Corporation now existing or hereafter authorized which has preference or priority over the Series F Preferred

Stock as to the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Corporation.

“Series F Preferred Stock” shall have the meaning set forth in Section 1 hereof.

“Telerate Page 3750” means the display page so designated on the Moneyline/Telerate Service (or any other page as may replace that page on that service, or any other

service as may be nominated as the information vendor, for the purpose of displaying rates or prices comparable to the London Interbank Offered Rate for U.S. dollar

deposits).

“Three-Month LIBOR” means, with respect to any Dividend Period, the offered rate (expressed as a percentage per annum) for deposits in U.S. dollars for a three-

month period commencing on the first day of that Dividend Period that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the second London Banking Day

immediately preceding the first day of that Dividend Period (the “Dividend Determination Date”). If such rate does not appear on Telerate Page 3750, Three-Month LIBOR

will be determined on the basis of the rates at which deposits in U.S. dollars for a three-month period commencing on the first day of that Dividend Period and in a principal

amount of not less than $1,000,000 are offered to prime banks in the London interbank market by four major banks in the London interbank market selected by the

Corporation, at approximately 11:00 a.m., London time on the second London Banking Day immediately preceding the first day of that Dividend Period. The Calculation

Agent will request the principal London office of each of such banks to provide a quotation of its rate. If at least two such quotations are provided, Three-Month LIBOR with

respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest .00001 of 1%) of such quotations. If fewer than two quotations are

provided, Three-Month LIBOR with respect to that Dividend Period will be the arithmetic mean (rounded upward if necessary to the nearest .00001 of 1%) of the rates quoted

by three major banks in New York City selected by the Corporation, at approximately 11:00 a.m., New York City time, on the first day of that Dividend Period for loans in

U.S. dollars to leading European banks for a three-month period commencing on the first day of that Dividend Period and in a

principal amount of not less than $1,000,000. However, if fewer than three banks selected by the Corporation to provide quotations are not quoting as described above, Three-

Month LIBOR for that Dividend Period will be the same as Three-Month LIBOR as determined for the previous Dividend Period, or in the case of the first Dividend Period,

the most recent rate that could have been determined in accordance with the first sentence of this paragraph had Series F Preferred Stock been outstanding. The Calculation

Agent’s establishment of Three-Month LIBOR and calculation of the amount of dividends for each Dividend Period will be on file at the principal offices of the Corporation,

will be made available to any holder of Series F Preferred Stock upon request and will be final and binding in the absence of manifest error.

Section 4. Dividends.

(a) Rate. Holders of Series F Preferred Stock shall be entitled to receive, if, as and when declared by the Board of Directors of the Corporation or any duly authorized

committee of the Board of Directors of the Corporation, but only out of assets legally available therefor, non-cumulative cash dividends on the liquidation preference of

$100,000 per share of Series F Preferred Stock, and no more, payable quarterly in arrears on each March 15, June 15, September 15 and December 15; provided, however, if

any such day is not a Business Day, then payment of any dividend otherwise payable on that date will be made on the next succeeding day that is a Business Day, unless that

day falls in the next calendar year, in which case payment of such dividend will occur on the immediately preceding Business Day (in either case, without any interest or other

payment in respect of such delay) (each such day on which dividends are payable a “Dividend Payment Date”). The period from and including the date of issuance of the

Series F Preferred Stock or any Dividend Payment Date to but excluding the next Dividend Payment Date is a “Dividend Period.” Dividends on each share of Series F

Preferred Stock will accrue on the liquidation preference of $100,000 per share for each Dividend Period (1) from the date of issuance to, but excluding, the Dividend

Payment Date in March 2012 (if issued prior to that date) at a rate per annum equal to Three-Month LIBOR plus a spread of 0.40% and (2) thereafter at a rate per annum

equal to the greater of (i) Three-Month LIBOR plus a spread of 0.40% and (ii) 4.00%. The record date for payment of dividends on the Series F Preferred Stock shall be the

last Business Day of the calendar month immediately preceding the month during which the Dividend Payment Date falls. The amount of dividends payable shall be

computed on the basis of a 360-day year and the actual number of days elapsed in a Dividend Period.

(b) Non-Cumulative Dividends. Dividends on shares of Series F Preferred Stock shall be non-cumulative. To the extent that any dividends payable on the shares of

Series F Preferred Stock on any Dividend Payment Date are not declared and paid, in full or otherwise, on such Dividend Payment Date, then such unpaid dividends shall not

cumulate and shall cease to accrue and be payable and the Corporation shall have no obligation to pay, and the holders of Series F Preferred Stock shall have no right to

receive, dividends accrued for such Dividend Period after the Dividend Payment Date for such Dividend Period or interest with respect to such dividends, whether or not

dividends are declared for any subsequent Dividend Period with respect to Series F Preferred Stock, Parity Stock, Junior Stock or any other class or series of authorized

preferred stock of the Corporation.

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(c) Priority of Dividends. So long as any share of Series F Preferred Stock remains outstanding, (i) no dividend shall be declared or paid or set aside for payment and

no distribution shall be declared or made or set aside for payment on any Junior Stock, other than a dividend payable solely in shares of Junior Stock, (ii) no shares of Junior

Stock shall be repurchased, redeemed or otherwise acquired for consideration by the Corporation, directly or indirectly (other than as a result of a reclassification of Junior

Stock for or into other Junior Stock, or the exchange or conversion of one share of Junior Stock for or into another share of Junior Stock, and other than through the use of the

proceeds of a substantially

contemporaneous sale of other shares of Junior Stock), nor shall any monies be paid to or made available for a sinking fund for the redemption of any such Junior Stock by the

Corporation and (iii) no shares of Parity Stock shall be repurchased, redeemed or otherwise acquired for consideration by the Corporation otherwise than pursuant to pro rata

offers to purchase all, or apro rata portion, of the Series F Preferred Stock and such Parity Stock except by conversion into or exchange for Junior Stock, in each case unless

full dividends on all outstanding shares of Series F Preferred Stock for the then-current Dividend Period have been paid in full or declared and a sum sufficient for the

payment thereof set aside. The foregoing limitations do not apply to purchases or acquisitions of the Corporation’s Junior Stock pursuant to any employee or director incentive

or benefit plan or arrangement (including any employment, severance or consulting agreement) of the Corporation or any subsidiary of the Corporation heretofore or hereafter

adopted. Subject to the succeeding sentence, for so long as any shares of Series F Preferred Stock remain outstanding, no dividends shall be declared or paid or set aside for

payment on any Parity Stock for any period unless full dividends on all outstanding shares of Series F Preferred Stock for the then-current Dividend Period have been paid in

full or declared and a sum sufficient for the payment thereof set aside. To the extent the Corporation declares dividends on the Series F Preferred Stock and on any Parity

Stock but cannot make full payment of such declared dividends, the Corporation will allocate the dividend payments on a pro rata basis among the holders of the shares of

Series F Preferred Stock and the holders of any Parity Stock. For purposes of calculating the pro rata allocation of partial dividend payments, the Corporation will allocate

dividend payments based on the ratio between the then-current dividend payments due on the shares of Series F Preferred Stock and the aggregate of the current and accrued

dividends due on the Parity Stock. No interest will be payable in respect of any dividend payment on shares of Series F Preferred Stock that may be in arrears. Subject to the

foregoing, and not otherwise, such dividends (payable in cash, stock or otherwise) as may be determined by the Board of Directors of the Corporation or any duly authorized

committee of the Board of Directors of the Corporation may be declared and paid on any Junior Stock from time to time out of any assets legally available therefor, and the

shares of Series F Preferred Stock shall not be entitled to participate in any such dividend.

Section 5. Liquidation Rights.

(a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, holders of Series F Preferred Stock

shall be entitled, out of assets legally available therefor, before any distribution or payment out of the assets of the Corporation may be made to or set aside for the holders of

any Junior Stock and subject to the rights of the holders of any class or series of securities ranking senior to or on parity with Series F Preferred Stock upon liquidation and the

rights of the Corporation’s depositors and other creditors, to receive in full a liquidating distribution in the amount of the liquidation preference of $100,000 per share, plus

any dividends which have been declared but not yet paid, without accumulation of any undeclared dividends, to the date of liquidation. The holders of Series F Preferred

Stock shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation

other than what is expressly provided for in this Section 5.

(b) Partial Payment. If the assets of the Corporation are not sufficient to pay in full the liquidation preference plus any dividends which have been declared but not yet

paid to all holders of Series F Preferred Stock and all holders of any Parity Stock, the amounts paid to the holders of Series F Preferred Stock and to the holders of all Parity

Stock shall be pro rata in accordance with the respective aggregate liquidation preferences plus any dividends which have been declared but not yet paid of Series F Preferred

Stock and all such Parity Stock.

(c) Residual Distributions. If the liquidation preference plus any dividends which have been declared but not yet paid has been paid in full to all holders of Series F

Preferred Stock and all holders of any Parity Stock, then the holders of Junior Stock shall be entitled to receive all remaining assets of the Corporation according to their

respective rights and preferences.

(d) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock,

securities or other consideration) of all or substantially all of the property and assets of the Corporation shall not be deemed a voluntary or involuntary dissolution, liquidation

or winding up of the affairs of the Corporation, nor shall the merger, consolidation or any other business combination transaction of the Corporation into or with any other

corporation or person or the merger, consolidation or any other business combination transaction of any other corporation or person into or with the Corporation be deemed to

be a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation.

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Section 6. Redemption.

(a) Optional Redemption. The Corporation, at the option of its Board of Directors or any duly authorized committee of the Board of Directors of the Corporation, may

redeem out of funds legally available therefor, in whole or in part, the shares of Series F Preferred Stock at the time outstanding, at any time on or after the later of March 15,

2012 and the date of original issuance of the Series F Preferred Stock, upon notice given as provided in Section 6(b) below. The redemption price for shares of Series F

Preferred Stock shall be $100,000 per share plus dividends that have been declared but not paid plus accrued and unpaid dividends for the then-current Dividend Period to the

redemption date.

(b) Notice of Redemption. Notice of every redemption of shares of Series F Preferred Stock shall be mailed by first class mail, postage prepaid, addressed to the

holders of record of such shares to be redeemed at their respective last addresses appearing on the stock register of the Corporation. Such mailing shall be at least 15 days and

not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this Section 6(b) shall be conclusively presumed to have been duly given,

whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of

Series F Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series F Preferred Stock. Each

notice shall state (i) the redemption date; (ii) the number of shares of Series F Preferred Stock to be redeemed and, if fewer than all the shares held by such holder are to be

redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where the certificates for such shares are to be

surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on the redemption date. Notwithstanding the

foregoing, if the Series F Preferred Stock is held in book-entry form through DTC, the Corporation may give such notice in any manner permitted by DTC.

(c) Partial Redemption. In case of any redemption of only part of the shares of Series F Preferred Stock at the time outstanding, the shares of Series F Preferred Stock

to be redeemed shall be selected either pro rata from the holders of record of Series F Preferred Stock in proportion to the number of Series F Preferred Stock held by such

holders or by lot or in such other manner as the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may

determine to be fair and equitable. Subject to the provisions of this Section 6, the Board of Directors of the Corporation, the Committee or any duly authorized committee of

the Board of Directors shall have full power and authority to prescribe the terms and conditions upon which shares of Series F Preferred Stock shall be redeemed from time to

time.

(d) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the

redemption have been set aside by the Corporation, separate and apart from its other assets, in trust for the pro rata benefit of the holders of the shares called for redemption,

so as to be and continue to be available therefor, or deposited by the Corporation with a bank or trust company selected by the Board of Directors of the Corporation or any

duly authorized committee of the Board of Directors (the “Depositary Company”) in trust for the pro rata benefit of the holders of the shares called for redemption, then,

notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date all shares so called for

redemption shall cease to be outstanding, all dividends with respect to such shares shall cease to accrue after such redemption date, and all rights with respect to such shares

shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption from such bank or

trust company at any time after the redemption date from the funds so deposited, without interest. The Corporation shall be entitled to receive, from time to time, from the

Depositary Company any interest accrued on such funds, and the holders of any shares called for redemption shall have no claim to any such interest. Any funds so deposited

and unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released or repaid to the Corporation, and in the event of such

repayment to the Corporation, the holders of record of the shares so called for redemption shall be deemed to be unsecured creditors of the Corporation for an amount

equivalent to the amount deposited as stated above for the redemption of such shares and so repaid to the Corporation, but shall in no event be entitled to any interest.

Section 7. Voting Rights. The holders of the Series F Preferred Stock will have no voting rights and will not be entitled to elect any directors, except as expressly

provided by law.

Section 8. Preemption and Conversion. The holders of Series F Preferred Stock shall not have any rights of preemption or rights to convert such Series F Preferred

Stock into shares of any other class of capital stock of the Corporation.

Section 9. Rank. Notwithstanding anything set forth in the Certificate of Incorporation or this Certificate of Designations to the contrary, the Board of Directors of the

Corporation, the Committee or any authorized committee of the Board of Directors of the Corporation, without the vote of the holders of the Series F Preferred Stock, may

authorize and issue additional shares of Junior Stock, Parity Stock or any class or series of Senior Stock or any other securities ranking senior to the Series F

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Preferred Stock as to dividends and the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.

Section 10. Repurchase. Subject to the limitations imposed herein, the Corporation may purchase and sell Series F Preferred Stock from time to time to such extent, in

such manner, and upon such terms as the Board of Directors of the Corporation or any duly authorized committee of the Board of Directors of the Corporation may determine;

provided, however, that the Corporation shall not use any of its funds for any such purchase when there are reasonable grounds to believe that the Corporation is, or by such

purchase would be, rendered insolvent.

Section 11. Unissued or Reacquired Shares. Shares of Series F Preferred Stock not issued or which have been issued and converted, redeemed or otherwise

purchased or acquired by the Corporation shall be restored to the status of authorized but unissued shares of preferred stock without designation as to series.

Section 12. No Sinking Fund. Shares of Series F Preferred Stock are not subject to the operation of a sinking fund.

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Exhibit C

Adjustable Rate Non-Cumulative Preferred Stock, Series G

CERTIFICATE OF DESIGNATIONS

OF

ADJUSTABLE RATE NON-CUMULATIVE PREFERRED STOCK, SERIES G

OF

BANK OF AMERICA CORPORATION

Pursuant to Section 151 of the

General Corporation Law of the State of Delaware

Bank of America Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”), does hereby

certify that:

1. At a meeting duly convened and held on April 26, 2006, the Board of Directors of the Corporation (the “Board”) duly adopted resolutions (a) authorizing the issuance

and sale by the Corporation of one or more series of the Corporation’s preferred stock, and (b) appointing a Committee (the “Committee”) of the Board to act on behalf of the

Board in establishing the number of authorized shares, the dividend rate and other powers, designations, preferences and rights of the preferred stock.

2. Thereafter, on February 12, 2007, the Committee duly adopted the following resolution by written consent:

“RESOLVED, that the powers, designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions

thereof, of the Corporation’s Adjustable Rate Non-Cumulative Preferred Stock, Series G, including those established by the Board and the number of authorized shares and

dividend rate established hereby, are authorized and approved as set forth in Exhibit A hereto, which is incorporated herein by reference.”

IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation by its duly authorized officer this 15th day of February, 2007.

BANK OF AMERICA CORPORATION

/s/ TERESA M. BRENNER

By:

Name: Teresa M. Brenner

Title: Associate General Counsel

31

EXHIBIT A

TO

CERTIFICATE OF DESIGNATIONS

OF

ADJUSTABLE RATE NON-CUMULATIVE PREFERRED STOCK, SERIES G

OF

BANK OF AMERICA CORPORATION

Section 1. Designation. The designation of the series of preferred stock shall be “Adjustable Rate Non-Cumulative Preferred Stock, Series G” (the “Series G Preferred

Stock”). Each share of Series G Preferred Stock shall be identical in all respects to every other share of Series G Preferred Stock. Series G Preferred Stock will rank equally

with Parity Stock, if any, will rank senior to Junior Stock and will rank junior to Senior Stock, if any, with respect to the payment of dividends and the distribution of assets in

the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.

Section 2. Number of Shares. The number of authorized shares of Series G Preferred Stock shall be 8,501. That number from time to time may be increased (but not in

excess of the total number of authorized shares of preferred stock) or decreased (but not below the number of shares of Series G Preferred Stock then outstanding) by further

resolution duly adopted by the Board of Directors of the Corporation, the Committee or any other duly authorized committee of the Board of Directors of the Corporation and

by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction, as the case may be, has

been so authorized. The Corporation shall have the authority to issue fractional shares of Series G Preferred Stock.

Section 3. Definitions. As used herein with respect to Series G Preferred Stock:

“Business Day” means each Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions are not authorized or obligated by law, regulation or

executive order to close in New York, New York or in Charlotte, North Carolina.

“Calculation Agent” shall mean The Bank of New York Trust Company, N.A., or such other bank or entity as may be appointed by the Corporation to act as calculation

agent for the Series G Preferred Stock.

“Depositary Company” shall have the meaning set forth in Section 6(d) hereof.

“Dividend Determination Date” shall have the meaning set forth below in the definition of “Three-Month LIBOR.”

“Dividend Payment Date” shall have the meaning set forth in Section 4(a) hereof.

“Dividend Period” shall have the meaning set forth in Section 4(a) hereof.

“DTC” means The Depository Trust Company, together with its successors and assigns.

“Junior Stock” means the Corporation’s common stock and any other class or series of stock of the Corporation now existing or hereafter authorized over which Series

G Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up

of the Corporation.

“London Banking Day” means any day on which commercial banks are open for general business (including dealings in deposits in U.S. dollars) in London, England.

“Parity Stock” means (a) the Corporation’s 7% Cumulative Redeemable Preferred Stock, Series B, (b) the Corporation’s 6.204% Non-Cumulative Preferred Stock,

Series D, (c) the Corporation’s Floating Rate Non-Cumulative Preferred Stock, Series E, (d) the Corporation’s Floating Rate Non-Cumulative Preferred Stock, Series F and

(e) any other class or series of stock of the Corporation hereafter authorized that ranks on a par with the Series G Preferred Stock in the payment of dividends or in the

distribution of assets on any liquidation, dissolution or winding up of the Corporation.

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“Senior Stock” means any class or series of stock of the Corporation now existing or hereafter authorized which has preference or priority over the Series G Preferred

Stock as to the payment of dividends or in the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the Corporation.

“Series G Preferred Stock” shall have the meaning set forth in Section 1 hereof.