Document
 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ü] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2017
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
Former name, former address and former fiscal year, if changed since last report:
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ü No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ü No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 (check one).
Large accelerated filer ü
 
Accelerated filer
 
Non-accelerated filer
(do not check if a smaller
reporting company)
 
Smaller reporting company
Emerging growth company
Yes No ü
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.
Yes No
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).
Yes No ü
On July 28, 2017, there were 9,850,580,344 shares of Bank of America Corporation Common Stock outstanding.
 
 
 
 
 


Bank of America Corporation and Subsidiaries
June 30, 2017
Form 10-Q
INDEX
Part I. Financial Information
Item 1. Financial Statements
 
Page
Consolidated Statement of Income
 
Consolidated Statement of Comprehensive Income
 
Consolidated Balance Sheet
 
Consolidated Statement of Changes in Shareholders' Equity
 
Consolidated Statement of Cash Flows
 
Notes to Consolidated Financial Statements
 
Note 1 – Summary of Significant Accounting Principles
 
Note 2 – Derivatives
 
Note 3 – Securities
 
Note 4 – Outstanding Loans and Leases
 
Note 5 – Allowance for Credit Losses
 
Note 6 – Securitizations and Other Variable Interest Entities
 
Note 7 – Representations and Warranties Obligations and Corporate Guarantees
 
Note 8 – Goodwill and Intangible Assets
 
Note 9 – Federal Funds Sold or Purchased, Securities Financing Agreements and Short-term Borrowings
 
Note 10 – Commitments and Contingencies
 
Note 11 – Shareholders’ Equity
 
Note 12 – Accumulated Other Comprehensive Income (Loss)
 
Note 13 – Earnings Per Common Share
 
Note 14 – Fair Value Measurements
 
Note 15 – Fair Value Option
 
Note 16 – Fair Value of Financial Instruments
 
Note 17 – Business Segment Information
 
Glossary
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest Rate Risk Management for the Banking Book
 
 
 
Non-GAAP Reconciliations
 
 
 
 
Item 3. Quantitative and Qualitative Disclosures about Market Risk
 
Item 4. Controls and Procedures
 

1 Bank of America



Part II. Other Information
Item 1. Legal Proceedings
 
Item 1A. Risk Factors
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 
Item 6. Exhibits
 
Signature
 
Index to Exhibits
 
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Bank of America Corporation (the "Corporation") and its management may make certain statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “anticipates,” “targets,” “expects,” “hopes,” “estimates,” “intends,” “plans,” “goals,” “believes,” “continue" and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.” Forward-looking statements represent the Corporation's current expectations, plans or forecasts of its future results, revenues, expenses, efficiency ratio, capital measures, 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 our 2016 Annual Report on Form 10-K and in any of the Corporation’s subsequent Securities and Exchange Commission filings: potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings, or enforcement actions, including inquiries into our retail sales practices, and the possibility that amounts may be in excess of the Corporation’s recorded liability and estimated range of possible loss for litigation exposures; the possibility that the Corporation could face increased servicing, securities, fraud, indemnity, contribution or other claims from one or more counterparties, including trustees, purchasers of loans, underwriters, issuers, other parties involved in securitizations, monolines or private-label and other investors; the possibility that future representations and warranties losses may occur in excess of the Corporation’s recorded liability and estimated range of possible loss for its representations and warranties exposures; the 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; 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, currency exchange rates
 
and economic conditions; the impact on the Corporation's business, financial condition and results of operations of a potential higher interest rate environment; 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 impact on the Corporation’s business, financial condition and results of operations from a protracted period of lower oil prices or ongoing volatility with respect to oil prices; the Corporation's ability to achieve its expense targets or net interest income expectations or other projections or expectations; adverse changes to the Corporation’s credit ratings from the major credit rating agencies; estimates of the fair value of certain of the Corporation’s assets and liabilities; uncertainty regarding the content, timing and impact of regulatory capital and liquidity requirements, including the approval of our internal models methodology for calculating counterparty credit risk for derivatives; the potential impact of total loss-absorbing capacity requirements; potential adverse changes to our global systemically important bank (G-SIB) surcharge; the potential impact of Federal Reserve actions on the Corporation’s capital plans; the possible impact of the Corporation's failure to remediate shortcomings identified by banking regulators in the Corporation's Resolution Plan; 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 (FDIC) assessments, the Volcker Rule, fiduciary standards and derivatives regulations; a failure in or breach of the Corporation’s operational or security systems or infrastructure, or those of third parties, including as a result of cyberattacks; the impact on the Corporation's business, financial condition and results of operations from the planned exit of the United Kingdom (U.K.) from the European Union (EU); and other similar matters.
Forward-looking statements speak only as of the date they are made, and the Corporation undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.
Notes to the Consolidated Financial Statements referred to in the Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) are incorporated by reference into the MD&A. Certain prior-period amounts have been reclassified to conform to current-period presentation. Throughout the MD&A, the Corporation uses certain acronyms and abbreviations which are defined in the Glossary.



 
 
Bank of America     2

Executive Summary
Business Overview
The Corporation is a Delaware corporation, a bank holding company (BHC) and a financial holding company. When used in this report, “the Corporation” may refer to Bank of America Corporation individually, Bank of America Corporation and its subsidiaries, or certain of Bank of America Corporation’s subsidiaries or affiliates. Our principal executive offices are located in Charlotte, North Carolina. Through our banking and various nonbank subsidiaries throughout the U.S. and in international markets, we provide a diversified range of banking and nonbank financial services and products through four business segments: Consumer Banking, Global Wealth & Investment Management (GWIM), Global Banking and Global Markets, with the remaining operations recorded in All Other. We operate our banking activities primarily under the Bank of America, National Association (Bank of America, N.A. or BANA) charter. At June 30, 2017, the Corporation had approximately $2.3 trillion in assets and a headcount of approximately 211,000 employees. Headcount remained relatively unchanged since December 31, 2016. Beginning in the second quarter of 2017, we changed from reporting full-time equivalent employees to reporting headcount. Prior-period amounts have been reclassified.
As of June 30, 2017, we operated in all 50 states, the District of Columbia, the U.S. Virgin Islands, Puerto Rico and more than 35 countries. Our retail banking footprint covers approximately 83 percent of the U.S. population, and we serve approximately 47 million consumer and small business relationships with approximately 4,500 retail financial centers, approximately 16,000 ATMs, and leading digital banking platforms (www.bankofamerica.com) with approximately 34 million active users, including 23 million mobile active users. We offer industry-leading support to approximately three million small business owners. Our wealth management businesses, with client balances of approximately $2.6 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.
Second Quarter 2017 Economic and Business Environment
Macroeconomic trends in the U.S. in the second quarter were characterized by continued economic growth and low inflation, after GDP growth decelerated in the first quarter. Consumer and business attitudes on the economy have remained broadly unchanged from the high historical levels reached in the first quarter. The labor market remained healthy, with sustained strong non-farm payroll gains in the second quarter. Contrary to the Federal Open Market Committee projections, inflation fell during the quarter as year-over-year growth in headline CPI decreased by approximately half a percentage point. In June, the Federal Reserve raised its target federal funds rate corridor, in line with market
expectations. Financial markets also responded to several ongoing developments: first, in response to the June rate hike and the potential for additional hikes over 2017, the Treasury yield curve continued to flatten. Second, the equity markets continued to rally, albeit with weaker momentum, with the S&P 500 index gaining over 2.5 percent. The U.S. Dollar weakened, erasing all the gains that followed the November presidential election.
 
Abroad, after eurozone GDP grew in the first quarter at the fastest pace in two years, the recovery continued to gain momentum; although, political uncertainty remained elevated ahead of the French elections. The more robust economic momentum has failed to translate into stronger inflationary pressures, which remained depressed over the quarter. As a result, the European Central Bank remained cautious about the outlook for monetary policy and its quantitative easing program despite the improved growth outlook.
The U.K. gained center-stage on both the economic and political front. The impact of Brexit has started to materialize in the economy with the first quarter GDP growth coming close to stagnation and many indicators weakening further over the second quarter, albeit still pointing to positive growth. At the same time, inflation continued in an upward trend and reached the highest level since 2012, well above the Bank of England target, driven by the pass-through from the Sterling depreciation that followed the Brexit referendum.
In Japan, economic momentum remained intact in the second quarter, though business investment had slowed early in the year. The monetary policy stance remained unchanged while underlying inflation strengthened slightly over the quarter. In China, the service sector remained a key driver of economic growth. The Yuan had a volatile quarter reaching a seven-month high in June which contributed to a softening of supply chain inflationary pressures over the quarter.
Recent Events
Capital Management
On June 28, 2017, following the Federal Reserve's non-objection to our 2017 Comprehensive Capital Analysis and Review (CCAR) capital plan, the Board of Directors (the Board) authorized the repurchase of $12.9 billion in common stock from July 1, 2017 through June 30, 2018, including approximately $900 million to offset the effect of equity-based compensation plans during the same period. The common stock repurchase authorization includes both common stock and warrants. Also in connection with the non-objection to our CCAR plan, on July 26, 2017, the Board declared a quarterly common stock dividend of $0.12 per share, payable on September 29, 2017 to shareholders of record as of September 1, 2017. For additional information, see the Corporation's Current Report on Form 8-K filed on June 28, 2017.
During the second quarter of 2017, we repurchased approximately $2.2 billion of common stock pursuant to the Board's repurchase authorizations announced on June 29, 2016 and January 13, 2017. These repurchase authorizations expired on June 30, 2017. For additional information, see Capital Management on page 28.
Sale of Non-U.S. Consumer Credit Card Business
On June 1, 2017, the Corporation completed the previously-announced sale of its non-U.S. consumer credit card business to a third party and recorded an after-tax gain of $103 million. As previously disclosed, the sale improved our transitional Basel 3 Common equity tier 1 capital ratio by 11 basis points (bps) under the Advanced approaches and 15 bps under the Standardized approach. This sale completes the transformation of our consumer credit card business from a multi-country, multi-brand business to a single-brand business serving core retail customers in the United States. For more information, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements.

3 Bank of America



Series T Preferred Stock
In connection with an investment in the Corporation’s Series T preferred stock in 2011, the holder of the Series T 6% Non-cumulative Preferred Stock (Series T preferred stock) received warrants to purchase up to 700 million shares of the Corporation’s common stock at an exercise price of $7.142857 per share. The holder of the Series T preferred stock publicly announced on June 30, 2017, consistent with similar statements made in its 2016 Annual Report to Shareholders, that it intends to exercise the warrants and acquire all 700 million shares of our common stock using the Series T preferred stock to satisfy the exercise price
 
given its expectation of an increase in our common stock dividend. Upon exercise of the warrants, common shares outstanding will increase; however, there will be no effect on diluted earnings per share as this conversion has been previously included in the Corporation's diluted earnings per share calculation.
Selected Financial Data
Table 1 provides selected consolidated financial data for the three and six months ended June 30, 2017 and 2016, and at June 30, 2017 and December 31, 2016.
 
 
 
 
 
 
 
 
 
Table 1
Selected Financial Data
 
 
 
 
 
 
 
 
 
Three Months Ended June 30
 
Six Months Ended June 30
(Dollars in millions, except per share information)
2017
 
2016
 
2017
 
2016
Income statement
 

 
 

 
 
 
 
Revenue, net of interest expense
$
22,829

 
$
21,286

 
$
45,077

 
$
42,076

Net income
5,269

 
4,783

 
10,125

 
8,255

Diluted earnings per common share
0.46

 
0.41

 
0.87

 
0.68

Dividends paid per common share
0.075

 
0.05

 
0.15

 
0.10

Performance ratios
 

 
 

 
 
 
 
Return on average assets
0.93
%
 
0.88
%
 
0.91
%
 
0.76
%
Return on average common shareholders' equity
8.00

 
7.40

 
7.64

 
6.26

Return on average tangible common shareholders’ equity (1)
11.23

 
10.54

 
10.76

 
8.95

Efficiency ratio
60.13

 
63.38

 
63.39

 
67.28

 
 
 
 
 
 
 
 
 
 
 
 
 
June 30
2017
 
December 31
2016
Balance sheet
 

 
 

 
 

 
 

Total loans and leases
 
 
 
 
$
916,666

 
$
906,683

Total assets
 
 
 
 
2,254,529

 
2,187,702

Total deposits
 
 
 
 
1,262,980

 
1,260,934

Total common shareholders’ equity
 
 
 
 
245,767

 
241,620

Total shareholders’ equity
 
 
 
 
270,987

 
266,840

(1) 
Return on average tangible common shareholders' equity is a non-GAAP financial measure. For additional information and a corresponding reconciliation to accounting principles generally accepted in the United States of America (GAAP) financial measures, see Non-GAAP Reconciliations on page 67.
Financial Highlights
Net income was $5.3 billion and $10.1 billion, or $0.46 and $0.87 per diluted share for the three and six months ended June 30, 2017 compared to $4.8 billion and $8.3 billion, or $0.41 and $0.68 per diluted share for the same periods in 2016. The results for the three and six months ended June 30, 2017 compared to the same periods in 2016 were driven by higher revenue and lower provision for credit losses and an increase in noninterest expense.
Total assets increased $66.8 billion from December 31, 2016 to $2.3 trillion at June 30, 2017 due to higher trading account assets primarily driven by increased client financing activities in equities, growth in securities borrowed or purchased under agreements to resell primarily due to increased matched-book
 
activity, as well as higher cash and cash equivalents and loans and leases. These increases were partially offset by the impact of the sale of the non-U.S. consumer credit card business. Total liabilities increased $62.7 billion from December 31, 2016 to $2.0 trillion at June 30, 2017 primarily driven by higher securities loaned or sold under agreements to repurchase due to increased matched-book activity, an increase in trading account liabilities as well as an increase in short-term borrowings. Shareholders' equity increased $4.1 billion from December 31, 2016 primarily due to net income, partially offset by returns of capital to shareholders of $7.3 billion through common stock repurchases and common and preferred stock dividends.

 
 
Bank of America     4

 
 
 
 
 
 
 
 
 
Table 2
Summary Income Statement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30
 
Six Months Ended June 30
(Dollars in millions)
2017
 
2016
 
2017
 
2016
Net interest income
$
10,986

 
$
10,118

 
$
22,044

 
$
20,603

Noninterest income
11,843

 
11,168

 
23,033

 
21,473

Total revenue, net of interest expense
22,829

 
21,286

 
45,077

 
42,076

Provision for credit losses
726

 
976

 
1,561

 
1,973

Noninterest expense
13,726

 
13,493

 
28,574

 
28,309

Income before income taxes
8,377

 
6,817

 
14,942

 
11,794

Income tax expense
3,108

 
2,034

 
4,817

 
3,539

Net income
5,269

 
4,783

 
10,125

 
8,255

Preferred stock dividends
361

 
361

 
863

 
818

Net income applicable to common shareholders
$
4,908

 
$
4,422

 
$
9,262

 
$
7,437

 
 
 
 
 
 
 
 
 
Per common share information
 
 
 
 
 
 
 
Earnings
$
0.49

 
$
0.43

 
$
0.92

 
$
0.72

Diluted earnings
0.46

 
0.41

 
0.87

 
0.68

Net Interest Income
Net interest income increased $868 million to $11.0 billion, and $1.4 billion to $22.0 billion for the three and six months ended June 30, 2017 compared to the same periods in 2016. The net interest yield increased 11 bps to 2.29 percent, and nine bps to 2.32 percent. These increases were primarily driven by a higher interest rate environment and loan growth. For more information regarding interest rate risk management, see Interest Rate Risk Management for the Banking Book on page 63.
Noninterest Income
 
 
 
 
 
 
 
 
 
Table 3
Noninterest Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30
 
Six Months Ended June 30
(Dollars in millions)
2017
 
2016
 
2017
 
2016
Card income
$
1,469

 
$
1,464

 
$
2,918

 
$
2,894

Service charges
1,977

 
1,871

 
3,895

 
3,708

Investment and brokerage services
3,317

 
3,201

 
6,579

 
6,383

Investment banking income
1,532

 
1,408

 
3,116

 
2,561

Trading account profits
1,956

 
2,018

 
4,287

 
3,680

Mortgage banking income
230

 
312

 
352

 
745

Gains on sales of debt securities
101

 
249

 
153

 
439

Other income
1,261

 
645

 
1,733

 
1,063

Total noninterest income
$
11,843

 
$
11,168

 
$
23,033

 
$
21,473

Noninterest income increased $675 million to $11.8 billion, and $1.6 billion to $23.0 billion for the three and six months ended June 30, 2017 compared to the same periods in 2016. The following highlights the more significant changes.
●
Service charges increased $106 million and $187 million primarily driven by the impact of pricing strategies and higher treasury services-related revenue.
●
Investment and brokerage services income increased $116 million and $196 million primarily driven by higher assets under management (AUM) flows and market valuations, partially offset by lower transactional revenue.
●
Investment banking income increased $124 million and $555 million primarily due to higher advisory fees, and for the six month period, higher debt and equity issuance fees.
●
Trading account profits decreased $62 million for the three-month period primarily due to weaker performance across fixed-income products, and increased $607 million for the six-month period primarily due to stronger performance across credit products led by mortgages, and increased client financing activity in equities.
 
●
Mortgage banking income decreased $82 million and $393 million primarily due to lower production income driven by lower volumes and net servicing income due to a smaller servicing portfolio.
●
Gains on sales of debt securities decreased $148 million and $286 million primarily driven by lower sales volume.
●
Other income increased $616 million and $670 million primarily due to the $793 million pre-tax gain recognized in connection with the sale of the non-U.S. consumer credit card business.
Provision for Credit Losses
The provision for credit losses decreased $250 million to $726 million, and $412 million to $1.6 billion for the three and six months ended June 30, 2017 compared to the same periods in 2016 primarily due to credit quality improvements in the consumer real estate portfolio and reductions in energy exposures in the commercial portfolio, partially offset by portfolio seasoning and loan growth in the U.S. credit card portfolio. For more information on the provision for credit losses, see Provision for Credit Losses on page 57.

5 Bank of America



Noninterest Expense
 
 
 
 
 
 
 
 
 
Table 4
Noninterest Expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30
 
Six Months Ended June 30
(Dollars in millions)
2017
 
2016
 
2017
 
2016
Personnel
$
7,712

 
$
7,722

 
$
16,870

 
$
16,574

Occupancy
1,001

 
1,036

 
2,001

 
2,064

Equipment
427

 
451

 
865

 
914

Marketing
442

 
414

 
774

 
833

Professional fees
485

 
472

 
941

 
897

Amortization of intangibles
160

 
186

 
322

 
373

Data processing
773

 
717

 
1,567

 
1,555

Telecommunications
177

 
189

 
368

 
362

Other general operating
2,549

 
2,306

 
4,866

 
4,737

Total noninterest expense
$
13,726

 
$
13,493

 
$
28,574

 
$
28,309

Noninterest expense increased $233 million to $13.7 billion, and $265 million to $28.6 billion for the three and six months ended June 30, 2017 compared to the same periods in 2016. The increases were primarily due to higher other general operating expense which included a $295 million impairment charge related
 
to certain data centers in the process of being sold and higher FDIC expense, partially offset by lower litigation expense. The increase in the six-months period was also driven by an increase in personnel expense due in part to higher revenue-related incentive costs.
Income Tax Expense
 
 
 
 
 
 
 
 
 
Table 5
Income Tax Expense
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30
 
Six Months Ended June 30
(Dollars in millions)
2017
 
2016
 
2017
 
2016
Income before income taxes
$
8,377

 
$
6,817

 
$
14,942

 
$
11,794

Income tax expense
3,108

 
2,034

 
4,817

 
3,539

Effective tax rate
37.1
%
 
29.8
%
 
32.2
%
 
30.0
%
The effective tax rates for both the three and six months ended June 30, 2017 were driven by the impact of our recurring tax preference benefits, offset by $690 million of tax expense recognized in connection with the sale of the non-U.S. consumer credit card business, which related to gains on derivatives used
 
to hedge the currency risk of the net investment. The six-month effective tax rate also included a tax benefit related to a new accounting standard on share-based compensation. The effective tax rates for the three and six months ended June 30, 2016 were driven by our recurring tax preference items.


 
 
Bank of America     6

 
 
 
 
 
 
 
 
 
 
 
Table 6
Selected Quarterly Financial Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2017 Quarters
 
2016 Quarters
(Dollars in millions, except per share information)
Second
 
First
 
Fourth
 
Third
 
Second
Income statement
 

 
 

 
 

 
 

 
 

Net interest income
$
10,986

 
$
11,058

 
$
10,292

 
$
10,201

 
$
10,118

Noninterest income
11,843

 
11,190

 
9,698

 
11,434

 
11,168

Total revenue, net of interest expense
22,829

 
22,248

 
19,990

 
21,635

 
21,286

Provision for credit losses
726

 
835

 
774

 
850

 
976

Noninterest expense
13,726

 
14,848

 
13,161

 
13,481

 
13,493

Income before income taxes
8,377

 
6,565

 
6,055

 
7,304

 
6,817

Income tax expense
3,108

 
1,709

 
1,359

 
2,349

 
2,034

Net income
5,269

 
4,856

 
4,696

 
4,955

 
4,783

Net income applicable to common shareholders
4,908

 
4,354

 
4,335

 
4,452

 
4,422

Average common shares issued and outstanding
10,014

 
10,100

 
10,170

 
10,250

 
10,328

Average diluted common shares issued and outstanding
10,822

 
10,915

 
10,959

 
11,000

 
11,059

Performance ratios
 

 
 

 
 

 
 

 
 

Return on average assets
0.93
%
 
0.88
%
 
0.85
%
 
0.90
%
 
0.88
%
Four quarter trailing return on average assets (1)
0.89

 
0.88

 
0.82

 
0.76

 
0.74

Return on average common shareholders’ equity
8.00

 
7.27

 
7.04

 
7.27

 
7.40

Return on average tangible common shareholders’ equity (2)
11.23

 
10.28

 
9.92

 
10.28

 
10.54

Return on average shareholders' equity
7.79

 
7.35

 
6.91

 
7.33

 
7.25

Return on average tangible shareholders’ equity (2)
10.54

 
10.00

 
9.38

 
9.98

 
9.93

Total ending equity to total ending assets
12.02

 
11.93

 
12.20

 
12.30

 
12.23

Total average equity to total average assets
11.95

 
12.01

 
12.24

 
12.28

 
12.13

Dividend payout
15.25

 
17.37

 
17.68

 
17.32

 
11.73

Per common share data
 

 
 

 
 

 
 

 
 

Earnings
$
0.49

 
$
0.43

 
$
0.43

 
$
0.43

 
$
0.43

Diluted earnings
0.46

 
0.41

 
0.40

 
0.41

 
0.41

Dividends paid
0.075

 
0.075

 
0.075

 
0.075

 
0.05

Book value
24.88

 
24.36

 
24.04

 
24.19

 
23.71

Tangible book value (2)
17.78

 
17.23

 
16.95

 
17.14

 
16.71

Market price per share of common stock
 

 
 

 
 

 
 

 
 

Closing
$
24.26

 
$
23.59

 
$
22.10

 
$
15.65

 
$
13.27

High closing
24.32

 
25.50

 
23.16

 
16.19

 
15.11

Low closing
22.23

 
22.05

 
15.63

 
12.74

 
12.18

Market capitalization
$
239,643

 
$
235,291

 
$
222,163

 
$
158,438

 
$
135,577

(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 for corresponding reconciliations to GAAP financial measures, see Non-GAAP Reconciliations on page 67.
(3) 
For more information on the impact of the purchased credit-impaired (PCI) loan portfolio on asset quality, see Consumer Portfolio Credit Risk Management on page 39.
(4) 
Includes the allowance for loan and lease losses and the reserve for unfunded lending commitments.
(5) 
Balances and ratios do not include loans accounted for under the fair value option. For additional exclusions from nonperforming loans, leases and foreclosed properties, see Consumer Portfolio Credit Risk Management – Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity on page 47 and corresponding Table 33, and Commercial Portfolio Credit Risk Management – Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity on page 52 and corresponding Table 40.
(6) 
Asset quality metrics include $242 million and $243 million of non-U.S. credit card allowance for loan and lease losses and $9.5 billion and $9.2 billion of non-U.S. credit card loans in the first quarter of 2017 and in the fourth quarter of 2016, which were included in assets of business held for sale on the Consolidated Balance Sheet at December 31, 2016. On June 1, 2017, the Corporation completed the sale of its non-U.S. consumer credit card business.
(7) 
Primarily includes amounts allocated to the U.S. credit card and unsecured consumer lending portfolios in Consumer Banking, PCI loans and the non-U.S. credit card portfolio in All Other.
(8) 
Net charge-offs exclude $55 million, $33 million, $70 million, $83 million, and $82 million of write-offs in the PCI loan portfolio in the second and first quarters of 2017, and in the fourth, third and second quarters of 2016, respectively. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 45.
(9) 
Includes net charge-offs of $44 million and $41 million on non-U.S. credit card loans in the first quarter of 2017 and in the fourth quarter of 2016, which were included in assets of business held for sale on the Consolidated Balance Sheet at March 31, 2017 and December 31, 2016.
(10) 
Risk-based capital ratios are reported under Basel 3 Advanced - Transition. For additional information, see Capital Management on page 28.

7 Bank of America



 
 
 
 
 
 
 
 
 
 
 
Table 6
Selected Quarterly Financial Data (continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2017 Quarters
 
2016 Quarters
(Dollars in millions)
Second
 
First
 
Fourth
 
Third
 
Second
Average balance sheet
 

 
 

 
 

 
 

 
 

Total loans and leases
$
914,717

 
$
914,144

 
$
908,396

 
$
900,594

 
$
899,670

Total assets
2,269,153

 
2,231,420

 
2,208,039

 
2,189,490

 
2,188,241

Total deposits
1,256,838

 
1,256,632

 
1,250,948

 
1,227,186

 
1,213,291

Long-term debt
224,019

 
221,468

 
220,587

 
227,269

 
233,061

Common shareholders’ equity
246,003

 
242,883

 
245,139

 
243,679

 
240,376

Total shareholders’ equity
271,223

 
268,103

 
270,360

 
268,899

 
265,354

Asset quality (3)
 

 
 

 
 

 
 

 
 

Allowance for credit losses (4)
$
11,632

 
$
11,869

 
$
11,999

 
$
12,459

 
$
12,587

Nonperforming loans, leases and foreclosed properties (5)
7,127

 
7,637

 
8,084

 
8,737

 
8,799

Allowance for loan and lease losses as a percentage of total loans and leases outstanding (5, 6)
1.20
%
 
1.25
%
 
1.26
%
 
1.30
%
 
1.32
%
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases (5, 6)
160

 
156

 
149

 
140

 
142

Allowance for loan and lease losses as a percentage of total nonperforming loans and leases, excluding the PCI loan portfolio (5, 6)
154

 
150

 
144

 
135

 
135

Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases (7)
$
3,782

 
$
4,047

 
$
3,951

 
$
4,068

 
$
4,087

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 (5, 7)
104
%
 
100
%
 
98
%
 
91
%
 
93
%
Net charge-offs (8, 9)
$
908

 
$
934

 
$
880

 
$
888

 
$
985

Annualized net charge-offs as a percentage of average loans and leases outstanding (5, 8)
0.40
%
 
0.42
%
 
0.39
%
 
0.40
%
 
0.44
%
Annualized net charge-offs as a percentage of average loans and leases outstanding, excluding the PCI loan portfolio (5)
0.41

 
0.42

 
0.39

 
0.40

 
0.45

Annualized net charge-offs and PCI write-offs as a percentage of average loans and leases outstanding (5)
0.43

 
0.43

 
0.42

 
0.43

 
0.48

Nonperforming loans and leases as a percentage of total loans and leases outstanding (5, 6)
0.75

 
0.80

 
0.85

 
0.93

 
0.94

Nonperforming loans, leases and foreclosed properties as a percentage of total loans, leases and foreclosed properties (5, 6)
0.78

 
0.84

 
0.89

 
0.97

 
0.98

Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs (6, 8)
2.99

 
3.00

 
3.28

 
3.31

 
2.99

Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs, excluding the PCI loan portfolio (6)
2.88

 
2.88

 
3.16

 
3.18

 
2.85

Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs and PCI write-offs (6)
2.82

 
2.90

 
3.04

 
3.03

 
2.76

Capital ratios at period end (10)
 

 
 

 
 

 
 

 
 

Risk-based capital:
 

 
 

 
 

 
 

 
 

Common equity tier 1 capital
11.6
%
 
11.0
%
 
11.0
%
 
11.0
%
 
10.6
%
Tier 1 capital
13.2

 
12.5

 
12.4

 
12.4

 
12.0

Total capital
15.1

 
14.4

 
14.3

 
14.2

 
13.9

Tier 1 leverage
8.9

 
8.8

 
8.9

 
9.1

 
8.9

Tangible equity (2)
9.2

 
9.1

 
9.2

 
9.4

 
9.3

Tangible common equity (2)
8.0

 
7.9

 
8.1

 
8.2

 
8.1

For footnotes see page 7.

 
 
Bank of America     8

 
 
 
 
 
Table 7
Selected Year-to-Date Financial Data
 
 
 
 
 
Six Months Ended June 30
(In millions, except per share information)
2017
 
2016
Income statement
 
 
 
Net interest income
$
22,044

 
$
20,603

Noninterest income
23,033

 
21,473

Total revenue, net of interest expense
45,077

 
42,076

Provision for credit losses
1,561

 
1,973

Noninterest expense
28,574

 
28,309

Income before income taxes
14,942

 
11,794

Income tax expense
4,817

 
3,539

Net income
10,125

 
8,255

Net income applicable to common shareholders
9,262

 
7,437

Average common shares issued and outstanding
10,056

 
10,308

Average diluted common shares issued and outstanding
10,868

 
11,080

Performance ratios
 

 
 

Return on average assets
0.91
%
 
0.76
%
Return on average common shareholders’ equity
7.64

 
6.26

Return on average tangible common shareholders’ equity (1)
10.76

 
8.95

Return on average shareholder's equity
7.57

 
6.31

Return on average tangible shareholders’ equity (1)
10.27

 
8.68

Total ending equity to total ending assets
12.02

 
12.23

Total average equity to total average assets
11.98

 
12.05

Dividend payout
16.25

 
13.92

Per common share data
 

 
 

Earnings
$
0.92

 
$
0.72

Diluted earnings
0.87

 
0.68

Dividends paid
0.15

 
0.10

Book value
24.88

 
23.71

Tangible book value (1)
17.78

 
16.71

Market price per share of common stock
 

 
 

Closing
$
24.26

 
$
13.27

High closing
25.50

 
16.43

Low closing
22.05

 
11.16

Market capitalization
$
239,643

 
$
135,577

(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 for corresponding reconciliations to GAAP financial measures, see Non-GAAP Reconciliations on page 67.
(2) 
For more information on the impact of the PCI loan portfolio on asset quality, see Consumer Portfolio Credit Risk Management on page 39.
(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, see Consumer Portfolio Credit Risk Management – Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity on page 47 and corresponding Table 33, and Commercial Portfolio Credit Risk Management – Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity on page 52 and corresponding Table 40.
(5) 
Primarily includes amounts allocated to the U.S. credit card and unsecured consumer lending portfolios in Consumer Banking, PCI loans and the non-U.S. credit card portfolio in All Other.
(6) 
Net charge-offs exclude $88 million and $187 million of write-offs in the PCI loan portfolio for the six months ended June 30, 2017 and 2016. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 45.

9 Bank of America



 
 
 
 
 
Table 7
Selected Year-to-Date Financial Data (continued)
 
 
Six Months Ended June 30
(Dollars in millions)
2017
 
2016
Average balance sheet
 

 
 

Total loans and leases
$
914,432

 
$
896,327

Total assets
2,250,391

 
2,181,082

Total deposits
1,256,735

 
1,205,873

Long-term debt
222,751

 
233,358

Common shareholders’ equity
244,452

 
238,803

Total shareholders’ equity
269,672

 
262,889

Asset quality (2)
 

 
 

Allowance for credit losses (3)
$
11,632

 
$
12,587

Nonperforming loans, leases and foreclosed properties (4)
7,127

 
8,799

Allowance for loan and lease losses as a percentage of total loans and leases outstanding (4)
1.20
%
 
1.32
%
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases (4)
160

 
142

Allowance for loan and lease losses as a percentage of total nonperforming loans and leases, excluding the PCI loan portfolio (4)
154

 
135

Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases (5)
$
3,782

 
$
4,087

Allowance for loan and lease losses as a percentage of total nonperforming loans and leases, excluding the allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases (4, 5)
104
%
 
93
%
Net charge-offs (6)
$
1,842

 
$
2,053

Annualized net charge-offs as a percentage of average loans and leases outstanding (4, 6)
0.41
%
 
0.46
%
Annualized net charge-offs as a percentage of average loans and leases outstanding, excluding the PCI loan portfolio (4)
0.42

 
0.47

Annualized net charge-offs and PCI write-offs as a percentage of average loans and leases outstanding (4)
0.43

 
0.51

Nonperforming loans and leases as a percentage of total loans and leases outstanding (4)
0.75

 
0.94

Nonperforming loans, leases and foreclosed properties as a percentage of total loans, leases and foreclosed properties (4)
0.78

 
0.98

Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs (6)
2.99

 
2.99

Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs, excluding the PCI loan portfolio
2.88

 
2.85

Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs and PCI write-offs
2.82

 
2.76

For footnotes see page 9.

 
 
Bank of America     10

Supplemental Financial Data
In this Form 10-Q, we present certain non-GAAP financial measures. Non-GAAP financial measures exclude certain items or otherwise include components that differ from the most directly comparable measures calculated in accordance with GAAP. Non-GAAP financial measures are provided as additional useful information to assess our financial condition, results of operations (including period-to-period operating performance) or compliance with prospective regulatory requirements. These non-GAAP financial measures are not intended as a substitute for GAAP financial measures and may not be defined or calculated the same way as non-GAAP financial measures used by other companies.
We view net interest income and related ratios and analyses on an fully taxable-equivalent (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 35 percent and a representative state tax rate. In addition, certain performance measures including the efficiency ratio and net interest yield utilize net interest income (and thus total revenue) on an FTE basis. The efficiency ratio measures the costs expended to generate a dollar of revenue, and net interest yield measures the bps we earn over the cost of funds. We 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)) which result in non-GAAP financial measures. We believe that the presentation of measures that exclude these items are useful because they 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 an adjusted shareholders’ equity or common shareholders’ equity amount which has been reduced by goodwill and certain acquired intangible assets (excluding mortgage servicing rights (MSRs)), net of related deferred tax liabilities. These measures are used to evaluate our use of equity. In addition, profitability, relationship and investment models use both return on average tangible common shareholders’ equity and return on average tangible shareholders’ equity as key measures to support our overall growth goals. These ratios are as follows:
●
Return on average tangible common shareholders’ equity measures our earnings contribution as a percentage of adjusted common shareholders’ equity. The tangible common equity ratio represents adjusted ending common shareholders’ equity divided by total assets less goodwill and certain acquired intangible assets (excluding MSRs), net of related deferred tax liabilities.
●
Return on average tangible shareholders’ equity measures our earnings contribution as a percentage of adjusted average total shareholders’ equity. The tangible equity ratio represents adjusted ending shareholders’ equity divided by total assets less goodwill and certain acquired intangible assets (excluding MSRs), net of related deferred tax liabilities.
●
Tangible book value per common share represents adjusted ending common shareholders’ equity divided by ending common shares outstanding.
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 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. Table 8 presents certain non-GAAP financial measures and performance measurements on an FTE basis.
 
 
 
 
 
 
 
 
 
Table 8
Supplemental Financial Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30
 
Six Months Ended June 30
(Dollars in millions)
2017
 
2016
 
2017
 
2016
Fully taxable-equivalent basis data
 

 
 

 
 
 
 
Net interest income
$
11,223

 
$
10,341

 
$
22,478

 
$
21,041

Total revenue, net of interest expense
23,066

 
21,509

 
45,511

 
42,514

Net interest yield
2.34
%
 
2.23
%
 
2.37
%
 
2.28
%
Efficiency ratio
59.51

 
62.73

 
62.78

 
66.59


11 Bank of America



 
 
 
 
 
 
 
 
 
 
 
 
 
Table 9
Quarterly Average Balances and Interest Rates – FTE Basis
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second Quarter 2017
 
Second Quarter 2016
(Dollars in millions)
Average
Balance
 
Interest
Income/
Expense
 
Yield/
Rate
 
Average
Balance
 
Interest
Income/
Expense
 
Yield/
Rate
Earning assets
 

 
 

 
 

 
 

 
 

 
 

Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks
$
129,201

 
$
261

 
0.81
%
 
$
135,312

 
$
157

 
0.47
%
Time deposits placed and other short-term investments
11,448

 
58

 
2.03

 
7,855

 
35

 
1.79

Federal funds sold and securities borrowed or purchased under agreements to resell
226,700

 
560

 
0.99

 
223,005

 
260

 
0.47

Trading account assets
135,931

 
1,199

 
3.54

 
127,189

 
1,109

 
3.50

Debt securities (1)
431,132

 
2,632

 
2.44

 
419,085

 
2,284

 
2.20

Loans and leases (2):
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
195,935

 
1,697

 
3.46

 
186,752

 
1,626

 
3.48

Home equity
63,332

 
664

 
4.20

 
73,141

 
703

 
3.86

U.S. credit card
89,464

 
2,128

 
9.54

 
86,705

 
1,983

 
9.20

Non-U.S. credit card (1)
6,494

 
147

 
9.08

 
9,988

 
250

 
10.06

Direct/Indirect consumer (3)
93,146

 
643

 
2.77

 
91,643

 
563

 
2.47

Other consumer (4)
2,629

 
26

 
4.07

 
2,220

 
16

 
3.00

Total consumer
451,000

 
5,305

 
4.71

 
450,449

 
5,141

 
4.58

U.S. commercial
291,162

 
2,403

 
3.31

 
276,640

 
2,006

 
2.92

Commercial real estate (5)
58,198

 
514

 
3.54

 
57,772

 
434

 
3.02

Commercial lease financing
21,649

 
156

 
2.89

 
20,874

 
147

 
2.81

Non-U.S. commercial
92,708

 
615

 
2.66

 
93,935

 
564

 
2.42

Total commercial
463,717

 
3,688

 
3.19

 
449,221

 
3,151

 
2.82

Total loans and leases
914,717

 
8,993

 
3.94

 
899,670

 
8,292

 
3.70

Other earning assets
73,618

 
680

 
3.70

 
55,957

 
660

 
4.74

Total earning assets (6)
1,922,747

 
14,383

 
3.00

 
1,868,073

 
12,797

 
2.75

Cash and due from banks (1)
27,659

 
 
 
 
 
27,924

 
 
 
 
Other assets, less allowance for loan and lease losses (1)
318,747

 
 
 
 
 
292,244

 
 
 
 
Total assets
$
2,269,153

 
 
 
 
 
$
2,188,241

 
 
 
 
Interest-bearing liabilities
 

 
 

 
 

 
 

 
 

 
 

U.S. interest-bearing deposits:
 

 
 

 
 

 
 

 
 

 
 

Savings
$
54,494

 
$
2

 
0.01
%
 
$
50,105

 
$
1

 
0.01
%
NOW and money market deposit accounts
619,593

 
105

 
0.07

 
583,913

 
72

 
0.05

Consumer CDs and IRAs
45,682

 
30

 
0.27

 
48,450

 
33

 
0.28

Negotiable CDs, public funds and other deposits
36,041

 
68

 
0.75

 
32,879

 
35

 
0.42

Total U.S. interest-bearing deposits
755,810

 
205

 
0.11

 
715,347

 
141

 
0.08

Non-U.S. interest-bearing deposits:
 
 
 
 
 
 
 
 
 
 
 
Banks located in non-U.S. countries
3,058

 
6

 
0.77

 
4,235

 
10

 
0.98

Governments and official institutions
981

 
2

 
0.90

 
1,542

 
2

 
0.66

Time, savings and other
60,047

 
133

 
0.89

 
60,311

 
92

 
0.61

Total non-U.S. interest-bearing deposits
64,086

 
141

 
0.89

 
66,088

 
104

 
0.63

Total interest-bearing deposits
819,896

 
346

 
0.17

 
781,435

 
245

 
0.13

Federal funds purchased, securities loaned or sold under agreements to repurchase and short-term borrowings
251,641

 
917

 
1.46

 
215,852

 
626

 
1.17

Trading account liabilities
45,156

 
307

 
2.73

 
36,652

 
242

 
2.66

Long-term debt
224,019

 
1,590

 
2.84

 
233,061

 
1,343

 
2.31

Total interest-bearing liabilities (6)
1,340,712

 
3,160

 
0.94

 
1,267,000

 
2,456

 
0.78

Noninterest-bearing sources:
 
 
 
 
 
 
 
 
 
 
 
Noninterest-bearing deposits
436,942

 
 
 
 
 
431,856

 
 
 
 
Other liabilities
220,276

 
 
 
 
 
224,031

 
 
 
 
Shareholders’ equity
271,223

 
 
 
 
 
265,354

 
 
 
 
Total liabilities and shareholders’ equity
$
2,269,153

 
 
 
 
 
$
2,188,241

 
 
 
 
Net interest spread
 
 
 
 
2.06
%
 
 
 
 
 
1.97
%
Impact of noninterest-bearing sources
 
 
 
 
0.28

 
 
 
 
 
0.26

Net interest income/yield on earning assets
 
 
$
11,223

 
2.34
%
 
 
 
$
10,341

 
2.23
%
(1) 
Includes assets of the Corporation's non-U.S. consumer credit card business, which were previously included in assets of business held for sale on the Consolidated Balance Sheet. On June 1, 2017, the Corporation completed the sale of its non-U.S. consumer credit card business.
(2) 
Nonperforming loans are included in the respective average loan balances. Income on these nonperforming loans is generally recognized on a cost recovery basis. PCI loans were recorded at fair value upon acquisition and accrete interest income over the estimated life of the loan.
(3) 
Includes non-U.S. consumer loans of $2.9 billion and $3.4 billion in the second quarter of 2017 and 2016.
(4) 
Includes consumer finance loans of $431 million and $526 million; consumer leases of $2.0 billion and $1.5 billion, and consumer overdrafts of $167 million and $166 million in the second quarter of 2017 and 2016, respectively.
(5) 
Includes U.S. commercial real estate loans of $55.0 billion and $54.3 billion, and non-U.S. commercial real estate loans of $3.2 billion and $3.5 billion in the second quarter of 2017 and 2016, respectively.
(6) 
Interest income includes the impact of interest rate risk management contracts, which decreased interest income on the underlying assets by $24 million and $56 million in the second quarter of 2017 and 2016. Interest expense includes the impact of interest rate risk management contracts, which decreased interest expense on the underlying liabilities by $326 million and $610 million in the second quarter of 2017 and 2016. For additional information, see Interest Rate Risk Management for the Banking Book on page 63.

 
 
Bank of America     12

 
 
 
 
 
 
 
 
 
 
 
 
 
Table 10
Year-to-Date Average Balances and Interest Rates – FTE Basis
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30
 
 
2017
 
2016
(Dollars in millions)
Average
Balance
 
Interest
Income/
Expense
 
Yield/
Rate
 
Average
Balance
 
Interest
Income/
Expense
 
Yield/
Rate
Earning assets
 

 
 

 
 

 
 

 
 

 
 

Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks
$
126,576

 
$
463

 
0.74
%
 
$
136,943

 
$
312

 
0.46
%
Time deposits placed and other short-term investments
11,472

 
105

 
1.84

 
8,506

 
67

 
1.59

Federal funds sold and securities borrowed or purchased under agreements to resell
221,579

 
999

 
0.91

 
216,094

 
536

 
0.50

Trading account assets
130,824

 
2,310

 
3.56

 
131,748

 
2,321

 
3.54

Debt securities (1)
430,685

 
5,205

 
2.41

 
409,531

 
4,821

 
2.38

Loans and leases (2):
 

 
 

 
 

 
 

 
 

 
 

Residential mortgage
194,787

 
3,358

 
3.45

 
186,866

 
3,255

 
3.48

Home equity
64,414

 
1,303

 
4.07

 
74,235

 
1,414

 
3.82

U.S. credit card
89,545

 
4,239

 
9.55

 
86,934

 
4,004

 
9.26

Non-U.S. credit card (1)
7,923

 
358

 
9.12

 
9,905

 
503

 
10.21

Direct/Indirect consumer (3)
93,218

 
1,251

 
2.71

 
90,493

 
1,113

 
2.47

Other consumer (4)
2,589

 
53

 
4.07

 
2,178

 
32

 
3.01

Total consumer
452,476

 
10,562

 
4.69

 
450,611

 
10,321

 
4.60

U.S. commercial
289,325

 
4,625

 
3.22

 
273,576

 
3,942

 
2.90

Commercial real estate (5)
57,982

 
993

 
3.45

 
57,521

 
868

 
3.03

Commercial lease financing
21,885

 
387

 
3.54

 
20,975

 
329

 
3.14

Non-U.S. commercial
92,764

 
1,210

 
2.63