

		~~Bank of America 2015~~15

operate properly or become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control which could adversely affect our ability to process these transactions or provide these services. There could be sudden increases in customer transaction volume; electrical, telecommunications or other major physical infrastructure outages; natural disasters such as earthquakes, tornadoes, hurricanes and floods; disease pandemics; and events arising from local or larger scale political or social matters, including terrorist acts. We continuously update these systems to support our operations and growth. This updating entails significant costs and creates risks associated with implementing new systems and integrating them with existing ones. Operational risk exposures could adversely impact our results of operations, liquidity and financial condition, as well as cause 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 reputational harm.

Our businesses are highly dependent on the security and efficacy of our infrastructure, computer and data management systems, as well as those of third parties with whom we interact. Cyber security risks for financial institutions have significantly increased in recent years in part because of the proliferation of new technologies, the use of the Internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties, including foreign state actors. Our businesses rely on the secure processing, transmission, storage and retrieval of confidential, proprietary 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. We rely on digital technologies, computer, database and email systems, software, and networks to conduct our operations. In addition, to access our network, products and services, our customers and other third parties may use personal mobile devices or computing devices that are outside of our network environment. We, our customers, regulators and other third parties have been subject to, and are likely to continue to be the target of, cyber attacks. These cyber attacks include computer viruses, malicious or destructive code, phishing attacks, denial of service or information or other security breaches, that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information of the Corporation, our employees, our customers or of third parties, or otherwise materially disrupt our or our customers’ or other third parties’ network access or business operations. For example, in recent years, we have been subject to malicious activity, including distributed denial of service attacks. Additionally, several large retailers have disclosed substantial cyber security breaches affecting debit and credit card accounts of their customers, some of whom were our cardholders. Although these incidents have not, to date, had a material impact on us, we believe that such incidents will continue, and we are unable to predict the severity of such future attacks on us. Our counterparties, regulators, customers and clients, and other third parties with whom we or our customers and clients interact are exposed to similar incidents, and incidents affecting those third parties could impact us.

Although to date we have not experienced any material losses or other material consequences relating to technology failure, cyber attacks or other information or other security breaches, there can be no assurance that we will not suffer such losses or other consequences in the future. Our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, our prominent size and scale, and our role in the financial services industry and the broader economy, our plans to continue to implement our internet banking and mobile banking channel strategies and develop additional remote connectivity solutions to serve our customers when and how they want to be served, our continuous transmission of sensitive information to, and storage of such information by, third parties, including our vendors and regulators, our expanded geographic footprint and international presence, the outsourcing of some of our business operations, the continued uncertain global economic environment, threats of cyber terrorism, external extremist parties, including foreign state actors, in some circumstances as a means to promote political ends, and system and customer account updates and conversions. As a result, cyber security and the continued development and enhancement of our controls, processes and practices designed to protect our systems, computers, software, data and networks from attack, damage or unauthorized access remain a priority for us. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities or incidents.

We also face indirect technology, cyber security and operational risks relating to the third parties with whom we do business or upon whom we rely to facilitate or enable our business activities. In addition to customers and clients, the third parties with whom we interact and upon whom we rely include financial counterparties; financial intermediaries such as clearing agents, exchanges and clearing houses; vendors; regulators; providers of critical infrastructure such as internet access and electrical power, and retailers for whom we process transactions. Each of these third parties faces the risk of cyber attack, information breach or loss, or technology failure. Any such cyber attack, information breach or loss, or technology failure of a third party could, among other things, adversely affect our ability to effect transactions, service our clients, manage our exposure to risk or expand our businesses. As a result of financial entities and technology systems becoming more interdependent and complex, a cyber incident, information breach or loss, or technology failure that significantly degrades, deletes or compromises the systems or data of one or more financial entities could have a material impact on counterparties or other market participants, including the Corporation. For example, in recent years, there has been significant consolidation among clearing agents, exchanges and clearing houses and increased interconnectivity of multiple financial institutions with central agents, exchanges and clearing houses. This consolidation and interconnectivity increases the risk of operational failure, on both individual and industry-wide bases, as disparate complex systems need to be integrated, often on an accelerated basis. Any such cyber attack, information breach or loss, failure, termination or constraint could, among other things, adversely affect our ability to effect transactions, service our clients, manage our exposure to risk or expand our businesses.

~~Any of the matters discussed above could result in our loss of customers and business opportunities, significant business disruption to our operations and business, misappropriation or~~



16 Bank of America ~~2015~~2016

destruction of our confidential information and/or that of our customers, or damage to our customers’ and/or third parties’ computers or systems, and could result in a violation of applicable privacy laws and other laws, litigation exposure, regulatory fines, penalties or intervention, loss of confidence in our security measures, reputational damage, reimbursement or other compensatory costs, and additional compliance costs. In addition, any of the matters described above could adversely impact our results of operations, liquidity and financial condition.

~~Risk of Being an International Business~~

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

We do business throughout the world, including in developing regions of the world commonly known as emerging markets. 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 governmental policies or policies of central banks, expropriation, nationalization and/or confiscation of assets, price controls, capital controls, exchange controls, other restrictive actions, unfavorable political and diplomatic developments, oil price fluctuation and changes in legislation. These risks are especially elevated in emerging markets. A number of non-U.S. jurisdictions in which we do business have been negatively impacted by slowing growth rates or recessionary conditions, market volatility and/or political unrest. The eurozone economy grew modestly in 2015 but faces continuing challenges, including uncertainty regarding economic performance in emerging markets, some weakened appreciably by the severe decline in oil prices. The influx of refugees, related to the war in Syria, and continued political uncertainty relating to various nations’ fiscal plans have the potential to negatively impact consumer and business confidence and credit factors, affecting our business and operation results. Notably, sovereign debt purchases by the European Central Bank have supported Southern European financial markets but risks remain. The economy in China continues to gradually slow while facing longer term readjustment challenge. Russia and Brazil remain nations in the midst of severe downturns.

Additionally, the U.K. government has announced the possibility of a referendum regarding the U.K.’s continued membership in the EU. The referendum is expected to occur before the end of 2017. An exit of the U.K. from the EU could significantly affect the fiscal, monetary and regulatory landscape in the U.K. We conduct business in Europe primarily through our U.K. subsidiaries. An exit from the EU could impact our operations in the EU and may result in moving some of our operations in the U.K. to our EU based entities, which could impose costs on us and could have an impact on our business, finance condition and results of operations.

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

Our non-U.S. businesses are also subject to extensive regulation by various regulators, including governments, securities exchanges, central banks and other regulatory bodies, in the jurisdictions in which those businesses operate. 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 have an adverse effect not only on our businesses in that market but also on our reputation in general.

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 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 market countries, are generally smaller, less liquid and more volatile than U.S. trading markets.

In addition to non-U.S. legislation, our international operations are also subject to U.S. legal requirements. For example, our international operations are subject to U.S. laws on foreign corrupt practices, the Office of Foreign Assets Control, and anti-money laundering regulations.

We are subject to geopolitical risks, including acts or threats of terrorism, and actions taken by the U.S. or other governments in response thereto and/or military conflicts, which could adversely affect business and economic conditions abroad as well as in the U.S.

~~For more information on our non-U.S. credit and trading portfolios, see Non-U.S. Portfolio in the MD&A on page 86.~~

~~Risk from Accounting Changes~~

~~Changes in accounting standards or inaccurate estimates 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 (such as the Financial Accounting Standards Board (FASB), 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 retroactively, resulting in the Corporation possibly needing to revise and republish prior-period financial statements.

~~The FASB issued in 2012 a proposed standard on accounting for credit losses. The standard would replace multiple existing impairment models, including replacing an “incurred loss” model~~



		~~Bank of America 2015~~17

for loans with an “expected loss” model. The FASB has indicated a tentative effective date of January 1, 2019, and final guidance is expected to be issued in the second quarter of 2016. The final standard may materially reduce retained earnings in the period of adoption.

~~For more information on some of our critical accounting policies and recent accounting changes, see~~ ~~Complex Accounting Estimates~~ ~~in the MD&A on page~~ ~~100~~ ~~and~~ ~~Note 1 – Summary of~~

~~Significant Accounting Principlesto the Consolidated Financial Statements~~.

Item 1B. Unresolved Staff Comments

None

Item 2. Properties

As of December 31, ~~2015~~2016, our 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	1,200,392
Bank of America Tower at One Bryant Park	New York, NY	55 Story Building	GWIM, Global Banking and Global Markets	Leased ⁽²⁾	~~1,798,373~~1,836,575
Bank of America Merrill Lynch Financial Centre	London, UK	4 Building Campus	Global Banking and Global Markets	Leased	~~565,931~~565,866
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 ~~84.3~~81.7 million square feet in ~~22,512~~21,194 facility and ATM locations globally, including approximately ~~78.4~~76.0 million square feet in the U.S. (all 50 states and the District of Columbia, the U.S. Virgin Islands and Puerto Rico) and approximately ~~5.9~~5.7 million square feet in more than 35 countries.

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

Item 3. Legal Proceedings

See Litigation and Regulatory Matters in Note 12 – Commitments and Contingencies to the Consolidated Financial Statements, which is incorporated herein by reference.

Item 4. Mine Safety Disclosures

None



		18Bank of America ~~2015~~201617

Part II

Bank of America Corporation and Subsidiaries

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

The principal market on which our common stock is traded is the New York Stock Exchange. Our common stock is also listed on the London Stock Exchange and the Tokyo Stock Exchange. As of February ~~23, 2016,~~22, 2017, there were ~~193,422~~183,458 registered shareholders of common stock. The table below sets forth the high and low closing sales prices of the common stock on the New York Stock Exchange for the periods indicated during ~~2014~~2015 and ~~2015,~~2016, as well as the dividends we paid on a quarterly basis:



	Quarter	High		Low		Dividend
2014	First	$	17.92	$	16.10	$	0.01
	Second	17.34		14.51		0.01
	Third	17.18		14.98		0.05
	Fourth	18.13		15.76		0.05		Quarter	High		Low		Dividend
2015	First	17.90		15.15		0.05		First	$	17.90	$	15.15	$	0.05
	Second	17.67		15.41		0.05		Second	17.67		15.41		0.05
	Third	18.45		15.26		0.05		Third	18.45		15.26		0.05
	Fourth	17.95		15.38		0.05		Fourth	17.95		15.38		0.05
2016								First	16.43		11.16		0.05
								Second	15.11		12.18		0.05
								Third	16.19		12.74		0.075
								Fourth	23.16		15.63		0.075

For more information regarding our ability to pay dividends, see Note 13 – Shareholders’ Equity and Note 16 – Regulatory Requirements and Restrictions to the Consolidated Financial Statements, which are incorporated herein by reference.

For information on our equity compensation plans, see Note 18 – Stock-based Compensation Plans to the Consolidated Financial Statements and Item 12 on page ~~254~~218 of this report, which are incorporated herein by reference.

The table below presents share repurchase activity for the three months ended December 31, ~~2015.~~2016. The primary source of funds for cash distributions by the Corporation to its shareholders is dividends received from its banking subsidiaries. Each of the banking subsidiaries is subject to various regulatory policies and requirements relating to the payment of dividends, including requirements to maintain capital above regulatory minimums. All of the Corporation’s preferred stock outstanding has preference over the Corporation’s common stock with respect to payment of dividends.

(Dollars in millions, except per share information; shares in thousands)
Common Shares Repurchased ⁽¹⁾
Weighted-Average Per Share Price
Shares
Purchased as
Part of Publicly
Announced Programs

Remaining Buyback
Authority Amounts ⁽²⁾
October 1 - 31, 2015 16,051
$ 16.20
16,051
$ 2,166
November 1 - 30, 2015 31,129
17.37
31,060
1,626
December 1 - 31, 2015 2
17.47
—
1,626
Three months ended December 31, 2015 47,182
16.97




(Dollars in millions, except per share information; shares in thousands)	Common Shares Repurchased ⁽¹⁾	Weighted-Average Per Share Price		Shares Purchased as Part of Publicly Announced Programs	Remaining Buyback Authority Amounts ⁽²⁾
October 1 - 31, 2016	18,801	$	16.45	18,800	$	3,291
November 1 - 30, 2016	30,128	17.72		30,128	2,757
December 1 - 31, 2016	22,323	21.76		22,320	2,271
Three months ended December 31, 2016	71,252	18.65


⁽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 under equity incentive plans.

⁽²⁾

The Corporation's 2016 CCAR capital plan included a request to repurchase $5.0 billion of common stock over four quarters beginning in the third quarter of 2016 and to repurchase common stock to offset the dilution resulting from certain equity-based compensation awards. On ~~March 11, 2015,~~June 29, 2016, following the Federal Reserve's non-objection to the Corporation's 2016 CCAR capital plan, the Board authorized this common stock repurchase beginning July 1, 2016. During the three months ended December 31, 2016, pursuant to the Board's authorization, the Corporation repurchased $1.3 billion of ~~Directors authorized~~common stock, which included common stock to offset equity-based compensation awards. On January 13, 2017, the Corporation announced that the Board approved the repurchase of ~~up to $4.0~~an additional $1.8 billion of ~~the Corporation’s~~ common stock ~~through open market purchases or privately negotiated transactions, including Rule 10b5-1 plans,~~ during the ~~period from April 1, 2015 through June 30, 2016.~~first and second quarters of 2017. Amounts shown in such column do not include such additional repurchase authority. For additional information, see Capital Management -- CCAR and Capital Planning on page 5345 and Note 13 – Shareholders’ Equity to the Consolidated Financial Statements.

The Corporation did not have any unregistered sales of its equity securities in ~~2015.~~2016.

Item 6. Selected Financial Data

See Table 87 in the MD&A on page 2926 and Statistical Table XXII in the MD&A on page ~~118,~~105, which are incorporated herein by reference.



		18Bank of America ~~2015~~192016



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		2220
Recent Events		2221
Financial Highlights		2422
Balance Sheet Overview		2724
Supplemental Financial Data		3027
Business Segment Operations		3229
Consumer Banking		3330
Global Wealth & Investment Management		3633
Global Banking		3835
Global Markets		40
~~Legacy Assets & Servicing~~37		42
All Other		4539
Off-Balance Sheet Arrangements and Contractual Obligations		4640
Managing Risk		4941
Strategic Risk Management		5344
Capital Management		5345
Liquidity Risk		6051
Credit Risk Management		6555
Consumer Portfolio Credit Risk Management		6656
Commercial Portfolio Credit Risk Management		7766
Non-U.S. Portfolio		8674
Provision for Credit Losses		8875
Allowance for Credit Losses		8875
Market Risk Management		9279
Trading Risk Management		9380
Interest Rate Risk Management for ~~Non-trading Activities~~ the Banking Book		9784
Mortgage Banking Risk Management		9986
Compliance Risk Management		9986
Operational Risk Management		9986
Reputational Risk Management		~~100~~87
Complex Accounting Estimates		~~100~~87
~~2014~~2015 Compared to ~~2013~~2014		~~105~~90
Overview		~~105~~90
Business Segment Operations		~~106~~ 92
Statistical Tables		~~108~~93
Glossary		~~126~~110



		20Bank of America ~~2015~~201619

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

~~This report, the documents that it incorporates by reference and the documents into which it may be incorporated by reference may contain, and from time to time~~ Bank of America Corporation ~~(collectively with its subsidiaries, the Corporation)~~(the "Corporation") and its management may make certain statements that constitute ~~forward-looking statements~~"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,” "suggests" and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.” Forward-looking statements represent the ~~Corporation~~’sCorporation's current expectations, plans or forecasts of its future results, ~~and~~ 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~~’sCorporation's control. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements.

You should not place undue reliance on any forward-looking statement and should consider the following uncertainties and risks, as well as the risks and uncertainties more fully discussed ~~elsewhere in this report, including~~ under Item 1A. Risk Factors of this Annual Report on Form 10-K and in any of the Corporation’s subsequent Securities and Exchange Commission filings: the Corporation’s ability to resolve representations and warranties repurchase and related claims, including claims brought by investors or trustees seeking to distinguish certain aspects of the New York Court of Appeals' ACE Securities Corp. v. DB Structured Products, Inc. (ACE) decision or to assert other claims seeking to avoid the impact of the ACE decision; 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 possibility that the Corporation may not collect mortgage insurance claims;~~ potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation and regulatory

proceedings, including the possibility that amounts may be in excess of the Corporation’s recorded liability and estimated range of possible ~~losses~~loss for litigation exposures; the possible outcome of LIBOR, other reference rate, financial instrument and foreign exchange inquiries, investigations and ~~investigations;~~litigation; 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 (including rising, negative or continued low interest rates), currency exchange rates and economic conditions; the possibility that future credit losses may be higher than currently expected due to changes in economic assumptions, customer behavior and other uncertainties; the impact on the Corporation’s business, financial condition and results of operations of a potential higher interest rate environment; 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 or other projections; 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 potential ~~adoption~~impact of total loss-absorbing capacity requirements; potential adverse changes to our global systemically important bank (G-SIB) surcharge; the potential for payment protection insurance exposure to increase as a result of Financial Conduct Authority actions; the ~~possible~~ 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 ~~new and evolving~~ 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 ~~cyber attacks~~cyberattacks; the impact on the Corporation's business, financial condition and results of operations from the potential 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-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.



		~~Bank of America 2015~~21

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 ~~five~~four business segments: Consumer Banking, Global Wealth & Investment Management (GWIM), Global Banking, and Global Markets ~~and~~ ~~Legacy Assets & Servicing (LAS)~~, with the remaining operations recorded in All Other. We operate our banking activities primarily under the Bank of America, National Association (Bank of America, N.A. or BANA) charter. At December 31, ~~2015,~~2016, the Corporation had approximately ~~$2.1~~$2.2 trillion in assets and approximately ~~213,000~~208,000 full-time equivalent employees.

As of December 31, ~~2015~~,2016, 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 80 percent of the U.S. population, and we serve



20 Bank of America 2016

approximately 4746 million consumer and small business relationships with approximately ~~4,700~~4,600 retail financial centers, approximately ~~16,000~~15,900 ATMs, ~~nationwide call centers,~~ and leading online (www.bankofamerica.com) and mobile banking platforms ~~(www.bankofamerica.com).~~with approximately 34 million active accounts and more than 22 million mobile active users. We offer industry-leading support to approximately three million small business owners. Our wealth management businesses, with client balances of ~~nearly~~approximately $2.5 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.

~~2015~~2016 Economic and Business Environment

InThe economy in the U.S.~~, the economy~~ grew in ~~2015~~2016 for the seventh consecutive year. Following a soft start to the year partly reflecting severe winter weather, domestic demand grew at a moderate pace over the remainder of the year. Suppressed by a slowdown in housing gains and ~~other temporary factors, economic~~a decrease in state and local government purchases, domestic spending growth ~~picked up mid-year before a mild deceleration near year end. While economic growth struggled to reach~~was less than two percent, while weak exports, in part a lagged response to the ~~year,~~sharp U.S. dollar appreciation of recent years, and continued inventory reductions by businesses also had a negative impact on GDP growth.

Meanwhile, the labor market continued to ~~improve.~~tighten, and average hourly earnings increased at the fastest pace since 2008. Payroll gains ~~were~~remained solid, ~~while~~and the unemployment rate ~~fell to five percent late in~~trended downward, with the ~~year.~~decline limited by stabilizing labor force participation. With ~~steady~~ employment ~~gains~~ and ~~continued low oil prices,~~wages both rising, consumer spending, ~~increased at a strong pace for most~~the largest component of the ~~year and residential construction gained momentum.~~U.S. economy, was an economic bright spot. Core inflation (which, unlike headline inflation, excludes certain items ~~which may be~~ subject to frequent volatile price ~~changes, like~~change such as food and energy) also increased during 2016, but remained ~~relatively unchanged in 2015, more than half a percentage point~~ below ~~the Board of Governors of~~ the Federal Reserve System’s (Federal Reserve) longer-term target of two percent. ~~Inflation was suppressed by falling~~Meanwhile, headline inflation recovered, as energy ~~costs.~~costs began to reverse some of their large declines of recent years.

~~U.S. household net worth rose~~Following a weak start, equity markets advanced in 2016. Higher energy costs improved the trajectory of the manufacturing sector and the outlook for ~~a seventh consecutive year, but at a slower pace~~business investment. Treasury yields decreased in ~~2015. After a modest~~the first half of the year, ~~home prices rebounded in~~but more than reversed their declines during the second half, ~~of 2015 and rose more than five percent~~especially in ~~2015, while equity markets registered little net change. With energy costs continuing~~the fourth quarter. The U.S. dollar followed a similar pattern, depreciating in the first half only to ~~decline~~reverse the losses later in ~~2015,~~ the

year.

consumer spending outlook remained positive, although the negative impacts on energy-related investments hurt the manufacturing economy and continued to impact financial markets. With the sharp U.S. Dollar appreciation in late 2014 and 2015, export gains slowed, further weakening manufacturing, while import growth was steady, resulting inFor a ~~decline in net exports and a negative impact on 2015 gross domestic product growth.~~

~~U.S. Treasury yields were unstable, but rose modestly over the course of the year, as a rate hike from the Federal Reserve neared. At its final meeting of the~~second consecutive year, the Federal Open Market Committee ~~(FOMC)~~ raised its target range for the Federal funds rate by 25 basis points (bps), at the year’s final meeting. With a stronger economy, rising inflation and continued labor market tightening, Federal Reserve members raised expectations that if economic growth continued, the pace of rate increases will pick up in 2017, although the removal of accommodation would remain gradual. The contrast between U.S. tightening and quantitative easing in Europe and Japan remained a source of dollar strength.

Internationally, the Eurozone grew moderately in 2016 amid increasing political uncertainty and fragmentation which led to political impasse and fragile governments in many countries, including Italy and Spain. In this context, the European Central Bank extended its ~~first rate increase in over nine years.~~quantitative easing program, albeit at a slower pace. At the same time, the ~~Federal Reserve repeated its expectation that policy would be normalized gradually, and would remain accommodative~~U.K. surprised financial markets by voting in favor of leaving the EU. Despite this decision, the U.K. economy proved resilient. Activity in Japan continued to expand in 2016. However, inflation fell back into negative territory for most of the ~~foreseeable future. Amid~~year, forcing the ~~contrast between U.S. tightening~~Bank of Japan to adopt a new monetary policy ~~versus the easing of monetary policy~~framework aimed at targeting sovereign yields. Aided in ~~much of the world, the U.S. Dollar appreciated significantly over the year, especially against emerging market and commodity-oriented currencies.~~

Internationally, the eurozone continued to grow modestly in 2015, as the European Central Bank (ECB) began a program of significant purchases of sovereign debt, helping to keep bond yields low and to maintain stability in southern European markets. Core inflation in the eurozone stabilized early and then edged higher over the year. The Euro/U.S. Dollar exchange rate continued to decline early in the year drivenpart by the ~~differing directions~~increase in oil prices, the Russian and Brazilian economies showed signs of U.S. and eurozone monetary policies, further boosting European competitiveness. However, the eurozone remains vulnerable to economic slowing in emerging markets. Late in the year, the ECB extended its horizon for bond purchases, but failed to increasestabilizing following their ~~size.~~

~~Economic growth was slow and uncertain in Japan, while the 2014 gains in core inflation were reversed. Declining energy costs continued to hurt Russia’s~~deep recessions. China’s economy ~~which remained in recession for 2015. Brazil’s recession also continued, aggravated by extreme policy uncertainty. Amid continued gradual economic moderation, China eased monetary policy~~decelerated modestly during the year, ~~but continued~~as its ~~focus~~transition towards a growth model less focused on ~~longer-run issues including increasing its focus on rebalancing the economy~~trade, and ~~encouraging consumer spending.~~public investment continued.

Recent Events

~~Settlement with Bank of New York Mellon~~

The final conditions of the settlement with the Bank of New York Mellon (BNY Mellon) have been satisfied and, accordingly, the Corporation made the settlement payment of $8.5 billion in February 2016. The settlement payment was previously fully reserved. Pursuant to the settlement agreement, allocation and distribution of the $8.5 billion settlement payment is the responsibility of the residential mortgage-backed securities (RMBS) trustee, BNY Mellon. On February 5, 2016, BNY Mellon filed an Article 77 proceeding in the New York County Supreme Court asking the court for instruction with respect to certain issues concerning the distribution of each trust’s allocable share of the settlement payment and asking that the settlement payment be ordered to be held in escrow pending the outcome of this Article 77 proceeding. The Corporation is not a party to this proceeding. For additional information, see Off-Balance Sheet Arrangements and Contractual Obligations on page 46.



22 ~~Bank of America 2015~~

Capital Management

During ~~2015,~~2016, we repurchased approximately ~~$2.4~~$5.1 billion of common stock ~~with an average price~~pursuant to the Board of ~~$16.92 per share, in connection with~~Directors’ (the Board) authorization of our 2016 and 2015 Comprehensive Capital Analysis and Review (CCAR) capital plans and to offset equity-based compensation awards. Also, in addition to the previously announced repurchases associated with the 2016 CCAR capital plan, ~~which included~~on January 13, 2017, we announced a ~~request~~plan to repurchase ~~$4.0~~an additional $1.8 billion of common stock ~~over five quarters beginning in~~during the ~~second quarter~~first half of ~~2015, and~~2017, to ~~maintain the quarterly common stock dividend at the current rate of $0.05 per share.~~

~~Based on the conditional non-objection we received from~~which the Federal Reserve on our 2015 CCAR submission, we were required to resubmit our CCAR capital plan by September 30, 2015 and address certain weaknesses the Federal Reserve identified in our capital planning process. We have established plans and taken actions which addressed the identified weaknesses, and we resubmitted our CCAR capital plan on September 30, 2015. The Federal Reserve announced that it did not ~~object to our resubmitted CCAR capital plan on December 10, 2015.~~

As an Advanced approaches institution, under Basel 3, we were required to complete a qualification period (parallel run) to demonstrate compliance with the Basel 3 Advanced approaches capital framework to the satisfaction of U.S. banking regulators. We received approval to begin using the Advanced approaches capital framework to determine risk-based capital requirements beginning in the fourth quarter of 2015. As previously disclosed, with the approval to exit parallel run, U.S. banking regulators requested modifications to certain internal analytical models including the wholesale (e.g., commercial) credit models. All requested modifications were incorporated, which increased our risk-weighted assets, and are reflected in the risk-based ratios in the fourth quarter of 2015. Having exited parallel run on October 1, 2015, we 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 Prompt Corrective Action (PCA) framework and was the Advanced approaches in the fourth quarter of 2015.object. For additional information, see Capital Management on page ~~53.~~

45.

Sale of Non-U.S. Consumer Credit Card Business

~~Trust Preferred Securities~~

On December ~~29, 2015,~~20, 2016, we entered into an agreement to sell our non-U.S. consumer credit card business to a third party. Subject to regulatory approval, this transaction is expected to close by mid-2017. After closing, we will retain substantially all payment protection insurance (PPI) exposure above existing reserves. We have considered this exposure in our estimate of a small after-tax gain on the ~~Corporation provided notice~~sale. This transaction, once completed, will reduce risk-weighted assets and goodwill, benefiting regulatory capital. At December 31, 2016, the assets of this business, which are presented in assets of business held for sale on the ~~redemption~~Consolidated Balance Sheet, included non-U.S. credit card loans of $9.2 billion. This business is included in All Other for reporting purposes. For more information on ~~January 29, 2016~~the assets and liabilities of ~~all trust preferred securities~~this business, see Note 1 – Summary of Merrill Lynch Preferred Capital Trust III, Merrill Lynch Preferred Capital Trust IV and Merrill Lynch Preferred Capital Trust V (the Trust Preferred Securities). In connection with the Corporation’s acquisition of Merrill Lynch & Co., Inc. in 2009, the Corporation recorded a discount to par value as purchase accounting adjustments associated with the Trust Preferred Securities. The Corporation recorded a $612 million charge to net interest income relatedSignificant Accounting Principles to the ~~discount on these securities.~~

~~New Accounting Guidance on Recognition and Measurement of~~Consolidated Financial ~~Instruments~~

In January 2016, the Financial Accounting Standards Board (FASB) issued new accounting guidance on recognition and measurement of financial instruments. The Corporation has early adopted, retrospective to January 1, 2015, the provision that requires the Corporation to present unrealized gains and losses resulting from changes in the Corporation’s own credit spreads on liabilities accounted for under the fair value option (referred to as debit valuation adjustments, or DVA) in accumulated other comprehensive income (OCI). The impact of the adoption was to reclassify, as of January 1, 2015, unrealized DVA losses of $2.0 billion pretax ($1.2 billion after tax) from retained earnings to accumulated OCI. Further, pretax unrealized DVA gains of $301 million, $301 million and $420 million were reclassified from other income to accumulated OCI for the third, second and first quarters of 2015, respectively. This had the effect of reducing net income as previously reported for the aforementioned quarters by $187 million, $186 million and $260 million, or approximately $0.02 per share in each quarter. This change is reflected in consolidated results and the Statements.~~Global Markets~~ ~~segment results. Results for 2014 were not subject to restatement under the provisions of the new accounting guidance.~~

~~Selected Financial Data~~

~~Table~~ 1 ~~provides selected consolidated financial data for~~ ~~2015~~ ~~and~~ ~~2014~~.

Table 1 Selected Financial Data

(Dollars in millions, except per share information) 2015 2014
Income statement

Revenue, net of interest expense (FTE basis) ⁽¹⁾
$ 83,416
$ 85,116
Net income 15,888
4,833
Diluted earnings per common share 1.31
0.36
Dividends paid per common share 0.20
0.12
Performance ratios

Return on average assets 0.74 % 0.23 %
Return on average tangible common shareholders’ equity ⁽¹⁾
9.11
2.52
Efficiency ratio (FTE basis) ⁽¹⁾
68.56
88.25
Balance sheet at year end

Total loans and leases $ 903,001
$ 881,391
Total assets 2,144,316
2,104,534
Total deposits 1,197,259
1,118,936
Total common shareholders’ equity 233,932
224,162
Total shareholders’ equity 256,205
243,471


⁽¹⁾	Fully taxable-equivalent (FTE) basis, return on average tangible common shareholders’ equity and the efficiency ratio are non-GAAP financial measures. Other companies may define or calculate these measures differently. For additional information, see ~~Supplemental Financial Data~~ ~~on page~~ 30~~, and for corresponding reconciliations to GAAP financial measures, see Statistical Table XIII.~~



		Bank of America ~~2015~~2016 2321

Selected Financial ~~Highlights~~Data

~~Net income was~~Table ~~$15.9 billion, or~~ ~~$1.31~~1 ~~per diluted share in~~provides selected consolidated financial data for 2016 and 2015 ~~compared to~~ ~~$4.8 billion, or~~ ~~$0.36~~ ~~per diluted share in~~ ~~2014~~. ~~The results for~~ ~~2015~~ compared to 2014 were primarily driven by a decrease of $15.2 billion in litigation expense, as well as decreases in all other noninterest expense categories, partially offset by a decline in net interest income on a fully taxable-equivalent (FTE) basis, higher provision for credit losses and lower revenue. Included in net interest income on an FTE basis was a charge related to the discount on certain trust preferred securities of $612 million in 2015, as well as a negative market-related adjustment on debt securities of $296 million compared to a negative market-related adjustment of $1.1 billion in 2014.

Total assets increased $39.8 billion from December 31, 2014 to $2.1 trillion at December 31, 2015 primarily driven by an increase in debt securities due to the deployment of deposit inflows, an increase in loans driven by strong demand for commercial loans outpacing consumer loan sales and run-off, and higher cash and cash equivalents from strong deposit inflows. Total liabilities increased $27.0 billion from December 31, 2014 to $1.9 trillion at December 31, 2015 primarily driven by an increase in deposits, partially offset by declines in securities loaned or sold under agreements to repurchase, trading account liabilities and long-term debt. During 2015, we returned $5.9 billion in capital to shareholders through common and preferred stock dividends and share repurchases. For more information on the balance sheet, see Executive Summary – Balance Sheet Overview on page 27.

From a capital management perspective, during 2015, we maintained our strong capital position with Common equity tier 1 capital of $163.0 billion, risk-weighted assets of $1,602 billion and a Common equity tier 1 capital ratio of 10.2 percent at December 31, 2015 as measured under the Basel 3 Advanced – Transition. On September 3, 2015, we received approval to exit parallel run and begin using the Basel 3 Advanced approaches capital framework to determine risk-based capital requirements in the fourth quarter of 2015. The Corporation’s transitional supplementary leverage ratio (SLR) was 6.6 percent and 6.2 percent at December 31, 2015 and 2014, both above the 5.0 percent required minimum. Our Global Excess Liquidity Sources were $504 billion with time-to-required funding at 39 months at December 31, 2015 compared to $439 billion and 39 months at December 31, 2014. For additional information, see Capital Management on page 53 and Liquidity Risk on page 60.

Table 2 Summary Income Statement

(Dollars in millions) 2015 2014
Net interest income (FTE basis)⁽¹⁾
$ 40,160
$ 40,821
Noninterest income 43,256
44,295
Total revenue, net of interest expense (FTE basis)⁽¹⁾
83,416
85,116
Provision for credit losses 3,161
2,275
Noninterest expense 57,192
75,117
Income before income taxes (FTE basis) ⁽¹⁾
23,063
7,724
Income tax expense (FTE basis)⁽¹⁾
7,175
2,891
Net income 15,888
4,833
Preferred stock dividends 1,483
1,044
Net income applicable to common shareholders $ 14,405
$ 3,789

Per common share information
Earnings $ 1.38
$ 0.36
Diluted earnings 1.31
0.36




Table 1	Selected Financial Data

(Dollars in millions, except per share information)		2016			2015
Income statement
Revenue, net of interest expense		$	83,701		$	82,965
Net income		17,906			15,836
Diluted earnings per common share		1.50			1.31
Dividends paid per common share		0.25			0.20
Performance ratios
Return on average assets		0.82		%	0.73		%
Return on average common shareholders' equity		6.71			6.24
Return on average tangible common shareholders’ equity ⁽¹⁾		9.54			9.08
Efficiency ratio		65.65			69.59
Balance sheet at year end
Total loans and leases		$	906,683		$	896,983
Total assets		2,187,702			2,144,287
Total deposits		1,260,934			1,197,259
Total common shareholders’ equity		241,620			233,903
Total shareholders’ equity		266,840			256,176

⁽¹⁾

~~FTE basis~~Return on average tangible common shareholders' equity is a non-GAAP financial measure. For ~~more~~additional information, ~~on this measure,~~ see Supplemental Financial Data on page 3027, and for a corresponding ~~reconciliation~~reconciliations to ~~GAAP~~accounting principles generally accepted in the United States of America (GAAP) financial measures, see Statistical Table ~~XIII.~~XV.

Financial Highlights

Net income was $17.9 billion, or $1.50 per diluted share in 2016 compared to $15.8 billion, or $1.31 per diluted share in 2015. The results for 2016 compared to 2015 were driven by higher net interest income and lower noninterest expense, partially offset by a decline in noninterest income and higher provision for credit losses.




Table 2	Summary Income Statement

(Dollars in millions)		2016		2015
Net interest income		$	41,096	$	38,958
Noninterest income		42,605		44,007
Total revenue, net of interest expense		83,701		82,965
Provision for credit losses		3,597		3,161
Noninterest expense		54,951		57,734
Income before income taxes		25,153		22,070
Income tax expense		7,247		6,234
Net income		17,906		15,836
Preferred stock dividends		1,682		1,483
Net income applicable to common shareholders		$	16,224	$	14,353

Per common share information
Earnings		$	1.58	$	1.37
Diluted earnings		1.50		1.31

Net Interest Income

Net interest income ~~on an FTE basis~~ ~~decreased$661 million~~increased $2.1 billion to ~~$40.2~~$41.1 billion in ~~2015~~2016 compared to ~~2014~~.2015. The net interest yield ~~on an FTE basis~~ ~~decreasedfive~~increased seven bps to ~~2.20~~2.21 percent for ~~2015~~.2016. These ~~declines~~increases were primarily driven by ~~lower loan yields~~growth in commercial loans, the impact of higher short-end interest rates and ~~consumer loan~~increased debt securities balances, as well as a charge of $612 million in 2015 related to the ~~discount on~~redemption of certain trust preferred securities, partially offset by ~~a $785 million improvement in~~lower loan spreads and market-related ~~adjustments on debt securities, lower funding costs, higher trading-related~~hedge ineffectiveness. We expect net interest income ~~lower~~to increase approximately $600 million per quarter beginning in the first quarter of 2017, assuming interest rates ~~paid on deposits~~remain at the year-end 2016 level and ~~commercial loan growth. Market-related adjustments on debt securities resulted~~modest growth in ~~an expense of $296 million in 2015~~loans and deposits.

Noninterest Income




Table 3	Noninterest Income

(Dollars in millions)		2016		2015
Card income		$	5,851	$	5,959
Service charges		7,638		7,381
Investment and brokerage services		12,745		13,337
Investment banking income		5,241		5,572
Trading account profits		6,902		6,473
Mortgage banking income		1,853		2,364
Gains on sales of debt securities		490		1,138
Other income		1,885		1,783
Total noninterest income		$	42,605	$	44,007

Noninterest income decreased $1.4 billion to $42.6 billion for 2016 compared to ~~an expense of $1.1 billion in 2014. Negative market-related adjustments on debt securities were primarily due to~~2015. The following highlights the acceleration of premium amortization on debt securities as the decline in long-term interest rates shortened the estimated lives of mortgage-related debt securities. Also included in market-related adjustments is hedge ineffectiveness that impacted net interest income. For additional information, see ~~Note 1 – Summary of Significant Accounting Principles~~ ~~to the Consolidated Financial Statements.~~significant changes.


●	Service charges increased $257 million primarily due to higher treasury-related revenue.


●	Investment and brokerage services income decreased $592 million driven by lower transactional revenue, and decreased asset management fees due to lower market valuations, partially offset by the impact of higher long-term assets under management (AUM) flows.


●	Investment banking income decreased $331 million driven by lower equity issuance fees and advisory fees due to a decline in market fee pools.


●	Trading account profits increased $429 million due to a stronger performance across credit products led by mortgages and continued strength in rates products, partially offset by reduced client activity in equities.


●	Mortgage banking income decreased $511 million primarily driven by a decline in production income, higher representations and warranties provision and lower servicing income, partially offset by more favorable mortgage servicing rights (MSR) results, net of the related hedge performance.


●	Gains on sales of debt securities decreased $648 million primarily driven by lower sales volume.



2422 Bank of America ~~2015~~2016

~~Noninterest Income~~

Table 3 Noninterest Income

(Dollars in millions) 2015 2014
Card income $ 5,959
$ 5,944
Service charges 7,381
7,443
Investment and brokerage services 13,337
13,284
Investment banking income 5,572
6,065
Equity investment income 261
1,130
Trading account profits 6,473
6,309
Mortgage banking income 2,364
1,563
Gains on sales of debt securities 1,091
1,354
Other income 818
1,203
Total noninterest income $ 43,256
$ 44,295

~~Noninterest income~~ ~~decreased$1.0 billion~~ to ~~$43.3 billion~~ ~~for~~ ~~2015~~ ~~compared to~~ ~~2014. The following highlights the significant changes.~~


Ÿ●	~~Investment banking~~Other income ~~decreased $493~~increased $102 million ~~driven by lower debt and equity issuance fees, partially offset by higher advisory fees.~~


Ÿ	~~Equity investment income~~ ~~decreased~~ ~~$869 million as 2014 included a gain on the sale of a portion of an equity investment and gains from an initial public offering (IPO) of an equity investment in~~ ~~Global Markets~~.

Trading account profits increased $164 million. Excluding DVA, trading account profits decreased $330 million driven by declines in credit-related products reflecting lower client activity, partially offset by strong performance in equity derivatives, increased client activity in equities in the Asia-Pacific region, improvement in currencies on higher client flows and increased volatility. For more information on trading account profits, see ~~Global Markets~~ ~~on page 40.~~

~~Mortgage banking income~~ ~~increased$801 million~~ primarily due to lower ~~provision for representations~~debit valuation adjustment (DVA) losses on structured liabilities, improved results from loans and ~~warranties~~the related hedging activities in ~~2015 compared to 2014,~~the fair value option portfolio, and ~~to a lesser extent, improved mortgage servicing rights (MSR) net-of-hedge performance and an increase in core production revenue,~~lower PPI expense, partially offset by ~~a decline in servicing fees.~~

~~Other income decreased~~ ~~$385 million~~ ~~primarily due~~lower gains on asset sales. DVA losses related to ~~DVA gains of $407~~structured liabilities were $97 million in ~~2014~~2016 compared to ~~DVA losses of~~ $633 million in ~~2015, partially offset by higher gains on asset sales and lower U.K. consumer payment protection insurance (PPI) costs in~~ 2015. ~~For more information on the accounting change related to DVA, see Executive Summary – Recent Events on page 22.~~

Provision for Credit Losses

Table 4 Credit Quality Data

(Dollars in millions) 2015 2014
Provision for credit losses
Consumer $ 2,208
$ 1,482
Commercial 953
793
Total provision for credit losses $ 3,161
$ 2,275

Net charge-offs ⁽¹⁾
$ 4,338
$ 4,383
Net charge-off ratio ⁽²⁾
0.50 % 0.49 %


⁽¹⁾	~~Net charge-offs exclude write-offs in the purchased credit-impaired loan portfolio.~~


⁽²⁾	~~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.~~

The provision for credit losses increased~~$886~~ $436 million to ~~$3.2~~$3.6 billion for ~~2015~~2016 compared to ~~2014. The provision for credit losses was~~ ~~$1.2 billion~~ ~~lower than net charge-offs for~~ 2015, resulting in a reduction in the allowance for credit losses. The provision for credit losses in 2014 included $400 million of additional costs associated with the consumer relief portion of the settlement with the U.S. Department of Justice (DoJ). Excluding these additional costs, the provision for credit losses in the consumer portfolio increased $1.1 billion compared to 2014 due to a slower pace of portfolio improvement than in 2014, and also due to a lower level of recoveries on nonperforming loan sales and other recoveries in 2015. The provision for credit losses for the commercial portfolio increased $160 million in 2015 compared to 2014 driven by energy sector exposure and higher unfunded balances. The decrease in net charge-offs was primarily due to credit quality improvement in the consumer portfolio ~~partially offset by~~and an increase in energy sector reserves for the higher ~~net charge-offs~~risk energy sub-sectors in the commercial ~~portfolio primarily due to lower net recoveries in commercial real estate and higher energy-related net charge-offs.~~

As we look at 2016, reserve releases are expected to decrease from 2015 levels. All else equal, this would result in increased provision expense, assuming sustained stability in underlying asset quality.portfolio. For more information on the provision for credit losses, see Provision for Credit Losses on page ~~88.~~75. For more information on our energy sector exposure, see Commercial Portfolio Credit Risk Management – Industry Concentrations on page 71.



		~~Bank of America 2015~~25

Noninterest Expense



Table 5	Noninterest Expense
Table 4						Noninterest Expense

(Dollars in millions)	(Dollars in millions)	2015		2014		(Dollars in millions)	2016		2015
Personnel	Personnel	$	32,868	$	33,787	Personnel	$	31,616	$	32,868
Occupancy	Occupancy	4,093		4,260		Occupancy	4,038		4,093
Equipment	Equipment	2,039		2,125		Equipment	1,804		2,039
Marketing	Marketing	1,811		1,829		Marketing	1,703		1,811
Professional fees	Professional fees	2,264		2,472		Professional fees	1,971		2,264
Amortization of intangibles	Amortization of intangibles	834		936		Amortization of intangibles	730		834
Data processing	Data processing	3,115		3,144		Data processing	3,007		3,115
Telecommunications	Telecommunications	823		1,259		Telecommunications	746		823
Other general operating	Other general operating	9,345		25,305		Other general operating	9,336		9,887
Total noninterest expense	Total noninterest expense	$	57,192	$	75,117	Total noninterest expense	$	54,951	$	57,734

Noninterest expense decreased ~~$17.9~~$2.8 billion to ~~$57.2~~$55.0 billion for ~~2015~~2016 compared to ~~2014. The following highlights~~2015. Personnel expense decreased $1.3 billion as we continue to manage headcount and achieve cost savings. Continued expense management, as well as the ~~significant changes.~~expiration of advisor retention awards, more than offset the increases in client-facing professionals. Professional fees decreased $293 million primarily due to lower legal fees. Other general operating expense decreased $551 million primarily driven by lower foreclosed properties expense and lower brokerage fees, partially offset by higher FDIC expense.


Ÿ	~~Personnel expense~~ ~~decreased$919 million~~ ~~as we continue to streamline processes, reduce headcount and achieve cost savings.~~ We have previously announced an annual noninterest expense target of approximately $53 billion for full-year 2018.


Ÿ	~~Occupancy decreased $167 million primarily due to our focus on reducing our rental footprint.~~


Ÿ	~~Professional fees decreased $208 million due to lower default-related servicing expenses and legal fees.~~


Ÿ	~~Telecommunications expense decreased $436 million due to efficiencies gained as we have simplified our operating model, including in-sourcing certain functions.~~


Ÿ	Other general operating expense decreased $16.0 billion primarily due to a decrease of $15.2 billion in litigation expense which was primarily related to previously disclosed legacy mortgage-related matters and other litigation charges in 2014.

Income Tax Expense



Table 6	Income Tax Expense
Table 5								Income Tax Expense

(Dollars in millions)	(Dollars in millions)	2015			2014			(Dollars in millions)	2016			2015
Income before income taxes	Income before income taxes	$	22,154		$	6,855		Income before income taxes	$	25,153		$	22,070
Income tax expense	Income tax expense	6,266			2,022			Income tax expense	7,247			6,234
Effective tax rate	Effective tax rate	28.3		%	29.5		%	Effective tax rate	28.8		%	28.2		%

The effective tax rate for ~~2015~~2016 was driven by our recurring tax ~~preference benefits~~preferences and net tax benefits related to ~~certain non-U.S. restructurings,~~various tax audit matters, partially offset by a charge for the impact of the U.K. tax law changes discussed below. The effective tax rate for ~~2014~~2015 was driven by our recurring tax ~~preference benefits, the resolution of several tax examinations~~preferences and by tax benefits ~~from~~related to certain non-U.S. restructurings, partially offset by a charge for the ~~non-deductible treatment~~impact of ~~certain litigation charges. We expect an effective tax rate in the low 30 percent range, absent unusual items, for 2016.~~

~~On November 18, 2015,~~ the U.K. tax law change enacted in 2015.

The U.K. Finance ~~(No. 2) Act 2015 (the Act)~~Bill 2016 was enacted on September 15, 2016. The changes included reducing the U.K. corporate income tax rate by ~~two~~one percent to ~~18 percent. The first one~~17 percent, ~~reduction will be~~ effective ~~on April 1, 2017 and the second on~~ April 1, 2020. ~~The Act also included~~This reduction favorably affects income tax expense on future U.K. earnings, but required a remeasurement of our U.K. net deferred tax ~~surcharge on~~assets using the lower tax rate. Accordingly, upon enactment, we recorded an income tax charge of $348 million. In addition, for banking companies, the portion of ~~eight percent, effective on January 1, 2016, and provided~~U.K. taxable income that can be reduced by existing net operating loss carryforwards ~~may not reduce the additional eight~~in any one taxable year has been reduced from 50 percent ~~income tax liability. Lastly, the Act provided that expenses for certain compensation payments, such as PPI, are not deductible~~ to ~~the extent attributable~~25 percent retroactive to ~~July 8, 2015 or later. These provisions resulted in a charge of approximately $290 million in 2015, primarily from remeasuring our~~April 1, 2016.

Our U.K. deferred tax assets, which consist primarily of net operating losses, are expected to be realized by certain subsidiaries over a number of years. Significant changes to management's earnings forecasts for those subsidiaries, changes in applicable laws, further changes in tax laws or changes in the ability of our U.K. subsidiaries to conduct business in the EU, could lead management to reassess our ability to realize the U.K. deferred tax assets. For additional information, see Item 1A. Risk Factors.



		26Bank of America ~~2015~~201623

Balance Sheet Overview



Table 7	Selected Balance Sheet Data
Table 6										Selected Balance Sheet Data

		December 31									December 31
(Dollars in millions)	(Dollars in millions)	2015			2014			% Change		(Dollars in millions)	2016			2015			% Change
Assets	Assets									Assets
Cash and cash equivalents	Cash and cash equivalents	$	159,353		$	138,589		15	%	Cash and cash equivalents	$	147,738		$	159,353		(7	)%
Federal funds sold and securities borrowed or purchased under agreements to resell	Federal funds sold and securities borrowed or purchased under agreements to resell	192,482			191,823			—		Federal funds sold and securities borrowed or purchased under agreements to resell	198,224			192,482			3
Trading account assets	Trading account assets	176,527			191,785			(8	)	Trading account assets	180,209			176,527			2
Debt securities	Debt securities	407,005			380,461			7		Debt securities	430,731			406,888			6
Loans and leases	Loans and leases	903,001			881,391			2		Loans and leases	906,683			896,983			1
Allowance for loan and lease losses	Allowance for loan and lease losses	(12,234		)	(14,419		)	(15	)	Allowance for loan and lease losses	(11,237		)	(12,234		)	(8	)
All other assets	All other assets	318,182			334,904			(5	)	All other assets	335,354			324,288			3
Total assets	Total assets	$	2,144,316		$	2,104,534		2		Total assets	$	2,187,702		$	2,144,287		2
Liabilities	Liabilities									Liabilities
Deposits	Deposits	$	1,197,259		$	1,118,936		7		Deposits	$	1,260,934		$	1,197,259		5
Federal funds purchased and securities loaned or sold under agreements to repurchase	Federal funds purchased and securities loaned or sold under agreements to repurchase	174,291			201,277			(13	)	Federal funds purchased and securities loaned or sold under agreements to repurchase	170,291			174,291			(2	)
Trading account liabilities	Trading account liabilities	66,963			74,192			(10	)	Trading account liabilities	63,031			66,963			(6	)
Short-term borrowings	Short-term borrowings	28,098			31,172			(10	)	Short-term borrowings	23,944			28,098			(15	)
Long-term debt	Long-term debt	236,764			243,139			(3	)	Long-term debt	216,823			236,764			(8	)
All other liabilities	All other liabilities	184,736			192,347			(4	)	All other liabilities	185,839			184,736			1
Total liabilities	Total liabilities	1,888,111			1,861,063			1		Total liabilities	1,920,862			1,888,111			2
Shareholders’ equity	Shareholders’ equity	256,205			243,471			5		Shareholders’ equity	266,840			256,176			4
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	2,144,316		$	2,104,534		2		Total liabilities and shareholders’ equity	$	2,187,702		$	2,144,287		2

Assets

At December 31, ~~2015,~~2016, total assets were approximately ~~$2.1~~$2.2 trillion, up ~~$39.8~~$43.4 billion from December 31, ~~2014.~~2015. The increase in assets was primarily ~~driven by an increase in~~due to higher debt securities ~~due to~~driven by the deployment of deposit inflows, an increase in loans and leases driven by ~~strong~~client demand for commercial loans, ~~outpacing consumer loan sales and run-off,~~ and higher ~~cash and cash equivalents from strong deposit inflows.~~securities borrowed or purchased under agreements to resell due to increased customer financing activity. These increases were partially offset by a decrease in ~~trading account assets due to repositioning activity on the balance sheet,~~cash and ~~a decrease in all other assets.~~cash equivalents as excess cash was deployed.

The Corporation took certain actions in 2015 to further strengthen liquidity in response to the Basel 3 Liquidity Coverage Ratio (LCR) requirements. Most notably, we exchanged residential mortgage loans supported by long-term standby agreements with Fannie Mae (FNMA) and Freddie Mac (FHLMC) into debt securities guaranteed by FNMA and FHLMC, which further improved liquidity in the asset and liability management (ALM) portfolio.

Cash and Cash Equivalents

Cash and cash equivalents ~~increased $20.8~~decreased $11.6 billion primarily ~~due to strong deposit inflows~~ driven by loan growth, ~~in customer~~net securities purchases and ~~client activity, partially offset by commercial loan growth.~~net debt maturities.

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

Federal funds transactions involve lending reserve balances on a short-term basis. Securities borrowed or purchased under agreements to resell are collateralized lending transactions utilized to accommodate customer transactions, earn interest rate spreads, and obtain securities for settlement and for collateral. Federal funds sold and securities borrowed or purchased under agreements to resell ~~remained relatively unchanged compared~~increased $5.7 billion due to ~~December 31, 2014, as an increase in securities borrowed~~a higher level of ~~$3.3 billion was offset by a decrease in reverse repurchase agreements of $2.6 billion.~~customer financing activity.

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 ~~decreased $15.3~~increased $3.7 billion primarily ~~due to balance sheet repositioning activity~~ driven by client demand within Global Markets.

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 ~~$26.5~~$23.8 billion primarily driven by the deployment of deposit ~~inflows and the exchange of certain loans into debt securities.~~inflows. For more information on debt securities, see Note 3 – Securities to the Consolidated Financial Statements.

Loans and Leases

Loans and leases increased ~~$21.6~~$9.7 billion compared to December 31, 2015. The increase consisted of $18.9 billion in net loan growth driven by strong client demand for commercial loans, ~~outpacing consumer loan sales~~partially offset by $9.2 billion in non-U.S. credit card loans that were reclassified from loans and ~~run-off.~~leases to assets of business held for sale, which is included in all other assets in the table above. For more information on the loan portfolio, see Credit Risk Management on page ~~65.~~55.

Allowance for Loan and Lease Losses

~~Allowance~~The allowance for loan and lease losses decreased ~~$2.2~~$1.0 billion primarily due to the impact of improvements in credit quality from ~~the improving~~a stronger economy. For additional information, see Allowance for Credit Losses on page ~~88.~~75.



		24Bank of America ~~2015~~272016

All Other Assets

All other assets ~~decreased $16.7~~increased $11.1 billion driven by ~~a decrease~~the reclassification of $10.7 billion in assets related to our non-U.S. credit card business primarily from loans and leases and debt securities to assets of business held for sale, which is included in all other ~~noninterest receivables, loans held-for-sale (LHFS) and derivative assets.~~assets in Table 6.

Liabilities

At December 31, ~~2015~~,2016, total liabilities were approximately $1.9 trillion, up ~~$27.0~~$32.8 billion from December 31, ~~2014,~~2015, primarily ~~driven by~~due to an increase in deposits, partially offset by ~~declines~~a decrease in ~~securities loaned or sold under agreements to repurchase, trading account liabilities and~~ long-term debt.

Deposits

Deposits increased ~~$78.3~~$63.7 billion primarily due to an increase in retail 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 ~~$27.0~~$4.0 billion primarily due to a decrease in repurchase agreements.

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 decreased ~~$7.2~~$3.9 billion primarily due to lower levels of short U.S. Treasury positions ~~due to balance sheet repositioning activity~~ driven by less 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 decreased ~~$3.1~~$4.2 billion primarily due to ~~planned reductions~~a decrease in short-term bank notes, partially offset by an increase in short-term FHLB ~~borrowings.~~Advances. For more information on short-term borrowings, see Note 10 – Federal Funds Sold or Purchased, Securities Financing Agreements and Short-term Borrowings to the Consolidated Financial Statements.

Long-term Debt

Long-term debt decreased ~~$6.4~~$19.9 billion primarily ~~due to the impact of revaluation of non-U.S. Dollar debt~~driven by maturities and changes in fair value for debt accounted for under the fair value option. These impacts were substantially offset through derivative hedge transactions. Excluding these two factors, total long-term debt remained relatively unchanged in 2015.redemptions outpacing issuances. For more information on long-term debt, see Note 11 – Long-term Debt to the Consolidated Financial Statements.

All Other Liabilities

All other liabilities ~~decreased $7.6~~increased $1.1 billion due to ~~a decrease~~an increase in derivative liabilities.

Shareholders’ Equity

Shareholders’ equity increased ~~$12.7~~$10.7 billion driven by earnings and preferred stock issuances, partially offset by returns of capital to shareholders of ~~$5.9~~$9.4 billion through common and preferred stock dividends and share repurchases, as well as a decrease in accumulated ~~OCI~~other comprehensive income (OCI) primarily due ~~primarily~~ to an increase in unrealized losses on available-for-sale (AFS) debt securities as a result of ~~the increase in~~higher interest rates.

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 additional information on liquidity, see Liquidity Risk on page ~~60.~~51.



		28Bank of America ~~2015~~201625



Table 8	Five-year Summary of Selected Financial Data ⁽¹⁾
Table 7																	Five-year Summary of Selected Financial Data

(In millions, except per share information)	(In millions, except per share information)	2015			2014			2013			2012			2011			(In millions, except per share information)	2016			2015			2014			2013			2012
Income statement	Income statement																Income statement
Net interest income	Net interest income	$	39,251		$	39,952		$	42,265		$	40,656		$	44,616		Net interest income	$	41,096		$	38,958		$	40,779		$	40,719		$	40,135
Noninterest income	Noninterest income	43,256			44,295			46,677			42,678			48,838			Noninterest income	42,605			44,007			45,115			46,783			42,663
Total revenue, net of interest expense	Total revenue, net of interest expense	82,507			84,247			88,942			83,334			93,454			Total revenue, net of interest expense	83,701			82,965			85,894			87,502			82,798
Provision for credit losses	Provision for credit losses	3,161			2,275			3,556			8,169			13,410			Provision for credit losses	3,597			3,161			2,275			3,556			8,169
Goodwill impairment		—			—			—			—			3,184
Merger and restructuring charges		—			—			—			—			638
All other noninterest expense		57,192			75,117			69,214			72,093			76,452
Income (loss) before income taxes		22,154			6,855			16,172			3,072			(230		)
Noninterest expense																	Noninterest expense	54,951			57,734			75,656			69,213			72,094
Income before income taxes																	Income before income taxes	25,153			22,070			7,963			14,733			2,535
Income tax expense (benefit)	Income tax expense (benefit)	6,266			2,022			4,741			(1,116		)	(1,676		)	Income tax expense (benefit)	7,247			6,234			2,443			4,194			(1,320		)
Net income	Net income	15,888			4,833			11,431			4,188			1,446			Net income	17,906			15,836			5,520			10,539			3,855
Net income applicable to common shareholders	Net income applicable to common shareholders	14,405			3,789			10,082			2,760			85			Net income applicable to common shareholders	16,224			14,353			4,476			9,190			2,427
Average common shares issued and outstanding	Average common shares issued and outstanding	10,462			10,528			10,731			10,746			10,143			Average common shares issued and outstanding	10,284			10,462			10,528			10,731			10,746
Average diluted common shares issued and outstanding	Average diluted common shares issued and outstanding	11,214			10,585			11,491			10,841			10,255			Average diluted common shares issued and outstanding	11,036			11,214			10,585			11,491			10,841
Performance ratios	Performance ratios																Performance ratios
Return on average assets	Return on average assets	0.74		%	0.23		%	0.53		%	0.19		%	0.06		%	Return on average assets	0.82		%	0.73		%	0.26		%	0.49		%	0.18		%
Return on average common shareholders’ equity	Return on average common shareholders’ equity	6.26			1.70			4.62			1.27			0.04			Return on average common shareholders’ equity	6.71			6.24			2.01			4.21			1.12
Return on average tangible common shareholders’ equity ⁽²⁾		9.11			2.52			6.97			1.94			0.06
Return on average tangible shareholders’ equity ⁽²⁾		8.83			2.92			7.13			2.60			0.96
Return on average tangible common shareholders’ equity ⁽¹⁾																	Return on average tangible common shareholders’ equity ⁽¹⁾	9.54			9.08			2.98			6.35			1.71
Return on average shareholder's equity																	Return on average shareholder's equity	6.72			6.28			2.32			4.51			1.64
Return on average tangible shareholders’ equity ⁽¹⁾																	Return on average tangible shareholders’ equity ⁽¹⁾	9.19			8.80			3.34			6.58			2.40
Total ending equity to total ending assets	Total ending equity to total ending assets	11.95			11.57			11.07			10.72			10.81			Total ending equity to total ending assets	12.20			11.95			11.57			11.06			10.72
Total average equity to total average assets	Total average equity to total average assets	11.67			11.11			10.81			10.75			9.98			Total average equity to total average assets	12.16			11.66			11.11			10.81			10.75
Dividend payout	Dividend payout	14.51			33.31			4.25			15.86			n/m			Dividend payout	15.86			14.56			28.20			4.66			18.03
Per common share data	Per common share data																Per common share data
Earnings	Earnings	$	1.38		$	0.36		$	0.94		$	0.26		$	0.01		Earnings	$	1.58		$	1.37		$	0.43		$	0.86		$	0.23
Diluted earnings	Diluted earnings	1.31			0.36			0.90			0.25			0.01			Diluted earnings	1.50			1.31			0.42			0.83			0.22
Dividends paid	Dividends paid	0.20			0.12			0.04			0.04			0.04			Dividends paid	0.25			0.20			0.12			0.04			0.04
Book value	Book value	22.54			21.32			20.71			20.24			20.09			Book value	24.04			22.53			21.32			20.69			20.24
Tangible book value ⁽²⁾		15.62			14.43			13.79			13.36			12.95
Tangible book value ⁽¹⁾																	Tangible book value ⁽¹⁾	16.95			15.62			14.43			13.77			13.36
Market price per share of common stock	Market price per share of common stock																Market price per share of common stock
Closing	Closing	$	16.83		$	17.89		$	15.57		$	11.61		$	5.56		Closing	$	22.10		$	16.83		$	17.89		$	15.57		$	11.61
High closing	High closing	18.45			18.13			15.88			11.61			15.25			High closing	23.16			18.45			18.13			15.88			11.61
Low closing	Low closing	15.15			14.51			11.03			5.80			4.99			Low closing	11.16			15.15			14.51			11.03			5.80
Market capitalization	Market capitalization	$	174,700		$	188,141		$	164,914		$	125,136		$	58,580		Market capitalization	$	222,163		$	174,700		$	188,141		$	164,914		$	125,136


⁽¹⁾	~~The results for 2015 were impacted by the early adoption of new accounting guidance on recognition and measurement of financial instruments. For additional information, see~~ ~~Executive Summary – Recent Events~~ ~~on page~~ 22.


⁽²⁾	Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures. ~~Other companies may define or calculate these measures differently.~~ For more information on these ratios, see Supplemental Financial Data on page 3027, and for corresponding reconciliations to GAAP financial measures, see Statistical Table ~~XIII~~XV on page ~~123~~108.


⁽³⁾⁽²⁾	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 6656.


⁽⁴⁾⁽³⁾	Includes the allowance for loan and lease losses and the reserve for unfunded lending commitments.

⁽⁵⁾⁽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 7564 and corresponding Table 3530, and Commercial Portfolio Credit Risk Management – Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity on page 8270 and corresponding Table 4437.


⁽⁵⁾	Asset quality metrics include $243 million of non-U.S. credit card allowance for loan and lease losses and $9.2 billion of non-U.S. credit card loans, which are included in assets of business held for sale on the Consolidated Balance Sheet at December 31, 2016.


⁽⁶⁾	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.


⁽⁷⁾	Net charge-offs exclude $340 million, $808 million, $810 million, $2.3 billion and $~~2.3~~2.8 billion of write-offs in the PCI loan portfolio for 2016, 2015, 2014, 2013 and ~~2013~~2012, respectively. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 7362.


⁽⁸⁾	~~There were no write-offs of PCI loans in 2011.~~

⁽⁹⁾

~~Capital~~Risk-based capital ratios are reported under Basel 3 Advanced ~~approaches~~- Transition at December 31, 2016 and 2015. ~~Prior to 2015, we were required to report regulatory~~We reported risk-based capital ratios under Basel 3 Standardized - Transition at December 31, 2014 and under the ~~Standardized~~general risk-based approach ~~only.~~at December 31, 2013 and 2012. For additional information, see Capital Management on page 5345.

n/a = not applicable

~~n/m = not meaningful~~



		26Bank of America ~~2015~~292016



Table 8	Five-year Summary of Selected Financial Data ⁽¹⁾ (continued)
Table 7																	Five-year Summary of Selected Financial Data (continued)

(Dollars in millions)	(Dollars in millions)	2015			2014			2013			2012			2011			(Dollars in millions)	2016			2015			2014			2013			2012
Average balance sheet	Average balance sheet																Average balance sheet
Total loans and leases	Total loans and leases	$	882,183		$	903,901		$	918,641		$	898,768		$	938,096		Total loans and leases	$	900,433		$	876,787		$	898,703		$	918,641		$	898,768
Total assets	Total assets	2,160,141			2,145,590			2,163,513			2,191,356			2,296,322			Total assets	2,189,971			2,160,197			2,145,393			2,163,296			2,191,361
Total deposits	Total deposits	1,155,860			1,124,207			1,089,735			1,047,782			1,035,802			Total deposits	1,222,561			1,155,860			1,124,207			1,089,735			1,047,782
Long-term debt	Long-term debt	240,059			253,607			263,417			316,393			421,229			Long-term debt	228,617			240,059			253,607			263,417			316,393
Common shareholders’ equity	Common shareholders’ equity	230,182			223,072			218,468			216,996			211,709			Common shareholders’ equity	241,621			230,173			222,907			218,340			216,999
Total shareholders’ equity	Total shareholders’ equity	251,990			238,482			233,951			235,677			229,095			Total shareholders’ equity	266,277			251,981			238,317			233,819			235,681
Asset quality ⁽³⁾⁽²⁾	Asset quality ⁽³⁾⁽²⁾																Asset quality ⁽³⁾⁽²⁾
Allowance for credit losses ⁽⁴⁾⁽³⁾	Allowance for credit losses ⁽⁴⁾⁽³⁾	$	12,880		$	14,947		$	17,912		$	24,692		$	34,497		Allowance for credit losses ⁽⁴⁾⁽³⁾	$	11,999		$	12,880		$	14,947		$	17,912		$	24,692
Nonperforming loans, leases and foreclosed properties ⁽⁵⁾⁽⁴⁾	Nonperforming loans, leases and foreclosed properties ⁽⁵⁾⁽⁴⁾	9,836			12,629			17,772			23,555			27,708			Nonperforming loans, leases and foreclosed properties ⁽⁵⁾⁽⁴⁾	8,084			9,836			12,629			17,772			23,555
Allowance for loan and lease losses as a percentage of total loans and leases outstanding ⁽⁵⁾		1.37		%	1.65		%	1.90		%	2.69		%	3.68		%
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases ⁽⁵⁾		130			121			102			107			135
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases, excluding the PCI loan portfolio ⁽⁵⁾		122			107			87			82			101
Allowance for loan and lease losses as a percentage of total loans and leases outstanding ^{(4, 5)}																	Allowance for loan and lease losses as a percentage of total loans and leases outstanding ^{(4, 5)}	1.26		%	1.37		%	1.66		%	1.90		%	2.69		%
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases ^{(4, 5)}																	Allowance for loan and lease losses as a percentage of total nonperforming loans and leases ^{(4, 5)}	149			130			121			102			107
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases, excluding the PCI loan portfolio ^{(4, 5)}																	Allowance for loan and lease losses as a percentage of total nonperforming loans and leases, excluding the PCI loan portfolio ^{(4, 5)}	144			122			107			87			82
Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases ⁽⁶⁾	Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases ⁽⁶⁾	$	4,518		$	5,944		$	7,680		$	12,021		$	17,490		Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases ⁽⁶⁾	$	3,951		$	4,518		$	5,944		$	7,680		$	12,021
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, 6)}		82		%	71		%	57		%	54		%	65		%
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, 6)}																	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, 6)}	98		%	82		%	71		%	57		%	54		%
Net charge-offs ⁽⁷⁾	Net charge-offs ⁽⁷⁾	$	4,338		$	4,383		$	7,897		$	14,908		$	20,833		Net charge-offs ⁽⁷⁾	$	3,821		$	4,338		$	4,383		$	7,897		$	14,908
Net charge-offs as a percentage of average loans and leases outstanding ^{(5, 7)}		0.50		%	0.49		%	0.87		%	1.67		%	2.24		%
Net charge-offs as a percentage of average loans and leases outstanding ^{(4, 7)}																	Net charge-offs as a percentage of average loans and leases outstanding ^{(4, 7)}	0.43		%	0.50		%	0.49		%	0.87		%	1.67		%
Net charge-offs as a percentage of average loans and leases outstanding, excluding the PCI loan portfolio ⁽⁵⁾⁽⁴⁾	Net charge-offs as a percentage of average loans and leases outstanding, excluding the PCI loan portfolio ⁽⁵⁾⁽⁴⁾	0.51			0.50			0.90			1.73			2.32			Net charge-offs as a percentage of average loans and leases outstanding, excluding the PCI loan portfolio ⁽⁵⁾⁽⁴⁾	0.44			0.51			0.50			0.90			1.73
Net charge-offs and PCI write-offs as a percentage of average loans and leases outstanding ^{(5, 8)}		0.59			0.58			1.13			1.99			2.24
Nonperforming loans and leases as a percentage of total loans and leases outstanding ⁽⁵⁾		1.05			1.37			1.87			2.52			2.74
Nonperforming loans, leases and foreclosed properties as a percentage of total loans, leases and foreclosed properties ⁽⁵⁾		1.10			1.45			1.93			2.62			3.01
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs ⁽⁷⁾		2.82			3.29			2.21			1.62			1.62
Net charge-offs and PCI write-offs as a percentage of average loans and leases outstanding ⁽⁴⁾																	Net charge-offs and PCI write-offs as a percentage of average loans and leases outstanding ⁽⁴⁾	0.47			0.59			0.58			1.13			1.99
Nonperforming loans and leases as a percentage of total loans and leases outstanding ^{(4, 5)}																	Nonperforming loans and leases as a percentage of total loans and leases outstanding ^{(4, 5)}	0.85			1.05			1.38			1.87			2.52
Nonperforming loans, leases and foreclosed properties as a percentage of total loans, leases and foreclosed properties ^{(4, 5)}																	Nonperforming loans, leases and foreclosed properties as a percentage of total loans, leases and foreclosed properties ^{(4, 5)}	0.89			1.10			1.45			1.93			2.62
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs ^{(5, 7)}																	Ratio of the allowance for loan and lease losses at December 31 to net charge-offs ^{(5, 7)}	3.00			2.82			3.29			2.21			1.62
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs, excluding the PCI loan portfolio(5)	Ratio of the allowance for loan and lease losses at December 31 to net charge-offs, excluding the PCI loan portfolio(5)	2.64			2.91			1.89			1.25			1.22			Ratio of the allowance for loan and lease losses at December 31 to net charge-offs, excluding the PCI loan portfolio(5)	2.89			2.64			2.91			1.89			1.25
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs and PCI write-offs ⁽⁸⁾⁽⁵⁾	Ratio of the allowance for loan and lease losses at December 31 to net charge-offs and PCI write-offs ⁽⁸⁾⁽⁵⁾	2.38			2.78			1.70			1.36			1.62			Ratio of the allowance for loan and lease losses at December 31 to net charge-offs and PCI write-offs ⁽⁸⁾⁽⁵⁾	2.76			2.38			2.78			1.70			1.36
Capital ratios at year end ⁽⁹⁾⁽⁸⁾	Capital ratios at year end ⁽⁹⁾⁽⁸⁾																Capital ratios at year end ⁽⁹⁾⁽⁸⁾
Risk-based capital:	Risk-based capital:																Risk-based capital:
Common equity tier 1 capital	Common equity tier 1 capital	10.2		%	12.3		%	n/a			n/a			n/a			Common equity tier 1 capital	11.0		%	10.2		%	12.3		%	n/a			n/a
Tier 1 common capital	Tier 1 common capital	n/a			n/a			10.9		%	10.8		%	9.7		%	Tier 1 common capital	n/a			n/a			n/a			10.9		%	10.8		%
Tier 1 capital	Tier 1 capital	11.3			13.4			12.2			12.7			12.2			Tier 1 capital	12.4			11.3			13.4			12.2			12.7
Total capital	Total capital	13.2			16.5			15.1			16.1			16.6			Total capital	14.3			13.2			16.5			15.1			16.1
Tier 1 leverage	Tier 1 leverage	8.6			8.2			7.7			7.2			7.4			Tier 1 leverage	8.9			8.6			8.2			7.7			7.2
Tangible equity ⁽²⁾⁽¹⁾	Tangible equity ⁽²⁾⁽¹⁾	8.9			8.4			7.9			7.6			7.5			Tangible equity ⁽²⁾⁽¹⁾	9.2			8.9			8.4			7.8			7.6
Tangible common equity ⁽²⁾⁽¹⁾	Tangible common equity ⁽²⁾⁽¹⁾	7.8			7.5			7.2			6.7			6.6			Tangible common equity ⁽²⁾⁽¹⁾	8.1			7.8			7.5			7.2			6.7

For footnotes see page 29.26.

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 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~~fully taxable-equivalent (FTE) basis, which when presented on a consolidated basis, are non-GAAP financial measures. ~~We believe managing the business with net interest income on an FTE basis provides a more accurate picture of the interest margin for comparative purposes.~~ To

derive the FTE basis, net interest income is adjusted to reflect tax-exempt income on an equivalent before-tax basis with a corresponding increase in income tax expense. For purposes of this calculation, we use the federal statutory tax rate of 35 ~~percent. This measure ensures comparability of net interest income arising from taxable~~percent and ~~tax-exempt sources.~~

~~Certain~~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., DVA) which result in non-GAAP



		Bank of America 201627

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 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



30 ~~Bank of America 2015~~

measures to support our overall growth goals. These ratios are as follows:


Ÿ●	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.


Ÿ●	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.


Ÿ●	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 Table 87 and Statistical Table X.

We evaluate our business segment results based on measures that utilize average allocated capital. Return on average allocated capital is calculated as net income adjusted for cost of funds and earnings credits and certain expenses related to intangibles, divided by average allocated capital. Allocated capital and the related return both represent non-GAAP financial measures.XII.

Statistical Tables ~~XIII, XIV~~XV and XVXVI on pages ~~123~~, ~~124~~108 and ~~125~~109 provide reconciliations of these non-GAAP financial measures to GAAP financial measures. We believe the use of these non-GAAP financial measures provides additional clarity in assessing the results of the Corporation and our segments. Other companies may define or calculate these measures and ratios differently.



Table 9	Five-year Supplemental Financial Data
Table 8																	Five-year Supplemental Financial Data

(Dollars in millions, except per share information)	(Dollars in millions, except per share information)	2015			2014			2013			2012			2011			(Dollars in millions, except per share information)	2016			2015			2014			2013			2012
Fully taxable-equivalent basis data	Fully taxable-equivalent basis data																Fully taxable-equivalent basis data
Net interest income	Net interest income	$	40,160		$	40,821		$	43,124		$	41,557		$	45,588		Net interest income	$	41,996		$	39,847		$	41,630		$	41,578		$	41,036
Total revenue, net of interest expense ⁽¹⁾	Total revenue, net of interest expense ⁽¹⁾	83,416			85,116			89,801			84,235			94,426			Total revenue, net of interest expense ⁽¹⁾	84,601			83,854			86,745			88,361			83,699
Net interest yield	Net interest yield	2.20		%	2.25		%	2.37		%	2.24		%	2.38		%	Net interest yield	2.25		%	2.19		%	2.30		%	2.29		%	2.22		%
Efficiency ratio ⁽¹⁾	Efficiency ratio ⁽¹⁾	68.56			88.25			77.07			85.59			85.01			Efficiency ratio ⁽¹⁾	64.95			68.85			87.22			78.33			86.13



⁽¹⁾	~~The results for 2015 were impacted by the early adoption of new accounting guidance on recognition and measurement of financial instruments. For additional information, see~~ ~~Executive Summary – Recent Events~~ ~~on page~~ 22.

~~Net Interest Income Excluding Trading-related Net Interest Income~~

We manage net interest income on an FTE basis and excluding the impact of trading-related activities. We evaluate our sales and trading results and strategies on a total market-based revenue approach by combining net interest income and noninterest income for ~~Global Markets~~. An analysis of net interest income, average earning assets and net interest yield on earning assets, all of which adjust for the impact of trading-related net interest income from reported net interest income on an FTE basis, is shown below. We believe the use of this non-GAAP presentation in ~~Table 10~~ ~~provides additional clarity in assessing our results.~~

Table 10 Net Interest Income Excluding Trading-related Net Interest Income

(Dollars in millions) 2015 2014
Net interest income (FTE basis)

As reported $ 40,160
$ 40,821
Impact of trading-related net interest income (3,928 ) (3,610 )
Net interest income excluding trading-related net interest income (FTE basis) ⁽¹⁾
$ 36,232
$ 37,211
Average earning assets

As reported $ 1,830,342
$ 1,814,930
Impact of trading-related earning assets (415,658 ) (445,760 )
Average earning assets excluding trading-related earning assets ⁽¹⁾
$ 1,414,684
$ 1,369,170
Net interest yield contribution (FTE basis)

As reported 2.20 % 2.25 %
Impact of trading-related activities 0.36
0.47
Net interest yield on earning assets excluding trading-related activities (FTE basis) ⁽¹⁾
2.56 % 2.72 %


⁽¹⁾	~~Represents a non-GAAP financial measure.~~

Net interest income excluding trading-related net interest income decreased $979 million to $36.2 billion for 2015 compared to 2014. The decline was primarily driven by lower loan yields and consumer loan balances, as well as a charge of $612 million in 2015 related to the discount on certain trust preferred securities. This was partially offset by a $785 million improvement in market-related adjustments on debt securities, lower funding costs, lower rates paid on deposits and commercial loan growth. Market-related adjustments on debt securities resulted in an expense of $296 million in 2015 compared to an expense of $1.1 billion in 2014. For more information on market-related and other adjustments, see Executive Summary – Financial Highlights on page 24. For more information on the impact of interest rates, see Interest Rate Risk Management for Non-trading Activities on page 97.

~~Average earning assets excluding trading-related earning assets~~ ~~increased$45.5 billion~~ to ~~$1,414.7 billion~~ ~~for~~ ~~2015~~ ~~compared to~~ ~~2014. The~~ ~~increase~~ ~~was primarily in debt securities, commercial loans and cash held at central banks, partially offset by a decline in consumer loans.~~

~~Net interest yield on earning assets excluding trading-related activities~~ ~~decreased~~16 ~~bps to~~ ~~2.56 percent~~ ~~for~~ ~~2015~~ ~~compared to~~ ~~2014~~ ~~due to the same factors as described above.~~



		28Bank of America ~~2015~~312016

Business Segment Operations

Segment Description and Basis of Presentation

We report our results of operations through the following ~~five~~four business segments: Consumer Banking, ~~Global Wealth & Investment Management (GWIM)~~GWIM, Global Banking, and Global Markets ~~and~~ ~~Legacy Assets & Servicing (LAS)~~, with the remaining operations recorded in All Other. The primary activities, products and businesses of the business segments and All Other are shown below.

~~The Corporation~~We periodically ~~reviews~~review capital allocated to ~~its~~our businesses and ~~allocates~~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. ~~The Corporation’s~~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 4941. The capital allocated to the business segments is referred to as allocated ~~capital, which represents a non-GAAP financial measure.~~capital. For purposes of goodwill impairment testing, ~~the Corporation utilizes~~we utilize allocated equity as a proxy for the

carrying value of ~~its~~our reporting units. Allocated equity in the reporting units is comprised of allocated capital plus capital for the portion of goodwill and intangibles specifically assigned to the reporting unit. For additional information, see Note 8 – Goodwill and Intangible Assets to the Consolidated Financial Statements.

During 2015, we made refinements to the amount of capital allocated to each of our businesses based on multiple considerations that included, but were not limited to, risk-weighted assets measured under Basel 3 Standardized and Advanced approaches, business segment exposures and risk profile, and strategic plans. As a result of this process, effective January 1, 2015, we adjusted the amount of capital being allocated to our business segments, primarily ~~LAS. For more information on Basel 3 risk-weighted assets measured under the Standardized and Advanced approaches, see Capital Management on page 53.~~

For more information on the basis of presentation for business segments ~~including the allocation of market-related adjustments to net interest income,~~ and reconciliations to consolidated total revenue, net income and year-end total assets, see Note 24 – Business Segment Information to the Consolidated Financial Statements.



		32Bank of America ~~2015~~201629

Consumer Banking



		Deposits						Consumer Lending						Total Consumer Banking									Deposits						Consumer Lending						Total Consumer Banking
(Dollars in millions)	(Dollars in millions)	2015			2014			2015			2014			2015			2014			% Change		(Dollars in millions)	2016			2015			2016			2015			2016			2015			% Change
Net interest income (FTE basis)	Net interest income (FTE basis)	$	9,624		$	9,436		$	10,220		$	10,741		$	19,844		$	20,177		(2	)%	Net interest income (FTE basis)	$	10,701		$	9,635		$	10,589		$	10,793		$	21,290		$	20,428		4	%
Noninterest income:	Noninterest income:																					Noninterest income:
Card income	Card income	11			10			4,923			4,834			4,934			4,844			2		Card income	9			11			4,926			4,926			4,935			4,937			—
Service charges	Service charges	4,100			4,159			1			1			4,101			4,160			(1	)	Service charges	4,141			4,100			1			1			4,142			4,101			1
Mortgage banking income	Mortgage banking income	—			—			883			813			883			813			9		Mortgage banking income	—			—			960			1,332			960			1,332			(28	)
All other income	All other income	482			418			374			397			856			815			5		All other income	403			483			1			244			404			727			(44	)
Total noninterest income	Total noninterest income	4,593			4,587			6,181			6,045			10,774			10,632			1		Total noninterest income	4,553			4,594			5,888			6,503			10,441			11,097			(6	)
Total revenue, net of interest expense (FTE basis)	Total revenue, net of interest expense (FTE basis)	14,217			14,023			16,401			16,786			30,618			30,809			(1	)	Total revenue, net of interest expense (FTE basis)	15,254			14,229			16,477			17,296			31,731			31,525			1

Provision for credit losses	Provision for credit losses	199			268			2,325			2,412			2,524			2,680			(6	)	Provision for credit losses	174			200			2,541			2,146			2,715			2,346			16
Noninterest expense	Noninterest expense	9,792			9,905			7,693			7,960			17,485			17,865			(2	)	Noninterest expense	9,678			9,856			7,975			8,860			17,653			18,716			(6	)
Income before income taxes (FTE basis)	Income before income taxes (FTE basis)	4,226			3,850			6,383			6,414			10,609			10,264			3		Income before income taxes (FTE basis)	5,402			4,173			5,961			6,290			11,363			10,463			9
Income tax expense (FTE basis)	Income tax expense (FTE basis)	1,541			1,435			2,329			2,393			3,870			3,828			1		Income tax expense (FTE basis)	1,992			1,521			2,198			2,293			4,190			3,814			10
Net income	Net income	$	2,685		$	2,415		$	4,054		$	4,021		$	6,739		$	6,436		5		Net income	$	3,410		$	2,652		$	3,763		$	3,997		$	7,173		$	6,649		8

Net interest yield (FTE basis)	Net interest yield (FTE basis)	1.75		%	1.83		%	5.08		%	5.54		%	3.46		%	3.73		%			Net interest yield (FTE basis)	1.79		%	1.75		%	4.37		%	4.70		%	3.38		%	3.52		%
Return on average allocated capital	Return on average allocated capital	22			22			24			21			23			21					Return on average allocated capital	28			22			17			19			21			20
Efficiency ratio (FTE basis)	Efficiency ratio (FTE basis)	68.87			70.63			46.91			47.42			57.11			57.99					Efficiency ratio (FTE basis)	63.44			69.27			48.41			51.23			55.63			59.37

Balance Sheet

Average
Total loans and leases	Total loans and leases	$	5,829		$	6,059		$	198,894		$	191,056		$	204,723		$	197,115		4		Total loans and leases	$	4,809		$	4,713		$	240,999		$	227,719		$	245,808		$	232,432		6
Total earning assets⁽¹⁾	Total earning assets⁽¹⁾	549,686			516,014			201,190			193,923			573,072			541,097			6		Total earning assets⁽¹⁾	598,043			549,600			242,445			229,579			629,990			580,095			9
Total assets ⁽¹⁾	Total assets ⁽¹⁾	576,653			542,748			210,461			203,330			609,310			577,238			6		Total assets ⁽¹⁾	624,592			576,569			254,287			242,707			668,381			620,192			8
Total deposits	Total deposits	544,685			511,925			n/m			n/m			545,839			512,820			6		Total deposits	592,417			544,685			7,237			8,191			599,654			552,876			8
Allocated capital	Allocated capital	12,000			11,000			17,000			19,000			29,000			30,000			(3	)	Allocated capital	12,000			12,000			22,000			21,000			34,000			33,000			3

Year end
Total loans and leases	Total loans and leases	$	5,927		$	5,951		$	208,478		$	196,049		$	214,405		$	202,000		6		Total loans and leases	$	4,938		$	4,735		$	254,053		$	234,116		$	258,991		$	238,851		8
Total earning assets ⁽¹⁾	Total earning assets ⁽¹⁾	576,241			526,849			210,208			199,097			599,631			551,922			9		Total earning assets ⁽¹⁾	631,172			576,108			255,511			235,496			662,704			605,012			10
Total assets⁽¹⁾	Total assets⁽¹⁾	603,580			554,173			219,702			208,729			636,464			588,878			8		Total assets⁽¹⁾	658,316			603,448			268,002			248,571			702,339			645,427			9
Total deposits	Total deposits	571,467			523,350			n/m			n/m			572,739			524,415			9		Total deposits	625,727			571,467			7,063			6,365			632,790			577,832			10


⁽¹⁾	In segments and businesses where the total of liabilities and equity exceeds assets, we allocate assets from All Other to match the segments’ and businesses’ liabilities and allocated shareholders’ equity. As a result, total earning assets and total assets of the businesses may not equal total Consumer Banking.

~~n/m = not meaningful~~

Consumer Banking, which is comprised of Deposits and Consumer Lending, offers a diversified range of credit, banking and investment products and services to consumers and small businesses. Our customers and clients have access to a ~~franchise network that stretches~~ coast to coast ~~through~~network including financial centers in 33 states and the District of Columbia. ~~The franchise~~Our network includes approximately ~~4,700~~4,600 financial centers, ~~16,000~~15,900 ATMs, nationwide call centers, and online and mobile platforms.

Consumer Banking Results

Net income for Consumer Banking increased ~~$303~~$524 million to ~~$6.7~~$7.2 billion in ~~2015~~2016 compared to ~~2014~~2015 primarily driven by lower noninterest expense ~~lower~~and higher revenue, partially offset by higher provision for credit ~~losses and higher noninterest income, partially offset by lower net interest income.~~losses. Net interest income ~~decreased $333~~increased $862 million to ~~$19.8~~$21.3 billion asprimarily due to the beneficial impact of an increase in investable assets as a result of higher ~~deposits, and higher residential mortgage balances~~

~~were more than offset by the impact of the allocation of ALM activities, higher funding costs, lower card yields and lower average card loan balances.~~deposits. Noninterest income ~~increased $142~~decreased $656 million to ~~$10.8~~$10.4 billion ~~driven by higher card income and higher~~due to lower mortgage banking income ~~from improved production margins, partially offset by lower service charges.~~and gains in 2015 on certain divestitures.

The provision for credit losses ~~decreased $156~~increased $369 million to ~~$2.5~~$2.7 billion in ~~2015~~2016 primarily driven by ~~continued~~a slower pace of improvement in ~~credit quality primarily related to our small business and~~the credit card ~~portfolios.~~portfolio. Noninterest expense decreased ~~$380 million~~$1.1 billion to ~~$17.5~~$17.7 billion ~~primarily~~ driven by improved operating efficiencies and lower ~~personnel and operating expenses,~~fraud costs, partially offset by higher ~~fraud costs in advance of Europay, MasterCard and Visa (EMV) chip implementation.~~FDIC expense.

The return on average allocated capital was 2321 percent, up from 2120 percent, reflecting higher net ~~income and a decrease in allocated capital.~~income. For ~~more~~additional information on capital allocations, see Business Segment Operations on page ~~32.~~29.



		~~Bank of America 2015~~33

Deposits

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



30 Bank of America 2016

Deposits includes the net impact of migrating customers and their related deposit and brokerage asset balances between Deposits and GWIM as well as other client-managed businesses. For more information on the migration of customer balances to or from GWIM, see GWIM- Net Migration Summary on page 36.34.

Net income for Deposits increased~~$270~~ $758 million to ~~$2.7~~$3.4 billion in ~~2015~~2016 driven by higher ~~net interest income,~~revenue and lower noninterest ~~expense and provision for credit losses.~~expense. Net interest income increased ~~$188 million~~$1.1 billion to ~~$9.6~~$10.7 billion primarily due to the beneficial impact of an increase in investable assets as a result of higher ~~deposits, partially offset by the impact of the allocation of ALM activities.~~deposits. Noninterest income ofdecreased $41 million to $4.6 billion ~~remained relatively unchanged.~~due to gains in the prior year on certain divestitures.

The provision for credit losses decreased ~~$69~~$26 million to ~~$199 million driven by continued improvement in credit quality.~~$174 million. Noninterest expense decreased ~~$113~~$178 million to ~~$9.8~~$9.7 billion ~~due to lower~~primarily driven by improved operating ~~expenses.~~efficiencies, partially offset by higher FDIC expense.

Average deposits increased~~$32.8~~ $47.7 billion to ~~$544.7~~$592.4 billion in ~~2015~~2016 driven by a continuing customer shift to more liquid products in the low rate environment. Growth in checking, traditional savings and money market savings of ~~$43.5~~$53.8 billion was partially offset by a decline in time deposits of ~~$10.7~~$6.1 billion. As a result of our continued pricing discipline and the shift in the mix of deposits, the rate paid on average deposits declined by one bp to ~~five~~four bps.



Key Statistics – Deposits

	2015			2014			2016			2015
Total deposit spreads (excludes noninterest costs)(1)	1.63		%	1.60		%	1.65		%	1.62		%

Year end
Client brokerage assets (in millions)	$	122,721		$	113,763		$	144,696		$	122,721
Online banking active accounts (units in thousands)	31,674			30,904			33,811			31,674
Mobile banking active users (units in thousands)	18,705			16,539			21,648			18,705
Financial centers	4,726			4,855			4,579			4,726
ATMs	16,038			15,834			15,928			16,038


⁽¹⁾	Includes deposits held in Consumer Lending.

Client brokerage assets increased ~~$9.0~~$22.0 billion in ~~2015~~2016 driven by client flows and strong ~~account flows, partially offset by lower~~ market ~~valuations.~~performance. Mobile banking active users increased ~~2.2~~2.9 million reflecting

continuing changes in our customers’ banking preferences. The number of financial centers declined~~129~~ 147 driven by changes in customer preferences to self-service options ~~and~~ 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, ~~marine, aircraft,~~ recreational vehicle and consumer personal loans. In addition to earning net interest spread revenue on its lending activities, Consumer Lending generates interchange revenue from credit and debit card transactions, 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.

We classify consumer real estate loans as core or non-core based on loan and customer characteristics such as origination

date, product type, loan-to-value (LTV), Fair Isaac Corporation (FICO) score and delinquency status. Total owned loans in the core portfolio held in Consumer Lending increased $10.6 billion to $101.2 billion in 2016 primarily driven by higher residential mortgage balances, partially offset by a decline in home equity balances. For more information on the core and non-core portfolios, see Consumer Portfolio Credit Risk Management on page 56.

Consumer Lending includes the net impact of migrating customers and their related loan balances between Consumer Lending and GWIM. For more information on the migration of customer balances to or from GWIM, see GWIM on page 36.33.

Net income for Consumer Lending ~~remained relatively unchanged at~~ ~~$4.1~~decreased $234 million to $3.8 billion in ~~2015 as lower noninterest expense,~~2016 driven by a decline in revenue and higher ~~noninterest income and lower~~ provision for credit losses, ~~largely~~partially offset ~~the decline in net interest income.~~by lower noninterest expense. Net interest income decreased ~~$521~~$204 million to ~~$10.2~~$10.6 billion primarily driven by higher funding costs, ~~lower card yields and average card loan balances, and~~partially offset by the impact of ~~the allocation of ALM activities, partially offset by higher residential mortgage~~an increase in consumer auto lending balances. Noninterest income ~~increased $136~~decreased $615 million to ~~$6.2~~$5.9 billion ~~due to higher card income as well as~~driven by lower mortgage banking income ~~from improved production margins.~~and gains in 2015 on certain divestitures.

The provision for credit losses ~~decreased $87~~increased $395 million to ~~$2.3~~$2.5 billion in ~~2015~~2016 primarily driven by ~~continued credit quality~~a slower pace of improvement ~~within~~in the ~~small business and~~ credit card ~~portfolios.~~portfolio. Noninterest expense decreased ~~$267~~$885 million to ~~$7.7~~$8.0 billion primarily driven by improved operating efficiencies and lower fraud costs due to the benefit of the Europay, MasterCard and Visa (EMV) chip implementation, as well as lower personnel ~~expense, partially offset by higher fraud costs in advance of EMV chip implementation.~~expense.

Average loans increased ~~$7.8~~$13.3 billion to ~~$198.9~~$241.0 billion in ~~2015~~2016 primarily driven by increases in residential mortgages and consumer vehicle loans, partially offset by lower home equity ~~loans and continued run-off of non-core portfolios. Beginning with new originations in 2014, we retain certain residential mortgages in~~ ~~Consumer Banking, consistent with where the overall relationship is managed; previously such mortgages were in~~ ~~All Other~~.loans.



Key Statistics – Consumer Lending

(Dollars in millions)	2015			2014			2016			2015
Total U.S. credit card ⁽¹⁾
Gross interest yield	9.16		%	9.34		%	9.29		%	9.16		%
Risk-adjusted margin	9.33			9.44			9.04			9.31
New accounts (in thousands)	4,973			4,541			4,979			4,973
Purchase volumes	$	221,378		$	212,088		$	226,432		$	221,378
Debit card purchase volumes	$	277,695		$	272,576		$	285,612		$	277,695


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



34 ~~Bank of America 2015~~

During ~~2015,~~2016, the total U.S. credit card risk-adjusted margin decreased 1127 bps ~~due to~~primarily driven by the impact of gains in 2015 on certain divestitures and a decrease in net interest margin, ~~and the net impact of gains on asset sales,~~ partially offset by an improvement in credit quality in the U.S. Card portfolio. Total U.S. credit card purchase volumes increased ~~$9.3~~$5.1 billion to ~~$221.4~~$226.4 billion and debit card purchase volumes increased~~$5.1~~ $7.9 billion to ~~$277.7~~$285.6 billion,, reflecting higher levels of consumer spending. The increase in total U.S. credit card purchase volumes was partially offset by the impact of certain divestitures.

Mortgage Banking Income

Mortgage banking income is earned primarily in Consumer Banking and ~~LAS~~All Other. ~~Mortgage~~Total production income within mortgage banking income ~~in Consumer Lending consists mainly of core production income, which~~ is comprised primarily of revenue from the fair value gains and losses recognized on our interest rate lock commitments (IRLCs) and ~~LHFS,~~loans held-for-sale (LHFS), the related secondary market execution, and costs related to representations and warranties made in the sales transactions along with other obligations incurred in the sales of mortgage loans. Servicing



		Bank of America 201631

income within mortgage banking income includes income earned in connection with servicing activities and MSR valuation adjustments, net of results from risk management activities used to hedge certain market risks of the MSRs. Servicing income for the core portfolio is recorded in Consumer Banking. Servicing income for the non-core portfolio, including hedge ineffectiveness on MSR hedges, is recorded in All Other. The costs associated with our servicing activities are included in noninterest expense.

The table below summarizes the components of mortgage banking income.

Mortgage Banking Income

(Dollars in millions) 2015 2014
Consumer Lending:
Core production revenue $ 942
$ 875
Representations and warranties provision 11
10
Other consumer mortgage banking income ⁽¹⁾
(70 ) (72 )
Total Consumer Lending mortgage banking income 883
813
LAS mortgage banking income ⁽²⁾
1,658
1,045
Eliminations ⁽³⁾
(177 ) (295 )
Total consolidated mortgage banking income $ 2,364
$ 1,563


⁽¹⁾	~~Primarily intercompany charges for loan servicing activities provided by~~ ~~LAS~~.

⁽²⁾

~~Amounts for~~ ~~LAS~~ Amounts for mortgage banking income in All Other are included in this Consumer Banking table to show the components of consolidated mortgage banking income.




Mortgage Banking Income

(Dollars in millions)	2016			2015
Consumer Banking mortgage banking income
Total production income	$	663		$	950
Net servicing income
Servicing fees	708			855
Amortization of expected cash flows ⁽¹⁾	(577		)	(661		)
Fair value changes of MSRs, net of risk management activities used to hedge certain market risks ⁽²⁾	166			188
Total net servicing income	297			382
Total Consumer Banking mortgage banking income	960			1,332
Other mortgage banking income
Servicing fees	452			540
Amortization of expected cash flows ⁽¹⁾	(74		)	(77		)
Fair value changes of MSRs, net of risk management activities used to hedge certain market risks ⁽²⁾	546			426
Other	(31		)	143
Total other mortgage banking income⁽³⁾	893			1,032
Total consolidated mortgage banking income	$	1,853		$	2,364


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


⁽²⁾	Includes changes in fair value of MSRs due to changes in inputs and assumptions, net of risk management activities, and gains (losses) on sales of MSRs. For additional information, see Note 23 – Mortgage Servicing Rights to the Consolidated Financial Statements.


⁽³⁾	Includes ~~the effect of transfers~~$889 million and $1.0 billion of mortgage ~~loans from~~ ~~Consumer Banking~~ ~~to the ALM portfolio included~~banking income recorded in All Other ~~intercompany charges~~ for ~~loan servicing~~2016 and ~~net gains or losses on intercompany trades related to mortgage servicing rights risk management.~~2015.

~~Core~~Total production ~~revenue increased $67~~income for Consumer Banking decreased $287 million to ~~$942~~$663 million in ~~2015~~ ~~primarily~~2016 due to ~~an increase~~a decrease in ~~margins.~~production volume to be sold, resulting from a decision to retain certain residential mortgage loans in Consumer Banking.

Servicing

The costs associated with servicing activities related to the residential mortgage and home equity loan portfolios, including owned loans and loans serviced for others (collectively, the mortgage serviced portfolio) are allocated to the business segment that owns the loans or MSRs or All Other.

Servicing activities include collecting cash for principal, interest and escrow payments from borrowers, disbursing customer draws for lines of credit, accounting for and remitting principal and interest payments to investors and escrow payments to third parties, and responding to customer inquiries. Our home retention efforts, including single point of contact resources, are also part of our servicing activities, along with supervision of foreclosures and property dispositions. Prior to foreclosure, we evaluate various workout options in an effort to help our customers avoid foreclosure.

Key Statistics

(Dollars in millions) 2015 2014
Loan production ⁽¹⁾:

Total ⁽²⁾:

First mortgage $ 56,930
$ 43,290
Home equity 13,060
11,233
Consumer Banking:

First mortgage $ 40,878
$ 32,339
Home equity 11,988
10,286
Consumer Banking servicing income decreased $85 million to $297 million in 2016 driven by lower servicing fees, partially offset by lower amortization of expected cash flows due to a smaller servicing portfolio. Servicing fees declined $147 million to $708 million in 2016 reflecting the decline in the size of the servicing portfolio.

Mortgage Servicing Rights

At December 31, 2016, the core MSR portfolio, held within Consumer Lending, was $2.1 billion compared to $2.3 billion at December 31, 2015. The decrease was primarily driven by the amortization of expected cash flows, which exceeded new additions, as well as changes in fair value due to changes in inputs and assumptions. For more information on MSRs, see Note 23 – Mortgage Servicing Rights to the Consolidated Financial Statements.




Key Statistics

(Dollars in millions)	2016		2015
Loan production ⁽¹⁾:
Total ⁽²⁾:
First mortgage	$	64,153	$	56,930
Home equity	15,214		13,060
Consumer Banking:
First mortgage	$	44,510	$	40,878
Home equity	13,675		11,988


⁽¹⁾	The ~~above~~ 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 $3.6 billion and $7.2 billion in ~~2015~~2016 compared to ~~2014~~ ~~reflecting growth in the overall mortgage market as~~2015 driven by improving housing trends and a lower ~~interest rates beginning in late 2014 drove an increase in refinances.~~rate environment.

~~During~~ ~~2015, 63 percent of the total Corporation first mortgage production volume was for refinance originations and 37 percent was for purchase originations compared to 60 percent and 40 percent in~~ ~~2014. Home Affordable Refinance Program (HARP) originations were two percent of all refinance originations compared to six percent in~~ ~~2014. Making Home Affordable non-HARP originations were eight percent of all refinance originations compared to 17 percent in~~ ~~2014. The remaining 90 percent of refinance originations were conventional refinances compared to 77 percent in~~ ~~2014~~.

Home equity production for the total Corporation ~~was $13.1~~increased $2.2 billion ~~for~~ ~~2015~~in 2016 compared to ~~$11.2 billion for~~ ~~2014, with the increase~~2015 due to a higher demand in the market based on improving housing trends, ~~and increased market share driven by~~as well as improved financial center engagement with customers and more competitive pricing.



		32Bank of America ~~2015~~352016

Global Wealth & Investment Management

(Dollars in millions) 2015 2014 % Change
Net interest income (FTE basis) $ 5,499
$ 5,836
(6 )%
Noninterest income:
Investment and brokerage services 10,792
10,722
1
All other income 1,710
1,846
(7 )
Total noninterest income 12,502
12,568
(1 )
Total revenue, net of interest expense (FTE basis) 18,001
18,404
(2 )

Provision for credit losses 51
14
n/m
Noninterest expense 13,843
13,654
1
Income before income taxes (FTE basis) 4,107
4,736
(13 )
Income tax expense (FTE basis) 1,498
1,767
(15 )
Net income $ 2,609
$ 2,969
(12 )

Net interest yield (FTE basis) 2.12 % 2.34 %
Return on average allocated capital 22
25

Efficiency ratio (FTE basis) 76.90
74.19

Balance Sheet

Average
Total loans and leases $ 131,383
$ 119,775
10
Total earning assets 258,935
248,979
4
Total assets 275,866
267,511
3
Total deposits 244,725
240,242
2
Allocated capital 12,000
12,000
—

Year end

Total loans and leases $ 137,847
$ 125,431
10
Total earning assets 279,465
256,519
9
Total assets 296,139
274,887
8
Total deposits 260,893
245,391
6

~~n/m = not meaningful~~




(Dollars in millions)	2016			2015			% Change
Net interest income (FTE basis)	$	5,759		$	5,527		4	%
Noninterest income:
Investment and brokerage services	10,316			10,792			(4	)
All other income	1,575			1,715			(8	)
Total noninterest income	11,891			12,507			(5	)
Total revenue, net of interest expense (FTE basis)	17,650			18,034			(2	)

Provision for credit losses	68			51			33
Noninterest expense	13,182			13,943			(5	)
Income before income taxes (FTE basis)	4,400			4,040			9
Income tax expense (FTE basis)	1,629			1,473			11
Net income	$	2,771		$	2,567		8

Net interest yield (FTE basis)	2.09		%	2.13		%
Return on average allocated capital	21			21
Efficiency ratio (FTE basis)	74.68			77.32

Balance Sheet

Average
Total loans and leases	$	142,429		$	132,499		7
Total earning assets	275,800			259,020			6
Total assets	291,479			275,950			6
Total deposits	256,425			244,725			5
Allocated capital	13,000			12,000			8

Year end
Total loans and leases	$	148,179		$	139,039		7
Total earning assets	283,152			279,597			1
Total assets	298,932			296,271			1
Total deposits	262,530			260,893			1

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

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

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

Client assets managed under advisory and/or discretion of GWIM are ~~assets under management (AUM)~~AUM and are typically held in diversified portfolios. The majority of client AUM have an investment strategy with a duration of greater than one year and are, therefore, considered long-term AUM. Fees earned on long-term AUM are calculated as a percentage of total AUM. The asset management fees charged to clients per year are dependent on various factors, but are generally driven by the breadth of the client’s relationship and generally range from 50 to 150 bps on their total AUM. The net client long-term AUM flows represent the net change in clients’ long-term AUM balances over a specified period of time,

excluding market appreciation/depreciation and other adjustments.

Client assets under advisory ~~and~~and/or discretion of GWIM in which the investment strategy seeks current income, while maintaining liquidity and capital preservation, are considered liquidity AUM. The duration of these strategies is primarily less than one year. The change in AUM balances from the prior year is primarily the net client flows for liquidity AUM.

Net income for GWIM ~~decreased $360~~increased $204 million to ~~$2.6~~$2.8 billion in ~~2015~~2016 compared to ~~2014~~2015 driven by a decrease in ~~revenue and increases in~~ noninterest expense, ~~and the provision for credit losses.~~partially offset by a decrease in revenue.

Net interest income ~~decreased $337~~increased $232 million to ~~$5.5~~$5.8 billion ~~due to the impact of the allocation of ALM activities, partially offset~~driven by the impact of growth in loan and deposit ~~growth.~~balances. Noninterest income, which primarily includes investment and brokerage services income, decreased ~~$66~~$616 million to ~~$12.5 billion~~$11.9 billion. The decline in noninterest income was driven by lower transactional revenue ~~partially offset by increased~~and decreased asset management fees primarily due to lower market valuations in 2016, partially offset by the impact of long-term AUM ~~flows and higher average market levels.~~flows. Noninterest expense ~~increased$189~~decreased $761 million to ~~$13.8~~$13.2 billion primarily due to ~~higher amortization~~the expiration of ~~previously issued stock~~advisor retention awards, lower revenue-related incentives and ~~investments in client-facing professionals,~~lower operating and support costs, partially offset by ~~lower revenue-related incentives.~~higher FDIC expense.

Return on average allocated capital was 2221 percent ~~down from 25 percent due to a decrease in net income.~~for both 2016 and 2015.



		36Bank of America ~~2015~~201633



Key Indicators and Metrics

(Dollars in millions, except as noted)	2015			2014		2016			2015
Revenue by Business
Merrill Lynch Global Wealth Management	$	14,898		$	15,256	$	14,486		$	14,926
U.S. Trust	3,027			3,084		3,075			3,032
Other ⁽¹⁾	76			64		89			76
Total revenue, net of interest expense (FTE basis)	$	18,001		$	18,404	$	17,650		$	18,034

Client Balances by Business, at year end
Merrill Lynch Global Wealth Management	$	1,985,309		$	2,033,801	$	2,102,175		$	1,986,502
U.S. Trust	388,604			387,491		406,392			388,604
Other ⁽¹⁾	82,929			76,705		—			82,929
Total client balances	$	2,456,842		$	2,497,997	$	2,508,567		$	2,458,035

Client Balances by Type, at year end
Long-term assets under management	$	817,938		$	826,171	$	886,148		$	817,938
Liquidity assets under management(1)	82,925			76,701		—			82,925
Assets under management	900,863			902,872		886,148			900,863
Brokerage assets	1,040,937			1,081,434		1,085,826			1,040,938
Assets in custody	113,239			139,555		123,066			113,239
Deposits	260,893			245,391		262,530			260,893
Loans and leases ⁽²⁾	140,910			128,745		150,997			142,102
Total client balances	$	2,456,842		$	2,497,997	$	2,508,567		$	2,458,035

Assets Under Management Rollforward
Assets under management, beginning of year	$	902,872		$	821,449	$	900,863		$	902,872
Net long-term client flows	34,441			49,800		38,572			34,441
Net liquidity client flows	6,133			3,361		(7,990		)	6,133
Market valuation/other(1)	(42,583		)	28,262		(45,297		)	(42,583		)
Total assets under management, end of year	$	900,863		$	902,872	$	886,148		$	900,863

Associates, at year end ⁽³⁾
Associates, at year end ^{(3, 4)}
Number of financial advisors	16,724			16,035		16,830			16,687
Total wealth advisors	18,167			17,231
Total client-facing professionals	20,632			19,750
Total wealth advisors, including financial advisors						18,688			18,515
Total primary sales professionals, including financial advisors and wealth advisors						19,676			19,462

Merrill Lynch Global Wealth Management Metric(4)
Financial advisor productivity ⁽⁴⁾ (in thousands)	$	1,019		$	1,065
Financial advisor productivity ⁽⁵⁾ (in thousands)						$	979		$	1,024

U.S. Trust Metric, at year end(4)
Client-facing professionals	2,181			2,155
Primary sales professionals						1,678			1,595


⁽¹⁾	Includes the results of BofA Global Capital Management, the cash management division of Bank of America, and certain administrative items. Also reflects the sale to a third party of approximately $80 billion of BofA Global Capital Management's AUM during the three months ended June 30, 2016.


⁽²⁾	Includes margin receivables which are classified in customer and other receivables on the Consolidated Balance Sheet.


⁽³⁾	Includes financial advisors in the Consumer Banking segment of ~~2,191~~2,201 and ~~1,950~~2,187 at December 31, ~~2015~~2016 and ~~2014.~~2015.


⁽⁴⁾	Associate headcount computation is based upon full-time equivalents.


⁽⁵⁾	Financial advisor productivity is defined as ~~Merrill Lynch Global Wealth Management~~MLGWM total revenue, excluding the allocation of certain ~~ALM~~asset and liability management (ALM) activities, divided by the total number of financial advisors (excluding financial advisors in the Consumer Banking segment).

Client balances ~~decreased $41.2~~increased $50.5 billion, or two percent, to ~~nearly~~more than $2.5 trillion at December 31, 2016, driven by market ~~declines,~~valuation increases and positive net flows, partially offset by ~~client balance flows.~~the impact of the sale of BofA Global Capital Management's AUM.

The number of wealth advisors increased ~~five~~one percent, due to continued investment in the advisor development programs, ~~improved~~ competitive recruiting and near historically low advisor attrition levels.

In ~~2015~~,2016, revenue from MLGWM of ~~$14.9~~$14.5 billion ~~and U.S. Trust of $3.0 billion were each~~ was down~~two~~ three percent ~~primarily~~ driven by ~~lower net interest~~a decline in noninterest income due to ~~the impact of the allocation of ALM activities. Additionally, noninterest income was down in MLGWM driven by~~ lower transactional revenue and asset management fees primarily related to lower market valuations, partially offset by the impact of long-term AUM flows. Net interest income was up, primarily driven by growth in loan and deposit balances. U.S. Trust revenue of $3.1 billion was up one percent primarily driven by higher net interest income due to higher loan and deposit balances.

Net Migration Summary

GWIM results are impacted by the net migration of clients and their corresponding deposit, loan and brokerage balances primarily to or from Consumer Banking, as presented in the table below. Migrations result from the movement of clients between business segments to better align with client needs.

Net Migration Summary ⁽¹⁾

(Dollars in millions) 2015 2014
Total deposits, net – to (from) GWIM
$ (218 ) $ 1,350
Total loans, net – to (from) GWIM
(97 ) (61 )
Total brokerage, net – to (from) GWIM
(2,416 ) (2,710 )




Net Migration Summary ⁽¹⁾

(Dollars in millions)	2016			2015
Total deposits, net – from GWIM	$	(1,319	)	$	(218	)
Total loans, net – from GWIM	(7		)	(97		)
Total brokerage, net – from GWIM	(1,972		)	(2,416		)


⁽¹⁾	Migration occurs primarily between GWIM and Consumer Banking.



		34Bank of America ~~2015~~372016

Global Banking



(Dollars in millions)	(Dollars in millions)	2015			2014			% Change		(Dollars in millions)	2016			2015			% Change
Net interest income (FTE basis)	Net interest income (FTE basis)	$	9,254		$	9,810		(6	)%	Net interest income (FTE basis)	$	9,942		$	9,244		8	%
Noninterest income:	Noninterest income:									Noninterest income:
Service charges	Service charges	2,914			2,901			—		Service charges	3,094			2,914			6
Investment banking fees	Investment banking fees	3,110			3,213			(3	)	Investment banking fees	2,884			3,110			(7	)
All other income	All other income	1,641			1,683			(2	)	All other income	2,510			2,353			7
Total noninterest income	Total noninterest income	7,665			7,797			(2	)	Total noninterest income	8,488			8,377			1
Total revenue, net of interest expense (FTE basis)	Total revenue, net of interest expense (FTE basis)	16,919			17,607			(4	)	Total revenue, net of interest expense (FTE basis)	18,430			17,621			5

Provision for credit losses	Provision for credit losses	685			322			113		Provision for credit losses	883			686			29
Noninterest expense	Noninterest expense	7,888			8,170			(3	)	Noninterest expense	8,486			8,481			—
Income before income taxes (FTE basis)	Income before income taxes (FTE basis)	8,346			9,115			(8	)	Income before income taxes (FTE basis)	9,061			8,454			7
Income tax expense (FTE basis)	Income tax expense (FTE basis)	3,073			3,346			(8	)	Income tax expense (FTE basis)	3,341			3,114			7
Net income	Net income	$	5,273		$	5,769		(9	)	Net income	$	5,720		$	5,340		7

Net interest yield (FTE basis)	Net interest yield (FTE basis)	2.85		%	3.10		%			Net interest yield (FTE basis)	2.86		%	2.90		%
Return on average allocated capital	Return on average allocated capital	15			17					Return on average allocated capital	15			15
Efficiency ratio (FTE basis)	Efficiency ratio (FTE basis)	46.62			46.40					Efficiency ratio (FTE basis)	46.04			48.13

Balance Sheet

Average	Average									Average
Total loans and leases	Total loans and leases	$	305,220		$	286,484		7		Total loans and leases	$	333,820		$	303,907		10
Total earning assets	Total earning assets	324,402			316,880			2		Total earning assets	347,489			318,977			9
Total assets	Total assets	369,001			362,273			2		Total assets	396,705			369,001			8
Total deposits	Total deposits	294,733			288,010			2		Total deposits	304,101			294,733			3
Allocated capital	Allocated capital	35,000			33,500			4		Allocated capital	37,000			35,000			6

Year end	Year end									Year end
Total loans and leases	Total loans and leases	$	325,677		$	288,905		13		Total loans and leases	$	339,271		$	323,687		5
Total earning assets	Total earning assets	336,755			308,419			9		Total earning assets	356,241			334,766			6
Total assets	Total assets	382,043			353,637			8		Total assets	408,268			386,132			6
Total deposits	Total deposits	296,162			279,792			6		Total deposits	306,430			296,162			3

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, ~~to clients,~~ and underwriting and advisory services through our network of offices and client relationship teams. Our lending products and services include commercial loans, leases, commitment facilities, trade finance, real estate lending and asset-based lending. Our treasury solutions business includes treasury management, foreign exchange and short-term investing options. We also 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 ~~auto dealerships~~ 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$496 million~~ increased $380 million to ~~$5.3~~$5.7 billion in ~~2015~~2016 compared to ~~2014~~ ~~primarily driven by lower~~2015 as higher revenue ~~and higher~~more than offset an increase in the provision for credit ~~losses,~~losses.

Revenue increased $809 million to $18.4 billion in 2016 compared to 2015 driven by higher net interest income, which increased $698 million to $9.9 billion driven by the impact of growth in loans and leases and higher deposits. Noninterest income increased $111 million to $8.5 billion primarily due to the impact from loans and the related loan hedging activities in the fair value option portfolio and higher treasury-related revenues, partially offset by lower ~~noninterest expense.~~investment banking fees.

~~Revenue~~ ~~decreased$688 million~~ ~~to $16.9 billion in~~ ~~2015~~ primarily due to lower net interest income. The decline in net interest income reflects the impact of the allocation of ALM activities, including liquidity costs as well as loan spread compression, partially offset by loan growth. Noninterest income of $7.7 billion remained relatively unchanged in 2015.

The provision for credit losses increased ~~$363~~$197 million to ~~$685~~$883 million in ~~2015~~ ~~primarily~~2016 driven by ~~energy exposure and~~increases in energy-related reserves as well as loan growth. For additional information, see Commercial Portfolio Credit Risk Management – Industry Concentrations on page ~~83.~~71. Noninterest expense ~~decreased $282 million to $7.9~~of $8.5 billion remained relatively unchanged in ~~2015~~ ~~primarily due to~~2016 as investments in client-facing professionals in Commercial and Business Banking, higher severance costs and an increase in FDIC expense were largely offset by lower ~~litigation expense~~operating and ~~technology initiative~~support costs.

The return on average allocated capital ~~was~~ remained unchanged at 15 percent, in ~~2015, down from~~ ~~17 percent~~ in ~~2014, due to~~ as higher net income was partially offset by an increased capital ~~allocations and lower net income.~~allocation. For more information on capital allocated to the business segments, see Business Segment Operations on page 32.29.



		38Bank of America ~~2015~~201635

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 presents a summary of the results, which exclude certain ~~capital markets activity~~investment banking activities in Global Banking.



Global Corporate, Global Commercial and Business Banking	Global Corporate, Global Commercial and Business Banking																	Global Corporate, Global Commercial and Business Banking

		Global Corporate Banking				Global Commercial Banking				Business Banking				Total					Global Corporate Banking				Global Commercial Banking				Business Banking				Total
(Dollars in millions)	(Dollars in millions)	2015		2014		2015		2014		2015		2014		2015		2014		(Dollars in millions)	2016		2015		2016		2015		2016		2015		2016		2015
Revenue	Revenue																	Revenue
Business Lending	Business Lending	$	3,291	$	3,420	$	3,974	$	3,942	$	342	$	363	$	7,607	$	7,725	Business Lending	$	4,285	$	3,981	$	4,140	$	3,968	$	376	$	352	$	8,801	$	8,301
Global Transaction Services	Global Transaction Services	2,802		2,992		2,633		2,854		702		715		6,137		6,561		Global Transaction Services	2,982		2,793		2,718		2,649		739		703		6,439		6,145
Total revenue, net of interest expense	Total revenue, net of interest expense	$	6,093	$	6,412	$	6,607	$	6,796	$	1,044	$	1,078	$	13,744	$	14,286	Total revenue, net of interest expense	$	7,267	$	6,774	$	6,858	$	6,617	$	1,115	$	1,055	$	15,240	$	14,446

Balance Sheet
Average	Average																	Average
Total loans and leases	Total loans and leases	$	139,337	$	129,601	$	149,217	$	140,539	$	16,589	$	16,329	$	305,143	$	286,469	Total loans and leases	$	152,944	$	138,025	$	163,341	$	148,735	$	17,506	$	17,072	$	333,791	$	303,832
Total deposits	Total deposits	139,042		141,386		122,149		116,570		33,545		30,055		294,736		288,011		Total deposits	142,593		138,142		126,253		123,007		35,256		33,588		304,102		294,737

Year end	Year end																	Year end
Total loans and leases	Total loans and leases	$	148,714	$	131,019	$	160,302	$	141,555	$	16,662	$	16,333	$	325,678	$	288,907	Total loans and leases	$	152,589	$	146,803	$	168,864	$	159,720	$	17,846	$	17,165	$	339,299	$	323,688
Total deposits	Total deposits	134,714		128,730		127,731		119,215		33,722		31,847		296,167		279,792		Total deposits	142,815		133,742		128,210		128,656		35,409		33,767		306,434		296,165

Business Lending revenue ~~of $7.6 billion remained relatively unchanged~~increased $500 million in ~~2015~~2016 compared to ~~2014 as loan spread compression was offset~~2015 driven by the ~~benefit~~impact of growth in loans and leases, as well as the impact from loans and the related loan ~~growth.~~hedging activities in the fair value option portfolio.

Global Transaction Services revenue ~~decreased $424~~increased $294 million in 2016 compared to 2015 ~~primarily due to lower~~driven by growth in treasury-related revenue as well as higher net interest income driven by the beneficial impact of an increase in investable assets as a result of ~~the impact of the allocation of ALM activities, including liquidity costs.~~higher deposits.

Average loans and leases increased ~~seven~~10 percent in ~~2015~~2016 compared to ~~2014~~2015 driven by growth in the commercial and industrial, and leasing portfolios. Average deposits increased three percent due to ~~strong origination volumes~~continued portfolio growth with new and ~~increased revolver utilization. Average deposits remained relatively unchanged in 2015.~~existing clients.

Global Investment Banking

Client teams and product specialists underwrite and distribute debt, equity and loan products, and provide advisory services and tailored risk management solutions. The economics of ~~most~~certain investment banking and underwriting activities are shared primarily between Global Banking and Global Markets ~~based on the activities performed by each segment.~~under an internal revenue-sharing arrangement. To provide a complete discussion of our consolidated investment banking fees, the following table presents total Corporation investment banking fees and the portion attributable to Global Banking.



Investment Banking Fees	Investment Banking Fees												Investment Banking Fees

	Global Banking						Total Corporation						Global Banking						Total Corporation
(Dollars in millions)	2015			2014			2015			2014			2016			2015			2016			2015
Products
Advisory	$	1,354		$	1,098		$	1,503		$	1,205		$	1,156		$	1,354		$	1,269		$	1,503
Debt issuance	1,296			1,532			3,033			3,583			1,407			1,296			3,276			3,033
Equity issuance	460			583			1,236			1,490			321			460			864			1,236
Gross investment banking fees	3,110			3,213			5,772			6,278			2,884			3,110			5,409			5,772
Self-led deals	(57		)	(91		)	(200		)	(213		)	(49		)	(57		)	(168		)	(200		)
Total investment banking fees	$	3,053		$	3,122		$	5,572		$	6,065		$	2,835		$	3,053		$	5,241		$	5,572

Total Corporation investment banking fees of ~~$5.6~~$5.2 billion, excluding self-led deals, included within Global Banking and Global Markets, decreased ~~eight~~six percent in ~~2015~~2016 compared to ~~2014~~2015 driven by lower ~~debt and~~ equity issuance fees ~~partially offset by higher~~and advisory ~~fees. Underwriting~~ fees ~~for debt products declined primarily as~~due to a ~~result of lower debt issuance volumes mainly~~decline in ~~leveraged finance transactions.~~market fee pools.



		36Bank of America ~~2015~~392016

Global Markets



(Dollars in millions)	(Dollars in millions)	2015			2014			% Change		(Dollars in millions)	2016			2015			% Change
Net interest income (FTE basis)	Net interest income (FTE basis)	$	4,338		$	4,004		8	%	Net interest income (FTE basis)	$	4,558		$	4,191		9	%
Noninterest income:	Noninterest income:									Noninterest income:
Investment and brokerage services	Investment and brokerage services	2,221			2,205			1		Investment and brokerage services	2,102			2,221			(5	)
Investment banking fees	Investment banking fees	2,401			2,743			(12	)	Investment banking fees	2,296			2,401			(4	)
Trading account profits	Trading account profits	6,070			5,997			1		Trading account profits	6,550			6,109			7
All other income	All other income	37			1,239			(97	)	All other income	584			91			n/m
Total noninterest income	Total noninterest income	10,729			12,184			(12	)	Total noninterest income	11,532			10,822			7
Total revenue, net of interest expense (FTE basis)	Total revenue, net of interest expense (FTE basis)	15,067			16,188			(7	)	Total revenue, net of interest expense (FTE basis)	16,090			15,013			7

Provision for credit losses	Provision for credit losses	99			110			(10	)	Provision for credit losses	31			99			(69	)
Noninterest expense	Noninterest expense	11,310			11,862			(5	)	Noninterest expense	10,170			11,374			(11	)
Income before income taxes (FTE basis)	Income before income taxes (FTE basis)	3,658			4,216			(13	)	Income before income taxes (FTE basis)	5,889			3,540			66
Income tax expense (FTE basis)	Income tax expense (FTE basis)	1,162			1,511			(23	)	Income tax expense (FTE basis)	2,072			1,117			85
Net income	Net income	$	2,496		$	2,705		(8	)	Net income	$	3,817		$	2,423		58

Return on average allocated capital	Return on average allocated capital	7		%	8		%			Return on average allocated capital	10		%	7		%
Efficiency ratio (FTE basis)	Efficiency ratio (FTE basis)	75.06			73.28					Efficiency ratio (FTE basis)	63.21			75.75

Balance Sheet

Average	Average									Average
Trading-related assets:	Trading-related assets:									Trading-related assets:
Trading account securities	Trading account securities	$	195,731		$	201,956		(3	)	Trading account securities	$	185,135		$	195,650		(5	)
Reverse repurchases	Reverse repurchases	103,690			116,085			(11	)	Reverse repurchases	89,715			103,506			(13	)
Securities borrowed	Securities borrowed	79,494			85,098			(7	)	Securities borrowed	87,286			79,494			10
Derivative assets	Derivative assets	54,520			46,676			17		Derivative assets	50,769			54,519			(7	)
Total trading-related assets ⁽¹⁾	Total trading-related assets ⁽¹⁾	433,435			449,815			(4	)	Total trading-related assets ⁽¹⁾	412,905			433,169			(5	)
Total loans and leases	Total loans and leases	63,572			62,073			2		Total loans and leases	69,641			63,443			10
Total earning assets ⁽¹⁾	Total earning assets ⁽¹⁾	433,372			461,189			(6	)	Total earning assets ⁽¹⁾	423,579			430,468			(2	)
Total assets	Total assets	596,849			607,623			(2	)	Total assets	585,342			594,057			(1	)
Total deposits	Total deposits	38,470			40,813			(6	)	Total deposits	34,250			38,074			(10	)
Allocated capital	Allocated capital	35,000			34,000			3		Allocated capital	37,000			35,000			6

Year end	Year end									Year end
Total trading-related assets ⁽¹⁾	Total trading-related assets ⁽¹⁾	$	374,081		$	418,860		(11	)	Total trading-related assets ⁽¹⁾	$	380,562		$	373,926		2
Total loans and leases	Total loans and leases	73,208			59,388			23		Total loans and leases	72,743			73,208			(1	)
Total earning assets ⁽¹⁾	Total earning assets ⁽¹⁾	386,857			421,799			(8	)	Total earning assets ⁽¹⁾	397,023			384,046			3
Total assets	Total assets	551,587			579,594			(5	)	Total assets	566,060			548,790			3
Total deposits	Total deposits	37,276			40,746			(9	)	Total deposits	34,927			37,038			(6	)


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

n/m = not meaningful

Global Markets offers sales and trading services, including research, to institutional clients across fixed-income, credit, currency, commodity and equity businesses. Global Markets product coverage includes securities and derivative products in both the primary and secondary markets. Global Markets provides market-making, financing, securities clearing, settlement and custody services globally to our institutional investor clients in support of their investing and trading activities. We also work with our commercial and corporate clients to provide risk management products using interest rate, equity, credit, currency and commodity derivatives, foreign exchange, fixed-income and mortgage-related products. As a result of our market-making activities in these products, we may be required to manage risk in a broad range of financial products including government securities, equity and equity-linked securities, high-grade and high-yield corporate debt securities, syndicated loans, MBS, commodities and asset-backed securities (ABS). The economics of ~~most~~certain investment banking and underwriting activities are shared primarily between Global Markets and Global Banking ~~based on the activities performed by each segment.~~under an internal revenue-sharing arrangement. Global Banking originates certain deal-related

transactions with our corporate and commercial clients that are executed and distributed by Global Markets. For information on investment banking fees on a consolidated basis, see page 3936.

~~Retrospective to January 1, 2015, we early adopted new accounting guidance that requires the Corporation to present unrealized DVA gains and losses on certain liabilities accounted~~Net income for ~~under the fair value option in accumulated OCI. This change, which is reflected entirely in~~ Global Markets~~, resulted~~ increased $1.4 billion to $3.8 billion in ~~a reclassification of pretax unrealized DVA gains of $1.0 billion from other income~~2016 compared to ~~accumulated OCI for~~ 2015. ~~Results for 2014 were not subject to restatement under the provisions of the new accounting guidance.~~ Net DVA ~~on derivatives is still reported in~~ ~~Global Markets~~ ~~segment results. For additional information, see Executive Summary – Recent Events on page 22. In 2014, we implemented a funding valuation adjustment (FVA) into our valuation estimates primarily~~losses were $238 million compared to ~~include funding costs on uncollateralized derivatives and derivatives where we are not permitted to use the collateral we receive. This change in estimate resulted in a net FVA pretax charge~~losses of ~~$497~~$786 million in ~~2014, which is included~~2015. Excluding net DVA, net income increased $1.1 billion to $4.0 billion in 2016 compared to 2015 primarily driven by higher sales and trading revenue and lower noninterest expense, partially offset by lower investment banking fees and investment and brokerage services revenue. Sales and trading revenue, excluding net ~~DVA.~~DVA, increased $638 million primarily due to a stronger performance globally across credit products led by mortgages and continued strength in rates products. The increase was partially offset by challenging credit market conditions in early 2016 as well as reduced client activity in equities, most notably in Asia, and a less favorable trading environment for equity derivatives. Noninterest expense decreased $1.2 billion to $10.2 billion primarily due to lower litigation expense and lower revenue-related expenses.



		40Bank of America ~~2015~~201637

~~Net income for~~ ~~Global Markets~~ decreased $209 million to $2.5 billion in 2015 compared to 2014. Excluding net DVA, net income increased $128 million to $3.0 billion in 2015 compared to 2014, primarily driven by lower noninterest expense and lower tax expense, partially offset by lower revenue. Revenue, excluding net DVA, decreased due to lower trading account profits due to declines in credit-related businesses, lower investment banking fees and lower equity investment gains (not included in sales and trading revenue) as 2014 included gains related to the IPO of an equity investment, partially offset by an increase in net interest income. Net DVA losses were $786 million compared to losses of $240 million in 2014. Sales and trading revenue, excluding net DVA, decreased $142 million due to lower fixed-income, currencies and commodities (FICC) revenue, partially offset by increased Equities revenue. Noninterest expense decreased $552 million to $11.3 billion largely due to lower litigation expense and, to a lesser extent, lower revenue-related incentive compensation and support costs. The effective tax rate for 2014 reflected the impact of non-deductible litigation expense.

Average earning assets decreased ~~$27.8~~$6.9 billion to ~~$433.4~~$423.6 billion in ~~2015 largely~~2016 primarily driven by a decrease in ~~reverse repurchases, securities borrowed~~match book financing activity and ~~trading securities primarily due to~~ a reduction in ~~client~~trading inventory, partially offset by higher loans and other customer financing. Year-end trading-related assets increased $6.6 billion in 2016 primarily driven by higher securities borrowed or purchased under agreements to resell due to increased customer financing activity ~~and continuing balance sheet optimization efforts across~~ ~~Global Markets~~.

~~Year-end loans and leases increased $13.8 billion in 2015 primarily~~as well as higher trading account assets due to ~~growth in mortgage and securitization finance.~~client demand.

The return on average allocated capital was 10 percent, up from seven percent, ~~down from eight percent,~~ reflecting ~~a decrease~~an increase in net income, ~~and~~partially offset by an increase in allocated capital.

Sales and Trading Revenue

Sales and trading revenue includes unrealized and realized gains and losses on trading and other assets, net interest income, and fees primarily from commissions on equity securities. Sales and trading revenue is segregated into fixed-income (government debt obligations, investment and non-investment grade corporate debt obligations, commercial MBS, ~~RMBS,~~residential mortgage-backed securities (RMBS), collateralized loan obligations (CLOs), interest rate and credit derivative contracts),

currencies (interest rate and foreign exchange contracts), commodities (primarily futures, forwards, swaps and options) and equities (equity-linked derivatives and cash equity activity). The 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 the impact of net DVA, which is a non-GAAP financial measure. We believe the use of this non-GAAP financial measure provides ~~clarity in assessing~~additional useful information to assess the underlying performance of these ~~businesses.~~businesses and to allow better comparison of period-to-period operating performance.




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

(Dollars in millions)	2016		2015
Sales and trading revenue
Fixed-income, currencies and commodities	$	9,373	$	7,869
Equities	4,017		4,335
Total sales and trading revenue	$	13,390	$	12,204

Sales and trading revenue, excluding net DVA ⁽³⁾
Fixed-income, currencies and commodities	$	9,611	$	8,632
Equities	4,017		4,358
Total sales and trading revenue, excluding net DVA	$	13,628	$	12,990

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

(Dollars in millions) 2015 2014
Sales and trading revenue
Fixed-income, currencies and commodities $ 7,923
$ 8,752
Equities 4,335
4,194
Total sales and trading revenue $ 12,258
$ 12,946

Sales and trading revenue, excluding net DVA ⁽³⁾

Fixed-income, currencies and commodities $ 8,686
$ 9,060
Equities 4,358
4,126
Total sales and trading revenue, excluding net DVA $ 13,044
$ 13,186


⁽¹⁾	Includes FTE adjustments of $~~182~~184 million and $~~181~~182 million for ~~2015~~2016 and ~~2014~~2015. For more information on sales and trading revenue, see Note 2 – Derivatives to the Consolidated Financial Statements.


⁽²⁾	Includes Global Banking sales and trading revenue of $~~422~~406 million and $~~382~~424 million for ~~2015~~2016 and ~~2014~~2015.

⁽³⁾

~~FICC~~Fixed-income, currencies and commodities (FICC) and Equities sales and trading revenue, excluding ~~the impact of~~ net DVA, is a non-GAAP financial measure. FICC net DVA losses were $~~763~~238 million for ~~2015~~2016 compared to net DVA losses of $~~308~~763 million in ~~2014~~2015. Equities net DVA losses were $~~23 million~~0 for ~~2015~~2016 compared to net DVA ~~gains~~losses of $6823 million in ~~2014~~2015.

The explanations for period-over-period changes in sales and trading, FICC and Equities revenue, as set forth below, would be the same if net DVA was included.

FICC revenue, excluding net DVA, ~~decreased$374 million~~increased to ~~$8.7 billion~~ ~~primarily driven by declines in credit-related businesses due to lower client activity,~~$979 million as rates products improved on increased customer flow, and mortgages recorded strong results. This was partially offset by ~~stronger results~~a weaker performance in ~~rates, currencies and~~ commodities, ~~products.~~as lower volatility dampened client activity. Equities revenue, excluding net DVA, ~~increased $232~~decreased $341 million to ~~$4.4~~$4.0 billion primarily driven by ~~strong~~lower levels of client activity, primarily in Asia, which benefited in 2015 from increased market volumes relating to stock markets rallies in the region, as well as weaker trading performance in ~~derivatives and increased client activity in the Asia-Pacific region.~~



		~~Bank of America 2015~~41

~~Legacy Assets & Servicing~~

(Dollars in millions) 2015 2014 % Change
Net interest income (FTE basis) $ 1,573
$ 1,520
3 %
Noninterest income:
Mortgage banking income 1,658
1,045
59
All other income 199
111
79
Total noninterest income 1,857
1,156
61
Total revenue, net of interest expense (FTE basis) 3,430
2,676
28

Provision for credit losses 144
127
13
Noninterest expense 4,451
20,633
(78 )
Loss before income taxes (FTE basis) (1,165 ) (18,084 ) (94 )
Income tax benefit (FTE basis) (425 ) (4,974 ) (91 )
Net loss $ (740 ) $ (13,110 ) (94 )

Net interest yield (FTE basis) 3.82 % 4.04 %

Balance Sheet

Average
Total loans and leases $ 29,885
$ 35,941
(17 )
Total earning assets 41,160
37,593
9
Total assets 51,222
52,133
(2 )
Allocated capital 24,000
17,000
41

Year end
Total loans and leases $ 26,521
$ 33,055
(20 )
Total earning assets 37,783
33,923
11
Total assets 47,292
45,957
3

~~LAS~~ is responsible for our mortgage servicing activities related to residential first mortgage and home equity loans serviced for others and loans held by the Corporation, including loans that have been designated as the ~~LAS~~ ~~Portfolios. The~~ ~~LAS~~ Portfolios (both owned and serviced), herein referred to as the Legacy Owned and Legacy Serviced Portfolios, respectively (together, the Legacy Portfolios), and as further defined below, include those loans originated prior to January 1, 2011 that would not have been originated under our established underwriting standards as of December 31, 2010.derivatives. For more information on ~~our~~ ~~Legacy Portfolios, see page~~ 43~~. In addition,~~ ~~LAS~~ ~~is responsible for managing certain legacy exposures related to mortgage origination,~~ sales and ~~servicing activities (e.g., litigation, representations and warranties).~~trading revenue, see ~~LAS~~Note 2 – Derivatives ~~also includes the financial results of the home equity portfolio selected as part of the Legacy Owned Portfolio and the results of MSR activities, including net hedge results.~~

~~LAS~~ ~~includes certain revenues and expenses on loans serviced for others, including owned loans serviced for~~ ~~Consumer Banking~~, ~~GWIM~~ ~~and~~ ~~All Other~~.

~~The net loss for~~ ~~LAS~~ ~~decreased $12.4 billion to $740 million for 2015 compared to 2014 primarily driven by significantly lower litigation expense, which is included in noninterest expense. Also contributing~~ to the decrease in the net loss was higher revenue, primarily mortgage banking income, partially offset by higher provision for credit losses. Mortgage banking income increased $613 million primarily due to a lower representations and warranties provision compared to 2014 and improved MSR net-of-hedge performance, partially offset by lower servicing fees due to a smaller servicing portfolio. The provision for credit losses ~~increased$17 million~~ ~~as the portfolio begins to stabilize. Also, the provision for credit losses in 2014 included $400 million of~~

additional costs associated with the consumer relief portion of the settlement with the DoJ. Noninterest expense decreased $16.2 billion primarily due to a $14.4 billion decrease in litigation expense. Excluding litigation, noninterest expense decreased $1.8 billion to $3.6 billion due to lower default-related staffing and other default-related servicing expenses.

~~The increase in allocated capital for~~ ~~LAS~~ ~~reflects higher Basel 3 Advanced approaches operational risk capital than in 2014. For more information on capital allocated to the business segments, see Business Segment Operations on page 32.~~Consolidated Financial Statements.

~~Servicing~~

~~LAS~~ is responsible for all of our in-house servicing activities related to the residential mortgage and home equity loan portfolios, including owned loans and loans serviced for others (collectively, the mortgage serviced portfolio). A portion of this portfolio has been designated as the Legacy Serviced Portfolio, which represented 25 percent, 26 percent and 30 percent of the total mortgage serviced portfolio, as measured by unpaid principal balance, at ~~December 31, 2015, 2014 and 2013, respectively. In addition,~~ ~~LAS~~ ~~is responsible for contracting with and overseeing subservicing vendors who service loans on our behalf.~~

Servicing activities include collecting cash for principal, interest and escrow payments from borrowers, disbursing customer draws for lines of credit, accounting for and remitting principal and interest payments to investors and escrow payments to third parties, and responding to customer inquiries. Our home retention efforts, including single point of contact resources, are also part of our servicing activities, along with supervision of foreclosures and property dispositions. Prior to foreclosure, ~~LAS~~ ~~evaluates various workout options in an effort to help our customers avoid foreclosure.~~



4238 Bank of America ~~2015~~2016

~~Legacy Portfolios~~

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

~~Legacy Owned Portfolio~~

The Legacy Owned Portfolio includes those loans that met the criteria as described above and are on the balance sheet of the Corporation. Home equity loans in this portfolio are held on the balance sheet of ~~LAS, and residential mortgage loans in this portfolio are included as part of~~ ~~All Other. The financial results of the on-balance sheet loans are reported in the segment that owns the loans or in~~ ~~All Other. Total loans in the Legacy Owned Portfolio~~ ~~decreased$18.3 billion~~ in ~~2015~~ to ~~$71.6 billion~~ at ~~December 31, 2015, of which $26.5 billion was held on the~~ ~~LAS~~ ~~balance sheet and the remainder was included in~~ ~~All Other. The decrease was largely due to payoffs and paydowns, as well as loan sales.~~

~~Legacy Serviced Portfolio~~

~~The Legacy Serviced Portfolio includes loans serviced by~~ ~~LAS~~ in both the Legacy Owned Portfolio and those loans serviced for outside investors that met the criteria as described above. The table below summarizes the balances of the residential mortgage loans included in the Legacy Serviced Portfolio (the Legacy Residential Mortgage Serviced Portfolio) representing 24 percent, 24 percent and 28 percent of the total residential mortgage serviced portfolio of $491 billion, $609 billion and $719 billion, as measured by unpaid principal balance, at ~~December 31, 2015~~, ~~2014~~ ~~and~~ ~~2013, respectively. The decline in the Legacy Residential Mortgage Serviced Portfolio was due to paydowns and payoffs, and MSR and loan sales.~~

Legacy Residential Mortgage Serviced Portfolio, a subset of the Residential Mortgage Serviced Portfolio ⁽¹⁾

December 31
(Dollars in billions) 2015 2014 2013
Unpaid principal balance
Residential mortgage loans
Total $ 116
$ 148
$ 203
60 days or more past due 13
25
49

Number of loans serviced (in thousands)
Residential mortgage loans
Total 632
794
1,083
60 days or more past due 72
135
258


⁽¹⁾	~~Excludes~~ ~~$28 billion~~, ~~$34 billion~~ ~~and~~ ~~$39 billion~~ ~~of home equity loans and HELOCs at~~ ~~December 31, 2015~~, ~~2014~~ ~~and~~ ~~2013, respectively.~~

~~Non-Legacy Portfolio~~

~~As previously discussed,~~ ~~LAS~~ is responsible for all of our servicing activities. The table below summarizes the balances of the residential mortgage loans that are not included in the Legacy Serviced Portfolio (the Non-Legacy Residential Mortgage Serviced Portfolio) representing 76 percent, 76 percent and 72 percent of the total residential mortgage serviced portfolio, as measured by unpaid principal balance, at December 31, 2015, 2014 and 2013, respectively. The decline in the Non-Legacy Residential Mortgage Serviced Portfolio was primarily due to paydowns and payoffs, partially offset by new originations.

Non-Legacy Residential Mortgage Serviced Portfolio, a subset of the Residential Mortgage Serviced Portfolio ⁽¹⁾

December 31
(Dollars in billions) 2015 2014 2013
Unpaid principal balance
Residential mortgage loans
Total $ 375
$ 461
$ 516
60 days or more past due 5
9
12

Number of loans serviced (in thousands)
Residential mortgage loans
Total 2,376
2,951
3,267
60 days or more past due 31
54
67


⁽¹⁾	~~Excludes~~ ~~$46 billion~~, ~~$50 billion~~ ~~and~~ ~~$52 billion~~ ~~of home equity loans and HELOCs at~~ ~~December 31, 2015~~, ~~2014~~ ~~and~~ ~~2013, respectively.~~



		~~Bank of America 2015~~43

~~LAS~~ ~~Mortgage Banking Income~~

~~LAS~~ mortgage banking income includes income earned in connection with servicing activities and MSR valuation adjustments, net of results from risk management activities used to hedge certain market risks of the MSRs. The costs associated with our servicing activities are included in noninterest expense. ~~LAS~~ ~~mortgage banking income also includes the cost of legacy representations and warranties exposures and revenue from the sales of loans that had returned to performing status. The table below summarizes~~ ~~LAS~~ ~~mortgage banking income.~~

LAS Mortgage Banking Income

(Dollars in millions) 2015 2014
Servicing income:
Servicing fees $ 1,520
$ 1,957
Amortization of expected cash flows ⁽¹⁾
(738 ) (818 )
Fair value changes of MSRs, net of risk management activities used to hedge certain market risks ⁽²⁾
516
294
Total net servicing income 1,298
1,433
Representations and warranties (provision) benefit 28
(693 )
Other mortgage banking income ⁽³⁾
332
305
Total LAS mortgage banking income
$ 1,658
$ 1,045


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


⁽²⁾	~~Includes gains (losses) on sales of MSRs.~~


⁽³⁾	~~Consists primarily of revenue from sales of repurchased loans that had returned to performing status.~~

~~In 2015,~~ ~~LAS~~ mortgage banking income increased $613 million to $1.7 billion primarily driven by a lower representations and warranties provision and improved MSR net-of-hedge performance, partially offset by lower servicing fees due to a smaller servicing portfolio. Servicing fees declined 22 percent to $1.5 billion in 2015 as the size of the servicing portfolio continued to decline driven by loan prepayment activity, which exceeded new

originations, as well as strategic sales of MSRs in 2014. The $28 million benefit in the provision for representations and warranties for 2015 compared to a provision of $693 million in 2014 was primarily driven by the impact of the ~~ACE Securities Corp. v. DB Structured Products, Inc.~~ (ACE) decision, as time-barred claims are now treated as resolved. For more information on the ACE decision, see Off-Balance Sheet Arrangements and Contractual Obligations – Representations and Warranties on page 46.

Key Statistics
December 31
(Dollars in millions, except as noted) 2015 2014
Mortgage serviced portfolio (in billions) ^{(1, 2)}
$ 565
$ 693

Mortgage loans serviced for investors (in billions) ⁽¹⁾
378
474

Mortgage servicing rights:

Balance ⁽³⁾
2,680
3,271

Capitalized mortgage servicing rights
(% of loans serviced for investors)
71
bps 69
bps


⁽¹⁾	~~The servicing portfolio and mortgage loans serviced for investors represent the unpaid principal balance of loans. At both~~ ~~December 31, 2015 and 2014, the balance excludes~~ ~~$16 billion~~ ~~of non-U.S. consumer mortgage loans serviced for investors.~~


⁽²⁾	~~Servicing of residential mortgage loans, HELOCs and home equity loans by~~ ~~LAS~~.


⁽³⁾	At ~~December 31, 2015 and 2014, excludes~~ ~~$407 million~~ ~~and~~ ~~$259 million~~ ~~of certain non-U.S. residential mortgage MSR balances that are recorded in~~ ~~Global Markets~~.

~~Mortgage Servicing Rights~~

At ~~December 31, 2015, the balance of consumer MSRs managed within~~ ~~LAS, which excludes $407 million of certain non-U.S. residential mortgage MSRs recorded in~~ ~~Global Markets,~~ ~~was~~ ~~$2.7 billion~~ ~~compared to~~ ~~$3.3 billion~~ at ~~December 31, 2014. The decrease was primarily driven by the recognition of modeled cash flows and sales of MSRs, partially offset by new loan originations. For more information on MSRs, see~~ ~~Note 23 – Mortgage Servicing Rightsto the Consolidated Financial Statements~~.



44 ~~Bank of America 2015~~

All Other



(Dollars in millions)	(Dollars in millions)	2015			2014			% Change		(Dollars in millions)	2016			2015			% Change
Net interest income (FTE basis)	Net interest income (FTE basis)	$	(348	)	$	(526	)	(34	)%	Net interest income (FTE basis)	$	447		$	457		(2	)%
Noninterest income:	Noninterest income:									Noninterest income:
Card income	Card income	263			356			(26	)	Card income	189			260			(27	)
Equity investment income		—			727			(100	)
Mortgage banking income										Mortgage banking income	889			1,022			(13	)
Gains on sales of debt securities	Gains on sales of debt securities	1,079			1,310			(18	)	Gains on sales of debt securities	490			1,126			(56	)
All other loss	All other loss	(1,613		)	(2,435		)	(34	)	All other loss	(1,315		)	(1,204		)	9
Total noninterest income	Total noninterest income	(271		)	(42		)	n/m		Total noninterest income	253			1,204			(79	)
Total revenue, net of interest expense (FTE basis)	Total revenue, net of interest expense (FTE basis)	(619		)	(568		)	9		Total revenue, net of interest expense (FTE basis)	700			1,661			(58	)

Provision for credit losses	Provision for credit losses	(342		)	(978		)	(65	)	Provision for credit losses	(100		)	(21		)	n/m
Noninterest expense	Noninterest expense	2,215			2,933			(24	)	Noninterest expense	5,460			5,220			5
Loss before income taxes (FTE basis)	Loss before income taxes (FTE basis)	(2,492		)	(2,523		)	(1	)	Loss before income taxes (FTE basis)	(4,660		)	(3,538		)	32
Income tax benefit (FTE basis)	Income tax benefit (FTE basis)	(2,003		)	(2,587		)	(23	)	Income tax benefit (FTE basis)	(3,085		)	(2,395		)	29
Net income (loss)		$	(489	)	$	64		n/m
Net loss										Net loss	$	(1,575	)	$	(1,143	)	38

Balance Sheet(1)

Average	Average									Average
Loans and leases:
Residential mortgage		$	130,893		$	180,249		(27	)
Non-U.S. credit card		10,104			11,511			(12	)
Other		6,403			10,753			(40	)
Total loans and leases	Total loans and leases	147,400			202,513			(27	)	Total loans and leases	$	108,735		$	144,506		(25	)
Total assets ⁽¹⁾		257,893			278,812			(8	)
Total deposits	Total deposits	21,862			30,834			(29	)	Total deposits	28,131			25,452			11

Year end	Year end									Year end
Loans and leases:
Residential mortgage		$	109,030		$	155,595		(30	)
Non-U.S. credit card		9,975			10,465			(5	)
Other		6,338			6,552			(3	)
Total loans and leases		125,343			172,612			(27	)
Total equity investments		4,297			4,871			(12	)
Total assets ⁽¹⁾		230,791			261,581			(12	)
Total loans and leases⁽²⁾										Total loans and leases⁽²⁾	$	96,713		$	122,198		(21	)
Total deposits	Total deposits	22,898			19,240			19		Total deposits	24,257			25,334			(4	)

⁽¹⁾

In segments where the total of liabilities and equity exceeds assets, which are generally deposit-taking segments, we allocate assets from All Other to those segments to match liabilities (i.e., deposits) and allocated shareholders’ equity. Such allocated assets were $~~499.4~~500.0 billion and $~~480.3~~463.4 billion for ~~2015~~2016 and ~~2014~~2015, and $~~518.8~~518.7 billion and $~~474.6~~489.0 billion at December 31, ~~2015~~2016 and ~~2014~~2015.


⁽²⁾	Includes $9.2 billion of non-U.S. credit card loans, which are included in assets of business held for sale on the Consolidated Balance Sheet.

n/m = not meaningful

All Other consists of ALM activities,, equity investments, the ~~international~~non-U.S. consumer credit card business, non-core mortgage loans and servicing activities, the net impact of periodic revisions to the MSR valuation model for both core and non-core MSRs, other liquidating businesses, residual expense allocations and other. ALM activities encompass certain residential mortgages, debt securities, interest rate and foreign currency risk management activities, ~~including the residual net interest income allocation,~~ the impact of certain allocation methodologies and accounting hedge ineffectiveness. The results of certain ALM activities are allocated to our business segments. ~~Beginning with new originations in 2014, we retain certain residential mortgages in~~ ~~Consumer Banking, consistent with where the overall relationship is managed; previously such mortgages were in~~ ~~All Other. Additionally, certain residential mortgage loans that are managed by~~ ~~LAS~~ ~~are held in~~ ~~All Other~~. For more information on our ALM activities, see~~Interest Rate Risk Management for Non-trading Activities~~ ~~on page~~ 97 ~~and~~ Note 24 – Business Segment Information to the Consolidated Financial Statements. Equity investments include our merchant services joint venture as well as Global Principal Investments (GPI) which is comprised of a portfolio of equity, real estate and other alternative investments. For more information on our merchant services joint venture, see Note 12 – Commitments and Contingencies to the Consolidated Financial Statements.

On December 20, 2016, we entered into an agreement to sell our non-U.S. consumer credit card business to a third party. Subject to regulatory approval, this transaction is expected to close by mid-2017. For more information on the sale of our non-U.S. consumer credit card business, see Recent Events on page 21 and Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements.

The Corporation classifies consumer real estate loans as core or non-core based on loan and customer characteristics such as origination date, product type, LTV, FICO score and delinquency status. Residential mortgage loans that are held for interest rate or liquidity risk management purposes are presented on the balance sheet of All Other. For more information on our interest rate and liquidity risk management activities, see Liquidity Risk on

~~Net income~~page 51 and Interest Rate Risk Management for the Banking Book on page 84. During 2016, residential mortgage loans held for ALM activities decreased $8.5 billion to $34.7 billion at December 31, 2016 primarily as a result of payoffs, paydowns and loan sales outpacing new volume. Non-core residential mortgage and home equity loans, which are principally run-off portfolios, including certain loans accounted for under the fair value option and MSRs pertaining to non-core loans serviced for others, are also held in All Other. During 2016, total non-core loans decreased $15.7 billion to $53.1 billion at December 31, 2016 due largely to payoffs and paydowns, as well as loan sales.

The net loss for All Other ~~decreased $553~~increased $432 million to ~~a loss of~~ ~~$489 million~~$1.6 billion in ~~2015~~2016 primarily due to ~~a decrease in equity investment income, a decrease in the benefit in the provision for credit losses and~~ lower gains on ~~sales~~the sale of debt securities, ~~partially offset by higher net interest~~lower mortgage banking income, ~~an increase in~~lower gains on sales of consumer real estate loans ~~lower U.K. PPI costs~~and an increase in noninterest expense, partially offset by an improvement in the provision for credit losses and a decrease of $174 million in ~~noninterest expense.~~PPI costs.

~~Net interest~~Mortgage banking income ~~increased $178~~decreased $133 million primarily ~~driven by a lower impact from negative market-related adjustments on debt securities,~~due to higher representations and warranties provision, partially offset by more favorable MSR results, net of the related hedge performance, which includes a ~~$612~~net $306 million ~~charge~~increase in ~~2015 related~~MSR fair value due to ~~the discount on~~a revision of certain trust preferred securities. Negative market-related adjustments on debt securities were $296 million compared to $1.1 billion in 2014. Equity investment income decreased $727 million as the prior year included a gain on the sale of a portion of an equity investment.MSR valuation assumptions. Gains on the sales of loans, including nonperforming and other delinquent loans ~~net of hedges,~~ were ~~$1.0 billion~~$232 million compared to gains of ~~$672~~$1.0 billion in 2015.

The benefit in the provision for credit losses improved $79 million to a benefit of $100 million in ~~2014. Also included~~2016 primarily driven by lower loan and lease balances from continued run-off of non-core consumer real estate loans. Noninterest expense increased $240 million to $5.5 billion driven by litigation expense.

The income tax benefit was $3.1 billion in ~~all other loss were U.K. PPI costs of $319 million~~2016 compared to ~~$621 million, and negative FTE adjustments~~a benefit of ~~$1.6~~$2.4 billion ~~compared to $1.3 billion to eliminate~~in 2015 with the ~~FTE treatment of certain tax credits recorded in~~ ~~Global Banking.~~increase driven by the



		Bank of America ~~2015~~2016 4539

~~The benefit~~change in the ~~provision for credit losses decreased~~ ~~$636 million~~pretax loss and net tax benefits related to ~~a benefit of~~ ~~$342 million~~ ~~in 2015 primarily driven by lower recoveries, including those recorded in connection with residential mortgage loan sales.~~

~~Noninterest expense decreased $718 million to $2.2 billion reflecting a decrease in litigation expense and lower personnel, infrastructure and support costs,~~various tax audit matters, partially offset by ~~higher professional fees~~a $348 million tax charge in 2016 related to the change in ~~part to our CCAR resubmission.~~

~~The income~~the U.K. corporate tax ~~benefit~~ ~~was~~ ~~$2.0 billion~~ ~~on a pretax loss of $2.5 billion in~~ ~~2015~~rate compared to a ~~benefit of~~ ~~$2.6 billion~~ ~~on a pretax loss of $2.5 billion in~~ ~~2014, as 2014 included tax benefits attributable to the resolution of several tax examinations, and 2015 included the charge of approximately~~ $290 million ~~related to the U.K tax law change. In addition, both~~charge in 2015. Both periods include income tax benefit adjustments to eliminate the FTE treatment of certain tax credits recorded in Global Banking.

Off-Balance Sheet Arrangements and Contractual Obligations

We have contractual obligations to make future payments on debt and lease agreements. Additionally, in the normal course of business, we enter into contractual arrangements whereby we commit to future purchases of products or services from unaffiliated parties. Purchase obligations are defined as obligations that are legally binding agreements whereby we agree to purchase products or services with a specific minimum quantity

at a fixed, minimum or variable price over a specified period of time. Included in purchase obligations are vendor contracts, the most significant of which include communication services, processing services and software contracts. Debt, lease and other obligations are more fully discussed in Note 11 – Long-term Debt and Note 12 – Commitments and Contingenciesto the Consolidated Financial Statements.

Other long-term liabilities include our contractual funding obligations related to the Qualified Pension ~~Plans,~~Plan, Non-U.S. Pension Plans, Nonqualified and Other Pension Plans, and Postretirement Health and Life Plans (collectively, 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 ~~2015~~2016 and ~~2014~~,2015, we contributed ~~$234~~$256 million ~~each year~~ and $234 million to the Plans, and we expect to make ~~$261~~$215 million of contributions during ~~2016~~.2017. The Plans are more fully discussed in Note 17 – Employee Benefit Plansto the Consolidated Financial ~~Statements~~.

~~Debt, lease, equity and other obligations are more fully discussed in~~ ~~Note 11 – Long-term Debt~~ ~~and~~ ~~Note 12 – Commitments and Contingenciesto the Consolidated Financial Statements~~.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 12 – Commitments and Contingencies to the Consolidated Financial Statements.

Table 119 includes certain contractual obligations at December 31, ~~2015~~2016 and ~~2014.~~2015.



Table 11	Contractual Obligations
Table 9														Contractual Obligations

		December 31, 2015										December 31 2014			December 31, 2016										December 31 2015
(Dollars in millions)	(Dollars in millions)	Due in One Year or Less		Due After One Year Through Three Years		Due After Three Years Through Five Years		Due After Five Years		Total		Total		(Dollars in millions)	Due in One Year or Less		Due After One Year Through Three Years		Due After Three Years Through Five Years		Due After Five Years		Total		Total
Long-term debt	Long-term debt	$	43,334	$	75,377	$	36,513	$	81,540	$	236,764	$	243,139	Long-term debt	$	43,964	$	60,106	$	26,034	$	86,719	$	216,823	$	236,764
Operating lease obligations	Operating lease obligations	2,456		3,846		2,798		4,581		13,681		14,406		Operating lease obligations	2,324		3,877		2,908		4,511		13,620		13,681
Purchase obligations	Purchase obligations	2,007		1,905		629		809		5,350		5,544		Purchase obligations	2,089		2,019		604		1,030		5,742		5,350
Time deposits	Time deposits	65,567		5,207		2,517		683		73,974		84,843		Time deposits	65,112		5,961		3,369		502		74,944		73,974
Other long-term liabilities	Other long-term liabilities	1,663		870		668		1,110		4,311		4,232		Other long-term liabilities	1,991		837		648		1,091		4,567		4,311
Estimated interest expense on long-term debt and time deposits⁽¹⁾	Estimated interest expense on long-term debt and time deposits⁽¹⁾	4,753		7,124		5,064		26,957		43,898		45,462		Estimated interest expense on long-term debt and time deposits⁽¹⁾	4,814		9,852		4,910		19,871		39,447		43,898
Total contractual obligations	Total contractual obligations	$	119,780	$	94,329	$	48,189	$	115,680	$	377,978	$	397,626	Total contractual obligations	$	120,294	$	82,652	$	38,473	$	113,724	$	355,143	$	377,978


⁽¹⁾	Represents forecasted net interest expense on long-term debt and time deposits based on interest rates at December 31, ~~2015~~2016. Forecasts are based on the contractual maturity dates of each liability, and are net of derivative hedges, where applicable.

Representations and Warranties

We securitize first-lien residential mortgage loans generally in the form of RMBS guaranteed by the government-sponsored enterprises (GSEs), which include ~~FHLMC~~Freddie Mac (FHLMC) and ~~FNMA,~~Fannie Mae (FNMA), or by the Government National Mortgage Association (GNMA) in the case of Federal Housing Administration (FHA)-insured, U.S. Department of Veterans Affairs (VA)-guaranteed and Rural Housing Service-guaranteed mortgage loans, and sell 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 loans and home equity loans as private-label securitizations ~~(in certain of these securitizations, monoline insurers or other financial guarantee providers insured all or some of the securities)~~ or in the form of whole loans. In connection with these transactions, we or certain of our

subsidiaries or legacy companies made various representations and warranties. Breaches of these representations and warranties have resulted in and may continue to result in the requirement to repurchase mortgage loans or to otherwise make whole or provide other remedies to ~~the GSEs, U.S. Department of Housing and Urban Development with respect to FHA-insured loans, VA, whole-loan~~ investors, securitization trusts, ~~monoline~~guarantors, insurers or other ~~financial guarantors as applicable~~parties (collectively, repurchases). In all such cases, subsequent to repurchasing the loan, we would be exposed to any credit loss on the repurchased mortgage loans after accounting for any mortgage insurance (MI) or mortgage guarantee payments that we may receive.

~~We have vigorously contested any request for repurchase where we have concluded that a valid basis for repurchase does not exist and will continue to do so in the future. However, in an effort to~~



46 ~~Bank of America 2015~~

resolve legacy mortgage-related issues, we have reached settlements, certain of which have been for significant amounts, in lieu of a loan-by-loan review process, including with the GSEs, four monoline insurers and BNY Mellon, as trustee for certain securitization trusts.

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

~~Settlement with the Bank of New York Mellon, as Trustee~~

On April 22, 2015, the New York County Supreme Court entered final judgment approving the BNY Mellon Settlement. In October 2015, BNY Mellon obtained certain state tax opinions and an IRS private letter ruling confirming that the settlement will not impact the real estate mortgage investment conduit tax status of the trusts. The final conditions of the settlement have been satisfied and, accordingly, the Corporation made the settlement payment to BNY Mellon of $8.5 billion in February 2016. Pursuant to the settlement agreement, allocation and distribution of the $8.5 billion settlement payment is the responsibility of the RMBS trustee, BNY Mellon. On February 5, 2016, BNY Mellon filed an Article 77 proceeding in the New York County Supreme Court asking the court for instruction with respect to certain issues concerning the distribution of each trust’s allocable share of the settlement payment and asking that the settlement payment be ordered to be held in escrow pending the outcome of this Article 77 proceeding. The Corporation is not a party to this proceeding.

~~New York Court Decision on Statute of Limitations~~

~~On June 11, 2015, the New York Court of Appeals, New York’s highest appellate court, issued its opinion on the statute of limitations applicable to representations and warranties claims in~~ ~~ACE Securities Corp. v. DB Structured Products, Inc.~~ (ACE). The Court of Appeals held that, under New York law, a claim for breach of contractual representations and warranties begins to run at the time the representations and warranties are made, and rejected the argument that the six-year statute of limitations does not begin to run until the time repurchase is refused. The Court of Appeals also held that compliance with the contractual notice and cure period was a pre-condition to filing suit, and claims that did not comply with such contractual requirements prior to the expiration of the statute of limitations period were invalid. While no entity affiliated with the Corporation was a party to this litigation, the vast majority of the private-label RMBS trusts into which entities affiliated with the Corporation sold loans and made representations and warranties are governed by New York law. While the Corporation treats claims where the statute of limitations has expired, as determined in accordance with the ACE decision, as time-barred and therefore resolved and no longer outstanding, investors or trustees have sought to distinguish certain aspects of the ACE decision or to assert other claims against RMBS counterparties seeking to avoid or circumvent the impact of the ACE decision. For example, a recent ruling by a New York intermediate appellate court allowed a counterparty to pursue litigation on loans in the entire trust even though only some of the loans complied with the condition precedent of timely pre-suit notice and opportunity to cure or repurchase. The potential impact on the Corporation, if any, of judicial limitations on the ACE decision,

~~or claims seeking to distinguish or avoid the ACE decision is unclear at this time. For additional information, see~~ ~~Note 7 – Representations and Warranties Obligations and Corporate Guarantees~~ ~~to the Consolidated Financial Statements.~~

~~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, MI or mortgage guarantee payments. Claims received from a counterparty remain outstanding until the underlying loan is repurchased, the claim is rescinded by the counterparty, we determine that the applicable statute of limitations has expired, or representations and warranties claims with respect to the applicable trust are settled, and fully and finally released. When a claim is denied and we do not receive a response from the counterparty, the claim remains in the unresolved repurchase claims balance until resolution in one of the ways described above.

At December 31, ~~2015~~2016, we had $~~18.4~~18.3 billion of unresolved repurchase claims, ~~net of duplicate claims,~~predominately related to subprime and pay option first-lien loans and home equity loans, compared to ~~$22.8~~$18.4 billion at December 31, ~~2014~~2015. These repurchase claims primarily relate to private-label securitizations and exclude claims in the amount of $7.4 billion at December 31, 2015 where the statute of limitations has expired without litigation being commenced. At December 31, 2014, time-barred claims of $5.2 billion were included in unresolved repurchase claims. The notional amount of unresolved repurchase claims at both December 31, 2015 and 2014 includes $3.5 billion of claims related to loans in specific private-label securitization groups or tranches where we own substantially all of the outstanding securities. For additional information, see ~~Note 7 – Representations and Warranties Obligations and Corporate Guarantees~~ ~~to the Consolidated Financial Statements.~~

The overall decrease in the notional amount of outstanding unresolved repurchase claims in 2015 is primarily due to the impact of time-barred claims under the ACE decision, partially offset by new claims from private-label securitization trustees. Outstanding repurchase claims remain unresolved primarily due to (1) the level of detail, support and analysis accompanying such claims, which impact overall claim quality and, therefore, ~~claims~~claim resolution and (2) the lack of an established process to resolve disputes related to these claims.

As a result of various bulk settlements with the GSEs, we have resolved substantially all outstanding and potential representations and warranties repurchase claims on whole loans sold by legacy Bank of America and Countrywide Financial Corporation (Countrywide) to FNMA and FHLMC through June 30, 2012 and December 31, 2009, respectively. At December 31, 2015, the notional amount of unresolved repurchase claims submitted by the GSEs was $14 million for loans originated prior to 2009. For more information on the monolines and experience with the GSEs, see ~~Note 7 – Representations and Warranties Obligations and Corporate Guarantees~~ ~~to the Consolidated Financial Statements.~~

During 2015 and 2014, we had limited loan-level representations and warranties repurchase claims experience with the monoline insurers due to bulk settlements in prior years and ongoing litigation with a single monoline insurer. For additional



		~~Bank of America 2015~~47

~~information, see~~ ~~Note 12 – Commitments and Contingencies~~ ~~to the Consolidated Financial Statements.~~

In addition to unresolved repurchase claims, we have received notifications from sponsors of third-party securitizations with whom we engaged in whole-loan transactions indicating that we may have indemnity obligations with respect to loans for which we have not received a repurchase request. These outstanding notifications totaled ~~$1.4~~$1.3 billion and ~~$2.0~~$1.4 billion at December 31, ~~2015~~2016 and ~~2014.~~2015.

~~We also from time to time receive correspondence purporting to raise~~The liability for representations and warranties ~~breach issues~~and corporate guarantees is included in accrued expenses and other liabilities on the Consolidated Balance Sheet and the related provision is included in mortgage banking income in the Consolidated



40 Bank of America 2016

Statement of Income. At December 31, 2016 and 2015, the liability for representations and warranties was $2.3 billion and $11.3 billion. The representations and warranties provision was $106 million for 2016 compared to a benefit of $39 million for 2015.

In addition, we currently estimate that the range of possible loss for representations and warranties exposures could be up to $2 billion over existing accruals at December 31, 2016. The estimated range of possible loss represents a reasonably possible loss, but does not represent a probable loss, and is based on currently available information, significant judgment and a number of assumptions that are subject to change.

Future provisions and/or ranges of possible loss associated with obligations under representations and warranties may be significantly impacted if future experiences are different from ~~entities that do not have contractual standing~~historical experience or ~~ability~~our understandings, interpretations or assumptions. Adverse developments, with respect to ~~bring such claims. We believe such communications to be procedurally and/~~one or ~~substantively invalid, and generally do not respond.~~

~~The presence~~more of ~~repurchase claims on a given trust, receipt of notices of indemnification obligations and receipt of other communications, as discussed above, are all factors that inform our~~the assumptions underlying the liability for representations and warranties and the corresponding estimated range of possible loss, such as investors or trustees successfully challenging or avoiding the application of the relevant statute of limitations, could result in significant increases to future provisions and/or the estimated range of possible loss. For more information on representations and warranties, see Note 7 – Representations and Warranties Obligations and Corporate Guarantees to the Consolidated Financial Statements and, for more information related to the sensitivity of the assumptions used to estimate our liability for representations and warranties, see Complex Accounting Estimates – Representations and Warranties Liability on page 90.

Other Mortgage-related Matters

We continue to be subject to additional mortgage-related litigation and disputes, as well as governmental and regulatory scrutiny and investigations, related to our past and current origination, servicing, transfer of servicing and servicing rights, servicing compliance obligations, foreclosure activities, indemnification obligations, and mortgage insurance and captive reinsurance practices with mortgage insurers. The ongoing environment of additional regulation, increased regulatory compliance obligations, and enhanced regulatory enforcement, combined with ongoing uncertainty related to the continuing evolution of the regulatory environment, has resulted in increased operational and compliance costs and may limit our ability to continue providing certain products and services. For more information on management’s estimate of the aggregate range of possible loss for certain litigation matters and on regulatory investigations, see Note 12 – Commitments and Contingencies to the Consolidated Financial Statements.

Managing Risk

Overview

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

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


●	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.


●	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 with the appropriate funding sources 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, regulations and related self-regulatory organizations’ standards and codes of conduct.


●	Operational risk is the risk of loss resulting from inadequate or failed internal 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 through an inability to establish new or maintain existing customer/client relationships or otherwise adversely impact relationships with key stakeholders, such as investors, regulators, employees and the community.

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 our values and operating principles. It requires us to focus on risk in all activities and encourages the necessary mindset and behavior to enable effective risk management, and promotes sound risk-taking within our risk appetite. Sustaining a culture of managing risk well throughout the organization is critical to our success and is a clear expectation of our executive management team and the Board.

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

Executive management assesses, with Board oversight, the risk-adjusted returns of each business. Management reviews and approves the strategic and financial operating plans, as well as the capital plan and Risk Appetite Statement, and recommends them annually to the Board for approval. Our strategic plan takes into consideration return objectives and financial resources, which must align with risk capacity and risk appetite. Management sets financial objectives for each business by allocating capital and setting a target for return on capital for each business. Capital



		Bank of America 201641

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 29.

Our Risk Appetite Statement is how we maintain an acceptable risk profile by providing a common framework and a comparable set of measures for senior management and the Board to clearly indicate the level of risk we are willing to accept. Risk appetite is aligned with the strategic, capital and financial operating plans to maintain consistency with our strategy and financial resources. Our line of business strategies and risk appetite are also similarly aligned. For a more detailed discussion of our risk management activities, see the discussion below and pages 44 through 87.

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 are based on the amount of capital, earnings or liquidity we are willing to put at risk to achieve our strategic objectives and business plans. 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, oversees financial performance, execution of the strategic and financial operating plans, adherence to risk appetite limits and the adequacy of internal controls.

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.

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⁾ This presentation does not include committees for other legal entities.

⁽²⁾ Reports to the CEO and CFO with oversight by the Audit Committee.

Board of Directors and Board Committees

The Board is comprised of 14 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 Corporate General Auditor (CGA) 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. It approves the Risk Framework



42 Bank of America 2016

Other Board Committees

Our Corporate Governance 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 stockholder engagement activities.

Our Compensation and Benefits 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, and reviewing and approving all of our executive officers’ compensation.

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 we face. The MRC provides 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

In addition to the role of Executive Officers in managing risk, we have clear ownership and accountability across the 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 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 include the lines of business as well as the Global Technology and Operations Group, and 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 the Chief Financial Officer (CFO) Group, Global Marketing and Corporate Affairs (GM&CA) and the Chief Administrative Officer (CAO) Group.

Independent Risk Management

IRM is part of our control functions and includes Global Risk Management and Global Compliance. 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, GM&CA and the 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 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 enterprise risk teams, FLU risk teams and control function risk teams that work collaboratively in executing their respective duties.

Within IRM, Global Compliance independently assesses compliance risk, and evaluates adherence to applicable laws, rules and regulations, including identifying compliance issues and risks, performing monitoring and testing, and reporting on the state of compliance activities across the Corporation. Additionally, Global Compliance works with FLUs and control functions so that day-to-day activities operate in a compliant manner.

Corporate Audit

Corporate Audit and the CGA maintain their independence from the FLUs, IRM and other control functions by reporting directly to the Audit Committee or the Board. The CGA 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 day-to-day business processes across the Corporation, with a goal of ensuring risks are appropriately considered, evaluated and responded to in a timely manner.

We employ a risk management process, referred to as Identify, Measure, Monitor and Control (IMMC), 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



		Bank of America 201643

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. Corporate culture and the actions of our employees are also critical to effective risk management. Through our Code of Conduct, we set a high standard for our employees. The Code of Conduct provides a framework for all of our employees to conduct themselves with the highest integrity. We instill a strong and comprehensive culture of managing risk well through communications, training, policies, procedures and organizational roles and responsibilities. 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.

Corporation-wide Stress Testing

Integral to our Capital Planning, Financial Planning and Strategic Planning processes, we conduct capital scenario management and 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 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.

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, Contingency Funding Plan and Recovery Plan, which provide monitoring, escalation, actions and routines designed to enable us to increase capital, access funding sources and reduce risk through consideration of potential options that include asset sales, business sales, capital or debt issuances, or other de-risking strategies. We also maintain a Resolution Plan to limit adverse systemic impacts that could be associated with a potential resolution of Bank of America.

Strategic Risk Management

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

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

Significant strategic actions, such as capital actions, material acquisitions or divestitures, and Resolution Plans are reviewed and approved by the Board. At the business level, processes are in place to discuss the strategic risk implications of new, expanded or modified businesses, products or services and other strategic initiatives, and to provide formal review and approval where required. With oversight by the Board and the ERC, executive management performs similar analyses throughout the year, and evaluates changes to the financial forecast or the risk, capital or liquidity positions as deemed appropriate to balance and optimize achieving the targeted risk appetite, shareholder returns and maintaining the targeted financial strength. Proprietary models are used to measure the capital requirements for credit, country, market, operational and strategic risks. The allocated capital assigned to each business is based on its unique risk profile. With oversight by the Board, executive management assesses the risk-adjusted returns of each business in approving strategic and financial operating plans. The businesses use allocated capital to define business strategies, and price products and transactions.



44 Bank of America 2016

Capital Management

The Corporation manages its capital position so its capital is more than adequate to support its business activities and to maintain capital, risk and risk appetite commensurate with one another. 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.

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 CCAR capital plan.

In April 2016, we submitted our 2016 CCAR capital plan and related supervisory stress tests. The 2016 CCAR capital plan included requests: (i) to repurchase $5.0 billion of common stock

over four quarters beginning in the third quarter of 2016, (ii) to repurchase common stock to offset the dilution resulting from certain equity-based compensation awards, and (iii) to increase the quarterly common stock dividend from $0.05 per share to $0.075 per share. On June 29, 2016, following the Federal Reserve's non-objection to our 2016 CCAR capital plan, the Board authorized the common stock repurchase beginning July 1, 2016. Also, in addition to the previously announced repurchases associated with the 2016 CCAR capital plan, on January 13, 2017, we announced a plan to repurchase an additional $1.8 billion of common stock during the first half of 2017, to which the Federal Reserve did not object. The common stock repurchase authorization includes both common stock and warrants.

During 2016, we repurchased approximately $5.1 billion of common stock pursuant to the Board’s authorization of our 2016 and 2015 CCAR capital plans and to offset equity-based compensation awards.

The timing and amount of common stock repurchases will be 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 common stock 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 a “well-capitalized” BHC, we may notify the Federal Reserve of our intention to make additional capital distributions not to exceed one percent of Tier 1 capital (0.25 percent of Tier 1 capital beginning April 1, 2017), and which were not contemplated in our capital plan, subject to the Federal Reserve's non-objection.

Regulatory Capital

As a financial services holding company, we are subject to regulatory capital rules issued by U.S. banking regulators including Basel 3, which includes certain transition provisions through January 1, 2019. The Corporation and its primary affiliated banking entity, BANA, are Basel 3 Advanced approaches institutions.



		Bank of America 201645

Basel 3 Overview

Basel 3 updated the composition of capital and established a Common equity tier 1 capital ratio. Common equity tier 1 capital primarily includes common stock, retained earnings and accumulated OCI, net of deductions and adjustments primarily related to goodwill, deferred tax assets, intangibles, MSRs and defined benefit pension assets. Under the Basel 3 regulatory capital transition provisions, certain deductions and adjustments to Common equity tier 1 capital are phased in through January 1, 2018. In 2016, under the transition provisions, 60 percent of these deductions and adjustments were recognized. Basel 3 also revised minimum capital ratios and buffer requirements, added a supplementary leverage ratio (SLR), and addressed the adequately capitalized minimum requirements under the Prompt Corrective Action (PCA) framework. Finally, Basel 3 established 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 determines risk weights based on internal models.

As an Advanced approaches institution, we 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.

Minimum Capital Requirements

Minimum capital requirements and related buffers are being phased in from January 1, 2014 through January 1, 2019. Effective January 1, 2015, the PCA framework was also amended to reflect the requirements of Basel 3. The PCA framework establishes categories of capitalization, including “well capitalized,” based on regulatory ratio requirements. U.S. banking regulators are required to take certain mandatory actions depending on the category of capitalization, with no mandatory actions required for “well-capitalized” banking organizations, which included BANA at December 31, 2016.

On January 1, 2016, we became subject to a capital conservation buffer, a countercyclical capital buffer and a global systemically important bank (G-SIB) surcharge which will be phased in over a three-year period ending January 1, 2019. Once

Supplementary Leverage Ratio

Basel 3 also requires Advanced approaches institutions to disclose an SLR. 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. Effective January 1, 2018, the Corporation will be required to maintain a minimum 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. Insured depository institution subsidiaries of BHCs will be required to maintain a minimum 6.0 percent SLR to be considered "well capitalized" under the PCA framework.

Capital Composition and Ratios

Table 10 presents Bank of America Corporation’s transition and fully phased-in capital ratios and related information in accordance with Basel 3 Standardized and Advanced approaches as measured at December 31, 2016 and 2015. Fully phased-in estimates are non-GAAP financial measures that the Corporation considers to be useful measures in evaluating compliance with new regulatory capital requirements that are not yet effective. For reconciliations to GAAP financial measures, see Table 13. As of December 31, 2016 and 2015, the Corporation meets the definition of “well capitalized” under current regulatory requirements.



46 Bank of America 2016




Table 10	Bank of America Corporation Regulatory Capital under Basel 3⁽¹⁾

		December 31, 2016
		Transition								Fully Phased-in
(Dollars in millions)		Standardized Approach			Advanced Approaches			Regulatory Minimum^{(2, 3)}		Standardized Approach			Advanced Approaches ⁽⁴⁾			Regulatory Minimum ⁽⁵⁾
Risk-based capital metrics:
Common equity tier 1 capital		$	168,866		$	168,866				$	162,729		$	162,729
Tier 1 capital		190,315			190,315					187,559			187,559
Total capital ⁽⁶⁾		228,187			218,981					223,130			213,924
Risk-weighted assets (in billions)		1,399			1,530					1,417			1,512
Common equity tier 1 capital ratio		12.1		%	11.0		%	5.875	%	11.5		%	10.8		%	9.5	%
Tier 1 capital ratio		13.6			12.4			7.375		13.2			12.4			11.0
Total capital ratio		16.3			14.3			9.375		15.8			14.2			13.0

Leverage-based metrics:
Adjusted quarterly average assets (in billions) ⁽⁷⁾		$	2,131		$	2,131				$	2,131		$	2,131
Tier 1 leverage ratio		8.9		%	8.9		%	4.0		8.8		%	8.8		%	4.0

SLR leverage exposure (in billions)													$	2,702
SLR													6.9		%	5.0

		December 31, 2015
Risk-based capital metrics:
Common equity tier 1 capital		$	163,026		$	163,026				$	154,084		$	154,084
Tier 1 capital		180,778			180,778					175,814			175,814
Total capital ⁽⁶⁾		220,676			210,912					211,167			201,403
Risk-weighted assets (in billions)		1,403			1,602					1,427			1,575
Common equity tier 1 capital ratio		11.6		%	10.2		%	4.5	%	10.8		%	9.8		%	9.5	%
Tier 1 capital ratio		12.9			11.3			6.0		12.3			11.2			11.0
Total capital ratio		15.7			13.2			8.0		14.8			12.8			13.0

Leverage-based metrics:
Adjusted quarterly average assets (in billions) ⁽⁷⁾		$	2,103		$	2,103				$	2,102		$	2,102
Tier 1 leverage ratio		8.6		%	8.6		%	4.0		8.4		%	8.4		%	4.0

SLR leverage exposure (in billions)													$	2,727
SLR													6.4		%	5.0


⁽¹⁾	As an Advanced approaches institution, we are required to report regulatory capital risk-weighted assets and ratios under both the Standardized and Advanced approaches. The approach that yields the lower ratio is to be used to assess capital adequacy and was the Advanced approaches method at December 31, 2016 and 2015.


⁽²⁾	The December 31, 2016 amount includes a transition capital conservation buffer of 0.625 percent and a transition G-SIB surcharge of 0.75 percent. The 2016 countercyclical capital buffer is zero.


⁽³⁾	To be “well capitalized” under the current U.S. banking regulatory agency definitions, we must maintain a Total capital ratio of 10 percent or greater.


⁽⁴⁾	Basel 3 fully phased-in Advanced approaches estimates assume approval by U.S. banking regulators of our internal analytical models, including approval of the internal models methodology (IMM). As of December 31, 2016, we did not have regulatory approval of the IMM model.


⁽⁵⁾	Fully phased-in regulatory minimums assume a capital conservation buffer of 2.5 percent and estimated G-SIB surcharge of 2.5 percent. The estimated fully phased-in countercyclical capital buffer is zero. We will be subject to fully phased-in regulatory minimums on January 1, 2019. The fully phased-in SLR minimum assumes a leverage buffer of 2.0 percent and is applicable on January 1, 2018.


⁽⁶⁾	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.


⁽⁷⁾	Reflects adjusted average total assets for the three months ended December 31, 2016 and 2015.

Common equity tier 1 capital under Basel 3 Advanced – Transition was $168.9 billion at December 31, 2016, an increase of $5.8 billion compared to December 31, 2015 driven by earnings, partially offset by dividends, common stock repurchases and the impact of certain transition provisions under the Basel 3 rules. During 2016, Total capital increased $8.1 billion primarily

driven by the same factors that drove the increase in Common equity tier 1 capital as well as issuances of preferred stock and subordinated debt.

Risk-weighted assets decreased $72 billion during 2016 to $1,530 billion primarily due to lower market risk, and lower exposures and improved credit quality on legacy retail products.



		Bank of America 201647

Table 11 presents the capital composition as measured under Basel 3 – Transition at December 31, 2016 and 2015.




Table 11	Capital Composition under Basel 3 – Transition ^{(1, 2)}

		December 31
(Dollars in millions)		2016			2015
Total common shareholders’ equity		$	241,620		$	233,932
Goodwill		(69,191		)	(69,215		)
Deferred tax assets arising from net operating loss and tax credit carryforwards		(4,976		)	(3,434		)
Adjustments for amounts recorded in accumulated OCI attributed to defined benefit postretirement plans		1,392			1,774
Net unrealized (gains) losses on debt and equity securities and net (gains) losses on derivatives recorded in accumulated OCI, net-of-tax		1,402			1,220
Intangibles, other than mortgage servicing rights and goodwill		(1,198		)	(1,039		)
DVA related to liabilities and derivatives		413			204
Other		(596		)	(416		)
Common equity tier 1 capital		168,866			163,026
Qualifying preferred stock, net of issuance cost		25,220			22,273
Deferred tax assets arising from net operating loss and tax credit carryforwards		(3,318		)	(5,151		)
Trust preferred securities		—			1,430
Defined benefit pension fund assets		(341		)	(568		)
DVA related to liabilities and derivatives under transition		276			307
Other		(388		)	(539		)
Total Tier 1 capital		190,315			180,778
Long-term debt qualifying as Tier 2 capital		23,365			22,579
Eligible credit reserves included in Tier 2 capital		3,035			3,116
Nonqualifying capital instruments subject to phase out from Tier 2 capital		2,271			4,448
Other		(5		)	(9		)
Total Basel 3 Capital		$	218,981		$	210,912


⁽¹⁾	See Table 10, footnote 1.


⁽²⁾	Deductions from and adjustments to regulatory capital subject to transition provisions under Basel 3 are generally recognized in 20 percent annual increments, and will be fully recognized as of January 1, 2018. Any assets that are a direct deduction from the computation of capital are excluded from risk-weighted assets and adjusted average total assets.

Table 12 presents the components of our risk-weighted assets as measured under Basel 3 – Transition at December 31, 2016 and 2015.




Table 12	Risk-weighted assets under Basel 3 – Transition

		December 31
		2016				2015
(Dollars in billions)		Standardized Approach		Advanced Approaches		Standardized Approach		Advanced Approaches
Credit risk		$	1,334	$	903	$	1,314	$	940
Market risk		65		63		89		86
Operational risk		n/a		500		n/a		500
Risks related to CVA		n/a		64		n/a		76
Total risk-weighted assets		$	1,399	$	1,530	$	1,403	$	1,602

n/a = not applicable



48 Bank of America 2016

Table 13 presents a reconciliation of regulatory capital in accordance with Basel 3 Standardized – Transition to the Basel 3 Standardized approach fully phased-in estimates and Basel 3 Advanced approaches fully phased-in estimates at December 31, 2016 and 2015.




Table 13	Regulatory Capital Reconciliations between Basel 3 Transition to Fully Phased-in ⁽¹⁾

		December 31
(Dollars in millions)		2016			2015
Common equity tier 1 capital (transition)		$	168,866		$	163,026
Deferred tax assets arising from net operating loss and tax credit carryforwards phased in during transition		(3,318		)	(5,151		)
Accumulated OCI phased in during transition		(1,899		)	(1,917		)
Intangibles phased in during transition		(798		)	(1,559		)
Defined benefit pension fund assets phased in during transition		(341		)	(568		)
DVA related to liabilities and derivatives phased in during transition		276			307
Other adjustments and deductions phased in during transition		(57		)	(54		)
Common equity tier 1 capital (fully phased-in)		162,729			154,084
Additional Tier 1 capital (transition)		21,449			17,752
Deferred tax assets arising from net operating loss and tax credit carryforwards phased out during transition		3,318			5,151
Trust preferred securities phased out during transition		—			(1,430		)
Defined benefit pension fund assets phased out during transition		341			568
DVA related to liabilities and derivatives phased out during transition		(276		)	(307		)
Other transition adjustments to additional Tier 1 capital		(2		)	(4		)
Additional Tier 1 capital (fully phased-in)		24,830			21,730
Tier 1 capital (fully phased-in)		187,559			175,814
Tier 2 capital (transition)		28,666			30,134
Nonqualifying capital instruments phased out during transition		(2,271		)	(4,448		)
Other adjustments to Tier 2 capital		9,176			9,667
Tier 2 capital (fully phased-in)		35,571			35,353
Basel 3 Standardized approach Total capital (fully phased-in)		223,130			211,167
Change in Tier 2 qualifying allowance for credit losses		(9,206		)	(9,764		)
Basel 3 Advanced approaches Total capital (fully phased-in)		$	213,924		$	201,403

Risk-weighted assets – As reported to Basel 3 (fully phased-in)
Basel 3 Standardized approach risk-weighted assets as reported		$	1,399,477		$	1,403,293
Changes in risk-weighted assets from reported to fully phased-in		17,638			24,089
Basel 3 Standardized approach risk-weighted assets (fully phased-in)		$	1,417,115		$	1,427,382

Basel 3 Advanced approaches risk-weighted assets as reported		$	1,529,903		$	1,602,373
Changes in risk-weighted assets from reported to fully phased-in		(18,113		)	(27,690		)
Basel 3 Advanced approaches risk-weighted assets (fully phased-in) ⁽²⁾		$	1,511,790		$	1,574,683


⁽¹⁾	See Table 10, footnote 1.


⁽²⁾	Basel 3 fully phased-in Advanced approaches estimates assume approval by U.S. banking regulators of our internal analytical models, including approval of the IMM. As of December 31, 2016, we did not have regulatory approval for the IMM model.



		Bank of America 201649

Bank of America, N.A. Regulatory Capital

Table 14 presents transition regulatory capital information for BANA in accordance with Basel 3 Standardized and Advanced approaches as measured at December 31, 2016 and 2015. As of December 31, 2016, BANA met the definition of “well capitalized” under the PCA framework.




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

		December 31, 2016
		Standardized Approach						Advanced Approaches
(Dollars in millions)		Ratio		Amount		Minimum Required⁽¹⁾		Ratio		Amount		Minimum Required ⁽¹⁾
Common equity tier 1 capital		12.7	%	$	149,755	6.5	%	14.3	%	$	149,755	6.5	%
Tier 1 capital		12.7		149,755		8.0		14.3		149,755		8.0
Total capital		13.9		163,471		10.0		14.8		154,697		10.0
Tier 1 leverage		9.3		149,755		5.0		9.3		149,755		5.0

		December 31, 2015
Common equity tier 1 capital		12.2	%	$	144,869	6.5	%	13.1	%	$	144,869	6.5	%
Tier 1 capital		12.2		144,869		8.0		13.1		144,869		8.0
Total capital		13.5		159,871		10.0		13.6		150,624		10.0
Tier 1 leverage		9.2		144,869		5.0		9.2		144,869		5.0


⁽¹⁾	Percent required to meet guidelines to be considered “well capitalized” under the PCA framework.

Regulatory Developments

Minimum Total Loss-Absorbing Capacity

On December 15, 2016, the Federal Reserve issued a final rule establishing external total loss-absorbing capacity (TLAC) requirements to improve the resolvability and resiliency of large, interconnected BHCs. The rule will be effective January 1, 2019 and U.S. G-SIBs will be required to maintain a minimum external TLAC. We estimate our minimum required external TLAC would be the greater of 22.5 percent of risk-weighted assets or 9.5 percent of SLR leverage exposure. In addition, U.S. G-SIBs must meet a minimum long-term debt requirement. Our minimum required long-term debt is estimated to be the greater of 8.5 percent of risk-weighted assets or 4.5 percent of SLR leverage exposure. The impact of the TLAC rule is not expected to be material to our results of operations. The Corporation issued $11.6 billion of TLAC compliant debt in early 2017.

Revisions to Approaches for Measuring Risk-weighted Assets

The Basel Committee has several open proposals to revise key methodologies for measuring risk-weighted assets. The proposals include a standardized approach for credit risk, standardized approach for operational risk, revisions to the credit valuation adjustment (CVA) risk framework and constraints on the use of internal models. The Basel Committee has also finalized a revised standardized model for counterparty credit risk, revisions to the securitization framework and its fundamental review of the trading book, which updates both modeled and standardized approaches for market risk measurement. These revisions are to be coupled with a proposed capital floor framework to limit the extent to which banks can reduce risk-weighted asset levels through the use of internal models, both at the input parameter and aggregate risk-weighted asset level. The Basel Committee expects to finalize the outstanding proposals in 2017. U.S. banking regulators may update the U.S. Basel 3 rules to incorporate the Basel Committee revisions.

Single-Counterparty Credit Limits

On March 4, 2016, the Federal Reserve issued a notice of proposed rulemaking (NPR) to establish Single-Counterparty Credit Limits (SCCL) for large U.S. BHCs. The SCCL rule is designed to complement and serve as a backstop to risk-based capital requirements to ensure that the maximum possible loss that a bank could incur due to a single counterparty’s default would not endanger the bank’s survival. Under the proposal, U.S. BHCs must calculate SCCL by dividing the net aggregate credit exposure to a given counterparty by a bank’s eligible Tier 1 capital base, ensuring that exposure to G-SIBs and other nonbank systemically important financial institutions does not breach 15 percent and exposures to other counterparties do not breach 25 percent.

Capital Requirements for Swap Dealers

On December 2, 2016, the Commodity Futures Trading Commission issued an NPR 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 must meet capital requirements under one of two approaches. The first approach is a bank-based capital approach which requires that firms maintain Common equity tier 1 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.

Broker-dealer Regulatory Capital and Securities Regulation

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



50 Bank of America 2016

merchants and are subject to the Commodity Futures Trading Commission Regulation 1.17.

MLPF&S has elected to compute the minimum capital requirement in accordance with the Alternative Net Capital Requirement as permitted by SEC Rule 15c3-1. At December 31, 2016, MLPF&S’s regulatory net capital as defined by Rule 15c3-1 was $11.9 billion and exceeded the minimum requirement of $1.8 billion by $10.1 billion. MLPCC’s net capital of $2.8 billion exceeded the minimum requirement of $481 million by $2.3 billion.

In accordance with the Alternative Net Capital Requirements, MLPF&S is required to maintain tentative net capital in excess of $1.0 billion, net capital in excess of $500 million and notify the SEC in the event its tentative net capital is less than $5.0 billion. At December 31, 2016, MLPF&S had tentative net capital and net capital in excess of the minimum and notification requirements.

Merrill Lynch International (MLI), a U.K. investment firm, is regulated by the Prudential Regulation Authority and the Financial Conduct Authority, and is subject to certain regulatory capital requirements. At December 31, 2016, MLI’s capital resources were $34.9 billion which exceeded the minimum requirement of $14.8 billion.

Liquidity Risk

Funding and Liquidity Risk Management

Liquidity risk is the inability to meet expected or unexpected cash flow and collateral needs while continuing to support our businesses and customers with the appropriate funding sources under a range of economic conditions. Our primary liquidity risk management objective is to meet all contractual and contingent financial obligations at all times, including during periods of stress. 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 within Corporate Treasury 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 policy and the ERC approves the contingency funding plan, including establishing liquidity risk tolerance levels. The MRC monitors our liquidity position and reviews the impact of strategic decisions on our liquidity. 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, cash flow forecasts, stress testing scenarios and results, and reviews and approves certain liquidity risk limits. For additional information, see Managing Risk on page 41. 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.

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), formerly Global Excess Liquidity Sources, 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 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 and supranational securities. We believe 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.

Pursuant to the Federal Reserve and FDIC request disclosed in our Current Report on Form 8-K dated April 13, 2016, we provided our Resolution Plan submission to those regulators on September 30, 2016. In connection with our resolution planning activities, in the third quarter of 2016, we entered into intercompany arrangements with certain key subsidiaries under which we transferred certain of our parent company assets, and agreed to transfer certain additional parent company assets, to NB Holdings, Inc., 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.

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. For more information on the final LCR rules, see Liquidity Risk – Basel 3 Liquidity Standards on page 53.



		Bank of America 201651

Our GLS were $499 billion and $504 billion at December 31, 2016 and 2015, and were as shown in Table 15.




Table 15	Global Liquidity Sources

		December 31				Average for Three Months Ended December 31 2016
(Dollars in billions)		2016		2015
Parent company and NB Holdings		$	76	$	96	$	77
Bank subsidiaries		372		361		389
Other regulated entities		51		47		49
Total Global Liquidity Sources		$	499	$	504	$	515

As shown in Table 15, parent company and NB Holdings liquidity totaled $76 billion and $96 billion at December 31, 2016 and 2015. The decrease in parent company and NB Holdings liquidity was primarily due to the BNY Mellon settlement payment in the first quarter of 2016 and prepositioning liquidity to subsidiaries in connection with resolution planning. Typically, parent company and NB Holdings liquidity is in the form of cash deposited with BANA.

Liquidity held at our bank subsidiaries totaled $372 billion and $361 billion at December 31, 2016 and 2015. The increase in bank subsidiaries’ liquidity was primarily due to deposit growth, partially offset by loan growth. 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 obtained by borrowing against this pool of specifically-identified eligible assets was $310 billion and $252 billion at December 31, 2016 and 2015. 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 can only be transferred to the parent company or nonbank subsidiaries with prior regulatory approval.

Liquidity held at our other regulated entities, comprised primarily of broker-dealer subsidiaries, totaled $51 billion and $47 billion at December 31, 2016 and 2015. Our other regulated entities also held unencumbered investment-grade securities and equities that we believe could be used to generate additional liquidity. Liquidity held in an other regulated entity is primarily available to meet the obligations of that entity and transfers to the parent company or to any other subsidiary may be subject to prior regulatory approval due to regulatory restrictions and minimum requirements.

Table 16 presents the composition of GLS at December 31, 2016 and 2015.




Table 16	Global Liquidity Sources Composition

		December 31
(Dollars in billions)		2016		2015
Cash on deposit		$	106	$	119
U.S. Treasury securities		58		38
U.S. agency securities and mortgage-backed securities		318		327
Non-U.S. government and supranational securities		17		20
Total Global Liquidity Sources		$	499	$	504

Time-to-required Funding and Liquidity Stress Analysis

We use a variety of metrics to determine the appropriate amounts of liquidity to maintain at the parent company and our subsidiaries. One metric we use to evaluate the appropriate level of liquidity at the parent company and NB Holdings is “time-to-required funding (TTF).” This debt coverage measure indicates the number of months the parent company can continue to meet its unsecured contractual obligations as they come due using only the parent company and NB Holdings' liquidity sources without issuing any new debt or accessing any additional liquidity sources. We define unsecured contractual obligations for purposes of this metric as maturities of senior or subordinated debt issued or guaranteed by Bank of America Corporation. These include certain unsecured debt instruments, primarily structured liabilities, which we may be required to settle for cash prior to maturity. Prior to the third quarter of 2016, TTF incorporated only the liquidity of the parent company. During the third quarter of 2016, TTF was expanded to include the liquidity of NB Holdings, following changes in our liquidity management practices, initiated in connection with the Corporation's resolution planning activities, that include maintaining at NB Holdings certain liquidity previously held solely at the parent company. Our TTF was 35 months at December 31, 2016.

We also utilize liquidity stress analysis to assist us in determining the appropriate amounts of liquidity to maintain at the parent company and our subsidiaries. The liquidity stress testing process is an integral part of analyzing our potential contractual and contingent cash outflows. We evaluate the liquidity requirements under a range of scenarios with varying levels of severity and time horizons. The scenarios we consider and utilize incorporate market-wide and Corporation-specific events, including potential credit rating downgrades for the parent company and our subsidiaries, and 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.



52 Bank of America 2016

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

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

Basel 3 Liquidity Standards

Basel 3 has two liquidity risk-related standards: the LCR and the Net Stable Funding Ratio (NSFR).

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. The LCR regulatory requirement of 100 percent as of January 1, 2017 is applicable to the Corporation on a consolidated basis and to our insured depository institutions. As of December 31, 2016, the consolidated Corporation and its insured depository institutions were above the 2017 LCR requirements. Our LCR may fluctuate from period to period due to normal business flows from customer activity. On December 19, 2016, the Federal Reserve published the final LCR public disclosure requirements. Effective April 1, 2017, the final rule requires us to disclose publicly, on a quarterly basis, quantitative information about our LCR calculation and a discussion of the factors that have a significant effect on our LCR.

In April 2016, U.S. banking regulators issued a proposal for an NSFR requirement applicable to U.S. financial institutions following the Basel Committee's final standard in 2014. The U.S. NSFR would apply to the Corporation on a consolidated basis and to our insured depository institutions beginning on January 1, 2018. We expect to meet the NSFR requirement within the regulatory timeline. The standard is intended to reduce funding risk over a longer time horizon. The NSFR is designed to ensure an appropriate amount of stable funding, generally capital and liabilities maturing beyond one year, given the mix of assets and off-balance sheet items.

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 $1.26 trillion and $1.20 trillion at December 31, 2016 and 2015. 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 GSEs, 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 10 – Federal Funds Sold or Purchased, Securities Financing Agreements and Short-term Borrowingsto 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.

During 2016, we issued $35.6 billion of long-term debt, consisting of $27.5 billion for Bank of America Corporation, $1.0 billion for Bank of America, N.A. and $7.1 billion of other debt.

Table 17 presents our long-term debt by major currency at December 31, 2016 and 2015.




Table 17	Long-term Debt by Major Currency

		December 31
(Dollars in millions)		2016		2015
U.S. Dollar		$	172,082	$	190,381
Euro		28,236		29,797
British Pound		6,588		7,080
Japanese Yen		3,919		3,099
Australian Dollar		2,900		2,534
Canadian Dollar		1,049		1,428
Other		2,049		2,445
Total long-term debt		$	216,823	$	236,764



		Bank of America 201653

Total long-term debt decreased $19.9 billion, or eight percent, in 2016, primarily due to maturities outpacing issuances. We may, from time to time, purchase outstanding debt instruments in various transactions, depending on prevailing market conditions, liquidity and other factors. In addition, our other regulated entities may make markets in our debt instruments to provide liquidity for investors. For more information on long-term debt funding, see Note 11 – Long-term Debtto the Consolidated Financial Statements.

We use derivative transactions to manage the duration, interest rate and currency risks of our borrowings, considering the characteristics of the assets they are funding. For further details on our ALM activities, see Interest Rate Risk Management for the Banking Book on page 84.

We may also issue unsecured debt in the form of structured notes for client purposes, certain of which qualify as TLAC eligible debt. During 2016, we issued $6.2 billion of structured notes, a majority of which were issued by Bank of America Corporation. Structured notes 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.

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 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 January 24, 2017, Moody’s Investors Services, Inc. (Moody’s) improved its ratings outlook on the Corporation and its subsidiaries, including BANA, to positive from stable, based on the agency’s view that there is an increased likelihood that the Corporation’s profitability will strengthen on a sustainable basis over the next 12 to 18 months while the Corporation continues to adhere to its conservative risk profile, lowering its earnings volatility. The agency concurrently affirmed the current ratings of the Corporation and its subsidiaries, which have not changed since the conclusion of the agency’s previous review of several global investment banking groups, including Bank of America, on May 28, 2015.

On December 16, 2016, Standard & Poor’s Global Ratings (S&P) concluded its CreditWatch with positive implications for operating subsidiaries of four U.S. G-SIBs, including Bank of America. As a result, S&P upgraded the long-term senior debt ratings of BANA, MLPF&S, MLI and Bank of America Merrill Lynch International Limited (BAMLI) by one notch, to A+ from A. These ratings actions followed the Federal Reserve’s publication of the TLAC final rule, which provided clarity on which debt instruments will count as external TLAC, and by extension, will also count under S&P’s Additional Loss Absorbing Capacity (ALAC) framework. The ALAC framework details how a BHC’s loss-absorbing debt and equity capital buffers may enable uplift to its operating subsidiaries’ credit ratings. The Federal Reserve’s decision to allow existing debt containing otherwise impermissible acceleration clauses to count as external TLAC improved the Corporation’s ALAC calculation enough to warrant an additional notch of uplift under S&P’s methodology. Following the upgrades, S&P revised the outlook for its ratings to stable on those four operating subsidiaries. The ratings of Bank of America Corporation, which does not receive any ratings uplift under S&P’s ALAC framework, were not impacted by this ratings action and remain on stable outlook.



54 Bank of America 2016

On December 13, 2016, Fitch Ratings (Fitch) completed its latest semi-annual review of 12 large, complex securities trading and universal banks, including Bank of America. The agency affirmed the long-term and short-term senior debt ratings of Bank of America Corporation and Bank of America, N.A., and maintained stable outlooks on those ratings. Fitch concurrently revised the

outlooks for two of Bank of America’s material international operating subsidiaries, MLI and BAMLI, to stable from positive due to a delay in host country internal TLAC proposals.

Table 18 presents the current long-term/short-term senior debt ratings and outlooks expressed by the rating agencies.

Table 18

Senior Debt Ratings

Moody’s Investors Service

Standard & Poor’s Global Ratings

Fitch Ratings

Long-term

Short-term

Outlook

Long-term

Short-term

Outlook

Long-term

Short-term

Outlook

Bank of America Corporation

Baa1

P-2

Positive

BBB+

A-2

Stable

Bank of America, N.A.

P-1

Positive

A+

A-1

Stable

A+

Stable

Merrill Lynch, Pierce, Fenner & Smith

A+

A-1

Stable

A+

Stable

Merrill Lynch International

A+

A-1

Stable

NR = not rated

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

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 – Time-to-required Funding and Stress Modeling on page 52.

For information on the additional collateral and termination payments that could be required in connection with certain OTC derivative contracts and other trading agreements as a result of such a credit rating downgrade, see Note 2 – Derivatives to the Consolidated Financial Statements.

Common Stock Dividends

For a summary of our declared quarterly cash dividends on common stock during 2016 and through February 23, 2017, see Note 13 – Shareholders’ Equityto 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 2 – Derivatives and Note 12 – 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.



		Bank of America 201655

For more information on our credit risk management activities, see Consumer Portfolio Credit Risk Management below, Commercial Portfolio Credit Risk Management on page 66, Non-U.S. Portfolio on page 74, Provision for Credit Losses on page 75, Allowance for Credit Losses on page 75, and Note 4 – Outstanding Loans and Leases and Note 5 – Allowance for Credit Lossesto the Consolidated Financial Statements.

Consumer Portfolio Credit Risk Management

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

Consumer Credit Portfolio

Improvement in the U.S. unemployment rate and home prices continued during 2016 resulting in improved credit quality and lower credit losses across most major consumer portfolios compared to 2015. The 30 and 90 days or more past due balances

declined across nearly all consumer loan portfolios during 2016 as a result of improved delinquency trends.

Improved credit quality, continued loan balance run-off and sales across the consumer portfolio drove a $1.2 billiondecrease in the consumer allowance for loan and lease losses in 2016 to $6.2 billion at December 31, 2016. For additional information, see Allowance for Credit Losses on page 75.

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 Principlesto the Consolidated Financial Statements.

Table 19 presents our outstanding consumer loans and leases, and the PCI loan portfolio. In addition to being included in the “Outstandings” columns in Table 19, PCI loans are also shown separately in the “Purchased Credit-impaired Loan Portfolio” columns. The impact of the PCI loan portfolio on certain credit statistics is reported where appropriate. For more information on PCI loans, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 62 and Note 4 – Outstanding Loans and Leasesto the Consolidated Financial Statements.




Table 19	Consumer Loans and Leases

		December 31
		Outstandings				Purchased Credit-impaired Loan Portfolio
(Dollars in millions)		2016		2015		2016		2015
Residential mortgage ⁽¹⁾		$	191,797	$	187,911	$	10,127	$	12,066
Home equity		66,443		75,948		3,611		4,619
U.S. credit card		92,278		89,602		n/a		n/a
Non-U.S. credit card		9,214		9,975		n/a		n/a
Direct/Indirect consumer ⁽²⁾		94,089		88,795		n/a		n/a
Other consumer ⁽³⁾		2,499		2,067		n/a		n/a
Consumer loans excluding loans accounted for under the fair value option		456,320		454,298		13,738		16,685
Loans accounted for under the fair value option ⁽⁴⁾		1,051		1,871		n/a		n/a
Total consumer loans and leases ⁽⁵⁾		$	457,371	$	456,169	$	13,738	$	16,685


⁽¹⁾	Outstandings include pay option loans of $1.8 billion and $2.3 billion at December 31, 2016 and 2015. We no longer originate pay option loans.

⁽²⁾

Outstandings include auto and specialty lending loans of $48.9 billion and $42.6 billion, unsecured consumer lending loans of $585 million and $886 million, U.S. securities-based lending loans of $40.1 billion and $39.8 billion, non-U.S. consumer loans of $3.0 billion and $3.9 billion, student loans of $497 million and $564 million and other consumer loans of $1.1 billion and $1.0 billion at December 31, 2016 and 2015.


⁽³⁾	Outstandings include consumer finance loans of $465 million and $564 million, consumer leases of $1.9 billion and $1.4 billion and consumer overdrafts of $157 million and $146 million at December 31, 2016 and 2015.


⁽⁴⁾	Consumer loans accounted for under the fair value option include residential mortgage loans of $710 million and $1.6 billion and home equity loans of $341 million and $250 million at December 31, 2016 and 2015. For more information on the fair value option, see Note 21 – Fair Value Optionto the Consolidated Financial Statements.


⁽⁵⁾	Includes $9.2 billion of non-U.S. credit card loans, which are included in assets of business held for sale on the Consolidated Balance Sheet at December 31, 2016.

n/a = not applicable



56 Bank of America 2016

Table 20 presents consumer nonperforming loans and accruing consumer loans past due 90 days or more. Nonperforming loans do not include past due consumer credit card loans, other unsecured loans and in general, consumer loans not secured by real estate (loans discharged in Chapter 7 bankruptcy are included) as these loans are typically charged off no later than the end of the month in which the loan becomes 180 days past due. Real estate-secured past due consumer loans that are insured by the FHA or individually insured under long-term standby agreements

with FNMA and FHLMC (collectively, the fully-insured loan portfolio) are reported as accruing as opposed to nonperforming since the principal repayment is insured. Fully-insured loans included in accruing past due 90 days or more are primarily from our repurchases of delinquent FHA loans pursuant to our servicing agreements with GNMA. Additionally, nonperforming loans and accruing balances past due 90 days or more do not include the PCI loan portfolio or loans accounted for under the fair value option even though the customer may be contractually past due.




Table 20	Consumer Credit Quality

		December 31
		Nonperforming						Accruing Past Due 90 Days or More
(Dollars in millions)		2016			2015			2016			2015
Residential mortgage ⁽¹⁾		$	3,056		$	4,803		$	4,793		$	7,150
Home equity		2,918			3,337			—			—
U.S. credit card		n/a			n/a			782			789
Non-U.S. credit card		n/a			n/a			66			76
Direct/Indirect consumer		28			24			34			39
Other consumer		2			1			4			3
Total ⁽²⁾		$	6,004		$	8,165		$	5,679		$	8,057
Consumer loans and leases as a percentage of outstanding consumer loans and leases ⁽²⁾		1.32		%	1.80		%	1.24		%	1.77		%
Consumer loans and leases as a percentage of outstanding loans and leases, excluding PCI and fully-insured loan portfolios ⁽²⁾		1.45			2.04			0.21			0.23


⁽¹⁾	Residential mortgage loans accruing past due 90 days or more are fully-insured loans. At December 31, 2016 and 2015, residential mortgage included $3.0 billion and $4.3 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 $1.8 billion and $2.9 billion of loans on which interest was still accruing.


⁽²⁾	Balances exclude consumer loans accounted for under the fair value option. At December 31, 2016 and 2015, $48 million and $293 million of loans accounted for under the fair value option were past due 90 days or more and not accruing interest.

n/a = not applicable

Table 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 ⁽¹⁾				Net Charge-off Ratios ^{(1, 2)}
(Dollars in millions)		2016		2015		2016		2015
Residential mortgage		$	131	$	473	0.07	%	0.24	%
Home equity		405		636		0.57		0.79
U.S. credit card		2,269		2,314		2.58		2.62
Non-U.S. credit card		175		188		1.83		1.86
Direct/Indirect consumer		134		112		0.15		0.13
Other consumer		205		193		8.95		9.96
Total		$	3,319	$	3,916	0.74		0.84


⁽¹⁾	Net charge-offs exclude write-offs in the PCI loan portfolio. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 62.


⁽²⁾	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.

Net charge-off ratios, excluding the PCI and fully-insured loan portfolios, were 0.09 percent and 0.35 percent for residential mortgage, 0.60 percent and 0.84 percent for home equity and 0.82 percent and 0.99 percent for the total consumer portfolio for 2016 and 2015, respectively. These are the only product classifications that include PCI and fully-insured loans.

Net charge-offs, as shown in Tables 21 and 22, exclude write-offs in the PCI loan portfolio of $144 million and $634 million in

residential mortgage and $196 million and $174 million in home equity for 2016 and 2015. Net charge-off ratios including the PCI write-offs were 0.15 percent and 0.56 percent for residential mortgage and 0.84 percent and 1.00 percent for home equity in 2016 and 2015. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 62.



		Bank of America 201657

Table 22 presents outstandings, nonperforming balances, net charge-offs, allowance for loan and lease losses and provision for loan and lease losses for the core and non-core portfolio within the consumer real estate portfolio. We categorize consumer real estate loans as core and non-core based on loan and customer characteristics such as origination date, product type, LTV, FICO score and delinquency status consistent with our current consumer and mortgage servicing strategy. Generally, loans that were originated after January 1, 2010, qualified under government-sponsored enterprise underwriting guidelines, or otherwise met our underwriting guidelines in place in 2015 are characterized as core loans. Loans held in legacy private-label securitizations, government-insured loans originated prior to 2010, loan products no longer originated, and loans originated prior to 2010 and classified as nonperforming or modified in a TDR prior to 2016

are generally characterized as non-core loans, and are principally run-off portfolios. Core loans as reported within Table 22 include loans held in the Consumer Banking and GWIM segments, as well as loans held for ALM activities in All Other. For more information on core and non-core loans, see Note 4 – Outstanding Loans and Leases to the Consolidated Financial Statements.

As shown in Table 22, outstanding core consumer real estate loans increased $9.2 billion during 2016 driven by an increase of $14.7 billion in residential mortgage, partially offset by a $5.5 billion decrease in home equity. The increase in residential mortgage was primarily driven by originations outpacing prepayments in Consumer Banking and GWIM. The decrease in home equity was driven by paydowns outpacing new originations and draws on existing lines.




Table 22	Consumer Real Estate Portfolio ⁽¹⁾

		December 31
		Outstandings				Nonperforming				Net Charge-offs ⁽²⁾
(Dollars in millions)		2016		2015		2016		2015		2016			2015
Core portfolio
Residential mortgage		$	156,497	$	141,795	$	1,274	$	1,825	$	(29	)	$	101
Home equity		49,373		54,917		969		974		113			163
Total core portfolio		205,870		196,712		2,243		2,799		84			264
Non-core portfolio
Residential mortgage		35,300		46,116		1,782		2,978		160			372
Home equity		17,070		21,031		1,949		2,363		292			473
Total non-core portfolio		52,370		67,147		3,731		5,341		452			845
Consumer real estate portfolio
Residential mortgage		191,797		187,911		3,056		4,803		131			473
Home equity		66,443		75,948		2,918		3,337		405			636
Total consumer real estate portfolio		$	258,240	$	263,859	$	5,974	$	8,140	$	536		$	1,109

						December 31
						Allowance for Loan and Lease Losses				Provision for Loan and Lease Losses
						2016		2015		2016			2015
Core portfolio
Residential mortgage						$	252	$	319	$	(98	)	$	(17	)
Home equity						560		664		10			(33		)
Total core portfolio						812		983		(88		)	(50		)
Non-core portfolio
Residential mortgage						760		1,181		(86		)	(277		)
Home equity						1,178		1,750		(84		)	257
Total non-core portfolio						1,938		2,931		(170		)	(20		)
Consumer real estate portfolio
Residential mortgage						1,012		1,500		(184		)	(294		)
Home equity						1,738		2,414		(74		)	224
Total consumer real estate portfolio						$	2,750	$	3,914	$	(258	)	$	(70	)

⁽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 $710 million and $1.6 billion and home equity loans of $341 million and $250 million at December 31, 2016 and 2015. For more information on the fair value option, see Note 21 – Fair Value Optionto the Consolidated Financial Statements.


⁽²⁾	Net charge-offs exclude write-offs in the PCI loan portfolio. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 62.

We believe that the presentation of information adjusted to exclude the impact of the PCI loan portfolio, the fully-insured loan portfolio and loans accounted for under the fair value option is more representative of the ongoing operations and credit quality of the business. As a result, in the following discussions of the residential mortgage and home equity portfolios, we provide information that excludes the impact of the PCI loan portfolio, the fully-insured loan portfolio and loans accounted for under the fair value option in certain credit quality statistics. We separately disclose information on the PCI loan portfolio on page 62.

Residential Mortgage

The residential mortgage portfolio makes up the largest percentage of our consumer loan portfolio at 42 percent of consumer loans and leases at December 31, 2016. Approximately 36 percent of the residential mortgage portfolio is in All Other and is comprised of originated loans, purchased loans used in our overall ALM activities, delinquent FHA loans repurchased pursuant to our servicing agreements with GNMA as well as loans repurchased related to our representations and warranties. Approximately 34 percent of the residential mortgage portfolio is



58 Bank of America 2016

in GWIM and represents residential mortgages originated for the home purchase and refinancing needs of our wealth management clients and the remaining portion of the portfolio is primarily in Consumer Banking.

Outstanding balances in the residential mortgage portfolio, excluding loans accounted for under the fair value option, increased $3.9 billion in 2016 as retention of new originations was partially offset by loan sales of $6.6 billion and run-off. Loan sales primarily included $3.1 billion of loans in consolidated agency residential mortgage securitization vehicles and $1.9 billion of nonperforming and other delinquent loans.

At December 31, 2016 and 2015, the residential mortgage portfolio included $28.7 billion and $37.1 billion of outstanding fully-insured loans. On this portion of the residential mortgage portfolio, we are protected against principal loss as a result of either FHA insurance or long-term standby agreements that provide for the transfer of credit risk to FNMA and FHLMC. At December 31, 2016 and 2015, $22.3 billion and $33.4 billion had FHA

insurance with the remainder protected by long-term standby agreements. At December 31, 2016 and 2015, $7.4 billion and $11.2 billion of the FHA-insured loan population were repurchases of delinquent FHA loans pursuant to our servicing agreements with GNMA.

Table 23 presents certain residential mortgage key credit statistics on both a reported basis excluding loans accounted for under the fair value option, and excluding the PCI loan portfolio, our fully-insured loan portfolio and loans accounted for under the fair value option. Additionally, in the “Reported Basis” columns in the table below, accruing balances past due and nonperforming loans do not include the PCI loan portfolio, in accordance with our accounting policies, even though the customer may be contractually past due. As such, the following discussion presents the residential mortgage portfolio excluding the PCI loan portfolio, the fully-insured loan portfolio and loans accounted for under the fair value option. For more information on the PCI loan portfolio, see page 62.




Table 23	Residential Mortgage – Key Credit Statistics

		December 31
		Reported Basis ⁽¹⁾						Excluding Purchased Credit-impaired and Fully-insured Loans
(Dollars in millions)		2016			2015			2016			2015
Outstandings		$	191,797		$	187,911		$	152,941		$	138,768
Accruing past due 30 days or more		8,232			11,423			1,835			1,568
Accruing past due 90 days or more		4,793			7,150			—			—
Nonperforming loans		3,056			4,803			3,056			4,803
Percent of portfolio
Refreshed LTV greater than 90 but less than or equal to 100		5		%	7		%	3		%	5		%
Refreshed LTV greater than 100		4			8			3			4
Refreshed FICO below 620		9			13			4			6
2006 and 2007 vintages ⁽²⁾		13			17			12			17
Net charge-off ratio ⁽³⁾		0.07			0.24			0.09			0.35


⁽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 account for $931 million, or 31 percent, and $1.6 billion, or 34 percent, of nonperforming residential mortgage loans at December 31, 2016 and 2015. Additionally, these vintages accounted for net recoveries of $2 million in 2016 and net charge-offs of $136 million in 2015.


⁽³⁾	Net charge-off ratios are calculated as net charge-offs divided by average outstanding loans excluding loans accounted for under the fair value option.

Nonperforming residential mortgage loans decreased$1.7 billion in 2016 as outflows, including sales of $1.4 billion, outpaced new inflows. Of the nonperforming residential mortgage loans at December 31, 2016, $1.0 billion, or 33 percent, were current on contractual payments. Accruing past due 30 days or more increased $267 million due to the timing impact of a consumer real estate payment servicer conversion that occurred during the fourth quarter of 2016.

Net charge-offs decreased $342 million to $131 million in 2016, compared to $473 million in 2015. This decrease in net charge-offs was primarily driven by charge-offs related to the consumer relief portion of the settlement with the U.S. Department of Justice (DoJ) of $402 million in 2015. Net charge-offs also included charge-offs of $26 million related to nonperforming loan sales during 2016 compared to recoveries of $127 million in 2015. Additionally, net charge-offs declined driven by favorable portfolio trends and decreased write-downs on loans greater than 180 days past due, which were written down to the estimated fair value of the collateral, less costs to sell, due in part to improvement in home prices and the U.S. economy.

Loans with a refreshed LTV greater than 100 percent represented three percent and four percent of the residential mortgage loan portfolio at December 31, 2016 and 2015. Of the

loans with a refreshed LTV greater than 100 percent, 98 percent were performing at both December 31, 2016 and 2015. Loans with a refreshed LTV greater than 100 percent reflect loans where the outstanding carrying value of the loan is greater than the most recent valuation of the property securing the loan. The majority of these loans have a refreshed LTV greater than 100 percent primarily due to home price deterioration since 2006, partially offset by subsequent appreciation.

Of the $152.9 billion in total residential mortgage loans outstanding at December 31, 2016, as shown in Table 24, 37 percent were originated as interest-only loans. The outstanding balance of interest-only residential mortgage loans that have entered the amortization period was $11.0 billion, or 19 percent, at December 31, 2016. 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, 2016, $249 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 $1.8 billion, or one percent for the entire residential mortgage portfolio. In addition, at December 31, 2016, $448 million, or four percent of outstanding interest-only residential



		Bank of America 201659

mortgage loans that had entered the amortization period were nonperforming, of which $233 million were contractually current, compared to $3.1 billion, or two percent for the entire residential mortgage portfolio, of which $1.0 billion were contractually current. 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. More than 80 percent of these loans that have yet to enter the amortization period will not be required to make a fully-amortizing payment until 2019 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 15 percent and 14 percent of outstandings at December 31, 2016 and 2015. Loans within this MSA contributed net recoveries of $13 million within the residential mortgage portfolio during 2016 and 2015. In the New York area, the New York-Northern New Jersey-Long Island MSA made up 12 percent and 11 percent of outstandings during 2016 and 2015. Loans within this MSA contributed net charge-offs of $33 million and $101 million within the residential mortgage portfolio during 2016 and 2015.




Table 24	Residential Mortgage State Concentrations

		December 31
		Outstandings ⁽¹⁾				Nonperforming ⁽¹⁾				Net Charge-offs ⁽²⁾
(Dollars in millions)		2016		2015		2016		2015		2016			2015
California		$	58,295	$	48,865	$	554	$	977	$	(70	)	$	(49	)
New York ⁽³⁾		14,476		12,696		290		399		18			57
Florida ⁽³⁾		10,213		10,001		322		534		20			53
Texas		6,607		6,208		132		185		9			10
Massachusetts		5,344		4,799		77		118		3			8
Other U.S./Non-U.S.		58,006		56,199		1,681		2,590		151			394
Residential mortgage loans ⁽⁴⁾		$	152,941	$	138,768	$	3,056	$	4,803	$	131		$	473
Fully-insured loan portfolio		28,729		37,077
Purchased credit-impaired residential mortgage loan portfolio ⁽⁵⁾		10,127		12,066
Total residential mortgage loan portfolio		$	191,797	$	187,911


⁽¹⁾	Outstandings and nonperforming loans exclude loans accounted for under the fair value option.


⁽²⁾	Net charge-offs exclude $144 million of write-offs in the residential mortgage PCI loan portfolio in 2016 compared to $634 million in 2015. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 62.


⁽³⁾	In these states, foreclosure requires a court order following a legal proceeding (judicial states).


⁽⁴⁾	Amounts exclude the PCI residential mortgage and fully-insured loan portfolios.


⁽⁵⁾	At December 31, 2016 and 2015, 48 percent and 47 percent of PCI residential mortgage loans were in California. There were no other significant single state concentrations.

Home Equity

At December 31, 2016, the home equity portfolio made up 15 percent of the consumer portfolio and is comprised of home equity lines of credit (HELOCs), home equity loans and reverse mortgages.

At December 31, 2016, our HELOC portfolio had an outstanding balance of $58.6 billion, or 88 percent of the total home equity portfolio compared to $66.1 billion, or 87 percent, at December 31, 2015. HELOCs generally have an initial draw period of 10 years and the borrowers typically are only required to pay the interest due on the loans on a monthly basis. After the initial draw period ends, the loans generally convert to 15-year amortizing loans.

At December 31, 2016, our home equity loan portfolio had an outstanding balance of $5.9 billion, or nine percent of the total home equity portfolio compared to $7.9 billion, or 10 percent, at December 31, 2015. Home equity loans are almost all fixed-rate loans with amortizing payment terms of 10 to 30 years and of the $5.9 billion at December 31, 2016, 56 percent have 25- to 30-year terms. At December 31, 2016, our reverse mortgage portfolio had an outstanding balance, excluding loans accounted for under the fair value option, of $1.9 billion, or three percent of the total home equity portfolio compared to $2.0 billion, or three percent, at December 31, 2015. We no longer originate reverse mortgages.

At December 31, 2016, approximately 67 percent of the home equity portfolio was in Consumer Banking, 26 percent was in All Other and the remainder of the portfolio was primarily in GWIM. Outstanding balances in the home equity portfolio, excluding loans accounted for under the fair value option, decreased$9.5 billion in 2016 primarily due to paydowns and charge-offs outpacing new originations and draws on existing lines. Of the total home equity portfolio at December 31, 2016 and 2015, $19.6 billion and $20.3 billion, or 29 percent and 27 percent, were in first-lien positions (31 percent and 28 percent excluding the PCI home equity portfolio). At December 31, 2016, 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 $10.9 billion, or 17 percent of our total home equity portfolio excluding the PCI loan portfolio.

Unused HELOCs totaled $47.2 billion and $50.3 billion at December 31, 2016 and 2015. The decrease was primarily due to accounts reaching the end of their draw period, which automatically eliminates open line exposure, as well as customers choosing to close accounts. Both of these more than offset customer paydowns of principal balances and the impact of new production. The HELOC utilization rate was 55 percent and 57 percent at December 31, 2016 and 2015.



60 Bank of America 2016

Table 25 presents certain home equity portfolio key credit statistics on both a reported basis excluding loans accounted for under the fair value option, and excluding the PCI loan portfolio and loans accounted for under the fair value option. Additionally, in the “Reported Basis” columns in the table below, accruing balances past due 30 days or more and nonperforming loans do

not include the PCI loan portfolio, in accordance with our accounting policies, even though the customer may be contractually past due. As such, the following discussion presents the home equity portfolio excluding the PCI loan portfolio and loans accounted for under the fair value option. For more information on the PCI loan portfolio, see page 62.




Table 25	Home Equity – Key Credit Statistics

		December 31
		Reported Basis ⁽¹⁾						Excluding Purchased Credit-impaired Loans
(Dollars in millions)		2016			2015			2016			2015
Outstandings		$	66,443		$	75,948		$	62,832		$	71,329
Accruing past due 30 days or more ⁽²⁾		566			613			566			613
Nonperforming loans ⁽²⁾		2,918			3,337			2,918			3,337
Percent of portfolio
Refreshed CLTV greater than 90 but less than or equal to 100		5		%	6		%	4		%	6		%
Refreshed CLTV greater than 100		8			12			7			11
Refreshed FICO below 620		7			7			6			7
2006 and 2007 vintages ⁽³⁾		37			43			34			41
Net charge-off ratio ⁽⁴⁾		0.57			0.79			0.60			0.84


⁽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 includes $81 million and $89 million and nonperforming loans include $340 million and $396 million of loans where we serviced the underlying first-lien at December 31, 2016 and 2015.


⁽³⁾	These vintages of loans have higher refreshed combined LTV ratios and accounted for 50 percent and 45 percent of nonperforming home equity loans at December 31, 2016 and 2015, and 54 percent of net charge-offs in both 2016 and 2015.


⁽⁴⁾	Net charge-off ratios are calculated as net charge-offs divided by average outstanding loans excluding loans accounted for under the fair value option.

Nonperforming outstanding balances in the home equity portfolio decreased $419 million in 2016 as outflows, including sales of $234 million, outpaced new inflows. Of the nonperforming home equity portfolio at December 31, 2016, $1.5 billion, or 50 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, $876 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 collateral, less costs to sell. Accruing loans that were 30 days or more past due decreased $47 million in 2016.

In some cases, the junior-lien home equity outstanding balance that we hold is performing, but the underlying first-lien is not. For outstanding balances in the home equity portfolio on which we service the first-lien loan, we are able to track whether the first-lien loan is in default. For loans where the first-lien is serviced by a third party, we utilize credit bureau data to estimate the delinquency status of the first-lien. Given that the credit bureau database we use does not include a property address for the mortgages, we are unable to identify with certainty whether a reported delinquent first-lien mortgage pertains to the same property for which we hold a junior-lien loan. For certain loans, we utilize a third-party vendor to combine credit bureau and public record data to better link a junior-lien loan with the underlying first-lien mortgage. At December 31, 2016, we estimate that $1.0 billion of current and $149 million of 30 to 89 days past due junior-lien loans were behind a delinquent first-lien loan. We service the first-lien loans on $190 million of these combined amounts, with the remaining $980 million serviced by third parties. Of the $1.2 billion of current to 89 days past due junior-lien loans, based on available credit bureau data and our own internal servicing data,

we estimate that approximately $428 million had first-lien loans that were 90 days or more past due.

Net charge-offs decreased$231 million to $405 million in 2016, compared to $636 million in 2015 driven by favorable portfolio trends due in part to improvement in home prices and the U.S. economy. Additionally, the decrease in net charge-offs was partly attributable to charge-offs of $75 million related to the consumer relief portion of the settlement with the DoJ in 2015.

Outstanding balances with refreshed combined loan-to-value (CLTV) greater than 100 percent comprised seven percent and 11 percent of the home equity portfolio at December 31, 2016 and 2015. Outstanding balances in the home equity portfolio with a refreshed CLTV greater than 100 percent reflect loans where our loan and available line of credit combined with any outstanding senior liens against the property are equal to or greater than the most recent valuation of the property securing the loan. Depending on the value of the property, there may be collateral in excess of the first-lien that is available to reduce the severity of loss on the second-lien. Of those outstanding balances with a refreshed CLTV greater than 100 percent, 95 percent of the customers were current on their home equity loan and 91 percent of second-lien loans with a refreshed CLTV greater than 100 percent were current on both their second-lien and underlying first-lien loans at December 31, 2016.

Of the $62.8 billion in total home equity portfolio outstandings at December 31, 2016, as shown in Table 26, 52 percent require interest-only payments. The outstanding balance of HELOCs that have entered the amortization period was $14.7 billion at December 31, 2016. 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 December 31, 2016, $295 million, or two percent of outstanding HELOCs that had entered the amortization period were accruing past due 30 days or more. In addition, at December 31, 2016, $1.8 billion, or 12 percent of outstanding HELOCs that had entered the amortization period were



		Bank of America 201661

nonperforming, of which $868 million were contractually current. Loans in our HELOC portfolio generally have an initial draw period of 10 years and 23 percent of these loans will enter the amortization period in 2017 and will be required to make fully-amortizing payments. We communicate to contractually current customers more than a year prior to the end of their draw period to inform them of the potential change to the payment structure before entering the amortization period, and provide payment options to customers prior to the end of the draw period.

Although we do not actively track how many of our home equity customers pay only the minimum amount due on their home equity loans and lines, we can infer some of this information through a review of our HELOC portfolio that we service and that is still in its revolving period (i.e., customers may draw on and repay their line of credit, but are generally only required to pay interest on a

monthly basis). During 2016, approximately 34 percent of these customers with an outstanding balance did not pay any principal on their HELOCs.

Table 26 presents outstandings, nonperforming balances and net charge-offs by certain state concentrations for the home equity portfolio. In the New York area, the New York-Northern New Jersey-Long Island MSA made up 13 percent of the outstanding home equity portfolio at both December 31, 2016 and 2015. Loans within this MSA contributed 17 percent and 13 percent of net charge-offs in 2016 and 2015 within the home equity portfolio. The Los Angeles-Long Beach-Santa Ana MSA within California made up 11 percent and 12 percent of the outstanding home equity portfolio in 2016 and 2015. Loans within this MSA contributed zero percent and two percent of net charge-offs in 2016 and 2015 within the home equity portfolio.




Table 26	Home Equity State Concentrations

		December 31
		Outstandings ⁽¹⁾				Nonperforming ⁽¹⁾				Net Charge-offs ⁽²⁾
(Dollars in millions)		2016		2015		2016		2015		2016		2015
California		$	17,563	$	20,356	$	829	$	902	$	7	$	57
Florida ⁽³⁾		7,319		8,474		442		518		76		128
New Jersey ⁽³⁾		5,102		5,570		201		230		50		51
New York ⁽³⁾		4,720		5,249		271		316		45		61
Massachusetts		3,078		3,378		100		115		12		17
Other U.S./Non-U.S.		25,050		28,302		1,075		1,256		215		322
Home equity loans ⁽⁴⁾		$	62,832	$	71,329	$	2,918	$	3,337	$	405	$	636
Purchased credit-impaired home equity portfolio ⁽⁵⁾		3,611		4,619
Total home equity loan portfolio		$	66,443	$	75,948


⁽¹⁾	Outstandings and nonperforming loans exclude loans accounted for under the fair value option.


⁽²⁾	Net charge-offs exclude $196 million of write-offs in the home equity PCI loan portfolio in 2016 compared to $174 million in 2015. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 62.


⁽³⁾	In these states, foreclosure requires a court order following a legal proceeding (judicial states).


⁽⁴⁾	Amount excludes the PCI home equity portfolio.


⁽⁵⁾	At both December 31, 2016 and 2015, 29 percent of PCI home equity loans were in California. There were no other significant single state concentrations.

Purchased Credit-impaired Loan Portfolio

Accounting Principles and Note 4 – Outstanding Loans and Leases to the Consolidated Financial Statements.

Table 27 presents the unpaid principal balance, carrying value, related valuation allowance and the net carrying value as a percentage of the unpaid principal balance for the PCI loan portfolio.




Table 27	Purchased Credit-impaired Loan Portfolio

		December 31, 2016
(Dollars in millions)		Unpaid Principal Balance		Gross Carrying Value		Related Valuation Allowance		Carrying Value Net of Valuation Allowance		Percent of Unpaid Principal Balance
Residential mortgage ⁽¹⁾		$	10,330	$	10,127	$	169	$	9,958	96.40	%
Home equity		3,689		3,611		250		3,361		91.11
Total purchased credit-impaired loan portfolio		$	14,019	$	13,738	$	419	$	13,319	95.01

		December 31, 2015
Residential mortgage		$	12,350	$	12,066	$	338	$	11,728	94.96	%
Home equity		4,650		4,619		466		4,153		89.31
Total purchased credit-impaired loan portfolio		$	17,000	$	16,685	$	804	$	15,881	93.42

⁽¹⁾

Includes pay option loans with an unpaid principal balance of $1.9 billion and a carrying value of $1.8 billion at December 31, 2016. This includes $1.6 billion of loans that were credit-impaired upon acquisition and $226 million of loans that are 90 days or more past due. The total unpaid principal balance of pay option loans with accumulated negative amortization was $303 million, including $16 million of negative amortization.

The total PCI unpaid principal balance decreased $3.0 billion, or 18 percent, in 2016 primarily driven by payoffs, sales, paydowns

and write-offs. During 2016, we sold PCI loans with a carrying value of $549 million compared to sales of $1.4 billion in 2015.



62 Bank of America 2016

Of the unpaid principal balance of $14.0 billion at December 31, 2016, $12.3 billion, or 88 percent, was current based on the contractual terms, $949 million, or seven percent, was in early stage delinquency, and $523 million was 180 days or more past due, including $451 million of first-lien mortgages and $72 million of home equity loans.

During 2016, we recorded a provision benefit of $45 million for the PCI loan portfolio which included a benefit of $25 million for residential mortgage and $20 million for home equity. This compared to a total provision benefit of $40 million in 2015. The provision benefit in 2016 was primarily driven by continued home price improvement and lower default estimates on second-lien loans.

The PCI valuation allowance declined$385 million during 2016 due to write-offs in the PCI loan portfolio of $144 million in residential mortgage and $196 million in home equity, combined with a provision benefit of $45 million.

The PCI residential mortgage loan portfolio represented 74 percent of the total PCI loan portfolio at December 31, 2016. Those loans to borrowers with a refreshed FICO score below 620 represented 27 percent of the PCI residential mortgage loan portfolio at December 31, 2016. Loans with a refreshed LTV greater than 90 percent, after consideration of purchase accounting adjustments and the related valuation allowance, represented 23 percent of the PCI residential mortgage loan portfolio and 26 percent based on the unpaid principal balance at December 31, 2016.

The PCI home equity portfolio represented 26 percent of the total PCI loan portfolio at December 31, 2016. Those loans with

a refreshed FICO score below 620 represented 15 percent of the PCI home equity portfolio at December 31, 2016. Loans with a refreshed CLTV greater than 90 percent, after consideration of purchase accounting adjustments and the related valuation allowance, represented 46 percent of the PCI home equity portfolio and 49 percent based on the unpaid principal balance at December 31, 2016.

U.S. Credit Card

At December 31, 2016, 96 percent of the U.S. credit card portfolio was managed in Consumer Banking with the remainder in GWIM. Outstandings in the U.S. credit card portfolio increased $2.7 billion in 2016 as retail volumes outpaced payments. Net charge-offs decreased $45 million to $2.3 billion in 2016 due to improvements in delinquencies and bankruptcies as a result of an improved economic environment and the impact of higher credit quality originations. U.S. credit card loans 30 days or more past due and still accruing interest increased $20 million from loan growth while loans 90 days or more past due and still accruing interest decreased $7 million in 2016.

Unused lines of credit for U.S. credit card totaled $321.6 billion and $312.5 billion at December 31, 2016 and 2015. The $9.1 billion increase was driven by account growth and lines of credit increases.

Table 28 presents certain state concentrations for the U.S. credit card portfolio.




Table 28	U.S. Credit Card State Concentrations

		December 31
		Outstandings				Accruing Past Due 90 Days or More				Net Charge-offs
(Dollars in millions)		2016		2015		2016		2015		2016		2015
California		$	14,251	$	13,658	$	115	$	115	$	360	$	358
Florida		7,864		7,420		85		81		245		244
Texas		7,037		6,620		65		58		164		157
New York		5,683		5,547		60		57		161		162
Washington		4,128		3,907		18		19		56		59
Other U.S.		53,315		52,450		439		459		1,283		1,334
Total U.S. credit card portfolio		$	92,278	$	89,602	$	782	$	789	$	2,269	$	2,314

Non-U.S. Credit Card

Outstandings in the non-U.S. credit card portfolio, which are recorded in All Other, decreased$761 million in 2016 primarily driven by weakening of the British Pound against the U.S. Dollar. Net charge-offs decreased$13 million to $175 million in 2016 due to the same driver.

Unused lines of credit for non-U.S. credit card totaled $24.4 billion and $27.9 billion at December 31, 2016 and 2015. The $3.5 billion decrease was driven by weakening of the British Pound against the U.S. Dollar, partially offset by account growth and increases in lines of credit.

consumer credit card business, see Recent Events on page 21 and Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements.

Direct/Indirect Consumer

At December 31, 2016, approximately 53 percent of the direct/indirect portfolio was included in Consumer Banking (consumer auto and specialty lending – automotive, marine, aircraft, recreational vehicle loans and consumer personal loans), and 47 percent was included in GWIM (principally securities-based lending loans).

Outstandings in the direct/indirect portfolio increased $5.3 billion in 2016 primarily driven by the consumer auto loan portfolio.

Table 29 presents certain state concentrations for the direct/indirect consumer loan portfolio.



		Bank of America 201663




Table 29	Direct/Indirect State Concentrations

		December 31
		Outstandings				Accruing Past Due 90 Days or More				Net Charge-offs
(Dollars in millions)		2016		2015		2016		2015		2016		2015
California		$	11,300	$	10,735	$	3	$	3	$	13	$	8
Florida		9,418		8,835		3		3		29		20
Texas		9,406		8,514		5		4		21		17
New York		5,253		5,077		1		1		3		3
Georgia		3,255		2,869		4		4		9		7
Other U.S./Non-U.S.		55,457		52,765		18		24		59		57
Total direct/indirect loan portfolio		$	94,089	$	88,795	$	34	$	39	$	134	$	112

Other Consumer

At December 31, 2016, approximately 75 percent of the $2.5 billion other consumer portfolio was consumer auto leases included in Consumer Banking. The remainder is primarily associated with certain consumer finance businesses that we previously exited.

Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity

Table 30 presents nonperforming consumer loans, leases and foreclosed properties activity during 2016 and 2015. For more information on nonperforming loans, see Note 1 – Summary of Significant Accounting Principles and Note 4 – Outstanding Loans and Leases to the Consolidated Financial Statements. During 2016, nonperforming consumer loans declined$2.2 billion to $6.0 billion primarily driven by loan sales of $1.6 billion. Additionally, nonperforming loans declined as outflows outpaced new inflows.

The outstanding balance of a real estate-secured loan 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 repayment of the loan is fully insured. At December 31, 2016, $2.5 billion, or 40 percent of nonperforming consumer real estate loans and foreclosed properties had been written down to their estimated property value less costs to sell, including $2.2 billion of nonperforming loans 180 days or more past due and $363 million of foreclosed properties. In addition, at December 31, 2016, $2.5 billion, or 39 percent of nonperforming consumer loans were modified and are now current after successful trial periods, or are current loans classified as nonperforming loans in accordance with applicable policies.

Foreclosed properties decreased$81 million in 2016 as liquidations outpaced additions. PCI loans are excluded from nonperforming loans as these loans were written down to fair value at the acquisition date; however, once we acquire the underlying real estate upon foreclosure of the delinquent PCI loan, it is included in foreclosed properties. PCI-related foreclosed properties decreased $65 million in 2016. Not included in foreclosed properties at December 31, 2016 was $1.2 billion of real estate that was acquired upon foreclosure of certain delinquent government-guaranteed loans (principally FHA-insured loans). We exclude these amounts from our nonperforming loans and foreclosed properties activity as we expect we will be reimbursed once the property is conveyed to the guarantor for principal and, up to certain limits, costs incurred during the foreclosure process and interest incurred during the holding period.

Nonperforming loans also include certain loans that have been modified in TDRs where economic concessions have been granted to borrowers experiencing financial difficulties. These concessions typically result from our loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructuring and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months. Nonperforming TDRs, excluding those modified loans in the PCI loan portfolio, are included in Table 30.



64 Bank of America 2016




Table 30	Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity⁽¹⁾

(Dollars in millions)		2016			2015
Nonperforming loans and leases, January 1		$	8,165		$	10,819
Additions to nonperforming loans and leases:
New nonperforming loans and leases		3,492			4,949
Reductions to nonperforming loans and leases:
Paydowns and payoffs		(795		)	(1,018		)
Sales		(1,604		)	(1,674		)
Returns to performing status ⁽²⁾		(1,628		)	(2,710		)
Charge-offs		(1,277		)	(1,769		)
Transfers to foreclosed properties ⁽³⁾		(294		)	(432		)
Transfers to loans held-for-sale		(55		)	—
Total net reductions to nonperforming loans and leases		(2,161		)	(2,654		)
Total nonperforming loans and leases, December 31 ⁽⁴⁾		6,004			8,165
Foreclosed properties, January 1		444			630
Additions to foreclosed properties:
New foreclosed properties ⁽³⁾		431			606
Reductions to foreclosed properties:
Sales		(443		)	(686		)
Write-downs		(69		)	(106		)
Total net reductions to foreclosed properties		(81		)	(186		)
Total foreclosed properties, December 31 ⁽⁵⁾		363			444
Nonperforming consumer loans, leases and foreclosed properties, December 31		$	6,367		$	8,609
Nonperforming consumer loans and leases as a percentage of outstanding consumer loans and leases ⁽⁶⁾		1.32		%	1.80		%
Nonperforming consumer loans, leases and foreclosed properties as a percentage of outstanding consumer loans, leases and foreclosed properties ⁽⁶⁾		1.39			1.89


⁽¹⁾	Balances do not include nonperforming LHFS of $69 million and $5 million and nonaccruing TDRs removed from the PCI loan portfolio prior to January 1, 2010 of $27 million and $38 million at December 31, 2016 and 2015 as well as loans accruing past due 90 days or more as presented in Table 20 and Note 4 – Outstanding Loans and Leasesto the Consolidated Financial Statements.


⁽²⁾	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.

⁽³⁾

New foreclosed properties represents transfers of nonperforming loans to foreclosed properties net of charge-offs taken during the first 90 days after transfer of a loan to foreclosed properties. New foreclosed properties also includes properties obtained upon foreclosure of delinquent PCI loans, properties repurchased due to representations and warranties exposure and properties acquired with newly consolidated subsidiaries.


⁽⁴⁾	At December 31, 2016, 36 percent of nonperforming loans were 180 days or more past due.


⁽⁵⁾	Foreclosed property balances do not include properties insured by certain government-guaranteed loans, principally FHA-insured loans, of $1.2 billion and $1.4 billion at December 31, 2016 and 2015.


⁽⁶⁾	Outstanding consumer loans and leases exclude loans accounted for under the fair value option.

Our policy is to record any losses in the value of foreclosed properties as a reduction in the allowance for loan and lease losses during the first 90 days after transfer of a loan to foreclosed properties. Thereafter, further losses in value as well as gains and losses on sale are recorded in noninterest expense. New foreclosed properties included in Table 30 are net of $73 million and $162 million of charge-offs and write-offs of PCI loans in 2016 and 2015, recorded during the first 90 days after transfer.

We classify junior-lien home equity loans as nonperforming when the first-lien loan becomes 90 days past due even if the junior-lien loan is performing. At December 31, 2016 and 2015, $428 million and $484 million of such junior-lien home equity loans were included in nonperforming loans and leases.



		Bank of America 201665

Table 31 presents TDRs for the consumer real estate portfolio. Performing TDR balances are excluded from nonperforming loans and leases in Table 30.




Table 31	Consumer Real Estate Troubled Debt Restructurings

		December 31
		2016						2015
(Dollars in millions)		Total		Nonperforming		Performing		Total		Nonperforming		Performing
Residential mortgage ^{(1, 2)}		$	12,631	$	1,992	$	10,639	$	18,372	$	3,284	$	15,088
Home equity ⁽³⁾		2,777		1,566		1,211		2,686		1,649		1,037
Total consumer real estate troubled debt restructurings		$	15,408	$	3,558	$	11,850	$	21,058	$	4,933	$	16,125


⁽¹⁾	Residential mortgage TDRs deemed collateral dependent totaled $3.5 billion and $4.9 billion, and included $1.6 billion and $2.7 billion of loans classified as nonperforming and $1.9 billion and $2.2 billion of loans classified as performing at December 31, 2016 and 2015.


⁽²⁾	Residential mortgage performing TDRs included $5.3 billion and $8.7 billion of loans that were fully-insured at December 31, 2016 and 2015.


⁽³⁾	Home equity TDRs deemed collateral dependent totaled $1.6 billion and $1.6 billion, and included $1.3 billion and $1.3 billion of loans classified as nonperforming and $301 million and $290 million of loans classified as performing at December 31, 2016 and 2015.

In addition to modifying consumer real estate loans, we work with customers who are experiencing financial difficulty by modifying credit card and other consumer loans. Credit card and other consumer loan modifications generally involve a reduction in the customer’s interest rate on the account and placing the customer on a fixed payment plan not exceeding 60 months, all of which are considered TDRs (the renegotiated TDR portfolio). In addition, the accounts of non-U.S. credit card customers who do not qualify for a fixed payment plan may have their interest rates reduced, as required by certain local jurisdictions. These modifications, which are also TDRs, tend to experience higher payment default rates given that the borrowers may lack the ability to repay even with the interest rate reduction. In all cases, the customer’s available line of credit is canceled.

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 30 as substantially all of the loans remain on accrual status until either charged off or paid in full. At December 31, 2016 and 2015, our renegotiated TDR portfolio was $610 million and $779 million, of which $493 million and $635 million were current or less than 30 days past due under the modified terms. The decline in the renegotiated TDR portfolio was primarily driven by paydowns and charge-offs as well as lower program enrollments. For more information on the renegotiated TDR portfolio, see Note 4 – Outstanding Loans and Leasesto the Consolidated Financial Statements.

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. Our business and risk management personnel 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 Principlesto 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 do not result in undesirable levels of risk. 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 36, 39, 44 and 45 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, including our utilized exposure to the energy sector which was three percent and four percent of total commercial utilized exposure at December 31, 2016 and 2015, see Commercial Portfolio Credit Risk Management – Industry Concentrations on page 71 and Table 39.

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



66 Bank of America 2016

accounting hedges. They are carried at fair value with changes in fair value recorded in other income (loss).

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 additional information, see Note 12 – Commitments and Contingencies to the Consolidated Financial Statements.

Commercial Credit Portfolio

During 2016, other than in the higher risk energy sub-sectors, credit quality among large corporate borrowers was strong. While we experienced some deterioration in the energy sector in 2016, oil prices have stabilized, which contributed to a modest improvement in energy-related exposure by year end. Credit quality of commercial real estate borrowers continued to be strong with conservative LTV ratios, stable market rents in most sectors and vacancy rates remaining low.

Outstanding commercial loans and leases increased $17.7 billion during 2016 primarily in U.S. commercial. Nonperforming commercial loans and leases increased $562 million during 2016. Nonperforming commercial loans and leases as a percentage of outstanding loans and leases, excluding loans accounted for under the fair value option, increased during 2016 to 0.38 percent from 0.28 percent at December 31, 2015. Reservable criticized balances increased $424 million to $16.3 billion during 2016 as a result of net downgrades outpacing paydowns, primarily in the energy sector. The increase in nonperforming loans was primarily due to energy and metals mining exposure. The allowance for loan and lease losses for the commercial portfolio increased $409 million to $5.3 billion at December 31, 2016. For additional information, see Allowance for Credit Losses on page 75.

Table 32 presents our commercial loans and leases portfolio, and related credit quality information at December 31, 2016 and 2015.




Table 32	Commercial Loans and Leases

		December 31
		Outstandings				Nonperforming				Accruing Past Due 90 Days or More
(Dollars in millions)		2016		2015		2016		2015		2016		2015
U.S. commercial		$	270,372	$	252,771	$	1,256	$	867	$	106	$	113
Commercial real estate ⁽¹⁾		57,355		57,199		72		93		7		3
Commercial lease financing		22,375		21,352		36		12		19		15
Non-U.S. commercial		89,397		91,549		279		158		5		1
		439,499		422,871		1,643		1,130		137		132
U.S. small business commercial ⁽²⁾		12,993		12,876		60		82		71		61
Commercial loans excluding loans accounted for under the fair value option		452,492		435,747		1,703		1,212		208		193
Loans accounted for under the fair value option ⁽³⁾		6,034		5,067		84		13		—		—
Total commercial loans and leases		$	458,526	$	440,814	$	1,787	$	1,225	$	208	$	193


⁽¹⁾	Includes U.S. commercial real estate loans of $54.3 billion and $53.6 billion and non-U.S. commercial real estate loans of $3.1 billion and $3.5 billion at December 31, 2016 and 2015.


⁽²⁾	Includes card-related products.


⁽³⁾	Commercial loans accounted for under the fair value option include U.S. commercial loans of $2.9 billion and $2.3 billion and non-U.S. commercial loans of $3.1 billion and $2.8 billion at December 31, 2016 and 2015. For more information on the fair value option, see Note 21 – Fair Value Option to the Consolidated Financial Statements.

Table 33 presents net charge-offs and related ratios for our commercial loans and leases for 2016 and 2015. The increase in net charge-offs of $80 million in 2016 was primarily due to higher energy sector related losses.




Table 33	Commercial Net Charge-offs and Related Ratios

		Net Charge-offs						Net Charge-off Ratios ⁽¹⁾
(Dollars in millions)		2016			2015			2016		2015
U.S. commercial		$	184		$	139		0.07	%	0.06	%
Commercial real estate		(31		)	(5		)	(0.05	)	(0.01	)
Commercial lease financing		21			9			0.10		0.04
Non-U.S. commercial		120			54			0.13		0.06
		294			197			0.07		0.05
U.S. small business commercial		208			225			1.60		1.71
Total commercial		$	502		$	422		0.11		0.10


⁽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.



		Bank of America 201667

Table 34 presents commercial credit exposure by type for utilized, unfunded and total binding committed credit exposure. Commercial utilized credit exposure includes SBLCs and financial guarantees, bankers’ acceptances and commercial letters of credit 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.

Total commercial utilized credit exposure increased$15.3 billion in 2016 primarily driven by growth in loans and leases. The utilization rate for loans and leases, SBLCs and financial guarantees, commercial letters of credit and bankers acceptances, in the aggregate, was 58 percent and 56 percent at December 31, 2016 and 2015.




Table 34	Commercial Credit Exposure by Type

		December 31
		Commercial Utilized ⁽¹⁾				Commercial Unfunded ^{(2, 3, 4)}				Total Commercial Committed
(Dollars in millions)		2016		2015		2016		2015		2016		2015
Loans and leases ⁽⁵⁾		$	464,260	$	446,832	$	366,106	$	376,478	$	830,366	$	823,310
Derivative assets ⁽⁶⁾		42,512		49,990		—		—		42,512		49,990
Standby letters of credit and financial guarantees		33,135		33,236		660		690		33,795		33,926
Debt securities and other investments		26,244		21,709		5,474		4,173		31,718		25,882
Loans held-for-sale		6,510		5,456		3,824		1,203		10,334		6,659
Commercial letters of credit		1,464		1,725		112		390		1,576		2,115
Bankers’ acceptances		395		298		13		—		408		298
Other		372		317		—		—		372		317
Total		$	574,892	$	559,563	$	376,189	$	382,934	$	951,081	$	942,497


⁽¹⁾	Total commercial utilized exposure includes loans of $6.0 billion and $5.1 billion and issued letters of credit with a notional amount of $284 million and $290 million accounted for under the fair value option at December 31, 2016 and 2015.


⁽²⁾	Total commercial unfunded exposure includes loan commitments accounted for under the fair value option with a notional amount of $6.7 billion and $10.6 billion at December 31, 2016 and 2015.


⁽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 (e.g. syndicated or participated) to other financial institutions. The distributed amounts were $12.1 billion and $14.3 billion at December 31, 2016 and 2015.


⁽⁵⁾	Includes credit risk exposure associated with assets under operating lease arrangements of $5.7 billion and $6.0 billion at December 31, 2016 and 2015.

⁽⁶⁾

Derivative assets are carried at fair value, reflect the effects of legally enforceable master netting agreements and have been reduced by cash collateral of $43.3 billion and $41.9 billion at December 31, 2016 and 2015. Not reflected in utilized and committed exposure is additional non-cash derivative collateral held of $22.9 billion and $23.3 billion at December 31, 2016 and 2015, which consists primarily of other marketable securities.

Table 35 presents commercial utilized reservable criticized exposure by loan type. Criticized exposure corresponds to the Special Mention, Substandard and Doubtful asset categories as defined by regulatory authorities. Total commercial utilized reservable criticized exposure increased$424 million, or three

percent, in 2016 driven by downgrades, primarily related to our energy exposure, outpacing paydowns and upgrades. Approximately 76 percent and 78 percent of commercial utilized reservable criticized exposure was secured at December 31, 2016 and 2015.




Table 35	Commercial Utilized Reservable Criticized Exposure

		December 31
		2016				2015
(Dollars in millions)		Amount ⁽¹⁾		Percent ⁽²⁾		Amount ⁽¹⁾		Percent ⁽²⁾
U.S. commercial		$	10,311	3.46	%	$	9,965	3.56	%
Commercial real estate		399		0.68		513		0.87
Commercial lease financing		810		3.62		708		3.31
Non-U.S. commercial		3,974		4.17		3,944		4.04
		15,494		3.27		15,130		3.30
U.S. small business commercial		826		6.36		766		5.95
Total commercial utilized reservable criticized exposure		$	16,320	3.35		$	15,896	3.38


⁽¹⁾	Total commercial utilized reservable criticized exposure includes loans and leases of $14.9 billion and $14.5 billion and commercial letters of credit of $1.4 billion at December 31, 2016 and 2015.


⁽²⁾	Percentages are calculated as commercial utilized reservable criticized exposure divided by total commercial utilized reservable exposure for each exposure category.

U.S. Commercial

At December 31, 2016, 72 percent of the U.S. commercial loan portfolio, excluding small business, was managed in Global Banking, 16 percent in Global Markets, 10 percent in GWIM (generally business-purpose loans for high net worth clients) and the remainder primarily in Consumer Banking. U.S. commercial loans, excluding loans accounted for under the fair value option,

increased $17.6 billion, or seven percent, during 2016 due to growth across all of the commercial businesses. Energy exposure largely drove increases in reservable criticized balances of $346 million, or three percent, and nonperforming loans and leases of $389 million, or 45 percent, during 2016, as well as increases in net charge-offs of $45 million in 2016 compared to 2015.



68 Bank of America 2016

Commercial Real Estate

Commercial real estate primarily includes commercial loans and leases 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. The portfolio remains diversified across property types and geographic regions. California represented the largest state concentration at 23 percent and 21 percent of the commercial real estate loans and leases portfolio at December 31, 2016 and 2015. 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. Outstanding loans remained relatively unchanged with new originations slightly outpacing paydowns during 2016.

During 2016, 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.

Nonperforming commercial real estate loans and foreclosed properties decreased $22 million, or 20 percent, to $86 million and reservable criticized balances decreased $114 million, or 22 percent, to $399 million at December 31, 2016. The decrease in reservable criticized balances was primarily due to loan resolutions and strong commercial real estate fundamentals in most sectors. Net recoveries were $31 million and $5 million in 2016 and 2015.

Table 36 presents outstanding commercial real estate loans by geographic region, based on the geographic location of the collateral, and by property type.




Table 36	Outstanding Commercial Real Estate Loans

		December 31
(Dollars in millions)		2016		2015
By Geographic Region
California		$	13,450	$	12,063
Northeast		10,329		10,292
Southwest		7,567		7,789
Southeast		5,630		6,066
Midwest		4,380		3,780
Florida		3,213		3,330
Northwest		2,430		2,327
Illinois		2,408		2,536
Midsouth		2,346		2,435
Non-U.S.		3,103		3,549
Other ⁽¹⁾		2,499		3,032
Total outstanding commercial real estate loans		$	57,355	$	57,199
By Property Type
Non-residential
Office		$	16,643	$	15,246
Multi-family rental		8,817		8,956
Shopping centers/retail		8,794		8,594
Hotels / Motels		5,550		5,415
Industrial / Warehouse		5,357		5,501
Multi-Use		2,822		3,003
Unsecured		1,730		2,056
Land and land development		357		539
Other		5,595		5,791
Total non-residential		55,665		55,101
Residential		1,690		2,098
Total outstanding commercial real estate loans		$	57,355	$	57,199


⁽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.

At December 31, 2016, total committed non-residential exposure was $76.9 billion compared to $81.0 billion at December 31, 2015, of which $55.7 billion and $55.1 billion were funded loans. Non-residential nonperforming loans and foreclosed properties decreased $13 million, or 14 percent, to $81 million at December 31, 2016 due to decreases across most property types. The non-residential nonperforming loans and foreclosed properties represented 0.14 percent and 0.17 percent of total non-residential loans and foreclosed properties at December 31, 2016 and 2015. Non-residential utilized reservable criticized exposure decreased $105 million, or 21 percent, to $397 million at December 31, 2016 compared to $502 million at December 31, 2015, which represented 0.70 percent and 0.89 percent of non-

residential utilized reservable exposure. For the non-residential portfolio, net recoveries increased $24 million to $31 million in 2016 compared to 2015.

At December 31, 2016, total committed residential exposure was $3.7 billion compared to $4.1 billion at December 31, 2015, of which $1.7 billion and $2.1 billion were funded secured loans. The residential nonperforming loans and foreclosed properties decreased $8 million, or 57 percent, and residential utilized reservable criticized exposure decreased $8 million, or 73 percent, during 2016. The nonperforming loans, leases and foreclosed properties and the utilized reservable criticized ratios for the residential portfolio were 0.35 percent and 0.16 percent at



		Bank of America 201669

December 31, 2016 compared to 0.66 percent and 0.52 percent at December 31, 2015.

At December 31, 2016 and 2015, the commercial real estate loan portfolio included $6.8 billion and $7.6 billion of funded construction and land development loans that were originated to fund the construction and/or rehabilitation of commercial properties. Reservable criticized construction and land development loans totaled $107 million and $108 million, and nonperforming construction and land development loans and foreclosed properties totaled $44 million at both December 31, 2016 and 2015. During a property’s construction phase, interest income is typically paid from interest reserves that are established at the inception of the loan. As construction is completed and the property is put into service, these interest reserves are depleted and interest payments from operating cash flows begin. We do not recognize interest income on nonperforming loans regardless of the existence of an interest reserve.

Non-U.S. Commercial

At December 31, 2016, 77 percent of the non-U.S. commercial loan portfolio was managed in Global Banking and 23 percent in Global Markets. Outstanding loans, excluding loans accounted for under the fair value option, decreased $2.2 billion in 2016 primarily due to payoffs. Net charge-offs increased$66 million to $120 million in 2016 primarily due to higher energy sector related losses in the first half of 2016. For more information on the non-U.S. commercial portfolio, see Non-U.S. Portfolio on page 74.

U.S. Small Business Commercial

The U.S. small business commercial loan portfolio is comprised of small business card loans and small business loans managed in Consumer Banking. Credit card-related products were 48 percent and 45 percent of the U.S. small business commercial portfolio at December 31, 2016 and 2015. Net charge-offs decreased$17 million to $208 million in 2016 primarily driven by portfolio improvement. Of the U.S. small business commercial net charge-offs, 86 percent and 81 percent were credit card-related products in 2016 and 2015.

Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity

Table 37 presents the nonperforming commercial loans, leases and foreclosed properties activity during 2016 and 2015. Nonperforming loans do not include loans accounted for under the fair value option. During 2016, nonperforming commercial loans and leases increased$491 million to $1.7 billion primarily due to energy and metals and mining exposure. Approximately 77 percent of commercial nonperforming loans, leases and foreclosed properties were secured and approximately 66 percent were contractually current. Commercial nonperforming loans were carried at approximately 88 percent of their unpaid principal balance before consideration of the allowance for loan and lease losses as the carrying value of these loans has been reduced to the estimated property value less costs to sell.




Table 37	Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity ^{(1, 2)}

(Dollars in millions)		2016			2015
Nonperforming loans and leases, January 1		$	1,212		$	1,113
Additions to nonperforming loans and leases:
New nonperforming loans and leases		2,330			1,367
Advances		17			36
Reductions to nonperforming loans and leases:
Paydowns		(824		)	(491		)
Sales		(318		)	(108		)
Returns to performing status ⁽³⁾		(267		)	(130		)
Charge-offs		(434		)	(362		)
Transfers to foreclosed properties ⁽⁴⁾		(4		)	(213		)
Transfers to loans held-for-sale		(9		)	—
Total net additions to nonperforming loans and leases		491			99
Total nonperforming loans and leases, December 31		1,703			1,212
Foreclosed properties, January 1		15			67
Additions to foreclosed properties:
New foreclosed properties ⁽⁴⁾		24			207
Reductions to foreclosed properties:
Sales		(25		)	(256		)
Write-downs		—			(3		)
Total net reductions to foreclosed properties		(1		)	(52		)
Total foreclosed properties, December 31		14			15
Nonperforming commercial loans, leases and foreclosed properties, December 31		$	1,717		$	1,227
Nonperforming commercial loans and leases as a percentage of outstanding commercial loans and leases ⁽⁵⁾		0.38		%	0.28		%
Nonperforming commercial loans, leases and foreclosed properties as a percentage of outstanding commercial loans, leases and foreclosed properties ⁽⁵⁾		0.38			0.28


⁽¹⁾	Balances do not include nonperforming LHFS of $195 million and $220 million at December 31, 2016 and 2015.


⁽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⁾	New foreclosed properties represents transfers of nonperforming loans to foreclosed properties net of charge-offs recorded during the first 90 days after transfer of a loan to foreclosed properties.


⁽⁵⁾	Outstanding commercial loans exclude loans accounted for under the fair value option.



70 Bank of America 2016

Table 38 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 4 – Outstanding Loans and Leasesto the Consolidated Financial Statements.




Table 38	Commercial Troubled Debt Restructurings

		December 31
		2016						2015
(Dollars in millions)		Total		Nonperforming		Performing		Total		Nonperforming		Performing
U.S. commercial		$	1,860	$	720	$	1,140	$	1,225	$	394	$	831
Commercial real estate		140		45		95		118		27		91
Commercial lease financing		4		2		2		—		—		—
Non-U.S. commercial		308		25		283		363		136		227
		2,312		792		1,520		1,706		557		1,149
U.S. small business commercial		15		2		13		29		10		19
Total commercial troubled debt restructurings		$	2,327	$	794	$	1,533	$	1,735	$	567	$	1,168

Industry Concentrations

Table 39 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 credit exposure increased $8.6 billion, or one percent, in 2016 to $951.1 billion. Increases in commercial committed exposure were concentrated in healthcare equipment and services, telecommunication services, capital goods and consumer services, partially offset by lower exposure to technology hardware and equipment, banking, and food, beverage and tobacco.

Industry limits are used internally to manage industry concentrations and are based on committed exposures and capital usage that are allocated on an industry-by-industry basis. A risk management framework is in place to set and approve industry limits as well as to provide ongoing monitoring. The MRC overseas industry limit governance.

Diversified financials, our largest industry concentration with committed exposure of $124.5 billion, decreased $3.9 billion, or three percent, in 2016. The decrease was primarily due to a reduction in bridge financing exposure and other commitments.

Real estate, our second largest industry concentration with committed exposure of $83.7 billion, decreased $4.0 billion, or five percent, in 2016. For more information on the commercial real estate and related portfolios, see Commercial Portfolio Credit Risk Management – Commercial Real Estate on page 69.

Our energy-related committed exposure decreased $4.6 billion in 2016 to $39.2 billion. Within the higher risk sub-sectors of exploration and production and oil field services, total committed exposure declined $2.8 billion to $15.3 billion at December 31, 2016, or 39 percent of total committed energy exposure. Total utilized exposure to these sub-sectors declined approximately $1.7 billion to $6.7 billion in 2016. Of the total $5.7 billion of reservable utilized exposure to the higher risk sub-sectors, 56 percent was criticized at December 31, 2016. Energy sector net charge-offs increased $141 million to $241 million in 2016, and energy sector reservable criticized exposure increased $910 million in 2016 to $5.5 billion due to low oil prices which impacted the financial performance of energy clients. The energy allowance for credit losses increased $382 million in 2016 to $925 million primarily due to an increase in reserves for the higher risk sub-sectors.



		Bank of America 201671




Table 39	Commercial Credit Exposure by Industry ⁽¹⁾

		December 31
		Commercial Utilized				Total Commercial Committed ⁽²⁾
(Dollars in millions)		2016		2015		2016			2015
Diversified financials		$	81,156	$	79,496	$	124,535		$	128,436
Real estate ⁽³⁾		61,203		61,759		83,658			87,650
Retailing		41,630		37,675		68,507			63,975
Healthcare equipment and services		37,656		35,134		64,663			57,901
Capital goods		34,278		30,790		64,202			58,583
Government and public education		45,694		44,835		54,626			53,133
Banking		39,877		45,952		47,799			53,825
Materials		22,578		24,012		44,357			46,013
Consumer services		27,413		24,084		42,523			37,058
Energy		19,686		21,257		39,231			43,811
Food, beverage and tobacco		19,669		18,316		37,145			43,164
Commercial services and supplies		21,241		19,552		35,360			32,045
Transportation		19,805		19,369		27,483			27,371
Utilities		11,349		11,396		27,140			27,849
Media		13,419		12,833		27,116			24,194
Individuals and trusts		16,364		17,992		21,764			23,176
Software and services		7,991		6,617		19,790			18,362
Pharmaceuticals and biotechnology		5,539		6,302		18,910			16,472
Technology hardware and equipment		7,793		6,337		18,429			24,734
Telecommunication services		6,317		4,717		16,925			10,645
Insurance, including monolines		7,406		5,095		13,936			10,728
Automobiles and components		5,459		4,804		12,969			11,329
Consumer durables and apparel		6,042		6,053		11,460			11,165
Food and staples retailing		4,795		4,351		8,869			9,439
Religious and social organizations		4,423		4,526		6,252			5,929
Other		6,109		6,309		13,432			15,510
Total commercial credit exposure by industry		$	574,892	$	559,563	$	951,081		$	942,497
Net credit default protection purchased on total commitments ⁽⁴⁾						$	(3,477	)	$	(6,677	)


⁽¹⁾	Includes U.S. small business commercial exposure.


⁽²⁾	Includes the notional amount of unfunded legally binding lending commitments net of amounts distributed (e.g., syndicated or participated) to other financial institutions. The distributed amounts were $12.1 billion and $14.3 billion at December 31, 2016 and 2015.


⁽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 borrowers’ or counterparties’ primary business activity using operating cash flows and primary source of repayment as key factors.


⁽⁴⁾	Represents net notional credit protection purchased. For additional information, see Commercial Portfolio Credit Risk Management – Risk Mitigation below.

Risk Mitigation

We purchase credit protection to cover the funded portion as well as the unfunded portion of certain credit exposures. To lower the cost of obtaining our desired credit protection levels, we may add credit exposure within an industry, borrower or counterparty group by selling protection.

At December 31, 2016 and 2015, net notional credit default protection purchased in our credit derivatives portfolio to hedge our funded and unfunded exposures for which we elected the fair value option, as well as certain other credit exposures, was $3.5 billion and $6.7 billion. We recorded net losses of $438 million in 2016 compared to net gains of $150 million in 2015 on these positions. The gains and losses on these instruments were offset by gains and losses on the related exposures. The Value-at-Risk (VaR) results for these exposures are included in the fair value option portfolio information in Table 48. For additional information, see Trading Risk Management on page 80.

Tables 40 and 41 present the maturity profiles and the credit exposure debt ratings of the net credit default protection portfolio at December 31, 2016 and 2015.




Table 40	Net Credit Default Protection by Maturity

		December 31
		2016		2015
Less than or equal to one year		56	%	39	%
Greater than one year and less than or equal to five years		41		59
Greater than five years		3		2
Total net credit default protection		100	%	100	%



72 Bank of America 2016




Table 41	Net Credit Default Protection by Credit Exposure Debt Rating

		December 31
		2016					2015
(Dollars in millions)		Net Notional ⁽¹⁾			Percent of Total		Net Notional ⁽¹⁾			Percent of Total
Ratings ^{(2, 3)}
A		$	(135	)	3.9	%	$	(752	)	11.3	%
BBB		(1,884		)	54.2		(3,030		)	45.4
BB		(871		)	25.1		(2,090		)	31.3
B		(477		)	13.7		(634		)	9.5
CCC and below		(81		)	2.3		(139		)	2.1
NR ⁽⁴⁾		(29		)	0.8		(32		)	0.4
Total net credit default protection		$	(3,477	)	100.0	%	$	(6,677	)	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 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.

Table 42 presents the total contract/notional amount of credit derivatives outstanding and includes both purchased and written credit derivatives. The credit risk amounts are measured as net asset exposure by counterparty, taking into consideration all contracts with the counterparty. For more information on our written credit derivatives, see Note 2 – Derivativesto the Consolidated Financial Statements.

The credit risk amounts discussed above and presented in Table 42 take into consideration the effects of legally enforceable master netting agreements while amounts disclosed in Note 2 – Derivativesto the Consolidated Financial Statements are shown on a gross basis. Credit risk reflects the potential benefit from offsetting exposure to non-credit derivative products with the same counterparties that may be netted upon the occurrence of certain events, thereby reducing our overall exposure.




Table 42	Credit Derivatives

		December 31
		2016				2015
(Dollars in millions)		Contract/ Notional		Credit Risk		Contract/ Notional		Credit Risk
Purchased credit derivatives:
Credit default swaps		$	603,979	$	2,732	$	928,300	$	3,677
Total return swaps/other		21,165		433		26,427		1,596
Total purchased credit derivatives		$	625,144	$	3,165	$	954,727	$	5,273
Written credit derivatives:
Credit default swaps		$	614,355	n/a		$	924,143	n/a
Total return swaps/other		25,354		n/a		39,658		n/a
Total written credit derivatives		$	639,709	n/a		$	963,801	n/a

n/a = not applicable

Counterparty Credit Risk Valuation Adjustments

We record counterparty credit risk valuation adjustments on certain derivative assets, including our credit default protection purchased, in order to properly reflect the credit risk of the counterparty, as presented in Table 43. We calculate CVA based on a modeled expected exposure that incorporates current market risk factors including changes in market spreads and non-credit related market factors that affect the value of a derivative. The exposure also takes into consideration credit mitigants such as legally enforceable master netting agreements and collateral. For additional information, see Note 2 – Derivativesto the Consolidated Financial Statements.

We enter into risk management activities to offset market driven exposures. We often hedge the counterparty spread risk in CVA with credit default swaps (CDS). We hedge other market risks

in CVA primarily with currency 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.




Table 43	Credit Valuation Gains and Losses

Gains (Losses)		2016							2015
(Dollars in millions)		Gross		Hedge			Net		Gross		Hedge			Net
Credit valuation		$	374	$	(160	)	$	214	$	255	$	(28	)	$	227



		Bank of America 201673

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 44 presents our 20 largest non-U.S. country exposures. These exposures accounted for 88 percent and 86 percent of our total non-U.S. exposure at December 31, 2016 and 2015. Net country exposure for these 20 countries increased $6.5 billion in 2016 primarily driven by increases in Germany, and to a lesser extent Canada, France and Switzerland. On a product basis, the increase was driven by an increase in funded loans and loan equivalents in Germany and Canada, higher unfunded commitments in Germany and Switzerland, and an increase in securities in France and Canada.

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. The risk assignments by country can be adjusted for external guarantees and certain collateral types. Exposures that are subject to external guarantees are reported under the country of the guarantor. Exposures with tangible collateral are reflected in the country where the collateral is held. For securities received, other than cross-border resale agreements, outstandings are assigned to the domicile of the issuer of the securities.

Funded loans and loan equivalents include loans, leases, and other extensions of credit and funds, including letters of credit and due from placements, which have not been reduced by collateral, hedges or credit default protection. Funded loans and loan equivalents are reported net of charge-offs but prior to any allowance for loan and lease losses. 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 CDS, and secured financing transactions. Derivatives exposures are presented net of collateral, which is predominantly cash, pledged under legally enforceable master netting agreements. Secured financing transaction exposures are presented net of eligible cash or securities pledged as collateral.

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 (i.e., negative issuer exposures are reported as zero). Other investments include our GPI portfolio and strategic investments.

Net country exposure represents country exposure less hedges and credit default protection purchased, net of credit default protection sold. We hedge certain of our country exposures with credit default protection primarily in the form of single-name, as well as indexed and tranched CDS. The exposures associated with these hedges represent the amount that would be realized upon the isolated default of an individual issuer in the relevant country assuming a zero recovery rate for that individual issuer, and are calculated based on the CDS notional amount adjusted for any fair value receivable or payable. Changes in the assumption of an isolated default can produce different results in a particular tranche.




Table 44	Top 20 Non-U.S. Countries Exposure

(Dollars in millions)		Funded Loans and Loan Equivalents		Unfunded Loan Commitments		Net Counterparty Exposure		Securities/ Other Investments		Country Exposure at December 31 2016		Hedges and Credit Default Protection			Net Country Exposure at December 31 2016		Increase (Decrease) from December 31 2015
United Kingdom		$	29,329	$	13,105	$	6,145	$	3,823	$	52,402	$	(4,669	)	$	47,733	$	(5,513	)
Germany		13,202		8,648		1,979		2,579		26,408		(4,030		)	22,378		8,974
Canada		6,722		7,159		2,023		3,803		19,707		(933		)	18,774		4,042
Japan		12,065		652		2,448		1,597		16,762		(1,751		)	15,011		647
Brazil		9,118		389		780		3,646		13,933		(267		)	13,666		(1,984		)
China		9,230		722		714		949		11,615		(730		)	10,885		411
France		3,112		4,823		1,899		5,325		15,159		(4,465		)	10,694		2,008
Switzerland		4,050		5,999		499		507		11,055		(1,409		)	9,646		3,383
India		6,671		288		353		2,086		9,398		(170		)	9,228		(1,126		)
Australia		4,792		2,685		559		1,249		9,285		(362		)	8,923		(622		)
Hong Kong		6,425		156		441		520		7,542		(63		)	7,479		(110		)
Netherlands		3,537		2,496		559		2,296		8,888		(1,490		)	7,398		(236		)
South Korea		4,175		838		864		829		6,706		(600		)	6,106		(752		)
Singapore		2,633		199		699		1,937		5,468		(50		)	5,418		689
Mexico		2,817		1,391		187		430		4,825		(341		)	4,484		(570		)
Italy		2,329		1,036		577		1,246		5,188		(1,101		)	4,087		(1,221		)
United Arab Emirates		2,104		139		570		27		2,840		(97		)	2,743		(283		)
Turkey		2,695		50		69		58		2,872		(182		)	2,690		(450		)
Spain		1,818		614		173		894		3,499		(953		)	2,546		(517		)
Taiwan		1,417		33		341		317		2,108		(27		)	2,081		(294		)
Total top 20 non-U.S. countries exposure		$	128,241	$	51,422	$	21,879	$	34,118	$	235,660	$	(23,690	)	$	211,970	$	6,476



74 Bank of America 2016

Strengthening of the U.S. Dollar, weak commodity prices, signs of slowing growth in China, a protracted recession in Brazil and recent political events in Turkey are driving risk aversion in emerging markets. At December 31, 2016, net exposure to China was $10.9 billion, concentrated in large state-owned companies, subsidiaries of multinational corporations and commercial banks. At December 31, 2016, net exposure to Brazil was $13.7 billion, concentrated in sovereign securities, oil and gas companies and commercial banks. At December 31, 2016, net exposure to Turkey was $2.7 billion, concentrated in commercial banks.

The outlook for policy direction and therefore economic performance in the EU is uncertain as a consequence of reduced political cohesion and the lack of clarity following the U.K. Referendum to leave the EU. At December 31, 2016, net exposure to the U.K. was $47.7 billion, concentrated in multinational corporations and sovereign clients. For additional information, see

Executive Summary – 2016 Economic and Business Environment on page 21.

Table 45 presents countries where total cross-border exposure exceeded one percent of our total assets. At December 31, 2016, the U.K. and France were the only countries where total cross-border exposure exceeded one percent of our total assets. At December 31, 2016, Germany had total cross-border exposure of $18.4 billion representing 0.84 percent of our total assets. No other countries had total cross-border exposure that exceeded 0.75 percent of our total assets at December 31, 2016.

Cross-border exposure includes the components of Country Risk Exposure as detailed in Table 44 as well as the notional amount of cash loaned under secured financing agreements. Local exposure, defined as exposure booked in local offices of a respective country with clients in the same country, is excluded.




Table 45	Total Cross-border Exposure Exceeding One Percent of Total Assets

(Dollars in millions)		December 31	Public Sector		Banks		Private Sector		Cross-border Exposure		Exposure as a Percent of Total Assets
United Kingdom		2016	$	2,975	$	4,557	$	42,105	$	49,637	2.27	%
		2015	3,264		5,104		38,576		46,944		2.19
		2014	11		2,056		34,595		36,662		1.74
France		2016	4,956		1,205		23,193		29,354		1.34
		2015	3,343		1,766		17,099		22,208		1.04
		2014	4,479		2,631		14,368		21,478		1.02

Provision for Credit Losses

The provision for credit losses increased$436 million to $3.6 billion in 2016 compared to 2015. The provision for credit losses was $224 million lower than net charge-offs for 2016, resulting in a reduction in the allowance for credit losses. This compared to a reduction of $1.2 billion in the allowance for credit losses in 2015.

The provision for credit losses for the consumer portfolio increased $360 million to $2.6 billion in 2016 compared to 2015 due to a slower pace of credit quality improvement. Included in the provision is a benefit of $45 million related to the PCI loan portfolio for 2016 compared to a benefit of $40 million in 2015.

The provision for credit losses for the commercial portfolio, including unfunded lending commitments, increased $76 million to $1.0 billion in 2016 compared to 2015 driven by an increase in energy sector reserves in the first half of 2016 for the higher risk energy sub-sectors. While we experienced some deterioration in the energy sector in 2016, oil prices have stabilized which contributed to a modest improvement in energy-related exposure by year end.

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

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, small business credit card and unsecured consumer 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 and certain homogeneous commercial loan and lease products is based on aggregated portfolio evaluations, 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 and credit scores. 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 CLTV, and borrower credit score as well as vintage and geography, all of which are further broken down into



		Bank of America 201675

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, 2016, the loss forecast process resulted in reductions in the residential mortgage and home equity portfolios compared to December 31, 2015.

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, 2016, the allowance increased for the U.S. commercial and non-U.S. commercial portfolios compared to December 31, 2015.

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. We also consider factors that are applicable to unique portfolio segments. For example, we consider the risk of uncertainty in our loss forecasting models related to junior-lien home equity loans that are current, but have first-lien loans that we do not service that are 30 days or more past due. In addition, we consider the increased risk of default associated with our interest-only loans that have yet to enter the amortization period. Further, we consider the inherent uncertainty in mathematical models that are built upon historical data.

During 2016, the factors that impacted the allowance for loan and lease losses included improvements in the credit quality of the portfolios driven by continuing improvements in the U.S. economy and labor markets, proactive credit risk management initiatives and the impact of high credit quality originations. Evidencing the improvements in the U.S. economy and labor markets are growth in consumer spending, downward unemployment trends and increases in home prices. In addition to these improvements, in the consumer portfolio, loan sales, returns to performing status, paydowns and charge-offs continued to outpace new nonaccrual loans. During 2016, the allowance for loan and lease losses in the commercial portfolio reflected

increased coverage for the energy sector due to low oil prices which impacted the financial performance of energy clients and contributed to an increase in reservable criticized balances. While we experienced some deterioration in the energy sector in 2016, oil prices have stabilized which contributed to a modest improvement in energy-related exposure by year end.

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.

Additions to, or reductions of, the allowance for loan and lease losses generally are recorded through charges or credits to the provision for credit losses. Credit exposures deemed to be uncollectible are charged against the allowance for loan and lease losses. Recoveries of previously charged off amounts are credited to the allowance for loan and lease losses.

The allowance for loan and lease losses for the consumer portfolio, as presented in Table 47, was $6.2 billion at December 31, 2016, a decrease of $1.2 billion from December 31, 2015. The decrease was primarily in the home equity and residential mortgage portfolios. Reductions in the residential mortgage and home equity portfolios were due to improved home prices, lower nonperforming loans and a decrease in consumer loan balances, as well as write-offs in our PCI loan portfolio.

The allowance related to the U.S. credit card and unsecured consumer lending portfolios at December 31, 2016 remained relatively unchanged and in line with the level of delinquencies compared to December 31, 2015. For example, in the U.S. credit card portfolio, accruing loans 30 days or more past due remained relatively unchanged at $1.6 billion at December 31, 2016 (to 1.73 percent from 1.76 percent of outstanding U.S. credit card loans at December 31, 2015), while accruing loans 90 days or more past due decreased to $782 million at December 31, 2016 from $789 million (to 0.85 percent from 0.88 percent of outstanding U.S. credit card loans) at December 31, 2015. See Tables 20 and 21 for additional details on key credit statistics for the credit card and other unsecured consumer lending portfolios.

The allowance for loan and lease losses for the commercial portfolio, as presented in Table 47, was $5.3 billion at December 31, 2016, an increase of $409 million from December 31, 2015 driven by increased allowance coverage for the higher risk energy sub-sectors as a result of low oil prices. Commercial utilized reservable criticized exposure increased to $16.3 billion at December 31, 2016 from $15.9 billion (to 3.35 percent from 3.38 percent of total commercial utilized reservable exposure) at December 31, 2015, largely due to downgrades outpacing paydowns and upgrades in the energy portfolio. Nonperforming commercial loans increased to $1.7 billion at December 31, 2016 from $1.2 billion (to 0.38 percent from 0.28 percent of outstanding commercial loans excluding loans accounted for under the fair value option) at December 31, 2015 with the increase primarily in the energy and metals and mining sectors. Commercial loans and leases outstanding increased to $458.5 billion at December 31, 2016 from $440.8 billion at December 31, 2015. See Tables 32, 33 and 35 for additional details on key commercial credit statistics.

The allowance for loan and lease losses as a percentage of total loans and leases outstanding was 1.26 percent at December 31, 2016 compared to 1.37 percent at December 31, 2015. The decrease in the ratio was primarily due to improved



76 Bank of America 2016

credit quality in the consumer portfolios driven by improved economic conditions and write-offs in the PCI loan portfolio. The December 31, 2016 and 2015 ratios above include the PCI loan portfolio. Excluding the PCI loan portfolio, the allowance for loan and lease losses as a percentage of total loans and leases outstanding was 1.24 percent and 1.31 percent at December 31, 2016 and 2015.

Table 46 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 2016 and 2015.




Table 46	Allowance for Credit Losses

(Dollars in millions)		2016			2015
Allowance for loan and lease losses, January 1		$	12,234		$	14,419
Loans and leases charged off
Residential mortgage		(403		)	(866		)
Home equity		(752		)	(975		)
U.S. credit card		(2,691		)	(2,738		)
Non-U.S. credit card		(238		)	(275		)
Direct/Indirect consumer		(392		)	(383		)
Other consumer		(232		)	(224		)
Total consumer charge-offs		(4,708		)	(5,461		)
U.S. commercial ⁽¹⁾		(567		)	(536		)
Commercial real estate		(10		)	(30		)
Commercial lease financing		(30		)	(19		)
Non-U.S. commercial		(133		)	(59		)
Total commercial charge-offs		(740		)	(644		)
Total loans and leases charged off		(5,448		)	(6,105		)
Recoveries of loans and leases previously charged off
Residential mortgage		272			393
Home equity		347			339
U.S. credit card		422			424
Non-U.S. credit card		63			87
Direct/Indirect consumer		258			271
Other consumer		27			31
Total consumer recoveries		1,389			1,545
U.S. commercial ⁽²⁾		175			172
Commercial real estate		41			35
Commercial lease financing		9			10
Non-U.S. commercial		13			5
Total commercial recoveries		238			222
Total recoveries of loans and leases previously charged off		1,627			1,767
Net charge-offs		(3,821		)	(4,338		)
Write-offs of PCI loans		(340		)	(808		)
Provision for loan and lease losses		3,581			3,043
Other ⁽³⁾		(174		)	(82		)
Allowance for loan and lease losses, December 31		11,480			12,234
Less: Allowance included in assets of business held for sale ⁽⁴⁾		(243		)	—
Total allowance for loan and lease losses, December 31		11,237			12,234
Reserve for unfunded lending commitments, January 1		646			528
Provision for unfunded lending commitments		16			118
Other⁽³⁾		100			—
Reserve for unfunded lending commitments, December 31		762			646
Allowance for credit losses, December 31		$	11,999		$	12,880


⁽¹⁾	Includes U.S. small business commercial charge-offs of $253 million and $282 million in 2016 and 2015.


⁽²⁾	Includes U.S. small business commercial recoveries of $45 million and $57 million in 2016 and 2015.


⁽³⁾	Primarily represents the net impact of portfolio sales, consolidations and deconsolidations, foreign currency translation adjustments and certain other reclassifications.


⁽⁴⁾	Represents allowance related to the non-U.S. credit card loan portfolio, which is included in assets of business held for sale on the Consolidated Balance Sheet at December 31, 2016.



		Bank of America 201677




Table 46	Allowance for Credit Losses (continued)

(Dollars in millions)		2016			2015
Loan and allowance ratios ⁽⁵⁾:
Loans and leases outstanding at December 31 ⁽⁶⁾		$	908,812		$	890,045
Allowance for loan and lease losses as a percentage of total loans and leases outstanding at December 31 ⁽⁶⁾		1.26		%	1.37		%
Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases outstanding at December 31 ⁽⁷⁾		1.36			1.63
Commercial allowance for loan and lease losses as a percentage of total commercial loans and leases outstanding at December 31 ⁽⁸⁾		1.16			1.11
Average loans and leases outstanding ⁽⁶⁾		$	892,255		$	869,065
Net charge-offs as a percentage of average loans and leases outstanding ^{(6, 9)}		0.43		%	0.50		%
Net charge-offs and PCI write-offs as a percentage of average loans and leases outstanding ⁽⁶⁾		0.47			0.59
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases at December 31 ^{(6, 10)}		149			130
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs ⁽⁹⁾		3.00			2.82
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs and PCI write-offs		2.76			2.38
Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases at December 31 ⁽¹¹⁾		$	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^{(6, 11)}		98		%	82		%
Loan and allowance ratios excluding PCI loans and the related valuation allowance: ^{(5, 12)}
Allowance for loan and lease losses as a percentage of total loans and leases outstanding at December 31 ⁽⁶⁾		1.24		%	1.31		%
Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases outstanding at December 31 ⁽⁷⁾		1.31			1.50
Net charge-offs as a percentage of average loans and leases outstanding ⁽⁶⁾		0.44			0.51
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases at December 31 ^{(6, 10)}		144			122
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs		2.89			2.64


⁽⁵⁾	Loan and allowance ratios 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 are included in assets of business held for sale on the Consolidated Balance Sheet at December 31, 2016.


⁽⁶⁾	Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of $7.1 billion and $6.9 billion at December 31, 2016 and 2015. Average loans accounted for under the fair value option were $8.2 billion and $7.7 billion in 2016 and 2015.


⁽⁷⁾	Excludes consumer loans accounted for under the fair value option of $1.1 billion and $1.9 billion at December 31, 2016 and 2015.


⁽⁸⁾	Excludes commercial loans accounted for under the fair value option of $6.0 billion and $5.1 billion at December 31, 2016 and 2015.


⁽⁹⁾	Net charge-offs exclude $340 million and $808 million of write-offs in the PCI loan portfolio in 2016 and 2015. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 62.


⁽¹⁰⁾	For more information on our definition of nonperforming loans, see pages 64 and 70.


⁽¹¹⁾	Primarily includes amounts allocated to 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.


⁽¹²⁾	For more information on the PCI loan portfolio and the valuation allowance for PCI loans, see Note 4 – Outstanding Loans and Leases and Note 5 – Allowance for Credit Losses to the Consolidated Financial Statements.

For reporting purposes, we allocate the allowance for credit losses across products as presented in Table 47.




Table 47	Allocation of the Allowance for Credit Losses by Product Type

		December 31, 2016							December 31, 2015
(Dollars in millions)		Amount			Percent of Total		Percent of Loans and Leases Outstanding ⁽¹⁾		Amount		Percent of Total		Percent of Loans and Leases Outstanding ⁽¹⁾
Allowance for loan and lease losses
Residential mortgage		$	1,012		8.82	%	0.53	%	$	1,500	12.26	%	0.80	%
Home equity		1,738			15.14		2.62		2,414		19.73		3.18
U.S. credit card		2,934			25.56		3.18		2,927		23.93		3.27
Non-U.S. credit card		243			2.12		2.64		274		2.24		2.75
Direct/Indirect consumer		244			2.13		0.26		223		1.82		0.25
Other consumer		51			0.44		2.01		47		0.38		2.27
Total consumer		6,222			54.21		1.36		7,385		60.36		1.63
U.S. commercial ⁽²⁾		3,326			28.97		1.17		2,964		24.23		1.12
Commercial real estate		920			8.01		1.60		967		7.90		1.69
Commercial lease financing		138			1.20		0.62		164		1.34		0.77
Non-U.S. commercial		874			7.61		0.98		754		6.17		0.82
Total commercial ⁽³⁾		5,258			45.79		1.16		4,849		39.64		1.11
Allowance for loan and lease losses ⁽⁴⁾		11,480			100.00	%	1.26		12,234		100.00	%	1.37
Less: Allowance included in assets of business held for sale ⁽⁵⁾		(243		)					—
Total allowance for loan and lease losses		11,237							12,234
Reserve for unfunded lending commitments		762							646
Allowance for credit losses		$	11,999						$	12,880

⁽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 included residential mortgage loans of $710 million and $1.6 billion and home equity loans of $341 million and $250 million at December 31, 2016 and 2015. Commercial loans accounted for under the fair value option included U.S. commercial loans of $2.9 billion and $2.3 billion and non-U.S. commercial loans of $3.1 billion and $2.8 billion at December 31, 2016 and 2015.


⁽²⁾	Includes allowance for loan and lease losses for U.S. small business commercial loans of $416 million and $507 million at December 31, 2016 and 2015.


⁽³⁾	Includes allowance for loan and lease losses for impaired commercial loans of $273 million and $217 million at December 31, 2016 and 2015.


⁽⁴⁾	Includes $419 million and $804 million of valuation allowance presented with the allowance for loan and lease losses related to PCI loans at December 31, 2016 and 2015.


⁽⁵⁾	Represents allowance for loan and lease losses related to the non-U.S. credit card loan portfolio, which is included in assets of business held for sale on the Consolidated Balance Sheet at December 31, 2016.



78 Bank of America 2016

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 $762 million at December 31, 2016, an increase of $116 million from December 31, 2015. The increase was primarily attributable to increased coverage for the energy sector due to low oil prices which impacted the financial performance of energy clients.

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 additional information, see Interest Rate Risk Management for the Banking Book on page 84.

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 of Global Markets are monitored and governed by their respective governance functions.

Quantitative risk models, such as VaR, are an essential component in evaluating the market risks within a portfolio. 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 our risk framework and risk appetite, prevailing regulatory guidance and industry best practice. Models must meet certain validation criteria, including effective challenge of the model development process and a sufficient demonstration of developmental evidence incorporating a comparison of alternative theories and approaches. 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. In addition, the relevant stakeholders must agree on any required actions or restrictions to the models and maintain a stringent monitoring process for continued compliance.

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, 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. First, 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 (CDO) using mortgages as underlying collateral. Second, we originate a variety of MBS which involves the accumulation of mortgage-related loans in anticipation of eventual securitization. Third, we may hold positions in mortgage securities and residential mortgage loans as part of the ALM portfolio. Fourth, we create MSRs as part of our mortgage origination activities. For more information on MSRs, see Note 1 – Summary of Significant Accounting Principles and Note 23 – Mortgage Servicing Rights to



		Bank of America 201679

the Consolidated Financial Statements. 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 additional information, see Mortgage Banking Risk Management on page 86.

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 risk 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. This 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 relatively 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 they 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



80 Bank of America 2016

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 48 presents the total market-based trading portfolio VaR which is the combination of the covered positions trading portfolio and the impact from less liquid trading exposures. 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 we choose to exclude with prior regulatory approval. In addition, Table 48 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. The fair value option portfolio combined with the total market-based trading portfolio VaR represents our total market-based portfolio VaR. Additionally, market risk VaR for trading activities as presented in Table 48 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 48 include market risk to which we are exposed from all business segments, excluding CVA and DVA. The majority of this portfolio is within the Global Markets segment.

Table 48 presents year-end, average, high and low daily trading VaR for 2016 and 2015 using a 99 percent confidence level.




Table 48	Market Risk VaR for Trading Activities

		2016										2015
(Dollars in millions)		Year End			Average			High ⁽¹⁾		Low ⁽¹⁾		Year End			Average			High ⁽¹⁾		Low ⁽¹⁾
Foreign exchange		$	8		$	9		$	16	$	5	$	10		$	10		$	42	$	5
Interest rate		11			19			30		10		17			25			42		14
Credit		25			30			37		25		32			35			46		27
Equity		19			18			30		11		18			16			33		9
Commodity		4			6			12		3		4			5			8		3
Portfolio diversification		(39		)	(46		)	—		—		(36		)	(46		)	—		—
Total covered positions trading portfolio		28			36			50		24		45			45			66		26
Impact from less liquid exposures		6			5			—		—		3			8			—		—
Total market-based trading portfolio		34			41			58		28		48			53			74		31
Fair value option loans		14			23			40		12		35			26			36		17
Fair value option hedges		6			11			22		5		17			14			22		8
Fair value option portfolio diversification		(10		)	(21		)	—		—		(35		)	(26		)	—		—
Total fair value option portfolio		10			13			20		8		17			14			19		10
Portfolio diversification		(4		)	(6		)	—		—		(4		)	(6		)	—		—
Total market-based portfolio		$	40		$	48		$	70	$	32	$	61		$	61		$	85	$	41


⁽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, are not relevant.

The average total market-based trading portfolio VaR decreased during 2016 primarily due to reduced exposure to the interest rate and credit markets.



		Bank of America 201681

The graph below presents the daily total market-based trading portfolio VaR for 2016, corresponding to the data in Table 48.

Additional VaR statistics produced within our single VaR model are provided in Table 49 at the same level of detail as in Table 48. 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 49 presents average trading VaR statistics at 99 percent and 95 percent confidence levels for 2016 and 2015.




Table 49	Average Market Risk VaR for Trading Activities – 99 percent and 95 percent VaR Statistics

		2016						2015
(Dollars in millions)		99 percent			95 percent			99 percent			95 percent
Foreign exchange		$	9		$	5		$	10		$	6
Interest rate		19			12			25			15
Credit		30			18			35			20
Equity		18			11			16			9
Commodity		6			3			5			3
Portfolio diversification		(46		)	(30		)	(46		)	(31		)
Total covered positions trading portfolio		36			19			45			22
Impact from less liquid exposures		5			3			8			3
Total market-based trading portfolio		41			22			53			25
Fair value option loans		23			13			26			15
Fair value option hedges		11			8			14			9
Fair value option portfolio diversification		(21		)	(13		)	(26		)	(16		)
Total fair value option portfolio		13			8			14			8
Portfolio diversification		(6		)	(4		)	(6		)	(5		)
Total market-based portfolio		$	48		$	26		$	61		$	28

Backtesting

The accuracy of the VaR methodology is evaluated by backtesting, which compares the daily VaR results, utilizing a one-day holding period, against a comparable subset of trading revenue. 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 and 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 intraday trading revenues.

We conduct daily backtesting on our portfolios, ranging from the total market-based portfolio to individual trading areas. Additionally, 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.



82 Bank of America 2016

During 2016, there were no days in which there was a backtesting excess for our total market-based 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 (FVA) 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 20 – 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.

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 additional information, see Managing Risk on page 44.



		Bank of America 201683

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 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 and maturity characteristics. Our overall goal is to manage interest rate risk so that movements in interest rates do not significantly adversely affect earnings and capital.

Table 50 presents the spot and 12-month forward rates used in our baseline forecasts at December 31, 2016 and 2015.




Table 50	Forward Rates

		December 31, 2016
		Federal Funds		Three-month LIBOR		10-Year Swap
Spot rates		0.75	%	1.00	%	2.34	%
12-month forward rates		1.25		1.51		2.49

		December 31, 2015
Spot rates		0.50	%	0.61	%	2.19	%
12-month forward rates		1.00		1.22		2.39

Table 51 shows the pretax dollar impact to forecasted net interest income over the next 12 months from December 31, 2016 and 2015, 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 2016, the asset sensitivity of our balance sheet decreased primarily driven by higher long-end rates. We continue to be asset sensitive to a parallel move in interest rates with the majority of that benefit coming from the short end of the yield curve. Additionally, higher interest rates impact the fair value of debt securities and, accordingly, for debt securities classified as AFS, may adversely affect accumulated OCI and thus capital levels under the Basel 3 capital rules. Under instantaneous upward parallel shifts, the near-term adverse impact to Basel 3 capital is reduced over time by offsetting positive impacts to net interest income. For more information on the transition provisions of Basel 3, see Capital Management – Regulatory Capital on page 45.




Table 51	Estimated Banking Book Net Interest Income Sensitivity

(Dollars in millions)		Short Rate (bps)	Long Rate (bps)	December 31
Curve Change				2016			2015
Parallel Shifts
+100 bps instantaneous shift		+100	+100	$	3,370		$	3,606
-50 bps instantaneous shift		-50	-50	(2,900		)	(3,458		)
Flatteners
Short-end instantaneous change		+100	—	2,473			2,418
Long-end instantaneous change		—	-50	(961		)	(1,767		)
Steepeners
Short-end instantaneous change		-50	—	(1,918		)	(1,672		)
Long-end instantaneous change		—	+100	928			1,217

The sensitivity analysis in Table 51 assumes that we take no action in response to these rate shocks and does not assume any change in other macroeconomic variables normally correlated with changes in interest rates. As part of our ALM activities, we use securities, certain residential mortgages, and interest rate and foreign exchange derivatives in managing interest rate sensitivity.

The behavior of our deposit 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 51 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 2 – Derivativesto 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 during 2016 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.



84 Bank of America 2016

Table 52 presents derivatives utilized in our ALM activities including those designated as accounting and economic hedging instruments 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, 2016 and 2015. These amounts do not include derivative hedges on our MSRs.




Table 52	Asset and Liability Management Interest Rate and Foreign Exchange Contracts

					December 31, 2016
					Expected Maturity
(Dollars in millions, average estimated duration in years)		Fair Value			Total			2017			2018			2019			2020			2021			Thereafter			Average Estimated Duration
Receive-fixed interest rate swaps ⁽¹⁾		$	4,055																							4.81
Notional amount					$	118,603		$	21,453		$	25,788		$	10,283		$	7,515		$	5,307		$	48,257
Weighted-average fixed-rate					2.83		%	3.64		%	2.81		%	2.31		%	2.07		%	3.18		%	2.67		%
Pay-fixed interest rate swaps ⁽¹⁾		159																								2.77
Notional amount					$	22,400		$	1,527		$	9,168		$	2,072		$	7,975		$	213		$	1,445
Weighted-average fixed-rate					1.37		%	1.84		%	1.47		%	0.97		%	1.08		%	1.00		%	2.45		%
Same-currency basis swaps⁽²⁾		(26		)
Notional amount					$	59,274		$	20,775		$	11,027		$	6,784		$	1,180		$	2,799		$	16,709
Foreign exchange basis swaps ^{(1, 3, 4)}		(4,233		)
Notional amount					125,522			26,509			22,724			12,178			12,150			8,365			43,596
Option products ⁽⁵⁾		5
Notional amount ⁽⁶⁾					1,687			1,673			—			—			—			—			14
Foreign exchange contracts ^{(1, 4, 7)}		3,180
Notional amount ⁽⁶⁾					(20,285		)	(30,199		)	197			1,961			(8		)	881			6,883
Futures and forward rate contracts		19
Notional amount ⁽⁶⁾					37,896			37,896			—			—			—			—			—
Net ALM contracts		$	3,159

					December 31, 2015
					Expected Maturity
(Dollars in millions, average estimated duration in years)		Fair Value			Total			2016			2017			2018			2019			2020			Thereafter			Average Estimated Duration
Receive-fixed interest rate swaps ⁽¹⁾		$	6,291																							4.98
Notional amount					$	114,354		$	15,339		$	21,453		$	21,850		$	9,783		$	7,015		$	38,914
Weighted-average fixed-rate					3.12		%	3.12		%	3.64		%	3.20		%	2.37		%	2.13		%	3.16		%
Pay-fixed interest rate swaps ⁽¹⁾		(81		)																						3.98
Notional amount					$	12,131		$	1,025		$	1,527		$	5,668		$	600		$	51		$	3,260
Weighted-average fixed-rate					1.70		%	1.65		%	1.84		%	1.41		%	1.59		%	3.64		%	2.15		%
Same-currency basis swaps ⁽²⁾		(70		)
Notional amount					$	75,224		$	15,692		$	20,833		$	11,026		$	6,786		$	1,180		$	19,707
Foreign exchange basis swaps ^{(1, 3, 4)}		(3,968		)
Notional amount					144,446			25,762			27,441			19,319			12,226			10,572			49,126
Option products ⁽⁵⁾		57
Notional amount ⁽⁶⁾					752			737			—			—			—			—			15
Foreign exchange contracts ^{(1, 4, 7)}		2,345
Notional amount ⁽⁶⁾					(25,405		)	(36,504		)	5,380			(2,228		)	2,123			52			5,772
Futures and forward rate contracts		(5		)
Notional amount ⁽⁶⁾					200			200			—			—			—			—			—
Net ALM contracts		$	4,569


⁽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, 2016 and 2015, the notional amount of same-currency basis swaps included $59.3 billion and $75.2 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 option products of $1.7 billion at December 31, 2016 was comprised of $1.7 billion in foreign exchange options and $14 million in purchased caps/floors. Option products of $752 million at December 31, 2015 were comprised of $737 million in foreign exchange options and $15 million in purchased caps/floors.


⁽⁶⁾	Reflects the net of long and short positions. Amounts shown as negative reflect a net short position.

⁽⁷⁾



		Bank of America 201685

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 $1.4 billion and $1.7 billion, on a pretax basis, at December 31, 2016 and 2015. 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, 2016, the pretax net losses are expected to be reclassified into earnings as follows: $205 million, or 14 percent within the next year, 47 percent in years two through five, and 28 percent in years six through ten, with the remaining 11 percent thereafter. For more information on derivatives designated as cash flow hedges, see Note 2 – Derivativesto 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, 2016.

Mortgage Banking Risk Management

We originate, fund and service mortgage loans, which subject us to credit, liquidity and interest rate risks, among others. We determine whether loans will be held-for-investment or held-for-sale at the time of commitment and manage credit and liquidity risks by selling or securitizing a portion of the loans we originate.

Interest rate risk and market risk can be substantial in the mortgage business. Fluctuations in interest rates drive consumer demand for new mortgages and the level of refinancing activity which, in turn, affects total origination and servicing income. Hedging the various sources of interest rate risk in mortgage banking is a complex process that requires complex modeling and ongoing monitoring. Typically, an increase in mortgage interest rates will lead to a decrease in mortgage originations and related fees. IRLCs and the related residential first mortgage LHFS are subject to interest rate risk between the date of the IRLC and the date the loans are sold to the secondary market, as an increase in mortgage interest rates typically leads to a decrease in the value of these instruments.

MSRs are nonfinancial assets created when the underlying mortgage loan is sold to investors and we retain the right to service the loan. Typically, an increase in mortgage rates will lead to an increase in the value of the MSRs driven by lower prepayment expectations. This increase in value from increases in mortgage rates is opposite of, and therefore offsets, the risk described for IRLCs and LHFS. Because the interest rate risks of these two hedged items offset, we combine them into one overall hedged item with one combined economic hedge portfolio.

To hedge these combined assets, we use certain derivatives such as interest rate options, interest rate swaps, forward sale commitments, eurodollar and U.S. Treasury futures, and mortgage TBAs, as well as other securities including agency MBS, principal-only and interest-only MBS and U.S. Treasury securities. During 2016 and 2015, we recorded gains in mortgage banking income

of $366 million and $360 million related to the change in fair value of the derivative contracts and other securities used to hedge the market risks of the MSRs, IRLCs and LHFS, net of gains and losses due to changes in fair value of these hedged items. For more information on MSRs, see Note 23 – Mortgage Servicing Rights to the Consolidated Financial Statements and for more information on mortgage banking income, see Consumer Banking on page 30.

Compliance Risk Management

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, regulations and related self-regulatory organizations’ standards and codes of conduct (collectively, applicable laws, rules and regulations). Global Compliance independently assesses compliance risk, and evaluates FLUs and control functions for adherence to applicable laws, rules and regulations, including identifying compliance issues and risks, performing monitoring and independent testing, and reporting on the state of compliance activities across the Corporation. Additionally, Global Compliance works with FLUs and control functions so that day-to-day activities operate in a compliant manner.

The Corporation’s approach to the management of compliance risk is described in the Global Compliance – Enterprise Policy, which outlines the requirements of the Corporation’s global compliance program, and defines roles and responsibilities of FLUs, IRM and Corporate Audit, the three lines of defense in managing compliance risk. The requirements work together to drive a comprehensive risk-based approach for the proactive identification, management and escalation of compliance risks throughout the Corporation. For more information on FLUs and control functions, see Managing Risk on page 41.

The Global Compliance – Enterprise Policy also sets the requirements for reporting compliance risk information to executive management as well as the Board or appropriate Board-level committees in support of Global Compliance's responsibility for conducting independent oversight of the Corporation’s compliance risk management activities. The Board provides oversight of compliance risk through its Audit Committee and the ERC.

Operational Risk Management

The Corporation defines operational risk as the risk of loss resulting from inadequate or failed internal 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. Successful operational risk management is particularly important to diversified financial services companies because of the nature, volume and complexity of the financial services business. Operational risk is a significant component in the calculation of total risk-weighted assets used in the Basel 3 capital calculation under the Advanced approaches. For more information on Basel 3 Advanced approaches, see Capital Management on page 45.

We approach operational risk management from two perspectives within the structure of the Corporation: (1) at the enterprise level to provide independent, integrated management of operational risk across the organization, and (2) at the business and control function levels to address operational risk in revenue



86 Bank of America 2016

producing and non-revenue producing units. The Operational Risk Management Program addresses the overarching processes for identifying, measuring, monitoring and controlling operational risk, and reporting operational risk information to management and the Board. Our internal governance structure enhances the effectiveness of the Corporation’s Operational Risk Management Program and is administered at the enterprise level through formal oversight by the Board, the ERC, the CRO and a variety of management committees and risk oversight groups aligned to the Corporation’s overall risk governance framework and practices. Of these, the MRC oversees the Corporation’s policies and processes for operational risk management. The MRC also serves as an escalation point for critical operational risk matters within the Corporation. The MRC reports operational risk activities to the ERC. The independent operational risk management teams oversee the businesses and control functions to monitor adherence to the Operational Risk Management Program and advise and challenge operational risk exposures.

Within the Global Risk Management organization, the Corporate Operational Risk team develops and guides the strategies, enterprise-wide policies, practices, controls and monitoring tools for assessing and managing operational risks across the organization. The Corporate Operational Risk team reports results to businesses, control functions, senior management, management committees, the ERC and the Board.

The FLUs and control functions are responsible for assessing, monitoring and managing all the risks within their units, including operational risks. In addition to enterprise risk management tools such as loss reporting, scenario analysis and Risk and Control Self Assessments (RCSAs), operational risk executives, working in conjunction with senior business executives, have developed key tools to help identify, measure, monitor and control risk in each business and control function. Examples of these include personnel management practices; data management, data quality controls and related processes; fraud management units; cybersecurity controls, processes and systems; transaction processing, monitoring and analysis; business recovery planning; and new product introduction processes. The FLUs and control functions are also responsible for consistently implementing and monitoring adherence to corporate practices.

Among the key tools in the risk management process are the RCSAs. The RCSA process, consistent with identification, measurement, monitoring and control, is one of our primary methods for capturing the identification and assessment of operational risk exposures, including inherent and residual operational risk ratings, and control effectiveness ratings. The end-to-end RCSA process incorporates risk identification and assessment of the control environment; monitoring, reporting and escalating risk; quality assurance and data validation; and integration with the risk appetite. Key operational risk indicators have been developed and are used to assist in identifying trends and issues on an enterprise, business and control function level. This results in a comprehensive risk management view that enables understanding of and action on operational risks and controls for our processes, products, activities and systems.

Independent review and challenge to the Corporation’s overall operational risk management framework is performed by the Enterprise Independent Testing Team and reported through the operational risk governance committees and management routines.

Insurance maintained by the Corporation may mitigate the impact of operational losses. Certain insurance is purchased to

be in compliance with laws, regulations or legal requirements, and in conjunction with specific hedging strategies to reduce adverse financial impacts arising from operational losses.

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 through an inability to establish new or maintain existing customer/client relationships or otherwise impact relationships with key stakeholders, such as investors, regulators, employees and the community. 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. 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 key risk indicators are reported 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 in Note 1 – Summary of Significant Accounting Principlesto 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 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.



		Bank of America 201687

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 losses inherent in the Corporation’s loan portfolio excluding those loans accounted for under the fair value option. Our process for determining the allowance for credit losses is discussed in Note 1 – Summary of Significant Accounting Principlesto the Consolidated Financial Statements. We evaluate our allowance at the portfolio segment level and our portfolio segments are Consumer Real Estate, Credit Card and Other Consumer, and Commercial. Due to the variability in the drivers of the assumptions used in this process, estimates of the portfolio’s inherent risks and overall collectability change with changes in the economy, individual industries, countries, and borrowers’ ability and willingness to repay their obligations. The degree to which any particular assumption affects the allowance for credit losses depends on the severity of the change and its relationship to the other assumptions.

Key judgments used in determining the allowance for credit losses include risk ratings for pools of commercial loans and leases, market and collateral values and discount rates for individually evaluated loans, product type classifications for consumer and commercial loans and leases, loss rates used for consumer and commercial loans and leases, adjustments made to address current events and conditions, considerations regarding domestic and global economic uncertainty, and overall credit conditions.

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, excluding PCI loans, 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, 2016 would have increased by $51 million. PCI loans within our Consumer Real Estate portfolio segment are initially recorded at fair value. Applicable accounting guidance prohibits carry-over or creation of valuation allowances in the initial accounting. However, subsequent decreases in the expected cash flows from the date of acquisition result in a charge to the provision for credit losses and a corresponding increase to the allowance for loan and lease losses. We subject our PCI portfolio to stress scenarios to evaluate the potential impact given certain events. A one-percent decrease in the expected cash flows could result in a $127 million impairment of the portfolio. For each one-percent increase in the loss rates on loans collectively evaluated for impairment within our Credit Card and Other Consumer portfolio segment and U.S. small business commercial card portfolio, coupled with a one-percent decrease in the expected cash flows on those loans individually evaluated for impairment within the Credit Card and Other Consumer portfolio segment and the U.S. small business commercial card portfolio, the allowance for loan and lease losses at December 31, 2016 would have increased by $38 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 risk-rated Doubtful as defined by regulatory authorities, the allowance for loan and lease losses would have increased by $2.8 billion at December 31, 2016.

The allowance for loan and lease losses as a percentage of total loans and leases at December 31, 2016 was 1.26 percent and these hypothetical increases in the allowance would raise the ratio to 1.60 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.

For more information on the Financial Accounting Standards Board's (FASB) proposed standard on accounting for credit losses, see Note 1 – Summary of Significant Accounting Principlesto the Consolidated Financial Statements.

Fair Value of Financial Instruments

We are, under applicable accounting guidance, 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 based on the three-level fair value hierarchy in the guidance. We carry trading account assets and liabilities, derivative assets and liabilities, AFS debt and equity securities, other debt securities, consumer MSRs and certain other assets at fair value. Also, we account for certain loans and loan commitments, LHFS, short-term borrowings, securities financing agreements, asset-backed secured financings, long-term deposits and long-term debt under the fair value option.

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



88 Bank of America 2016

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. Similarly, broker quotes that are executable are given a higher level of reliance than indicative broker quotes, which are not executable. These processes and controls are performed independently of the business. For additional information, see Note 20 – Fair Value Measurements and Note 21 – Fair Value Optionto 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 guidance. Level 3 financial assets and liabilities include certain loans, MBS, ABS, CDOs, CLOs, structured liabilities and highly structured, complex or long-dated derivative contracts and MSRs. 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. Total recurring Level 3 assets were $14.5 billion, or 0.66 percent of total assets, and total recurring Level 3 liabilities were $7.2 billion, or 0.37 percent of total liabilities, at December 31, 2016 compared to $18.1 billion or 0.84 percent and $7.5 billion or 0.40 percent at December 31, 2015.

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. These transfers are considered to be effective as of the beginning of the quarter in which they occur. For more information on the significant transfers into and out of Level 3 during 2016 and 2015, see Note 20 – Fair Value Measurementsto 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.

See Note 19 – Income Taxesto the Consolidated Financial Statements for a table of significant tax attributes and additional information. For more information, see Item 1A. Risk Factors – Regulatory, Compliance and Legal.

Goodwill and Intangible Assets

Background

2016 Annual Goodwill Impairment Testing

Estimating the fair value of reporting units is a subjective process that involves the use of estimates and judgments, particularly related to cash flows, the appropriate discount rates and an applicable control premium. We determined the fair values of the reporting units using a combination of valuation techniques consistent with the market approach and the income approach and also utilized independent valuation specialists.

The market approach we used estimates the fair value of the individual reporting units by incorporating any combination of the book capital, tangible capital and earnings multiples from comparable publicly-traded companies in industries similar to the reporting unit. The relative weight assigned to these multiples varies among the reporting units based on qualitative and quantitative characteristics, primarily the size and relative profitability of the reporting unit as compared to the comparable publicly-traded companies. Since the fair values determined under the market approach are representative of a noncontrolling interest, we added a control premium to arrive at the reporting units’ estimated fair values on a controlling basis.

For purposes of the income approach, we calculated discounted cash flows by taking the net present value of estimated future cash flows and an appropriate terminal value. Our discounted cash flow analysis employs a capital asset pricing model in estimating the discount rate (i.e., cost of equity financing) for each reporting unit. The inputs to this model include the risk-free rate of return, beta, which is a measure of the level of non-diversifiable risk associated with comparable companies for each specific reporting unit, market equity risk premium and in certain cases an unsystematic (company-specific) risk factor. We use our internal forecasts to estimate future cash flows and actual results may differ from forecasted results.



		Bank of America 201689

We completed our annual goodwill impairment test as of June 30, 2016 for all of our reporting units that had goodwill. We also evaluated the non-U.S. consumer card business within All Other, as this business comprises substantially all of the goodwill included in All Other. To determine fair value, we utilized a combination of the market approach and the income approach. Under the market approach, we compared earnings and equity multiples of the individual reporting units to multiples of public companies comparable to the individual reporting units. The control premium used in the June 30, 2016 annual goodwill impairment test was 30 percent, based upon observed comparable premiums paid for change in control transactions for financial institutions, for all reporting units. Under the income approach, we updated our assumptions to reflect the current market environment. The discount rates used in the June 30, 2016 annual goodwill impairment test ranged from 8.9 percent to 12.7 percent depending on the relative risk of a reporting unit. Cumulative average growth rates developed by management for revenues and expenses in each reporting unit ranged from negative 3.2 percent to positive 5.9 percent.

Our market capitalization remained below our recorded book value during 2016. We do not believe that our current market capitalization reflects the aggregate fair value of our individual reporting units with assigned goodwill, as our market capitalization does not include consideration of individual reporting unit control premiums. Additionally, while the impact of recent regulatory changes has been considered in the reporting units' forecasts and valuations, overall regulatory and market uncertainties persist that we believe further impact our stock price.

Based on the results of step one of the annual goodwill impairment test, we determined that step two was not required for any of the reporting units as their fair value exceeded their carrying value indicating there was no impairment.

In 2015, we completed our annual goodwill impairment test as of June 30, 2015 for all of our reporting units that had goodwill. Based on the results of step one of the annual goodwill impairment test, we determined that step two was not required for any of the reporting units as their fair value exceeded their carrying value indicating there was no impairment.

~~Representations~~Managing Risk

Overview

Risk is inherent in all our business activities. Sound risk management enables us to serve our customers and ~~Warranties Liability~~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 ~~liability for representations~~seven key types of risk faced by the Corporation are strategic, credit, market, liquidity, compliance, operational and ~~warranties~~reputational risks.


●	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.


●	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 with the appropriate funding sources 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, regulations and related self-regulatory organizations’ standards and codes of conduct.


●	Operational risk is the risk of loss resulting from inadequate or failed internal 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 through an inability to establish new or maintain existing customer/client relationships or otherwise adversely impact relationships with key stakeholders, such as investors, regulators, employees and the community.

The following sections address in more detail the specific procedures, measures and ~~corporate guarantees is included in accrued expenses and other liabilities~~analyses of the major categories of risk. This discussion of managing risk focuses on the ~~Consolidated Balance Sheet~~current Risk Framework that, as part of its annual review process, was approved by the ERC and the ~~related provision~~Board.

As set forth in our Risk Framework, a culture of managing risk well is ~~included~~fundamental to our values and operating principles. It requires us to focus on risk in ~~mortgage banking income~~all activities and encourages the necessary mindset and behavior to enable effective risk management, and promotes sound risk-taking within our risk appetite. Sustaining a culture of managing risk well throughout the organization is critical to our success and is a clear expectation of our executive management team and the Board.



		Bank of America 201641

allocations and operating limits are regularly evaluated as part of our overall governance processes as the businesses and the economic environment in ~~the Consolidated Statement of Income.~~which we operate continue to evolve. For more information regarding capital allocations, see Business Segment Operations on page 29.

Our lines of business operate with risk limits (which may include credit, market and/or operational limits, as applicable) that are based on the ~~representations~~amount of capital, earnings or liquidity we are willing to put at risk to achieve our strategic objectives and ~~warranties liability~~business plans. 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, oversees financial performance, execution of the strategic and financial operating plans, adherence to risk appetite limits and the ~~corresponding estimated range~~adequacy of ~~possible loss,~~internal controls.

Risk Management Governance

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⁾ This presentation does not include committees for other legal entities.

⁽²⁾ Reports to the CEO and CFO with oversight by the Audit Committee.

Board of Directors and Board Committees

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

Enterprise Risk Committee

The ERC has primary responsibility for oversight of the Risk Framework and key risks we face. It approves the Risk Framework



42 Bank of America 2016

Other Board Committees

Management Committees

Lines of Defense

Executive Officers

Front Line Units

Independent Risk Management

Corporate Audit

Risk Management Processes

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



		Bank of America 201643

Corporation-wide Stress Testing

Contingency Planning

Strategic Risk Management



44 Bank of America 2016

Capital Management

We periodically review capital allocated to our businesses and allocate capital annually during the strategic and capital planning processes. For additional information, see ~~Off-Balance Sheet Arrangements and Contractual Obligations – Estimated Range of Possible Loss~~Business Segment Operations on page 4929.

CCAR and ~~Note 7 – Representations~~Capital Planning

The Federal Reserve requires BHCs to submit a capital plan and ~~Warranties Obligations~~requests for capital actions on an annual basis, consistent with the rules governing the CCAR capital plan.

In April 2016, we submitted our 2016 CCAR capital plan and ~~Corporate Guarantees~~related supervisory stress tests. The 2016 CCAR capital plan included requests: (i) to repurchase $5.0 billion of common stock

over four quarters beginning in the third quarter of 2016, (ii) to repurchase common stock to offset the dilution resulting from certain equity-based compensation awards, and (iii) to increase the quarterly common stock dividend from $0.05 per share to $0.075 per share. On June 29, 2016, following the Federal Reserve's non-objection to our 2016 CCAR capital plan, the Board authorized the common stock repurchase beginning July 1, 2016. Also, in addition to the ~~Consolidated Financial Statements.~~previously announced repurchases associated with the 2016 CCAR capital plan, on January 13, 2017, we announced a plan to repurchase an additional $1.8 billion of common stock during the first half of 2017, to which the Federal Reserve did not object. The common stock repurchase authorization includes both common stock and warrants.

AtDuring 2016, we repurchased approximately $5.1 billion of common stock pursuant to the Board’s authorization of our 2016 and 2015 CCAR capital plans and to offset equity-based compensation awards.

Regulatory Capital



		Bank of America 201645

Basel 3 Overview

Minimum Capital Requirements

Supplementary Leverage Ratio

Capital Composition and Ratios



46 Bank of America 2016




Table 10	Bank of America Corporation Regulatory Capital under Basel 3⁽¹⁾

		December 31, 2016
		Transition								Fully Phased-in
(Dollars in millions)		Standardized Approach			Advanced Approaches			Regulatory Minimum^{(2, 3)}		Standardized Approach			Advanced Approaches ⁽⁴⁾			Regulatory Minimum ⁽⁵⁾
Risk-based capital metrics:
Common equity tier 1 capital		$	168,866		$	168,866				$	162,729		$	162,729
Tier 1 capital		190,315			190,315					187,559			187,559
Total capital ⁽⁶⁾		228,187			218,981					223,130			213,924
Risk-weighted assets (in billions)		1,399			1,530					1,417			1,512
Common equity tier 1 capital ratio		12.1		%	11.0		%	5.875	%	11.5		%	10.8		%	9.5	%
Tier 1 capital ratio		13.6			12.4			7.375		13.2			12.4			11.0
Total capital ratio		16.3			14.3			9.375		15.8			14.2			13.0

Leverage-based metrics:
Adjusted quarterly average assets (in billions) ⁽⁷⁾		$	2,131		$	2,131				$	2,131		$	2,131
Tier 1 leverage ratio		8.9		%	8.9		%	4.0		8.8		%	8.8		%	4.0

SLR leverage exposure (in billions)													$	2,702
SLR													6.9		%	5.0

		December 31, 2015
Risk-based capital metrics:
Common equity tier 1 capital		$	163,026		$	163,026				$	154,084		$	154,084
Tier 1 capital		180,778			180,778					175,814			175,814
Total capital ⁽⁶⁾		220,676			210,912					211,167			201,403
Risk-weighted assets (in billions)		1,403			1,602					1,427			1,575
Common equity tier 1 capital ratio		11.6		%	10.2		%	4.5	%	10.8		%	9.8		%	9.5	%
Tier 1 capital ratio		12.9			11.3			6.0		12.3			11.2			11.0
Total capital ratio		15.7			13.2			8.0		14.8			12.8			13.0

Leverage-based metrics:
Adjusted quarterly average assets (in billions) ⁽⁷⁾		$	2,103		$	2,103				$	2,102		$	2,102
Tier 1 leverage ratio		8.6		%	8.6		%	4.0		8.4		%	8.4		%	4.0

SLR leverage exposure (in billions)													$	2,727
SLR													6.4		%	5.0


⁽¹⁾	As an Advanced approaches institution, we are required to report regulatory capital risk-weighted assets and ratios under both the Standardized and Advanced approaches. The approach that yields the lower ratio is to be used to assess capital adequacy and was the Advanced approaches method at December 31, 2016 and 2015.


⁽²⁾	The December 31, 2016 amount includes a transition capital conservation buffer of 0.625 percent and a transition G-SIB surcharge of 0.75 percent. The 2016 countercyclical capital buffer is zero.


⁽³⁾	To be “well capitalized” under the current U.S. banking regulatory agency definitions, we must maintain a Total capital ratio of 10 percent or greater.


⁽⁴⁾	Basel 3 fully phased-in Advanced approaches estimates assume approval by U.S. banking regulators of our internal analytical models, including approval of the internal models methodology (IMM). As of December 31, 2016, we did not have regulatory approval of the IMM model.


⁽⁵⁾	Fully phased-in regulatory minimums assume a capital conservation buffer of 2.5 percent and estimated G-SIB surcharge of 2.5 percent. The estimated fully phased-in countercyclical capital buffer is zero. We will be subject to fully phased-in regulatory minimums on January 1, 2019. The fully phased-in SLR minimum assumes a leverage buffer of 2.0 percent and is applicable on January 1, 2018.


⁽⁶⁾	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.


⁽⁷⁾	Reflects adjusted average total assets for the three months ended December 31, 2016 and 2015.

Common equity tier 1 capital under Basel 3 Advanced – Transition was $168.9 billion at December 31, 2016, an increase of $5.8 billion compared to December 31, 2015 and 2014, the liability for representations and warranties was $11.3 billion and $12.1 billion, which included $8.5 billion related to the BNY Mellon Settlement. The representations and warranties benefit was $39 million for 2015 compared to a provision of $683 million for 2014. The benefit in the provision for representations and warranties for 2015 compared to a provision in 2014 was primarily driven by earnings, partially offset by dividends, common stock repurchases and the impact of certain transition provisions under the ~~ACE decision.~~

Our liability for representations and warranties is necessarily dependent on, and limited by, a number of factors including for private-label securitizations the implied repurchase experience based on the BNY Mellon Settlement, as well as certain other assumptions and judgmental factors. Where relevant, we also consider more recent experience, such as claim activity, notification of potential indemnification obligations, our experience with various counterparties, the ACE decision, other recent court decisions related to the statute of limitations, and other facts and circumstances, such as bulk settlements, as we believe appropriate. Accordingly, future provisions associated with obligations under representations and warranties may be materially impacted if future experiences are different from historical experience or our understandings, interpretations or assumptions.Basel 3 rules. During 2016, Total capital increased $8.1 billion primarily

~~Experience with Investors Other than Government-sponsored Enterprises~~

Prior to 2009, legacy companies and certain subsidiaries sold pools of first-lien residential mortgage loans and home equity loans as private-label securitizations or in the form of whole loans to investors other than the GSEs (although the GSEs are investors in certain private-label securitizations). The majority of the loans sold were included in private-label securitizations, including third-party sponsored transactions. We provided representations and warranties to the whole-loan investors and these investors may retain those rights even when the whole loans were aggregated with other collateral into private-label securitizations sponsoreddriven by the ~~whole-loan investors. Such loans originated from~~ ~~2004~~ ~~through~~ ~~2008~~ ~~had an original principal balance~~same factors that drove the increase in Common equity tier 1 capital as well as issuances of ~~$970~~preferred stock and subordinated debt.

Risk-weighted assets decreased $72 billion~~, including $786~~ during 2016 to $1,530 billion ~~sold~~primarily due to ~~private-label~~lower market risk, and ~~whole-loan investors without monoline insurance. Taking into account settlements~~lower exposures and improved credit quality on legacy retail products.



		Bank of America 201647

Table 11 presents the application of the statute of limitations for repurchase claims for these trusts, we believe the remaining open exposure for repurchase claims exists on loans with an original principal balance of $102 billion. Of the $102 billion, $45 billion has been paid in full and $42 billion has defaulted or was severely delinquentcapital composition as measured under Basel 3 – Transition at December 31, 2016 and 2015. ~~At least 25 payments have been made on approximately 62~~




Table 11	Capital Composition under Basel 3 – Transition ^{(1, 2)}

		December 31
(Dollars in millions)		2016			2015
Total common shareholders’ equity		$	241,620		$	233,932
Goodwill		(69,191		)	(69,215		)
Deferred tax assets arising from net operating loss and tax credit carryforwards		(4,976		)	(3,434		)
Adjustments for amounts recorded in accumulated OCI attributed to defined benefit postretirement plans		1,392			1,774
Net unrealized (gains) losses on debt and equity securities and net (gains) losses on derivatives recorded in accumulated OCI, net-of-tax		1,402			1,220
Intangibles, other than mortgage servicing rights and goodwill		(1,198		)	(1,039		)
DVA related to liabilities and derivatives		413			204
Other		(596		)	(416		)
Common equity tier 1 capital		168,866			163,026
Qualifying preferred stock, net of issuance cost		25,220			22,273
Deferred tax assets arising from net operating loss and tax credit carryforwards		(3,318		)	(5,151		)
Trust preferred securities		—			1,430
Defined benefit pension fund assets		(341		)	(568		)
DVA related to liabilities and derivatives under transition		276			307
Other		(388		)	(539		)
Total Tier 1 capital		190,315			180,778
Long-term debt qualifying as Tier 2 capital		23,365			22,579
Eligible credit reserves included in Tier 2 capital		3,035			3,116
Nonqualifying capital instruments subject to phase out from Tier 2 capital		2,271			4,448
Other		(5		)	(9		)
Total Basel 3 Capital		$	218,981		$	210,912


⁽¹⁾	See Table 10, footnote 1.


⁽²⁾	Deductions from and adjustments to regulatory capital subject to transition provisions under Basel 3 are generally recognized in 20 percent annual increments, and will be fully recognized as of January 1, 2018. Any assets that are a direct deduction from the computation of capital are excluded from risk-weighted assets and adjusted average total assets.

Table 12 presents the components of these defaulted and severely delinquent loans. These remaining loans with open exposure predominantly relate to legacy Countrywide and First Franklin Financial Corporation originations of pay option and subprime first mortgages.

As it relates to private-label securitizations, a contractual liability to repurchase mortgage loans generally arises if there is a breach of representations and warranties that materially and adversely affects the interest of the investor or all the investors in a securitization trust or of the monoline insurer or other financial guarantor (as applicable).

We have received approximately $32.7 billion of representations and warranties repurchase claims related to loans originated between 2004 and 2008 including $23.7 billion from private-label securitization trustees and a financial guarantee provider, $8.2 billion from whole-loan investors and $816 million from one private-label securitization counterparty. New private-label claims are primarily related to repurchase requests received from trustees for private-label securitization transactions not included in the BNY Mellon Settlement. Of the $32.7 billion in claims, we have resolved ~~$16.0 billion~~ ~~of these claims with losses of~~ ~~$1.9 billion. Approximately~~ ~~$3.6 billion~~ ~~of these claims were resolved through repurchase or indemnification,~~ ~~$4.7 billion~~ ~~were rescinded by the investor, $325 million were resolved through settlements and $7.4 billion are time-barred~~our risk-weighted assets as measured under ~~the applicable statute of limitations and are therefore considered resolved.~~

At Basel 3 – Transition at December 31, ~~2015, for these vintages, the notional amount of unresolved repurchase claims submitted by private-label securitization trustees, whole-loan investors, including third-party securitization sponsors~~2016 and ~~others was~~ ~~$16.7 billion. We have performed an initial review with respect to substantially all of these claims and although we do~~2015.




Table 12	Risk-weighted assets under Basel 3 – Transition

		December 31
		2016				2015
(Dollars in billions)		Standardized Approach		Advanced Approaches		Standardized Approach		Advanced Approaches
Credit risk		$	1,334	$	903	$	1,314	$	940
Market risk		65		63		89		86
Operational risk		n/a		500		n/a		500
Risks related to CVA		n/a		64		n/a		76
Total risk-weighted assets		$	1,399	$	1,530	$	1,403	$	1,602

n/a = not believe a valid basis for repurchase has been established by the claimant, we consider such claims activity in the computation of our liability for representations and warranties. Until we receive a repurchase claim, we generally do not review loan files related to private-label securitizations and believe we are not required by the governing documents to do so, unless particular facts suggest we should review an individual loan file.applicable



48 Bank of America ~~2015~~2016




Table 13	Regulatory Capital Reconciliations between Basel 3 Transition to Fully Phased-in ⁽¹⁾

		December 31
(Dollars in millions)		2016			2015
Common equity tier 1 capital (transition)		$	168,866		$	163,026
Deferred tax assets arising from net operating loss and tax credit carryforwards phased in during transition		(3,318		)	(5,151		)
Accumulated OCI phased in during transition		(1,899		)	(1,917		)
Intangibles phased in during transition		(798		)	(1,559		)
Defined benefit pension fund assets phased in during transition		(341		)	(568		)
DVA related to liabilities and derivatives phased in during transition		276			307
Other adjustments and deductions phased in during transition		(57		)	(54		)
Common equity tier 1 capital (fully phased-in)		162,729			154,084
Additional Tier 1 capital (transition)		21,449			17,752
Deferred tax assets arising from net operating loss and tax credit carryforwards phased out during transition		3,318			5,151
Trust preferred securities phased out during transition		—			(1,430		)
Defined benefit pension fund assets phased out during transition		341			568
DVA related to liabilities and derivatives phased out during transition		(276		)	(307		)
Other transition adjustments to additional Tier 1 capital		(2		)	(4		)
Additional Tier 1 capital (fully phased-in)		24,830			21,730
Tier 1 capital (fully phased-in)		187,559			175,814
Tier 2 capital (transition)		28,666			30,134
Nonqualifying capital instruments phased out during transition		(2,271		)	(4,448		)
Other adjustments to Tier 2 capital		9,176			9,667
Tier 2 capital (fully phased-in)		35,571			35,353
Basel 3 Standardized approach Total capital (fully phased-in)		223,130			211,167
Change in Tier 2 qualifying allowance for credit losses		(9,206		)	(9,764		)
Basel 3 Advanced approaches Total capital (fully phased-in)		$	213,924		$	201,403

Risk-weighted assets – As reported to Basel 3 (fully phased-in)
Basel 3 Standardized approach risk-weighted assets as reported		$	1,399,477		$	1,403,293
Changes in risk-weighted assets from reported to fully phased-in		17,638			24,089
Basel 3 Standardized approach risk-weighted assets (fully phased-in)		$	1,417,115		$	1,427,382

Basel 3 Advanced approaches risk-weighted assets as reported		$	1,529,903		$	1,602,373
Changes in risk-weighted assets from reported to fully phased-in		(18,113		)	(27,690		)
Basel 3 Advanced approaches risk-weighted assets (fully phased-in) ⁽²⁾		$	1,511,790		$	1,574,683


⁽¹⁾	See Table 10, footnote 1.


⁽²⁾	Basel 3 fully phased-in Advanced approaches estimates assume approval by U.S. banking regulators of our internal analytical models, including approval of the IMM. As of December 31, 2016, we did not have regulatory approval for the IMM model.

~~Estimated Range~~



		Bank of America 201649

Bank of ~~Possible Loss~~America, N.A. Regulatory Capital




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

		December 31, 2016
		Standardized Approach						Advanced Approaches
(Dollars in millions)		Ratio		Amount		Minimum Required⁽¹⁾		Ratio		Amount		Minimum Required ⁽¹⁾
Common equity tier 1 capital		12.7	%	$	149,755	6.5	%	14.3	%	$	149,755	6.5	%
Tier 1 capital		12.7		149,755		8.0		14.3		149,755		8.0
Total capital		13.9		163,471		10.0		14.8		154,697		10.0
Tier 1 leverage		9.3		149,755		5.0		9.3		149,755		5.0

		December 31, 2015
Common equity tier 1 capital		12.2	%	$	144,869	6.5	%	13.1	%	$	144,869	6.5	%
Tier 1 capital		12.2		144,869		8.0		13.1		144,869		8.0
Total capital		13.5		159,871		10.0		13.6		150,624		10.0
Tier 1 leverage		9.2		144,869		5.0		9.2		144,869		5.0


⁽¹⁾	Percent required to meet guidelines to be considered “well capitalized” under the PCA framework.

Regulatory Developments

Minimum Total Loss-Absorbing Capacity

Revisions to Approaches for Measuring Risk-weighted Assets

Single-Counterparty Credit Limits

Capital Requirements for Swap Dealers

Broker-dealer Regulatory Capital and Securities Regulation



50 Bank of America 2016

merchants and are subject to the Commodity Futures Trading Commission Regulation 1.17.

Liquidity Risk

Funding and Liquidity Risk Management

Global Liquidity Sources and Other Unencumbered Assets



		Bank of America 201651

Our GLS were $499 billion and $504 billion at December 31, 2016 and 2015, and were as shown in Table 15.




Table 15	Global Liquidity Sources

		December 31				Average for Three Months Ended December 31 2016
(Dollars in billions)		2016		2015
Parent company and NB Holdings		$	76	$	96	$	77
Bank subsidiaries		372		361		389
Other regulated entities		51		47		49
Total Global Liquidity Sources		$	499	$	504	$	515

Table 16 presents the composition of GLS at December 31, 2016 and 2015.




Table 16	Global Liquidity Sources Composition

		December 31
(Dollars in billions)		2016		2015
Cash on deposit		$	106	$	119
U.S. Treasury securities		58		38
U.S. agency securities and mortgage-backed securities		318		327
Non-U.S. government and supranational securities		17		20
Total Global Liquidity Sources		$	499	$	504

Time-to-required Funding and Liquidity Stress Analysis



52 Bank of America 2016

Basel 3 Liquidity Standards

Basel 3 has two liquidity risk-related standards: the LCR and the Net Stable Funding Ratio (NSFR).

Diversified Funding Sources

company funding impractical, certain other subsidiaries may issue their own debt.

We ~~currently estimate~~fund a substantial portion of our lending activities through our deposits, which were $1.26 trillion and $1.20 trillion at December 31, 2016 and 2015. 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 GSEs, the FHA and private-label investors, as well as FHLB loans.

During 2016, we issued $35.6 billion of long-term debt, consisting of $27.5 billion for Bank of America Corporation, $1.0 billion for Bank of America, N.A. and $7.1 billion of other debt.

Table 17 presents our long-term debt by major currency at December 31, 2016 and 2015.




Table 17	Long-term Debt by Major Currency

		December 31
(Dollars in millions)		2016		2015
U.S. Dollar		$	172,082	$	190,381
Euro		28,236		29,797
British Pound		6,588		7,080
Japanese Yen		3,919		3,099
Australian Dollar		2,900		2,534
Canadian Dollar		1,049		1,428
Other		2,049		2,445
Total long-term debt		$	216,823	$	236,764



		Bank of America 201653

Contingency Planning

Credit Ratings

On January 24, 2017, Moody’s Investors Services, Inc. (Moody’s) improved its ratings outlook on the Corporation and its subsidiaries, including BANA, to positive from stable, based on the agency’s view that there is an increased likelihood that the ~~range~~Corporation’s profitability will strengthen on a sustainable basis over the next 12 to 18 months while the Corporation continues to adhere to its conservative risk profile, lowering its earnings volatility. The agency concurrently affirmed the current ratings of ~~possible~~the Corporation and its subsidiaries, which have not changed since the conclusion of the agency’s previous review of several global investment banking groups, including Bank of America, on May 28, 2015.



54 Bank of America 2016

On December 13, 2016, Fitch Ratings (Fitch) completed its latest semi-annual review of 12 large, complex securities trading and universal banks, including Bank of America. The agency affirmed the long-term and short-term senior debt ratings of Bank of America Corporation and Bank of America, N.A., and maintained stable outlooks on those ratings. Fitch concurrently revised the

outlooks for two of Bank of America’s material international operating subsidiaries, MLI and BAMLI, to stable from positive due to a delay in host country internal TLAC proposals.

Table 18 presents the current long-term/short-term senior debt ratings and outlooks expressed by the rating agencies.

Table 18

Senior Debt Ratings

Moody’s Investors Service

Standard & Poor’s Global Ratings

Fitch Ratings

Long-term

Short-term

Outlook

Long-term

Short-term

Outlook

Long-term

Short-term

Outlook

Bank of America Corporation

Baa1

P-2

Positive

BBB+

A-2

Stable

Bank of America, N.A.

P-1

Positive

A+

A-1

Stable

A+

Stable

Merrill Lynch, Pierce, Fenner & Smith

A+

A-1

Stable

A+

Stable

Merrill Lynch International

A+

A-1

Stable

NR = not rated

Common Stock Dividends

For a summary of our declared quarterly cash dividends on common stock during 2016 and through February 23, 2017, see Note 13 – Shareholders’ Equityto the Consolidated Financial Statements.

Credit Risk Management



		Bank of America 201655

Consumer Portfolio Credit Risk Management

Consumer Credit Portfolio

declined across nearly all consumer loan portfolios during 2016 as a result of improved delinquency trends.




Table 19	Consumer Loans and Leases

		December 31
		Outstandings				Purchased Credit-impaired Loan Portfolio
(Dollars in millions)		2016		2015		2016		2015
Residential mortgage ⁽¹⁾		$	191,797	$	187,911	$	10,127	$	12,066
Home equity		66,443		75,948		3,611		4,619
U.S. credit card		92,278		89,602		n/a		n/a
Non-U.S. credit card		9,214		9,975		n/a		n/a
Direct/Indirect consumer ⁽²⁾		94,089		88,795		n/a		n/a
Other consumer ⁽³⁾		2,499		2,067		n/a		n/a
Consumer loans excluding loans accounted for under the fair value option		456,320		454,298		13,738		16,685
Loans accounted for under the fair value option ⁽⁴⁾		1,051		1,871		n/a		n/a
Total consumer loans and leases ⁽⁵⁾		$	457,371	$	456,169	$	13,738	$	16,685


⁽¹⁾	Outstandings include pay option loans of $1.8 billion and $2.3 billion at December 31, 2016 and 2015. We no longer originate pay option loans.

⁽²⁾


⁽³⁾	Outstandings include consumer finance loans of $465 million and $564 million, consumer leases of $1.9 billion and $1.4 billion and consumer overdrafts of $157 million and $146 million at December 31, 2016 and 2015.


⁽⁴⁾	Consumer loans accounted for under the fair value option include residential mortgage loans of $710 million and $1.6 billion and home equity loans of $341 million and $250 million at December 31, 2016 and 2015. For more information on the fair value option, see Note 21 – Fair Value Optionto the Consolidated Financial Statements.


⁽⁵⁾	Includes $9.2 billion of non-U.S. credit card loans, which are included in assets of business held for sale on the Consolidated Balance Sheet at December 31, 2016.

n/a = not applicable



56 Bank of America 2016




Table 20	Consumer Credit Quality

		December 31
		Nonperforming						Accruing Past Due 90 Days or More
(Dollars in millions)		2016			2015			2016			2015
Residential mortgage ⁽¹⁾		$	3,056		$	4,803		$	4,793		$	7,150
Home equity		2,918			3,337			—			—
U.S. credit card		n/a			n/a			782			789
Non-U.S. credit card		n/a			n/a			66			76
Direct/Indirect consumer		28			24			34			39
Other consumer		2			1			4			3
Total ⁽²⁾		$	6,004		$	8,165		$	5,679		$	8,057
Consumer loans and leases as a percentage of outstanding consumer loans and leases ⁽²⁾		1.32		%	1.80		%	1.24		%	1.77		%
Consumer loans and leases as a percentage of outstanding loans and leases, excluding PCI and fully-insured loan portfolios ⁽²⁾		1.45			2.04			0.21			0.23


⁽¹⁾	Residential mortgage loans accruing past due 90 days or more are fully-insured loans. At December 31, 2016 and 2015, residential mortgage included $3.0 billion and $4.3 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 $1.8 billion and $2.9 billion of loans on which interest was still accruing.


⁽²⁾	Balances exclude consumer loans accounted for under the fair value option. At December 31, 2016 and 2015, $48 million and $293 million of loans accounted for under the fair value option were past due 90 days or more and not accruing interest.

n/a = not applicable

Table 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 ⁽¹⁾				Net Charge-off Ratios ^{(1, 2)}
(Dollars in millions)		2016		2015		2016		2015
Residential mortgage		$	131	$	473	0.07	%	0.24	%
Home equity		405		636		0.57		0.79
U.S. credit card		2,269		2,314		2.58		2.62
Non-U.S. credit card		175		188		1.83		1.86
Direct/Indirect consumer		134		112		0.15		0.13
Other consumer		205		193		8.95		9.96
Total		$	3,319	$	3,916	0.74		0.84


⁽¹⁾	Net charge-offs exclude write-offs in the PCI loan portfolio. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 62.


⁽²⁾	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.

Net charge-offs, as shown in Tables 21 and 22, exclude write-offs in the PCI loan portfolio of $144 million and $634 million in



		Bank of America 201657




Table 22	Consumer Real Estate Portfolio ⁽¹⁾

		December 31
		Outstandings				Nonperforming				Net Charge-offs ⁽²⁾
(Dollars in millions)		2016		2015		2016		2015		2016			2015
Core portfolio
Residential mortgage		$	156,497	$	141,795	$	1,274	$	1,825	$	(29	)	$	101
Home equity		49,373		54,917		969		974		113			163
Total core portfolio		205,870		196,712		2,243		2,799		84			264
Non-core portfolio
Residential mortgage		35,300		46,116		1,782		2,978		160			372
Home equity		17,070		21,031		1,949		2,363		292			473
Total non-core portfolio		52,370		67,147		3,731		5,341		452			845
Consumer real estate portfolio
Residential mortgage		191,797		187,911		3,056		4,803		131			473
Home equity		66,443		75,948		2,918		3,337		405			636
Total consumer real estate portfolio		$	258,240	$	263,859	$	5,974	$	8,140	$	536		$	1,109

						December 31
						Allowance for Loan and Lease Losses				Provision for Loan and Lease Losses
						2016		2015		2016			2015
Core portfolio
Residential mortgage						$	252	$	319	$	(98	)	$	(17	)
Home equity						560		664		10			(33		)
Total core portfolio						812		983		(88		)	(50		)
Non-core portfolio
Residential mortgage						760		1,181		(86		)	(277		)
Home equity						1,178		1,750		(84		)	257
Total non-core portfolio						1,938		2,931		(170		)	(20		)
Consumer real estate portfolio
Residential mortgage						1,012		1,500		(184		)	(294		)
Home equity						1,738		2,414		(74		)	224
Total consumer real estate portfolio						$	2,750	$	3,914	$	(258	)	$	(70	)

⁽¹⁾


⁽²⁾	Net charge-offs exclude write-offs in the PCI loan portfolio. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 62.

Residential Mortgage

The residential mortgage portfolio makes up the largest percentage of our consumer loan portfolio at 42 percent of consumer loans and leases at December 31, 2016. Approximately 36 percent of the residential mortgage portfolio is in All Other and is comprised of originated loans, purchased loans used in our overall ALM activities, delinquent FHA loans repurchased pursuant to our servicing agreements with GNMA as well as loans repurchased related to our representations and ~~warranties exposures could~~warranties. Approximately 34 percent of the residential mortgage portfolio is



58 Bank of America 2016

Table 23 presents certain residential mortgage key credit statistics on both a reported basis excluding loans accounted for under the fair value option, and excluding the PCI loan portfolio, our fully-insured loan portfolio and loans accounted for under the fair value option. Additionally, in the “Reported Basis” columns in the table below, accruing balances past due and nonperforming loans do not include the PCI loan portfolio, in accordance with our accounting policies, even though the customer may be upcontractually past due. As such, the following discussion presents the residential mortgage portfolio excluding the PCI loan portfolio, the fully-insured loan portfolio and loans accounted for under the fair value option. For more information on the PCI loan portfolio, see page 62.




Table 23	Residential Mortgage – Key Credit Statistics

		December 31
		Reported Basis ⁽¹⁾						Excluding Purchased Credit-impaired and Fully-insured Loans
(Dollars in millions)		2016			2015			2016			2015
Outstandings		$	191,797		$	187,911		$	152,941		$	138,768
Accruing past due 30 days or more		8,232			11,423			1,835			1,568
Accruing past due 90 days or more		4,793			7,150			—			—
Nonperforming loans		3,056			4,803			3,056			4,803
Percent of portfolio
Refreshed LTV greater than 90 but less than or equal to 100		5		%	7		%	3		%	5		%
Refreshed LTV greater than 100		4			8			3			4
Refreshed FICO below 620		9			13			4			6
2006 and 2007 vintages ⁽²⁾		13			17			12			17
Net charge-off ratio ⁽³⁾		0.07			0.24			0.09			0.35


⁽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 account for $931 million, or 31 percent, and $1.6 billion, or 34 percent, of nonperforming residential mortgage loans at December 31, 2016 and 2015. Additionally, these vintages accounted for net recoveries of $2 million in 2016 and net charge-offs of $136 million in 2015.


⁽³⁾	Net charge-off ratios are calculated as net charge-offs divided by average outstanding loans excluding loans accounted for under the fair value option.

Loans with a refreshed LTV greater than 100 percent represented three percent and four percent of the residential mortgage loan portfolio at December 31, 2016 and 2015. Of the

Of the $152.9 billion in total residential mortgage loans outstanding at December 31, 2016, as shown in Table 24, 37 percent were originated as interest-only loans. The outstanding balance of interest-only residential mortgage loans that have entered the amortization period was $11.0 billion, or 19 percent, at December 31, 2016. 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, 2016, $249 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 $21.8 billion ~~over existing accruals~~, or one percent for the entire residential mortgage portfolio. In addition, at December 31, 2016, $448 million, or four percent of outstanding interest-only residential



		Bank of America 201659

Table 24 presents outstandings, nonperforming loans and net charge-offs by certain state concentrations for the residential




Table 24	Residential Mortgage State Concentrations

		December 31
		Outstandings ⁽¹⁾				Nonperforming ⁽¹⁾				Net Charge-offs ⁽²⁾
(Dollars in millions)		2016		2015		2016		2015		2016			2015
California		$	58,295	$	48,865	$	554	$	977	$	(70	)	$	(49	)
New York ⁽³⁾		14,476		12,696		290		399		18			57
Florida ⁽³⁾		10,213		10,001		322		534		20			53
Texas		6,607		6,208		132		185		9			10
Massachusetts		5,344		4,799		77		118		3			8
Other U.S./Non-U.S.		58,006		56,199		1,681		2,590		151			394
Residential mortgage loans ⁽⁴⁾		$	152,941	$	138,768	$	3,056	$	4,803	$	131		$	473
Fully-insured loan portfolio		28,729		37,077
Purchased credit-impaired residential mortgage loan portfolio ⁽⁵⁾		10,127		12,066
Total residential mortgage loan portfolio		$	191,797	$	187,911


⁽¹⁾	Outstandings and nonperforming loans exclude loans accounted for under the fair value option.


⁽²⁾	Net charge-offs exclude $144 million of write-offs in the residential mortgage PCI loan portfolio in 2016 compared to $634 million in 2015. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 62.


⁽³⁾	In these states, foreclosure requires a court order following a legal proceeding (judicial states).


⁽⁴⁾	Amounts exclude the PCI residential mortgage and fully-insured loan portfolios.


⁽⁵⁾	At December 31, 2016 and 2015, 48 percent and 47 percent of PCI residential mortgage loans were in California. There were no other significant single state concentrations.

Home Equity

At December 31, 2016, the home equity portfolio made up 15 percent of the consumer portfolio and is comprised of home equity lines of credit (HELOCs), home equity loans and reverse mortgages.

At December 31, 2016, approximately 67 percent of the home equity portfolio was in Consumer Banking, 26 percent was in All Other and ~~do not consider such claims~~the remainder of the portfolio was primarily in GWIM. Outstanding balances in the ~~estimated range~~home equity portfolio, excluding loans accounted for under the fair value option, decreased$9.5 billion in 2016 primarily due to paydowns and charge-offs outpacing new originations and draws on existing lines. Of the total home equity portfolio at December 31, 2016 and 2015, $19.6 billion and $20.3 billion, or 29 percent and 27 percent, were in first-lien positions (31 percent and 28 percent excluding the PCI home equity portfolio). At December 31, 2016, 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 $10.9 billion, or 17 percent of possible loss. The estimated range of possible loss reflects principally exposures related to loans in private-label securitization trusts. It represents a reasonably possible loss, but does not represent a probable loss, and is based on currently available information, significant judgment and a number of assumptions that are subject to change.our total home equity portfolio excluding the PCI loan portfolio.



60 Bank of America 2016




Table 25	Home Equity – Key Credit Statistics

		December 31
		Reported Basis ⁽¹⁾						Excluding Purchased Credit-impaired Loans
(Dollars in millions)		2016			2015			2016			2015
Outstandings		$	66,443		$	75,948		$	62,832		$	71,329
Accruing past due 30 days or more ⁽²⁾		566			613			566			613
Nonperforming loans ⁽²⁾		2,918			3,337			2,918			3,337
Percent of portfolio
Refreshed CLTV greater than 90 but less than or equal to 100		5		%	6		%	4		%	6		%
Refreshed CLTV greater than 100		8			12			7			11
Refreshed FICO below 620		7			7			6			7
2006 and 2007 vintages ⁽³⁾		37			43			34			41
Net charge-off ratio ⁽⁴⁾		0.57			0.79			0.60			0.84


⁽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 includes $81 million and $89 million and nonperforming loans include $340 million and $396 million of loans where we serviced the underlying first-lien at December 31, 2016 and 2015.


⁽³⁾	These vintages of loans have higher refreshed combined LTV ratios and accounted for 50 percent and 45 percent of nonperforming home equity loans at December 31, 2016 and 2015, and 54 percent of net charge-offs in both 2016 and 2015.


⁽⁴⁾	Net charge-off ratios are calculated as net charge-offs divided by average outstanding loans excluding loans accounted for under the fair value option.

In some cases, the junior-lien home equity outstanding balance that we hold is performing, but the underlying first-lien is not. For outstanding balances in the home equity portfolio on which we service the first-lien loan, we are able to track whether the first-lien loan is in default. For loans where the first-lien is serviced by a third party, we utilize credit bureau data to estimate the ~~representations~~delinquency status of the first-lien. Given that the credit bureau database we use does not include a property address for the mortgages, we are unable to identify with certainty whether a reported delinquent first-lien mortgage pertains to the same property for which we hold a junior-lien loan. For certain loans, we utilize a third-party vendor to combine credit bureau and ~~warranties liability,~~public record data to better link a junior-lien loan with the ~~corresponding estimated range~~underlying first-lien mortgage. At December 31, 2016, we estimate that $1.0 billion of ~~possible loss~~current and $149 million of 30 to 89 days past due junior-lien loans were behind a delinquent first-lien loan. We service the first-lien loans on $190 million of these combined amounts, with the remaining $980 million serviced by third parties. Of the $1.2 billion of current to 89 days past due junior-lien loans, based on available credit bureau data and our own internal servicing data,

we estimate that approximately $428 million had first-lien loans that were 90 days or more past due.

Net charge-offs decreased$231 million to $405 million in 2016, compared to $636 million in 2015 driven by favorable portfolio trends due in part to improvement in home prices and the ~~types~~U.S. economy. Additionally, the decrease in net charge-offs was partly attributable to charge-offs of ~~losses~~$75 million related to the consumer relief portion of the settlement with the DoJ in 2015.



		Bank of America 201661

Although we do not ~~considered in such estimates, see Item 1A. Risk Factors~~actively track how many of our home equity customers pay only the minimum amount due on their home equity loans and lines, we can infer some of this ~~Annual Report~~information through a review of our HELOC portfolio that we service and that is still in its revolving period (i.e., customers may draw on ~~Form 10-K~~and repay their line of credit, but are generally only required to pay interest on a

monthly basis). During 2016, approximately 34 percent of these customers with an outstanding balance did not pay any principal on their HELOCs.




Table 26	Home Equity State Concentrations

		December 31
		Outstandings ⁽¹⁾				Nonperforming ⁽¹⁾				Net Charge-offs ⁽²⁾
(Dollars in millions)		2016		2015		2016		2015		2016		2015
California		$	17,563	$	20,356	$	829	$	902	$	7	$	57
Florida ⁽³⁾		7,319		8,474		442		518		76		128
New Jersey ⁽³⁾		5,102		5,570		201		230		50		51
New York ⁽³⁾		4,720		5,249		271		316		45		61
Massachusetts		3,078		3,378		100		115		12		17
Other U.S./Non-U.S.		25,050		28,302		1,075		1,256		215		322
Home equity loans ⁽⁴⁾		$	62,832	$	71,329	$	2,918	$	3,337	$	405	$	636
Purchased credit-impaired home equity portfolio ⁽⁵⁾		3,611		4,619
Total home equity loan portfolio		$	66,443	$	75,948


⁽¹⁾	Outstandings and nonperforming loans exclude loans accounted for under the fair value option.


⁽²⁾	Net charge-offs exclude $196 million of write-offs in the home equity PCI loan portfolio in 2016 compared to $174 million in 2015. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 62.


⁽³⁾	In these states, foreclosure requires a court order following a legal proceeding (judicial states).


⁽⁴⁾	Amount excludes the PCI home equity portfolio.


⁽⁵⁾	At both December 31, 2016 and 2015, 29 percent of PCI home equity loans were in California. There were no other significant single state concentrations.

Purchased Credit-impaired Loan Portfolio

Accounting Principles and Note 74 – ~~Representations~~Outstanding Loans and ~~Warranties Obligations~~Leases to the Consolidated Financial Statements.

Table 27 presents the unpaid principal balance, carrying value, related valuation allowance and ~~Corporate Guarantees~~the net carrying value as a percentage of the unpaid principal balance for the PCI loan portfolio.




Table 27	Purchased Credit-impaired Loan Portfolio

		December 31, 2016
(Dollars in millions)		Unpaid Principal Balance		Gross Carrying Value		Related Valuation Allowance		Carrying Value Net of Valuation Allowance		Percent of Unpaid Principal Balance
Residential mortgage ⁽¹⁾		$	10,330	$	10,127	$	169	$	9,958	96.40	%
Home equity		3,689		3,611		250		3,361		91.11
Total purchased credit-impaired loan portfolio		$	14,019	$	13,738	$	419	$	13,319	95.01

		December 31, 2015
Residential mortgage		$	12,350	$	12,066	$	338	$	11,728	94.96	%
Home equity		4,650		4,619		466		4,153		89.31
Total purchased credit-impaired loan portfolio		$	17,000	$	16,685	$	804	$	15,881	93.42

⁽¹⁾

The total PCI unpaid principal balance decreased $3.0 billion, or 18 percent, in 2016 primarily driven by payoffs, sales, paydowns

and write-offs. During 2016, we sold PCI loans with a carrying value of $549 million compared to sales of $1.4 billion in 2015.



62 Bank of America 2016

The PCI home equity portfolio represented 26 percent of the total PCI loan portfolio at December 31, 2016. Those loans with

U.S. Credit Card

Table 28 presents certain state concentrations for the U.S. credit card portfolio.




Table 28	U.S. Credit Card State Concentrations

		December 31
		Outstandings				Accruing Past Due 90 Days or More				Net Charge-offs
(Dollars in millions)		2016		2015		2016		2015		2016		2015
California		$	14,251	$	13,658	$	115	$	115	$	360	$	358
Florida		7,864		7,420		85		81		245		244
Texas		7,037		6,620		65		58		164		157
New York		5,683		5,547		60		57		161		162
Washington		4,128		3,907		18		19		56		59
Other U.S.		53,315		52,450		439		459		1,283		1,334
Total U.S. credit card portfolio		$	92,278	$	89,602	$	782	$	789	$	2,269	$	2,314

Non-U.S. Credit Card

consumer credit card business, see Recent Events on page 21 and Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements.

Direct/Indirect Consumer

Outstandings in the direct/indirect portfolio increased $5.3 billion in 2016 primarily driven by the consumer auto loan portfolio.

Table 29 presents certain state concentrations for the direct/indirect consumer loan portfolio.



		Bank of America 201663




Table 29	Direct/Indirect State Concentrations

		December 31
		Outstandings				Accruing Past Due 90 Days or More				Net Charge-offs
(Dollars in millions)		2016		2015		2016		2015		2016		2015
California		$	11,300	$	10,735	$	3	$	3	$	13	$	8
Florida		9,418		8,835		3		3		29		20
Texas		9,406		8,514		5		4		21		17
New York		5,253		5,077		1		1		3		3
Georgia		3,255		2,869		4		4		9		7
Other U.S./Non-U.S.		55,457		52,765		18		24		59		57
Total direct/indirect loan portfolio		$	94,089	$	88,795	$	34	$	39	$	134	$	112

Other Consumer

Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity



64 Bank of America 2016




Table 30	Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity⁽¹⁾

(Dollars in millions)		2016			2015
Nonperforming loans and leases, January 1		$	8,165		$	10,819
Additions to nonperforming loans and leases:
New nonperforming loans and leases		3,492			4,949
Reductions to nonperforming loans and leases:
Paydowns and payoffs		(795		)	(1,018		)
Sales		(1,604		)	(1,674		)
Returns to performing status ⁽²⁾		(1,628		)	(2,710		)
Charge-offs		(1,277		)	(1,769		)
Transfers to foreclosed properties ⁽³⁾		(294		)	(432		)
Transfers to loans held-for-sale		(55		)	—
Total net reductions to nonperforming loans and leases		(2,161		)	(2,654		)
Total nonperforming loans and leases, December 31 ⁽⁴⁾		6,004			8,165
Foreclosed properties, January 1		444			630
Additions to foreclosed properties:
New foreclosed properties ⁽³⁾		431			606
Reductions to foreclosed properties:
Sales		(443		)	(686		)
Write-downs		(69		)	(106		)
Total net reductions to foreclosed properties		(81		)	(186		)
Total foreclosed properties, December 31 ⁽⁵⁾		363			444
Nonperforming consumer loans, leases and foreclosed properties, December 31		$	6,367		$	8,609
Nonperforming consumer loans and leases as a percentage of outstanding consumer loans and leases ⁽⁶⁾		1.32		%	1.80		%
Nonperforming consumer loans, leases and foreclosed properties as a percentage of outstanding consumer loans, leases and foreclosed properties ⁽⁶⁾		1.39			1.89


⁽¹⁾	Balances do not include nonperforming LHFS of $69 million and $5 million and nonaccruing TDRs removed from the PCI loan portfolio prior to January 1, 2010 of $27 million and $38 million at December 31, 2016 and 2015 as well as loans accruing past due 90 days or more as presented in Table 20 and Note 4 – Outstanding Loans and Leasesto the Consolidated Financial Statements.


⁽²⁾	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.

⁽³⁾


⁽⁴⁾	At December 31, 2016, 36 percent of nonperforming loans were 180 days or more past due.


⁽⁵⁾	Foreclosed property balances do not include properties insured by certain government-guaranteed loans, principally FHA-insured loans, of $1.2 billion and $1.4 billion at December 31, 2016 and 2015.


⁽⁶⁾	Outstanding consumer loans and leases exclude loans accounted for under the fair value option.



		Bank of America 201665

Table 31 presents TDRs for the consumer real estate portfolio. Performing TDR balances are excluded from nonperforming loans and leases in Table 30.




Table 31	Consumer Real Estate Troubled Debt Restructurings

		December 31
		2016						2015
(Dollars in millions)		Total		Nonperforming		Performing		Total		Nonperforming		Performing
Residential mortgage ^{(1, 2)}		$	12,631	$	1,992	$	10,639	$	18,372	$	3,284	$	15,088
Home equity ⁽³⁾		2,777		1,566		1,211		2,686		1,649		1,037
Total consumer real estate troubled debt restructurings		$	15,408	$	3,558	$	11,850	$	21,058	$	4,933	$	16,125


⁽¹⁾	Residential mortgage TDRs deemed collateral dependent totaled $3.5 billion and $4.9 billion, and included $1.6 billion and $2.7 billion of loans classified as nonperforming and $1.9 billion and $2.2 billion of loans classified as performing at December 31, 2016 and 2015.


⁽²⁾	Residential mortgage performing TDRs included $5.3 billion and $8.7 billion of loans that were fully-insured at December 31, 2016 and 2015.


⁽³⁾	Home equity TDRs deemed collateral dependent totaled $1.6 billion and $1.6 billion, and included $1.3 billion and $1.3 billion of loans classified as nonperforming and $301 million and $290 million of loans classified as performing at December 31, 2016 and 2015.

Commercial Portfolio Credit Risk Management

Credit risk management for ~~more information related to~~ the ~~sensitivity~~commercial portfolio begins with an assessment of the ~~assumptions used to estimate our liability for representations and warranties, see Complex Accounting Estimates – Representations and Warranties Liability~~credit risk profile of the borrower or counterparty based on ~~page~~ ~~104.~~

~~Department~~an analysis of ~~Justice Settlement~~

~~On August 20, 2014, we reached a comprehensive settlement with the DoJ and certain federal and state agencies (DoJ Settlement).~~its financial position. As part of the ~~DoJ Settlement, we paid civil monetary penalties~~overall credit risk assessment, our commercial credit exposures are assigned a risk rating and compensatory remediation payments in 2014. In 2014 and 2015, we provided creditable consumer relief activities primarily in the form of mortgage modifications, including first-lien principal forgiveness and forbearance modifications and second- and junior-lien extinguishments, low- to moderate-income mortgage originations, and community reinvestment and neighborhood stabilization efforts, with initiatives focused on communities experiencing, or at risk of, blight. Also, we have provided support for the expansion of available affordable rental housing. Our actions are well ahead of the DoJ agreement calling for us to complete delivery of the consumer relief by no later than August 31, 2018. The consumer relief requirements are subject to ~~oversight by~~approval based on defined credit approval standards. Subsequent to loan origination, risk ratings are monitored on an ~~independent monitor.~~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. Our business and risk management personnel 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

~~Other Mortgage-related Matters~~

portfolios. In addition, risk ratings are a factor in determining the level of allocated capital and the allowance for credit losses.

~~We continue~~As part of our ongoing risk mitigation initiatives, we attempt to ~~be subject~~work with clients experiencing financial difficulty to ~~additional borrower and non-borrower litigation and governmental and regulatory scrutiny and investigations related~~modify their loans to ~~our past and~~terms that better align with their current origination, servicing, transfer of servicing and servicing rights, servicing compliance obligations, foreclosure activities, and MI and captive reinsurance practices with mortgage insurers. The ongoing environment of additional regulation, increased regulatory compliance obligations, and enhanced regulatory enforcement, combined with ongoing uncertainty related to the continuing evolution of the regulatory environment, has resulted in increased operational and compliance costs and may limit our ability to ~~continue providing certain products and services.~~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 ~~management’s estimate~~our accounting policies regarding delinquencies, nonperforming status and net charge-offs for the commercial portfolio, see Note 1 – Summary of Significant Accounting Principlesto 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 do not result in undesirable levels of risk. 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 36, 39, 44 and 45 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 ~~aggregate range~~commercial credit portfolio. For more information on our industry concentrations, including our utilized exposure to the energy sector which was three percent and four percent of ~~possible~~total commercial utilized exposure at December 31, 2016 and 2015, see Commercial Portfolio Credit Risk Management – Industry Concentrations on page 71 and Table 39.



66 Bank of America 2016

accounting hedges. They are carried at fair value with changes in fair value recorded in other income (loss).

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 ~~and on regulatory investigations,~~scenarios. For additional information, see Note 12 – Commitments and Contingencies to the Consolidated Financial Statements.

Commercial Credit Portfolio

Table 32 presents our commercial loans and leases portfolio, and related credit quality information at December 31, 2016 and 2015.




Table 32	Commercial Loans and Leases

		December 31
		Outstandings				Nonperforming				Accruing Past Due 90 Days or More
(Dollars in millions)		2016		2015		2016		2015		2016		2015
U.S. commercial		$	270,372	$	252,771	$	1,256	$	867	$	106	$	113
Commercial real estate ⁽¹⁾		57,355		57,199		72		93		7		3
Commercial lease financing		22,375		21,352		36		12		19		15
Non-U.S. commercial		89,397		91,549		279		158		5		1
		439,499		422,871		1,643		1,130		137		132
U.S. small business commercial ⁽²⁾		12,993		12,876		60		82		71		61
Commercial loans excluding loans accounted for under the fair value option		452,492		435,747		1,703		1,212		208		193
Loans accounted for under the fair value option ⁽³⁾		6,034		5,067		84		13		—		—
Total commercial loans and leases		$	458,526	$	440,814	$	1,787	$	1,225	$	208	$	193


⁽¹⁾	Includes U.S. commercial real estate loans of $54.3 billion and $53.6 billion and non-U.S. commercial real estate loans of $3.1 billion and $3.5 billion at December 31, 2016 and 2015.


⁽²⁾	Includes card-related products.


⁽³⁾	Commercial loans accounted for under the fair value option include U.S. commercial loans of $2.9 billion and $2.3 billion and non-U.S. commercial loans of $3.1 billion and $2.8 billion at December 31, 2016 and 2015. For more information on the fair value option, see Note 21 – Fair Value Option to the Consolidated Financial Statements.




Table 33	Commercial Net Charge-offs and Related Ratios

		Net Charge-offs						Net Charge-off Ratios ⁽¹⁾
(Dollars in millions)		2016			2015			2016		2015
U.S. commercial		$	184		$	139		0.07	%	0.06	%
Commercial real estate		(31		)	(5		)	(0.05	)	(0.01	)
Commercial lease financing		21			9			0.10		0.04
Non-U.S. commercial		120			54			0.13		0.06
		294			197			0.07		0.05
U.S. small business commercial		208			225			1.60		1.71
Total commercial		$	502		$	422		0.11		0.10


⁽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.



		Bank of America 201667




Table 34	Commercial Credit Exposure by Type

		December 31
		Commercial Utilized ⁽¹⁾				Commercial Unfunded ^{(2, 3, 4)}				Total Commercial Committed
(Dollars in millions)		2016		2015		2016		2015		2016		2015
Loans and leases ⁽⁵⁾		$	464,260	$	446,832	$	366,106	$	376,478	$	830,366	$	823,310
Derivative assets ⁽⁶⁾		42,512		49,990		—		—		42,512		49,990
Standby letters of credit and financial guarantees		33,135		33,236		660		690		33,795		33,926
Debt securities and other investments		26,244		21,709		5,474		4,173		31,718		25,882
Loans held-for-sale		6,510		5,456		3,824		1,203		10,334		6,659
Commercial letters of credit		1,464		1,725		112		390		1,576		2,115
Bankers’ acceptances		395		298		13		—		408		298
Other		372		317		—		—		372		317
Total		$	574,892	$	559,563	$	376,189	$	382,934	$	951,081	$	942,497


⁽¹⁾	Total commercial utilized exposure includes loans of $6.0 billion and $5.1 billion and issued letters of credit with a notional amount of $284 million and $290 million accounted for under the fair value option at December 31, 2016 and 2015.


⁽²⁾	Total commercial unfunded exposure includes loan commitments accounted for under the fair value option with a notional amount of $6.7 billion and $10.6 billion at December 31, 2016 and 2015.


⁽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 (e.g. syndicated or participated) to other financial institutions. The distributed amounts were $12.1 billion and $14.3 billion at December 31, 2016 and 2015.


⁽⁵⁾	Includes credit risk exposure associated with assets under operating lease arrangements of $5.7 billion and $6.0 billion at December 31, 2016 and 2015.

⁽⁶⁾




Table 35	Commercial Utilized Reservable Criticized Exposure

		December 31
		2016				2015
(Dollars in millions)		Amount ⁽¹⁾		Percent ⁽²⁾		Amount ⁽¹⁾		Percent ⁽²⁾
U.S. commercial		$	10,311	3.46	%	$	9,965	3.56	%
Commercial real estate		399		0.68		513		0.87
Commercial lease financing		810		3.62		708		3.31
Non-U.S. commercial		3,974		4.17		3,944		4.04
		15,494		3.27		15,130		3.30
U.S. small business commercial		826		6.36		766		5.95
Total commercial utilized reservable criticized exposure		$	16,320	3.35		$	15,896	3.38


⁽¹⁾	Total commercial utilized reservable criticized exposure includes loans and leases of $14.9 billion and $14.5 billion and commercial letters of credit of $1.4 billion at December 31, 2016 and 2015.


⁽²⁾	Percentages are calculated as commercial utilized reservable criticized exposure divided by total commercial utilized reservable exposure for each exposure category.

U.S. Commercial



68 Bank of America 2016

Commercial Real Estate

During 2016, we continued to see low default rates and solid credit quality in both the residential and non-residential portfolios.

Table 36 presents outstanding commercial real estate loans by geographic region, based on the geographic location of the collateral, and by property type.




Table 36	Outstanding Commercial Real Estate Loans

		December 31
(Dollars in millions)		2016		2015
By Geographic Region
California		$	13,450	$	12,063
Northeast		10,329		10,292
Southwest		7,567		7,789
Southeast		5,630		6,066
Midwest		4,380		3,780
Florida		3,213		3,330
Northwest		2,430		2,327
Illinois		2,408		2,536
Midsouth		2,346		2,435
Non-U.S.		3,103		3,549
Other ⁽¹⁾		2,499		3,032
Total outstanding commercial real estate loans		$	57,355	$	57,199
By Property Type
Non-residential
Office		$	16,643	$	15,246
Multi-family rental		8,817		8,956
Shopping centers/retail		8,794		8,594
Hotels / Motels		5,550		5,415
Industrial / Warehouse		5,357		5,501
Multi-Use		2,822		3,003
Unsecured		1,730		2,056
Land and land development		357		539
Other		5,595		5,791
Total non-residential		55,665		55,101
Residential		1,690		2,098
Total outstanding commercial real estate loans		$	57,355	$	57,199


⁽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.

residential utilized reservable exposure. For the non-residential portfolio, net recoveries increased $24 million to $31 million in 2016 compared to 2015.



		Bank of America 201669

December 31, 2016 compared to 0.66 percent and 0.52 percent at December 31, 2015.

Non-U.S. Commercial

U.S. Small Business Commercial

Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity




Table 37	Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity ^{(1, 2)}

(Dollars in millions)		2016			2015
Nonperforming loans and leases, January 1		$	1,212		$	1,113
Additions to nonperforming loans and leases:
New nonperforming loans and leases		2,330			1,367
Advances		17			36
Reductions to nonperforming loans and leases:
Paydowns		(824		)	(491		)
Sales		(318		)	(108		)
Returns to performing status ⁽³⁾		(267		)	(130		)
Charge-offs		(434		)	(362		)
Transfers to foreclosed properties ⁽⁴⁾		(4		)	(213		)
Transfers to loans held-for-sale		(9		)	—
Total net additions to nonperforming loans and leases		491			99
Total nonperforming loans and leases, December 31		1,703			1,212
Foreclosed properties, January 1		15			67
Additions to foreclosed properties:
New foreclosed properties ⁽⁴⁾		24			207
Reductions to foreclosed properties:
Sales		(25		)	(256		)
Write-downs		—			(3		)
Total net reductions to foreclosed properties		(1		)	(52		)
Total foreclosed properties, December 31		14			15
Nonperforming commercial loans, leases and foreclosed properties, December 31		$	1,717		$	1,227
Nonperforming commercial loans and leases as a percentage of outstanding commercial loans and leases ⁽⁵⁾		0.38		%	0.28		%
Nonperforming commercial loans, leases and foreclosed properties as a percentage of outstanding commercial loans, leases and foreclosed properties ⁽⁵⁾		0.38			0.28


⁽¹⁾	Balances do not include nonperforming LHFS of $195 million and $220 million at December 31, 2016 and 2015.


⁽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⁾	New foreclosed properties represents transfers of nonperforming loans to foreclosed properties net of charge-offs recorded during the first 90 days after transfer of a loan to foreclosed properties.


⁽⁵⁾	Outstanding commercial loans exclude loans accounted for under the fair value option.



70 Bank of America 2016




Table 38	Commercial Troubled Debt Restructurings

		December 31
		2016						2015
(Dollars in millions)		Total		Nonperforming		Performing		Total		Nonperforming		Performing
U.S. commercial		$	1,860	$	720	$	1,140	$	1,225	$	394	$	831
Commercial real estate		140		45		95		118		27		91
Commercial lease financing		4		2		2		—		—		—
Non-U.S. commercial		308		25		283		363		136		227
		2,312		792		1,520		1,706		557		1,149
U.S. small business commercial		15		2		13		29		10		19
Total commercial troubled debt restructurings		$	2,327	$	794	$	1,533	$	1,735	$	567	$	1,168

Industry Concentrations



		Bank of America 201671




Table 39	Commercial Credit Exposure by Industry ⁽¹⁾

		December 31
		Commercial Utilized				Total Commercial Committed ⁽²⁾
(Dollars in millions)		2016		2015		2016			2015
Diversified financials		$	81,156	$	79,496	$	124,535		$	128,436
Real estate ⁽³⁾		61,203		61,759		83,658			87,650
Retailing		41,630		37,675		68,507			63,975
Healthcare equipment and services		37,656		35,134		64,663			57,901
Capital goods		34,278		30,790		64,202			58,583
Government and public education		45,694		44,835		54,626			53,133
Banking		39,877		45,952		47,799			53,825
Materials		22,578		24,012		44,357			46,013
Consumer services		27,413		24,084		42,523			37,058
Energy		19,686		21,257		39,231			43,811
Food, beverage and tobacco		19,669		18,316		37,145			43,164
Commercial services and supplies		21,241		19,552		35,360			32,045
Transportation		19,805		19,369		27,483			27,371
Utilities		11,349		11,396		27,140			27,849
Media		13,419		12,833		27,116			24,194
Individuals and trusts		16,364		17,992		21,764			23,176
Software and services		7,991		6,617		19,790			18,362
Pharmaceuticals and biotechnology		5,539		6,302		18,910			16,472
Technology hardware and equipment		7,793		6,337		18,429			24,734
Telecommunication services		6,317		4,717		16,925			10,645
Insurance, including monolines		7,406		5,095		13,936			10,728
Automobiles and components		5,459		4,804		12,969			11,329
Consumer durables and apparel		6,042		6,053		11,460			11,165
Food and staples retailing		4,795		4,351		8,869			9,439
Religious and social organizations		4,423		4,526		6,252			5,929
Other		6,109		6,309		13,432			15,510
Total commercial credit exposure by industry		$	574,892	$	559,563	$	951,081		$	942,497
Net credit default protection purchased on total commitments ⁽⁴⁾						$	(3,477	)	$	(6,677	)


⁽¹⁾	Includes U.S. small business commercial exposure.


⁽²⁾	Includes the notional amount of unfunded legally binding lending commitments net of amounts distributed (e.g., syndicated or participated) to other financial institutions. The distributed amounts were $12.1 billion and $14.3 billion at December 31, 2016 and 2015.


⁽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 borrowers’ or counterparties’ primary business activity using operating cash flows and primary source of repayment as key factors.


⁽⁴⁾	Represents net notional credit protection purchased. For additional information, see Commercial Portfolio Credit Risk Management – Risk Mitigation below.

Risk Mitigation

Tables 40 and 41 present the maturity profiles and the credit exposure debt ratings of the net credit default protection portfolio at December 31, 2016 and 2015.




Table 40	Net Credit Default Protection by Maturity

		December 31
		2016		2015
Less than or equal to one year		56	%	39	%
Greater than one year and less than or equal to five years		41		59
Greater than five years		3		2
Total net credit default protection		100	%	100	%



72 Bank of America 2016




Table 41	Net Credit Default Protection by Credit Exposure Debt Rating

		December 31
		2016					2015
(Dollars in millions)		Net Notional ⁽¹⁾			Percent of Total		Net Notional ⁽¹⁾			Percent of Total
Ratings ^{(2, 3)}
A		$	(135	)	3.9	%	$	(752	)	11.3	%
BBB		(1,884		)	54.2		(3,030		)	45.4
BB		(871		)	25.1		(2,090		)	31.3
B		(477		)	13.7		(634		)	9.5
CCC and below		(81		)	2.3		(139		)	2.1
NR ⁽⁴⁾		(29		)	0.8		(32		)	0.4
Total net credit default protection		$	(3,477	)	100.0	%	$	(6,677	)	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.




Table 42	Credit Derivatives

		December 31
		2016				2015
(Dollars in millions)		Contract/ Notional		Credit Risk		Contract/ Notional		Credit Risk
Purchased credit derivatives:
Credit default swaps		$	603,979	$	2,732	$	928,300	$	3,677
Total return swaps/other		21,165		433		26,427		1,596
Total purchased credit derivatives		$	625,144	$	3,165	$	954,727	$	5,273
Written credit derivatives:
Credit default swaps		$	614,355	n/a		$	924,143	n/a
Total return swaps/other		25,354		n/a		39,658		n/a
Total written credit derivatives		$	639,709	n/a		$	963,801	n/a

n/a = not applicable

Counterparty Credit Risk Valuation Adjustments

We enter into risk management activities to offset market driven exposures. We often hedge the counterparty spread risk in CVA with credit default swaps (CDS). We hedge other market risks




Table 43	Credit Valuation Gains and Losses

Gains (Losses)		2016							2015
(Dollars in millions)		Gross		Hedge			Net		Gross		Hedge			Net
Credit valuation		$	374	$	(160	)	$	214	$	255	$	(28	)	$	227



		Bank of America 201673

Non-U.S. Portfolio




Table 44	Top 20 Non-U.S. Countries Exposure

(Dollars in millions)		Funded Loans and Loan Equivalents		Unfunded Loan Commitments		Net Counterparty Exposure		Securities/ Other Investments		Country Exposure at December 31 2016		Hedges and Credit Default Protection			Net Country Exposure at December 31 2016		Increase (Decrease) from December 31 2015
United Kingdom		$	29,329	$	13,105	$	6,145	$	3,823	$	52,402	$	(4,669	)	$	47,733	$	(5,513	)
Germany		13,202		8,648		1,979		2,579		26,408		(4,030		)	22,378		8,974
Canada		6,722		7,159		2,023		3,803		19,707		(933		)	18,774		4,042
Japan		12,065		652		2,448		1,597		16,762		(1,751		)	15,011		647
Brazil		9,118		389		780		3,646		13,933		(267		)	13,666		(1,984		)
China		9,230		722		714		949		11,615		(730		)	10,885		411
France		3,112		4,823		1,899		5,325		15,159		(4,465		)	10,694		2,008
Switzerland		4,050		5,999		499		507		11,055		(1,409		)	9,646		3,383
India		6,671		288		353		2,086		9,398		(170		)	9,228		(1,126		)
Australia		4,792		2,685		559		1,249		9,285		(362		)	8,923		(622		)
Hong Kong		6,425		156		441		520		7,542		(63		)	7,479		(110		)
Netherlands		3,537		2,496		559		2,296		8,888		(1,490		)	7,398		(236		)
South Korea		4,175		838		864		829		6,706		(600		)	6,106		(752		)
Singapore		2,633		199		699		1,937		5,468		(50		)	5,418		689
Mexico		2,817		1,391		187		430		4,825		(341		)	4,484		(570		)
Italy		2,329		1,036		577		1,246		5,188		(1,101		)	4,087		(1,221		)
United Arab Emirates		2,104		139		570		27		2,840		(97		)	2,743		(283		)
Turkey		2,695		50		69		58		2,872		(182		)	2,690		(450		)
Spain		1,818		614		173		894		3,499		(953		)	2,546		(517		)
Taiwan		1,417		33		341		317		2,108		(27		)	2,081		(294		)
Total top 20 non-U.S. countries exposure		$	128,241	$	51,422	$	21,879	$	34,118	$	235,660	$	(23,690	)	$	211,970	$	6,476



74 Bank of America 2016

Executive Summary – 2016 Economic and Business Environment on page 21.




Table 45	Total Cross-border Exposure Exceeding One Percent of Total Assets

(Dollars in millions)		December 31	Public Sector		Banks		Private Sector		Cross-border Exposure		Exposure as a Percent of Total Assets
United Kingdom		2016	$	2,975	$	4,557	$	42,105	$	49,637	2.27	%
		2015	3,264		5,104		38,576		46,944		2.19
		2014	11		2,056		34,595		36,662		1.74
France		2016	4,956		1,205		23,193		29,354		1.34
		2015	3,343		1,766		17,099		22,208		1.04
		2014	4,479		2,631		14,368		21,478		1.02

Provision for Credit Losses

Allowance for Credit Losses

Allowance for Loan and Lease Losses

LHFS and loans accounted for under the fair value option as the fair value reflects a credit risk component.



		Bank of America 201675



76 Bank of America 2016

Table 46 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 2016 and 2015.




Table 46	Allowance for Credit Losses

(Dollars in millions)		2016			2015
Allowance for loan and lease losses, January 1		$	12,234		$	14,419
Loans and leases charged off
Residential mortgage		(403		)	(866		)
Home equity		(752		)	(975		)
U.S. credit card		(2,691		)	(2,738		)
Non-U.S. credit card		(238		)	(275		)
Direct/Indirect consumer		(392		)	(383		)
Other consumer		(232		)	(224		)
Total consumer charge-offs		(4,708		)	(5,461		)
U.S. commercial ⁽¹⁾		(567		)	(536		)
Commercial real estate		(10		)	(30		)
Commercial lease financing		(30		)	(19		)
Non-U.S. commercial		(133		)	(59		)
Total commercial charge-offs		(740		)	(644		)
Total loans and leases charged off		(5,448		)	(6,105		)
Recoveries of loans and leases previously charged off
Residential mortgage		272			393
Home equity		347			339
U.S. credit card		422			424
Non-U.S. credit card		63			87
Direct/Indirect consumer		258			271
Other consumer		27			31
Total consumer recoveries		1,389			1,545
U.S. commercial ⁽²⁾		175			172
Commercial real estate		41			35
Commercial lease financing		9			10
Non-U.S. commercial		13			5
Total commercial recoveries		238			222
Total recoveries of loans and leases previously charged off		1,627			1,767
Net charge-offs		(3,821		)	(4,338		)
Write-offs of PCI loans		(340		)	(808		)
Provision for loan and lease losses		3,581			3,043
Other ⁽³⁾		(174		)	(82		)
Allowance for loan and lease losses, December 31		11,480			12,234
Less: Allowance included in assets of business held for sale ⁽⁴⁾		(243		)	—
Total allowance for loan and lease losses, December 31		11,237			12,234
Reserve for unfunded lending commitments, January 1		646			528
Provision for unfunded lending commitments		16			118
Other⁽³⁾		100			—
Reserve for unfunded lending commitments, December 31		762			646
Allowance for credit losses, December 31		$	11,999		$	12,880


⁽¹⁾	Includes U.S. small business commercial charge-offs of $253 million and $282 million in 2016 and 2015.


⁽²⁾	Includes U.S. small business commercial recoveries of $45 million and $57 million in 2016 and 2015.


⁽³⁾	Primarily represents the net impact of portfolio sales, consolidations and deconsolidations, foreign currency translation adjustments and certain other reclassifications.


⁽⁴⁾	Represents allowance related to the non-U.S. credit card loan portfolio, which is included in assets of business held for sale on the Consolidated Balance Sheet at December 31, 2016.



		Bank of America 201677




Table 46	Allowance for Credit Losses (continued)

(Dollars in millions)		2016			2015
Loan and allowance ratios ⁽⁵⁾:
Loans and leases outstanding at December 31 ⁽⁶⁾		$	908,812		$	890,045
Allowance for loan and lease losses as a percentage of total loans and leases outstanding at December 31 ⁽⁶⁾		1.26		%	1.37		%
Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases outstanding at December 31 ⁽⁷⁾		1.36			1.63
Commercial allowance for loan and lease losses as a percentage of total commercial loans and leases outstanding at December 31 ⁽⁸⁾		1.16			1.11
Average loans and leases outstanding ⁽⁶⁾		$	892,255		$	869,065
Net charge-offs as a percentage of average loans and leases outstanding ^{(6, 9)}		0.43		%	0.50		%
Net charge-offs and PCI write-offs as a percentage of average loans and leases outstanding ⁽⁶⁾		0.47			0.59
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases at December 31 ^{(6, 10)}		149			130
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs ⁽⁹⁾		3.00			2.82
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs and PCI write-offs		2.76			2.38
Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases at December 31 ⁽¹¹⁾		$	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^{(6, 11)}		98		%	82		%
Loan and allowance ratios excluding PCI loans and the related valuation allowance: ^{(5, 12)}
Allowance for loan and lease losses as a percentage of total loans and leases outstanding at December 31 ⁽⁶⁾		1.24		%	1.31		%
Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases outstanding at December 31 ⁽⁷⁾		1.31			1.50
Net charge-offs as a percentage of average loans and leases outstanding ⁽⁶⁾		0.44			0.51
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases at December 31 ^{(6, 10)}		144			122
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs		2.89			2.64


⁽⁵⁾	Loan and allowance ratios 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 are included in assets of business held for sale on the Consolidated Balance Sheet at December 31, 2016.


⁽⁶⁾	Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of $7.1 billion and $6.9 billion at December 31, 2016 and 2015. Average loans accounted for under the fair value option were $8.2 billion and $7.7 billion in 2016 and 2015.


⁽⁷⁾	Excludes consumer loans accounted for under the fair value option of $1.1 billion and $1.9 billion at December 31, 2016 and 2015.


⁽⁸⁾	Excludes commercial loans accounted for under the fair value option of $6.0 billion and $5.1 billion at December 31, 2016 and 2015.


⁽⁹⁾	Net charge-offs exclude $340 million and $808 million of write-offs in the PCI loan portfolio in 2016 and 2015. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 62.


⁽¹⁰⁾	For more information on our definition of nonperforming loans, see pages 64 and 70.


⁽¹¹⁾	Primarily includes amounts allocated to 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.


⁽¹²⁾	For more information on the PCI loan portfolio and the valuation allowance for PCI loans, see Note 4 – Outstanding Loans and Leases and Note 5 – Allowance for Credit Losses to the Consolidated Financial Statements.

For reporting purposes, we allocate the allowance for credit losses across products as presented in Table 47.




Table 47	Allocation of the Allowance for Credit Losses by Product Type

		December 31, 2016							December 31, 2015
(Dollars in millions)		Amount			Percent of Total		Percent of Loans and Leases Outstanding ⁽¹⁾		Amount		Percent of Total		Percent of Loans and Leases Outstanding ⁽¹⁾
Allowance for loan and lease losses
Residential mortgage		$	1,012		8.82	%	0.53	%	$	1,500	12.26	%	0.80	%
Home equity		1,738			15.14		2.62		2,414		19.73		3.18
U.S. credit card		2,934			25.56		3.18		2,927		23.93		3.27
Non-U.S. credit card		243			2.12		2.64		274		2.24		2.75
Direct/Indirect consumer		244			2.13		0.26		223		1.82		0.25
Other consumer		51			0.44		2.01		47		0.38		2.27
Total consumer		6,222			54.21		1.36		7,385		60.36		1.63
U.S. commercial ⁽²⁾		3,326			28.97		1.17		2,964		24.23		1.12
Commercial real estate		920			8.01		1.60		967		7.90		1.69
Commercial lease financing		138			1.20		0.62		164		1.34		0.77
Non-U.S. commercial		874			7.61		0.98		754		6.17		0.82
Total commercial ⁽³⁾		5,258			45.79		1.16		4,849		39.64		1.11
Allowance for loan and lease losses ⁽⁴⁾		11,480			100.00	%	1.26		12,234		100.00	%	1.37
Less: Allowance included in assets of business held for sale ⁽⁵⁾		(243		)					—
Total allowance for loan and lease losses		11,237							12,234
Reserve for unfunded lending commitments		762							646
Allowance for credit losses		$	11,999						$	12,880

⁽¹⁾


⁽²⁾	Includes allowance for loan and lease losses for U.S. small business commercial loans of $416 million and $507 million at December 31, 2016 and 2015.


⁽³⁾	Includes allowance for loan and lease losses for impaired commercial loans of $273 million and $217 million at December 31, 2016 and 2015.


⁽⁴⁾	Includes $419 million and $804 million of valuation allowance presented with the allowance for loan and lease losses related to PCI loans at December 31, 2016 and 2015.


⁽⁵⁾	Represents allowance for loan and lease losses related to the non-U.S. credit card loan portfolio, which is included in assets of business held for sale on the Consolidated Balance Sheet at December 31, 2016.



78 Bank of America 2016

Reserve for Unfunded Lending Commitments

Market Risk Management

Interest Rate Risk

Foreign Exchange Risk

Mortgage Risk



		Bank of America 201679

Equity Market Risk

Commodity Risk

Issuer Credit Risk

Market Liquidity Risk

Trading Risk Management

independently evaluate the risk of the portfolios under the current market environment and potential future environments.



80 Bank of America 2016

Appetite Statement. These risk appetite limits are reported on a daily basis and are approved at least annually by the ERC and the Board.

Table 48 presents year-end, average, high and low daily trading VaR for 2016 and 2015 using a 99 percent confidence level.




Table 48	Market Risk VaR for Trading Activities

		2016										2015
(Dollars in millions)		Year End			Average			High ⁽¹⁾		Low ⁽¹⁾		Year End			Average			High ⁽¹⁾		Low ⁽¹⁾
Foreign exchange		$	8		$	9		$	16	$	5	$	10		$	10		$	42	$	5
Interest rate		11			19			30		10		17			25			42		14
Credit		25			30			37		25		32			35			46		27
Equity		19			18			30		11		18			16			33		9
Commodity		4			6			12		3		4			5			8		3
Portfolio diversification		(39		)	(46		)	—		—		(36		)	(46		)	—		—
Total covered positions trading portfolio		28			36			50		24		45			45			66		26
Impact from less liquid exposures		6			5			—		—		3			8			—		—
Total market-based trading portfolio		34			41			58		28		48			53			74		31
Fair value option loans		14			23			40		12		35			26			36		17
Fair value option hedges		6			11			22		5		17			14			22		8
Fair value option portfolio diversification		(10		)	(21		)	—		—		(35		)	(26		)	—		—
Total fair value option portfolio		10			13			20		8		17			14			19		10
Portfolio diversification		(4		)	(6		)	—		—		(4		)	(6		)	—		—
Total market-based portfolio		$	40		$	48		$	70	$	32	$	61		$	61		$	85	$	41


⁽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, are not relevant.

The average total market-based trading portfolio VaR decreased during 2016 primarily due to reduced exposure to the interest rate and credit markets.



		Bank of America 201681

The graph below presents the daily total market-based trading portfolio VaR for 2016, corresponding to the data in Table 48.




Table 49	Average Market Risk VaR for Trading Activities – 99 percent and 95 percent VaR Statistics

		2016						2015
(Dollars in millions)		99 percent			95 percent			99 percent			95 percent
Foreign exchange		$	9		$	5		$	10		$	6
Interest rate		19			12			25			15
Credit		30			18			35			20
Equity		18			11			16			9
Commodity		6			3			5			3
Portfolio diversification		(46		)	(30		)	(46		)	(31		)
Total covered positions trading portfolio		36			19			45			22
Impact from less liquid exposures		5			3			8			3
Total market-based trading portfolio		41			22			53			25
Fair value option loans		23			13			26			15
Fair value option hedges		11			8			14			9
Fair value option portfolio diversification		(21		)	(13		)	(26		)	(16		)
Total fair value option portfolio		13			8			14			8
Portfolio diversification		(6		)	(4		)	(6		)	(5		)
Total market-based portfolio		$	48		$	26		$	61		$	28

Backtesting

different than the level of market volatility that existed during the three years of historical data used in the VaR calculation.



82 Bank of America 2016

During 2016, there were no days in which there was a backtesting excess for our total market-based portfolio VaR, utilizing a one-day holding period.

Total Trading-related Revenue

Trading Portfolio Stress Testing



		Bank of America 201683

Interest Rate Risk Management for the Banking Book

The following discussion presents net interest income for banking book activities.

Table 50 presents the spot and 12-month forward rates used in our baseline forecasts at December 31, 2016 and 2015.




Table 50	Forward Rates

		December 31, 2016
		Federal Funds		Three-month LIBOR		10-Year Swap
Spot rates		0.75	%	1.00	%	2.34	%
12-month forward rates		1.25		1.51		2.49

		December 31, 2015
Spot rates		0.50	%	0.61	%	2.19	%
12-month forward rates		1.00		1.22		2.39




Table 51	Estimated Banking Book Net Interest Income Sensitivity

(Dollars in millions)		Short Rate (bps)	Long Rate (bps)	December 31
Curve Change				2016			2015
Parallel Shifts
+100 bps instantaneous shift		+100	+100	$	3,370		$	3,606
-50 bps instantaneous shift		-50	-50	(2,900		)	(3,458		)
Flatteners
Short-end instantaneous change		+100	—	2,473			2,418
Long-end instantaneous change		—	-50	(961		)	(1,767		)
Steepeners
Short-end instantaneous change		-50	—	(1,918		)	(1,672		)
Long-end instantaneous change		—	+100	928			1,217

Interest Rate and Foreign Exchange Derivative Contracts



84 Bank of America 2016

average estimated durations of our open ALM derivatives at December 31, 2016 and 2015. These amounts do not include derivative hedges on our MSRs.




Table 52	Asset and Liability Management Interest Rate and Foreign Exchange Contracts

					December 31, 2016
					Expected Maturity
(Dollars in millions, average estimated duration in years)		Fair Value			Total			2017			2018			2019			2020			2021			Thereafter			Average Estimated Duration
Receive-fixed interest rate swaps ⁽¹⁾		$	4,055																							4.81
Notional amount					$	118,603		$	21,453		$	25,788		$	10,283		$	7,515		$	5,307		$	48,257
Weighted-average fixed-rate					2.83		%	3.64		%	2.81		%	2.31		%	2.07		%	3.18		%	2.67		%
Pay-fixed interest rate swaps ⁽¹⁾		159																								2.77
Notional amount					$	22,400		$	1,527		$	9,168		$	2,072		$	7,975		$	213		$	1,445
Weighted-average fixed-rate					1.37		%	1.84		%	1.47		%	0.97		%	1.08		%	1.00		%	2.45		%
Same-currency basis swaps⁽²⁾		(26		)
Notional amount					$	59,274		$	20,775		$	11,027		$	6,784		$	1,180		$	2,799		$	16,709
Foreign exchange basis swaps ^{(1, 3, 4)}		(4,233		)
Notional amount					125,522			26,509			22,724			12,178			12,150			8,365			43,596
Option products ⁽⁵⁾		5
Notional amount ⁽⁶⁾					1,687			1,673			—			—			—			—			14
Foreign exchange contracts ^{(1, 4, 7)}		3,180
Notional amount ⁽⁶⁾					(20,285		)	(30,199		)	197			1,961			(8		)	881			6,883
Futures and forward rate contracts		19
Notional amount ⁽⁶⁾					37,896			37,896			—			—			—			—			—
Net ALM contracts		$	3,159

					December 31, 2015
					Expected Maturity
(Dollars in millions, average estimated duration in years)		Fair Value			Total			2016			2017			2018			2019			2020			Thereafter			Average Estimated Duration
Receive-fixed interest rate swaps ⁽¹⁾		$	6,291																							4.98
Notional amount					$	114,354		$	15,339		$	21,453		$	21,850		$	9,783		$	7,015		$	38,914
Weighted-average fixed-rate					3.12		%	3.12		%	3.64		%	3.20		%	2.37		%	2.13		%	3.16		%
Pay-fixed interest rate swaps ⁽¹⁾		(81		)																						3.98
Notional amount					$	12,131		$	1,025		$	1,527		$	5,668		$	600		$	51		$	3,260
Weighted-average fixed-rate					1.70		%	1.65		%	1.84		%	1.41		%	1.59		%	3.64		%	2.15		%
Same-currency basis swaps ⁽²⁾		(70		)
Notional amount					$	75,224		$	15,692		$	20,833		$	11,026		$	6,786		$	1,180		$	19,707
Foreign exchange basis swaps ^{(1, 3, 4)}		(3,968		)
Notional amount					144,446			25,762			27,441			19,319			12,226			10,572			49,126
Option products ⁽⁵⁾		57
Notional amount ⁽⁶⁾					752			737			—			—			—			—			15
Foreign exchange contracts ^{(1, 4, 7)}		2,345
Notional amount ⁽⁶⁾					(25,405		)	(36,504		)	5,380			(2,228		)	2,123			52			5,772
Futures and forward rate contracts		(5		)
Notional amount ⁽⁶⁾					200			200			—			—			—			—			—
Net ALM contracts		$	4,569


⁽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, 2016 and 2015, the notional amount of same-currency basis swaps included $59.3 billion and $75.2 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 option products of $1.7 billion at December 31, 2016 was comprised of $1.7 billion in foreign exchange options and $14 million in purchased caps/floors. Option products of $752 million at December 31, 2015 were comprised of $737 million in foreign exchange options and $15 million in purchased caps/floors.


⁽⁶⁾	Reflects the net of long and short positions. Amounts shown as negative reflect a net short position.

⁽⁷⁾



		Bank of America 201685

Mortgage Banking Risk Management

Compliance Risk Management

Operational Risk Management



86 Bank of America 2016

Insurance maintained by the Corporation may mitigate the impact of operational losses. Certain insurance is purchased to

be in compliance with laws, regulations or legal requirements, and in conjunction with specific hedging strategies to reduce adverse financial impacts arising from operational losses.

Reputational Risk Management

Complex Accounting Estimates



		Bank of America 201687

Allowance for Credit Losses

Fair Value of Financial Instruments



88 Bank of America 2016

Level 3 Assets and Liabilities

Accrued Income Taxes and Deferred Tax Assets

Goodwill and Intangible Assets

Background

2016 Annual Goodwill Impairment Testing



		Bank of America 201689

Managing Risk

Overview

Risk is inherent in all our business activities. Sound risk management enables us to serve our customers and deliver for our shareholders. If not managed well, risks can result in financial loss, regulatory sanctions and penalties, and damage to our reputation, each of which may adversely impact our ability to execute our business strategies. ~~The Corporation takes~~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 ~~Corporation’s Board of Directors (the Board).~~Board.

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


Ÿ●	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.


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


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


Ÿ●	Liquidity risk is the ~~potential~~ inability to meet expected or unexpected cash flow and collateral needs while continuing to support our ~~business~~businesses and ~~customer needs~~customers with the appropriate funding sources under a range of economic conditions.


Ÿ●	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, regulations and related self-regulatory organizations’ standards and codes of conduct.


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

Ÿ●

Reputational risk is the risk that negative perceptions of the Corporation’s conduct or business practices ~~will~~may adversely ~~affect~~impact its profitability or operations through an inability to establish new or maintain existing customer/client ~~relationships.~~relationships or otherwise adversely impact relationships with key stakeholders, such as investors, regulators, employees and the community.

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 ~~2016~~current Risk Framework ~~(Risk Framework)~~ that, as part of its annual review process, was approved by the ERC and the ~~Board~~Board.

As set forth in ~~December 2015. The key enhancements from the 2015~~our Risk Framework, ~~include further increasing the focus on our strong~~a culture of managing risk culture and emphasizing our risk identification practices and the involvement and input of Front Line Units (FLUs) and control functions. It continues to recognize the same seven key risk types as discussed above and our risk management approach as outlined below.

~~A strong risk culture~~well is fundamental to our values and operating principles. 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 ~~strong~~culture of managing risk ~~culture~~well throughout the organization is critical to ~~the~~our success ~~of the Corporation~~ and is a clear expectation of our executive management team and the Board.



		~~Bank of America 2015~~49

Executive management assesses, with Board oversight, the risk-adjusted returns of each business. Management reviews and approves the strategic and financial operating plans, as well as the capital plan and ~~risk appetite statement,~~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



		Bank of America 201641

Our Risk Appetite Statement is ~~intended to ensure that the Corporation maintains~~how we maintain an acceptable risk profile by providing a common framework and a comparable set of measures for senior management and the Board to clearly indicate the level of risk ~~the Corporation is~~we are willing to accept. Risk appetite is ~~set at least annually in conjunction~~aligned with the strategic, capital and financial operating plans to ~~align risk appetite~~maintain consistency with ~~the Corporation’s~~our strategy and financial resources. Our line of business strategies and risk appetite are also similarly aligned. For a more detailed discussion of our risk management activities, see the discussion below and pages 5344 through ~~100~~87.

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 ~~the Corporation~~us to continue to operate in a safe and sound manner, ~~at all times,~~ including during periods of stress.

Risk Management Governance

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. ~~This chart reflects the current Risk Framework as approved by the Board in December 2015.~~

⁽¹⁾ This presentation does not include committees for other legal entities.

⁽²⁾ Reports to the CEO and CFO with oversight by the Audit Committee.

Board of Directors and Board Committees

The Board ~~which consists~~is comprised of ~~a substantial majority~~14 directors, all but one of ~~independent directors,~~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 ~~appropriate~~ inquiries of, and receive reports from management on risk-related matters to ~~determine whether there are~~assess scope or resource limitations that could impede the ability of independent risk management (IRM) and/or Corporate Audit to execute its

responsibilities. The ~~following~~ Board committees discussed below have the principal responsibility for enterprise-wide oversight of our risk management activities. ~~These committees and other Board committees, as applicable, regularly report to the Board on risk-related matters.~~ Through these activities, the Board and applicable committees are provided with ~~thorough~~ information on ~~the Corporation’s~~our risk profile, and ~~challenge~~oversee executive management ~~to appropriately address~~addressing key risks ~~facing the Corporation.~~we face. Other Board committees as described below provide additional oversight of specific risks.



50 ~~Bank of America 2015~~

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 ~~thorough~~ insight about our management of enterprise-wide risks.

~~Enterprise Risk Committee~~

The Enterprise Risk Committee (ERC) has primary responsibility for oversight of the Risk Framework and material risks facing the Corporation. 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 all key risks facing the Corporation. The ERC may consult with other Board committees on risk-related matters.

Audit Committee

The Audit Committee oversees the qualifications, performance and independence of the Independent Registered Public Accounting Firm, the performance of ~~the Corporation’s~~our corporate audit function, the integrity of ~~the Corporation’s~~our consolidated financial statements, our compliance ~~by the Corporation~~ with legal and regulatory requirements, and makes inquiries of management or the Corporate General Auditor (CGA) 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.

~~Credit~~Enterprise Risk Committee

The ~~Credit Committee provides additional~~ERC has primary responsibility for oversight of the Risk Framework and key risks we face. It approves the Risk Framework



42 Bank of America 2016

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 ~~management~~control of ~~Corporation-wide credit exposures. Our Credit Committee oversees, among~~key risks we face. The ERC may consult with other ~~things, the identification and management of our credit exposures~~Board committees on ~~an enterprise-wide basis, our responses to trends affecting those exposures, the adequacy of the allowance for credit losses and our credit-related policies.~~risk-related matters.

Other Board Committees

Management Committees

Management committees may receive their authority from the Board, a Board committee, another management committee or from one or more executive officers. ~~The~~Our primary management-level risk committee ~~for the Corporation~~ is the Management Risk Committee (MRC). Subject to Board oversight, the MRC is responsible for management oversight of ~~all~~ key risks ~~facing the Corporation.~~we face. The MRC provides management oversight of ~~the~~

~~Corporation’s~~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. The MRC is responsible for holistic risk management, including an integrated evaluation of risk, earnings, capital and liquidity, and it reports on these matters to the Board or Board committees.regulations, among other things.

Lines of Defense

In addition to the role of Executive Officers in managing risk, we have clear ownership and accountability across the three lines of defense: ~~FLUs, independent risk management~~Front Line Units (FLUs), IRM and Corporate Audit. ~~The Corporation~~We also ~~has~~have control functions outside of FLUs and ~~independent risk management~~IRM (e.g., Legal and Global Human Resources). The three lines of defense are integrated into our management-level governance structure. Each of these 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 ~~the Corporation’s~~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 include the lines of business ~~and an organizational unit,~~as well as the Global Technology and Operations ~~Group. FLUs~~Group, and are ~~held accountable by the CEO and the Board~~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 ~~independent risk management~~IRM are the Chief Financial Officer (CFO) Group, Global Marketing and Corporate Affairs (GM&CA) and the Chief Administrative Officer (CAO) Group.

Independent Risk Management

~~Independent risk management (IRM)~~IRM is part of our control functions and includes Global Risk Management and Global Compliance. 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, GM&CA and the 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.



		~~Bank of America 2015~~51

The CRO has the 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 enterprise risk teams, FLU risk teams and ~~FLU~~control function risk teams that work collaboratively in executing their respective duties.

Corporate Audit

Risk Management Processes

We employ a risk management process, referred to as Identify, Measure, Monitor and Control (IMMC), 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 ~~all~~ key risks inherent in our business activities or key risks that may arise from external factors. Each employee is expected to identify and escalate



		Bank of America 201643

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 ~~immediate~~ 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.

Among the key tools in the risk management process are the Risk and Control Self Assessments (RCSAs). The RCSA process, consistent with IMMC, is one of our primary methods for capturing the identification and assessment of operational risk exposures, including inherent and residual operational risk ratings, and control effectiveness ratings. The end-to-end RCSA process incorporates risk identification and assessment of the control environment; monitoring, reporting and escalating risk; quality assurance and data validation; and integration with the risk appetite. This results in a comprehensive risk management view that enables understanding of and action on operational risks and controls for our processes, products, activities and systems.

The formal processes used to manage risk represent a part of our overall risk management process. Corporate culture and the actions of our employees are also critical to effective risk management. Through our Code of Conduct, we set a high standard for our employees. The Code of Conduct provides a framework for all of our employees to conduct themselves with the highest integrity. We instill a strong and comprehensive culture of managing risk ~~management culture~~well through communications, training, policies, procedures and organizational roles and responsibilities. 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.

Corporation-wide Stress Testing

Integral to ~~the Corporation’s~~our Capital Planning, Financial Planning and Strategic Planning processes, ~~is stress testing, which the Corporation conducts~~we conduct capital scenario management and forecasting on a periodic basis to better understand balance sheet, earnings ~~capital~~ and ~~liquidity~~capital sensitivities to certain economic and business scenarios, including economic and market conditions that are more severe than anticipated. These ~~stress tests~~forecasts provide an understanding of the potential impacts from ~~the Corporation’s~~our risk profile on the balance sheet, earnings ~~capital~~ and ~~liquidity,~~capital, and serve as a key component of ~~the Corporation’s~~our capital and risk ~~management.~~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.

Contingency Planning ~~Routines~~

We have developed and maintain contingency plans that are designed to prepare us in advance to respond in the event of potential adverse ~~outcomes and scenarios.~~economic, financial or market stress. These contingency ~~planning routines~~plans include ~~capital contingency planning, liquidity contingency funding plans, recovery planning~~our Capital Contingency Plan, Contingency Funding Plan and ~~enterprise resiliency, and~~Recovery Plan, which provide monitoring, escalation, ~~routines~~actions and ~~response plans. Contingency response plans are~~routines designed to enable us to increase capital, access funding sources and reduce



52 ~~Bank of America 2015~~

risk through consideration of potential ~~actions~~options that include asset sales, business sales, capital or debt issuances, ~~and~~or other de-risking strategies. We also maintain ~~contingency plans as part of our resolution plan~~a Resolution Plan to limit adverse systemic impacts that could be associated with a potential ~~resolution.~~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. ~~It is the~~This risk ~~that~~ 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.

~~The~~On an annual basis, the Board reviews and approves the strategic plan, ~~is reviewed and approved annually by the Board, as is the~~ capital plan, financial operating plan and ~~risk appetite statement.~~Risk Appetite Statement. With oversight by the Board, executive management ~~ensures that consistency is applied while executing~~directs the ~~Corporation’s~~lines of business to execute our strategic plan consistent with our core operating principles and risk appetite. The executive management team ~~continuously~~ monitors business performance throughout the year ~~to assess strategic risk~~ and ~~find early warning signals so that risks can be proactively managed. Executive management regularly reviews performance versus the plan, updates~~provides the Board ~~via quarterly reporting routines (and more frequently as relevant)~~with regular progress reports on whether strategic objectives and ~~implements changes as deemed appropriate.~~timelines are being met, including reports on strategic risks and if additional or alternative actions need to be considered or implemented. The ~~following are assessed in the~~ regular executive ~~reviews:~~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 ~~recovery and resolution plans~~Resolution Plans are reviewed and approved by the ~~Board as required.~~Board. At the business level, ~~as we introduce~~processes are in place to discuss the strategic risk implications of new, expanded or modified businesses, products ~~we monitor their performance relative~~or services and other strategic initiatives, and to ~~expectations (e.g., for earnings~~provide formal review and ~~returns on capital).~~approval where required. With oversight by the Board and the ERC, executive management performs similar analyses throughout the year, and evaluates changes to the financial forecast or the risk, capital or liquidity positions as deemed appropriate to balance and optimize achieving the targeted risk appetite, shareholder returns and maintaining the targeted financial strength.

~~We use proprietary~~ 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 ~~exposures.~~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. ~~For more information on how this measure is calculated, see~~ ~~Supplemental Financial Data~~ ~~on page~~ 30.



44 Bank of America 2016

Capital Management

The Corporation manages its capital position ~~to maintain sufficient~~so its capital is more than adequate to support its business activities and to maintain capital, risk and risk appetite commensurate with one another. 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.

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 CCAR capital plan.

In ~~January 2015,~~April 2016, we submitted our ~~2015~~2016 CCAR capital plan and related supervisory stress tests. The ~~requested~~2016 CCAR capital ~~actions~~plan included ~~a request~~requests: (i) to repurchase ~~$4.0~~$5.0 billion of common stock

over ~~five~~four quarters beginning in the ~~second~~third quarter of ~~2015,~~2016, (ii) to repurchase common stock to offset the dilution resulting from certain equity-based compensation awards, and (iii) to ~~maintain~~increase the quarterly common stock dividend ~~at the current rate of~~from $0.05 per share to $0.075 per share. On ~~March 11, 2015,~~June 29, 2016, following the Federal ~~Reserve advised that it did not object~~Reserve's non-objection to our ~~2015 capital plan but gave a conditional non-objection under which we were required to resubmit our~~2016 CCAR capital plan, ~~and address certain weaknesses~~ the ~~Federal Reserve identified~~Board authorized the common stock repurchase beginning July 1, 2016. Also, in ~~our capital planning process. We have established plans and taken actions which addressed~~addition to the ~~identified weaknesses, and we resubmitted our~~previously announced repurchases associated with the 2016 CCAR capital plan, on ~~September 30, 2015. The~~January 13, 2017, we announced a plan to repurchase an additional $1.8 billion of common stock during the first half of 2017, to which the Federal Reserve ~~announced on December 10, 2015 that it~~ did not ~~object~~object. The common stock repurchase authorization includes both common stock and warrants.

During 2016, we repurchased approximately $5.1 billion of common stock pursuant to the Board’s authorization of our ~~resubmitted CCAR capital plan.~~

~~As of December 31, 2015, in connection with our~~2016 and 2015 CCAR capital ~~plan, we have repurchased approximately $2.4 billion of common stock. The timing~~plans and ~~amount of additional common stock repurchases and common stock dividends will continue~~ to ~~be consistent with our 2015 CCAR capital plan. In addition, the~~offset equity-based compensation awards.



		~~Bank of America 2015~~53

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 a “well-capitalized” BHC, we may notify the Federal Reserve of our intention to make additional capital distributions not to exceed one percent of Tier 1 capital (0.25 percent of Tier 1 capital beginning April 1, 2017), and which were not contemplated in our capital plan, subject to the Federal Reserve's non-objection.

Regulatory Capital

As a financial services holding company, we are subject to regulatory capital rules issued by U.S. banking ~~regulators. On January 1, 2014, we became subject to~~regulators including Basel 3, which includes certain transition provisions through January 1, 2019. The Corporation and its primary affiliated banking entity, BANA, are Basel 3 Advanced approaches ~~institutions under Basel 3.~~institutions.



		Bank of America 201645

Basel 3 Overview

Basel 3 updated the composition of capital and established a Common equity tier 1 capital ratio. Common equity tier 1 capital primarily includes common stock, retained earnings and accumulated ~~OCI.~~OCI, net of deductions and adjustments primarily related to goodwill, deferred tax assets, intangibles, MSRs and defined benefit pension assets. Under the Basel 3 regulatory capital transition provisions, certain deductions and adjustments to Common equity tier 1 capital are phased in through January 1, 2018. In 2016, under the transition provisions, 60 percent of these deductions and adjustments were recognized. Basel 3 also revised minimum capital ratios and buffer requirements, added a ~~SLR,~~supplementary leverage ratio (SLR), and addressed the adequately capitalized minimum requirements under the ~~PCA~~Prompt Corrective Action (PCA) framework. Finally, Basel 3 established two methods of calculating risk-weighted assets, the Standardized approach and the Advanced approaches. ~~For additional information, see Capital Management –~~The Standardized ~~Approach~~approach relies primarily on supervisory risk weights based on exposure type and ~~Capital Management –~~the Advanced ~~Approaches~~approaches determines risk weights based on ~~page 55.~~internal models.

internal analytical models including the wholesale (e.g., commercial) credit models. All requested modifications were incorporated, which increased our risk-weighted assets, and are reflected in the risk-based ratios in the fourth quarter of 2015. Having exited parallel run on October 1, 2015, we 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, and was the Advanced approaches in the fourth quarter of 2015. Prior to the fourth quarter of 2015, we were required to report our capital adequacy under the Standardized approach only.~~framework.

~~Regulatory Capital Composition~~

Basel 3 requires certain deductions from and adjustments to capital, which are primarily those related to MSRs, deferred tax assets and defined benefit pension assets. Also, any assets that are a direct deduction from the computation of capital are excluded from risk-weighted assets and adjusted average total assets. Basel 3 also provides for the inclusion in capital of net unrealized gains and losses on AFS debt and certain marketable equity securities recorded in accumulated OCI. These changes are impacted by, among other factors, fluctuations in interest rates, earnings performance and corporate actions. Under Basel 3 regulatory capital transition provisions, changes to the composition of regulatory capital are generally recognized in 20 percent annual increments, and will be fully recognized as of January 1, 2018.

~~Table 12 summarizes how certain regulatory capital deductions and adjustments have been or will be transitioned from 2014 through 2018 for Common equity tier 1 and Tier 1 capital.~~

Table 12 Summary of Certain Basel 3 Regulatory Capital Transition Provisions

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


⁽¹⁾	Represents the phase-out percentage of the exclusion by year (e.g., 40 percent of net unrealized gains (losses) on AFS debt and certain marketable equity securities recorded in accumulated OCI was included in 2015).

Additionally, Basel 3 revised the regulatory capital treatment for Trust Securities, requiring them to be transitioned from Tier 1 capital into Tier 2 capital in 2014 and 2015, until fully excluded from Tier 1 capital in 2016, and transitioned from Tier 2 capital beginning in 2016 with the full exclusion in 2022. As of December 31, 2015, our qualifying Trust Securities were $1.4 billion, approximately nine bps of the Tier 1 capital ratio.

Minimum Capital Requirements



54 ~~Bank of America 2015~~

December 31, ~~2015. Also effective January 1, 2015, Common equity tier 1 capital is included in the measurement of “well-capitalized” for depository institutions.~~2016.

~~Beginning~~On January 1, 2016, we ~~are~~became subject to a capital conservation buffer, a countercyclical capital buffer and a global systemically important bank (G-SIB) surcharge which will be phased in over a three-year period ending January 1, 2019. Once

fully phased in, the Corporation’s risk-based capital ratio requirements will include a capital conservation buffer greater than 2.5 percent, plus any applicable countercyclical capital buffer and a G-SIB surcharge in order to avoid ~~certain~~ restrictions on capital distributions and discretionary bonus payments. The buffers and surcharge must be composed solely of Common equity tier 1 capital. Under the phase-in provisions, we were required to maintain a capital conservation buffer greater than 0.625 percent plus a G-SIB surcharge of 0.75 percent in 2016. The countercyclical capital buffer is currently set at zero. U.S. banking regulators must jointly decide on any increase in the countercyclical buffer, after which time institutions will have up to one year for implementation. Based on the Federal Reserve final rule published in July 2015, weWe estimate that our fully phased-in G-SIB surcharge will ~~increase our risk-based capital ratio requirements by 3.0 percent once fully phased in.~~be 2.5 percent. The G-SIB surcharge ~~is calculated annually and~~ may differ from this estimate over time. ~~For more information on our G-SIB surcharge, see Capital Management – Regulatory Developments on page 59.~~

~~Standardized Approach~~

Total risk-weighted assets under the Basel 3 Standardized approach consist of credit risk and market risk measures. Credit risk-weighted assets are measured by applying fixed risk weights to on- and off-balance sheet exposures (excluding securitizations), determined based on the characteristics of the exposure, such as type of obligor, Organization for Economic Cooperation and Development country risk code and maturity, among others. Off-balance sheet exposures primarily include financial guarantees, unfunded lending commitments, letters of credit and potential future derivative exposures. Market risk applies to covered positions which include trading assets and liabilities, foreign exchange exposures and commodity exposures. Market risk capital is modeled for general market risk and specific risk for products where specific risk regulatory approval has been granted; in the absence of specific risk model approval, standard specific risk charges apply. For securitization exposures, risk-weighted assets are determined using the Simplified Supervisory Formula Approach (SSFA). Under the Standardized approach, no distinction is made for variations in credit quality for corporate exposures, and the economic benefit of collateral is restricted to a limited list of eligible securities and cash.

~~Advanced Approaches~~

In addition to the credit risk and market risk measures, Basel 3 Advanced approaches include measures of operational risk and risks related to the credit valuation adjustment (CVA) for over-the-counter (OTC) derivative exposures. The Advanced approaches rely on internal analytical models to measure risk weights for credit risk exposures and allow the use of models to estimate the exposure at default (EAD) for certain exposure types. Market risk

capital measurements are consistent with the Standardized approach, except for securitization exposures. For both trading and non-trading securitization exposures, institutions are permitted to use the Supervisory Formula Approach (SFA) and would use the SSFA if the SFA is unavailable for a particular exposure. Non-securitization credit risk exposures are measured using internal ratings-based models to determine the applicable risk weight by estimating the probability of default, loss given default (LGD) and, in certain instances, EAD. The internal analytical models primarily rely on internal historical default and loss experience. Operational risk is measured using internal analytical models which rely on both internal and external operational loss experience and data. The calculations require management to make estimates, assumptions and interpretations, including with respect to the probability of future events based on historical experience. Actual results could differ from those estimates and assumptions. Under the Federal Reserve’s reservation of authority, they may require us to hold an amount of capital greater than otherwise required under the capital rules if they determine that our risk-based capital requirement using our internal analytical models is not commensurate with our credit, market, operational or other risks.

Supplementary Leverage Ratio

Basel 3 also requires Advanced approaches institutions to disclose aan SLR. The numerator of the SLR is quarter-end Basel 3 Tier 1 ~~capital reflective of Basel 3 numerator transition provisions.~~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. Off-balance sheet exposures primarily include undrawn lending commitments, letters of credit, potential future derivative exposures and repo-style transactions. Total leverage exposure includes the effective notional principal amount of credit derivatives and similar instruments through which credit protection is sold. The credit conversion factors (CCFs) applied to certain off-balance sheet exposures conform to the graduated CCF utilized under the Basel 3 Standardized approach, but are subject to a minimum 10 percent CCF. Effective January 1, 2018, the Corporation will be required to maintain a minimum SLR of 3.0 percent, plus a ~~supplementary~~ leverage buffer of 2.0 percent in order to avoid certain restrictions on capital distributions and discretionary ~~bonuses.~~bonus payments. Insured depository institution subsidiaries of BHCs ~~including BANA,~~ will be required to maintain a minimum 6.0 percent SLR to be considered ~~“well capitalized”~~"well capitalized" under the PCA framework.

Capital Composition and Ratios

Table 1310 presents Bank of America Corporation’s transition and fully phased-in capital ratios and related information in accordance with Basel 3 Standardized and Advanced approaches as measured at December 31, ~~2015~~2016 and ~~2014.~~2015. Fully phased-in estimates are non-GAAP financial measures that the Corporation considers to be useful measures in evaluating compliance with new regulatory capital requirements that are not yet effective. For reconciliations to GAAP financial measures, see Table 13. As of December 31, ~~2015~~2016 and ~~2014,~~2015, the Corporation meets the definition of “well capitalized” under current regulatory requirements.



		46Bank of America ~~2015~~552016



Table 13	Bank of America Corporation Regulatory Capital under Basel 3⁽¹⁾
Table 10																				Bank of America Corporation Regulatory Capital under Basel 3⁽¹⁾

		December 31, 2015																			December 31, 2016
		Transition										Fully Phased-in									Transition								Fully Phased-in
(Dollars in millions)	(Dollars in millions)	Standardized Approach			Advanced Approaches			Regulatory Minimum		Well-capitalized ⁽²⁾		Standardized Approach			Advanced Approaches ⁽³⁾			Regulatory Minimum ⁽⁴⁾		(Dollars in millions)	Standardized Approach			Advanced Approaches			Regulatory Minimum^{(2, 3)}		Standardized Approach			Advanced Approaches ⁽⁴⁾			Regulatory Minimum ⁽⁵⁾
Risk-based capital metrics:	Risk-based capital metrics:																			Risk-based capital metrics:
Common equity tier 1 capital	Common equity tier 1 capital	$	163,026		$	163,026						$	154,084		$	154,084				Common equity tier 1 capital	$	168,866		$	168,866				$	162,729		$	162,729
Tier 1 capital	Tier 1 capital	180,778			180,778							175,814			175,814					Tier 1 capital	190,315			190,315					187,559			187,559
Total capital ⁽⁵⁾		220,676			210,912							211,167			201,403
Total capital ⁽⁶⁾																				Total capital ⁽⁶⁾	228,187			218,981					223,130			213,924
Risk-weighted assets (in billions)	Risk-weighted assets (in billions)	1,403			1,602							1,427			1,575					Risk-weighted assets (in billions)	1,399			1,530					1,417			1,512
Common equity tier 1 capital ratio	Common equity tier 1 capital ratio	11.6		%	10.2		%	4.5	%	n/a		10.8		%	9.8		%	10.0	%	Common equity tier 1 capital ratio	12.1		%	11.0		%	5.875	%	11.5		%	10.8		%	9.5	%
Tier 1 capital ratio	Tier 1 capital ratio	12.9			11.3			6.0		6.0	%	12.3			11.2			11.5		Tier 1 capital ratio	13.6			12.4			7.375		13.2			12.4			11.0
Total capital ratio	Total capital ratio	15.7			13.2			8.0		10.0		14.8			12.8			13.5		Total capital ratio	16.3			14.3			9.375		15.8			14.2			13.0

Leverage-based metrics:	Leverage-based metrics:																			Leverage-based metrics:
Adjusted quarterly average assets (in billions) ⁽⁶⁾		$	2,103		$	2,103						$	2,102		$	2,102
Adjusted quarterly average assets (in billions) ⁽⁷⁾																				Adjusted quarterly average assets (in billions) ⁽⁷⁾	$	2,131		$	2,131				$	2,131		$	2,131
Tier 1 leverage ratio	Tier 1 leverage ratio	8.6		%	8.6		%	4.0		n/a		8.4		%	8.4		%	4.0		Tier 1 leverage ratio	8.9		%	8.9		%	4.0		8.8		%	8.8		%	4.0

SLR leverage exposure (in billions)	SLR leverage exposure (in billions)	$	2,728		$	2,728						$	2,727		$	2,727				SLR leverage exposure (in billions)												$	2,702
SLR	SLR	6.6		%	6.6		%	5.0		n/a		6.4		%	6.4		%	5.0		SLR												6.9		%	5.0

		December 31, 2014																			December 31, 2015
Risk-based capital metrics:	Risk-based capital metrics:																			Risk-based capital metrics:
Common equity tier 1 capital	Common equity tier 1 capital	$	155,361		n/a							$	141,217		$	141,217				Common equity tier 1 capital	$	163,026		$	163,026				$	154,084		$	154,084
Tier 1 capital	Tier 1 capital	168,973			n/a							160,480			160,480					Tier 1 capital	180,778			180,778					175,814			175,814
Total capital ⁽⁵⁾		208,670			n/a							196,115			185,986
Risk-weighted assets (in billions) ⁽⁷⁾		1,262			n/a							1,415			1,465
Total capital ⁽⁶⁾																				Total capital ⁽⁶⁾	220,676			210,912					211,167			201,403
Risk-weighted assets (in billions)																				Risk-weighted assets (in billions)	1,403			1,602					1,427			1,575
Common equity tier 1 capital ratio	Common equity tier 1 capital ratio	12.3		%	n/a			4.0	%	n/a		10.0		%	9.6		%	10.0	%	Common equity tier 1 capital ratio	11.6		%	10.2		%	4.5	%	10.8		%	9.8		%	9.5	%
Tier 1 capital ratio	Tier 1 capital ratio	13.4			n/a			5.5		6.0	%	11.3			11.0			11.5		Tier 1 capital ratio	12.9			11.3			6.0		12.3			11.2			11.0
Total capital ratio	Total capital ratio	16.5			n/a			8.0		10.0		13.9			12.7			13.5		Total capital ratio	15.7			13.2			8.0		14.8			12.8			13.0

Leverage-based metrics:	Leverage-based metrics:																			Leverage-based metrics:
Adjusted quarterly average assets (in billions) ⁽⁶⁾		$	2,060		$	2,060						$	2,057		$	2,057
Adjusted quarterly average assets (in billions) ⁽⁷⁾																				Adjusted quarterly average assets (in billions) ⁽⁷⁾	$	2,103		$	2,103				$	2,102		$	2,102
Tier 1 leverage ratio	Tier 1 leverage ratio	8.2		%	8.2		%	4.0		n/a		7.8		%	7.8		%	4.0		Tier 1 leverage ratio	8.6		%	8.6		%	4.0		8.4		%	8.4		%	4.0

SLR leverage exposure (in billions)	SLR leverage exposure (in billions)	$	2,732		$	2,732						$	2,728		$	2,728				SLR leverage exposure (in billions)												$	2,727
SLR	SLR	6.2		%	6.2		%	5.0		n/a		5.9		%	5.9		%	5.0		SLR												6.4		%	5.0

⁽¹⁾

~~We received approval to begin using the~~As an Advanced approaches ~~capital framework to determine risk-based capital requirements in the fourth quarter of 2015. With the approval to exit parallel run,~~institution, we are required to report regulatory capital risk-weighted assets and ratios under both the Standardized and Advanced approaches. The approach that yields the lower ratio is to be used to assess capital adequacy and was the Advanced approaches method at December 31, ~~2015. Prior to exiting parallel run, we were required to report regulatory capital risk-weighted assets~~2016 and ratios under the Standardized approach only. As previously disclosed, with the approval to exit parallel run, U.S. banking regulators requested modifications to certain internal analytical models including the wholesale (e.g., commercial) credit models which increased our risk-weighted assets in the fourth quarter of 2015.2015.


⁽²⁾	The December 31, 2016 amount includes a transition capital conservation buffer of 0.625 percent and a transition G-SIB surcharge of 0.75 percent. The 2016 countercyclical capital buffer is zero.


⁽³⁾	To be “well capitalized” under the current U.S. banking regulatory agency definitions, ~~a bank holding company~~we must maintain ~~these~~a Total capital ratio of 10 percent or ~~higher ratios and not be subject to a Federal Reserve order or directive to maintain higher capital levels.~~greater.


⁽³⁾⁽⁴⁾	Basel 3 fully phased-in Advanced approaches estimates assume approval by U.S. banking regulators of our internal analytical models, including approval of the internal models methodology (IMM). As of December 31, ~~2015,~~2016, we ~~had~~did not ~~received~~have regulatory approval of the IMM ~~approval.~~model.


⁽⁴⁾⁽⁵⁾	Fully phased-in regulatory minimums assume a capital conservation buffer of 2.5 percent and estimated G-SIB surcharge of ~~3.0~~2.5 percent. The estimated fully phased-in countercyclical capital buffer is zero. We will be subject to fully phased-in regulatory minimums on January 1, 2019. The fully phased-in SLR minimum assumes a leverage buffer of 2.0 percent and is applicable on January 1, 2018.


⁽⁵⁾⁽⁶⁾	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.


⁽⁶⁾⁽⁷⁾	Reflects adjusted average total assets for the three months ended December 31, ~~2015~~2016 and ~~2014~~2015.


⁽⁷⁾	~~On a pro-forma basis, under Basel 3 Standardized – Transition as measured at January 1, 2015, the~~ ~~December 31, 2014~~ ~~risk-weighted assets would have been~~ ~~$1,392 billion~~.

~~n/a = not applicable~~

Common equity tier 1 capital under Basel 3 Advanced – Transition was ~~$163.0~~$168.9 billion at December 31, ~~2015,~~2016, an increase of ~~$7.7~~$5.8 billion compared to December 31, ~~2014~~2015 driven by earnings, partially offset by dividends, common stock repurchases and the impact of certain transition provisions under the Basel 3 rules. ~~For more information on Basel 3 transition provisions, see Table 12.~~ During ~~2015,~~2016, Total capital increased ~~$2.2~~$8.1 billion primarily

driven by the same factors that drove the increase in Common equity tier 1 capital as well as issuances of preferred stock and subordinated ~~debt, partially offset by lower eligible credit reserves included in additional Tier 2 capital. The decrease in eligible credit~~

reserves included in additional Tier 2 capital is due to the change in the calculation of eligible credit reserves under the Advanced approaches. The Corporation began using the Advanced approaches capital framework to determine risk-based capital requirements in the fourth quarter of 2015. For additional information, see Table 14.debt.

Risk-weighted assets ~~increased $341~~decreased $72 billion during ~~2015~~2016 to ~~$1,602~~$1,530 billion primarily due to ~~the change in the calculation of risk-weighted assets from the general risk-based approach at December 31, 2014 to the Basel 3 Advanced approaches.~~lower market risk, and lower exposures and improved credit quality on legacy retail products.



56 ~~Bank of America 2015~~

~~Table 14 presents the capital composition as measured under Basel 3 – Transition at December 31, 2015 and 2014.~~

Table 14
Capital Composition under Basel 3 – Transition ⁽¹⁾

December 31
(Dollars in millions) 2015 2014
Total common shareholders’ equity $ 233,932
$ 224,162
Goodwill (69,215 ) (69,234 )
Deferred tax assets arising from net operating loss and tax credit carryforwards (3,434 ) (2,226 )
Unamortized net periodic benefit costs recorded in accumulated OCI, net-of-tax 1,774
2,680
Net unrealized (gains) losses on AFS debt and equity securities and net (gains) losses on derivatives recorded in accumulated OCI, net-of-tax 1,220
573
Intangibles, other than mortgage servicing rights and goodwill (1,039 ) (639 )
DVA related to liabilities and derivatives 204
231
Other (416 ) (186 )
Common equity tier 1 capital 163,026
155,361
Qualifying preferred stock, net of issuance cost 22,273
19,308
Deferred tax assets arising from net operating loss and tax credit carryforwards (5,151 ) (8,905 )
Trust preferred securities 1,430
2,893
Defined benefit pension fund assets (568 ) (599 )
DVA related to liabilities and derivatives under transition 307
925
Other (539 ) (10 )
Total Tier 1 capital 180,778
168,973
Long-term debt qualifying as Tier 2 capital 22,579
21,186
Allowance for loan and lease losses included in Tier 2 capital n/a
14,634
Eligible credit reserves included in Tier 2 capital 3,116
n/a
Nonqualifying capital instruments subject to phase out from Tier 2 capital 4,448
3,881
Other (9 ) (4 )
Total Basel 3 Capital $ 210,912
$ 208,670


⁽¹⁾	~~See~~ ~~Table 13, footnote 1.~~

~~n/a = not applicable~~

~~Table 15 presents the components of our risk-weighted assets as measured under Basel 3 – Transition at December 31, 2015 and 2014.~~

Table 15 Risk-weighted assets under Basel 3 – Transition

December 31
2015 2014
(Dollars in billions) Standardized Approach Advanced Approaches Standardized Approach Advanced Approaches
Credit risk $ 1,314
$ 940
$ 1,169
n/a
Market risk 89
86
93
n/a
Operational risk n/a
500
n/a
n/a
Risks related to CVA n/a
76
n/a
n/a
Total risk-weighted assets $ 1,403
$ 1,602
$ 1,262
n/a

~~n/a = not applicable~~



		Bank of America ~~2015~~2016 5747

Table 1611 presents the capital composition as measured under Basel 3 – Transition at December 31, 2016 and 2015.




Table 11	Capital Composition under Basel 3 – Transition ^{(1, 2)}

		December 31
(Dollars in millions)		2016			2015
Total common shareholders’ equity		$	241,620		$	233,932
Goodwill		(69,191		)	(69,215		)
Deferred tax assets arising from net operating loss and tax credit carryforwards		(4,976		)	(3,434		)
Adjustments for amounts recorded in accumulated OCI attributed to defined benefit postretirement plans		1,392			1,774
Net unrealized (gains) losses on debt and equity securities and net (gains) losses on derivatives recorded in accumulated OCI, net-of-tax		1,402			1,220
Intangibles, other than mortgage servicing rights and goodwill		(1,198		)	(1,039		)
DVA related to liabilities and derivatives		413			204
Other		(596		)	(416		)
Common equity tier 1 capital		168,866			163,026
Qualifying preferred stock, net of issuance cost		25,220			22,273
Deferred tax assets arising from net operating loss and tax credit carryforwards		(3,318		)	(5,151		)
Trust preferred securities		—			1,430
Defined benefit pension fund assets		(341		)	(568		)
DVA related to liabilities and derivatives under transition		276			307
Other		(388		)	(539		)
Total Tier 1 capital		190,315			180,778
Long-term debt qualifying as Tier 2 capital		23,365			22,579
Eligible credit reserves included in Tier 2 capital		3,035			3,116
Nonqualifying capital instruments subject to phase out from Tier 2 capital		2,271			4,448
Other		(5		)	(9		)
Total Basel 3 Capital		$	218,981		$	210,912


⁽¹⁾	See Table 10, footnote 1.


⁽²⁾	Deductions from and adjustments to regulatory capital subject to transition provisions under Basel 3 are generally recognized in 20 percent annual increments, and will be fully recognized as of January 1, 2018. Any assets that are a direct deduction from the computation of capital are excluded from risk-weighted assets and adjusted average total assets.

Table 12 presents the components of our risk-weighted assets as measured under Basel 3 – Transition at December 31, 2016 and 2015.




Table 12	Risk-weighted assets under Basel 3 – Transition

		December 31
		2016				2015
(Dollars in billions)		Standardized Approach		Advanced Approaches		Standardized Approach		Advanced Approaches
Credit risk		$	1,334	$	903	$	1,314	$	940
Market risk		65		63		89		86
Operational risk		n/a		500		n/a		500
Risks related to CVA		n/a		64		n/a		76
Total risk-weighted assets		$	1,399	$	1,530	$	1,403	$	1,602

n/a = not applicable



48 Bank of America 2016



Table 16	Regulatory Capital Reconciliations between Basel 3 Transition to Fully Phased-in ⁽¹⁾
Table 13								Regulatory Capital Reconciliations between Basel 3 Transition to Fully Phased-in ⁽¹⁾

		December 31							December 31
(Dollars in millions)	(Dollars in millions)	2015			2014			(Dollars in millions)	2016			2015
Common equity tier 1 capital (transition)	Common equity tier 1 capital (transition)	$	163,026		$	155,361		Common equity tier 1 capital (transition)	$	168,866		$	163,026
Deferred tax assets arising from net operating loss and tax credit carryforwards phased in during transition	Deferred tax assets arising from net operating loss and tax credit carryforwards phased in during transition	(5,151		)	(8,905		)	Deferred tax assets arising from net operating loss and tax credit carryforwards phased in during transition	(3,318		)	(5,151		)
Accumulated OCI phased in during transition	Accumulated OCI phased in during transition	(1,917		)	(1,592		)	Accumulated OCI phased in during transition	(1,899		)	(1,917		)
Intangibles phased in during transition	Intangibles phased in during transition	(1,559		)	(2,556		)	Intangibles phased in during transition	(798		)	(1,559		)
Defined benefit pension fund assets phased in during transition	Defined benefit pension fund assets phased in during transition	(568		)	(599		)	Defined benefit pension fund assets phased in during transition	(341		)	(568		)
DVA related to liabilities and derivatives phased in during transition	DVA related to liabilities and derivatives phased in during transition	307			925			DVA related to liabilities and derivatives phased in during transition	276			307
Other adjustments and deductions phased in during transition	Other adjustments and deductions phased in during transition	(54		)	(1,417		)	Other adjustments and deductions phased in during transition	(57		)	(54		)
Common equity tier 1 capital (fully phased-in)	Common equity tier 1 capital (fully phased-in)	154,084			141,217			Common equity tier 1 capital (fully phased-in)	162,729			154,084
Additional Tier 1 capital (transition)	Additional Tier 1 capital (transition)	17,752			13,612			Additional Tier 1 capital (transition)	21,449			17,752
Deferred tax assets arising from net operating loss and tax credit carryforwards phased out during transition	Deferred tax assets arising from net operating loss and tax credit carryforwards phased out during transition	5,151			8,905			Deferred tax assets arising from net operating loss and tax credit carryforwards phased out during transition	3,318			5,151
Trust preferred securities phased out during transition	Trust preferred securities phased out during transition	(1,430		)	(2,893		)	Trust preferred securities phased out during transition	—			(1,430		)
Defined benefit pension fund assets phased out during transition	Defined benefit pension fund assets phased out during transition	568			599			Defined benefit pension fund assets phased out during transition	341			568
DVA related to liabilities and derivatives phased out during transition	DVA related to liabilities and derivatives phased out during transition	(307		)	(925		)	DVA related to liabilities and derivatives phased out during transition	(276		)	(307		)
Other transition adjustments to additional Tier 1 capital	Other transition adjustments to additional Tier 1 capital	(4		)	(35		)	Other transition adjustments to additional Tier 1 capital	(2		)	(4		)
Additional Tier 1 capital (fully phased-in)	Additional Tier 1 capital (fully phased-in)	21,730			19,263			Additional Tier 1 capital (fully phased-in)	24,830			21,730
Tier 1 capital (fully phased-in)	Tier 1 capital (fully phased-in)	175,814			160,480			Tier 1 capital (fully phased-in)	187,559			175,814
Tier 2 capital (transition)	Tier 2 capital (transition)	30,134			39,697			Tier 2 capital (transition)	28,666			30,134
Nonqualifying capital instruments phased out during transition	Nonqualifying capital instruments phased out during transition	(4,448		)	(3,881		)	Nonqualifying capital instruments phased out during transition	(2,271		)	(4,448		)
Changes in Tier 2 qualifying allowance for credit losses and others		9,667			(181		)
Other adjustments to Tier 2 capital								Other adjustments to Tier 2 capital	9,176			9,667
Tier 2 capital (fully phased-in)	Tier 2 capital (fully phased-in)	35,353			35,635			Tier 2 capital (fully phased-in)	35,571			35,353
Basel 3 Standardized approach Total capital (fully phased-in)	Basel 3 Standardized approach Total capital (fully phased-in)	211,167			196,115			Basel 3 Standardized approach Total capital (fully phased-in)	223,130			211,167
Change in Tier 2 qualifying allowance for credit losses	Change in Tier 2 qualifying allowance for credit losses	(9,764		)	(10,129		)	Change in Tier 2 qualifying allowance for credit losses	(9,206		)	(9,764		)
Basel 3 Advanced approaches Total capital (fully phased-in)	Basel 3 Advanced approaches Total capital (fully phased-in)	$	201,403		$	185,986		Basel 3 Advanced approaches Total capital (fully phased-in)	$	213,924		$	201,403

Risk-weighted assets – As reported to Basel 3 (fully phased-in)	Risk-weighted assets – As reported to Basel 3 (fully phased-in)							Risk-weighted assets – As reported to Basel 3 (fully phased-in)
Basel 3 Standardized approach risk-weighted assets as reported	Basel 3 Standardized approach risk-weighted assets as reported	$	1,403,293		$	1,261,544		Basel 3 Standardized approach risk-weighted assets as reported	$	1,399,477		$	1,403,293
Changes in risk-weighted assets from reported to fully phased-in	Changes in risk-weighted assets from reported to fully phased-in	24,089			153,722			Changes in risk-weighted assets from reported to fully phased-in	17,638			24,089
Basel 3 Standardized approach risk-weighted assets (fully phased-in)	Basel 3 Standardized approach risk-weighted assets (fully phased-in)	$	1,427,382		$	1,415,266		Basel 3 Standardized approach risk-weighted assets (fully phased-in)	$	1,417,115		$	1,427,382

Basel 3 Advanced approaches risk-weighted assets as reported	Basel 3 Advanced approaches risk-weighted assets as reported	$	1,602,373		n/a			Basel 3 Advanced approaches risk-weighted assets as reported	$	1,529,903		$	1,602,373
Changes in risk-weighted assets from reported to fully phased-in	Changes in risk-weighted assets from reported to fully phased-in	(27,690		)	n/a			Changes in risk-weighted assets from reported to fully phased-in	(18,113		)	(27,690		)
Basel 3 Advanced approaches risk-weighted assets (fully phased-in) ⁽²⁾	Basel 3 Advanced approaches risk-weighted assets (fully phased-in) ⁽²⁾	$	1,574,683		$	1,465,479		Basel 3 Advanced approaches risk-weighted assets (fully phased-in) ⁽²⁾	$	1,511,790		$	1,574,683


⁽¹⁾	See Table 1310, footnote 1.


⁽²⁾	Basel 3 fully phased-in Advanced approaches estimates assume approval by U.S. banking regulators of our internal analytical models, including approval of the ~~internal models methodology (IMM).~~IMM. As of December 31, ~~2015,~~2016, we ~~had~~did not ~~received~~have regulatory approval for the IMM ~~approval.~~model.

~~n/a = not applicable~~



		58Bank of America ~~2015~~201649

Bank of America, N.A. Regulatory Capital

Table 1714 presents transition regulatory capital information for BANA in accordance with Basel 3 Standardized and Advanced ~~Approaches~~approaches as measured at December 31, ~~2015~~2016 and ~~2014.~~2015. As of December 31, 2016, BANA met the definition of “well capitalized” under the PCA framework.



Table 17	Bank of America, N.A. Regulatory Capital under Basel 3
Table 14														Bank of America, N.A. Regulatory Capital under Basel 3

		December 31, 2015													December 31, 2016
		Standardized Approach						Advanced Approaches							Standardized Approach						Advanced Approaches
(Dollars in millions)	(Dollars in millions)	Ratio		Amount		Minimum Required⁽¹⁾		Ratio		Amount		Minimum Required ⁽¹⁾		(Dollars in millions)	Ratio		Amount		Minimum Required⁽¹⁾		Ratio		Amount		Minimum Required ⁽¹⁾
Common equity tier 1 capital	Common equity tier 1 capital	12.2	%	$	144,869	6.5	%	13.1	%	$	144,869	6.5	%	Common equity tier 1 capital	12.7	%	$	149,755	6.5	%	14.3	%	$	149,755	6.5	%
Tier 1 capital	Tier 1 capital	12.2		144,869		8.0		13.1		144,869		8.0		Tier 1 capital	12.7		149,755		8.0		14.3		149,755		8.0
Total capital	Total capital	13.5		159,871		10.0		13.6		150,624		10.0		Total capital	13.9		163,471		10.0		14.8		154,697		10.0
Tier 1 leverage	Tier 1 leverage	9.2		144,869		5.0		9.2		144,869		5.0		Tier 1 leverage	9.3		149,755		5.0		9.3		149,755		5.0

		December 31, 2014													December 31, 2015
Common equity tier 1 capital	Common equity tier 1 capital	13.1	%	$	145,150	4.0	%	n/a		n/a		4.0	%	Common equity tier 1 capital	12.2	%	$	144,869	6.5	%	13.1	%	$	144,869	6.5	%
Tier 1 capital	Tier 1 capital	13.1		145,150		6.0		n/a		n/a		6.0		Tier 1 capital	12.2		144,869		8.0		13.1		144,869		8.0
Total capital	Total capital	14.6		161,623		10.0		n/a		n/a		10.0		Total capital	13.5		159,871		10.0		13.6		150,624		10.0
Tier 1 leverage	Tier 1 leverage	9.6		145,150		5.0		n/a		n/a		5.0		Tier 1 leverage	9.2		144,869		5.0		9.2		144,869		5.0


⁽¹⁾	Percent required to meet guidelines to be considered “well capitalized” under the ~~Prompt Corrective Action framework, except for the~~ ~~December 31, 2014~~ ~~Common equity tier 1 capital which reflects capital adequacy minimum requirements as an Advanced approaches bank under Basel 3 during a transition period that ended in 2014.~~ PCA framework.

~~n/a = not applicable~~

Regulatory Developments

~~Global Systemically Important Bank Surcharge~~

We have been designated as a G-SIB and as such, are subject to a risk-based capital surcharge (G-SIB surcharge) that must be satisfied with Common equity tier 1 capital. The surcharge assessment methodology published by the Basel Committee on Banking Supervision (Basel Committee) relies on an indicator-based measurement approach (e.g., size, complexity, cross-jurisdictional activity, inter-connectedness and substitutability/financial institution infrastructure) to determine a score relative to the global banking industry. Institutions with the highest scores are designated as G-SIBs and are assigned to one of four loss absorbency buckets from ~~1.0 percent~~ to ~~2.5 percent, in~~ ~~0.5 percent~~ ~~increments based on each institution’s relative score and supervisory judgment. A fifth loss absorbency bucket of 3.5 percent serves to discourage banks from becoming more systemically important.~~

In July 2015, the Federal Reserve finalized a regulation that will implement G-SIB surcharge requirements for the largest U.S. BHCs. Under the final rule, assignment to loss absorbency buckets will be determined by the higher score as calculated according to two methods. Method 1 is consistent with the Basel Committee’s methodology, whereas method 2 replaces the substitutability/financial institution infrastructure indicator with a measure of short-term wholesale funding and then determines the overall score by applying a fixed multiplier for each of the other systemic indicators. Under the final U.S. rules, the G-SIB surcharge is being phased in beginning on January 1, 2016, becoming fully effective on January 1, 2019. Once fully phased in, we estimate that our G-SIB surcharge will increase our risk-based capital ratio requirements by 3.0 percent under method 2 and 1.5 percent under method 1.

~~For more information on regulatory capital, see~~ ~~Note 16 – Regulatory Requirements and Restrictions~~ ~~to the Consolidated Financial Statements.~~

Minimum Total Loss-Absorbing Capacity

On ~~October 30, 2015,~~December 15, 2016, the Federal Reserve issued a ~~notice of proposed rulemaking to establish~~final rule establishing external total loss-absorbing capacity (TLAC) requirements to improve the resolvability and resiliency of large, interconnected BHCs. ~~Under the proposal,~~The rule will be effective January 1, 2019 and U.S. G-SIBs ~~would~~will be required to maintain a minimum external TLAC. We estimate our minimum required external TLAC ofwould be the greater of ~~(1) 16~~22.5 percent of risk-weighted assets in 2019, increasing to 18 percent of risk-weighted assets in 2022 (plus additional TLAC equal to enough Common equity tier 1 capital as a percentage of risk-weighted assets to cover the capital conservation buffer, any applicable countercyclical capital buffer plus the applicable method 1 G-SIB surcharge), or ~~(2)~~ 9.5 percent of ~~the denominator of the SLR.~~SLR leverage exposure. In addition, U.S. G-SIBs must meet a minimum long-term debt ~~requirement equal~~requirement. Our minimum required long-term debt is estimated to be the greater of ~~(1) 6.0~~8.5 percent of risk-weighted assets ~~plus the applicable method 2 G-SIB surcharge,~~ or ~~(2)~~ 4.5 percent of ~~the denominator~~SLR leverage exposure. The impact of the ~~SLR.~~TLAC rule is not expected to be material to our results of operations. The Corporation issued $11.6 billion of TLAC compliant debt in early 2017.

Revisions to Approaches for Measuring ~~Risk-Weighted~~Risk-weighted Assets

The Basel Committee has several open proposals to revise key methodologies for measuring risk-weighted assets. The proposals include a standardized approach for credit risk, standardized ~~approaches~~approach for operational risk, revisions to the ~~securitization~~credit valuation adjustment (CVA) risk framework and constraints on the use of internal models. The Basel Committee has also finalized a revised standardized model for counterparty credit risk, revisions to the ~~CVA risk framework. In January 2016, the Basel Committee finalized~~securitization framework and its fundamental review of the trading book, which updates both modeled and standardized approaches for market risk measurement. ~~A revised standardized model for counterparty credit risk has also previously been finalized.~~ These revisions ~~would~~are to be coupled with a proposed capital floor framework to limit the extent to which banks can reduce risk-weighted asset levels through the use of internal ~~models.~~models, both at the input parameter and aggregate risk-weighted asset level. The Basel Committee expects to finalize the outstanding proposals ~~by the end of 2016. Once the proposals are finalized,~~in 2017. U.S. banking regulators may update the U.S. Basel 3 rules to incorporate the Basel Committee revisions.

Single-Counterparty Credit Limits



		~~Bank of America 2015~~59On March 4, 2016, the Federal Reserve issued a notice of proposed rulemaking (NPR) to establish Single-Counterparty Credit Limits (SCCL) for large U.S. BHCs. The SCCL rule is designed to complement and serve as a backstop to risk-based capital requirements to ensure that the maximum possible loss that a bank could incur due to a single counterparty’s default would not endanger the bank’s survival. Under the proposal, U.S. BHCs must calculate SCCL by dividing the net aggregate credit exposure to a given counterparty by a bank’s eligible Tier 1 capital base, ensuring that exposure to G-SIBs and other nonbank systemically important financial institutions does not breach 15 percent and exposures to other counterparties do not breach 25 percent. Capital Requirements for Swap Dealers On December 2, 2016, the Commodity Futures Trading Commission issued an NPR 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 must meet capital requirements under one of two approaches. The first approach is a bank-based capital approach which requires that firms maintain Common equity tier 1 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.

Broker-dealer Regulatory Capital and Securities Regulation

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



50 Bank of America 2016

merchants and are subject to the Commodity Futures Trading Commission Regulation 1.17.

MLPF&S has elected to compute the minimum capital requirement in accordance with the Alternative Net Capital Requirement as permitted by SEC Rule 15c3-1. At December 31, ~~2015,~~2016, MLPF&S’s regulatory net capital as defined by Rule 15c3-1 was ~~$11.4~~$11.9 billion and exceeded the minimum requirement of ~~$1.5~~$1.8 billion by ~~$9.9~~$10.1 billion. MLPCC’s net capital of ~~$3.3~~$2.8 billion exceeded the minimum requirement of ~~$473~~$481 million by ~~$2.8~~$2.3 billion.

In accordance with the Alternative Net Capital Requirements, MLPF&S is required to maintain tentative net capital in excess of $1.0 billion, net capital in excess of $500 million and notify the SEC in the event its tentative net capital is less than $5.0 billion. At December 31, ~~2015,~~2016, MLPF&S had tentative net capital and net capital in excess of the minimum and notification requirements.

Merrill Lynch International (MLI), a U.K. investment firm, is regulated by the Prudential Regulation Authority and the Financial Conduct Authority, and is subject to certain regulatory capital requirements. At December 31, ~~2015,~~2016, MLI’s capital resources were ~~$34.4~~$34.9 billion which exceeded the minimum requirement of ~~$16.6~~$14.8 billion.

~~Common Stock Dividends~~

~~For a summary of our declared quarterly cash dividends on common stock during~~ ~~2015~~ ~~and through~~ ~~February 24, 2016, see~~ ~~Note 13 – Shareholders’ Equityto the Consolidated Financial Statements~~.

Liquidity Risk

Funding and Liquidity Risk Management

Liquidity risk is the ~~potential~~ inability to meet expected or unexpected cash flow and collateral needs while continuing to support our ~~business~~businesses and ~~customer needs~~customers with the appropriate funding sources under a range of economic conditions. Our primary liquidity risk management objective is to meet all contractual and contingent financial obligations at all times, including during periods of stress. To achieve that objective, we analyze and monitor our liquidity risk under expected and stressed conditions, maintain ~~excess~~ liquidity and access to diverse funding sources, including our stable deposit base, and seek to align liquidity-related incentives and risks.

We define ~~excess~~ 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 ~~risk~~ management within Corporate Treasury 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 ~~the Corporation’s~~our liquidity policy and the ERC approves the contingency funding plan, including establishing liquidity risk tolerance levels. The MRC monitors our liquidity position and reviews the impact of strategic decisions on our liquidity. The MRC is responsible for overseeing liquidity risks and ~~maintaining~~directing management to maintain exposures within the established tolerance levels. The MRC reviews and monitors our liquidity position, cash flow forecasts, stress testing scenarios and results, and ~~implements our~~reviews and approves certain liquidity ~~limits and guidelines.~~risk limits. For additional information, see Managing Risk on page ~~49.~~41. Under this governance framework, we have developed certain funding and liquidity risk management practices which include: maintaining ~~excess~~ liquidity at the parent company and selected subsidiaries, including our bank subsidiaries and other regulated entities; determining what

amounts of ~~excess~~ 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.

Global ~~Excess~~ Liquidity Sources and Other Unencumbered Assets

We maintain ~~excess~~ liquidity available to ~~Bank of America~~the Corporation, including the parent company and selected subsidiaries, in the form of cash and high-quality, liquid, unencumbered securities. Our liquidity buffer, orreferred to as Global Liquidity Sources (GLS), formerly Global Excess Liquidity Sources, ~~(GELS),~~ 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 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 and supranational securities. We believe we can quickly obtain cash for these securities, even in stressed conditions, through repurchase agreements or outright sales. We hold our ~~GELS~~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.

Our ~~GELS~~GLS are substantially the same in composition to what qualifies as High Quality Liquid Assets (HQLA) under the final U.S. ~~LCR~~Liquidity Coverage Ratio (LCR) rules. For more information on the final LCR rules, see Liquidity Risk – Basel 3 Liquidity Standards on page 6253.



		60Bank of America ~~2015~~201651

Our ~~GELS~~GLS were $~~504~~499 billion and $~~439~~504 billion at December 31, ~~2015~~2016 and ~~2014~~2015, and were ~~maintained~~ as ~~presented~~shown in Table 1815.



Table 18	Global Excess Liquidity Sources
Table 15								Global Liquidity Sources

		December 31				Average for Three Months Ended December 31 2015			December 31				Average for Three Months Ended December 31 2016
(Dollars in billions)	(Dollars in billions)	2015		2014				(Dollars in billions)	2016		2015
Parent company		$	96	$	98	$	96
Parent company and NB Holdings								Parent company and NB Holdings	$	76	$	96	$	77
Bank subsidiaries	Bank subsidiaries	361		306		369		Bank subsidiaries	372		361		389
Other regulated entities	Other regulated entities	47		35		45		Other regulated entities	51		47		49
Total Global Excess Liquidity Sources		$	504	$	439	$	510
Total Global Liquidity Sources								Total Global Liquidity Sources	$	499	$	504	$	515

As shown in Table 1815, parent company ~~GELS~~and NB Holdings liquidity totaled$76 billion and $96 billion ~~and~~ ~~$98 billion~~at December 31, ~~2015~~2016 and ~~2014.~~2015. The decrease in parent company and NB Holdings liquidity was primarily due to ~~derivative cash collateral outflows, common stock buy-backs~~the BNY Mellon settlement payment in the first quarter of 2016 and ~~dividends, partially offset by net subsidiary inflows.~~prepositioning liquidity to subsidiaries in connection with resolution planning. Typically, parent company ~~excess~~and NB Holdings liquidity is in the form of cash deposited with BANA.

~~GELS available to~~Liquidity held at our bank subsidiaries totaled $~~361~~372 billion and $~~306~~361 billion at December 31, ~~2015~~2016 and ~~2014.~~2015. The increase in bank subsidiaries’ liquidity was primarily due to deposit ~~inflows,~~growth, partially offset by loan growth. ~~GELS~~Liquidity at bank subsidiaries ~~exclude~~excludes the cash deposited by the parent ~~company.~~company and NB Holdings. Our bank subsidiaries can also generate incremental liquidity by pledging a range of ~~other~~ unencumbered loans and securities to certain ~~Federal Home Loan Banks (FHLBs)~~FHLBs and the Federal Reserve Discount Window. The cash we could have obtained by borrowing against this pool of specifically-identified eligible assets was ~~$252~~$310 billion and ~~$214~~$252 billion at December 31, ~~2015~~2016 and ~~2014.~~2015. 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 can only be transferred to the parent company or nonbank subsidiaries with prior regulatory approval.

~~GELS available to~~Liquidity held at our other regulated entities, comprised primarily of broker-dealer subsidiaries, totaled $4751 billion and $3547 billion at December 31, ~~2015~~2016 and ~~2014. The increase in liquidity in other regulated entities is largely driven by parent company liquidity contributions to the Corporation’s primary U.S. broker-dealer.~~2015. Our other regulated entities also held ~~other~~ unencumbered investment-grade securities and equities that we believe could be used to generate additional liquidity. Liquidity held in an other regulated entity is primarily available to meet the obligations of that entity and transfers to the parent company or to any other subsidiary may be subject to prior regulatory approval due to regulatory restrictions and minimum requirements.

Table 1916 presents the composition of ~~GELS~~GLS at December 31, ~~2015~~2016 and ~~2014.~~2015.



Table 19	Global Excess Liquidity Sources Composition
Table 16						Global Liquidity Sources Composition

		December 31					December 31
(Dollars in billions)	(Dollars in billions)	2015		2014		(Dollars in billions)	2016		2015
Cash on deposit	Cash on deposit	$	119	$	97	Cash on deposit	$	106	$	119
U.S. Treasury securities	U.S. Treasury securities	38		74		U.S. Treasury securities	58		38
U.S. agency securities and mortgage-backed securities	U.S. agency securities and mortgage-backed securities	327		252		U.S. agency securities and mortgage-backed securities	318		327
Non-U.S. government and supranational securities	Non-U.S. government and supranational securities	20		16		Non-U.S. government and supranational securities	17		20
Total Global Excess Liquidity Sources		$	504	$	439
Total Global Liquidity Sources						Total Global Liquidity Sources	$	499	$	504

Time-to-required Funding and Liquidity Stress ~~Modeling~~Analysis

We use a variety of metrics to determine the appropriate amounts of ~~excess~~ liquidity to maintain at the parent company and our ~~bank subsidiaries and other regulated entities.~~subsidiaries. One metric we use to evaluate the appropriate level of ~~excess~~ liquidity at the parent company and NB Holdings is “time-to-required ~~funding.~~funding (TTF).” This debt coverage measure indicates the number of months ~~that~~ the parent company can continue to meet its unsecured contractual obligations as they come due using only the parent ~~company’s~~company and NB Holdings' liquidity sources without issuing any new debt or accessing any additional liquidity sources. We define unsecured contractual obligations for purposes of this metric as maturities of senior or subordinated debt issued or guaranteed by Bank of America Corporation. These include certain unsecured debt instruments, primarily structured liabilities, which we may be required to settle for cash prior to maturity. Prior to the third quarter of 2016, TTF incorporated only the liquidity of the parent company. During the third quarter of 2016, TTF was expanded to include the liquidity of NB Holdings, following changes in our liquidity management practices, initiated in connection with the Corporation's resolution planning activities, that include maintaining at NB Holdings certain liquidity previously held solely at the parent company. Our ~~time-to-required funding~~TTF was 3935 months at December 31, ~~2015. For purposes of calculating time-to-required funding, at~~ ~~December 31, 2015~~, we have included in the amount of unsecured contractual obligations $8.5 billion related to the BNY Mellon Settlement. The final conditions of the settlement have been satisfied and, accordingly, the Corporation made the settlement payment in February 2016. ~~For more information on the BNY Mellon Settlement, see~~ ~~Note 7 – Representations and Warranties Obligations and Corporate Guarantees~~ ~~to the Consolidated Financial Statements.~~

We also utilize liquidity stress analysis to assist us in determining the appropriate amounts of ~~excess~~ liquidity to maintain at the parent company and our ~~bank subsidiaries and other regulated entities.~~subsidiaries. The liquidity stress testing process is an integral part of analyzing our potential contractual and contingent cash ~~outflows beyond the outflows considered in the time-to-required funding analysis.~~outflows. We evaluate the liquidity requirements under a range of scenarios with varying levels of severity and time horizons. The scenarios we consider and utilize incorporate market-wide and Corporation-specific events, including potential credit rating downgrades for the parent company and our subsidiaries, and 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.



		52Bank of America ~~2015~~612016

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

~~Basel 3 Liquidity Standards~~Contingency Planning

~~The Basel Committee has issued two liquidity risk-related standards~~We have developed and maintain contingency plans that are ~~considered part~~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, Contingency Funding Plan 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 ~~Basel 3~~major risk categories along with credit, market, liquidity, ~~standards: the LCR~~compliance, operational and ~~the Net Stable Funding Ratio (NSFR).~~

~~In 2014, U.S. banking regulators finalized LCR requirements for the largest U.S. financial institutions on~~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 consolidated basis and for their subsidiary depository institutions with total assets greater than $10 billion. 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. Under the final rule, an initial minimum LCR of 80 percent was required as of January 2015, increased to 90 percent as of January 2016 and will increase to 100 percent in January 2017. These minimum requirements are applicable to the Corporation on a consolidated basis and to our insured depository institutions. As of December 31, 2015, we estimate that the consolidated Corporation was above the 2017 LCR requirements. The Corporation’s LCR may fluctuate from period to period due to normal business flows from customer activity.

In 2014, the Basel Committee issued a final standard for the NSFR, the standard that is intended to reduce funding risk over a longer time horizon. The NSFR is designed to ensure an appropriate amount of stable funding, generally capital and liabilities maturing beyond one year, given the mix of assets and off-balance sheet items. The final standard aligns the NSFR to the LCR and gives more credit to a wider range of funding. The final standard also includes adjustments to the stable funding required for certain types of assets, some of which reduce the stable funding requirement and some of which increase it. Basel Committee standards generally do not apply directly to U.S. financial institutions, but require adoption by U.S. banking regulators. U.S. banking regulators are expected to propose a similar NSFR regulation applicable to U.S. financial institutions in the near future. We expect to meet the NSFR requirement within the regulatory timeline.

~~Diversified Funding Sources~~

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

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

~~We fund a substantial portion of our lending activities through our deposits, which were~~ ~~$1.20 trillion~~ ~~and $1.12 trillion at December 31, 2015 and 2014. 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 Federal Deposit Insurance Corporation (FDIC). We consider a substantial portion of our deposits to be a stable, low-cost and consistent source of funding. We believe this deposit funding is generally less sensitive to interest rate changes, market volatility or changes in our credit ratings than wholesale funding sources. Our lending activities may also be financed through secured borrowings, including credit card securitizations and securitizations with GSEs, the FHA and private-label investors, as well as FHLBs 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 sensitivetimely manner 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 termsthe regulatory, macroeconomic or ~~significant reductions~~competitive environments, in the ~~availability~~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.

Significant strategic actions, such as capital actions, material acquisitions or divestitures, and Resolution Plans are reviewed and approved by the ~~liquidity risks arising from secured funding by sourcing funding globally from a diverse group~~Board. At the business level, processes are in place to discuss the strategic risk implications of ~~counterparties, providing a range of securities collateral~~new, expanded or modified businesses, products or services and ~~pursuing longer durations, when appropriate. For more information on secured financing agreements, see~~ ~~Note 10 – Federal Funds Sold or Purchased, Securities Financing Agreements and Short-term Borrowingsto the Consolidated Financial Statements~~.

~~We issue long-term unsecured debt in a variety of maturities and currencies to achieve cost-efficient funding~~other strategic initiatives, and to ~~maintain an appropriate maturity profile. While~~provide formal review and approval where required. With oversight by the ~~cost~~Board and ~~availability of unsecured funding may be negatively impacted by general market conditions or by matters specific~~the ERC, executive management performs similar analyses throughout the year, and evaluates changes to the financial ~~services industry~~forecast or the ~~Corporation, we seek~~risk, capital or liquidity positions as deemed appropriate to ~~mitigate refinancing~~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 ~~actively managing~~ the ~~amount~~Board, executive management assesses the risk-adjusted returns of ~~our borrowings that we anticipate will mature within any month or quarter.~~

~~During 2015, we issued $43.7 billion of long-term debt, consisting of $26.4 billion for Bank of America Corporation, $10.0 billion for Bank of America, N.A.~~each business in approving strategic and ~~$7.3 billion of other debt.~~financial operating plans. The businesses use allocated capital to define business strategies, and price products and transactions.



6244 Bank of America ~~2015~~2016

~~Table 20~~ ~~presents~~Capital Management

The Corporation manages its capital position so its capital is more than adequate to support its business activities and to maintain capital, risk and risk appetite commensurate with one another. 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 ~~long-term debt~~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.

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 CCAR capital plan.

In April 2016, we submitted our 2016 CCAR capital plan and related supervisory stress tests. The 2016 CCAR capital plan included requests: (i) to repurchase $5.0 billion of common stock

During 2016, we repurchased approximately $5.1 billion of common stock pursuant to the Board’s authorization of our 2016 and 2015 CCAR capital plans and to offset equity-based compensation awards.

Regulatory Capital

As a financial services holding company, we are subject to regulatory capital rules issued by ~~major currency~~U.S. banking regulators including Basel 3, which includes certain transition provisions through January 1, 2019. The Corporation and its primary affiliated banking entity, BANA, are Basel 3 Advanced approaches institutions.



		Bank of America 201645

Basel 3 Overview

Minimum Capital Requirements

Supplementary Leverage Ratio

Capital Composition and Ratios



46 Bank of America 2016




Table 10	Bank of America Corporation Regulatory Capital under Basel 3⁽¹⁾

		December 31, 2016
		Transition								Fully Phased-in
(Dollars in millions)		Standardized Approach			Advanced Approaches			Regulatory Minimum^{(2, 3)}		Standardized Approach			Advanced Approaches ⁽⁴⁾			Regulatory Minimum ⁽⁵⁾
Risk-based capital metrics:
Common equity tier 1 capital		$	168,866		$	168,866				$	162,729		$	162,729
Tier 1 capital		190,315			190,315					187,559			187,559
Total capital ⁽⁶⁾		228,187			218,981					223,130			213,924
Risk-weighted assets (in billions)		1,399			1,530					1,417			1,512
Common equity tier 1 capital ratio		12.1		%	11.0		%	5.875	%	11.5		%	10.8		%	9.5	%
Tier 1 capital ratio		13.6			12.4			7.375		13.2			12.4			11.0
Total capital ratio		16.3			14.3			9.375		15.8			14.2			13.0

Leverage-based metrics:
Adjusted quarterly average assets (in billions) ⁽⁷⁾		$	2,131		$	2,131				$	2,131		$	2,131
Tier 1 leverage ratio		8.9		%	8.9		%	4.0		8.8		%	8.8		%	4.0

SLR leverage exposure (in billions)													$	2,702
SLR													6.9		%	5.0

		December 31, 2015
Risk-based capital metrics:
Common equity tier 1 capital		$	163,026		$	163,026				$	154,084		$	154,084
Tier 1 capital		180,778			180,778					175,814			175,814
Total capital ⁽⁶⁾		220,676			210,912					211,167			201,403
Risk-weighted assets (in billions)		1,403			1,602					1,427			1,575
Common equity tier 1 capital ratio		11.6		%	10.2		%	4.5	%	10.8		%	9.8		%	9.5	%
Tier 1 capital ratio		12.9			11.3			6.0		12.3			11.2			11.0
Total capital ratio		15.7			13.2			8.0		14.8			12.8			13.0

Leverage-based metrics:
Adjusted quarterly average assets (in billions) ⁽⁷⁾		$	2,103		$	2,103				$	2,102		$	2,102
Tier 1 leverage ratio		8.6		%	8.6		%	4.0		8.4		%	8.4		%	4.0

SLR leverage exposure (in billions)													$	2,727
SLR													6.4		%	5.0


⁽¹⁾	As an Advanced approaches institution, we are required to report regulatory capital risk-weighted assets and ratios under both the Standardized and Advanced approaches. The approach that yields the lower ratio is to be used to assess capital adequacy and was the Advanced approaches method at December 31, 2016 and 2015.


⁽²⁾	The December 31, 2016 amount includes a transition capital conservation buffer of 0.625 percent and a transition G-SIB surcharge of 0.75 percent. The 2016 countercyclical capital buffer is zero.


⁽³⁾	To be “well capitalized” under the current U.S. banking regulatory agency definitions, we must maintain a Total capital ratio of 10 percent or greater.


⁽⁴⁾	Basel 3 fully phased-in Advanced approaches estimates assume approval by U.S. banking regulators of our internal analytical models, including approval of the internal models methodology (IMM). As of December 31, 2016, we did not have regulatory approval of the IMM model.


⁽⁵⁾	Fully phased-in regulatory minimums assume a capital conservation buffer of 2.5 percent and estimated G-SIB surcharge of 2.5 percent. The estimated fully phased-in countercyclical capital buffer is zero. We will be subject to fully phased-in regulatory minimums on January 1, 2019. The fully phased-in SLR minimum assumes a leverage buffer of 2.0 percent and is applicable on January 1, 2018.


⁽⁶⁾	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.


⁽⁷⁾	Reflects adjusted average total assets for the three months ended December 31, 2016 and 2015.

Common equity tier 1 capital under Basel 3 Advanced – Transition was $168.9 billion at December 31, 2016, an increase of $5.8 billion compared to December 31, 2015 driven by earnings, partially offset by dividends, common stock repurchases and ~~2014.~~the impact of certain transition provisions under the Basel 3 rules. During 2016, Total capital increased $8.1 billion primarily

driven by the same factors that drove the increase in Common equity tier 1 capital as well as issuances of preferred stock and subordinated debt.

Risk-weighted assets decreased $72 billion during 2016 to $1,530 billion primarily due to lower market risk, and lower exposures and improved credit quality on legacy retail products.



		Bank of America 201647

Table 11 presents the capital composition as measured under Basel 3 – Transition at December 31, 2016 and 2015.




Table 11	Capital Composition under Basel 3 – Transition ^{(1, 2)}

		December 31
(Dollars in millions)		2016			2015
Total common shareholders’ equity		$	241,620		$	233,932
Goodwill		(69,191		)	(69,215		)
Deferred tax assets arising from net operating loss and tax credit carryforwards		(4,976		)	(3,434		)
Adjustments for amounts recorded in accumulated OCI attributed to defined benefit postretirement plans		1,392			1,774
Net unrealized (gains) losses on debt and equity securities and net (gains) losses on derivatives recorded in accumulated OCI, net-of-tax		1,402			1,220
Intangibles, other than mortgage servicing rights and goodwill		(1,198		)	(1,039		)
DVA related to liabilities and derivatives		413			204
Other		(596		)	(416		)
Common equity tier 1 capital		168,866			163,026
Qualifying preferred stock, net of issuance cost		25,220			22,273
Deferred tax assets arising from net operating loss and tax credit carryforwards		(3,318		)	(5,151		)
Trust preferred securities		—			1,430
Defined benefit pension fund assets		(341		)	(568		)
DVA related to liabilities and derivatives under transition		276			307
Other		(388		)	(539		)
Total Tier 1 capital		190,315			180,778
Long-term debt qualifying as Tier 2 capital		23,365			22,579
Eligible credit reserves included in Tier 2 capital		3,035			3,116
Nonqualifying capital instruments subject to phase out from Tier 2 capital		2,271			4,448
Other		(5		)	(9		)
Total Basel 3 Capital		$	218,981		$	210,912


⁽¹⁾	See Table 10, footnote 1.


⁽²⁾	Deductions from and adjustments to regulatory capital subject to transition provisions under Basel 3 are generally recognized in 20 percent annual increments, and will be fully recognized as of January 1, 2018. Any assets that are a direct deduction from the computation of capital are excluded from risk-weighted assets and adjusted average total assets.

Table 12 presents the components of our risk-weighted assets as measured under Basel 3 – Transition at December 31, 2016 and 2015.




Table 12	Risk-weighted assets under Basel 3 – Transition

		December 31
		2016				2015
(Dollars in billions)		Standardized Approach		Advanced Approaches		Standardized Approach		Advanced Approaches
Credit risk		$	1,334	$	903	$	1,314	$	940
Market risk		65		63		89		86
Operational risk		n/a		500		n/a		500
Risks related to CVA		n/a		64		n/a		76
Total risk-weighted assets		$	1,399	$	1,530	$	1,403	$	1,602

n/a = not applicable



48 Bank of America 2016




Table 13	Regulatory Capital Reconciliations between Basel 3 Transition to Fully Phased-in ⁽¹⁾

		December 31
(Dollars in millions)		2016			2015
Common equity tier 1 capital (transition)		$	168,866		$	163,026
Deferred tax assets arising from net operating loss and tax credit carryforwards phased in during transition		(3,318		)	(5,151		)
Accumulated OCI phased in during transition		(1,899		)	(1,917		)
Intangibles phased in during transition		(798		)	(1,559		)
Defined benefit pension fund assets phased in during transition		(341		)	(568		)
DVA related to liabilities and derivatives phased in during transition		276			307
Other adjustments and deductions phased in during transition		(57		)	(54		)
Common equity tier 1 capital (fully phased-in)		162,729			154,084
Additional Tier 1 capital (transition)		21,449			17,752
Deferred tax assets arising from net operating loss and tax credit carryforwards phased out during transition		3,318			5,151
Trust preferred securities phased out during transition		—			(1,430		)
Defined benefit pension fund assets phased out during transition		341			568
DVA related to liabilities and derivatives phased out during transition		(276		)	(307		)
Other transition adjustments to additional Tier 1 capital		(2		)	(4		)
Additional Tier 1 capital (fully phased-in)		24,830			21,730
Tier 1 capital (fully phased-in)		187,559			175,814
Tier 2 capital (transition)		28,666			30,134
Nonqualifying capital instruments phased out during transition		(2,271		)	(4,448		)
Other adjustments to Tier 2 capital		9,176			9,667
Tier 2 capital (fully phased-in)		35,571			35,353
Basel 3 Standardized approach Total capital (fully phased-in)		223,130			211,167
Change in Tier 2 qualifying allowance for credit losses		(9,206		)	(9,764		)
Basel 3 Advanced approaches Total capital (fully phased-in)		$	213,924		$	201,403

Risk-weighted assets – As reported to Basel 3 (fully phased-in)
Basel 3 Standardized approach risk-weighted assets as reported		$	1,399,477		$	1,403,293
Changes in risk-weighted assets from reported to fully phased-in		17,638			24,089
Basel 3 Standardized approach risk-weighted assets (fully phased-in)		$	1,417,115		$	1,427,382

Basel 3 Advanced approaches risk-weighted assets as reported		$	1,529,903		$	1,602,373
Changes in risk-weighted assets from reported to fully phased-in		(18,113		)	(27,690		)
Basel 3 Advanced approaches risk-weighted assets (fully phased-in) ⁽²⁾		$	1,511,790		$	1,574,683


⁽¹⁾	See Table 10, footnote 1.


⁽²⁾	Basel 3 fully phased-in Advanced approaches estimates assume approval by U.S. banking regulators of our internal analytical models, including approval of the IMM. As of December 31, 2016, we did not have regulatory approval for the IMM model.



		Bank of America 201649

Bank of America, N.A. Regulatory Capital




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

		December 31, 2016
		Standardized Approach						Advanced Approaches
(Dollars in millions)		Ratio		Amount		Minimum Required⁽¹⁾		Ratio		Amount		Minimum Required ⁽¹⁾
Common equity tier 1 capital		12.7	%	$	149,755	6.5	%	14.3	%	$	149,755	6.5	%
Tier 1 capital		12.7		149,755		8.0		14.3		149,755		8.0
Total capital		13.9		163,471		10.0		14.8		154,697		10.0
Tier 1 leverage		9.3		149,755		5.0		9.3		149,755		5.0

		December 31, 2015
Common equity tier 1 capital		12.2	%	$	144,869	6.5	%	13.1	%	$	144,869	6.5	%
Tier 1 capital		12.2		144,869		8.0		13.1		144,869		8.0
Total capital		13.5		159,871		10.0		13.6		150,624		10.0
Tier 1 leverage		9.2		144,869		5.0		9.2		144,869		5.0


⁽¹⁾	Percent required to meet guidelines to be considered “well capitalized” under the PCA framework.

Regulatory Developments

Minimum Total Loss-Absorbing Capacity

Revisions to Approaches for Measuring Risk-weighted Assets

Single-Counterparty Credit Limits

Capital Requirements for Swap Dealers

Broker-dealer Regulatory Capital and Securities Regulation



50 Bank of America 2016

merchants and are subject to the Commodity Futures Trading Commission Regulation 1.17.

Liquidity Risk

Funding and Liquidity Risk Management

Global Liquidity Sources and Other Unencumbered Assets



		Bank of America 201651

Our GLS were $499 billion and $504 billion at December 31, 2016 and 2015, and were as shown in Table 15.

Table 20 Long-term Debt by Major Currency

December 31
(Dollars in millions) 2015 2014
U.S. Dollar $ 190,381
$ 191,264
Euro 29,797
30,687
British Pound 7,080
7,881
Japanese Yen 3,099
6,058
Australian Dollar 2,534
2,135
Canadian Dollar 1,428
1,779
Swiss Franc 872
897
Other 1,573
2,438
Total long-term debt $ 236,764
$ 243,139




Table 15	Global Liquidity Sources

		December 31				Average for Three Months Ended December 31 2016
(Dollars in billions)		2016		2015
Parent company and NB Holdings		$	76	$	96	$	77
Bank subsidiaries		372		361		389
Other regulated entities		51		47		49
Total Global Liquidity Sources		$	499	$	504	$	515

~~Total long-term debt decreased $6.4~~As shown in Table 15, parent company and NB Holdings liquidity totaled $76 billion ~~or three percent,~~ and $96 billion at December 31, 2016 and 2015. The decrease in ~~2015,~~parent company and NB Holdings liquidity was primarily due to the ~~impact~~BNY Mellon settlement payment in the first quarter of ~~revaluation~~2016 and prepositioning liquidity to subsidiaries in connection with resolution planning. Typically, parent company and NB Holdings liquidity is in the form of ~~non-U.S. Dollar debt~~cash deposited with BANA.

Liquidity held at our bank subsidiaries totaled $372 billion and ~~changes~~$361 billion at December 31, 2016 and 2015. The increase in ~~fair value for debt accounted for under~~bank subsidiaries’ liquidity was primarily due to deposit growth, partially offset by loan growth. Liquidity at bank subsidiaries excludes the ~~fair value option. These impacts were substantially offset through derivative hedge transactions. Excluding these two factors, total long-term debt remained relatively unchanged in~~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 obtained by borrowing against this pool of specifically-identified eligible assets was $310 billion and $252 billion at December 31, 2016 and 2015. We ~~may,~~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 ~~time~~the FHLBs and the Federal Reserve and is subject to ~~time, purchase outstanding debt instruments in various transactions, depending on prevailing market conditions,~~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 ~~other factors. In addition,~~can only be transferred to the parent company or nonbank subsidiaries with prior regulatory approval.

Liquidity held at our other regulated entities, ~~may make markets~~comprised primarily of broker-dealer subsidiaries, totaled $51 billion and $47 billion at December 31, 2016 and 2015. Our other regulated entities also held unencumbered investment-grade securities and equities that we believe could be used to generate additional liquidity. Liquidity held in ~~our debt instruments~~an other regulated entity is primarily available to ~~provide liquidity for investors. For more information on long-term debt funding, see~~ ~~Note 11 – Long-term Debt~~meet the obligations of that entity and transfers to the ~~Consolidated Financial Statements~~parent company or to any other subsidiary may be subject to prior regulatory approval due to regulatory restrictions and minimum requirements.

Table 16. presents the composition of GLS at December 31, 2016 and 2015.




Table 16	Global Liquidity Sources Composition

		December 31
(Dollars in billions)		2016		2015
Cash on deposit		$	106	$	119
U.S. Treasury securities		58		38
U.S. agency securities and mortgage-backed securities		318		327
Non-U.S. government and supranational securities		17		20
Total Global Liquidity Sources		$	499	$	504

Time-to-required Funding and Liquidity Stress Analysis

We use ~~derivative transactions~~a variety of metrics to ~~manage~~determine the ~~duration, interest rate~~appropriate amounts of liquidity to maintain at the parent company and ~~currency risks~~our subsidiaries. One metric we use to evaluate the appropriate level of ~~our borrowings, considering~~liquidity at the ~~characteristics~~parent company and NB Holdings is “time-to-required funding (TTF).” This debt coverage measure indicates the number of months the ~~assets~~parent company can continue to meet its unsecured contractual obligations as they ~~are funding. For further details on our ALM activities, see~~ ~~Interest Rate Risk Management~~come due using only the parent company and NB Holdings' liquidity sources without issuing any new debt or accessing any additional liquidity sources. We define unsecured contractual obligations for ~~Non-trading Activities~~ ~~on page~~ 97.

~~We may also issue unsecured~~purposes of this metric as maturities of senior or subordinated debt ~~in the form of structured notes for client purposes. During 2015, we~~ issued ~~$7.2 billion of structured notes, a majority of which was issued~~or guaranteed by Bank of America Corporation. ~~Structured notes are~~These include certain unsecured debt ~~obligations that pay investors returns linked to other debt or equity securities, indices, currencies or commodities. We typically hedge the returns~~instruments, primarily structured liabilities, which 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 couldmay be required to settle ~~certain structured liability obligations~~ for cash ~~or other securities~~ prior to ~~maturity under~~maturity. Prior to the third quarter of 2016, TTF incorporated only the liquidity of the parent company. During the third quarter of 2016, TTF was expanded to include the liquidity of NB Holdings, following changes in our liquidity management practices, initiated in connection with the Corporation's resolution planning activities, that include maintaining at NB Holdings certain ~~circumstances, which we consider for~~ liquidity ~~planning purposes. We believe, however, that a portion of such borrowings will remain outstanding beyond~~previously held solely at the ~~earliest put or redemption date. We had outstanding structured liabilities with a carrying value of $32.6 billion and $38.8 billion~~parent company. Our TTF was 35 months at December 31, ~~2015~~2016.

We also utilize liquidity stress analysis to assist us in determining the appropriate amounts of liquidity to maintain at the parent company and ~~2014.~~our subsidiaries. The liquidity stress testing process is an integral part of analyzing our potential contractual and contingent cash outflows. We evaluate the liquidity requirements under a range of scenarios with varying levels of severity and time horizons. The scenarios we consider and utilize incorporate market-wide and Corporation-specific events, including potential credit rating downgrades for the parent company and our subsidiaries, and 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.

~~Substantially all~~



52 Bank of America 2016

The types of potential contractual and contingent cash outflows we consider in our ~~senior~~scenarios may include, but are not limited to, upcoming contractual maturities of unsecured debt and ~~subordinated~~reductions in new debt ~~obligations contain no provisions that could trigger a requirement for an early repayment, require~~issuance; diminished access to secured financing markets; potential deposit withdrawals; increased draws on loan commitments, liquidity facilities and letters of credit; additional collateral ~~support, result in changes to terms, accelerate maturity or create additional financial obligations upon an adverse change in~~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 ~~ratios, earnings, cash flows or stock price.~~instruments, and in some cases these impacts could be material to our financial results.

Contingency Planning

Strategic Risk Management



44 Bank of America 2016

Capital Management

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 CCAR capital plan.

In April 2016, we submitted our 2016 CCAR capital plan and related supervisory stress tests. The 2016 CCAR capital plan included requests: (i) to repurchase $5.0 billion of common stock

During 2016, we repurchased approximately $5.1 billion of common stock pursuant to the Board’s authorization of our 2016 and 2015 CCAR capital plans and to offset equity-based compensation awards.

Regulatory Capital



		Bank of America 201645

Basel 3 Overview

Minimum Capital Requirements

Supplementary Leverage Ratio

Capital Composition and Ratios



46 Bank of America 2016




Table 10	Bank of America Corporation Regulatory Capital under Basel 3⁽¹⁾

		December 31, 2016
		Transition								Fully Phased-in
(Dollars in millions)		Standardized Approach			Advanced Approaches			Regulatory Minimum^{(2, 3)}		Standardized Approach			Advanced Approaches ⁽⁴⁾			Regulatory Minimum ⁽⁵⁾
Risk-based capital metrics:
Common equity tier 1 capital		$	168,866		$	168,866				$	162,729		$	162,729
Tier 1 capital		190,315			190,315					187,559			187,559
Total capital ⁽⁶⁾		228,187			218,981					223,130			213,924
Risk-weighted assets (in billions)		1,399			1,530					1,417			1,512
Common equity tier 1 capital ratio		12.1		%	11.0		%	5.875	%	11.5		%	10.8		%	9.5	%
Tier 1 capital ratio		13.6			12.4			7.375		13.2			12.4			11.0
Total capital ratio		16.3			14.3			9.375		15.8			14.2			13.0

Leverage-based metrics:
Adjusted quarterly average assets (in billions) ⁽⁷⁾		$	2,131		$	2,131				$	2,131		$	2,131
Tier 1 leverage ratio		8.9		%	8.9		%	4.0		8.8		%	8.8		%	4.0

SLR leverage exposure (in billions)													$	2,702
SLR													6.9		%	5.0

		December 31, 2015
Risk-based capital metrics:
Common equity tier 1 capital		$	163,026		$	163,026				$	154,084		$	154,084
Tier 1 capital		180,778			180,778					175,814			175,814
Total capital ⁽⁶⁾		220,676			210,912					211,167			201,403
Risk-weighted assets (in billions)		1,403			1,602					1,427			1,575
Common equity tier 1 capital ratio		11.6		%	10.2		%	4.5	%	10.8		%	9.8		%	9.5	%
Tier 1 capital ratio		12.9			11.3			6.0		12.3			11.2			11.0
Total capital ratio		15.7			13.2			8.0		14.8			12.8			13.0

Leverage-based metrics:
Adjusted quarterly average assets (in billions) ⁽⁷⁾		$	2,103		$	2,103				$	2,102		$	2,102
Tier 1 leverage ratio		8.6		%	8.6		%	4.0		8.4		%	8.4		%	4.0

SLR leverage exposure (in billions)													$	2,727
SLR													6.4		%	5.0


⁽¹⁾	As an Advanced approaches institution, we are required to report regulatory capital risk-weighted assets and ratios under both the Standardized and Advanced approaches. The approach that yields the lower ratio is to be used to assess capital adequacy and was the Advanced approaches method at December 31, 2016 and 2015.


⁽²⁾	The December 31, 2016 amount includes a transition capital conservation buffer of 0.625 percent and a transition G-SIB surcharge of 0.75 percent. The 2016 countercyclical capital buffer is zero.


⁽³⁾	To be “well capitalized” under the current U.S. banking regulatory agency definitions, we must maintain a Total capital ratio of 10 percent or greater.


⁽⁴⁾	Basel 3 fully phased-in Advanced approaches estimates assume approval by U.S. banking regulators of our internal analytical models, including approval of the internal models methodology (IMM). As of December 31, 2016, we did not have regulatory approval of the IMM model.


⁽⁵⁾	Fully phased-in regulatory minimums assume a capital conservation buffer of 2.5 percent and estimated G-SIB surcharge of 2.5 percent. The estimated fully phased-in countercyclical capital buffer is zero. We will be subject to fully phased-in regulatory minimums on January 1, 2019. The fully phased-in SLR minimum assumes a leverage buffer of 2.0 percent and is applicable on January 1, 2018.


⁽⁶⁾	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.


⁽⁷⁾	Reflects adjusted average total assets for the three months ended December 31, 2016 and 2015.

driven by the same factors that drove the increase in Common equity tier 1 capital as well as issuances of preferred stock and subordinated debt.

Risk-weighted assets decreased $72 billion during 2016 to $1,530 billion primarily due to lower market risk, and lower exposures and improved credit quality on legacy retail products.



		Bank of America 201647

Table 11 presents the capital composition as measured under Basel 3 – Transition at December 31, 2016 and 2015.




Table 11	Capital Composition under Basel 3 – Transition ^{(1, 2)}

		December 31
(Dollars in millions)		2016			2015
Total common shareholders’ equity		$	241,620		$	233,932
Goodwill		(69,191		)	(69,215		)
Deferred tax assets arising from net operating loss and tax credit carryforwards		(4,976		)	(3,434		)
Adjustments for amounts recorded in accumulated OCI attributed to defined benefit postretirement plans		1,392			1,774
Net unrealized (gains) losses on debt and equity securities and net (gains) losses on derivatives recorded in accumulated OCI, net-of-tax		1,402			1,220
Intangibles, other than mortgage servicing rights and goodwill		(1,198		)	(1,039		)
DVA related to liabilities and derivatives		413			204
Other		(596		)	(416		)
Common equity tier 1 capital		168,866			163,026
Qualifying preferred stock, net of issuance cost		25,220			22,273
Deferred tax assets arising from net operating loss and tax credit carryforwards		(3,318		)	(5,151		)
Trust preferred securities		—			1,430
Defined benefit pension fund assets		(341		)	(568		)
DVA related to liabilities and derivatives under transition		276			307
Other		(388		)	(539		)
Total Tier 1 capital		190,315			180,778
Long-term debt qualifying as Tier 2 capital		23,365			22,579
Eligible credit reserves included in Tier 2 capital		3,035			3,116
Nonqualifying capital instruments subject to phase out from Tier 2 capital		2,271			4,448
Other		(5		)	(9		)
Total Basel 3 Capital		$	218,981		$	210,912


⁽¹⁾	See Table 10, footnote 1.


⁽²⁾	Deductions from and adjustments to regulatory capital subject to transition provisions under Basel 3 are generally recognized in 20 percent annual increments, and will be fully recognized as of January 1, 2018. Any assets that are a direct deduction from the computation of capital are excluded from risk-weighted assets and adjusted average total assets.

Table 12 presents the components of our risk-weighted assets as measured under Basel 3 – Transition at December 31, 2016 and 2015.




Table 12	Risk-weighted assets under Basel 3 – Transition

		December 31
		2016				2015
(Dollars in billions)		Standardized Approach		Advanced Approaches		Standardized Approach		Advanced Approaches
Credit risk		$	1,334	$	903	$	1,314	$	940
Market risk		65		63		89		86
Operational risk		n/a		500		n/a		500
Risks related to CVA		n/a		64		n/a		76
Total risk-weighted assets		$	1,399	$	1,530	$	1,403	$	1,602

n/a = not applicable



48 Bank of America 2016




Table 13	Regulatory Capital Reconciliations between Basel 3 Transition to Fully Phased-in ⁽¹⁾

		December 31
(Dollars in millions)		2016			2015
Common equity tier 1 capital (transition)		$	168,866		$	163,026
Deferred tax assets arising from net operating loss and tax credit carryforwards phased in during transition		(3,318		)	(5,151		)
Accumulated OCI phased in during transition		(1,899		)	(1,917		)
Intangibles phased in during transition		(798		)	(1,559		)
Defined benefit pension fund assets phased in during transition		(341		)	(568		)
DVA related to liabilities and derivatives phased in during transition		276			307
Other adjustments and deductions phased in during transition		(57		)	(54		)
Common equity tier 1 capital (fully phased-in)		162,729			154,084
Additional Tier 1 capital (transition)		21,449			17,752
Deferred tax assets arising from net operating loss and tax credit carryforwards phased out during transition		3,318			5,151
Trust preferred securities phased out during transition		—			(1,430		)
Defined benefit pension fund assets phased out during transition		341			568
DVA related to liabilities and derivatives phased out during transition		(276		)	(307		)
Other transition adjustments to additional Tier 1 capital		(2		)	(4		)
Additional Tier 1 capital (fully phased-in)		24,830			21,730
Tier 1 capital (fully phased-in)		187,559			175,814
Tier 2 capital (transition)		28,666			30,134
Nonqualifying capital instruments phased out during transition		(2,271		)	(4,448		)
Other adjustments to Tier 2 capital		9,176			9,667
Tier 2 capital (fully phased-in)		35,571			35,353
Basel 3 Standardized approach Total capital (fully phased-in)		223,130			211,167
Change in Tier 2 qualifying allowance for credit losses		(9,206		)	(9,764		)
Basel 3 Advanced approaches Total capital (fully phased-in)		$	213,924		$	201,403

Risk-weighted assets – As reported to Basel 3 (fully phased-in)
Basel 3 Standardized approach risk-weighted assets as reported		$	1,399,477		$	1,403,293
Changes in risk-weighted assets from reported to fully phased-in		17,638			24,089
Basel 3 Standardized approach risk-weighted assets (fully phased-in)		$	1,417,115		$	1,427,382

Basel 3 Advanced approaches risk-weighted assets as reported		$	1,529,903		$	1,602,373
Changes in risk-weighted assets from reported to fully phased-in		(18,113		)	(27,690		)
Basel 3 Advanced approaches risk-weighted assets (fully phased-in) ⁽²⁾		$	1,511,790		$	1,574,683


⁽¹⁾	See Table 10, footnote 1.


⁽²⁾	Basel 3 fully phased-in Advanced approaches estimates assume approval by U.S. banking regulators of our internal analytical models, including approval of the IMM. As of December 31, 2016, we did not have regulatory approval for the IMM model.



		Bank of America 201649

Bank of America, N.A. Regulatory Capital




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

		December 31, 2016
		Standardized Approach						Advanced Approaches
(Dollars in millions)		Ratio		Amount		Minimum Required⁽¹⁾		Ratio		Amount		Minimum Required ⁽¹⁾
Common equity tier 1 capital		12.7	%	$	149,755	6.5	%	14.3	%	$	149,755	6.5	%
Tier 1 capital		12.7		149,755		8.0		14.3		149,755		8.0
Total capital		13.9		163,471		10.0		14.8		154,697		10.0
Tier 1 leverage		9.3		149,755		5.0		9.3		149,755		5.0

		December 31, 2015
Common equity tier 1 capital		12.2	%	$	144,869	6.5	%	13.1	%	$	144,869	6.5	%
Tier 1 capital		12.2		144,869		8.0		13.1		144,869		8.0
Total capital		13.5		159,871		10.0		13.6		150,624		10.0
Tier 1 leverage		9.2		144,869		5.0		9.2		144,869		5.0


⁽¹⁾	Percent required to meet guidelines to be considered “well capitalized” under the PCA framework.

Regulatory Developments

Minimum Total Loss-Absorbing Capacity

Revisions to Approaches for Measuring Risk-weighted Assets

Single-Counterparty Credit Limits

Capital Requirements for Swap Dealers

Broker-dealer Regulatory Capital and Securities Regulation



50 Bank of America 2016

merchants and are subject to the Commodity Futures Trading Commission Regulation 1.17.

Liquidity Risk

Funding and Liquidity Risk Management

Global Liquidity Sources and Other Unencumbered Assets



		Bank of America 201651

Our GLS were $499 billion and $504 billion at December 31, 2016 and 2015, and were as shown in Table 15.




Table 15	Global Liquidity Sources

		December 31				Average for Three Months Ended December 31 2016
(Dollars in billions)		2016		2015
Parent company and NB Holdings		$	76	$	96	$	77
Bank subsidiaries		372		361		389
Other regulated entities		51		47		49
Total Global Liquidity Sources		$	499	$	504	$	515

Table 16 presents the composition of GLS at December 31, 2016 and 2015.




Table 16	Global Liquidity Sources Composition

		December 31
(Dollars in billions)		2016		2015
Cash on deposit		$	106	$	119
U.S. Treasury securities		58		38
U.S. agency securities and mortgage-backed securities		318		327
Non-U.S. government and supranational securities		17		20
Total Global Liquidity Sources		$	499	$	504

Time-to-required Funding and Liquidity Stress Analysis



52 Bank of America 2016

Basel 3 Liquidity Standards

Basel 3 has two liquidity risk-related standards: the LCR and the Net Stable Funding Ratio (NSFR).

Diversified Funding Sources

company funding impractical, certain other subsidiaries may issue their own debt.

During 2016, we issued $35.6 billion of long-term debt, consisting of $27.5 billion for Bank of America Corporation, $1.0 billion for Bank of America, N.A. and $7.1 billion of other debt.

Table 17 presents our long-term debt by major currency at December 31, 2016 and 2015.




Table 17	Long-term Debt by Major Currency

		December 31
(Dollars in millions)		2016		2015
U.S. Dollar		$	172,082	$	190,381
Euro		28,236		29,797
British Pound		6,588		7,080
Japanese Yen		3,919		3,099
Australian Dollar		2,900		2,534
Canadian Dollar		1,049		1,428
Other		2,049		2,445
Total long-term debt		$	216,823	$	236,764



		Bank of America 201653

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.

Credit Ratings

Our borrowing costs and ability to raise funds are impacted by our credit ratings. In addition, credit ratings may be important to customers or counterparties when we compete in certain markets and when we seek to engage in certain transactions, including ~~OTC~~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.

On December ~~8, 2015,~~16, 2016, Standard & Poor’s Global Ratings (S&P) concluded its CreditWatch with positive implications for operating subsidiaries of four U.S. G-SIBs, including Bank of America. As a result, S&P upgraded the long-term senior debt ratings of BANA, MLPF&S, MLI and Bank of America Merrill Lynch International Limited (BAMLI) by one notch, to A+ from A. These ratings actions followed the Federal Reserve’s publication of the TLAC final rule, which provided clarity on which debt instruments will count as external TLAC, and by extension, will also count under S&P’s Additional Loss Absorbing Capacity (ALAC) framework. The ALAC framework details how a BHC’s loss-absorbing debt and equity capital buffers may enable uplift to its operating subsidiaries’ credit ratings. The Federal Reserve’s decision to allow existing debt containing otherwise impermissible acceleration clauses to count as external TLAC improved the Corporation’s ALAC calculation enough to warrant an additional notch of uplift under S&P’s methodology. Following the upgrades, S&P revised the outlook for its ratings to stable on those four operating subsidiaries. The ratings of Bank of America Corporation, which does not receive any ratings uplift under S&P’s ALAC framework, were not impacted by this ratings action and remain on stable outlook.



54 Bank of America 2016

On December 13, 2016, Fitch Ratings (Fitch) completed its latest semi-annual review of 12 large, complex securities trading and universal banks, including Bank of America. The agency affirmed all of our ratings and maintained the outlooks it established upon completion of its prior review on May 19, 2015. Following that review, Fitch revised the support rating floors for the U.S. G-SIBs to No Floor from A, effectively removing the implied government support uplift from those institutions’ ratings. The rating agency also upgraded Bank of America Corporation’s stand-alone rating, or Viability Rating, to ‘a’ from ‘a-’, while affirming its long-term and short-term senior debt ratings at A and F1. Fitch concurrently upgraded Bank of America, N.A.’s long-term senior debt rating to A+ from A, and its long-term deposit rating to AA- from A+. Fitch set the outlook on those ratings at stable. Fitch also revised the



		~~Bank of America 2015~~63

~~outlook to positive on the ratings of Bank of America’s material international operating subsidiaries, including MLI.~~

On December 2, 2015, Standard & Poor’s Ratings Services (S&P) concluded its review of the ratings of eight U.S. G-SIBs, including Bank of America. Consistent with prior guidance, S&P downgraded our holding company long-term senior debt rating to BBB+ from A- due to the removal of the remaining notch of uplift for U.S. government support and revised the outlook to Stable from CreditWatch Negative. The Corporation’s short-term ratings were not affected. This action reflected S&P’s view that extraordinary U.S. government support of the banking system is less likely under the current U.S. resolution framework. S&P concurrently left the long-term and short-term senior debt ratings of Bank of ~~America’s core rated operating subsidiaries, including~~America Corporation and Bank of America, N.A., ~~MLPF&S, MLI,~~ and ~~Bank of America Merrill Lynch International Limited, unchanged at A and A-1, respectively. S&P eliminated~~maintained stable outlooks on those ratings. Fitch concurrently revised the remaining notch of uplift for potential government support from those entities’ senior long-term debt ratings, but the agency subsequently added a notch of uplift upon implementing its new framework for incorporating loss-absorbing

holding company debt and equity capital buffers into operating subsidiary credit ratings. Those ratings remain on CreditWatch positive pending further clarity on what debt instruments will count toward TLAC requirements. Additionally, S&P concluded its CreditWatch Developing on the subordinated debt ratingoutlooks for two of Bank of ~~America, N.A., which the agency downgraded~~America’s material international operating subsidiaries, MLI and BAMLI, to ~~BBB+~~stable from ~~A-.~~

On May 28, 2015, Moody’s Investors Service, Inc. (Moody’s) concluded its previously announced review of several global investment banking groups, including Bank of America, which followed the publication of the agency’s new bank rating methodology. Moody’s upgraded Bank of America Corporation’s long-term senior debt ratingpositive due to Baa1 from Baa2, and the preferred stock rating to Ba2 from Ba3. Moody’s also upgraded the long-term senior debt and long-term deposit ratings of Bank of America, N.A. to A1 from A2. Moody’s affirmed the short-term ratings at P-2 for Bank of America Corporation and P-1 for Bank of America, N.A. Moody’s now has a ~~stable outlook on all of our ratings.~~delay in host country internal TLAC proposals.

Table 2118 presents the ~~Corporation’s~~ current long-term/short-term senior debt ratings and outlooks expressed by the rating agencies.

Table 2118

Senior Debt Ratings

Moody’s Investors Service

Standard & Poor’s Global Ratings

Fitch Ratings

Long-term

Short-term

Outlook

Long-term

Short-term⁽¹⁾

Outlook

Long-term

Short-term

Outlook

Bank of America Corporation

Baa1

P-2

~~Stable~~Positive

BBB+

A-2

Stable

Bank of America, N.A.

P-1

~~Stable~~Positive

AA+

A-1

~~CreditWatch Positive~~Stable

A+

Stable

Merrill Lynch, Pierce, Fenner & Smith

AA+

A-1

~~CreditWatch Positive~~Stable

A+

Stable

Merrill Lynch International

AA+

A-1

~~CreditWatch Positive~~Stable

~~Positive~~Stable


⁽¹⁾	~~S&P short-term ratings are not on CreditWatch.~~

NR = not rated

For ~~more~~ information on the additional collateral and termination payments that could be required in connection with certain OTC derivative contracts and other trading agreements as a result of such a credit rating downgrade, see Note 2 – Derivatives to the Consolidated Financial Statements.

Common Stock Dividends

For a summary of our declared quarterly cash dividends on common stock during 2016 and through February 23, 2017, see Note 13 – Shareholders’ Equityto the Consolidated Financial Statements.



64 ~~Bank of America 2015~~

Credit Risk Management

~~Credit quality remained stable during~~ ~~2015~~ driven by lower U.S. unemployment and improving home prices as well as our proactive credit risk management activities positively impacting our credit portfolio as nonperforming loans and delinquencies continued to improve. For additional information, see ~~Executive Summary – 2015 Economic and Business Environment~~ ~~on page~~ 22.

~~We have non-U.S. exposure largely in Europe and Asia Pacific. For more information on our exposures and related risks in non-U.S. countries, see~~ ~~Non-U.S. Portfolio~~ ~~on page~~ 86 ~~and Item 1A. Risk Factors of this Annual Report on Form 10-K.~~

Utilized energy exposure represents approximately two percent of total loans and leases. For more information on our exposures and related risks in the energy industry, see Commercial Portfolio Credit Risk Management – Industry Concentrations on page 83 and Table 46.



		Bank of America 201655

For more information on our credit risk management activities, see Consumer Portfolio Credit Risk Management ~~on page~~ 66,below, Commercial Portfolio Credit Risk Management on page 7766, Non-U.S. Portfolio on page 8674, Provision for Credit Losses on page ~~88 and~~75, Allowance for Credit Losses on page 8875, ~~Note 1 – Summary of Significant Accounting Principles~~,and Note 4 – Outstanding Loans and Leases and Note 5 – Allowance for Credit Losses to the Consolidated Financial Statements.



		~~Bank of America 2015~~65

Consumer Portfolio Credit Risk Management

~~During~~ ~~2015~~, we completed approximately 51,300 customer loan modifications with a total unpaid principal balance of $8.4 billion, including approximately 21,200 permanent modifications, under the U.S. government’s Making Home Affordable Program. Of the loan modifications completed in ~~2015~~, in terms of both the volume of modifications and the unpaid principal balance associated with the underlying loans, more than half were in the Corporation’s held-for-investment (HFI) portfolio. For modified loans on our balance sheet, these modification types are generally considered troubled debt restructurings (TDR). For more information on TDRs and portfolio impacts, see ~~Consumer Portfolio Credit Risk Management – Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity~~ ~~on page~~ 75 ~~and~~ ~~Note 4 – Outstanding Loans and Leasesto the Consolidated Financial Statements~~.

Consumer Credit Portfolio

Improvement in the U.S. unemployment rate and home prices continued during ~~2015~~2016 resulting in improved credit quality and lower credit losses across most major consumer portfolios compared to ~~2014~~2015. ~~Nearly all consumer loan portfolios~~The 30 and 90 days or more past due balances

declined across nearly all consumer loan portfolios during ~~2015~~2016 as a result of improved delinquency trends.

Improved credit quality, continued loan balance run-off and sales across the consumer portfolio drove a $~~2.6~~1.2 billion decrease in the consumer allowance for loan and lease losses in ~~2015~~2016 to ~~$7.4~~$6.2 billion at December 31, ~~2015~~2016. For additional information, see Allowance for Credit Losses on page 8875.

For more information on our accounting policies regarding delinquencies, nonperforming status, charge-offs and ~~TDRs~~troubled debt restructurings (TDRs) for the consumer portfolio, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements. ~~For more information~~

In connection with an agreement to sell our non-U.S. consumer credit card business, this business, which includes $9.2 billion of non-U.S. credit card loans and related allowance for loan and lease losses of $243 million, was reclassified to assets of business held for sale on representations and warranties related to our residential mortgage and home equity portfolios, see Off-Balance Sheet Arrangements and Contractual Obligations – Representations and Warranties on page 46 and ~~Note 7 – Representations and Warranties Obligations and Corporate Guarantees~~to the Consolidated ~~Financial Statements~~.Balance Sheet as of December 31, 2016. In this section, all applicable amounts and ratios include these balances, unless otherwise noted.

Table 2219 presents our outstanding consumer loans and leases, and the PCI loan portfolio. In addition to being included in the “Outstandings” columns in Table 2219, PCI loans are also shown separately in the “Purchased Credit-impaired Loan Portfolio” columns. The impact of the PCI loan portfolio on certain credit statistics is reported where appropriate. For more information on PCI loans, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 7362 and Note 4 – Outstanding Loans and Leases to the Consolidated Financial Statements.



Table 22	Consumer Loans and Leases
Table 19										Consumer Loans and Leases

		December 31									December 31
		Outstandings				Purchased Credit-impaired Loan Portfolio					Outstandings				Purchased Credit-impaired Loan Portfolio
(Dollars in millions)	(Dollars in millions)	2015		2014		2015		2014		(Dollars in millions)	2016		2015		2016		2015
Residential mortgage ⁽¹⁾	Residential mortgage ⁽¹⁾	$	187,911	$	216,197	$	12,066	$	15,152	Residential mortgage ⁽¹⁾	$	191,797	$	187,911	$	10,127	$	12,066
Home equity	Home equity	75,948		85,725		4,619		5,617		Home equity	66,443		75,948		3,611		4,619
U.S. credit card	U.S. credit card	89,602		91,879		n/a		n/a		U.S. credit card	92,278		89,602		n/a		n/a
Non-U.S. credit card	Non-U.S. credit card	9,975		10,465		n/a		n/a		Non-U.S. credit card	9,214		9,975		n/a		n/a
Direct/Indirect consumer ⁽²⁾	Direct/Indirect consumer ⁽²⁾	88,795		80,381		n/a		n/a		Direct/Indirect consumer ⁽²⁾	94,089		88,795		n/a		n/a
Other consumer ⁽³⁾	Other consumer ⁽³⁾	2,067		1,846		n/a		n/a		Other consumer ⁽³⁾	2,499		2,067		n/a		n/a
Consumer loans excluding loans accounted for under the fair value option	Consumer loans excluding loans accounted for under the fair value option	454,298		486,493		16,685		20,769		Consumer loans excluding loans accounted for under the fair value option	456,320		454,298		13,738		16,685
Loans accounted for under the fair value option ⁽⁴⁾	Loans accounted for under the fair value option ⁽⁴⁾	1,871		2,077		n/a		n/a		Loans accounted for under the fair value option ⁽⁴⁾	1,051		1,871		n/a		n/a
Total consumer loans and leases(5)	Total consumer loans and leases(5)	$	456,169	$	488,570	$	16,685	$	20,769	Total consumer loans and leases(5)	$	457,371	$	456,169	$	13,738	$	16,685


⁽¹⁾	Outstandings include pay option loans of $~~2.3~~1.8 billion and $~~3.2~~2.3 billion at December 31, ~~2015~~2016 and ~~2014~~2015. We no longer originate pay option loans.

⁽²⁾

Outstandings include auto and specialty lending loans of $~~42.6~~48.9 billion and $~~37.7~~42.6 billion, unsecured consumer lending loans of $~~886~~585 million and $~~1.5 billion~~886 million, U.S. securities-based lending loans of $~~39.8~~40.1 billion and $~~35.8~~39.8 billion, non-U.S. consumer loans of $~~3.9~~3.0 billion and $~~4.0~~3.9 billion, student loans of $~~564~~497 million and $~~632~~564 million and other consumer loans of $~~1.0~~1.1 billion and $~~761 million~~1.0 billion at December 31, ~~2015~~2016 and ~~2014~~2015.


⁽³⁾	Outstandings include consumer finance loans of $~~564~~465 million and $~~676~~564 million, consumer leases of ~~$1.4~~$1.9 billion and ~~$1.0~~$1.4 billion and consumer overdrafts of $~~146~~157 million and $~~162~~146 million at December 31, ~~2015~~2016 and ~~2014~~2015.


⁽⁴⁾	Consumer loans accounted for under the fair value option include residential mortgage loans of ~~$1.6 billion~~$710 million and ~~$1.9~~$1.6 billion and home equity loans of ~~$250~~$341 million and ~~$196~~$250 million at December 31, ~~2015~~2016 and ~~2014~~2015. For more information on the fair value option, see Note 21 – Fair Value Option to the Consolidated Financial Statements.


⁽⁵⁾	Includes $9.2 billion of non-U.S. credit card loans, which are included in assets of business held for sale on the Consolidated Balance Sheet at December 31, 2016.

n/a = not applicable



6656 Bank of America ~~2015~~2016

Table 2320 presents consumer nonperforming loans and accruing consumer loans past due 90 days or more. Nonperforming loans do not include past due consumer credit card loans, other unsecured loans and in general, consumer ~~non-real estate-secured~~ loans not secured by real estate (loans discharged in Chapter 7 bankruptcy are included) as these loans are typically charged off no later than the end of the month in which the loan becomes 180 days past due. Real estate-secured past due consumer loans that are insured by the FHA or individually insured under long-term standby agreements ~~with~~



Table 23	Consumer Credit Quality
Table 20														Consumer Credit Quality

		December 31													December 31
		Nonperforming						Accruing Past Due 90 Days or More							Nonperforming						Accruing Past Due 90 Days or More
(Dollars in millions)	(Dollars in millions)	2015			2014			2015			2014			(Dollars in millions)	2016			2015			2016			2015
Residential mortgage ⁽¹⁾	Residential mortgage ⁽¹⁾	$	4,803		$	6,889		$	7,150		$	11,407		Residential mortgage ⁽¹⁾	$	3,056		$	4,803		$	4,793		$	7,150
Home equity	Home equity	3,337			3,901			—			—			Home equity	2,918			3,337			—			—
U.S. credit card	U.S. credit card	n/a			n/a			789			866			U.S. credit card	n/a			n/a			782			789
Non-U.S. credit card	Non-U.S. credit card	n/a			n/a			76			95			Non-U.S. credit card	n/a			n/a			66			76
Direct/Indirect consumer	Direct/Indirect consumer	24			28			39			64			Direct/Indirect consumer	28			24			34			39
Other consumer	Other consumer	1			1			3			1			Other consumer	2			1			4			3
Total ⁽²⁾	Total ⁽²⁾	$	8,165		$	10,819		$	8,057		$	12,433		Total ⁽²⁾	$	6,004		$	8,165		$	5,679		$	8,057
Consumer loans and leases as a percentage of outstanding consumer loans and leases ⁽²⁾	Consumer loans and leases as a percentage of outstanding consumer loans and leases ⁽²⁾	1.80		%	2.22		%	1.77		%	2.56		%	Consumer loans and leases as a percentage of outstanding consumer loans and leases ⁽²⁾	1.32		%	1.80		%	1.24		%	1.77		%
Consumer loans and leases as a percentage of outstanding loans and leases, excluding PCI and fully-insured loan portfolios ⁽²⁾	Consumer loans and leases as a percentage of outstanding loans and leases, excluding PCI and fully-insured loan portfolios ⁽²⁾	2.04			2.70			0.23			0.26			Consumer loans and leases as a percentage of outstanding loans and leases, excluding PCI and fully-insured loan portfolios ⁽²⁾	1.45			2.04			0.21			0.23

⁽¹⁾

Residential mortgage loans accruing past due 90 days or more are fully-insured loans. At December 31, ~~2015~~2016 and ~~2014~~2015, residential mortgage included $~~4.3~~3.0 billion and $~~7.3~~4.3 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 $~~2.9~~1.8 billion and $~~4.1~~2.9 billion of loans on which interest was still accruing.


⁽²⁾	Balances exclude consumer loans accounted for under the fair value option. At December 31, ~~2015~~2016 and ~~2014~~2015, $~~293~~48 million and $~~392~~293 million of loans accounted for under the fair value option were past due 90 days or more and not accruing interest.

n/a = not applicable

Table 2421 presents net charge-offs and related ratios for consumer loans and leases.



Table 24	Consumer Net Charge-offs and Related Ratios
Table 21											Consumer Net Charge-offs and Related Ratios

		Net Charge-offs ⁽¹⁾					Net Charge-off Ratios ^{(1, 2)}					Net Charge-offs ⁽¹⁾				Net Charge-off Ratios ^{(1, 2)}
(Dollars in millions)	(Dollars in millions)	2015		2014			2015		2014		(Dollars in millions)	2016		2015		2016		2015
Residential mortgage	Residential mortgage	$	473	$	(114	)	0.24	%	(0.05	)%	Residential mortgage	$	131	$	473	0.07	%	0.24	%
Home equity	Home equity	636		907			0.79		1.01		Home equity	405		636		0.57		0.79
U.S. credit card	U.S. credit card	2,314		2,638			2.62		2.96		U.S. credit card	2,269		2,314		2.58		2.62
Non-U.S. credit card	Non-U.S. credit card	188		242			1.86		2.10		Non-U.S. credit card	175		188		1.83		1.86
Direct/Indirect consumer	Direct/Indirect consumer	112		169			0.13		0.20		Direct/Indirect consumer	134		112		0.15		0.13
Other consumer	Other consumer	193		229			9.96		11.27		Other consumer	205		193		8.95		9.96
Total	Total	$	3,916	$	4,071		0.84		0.80		Total	$	3,319	$	3,916	0.74		0.84


⁽¹⁾	Net charge-offs exclude write-offs in the PCI loan portfolio. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 7362.


⁽²⁾	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.

Net charge-off ratios, excluding the PCI and fully-insured loan portfolios, were ~~0.35~~0.09 percent and ~~(0.08)~~0.35 percent for residential mortgage, ~~0.84~~0.60 percent and ~~1.09~~0.84 percent for home equity and ~~0.54~~0.82 percent and ~~1.00~~0.99 percent for the total consumer portfolio for ~~2015~~2016 and ~~2014~~2015, respectively. These are the only product classifications that include PCI and fully-insured loans.

Net charge-offs, as shown in Tables 2421 and ~~25,~~22, exclude write-offs in the PCI loan portfolio of ~~$634~~$144 million and ~~$545~~$634 million in

residential mortgage and ~~$174~~$196 million and ~~$265~~$174 million in home equity for ~~2015~~2016 and ~~2014~~2015. Net charge-off ratios including the PCI write-offs were ~~0.56~~0.15 percent and ~~0.18~~0.56 percent for residential mortgage and ~~1.00~~0.84 percent and ~~1.31~~1.00 percent for home equity in ~~2015~~2016 and ~~2014~~2015. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 7362.



		Bank of America ~~2015~~2016 6757

Table 2522 presents outstandings, nonperforming balances, net charge-offs, allowance for loan and lease losses and provision for loan and lease losses for the ~~Core portfolio~~core and ~~the Legacy Assets & Servicing~~non-core portfolio within the consumer real estate portfolio. We categorize consumer real estate loans as core and non-core based on loan and customer characteristics such as origination date, product type, LTV, FICO score and delinquency status consistent with our current consumer and mortgage servicing strategy. Generally, loans that were originated after January 1, 2010, qualified under government-sponsored enterprise underwriting guidelines, or otherwise met our underwriting guidelines in place in 2015 are characterized as core loans. Loans held in legacy private-label securitizations, government-insured loans originated prior to 2010, loan products no longer originated, and loans originated prior to 2010 and classified as nonperforming or modified in a TDR prior to 2016

are generally characterized as non-core loans, and are principally run-off portfolios. Core loans as reported within Table 22 include loans held in the Consumer Banking and GWIM segments, as well as loans held for ALM activities in All Other. For more information on ~~the Legacy Assets & Servicing portfolio,~~core and non-core loans, see ~~LAS~~Note 4 – Outstanding Loans and Leases ~~on page~~to the Consolidated Financial Statements.

As shown in Table 22, outstanding core consumer real estate loans increased $9.2 billion during 2016 driven by an increase of $14.7 billion in residential mortgage, partially offset by a $5.5 billion decrease in home equity. The increase in residential mortgage was primarily driven by originations outpacing prepayments in 42Consumer Banking and GWIM. The decrease in home equity was driven by paydowns outpacing new originations and draws on existing lines.



Table 25	Consumer Real Estate Portfolio ⁽¹⁾
Table 22																Consumer Real Estate Portfolio ⁽¹⁾

		December 31															December 31
		Outstandings				Nonperforming				Net Charge-offs ⁽²⁾							Outstandings				Nonperforming				Net Charge-offs ⁽²⁾
(Dollars in millions)	(Dollars in millions)	2015		2014		2015		2014		2015			2014			(Dollars in millions)	2016		2015		2016		2015		2016			2015
Core portfolio	Core portfolio															Core portfolio
Residential mortgage	Residential mortgage	$	145,845	$	162,220	$	1,845	$	2,398	$	128		$	140		Residential mortgage	$	156,497	$	141,795	$	1,274	$	1,825	$	(29	)	$	101
Home equity	Home equity	48,264		51,887		1,354		1,496		219			275			Home equity	49,373		54,917		969		974		113			163
Total Core portfolio		194,109		214,107		3,199		3,894		347			415
Legacy Assets & Servicing portfolio
Total core portfolio																Total core portfolio	205,870		196,712		2,243		2,799		84			264
Non-core portfolio																Non-core portfolio
Residential mortgage	Residential mortgage	42,066		53,977		2,958		4,491		345			(254		)	Residential mortgage	35,300		46,116		1,782		2,978		160			372
Home equity	Home equity	27,684		33,838		1,983		2,405		417			632			Home equity	17,070		21,031		1,949		2,363		292			473
Total Legacy Assets & Servicing portfolio		69,750		87,815		4,941		6,896		762			378
Total non-core portfolio																Total non-core portfolio	52,370		67,147		3,731		5,341		452			845
Consumer real estate portfolio	Consumer real estate portfolio															Consumer real estate portfolio
Residential mortgage	Residential mortgage	187,911		216,197		4,803		6,889		473			(114		)	Residential mortgage	191,797		187,911		3,056		4,803		131			473
Home equity	Home equity	75,948		85,725		3,337		3,901		636			907			Home equity	66,443		75,948		2,918		3,337		405			636
Total consumer real estate portfolio	Total consumer real estate portfolio	$	263,859	$	301,922	$	8,140	$	10,790	$	1,109		$	793		Total consumer real estate portfolio	$	258,240	$	263,859	$	5,974	$	8,140	$	536		$	1,109

						December 31															December 31
						Allowance for Loan and Lease Losses				Provision for Loan and Lease Losses											Allowance for Loan and Lease Losses				Provision for Loan and Lease Losses
						2015		2014		2015			2014								2016		2015		2016			2015
Core portfolio	Core portfolio															Core portfolio
Residential mortgage	Residential mortgage					$	418	$	593	$	(47	)	$	(47	)	Residential mortgage					$	252	$	319	$	(98	)	$	(17	)
Home equity	Home equity					639		702		153			3			Home equity					560		664		10			(33		)
Total Core portfolio						1,057		1,295		106			(44		)
Legacy Assets & Servicing portfolio
Total core portfolio																Total core portfolio					812		983		(88		)	(50		)
Non-core portfolio																Non-core portfolio
Residential mortgage	Residential mortgage					1,082		2,307		(247		)	(696		)	Residential mortgage					760		1,181		(86		)	(277		)
Home equity	Home equity					1,775		2,333		71			(236		)	Home equity					1,178		1,750		(84		)	257
Total Legacy Assets & Servicing portfolio						2,857		4,640		(176		)	(932		)
Total non-core portfolio																Total non-core portfolio					1,938		2,931		(170		)	(20		)
Consumer real estate portfolio	Consumer real estate portfolio															Consumer real estate portfolio
Residential mortgage	Residential mortgage					1,500		2,900		(294		)	(743		)	Residential mortgage					1,012		1,500		(184		)	(294		)
Home equity	Home equity					2,414		3,035		224			(233		)	Home equity					1,738		2,414		(74		)	224
Total consumer real estate portfolio	Total consumer real estate portfolio					$	3,914	$	5,935	$	(70	)	$	(976	)	Total consumer real estate portfolio					$	2,750	$	3,914	$	(258	)	$	(70	)

⁽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 $~~1.6 billion~~710 million and $~~1.9~~1.6 billion and home equity loans of $~~250~~341 million and $~~196~~250 million at December 31, ~~2015~~2016 and ~~2014~~2015. For more information on the fair value option, see Note 21 – Fair Value Option to the Consolidated Financial Statements.


⁽²⁾	Net charge-offs exclude write-offs in the PCI loan portfolio. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 7362.

Residential Mortgage

The residential mortgage portfolio makes up the largest percentage of our consumer loan portfolio at 4142 percent of consumer loans and leases at December 31, ~~2015~~2016. Approximately 5836 percent of the residential mortgage portfolio is in All Other and is comprised of originated loans, purchased loans used in our overall ALM activities, delinquent FHA loans repurchased pursuant to our servicing agreements with GNMA as well as loans repurchased related to our representations and warranties. Approximately 3034 percent of the residential mortgage portfolio is



58 Bank of America 2016

Outstanding balances in the residential mortgage portfolio, excluding loans accounted for under the fair value option, ~~decreased $28.3~~increased $3.9 billion ~~during~~in ~~2015~~2016 ~~due to~~as retention of new originations was partially offset by loan sales of ~~$24.2~~$6.6 billion and ~~runoff outpacing the retention of new originations.~~run-off. Loan sales primarily included ~~$16.4 billion of loans with standby insurance agreements,~~ $3.1 ~~billion of nonperforming and other delinquent loans and $4.5~~ billion of loans in consolidated agency residential mortgage securitization ~~vehicles.~~vehicles and $1.9 billion of nonperforming and other delinquent loans.

At December 31, ~~2015~~2016 and ~~2014~~2015, the residential mortgage portfolio included $~~37.1~~28.7 billion and $~~65.0~~37.1 billion of outstanding fully-insured loans. On this portion of the residential mortgage portfolio, we are protected against principal loss as a result of either FHA insurance or long-term standby agreements that provide for the transfer of credit risk to FNMA and FHLMC. At December 31, ~~2015~~2016 and ~~2014~~2015, ~~$33.4~~$22.3 billion and ~~$47.8~~$33.4 billion had FHA

insurance with the remainder protected by long-term standby agreements. At December 31, ~~2015~~2016 and ~~2014~~2015, ~~$11.2~~$7.4 billion and



68 ~~Bank of America 2015~~

~~$15.9~~ $11.2 billion of the FHA-insured loan population were repurchases of delinquent FHA loans pursuant to our servicing agreements with GNMA.

Table 2623 presents certain residential mortgage key credit statistics on both a reported basis excluding loans accounted for under the fair value option, and excluding the PCI loan portfolio, our fully-insured loan portfolio and loans accounted for under the fair value option. Additionally, in the “Reported Basis” columns in

the table below, accruing balances past due and nonperforming loans do not include the PCI loan portfolio, in accordance with our accounting policies, even though the customer may be contractually past due. As such, the following discussion presents the residential mortgage portfolio excluding the PCI loan portfolio, the fully-insured loan portfolio and loans accounted for under the fair value option. For more information on the PCI loan portfolio, see page 7362.



Table 26	Residential Mortgage – Key Credit Statistics
Table 23														Residential Mortgage – Key Credit Statistics

		December 31													December 31
		Reported Basis ⁽¹⁾						Excluding Purchased Credit-impaired and Fully-insured Loans							Reported Basis ⁽¹⁾						Excluding Purchased Credit-impaired and Fully-insured Loans
(Dollars in millions)	(Dollars in millions)	2015			2014			2015			2014			(Dollars in millions)	2016			2015			2016			2015
Outstandings	Outstandings	$	187,911		$	216,197		$	138,768		$	136,075		Outstandings	$	191,797		$	187,911		$	152,941		$	138,768
Accruing past due 30 days or more	Accruing past due 30 days or more	11,423			16,485			1,568			1,868			Accruing past due 30 days or more	8,232			11,423			1,835			1,568
Accruing past due 90 days or more	Accruing past due 90 days or more	7,150			11,407			—			—			Accruing past due 90 days or more	4,793			7,150			—			—
Nonperforming loans	Nonperforming loans	4,803			6,889			4,803			6,889			Nonperforming loans	3,056			4,803			3,056			4,803
Percent of portfolio	Percent of portfolio													Percent of portfolio
Refreshed LTV greater than 90 but less than or equal to 100	Refreshed LTV greater than 90 but less than or equal to 100	7		%	9		%	5		%	6		%	Refreshed LTV greater than 90 but less than or equal to 100	5		%	7		%	3		%	5		%
Refreshed LTV greater than 100	Refreshed LTV greater than 100	8			12			4			7			Refreshed LTV greater than 100	4			8			3			4
Refreshed FICO below 620	Refreshed FICO below 620	13			16			6			8			Refreshed FICO below 620	9			13			4			6
2006 and 2007 vintages ⁽²⁾	2006 and 2007 vintages ⁽²⁾	17			19			17			22			2006 and 2007 vintages ⁽²⁾	13			17			12			17
Net charge-off ratio ⁽³⁾	Net charge-off ratio ⁽³⁾	0.24			(0.05		)	0.35			(0.08		)	Net charge-off ratio ⁽³⁾	0.07			0.24			0.09			0.35


⁽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 account for $931 million, or 31 percent, and $1.6 billion, or 34 ~~percent, and $2.8 billion, or~~ 41 percent, of nonperforming residential mortgage loans at December 31, ~~2015~~2016 and ~~2014~~2015. Additionally, these vintages accounted for net recoveries of $2 million in 2016 and net charge-offs of $136 million ~~to residential mortgage net charge-offs~~ in 2015 ~~and net recoveries of $233 million to residential mortgage net recoveries in~~ ~~2014~~.


⁽³⁾	Net charge-off ratios are calculated as net charge-offs divided by average outstanding loans excluding loans accounted for under the fair value option.

Nonperforming residential mortgage loans decreased $~~2.1~~1.7 billion in ~~2015~~2016 as outflows, including sales of ~~$1.5~~$1.4 billion, partially offset by a $261 million net increase related to the DoJ Settlement for those loans that are no longer fully insured. Excluding these items, nonperforming residential mortgage loans decreased as outflows, including the transfers of certain qualifying borrowers discharged in a Chapter 7 bankruptcy to performing status, outpaced new inflows. Of the nonperforming residential mortgage loans at December 31, ~~2015~~2016, ~~$1.6~~$1.0 billion, or 3433 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, as well as loans that have not yet demonstrated a sustained period of payment performance following a TDR. In addition, $2.0 billion, or 43 percent of nonperforming residential mortgage loans were 180 days or moreAccruing past due ~~and had been written down to the estimated fair value of the collateral, less costs to sell. Accruing loans that were~~ 30 days or more ~~past~~increased $267 million due ~~decreased$300 million~~ in ~~2015~~.to the timing impact of a consumer real estate payment servicer conversion that occurred during the fourth quarter of 2016.

Net charge-offs ~~increased $587~~decreased $342 million to $131 million in 2016, compared to $473 million in ~~2015, or 0.35 percent of total average residential mortgage loans, compared to a net recovery of $114 million, or (0.08) percent, in 2014.~~2015. This ~~increase~~decrease in net charge-offs was primarily driven by ~~$402 million of~~ charge-offs ~~during 2015~~ related to the consumer relief portion of the ~~DoJ Settlement. In addition, net~~settlement with the U.S. Department of Justice (DoJ) of $402 million in 2015. Net charge-offs also included ~~recoveries~~charge-offs of ~~$127~~$26 million related to nonperforming loan sales during ~~2015~~2016 compared to ~~$407~~recoveries of $127 million in ~~2014. Excluding these items,~~2015. Additionally, net charge-offs declined driven by favorable portfolio trends and decreased write-downs on loans greater than 180 days past due, which were written down to the estimated fair value of the collateral, less costs to sell, due in part to improvement in home prices and the U.S. economy.

~~Residential mortgage loans with a greater than 90 percent but less than or equal to 100 percent refreshed loan-to-value (LTV)~~

~~represented five percent and six percent of the residential mortgage portfolio at~~ ~~December 31, 2015 and 2014~~. Loans with a refreshed LTV greater than 100 percent represented ~~four~~three percent and ~~seven~~four percent of the residential mortgage loan portfolio at December 31, ~~2015~~2016 and ~~2014~~2015. Of the

loans with a refreshed LTV greater than 100 percent, 98 percent ~~and 96 percent~~ were performing at both December 31, ~~2015~~2016 and ~~2014~~2015. Loans with a refreshed LTV greater than 100 percent reflect loans where the outstanding carrying value of the loan is greater than the most recent valuation of the property securing the loan. The majority of these loans have a refreshed LTV greater than 100 percent primarily due to home price deterioration since 2006, partially offset by subsequent appreciation. ~~Loans to borrowers with refreshed FICO scores below 620 represented~~ ~~six percent~~ ~~and~~ ~~eight percent~~ ~~of the residential mortgage portfolio at~~ ~~December 31, 2015 and 2014~~.

Of the $~~138.8~~152.9 billion in total residential mortgage loans outstanding at December 31, ~~2015,~~2016, as shown in Table 2724, 3937 percent were originated as interest-only loans. The outstanding balance of interest-only residential mortgage loans that have entered the amortization period was ~~$12.0~~$11.0 billion, or 2219 percent, at December 31, ~~2015~~2016. 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, ~~2015~~2016, ~~$214~~$249 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 $~~1.6~~1.8 billion, or one percent for the entire residential mortgage portfolio. In addition, at December 31, ~~2015~~2016, ~~$712~~$448 million, or ~~six~~four percent of outstanding interest-only residential ~~mortgage loans that had entered the amortization period were nonperforming, of which $348 million were contractually current,~~



		Bank of America ~~2015~~2016 6959

mortgage loans that had entered the amortization period were nonperforming, of which $233 million were contractually current, compared to $~~4.8~~3.1 billion, or ~~three~~two percent for the entire residential mortgage portfolio, of which ~~$1.6~~$1.0 billion were contractually current. 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 75~~More than 80 percent of these loans that have yet to enter the amortization period will not be required to make a fully-amortizing payment until 2019 or later.

Table 2724 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 1415 percent and 1314 percent of outstandings at December 31, ~~2015~~2016 and ~~2014~~2015. Loans within this MSA contributed net recoveries of $13 million ~~and $81 million~~ within the residential mortgage portfolio during ~~2015~~2016 and ~~2014.~~2015. In the New York area, the New York-Northern New Jersey-Long Island MSA made up 12 percent and 11 percent of outstandings ~~at both~~ ~~December 31, 2015~~during 2016 and ~~2014~~.2015. Loans within this MSA contributed net charge-offs of ~~$101~~$33 million and ~~$27~~$101 million within the residential mortgage portfolio during ~~2015~~2016 and ~~2014.~~2015.



Table 27	Residential Mortgage State Concentrations
Table 24																Residential Mortgage State Concentrations

		December 31															December 31
		Outstandings ⁽¹⁾				Nonperforming ⁽¹⁾				Net Charge-offs ⁽²⁾							Outstandings ⁽¹⁾				Nonperforming ⁽¹⁾				Net Charge-offs ⁽²⁾
(Dollars in millions)	(Dollars in millions)	2015		2014		2015		2014		2015			2014			(Dollars in millions)	2016		2015		2016		2015		2016			2015
California	California	$	48,865	$	45,496	$	977	$	1,459	$	(49	)	$	(280	)	California	$	58,295	$	48,865	$	554	$	977	$	(70	)	$	(49	)
New York ⁽³⁾	New York ⁽³⁾	12,696		11,826		399		477		57			15			New York ⁽³⁾	14,476		12,696		290		399		18			57
Florida ⁽³⁾	Florida ⁽³⁾	10,001		10,116		534		858		53			(43		)	Florida ⁽³⁾	10,213		10,001		322		534		20			53
Texas	Texas	6,208		6,635		185		269		10			1			Texas	6,607		6,208		132		185		9			10
Virginia		4,097		4,402		164		244		20			4
Massachusetts																Massachusetts	5,344		4,799		77		118		3			8
Other U.S./Non-U.S.	Other U.S./Non-U.S.	56,901		57,600		2,544		3,582		382			189			Other U.S./Non-U.S.	58,006		56,199		1,681		2,590		151			394
Residential mortgage loans ⁽⁴⁾	Residential mortgage loans ⁽⁴⁾	$	138,768	$	136,075	$	4,803	$	6,889	$	473		$	(114	)	Residential mortgage loans ⁽⁴⁾	$	152,941	$	138,768	$	3,056	$	4,803	$	131		$	473
Fully-insured loan portfolio	Fully-insured loan portfolio	37,077		64,970												Fully-insured loan portfolio	28,729		37,077
Purchased credit-impaired residential mortgage loan portfolio ⁽⁵⁾	Purchased credit-impaired residential mortgage loan portfolio ⁽⁵⁾	12,066		15,152												Purchased credit-impaired residential mortgage loan portfolio ⁽⁵⁾	10,127		12,066
Total residential mortgage loan portfolio	Total residential mortgage loan portfolio	$	187,911	$	216,197											Total residential mortgage loan portfolio	$	191,797	$	187,911


⁽¹⁾	Outstandings and nonperforming loans exclude loans accounted for under the fair value option.


⁽²⁾	Net charge-offs exclude $~~634~~144 million of write-offs in the residential mortgage PCI loan portfolio in ~~2015~~2016 compared to $~~545~~634 million in ~~2014~~2015. For ~~additional~~more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 7362.


⁽³⁾	In these states, foreclosure requires a court order following a legal proceeding (judicial states).


⁽⁴⁾	Amounts exclude the PCI residential mortgage and fully-insured loan portfolios.


⁽⁵⁾	~~Forty-seven~~At December 31, 2016 and 2015, 48 percent and 4547 percent of PCI residential mortgage loans were in ~~California at~~ ~~December 31, 2015~~ ~~and~~ ~~2014~~.California. There were no other significant single state concentrations.

The Community Reinvestment Act (CRA) encourages banks to meet the credit needs of their communities for housing and other purposes, particularly in neighborhoods with low or moderate incomes. Our CRA portfolio was $8.0 billion and $9.0 billion at ~~December 31, 2015 and 2014, or six percent and seven percent of the residential mortgage portfolio. The CRA portfolio included $552 million and $986 million of nonperforming loans at~~ ~~December 31, 2015 and 2014~~, representing 11 percent and 14 percent of total nonperforming residential mortgage loans. In 2015, net charge-offs in the CRA portfolio were $85 million of the $473 million total net charge-offs for the residential mortgage portfolio. In ~~2014, net charge-offs in the CRA portfolio were $52 million compared to net recoveries of $114 million for the residential mortgage portfolio.~~

Home Equity

At December 31, ~~2015~~2016, the home equity portfolio made up 1715 percent of the consumer portfolio and is comprised of home equity lines of credit (HELOCs), home equity loans and reverse mortgages.

At December 31, ~~2015~~2016, our HELOC portfolio had an outstanding balance of ~~$66.1~~$58.6 billion, or 8788 percent of the total home equity portfolio compared to ~~$74.2~~$66.1 billion, or 87 percent, at December 31, ~~2014~~2015. HELOCs generally have an initial draw period of 10 years and the borrowers typically are only required to pay the interest due on the loans on a monthly basis. After the initial draw period ends, the loans generally convert to 15-year amortizing loans.

At December 31, ~~2015~~2016, our home equity loan portfolio had an outstanding balance of $5.9 billion, or nine percent of the total home equity portfolio compared to $7.9 billion, or 10 percent, ~~of the total home~~

~~equity portfolio compared to $9.8 billion, or 11 percent,~~ at December 31, ~~2014~~2015. Home equity loans are almost all fixed-rate loans with amortizing payment terms of 10 to 30 years and of the ~~$7.9~~$5.9 billion at December 31, ~~2015~~2016, 5456 percent have 25- to 30-year terms. At December 31, ~~2015~~2016, our reverse mortgage portfolio had an outstanding balance, excluding loans accounted for under the fair value option, of ~~$2.0~~$1.9 billion, or three percent of the total home equity portfolio compared to ~~$1.7~~$2.0 billion, or ~~two~~three percent, at December 31, ~~2014~~2015. We no longer originate reverse mortgages.

At December 31, ~~2015~~2016, approximately 5667 percent of the home equity portfolio was ~~included~~ in Consumer Banking, 3426 percent was ~~included~~ in ~~LAS~~All Other and the remainder of the portfolio was primarily in GWIM. Outstanding balances in the home equity portfolio, excluding loans accounted for under the fair value option, decreased $~~9.8~~9.5 billion in ~~2015~~2016 primarily due to paydowns and charge-offs outpacing new originations and draws on existing lines. Of the total home equity portfolio at December 31, ~~2015~~2016 and ~~2014~~2015, $19.6 billion and $20.3 billion, ~~and $20.6 billion,~~ or 2729 percent and 2427 percent, were in first-lien positions ~~(28~~(31 percent and 2628 percent excluding the PCI home equity portfolio). At December 31, ~~2015~~2016, 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 ~~$12.9~~$10.9 billion, or 1817 percent of our total home equity portfolio excluding the PCI loan portfolio.

Unused HELOCs totaled $~~50.3~~47.2 billion and $~~53.7~~50.3 billion at December 31, ~~2015~~2016 and ~~2014~~2015. The decrease was primarily due to ~~customers choosing to close accounts, as well as~~ accounts reaching the end of their draw period, which automatically eliminates open line ~~exposure.~~exposure, as well as customers choosing to close accounts. Both of these more than offset customer paydowns of principal balances and the impact of new production. The HELOC utilization rate was 55 percent and 57 percent at December 31, 2016 and 2015.



7060 Bank of America ~~2015~~2016

~~production. The HELOC utilization rate was 57 percent and 58 percent at~~ ~~December 31, 2015~~ ~~and~~ ~~2014~~.

Table 2825 presents certain home equity portfolio key credit statistics on both a reported basis excluding loans accounted for under the fair value option, and excluding the PCI loan portfolio and loans accounted for under the fair value option. Additionally, in the “Reported Basis” columns in the table below, accruing

balances past due 30 days or more and nonperforming loans do



Table 28	Home Equity – Key Credit Statistics
Table 25														Home Equity – Key Credit Statistics

		December 31													December 31
		Reported Basis ⁽¹⁾						Excluding Purchased Credit-impaired Loans							Reported Basis ⁽¹⁾						Excluding Purchased Credit-impaired Loans
(Dollars in millions)	(Dollars in millions)	2015			2014			2015			2014			(Dollars in millions)	2016			2015			2016			2015
Outstandings	Outstandings	$	75,948		$	85,725		$	71,329		$	80,108		Outstandings	$	66,443		$	75,948		$	62,832		$	71,329
Accruing past due 30 days or more ⁽²⁾	Accruing past due 30 days or more ⁽²⁾	613			640			613			640			Accruing past due 30 days or more ⁽²⁾	566			613			566			613
Nonperforming loans ⁽²⁾	Nonperforming loans ⁽²⁾	3,337			3,901			3,337			3,901			Nonperforming loans ⁽²⁾	2,918			3,337			2,918			3,337
Percent of portfolio	Percent of portfolio													Percent of portfolio
Refreshed CLTV greater than 90 but less than or equal to 100	Refreshed CLTV greater than 90 but less than or equal to 100	6		%	8		%	6		%	7		%	Refreshed CLTV greater than 90 but less than or equal to 100	5		%	6		%	4		%	6		%
Refreshed CLTV greater than 100	Refreshed CLTV greater than 100	12			16			11			14			Refreshed CLTV greater than 100	8			12			7			11
Refreshed FICO below 620	Refreshed FICO below 620	7			8			7			7			Refreshed FICO below 620	7			7			6			7
2006 and 2007 vintages ⁽³⁾	2006 and 2007 vintages ⁽³⁾	43			46			41			43			2006 and 2007 vintages ⁽³⁾	37			43			34			41
Net charge-off ratio ⁽⁴⁾	Net charge-off ratio ⁽⁴⁾	0.79			1.01			0.84			1.09			Net charge-off ratio ⁽⁴⁾	0.57			0.79			0.60			0.84


⁽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 includes $8981 million and $9889 million and nonperforming loans include $~~396~~340 million and $~~505~~396 million of loans where we serviced the underlying first-lien at December 31, ~~2015~~2016 and ~~2014~~2015.


⁽³⁾	These vintages of loans have higher refreshed combined LTV ratios and accounted for 4550 percent and 4745 percent of nonperforming home equity loans at December 31, ~~2015~~2016 and ~~2014~~2015, and 54 percent ~~and~~ ~~59 percent~~of net charge-offs in both ~~2015~~2016 and ~~2014~~2015.


⁽⁴⁾	Net charge-off ratios are calculated as net charge-offs divided by average outstanding loans excluding loans accounted for under the fair value option.

Nonperforming outstanding balances in the home equity portfolio decreased ~~$564~~$419 million in ~~2015~~2016 as outflows, including sales of ~~$154~~$234 million, ~~and the transfer of certain qualifying borrowers discharged in a Chapter 7 bankruptcy to performing status,~~ outpaced new inflows. Of the nonperforming home equity portfolio at December 31, ~~2015, $1.4~~2016, $1.5 billion, or 4250 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, ~~$1.3 billion,~~$876 million, or 3830 percent of nonperforming home equity loans, were 180 days or more past due and had been written down to the estimated fair value of the collateral, less costs to sell. Accruing loans that were 30 days or more past due decreased ~~$27~~$47 million in ~~2015.~~2016.

In some cases, the junior-lien home equity outstanding balance that we hold is performing, but the underlying first-lien is not. For outstanding balances in the home equity portfolio on which we service the first-lien loan, we are able to track whether the first-lien loan is in default. For loans where the first-lien is serviced by a third party, we utilize credit bureau data to estimate the delinquency status of the first-lien. Given that the credit bureau database we use does not include a property address for the mortgages, we are unable to identify with certainty whether a reported delinquent first-lien mortgage pertains to the same property for which we hold a junior-lien loan. For certain loans, we utilize a third-party vendor to combine credit bureau and public record data to better link a junior-lien loan with the underlying first-lien mortgage. At December 31, ~~2015~~2016, we estimate that ~~$1.2~~$1.0 billion of current and ~~$157~~$149 million of 30 to 89 days past due junior-lien loans were behind a delinquent first-lien loan. We service the first-lien loans on ~~$193~~$190 million of these combined amounts, with

the remaining ~~$1.1 billion~~$980 million serviced by third parties. Of the ~~$1.3~~$1.2 billion of current to 89 days past due junior-lien loans, based on available credit bureau data and our own internal servicing data,

we estimate that ~~$484~~approximately $428 million had first-lien loans that were 90 days or more past due.

Net charge-offs decreased $~~271~~231 million to $~~636~~405 million~~, or~~ ~~0.84 percent~~ ~~of the total average home equity portfolio~~ in ~~2015~~2016, compared to $~~907~~636 million~~, or~~ ~~1.09 percent~~, in ~~2014~~2015~~. The decrease in net charge-offs was primarily~~ driven by favorable portfolio trends due in part to improvement in home prices and the U.S. ~~economy, and lower~~economy. Additionally, the decrease in net charge-offs was partly attributable to charge-offs of $75 million related to the consumer relief portion of the settlement with the DoJ ~~Settlement, partially offset by lower recoveries.~~in 2015.

Outstanding balances ~~in the home equity portfolio~~ with ~~greater than 90 percent but less than or equal to 100 percent~~ refreshed combined loan-to-value (CLTV) greater than 100 percent comprised ~~six percent~~ ~~and~~ seven percent and 11 percent of the home equity portfolio at December 31, ~~2015~~2016 and ~~2014. Outstanding balances with refreshed CLTV greater than 100 percent comprised~~ ~~11 percent~~ ~~and~~ ~~14 percent~~ ~~of the home equity portfolio at~~ ~~December 31,~~ 2015 ~~and 2014~~. Outstanding balances in the home equity portfolio with a refreshed CLTV greater than 100 percent reflect loans where our loan and available line of credit combined with any outstanding senior liens against the property are equal to or greater than the most recent valuation of the property securing the loan. Depending on the value of the property, there may be collateral in excess of the first-lien that is available to reduce the severity of loss on the second-lien. Of those outstanding balances with a refreshed CLTV greater than 100 percent, 9695 percent of the customers were current on their home equity loan and 9291 percent of second-lien loans with a refreshed CLTV greater than 100 percent were current on both their second-lien and underlying first-lien loans at December 31, ~~2015. Outstanding balances in the home equity portfolio to borrowers with a refreshed FICO score below 620 represented~~



		~~Bank of America 2015~~71

~~seven percent of the home equity portfolio at both~~ ~~December 31, 2015 and 2014~~2016.

Of the $~~71.3~~62.8 billion in total home equity portfolio outstandings at December 31, ~~2015,~~2016, as shown in Table ~~29, 66~~26, 52 percent ~~were~~require interest-only ~~loans, almost all of which were HELOCs.~~payments. The outstanding balance of HELOCs that have entered the amortization period was ~~$9.7~~$14.7 billion ~~or 15 percent of total HELOCs~~ at December 31, ~~2015~~2016. 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 December 31, ~~2015~~2016, ~~$226~~$295 million, or two percent of outstanding HELOCs that had entered the amortization period were accruing past due 30 days or ~~more compared to $561 million, or one percent for the entire HELOC portfolio.~~more. In addition, at December 31, ~~2015~~2016, ~~$1.3~~$1.8 billion, or 1412 percent of outstanding HELOCs that had entered the amortization period were



		Bank of America 201661

nonperforming, of which ~~$507~~$868 million ~~were contractually current, compared to $3.1 billion, or five percent for the entire HELOC portfolio, of which $1.2 billion~~ were contractually current. Loans in our HELOC portfolio generally have an initial draw period of 10 years and 4423 percent of these loans will enter the amortization period in ~~2016 and~~ 2017 and will be required to make fully-amortizing payments. We communicate to contractually current customers more than a year prior to the end of their draw

period to inform them of the potential change to the payment structure before entering the amortization period, and provide payment options to customers prior to the end of the draw period.

monthly basis). During ~~2015~~2016, approximately 3934 percent of these customers with an outstanding balance did not pay any principal on their HELOCs.

Table 2926 presents outstandings, nonperforming balances and net charge-offs by certain state concentrations for the home equity portfolio. In the New York area, the New York-Northern New Jersey-Long Island MSA made up 13 percent ~~and 12 percent~~ of the outstanding home equity portfolio at both December 31, ~~2015~~2016 and ~~2014~~2015. Loans within this MSA contributed 1317 percent and 1413 percent of net charge-offs in ~~2015~~2016 and ~~2014~~2015 within the home equity portfolio. The Los Angeles-Long Beach-Santa Ana MSA within California made up 11 percent and 12 percent of the outstanding home equity portfolio ~~at both~~ ~~December 31, 2015~~in 2016 and ~~2014~~.2015. Loans within this MSA contributed ~~two~~zero percent and ~~four~~two percent of net charge-offs in ~~2015~~2016 and ~~2014~~2015 within the home equity portfolio.



Table 29	Home Equity State Concentrations
Table 26														Home Equity State Concentrations

		December 31													December 31
		Outstandings ⁽¹⁾				Nonperforming ⁽¹⁾				Net Charge-offs ⁽²⁾					Outstandings ⁽¹⁾				Nonperforming ⁽¹⁾				Net Charge-offs ⁽²⁾
(Dollars in millions)	(Dollars in millions)	2015		2014		2015		2014		2015		2014		(Dollars in millions)	2016		2015		2016		2015		2016		2015
California	California	$	20,356	$	23,250	$	902	$	1,012	$	57	$	118	California	$	17,563	$	20,356	$	829	$	902	$	7	$	57
Florida ⁽³⁾	Florida ⁽³⁾	8,474		9,633		518		574		128		170		Florida ⁽³⁾	7,319		8,474		442		518		76		128
New Jersey ⁽³⁾	New Jersey ⁽³⁾	5,570		5,883		230		299		51		68		New Jersey ⁽³⁾	5,102		5,570		201		230		50		51
New York ⁽³⁾	New York ⁽³⁾	5,249		5,671		316		387		61		81		New York ⁽³⁾	4,720		5,249		271		316		45		61
Massachusetts	Massachusetts	3,378		3,655		115		148		17		30		Massachusetts	3,078		3,378		100		115		12		17
Other U.S./Non-U.S.	Other U.S./Non-U.S.	28,302		32,016		1,256		1,481		322		440		Other U.S./Non-U.S.	25,050		28,302		1,075		1,256		215		322
Home equity loans ⁽⁴⁾	Home equity loans ⁽⁴⁾	$	71,329	$	80,108	$	3,337	$	3,901	$	636	$	907	Home equity loans ⁽⁴⁾	$	62,832	$	71,329	$	2,918	$	3,337	$	405	$	636
Purchased credit-impaired home equity portfolio ⁽⁵⁾	Purchased credit-impaired home equity portfolio ⁽⁵⁾	4,619		5,617										Purchased credit-impaired home equity portfolio ⁽⁵⁾	3,611		4,619
Total home equity loan portfolio	Total home equity loan portfolio	$	75,948	$	85,725									Total home equity loan portfolio	$	66,443	$	75,948


⁽¹⁾	Outstandings and nonperforming loans exclude loans accounted for under the fair value option.


⁽²⁾	Net charge-offs exclude $~~174~~196 million of write-offs in the home equity PCI loan portfolio in ~~2015~~2016 compared to $~~265~~174 million in ~~2014~~2015. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 7362.


⁽³⁾	In these states, foreclosure requires a court order following a legal proceeding (judicial states).


⁽⁴⁾	Amount excludes the PCI home equity portfolio.


⁽⁵⁾	~~Twenty-nine~~At both December 31, 2016 and 2015, 29 percent of PCI home equity loans were in ~~California at both~~ ~~December 31, 2015~~ ~~and~~ ~~2014~~.California. There were no other significant single state concentrations.



72 ~~Bank of America 2015~~

Purchased Credit-impaired Loan Portfolio

Loans acquired with evidence of credit quality deterioration since origination and for which it is probable at purchase that we will be unable to collect all contractually required payments are accounted for under the accounting guidance for PCI loans, which addresses accounting for differences between contractual and expected cash flows to be collected from the purchaser’s initial investment in loans if those differences are attributable, at least in part, to credit

~~quality.~~loans. For more information on PCI loans, see Note 1 – Summary of Significant

Accounting Principles and Note 4 – Outstanding Loans and Leases to the Consolidated Financial Statements.

Table 3027 presents the unpaid principal balance, carrying value, related valuation allowance and the net carrying value as a percentage of the unpaid principal balance for the PCI loan portfolio.



Table 30	Purchased Credit-impaired Loan Portfolio
Table 27												Purchased Credit-impaired Loan Portfolio

		December 31, 2015											December 31, 2016
(Dollars in millions)	(Dollars in millions)	Unpaid Principal Balance		Gross Carrying Value		Related Valuation Allowance		Carrying Value Net of Valuation Allowance		Percent of Unpaid Principal Balance		(Dollars in millions)	Unpaid Principal Balance		Gross Carrying Value		Related Valuation Allowance		Carrying Value Net of Valuation Allowance		Percent of Unpaid Principal Balance
Residential mortgage		$	12,350	$	12,066	$	338	$	11,728	94.96	%
Residential mortgage ⁽¹⁾												Residential mortgage ⁽¹⁾	$	10,330	$	10,127	$	169	$	9,958	96.40	%
Home equity	Home equity	4,650		4,619		466		4,153		89.31		Home equity	3,689		3,611		250		3,361		91.11
Total purchased credit-impaired loan portfolio	Total purchased credit-impaired loan portfolio	$	17,000	$	16,685	$	804	$	15,881	93.42		Total purchased credit-impaired loan portfolio	$	14,019	$	13,738	$	419	$	13,319	95.01

		December 31, 2014											December 31, 2015
Residential mortgage	Residential mortgage	$	15,726	$	15,152	$	880	$	14,272	90.75	%	Residential mortgage	$	12,350	$	12,066	$	338	$	11,728	94.96	%
Home equity	Home equity	5,605		5,617		772		4,845		86.44		Home equity	4,650		4,619		466		4,153		89.31
Total purchased credit-impaired loan portfolio	Total purchased credit-impaired loan portfolio	$	21,331	$	20,769	$	1,652	$	19,117	89.62		Total purchased credit-impaired loan portfolio	$	17,000	$	16,685	$	804	$	15,881	93.42

⁽¹⁾

The total PCI unpaid principal balance decreased~~$4.3~~ $3.0 billion,, or 2018 percent,, in ~~2015~~2016 primarily driven by payoffs, sales, ~~payoffs,~~ paydowns

and write-offs. During ~~2015~~,2016, we sold PCI loans with a carrying value of ~~$1.4 billion~~$549 million compared to sales of ~~$1.9~~$1.4 billion in ~~2014~~.2015.



62 Bank of America 2016

Of the unpaid principal balance of $~~17.0~~14.0 billion at December 31, ~~2015~~2016, ~~$14.7~~$12.3 billion, or 8688 percent, was current based on the contractual terms, ~~$1.2 billion,~~$949 million, or seven percent, was in early stage delinquency, and ~~$800~~$523 million was 180 days or more past due, including ~~$707~~$451 million of first-lien mortgages and ~~$93~~$72 million of home equity loans.

During ~~2015~~2016, we recorded a provision benefit of ~~$40~~$45 million for the PCI loan portfolio which included ~~an expense~~a benefit of ~~$92~~$25 million for residential mortgage and ~~a benefit of $132~~$20 million for home equity. This compared to a total provision benefit of ~~$31~~$40 million in ~~2014~~2015. The provision benefit in ~~2015~~2016 was primarily driven by continued home price improvement and lower default ~~estimates.~~estimates on second-lien loans.

The PCI valuation allowance declined $~~848~~385 million during ~~2015~~2016 due to write-offs in the PCI loan portfolio of ~~$634~~$144 million in residential mortgage and ~~$174~~$196 million in home equity, combined with a provision benefit of ~~$40~~$45 million.

~~Purchased Credit-impaired Residential Mortgage Loan Portfolio~~

The PCI residential mortgage loan portfolio represented 7274 percent of the total PCI loan portfolio at December 31, ~~2015~~.2016. Those loans to borrowers with a refreshed FICO score below 620 represented 3127 percent of the PCI residential mortgage loan portfolio at December 31, ~~2015~~.2016. Loans with a refreshed LTV greater than 90 percent, after consideration of purchase accounting adjustments and the related valuation allowance, represented 2823 percent of the PCI residential mortgage loan portfolio and 3326 percent based on the unpaid principal balance at December 31, ~~2015~~.2016.

Pay option adjustable-rate mortgages, which are included in the PCI residential mortgage portfolio, have interest rates that adjust monthly and minimum required payments that adjust annually. During an initial five- or ten-year period, minimum required

payments may increase by no more than 7.5 percent. If payments are insufficient to pay all of the monthly interest charges, unpaid interest is added to the loan balance (i.e., negative amortization) until the loan balance increases to a specified limit, at which time a new monthly payment amount adequate to repay the loan over its remaining contractual life is established.

At ~~December 31, 2015~~, the unpaid principal balance of pay option loans was $2.4 billion, with a carrying value of $2.3 billion. The total unpaid principal balance of pay option loans with accumulated negative amortization was $503 million, including $28 million of negative amortization. We believe the majority of borrowers that are now making scheduled payments are able to do so primarily because the low rate environment has caused the fully indexed rates to be affordable to more borrowers. We continue to evaluate our exposure to payment resets on the acquired negative-amortizing loans and have taken into consideration several assumptions including prepayment and default rates. Of the loans in the pay option portfolio at ~~December 31, 2015~~ that have not already experienced a payment reset, 54 percent are expected to reset in 2016 and 22 percent are expected to reset thereafter. In addition, four percent are expected to prepay and approximately 20 percent are expected to default prior to being reset, most of which were severely delinquent as of ~~December 31, 2015. We no longer originate pay option loans.~~

~~Purchased Credit-impaired Home Equity Loan Portfolio~~

The PCI home equity portfolio represented 2826 percent of the total PCI loan portfolio at December 31, ~~2015~~.2016. Those loans with

a refreshed FICO score below 620 represented 1615 percent of the PCI home equity portfolio at December 31, ~~2015~~.2016. Loans with a refreshed CLTV greater than 90 percent, after consideration of purchase accounting adjustments and the related valuation allowance, represented 5746 percent of the PCI home equity portfolio and 6049 percent based on the unpaid principal balance at December 31, ~~2015~~.2016.



		~~Bank of America 2015~~73

U.S. Credit Card

At December 31, ~~2015, 97~~2016, 96 percent of the U.S. credit card portfolio was managed in Consumer Banking with the remainder ~~managed~~ in GWIM. Outstandings in the U.S. credit card portfolio ~~decreased $2.3~~increased $2.7 billion in ~~2015 due to portfolio divestitures.~~2016 as retail volumes outpaced payments. Net charge-offs decreased ~~$324~~$45 million to $2.3 billion in ~~2015~~2016 due to improvements in delinquencies and bankruptcies as a result of an improved economic environment and the impact of higher credit quality originations. U.S. credit card loans 30 days or more past due and still accruing interest ~~decreased $126~~increased $20 million from loan growth while loans 90 days or more past due and still accruing interest decreased ~~$77~~$7 million in ~~2015 as a result of the factors mentioned above that contributed to lower net charge-offs.~~2016.

Unused lines of credit for U.S. credit card totaled ~~$312.5~~$321.6 billion and ~~$305.9~~$312.5 billion at December 31, ~~2015~~2016 and ~~2014.~~2015. The ~~$6.6~~$9.1 billion increase was driven by account growth and ~~line~~lines of credit increases.

Table ~~31 presents certain key credit statistics for the U.S. credit card portfolio.~~

Table 31 U.S. Credit Card – Key Credit Statistics

December 31
(Dollars in millions) 2015 2014
Outstandings $ 89,602
$ 91,879
Accruing past due 30 days or more 1,575
1,701
Accruing past due 90 days or more 789
866

2015 2014
Net charge-offs $ 2,314
$ 2,638
Net charge-off ratios ⁽¹⁾
2.62 % 2.96 %


⁽¹⁾	~~Net charge-off ratios are calculated as net charge-offs divided by average outstanding loans.~~

~~Table 32~~28 presents certain state concentrations for the U.S. credit card portfolio.



Table 32	U.S. Credit Card State Concentrations
Table 28														U.S. Credit Card State Concentrations

		December 31													December 31
		Outstandings				Accruing Past Due 90 Days or More				Net Charge-offs					Outstandings				Accruing Past Due 90 Days or More				Net Charge-offs
(Dollars in millions)	(Dollars in millions)	2015		2014		2015		2014		2015		2014		(Dollars in millions)	2016		2015		2016		2015		2016		2015
California	California	$	13,658	$	13,682	$	115	$	127	$	358	$	414	California	$	14,251	$	13,658	$	115	$	115	$	360	$	358
Florida	Florida	7,420		7,530		81		89		244		278		Florida	7,864		7,420		85		81		245		244
Texas	Texas	6,620		6,586		58		58		157		177		Texas	7,037		6,620		65		58		164		157
New York	New York	5,547		5,655		57		59		162		174		New York	5,683		5,547		60		57		161		162
Washington	Washington	3,907		3,907		19		22		59		71		Washington	4,128		3,907		18		19		56		59
Other U.S.	Other U.S.	52,450		54,519		459		511		1,334		1,524		Other U.S.	53,315		52,450		439		459		1,283		1,334
Total U.S. credit card portfolio	Total U.S. credit card portfolio	$	89,602	$	91,879	$	789	$	866	$	2,314	$	2,638	Total U.S. credit card portfolio	$	92,278	$	89,602	$	782	$	789	$	2,269	$	2,314

Non-U.S. Credit Card

Outstandings in the non-U.S. credit card portfolio, which are recorded in All Other, decreased $~~490~~761 million in ~~2015~~2016 ~~due to a~~primarily driven by weakening of the British Pound against the U.S. Dollar. Net charge-offs decreased $5413 million to $~~188~~175 million in ~~2015~~2016 due to ~~improvement in delinquencies as a result of higher credit quality originations and an improved economic environment.~~the same driver.

Unused lines of credit for non-U.S. credit card totaled ~~$27.9~~$24.4 billion and ~~$28.2~~$27.9 billion at December 31, ~~2015~~2016 and ~~2014~~2015. The ~~$271 million~~$3.5 billion decrease was driven by weakening of the British Pound against the U.S. Dollar, partially offset by account growth and increases in lines of credit.

On December 20, 2016, we entered into an agreement to sell our non-U.S. consumer credit ~~increases.~~card business to a third party. Subject to regulatory approval, this transaction is expected to close by mid-2017. For more information on the sale of our non-U.S.

~~Table 33~~ ~~presents certain key credit statistics for the non-U.S.~~consumer credit card ~~portfolio.~~business, see Recent Events on page 21 and Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements.

Table 33 Non-U.S. Credit Card – Key Credit Statistics

December 31
(Dollars in millions) 2015 2014
Outstandings $ 9,975
$ 10,465
Accruing past due 30 days or more 146
183
Accruing past due 90 days or more 76
95

2015 2014
Net charge-offs $ 188
$ 242
Net charge-off ratios ⁽¹⁾
1.86 % 2.10 %

⁽¹⁾~~Net charge-off ratios are calculated as net charge-offs divided by average outstanding loans.~~



74 ~~Bank of America 2015~~

Direct/Indirect Consumer

At December 31, ~~2015~~2016, approximately 5053 percent of the direct/indirect portfolio ~~was included in~~ ~~GWIM~~ ~~(principally securities-based lending loans), 49 percent~~ was included in Consumer Banking (consumer auto and specialty lending – automotive, marine, aircraft, recreational vehicle loans and consumer personal loans), and ~~the remainder~~47 percent was ~~primarily student loans~~included inGWIM ~~All Other~~(principally securities-based lending loans).

Outstandings in the direct/indirect portfolio increased $~~8.4~~5.3 billion in ~~2015~~2016 ~~as growth in~~primarily driven by the consumer auto ~~portfolio and growth in securities-based lending were partially offset by lower outstandings in the unsecured consumer lending~~loan portfolio.

~~Net charge-offs~~ ~~decreased$57 million~~ to ~~$112 million~~ in ~~2015, or~~ ~~0.13 percent~~ ~~of total average direct/indirect loans, compared~~

~~to $169 million, or~~ ~~0.20 percent, in~~ ~~2014~~. This decrease in net charge-offs was primarily driven by improvements in delinquencies and bankruptcies in the unsecured consumer lending portfolio as a result of an improved economic environment as well as reduced outstandings in this portfolio.

~~Direct/indirect loans that were past due 90 days or more and still accruing interest declined $25 million to $39 million in~~ ~~2015~~ ~~due to decreases in the unsecured consumer lending, and consumer auto and specialty lending portfolios.~~

Table 3429 presents certain state concentrations for the direct/indirect consumer loan portfolio.



		Bank of America 201663



Table 34	Direct/Indirect State Concentrations
Table 29														Direct/Indirect State Concentrations

		December 31													December 31
		Outstandings				Accruing Past Due 90 Days or More				Net Charge-offs					Outstandings				Accruing Past Due 90 Days or More				Net Charge-offs
(Dollars in millions)	(Dollars in millions)	2015		2014		2015		2014		2015		2014		(Dollars in millions)	2016		2015		2016		2015		2016		2015
California	California	$	10,735	$	9,770	$	3	$	5	$	8	$	18	California	$	11,300	$	10,735	$	3	$	3	$	13	$	8
Florida	Florida	8,835		7,930		3		5		20		27		Florida	9,418		8,835		3		3		29		20
Texas	Texas	8,514		7,741		4		5		17		19		Texas	9,406		8,514		5		4		21		17
New York	New York	5,077		4,458		1		2		3		9		New York	5,253		5,077		1		1		3		3
Illinois		2,906		2,550		1		2		3		5
Georgia														Georgia	3,255		2,869		4		4		9		7
Other U.S./Non-U.S.	Other U.S./Non-U.S.	52,728		47,932		27		45		61		91		Other U.S./Non-U.S.	55,457		52,765		18		24		59		57
Total direct/indirect loan portfolio	Total direct/indirect loan portfolio	$	88,795	$	80,381	$	39	$	64	$	112	$	169	Total direct/indirect loan portfolio	$	94,089	$	88,795	$	34	$	39	$	134	$	112

Other Consumer

At December 31, ~~2015~~2016, approximately 6675 percent of the $~~2.1~~2.5 billion other consumer portfolio was consumer auto leases included in Consumer Banking. The remainder is primarily associated with certain consumer finance businesses that we previously exited.

Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity

Table 3530 presents nonperforming consumer loans, leases and foreclosed properties activity during ~~2015~~2016 and ~~2014~~2015. Nonperforming LHFS are excluded from nonperforming loans as they are recorded at either fair value or the lower of cost or fair value. Nonperforming loans do not include past due consumer credit card loans, other unsecured loans and in general, consumer non-real estate-secured loans (loans discharged in Chapter 7 bankruptcy are included) as these loans are typically charged off no later than the end of the month in which the loan becomes 180 days past due. The charge-offs on these loans have no impact on nonperforming activity and, accordingly, are excluded from this table. The fully-insured loan portfolio is not reported as nonperforming as principal repayment is insured. Additionally, nonperforming loans do not include the PCI loan portfolio or loans accounted for under the fair value option. For more information on nonperforming loans, see Note 1 – Summary of Significant Accounting Principles and Note 4 – Outstanding Loans and Leases to the Consolidated Financial Statements. During ~~2015~~2016, nonperforming consumer loans declined $~~2.7~~2.2 billion to ~~$8.2~~$6.0 billion ~~and included the impact of~~primarily driven by loan sales of $1.7 billion, partially offset by a net increase of $186 million related to the impact of the consumer relief portion of the DoJ Settlement for those loans that are no longer fully insured. Excluding these,$1.6 billion. Additionally, nonperforming loans declined as outflows ~~including the transfer~~

~~of certain qualifying borrowers discharged in a Chapter 7 bankruptcy to performing status,~~ outpaced new inflows.

The outstanding balance of a real estate-secured loan 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 repayment of the loan is fully insured. At December 31, ~~2015~~2016, ~~$3.8~~$2.5 billion, or 4440 percent of nonperforming consumer real estate loans and foreclosed properties had been written down to their estimated property value less costs to sell, including ~~$3.3~~$2.2 billion of nonperforming loans 180 days or more past due and ~~$444~~$363 million of foreclosed properties. In addition, at December 31, ~~2015~~2016, ~~$3.0~~$2.5 billion, or 3539 percent of nonperforming consumer loans were modified and are now current after successful trial periods, or are current loans classified as nonperforming loans in accordance with applicable policies.

Foreclosed properties decreased $~~186~~81 million in ~~2015~~2016 as liquidations outpaced additions. PCI loans are excluded from nonperforming loans as these loans were written down to fair value at the acquisition date; however, once we acquire the underlying real estate ~~is acquired by the Corporation~~ upon foreclosure of the delinquent PCI loan, it is included in foreclosed properties. PCI-related foreclosed properties ~~increased $39~~decreased $65 million in ~~2015~~2016. Not included in foreclosed properties at December 31, ~~2015~~2016 was ~~$1.4~~$1.2 billion of real estate that was acquired upon foreclosure of certain delinquent government-guaranteed loans (principally FHA-insured loans). We exclude these amounts from our nonperforming loans and foreclosed properties activity as we expect we will be reimbursed once the property is conveyed to the guarantor for principal and, up to certain limits, costs incurred during the foreclosure process and interest incurred during the holding period.



		~~Bank of America 2015~~75

~~Restructured Loans~~

forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructuring and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months. Nonperforming TDRs, excluding those modified loans in the PCI loan portfolio, are included in Table 3530.



64 Bank of America 2016



Table 35	Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity⁽¹⁾
Table 30								Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity⁽¹⁾

(Dollars in millions)	(Dollars in millions)	2015			2014			(Dollars in millions)	2016			2015
Nonperforming loans and leases, January 1	Nonperforming loans and leases, January 1	$	10,819		$	15,840		Nonperforming loans and leases, January 1	$	8,165		$	10,819
Additions to nonperforming loans and leases:	Additions to nonperforming loans and leases:							Additions to nonperforming loans and leases:
New nonperforming loans and leases	New nonperforming loans and leases	4,949			7,077			New nonperforming loans and leases	3,492			4,949
Reductions to nonperforming loans and leases:	Reductions to nonperforming loans and leases:							Reductions to nonperforming loans and leases:
Paydowns and payoffs	Paydowns and payoffs	(1,018		)	(1,625		)	Paydowns and payoffs	(795		)	(1,018		)
Sales	Sales	(1,674		)	(4,129		)	Sales	(1,604		)	(1,674		)
Returns to performing status ⁽²⁾	Returns to performing status ⁽²⁾	(2,710		)	(3,277		)	Returns to performing status ⁽²⁾	(1,628		)	(2,710		)
Charge-offs	Charge-offs	(1,769		)	(2,187		)	Charge-offs	(1,277		)	(1,769		)
Transfers to foreclosed properties ⁽³⁾	Transfers to foreclosed properties ⁽³⁾	(432		)	(672		)	Transfers to foreclosed properties ⁽³⁾	(294		)	(432		)
Transfers to loans held-for-sale	Transfers to loans held-for-sale	—			(208		)	Transfers to loans held-for-sale	(55		)	—
Total net reductions to nonperforming loans and leases	Total net reductions to nonperforming loans and leases	(2,654		)	(5,021		)	Total net reductions to nonperforming loans and leases	(2,161		)	(2,654		)
Total nonperforming loans and leases, December 31 ⁽⁴⁾	Total nonperforming loans and leases, December 31 ⁽⁴⁾	8,165			10,819			Total nonperforming loans and leases, December 31 ⁽⁴⁾	6,004			8,165
Foreclosed properties, January 1	Foreclosed properties, January 1	630			533			Foreclosed properties, January 1	444			630
Additions to foreclosed properties:	Additions to foreclosed properties:							Additions to foreclosed properties:
New foreclosed properties ⁽³⁾	New foreclosed properties ⁽³⁾	606			1,011			New foreclosed properties ⁽³⁾	431			606
Reductions to foreclosed properties:	Reductions to foreclosed properties:							Reductions to foreclosed properties:
Sales	Sales	(686		)	(829		)	Sales	(443		)	(686		)
Write-downs	Write-downs	(106		)	(85		)	Write-downs	(69		)	(106		)
Total net additions (reductions) to foreclosed properties		(186		)	97
Total net reductions to foreclosed properties								Total net reductions to foreclosed properties	(81		)	(186		)
Total foreclosed properties, December 31 ⁽⁵⁾	Total foreclosed properties, December 31 ⁽⁵⁾	444			630			Total foreclosed properties, December 31 ⁽⁵⁾	363			444
Nonperforming consumer loans, leases and foreclosed properties, December 31	Nonperforming consumer loans, leases and foreclosed properties, December 31	$	8,609		$	11,449		Nonperforming consumer loans, leases and foreclosed properties, December 31	$	6,367		$	8,609
Nonperforming consumer loans and leases as a percentage of outstanding consumer loans and leases ⁽⁶⁾	Nonperforming consumer loans and leases as a percentage of outstanding consumer loans and leases ⁽⁶⁾	1.80		%	2.22		%	Nonperforming consumer loans and leases as a percentage of outstanding consumer loans and leases ⁽⁶⁾	1.32		%	1.80		%
Nonperforming consumer loans, leases and foreclosed properties as a percentage of outstanding consumer loans, leases and foreclosed properties ⁽⁶⁾	Nonperforming consumer loans, leases and foreclosed properties as a percentage of outstanding consumer loans, leases and foreclosed properties ⁽⁶⁾	1.89			2.35			Nonperforming consumer loans, leases and foreclosed properties as a percentage of outstanding consumer loans, leases and foreclosed properties ⁽⁶⁾	1.39			1.89

⁽¹⁾

Balances do not include nonperforming LHFS of $569 million and $75 million and nonaccruing TDRs removed from the PCI loan portfolio prior to January 1, 2010 of $3827 million and $~~102~~38 million at December 31, ~~2015~~2016 and ~~2014~~2015 as well as loans accruing past due 90 days or more as presented in Table 2320 and Note 4 – Outstanding Loans and Leases to the Consolidated Financial Statements.


⁽²⁾	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.

⁽³⁾


⁽⁴⁾	At December 31, ~~2015~~2016, 4136 percent of nonperforming loans were 180 days or more past due.


⁽⁵⁾	Foreclosed property balances do not include properties insured by certain government-guaranteed loans, principally FHA-insured loans, of $~~1.4~~1.2 billion and $~~1.1~~1.4 billion at December 31, ~~2015~~2016 and ~~2014~~2015.


⁽⁶⁾	Outstanding consumer loans and leases exclude loans accounted for under the fair value option.

Our policy is to record any losses in the value of foreclosed properties as a reduction in the allowance for loan and lease losses during the first 90 days after transfer of a loan to foreclosed properties. Thereafter, further losses in value as well as gains and losses on sale are recorded in noninterest expense. New foreclosed properties included in Table 3530 are net of ~~$162~~$73 million and ~~$191~~$162 million of charge-offs and write-offs of PCI loans in ~~2015~~2016 and ~~2014~~2015, recorded during the first 90 days after transfer.

We classify junior-lien home equity loans as nonperforming when the first-lien loan becomes 90 days past due even if the junior-lien loan is performing. At December 31, ~~2015~~2016 and ~~2014~~2015, $~~484~~428 million and ~~$800~~$484 million of such junior-lien home equity loans were included in nonperforming loans and leases. ~~This decline was driven by overall portfolio improvement as well as $75 million of charge-offs related to the consumer relief portion of the DoJ Settlement.~~



		76Bank of America ~~2015~~201665

Table 3631 presents TDRs for the consumer real estate portfolio. Performing TDR balances are excluded from nonperforming loans and leases in Table ~~35.~~30.



Table 36	Consumer Real Estate Troubled Debt Restructurings
Table 31														Consumer Real Estate Troubled Debt Restructurings

		December 31													December 31
		2015						2014							2016						2015
(Dollars in millions)	(Dollars in millions)	Total		Nonperforming		Performing		Total		Nonperforming		Performing		(Dollars in millions)	Total		Nonperforming		Performing		Total		Nonperforming		Performing
Residential mortgage ^{(1, 2)}	Residential mortgage ^{(1, 2)}	$	18,372	$	3,284	$	15,088	$	23,270	$	4,529	$	18,741	Residential mortgage ^{(1, 2)}	$	12,631	$	1,992	$	10,639	$	18,372	$	3,284	$	15,088
Home equity ⁽³⁾	Home equity ⁽³⁾	2,686		1,649		1,037		2,358		1,595		763		Home equity ⁽³⁾	2,777		1,566		1,211		2,686		1,649		1,037
Total consumer real estate troubled debt restructurings	Total consumer real estate troubled debt restructurings	$	21,058	$	4,933	$	16,125	$	25,628	$	6,124	$	19,504	Total consumer real estate troubled debt restructurings	$	15,408	$	3,558	$	11,850	$	21,058	$	4,933	$	16,125


⁽¹⁾	Residential mortgage TDRs deemed collateral dependent totaled $~~4.9~~3.5 billion and $~~5.8~~4.9 billion, and included $~~2.7~~1.6 billion and $~~3.6~~2.7 billion of loans classified as nonperforming and $~~2.2~~1.9 billion and $2.2 billion of loans classified as performing at December 31, ~~2015~~2016 and ~~2014~~2015.


⁽²⁾	Residential mortgage performing TDRs included $~~8.7~~5.3 billion and $~~11.9~~8.7 billion of loans that were fully-insured at December 31, ~~2015~~2016 and ~~2014~~2015.


⁽³⁾	Home equity TDRs deemed collateral dependent totaled $1.6 billion and $1.6 billion, and included $1.3 billion and $~~1.4~~1.3 billion of loans classified as nonperforming and $~~290~~301 million and $~~178~~290 million of loans classified as performing at December 31, ~~2015~~2016 and ~~2014~~2015.

Modifications of credit card and other consumer loans are ~~primarily~~ made through ~~internal~~ renegotiation programs utilizing direct customer contact, but may also utilize external renegotiation programs. The renegotiated TDR portfolio is excluded in large part from Table 3530 as substantially all of the loans remain on accrual status until either charged off or paid in full. At December 31, ~~2015~~2016 and ~~2014~~2015, our renegotiated TDR portfolio was $~~779~~610 million and $~~1.1 billion~~779 million, of which $~~635~~493 million and $~~907~~635 million were current or less than 30 days past due under the modified terms. The decline in the renegotiated TDR portfolio was primarily driven by paydowns and charge-offs as well as lower program enrollments. For more information on the renegotiated TDR portfolio, see Note 4 – Outstanding Loans and Leases to the Consolidated Financial Statements.

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 ~~this~~these considerations with the total borrower or counterparty relationship. Our business and risk management personnel 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~~

portfolios. In addition, risk ratings are a factor in determining the level of allocated capital and the allowance for credit losses.

Management of Commercial Credit Risk Concentrations

Commercial credit risk is evaluated and managed with the goal that concentrations of credit exposure do not result in undesirable levels of risk. 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 ~~41, 46, 52~~36, 39, 44 and 5345 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, including our utilized exposure to the energy sector which was ~~two~~three percent and four percent of total ~~loans and leases~~commercial utilized exposure at December 31, 2016 and 2015, see Commercial Portfolio Credit Risk Management – Industry Concentrations on page 8371 and Table ~~46.~~39.

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 ~~the Corporation’s~~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.~~



		66Bank of America ~~2015~~772016

accounting hedges. They are carried at fair value with changes in fair value recorded in other income (loss).

In addition, ~~the Corporation is~~we are a member of various securities and derivative exchanges and clearinghouses, both in the U.S. and other countries. As a member, ~~the Corporation~~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 additional information, see Note 12 – Commitments and Contingencies to the Consolidated Financial Statements.

Commercial Credit Portfolio

During ~~2015,~~2016, other than in the higher risk energy sub-sectors, credit quality among large corporate borrowers ~~remained stable except~~was strong. While we experienced some deterioration in the energy sector in 2016, oil prices have stabilized, which ~~experienced some deterioration due~~contributed to ~~the sustained drop~~a modest improvement in ~~oil prices.~~energy-related exposure by year end. Credit quality of commercial real estate borrowers continued to ~~improve as property valuations increased~~be strong with conservative LTV ratios, stable market rents in most sectors and vacancy rates ~~remained~~remaining low.

Outstanding commercial loans and leases increased ~~$54.0~~$17.7 billion during 2016 primarily in U.S. ~~commercial, non-U.S. commercial and~~

~~commercial real estate.~~commercial. Nonperforming commercial loans and leases increased ~~$112~~$562 million during ~~2015~~2016. Nonperforming commercial loans and leases as a percentage of outstanding loans and leases, excluding loans accounted for under the fair value option, ~~decreased~~increased during ~~2015~~2016 to ~~0.27~~0.38 percent from ~~0.29~~0.28 percent at December 31, ~~2014.~~2015. Reservable criticized balances increased ~~$4.9 billion~~$424 million to ~~$16.5~~$16.3 billion during ~~2015~~2016 as a result of net downgrades outpacing paydowns, ~~and upgrades.~~primarily in the energy sector. The increase in ~~reservable criticized balances~~nonperforming loans was primarily due to ~~our~~ energy ~~exposure as the credit quality of certain borrowers was impacted by the sustained drop in oil prices.~~and metals mining exposure. The allowance for loan and lease losses for the commercial portfolio increased $~~412~~409 million to ~~$4.8~~$5.3 billion at December 31, ~~2015 compared to~~ ~~December 31, 2014~~.2016. For additional information, see Allowance for Credit Losses on page 8875.

Table 3732 presents our commercial loans and leases portfolio, and related credit quality information at December 31, ~~2015~~2016 and ~~2014~~2015.



Table 37	Commercial Loans and Leases
Table 32														Commercial Loans and Leases

		December 31													December 31
		Outstandings				Nonperforming				Accruing Past Due 90 Days or More					Outstandings				Nonperforming				Accruing Past Due 90 Days or More
(Dollars in millions)	(Dollars in millions)	2015		2014		2015		2014		2015		2014		(Dollars in millions)	2016		2015		2016		2015		2016		2015
U.S. commercial	U.S. commercial	$	252,771	$	220,293	$	867	$	701	$	113	$	110	U.S. commercial	$	270,372	$	252,771	$	1,256	$	867	$	106	$	113
Commercial real estate ⁽¹⁾	Commercial real estate ⁽¹⁾	57,199		47,682		93		321		3		3		Commercial real estate ⁽¹⁾	57,355		57,199		72		93		7		3
Commercial lease financing	Commercial lease financing	27,370		24,866		12		3		17		41		Commercial lease financing	22,375		21,352		36		12		19		15
Non-U.S. commercial	Non-U.S. commercial	91,549		80,083		158		1		1		—		Non-U.S. commercial	89,397		91,549		279		158		5		1
		428,889		372,924		1,130		1,026		134		154			439,499		422,871		1,643		1,130		137		132
U.S. small business commercial ⁽²⁾	U.S. small business commercial ⁽²⁾	12,876		13,293		82		87		61		67		U.S. small business commercial ⁽²⁾	12,993		12,876		60		82		71		61
Commercial loans excluding loans accounted for under the fair value option	Commercial loans excluding loans accounted for under the fair value option	441,765		386,217		1,212		1,113		195		221		Commercial loans excluding loans accounted for under the fair value option	452,492		435,747		1,703		1,212		208		193
Loans accounted for under the fair value option ⁽³⁾	Loans accounted for under the fair value option ⁽³⁾	5,067		6,604		13		—		—		—		Loans accounted for under the fair value option ⁽³⁾	6,034		5,067		84		13		—		—
Total commercial loans and leases	Total commercial loans and leases	$	446,832	$	392,821	$	1,225	$	1,113	$	195	$	221	Total commercial loans and leases	$	458,526	$	440,814	$	1,787	$	1,225	$	208	$	193


⁽¹⁾	Includes U.S. commercial real estate loans of $~~53.6~~54.3 billion and $~~45.2~~53.6 billion and non-U.S. commercial real estate loans of $~~3.5~~3.1 billion and $~~2.5~~3.5 billion at December 31, ~~2015~~2016 and ~~2014~~2015.


⁽²⁾	Includes card-related products.


⁽³⁾	Commercial loans accounted for under the fair value option include U.S. commercial loans of $~~2.3~~2.9 billion and $~~1.9~~2.3 billion and non-U.S. commercial loans of $~~2.8~~3.1 billion and $~~4.7~~2.8 billion at December 31, ~~2015~~2016 and ~~2014~~2015. For more information on the fair value option, see Note 21 – Fair Value Optionto the Consolidated Financial ~~Statements~~.Statements.

Table 3833 presents net charge-offs and related ratios for our commercial loans and leases for ~~2015~~2016 and ~~2014.~~2015. The increase in net charge-offs of ~~$110~~$80 million in ~~2015~~2016 was primarily ~~related~~due to ~~higher recoveries in commercial real estate in 2014 and~~ higher energy sector related ~~losses in 2015.~~losses.



Table 38	Commercial Net Charge-offs and Related Ratios
Table 33												Commercial Net Charge-offs and Related Ratios

		Net Charge-offs						Net Charge-off Ratios ⁽¹⁾					Net Charge-offs						Net Charge-off Ratios ⁽¹⁾
(Dollars in millions)	(Dollars in millions)	2015			2014			2015		2014		(Dollars in millions)	2016			2015			2016		2015
U.S. commercial	U.S. commercial	$	139		$	88		0.06	%	0.04	%	U.S. commercial	$	184		$	139		0.07	%	0.06	%
Commercial real estate	Commercial real estate	(5		)	(83		)	(0.01	)	(0.18	)	Commercial real estate	(31		)	(5		)	(0.05	)	(0.01	)
Commercial lease financing	Commercial lease financing	9			(9		)	0.04		(0.04	)	Commercial lease financing	21			9			0.10		0.04
Non-U.S. commercial	Non-U.S. commercial	54			34			0.06		0.04		Non-U.S. commercial	120			54			0.13		0.06
		197			30			0.05		0.01			294			197			0.07		0.05
U.S. small business commercial	U.S. small business commercial	225			282			1.71		2.10		U.S. small business commercial	208			225			1.60		1.71
Total commercial	Total commercial	$	422		$	312		0.10		0.08		Total commercial	$	502		$	422		0.11		0.10


⁽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.



		78Bank of America ~~2015~~201667

Table 3934 presents commercial credit exposure by type for utilized, unfunded and total binding committed credit exposure. Commercial utilized credit exposure includes SBLCs and financial guarantees, bankers’ acceptances and commercial letters of credit for which we are legally bound to advance funds under prescribed conditions during a specified time ~~period.~~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.

Total commercial utilized credit exposure increased $~~52.9~~15.3 billion in ~~2015~~2016 primarily driven by growth in loans and leases. The utilization rate for loans and leases, SBLCs and financial guarantees, commercial letters of credit and bankers acceptances, in the aggregate, was 5658 percent and 5756 percent at December 31, ~~2015~~2016 and ~~2014~~2015.



Table 39	Commercial Credit Exposure by Type
Table 34														Commercial Credit Exposure by Type

		December 31													December 31
		Commercial Utilized ⁽¹⁾				Commercial Unfunded ^{(2, 3)}				Total Commercial Committed					Commercial Utilized ⁽¹⁾				Commercial Unfunded ^{(2, 3, 4)}				Total Commercial Committed
(Dollars in millions)	(Dollars in millions)	2015		2014		2015		2014		2015		2014		(Dollars in millions)	2016		2015		2016		2015		2016		2015
Loans and leases(5)	Loans and leases(5)	$	446,832	$	392,821	$	376,478	$	317,258	$	823,310	$	710,079	Loans and leases(5)	$	464,260	$	446,832	$	366,106	$	376,478	$	830,366	$	823,310
Derivative assets ⁽⁴⁾⁽⁶⁾	Derivative assets ⁽⁴⁾⁽⁶⁾	49,990		52,682		—		—		49,990		52,682		Derivative assets ⁽⁴⁾⁽⁶⁾	42,512		49,990		—		—		42,512		49,990
Standby letters of credit and financial guarantees	Standby letters of credit and financial guarantees	33,236		33,550		690		745		33,926		34,295		Standby letters of credit and financial guarantees	33,135		33,236		660		690		33,795		33,926
Debt securities and other investments	Debt securities and other investments	21,709		17,301		4,173		5,315		25,882		22,616		Debt securities and other investments	26,244		21,709		5,474		4,173		31,718		25,882
Loans held-for-sale	Loans held-for-sale	5,456		7,036		1,203		2,315		6,659		9,351		Loans held-for-sale	6,510		5,456		3,824		1,203		10,334		6,659
Commercial letters of credit	Commercial letters of credit	1,725		2,037		390		126		2,115		2,163		Commercial letters of credit	1,464		1,725		112		390		1,576		2,115
Bankers’ acceptances	Bankers’ acceptances	298		255		—		—		298		255		Bankers’ acceptances	395		298		13		—		408		298
Foreclosed properties and other		317		960		—		—		317		960
Other														Other	372		317		—		—		372		317
Total		$	559,563	$	506,642	$	382,934	$	325,759	$	942,497	$	832,401		$	574,892	$	559,563	$	376,189	$	382,934	$	951,081	$	942,497


⁽¹⁾	Total commercial utilized exposure includes loans of $~~5.1~~6.0 billion and $~~6.6~~5.1 billion and issued letters of credit with a notional amount of $~~290~~284 million and $~~535~~290 million accounted for under the fair value option at December 31, ~~2015~~2016 and ~~2014~~2015.


⁽²⁾	Total commercial unfunded exposure includes loan commitments accounted for under the fair value option with a notional amount of $~~10.6~~6.7 billion and $~~9.4~~10.6 billion at December 31, ~~2015~~2016 and ~~2014~~2015.


⁽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 (e.g. syndicated or participated) to other financial institutions. The distributed amounts were $12.1 billion and $14.3 billion at December 31, 2016 and 2015.


⁽⁵⁾	Includes credit risk exposure associated with assets under operating lease arrangements of $5.7 billion and $6.0 billion at December 31, 2016 and 2015.

⁽⁶⁾

Derivative assets are carried at fair value, reflect the effects of legally enforceable master netting agreements and have been reduced by cash collateral of $~~41.9~~43.3 billion and $~~47.3~~41.9 billion at December 31, ~~2015~~2016 and ~~2014~~2015. Not reflected in utilized and committed exposure is additional non-cash derivative collateral held of ~~$23.3~~$22.9 billion and $~~23.8~~23.3 billion at December 31, 2016 and 2015, which consists primarily of other marketable securities.

Table 4035 presents commercial utilized reservable criticized exposure by loan type. Criticized exposure corresponds to the Special Mention, Substandard and Doubtful asset categories as defined by regulatory authorities. Total commercial utilized reservable criticized exposure increased $~~4.9 billion~~424 million, or 43three

percent, in ~~2015~~2016 driven by downgrades, primarily related to our energy exposure, outpacing paydowns and upgrades. Approximately 7876 percent and 8778 percent of commercial utilized reservable criticized exposure was secured at December 31, ~~2015~~2016 and ~~2014~~2015.



Table 40	Commercial Utilized Reservable Criticized Exposure
Table 35										Commercial Utilized Reservable Criticized Exposure

		December 31									December 31
		2015				2014					2016				2015
(Dollars in millions)	(Dollars in millions)	Amount ⁽¹⁾		Percent ⁽²⁾		Amount ⁽¹⁾		Percent ⁽²⁾		(Dollars in millions)	Amount ⁽¹⁾		Percent ⁽²⁾		Amount ⁽¹⁾		Percent ⁽²⁾
U.S. commercial	U.S. commercial	$	9,965	3.56	%	$	7,597	3.07	%	U.S. commercial	$	10,311	3.46	%	$	9,965	3.56	%
Commercial real estate	Commercial real estate	513		0.87		1,108		2.24		Commercial real estate	399		0.68		513		0.87
Commercial lease financing	Commercial lease financing	1,320		4.82		1,034		4.16		Commercial lease financing	810		3.62		708		3.31
Non-U.S. commercial	Non-U.S. commercial	3,944		4.04		887		1.03		Non-U.S. commercial	3,974		4.17		3,944		4.04
		15,742		3.39		10,626		2.60			15,494		3.27		15,130		3.30
U.S. small business commercial	U.S. small business commercial	766		5.95		944		7.10		U.S. small business commercial	826		6.36		766		5.95
Total commercial utilized reservable criticized exposure	Total commercial utilized reservable criticized exposure	$	16,508	3.46		$	11,570	2.74		Total commercial utilized reservable criticized exposure	$	16,320	3.35		$	15,896	3.38


⁽¹⁾	Total commercial utilized reservable criticized exposure includes loans and leases of $~~15.1~~14.9 billion and $~~10.2~~14.5 billion and commercial letters of credit of $1.4 billion ~~and~~ ~~$1.3 billion~~at December 31, ~~2015~~2016 and ~~2014~~2015.


⁽²⁾	Percentages are calculated as commercial utilized reservable criticized exposure divided by total commercial utilized reservable exposure for each exposure category.

U.S. Commercial

At December 31, ~~2015~~2016, 7072 percent of the U.S. commercial loan portfolio, excluding small business, was managed in Global Banking, 1716 percent in Global Markets, 10 percent in GWIM (generally business-purpose loans for high net worth clients) and the remainder primarily in Consumer Banking. U.S. commercial

loans, excluding loans accounted for under the fair value option,

increased ~~$32.5~~$17.6 billion, or 15seven percent, during ~~2015~~2016 due to growth across all of the commercial businesses. ~~Nonperforming~~Energy exposure largely drove increases in reservable criticized balances of $346 million, or three percent, and nonperforming loans and leases ~~increased $166~~of $389 million, or 2445 percent, during 2016, as well as increases in net charge-offs of $45 million in ~~2015, largely related to our energy exposure. Net charge-offs~~ ~~increased$51 million~~2016 compared to ~~$139 million during~~ ~~2015~~.2015.



		68Bank of America ~~2015~~792016

Commercial Real Estate

Commercial real estate primarily includes commercial loans and leases 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. The portfolio remains diversified across property types and geographic regions. California represented the largest state concentration at 2123 percent and 2221 percent of the commercial real estate loans and leases portfolio at December 31, ~~2015~~2016 and ~~2014~~2015. 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. Outstanding loans ~~increased $9.5 billion, or 20 percent, during~~ ~~2015~~ ~~due to~~remained relatively unchanged with new originations ~~primarily in major metropolitan markets.~~slightly outpacing paydowns during 2016.

During ~~2015~~2016, we continued to see ~~improvements in~~low default rates and solid credit quality in both the residential and non-residential portfolios. We

Nonperforming commercial real estate loans and foreclosed properties decreased~~$280~~ $22 million,, or 7220 percent, to $86 million and reservable criticized balances decreased ~~$595~~$114 million, or 5422 percent, ~~during 2015.~~to $399 million at December 31, 2016. The decrease in reservable criticized balances was primarily due to loan resolutions and strong commercial real estate fundamentals ~~throughout the year.~~in most sectors. Net recoveries were $31 million and $5 million in ~~2015~~2016 ~~compared to net recoveries of $83 million in 2014.~~and 2015.

Table 4136 presents outstanding commercial real estate loans by geographic region, based on the geographic location of the collateral, and by property type.



Table 41	Outstanding Commercial Real Estate Loans
Table 36						Outstanding Commercial Real Estate Loans

		December 31					December 31
(Dollars in millions)	(Dollars in millions)	2015		2014		(Dollars in millions)	2016		2015
By Geographic Region	By Geographic Region					By Geographic Region
California	California	$	12,063	$	10,352	California	$	13,450	$	12,063
Northeast	Northeast	10,292		8,781		Northeast	10,329		10,292
Southwest	Southwest	7,789		6,570		Southwest	7,567		7,789
Southeast	Southeast	6,066		5,495		Southeast	5,630		6,066
Midwest	Midwest	3,780		2,867		Midwest	4,380		3,780
Florida	Florida	3,330		2,520		Florida	3,213		3,330
Northwest						Northwest	2,430		2,327
Illinois	Illinois	2,536		2,785		Illinois	2,408		2,536
Midsouth	Midsouth	2,435		1,724		Midsouth	2,346		2,435
Northwest		2,327		2,151
Non-U.S.	Non-U.S.	3,549		2,494		Non-U.S.	3,103		3,549
Other ⁽¹⁾	Other ⁽¹⁾	3,032		1,943		Other ⁽¹⁾	2,499		3,032
Total outstanding commercial real estate loans	Total outstanding commercial real estate loans	$	57,199	$	47,682	Total outstanding commercial real estate loans	$	57,355	$	57,199
By Property Type	By Property Type					By Property Type
Non-residential	Non-residential					Non-residential
Office	Office	$	15,246	$	13,306	Office	$	16,643	$	15,246
Multi-family rental	Multi-family rental	8,956		8,382		Multi-family rental	8,817		8,956
Shopping centers/retail	Shopping centers/retail	8,594		7,969		Shopping centers/retail	8,794		8,594
Industrial/warehouse		5,501		4,550
Hotels/motels		5,415		3,578
Multi-use		3,003		1,943
Hotels / Motels						Hotels / Motels	5,550		5,415
Industrial / Warehouse						Industrial / Warehouse	5,357		5,501
Multi-Use						Multi-Use	2,822		3,003
Unsecured	Unsecured	2,056		1,194		Unsecured	1,730		2,056
Land and land development	Land and land development	539		490		Land and land development	357		539
Other	Other	5,791		4,560		Other	5,595		5,791
Total non-residential	Total non-residential	55,101		45,972		Total non-residential	55,665		55,101
Residential	Residential	2,098		1,710		Residential	1,690		2,098
Total outstanding commercial real estate loans	Total outstanding commercial real estate loans	$	57,199	$	47,682	Total outstanding commercial real estate loans	$	57,355	$	57,199


⁽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.



80 ~~Bank of America 2015~~

~~Tables~~ 42 ~~and~~ 43 ~~present commercial real estate credit quality data by non-residential and residential property types. The residential portfolio presented in Tables~~ 41, 42 ~~and~~ 43 ~~includes~~

~~condominiums and other residential real estate. Other property types in Tables~~ 41, 42 ~~and~~ 43 ~~primarily include special purpose, nursing/retirement homes, medical facilities and restaurants.~~

Table 42 Commercial Real Estate Credit Quality Data

December 31

Nonperforming Loans and
Foreclosed Properties ⁽¹⁾

Utilized Reservable
Criticized Exposure⁽²⁾
(Dollars in millions) 2015 2014 2015 2014
Non-residential

Office $ 14
$ 177
$ 110
$ 235
Multi-family rental 18
21
69
125
Shopping centers/retail 12
46
183
350
Industrial/warehouse 6
42
16
67
Hotels/motels 18
3
16
26
Multi-use 15
11
42
55
Unsecured 1
1
4
14
Land and land development 2
51
3
63
Other 8
14
59
145
Total non-residential 94
366
502
1,080
Residential 14
22
11
28
Total commercial real estate $ 108
$ 388
$ 513
$ 1,108


⁽¹⁾	~~Includes commercial foreclosed properties of~~ ~~$15 million~~ ~~and~~ ~~$67 million~~ at ~~December 31, 2015 and 2014~~.


⁽²⁾	~~Includes loans, SBLCs and bankers’ acceptances and excludes loans accounted for under the fair value option.~~

Table 43 Commercial Real Estate Net Charge-offs and Related Ratios

Net Charge-offs
Net Charge-off Ratios ⁽¹⁾
(Dollars in millions) 2015 2014 2015 2014
Non-residential

Office $ 3
$ (4 ) 0.02 % (0.04 )%
Multi-family rental 1
(22 ) 0.01
(0.25 )
Shopping centers/retail 1
4
0.01
0.06
Industrial/warehouse (1 ) (1 ) (0.02 ) (0.03 )
Hotels/motels 5
(3 ) 0.12
(0.07 )
Multi-use (4 ) (9 ) (0.19 ) (0.49 )
Unsecured (4 ) (22 ) (0.20 ) (1.37 )
Land and land development (9 ) (2 ) (1.60 ) (0.31 )
Other 1
(16 ) 0.01
(0.37 )
Total non-residential (7 ) (75 ) (0.01 ) (0.16 )
Residential 2
(8 ) 0.08
(0.47 )
Total commercial real estate $ (5 ) $ (83 ) (0.01 ) (0.18 )


⁽¹⁾	~~Net charge-off ratios are calculated as net charge-offs divided by average outstanding loans excluding loans accounted for under the fair value option.~~

At December 31, ~~2015~~2016, total committed non-residential exposure was ~~$81.0~~$76.9 billion compared to ~~$67.7~~$81.0 billion at December 31, ~~2014~~2015, of which ~~$55.1~~$55.7 billion and ~~$46.0~~$55.1 billion were funded loans. Non-residential nonperforming loans and foreclosed properties ~~declined $272~~decreased $13 million, or 7414 percent, to ~~$94~~$81 million ~~during~~ ~~2015~~ ~~primarily~~ at December 31, 2016 due to ~~a decrease in office property.~~decreases across most property types. The non-residential nonperforming loans and foreclosed properties represented ~~0.17~~0.14 percent and ~~0.79~~0.17 percent of total non-residential loans and foreclosed properties at December 31, ~~2015~~2016 and ~~2014.~~2015. Non-residential utilized reservable criticized exposure decreased ~~$578~~ $105 million, or 5421 percent, to $397 million at ~~$502~~December 31, 2016 compared to $502 million at December 31, 2015 ~~compared to $1.1 billion at~~ ~~December 31, 2014~~, which represented 0.70 percent and 0.89 percent ~~and 2.27 percent~~ of ~~non-residential~~non-

residential utilized reservable exposure. For the non-residential portfolio, net recoveries ~~decreased$68~~increased $24 million to $7$31 million in ~~2015~~2016 compared to ~~2014.~~2015.

At December 31, ~~2015~~2016, total committed residential exposure was ~~$4.1~~$3.7 billion compared to ~~$3.6~~$4.1 billion at December 31, ~~2014~~2015,

of which ~~$2.1~~$1.7 billion and ~~$1.7~~$2.1 billion were funded secured loans. ~~Residential~~The residential nonperforming loans and foreclosed properties decreased$8 $8 million,, or 3657 percent, and residential utilized reservable criticized exposure decreased~~$17~~ $8 million,, or 6173 percent, during ~~2015.~~2016. The nonperforming loans, leases and foreclosed properties and the utilized reservable criticized ratios for the residential portfolio were 0.35 percent and 0.16 percent at



		Bank of America 201669

December 31, 2016 compared to 0.66 percent and 0.52 percent at December 31, 2015 ~~compared to 1.28 percent and 1.51 percent at~~ ~~December 31, 2014~~.

At December 31, ~~2015~~2016 and ~~2014~~2015, the commercial real estate loan portfolio included ~~$7.6~~$6.8 billion and ~~$6.7~~$7.6 billion of funded construction and land development loans that were originated to fund the construction and/or rehabilitation of commercial properties. Reservable criticized construction and land development loans totaled ~~$108~~$107 million and ~~$164~~$108 million, and nonperforming construction and land development loans and foreclosed properties totaled $44 million ~~and $80 million~~ at both December 31, ~~2015~~2016 and ~~2014~~2015. During a property’s construction



		~~Bank of America 2015~~81

phase, interest income is typically paid from interest reserves that are established at the inception of the loan. As construction is completed and the property is put into service, these interest reserves are depleted and interest payments from operating cash flows begin. We do not recognize interest income on nonperforming loans regardless of the existence of an interest reserve.

Non-U.S. Commercial

At December 31, ~~2015~~2016, 7477 percent of the non-U.S. commercial loan portfolio was managed in Global Banking and 2623 percent in Global Markets. Outstanding loans, excluding loans accounted for under the fair value option, ~~increased $11.5~~decreased $2.2 billion in ~~2015~~2016 primarily due to ~~growth in securitization finance on consumer loans and increased corporate demand.~~payoffs. Net charge-offs increased $2066 million to ~~$54~~$120 million in ~~2015~~2016. primarily due to higher energy sector related losses in the first half of 2016. For more information on the non-U.S. commercial portfolio, see Non-U.S. Portfolio on page 8674.

U.S. Small Business Commercial

The U.S. small business commercial loan portfolio is comprised of small business card loans and small business loans managed in Consumer Banking. Credit card-related products were 4548 percent and 4345 percent of the U.S. small business commercial portfolio at December 31, ~~2015~~2016 and ~~2014~~2015. Net charge-offs decreased $5717 million to ~~$225~~$208 million in ~~2015~~2016 primarily driven by ~~improvement~~

~~in small business card loan delinquencies, a reduction in higher risk vintages and increased recoveries from the sale of previously charged-off loans.~~portfolio improvement. Of the U.S. small business commercial net charge-offs, 8186 percent and 7381 percent were credit card-related products in ~~2015~~2016 and ~~2014~~2015.

Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity

Table 4437 presents the nonperforming commercial loans, leases and foreclosed properties activity during ~~2015~~2016 and ~~2014~~2015. Nonperforming loans do not include loans accounted for under the fair value option. During ~~2015~~2016, nonperforming commercial loans and leases increased $99491 million to $~~1.2~~1.7 billion primarily due to energy ~~sector related~~and metals and mining exposure. ~~The decline in foreclosed properties of $52 million in 2015 was primarily due to the sale of properties.~~ Approximately 8877 percent of commercial nonperforming loans, leases and foreclosed properties were secured and approximately 6966 percent were contractually current. Commercial nonperforming loans were carried at approximately 8588 percent of their unpaid principal balance before consideration of the allowance for loan and lease losses as the carrying value of these loans has been reduced to the estimated property value less costs to sell.



Table 44	Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity ^{(1, 2)}
Table 37								Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity ^{(1, 2)}

(Dollars in millions)	(Dollars in millions)	2015			2014			(Dollars in millions)	2016			2015
Nonperforming loans and leases, January 1	Nonperforming loans and leases, January 1	$	1,113		$	1,309		Nonperforming loans and leases, January 1	$	1,212		$	1,113
Additions to nonperforming loans and leases:	Additions to nonperforming loans and leases:							Additions to nonperforming loans and leases:
New nonperforming loans and leases	New nonperforming loans and leases	1,367			1,228			New nonperforming loans and leases	2,330			1,367
Advances	Advances	36			48			Advances	17			36
Reductions to nonperforming loans and leases:	Reductions to nonperforming loans and leases:							Reductions to nonperforming loans and leases:
Paydowns	Paydowns	(491		)	(717		)	Paydowns	(824		)	(491		)
Sales	Sales	(108		)	(149		)	Sales	(318		)	(108		)
Returns to performing status ⁽³⁾	Returns to performing status ⁽³⁾	(130		)	(261		)	Returns to performing status ⁽³⁾	(267		)	(130		)
Charge-offs	Charge-offs	(362		)	(332		)	Charge-offs	(434		)	(362		)
Transfers to foreclosed properties ⁽⁴⁾	Transfers to foreclosed properties ⁽⁴⁾	(213		)	(13		)	Transfers to foreclosed properties ⁽⁴⁾	(4		)	(213		)
Total net additions (reductions) to nonperforming loans and leases		99			(196		)
Transfers to loans held-for-sale								Transfers to loans held-for-sale	(9		)	—
Total net additions to nonperforming loans and leases								Total net additions to nonperforming loans and leases	491			99
Total nonperforming loans and leases, December 31	Total nonperforming loans and leases, December 31	1,212			1,113			Total nonperforming loans and leases, December 31	1,703			1,212
Foreclosed properties, January 1	Foreclosed properties, January 1	67			90			Foreclosed properties, January 1	15			67
Additions to foreclosed properties:	Additions to foreclosed properties:							Additions to foreclosed properties:
New foreclosed properties ⁽⁴⁾	New foreclosed properties ⁽⁴⁾	207			11			New foreclosed properties ⁽⁴⁾	24			207
Reductions to foreclosed properties:	Reductions to foreclosed properties:							Reductions to foreclosed properties:
Sales	Sales	(256		)	(26		)	Sales	(25		)	(256		)
Write-downs	Write-downs	(3		)	(8		)	Write-downs	—			(3		)
Total net reductions to foreclosed properties	Total net reductions to foreclosed properties	(52		)	(23		)	Total net reductions to foreclosed properties	(1		)	(52		)
Total foreclosed properties, December 31	Total foreclosed properties, December 31	15			67			Total foreclosed properties, December 31	14			15
Nonperforming commercial loans, leases and foreclosed properties, December 31	Nonperforming commercial loans, leases and foreclosed properties, December 31	$	1,227		$	1,180		Nonperforming commercial loans, leases and foreclosed properties, December 31	$	1,717		$	1,227
Nonperforming commercial loans and leases as a percentage of outstanding commercial loans and leases ⁽⁵⁾	Nonperforming commercial loans and leases as a percentage of outstanding commercial loans and leases ⁽⁵⁾	0.27		%	0.29		%	Nonperforming commercial loans and leases as a percentage of outstanding commercial loans and leases ⁽⁵⁾	0.38		%	0.28		%
Nonperforming commercial loans, leases and foreclosed properties as a percentage of outstanding commercial loans, leases and foreclosed properties ⁽⁵⁾	Nonperforming commercial loans, leases and foreclosed properties as a percentage of outstanding commercial loans, leases and foreclosed properties ⁽⁵⁾	0.28			0.31			Nonperforming commercial loans, leases and foreclosed properties as a percentage of outstanding commercial loans, leases and foreclosed properties ⁽⁵⁾	0.38			0.28


⁽¹⁾	Balances do not include nonperforming LHFS of ~~$220~~$195 million and ~~$212~~$220 million at December 31, ~~2015~~2016 and ~~2014~~2015.


⁽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⁾	New foreclosed properties represents transfers of nonperforming loans to foreclosed properties net of charge-offs recorded during the first 90 days after transfer of a loan to foreclosed properties.


⁽⁵⁾	Outstanding commercial loans exclude loans accounted for under the fair value option.



8270 Bank of America ~~2015~~2016

Table 4538 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



Table 45	Commercial Troubled Debt Restructurings
Table 38														Commercial Troubled Debt Restructurings

		December 31													December 31
		2015						2014							2016						2015
(Dollars in millions)	(Dollars in millions)	Total		Nonperforming		Performing		Total		Nonperforming		Performing		(Dollars in millions)	Total		Nonperforming		Performing		Total		Nonperforming		Performing
U.S. commercial	U.S. commercial	$	1,225	$	394	$	831	$	1,096	$	308	$	788	U.S. commercial	$	1,860	$	720	$	1,140	$	1,225	$	394	$	831
Commercial real estate	Commercial real estate	118		27		91		456		234		222		Commercial real estate	140		45		95		118		27		91
Commercial lease financing														Commercial lease financing	4		2		2		—		—		—
Non-U.S. commercial	Non-U.S. commercial	363		136		227		43		—		43		Non-U.S. commercial	308		25		283		363		136		227
															2,312		792		1,520		1,706		557		1,149
U.S. small business commercial	U.S. small business commercial	29		10		19		35		—		35		U.S. small business commercial	15		2		13		29		10		19
Total commercial troubled debt restructurings	Total commercial troubled debt restructurings	$	1,735	$	567	$	1,168	$	1,630	$	542	$	1,088	Total commercial troubled debt restructurings	$	2,327	$	794	$	1,533	$	1,735	$	567	$	1,168

Industry Concentrations

Table 4639 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 credit exposure increased ~~$110.1~~$8.6 billion, or 13one percent, in ~~2015~~2016 to $~~942.5~~951.1 billion. Increases in commercial committed exposure were concentrated in ~~diversified financials,~~healthcare equipment and services, telecommunication services, capital goods and consumer services, partially offset by lower exposure to technology hardware and equipment, ~~real estate,~~banking, and food, beverage and ~~tobacco and retailing.~~tobacco.

Diversified financials, our largest industry concentration with committed exposure of ~~$128.4~~$124.5 billion, ~~increased $24.9~~decreased $3.9 billion, or 24three percent, in ~~2015~~2016. The ~~increase~~decrease was primarily ~~driven by growth~~due to a reduction in bridge financing exposure ~~to asset managers, acquisition financing~~ and ~~certain asset-backed lending products.~~other commitments.

Real estate, our second largest industry concentration with committed exposure of ~~$87.7~~$83.7 billion, ~~increased $11.5~~decreased $4.0 billion, or 15five percent, in ~~2015. The increase was primarily due to strong~~

demand for quality core assets in major metropolitan markets. Real estate construction and land development exposure represented 14 percent and 13 percent of the total real estate industry committed exposure at ~~December 31, 2015~~ ~~and~~ ~~2014~~2016. For more information on the commercial real estate and related portfolios, see Commercial Portfolio Credit Risk Management – Commercial Real Estate on page 8069.

~~During 2015,~~Our energy-related committed exposure decreased $4.6 billion in 2016 to $39.2 billion. Within the higher risk sub-sectors of exploration and production and oil field services, total committed exposure declined $2.8 billion to $15.3 billion at December 31, 2016, or 39 percent of total committed energy exposure. Total utilized exposure to these sub-sectors declined approximately $1.7 billion to $6.7 billion in 2016. Of the total $5.7 billion of reservable utilized exposure to the ~~technology hardware~~higher risk sub-sectors, 56 percent was criticized at December 31, 2016. Energy sector net charge-offs increased $141 million to $241 million in 2016, and ~~equipment industry~~energy sector reservable criticized exposure increased~~$12.4~~ $910 million in 2016 to $5.5 billion or 100 percent, food, beverages and tobacco increased $8.7 billion, or 25 percent, and retailing industry increased $5.9 billion, or 10 percent, primarily driven by bridge financing for acquisitions and increased client activity.

~~The significant decline in~~due to low oil prices ~~since June 2014 has~~which impacted ~~and may continue to impact~~ the financial performance of energy ~~producers as well as~~clients. The energy ~~equipment and service providers within the energy sector. At December 31, 2015, these two subsectors comprised 39 percent of our overall utilized energy exposure. While we experienced modest~~allowance for credit losses increased $382 million in ~~our energy portfolio through December 31, 2015,~~2016 to $925 million primarily due to an increase in reserves for the magnitude of the impact over time will depend upon the level and duration of future oil prices. Our energy-related exposure decreased $3.9 billion in 2015 to $43.8 billion driven by paydowns from large clients.higher risk sub-sectors.



		Bank of America ~~2015~~2016 8371

~~Our committed state and municipal exposure of $43.4 billion at~~ ~~December 31, 2015~~ consisted of $35.9 billion of commercial utilized exposure (including $20.0 billion of funded loans, $6.4 billion of SBLCs and $2.2 billion of derivative assets) and $7.5 billion of unfunded commercial exposure (primarily unfunded loan commitments and letters of credit) and is reported in the government and public education industry in ~~Table 46. With the U.S. economy gradually strengthening, most state and local~~

governments are experiencing improved fiscal circumstances and continue to honor debt obligations as agreed. While historical default rates have been low, as part of our overall and ongoing risk management processes, we continually monitor these exposures through a rigorous review process. Additionally, internal communications are regularly circulated such that exposure levels are maintained in compliance with established concentration guidelines.



Table 46	Commercial Credit Exposure by Industry ⁽¹⁾
Table 39												Commercial Credit Exposure by Industry ⁽¹⁾

		December 31											December 31
		Commercial Utilized				Total Commercial Committed							Commercial Utilized				Total Commercial Committed ⁽²⁾
(Dollars in millions)	(Dollars in millions)	2015		2014		2015			2014			(Dollars in millions)	2016		2015		2016			2015
Diversified financials	Diversified financials	$	79,496	$	63,306	$	128,436		$	103,528		Diversified financials	$	81,156	$	79,496	$	124,535		$	128,436
Real estate ⁽²⁾⁽³⁾	Real estate ⁽²⁾⁽³⁾	61,759		53,834		87,650			76,153			Real estate ⁽²⁾⁽³⁾	61,203		61,759		83,658			87,650
Retailing	Retailing	37,675		33,683		63,975			58,043			Retailing	41,630		37,675		68,507			63,975
Healthcare equipment and services												Healthcare equipment and services	37,656		35,134		64,663			57,901
Capital goods	Capital goods	30,790		29,028		58,583			54,653			Capital goods	34,278		30,790		64,202			58,583
Healthcare equipment and services		35,134		32,923		57,901			52,450
Government and public education												Government and public education	45,694		44,835		54,626			53,133
Banking	Banking	45,952		42,330		53,825			48,353			Banking	39,877		45,952		47,799			53,825
Government and public education		44,835		42,095		53,133			49,937
Materials	Materials	24,012		23,664		46,013			45,821			Materials	22,578		24,012		44,357			46,013
Consumer services												Consumer services	27,413		24,084		42,523			37,058
Energy	Energy	21,257		23,830		43,811			47,667			Energy	19,686		21,257		39,231			43,811
Food, beverage and tobacco	Food, beverage and tobacco	18,316		16,131		43,164			34,465			Food, beverage and tobacco	19,669		18,316		37,145			43,164
Consumer services		24,084		21,657		37,058			33,269
Commercial services and supplies	Commercial services and supplies	19,552		17,997		32,045			30,451			Commercial services and supplies	21,241		19,552		35,360			32,045
Transportation												Transportation	19,805		19,369		27,483			27,371
Utilities	Utilities	11,396		9,399		27,849			25,235			Utilities	11,349		11,396		27,140			27,849
Transportation		19,369		17,538		27,371			24,541
Technology hardware and equipment		6,337		5,489		24,734			12,350
Media	Media	12,833		11,128		24,194			21,502			Media	13,419		12,833		27,116			24,194
Individuals and trusts	Individuals and trusts	17,992		16,749		23,176			21,195			Individuals and trusts	16,364		17,992		21,764			23,176
Software and services	Software and services	6,617		5,927		18,362			14,071			Software and services	7,991		6,617		19,790			18,362
Pharmaceuticals and biotechnology	Pharmaceuticals and biotechnology	6,302		5,707		16,472			13,493			Pharmaceuticals and biotechnology	5,539		6,302		18,910			16,472
Technology hardware and equipment												Technology hardware and equipment	7,793		6,337		18,429			24,734
Telecommunication services												Telecommunication services	6,317		4,717		16,925			10,645
Insurance, including monolines												Insurance, including monolines	7,406		5,095		13,936			10,728
Automobiles and components	Automobiles and components	4,804		4,114		11,329			9,683			Automobiles and components	5,459		4,804		12,969			11,329
Consumer durables and apparel	Consumer durables and apparel	6,053		6,111		11,165			10,613			Consumer durables and apparel	6,042		6,053		11,460			11,165
Insurance, including monolines		5,095		5,204		10,728			11,252
Telecommunication services		4,717		3,814		10,645			9,295
Food and staples retailing	Food and staples retailing	4,351		3,848		9,439			7,418			Food and staples retailing	4,795		4,351		8,869			9,439
Religious and social organizations	Religious and social organizations	4,526		4,881		5,929			6,548			Religious and social organizations	4,423		4,526		6,252			5,929
Other	Other	6,309		6,255		15,510			10,415			Other	6,109		6,309		13,432			15,510
Total commercial credit exposure by industry	Total commercial credit exposure by industry	$	559,563	$	506,642	$	942,497		$	832,401		Total commercial credit exposure by industry	$	574,892	$	559,563	$	951,081		$	942,497
Net credit default protection purchased on total commitments ⁽³⁾⁽⁴⁾	Net credit default protection purchased on total commitments ⁽³⁾⁽⁴⁾					$	(6,677	)	$	(7,302	)	Net credit default protection purchased on total commitments ⁽³⁾⁽⁴⁾					$	(3,477	)	$	(6,677	)


⁽¹⁾	Includes U.S. small business commercial exposure.


⁽²⁾	Includes the notional amount of unfunded legally binding lending commitments net of amounts distributed (e.g., syndicated or participated) to other financial institutions. The distributed amounts were $12.1 billion and $14.3 billion at December 31, 2016 and 2015.


⁽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 borrowers’ or counterparties’ primary business activity using operating cash flows and primary source of repayment as key factors.


⁽³⁾⁽⁴⁾	Represents net notional credit protection purchased. For additional information, see Commercial Portfolio Credit Risk Management – Risk Mitigation ~~on page~~ 84. below.

Risk Mitigation

At December 31, ~~2015~~2016 and ~~2014~~2015, net notional credit default protection purchased in our credit derivatives portfolio to hedge our funded and unfunded exposures for which we elected the fair value option, as well as certain other credit exposures, was $~~6.7~~3.5 billion and $~~7.3~~6.7 billion. We recorded net losses of $438 million in 2016 compared to net gains of $150 million in ~~2015 compared to net losses of $50 million in~~ ~~2014~~2015 on these positions. The gains and losses on these instruments were offset by gains and losses on the related exposures. The Value-at-Risk (VaR) results for these exposures are included in the fair value option portfolio information in Table ~~56.~~48. For additional information, see Trading Risk Management on page ~~93.~~80.

Tables 4740 and 4841 present the maturity profiles and the credit exposure debt ratings of the net credit default protection portfolio at December 31, ~~2015~~2016 and ~~2014~~2015.



Table 47	Net Credit Default Protection by Maturity
Table 40						Net Credit Default Protection by Maturity

		December 31					December 31
		2015		2014			2016		2015
Less than or equal to one year	Less than or equal to one year	39	%	43	%	Less than or equal to one year	56	%	39	%
Greater than one year and less than or equal to five years	Greater than one year and less than or equal to five years	59		55		Greater than one year and less than or equal to five years	41		59
Greater than five years	Greater than five years	2		2		Greater than five years	3		2
Total net credit default protection	Total net credit default protection	100	%	100	%	Total net credit default protection	100	%	100	%



8472 Bank of America ~~2015~~2016



Table 48	Net Credit Default Protection by Credit Exposure Debt Rating
Table 41												Net Credit Default Protection by Credit Exposure Debt Rating

		December 31											December 31
		2015					2014						2016					2015
(Dollars in millions)	(Dollars in millions)	Net Notional ⁽¹⁾			Percent of Total		Net Notional ⁽¹⁾			Percent of Total		(Dollars in millions)	Net Notional ⁽¹⁾			Percent of Total		Net Notional ⁽¹⁾			Percent of Total
Ratings ^{(2, 3)}	Ratings ^{(2, 3)}											Ratings ^{(2, 3)}
AA		$	—		—	%	$	(30	)	0.4	%
A	A	(752		)	11.3		(660		)	9.0		A	$	(135	)	3.9	%	$	(752	)	11.3	%
BBB	BBB	(3,030		)	45.4		(4,401		)	60.3		BBB	(1,884		)	54.2		(3,030		)	45.4
BB	BB	(2,090		)	31.3		(1,527		)	20.9		BB	(871		)	25.1		(2,090		)	31.3
B	B	(634		)	9.5		(610		)	8.4		B	(477		)	13.7		(634		)	9.5
CCC and below	CCC and below	(139		)	2.1		(42		)	0.6		CCC and below	(81		)	2.3		(139		)	2.1
NR ⁽⁴⁾	NR ⁽⁴⁾	(32		)	0.4		(32		)	0.4		NR ⁽⁴⁾	(29		)	0.8		(32		)	0.4
Total net credit default protection	Total net credit default protection	$	(6,677	)	100.0	%	$	(7,302	)	100.0	%	Total net credit default protection	$	(3,477	)	100.0	%	$	(6,677	)	100.0	%


⁽¹⁾	Represents net credit default protection ~~(purchased) sold.~~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.

Table 4942 presents the total contract/notional amount of credit derivatives outstanding and includes both purchased and written credit derivatives. The credit risk amounts are measured as net asset exposure by counterparty, taking into consideration all contracts with the counterparty. For more information on our written credit derivatives, see Note 2 – Derivatives to the Consolidated Financial Statements.

The credit risk amounts discussed above and presented in Table 4942 take into consideration the effects of legally enforceable master netting agreements while amounts disclosed in Note 2 – Derivatives to the Consolidated Financial Statements are shown on a gross basis. Credit risk reflects the potential benefit from offsetting exposure to non-credit derivative products with the same counterparties that may be netted upon the occurrence of certain events, thereby reducing our overall exposure.



Table 49	Credit Derivatives
Table 42										Credit Derivatives

		December 31									December 31
		2015				2014					2016				2015
(Dollars in millions)	(Dollars in millions)	Contract/ Notional		Credit Risk		Contract/ Notional		Credit Risk		(Dollars in millions)	Contract/ Notional		Credit Risk		Contract/ Notional		Credit Risk
Purchased credit derivatives:	Purchased credit derivatives:									Purchased credit derivatives:
Credit default swaps	Credit default swaps	$	928,300	$	3,677	$	1,094,796	$	3,833	Credit default swaps	$	603,979	$	2,732	$	928,300	$	3,677
Total return swaps/other	Total return swaps/other	26,427		1,596		44,333		510		Total return swaps/other	21,165		433		26,427		1,596
Total purchased credit derivatives	Total purchased credit derivatives	$	954,727	$	5,273	$	1,139,129	$	4,343	Total purchased credit derivatives	$	625,144	$	3,165	$	954,727	$	5,273
Written credit derivatives:	Written credit derivatives:									Written credit derivatives:
Credit default swaps	Credit default swaps	$	924,143	n/a		$	1,073,101	n/a		Credit default swaps	$	614,355	n/a		$	924,143	n/a
Total return swaps/other	Total return swaps/other	39,658		n/a		61,031		n/a		Total return swaps/other	25,354		n/a		39,658		n/a
Total written credit derivatives	Total written credit derivatives	$	963,801	n/a		$	1,134,132	n/a		Total written credit derivatives	$	639,709	n/a		$	963,801	n/a

n/a = not applicable

Counterparty Credit Risk Valuation Adjustments

We record counterparty credit risk valuation adjustments on certain derivative assets, including our credit default protection purchased, in order to properly reflect the credit risk of the counterparty, as presented in Table ~~50.~~43. We calculate CVA based on a modeled expected exposure that incorporates current market risk factors including changes in market spreads and non-credit related market factors that affect the value of a derivative. The exposure also takes into consideration credit mitigants such as legally enforceable master netting agreements and collateral. For additional information, see Note 2 – Derivatives to the Consolidated Financial Statements.

We enter into risk management activities to offset market driven exposures. We often hedge the counterparty spread risk in

CVA with credit default swaps (CDS). We hedge other market risks



Table 50	Credit Valuation Gains and Losses
Table 43																Credit Valuation Gains and Losses

Gains (Losses)	Gains (Losses)	2015							2014							Gains (Losses)	2016							2015
(Dollars in millions)	(Dollars in millions)	Gross		Hedge			Net		Gross			Hedge		Net		(Dollars in millions)	Gross		Hedge			Net		Gross		Hedge			Net
Credit valuation	Credit valuation	$	255	$	(28	)	$	227	$	(22	)	$	213	$	191	Credit valuation	$	374	$	(160	)	$	214	$	255	$	(28	)	$	227



		Bank of America ~~2015~~2016 8573

Non-U.S. Portfolio

Table 5144 presents our 20 largest non-U.S. country exposures. These exposures accounted for 88 percent and 86 percent of our total non-U.S. exposure ~~by region~~ at December 31, ~~2015~~2016 and ~~2014~~2015. Net country exposure for these 20 countries increased $6.5 billion in 2016 primarily driven by increases in Germany, and to a lesser extent Canada, France and Switzerland. On a product basis, the increase was driven by an increase in funded loans and loan equivalents in Germany and Canada, higher unfunded commitments in Germany and Switzerland, and an increase in securities in France and Canada.

Table 51 Total Non-U.S. Exposure by Region

December 31
2015 2014
(Dollars in millions) Amount
Percent of
Total
Amount
Percent of
Total
Europe $ 140,836
52 % $ 129,573
49 %
Asia Pacific 75,446
28
78,792
30
Latin America 25,478
9
23,403
9
Middle East and Africa 11,516
4
10,801
4
Other ⁽¹⁾
18,035
7
22,701
8
Total $ 271,311
100 % $ 265,270
100 %


⁽¹⁾	~~Other includes Canada exposure of $16.6 billion and $20.4 billion at~~ ~~December 31, 2015~~ ~~and~~ ~~2014~~.

~~Our total non-U.S. exposure was~~ ~~$271.3 billion~~ at ~~December 31, 2015, an~~ ~~increase~~ of ~~$6.0 billion~~ ~~from~~ ~~December 31, 2014~~. The increase in non-U.S. exposure was driven by growth in Europe, Latin America, and Middle East and Africa exposures, partially offset by a reduction in Asia Pacific and Other. Our non-U.S. exposure remained concentrated in Europe which accounted for ~~$140.8 billion, or~~ ~~52 percent~~ ~~of total non-U.S.~~

~~exposure. The European exposure was mostly in Western Europe and was distributed across a variety of industries.~~

~~Table 52~~ ~~presents our 20 largest non-U.S. country exposures. These exposures accounted for~~ ~~86 percent~~ ~~and 88 percent of our total non-U.S. exposure at~~ ~~December 31, 2015~~ ~~and~~ ~~2014~~. Net country exposure for these 20 countries increased $6.1 billion in 2015 primarily driven by increases in the United Kingdom, Belgium and Australia, partially offset by reductions in Canada, Japan, China, France and Hong Kong. On a product basis, the increase was driven by higher funded loans and loan equivalents in the United Kingdom, Germany, Australia and India and higher unfunded commitments in Belgium and the United Kingdom. These increases were partially offset by reductions in securities in the United Kingdom, Canada, India and France.




Table 44	Top 20 Non-U.S. Countries Exposure

(Dollars in millions)		Funded Loans and Loan Equivalents		Unfunded Loan Commitments		Net Counterparty Exposure		Securities/ Other Investments		Country Exposure at December 31 2016		Hedges and Credit Default Protection			Net Country Exposure at December 31 2016		Increase (Decrease) from December 31 2015
United Kingdom		$	29,329	$	13,105	$	6,145	$	3,823	$	52,402	$	(4,669	)	$	47,733	$	(5,513	)
Germany		13,202		8,648		1,979		2,579		26,408		(4,030		)	22,378		8,974
Canada		6,722		7,159		2,023		3,803		19,707		(933		)	18,774		4,042
Japan		12,065		652		2,448		1,597		16,762		(1,751		)	15,011		647
Brazil		9,118		389		780		3,646		13,933		(267		)	13,666		(1,984		)
China		9,230		722		714		949		11,615		(730		)	10,885		411
France		3,112		4,823		1,899		5,325		15,159		(4,465		)	10,694		2,008
Switzerland		4,050		5,999		499		507		11,055		(1,409		)	9,646		3,383
India		6,671		288		353		2,086		9,398		(170		)	9,228		(1,126		)
Australia		4,792		2,685		559		1,249		9,285		(362		)	8,923		(622		)
Hong Kong		6,425		156		441		520		7,542		(63		)	7,479		(110		)
Netherlands		3,537		2,496		559		2,296		8,888		(1,490		)	7,398		(236		)
South Korea		4,175		838		864		829		6,706		(600		)	6,106		(752		)
Singapore		2,633		199		699		1,937		5,468		(50		)	5,418		689
Mexico		2,817		1,391		187		430		4,825		(341		)	4,484		(570		)
Italy		2,329		1,036		577		1,246		5,188		(1,101		)	4,087		(1,221		)
United Arab Emirates		2,104		139		570		27		2,840		(97		)	2,743		(283		)
Turkey		2,695		50		69		58		2,872		(182		)	2,690		(450		)
Spain		1,818		614		173		894		3,499		(953		)	2,546		(517		)
Taiwan		1,417		33		341		317		2,108		(27		)	2,081		(294		)
Total top 20 non-U.S. countries exposure		$	128,241	$	51,422	$	21,879	$	34,118	$	235,660	$	(23,690	)	$	211,970	$	6,476



8674 Bank of America ~~2015~~2016

Table 52 Top 20 Non-U.S. Countries Exposure

(Dollars in millions) Funded Loans and Loan Equivalents Unfunded Loan Commitments Net Counterparty Exposure
Securities/
Other
Investments
Country Exposure at December 31
2015 Hedges and Credit Default Protection Net Country Exposure at December 31
2015 Increase (Decrease) from December 31
2014
United Kingdom $ 30,268
$ 15,086
$ 8,923
$ 4,194
$ 58,471
$ (5,225 ) $ 53,246
$ 7,699
Brazil 9,981
401
902
4,593
15,877
(227 ) 15,650
666
Canada 5,522
6,695
2,279
2,097
16,593
(1,861 ) 14,732
(3,808 )
Japan 13,381
532
1,145
718
15,776
(1,412 ) 14,364
(2,370 )
Germany 7,373
6,389
2,604
1,991
18,357
(4,953 ) 13,404
845
China 9,207
627
739
748
11,321
(847 ) 10,474
(1,818 )
India 7,045
238
363
2,880
10,526
(172 ) 10,354
(232 )
Australia 5,061
2,390
705
1,737
9,893
(348 ) 9,545
1,872
France 2,822
4,795
1,392
3,816
12,825
(4,139 ) 8,686
(1,752 )
Netherlands 3,329
3,283
879
1,631
9,122
(1,488 ) 7,634
(501 )
Hong Kong 5,850
273
788
701
7,612
(23 ) 7,589
(1,019 )
South Korea 4,351
749
674
1,751
7,525
(667 ) 6,858
409
Switzerland 3,337
2,947
707
650
7,641
(1,378 ) 6,263
(268 )
Belgium 648
4,749
149
185
5,731
(263 ) 5,468
4,260
Italy 2,933
1,062
1,544
1,563
7,102
(1,794 ) 5,308
(91 )
Mexico 2,708
1,327
141
1,209
5,385
(331 ) 5,054
783
Singapore 2,297
167
481
1,843
4,788
(59 ) 4,729
725
Turkey 2,996
172
30
49
3,247
(107 ) 3,140
652
Spain 1,847
677
231
940
3,695
(632 ) 3,063
(553 )
United Arab Emirates 2,008
56
1,027
37
3,128
(102 ) 3,026
619
Total top 20 non-U.S. countries exposure $ 122,964
$ 52,615
$ 25,703
$ 33,333
$ 234,615
$ (26,028 ) $ 208,587
$ 6,118

~~Weakening~~Strengthening of the U.S. Dollar, weak commodity prices, signs of slowing growth in China, ~~and~~ a protracted recession in Brazil and recent political events in Turkey are driving risk aversion in emerging markets. ~~Net~~At December 31, 2016, net exposure to China ~~decreased to $10.5~~was $10.9 billion, ~~at December 31, 2015,~~ concentrated in large state-owned companies, subsidiaries of multinational corporations and commercial banks. ~~Net~~At December 31, 2016, net exposure to Brazil was ~~$15.7~~$13.7 billion, concentrated in sovereign securities, oil and gas companies and commercial banks. At December 31, 2016, net exposure to Turkey was $2.7 billion, concentrated in commercial banks.

~~Russian intervention~~The outlook for policy direction and therefore economic performance in ~~Ukraine initiated in 2014 significantly increased regional geopolitical tensions. The Russian economy continues~~the EU is uncertain as a consequence of reduced political cohesion and the lack of clarity following the U.K. Referendum to ~~slow due~~leave the EU. At December 31, 2016, net exposure to the ~~negative impacts of weak oil prices, ongoing economic sanctions and high interest rates resulting from Russian central bank actions taken to counter ruble depreciation. Net exposure to Russia~~U.K. was ~~reduced to $2.2~~$47.7 billion, at ~~December 31, 2015~~, concentrated in ~~oil~~multinational corporations and ~~gas companies and commercial banks. Our exposure to Ukraine at~~ ~~December 31, 2015~~ was minimal. In response to Russian actions, U.S. and European governments have imposed sanctions on a limited number of Russian individuals and business entities. Geopolitical and economic conditions remain fluid with potential for further escalation of tensions, increased severity of sanctions against Russian interests, sustained low oil prices and rating agency downgrades.

Certain European countries, including Italy, Spain, Ireland and Portugal, have experienced varying degrees of financial stress in recent years. While market conditions have improved in Europe, policymakers continue to address fundamental challenges of competitiveness, growth, deflation and high unemployment. A return of political stress or financial instability in these countriessovereign clients. For additional information, see

~~could disrupt financial markets~~Executive Summary – 2016 Economic and ~~have a detrimental impact~~Business Environment on ~~global economic conditions and sovereign and non-sovereign debt in these countries. Net exposure at~~ ~~December 31, 2015~~ ~~to Italy and Spain was $5.3 billion and $3.1 billion as presented in Table 52. Net exposure at~~ ~~December 31, 2015~~ to Ireland and Portugal was $1.0 billion and $54 million. We expect to continue to support client activities in the region and our exposures may vary over time as we monitor the situation and manage our risk profile.page 21.

Table 5345 presents countries where total cross-border exposure exceeded one percent of our total assets. At December 31, ~~2015~~2016, the ~~United Kingdom~~U.K. and France were the only countries where total cross-border exposure exceeded one percent of our total assets. At December 31, ~~2015~~2016, ~~Canada and~~ Germany had total cross-border exposure of ~~$18.3 billion and $16.5~~$18.4 billion representing ~~0.85 percent and 0.77~~0.84 percent of our total assets. No other countries had total cross-border exposure that exceeded 0.75 percent of our total assets at December 31, ~~2015~~2016.

Cross-border ~~exposures~~exposure includes the components of Country Risk Exposure as detailed in Table 53 are calculated using Federal Financial Institutions Examination Council (FFIEC) guidelines and not our internal risk management view; therefore, exposures are not comparable between Tables 52 and 53. Exposure includes cross-border claims by our non-U.S. offices including loans, acceptances, time deposits placed, trading account assets, securities, derivative assets, other interest-earning investments and other monetary assets. Amounts also include unfunded commitments, letters of credit and financial guarantees, and44 as well as the notional amount of cash loaned under secured financing ~~transactions. Sector definitions are consistent~~agreements. Local exposure, defined as exposure booked in local offices of a respective country with ~~FFIEC reporting requirements for preparing~~clients in the ~~Country Exposure Report.~~same country, is excluded.



		~~Bank of America 2015~~87



Table 53	Total Cross-border Exposure Exceeding One Percent of Total Assets
Table 45													Total Cross-border Exposure Exceeding One Percent of Total Assets

(Dollars in millions)	(Dollars in millions)	December 31	Public Sector		Banks		Private Sector		Cross-border Exposure		Exposure as a Percent of Total Assets		(Dollars in millions)	December 31	Public Sector		Banks		Private Sector		Cross-border Exposure		Exposure as a Percent of Total Assets
United Kingdom	United Kingdom	2015	$	3,264	$	5,104	$	38,576	$	46,944	2.19	%	United Kingdom	2016	$	2,975	$	4,557	$	42,105	$	49,637	2.27	%
		2014	11		2,056		34,595		36,662		1.74			2015	3,264		5,104		38,576		46,944		2.19
														2014	11		2,056		34,595		36,662		1.74
France	France	2015	3,343		1,766		17,099		22,208		1.04		France	2016	4,956		1,205		23,193		29,354		1.34
		2014	4,479		2,631		14,368		21,478		1.02			2015	3,343		1,766		17,099		22,208		1.04
														2014	4,479		2,631		14,368		21,478		1.02

Provision for Credit Losses

The provision for credit losses increased $~~886~~436 million to $~~3.2~~3.6 billion in ~~2015~~2016 compared to ~~2014~~2015. The provision for credit losses was $~~1.2 billion~~224 million lower than net charge-offs for ~~2015~~2016, resulting in a reduction in the allowance for credit losses. This compared to a reduction of ~~$2.1~~$1.2 billion in the allowance for credit losses in 2014. As we look at 2016, reserve releases are expected to decrease from 2015 levels. All else equal, this would result in increased provision expense, assuming sustained stability in underlying asset quality.2015.

The provision for credit losses for the consumer portfolio increased~~$726~~ $360 million to ~~$2.2~~$2.6 billion in ~~2015~~2016 compared to 2014. The provision for credit losses in 2014 included $400 million of additional costs associated with the consumer relief portion of the DoJ Settlement. Excluding these additional costs, the consumer provision for credit losses increased2015 due to a slower pace of ~~portfolio improvement than in 2014, and also due to a lower level of recoveries on nonperforming loan sales and other recoveries in 2015.~~credit quality improvement. Included in the provision is a benefit of ~~$40~~$45 million related to the PCI loan portfolio for ~~2015~~2016 compared to a benefit of ~~$31~~$40 million in ~~2014.~~2015.

The provision for credit losses for the commercial portfolio, including unfunded lending commitments, increased~~$160~~ $76 million to ~~$953 million~~$1.0 billion in ~~2015~~2016 compared to ~~2014~~2015 driven by an increase in energy sector reserves in the first half of 2016 for the higher risk energy sub-sectors. While we experienced some deterioration in the energy sector in 2016, oil prices have stabilized which contributed to a modest improvement in energy-related exposure ~~and higher unfunded balances.~~by year end.

Allowance for Credit Losses

Allowance for Loan and Lease Losses

LHFS and loans accounted for under the fair value option as the fair value reflects a credit risk component.

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.



		Bank of America 201675

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, ~~2015~~2016, the loss forecast process resulted in reductions in the ~~allowance for all major consumer~~residential mortgage and home equity portfolios compared to December 31, ~~2014~~2015.

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 ~~LGD~~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, ~~2015~~2016, the allowance increased for the



88 ~~Bank of America 2015~~

U.S. commercial and non-U.S. commercial ~~and commercial lease financing~~ portfolios compared to December 31, ~~2014~~2015.

During ~~2015~~,2016, the factors that impacted the allowance for loan and lease losses included ~~overall~~ improvements in the credit quality of the portfolios driven by continuing improvements in the U.S. economy and labor markets, ~~continuing~~ proactive credit risk management initiatives and the impact of ~~recent higher~~high credit quality originations. ~~Additionally, the resolution of uncertainties through current recognition of net charge-offs has impacted the amount of reserve needed in certain portfolios.~~ Evidencing the improvements in the U.S. economy and labor markets are ~~modest~~ growth in consumer spending, ~~improvements in~~downward unemployment ~~levels,~~trends and increases in home ~~prices and a decrease in the absolute level and our share of national consumer bankruptcy filings.~~prices. In addition to these improvements, in the consumer portfolio, loan sales, returns to performing status, ~~charge-offs, sales,~~ paydowns and ~~transfers to foreclosed properties~~charge-offs continued to outpace new nonaccrual loans. ~~Also impacting~~During 2016, the allowance for loan and lease losses in the commercial portfolio ~~were growth~~reflected

increased coverage for the energy sector due to low oil prices which impacted the financial performance of energy clients and contributed to an increase in ~~loan balances and higher~~ reservable criticized ~~levels, particularly~~balances. While we experienced some deterioration in the energy sector ~~due primarily~~in 2016, oil prices have stabilized which contributed to ~~lower oil prices.~~a modest improvement in energy-related exposure by year end.

The allowance for loan and lease losses for the consumer portfolio, as presented in Table 5547, was $~~7.4~~6.2 billion at December 31, ~~2015~~2016, a decrease of $~~2.6~~1.2 billion from December 31, ~~2014~~2015. The decrease was primarily in the ~~residential mortgage,~~ home equity and ~~credit card~~residential mortgage portfolios. Reductions in the residential mortgage and home equity portfolios were due to improved home prices, ~~and~~ lower ~~delinquencies,~~nonperforming loans and a decrease in consumer loan balances, as well as ~~the utilization of reserves recorded as a part of the DoJ Settlement. Further, the residential mortgage and home equity allowance declined due to~~ write-offs in our PCI loan portfolio.

The ~~decrease in the~~ allowance related to the U.S. credit card and unsecured consumer lending portfolios at December 31, 2016 remained relatively unchanged and in ~~Consumer Banking~~ ~~was primarily due~~line with the level of delinquencies compared to ~~improvement in delinquencies and more generally in unemployment levels.~~December 31, 2015. For example, in the U.S. credit card portfolio, accruing loans 30 days or more past due ~~decreased~~ toremained relatively unchanged at $1.6 billion at December 31, ~~2015~~ ~~from~~ ~~$1.7 billion~~2016 (to ~~1.76~~1.73 percent from ~~1.85~~1.76 percent of outstanding U.S. credit card ~~loans)~~loans at December 31, ~~2014~~2015), ~~and~~while accruing loans 90 days or more past due decreased to $~~789~~782 million at December 31, ~~2015~~2016 from $~~866~~789 million (to ~~0.88~~0.85 percent from ~~0.94~~0.88 percent of outstanding U.S. credit card loans) at December 31, ~~2014~~2015. See Tables 23, 24, 3120 and 3321 for additional details on key credit statistics for the credit card and other unsecured consumer lending portfolios.

The allowance for loan and lease losses for the commercial portfolio, as presented in Table 5547, was $~~4.8~~5.3 billion at December 31, ~~2015~~2016, an increase of $~~412~~409 million from December 31, ~~2014~~2015 ~~with~~driven by increased allowance coverage for the ~~increase attributable to loan growth and~~ higher ~~reservable criticized levels.~~risk energy sub-sectors as a result of low oil prices. Commercial utilized reservable criticized exposure increased to $~~16.5~~16.3 billion at December 31, ~~2015~~2016 from $~~11.6~~15.9 billion (to ~~3.46~~3.35 percent from ~~2.74~~3.38 percent of total commercial utilized reservable exposure) at December 31, ~~2014~~2015, largely due to downgrades outpacing paydowns and upgrades in the energy portfolio. Nonperforming commercial loans increased ~~$99 million from~~ ~~December 31, 2014~~to $~~1.2~~1.7 billion at December 31, 2016 from $1.2 billion (to ~~0.27~~0.38 percent from ~~0.29~~0.28 percent of outstanding commercial ~~loans)~~loans excluding loans accounted for under the fair value option) at December 31, 2015 ~~largely~~ with the increase primarily in the energy ~~sector.~~and metals and mining sectors. Commercial loans and leases outstanding increased to ~~$446.8~~$458.5 billion at December 31, ~~2015~~2016 from ~~$392.8~~$440.8 billion at December 31, ~~2014.~~2015. See Tables 3732, 3833 and 4035 for additional details on key commercial credit statistics.

The allowance for loan and lease losses as a percentage of total loans and leases outstanding was 1.26 percent at December 31, 2016 compared to 1.37 percent at December 31, 2015 ~~compared to~~ ~~1.65 percent~~ at ~~December 31, 2014~~. The decrease in the ratio was primarily due to improved



76 Bank of America 2016

credit quality in the consumer portfolios driven by improved economic conditions and write-offs in the PCI loan ~~portfolio and utilization of reserves related to the DoJ Settlement.~~portfolio. The December 31, ~~2015~~2016 and ~~2014~~2015 ratios above include the PCI loan portfolio. Excluding the PCI loan portfolio, the allowance for loan and lease losses as a percentage of total loans and leases outstanding was ~~1.30~~1.24 percent and ~~1.50~~1.31 percent at December 31, ~~2015~~2016 and ~~2014~~2015.



		~~Bank of America 2015~~89

Table 5446 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 ~~2015~~2016 and ~~2014.~~2015.



Table 54	Allowance for Credit Losses
Table 46								Allowance for Credit Losses

(Dollars in millions)	(Dollars in millions)	2015			2014			(Dollars in millions)	2016			2015
Allowance for loan and lease losses, January 1	Allowance for loan and lease losses, January 1	$	14,419		$	17,428		Allowance for loan and lease losses, January 1	$	12,234		$	14,419
Loans and leases charged off	Loans and leases charged off							Loans and leases charged off
Residential mortgage	Residential mortgage	(866		)	(855		)	Residential mortgage	(403		)	(866		)
Home equity	Home equity	(975		)	(1,364		)	Home equity	(752		)	(975		)
U.S. credit card	U.S. credit card	(2,738		)	(3,068		)	U.S. credit card	(2,691		)	(2,738		)
Non-U.S. credit card	Non-U.S. credit card	(275		)	(357		)	Non-U.S. credit card	(238		)	(275		)
Direct/Indirect consumer	Direct/Indirect consumer	(383		)	(456		)	Direct/Indirect consumer	(392		)	(383		)
Other consumer	Other consumer	(224		)	(268		)	Other consumer	(232		)	(224		)
Total consumer charge-offs	Total consumer charge-offs	(5,461		)	(6,368		)	Total consumer charge-offs	(4,708		)	(5,461		)
U.S. commercial ⁽¹⁾	U.S. commercial ⁽¹⁾	(536		)	(584		)	U.S. commercial ⁽¹⁾	(567		)	(536		)
Commercial real estate	Commercial real estate	(30		)	(29		)	Commercial real estate	(10		)	(30		)
Commercial lease financing	Commercial lease financing	(19		)	(10		)	Commercial lease financing	(30		)	(19		)
Non-U.S. commercial	Non-U.S. commercial	(59		)	(35		)	Non-U.S. commercial	(133		)	(59		)
Total commercial charge-offs	Total commercial charge-offs	(644		)	(658		)	Total commercial charge-offs	(740		)	(644		)
Total loans and leases charged off	Total loans and leases charged off	(6,105		)	(7,026		)	Total loans and leases charged off	(5,448		)	(6,105		)
Recoveries of loans and leases previously charged off	Recoveries of loans and leases previously charged off							Recoveries of loans and leases previously charged off
Residential mortgage	Residential mortgage	393			969			Residential mortgage	272			393
Home equity	Home equity	339			457			Home equity	347			339
U.S. credit card	U.S. credit card	424			430			U.S. credit card	422			424
Non-U.S. credit card	Non-U.S. credit card	87			115			Non-U.S. credit card	63			87
Direct/Indirect consumer	Direct/Indirect consumer	271			287			Direct/Indirect consumer	258			271
Other consumer	Other consumer	31			39			Other consumer	27			31
Total consumer recoveries	Total consumer recoveries	1,545			2,297			Total consumer recoveries	1,389			1,545
U.S. commercial ⁽²⁾	U.S. commercial ⁽²⁾	172			214			U.S. commercial ⁽²⁾	175			172
Commercial real estate	Commercial real estate	35			112			Commercial real estate	41			35
Commercial lease financing	Commercial lease financing	10			19			Commercial lease financing	9			10
Non-U.S. commercial	Non-U.S. commercial	5			1			Non-U.S. commercial	13			5
Total commercial recoveries	Total commercial recoveries	222			346			Total commercial recoveries	238			222
Total recoveries of loans and leases previously charged off	Total recoveries of loans and leases previously charged off	1,767			2,643			Total recoveries of loans and leases previously charged off	1,627			1,767
Net charge-offs	Net charge-offs	(4,338		)	(4,383		)	Net charge-offs	(3,821		)	(4,338		)
Write-offs of PCI loans	Write-offs of PCI loans	(808		)	(810		)	Write-offs of PCI loans	(340		)	(808		)
Provision for loan and lease losses	Provision for loan and lease losses	3,043			2,231			Provision for loan and lease losses	3,581			3,043
Other ⁽³⁾	Other ⁽³⁾	(82		)	(47		)	Other ⁽³⁾	(174		)	(82		)
Allowance for loan and lease losses, December 31	Allowance for loan and lease losses, December 31	12,234			14,419			Allowance for loan and lease losses, December 31	11,480			12,234
Less: Allowance included in assets of business held for sale ⁽⁴⁾								Less: Allowance included in assets of business held for sale ⁽⁴⁾	(243		)	—
Total allowance for loan and lease losses, December 31								Total allowance for loan and lease losses, December 31	11,237			12,234
Reserve for unfunded lending commitments, January 1	Reserve for unfunded lending commitments, January 1	528			484			Reserve for unfunded lending commitments, January 1	646			528
Provision for unfunded lending commitments	Provision for unfunded lending commitments	118			44			Provision for unfunded lending commitments	16			118
Other⁽³⁾								Other⁽³⁾	100			—
Reserve for unfunded lending commitments, December 31	Reserve for unfunded lending commitments, December 31	646			528			Reserve for unfunded lending commitments, December 31	762			646
Allowance for credit losses, December 31	Allowance for credit losses, December 31	$	12,880		$	14,947		Allowance for credit losses, December 31	$	11,999		$	12,880


⁽¹⁾	Includes U.S. small business commercial charge-offs of $~~282~~253 million and $~~345~~282 million in ~~2015~~2016 and ~~2014~~2015.


⁽²⁾	Includes U.S. small business commercial recoveries of $5745 million and $6357 million in ~~2015~~2016 and ~~2014~~2015.


⁽³⁾	Primarily represents the net impact of portfolio sales, consolidations and deconsolidations, ~~and~~ foreign currency translation ~~adjustments.~~adjustments and certain other reclassifications.


⁽⁴⁾	Represents allowance related to the non-U.S. credit card loan portfolio, which is included in assets of business held for sale on the Consolidated Balance Sheet at December 31, 2016.



		90Bank of America ~~2015~~201677

Table 54 Allowance for Credit Losses (continued)

(Dollars in millions) 2015 2014
Loan and allowance ratios:
Loans and leases outstanding at December 31 ⁽⁴⁾
$ 896,063
$ 872,710
Allowance for loan and lease losses as a percentage of total loans and leases outstanding at December 31 ⁽⁴⁾
1.37 % 1.65 %
Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases outstanding at December 31 ⁽⁵⁾
1.63
2.05
Commercial allowance for loan and lease losses as a percentage of total commercial loans and leases outstanding at December 31 ⁽⁶⁾
1.10
1.15
Average loans and leases outstanding ⁽⁴⁾
$ 874,461
$ 894,001
Net charge-offs as a percentage of average loans and leases outstanding ^{(4, 7)}
0.50 % 0.49 %
Net charge-offs and PCI write-offs as a percentage of average loans and leases outstanding ⁽⁴⁾
0.59
0.58
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases at December 31 ^{(4, 8)}
130
121
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs ⁽⁷⁾
2.82
3.29
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs and PCI write-offs 2.38
2.78
Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases at December 31 ⁽⁹⁾
$ 4,518
$ 5,944
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^{(4, 9)}
82 % 71 %
Loan and allowance ratios excluding PCI loans and the related valuation allowance: ⁽¹⁰⁾

Allowance for loan and lease losses as a percentage of total loans and leases outstanding at December 31 ⁽⁴⁾
1.30 % 1.50 %
Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases outstanding at December 31 ⁽⁵⁾
1.50
1.79
Net charge-offs as a percentage of average loans and leases outstanding ⁽⁴⁾
0.51
0.50
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases at December 31 ^{(4, 8)}
122
107
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs 2.64
2.91




Table 46	Allowance for Credit Losses (continued)

(Dollars in millions)		2016			2015
Loan and allowance ratios ⁽⁵⁾:
Loans and leases outstanding at December 31 ⁽⁶⁾		$	908,812		$	890,045
Allowance for loan and lease losses as a percentage of total loans and leases outstanding at December 31 ⁽⁶⁾		1.26		%	1.37		%
Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases outstanding at December 31 ⁽⁷⁾		1.36			1.63
Commercial allowance for loan and lease losses as a percentage of total commercial loans and leases outstanding at December 31 ⁽⁸⁾		1.16			1.11
Average loans and leases outstanding ⁽⁶⁾		$	892,255		$	869,065
Net charge-offs as a percentage of average loans and leases outstanding ^{(6, 9)}		0.43		%	0.50		%
Net charge-offs and PCI write-offs as a percentage of average loans and leases outstanding ⁽⁶⁾		0.47			0.59
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases at December 31 ^{(6, 10)}		149			130
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs ⁽⁹⁾		3.00			2.82
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs and PCI write-offs		2.76			2.38
Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases at December 31 ⁽¹¹⁾		$	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^{(6, 11)}		98		%	82		%
Loan and allowance ratios excluding PCI loans and the related valuation allowance: ^{(5, 12)}
Allowance for loan and lease losses as a percentage of total loans and leases outstanding at December 31 ⁽⁶⁾		1.24		%	1.31		%
Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases outstanding at December 31 ⁽⁷⁾		1.31			1.50
Net charge-offs as a percentage of average loans and leases outstanding ⁽⁶⁾		0.44			0.51
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases at December 31 ^{(6, 10)}		144			122
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs		2.89			2.64


⁽⁴⁾⁽⁵⁾	Loan and allowance ratios 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 are included in assets of business held for sale on the Consolidated Balance Sheet at December 31, 2016.


⁽⁶⁾	Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of $~~6.9~~7.1 billion and $~~8.7~~6.9 billion at December 31, ~~2015~~2016 and ~~2014~~2015. Average loans accounted for under the fair value option were $~~7.7~~8.2 billion and $~~9.9~~7.7 billion in ~~2015~~2016 and ~~2014~~2015.


⁽⁵⁾⁽⁷⁾	Excludes consumer loans accounted for under the fair value option of $~~1.9~~1.1 billion and $~~2.1~~1.9 billion at December 31, ~~2015~~2016 and ~~2014~~2015.


⁽⁶⁾⁽⁸⁾	Excludes commercial loans accounted for under the fair value option of $~~5.1~~6.0 billion and $~~6.6~~5.1 billion at December 31, ~~2015~~2016 and ~~2014~~2015.


⁽⁷⁾⁽⁹⁾	Net charge-offs exclude $~~808~~340 million and $~~810~~808 million of write-offs in the PCI loan portfolio in ~~2015~~2016 and ~~2014~~2015. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 7362.


^(8)(10)	For more information on our definition of nonperforming loans, see pages 7564 and 8270.


^(9)(11)	Primarily includes amounts allocated to 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.


^(10)(12)	For more information on the PCI loan portfolio and the valuation allowance for PCI loans, see Note 4 – Outstanding Loans and Leases and Note 5 – Allowance for Credit Lossesto the Consolidated Financial ~~Statements~~.Statements.

For reporting purposes, we allocate the allowance for credit losses across ~~products. However, the allowance is generally available to absorb any credit losses without restriction.~~products as presented in Table 5547 ~~presents our allocation by product type.~~.



Table 55	Allocation of the Allowance for Credit Losses by Product Type
Table 47														Allocation of the Allowance for Credit Losses by Product Type

		December 31, 2015						December 31, 2014							December 31, 2016							December 31, 2015
(Dollars in millions)	(Dollars in millions)	Amount		Percent of Total		Percent of Loans and Leases Outstanding ⁽¹⁾		Amount		Percent of Total		Percent of Loans and Leases Outstanding ⁽¹⁾		(Dollars in millions)	Amount			Percent of Total		Percent of Loans and Leases Outstanding ⁽¹⁾		Amount		Percent of Total		Percent of Loans and Leases Outstanding ⁽¹⁾
Allowance for loan and lease losses	Allowance for loan and lease losses													Allowance for loan and lease losses
Residential mortgage	Residential mortgage	$	1,500	12.26	%	0.80	%	$	2,900	20.11	%	1.34	%	Residential mortgage	$	1,012		8.82	%	0.53	%	$	1,500	12.26	%	0.80	%
Home equity	Home equity	2,414		19.73		3.18		3,035		21.05		3.54		Home equity	1,738			15.14		2.62		2,414		19.73		3.18
U.S. credit card	U.S. credit card	2,927		23.93		3.27		3,320		23.03		3.61		U.S. credit card	2,934			25.56		3.18		2,927		23.93		3.27
Non-U.S. credit card	Non-U.S. credit card	274		2.24		2.75		369		2.56		3.53		Non-U.S. credit card	243			2.12		2.64		274		2.24		2.75
Direct/Indirect consumer	Direct/Indirect consumer	223		1.82		0.25		299		2.07		0.37		Direct/Indirect consumer	244			2.13		0.26		223		1.82		0.25
Other consumer	Other consumer	47		0.38		2.27		59		0.41		3.15		Other consumer	51			0.44		2.01		47		0.38		2.27
Total consumer	Total consumer	7,385		60.36		1.63		9,982		69.23		2.05		Total consumer	6,222			54.21		1.36		7,385		60.36		1.63
U.S. commercial ⁽²⁾	U.S. commercial ⁽²⁾	2,964		24.23		1.12		2,619		18.16		1.12		U.S. commercial ⁽²⁾	3,326			28.97		1.17		2,964		24.23		1.12
Commercial real estate	Commercial real estate	967		7.90		1.69		1,016		7.05		2.13		Commercial real estate	920			8.01		1.60		967		7.90		1.69
Commercial lease financing	Commercial lease financing	164		1.34		0.60		153		1.06		0.62		Commercial lease financing	138			1.20		0.62		164		1.34		0.77
Non-U.S. commercial	Non-U.S. commercial	754		6.17		0.82		649		4.50		0.81		Non-U.S. commercial	874			7.61		0.98		754		6.17		0.82
Total commercial ⁽³⁾	Total commercial ⁽³⁾	4,849		39.64		1.10		4,437		30.77		1.15		Total commercial ⁽³⁾	5,258			45.79		1.16		4,849		39.64		1.11
Allowance for loan and lease losses ⁽⁴⁾	Allowance for loan and lease losses ⁽⁴⁾	12,234		100.00	%	1.37		14,419		100.00	%	1.65		Allowance for loan and lease losses ⁽⁴⁾	11,480			100.00	%	1.26		12,234		100.00	%	1.37
Less: Allowance included in assets of business held for sale ⁽⁵⁾														Less: Allowance included in assets of business held for sale ⁽⁵⁾	(243		)					—
Total allowance for loan and lease losses														Total allowance for loan and lease losses	11,237							12,234
Reserve for unfunded lending commitments	Reserve for unfunded lending commitments	646						528						Reserve for unfunded lending commitments	762							646
Allowance for credit losses	Allowance for credit losses	$	12,880					$	14,947					Allowance for credit losses	$	11,999						$	12,880

⁽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 included residential mortgage loans of $~~1.6 billion~~710 million and $~~1.9~~1.6 billion and home equity loans of $~~250~~341 million and $~~196~~250 million at December 31, ~~2015~~2016 and ~~2014~~2015. Commercial loans accounted for under the fair value option included U.S. commercial loans of $~~2.3~~2.9 billion and $~~1.9~~2.3 billion and non-U.S. commercial loans of $~~2.8~~3.1 billion and $~~4.7~~2.8 billion at December 31, ~~2015~~2016 and ~~2014~~2015.


⁽²⁾	Includes allowance for loan and lease losses for U.S. small business commercial loans of $~~507~~416 million and $~~536~~507 million at December 31, ~~2015~~2016 and ~~2014~~2015.


⁽³⁾	Includes allowance for loan and lease losses for impaired commercial loans of $~~217~~273 million and $~~159~~217 million at December 31, ~~2015~~2016 and ~~2014~~2015.


⁽⁴⁾	Includes $~~804~~419 million and $~~1.7 billion~~804 million of valuation allowance presented with the allowance for loan and lease losses related to PCI loans at December 31, ~~2015~~2016 and ~~2014~~2015.


⁽⁵⁾	Represents allowance for loan and lease losses related to the non-U.S. credit card loan portfolio, which is included in assets of business held for sale on the Consolidated Balance Sheet at December 31, 2016.



		78Bank of America ~~2015~~912016

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 ~~the Corporation’s~~our historical experience are applied to the unfunded commitments to estimate the funded ~~EAD.~~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 $~~646~~762 million at December 31, ~~2015~~2016, an increase of $~~118~~116 million from December 31, ~~2014with the~~2015. The increase was primarily attributable ~~primarily~~ to ~~higher unfunded commitments.~~increased coverage for the energy sector due to low oil prices which impacted the financial performance of energy clients.

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 ~~the results of the Corporation.~~our results. For additional information, see Interest Rate Risk Management for ~~Non-trading Activities~~the Banking Book on page 9784.

Global Risk Management is responsible for providing senior management with a clear and comprehensive understanding of the trading risks to which ~~the Corporation is~~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,

Quantitative risk models, such as VaR, are an essential component in evaluating the market risks within a portfolio. AThe Enterprise Model Risk Committee (EMRC), a subcommittee of the ~~Management Risk Committee (MRC)~~MRC, is responsible for providing management oversight and approval of model risk management and ~~governance (Risk Management, or RM subcommittee).~~governance. The ~~RM subcommittee~~EMRC defines model risk standards, consistent with ~~the Corporation’s~~our risk framework and risk appetite, prevailing regulatory guidance and industry best practice. Models must meet certain validation criteria, including effective challenge of the model development process and a sufficient demonstration of developmental evidence incorporating a comparison of alternative theories and approaches. The ~~RM subcommittee ensures~~EMRC oversees that model standards are consistent with model risk requirements and monitors the effective challenge in the model validation process across the Corporation. In addition, the relevant stakeholders must agree on any required actions or restrictions to the models and maintain a stringent monitoring process ~~to ensure~~for continued compliance.

~~For more information on the fair value of certain financial assets and liabilities, see~~ ~~Note 20 – Fair Value Measurementsto the Consolidated Financial Statements~~.

Interest Rate Risk

Foreign Exchange Risk

Mortgage Risk



92 ~~Bank of America 2015~~

accumulation of mortgage-related loans in anticipation of eventual securitization. Third, we may hold positions in mortgage securities and residential mortgage loans as part of the ALM portfolio. Fourth, we create MSRs as part of our mortgage origination activities. For more information on MSRs, see Note 1 – Summary of Significant Accounting Principles and Note 23 – Mortgage Servicing Rightsto



		Bank of America 201679

the Consolidated Financial ~~Statements~~.Statements. 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 additional information, see Mortgage Banking Risk Management on page 99.86.

Equity Market Risk

Commodity Risk

Issuer Credit Risk

Market Liquidity Risk

Trading Risk Management

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.

Trading limits on quantitative risk measures, including VaR, are independently set by Global Markets Risk Management and reviewed on a regular basis ~~to ensure~~so they 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 ~~ensure~~allow for extensive coverage of risks as well as at aggregated



		~~Bank of America 2015~~93

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



80 Bank of America 2016

Appetite Statement. These risk appetite limits are reported on a daily basis and are approved at least annually by the ERC and the Board.

Table 5648 presents the total market-based trading portfolio VaR which is the combination of the covered positions trading portfolio and the impact from less liquid trading exposures. 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 ~~the Corporation is~~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 we choose to exclude with prior regulatory approval. In addition, Table 5648 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. The fair value option portfolio combined with the total market-based trading portfolio VaR represents ~~the Corporation’s~~our total market-based portfolio VaR. Additionally, market risk VaR for trading activities as presented in Table 5648 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 5648 include market risk to which we are exposed from all business segments, ~~to which the Corporation is exposed,~~ excluding CVA and DVA. The majority of this portfolio is within the Global Markets segment.

Table 5648 presents year-end, average, high and low daily trading VaR for ~~2015~~2016 and ~~2014~~2015 using a 99 percent confidence level.



Table 56	Market Risk VaR for Trading Activities
Table 48																						Market Risk VaR for Trading Activities

		2015										2014											2016										2015
(Dollars in millions)	(Dollars in millions)	Year End			Average			High ⁽¹⁾		Low ⁽¹⁾		Year End			Average			High ⁽¹⁾		Low ⁽¹⁾		(Dollars in millions)	Year End			Average			High ⁽¹⁾		Low ⁽¹⁾		Year End			Average			High ⁽¹⁾		Low ⁽¹⁾
Foreign exchange	Foreign exchange	$	10		$	10		$	42	$	5	$	13		$	16		$	24	$	8	Foreign exchange	$	8		$	9		$	16	$	5	$	10		$	10		$	42	$	5
Interest rate	Interest rate	17			25			42		14		24			34			60		19		Interest rate	11			19			30		10		17			25			42		14
Credit	Credit	32			35			46		27		43			52			82		32		Credit	25			30			37		25		32			35			46		27
Equity	Equity	18			16			33		9		16			17			32		11		Equity	19			18			30		11		18			16			33		9
Commodity	Commodity	4			5			8		3		8			8			10		6		Commodity	4			6			12		3		4			5			8		3
Portfolio diversification	Portfolio diversification	(36		)	(46		)	—		—		(56		)	(78		)	—		—		Portfolio diversification	(39		)	(46		)	—		—		(36		)	(46		)	—		—
Total covered positions trading portfolio	Total covered positions trading portfolio	45			45			66		26		48			49			86		33		Total covered positions trading portfolio	28			36			50		24		45			45			66		26
Impact from less liquid exposures	Impact from less liquid exposures	3			8			—		—		7			7			—		—		Impact from less liquid exposures	6			5			—		—		3			8			—		—
Total market-based trading portfolio	Total market-based trading portfolio	48			53			74		31		55			56			101		38		Total market-based trading portfolio	34			41			58		28		48			53			74		31
Fair value option loans	Fair value option loans	35			26			36		17		35			31			40		21		Fair value option loans	14			23			40		12		35			26			36		17
Fair value option hedges	Fair value option hedges	17			14			22		8		21			14			23		8		Fair value option hedges	6			11			22		5		17			14			22		8
Fair value option portfolio diversification	Fair value option portfolio diversification	(35		)	(26		)	—		—		(37		)	(24		)	—		—		Fair value option portfolio diversification	(10		)	(21		)	—		—		(35		)	(26		)	—		—
Total fair value option portfolio	Total fair value option portfolio	17			14			19		10		19			21			28		15		Total fair value option portfolio	10			13			20		8		17			14			19		10
Portfolio diversification	Portfolio diversification	(4		)	(6		)	—		—		(7		)	(12		)	—		—		Portfolio diversification	(4		)	(6		)	—		—		(4		)	(6		)	—		—
Total market-based portfolio	Total market-based portfolio	$	61		$	61		$	85	$	41	$	67		$	65		$	120	$	44	Total market-based portfolio	$	40		$	48		$	70	$	32	$	61		$	61		$	85	$	41


⁽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, are not relevant.

The average total market-based trading portfolio VaR decreased during ~~2015~~2016 primarily due to reduced exposure to the ~~credit and~~ interest rate ~~markets, partially offset by a reduction in portfolio diversification.~~and credit markets.



		94Bank of America ~~2015~~201681

The graph below presents the daily total market-based trading portfolio VaR for ~~2015,~~2016, corresponding to the data in Table ~~56.~~48.

Additional VaR statistics produced within ~~the Corporation’s~~our single VaR model are provided in Table 5749 at the same level of detail as in Table 5648. Evaluating VaR with additional statistics allows for an increased understanding of the risks in the portfolio as the historical market

~~as the historical market~~ data used in the VaR calculation does not necessarily follow a predefined statistical distribution. Table 5749 presents average trading VaR statistics ~~for~~at 99 percent and 95 percent confidence levels for ~~2015~~2016 and ~~2014~~2015.



Table 57	Average Market Risk VaR for Trading Activities – 99 percent and 95 percent VaR Statistics
Table 49														Average Market Risk VaR for Trading Activities – 99 percent and 95 percent VaR Statistics

		2015						2014							2016						2015
(Dollars in millions)	(Dollars in millions)	99 percent			95 percent			99 percent			95 percent			(Dollars in millions)	99 percent			95 percent			99 percent			95 percent
Foreign exchange	Foreign exchange	$	10		$	6		$	16		$	9		Foreign exchange	$	9		$	5		$	10		$	6
Interest rate	Interest rate	25			15			34			21			Interest rate	19			12			25			15
Credit	Credit	35			20			52			26			Credit	30			18			35			20
Equity	Equity	16			9			17			9			Equity	18			11			16			9
Commodity	Commodity	5			3			8			4			Commodity	6			3			5			3
Portfolio diversification	Portfolio diversification	(46		)	(31		)	(78		)	(43		)	Portfolio diversification	(46		)	(30		)	(46		)	(31		)
Total covered positions trading portfolio	Total covered positions trading portfolio	45			22			49			26			Total covered positions trading portfolio	36			19			45			22
Impact from less liquid exposures	Impact from less liquid exposures	8			3			7			3			Impact from less liquid exposures	5			3			8			3
Total market-based trading portfolio	Total market-based trading portfolio	53			25			56			29			Total market-based trading portfolio	41			22			53			25
Fair value option loans	Fair value option loans	26			15			31			15			Fair value option loans	23			13			26			15
Fair value option hedges	Fair value option hedges	14			9			14			9			Fair value option hedges	11			8			14			9
Fair value option portfolio diversification	Fair value option portfolio diversification	(26		)	(16		)	(24		)	(14		)	Fair value option portfolio diversification	(21		)	(13		)	(26		)	(16		)
Total fair value option portfolio	Total fair value option portfolio	14			8			21			10			Total fair value option portfolio	13			8			14			8
Portfolio diversification	Portfolio diversification	(6		)	(5		)	(12		)	(8		)	Portfolio diversification	(6		)	(4		)	(6		)	(5		)
Total market-based portfolio	Total market-based portfolio	$	61		$	28		$	65		$	31		Total market-based portfolio	$	48		$	26		$	61		$	28

Backtesting

The accuracy of the VaR methodology is evaluated by backtesting, which compares the daily VaR results, utilizing a one-day holding period, against a comparable subset of trading revenue. 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 and to ensure that the VaR methodology accurately represents those losses. ~~As our primary~~We expect the frequency of trading losses in excess of VaR to be in line with the confidence level of the VaR statistic ~~used for backtesting is based on~~being tested. For example, with a 99 percent confidence level, ~~and a one-day holding period,~~ 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

~~materially~~ different than the level of market volatility that existed during the three years of historical data used in the VaR calculation.



		82Bank of America ~~2015~~952016

~~types of revenue excluded for backtesting are fees, commissions, reserves, net interest income and intraday trading revenues.~~

During ~~2015~~2016, there were no days in which there was a backtesting excess for our total market-based portfolio VaR, utilizing a one-day holding period.

Total Trading-related Revenue

Total trading-related revenue, excluding brokerage fees, and CVA, DVA and ~~DVA related revenue,~~funding valuation adjustment (FVA) 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 20 – Fair Value Measurements to the Consolidated Financial Statements. Trading-related ~~revenues~~revenue can be volatile and ~~are~~is largely driven by general

market conditions and customer demand. Also, trading-related ~~revenues are~~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 ~~revenues~~revenue by business ~~are~~is monitored and the primary drivers of these are reviewed.

The histogram below is a graphic depiction of trading volatility and illustrates the daily level of trading-related revenue for 2016 and 2015. During 2016, positive trading-related revenue was recorded for 99 percent of the trading days, of which 84 percent were daily trading gains of over $25 million and the largest loss was $24 million. This compares to 2015 ~~and 2014. During 2015,~~where positive trading-related revenue was recorded for 98 percent of the trading days, of which 77 percent were daily trading gains of over $25 million and the largest loss was $22 million. This compares to 2014 where positive trading-related revenue was recorded for 95 percent of the trading days, of which 72 percent were daily trading gains of over $25 million and the largest loss was $17 million.

Trading Portfolio Stress Testing

scenarios provide ~~simulations of the~~ estimated portfolio ~~impact~~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.



		96Bank of America ~~2015~~201683

Interest Rate Risk Management for ~~Non-trading Activities~~the Banking Book

The following discussion presents net interest income ~~excluding the impact of trading-related~~for banking book activities.

Interest rate risk represents the most significant market risk exposure to our ~~non-trading~~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.

Table 5850 presents the spot and 12-month forward rates used in our baseline forecasts at December 31, ~~2015~~2016 and ~~2014~~2015.



Table 58	Forward Rates
Table 50								Forward Rates

		December 31, 2015							December 31, 2016
		Federal Funds		Three-month LIBOR		10-Year Swap			Federal Funds		Three-month LIBOR		10-Year Swap
Spot rates	Spot rates	0.50	%	0.61	%	2.19	%	Spot rates	0.75	%	1.00	%	2.34	%
12-month forward rates	12-month forward rates	1.00		1.22		2.39		12-month forward rates	1.25		1.51		2.49

		December 31, 2014							December 31, 2015
Spot rates	Spot rates	0.25	%	0.26	%	2.28	%	Spot rates	0.50	%	0.61	%	2.19	%
12-month forward rates	12-month forward rates	0.75		0.91		2.55		12-month forward rates	1.00		1.22		2.39

Table 5951 shows the pretax dollar impact to forecasted net interest income over the next 12 months from December 31, ~~2015~~2016 and ~~2014,~~2015, resulting from instantaneous parallel and non-parallel shocks to the market-based forward curve. Periodically we evaluate the scenarios presented ~~to ensure~~so that they are meaningful in the context of the current rate environment. ~~For more information on net interest income excluding the impact of trading-related activities, see page 31.~~

During ~~2015,~~2016, the asset sensitivity of our balance sheet ~~increased due to~~decreased primarily driven by higher ~~deposit balances and lower~~ long-end ~~interest~~ rates. We continue to be asset sensitive to a parallel move in interest rates with the majority of that benefit coming from the short end of the yield curve. Additionally, higher interest rates impact the fair value of debt securities and, accordingly, for debt securities classified as AFS, may adversely affect accumulated OCI and thus capital levels under the Basel 3 capital rules. Under instantaneous upward parallel shifts, the near-term adverse impact to Basel 3 capital is reduced over time by offsetting positive

impacts to net interest income. For more information on the transition provisions of Basel 3, see Capital Management – Regulatory Capital on page ~~54.~~45.




Table 51	Estimated Banking Book Net Interest Income Sensitivity

(Dollars in millions)		Short Rate (bps)	Long Rate (bps)	December 31
Curve Change				2016			2015
Parallel Shifts
+100 bps instantaneous shift		+100	+100	$	3,370		$	3,606
-50 bps instantaneous shift		-50	-50	(2,900		)	(3,458		)
Flatteners
Short-end instantaneous change		+100	—	2,473			2,418
Long-end instantaneous change		—	-50	(961		)	(1,767		)
Steepeners
Short-end instantaneous change		-50	—	(1,918		)	(1,672		)
Long-end instantaneous change		—	+100	928			1,217

Table 59 Estimated Net Interest Income Excluding Trading-related Net Interest Income

(Dollars in millions)
Short
Rate (bps)

Long
Rate (bps)
December 31
Curve Change 2015 2014
Parallel Shifts
+100 bps
instantaneous shift
+100 +100 $ 4,306
$ 3,685
-50 bps
instantaneous shift
-50
-50
(3,903 ) (3,043 )
Flatteners

Short-end
instantaneous change
+100 —
2,417
1,966
Long-end
instantaneous change
—
-50
(2,212 ) (1,772 )
Steepeners

Short-end
instantaneous change
-50
—
(1,671 ) (1,261 )
Long-end
instantaneous change
—
+100 1,919
1,782

The sensitivity analysis in Table 5951 assumes that we take no action in response to these rate shocks and does not assume any change in other macroeconomic variables normally correlated with changes in interest rates. As part of our ALM activities, we use securities, certain residential mortgages, and interest rate and foreign exchange derivatives in managing interest rate sensitivity.

The behavior of our deposit 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 5951 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 ~~the Corporation’s~~our benefit in those scenarios.

Interest Rate and Foreign Exchange Derivative Contracts

Changes to the composition of our derivatives portfolio during ~~2015~~2016 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



		~~Bank of America 2015~~97

environments, balance sheet composition and trends, and the relative mix of our cash and derivative positions.



84 Bank of America 2016

Table 6052 presents derivatives utilized in our ALM activities including those designated as accounting and economic hedging instruments and shows the notional amount, fair value, ~~weighted-~~

~~average~~weighted-average receive-fixed and pay-fixed rates, expected maturity and

average estimated durations of our open ALM derivatives at December 31, ~~2015~~2016 and ~~2014~~2015. These amounts do not include derivative hedges on our MSRs.



Table 60	Asset and Liability Management Interest Rate and Foreign Exchange Contracts
Table 52																											Asset and Liability Management Interest Rate and Foreign Exchange Contracts

					December 31, 2015																										December 31, 2016
					Expected Maturity																										Expected Maturity
(Dollars in millions, average estimated duration in years)	(Dollars in millions, average estimated duration in years)	Fair Value			Total			2016			2017			2018			2019			2020			Thereafter			Average Estimated Duration	(Dollars in millions, average estimated duration in years)	Fair Value			Total			2017			2018			2019			2020			2021			Thereafter			Average Estimated Duration
Receive-fixed interest rate swaps ⁽¹⁾	Receive-fixed interest rate swaps ⁽¹⁾	$	6,291																							4.98	Receive-fixed interest rate swaps ⁽¹⁾	$	4,055																							4.81
Notional amount	Notional amount				$	114,354		$	15,339		$	21,453		$	21,850		$	9,783		$	7,015		$	38,914			Notional amount				$	118,603		$	21,453		$	25,788		$	10,283		$	7,515		$	5,307		$	48,257
Weighted-average fixed-rate	Weighted-average fixed-rate				3.12		%	3.12		%	3.64		%	3.20		%	2.37		%	2.13		%	3.16		%		Weighted-average fixed-rate				2.83		%	3.64		%	2.81		%	2.31		%	2.07		%	3.18		%	2.67		%
Pay-fixed interest rate swaps ⁽¹⁾	Pay-fixed interest rate swaps ⁽¹⁾	(81		)																						3.98	Pay-fixed interest rate swaps ⁽¹⁾	159																								2.77
Notional amount	Notional amount				$	12,131		$	1,025		$	1,527		$	5,668		$	600		$	51		$	3,260			Notional amount				$	22,400		$	1,527		$	9,168		$	2,072		$	7,975		$	213		$	1,445
Weighted-average fixed-rate	Weighted-average fixed-rate				1.70		%	1.65		%	1.84		%	1.41		%	1.59		%	3.64		%	2.15		%		Weighted-average fixed-rate				1.37		%	1.84		%	1.47		%	0.97		%	1.08		%	1.00		%	2.45		%
Same-currency basis swaps⁽²⁾	Same-currency basis swaps⁽²⁾	(70		)																							Same-currency basis swaps⁽²⁾	(26		)
Notional amount	Notional amount				$	75,224		$	15,692		$	20,833		$	11,026		$	6,786		$	1,180		$	19,707			Notional amount				$	59,274		$	20,775		$	11,027		$	6,784		$	1,180		$	2,799		$	16,709
Foreign exchange basis swaps ^{(1, 3, 4)}	Foreign exchange basis swaps ^{(1, 3, 4)}	(3,968		)																							Foreign exchange basis swaps ^{(1, 3, 4)}	(4,233		)
Notional amount	Notional amount				144,446			25,762			27,441			19,319			12,226			10,572			49,126				Notional amount				125,522			26,509			22,724			12,178			12,150			8,365			43,596
Option products ⁽⁵⁾	Option products ⁽⁵⁾	57																									Option products ⁽⁵⁾	5
Notional amount ⁽⁶⁾	Notional amount ⁽⁶⁾				752			737			—			—			—			—			15				Notional amount ⁽⁶⁾				1,687			1,673			—			—			—			—			14
Foreign exchange contracts ^{(1, 4, 7)}	Foreign exchange contracts ^{(1, 4, 7)}	2,345																									Foreign exchange contracts ^{(1, 4, 7)}	3,180
Notional amount ⁽⁶⁾	Notional amount ⁽⁶⁾				(25,405		)	(36,504		)	5,380			(2,228		)	2,123			52			5,772				Notional amount ⁽⁶⁾				(20,285		)	(30,199		)	197			1,961			(8		)	881			6,883
Futures and forward rate contracts	Futures and forward rate contracts	(5		)																							Futures and forward rate contracts	19
Notional amount ⁽⁶⁾	Notional amount ⁽⁶⁾				200			200			—			—			—			—			—				Notional amount ⁽⁶⁾				37,896			37,896			—			—			—			—			—
Net ALM contracts	Net ALM contracts	$	4,569																								Net ALM contracts	$	3,159

					December 31, 2014																										December 31, 2015
					Expected Maturity																										Expected Maturity
(Dollars in millions, average estimated duration in years)	(Dollars in millions, average estimated duration in years)	Fair Value			Total			2015			2016			2017			2018			2019			Thereafter			Average Estimated Duration	(Dollars in millions, average estimated duration in years)	Fair Value			Total			2016			2017			2018			2019			2020			Thereafter			Average Estimated Duration
Receive-fixed interest rate swaps ⁽¹⁾	Receive-fixed interest rate swaps ⁽¹⁾	$	7,626																							4.34	Receive-fixed interest rate swaps ⁽¹⁾	$	6,291																							4.98
Notional amount	Notional amount				$	113,766		$	11,785		$	15,339		$	21,453		$	15,299		$	10,233		$	39,657			Notional amount				$	114,354		$	15,339		$	21,453		$	21,850		$	9,783		$	7,015		$	38,914
Weighted-average fixed-rate	Weighted-average fixed-rate				2.98		%	3.56		%	3.12		%	3.64		%	4.07		%	0.49		%	2.63		%		Weighted-average fixed-rate				3.12		%	3.12		%	3.64		%	3.20		%	2.37		%	2.13		%	3.16		%
Pay-fixed interest rate swaps ⁽¹⁾	Pay-fixed interest rate swaps ⁽¹⁾	(829		)																						8.05	Pay-fixed interest rate swaps ⁽¹⁾	(81		)																						3.98
Notional amount	Notional amount				$	14,668		$	520		$	1,025		$	1,527		$	2,908		$	425		$	8,263			Notional amount				$	12,131		$	1,025		$	1,527		$	5,668		$	600		$	51		$	3,260
Weighted-average fixed-rate	Weighted-average fixed-rate				2.27		%	2.30		%	1.65		%	1.84		%	1.62		%	0.09		%	2.77		%		Weighted-average fixed-rate				1.70		%	1.65		%	1.84		%	1.41		%	1.59		%	3.64		%	2.15		%
Same-currency basis swaps ⁽²⁾	Same-currency basis swaps ⁽²⁾	(74		)																							Same-currency basis swaps ⁽²⁾	(70		)
Notional amount	Notional amount				$	94,413		$	18,881		$	15,691		$	21,068		$	11,026		$	6,787		$	20,960			Notional amount				$	75,224		$	15,692		$	20,833		$	11,026		$	6,786		$	1,180		$	19,707
Foreign exchange basis swaps ^{(1, 3, 4)}	Foreign exchange basis swaps ^{(1, 3, 4)}	(2,352		)																							Foreign exchange basis swaps ^{(1, 3, 4)}	(3,968		)
Notional amount	Notional amount				161,196			27,629			26,118			27,026			14,255			12,359			53,809				Notional amount				144,446			25,762			27,441			19,319			12,226			10,572			49,126
Option products ⁽⁵⁾	Option products ⁽⁵⁾	11																									Option products ⁽⁵⁾	57
Notional amount ⁽⁶⁾	Notional amount ⁽⁶⁾				980			964			—			—			—			—			16				Notional amount ⁽⁶⁾				752			737			—			—			—			—			15
Foreign exchange contracts ^{(1, 4, 7)}	Foreign exchange contracts ^{(1, 4, 7)}	3,700																									Foreign exchange contracts ^{(1, 4, 7)}	2,345
Notional amount ⁽⁶⁾	Notional amount ⁽⁶⁾				(22,572		)	(29,931		)	(2,036		)	6,134			(2,335		)	2,359			3,237				Notional amount ⁽⁶⁾				(25,405		)	(36,504		)	5,380			(2,228		)	2,123			52			5,772
Futures and forward rate contracts	Futures and forward rate contracts	(129		)																							Futures and forward rate contracts	(5		)
Notional amount ⁽⁶⁾	Notional amount ⁽⁶⁾				(14,949		)	(14,949		)	—			—			—			—			—				Notional amount ⁽⁶⁾				200			200			—			—			—			—			—
Net ALM contracts	Net ALM contracts	$	7,953																								Net ALM contracts	$	4,569


⁽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, ~~2015~~2016 and ~~2014~~2015, the notional amount of same-currency basis swaps included $~~75.2~~59.3 billion and $~~94.4~~75.2 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 option products of $1.7 billion at December 31, 2016 was comprised of $1.7 billion in foreign exchange options and $14 million in purchased caps/floors. Option products of $752 million at December 31, 2015 ~~was~~were comprised of $737 million in foreign exchange options and $15 million in purchased caps/floors. ~~Option products of~~ ~~$980 million~~ at ~~December 31, 2014~~ ~~were comprised of~~ ~~$974 million~~ ~~in foreign exchange options,~~ ~~$16 million~~ ~~in purchased caps/floors and~~ ~~$(10) million~~ ~~in swaptions.~~


⁽⁶⁾	Reflects the net of long and short positions. Amounts shown as negative reflect a net short position.

⁽⁷⁾

The notional amount of foreign exchange contracts of $(20.3) billion at December 31, 2016 was comprised of $21.5 billion in foreign currency-denominated and cross-currency receive-fixed swaps, $(38.5) billion in net foreign currency forward rate contracts, $(4.6) billion in foreign currency-denominated pay-fixed swaps and $1.3 billion in net foreign currency futures contracts. Foreign exchange contracts of $(25.4) billion at December 31, 2015 ~~was~~were comprised of $21.3 billion in foreign currency-denominated and cross-currency receive-fixed swaps, $(40.3) billion in net foreign currency forward rate contracts, $(7.6) billion in foreign currency-denominated pay-fixed swaps and $1.2 billion in ~~net foreign currency futures contracts. Foreign exchange contracts of~~ ~~$(22.6) billion~~ at ~~December 31, 2014~~ ~~were comprised of~~ ~~$21.0 billion~~ ~~in foreign currency-denominated and cross-currency receive-fixed swaps,~~ ~~$(36.4) billion~~ ~~in net foreign currency forward rate contracts,~~ ~~$(8.3) billion~~ ~~in foreign currency-denominated pay-fixed swaps and~~ ~~$1.1 billion~~ in foreign currency futures contracts.



		98Bank of America ~~2015~~201685

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 ~~$1.7~~$1.4 billion and ~~$2.7~~$1.7 billion, on a pretax basis, at December 31, ~~2015~~2016 and ~~2014~~2015. 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, ~~2015~~2016, the pretax net losses are expected to be reclassified into earnings as follows: ~~$563~~$205 million, or 3314 percent within the next year, 3747 percent in years two through five, and 2028 percent in years six through ten, with the remaining 1011 percent thereafter. For more information on derivatives designated as cash flow hedges, see Note 2 – Derivatives to the Consolidated Financial Statements.

Mortgage Banking Risk Management

We originate, fund and service mortgage loans, which subject us to credit, liquidity and interest rate risks, among others. We determine whether loans will be ~~HFI~~held-for-investment or held-for-sale at the time of commitment and manage credit and liquidity risks by selling or securitizing a portion of the loans we originate.

Interest rate risk and market risk can be substantial in the mortgage business. Fluctuations in interest rates drive consumer demand for new mortgages and the level of refinancing activity which, in turn, affects total origination and servicing income. Hedging the various sources of interest rate risk in mortgage banking is a complex process that requires complex modeling and ongoing monitoring. Typically, an increase in mortgage interest rates will lead to a decrease in mortgage originations and related fees. IRLCs and the related residential first mortgage LHFS are subject to interest rate risk between the date of the IRLC and the date the loans are sold to the secondary market, as an increase in mortgage interest rates ~~will~~ typically ~~lead~~leads to a decrease in the value of these instruments.

~~Interest rate and certain market risks of IRLCs and residential mortgage LHFS are economically hedged in combination with MSRs.~~ To hedge these combined assets, we use certain derivatives such as interest rate options, interest rate swaps, forward sale commitments, eurodollar and U.S. Treasury futures,

and mortgage TBAs, as well as other securities including agency MBS, principal-only and interest-only MBS and U.S. Treasury securities. During ~~2015~~2016 and ~~2014,~~2015, we recorded gains in mortgage banking income

of ~~$360~~$366 million and ~~$357~~$360 million related to the change in fair value of the derivative contracts and other securities used to hedge the market risks of the MSRs, IRLCs and LHFS, net of gains and losses due to changes in fair value of these hedged items. For more information on MSRs, see Note 23 – Mortgage Servicing Rightsto the Consolidated Financial Statements and for more information on mortgage banking income, see Consumer Banking on page ~~33.~~30.

Compliance Risk Management

The Corporation’s approach to the management of compliance risk is described in the Global Compliance – Enterprise Policy, which outlines the requirements of the Corporation’s global compliance program, and defines roles and responsibilities ~~related to~~of FLUs, IRM and Corporate Audit, the ~~implementation, execution and management~~three lines of ~~the~~defense in managing compliance ~~program by Global Compliance.~~risk. The requirements work together to drive a comprehensive risk-based approach for the proactive identification, management and escalation of compliance risks throughout the Corporation. For more information on FLUs and control functions, see Managing Risk on page 41.

The Global Compliance – Enterprise Policy also sets the requirements for reporting compliance risk information to executive management as well as the Board or appropriate Board-level committees ~~with an outline~~in support of Global Compliance's responsibility for conducting ~~objective~~ independent oversight of the Corporation’s compliance risk management activities. The Board provides oversight of compliance risk through its Audit Committee and the ERC.

Operational Risk Management



		~~Bank of America 2015~~99



86 Bank of America 2016

producing and non-revenue producing units. The Operational Risk Management Program addresses the overarching processes for identifying, measuring, monitoring and controlling operational risk, and reporting operational risk information to management and the Board. ~~A sound~~Our internal governance structure enhances the effectiveness of the Corporation’s Operational Risk Management Program and is ~~accomplished~~administered at the enterprise level through formal oversight by the Board, the ERC, the CRO and a variety of management committees and risk oversight groups aligned to the Corporation’s overall risk governance framework and practices. Of these, the MRC oversees the Corporation’s policies and processes for ~~sound~~ operational risk management. The MRC also serves as an escalation point for critical operational risk matters within the Corporation. The MRC reports operational risk activities to the ERC. The independent operational risk management teams oversee the businesses and control functions to monitor adherence to the Operational Risk Management Program and advise and challenge operational risk exposures.

Within the Global Risk Management organization, the ~~Enterprise~~Corporate Operational Risk team develops and guides the strategies, enterprise-wide policies, practices, controls and monitoring tools for assessing and managing operational risks across the organization. The ~~Enterprise~~Corporate Operational Risk team reports results to businesses, control functions, senior management, management committees, the ERC and the Board.

The ~~businesses~~FLUs and control functions are responsible for assessing, monitoring and managing all the risks within their units, including operational risks. In addition to enterprise risk management tools such as loss reporting, scenario analysis and ~~RCSAs,~~Risk and Control Self Assessments (RCSAs), operational risk executives, working in conjunction with senior business executives, have developed key tools to help identify, measure, monitor and control risk in each business and control function. Examples of these include personnel management practices; data management, data quality controls and related processes; fraud management units; cybersecurity controls, processes and systems; transaction processing, monitoring and analysis; business recovery planning; and new product introduction processes. The ~~business~~FLUs and control functions are also responsible for consistently implementing and monitoring adherence to corporate practices.

~~Business~~Among the key tools in the risk management process are the RCSAs. The RCSA process, consistent with identification, measurement, monitoring and control, ~~function management uses the enterprise RCSA process to capture~~is one of our primary methods for capturing the identification and assessment of operational risk exposures, including inherent and ~~evaluate the status of~~residual operational risk ratings, and control ~~issues including~~effectiveness ratings. The end-to-end RCSA process incorporates risk ~~mitigation plans, as appropriate. The goals~~identification and assessment of ~~this process are to assess changing market~~the control environment; monitoring, reporting and ~~business conditions, evaluate key risks impacting each business~~escalating risk; quality assurance and ~~control function,~~data validation; and ~~assess~~integration with the ~~controls in place to mitigate the risks.~~risk appetite. Key operational risk indicators have been developed and are used to assist in identifying trends and issues on an enterprise, business and control function level. This results in a comprehensive risk management view that enables understanding of and action on operational risks and controls for our processes, products, activities and systems.

Independent review and challenge to the Corporation’s overall operational risk management framework is performed by the ~~Corporate Operational Risk Program Adherence~~Enterprise Independent Testing Team and reported through the operational risk governance committees and management routines.

~~Where appropriate, insurance policies are purchased to~~Insurance maintained by the Corporation may mitigate the impact of operational losses. ~~These~~Certain insurance is purchased to

~~policies are explicitly incorporated~~be in ~~the structural features of~~compliance with laws, regulations or legal requirements, and in conjunction with specific hedging strategies to reduce adverse financial impacts arising from operational risk evaluation. As insurance recoveries, especially given recent market events, are subject to legal and financial uncertainty, the inclusion of these insurance policies is subject to reductions in their expected mitigating benefits.losses.

Reputational Risk Management

Reputational risk is the risk that negative perceptions of the Corporation’s conduct or business practices ~~will~~may adversely ~~affect~~impact its profitability or operations through an inability to establish new or maintain existing customer/client ~~relationships.~~relationships or otherwise impact relationships with key stakeholders, such as investors, regulators, employees and the community. 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.

Complex Accounting Estimates

Our significant accounting principles, as described in Note 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.



		~~100~~Bank of America ~~2015~~201687

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 losses inherent in the Corporation’s loan portfolio excluding those loans accounted for under the fair value option. Our process for determining the allowance for credit losses is discussed in Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements. We evaluate our allowance at the portfolio segment level and our portfolio segments are Consumer Real Estate, Credit Card and Other Consumer, and Commercial. Due to the variability in the drivers of the assumptions used in this process, estimates of the portfolio’s inherent risks and overall collectability change with changes in the economy, individual industries, countries, and borrowers’ ability and willingness to repay their obligations. The degree to which any particular assumption affects the allowance for credit losses depends on the severity of the change and its relationship to the other assumptions.

Key judgments used in determining the allowance for credit losses include risk ratings for pools of commercial loans and leases, market and collateral values and discount rates for individually evaluated loans, product type classifications for consumer and commercial loans and leases, loss rates used for consumer and commercial loans and leases, adjustments made to address current events and conditions, ~~(e.g., the recent sharp drop in oil prices),~~ considerations regarding domestic and global economic uncertainty, and overall credit conditions.

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, excluding PCI loans, 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, ~~2015~~2016 would have increased by ~~$71~~$51 million. PCI loans within our Consumer Real Estate portfolio segment are initially recorded at fair value. Applicable accounting guidance prohibits carry-over or creation of valuation allowances in the initial accounting. However, subsequent decreases in the expected cash flows from the date of acquisition result in a charge to the provision for credit losses and a corresponding increase to the allowance for loan and lease losses. We subject our PCI portfolio to stress scenarios to evaluate the potential impact given certain events. A one-percent decrease in the expected cash flows could result in a ~~$151~~$127 million impairment of the portfolio. For each one-percent increase in the loss rates on loans collectively evaluated for impairment within our Credit Card and Other Consumer portfolio segment and U.S. small business commercial card portfolio, coupled with a one-percent decrease in the expected cash flows on those loans individually evaluated for impairment within the Credit Card and Other Consumer portfolio segment and the U.S. small business commercial card portfolio, the allowance for loan and lease losses at December 31, ~~2015~~2016 would have increased by $38 million.

The allowance for loan and lease losses as a percentage of total loans and leases at December 31, ~~2015~~2016 was ~~1.37~~1.26 percent and these hypothetical increases in the allowance would raise the ratio to ~~1.75~~1.60 percent.

For more information on the ~~FASB’s~~Financial Accounting Standards Board's (FASB) proposed standard on accounting for credit losses, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements.

~~Mortgage Servicing Rights~~

MSRs are nonfinancial assets that are created when a mortgage loan is sold and we retain the right to service the loan. We account for consumer MSRs, including residential mortgage and home equity MSRs, at fair value with changes in fair value primarily recorded in mortgage banking income in the Consolidated Statement of Income.

We determine the fair value of our consumer MSRs using a valuation model that calculates the present value of estimated future net servicing income. The model incorporates key economic assumptions including estimates of prepayment rates and resultant weighted-average lives of the MSRs, and the option-adjusted spread levels. These variables can, and generally do, change from quarter to quarter as market conditions and projected interest rates change. These assumptions are subjective in nature and changes in these assumptions could materially affect our operating results. For example, increasing the prepayment rate assumption used in the valuation of our consumer MSRs by 10 percent while keeping all other assumptions unchanged could have resulted in an estimated decrease of $163 million in both MSRs and mortgage banking income for ~~2015. This impact does not reflect any hedge strategies that may be undertaken to mitigate such risk.~~

We manage potential changes in the fair value of MSRs through a comprehensive risk management program. The intent is to mitigate the effects of changes in the fair value of MSRs through the use of risk management instruments. To reduce the sensitivity of earnings to interest rate and market value fluctuations, securities including MBS and U.S. Treasury securities, as well as certain derivatives such as options and interest rate swaps, may be used to hedge certain market risks of the MSRs, but are not designated as accounting hedges. These instruments are carried at fair value with changes in fair value primarily recognized in mortgage banking income. For additional information, see ~~Mortgage Banking Risk Management~~ ~~on page~~ 99.



		~~Bank of America 2015101~~

~~For more information on MSRs, including the sensitivity of weighted-average lives and the fair value of MSRs to changes in modeled assumptions, see~~ ~~Note 23 – Mortgage Servicing Rightsto the Consolidated Financial Statements~~.

Fair Value of Financial Instruments

We ~~classify the fair values of financial instruments based on the fair value hierarchy established~~are, under applicable accounting guidance, ~~which requires an entity~~required to maximize the use of observable inputs and minimize the use of unobservable inputs ~~when~~in measuring fair value. ~~Applicable accounting guidance establishes three levels~~We classify fair value measurements of ~~inputs used to measure~~financial instruments based on the three-level fair ~~value.~~value hierarchy in the guidance. We carry trading account assets and liabilities, derivative assets and liabilities, AFS debt and equity securities, other debt securities, consumer MSRs and certain other assets at fair value. Also, we account for certain loans and loan commitments, LHFS, short-term borrowings, securities financing agreements, asset-backed secured financings, long-term deposits and long-term debt under the fair value option.

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



88 Bank of America 2016

In 2014, we implemented an FVA into valuation estimates primarily to include funding costs on uncollateralized derivatives and derivatives where we are not permitted to use the collateral received. This change resulted in a pretax net FVA charge of $497 million at the time of implementation. Significant judgment is required in modeling expected exposure profiles and in discounting for the funding risk premium inherent in these derivatives.

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 guidance. ~~The~~ Level 3 financial assets and liabilities include certain loans, MBS, ABS, CDOs, CLOs, ~~and~~ structured liabilities and highly structured, complex or long-dated derivative contracts and ~~consumer~~ MSRs. 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. Total recurring Level 3 assets were $14.5 billion, or 0.66 percent of total assets, and total recurring Level 3 liabilities were $7.2 billion, or 0.37 percent of total liabilities, at December 31, 2016 compared to $18.1 billion or 0.84 percent and $7.5 billion or 0.40 percent at December 31, 2015.

Table 61 Recurring Level 3 Asset and Liability Summary

December 31
2015 2014
(Dollars in millions)
Level 3
Fair Value

As a %
of Total
Level 3
Assets

As a %
of Total
Assets

Level 3
Fair Value

As a %
of Total
Level 3
Assets

As a %
of Total
Assets
Trading account assets $ 5,634
31.13 % 0.26 % $ 6,259
28.12 % 0.30 %
Derivative assets 5,134
28.37
0.24
6,851
30.77
0.33
AFS debt securities 1,432
7.91
0.07
2,555
11.48
0.12
Loans and leases 1,620
8.95
0.08
1,983
8.91
0.09
Mortgage servicing rights 3,087
17.06
0.14
3,530
15.86
0.17
All other Level 3 assets at fair value 1,191
6.58
0.05
1,084
4.86
0.05
Total Level 3 assets at fair value ⁽¹⁾
$ 18,098
100.00 % 0.84 % $ 22,262
100.00 % 1.06 %

Level 3
Fair Value

As a %
of Total
Level 3
Liabilities

As a %
of Total
Liabilities

Level 3
Fair Value

As a %
of Total
Level 3
Liabilities

As a %
of Total
Liabilities
Derivative liabilities $ 5,575
74.50 % 0.30 % $ 7,771
76.34 % 0.42 %
Long-term debt 1,513
20.22
0.08
2,362
23.20
0.13
All other Level 3 liabilities at fair value 395
5.28
0.02
46
0.46
—
Total Level 3 liabilities at fair value ⁽¹⁾
$ 7,483
100.00 % 0.40 % $ 10,179
100.00 % 0.55 %


⁽¹⁾	~~Level 3 total assets and liabilities are shown before the impact of cash collateral and counterparty netting related to derivative positions.~~



~~102~~ ~~Bank of America 2015~~

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. These transfers are considered to be effective as of the beginning of the quarter in which they occur. For more information on the significant transfers into and out of Level 3 during ~~2015~~2016 and ~~2014,~~2015, see Note 20 – Fair Value Measurements to the Consolidated Financial Statements.

Accrued Income Taxes and Deferred Tax Assets

Consistent with the applicable accounting guidance, we monitor relevant tax authorities and change our estimate of accrued income taxes due to changes in income tax laws and their interpretation by the courts and regulatory authorities. These revisions of our estimate of accrued income taxes, which also may result from our income tax planning and from the resolution of income tax controversies, may be material to our operating results for any given period.

~~While~~Consistent with the applicable accounting guidance, we ~~have established valuation allowances for certain state~~monitor relevant tax authorities and non-U.S. deferred tax assets, we have concluded that no valuation allowance was necessary with respect to nearly all U.S. federal and U.K. deferred tax assets, including NOL and tax credit carryforwards. The majoritychange our estimates of ~~U.K.~~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 ~~consist primarily~~also may result from our income tax planning and from the resolution of ~~NOLs, are expected to~~income tax audit matters, may be realized by certain subsidiaries over an extended number of years. Management’s conclusion is supported by financial results and forecasts, the reorganization of certain business activities and the indefinite period to carry forward NOLs. However, significant changesmaterial to our estimates, such as changes that would be caused by substantial and prolonged worsening of the condition of Europe’s capital markets, or to applicable tax laws, such as laws affecting the realizability of NOLs or other deferred tax assets,

operating results for any given period.

~~could lead management to reassess its U.K. valuation allowance conclusions.~~ See Note 19 – 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 ~~of this Annual Report on Form 10-K.~~– Regulatory, Compliance and Legal.

Goodwill and Intangible Assets

Background

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 Assetsto the Consolidated Financial ~~Statements~~.Statements. Goodwill is reviewed for potential impairment at the reporting unit level on an annual basis, which for the Corporation is as of June 30, and in interim periods if events or circumstances indicate a potential impairment. A reporting unit is an operating segment or one level below. As reporting units are determined after an acquisition or evolve with changes in business strategy, goodwill is assigned to reporting units and it no longer retains its association with a particular acquisition. All of the revenue streams and related activities of a reporting unit, whether acquired or organic, are available to support the value of the goodwill.

Effective January 1, 2015, the Corporation changed its basis of presentation related to its business segments. The realignment triggered a test for goodwill impairment, which was performed both immediately before and after the realignment. In performing the goodwill impairment test, the Corporation compared the fair value of the affected reporting units with their carrying value as measured by allocated equity. The fair value of the affected reporting units exceeded their carrying value and, accordingly, no goodwill impairment resulted from the realignment.

~~2015~~2016 Annual Goodwill Impairment ~~Test~~Testing

The market approach we used estimates the fair value of the individual reporting units by incorporating any combination of the ~~tangible~~book capital, ~~book~~tangible capital and earnings multiples from comparable publicly-traded companies in industries similar to the reporting unit. The relative weight assigned to these multiples varies among the reporting units based on qualitative and quantitative characteristics, primarily the size and relative profitability of the reporting unit as compared to the comparable publicly-traded companies. Since the fair values determined under the market approach are representative of a noncontrolling interest, we added a control premium to arrive at the reporting units’ estimated fair values on a controlling basis.



		Bank of America ~~2015~~2016 ~~103~~89

specific reporting unit, market equity risk premium and in certain cases an unsystematic (company-specific) risk factor. The unsystematic risk factor is the input that specifically addresses uncertainty related to our projections of earnings and growth, including the uncertainty related to loss expectations. We utilized discount rates that we believe adequately reflect the risk and uncertainty in the financial markets generally and specifically in our internally developed forecasts. We estimated expected rates of equity returns based on historical market returns and risk/return rates for industries similar to each reporting unit. We use our internal forecasts to estimate future cash flows and actual results may differ from forecasted results.

We completed our annual goodwill impairment test as of June 30, ~~2015~~2016 for all of our reporting units that had goodwill. In performing the first step of the annual goodwill impairment analysis, we compared the fair value of each reporting unit to its estimated carrying value as measured by allocated equity, which includes goodwill. We also evaluated the ~~U.K. Card~~non-U.S. consumer card business within All Other, as ~~the U.K. Card~~this business comprises substantially all of the goodwill included in All Other. To determine fair value, we utilized a combination of the market approach and the income approach. Under the market approach, we compared earnings and equity multiples of the individual reporting units to multiples of public companies comparable to the individual reporting units. The control premium used in the June 30, ~~2015~~2016 annual goodwill impairment test was 30 percent, based upon observed comparable premiums paid for change in control transactions for financial institutions, for all reporting units. Under the income approach, we updated our assumptions to reflect the current market environment. The discount rates used in the June 30, ~~2015~~2016 annual goodwill impairment test ranged from ~~10.2~~8.9 percent to ~~13.7~~12.7 percent depending on the relative risk of a reporting unit. ~~Growth~~Cumulative average growth rates developed by management for ~~individual revenue~~revenues and ~~expense items~~expenses in each reporting unit ranged from negative ~~3.5~~3.2 percent to positive ~~8.0~~5.9 percent.

~~The Corporation’s~~Our market capitalization remained below our recorded book value during ~~2015. As none of our reporting units are publicly-traded, individual reporting unit fair value determinations may not directly correlate to the Corporation’s market capitalization.~~2016. We considered the comparison of the aggregate fair value of the reporting units with assigned goodwill to the Corporation’s market capitalization as of June 30, 2015. Although we believe it is reasonable to conclude that market capitalization could be an indicator of fair value over time, we do not believe that our current market capitalization ~~would reflect~~reflects the aggregate fair value of our individual reporting units with assigned goodwill, as ~~reporting units with no assigned goodwill have not been valued and are excluded (e.g.,~~ ~~LAS) from the comparison and~~ our market capitalization does not include consideration of individual reporting unit control premiums. ~~Although the individual reporting units have considered~~Additionally, while the impact of recent regulatory changes has been considered in ~~their~~the reporting units' forecasts and valuations, overall regulatory and market uncertainties persist that we believe further impact ~~the Corporation’s~~our stock price.

~~2014~~ ~~Annual Impairment Test~~

WeIn 2015, we completed our annual goodwill impairment test as of June 30, ~~2014~~2015 for all of our reporting units that had goodwill. ~~We also evaluated the U.K. Card business within~~ ~~All Other,~~ ~~as the U.K. Card business comprises the majority of the goodwill included in~~ ~~All Other.~~

Representations and Warranties Liability

The methodology used to estimate the liability for obligations under representations and warranties related to transfers of residential mortgage loans is a function of the type of representations and warranties provided in the sales contract and considers a variety of factors. Depending upon the counterparty, these factors include actual defaults, estimated future defaults, historical loss experience, estimated home prices, other economic conditions, estimated probability that we will receive a repurchase request, number of payments made by the borrower prior to default and estimated probability that we will be required to repurchase a loan. It also considers other relevant facts and circumstances, such as bulk settlements and identity of the counterparty or type of counterparty, as appropriate. The estimate of the liability for obligations under representations and warranties is based upon currently available information, significant judgment, and a number of factors, including those set forth above, that are subject to change. Changes to any one of these factors could significantly impact the estimate of our liability.

The representations and warranties provision may vary significantly each period as the methodology used to estimate the expense continues to be refined based on the level and type of repurchase requests presented, defects identified, the latest experience gained on repurchase requests and other relevant facts and circumstances. The estimate of the liability for representations and warranties is sensitive to future defaults, loss severity and the net repurchase rate. An assumed simultaneous increase or decrease of 10 percent in estimated future defaults, loss severity and the net repurchase rate would result in an increase or decrease of approximately $~~300~~250 million in the representations and warranties liability as of December 31, ~~2015~~2016. These sensitivities are hypothetical and are intended to provide an indication of the impact of a significant change in these key assumptions on the representations and warranties liability. In reality, changes in one assumption may result in changes in other assumptions, which may or may not counteract the sensitivity.

For more information on representations and warranties exposure and the corresponding estimated range of possible loss, see Off-Balance Sheet Arrangements and Contractual Obligations – Representations and Warranties on page 4640, as well as Note 7 – Representations and Warranties Obligations and Corporate Guarantees and Note 12 – Commitments and Contingencies to the Consolidated Financial Statements.



~~104~~ ~~Bank of America~~ 2015

~~Litigation Reserve~~

~~For a limited number of the matters disclosed in~~ ~~Note 12 – Commitments and Contingenciesto the Consolidated Financial Statements~~ for which a loss is probable or reasonably possible in future periods, whether in excess of a related accrued liability or where there is no accrued liability, we are able to estimate a range of possible loss. In determining whether it is possible to provide an estimate of loss or range of possible loss, the Corporation reviews and evaluates its material litigation and regulatory matters on an ongoing basis, in conjunction with any outside counsel handling the matter, in light of potentially relevant factual and legal developments. These may include information learned through the discovery process, rulings on dispositive motions, settlement discussions, and other rulings by courts, arbitrators or others. In cases in which the Corporation possesses sufficient information to develop an estimate of loss or range of possible loss, that estimate is aggregated and disclosed in ~~Note 12 – Commitments and Contingenciesto the Consolidated Financial Statements~~. For other disclosed matters for which a loss is probable or reasonably possible, such an estimate is not possible. Those matters for which an estimate is not possible are not included within this estimated range. Therefore, the estimated range of possible loss represents what we believe to be an estimate of possible loss only for certain matters meeting these criteria. It does not represent the Corporation’s maximum loss exposure. Information is provided in ~~Note 12 – Commitments and Contingenciesto the Consolidated Financial Statements~~ ~~regarding the nature of all of these contingencies and, where specified, the amount of the claim associated with these loss contingencies.~~

~~Consolidation and Accounting for Variable Interest Entities~~

In accordance with applicable accounting guidance, an entity that has a controlling financial interest in a variable interest entity (VIE) is referred to as the primary beneficiary and consolidates the VIE. The Corporation is deemed to have a controlling financial interest and is the primary beneficiary of 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.

Determining whether an entity has a controlling financial interest in a VIE requires significant judgment. An entity must assess the purpose and design of the VIE, including explicit and implicit contractual arrangements, and the entity’s involvement in both the design of the VIE and its ongoing activities. The entity must then determine which activities have the most significant impact on the economic performance of the VIE and whether the entity has the power to direct such activities. For VIEs that hold financial assets, the party that services the assets or makes investment management decisions may have the power to direct the most significant activities of a VIE. Alternatively, a third party that has the unilateral right to replace the servicer or investment manager or to liquidate the VIE may be deemed to be the party with power. If there are no significant ongoing activities, the party that was responsible for the design of the VIE may be deemed to

have power. If the entity determines that it has the power to direct the most significant activities of the VIE, then the entity must determine if it has either an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Such economic interests may include investments in debt or equity instruments issued by the VIE, liquidity commitments, and explicit and implicit guarantees.

On a quarterly basis, we reassess whether we have a controlling financial interest and are the primary beneficiary of a VIE. The quarterly reassessment process considers whether we have acquired or divested the power to direct the activities of the VIE through changes in governing documents or other circumstances. The reassessment also considers whether we have acquired or disposed of a financial interest that could be significant to the VIE, or whether an interest in the VIE has become significant or is no longer significant. The consolidation status of the VIEs with which we are involved may change as a result of such reassessments. Changes in consolidation status are applied prospectively, with assets and liabilities of a newly consolidated VIE initially recorded at fair value. A gain or loss may be recognized upon deconsolidation of a VIE depending on the carrying values of deconsolidated assets and liabilities compared to the fair value of retained interests and ongoing contractual arrangements.

~~2014~~ Compared to ~~2013~~2014

The following discussion and analysis provide a comparison of our results of operations for ~~2014~~2015 and ~~2013~~.2014. This discussion should be read in conjunction with the Consolidated Financial Statements and related Notes. ~~Tables~~ 8Table 7 and 9Note 24 – Business Segment Informationto the Consolidated Financial Statements contain financial data to supplement this discussion.

Overview

Net Income

Net income was ~~$4.8~~$15.8 billion, in ~~2014~~ ~~compared to~~ ~~$11.4 billion~~ in ~~2013. Including preferred stock dividends, net income applicable to common shareholders was~~ ~~$3.8 billion~~, or ~~$0.36~~$1.31 per diluted share in ~~2014 and~~ ~~$10.1~~2015 compared to $5.5 billion,, or ~~$0.90~~$0.42 per diluted share in ~~2013~~.2014. The increase in net income for 2015 compared to 2014 was primarily driven by a decrease of $15.2 billion in litigation expense.

Net Interest Income

Net interest income ~~on an FTE basis~~ decreased ~~$2.3~~$1.8 billion to ~~$40.8~~$39.0 billion in ~~2014~~2015 compared to ~~2013.~~2014. The net interest yield ~~on an FTE basis~~ decreased 1211 bps to ~~2.25~~2.14 percent in ~~2014.~~2015. These declines were primarily due to the acceleration of market-related premium amortization on debt securities as the decline in long-term interest rates shortened the expected lives of the securities. Also contributing to these declines weredriven by lower loan yields and consumer loan balances, as well as a charge of $612 million in 2015 related to the redemption of certain trust preferred securities, partially offset by lower funding costs, higher trading-related net interest income, from the ALM portfolio and a decrease in trading-related net interest income. Market-related premium amortization was an expense of $1.2 billion in 2014 compared to a benefit of $784 million in 2013. Partially offsetting these declines were reductions in funding yields, lower ~~long-term debt balances~~rates paid on deposits and commercial loan growth.

Noninterest Income

Noninterest income was $44.0 billion in 2015, a decrease of $1.1 billion compared to 2014, which was driven by the following factors:


●	Investment banking income decreased $493 million driven by lower debt and equity issuance fees, partially offset by higher advisory fees.



90 Bank of America 2016


●	Trading account profits increased $164 million. Excluding DVA, trading account profits decreased $330 million driven by declines in credit-related products reflecting lower client activity, partially offset by strong performance in equity derivatives, increased client activity in equities in the Asia-Pacific region, improvement in currencies on higher client flows and increased volatility.


●	Mortgage banking income increased $801 million primarily due to a benefit for representations and warranties in 2015 compared to a provision in 2014, and to a lesser extent, improved MSR net-of-hedge performance and an increase in core production revenue, partially offset by a decline in servicing fees.

●

Other income decreased $1.2 billion primarily due to DVA gains of $407 million in 2014 compared to DVA losses of $633 million in 2015 and an $869 million decrease in equity investment income as 2014 included a gain on the sale of a portion of an equity investment and gains from an initial public offering (IPO) of an equity investment in Global Markets. These declines were partially offset by higher gains on asset sales and lower PPI costs in 2015.

Provision for Credit Losses

The provision for credit losses was $3.2 billion in 2015, an increase of $886 million compared to 2014. The provision for credit losses was $1.2 billion lower than net charge-offs for 2015, resulting in a reduction in the allowance for credit losses. The provision for credit losses in 2014 included $400 million of additional costs associated with the consumer relief portion of the settlement with the DoJ. Excluding these additional costs, the provision for credit losses in the consumer portfolio increased $1.1 billion compared to 2014 due to a slower pace of portfolio improvement, and also due to a lower level of recoveries on nonperforming loan sales and other recoveries in 2015. The provision for credit losses for the commercial portfolio increased $160 million in 2015 compared to 2014 driven by energy sector exposure.

Net charge-offs totaled $4.3 billion, or 0.50 percent of average loans and leases in 2015 compared to $4.4 billion, or 0.49 percent

in 2014. The decrease in net charge-offs was primarily due to credit quality improvement in the consumer portfolio, partially offset by higher net charge-offs in the commercial portfolio primarily due to lower net recoveries in commercial real estate and higher energy-related net charge-offs.

Noninterest Expense

Noninterest expense was $57.7 billion in 2015, a decrease of $17.9 billion compared to 2014, primarily driven by a decrease of $15.2 billion in litigation expense as well as the following factors:


●	Personnel expense decreased $919 million as we continue to streamline processes, reduce headcount and achieve cost savings.


●	Occupancy decreased $167 million primarily due to our focus on reducing our rental footprint.


●	Professional fees decreased $208 million due to lower default-related servicing expenses and legal fees.


●	Telecommunications expense decreased $436 million due to efficiencies gained as we have simplified our operating model, including in-sourcing certain functions.


●	Other general operating expense decreased $16.0 billion primarily due to a decrease of $15.2 billion in litigation expense which was primarily related to previously disclosed legacy mortgage-related matters and other litigation charges in 2014.

Income Tax Expense

The income tax expense was $6.2 billion on pretax income of $22.1 billion in 2015 compared to income tax expense of $2.4 billion on pretax income of $8.0 billion in 2014. The effective tax rate for 2015 was 28.2 percent and was driven by our recurring tax preferences and tax benefits related to certain non-U.S. restructurings, partially offset by a $290 million charge for the impact of the U.K. tax law changes.

The effective tax rate for 2014 was 30.7 percent and was driven by our recurring tax preference benefits, the resolution of several tax examinations and tax benefits from non-U.S. restructurings, partially offset by the non-deductible treatment of certain litigation charges.



		Bank of America ~~2015~~2016 ~~105~~91

~~Noninterest Income~~

~~Noninterest income was $44.3 billion in 2014, a decrease of $2.4 billion compared to~~ ~~2013~~.


Ÿ	~~Investment and brokerage services income increased $1.0 billion primarily driven by increased asset management fees driven by the impact of long-term AUM inflows and higher market levels.~~


Ÿ	~~Equity investment income decreased $1.8 billion to $1.1 billion in 2014 primarily due to a lower level of gains compared to 2013 and the continued wind-down of GPI.~~


Ÿ	~~Trading account profits decreased $747 million, which included a charge of $497 million in 2014 related to the implementation of an FVA in~~ ~~Global Markets~~ ~~and net DVA losses on derivatives of $150 million in 2014 compared to losses of $509 million in 2013.~~


Ÿ	~~Mortgage banking income decreased $2.3 billion primarily driven by lower servicing income and core production revenue, partially offset by a lower representations and warranties provision.~~


Ÿ	Other income (loss) improved $1.3 billion due to an increase of $1.1 billion in net DVA gains on structured liabilities as our spreads widened, and gains associated with the sales of residential mortgage loans, partially offset by an increase in U.K. consumer PPI costs. Results for 2013 also included a write-down of $450 million on a monoline receivable.

~~Provision for Credit Losses~~

The provision for credit losses was $2.3 billion in 2014, a decrease of $1.3 billion compared to 2013. The provision for credit losses was $2.1 billion lower than net charge-offs for 2014, resulting in a reduction in the allowance for credit losses. The decrease in the provision from 2013 was driven by portfolio improvement, including increased home prices in the consumer real estate portfolio and lower unemployment levels driving improvement in the credit card portfolios, as well as improved asset quality in the commercial portfolio. Partially offsetting this decline was $400 million of additional costs in 2014 associated with the consumer relief portion of the DoJ Settlement.

~~Net charge-offs totaled $4.4 billion, or 0.49 percent of average loans and leases in~~ ~~2014~~ ~~compared to $7.9 billion, or 0.87 percent in~~ ~~2013. The decrease in net charge-offs was due to credit quality improvement across all major portfolios and the impact of increased recoveries primarily from nonperforming and delinquent loan sales.~~

~~Noninterest Expense~~

~~Noninterest expense was~~ ~~$75.1 billion~~ in ~~2014, an increase of $5.9 billion compared to~~ ~~2013~~. The increase was primarily driven by higher litigation expense. Litigation expense increased $10.3 billion primarily as a result of charges related to the settlements with the DoJ and the Federal Housing Finance Agency (FHFA). The increase in litigation expense was partially offset by a decrease of $3.2 billion in default-related staffing and other default-related servicing expenses in ~~LAS~~.

~~Income Tax Expense~~

The income tax expense was $2.0 billion on pretax income of $6.9 billion in 2014 compared to income tax expense of $4.7 billion in 2013. The effective tax rate for 2014 was 29.5 percent and was driven by our recurring tax preference items, the resolution of several tax examinations and tax benefits from non-U.S.

~~restructurings, partially offset by the non-deductible treatment of certain litigation charges.~~

The effective tax rate for 2013 was 29.3 percent and was driven by our recurring tax preference items and by certain tax benefits related to non-U.S. operations, partially offset by the $1.1 billion negative impact from the U.K. 2013 Finance Act, enacted in July 2013, which reduced the U.K. corporate income tax rate by three percent. The $1.1 billion charge resulted from remeasuring our U.K. net deferred tax assets, in the period of enactment, using the lower rates.

Business Segment Operations

Consumer Banking

Consumer Banking recorded net income of ~~$6.4~~$6.6 billion in ~~2014~~2015 compared to $6.3 billion in ~~2013~~2014 with the increase primarily driven by lower noninterest expense, ~~and~~lower provision for credit losses and higher noninterest income, partially offset by lower ~~revenue.~~net interest income. Net interest income decreased ~~$442~~$362 million to ~~$20.2~~$20.4 billion in ~~2014 due to lower average card loan balances and yields, partially offset by~~2015 as the beneficial impact of an increase in investable assets as a result of higher deposit balances was more than offset by the impact of the allocation of ALM activities, higher funding costs, lower card yields and lower average card loan balances. Noninterest income ~~decreased $681~~increased $59 million to ~~$10.6~~$11.1 billion in ~~2014~~2015 primarily ~~due to~~driven by higher card income and the impact on revenue of certain divestitures, partially offset by lower mortgage banking income and ~~lower revenue from consumer protection products, partially offset by portfolio divestiture gains, and higher~~ service ~~charges and card income.~~charges. The provision for credit losses decreased ~~$486~~$124 million to ~~$2.7~~$2.3 billion in ~~2014~~ ~~primarily as a result of improvements~~2015 driven by continued improvement in credit ~~quality.~~quality primarily related to our small business and credit card portfolios. Noninterest expense decreased ~~$1.0~~$674 million to $18.7 billion to ~~$17.9 billion~~ in ~~2014~~2015 primarily driven by lower operating and personnel ~~operating, litigation and FDIC expenses.~~expenses, partially offset by higher fraud costs in advance of EMV chip implementation.

Global Wealth & Investment Management

GWIM recorded net income of ~~$3.0~~$2.6 billion in ~~both~~ 2015 compared to $2.9 billion in 2014 with the decrease driven by a decrease in revenue and ~~2013~~ ~~as an increase~~increases in noninterest ~~income~~expense and ~~lower~~the provision for credit ~~costs were offset by lower net interest income and higher noninterest expense.~~losses. Net interest income decreased ~~$228~~$303 million to ~~$5.8~~$5.5 billion in ~~2014 as a result~~2015 due to the impact of the ~~low rate environment,~~allocation of ALM activities, partially offset by the impact of loan and deposit growth. Noninterest income, primarily investment and brokerage services, ~~increased $842~~decreased $66 million to ~~$12.6~~$12.5 billion in ~~2014~~2015 driven by lower transactional revenue, partially offset by increased asset management fees due to the impact of long-term AUM flows and higher average market ~~levels,~~levels. Noninterest expense increased $107 million to $13.9 billion in 2015 primarily due to higher amortization of previously issued stock awards and investments in client-facing professionals, partially offset by lower ~~transactional revenue. Noninterest expense increased~~ ~~$615 million~~ to ~~$13.7 billion~~ ~~in 2014 primarily due to higher~~ revenue-related ~~incentive compensation and support expenses, partially offset by lower other~~ expenses.

Global Banking

Global Banking recorded net income of $5.3 billion in 2015 compared to $5.8 billion in 2014 ~~compared to $5.2 billion in 2013~~ with the ~~increase~~decrease primarily driven by ~~a reduction in the~~lower revenue and higher provision for credit losses, ~~and, to a lesser degree, an increase in revenue,~~ partially offset by ~~higher~~lower noninterest expense. Revenue ~~increased $171~~decreased $645 million to $17.6 billion in ~~2014~~2015 primarily ~~from higher~~due to lower net interest income. The decline in net interest income reflects the impact of the allocation of the ALM activities, including liquidity costs as well as loan spread compression, partially offset by loan growth. The provision for credit losses ~~decreased $820~~increased $361 million to ~~$322~~$686 million in ~~2014~~2015 driven by ~~improved credit quality,~~energy exposure and ~~2013 included increased reserves from~~ loan growth. Noninterest expense ~~increased $119~~decreased $325 million to ~~$8.2~~$8.5 billion in 2015 primarily due to lower litigation expense and technology initiative costs.

Global Markets

Global Markets recorded net income of $2.4 billion in 2015 compared to $2.6 billion in 2014. Excluding net DVA, net income increased $170 million to $2.9 billion in 2015 primarily driven by lower noninterest expense and lower tax expense, partially offset by lower revenue. Revenue, excluding net DVA, decreased due to lower trading account profits from declines in credit-related businesses, lower investment banking fees and lower equity investment gains as 2014 included gains related to the IPO of an equity investment, partially offset by an increase in net interest income. Net DVA losses were $786 million in 2015 compared to losses of $240 million in 2014. Noninterest expense decreased $615 million to $11.4 billion in 2015 largely due to lower litigation expense and, to a lesser extent, lower revenue-related incentive compensation and support costs.

All Other

All Other recorded a net loss of $1.1 billion in 2015 compared to a net loss of $12.0 billion in 2014 with the improvement primarily ~~from additional client-facing personnel~~driven by a $15.2 billion decrease in litigation expense, which is included in noninterest expense, as well as an $862 million increase in mortgage banking income, primarily due to lower representations and ~~higher litigation expense.~~warranties provision. These were partially offset by a $950 million decrease in net interest income primarily driven by a $612 million charge in 2015 related to the discount on certain trust preferred securities.



~~106~~92 Bank of America ~~2015~~2016

~~Global Markets~~

~~Global Markets~~ recorded net income of $2.7 billion in 2014 compared to $1.1 billion in 2013. In 2014, we implemented an FVA into valuation estimates resulting in an initial charge of $497 million. Excluding net DVA/FVA and charges in 2013 related to the U.K. corporate income tax rate reduction, net income decreased $135 million to $2.9 billion in 2014 primarily driven by lower trading account profits and net interest income, partially offset by a decrease in noninterest expense, a $240 million gain in 2014 related to the IPO of an equity investment and higher investment and brokerage services income. Net DVA/FVA losses were $240 million in 2014 compared to losses of $1.2 billion in 2013. Noninterest expense decreased $232 million to $11.9 billion in 2014 due to lower litigation expense and revenue-related incentives, partially offset by higher technology costs and investments in infrastructure.

~~Legacy Assets & Servicing~~

~~LAS~~ ~~recorded a net loss of~~ ~~$13.1 billion~~ in ~~2014~~ ~~compared to a net loss of~~ ~~$4.9 billion~~ in ~~2013~~ with the increase in the net loss primarily driven by significantly higher litigation expense, which is included in noninterest expense, as a result of the settlements with the DoJ and FHFA, a lower tax benefit rate resulting from the non-deductible treatment of a portion of the DoJ Settlement, lower mortgage banking income and higher provision for credit losses.

Mortgage banking income decreased $1.6 billion to $1.0 billion in 2014 primarily due to lower servicing income, partially offset by a lower representations and warranties provision. The provision for credit losses increased $410 million to $127 million in 2014 driven by additional costs associated with the consumer relief portion of the DoJ Settlement. Noninterest expense increased $8.2 billion to $20.6 billion in 2014 due to an $11.4 billion increase in litigation expense, partially offset by a decline in default-related servicing expenses, including mortgage-related assessments, waivers and similar costs related to foreclosure delays.

~~All Other~~

~~All Other~~ ~~recorded net income of~~ ~~$64 million~~ in ~~2014~~ ~~compared to~~ ~~$717 million~~ in ~~2013~~ with the decrease due to the negative impact on net interest income of market-related premium amortization expense on debt securities of $1.2 billion in 2014 compared to a benefit of $784 million in 2013, a decrease of $2.0 billion in equity investment income and a $363 million increase in U.K. PPI costs. Partially offsetting these decreases were gains related to the sales of residential mortgage loans, a $313 million improvement in the provision (benefit) for credit losses and a decrease of $1.8 billion in noninterest expense. The decrease in noninterest expense was primarily due to a decline in litigation expense. Also, the income tax benefit increased $547 million.



		~~Bank of America 2015107~~



Statistical Tables




Table of Contents
		Page
Table I – Average Balances and Interest Rates – FTE Basis		~~109~~94
Table II – Analysis of Changes in Net Interest Income – FTE Basis		~~110~~95
Table III – Preferred Stock Cash Dividend Summary		~~111~~96
Table IV – Outstanding Loans and Leases		~~113~~98
Table V – Nonperforming Loans, Leases and Foreclosed Properties		99
Table VI – Accruing Loans and Leases Past Due 90 Days or More		100
Table VII – Allowance for Credit Losses		~~114~~101
Table VIVIII – Allocation of the Allowance for Credit Losses by Product Type		~~116~~103
Table ~~VII~~IX – Selected Loan Maturity Data		~~116~~
~~Table VIII – Non-exchange Traded Commodity Contracts~~		~~117~~
~~Table IX – Non-exchange Traded Commodity Contract Maturities~~		~~117~~104
Table X – Non-exchange Traded Commodity Related Contracts		104
Table XI – Non-exchange Traded Commodity Related Contract Maturities		104
Table XII – Selected Quarterly Financial Data		~~118~~105
Table XIXIII – Quarterly Average Balances and Interest Rates – FTE Basis		~~120~~107
Table ~~XII~~XIV – Quarterly Supplemental Financial Data		~~122~~108
Table ~~XIII~~XV – Five-year Reconciliations to GAAP Financial Measures		~~123~~108
Table ~~XIV – Two-year Reconciliations to GAAP Financial Measures~~		~~124~~
~~Table XV~~XVI – Quarterly Reconciliations to GAAP Financial Measures		~~125~~109



		~~108~~Bank of America ~~2015~~201693



Table I Average Balances and Interest Rates – FTE Basis	Table I Average Balances and Interest Rates – FTE Basis																		Table I Average Balances and Interest Rates – FTE Basis

	2015						2014						2013						2016						2015						2014
(Dollars in millions)	Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate		Average Balance		Interest Income/ Expense		Yield/ Rate
Earning assets
Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks⁽¹⁾	$	136,391	$	369	0.27	%	$	113,999	$	308	0.27	%	$	72,574	$	182	0.25	%	$	133,374	$	605	0.45	%	$	136,391	$	369	0.27	%	$	113,999	$	308	0.27	%
Time deposits placed and other short-term investments	9,556		147		1.53		11,032		170		1.54		16,066		187		1.16		9,026		140		1.55		9,556		146		1.53		11,032		170		1.54
Federal funds sold and securities borrowed or purchased under agreements to resell	211,471		988		0.47		222,483		1,039		0.47		224,331		1,229		0.55		216,161		1,118		0.52		211,471		988		0.47		222,483		1,039		0.47
Trading account assets	137,837		4,547		3.30		145,686		4,716		3.24		168,998		4,879		2.89		129,766		4,563		3.52		137,837		4,547		3.30		145,686		4,716		3.24
Debt securities ⁽²⁾⁽¹⁾	390,884		9,374		2.41		351,702		8,062		2.28		337,953		9,779		2.89		418,289		9,263		2.23		390,849		9,233		2.38		351,437		9,051		2.57
Loans and leases ⁽³⁾:
Loans and leases ⁽²⁾:
Residential mortgage	201,366		6,967		3.46		237,270		8,462		3.57		256,534		9,315		3.63		188,250		6,488		3.45		201,366		6,967		3.46		237,270		8,462		3.57
Home equity	81,070		2,984		3.68		89,705		3,340		3.72		100,264		3,835		3.82		71,760		2,713		3.78		81,070		2,984		3.68		89,705		3,340		3.72
U.S. credit card	88,244		8,085		9.16		88,962		8,313		9.34		90,369		8,792		9.73		87,905		8,170		9.29		88,244		8,085		9.16		88,962		8,313		9.34
Non-U.S. credit card	10,104		1,051		10.40		11,511		1,200		10.42		10,861		1,271		11.70		9,527		926		9.72		10,104		1,051		10.40		11,511		1,200		10.42
Direct/Indirect consumer ⁽⁴⁾⁽³⁾	84,585		2,040		2.41		82,409		2,099		2.55		82,907		2,370		2.86		91,853		2,296		2.50		84,585		2,040		2.41		82,409		2,099		2.55
Other consumer ⁽⁵⁾⁽⁴⁾	1,938		56		2.86		2,029		139		6.86		1,807		72		4.02		2,295		75		3.26		1,938		56		2.86		2,029		139		6.86
Total consumer	467,307		21,183		4.53		511,886		23,553		4.60		542,742		25,655		4.73		451,590		20,668		4.58		467,307		21,183		4.53		511,886		23,553		4.60
U.S. commercial	248,355		6,883		2.77		230,173		6,630		2.88		218,875		6,811		3.11		276,887		8,101		2.93		248,354		6,883		2.77		230,172		6,630		2.88
Commercial real estate ⁽⁶⁾⁽⁵⁾	52,136		1,521		2.92		47,525		1,432		3.01		42,345		1,391		3.29		57,547		1,773		3.08		52,136		1,521		2.92		47,525		1,432		3.01
Commercial lease financing	25,197		799		3.17		24,423		838		3.43		23,863		851		3.56		21,146		627		2.97		19,802		628		3.17		19,226		658		3.42
Non-U.S. commercial	89,188		2,008		2.25		89,894		2,196		2.44		90,816		2,083		2.29		93,263		2,337		2.51		89,188		2,008		2.25		89,894		2,196		2.44
Total commercial	414,876		11,211		2.70		392,015		11,096		2.83		375,899		11,136		2.96		448,843		12,838		2.86		409,480		11,040		2.70		386,817		10,916		2.82
Total loans and leases(1)	882,183		32,394		3.67		903,901		34,649		3.83		918,641		36,791		4.00		900,433		33,506		3.72		876,787		32,223		3.68		898,703		34,469		3.84
Other earning assets	62,020		2,890		4.66		66,127		2,811		4.25		80,985		2,832		3.50		59,775		2,762		4.62		62,040		2,890		4.66		66,128		2,812		4.25
Total earning assets ⁽⁷⁾⁽⁶⁾	1,830,342		50,709		2.77		1,814,930		51,755		2.85		1,819,548		55,879		3.07		1,866,824		51,957		2.78		1,824,931		50,396		2.76		1,809,468		52,565		2.90
Cash and due from banks(1)	28,921						27,079						36,440						27,893						28,921						27,079
Other assets, less allowance for loan and lease losses(1)	300,878						303,581						307,525						295,254						306,345						308,846
Total assets	$	2,160,141					$	2,145,590					$	2,163,513					$	2,189,971					$	2,160,197					$	2,145,393
Interest-bearing liabilities
U.S. interest-bearing deposits:
Savings	$	46,498	$	7	0.01	%	$	46,270	$	3	0.01	%	$	43,868	$	22	0.05	%	$	49,495	$	5	0.01	%	$	46,498	$	7	0.01	%	$	46,270	$	3	0.01	%
NOW and money market deposit accounts	543,133		273		0.05		518,893		316		0.06		506,082		413		0.08		589,737		294		0.05		543,133		273		0.05		518,893		316		0.06
Consumer CDs and IRAs	54,679		162		0.30		66,797		264		0.40		79,913		472		0.59		48,594		133		0.27		54,679		162		0.30		66,797		264		0.40
Negotiable CDs, public funds and other deposits	29,976		95		0.32		31,507		108		0.34		26,553		117		0.44		32,889		160		0.49		29,976		95		0.32		31,507		108		0.34
Total U.S. interest-bearing deposits	674,286		537		0.08		663,467		691		0.10		656,416		1,024		0.16		720,715		592		0.08		674,286		537		0.08		663,467		691		0.10
Non-U.S. interest-bearing deposits:
Banks located in non-U.S. countries	4,473		31		0.70		8,744		61		0.69		12,431		69		0.56		3,891		32		0.82		4,473		31		0.70		8,744		61		0.69
Governments and official institutions	1,492		5		0.33		1,740		2		0.14		1,584		3		0.18		1,437		9		0.64		1,492		5		0.33		1,740		2		0.14
Time, savings and other	54,767		288		0.53		60,729		326		0.54		55,630		300		0.54		59,183		382		0.65		54,767		288		0.53		60,729		326		0.54
Total non-U.S. interest-bearing deposits	60,732		324		0.53		71,213		389		0.55		69,645		372		0.54		64,511		423		0.66		60,732		324		0.53		71,213		389		0.55
Total interest-bearing deposits	735,018		861		0.12		734,680		1,080		0.15		726,061		1,396		0.19		785,226		1,015		0.13		735,018		861		0.12		734,680		1,080		0.15
Federal funds purchased, securities loaned or sold under agreements to repurchase and short-term borrowings	246,295		2,387		0.97		257,678		2,578		1.00		301,415		2,923		0.97		213,258		2,350		1.10		246,295		2,387		0.97		257,678		2,579		1.00
Trading account liabilities	76,772		1,343		1.75		87,152		1,576		1.81		88,323		1,638		1.85		72,779		1,018		1.40		76,772		1,343		1.75		87,152		1,576		1.81
Long-term debt ⁽⁸⁾⁽⁷⁾	240,059		5,958		2.48		253,607		5,700		2.25		263,417		6,798		2.58		228,617		5,578		2.44		240,059		5,958		2.48		253,607		5,700		2.25
Total interest-bearing liabilities ⁽⁷⁾⁽⁶⁾	1,298,144		10,549		0.81		1,333,117		10,934		0.82		1,379,216		12,755		0.92		1,299,880		9,961		0.77		1,298,144		10,549		0.81		1,333,117		10,935		0.82
Noninterest-bearing sources:
Noninterest-bearing deposits	420,842						389,527						363,674						437,335						420,842						389,527
Other liabilities	189,165						184,464						186,672						186,479						189,230						184,432
Shareholders’ equity	251,990						238,482						233,951						266,277						251,981						238,317
Total liabilities and shareholders’ equity	$	2,160,141					$	2,145,590					$	2,163,513					$	2,189,971					$	2,160,197					$	2,145,393
Net interest spread					1.96	%					2.03	%					2.15	%					2.01	%					1.95	%					2.08	%
Impact of noninterest-bearing sources					0.24						0.22						0.22						0.24						0.24						0.22
Net interest income/yield on earning assets			$	40,160	2.20	%			$	40,821	2.25	%			$	43,124	2.37	%			$	41,996	2.25	%			$	39,847	2.19	%			$	41,630	2.30	%

⁽¹⁾

~~Beginning in 2014, interest-bearing deposits placed with~~Includes assets of the ~~Federal Reserve and certain~~Corporation's non-U.S. ~~central banks~~consumer credit card business, which are included in ~~earning assets. In prior periods, these balances were included with cash and due from banks in the cash and cash equivalents line, consistent with~~assets of business held for sale on the Consolidated Balance Sheet ~~presentation. Prior periods have been reclassified to conform to current period presentation.~~at December 31, 2016.

⁽²⁾

~~Yields on debt securities excluding the impact of market-related adjustments were~~ ~~2.50 percent~~, ~~2.62 percent~~ ~~and~~ ~~2.67 percent~~ in ~~2015~~, ~~2014~~ ~~and~~ ~~2013~~, respectively. Yields on debt securities excluding the impact of market-related adjustments are a non-GAAP financial measure. The Corporation believes the use of this non-GAAP financial measure provides additional clarity in assessing its results.


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


⁽³⁾	Includes non-U.S. consumer loans of $3.4 billion, $4.0 billion and $4.4 billion in 2016, 2015 and 2014, respectively.


⁽⁴⁾	Includes ~~non-U.S.~~ consumer finance loans of $~~4.0~~514 million, $619 million and $1.1 billion; consumer leases of $1.6 billion, $~~4.4~~1.2 billion and $~~6.7 billion~~819 million, and consumer overdrafts of $173 million, $156 million and $149 million in ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014, respectively.

⁽⁵⁾

Includes ~~consumer finance~~U.S. commercial real estate loans of $~~619 million~~54.2 billion, $~~1.1~~49.0 billion and $~~1.3~~46.0 billion~~; consumer leases~~, and non-U.S. commercial real estate loans of $~~1.2~~3.4 billion, $~~819 million~~3.1 billion and $~~354 million~~1.6 billion~~; and consumer overdrafts of~~ in ~~$156 million~~2016, ~~$149 million~~2015 and ~~$153 million~~ in ~~2015~~, 2014 ~~and~~ ~~2013~~, respectively.


⁽⁶⁾	~~Includes U.S. commercial real estate loans of~~ ~~$49.0 billion~~, ~~$46.0 billion~~ ~~and~~ ~~$40.7 billion, and non-U.S. commercial real estate loans of~~ ~~$3.1 billion~~, ~~$1.6 billion~~ ~~and~~ ~~$1.6 billion~~ in ~~2015~~, ~~2014~~ ~~and~~ ~~2013, respectively.~~

⁽⁷⁾

Interest income includes the impact of interest rate risk management contracts, which decreased interest income on the underlying assets by $59176 million, $5859 million and $~~205~~58 million in ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014, respectively. Interest expense includes the impact of interest rate risk management contracts, which decreased interest expense on the underlying liabilities by $~~2.4~~2.1 billion, $~~2.5~~2.4 billion and $~~2.4~~2.5 billion in ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014, respectively. For additional information, see Interest Rate Risk Management for ~~Non-trading Activities~~the Banking Book on page 9784.


⁽⁸⁾⁽⁷⁾	The yield on long-term debt excluding the $612 million adjustment onrelated to the redemption of certain trust preferred securities was 2.23 percent for ~~2015~~.2015. For more information, see Note 11 – Long-term Debtto the Consolidated Financial ~~Statements~~.Statements. The yield on long-term debt excluding the adjustment is a non-GAAP financial measure.



		94Bank of America ~~2015109~~2016



Table II Analysis of Changes in Net Interest Income – FTE Basis	Table II Analysis of Changes in Net Interest Income – FTE Basis																		Table II Analysis of Changes in Net Interest Income – FTE Basis

	From 2014 to 2015									From 2013 to 2014									From 2015 to 2016									From 2014 to 2015
	Due to Change in ⁽¹⁾									Due to Change in ⁽¹⁾									Due to Change in ⁽¹⁾									Due to Change in ⁽¹⁾
(Dollars in millions)	Volume			Rate			Net Change			Volume			Rate			Net Change			Volume			Rate			Net Change			Volume			Rate			Net Change
Increase (decrease) in interest income
Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks ⁽²⁾	$	60		$	1		$	61		$	103		$	23		$	126		$	(9	)	$	245		$	236		$	60		$	1		$	61
Time deposits placed and other short-term investments	(23		)	—			(23		)	(59		)	42			(17		)	(8		)	2			(6		)	(23		)	(1		)	(24		)
Federal funds sold and securities borrowed or purchased under agreements to resell	(45		)	(6		)	(51		)	(5		)	(185		)	(190		)	28			102			130			(45		)	(6		)	(51		)
Trading account assets	(250		)	81			(169		)	(669		)	506			(163		)	(265		)	281			16			(250		)	81			(169		)
Debt securities	850			462			1,312			385			(2,102		)	(1,717		)	722			(692		)	30			994			(812		)	182
Loans and leases:
Residential mortgage	(1,273		)	(222		)	(1,495		)	(702		)	(151		)	(853		)	(454		)	(25		)	(479		)	(1,273		)	(222		)	(1,495		)
Home equity	(324		)	(32		)	(356		)	(408		)	(87		)	(495		)	(343		)	72			(271		)	(324		)	(32		)	(356		)
U.S. credit card	(71		)	(157		)	(228		)	(136		)	(343		)	(479		)	(33		)	118			85			(71		)	(157		)	(228		)
Non-U.S. credit card	(147		)	(2		)	(149		)	76			(147		)	(71		)	(60		)	(65		)	(125		)	(147		)	(2		)	(149		)
Direct/Indirect consumer	58			(117		)	(59		)	(13		)	(258		)	(271		)	174			82			256			58			(117		)	(59		)
Other consumer	(6		)	(77		)	(83		)	10			57			67			10			9			19			(6		)	(77		)	(83		)
Total consumer							(2,370		)							(2,102		)							(515		)							(2,370		)
U.S. commercial	523			(270		)	253			347			(528		)	(181		)	787			431			1,218			523			(270		)	253
Commercial real estate	137			(48		)	89			173			(132		)	41			159			93			252			137			(48		)	89
Commercial lease financing	26			(65		)	(39		)	18			(31		)	(13		)	42			(43		)	(1		)	19			(49		)	(30		)
Non-U.S. commercial	(20		)	(168		)	(188		)	(24		)	137			113			90			239			329			(20		)	(168		)	(188		)
Total commercial							115									(40		)							1,798									124
Total loans and leases							(2,255		)							(2,142		)							1,283									(2,246		)
Other earning assets	(175		)	254			79			(518		)	497			(21		)	(104		)	(24		)	(128		)	(175		)	253			78
Total interest income							$	(1,046	)							$	(4,124	)							$	1,561								$	(2,169	)
Increase (decrease) in interest expense
U.S. interest-bearing deposits:
Savings	$	2		$	2		$	4		$	1		$	(20	)	$	(19	)	$	(2	)	$	—		$	(2	)	$	2		$	2		$	4
NOW and money market deposit accounts	10			(53		)	(43		)	2			(99		)	(97		)	22			(1		)	21			10			(53		)	(43		)
Consumer CDs and IRAs	(45		)	(57		)	(102		)	(78		)	(130		)	(208		)	(16		)	(13		)	(29		)	(45		)	(57		)	(102		)
Negotiable CDs, public funds and other deposits	(6		)	(7		)	(13		)	22			(31		)	(9		)	10			55			65			(6		)	(7		)	(13		)
Total U.S. interest-bearing deposits							(154		)							(333		)							55									(154		)
Non-U.S. interest-bearing deposits:
Banks located in non-U.S. countries	(30		)	—			(30		)	(20		)	12			(8		)	(4		)	5			1			(30		)	—			(30		)
Governments and official institutions	—			3			3			—			(1		)	(1		)	—			4			4			—			3			3
Time, savings and other	(30		)	(8		)	(38		)	28			(2		)	26			26			68			94			(30		)	(8		)	(38		)
Total non-U.S. interest-bearing deposits							(65		)							17									99									(65		)
Total interest-bearing deposits							(219		)							(316		)							154									(219		)
Federal funds purchased, securities loaned or sold under agreements to repurchase and short-term borrowings	(115		)	(76		)	(191		)	(424		)	79			(345		)	(318		)	281			(37		)	(116		)	(76		)	(192		)
Trading account liabilities	(186		)	(47		)	(233		)	(26		)	(36		)	(62		)	(69		)	(256		)	(325		)	(186		)	(47		)	(233		)
Long-term debt	(299		)	557			258			(255		)	(843		)	(1,098		)	(288		)	(92		)	(380		)	(299		)	557			258
Total interest expense							(385		)							(1,821		)							(588		)							(386		)
Net decrease in net interest income							$	(661	)							$	(2,303	)
Net increase (decrease) in net interest income																									$	2,149								$	(1,783	)


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



~~110~~ ~~Bank of America 2015~~

Table III Preferred Stock Cash Dividend Summary ⁽¹⁾

December 31, 2015
Preferred Stock
Outstanding
Notional
Amount
(in millions)
Declaration Date Record Date Payment Date
Per Annum
Dividend Rate

Dividend Per
Share
Series B ⁽²⁾
$ 1
January 21, 2016 April 11, 2016 April 25, 2016 7.00 % $ 1.75
October 22, 2015 January 11, 2016 January 25, 2016 7.00
1.75
July 23, 2015 October 9, 2015 October 23, 2015 7.00
1.75

April 16, 2015 July 10, 2015 July 24, 2015 7.00
1.75

February 10, 2015 April 10, 2015 April 24, 2015 7.00
1.75
Series D ⁽³⁾
$ 654
January 11, 2016 February 29, 2016 March 14, 2016 6.204 % $ 0.38775

October 9, 2015 November 30, 2015 December 14, 2015 6.204
0.38775

July 9, 2015 August 31, 2015 September 14, 2015 6.204
0.38775
April 13, 2015 May 29, 2015 June 15, 2015 6.204
0.38775
January 9, 2015 February 27, 2015 March 16, 2015 6.204
0.38775
Series E ⁽³⁾
$ 317
January 11, 2016 January 29, 2016 February 16, 2016 Floating
$ 0.25556
October 9, 2015 October 30, 2015 November 16, 2015 Floating
0.25556

July 9, 2015 July 31, 2015 August 17, 2015 Floating
0.25556
April 13, 2015 April 30, 2015 May 15, 2015 Floating
0.24722
January 9, 2015 January 30, 2015 February 17, 2015 Floating
0.25556
Series F $ 141
January 11, 2016 February 29, 2016 March 15, 2016 Floating
$ 1,011.11111
October 9, 2015 November 30, 2015 December 15, 2015 Floating
1,011.11111
July 9, 2015 August 31, 2015 September 15, 2015 Floating
1,022.22222
April 13, 2015 May 29, 2015 June 15, 2015 Floating
1,022.22222
January 9, 2015 February 27, 2015 March 16, 2015 Floating
1,000.00
Series G $ 493
January 11, 2016 February 29, 2016 March 15, 2016 Adjustable
$ 1,011.11111
October 9, 2015 November 30, 2015 December 15, 2015 Adjustable
1,011.11111
July 9, 2015 August 31, 2015 September 15, 2015 Adjustable
1,022.22222
April 13, 2015 May 29, 2015 June 15, 2015 Adjustable
1,022.22222
January 9, 2015 February 27, 2015 March 16, 2015 Adjustable
1,000.00
Series I ⁽³⁾
$ 365
January 11, 2016 March 15, 2016 April 1, 2016 6.625 % $ 0.4140625

October 9, 2015 December 15, 2015 January 4, 2016 6.625
0.4140625

July 9, 2015 September 15, 2015 October 1, 2015 6.625
0.4140625

April 13, 2015 June 15, 2015 July 1, 2015 6.625
0.4140625

January 9, 2015 March 15, 2015 April 1, 2015 6.625
0.4140625
Series K ^{(4, 5)}
$ 1,544
January 11, 2016 January 15, 2016 February 1, 2016 Fixed-to-floating
$ 40.00

July 9, 2015 July 15, 2015 July 30, 2015 Fixed-to-floating
40.00

January 9, 2015 January 15, 2015 January 30, 2015 Fixed-to-floating
40.00
Series L $ 3,080
December 18, 2015 January 1, 2016 February 1, 2016 7.25 % $ 18.125

September 18, 2015 October 1, 2015 October 30, 2015 7.25
18.125

June 19, 2015 July 1, 2015 July 30, 2015 7.25
18.125

March 18, 2015 April 1, 2015 April 30, 2015 7.25
18.125
Series M ^{(4, 5)}
$ 1,310
October 9, 2015 October 31, 2015 November 16, 2015 Fixed-to-floating
$ 40.625

April 13, 2015 April 30, 2015 May 15, 2015 Fixed-to-floating
40.625
Series T $ 5,000
January 21, 2016 March 26, 2016 April 11, 2016 6.00 % $ 1,500.00
October 22, 2015 December 26, 2015 January 11, 2016 6.00
1,500.00
July 23, 2015 September 25, 2015 October 13, 2015 6.00
1,500.00
April 16, 2015 June 25, 2015 July 10, 2015 6.00
1,500.00
February 10, 2015 March 26, 2015 April 10, 2015 6.00
1,500.00
Series U ^{(4, 5)}
$ 1,000
October 9, 2015 November 15, 2015 December 1, 2015 Fixed-to-floating
$ 26.00
April 13, 2015 May 15, 2015 June 1, 2015 Fixed-to-floating
26.00
Series V ^{(4, 5)}
$ 1,500
October 9, 2015 December 1, 2015 December 17, 2015 Fixed-to-floating
$ 25.625
April 13, 2015 June 1, 2015 June 17, 2015 Fixed-to-floating
25.625
Series W ⁽³⁾
$ 1,100
January 11, 2016 February 15, 2016 March 9, 2016 6.625 % $ 0.4140625
October 9, 2015 November 15, 2015 December 9, 2015 6.625
0.4140625
July 9, 2015 August 15, 2015 September 9, 2015 6.625
0.4140625
April 13, 2015 May 15, 2015 June 9, 2015 6.625
0.4140625
January 9, 2015 February 15, 2015 March 9, 2015 6.625
0.4140625
Series X ^{(4, 5)}
$ 2,000
January 11, 2016 February 15, 2016 March 7, 2016 Fixed-to-floating
$ 31.25
July 9, 2015 August 15, 2015 September 8, 2015 Fixed-to-floating
31.25
January 9, 2015 February 15, 2015 March 5, 2015 Fixed-to-floating
31.25
Series Y ⁽³⁾
$ 1,100
December 18, 2015 January 1, 2016 January 27, 2016 6.50 % $ 0.40625
September 18, 2015 October 1, 2015 October 27, 2015 6.50
0.40625
June 19, 2015 July 1, 2015 July 27, 2015 6.50
0.40625
March 18, 2015 April 1, 2015 April 27, 2015 6.50
0.40625
Series Z ^{(4, 5)}
$ 1,400
September 18, 2015 October 1, 2015 October 23, 2015 Fixed-to-floating
$ 32.50
March 18, 2015 April 1, 2015 April 23, 2015 Fixed-to-floating
32.50
Series AA ^{(4, 5)}
$ 1,900
January 11, 2016 March 1, 2016 March 17, 2016 Fixed-to-floating
$ 30.50
July 9, 2015 September 1, 2015 September 17, 2015 Fixed-to-floating
30.50

~~For footnotes see page 112.~~



		Bank of America ~~2015~~2016 ~~111~~95

Table III Preferred Stock Cash Dividend Summary ⁽¹⁾ (continued)

December 31, 2015
Preferred Stock
Outstanding
Notional
Amount
(in millions)
Declaration Date Record Date Payment Date
Per Annum
Dividend Rate

Dividend Per
Share
Series 1 ⁽⁶⁾
$ 98
January 11, 2016 February 15, 2016 February 29, 2016 Floating
$ 0.18750
October 9, 2015 November 15, 2015 November 30, 2015 Floating
0.18750

July 9, 2015 August 15, 2015 August 28, 2015 Floating
0.18750
April 13, 2015 May 15, 2015 May 28, 2015 Floating
0.18750
January 9, 2015 February 15, 2015 February 27, 2015 Floating
0.18750
Series 2 ⁽⁶⁾
$ 299
January 11, 2016 February 15, 2016 February 29, 2016 Floating
$ 0.19167
October 9, 2015 November 15, 2015 November 30, 2015 Floating
0.19167

July 9, 2015 August 15, 2015 August 28, 2015 Floating
0.19167
April 13, 2015 May 15, 2015 May 28, 2015 Floating
0.18542
January 9, 2015 February 15, 2015 February 27, 2015 Floating
0.19167
Series 3 ⁽⁶⁾
$ 653
January 11, 2016 February 15, 2016 February 29, 2016 6.375 % $ 0.3984375

October 9, 2015 November 15, 2015 November 30, 2015 6.375
0.3984375

July 9, 2015 August 15, 2015 August 28, 2015 6.375
0.3984375

April 13, 2015 May 15, 2015 May 28, 2015 6.375
0.3984375

January 9, 2015 February 15, 2015 March 2, 2015 6.375
0.3984375
Series 4 ⁽⁶⁾
$ 210
January 11, 2016 February 15, 2016 February 29, 2016 Floating
$ 0.25556
October 9, 2015 November 15, 2015 November 30, 2015 Floating
0.25556

July 9, 2015 August 15, 2015 August 28, 2015 Floating
0.25556
April 13, 2015 May 15, 2015 May 28, 2015 Floating
0.24722
January 9, 2015 February 15, 2015 February 27, 2015 Floating
0.25556
Series 5 ⁽⁶⁾
$ 422
January 11, 2016 February 1, 2016 February 22, 2016 Floating
$ 0.25556
October 9, 2015 November 1, 2015 November 23, 2015 Floating
0.25556

July 9, 2015 August 1, 2015 August 21, 2015 Floating
0.25556
April 13, 2015 May 1, 2015 May 21, 2015 Floating
0.24722
January 9, 2015 February 1, 2015 February 23, 2015 Floating
0.25556

Table III Preferred Stock Cash Dividend Summary ⁽¹⁾

December 31, 2016

Preferred Stock

Outstanding
Notional
Amount

(in millions)

Declaration Date

Record Date

Payment Date

Per Annum

Dividend Rate

Dividend Per

Series B ⁽²⁾

January 26, 2017

April 11, 2017

April 25, 2017

7.00

1.75

October 27, 2016

January 11, 2017

January 25, 2017

7.00

1.75

July 27, 2016

October 11, 2016

October 25, 2016

7.00

1.75

April 27, 2016

July 11, 2016

July 25, 2016

7.00

1.75

January 21, 2016

April 11, 2016

April 25, 2016

7.00

1.75

Series D ⁽³⁾

654

January 9, 2017

February 28, 2017

March 14, 2017

6.204

0.38775

October 10, 2016

November 30, 2016

December 14, 2016

6.204

0.38775

July 7, 2016

August 31, 2016

September 14, 2016

6.204

0.38775

April 15, 2016

May 31, 2016

June 14, 2016

6.204

0.38775

January 11, 2016

February 29, 2016

March 14, 2016

6.204

0.38775

Series E ⁽³⁾

317

January 9, 2017

January 31, 2017

February 15, 2017

Floating

0.25556

October 10, 2016

October 31, 2016

November 15, 2016

Floating

0.25556

July 7, 2016

July 29, 2016

August 15, 2016

Floating

0.25556

April 15, 2016

April 29, 2016

May 16, 2016

Floating

0.25000

January 11, 2016

January 29, 2016

February 16, 2016

Floating

0.25556

Series F

141

January 9, 2017

February 28, 2017

March 15, 2017

Floating

1,000.00

October 10, 2016

November 30, 2016

December 15, 2016

Floating

1,011.11111

July 7, 2016

August 31, 2016

September 15, 2016

Floating

1,022.22222

April 15, 2016

May 31, 2016

June 15, 2016

Floating

1,022.22222

January 11, 2016

February 29, 2016

March 15, 2016

Floating

1,011.11111

Series G

493

January 9, 2017

February 28, 2017

March 15, 2017

Adjustable

1,000.00

October 10, 2016

November 30, 2016

December 15, 2016

Adjustable

1,011.11111

July 7, 2016

August 31, 2016

September 15, 2016

Adjustable

1,022.22222

April 15, 2016

May 31, 2016

June 15, 2016

Adjustable

1,022.22222

January 11, 2016

February 29, 2016

March 15, 2016

Adjustable

1,011.11111

Series I ⁽³⁾

365

January 9, 2017

March 15, 2017

April 3, 2017

6.625

0.4140625

October 10, 2016

December 15, 2016

January 3, 2017

6.625

0.4140625

July 7, 2016

September 15, 2016

October 3, 2016

6.625

0.4140625

April 15, 2016

June 15, 2016

July 1, 2016

6.625

0.4140625

January 11, 2016

March 15, 2016

April 1, 2016

6.625

0.4140625

Series K ^{(4, 5)}

1,544

January 9, 2017

January 15, 2017

January 30, 2017

Fixed-to-floating

40.00

July 7, 2016

July 15, 2016

August 1, 2016

Fixed-to-floating

40.00

January 11, 2016

January 15, 2016

February 1, 2016

Fixed-to-floating

40.00

Series L

3,080

December 16, 2016

January 1, 2017

January 30, 2017

7.25

18.125

September 16, 2016

October 1, 2016

October 31, 2016

7.25

18.125

June 17, 2016

July 1, 2016

August 1, 2016

7.25

18.125

March 18, 2016

April 1, 2016

May 2, 2016

7.25

18.125

Series M ^{(4, 5)}

1,310

October 10, 2016

October 31, 2016

November 15, 2016

Fixed-to-floating

40.625

April 15, 2016

April 30, 2016

May 16, 2016

Fixed-to-floating

40.625

Series T

5,000

January 26, 2017

March 26, 2017

April 10, 2017

6.00

1,500.00

October 27, 2016

December 26, 2016

January 10, 2017

6.00

1,500.00

July 27, 2016

September 25, 2016

October 11, 2016

6.00

1,500.00

April 27, 2016

June 25, 2016

July 11, 2016

6.00

1,500.00

January 21, 2016

March 26, 2016

April 11, 2016

6.00

1,500.00

Series U ^{(4, 5)}

1,000

October 10, 2016

November 15, 2016

December 1, 2016

Fixed-to-floating

26.00

April 15, 2016

May 15, 2016

June 1, 2016

Fixed-to-floating

26.00

Series V ^{(4, 5)}

1,500

October 10, 2016

December 1, 2016

December 19, 2016

Fixed-to-floating

25.625

April 15, 2016

June 1, 2016

June 17, 2016

Fixed-to-floating

25.625

Series W ⁽³⁾

1,100

January 9, 2017

February 15, 2017

March 9, 2017

6.625

0.4140625

October 10, 2016

November 15, 2016

December 9, 2016

6.625

0.4140625

July 7, 2016

August 15, 2016

September 9, 2016

6.625

0.4140625

April 15, 2016

May 15, 2016

June 9, 2016

6.625

0.4140625

January 11, 2016

February 15, 2016

March 9, 2016

6.625

0.4140625

Series X ^{(4, 5)}

2,000

January 9, 2017

February 15, 2017

March 6, 2017

Fixed-to-floating

31.25

July 7, 2016

August 15, 2016

September 6, 2016

Fixed-to-floating

31.25

January 11, 2016

February 15, 2016

March 7, 2016

Fixed-to-floating

31.25

Series Y ⁽³⁾

1,100

December 16, 2016

January 1, 2017

January 27, 2017

6.50

0.40625

September 16, 2016

October 1, 2016

October 27, 2016

6.50

0.40625

June 17, 2016

July 1, 2016

July 27, 2016

6.50

0.40625

March 18, 2016

April 1, 2016

April 27, 2016

6.50

0.40625

Series Z ^{(4, 5)}

1,400

September 16, 2016

October 1, 2016

October 24, 2016

Fixed-to-floating

32.50

March 18, 2016

April 1, 2016

April 25, 2016

Fixed-to-floating

32.50

For footnotes see next page.



96 Bank of America 2016

Table III Preferred Stock Cash Dividend Summary ⁽¹⁾ (continued)

December 31, 2016

Preferred Stock

Outstanding
Notional
Amount

(in millions)

Declaration Date

Record Date

Payment Date

Per Annum

Dividend Rate

Dividend Per

Series AA ^{(4, 5)}

1,900

January 9, 2017

March 1, 2017

March 17, 2017

Fixed-to-floating

30.50

July 7, 2016

September 1, 2016

September 19, 2016

Fixed-to-floating

30.50

January 11, 2016

March 1, 2016

March 17, 2016

Fixed-to-floating

30.50

Series CC ⁽³⁾

1,100

December 16, 2016

January 1, 2017

January 30, 2017

6.20

0.3875

September 16, 2016

October 1, 2016

October 31, 2016

6.20

0.3875

June 17, 2016

July 1, 2016

July 29, 2016

6.20

0.3875

March 18, 2016

April 1, 2016

April 29, 2016

6.20

0.3875

Series DD ^(4,5)

1,000

January 9, 2017

February 15, 2017

March 10, 2017

Fixed-to-floating

31.50

July 7, 2016

August 15, 2016

September 12, 2016

Fixed-to-floating

31.50

Series EE ⁽³⁾

900

December 16, 2016

January 1, 2017

January 25, 2017

6.00

0.375

September 16, 2016

October 1, 2016

October 25, 2016

6.00

0.375

June 17, 2016

July 1, 2016

July 25, 2016

6.00

0.375

Series 1 ⁽⁶⁾

January 9, 2017

February 15, 2017

February 28, 2017

Floating

0.18750

October 10, 2016

November 15, 2016

November 28, 2016

Floating

0.18750

July 7, 2016

August 15, 2016

August 30, 2016

Floating

0.18750

April 15, 2016

May 15, 2016

May 31, 2016

Floating

0.18750

January 11, 2016

February 15, 2016

February 29, 2016

Floating

0.18750

Series 2 ⁽⁶⁾

299

January 9, 2017

February 15, 2017

February 28, 2017

Floating

0.19167

October 10, 2016

November 15, 2016

November 28, 2016

Floating

0.19167

July 7, 2016

August 15, 2016

August 30, 2016

Floating

0.19167

April 15, 2016

May 15, 2016

May 31, 2016

Floating

0.18750

January 11, 2016

February 15, 2016

February 29, 2016

Floating

0.19167

Series 3 ⁽⁶⁾

653

January 9, 2017

February 15, 2017

February 28, 2017

6.375

0.3984375

October 10, 2016

November 15, 2016

November 28, 2016

6.375

0.3984375

July 7, 2016

August 15, 2016

August 29, 2016

6.375

0.3984375

April 15, 2016

May 15, 2016

May 31, 2016

6.375

0.3984375

January 11, 2016

February 15, 2016

February 29, 2016

6.375

0.3984375

Series 4 ⁽⁶⁾

210

January 9, 2017

February 15, 2017

February 28, 2017

Floating

0.25556

October 10, 2016

November 15, 2016

November 28, 2016

Floating

0.25556

July 7, 2016

August 15, 2016

August 30, 2016

Floating

0.25556

April 15, 2016

May 15, 2016

May 31, 2016

Floating

0.25000

January 11, 2016

February 15, 2016

February 29, 2016

Floating

0.25556

Series 5 ⁽⁶⁾

422

January 9, 2017

February 1, 2017

February 21, 2017

Floating

0.25556

October 10, 2016

November 1, 2016

November 21, 2016

Floating

0.25556

July 7, 2016

August 1, 2016

August 22, 2016

Floating

0.25556

April 15, 2016

May 1, 2016

May 23, 2016

Floating

0.25000

January 11, 2016

February 1, 2016

February 22, 2016

Floating

0.25556


⁽¹⁾	Preferred stock cash dividend summary is as of February ~~24, 2016~~23, 2017.


⁽²⁾	Dividends are cumulative.


⁽³⁾	Dividends per depositary share, each representing a 1/1,000^th interest in a share of preferred stock.


⁽⁴⁾	Initially pays dividends semi-annually.


⁽⁵⁾	Dividends per depositary share, each representing a 1/25^th interest in a share of preferred stock.


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



		~~112~~Bank of America ~~2015~~201697



Table IV Outstanding Loans and Leases	Table IV Outstanding Loans and Leases										Table IV Outstanding Loans and Leases

	December 31										December 31
(Dollars in millions)	2015		2014		2013		2012		2011		2016			2015		2014		2013		2012
Consumer
Residential mortgage ⁽¹⁾	$	187,911	$	216,197	$	248,066	$	252,929	$	273,228	$	191,797		$	187,911	$	216,197	$	248,066	$	252,929
Home equity	75,948		85,725		93,672		108,140		124,856		66,443			75,948		85,725		93,672		108,140
U.S. credit card	89,602		91,879		92,338		94,835		102,291		92,278			89,602		91,879		92,338		94,835
Non-U.S. credit card	9,975		10,465		11,541		11,697		14,418		9,214			9,975		10,465		11,541		11,697
Direct/Indirect consumer ⁽²⁾	88,795		80,381		82,192		83,205		89,713		94,089			88,795		80,381		82,192		83,205
Other consumer ⁽³⁾	2,067		1,846		1,977		1,628		2,688		2,499			2,067		1,846		1,977		1,628
Total consumer loans excluding loans accounted for under the fair value option	454,298		486,493		529,786		552,434		607,194		456,320			454,298		486,493		529,786		552,434
Consumer loans accounted for under the fair value option ⁽⁴⁾	1,871		2,077		2,164		1,005		2,190		1,051			1,871		2,077		2,164		1,005
Total consumer	456,169		488,570		531,950		553,439		609,384		457,371			456,169		488,570		531,950		553,439
Commercial
U.S. commercial ⁽⁵⁾	265,647		233,586		225,851		209,719		193,199		283,365			265,647		233,586		225,851		209,719
Commercial real estate ⁽⁶⁾	57,199		47,682		47,893		38,637		39,596		57,355			57,199		47,682		47,893		38,637
Commercial lease financing	27,370		24,866		25,199		23,843		21,989		22,375			21,352		19,579		25,199		23,843
Non-U.S. commercial	91,549		80,083		89,462		74,184		55,418		89,397			91,549		80,083		89,462		74,184
Total commercial loans excluding loans accounted for under the fair value option	441,765		386,217		388,405		346,383		310,202		452,492			435,747		380,930		388,405		346,383
Commercial loans accounted for under the fair value option ⁽⁴⁾	5,067		6,604		7,878		7,997		6,614		6,034			5,067		6,604		7,878		7,997
Total commercial	446,832		392,821		396,283		354,380		316,816		458,526			440,814		387,534		396,283		354,380
Less: Loans of business held for sale ⁽⁷⁾											(9,214		)	—		—		—		—
Total loans and leases	$	903,001	$	881,391	$	928,233	$	907,819	$	926,200	$	906,683		$	896,983	$	876,104	$	928,233	$	907,819


⁽¹⁾	Includes pay option loans of $1.8 billion, $2.3 billion, $3.2 billion, $4.4 billion, and $6.7 ~~billion~~ ~~and~~ ~~$9.9~~ billion, and non-U.S. residential mortgage loans of $2 million, $2 million, $02 million, $~~93 million~~0 and $8593 million at December 31, 2016, 2015, 2014, 2013, and 2012 ~~and~~ ~~2011~~, respectively. The Corporation no longer originates pay option loans.

⁽²⁾

Includes auto and specialty lending loans of $48.9 billion, $42.6 billion, $37.7 billion, $38.5 billion, and $35.9 ~~billion~~ ~~and~~ ~~$43.0~~ billion, unsecured consumer lending loans of$585 million, $886 million, $1.5 billion, $2.7 billion, and $4.7 ~~billion~~ ~~and~~ ~~$8.0~~ billion, U.S. securities-based lending loans of$40.1 billion, $39.8 billion, $35.8 billion, $31.2 billion, and $28.3 ~~billion~~ ~~and~~ ~~$23.6~~ billion, non-U.S. consumer loans of$3.0 billion, $3.9 billion, $4.0 billion, $4.7 billion, and $8.3 ~~billion~~ ~~and~~ ~~$7.6~~ billion, student loans of$497 million, $564 million, $632 million, $4.1 billion, and $4.8 ~~billion~~ ~~and~~ ~~$6.0~~ billion, and other consumer loans of$1.1 billion, $1.0 billion, $761 million, $1.0 billion, and $1.2 ~~billion~~ ~~and~~ ~~$1.5~~ billion at December 31, 2016, 2015, 2014, 2013, and 2012 ~~and~~ ~~2011~~, respectively.

⁽³⁾

Includes consumer finance loans of $465 million, $564 million, $676 million, $1.2 billion, and $1.4 ~~billion~~ ~~and~~ ~~$1.7~~ billion, consumer leases of$1.9 billion, $1.4 billion, $1.0 billion, $606 million, and $34 million, and$0, consumer overdrafts of$157 million, $146 million, $162 million, $176 million, and $177 ~~million~~ ~~and~~ ~~$103 million, and other non-U.S. consumer loans of~~ ~~$4 million~~, ~~$3 million~~, ~~$5 million~~, ~~$5 million~~ ~~and~~ ~~$929~~ million at December 31, 2016, 2015, 2014, 2013, and 2012 ~~and~~ ~~2011~~, respectively.

⁽⁴⁾

Consumer loans accounted for under the fair value option were residential mortgage loans of $710 million, $1.6 billion, $1.9 billion, $2.0 billion, and $1.0 ~~billion~~ ~~and~~ ~~$2.2~~ billion, and home equity loans of$341 million, $250 million, $196 million, $147 million, $0 and $0 at December 31, 2016, 2015, 2014, 2013, and 2012 ~~and~~ ~~2011~~, respectively. Commercial loans accounted for under the fair value option were U.S. commercial loans of $2.9 billion, $2.3 billion, $1.9 billion, $1.5 billion, and $2.3 ~~billion~~ ~~and~~ ~~$2.2~~ billion, and non-U.S. commercial loans of$3.1 billion, $2.8 billion, $4.7 billion, $6.4 billion, and $5.7 ~~billion~~ ~~and~~ ~~$4.4~~ billion at December 31, 2016, 2015, 2014, 2013, and 2012 ~~and~~ ~~2011~~, respectively.


⁽⁵⁾	Includes U.S. small business commercial loans, including card-related products, of $13.0 billion, $12.9 billion, $13.3 billion, $13.3 billion, and $12.6 ~~billion~~ ~~and~~ ~~$13.3~~ billion at December 31, 2016, 2015, 2014, 2013, and 2012 ~~and~~ ~~2011~~, respectively.


⁽⁶⁾	Includes U.S. commercial real estate loans of $54.3 billion, $53.6 billion, $45.2 billion, $46.3 billion, and $37.2 ~~billion~~ ~~and~~ ~~$37.8~~ billion, and non-U.S. commercial real estate loans of$3.1 billion, $3.5 billion, $2.5 billion, $1.6 billion, and $1.5 ~~billion~~ ~~and~~ ~~$1.8~~ billion at December 31, 2016, 2015, 2014, 2013, and 2012 ~~and~~ ~~2011~~, respectively.


⁽⁷⁾	Represents non-U.S. credit card loans, which are included in assets of business held for sale on the Consolidated Balance Sheet.



98 Bank of America 2016




Table V Nonperforming Loans, Leases and Foreclosed Properties ⁽¹⁾

	December 31
(Dollars in millions)	2016		2015		2014		2013		2012
Consumer
Residential mortgage	$	3,056	$	4,803	$	6,889	$	11,712	$	15,055
Home equity	2,918		3,337		3,901		4,075		4,282
Direct/Indirect consumer	28		24		28		35		92
Other consumer	2		1		1		18		2
Total consumer ⁽²⁾	6,004		8,165		10,819		15,840		19,431
Commercial
U.S. commercial	1,256		867		701		819		1,484
Commercial real estate	72		93		321		322		1,513
Commercial lease financing	36		12		3		16		44
Non-U.S. commercial	279		158		1		64		68
	1,643		1,130		1,026		1,221		3,109
U.S. small business commercial	60		82		87		88		115
Total commercial ⁽³⁾	1,703		1,212		1,113		1,309		3,224
Total nonperforming loans and leases	7,707		9,377		11,932		17,149		22,655
Foreclosed properties	377		459		697		623		900
Total nonperforming loans, leases and foreclosed properties	$	8,084	$	9,836	$	12,629	$	17,772	$	23,555

⁽¹⁾

Balances do not include PCI loans even though the customer may be contractually past due. PCI loans were recorded at fair value upon acquisition and accrete interest income over the remaining life of the loan. In addition, balances do not include foreclosed properties insured by certain government-guaranteed loans, principally FHA-insured loans, that entered foreclosure of $1.2 billion, $1.4 billion, $1.1 billion, $1.4 billion and $2.5 billion at December 31, 2016, 2015, 2014, 2013 and 2012, respectively.

⁽²⁾

In 2016, $1.0 billion in interest income was estimated to be contractually due on $6.0 billion of consumer loans and leases classified as nonperforming at December 31, 2016, as presented in the table above, plus $12.5 billion of TDRs classified as performing at December 31, 2016. Approximately $653 million of the estimated $1.0 billion in contractual interest was received and included in interest income for 2016.

⁽³⁾

In 2016, $185 million in interest income was estimated to be contractually due on $1.7 billion of commercial loans and leases classified as nonperforming at December 31, 2016, as presented in the table above, plus $1.5 billion of TDRs classified as performing at December 31, 2016. Approximately $105 million of the estimated $185 million in contractual interest was received and included in interest income for 2016.



		Bank of America ~~2015~~2016 ~~113~~99

Table V Allowance for Credit Losses

(Dollars in millions) 2015 2014 2013 2012 2011
Allowance for loan and lease losses, January 1 $ 14,419
$ 17,428
$ 24,179
$ 33,783
$ 41,885
Loans and leases charged off

Residential mortgage (866 ) (855 ) (1,508 ) (3,276 ) (4,294 )
Home equity (975 ) (1,364 ) (2,258 ) (4,573 ) (4,997 )
U.S. credit card (2,738 ) (3,068 ) (4,004 ) (5,360 ) (8,114 )
Non-U.S. credit card (275 ) (357 ) (508 ) (835 ) (1,691 )
Direct/Indirect consumer (383 ) (456 ) (710 ) (1,258 ) (2,190 )
Other consumer (224 ) (268 ) (273 ) (274 ) (252 )
Total consumer charge-offs (5,461 ) (6,368 ) (9,261 ) (15,576 ) (21,538 )
U.S. commercial ⁽¹⁾
(536 ) (584 ) (774 ) (1,309 ) (1,690 )
Commercial real estate (30 ) (29 ) (251 ) (719 ) (1,298 )
Commercial lease financing (19 ) (10 ) (4 ) (32 ) (61 )
Non-U.S. commercial (59 ) (35 ) (79 ) (36 ) (155 )
Total commercial charge-offs (644 ) (658 ) (1,108 ) (2,096 ) (3,204 )
Total loans and leases charged off (6,105 ) (7,026 ) (10,369 ) (17,672 ) (24,742 )
Recoveries of loans and leases previously charged off

Residential mortgage 393
969
424
165
377
Home equity 339
457
455
331
517
U.S. credit card 424
430
628
728
838
Non-U.S. credit card 87
115
109
254
522
Direct/Indirect consumer 271
287
365
495
714
Other consumer 31
39
39
42
50
Total consumer recoveries 1,545
2,297
2,020
2,015
3,018
U.S. commercial ⁽²⁾
172
214
287
368
500
Commercial real estate 35
112
102
335
351
Commercial lease financing 10
19
29
38
37
Non-U.S. commercial 5
1
34
8
3
Total commercial recoveries 222
346
452
749
891
Total recoveries of loans and leases previously charged off 1,767
2,643
2,472
2,764
3,909
Net charge-offs (4,338 ) (4,383 ) (7,897 ) (14,908 ) (20,833 )
Write-offs of PCI loans (808 ) (810 ) (2,336 ) (2,820 ) —
Provision for loan and lease losses 3,043
2,231
3,574
8,310
13,629
Other ⁽³⁾
(82 ) (47 ) (92 ) (186 ) (898 )
Allowance for loan and lease losses, December 31 12,234
14,419
17,428
24,179
33,783
Reserve for unfunded lending commitments, January 1 528
484
513
714
1,188
Provision for unfunded lending commitments 118
44
(18 ) (141 ) (219 )
Other ⁽⁴⁾
—
—
(11 ) (60 ) (255 )
Reserve for unfunded lending commitments, December 31 646
528
484
513
714
Allowance for credit losses, December 31 $ 12,880
$ 14,947
$ 17,912
$ 24,692
$ 34,497




Table VI Accruing Loans and Leases Past Due 90 Days or More ⁽¹⁾

	December 31
(Dollars in millions)	2016		2015		2014		2013		2012
Consumer
Residential mortgage ⁽²⁾	$	4,793	$	7,150	$	11,407	$	16,961	$	22,157
U.S. credit card	782		789		866		1,053		1,437
Non-U.S. credit card	66		76		95		131		212
Direct/Indirect consumer	34		39		64		408		545
Other consumer	4		3		1		2		2
Total consumer	5,679		8,057		12,433		18,555		24,353
Commercial
U.S. commercial	106		113		110		47		65
Commercial real estate	7		3		3		21		29
Commercial lease financing	19		15		40		41		15
Non-U.S. commercial	5		1		—		17		—
	137		132		153		126		109
U.S. small business commercial	71		61		67		78		120
Total commercial	208		193		220		204		229
Total accruing loans and leases past due 90 days or more ⁽³⁾	$	5,887	$	8,250	$	12,653	$	18,759	$	24,582


⁽¹⁾	Our policy is to classify consumer real estate-secured loans as nonperforming at 90 days past due, except the PCI loan portfolio, the fully-insured loan portfolio and loans accounted for under the fair value option as referenced in footnote 3.


⁽²⁾	Balances are fully-insured loans.

⁽³⁾

Balances exclude loans accounted for under the fair value option. At December 31, 2016, 2015, 2014, and 2013 $1 million, $1 million, $5 million and $8 million of loans accounted for under the fair value option were past due 90 days or more and still accruing interest. At December 31, 2012, there were no loans accounted for under the fair value option that were past due 90 days or more and still accruing interest.



100 Bank of America 2016




Table VII Allowance for Credit Losses

(Dollars in millions)	2016			2015			2014			2013			2012
Allowance for loan and lease losses, January 1	$	12,234		$	14,419		$	17,428		$	24,179		$	33,783
Loans and leases charged off
Residential mortgage	(403		)	(866		)	(855		)	(1,508		)	(3,276		)
Home equity	(752		)	(975		)	(1,364		)	(2,258		)	(4,573		)
U.S. credit card	(2,691		)	(2,738		)	(3,068		)	(4,004		)	(5,360		)
Non-U.S. credit card	(238		)	(275		)	(357		)	(508		)	(835		)
Direct/Indirect consumer	(392		)	(383		)	(456		)	(710		)	(1,258		)
Other consumer	(232		)	(224		)	(268		)	(273		)	(274		)
Total consumer charge-offs	(4,708		)	(5,461		)	(6,368		)	(9,261		)	(15,576		)
U.S. commercial ⁽¹⁾	(567		)	(536		)	(584		)	(774		)	(1,309		)
Commercial real estate	(10		)	(30		)	(29		)	(251		)	(719		)
Commercial lease financing	(30		)	(19		)	(10		)	(4		)	(32		)
Non-U.S. commercial	(133		)	(59		)	(35		)	(79		)	(36		)
Total commercial charge-offs	(740		)	(644		)	(658		)	(1,108		)	(2,096		)
Total loans and leases charged off	(5,448		)	(6,105		)	(7,026		)	(10,369		)	(17,672		)
Recoveries of loans and leases previously charged off
Residential mortgage	272			393			969			424			165
Home equity	347			339			457			455			331
U.S. credit card	422			424			430			628			728
Non-U.S. credit card	63			87			115			109			254
Direct/Indirect consumer	258			271			287			365			495
Other consumer	27			31			39			39			42
Total consumer recoveries	1,389			1,545			2,297			2,020			2,015
U.S. commercial ⁽²⁾	175			172			214			287			368
Commercial real estate	41			35			112			102			335
Commercial lease financing	9			10			19			29			38
Non-U.S. commercial	13			5			1			34			8
Total commercial recoveries	238			222			346			452			749
Total recoveries of loans and leases previously charged off	1,627			1,767			2,643			2,472			2,764
Net charge-offs	(3,821		)	(4,338		)	(4,383		)	(7,897		)	(14,908		)
Write-offs of PCI loans	(340		)	(808		)	(810		)	(2,336		)	(2,820		)
Provision for loan and lease losses	3,581			3,043			2,231			3,574			8,310
Other ⁽³⁾	(174		)	(82		)	(47		)	(92		)	(186		)
Allowance for loan and lease losses, December 31	11,480			12,234			14,419			17,428			24,179
Less: Allowance included in assets of business held for sale ⁽⁴⁾	(243		)	—			—			—			—
Total allowance for loan and lease losses, December 31	11,237			12,234			14,419			17,428			24,179
Reserve for unfunded lending commitments, January 1	646			528			484			513			714
Provision for unfunded lending commitments	16			118			44			(18		)	(141		)
Other ⁽³⁾	100			—			—			(11		)	(60		)
Reserve for unfunded lending commitments, December 31	762			646			528			484			513
Allowance for credit losses, December 31	$	11,999		$	12,880		$	14,947		$	17,912		$	24,692


⁽¹⁾	Includes U.S. small business commercial charge-offs of $253 million, $282 million, $345 million, $457 million, and $799 million ~~and~~in ~~$1.1 billion~~2016 in, 2015, 2014, 2013, and 2012 ~~and~~ ~~2011~~, respectively.


⁽²⁾	Includes U.S. small business commercial recoveries of $45 million, $57 million, $63 million, $98 million, and $100 million ~~and~~in ~~$106 million~~2016 in, 2015, 2014, 2013, and 2012 ~~and~~ ~~2011~~, respectively.


⁽³⁾	Primarily represents the net impact of portfolio sales, consolidations and deconsolidations, ~~and~~ foreign currency translation ~~adjustments. In addition, the 2011 amount includes a~~ ~~$449 million~~ ~~reduction in the allowance for loan~~adjustments and ~~lease losses related to Canadian consumer card loans that were transferred to LHFS.~~ certain other reclassifications.


⁽⁴⁾	~~Primarily represents accretion~~Represents allowance for loan and lease losses related to the non-U.S. credit card loan portfolio, which is included in assets of business held for sale on the ~~Merrill Lynch purchase accounting adjustment and the impact of funding previously unfunded positions.~~Consolidated Balance Sheet at December 31, 2016.



		~~114~~Bank of America ~~2015~~2016101

Table V Allowance for Credit Losses (continued)

(Dollars in millions) 2015 2014 2013 2012 2011
Loan and allowance ratios:
Loans and leases outstanding at December 31 ⁽⁵⁾
$ 896,063
$ 872,710
$ 918,191
$ 898,817
$ 917,396
Allowance for loan and lease losses as a percentage of total loans and leases outstanding at December 31 ⁽⁵⁾
1.37 % 1.65 % 1.90 % 2.69 % 3.68 %
Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases outstanding at December 31 ⁽⁶⁾
1.63
2.05
2.53
3.81
4.88
Commercial allowance for loan and lease losses as a percentage of total commercial loans and leases outstanding at December 31 ⁽⁷⁾
1.10
1.15
1.03
0.90
1.33
Average loans and leases outstanding ⁽⁵⁾
$ 874,461
$ 894,001
$ 909,127
$ 890,337
$ 929,661
Net charge-offs as a percentage of average loans and leases outstanding ^{(5, 8)}
0.50 % 0.49 % 0.87 % 1.67 % 2.24 %
Net charge-offs and PCI write-offs as a percentage of average loans and leases outstanding ^{(5, 9)}
0.59
0.58
1.13
1.99
2.24
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases at December 31 ^{(5, 10)}
130
121
102
107
135
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs ⁽⁸⁾
2.82
3.29
2.21
1.62
1.62
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs and PCI write-offs ⁽⁹⁾
2.38
2.78
1.70
1.36
1.62
Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases at December 31 ⁽¹¹⁾
$ 4,518
$ 5,944
$ 7,680
$ 12,021
$ 17,490
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 ^{(5, 11)}
82 % 71 % 57 % 54 % 65 %
Loan and allowance ratios excluding PCI loans and the related valuation allowance: ⁽¹²⁾

Allowance for loan and lease losses as a percentage of total loans and leases outstanding at December 31 ⁽⁵⁾
1.30 % 1.50 % 1.67 % 2.14 % 2.86 %
Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases outstanding at December 31 ⁽⁶⁾
1.50
1.79
2.17
2.95
3.68
Net charge-offs as a percentage of average loans and leases outstanding ⁽⁵⁾
0.51
0.50
0.90
1.73
2.32
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases at December 31 ^{(5, 10)}
122
107
87
82
101
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs 2.64
2.91
1.89
1.25
1.22




Table VII Allowance for Credit Losses (continued)

(Dollars in millions)	2016			2015			2014			2013			2012
Loan and allowance ratios ⁽⁵⁾:
Loans and leases outstanding at December 31 ⁽⁶⁾	$	908,812		$	890,045		$	867,422		$	918,191		$	898,817
Allowance for loan and lease losses as a percentage of total loans and leases outstanding at December 31 ⁽⁶⁾	1.26		%	1.37		%	1.66		%	1.90		%	2.69		%
Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases outstanding at December 31 ⁽⁷⁾	1.36			1.63			2.05			2.53			3.81
Commercial allowance for loan and lease losses as a percentage of total commercial loans and leases outstanding at December 31 ⁽⁸⁾	1.16			1.11			1.16			1.03			0.90
Average loans and leases outstanding ⁽⁶⁾	$	892,255		$	869,065		$	888,804		$	909,127		$	890,337
Net charge-offs as a percentage of average loans and leases outstanding ^{(6, 9)}	0.43		%	0.50		%	0.49		%	0.87		%	1.67		%
Net charge-offs and PCI write-offs as a percentage of average loans and leases outstanding ⁽⁶⁾	0.47			0.59			0.58			1.13			1.99
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases at December 31 ^{(6, 10)}	149			130			121			102			107
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs ⁽⁹⁾	3.00			2.82			3.29			2.21			1.62
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs and PCI write-offs	2.76			2.38			2.78			1.70			1.36
Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases at December 31 ⁽¹¹⁾	$	3,951		$	4,518		$	5,944		$	7,680		$	12,021
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 ^{(6, 11)}	98		%	82		%	71		%	57		%	54		%
Loan and allowance ratios excluding PCI loans and the related valuation allowance: ^{(5, 12)}
Allowance for loan and lease losses as a percentage of total loans and leases outstanding at December 31 ⁽⁶⁾	1.24		%	1.31		%	1.51		%	1.67		%	2.14		%
Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases outstanding at December 31 ⁽⁷⁾	1.31			1.50			1.79			2.17			2.95
Net charge-offs as a percentage of average loans and leases outstanding ⁽⁶⁾	0.44			0.51			0.50			0.90			1.73
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases at December 31 ^{(6, 10)}	144			122			107			87			82
Ratio of the allowance for loan and lease losses at December 31 to net charge-offs	2.89			2.64			2.91			1.89			1.25


⁽⁵⁾	Loan and allowance ratios 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 are included in assets of business held for sale on the Consolidated Balance Sheet at December 31, 2016.

⁽⁶⁾

Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of $~~6.9~~7.1 billion, $~~8.7~~6.9 billion, $8.7 billion, $10.0 billion ~~$9.0 billion~~ and ~~$8.8~~$9.0 billion at December 31, 2016, 2015, 2014, 2013, and 2012 ~~and~~ ~~2011~~, respectively. Average loans accounted for under the fair value option were $~~7.7~~8.2 billion, $~~9.9~~7.7 billion, ~~$9.5~~$9.9 billion, ~~$8.4~~$9.5 billion and $8.4 billion in2016, 2015, 2014, 2013, and 2012 ~~and~~ ~~2011~~, respectively.


⁽⁶⁾⁽⁷⁾	Excludes consumer loans accounted for under the fair value option of $~~1.9~~1.1 billion, $~~2.1~~1.9 billion, $2.1 billion, $2.2 billion ~~$1.0 billion~~ and ~~$2.2~~$1.0 billion at December 31, 2016, 2015, 2014, 2013, and 2012 ~~and~~ ~~2011~~, respectively.


⁽⁷⁾⁽⁸⁾	Excludes commercial loans accounted for under the fair value option of $~~5.1~~6.0 billion, $~~6.6~~5.1 billion, $6.6 billion, $7.9 billion ~~$8.0 billion~~ and ~~$6.6~~$8.0 billion at December 31, 2016, 2015, 2014, 2013, and 2012 ~~and~~ ~~2011~~, respectively.


⁽⁸⁾⁽⁹⁾	Net charge-offs exclude $~~808~~340 million, $~~810~~808 million, $810 million, $2.3 billion and $2.8 billion of write-offs in the PCI loan portfolio in 2016, 2015, 2014, 2013 and 2012. respectively. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 7362.


⁽⁹⁾	~~There were no write-offs of PCI loans in 2011.~~


⁽¹⁰⁾	For more information on our definition of nonperforming loans, see pages 7564 and 8270.


⁽¹¹⁾	Primarily includes amounts allocated to U.S. credit card and unsecured consumer lending portfolios in Consumer Banking, PCI loans and the non-U.S. credit portfolio in All Other.


⁽¹²⁾	For more information on the PCI loan portfolio and the valuation allowance for PCI loans, see Note 4 – Outstanding Loans and Leases and Note 5 – Allowance for Credit Losses to the Consolidated Financial Statements.



		102Bank of America ~~2015115~~2016



Table VI Allocation of the Allowance for Credit Losses by Product Type
Table VIII Allocation of the Allowance for Credit Losses by Product Type																					Table VIII Allocation of the Allowance for Credit Losses by Product Type

	December 31																				December 31
	2015				2014				2013				2012				2011				2016					2015				2014				2013				2012
(Dollars in millions)	Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total		Amount			Percent of Total		Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total
Allowance for loan and lease losses
Residential mortgage	$	1,500	12.26	%	$	2,900	20.11	%	$	4,084	23.43	%	$	7,088	29.31	%	$	7,985	23.64	%	$	1,012		8.82	%	$	1,500	12.26	%	$	2,900	20.11	%	$	4,084	23.43	%	$	7,088	29.31	%
Home equity	2,414		19.73		3,035		21.05		4,434		25.44		7,845		32.45		13,094		38.76		1,738			15.14		2,414		19.73		3,035		21.05		4,434		25.44		7,845		32.45
U.S. credit card	2,927		23.93		3,320		23.03		3,930		22.55		4,718		19.51		6,322		18.71		2,934			25.56		2,927		23.93		3,320		23.03		3,930		22.55		4,718		19.51
Non-U.S. credit card	274		2.24		369		2.56		459		2.63		600		2.48		946		2.80		243			2.12		274		2.24		369		2.56		459		2.63		600		2.48
Direct/Indirect consumer	223		1.82		299		2.07		417		2.39		718		2.97		1,153		3.41		244			2.13		223		1.82		299		2.07		417		2.39		718		2.97
Other consumer	47		0.38		59		0.41		99		0.58		104		0.43		148		0.44		51			0.44		47		0.38		59		0.41		99		0.58		104		0.43
Total consumer	7,385		60.36		9,982		69.23		13,423		77.02		21,073		87.15		29,648		87.76		6,222			54.21		7,385		60.36		9,982		69.23		13,423		77.02		21,073		87.15
U.S. commercial ⁽¹⁾	2,964		24.23		2,619		18.16		2,394		13.74		1,885		7.80		2,441		7.23		3,326			28.97		2,964		24.23		2,619		18.16		2,394		13.74		1,885		7.80
Commercial real estate	967		7.90		1,016		7.05		917		5.26		846		3.50		1,349		3.99		920			8.01		967		7.90		1,016		7.05		917		5.26		846		3.50
Commercial lease financing	164		1.34		153		1.06		118		0.68		78		0.32		92		0.27		138			1.20		164		1.34		153		1.06		118		0.68		78		0.32
Non-U.S. commercial	754		6.17		649		4.50		576		3.30		297		1.23		253		0.75		874			7.61		754		6.17		649		4.50		576		3.30		297		1.23
Total commercial ⁽²⁾	4,849		39.64		4,437		30.77		4,005		22.98		3,106		12.85		4,135		12.24		5,258			45.79		4,849		39.64		4,437		30.77		4,005		22.98		3,106		12.85
Allowance for loan and lease losses ⁽³⁾	12,234		100.00	%	14,419		100.00	%	17,428		100.00	%	24,179		100.00	%	33,783		100.00	%	11,480			100.00	%	12,234		100.00	%	14,419		100.00	%	17,428		100.00	%	24,179		100.00	%
Less: Allowance included in assets of business held for sale ⁽⁴⁾																					(243		)			—				—				—				—
Total allowance for loan and lease losses																					11,237					12,234				14,419				17,428				24,179
Reserve for unfunded lending commitments	646				528				484				513				714				762					646				528				484				513
Allowance for credit losses	$	12,880			$	14,947			$	17,912			$	24,692			$	34,497			$	11,999				$	12,880			$	14,947			$	17,912			$	24,692


⁽¹⁾	Includes allowance for loan and lease losses for U.S. small business commercial loans of $416 million, $507 million, $536 million, $462 million, and $642 ~~million~~ ~~and~~ ~~$893~~ million at December 31, 2016, 2015, 2014, 2013, and 2012 ~~and~~ ~~2011~~, respectively.


⁽²⁾	Includes allowance for loan and lease losses for impaired commercial loans of $273 million, $217 million, $159 million, $277 million, and $475 ~~million~~ ~~and~~ ~~$545~~ million at December 31, 2016, 2015, 2014, 2013, and 2012 ~~and~~ ~~2011~~, respectively.


⁽³⁾	Includes $419 million, $804 million, $1.7 billion, $2.5 billion, and $5.5 ~~billion~~ ~~and~~ ~~$8.5~~ billion of valuation allowance presented with the allowance for loan and lease losses related to PCI loans at December 31, 2016, 2015, 2014, 2013, and 2012 ~~and~~ ~~2011~~, respectively.


⁽⁴⁾	Represents allowance for loan and lease losses related to the non-U.S. credit card loan portfolio, which is included in assets of business held for sale on the Consolidated Balance Sheet at December 31, 2016.



		Bank of America 2016103



Table VII Selected Loan Maturity Data ^{(1, 2)}
Table IX Selected Loan Maturity Data ^{(1, 2)}													Table IX Selected Loan Maturity Data ^{(1, 2)}

	December 31, 2015												December 31, 2016
(Dollars in millions)	Due in One Year or Less			Due After One Year Through Five Years			Due After Five Years			Total			Due in One Year or Less			Due After One Year Through Five Years			Due After Five Years			Total
U.S. commercial	$	74,624		$	149,456		$	43,837		$	267,917		$	74,191		$	167,670		$	44,424		$	286,285
U.S. commercial real estate	10,417			39,495			3,738			53,650			11,555			38,826			3,871			54,252
Non-U.S. and other ⁽³⁾	64,078			27,646			6,171			97,895			33,971			53,270			8,373			95,614
Total selected loans	$	149,119		$	216,597		$	53,746		$	419,462		$	119,717		$	259,766		$	56,668		$	436,151
Percent of total	36		%	51		%	13		%	100		%	27		%	60		%	13		%	100		%
Sensitivity of selected loans to changes in interest rates for loans due after one year:
Fixed interest rates				$	16,216		$	27,338								$	17,396		$	25,636
Floating or adjustable interest rates				200,381			26,408									242,370			31,032
Total				$	216,597		$	53,746								$	259,766		$	56,668


⁽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 X Non-exchange Traded Commodity Related Contracts

	2016
(Dollars in millions)	Asset Positions			Liability Positions
Net fair value of contracts outstanding, January 1, 2016	$	8,299		$	7,313
Effect of legally enforceable master netting agreements	3,244			3,244
Gross fair value of contracts outstanding, January 1, 2016	11,543			10,557
Contracts realized or otherwise settled	(5,420		)	(5,853		)
Fair value of new contracts	2,421			2,210
Other changes in fair value	(1,323		)	(482		)
Gross fair value of contracts outstanding, December 31, 2016	7,221			6,432
Less: Legally enforceable master netting agreements	(1,480		)	(1,480		)
Net fair value of contracts outstanding, December 31, 2016	$	5,741		$	4,952




Table XI Non-exchange Traded Commodity Related Contract Maturities

	2016
(Dollars in millions)	Asset Positions			Liability Positions
Less than one year	$	2,727		$	2,931
Greater than or equal to one year and less than three years	1,418			1,219
Greater than or equal to three years and less than five years	625			554
Greater than or equal to five years	2,451			1,728
Gross fair value of contracts outstanding	7,221			6,432
Less: Legally enforceable master netting agreements	(1,480		)	(1,480		)
Net fair value of contracts outstanding	$	5,741		$	4,952



~~116~~104 Bank of America ~~2015~~2016

Table VIII Non-exchange Traded Commodity Contracts

2015
(Dollars in millions)
Asset
Positions

Liability
Positions
Net fair value of contracts outstanding, January 1, 2015 $ 8,052
$ 8,593
Effect of legally enforceable master netting agreements 5,506
5,506
Gross fair value of contracts outstanding, January 1, 2015 13,558
14,099
Contracts realized or otherwise settled (8,262 ) (9,114 )
Fair value of new contracts 4,624
4,250
Other changes in fair value 1,623
1,322
Gross fair value of contracts outstanding, December 31, 2015 11,543
10,557
Less: Legally enforceable master netting agreements (3,244 ) (3,244 )
Net fair value of contracts outstanding, December 31, 2015 $ 8,299
$ 7,313

Table IX Non-exchange Traded Commodity Contract Maturities

2015
(Dollars in millions) Asset
Positions Liability
Positions
Less than one year $ 5,420
$ 5,853
Greater than or equal to one year and less than three years 2,619
2,121
Greater than or equal to three years and less than five years 723
671
Greater than or equal to five years 2,781
1,912
Gross fair value of contracts outstanding 11,543
10,557
Less: Legally enforceable master netting agreements (3,244 ) (3,244 )
Net fair value of contracts outstanding $ 8,299
$ 7,313



		~~Bank of America 2015117~~



Table X Selected Quarterly Financial Data
Table XII Selected Quarterly Financial Data																									Table XII Selected Quarterly Financial Data

	2015 Quarters ⁽¹⁾												2014 Quarters												2016 Quarters												2015 Quarters
(In millions, except per share information)	Fourth			Third			Second			First			Fourth			Third			Second			First			Fourth			Third			Second			First			Fourth			Third			Second			First
Income statement
Net interest income	$	9,801		$	9,511		$	10,488		$	9,451		$	9,635		$	10,219		$	10,013		$	10,085		$	10,292		$	10,201		$	10,118		$	10,485		$	9,686		$	9,900		$	9,517		$	9,855
Noninterest income	9,727			10,870			11,328			11,331			9,090			10,990			11,734			12,481			9,698			11,434			11,168			10,305			9,896			11,092			11,523			11,496
Total revenue, net of interest expense	19,528			20,381			21,816			20,782			18,725			21,209			21,747			22,566			19,990			21,635			21,286			20,790			19,582			20,992			21,040			21,351
Provision for credit losses	810			806			780			765			219			636			411			1,009			774			850			976			997			810			806			780			765
Noninterest expense	13,871			13,808			13,818			15,695			14,196			20,142			18,541			22,238			13,161			13,481			13,493			14,816			14,010			13,939			13,959			15,826
Income (loss) before income taxes	4,847			5,767			7,218			4,322			4,310			431			2,795			(681		)
Income tax expense (benefit)	1,511			1,446			2,084			1,225			1,260			663			504			(405		)
Net income (loss)	3,336			4,321			5,134			3,097			3,050			(232		)	2,291			(276		)
Net income (loss) applicable to common shareholders	3,006			3,880			4,804			2,715			2,738			(470		)	2,035			(514		)
Income before income taxes																									6,055			7,304			6,817			4,977			4,762			6,247			6,301			4,760
Income tax expense																									1,359			2,349			2,034			1,505			1,478			1,628			1,736			1,392
Net income																									4,696			4,955			4,783			3,472			3,284			4,619			4,565			3,368
Net income applicable to common shareholders																									4,335			4,452			4,422			3,015			2,954			4,178			4,235			2,986
Average common shares issued and outstanding	10,399			10,444			10,488			10,519			10,516			10,516			10,519			10,561			10,170			10,250			10,328			10,370			10,399			10,444			10,488			10,519
Average diluted common shares issued and outstanding ⁽²⁾	11,153			11,197			11,238			11,267			11,274			10,516			11,265			10,561			10,959			11,000			11,059			11,100			11,153			11,197			11,238			11,267
Performance ratios
Return on average assets	0.61		%	0.79		%	0.96		%	0.59		%	0.57		%	n/m			0.42		%	n/m			0.85		%	0.90		%	0.88		%	0.64		%	0.60		%	0.84		%	0.85		%	0.64		%
Four quarter trailing return on average assets ⁽³⁾⁽¹⁾	0.74			0.73			0.52			0.38			0.23			0.24		%	0.37			0.45		%	0.82			0.76			0.74			0.73			0.73			0.74			0.52			0.42
Return on average common shareholders’ equity	5.08			6.65			8.42			4.88			4.84			n/m			3.68			n/m			7.04			7.27			7.40			5.11			4.99			7.16			7.43			5.37
Return on average tangible common shareholders’ equity ⁽⁴⁾⁽²⁾	7.32			9.65			12.31			7.19			7.15			n/m			5.47			n/m			9.92			10.28			10.54			7.33			7.19			10.40			10.85			7.91
Return on average tangible shareholders’ equity ⁽⁴⁾	7.15			9.43			11.51			7.24			7.08			n/m			5.64			n/m
Return on average shareholders' equity																									6.91			7.33			7.25			5.36			5.07			7.22			7.29			5.55
Return on average tangible shareholders’ equity ⁽²⁾																									9.38			9.98			9.93			7.40			7.04			10.08			10.24			7.87
Total ending equity to total ending assets	11.95			11.89			11.71			11.67			11.57			11.24			10.94			10.79			12.20			12.30			12.23			12.03			11.95			11.88			11.70			11.68
Total average equity to total average assets	11.79			11.71			11.67			11.49			11.39			11.14			10.87			11.06			12.24			12.28			12.13			11.98			11.79			11.70			11.67			11.50
Dividend payout	17.27			13.43			10.90			19.38			19.21			n/m			5.16			n/m			17.68			17.32			11.73			17.13			17.57			12.48			12.36			17.62
Per common share data
Earnings (loss)	$	0.29		$	0.37		$	0.46		$	0.26		$	0.26		$	(0.04	)	$	0.19		$	(0.05	)
Diluted earnings (loss) ⁽²⁾	0.28			0.35			0.43			0.25			0.25			(0.04		)	0.19			(0.05		)
Earnings																									$	0.43		$	0.43		$	0.43		$	0.29		$	0.28		$	0.40		$	0.40		$	0.28
Diluted earnings																									0.40			0.41			0.41			0.28			0.27			0.38			0.38			0.27
Dividends paid	0.05			0.05			0.05			0.05			0.05			0.05			0.01			0.01			0.075			0.075			0.05			0.05			0.05			0.05			0.05			0.05
Book value	22.54			22.41			21.91			21.66			21.32			20.99			21.16			20.75			24.04			24.19			23.71			23.14			22.53			22.40			21.89			21.67
Tangible book value ⁽⁴⁾	15.62			15.50			15.02			14.79			14.43			14.09			14.24			13.81
Tangible book value ⁽²⁾																									16.95			17.14			16.71			16.19			15.62			15.50			15.00			14.80
Market price per share of common stock
Closing	$	16.83		$	15.58		$	17.02		$	15.39		$	17.89		$	17.05		$	15.37		$	17.20		$	22.10		$	15.65		$	13.27		$	13.52		$	16.83		$	15.58		$	17.02		$	15.39
High closing	17.95			18.45			17.67			17.90			18.13			17.18			17.34			17.92			23.16			16.19			15.11			16.43			17.95			18.45			17.67			17.90
Low closing	15.38			15.26			15.41			15.15			15.76			14.98			14.51			16.10			15.63			12.74			12.18			11.16			15.38			15.26			15.41			15.15
Market capitalization	$	174,700		$	162,457		$	178,231		$	161,909		$	188,141		$	179,296		$	161,628		$	181,117		$	222,163		$	158,438		$	135,577		$	139,427		$	174,700		$	162,457		$	178,231		$	161,909


⁽¹⁾	~~The results for 2015 were impacted by the early adoption of new accounting guidance on recognition and measurement of financial instruments. For additional information, see~~ ~~Executive Summary – Recent Events~~ ~~on page~~ 22.


⁽²⁾	The diluted earnings (loss) per common share excluded the effect of any equity instruments that are antidilutive to earnings per share. There were no potential common shares that were dilutive in the third and first quarters of 2014 because of the net loss applicable to common shareholders.


⁽³⁾	Calculated as total net income ~~(loss)~~ for four consecutive quarters divided by annualized average assets for four consecutive quarters.


⁽⁴⁾⁽²⁾	Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures. ~~Other companies may define or calculate these measures differently.~~ For more information on these ratios, see Supplemental Financial Data on page 3027, and for corresponding reconciliations to GAAP financial measures, see Statistical Table ~~XV.~~XVI.


⁽⁵⁾⁽³⁾	For more information on the impact of the PCI loan portfolio on asset quality, see Consumer Portfolio Credit Risk Management on page 6656.


⁽⁶⁾⁽⁴⁾	Includes the allowance for loan and lease losses and the reserve for unfunded lending commitments.

⁽⁷⁾⁽⁵⁾


⁽⁸⁾⁽⁶⁾	Asset quality metrics as of December 31, 2016 include $243 million of non-U.S. credit card allowance for loan and lease losses and $9.2 billion of non-U.S. credit card loans, which are included in assets of business held for sale on the Consolidated Balance Sheet at December 31, 2016.


⁽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.

⁽⁹⁾⁽⁸⁾

Net charge-offs exclude$70 million, $83 million, $82 million and $105 million of write-offs in the PCI loan portfolio in the fourth, third, second and first quarters of 2016, respectively, and $82 million, $148 million, $290 million and $288 million ~~of write-offs in the PCI loan portfolio~~ in the fourth, third, second and first quarters of 2015, ~~respectively, and~~ ~~$13 million~~, ~~$246 million~~, ~~$160 million~~ ~~and~~ ~~$391 million~~ ~~in the fourth, third, second and first quarters of~~ ~~2014~~, respectively. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 7362.


^(10)(9)	~~Capital~~Risk-based capital ratios are reported under Basel 3 Advanced ~~approaches~~- Transition beginning in the fourth quarter of 2015. Prior to fourth quarter of 2015, we were required to report ~~regulatory~~risk-based capital ratios under ~~the~~Basel 3 Standardized ~~approach~~- Transition only. For additional information, see Capital Management on page 5345.

~~n/m = not meaningful~~



~~118~~ ~~Bank of America 2015~~

Table X Selected Quarterly Financial Data (continued)

2015 Quarters ⁽¹⁾
2014 Quarters
(Dollars in millions) Fourth Third Second First Fourth Third Second First
Average balance sheet

Total loans and leases $ 891,861
$ 882,841
$ 881,415
$ 872,393
$ 884,733
$ 899,241
$ 912,580
$ 919,482
Total assets 2,180,472
2,168,993
2,151,966
2,138,574
2,137,551
2,136,109
2,169,555
2,139,266
Total deposits 1,186,051
1,159,231
1,146,789
1,130,726
1,122,514
1,127,488
1,128,563
1,118,178
Long-term debt 237,384
240,520
242,230
240,127
249,221
251,772
259,825
253,678
Common shareholders’ equity 234,851
231,620
228,780
225,357
224,479
222,374
222,221
223,207
Total shareholders’ equity 257,125
253,893
251,054
245,744
243,454
238,040
235,803
236,559
Asset quality ⁽⁵⁾

Allowance for credit losses ⁽⁶⁾
$ 12,880
$ 13,318
$ 13,656
$ 14,213
$ 14,947
$ 15,635
$ 16,314
$ 17,127
Nonperforming loans, leases and foreclosed properties ⁽⁷⁾
9,836
10,336
11,565
12,101
12,629
14,232
15,300
17,732
Allowance for loan and lease losses as a percentage of total loans and leases outstanding ⁽⁷⁾
1.37 % 1.44 % 1.49 % 1.57 % 1.65 % 1.71 % 1.75 % 1.84 %
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases ⁽⁷⁾
130
129
122
122
121
112
108
97
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases, excluding the PCI loan portfolio ⁽⁷⁾
122
120
111
110
107
100
95
85
Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases ⁽⁸⁾
$ 4,518
$ 4,682
$ 5,050
$ 5,492
$ 5,944
$ 6,013
$ 6,488
$ 7,143
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 ^{(7, 8)}
82 % 81 % 75 % 73 % 71 % 67 % 64 % 55 %
Net charge-offs ⁽⁹⁾
$ 1,144
$ 932
$ 1,068
$ 1,194
$ 879
$ 1,043
$ 1,073
$ 1,388
Annualized net charge-offs as a percentage of average loans and leases outstanding ^{(7, 9)}
0.51 % 0.42 % 0.49 % 0.56 % 0.40 % 0.46 % 0.48 % 0.62 %
Annualized net charge-offs as a percentage of average loans and leases outstanding, excluding the PCI loan portfolio ⁽⁷⁾
0.52
0.43
0.50
0.57
0.41
0.48
0.49
0.64
Annualized net charge-offs and PCI write-offs as a percentage of average loans and leases outstanding ⁽⁷⁾
0.55
0.49
0.62
0.70
0.40
0.57
0.55
0.79
Nonperforming loans and leases as a percentage of total loans and leases outstanding ⁽⁷⁾
1.05
1.11
1.22
1.29
1.37
1.53
1.63
1.89
Nonperforming loans, leases and foreclosed properties as a percentage of total loans, leases and foreclosed properties ⁽⁷⁾
1.10
1.17
1.31
1.39
1.45
1.61
1.70
1.96
Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs ⁽⁹⁾
2.70
3.42
3.05
2.82
4.14
3.65
3.67
2.95
Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs, excluding the PCI loan portfolio 2.52
3.18
2.79
2.55
3.66
3.27
3.25
2.58
Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs and PCI write-offs 2.52
2.95
2.40
2.28
4.08
2.95
3.20
2.30
Capital ratios at period end ⁽¹⁰⁾

Risk-based capital:

Common equity tier 1 capital 10.2 % 11.6 % 11.2 % 11.1 % 12.3 % 12.0 % 12.0 % 11.8 %
Tier 1 capital 11.3
12.9
12.5
12.3
13.4
12.8
12.5
11.9
Total capital 13.2
15.8
15.5
15.3
16.5
15.8
15.3
14.8
Tier 1 leverage 8.6
8.5
8.5
8.4
8.2
7.9
7.7
7.4
Tangible equity ⁽⁴⁾
8.9
8.8
8.6
8.6
8.4
8.1
7.8
7.6
Tangible common equity ⁽⁴⁾
7.8
7.8
7.6
7.5
7.5
7.2
7.1
7.0

~~For footnotes see page~~ ~~118~~.



		Bank of America ~~2015~~2016 ~~119~~105

Table XI Quarterly Average Balances and Interest Rates – FTE Basis

Fourth Quarter 2015 Third Quarter 2015
(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 $ 148,102
$ 108
0.29 % $ 145,174
$ 96
0.26 %
Time deposits placed and other short-term investments 10,120
42
1.62
11,503
38
1.33
Federal funds sold and securities borrowed or purchased under agreements to resell 207,585
214
0.41
210,127
275
0.52
Trading account assets 134,797
1,141
3.37
140,484
1,170
3.31
Debt securities ⁽¹⁾
399,423
2,541
2.55
394,420
1,853
1.88
Loans and leases ⁽²⁾:

Residential mortgage 189,650
1,644
3.47
193,791
1,690
3.49
Home equity 77,109
715
3.69
79,715
730
3.64
U.S. credit card 88,623
2,045
9.15
88,201
2,033
9.15
Non-U.S. credit card 10,155
258
10.07
10,244
267
10.34
Direct/Indirect consumer ⁽³⁾
87,858
530
2.40
85,975
515
2.38
Other consumer ⁽⁴⁾
2,039
11
2.09
1,980
15
3.01
Total consumer 455,434
5,203
4.55
459,906
5,250
4.54
U.S. commercial 261,727
1,790
2.72
251,908
1,743
2.75
Commercial real estate ⁽⁵⁾
56,126
408
2.89
53,605
384
2.84
Commercial lease financing 26,127
204
3.12
25,425
199
3.12
Non-U.S. commercial 92,447
530
2.27
91,997
514
2.22
Total commercial 436,427
2,932
2.67
422,935
2,840
2.67
Total loans and leases 891,861
8,135
3.63
882,841
8,090
3.64
Other earning assets 61,070
748
4.87
62,847
716
4.52
Total earning assets ⁽⁶⁾
1,852,958
12,929
2.78
1,847,396
12,238
2.64
Cash and due from banks 29,503
27,730

Other assets, less allowance for loan and lease losses 298,011
293,867

Total assets $ 2,180,472
$ 2,168,993

Interest-bearing liabilities

U.S. interest-bearing deposits:

Savings $ 46,094
$ 1
0.01 % $ 46,297
$ 2
0.02 %
NOW and money market deposit accounts 558,441
68
0.05
545,741
67
0.05
Consumer CDs and IRAs 51,107
37
0.29
53,174
38
0.29
Negotiable CDs, public funds and other deposits 30,546
25
0.32
30,631
26
0.33
Total U.S. interest-bearing deposits 686,188
131
0.08
675,843
133
0.08
Non-U.S. interest-bearing deposits:

Banks located in non-U.S. countries 3,997
7
0.69
4,196
7
0.71
Governments and official institutions 1,687
2
0.37
1,654
1
0.33
Time, savings and other 55,965
71
0.51
53,793
73
0.53
Total non-U.S. interest-bearing deposits 61,649
80
0.52
59,643
81
0.54
Total interest-bearing deposits 747,837
211
0.11
735,486
214
0.12
Federal funds purchased, securities loaned or sold under agreements to repurchase and short-term borrowings 231,650
519
0.89
257,323
597
0.92
Trading account liabilities 73,139
272
1.48
77,443
342
1.75
Long-term debt ⁽⁷⁾
237,384
1,895
3.18
240,520
1,343
2.22
Total interest-bearing liabilities ⁽⁶⁾
1,290,010
2,897
0.89
1,310,772
2,496
0.76
Noninterest-bearing sources:

Noninterest-bearing deposits 438,214
423,745

Other liabilities 195,123
180,583

Shareholders’ equity 257,125
253,893

Total liabilities and shareholders’ equity $ 2,180,472
$ 2,168,993

Net interest spread 1.89 %

1.88 %
Impact of noninterest-bearing sources 0.27

0.22
Net interest income/yield on earning assets $ 10,032
2.16 %
$ 9,742
2.10 %




Table XII Selected Quarterly Financial Data (continued)

	2016 Quarters												2015 Quarters
(Dollars in millions)	Fourth			Third			Second			First			Fourth			Third			Second			First
Average balance sheet
Total loans and leases	$	908,396		$	900,594		$	899,670		$	892,984		$	886,156		$	877,429		$	876,178		$	876,169
Total assets	2,208,039			2,189,490			2,188,241			2,173,922			2,180,507			2,168,930			2,151,966			2,138,832
Total deposits	1,250,948			1,227,186			1,213,291			1,198,455			1,186,051			1,159,231			1,146,789			1,130,725
Long-term debt	220,587			227,269			233,061			233,654			237,384			240,520			242,230			240,127
Common shareholders’ equity	245,139			243,679			240,376			237,229			234,800			231,524			228,774			225,477
Total shareholders’ equity	270,360			268,899			265,354			260,423			257,074			253,798			251,048			245,863
Asset quality ⁽³⁾
Allowance for credit losses ⁽⁴⁾	$	11,999		$	12,459		$	12,587		$	12,696		$	12,880		$	13,318		$	13,656		$	14,213
Nonperforming loans, leases and foreclosed properties ⁽⁵⁾	8,084			8,737			8,799			9,281			9,836			10,336			11,565			12,101
Allowance for loan and lease losses as a percentage of total loans and leases outstanding ^{(5, 6)}	1.26		%	1.30		%	1.32		%	1.35		%	1.37		%	1.45		%	1.50		%	1.58		%
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases ^{(5, 6)}	149			140			142			136			130			129			122			122
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases, excluding the PCI loan portfolio ^{(5, 6)}	144			135			135			129			122			120			111			110
Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases ⁽⁷⁾	$	3,951		$	4,068		$	4,087		$	4,138		$	4,518		$	4,682		$	5,050		$	5,492
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)}	98		%	91		%	93		%	90		%	82		%	81		%	75		%	73		%
Net charge-offs ⁽⁸⁾	$	880		$	888		$	985		$	1,068		$	1,144		$	932		$	1,068		$	1,194
Annualized net charge-offs as a percentage of average loans and leases outstanding ^{(5, 8)}	0.39		%	0.40		%	0.44		%	0.48		%	0.52		%	0.43		%	0.49		%	0.56		%
Annualized net charge-offs as a percentage of average loans and leases outstanding, excluding the PCI loan portfolio ⁽⁵⁾	0.39			0.40			0.45			0.49			0.53			0.43			0.50			0.58
Annualized net charge-offs and PCI write-offs as a percentage of average loans and leases outstanding ⁽⁵⁾	0.42			0.43			0.48			0.53			0.55			0.49			0.63			0.70
Nonperforming loans and leases as a percentage of total loans and leases outstanding ^{(5, 6)}	0.85			0.93			0.94			0.99			1.05			1.12			1.23			1.30
Nonperforming loans, leases and foreclosed properties as a percentage of total loans, leases and foreclosed properties ^{(5, 6)}	0.89			0.97			0.98			1.04			1.10			1.18			1.32			1.40
Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs ^{(6, 8)}	3.28			3.31			2.99			2.81			2.70			3.42			3.05			2.82
Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs, excluding the PCI loan portfolio ⁽⁶⁾	3.16			3.18			2.85			2.67			2.52			3.18			2.79			2.55
Ratio of the allowance for loan and lease losses at period end to annualized net charge-offs and PCI write-offs ⁽⁶⁾	3.04			3.03			2.76			2.56			2.52			2.95			2.40			2.28
Capital ratios at period end ⁽⁹⁾
Risk-based capital:
Common equity tier 1 capital	11.0		%	11.0		%	10.6		%	10.3		%	10.2		%	11.6		%	11.2		%	11.1		%
Tier 1 capital	12.4			12.4			12.0			11.5			11.3			12.9			12.5			12.3
Total capital	14.3			14.2			13.9			13.4			13.2			15.8			15.5			15.3
Tier 1 leverage	8.9			9.1			8.9			8.7			8.6			8.5			8.5			8.4
Tangible equity ⁽²⁾	9.2			9.4			9.3			9.1			8.9			8.8			8.6			8.6
Tangible common equity ⁽²⁾	8.1			8.2			8.1			7.9			7.8			7.8			7.6			7.5

For footnotes see page 105.



106 Bank of America 2016




Table XIII Quarterly Average Balances and Interest Rates – FTE Basis

	Fourth Quarter 2016						Fourth Quarter 2015
(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	$	125,820	$	145	0.46	%	$	148,102	$	108	0.29	%
Time deposits placed and other short-term investments	9,745		39		1.57		10,120		41		1.61
Federal funds sold and securities borrowed or purchased under agreements to resell	218,200		315		0.57		207,585		214		0.41
Trading account assets	126,731		1,131		3.55		134,797		1,141		3.37
Debt securities ⁽¹⁾	430,719		2,273		2.11		399,338		2,470		2.48
Loans and leases ⁽²⁾:
Residential mortgage	191,003		1,621		3.39		189,650		1,644		3.47
Home equity	68,021		618		3.63		77,109		715		3.69
U.S. credit card	89,521		2,105		9.35		88,623		2,045		9.15
Non-U.S. credit card	9,051		192		8.43		10,155		258		10.07
Direct/Indirect consumer ⁽³⁾	93,527		598		2.54		87,858		530		2.40
Other consumer ⁽⁴⁾	2,462		25		3.99		2,039		11		2.09
Total consumer	453,585		5,159		4.53		455,434		5,203		4.55
U.S. commercial	283,491		2,119		2.97		261,727		1,790		2.72
Commercial real estate ⁽⁵⁾	57,540		453		3.13		56,126		408		2.89
Commercial lease financing	21,436		145		2.71		20,422		155		3.03
Non-U.S. commercial	92,344		589		2.54		92,447		530		2.27
Total commercial	454,811		3,306		2.89		430,722		2,883		2.66
Total loans and leases ⁽¹⁾	908,396		8,465		3.71		886,156		8,086		3.63
Other earning assets	64,501		731		4.52		61,073		748		4.87
Total earning assets ⁽⁶⁾	1,884,112		13,099		2.77		1,847,171		12,808		2.76
Cash and due from banks ⁽¹⁾	27,452						29,503
Other assets, less allowance for loan and lease losses ⁽¹⁾	296,475						303,833
Total assets	$	2,208,039					$	2,180,507
Interest-bearing liabilities
U.S. interest-bearing deposits:
Savings	$	50,132	$	1	0.01	%	$	46,094	$	1	0.01	%
NOW and money market deposit accounts	604,155		78		0.05		558,441		68		0.05
Consumer CDs and IRAs	47,625		32		0.27		51,107		37		0.29
Negotiable CDs, public funds and other deposits	34,904		53		0.60		30,546		25		0.32
Total U.S. interest-bearing deposits	736,816		164		0.09		686,188		131		0.08
Non-U.S. interest-bearing deposits:
Banks located in non-U.S. countries	2,918		4		0.48		3,997		7		0.69
Governments and official institutions	1,346		2		0.74		1,687		2		0.37
Time, savings and other	60,123		109		0.73		55,965		71		0.51
Total non-U.S. interest-bearing deposits	64,387		115		0.71		61,649		80		0.52
Total interest-bearing deposits	801,203		279		0.14		747,837		211		0.11
Federal funds purchased, securities loaned or sold under agreements to repurchase and short-term borrowings	207,679		542		1.04		231,650		519		0.89
Trading account liabilities	71,598		240		1.33		73,139		272		1.48
Long-term debt ⁽⁷⁾	220,587		1,512		2.74		237,384		1,895		3.18
Total interest-bearing liabilities ⁽⁶⁾	1,301,067		2,573		0.79		1,290,010		2,897		0.89
Noninterest-bearing sources:
Noninterest-bearing deposits	449,745						438,214
Other liabilities	186,867						195,209
Shareholders’ equity	270,360						257,074
Total liabilities and shareholders’ equity	$	2,208,039					$	2,180,507
Net interest spread					1.98	%					1.87	%
Impact of noninterest-bearing sources					0.25						0.27
Net interest income/yield on earning assets			$	10,526	2.23	%			$	9,911	2.14	%

⁽¹⁾

~~Yields~~Includes assets of the Corporation's non-U.S. consumer credit card business, which are included in assets of business held for sale on ~~debt securities excluding~~ the ~~impact of market-related adjustments were~~ ~~2.47 percent~~, ~~2.50 percent~~, ~~2.48 percent~~ ~~and~~ ~~2.54 percent~~ ~~in the fourth, third, second and first quarters of~~ ~~2015, respectively, and~~ ~~2.53 percent~~ ~~in the fourth quarter of~~ ~~2014~~. Yields on debt securities excluding the impact of market-related adjustments are a non-GAAP financial measure. The Corporation believes the use of this non-GAAP financial measure provides additional clarity in assessing its results.

Consolidated Balance Sheet at December 31, 2016.


⁽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 ~~remaining~~estimated life of the loan.


⁽³⁾	Includes non-U.S. consumer loans of $~~4.0~~3.1 billion ~~for each of the quarters of~~ ~~2015~~ and $~~4.2~~4.0 billion in the fourth quarter of ~~2014~~2016 and 2015.

⁽⁴⁾

Includes consumer finance loans of $~~578 million~~, ~~$605 million~~, ~~$632~~478 million and $~~661~~578 million ~~in the fourth, third, second and first quarters~~; consumer leases of ~~2015~~$1.8 billion~~, respectively,~~ and $~~907~~1.3 billion, and consumer overdrafts of $177 million and $174 million in the fourth quarter of ~~2014; consumer leases of~~ ~~$1.3 billion~~, ~~$1.2 billion~~, ~~$1.1 billion~~2016 and ~~$1.0 billion~~ ~~in the fourth, third, second and first quarters of~~ 2015, ~~respectively, and~~ ~~$965 million~~ ~~in the fourth quarter of~~ ~~2014; and consumer overdrafts of~~ ~~$174 million~~, ~~$177 million~~, ~~$131 million~~ ~~and~~ ~~$141 million~~ ~~in the fourth, third, second and first quarters of~~ ~~2015, respectively, and~~ ~~$156 million~~ ~~in the fourth quarter of~~ ~~2014~~.respectively.

⁽⁵⁾

Includes U.S. commercial real estate loans of $~~52.8 billion~~, ~~$49.8 billion~~, ~~$47.6~~54.3 billion and $~~45.6~~52.8 billion ~~in the fourth, third, second~~, and ~~first quarters~~non-U.S. commercial real estate loans of ~~2015~~$3.2 billion~~, respectively,~~ and $~~45.1~~3.3 billion in the fourth quarter of ~~2014; and non-U.S. commercial real estate loans of~~ ~~$3.3 billion~~, ~~$3.8 billion~~, ~~$2.8 billion~~2016 and ~~$2.7 billion~~ ~~in the fourth, third, second and first quarters of~~ 2015, ~~respectively, and~~ ~~$1.9 billion~~ ~~in the fourth quarter of~~ ~~2014~~.respectively.

⁽⁶⁾

Interest income includes the impact of interest rate risk management contracts, which decreased interest income on the underlying assets by $~~32 million~~, ~~$8 million~~, $821 million and $~~11 million~~ ~~in the fourth, third, second and first quarters of~~ ~~2015, respectively, and~~ ~~$10~~32 million in the fourth quarter of ~~2014~~2016 and 2015. Interest expense includes the impact of interest rate risk management contracts, which decreased interest expense on the underlying liabilities by $~~681 million~~, ~~$590 million~~, ~~$509~~332 million and $~~582 million~~ ~~in the fourth, third, second and first quarters of~~ ~~2015, respectively, and~~ ~~$659~~681 million in the fourth quarter of ~~2014~~2016 and 2015. For additional information, see Interest Rate Risk Management for ~~Non-trading Activities~~the Banking Book on page 9784.


⁽⁷⁾	The yield on long-term debt excluding the $612 million adjustment onrelated to the redemption of certain trust preferred securities was 2.15 percent for the fourth quarter of 2015. ~~For more information, see~~ ~~Note 11 – Long-term Debtto the Consolidated Financial Statements~~. The yield on long-term debt excluding the adjustment is a non-GAAP financial measure.

~~120~~ ~~Bank of America 2015~~

Table XI Quarterly Average Balances and Interest Rates – FTE Basis (continued)

Second Quarter 2015 First Quarter 2015 Fourth Quarter 2014
(Dollars in millions)
Average
Balance

Interest
Income/
Expense

Yield/
Rate

Average
Balance

Interest
Income/
Expense

Yield/
Rate

Average
Balance

Interest
Income/
Expense

Yield/
Rate
Earning assets

Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks $ 125,762
$ 81
0.26 % $ 126,189
$ 84
0.27 % $ 109,042
$ 74
0.27 %
Time deposits placed and other short-term investments 8,183
34
1.64
8,379
33
1.61
9,339
41
1.73
Federal funds sold and securities borrowed or purchased under agreements to resell 214,326
268
0.50
213,931
231
0.44
217,982
237
0.43
Trading account assets 137,137
1,114
3.25
138,946
1,122
3.26
144,147
1,142
3.15
Debt securities ⁽¹⁾
386,357
3,082
3.21
383,120
1,898
2.01
371,014
1,687
1.82
Loans and leases ⁽²⁾:

Residential mortgage 207,356
1,782
3.44
215,030
1,851
3.45
223,132
1,946
3.49
Home equity 82,640
769
3.73
84,915
770
3.66
86,825
808
3.70
U.S. credit card 87,460
1,980
9.08
88,695
2,027
9.27
89,381
2,087
9.26
Non-U.S. credit card 10,012
264
10.56
10,002
262
10.64
10,950
280
10.14
Direct/Indirect consumer ⁽³⁾
83,698
504
2.42
80,713
491
2.47
83,121
522
2.49
Other consumer ⁽⁴⁾
1,885
15
3.14
1,847
15
3.29
2,031
85
16.75
Total consumer 473,051
5,314
4.50
481,202
5,416
4.54
495,440
5,728
4.60
U.S. commercial 244,540
1,705
2.80
234,907
1,645
2.84
231,215
1,648
2.83
Commercial real estate ⁽⁵⁾
50,478
382
3.03
48,234
347
2.92
46,996
360
3.04
Commercial lease financing 24,723
180
2.92
24,495
216
3.53
24,238
199
3.28
Non-U.S. commercial 88,623
479
2.17
83,555
485
2.35
86,844
527
2.41
Total commercial 408,364
2,746
2.70
391,191
2,693
2.79
389,293
2,734
2.79
Total loans and leases 881,415
8,060
3.67
872,393
8,109
3.75
884,733
8,462
3.80
Other earning assets 62,712
721
4.60
61,441
705
4.66
65,864
739
4.46
Total earning assets ⁽⁶⁾
1,815,892
13,360
2.95
1,804,399
12,182
2.73
1,802,121
12,382
2.73
Cash and due from banks 30,751

27,695

27,590

Other assets, less allowance for loan and lease losses 305,323

306,480

307,840

Total assets $ 2,151,966

$ 2,138,574

$ 2,137,551

Interest-bearing liabilities

U.S. interest-bearing deposits:

Savings $ 47,381
$ 2
0.02 % $ 46,224
$ 2
0.02 % $ 45,621
$ 1
0.01 %
NOW and money market deposit accounts 536,201
71
0.05
531,827
67
0.05
515,995
76
0.06
Consumer CDs and IRAs 55,832
42
0.30
58,704
45
0.31
61,880
52
0.33
Negotiable CDs, public funds and other deposits 29,904
22
0.30
28,796
22
0.31
30,950
22
0.29
Total U.S. interest-bearing deposits 669,318
137
0.08
665,551
136
0.08
654,446
151
0.09
Non-U.S. interest-bearing deposits:

Banks located in non-U.S. countries 5,162
9
0.67
4,544
8
0.74
5,415
9
0.63
Governments and official institutions 1,239
1
0.38
1,382
1
0.21
1,647
1
0.18
Time, savings and other 55,030
69
0.51
54,276
75
0.55
57,029
76
0.53
Total non-U.S. interest-bearing deposits 61,431
79
0.52
60,202
84
0.56
64,091
86
0.53
Total interest-bearing deposits 730,749
216
0.12
725,753
220
0.12
718,537
237
0.13
Federal funds purchased, securities loaned or sold under agreements to repurchase and short-term borrowings 252,088
686
1.09
244,134
585
0.97
251,432
615
0.97
Trading account liabilities 77,772
335
1.73
78,787
394
2.03
78,174
350
1.78
Long-term debt ⁽⁷⁾
242,230
1,407
2.33
240,127
1,313
2.20
249,221
1,315
2.10
Total interest-bearing liabilities ⁽⁶⁾
1,302,839
2,644
0.81
1,288,801
2,512
0.79
1,297,364
2,517
0.77
Noninterest-bearing sources:

Noninterest-bearing deposits 416,040

404,973

403,977

Other liabilities 182,033

199,056

192,756

Shareholders’ equity 251,054

245,744

243,454

Total liabilities and shareholders’ equity $ 2,151,966

$ 2,138,574

$ 2,137,551

Net interest spread

2.14 %

1.94 %

1.96 %
Impact of noninterest-bearing sources

0.23

0.23

0.22
Net interest income/yield on earning assets
$ 10,716
2.37 %
$ 9,670
2.17 %
$ 9,865
2.18 %

~~For footnotes see page~~ ~~120~~.



		Bank of America ~~2015~~2016 ~~121~~107



Table XII Quarterly Supplemental Financial Data
Table XIV Quarterly Supplemental Financial Data																									Table XIV Quarterly Supplemental Financial Data

	2015 Quarters												2014 Quarters												2016 Quarters												2015 Quarters
(Dollars in millions, except per share information)	Fourth			Third			Second			First			Fourth			Third			Second			First			Fourth			Third			Second			First			Fourth			Third			Second			First
Fully taxable-equivalent basis data ⁽¹⁾
Net interest income	$	10,032		$	9,742		$	10,716		$	9,670		$	9,865		$	10,444		$	10,226		$	10,286		$	10,526		$	10,429		$	10,341		$	10,700		$	9,911		$	10,127		$	9,739		$	10,070
Total revenue, net of interest expense ⁽²⁾	19,759			20,612			22,044			21,001			18,955			21,434			21,960			22,767			20,224			21,863			21,509			21,005			19,807			21,219			21,262			21,566
Net interest yield	2.16		%	2.10		%	2.37		%	2.17		%	2.18		%	2.29		%	2.22		%	2.29		%	2.23		%	2.23		%	2.23		%	2.33		%	2.14		%	2.19		%	2.16		%	2.26		%
Efficiency ratio ⁽²⁾	70.20			66.99			62.69			74.73			74.90			93.97			84.43			97.68			65.08			61.66			62.73			70.54			70.73			65.70			65.65			73.39

⁽¹⁾

FTE basis is a non-GAAP financial measure. FTE basis is a performance measure used by management in operating the business that management believes provides investors with a more accurate picture of the interest margin for comparative purposes. The Corporation believes that this presentation allows for comparison of amounts from both taxable and tax-exempt sources and is consistent with industry practices. For more information on these performance measures and ratios, see Supplemental Financial Data on page 3027 and for corresponding reconciliations to GAAP financial measures, see Statistical Table ~~XV.~~XVI.


⁽²⁾	~~The results for 2015 were impacted by the early adoption of new accounting guidance on recognition and measurement of financial instruments. For additional information, see~~ ~~Executive Summary – Recent Events~~ ~~on page~~ 22.



~~122~~ ~~Bank of America 2015~~



Table XIII Five-year Reconciliations to GAAP Financial Measures ⁽¹⁾
Table XV Five-year Reconciliations to GAAP Financial Measures ⁽¹⁾																Table XV Five-year Reconciliations to GAAP Financial Measures ⁽¹⁾

(Dollars in millions, shares in thousands)	2015			2014			2013			2012			2011			2016			2015			2014			2013			2012
Reconciliation of net interest income to net interest income on a fully taxable-equivalent basis
Net interest income	$	39,251		$	39,952		$	42,265		$	40,656		$	44,616		$	41,096		$	38,958		$	40,779		$	40,719		$	40,135
Fully taxable-equivalent adjustment	909			869			859			901			972			900			889			851			859			901
Net interest income on a fully taxable-equivalent basis	$	40,160		$	40,821		$	43,124		$	41,557		$	45,588		$	41,996		$	39,847		$	41,630		$	41,578		$	41,036
Reconciliation of total revenue, net of interest expense to total revenue, net of interest expense on a fully taxable-equivalent basis
Total revenue, net of interest expense	$	82,507		$	84,247		$	88,942		$	83,334		$	93,454		$	83,701		$	82,965		$	85,894		$	87,502		$	82,798
Fully taxable-equivalent adjustment	909			869			859			901			972			900			889			851			859			901
Total revenue, net of interest expense on a fully taxable-equivalent basis	$	83,416		$	85,116		$	89,801		$	84,235		$	94,426		$	84,601		$	83,854		$	86,745		$	88,361		$	83,699
Reconciliation of total noninterest expense to total noninterest expense, excluding goodwill impairment charges
Total noninterest expense	$	57,192		$	75,117		$	69,214		$	72,093		$	80,274
Goodwill impairment charges	—			—			—			—			(3,184		)
Total noninterest expense, excluding goodwill impairment charges	$	57,192		$	75,117		$	69,214		$	72,093		$	77,090
Reconciliation of income tax expense (benefit) to income tax expense (benefit) on a fully taxable-equivalent basis
Income tax expense (benefit)	$	6,266		$	2,022		$	4,741		$	(1,116	)	$	(1,676	)	$	7,247		$	6,234		$	2,443		$	4,194		$	(1,320	)
Fully taxable-equivalent adjustment	909			869			859			901			972			900			889			851			859			901
Income tax expense (benefit) on a fully taxable-equivalent basis	$	7,175		$	2,891		$	5,600		$	(215	)	$	(704	)	$	8,147		$	7,123		$	3,294		$	5,053		$	(419	)
Reconciliation of net income to net income, excluding goodwill impairment charges
Net income	$	15,888		$	4,833		$	11,431		$	4,188		$	1,446
Goodwill impairment charges	—			—			—			—			3,184
Net income, excluding goodwill impairment charges	$	15,888		$	4,833		$	11,431		$	4,188		$	4,630
Reconciliation of net income applicable to common shareholders to net income applicable to common shareholders, excluding goodwill impairment charges
Net income applicable to common shareholders	$	14,405		$	3,789		$	10,082		$	2,760		$	85
Goodwill impairment charges	—			—			—			—			3,184
Net income applicable to common shareholders, excluding goodwill impairment charges	$	14,405		$	3,789		$	10,082		$	2,760		$	3,269
Reconciliation of average common shareholders’ equity to average tangible common shareholders’ equity
Common shareholders’ equity	$	230,182		$	223,072		$	218,468		$	216,996		$	211,709		$	241,621		$	230,173		$	222,907		$	218,340		$	216,999
Goodwill	(69,772		)	(69,809		)	(69,910		)	(69,974		)	(72,334		)	(69,750		)	(69,772		)	(69,809		)	(69,910		)	(69,974		)
Intangible assets (excluding MSRs)	(4,201		)	(5,109		)	(6,132		)	(7,366		)	(9,180		)	(3,382		)	(4,201		)	(5,109		)	(6,132		)	(7,366		)
Related deferred tax liabilities	1,852			2,090			2,328			2,593			2,898			1,644			1,852			2,090			2,328			2,593
Tangible common shareholders’ equity	$	158,061		$	150,244		$	144,754		$	142,249		$	133,093		$	170,133		$	158,052		$	150,079		$	144,626		$	142,252
Reconciliation of average shareholders’ equity to average tangible shareholders’ equity
Shareholders’ equity	$	251,990		$	238,482		$	233,951		$	235,677		$	229,095		$	266,277		$	251,981		$	238,317		$	233,819		$	235,681
Goodwill	(69,772		)	(69,809		)	(69,910		)	(69,974		)	(72,334		)	(69,750		)	(69,772		)	(69,809		)	(69,910		)	(69,974		)
Intangible assets (excluding MSRs)	(4,201		)	(5,109		)	(6,132		)	(7,366		)	(9,180		)	(3,382		)	(4,201		)	(5,109		)	(6,132		)	(7,366		)
Related deferred tax liabilities	1,852			2,090			2,328			2,593			2,898			1,644			1,852			2,090			2,328			2,593
Tangible shareholders’ equity	$	179,869		$	165,654		$	160,237		$	160,930		$	150,479		$	194,789		$	179,860		$	165,489		$	160,105		$	160,934
Reconciliation of year-end common shareholders’ equity to year-end tangible common shareholders’ equity
Common shareholders’ equity	$	233,932		$	224,162		$	219,333		$	218,188		$	211,704		$	241,620		$	233,903		$	224,167		$	219,124		$	218,194
Goodwill	(69,761		)	(69,777		)	(69,844		)	(69,976		)	(69,967		)	(69,744		)	(69,761		)	(69,777		)	(69,844		)	(69,976		)
Intangible assets (excluding MSRs)	(3,768		)	(4,612		)	(5,574		)	(6,684		)	(8,021		)	(2,989		)	(3,768		)	(4,612		)	(5,574		)	(6,684		)
Related deferred tax liabilities	1,716			1,960			2,166			2,428			2,702			1,545			1,716			1,960			2,166			2,428
Tangible common shareholders’ equity	$	162,119		$	151,733		$	146,081		$	143,956		$	136,418		$	170,432		$	162,090		$	151,738		$	145,872		$	143,962
Reconciliation of year-end shareholders’ equity to year-end tangible shareholders’ equity
Shareholders’ equity	$	256,205		$	243,471		$	232,685		$	236,956		$	230,101		$	266,840		$	256,176		$	243,476		$	232,475		$	236,962
Goodwill	(69,761		)	(69,777		)	(69,844		)	(69,976		)	(69,967		)	(69,744		)	(69,761		)	(69,777		)	(69,844		)	(69,976		)
Intangible assets (excluding MSRs)	(3,768		)	(4,612		)	(5,574		)	(6,684		)	(8,021		)	(2,989		)	(3,768		)	(4,612		)	(5,574		)	(6,684		)
Related deferred tax liabilities	1,716			1,960			2,166			2,428			2,702			1,545			1,716			1,960			2,166			2,428
Tangible shareholders’ equity	$	184,392		$	171,042		$	159,433		$	162,724		$	154,815		$	195,652		$	184,363		$	171,047		$	159,223		$	162,730
Reconciliation of year-end assets to year-end tangible assets
Assets	$	2,144,316		$	2,104,534		$	2,102,273		$	2,209,974		$	2,129,046		$	2,187,702		$	2,144,287		$	2,104,539		$	2,102,064		$	2,209,981
Goodwill	(69,761		)	(69,777		)	(69,844		)	(69,976		)	(69,967		)	(69,744		)	(69,761		)	(69,777		)	(69,844		)	(69,976		)
Intangible assets (excluding MSRs)	(3,768		)	(4,612		)	(5,574		)	(6,684		)	(8,021		)	(2,989		)	(3,768		)	(4,612		)	(5,574		)	(6,684		)
Related deferred tax liabilities	1,716			1,960			2,166			2,428			2,702			1,545			1,716			1,960			2,166			2,428
Tangible assets	$	2,072,503		$	2,032,105		$	2,029,021		$	2,135,742		$	2,053,760		$	2,116,514		$	2,072,474		$	2,032,110		$	2,028,812		$	2,135,749

⁽¹⁾

Presents reconciliations of non-GAAP financial measures to GAAP financial measures. We believe the use of these non-GAAP financial measures provides additional clarity in assessing the results of the Corporation. Other companies may define or calculate these measures differently. For more information on non-GAAP financial measures and ratios we use in assessing the results of the Corporation, see Supplemental Financial Data on page 3027.



		~~Bank of America 2015123~~

Table XIV Two-year Reconciliations to GAAP Financial Measures ^{(1, 2)}

(Dollars in millions) 2015 2014
Consumer Banking

Reported net income $ 6,739
$ 6,436
Adjustment related to intangibles ⁽³⁾
4
4
Adjusted net income $ 6,743
$ 6,440

Average allocated equity ⁽⁴⁾
$ 59,319
$ 60,398
Adjustment related to goodwill and a percentage of intangibles (30,319 ) (30,398 )
Average allocated capital $ 29,000
$ 30,000

Deposits
Reported net income $ 2,685
$ 2,415
Adjustment related to intangibles ⁽³⁾
—
—
Adjusted net income $ 2,685
$ 2,415

Average allocated equity ⁽⁴⁾
$ 30,420
$ 29,432
Adjustment related to goodwill and a percentage of intangibles (18,420 ) (18,432 )
Average allocated capital $ 12,000
$ 11,000

Consumer Lending
Reported net income $ 4,054
$ 4,021
Adjustment related to intangibles ⁽³⁾
4
4
Adjusted net income $ 4,058
$ 4,025

Average allocated equity ⁽⁴⁾
$ 28,900
$ 30,966
Adjustment related to goodwill and a percentage of intangibles (11,900 ) (11,966 )
Average allocated capital $ 17,000
$ 19,000

Global Wealth & Investment Management
Reported net income $ 2,609
$ 2,969
Adjustment related to intangibles ⁽³⁾
11
13
Adjusted net income $ 2,620
$ 2,982

Average allocated equity ⁽⁴⁾
$ 22,130
$ 22,214
Adjustment related to goodwill and a percentage of intangibles (10,130 ) (10,214 )
Average allocated capital $ 12,000
$ 12,000

Global Banking
Reported net income $ 5,273
$ 5,769
Adjustment related to intangibles ⁽³⁾
1
2
Adjusted net income $ 5,274
$ 5,771

Average allocated equity ⁽⁴⁾
$ 58,935
$ 57,429
Adjustment related to goodwill and a percentage of intangibles (23,935 ) (23,929 )
Average allocated capital $ 35,000
$ 33,500

Global Markets
Reported net income $ 2,496
$ 2,705
Adjustment related to intangibles ⁽³⁾
10
9
Adjusted net income $ 2,506
$ 2,714

Average allocated equity ⁽⁴⁾
$ 40,392
$ 39,394
Adjustment related to goodwill and a percentage of intangibles (5,392 ) (5,394 )
Average allocated capital $ 35,000
$ 34,000

⁽¹⁾

Presents reconciliations of non-GAAP financial measures to GAAP financial measures. We believe the use of these non-GAAP financial measures provides additional clarity in assessing the results of the Corporation and our segments. Other companies may define or calculate these measures differently. For more information on non-GAAP financial measures and ratios we use in assessing the results of the Corporation, see ~~Supplemental Financial Data~~ ~~on page~~ 30.


⁽²⁾	~~There are no adjustments to reported net income (loss) or average allocated equity for~~ ~~LAS~~.


⁽³⁾	~~Represents cost of funds, earnings credits and certain expenses related to intangibles.~~


⁽⁴⁾	Average allocated equity is comprised of average allocated capital plus capital for the portion of goodwill and intangibles specifically assigned to the business segment. For more information on allocated capital, see ~~Business Segment Operations~~ ~~on page~~ 32 ~~and~~ ~~Note 8 – Goodwill and Intangible Assetsto the Consolidated Financial Statements~~.



~~124~~108 Bank of America ~~2015~~2016



Table XV Quarterly Reconciliations to GAAP Financial Measures ⁽¹⁾
Table XVI Quarterly Reconciliations to GAAP Financial Measures ⁽¹⁾																									Table XVI Quarterly Reconciliations to GAAP Financial Measures ⁽¹⁾

	2015 Quarters												2014 Quarters												2016 Quarters												2015 Quarters
(Dollars in millions)	Fourth			Third			Second			First			Fourth			Third			Second			First			Fourth			Third			Second			First			Fourth			Third			Second			First
Reconciliation of net interest income to net interest income on a fully taxable-equivalent basis
Net interest income	$	9,801		$	9,511		$	10,488		$	9,451		$	9,635		$	10,219		$	10,013		$	10,085		$	10,292		$	10,201		$	10,118		$	10,485		$	9,686		$	9,900		$	9,517		$	9,855
Fully taxable-equivalent adjustment	231			231			228			219			230			225			213			201			234			228			223			215			225			227			222			215
Net interest income on a fully taxable-equivalent basis	$	10,032		$	9,742		$	10,716		$	9,670		$	9,865		$	10,444		$	10,226		$	10,286		$	10,526		$	10,429		$	10,341		$	10,700		$	9,911		$	10,127		$	9,739		$	10,070
Reconciliation of total revenue, net of interest expense to total revenue, net of interest expense on a fully taxable-equivalent basis
Total revenue, net of interest expense⁽²⁾	$	19,528		$	20,381		$	21,816		$	20,782		$	18,725		$	21,209		$	21,747		$	22,566		$	19,990		$	21,635		$	21,286		$	20,790		$	19,582		$	20,992		$	21,040		$	21,351
Fully taxable-equivalent adjustment	231			231			228			219			230			225			213			201			234			228			223			215			225			227			222			215
Total revenue, net of interest expense on a fully taxable-equivalent basis	$	19,759		$	20,612		$	22,044		$	21,001		$	18,955		$	21,434		$	21,960		$	22,767		$	20,224		$	21,863		$	21,509		$	21,005		$	19,807		$	21,219		$	21,262		$	21,566
Reconciliation of income tax expense (benefit) to income tax expense (benefit) on a fully taxable-equivalent basis
Income tax expense (benefit)⁽²⁾	$	1,511		$	1,446		$	2,084		$	1,225		$	1,260		$	663		$	504		$	(405	)
Reconciliation of income tax expense to income tax expense on a fully taxable-equivalent basis
Income tax expense																									$	1,359		$	2,349		$	2,034		$	1,505		$	1,478		$	1,628		$	1,736		$	1,392
Fully taxable-equivalent adjustment	231			231			228			219			230			225			213			201			234			228			223			215			225			227			222			215
Income tax expense (benefit) on a fully taxable-equivalent basis	$	1,742		$	1,677		$	2,312		$	1,444		$	1,490		$	888		$	717		$	(204	)
Income tax expense on a fully taxable-equivalent basis																									$	1,593		$	2,577		$	2,257		$	1,720		$	1,703		$	1,855		$	1,958		$	1,607
Reconciliation of average common shareholders’ equity to average tangible common shareholders’ equity
Common shareholders’ equity	$	234,851		$	231,620		$	228,780		$	225,357		$	224,479		$	222,374		$	222,221		$	223,207		$	245,139		$	243,679		$	240,376		$	237,229		$	234,800		$	231,524		$	228,774		$	225,477
Goodwill	(69,761		)	(69,774		)	(69,775		)	(69,776		)	(69,782		)	(69,792		)	(69,822		)	(69,842		)	(69,745		)	(69,744		)	(69,751		)	(69,761		)	(69,761		)	(69,774		)	(69,775		)	(69,776		)
Intangible assets (excluding MSRs)	(3,888		)	(4,099		)	(4,307		)	(4,518		)	(4,747		)	(4,992		)	(5,235		)	(5,474		)	(3,091		)	(3,276		)	(3,480		)	(3,687		)	(3,888		)	(4,099		)	(4,307		)	(4,518		)
Related deferred tax liabilities	1,753			1,811			1,885			1,959			2,019			2,077			2,100			2,165			1,580			1,628			1,662			1,707			1,753			1,811			1,885			1,959
Tangible common shareholders’ equity	$	162,955		$	159,558		$	156,583		$	153,022		$	151,969		$	149,667		$	149,264		$	150,056		$	173,883		$	172,287		$	168,807		$	165,488		$	162,904		$	159,462		$	156,577		$	153,142
Reconciliation of average shareholders’ equity to average tangible shareholders’ equity
Shareholders’ equity	$	257,125		$	253,893		$	251,054		$	245,744		$	243,454		$	238,040		$	235,803		$	236,559		$	270,360		$	268,899		$	265,354		$	260,423		$	257,074		$	253,798		$	251,048		$	245,863
Goodwill	(69,761		)	(69,774		)	(69,775		)	(69,776		)	(69,782		)	(69,792		)	(69,822		)	(69,842		)	(69,745		)	(69,744		)	(69,751		)	(69,761		)	(69,761		)	(69,774		)	(69,775		)	(69,776		)
Intangible assets (excluding MSRs)	(3,888		)	(4,099		)	(4,307		)	(4,518		)	(4,747		)	(4,992		)	(5,235		)	(5,474		)	(3,091		)	(3,276		)	(3,480		)	(3,687		)	(3,888		)	(4,099		)	(4,307		)	(4,518		)
Related deferred tax liabilities	1,753			1,811			1,885			1,959			2,019			2,077			2,100			2,165			1,580			1,628			1,662			1,707			1,753			1,811			1,885			1,959
Tangible shareholders’ equity	$	185,229		$	181,831		$	178,857		$	173,409		$	170,944		$	165,333		$	162,846		$	163,408		$	199,104		$	197,507		$	193,785		$	188,682		$	185,178		$	181,736		$	178,851		$	173,528
Reconciliation of period-end common shareholders’ equity to period-end tangible common shareholders’ equity
Common shareholders’ equity	$	233,932		$	233,632		$	229,386		$	227,915		$	224,162		$	220,768		$	222,565		$	218,536		$	241,620		$	244,863		$	242,206		$	238,662		$	233,903		$	233,588		$	229,251		$	228,011
Goodwill	(69,761		)	(69,761		)	(69,775		)	(69,776		)	(69,777		)	(69,784		)	(69,810		)	(69,842		)	(69,744		)	(69,744		)	(69,744		)	(69,761		)	(69,761		)	(69,761		)	(69,775		)	(69,776		)
Intangible assets (excluding MSRs)	(3,768		)	(3,973		)	(4,188		)	(4,391		)	(4,612		)	(4,849		)	(5,099		)	(5,337		)	(2,989		)	(3,168		)	(3,352		)	(3,578		)	(3,768		)	(3,973		)	(4,188		)	(4,391		)
Related deferred tax liabilities	1,716			1,762			1,813			1,900			1,960			2,019			2,078			2,100			1,545			1,588			1,637			1,667			1,716			1,762			1,813			1,900
Tangible common shareholders’ equity	$	162,119		$	161,660		$	157,236		$	155,648		$	151,733		$	148,154		$	149,734		$	145,457		$	170,432		$	173,539		$	170,747		$	166,990		$	162,090		$	161,616		$	157,101		$	155,744
Reconciliation of period-end shareholders’ equity to period-end tangible shareholders’ equity
Shareholders’ equity	$	256,205		$	255,905		$	251,659		$	250,188		$	243,471		$	238,681		$	237,411		$	231,888		$	266,840		$	270,083		$	267,426		$	263,004		$	256,176		$	255,861		$	251,524		$	250,284
Goodwill	(69,761		)	(69,761		)	(69,775		)	(69,776		)	(69,777		)	(69,784		)	(69,810		)	(69,842		)	(69,744		)	(69,744		)	(69,744		)	(69,761		)	(69,761		)	(69,761		)	(69,775		)	(69,776		)
Intangible assets (excluding MSRs)	(3,768		)	(3,973		)	(4,188		)	(4,391		)	(4,612		)	(4,849		)	(5,099		)	(5,337		)	(2,989		)	(3,168		)	(3,352		)	(3,578		)	(3,768		)	(3,973		)	(4,188		)	(4,391		)
Related deferred tax liabilities	1,716			1,762			1,813			1,900			1,960			2,019			2,078			2,100			1,545			1,588			1,637			1,667			1,716			1,762			1,813			1,900
Tangible shareholders’ equity	$	184,392		$	183,933		$	179,509		$	177,921		$	171,042		$	166,067		$	164,580		$	158,809		$	195,652		$	198,759		$	195,967		$	191,332		$	184,363		$	183,889		$	179,374		$	178,017
Reconciliation of period-end assets to period-end tangible assets
Assets	$	2,144,316		$	2,153,006		$	2,149,034		$	2,143,545		$	2,104,534		$	2,123,613		$	2,170,557		$	2,149,851		$	2,187,702		$	2,195,314		$	2,186,966		$	2,185,726		$	2,144,287		$	2,152,962		$	2,148,899		$	2,143,644
Goodwill	(69,761		)	(69,761		)	(69,775		)	(69,776		)	(69,777		)	(69,784		)	(69,810		)	(69,842		)	(69,744		)	(69,744		)	(69,744		)	(69,761		)	(69,761		)	(69,761		)	(69,775		)	(69,776		)
Intangible assets (excluding MSRs)	(3,768		)	(3,973		)	(4,188		)	(4,391		)	(4,612		)	(4,849		)	(5,099		)	(5,337		)	(2,989		)	(3,168		)	(3,352		)	(3,578		)	(3,768		)	(3,973		)	(4,188		)	(4,391		)
Related deferred tax liabilities	1,716			1,762			1,813			1,900			1,960			2,019			2,078			2,100			1,545			1,588			1,637			1,667			1,716			1,762			1,813			1,900
Tangible assets	$	2,072,503		$	2,081,034		$	2,076,884		$	2,071,278		$	2,032,105		$	2,050,999		$	2,097,726		$	2,076,772		$	2,116,514		$	2,123,990		$	2,115,507		$	2,114,054		$	2,072,474		$	2,080,990		$	2,076,749		$	2,071,377

⁽¹⁾


⁽²⁾	~~The results for 2015 were impacted by the early adoption of new accounting guidance on recognition and measurement of financial instruments. For additional information, see~~ ~~Executive Summary – Recent Events~~ ~~on page~~ 2227.



		Bank of America ~~2015~~2016 ~~125~~109

Glossary

Alt-A Mortgage –A type of U.S. mortgage that ~~for various reasons,~~ is considered riskier than A-paper, or ~~“prime,”~~"prime," and less risky than ~~“subprime,”~~"subprime," the riskiest category. Alt-A interest rates ~~which are determined by credit risk,~~ therefore tend to be between those of prime and subprime consumer real estate loans. Typically, Alt-A mortgages are characterized by borrowers with less than full documentation, lower credit scores and higher LTVs.

Assets in Custody – Consist largely of custodial and non-discretionary trust assets excluding brokerage assets administered for clients. Trust assets encompass a broad range of asset types including real estate, private company ownership interest, personal property and investments.

Assets Under Management (AUM) – The total market value of assets under the investment advisory and/or discretion of GWIM which generate asset management fees based on a percentage of the assets’ market values. AUM reflects assets that are generally managed for institutional, high net worth and retail clients, and are distributed through various investment products including mutual funds, other commingled vehicles and separate accounts. ~~AUM is classified in two categories, Liquidity AUM~~

Banking Book – All on- and ~~Long-term AUM. Liquidity AUM~~off-balance sheet financial instruments of the Corporation except for those positions that are ~~assets under advisory and discretion of~~ ~~GWIM~~ in which the investment strategy seeks current income, while maintaining liquidity and capital preservation. The duration of these strategies is primarily less than one year. Long-term AUM are assets under advisory and/or discretion of ~~GWIM~~ ~~in which the duration of investment strategy is longer than one year.~~held for trading purposes.

Carrying Value (with respect to loans) – The amount at which a loan is recorded on the balance sheet. For loans recorded at amortized cost, carrying value is the unpaid principal balance net of unamortized deferred loan origination fees and costs and unamortized purchase ~~premium~~premiums or ~~discount. For loans that are or have been on nonaccrual status, the carrying value is also reduced by any~~discounts, less net charge-offs ~~that have been recorded~~ and ~~the amount of~~ interest payments applied as a reduction of principal under the cost recovery ~~method.~~method for loans that have been on nonaccrual status. For PCI loans, the carrying value equals fair value upon acquisition adjusted for subsequent cash collections and yield accreted to date. For credit card loans, the carrying value also includes interest that has been billed to the customer. For loans classified as held-for-sale, carrying value is the lower of carrying value as described in the sentences above, or fair value. For loans for which we have elected the fair value option, the carrying value is fair value.

Client Brokerage Assets – ~~Include client~~Client assets which are held in brokerage ~~accounts. This includes~~accounts, including non-discretionary brokerage and fee-based assets ~~which~~that generate brokerage income and asset management fee revenue.

Committed Credit Exposure – Includes any funded portion of a facility plus the unfunded portion of a facility on which the lender is legally bound to advance funds during a specified period under prescribed conditions.

Credit Derivatives – Contractual agreements that provide protection against a credit event on one or more referenced

obligations. The nature of a credit event is established by the protection purchaser and the protection seller at the inception of the transaction, and such events generally include bankruptcy or insolvency of the referenced credit entity, failure to meet payment obligations when due, as well as acceleration of indebtedness and payment repudiation or moratorium. The purchaser of the credit derivative pays a periodic fee in return for a payment by the protection seller upon the occurrence, if any, of such a credit event. A ~~credit default swap~~CDS is a type of a credit derivative.

Credit Valuation Adjustment (CVA) – A portfolio adjustment required to properly reflect the counterparty credit risk exposure as part of the fair value of derivative instruments.

Debit Valuation Adjustment (DVA) – A portfolio adjustment required to properly reflect the Corporation’s own credit risk exposure as part of the fair value of derivative instruments and/or structured liabilities.

Funding Valuation Adjustment (FVA) – A portfolio adjustment required to include funding costs on uncollateralized derivatives and derivatives where the Corporation is not permitted to use the collateral it receives.

Interest Rate Lock Commitment (IRLC) – Commitment with a loan applicant in which the loan terms, including interest rate and price, 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 that is reported in terms of ending and average LTV. Ending~~metric. LTV is calculated as the outstanding carrying value of the loan ~~at the end of the period~~ divided by the estimated value of the property securing ~~the loan. An additional metric related to LTV is~~ ~~combined loan-to-value (CLTV)~~ which is similar to the LTV metric, yet combines the outstanding balance on the residential mortgage loan and the outstanding carrying value on the home equity loan or available line of credit, both of which are secured by the same property, divided by the estimated value of the property. A LTV of 100 percent reflects a loan that is currently secured by a property valued at an amount exactly equal to the carrying value or available line of the loan. Estimated property values are generally determined through the use of automated valuation models (AVMs) or the CoreLogic Case-Shiller Index. An AVM is a tool that estimates the value of a property by reference to large volumes of market data including sales of comparable properties and price trends specific to the MSA in which the property being valued is located. CoreLogic Case-Shiller is a widely used index based on data from repeat sales of single family homes. CoreLogic Case-Shiller indexed-based values are reported on a three-month or one-quarter lag.



110 Bank of America 2016

Margin Receivable – An extension of credit secured by eligible securities in certain brokerage accounts.



~~126~~ ~~Bank of America 2015~~

~~Market-related Adjustments~~ – Include adjustments to premium amortization or discount accretion on debt securities when a decrease in long-term rates shortens (or an increase extends) the estimated lives of mortgage-related debt securities. Also included in market-related adjustments is hedge ineffectiveness that impacts net interest income.

Matched Book – Repurchase and resale agreements ~~and~~or securities borrowed and loaned transactions where the overall asset and liability position is similar in size and/or maturity. Generally, these are entered into to accommodate customers ~~and earn~~where the Corporation earns the interest rate ~~spreads.~~spread.

Mortgage Servicing ~~Right~~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.

Net Interest Yield – Net interest income divided by average total interest-earning assets.

Nonperforming Loans and Leases – ~~Include~~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 (TDRs).~~difficulties. Loans accounted for under the fair value option, PCI loans and LHFS are not reported as nonperforming loans and leases. ~~Consumer credit~~Credit card receivables, residential mortgage loans business card loans, consumer loans secured by personal property (except for certain secured consumer loans, including those that have been modified in a TDR), and consumer loans secured by real estate that are insured by the FHA or through long-term credit protection agreements with FNMA and FHLMC (fully-insured loan portfolio) and certain other consumer loans are not placed on nonaccrual status and are, therefore, not reported as nonperforming loans and leases.

Pay Option Loans – Pay option adjustable-rate mortgages have interest rates that adjust monthly and minimum required payments that adjust annually. During an initial five- or ten-year period, minimum required payments may increase by no more than 7.5 percent. If payments are insufficient to pay all of the monthly interest charges, unpaid interest is added to the loan balance (i.e., negative amortization) until the loan balance increases to a specified limit, at which time a new monthly payment amount adequate to repay the loan over its remaining contractual life is established.

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,”~~undercapitalized” and “critically undercapitalized.” Insured depository institutions that fail to meet certain of these capital levels are subject to increasingly strict limits on their activities, including their ability to make capital distributions, pay management compensation, grow assets and take other actions.

Purchased Credit-impaired (PCI) Loan – A loan purchased as an individual loan, in a portfolio of loans or in a business combination

with evidence of deterioration in credit quality since origination for which it is probable, upon acquisition, that the investor will be unable to collect all contractually required payments. These loans are recorded at fair value upon acquisition.

Subprime Loans– Although a standard industry definition for subprime loans (including subprime mortgage loans) does not exist, the Corporation defines subprime loans as specific product offerings for higher risk borrowers, including individuals with one or a combination of high credit risk factors, such as low FICO scores, high debt to income ratios and inferior payment history.

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. 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, loans discharged in bankruptcy or other actions intended to maximize collection. 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 from bankruptcy. TDRs are generally reported as nonperforming loans and leases while on nonaccrual status. Nonperforming TDRs may be returned to accrual status when, among other criteria, payment in full of all amounts due under the restructured terms is expected and the borrower has demonstrated a sustained period of repayment performance, generally six months. TDRs that are on accrual status are reported as performing TDRs through the end of the calendar year in which the restructuring occurred or the year in which they are returned to accrual status. In addition, if accruing TDRs bear less than a market rate of interest at the time of modification, they are reported as performing TDRs throughout their remaining lives unless and until they cease to perform in accordance with their modified contractual terms, at which time they would be placed on nonaccrual status and reported as nonperforming TDRs.

Value-at-Risk (VaR) – VaR is a model that simulates the value of a portfolio under a range of hypothetical scenarios in order to generate a distribution of potential gains and losses. VaR represents the loss the portfolio is expected to experience with a given confidence level based on historical data. A VaR model is an effective tool in estimating ranges of potential gains and losses on our trading portfolios.



		Bank of America ~~2015~~2016 ~~127~~111

Acronyms



ABS	Asset-backed securities
AFS	Available-for-sale
ALM	Asset and liability management
~~ARM~~	~~Adjustable-rate mortgage~~
AUM	Assets under management
BANA	Bank of America, National Association
BHC	Bank holding company
bps	basis points
CCAR	Comprehensive Capital Analysis and Review
CDO	Collateralized debt obligation
CDS	Credit default swap
CGA	Corporate General Auditor
CLO	Collateralized loan obligation
~~CRA~~CLTV	~~Community Reinvestment Act~~Combined loan-to-value
CVA	Credit valuation adjustment
DIF	Deposit Insurance Fund
DoJ	U.S. Department of Justice
DVA	Debit valuation adjustment
EAD	Exposure at default
EMV	Europay, Mastercard and Visa
EPS	Earnings per common share
ERC	Enterprise Risk Committee
FASB	Financial Accounting Standards Board
FCA	Financial Conduct Authority
FDIC	Federal Deposit Insurance Corporation
FHA	Federal Housing Administration
~~FHFA~~	~~Federal Housing Finance Agency~~
FHLB	Federal Home Loan Bank
FHLMC	Freddie Mac
FICC	Fixed-income, currencies and commodities
FICO	Fair Isaac Corporation (credit score)
FLUs	Front line units
FNMA	Fannie Mae
FTE	Fully taxable-equivalent
FVA	Funding valuation adjustment
GAAP	Accounting principles generally accepted in the United States of America
GLS	Global Liquidity Sources
GM&CA	Global Marketing and Corporate Affairs
GNMA	Government National Mortgage Association
GPI	Global Principal Investments
GSE	Government-sponsored enterprise
G-SIB	Global systemically important bank
GWIM	Global Wealth & Investment Management
HELOC	Home equity ~~lines~~line of credit
HQLA	High Quality Liquid Assets
HTM	Held-to-maturity



~~HFI~~ICAAP	~~Held-for-investment~~Internal Capital Adequacy Assessment Process
~~HQLA~~IMM	~~High Quality Liquid Assets~~Internal models methodology
~~HUD~~IRLC	~~U.S. Department of Housing and Urban Development~~Interest rate lock commitment
IRM	Independent risk management
ISDA	International Swaps and Derivatives Association, Inc.
LCR	Liquidity Coverage Ratio
LGD	~~Loss-given~~Loss given default
LHFS	Loans held-for-sale
LIBOR	London InterBank Offered Rate
LTV	Loan-to-value
MBS	Mortgage-backed securities
MD&A	Management’s Discussion and Analysis of Financial Condition and Results of Operations
MI	Mortgage insurance
MLGWM	Merrill Lynch Global Wealth Management
MLI	Merrill Lynch International
MLPCC	Merrill Lynch Professional Clearing Corp
MLPF&S	Merrill Lynch, Pierce, Fenner & Smith Incorporated
MRC	Management Risk Committee
MSA	Metropolitan ~~statistical area~~Statistical Area
MSR	Mortgage servicing right
NPR	Notice of proposed rulemaking
NSFR	Net Stable Funding Ratio
OAS	Option-adjusted spread
OCC	Office of the Comptroller of the Currency
OCI	Other comprehensive income
OTC	Over-the-counter
OTTI	Other-than-temporary impairment
PCA	Prompt Corrective Action
PCI	Purchased credit-impaired
PPI	Payment protection insurance
RCSAs	Risk and Control Self Assessments
RMBS	Residential mortgage-backed securities
~~SBLCs~~RSU	Restricted stock unit
SBLC	Standby ~~letters~~letter of credit
SCCL	Single-Counterparty Credit Limits
SEC	Securities and Exchange Commission
SLR	Supplementary leverage ratio
TDR	Troubled debt restructurings
TLAC	Total Loss-Absorbing Capacity
VA	U.S. Department of Veterans Affairs
VaR	Value-at-Risk
VIE	Variable interest entity



~~128~~112 Bank of America ~~2015~~2016

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

See Market Risk Management on page 9279 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		~~132~~116
Consolidated Statement of Comprehensive Income		~~133~~117
Consolidated Balance Sheet		~~134~~118
Consolidated Statement of Changes in Shareholders’ Equity		~~136~~120
Consolidated Statement of Cash Flows		~~137~~121
Note 1 – Summary of Significant Accounting Principles		~~138~~122
Note 2 – Derivatives		~~149~~131
Note 3 – Securities		~~159~~141
Note 4 – Outstanding Loans and Leases		~~164~~145
Note 5 – Allowance for Credit Losses		~~179~~157
Note 6 – Securitizations and Other Variable Interest Entities		~~181~~159
Note 7 – Representations and Warranties Obligations and Corporate Guarantees		~~187~~165
Note 8 – Goodwill and Intangible Assets		~~191~~167
Note 9 – Deposits		~~192~~168
Note 10 – Federal Funds Sold or Purchased, Securities Financing Agreements and Short-term Borrowings		~~192~~168
Note 11 – Long-term Debt		~~195~~171
Note 12 – Commitments and Contingencies		~~198~~174
Note 13 – Shareholders’ Equity		~~206~~180
Note 14 – Accumulated Other Comprehensive Income (Loss)		~~210~~183
Note 15 – Earnings Per Common Share		~~212~~184
Note 16 – Regulatory Requirements and Restrictions		~~213~~185
Note 17 – Employee Benefit Plans		~~215~~186
Note 18 – Stock-based Compensation Plans		~~222~~193
Note 19 – Income Taxes		~~223~~193
Note 20 – Fair Value Measurements		~~226~~196
Note 21 – Fair Value Option		~~240~~207
Note 22 – Fair Value of Financial Instruments		~~243~~210
Note 23 – Mortgage Servicing Rights		~~244~~211
Note 24 – Business Segment Information		~~245~~212
Note 25 – Parent Company Information		~~249~~214
Note 26 – Performance by Geographical Area		~~251~~215



		Bank of America ~~2015~~2016 ~~129~~113

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:~~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, ~~2015~~2016

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, ~~2015~~2016, the Corporation’s internal control over financial reporting is effective.

The Corporation’s internal control over financial reporting as of December 31, ~~2015~~2016 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, ~~2015~~2016.

Brian T. Moynihan

Chairman, Chief Executive Officer and President

Paul M. Donofrio

Chief Financial Officer



~~130~~114 Bank of America ~~2015~~2016

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Bank of America Corporation:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows present fairly, in all material respects, the financial position of Bank of America Corporation and its subsidiaries at December 31, ~~2015~~2016 and ~~2014~~2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, ~~2015~~2016 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, ~~2015~~2016, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Corporation’s management is responsible for these 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 these financial statements and on the Corporation’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, 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.

As discussed in Note 1 to the consolidated financial statements, the Corporation changed the manner in which it accounts for the amortization of premiums and the accretion of discounts related to certain debt securities in 2016.

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.

Charlotte, North Carolina

February ~~24, 2016~~

23, 2017



		Bank of America ~~2015~~2016 ~~131~~115

Bank of America Corporation and Subsidiaries



Consolidated Statement of Income

(Dollars in millions, except per share information)	2015		2014		2013			2016		2015		2014
Interest income
Loans and leases	$	32,070	$	34,307	$	36,470		$	33,228	$	31,918	$	34,145
Debt securities	9,319		8,021		9,749			9,167		9,178		9,010
Federal funds sold and securities borrowed or purchased under agreements to resell	988		1,039		1,229			1,118		988		1,039
Trading account assets	4,397		4,561		4,706			4,423		4,397		4,561
Other interest income	3,026		2,958		2,866			3,121		3,026		2,959
Total interest income	49,800		50,886		55,020			51,057		49,507		51,714

Interest expense
Deposits	861		1,080		1,396			1,015		861		1,080
Short-term borrowings	2,387		2,578		2,923			2,350		2,387		2,579
Trading account liabilities	1,343		1,576		1,638			1,018		1,343		1,576
Long-term debt	5,958		5,700		6,798			5,578		5,958		5,700
Total interest expense	10,549		10,934		12,755			9,961		10,549		10,935
Net interest income	39,251		39,952		42,265			41,096		38,958		40,779

Noninterest income
Card income	5,959		5,944		5,826			5,851		5,959		5,944
Service charges	7,381		7,443		7,390			7,638		7,381		7,443
Investment and brokerage services	13,337		13,284		12,282			12,745		13,337		13,284
Investment banking income	5,572		6,065		6,126			5,241		5,572		6,065
Equity investment income	261		1,130		2,901
Trading account profits	6,473		6,309		7,056			6,902		6,473		6,309
Mortgage banking income	2,364		1,563		3,874			1,853		2,364		1,563
Gains on sales of debt securities	1,091		1,354		1,271			490		1,138		1,481
Other income (loss)	818		1,203		(49		)
Other income								1,885		1,783		3,026
Total noninterest income	43,256		44,295		46,677			42,605		44,007		45,115
Total revenue, net of interest expense	82,507		84,247		88,942			83,701		82,965		85,894

Provision for credit losses	3,161		2,275		3,556			3,597		3,161		2,275

Noninterest expense
Personnel	32,868		33,787		34,719			31,616		32,868		33,787
Occupancy	4,093		4,260		4,475			4,038		4,093		4,260
Equipment	2,039		2,125		2,146			1,804		2,039		2,125
Marketing	1,811		1,829		1,834			1,703		1,811		1,829
Professional fees	2,264		2,472		2,884			1,971		2,264		2,472
Amortization of intangibles	834		936		1,086			730		834		936
Data processing	3,115		3,144		3,170			3,007		3,115		3,144
Telecommunications	823		1,259		1,593			746		823		1,259
Other general operating	9,345		25,305		17,307			9,336		9,887		25,844
Total noninterest expense	57,192		75,117		69,214			54,951		57,734		75,656
Income before income taxes	22,154		6,855		16,172			25,153		22,070		7,963
Income tax expense	6,266		2,022		4,741			7,247		6,234		2,443
Net income	$	15,888	$	4,833	$	11,431		$	17,906	$	15,836	$	5,520
Preferred stock dividends	1,483		1,044		1,349			1,682		1,483		1,044
Net income applicable to common shareholders	$	14,405	$	3,789	$	10,082		$	16,224	$	14,353	$	4,476

Per common share information
Earnings	$	1.38	$	0.36	$	0.94		$	1.58	$	1.37	$	0.43
Diluted earnings	1.31		0.36		0.90			1.50		1.31		0.42
Dividends paid	0.20		0.12		0.04			0.25		0.20		0.12
Average common shares issued and outstanding (in thousands)	10,462,282		10,527,818		10,731,165			10,284,147		10,462,282		10,527,818
Average diluted common shares issued and outstanding (in thousands)	11,213,992		10,584,535		11,491,418			11,035,657		11,213,992		10,584,535

See accompanying Notes to Consolidated Financial Statements.



~~132~~116 Bank of America ~~2015~~2016

Bank of America Corporation and Subsidiaries



Consolidated Statement of Comprehensive Income

(Dollars in millions)	2015			2014			2013			2016			2015			2014
Net income	$	15,888		$	4,833		$	11,431		$	17,906		$	15,836		$	5,520
Other comprehensive income (loss), net-of-tax:
Net change in available-for-sale debt and marketable equity securities	(1,598		)	4,621			(8,166		)
Net change in debt and marketable equity securities										(1,345		)	(1,580		)	4,149
Net change in debit valuation adjustments	615			—			—			(156		)	615			—
Net change in derivatives	584			616			592			182			584			616
Employee benefit plan adjustments	394			(943		)	2,049			(524		)	394			(943		)
Net change in foreign currency translation adjustments	(123		)	(157		)	(135		)	(87		)	(123		)	(157		)
Other comprehensive income (loss)	(128		)	4,137			(5,660		)	(1,930		)	(110		)	3,665
Comprehensive income	$	15,760		$	8,970		$	5,771		$	15,976		$	15,726		$	9,185

See accompanying Notes to Consolidated Financial Statements.



		Bank of America ~~2015~~2016 ~~133~~117

Bank of America Corporation and Subsidiaries



Consolidated Balance Sheet

	December 31						December 31
(Dollars in millions)	2015			2014			2016			2015
Assets
Cash and due from banks	$	31,265		$	33,118		$	30,719		$	31,265
Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks	128,088			105,471			117,019			128,088
Cash and cash equivalents	159,353			138,589			147,738			159,353
Time deposits placed and other short-term investments	7,744			7,510			9,861			7,744
Federal funds sold and securities borrowed or purchased under agreements to resell (includes $55,143 and $62,182 measured at fair value)	192,482			191,823
Trading account assets (includes $105,135 and $110,620 pledged as collateral)	176,527			191,785
Federal funds sold and securities borrowed or purchased under agreements to resell (includes $49,750 and $55,143 measured at fair value)							198,224			192,482
Trading account assets (includes $106,057 and $107,776 pledged as collateral)							180,209			176,527
Derivative assets	49,990			52,682			42,512			49,990
Debt securities:
Carried at fair value (includes $29,810 and $32,741 pledged as collateral)	322,380			320,695
Held-to-maturity, at cost (fair value – $84,046 and $59,641; $9,074 and $15,432 pledged as collateral)	84,625			59,766
Carried at fair value (includes $29,804 and $29,810 pledged as collateral)							313,660			322,380
Held-to-maturity, at cost (fair value – $115,285 and $84,046; $8,233 and $9,074 pledged as collateral)							117,071			84,508
Total debt securities	407,005			380,461			430,731			406,888
Loans and leases (includes $6,938 and $8,681 measured at fair value and $37,767 and $52,959 pledged as collateral)	903,001			881,391
Loans and leases (includes $7,085 and $6,938 measured at fair value and $31,805 and $37,767 pledged as collateral)							906,683			896,983
Allowance for loan and lease losses	(12,234		)	(14,419		)	(11,237		)	(12,234		)
Loans and leases, net of allowance	890,767			866,972			895,446			884,749
Premises and equipment, net	9,485			10,049			9,139			9,485
Mortgage servicing rights (includes $3,087 and $3,530 measured at fair value)	3,087			3,530
Mortgage servicing rights							2,747			3,087
Goodwill	69,761			69,777			68,969			69,761
Intangible assets	3,768			4,612			2,922			3,768
Loans held-for-sale (includes $4,818 and $6,801 measured at fair value)	7,453			12,836
Loans held-for-sale (includes $4,026 and $4,818 measured at fair value)							9,066			7,453
Customer and other receivables	58,312			61,845			58,759			58,312
Other assets (includes $14,320 and $13,873 measured at fair value)	108,582			112,063
Assets of business held for sale							10,670			n/a
Other assets (includes $13,802 and $14,320 measured at fair value)							120,709			114,688
Total assets	$	2,144,316		$	2,104,534		$	2,187,702		$	2,144,287



Assets of consolidated variable interest entities included in total assets above (isolated to settle the liabilities of the variable interest entities)
Trading account assets	$	6,344		$	6,890		$	5,773		$	6,344
Loans and leases	72,946			95,187			56,001			72,946
Allowance for loan and lease losses	(1,320		)	(1,968		)	(1,032		)	(1,320		)
Loans and leases, net of allowance	71,626			93,219			54,969			71,626
Loans held-for-sale	284			1,822			188			284
All other assets	1,530			2,769			1,596			1,530
Total assets of consolidated variable interest entities	$	79,784		$	104,700		$	62,526		$	79,784

n/a = not applicable

See accompanying Notes to Consolidated Financial Statements.



~~134~~118 Bank of America ~~2015~~2016

Bank of America Corporation and Subsidiaries



Consolidated Balance Sheet (continued)

	December 31						December 31
(Dollars in millions)	2015			2014			2016			2015
Liabilities
Deposits in U.S. offices:
Noninterest-bearing	$	422,237		$	393,102		$	438,125		$	422,237
Interest-bearing (includes $1,116 and $1,469 measured at fair value)	703,761			660,161
Interest-bearing (includes $731 and $1,116 measured at fair value)							750,891			703,761
Deposits in non-U.S. offices:
Noninterest-bearing	9,916			7,230			12,039			9,916
Interest-bearing	61,345			58,443			59,879			61,345
Total deposits	1,197,259			1,118,936			1,260,934			1,197,259
Federal funds purchased and securities loaned or sold under agreements to repurchase (includes $24,574 and $35,357 measured at fair value)	174,291			201,277
Federal funds purchased and securities loaned or sold under agreements to repurchase (includes $35,766 and $24,574 measured at fair value)							170,291			174,291
Trading account liabilities	66,963			74,192			63,031			66,963
Derivative liabilities	38,450			46,909			39,480			38,450
Short-term borrowings (includes $1,325 and $2,697 measured at fair value)	28,098			31,172
Accrued expenses and other liabilities (includes $13,899 and $12,055 measured at fair value and $646 and $528 of reserve for unfunded lending commitments)	146,286			145,438
Long-term debt (includes $30,097 and $36,404 measured at fair value)	236,764			243,139
Short-term borrowings (includes $2,024 and $1,325 measured at fair value)							23,944			28,098
Accrued expenses and other liabilities (includes $14,630 and $13,899 measured at fair value and $762 and $646 of reserve for unfunded lending commitments)							146,359			146,286
Long-term debt (includes $30,037 and $30,097 measured at fair value)							216,823			236,764
Total liabilities	1,888,111			1,861,063			1,920,862			1,888,111
Commitments and contingencies (Note 6 – Securitizations and Other Variable Interest Entities, Note 7 – Representations and Warranties Obligations and Corporate Guarantees and Note 12 – Commitments and Contingencies)
Shareholders’ equity
Preferred stock, $0.01 par value; authorized – 100,000,000 shares; issued and outstanding – 3,767,790 and 3,647,790 shares	22,273			19,309
Common stock and additional paid-in capital, $0.01 par value; authorized – 12,800,000,000 shares; issued and outstanding – 10,380,265,063 and 10,516,542,476 shares	151,042			153,458
Preferred stock, $0.01 par value; authorized – 100,000,000 shares; issued and outstanding – 3,887,329 and 3,767,790 shares							25,220			22,273
Common stock and additional paid-in capital, $0.01 par value; authorized – 12,800,000,000 shares; issued and outstanding – 10,052,625,604 and 10,380,265,063 shares							147,038			151,042
Retained earnings	88,564			75,024			101,870			88,219
Accumulated other comprehensive income (loss)	(5,674		)	(4,320		)	(7,288		)	(5,358		)
Total shareholders’ equity	256,205			243,471			266,840			256,176
Total liabilities and shareholders’ equity	$	2,144,316		$	2,104,534		$	2,187,702		$	2,144,287

Liabilities of consolidated variable interest entities included in total liabilities above
Short-term borrowings	$	681		$	1,032		$	348		$	681
Long-term debt (includes $11,304 and $11,943 of non-recourse debt)	14,073			13,307
All other liabilities (includes $20 and $84 of non-recourse liabilities)	21			138
Long-term debt (includes $10,417 and $11,304 of non-recourse debt)							10,646			14,073
All other liabilities (includes $38 and $20 of non-recourse liabilities)							41			21
Total liabilities of consolidated variable interest entities	$	14,775		$	14,477		$	11,035		$	14,775

See accompanying Notes to Consolidated Financial Statements.



		Bank of America ~~2015~~2016 ~~135~~119

Bank of America Corporation and Subsidiaries



Consolidated Statement of Changes in Shareholders’ Equity

	Preferred Stock			Common Stock and Additional Paid-in Capital					Retained Earnings			Accumulated Other Comprehensive Income (Loss)				Total Shareholders’ Equity			Preferred Stock		Common Stock and Additional Paid-in Capital					Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
(Dollars in millions, shares in thousands)				Shares		Amount									Shares						Amount

Balance, December 31, 2012	$	18,768		10,778,264		$	158,142		$	62,843		$	(2,797	)			$	236,956
Balance, December 31, 2013																			$	13,352	10,591,808		$	155,293		$	71,517		$	(7,687	)	$	232,475
Net income									11,431							11,431										5,520						5,520
Net change in available-for-sale debt and marketable equity securities												(8,166		)		(8,166		)
Net change in debt and marketable equity securities																													4,149			4,149
Net change in derivatives												592				592													616			616
Employee benefit plan adjustments												2,049				2,049													(943		)	(943		)
Net change in foreign currency translation adjustments												(135		)		(135		)											(157		)	(157		)
Dividends paid:
Common									(428		)					(428		)
Preferred									(1,249		)					(1,249		)
Issuance of preferred stock	1,008															1,008
Redemption of preferred stock	(6,461		)						(100		)					(6,561		)
Common stock issued under employee plans and related tax effects				45,288		371										371
Common stock repurchased				(231,744	)	(3,220		)								(3,220		)
Other	37															37
Balance, December 31, 2013	13,352			10,591,808		155,293			72,497			(8,457		)		232,685
Net income									4,833							4,833
Net change in available-for-sale debt and marketable equity securities												4,621				4,621
Net change in derivatives												616				616
Employee benefit plan adjustments												(943		)		(943		)
Net change in foreign currency translation adjustments												(157		)		(157		)
Dividends paid:
Dividends declared:
Common									(1,262		)					(1,262		)								(1,262		)				(1,262		)
Preferred									(1,044		)					(1,044		)								(1,044		)				(1,044		)
Issuance of preferred stock	5,957															5,957			5,957													5,957
Common stock issued under employee plans and related tax effects				25,866		(160		)								(160		)			25,866		(160		)							(160		)
Common stock repurchased				(101,132	)	(1,675		)								(1,675		)			(101,132	)	(1,675		)							(1,675		)
Balance, December 31, 2014	19,309			10,516,542		153,458			75,024			(4,320		)		243,471			19,309		10,516,542		153,458			74,731			(4,022		)	243,476
Cumulative adjustment for accounting change related to debit valuation adjustments									1,226			(1,226		)		—										1,226			(1,226		)	—
Net income									15,888							15,888										15,836						15,836
Net change in available-for-sale debt and marketable equity securities												(1,598		)		(1,598		)
Net change in debt and marketable equity securities																													(1,580		)	(1,580		)
Net change in debit valuation adjustments												615				615													615			615
Net change in derivatives												584				584													584			584
Employee benefit plan adjustments												394				394													394			394
Net change in foreign currency translation adjustments												(123		)		(123		)											(123		)	(123		)
Dividends paid:
Dividends declared:
Common									(2,091		)					(2,091		)								(2,091		)				(2,091		)
Preferred									(1,483		)					(1,483		)								(1,483		)				(1,483		)
Issuance of preferred stock	2,964															2,964			2,964													2,964
Common stock issued under employee plans and related tax effects				4,054		(42		)								(42		)			4,054		(42		)							(42		)
Common stock repurchased				(140,331	)	(2,374		)								(2,374		)			(140,331	)	(2,374		)							(2,374		)
Balance, December 31, 2015	$	22,273		10,380,265		$	151,042		$	88,564		$	(5,674	)		$	256,205		22,273		10,380,265		151,042			88,219			(5,358		)	256,176
Net income																										17,906						17,906
Net change in debt and marketable equity securities																													(1,345		)	(1,345		)
Net change in debit valuation adjustments																													(156		)	(156		)
Net change in derivatives																													182			182
Employee benefit plan adjustments																													(524		)	(524		)
Net change in foreign currency translation adjustments																													(87		)	(87		)
Dividends declared:
Common																										(2,573		)				(2,573		)
Preferred																										(1,682		)				(1,682		)
Issuance of preferred stock																			2,947													2,947
Common stock issued under employee plans and related tax effects																					5,111		1,108									1,108
Common stock repurchased																					(332,750	)	(5,112		)							(5,112		)
Balance, December 31, 2016																			$	25,220	10,052,626		$	147,038		$	101,870		$	(7,288	)	$	266,840

See accompanying Notes to Consolidated Financial Statements.



~~136~~120 Bank of America ~~2015~~2016

Bank of America Corporation and Subsidiaries



Consolidated Statement of Cash Flows

(Dollars in millions)	2015			2014			2013			2016			2015			2014
Operating activities
Net income	$	15,888		$	4,833		$	11,431		$	17,906		$	15,836		$	5,520
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	3,161			2,275			3,556			3,597			3,161			2,275
Gains on sales of debt securities	(1,091		)	(1,354		)	(1,271		)	(490		)	(1,138		)	(1,481		)
Fair value adjustments on structured liabilities	633			(407		)	649
Realized debit valuation adjustments on structured liabilities										17			556			—
Depreciation and premises improvements amortization	1,555			1,586			1,597			1,511			1,555			1,586
Amortization of intangibles	834			936			1,086			730			834			936
Net amortization of premium/discount on debt securities	2,472			2,688			1,577			3,134			2,613			1,699
Deferred income taxes	3,108			726			3,262			5,841			2,924			1,147
Stock-based compensation										1,235			28			78
Loans held-for-sale:
Originations and purchases	(38,675		)	(40,113		)	(65,688		)	(33,107		)	(37,933		)	(39,358		)
Proceeds from sales and paydowns of loans originally classified as held-for-sale	36,204			38,528			77,707			31,376			36,204			38,528
Net change in:
Trading and derivative instruments	3,292			6,621			33,870			(866		)	2,550			5,866
Other assets	2,458			5,828			35,154			(13,802		)	2,645			5,894
Accrued expenses and other liabilities	730			9,702			(12,919		)	(35		)	730			9,702
Other operating activities, net	(2,839		)	(1,714		)	2,806			1,259			(2,218		)	(1,597		)
Net cash provided by operating activities	27,730			30,135			92,817			18,306			28,347			30,795
Investing activities
Net change in:
Time deposits placed and other short-term investments	50			4,030			7,154			(2,117		)	50			4,030
Federal funds sold and securities borrowed or purchased under agreements to resell	(659		)	(1,495		)	29,596			(5,742		)	(659		)	(1,495		)
Debt securities carried at fair value:
Proceeds from sales	145,079			126,399			103,743			79,371			145,079			126,399
Proceeds from paydowns and maturities	84,988			79,704			85,554			100,768			84,988			79,704
Purchases	(219,412		)	(247,902		)	(160,744		)	(189,061		)	(219,412		)	(247,902		)
Held-to-maturity debt securities:
Proceeds from paydowns and maturities	12,872			7,889			8,472			18,677			12,872			7,889
Purchases	(36,575		)	(13,274		)	(14,388		)	(39,899		)	(36,575		)	(13,274		)
Loans and leases:
Proceeds from sales	22,316			28,765			12,331			18,230			22,316			28,765
Purchases	(12,629		)	(10,609		)	(16,734		)	(12,283		)	(12,629		)	(10,609		)
Other changes in loans and leases, net	(52,626		)	19,239			(34,256		)	(31,194		)	(51,895		)	19,160
Proceeds from sales of equity investments	333			1,577			4,818			299			333			1,577
Other investing activities, net	1,309			(1,923		)	(488		)	(192		)	(39		)	(2,504		)
Net cash provided by (used in) investing activities	(54,954		)	(7,600		)	25,058
Net cash used in investing activities										(63,143		)	(55,571		)	(8,260		)
Financing activities
Net change in:
Deposits	78,347			(335		)	14,010			63,675			78,347			(335		)
Federal funds purchased and securities loaned or sold under agreements to repurchase	(26,986		)	3,171			(95,153		)	(4,000		)	(26,986		)	3,171
Short-term borrowings	(3,074		)	(14,827		)	16,009			(4,014		)	(3,074		)	(14,827		)
Long-term debt:
Proceeds from issuance	43,670			51,573			45,658			35,537			43,670			51,573
Retirement of long-term debt	(40,365		)	(53,749		)	(65,602		)	(51,849		)	(40,365		)	(53,749		)
Preferred stock:
Proceeds from issuance	2,964			5,957			1,008
Redemption	—			—			(6,461		)
Preferred stock: Proceeds from issuance										2,947			2,964			5,957
Common stock repurchased	(2,374		)	(1,675		)	(3,220		)	(5,112		)	(2,374		)	(1,675		)
Cash dividends paid	(3,574		)	(2,306		)	(1,677		)	(4,194		)	(3,574		)	(2,306		)
Excess tax benefits on share-based payments	16			34			12			14			16			34
Other financing activities, net	(39		)	(44		)	(26		)	(22		)	(39		)	(44		)
Net cash provided by (used in) financing activities	48,585			(12,201		)	(95,442		)	32,982			48,585			(12,201		)
Effect of exchange rate changes on cash and cash equivalents	(597		)	(3,067		)	(1,863		)	240			(597		)	(3,067		)
Net increase in cash and cash equivalents	20,764			7,267			20,570
Net increase (decrease) in cash and cash equivalents										(11,615		)	20,764			7,267
Cash and cash equivalents at January 1	138,589			131,322			110,752			159,353			138,589			131,322
Cash and cash equivalents at December 31	$	159,353		$	138,589		$	131,322		$	147,738		$	159,353		$	138,589
Supplemental cash flow disclosures
Interest paid	$	10,623		$	11,082		$	12,912		$	10,510		$	10,623		$	11,082
Income taxes paid	2,326			2,558			1,559			1,633			2,326			2,558
Income taxes refunded	(151		)	(144		)	(244		)	(590		)	(151		)	(144		)

See accompanying Notes to Consolidated Financial Statements.



		Bank of America ~~2015~~2016 ~~137~~121

Bank of America Corporation and Subsidiaries

Notes to Consolidated Financial Statements

NOTE 1 Summary of Significant Accounting Principles

Bank of America Corporation, ~~(together with its consolidated subsidiaries, the Corporation),~~ a bank holding company (BHC) 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 ~~equity investment~~other income.

The preparation of the Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect reported amounts and disclosures. Realized results could differ from those estimates and assumptions. Certain prior-year amounts have been reclassified to conform to current-year presentation.

On December 20, 2016, the Corporation entered into an agreement to sell its non-U.S. consumer credit card business to a third party. Subject to regulatory approval, this transaction is expected to close by mid-2017. After closing, the Corporation will retain substantially all payment protection insurance (PPI) exposure above existing reserves. The Corporation has considered this exposure in its estimate of a small after-tax gain on the sale. This transaction will reduce risk-weighted assets and goodwill upon closing, benefiting regulatory capital. At December 31, 2016, the assets of this business, which are presented in the assets of business held for sale line on the Consolidated Balance Sheet, included consumer credit card receivables of $9.2 billion, an allowance for loan losses of $243 million, goodwill of $775 million, available-for-sale (AFS) debt securities of $619 million and all other assets of $305 million. Liabilities are primarily comprised of intercompany borrowings. This business is includedin All Other for reporting purposes.

Change in Accounting Method

Effective July 1, 2016, the Corporation changed its accounting method under the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 310-20, Nonrefundable fees and other costs, from the prepayment method (also referred to as the retrospective method) to the contractual method.

The Corporation believes that the contractual method is the preferable method of accounting because it is consistent with the accounting method used by peer institutions in terms of net interest income. Additionally, the contractual method better aligns with the Corporation's asset and liability management (ALM) strategy.

The following is the impact of the change in accounting method on the annual periods presented in the consolidated financial statements herein. The impact is expressed as an increase/(decrease) as compared to amounts originally reported. For 2015 and 2014: net interest income — $(141) million and $989 million, gains on sales of debt securities — $47 million and $127 million, and net income — $(52) million, or $0.00 per diluted share and $687 million, or $0.06 per diluted share, respectively. The change in accounting method decreased retained earnings $980 million at January 1, 2014. Since the change in accounting method was effective July 1, 2016 and the financial results under the prepayment method as compared to the contractual method would not affect future management decisions, the Corporation did not undertake the operational effort and cost to maintain separate systems of record for the prepayment method to enable a calculation of the impact of the change subsequent to the effective date. As a result, the impact of the change in accounting method for 2016 is not disclosed.

New Accounting Pronouncements

In August 2016 and November 2016, the FASB issued new accounting guidance that addresses classification of certain cash receipts and cash payments, including changes in restricted cash, in the statement of cash flows. This new accounting guidance will result in some changes in classification in the Consolidated Statement of Cash Flows, which the Corporation does not expect will be significant, and will not have any impact on its consolidated financial position or results of operations. The new guidance is effective on January 1, 2018, on a retrospective basis, with early adoption permitted.

In June 2016, the FASB issued new accounting guidance that will require the earlier recognition of credit losses on loans and other financial instruments based on an expected loss model, replacing the incurred loss model that is currently in use. Under the new guidance, an entity will measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The expected loss model will apply to loans and leases, unfunded lending commitments, held-to-maturity (HTM) debt securities and other debt instruments measured at amortized cost. The impairment model for AFS debt securities will require the recognition of credit losses through a valuation allowance when fair value is less than amortized cost, regardless of whether the impairment is considered to be other-than-temporary. The new guidance is effective on January 1, 2020, with early adoption permitted on January 1, 2019. The Corporation is in the process of identifying and implementing required changes to loan loss estimation models and processes and evaluating the impact of this new accounting guidance, which at the date of adoption is expected to increase the allowance for credit losses with a resulting negative adjustment to retained earnings.

In March 2016, the FASB issued new accounting guidance that simplifies certain aspects of the accounting for share-based



122 Bank of America 2016

payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The new guidance is effective on January 1, 2017. The Corporation does not expect the provisions of this new accounting guidance to have a material impact on its consolidated financial position or results of operations.

In February 2016, the FASB issued new accounting guidance that requires substantially all leases to be recorded as assets and liabilities on the balance sheet. Upon adoption, for leases where the Corporation is lessee, the Corporation will record a right of use asset and a lease payment obligation associated with arrangements previously accounted for as operating leases. Lessor accounting is largely unchanged from existing GAAP. This new accounting guidance is effective on January 1, 2019, using a modified retrospective transition that will be applied to all prior periods presented. The Corporation is in the process of reviewing its existing lease portfolios, as well as other service contracts for embedded leases, to evaluate the impact of the new accounting guidance on the financial statements, as well as the impact to regulatory capital and risk-weighted assets. The effect of the adoption will depend on its lease portfolio at the time of transition; however, the Corporation does not expect the new accounting guidance to have a material impact on its consolidated results of operations. Upon completion of the inventory review and consideration of system requirements, the Corporation will evaluate the impacts of adopting the new accounting guidance on its disclosures.

In January 2016, the FASB issued new accounting guidance on recognition and measurement of financial instruments. The new guidance makes targeted changes to existing GAAP including, among other provisions, requiring certain equity investments to be measured at fair value with changes in fair value reported in earnings and requiring changes in instrument-specific credit risk (i.e., debit valuation adjustments (DVA)) for financial liabilities recorded at fair value under the fair value option to be reported in other comprehensive income (OCI). The accounting for DVA related to other financial liabilities, for example, derivatives, does not change. The new guidance is effective on January 1, 2018, with early adoption permitted for the provisions related to DVA.

~~The~~ In 2015, the Corporation early adopted, retrospective to January 1, 2015, the provisions of this new accounting guidance related to DVA on financial liabilities accounted for under the fair value option. The ~~impact of~~Corporation does not expect the adoption was to reclassify, as of January 1, 2015, unrealized DVA losses of $1.2 billion after tax ($2.0 billion pretax) from January 1, 2015 retained earnings to accumulated OCI. Further, pretax unrealized DVA gains of $301 million, $301 million and $420 million were reclassified from other income to accumulated OCI for the three months ended September 30, 2015,

June 30, 2015 and March 31, 2015, respectively. This had the effect of reducing net income as previously reported for the aforementioned quarters by $187 million, $186 million and $260 million, or approximately $0.02 per share in each quarter. This change is reflected in the Consolidated Statement of Income and the ~~Global Markets~~ ~~segment results. Financial statements for 2014 and 2013 were not subject to restatement under the~~remaining provisions of this new accounting ~~guidance. For additional information, see~~ ~~Note 14 – Accumulated Other Comprehensive Income (Loss)~~ ~~and~~ ~~Note 21 – Fair Value Option~~. The Corporation does not expect the provisions of this new accounting guidance other than those related to DVA, as described above, to have a material impact on its consolidated financial position or results of operations.

In February 2015, the FASB issued new accounting guidance that amends the criteria for determining whether limited partnerships and similar entities are VIEs, clarifies when a general partner or asset manager should consolidate an entity and eliminates the indefinite deferral of certain aspects of VIE accounting guidance for investments in certain investment funds. Money market funds registered under Rule 2a-7 of the Investment Company Act and similar funds are exempt from consolidation under the new guidance. The new accounting guidance is effective on January 1, 2016. The Corporation does not expect the new guidance to have a material impact on its consolidated financial position or results of operations.

In May 2014, the FASB issued new accounting guidance ~~to clarify the principles~~ for recognizing revenue from contracts with ~~customers. The new accounting guidance,~~customers, which ~~does not apply to financial instruments,~~ is effective on January 1, 2018. While the new guidance does not apply to revenue associated with loans or securities, the Corporation has been working to identify the customer contracts within the scope of the new guidance and assess the related revenues to determine if any accounting or internal control changes will be required for the new provisions. While the assessment is not complete, the timing of the Corporation’s revenue recognition is not expected to materially change. The classification of certain contract costs continues to be evaluated and the final interpretation may impact the presentation of certain contract costs. Overall, the Corporation does not expect the new guidance

to have a material impact on its consolidated financial position or results of operations. The next phase of the Corporation’s implementation work will be to evaluate any changes that may be required to the Corporation’s applicable disclosures.

In December 2012, the FASB issued a proposed standard on accounting for credit losses. It would replace multiple existing impairment models, including an “incurred loss” model for loans, with an “expected loss” model. The FASB has indicated a tentative effective date of January 1, 2019, and final guidance is expected to be issued in the second quarter of 2016. The final standard may materially reduce retained earnings in the period of adoption.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.

~~Consolidated Statement of Cash Flows~~

In the Consolidated Statement of Cash Flows for the year ended December 31, 2014 as included herein, the Corporation made certain corrections related to non-cash activity which are not material to the Consolidated Financial Statements taken as a whole, do not impact the Consolidated Statement of Income or Consolidated Balance Sheet, and have no impact on the Corporation’s cash and cash equivalents balance. Certain non-cash transactions involving the sale of loans and receipt of debt securities as proceeds were incorrectly classified between



~~138~~ ~~Bank of America 2015~~

operating activities and investing activities. The corrections resulted in a $3.4 billion increase in net cash provided by operating activities, offset by a $3.4 billion increase in net cash used in investing activities when compared to the Consolidated Statement of Cash Flows in the Form 10-K for the year ended December 31, 2014.

The Consolidated Statement of Cash Flows included in the previously-filed Form 10-Qs for the quarterly periods ended March 31, 2015 and June 30, 2015 also incorrectly reported this type of non-cash activity by $4.8 billion and $9.3 billion, where an increase in net cash provided by operating activities was offset by an increase in net cash used in investing activities. The incorrectly reported amounts in these 2015 quarterly periods also were not material to the Consolidated Financial Statements taken as a whole, did not impact the Consolidated Statements of Income or Consolidated Balance Sheets and had no impact on cash and cash equivalents for those periods.

~~For information on certain non-cash transactions, which are not reflected in the Consolidated Statement of Cash Flows, see~~ ~~Note 4 – Outstanding Loans and Leases~~ ~~and~~ ~~Note 6 – Securitizations and Other Variable Interest Entities.~~

Securities Financing Agreements

~~The Corporation enters into securities~~Securities borrowed or purchased under agreements to resell and securities loaned or sold under agreements to repurchase (securities financing agreements) ~~to accommodate customers (also referred to as “matched-book transactions”), obtain securities to cover short positions, and to finance inventory positions. 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 ~~the amounts at which the securities were acquired~~acquisition or ~~sold~~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 trading account profits in the Consolidated Statement of Income.

The Corporation’s policy is to ~~obtain possession of collateral with a~~monitor the market value ~~equal to or in excess~~ of the principal amount loaned under resale ~~agreements. To ensure that the market value of the underlying~~agreements and obtain collateral ~~remains sufficient, collateral is generally valued daily and the Corporation may require counterparties to deposit additional collateral~~from or ~~may~~ return collateral pledged to counterparties when appropriate. Securities financing agreements ~~give rise to negligible~~do not create material credit risk ~~as a result of~~due to these collateral ~~provisions and, accordingly, no~~provisions; therefore, an allowance for loan losses is ~~considered necessary.~~unnecessary.

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 as collateral that it is permitted by contract or custom to sell or repledge. At December 31, ~~2015~~2016 and ~~2014,~~2015, the fair value of this collateral was $~~458.9~~452.1 billion and $~~508.7~~458.9 billion, of which $~~383.5~~372.0 billion and $~~419.3~~383.5 billion was 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.



		Bank of America 2016123

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 or quoted market prices for 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 trading account profits.

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). Derivatives utilized by the Corporation include swaps, ~~financial~~ futures and forward settlement contracts, and option contracts.



		~~Bank of America 2015139~~

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 trading account profits.

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 a qualifying accounting hedge relationship 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 mortgage loans held-for-sale (LHFS) that are originated by the Corporation are recorded in mortgage banking income. Changes in the fair value of derivatives that serve to mitigate interest rate risk and foreign currency risk are included in other income (loss). 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 other income (loss).

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.

The Corporation uses its accounting hedges as either fair value hedges, cash flow hedges or hedges of net investments in foreign operations. The Corporation manages interest rate and foreign currency exchange rate sensitivity predominantly through the use of derivatives.

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 or liabilities, or forecasted transactions caused by interest rate or foreign exchange fluctuations. Changes in the fair value of derivatives designated as cash flow hedges are recorded in accumulated 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. Hedge ineffectiveness and gains and losses on the component of a derivative excluded in assessing hedge effectiveness are recorded in the same income statement line item. The Corporation records changes in the fair value of derivatives used as hedges of the net investment in foreign operations, to the extent effective, as a component of accumulated OCI. If a derivative instrument in a cash flow hedge is terminated or the hedge designation is removed, related amounts in accumulated OCI are reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings. If it becomes probable that a



124 Bank of America 2016

forecasted transaction will not occur, any related amounts in accumulated OCI are reclassified into earnings in that period.

~~Interest Rate Lock Commitments~~

The Corporation enters into IRLCs in connection with its mortgage banking activities to fund residential mortgage loans at specified times in the future. IRLCs that relate to the origination of mortgage loans that will be classified as held-for-sale are considered derivative instruments under applicable accounting guidance. As such, these IRLCs are recorded at fair value with changes in fair value recorded in mortgage banking income, typically resulting in recognition of a gain when the Corporation enters into IRLCs.

In estimating the fair value of an IRLC, the Corporation assigns a probability that the loan commitment will be exercised and the loan will be funded. The fair value of the commitments is derived from the fair value of related mortgage loans which is based on observable market data and includes the expected net future cash flows related to servicing of the loans. Changes in the fair value of IRLCs are recognized based on interest rate changes, changes in the probability that the commitment will be exercised and the passage of time. Changes from the expected future cash flows related to the customer relationship are excluded from the valuation of IRLCs.



~~140~~ ~~Bank of America 2015~~

Outstanding IRLCs expose the Corporation to the risk that the price of the loans underlying the commitments might decline from inception of the rate lock to funding of the loan. To manage this risk, the Corporation utilizes forward loan sales commitments and other derivative instruments, including interest rate swaps and options, to economically hedge the risk of potential changes in the value of the loans that would result from the commitments. The changes in the fair value of these derivatives are recorded in mortgage banking income.

Securities

Debt securities are recorded on the Consolidated Balance Sheet as of their trade date. Debt securities bought principally with the intent to buy and sell in the short term as part of the Corporation’s trading activities are reported at fair value in trading account assets with unrealized gains and losses included in trading account profits. Debt securities purchased for longer term investment purposes, as part of ~~asset and liability management (ALM)~~ALM and other strategic activities, are generally reported at fair value as ~~available-for-sale (AFS)~~AFS securities with net unrealized gains and losses net-of-tax included in accumulated OCI. Certain other debt securities purchased for ALM and other strategic purposes are reported at fair value with unrealized gains and losses reported in other income (loss). These are referred to as other debt securities carried at fair value. AFS securities and other debt securities carried at fair value are reported in debt securities on the Consolidated Balance Sheet. The Corporation may hedge these other debt securities with risk management derivatives with the unrealized gains and losses also reported in other income (loss). The debt securities are carried at fair value with unrealized gains and losses reported in other income (loss) to mitigate accounting asymmetry with the risk management derivatives and to achieve operational simplifications. Debt securities ~~which~~that management has the intent and ability to hold to maturity are reported at amortized cost. Certain debt securities purchased for use in other risk management activities, such as hedging certain market risks related to MSRs, are reported in other assets at fair value with unrealized gains and losses reported in the same line item as the item being hedged.

The Corporation regularly evaluates each AFS and ~~held-to-maturity (HTM)~~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. IfFor AFS debt securities the ~~impairment~~Corporation intends to hold, an analysis is performed to determine how much of the ~~AFS or HTM debt security~~decline in fair value is ~~credit-related,~~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 impairment (OTTI) loss is ~~recorded~~recognized in ~~earnings. For AFS debt securities,~~ the ~~non-credit~~Consolidated Statement of Income for that amount. If any of the decline in fair value is related ~~impairment loss~~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 ~~an AFS debt security~~ or believes it is more-likely-than-not that it will ~~more-likely-than-not~~ be required to sell athe debt security, ~~the Corporation records the full amount of the impairment loss~~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 ~~estimated~~contractual lives ~~of the securities. Prepayment experience, which is primarily driven by interest rates, is continually evaluated~~

to determine the estimated lives of the securities. When a change is made to the estimated lives of the securities, the related premium or discount is adjusted, with a corresponding charge or credit to interest income, to the appropriate amount had the current estimated lives been applied since the acquisition of the securities. Realized gains and losses from the sales of debt securities are determined using the specific identification method.

Marketable equity securities are classified based on management’s intention on the date of purchase and recorded on the Consolidated Balance Sheet as of the trade date. Marketable equity securities that are bought and held principally for the purpose of resale in the near term are classified as trading and are carried at fair value with unrealized gains and losses included in trading account profits. Other marketable equity securities are accounted for as AFS and classified in other assets. All AFS marketable equity securities are carried at fair value with net unrealized gains and losses included in accumulated OCI, net-of-tax. If there is an other-than-temporary decline in the fair value of any individual AFS marketable equity security, the cost basis is reduced and the Corporation reclassifies the associated net unrealized loss out of accumulated OCI with a corresponding charge to equity investment income. Dividend income on AFS marketable equity securities is included in equity investment income. Realized gains and losses on the sale of all AFS marketable equity securities, which are recorded in equity investment income, are determined using the specific identification method.

Certain equity investments held by Global Principal Investments (GPI), the Corporation’s diversified equity investor in private equity, real estate and other alternative investments, are subject to investment company accounting under applicable accounting guidance and, accordingly, are carried at fair value with changes in fair value reported in equity investment income. These investments are included in other assets. Initially, the transaction price of the investment is generally considered to be the best indicator of fair value. Thereafter, valuation of direct investments is based on an assessment of each individual investment using methodologies that include publicly-traded comparables derived by multiplying a key performance metric of the portfolio company by the relevant valuation multiple observed for comparable companies, acquisition comparables, entry level multiples and discounted cash flow analyses, and are subject to appropriate discounts for lack of liquidity or marketability. For fund investments, the Corporation generally records the fair value of its proportionate interest in the fund’s capital as reported by the respective fund managers.

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 changes in fair value reported in other income (loss).



		~~Bank of America 2015141~~

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 ~~core portfolio~~ residential mortgage ~~Legacy Assets & Servicing residential mortgage, core portfolio home equity~~ and ~~Legacy Assets & Servicing~~ home equity. The classes within the Credit Card and Other Consumer portfolio segment are U.S. credit card, non-U.S. credit card, direct/indirect consumer and other consumer. The classes within the Commercial portfolio segment are U.S. commercial, commercial real estate, commercial lease financing, non-U.S. commercial and U.S. small business commercial.



		Bank of America 2016125

Purchased Credit-impaired Loans

Purchased loans with evidence of credit quality deterioration as of the purchase date for which it is probable that the Corporation will not receive all contractually required payments receivable are accounted for as purchased credit-impaired (PCI) loans. Evidence of credit quality deterioration since origination may include past due status, refreshed credit scores and refreshed loan-to-value (LTV) ratios. At acquisition, PCI loans are recorded at fair value with no allowance for credit losses, and accounted for individually or aggregated in pools based on similar risk characteristics such as credit risk, collateral type and interest rate risk. The Corporation estimates the amount and timing of expected cash flows for each loan or pool of loans. The expected cash flows in excess of the amount paid for the loans is referred to as the accretable yield and is recorded as interest income over the remaining estimated life of the loan or pool of loans. The excess of the PCI loans’ contractual principal and interest over the expected cash flows is referred to as the nonaccretable difference. Over the life of the PCI loans, the expected cash flows continue to be estimated using models that incorporate management’s estimate of current assumptions such as default rates, loss severity and prepayment speeds. If, upon subsequent valuation, the Corporation determines it is probable that the present value of the expected cash flows has decreased, a charge to the provision for credit losses is recorded with a corresponding increase in the allowance for credit losses. If it is probable that there is a significant increase in the present value of expected cash flows, the allowance for credit losses is reduced or, if there is no remaining allowance for credit losses related to these PCI loans, the accretable yield is increased through a reclassification from nonaccretable difference, resulting in a prospective increase in interest income. Reclassifications to or from nonaccretable difference can also occur for changes in the PCI loans’ estimated lives. If a loan within a PCI pool is sold, foreclosed, forgiven or the expectation of any future proceeds is remote, the loan is removed from the pool at its proportional carrying value. If the loan’s recovery value is less than the loan’s carrying value, the difference is first applied against

the PCI pool’s nonaccretable difference and then against the allowance for credit losses.

Leases

The Corporation provides equipment financing to its customers through a variety of lease arrangements. Direct financing leases are carried at the aggregate of lease payments receivable plus estimated residual value of the leased property less unearned income. Leveraged leases, which are a form of financing leases, are reported net of non-recourse debt. Unearned income on leveraged and direct financing leases is accreted to interest income over the lease terms using methods that approximate the interest method.

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 losses inherent in the Corporation’s lending ~~activities. The allowance for loan and lease losses and the reserve for unfunded lending commitments exclude amounts for~~activities excluding loans and unfunded lending commitments accounted for under the fair value option as the fair values of these instruments reflect a credit component. The allowance for loan and lease losses does not include amounts related to accrued interest receivable, other than billed interest and fees on credit card receivables, as accrued interest receivable is reversed when a loan is placed on nonaccrual status.option. 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. Write-offs on PCI loans on which there is a valuation allowance are recorded against the valuation allowance. For additional information, see Purchased Credit-impaired Loans in this Note. Cash recovered on previously charged-off amounts is recorded as a recovery to these accounts. Management evaluates the adequacy of the allowance for credit losses based on the combined total of the allowance for loan and lease losses and the reserve for unfunded lending commitments.

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 and credit ~~scores.~~

scores and the amount of loss in the event of default.



~~142~~ ~~Bank of America 2015~~

~~The Corporation’s Consumer Real Estate portfolio segment is comprised primarily of large groups of homogeneous~~For consumer loans secured by residential real ~~estate. The amount of losses incurred in the homogeneous loan pools is estimated based on the number of loans that will default and the loss in the event of default. Using~~estate, using statistical modeling methodologies, the Corporation estimates the number of ~~homogeneous~~ 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 LTV or, in the case of a subordinated lien, refreshed combined LTV (CLTV), borrower credit score, months since origination (referred to as vintage) and geography, all of which are further broken down by present collection status (whether the loan is current, delinquent, in default or in bankruptcy). ~~This estimate~~The severity or loss given default is estimated based on the refreshed LTV for first mortgages or CLTV for subordinated liens. The estimates are based on the Corporation’s historical experience with the loan ~~portfolio. The estimate is~~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 onmodels also incorporate recent experience with modification programs including redefaults subsequent to modification, a ~~loan is based on an analysis of~~loan's default history prior to modification and the ~~movement of loans with the measured attributes from either current or any of the delinquency categories to default over a 12-month period.~~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 reserves 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.

~~The remaining portfolios, including~~For impaired loans, which include nonperforming commercial loans as well as consumer and commercial loans and leases modified in a troubled debt restructuring (TDR), are reviewed in accordance with applicable accounting guidance on impaired loans and TDRs. If necessary, a specific allowance is established for these loans if they are deemed to be impaired. A loan is considered impaired when, based on current information and events, it is probable that the Corporation will be unable to collect all amounts due, including principal and/or interest, in accordance with the contractual terms of the agreement, or the loan has been modified in a TDR. Once a loan has been identified as impaired, management measures impairment primarily based on the present value of



126 Bank of America 2016

payments expected to be received, discounted at the loans’ original effective contractual interest ~~rates, or~~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 a component of the allowance for loan and lease losses unless these are secured consumer loans that are solely dependent on the collateral for repayment,

in which case the amount that exceeds the fair value of the collateral is charged off.

Generally, when determining the fair value of the collateral securing consumer real estate-secured loans that are solely dependent on the collateral for repayment, prior to performing a detailed property valuation including a walk-through of a property, 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 and financial guarantees, and binding unfunded loan commitments. ~~The reserve for unfunded lending commitments excludes commitments accounted for under the fair value option.~~ 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, including nonaccruing loans whose contractual terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties.~~status. Loans accounted for under the fair value option, PCI loans 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. ~~Accrued interest receivable~~



		~~Bank of America 2015143~~

is reversed when a consumer loan is placed on nonaccrual status. Interest collections on nonaccruing consumer loans for which the ultimate collectability of principal is uncertain are generally applied as principal reductions; otherwise, such collections are credited to interest income when received. These loans 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, or when the loan otherwise becomes well-secured and is in the process of collection. 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. ~~The estimated property value less costs to sell is determined using the same process as described for impaired loans in Allowance for Credit Losses in this Note.~~

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 property-secured 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, for loans in bankruptcy, 60 days past due. Credit card and other unsecured consumer loans are charged off no later than the end of the month in which the account becomes 180 days past due or within 60 days after receipt of notification of death or bankruptcy.

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.

Accrued interest receivable is reversed when commercial loans and leases are placed on nonaccrual status. Interest collections on nonaccruing commercial 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. Commercial 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, or when the loan otherwise becomes well-secured and is in the process of collection. Business card loans are charged off no later than the end of the month in which the account becomes 180 days past due or 60 days after receipt of notification of death or bankruptcy. These loans are not placed on nonaccrual status prior to charge-off and, therefore, are not reported as nonperforming 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.

remaining life of the loan. In addition, reported net charge-offs exclude write-offs on PCI loans as the fair value already considers the estimated credit losses.

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



		Bank of America 2016127

maximize collections. ~~Loans classified as TDRs are considered impaired loans.~~ Loans that are carried at fair value, LHFS and PCI loans are not classified as TDRs.

~~Consumer and commercial loans~~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. Generally, TDRs are reported as performing or nonperforming TDRs, depending on nonaccrual status, throughout their remaining lives. Accruing TDRs that bear a market rate of interest are reported as performing TDRs through the end of the calendar year in which the loans are returned to accrual status.

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 ~~are not placed~~generally remain on ~~nonaccrual status. Credit card and other unsecured consumer loans that have been renegotiated and placed on a fixed payment plan after July 1, 2012 are generally~~accrual status until the loan is either paid in full or charged off, which occurs no later than the end of the month in which the ~~account~~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



~~144~~ ~~Bank of America 2015~~

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 to 12 years for furniture and equipment, and the shorter of lease term or estimated useful life for leasehold improvements.

~~Internally-developed Software~~

The Corporation capitalizes the costs associated with certain internally-developed software, and amortizes the costs over the expected useful life. Direct project costs of internally-developed software are capitalized when it is probable that the project will be completed and the software will be used for its intended function.

~~Mortgage Servicing Rights~~

The Corporation accounts for consumer MSRs, including residential mortgage and home equity MSRs, at fair value with changes in fair value recorded in mortgage banking income. To reduce the volatility of earnings related to interest rate and market value fluctuations, U.S. Treasury securities, mortgage-backed securities and derivatives such as options and interest rate swaps may be used to hedge certain market risks of the MSRs. Such derivatives are not designated as qualifying accounting hedges. These instruments are carried at fair value with changes in fair value recognized in mortgage banking income. The Corporation estimates the fair value of consumer MSRs using a valuation model that calculates the present value of estimated future net servicing income and, when available, quoted prices from independent parties.

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 ~~as defined under applicable accounting guidance,~~ is a business segment or one level below a business segment. The goodwill impairment analysis is a two-step test. The first step of the goodwill impairment test involves comparing the fair value of each reporting unit with its carrying value, including goodwill, as measured by allocated equity. ~~In certain circumstances,~~For purposes of goodwill impairment testing, the ~~first step may be performed using~~Corporation utilizes allocated equity as a ~~qualitative assessment.~~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. 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, the second step must be performed to measure potential impairment.

The second step involves calculating an implied fair value of goodwill ~~for each reporting unit for which the first step indicated possible impairment. The implied fair value of goodwill is determined in the same manner as the amount of goodwill~~

~~recognized in a business combination,~~ 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. Measurement of the fair values of the assets and liabilities of a reporting unit is consistent with the requirements of the fair value measurements accounting guidance, as described in Fair Value in this Note. The adjustments to measure the assets, liabilities and intangibles at fair value are for the purpose of measuring the implied fair value of goodwill and such adjustments are not reflected on the Consolidated Balance Sheet. 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 ~~entity that has a controlling financial interest in a VIE is referred to as the primary beneficiary and~~Corporation consolidates ~~the VIE. The Corporation is deemed to have a controlling financial interest and is the primary beneficiary of~~ 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 whether it has a controlling financial interest in and is the primary beneficiary of a VIE. The quarterly reassessment process considers whether the Corporation has acquired or divested the power to direct the activities ofits involvement with the VIE ~~through~~and evaluates the impact of changes in governing documents ~~or other circumstances. The reassessment also considers whether the Corporation has acquired or disposed of a~~and its financial ~~interest that could be significant to the VIE, or whether an interest~~interests in the ~~VIE has become significant or is no longer significant.~~VIE. The consolidation status of the VIEs with which the Corporation is involved may change as a result of such reassessments. Changes in consolidation status are applied prospectively, with assets and liabilities of a newly consolidated VIE initially recorded at fair value. A gain or loss may be recognized upon deconsolidation of a VIE depending on the carrying values of deconsolidated assets and liabilities compared to the fair value of retained interests and ongoing contractual arrangements.



		~~Bank of America 2015145~~

creditors of these trusts typically have no recourse to the Corporation except in accordance with the Corporation’s obligations under standard representations and warranties.

When the Corporation is the servicer of whole loans held in a securitization trust, including non-agency residential mortgages, home equity loans, credit cards, ~~automobile loans~~ and ~~student~~other loans, the Corporation



128 Bank of America 2016

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 ~~the~~its assets, ~~of the CDO,~~ 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 ~~held-to-maturity~~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. This may require management to estimate credit losses, prepayment speeds, forward interest yield curves, discount rates and other factors that impact the value of retained interests. Retained residual interests in unconsolidated securitization trusts are classified in trading account assets or other assets with changes in fair value recorded in earnings. The Corporation may also enter into derivatives with unconsolidated VIEs, which are carried at fair value with changes in fair value recorded in earnings.

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. ~~A three-level hierarchy, provided in the applicable accounting~~Under this guidance, ~~for inputs~~an entity is ~~utilized in measuring fair value which maximizes~~required to maximize the use of

observable inputs and ~~minimizes~~minimize the use of unobservable inputs ~~by requiring that observable inputs be used to determine the exit price when available. Under applicable accounting guidance, the Corporation~~in measuring fair value. A hierarchy is established which categorizes ~~its financial instruments,~~fair value measurements into three levels based on the ~~priority of~~ inputs to the valuation technique ~~into this three-level hierarchy, as described below. Trading account assets~~with the highest priority given to unadjusted quoted prices in active markets and ~~liabilities, derivative assets and liabilities, AFS debt and equity securities, other debt securities carried at~~the lowest priority given to unobservable inputs. The Corporation categorizes its fair value consumer MSRs and certain other assets are carried at fair value in accordance with applicable accounting guidance. The Corporation has also elected to account for certain assets and liabilities under the fair value option, including certain commercial and consumer loans and loan commitments, LHFS, short-term borrowings, securities financing agreements, long-term deposits and long-term debt. The following describes themeasurements 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.



~~146~~ ~~Bank of America 2015~~

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.



		Bank of America 2016129

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 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.

~~Accumulated Other Comprehensive Income~~

The Corporation records the following in accumulated OCI, net-of-tax: unrealized gains and losses on AFS debt and marketable equity securities, unrealized gains or losses on DVA on financial liabilities recorded at fair value under the fair value option, gains and losses on cash flow accounting hedges, certain employee benefit plan adjustments, and foreign currency translation adjustments and related hedges of net investments in foreign operations. Unrealized gains and losses on AFS debt and marketable equity securities are reclassified to earnings as the gains or losses are realized upon sale of the securities. Unrealized losses on AFS securities deemed to represent OTTI are reclassified to earnings at the time of the impairment charge. For AFS debt securities that the Corporation does not intend to sell or it is not more-likely-than-not that it will be required to sell, only the credit component of an unrealized loss is reclassified to earnings. Realized gains or losses on DVA are reclassified to earnings upon derecognition of the liability. Gains or losses on derivatives accounted for as cash flow hedges are reclassified to earnings when the hedged transaction affects earnings. Translation gains

~~or losses on foreign currency translation adjustments are reclassified to earnings upon the substantial sale or liquidation of investments in foreign operations.~~

Revenue Recognition

Revenue is recorded when earned, which is generally over the period services are provided and no contingencies exist. The following summarizes the Corporation’s revenue recognition policies as they relate to certain noninterest income line items in the Consolidated Statement of Income.

Card income includes fees such as interchange, cash advance, annual, late, over-limit and other miscellaneous ~~fees, which are recorded as revenue when earned.~~fees. Uncollected fees are included in ~~the~~ customer card receivables balances with an amount recorded in the allowance for loan and lease losses for estimated uncollectible card receivables. Uncollected fees are written off when a card receivable reaches 180 days past due.

Service charges include fees for insufficient funds, overdrafts and other banking ~~services and are recorded as revenue when earned.~~services. Uncollected fees are included in outstanding loan balances with an amount recorded for estimated uncollectible service fees receivable. Uncollected fees are written off when a fee receivable reaches 60 days past due.

Investment and brokerage services revenue consists primarily of asset management fees and brokerage ~~income that are recognized over the period the services are provided or when commissions are earned.~~income. Asset management fees consist primarily of fees for investment management and trust services and are generally based on the dollar amount of the assets being managed. Brokerage income generally includes commissions and fees earned on the sale of various financial products.

Investment banking income consists primarily of advisory and underwriting fees ~~that are recognized in income as the services are provided and no contingencies exist. Revenues~~which are generally recognized net of any direct expenses. Non-reimbursed expenses are recorded as noninterest expense.

Earnings Per Common Share

Earnings per common share (EPS) is computed by dividing net income (loss) allocated to common shareholders by the weighted-average common shares outstanding, ~~except that it does not include~~excluding unvested common shares subject to repurchase or cancellation. Net income (loss) allocated to common shareholders ~~represents net income (loss) applicable to common shareholders which~~ is net income (loss) 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 (see below for more information). Diluted EPS is computed by dividing income (loss) 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.



		~~Bank of America 2015147~~

Unvested share-based payment awards that contain nonforfeitable rights to dividends are participating securities that are included in computing EPS using the two-class method. The two-class method is an earnings allocation formula under which EPS is calculated for common stock and participating securities according to dividends declared and participating rights in undistributed earnings. Under this method, all earnings, distributed and undistributed, are allocated to participating securities and common shares based on their respective rights to receive dividends.

In an exchange of non-convertible preferred stock, income allocated to common shareholders is adjusted for the difference between the carrying value of the preferred stock and the fair value of the consideration exchanged. In an induced conversion of convertible preferred stock, income allocated to common shareholders is reduced by the excess of the fair value of the consideration exchanged over the fair value of the common stock that would have been issued under the original conversion terms.

Foreign Currency Translation

Assets, liabilities and operations of foreign branches and subsidiaries are recorded based on the functional currency of each entity. ~~For certain of the foreign operations,~~When the functional currency of a foreign operation is the local currency, ~~in which case~~ 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 orand losses ~~as well as~~and related hedge gains and losses ~~from certain hedges,~~ are reported as a component of accumulated OCI, net-of-tax. When the foreign entity’s functional currency is ~~determined to be~~ the U.S. Dollar, the

resulting remeasurement gains or losses on foreign currency-denominated assets or liabilities are included in earnings.

Credit Card and Deposit Arrangements

Endorsing Organization Agreements

The Corporation contracts with other organizations to obtain their endorsement of the Corporation’s loan and deposit products. This endorsement may provide to the Corporation exclusive rights to market to the organization’s members or to customers on behalf of the Corporation. These organizations endorse the Corporation’s loan and deposit products and provide the Corporation with their mailing lists and marketing activities. These agreements generally have terms that range five or more years. The Corporation typically pays royalties in exchange for the endorsement. Compensation costs related to the credit card agreements are recorded as contra-revenue in card income.

Cardholder Reward Agreements

The Corporation offers reward programs that allow its cardholders to earn points that can be redeemed for a broad range of rewards including cash, travel and gift cards. The Corporation establishes a rewards liability based upon the points earned that are expected to be redeemed and the average cost per point redeemed. 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 estimated cost of the rewards programs is recorded as contra-revenue in card income.



~~148~~130 Bank of America ~~2015~~2016

NOTE 2 Derivatives

Derivative Balances

Derivatives are entered into on behalf of customers, for trading, or to support risk management activities. Derivatives used in risk management activities include derivatives that may or may not be designated in qualifying hedge accounting relationships. Derivatives that are not designated in qualifying hedge accounting relationships are referred to as other risk management derivatives. For more information on the Corporation’s derivatives and hedging

activities, see Note 1 – Summary of Significant Accounting Principles. The following tables present derivative instruments included on the Consolidated Balance Sheet in derivative assets and liabilities at December 31, ~~2015~~2016 and ~~2014~~2015. Balances are presented on a gross basis, prior to the application of counterparty and cash collateral netting. Total derivative assets and liabilities are adjusted on an aggregate basis to take into consideration the effects of legally enforceable master netting agreements and have been reduced by the cash collateral received or paid.



			December 31, 2015																December 31, 2016
			Gross Derivative Assets							Gross Derivative Liabilities									Gross Derivative Assets							Gross Derivative Liabilities
(Dollars in billions)	Contract/ Notional ⁽¹⁾		Trading and Other Risk Management Derivatives		Qualifying Accounting Hedges		Total			Trading and Other Risk Management Derivatives		Qualifying Accounting Hedges		Total			Contract/ Notional ⁽¹⁾		Trading and Other Risk Management Derivatives		Qualifying Accounting Hedges		Total			Trading and Other Risk Management Derivatives		Qualifying Accounting Hedges		Total
Interest rate contracts
Swaps	$	21,706.8	$	439.6	$	7.4	$	447.0		$	440.7	$	1.2	$	441.9		$	16,977.7	$	385.0	$	5.9	$	390.9		$	386.9	$	2.0	$	388.9
Futures and forwards	7,259.7		1.1		—		1.1			1.3		—		1.3			5,609.5		2.2		—		2.2			2.1		—		2.1
Written options	1,322.4		—		—		—			57.7		—		57.7			1,146.2		—		—		—			52.2		—		52.2
Purchased options	1,403.3		58.9		—		58.9			—		—		—			1,178.7		53.3		—		53.3			—		—		—
Foreign exchange contracts
Swaps	2,149.9		49.2		0.9		50.1			52.2		2.8		55.0			1,828.6		54.6		4.2		58.8			58.8		6.2		65.0
Spot, futures and forwards	4,104.4		46.0		1.2		47.2			45.8		0.3		46.1			3,410.7		58.8		1.7		60.5			56.6		0.8		57.4
Written options	467.2		—		—		—			10.6		—		10.6			356.6		—		—		—			9.4		—		9.4
Purchased options	439.9		10.2		—		10.2			—		—		—			342.4		8.9		—		8.9			—		—		—
Equity contracts
Swaps	201.2		3.3		—		3.3			3.8		—		3.8			189.7		3.4		—		3.4			4.0		—		4.0
Futures and forwards	74.0		2.1		—		2.1			1.2		—		1.2			68.7		0.9		—		0.9			0.9		—		0.9
Written options	352.8		—		—		—			21.1		—		21.1			431.5		—		—		—			21.4		—		21.4
Purchased options	325.4		23.8		—		23.8			—		—		—			385.5		23.9		—		23.9			—		—		—
Commodity contracts
Swaps	47.0		4.7		—		4.7			7.1		—		7.1			48.2		2.5		—		2.5			5.1		—		5.1
Futures and forwards	268.7		3.8		—		3.8			0.7		—		0.7			49.1		3.6		—		3.6			0.5		—		0.5
Written options	58.7		—		—		—			5.5		—		5.5			29.3		—		—		—			1.9		—		1.9
Purchased options	65.7		5.3		—		5.3			—		—		—			28.9		2.0		—		2.0			—		—		—
Credit derivatives
Purchased credit derivatives:
Credit default swaps	928.3		14.4		—		14.4			14.8		—		14.8			604.0		8.1		—		8.1			10.3		—		10.3
Total return swaps/other	26.4		0.2		—		0.2			1.9		—		1.9			21.2		0.4		—		0.4			1.5		—		1.5
Written credit derivatives:
Credit default swaps	924.1		15.3		—		15.3			13.1		—		13.1			614.4		10.7		—		10.7			7.5		—		7.5
Total return swaps/other	39.7		2.3		—		2.3			0.4		—		0.4			25.4		1.0		—		1.0			0.2		—		0.2
Gross derivative assets/liabilities			$	680.2	$	9.5	$	689.7		$	677.9	$	4.3	$	682.2				$	619.3	$	11.8	$	631.1		$	619.3	$	9.0	$	628.3
Less: Legally enforceable master netting agreements							(597.8		)					(597.8		)							(545.3		)					(545.3		)
Less: Cash collateral received/paid							(41.9		)					(45.9		)							(43.3		)					(43.5		)
Total derivative assets/liabilities							$	50.0						$	38.5								$	42.5						$	39.5


⁽¹⁾	Represents the total contract/notional amount of derivative assets and liabilities outstanding.



		Bank of America ~~2015~~2016 ~~149~~131



			December 31, 2014																December 31, 2015
			Gross Derivative Assets							Gross Derivative Liabilities									Gross Derivative Assets							Gross Derivative Liabilities
(Dollars in billions)	Contract/ Notional ⁽¹⁾		Trading and Other Risk Management Derivatives		Qualifying Accounting Hedges		Total			Trading and Other Risk Management Derivatives		Qualifying Accounting Hedges		Total			Contract/ Notional ⁽¹⁾		Trading and Other Risk Management Derivatives		Qualifying Accounting Hedges		Total			Trading and Other Risk Management Derivatives		Qualifying Accounting Hedges		Total
Interest rate contracts
Swaps	$	29,445.4	$	658.5	$	8.5	$	667.0		$	658.2	$	0.5	$	658.7		$	21,706.8	$	439.6	$	7.4	$	447.0		$	440.8	$	1.2	$	442.0
Futures and forwards	10,159.4		1.7		—		1.7			2.0		—		2.0			6,237.6		1.1		—		1.1			1.3		—		1.3
Written options	1,725.2		—		—		—			85.4		—		85.4			1,313.8		—		—		—			57.6		—		57.6
Purchased options	1,739.8		85.6		—		85.6			—		—		—			1,393.3		58.9		—		58.9			—		—		—
Foreign exchange contracts
Swaps	2,159.1		51.5		0.8		52.3			54.6		1.9		56.5			2,149.9		49.2		0.9		50.1			52.2		2.8		55.0
Spot, futures and forwards	4,226.4		68.9		1.5		70.4			72.4		0.2		72.6			4,104.3		46.0		1.2		47.2			45.8		0.3		46.1
Written options	600.7		—		—		—			16.0		—		16.0			467.2		—		—		—			10.6		—		10.6
Purchased options	584.6		15.1		—		15.1			—		—		—			439.9		10.2		—		10.2			—		—		—
Equity contracts
Swaps	193.7		3.2		—		3.2			4.0		—		4.0			201.2		3.3		—		3.3			3.8		—		3.8
Futures and forwards	69.5		2.1		—		2.1			1.8		—		1.8			72.8		2.1		—		2.1			1.2		—		1.2
Written options	341.0		—		—		—			26.0		—		26.0			347.6		—		—		—			21.1		—		21.1
Purchased options	318.4		27.9		—		27.9			—		—		—			320.3		23.8		—		23.8			—		—		—
Commodity contracts
Swaps	74.3		5.8		—		5.8			8.5		—		8.5			47.0		4.7		—		4.7			7.1		—		7.1
Futures and forwards	376.5		4.5		—		4.5			1.8		—		1.8			45.6		3.8		—		3.8			0.7		—		0.7
Written options	129.5		—		—		—			11.5		—		11.5			36.6		—		—		—			4.4		—		4.4
Purchased options	141.3		10.7		—		10.7			—		—		—			37.4		4.2		—		4.2			—		—		—
Credit derivatives
Purchased credit derivatives:
Credit default swaps	1,094.8		13.3		—		13.3			23.4		—		23.4			928.3		14.4		—		14.4			14.8		—		14.8
Total return swaps/other	44.3		0.2		—		0.2			1.4		—		1.4			26.4		0.2		—		0.2			1.9		—		1.9
Written credit derivatives:
Credit default swaps	1,073.1		24.5		—		24.5			11.9		—		11.9			924.1		15.3		—		15.3			13.1		—		13.1
Total return swaps/other	61.0		0.5		—		0.5			0.3		—		0.3			39.7		2.3		—		2.3			0.4		—		0.4
Gross derivative assets/liabilities			$	974.0	$	10.8	$	984.8		$	979.2	$	2.6	$	981.8				$	679.1	$	9.5	$	688.6		$	676.8	$	4.3	$	681.1
Less: Legally enforceable master netting agreements							(884.8		)					(884.8		)							(596.7		)					(596.7		)
Less: Cash collateral received/paid							(47.3		)					(50.1		)							(41.9		)					(45.9		)
Total derivative assets/liabilities							$	52.7						$	46.9								$	50.0						$	38.5


⁽¹⁾	Represents the total contract/notional amount of derivative assets and liabilities outstanding.

Offsetting of Derivatives

The Corporation enters into International Swaps and Derivatives Association, Inc. (ISDA) master netting agreements or similar agreements with substantially all of the Corporation’s derivative counterparties. Where legally enforceable, these master netting agreements give the Corporation, in the event of default by the counterparty, the right to liquidate securities held as collateral and to offset receivables and payables with the same counterparty. For purposes of the Consolidated Balance Sheet, the Corporation offsets derivative assets and liabilities and cash collateral held with the same counterparty where it has such a legally enforceable master netting agreement.

The Offsetting of Derivatives table presents derivative instruments included in derivative assets and liabilities on the Consolidated Balance Sheet at December 31, ~~2015~~2016 and ~~2014~~2015 by primary risk (e.g., interest rate risk) and the platform, where applicable, on which these derivatives are transacted. Exchange-traded derivatives include listed options transacted on an exchange. 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. Balances are presented on a gross basis, prior to

the application of counterparty and cash collateral netting. Total gross derivative assets and liabilities are adjusted on an aggregate basis to take into consideration the effects of legally enforceable master netting agreements which includes reducing the balance for counterparty netting and cash collateral received or paid.

Other gross derivative assets and liabilities in the table represent derivatives entered into under master netting agreements where uncertainty exists as to the enforceability of these agreements under bankruptcy laws in some countries or industries and, accordingly, receivables and payables with counterparties in these countries or industries are reported on a gross basis.

Also included in the table is financial instruments collateral related to legally enforceable master netting agreements that represents securities collateral received or pledged and ~~customer~~ cash and securities collateral held and posted at third-party custodians. These amounts are not offset on the Consolidated Balance Sheet but are shown as a reduction to total derivative assets and liabilities in the table to derive net derivative assets and liabilities.

For more information on offsetting of securities financing agreements, see Note 10 – Federal Funds Sold or Purchased, Securities Financing Agreements and Short-term Borrowings.



~~150~~132 Bank of America ~~2015~~2016



Offsetting of Derivatives

	December 31, 2015						December 31, 2014						December 31, 2016						December 31, 2015
(Dollars in billions)	Derivative Assets			Derivative Liabilities			Derivative Assets			Derivative Liabilities			Derivative Assets			Derivative Liabilities			Derivative Assets			Derivative Liabilities
Interest rate contracts
Over-the-counter	$	309.3		$	297.2		$	386.6		$	373.2		$	267.3		$	258.2		$	309.3		$	297.2
Exchange-traded	—			—			0.1			0.1
Over-the-counter cleared	197.0			201.7			365.7			368.7			177.2			182.8			197.0			201.7
Foreign exchange contracts
Over-the-counter	103.2			107.5			133.0			139.9			124.3			126.7			103.2			107.5
Over-the-counter cleared	0.1			0.1			—			—			0.3			0.3			0.1			0.1
Equity contracts
Over-the-counter	16.6			14.0			19.5			16.7			15.6			13.7			16.6			14.0
Exchange-traded	10.0			9.2			8.6			7.8			11.4			10.8			10.0			9.2
Commodity contracts
Over-the-counter	7.3			8.9			10.2			11.9			3.7			4.9			7.3			8.9
Exchange-traded	2.9			2.9			7.4			7.7			1.1			1.0			1.8			1.8
Over-the-counter cleared	0.1			0.1			0.1			0.6			—			—			0.1			0.1
Credit derivatives
Over-the-counter	24.6			22.9			30.8			30.2			15.3			14.7			24.6			22.9
Over-the-counter cleared	6.5			6.4			7.0			6.8			4.3			4.3			6.5			6.4
Total gross derivative assets/liabilities, before netting
Over-the-counter	461.0			450.5			580.1			571.9			426.2			418.2			461.0			450.5
Exchange-traded	12.9			12.1			16.1			15.6			12.5			11.8			11.8			11.0
Over-the-counter cleared	203.7			208.3			372.8			376.1			181.8			187.4			203.7			208.3
Less: Legally enforceable master netting agreements and cash collateral received/paid
Over-the-counter	(426.6		)	(425.7		)	(545.7		)	(545.5		)	(398.2		)	(392.6		)	(426.6		)	(425.7		)
Exchange-traded	(9.8		)	(9.8		)	(13.9		)	(13.9		)	(8.9		)	(8.9		)	(8.7		)	(8.7		)
Over-the-counter cleared	(203.3		)	(208.2		)	(372.5		)	(375.5		)	(181.5		)	(187.3		)	(203.3		)	(208.2		)
Derivative assets/liabilities, after netting	37.9			27.2			36.9			28.7			31.9			28.6			37.9			27.2
Other gross derivative assets/liabilities	12.1			11.3			15.8			18.2
Other gross derivative assets/liabilities ⁽¹⁾													10.6			10.9			12.1			11.3
Total derivative assets/liabilities	50.0			38.5			52.7			46.9			42.5			39.5			50.0			38.5
Less: Financial instruments collateral ⁽¹⁾	(13.9		)	(6.5		)	(13.3		)	(8.9		)
Less: Financial instruments collateral ⁽²⁾													(13.5		)	(10.5		)	(13.9		)	(6.5		)
Total net derivative assets/liabilities	$	36.1		$	32.0		$	39.4		$	38.0		$	29.0		$	29.0		$	36.1		$	32.0


⁽¹⁾	Consists of derivatives entered into under master netting agreements where the enforceability of these agreements is uncertain.


⁽²⁾	These amounts are limited to the derivative asset/liability balance and, accordingly, do not include excess collateral received/pledged.

ALM and Risk Management Derivatives

The Corporation’s ALM and risk management activities include the use of derivatives to mitigate risk to the Corporation including derivatives designated in qualifying hedge accounting relationships and derivatives used in other risk management activities. Interest rate, foreign exchange, equity, commodity and credit contracts are utilized in the Corporation’s ALM and risk management activities.

The Corporation maintains an overall interest rate risk management strategy that incorporates the use of interest rate contracts, which are generally non-leveraged generic interest rate and basis swaps, options, futures and forwards, to minimize significant fluctuations in earnings caused by interest rate volatility. The Corporation’s goal is to manage interest rate sensitivity and volatility so that movements in interest rates do not significantly adversely affect earnings or capital. As a result of interest rate fluctuations, hedged fixed-rate assets and liabilities appreciate or depreciate in fair value. Gains or losses on the derivative instruments that are linked to the hedged fixed-rate assets and liabilities are expected to substantially offset this unrealized appreciation or depreciation.

Market risk, including interest rate risk, can be substantial in the mortgage business. Market risk in the mortgage business is the risk that values of mortgage assets or revenues will be adversely affected by changes in market conditions such as interest rate movements. To mitigate the interest rate risk in mortgage banking production income, the Corporation utilizes

~~Corporation utilizes~~ forward loan sale commitments and other derivative instruments, including purchased options, and certain debt securities. The Corporation also utilizes derivatives such as interest rate options, interest rate swaps, forward settlement contracts and eurodollar futures to hedge certain market risks of MSRs. For more information on MSRs, see Note 23 – Mortgage Servicing Rights.

The Corporation uses foreign exchange contracts to manage the foreign exchange risk associated with certain foreign currency-denominated assets and liabilities, as well as the Corporation’s investments in non-U.S. subsidiaries. Foreign exchange contracts, which include spot and forward contracts, represent agreements to exchange the currency of one country for the currency of another country at an agreed-upon price on an agreed-upon settlement date. Exposure to loss on these contracts will increase or decrease over their respective lives as currency exchange and interest rates fluctuate.

The Corporation enters into derivative commodity contracts such as futures, swaps, options and forwards as well as non-derivative commodity contracts to provide price risk management services to customers or to manage price risk associated with its physical and financial commodity positions. The non-derivative commodity contracts and physical inventories of commodities expose the Corporation to earnings volatility. Fair value accounting hedges provide a method to mitigate a portion of this earnings volatility.



		Bank of America ~~2015~~2016 ~~151~~133

The Corporation purchases credit derivatives to manage credit risk related to certain funded and unfunded credit exposures. Credit derivatives include credit default swaps (CDS), total return swaps and swaptions. These derivatives are recorded on the Consolidated Balance Sheet at fair value with changes in fair value recorded in other income.

Derivatives Designated as Accounting Hedges

The Corporation uses various types of interest rate, commodity and foreign exchange derivative contracts to protect against changes in the fair value of its assets and liabilities due to fluctuations in interest rates, commodity prices and exchange rates (fair value hedges). The Corporation also uses these types of contracts and equity derivatives to protect against changes in the cash flows of its assets and liabilities, and other forecasted transactions (cash flow hedges). The Corporation hedges its net investment in consolidated non-U.S. operations determined to

have functional currencies other than the U.S. Dollar using forward exchange contracts and cross-currency basis swaps, and by issuing foreign currency-denominated debt (net investment hedges).

Fair Value Hedges

The table below summarizes information related to fair value hedges for ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014, including hedges of interest rate risk on long-term debt that were acquired as part of a business combination and redesignated at that time. At redesignation, the fair value of the derivatives was positive. As the derivatives mature, the fair value will approach zero. As a result, ineffectiveness will occur and the fair value changes in the derivatives and the long-term debt being hedged may be directionally the same in certain scenarios. Based on a regression analysis, the derivatives continue to be highly effective at offsetting changes in the fair value of the long-term debt attributable to interest rate risk.



Derivatives Designated as Fair Value Hedges

Gains (Losses)	2015									2016
(Dollars in millions)	Derivative			Hedged Item			Hedge Ineffectiveness			Derivative			Hedged Item			Hedge Ineffectiveness
Interest rate risk on long-term debt ⁽¹⁾	$	(718	)	$	(77	)	$	(795	)	$	(1,488	)	$	646		$	(842	)
Interest rate and foreign currency risk on long-term debt ⁽¹⁾	(1,898		)	1,812			(86		)	(941		)	944			3
Interest rate risk on available-for-sale securities ⁽²⁾	105			(127		)	(22		)	227			(286		)	(59		)
Price risk on commodity inventory ⁽³⁾	15			(11		)	4			(17		)	17			—
Total	$	(2,496	)	$	1,597		$	(899	)	$	(2,219	)	$	1,321		$	(898	)

	2014									2015
Interest rate risk on long-term debt ⁽¹⁾	$	2,144		$	(2,935	)	$	(791	)	$	(718	)	$	(77	)	$	(795	)
Interest rate and foreign currency risk on long-term debt ⁽¹⁾	(2,212		)	2,120			(92		)	(1,898		)	1,812			(86		)
Interest rate risk on available-for-sale securities ⁽²⁾	(35		)	3			(32		)	105			(127		)	(22		)
Price risk on commodity inventory ⁽³⁾	21			(15		)	6			15			(11		)	4
Total	$	(82	)	$	(827	)	$	(909	)	$	(2,496	)	$	1,597		$	(899	)

	2013									2014
Interest rate risk on long-term debt ⁽¹⁾	$	(4,704	)	$	3,925		$	(779	)	$	2,144		$	(2,935	)	$	(791	)
Interest rate and foreign currency risk on long-term debt ⁽¹⁾	(1,291		)	1,085			(206		)	(2,212		)	2,120			(92		)
Interest rate risk on available-for-sale securities ⁽²⁾	839			(840		)	(1		)	(35		)	3			(32		)
Price risk on commodity inventory ⁽³⁾	(13		)	11			(2		)	21			(15		)	6
Total	$	(5,169	)	$	4,181		$	(988	)	$	(82	)	$	(827	)	$	(909	)


⁽¹⁾	Amounts are recorded in interest expense on long-term debt and in other ~~income (loss).~~income.


⁽²⁾	Amounts are recorded in interest income on debt securities.


⁽³⁾	Amounts relating to commodity inventory are recorded in trading account profits.



~~152~~134 Bank of America ~~2015~~2016

Cash Flow and Net Investment Hedges

The table below summarizes certain information related to cash flow hedges and net investment hedges for ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014. Of the ~~$1.1 billion~~$895 million after-tax net loss ~~(after-tax)~~($1.4 billion on a pretax basis) on derivatives in accumulated OCI for ~~2015~~2016, $~~563~~128 million (~~$352~~after-tax ($206 million ~~after-tax)~~ on a pretax basis) is expected to be reclassified into earnings in the next 12 months. These net losses reclassified into earnings are expected to primarily reduce net

~~net~~ interest income related to the respective hedged items. Amounts related to price risk on restricted stock awards reclassified from accumulated OCI are recorded in personnel expense. For terminated cash flow hedges, the time period over which substantially all of the forecasted transactions are hedged is approximately seven years, with a maximum length of time for certain forecasted transactions of 20 years.



Derivatives Designated as Cash Flow and Net Investment Hedges

	2015									2016
(Dollars in millions, amounts pretax)	Gains (Losses) Recognized in Accumulated OCI on Derivatives			Gains (Losses) in Income Reclassified from Accumulated OCI			Hedge Ineffectiveness and Amounts Excluded from Effectiveness Testing ⁽¹⁾			Gains (Losses) Recognized in Accumulated OCI on Derivatives			Gains (Losses) in Income Reclassified from Accumulated OCI			Hedge Ineffectiveness and Amounts Excluded from Effectiveness Testing ⁽¹⁾
Cash flow hedges
Interest rate risk on variable-rate portfolios	$	95		$	(974	)	$	(2	)	$	(340	)	$	(553	)	$	1
Price risk on restricted stock awards ⁽²⁾	(40		)	91			—			41			(32		)	—
Total	$	55		$	(883	)	$	(2	)	$	(299	)	$	(585	)	$	1
Net investment hedges
Foreign exchange risk	$	3,010		$	153		$	(298	)	$	1,636		$	3		$	(325	)

	2014									2015
Cash flow hedges
Interest rate risk on variable-rate portfolios	$	68		$	(1,119	)	$	(4	)	$	95		$	(974	)	$	(2	)
Price risk on restricted stock awards⁽²⁾	127			359			—			(40		)	91			—
Total	$	195		$	(760	)	$	(4	)	$	55		$	(883	)	$	(2	)
Net investment hedges
Foreign exchange risk	$	3,021		$	21		$	(503	)	$	3,010		$	153		$	(298	)

	2013									2014
Cash flow hedges
Interest rate risk on variable-rate portfolios	$	(321	)	$	(1,102	)	$	—		$	68		$	(1,119	)	$	(4	)
Price risk on restricted stock awards ⁽²⁾	477			329			—			127			359			—
Total	$	156		$	(773	)	$	—		$	195		$	(760	)	$	(4	)
Net investment hedges
Foreign exchange risk	$	1,024		$	(355	)	$	(134	)	$	3,021		$	21		$	(503	)


⁽¹⁾	Amounts related to cash flow hedges represent hedge ineffectiveness and amounts related to net investment hedges represent amounts excluded from effectiveness testing.


⁽²⁾	The hedge gain (loss) recognized in accumulated OCI is primarily related to the change in the Corporation’s stock price for the period.



		~~Bank of America 2015153~~

Other Risk Management Derivatives

Other risk management derivatives are used by the Corporation to reduce certain risk exposures. These derivatives are not qualifying accounting hedges because either they did not qualify for or were not designated as accounting hedges. The table below presents gains (losses) on these derivatives for 2016, 2015 ~~2014~~ and ~~2013.~~2014. These gains (losses) are largely offset by the income or expense that is recorded on the hedged item.



Other Risk Management Derivatives

Gains (Losses)

(Dollars in millions)	2015			2014			2013			2016			2015			2014
Interest rate risk on mortgage banking income ⁽¹⁾	$	254		$	1,017		$	(619	)	$	461		$	254		$	1,017
Credit risk on loans ⁽²⁾	(22		)	16			(47		)	(107		)	(22		)	16
Interest rate and foreign currency risk on ALM activities ⁽³⁾	(222		)	(3,683		)	2,501			(754		)	(222		)	(3,683		)
Price risk on restricted stock awards ⁽⁴⁾	(267		)	600			865			9			(267		)	600
Other	11			(9		)	(19		)	5			11			(9		)

⁽¹⁾

Net gains (losses) on these derivatives are recorded in mortgage banking income as they are used to mitigate the interest rate risk related to MSRs, IRLCs and mortgage loans held-for-sale, all of which are measured at fair value with changes in fair value recorded in mortgage banking income. The net gains on IRLCs related to the origination of mortgage loans that are held-for-sale, which are not included in the table but are considered derivative instruments, were $~~714~~533 million, $~~776~~714 million and $~~927~~776 million for ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014, respectively.


⁽²⁾	Primarily related to derivatives that are economic hedges of credit risk on loans. Net gains (losses) on these derivatives are recorded in other income.


⁽³⁾	Primarily related to hedges of debt securities carried at fair value and hedges of foreign currency-denominated debt. Gains (losses) on these derivatives and the related hedged items are recorded in other income.


⁽⁴⁾	Gains (losses) on these derivatives are recorded in personnel expense.



		Bank of America 2016135

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 ~~by the Corporation~~ through ~~a derivative agreement with the initial transferee. These transactions are accounted for as sales because~~derivatives (e.g., interest rate and/or credit), but the Corporation does not retain control over the assets transferred.

Through December 31, 2016 and 2015, the Corporation transferred $6.6 billion and $7.9 billion of primarily non-U.S. government-guaranteed ~~mortgage-backed securities (MBS)~~MBS to a third-party ~~trust. The Corporation~~trust and received gross cash proceeds of $6.6 billion and $7.9 billion at the transfer dates. At December 31, 2016 and 2015, the fair value of these securities was $6.3 billion and $7.2 billion. The Corporation simultaneously entered into derivatives with those counterparties whereby the Corporation retained certain economic exposures to those securities (e.g., interest rate and/or credit risk). A derivative assetDerivative assets of $43 million and $24 million and ~~a liability~~liabilities of $10 million and $29 million were recorded at December 31, 2016 and 2015, and are included in credit derivatives in the derivative instruments table on page ~~149. The economic exposure retained by the Corporation is typically hedged with interest rate swaps and interest rate swaptions.~~131.

Sales and Trading Revenue

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 trading account profits 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 trading account profits. For debt securities, revenue, with the exception of interest associated with the debt securities, is typically included in trading account profits. 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 trading account profits as part of the initial mark to fair value. For derivatives, the majority of revenue is included in trading account profits. In transactions where the Corporation acts as agent, which include exchange-traded futures and options, fees are recorded in other income.



~~154~~ ~~Bank of America 2015~~

The following table, ~~below,~~ which includes both derivatives and non-derivative cash instruments, identifies the amounts in the respective income statement line items attributable to the Corporation’s sales and trading revenue in Global Markets, categorized by primary risk, for 2016, 2015, ~~2014~~ and ~~2013~~.2014. The difference between total trading account profits in the following table ~~below~~ and in the Consolidated Statement of Income represents trading activities in business segments other than Global Markets. This table includes ~~DVA~~debit valuation and funding valuation adjustment ~~(FVA)~~(DVA/FVA) gains (losses). Global Markets results inNote 24 – Business Segment

Information are presented on a fully taxable-equivalent (FTE) basis. The following table ~~below~~ is not presented on an FTE basis.



136 Bank of America 2016

The results for 2016 and 2015 were impacted by the ~~early~~ adoption of new accounting guidance in 2015 on recognition and measurement of financial instruments. As such, amounts in the "Other" column for 2016 and 2015 exclude unrealized DVA resulting from changes in the Corporation’s own credit spreads on

liabilities accounted for under the fair value option. Amounts for 2014 ~~and 2013~~ include such amounts. For more information on the implementation of new accounting guidance, see Note 1 – Summary of Significant Accounting Principles.



Sales and Trading Revenue

	2015										2016
(Dollars in millions)	Trading Account Profits		Net Interest Income			Other ⁽¹⁾			Total		Trading Account Profits		Net Interest Income			Other ⁽¹⁾			Total
Interest rate risk	$	1,251	$	1,457		$	(319	)	$	2,389	$	1,608	$	1,397		$	304		$	3,309
Foreign exchange risk	1,322		(10		)	(117		)	1,195		1,360		(10		)	(154		)	1,196
Equity risk	2,115		56			2,146			4,317		1,915		15			2,072			4,002
Credit risk	901		2,360			452			3,713		1,258		2,587			425			4,270
Other risk	481		(80		)	61			462		409		(20		)	40			429
Total sales and trading revenue	$	6,070	$	3,783		$	2,223		$	12,076	$	6,550	$	3,969		$	2,687		$	13,206

	2014										2015
Interest rate risk	$	962	$	1,097		$	401		$	2,460	$	1,300	$	1,307		$	(263	)	$	2,344
Foreign exchange risk	1,177		7			(128		)	1,056		1,322		(10		)	(117		)	1,195
Equity risk	1,954		(79		)	2,307			4,182		2,115		56			2,146			4,317
Credit risk	1,396		2,563			617			4,576		910		2,361			452			3,723
Other risk	508		(123		)	106			491		462		(81		)	62			443
Total sales and trading revenue	$	5,997	$	3,465		$	3,303		$	12,765	$	6,109	$	3,633		$	2,280		$	12,022

	2013										2014
Interest rate risk	$	1,217	$	1,158		$	(290	)	$	2,085	$	983	$	946		$	466		$	2,395
Foreign exchange risk	1,169		6			(100		)	1,075		1,177		7			(128		)	1,056
Equity risk	1,994		112			2,066			4,172		1,954		(79		)	2,307			4,182
Credit risk	1,966		2,647			77			4,690		1,404		2,563			617			4,584
Other risk	388		(217		)	69			240		508		(123		)	108			493
Total sales and trading revenue	$	6,734	$	3,706		$	1,822		$	12,262	$	6,026	$	3,314		$	3,370		$	12,710


⁽¹⁾	Represents amounts in investment and brokerage services and other income that are recorded in Global Markets and included in the definition of sales and trading revenue. Includes investment and brokerage services revenue of $~~2.2~~2.1 billion, $2.2 billion and $~~2.1~~2.2 billion for ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014, 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 pre-defined 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 derivative instruments where the Corporation is the seller of credit protection and their expiration at December 31, ~~2015~~2016 and ~~2014~~2015 are summarized in the ~~table below.~~following table. These instruments are classified as investment and non-investment grade based on the credit quality of the underlying referenced obligation. The Corporation considers ratings of BBB- or higher as investment grade. Non-investment grade includes non-rated credit derivative instruments. The Corporation discloses internal categorizations of investment grade and non-investment grade consistent with how risk is managed for these instruments.



		Bank of America ~~2015~~2016 ~~155~~137

Credit Derivative Instruments

December 31, 2015
Carrying Value
(Dollars in millions)
Less than
One Year

One to
Three Years

Three to
Five Years

Over Five
Years
Total
Credit default swaps:

Investment grade $ 84
$ 481
$ 2,203
$ 680
$ 3,448
Non-investment grade 672
3,035
2,386
3,583
9,676
Total 756
3,516
4,589
4,263
13,124
Total return swaps/other:

Investment grade 5
—
—
—
5
Non-investment grade 171
236
8
2
417
Total 176
236
8
2
422
Total credit derivatives $ 932
$ 3,752
$ 4,597
$ 4,265
$ 13,546
Credit-related notes:

Investment grade $ 267
$ 57
$ 444
$ 2,203
$ 2,971
Non-investment grade 61
118
117
1,264
1,560
Total credit-related notes $ 328
$ 175
$ 561
$ 3,467
$ 4,531
Maximum Payout/Notional
Credit default swaps:

Investment grade $ 149,177
$ 280,658
$ 178,990
$ 26,352
$ 635,177
Non-investment grade 81,596
135,850
53,299
18,221
288,966
Total 230,773
416,508
232,289
44,573
924,143
Total return swaps/other:

Investment grade 9,758
—
—
—
9,758
Non-investment grade 20,917
6,989
1,371
623
29,900
Total 30,675
6,989
1,371
623
39,658
Total credit derivatives $ 261,448
$ 423,497
$ 233,660
$ 45,196
$ 963,801


	December 31, 2014
Credit Derivative Instruments
	Carrying Value
											December 31, 2016
											Carrying Value
(Dollars in millions)											Less than One Year		One to Three Years		Three to Five Years		Over Five Years		Total
Credit default swaps:
Investment grade	$	100	$	714	$	1,455	$	939	$	3,208	$	10	$	64	$	535	$	783	$	1,392
Non-investment grade	916		2,107		1,338		4,301		8,662		771		1,053		908		3,339		6,071
Total	1,016		2,821		2,793		5,240		11,870		781		1,117		1,443		4,122		7,463
Total return swaps/other:
Investment grade	24		—		—		—		24		16		—		—		—		16
Non-investment grade	64		247		2		—		313		127		10		2		1		140
Total	88		247		2		—		337		143		10		2		1		156
Total credit derivatives	$	1,104	$	3,068	$	2,795	$	5,240	$	12,207	$	924	$	1,127	$	1,445	$	4,123	$	7,619
Credit-related notes:
Investment grade	$	2	$	365	$	568	$	2,634	$	3,569	$	—	$	12	$	542	$	1,423	$	1,977
Non-investment grade	5		141		85		1,443		1,674		70		22		60		1,318		1,470
Total credit-related notes	$	7	$	506	$	653	$	4,077	$	5,243	$	70	$	34	$	602	$	2,741	$	3,447
	Maximum Payout/Notional										Maximum Payout/Notional
Credit default swaps:
Investment grade	$	132,974	$	342,914	$	242,728	$	28,982	$	747,598	$	121,083	$	143,200	$	116,540	$	21,905	$	402,728
Non-investment grade	54,326		170,580		80,011		20,586		325,503		84,755		67,160		41,001		18,711		211,627
Total	187,300		513,494		322,739		49,568		1,073,101		205,838		210,360		157,541		40,616		614,355
Total return swaps/other:
Investment grade	22,645		—		—		—		22,645		12,792		—		—		—		12,792
Non-investment grade	23,839		10,792		3,268		487		38,386		6,638		5,127		589		208		12,562
Total	46,484		10,792		3,268		487		61,031		19,430		5,127		589		208		25,354
Total credit derivatives	$	233,784	$	524,286	$	326,007	$	50,055	$	1,134,132	$	225,268	$	215,487	$	158,130	$	40,824	$	639,709



	December 31, 2015
	Carrying Value
Credit default swaps:
Investment grade	$	84	$	481	$	2,203	$	680	$	3,448
Non-investment grade	672		3,035		2,386		3,583		9,676
Total	756		3,516		4,589		4,263		13,124
Total return swaps/other:
Investment grade	5		—		—		—		5
Non-investment grade	171		236		8		2		417
Total	176		236		8		2		422
Total credit derivatives	$	932	$	3,752	$	4,597	$	4,265	$	13,546
Credit-related notes:
Investment grade	$	267	$	57	$	444	$	2,203	$	2,971
Non-investment grade	61		118		117		1,264		1,560
Total credit-related notes	$	328	$	175	$	561	$	3,467	$	4,531
	Maximum Payout/Notional
Credit default swaps:
Investment grade	$	149,177	$	280,658	$	178,990	$	26,352	$	635,177
Non-investment grade	81,596		135,850		53,299		18,221		288,966
Total	230,773		416,508		232,289		44,573		924,143
Total return swaps/other:
Investment grade	9,758		—		—		—		9,758
Non-investment grade	20,917		6,989		1,371		623		29,900
Total	30,675		6,989		1,371		623		39,658
Total credit derivatives	$	261,448	$	423,497	$	233,660	$	45,196	$	963,801



~~156~~138 Bank of America ~~2015~~2016

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 to help ensure that certain credit risk-related losses occur within acceptable, predefined limits.

The Corporation manages its market risk exposure to credit derivatives by entering into a variety of offsetting derivative contracts and security positions. For example, in certain instances, the Corporation may purchase credit protection with identical underlying referenced names to offset its exposure. The carrying value and notional amount of written credit derivatives for which the Corporation held purchased credit derivatives with identical underlying referenced names and terms were $4.7 billion and $490.7 billion at December 31, 2016, and $8.2 billion and $706.0 billion at December 31, 2015 ~~and~~ ~~$5.7 billion~~ ~~and~~ ~~$880.6 billion~~ at ~~December 31, 2014~~.

Credit-related notes in the table on page ~~156~~138 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 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 ~~149~~131, the Corporation enters into legally enforceable master netting agreements which reduce risk by permitting the closeout and netting of transactions with the same counterparty upon the occurrence of certain events.

A majority 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, ~~2015~~2016 and ~~2014~~2015, the Corporation held cash and securities collateral of $~~78.9~~85.5 billion and $~~82.0~~78.9 billion, and posted cash and securities collateral of $~~62.7~~71.1 billion and $~~67.9~~62.7 billion in the normal course of business under derivative agreements. This

excludes 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, ~~2015~~2016, 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 approximately $~~2.9~~1.8 billion, including $~~1.6~~1.0 billion for Bank of America, N.A. (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, 2016 and 2015,, the ~~current~~ liability recorded for these derivative contracts was $46 million and $69 million.

The table below presents the amount of additional collateral that would have been contractually required by derivative contracts and other trading agreements at December 31, ~~2015~~2016 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

	December 31, 2015				December 31, 2016
(Dollars in millions)	One incremental notch		Second incremental notch		One incremental notch		Second incremental notch
Bank of America Corporation	$	1,011	$	1,948	$	498	$	866
Bank of America, N.A. and subsidiaries ⁽¹⁾	762		1,474		310		492


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

The table below 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, ~~2015~~2016 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

	December 31, 2015				December 31, 2016
(Dollars in millions)	One incremental notch		Second incremental notch		One incremental notch		Second incremental notch
Derivative liabilities	$	879	$	2,792	$	691	$	1,324
Collateral posted	501		2,269		459		1,026



		Bank of America ~~2015~~2016 ~~157~~139

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 rate and currency changes 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 early adopted, retrospective to January 1, 2015, the provision of new accounting guidance issued in January 2016 that requires the Corporation to record unrealized DVA resulting from changes in the Corporation’s own credit spreads on

liabilities accounted for under the fair value option in accumulated OCI. This new accounting guidance had no impact on the accounting for DVA on derivatives. For additional information, see New Accounting Pronouncements in Note 1 – Summary of Significant Accounting Principles.

~~In 2014, the Corporation implemented a funding valuation adjustment (FVA) into valuation estimates primarily to include~~

funding costs on uncollateralized derivatives and derivatives where the Corporation is not permitted to use the collateral it receives. The change in estimate resulted in a net pretax FVA charge of $497 million, at the time of implementation, including a charge of $632 million related to funding costs, partially offset by a funding benefit of $135 million, both related to derivative asset exposures. The net FVA charge was recorded as a reduction to sales and trading revenue in ~~Global Markets~~. The Corporation calculates this valuation adjustment based on modeled expected exposure profiles discounted for the funding risk premium inherent in these derivatives. FVA related to derivative assets and liabilities is the effect of funding costs on the fair value of these derivatives.

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 currency 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 trading account profits, on a gross and net of hedge basis for ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014. 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.



Valuation Adjustments on Derivatives

Gains (Losses)
	2015						2014						2013						2016					2015						2014
(Dollars in millions)	Gross			Net			Gross			Net			Gross			Net			Gross		Net			Gross			Net			Gross			Net
Derivative assets (CVA) ⁽¹⁾	$	255		$	227		$	(22	)	$	191		$	738		$	(96	)	$	374	$	214		$	255		$	227		$	(22	)	$	191
Derivative assets (FVA) ⁽²⁾	(34		)	(34		)	(632		)	(632		)	n/a			n/a
Derivative assets/liabilities (FVA) ⁽¹⁾																			186		102			16			16			(497		)	(497		)
Derivative liabilities (DVA) ⁽³⁾⁽¹⁾	(18		)	(153		)	(28		)	(150		)	(39		)	(75		)	24		(141		)	(18		)	(153		)	(28		)	(150		)
Derivative liabilities (FVA) ⁽²⁾	50			50			135			135			n/a			n/a


⁽¹⁾	At December 31, 2016, 2015 ~~2014~~ and ~~2013~~2014, ~~the~~ cumulative CVA reduced the derivative assets balance by $~~1.4~~1.0 billion, $~~1.6~~1.4 billion and $1.6 billion, ~~respectively.~~


⁽²⁾	~~FVA was adopted in 2014 and the~~ cumulative FVA reduced the net derivatives balance by $296 million, $481 million and $497 million at ~~December 31, 2015~~, and ~~2014~~.


⁽³⁾	At ~~December 31, 2015, 2014 and 2013, the~~ cumulative DVA reduced the derivative liabilities balance by $~~750~~774 million, $~~769~~750 million and $~~803~~769 million, respectively.

~~n/a = not applicable~~



~~158~~140 Bank of America ~~2015~~2016

NOTE 3 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, HTM debt securities and AFS marketable equity securities at December 31, ~~2015~~2016 and ~~2014.~~2015.



Debt Securities and Available-for-Sale Marketable Equity Securities	Debt Securities and Available-for-Sale Marketable Equity Securities									Debt Securities and Available-for-Sale Marketable Equity Securities

	December 31, 2015									December 31, 2016
(Dollars in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost			Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale debt securities
Mortgage-backed securities:
Agency	$	229,847	$	788	$	(1,688	)	$	228,947	$	190,809		$	640	$	(1,963	)	$	189,486
Agency-collateralized mortgage obligations	10,930		126		(71		)	10,985		8,296			85		(51		)	8,330
Commercial	7,176		50		(61		)	7,165		12,594			21		(293		)	12,322
Non-agency residential ⁽¹⁾	3,031		218		(70		)	3,179		1,863			181		(31		)	2,013
Total mortgage-backed securities	250,984		1,182		(1,890		)	250,276		213,562			927		(2,338		)	212,151
U.S. Treasury and agency securities	25,075		211		(9		)	25,277		48,800			204		(752		)	48,252
Non-U.S. securities	5,743		27		(3		)	5,767		6,372			13		(3		)	6,382
Corporate/Agency bonds	243		3		(3		)	243
Other taxable securities, substantially all asset-backed securities	10,238		50		(86		)	10,202		10,573			64		(23		)	10,614
Total taxable securities	292,283		1,473		(1,991		)	291,765		279,307			1,208		(3,116		)	277,399
Tax-exempt securities	13,978		63		(33		)	14,008		17,272			72		(184		)	17,160
Total available-for-sale debt securities	306,261		1,536		(2,024		)	305,773		296,579			1,280		(3,300		)	294,559
Less: Available-for-sale securities of business held for sale⁽²⁾										(619		)	—		—			(619		)
Other debt securities carried at fair value	16,678		103		(174		)	16,607		19,748			121		(149		)	19,720
Total debt securities carried at fair value ⁽²⁾	322,939		1,639		(2,198		)	322,380
Total debt securities carried at fair value										315,708			1,401		(3,449		)	313,660
Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities	84,625		271		(850		)	84,046		117,071			248		(2,034		)	115,285
Total debt securities	$	407,564	$	1,910	$	(3,048	)	$	406,426
Available-for-sale marketable equity securities ⁽³⁾	$	326	$	99	$	—		$	425
Total debt securities ⁽³⁾										$	432,779		$	1,649	$	(5,483	)	$	428,945
Available-for-sale marketable equity securities ⁽⁴⁾										$	325		$	51	$	(1	)	$	375

	December 31, 2014									December 31, 2015
Available-for-sale debt securities
Mortgage-backed securities:
Agency	$	163,592	$	2,040	$	(593	)	$	165,039	$	229,356		$	1,061	$	(1,470	)	$	228,947
Agency-collateralized mortgage obligations	14,175		152		(79		)	14,248		10,892			148		(55		)	10,985
Commercial	3,931		69		—			4,000		7,200			30		(65		)	7,165
Non-agency residential ⁽¹⁾	4,244		287		(77		)	4,454		3,031			219		(71		)	3,179
Total mortgage-backed securities	185,942		2,548		(749		)	187,741		250,479			1,458		(1,661		)	250,276
U.S. Treasury and agency securities	69,267		360		(32		)	69,595		25,075			211		(9		)	25,277
Non-U.S. securities	6,208		33		(11		)	6,230		5,743			27		(3		)	5,767
Corporate/Agency bonds	361		9		(2		)	368
Other taxable securities, substantially all asset-backed securities	10,774		39		(22		)	10,791		10,475			54		(84		)	10,445
Total taxable securities	272,552		2,989		(816		)	274,725		291,772			1,750		(1,757		)	291,765
Tax-exempt securities	9,556		12		(19		)	9,549		13,978			63		(33		)	14,008
Total available-for-sale debt securities	282,108		3,001		(835		)	284,274		305,750			1,813		(1,790		)	305,773
Other debt securities carried at fair value	36,524		261		(364		)	36,421		16,678			103		(174		)	16,607
Total debt securities carried at fair value ⁽²⁾	318,632		3,262		(1,199		)	320,695
Total debt securities carried at fair value										322,428			1,916		(1,964		)	322,380
Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities	59,766		486		(611		)	59,641		84,508			330		(792		)	84,046
Total debt securities	$	378,398	$	3,748	$	(1,810	)	$	380,336
Available-for-sale marketable equity securities ⁽³⁾	$	336	$	27	$	—		$	363
Total debt securities ⁽³⁾										$	406,936		$	2,246	$	(2,756	)	$	406,426
Available-for-sale marketable equity securities ⁽⁴⁾										$	326		$	99	$	—		$	425


⁽¹⁾	At December 31, ~~2015~~2016 and ~~2014~~2015, the underlying collateral type included approximately 7160 percent and 7671 percent prime, 1519 percent and 1415 percent Alt-A, and 1421 percent and 1014 percent subprime.


⁽²⁾	Represents AFS debt securities of business held for sale of which there were no unrealized gains or losses at December 31, 2016.

⁽³⁾

The Corporation had debt securities from FNMA and FHLMC that each exceeded 10 percent of shareholders’ equity, with an amortized cost of $~~146.2~~156.4 billion and $~~53.4~~48.7 billion, and a fair value of $154.4 billion and $48.3 billion at December 31, 2016. Debt securities from FNMA and FHLMC that exceeded 10 percent of shareholders’ equity had an amortized cost of $145.8 billion and $53.3 billion, and a fair value of $145.5 billion and $53.2 billion at December 31, 2015. ~~Debt securities from FNMA and FHLMC that exceeded 10 percent of shareholders’ equity had an amortized cost of~~ ~~$130.7 billion~~ ~~and~~ ~~$28.3 billion, and a fair value of~~ ~~$131.4 billion~~ ~~and~~ ~~$28.6 billion~~ at ~~December 31, 2014~~.


⁽³⁾⁽⁴⁾	Classified in other assets on the Consolidated Balance Sheet.

At December 31, ~~2015,~~2016, the accumulated net unrealized loss on AFS debt securities included in accumulated OCI was ~~$300 million,~~$1.3 billion, net of the related income tax benefit of ~~$188~~$721 million. At December 31, ~~2015~~2016 and ~~2014,~~2015, the Corporation had nonperforming AFS debt securities of ~~$188~~$121 million and ~~$161~~$188 million.



		~~Bank of America 2015159~~

The following table ~~below~~ presents the components of other debt securities carried at fair value where the changes in fair value are reported in other income. In ~~2015~~,2016, the Corporation recorded unrealized mark-to-market net gains of~~$43~~ $51 million and realized net losses of ~~$313~~$128 million, compared to unrealized mark-to-market net gains of ~~$1.2 billion~~$62 million and realized net ~~gains~~losses of ~~$275~~$324 million in ~~2014~~.2015. These amounts exclude hedge results.

Other Debt Securities Carried at Fair Value

December 31
(Dollars in millions) 2015 2014
Mortgage-backed securities:
Agency $ —
$ 15,704
Agency-collateralized mortgage obligations 7
—
Non-agency residential 3,490
3,745
Total mortgage-backed securities 3,497
19,449
U.S. Treasury and agency securities —
1,541
Non-U.S. securities ⁽¹⁾
12,843
15,132
Other taxable securities, substantially all asset-backed securities 267
299
Total $ 16,607
$ 36,421



		Bank of America 2016141




Other Debt Securities Carried at Fair Value

	December 31
(Dollars in millions)	2016		2015
Mortgage-backed securities:
Agency-collateralized mortgage obligations	$	5	$	7
Non-agency residential	3,139		3,490
Total mortgage-backed securities	3,144		3,497
Non-U.S. securities ⁽¹⁾	16,336		12,843
Other taxable securities, substantially all asset-backed securities	240		267
Total	$	19,720	$	16,607


⁽¹⁾	These securities are primarily used to satisfy certain international regulatory liquidity requirements.

The gross realized gains and losses on sales of AFS debt securities for 2016, 2015, ~~2014~~ and ~~2013~~2014 are presented in the ~~table below.~~following table.



Gains and Losses on Sales of AFS Debt Securities

(Dollars in millions)	2015			2014			2013			2016			2015			2014
Gross gains	$	1,118		$	1,366		$	1,302		$	520		$	1,174		$	1,504
Gross losses	(27		)	(12		)	(31		)	(30		)	(36		)	(23		)
Net gains on sales of AFS debt securities	$	1,091		$	1,354		$	1,271		$	490		$	1,138		$	1,481
Income tax expense attributable to realized net gains on sales of AFS debt securities	$	415		$	515		$	470		$	186		$	432		$	563



~~160~~ ~~Bank of America 2015~~

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, ~~2015~~2016 and ~~2014~~2015.



Temporarily Impaired and Other-than-temporarily Impaired AFS Debt Securities	Temporarily Impaired and Other-than-temporarily Impaired AFS Debt Securities															Temporarily Impaired and Other-than-temporarily Impaired AFS Debt Securities

	December 31, 2015															December 31, 2016
	Less than Twelve Months					Twelve Months or Longer					Total					Less than Twelve Months					Twelve Months or Longer					Total
(Dollars in millions)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Temporarily impaired AFS debt securities
Mortgage-backed securities:
Agency	$	131,511	$	(1,245	)	$	14,895	$	(443	)	$	146,406	$	(1,688	)	$	135,210	$	(1,846	)	$	3,770	$	(117	)	$	138,980	$	(1,963	)
Agency-collateralized mortgage obligations	1,271		(9		)	1,637		(62		)	2,908		(71		)	3,229		(25		)	1,028		(26		)	4,257		(51		)
Commercial	4,066		(61		)	—		—			4,066		(61		)	9,018		(293		)	—		—			9,018		(293		)
Non-agency residential	553		(5		)	723		(32		)	1,276		(37		)	212		(1		)	204		(13		)	416		(14		)
Total mortgage-backed securities	137,401		(1,320		)	17,255		(537		)	154,656		(1,857		)	147,669		(2,165		)	5,002		(156		)	152,671		(2,321		)
U.S. Treasury and agency securities	1,172		(5		)	190		(4		)	1,362		(9		)	28,462		(752		)	—		—			28,462		(752		)
Non-U.S. securities	—		—			134		(3		)	134		(3		)	52		(1		)	142		(2		)	194		(3		)
Corporate/Agency bonds	107		(3		)	—		—			107		(3		)
Other taxable securities, substantially all asset-backed securities	5,071		(69		)	792		(17		)	5,863		(86		)	762		(5		)	1,438		(18		)	2,200		(23		)
Total taxable securities	143,751		(1,397		)	18,371		(561		)	162,122		(1,958		)	176,945		(2,923		)	6,582		(176		)	183,527		(3,099		)
Tax-exempt securities	4,400		(12		)	1,877		(21		)	6,277		(33		)	4,782		(148		)	1,873		(36		)	6,655		(184		)
Total temporarily impaired AFS debt securities	148,151		(1,409		)	20,248		(582		)	168,399		(1,991		)	181,727		(3,071		)	8,455		(212		)	190,182		(3,283		)
Other-than-temporarily impaired AFS debt securities ⁽¹⁾
Non-agency residential mortgage-backed securities	481		(19		)	98		(14		)	579		(33		)	94		(1		)	401		(16		)	495		(17		)
Total temporarily impaired and other-than-temporarily impaired AFS debt securities	$	148,632	$	(1,428	)	$	20,346	$	(596	)	$	168,978	$	(2,024	)	$	181,821	$	(3,072	)	$	8,856	$	(228	)	$	190,677	$	(3,300	)

	December 31, 2014															December 31, 2015
Temporarily impaired AFS debt securities
Mortgage-backed securities:
Agency	$	1,366	$	(8	)	$	43,118	$	(585	)	$	44,484	$	(593	)	$	115,502	$	(1,082	)	$	13,083	$	(388	)	$	128,585	$	(1,470	)
Agency-collateralized mortgage obligations	2,242		(19		)	3,075		(60		)	5,317		(79		)	2,536		(19		)	1,212		(36		)	3,748		(55		)
Commercial																4,587		(65		)	—		—			4,587		(65		)
Non-agency residential	307		(3		)	809		(41		)	1,116		(44		)	553		(5		)	723		(33		)	1,276		(38		)
Total mortgage-backed securities	3,915		(30		)	47,002		(686		)	50,917		(716		)	123,178		(1,171		)	15,018		(457		)	138,196		(1,628		)
U.S. Treasury and agency securities	10,121		(22		)	667		(10		)	10,788		(32		)	1,172		(5		)	190		(4		)	1,362		(9		)
Non-U.S. securities	157		(9		)	32		(2		)	189		(11		)	—		—			134		(3		)	134		(3		)
Corporate/Agency bonds	43		(1		)	93		(1		)	136		(2		)
Other taxable securities, substantially all asset-backed securities	575		(3		)	1,080		(19		)	1,655		(22		)	4,936		(67		)	869		(17		)	5,805		(84		)
Total taxable securities	14,811		(65		)	48,874		(718		)	63,685		(783		)	129,286		(1,243		)	16,211		(481		)	145,497		(1,724		)
Tax-exempt securities	980		(1		)	680		(18		)	1,660		(19		)	4,400		(12		)	1,877		(21		)	6,277		(33		)
Total temporarily impaired AFS debt securities	15,791		(66		)	49,554		(736		)	65,345		(802		)	133,686		(1,255		)	18,088		(502		)	151,774		(1,757		)
Other-than-temporarily impaired AFS debt securities ⁽¹⁾
Non-agency residential mortgage-backed securities	555		(33		)	—		—			555		(33		)	481		(19		)	98		(14		)	579		(33		)
Total temporarily impaired and other-than-temporarily impaired AFS debt securities	$	16,346	$	(99	)	$	49,554	$	(736	)	$	65,900	$	(835	)	$	134,167	$	(1,274	)	$	18,186	$	(516	)	$	152,353	$	(1,790	)


⁽¹⁾	Includes ~~other-than-temporarily impaired~~OTTI AFS debt securities on which an OTTI loss, primarily related to changes in interest rates, remains in accumulated OCI.



		142Bank of America ~~2015161~~2016

The Corporation recorded OTTI losses on AFS debt securities in ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014 as presented in the ~~Net Credit-related Impairment Losses Recognized in Earnings~~following table. Substantially all OTTI losses in ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014 consisted of credit losses on non-agency residential mortgage-backed securities (RMBS) and were recorded in other income in the Consolidated Statement of Income. ~~The credit losses on the RMBS in 2015 were driven by decreases in the estimated RMBS cash flows primarily due to a model change resulting in the refinement of expected cash flows.~~

A debt security is impaired when its fair value is less than its amortized cost. If the Corporation intends or will more-likely-than-not be required to sell a debt security prior to recovery, the entire impairment loss is recorded in the Consolidated Statement of Income. For AFS debt securities the Corporation does not intend or will not more-likely-than-not be required to sell, an analysis is performed to determine if any of the impairment is due to credit or whether it is due to other factors (e.g., interest rate). Credit losses are considered unrecoverable and are recorded in the Consolidated Statement of Income with the remaining unrealized losses recorded in OCI. In certain instances, the credit loss on a

~~debt security may exceed the total impairment, in which case, the excess of the credit loss over the total impairment is recorded as an unrealized gain in OCI.~~



Net Credit-related Impairment Losses Recognized in Earnings

(Dollars in millions)	2015			2014			2013			2016			2015			2014
Total OTTI losses	$	(111	)	$	(30	)	$	(21	)	$	(31	)	$	(111	)	$	(30	)
Less: non-credit portion of total OTTI losses recognized in OCI	30			14			1			12			30			14
Net credit-related impairment losses recognized in earnings	$	(81	)	$	(16	)	$	(20	)	$	(19	)	$	(81	)	$	(16	)

The table below presents a rollforward of the credit losses recognized in earnings in ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014 on AFS debt securities that the Corporation does not have the intent to sell or will not more-likely-than-not be required to sell.



Rollforward of OTTI Credit Losses Recognized	Rollforward of OTTI Credit Losses Recognized								Rollforward of OTTI Credit Losses Recognized

(Dollars in millions)	2015			2014		2013			2016			2015			2014
Balance, January 1	$	200		$	184	$	243		$	266		$	200		$	184
Additions for credit losses recognized on AFS debt securities that had no previous impairment losses	52			14		6			2			52			14
Additions for credit losses recognized on AFS debt securities that had previously incurred impairment losses	29			2		14			17			29			2
Reductions for AFS debt securities matured, sold or intended to be sold	(15		)	—		(79		)	(32		)	(15		)	—
Balance, December 31	$	266		$	200	$	184		$	253		$	266		$	200

The Corporation estimates the portion of a loss on a security that is attributable to credit using a discounted cash flow model and estimates the expected cash flows of the underlying collateral using internal credit, 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. Assumptions used for the underlying loans that support the MBS can vary widely from loan to loan and are influenced by such factors as loan interest rate, geographic location of the borrower, borrower characteristics and collateral type. Based on these assumptions, the Corporation then determines how the underlying collateral cash flows will be distributed to each MBS issued from the applicable special purpose entity. Expected principal and interest cash flows on an impaired AFS debt security are discounted using the effective yield of each individual impaired AFS debt security.

Significant assumptions used in estimating the expected cash flows for measuring credit losses on non-agency RMBS were as follows at December 31, ~~2015~~2016.



Significant Assumptions

			Range ⁽¹⁾						Range ⁽¹⁾
	Weighted- average		10th Percentile ⁽²⁾		90th Percentile ⁽²⁾		Weighted- average		10th Percentile ⁽²⁾		90th Percentile ⁽²⁾
Prepayment speed	12.6	%	3.8	%	25.5	%	13.8	%	4.6	%	27.0	%
Loss severity	32.6		12.9		34.8		20.1		8.8		36.5
Life default rate	26.0		0.8		86.1		20.4		0.7		77.4


⁽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.

~~Constant~~Annual constant prepayment speed and loss severity rates are projected considering collateral characteristics such as ~~LTV,~~loan-to-value (LTV), creditworthiness of borrowers as measured using ~~FICO~~Fair Isaac Corporation (FICO) scores, and geographic concentrations. The weighted-average severity by collateral type was ~~29.2~~17.0 percent for prime, ~~31.4~~18.8 percent for Alt-A and ~~42.9~~30.4 percent for subprime at December 31, ~~2015.~~2016. Additionally, default rates are projected by considering collateral characteristics including, but not limited to, LTV, FICO score and geographic concentration. Weighted-average life default rates by collateral type were ~~16.1~~13.9 percent for prime, ~~28.0~~21.7 percent for Alt-A and ~~27.2~~20.9 percent for subprime at December 31, ~~2015.~~2016.



		~~162~~Bank of America ~~2015~~2016143

The ~~expected~~remaining contractual maturity distribution and yields of the Corporation’s debt securities carried at fair value and HTM debt securities at December 31, ~~2015~~2016 are summarized in the table below. Actual ~~maturities~~duration and yields may differ ~~from~~as prepayments on the ~~contractual~~loans underlying the mortgages or ~~expected maturities since borrowers may have~~other ABS are passed through to the ~~right to prepay obligations with or without prepayment penalties.~~Corporation.



Maturities of Debt Securities Carried at Fair Value and Held-to-maturity Debt Securities

	December 31, 2015																				December 31, 2016
	Due in One Year or Less				Due after One Year through Five Years				Due after Five Years through Ten Years				Due after Ten Years				Total				Due in One Year or Less				Due after One Year through Five Years				Due after Five Years through Ten Years				Due after Ten Years				Total
(Dollars in millions)	Amount		Yield ⁽¹⁾		Amount		Yield ⁽¹⁾		Amount		Yield ⁽¹⁾		Amount		Yield ⁽¹⁾		Amount		Yield ⁽¹⁾		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	$	57	4.40	%	$	28,943	2.40	%	$	197,797	2.80	%	$	3,050	2.90	%	$	229,847	2.75	%	$	2	4.50	%	$	47	4.45	%	$	381	2.56	%	$	190,379	3.23	%	$	190,809	3.23	%
Agency-collateralized mortgage obligations	157		1.10		3,077		2.20		7,702		2.80		—		—		10,936		2.61		—		—		—		—		—		—		8,300		3.18		8,300		3.18
Commercial	205		2.16		615		2.10		6,356		2.70		—		—		7,176		2.63		48		8.60		558		1.96		11,632		2.47		356		2.58		12,594		2.47
Non-agency residential	320		5.00		1,123		4.99		1,165		4.18		3,989		7.90		6,597		6.60		—		—		—		—		12		0.01		5,016		8.50		5,028		8.48
Total mortgage-backed securities	739		3.31		33,758		2.46		213,020		2.80		7,039		5.73		254,556		3.03		50		8.32		605		2.15		12,025		2.46		204,051		3.36		216,731		3.31
U.S. Treasury and agency securities	516		0.19		23,103		1.70		1,454		3.14		2		4.57		25,075		1.75		517		0.47		34,898		1.57		13,234		1.58		151		5.42		48,800		1.57
Non-U.S. securities	16,707		0.82		1,864		3.08		6		2.79		—		—		18,577		1.04
Corporate/Agency bonds	40		3.97		69		4.20		131		3.41		3		3.67		243		3.93
Non-U.S. securities ⁽²⁾																					21,164		0.25		1,097		1.92		206		1.30		240		6.60		22,707		0.41
Other taxable securities, substantially all asset-backed securities	2,918		1.11		4,596		1.28		2,268		2.38		728		3.96		10,510		1.67		2,040		1.77		5,102		1.63		2,279		2.71		1,396		3.18		10,817		2.08
Total taxable securities	20,920		0.94		63,390		2.13		216,879		2.81		7,772		5.57		308,961		2.61		23,771		0.40		41,702		1.59		27,744		2.05		205,838		3.36		299,055		2.76
Tax-exempt securities	836		1.27		5,127		1.31		5,879		1.35		2,136		1.55		13,978		1.36		646		1.13		6,563		1.49		7,846		1.57		2,217		1.53		17,272		1.52
Total amortized cost of debt securities carried at fair value	$	21,756	0.95		$	68,517	2.06		$	222,758	2.77		$	9,908	4.70		$	322,939	2.56
Amortized cost of HTM debt securities⁽²⁾	$	568	0.01		$	18,325	2.30		$	62,978	2.50		$	2,754	2.82		$	84,625	2.45
Total amortized cost of debt securities carried at fair value⁽²⁾																					$	24,417	0.42		$	48,265	1.58		$	35,590	1.95		$	208,055	3.34		$	316,327	2.69
Amortized cost of HTM debt securities⁽³⁾																					$	—	—		$	26	4.01		$	971	2.32		$	116,074	3.01		$	117,071	3.01

Debt securities carried at fair value
Mortgage-backed securities:
Agency	$	59			$	29,150			$	196,720			$	3,018			$	228,947			$	2			$	48			$	382			$	189,054			$	189,486
Agency-collateralized mortgage obligations	157				3,056				7,779				—				10,992				—				—				—				8,335				8,335
Commercial	223				618				6,324				—				7,165				48				559				11,378				337				12,322
Non-agency residential	354				1,102				1,263				3,950				6,669				—				—				19				5,133				5,152
Total mortgage-backed securities	793				33,926				212,086				6,968				253,773				50				607				11,779				202,859				215,295
U.S. Treasury and agency securities	516				23,266				1,493				2				25,277				517				34,784				12,788				163				48,252
Non-U.S. securities	16,720				1,884				6				—				18,610
Corporate/Agency bonds	41				70				128				4				243
Non-U.S. securities ⁽²⁾																					21,165				1,100				208				245				22,718
Other taxable securities, substantially all asset-backed securities	3,102				4,349				2,296				722				10,469				2,036				5,078				2,303				1,437				10,854
Total taxable securities	21,172				63,495				216,009				7,696				308,372				23,768				41,569				27,078				204,704				297,119
Tax-exempt securities	836				5,161				5,882				2,129				14,008				646				6,561				7,754				2,199				17,160
Total debt securities carried at fair value	$	22,008			$	68,656			$	221,891			$	9,825			$	322,380
Fair value of HTM debt securities ⁽²⁾	$	569			$	18,356			$	62,360			$	2,761			$	84,046
Total debt securities carried at fair value⁽²⁾																					$	24,414			$	48,130			$	34,832			$	206,903			$	314,279
Fair value of HTM debt securities ⁽³⁾																					$	—			$	26			$	959			$	114,300			$	115,285

⁽¹⁾

~~Average~~The average yield is computed ~~using the effective yield of each security at the end of the period, weighted~~ based on a constant effective interest rate over the ~~amortized cost~~contractual life of each security. The ~~effective~~average yield considers the contractual coupon and the amortization of premiums and accretion of discounts, ~~and excludes~~excluding the effect of related hedging derivatives.


⁽²⁾	Includes $619 million of amortized cost and fair value for AFS debt securities of business held for sale. These AFS debt securities mature in one year or less and have an average yield of 0.21 percent.


⁽³⁾	Substantially all U.S. agency MBS.

~~Certain Corporate and Strategic Investments~~

~~The Corporation’s 49 percent investment in a merchant services joint venture, which is recorded in other assets on the Consolidated Balance Sheet and in~~ ~~All Other, had a carrying value of $3.0 billion and $3.1 billion at December 31, 2015 and 2014. For additional information, see~~ ~~Note 12 – Commitments and Contingencies~~.

~~In 2013, the Corporation sold its remaining investment in China Construction Bank Corporation (CCB) and realized a pretax gain of $753 million in~~ ~~All Other~~ reported in equity investment income in the Consolidated Statement of Income. The strategic assistance agreement between the Corporation and CCB, which includes cooperation in specific business areas, extends through 2016.

The Corporation holds investments in partnerships that construct, own and operate real estate projects that qualify for low income housing tax credits. The Corporation earns a return primarily through the receipt of tax credits allocated to the real estate projects.

Total low income housing tax credit investments were $7.1 billion and $6.6 billion at December 31, 2015 and 2014. These investments are reported in other assets on the Consolidated Balance Sheet. The Corporation had unfunded commitments to provide capital contributions of $2.4 billion and $2.2 billion to these partnerships at December 31, 2015 and 2014, which are expected to be paid over the next five years. These commitments are reported in accrued expenses and other liabilities on the Consolidated Balance Sheet. During 2015 and 2014, the Corporation recognized tax credits and other tax benefits from investments in affordable housing partnerships of $928 million and $920 million, partially offset by pretax losses recognized in other income of $629 million and $601 million.



		144Bank of America ~~2015163~~2016

NOTE 4 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, ~~2015~~2016 and ~~2014~~2015.



	December 31, 2015																								December 31, 2016
(Dollars in millions)	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			Total Current or Less Than 30 Days Past Due ⁽³⁾			Purchased Credit-impaired ⁽⁴⁾			Loans Accounted for Under the Fair Value Option			Total Outstandings			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			Total Current or Less Than 30 Days Past Due ⁽³⁾			Purchased Credit-impaired ⁽⁴⁾			Loans Accounted for Under the Fair Value Option			Total Outstandings
Consumer real estate
Core portfolio
Residential mortgage	$	1,603		$	645		$	3,834		$	6,082		$	139,763								$	145,845		$	1,340		$	425		$	1,213		$	2,978		$	153,519								$	156,497
Home equity	225			104			719			1,048			47,216									48,264			239			105			451			795			48,578									49,373
Legacy Assets & Servicing portfolio
Non-core portfolio
Residential mortgage ⁽⁵⁾	1,656			890			6,019			8,565			21,435			$	12,066					42,066			1,338			674			5,343			7,355			17,818			$	10,127					35,300
Home equity	310			163			1,030			1,503			21,562			4,619						27,684			260			136			832			1,228			12,231			3,611						17,070
Credit card and other consumer
U.S. credit card	454			332			789			1,575			88,027									89,602			472			341			782			1,595			90,683									92,278
Non-U.S. credit card	39			31			76			146			9,829									9,975			37			27			66			130			9,084									9,214
Direct/Indirect consumer ⁽⁶⁾	227			62			42			331			88,464									88,795			272			79			34			385			93,704									94,089
Other consumer ⁽⁷⁾	18			3			4			25			2,042									2,067			26			8			6			40			2,459									2,499
Total consumer	4,532			2,230			12,513			19,275			418,338			16,685						454,298			3,984			1,795			8,727			14,506			428,076			13,738						456,320
Consumer loans accounted for under the fair value option ⁽⁸⁾																			$	1,871		1,871																					$	1,051		1,051
Total consumer loans and leases	4,532			2,230			12,513			19,275			418,338			16,685			1,871			456,169			3,984			1,795			8,727			14,506			428,076			13,738			1,051			457,371
Commercial
U.S. commercial	444			148			332			924			251,847									252,771			952			263			400			1,615			268,757									270,372
Commercial real estate ⁽⁹⁾	36			11			82			129			57,070									57,199			20			10			56			86			57,269									57,355
Commercial lease financing	169			32			22			223			27,147									27,370			167			21			27			215			22,160									22,375
Non-U.S. commercial	6			1			1			8			91,541									91,549			348			4			5			357			89,040									89,397
U.S. small business commercial	83			41			72			196			12,680									12,876			96			49			84			229			12,764									12,993
Total commercial	738			233			509			1,480			440,285									441,765			1,583			347			572			2,502			449,990									452,492
Commercial loans accounted for under the fair value option ⁽⁸⁾																			5,067			5,067																					6,034			6,034
Total commercial loans and leases	738			233			509			1,480			440,285						5,067			446,832			1,583			347			572			2,502			449,990						6,034			458,526
Total loans and leases	$	5,270		$	2,463		$	13,022		$	20,755		$	858,623		$	16,685		$	6,938		$	903,001
Percentage of outstandings	0.59		%	0.27		%	1.44		%	2.30		%	95.08		%	1.85		%	0.77		%	100.00		%
Total consumer and commercial loans and leases⁽¹⁰⁾																									$	5,567		$	2,142		$	9,299		$	17,008		$	878,066		$	13,738		$	7,085		$	915,897
Less: Loans of business held for sale⁽¹⁰⁾																																														(9,214		)
Total loans and leases ⁽¹¹⁾																																														$	906,683
Percentage of outstandings ⁽¹⁰⁾																									0.61		%	0.23		%	1.02		%	1.86		%	95.87		%	1.50		%	0.77		%	100.00		%


⁽¹⁾	Consumer real estate loans 30-59 days past due includes fully-insured loans of $1.1 billion and nonperforming loans of $266 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $547 million and nonperforming loans of $216 million.


⁽²⁾	Consumer real estate includes fully-insured loans of $4.8 billion.


⁽³⁾	Consumer real estate includes $2.5 billion and direct/indirect consumer includes $27 million of nonperforming loans.


⁽⁴⁾	PCI loan amounts are shown gross of the valuation allowance.


⁽⁵⁾	Total outstandings includes pay option loans of $1.8 billion. The Corporation no longer originates this product.


⁽⁶⁾	Total outstandings includes auto and specialty lending loans of $48.9 billion, unsecured consumer lending loans of $585 million, U.S. securities-based lending loans of $40.1 billion, non-U.S. consumer loans of $3.0 billion, student loans of $497 million and other consumer loans of $1.1 billion.


⁽⁷⁾	Total outstandings includes consumer finance loans of $465 million, consumer leases of $1.9 billion and consumer overdrafts of $157 million.


⁽⁸⁾	Consumer loans accounted for under the fair value option were residential mortgage loans of $710 million and home equity loans of $341 million. Commercial loans accounted for under the fair value option were U.S. commercial loans of $2.9 billion and non-U.S. commercial loans of $3.1 billion. For additional information, see Note 20 – Fair Value Measurements and Note 21 – Fair Value Option.


⁽⁹⁾	Total outstandings includes U.S. commercial real estate loans of $54.3 billion and non-U.S. commercial real estate loans of $3.1 billion.


⁽¹⁰⁾	Includes non-U.S. credit card loans, which are included in assets of business held for sale on the Consolidated Balance Sheet.


⁽¹¹⁾	The Corporation pledged $143.1 billion of loans to secure potential borrowing capacity with the Federal Reserve Bank and Federal Home Loan Bank (FHLB). This amount is not included in the parenthetical disclosure of loans and leases pledged as collateral on the Consolidated Balance Sheet as there were no related outstanding borrowings.



		Bank of America 2016145




	December 31, 2015
(Dollars in millions)	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			Total Current or Less Than 30 Days Past Due ⁽³⁾			Purchased Credit-impaired ⁽⁴⁾			Loans Accounted for Under the Fair Value Option			Total Outstandings
Consumer real estate
Core portfolio
Residential mortgage	$	1,214		$	368		$	1,414		$	2,996		$	138,799								$	141,795
Home equity	200			93			579			872			54,045									54,917
Non-core portfolio
Residential mortgage ⁽⁵⁾	2,045			1,167			8,439			11,651			22,399			$	12,066					46,116
Home equity	335			174			1,170			1,679			14,733			4,619						21,031
Credit card and other consumer
U.S. credit card	454			332			789			1,575			88,027									89,602
Non-U.S. credit card	39			31			76			146			9,829									9,975
Direct/Indirect consumer ⁽⁶⁾	227			62			42			331			88,464									88,795
Other consumer ⁽⁷⁾	18			3			4			25			2,042									2,067
Total consumer	4,532			2,230			12,513			19,275			418,338			16,685						454,298
Consumer loans accounted for under the fair value option ⁽⁸⁾																			$	1,871		1,871
Total consumer loans and leases	4,532			2,230			12,513			19,275			418,338			16,685			1,871			456,169
Commercial
U.S. commercial	444			148			332			924			251,847									252,771
Commercial real estate ⁽⁹⁾	36			11			82			129			57,070									57,199
Commercial lease financing	150			29			20			199			21,153									21,352
Non-U.S. commercial	6			1			1			8			91,541									91,549
U.S. small business commercial	83			41			72			196			12,680									12,876
Total commercial	719			230			507			1,456			434,291									435,747
Commercial loans accounted for under the fair value option ⁽⁸⁾																			5,067			5,067
Total commercial loans and leases	719			230			507			1,456			434,291						5,067			440,814
Total loans and leases⁽¹⁰⁾	$	5,251		$	2,460		$	13,020		$	20,731		$	852,629		$	16,685		$	6,938		$	896,983
Percentage of outstandings	0.59		%	0.27		%	1.45		%	2.31		%	95.06		%	1.86		%	0.77		%	100.00		%


⁽¹⁾	Consumer real estate loans 30-59 days past due includes fully-insured loans of $1.7 billion and nonperforming loans of $379 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $1.0 billion and nonperforming loans of $297 million.


⁽²⁾	Consumer real estate includes fully-insured loans of $7.2 billion.


⁽³⁾	Consumer real estate includes $3.0 billion and direct/indirect consumer includes $21 million of nonperforming loans.


⁽⁴⁾	PCI loan amounts are shown gross of the valuation allowance.


⁽⁵⁾	Total outstandings includes pay option loans of $2.3 billion. The Corporation no longer originates this product.


⁽⁶⁾	Total outstandings includes auto and specialty lending loans of $42.6 billion, unsecured consumer lending loans of $886 million, U.S. securities-based lending loans of $39.8 billion, non-U.S. consumer loans of $3.9 billion, student loans of $564 million and other consumer loans of $1.0 billion.


⁽⁷⁾	Total outstandings includes consumer finance loans of $564 million, consumer leases of $1.4 billion and consumer overdrafts of $146 million.


⁽⁸⁾	Consumer loans accounted for under the fair value option were residential mortgage loans of $1.6 billion and home equity loans of $250 million. Commercial loans accounted for under the fair value option were U.S. commercial loans of $2.3 billion and non-U.S. commercial loans of $2.8 billion. For additional information, see Note 20 – Fair Value Measurements and Note 21 – Fair Value Option.


⁽⁹⁾	Total outstandings includes U.S. commercial real estate loans of $53.6 billion and non-U.S. commercial real estate loans of $3.5 billion.



~~164~~ ~~Bank of America 2015~~

December 31, 2014
(Dollars in millions)
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
Total
Current or
Less Than
30 Days
Past Due ⁽³⁾

Purchased
Credit-impaired ⁽⁴⁾

Loans
Accounted
for Under
the Fair
Value Option
Total Outstandings
Consumer real estate

Core portfolio
Residential mortgage $ 1,847
$ 700
$ 5,561
$ 8,108
$ 154,112

$ 162,220
Home equity 218
105
744
1,067
50,820

51,887
Legacy Assets & Servicing portfolio

Residential mortgage ⁽⁵⁾
2,008
1,060
10,513
13,581
25,244
$ 15,152

53,977
Home equity 374
174
1,166
1,714
26,507
5,617

33,838
Credit card and other consumer

U.S. credit card 494
341
866
1,701
90,178

91,879
Non-U.S. credit card 49
39
95
183
10,282

10,465
Direct/Indirect consumer ⁽⁶⁾
245
71
65
381
80,000

80,381
Other consumer ⁽⁷⁾
11
2
2
15
1,831

1,846
Total consumer 5,246
2,492
19,012
26,750
438,974
20,769

486,493
Consumer loans accounted for under the fair value option ⁽⁸⁾
$ 2,077

2,077
Total consumer loans and leases 5,246
2,492
19,012
26,750
438,974
20,769
2,077
488,570
Commercial

U.S. commercial 320
151
318
789
219,504

220,293
Commercial real estate ⁽⁹⁾
138
16
288
442
47,240

47,682
Commercial lease financing 121
41
42
204
24,662

24,866
Non-U.S. commercial 5
4
—
9
80,074

80,083
U.S. small business commercial 88
45
94
227
13,066

13,293
Total commercial 672
257
742
1,671
384,546

386,217
Commercial loans accounted for under the fair value option ⁽⁸⁾
6,604
6,604
Total commercial loans and leases 672
257
742
1,671
384,546
6,604
392,821
Total loans and leases $ 5,918
$ 2,749
$ 19,754
$ 28,421
$ 823,520
$ 20,769
$ 8,681
$ 881,391
Percentage of outstandings 0.67 % 0.31 % 2.24 % 3.22 % 93.44 % 2.36 % 0.98 % 100.00 %

^(1)(10)

~~Consumer real estate loans 30-59 days past due includes fully-insured loans of~~The Corporation pledged $~~2.1~~149.4 billion of loans to secure potential borrowing capacity with the Federal Reserve Bank and ~~nonperforming~~FHLB. This amount is not included in the parenthetical disclosure of loans of ~~$392 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of~~ ~~$1.1 billion~~and ~~nonperforming loans of~~ ~~$332 million~~.


⁽²⁾	~~Consumer real estate includes fully-insured loans of~~ ~~$11.4 billion~~.


⁽³⁾	~~Consumer real estate includes~~ ~~$3.6 billion~~ ~~and direct/indirect consumer includes~~ ~~$27 million~~ ~~of nonperforming loans.~~


⁽⁴⁾	~~PCI loan amounts are shown gross of~~leases pledged as collateral on the ~~valuation allowance.~~


⁽⁵⁾	~~Total outstandings includes pay option loans of~~ ~~$3.2 billion. The Corporation~~Consolidated Balance Sheet as there were no ~~longer originates this product.~~


⁽⁶⁾	~~Total outstandings includes auto and specialty lending loans of~~ ~~$37.7 billion, unsecured consumer lending loans of~~ ~~$1.5 billion, U.S. securities-based lending loans of~~ ~~$35.8 billion, non-U.S. consumer loans of~~ ~~$4.0 billion, student loans of~~ ~~$632 million~~ ~~and other consumer loans of~~ ~~$761 million~~.


⁽⁷⁾	~~Total outstandings includes consumer finance loans of~~ ~~$676 million, consumer leases of~~ ~~$1.0 billion~~ ~~and consumer overdrafts of~~ ~~$162 million~~.

⁽⁸⁾

~~Consumer loans accounted for under the fair value option were residential mortgage loans of~~ ~~$1.9 billion~~ ~~and home equity loans of~~ ~~$196 million. Commercial loans accounted for under the fair value option were U.S. commercial loans of~~ ~~$1.9 billion~~ ~~and non-U.S. commercial loans of~~ ~~$4.7 billion. For additional information, see~~ ~~Note 20 – Fair Value Measurements~~ ~~and~~ ~~Note 21 – Fair Value Option~~.


⁽⁹⁾	~~Total outstandings includes U.S. commercial real estate loans of~~ ~~$45.2 billion~~ ~~and non-U.S. commercial real estate loans of~~ ~~$2.5 billion~~.related outstanding borrowings.

In connection with an agreement to sell the Corporation's non-U.S. consumer credit card business, this business, which includes $9.2 billion of non-U.S. credit card loans and related allowance for loan and lease losses of $243 million, was reclassified to assets of business held for sale on the Consolidated Balance Sheet as of December 31, 2016. In this Note, all applicable amounts include these balances, unless otherwise noted. For more information, see Note 1 – Summary of Significant Accounting Principles.

The Corporation categorizes consumer real estate loans as core and non-core based on loan and customer characteristics such as origination date, product type, LTV, FICO score and delinquency status consistent with its current consumer and mortgage servicing strategy. Generally, loans that were originated after January 1, 2010, qualified under government-sponsored enterprise underwriting guidelines, or otherwise met the Corporation's underwriting guidelines in place in 2015 are characterized as core loans. Loans held in legacy private-label securitizations, government-insured loans originated prior to 2010, loan products no longer originated, and loans originated

prior to 2010 and classified as nonperforming or modified in a TDR prior to 2016 are generally characterized as non-core loans, and are principally run-off portfolios.

The Corporation has entered into long-term credit protection agreements with FNMA and FHLMC on loans totaling $~~3.7~~6.4 billion and $~~17.2~~3.7 billion at December 31, ~~2015~~2016 and ~~2014~~2015, providing full credit protection on residential mortgage loans that become severely delinquent. All of these loans are individually insured and therefore the Corporation does not record an allowance for credit losses related to these loans.

Nonperforming Loans and Leases

The Corporation classifies junior-lien home equity loans as nonperforming when the first-lien loan becomes 90 days past due even if the junior-lien loan is performing. At December 31, ~~2015~~2016 and ~~2014~~2015, $~~484~~428 million and ~~$800~~$484 million of such junior-lien home equity loans were included in nonperforming loans.

The Corporation classifies consumer real estate loans that have been discharged in Chapter 7 bankruptcy and not reaffirmed

by the borrower as TDRs, irrespective of payment history or



146 Bank of America 2016

delinquency status, even if the repayment terms for the loan have not been otherwise modified. The Corporation continues to have a lien on the underlying collateral. At December 31, ~~2015~~2016, nonperforming loans discharged in Chapter 7 bankruptcy with no change in repayment terms were ~~$785~~$543 million of which ~~$457~~$332 million were current on their contractual payments, while ~~$285~~$181 million were 90 days or more past due. Of the contractually current nonperforming loans, ~~more than~~approximately 8081 percent were discharged in Chapter 7 bankruptcy ~~more than~~over 12 months ago, and ~~more than~~approximately 6070 percent were discharged 24 months or more ago. As subsequent cash payments are received on these nonperforming loans that are contractually current, the interest component of the payments is generally recorded as interest income on a cash basis and the principal component is recorded as a reduction in the carrying value of the loan.



		~~Bank of America 2015165~~

During ~~2015,~~2016, the Corporation sold nonperforming and other delinquent consumer real estate loans with a carrying value of $2.2 billion, including $549 million of PCI loans, compared to $3.2 billion, including $1.4 billion of PCI loans, ~~compared to $6.7 billion, including $1.9 billion of PCI loans,~~ in ~~2014.~~2015. The Corporation

recorded ~~recoveries~~net charge-offs related to these sales of $30 million during 2016 and net recoveries of $133 million ~~and $407 million~~ during ~~2015 and 2014.~~2015. Gains related to these sales of ~~$173~~$75 million and ~~$247~~$173 million were recorded in other income in the Consolidated Statement of Income during ~~2015~~2016 and ~~2014.~~2015.

The table below presents the Corporation’s nonperforming loans and leases including nonperforming TDRs, and loans accruing past due 90 days or more at December 31, ~~2015~~2016 and ~~2014~~2015. 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	Credit Quality								Credit Quality

	December 31								December 31
	Nonperforming Loans and Leases				Accruing Past Due 90 Days or More				Nonperforming Loans and Leases				Accruing Past Due 90 Days or More
(Dollars in millions)	2015		2014		2015		2014		2016		2015		2016		2015
Consumer real estate
Core portfolio
Residential mortgage ⁽¹⁾	$	1,845	$	2,398	$	2,645	$	3,942	$	1,274	$	1,825	$	486	$	382
Home equity	1,354		1,496		—		—		969		974		—		—
Legacy Assets & Servicing portfolio
Non-core portfolio
Residential mortgage⁽¹⁾	2,958		4,491		4,505		7,465		1,782		2,978		4,307		6,768
Home equity	1,983		2,405		—		—		1,949		2,363		—		—
Credit card and other consumer
U.S. credit card	n/a		n/a		789		866		n/a		n/a		782		789
Non-U.S. credit card	n/a		n/a		76		95		n/a		n/a		66		76
Direct/Indirect consumer	24		28		39		64		28		24		34		39
Other consumer	1		1		3		1		2		1		4		3
Total consumer	8,165		10,819		8,057		12,433		6,004		8,165		5,679		8,057
Commercial
U.S. commercial	867		701		113		110		1,256		867		106		113
Commercial real estate	93		321		3		3		72		93		7		3
Commercial lease financing	12		3		17		41		36		12		19		15
Non-U.S. commercial	158		1		1		—		279		158		5		1
U.S. small business commercial	82		87		61		67		60		82		71		61
Total commercial	1,212		1,113		195		221		1,703		1,212		208		193
Total loans and leases	$	9,377	$	11,932	$	8,252	$	12,654	$	7,707	$	9,377	$	5,887	$	8,250

⁽¹⁾

Residential mortgage loans in the ~~Core~~core and ~~Legacy Assets & Servicing~~non-core portfolios accruing past due 90 days or more are fully-insured loans. At December 31, ~~2015~~2016 and ~~2014~~2015, residential mortgage includes $~~4.3~~3.0 billion and $~~7.3~~4.3 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 $~~2.9~~1.8 billion and $~~4.1~~2.9 billion of loans on which interest is still accruing.

n/a = not applicable

Credit Quality Indicators

The Corporation monitors credit quality within its Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments based on primary credit quality indicators. For more information on the portfolio segments, see Note 1 – Summary of Significant Accounting Principles. Within the Consumer Real Estate portfolio segment, the primary credit quality indicators are refreshed LTV and refreshed FICO score. Refreshed LTV measures the carrying value of the loan as a percentage of the value of the property securing the loan, refreshed quarterly. Home equity loans are evaluated using ~~combined loan-to-value (CLTV)~~CLTV which measures the carrying value of the Corporation’s loan and available line of credit combined with any outstanding senior liens against the property as a percentage of the value of the property securing the loan, refreshed quarterly. FICO score measures the creditworthiness of the borrower based on the financial obligations of the borrower and the borrower’s credit history. ~~At a minimum,~~FICO scores are typically refreshed quarterly or more

frequently. Certain borrowers (e.g., borrowers that have had debts discharged in a bankruptcy proceeding) may not have their FICO scores ~~are refreshed quarterly, and in many cases, more frequently.~~updated. FICO scores are also a primary credit quality indicator for the Credit Card and Other Consumer portfolio segment and the business card portfolio within U.S. small business commercial. Within the Commercial portfolio segment, loans are evaluated using the internal classifications of pass rated or reservable criticized as the primary credit quality indicators. The term reservable criticized refers to those commercial loans that are internally classified or listed by the Corporation as Special Mention, Substandard or Doubtful, which are asset quality categories defined by regulatory authorities. These assets have an elevated level of risk and may have a high probability of default or total loss. Pass rated refers to all loans not considered reservable criticized. In addition to these primary credit quality indicators, the Corporation uses other credit quality indicators for certain types of loans.



		~~166~~Bank of America ~~2015~~2016147

The following tables present certain credit quality indicators for the Corporation’s Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments, by class of financing receivables, at December 31, ~~2015~~2016 and ~~2014~~.2015.



Consumer Real Estate – Credit Quality Indicators ⁽¹⁾	Consumer Real Estate – Credit Quality Indicators ⁽¹⁾												Consumer Real Estate – Credit Quality Indicators ⁽¹⁾

	December 31, 2015												December 31, 2016
(Dollars in millions)	Core Portfolio Residential Mortgage ⁽²⁾		Legacy Assets & Servicing Residential Mortgage ⁽²⁾		Residential Mortgage PCI ⁽³⁾		Core Portfolio Home Equity ⁽²⁾		Legacy Assets & Servicing Home Equity ⁽²⁾		Home Equity PCI		Core Portfolio Residential Mortgage ⁽²⁾		Non-core Residential Mortgage ⁽²⁾		Residential Mortgage PCI ⁽³⁾		Core Portfolio Home Equity ⁽²⁾		Non-core Home Equity ⁽²⁾		Home Equity PCI
Refreshed LTV⁽⁴⁾
Less than or equal to 90 percent	$	109,869	$	16,646	$	8,655	$	44,006	$	15,666	$	2,003	$	129,737	$	14,280	$	7,811	$	47,171	$	8,480	$	1,942
Greater than 90 percent but less than or equal to 100 percent	4,251		2,007		1,403		1,652		2,382		852		3,634		1,446		1,021		1,006		1,668		630
Greater than 100 percent	2,783		3,212		2,008		2,606		5,017		1,764		1,872		1,972		1,295		1,196		3,311		1,039
Fully-insured loans ⁽⁵⁾	28,942		8,135		—		—		—		—		21,254		7,475		—		—		—		—
Total consumer real estate	$	145,845	$	30,000	$	12,066	$	48,264	$	23,065	$	4,619	$	156,497	$	25,173	$	10,127	$	49,373	$	13,459	$	3,611
Refreshed FICO score
Less than 620	$	3,465	$	4,408	$	3,798	$	1,898	$	2,785	$	729	$	2,479	$	3,198	$	2,741	$	1,254	$	2,692	$	559
Greater than or equal to 620 and less than 680	5,792		3,438		2,586		3,242		3,817		825		5,094		2,807		2,241		2,853		3,094		636
Greater than or equal to 680 and less than 740	22,017		5,605		3,187		9,203		6,527		1,356		22,629		4,512		2,916		10,069		3,176		1,069
Greater than or equal to 740	85,629		8,414		2,495		33,921		9,936		1,709		105,041		7,181		2,229		35,197		4,497		1,347
Fully-insured loans ⁽⁵⁾	28,942		8,135		—		—		—		—		21,254		7,475		—		—		—		—
Total consumer real estate	$	145,845	$	30,000	$	12,066	$	48,264	$	23,065	$	4,619	$	156,497	$	25,173	$	10,127	$	49,373	$	13,459	$	3,611


⁽¹⁾	Excludes $1.1 billion of loans accounted for under the fair value option.


⁽²⁾	Excludes PCI loans.


⁽³⁾	Includes $1.6 billion of pay option loans. The Corporation no longer originates this product.


⁽⁴⁾	Refreshed LTV percentages for PCI loans are calculated using the carrying value net of the related valuation allowance.


⁽⁵⁾	Credit quality indicators are not reported for fully-insured loans as principal repayment is insured.




Credit Card and Other Consumer – Credit Quality Indicators

	December 31, 2016
(Dollars in millions)	U.S. Credit Card		Non-U.S. Credit Card		Direct/Indirect Consumer		Other Consumer ⁽¹⁾
Refreshed FICO score
Less than 620	$	4,431	$	—	$	1,478	$	187
Greater than or equal to 620 and less than 680	12,364		—		2,070		222
Greater than or equal to 680 and less than 740	34,828		—		12,491		404
Greater than or equal to 740	40,655		—		33,420		1,525
Other internal credit metrics ^{(2, 3, 4)}	—		9,214		44,630		161
Total credit card and other consumer	$	92,278	$	9,214	$	94,089	$	2,499


⁽¹⁾	At December 31, 2016, 19 percent of the other consumer portfolio is associated with portfolios from certain consumer finance businesses that the Corporation previously exited.


⁽²⁾	Other internal credit metrics may include delinquency status, geography or other factors.


⁽³⁾	Direct/indirect consumer includes $43.1 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk and $499 million of loans the Corporation no longer originates, primarily student loans.


⁽⁴⁾	Non-U.S. credit card represents the U.K. credit card portfolio which is evaluated using internal credit metrics, including delinquency status. At December 31, 2016, 98 percent of this portfolio was current or less than 30 days past due, one percent was 30-89 days past due and one percent was 90 days or more past due.




Commercial – Credit Quality Indicators ⁽¹⁾

	December 31, 2016
(Dollars in millions)	U.S. Commercial		Commercial Real Estate		Commercial Lease Financing		Non-U.S. Commercial		U.S. Small Business Commercial ⁽²⁾
Risk ratings
Pass rated	$	261,214	$	56,957	$	21,565	$	85,689	$	453
Reservable criticized	9,158		398		810		3,708		71
Refreshed FICO score ⁽³⁾
Less than 620									200
Greater than or equal to 620 and less than 680									591
Greater than or equal to 680 and less than 740									1,741
Greater than or equal to 740									3,264
Other internal credit metrics ^{(3, 4)}									6,673
Total commercial	$	270,372	$	57,355	$	22,375	$	89,397	$	12,993


⁽¹⁾	Excludes $6.0 billion of loans accounted for under the fair value option.


⁽²⁾	U.S. small business commercial includes $755 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. At December 31, 2016, 98 percent of the balances where internal credit metrics are used was current or less than 30 days past due.


⁽³⁾	Refreshed FICO score and other internal credit metrics are applicable only to the U.S. small business commercial portfolio.


⁽⁴⁾	Other internal credit metrics may include delinquency status, application scores, geography or other factors.



148 Bank of America 2016




Consumer Real Estate – Credit Quality Indicators ⁽¹⁾

	December 31, 2015
(Dollars in millions)	Core Portfolio Residential Mortgage ⁽²⁾		Non-core Residential Mortgage ⁽²⁾		Residential Mortgage PCI ⁽³⁾		Core Portfolio Home Equity ⁽²⁾		Non-core Home Equity ⁽²⁾		Home Equity PCI
Refreshed LTV ⁽⁴⁾
Less than or equal to 90 percent	$	110,023	$	16,481	$	8,655	$	51,262	$	8,347	$	2,003
Greater than 90 percent but less than or equal to 100 percent	4,038		2,224		1,403		1,858		2,190		852
Greater than 100 percent	2,638		3,364		2,008		1,797		5,875		1,764
Fully-insured loans ⁽⁵⁾	25,096		11,981		—		—		—		—
Total consumer real estate	$	141,795	$	34,050	$	12,066	$	54,917	$	16,412	$	4,619
Refreshed FICO score
Less than 620	$	3,129	$	4,749	$	3,798	$	1,322	$	3,490	$	729
Greater than or equal to 620 and less than 680	5,472		3,762		2,586		3,295		3,862		825
Greater than or equal to 680 and less than 740	22,486		5,138		3,187		12,180		3,451		1,356
Greater than or equal to 740	85,612		8,420		2,495		38,120		5,609		1,709
Fully-insured loans ⁽⁵⁾	25,096		11,981		—		—		—		—
Total consumer real estate	$	141,795	$	34,050	$	12,066	$	54,917	$	16,412	$	4,619


⁽¹⁾	Excludes $1.9 billion of loans accounted for under the fair value option.


⁽²⁾	Excludes PCI loans.


⁽³⁾	Includes $2.0 billion of pay option loans. The Corporation no longer originates this product.


⁽⁴⁾	Refreshed LTV percentages for PCI loans are calculated using the carrying value net of the related valuation allowance.


⁽⁵⁾	Credit quality indicators are not reported for fully-insured loans as principal repayment is insured.




Credit Card and Other Consumer – Credit Quality Indicators

	December 31, 2015
(Dollars in millions)	U.S. Credit Card		Non-U.S. Credit Card		Direct/Indirect Consumer		Other Consumer ⁽¹⁾
Refreshed FICO score
Less than 620	$	4,196	$	—	$	1,244	$	217
Greater than or equal to 620 and less than 680	11,857		—		1,698		214
Greater than or equal to 680 and less than 740	34,270		—		10,955		337
Greater than or equal to 740	39,279		—		29,581		1,149
Other internal credit metrics ^{(2, 3, 4)}	—		9,975		45,317		150
Total credit card and other consumer	$	89,602	$	9,975	$	88,795	$	2,067


⁽¹⁾	~~Twenty-seven~~At December 31, 2015, 27 percent of the other consumer portfolio is associated with portfolios from certain consumer finance businesses that the Corporation previously exited.


⁽²⁾	Other internal credit metrics may include delinquency status, geography or other factors.


⁽³⁾	Direct/indirect consumer includes $43.7 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk and $567 million of loans the Corporation no longer originates, primarily student loans.


⁽⁴⁾	Non-U.S. credit card represents the U.K. credit card portfolio which is evaluated using internal credit metrics, including delinquency status. At December 31, 2015, 98 percent of this portfolio was current or less than 30 days past due, one percent was 30-89 days past due and one percent was 90 days or more past due.



Commercial – Credit Quality Indicators ⁽¹⁾	Commercial – Credit Quality Indicators ⁽¹⁾										Commercial – Credit Quality Indicators ⁽¹⁾

	December 31, 2015										December 31, 2015
(Dollars in millions)	U.S. Commercial		Commercial Real Estate		Commercial Lease Financing		Non-U.S. Commercial		U.S. Small Business Commercial ⁽²⁾		U.S. Commercial		Commercial Real Estate		Commercial Lease Financing		Non-U.S. Commercial		U.S. Small Business Commercial ⁽²⁾
Risk ratings
Pass rated	$	243,922	$	56,688	$	26,050	$	87,905	$	571	$	243,922	$	56,688	$	20,644	$	87,905	$	571
Reservable criticized	8,849		511		1,320		3,644		96		8,849		511		708		3,644		96
Refreshed FICO score ⁽³⁾
Less than 620									184										184
Greater than or equal to 620 and less than 680									543										543
Greater than or equal to 680 and less than 740									1,627										1,627
Greater than or equal to 740									3,027										3,027
Other internal credit metrics ^{(3, 4)}									6,828										6,828
Total commercial	$	252,771	$	57,199	$	27,370	$	91,549	$	12,876	$	252,771	$	57,199	$	21,352	$	91,549	$	12,876


⁽¹⁾	Excludes $5.1 billion of loans accounted for under the fair value option.


⁽²⁾	U.S. small business commercial includes $670 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. At December 31, 2015, 98 percent of the balances where internal credit metrics are used was current or less than 30 days past due.


⁽³⁾	Refreshed FICO score and other internal credit metrics are applicable only to the U.S. small business commercial portfolio.


⁽⁴⁾	Other internal credit metrics may include delinquency status, application scores, geography or other factors.



		Bank of America ~~2015~~2016 ~~167~~149

Consumer Real Estate – Credit Quality Indicators ⁽¹⁾

December 31, 2014
(Dollars in millions)
Core Portfolio Residential
Mortgage ⁽²⁾

Legacy Assets & Servicing Residential
Mortgage ⁽²⁾

Residential Mortgage PCI ⁽³⁾

Core Portfolio Home Equity ⁽²⁾

Legacy Assets & Servicing Home Equity ⁽²⁾

Home
Equity PCI
Refreshed LTV ⁽⁴⁾

Less than or equal to 90 percent $ 100,255
$ 18,499
$ 9,972
$ 45,414
$ 17,453
$ 2,046
Greater than 90 percent but less than or equal to 100 percent 4,958
3,081
2,005
2,442
3,272
1,048
Greater than 100 percent 4,017
5,265
3,175
4,031
7,496
2,523
Fully-insured loans ⁽⁵⁾
52,990
11,980
—
—
—
—
Total consumer real estate $ 162,220
$ 38,825
$ 15,152
$ 51,887
$ 28,221
$ 5,617
Refreshed FICO score

Less than 620 $ 4,184
$ 6,313
$ 6,109
$ 2,169
$ 3,470
$ 864
Greater than or equal to 620 and less than 680 6,272
4,032
3,014
3,683
4,529
995
Greater than or equal to 680 and less than 740 21,946
6,463
3,310
10,231
7,905
1,651
Greater than or equal to 740 76,828
10,037
2,719
35,804
12,317
2,107
Fully-insured loans ⁽⁵⁾
52,990
11,980
—
—
—
—
Total consumer real estate $ 162,220
$ 38,825
$ 15,152
$ 51,887
$ 28,221
$ 5,617


⁽¹⁾	~~Excludes~~ ~~$2.1 billion~~ ~~of loans accounted for under the fair value option.~~


⁽²⁾	~~Excludes PCI loans.~~


⁽³⁾	~~Includes~~ ~~$2.8 billion~~ ~~of pay option loans. The Corporation no longer originates this product.~~


⁽⁴⁾	~~Refreshed LTV percentages for PCI loans are calculated using the carrying value net of the related valuation allowance.~~


⁽⁵⁾	~~Credit quality indicators are not reported for fully-insured loans as principal repayment is insured.~~

Credit Card and Other Consumer – Credit Quality Indicators

December 31, 2014
(Dollars in millions)
U.S. Credit
Card

Non-U.S.
Credit Card

Direct/Indirect
Consumer

Other
Consumer ⁽¹⁾
Refreshed FICO score

Less than 620 $ 4,467
$ —
$ 1,296
$ 266
Greater than or equal to 620 and less than 680 12,177
—
1,892
227
Greater than or equal to 680 and less than 740 34,986
—
10,749
307
Greater than or equal to 740 40,249
—
25,279
881
Other internal credit metrics ^{(2, 3, 4)}
—
10,465
41,165
165
Total credit card and other consumer $ 91,879
$ 10,465
$ 80,381
$ 1,846


⁽¹⁾	~~Thirty-seven percent~~ ~~of the other consumer portfolio is associated with portfolios from certain consumer finance businesses that the Corporation previously exited.~~


⁽²⁾	~~Other internal credit metrics may include delinquency status, geography or other factors.~~


⁽³⁾	~~Direct/indirect consumer includes~~ ~~$39.7 billion~~ ~~of securities-based lending which is overcollateralized and therefore has minimal credit risk and~~ ~~$632 million~~ ~~of loans the Corporation no longer originates, primarily student loans.~~


⁽⁴⁾	~~Non-U.S. credit card represents the U.K. credit card portfolio which is evaluated using internal credit metrics, including delinquency status. At~~ ~~December 31, 2014~~, ~~98 percent~~ ~~of this portfolio was current or less than 30 days past due,~~ ~~one percent~~ ~~was 30-89 days past due and~~ ~~one percent~~ ~~was 90 days or more past due.~~

Commercial – Credit Quality Indicators ⁽¹⁾

December 31, 2014
(Dollars in millions)
U.S.
Commercial

Commercial
Real Estate

Commercial
Lease
Financing

Non-U.S.
Commercial

U.S. Small
Business
Commercial ⁽²⁾
Risk ratings

Pass rated $ 213,839
$ 46,632
$ 23,832
$ 79,367
$ 751
Reservable criticized 6,454
1,050
1,034
716
182
Refreshed FICO score ⁽³⁾

Less than 620 184
Greater than or equal to 620 and less than 680 529
Greater than or equal to 680 and less than 740 1,591
Greater than or equal to 740 2,910
Other internal credit metrics ^{(3, 4)}
7,146
Total commercial $ 220,293
$ 47,682
$ 24,866
$ 80,083
$ 13,293


⁽¹⁾	~~Excludes~~ ~~$6.6 billion~~ ~~of loans accounted for under the fair value option.~~


⁽²⁾	~~U.S. small business commercial includes~~ ~~$762 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. At~~ ~~December 31, 2014~~, ~~98 percent~~ ~~of the balances where internal credit metrics are used was current or less than 30 days past due.~~


⁽³⁾	~~Refreshed FICO score and other internal credit metrics are applicable only to the U.S. small business commercial portfolio.~~


⁽⁴⁾	~~Other internal credit metrics may include delinquency status, application scores, geography or other factors.~~



~~168~~ ~~Bank of America 2015~~

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. Impaired loans include nonperforming commercial loans and all consumer and commercial TDRs. Impaired loans exclude nonperforming consumer loans and nonperforming commercial leases unless they are classified as TDRs. Loans accounted for under the fair value option are also excluded. PCI loans are excluded and reported separately on page ~~178~~156. For additional 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. Excluding PCI loans, 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 the government’s Making Home Affordable Program (modifications under government programs) or the Corporation’s proprietary programs (modifications under 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 that have been discharged in Chapter 7 bankruptcy with no change in repayment terms and not reaffirmed by the borrower of ~~$1.8~~$1.4 billion were included in TDRs at December 31, ~~2015~~2016, of which ~~$785~~$543 million were classified as

nonperforming and ~~$765~~$555 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.

A consumer real estate loan, excluding PCI loans which are reported separately, is not classified as impaired unless it is a TDR. Once such a loan has been designated as a TDR, it is then individually assessed for impairment. 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, as discussed in the following paragraph.~~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.

The net present value of the estimated cash flows used to measure impairment is based on model-driven estimates of projected payments, prepayments, defaults and loss-given-default (LGD). Using statistical modeling methodologies, the Corporation estimates the probability that a loan will default prior to maturity based on the attributes of each loan. The factors that are most relevant to the probability of default are the refreshed LTV, or in the case of a subordinated lien, refreshed CLTV, borrower credit score, months since origination (i.e., vintage) and geography. Each of these factors is further broken down by present collection status (whether the loan is current, delinquent, in default or in bankruptcy). Severity (or LGD) is estimated based on the refreshed LTV for first mortgages or CLTV for subordinated liens. The estimates are based on the Corporation’s historical experience as adjusted to reflect an assessment of environmental factors that may not be reflected in the historical data, 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 redefaults subsequent to modification, a loan’s default history prior to modification and the change in borrower payments post-modification.

At December 31, ~~2015~~2016 and ~~2014~~2015, remaining commitments to lend additional funds to debtors whose terms have been modified in a consumer real estate TDR were immaterial. Consumer real estate foreclosed properties totaled $~~444~~363 million and $~~630~~444 million at December 31, ~~2015~~2016 and ~~2014~~2015. The carrying value of consumer real estate loans, including fully-insured and PCI loans, for which formal foreclosure proceedings were in process as of December 31, ~~2015~~2016 was ~~$5.8~~$4.8 billion. During ~~2015~~2016 and ~~2014,~~2015, the Corporation reclassified ~~$2.1~~$1.4 billion and ~~$1.9~~$2.1 billion 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 on the Consolidated Statement of Cash Flows.



		150Bank of America ~~2015169~~2016

The table below provides the unpaid principal balance, carrying value and related allowance at December 31, ~~2015~~2016 and ~~2014~~,2015, and the average carrying value and interest income recognized for 2016, 2015, ~~2014~~ and ~~2013~~2014 for impaired loans in the Corporation’s Consumer Real Estate portfolio ~~segment, and includes primarily~~

~~loans managed by~~ ~~Legacy Assets & Servicing (LAS)~~.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.



Impaired Loans – Consumer Real Estate	Impaired Loans – Consumer Real Estate												Impaired Loans – Consumer Real Estate

	December 31, 2015						December 31, 2014						December 31, 2016						December 31, 2015
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Related Allowance		Unpaid Principal Balance		Carrying Value		Related Allowance		Unpaid Principal Balance		Carrying Value		Related Allowance		Unpaid Principal Balance		Carrying Value		Related Allowance
With no recorded allowance
Residential mortgage	$	14,888	$	11,901	$	—	$	19,710	$	15,605	$	—	$	11,151	$	8,695	$	—	$	14,888	$	11,901	$	—
Home equity	3,545		1,775		—		3,540		1,630		—		3,704		1,953		—		3,545		1,775		—
With an allowance recorded
Residential mortgage	$	6,624	$	6,471	$	399	$	7,861	$	7,665	$	531	$	4,041	$	3,936	$	219	$	6,624	$	6,471	$	399
Home equity	1,047		911		235		852		728		196		910		824		137		1,047		911		235
Total
Residential mortgage	$	21,512	$	18,372	$	399	$	27,571	$	23,270	$	531	$	15,192	$	12,631	$	219	$	21,512	$	18,372	$	399
Home equity	4,592		2,686		235		4,392		2,358		196		4,614		2,777		137		4,592		2,686		235

	2015				2014				2013				2016				2015				2014
	Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾
With no recorded allowance
Residential mortgage	$	13,867	$	403	$	15,065	$	490	$	16,625	$	621	$	10,178	$	360	$	13,867	$	403	$	15,065	$	490
Home equity	1,777		89		1,486		87		1,245		76		1,906		90		1,777		89		1,486		87
With an allowance recorded
Residential mortgage	$	7,290	$	236	$	10,826	$	411	$	13,926	$	616	$	5,067	$	167	$	7,290	$	236	$	10,826	$	411
Home equity	785		24		743		25		912		41		852		24		785		24		743		25
Total
Residential mortgage	$	21,157	$	639	$	25,891	$	901	$	30,551	$	1,237	$	15,245	$	527	$	21,157	$	639	$	25,891	$	901
Home equity	2,562		113		2,229		112		2,157		117		2,758		114		2,562		113		2,229		112


⁽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.



~~170~~ ~~Bank of America 2015~~

The table below presents the December 31, 2016, 2015 ~~2014~~ and ~~2013~~2014 unpaid principal balance, carrying value, and average pre- and post-modification interest rates on consumer real estate loans that were modified in TDRs during 2016, 2015, ~~2014~~ and ~~2013,~~2014, and net charge-offs recorded during the period in which the modification

occurred. 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. ~~These TDRs are primarily managed by~~ ~~LAS~~.



Consumer Real Estate – TDRs Entered into During 2015, 2014 and 2013 ⁽¹⁾
Consumer Real Estate – TDRs Entered into During 2016, 2015 and 2014 ⁽¹⁾											Consumer Real Estate – TDRs Entered into During 2016, 2015 and 2014 ⁽¹⁾

	December 31, 2015								2015		December 31, 2016								2016
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Pre-Modification Interest Rate		Post-Modification Interest Rate ⁽²⁾		Net Charge-offs ⁽³⁾		Unpaid Principal Balance		Carrying Value		Pre-Modification Interest Rate		Post-Modification Interest Rate ⁽²⁾		Net Charge-offs ⁽³⁾
Residential mortgage	$	2,986	$	2,655	4.98	%	4.43	%	$	97	$	1,130	$	1,017	4.73	%	4.16	%	$	11
Home equity	1,019		775		3.54		3.17		84		849		649		3.95		2.72		61
Total	$	4,005	$	3,430	4.61		4.11		$	181	$	1,979	$	1,666	4.40		3.54		$	72

	December 31, 2014								2014		December 31, 2015								2015
Residential mortgage	$	5,940	$	5,120	5.28	%	4.93	%	$	72	$	2,986	$	2,655	4.98	%	4.43	%	$	97
Home equity	863		592		4.00		3.33		99		1,019		775		3.54		3.17		84
Total	$	6,803	$	5,712	5.12		4.73		$	171	$	4,005	$	3,430	4.61		4.11		$	181

	December 31, 2013								2013		December 31, 2014								2014
Residential mortgage	$	11,233	$	10,016	5.30	%	4.27	%	$	235	$	5,940	$	5,120	5.28	%	4.93	%	$	72
Home equity	878		521		5.29		3.92		192		863		592		4.00		3.33		99
Total	$	12,111	$	10,537	5.30		4.24		$	427	$	6,803	$	5,712	5.12		4.73		$	171


⁽¹⁾	During ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014, the Corporation forgave principal of $~~396~~13 million, $53396 million and $~~467~~53 million, respectively, related to residential mortgage loans in connection with TDRs.


⁽²⁾	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.


⁽³⁾	Net charge-offs include amounts recorded on loans modified during the period that are no longer held by the Corporation at December 31, 2016, 2015 ~~2014~~ and ~~2013~~2014 due to sales and other dispositions.



		Bank of America ~~2015~~2016 ~~171~~151

The table below presents the December 31, 2016, 2015 ~~2014~~ and ~~2013~~2014 carrying value for consumer real estate loans that were modified in a TDR during ~~2015~~2016, ~~2014~~2015 and ~~2013,~~2014, by type of modification.



Consumer Real Estate – Modification Programs	Consumer Real Estate – Modification Programs						Consumer Real Estate – Modification Programs

	TDRs Entered into During 2015						TDRs Entered into During 2016				TDRs Entered into During 2015				TDRs Entered into During 2014
(Dollars in millions)	Residential Mortgage		Home Equity		Total Carrying Value		Residential Mortgage		Home Equity		Residential Mortgage		Home Equity		Residential Mortgage		Home Equity
Modifications under government programs
Contractual interest rate reduction	$	408	$	23	$	431	$	116	$	35	$	408	$	23	$	643	$	56
Principal and/or interest forbearance	4		7		11		2		11		4		7		16		18
Other modifications ⁽¹⁾	46		—		46		22		1		46		—		98		1
Total modifications under government programs	458		30		488		140		47		458		30		757		75
Modifications under proprietary programs
Contractual interest rate reduction	191		28		219		84		151		191		28		244		22
Capitalization of past due amounts	69		10		79		24		16		69		10		71		2
Principal and/or interest forbearance	124		44		168		10		62		124		44		66		75
Other modifications⁽¹⁾	34		95		129		4		71		34		95		40		47
Total modifications under proprietary programs	418		177		595		122		300		418		177		421		146
Trial modifications	1,516		452		1,968		597		234		1,516		452		3,421		182
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	263		116		379		158		68		263		116		521		189
Total modifications	$	2,655	$	775	$	3,430	$	1,017	$	649	$	2,655	$	775	$	5,120	$	592

	TDRs Entered into During 2014
Modifications under government programs
Contractual interest rate reduction	$	643	$	56	$	699
Principal and/or interest forbearance	16		18		34
Other modifications ⁽¹⁾	98		1		99
Total modifications under government programs	757		75		832
Modifications under proprietary programs
Contractual interest rate reduction	244		22		266
Capitalization of past due amounts	71		2		73
Principal and/or interest forbearance	66		75		141
Other modifications⁽¹⁾	40		47		87
Total modifications under proprietary programs	421		146		567
Trial modifications	3,421		182		3,603
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	521		189		710
Total modifications	$	5,120	$	592	$	5,712

	TDRs Entered into During 2013
Modifications under government programs
Contractual interest rate reduction	$	1,815	$	48	$	1,863
Principal and/or interest forbearance	35		24		59
Other modifications ⁽¹⁾	100		—		100
Total modifications under government programs	1,950		72		2,022
Modifications under proprietary programs
Contractual interest rate reduction	2,799		40		2,839
Capitalization of past due amounts	132		2		134
Principal and/or interest forbearance	469		17		486
Other modifications⁽¹⁾	105		25		130
Total modifications under proprietary programs	3,505		84		3,589
Trial modifications	3,410		87		3,497
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	1,151		278		1,429
Total modifications	$	10,016	$	521	$	10,537


⁽¹⁾	Includes other modifications such as term or payment extensions and repayment plans.


⁽²⁾	Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.



~~172~~ ~~Bank of America 2015~~

The table below presents the carrying value of consumer real estate loans that entered into payment default during 2016, 2015, ~~2014~~ and ~~2013~~2014 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. Payment defaults on a trial modification where the borrower has not yet met the terms of the agreement are included in the table below if the borrower is 90 days or more past due three months after the offer to modify is made.



Consumer Real Estate – TDRs Entering Payment Default That Were Modified During the Preceding 12 Months(1)

	2015						2016				2015				2014
(Dollars in millions)	Residential Mortgage		Home Equity		Total Carrying Value ⁽¹⁾		Residential Mortgage		Home Equity		Residential Mortgage		Home Equity		Residential Mortgage		Home Equity
Modifications under government programs	$	452	$	5	$	457	$	259	$	3	$	452	$	5	$	696	$	4
Modifications under proprietary programs	263		24		287		133		63		263		24		714		12
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	238		47		285		136		22		238		47		481		70
Trial modifications ⁽³⁾	2,997		181		3,178		714		110		2,997		181		2,231		56
Total modifications	$	3,950	$	257	$	4,207	$	1,242	$	198	$	3,950	$	257	$	4,122	$	142

	2014
Modifications under government programs	$	696	$	4	$	700
Modifications under proprietary programs	714		12		726
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	481		70		551
Trial modifications	2,231		56		2,287
Total modifications	$	4,122	$	142	$	4,264

	2013
Modifications under government programs	$	454	$	2	$	456
Modifications under proprietary programs	1,117		4		1,121
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	964		30		994
Trial modifications	4,376		14		4,390
Total modifications	$	6,911	$	50	$	6,961


⁽¹⁾	Includes loans with a carrying value of $~~$1.8 billion~~613 million, $~~2.0~~1.8 billion and $~~2.4~~2.0 billion that entered into payment default during ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014, respectively, but were no longer held by the Corporation as of December 31, 2016, 2015 ~~2014~~ and ~~2013~~2014 due to sales and other dispositions.


⁽²⁾	Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.


⁽³⁾	Includes~~$1.7 billion~~ of trial modification offers ~~made in connection with the 2014 settlement with the U.S. Department of Justice~~ to which the customer ~~has~~did not ~~responded for~~ ~~2015~~. respond.

Credit Card and Other Consumer

Impaired loans within the Credit Card and Other Consumer portfolio segment consist entirely of loans that have been modified in ~~TDRs (the renegotiated credit card and other consumer TDR portfolio, collectively referred to as the renegotiated TDR portfolio).~~TDRs. The Corporation seeks to assist customers that are experiencing financial difficulty by modifying loans while ensuring compliance with federal, local and international laws and guidelines. Credit card and other consumer loan modifications generally involve reducing the interest rate on the account and placing the customer on a fixed payment plan not exceeding 60 months, all of which are considered TDRs. In addition, the accounts of non-U.S. credit card customers who do not qualify for a fixed payment plan may have their interest rates reduced, as required by certain local jurisdictions. These modifications, which are also TDRs, tend to experience higher payment default rates given that the borrowers may lack the ability to repay even with the interest rate reduction.

consumer loans that have been discharged in Chapter 7 bankruptcy as TDRs which are written down to collateral value and placed on nonaccrual status no later than the time of discharge. For more information on the regulatory guidance on loans discharged in Chapter 7 bankruptcy, see Nonperforming Loans and Leases in this Note.

All credit card and substantially all other consumer loans that have been modified in TDRs remain on accrual status until the loan is either 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 generally at 120 days past due for a loan that has been placed on a fixed payment plan.

The allowance for impaired credit card and substantially all other consumer loans is based on the present value of projected cash flows, which incorporates the Corporation’s historical payment default and loss experience on modified loans, discounted using the portfolio’s average contractual interest rate, excluding promotionally priced loans, in effect prior to restructuring. Credit card and other consumer loans are included in homogeneous pools which are collectively evaluated for impairment. For these portfolios, loss forecast models are utilized that consider a variety of factors including, but not limited to, historical loss experience, delinquency status, economic trends and credit scores.



		152Bank of America ~~2015173~~2016



Impaired Loans – Credit Card and Other Consumer – Renegotiated TDRs
Impaired Loans – Credit Card and Other Consumer													Impaired Loans – Credit Card and Other Consumer

	December 31, 2015						December 31, 2014						December 31, 2016						December 31, 2015
(Dollars in millions)	Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance		Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance		Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance		Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance
With no recorded allowance
Direct/Indirect consumer	$	50	$	21	$	—	$	59	$	25	$	—	$	49	$	22	$	—	$	50	$	21	$	—
With an allowance recorded
U.S. credit card	$	598	$	611	$	176	$	804	$	856	$	207	$	479	$	485	$	128	$	598	$	611	$	176
Non-U.S. credit card	109		126		70		132		168		108		88		100		61		109		126		70
Direct/Indirect consumer	17		21		4		76		92		24		3		3		—		17		21		4
Total
U.S. credit card	$	598	$	611	$	176	$	804	$	856	$	207	$	479	$	485	$	128	$	598	$	611	$	176
Non-U.S. credit card	109		126		70		132		168		108		88		100		61		109		126		70
Direct/Indirect consumer	67		42		4		135		117		24		52		25		—		67		42		4

	2015				2014				2013				2016				2015				2014
	Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾
With no recorded allowance
Direct/Indirect consumer	$	22	$	—	$	27	$	—	$	42	$	—	$	20	$	—	$	22	$	—	$	27	$	—
Other consumer	—		—		33		2		34		2		—		—		—		—		33		2
With an allowance recorded
U.S. credit card	$	749	$	43	$	1,148	$	71	$	2,144	$	134	$	556	$	31	$	749	$	43	$	1,148	$	71
Non-U.S. credit card	145		4		210		6		266		7		111		3		145		4		210		6
Direct/Indirect consumer	51		3		180		9		456		24		10		1		51		3		180		9
Other consumer	—		—		23		1		28		2		—		—		—		—		23		1
Total
U.S. credit card	$	749	$	43	$	1,148	$	71	$	2,144	$	134	$	556	$	31	$	749	$	43	$	1,148	$	71
Non-U.S. credit card	145		4		210		6		266		7		111		3		145		4		210		6
Direct/Indirect consumer	73		3		207		9		498		24		30		1		73		3		207		9
Other consumer	—		—		56		3		62		4		—		—		—		—		56		3


⁽¹⁾	Includes accrued interest and fees.


⁽²⁾	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 provides information on the Corporation’s primary modification programs for the ~~renegotiated~~Credit Card and Other Consumer TDR portfolio at December 31, ~~2015~~2016 and ~~2014~~2015.



Credit Card and Other Consumer – Renegotiated TDRs by Program Type
Credit Card and Other Consumer – TDRs by Program Type																					Credit Card and Other Consumer – TDRs by Program Type

	December 31																				December 31
	Internal Programs				External Programs				Other ⁽¹⁾				Total				Percent of Balances Current or Less Than 30 Days Past Due				Internal Programs				External Programs				Other ⁽¹⁾				Total				Percent of Balances Current or Less Than 30 Days Past Due
(Dollars in millions)	2015		2014		2015		2014		2015		2014		2015		2014		2015		2014		2016		2015		2016		2015		2016		2015		2016		2015		2016		2015
U.S. credit card	$	313	$	450	$	296	$	397	$	2	$	9	$	611	$	856	88.74	%	84.99	%	$	220	$	313	$	264	$	296	$	1	$	2	$	485	$	611	88.99	%	88.74	%
Non-U.S. credit card	21		41		10		16		95		111		126		168		44.25		47.56		11		21		7		10		82		95		100		126		38.47		44.25
Direct/Indirect consumer	11		50		7		34		24		33		42		117		89.12		85.21		2		11		1		7		22		24		25		42		90.49		89.12
Total renegotiated TDRs	$	345	$	541	$	313	$	447	$	121	$	153	$	779	$	1,141	81.55		79.51
Total TDRs by program type																					$	233	$	345	$	272	$	313	$	105	$	121	$	610	$	779	80.79		81.55


⁽¹⁾	Other TDRs for non-U.S. credit card include modifications of accounts that are ineligible for a fixed payment plan.



		~~174~~Bank of America ~~2015~~2016153

The table below provides information on the Corporation’s ~~renegotiated~~Credit Card and Other Consumer TDR portfolio including the December 31, 2016, 2015 ~~2014~~ and ~~2013~~2014 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of loans that were modified in TDRs during ~~2015~~2016, ~~2014~~2015 and ~~2013,~~2014, and net charge-offs recorded during the period in which the modification occurred.



Credit Card and Other Consumer – Renegotiated TDRs Entered into During 2015, 2014 and 2013
Credit Card and Other Consumer – TDRs Entered into During 2016, 2015 and 2014											Credit Card and Other Consumer – TDRs Entered into During 2016, 2015 and 2014

	December 31, 2015								2015		December 31, 2016								2016
(Dollars in millions)	Unpaid Principal Balance		Carrying Value ⁽¹⁾		Pre-Modification Interest Rate		Post-Modification Interest Rate		Net Charge-offs		Unpaid Principal Balance		Carrying Value ⁽¹⁾		Pre-Modification Interest Rate		Post-Modification Interest Rate		Net Charge-offs
U.S. credit card	$	205	$	218	17.07	%	5.08	%	$	26	$	163	$	172	17.54	%	5.47	%	$	15
Non-U.S. credit card	74		86		24.05		0.53		63		66		75		23.99		0.52		50
Direct/Indirect consumer	19		12		5.95		5.19		9		21		13		3.44		3.29		9
Total	$	298	$	316	18.58		3.84		$	98	$	250	$	260	18.73		3.93		$	74

	December 31, 2014								2014		December 31, 2015								2015
U.S. credit card	$	276	$	301	16.64	%	5.15	%	$	37	$	205	$	218	17.07	%	5.08	%	$	26
Non-U.S. credit card	91		106		24.90		0.68		91		74		86		24.05		0.53		63
Direct/Indirect consumer	27		19		8.66		4.90		14		19		12		5.95		5.19		9
Total	$	394	$	426	18.32		4.03		$	142	$	298	$	316	18.58		3.84		$	98

	December 31, 2013								2013		December 31, 2014								2014
U.S. credit card	$	299	$	329	16.84	%	5.84	%	$	30	$	276	$	301	16.64	%	5.15	%	$	37
Non-U.S. credit card	134		147		25.90		0.95		138		91		106		24.90		0.68		91
Direct/Indirect consumer	47		38		11.53		4.74		15		27		19		8.66		4.90		14
Other consumer	8		8		9.28		5.25		—
Total	$	488	$	522	18.89		4.37		$	183	$	394	$	426	18.32		4.03		$	142


⁽¹⁾	Includes accrued interest and fees.

~~The table below provides information on the Corporation’s primary modification programs for the renegotiated TDR portfolio for loans that were modified in TDRs during~~ ~~2015~~, ~~2014~~ ~~and 2013.~~

Credit Card and Other Consumer – Renegotiated TDRs Entered into During the Period by Program Type

2015
(Dollars in millions) Internal Programs External Programs
Other ⁽¹⁾
Total
U.S. credit card $ 134
$ 84
$ —
$ 218
Non-U.S. credit card 3
4
79
86
Direct/Indirect consumer 1
—
11
12
Total renegotiated TDRs $ 138
$ 88
$ 90
$ 316

2014
U.S. credit card $ 196
$ 105
$ —
$ 301
Non-U.S. credit card 6
6
94
106
Direct/Indirect consumer 4
2
13
19
Total renegotiated TDRs $ 206
$ 113
$ 107
$ 426

2013
U.S. credit card $ 192
$ 137
$ —
$ 329
Non-U.S. credit card 16
9
122
147
Direct/Indirect consumer 15
8
15
38
Other consumer 8
—
—
8
Total renegotiated TDRs $ 231
$ 154
$ 137
$ 522


⁽¹⁾	~~Other TDRs for non-U.S. credit card include modifications of accounts that are ineligible for a fixed payment plan.~~



		~~Bank of America 2015175~~

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 1413 percent of new U.S. credit card TDRs, 8890 percent of new non-U.S. credit card TDRs and 1214 percent of new direct/indirect consumer TDRs may be in payment default within 12 months after modification. Loans that entered into payment default during 2016, 2015, ~~2014~~ and ~~2013~~2014 that had been modified in a TDR during the preceding 12 months were $30 million, $43 million ~~$56 million~~ and ~~$61~~$56 million for U.S. credit card, $127 million, $152 million ~~$200 million~~ and ~~$236~~$200 million for non-U.S. credit card, and $3$2 million,, $5 $3 million and ~~$12~~$5 million for direct/indirect consumer.

~~Commercial~~Purchased Credit-impaired Loans

~~Impaired~~Purchased loans with evidence of credit quality deterioration as of the purchase date for which it is probable that the Corporation will not receive all contractually required payments receivable are accounted for as purchased credit-impaired (PCI) loans. Evidence of credit quality deterioration since origination may include past due status, refreshed credit scores and refreshed loan-to-value (LTV) ratios. At acquisition, PCI loans are recorded at fair value with no allowance for credit losses, and accounted for individually or aggregated in pools based on similar risk characteristics such as credit risk, collateral type and interest rate risk. The Corporation estimates the amount and timing of expected cash flows for each loan or pool of loans. The expected cash flows in excess of the amount paid for the loans is referred to as the accretable yield and is recorded as interest income over the remaining estimated life of the loan or pool of loans. The excess of the PCI loans’ contractual principal and interest over the expected cash flows is referred to as the nonaccretable difference. Over the life of the PCI loans, the expected cash flows continue to be estimated using models that incorporate management’s estimate of current assumptions such as default rates, loss severity and prepayment speeds. If, upon subsequent valuation, the Corporation determines it is probable that the present value of the expected cash flows has decreased, a charge to the provision for credit losses is recorded with a corresponding increase in the allowance for credit losses. If it is probable that there is a significant increase in the present value of expected cash flows, the allowance for credit losses is reduced or, if there is no remaining allowance for credit losses related to these PCI loans, the accretable yield is increased through a reclassification from nonaccretable difference, resulting in a prospective increase in interest income. Reclassifications to or from nonaccretable difference can also occur for changes in the PCI loans’ estimated lives. If a loan within a PCI pool is sold, foreclosed, forgiven or the expectation of any future proceeds is remote, the loan is removed from the pool at its proportional carrying value. If the loan’s recovery value is less than the loan’s carrying value, the difference is first applied against the PCI pool’s nonaccretable difference and then against the allowance for credit losses.

Leases

Allowance for Credit Losses

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 LTV or, in the case of a subordinated lien, refreshed combined LTV (CLTV), borrower credit score, months since origination (referred to as vintage) 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 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 redefaults 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.

For impaired loans, which include nonperforming commercial loans as well as consumer and commercial loans and ~~TDRs (both performing and nonperforming)~~leases modified in a troubled debt restructuring (TDR), ~~are primarily measured based~~management measures impairment primarily based on the present value of



126 Bank of America 2016

payments expected to be received, discounted at the ~~loan’s~~loans’ original effective contractual interest ~~rate. Commercial impaired~~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 a component of the allowance for loan and lease losses unless these are secured consumer loans that are solely dependent on the 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 and 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.

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, PCI loans and LHFS are not reported as nonperforming.

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.

Business card loans are charged off no later than the end of the month in which the account becomes 180 days past due or 60 days after receipt of notification of death or bankruptcy. These loans are not placed on nonaccrual status prior to charge-off and, therefore, are not reported as nonperforming loans. Other commercial loans and leases are generally charged off when all or a portion of the principal amount is determined to be uncollectible.

PCI loans are recorded at fair value at the acquisition date. Although the PCI loans may be contractually delinquent, the Corporation does not classify these loans as nonperforming as the loans were written down to fair value at the acquisition date and the accretable yield is recognized in interest income over the remaining life of the loan. In addition, reported net charge-offs exclude write-offs on PCI loans as the fair value already considers the estimated credit losses.

Troubled Debt Restructurings



		Bank of America 2016127

maximize collections. Loans that are carried at fair value, LHFS and PCI loans 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 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.

Loans Held-for-sale

Loans that are intended to be sold 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. 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

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 goodwill impairment analysis is a two-step test. The first step of the goodwill impairment test involves comparing the fair value of each reporting unit with 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. 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, the second step must be performed to measure potential impairment.

The second 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.

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 such that the assets are legally isolated from the creditors of the Corporation. Assets held in a trust can only be used to settle obligations of the trust. The creditors of these trusts typically have no recourse to the Corporation except in accordance with the Corporation’s obligations under standard representations and warranties.

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



128 Bank of America 2016

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

observable inputs and minimize the use of unobservable inputs in measuring fair value. A hierarchy is established which categorizes fair value measurements into three levels 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

Level 3

Income Taxes



		Bank of America 2016129

Revenue Recognition

Card income includes fees such as interchange, cash advance, annual, late, over-limit and other miscellaneous fees. Uncollected fees are included in customer card receivables balances with an amount recorded in the allowance for loan and lease losses for estimated uncollectible card receivables. Uncollected fees are written off when a card receivable reaches 180 days past due.

Service charges include fees for insufficient funds, overdrafts and other banking services. Uncollected fees are included in outstanding loan balances with an amount recorded for estimated uncollectible service fees receivable. Uncollected fees are written off when a fee receivable reaches 60 days past due.

Investment and brokerage services revenue consists primarily of asset management fees and brokerage income. Asset management fees consist primarily of fees for investment management and trust services and are generally based on the dollar amount of the assets being managed. Brokerage income generally includes commissions and fees earned on the sale of various financial products.

Investment banking income consists primarily of advisory and underwriting fees which are generally recognized net of any direct expenses. Non-reimbursed expenses are recorded as noninterest expense.

Earnings Per Common Share

Earnings per common share (EPS) is computed by dividing net income (loss) allocated to common shareholders by the weighted-average common shares outstanding, excluding unvested common shares subject to repurchase or cancellation. Net income (loss) allocated to common shareholders is net income (loss) 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 (see below for more information). Diluted EPS is computed by dividing income (loss) allocated to common shareholders plus dividends on dilutive convertible preferred stock and preferred stock that can be tendered to exercise warrants, by

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 and related hedge 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.

Credit Card and Deposit Arrangements

Endorsing Organization Agreements

Cardholder Reward Agreements



130 Bank of America 2016

NOTE 2 Derivatives

Derivative Balances

activities, see Note 1 – Summary of Significant Accounting Principles. The following tables present derivative instruments included on the Consolidated Balance Sheet in derivative assets and liabilities at December 31, 2016 and 2015. Balances are presented on a gross basis, prior to the application of counterparty and cash collateral netting. Total derivative assets and liabilities are adjusted on an aggregate basis to take into consideration the effects of legally enforceable master netting agreements and have been reduced by the cash collateral received or paid.




			December 31, 2016
			Gross Derivative Assets							Gross Derivative Liabilities
(Dollars in billions)	Contract/ Notional ⁽¹⁾		Trading and Other Risk Management Derivatives		Qualifying Accounting Hedges		Total			Trading and Other Risk Management Derivatives		Qualifying Accounting Hedges		Total
Interest rate contracts
Swaps	$	16,977.7	$	385.0	$	5.9	$	390.9		$	386.9	$	2.0	$	388.9
Futures and forwards	5,609.5		2.2		—		2.2			2.1		—		2.1
Written options	1,146.2		—		—		—			52.2		—		52.2
Purchased options	1,178.7		53.3		—		53.3			—		—		—
Foreign exchange contracts
Swaps	1,828.6		54.6		4.2		58.8			58.8		6.2		65.0
Spot, futures and forwards	3,410.7		58.8		1.7		60.5			56.6		0.8		57.4
Written options	356.6		—		—		—			9.4		—		9.4
Purchased options	342.4		8.9		—		8.9			—		—		—
Equity contracts
Swaps	189.7		3.4		—		3.4			4.0		—		4.0
Futures and forwards	68.7		0.9		—		0.9			0.9		—		0.9
Written options	431.5		—		—		—			21.4		—		21.4
Purchased options	385.5		23.9		—		23.9			—		—		—
Commodity contracts
Swaps	48.2		2.5		—		2.5			5.1		—		5.1
Futures and forwards	49.1		3.6		—		3.6			0.5		—		0.5
Written options	29.3		—		—		—			1.9		—		1.9
Purchased options	28.9		2.0		—		2.0			—		—		—
Credit derivatives
Purchased credit derivatives:
Credit default swaps	604.0		8.1		—		8.1			10.3		—		10.3
Total return swaps/other	21.2		0.4		—		0.4			1.5		—		1.5
Written credit derivatives:
Credit default swaps	614.4		10.7		—		10.7			7.5		—		7.5
Total return swaps/other	25.4		1.0		—		1.0			0.2		—		0.2
Gross derivative assets/liabilities			$	619.3	$	11.8	$	631.1		$	619.3	$	9.0	$	628.3
Less: Legally enforceable master netting agreements							(545.3		)					(545.3		)
Less: Cash collateral received/paid							(43.3		)					(43.5		)
Total derivative assets/liabilities							$	42.5						$	39.5


⁽¹⁾	Represents the total contract/notional amount of derivative assets and liabilities outstanding.



		Bank of America 2016131




			December 31, 2015
			Gross Derivative Assets							Gross Derivative Liabilities
(Dollars in billions)	Contract/ Notional ⁽¹⁾		Trading and Other Risk Management Derivatives		Qualifying Accounting Hedges		Total			Trading and Other Risk Management Derivatives		Qualifying Accounting Hedges		Total
Interest rate contracts
Swaps	$	21,706.8	$	439.6	$	7.4	$	447.0		$	440.8	$	1.2	$	442.0
Futures and forwards	6,237.6		1.1		—		1.1			1.3		—		1.3
Written options	1,313.8		—		—		—			57.6		—		57.6
Purchased options	1,393.3		58.9		—		58.9			—		—		—
Foreign exchange contracts
Swaps	2,149.9		49.2		0.9		50.1			52.2		2.8		55.0
Spot, futures and forwards	4,104.3		46.0		1.2		47.2			45.8		0.3		46.1
Written options	467.2		—		—		—			10.6		—		10.6
Purchased options	439.9		10.2		—		10.2			—		—		—
Equity contracts
Swaps	201.2		3.3		—		3.3			3.8		—		3.8
Futures and forwards	72.8		2.1		—		2.1			1.2		—		1.2
Written options	347.6		—		—		—			21.1		—		21.1
Purchased options	320.3		23.8		—		23.8			—		—		—
Commodity contracts
Swaps	47.0		4.7		—		4.7			7.1		—		7.1
Futures and forwards	45.6		3.8		—		3.8			0.7		—		0.7
Written options	36.6		—		—		—			4.4		—		4.4
Purchased options	37.4		4.2		—		4.2			—		—		—
Credit derivatives
Purchased credit derivatives:
Credit default swaps	928.3		14.4		—		14.4			14.8		—		14.8
Total return swaps/other	26.4		0.2		—		0.2			1.9		—		1.9
Written credit derivatives:
Credit default swaps	924.1		15.3		—		15.3			13.1		—		13.1
Total return swaps/other	39.7		2.3		—		2.3			0.4		—		0.4
Gross derivative assets/liabilities			$	679.1	$	9.5	$	688.6		$	676.8	$	4.3	$	681.1
Less: Legally enforceable master netting agreements							(596.7		)					(596.7		)
Less: Cash collateral received/paid							(41.9		)					(45.9		)
Total derivative assets/liabilities							$	50.0						$	38.5


⁽¹⁾	Represents the total contract/notional amount of derivative assets and liabilities outstanding.

Offsetting of Derivatives

The Offsetting of Derivatives table presents derivative instruments included in derivative assets and liabilities on the Consolidated Balance Sheet at December 31, 2016 and 2015 by primary risk (e.g., interest rate risk) and the platform, where applicable, on which these derivatives are transacted. Exchange-traded derivatives include listed options transacted on an exchange. 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. Balances are presented on a gross basis, prior to

Also included in the table is financial instruments collateral related to legally enforceable master netting agreements that represents securities collateral received or pledged and cash and securities collateral held and posted at third-party custodians. These amounts are not offset on the Consolidated Balance Sheet but are shown as a reduction to total derivative assets and liabilities in the table to derive net derivative assets and liabilities.

For more information on offsetting of securities financing agreements, see Note 10 – Federal Funds Sold or Purchased, Securities Financing Agreements and Short-term Borrowings.



132 Bank of America 2016




Offsetting of Derivatives

	December 31, 2016						December 31, 2015
(Dollars in billions)	Derivative Assets			Derivative Liabilities			Derivative Assets			Derivative Liabilities
Interest rate contracts
Over-the-counter	$	267.3		$	258.2		$	309.3		$	297.2
Over-the-counter cleared	177.2			182.8			197.0			201.7
Foreign exchange contracts
Over-the-counter	124.3			126.7			103.2			107.5
Over-the-counter cleared	0.3			0.3			0.1			0.1
Equity contracts
Over-the-counter	15.6			13.7			16.6			14.0
Exchange-traded	11.4			10.8			10.0			9.2
Commodity contracts
Over-the-counter	3.7			4.9			7.3			8.9
Exchange-traded	1.1			1.0			1.8			1.8
Over-the-counter cleared	—			—			0.1			0.1
Credit derivatives
Over-the-counter	15.3			14.7			24.6			22.9
Over-the-counter cleared	4.3			4.3			6.5			6.4
Total gross derivative assets/liabilities, before netting
Over-the-counter	426.2			418.2			461.0			450.5
Exchange-traded	12.5			11.8			11.8			11.0
Over-the-counter cleared	181.8			187.4			203.7			208.3
Less: Legally enforceable master netting agreements and cash collateral received/paid
Over-the-counter	(398.2		)	(392.6		)	(426.6		)	(425.7		)
Exchange-traded	(8.9		)	(8.9		)	(8.7		)	(8.7		)
Over-the-counter cleared	(181.5		)	(187.3		)	(203.3		)	(208.2		)
Derivative assets/liabilities, after netting	31.9			28.6			37.9			27.2
Other gross derivative assets/liabilities ⁽¹⁾	10.6			10.9			12.1			11.3
Total derivative assets/liabilities	42.5			39.5			50.0			38.5
Less: Financial instruments collateral ⁽²⁾	(13.5		)	(10.5		)	(13.9		)	(6.5		)
Total net derivative assets/liabilities	$	29.0		$	29.0		$	36.1		$	32.0


⁽¹⁾	Consists of derivatives entered into under master netting agreements where the enforceability of these agreements is uncertain.


⁽²⁾	These amounts are limited to the derivative asset/liability balance and, accordingly, do not include excess collateral received/pledged.

ALM and Risk Management Derivatives

forward loan sale commitments and other derivative instruments, including purchased options, and certain debt securities. The Corporation also utilizes derivatives such as interest rate options, interest rate swaps, forward settlement contracts and eurodollar futures to hedge certain market risks of MSRs. For more information on MSRs, see Note 23 – Mortgage Servicing Rights.



		Bank of America 2016133

Derivatives Designated as Accounting Hedges

have functional currencies other than the U.S. Dollar using forward exchange contracts and cross-currency basis swaps, and by issuing foreign currency-denominated debt (net investment hedges).

Fair Value Hedges

The table below summarizes information related to fair value hedges for 2016, 2015 and 2014, including hedges of interest rate risk on long-term debt that were acquired as part of a business combination and redesignated at that time. At redesignation, the fair value of the derivatives was positive. As the derivatives mature, the fair value will approach zero. As a result, ineffectiveness will occur and the fair value changes in the derivatives and the long-term debt being hedged may be directionally the same in certain scenarios. Based on a regression analysis, the derivatives continue to be highly effective at offsetting changes in the fair value of the long-term debt attributable to interest rate risk.




Derivatives Designated as Fair Value Hedges

Gains (Losses)	2016
(Dollars in millions)	Derivative			Hedged Item			Hedge Ineffectiveness
Interest rate risk on long-term debt ⁽¹⁾	$	(1,488	)	$	646		$	(842	)
Interest rate and foreign currency risk on long-term debt ⁽¹⁾	(941		)	944			3
Interest rate risk on available-for-sale securities ⁽²⁾	227			(286		)	(59		)
Price risk on commodity inventory ⁽³⁾	(17		)	17			—
Total	$	(2,219	)	$	1,321		$	(898	)

	2015
Interest rate risk on long-term debt ⁽¹⁾	$	(718	)	$	(77	)	$	(795	)
Interest rate and foreign currency risk on long-term debt ⁽¹⁾	(1,898		)	1,812			(86		)
Interest rate risk on available-for-sale securities ⁽²⁾	105			(127		)	(22		)
Price risk on commodity inventory ⁽³⁾	15			(11		)	4
Total	$	(2,496	)	$	1,597		$	(899	)

	2014
Interest rate risk on long-term debt ⁽¹⁾	$	2,144		$	(2,935	)	$	(791	)
Interest rate and foreign currency risk on long-term debt ⁽¹⁾	(2,212		)	2,120			(92		)
Interest rate risk on available-for-sale securities ⁽²⁾	(35		)	3			(32		)
Price risk on commodity inventory ⁽³⁾	21			(15		)	6
Total	$	(82	)	$	(827	)	$	(909	)


⁽¹⁾	Amounts are recorded in interest expense on long-term debt and in other income.


⁽²⁾	Amounts are recorded in interest income on debt securities.


⁽³⁾	Amounts relating to commodity inventory are recorded in trading account profits.



134 Bank of America 2016

Cash Flow and Net Investment Hedges

The table below summarizes certain information related to cash flow hedges and net investment hedges for 2016, 2015 and 2014. Of the $895 million after-tax net loss ($1.4 billion on a pretax basis) on derivatives in accumulated OCI for 2016, $128 million after-tax ($206 million on a pretax basis) is expected to be reclassified into earnings in the next 12 months. These net losses reclassified into earnings are expected to primarily reduce net

interest income related to the respective hedged items. Amounts related to price risk on restricted stock awards reclassified from accumulated OCI are recorded in personnel expense. For terminated cash flow hedges, the time period over which substantially all of the forecasted transactions are hedged is approximately seven years, with a maximum length of time for certain forecasted transactions of 20 years.




Derivatives Designated as Cash Flow and Net Investment Hedges

	2016
(Dollars in millions, amounts pretax)	Gains (Losses) Recognized in Accumulated OCI on Derivatives			Gains (Losses) in Income Reclassified from Accumulated OCI			Hedge Ineffectiveness and Amounts Excluded from Effectiveness Testing ⁽¹⁾
Cash flow hedges
Interest rate risk on variable-rate portfolios	$	(340	)	$	(553	)	$	1
Price risk on restricted stock awards ⁽²⁾	41			(32		)	—
Total	$	(299	)	$	(585	)	$	1
Net investment hedges
Foreign exchange risk	$	1,636		$	3		$	(325	)

	2015
Cash flow hedges
Interest rate risk on variable-rate portfolios	$	95		$	(974	)	$	(2	)
Price risk on restricted stock awards⁽²⁾	(40		)	91			—
Total	$	55		$	(883	)	$	(2	)
Net investment hedges
Foreign exchange risk	$	3,010		$	153		$	(298	)

	2014
Cash flow hedges
Interest rate risk on variable-rate portfolios	$	68		$	(1,119	)	$	(4	)
Price risk on restricted stock awards ⁽²⁾	127			359			—
Total	$	195		$	(760	)	$	(4	)
Net investment hedges
Foreign exchange risk	$	3,021		$	21		$	(503	)


⁽¹⁾	Amounts related to cash flow hedges represent hedge ineffectiveness and amounts related to net investment hedges represent amounts excluded from effectiveness testing.


⁽²⁾	The hedge gain (loss) recognized in accumulated OCI is primarily related to the change in the Corporation’s stock price for the period.

Other Risk Management Derivatives

Other risk management derivatives are used by the Corporation to reduce certain risk exposures. These derivatives are not qualifying accounting hedges because either they did not qualify for or were not designated as accounting hedges. The table below presents gains (losses) on these derivatives for 2016, 2015 and 2014. These gains (losses) are largely offset by the income or expense that is recorded on the hedged item.




Other Risk Management Derivatives

Gains (Losses)

(Dollars in millions)	2016			2015			2014
Interest rate risk on mortgage banking income ⁽¹⁾	$	461		$	254		$	1,017
Credit risk on loans ⁽²⁾	(107		)	(22		)	16
Interest rate and foreign currency risk on ALM activities ⁽³⁾	(754		)	(222		)	(3,683		)
Price risk on restricted stock awards ⁽⁴⁾	9			(267		)	600
Other	5			11			(9		)

⁽¹⁾

Net gains (losses) on these derivatives are recorded in mortgage banking income as they are used to mitigate the interest rate risk related to MSRs, IRLCs and mortgage loans held-for-sale, all of which are measured at fair value with changes in fair value recorded in mortgage banking income. The net gains on IRLCs related to the origination of mortgage loans that are held-for-sale, which are not included in the table but are considered derivative instruments, were $533 million, $714 million and $776 million for 2016, 2015 and 2014, respectively.


⁽²⁾	Primarily related to derivatives that are economic hedges of credit risk on loans. Net gains (losses) on these derivatives are recorded in other income.


⁽³⁾	Primarily related to hedges of debt securities carried at fair value and hedges of foreign currency-denominated debt. Gains (losses) on these derivatives and the related hedged items are recorded in other income.


⁽⁴⁾	Gains (losses) on these derivatives are recorded in personnel expense.



		Bank of America 2016135

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. Through December 31, 2016 and 2015, the Corporation transferred $6.6 billion and $7.9 billion of primarily non-U.S. government-guaranteed MBS to a third-party trust and received gross cash proceeds of $6.6 billion and $7.9 billion at the transfer dates. At December 31, 2016 and 2015, the fair value of these securities was $6.3 billion and $7.2 billion. Derivative assets of $43 million and $24 million and liabilities of $10 million and $29 million were recorded at December 31, 2016 and 2015, and are included in credit derivatives in the derivative instruments table on page 131.

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 trading account profits and net interest income as well as other revenue categories.

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 2016, 2015 and 2014. The difference between total trading account profits in the following table and in the Consolidated Statement of Income represents trading activities in business segments other than Global Markets. This table includes debit valuation and funding valuation adjustment (DVA/FVA) gains (losses). Global Markets results in Note 24 – Business Segment Information are presented on a fully taxable-equivalent (FTE) basis. The following table is not presented on an FTE basis.



136 Bank of America 2016

The results for 2016 and 2015 were impacted by the adoption of new accounting guidance in 2015 on recognition and measurement of financial instruments. As such, amounts in the "Other" column for 2016 and 2015 exclude unrealized DVA resulting from changes in the Corporation’s own credit spreads on

liabilities accounted for under the fair value option. Amounts for 2014 include such amounts. For more information on the implementation of new accounting guidance, see Note 1 – Summary of Significant Accounting Principles.




Sales and Trading Revenue

	2016
(Dollars in millions)	Trading Account Profits		Net Interest Income			Other ⁽¹⁾			Total
Interest rate risk	$	1,608	$	1,397		$	304		$	3,309
Foreign exchange risk	1,360		(10		)	(154		)	1,196
Equity risk	1,915		15			2,072			4,002
Credit risk	1,258		2,587			425			4,270
Other risk	409		(20		)	40			429
Total sales and trading revenue	$	6,550	$	3,969		$	2,687		$	13,206

	2015
Interest rate risk	$	1,300	$	1,307		$	(263	)	$	2,344
Foreign exchange risk	1,322		(10		)	(117		)	1,195
Equity risk	2,115		56			2,146			4,317
Credit risk	910		2,361			452			3,723
Other risk	462		(81		)	62			443
Total sales and trading revenue	$	6,109	$	3,633		$	2,280		$	12,022

	2014
Interest rate risk	$	983	$	946		$	466		$	2,395
Foreign exchange risk	1,177		7			(128		)	1,056
Equity risk	1,954		(79		)	2,307			4,182
Credit risk	1,404		2,563			617			4,584
Other risk	508		(123		)	108			493
Total sales and trading revenue	$	6,026	$	3,314		$	3,370		$	12,710


⁽¹⁾	Represents amounts in investment and brokerage services and other income that are recorded in Global Markets and included in the definition of sales and trading revenue. Includes investment and brokerage services revenue of $2.1 billion, $2.2 billion and $2.2 billion for 2016, 2015 and 2014, respectively.

Credit Derivatives

occurred and/or may only be required to make payment up to a specified amount.

Credit derivative instruments where the Corporation is the seller of credit protection and their expiration at December 31, 2016 and 2015 are summarized in the following table. These instruments are classified as investment and non-investment grade based on the credit quality of the underlying referenced obligation. The Corporation considers ratings of BBB- or higher as investment grade. Non-investment grade includes non-rated credit derivative instruments. The Corporation discloses internal categorizations of investment grade and non-investment grade consistent with how risk is managed for these instruments.



		Bank of America 2016137




Credit Derivative Instruments

	December 31, 2016
	Carrying Value
(Dollars in millions)	Less than One Year		One to Three Years		Three to Five Years		Over Five Years		Total
Credit default swaps:
Investment grade	$	10	$	64	$	535	$	783	$	1,392
Non-investment grade	771		1,053		908		3,339		6,071
Total	781		1,117		1,443		4,122		7,463
Total return swaps/other:
Investment grade	16		—		—		—		16
Non-investment grade	127		10		2		1		140
Total	143		10		2		1		156
Total credit derivatives	$	924	$	1,127	$	1,445	$	4,123	$	7,619
Credit-related notes:
Investment grade	$	—	$	12	$	542	$	1,423	$	1,977
Non-investment grade	70		22		60		1,318		1,470
Total credit-related notes	$	70	$	34	$	602	$	2,741	$	3,447
	Maximum Payout/Notional
Credit default swaps:
Investment grade	$	121,083	$	143,200	$	116,540	$	21,905	$	402,728
Non-investment grade	84,755		67,160		41,001		18,711		211,627
Total	205,838		210,360		157,541		40,616		614,355
Total return swaps/other:
Investment grade	12,792		—		—		—		12,792
Non-investment grade	6,638		5,127		589		208		12,562
Total	19,430		5,127		589		208		25,354
Total credit derivatives	$	225,268	$	215,487	$	158,130	$	40,824	$	639,709



	December 31, 2015
	Carrying Value
Credit default swaps:
Investment grade	$	84	$	481	$	2,203	$	680	$	3,448
Non-investment grade	672		3,035		2,386		3,583		9,676
Total	756		3,516		4,589		4,263		13,124
Total return swaps/other:
Investment grade	5		—		—		—		5
Non-investment grade	171		236		8		2		417
Total	176		236		8		2		422
Total credit derivatives	$	932	$	3,752	$	4,597	$	4,265	$	13,546
Credit-related notes:
Investment grade	$	267	$	57	$	444	$	2,203	$	2,971
Non-investment grade	61		118		117		1,264		1,560
Total credit-related notes	$	328	$	175	$	561	$	3,467	$	4,531
	Maximum Payout/Notional
Credit default swaps:
Investment grade	$	149,177	$	280,658	$	178,990	$	26,352	$	635,177
Non-investment grade	81,596		135,850		53,299		18,221		288,966
Total	230,773		416,508		232,289		44,573		924,143
Total return swaps/other:
Investment grade	9,758		—		—		—		9,758
Non-investment grade	20,917		6,989		1,371		623		29,900
Total	30,675		6,989		1,371		623		39,658
Total credit derivatives	$	261,448	$	423,497	$	233,660	$	45,196	$	963,801



138 Bank of America 2016

Credit-related notes in the table on page 138 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 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 131, the Corporation enters into legally enforceable master netting agreements which reduce risk by permitting the closeout and netting of transactions with the same counterparty upon the occurrence of certain events.

A majority 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, 2016 and 2015, the Corporation held cash and securities collateral of $85.5 billion and $78.9 billion, and posted cash and securities collateral of $71.1 billion and $62.7 billion in the normal course of business under derivative agreements. This

excludes cross-product margining agreements where clients are permitted to margin on a net basis for both derivative and secured financing arrangements.

At December 31, 2016, 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 approximately $1.8 billion, including $1.0 billion for Bank of America, N.A. (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, 2016 and 2015, the liability recorded for these derivative contracts was $46 million and $69 million.

The table below presents the amount of additional collateral that would have been contractually required by derivative contracts and other trading agreements at December 31, 2016if 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

	December 31, 2016
(Dollars in millions)	One incremental notch		Second incremental notch
Bank of America Corporation	$	498	$	866
Bank of America, N.A. and subsidiaries ⁽¹⁾	310		492


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

The table below 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, 2016if 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

	December 31, 2016
(Dollars in millions)	One incremental notch		Second incremental notch
Derivative liabilities	$	691	$	1,324
Collateral posted	459		1,026



		Bank of America 2016139

Valuation Adjustments on Derivatives

The table below presents CVA, DVA and FVA gains (losses) on derivatives, which are recorded in trading account profits, on a gross and net of hedge basis for 2016, 2015 and 2014. 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.




Valuation Adjustments on Derivatives

Gains (Losses)
	2016					2015						2014
(Dollars in millions)	Gross		Net			Gross			Net			Gross			Net
Derivative assets (CVA) ⁽¹⁾	$	374	$	214		$	255		$	227		$	(22	)	$	191
Derivative assets/liabilities (FVA) ⁽¹⁾	186		102			16			16			(497		)	(497		)
Derivative liabilities (DVA) ⁽¹⁾	24		(141		)	(18		)	(153		)	(28		)	(150		)


⁽¹⁾	At December 31, 2016, 2015 and 2014, cumulative CVA reduced the derivative assets balance by $1.0 billion, $1.4 billion and $1.6 billion, cumulative FVA reduced the net derivatives balance by $296 million, $481 million and $497 million, and cumulative DVA reduced the derivative liabilities balance by $774 million, $750 million and $769 million, respectively.



140 Bank of America 2016

NOTE 3 Securities




Debt Securities and Available-for-Sale Marketable Equity Securities

	December 31, 2016
(Dollars in millions)	Amortized Cost			Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale debt securities
Mortgage-backed securities:
Agency	$	190,809		$	640	$	(1,963	)	$	189,486
Agency-collateralized mortgage obligations	8,296			85		(51		)	8,330
Commercial	12,594			21		(293		)	12,322
Non-agency residential ⁽¹⁾	1,863			181		(31		)	2,013
Total mortgage-backed securities	213,562			927		(2,338		)	212,151
U.S. Treasury and agency securities	48,800			204		(752		)	48,252
Non-U.S. securities	6,372			13		(3		)	6,382
Other taxable securities, substantially all asset-backed securities	10,573			64		(23		)	10,614
Total taxable securities	279,307			1,208		(3,116		)	277,399
Tax-exempt securities	17,272			72		(184		)	17,160
Total available-for-sale debt securities	296,579			1,280		(3,300		)	294,559
Less: Available-for-sale securities of business held for sale⁽²⁾	(619		)	—		—			(619		)
Other debt securities carried at fair value	19,748			121		(149		)	19,720
Total debt securities carried at fair value	315,708			1,401		(3,449		)	313,660
Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities	117,071			248		(2,034		)	115,285
Total debt securities ⁽³⁾	$	432,779		$	1,649	$	(5,483	)	$	428,945
Available-for-sale marketable equity securities ⁽⁴⁾	$	325		$	51	$	(1	)	$	375

	December 31, 2015
Available-for-sale debt securities
Mortgage-backed securities:
Agency	$	229,356		$	1,061	$	(1,470	)	$	228,947
Agency-collateralized mortgage obligations	10,892			148		(55		)	10,985
Commercial	7,200			30		(65		)	7,165
Non-agency residential ⁽¹⁾	3,031			219		(71		)	3,179
Total mortgage-backed securities	250,479			1,458		(1,661		)	250,276
U.S. Treasury and agency securities	25,075			211		(9		)	25,277
Non-U.S. securities	5,743			27		(3		)	5,767
Other taxable securities, substantially all asset-backed securities	10,475			54		(84		)	10,445
Total taxable securities	291,772			1,750		(1,757		)	291,765
Tax-exempt securities	13,978			63		(33		)	14,008
Total available-for-sale debt securities	305,750			1,813		(1,790		)	305,773
Other debt securities carried at fair value	16,678			103		(174		)	16,607
Total debt securities carried at fair value	322,428			1,916		(1,964		)	322,380
Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities	84,508			330		(792		)	84,046
Total debt securities ⁽³⁾	$	406,936		$	2,246	$	(2,756	)	$	406,426
Available-for-sale marketable equity securities ⁽⁴⁾	$	326		$	99	$	—		$	425


⁽¹⁾	At December 31, 2016 and 2015, the underlying collateral type included approximately 60 percent and 71 percent prime, 19 percent and 15 percent Alt-A, and 21 percent and 14 percent subprime.


⁽²⁾	Represents AFS debt securities of business held for sale of which there were no unrealized gains or losses at December 31, 2016.

⁽³⁾

The Corporation had debt securities from FNMA and FHLMC that each exceeded 10 percent of shareholders’ equity, with an amortized cost of $156.4 billion and $48.7 billion, and a fair value of $154.4 billion and $48.3 billion at December 31, 2016. Debt securities from FNMA and FHLMC that exceeded 10 percent of shareholders’ equity had an amortized cost of $145.8 billion and $53.3 billion, and a fair value of $145.5 billion and $53.2 billion at December 31, 2015.


⁽⁴⁾	Classified in other assets on the Consolidated Balance Sheet.

At December 31, 2016, the accumulated net unrealized loss on AFS debt securities included in accumulated OCI was $1.3 billion, net of the related income tax benefit of $721 million. At December 31, 2016 and 2015, the Corporation had nonperforming AFS debt securities of $121 million and $188 million.

The following table presents the components of other debt securities carried at fair value where the changes in fair value are reported in other income. In 2016, the Corporation recorded unrealized mark-to-market net gains of $51 million and realized net losses of $128 million, compared to unrealized mark-to-market net gains of $62 million and realized net losses of $324 million in 2015. These amounts exclude hedge results.



		Bank of America 2016141




Other Debt Securities Carried at Fair Value

	December 31
(Dollars in millions)	2016		2015
Mortgage-backed securities:
Agency-collateralized mortgage obligations	$	5	$	7
Non-agency residential	3,139		3,490
Total mortgage-backed securities	3,144		3,497
Non-U.S. securities ⁽¹⁾	16,336		12,843
Other taxable securities, substantially all asset-backed securities	240		267
Total	$	19,720	$	16,607


⁽¹⁾	These securities are primarily used to satisfy certain international regulatory liquidity requirements.

The gross realized gains and losses on sales of AFS debt securities for 2016, 2015 and 2014 are presented in the following table.




Gains and Losses on Sales of AFS Debt Securities

(Dollars in millions)	2016			2015			2014
Gross gains	$	520		$	1,174		$	1,504
Gross losses	(30		)	(36		)	(23		)
Net gains on sales of AFS debt securities	$	490		$	1,138		$	1,481
Income tax expense attributable to realized net gains on sales of AFS debt securities	$	186		$	432		$	563




Temporarily Impaired and Other-than-temporarily Impaired AFS Debt Securities

	December 31, 2016
	Less than Twelve Months					Twelve Months or Longer					Total
(Dollars in millions)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Temporarily impaired AFS debt securities
Mortgage-backed securities:
Agency	$	135,210	$	(1,846	)	$	3,770	$	(117	)	$	138,980	$	(1,963	)
Agency-collateralized mortgage obligations	3,229		(25		)	1,028		(26		)	4,257		(51		)
Commercial	9,018		(293		)	—		—			9,018		(293		)
Non-agency residential	212		(1		)	204		(13		)	416		(14		)
Total mortgage-backed securities	147,669		(2,165		)	5,002		(156		)	152,671		(2,321		)
U.S. Treasury and agency securities	28,462		(752		)	—		—			28,462		(752		)
Non-U.S. securities	52		(1		)	142		(2		)	194		(3		)
Other taxable securities, substantially all asset-backed securities	762		(5		)	1,438		(18		)	2,200		(23		)
Total taxable securities	176,945		(2,923		)	6,582		(176		)	183,527		(3,099		)
Tax-exempt securities	4,782		(148		)	1,873		(36		)	6,655		(184		)
Total temporarily impaired AFS debt securities	181,727		(3,071		)	8,455		(212		)	190,182		(3,283		)
Other-than-temporarily impaired AFS debt securities ⁽¹⁾
Non-agency residential mortgage-backed securities	94		(1		)	401		(16		)	495		(17		)
Total temporarily impaired and other-than-temporarily impaired AFS debt securities	$	181,821	$	(3,072	)	$	8,856	$	(228	)	$	190,677	$	(3,300	)

	December 31, 2015
Temporarily impaired AFS debt securities
Mortgage-backed securities:
Agency	$	115,502	$	(1,082	)	$	13,083	$	(388	)	$	128,585	$	(1,470	)
Agency-collateralized mortgage obligations	2,536		(19		)	1,212		(36		)	3,748		(55		)
Commercial	4,587		(65		)	—		—			4,587		(65		)
Non-agency residential	553		(5		)	723		(33		)	1,276		(38		)
Total mortgage-backed securities	123,178		(1,171		)	15,018		(457		)	138,196		(1,628		)
U.S. Treasury and agency securities	1,172		(5		)	190		(4		)	1,362		(9		)
Non-U.S. securities	—		—			134		(3		)	134		(3		)
Other taxable securities, substantially all asset-backed securities	4,936		(67		)	869		(17		)	5,805		(84		)
Total taxable securities	129,286		(1,243		)	16,211		(481		)	145,497		(1,724		)
Tax-exempt securities	4,400		(12		)	1,877		(21		)	6,277		(33		)
Total temporarily impaired AFS debt securities	133,686		(1,255		)	18,088		(502		)	151,774		(1,757		)
Other-than-temporarily impaired AFS debt securities ⁽¹⁾
Non-agency residential mortgage-backed securities	481		(19		)	98		(14		)	579		(33		)
Total temporarily impaired and other-than-temporarily impaired AFS debt securities	$	134,167	$	(1,274	)	$	18,186	$	(516	)	$	152,353	$	(1,790	)


⁽¹⁾	Includes OTTI AFS debt securities on which an OTTI loss, primarily related to changes in interest rates, remains in accumulated OCI.



142 Bank of America 2016

The Corporation recorded OTTI losses on AFS debt securities in 2016, 2015 and 2014 as presented in the following table. Substantially all OTTI losses in 2016, 2015 and 2014 consisted of credit losses on non-agency residential mortgage-backed securities (RMBS) and were recorded in other income in the Consolidated Statement of Income.




Net Credit-related Impairment Losses Recognized in Earnings

(Dollars in millions)	2016			2015			2014
Total OTTI losses	$	(31	)	$	(111	)	$	(30	)
Less: non-credit portion of total OTTI losses recognized in OCI	12			30			14
Net credit-related impairment losses recognized in earnings	$	(19	)	$	(81	)	$	(16	)

The table below presents a rollforward of the credit losses recognized in earnings in 2016, 2015 and 2014 on AFS debt securities that the Corporation does not have the intent to sell or will not more-likely-than-not be required to sell.




Rollforward of OTTI Credit Losses Recognized

(Dollars in millions)	2016			2015			2014
Balance, January 1	$	266		$	200		$	184
Additions for credit losses recognized on AFS debt securities that had no previous impairment losses	2			52			14
Additions for credit losses recognized on AFS debt securities that had previously incurred impairment losses	17			29			2
Reductions for AFS debt securities matured, sold or intended to be sold	(32		)	(15		)	—
Balance, December 31	$	253		$	266		$	200

Significant assumptions used in estimating the expected cash flows for measuring credit losses on non-agency RMBS were as follows at December 31, 2016.




Significant Assumptions

			Range ⁽¹⁾
	Weighted- average		10th Percentile ⁽²⁾		90th Percentile ⁽²⁾
Prepayment speed	13.8	%	4.6	%	27.0	%
Loss severity	20.1		8.8		36.5
Life default rate	20.4		0.7		77.4


⁽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 considering collateral characteristics such as loan-to-value (LTV), creditworthiness of borrowers as measured using Fair Isaac Corporation (FICO) scores, and geographic concentrations. The weighted-average severity by collateral type was 17.0 percent for prime, 18.8 percent for Alt-A and 30.4 percent for subprime at December 31, 2016. Additionally, default rates are projected by considering collateral characteristics including, but not limited to, LTV, FICO score and geographic concentration. Weighted-average life default rates by collateral type were 13.9 percent for prime, 21.7 percent for Alt-A and 20.9 percent for subprime at December 31, 2016.



		Bank of America 2016143

The remaining contractual maturity distribution and yields of the Corporation’s debt securities carried at fair value and HTM debt securities at December 31, 2016 are summarized in the table below. Actual duration and yields may differ as prepayments on the loans underlying the mortgages or other ABS are passed through to the Corporation.




Maturities of Debt Securities Carried at Fair Value and Held-to-maturity Debt Securities

	December 31, 2016
	Due in One Year or Less				Due after One Year through Five Years				Due after Five Years through Ten Years				Due after Ten Years				Total
(Dollars in millions)	Amount		Yield ⁽¹⁾		Amount		Yield ⁽¹⁾		Amount		Yield ⁽¹⁾		Amount		Yield ⁽¹⁾		Amount		Yield ⁽¹⁾
Amortized cost of debt securities carried at fair value
Mortgage-backed securities:
Agency	$	2	4.50	%	$	47	4.45	%	$	381	2.56	%	$	190,379	3.23	%	$	190,809	3.23	%
Agency-collateralized mortgage obligations	—		—		—		—		—		—		8,300		3.18		8,300		3.18
Commercial	48		8.60		558		1.96		11,632		2.47		356		2.58		12,594		2.47
Non-agency residential	—		—		—		—		12		0.01		5,016		8.50		5,028		8.48
Total mortgage-backed securities	50		8.32		605		2.15		12,025		2.46		204,051		3.36		216,731		3.31
U.S. Treasury and agency securities	517		0.47		34,898		1.57		13,234		1.58		151		5.42		48,800		1.57
Non-U.S. securities ⁽²⁾	21,164		0.25		1,097		1.92		206		1.30		240		6.60		22,707		0.41
Other taxable securities, substantially all asset-backed securities	2,040		1.77		5,102		1.63		2,279		2.71		1,396		3.18		10,817		2.08
Total taxable securities	23,771		0.40		41,702		1.59		27,744		2.05		205,838		3.36		299,055		2.76
Tax-exempt securities	646		1.13		6,563		1.49		7,846		1.57		2,217		1.53		17,272		1.52
Total amortized cost of debt securities carried at fair value⁽²⁾	$	24,417	0.42		$	48,265	1.58		$	35,590	1.95		$	208,055	3.34		$	316,327	2.69
Amortized cost of HTM debt securities⁽³⁾	$	—	—		$	26	4.01		$	971	2.32		$	116,074	3.01		$	117,071	3.01

Debt securities carried at fair value
Mortgage-backed securities:
Agency	$	2			$	48			$	382			$	189,054			$	189,486
Agency-collateralized mortgage obligations	—				—				—				8,335				8,335
Commercial	48				559				11,378				337				12,322
Non-agency residential	—				—				19				5,133				5,152
Total mortgage-backed securities	50				607				11,779				202,859				215,295
U.S. Treasury and agency securities	517				34,784				12,788				163				48,252
Non-U.S. securities ⁽²⁾	21,165				1,100				208				245				22,718
Other taxable securities, substantially all asset-backed securities	2,036				5,078				2,303				1,437				10,854
Total taxable securities	23,768				41,569				27,078				204,704				297,119
Tax-exempt securities	646				6,561				7,754				2,199				17,160
Total debt securities carried at fair value⁽²⁾	$	24,414			$	48,130			$	34,832			$	206,903			$	314,279
Fair value of HTM debt securities ⁽³⁾	$	—			$	26			$	959			$	114,300			$	115,285


⁽¹⁾	The 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⁾	Includes $619 million of amortized cost and fair value for AFS debt securities of business held for sale. These AFS debt securities mature in one year or less and have an average yield of 0.21 percent.


⁽³⁾	Substantially all U.S. agency MBS.



144 Bank of America 2016

NOTE 4 Outstanding Loans and Leases




	December 31, 2016
(Dollars in millions)	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			Total Current or Less Than 30 Days Past Due ⁽³⁾			Purchased Credit-impaired ⁽⁴⁾			Loans Accounted for Under the Fair Value Option			Total Outstandings
Consumer real estate
Core portfolio
Residential mortgage	$	1,340		$	425		$	1,213		$	2,978		$	153,519								$	156,497
Home equity	239			105			451			795			48,578									49,373
Non-core portfolio
Residential mortgage ⁽⁵⁾	1,338			674			5,343			7,355			17,818			$	10,127					35,300
Home equity	260			136			832			1,228			12,231			3,611						17,070
Credit card and other consumer
U.S. credit card	472			341			782			1,595			90,683									92,278
Non-U.S. credit card	37			27			66			130			9,084									9,214
Direct/Indirect consumer ⁽⁶⁾	272			79			34			385			93,704									94,089
Other consumer ⁽⁷⁾	26			8			6			40			2,459									2,499
Total consumer	3,984			1,795			8,727			14,506			428,076			13,738						456,320
Consumer loans accounted for under the fair value option ⁽⁸⁾																			$	1,051		1,051
Total consumer loans and leases	3,984			1,795			8,727			14,506			428,076			13,738			1,051			457,371
Commercial
U.S. commercial	952			263			400			1,615			268,757									270,372
Commercial real estate ⁽⁹⁾	20			10			56			86			57,269									57,355
Commercial lease financing	167			21			27			215			22,160									22,375
Non-U.S. commercial	348			4			5			357			89,040									89,397
U.S. small business commercial	96			49			84			229			12,764									12,993
Total commercial	1,583			347			572			2,502			449,990									452,492
Commercial loans accounted for under the fair value option ⁽⁸⁾																			6,034			6,034
Total commercial loans and leases	1,583			347			572			2,502			449,990						6,034			458,526
Total consumer and commercial loans and leases⁽¹⁰⁾	$	5,567		$	2,142		$	9,299		$	17,008		$	878,066		$	13,738		$	7,085		$	915,897
Less: Loans of business held for sale⁽¹⁰⁾																						(9,214		)
Total loans and leases ⁽¹¹⁾																						$	906,683
Percentage of outstandings ⁽¹⁰⁾	0.61		%	0.23		%	1.02		%	1.86		%	95.87		%	1.50		%	0.77		%	100.00		%


⁽¹⁾	Consumer real estate loans 30-59 days past due includes fully-insured loans of $1.1 billion and nonperforming loans of $266 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $547 million and nonperforming loans of $216 million.


⁽²⁾	Consumer real estate includes fully-insured loans of $4.8 billion.


⁽³⁾	Consumer real estate includes $2.5 billion and direct/indirect consumer includes $27 million of nonperforming loans.


⁽⁴⁾	PCI loan amounts are shown gross of the valuation allowance.


⁽⁵⁾	Total outstandings includes pay option loans of $1.8 billion. The Corporation no longer originates this product.


⁽⁶⁾	Total outstandings includes auto and specialty lending loans of $48.9 billion, unsecured consumer lending loans of $585 million, U.S. securities-based lending loans of $40.1 billion, non-U.S. consumer loans of $3.0 billion, student loans of $497 million and other consumer loans of $1.1 billion.


⁽⁷⁾	Total outstandings includes consumer finance loans of $465 million, consumer leases of $1.9 billion and consumer overdrafts of $157 million.


⁽⁸⁾	Consumer loans accounted for under the fair value option were residential mortgage loans of $710 million and home equity loans of $341 million. Commercial loans accounted for under the fair value option were U.S. commercial loans of $2.9 billion and non-U.S. commercial loans of $3.1 billion. For additional information, see Note 20 – Fair Value Measurements and Note 21 – Fair Value Option.


⁽⁹⁾	Total outstandings includes U.S. commercial real estate loans of $54.3 billion and non-U.S. commercial real estate loans of $3.1 billion.


⁽¹⁰⁾	Includes non-U.S. credit card loans, which are included in assets of business held for sale on the Consolidated Balance Sheet.


⁽¹¹⁾	The Corporation pledged $143.1 billion of loans to secure potential borrowing capacity with the Federal Reserve Bank and Federal Home Loan Bank (FHLB). This amount is not included in the parenthetical disclosure of loans and leases pledged as collateral on the Consolidated Balance Sheet as there were no related outstanding borrowings.



		Bank of America 2016145




	December 31, 2015
(Dollars in millions)	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			Total Current or Less Than 30 Days Past Due ⁽³⁾			Purchased Credit-impaired ⁽⁴⁾			Loans Accounted for Under the Fair Value Option			Total Outstandings
Consumer real estate
Core portfolio
Residential mortgage	$	1,214		$	368		$	1,414		$	2,996		$	138,799								$	141,795
Home equity	200			93			579			872			54,045									54,917
Non-core portfolio
Residential mortgage ⁽⁵⁾	2,045			1,167			8,439			11,651			22,399			$	12,066					46,116
Home equity	335			174			1,170			1,679			14,733			4,619						21,031
Credit card and other consumer
U.S. credit card	454			332			789			1,575			88,027									89,602
Non-U.S. credit card	39			31			76			146			9,829									9,975
Direct/Indirect consumer ⁽⁶⁾	227			62			42			331			88,464									88,795
Other consumer ⁽⁷⁾	18			3			4			25			2,042									2,067
Total consumer	4,532			2,230			12,513			19,275			418,338			16,685						454,298
Consumer loans accounted for under the fair value option ⁽⁸⁾																			$	1,871		1,871
Total consumer loans and leases	4,532			2,230			12,513			19,275			418,338			16,685			1,871			456,169
Commercial
U.S. commercial	444			148			332			924			251,847									252,771
Commercial real estate ⁽⁹⁾	36			11			82			129			57,070									57,199
Commercial lease financing	150			29			20			199			21,153									21,352
Non-U.S. commercial	6			1			1			8			91,541									91,549
U.S. small business commercial	83			41			72			196			12,680									12,876
Total commercial	719			230			507			1,456			434,291									435,747
Commercial loans accounted for under the fair value option ⁽⁸⁾																			5,067			5,067
Total commercial loans and leases	719			230			507			1,456			434,291						5,067			440,814
Total loans and leases⁽¹⁰⁾	$	5,251		$	2,460		$	13,020		$	20,731		$	852,629		$	16,685		$	6,938		$	896,983
Percentage of outstandings	0.59		%	0.27		%	1.45		%	2.31		%	95.06		%	1.86		%	0.77		%	100.00		%


⁽¹⁾	Consumer real estate loans 30-59 days past due includes fully-insured loans of $1.7 billion and nonperforming loans of $379 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $1.0 billion and nonperforming loans of $297 million.


⁽²⁾	Consumer real estate includes fully-insured loans of $7.2 billion.


⁽³⁾	Consumer real estate includes $3.0 billion and direct/indirect consumer includes $21 million of nonperforming loans.


⁽⁴⁾	PCI loan amounts are shown gross of the valuation allowance.


⁽⁵⁾	Total outstandings includes pay option loans of $2.3 billion. The Corporation no longer originates this product.


⁽⁶⁾	Total outstandings includes auto and specialty lending loans of $42.6 billion, unsecured consumer lending loans of $886 million, U.S. securities-based lending loans of $39.8 billion, non-U.S. consumer loans of $3.9 billion, student loans of $564 million and other consumer loans of $1.0 billion.


⁽⁷⁾	Total outstandings includes consumer finance loans of $564 million, consumer leases of $1.4 billion and consumer overdrafts of $146 million.


⁽⁸⁾	Consumer loans accounted for under the fair value option were residential mortgage loans of $1.6 billion and home equity loans of $250 million. Commercial loans accounted for under the fair value option were U.S. commercial loans of $2.3 billion and non-U.S. commercial loans of $2.8 billion. For additional information, see Note 20 – Fair Value Measurements and Note 21 – Fair Value Option.


⁽⁹⁾	Total outstandings includes U.S. commercial real estate loans of $53.6 billion and non-U.S. commercial real estate loans of $3.5 billion.


⁽¹⁰⁾	The Corporation pledged $149.4 billion of loans to secure potential borrowing capacity with the Federal Reserve Bank and FHLB. This amount is not included in the parenthetical disclosure of loans and leases pledged as collateral on the Consolidated Balance Sheet as there were no related outstanding borrowings.

prior to 2010 and classified as nonperforming or modified in a TDR prior to 2016 are generally characterized as non-core loans, and are principally run-off portfolios.

The Corporation has entered into long-term credit protection agreements with FNMA and FHLMC on loans totaling $6.4 billion and $3.7 billion at December 31, 2016 and 2015, providing full credit protection on residential mortgage loans that become severely delinquent. All of these loans are individually insured and therefore the Corporation does not record an allowance for credit losses related to these loans.

Nonperforming Loans and Leases

The Corporation classifies junior-lien home equity loans as nonperforming when the first-lien loan becomes 90 days past due even if the junior-lien loan is performing. At December 31, 2016 and 2015, $428 million and $484 million of such junior-lien home equity loans were included in nonperforming loans.

The Corporation classifies consumer real estate loans that have been discharged in Chapter 7 bankruptcy and not reaffirmed by the borrower as TDRs, irrespective of payment history or



146 Bank of America 2016

During 2016, the Corporation sold nonperforming and other delinquent consumer real estate loans with a carrying value of $2.2 billion, including $549 million of PCI loans, compared to $3.2 billion, including $1.4 billion of PCI loans, in 2015. The Corporation

recorded net charge-offs related to these sales of $30 million during 2016 and net recoveries of $133 million during 2015. Gains related to these sales of $75 million and $173 million were recorded in other income in the Consolidated Statement of Income during 2016 and 2015.

The table below presents the Corporation’s nonperforming loans and leases including nonperforming TDRs, and loans accruing past due 90 days or more at December 31, 2016 and 2015. 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

	December 31
	Nonperforming Loans and Leases				Accruing Past Due 90 Days or More
(Dollars in millions)	2016		2015		2016		2015
Consumer real estate
Core portfolio
Residential mortgage ⁽¹⁾	$	1,274	$	1,825	$	486	$	382
Home equity	969		974		—		—
Non-core portfolio
Residential mortgage⁽¹⁾	1,782		2,978		4,307		6,768
Home equity	1,949		2,363		—		—
Credit card and other consumer
U.S. credit card	n/a		n/a		782		789
Non-U.S. credit card	n/a		n/a		66		76
Direct/Indirect consumer	28		24		34		39
Other consumer	2		1		4		3
Total consumer	6,004		8,165		5,679		8,057
Commercial
U.S. commercial	1,256		867		106		113
Commercial real estate	72		93		7		3
Commercial lease financing	36		12		19		15
Non-U.S. commercial	279		158		5		1
U.S. small business commercial	60		82		71		61
Total commercial	1,703		1,212		208		193
Total loans and leases	$	7,707	$	9,377	$	5,887	$	8,250

⁽¹⁾

Residential mortgage loans in the core and non-core portfolios accruing past due 90 days or more are fully-insured loans. At December 31, 2016 and 2015, residential mortgage includes $3.0 billion and $4.3 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 $1.8 billion and $2.9 billion of loans on which interest is still accruing.

n/a = not applicable

Credit Quality Indicators

The Corporation monitors credit quality within its Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments based on primary credit quality indicators. For more information on the portfolio segments, see Note 1 – Summary of Significant Accounting Principles. Within the Consumer Real Estate portfolio segment, the primary credit quality indicators are refreshed LTV and refreshed FICO score. Refreshed LTV measures the carrying value of the loan as a percentage of the value of the property securing the loan, refreshed quarterly. Home equity loans are evaluated using CLTV which measures the carrying value of the Corporation’s loan and available line of credit combined with any outstanding senior liens against the property as a percentage of the value of the property securing the loan, refreshed quarterly. FICO score measures the creditworthiness of the borrower based on the financial obligations of the borrower and the borrower’s credit history. FICO scores are typically refreshed quarterly or more

frequently. Certain borrowers (e.g., borrowers that have had debts discharged in a bankruptcy proceeding) may not have their FICO scores updated. FICO scores are also a primary credit quality indicator for the Credit Card and Other Consumer portfolio segment and the business card portfolio within U.S. small business commercial. Within the Commercial portfolio segment, loans are evaluated using the internal classifications of pass rated or reservable criticized as the primary credit quality indicators. The term reservable criticized refers to those commercial loans that are internally classified or listed by the Corporation as Special Mention, Substandard or Doubtful, which are asset quality categories defined by regulatory authorities. These assets have an elevated level of risk and may have a high probability of default or total loss. Pass rated refers to all loans not considered reservable criticized. In addition to these primary credit quality indicators, the Corporation uses other credit quality indicators for certain types of loans.



		Bank of America 2016147




Consumer Real Estate – Credit Quality Indicators ⁽¹⁾

	December 31, 2016
(Dollars in millions)	Core Portfolio Residential Mortgage ⁽²⁾		Non-core Residential Mortgage ⁽²⁾		Residential Mortgage PCI ⁽³⁾		Core Portfolio Home Equity ⁽²⁾		Non-core Home Equity ⁽²⁾		Home Equity PCI
Refreshed LTV⁽⁴⁾
Less than or equal to 90 percent	$	129,737	$	14,280	$	7,811	$	47,171	$	8,480	$	1,942
Greater than 90 percent but less than or equal to 100 percent	3,634		1,446		1,021		1,006		1,668		630
Greater than 100 percent	1,872		1,972		1,295		1,196		3,311		1,039
Fully-insured loans ⁽⁵⁾	21,254		7,475		—		—		—		—
Total consumer real estate	$	156,497	$	25,173	$	10,127	$	49,373	$	13,459	$	3,611
Refreshed FICO score
Less than 620	$	2,479	$	3,198	$	2,741	$	1,254	$	2,692	$	559
Greater than or equal to 620 and less than 680	5,094		2,807		2,241		2,853		3,094		636
Greater than or equal to 680 and less than 740	22,629		4,512		2,916		10,069		3,176		1,069
Greater than or equal to 740	105,041		7,181		2,229		35,197		4,497		1,347
Fully-insured loans ⁽⁵⁾	21,254		7,475		—		—		—		—
Total consumer real estate	$	156,497	$	25,173	$	10,127	$	49,373	$	13,459	$	3,611


⁽¹⁾	Excludes $1.1 billion of loans accounted for under the fair value option.


⁽²⁾	Excludes PCI loans.


⁽³⁾	Includes $1.6 billion of pay option loans. The Corporation no longer originates this product.


⁽⁴⁾	Refreshed LTV percentages for PCI loans are calculated using the carrying value net of the related valuation allowance.


⁽⁵⁾	Credit quality indicators are not reported for fully-insured loans as principal repayment is insured.




Credit Card and Other Consumer – Credit Quality Indicators

	December 31, 2016
(Dollars in millions)	U.S. Credit Card		Non-U.S. Credit Card		Direct/Indirect Consumer		Other Consumer ⁽¹⁾
Refreshed FICO score
Less than 620	$	4,431	$	—	$	1,478	$	187
Greater than or equal to 620 and less than 680	12,364		—		2,070		222
Greater than or equal to 680 and less than 740	34,828		—		12,491		404
Greater than or equal to 740	40,655		—		33,420		1,525
Other internal credit metrics ^{(2, 3, 4)}	—		9,214		44,630		161
Total credit card and other consumer	$	92,278	$	9,214	$	94,089	$	2,499


⁽¹⁾	At December 31, 2016, 19 percent of the other consumer portfolio is associated with portfolios from certain consumer finance businesses that the Corporation previously exited.


⁽²⁾	Other internal credit metrics may include delinquency status, geography or other factors.


⁽³⁾	Direct/indirect consumer includes $43.1 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk and $499 million of loans the Corporation no longer originates, primarily student loans.


⁽⁴⁾	Non-U.S. credit card represents the U.K. credit card portfolio which is evaluated using internal credit metrics, including delinquency status. At December 31, 2016, 98 percent of this portfolio was current or less than 30 days past due, one percent was 30-89 days past due and one percent was 90 days or more past due.




Commercial – Credit Quality Indicators ⁽¹⁾

	December 31, 2016
(Dollars in millions)	U.S. Commercial		Commercial Real Estate		Commercial Lease Financing		Non-U.S. Commercial		U.S. Small Business Commercial ⁽²⁾
Risk ratings
Pass rated	$	261,214	$	56,957	$	21,565	$	85,689	$	453
Reservable criticized	9,158		398		810		3,708		71
Refreshed FICO score ⁽³⁾
Less than 620									200
Greater than or equal to 620 and less than 680									591
Greater than or equal to 680 and less than 740									1,741
Greater than or equal to 740									3,264
Other internal credit metrics ^{(3, 4)}									6,673
Total commercial	$	270,372	$	57,355	$	22,375	$	89,397	$	12,993


⁽¹⁾	Excludes $6.0 billion of loans accounted for under the fair value option.


⁽²⁾	U.S. small business commercial includes $755 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. At December 31, 2016, 98 percent of the balances where internal credit metrics are used was current or less than 30 days past due.


⁽³⁾	Refreshed FICO score and other internal credit metrics are applicable only to the U.S. small business commercial portfolio.


⁽⁴⁾	Other internal credit metrics may include delinquency status, application scores, geography or other factors.



148 Bank of America 2016




Consumer Real Estate – Credit Quality Indicators ⁽¹⁾

	December 31, 2015
(Dollars in millions)	Core Portfolio Residential Mortgage ⁽²⁾		Non-core Residential Mortgage ⁽²⁾		Residential Mortgage PCI ⁽³⁾		Core Portfolio Home Equity ⁽²⁾		Non-core Home Equity ⁽²⁾		Home Equity PCI
Refreshed LTV ⁽⁴⁾
Less than or equal to 90 percent	$	110,023	$	16,481	$	8,655	$	51,262	$	8,347	$	2,003
Greater than 90 percent but less than or equal to 100 percent	4,038		2,224		1,403		1,858		2,190		852
Greater than 100 percent	2,638		3,364		2,008		1,797		5,875		1,764
Fully-insured loans ⁽⁵⁾	25,096		11,981		—		—		—		—
Total consumer real estate	$	141,795	$	34,050	$	12,066	$	54,917	$	16,412	$	4,619
Refreshed FICO score
Less than 620	$	3,129	$	4,749	$	3,798	$	1,322	$	3,490	$	729
Greater than or equal to 620 and less than 680	5,472		3,762		2,586		3,295		3,862		825
Greater than or equal to 680 and less than 740	22,486		5,138		3,187		12,180		3,451		1,356
Greater than or equal to 740	85,612		8,420		2,495		38,120		5,609		1,709
Fully-insured loans ⁽⁵⁾	25,096		11,981		—		—		—		—
Total consumer real estate	$	141,795	$	34,050	$	12,066	$	54,917	$	16,412	$	4,619


⁽¹⁾	Excludes $1.9 billion of loans accounted for under the fair value option.


⁽²⁾	Excludes PCI loans.


⁽³⁾	Includes $2.0 billion of pay option loans. The Corporation no longer originates this product.


⁽⁴⁾	Refreshed LTV percentages for PCI loans are calculated using the carrying value net of the related valuation allowance.


⁽⁵⁾	Credit quality indicators are not reported for fully-insured loans as principal repayment is insured.




Credit Card and Other Consumer – Credit Quality Indicators

	December 31, 2015
(Dollars in millions)	U.S. Credit Card		Non-U.S. Credit Card		Direct/Indirect Consumer		Other Consumer ⁽¹⁾
Refreshed FICO score
Less than 620	$	4,196	$	—	$	1,244	$	217
Greater than or equal to 620 and less than 680	11,857		—		1,698		214
Greater than or equal to 680 and less than 740	34,270		—		10,955		337
Greater than or equal to 740	39,279		—		29,581		1,149
Other internal credit metrics ^{(2, 3, 4)}	—		9,975		45,317		150
Total credit card and other consumer	$	89,602	$	9,975	$	88,795	$	2,067


⁽¹⁾	At December 31, 2015, 27 percent of the other consumer portfolio is associated with portfolios from certain consumer finance businesses that the Corporation previously exited.


⁽²⁾	Other internal credit metrics may include delinquency status, geography or other factors.


⁽³⁾	Direct/indirect consumer includes $43.7 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk and $567 million of loans the Corporation no longer originates, primarily student loans.


⁽⁴⁾	Non-U.S. credit card represents the U.K. credit card portfolio which is evaluated using internal credit metrics, including delinquency status. At December 31, 2015, 98 percent of this portfolio was current or less than 30 days past due, one percent was 30-89 days past due and one percent was 90 days or more past due.




Commercial – Credit Quality Indicators ⁽¹⁾

	December 31, 2015
(Dollars in millions)	U.S. Commercial		Commercial Real Estate		Commercial Lease Financing		Non-U.S. Commercial		U.S. Small Business Commercial ⁽²⁾
Risk ratings
Pass rated	$	243,922	$	56,688	$	20,644	$	87,905	$	571
Reservable criticized	8,849		511		708		3,644		96
Refreshed FICO score ⁽³⁾
Less than 620									184
Greater than or equal to 620 and less than 680									543
Greater than or equal to 680 and less than 740									1,627
Greater than or equal to 740									3,027
Other internal credit metrics ^{(3, 4)}									6,828
Total commercial	$	252,771	$	57,199	$	21,352	$	91,549	$	12,876


⁽¹⁾	Excludes $5.1 billion of loans accounted for under the fair value option.


⁽²⁾	U.S. small business commercial includes $670 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. At December 31, 2015, 98 percent of the balances where internal credit metrics are used was current or less than 30 days past due.


⁽³⁾	Refreshed FICO score and other internal credit metrics are applicable only to the U.S. small business commercial portfolio.


⁽⁴⁾	Other internal credit metrics may include delinquency status, application scores, geography or other factors.



		Bank of America 2016149

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. Impaired loans include nonperforming commercial loans and all consumer and commercial TDRs. Impaired loans exclude nonperforming consumer loans and nonperforming commercial leases unless they are classified as TDRs. Loans accounted for under the fair value option are also excluded. PCI loans are excluded and reported separately on page 156. For additional information, see Note 1 – Summary of Significant Accounting Principles.

Consumer Real Estate

Consumer real estate loans that have been discharged in Chapter 7 bankruptcy with no change in repayment terms and not reaffirmed by the borrower of $1.4 billion were included in TDRs at December 31, 2016, of which $543 million were classified as

nonperforming and $555 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.

~~Modifications of loans to commercial borrowers~~ Alternatively, consumer real estate TDRs that are ~~experiencing financial difficulty~~considered to be dependent solely on the collateral for repayment (e.g., due to the lack of income verification) are ~~designed to reduce~~measured based on 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~~estimated fair value of the ~~borrower. Modifications that result in~~collateral and a ~~TDR may include extensions of maturity at a concessionary (below market) rate of interest, payment forbearances or other actions designed to benefit~~charge-off is recorded if the ~~customer while mitigating~~carrying value exceeds the Corporation’s risk exposure. Reductions in interest rates are rare. Instead, the interest rates are typically increased, although the increased rate may not represent a market rate of interest. Infrequently, concessions may also include principal forgiveness in connection with foreclosure, short sale or other settlement agreements leading to termination or salefair value of the ~~loan.~~

~~At the time~~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 ~~restructuring, the~~consumer real estate loans that 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~~180 or more days past due as TDRs do not ~~decreased, the modification may~~ have ~~little or no~~an 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~~and lease losses nor are additional charge-offs required at the time of modification. ~~For more information~~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 ~~modifications for~~ the ~~U.S. small business commercial portfolio, see Credit Card and Other Consumer~~outstanding principal balance, even after they have been modified in ~~this Note.~~a TDR.

At December 31, ~~2015~~2016 and ~~2014~~2015, remaining commitments to lend additional funds to debtors whose terms have been modified in a ~~commercial loan~~consumer real estate TDR were immaterial. ~~Commercial~~Consumer real estate foreclosed properties totaled ~~$15~~$363 million and ~~$67~~$444 million at December 31, ~~2015~~2016 and ~~2014~~2015. The carrying value of consumer real estate loans, including fully-insured and PCI loans, for which formal foreclosure proceedings were in process as of December 31, 2016 was $4.8 billion. During 2016 and 2015, the Corporation reclassified $1.4 billion and $2.1 billion 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 on the Consolidated Statement of Cash Flows.



~~176~~150 Bank of America ~~2015~~2016

The table below provides the unpaid principal balance, carrying value and related allowance at December 31, 2016 and 2015, and the average carrying value and interest income recognized for 2016, 2015 and 2014 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.




Impaired Loans – Consumer Real Estate

	December 31, 2016						December 31, 2015
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Related Allowance		Unpaid Principal Balance		Carrying Value		Related Allowance
With no recorded allowance
Residential mortgage	$	11,151	$	8,695	$	—	$	14,888	$	11,901	$	—
Home equity	3,704		1,953		—		3,545		1,775		—
With an allowance recorded
Residential mortgage	$	4,041	$	3,936	$	219	$	6,624	$	6,471	$	399
Home equity	910		824		137		1,047		911		235
Total
Residential mortgage	$	15,192	$	12,631	$	219	$	21,512	$	18,372	$	399
Home equity	4,614		2,777		137		4,592		2,686		235

	2016				2015				2014
	Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾
With no recorded allowance
Residential mortgage	$	10,178	$	360	$	13,867	$	403	$	15,065	$	490
Home equity	1,906		90		1,777		89		1,486		87
With an allowance recorded
Residential mortgage	$	5,067	$	167	$	7,290	$	236	$	10,826	$	411
Home equity	852		24		785		24		743		25
Total
Residential mortgage	$	15,245	$	527	$	21,157	$	639	$	25,891	$	901
Home equity	2,758		114		2,562		113		2,229		112


⁽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, 2016, 2015 and 2014 unpaid principal balance, carrying value, and average pre- and post-modification interest rates on consumer real estate loans that were modified in TDRs during 2016, 2015 and 2014, and net charge-offs recorded during the period in which the modification occurred. 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 2016, 2015 and 2014 ⁽¹⁾

	December 31, 2016								2016
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Pre-Modification Interest Rate		Post-Modification Interest Rate ⁽²⁾		Net Charge-offs ⁽³⁾
Residential mortgage	$	1,130	$	1,017	4.73	%	4.16	%	$	11
Home equity	849		649		3.95		2.72		61
Total	$	1,979	$	1,666	4.40		3.54		$	72

	December 31, 2015								2015
Residential mortgage	$	2,986	$	2,655	4.98	%	4.43	%	$	97
Home equity	1,019		775		3.54		3.17		84
Total	$	4,005	$	3,430	4.61		4.11		$	181

	December 31, 2014								2014
Residential mortgage	$	5,940	$	5,120	5.28	%	4.93	%	$	72
Home equity	863		592		4.00		3.33		99
Total	$	6,803	$	5,712	5.12		4.73		$	171


⁽¹⁾	During 2016, 2015 and 2014, the Corporation forgave principal of $13 million, $396 million and $53 million, respectively, related to residential mortgage loans in connection with TDRs.


⁽²⁾	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.


⁽³⁾	Net charge-offs include amounts recorded on loans modified during the period that are no longer held by the Corporation at December 31, 2016, 2015 and 2014 due to sales and other dispositions.



		Bank of America 2016151

The table below presents the December 31, 2016, 2015 and 2014 carrying value for consumer real estate loans that were modified in a TDR during 2016, 2015 and 2014, by type of modification.




Consumer Real Estate – Modification Programs

	TDRs Entered into During 2016				TDRs Entered into During 2015				TDRs Entered into During 2014
(Dollars in millions)	Residential Mortgage		Home Equity		Residential Mortgage		Home Equity		Residential Mortgage		Home Equity
Modifications under government programs
Contractual interest rate reduction	$	116	$	35	$	408	$	23	$	643	$	56
Principal and/or interest forbearance	2		11		4		7		16		18
Other modifications ⁽¹⁾	22		1		46		—		98		1
Total modifications under government programs	140		47		458		30		757		75
Modifications under proprietary programs
Contractual interest rate reduction	84		151		191		28		244		22
Capitalization of past due amounts	24		16		69		10		71		2
Principal and/or interest forbearance	10		62		124		44		66		75
Other modifications⁽¹⁾	4		71		34		95		40		47
Total modifications under proprietary programs	122		300		418		177		421		146
Trial modifications	597		234		1,516		452		3,421		182
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	158		68		263		116		521		189
Total modifications	$	1,017	$	649	$	2,655	$	775	$	5,120	$	592


⁽¹⁾	Includes other modifications such as term or payment extensions and repayment plans.


⁽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 during 2016, 2015 and 2014 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




Consumer Real Estate – TDRs Entering Payment Default That Were Modified During the Preceding 12 Months ⁽¹⁾

	2016				2015				2014
(Dollars in millions)	Residential Mortgage		Home Equity		Residential Mortgage		Home Equity		Residential Mortgage		Home Equity
Modifications under government programs	$	259	$	3	$	452	$	5	$	696	$	4
Modifications under proprietary programs	133		63		263		24		714		12
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	136		22		238		47		481		70
Trial modifications ⁽³⁾	714		110		2,997		181		2,231		56
Total modifications	$	1,242	$	198	$	3,950	$	257	$	4,122	$	142


⁽¹⁾	Includes loans with a carrying value of $613 million, $1.8 billion and $2.0 billion that entered into payment default during 2016, 2015 and 2014, respectively, but were no longer held by the Corporation as of December 31, 2016, 2015 and 2014 due to sales and other dispositions.


⁽²⁾	Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.


⁽³⁾	Includes trial modification offers to which the customer did not respond.

Credit Card and Other Consumer

Impaired loans within the Credit Card and Other Consumer portfolio segment consist entirely of loans that have been modified in TDRs. The Corporation seeks to assist customers that are experiencing financial difficulty by modifying loans while ensuring compliance with federal, local and international laws and guidelines. Credit card and other consumer loan modifications generally involve reducing the interest rate on the account and placing the customer on a fixed payment plan not exceeding 60 months, all of which are considered TDRs. In addition, the accounts of non-U.S. credit card customers who do not qualify for a fixed payment plan may have their interest rates reduced, as required by certain local jurisdictions. These modifications, which are also TDRs, tend to experience higher payment default rates given that the borrowers may lack the ability to repay even with the interest rate reduction.

In substantially all cases, the customer’s available line of credit is canceled. The Corporation makes loan modifications directly with borrowers for debt held only by the Corporation (internal programs). Additionally, the Corporation makes loan modifications for borrowers working with third-party renegotiation agencies that provide solutions to customers’ entire unsecured debt structures (external programs). The Corporation classifies other secured consumer loans that have been discharged in Chapter 7 bankruptcy as TDRs which are written down to collateral value and placed on nonaccrual status no later than the time of discharge. For more information on the regulatory guidance on loans discharged in Chapter 7 bankruptcy, see Nonperforming Loans and Leases in this Note.



152 Bank of America 2016

The table below provides the unpaid principal balance, carrying value and related allowance at December 31, ~~2015~~2016 and ~~2014~~2015, and the average carrying value and interest income recognized for ~~2015~~2016, ~~2014~~2015 and ~~2013 for impaired loans in~~2014 on TDRs within the ~~Corporation’s Commercial loan~~Credit Card and Other Consumer portfolio segment. ~~Certain impaired commercial loans do not have a related allowance as the valuation of these impaired loans exceeded the carrying value, which is net of previously recorded charge-offs.~~

Impaired Loans – Commercial

December 31, 2015 December 31, 2014
(Dollars in millions)
Unpaid
Principal
Balance

Carrying
Value

Related
Allowance

Unpaid
Principal
Balance

Carrying
Value

Related
Allowance
With no recorded allowance

U.S. commercial $ 566
$ 541
$ —
$ 668
$ 650
$ —
Commercial real estate 82
77
—
60
48
—
Non-U.S. commercial 4
4
—
—
—
—
With an allowance recorded
U.S. commercial $ 1,350
$ 1,157
$ 115
$ 1,139
$ 839
$ 75
Commercial real estate 328
107
11
678
495
48
Non-U.S. commercial 531
381
56
47
44
1
U.S. small business commercial ⁽¹⁾
105
101
35
133
122
35
Total

U.S. commercial $ 1,916
$ 1,698
$ 115
$ 1,807
$ 1,489
$ 75
Commercial real estate 410
184
11
738
543
48
Non-U.S. commercial 535
385
56
47
44
1
U.S. small business commercial ⁽¹⁾
105
101
35
133
122
35

2015 2014 2013
Average
Carrying
Value
Interest
Income
Recognized ⁽²⁾
Average
Carrying
Value
Interest
Income
Recognized ⁽²⁾
Average
Carrying
Value
Interest
Income
Recognized ⁽²⁾
With no recorded allowance

U.S. commercial $ 688
$ 14
$ 546
$ 12
$ 442
$ 6
Commercial real estate 75
1
166
3
269
3
Non-U.S. commercial 29
1
15
—
28
—
With an allowance recorded
U.S. commercial $ 953
$ 48
$ 1,198
$ 51
$ 1,553
$ 47
Commercial real estate 216
7
632
16
1,148
28
Non-U.S. commercial 125
7
52
3
109
5
U.S. small business commercial ⁽¹⁾
109
1
151
3
236
6
Total

U.S. commercial $ 1,641
$ 62
$ 1,744
$ 63
$ 1,995
$ 53
Commercial real estate 291
8
798
19
1,417
31
Non-U.S. commercial 154
8
67
3
137
5
U.S. small business commercial ⁽¹⁾
109
1
151
3
236
6




Impaired Loans – Credit Card and Other Consumer

	December 31, 2016						December 31, 2015
(Dollars in millions)	Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance		Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance
With no recorded allowance
Direct/Indirect consumer	$	49	$	22	$	—	$	50	$	21	$	—
With an allowance recorded
U.S. credit card	$	479	$	485	$	128	$	598	$	611	$	176
Non-U.S. credit card	88		100		61		109		126		70
Direct/Indirect consumer	3		3		—		17		21		4
Total
U.S. credit card	$	479	$	485	$	128	$	598	$	611	$	176
Non-U.S. credit card	88		100		61		109		126		70
Direct/Indirect consumer	52		25		—		67		42		4

	2016				2015				2014
	Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾
With no recorded allowance
Direct/Indirect consumer	$	20	$	—	$	22	$	—	$	27	$	—
Other consumer	—		—		—		—		33		2
With an allowance recorded
U.S. credit card	$	556	$	31	$	749	$	43	$	1,148	$	71
Non-U.S. credit card	111		3		145		4		210		6
Direct/Indirect consumer	10		1		51		3		180		9
Other consumer	—		—		—		—		23		1
Total
U.S. credit card	$	556	$	31	$	749	$	43	$	1,148	$	71
Non-U.S. credit card	111		3		145		4		210		6
Direct/Indirect consumer	30		1		73		3		207		9
Other consumer	—		—		—		—		56		3


⁽¹⁾	Includes ~~U.S. small business commercial renegotiated TDR loans~~accrued interest and ~~related allowance.~~fees.


⁽²⁾	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 provides information on the Corporation’s primary modification programs for the Credit Card and Other Consumer TDR portfolio at December 31, 2016 and 2015.




Credit Card and Other Consumer – TDRs by Program Type

	December 31
	Internal Programs				External Programs				Other ⁽¹⁾				Total				Percent of Balances Current or Less Than 30 Days Past Due
(Dollars in millions)	2016		2015		2016		2015		2016		2015		2016		2015		2016		2015
U.S. credit card	$	220	$	313	$	264	$	296	$	1	$	2	$	485	$	611	88.99	%	88.74	%
Non-U.S. credit card	11		21		7		10		82		95		100		126		38.47		44.25
Direct/Indirect consumer	2		11		1		7		22		24		25		42		90.49		89.12
Total TDRs by program type	$	233	$	345	$	272	$	313	$	105	$	121	$	610	$	779	80.79		81.55


⁽¹⁾	Other TDRs for non-U.S. credit card include modifications of accounts that are ineligible for a fixed payment plan.



		Bank of America ~~2015~~2016 ~~177~~153

The table below ~~presents~~provides information on the Corporation’s Credit Card and Other Consumer TDR portfolio including the December 31, 2016, 2015 ~~2014~~ and ~~2013~~2014 unpaid principal balance, ~~and~~ carrying value, and average pre- and post-modification interest rates of ~~commercial~~ loans that were modified asin TDRs during ~~2015~~2016, ~~2014~~2015 and ~~2013,~~2014, and net charge-offs ~~that were~~ recorded during the period in which the modification occurred. ~~The table below includes 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.~~

Commercial – TDRs Entered into During 2015, 2014 and 2013

December 31, 2015 2015
(Dollars in millions) Unpaid Principal Balance Carrying Value Net Charge-offs
U.S. commercial $ 853
$ 779
$ 28
Commercial real estate 42
42
—
Non-U.S. commercial 329
326
—
U.S. small business commercial ⁽¹⁾
14
11
3
Total $ 1,238
$ 1,158
$ 31

December 31, 2014 2014
U.S. commercial $ 818
$ 785
$ 49
Commercial real estate 346
346
8
Non-U.S. commercial 44
43
—
U.S. small business commercial ⁽¹⁾
3
3
—
Total $ 1,211
$ 1,177
$ 57

December 31, 2013 2013
U.S. commercial $ 926
$ 910
$ 33
Commercial real estate 483
425
3
Non-U.S. commercial 61
44
7
U.S. small business commercial ⁽¹⁾
8
9
1
Total $ 1,478
$ 1,388
$ 44




Credit Card and Other Consumer – TDRs Entered into During 2016, 2015 and 2014

	December 31, 2016								2016
(Dollars in millions)	Unpaid Principal Balance		Carrying Value ⁽¹⁾		Pre-Modification Interest Rate		Post-Modification Interest Rate		Net Charge-offs
U.S. credit card	$	163	$	172	17.54	%	5.47	%	$	15
Non-U.S. credit card	66		75		23.99		0.52		50
Direct/Indirect consumer	21		13		3.44		3.29		9
Total	$	250	$	260	18.73		3.93		$	74

	December 31, 2015								2015
U.S. credit card	$	205	$	218	17.07	%	5.08	%	$	26
Non-U.S. credit card	74		86		24.05		0.53		63
Direct/Indirect consumer	19		12		5.95		5.19		9
Total	$	298	$	316	18.58		3.84		$	98

	December 31, 2014								2014
U.S. credit card	$	276	$	301	16.64	%	5.15	%	$	37
Non-U.S. credit card	91		106		24.90		0.68		91
Direct/Indirect consumer	27		19		8.66		4.90		14
Total	$	394	$	426	18.32		4.03		$	142


⁽¹⁾	~~U.S. small business commercial TDRs are comprised of renegotiated small business card loans.~~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 ~~along with observable market prices or fair value~~in the calculation of ~~collateral when measuring~~ the allowance for loan and lease ~~losses.~~losses for impaired credit card and other consumer loans. Based on historical experience, the Corporation estimates that 13 percent of new U.S. credit card TDRs, ~~that were~~90 percent of new non-U.S. credit card TDRs and 14 percent of new direct/indirect consumer TDRs may be in payment default within 12 months after modification. Loans that entered into payment default during 2016, 2015 and 2014 that had been modified in a ~~carrying value of~~ ~~$105~~TDR during the preceding 12 months were $30 million,, ~~$103~~ $43 million and ~~$55~~$56 million for U.S. ~~commercial~~credit card, $127 million, $152 million and ~~$25 million~~, ~~$211 million~~ ~~and $128~~$200 million for ~~commercial real estate at December 31, 2015, 2014~~non-U.S. credit card, and ~~2013, respectively.~~

$2 million, $3 million and $5 million for direct/indirect consumer.

Purchased Credit-impaired Loans

~~PCI loans are acquired~~Purchased loans with evidence of credit quality deterioration ~~since origination~~as of the purchase date for which it is probable that the Corporation will not receive all contractually required payments receivable are accounted for as purchased credit-impaired (PCI) loans. Evidence of credit quality deterioration since origination may include past due status, refreshed credit scores and refreshed loan-to-value (LTV) ratios. At acquisition, PCI loans are recorded at fair value with no allowance for credit losses, and accounted for individually or aggregated in pools based on similar risk characteristics such as credit risk, collateral type and interest rate risk. The Corporation estimates the amount and timing of expected cash flows for each loan or pool of loans. The expected cash flows in excess of the amount paid for the loans is referred to as the accretable yield and is recorded as interest income over the remaining estimated life of the loan or pool of loans. The excess of the PCI loans’ contractual principal and interest over the expected cash flows is referred to as the nonaccretable difference. Over the life of the PCI loans, the expected cash flows continue to be estimated using models that incorporate management’s estimate of current assumptions such as default rates, loss severity and prepayment speeds. If, upon subsequent valuation, the Corporation determines it is probable that the present value of the expected cash flows has decreased, a charge to the provision for credit losses is recorded with a corresponding increase in the allowance for credit losses. If it is probable that there is a significant increase in the present value of expected cash flows, the allowance for credit losses is reduced or, if there is no remaining allowance for credit losses related to these PCI loans, the accretable yield is increased through a reclassification from nonaccretable difference, resulting in a prospective increase in interest income. Reclassifications to or from nonaccretable difference can also occur for changes in the PCI loans’ estimated lives. If a loan within a PCI pool is sold, foreclosed, forgiven or the expectation of any future proceeds is remote, the loan is removed from the pool at its proportional carrying value. If the loan’s recovery value is less than the loan’s carrying value, the difference is first applied against the PCI pool’s nonaccretable difference and then against the allowance for credit losses.

Leases

Allowance for Credit Losses

For 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



126 Bank of America 2016

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 a component of the allowance for loan and lease losses unless these are secured consumer loans that are solely dependent on the collateral for repayment, in which case the amount that exceeds the fair value of the collateral is charged off.

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 and 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.

Nonperforming Loans and Leases, Charge-offs and Delinquencies

Troubled Debt Restructurings



		Bank of America 2016127

maximize collections. Loans that are carried at fair value, LHFS and PCI loans are not classified as 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 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.

Loans Held-for-sale

Premises and Equipment

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

Variable Interest Entities

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



128 Bank of America 2016

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


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

Level 3

Income Taxes



		Bank of America 2016129

Revenue Recognition

Investment banking income consists primarily of advisory and underwriting fees which are generally recognized net of any direct expenses. Non-reimbursed expenses are recorded as noninterest expense.

Earnings Per Common Share

Foreign Currency Translation

Credit Card and Deposit Arrangements

Endorsing Organization Agreements

Cardholder Reward Agreements



130 Bank of America 2016

NOTE 2 Derivatives

Derivative Balances

activities, see Note 1 – Summary of Significant Accounting Principles. The following tables present derivative instruments included on the Consolidated Balance Sheet in derivative assets and liabilities at December 31, 2016 and 2015. Balances are presented on a gross basis, prior to the application of counterparty and cash collateral netting. Total derivative assets and liabilities are adjusted on an aggregate basis to take into consideration the effects of legally enforceable master netting agreements and have been reduced by the cash collateral received or paid.




			December 31, 2016
			Gross Derivative Assets							Gross Derivative Liabilities
(Dollars in billions)	Contract/ Notional ⁽¹⁾		Trading and Other Risk Management Derivatives		Qualifying Accounting Hedges		Total			Trading and Other Risk Management Derivatives		Qualifying Accounting Hedges		Total
Interest rate contracts
Swaps	$	16,977.7	$	385.0	$	5.9	$	390.9		$	386.9	$	2.0	$	388.9
Futures and forwards	5,609.5		2.2		—		2.2			2.1		—		2.1
Written options	1,146.2		—		—		—			52.2		—		52.2
Purchased options	1,178.7		53.3		—		53.3			—		—		—
Foreign exchange contracts
Swaps	1,828.6		54.6		4.2		58.8			58.8		6.2		65.0
Spot, futures and forwards	3,410.7		58.8		1.7		60.5			56.6		0.8		57.4
Written options	356.6		—		—		—			9.4		—		9.4
Purchased options	342.4		8.9		—		8.9			—		—		—
Equity contracts
Swaps	189.7		3.4		—		3.4			4.0		—		4.0
Futures and forwards	68.7		0.9		—		0.9			0.9		—		0.9
Written options	431.5		—		—		—			21.4		—		21.4
Purchased options	385.5		23.9		—		23.9			—		—		—
Commodity contracts
Swaps	48.2		2.5		—		2.5			5.1		—		5.1
Futures and forwards	49.1		3.6		—		3.6			0.5		—		0.5
Written options	29.3		—		—		—			1.9		—		1.9
Purchased options	28.9		2.0		—		2.0			—		—		—
Credit derivatives
Purchased credit derivatives:
Credit default swaps	604.0		8.1		—		8.1			10.3		—		10.3
Total return swaps/other	21.2		0.4		—		0.4			1.5		—		1.5
Written credit derivatives:
Credit default swaps	614.4		10.7		—		10.7			7.5		—		7.5
Total return swaps/other	25.4		1.0		—		1.0			0.2		—		0.2
Gross derivative assets/liabilities			$	619.3	$	11.8	$	631.1		$	619.3	$	9.0	$	628.3
Less: Legally enforceable master netting agreements							(545.3		)					(545.3		)
Less: Cash collateral received/paid							(43.3		)					(43.5		)
Total derivative assets/liabilities							$	42.5						$	39.5


⁽¹⁾	Represents the total contract/notional amount of derivative assets and liabilities outstanding.



		Bank of America 2016131




			December 31, 2015
			Gross Derivative Assets							Gross Derivative Liabilities
(Dollars in billions)	Contract/ Notional ⁽¹⁾		Trading and Other Risk Management Derivatives		Qualifying Accounting Hedges		Total			Trading and Other Risk Management Derivatives		Qualifying Accounting Hedges		Total
Interest rate contracts
Swaps	$	21,706.8	$	439.6	$	7.4	$	447.0		$	440.8	$	1.2	$	442.0
Futures and forwards	6,237.6		1.1		—		1.1			1.3		—		1.3
Written options	1,313.8		—		—		—			57.6		—		57.6
Purchased options	1,393.3		58.9		—		58.9			—		—		—
Foreign exchange contracts
Swaps	2,149.9		49.2		0.9		50.1			52.2		2.8		55.0
Spot, futures and forwards	4,104.3		46.0		1.2		47.2			45.8		0.3		46.1
Written options	467.2		—		—		—			10.6		—		10.6
Purchased options	439.9		10.2		—		10.2			—		—		—
Equity contracts
Swaps	201.2		3.3		—		3.3			3.8		—		3.8
Futures and forwards	72.8		2.1		—		2.1			1.2		—		1.2
Written options	347.6		—		—		—			21.1		—		21.1
Purchased options	320.3		23.8		—		23.8			—		—		—
Commodity contracts
Swaps	47.0		4.7		—		4.7			7.1		—		7.1
Futures and forwards	45.6		3.8		—		3.8			0.7		—		0.7
Written options	36.6		—		—		—			4.4		—		4.4
Purchased options	37.4		4.2		—		4.2			—		—		—
Credit derivatives
Purchased credit derivatives:
Credit default swaps	928.3		14.4		—		14.4			14.8		—		14.8
Total return swaps/other	26.4		0.2		—		0.2			1.9		—		1.9
Written credit derivatives:
Credit default swaps	924.1		15.3		—		15.3			13.1		—		13.1
Total return swaps/other	39.7		2.3		—		2.3			0.4		—		0.4
Gross derivative assets/liabilities			$	679.1	$	9.5	$	688.6		$	676.8	$	4.3	$	681.1
Less: Legally enforceable master netting agreements							(596.7		)					(596.7		)
Less: Cash collateral received/paid							(41.9		)					(45.9		)
Total derivative assets/liabilities							$	50.0						$	38.5


⁽¹⁾	Represents the total contract/notional amount of derivative assets and liabilities outstanding.

Offsetting of Derivatives

Also included in the table is financial instruments collateral related to legally enforceable master netting agreements that represents securities collateral received or pledged and cash and securities collateral held and posted at third-party custodians. These amounts are not offset on the Consolidated Balance Sheet but are shown as a reduction to total derivative assets and liabilities in the table to derive net derivative assets and liabilities.

For more information on offsetting of securities financing agreements, see Note 10 – Federal Funds Sold or Purchased, Securities Financing Agreements and Short-term Borrowings.



132 Bank of America 2016




Offsetting of Derivatives

	December 31, 2016						December 31, 2015
(Dollars in billions)	Derivative Assets			Derivative Liabilities			Derivative Assets			Derivative Liabilities
Interest rate contracts
Over-the-counter	$	267.3		$	258.2		$	309.3		$	297.2
Over-the-counter cleared	177.2			182.8			197.0			201.7
Foreign exchange contracts
Over-the-counter	124.3			126.7			103.2			107.5
Over-the-counter cleared	0.3			0.3			0.1			0.1
Equity contracts
Over-the-counter	15.6			13.7			16.6			14.0
Exchange-traded	11.4			10.8			10.0			9.2
Commodity contracts
Over-the-counter	3.7			4.9			7.3			8.9
Exchange-traded	1.1			1.0			1.8			1.8
Over-the-counter cleared	—			—			0.1			0.1
Credit derivatives
Over-the-counter	15.3			14.7			24.6			22.9
Over-the-counter cleared	4.3			4.3			6.5			6.4
Total gross derivative assets/liabilities, before netting
Over-the-counter	426.2			418.2			461.0			450.5
Exchange-traded	12.5			11.8			11.8			11.0
Over-the-counter cleared	181.8			187.4			203.7			208.3
Less: Legally enforceable master netting agreements and cash collateral received/paid
Over-the-counter	(398.2		)	(392.6		)	(426.6		)	(425.7		)
Exchange-traded	(8.9		)	(8.9		)	(8.7		)	(8.7		)
Over-the-counter cleared	(181.5		)	(187.3		)	(203.3		)	(208.2		)
Derivative assets/liabilities, after netting	31.9			28.6			37.9			27.2
Other gross derivative assets/liabilities ⁽¹⁾	10.6			10.9			12.1			11.3
Total derivative assets/liabilities	42.5			39.5			50.0			38.5
Less: Financial instruments collateral ⁽²⁾	(13.5		)	(10.5		)	(13.9		)	(6.5		)
Total net derivative assets/liabilities	$	29.0		$	29.0		$	36.1		$	32.0


⁽¹⁾	Consists of derivatives entered into under master netting agreements where the enforceability of these agreements is uncertain.


⁽²⁾	These amounts are limited to the derivative asset/liability balance and, accordingly, do not include excess collateral received/pledged.

ALM and Risk Management Derivatives



		Bank of America 2016133

Derivatives Designated as Accounting Hedges

have functional currencies other than the U.S. Dollar using forward exchange contracts and cross-currency basis swaps, and by issuing foreign currency-denominated debt (net investment hedges).

Fair Value Hedges




Derivatives Designated as Fair Value Hedges

Gains (Losses)	2016
(Dollars in millions)	Derivative			Hedged Item			Hedge Ineffectiveness
Interest rate risk on long-term debt ⁽¹⁾	$	(1,488	)	$	646		$	(842	)
Interest rate and foreign currency risk on long-term debt ⁽¹⁾	(941		)	944			3
Interest rate risk on available-for-sale securities ⁽²⁾	227			(286		)	(59		)
Price risk on commodity inventory ⁽³⁾	(17		)	17			—
Total	$	(2,219	)	$	1,321		$	(898	)

	2015
Interest rate risk on long-term debt ⁽¹⁾	$	(718	)	$	(77	)	$	(795	)
Interest rate and foreign currency risk on long-term debt ⁽¹⁾	(1,898		)	1,812			(86		)
Interest rate risk on available-for-sale securities ⁽²⁾	105			(127		)	(22		)
Price risk on commodity inventory ⁽³⁾	15			(11		)	4
Total	$	(2,496	)	$	1,597		$	(899	)

	2014
Interest rate risk on long-term debt ⁽¹⁾	$	2,144		$	(2,935	)	$	(791	)
Interest rate and foreign currency risk on long-term debt ⁽¹⁾	(2,212		)	2,120			(92		)
Interest rate risk on available-for-sale securities ⁽²⁾	(35		)	3			(32		)
Price risk on commodity inventory ⁽³⁾	21			(15		)	6
Total	$	(82	)	$	(827	)	$	(909	)


⁽¹⁾	Amounts are recorded in interest expense on long-term debt and in other income.


⁽²⁾	Amounts are recorded in interest income on debt securities.


⁽³⁾	Amounts relating to commodity inventory are recorded in trading account profits.



134 Bank of America 2016

Cash Flow and Net Investment Hedges




Derivatives Designated as Cash Flow and Net Investment Hedges

	2016
(Dollars in millions, amounts pretax)	Gains (Losses) Recognized in Accumulated OCI on Derivatives			Gains (Losses) in Income Reclassified from Accumulated OCI			Hedge Ineffectiveness and Amounts Excluded from Effectiveness Testing ⁽¹⁾
Cash flow hedges
Interest rate risk on variable-rate portfolios	$	(340	)	$	(553	)	$	1
Price risk on restricted stock awards ⁽²⁾	41			(32		)	—
Total	$	(299	)	$	(585	)	$	1
Net investment hedges
Foreign exchange risk	$	1,636		$	3		$	(325	)

	2015
Cash flow hedges
Interest rate risk on variable-rate portfolios	$	95		$	(974	)	$	(2	)
Price risk on restricted stock awards⁽²⁾	(40		)	91			—
Total	$	55		$	(883	)	$	(2	)
Net investment hedges
Foreign exchange risk	$	3,010		$	153		$	(298	)

	2014
Cash flow hedges
Interest rate risk on variable-rate portfolios	$	68		$	(1,119	)	$	(4	)
Price risk on restricted stock awards ⁽²⁾	127			359			—
Total	$	195		$	(760	)	$	(4	)
Net investment hedges
Foreign exchange risk	$	3,021		$	21		$	(503	)


⁽¹⁾	Amounts related to cash flow hedges represent hedge ineffectiveness and amounts related to net investment hedges represent amounts excluded from effectiveness testing.


⁽²⁾	The hedge gain (loss) recognized in accumulated OCI is primarily related to the change in the Corporation’s stock price for the period.

Other Risk Management Derivatives

Other risk management derivatives are used by the Corporation to reduce certain risk exposures. These derivatives are not qualifying accounting hedges because either they did not qualify for or were not designated as accounting hedges. The table below presents gains (losses) on these derivatives for 2016, 2015 and 2014. These gains (losses) are largely offset by the income or expense that is recorded on the hedged item.




Other Risk Management Derivatives

Gains (Losses)

(Dollars in millions)	2016			2015			2014
Interest rate risk on mortgage banking income ⁽¹⁾	$	461		$	254		$	1,017
Credit risk on loans ⁽²⁾	(107		)	(22		)	16
Interest rate and foreign currency risk on ALM activities ⁽³⁾	(754		)	(222		)	(3,683		)
Price risk on restricted stock awards ⁽⁴⁾	9			(267		)	600
Other	5			11			(9		)

⁽¹⁾

Net gains (losses) on these derivatives are recorded in mortgage banking income as they are used to mitigate the interest rate risk related to MSRs, IRLCs and mortgage loans held-for-sale, all of which are measured at fair value with changes in fair value recorded in mortgage banking income. The net gains on IRLCs related to the origination of mortgage loans that are held-for-sale, which are not included in the table but are considered derivative instruments, were $533 million, $714 million and $776 million for 2016, 2015 and 2014, respectively.


⁽²⁾	Primarily related to derivatives that are economic hedges of credit risk on loans. Net gains (losses) on these derivatives are recorded in other income.


⁽³⁾	Primarily related to hedges of debt securities carried at fair value and hedges of foreign currency-denominated debt. Gains (losses) on these derivatives and the related hedged items are recorded in other income.


⁽⁴⁾	Gains (losses) on these derivatives are recorded in personnel expense.



		Bank of America 2016135

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. Through December 31, 2016 and 2015, the Corporation transferred $6.6 billion and $7.9 billion of primarily non-U.S. government-guaranteed MBS to a third-party trust and received gross cash proceeds of $6.6 billion and $7.9 billion at the transfer dates. At December 31, 2016 and 2015, the fair value of these securities was $6.3 billion and $7.2 billion. Derivative assets of $43 million and $24 million and liabilities of $10 million and $29 million were recorded at December 31, 2016 and 2015, and are included in credit derivatives in the derivative instruments table on page 131.

Sales and Trading Revenue



136 Bank of America 2016




Sales and Trading Revenue

	2016
(Dollars in millions)	Trading Account Profits		Net Interest Income			Other ⁽¹⁾			Total
Interest rate risk	$	1,608	$	1,397		$	304		$	3,309
Foreign exchange risk	1,360		(10		)	(154		)	1,196
Equity risk	1,915		15			2,072			4,002
Credit risk	1,258		2,587			425			4,270
Other risk	409		(20		)	40			429
Total sales and trading revenue	$	6,550	$	3,969		$	2,687		$	13,206

	2015
Interest rate risk	$	1,300	$	1,307		$	(263	)	$	2,344
Foreign exchange risk	1,322		(10		)	(117		)	1,195
Equity risk	2,115		56			2,146			4,317
Credit risk	910		2,361			452			3,723
Other risk	462		(81		)	62			443
Total sales and trading revenue	$	6,109	$	3,633		$	2,280		$	12,022

	2014
Interest rate risk	$	983	$	946		$	466		$	2,395
Foreign exchange risk	1,177		7			(128		)	1,056
Equity risk	1,954		(79		)	2,307			4,182
Credit risk	1,404		2,563			617			4,584
Other risk	508		(123		)	108			493
Total sales and trading revenue	$	6,026	$	3,314		$	3,370		$	12,710


⁽¹⁾	Represents amounts in investment and brokerage services and other income that are recorded in Global Markets and included in the definition of sales and trading revenue. Includes investment and brokerage services revenue of $2.1 billion, $2.2 billion and $2.2 billion for 2016, 2015 and 2014, respectively.

Credit Derivatives

occurred and/or may only be required to make payment up to a specified amount.



		Bank of America 2016137




Credit Derivative Instruments

	December 31, 2016
	Carrying Value
(Dollars in millions)	Less than One Year		One to Three Years		Three to Five Years		Over Five Years		Total
Credit default swaps:
Investment grade	$	10	$	64	$	535	$	783	$	1,392
Non-investment grade	771		1,053		908		3,339		6,071
Total	781		1,117		1,443		4,122		7,463
Total return swaps/other:
Investment grade	16		—		—		—		16
Non-investment grade	127		10		2		1		140
Total	143		10		2		1		156
Total credit derivatives	$	924	$	1,127	$	1,445	$	4,123	$	7,619
Credit-related notes:
Investment grade	$	—	$	12	$	542	$	1,423	$	1,977
Non-investment grade	70		22		60		1,318		1,470
Total credit-related notes	$	70	$	34	$	602	$	2,741	$	3,447
	Maximum Payout/Notional
Credit default swaps:
Investment grade	$	121,083	$	143,200	$	116,540	$	21,905	$	402,728
Non-investment grade	84,755		67,160		41,001		18,711		211,627
Total	205,838		210,360		157,541		40,616		614,355
Total return swaps/other:
Investment grade	12,792		—		—		—		12,792
Non-investment grade	6,638		5,127		589		208		12,562
Total	19,430		5,127		589		208		25,354
Total credit derivatives	$	225,268	$	215,487	$	158,130	$	40,824	$	639,709



	December 31, 2015
	Carrying Value
Credit default swaps:
Investment grade	$	84	$	481	$	2,203	$	680	$	3,448
Non-investment grade	672		3,035		2,386		3,583		9,676
Total	756		3,516		4,589		4,263		13,124
Total return swaps/other:
Investment grade	5		—		—		—		5
Non-investment grade	171		236		8		2		417
Total	176		236		8		2		422
Total credit derivatives	$	932	$	3,752	$	4,597	$	4,265	$	13,546
Credit-related notes:
Investment grade	$	267	$	57	$	444	$	2,203	$	2,971
Non-investment grade	61		118		117		1,264		1,560
Total credit-related notes	$	328	$	175	$	561	$	3,467	$	4,531
	Maximum Payout/Notional
Credit default swaps:
Investment grade	$	149,177	$	280,658	$	178,990	$	26,352	$	635,177
Non-investment grade	81,596		135,850		53,299		18,221		288,966
Total	230,773		416,508		232,289		44,573		924,143
Total return swaps/other:
Investment grade	9,758		—		—		—		9,758
Non-investment grade	20,917		6,989		1,371		623		29,900
Total	30,675		6,989		1,371		623		39,658
Total credit derivatives	$	261,448	$	423,497	$	233,660	$	45,196	$	963,801



138 Bank of America 2016

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 131, the Corporation enters into legally enforceable master netting agreements which reduce risk by permitting the closeout and netting of transactions with the same counterparty upon the occurrence of certain events.

A majority 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, 2016 and 2015, the Corporation held cash and securities collateral of $85.5 billion and $78.9 billion, and posted cash and securities collateral of $71.1 billion and $62.7 billion in the normal course of business under derivative agreements. This

excludes cross-product margining agreements where clients are permitted to margin on a net basis for both derivative and secured financing arrangements.

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, 2016 and 2015, the liability recorded for these derivative contracts was $46 million and $69 million.




Additional Collateral Required to be Posted Upon Downgrade

	December 31, 2016
(Dollars in millions)	One incremental notch		Second incremental notch
Bank of America Corporation	$	498	$	866
Bank of America, N.A. and subsidiaries ⁽¹⁾	310		492


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

The table below 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, 2016if 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

	December 31, 2016
(Dollars in millions)	One incremental notch		Second incremental notch
Derivative liabilities	$	691	$	1,324
Collateral posted	459		1,026



		Bank of America 2016139

Valuation Adjustments on Derivatives




Valuation Adjustments on Derivatives

Gains (Losses)
	2016					2015						2014
(Dollars in millions)	Gross		Net			Gross			Net			Gross			Net
Derivative assets (CVA) ⁽¹⁾	$	374	$	214		$	255		$	227		$	(22	)	$	191
Derivative assets/liabilities (FVA) ⁽¹⁾	186		102			16			16			(497		)	(497		)
Derivative liabilities (DVA) ⁽¹⁾	24		(141		)	(18		)	(153		)	(28		)	(150		)


⁽¹⁾	At December 31, 2016, 2015 and 2014, cumulative CVA reduced the derivative assets balance by $1.0 billion, $1.4 billion and $1.6 billion, cumulative FVA reduced the net derivatives balance by $296 million, $481 million and $497 million, and cumulative DVA reduced the derivative liabilities balance by $774 million, $750 million and $769 million, respectively.



140 Bank of America 2016

NOTE 3 Securities




Debt Securities and Available-for-Sale Marketable Equity Securities

	December 31, 2016
(Dollars in millions)	Amortized Cost			Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale debt securities
Mortgage-backed securities:
Agency	$	190,809		$	640	$	(1,963	)	$	189,486
Agency-collateralized mortgage obligations	8,296			85		(51		)	8,330
Commercial	12,594			21		(293		)	12,322
Non-agency residential ⁽¹⁾	1,863			181		(31		)	2,013
Total mortgage-backed securities	213,562			927		(2,338		)	212,151
U.S. Treasury and agency securities	48,800			204		(752		)	48,252
Non-U.S. securities	6,372			13		(3		)	6,382
Other taxable securities, substantially all asset-backed securities	10,573			64		(23		)	10,614
Total taxable securities	279,307			1,208		(3,116		)	277,399
Tax-exempt securities	17,272			72		(184		)	17,160
Total available-for-sale debt securities	296,579			1,280		(3,300		)	294,559
Less: Available-for-sale securities of business held for sale⁽²⁾	(619		)	—		—			(619		)
Other debt securities carried at fair value	19,748			121		(149		)	19,720
Total debt securities carried at fair value	315,708			1,401		(3,449		)	313,660
Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities	117,071			248		(2,034		)	115,285
Total debt securities ⁽³⁾	$	432,779		$	1,649	$	(5,483	)	$	428,945
Available-for-sale marketable equity securities ⁽⁴⁾	$	325		$	51	$	(1	)	$	375

	December 31, 2015
Available-for-sale debt securities
Mortgage-backed securities:
Agency	$	229,356		$	1,061	$	(1,470	)	$	228,947
Agency-collateralized mortgage obligations	10,892			148		(55		)	10,985
Commercial	7,200			30		(65		)	7,165
Non-agency residential ⁽¹⁾	3,031			219		(71		)	3,179
Total mortgage-backed securities	250,479			1,458		(1,661		)	250,276
U.S. Treasury and agency securities	25,075			211		(9		)	25,277
Non-U.S. securities	5,743			27		(3		)	5,767
Other taxable securities, substantially all asset-backed securities	10,475			54		(84		)	10,445
Total taxable securities	291,772			1,750		(1,757		)	291,765
Tax-exempt securities	13,978			63		(33		)	14,008
Total available-for-sale debt securities	305,750			1,813		(1,790		)	305,773
Other debt securities carried at fair value	16,678			103		(174		)	16,607
Total debt securities carried at fair value	322,428			1,916		(1,964		)	322,380
Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities	84,508			330		(792		)	84,046
Total debt securities ⁽³⁾	$	406,936		$	2,246	$	(2,756	)	$	406,426
Available-for-sale marketable equity securities ⁽⁴⁾	$	326		$	99	$	—		$	425


⁽¹⁾	At December 31, 2016 and 2015, the underlying collateral type included approximately 60 percent and 71 percent prime, 19 percent and 15 percent Alt-A, and 21 percent and 14 percent subprime.


⁽²⁾	Represents AFS debt securities of business held for sale of which there were no unrealized gains or losses at December 31, 2016.

⁽³⁾


⁽⁴⁾	Classified in other assets on the Consolidated Balance Sheet.



		Bank of America 2016141




Other Debt Securities Carried at Fair Value

	December 31
(Dollars in millions)	2016		2015
Mortgage-backed securities:
Agency-collateralized mortgage obligations	$	5	$	7
Non-agency residential	3,139		3,490
Total mortgage-backed securities	3,144		3,497
Non-U.S. securities ⁽¹⁾	16,336		12,843
Other taxable securities, substantially all asset-backed securities	240		267
Total	$	19,720	$	16,607


⁽¹⁾	These securities are primarily used to satisfy certain international regulatory liquidity requirements.

The gross realized gains and losses on sales of AFS debt securities for 2016, 2015 and 2014 are presented in the following table.




Gains and Losses on Sales of AFS Debt Securities

(Dollars in millions)	2016			2015			2014
Gross gains	$	520		$	1,174		$	1,504
Gross losses	(30		)	(36		)	(23		)
Net gains on sales of AFS debt securities	$	490		$	1,138		$	1,481
Income tax expense attributable to realized net gains on sales of AFS debt securities	$	186		$	432		$	563




Temporarily Impaired and Other-than-temporarily Impaired AFS Debt Securities

	December 31, 2016
	Less than Twelve Months					Twelve Months or Longer					Total
(Dollars in millions)	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Temporarily impaired AFS debt securities
Mortgage-backed securities:
Agency	$	135,210	$	(1,846	)	$	3,770	$	(117	)	$	138,980	$	(1,963	)
Agency-collateralized mortgage obligations	3,229		(25		)	1,028		(26		)	4,257		(51		)
Commercial	9,018		(293		)	—		—			9,018		(293		)
Non-agency residential	212		(1		)	204		(13		)	416		(14		)
Total mortgage-backed securities	147,669		(2,165		)	5,002		(156		)	152,671		(2,321		)
U.S. Treasury and agency securities	28,462		(752		)	—		—			28,462		(752		)
Non-U.S. securities	52		(1		)	142		(2		)	194		(3		)
Other taxable securities, substantially all asset-backed securities	762		(5		)	1,438		(18		)	2,200		(23		)
Total taxable securities	176,945		(2,923		)	6,582		(176		)	183,527		(3,099		)
Tax-exempt securities	4,782		(148		)	1,873		(36		)	6,655		(184		)
Total temporarily impaired AFS debt securities	181,727		(3,071		)	8,455		(212		)	190,182		(3,283		)
Other-than-temporarily impaired AFS debt securities ⁽¹⁾
Non-agency residential mortgage-backed securities	94		(1		)	401		(16		)	495		(17		)
Total temporarily impaired and other-than-temporarily impaired AFS debt securities	$	181,821	$	(3,072	)	$	8,856	$	(228	)	$	190,677	$	(3,300	)

	December 31, 2015
Temporarily impaired AFS debt securities
Mortgage-backed securities:
Agency	$	115,502	$	(1,082	)	$	13,083	$	(388	)	$	128,585	$	(1,470	)
Agency-collateralized mortgage obligations	2,536		(19		)	1,212		(36		)	3,748		(55		)
Commercial	4,587		(65		)	—		—			4,587		(65		)
Non-agency residential	553		(5		)	723		(33		)	1,276		(38		)
Total mortgage-backed securities	123,178		(1,171		)	15,018		(457		)	138,196		(1,628		)
U.S. Treasury and agency securities	1,172		(5		)	190		(4		)	1,362		(9		)
Non-U.S. securities	—		—			134		(3		)	134		(3		)
Other taxable securities, substantially all asset-backed securities	4,936		(67		)	869		(17		)	5,805		(84		)
Total taxable securities	129,286		(1,243		)	16,211		(481		)	145,497		(1,724		)
Tax-exempt securities	4,400		(12		)	1,877		(21		)	6,277		(33		)
Total temporarily impaired AFS debt securities	133,686		(1,255		)	18,088		(502		)	151,774		(1,757		)
Other-than-temporarily impaired AFS debt securities ⁽¹⁾
Non-agency residential mortgage-backed securities	481		(19		)	98		(14		)	579		(33		)
Total temporarily impaired and other-than-temporarily impaired AFS debt securities	$	134,167	$	(1,274	)	$	18,186	$	(516	)	$	152,353	$	(1,790	)


⁽¹⁾	Includes OTTI AFS debt securities on which an OTTI loss, primarily related to changes in interest rates, remains in accumulated OCI.



142 Bank of America 2016




Net Credit-related Impairment Losses Recognized in Earnings

(Dollars in millions)	2016			2015			2014
Total OTTI losses	$	(31	)	$	(111	)	$	(30	)
Less: non-credit portion of total OTTI losses recognized in OCI	12			30			14
Net credit-related impairment losses recognized in earnings	$	(19	)	$	(81	)	$	(16	)




Rollforward of OTTI Credit Losses Recognized

(Dollars in millions)	2016			2015			2014
Balance, January 1	$	266		$	200		$	184
Additions for credit losses recognized on AFS debt securities that had no previous impairment losses	2			52			14
Additions for credit losses recognized on AFS debt securities that had previously incurred impairment losses	17			29			2
Reductions for AFS debt securities matured, sold or intended to be sold	(32		)	(15		)	—
Balance, December 31	$	253		$	266		$	200

Significant assumptions used in estimating the expected cash flows for measuring credit losses on non-agency RMBS were as follows at December 31, 2016.




Significant Assumptions

			Range ⁽¹⁾
	Weighted- average		10th Percentile ⁽²⁾		90th Percentile ⁽²⁾
Prepayment speed	13.8	%	4.6	%	27.0	%
Loss severity	20.1		8.8		36.5
Life default rate	20.4		0.7		77.4


⁽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.



		Bank of America 2016143




Maturities of Debt Securities Carried at Fair Value and Held-to-maturity Debt Securities

	December 31, 2016
	Due in One Year or Less				Due after One Year through Five Years				Due after Five Years through Ten Years				Due after Ten Years				Total
(Dollars in millions)	Amount		Yield ⁽¹⁾		Amount		Yield ⁽¹⁾		Amount		Yield ⁽¹⁾		Amount		Yield ⁽¹⁾		Amount		Yield ⁽¹⁾
Amortized cost of debt securities carried at fair value
Mortgage-backed securities:
Agency	$	2	4.50	%	$	47	4.45	%	$	381	2.56	%	$	190,379	3.23	%	$	190,809	3.23	%
Agency-collateralized mortgage obligations	—		—		—		—		—		—		8,300		3.18		8,300		3.18
Commercial	48		8.60		558		1.96		11,632		2.47		356		2.58		12,594		2.47
Non-agency residential	—		—		—		—		12		0.01		5,016		8.50		5,028		8.48
Total mortgage-backed securities	50		8.32		605		2.15		12,025		2.46		204,051		3.36		216,731		3.31
U.S. Treasury and agency securities	517		0.47		34,898		1.57		13,234		1.58		151		5.42		48,800		1.57
Non-U.S. securities ⁽²⁾	21,164		0.25		1,097		1.92		206		1.30		240		6.60		22,707		0.41
Other taxable securities, substantially all asset-backed securities	2,040		1.77		5,102		1.63		2,279		2.71		1,396		3.18		10,817		2.08
Total taxable securities	23,771		0.40		41,702		1.59		27,744		2.05		205,838		3.36		299,055		2.76
Tax-exempt securities	646		1.13		6,563		1.49		7,846		1.57		2,217		1.53		17,272		1.52
Total amortized cost of debt securities carried at fair value⁽²⁾	$	24,417	0.42		$	48,265	1.58		$	35,590	1.95		$	208,055	3.34		$	316,327	2.69
Amortized cost of HTM debt securities⁽³⁾	$	—	—		$	26	4.01		$	971	2.32		$	116,074	3.01		$	117,071	3.01

Debt securities carried at fair value
Mortgage-backed securities:
Agency	$	2			$	48			$	382			$	189,054			$	189,486
Agency-collateralized mortgage obligations	—				—				—				8,335				8,335
Commercial	48				559				11,378				337				12,322
Non-agency residential	—				—				19				5,133				5,152
Total mortgage-backed securities	50				607				11,779				202,859				215,295
U.S. Treasury and agency securities	517				34,784				12,788				163				48,252
Non-U.S. securities ⁽²⁾	21,165				1,100				208				245				22,718
Other taxable securities, substantially all asset-backed securities	2,036				5,078				2,303				1,437				10,854
Total taxable securities	23,768				41,569				27,078				204,704				297,119
Tax-exempt securities	646				6,561				7,754				2,199				17,160
Total debt securities carried at fair value⁽²⁾	$	24,414			$	48,130			$	34,832			$	206,903			$	314,279
Fair value of HTM debt securities ⁽³⁾	$	—			$	26			$	959			$	114,300			$	115,285


⁽¹⁾	The 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⁾	Includes $619 million of amortized cost and fair value for AFS debt securities of business held for sale. These AFS debt securities mature in one year or less and have an average yield of 0.21 percent.


⁽³⁾	Substantially all U.S. agency MBS.



144 Bank of America 2016

NOTE 4 Outstanding Loans and Leases




	December 31, 2016
(Dollars in millions)	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			Total Current or Less Than 30 Days Past Due ⁽³⁾			Purchased Credit-impaired ⁽⁴⁾			Loans Accounted for Under the Fair Value Option			Total Outstandings
Consumer real estate
Core portfolio
Residential mortgage	$	1,340		$	425		$	1,213		$	2,978		$	153,519								$	156,497
Home equity	239			105			451			795			48,578									49,373
Non-core portfolio
Residential mortgage ⁽⁵⁾	1,338			674			5,343			7,355			17,818			$	10,127					35,300
Home equity	260			136			832			1,228			12,231			3,611						17,070
Credit card and other consumer
U.S. credit card	472			341			782			1,595			90,683									92,278
Non-U.S. credit card	37			27			66			130			9,084									9,214
Direct/Indirect consumer ⁽⁶⁾	272			79			34			385			93,704									94,089
Other consumer ⁽⁷⁾	26			8			6			40			2,459									2,499
Total consumer	3,984			1,795			8,727			14,506			428,076			13,738						456,320
Consumer loans accounted for under the fair value option ⁽⁸⁾																			$	1,051		1,051
Total consumer loans and leases	3,984			1,795			8,727			14,506			428,076			13,738			1,051			457,371
Commercial
U.S. commercial	952			263			400			1,615			268,757									270,372
Commercial real estate ⁽⁹⁾	20			10			56			86			57,269									57,355
Commercial lease financing	167			21			27			215			22,160									22,375
Non-U.S. commercial	348			4			5			357			89,040									89,397
U.S. small business commercial	96			49			84			229			12,764									12,993
Total commercial	1,583			347			572			2,502			449,990									452,492
Commercial loans accounted for under the fair value option ⁽⁸⁾																			6,034			6,034
Total commercial loans and leases	1,583			347			572			2,502			449,990						6,034			458,526
Total consumer and commercial loans and leases⁽¹⁰⁾	$	5,567		$	2,142		$	9,299		$	17,008		$	878,066		$	13,738		$	7,085		$	915,897
Less: Loans of business held for sale⁽¹⁰⁾																						(9,214		)
Total loans and leases ⁽¹¹⁾																						$	906,683
Percentage of outstandings ⁽¹⁰⁾	0.61		%	0.23		%	1.02		%	1.86		%	95.87		%	1.50		%	0.77		%	100.00		%


⁽¹⁾	Consumer real estate loans 30-59 days past due includes fully-insured loans of $1.1 billion and nonperforming loans of $266 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $547 million and nonperforming loans of $216 million.


⁽²⁾	Consumer real estate includes fully-insured loans of $4.8 billion.


⁽³⁾	Consumer real estate includes $2.5 billion and direct/indirect consumer includes $27 million of nonperforming loans.


⁽⁴⁾	PCI loan amounts are shown gross of the valuation allowance.


⁽⁵⁾	Total outstandings includes pay option loans of $1.8 billion. The Corporation no longer originates this product.


⁽⁶⁾	Total outstandings includes auto and specialty lending loans of $48.9 billion, unsecured consumer lending loans of $585 million, U.S. securities-based lending loans of $40.1 billion, non-U.S. consumer loans of $3.0 billion, student loans of $497 million and other consumer loans of $1.1 billion.


⁽⁷⁾	Total outstandings includes consumer finance loans of $465 million, consumer leases of $1.9 billion and consumer overdrafts of $157 million.


⁽⁸⁾	Consumer loans accounted for under the fair value option were residential mortgage loans of $710 million and home equity loans of $341 million. Commercial loans accounted for under the fair value option were U.S. commercial loans of $2.9 billion and non-U.S. commercial loans of $3.1 billion. For additional information, see Note 20 – Fair Value Measurements and Note 21 – Fair Value Option.


⁽⁹⁾	Total outstandings includes U.S. commercial real estate loans of $54.3 billion and non-U.S. commercial real estate loans of $3.1 billion.


⁽¹⁰⁾	Includes non-U.S. credit card loans, which are included in assets of business held for sale on the Consolidated Balance Sheet.


⁽¹¹⁾	The Corporation pledged $143.1 billion of loans to secure potential borrowing capacity with the Federal Reserve Bank and Federal Home Loan Bank (FHLB). This amount is not included in the parenthetical disclosure of loans and leases pledged as collateral on the Consolidated Balance Sheet as there were no related outstanding borrowings.



		Bank of America 2016145




	December 31, 2015
(Dollars in millions)	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			Total Current or Less Than 30 Days Past Due ⁽³⁾			Purchased Credit-impaired ⁽⁴⁾			Loans Accounted for Under the Fair Value Option			Total Outstandings
Consumer real estate
Core portfolio
Residential mortgage	$	1,214		$	368		$	1,414		$	2,996		$	138,799								$	141,795
Home equity	200			93			579			872			54,045									54,917
Non-core portfolio
Residential mortgage ⁽⁵⁾	2,045			1,167			8,439			11,651			22,399			$	12,066					46,116
Home equity	335			174			1,170			1,679			14,733			4,619						21,031
Credit card and other consumer
U.S. credit card	454			332			789			1,575			88,027									89,602
Non-U.S. credit card	39			31			76			146			9,829									9,975
Direct/Indirect consumer ⁽⁶⁾	227			62			42			331			88,464									88,795
Other consumer ⁽⁷⁾	18			3			4			25			2,042									2,067
Total consumer	4,532			2,230			12,513			19,275			418,338			16,685						454,298
Consumer loans accounted for under the fair value option ⁽⁸⁾																			$	1,871		1,871
Total consumer loans and leases	4,532			2,230			12,513			19,275			418,338			16,685			1,871			456,169
Commercial
U.S. commercial	444			148			332			924			251,847									252,771
Commercial real estate ⁽⁹⁾	36			11			82			129			57,070									57,199
Commercial lease financing	150			29			20			199			21,153									21,352
Non-U.S. commercial	6			1			1			8			91,541									91,549
U.S. small business commercial	83			41			72			196			12,680									12,876
Total commercial	719			230			507			1,456			434,291									435,747
Commercial loans accounted for under the fair value option ⁽⁸⁾																			5,067			5,067
Total commercial loans and leases	719			230			507			1,456			434,291						5,067			440,814
Total loans and leases⁽¹⁰⁾	$	5,251		$	2,460		$	13,020		$	20,731		$	852,629		$	16,685		$	6,938		$	896,983
Percentage of outstandings	0.59		%	0.27		%	1.45		%	2.31		%	95.06		%	1.86		%	0.77		%	100.00		%


⁽¹⁾	Consumer real estate loans 30-59 days past due includes fully-insured loans of $1.7 billion and nonperforming loans of $379 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $1.0 billion and nonperforming loans of $297 million.


⁽²⁾	Consumer real estate includes fully-insured loans of $7.2 billion.


⁽³⁾	Consumer real estate includes $3.0 billion and direct/indirect consumer includes $21 million of nonperforming loans.


⁽⁴⁾	PCI loan amounts are shown gross of the valuation allowance.


⁽⁵⁾	Total outstandings includes pay option loans of $2.3 billion. The Corporation no longer originates this product.


⁽⁶⁾	Total outstandings includes auto and specialty lending loans of $42.6 billion, unsecured consumer lending loans of $886 million, U.S. securities-based lending loans of $39.8 billion, non-U.S. consumer loans of $3.9 billion, student loans of $564 million and other consumer loans of $1.0 billion.


⁽⁷⁾	Total outstandings includes consumer finance loans of $564 million, consumer leases of $1.4 billion and consumer overdrafts of $146 million.


⁽⁸⁾	Consumer loans accounted for under the fair value option were residential mortgage loans of $1.6 billion and home equity loans of $250 million. Commercial loans accounted for under the fair value option were U.S. commercial loans of $2.3 billion and non-U.S. commercial loans of $2.8 billion. For additional information, see Note 20 – Fair Value Measurements and Note 21 – Fair Value Option.


⁽⁹⁾	Total outstandings includes U.S. commercial real estate loans of $53.6 billion and non-U.S. commercial real estate loans of $3.5 billion.


⁽¹⁰⁾	The Corporation pledged $149.4 billion of loans to secure potential borrowing capacity with the Federal Reserve Bank and FHLB. This amount is not included in the parenthetical disclosure of loans and leases pledged as collateral on the Consolidated Balance Sheet as there were no related outstanding borrowings.

prior to 2010 and classified as nonperforming or modified in a TDR prior to 2016 are generally characterized as non-core loans, and are principally run-off portfolios.

Nonperforming Loans and Leases

The Corporation classifies junior-lien home equity loans as nonperforming when the first-lien loan becomes 90 days past due even if the junior-lien loan is performing. At December 31, 2016 and 2015, $428 million and $484 million of such junior-lien home equity loans were included in nonperforming loans.

The Corporation classifies consumer real estate loans that have been discharged in Chapter 7 bankruptcy and not reaffirmed by the borrower as TDRs, irrespective of payment history or



146 Bank of America 2016




Credit Quality

	December 31
	Nonperforming Loans and Leases				Accruing Past Due 90 Days or More
(Dollars in millions)	2016		2015		2016		2015
Consumer real estate
Core portfolio
Residential mortgage ⁽¹⁾	$	1,274	$	1,825	$	486	$	382
Home equity	969		974		—		—
Non-core portfolio
Residential mortgage⁽¹⁾	1,782		2,978		4,307		6,768
Home equity	1,949		2,363		—		—
Credit card and other consumer
U.S. credit card	n/a		n/a		782		789
Non-U.S. credit card	n/a		n/a		66		76
Direct/Indirect consumer	28		24		34		39
Other consumer	2		1		4		3
Total consumer	6,004		8,165		5,679		8,057
Commercial
U.S. commercial	1,256		867		106		113
Commercial real estate	72		93		7		3
Commercial lease financing	36		12		19		15
Non-U.S. commercial	279		158		5		1
U.S. small business commercial	60		82		71		61
Total commercial	1,703		1,212		208		193
Total loans and leases	$	7,707	$	9,377	$	5,887	$	8,250

⁽¹⁾

n/a = not applicable

Credit Quality Indicators

The Corporation monitors credit quality within its Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments based on primary credit quality indicators. For more information on the portfolio segments, see Note 1 – Summary of Significant Accounting Principles. Within the Consumer Real Estate portfolio segment, the primary credit quality indicators are refreshed LTV and refreshed FICO score. Refreshed LTV measures the carrying value of the loan as a percentage of the value of the property securing the loan, refreshed quarterly. Home equity loans are evaluated using CLTV which measures the carrying value of the Corporation’s loan and available line of credit combined with any outstanding senior liens against the property as a percentage of the value of the property securing the loan, refreshed quarterly. FICO score measures the creditworthiness of the borrower based on the financial obligations of the borrower and the borrower’s credit history. FICO scores are typically refreshed quarterly or more



		Bank of America 2016147




Consumer Real Estate – Credit Quality Indicators ⁽¹⁾

	December 31, 2016
(Dollars in millions)	Core Portfolio Residential Mortgage ⁽²⁾		Non-core Residential Mortgage ⁽²⁾		Residential Mortgage PCI ⁽³⁾		Core Portfolio Home Equity ⁽²⁾		Non-core Home Equity ⁽²⁾		Home Equity PCI
Refreshed LTV⁽⁴⁾
Less than or equal to 90 percent	$	129,737	$	14,280	$	7,811	$	47,171	$	8,480	$	1,942
Greater than 90 percent but less than or equal to 100 percent	3,634		1,446		1,021		1,006		1,668		630
Greater than 100 percent	1,872		1,972		1,295		1,196		3,311		1,039
Fully-insured loans ⁽⁵⁾	21,254		7,475		—		—		—		—
Total consumer real estate	$	156,497	$	25,173	$	10,127	$	49,373	$	13,459	$	3,611
Refreshed FICO score
Less than 620	$	2,479	$	3,198	$	2,741	$	1,254	$	2,692	$	559
Greater than or equal to 620 and less than 680	5,094		2,807		2,241		2,853		3,094		636
Greater than or equal to 680 and less than 740	22,629		4,512		2,916		10,069		3,176		1,069
Greater than or equal to 740	105,041		7,181		2,229		35,197		4,497		1,347
Fully-insured loans ⁽⁵⁾	21,254		7,475		—		—		—		—
Total consumer real estate	$	156,497	$	25,173	$	10,127	$	49,373	$	13,459	$	3,611


⁽¹⁾	Excludes $1.1 billion of loans accounted for under the fair value option.


⁽²⁾	Excludes PCI loans.


⁽³⁾	Includes $1.6 billion of pay option loans. The Corporation no longer originates this product.


⁽⁴⁾	Refreshed LTV percentages for PCI loans are calculated using the carrying value net of the related valuation allowance.


⁽⁵⁾	Credit quality indicators are not reported for fully-insured loans as principal repayment is insured.




Credit Card and Other Consumer – Credit Quality Indicators

	December 31, 2016
(Dollars in millions)	U.S. Credit Card		Non-U.S. Credit Card		Direct/Indirect Consumer		Other Consumer ⁽¹⁾
Refreshed FICO score
Less than 620	$	4,431	$	—	$	1,478	$	187
Greater than or equal to 620 and less than 680	12,364		—		2,070		222
Greater than or equal to 680 and less than 740	34,828		—		12,491		404
Greater than or equal to 740	40,655		—		33,420		1,525
Other internal credit metrics ^{(2, 3, 4)}	—		9,214		44,630		161
Total credit card and other consumer	$	92,278	$	9,214	$	94,089	$	2,499


⁽¹⁾	At December 31, 2016, 19 percent of the other consumer portfolio is associated with portfolios from certain consumer finance businesses that the Corporation previously exited.


⁽²⁾	Other internal credit metrics may include delinquency status, geography or other factors.


⁽³⁾	Direct/indirect consumer includes $43.1 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk and $499 million of loans the Corporation no longer originates, primarily student loans.


⁽⁴⁾	Non-U.S. credit card represents the U.K. credit card portfolio which is evaluated using internal credit metrics, including delinquency status. At December 31, 2016, 98 percent of this portfolio was current or less than 30 days past due, one percent was 30-89 days past due and one percent was 90 days or more past due.




Commercial – Credit Quality Indicators ⁽¹⁾

	December 31, 2016
(Dollars in millions)	U.S. Commercial		Commercial Real Estate		Commercial Lease Financing		Non-U.S. Commercial		U.S. Small Business Commercial ⁽²⁾
Risk ratings
Pass rated	$	261,214	$	56,957	$	21,565	$	85,689	$	453
Reservable criticized	9,158		398		810		3,708		71
Refreshed FICO score ⁽³⁾
Less than 620									200
Greater than or equal to 620 and less than 680									591
Greater than or equal to 680 and less than 740									1,741
Greater than or equal to 740									3,264
Other internal credit metrics ^{(3, 4)}									6,673
Total commercial	$	270,372	$	57,355	$	22,375	$	89,397	$	12,993


⁽¹⁾	Excludes $6.0 billion of loans accounted for under the fair value option.


⁽²⁾	U.S. small business commercial includes $755 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. At December 31, 2016, 98 percent of the balances where internal credit metrics are used was current or less than 30 days past due.


⁽³⁾	Refreshed FICO score and other internal credit metrics are applicable only to the U.S. small business commercial portfolio.


⁽⁴⁾	Other internal credit metrics may include delinquency status, application scores, geography or other factors.



148 Bank of America 2016




Consumer Real Estate – Credit Quality Indicators ⁽¹⁾

	December 31, 2015
(Dollars in millions)	Core Portfolio Residential Mortgage ⁽²⁾		Non-core Residential Mortgage ⁽²⁾		Residential Mortgage PCI ⁽³⁾		Core Portfolio Home Equity ⁽²⁾		Non-core Home Equity ⁽²⁾		Home Equity PCI
Refreshed LTV ⁽⁴⁾
Less than or equal to 90 percent	$	110,023	$	16,481	$	8,655	$	51,262	$	8,347	$	2,003
Greater than 90 percent but less than or equal to 100 percent	4,038		2,224		1,403		1,858		2,190		852
Greater than 100 percent	2,638		3,364		2,008		1,797		5,875		1,764
Fully-insured loans ⁽⁵⁾	25,096		11,981		—		—		—		—
Total consumer real estate	$	141,795	$	34,050	$	12,066	$	54,917	$	16,412	$	4,619
Refreshed FICO score
Less than 620	$	3,129	$	4,749	$	3,798	$	1,322	$	3,490	$	729
Greater than or equal to 620 and less than 680	5,472		3,762		2,586		3,295		3,862		825
Greater than or equal to 680 and less than 740	22,486		5,138		3,187		12,180		3,451		1,356
Greater than or equal to 740	85,612		8,420		2,495		38,120		5,609		1,709
Fully-insured loans ⁽⁵⁾	25,096		11,981		—		—		—		—
Total consumer real estate	$	141,795	$	34,050	$	12,066	$	54,917	$	16,412	$	4,619


⁽¹⁾	Excludes $1.9 billion of loans accounted for under the fair value option.


⁽²⁾	Excludes PCI loans.


⁽³⁾	Includes $2.0 billion of pay option loans. The Corporation no longer originates this product.


⁽⁴⁾	Refreshed LTV percentages for PCI loans are calculated using the carrying value net of the related valuation allowance.


⁽⁵⁾	Credit quality indicators are not reported for fully-insured loans as principal repayment is insured.




Credit Card and Other Consumer – Credit Quality Indicators

	December 31, 2015
(Dollars in millions)	U.S. Credit Card		Non-U.S. Credit Card		Direct/Indirect Consumer		Other Consumer ⁽¹⁾
Refreshed FICO score
Less than 620	$	4,196	$	—	$	1,244	$	217
Greater than or equal to 620 and less than 680	11,857		—		1,698		214
Greater than or equal to 680 and less than 740	34,270		—		10,955		337
Greater than or equal to 740	39,279		—		29,581		1,149
Other internal credit metrics ^{(2, 3, 4)}	—		9,975		45,317		150
Total credit card and other consumer	$	89,602	$	9,975	$	88,795	$	2,067


⁽¹⁾	At December 31, 2015, 27 percent of the other consumer portfolio is associated with portfolios from certain consumer finance businesses that the Corporation previously exited.


⁽²⁾	Other internal credit metrics may include delinquency status, geography or other factors.


⁽³⁾	Direct/indirect consumer includes $43.7 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk and $567 million of loans the Corporation no longer originates, primarily student loans.


⁽⁴⁾	Non-U.S. credit card represents the U.K. credit card portfolio which is evaluated using internal credit metrics, including delinquency status. At December 31, 2015, 98 percent of this portfolio was current or less than 30 days past due, one percent was 30-89 days past due and one percent was 90 days or more past due.




Commercial – Credit Quality Indicators ⁽¹⁾

	December 31, 2015
(Dollars in millions)	U.S. Commercial		Commercial Real Estate		Commercial Lease Financing		Non-U.S. Commercial		U.S. Small Business Commercial ⁽²⁾
Risk ratings
Pass rated	$	243,922	$	56,688	$	20,644	$	87,905	$	571
Reservable criticized	8,849		511		708		3,644		96
Refreshed FICO score ⁽³⁾
Less than 620									184
Greater than or equal to 620 and less than 680									543
Greater than or equal to 680 and less than 740									1,627
Greater than or equal to 740									3,027
Other internal credit metrics ^{(3, 4)}									6,828
Total commercial	$	252,771	$	57,199	$	21,352	$	91,549	$	12,876


⁽¹⁾	Excludes $5.1 billion of loans accounted for under the fair value option.


⁽²⁾	U.S. small business commercial includes $670 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. At December 31, 2015, 98 percent of the balances where internal credit metrics are used was current or less than 30 days past due.


⁽³⁾	Refreshed FICO score and other internal credit metrics are applicable only to the U.S. small business commercial portfolio.


⁽⁴⁾	Other internal credit metrics may include delinquency status, application scores, geography or other factors.



		Bank of America 2016149

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 ~~contractually~~amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming commercial loans and all consumer and commercial TDRs. Impaired loans exclude nonperforming consumer loans and nonperforming commercial leases unless they are classified as TDRs. Loans accounted for under the fair value option are also excluded. PCI loans are excluded and reported separately on page 156. For additional information, see Note 1 – Summary of Significant Accounting Principles.

Consumer Real Estate

nonperforming and $555 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 ~~payments.~~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.

At December 31, 2016 and 2015, remaining commitments to lend additional funds to debtors whose terms have been modified in a consumer real estate TDR were immaterial. Consumer real estate foreclosed properties totaled $363 million and $444 million at December 31, 2016 and 2015. The carrying value of consumer real estate loans, including fully-insured and PCI loans, for which formal foreclosure proceedings were in process as of December 31, 2016 was $4.8 billion. During 2016 and 2015, the Corporation reclassified $1.4 billion and $2.1 billion 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 on the Consolidated Statement of Cash Flows.



150 Bank of America 2016




Impaired Loans – Consumer Real Estate

	December 31, 2016						December 31, 2015
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Related Allowance		Unpaid Principal Balance		Carrying Value		Related Allowance
With no recorded allowance
Residential mortgage	$	11,151	$	8,695	$	—	$	14,888	$	11,901	$	—
Home equity	3,704		1,953		—		3,545		1,775		—
With an allowance recorded
Residential mortgage	$	4,041	$	3,936	$	219	$	6,624	$	6,471	$	399
Home equity	910		824		137		1,047		911		235
Total
Residential mortgage	$	15,192	$	12,631	$	219	$	21,512	$	18,372	$	399
Home equity	4,614		2,777		137		4,592		2,686		235

	2016				2015				2014
	Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾
With no recorded allowance
Residential mortgage	$	10,178	$	360	$	13,867	$	403	$	15,065	$	490
Home equity	1,906		90		1,777		89		1,486		87
With an allowance recorded
Residential mortgage	$	5,067	$	167	$	7,290	$	236	$	10,826	$	411
Home equity	852		24		785		24		743		25
Total
Residential mortgage	$	15,245	$	527	$	21,157	$	639	$	25,891	$	901
Home equity	2,758		114		2,562		113		2,229		112


⁽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.




Consumer Real Estate – TDRs Entered into During 2016, 2015 and 2014 ⁽¹⁾

	December 31, 2016								2016
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Pre-Modification Interest Rate		Post-Modification Interest Rate ⁽²⁾		Net Charge-offs ⁽³⁾
Residential mortgage	$	1,130	$	1,017	4.73	%	4.16	%	$	11
Home equity	849		649		3.95		2.72		61
Total	$	1,979	$	1,666	4.40		3.54		$	72

	December 31, 2015								2015
Residential mortgage	$	2,986	$	2,655	4.98	%	4.43	%	$	97
Home equity	1,019		775		3.54		3.17		84
Total	$	4,005	$	3,430	4.61		4.11		$	181

	December 31, 2014								2014
Residential mortgage	$	5,940	$	5,120	5.28	%	4.93	%	$	72
Home equity	863		592		4.00		3.33		99
Total	$	6,803	$	5,712	5.12		4.73		$	171


⁽¹⁾	During 2016, 2015 and 2014, the Corporation forgave principal of $13 million, $396 million and $53 million, respectively, related to residential mortgage loans in connection with TDRs.


⁽²⁾	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.


⁽³⁾	Net charge-offs include amounts recorded on loans modified during the period that are no longer held by the Corporation at December 31, 2016, 2015 and 2014 due to sales and other dispositions.



		Bank of America 2016151

The table below presents the December 31, 2016, 2015 and 2014 carrying value for consumer real estate loans that were modified in a TDR during 2016, 2015 and 2014, by type of modification.




Consumer Real Estate – Modification Programs

	TDRs Entered into During 2016				TDRs Entered into During 2015				TDRs Entered into During 2014
(Dollars in millions)	Residential Mortgage		Home Equity		Residential Mortgage		Home Equity		Residential Mortgage		Home Equity
Modifications under government programs
Contractual interest rate reduction	$	116	$	35	$	408	$	23	$	643	$	56
Principal and/or interest forbearance	2		11		4		7		16		18
Other modifications ⁽¹⁾	22		1		46		—		98		1
Total modifications under government programs	140		47		458		30		757		75
Modifications under proprietary programs
Contractual interest rate reduction	84		151		191		28		244		22
Capitalization of past due amounts	24		16		69		10		71		2
Principal and/or interest forbearance	10		62		124		44		66		75
Other modifications⁽¹⁾	4		71		34		95		40		47
Total modifications under proprietary programs	122		300		418		177		421		146
Trial modifications	597		234		1,516		452		3,421		182
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	158		68		263		116		521		189
Total modifications	$	1,017	$	649	$	2,655	$	775	$	5,120	$	592


⁽¹⁾	Includes other modifications such as term or payment extensions and repayment plans.


⁽²⁾	Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.




Consumer Real Estate – TDRs Entering Payment Default That Were Modified During the Preceding 12 Months ⁽¹⁾

	2016				2015				2014
(Dollars in millions)	Residential Mortgage		Home Equity		Residential Mortgage		Home Equity		Residential Mortgage		Home Equity
Modifications under government programs	$	259	$	3	$	452	$	5	$	696	$	4
Modifications under proprietary programs	133		63		263		24		714		12
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	136		22		238		47		481		70
Trial modifications ⁽³⁾	714		110		2,997		181		2,231		56
Total modifications	$	1,242	$	198	$	3,950	$	257	$	4,122	$	142


⁽¹⁾	Includes loans with a carrying value of $613 million, $1.8 billion and $2.0 billion that entered into payment default during 2016, 2015 and 2014, respectively, but were no longer held by the Corporation as of December 31, 2016, 2015 and 2014 due to sales and other dispositions.


⁽²⁾	Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.


⁽³⁾	Includes trial modification offers to which the customer did not respond.

Credit Card and Other Consumer



152 Bank of America 2016




Impaired Loans – Credit Card and Other Consumer

	December 31, 2016						December 31, 2015
(Dollars in millions)	Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance		Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance
With no recorded allowance
Direct/Indirect consumer	$	49	$	22	$	—	$	50	$	21	$	—
With an allowance recorded
U.S. credit card	$	479	$	485	$	128	$	598	$	611	$	176
Non-U.S. credit card	88		100		61		109		126		70
Direct/Indirect consumer	3		3		—		17		21		4
Total
U.S. credit card	$	479	$	485	$	128	$	598	$	611	$	176
Non-U.S. credit card	88		100		61		109		126		70
Direct/Indirect consumer	52		25		—		67		42		4

	2016				2015				2014
	Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾
With no recorded allowance
Direct/Indirect consumer	$	20	$	—	$	22	$	—	$	27	$	—
Other consumer	—		—		—		—		33		2
With an allowance recorded
U.S. credit card	$	556	$	31	$	749	$	43	$	1,148	$	71
Non-U.S. credit card	111		3		145		4		210		6
Direct/Indirect consumer	10		1		51		3		180		9
Other consumer	—		—		—		—		23		1
Total
U.S. credit card	$	556	$	31	$	749	$	43	$	1,148	$	71
Non-U.S. credit card	111		3		145		4		210		6
Direct/Indirect consumer	30		1		73		3		207		9
Other consumer	—		—		—		—		56		3


⁽¹⁾	Includes accrued interest and fees.


⁽²⁾	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 provides information on the Corporation’s primary modification programs for the Credit Card and Other Consumer TDR portfolio at December 31, 2016 and 2015.




Credit Card and Other Consumer – TDRs by Program Type

	December 31
	Internal Programs				External Programs				Other ⁽¹⁾				Total				Percent of Balances Current or Less Than 30 Days Past Due
(Dollars in millions)	2016		2015		2016		2015		2016		2015		2016		2015		2016		2015
U.S. credit card	$	220	$	313	$	264	$	296	$	1	$	2	$	485	$	611	88.99	%	88.74	%
Non-U.S. credit card	11		21		7		10		82		95		100		126		38.47		44.25
Direct/Indirect consumer	2		11		1		7		22		24		25		42		90.49		89.12
Total TDRs by program type	$	233	$	345	$	272	$	313	$	105	$	121	$	610	$	779	80.79		81.55


⁽¹⁾	Other TDRs for non-U.S. credit card include modifications of accounts that are ineligible for a fixed payment plan.



		Bank of America 2016153

The table below provides information on the Corporation’s Credit Card and Other Consumer TDR portfolio including the December 31, 2016, 2015 and 2014 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of loans that were modified in TDRs during 2016, 2015 and 2014, and net charge-offs recorded during the period in which the modification occurred.




Credit Card and Other Consumer – TDRs Entered into During 2016, 2015 and 2014

	December 31, 2016								2016
(Dollars in millions)	Unpaid Principal Balance		Carrying Value ⁽¹⁾		Pre-Modification Interest Rate		Post-Modification Interest Rate		Net Charge-offs
U.S. credit card	$	163	$	172	17.54	%	5.47	%	$	15
Non-U.S. credit card	66		75		23.99		0.52		50
Direct/Indirect consumer	21		13		3.44		3.29		9
Total	$	250	$	260	18.73		3.93		$	74

	December 31, 2015								2015
U.S. credit card	$	205	$	218	17.07	%	5.08	%	$	26
Non-U.S. credit card	74		86		24.05		0.53		63
Direct/Indirect consumer	19		12		5.95		5.19		9
Total	$	298	$	316	18.58		3.84		$	98

	December 31, 2014								2014
U.S. credit card	$	276	$	301	16.64	%	5.15	%	$	37
Non-U.S. credit card	91		106		24.90		0.68		91
Direct/Indirect consumer	27		19		8.66		4.90		14
Total	$	394	$	426	18.32		4.03		$	142


⁽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 13 percent of new U.S. credit card TDRs, 90 percent of new non-U.S. credit card TDRs and 14 percent of new direct/indirect consumer TDRs may be in payment default within 12 months after modification. Loans that entered into payment default during 2016, 2015 and 2014 that had been modified in a TDR during the preceding 12 months were $30 million, $43 million and $56 million for U.S. credit card, $127 million, $152 million and $200 million for non-U.S. credit card, and $2 million, $3 million and $5 million for direct/indirect consumer.

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 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.

At December 31, 2016 and 2015, remaining commitments to lend additional funds to debtors whose terms have been modified in a commercial loan TDR were $461 million and $187 million. Commercial foreclosed properties totaled $14 million and $15 million at December 31, 2016 and 2015.



154 Bank of America 2016

The table below provides the unpaid principal balance, carrying value and related allowance at December 31, 2016 and 2015, and the average carrying value and interest income recognized for 2016, 2015 and 2014 for impaired loans in the Corporation’s Commercial loan portfolio segment. Certain impaired commercial loans do not have a related allowance as the valuation of these impaired loans exceeded the carrying value, which is net of previously recorded charge-offs.




Impaired Loans – Commercial

	December 31, 2016						December 31, 2015
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Related Allowance		Unpaid Principal Balance		Carrying Value		Related Allowance
With no recorded allowance
U.S. commercial	$	860	$	827	$	—	$	566	$	541	$	—
Commercial real estate	77		71		—		82		77		—
Non-U.S. commercial	130		130		—		4		4		—
With an allowance recorded
U.S. commercial	$	2,018	$	1,569	$	132	$	1,350	$	1,157	$	115
Commercial real estate	243		96		10		328		107		11
Commercial lease financing	6		4		—		—		—		—
Non-U.S. commercial	545		432		104		531		381		56
U.S. small business commercial ⁽¹⁾	85		73		27		105		101		35
Total
U.S. commercial	$	2,878	$	2,396	$	132	$	1,916	$	1,698	$	115
Commercial real estate	320		167		10		410		184		11
Commercial lease financing	6		4		—		—		—		—
Non-U.S. commercial	675		562		104		535		385		56
U.S. small business commercial ⁽¹⁾	85		73		27		105		101		35

	2016				2015				2014
	Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾
With no recorded allowance
U.S. commercial	$	787	$	14	$	688	$	14	$	546	$	12
Commercial real estate	67		—		75		1		166		3
Non-U.S. commercial	34		1		29		1		15		—
With an allowance recorded
U.S. commercial	$	1,569	$	59	$	953	$	48	$	1,198	$	51
Commercial real estate	92		4		216		7		632		16
Commercial lease financing	2		—		—		—		—		—
Non-U.S. commercial	409		14		125		7		52		3
U.S. small business commercial ⁽¹⁾	87		1		109		1		151		3
Total
U.S. commercial	$	2,356	$	73	$	1,641	$	62	$	1,744	$	63
Commercial real estate	159		4		291		8		798		19
Commercial lease financing	2		—		—		—		—		—
Non-U.S. commercial	443		15		154		8		67		3
U.S. small business commercial ⁽¹⁾	87		1		109		1		151		3


⁽¹⁾	Includes U.S. small business commercial renegotiated TDR loans and related allowance.


⁽²⁾	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.



		Bank of America 2016155

The table below presents the December 31, 2016, 2015 and 2014 unpaid principal balance and carrying value of commercial loans that were modified as TDRs during 2016, 2015 and 2014, and net charge-offs that were recorded during the period in which the modification occurred. The table below includes 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.




Commercial – TDRs Entered into During 2016, 2015 and 2014

	December 31, 2016				2016
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Net Charge-offs
U.S. commercial	$	1,556	$	1,482	$	86
Commercial real estate	77		77		1
Commercial lease financing	6		4		2
Non-U.S. commercial	255		253		48
U.S. small business commercial ⁽¹⁾	1		1		—
Total	$	1,895	$	1,817	$	137

	December 31, 2015				2015
U.S. commercial	$	853	$	779	$	28
Commercial real estate	42		42		—
Non-U.S. commercial	329		326		—
U.S. small business commercial ⁽¹⁾	14		11		3
Total	$	1,238	$	1,158	$	31

	December 31, 2014				2014
U.S. commercial	$	818	$	785	$	49
Commercial real estate	346		346		8
Non-U.S. commercial	44		43		—
U.S. small business commercial ⁽¹⁾	3		3		—
Total	$	1,211	$	1,177	$	57


⁽¹⁾	U.S. small business commercial TDRs are comprised of renegotiated small business card loans.

A commercial TDR is generally deemed to be in payment default when the loan is 90 days or more past due, including delinquencies that were not resolved as part of the modification. U.S. small business commercial TDRs 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, along with observable market prices or fair value of collateral when measuring the allowance for loan and lease losses. TDRs that were in payment default had a carrying value of $140 million, $105 million and $103 million for U.S. commercial and $34 million, $25 million and $211 million for commercial real estate at December 31, 2016, 2015 and 2014, respectively.

Purchased Credit-impaired Loans

The table below shows activity for the accretable yield on PCI loans, which include the Countrywide Financial Corporation (Countrywide) portfolio and loans repurchased in connection with the 2013 settlement with FNMA. The amount of accretable yield is affected by changes in credit outlooks, including metrics such as default rates and loss severities, prepayment speeds, which can change the amount and period of time over which interest payments are expected to be received, and the interest rates on variable rate loans. The reclassifications from nonaccretable difference during ~~2015~~2016 and ~~2014~~2015 were primarily due to lower expected loss rates and a decrease in the forecasted prepayment speeds. Changes in the prepayment assumption affect the expected remaining life of the portfolio which results in a change to the amount of future interest cash flows.



Rollforward of Accretable Yield

(Dollars in millions)
Accretable yield, January 1, 2014	$	6,694
Accretion	(1,061		)
Disposals/transfers	(506		)
Reclassifications from nonaccretable difference	481
Accretable yield, December 31, 2014	5,608
Accretable yield, January 1, 2015				$	5,608
Accretion	(861		)	(861		)
Disposals/transfers	(465		)	(465		)
Reclassifications from nonaccretable difference	287			287
Accretable yield, December 31, 2015	$	4,569		4,569
Accretion				(722		)
Disposals/transfers				(486		)
Reclassifications from nonaccretable difference				444
Accretable yield, December 31, 2016				$	3,805

During ~~2015~~,2016, the Corporation sold PCI loans with a carrying value of ~~$1.4 billion,~~$549 million, which excludes the related allowance of ~~$234~~$60 million. For more information on PCI loans, see Note 1 – Summary of Significant Accounting Principles, and for the carrying value and valuation allowance for PCI loans, see Note 5 – Allowance for Credit Losses.

Loans Held-for-sale

The Corporation had LHFS of $~~7.5~~9.1 billion and $~~12.8~~7.5 billion at December 31, ~~2015~~2016 and ~~2014~~2015. Cash and non-cash proceeds from sales and paydowns of loans originally classified as LHFS were $~~41.2~~32.6 billion, $~~40.1~~41.2 billion and $~~81.0~~40.1 billion for ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014, respectively. Cash used for originations and purchases of LHFS totaled ~~$38.7~~$33.1 billion, ~~$40.1~~$37.9 billion and ~~$65.7~~$39.4 billion for ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014, respectively.



~~178~~156 Bank of America ~~2015~~2016

NOTE 5 Allowance for Credit Losses

The table below summarizes the changes in the allowance for credit losses by portfolio segment for ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014.



	2015												2016
(Dollars in millions)	Consumer Real Estate			Credit Card and Other Consumer			Commercial			Total Allowance			Consumer Real Estate			Credit Card and Other Consumer			Commercial			Total Allowance
Allowance for loan and lease losses, January 1	$	5,935		$	4,047		$	4,437		$	14,419		$	3,914		$	3,471		$	4,849		$	12,234
Loans and leases charged off	(1,841		)	(3,620		)	(644		)	(6,105		)	(1,155		)	(3,553		)	(740		)	(5,448		)
Recoveries of loans and leases previously charged off	732			813			222			1,767			619			770			238			1,627
Net charge-offs	(1,109		)	(2,807		)	(422		)	(4,338		)	(536		)	(2,783		)	(502		)	(3,821		)
Write-offs of PCI loans	(808		)	—			—			(808		)	(340		)	—			—			(340		)
Provision for loan and lease losses	(70		)	2,278			835			3,043			(258		)	2,826			1,013			3,581
Other ⁽¹⁾	(34		)	(47		)	(1		)	(82		)	(30		)	(42		)	(102		)	(174		)
Allowance for loan and lease losses, December 31	3,914			3,471			4,849			12,234			2,750			3,472			5,258			11,480
Less: Allowance included in assets of business held for sale ⁽²⁾													—			(243		)	—			(243		)
Total allowance for loan and lease losses, December 31													2,750			3,229			5,258			11,237
Reserve for unfunded lending commitments, January 1	—			—			528			528			—			—			646			646
Provision for unfunded lending commitments	—			—			118			118			—			—			16			16
Other ⁽¹⁾													—			—			100			100
Reserve for unfunded lending commitments, December 31	—			—			646			646			—			—			762			762
Allowance for credit losses, December 31	$	3,914		$	3,471		$	5,495		$	12,880		$	2,750		$	3,229		$	6,020		$	11,999


	2014												2015
Allowance for loan and lease losses, January 1	$	8,518		$	4,905		$	4,005		$	17,428		$	5,935		$	4,047		$	4,437		$	14,419
Loans and leases charged off	(2,219		)	(4,149		)	(658		)	(7,026		)	(1,841		)	(3,620		)	(644		)	(6,105		)
Recoveries of loans and leases previously charged off	1,426			871			346			2,643			732			813			222			1,767
Net charge-offs	(793		)	(3,278		)	(312		)	(4,383		)	(1,109		)	(2,807		)	(422		)	(4,338		)
Write-offs of PCI loans	(810		)	—			—			(810		)	(808		)	—			—			(808		)
Provision for loan and lease losses	(976		)	2,458			749			2,231			(70		)	2,278			835			3,043
Other ⁽¹⁾	(4		)	(38		)	(5		)	(47		)	(34		)	(47		)	(1		)	(82		)
Allowance for loan and lease losses, December 31	5,935			4,047			4,437			14,419			3,914			3,471			4,849			12,234
Reserve for unfunded lending commitments, January 1	—			—			484			484			—			—			528			528
Provision for unfunded lending commitments	—			—			44			44			—			—			118			118
Reserve for unfunded lending commitments, December 31	—			—			528			528			—			—			646			646
Allowance for credit losses, December 31	$	5,935		$	4,047		$	4,965		$	14,947		$	3,914		$	3,471		$	5,495		$	12,880


	2013												2014
Allowance for loan and lease losses, January 1	$	14,933		$	6,140		$	3,106		$	24,179		$	8,518		$	4,905		$	4,005		$	17,428
Loans and leases charged off	(3,766		)	(5,495		)	(1,108		)	(10,369		)	(2,219		)	(4,149		)	(658		)	(7,026		)
Recoveries of loans and leases previously charged off	879			1,141			452			2,472			1,426			871			346			2,643
Net charge-offs	(2,887		)	(4,354		)	(656		)	(7,897		)	(793		)	(3,278		)	(312		)	(4,383		)
Write-offs of PCI loans	(2,336		)	—			—			(2,336		)	(810		)	—			—			(810		)
Provision for loan and lease losses	(1,124		)	3,139			1,559			3,574			(976		)	2,458			749			2,231
Other ⁽¹⁾	(68		)	(20		)	(4		)	(92		)	(4		)	(38		)	(5		)	(47		)
Allowance for loan and lease losses, December 31	8,518			4,905			4,005			17,428			5,935			4,047			4,437			14,419
Reserve for unfunded lending commitments, January 1	—			—			513			513			—			—			484			484
Provision for unfunded lending commitments	—			—			(18		)	(18		)	—			—			44			44
Other	—			—			(11		)	(11		)
Reserve for unfunded lending commitments, December 31	—			—			484			484			—			—			528			528
Allowance for credit losses, December 31	$	8,518		$	4,905		$	4,489		$	17,912		$	5,935		$	4,047		$	4,965		$	14,947


⁽¹⁾	Primarily represents the net impact of portfolio sales, consolidations and deconsolidations, ~~and~~ foreign currency translation ~~adjustments.~~adjustments and certain other reclassifications.


⁽²⁾	Represents allowance for loan and lease losses related to the non-U.S. credit card loan portfolio, which is included in assets of business held for sale on the Consolidated Balance Sheet at December 31, 2016.

In 2016, 2015 ~~2014~~ and ~~2013,~~2014, for the PCI loan portfolio, the Corporation recorded a provision benefit of $45 million, $40 million ~~$31 million~~ and ~~$707~~$31 million, respectively. Write-offs in the PCI loan portfolio totaled $340 million, $808 million and $810 million during 2016, 2015 and ~~$2.3 billion during~~ ~~2015~~, 2014, ~~and~~ ~~2013~~, respectively. Write-offs included ~~$234~~$60 million, ~~$317~~

$234 million and ~~$414~~$317 million associated with the sale of PCI loans during 2016, 2015 and 2014, ~~and 2013,~~ respectively. ~~Write-offs in~~

2013 also included certain PCI loans that were ineligible for the National Mortgage Settlement, but had characteristics similar to the eligible loans, and the expectation of future cash proceeds was considered remote. The valuation allowance associated with the PCI loan portfolio was ~~$804~~$419 million,, ~~$1.7~~ $804 million and $1.7 billion ~~and~~ ~~$2.5 billion~~ at December 31, 2016, 2015, ~~2014~~ and ~~2013~~,2014, respectively.



		Bank of America ~~2015~~2016 ~~179~~157

The table below presents the allowance and the carrying value of outstanding loans and leases by portfolio segment at December 31, ~~2015~~2016 and ~~2014~~2015.



Allowance and Carrying Value by Portfolio Segment

	December 31, 2015												December 31, 2016
(Dollars in millions)	Consumer Real Estate			Credit Card and Other Consumer			Commercial			Total			Consumer Real Estate			Credit Card and Other Consumer			Commercial			Total
Impaired loans and troubled debt restructurings ⁽¹⁾
Allowance for loan and lease losses ⁽²⁾	$	634		$	250		$	217		$	1,101		$	356		$	189		$	273		$	818
Carrying value ⁽³⁾	21,058			779			2,368			24,205			15,408			610			3,202			19,220
Allowance as a percentage of carrying value	3.01		%	32.09		%	9.16		%	4.55		%	2.31		%	30.98		%	8.53		%	4.26		%
Loans collectively evaluated for impairment
Allowance for loan and lease losses	$	2,476		$	3,221		$	4,632		$	10,329		$	1,975		$	3,283		$	4,985		$	10,243
Carrying value ^{(3, 4)}	226,116			189,660			439,397			855,173			229,094			197,470			449,290			875,854
Allowance as a percentage of carrying value ⁽⁴⁾	1.10		%	1.70		%	1.05		%	1.21		%	0.86		%	1.66		%	1.11		%	1.17		%
Purchased credit-impaired loans
Valuation allowance	$	804		n/a			n/a			$	804		$	419		n/a			n/a			$	419
Carrying value gross of valuation allowance	16,685			n/a			n/a			16,685			13,738			n/a			n/a			13,738
Valuation allowance as a percentage of carrying value	4.82		%	n/a			n/a			4.82		%	3.05		%	n/a			n/a			3.05		%
Less: Assets of business held for sale ⁽⁵⁾
Allowance for loan and lease losses(6)													n/a			$	(243	)	n/a			$	(243	)
Carrying value ⁽³⁾													n/a			(9,214		)	n/a			(9,214		)
Total
Allowance for loan and lease losses(6)	$	3,914		$	3,471		$	4,849		$	12,234
Total allowance for loan and lease losses													$	2,750		$	3,229		$	5,258		$	11,237
Carrying value ^{(3, 4)}	263,859			190,439			441,765			896,063			258,240			188,866			452,492			899,598
Allowance as a percentage of carrying value ⁽⁴⁾	1.48		%	1.82		%	1.10		%	1.37		%
Total allowance as a percentage of carrying value ⁽⁴⁾													1.06		%	1.71		%	1.16		%	1.25		%


	December 31, 2014												December 31, 2015
Impaired loans and troubled debt restructurings ⁽¹⁾
Allowance for loan and lease losses ⁽²⁾	$	727		$	339		$	159		$	1,225		$	634		$	250		$	217		$	1,101
Carrying value ⁽³⁾	25,628			1,141			2,198			28,967			21,058			779			2,368			24,205
Allowance as a percentage of carrying value	2.84		%	29.71		%	7.23		%	4.23		%	3.01		%	32.09		%	9.16		%	4.55		%
Loans collectively evaluated for impairment
Allowance for loan and lease losses	$	3,556		$	3,708		$	4,278		$	11,542		$	2,476		$	3,221		$	4,632		$	10,329
Carrying value ^{(3, 4)}	255,525			183,430			384,019			822,974			226,116			189,660			433,379			849,155
Allowance as a percentage of carrying value ⁽⁴⁾	1.39		%	2.02		%	1.11		%	1.40		%	1.10		%	1.70		%	1.07		%	1.22		%
Purchased credit-impaired loans
Valuation allowance	$	1,652		n/a			n/a			$	1,652		$	804		n/a			n/a			$	804
Carrying value gross of valuation allowance	20,769			n/a			n/a			20,769			16,685			n/a			n/a			16,685
Valuation allowance as a percentage of carrying value	7.95		%	n/a			n/a			7.95		%	4.82		%	n/a			n/a			4.82		%
Total
Allowance for loan and lease losses	$	5,935		$	4,047		$	4,437		$	14,419		$	3,914		$	3,471		$	4,849		$	12,234
Carrying value ^{(3, 4)}	301,922			184,571			386,217			872,710			263,859			190,439			435,747			890,045
Allowance as a percentage of carrying value ⁽⁴⁾	1.97		%	2.19		%	1.15		%	1.65		%	1.48		%	1.82		%	1.11		%	1.37		%


⁽¹⁾	Impaired loans include nonperforming commercial loans and 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⁾	Allowance for loan and lease losses includes $27 million and $35 million related to impaired U.S. small business commercial at ~~both~~ December 31, ~~2015~~2016 and ~~2014~~2015.


⁽³⁾	Amounts are presented gross of the allowance for loan and lease losses.


⁽⁴⁾	Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of $~~6.9~~7.1 billion and $~~8.7~~6.9 billion at December 31, ~~2015~~2016 and ~~2014~~2015.


⁽⁵⁾	Represents allowance for loan and lease losses and loans related to the non-U.S. credit card portfolio, which is included in assets of business held for sale on the Consolidated Balance Sheet at December 31, 2016.


⁽⁶⁾	Includes $61 million of allowance for loan and lease losses related to impaired loans and TDRs and $182 million related to loans collectively evaluated for impairment.

n/a = not applicable



~~180~~158 Bank of America ~~2015~~2016

NOTE 6 Securitizations and Other Variable Interest Entities

The Corporation utilizes ~~variable interest entities (VIEs)~~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 utilization 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, ~~2015~~2016 and ~~2014~~2015, 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, ~~2015~~2016 and ~~2014~~2015, 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 arrangements. The Corporation’s maximum loss exposure does not include losses previously recognized through write-downs of assets. As a result of new accounting guidance, which was effective on January 1, 2016, the Corporation identified certain limited partnerships and similar entities that are now considered to be VIEs and are included in the unconsolidated VIE tables in this Note at December 31, 2016. The Corporation had a maximum loss exposure of $6.1 billion related to these VIEs, which had total assets of $16.7 billion.

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 to hold collateral. These securities and loans are

included in Note 3 – Securities or Note 4 – Outstanding Loans and Leases. In addition, the Corporation uses VIEs such as trust preferred securities trusts in connection with its funding activities. For additional information, see Note 11 – Long-term Debt. The Corporation uses VIEs, such as ~~cash~~common trust funds managed within Global Wealth & Investment Management ~~(GWIM)~~(GWIM), to provide investment opportunities for clients. These VIEs, which are generally not consolidated by the Corporation, as applicable, are not included in the tables in this Note.

Except as described below, the Corporation did not provide financial support to consolidated or unconsolidated VIEs during ~~2015~~2016 or ~~2014~~2015 that it was not previously contractually required to provide, nor does it intend to do so.

First-lien Mortgage Securitizations

First-lien Mortgages

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 government-sponsored enterprises, FNMA and FHLMC (collectively the GSEs), or Government National Mortgage Association (GNMA) primarily in the case of FHA-insured and U.S. Department of Veterans Affairs (VA)-guaranteed mortgage 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 or purchases from other entities. The Corporation typically services the loans it securitizes. Further, the Corporation may retain beneficial interests in the securitization trusts including senior and subordinate securities and equity tranches issued by the trusts. Except as described below and in Note 7 – Representations and Warranties Obligations and Corporate Guarantees, the Corporation does not provide guarantees or recourse to the securitization trusts other than standard representations and warranties.

The table below summarizes select information related to first-lien mortgage securitizations for 2016, 2015 and ~~2014~~.2014.



First-lien Mortgage Securitizations	First-lien Mortgage Securitizations												First-lien Mortgage Securitizations

	Residential Mortgage												Residential Mortgage
	Agency				Non-agency - Subprime				Commercial Mortgage				Agency						Non-agency - Subprime						Commercial Mortgage
(Dollars in millions)	2015		2014		2015		2014		2015		2014		2016		2015		2014		2016		2015		2014		2016		2015		2014
Cash proceeds from new securitizations⁽¹⁾	$	27,164	$	36,905	$	—	$	809	$	7,945	$	5,710	$	24,201	$	27,164	$	36,905	$	—	$	—	$	809	$	3,887	$	7,945	$	5,710
Gain on securitizations ⁽²⁾	894		371		—		49		49		68		370		894		371		—		—		49		38		49		68
Repurchases from securitization trusts ⁽³⁾													3,611		3,716		5,155		—		—		—		—		—		—


⁽¹⁾	The Corporation transfers residential mortgage loans to securitizations sponsored by the GSEs or GNMA in the normal course of business and receives RMBS in exchange which may then be sold into the market to third-party investors for cash proceeds.


⁽²⁾	A majority of the first-lien residential and commercial 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 $487 million, $750 million and $715 million, net of hedges, during2016, 2015 and 2014, 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. The majority of repurchased loans are FHA-insured mortgages collateralizing GNMA securities.

In addition to cash proceeds as reported in the table above, the Corporation received securities with an initial fair value of $4.2 billion, $22.3 billion and ~~$5.4~~$5.4 billion in connection with first-lien mortgage securitizations in 2016, 2015 and ~~2014~~.2014. The receipt of these securities represents non-cash operating and investing activities and, accordingly, is not reflected on the Consolidated Statement of Cash Flows. All of these securities were initially

classified as Level 2 assets within the fair value hierarchy. During 2016, 2015 and 2014 there were no changes to the initial classification.

The Corporation recognizes consumer MSRs from the sale or securitization of first-lien mortgage loans. Servicing fee and ancillary fee income on consumer mortgage loans serviced,

including securitizations where the Corporation has continuing ~~involvement, were~~ ~~$1.4 billion~~ ~~and~~ ~~$1.8 billion~~ in ~~2015~~ ~~and~~ ~~2014. Servicing advances on consumer mortgage loans, including securitizations where the Corporation has continuing involvement, were~~ ~~$7.8 billion~~ ~~and~~ ~~$10.4 billion~~ at ~~December 31, 2015~~ ~~and~~ ~~2014. 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. During~~ ~~2015~~ ~~and~~ ~~2014~~, ~~$3.7 billion~~ ~~and~~ ~~$5.2 billion~~ of loans were repurchased from first-lien securitization trusts primarily as a result of loan delinquencies or to perform modifications. The majority of these loans repurchased were FHA-insured mortgages collateralizing



		Bank of America ~~2015~~2016 ~~181~~159

~~GNMA securities.~~involvement, were $1.1 billion, $1.4 billion and $1.8 billion in 2016, 2015 and 2014. Servicing advances on consumer mortgage loans, including securitizations where the Corporation has continuing involvement, were $6.2 billion and $7.8 billion at December 31, 2016 and 2015. For more information on MSRs, see Note 23 – Mortgage Servicing Rights.

During 2016 and 2015, the Corporation deconsolidated ~~agency~~ residential mortgage securitization vehicles with total assets of $3.8 billion and $4.5 billion, and total liabilities of $628 million and $0 following the sale of retained interests or MSRs to third parties, after which the Corporation no longer had a controlling

financial interest through the unilateral ability to

liquidate the ~~vehicles.~~vehicles or as a servicer of the loans. Of the balances deconsolidated in 2016, $706 million of assets and $628 million of liabilities represent non-cash investing and financing activities and, accordingly, are not reflected on the Consolidated Statement of Cash Flows. Gains on sale of $125 million and $287 million related to the deconsolidations were recorded in other income in the Consolidated Statement of Income.

The table below summarizes select information related to first-lien mortgage securitization trusts in which the Corporation held a variable interest at December 31, ~~2015~~2016 and ~~2014~~2015.



First-lien Mortgage VIEs	First-lien Mortgage VIEs																					First-lien Mortgage VIEs

	Residential Mortgage																					Residential Mortgage
						Non-agency																				Non-agency
	Agency					Prime				Subprime				Alt-A				Commercial Mortgage				Agency				Prime				Subprime				Alt-A				Commercial Mortgage
	December 31					December 31												December 31				December 31
(Dollars in millions)	2015		2014			2015		2014		2015		2014		2015		2014		2015		2014		2016		2015		2016		2015		2016		2015		2016		2015		2016		2015
Unconsolidated VIEs
Maximum loss exposure ⁽¹⁾	$	28,188	$	14,918		$	1,027	$	1,288	$	2,905	$	3,167	$	622	$	710	$	326	$	352	$	22,661	$	28,192	$	757	$	1,027	$	2,750	$	2,905	$	560	$	622	$	344	$	326
On-balance sheet assets
Senior securities held ⁽²⁾:
Trading account assets	$	1,297	$	584		$	42	$	3	$	94	$	14	$	99	$	81	$	59	$	54	$	1,399	$	1,297	$	20	$	42	$	112	$	94	$	118	$	99	$	51	$	59
Debt securities carried at fair value	24,369		13,473			613		816		2,479		2,811		340		383		—		76		17,620		24,369		441		613		2,235		2,479		305		340		—		—
Held-to-maturity securities	2,507		837			—		—		—		—		—		—		37		42		3,630		2,511		—		—		—		—		—		—		64		37
Subordinate securities held ⁽²⁾:
Trading account assets	—		—			1		—		37		—		2		1		22		58		—		—		1		1		23		37		1		2		14		22
Debt securities carried at fair value	—		—			12		12		3		5		28		—		54		58		—		—		8		12		2		3		23		28		54		54
Held-to-maturity securities	—		—			—		—		—		—		—		—		13		15		—		—		—		—		—		—		—		—		13		13
Residual interests held	—		—			—		10		—		—		—		—		48		22		—		—		—		—		—		—		—		—		25		48
All other assets ⁽³⁾	15		24			40		56		—		1		153		245		—		—		12		15		28		40		—		—		113		153		—		—
Total retained positions	$	28,188	$	14,918		$	708	$	897	$	2,613	$	2,831	$	622	$	710	$	233	$	325	$	22,661	$	28,192	$	498	$	708	$	2,372	$	2,613	$	560	$	622	$	221	$	233
Principal balance outstanding ⁽⁴⁾	$	313,613	$	397,055		$	16,087	$	20,167	$	27,854	$	32,592	$	40,848	$	50,054	$	34,243	$	20,593	$	265,332	$	313,613	$	16,280	$	20,366	$	19,373	$	27,854	$	35,788	$	44,055	$	23,826	$	34,243

Consolidated VIEs
Maximum loss exposure ⁽¹⁾	$	26,878	$	38,345		$	65	$	77	$	232	$	206	$	—	$	—	$	—	$	—	$	18,084	$	26,878	$	—	$	65	$	—	$	232	$	25	$	—	$	—	$	—
On-balance sheet assets
Trading account assets	$	1,101	$	1,538		$	—	$	—	$	188	$	30	$	—	$	—	$	—	$	—	$	434	$	1,101	$	—	$	—	$	—	$	188	$	99	$	—	$	—	$	—
Loans and leases	25,328		36,187			111		130		675		768		—		—		—		—		17,223		25,328		—		111		—		675		—		—		—		—
Allowance for loan and lease losses	—		(2		)	—		—		—		—		—		—		—		—
All other assets	449		623			—		6		54		15		—		—		—		—		427		449		—		—		—		54		—		—		—		—
Total assets	$	26,878	$	38,346		$	111	$	136	$	917	$	813	$	—	$	—	$	—	$	—	$	18,084	$	26,878	$	—	$	111	$	—	$	917	$	99	$	—	$	—	$	—
On-balance sheet liabilities
Long-term debt	$	—	$	1		$	46	$	56	$	840	$	770	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	46	$	—	$	840	$	74	$	—	$	—	$	—
All other liabilities	1		—			—		3		—		13		—		—		—		—		4		1		—		—		—		—		—		—		—		—
Total liabilities	$	1	$	1		$	46	$	59	$	840	$	783	$	—	$	—	$	—	$	—	$	4	$	1	$	—	$	46	$	—	$	840	$	74	$	—	$	—	$	—

⁽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 liability for representations and warranties obligations and corporate guarantees and also excludes servicing advances and other servicing rights and obligations. For additional information, see Note 7 – Representations and Warranties Obligations and Corporate Guarantees and Note 23 – Mortgage Servicing ~~Rights~~.Rights.


⁽²⁾	As a holder of these securities, the Corporation receives scheduled principal and interest payments. During ~~2015~~2016 and ~~2014~~2015, ~~there were~~the Corporation recognized no$7 million ~~OTTI~~and $34 million of credit-related impairment losses ~~recorded~~in earnings on those securities classified as AFS debt securities and none on HTM securities.

⁽³⁾

Not included in the table above are all other assets of $~~222~~189 million and $~~635~~222 million, representing the unpaid principal balance of mortgage loans eligible for repurchase from unconsolidated residential mortgage securitization vehicles, principally guaranteed by GNMA, and all other liabilities of $~~222~~189 million and $~~635~~222 million, representing the principal amount that would be payable to the securitization vehicles if the Corporation was to exercise the repurchase option, at December 31, ~~2015~~2016 and ~~2014~~2015.


⁽⁴⁾	Principal balance outstanding includes loans the Corporation transferred with which it has continuing involvement, which may include servicing the loans.



~~182~~160 Bank of America ~~2015~~2016

Other Asset-backed Securitizations

The table below summarizes select information related to home equity loan, credit card and other asset-backed VIEs in which the Corporation held a variable interest at December 31, ~~2015~~2016 and ~~2014.~~2015.



Home Equity Loan, Credit Card and Other Asset-backed VIEs	Home Equity Loan, Credit Card and Other Asset-backed VIEs																								Home Equity Loan, Credit Card and Other Asset-backed VIEs

	Home Equity Loan ⁽¹⁾						Credit Card ^{(2, 3)}						Resecuritization Trusts				Municipal Bond Trusts				Automobile and Other Securitization Trusts				Home Equity Loan ⁽¹⁾						Credit Card ^{(2, 3)}						Resecuritization Trusts				Municipal Bond Trusts				Automobile and Other Securitization Trusts
	December 31																								December 31
(Dollars in millions)	2015			2014			2015			2014			2015		2014		2015		2014		2015		2014		2016			2015			2016			2015			2016		2015		2016		2015		2016		2015
Unconsolidated VIEs
Maximum loss exposure	$	3,988		$	4,801		$	—		$	—		$	13,043	$	8,569	$	1,572	$	2,100	$	63	$	77	$	2,732		$	3,988		$	—		$	—		$	9,906	$	13,046	$	1,635	$	1,572	$	47	$	63
On-balance sheet assets
Senior securities held ^{(4, 5)}:
Trading account assets	$	—		$	12		$	—		$	—		$	1,248	$	767	$	2	$	25	$	—	$	6	$	—		$	—		$	—		$	—		$	902	$	1,248	$	—	$	2	$	—	$	—
Debt securities carried at fair value	—			—			—			—			4,341		6,945		—		—		53		61		46			57			—			—			2,338		4,341		—		—		47		53
Held-to-maturity securities	—			—			—			—			7,367		740		—		—		—		—		—			—			—			—			6,569		7,370		—		—		—		—
Subordinate securities held ^{(4, 5)}:
Trading account assets	—			2			—			—			17		44		—		—		—		—		—			—			—			—			27		17		—		—		—		—
Debt securities carried at fair value	57			39			—			—			70		73		—		—		—		—		—			—			—			—			70		70		—		—		—		—
All other assets	—			—			—			—			—		—		—		—		10		10		—			—			—			—			—		—		—		—		—		10
Total retained positions	$	57		$	53		$	—		$	—		$	13,043	$	8,569	$	2	$	25	$	63	$	77	$	46		$	57		$	—		$	—		$	9,906	$	13,046	$	—	$	2	$	47	$	63
Total assets of VIEs ⁽⁶⁾	$	5,883		$	6,362		$	—		$	—		$	35,362	$	28,065	$	2,518	$	3,314	$	314	$	1,276	$	4,274		$	5,883		$	—		$	—		$	22,155	$	35,362	$	2,406	$	2,518	$	174	$	314

Consolidated VIEs
Maximum loss exposure	$	231		$	991		$	32,678		$	43,139		$	354	$	654	$	1,973	$	2,440	$	—	$	92	$	149		$	231		$	25,859		$	32,678		$	420	$	354	$	1,442	$	1,973	$	—	$	—
On-balance sheet assets
Trading account assets	$	—		$	—		$	—		$	—		$	771	$	1,295	$	1,984	$	2,452	$	—	$	—	$	—		$	—		$	—		$	—		$	1,428	$	771	$	1,454	$	1,984	$	—	$	—
Loans and leases	321			1,014			43,194			53,068			—		—		—		—		—		—		244			321			35,135			43,194			—		—		—		—		—		—
Allowance for loan and lease losses	(18		)	(56		)	(1,293		)	(1,904		)	—		—		—		—		—		—		(16		)	(18		)	(1,007		)	(1,293		)	—		—		—		—		—		—
Loans held-for-sale	—			—			—			—			—		—		—		—		—		555
All other assets	20			33			342			392			—		—		1		—		—		54		7			20			793			342			—		—		—		1		—		—
Total assets	$	323		$	991		$	42,243		$	51,556		$	771	$	1,295	$	1,985	$	2,452	$	—	$	609	$	235		$	323		$	34,921		$	42,243		$	1,428	$	771	$	1,454	$	1,985	$	—	$	—
On-balance sheet liabilities
Short-term borrowings	$	—		$	—		$	—		$	—		$	—	$	—	$	681	$	1,032	$	—	$	—	$	—		$	—		$	—		$	—		$	—	$	—	$	348	$	681	$	—	$	—
Long-term debt	183			1,076			9,550			8,401			417		641		12		12		—		516		108			183			9,049			9,550			1,008		417		12		12		—		—
All other liabilities	—			—			15			16			—		—		—		—		—		1		—			—			13			15			—		—		—		—		—		—
Total liabilities	$	183		$	1,076		$	9,565		$	8,417		$	417	$	641	$	693	$	1,044	$	—	$	517	$	108		$	183		$	9,062		$	9,565		$	1,008	$	417	$	360	$	693	$	—	$	—

⁽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 liability for representations and warranties obligations and corporate guarantees. For additional information, see Note 7 – Representations and Warranties Obligations and Corporate Guarantees.


⁽²⁾	At December 31, ~~2015~~2016 and ~~2014~~2015, loans and leases in the consolidated credit card trust included $~~24.7~~17.6 billion and $~~36.9~~24.7 billion of seller’s interest.


⁽³⁾	At December 31, ~~2015~~2016 and ~~2014~~2015, all other assets in the consolidated credit card trust included restricted cash, certain short-term investments, and unbilled accrued interest and fees.


⁽⁴⁾	As a holder of these securities, the Corporation receives scheduled principal and interest payments. During ~~2015~~2016 and ~~2014~~2015, ~~there were~~the Corporation recognized no$2 million ~~OTTI~~and $5 million of credit-related impairment losses ~~recorded~~in earnings on those securities classified as AFS ordebt securities and none on HTM ~~debt~~ securities.


⁽⁵⁾	The retained senior and subordinate securities were valued using quoted market prices or observable market inputs (Level 2 of the fair value hierarchy).


⁽⁶⁾	Total assets include loans the Corporation transferred with which itthe Corporation has continuing involvement, which may include servicing the loan.



		~~Bank of America 2015183~~

Home Equity Loans

The Corporation retains interests in home equity securitization trusts to which it transferred home equity loans. These retained interests include senior and subordinate securities and residual interests. In addition, the Corporation may be obligated to provide subordinate funding to the trusts during a rapid amortization event. The Corporation typically services the loans in the trusts. Except as described below and in Note 7 – Representations and Warranties Obligations and Corporate Guarantees, the Corporation does not provide guarantees or recourse to the securitization trusts other than standard representations and warranties. There were no securitizations of home equity loans during ~~2015~~2016 and ~~2014~~2015, and all of the home equity trusts that hold revolving home equity lines of credit (HELOCs) have entered the rapid amortization phase.

The maximum loss exposure in the table above includes the Corporation’s obligation to provide subordinate funding to the consolidated and unconsolidated home equity loan securitizations that have entered athe rapid amortization phase. During this period, cash payments from borrowers are accumulated to repay outstanding debt securities, and the Corporation continues to

make advances to borrowers when they draw on their lines of credit. At December 31, ~~2015~~2016 and ~~2014~~2015, home equity loan securitizations in rapid amortization for which the Corporation has a subordinate funding obligation, including both consolidated and unconsolidated trusts, had $~~4.0~~2.7 billion and $~~5.8~~4.0 billion of trust certificates ~~outstanding. This amount is significantly greater than the amount the Corporation expects to fund.~~outstanding that were held by third parties. The charges that will ultimately be recorded as a result of the rapid amortization events depend on the undrawn available credit on the home equity lines, ~~which totaled~~ ~~$7 million~~ ~~and~~ ~~$39 million~~ at ~~December 31, 2015~~ ~~and~~ ~~2014, as well as~~ performance of the loans, the amount of subsequent draws and the timing of related cash flows. During 2016 and 2015, amounts actually funded by the Corporation under this obligation totaled $1 millionand$7 million.

During 2015, the Corporation deconsolidated several home equity line of credit trusts with total assets of $488 million and total liabilities of $611 million as its obligation to provide subordinated funding is no longer considered to be a potentially significant variable interest in the trusts following a decline in the amount of credit available to be drawn by borrowers. In connection with deconsolidation, the Corporation recorded a gain of $123 million in other income in the Consolidated Statement of Income.



		Bank of America 2016161

The derecognition of assets and liabilities represents non-cash investing and financing activities and, accordingly, is not reflected on the Consolidated Statement of Cash Flows.

Credit Card Securitizations

The Corporation securitizes originated and purchased credit card loans. The Corporation’s continuing involvement with the securitization trust includes servicing the receivables, retaining an undivided interest (seller’s interest) in the receivables, and holding certain retained interests including senior and subordinate securities, subordinate interests in accrued interest and fees on the securitized receivables, and cash reserve accounts. The seller’s interest in the trust, which is pari passu to the investors’ interest, is classified in loans and leases.

During ~~2015~~2016, $~~2.3 billion~~750 million of new senior debt securities were issued to third-party investors from the credit card securitization trust compared to ~~$4.1~~$2.3 billion issued during ~~2014~~2015.

The Corporation held subordinate securities issued by the credit card securitization trust with a notional principal amount of $7.5 billion ~~and~~ ~~$7.4 billion~~at both December 31, ~~2015~~2016 and ~~2014~~2015. These securities serve as a form of credit enhancement to the senior debt securities and have a stated interest rate of zero

percent. There were ~~$371~~$121 million of these subordinate securities issued during ~~2015~~2016 and ~~$662~~$371 million issued during ~~2014~~2015.

Resecuritization Trusts

The Corporation transfers ~~existing~~trading securities, typically MBS, into resecuritization vehicles at the request of customers seeking securities with specific characteristics. The Corporation may also resecuritize debt securities carried at fair value, including AFS securities, within its investment portfolio for purposes of improving liquidity and capital, and managing credit or interest rate risk. Generally, there are no significant ongoing activities performed in a resecuritization trust and no single investor has the unilateral ability to liquidate the trust.

The Corporation resecuritized $23.4 billion, $30.7 billion and ~~$14.4~~$14.4 billion of securities in 2016, 2015 and ~~2014~~.2014. Resecuritizations in 2014 included $1.5 billion of AFS debt securities, and gains on sale of ~~$71~~$85 million were recorded. There were no resecuritizations of AFS debt securities during 2016 and 2015. Other securities transferred into resecuritization vehicles during 2016, 2015 and 2014, were measured at fair value with changes in fair value recorded in trading account profits or other income prior to the resecuritization and no gain or loss on sale was recorded. ~~Resecuritization~~During 2016, 2015 and 2014, resecuritization proceeds included securities with an initial fair value of ~~$9.8~~$3.3 billion,

$9.8 billion and $4.6 billion, including $6.9 billion and $747 million which were ~~subsequently~~ classified as HTM during 2015 and 2014. ~~All~~Substantially all of ~~these~~the other securities received as resecuritization proceeds were classified as trading securities and were categorized as Level 2 within the fair value hierarchy.

Municipal Bond Trusts

The Corporation administers municipal bond trusts that hold highly-rated, long-term, fixed-rate municipal bonds. The trusts obtain financing by issuing floating-rate trust certificates that reprice on a weekly or other short-term basis to third-party investors. The Corporation may transfer assets into the trusts and may also serve as remarketing agent and/or liquidity provider for the trusts. The floating-rate investors have the right to tender the certificates at specified dates. Should the Corporation be unable to remarket the tendered certificates, it may be obligated to purchase them at par under standby liquidity facilities. The Corporation also provides credit enhancement to investors in certain municipal bond trusts whereby the Corporation guarantees the payment of interest and principal on floating-rate certificates issued by these trusts in the event of default by the issuer of the underlying municipal bond.

The Corporation’s liquidity commitments to unconsolidated municipal bond trusts, including those for which the Corporation was transferor, totaled $1.6 billion ~~and~~ ~~$2.1 billion~~at both December 31, ~~2015~~2016 and ~~2014~~2015. The weighted-average remaining life of bonds held in the trusts at December 31, ~~2015~~2016 was ~~7.4~~5.6 years. There were no material write-downs or downgrades of assets or issuers during ~~2015~~2016 and ~~2014~~2015.

Automobile and Other Securitization Trusts

The Corporation transfers automobile and other loans into securitization trusts, typically to improve liquidity or manage credit risk. At December 31, ~~2015~~2016 and ~~2014~~2015, the Corporation serviced assets or otherwise had continuing involvement with automobile and other securitization trusts with outstanding balances of $~~314~~174 million and $~~1.9 billion~~314 million, including trusts collateralized by other loans of $174 million and $189 million and automobile loans of $~~125 million~~0 and $~~400~~125 million~~, other loans of~~ ~~$189 million~~ ~~and~~ ~~$876 million, and student loans of $0 and $609 million.~~.

During 2015, the Corporation deconsolidated a student loan trust with total assets of $515 million and total liabilities of $449



~~184~~ ~~Bank of America 2015~~

million following the transfer of servicing and sale of retained interests to third parties. No gain or loss was recorded as a result of the deconsolidation. The derecognition of assets and liabilities represents non-cash investing and financing activities and, accordingly, is not reflected on the Consolidated Statement of Cash Flows.



162 Bank of America 2016

Other Variable Interest Entities

The table below summarizes select information related to other VIEs in which the Corporation held a variable interest at December 31, ~~2015~~2016 and ~~2014.~~2015.



Other VIEs	Other VIEs																	Other VIEs

	December 31																	December 31
	2015									2014								2016									2015
(Dollars in millions)	Consolidated			Unconsolidated			Total			Consolidated			Unconsolidated		Total			Consolidated			Unconsolidated			Total			Consolidated			Unconsolidated			Total
Maximum loss exposure	$	6,295		$	12,916		$	19,211		$	7,981		$	12,391	$	20,372		$	6,114		$	17,707		$	23,821		$	6,295		$	12,916		$	19,211
On-balance sheet assets
Trading account assets	$	2,300		$	366		$	2,666		$	1,575		$	355	$	1,930		$	2,358		$	233		$	2,591		$	2,300		$	366		$	2,666
Debt securities carried at fair value	—			126			126			—			483		483			—			75			75			—			126			126
Loans and leases	3,317			3,389			6,706			4,020			2,693		6,713			3,399			3,249			6,648			3,317			3,389			6,706
Allowance for loan and lease losses	(9		)	(23		)	(32		)	(6		)	—		(6		)	(9		)	(24		)	(33		)	(9		)	(23		)	(32		)
Loans held-for-sale	284			1,025			1,309			1,267			814		2,081			188			464			652			284			1,025			1,309
All other assets	664			6,925			7,589			1,646			6,658		8,304			369			13,156			13,525			664			6,925			7,589
Total	$	6,556		$	11,808		$	18,364		$	8,502		$	11,003	$	19,505		$	6,305		$	17,153		$	23,458		$	6,556		$	11,808		$	18,364
On-balance sheet liabilities
Long-term debt ⁽¹⁾	$	3,025		$	—		$	3,025		$	1,834		$	—	$	1,834		$	395		$	—		$	395		$	3,025		$	—		$	3,025
All other liabilities	5			2,697			2,702			105			2,643		2,748			24			2,959			2,983			5			2,697			2,702
Total	$	3,030		$	2,697		$	5,727		$	1,939		$	2,643	$	4,582		$	419		$	2,959		$	3,378		$	3,030		$	2,697		$	5,727
Total assets of VIEs	$	6,556		$	40,894		$	47,450		$	8,502		$	41,467	$	49,969		$	6,305		$	62,095		$	68,400		$	6,556		$	49,190		$	55,746


⁽¹⁾	Includes $~~2.8 billion~~229 million and $~~1.4~~2.8 billion of long-term debt at December 31, ~~2015~~2016 and ~~2014~~2015 issued by other consolidated VIEs, which has recourse to the general credit of the Corporation.

During 2015, the Corporation consolidated certain customer vehicles after redeeming long-term debt owed to the vehicles and acquiring a controlling financial interest in the vehicles. The Corporation also deconsolidated certain investment vehicles following the sale or disposition of variable interests. These actions resulted in a net decrease in long-term debt of $1.2 billion which represents a non-cash financing activity and, accordingly, is not reflected on the Consolidated Statement of Cash Flows. No gain or loss was recorded as a result of the consolidation or deconsolidation of these VIEs.

Customer Vehicles

Customer vehicles include credit-linked, equity-linked and commodity-linked note vehicles, repackaging vehicles, and asset acquisition vehicles, 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 may transfer assets to and invest in securities issued by these vehicles. The Corporation typically enters into credit, equity, interest rate, commodity or foreign currency derivatives to synthetically create or alter the investment profile of the issued securities.

The Corporation’s maximum loss exposure to consolidated and unconsolidated customer vehicles totaled ~~$3.9~~$2.9 billion and ~~$4.7~~$3.9 billion at December 31, ~~2015~~2016 and ~~2014~~2015, 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 vehicles. The maximum loss exposure has not been reduced to reflect the benefit of offsetting swaps with the customers or collateral arrangements. The Corporation also had liquidity commitments, including written put options and collateral value guarantees, with certain unconsolidated vehicles of $~~691~~323 million and $~~658~~691 million at December 31, ~~2015~~2016 and ~~2014~~2015, that are included in the table above.

Collateralized Debt Obligation Vehicles

The Corporation receives fees for structuring CDO vehicles, which hold diversified pools of fixed-income securities, typically corporate debt or ABS, which the CDO vehicles fund by issuing multiple tranches of debt and equity securities. Synthetic CDOs enter into a portfolio of CDS to synthetically create exposure to fixed-income securities. CLOs, which are a subset of CDOs, hold pools of loans, typically corporate loans. CDOs are typically 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, including a CDS counterparty for synthetic CDOs. The Corporation has also entered into total return swaps with certain CDOs whereby the Corporation absorbs the economic returns generated by specified assets held by the CDO.



		Bank of America ~~2015~~2016 ~~185~~163

The Corporation’s maximum loss exposure to consolidated and unconsolidated CDOs totaled ~~$543~~$430 million and ~~$780~~$543 million at December 31, ~~2015~~2016 and ~~2014~~2015. This exposure is calculated on a gross basis and does not reflect any benefit from insurance purchased from third parties.

At December 31, ~~2015~~2016, the Corporation had $~~922~~127 million of aggregate liquidity exposure, included in the Other VIEs table net of previously recorded losses, to unconsolidated CDOs which hold senior CDO debt securities or other debt securities on the Corporation’s behalf. ~~For additional information, see~~ ~~Note 12 – Commitments and Contingencies~~.

Investment Vehicles

The Corporation sponsors, invests in or provides financing, which may be in connection with the sale of assets, to a variety of investment vehicles 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, ~~2015~~2016 and ~~2014~~2015, the Corporation’s consolidated investment vehicles had total assets of $~~397~~846 million and $~~1.1 billion~~397 million. The Corporation also held investments in unconsolidated vehicles with total assets of $~~14.7~~17.3 billion and $~~11.2~~14.7 billion at December 31, ~~2015~~2016 and ~~2014~~2015. The Corporation’s maximum loss exposure associated with both consolidated and unconsolidated investment vehicles totaled $5.1 billion at both December 31, ~~2015~~2016 and ~~2014~~2015 comprised primarily of on-balance sheet assets less non-recourse liabilities.

~~The~~In prior periods, the Corporation transferred servicing advance receivables to independent third parties in connection with the sale of MSRs. Portions of the receivables were transferred into unconsolidated securitization trusts. ~~The~~At both December 31, 2016 and 2015 the Corporation retained senior interests in such receivables with a maximum loss exposure and funding obligation of $150 million ~~and $660 million,~~, including a funded

balance of $~~122~~75 million and ~~$431~~$122 million at ~~December 31, 2015~~ ~~and~~ ~~2014~~,respectively, which were classified in other debt securities carried at fair value.

Leveraged Lease Trusts

The Corporation’s net investment in consolidated leveraged lease trusts totaled $~~2.8~~2.6 billion and $~~3.3~~2.8 billion at December 31, ~~2015~~2016 and ~~2014~~2015. 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.

~~Real Estate~~Tax Credit Vehicles

The Corporation ~~held investments in unconsolidated real estate vehicles with total assets of~~ ~~$6.6 billion~~ ~~and $6.2 billion at~~ ~~December 31, 2015~~ ~~and~~ ~~2014, which primarily consisted of~~holds investments in unconsolidated limited partnerships and similar entities that construct, own and operate affordable ~~rental~~ housing, wind and ~~commercial real estate~~solar projects. An unrelated third party is typically the general partner or managing member and has control over the significant activities of the ~~partnership.~~vehicle. The Corporation earns a return primarily through the receipt of tax credits allocated to the ~~real estate~~ projects. The maximum loss exposure included in the Other VIEs table was $12.6 billion at December 31, 2016 which includes the impact of the adoption of the new accounting guidance on determining whether limited partnerships and similar entities are VIEs. The maximum loss exposure included in this table was $6.5 billion at December 31, 2015 and primarily relates to affordable housing. 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 $7.4 billion and $7.1 billion, including unfunded commitments to provide capital contributions of $2.7 billion and $2.4 billion at December 31, 2016 and December 31, 2015. The unfunded commitments are expected to be paid over the next five years. During 2016 and 2015, the Corporation recognized tax credits and other tax benefits from investments in affordable housing partnerships of $1.1 billion and $928 million, and reported pretax losses in other noninterest income of $789 million and $629 million. 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.



~~186~~164 Bank of America ~~2015~~2016

NOTE 7 Representations and Warranties Obligations and Corporate Guarantees

Background

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 loans and home equity loans as private-label securitizations ~~(in certain of these securitizations, monoline insurers or other financial guarantee providers insured all or some of the securities)~~ or in the form of whole loans. In connection with these transactions, the Corporation or certain of its subsidiaries or legacy companies made various representations and warranties. These representations and warranties, as set forth in the agreements, related to, among other things, the ownership of the loan, the validity of the lien securing the loan, the absence of delinquent taxes or liens against the property securing the loan, the process used to select the loan for inclusion in a transaction, the loan’s compliance with any applicable loan criteria, including underwriting standards, and the loan’s compliance with applicable federal, state and local laws. Breaches of these representations and warranties have resulted in and may continue to result in the requirement to repurchase mortgage loans or to otherwise make whole or provide other remedies to ~~the GSEs, U.S. Department of Housing and Urban Development (HUD) with respect to FHA-insured loans, VA, whole-loan~~ investors, securitization trusts, ~~monoline~~guarantors, insurers or other ~~financial guarantors as applicable~~parties (collectively, repurchases). In all such cases, subsequent to repurchasing the loan, the Corporation would be exposed to any credit loss on the repurchased mortgage loans after accounting for any mortgage insurance (MI) or mortgage guarantee payments that it may receive.

The liability for representations and warranties exposures and the corresponding estimated range of possible loss are based upon currently available information, significant judgment, and a number of factors and assumptions, including those discussed in Liability for Representations and Warranties and Corporate Guarantees in this Note, that are subject to change. Changes to any one of these factors could significantly impact the liability for representations and warranties exposures and the corresponding estimated range of possible loss and could have a material adverse impact on the Corporation’s results of operations for any particular period. Given that these factors vary by counterparty, the Corporation analyzes representations and warranties obligations based on the specific counterparty, or type of counterparty, with whom the sale was made.

Settlement Actions

The Corporation has vigorously contested any request for repurchase where it has concluded that a valid basis for repurchase does not exist and will continue to do so in the future. However, in an effort to resolve legacy mortgage-related issues, the Corporation has reached bulk settlements, ~~including various~~

~~settlements with the GSEs, and including settlement amounts~~certain of which have been for significant ~~with counterparties~~amounts, in lieu of a loan-by-loan review ~~process.~~process, including settlements with the GSEs, four monoline insurers and Bank of New York Mellon (BNY Mellon), as trustee for certain securitization trusts. These bulk settlements generally did not cover all transactions with the relevant counterparties or all potential claims that may arise, including in some instances securities law, fraud, indemnification and servicing claims, which may be addressed separately. The Corporation’s liability in connection with the transactions and claims not covered by these settlements could be material to the Corporation’s results of operations or liquidity for any particular reporting period. The Corporation may reach other settlements in the future if opportunities arise on terms it believes to be advantageous. However, 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. ~~The following provides a summary of the settlement with The Bank of New York Mellon (BNY Mellon); the conditions of the settlement have now been fully satisfied.~~

~~Settlement with the Bank of New York Mellon, as Trustee~~

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, MImortgage insurance (MI) or mortgage guarantee payments. Claims received from a counterparty remain outstanding until the underlying loan is repurchased, the claim is rescinded by the counterparty, the Corporation determines that the applicable statute of limitations has expired, or representations and warranties claims with respect to the applicable trust are settled, and fully and finally released. ~~When a claim is denied and the~~The Corporation does not ~~receive a response from the counterparty, the claim remains~~include duplicate claims in the unresolved repurchase claims balance until resolution in one of the ways described above. Certain of the claims that have been received are duplicate claims which represent more than one claim outstanding related to a particular loan, typically as the result of bulk claims submitted without individual file reviews.amounts disclosed.



		~~Bank of America 2015187~~

The table below presents unresolved repurchase claims at December 31, ~~2015~~2016 and ~~2014~~2015. The unresolved repurchase claims

include only claims where the Corporation believes that the counterparty has the contractual right to submit claims. The unresolved repurchase claims predominantly relate to subprime and pay option first-lien loans and home equity loans. For additional information, see Private-label Securitizations and Whole-loan Sales Experience in this Note and Note 12 – Commitments and Contingencies.



Unresolved Repurchase Claims by Counterparty, net of duplicate claims

	December 31				December 31
(Dollars in millions)	2015		2014 ⁽¹⁾		2016		2015
By counterparty
Private-label securitization trustees, whole-loan investors, including third-party securitization sponsors and other^{(2, 3)}	$	16,748	$	21,276
Private-label securitization trustees, whole-loan investors, including third-party securitization sponsors and other⁽¹⁾					$	16,685	$	16,748
Monolines ⁽⁴⁾	1,599		1,511		1,583		1,599
GSEs	17		59		9		17
Total unresolved repurchase claims by counterparty, net of duplicate claims	$	18,364	$	22,846	$	18,277	$	18,364


⁽¹⁾	~~The~~ ~~December 31, 2014~~ amounts have been updated to reflect additional claims submitted in the fourth quarter of 2014 from a single monoline, currently pursuing litigation, and addressed by the Corporation in 2015 pursuant to an existing litigation schedule. For more information on bond insurance litigation, see ~~Note 12 – Commitments and Contingencies~~.


⁽²⁾	Includes $11.9 ~~billion~~ ~~and~~ ~~$13.8~~ billion of claims based on individual file reviews and $4.8 billion ~~and~~ ~~$7.5 billion~~of claims submitted without individual file reviews at both December 31, ~~2015~~2016 and ~~2014~~2015.


⁽³⁾	~~The total notional amount of unresolved repurchase claims does not include repurchase claims related to the trusts covered by the BNY Mellon Settlement.~~


⁽⁴⁾	At ~~December 31, 2015, substantially all of the unresolved monoline claims are currently the subject of litigation with a single monoline insurer and predominately pertain to second-lien loans.~~

During ~~2015,~~2016, the Corporation received $~~3.7 billion~~647 million in new repurchase claims, including ~~$2.9 billion~~$440 million of claims ~~submitted without individual loan file reviews.~~that are deemed time-barred. During ~~2015, $8.1 billion~~2016, $734 million in claims were resolved, including ~~$7.4 billion which~~$477 million that are deemed ~~resolved as a result of the New York Court of Appeals decision in~~ ~~Ace Securities Corp. v. DB Structure Products, Inc.~~ ~~(ACE).~~time-barred. Of the remaining unresolved monoline claims, substantially all of the claims pertain to second-lien loans and are currently the subject of litigation with a single monoline insurer. There may be additional claims or file requests in the future.

In addition to the unresolved repurchase claims in the Unresolved Repurchase Claims by Counterparty, net of duplicate claims table, the Corporation has received notifications from sponsors of third-party securitizations with whom the Corporation engaged in whole-loan transactions indicating that the Corporation may have indemnity obligations with respect to loans for which the Corporation has not received a repurchase request. These outstanding notifications totaled ~~$1.4~~$1.3 billion and ~~$2.0~~$1.4 billion at December 31, ~~2015~~2016 and ~~2014.~~

The Corporation also from time to time receives correspondence purporting to raise representations and warranties breach issues from entities that do not have contractual standing or ability to bring such claims. The Corporation believes such communications to be procedurally and/or substantively invalid, and generally does not respond.2015.

The presence of repurchase claims on a given trust, receipt of notices of indemnification obligations and receipt of other communications, as discussed above, are all factors that inform the Corporation’s liability for representations and warranties and the corresponding estimated range of possible loss.

~~Government-sponsored Enterprises Experience~~

As a result of various bulk settlements with the GSEs, the Corporation has resolved substantially all outstanding and potential representations and warranties repurchase claims on whole loans sold by legacy Bank of America and Countrywide to FNMA and FHLMC through June 30, 2012 and December 31, 2009, respectively. As of December 31, 2015, the notional amount of unresolved repurchase claims submitted by the GSEs was $14 million for loans originated prior to 2009.

Private-label Securitizations and Whole-loan Sales Experience

Prior to 2009, legacy companies and certain subsidiaries sold pools of first-lien residential mortgage loans and home equity loans as private-label securitizations or in the form of whole loans. In connection with these transactions, the Corporation or certain of its subsidiaries or legacy companies made various representations and warranties. When the Corporation provided representations and warranties in connection with the sale of whole loans, the whole-loan investors may retain the right to make repurchase claims even when the loans were aggregated with other collateral into private-label securitizations sponsored by the whole-loan investors. In other third-party securitizations, the whole-loan investors’ rights to enforce the representations and warranties were transferred to the securitization trustees. Private-label securitization investors generally do not have the contractual right



		Bank of America 2016165

to demand repurchase of loans directly or the right to access loan files directly.

In private-label securitizations, the applicable contracts provide that investors meet certain presentation thresholds to issue a binding direction to a trustee to assert repurchase claims. However, in certain circumstances, the Corporation believes that trustees have presented repurchase claims without requiring investors to meet contractual voting rights thresholds. New private-label claims are primarily related to repurchase requests received from trustees for private-label securitization transactions not included in the BNY Mellon Settlement.

On June 11, 2015, the New York Court of Appeals, New York’s highest appellate court, issued its opinion in the ACE case, holding that, under New York law the six-year statute of limitations starts to run at the time the representations and warranties are made, not the date when the repurchase demand was denied. In addition, the Court of Appeals held that compliance with the contractual notice and cure period was a pre-condition to filing suit, and claims that did not comply with such contractual requirements prior to the expiration of the statute of limitations period were invalid. While no entity affiliated with the Corporation was a party to this litigation, the vast majority of the private-label RMBS trusts into which entities affiliated with the Corporation sold loans and made representations and warranties are governed by New York law, and the ACE decision should therefore apply to representations and warranties claims and litigation brought on those RMBS trusts. A significant number of representations and warranties claims and lawsuits brought against the Corporation have involved claims where the statute of limitations has expired under the ACE decision and are therefore time-barred. The Corporation treats time-barred claims as resolved and no longer outstanding; however, while post-ACE case law is in early stages, investors or trustees have sought to distinguish certain aspects of the ACE decision or to assert other claims against other RMBS counterparties seeking to avoid or circumvent the impact of the ACE decision. For example,



~~188~~ ~~Bank of America 2015~~

institutional investors have filed lawsuits against trustees based upon alleged contractual, statutory and tort theories of liability and alleging failure to pursue representations and warranties claims and servicer defaults. The potential impact on the Corporation, if any, of such alternative legal theories or assertions, judicial limitations on the ACE decision, or claims seeking to distinguish or avoid the ACE decision is unclear at this time. For more information on repurchase demands, see Unresolved Repurchase Claims in this Note.

The private-label securitization agreements generally require that counterparties have the ability to both assert a representations and warranties claim and to actually prove that a loan has an actionable defect under the applicable contracts. While the Corporation believes the agreements for private-label securitizations generally contain less rigorous representations and warranties and place higher burdens on claimants seeking repurchases than the express provisions of comparable agreements with the GSEs, the agreements generally include a representation that underwriting practices were prudent and customary. In the case of private-label securitization trustees and third-party sponsors, there is currently no established process in place for the parties to reach a conclusion on an individual loan if there is a disagreement on the resolution of the claim. Private-label securitization investors generally do not have the contractual right to demand repurchase of loans directly or the right to access loan files directly. For more information on repurchase demands, see ~~Unresolved Repurchase Claims~~ ~~in this Note.~~

At December 31, ~~2015~~2016 and ~~2014,~~2015, for loans originated between 2004 and 2008, the notional amount of unresolved repurchase ~~claims, net of duplicated~~ claims submitted by private-label securitization trustees, whole-loan investors, including third-party securitization sponsors, and others was ~~$16.7~~$16.6 billion and ~~$21.2~~$16.7 billion. These repurchase claims at December 31, 2015 exclude claims in the amount of $7.4 billion where the statute of limitations has expired without litigation being commenced. At December 31, 2014, time-barred claims of $5.2 billion were included in unresolved repurchase claims. The notional amount of unresolved repurchase claims at ~~both~~ December 31, 2016 and 2015 includes $5.6 billion and ~~2014 includes~~ $3.5 billion of claims related to loans in specific private-label securitization groups or tranches where the Corporation owns substantially all of the outstanding ~~securities.~~securities or will otherwise realize the benefit of any repurchase claims paid.

The ~~overall decrease in the~~ notional amount of outstanding unresolved repurchase claims remained relatively unchanged in ~~2015 is primarily due~~2016 compared to ~~the impact of time-barred claims under the ACE decision, partially offset by new claims from private-label securitization trustees.~~2015. Outstanding repurchase claims ~~remain~~remained unresolved primarily due to (1) the level of detail, support and analysis accompanying such claims, which impact overall claim quality and, therefore, claims resolution, and (2) the lack of an established process to resolve disputes related to these claims.

The Corporation reviews properly presented repurchase claims on a loan-by-loan basis. ~~Claims~~For time-barred claims, the counterparty is informed that ~~are time-barred are~~the claim is denied on the basis of the statute of limitations and the claim is treated as resolved. ~~If, after the Corporation’s review of~~For timely claims, itif the Corporation, after review, does not believe a claim is valid, it will deny the claim and generally indicate a reason for the denial. ~~When~~If the counterparty agrees with the ~~Corporation’s~~Corporation's denial of the claim, the counterparty may rescind the claim. ~~When~~If there is a disagreement as to the resolution of the claim, meaningful dialogue and negotiation between the parties are generally necessary to reach a resolution on an individual claim. When a claim ~~has been~~is denied and the Corporation does not hear from the counterparty for six months, the Corporation views ~~these claims~~the claim as inactive; however, ~~they~~such claims remain in the outstanding claims balance until ~~resolution in one of the manners described above.~~resolution. In the case of private-label securitization trustees and third-party sponsors, there is currently no established process in place for the parties to reach a conclusion on an individual loan if there is a disagreement on the resolution of the claim. The Corporation has performed an initial review with respect to substantially all ~~of these~~outstanding claims and, although the Corporation does not believe a valid basis for repurchase has been established by the claimant, it considers such claims activity in the computation of its liability for representations and warranties.

~~Monoline Insurers Experience~~

During 2015, the Corporation had limited loan-level representations and warranties repurchase claims experience with the monoline insurers due to settlements with several monoline insurers and ongoing litigation with a single monoline insurer. To the extent the Corporation received repurchase claims from the monolines that were properly presented, it generally reviewed them on a loan-by-loan basis. Where the Corporation agrees that there has been a breach of representations and warranties given by the Corporation or subsidiaries or legacy companies that meets contractual requirements for repurchase, settlement is generally reached as to that loan within 60 to 90 days. For more information related to the monolines, see ~~Note 12 – Commitments and Contingencies~~.

Liability for Representations and Warranties and Corporate Guarantees and Estimated Range of Possible Loss

The liability for representations and warranties and corporate guarantees is included in accrued expenses and other liabilities on the Consolidated Balance Sheet and the related provision is included in mortgage banking income in the Consolidated Statement of Income. The liability for representations and warranties is established when those obligations are both probable and reasonably estimable.



		~~Bank of America 2015189~~

The Corporation’s representations and warranties liability and the corresponding estimated range of possible loss at December 31, ~~2015~~2016 considers, among other things, ~~implied~~the repurchase experience ~~based on~~implied in the settlements with BNY Mellon ~~Settlement, adjusted to reflect differences between the trusts covered by the settlement~~ and ~~the remainder of the population of private-label securitizations where the statute of limitations for representations and warranties claims has not expired.~~other counterparties. Since the securitization trusts that were included in the settlement with BNY Mellon ~~Settlement~~ differ from ~~those that were not included in~~other securitization trusts where the ~~BNY Mellon Settlement,~~possibility of timely claims exists, the Corporation adjusted the repurchase experience implied in the settlement in order to determine the representations and

warranties liability and the corresponding estimated range of possible loss.

The table below presents a rollforward of the liability for representations and warranties and corporate guarantees.



Representations and Warranties and Corporate Guarantees

(Dollars in millions)	2015			2014			2016			2015
Liability for representations and warranties and corporate guarantees, January 1	$	12,081		$	13,282		$	11,326		$	12,081
Additions for new sales	6			8			4			6
Net reductions	(722		)	(1,892		)
Payments							(9,097		)	(722		)
Provision (benefit)	(39		)	683			106			(39		)
Liability for representations and warranties and corporate guarantees, December 31 ⁽¹⁾	$	11,326		$	12,081		$	2,339		$	11,326


⁽¹⁾	In February 2016, the Corporation made an $8.5 billion settlement payment to BNY Mellon as part of the settlement with BNY ~~Mellon Settlement.~~Mellon.

The representations and warranties liability represents the Corporation’s best estimate of probable incurred losses as of December 31, ~~2015~~.2016. However, it is reasonably possible that future representations and warranties losses may occur in excess of the amounts recorded for these exposures.

~~Estimated Range of Possible Loss~~

The Corporation currently estimates that the range of possible loss for representations and warranties exposures could be up to $2$2 billion over existing accruals at December 31, ~~2015~~.2016. The Corporation treats claims that are time-barred as resolved and does not consider such claims in the estimated range of possible loss. The estimated range of possible loss reflects principally exposures related to loans in private-label securitization trusts. It

represents a reasonably possible loss, but does not represent a probable loss, and is based on currently available information, significant judgment and a number of assumptions that are subject to change.

The liability for representations and warranties exposures and the corresponding estimated range of possible loss do not consider certain losses related to servicing, ~~(except as such losses are included as potential costs of the BNY Mellon Settlement),~~ including foreclosure and related costs, fraud, indemnity, or claims (including for RMBS) related to securities law or monoline insurance litigation. Losses with respect to one or more of these matters could be material to the Corporation’s results of operations or liquidity for any particular reporting period.

Future provisions and/or ranges of possible loss for representations and warranties may be significantly impacted if actual experiences are different from the Corporation’s assumptions in predictive models, including, without limitation, the actual repurchase rates on loans in trusts not settled as part of the settlement with BNY Mellon ~~settlement~~ which may be different than the implied repurchase experience, estimated MI rescission rates, economic conditions, estimated home prices, consumer and counterparty behavior, the applicable statute of limitations, potential indemnity obligations to third parties to whom the Corporation has sold loans subject to representations and warranties and a variety of other judgmental factors. Adverse developments with respect to one or more of the assumptions underlying the liability for representations and warranties and the corresponding estimated range of possible loss, such as investors or trustees successfully challenging or avoiding the application of the relevant statute of limitations, could result in significant increases to future provisions and/or the estimated range of possible loss.

~~Cash Payments~~

During 2015 and 2014, excluding amounts paid in bulk settlements, the Corporation made loan repurchases and indemnification payments totaling $229 million and $496 million, respectively for first-lien and home equity loan repurchases and indemnification payments to reimburse investors or securitization trusts. The payments resulted in realized losses of $128 million and $334 million in 2015 and 2014 on unpaid principal amounts of $587 million and $857 million, respectively.

~~In February 2016, the Corporation made an $8.5 billion settlement payment to BNY Mellon as part of the BNY Mellon Settlement.~~



~~190~~166 Bank of America ~~2015~~2016

NOTE 8 Goodwill and Intangible Assets

Goodwill

The table below presents goodwill balances by business segment and All Otherat December 31, ~~2015~~2016 and ~~2014.~~2015. The reporting units utilized for goodwill impairment testing are the operating segments or one level below.



Goodwill ⁽¹⁾

	December 31				December 31
(Dollars in millions)	2015		2014		2016			2015
Consumer Banking	$	30,123	$	30,123	$	30,123		$	30,123
Global Wealth & Investment Management	9,698		9,698		9,681			9,698
Global Banking	23,923		23,923		23,923			23,923
Global Markets	5,197		5,197		5,197			5,197
All Other	820		836		820			820
Less: Goodwill of business held for sale ⁽¹⁾					(775		)	—
Total goodwill	$	69,761	$	69,777	$	68,969		$	69,761


⁽¹⁾	~~There was no~~Reflects the goodwill assigned to the non-U.S. consumer credit card business, which is included in ~~LAS~~ ~~at December 31, 2015 and 2014.~~ assets of business held for sale on the Consolidated Balance Sheet.

~~For purposes of goodwill impairment testing,~~During 2016, 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. The goodwill impairment test involves comparing the fair value of each reporting unit to its carrying value, including goodwill, as measured by allocated equity.

~~Annual Impairment Tests~~

~~The~~ Corporation completed its annual goodwill impairment ~~tests~~test as of June 30, ~~2015 and 2014~~2016 for all applicable reporting units. Based on the results of the annual goodwill impairment test, the Corporation determined there was no impairment.

Effective January 1, 2015, the Corporation changed its basis of presentation related to its business segments. The realignment triggered a test for goodwill impairment, which was performed both immediately before and after the realignment. The fair value of the affected reporting units exceeded their carrying value and, accordingly, no goodwill impairment resulted from the realignment.

Intangible Assets

The table below presents the gross and net carrying values and accumulated amortization for intangible assets at December 31, ~~2015~~2016 and ~~2014.~~2015.

Intangible Assets ^{(1, 2)}

December 31
2015 2014
(Dollars in millions)
Gross
Carrying Value

Accumulated
Amortization
Net
Carrying Value
Gross
Carrying Value

Accumulated
Amortization
Net
Carrying Value
Purchased credit card relationships $ 5,450
$ 4,755
$ 695
$ 5,504
$ 4,527
$ 977
Core deposit intangibles 1,779
1,505
274
1,779
1,382
397
Customer relationships 3,927
2,990
937
4,025
2,648
1,377
Affinity relationships 1,556
1,356
200
1,565
1,283
282
Other intangibles ⁽³⁾
2,143
481
1,662
2,045
466
1,579
Total intangible assets $ 14,855
$ 11,087
$ 3,768
$ 14,918
$ 10,306
$ 4,612




Intangible Assets ^{(1, 2)}

	December 31
	2016						2015
(Dollars in millions)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Purchased credit card and affinity relationships	$	6,830	$	6,243	$	587	$	7,006	$	6,111	$	895
Core deposit and other intangibles ⁽³⁾	3,836		2,046		1,790		3,922		1,986		1,936
Customer relationships	3,887		3,275		612		3,927		2,990		937
Total intangible assets⁽⁴⁾	$	14,553	$	11,564	$	2,989	$	14,855	$	11,087	$	3,768


⁽¹⁾	Excludes fully amortized intangible assets.


⁽²⁾	At December 31, ~~2015~~2016 and ~~2014~~2015, none of the intangible assets were impaired.


⁽³⁾	Includes$1.6 billion at both December 31, 2016 and 2015 of intangible assets associated with trade names that have an indefinite life and, accordingly, are not amortized.


⁽⁴⁾	Includes $67 million of intangible assets assigned to the non-U.S. consumer credit card business, which is included in assets of business held for sale on the Consolidated Balance Sheet.

Amortization of intangibles expense was $730 million, $834 million and $936 million for 2016, 2015 and 2014. The ~~tables below present intangible asset~~Corporation estimates aggregate amortization expense will be $638 million, $559 million, $120 million, $60 million, and $3 million for ~~2015, 2014~~the years ended 2017, 2018, 2019, 2020, and ~~2013, and estimated future intangible asset amortization expense as of December 31, 2015.~~2021.

Amortization Expense

(Dollars in millions) 2015 2014 2013
Purchased credit card and affinity relationships $ 356
$ 415
$ 475
Core deposit intangibles 122
140
197
Customer relationships 340
355
371
Other intangibles 16
26
43
Total amortization expense $ 834
$ 936
$ 1,086

Estimated Future Amortization Expense

(Dollars in millions) 2016 2017 2018 2019 2020
Purchased credit card and affinity relationships $ 298
$ 237
$ 179
$ 121
$ 60
Core deposit intangibles 104
90
80
—
—
Customer relationships 325
310
302
—
—
Other intangibles 10
6
4
2
—
Total estimated future amortization expense $ 737
$ 643
$ 565
$ 123
$ 60



		Bank of America ~~2015~~2016 ~~191~~167

NOTE 9 Deposits

The Corporation had U.S. certificates of deposit and other U.S. time deposits of $100 thousand or more totaling $~~28.3~~32.9 billion and $~~32.4~~28.3 billion at December 31, ~~2015~~2016 and ~~2014~~2015. Non-U.S. certificates of deposit and other non-U.S. time deposits of $100 thousand or more totaled $~~14.1~~14.7 billion and ~~$14.0~~$14.1 billion at December 31, ~~2015~~2016 and ~~2014~~2015. The Corporation also had

aggregate time deposits of ~~$14.2~~$18.3 billion in denominations that met or exceeded the Federal Deposit Insurance Corporation (FDIC) insurance limit at December 31, ~~2015.~~2016. The table below presents the contractual maturities for time deposits of $100 thousand or more at December 31, ~~2015~~2016.



Time Deposits of $100 Thousand or More

(Dollars in millions)	Three Months or Less		Over Three Months to Twelve Months		Thereafter		Total		Three Months or Less		Over Three Months to Twelve Months		Thereafter		Total
U.S. certificates of deposit and other time deposits	$	12,836	$	12,834	$	2,677	$	28,347	$	16,112	$	14,580	$	2,206	$	32,898
Non-U.S. certificates of deposit and other time deposits	12,352		1,517		277		14,146		8,688		2,746		3,243		14,677

The scheduled contractual maturities for total time deposits at December 31, ~~2015~~2016 are presented in the table below.



Contractual Maturities of Total Time Deposits

(Dollars in millions)	U.S.		Non-U.S.		Total		U.S.		Non-U.S.		Total
Due in 2016	$	51,319	$	14,248	$	65,567
Due in 2017	4,166		103		4,269		$	53,584	$	11,528	$	65,112
Due in 2018	937		1		938		3,081		1,702		4,783
Due in 2019	874		5		879		1,131		47		1,178
Due in 2020	1,380		258		1,638		1,475		250		1,725
Due in 2021							406		1,238		1,644
Thereafter	683		—		683		483		19		502
Total time deposits	$	59,359	$	14,615	$	73,974	$	60,160	$	14,784	$	74,944

NOTE 10 Federal Funds Sold or Purchased, Securities Financing Agreements and Short-term Borrowings

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 election of the fair value option, see Note 21 – Fair Value Option.



	2015				2014				2016				2015
(Dollars in millions)	Amount		Rate		Amount		Rate		Amount		Rate		Amount		Rate
Federal funds sold and securities borrowed or purchased under agreements to resell
At December 31	$	192,482	0.44	%	$	191,823	0.47	%
Average during year	211,471		0.47		222,483		0.47		$	216,161	0.52	%	$	211,471	0.47	%
Maximum month-end balance during year	226,502		n/a		240,122		n/a		225,015		n/a		226,502		n/a
Federal funds purchased and securities loaned or sold under agreements to repurchase
At December 31	174,291		0.82		201,277		0.98
Average during year	213,497		0.89		215,792		0.99		$	183,818	0.97	%	$	213,497	0.89	%
Maximum month-end balance during year	235,232		n/a		240,154		n/a		196,631		n/a		235,232		n/a
Short-term borrowings
At December 31	28,098		1.61		31,172		1.47
Average during year	32,798		1.49		41,886		1.08		29,440		1.95		32,798		1.49
Maximum month-end balance during year	40,110		n/a		51,409		n/a		33,051		n/a		40,110		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 ~~$16.8~~$9.3 billion and ~~$14.6~~$16.8 billion at

December 31, ~~2015~~2016 and ~~2014.~~2015. These short-term bank notes, along with ~~Federal Home Loan Bank (FHLB)~~FHLB advances, U.S. Treasury tax and loan notes, and term federal funds purchased, are included in short-term borrowings on the Consolidated Balance Sheet.



~~192~~168 Bank of America ~~2015~~2016

Offsetting of Securities Financing Agreements

The Corporation enters into securities financing agreements to accommodate customers (also referred to as "matched-book transactions"), obtain securities to cover short positions, and to 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 borrowed or purchased under agreements to resell, and in federal funds purchased and securities loaned or sold under agreements to repurchase at December 31, ~~2015~~2016 and ~~2014.~~2015. 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

agreements. For more information on the offsetting of derivatives, see Note 2 – Derivatives.

The “Other” amount in the table, which is included on the Consolidated Balance Sheet in accrued expenses and other liabilities, 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.

Gross assets and liabilities in the table include activity where uncertainty exists as to the enforceability of certain master netting agreements under bankruptcy laws in some countries or industries and, accordingly, these are reported on a gross basis.

The column titled “Financial Instruments” in the table 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 the net balance sheet amount in this table to derive a net asset or liability. Securities collateral received or pledged where the legal enforceability of the master netting agreements is not certain is not included.



Securities Financing Agreements

	December 31, 2015												December 31, 2016
(Dollars in millions)	Gross Assets/Liabilities		Amounts Offset			Net Balance Sheet Amount		Financial Instruments			Net Assets/Liabilities		Gross Assets/Liabilities		Amounts Offset			Net Balance Sheet Amount		Financial Instruments			Net Assets/Liabilities
Securities borrowed or purchased under agreements to resell ⁽¹⁾	$	347,281	$	(154,799	)	$	192,482	$	(144,332	)	$	48,150	$	326,970	$	(128,746	)	$	198,224	$	(154,974	)	$	43,250

Securities loaned or sold under agreements to repurchase	$	329,078	$	(154,799	)	$	174,279	$	(135,737	)	$	38,542	$	299,028	$	(128,746	)	$	170,282	$	(140,774	)	$	29,508
Other	13,235		—			13,235		(13,235		)	—		14,448		—			14,448		(14,448		)	—
Total	$	342,313	$	(154,799	)	$	187,514	$	(148,972	)	$	38,542	$	313,476	$	(128,746	)	$	184,730	$	(155,222	)	$	29,508

	December 31, 2014												December 31, 2015
Securities borrowed or purchased under agreements to resell ⁽¹⁾	$	316,567	$	(124,744	)	$	191,823	$	(145,573	)	$	46,250	$	347,281	$	(154,799	)	$	192,482	$	(144,332	)	$	48,150

Securities loaned or sold under agreements to repurchase	$	326,007	$	(124,744	)	$	201,263	$	(164,306	)	$	36,957	$	329,078	$	(154,799	)	$	174,279	$	(135,737	)	$	38,542
Other	11,641		—			11,641		(11,641		)	—		13,235		—			13,235		(13,235		)	—
Total	$	337,648	$	(124,744	)	$	212,904	$	(175,947	)	$	36,957	$	342,313	$	(154,799	)	$	187,514	$	(148,972	)	$	38,542


⁽¹⁾	Excludes repurchase activity of $~~9.3~~10.1 billion and $~~5.6~~9.3 billion reported in loans and leases on the Consolidated Balance Sheet at December 31, ~~2015~~2016 and ~~2014~~2015.



		Bank of America ~~2015~~2016 ~~193~~169

Repurchase Agreements and Securities Loaned Transactions Accounted for as Secured Borrowings

The tables below present securities sold under agreements to repurchase and securities loaned by remaining contractual term to maturity and class of collateral pledged. Included in “Other” are transactions where the Corporation acts as the lender in a securities lending agreement and receives securities that can be

pledged as collateral or sold. Certain agreements contain a right to substitute collateral and/or terminate the agreement prior to maturity at the option of the Corporation or the counterparty. Such agreements are included in the table below based on the remaining contractual term to maturity. At December 31, 2016 and 2015, the Corporation had no outstanding repurchase-to-maturity transactions.



Remaining Contractual Maturity

	December 31, 2015										December 31, 2016
(Dollars in millions)	Overnight and Continuous		30 Days or Less		After 30 Days Through 90 Days		Greater than 90 Days ⁽¹⁾		Total		Overnight and Continuous		30 Days or Less		After 30 Days Through 90 Days		Greater than 90 Days ⁽¹⁾		Total
Securities sold under agreements to repurchase	$	126,694	$	86,879	$	43,216	$	27,514	$	284,303	$	129,853	$	77,780	$	31,851	$	40,752	$	280,236
Securities loaned	39,772		363		2,352		2,288		44,775		8,564		6,602		1,473		2,153		18,792
Other	13,235		—		—		—		13,235		14,448		—		—		—		14,448
Total	$	179,701	$	87,242	$	45,568	$	29,802	$	342,313	$	152,865	$	84,382	$	33,324	$	42,905	$	313,476

											December 31, 2015
Securities sold under agreements to repurchase											$	126,694	$	86,879	$	43,216	$	27,514	$	284,303
Securities loaned											39,772		363		2,352		2,288		44,775
Other											13,235		—		—		—		13,235
Total											$	179,701	$	87,242	$	45,568	$	29,802	$	342,313


⁽¹⁾	No agreements have maturities greater than three years.



Class of Collateral Pledged

	December 31, 2015								December 31, 2016
(Dollars in millions)	Securities Sold Under Agreements to Repurchase		Securities Loaned		Other		Total		Securities Sold Under Agreements to Repurchase		Securities Loaned		Other		Total
U.S. government and agency securities	$	142,572	$	—	$	27	$	142,599	$	153,184	$	—	$	70	$	153,254
Corporate securities, trading loans and other	11,767		265		278		12,310		11,086		1,630		127		12,843
Equity securities	32,323		13,350		12,929		58,602		24,007		11,175		14,196		49,378
Non-U.S. sovereign debt	87,849		31,160		1		119,010		84,171		5,987		55		90,213
Mortgage trading loans and ABS	9,792		—		—		9,792		7,788		—		—		7,788
Total	$	284,303	$	44,775	$	13,235	$	342,313	$	280,236	$	18,792	$	14,448	$	313,476

									December 31, 2015
U.S. government and agency securities									$	142,572	$	—	$	27	$	142,599
Corporate securities, trading loans and other									11,767		265		278		12,310
Equity securities									32,323		13,350		12,929		58,602
Non-U.S. sovereign debt									87,849		31,160		1		119,010
Mortgage trading loans and ABS									9,792		—		—		9,792
Total									$	284,303	$	44,775	$	13,235	$	342,313

The Corporation is required to post collateral with a market value equal to or in excess of the principal amount borrowed under repurchase agreements. For securities loaned transactions, the Corporation receives collateral in the form of cash, letters of credit or other securities. To help ensure that the market value of the underlying collateral remains sufficient, collateral is generally valued daily and the Corporation may be required to deposit

additional collateral or may receive or return collateral pledged when appropriate. Repurchase agreements and securities loaned transactions are generally either overnight, continuous (i.e., no stated term) or short-term. The Corporation manages liquidity risks related to these agreements by sourcing funding from a diverse group of counterparties, providing a range of securities collateral and pursuing longer durations, when appropriate.



~~194~~170 Bank of America ~~2015~~2016

NOTE 11 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 at December 31, ~~2015~~2016 and ~~2014,~~2015, and the related contractual rates and maturity dates as of December 31, ~~2015~~2016.



	December 31				December 31
(Dollars in millions)	2015		2014		2016		2015
Notes issued by Bank of America Corporation
Senior notes:
Fixed, with a weighted-average rate of 4.55%, ranging from 1.25% to 8.40%, due 2016 to 2045	$	109,861	$	113,037
Floating, with a weighted-average rate of 1.38%, ranging from 0.11% to 5.07%, due 2016 to 2044	13,900		14,590
Fixed, with a weighted-average rate of 4.25%, ranging from 0.39% to 8.40%, due 2017 to 2046					$	108,933	$	109,861
Floating, with a weighted-average rate of 1.73%, ranging from 0.19% to 5.64%, due 2017 to 2044					13,164		13,900
Senior structured notes	17,548		22,168		17,049		17,548
Subordinated notes:
Fixed, with a weighted-average rate of 5.19%, ranging from 2.40% to 8.57%, due 2016 to 2045	27,216		23,246
Floating, with a weighted-average rate of 0.94%, ranging from 0.43% to 2.68%, due 2016 to 2026	5,029		5,455
Fixed, with a weighted-average rate of 4.87%, ranging from 2.40% to 8.57%, due 2017 to 2045					26,047		27,216
Floating, with a weighted-average rate of 0.83%, ranging from 0.23% to 2.52%, due 2017 to 2026					4,350		5,029
Junior subordinated notes (related to trust preferred securities):
Fixed, with a weighted-average rate of 6.78%, ranging from 5.25% to 8.05%, due 2027 to 2067	5,295		6,722
Floating, with a weighted-average rate of 1.08%, ranging from 0.87% to 1.53%, due 2027 to 2056	553		553
Fixed, with a weighted-average rate of 6.91%, ranging from 5.25% to 8.05%, due 2027 to 2067					3,280		5,295
Floating, with a weighted-average rate of 1.60%, ranging from 1.43% to 1.99%, due 2027 to 2056					552		553
Total notes issued by Bank of America Corporation	179,402		185,771		173,375		179,402
Notes issued by Bank of America, N.A.
Senior notes:
Fixed, with a weighted-average rate of 1.57%, ranging from 1.13% to 2.05%, due 2016 to 2018	7,483		2,740
Floating, with a weighted-average rate of 1.13%, ranging from 0.43% to 3.30%, due 2016 to 2041	4,942		3,028
Fixed, with a weighted-average rate of 1.67%, ranging from 0.02% to 2.05%, due 2017 to 2018					5,936		7,483
Floating, with a weighted-average rate of 1.66%, ranging from 0.94% to 2.86%, due 2017 to 2041					3,383		4,942
Subordinated notes:
Fixed, with a weighted-average rate of 5.68%, ranging from 5.30% to 6.10%, due 2016 to 2036	4,815		4,921
Floating, with a weighted-average rate of 0.80%, ranging from 0.79% to 0.81%, due 2016 to 2019	1,401		1,401
Fixed, with a weighted-average rate of 5.66%, ranging from 5.30% to 6.10%, due 2017 to 2036					4,424		4,815
Floating, with a weighted-average rate of 1.26%, ranging from 0.85% to 1.26%, due 2017 to 2019					598		1,401
Advances from Federal Home Loan Banks:
Fixed, with a weighted-average rate of 5.34%, ranging from 0.01% to 7.72%, due 2016 to 2034	172		183
Floating, with a weighted-average rate of 0.41%, ranging from 0.35% to 0.63%, due 2016	6,000		10,500
Fixed, with a weighted-average rate of 5.31%, ranging from 0.01% to 7.72%, due 2017 to 2034					162		172
Floating					—		6,000
Securitizations and other BANA VIEs(1)	9,756		9,882		9,164		9,756
Other	2,985		2,811		3,084		2,985
Total notes issued by Bank of America, N.A.	37,554		35,466		26,751		37,554
Other debt
Senior notes:
Fixed, with a rate of 5.50%, due 2017 to 2021	30		1
Floating	—		21
Fixed, with a weighted-average rate of 5.50%, due 2017 to 2021					1		30
Structured liabilities	14,974		15,971		15,171		14,974
Junior subordinated notes (related to trust preferred securities):
Fixed	—		340
Floating	—		66
Nonbank VIEs	4,317		3,425
Nonbank VIEs⁽¹⁾					1,482		4,317
Other	487		2,078		43		487
Total other debt	19,808		21,902		16,697		19,808
Total long-term debt	$	236,764	$	243,139	$	216,823	$	236,764


⁽¹⁾	Represents the total long-term debt included in the liabilities of consolidated VIEs on the Consolidated Balance Sheet.

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, ~~2015~~2016 and ~~2014~~2015, the amount of foreign currency-denominated debt translated into U.S. Dollars included in total long-term debt was $~~46.4~~44.7 billion and $~~51.9~~46.4 billion. Foreign currency contracts may be used to convert certain foreign currency-denominated debt into U.S. Dollars.

At December 31, ~~2015~~2016, long-term debt of consolidated VIEs in the table above included debt of credit card, home equity and all other VIEs of $~~9.6~~9.0 billion, $~~183~~108 million and $~~4.3~~1.5 billion, respectively. Long-term debt of VIEs is collateralized by the assets of the VIEs. For additional information, see Note 6 – Securitizations and Other Variable Interest Entities.

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 3.80 percent, 4.36 percent and 1.52 percent, respectively, at December 31, 2016, and 3.80 percent, 4.61 percent and 0.96 percent, respectively, at December 31, 2015 ~~and~~ ~~3.81 percent~~, ~~4.83 percent~~ ~~and~~ ~~0.80 percent, respectively, at~~ ~~December 31,~~

~~2014~~. The Corporation’s ALM activities maintain an overall interest rate risk management 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.

Certain senior structured notes and structured liabilities are accounted for under the fair value option. For more information on these notes, see Note 21 – Fair Value Option. Debt outstanding of $75 million at December 31, 2016 was issued by a 100 percent owned finance subsidiary of the parent company and is unconditionally guaranteed by the parent company.

The following table ~~below~~ shows the carrying value for aggregate annual contractual maturities of long-term debt as of December 31, ~~2015~~2016. 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 based on the value of a referenced index or



		~~Bank of America 2015195~~

security. In both cases, the Corporation or a subsidiary may be required to settle the obligation for cash or other securities



		Bank of America 2016171

prior to the contractual maturity date. These borrowings are reflected in the table as maturing at their contractual maturity date.

During 2016, the Corporation had total long-term debt maturities and redemptions in the aggregate of $51.6 billion consisting of $30.6 billion for Bank of America Corporation, $11.6

billion for Bank of America, N.A. and $9.4 billion of other debt. During 2015, the Corporation had total long-term debt maturities and redemptions in the aggregate of $40.4 billion

consisting of $25.3 billion for Bank of America Corporation, $6.6 billion for Bank of America, N.A. and $8.5 billion of other debt. ~~During~~ ~~2014~~, the Corporation had total long-term debt maturities and redemptions in the aggregate of $53.7 billion consisting of $33.9 billion for Bank of America Corporation, $8.9 billion for Bank of America, N.A. and $10.9 billion of other debt.



Long-term Debt by Maturity

(Dollars in millions)	2016		2017		2018		2019		2020		Thereafter		Total		2017		2018		2019		2020		2021		Thereafter		Total
Bank of America Corporation
Senior notes	$	16,777	$	18,303	$	20,211	$	16,820	$	11,351	$	40,299	$	123,761	$	17,913	$	19,765	$	17,858	$	12,168	$	10,382	$	44,011	$	122,097
Senior structured notes	4,230		2,352		1,942		1,374		955		6,695		17,548		3,931		3,137		1,341		969		409		7,262		17,049
Subordinated notes	4,861		4,885		2,677		1,479		3		18,340		32,245		4,760		2,603		1,431		—		349		21,254		30,397
Junior subordinated notes	—		—		—		—		—		5,848		5,848		—		—		—		—		—		3,832		3,832
Total Bank of America Corporation	25,868		25,540		24,830		19,673		12,309		71,182		179,402		26,604		25,505		20,630		13,137		11,140		76,359		173,375
Bank of America, N.A.
Senior notes	3,048		3,648		5,709		—		—		20		12,425		3,649		5,649		—		—		—		21		9,319
Subordinated notes	1,056		3,447		—		1		—		1,712		6,216		3,328		—		1		—		—		1,693		5,022
Advances from Federal Home Loan Banks	6,003		10		10		15		12		122		6,172		9		9		14		12		2		116		162
Securitizations and other Bank VIEs ⁽¹⁾	1,290		3,550		2,300		2,450		—		166		9,756		3,549		2,300		3,200		—		—		115		9,164
Other	53		2,713		76		85		30		28		2,985		2,718		102		105		10		—		149		3,084
Total Bank of America, N.A.	11,450		13,368		8,095		2,551		42		2,048		37,554		13,253		8,060		3,320		22		2		2,094		26,751
Other debt
Senior notes	—		1		—		—		—		29		30		1		—		—		—		—		—		1
Structured liabilities	3,110		2,029		1,175		882		1,034		6,744		14,974		3,860		1,288		1,261		977		756		7,029		15,171
Nonbank VIEs ⁽¹⁾	2,506		240		42		22		—		1,507		4,317		246		27		15		—		—		1,194		1,482
Other	400		57		—		—		—		30		487		—		—		—		—		—		43		43
Total other debt	6,016		2,327		1,217		904		1,034		8,310		19,808		4,107		1,315		1,276		977		756		8,266		16,697
Total long-term debt	$	43,334	$	41,235	$	34,142	$	23,128	$	13,385	$	81,540	$	236,764	$	43,964	$	34,880	$	25,226	$	14,136	$	11,898	$	86,719	$	216,823


⁽¹⁾	Represents the total long-term debt included in the liabilities of consolidated VIEs on the Consolidated Balance Sheet.

Trust Preferred and Hybrid Securities

Trust preferred securities (Trust Securities) are primarily issued by trust companies (the Trusts) that are not consolidated. These Trust Securities are mandatorily redeemable preferred security obligations of the Trusts. The sole assets of the Trusts generally are junior subordinated deferrable interest notes of the Corporation or its subsidiaries (the Notes). The Trusts generally are 100 percent-owned finance subsidiaries of the Corporation. Obligations associated with the Notes are included in the long-term debt table on page ~~195~~171.

Certain of the Trust Securities were issued at a discount and may be redeemed prior to maturity at the option of the Corporation. The Trusts generally have invested the proceeds of such Trust Securities in the Notes. Each issue of the Notes has an interest rate equal to the corresponding Trust Securities distribution rate. The Corporation has the right to defer payment of interest on the Notes at any time or from time to time for a period not exceeding five years provided that no extension period may extend beyond the stated maturity of the relevant Notes. During any such extension period, distributions on the Trust Securities will also be deferred, and the Corporation’s ability to pay dividends on its common and preferred stock will be restricted.

The Trust Securities generally are subject to mandatory redemption upon repayment of the related Notes at their stated

maturity dates or their earlier redemption at a redemption price equal to their liquidation amount plus accrued distributions to the date fixed for redemption and the premium, if any, paid by the Corporation upon concurrent repayment of the related Notes.

Periodic cash payments and payments upon liquidation or redemption with respect to Trust Securities are guaranteed by the Corporation or its subsidiaries to the extent of funds held by the Trusts (the Preferred Securities Guarantee). The Preferred Securities Guarantee, when taken together with the Corporation’s other obligations including its obligations under the Notes, generally will constitute a full and unconditional guarantee, on a subordinated basis, by the Corporation of payments due on the Trust Securities.

On December 29, 2015, the Corporation provided notice of the redemption, which settled on January 29, 2016, of all trust preferred securities of Merrill Lynch Preferred Capital Trust III, Merrill Lynch Preferred Capital Trust IV and Merrill Lynch Preferred Capital Trust V with a total carrying value in the aggregate of $2.0 billion. In connection with the Corporation’s acquisition of Merrill Lynch & Co., Inc. (Merrill Lynch) in 2009, the Corporation recorded a discount to par value as purchase accounting adjustments associated with these Trust Preferred Securities. The Corporation recorded a charge to net interest income of $612 million in 2015 related to the discount on the securities.



~~196~~172 Bank of America ~~2015~~2016

The Trust Securities Summary table details the outstanding Trust Securities and the related Notes previously issued which remained outstanding at December 31, ~~2015~~2016.

Trust Securities Summary(1)

(Dollars in millions)

December 31, 2015

December 31, 2016

Issuer

Issuance Date

Aggregate
Principal
Amount

of Trust

Securities

Aggregate
Principal
Amount

of the

Notes

Stated Maturity

of the Trust Securities

Per Annum Interest

Rate of the Notes

Interest Payment

Dates

Redemption Period

Issuance Date

Aggregate
Principal
Amount

of Trust

Securities

Aggregate
Principal
Amount

of the

Notes

Stated Maturity

of the Trust Securities

Per Annum Interest

Rate of the Notes

Interest Payment

Dates

Redemption Period

Bank of America

Capital Trust VI

March 2005

March 2035

5.63

Semi-Annual

Any time

March 2005

March 2035

5.63

Semi-Annual

Any time

Capital Trust VII⁽¹⁾⁽²⁾

August 2005

August 2035

5.25

Semi-Annual

Any time

August 2005

August 2035

5.25

Semi-Annual

Any time

Capital Trust VIII

August 2005

524

540

August 2035

6.00

Quarterly

On or after 8/25/10

Capital Trust XI

May 2006

658

678

May 2036

6.63

Semi-Annual

Any time

May 2006

658

678

May 2036

6.63

Semi-Annual

Any time

Capital Trust XV

May 2007

June 2056

3-mo. LIBOR + 80 bps

Quarterly

On or after 6/01/37

May 2007

June 2056

3-mo. LIBOR + 80 bps

Quarterly

On or after 6/01/37

NationsBank

Capital Trust III

February 1997

131

136

January 2027

3-mo. LIBOR + 55 bps

Quarterly

On or after 1/15/07

February 1997

131

136

January 2027

3-mo. LIBOR + 55 bps

Quarterly

On or after 1/15/07

BankAmerica

Capital III

January 1997

103

106

January 2027

3-mo. LIBOR + 57 bps

Quarterly

On or after 1/15/02

January 1997

103

106

January 2027

3-mo. LIBOR + 57 bps

Quarterly

On or after 1/15/02

Fleet

Capital Trust V

December 1998

December 2028

3-mo. LIBOR + 100 bps

Quarterly

On or after 12/18/03

December 1998

December 2028

3-mo. LIBOR + 100 bps

Quarterly

On or after 12/18/03

BankBoston

Capital Trust III

June 1997

June 2027

3-mo. LIBOR + 75 bps

Quarterly

On or after 6/15/07

June 1997

June 2027

3-mo. LIBOR + 75 bps

Quarterly

On or after 6/15/07

Capital Trust IV

June 1998

102

106

June 2028

3-mo. LIBOR + 60 bps

Quarterly

On or after 6/08/03

June 1998

102

106

June 2028

3-mo. LIBOR + 60 bps

Quarterly

On or after 6/08/03

MBNA

Capital Trust B

January 1997

February 2027

3-mo. LIBOR + 80 bps

Quarterly

On or after 2/01/07

January 1997

February 2027

3-mo. LIBOR + 80 bps

Quarterly

On or after 2/01/07

Countrywide

Capital III

June 1997

200

206

June 2027

8.05

Semi-Annual

Only under special event

June 1997

200

206

June 2027

8.05

Semi-Annual

Only under special event

Capital IV

April 2003

500

515

April 2033

6.75

Quarterly

On or after 4/11/08

Capital V

November 2006

1,495

1,496

November 2036

7.00

Quarterly

On or after 11/01/11

November 2006

1,495

1,496

November 2036

7.00

Quarterly

On or after 11/01/11

Merrill Lynch ⁽²⁾

Merrill Lynch

Capital Trust I

December 2006

1,050

1,051

December 2066

6.45

Quarterly

On or after 12/11

December 2006

1,050

1,051

December 2066

6.45

Quarterly

On or after 12/11

Capital Trust II

May 2007

950

951

June 2067

6.45

Quarterly

On or after 6/12

Capital Trust III

August 2007

750

751

September 2067

7.375

Quarterly

On or after 9/12

August 2007

750

751

September 2067

7.375

Quarterly

On or after 9/12

Total

6,699

6,781

4,724

4,773


⁽¹⁾	Bank of America Capital Trust VIII, Countrywide Capital IV and Merrill Lynch Capital Trust II were redeemed during 2016.


⁽²⁾	Notes are denominated in British Pound. Presentation currency is U.S. Dollar.


⁽²⁾	~~Call notices for Merrill Lynch Preferred Capital Trust III, IV and V were sent on December 29, 2015 and settled on January 29, 2016.~~



		Bank of America ~~2015~~2016 ~~197~~173

NOTE 12 Commitments and Contingencies

In the normal course of business, the Corporation enters into a number of off-balance sheet commitments. These commitments expose the Corporation to varying degrees of credit and market risk and are subject to the same credit and market risk limitation reviews as those instruments recorded on the Consolidated Balance Sheet.

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 table below includes the notional amount of unfunded legally binding lending commitments net of amounts distributed (e.g., ~~syndicated)~~syndicated or participated) to other financial ~~institutions of~~institutions. The distributed amounts were $~~14.3~~12.1 billion and $~~15.7~~14.3 billion at December 31, ~~2015~~2016 and ~~2014~~2015. At December 31, ~~2015~~2016, the carrying value of ~~these commitments, excluding commitments~~

these commitments, excluding commitments accounted for under the fair value option, was $~~664~~779 million, including deferred revenue of $1817 million and a reserve for unfunded lending commitments of $~~646~~762 million. At December 31, ~~2014~~2015, the comparable amounts were $~~546~~664 million, $18 million and $~~528~~646 million, respectively. The carrying value of these commitments is classified in accrued expenses and other liabilities on the Consolidated Balance Sheet.

The table below also includes the notional amount of commitments of $~~10.9~~7.0 billion and $~~9.9~~10.9 billion at December 31, ~~2015~~2016 and ~~2014~~2015 that are accounted for under the fair value option. However, the table below excludes cumulative net fair value of $~~658~~173 million and $~~405~~658 million on these commitments, which is classified in accrued expenses and other liabilities. For more information regarding the Corporation’s loan commitments accounted for under the fair value option, see Note 21 – Fair Value Option.



Credit Extension Commitments	Credit Extension Commitments

	December 31, 2015										December 31, 2016
(Dollars in millions)	Expire in One Year or Less		Expire After One Year Through Three Years		Expire After Three Years Through Five Years		Expire After Five Years		Total		Expire in One Year or Less		Expire After One Year Through Three Years		Expire After Three Years Through Five Years		Expire After Five Years		Total
Notional amount of credit extension commitments
Loan commitments	$	87,873	$	119,272	$	158,920	$	37,112	$	403,177	$	82,609	$	133,063	$	152,854	$	22,129	$	390,655
Home equity lines of credit	7,074		18,438		5,126		19,697		50,335		8,806		10,701		2,644		25,050		47,201
Standby letters of credit and financial guarantees ⁽¹⁾	19,584		9,903		3,385		1,218		34,090		19,165		10,754		3,225		1,027		34,171
Letters of credit	1,650		165		258		54		2,127		1,285		103		114		53		1,555
Legally binding commitments	116,181		147,778		167,689		58,081		489,729		111,865		154,621		158,837		48,259		473,582
Credit card lines ⁽²⁾	370,127		—		—		—		370,127		377,773		—		—		—		377,773
Total credit extension commitments	$	486,308	$	147,778	$	167,689	$	58,081	$	859,856	$	489,638	$	154,621	$	158,837	$	48,259	$	851,355

	December 31, 2014										December 31, 2015
Notional amount of credit extension commitments
Loan commitments	$	79,897	$	97,583	$	146,743	$	18,942	$	343,165	$	84,884	$	119,272	$	158,920	$	37,112	$	400,188
Home equity lines of credit	6,292		19,679		12,319		15,417		53,707		7,074		18,438		5,126		19,697		50,335
Standby letters of credit and financial guarantees ⁽¹⁾	19,259		9,106		4,519		1,807		34,691		19,584		9,903		3,385		1,218		34,090
Letters of credit	1,883		157		35		88		2,163		1,650		165		258		54		2,127
Legally binding commitments	107,331		126,525		163,616		36,254		433,726		113,192		147,778		167,689		58,081		486,740
Credit card lines ⁽²⁾	363,989		—		—		—		363,989		370,127		—		—		—		370,127
Total credit extension commitments	$	471,320	$	126,525	$	163,616	$	36,254	$	797,715	$	483,319	$	147,778	$	167,689	$	58,081	$	856,867

⁽¹⁾

The notional amounts of SBLCs and financial guarantees classified as investment grade and non-investment grade based on the credit quality of the underlying reference name within the instrument were $25.5 billion and $8.3 billion at December 31, 2016, and $25.5 billion and $8.4 billion at December 31, 2015~~, and~~ ~~$26.1 billion~~ ~~and~~ ~~$8.2 billion~~ at ~~December 31, 2014~~. Amounts in the table include consumer SBLCs of $~~164~~376 million and $~~396~~164 million at December 31, ~~2015~~2016 and ~~2014~~2015.


⁽²⁾	Includes business card unused lines of credit.

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.

Other Commitments

At December 31, ~~2015~~2016 and ~~2014~~2015, the Corporation had commitments to purchase loans (e.g., residential mortgage and commercial real estate) of $~~729~~767 million and $~~1.8 billion~~729 million, and commitments to purchase commercial loans of $636 million and $874 million, which upon settlement will be included in loans or LHFS.

At both December 31, ~~2015~~2016 and ~~2014~~2015, the Corporation had commitments to purchase commodities, primarily liquefied natural gas of $1.9 billion, ~~and $241 million,~~ which upon settlement will be included in trading account assets.

At December 31, ~~2015~~2016 and ~~2014~~2015, the Corporation had commitments to enter into resale and forward-dated resale and securities borrowing agreements of $~~92.6~~48.9 billion and $~~73.2~~88.6 billion, and commitments to enter into forward-dated repurchase and securities lending agreements of $~~59.2~~24.4 billion and $~~55.8~~53.7 billion. These commitments expire within the next 12 months.

The Corporation has entered into agreements to purchase retail automotive loans from certain auto loan originators. These agreements provide for stated purchase amounts and contain cancellation provisions that allow the Corporation to terminate its commitment to purchase at any time, with a minimum notification period. At December 31, 2016 and 2015, the Corporation’s maximum purchase commitment was $475 million and $1.2 billion. In addition, the Corporation has a commitment to originate or purchase auto loans and leases from a strategic partner up to $2.4 billion in 2017, with this commitment expiring on December 31, 2017.



174 Bank of America 2016

The Corporation is a party to operating leases for certain of its premises and equipment. Commitments under these leases are approximately $~~2.5~~2.3 billion, $2.1 billion, $~~1.7~~1.8 billion, $~~1.5~~1.6 billion and $1.3 billion for ~~2016~~2017 through ~~2020~~2021, respectively, and $~~4.6~~4.5 billion in the aggregate for all years thereafter.



~~198~~ ~~Bank of America 2015~~

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. The book value protection is provided on portfolios of intermediate investment-grade fixed-income securities and is intended to cover any shortfall in the event that policyholders surrender their policies and market value is below book value. These guarantees are recorded as derivatives and carried at fair value in the trading portfolio. At December 31, ~~2015~~2016 and ~~2014~~2015, the notional amount of these guarantees totaled $~~13.8~~13.9 billion and ~~$13.6~~$13.8 billion. At ~~both~~ December 31, ~~2015~~2016 and ~~2014~~2015, the Corporation’s maximum exposure related to these guarantees totaled $~~3.1~~3.2 billion and $3.1 billion, with estimated maturity dates between 2031 and 2039. The net fair value including the fee receivable associated with these guarantees was $124 million and $2512 million at December 31, ~~2015~~2016 and ~~2014~~2015, and reflects the probability of surrender as well as the multiple structural protection features in the contracts.

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 future 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 the early termination clause. Historically, 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. In connection with these services, a liability may arise in the event of a billing dispute between the merchant and a cardholder that is ultimately resolved in the cardholder’s favor. If the merchant defaults on its obligation to reimburse the cardholder, the cardholder, through its issuing bank, generally has until six months after the date of the transaction to present a chargeback to the merchant processor, which is primarily liable for any losses on covered transactions. However, if the merchant processor fails to

meet its obligation to reimburse the cardholder for disputed transactions, then the Corporation, as the sponsor, could be held liable for the disputed amount. In ~~2015~~2016 and ~~2014~~2015, the sponsored

entities processed and settled $~~669.0~~731.4 billion and $~~647.1~~669.0 billion of transactions and recorded losses of $2233 million and $1622 million. A significant portion of this activity was processed by a joint venture in which the Corporation holds a 49 percent ~~ownership.~~ownership, and is recorded in other assets on the Consolidated Balance Sheet and in All Other. At December 31, ~~2015~~2016 and ~~2014~~2015, the carrying value of the Corporation's investment in the merchant services joint venture was $2.9 billion and $3.0 billion. At December 31, 2016 and 2015, the sponsored merchant processing servicers held as collateral $~~181~~188 million and $~~130~~181 million of merchant escrow deposits which may be used to offset amounts due from the individual merchants.

The Corporation believes the maximum potential exposure for chargebacks would not exceed the total amount of merchant transactions processed through Visa and MasterCard for the last six months, which represents the claim period for the cardholder, plus any outstanding delayed-delivery transactions. As of December 31, ~~2015~~2016 and ~~2014~~2015, the maximum potential exposure for sponsored transactions totaled $~~277.1~~325.7 billion and $~~269.3~~277.1 billion. However, the Corporation believes that the maximum potential exposure is not representative of the actual potential loss exposure and does not expect to make material payments in connection with these guarantees.

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 potential for the Corporation to be required to make these payments is 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 arrangements, 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 firm on behalf of clients or their customers. The Corporation’s maximum 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.



		~~Bank of America 2015199~~

~~Other Derivative Contracts~~

The Corporation funds selected assets, including securities issued by CDOs and CLOs, through derivative contracts, typically total return swaps, with third parties and VIEs that are not consolidated by the Corporation. The total notional amount of these derivative contracts was ~~$371 million~~ ~~and~~ ~~$527 million~~ ~~with commercial banks and~~ ~~$921 million~~ ~~and~~ ~~$1.2 billion~~ ~~with VIEs at~~ ~~December 31, 2015 and 2014~~. The underlying securities are senior securities and substantially all of the Corporation’s exposures are insured. Accordingly, the Corporation’s exposure to loss consists principally of counterparty risk to the insurers. In certain circumstances, generally as a result of ratings downgrades, the Corporation may be required to purchase the underlying assets, which would not result in additional gain or loss to the Corporation as such exposure is already reflected in the fair value of the derivative contracts.

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 payment under these agreements was approximately $~~6.0~~6.7 billion and $~~6.2~~6.0 billion



		Bank of America 2016175

at December 31, ~~2015~~2016 and ~~2014~~2015. The estimated maturity dates of these obligations extend up to 2040. The Corporation has made no material payments under these guarantees.

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.

Payment Protection Insurance Claims Matter

In the U.K., the Corporation previously sold ~~payment protection insurance (PPI)~~PPI through its international card services business to credit card customers and consumer loan customers. PPI covers a consumer’s loan or debt repayment if certain events occur such as loss of job or illness. In response to an elevated level of customer complaints across the industry, heightened media coverage and pressure from consumer advocacy groups, the Prudential Regulation Authority and the Financial Conduct Authority (FCA) investigated and raised concerns about the way some companies have handled complaints related to the sale of these insurance policies. On December 20, 2016, the Corporation entered into an agreement to sell its non-U.S. consumer credit card business to a third party. Subject to regulatory approval, this transaction is expected to close by mid-2017. After closing, the Corporation will retain substantially all PPI exposure above existing reserves. The Corporation has considered this exposure in its estimate of a small after-tax gain on the sale. In ~~November 2015,~~August 2016, the FCA issued ~~proposed guidance~~a further consultation paper on the treatment of certain PPI ~~claims.~~claims and expects to finalize guidance by the first quarter of 2017.

The reserve for PPI claims was ~~$360~~$252 million and ~~$378~~$360 million at December 31, ~~2015~~2016 and ~~2014.~~2015. The Corporation recorded expense of $145 million and $319 million in 2016 and ~~$621~~2015.

FDIC

In 2016, the FDIC implemented a surcharge of 4.5 cents per $100 of their assessment base, after making certain adjustments, on insured depository institutions with total assets of $10 billion or more. The FDIC expects the surcharge to be in effect for approximately two years. If the Deposit Insurance Fund (DIF) reserve ratio does not reach 1.35 percent by December 31, 2018, the FDIC will impose a shortfall assessment on any bank subject to the surcharge. The surcharge increased the Corporation’s deposit insurance assessment for 2016 by approximately $200 million, ~~in 2015~~ and ~~2014. It is possible that~~ the Corporation ~~will incur additional~~expects approximately $100 million of expense per quarter related to ~~PPI claims; however,~~ the ~~amount~~surcharge in the future. The FDIC has also adopted regulations that establish a long-term target DIF ratio of ~~such~~greater than two percent, which would be expected to impose additional ~~expense cannot~~deposit insurance costs on the Corporation. Deposit insurance assessment rates are subject to change by the FDIC, and can be ~~reasonably estimated.~~impacted by the overall economy, the stability of the banking industry as a whole, and regulations or regulatory interpretations.

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 what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss, fines or penalties related to each pending matter may be.

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 Corporation continues to monitor the matter for further developments that could affect the amount of the accrued liability that has been previously established. Excluding expenses of internal and external legal service providers, litigation-related expense of $1.2 billion was recognized for both 2016 and 2015 ~~compared to~~ ~~$16.4 billion~~ ~~for~~ ~~2014~~.

For a limited number of the matters disclosed in this Note, for which a loss, whether in excess 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 potentially relevant factual and legal developments. 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 may not be possible. For those matters where an estimate of the range of possible loss is possible, management currently estimates the aggregate range of possible loss is $0 to $~~2.4~~1.5 billion in excess of the accrued liability (if any) related to those matters. This estimated range of possible loss is based upon currently available information and is subject to significant judgment and a variety of assumptions, and known and unknown uncertainties. The matters underlying the estimated range will change from time to time, and actual results may vary significantly from the current estimate. Therefore, this estimated range of possible loss represents what the Corporation believes to be an estimate of possible loss only for certain matters meeting these criteria. It does not represent the Corporation’s maximum loss exposure.

Information is provided below regarding the nature of all of these contingencies and, where specified, the amount of the claim associated with these loss contingencies. Based on current knowledge, management does not believe that loss contingencies arising from pending matters, including the matters described herein, will have a material adverse effect on the consolidated financial position or liquidity of the Corporation. However, in light of the inherent 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 Corporation’s results of operations or liquidity for any particular reporting period.



~~200~~176 Bank of America ~~2015~~2016

Ambac Bond Insurance Litigation

Ambac ~~Countrywide Litigation~~Assurance Corporation and the Segregated Account of Ambac Assurance Corporation (together, Ambac) have filed five 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 assert that the defendants misrepresented the characteristics of the underlying loans and/or breached certain contractual representations 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.

Ambac v. Countrywide I

The Corporation, Countrywide and other Countrywide entities are named as defendants in an action filed on September 29, 2010 ~~and as amended on May 28, 2013, by Ambac Assurance Corporation and the Segregated Account of Ambac Assurance Corporation (together, Ambac), entitled~~ ~~Ambac Assurance Corporation and The Segregated Account of Ambac Assurance Corporation v. Countrywide Home Loans, Inc., et al. This action, currently pending~~ in New York Supreme ~~Court, relates to bond insurance policies provided by~~Court. Ambac ~~on certain securitized pools of second-lien (and in one pool, first-lien) HELOCs, first-lien subprime home equity loans and fixed-rate second-lien mortgage loans. Plaintiffs allege that they have paid~~ claims as a result of defaults in the underlying loans and assert that the Countrywide defendants misrepresented the characteristics of the underlying loans and breached certain contractual representations and warranties regarding the underwriting and servicing of the loans. Plaintiffs also allege that the Corporation is liable based on successor liability theories. Damages claimed by Ambac aredamages in excess of $2.2 billion, ~~and include the amount of payments for current and future claims it has paid or claims it will be obligated to pay under the policies, increasing over time as it pays claims under relevant policies,~~ plus unspecified punitive damages.

On October 22, 2015, the New York Supreme Court granted in part and denied in part Countrywide’s motion for summary judgment and Ambac’s motion for partial summary judgment. Among other things, the court granted summary judgment dismissing Ambac’s claim for rescissory damages and denied summary judgment regarding Ambac’s claims for fraud and breach of the insurance agreements. The court also denied the Corporation’s motion for summary judgment and granted in part Ambac’s motion for partial summary judgment on Ambac’s successor-liability claims with respect to a single element of its de facto merger claim. The court denied summary judgment on the other elements of Ambac’s de facto merger claim and the other successor-liability claims. The parties filed cross-appeals with the First Department, which are pending.

Ambac ~~filed its notice of appeal on October 27, 2015. The Corporation filed its notice of appeal on November 16, 2015.~~v. Countrywide ~~filed its notice of cross-appeal on November 18, 2015.~~II

On December 30, 2014, Ambac filed a ~~second~~ complaint in ~~the same~~ New York Supreme Court against the same defendants, ~~entitled~~ ~~Ambac Assurance Corporation and The Segregated Account of Ambac Assurance Corporation v.Countrywide Home Loans, Inc., et al.~~, claiming fraudulent inducement against Countrywide, and successor and vicarious liability against the Corporation relating to eight partially Ambac-insured RMBS transactions that closed between 2005 and 2007, all backed by negative amortization pay option adjustable-rate mortgage (ARM) loans that were originated in whole or in part by Countrywide. Seven of the eight securitizations were issued and underwritten by non-parties to the litigation.Corporation. Ambac claims damages in excess of $600 million ~~consisting of all alleged past~~plus punitive damages. On December 19, 2016, the court granted in part and ~~future claims against its policies, plus other unspecified compensatory and punitive damages.~~denied in part Countrywide's motion to dismiss the complaint.

~~Also on~~Ambac v. Countrywide III

On December 30, 2014, Ambac filed ~~a third~~an action in Wisconsin ~~Circuit Court, Dane County,~~state court against ~~Countrywide Home Loans, Inc., entitled~~ ~~The Segregated Account of Ambac Assurance~~

~~Corporation and Ambac Assurance Corporation v. Countrywide Home Loans, Inc.,~~ claiming that Ambac was fraudulently induced to insure portions of five securitizations issued and underwritten in 2005 by a non-party that included Countrywide-originated first-lien negative amortization pay option ARM loans.Countrywide. The complaint seeks damages in excess of $350 million ~~for all alleged past and future Ambac insured claims payment obligations,~~ plus ~~other unspecified compensatory and~~ punitive damages. Countrywide ~~filed~~has challenged the Wisconsin courts' jurisdiction over it. Following a ~~motion to dismiss~~ruling by the ~~complaint on February 20, 2015. On July 2, 2015, the~~lower court ~~dismissed the complaint for lack of personal jurisdiction. Ambac appealed the dismissal to~~that jurisdiction did not exist, the Court of Appeals of Wisconsin ~~District IV, on July 21, 2015.~~reversed. Countrywide sought review by the Wisconsin Supreme Court, which has agreed to decide the issue. The appeal ~~remains under consideration.~~is pending.

Ambac v. Countrywide IV

On July 21, 2015, Ambac filed ~~a fourth~~an action in New York Supreme Court against Countrywide ~~Home Loans, Inc., entitled~~ ~~Ambac Assurance Corporation and The Segregated Account of Ambac Assurance Corporation v.Countrywide Home Loans, Inc~~. asserting the same claims for fraudulent inducement that ~~were~~Ambac asserted in ~~the Wisconsin complaint.~~Ambac v. Countrywide III. Ambac simultaneously moved to stay the action pending resolution of its appeal in ~~the Wisconsin action.~~Ambac v. Countrywide ~~opposed the motion to stay and on August 10, 2015,~~III. Countrywide moved to dismiss the complaint. ~~The~~On September

20, 2016, the court ~~heard argument on~~granted Ambac's motion to stay the ~~motions on November 18, 2015. Both motions remain under consideration.~~action pending resolution of the Wisconsin Supreme Court appeal in Ambac v. Countrywide III.

Ambac v. First Franklin ~~Litigation~~

On April 16, 2012, Ambac ~~sued~~filed an action against BANA, First Franklin ~~Financial Corporation (First Franklin), BANA,~~and various Merrill Lynch entities, including Merrill Lynch, Pierce, Fenner & Smith ~~Inc.~~Incorporated (MLPF&S), ~~Merrill Lynch Mortgage Lending, Inc. (MLML), and Merrill Lynch Mortgage Investors, Inc. (MLMI)~~ in New York Supreme ~~Court. Ambac’s claims relate~~Court relating to guaranty insurance Ambac provided on a First Franklin securitization ~~(Franklin Mortgage Loan Trust, Series 2007-FFC). MLML~~ sponsored ~~and Ambac insured certain certificates in the securitization.~~by Merrill Lynch. The complaint alleges that defendants breached representations and warranties concerning, among other things, First Franklin’s lending practices, the characteristics of the underlying mortgage loans, the underwriting guidelines followed in originating those loans, and the due diligence conducted with respect to those loans. The complaint asserts claims for fraudulent inducement and breach of contract, ~~indemnification and attorneys’ fees. Ambac also asserts~~including breach of contract claims against BANA based upon its servicing of the loans in the securitization. The complaint alleges that Ambac has paid hundreds of millions of dollars in claims and has accrued and continues to accrue tens of millions of dollars in additional ~~claims, and~~claims. Ambac seeks as damages the total claims it has paid and its projected future claims payment obligations, as well as specific performance of defendants’ contractual repurchase obligations.

On July 19, 2013, the court granted in part and denied in part defendants’ motion to dismiss ~~Ambac’s contract and fraud causes of action but dismissed Ambac’s indemnification cause of action. In addition,~~ the ~~court denied defendants’ motion to dismiss Ambac’s claims for attorneys’ fees and punitive damages.~~complaint. On September 17, 2015, the court ~~denied Ambac’s motion to strike defendants’ affirmative defense of in pari delicto and~~ granted Ambac’s motion to strike defendants’ affirmative defense of unclean hands.

ATM Access Fee Litigation

On January 10, 2012, a putative consumer class action was filed against Visa, Inc., MasterCard, Inc., and several financial institutions, including Bank of America Corporation and Bank of America, N.A. (collectively “Bank of America”), alleging that surcharges paid at bank ATMs are artificially inflated by Visa and MasterCard rules and regulations. The network rules are alleged to be the product of a conspiracy between Visa, MasterCard and banks in violation of Section 1 of the Sherman Act. Plaintiffs seek both injunctive relief, and monetary damages equal to treble the damages they claim to have sustained as a result of the alleged violations.

Bank of America, along with all other co-defendants, moved to dismiss the complaint on January 30, 2012. On February 13, 2013, the District Court granted the motion and dismissed the case. The plaintiffs moved the District Court for leave to file amended complaints, and on December 19, 2013, the District Court denied the motions to amend.

On January 14, 2014, plaintiffs filed a notice of appeal in the United States Court of Appeals for the District of Columbia Circuit (the “D.C. Circuit”). On August 4, 2015, the D.C. Circuit vacated the District Court’s decision and remanded the case to the District Court for further proceedings. On September 3, 2015, the networks and bank defendants filed petitions for re-hearing or re-hearing en banc before the D.C. Circuit. In a per curium order, the D.C. Circuit denied the petitions on September 28, 2015. On January 27, 2016, defendants filed a petition for certiorari with the United States Supreme Court. On June 28, 2016, the U.S. Supreme Court granted defendants’ petition for a writ of certiorari seeking review of the decision of the D.C. Circuit. On November 17, 2016, the U.S. Supreme Court ordered that the writ of certiorari be dismissed as improvidently granted.

Deposit Insurance Assessment

On January 9, 2017, the FDIC filed suit against BANA in federal district court in 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 for the quarters ending June 30, 2013 through December 31, 2014. The



		Bank of America ~~2015~~2016 ~~201~~177

~~European Commission - Credit Default Swaps Antitrust Investigation~~

~~On July 1, 2013,~~FDIC asserts this claim based on BANA’s alleged underreporting of counterparty exposures that resulted in underpayment of assessments for those quarters. The FDIC also has raised the ~~European Commission (Commission) announced~~prospect that it ~~had addressed a Statement of Objections (SO)~~will seek to assert that BANA underpaid its assessments for the ~~Corporation,~~quarters ending June 30, 2012 through March 31, 2013. BANA ~~and Banc of America Securities LLC (together,~~disagrees with the Bank of America Entities), a number of other financial institutions, Markit Group Limited, and the International Swaps and Derivatives Association (together, the Parties). The SO set forth the Commission’s preliminary conclusion that the Parties infringed European Union competition law by participating in alleged collusion to prevent exchange trading of CDS and futures. According to the SO, the conductFDIC’s interpretation of the ~~Bank of America Entities took place between August 2007~~regulations as they existed during the relevant time period, and ~~April 2009. On December 4, 2015, the Commission announced that it was closing its investigation~~intends to defend itself against the ~~Bank of America Entities and the other financial institutions involved in the investigation.~~FDIC’s claims.

Interchange and Related 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 consolidated in the U.S. District Court for the Eastern District of New York under the caption In Rere Payment Card Interchange Fee and Merchant Discount Anti-Trust Litigation (Interchange), named Visa, MasterCard and several banks and ~~BHCs,~~bank holding companies, including the Corporation, as defendants. Plaintiffs allege that defendants conspired to fix the level of default interchange rates and that certain rules of Visa and MasterCard related to merchant acceptance of payment cards at the point of sale were unreasonable restraints of trade. Plaintiffs sought unspecified damages and injunctive relief. On October 19, 2012, defendants settled the matter.

The settlement provided for, among other things, (i) payments by defendants to the class and individual plaintiffs totaling approximately $6.6 billion, allocated proportionately to each defendant based upon various loss-sharing agreements; (ii) distribution to class merchants of an amount equal to 10 basis points (bps) of default interchange across all Visa and MasterCard credit card transactions for a period of eight consecutive months, which otherwise would have been paid to issuers and which effectively reduces credit interchange for that period of time; and (iii) modifications to certain Visa and MasterCard rules regarding merchant point of sale practices.

The court granted final approval of the class settlement agreement on December 13, 2013. ~~Several class members appealed to~~On June 30, 2016, the ~~U.S.~~Second Circuit Court of Appeals ~~for~~vacated the ~~Second Circuit and the court held oral argument on September 28, 2015.~~

~~On July 28, 2015, certain objectors to the class settlement filed motions asking the district court to vacate or set aside its final~~ judgment approving the settlement ~~or in~~and remanded the ~~alternative, to grant~~case for further ~~discovery, in light of communications between one of MasterCard’s former lawyers and one of the lawyers~~proceedings. On November 23, 2016, counsel for the class ~~plaintiffs. The defendants~~filed a certiorari petition with the United States Supreme Court seeking review of the Second Circuit decision. As a result of the Second Circuit’s decision, the Interchange class case was remanded to the district court, and the parties are in the process of coordinating the case with the already-pending actions brought by merchants who had opted out of the class ~~plaintiffs filed responses to the motions on August 18, 2015 and the objectors filed replies on September 2, 2015. The court has not set oral argument.~~settlement, as described below.

Following district court approval of the class settlement agreement, a number of class members opted out of the ~~settlement.~~settlement, and many filed individual actions against the defendants. The Corporation was named as a defendant in one such individual action, as well as one action brought by cardholders (the “Cardholder Action”). In addition, a number of these individual actions were filed that do not name the Corporation as a defendant. As a result of various loss-sharing agreements, ~~from the main Interchange litigation,~~however, the Corporation remains liable for any settlement or judgment in ~~opt-out~~these individual suits where it is not named as a defendant.

Now that Interchange has been remanded to the district court, these individual actions will be coordinated as individual merchant lawsuits alongside the Interchange class case.

The Corporation has pending one opt-out suit, as well as an action brought by cardholders. All of the opt-out suits filed to date have been consolidated in the U.S. District Court for the Eastern District of New York. On ~~July 18, 2014, the court denied defendants’ motion to dismiss opt-out complaints filed by merchants, and on~~ November 26, 2014, the court granted defendants’ motion to dismiss the Sherman Act claim in the ~~cardholder complaint. In the cardholder action, the parties have moved for reconsideration of the court’s November 26, 2014 decision dismissing the Sherman Act claim, and have also~~Cardholder Action. Plaintiffs appealed ~~the decision~~that dismissal to the ~~U.S.~~Second Circuit Court of ~~Appeals for~~

Appeals. On October 17, 2016, the Second ~~Circuit.~~Circuit issued a summary order affirming the dismissal and, on October 31, 2016, it denied plaintiffs' petition for rehearing en banc.

LIBOR, Other Reference ~~Rate and~~Rates, Foreign Exchange (FX) ~~Inquiries~~ and ~~Litigation~~Bond Trading Matters

Government authorities in the Americas, Europe and the Asia Pacific region continue to conduct investigations and make inquiries of a significant number of FX market participants, including the Corporation, regarding FX market participants’ conduct and systems and controls. Government authorities ~~in these regions~~ also continue to conduct investigations concerning ~~submissions made by~~conduct and systems and controls of panel banks in connection with the setting of LIBOR and other reference ~~rates.~~rates as well as the trading of government, sovereign, supranational, and agency bonds. The Corporation is responding to and cooperating with these investigations.

In addition, the Corporation, BANA and certain Merrill Lynch ~~affiliates~~entities have been named as defendants along with most of the other LIBOR panel banks in a ~~series~~number of individual and putative class actions relating to defendants’ U.S. Dollar LIBOR contributions. All cases naming the Corporation and its affiliates relating to U.S. Dollar LIBOR have been or are in the process of being consolidated for pre-trial purposes in the U.S. District Court for the Southern District of New York by the Judicial Panel on Multidistrict Litigation. ~~The Corporation expects that any future U.S. Dollar LIBOR cases naming it or its affiliates will similarly be consolidated for pre-trial purposes.~~ Plaintiffs allege that they held or transacted in U.S. Dollar LIBOR-based financial instruments and sustained losses 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 (CEA), Racketeer Influenced and Corrupt Organizations (RICO), Securities Exchange Act of 1934 (Exchange Act), common law fraud, and breach of contract claims, and seek compensatory, treble and punitive damages, and injunctive relief.

InBeginning in March 2013, in a series of rulings, the court dismissed antitrust, RICO, Exchange Act and certain state law claims, and substantially limited the scope of CEA and various other claims. As to the Corporation and BANA, the court also dismissed manipulation claims based on alleged trader conduct. ~~Some~~On May 23, 2016, the U.S. Court of Appeals for the Second Circuit reversed the district court’s dismissal of the antitrust claims and remanded for further proceedings in the district court, and on December 20, 2016, the district court dismissed certain plaintiffs’ antitrust claims in their entirety and substantially limited the scope of the remaining antitrust claims.

On October 20, 2016, defendants filed a petition for a writ of certiorari to the U.S. Supreme Court to review the Second Circuit’s decision and, on January 17, 2017, the U.S. Supreme Court denied the defendants’ petition. Certain antitrust, CEA, and state law claims remain pending in the district court against the Corporation, BANA and certain Merrill Lynch ~~affiliates remain pending, however,~~entities, and the court is continuing to consider motions regarding them. Certain plaintiffs are also pursuing an appeal in the Second Circuit of the dismissal of their ~~antitrust~~Exchange Act and state law claims.

In addition, ~~in a consolidated amended complaint filed on March 31, 2014,~~ the Corporation, BANA and ~~BANA~~MLPF&S were named as defendants along with other FX market participants in a putative class action filed in the U.S. District Court for the Southern District of New York, ~~on behalf of~~in which plaintiffs ~~and a putative class who allegedly transacted in FX and are domiciled in the U.S. or transacted in FX in the U.S. The complaint alleges~~allege that ~~class members~~they sustained losses as a result of the defendants’ alleged conspiracy to manipulate the ~~WM/Reuters Closing Spot Rates.~~prices of over-the-counter FX transactions and FX transactions on an exchange. Plaintiffs assert ~~a single claim~~antitrust claims and claims for violations of ~~Sections 1~~the CEA and 3seek compensatory and treble damages,



~~202~~178 Bank of America ~~2015~~2016

~~of the Sherman Act and seek compensatory and treble damages,~~ as well as declaratory and injunctive relief.

On January 28, 2015, the court denied defendants’ motion to dismiss. In April 2015, the Corporation and BANA agreed to settle the class action for $180 million. On September 21, 2015, plaintiffs filed a second consolidated amended complaint, in which they named additional defendants, including MLPF&S, added claims for violations of the CEA, and expanded the scope of the FX transactions purportedly affected by the alleged conspiracy to include additional over-the-counter FX transactions and FX transactions on an exchange. On October 1, 2015, the Corporation, BANA and MLPF&S executed a final settlement agreement, in which ~~included~~they agreed to pay $187.5 million to settle the ~~previously-referenced $180 million settlement for persons who transacted in FX over-the-counter and a $7.5 million settlement for persons who transacted in FX on an exchange only.~~litigation. The settlement is subject to final court approval.

~~Montgomery~~

The Corporation, several current and former officers and directors, Banc of America Securities LLC (BAS), MLPF&S and other unaffiliated underwriters have been named as defendants in a putative class action filed in the U.S. District Court for the Southern District of New York entitled ~~Montgomery v. Bank of America, et al.~~ Plaintiff filed an amended complaint on January 14, 2011. Plaintiff seeks to represent all persons who acquired certain series of preferred stock offered by the Corporation pursuant to a shelf registration statement dated May 5, 2006. Plaintiff’s claims arise from three offerings dated January 24, 2008, January 28, 2008 and May 20, 2008, from which the Corporation allegedly received proceeds of $15.8 billion. The amended complaint asserts claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, and alleges that the prospectus supplements associated with the offerings: (i) failed to disclose that the Corporation’s loans, leases, CDOs and commercial MBS were impaired to a greater extent than disclosed; (ii) misrepresented the extent of the impaired assets by failing to establish adequate reserves or properly record losses for its impaired assets; (iii) misrepresented the adequacy of the Corporation’s internal controls in light of the alleged impairment of its assets; (iv) misrepresented the Corporation’s capital base and Tier 1 leverage ratio for risk-based capital in light of the allegedly impaired assets; and (v) misrepresented the thoroughness and adequacy of the Corporation’s due diligence in connection with its acquisition of Countrywide. The amended complaint seeks rescission, compensatory and other damages. On March 16, 2012, the court granted defendants’ motion to dismiss the first amended complaint. On December 3, 2013, the court denied plaintiffs’ motion to file a second amended complaint.

On June 15, 2015, the U.S. Court of Appeals for the Second Circuit affirmed the district court’s denial of plaintiff’s motion to amend. On June 29, 2015, plaintiff filed a petition for rehearing en banc.

On July 31, 2015, the U.S. Court of Appeals denied plaintiff’s petition for rehearing en banc. On January 11, 2016, the U.S. Supreme Court denied plaintiff’s petition for a writ of certiorari, thereby exhausting plaintiff’s appellate options.

Mortgage-backed Securities Litigation

The Corporation and its affiliates, Countrywide entities and their affiliates, and Merrill Lynch entities and their affiliates have been named as defendants in ~~a number of~~ cases relating to their various roles ~~as issuer, originator, seller, depositor, sponsor, underwriter~~

~~and/or controlling entity~~ in MBS ~~offerings, pursuant to which the MBS investors were entitled to a portion of the cash flow from the underlying pools of mortgages.~~offerings. These ~~cases generally include purported class action suits and actions by individual MBS purchasers. Although the allegations vary by lawsuit, these~~ cases generally allege that the registration statements, prospectuses and prospectus supplements for securities issued by securitization trusts contained material misrepresentations and omissions, in violation of the Securities Act of 1933 and/or state securities laws and other state statutory laws and/or common law. In addition, certain of these entities have received claims for contractual indemnification related to MBS securities actions, including claims from underwriters of MBS that were issued by these entities, and ~~common laws.~~from underwriters and issuers of MBS backed by loans originated by these entities.

These cases generally involve allegations of false and misleading statements regarding: (i) the process by which the properties that served as collateral for the mortgage loans underlying the MBS were appraised; (ii) the percentage of equity that mortgage borrowers had in their homes; (iii) the borrowers’ ability to repay their mortgage loans; (iv) the underwriting practices by which those mortgage loans were originated; and (v) the ratings given to the different tranches of MBS by rating ~~agencies; and (vi) the validity of each issuing trust’s title to the mortgage loans comprising the pool for that securitization (collectively, MBS Claims).~~agencies. Plaintiffs in these cases generally seek unspecified compensatory and/or rescissory damages, unspecified costs and legal ~~fees and, in some instances, seek rescission.~~

The Corporation, Countrywide, Merrill Lynch and their affiliates may have claims for or may be subject to claims for contractual indemnification in connection with their various roles in regard to MBS. Certain of these entities have received claims for indemnification related to MBS securities actions, including claims from underwriters of MBS that were issued by these entities, and from underwriters and issuers of MBS backed by loans originated by these entities.

~~FHLB Seattle Litigation~~

On December 23, 2009, the Federal Home Loan Bank of Seattle (FHLB Seattle) filed four separate complaints, each against different defendants, including the Corporation and its affiliates, Countrywide and its affiliates, and MLPF&S and its affiliates, as well as certain other defendants, in the Superior Court of Washington for King County entitled ~~Federal Home Loan Bank of Seattle v. UBS Securities LLC, et al.~~; ~~Federal Home Loan Bank of Seattle v. Countrywide Securities Corp., et al.~~; ~~Federal Home Loan Bank of Seattle v. Banc of America Securities LLC, et al.~~ ~~and~~ ~~Federal Home Loan Bank of Seattle v. Merrill Lynch, Pierce, Fenner & Smith, Inc., et al~~. FHLB Seattle asserts certain MBS Claims pertaining to its alleged purchases in 12 MBS offerings between 2005 and 2007. In those complaints, FHLB Seattle seeks, among other relief, unspecified damages under the Securities Act of Washington. On July 19, 2011, the Court denied the defendants’ motions to dismiss the complaints. In November 2015, the Court denied motions for summary judgment filed by all defendants that addressed certain common issues, including the method for calculating pre-judgment interest in the event an award of interest is ultimately made under the Securities Act of Washington. Motions for summary judgment filed by defendants addressing issues specific to each complaint and defendant, as well as additional issues common to all defendants, remain pending.

~~Luther Class Action Litigation and Related Actions~~

~~Beginning in 2007, a number of pension funds and other investors filed putative class action lawsuits alleging certain MBS Claims against Countrywide, several of its affiliates, MLPF&S, the~~



		~~Bank of America 2015203~~

Corporation, NB Holdings Corporation and certain other defendants. Those class action lawsuits concerned a total of 429 MBS offerings involving over $350 billion in securities issued by subsidiaries of Countrywide between 2005 and 2007. The actions, entitled Luther v. Countrywide Financial Corporation, et al., Maine State Retirement System v. Countrywide Financial Corporation, et al., Western Conference of Teamsters Pension Trust Fund v. Countrywide Financial Corporation, et al., ~~and~~ ~~Putnam Bank v. Countrywide Financial Corporation, et al.~~, were all assigned to the Countrywide RMBS MDL court. On December 6, 2013, the court granted final approval to a settlement of these actions in the amount of $500 million. Beginning on January 14, 2014, a number of class members appealed to the U.S. Court of Appeals for the Ninth Circuit. Oral argument is expected to be held in the second quarter of 2016.fees.

Mortgage Repurchase Litigation

U.S. Bank - Harborview Repurchase Litigation

On August 29, 2011, U.S. Bank, National Association (U.S. Bank), as trustee for the HarborView Mortgage Loan Trust 2005-10 (the Trust), a mortgage pool backed by loans originated by Countrywide Home Loans, Inc. (CHL), filed a complaint in New York Supreme Court, in a case entitled U.S. Bank National Association, as Trustee for HarborView Mortgage Loan Trust, Series 2005-10 v. Countrywide Home Loans, Inc. (dba Bank of America Home Loans), Bank of America Corporation, Countrywide Financial Corporation, Bank of America, N.A., and NB Holdings ~~Corporation.~~Corporation. U.S. Bank asserts that, as a result of alleged misrepresentations by CHL in connection with its sale of the loans, defendants must repurchase all the loans in the pool, or in the alternative, that it must repurchase a subset of those loans as to which U.S. Bank alleges that defendants have refused specific repurchase demands. U.S. Bank asserts claims for breach of contract and seeks specific performance of defendants’ alleged obligation to repurchase the entire pool of loans (alleged to have an original aggregate principal balance of $1.75 billion) or alternatively the aforementioned subset (alleged to have an aggregate principal balance of “over $100 million”), together with reimbursement of costs and expenses and other unspecified relief.

On ~~May 29, 2013, the New York Supreme Court dismissed U.S. Bank’s claim for repurchase of all the mortgage loans~~December 5, 2016, certain certificate-holders in the ~~Trust. The court granted~~Trust agreed to settle the claims in an amount not material to the Corporation, subject to acceptance by U.S. ~~Bank leave to amend this claim. On June 18, 2013, U.S. Bank filed its second amended complaint seeking to replead its claim for repurchase of all loans in the Trust.~~

On February 13, 2014, the court granted defendants’ motion to dismiss the repleaded claim seeking repurchase of all mortgage loans in the Trust; plaintiff appealed that order. On November 13, 2014, the court granted U.S. Bank’s motion for leave to amend the complaint; defendants appealed that order. The amended complaint alleges breach of contract based upon defendants’ failure to repurchase loans that were the subject of specific repurchase demands and also alleges breach of contract based upon defendants’ discovery, during origination and servicing, of loans with material breaches of representations and warranties.

On September 16, 2015, defendants (i) withdrew the appeal that had been noticed, but not briefed, regarding the court’s November 13, 2014 order that had granted U.S. Bank’s motion for leave to amend, and (ii) moved, on the ground of failure to perfect, for dismissal of U.S. Bank’s appeal from the court’s February 13, 2014 order that had dismissed a claim seekingBank.

~~repurchase of all mortgage loans and sought clarification of a prior dismissal order. On September 30, 2015,~~ U.S. Bank ~~advised the court that it did not oppose dismissal of its appeal from the February 13, 2014 order. On December 15, 2015, defendants’ motion to dismiss U.S. Bank’s appeal was granted.~~

~~U.S. Bank Summonses with Notice~~- SURF/OWNIT Repurchase Litigation

On August 29, 2014 and September 2, 2014, U.S. Bank, ~~National Association (U.S. Bank),~~ solely in its capacity as Trustee for seven securitization trusts (the Trusts), served seven summonses with notice commencing actions against First Franklin Financial Corporation, Merrill Lynch Mortgage Lending, Inc., Merrill Lynch Mortgage Investors, Inc. (MLMI), and Ownit Mortgage Solutions Inc. in New York Supreme Court. The summonses advance breach of contract claims alleging that defendants breached representations and warranties related to loans securitized in the Trusts. The summonses allege that defendants failed to repurchase breaching mortgage loans from the Trusts, and seek specific performance of defendants’ alleged obligation to repurchase breaching loans, declaratory judgment, compensatory, rescissory and other damages, and indemnity.

On February 25, 2015 and March 11, 2015, U.S. Bank ~~has~~ served complaints onregarding four of the seven Trusts. On December 7, 2015, the court granted in part and denied in part defendants’ motion to dismiss the complaints. The court dismissed claims for breach of representations and warranties against MLMI, dismissed U.S. Bank’s claims for indemnity and attorneys’ fees, and deferred a ruling regarding defendants’ alleged failure to provide notice of alleged ~~representation~~representations and ~~warranty~~warranties breaches, but upheld the complaints in all other respects. ~~Defendants have until June 8,~~On December 28, 2016, ~~to demand complaints relating to the remaining three Trusts.~~

~~O’Donnell Litigation~~

~~On February 24, 2012, Edward O’Donnell~~U.S. Bank filed a ~~sealed qui tam~~ complaint ~~under the False Claims Act against the Corporation, individually, and as successor~~with respect to ~~Countrywide, CHL and~~ a Countrywide business division known as Full Spectrum Lending. On October 24, 2012, the Department of Justice filed a complaint-in-intervention to join the matter, adding a claim under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) and adding BANA as a defendant. The action is entitled ~~United States of America, ex rel, Edward O’Donnell, appearing Qui Tam v. Bank of America Corp., et al.,~~ and was filed in the U.S. District Court for the Southern District of New York. The complaint-in-intervention asserted certain fraud claims in connection with the sale of loans to FNMA and FHLMC by Full Spectrum Lending and by the Corporation and BANA. On January 11, 2013, the government filed an amended complaint which added Countrywide Bank, FSB (CFSB) and a former officer of the Corporation as defendants. The court dismissed False Claims Act counts on May 8, 2013. On September 6, 2013, the government filed a second amended complaint alleging claims under FIRREA concerning allegedly fraudulent loan sales to the GSEs between August 2007 and May 2008. On September 24, 2013, the government dismissed the Corporation as a defendant. Following a trial, on October 23, 2013, a verdict of liability was returned against CHL, CFSB, BANA and the former officer. On July 30, 2014, the court imposed a civil penalty of $1.3 billion on BANA. On February 3, 2015, the court denied the Corporation’s motions for judgment as a matter of law, or in the alternative, a new trial.



~~204~~ ~~Bank of America 2015~~

~~On February 20, 2015, CHL, CFSB and BANA filed an appeal. The Second Circuit held oral argument on December 16, 2015, but has not issued a decision on the appeal.~~fifth Trust.

Pennsylvania Public School Employees’ Retirement System

The Corporation and several current and former officers were named as defendants in a putative class action filed in the U.S. District Court for the Southern District of New York entitled Pennsylvania Public School Employees’ Retirement System v. Bank of America, et al.

~~Following the filing~~Through a series of ~~a complaint~~complaints first filed on February 2, 2011, plaintiff ~~subsequently filed an amended complaint on September 23, 2011 in which plaintiff sought to sue~~sued on behalf of all persons who acquired the Corporation’s common stock between February 27, 2009 and October 19, 2010 and “Common Equivalent Securities” sold in a December 2009 offering. The amended complaint asserted claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Sections 11 and 15 of the Securities Act of 1933, ~~and alleged~~alleging, among other things that the Corporation’s public statements: (i) concealed problems in the Corporation’s mortgage servicing business resulting from the widespread use of the Mortgage Electronic Recording System; and (ii) failed to disclose the Corporation’s exposure to mortgage repurchase ~~claims; (iii) misrepresented the adequacy of internal controls; and (iv) violated certain Generally Accepted Accounting Principles. The amended complaint sought unspecified damages.~~

On July 11, 2012, the court granted in part and denied in part defendants’ motions to dismiss the amended complaint. All claims under the Securities Act were dismissed against all defendants, with prejudice. The motion to dismiss the claim against the Corporation under Section 10(b) of the Exchange Act was denied. All claims under the Exchange Act against the officers were dismissed, with leave to replead. Defendants moved to dismiss a second amended complaint in which plaintiff sought to replead claims against certain current and former officers under Sections 10(b) and 20(a). On April 17, 2013, the court granted in part and

~~denied in part the motion to dismiss, sustaining Sections 10(b) and 20(a) claims against the current and former officers.~~claims.

On August 12, 2015, the parties agreed to settle the claims for $335 million. ~~The agreement is subject to~~On December 27, 2016, the court granted final ~~documentation and court approval.~~

~~Takefuji Litigation~~

In April 2010, Takefuji Corporation (Takefuji) filed a claim against Merrill Lynch International and Merrill Lynch Japan Securities (MLJS) in Tokyo District Court. The claim concerns Takefuji’s purchase in 2007 of credit-linked notes structured and sold by defendants that resulted in a loss to Takefuji of approximately JPY29.0 billion (approximately $270 million) following an event of default. Takefuji alleges that defendants failed to meet certain disclosure obligations concerning the notes.

~~On July 19, 2013, the Tokyo District Court issued a judgment in defendants’ favor, a decision that Takefuji subsequently appealed~~approval to the Tokyo High Court. On August 27, 2014, the Tokyo High Court vacated the decision of the District Court and issued a judgment awarding Takefuji JPY14.5 billion (approximately $135 million) in damages, plus interest at a rate of five percent from March 18, 2008. On September 10, 2014, defendants filed an appeal with the Japanese Supreme Court. The appeal hearing occurred on February 16, 2016. The Corporation expects a judgment to be issued in the coming months.

~~U.S. Securities and Exchange Commission (SEC) Investigations~~

The SEC has been conducting investigations of the Corporation’s U.S. broker-dealer subsidiary, MLPF&S, regarding compliance with SEC Rule 15c3-3. The Corporation is cooperating with these investigations and is in discussions with the SEC regarding the possibility of resolving these matters. There can be no assurances that these discussions will lead to a resolution or whether the SEC will institute administrative or civil proceedings. The timing, amount and impact of these matters is uncertain.settlement.



		Bank of America ~~2015~~2016 ~~205~~179

NOTE 13 Shareholders’ Equity

Common Stock

Declared Quarterly Cash Dividends on Common Stock ⁽¹⁾

Declaration Date Record Date Payment Date Dividend Per Share

January 21, 2016 March 4, 2016 March 25, 2016 $ 0.05
October 22, 2015 December 4, 2015 December 24, 2015 0.05
July 23, 2015 September 4, 2015 September 25, 2015 0.05
April 16, 2015 June 5, 2015 June 26, 2015 0.05
February 10, 2015 March 6, 2015 March 27, 2015 0.05




Declared Quarterly Cash Dividends on Common Stock ⁽¹⁾

Declaration Date	Record Date	Payment Date	Dividend Per Share
Declaration Date	Record Date	Payment Date	Dividend Per Share
January 26, 2017	March 3, 2017	March 31, 2017	$	0.075
October 27, 2016	December 2, 2016	December 30, 2016	0.075
July 27, 2016	September 2, 2016	September 23, 2016	0.075
April 27, 2016	June 3, 2016	June 24, 2016	0.05
January 21, 2016	March 4, 2016	March 25, 2016	0.05


⁽¹⁾	In ~~2015~~2016 and through February ~~24, 2016~~23, 2017.

The following table summarizes common stock repurchases during 2016, 2015 and 2014.




Common Stock Repurchase Summary

(in millions)	2016		2015		2014
Total number of shares repurchased and retired
CCAR capital plan repurchases	278		140		101
Other authorized repurchases	55		—		—

Total purchase price of shares repurchased and retired ⁽¹⁾
CCAR capital plan repurchases	$	4,312	$	2,374	$	1,675
Other authorized repurchases	800		—		—


⁽¹⁾	Represents reductions to shareholders’ equity due to common stock repurchases.

On ~~March 11, 2015,~~June 29, 2016, the Corporation announced that the Federal Reserve completed its ~~2015~~review of the Corporation's 2016 Comprehensive Capital Analysis and Review (CCAR) ~~and advised that it~~capital plan to which the Federal Reserve did not ~~object to the 2015 capital plan but gave a conditional non-objection under which the Corporation was required to resubmit its~~object. The 2016 CCAR capital plan ~~by September 30, 2015 and address certain weaknesses the Federal Reserve identified in the Corporation’s capital planning process. The requested capital actions~~ included ~~a request~~requests to repurchase ~~$4.0~~$5.0 billion of common stock over ~~five~~four quarters beginning in the ~~second~~third quarter of ~~2015,~~2016, to repurchase common stock to offset the dilution resulting from certain equity-based compensation awards and to ~~maintain~~increase the quarterly common stock dividend ~~at the current rate of~~from $0.05 per ~~share. The~~share to $0.075. On January 13, 2017, the Corporation ~~resubmitted its CCAR capital~~announced a plan ~~on September 30, 2015 and on December 10, 2015,~~to repurchase an additional $1.8 billion of common stock during the first half of 2017, to which the Federal Reserve ~~announced that it~~ did not object, in addition to the ~~resubmitted~~previously announced repurchases associated with the 2016 CCAR capital plan.

In ~~2015,~~2016, the Corporation repurchased and retired ~~140.3~~113 million shares of common stock in connection with the 2015 CCAR capital plan, which reduced ~~shareholders’~~shareholders' equity by ~~$2.4 billion.~~$1.6 billion, completing the share repurchases under the 2015 CCAR capital plan. On March 18, 2016, the Corporation announced that the Board of Directors authorized additional repurchases of common

stock up to $800 million outside of the scope of the 2015 CCAR capital plan to offset the share count dilution resulting from equity incentive compensation awarded to retirement-eligible employees, to which the Federal Reserve did not object. In ~~2014 and 2013,~~2016, the Corporation repurchased and retired ~~101.1 million and 231.7~~55 million shares of common stock in connection with this additional authorization, which reduced ~~shareholders’~~shareholders' equity by ~~$1.7 billion and $3.2 billion.~~$800 million, completing this additional authorization.

At December 31, ~~2015,~~2016, the Corporation had warrants outstanding and exercisable to purchase ~~121.8~~122 million shares of

its common stock ~~at an exercise price of~~ ~~$30.79~~ ~~per share~~ expiring on October 28, 2018, and warrants outstanding and exercisable to purchase ~~150.4~~150 million shares of common stock ~~at an exercise price of $13.107 per share~~ expiring on January 16, 2019. These warrants were originally issued in connection with preferred stock issuances to the U.S. Department of the Treasury in 2009 and 2008, and are listed on the New York Stock Exchange. The exercise price of the warrants expiring on January 16, 2019 is subject to continued adjustment each time the quarterly cash dividend is in excess of $0.01 per common share to compensate the holders of the warrants for dilution resulting from an increased dividend. The Corporation had cash dividends of ~~$0.05 per share per quarter, or $0.20~~$0.075 per share for the third and fourth quarters of 2016, and cash dividends of $0.05 per share for the first and second quarters of 2016, or $0.25 per share for the year, ~~in 2015~~ resulting in an adjustment to the exercise price of these warrants in each quarter. As a result of the Corporation’s ~~2015~~2016 dividends of ~~$0.20~~$0.25 per common share, the exercise price of ~~these~~the warrants expiring on January 16, 2019, was adjusted to ~~$13.107.~~$12.938 per share. The warrants expiring on October 28, 2018, which have an exercise price of $30.79 per share, also contain this anti-dilution provision except the adjustment is triggered only when the Corporation declares quarterly dividends at a level greater than $0.32 per common share.

In connection with the issuance of the Corporation’s 6% Cumulative Perpetual Preferred Stock, Series T (the Series T Preferred Stock), the Corporation issued a warrant to purchase 700 million shares of the Corporation’s common stock. The warrant is exercisable at the holder’s option at any time, in whole or in part, until September 1, 2021, at an exercise price of $7.142857 per share of common stock. The warrant may be settled in cash or by exchanging all or a portion of the Series T Preferred Stock. For more information on the Series T Preferred Stock, see Preferred Stock in this Note.

In connection with employee stock plans, in ~~2015~~2016, the Corporation issued approximately 79 million shares and repurchased approximately 34 million shares of its common stock to satisfy tax withholding obligations. At December 31, ~~2015~~2016, the Corporation had reserved 1.6 billion unissued shares of common stock for future issuances under employee stock plans, common stock warrants, convertible notes and preferred stock.



~~206~~180 Bank of America ~~2015~~2016

Preferred Stock

~~The cash dividends declared on preferred stock were $1.5 billion, $1.0 billion and $1.2 billion for~~ ~~2015~~, ~~2014~~ ~~and~~ ~~2013, respectively.~~

On January 29, 2016, the Corporation issued 44,000 shares of its 6.200% Non-Cumulative Preferred Stock, Series CC for $1.1 billion. Dividends are paid quarterly commencing on April 29, 2016. Series CC preferred stock has a liquidation preference of $25,000 per share and is subject to certain restrictions in the event that the Corporation fails to declare and pay full dividends.

On January 27, 2015, the Corporation issued 44,000 shares of its 6.500% Non-Cumulative Preferred Stock, Series Y for $1.1 billion. Dividends are paid quarterly commencing on April 27, 2015. On March 17, 2015, the corporation issued 76,000 shares of its Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series AA for $1.9 billion. Dividends are paid semi-annually commencing on September 17, 2015. Series Y and AA preferred stock have a liquidation preference of $25,000 per share and are subject to certain restrictions in the event that the Corporation fails to declare and pay full dividends.

At the Corporation’s annual meeting of stockholders on May 7, 2014, the stockholders approved an amendment to the Series T Preferred Stock such that it qualifies as Tier 1 capital, and the amendment became effective in the three months ended June 30, 2014. The more significant changes to the terms of the Series T Preferred Stock in the amendment were: (1) dividends are no longer cumulative; (2) the dividend rate is fixed at 6%; and (3) the

~~Corporation may redeem the Series T Preferred Stock only after the fifth anniversary of the effective date of the amendment.~~

In 2014, the Corporation issued $6.0 billion of its Preferred Stock, Series V, X, W and Z. On June 17, 2014, the Corporation issued 60,000 shares of its Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series V for $1.5 billion. Dividends are paid semi-annually commencing on December 17, 2014. On September 5, 2014, the Corporation issued 80,000 shares of its Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series X for $2.0 billion. Dividends are paid semi-annually commencing on March 5, 2015. On September 9, 2014, the Corporation issued 44,000 shares of its 6.625% Non-Cumulative Preferred Stock, Series W for $1.1 billion. Dividends are paid quarterly commencing on December 9, 2014. On October 23, 2014, the Corporation issued 56,000 shares of its Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series Z for $1.4 billion. Dividends are paid semi-annually commencing on April 23, 2015. Series V, X, W and Z preferred stock have a liquidation preference of $25,000 per share and are subject to certain restrictions in the event that the Corporation fails to declare and pay full dividends.

~~In 2013, the Corporation redeemed for~~ ~~$6.6 billion~~ its Non-Cumulative Preferred Stock, Series H, J, 6, 7 and 8. The $100 million difference between the carrying value of $6.5 billion and the redemption price of the preferred stock was recorded as a preferred stock dividend. In addition, the Corporation issued $1.0 billion of its Fixed-to-Floating Rate Semi-annual Non-Cumulative Preferred Stock, Series U.



		~~Bank of America 2015207~~

The table below presents a summary of perpetual preferred stock outstanding at December 31, ~~2015.~~2016.



Preferred Stock Summary	Preferred Stock Summary										Preferred Stock Summary

(Dollars in millions, except as noted)	(Dollars in millions, except as noted)										(Dollars in millions, except as noted)
Series	Description	Initial Issuance Date	Total Shares Outstanding	Liquidation Preference per Share (in dollars)		Carrying Value ⁽¹⁾		Per Annum Dividend Rate		Redemption Period ⁽²⁾	Description	Initial Issuance Date	Total Shares Outstanding	Liquidation Preference per Share (in dollars)		Carrying Value ⁽¹⁾		Per Annum Dividend Rate		Redemption Period ⁽²⁾
Series B	7% Cumulative Redeemable	June 1997	7,571	$	100	$	1	7.00	%	n/a	7% Cumulative Redeemable	June 1997	7,110	$	100	$	1	7.00	%	n/a
Series D ⁽³⁾	6.204% Non-Cumulative	September 2006	26,174	25,000		654		6.204	%	On or after September 14, 2011	6.204% Non-Cumulative	September 2006	26,174	25,000		654		6.204	%	On or after September 14, 2011
Series E ⁽³⁾	Floating Rate Non-Cumulative	November 2006	12,691	25,000		317		3-mo. LIBOR + 35 bps ⁽⁴⁾		On or after November 15, 2011	Floating Rate Non-Cumulative	November 2006	12,691	25,000		317		3-mo. LIBOR + 35 bps ⁽⁴⁾		On or after November 15, 2011
Series F	Floating Rate Non-Cumulative	March 2012	1,409	100,000		141		3-mo. LIBOR + 40 bps ⁽⁴⁾		On or after March 15, 2012	Floating Rate Non-Cumulative	March 2012	1,409	100,000		141		3-mo. LIBOR + 40 bps ⁽⁴⁾		On or after March 15, 2012
Series G	Adjustable Rate Non-Cumulative	March 2012	4,926	100,000		493		3-mo. LIBOR + 40 bps ⁽⁴⁾		On or after March 15, 2012	Adjustable Rate Non-Cumulative	March 2012	4,926	100,000		493		3-mo. LIBOR + 40 bps ⁽⁴⁾		On or after March 15, 2012
Series I ⁽³⁾	6.625% Non-Cumulative	September 2007	14,584	25,000		365		6.625	%	On or after October 1, 2017	6.625% Non-Cumulative	September 2007	14,584	25,000		365		6.625	%	On or after October 1, 2017
Series K ⁽⁵⁾	Fixed-to-Floating Rate Non-Cumulative	January 2008	61,773	25,000		1,544		8.00% to, but excluding, 1/30/18; 3-mo. LIBOR + 363 bps thereafter		On or after January 30, 2018	Fixed-to-Floating Rate Non-Cumulative	January 2008	61,773	25,000		1,544		8.00% to, but excluding, 1/30/18; 3-mo. LIBOR + 363 bps thereafter		On or after January 30, 2018
Series L	7.25% Non-Cumulative Perpetual Convertible	January 2008	3,080,182	1,000		3,080		7.25	%	n/a	7.25% Non-Cumulative Perpetual Convertible	January 2008	3,080,182	1,000		3,080		7.25	%	n/a
Series M ⁽⁵⁾	Fixed-to-Floating Rate Non-Cumulative	April 2008	52,399	25,000		1,310		8.125% to, but excluding, 5/15/18; 3-mo. LIBOR + 364 bps thereafter		On or after May 15, 2018	Fixed-to-Floating Rate Non-Cumulative	April 2008	52,399	25,000		1,310		8.125% to, but excluding, 5/15/18; 3-mo. LIBOR + 364 bps thereafter		On or after May 15, 2018
Series T	6% Non-Cumulative	September 2011	50,000	100,000		2,918		6.00	%	See description in Preferred Stock in this Note	6% Non-Cumulative	September 2011	50,000	100,000		2,918		6.00	%	See below ⁽⁶⁾
Series U ⁽⁵⁾	Fixed-to-Floating Rate Non-Cumulative	May 2013	40,000	25,000		1,000		5.2% to, but excluding, 6/1/23; 3-mo. LIBOR + 313.5 bps thereafter		On or after June 1, 2023	Fixed-to-Floating Rate Non-Cumulative	May 2013	40,000	25,000		1,000		5.2% to, but excluding, 6/1/23; 3-mo. LIBOR + 313.5 bps thereafter		On or after June 1, 2023
Series V ⁽⁵⁾	Fixed-to-Floating Rate Non-Cumulative	June 2014	60,000	25,000		1,500		5.125% to, but excluding, 6/17/19; 3-mo. LIBOR + 338.7 bps thereafter		On or after June 17, 2019	Fixed-to-Floating Rate Non-Cumulative	June 2014	60,000	25,000		1,500		5.125% to, but excluding, 6/17/19; 3-mo. LIBOR + 338.7 bps thereafter		On or after June 17, 2019
Series W ⁽³⁾	6.625% Non-Cumulative	September 2014	44,000	25,000		1,100		6.625	%	On or after September 9, 2019	6.625% Non-Cumulative	September 2014	44,000	25,000		1,100		6.625	%	On or after September 9, 2019
Series X ⁽⁵⁾	Fixed-to-Floating Rate Non-Cumulative	September 2014	80,000	25,000		2,000		6.250% to, but excluding, 9/5/24; 3-mo. LIBOR + 370.5 bps thereafter		On or after September 5, 2024	Fixed-to-Floating Rate Non-Cumulative	September 2014	80,000	25,000		2,000		6.250% to, but excluding, 9/5/24; 3-mo. LIBOR + 370.5 bps thereafter		On or after September 5, 2024
Series Y ⁽³⁾	6.500% Non-Cumulative	January 2015	44,000	25,000		1,100		6.500	%	On or after January 27, 2020	6.500% Non-Cumulative	January 2015	44,000	25,000		1,100		6.500	%	On or after January 27, 2020
Series Z ⁽⁵⁾	Fixed-to-Floating Rate Non-Cumulative	October 2014	56,000	25,000		1,400		6.500% to, but excluding, 10/23/24; 3-mo. LIBOR + 417.4 bps thereafter		On or after October 23, 2024	Fixed-to-Floating Rate Non-Cumulative	October 2014	56,000	25,000		1,400		6.500% to, but excluding, 10/23/24; 3-mo. LIBOR + 417.4 bps thereafter		On or after October 23, 2024
Series AA ⁽⁵⁾	Fixed-to-Floating Rate Non-Cumulative	March 2015	76,000	25,000		1,900		6.100% to, but excluding, 3/17/25; 3-mo. LIBOR + 389.8 bps thereafter		On or after March 17, 2025	Fixed-to-Floating Rate Non-Cumulative	March 2015	76,000	25,000		1,900		6.100% to, but excluding, 3/17/25; 3-mo. LIBOR + 389.8 bps thereafter		On or after March 17, 2025
Series 1 ⁽⁶⁾	Floating Rate Non-Cumulative	November 2004	3,275	30,000		98		3-mo. LIBOR + 75 bps ⁽⁷⁾		On or after November 28, 2009
Series 2 ⁽⁶⁾	Floating Rate Non-Cumulative	March 2005	9,967	30,000		299		3-mo. LIBOR + 65 bps ⁽⁷⁾		On or after November 28, 2009
Series 3 ⁽⁶⁾	6.375% Non-Cumulative	November 2005	21,773	30,000		653		6.375	%	On or after November 28, 2010
Series 4 ⁽⁶⁾	Floating Rate Non-Cumulative	November 2005	7,010	30,000		210		3-mo. LIBOR + 75 bps ⁽⁴⁾		On or after November 28, 2010
Series 5 ⁽⁶⁾	Floating Rate Non-Cumulative	March 2007	14,056	30,000		422		3-mo. LIBOR + 50 bps ⁽⁴⁾		On or after May 21, 2012
Series CC ⁽³⁾											6.200% Non-Cumulative	January 2016	44,000	25,000		1,100		6.200	%	On or after January 29, 2021
Series DD⁽⁵⁾											Fixed-to-Floating Rate Non-Cumulative	March 2016	40,000	25,000		1,000		6.300% to, but excluding, 3/10/26; 3-mo. LIBOR + 455.3 bps thereafter		On or after March 10, 2026
Series EE⁽³⁾											6.000% Non-Cumulative	April 2016	36,000	25,000		900		6.000	%	On or after April 25, 2021
Series 1 ⁽⁷⁾											Floating Rate Non-Cumulative	November 2004	3,275	30,000		98		3-mo. LIBOR + 75 bps ⁽⁸⁾		On or after November 28, 2009
Series 2 ⁽⁷⁾											Floating Rate Non-Cumulative	March 2005	9,967	30,000		299		3-mo. LIBOR + 65 bps ⁽⁸⁾		On or after November 28, 2009
Series 3 ⁽⁷⁾											6.375% Non-Cumulative	November 2005	21,773	30,000		653		6.375	%	On or after November 28, 2010
Series 4 ⁽⁷⁾											Floating Rate Non-Cumulative	November 2005	7,010	30,000		210		3-mo. LIBOR + 75 bps ⁽⁴⁾		On or after November 28, 2010
Series 5 ⁽⁷⁾											Floating Rate Non-Cumulative	March 2007	14,056	30,000		422		3-mo. LIBOR + 50 bps ⁽⁴⁾		On or after May 21, 2012
Total			3,767,790			$	22,505						3,887,329			$	25,505


⁽¹⁾	Amounts shown are before third-party issuance costs and certain book value adjustments of $~~232~~285 million.


⁽²⁾	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.


⁽³⁾	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.


⁽⁴⁾	Subject to 4.00% minimum rate per annum.


⁽⁵⁾	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.


⁽⁶⁾	The terms of the Series T preferred stock were amended in 2014, which included changes such that (1) dividends are no longer cumulative, (2) the dividend rate is fixed at 6% and (3) the Corporation may redeem the Series T preferred stock only after the fifth anniversary of the amendment's effective date.


⁽⁷⁾	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.


⁽⁷⁾⁽⁸⁾	Subject to 3.00% minimum rate per annum.

n/a = not applicable



		~~208~~Bank of America ~~2015~~2016181

The cash dividends declared on preferred stock were $1.7 billion, $1.5 billion and $1.0 billion for 2016, 2015 and 2014, respectively.

The 7.25% Non-Cumulative Perpetual Convertible Preferred Stock, Series L (Series L Preferred Stock) listed in the Preferred Stock Summary table 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 Preferred 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 of 30 consecutive trading days, the closing price of common stock exceeds 130 percent of the then-applicable conversion price of the Series L Preferred Stock. If a conversion of Series L Preferred Stock occurs at the option of the holder, subsequent to a dividend record date but prior to the dividend payment date, the Corporation will still pay any accrued dividends payable.

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 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 distribution 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 arrearage.



		182Bank of America ~~2015209~~2016

NOTE 14 Accumulated Other Comprehensive Income (Loss)

The table below presents the changes in accumulated OCI after-tax for ~~2013~~, 2014, 2015 and ~~2015~~.2016.



(Dollars in millions)	Available-for- Sale Debt Securities			Available-for- Sale Marketable Equity Securities			Debit Valuation Adjustments ⁽¹⁾			Derivatives			Employee Benefit Plans			Foreign Currency ⁽²⁾			Total			Debt Securities			Available-for- Sale Marketable Equity Securities			Debit Valuation Adjustments			Derivatives			Employee Benefit Plans			Foreign Currency			Total
Balance, December 31, 2012	$	4,443		$	462		n/a			$	(2,869	)	$	(4,456	)	$	(377	)	$	(2,797	)
Net change	(7,700		)	(466		)	n/a			592			2,049			(135		)	(5,660		)
Balance, December 31, 2013	$	(3,257	)	$	(4	)	n/a			$	(2,277	)	$	(2,407	)	$	(512	)	$	(8,457	)	$	(2,487	)	$	(4	)	n/a			$	(2,277	)	$	(2,407	)	$	(512	)	$	(7,687	)
Net change	4,600			21			n/a			616			(943		)	(157		)	4,137			4,128			21			n/a			616			(943		)	(157		)	3,665
Balance, December 31, 2014	$	1,343		$	17		n/a			$	(1,661	)	$	(3,350	)	$	(669	)	$	(4,320	)	$	1,641		$	17		n/a			$	(1,661	)	$	(3,350	)	$	(669	)	$	(4,022	)
Cumulative adjustment for accounting change	—			—			$	(1,226	)	—			—			—			(1,226		)	—			—			$	(1,226	)	—			—			—			(1,226		)
Net change	(1,643		)	45			615			584			394			(123		)	(128		)	(1,625		)	45			615			584			394			(123		)	(110		)
Balance, December 31, 2015	$	(300	)	$	62		$	(611	)	$	(1,077	)	$	(2,956	)	$	(792	)	$	(5,674	)	$	16		$	62		$	(611	)	$	(1,077	)	$	(2,956	)	$	(792	)	$	(5,358	)
Net change																						(1,315		)	(30		)	(156		)	182			(524		)	(87		)	(1,930		)
Balance, December 31, 2016																						$	(1,299	)	$	32		$	(767	)	$	(895	)	$	(3,480	)	$	(879	)	$	(7,288	)


⁽¹⁾	~~For information on the impact of early adoption of new accounting guidance on recognition and measurement of financial instruments, see~~ ~~Note 1 – Summary of Significant Accounting Principles~~.


⁽²⁾	~~The net change in fair value represents the impact of changes in spot foreign exchange rates on the Corporation’s net investment in non-U.S. operations and related hedges.~~

n/a = not applicable

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 before- and after-tax for 2016, 2015, ~~2014~~ and ~~2013~~.2014.



Changes in OCI Components Before- and After-tax	Changes in OCI Components Before- and After-tax																											Changes in OCI Components Before- and After-tax

	2015									2014									2013									2016									2015									2014
(Dollars in millions)	Before-tax			Tax effect			After-tax			Before-tax			Tax effect			After-tax			Before-tax			Tax effect			After-tax			Before-tax			Tax effect			After-tax			Before-tax			Tax effect			After-tax			Before-tax			Tax effect			After-tax
Available-for-sale debt securities:
Debt securities:
Net increase (decrease) in fair value	$	(1,644	)	$	627		$	(1,017	)	$	8,698		$	(3,268	)	$	5,430		$	(10,989	)	$	4,077		$	(6,912	)	$	(1,645	)	$	622		$	(1,023	)	$	(1,564	)	$	595		$	(969	)	$	8,064		$	(3,027	)	$	5,037
Net realized gains reclassified into earnings	(1,010		)	384			(626		)	(1,338		)	508			(830		)	(1,251		)	463			(788		)
Reclassifications into earnings:
Gains on sales of debt securities																												(490		)	186			(304		)	(1,138		)	432			(706		)	(1,481		)	563			(918		)
Other income																												19			(7		)	12			81			(31		)	50			16			(7		)	9
Net realized (gains) losses reclassified into earnings																												(471		)	179			(292		)	(1,057		)	401			(656		)	(1,465		)	556			(909		)
Net change	(2,654		)	1,011			(1,643		)	7,360			(2,760		)	4,600			(12,240		)	4,540			(7,700		)	(2,116		)	801			(1,315		)	(2,621		)	996			(1,625		)	6,599			(2,471		)	4,128
Available-for-sale marketable equity securities:
Net increase in fair value	72			(27		)	45			34			(13		)	21			32			(12		)	20
Net realized gains reclassified into earnings	—			—			—			—			—			—			(771		)	285			(486		)
Net increase (decrease) in fair value ⁽¹⁾																												(49		)	19			(30		)	72			(27		)	45			34			(13		)	21
Net change	72			(27		)	45			34			(13		)	21			(739		)	273			(466		)	(49		)	19			(30		)	72			(27		)	45			34			(13		)	21
Debit valuation adjustments:
Net increase in fair value	436			(166		)	270			n/a			n/a			n/a			n/a			n/a			n/a
Net realized losses reclassified into earnings	556			(211		)	345			n/a			n/a			n/a			n/a			n/a			n/a
Net increase (decrease) in fair value																												(271		)	104			(167		)	436			(166		)	270			n/a			n/a			n/a
Net realized (gains) losses reclassified into earnings ⁽²⁾																												17			(6		)	11			556			(211		)	345			n/a			n/a			n/a
Net change	992			(377		)	615			n/a			n/a			n/a			n/a			n/a			n/a			(254		)	98			(156		)	992			(377		)	615			n/a			n/a			n/a
Derivatives:
Net increase in fair value	55			(22		)	33			195			(54		)	141			156			(51		)	105
Net realized losses reclassified into earnings	883			(332		)	551			760			(285		)	475			773			(286		)	487
Net increase (decrease) in fair value																												(299		)	113			(186		)	55			(22		)	33			195			(54		)	141
Reclassifications into earnings:
Net interest income																												553			(205		)	348			974			(367		)	607			1,119			(421		)	698
Personnel																												32			(12		)	20			(91		)	35			(56		)	(359		)	136			(223		)
Net realized (gains) losses reclassified into earnings																												585			(217		)	368			883			(332		)	551			760			(285		)	475
Net change	938			(354		)	584			955			(339		)	616			929			(337		)	592			286			(104		)	182			938			(354		)	584			955			(339		)	616
Employee benefit plans:
Net increase (decrease) in fair value	408			(121		)	287			(1,629		)	614			(1,015		)	2,985			(1,128		)	1,857			(921		)	329			(592		)	408			(121		)	287			(1,629		)	614			(1,015		)
Net realized losses reclassified into earnings	169			(62		)	107			55			(23		)	32			237			(79		)	158
Reclassifications into earnings:
Prior service cost																												5			(2		)	3			5			(2		)	3			5			(2		)	3
Net actuarial losses																												92			(34		)	58			164			(60		)	104			50			(21		)	29
Net realized (gains) losses reclassified into earnings⁽³⁾																												97			(36		)	61			169			(62		)	107			55			(23		)	32
Settlements, curtailments and other	1			(1		)	—			(1		)	41			40			46			(12		)	34			15			(8		)	7			1			(1		)	—			(1		)	41			40
Net change	578			(184		)	394			(1,575		)	632			(943		)	3,268			(1,219		)	2,049			(809		)	285			(524		)	578			(184		)	394			(1,575		)	632			(943		)
Foreign currency:
Net decrease in fair value	600			(723		)	(123		)	714			(879		)	(165		)	244			(384		)	(140		)
Net realized losses reclassified into earnings	(38		)	38			—			20			(12		)	8			138			(133		)	5
Net increase (decrease) in fair value																												514			(601		)	(87		)	600			(723		)	(123		)	714			(879		)	(165		)
Net realized (gains) losses reclassified into earnings ⁽²⁾																												—			—			—			(38		)	38			—			20			(12		)	8
Net change	562			(685		)	(123		)	734			(891		)	(157		)	382			(517		)	(135		)	514			(601		)	(87		)	562			(685		)	(123		)	734			(891		)	(157		)
Total other comprehensive income (loss)	$	488		$	(616	)	$	(128	)	$	7,508		$	(3,371	)	$	4,137		$	(8,400	)	$	2,740		$	(5,660	)	$	(2,428	)	$	498		$	(1,930	)	$	521		$	(631	)	$	(110	)	$	6,747		$	(3,082	)	$	3,665

~~n/a = not applicable~~



~~210~~ ~~Bank of America 2015~~⁽¹⁾		There were no amounts reclassified out of AFS marketable equity securities for 2016, 2015 and 2014.

~~The table below presents impacts on net income of significant amounts reclassified out of each component of accumulated OCI before- and after-tax for~~

⁽²⁾ ~~2015~~, ~~2014~~ ~~and~~ ~~2013~~.

Reclassifications Out of Accumulated OCI

(Dollars in millions)
Accumulated OCI Components Income Statement Line Item Impacted 2015 2014 2013
Available-for-sale debt securities:
Gains on sales of debt securities $ 1,091
$ 1,354
$ 1,271
Other loss (81 ) (16 ) (20 )
Income before income taxes 1,010
1,338
1,251
Income tax expense 384
508
463
Reclassification to net income 626
830
788
Available-for-sale marketable equity securities:
Equity investment income —
—
771
Income before income taxes —
—
771
Income tax expense —
—
285
Reclassification to net income —
—
486
Debit valuation adjustments:
Other loss (556 ) n/a
n/a
Loss before income taxes (556 ) n/a
n/a
Income tax benefit (211 ) n/a
n/a
Reclassification to net income (345 ) n/a
n/a
Derivatives:
Interest rate contracts Net interest income (974 ) (1,119 ) (1,119 )
Commodity contracts Trading account losses —
—
(1 )
Interest rate contracts Other income —
—
18
Equity compensation contracts Personnel 91
359
329
Loss before income taxes (883 ) (760 ) (773 )
Income tax benefit (332 ) (285 ) (286 )
Reclassification to net income (551 ) (475 ) (487 )
Employee benefit plans:
Prior service cost Personnel (5 ) (5 ) (4 )
Net actuarial losses Personnel (164 ) (50 ) (225 )
Settlements and curtailments Personnel —
—
(8 )
Loss before income taxes (169 ) (55 ) (237 )
Income tax benefit (62 ) (23 ) (79 )
Reclassification to net income (107 ) (32 ) (158 )
Foreign currency:
Other income (loss) 38
(20 ) (138 )
Income (loss) before income taxes 38
(20 ) (138 )
Income tax expense (benefit) 38
(12 ) (133 )
Reclassification to net income —
(8 ) (5 )
Total reclassification adjustments $ (377 ) $ 315
$ 624

Reclassifications of pretax DVA and foreign currency transactions are recorded in other income in the Consolidated Statement of Income.


⁽³⁾	Reclassifications of pretax employee benefit plan costs are recorded in personnel expense in the Consolidated Statement of Income.

n/a = not applicable



		Bank of America ~~2015~~2016 ~~211~~183

NOTE 15 Earnings Per Common Share

The calculation of ~~earnings per common share (EPS)~~EPS and diluted EPS for 2016, 2015, ~~2014~~ and ~~2013~~2014 is presented below. For more information on the calculation of EPS, see Note 1 – Summary of Significant Accounting Principles.



(Dollars in millions, except per share information; shares in thousands)	2015			2014			2013			2016			2015			2014
Earnings per common share
Net income	$	15,888		$	4,833		$	11,431		$	17,906		$	15,836		$	5,520
Preferred stock dividends	(1,483		)	(1,044		)	(1,349		)	(1,682		)	(1,483		)	(1,044		)
Net income applicable to common shareholders	14,405			3,789			10,082			$	16,224		$	14,353		$	4,476
Dividends and undistributed earnings allocated to participating securities	—			—			(2		)
Net income allocated to common shareholders	$	14,405		$	3,789		$	10,080
Average common shares issued and outstanding	10,462,282			10,527,818			10,731,165			10,284,147			10,462,282			10,527,818
Earnings per common share	$	1.38		$	0.36		$	0.94		$	1.58		$	1.37		$	0.43

Diluted earnings per common share
Net income applicable to common shareholders	$	14,405		$	3,789		$	10,082		$	16,224		$	14,353		$	4,476
Add preferred stock dividends due to assumed conversions	300			—			300			300			300			—
Dividends and undistributed earnings allocated to participating securities	—			—			(2		)
Net income allocated to common shareholders	$	14,705		$	3,789		$	10,380		$	16,524		$	14,653		$	4,476
Average common shares issued and outstanding	10,462,282			10,527,818			10,731,165			10,284,147			10,462,282			10,527,818
Dilutive potential common shares ⁽¹⁾	751,710			56,717			760,253			751,510			751,710			56,717
Total diluted average common shares issued and outstanding	11,213,992			10,584,535			11,491,418			11,035,657			11,213,992			10,584,535
Diluted earnings per common share	$	1.31		$	0.36		$	0.90		$	1.50		$	1.31		$	0.42


⁽¹⁾	Includes incremental dilutive shares from RSUs, restricted stock ~~units, restricted stock, stock options~~ and warrants.

The Corporation previously issued a warrant to purchase 700 million shares of the Corporation’s common stock to the holder of the Series T Preferred Stock. The warrant may be exercised, at the option of the holder, through tendering the Series T Preferred Stock or paying cash. For ~~2015~~2016 and ~~2013~~,2015, the 700 million average dilutive potential common shares were included in the diluted share count under the “if-converted” method. For 2014,, the 700 million average dilutive potential common shares were not included in the diluted share count because the result would have been antidilutive under the “if-converted” method. For additional information, see Note 13 – Shareholders’ ~~Equity~~.Equity.

For 2016, 2015, ~~2014~~ and ~~2013~~, 2014, 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 “if-converted” method. For 2016, 2015,

~~2014~~ and ~~2013~~,2014, average options to purchase 45 million, 66 million, and 91 million ~~and~~ ~~126 million~~ shares of common stock, respectively, were outstanding but not included in the computation of EPS because the result would have been antidilutive under the treasury stock method. For 2016, 2015 and 2014, average warrants to purchase 122 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, ~~compared to 272 million shares for 2013. For~~ ~~2015~~and ~~2014,~~ average warrants to purchase 150 million shares of common stock were included in the diluted EPS calculation under the treasury stock method.

~~In connection with the preferred stock actions described in~~ ~~Note 13 – Shareholders’ Equity, the Corporation recorded a $100 million non-cash preferred stock dividend in 2013, which is included in the calculation of net income allocated to common shareholders.~~



~~212~~184 Bank of America ~~2015~~2016

NOTE 16 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 for U.S. banking organizations. As a financial holding company, the Corporation is subject to capital adequacy rules issued by the Federal ~~Reserve, and its~~Reserve. The Corporation’s banking entity affiliates ~~including BANA and Bank of America California, N.A.,~~ are subject to capital adequacy rules issued by ~~their respective primary regulators.~~

~~On January 1, 2014,~~ the Corporation and its affiliates became subject to Basel 3, which includes certain transition provisions through January 1, 2019. The Corporation and its primary banking entity affiliate, BANA, are Advanced approaches institutions under Basel 3.OCC.

Basel 3 updated the composition of capital and established a Common equity tier 1 capital ratio. Common equity tier 1 capital primarily includes common stock, retained earnings and accumulated OCI. Basel 3 revised minimum capital ratios and buffer requirements, added a supplementary leverage ratio, and addressed the adequately capitalized minimum requirements

under the ~~PCA~~Prompt Corrective Action (PCA) framework. Finally, Basel 3 established two methods

of calculating risk-weighted assets, the Standardized approach and the Advanced approaches.

~~As an~~The Corporation and its primary banking entity affiliate, BANA, are Advanced approaches ~~institution,~~institutions under Basel 3,3. As Advanced approaches institutions, the Corporation ~~was required to complete a qualification period (parallel run) to demonstrate compliance with the Basel 3 Advanced approaches to the satisfaction of U.S.~~and its banking regulators. The Corporation received approval to begin using the Advanced approaches capital framework to determine risk-based capital requirements in the fourth quarter of 2015. Having exited parallel run on October 1, 2015, the Corporation isentity affiliates 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, and was the Advanced approaches in the fourth quarter of 2015. Prior to the fourth quarter of 2015, the Corporation was required to report its capital adequacy under the Standardized approach only.framework.

The table below presents capital ratios and related information in accordance with Basel 3 Standardized and Advanced approaches – Transition as measured at December 31, ~~2015~~2016 and ~~2014~~2015 for the Corporation and BANA.



Regulatory Capital under Basel 3 – Transition ⁽¹⁾	Regulatory Capital under Basel 3 – Transition ⁽¹⁾																				Regulatory Capital under Basel 3 – Transition ⁽¹⁾

	December 31, 2015																				December 31, 2016
	Bank of America Corporation										Bank of America, N.A.										Bank of America Corporation								Bank of America, N.A.
(Dollars in millions)	Standardized Approach			Advanced Approaches			Regulatory Minimum		Well-capitalized ⁽²⁾		Standardized Approach			Advanced Approaches			Regulatory Minimum		Well-capitalized ⁽²⁾		Standardized Approach			Advanced Approaches			Regulatory Minimum^{(2, 3)}		Standardized Approach			Advanced Approaches			Regulatory Minimum ⁽⁴⁾
Risk-based capital metrics:
Common equity tier 1 capital	$	163,026		$	163,026						$	144,869		$	144,869						$	168,866		$	168,866				$	149,755		$	149,755
Tier 1 capital	180,778			180,778							144,869			144,869							190,315			190,315					149,755			149,755
Total capital ⁽³⁾	220,676			210,912							159,871			150,624
Total capital ⁽⁵⁾																					228,187			218,981					163,471			154,697
Risk-weighted assets (in billions)	1,403			1,602							1,183			1,104							1,399			1,530					1,176			1,045
Common equity tier 1 capital ratio	11.6		%	10.2		%	4.5	%	n/a		12.2		%	13.1		%	4.5	%	6.5	%	12.1		%	11.0		%	5.875	%	12.7		%	14.3		%	6.5	%
Tier 1 capital ratio	12.9			11.3			6.0		6.0	%	12.2			13.1			6.0		8.0		13.6			12.4			7.375		12.7			14.3			8.0
Total capital ratio	15.7			13.2			8.0		10.0		13.5			13.6			8.0		10.0		16.3			14.3			9.375		13.9			14.8			10.0

Leverage-based metrics:
Adjusted quarterly average assets (in billions) ⁽⁴⁾	$	2,103		$	2,103						$	1,575		$	1,575
Adjusted quarterly average assets (in billions) ⁽⁶⁾																					$	2,131		$	2,131				$	1,611		$	1,611
Tier 1 leverage ratio	8.6		%	8.6		%	4.0		n/a		9.2		%	9.2		%	4.0		5.0		8.9		%	8.9		%	4.0		9.3		%	9.3		%	5.0

	December 31, 2014																				December 31, 2015
Risk-based capital metrics:
Common equity tier 1 capital	$	155,361		n/a							$	145,150		n/a							$	163,026		$	163,026				$	144,869		$	144,869
Tier 1 capital	168,973			n/a							145,150			n/a							180,778			180,778					144,869			144,869
Total capital ⁽³⁾	208,670			n/a							161,623			n/a
Total capital ⁽⁵⁾																					220,676			210,912					159,871			150,624
Risk-weighted assets (in billions)	1,262			n/a							1,105			n/a							1,403			1,602					1,183			1,104
Common equity tier 1 capital ratio	12.3		%	n/a			4.0	%	n/a		13.1		%	n/a			4.0	%	n/a		11.6		%	10.2		%	4.5	%	12.2		%	13.1		%	6.5	%
Tier 1 capital ratio	13.4			n/a			5.5		6.0	%	13.1			n/a			5.5		6.0	%	12.9			11.3			6.0		12.2			13.1			8.0
Total capital ratio	16.5			n/a			8.0		10.0		14.6			n/a			8.0		10.0		15.7			13.2			8.0		13.5			13.6			10.0

Leverage-based metrics:
Adjusted quarterly average assets (in billions) ⁽⁴⁾	$	2,060		$	2,060						$	1,509		$	1,509
Adjusted quarterly average assets (in billions) ⁽⁶⁾																					$	2,103		$	2,103				$	1,575		$	1,575
Tier 1 leverage ratio	8.2		%	8.2		%	4.0		n/a		9.6		%	9.6		%	4.0		5.0		8.6		%	8.6		%	4.0		9.2		%	9.2		%	5.0

⁽¹⁾

~~The Corporation received approval to begin using the~~As Advanced approaches ~~capital framework to determine risk-based capital requirements in the fourth quarter of 2015. With the approval to exit parallel run,~~institutions, the Corporation isand its banking entity affiliates are required to report regulatory capital risk-weighted assets and ratios under both the Standardized and Advanced approaches. The approach that yields the lower ratio is to be used to assess capital adequacy and was the Advanced approaches method at December 31, 2016 and 2015. Prior to exiting parallel run, the Corporation was required to report regulatory capital risk-weighted assets and ratios under the Standardized approach only. As previously disclosed, with the approval to exit parallel run, U.S. banking regulators requested modifications to certain internal analytical models including the wholesale (e.g., commercial) credit models which increased the Corporation’s risk-weighted assets in the fourth quarter of 2015.


⁽²⁾	The December 31, 2016 amount includes a transition capital conservation buffer of 0.625 percent and a transition global systemically important bank (G-SIB) surcharge of 0.75 percent. The 2016 countercyclical capital buffer is zero.


⁽³⁾	To be “well capitalized” under the current U.S. banking regulatory agency definitions, a ~~bank holding company or national bank~~BHC must maintain ~~these~~a Total capital ratio of 10 percent or ~~higher ratios and not be subject to a Federal Reserve order or directive to maintain higher capital levels.~~greater.


⁽³⁾⁽⁴⁾	Percent required to meet guidelines to be considered "well capitalized" under the PCA framework.


⁽⁵⁾	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⁾⁽⁶⁾	Reflects adjusted average total assets for the three months ended December 31, ~~2015~~2016 and ~~2014~~2015.

~~n/a = not applicable~~



		~~Bank of America 2015213~~

The capital adequacy rules issued by the U.S. banking regulators require institutions to meet the established minimums outlined in the Regulatory Capital under Basel 3 – Transition table. 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, ~~2015~~2016 and ~~2014,~~2015, the Corporation and its banking entity affiliates were ~~"well~~“well capitalized."”

Other Regulatory Matters

On February 18, 2014, the Federal Reserve approved a final rule implementing certain enhanced supervisory and prudential requirements established under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. The final rule formalizes risk management requirements primarily related to governance and liquidity risk management and reiterates the provisions of previously issued final rules related to risk-based and leverage capital and stress test requirements. Also, a debt-to-equity limit may be enacted for an individual BHC if it is determined to pose a grave threat to the financial stability of the U.S. Such limit is at the discretion of the Financial Stability Oversight Council (FSOC) or the Federal Reserve on behalf of the FSOC.

The Federal Reserve requires the Corporation’s banking subsidiaries to maintain reserve requirements based on a

percentage of certain ~~deposits.~~deposit liabilities. The average daily reserve balance requirements, in excess of vault cash, maintained by the Corporation with the Federal Reserve were $~~9.8~~7.7 billion and $~~9.1~~9.8 billion for ~~2015~~2016 and ~~2014~~2015. At December 31, ~~2015~~2016 and ~~2014~~2015, the Corporation had cash and cash equivalents in the amount of $~~12.1~~4.8 billion and ~~$7.7~~$5.1 billion, and securities with a fair value of $~~17.5~~14.6 billion and ~~$19.2~~$16.4 billion that were segregated in compliance with



		Bank of America 2016185

securities ~~regulations or~~regulations. In addition, at December 31, 2016 and 2015, the Corporation had cash deposited with clearing ~~organizations.~~organizations of $10.2 billion and $9.7 billion primarily in other assets.

The primary sources of funds for cash distributions by the Corporation to its shareholders are capital distributions received from its banking subsidiaries, BANA and Bank of America California, N.A. In ~~2015,~~2016, the Corporation received dividends of ~~$18.8~~$13.4 billion from BANA and ~~none~~$150 million from Bank of America California, N.A. The amount of dividends that a subsidiary bank may declare in a calendar year 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 defined by the OCC, consist of net income less dividends declared during the period. In ~~2016~~2017, BANA can declare and pay dividends of approximately ~~$5.0~~$6.2 billion to the Corporation plus an additional amount equal to its retained net profits for ~~2016~~2017 up to the date of any such dividend declaration. Bank of America California, N.A. can pay dividends of $~~895~~546 million in ~~2016~~2017 plus an additional amount equal to its retained net profits for ~~2016~~2017 up to the date of any such dividend declaration.



~~214~~ ~~Bank of America 2015~~

NOTE 17 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.

In 2013, the Corporation merged a defined benefit pension plan, which covered eligible employees of certain legacy companies, into the legacy Bank of America Pension Plan (the Pension Plan). This merged plan is referred to as theThe Qualified Pension Plan. The merger resulted in a remeasurement of the qualified pension obligations and plan assets at fair value as of the merger date which increased accumulated OCI by $2.0 billion, net-of-tax. The benefit structures under the merged legacy plans have not changed and remain intact in the Qualified Pension Plan.

Benefits earned under the Qualified Pension 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.

~~It is the policy of the Corporation to fund no less than the minimum funding amount required by the Employee Retirement Income Security Act of 1974 (ERISA).~~

~~The~~ Pension Plan has a balance guarantee feature for account balances with participant-selected ~~earnings,~~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.

The Corporation has an annuity contract that guarantees the payment of benefits vested under a terminated U.S. pension plan ~~(the Other~~(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 ~~2015~~2016 or ~~2014~~2015. 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 benefits, certain ~~benefits eligible to~~benefits-eligible employees may become eligible to continue participation as retirees in health care and/or life insurance plans sponsored ~~by the Corporation. Based on the other provisions of the individual plans, certain retirees may also have the cost of these benefits partially paid~~ 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 funded 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, ~~2015~~2016 and ~~2014~~2015. ~~Amounts recognized at~~ ~~December 31, 2015 and 2014~~ ~~are reflected in other assets, and in accrued expenses and other liabilities on the Consolidated Balance Sheet.~~ The estimate of the Corporation’s PBO associated with these plans considers various actuarial assumptions, including assumptions for mortality rates and discount rates. As of December 31, 2014, the Corporation adopted mortality assumptions published by the Society of Actuaries in October 2014, adjusted to reflect observed and anticipated future mortality experience of the participants in the Corporation’s U.S. plans. The adoption of the new mortality assumptions resulted in an increase of the PBO of approximately $580 million at December 31, 2014. 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 decrease in the weighted-average discount rates in 2016 resulted in an increase to the PBO of approximately $1.3 billion at December 31, 2016. The increase in the weighted-average discount rates in 2015 resulted in a decrease to the PBO of approximately $930 million at December 31, 2015. ~~The decrease in the weighted-average discount rates in 2014 resulted in an increase to the PBO of approximately $1.9 billion at December 31, 2014.~~



		186Bank of America ~~2015215~~2016

The Corporation’s ~~best~~ estimate of its contributions to be made to the Non-U.S. Pension Plans, Nonqualified and Other Pension Plans, and Postretirement Health and Life Plans in ~~2016~~2017 is ~~$50~~$20 million, ~~$103~~$96 million and ~~$108~~$99 million, respectively. The Corporation does not expect to make a contribution to the Qualified Pension Plan in ~~2016.~~2017. It is the policy of the Corporation to fund no less than the minimum funding amount required by the Employee Retirement Income Security Act of 1974 (ERISA).



Pension and Postretirement Plans

	Qualified Pension Plan ⁽¹⁾						Non-U.S. Pension Plans ⁽¹⁾						Nonqualified and Other Pension Plans ⁽¹⁾						Postretirement Health and Life Plans ⁽¹⁾						Qualified Pension Plan ⁽¹⁾						Non-U.S. Pension Plans ⁽¹⁾						Nonqualified and Other Pension Plans ⁽¹⁾						Postretirement Health and Life Plans ⁽¹⁾
(Dollars in millions)	2015			2014			2015			2014			2015			2014			2015			2014			2016			2015			2016			2015			2016			2015			2016			2015
Change in fair value of plan assets
Fair value, January 1	$	18,614		$	18,276		$	2,564		$	2,457		$	2,927		$	2,720		$	28		$	72		$	17,962		$	18,614		$	2,738		$	2,564		$	2,805		$	2,927		$	—		$	28
Actual return on plan assets	199			1,261			342			256			14			336			—			6			1,075			199			541			342			74			14			—			—
Company contributions	—			—			58			84			97			97			79			53			—			—			48			58			104			97			104			79
Plan participant contributions	—			—			1			1			—			—			127			129			—			—			1			1			—			—			125			127
Settlements and curtailments	—			—			(7		)	(5		)	—			—			—			—			—			—			(20		)	(7		)	(6		)	—			—			—
Benefits paid	(851		)	(923		)	(78		)	(68		)	(233		)	(226		)	(247		)	(248		)	(798		)	(851		)	(118		)	(78		)	(233		)	(233		)	(242		)	(247		)
Federal subsidy on benefits paid	n/a			n/a			n/a			n/a			n/a			n/a			13			16			n/a			n/a			n/a			n/a			n/a			n/a			13			13
Foreign currency exchange rate changes	n/a			n/a			(142		)	(161		)	n/a			n/a			n/a			n/a			n/a			n/a			(401		)	(142		)	n/a			n/a			n/a			n/a
Fair value, December 31	$	17,962		$	18,614		$	2,738		$	2,564		$	2,805		$	2,927		$	—		$	28		$	18,239		$	17,962		$	2,789		$	2,738		$	2,744		$	2,805		$	—		$	—
Change in projected benefit obligation
Projected benefit obligation, January 1	$	15,508		$	14,145		$	2,688		$	2,580		$	3,329		$	3,070		$	1,346		$	1,356		$	14,461		$	15,508		$	2,580		$	2,688		$	3,053		$	3,329		$	1,152		$	1,346
Service cost	—			—			27			29			—			1			8			8			—			—			25			27			—			—			7			8
Interest cost	621			665			93			109			122			133			48			58			634			621			86			93			127			122			47			48
Plan participant contributions	—			—			1			1			—			—			127			129			—			—			1			1			—			—			125			127
Plan amendments	—			—			(1		)	1			—			—			—			—			—			—			—			(1		)	—			—			—			—
Settlements and curtailments	—			—			(7		)	(6		)	—			—			—			—			—			—			(31		)	(7		)	(6		)	—			—			—
Actuarial loss (gain)	(817		)	1,621			(2		)	208			(165		)	351			(141		)	29			685			(817		)	535			(2		)	106			(165		)	25			(141		)
Benefits paid	(851		)	(923		)	(78		)	(68		)	(233		)	(226		)	(247		)	(248		)	(798		)	(851		)	(118		)	(78		)	(233		)	(233		)	(242		)	(247		)
Federal subsidy on benefits paid	n/a			n/a			n/a			n/a			n/a			n/a			13			16			n/a			n/a			n/a			n/a			n/a			n/a			13			13
Foreign currency exchange rate changes	n/a			n/a			(141		)	(166		)	n/a			n/a			(2		)	(2		)	n/a			n/a			(315		)	(141		)	n/a			n/a			(2		)	(2		)
Projected benefit obligation, December 31	$	14,461		$	15,508		$	2,580		$	2,688		$	3,053		$	3,329		$	1,152		$	1,346		$	14,982		$	14,461		$	2,763		$	2,580		$	3,047		$	3,053		$	1,125		$	1,152
Amount recognized, December 31	$	3,501		$	3,106		$	158		$	(124	)	$	(248	)	$	(402	)	$	(1,152	)	$	(1,318	)	$	3,257		$	3,501		$	26		$	158		$	(303	)	$	(248	)	$	(1,125	)	$	(1,152	)
Funded status, December 31
Accumulated benefit obligation	$	14,461		$	15,508		$	2,479		$	2,582		$	3,052		$	3,329		n/a			n/a			$	14,982		$	14,461		$	2,645		$	2,479		$	3,046		$	3,052		n/a			n/a
Overfunded (unfunded) status of ABO	3,501			3,106			259			(18		)	(247		)	(402		)	n/a			n/a			3,257			3,501			144			259			(302		)	(247		)	n/a			n/a
Provision for future salaries	—			—			101			106			1			—			n/a			n/a			—			—			118			101			1			1			n/a			n/a
Projected benefit obligation	14,461			15,508			2,580			2,688			3,053			3,329			$	1,152		$	1,346		14,982			14,461			2,763			2,580			3,047			3,053			$	1,125		$	1,152
Weighted-average assumptions, December 31
Discount rate	4.51		%	4.12		%	3.59		%	3.56		%	4.34		%	3.80		%	4.32		%	3.75		%	4.16		%	4.51		%	2.56		%	3.59		%	4.01		%	4.34		%	3.99		%	4.32		%
Rate of compensation increase	n/a			n/a			4.64			4.70			4.00			4.00			n/a			n/a			n/a			n/a			4.51			4.64			4.00			4.00			n/a			n/a


⁽¹⁾	The measurement date for the Qualified Pension Plan, Non-U.S. Pension Plans, Nonqualified and Other Pension Plans, and Postretirement Health and Life Plans was December 31 of each year reported.

n/a = not applicable

~~Amounts recognized on the Consolidated Balance Sheet at~~ ~~December 31, 2015 and 2014~~ ~~are presented in the table below.~~



Amounts Recognized on Consolidated Balance Sheet	Amounts Recognized on Consolidated Balance Sheet																						Amounts Recognized on Consolidated Balance Sheet

	Qualified Pension Plan				Non-U.S. Pension Plans						Nonqualified and Other Pension Plans						Postretirement Health and Life Plans						Qualified Pension Plan				Non-U.S. Pension Plans						Nonqualified and Other Pension Plans						Postretirement Health and Life Plans
(Dollars in millions)	2015		2014		2015			2014			2015			2014			2015			2014			2016		2015		2016			2015			2016			2015			2016			2015
Other assets	$	3,501	$	3,106	$	548		$	252		$	825		$	786		$	—		$	—		$	3,257	$	3,501	$	475		$	548		$	760		$	825		$	—		$	—
Accrued expenses and other liabilities	—		—		(390		)	(376		)	(1,073		)	(1,188		)	(1,152		)	(1,318		)	—		—		(449		)	(390		)	(1,063		)	(1,073		)	(1,125		)	(1,152		)
Net amount recognized at December 31	$	3,501	$	3,106	$	158		$	(124	)	$	(248	)	$	(402	)	$	(1,152	)	$	(1,318	)	$	3,257	$	3,501	$	26		$	158		$	(303	)	$	(248	)	$	(1,125	)	$	(1,152	)



		~~216~~Bank of America ~~2015~~2016187

Pension Plans with ABO and PBO in excess of plan assets as of December 31, ~~2015~~2016 and ~~2014~~2015 are presented in the table below. For ~~the non-qualified plans not subject to ERISA or non-U.S. pension~~these plans, funding strategies vary due to legal requirements and local practices.

Plans with PBO and ABO in Excess of Plan Assets

Non-U.S.
Pension Plans

Nonqualified
and Other
Pension Plans
(Dollars in millions) 2015 2014 2015 2014
PBO $ 574
$ 583
$ 1,075
$ 1,190
ABO 551
563
1,074
1,190
Fair value of plan assets 183
206
1
2

~~Net periodic benefit cost of the Corporation’s plans for~~ ~~2015~~, ~~2014~~ ~~and~~ ~~2013~~ ~~included the following components.~~




Plans with PBO and ABO in Excess of Plan Assets

	Non-U.S. Pension Plans				Nonqualified and Other Pension Plans
(Dollars in millions)	2016		2015		2016		2015
PBO	$	626	$	574	$	1,065	$	1,075
ABO	594		551		1,064		1,074
Fair value of plan assets	179		183		1		1



Components of Net Periodic Benefit Cost

	Qualified Pension Plan									Non-U.S. Pension Plans									Qualified Pension Plan									Non-U.S. Pension Plans
(Dollars in millions)	2015			2014			2013			2015			2014			2013			2016			2015			2014			2016			2015			2014
Components of net periodic benefit cost (income)
Service cost	$	—		$	—		$	—		$	27		$	29		$	32		$	—		$	—		$	—		$	25		$	27		$	29
Interest cost	621			665			623			93			109			98			634			621			665			86			93			109
Expected return on plan assets	(1,045		)	(1,018		)	(1,024		)	(133		)	(137		)	(121		)	(1,038		)	(1,045		)	(1,018		)	(123		)	(133		)	(137		)
Amortization of prior service cost	—			—			—			1			1			—			—			—			—			1			1			1
Amortization of net actuarial loss	170			111			242			6			3			2			139			170			111			6			6			3
Recognized loss (gain) due to settlements and curtailments	—			—			17			—			2			(7		)
Recognized loss due to settlements and curtailments																			—			—			—			1			—			2
Net periodic benefit cost (income)	$	(254	)	$	(242	)	$	(142	)	$	(6	)	$	7		$	4		$	(265	)	$	(254	)	$	(242	)	$	(4	)	$	(6	)	$	7
Weighted-average assumptions used to determine net cost for years ended December 31
Discount rate	4.12		%	4.85		%	4.00		%	3.56		%	4.30		%	4.23		%	4.51		%	4.12		%	4.85		%	3.59		%	3.56		%	4.30		%
Expected return on plan assets	6.00			6.00			6.50			5.27			5.52			5.50			6.00			6.00			6.00			4.84			5.27			5.52
Rate of compensation increase	n/a			n/a			n/a			4.70			4.91			4.37			n/a			n/a			n/a			4.67			4.70			4.91

	Nonqualified and Other Pension Plans									Postretirement Health and Life Plans									Nonqualified and Other Pension Plans									Postretirement Health and Life Plans
(Dollars in millions)	2015			2014			2013			2015			2014			2013			2016			2015			2014			2016			2015			2014
Components of net periodic benefit cost (income)
Service cost	$	—		$	1		$	1		$	8		$	8		$	9		$	—		$	—		$	1		$	7		$	8		$	8
Interest cost	122			133			120			48			58			54			127			122			133			47			48			58
Expected return on plan assets	(92		)	(124		)	(109		)	(1		)	(4		)	(5		)	(101		)	(92		)	(124		)	—			(1		)	(4		)
Amortization of prior service cost	—			—			—			4			4			4			—			—			—			4			4			4
Amortization of net actuarial loss (gain)	34			25			25			(46		)	(89		)	(42		)	25			34			25			(81		)	(46		)	(89		)
Recognized loss due to settlements and curtailments	—			—			2			—			—			6			3			—			—			—			—			—
Net periodic benefit cost (income)	$	64		$	35		$	39		$	13		$	(23	)	$	26		$	54		$	64		$	35		$	(23	)	$	13		$	(23	)
Weighted-average assumptions used to determine net cost for years ended December 31
Discount rate	3.80		%	4.55		%	3.65		%	3.75		%	4.50		%	3.65		%	4.34		%	3.80		%	4.55		%	4.32		%	3.75		%	4.50		%
Expected return on plan assets	3.26			4.60			3.75			6.00			6.00			6.50			3.66			3.26			4.60			n/a			6.00			6.00
Rate of compensation increase	4.00			4.00			4.00			n/a			n/a			n/a			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 ~~period~~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.

Net periodic postretirement health and life expense was determined using the “projected unit credit” actuarial method. 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. For the Postretirement Health ~~Care~~and Life Plans, 50 percent of the unrecognized gain or loss at the beginning of the fiscal year (or at subsequent remeasurement) is recognized 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 7.00 percent for ~~2016,~~2017, reducing in steps to 5.00 percent in ~~2021~~2023 and later years. A one-percentage-point increase in assumed health care cost trend rates would have increased the service and interest costs, and the benefit obligation by $21 million and $3429 million in ~~2015~~2016. A one-percentage-point decrease in assumed health care cost trend rates would have lowered the service and interest costs, and the benefit obligation by $21 million and $2925 million in ~~2015~~2016.



188 Bank of America 2016

The Corporation’s net periodic benefit cost (income) recognized for the plans is sensitive to the discount rate and expected return



		~~Bank of America 2015217~~

on plan assets. With all other assumptions held constant, a 25 ~~basis point (bp)~~bp decline in the discount rate and expected return on plan asset assumptions would have resulted in an increase in the net periodic benefit cost for the Qualified Pension Plan recognized in ~~2015~~2016 of approximately $9 million and ~~$44~~$43 million, and to be recognized in ~~2016~~2017 of approximately $9$6 million and ~~$43~~$45 million. For the

Postretirement Health and Life Plans, a 25 bp decline in the discount rate would have resulted in an increase in the net periodic benefit cost recognized in ~~2015~~2016 of approximately

$9 $8 million, and to be recognized in ~~2016~~2017 of approximately $8$7 million. For the Non-U.S. Pension Plans and the Nonqualified and Other Pension Plans, a 25 bp decline in discount rates would not have a significant impact on the net periodic benefit cost for ~~2015~~2016 and ~~2016.~~2017.

~~Pretax amounts included in accumulated OCI for employee benefit plans at December 31, 2015 and 2014 are presented in the table below.~~

Pretax Amounts Included in Accumulated OCI

Qualified
Pension Plan

Non-U.S.
Pension Plans

Nonqualified
and Other
Pension Plans

Postretirement
Health and
Life Plans
Total
(Dollars in millions) 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
Net actuarial loss (gain) $ 3,920
$ 4,061
$ 137
$ 355
$ 848
$ 968
$ (150 ) $ (56 ) $ 4,755
$ 5,328
Prior service cost (credits) —
—
(10 ) (9 ) —
—
16
20
6
11
Amounts recognized in accumulated OCI $ 3,920
$ 4,061
$ 127
$ 346
$ 848
$ 968
$ (134 ) $ (36 ) $ 4,761
$ 5,339

~~Pretax amounts recognized in OCI for employee benefit plans in~~ ~~2015~~ ~~included the following components.~~




Pretax Amounts Included in Accumulated OCI

	Qualified Pension Plan				Non-U.S. Pension Plans					Nonqualified and Other Pension Plans				Postretirement Health and Life Plans						Total
(Dollars in millions)	2016		2015		2016		2015			2016		2015		2016			2015			2016		2015
Net actuarial loss (gain)	$	4,429	$	3,920	$	216	$	137		$	953	$	848	$	(44	)	$	(150	)	$	5,554	$	4,755
Prior service cost (credits)	—		—		4		(10		)	—		—		12			16			16		6
Amounts recognized in accumulated OCI	$	4,429	$	3,920	$	220	$	127		$	953	$	848	$	(32	)	$	(134	)	$	5,570	$	4,761

Pretax Amounts Recognized in OCI

Qualified
Pension Plan

Non-U.S.
Pension Plans

Nonqualified
and Other
Pension Plans

Postretirement
Health and
Life Plans
Total
(Dollars in millions) 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
Current year actuarial loss (gain) $ 29
$ 1,378
$ (211 ) $ 87
$ (86 ) $ 138
$ (140 ) $ 26
$ (408 ) $ 1,629
Amortization of actuarial gain (loss) (170 ) (111 ) (6 ) (3 ) (34 ) (25 ) 46
89
(164 ) (50 )
Current year prior service cost (credit) —
—
(1 ) 1
—
—
—
—
(1 ) 1
Amortization of prior service cost —
—
(1 ) (1 ) —
—
(4 ) (4 ) (5 ) (5 )
Amounts recognized in OCI $ (141 ) $ 1,267
$ (219 ) $ 84
$ (120 ) $ 113
$ (98 ) $ 111
$ (578 ) $ 1,575

~~The estimated pretax amounts that will be amortized from accumulated OCI into expense in 2016 are presented in the table below.~~




Pretax Amounts Recognized in OCI

	Qualified Pension Plan						Non-U.S. Pension Plans						Nonqualified and Other Pension Plans						Postretirement Health and Life Plans						Total
(Dollars in millions)	2016			2015			2016			2015			2016			2015			2016			2015			2016			2015
Current year actuarial loss (gain)	$	648		$	29		$	100		$	(211	)	$	133		$	(86	)	$	25		$	(140	)	$	906		$	(408	)
Amortization of actuarial gain (loss)	(139		)	(170		)	(6		)	(6		)	(28		)	(34		)	81			46			(92		)	(164		)
Current year prior service cost (credit)	—			—			—			(1		)	—			—			—			—			—			(1		)
Amortization of prior service cost	—			—			(1		)	(1		)	—			—			(4		)	(4		)	(5		)	(5		)
Amounts recognized in OCI	$	509		$	(141	)	$	93		$	(219	)	$	105		$	(120	)	$	102		$	(98	)	$	809		$	(578	)



Estimated Pretax Amounts Amortized from Accumulated OCI into Period Cost in 2016
Estimated Pretax Amounts Amortized from Accumulated OCI into Period Cost in 2017												Estimated Pretax Amounts Amortized from Accumulated OCI into Period Cost in 2017

(Dollars in millions)	Qualified Pension Plan		Non-U.S. Pension Plans		Nonqualified and Other Pension Plans		Postretirement Health and Life Plans			Total		Qualified Pension Plan		Non-U.S. Pension Plans		Nonqualified and Other Pension Plans		Postretirement Health and Life Plans			Total
Net actuarial loss (gain)	$	136	$	6	$	25	$	(67	)	$	100	$	152	$	10	$	34	$	(20	)	$	176
Prior service cost	—		1		—		4			5		—		1		—		4			5
Total amounts amortized from accumulated OCI	$	136	$	7	$	25	$	(63	)	$	105	$	152	$	11	$	34	$	(16	)	$	181



		Bank of America 2016189

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 participants 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 investment 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 strategy used to minimize risk (part of the asset allocation plan) includes matching the ~~equity~~ exposure of participant-selected investment measures. For example, the common stock of the Corporation held in the trust is maintained as an offset to the exposure related to participants who elected to receive an investment measure based on the return performance of common stock of the Corporation. No plan assets are expected to be returned to the Corporation during ~~2016.~~2017.

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 the nature and the duration of the plan’s liabilities. The ~~current investment strategy was set following an asset-liability study and advice from the trustee’s~~



~~218~~ ~~Bank of America 2015~~

~~investment advisors. The~~ selected asset allocation strategy is designed to achieve a higher return than the lowest risk ~~strategy while maintaining a prudent approach to meeting the plan’s liabilities.~~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 the 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 ~~terminated~~ Other ~~U.S.~~ 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 ~~2016~~2017 by asset category for the Qualified Pension Plan, Non-U.S. Pension Plans, and Nonqualified and Other Pension ~~Plans, and Postretirement Health and Life~~ Plans are presented in the table below.




~~2016~~2017 Target Allocation

	Percentage
Asset Category	Qualified Pension Plan	Non-U.S. Pension Plans	Nonqualified and Other Pension Plans
Equity securities	2030 - 60	10 - 35	0 - 5
Debt securities	40 - 8070	40 - 80	95 - 100
Real estate	0 - 10	0 - 15	0 - 5
Other	0 - 5	0 - 1525	0 - 5

Equity securities for the Qualified Pension Plan include common stock of the Corporation in the amounts of $203 million (1.11 percent of total plan assets) and $189 million (1.05 percent of total plan assets) ~~and~~ ~~$215 million~~ (~~1.15 percent~~ ~~of total plan assets)~~ at December 31, ~~2015~~2016 and ~~2014.~~2015.



		190Bank of America ~~2015219~~2016

Fair Value Measurements

For 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 Principles and Note 20 – Fair Value Measurements.

Combined plan investment assets measured at fair value by level and in total at December 31, ~~2015~~2016 and ~~2014~~2015 are summarized in the Fair Value Measurements table.



Fair Value Measurements

	December 31, 2015								December 31, 2016
(Dollars in millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash and short-term investments
Money market and interest-bearing cash	$	3,061	$	—	$	—	$	3,061	$	776	$	—	$	—	$	776
Cash and cash equivalent commingled/mutual funds	—		4		—		4		—		997		—		997
Fixed income
U.S. government and agency securities	2,723		881		11		3,615		3,125		816		10		3,951
Corporate debt securities	—		1,795		—		1,795		—		1,892		—		1,892
Asset-backed securities	—		1,939		—		1,939		—		2,246		—		2,246
Non-U.S. debt securities	632		662		—		1,294		789		705		—		1,494
Fixed income commingled/mutual funds	551		1,421		—		1,972		778		1,503		—		2,281
Equity
Common and preferred equity securities	6,735		—		—		6,735		6,120		—		—		6,120
Equity commingled/mutual funds	3		1,503		—		1,506		735		1,225		—		1,960
Public real estate investment trusts	138		—		—		138		145		—		—		145
Real estate
Private real estate	—		—		144		144		—		—		150		150
Real estate commingled/mutual funds	—		12		731		743		—		12		748		760
Limited partnerships	—		121		49		170		—		132		38		170
Other investments ⁽¹⁾	—		287		102		389		15		732		83		830
Total plan investment assets, at fair value	$	13,843	$	8,625	$	1,037	$	23,505	$	12,483	$	10,260	$	1,029	$	23,772

	December 31, 2014								December 31, 2015
Cash and short-term investments
Money market and interest-bearing cash	$	3,814	$	—	$	—	$	3,814	$	3,061	$	—	$	—	$	3,061
Cash and cash equivalent commingled/mutual funds	—		4		—		4		—		4		—		4
Fixed income
U.S. government and agency securities	2,004		2,151		11		4,166		2,723		881		11		3,615
Corporate debt securities	—		1,454		—		1,454		—		1,795		—		1,795
Asset-backed securities	—		1,930		—		1,930		—		1,939		—		1,939
Non-U.S. debt securities	627		487		—		1,114		632		662		—		1,294
Fixed income commingled/mutual funds	101		1,397		—		1,498		551		1,421		—		1,972
Equity
Common and preferred equity securities	6,628		—		—		6,628		6,735		—		—		6,735
Equity commingled/mutual funds	16		1,817		—		1,833		3		1,503		—		1,506
Public real estate investment trusts	124		—		—		124		138		—		—		138
Real estate
Private real estate	—		—		127		127		—		—		144		144
Real estate commingled/mutual funds	—		4		632		636		—		12		731		743
Limited partnerships	—		122		65		187		—		121		49		170
Other investments ⁽¹⁾	1		490		127		618		—		287		102		389
Total plan investment assets, at fair value	$	13,315	$	9,856	$	962	$	24,133	$	13,843	$	8,625	$	1,037	$	23,505


⁽¹⁾	Other investments include interest rate swaps of $~~114~~257 million and $~~297~~114 million, participant loans of $5836 million and $7858 million, commodity and balanced funds of $~~165~~369 million and $~~178~~165 million and other various investments of $52168 million and $6552 million at December 31, ~~2015~~2016 and ~~2014~~2015.



		~~220~~Bank of America ~~2015~~2016191

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 ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014.



Level 3 Fair Value Measurements	Level 3 Fair Value Measurements													Level 3 Fair Value Measurements

	2015													2016
(Dollars in millions)	Balance January 1		Actual Return on Plan Assets Still Held at the Reporting Date			Purchases, Sales and Settlements			Transfers out of Level 3			Balance December 31		Balance January 1		Actual Return on Plan Assets Still Held at the Reporting Date			Purchases, Sales and Settlements			Transfers out of Level 3			Balance December 31
Fixed income
U.S. government and agency securities	$	11	$	—		$	—		$	—		$	11	$	11	$	—		$	(1	)	$	—		$	10
Real estate
Private real estate	127		14			3			—			144		144		1			5			—			150
Real estate commingled/mutual funds	632		37			62			—			731		731		21			(4		)	—			748
Limited partnerships	65		(1		)	(15		)	—			49		49		(2		)	(9		)	—			38
Other investments	127		(5		)	(20		)	—			102		102		4			(23		)	—			83
Total	$	962	$	45		$	30		$	—		$	1,037	$	1,037	$	24		$	(32	)	$	—		$	1,029

	2014													2015
Fixed income
U.S. government and agency securities	$	12	$	—		$	(1	)	$	—		$	11	$	11	$	—		$	—		$	—		$	11
Non-U.S. debt securities	6		—			(2		)	(4		)	—
Real estate
Private real estate	119		5			3			—			127		127		14			3			—			144
Real estate commingled/mutual funds	462		20			150			—			632		632		37			62			—			731
Limited partnerships	145		5			(85		)	—			65		65		(1		)	(15		)	—			49
Other investments	135		1			(9		)	—			127		127		(5		)	(20		)	—			102
Total	$	879	$	31		$	56		$	(4	)	$	962	$	962	$	45		$	30		$	—		$	1,037

	2013													2014
Fixed income
U.S. government and agency securities	$	13	$	—		$	(1	)	$	—		$	12	$	12	$	—		$	(1	)	$	—		$	11
Non-U.S. debt securities	10		(2		)	(2		)	—			6		6		—			(2		)	(4		)	—
Real estate
Private real estate	110		4			5			—			119		119		5			3			—			127
Real estate commingled/mutual funds	324		15			123			—			462		462		20			150			—			632
Limited partnerships	231		8			(66		)	(28		)	145		145		5			(85		)	—			65
Other investments	129		(6		)	12			—			135		135		1			(9		)	—			127
Total	$	817	$	19		$	71		$	(28	)	$	879	$	879	$	31		$	56		$	(4	)	$	962

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	Projected Benefit Payments										Projected Benefit Payments

							Postretirement Health and Life Plans										Postretirement Health and Life Plans
(Dollars in millions)	Qualified Pension Plan ⁽¹⁾		Non-U.S. Pension Plans ⁽²⁾		Nonqualified and Other Pension Plans ⁽²⁾		Net Payments ⁽³⁾		Medicare Subsidy		Qualified Pension Plan ⁽¹⁾		Non-U.S. Pension Plans ⁽²⁾		Nonqualified and Other Pension Plans ⁽²⁾		Net Payments ⁽³⁾		Medicare Subsidy
2016	$	915	$	56	$	246	$	121	$	13
2017	900		59		238		115		13		$	906	$	55	$	240	$	111	$	13
2018	902		62		240		111		13		906		55		239		108		12
2019	894		68		237		105		12		898		58		241		102		12
2020	903		71		236		101		12		909		61		241		99		12
2021 - 2025	4,409		463		1,110		450		52
2021											905		66		236		96		11
2022 - 2026											4,446		427		1,091		425		49


⁽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.



		~~Bank of America 2015221~~

Defined Contribution Plans

The Corporation maintains qualified ~~defined contribution retirement plans~~ and ~~nonqualified~~non-qualified defined contribution retirement plans. The Corporation recorded expense of $1.0 billion in each of 2016, ~~$1.0 billion~~2015 and ~~$1.1 billion~~ in ~~2015~~2014,~~2014~~ ~~and~~ ~~2013, respectively,~~ related to the qualified defined contribution plans. At December 31, 2016 and 2015, ~~and 2014,~~ ~~236~~224 million and ~~238~~236 million shares of the Corporation’s

common stock were held by these plans. Payments to the plans for dividends on common stock were $4860 million, $2948 million and $1029 million in ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014, respectively.

Certain non-U.S. employees are covered under defined contribution pension plans that are separately administered in accordance with local laws.



192 Bank of America 2016

NOTE 18 Stock-based Compensation Plans

The Corporation administers a number of equity compensation plans, with awards being granted predominantly from the Bank of America ~~Corporation 2003~~ Key ~~Associate Stock~~Employee Equity Plan ~~(KASP)~~(KEEP). ~~Grants in~~ ~~2015~~ ~~from~~Under this plan, 450 million shares of the ~~KASP included restricted~~Corporation’s common stock, ~~units (RSUs) which generally vest in~~ ~~three~~ ~~equal annual installments beginning one year from the grant date,~~ and ~~awards which will vest~~any shares that were subject to an award under this plan as of December 31, 2014, if such award is canceled, terminates, expires, lapses or is settled in cash for any reason from and after January 1, 2015, are authorized to be used for grants of awards under the ~~attainment of specified performance criteria.~~ KEEP.

During ~~2015,~~2016, the Corporation ~~issued 131~~granted 163 million ~~RSUs~~RSU awards to certain employees under the ~~KASP.~~KEEP. Generally, one-third of the RSUs ~~may be settled in cash or~~vest on each of the first three anniversaries of the grant date provided that the employee remains continuously employed with the Corporation during that time. The RSUs are authorized to settle predominantly in shares of common stock ~~depending on the terms~~ of the ~~applicable award. In 2015, two million of these RSUs were authorized to be settled in shares of common stock with the remainder in cash. Certain awards contain cancellation~~Corporation, and clawback provisions which permit the Corporation to cancel or recoup all or a portion of the award under specified circumstances. The compensation cost for these awards is accrued over the vesting period and adjusted to fair value based upon changes in the share price of the Corporation’s common stock.

~~For most awards, expense is generally recognized~~are expensed ratably over the vesting period, net of estimated forfeitures, ~~unless~~for non-retirement eligible employees based on the ~~employee meets certain retirement eligibility criteria. For~~grant-date fair value of the shares. 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. Awards granted in prior years were predominantly cash settled.

RSUs granted to employees ~~that meet~~who are retirement ~~eligibility criteria, the Corporation records the expense upon grant. For employees that~~eligible or will become retirement eligible during the vesting period are expensed as of the ~~Corporation recognizes expense~~grant date or ratably over the period from the grant date to the date ~~on which~~ the employee becomes retirement eligible, net of estimated forfeitures.

The compensation cost for the stock-based

plans was $~~2.17~~2.08 billion, ~~$2.30~~$2.17 billion and ~~$2.28~~$2.30 billion in 2016, 2015, and 2014 and ~~2013, respectively. The~~the related income tax benefit was $~~824~~792 million, $~~854~~824 million and $~~842~~854 million for ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014, respectively.

From time to time, the Corporation ~~enters~~has entered into equity total return swaps to hedge a portion of cash-settled RSUs granted to certain employees as part of their compensation ~~in prior periods~~ in order to minimize the change in the expense to the Corporation driven by fluctuations in the fair value of the RSUs. Certain of these derivatives are designated as cash flow hedges of unrecognized unvested awards with the changes in fair value of the hedge recorded in accumulated OCI and reclassified into earnings in the same period as the RSUs affect earnings. The remaining derivatives are used to hedge the price risk of cash-settled awards with changes in fair value recorded in personnel expense. For information on amounts recognized on equity total return swaps used to hedge the Corporation’s outstanding RSUs, see Note 2 – Derivatives.

On May 6, 2015, Bank of America shareholders approved the amendment and restatement of the KASP, and renamed it the Bank of America Corporation Key Employee Equity Plan (KEEP). Under the amendment and restatement of the KEEP, 450 million shares of the Corporation’s common stock and any shares that were subject to an award as of December 31, 2014 under the KASP, if such award is canceled, terminates, expires, lapses or is settled in cash for any reason from and after January 1, 2015, are authorized to be used for grants of awards.

Restricted Stock/Units

The table below presents the status at December 31, ~~2015~~2016 of the share-settled restricted stock/units and changes during ~~2015~~2016.

Stock-settled Restricted Stock/Units

Shares/Units
Weighted-
average Grant Date Fair Value
Outstanding at January 1, 2015 29,882,769
$ 9.30
Granted 2,079,667
16.60
Vested (8,750,921 ) 11.43
Canceled (655,497 ) 9.52
Outstanding at December 31, 2015 22,556,018
$ 9.14




Stock-settled Restricted Stock/Units

	Shares/Units		Weighted- average Grant Date Fair Value
Outstanding at January 1, 2016	22,556,018		$	9.14
Granted	157,125,817		11.95
Vested	(18,729,422	)	8.31
Canceled	(4,459,467	)	11.60
Outstanding at December 31, 2016	156,492,946		$	11.99



~~222~~ ~~Bank of America 2015~~

The table below presents the status at December 31, ~~2015~~2016 of the cash-settled RSUs granted under the ~~KASP~~KEEP and changes during ~~2015~~2016.




Cash-settled Restricted Units

	Units
Outstanding at January 1, ~~2015~~2016	~~316,956,435~~255,355,014
Granted	~~128,748,571~~5,787,494
Vested	(~~176,407,854~~132,833,423	)
Canceled	(~~13,942,138~~7,073,596	)
Outstanding at December 31, ~~2015~~2016	~~255,355,014~~121,235,489

At December 31, ~~2015~~2016, there was an estimated $1.2 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 ~~1.7~~1.6 years. The total fair value of restricted stock vested in ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014 was $~~145~~358 million, $~~704~~145 million and $~~906~~704 million, respectively. In ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014, the amount of cash paid to settle equity-based awards for all equity compensation plans was $~~3.0~~1.7 billion, $~~2.7~~3.0 billion and $~~1.7~~2.7 billion, respectively.

Stock Options

The table below presents the status of all option plans at December 31, ~~2015~~2016 and changes during ~~2015~~2016.



Stock Options

	Options		Weighted- average Exercise Price		Options		Weighted- average Exercise Price
Outstanding at January 1, 2015	88,087,054		$	48.96
Outstanding at January 1, 2016					63,875,475		$	49.18
Forfeited	(24,211,579	)	48.38		(21,518,193	)	46.45
Outstanding at December 31, 2015	63,875,475		49.18
Outstanding at December 31, 2016					42,357,282		50.57

All options outstanding as of December 31, ~~2015~~2016 were vested and exercisable with a weighted-average remaining contractual term of ~~1.1~~ ~~years~~less than one year and have no aggregate intrinsic value. No options have been granted since 2008.

NOTE 19 Income Taxes

The components of income tax expense for ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014 are presented in the table below.



Income Tax Expense	Income Tax Expense							Income Tax Expense

(Dollars in millions)	2015		2014		2013			2016			2015		2014
Current income tax expense
U.S. federal	$	2,387	$	443	$	180		$	302		$	2,539	$	443
U.S. state and local	210		340		786			120			210		340
Non-U.S.	561		513		513			984			561		513
Total current expense	3,158		1,296		1,479			1,406			3,310		1,296
Deferred income tax expense (benefit)
Deferred income tax expense
U.S. federal	1,992		583		2,056			5,464			1,812		953
U.S. state and local	519		85		(94		)	(279		)	515		136
Non-U.S.	597		58		1,300			656			597		58
Total deferred expense	3,108		726		3,262			5,841			2,924		1,147
Total income tax expense	$	6,266	$	2,022	$	4,741		$	7,247		$	6,234	$	2,443

Total income tax expense does not reflect the tax effects of items that are included in accumulated OCI. For additional information, see Note 14 – Accumulated Other Comprehensive



		Bank of America 2016193

Income (Loss). These tax effects resulted in a benefit of $498 million in 2016 and an expense of ~~$616~~$631 million in ~~2015~~ and ~~$3.4~~$3.1 billion in 2015 and 2014, ~~and a benefit of $2.7 billion in 2013,~~respectively, recorded in accumulated OCI. In addition, total income tax expense does not reflect tax effects associated with the Corporation’s employee stock plans which decreased common stock and additional paid-in capital ~~$44~~$41 million,, ~~$35~~ $44 million and ~~$128~~$35 million in 2016, 2015, ~~2014~~ and ~~2013~~,2014, respectively.



		~~Bank of America 2015223~~

Income tax expense for ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014 varied from the amount computed by applying the statutory income tax rate to income before income taxes. A reconciliation of the expected U.S. federal income tax expense, calculated by applying the federal statutory tax rate of 35 percent, to the Corporation’s actual income tax expense, and the effective tax rates for ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014 are presented in the table below.



Reconciliation of Income Tax Expense	Reconciliation of Income Tax Expense															Reconciliation of Income Tax Expense

	2015					2014					2013					2016					2015					2014
(Dollars in millions)	Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent
Expected U.S. federal income tax expense	$	7,754		35.0	%	$	2,399		35.0	%	$	5,660		35.0	%	$	8,804		35.0	%	$	7,725		35.0	%	$	2,787		35.0	%
Increase (decrease) in taxes resulting from:
State tax expense, net of federal benefit	474			2.1		276			4.0		450			2.8		420			1.7		438			1.9		322			4.0
Affordable housing credits/other credits	(1,087		)	(4.9	)	(950		)	(13.8	)	(863		)	(5.3	)
Affordable housing/energy/other credits																(1,203		)	(4.8	)	(1,087		)	(4.9	)	(950		)	(11.9	)
Tax-exempt income, including dividends																(562		)	(2.3	)	(539		)	(2.4	)	(533		)	(6.6	)
Changes in prior-period UTBs, including interest																(328		)	(1.3	)	(52		)	(0.2	)	(754		)	(9.5	)
Non-U.S. tax rate differential	(559		)	(2.5	)	(507		)	(7.4	)	(940		)	(5.8	)	(307		)	(1.2	)	(559		)	(2.5	)	(507		)	(6.4	)
Tax-exempt income, including dividends	(539		)	(2.4	)	(533		)	(7.8	)	(524		)	(3.2	)
Changes in prior period UTBs, including interest	(85		)	(0.4	)	(741		)	(10.8	)	(255		)	(1.6	)
Non-U.S. tax law changes	289			1.3		—			—		1,133			7.0		348			1.4		289			1.3		—			—
Nondeductible expenses	40			0.2		1,982			28.9		104			0.6		180			0.7		40			0.1		1,982			24.9
Other	(21		)	(0.1	)	96			1.4		(24		)	(0.2	)	(105		)	(0.4	)	(21		)	(0.1	)	96			1.2
Total income tax expense	$	6,266		28.3	%	$	2,022		29.5	%	$	4,741		29.3	%	$	7,247		28.8	%	$	6,234		28.2	%	$	2,443		30.7	%

The reconciliation of the beginning unrecognized tax benefits (UTB) balance to the ending balance is presented in the table below.



Reconciliation of the Change in Unrecognized Tax Benefits

(Dollars in millions)	2015			2014			2013			2016			2015			2014
Balance, January 1	$	1,068		$	3,068		$	3,677		$	1,095		$	1,068		$	3,068
Increases related to positions taken during the current year	36			75			98			104			36			75
Increases related to positions taken during prior years⁽¹⁾	187			519			254			1,318			187			519
Decreases related to positions taken during prior years ⁽¹⁾	(177		)	(973		)	(508		)	(1,091		)	(177		)	(973		)
Settlements	(1		)	(1,594		)	(448		)	(503		)	(1		)	(1,594		)
Expiration of statute of limitations	(18		)	(27		)	(5		)	(48		)	(18		)	(27		)
Balance, December 31	$	1,095		$	1,068		$	3,068		$	875		$	1,095		$	1,068


⁽¹⁾	~~The sum per year of positions taken during prior years differs from the~~ ~~$85 million~~, ~~$741 million~~ ~~and~~ ~~$255 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.

At December 31, 2016, 2015 ~~2014~~ and ~~2013,~~2014, the balance of the Corporation’s UTBs which would, if recognized, affect the Corporation’s effective tax rate was $~~0.7~~0.6 billion, $0.7 billion and $~~2.5~~0.7 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.

The Corporation files income tax returns in more than 100 state and non-U.S. jurisdictions each year. The IRS and other tax authorities in countries and states in which the Corporation has significant business operations examine tax returns periodically (continuously in some jurisdictions). The Tax Examination Status table summarizes the status of ~~significant~~ examinations ~~(U.S. federal unless otherwise noted)~~by major jurisdiction for the Corporation and various subsidiaries as of December 31, ~~2015~~2016.




Tax Examination Status

	Years under Examination⁽¹⁾	Status at December 31 ~~2015~~
~~U.S.~~	~~2010 – 2011~~	~~IRS Appeals~~2016
U.S.	2012 – 2013	Field examination
New York	~~2008 – 2014~~2015	~~Field examination~~To begin in 2017
U.K.	~~2012~~2012-2014	Field examination


⁽¹⁾	All tax years subsequent to the years shown remain subject to examination.

During ~~2015,~~2016, the Corporation ~~and IRS Appeals arrived at final agreement on the audit of Bank of America Corporation~~settled federal examinations for the 2010 ~~through~~and 2011 tax ~~years. While subject to review by~~years and settled various state and local examinations for multiple years, including New York through 2014. Also, field work for the ~~Joint Committee on Taxation of~~federal 2012 through 2013 and for the ~~U.S. Congress, the Corporation expects this examination will be concluded early in~~U.K. 2012 through 2014 examinations were substantially completed during 2016.



~~224~~194 Bank of America ~~2015~~2016

It is reasonably possible that the UTB balance may decrease by as much as ~~$0.1~~$0.2 billion 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 expense of $56 million during 2016 and benefits of $82 million ~~during 2015~~ and $196 million in 2015 and 2014, ~~and an expense of $127 million in 2013~~respectively, for interest and penalties, net-of-tax, in income tax expense. At December 31, ~~2015~~2016 and ~~2014,~~2015, the Corporation’s accrual for interest and penalties that related to income taxes, net of taxes and remittances, was $~~288~~167 million and $~~455~~288 million.

Significant components of the Corporation’s net deferred tax assets and liabilities at December 31, ~~2015~~2016 and ~~2014~~2015 are presented in the table below.



Deferred Tax Assets and Liabilities

	December 31						December 31
(Dollars in millions)	2015			2014			2016			2015
Deferred tax assets
Net operating loss carryforwards	$	9,494		$	10,955		$	9,199		$	9,439
Security, loan and debt valuations							4,726			4,919
Allowance for credit losses							4,362			4,649
Tax credit carryforwards							3,125			2,266
Accrued expenses	6,340			6,309			3,016			6,340
Allowance for credit losses	4,649			5,478
Security, loan and debt valuations	4,084			5,385
Employee compensation and retirement benefits	3,585			3,899			2,677			3,593
Tax credit carryforwards	2,707			5,614
Available-for-sale securities	152			—			784			152
Other	2,333			1,800			1,599			2,483
Gross deferred tax assets	33,344			39,440			29,488			33,841
Valuation allowance	(1,149		)	(1,111		)	(1,117		)	(1,149		)
Total deferred tax assets, net of valuation allowance	32,195			38,329			28,371			32,692

Deferred tax liabilities
Equipment lease financing	3,016			3,105			3,489			3,014
Intangibles	1,306			1,513			1,171			1,306
Fee income	864			881			847			864
Mortgage servicing rights	466			1,094			829			689
Long-term borrowings	327			630			355			327
Available-for-sale securities	—			828
Other	1,752			2,024			2,454			1,859
Gross deferred tax liabilities	7,731			10,075			9,145			8,059
Net deferred tax assets, net of valuation allowance	$	24,464		$	28,254		$	19,226		$	24,633

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, ~~2015~~2016.



Net Operating Loss and Tax Credit Carryforward Deferred Tax Assets

(Dollars in millions)	Deferred Tax Asset		Valuation Allowance			Net Deferred Tax Asset		First Year Expiring	Deferred Tax Asset		Valuation Allowance			Net Deferred Tax Asset		First Year Expiring
Net operating losses – U.S.	$	2,507	$	—		$	2,507	After 2027	$	1,908	$	—		$	1,908	After 2027
Net operating losses – U.K.	5,657		—			5,657		None ⁽¹⁾	5,410		—			5,410		None ⁽¹⁾
Net operating losses – other non-U.S.	432		(323		)	109		Various	411		(311		)	100		Various
Net operating losses – U.S. states ⁽²⁾	898		(405		)	493		Various	1,470		(398		)	1,072		Various
General business credits	2,635		—			2,635		After 2031	3,053		—			3,053		After 2031
Foreign tax credits	72		(72		)	—		n/a	72		(72		)	—		n/a


⁽¹⁾	The U.K. net operating losses 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 $~~1.4~~2.3 billion and $~~623~~612 million.

n/a = not applicable

Management concluded that no valuation allowance was necessary to reduce the deferred tax assets related to the U.K. NOL carryforwards, ~~and~~ U.S. NOL and general business credit 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, ~~and~~profit forecasts for the ~~reorganization of certain business activities~~relevant entities and the indefinite period to carry forward NOLs. However, ~~significant changes to~~a material change in those estimates ~~such as changes that would be caused by a substantial and prolonged worsening of the condition of Europe’s capital markets, or a change in applicable laws,~~ could lead management to reassess its U.K. valuation allowance conclusions.

At December 31, ~~2015,~~2016, U.S. federal income taxes had not been provided on $~~18.0~~17.8 billion of undistributed earnings of non-U.S. subsidiaries that management has determined have been reinvested for an indefinite period of time. If the Corporation were to record a deferred tax liability associated with these undistributed earnings, the amount would be approximately $~~5.0~~4.9 billion at December 31, ~~2015~~2016.



		Bank of America ~~2015~~2016 ~~225~~195

NOTE 20 Fair Value Measurements

Under applicable accounting guidance, 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 ~~based on the fair value hierarchy established~~ under applicable accounting guidance which requires an entity to maximize the use of observable inputs and minimize the use of unobservable ~~inputs when measuring fair value. There are~~inputs. The Corporation categorizes its financial instruments into three levels ~~of inputs used to measure~~based on the established fair ~~value.~~value hierarchy. The Corporation conducts a review of its 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 became unobservable or observable ~~respectively,~~ in the current marketplace. These transfers are considered to be effective as of the beginning of the quarter in which they occur. 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 additional information, see Note 21 – Fair Value Option.

Valuation Processes and Techniques

The Corporation has various processes and controls in place ~~to ensure~~so that fair value is reasonably estimated. A model validation policy governs the use and control of valuation models used to estimate fair value. This policy requires review and approval of models by personnel who are independent of the front office and periodic reassessments of models ~~to ensure~~so that they are continuing to perform as designed. In addition, detailed reviews of trading gains and losses are conducted on a daily basis by personnel who are independent of the front office. A price verification group, which is also independent of the front office, utilizes available market information including executed trades, market prices and market-observable valuation model inputs ~~to ensure~~so that fair values are reasonably estimated. The Corporation performs due diligence procedures over third-party pricing service providers in order to support their use in the valuation process. Where market information is not available to support internal valuations, independent reviews of the valuations are performed and any material exposures are escalated through a management review process.

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 ~~2015,~~2016, there were no changes to ~~the~~ 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.

For information regarding Level 1, 2 and 3 ~~Valuation Techniques~~

~~Financial instruments are considered Level~~valuation techniques, see Note 1 when the valuation is based on quoted prices in active markets for identical assets or liabilities. Level 2 financial instruments are valued using quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or models using inputs that are observable or– Summary of Significant Accounting Principles.

can be corroborated by observable market data for substantially the full term of the assets or liabilities. Financial instruments are considered Level 3 when their values are determined using pricing models, discounted cash flow methodologies or similar techniques, and at least one significant model assumption or input is unobservable and when determination of the fair value requires significant management judgment or estimation.

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, or 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, 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



~~226~~ ~~Bank of America 2015~~

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.



196 Bank of America 2016

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 ~~models that rely on estimates of prepayment rates, the resultant weighted-average lives of the MSRs and the~~an option-adjusted spread ~~levels. For more information on MSRs, see~~ ~~Note 23 – Mortgage Servicing Rights~~.(OAS) 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.

Private Equity Investments

Private equity investments consist of direct investments and fund investments which are initially valued at their transaction price. Thereafter, the fair value of direct investments is based on an assessment of each individual investment using methodologies that include publicly-traded comparables derived by multiplying a key performance metric (e.g., earnings before interest, taxes, depreciation and amortization) of the portfolio company by the relevant valuation multiple observed for comparable companies, acquisition comparables, entry level multiples and discounted cash flow analyses, and are subject to appropriate discounts for lack of liquidity or marketability. After initial recognition, the fair value of fund investments is based on the Corporation’s proportionate interest in the fund’s capital as reported by the respective fund managers.

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, 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 spreads 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 spreads 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 ~~2015~~2016 ~~227~~197

Recurring Fair Value

Assets and liabilities carried at fair value on a recurring basis at December 31, ~~2015~~2016 and ~~2014~~2015, including financial instruments which the Corporation accounts for under the fair value option, are summarized in the following tables.



	December 31, 2015											December 31, 2016
	Fair Value Measurements											Fair Value Measurements
(Dollars in millions)	Level 1		Level 2		Level 3		Netting Adjustments ⁽¹⁾			Assets/Liabilities at Fair Value		Level 1		Level 2		Level 3		Netting Adjustments ⁽¹⁾			Assets/Liabilities at Fair Value
Assets
Federal funds sold and securities borrowed or purchased under agreements to resell	$	—	$	55,143	$	—	$	—		$	55,143	$	—	$	49,750	$	—	$	—		$	49,750
Trading account assets:
U.S. government and agency securities ⁽²⁾	33,034		15,501		—		—			48,535
U.S. Treasury and agency securities ⁽²⁾												34,587		1,927		—		—			36,514
Corporate securities, trading loans and other	325		22,738		2,838		—			25,901		171		22,861		2,777		—			25,809
Equity securities	41,735		20,887		407		—			63,029		50,169		21,601		281		—			72,051
Non-U.S. sovereign debt	15,651		12,915		521		—			29,087		9,578		9,940		510		—			20,028
Mortgage trading loans and ABS	—		8,107		1,868		—			9,975
Total trading account assets	90,745		80,148		5,634		—			176,527
Derivative assets ⁽³⁾	5,149		679,458		5,134		(639,751		)	49,990
Mortgage trading loans, MBS and ABS:
U.S. government-sponsored agency guaranteed ⁽²⁾												—		15,799		—		—			15,799
Mortgage trading loans, ABS and other MBS												—		8,797		1,211		—			10,008
Total trading account assets ⁽³⁾												94,505		80,925		4,779		—			180,209
Derivative assets ⁽⁴⁾												7,337		619,848		3,931		(588,604		)	42,512
AFS debt securities:
U.S. Treasury and agency securities	23,374		1,903		—		—			25,277		46,787		1,465		—		—			48,252
Mortgage-backed securities:
Agency	—		228,947		—		—			228,947		—		189,486		—		—			189,486
Agency-collateralized mortgage obligations	—		10,985		—		—			10,985		—		8,330		—		—			8,330
Non-agency residential	—		3,073		106		—			3,179		—		2,013		—		—			2,013
Commercial	—		7,165		—		—			7,165		—		12,322		—		—			12,322
Non-U.S. securities	2,768		2,999		—		—			5,767		2,553		3,600		229		—			6,382
Corporate/Agency bonds	—		243		—		—			243
Other taxable securities	—		9,445		757		—			10,202		—		10,020		594		—			10,614
Tax-exempt securities	—		13,439		569		—			14,008		—		16,618		542		—			17,160
Total AFS debt securities	26,142		278,199		1,432		—			305,773		49,340		243,854		1,365		—			294,559
Other debt securities carried at fair value:
Mortgage-backed securities:
Agency-collateralized mortgage obligations	—		7		—		—			7		—		5		—		—			5
Non-agency residential	—		3,460		30		—			3,490		—		3,114		25		—			3,139
Non-U.S. securities	11,691		1,152		—		—			12,843		15,109		1,227		—		—			16,336
Other taxable securities	—		267		—		—			267		—		240		—		—			240
Total other debt securities carried at fair value	11,691		4,886		30		—			16,607		15,109		4,586		25		—			19,720
Loans and leases	—		5,318		1,620		—			6,938		—		6,365		720		—			7,085
Mortgage servicing rights	—		—		3,087		—			3,087		—		—		2,747		—			2,747
Loans held-for-sale	—		4,031		787		—			4,818		—		3,370		656		—			4,026
Other assets ⁽⁴⁾	11,923		2,023		374		—			14,320
Other assets												11,824		1,739		239		—			13,802
Total assets	$	145,650	$	1,109,206	$	18,098	$	(639,751	)	$	633,203	$	178,115	$	1,010,437	$	14,462	$	(588,604	)	$	614,410
Liabilities
Interest-bearing deposits in U.S. offices	$	—	$	1,116	$	—	$	—		$	1,116	$	—	$	731	$	—	$	—		$	731
Federal funds purchased and securities loaned or sold under agreements to repurchase	—		24,239		335		—			24,574		—		35,407		359		—			35,766
Trading account liabilities:
U.S. government and agency securities	14,803		169		—		—			14,972
U.S. Treasury and agency securities												15,854		197		—		—			16,051
Equity securities	27,898		2,392		—		—			30,290		25,884		3,014		—		—			28,898
Non-U.S. sovereign debt	13,589		1,951		—		—			15,540		9,409		2,103		—		—			11,512
Corporate securities and other	193		5,947		21		—			6,161		163		6,380		27		—			6,570
Total trading account liabilities	56,483		10,459		21		—			66,963		51,310		11,694		27		—			63,031
Derivative liabilities ⁽³⁾	4,941		671,613		5,575		(643,679		)	38,450
Derivative liabilities ⁽⁴⁾												7,173		615,896		5,244		(588,833		)	39,480
Short-term borrowings	—		1,295		30		—			1,325		—		2,024		—		—			2,024
Accrued expenses and other liabilities	11,656		2,234		9		—			13,899		12,978		1,643		9		—			14,630
Long-term debt	—		28,584		1,513		—			30,097		—		28,523		1,514		—			30,037
Total liabilities	$	73,080	$	739,540	$	7,483	$	(643,679	)	$	176,424	$	71,461	$	695,918	$	7,153	$	(588,833	)	$	185,699


⁽¹⁾	Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.


⁽²⁾	Includes $17.5 billion of GSE obligations.


⁽³⁾	Includes securities with a fair value of $14.6 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⁾	During 2016, $2.3 billion of derivative assets and $2.4 billion of derivative liabilities were transferred from Level 1 to Level 2 and $2.0 billion of derivative assets and $1.8 billion of derivative liabilities were transferred from Level 2 to Level 1 based on the inputs used to measure fair value. For further disaggregation of derivative assets and liabilities, see Note 2 – Derivatives.



198 Bank of America 2016




	December 31, 2015
	Fair Value Measurements
(Dollars in millions)	Level 1		Level 2		Level 3		Netting Adjustments ⁽¹⁾			Assets/Liabilities at Fair Value
Assets
Federal funds sold and securities borrowed or purchased under agreements to resell	$	—	$	55,143	$	—	$	—		$	55,143
Trading account assets:
U.S. Treasury and agency securities ⁽²⁾	33,034		2,413		—		—			35,447
Corporate securities, trading loans and other	325		22,738		2,838		—			25,901
Equity securities	41,735		20,887		407		—			63,029
Non-U.S. sovereign debt	15,651		12,915		521		—			29,087
Mortgage trading loans, MBS and ABS:
U.S. government-sponsored agency guaranteed ⁽²⁾	—		13,088		—		—			13,088
Mortgage trading loans, ABS and other MBS	—		8,107		1,868		—			9,975
Total trading account assets ⁽³⁾	90,745		80,148		5,634		—			176,527
Derivative assets ⁽⁴⁾	5,149		678,355		5,134		(638,648		)	49,990
AFS debt securities:
U.S. Treasury and agency securities	23,374		1,903		—		—			25,277
Mortgage-backed securities:
Agency	—		228,947		—		—			228,947
Agency-collateralized mortgage obligations	—		10,985		—		—			10,985
Non-agency residential	—		3,073		106		—			3,179
Commercial	—		7,165		—		—			7,165
Non-U.S. securities	2,768		2,999		—		—			5,767
Other taxable securities	—		9,688		757		—			10,445
Tax-exempt securities	—		13,439		569		—			14,008
Total AFS debt securities	26,142		278,199		1,432		—			305,773
Other debt securities carried at fair value:
Mortgage-backed securities:
Agency-collateralized mortgage obligations	—		7		—		—			7
Non-agency residential	—		3,460		30		—			3,490
Non-U.S. securities	11,691		1,152		—		—			12,843
Other taxable securities	—		267		—		—			267
Total other debt securities carried at fair value	11,691		4,886		30		—			16,607
Loans and leases	—		5,318		1,620		—			6,938
Mortgage servicing rights	—		—		3,087		—			3,087
Loans held-for-sale	—		4,031		787		—			4,818
Other assets ⁽⁵⁾	11,923		2,023		374		—			14,320
Total assets	$	145,650	$	1,108,103	$	18,098	$	(638,648	)	$	633,203
Liabilities
Interest-bearing deposits in U.S. offices	$	—	$	1,116	$	—	$	—		$	1,116
Federal funds purchased and securities loaned or sold under agreements to repurchase	—		24,239		335		—			24,574
Trading account liabilities:
U.S. Treasury and agency securities	14,803		169		—		—			14,972
Equity securities	27,898		2,392		—		—			30,290
Non-U.S. sovereign debt	13,589		1,951		—		—			15,540
Corporate securities and other	193		5,947		21		—			6,161
Total trading account liabilities	56,483		10,459		21		—			66,963
Derivative liabilities ⁽⁴⁾	4,941		670,600		5,575		(642,666		)	38,450
Short-term borrowings	—		1,295		30		—			1,325
Accrued expenses and other liabilities	11,656		2,234		9		—			13,899
Long-term debt	—		28,584		1,513		—			30,097
Total liabilities	$	73,080	$	738,527	$	7,483	$	(642,666	)	$	176,424


⁽¹⁾	Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.


⁽²⁾	Includes $14.8 billion of ~~government-sponsored enterprise~~GSE obligations.


⁽³⁾	Includes securities with a fair value of $16.4 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⁾

During 2015, $6.6 billion of derivative assets and $6.7 billion of derivative liabilities were transferred from Level 1 to Level 2 based on inputs used to measure fair value. Additionally $6.4 billion of derivative assets and $6.2 billion of derivative liabilities were transferred from Level 2 to Level 1 due to additional information related to certain options. For further disaggregation of derivative assets and liabilities, see Note 2 – Derivatives.


⁽⁴⁾⁽⁵⁾	During 2015, approximately $327 million of assets were transferred from Level 2 to Level 1 due to a restriction that was lifted for an equity investment.



~~228~~ ~~Bank of America 2015~~

December 31, 2014
Fair Value Measurements
(Dollars in millions) Level 1 Level 2 Level 3
Netting Adjustments ⁽¹⁾
Assets/Liabilities at Fair Value
Assets

Federal funds sold and securities borrowed or purchased under agreements to resell $ —
$ 62,182
$ —
$ —
$ 62,182
Trading account assets:

U.S. government and agency securities ⁽²⁾
33,470
17,549
—
—
51,019
Corporate securities, trading loans and other 243
31,699
3,270
—
35,212
Equity securities 33,518
22,488
352
—
56,358
Non-U.S. sovereign debt 20,348
15,332
574
—
36,254
Mortgage trading loans and ABS —
10,879
2,063
—
12,942
Total trading account assets 87,579
97,947
6,259
—
191,785
Derivative assets ⁽³⁾
4,957
972,977
6,851
(932,103 ) 52,682
AFS debt securities:

U.S. Treasury and agency securities 67,413
2,182
—
—
69,595
Mortgage-backed securities:

Agency —
165,039
—
—
165,039
Agency-collateralized mortgage obligations —
14,248
—
—
14,248
Non-agency residential —
4,175
279
—
4,454
Commercial —
4,000
—
—
4,000
Non-U.S. securities 3,191
3,029
10
—
6,230
Corporate/Agency bonds —
368
—
—
368
Other taxable securities 20
9,104
1,667
—
10,791
Tax-exempt securities —
8,950
599
—
9,549
Total AFS debt securities 70,624
211,095
2,555
—
284,274
Other debt securities carried at fair value:
U.S. Treasury and agency securities 1,541
—
—
—
1,541
Mortgage-backed securities:
Agency —
15,704
—
—
15,704
Non-agency residential —
3,745
—
—
3,745
Non-U.S. securities 13,270
1,862
—
—
15,132
Other taxable securities —
299
—
—
299
Total other debt securities carried at fair value 14,811
21,610
—
—
36,421
Loans and leases —
6,698
1,983
—
8,681
Mortgage servicing rights —
—
3,530
—
3,530
Loans held-for-sale —
6,628
173
—
6,801
Other assets ⁽⁴⁾
11,581
1,381
911
—
13,873
Total assets $ 189,552
$ 1,380,518
$ 22,262
$ (932,103 ) $ 660,229
Liabilities

Interest-bearing deposits in U.S. offices $ —
$ 1,469
$ —
$ —
$ 1,469
Federal funds purchased and securities loaned or sold under agreements to repurchase —
35,357
—
—
35,357
Trading account liabilities:

U.S. government and agency securities 18,514
446
—
—
18,960
Equity securities 24,679
3,670
—
—
28,349
Non-U.S. sovereign debt 16,089
3,625
—
—
19,714
Corporate securities and other 189
6,944
36
—
7,169
Total trading account liabilities 59,471
14,685
36
—
74,192
Derivative liabilities ⁽³⁾
4,493
969,502
7,771
(934,857 ) 46,909
Short-term borrowings —
2,697
—
—
2,697
Accrued expenses and other liabilities 10,795
1,250
10
—
12,055
Long-term debt —
34,042
2,362
—
36,404
Total liabilities $ 74,759
$ 1,059,002
$ 10,179
$ (934,857 ) $ 209,083


⁽¹⁾	~~Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.~~


⁽²⁾	~~Includes~~ ~~$17.2 billion~~ ~~of government-sponsored enterprise obligations.~~


⁽³⁾	~~For further disaggregation of derivative assets and liabilities, see~~ ~~Note 2 – Derivatives~~.

⁽⁴⁾

~~During~~ ~~2014, the Corporation reclassified certain assets and liabilities within its fair value hierarchy based on a review of its inputs used to measure fair value. Accordingly, approximately~~ ~~$4.1 billion~~ ~~of assets related to U.S. government and agency securities, non-U.S. government securities and equity derivatives, and~~ ~~$570 million~~ ~~of liabilities related to equity derivatives were transferred from Level 1 to Level 2.~~



		Bank of America ~~2015~~2016 ~~229~~199

The following tables present a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014, including net realized and unrealized gains (losses) included in earnings and accumulated OCI.



Level 3 – Fair Value Measurements ⁽¹⁾	Level 3 – Fair Value Measurements ⁽¹⁾																													Level 3 – Fair Value Measurements ⁽¹⁾

	2015																													2016
										Gross																													Gross
(Dollars in millions)	Balance January 1 2015			Gains (Losses) in Earnings			Gains (Losses) in OCI ⁽²⁾			Purchases		Sales			Issuances			Settlements			Gross Transfers into Level 3			Gross Transfers out of Level 3			Balance December 31 2015			Balance January 1 2016			Total Realized/Unrealized Gains/(Losses) ⁽²⁾			Gains (Losses) in OCI ⁽³⁾			Purchases		Sales			Issuances			Settlements			Gross Transfers into Level 3			Gross Transfers out of Level 3			Balance December 31 2016			Change in Unrealized Gains/(Losses) Related to Financial Instruments Still Held ⁽²⁾
Trading account assets:
Corporate securities, trading loans and other	$	3,270		$	(31	)	$	(11	)	$	1,540	$	(1,616	)	$	—		$	(1,122	)	$	1,570		$	(762	)	$	2,838		$	2,838		$	78		$	2		$	1,508	$	(847	)	$	—		$	(725	)	$	728		$	(805	)	$	2,777		$	(82	)
Equity securities	352			9			—			49		(11		)	—			(11		)	41			(22		)	407			407			74			—			73		(169		)	—			(82		)	70			(92		)	281			(59		)
Non-U.S. sovereign debt	574			114			(179		)	185		(1		)	—			(145		)	—			(27		)	521			521			122			91			12		(146		)	—			(90		)	—			—			510			120
Mortgage trading loans and ABS	2,063			154			1			1,250		(1,117		)	—			(493		)	50			(40		)	1,868
Mortgage trading loans, ABS and other MBS																														1,868			188			(2		)	988		(1,491		)	—			(344		)	158			(154		)	1,211			64
Total trading account assets	6,259			246			(189		)	3,024		(2,745		)	—			(1,771		)	1,661			(851		)	5,634			5,634			462			91			2,581		(2,653		)	—			(1,241		)	956			(1,051		)	4,779			43
Net derivative assets ⁽³⁾⁽⁴⁾	(920		)	1,335			(7		)	273		(863		)	—			(261		)	(40		)	42			(441		)	(441		)	285			—			470		(1,155		)	—			76			(186		)	(362		)	(1,313		)	(376		)
AFS debt securities:
Non-agency residential MBS	279			(12		)	—			134		—			—			(425		)	167			(37		)	106			106			—			—			—		(106		)	—			—			—			—			—
Non-U.S. securities	10			—			—			—		—			—			(10		)	—			—			—			—			—			(6		)	584		(92		)	—			(263		)	6			—			229			—
Other taxable securities	1,667			—			—			189		—			—			(160		)	—			(939		)	757			757			4			(2		)	—		—			—			(83		)	—			(82		)	594			—
Tax-exempt securities	599			—			—			—		—			—			(30		)	—			—			569			569			—			(1		)	1		—			—			(2		)	10			(35		)	542			—
Total AFS debt securities	2,555			(12		)	—			323		—			—			(625		)	167			(976		)	1,432			1,432			4			(9		)	585		(198		)	—			(348		)	16			(117		)	1,365			—
Other debt securities carried at fair value – Non-agency residential MBS	—			(3		)	—			33		—			—			—			—			—			30			30			(5		)	—			—		—			—			—			—			—			25			—
Loans and leases ^{(4, 5)}	1,983			(23		)	—			—		(4		)	57			(237		)	144			(300		)	1,620
Loans and leases ^{(5, 6)}																														1,620			(44		)	—			69		(553		)	50			(194		)	6			(234		)	720			17
Mortgage servicing rights ⁽⁵⁾⁽⁶⁾	3,530			187			—			—		(393		)	637			(874		)	—			—			3,087			3,087			149			—			—		(80		)	411			(820		)	—			—			2,747			(107		)
Loans held-for-sale ⁽⁴⁾⁽⁵⁾	173			(51		)	(8		)	771		(203		)	61			(61		)	203			(98		)	787			787			79			50			22		(256		)	—			(93		)	173			(106		)	656			70
Other assets ⁽⁶⁾	911			(55		)	—			11		(130		)	—			(51		)	10			(322		)	374			374			(13		)	—			38		(111		)	—			(52		)	3			—			239			(36		)
Federal funds purchased and securities loaned or sold under agreements to repurchase ⁽⁴⁾⁽⁵⁾	—			(11		)	—			—		—			(131		)	217			(411		)	1			(335		)	(335		)	(11		)	—			—		—			(22		)	27			(19		)	1			(359		)	4
Trading account liabilities – Corporate securities and other	(36		)	19			—			30		(34		)	—			—			—			—			(21		)	(21		)	5			—			—		(11		)	—			—			—			—			(27		)	4
Short-term borrowings ⁽⁴⁾⁽⁵⁾	—			17			—			—		—			(52		)	10			(24		)	19			(30		)	(30		)	1			—			—		—			—			29			—			—			—			—
Accrued expenses and other liabilities(5)	(10		)	1			—			—		—			—			—			—			—			(9		)	(9		)	—			—			—		—			—			—			—			—			(9		)	—
Long-term debt ⁽⁴⁾⁽⁵⁾	(2,362		)	287			19			616		—			(188		)	273			(1,592		)	1,434			(1,513		)	(1,513		)	(74		)	(20		)	140		—			(521		)	948			(939		)	465			(1,514		)	(184		)


⁽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 - trading account profits (losses); Net derivative assets - primarily trading account profits (losses) and mortgage banking income (loss); Mortgage servicing rights - primarily mortgage banking income (loss); Long-term debt - primarily trading account profits (losses).

⁽³⁾

Includes gains/losses in OCI related to unrealized ~~gains (losses)~~gains/losses on AFS debt securities, foreign currency translation adjustments and the impact ~~on structured liabilities~~ of changes in the Corporation’s credit ~~spreads. For more information, see~~ ~~Note 1 – Summary of Significant Accounting Principles~~.spreads on long-term debt accounted for under the fair value option.


⁽³⁾⁽⁴⁾	Net derivatives include derivative assets of $~~5.1~~3.9 billion and derivative liabilities of $~~5.6~~5.2 billion.


⁽⁴⁾⁽⁵⁾	Amounts represent instruments that are accounted for under the fair value option.


⁽⁵⁾⁽⁶⁾	Issuances represent loan originations and MSRs retained following securitizations or whole-loan sales.


⁽⁶⁾	~~Other assets is primarily comprised of certain private equity investments.~~

Significant transfers into Level 3, primarily due to decreased price observability, during ~~2015 included:~~2016 included $956 million of trading account assets, $186 million of net derivative assets, $173 million of LHFS and $939 million of long-term debt. Transfers occur on a regular basis for these long-term debt instruments due to changes in the impact of unobservable inputs on the value of the embedded derivative in relation to the instrument as a whole.


Ÿ	~~$1.7 billion of trading account assets~~


Ÿ	~~$167 million of AFS debt securities~~


Ÿ	~~$144 million of loans and leases~~


Ÿ	~~$203 million of LHFS~~


Ÿ	~~$411 million of federal funds purchased and securities loaned or sold under agreements to repurchase~~


Ÿ	$1.6 billion of long-term debt. Transfers occur on a regular basis for these long-term debt instruments due to changes in the impact of unobservable inputs on the value of the embedded derivative in relation to the instrument as a whole.

Significant transfers out of Level 3, primarily due to increased price observability, ~~unless otherwise noted,~~ during ~~2015 included:~~2016 included $1.1 billion of trading account assets, $362 million of net derivative assets, $117 million of AFS debt securities, $234 million of loans and leases, $106 million of LHFS and $465 million of long-term debt.


Ÿ	~~$851 million of trading account assets, primarily the result of increased market liquidity~~


Ÿ	~~$976 million of AFS debt securities~~


Ÿ	~~$300 million of loans and leases~~


Ÿ	~~$322 million of other assets~~


Ÿ	~~$1.4 billion of long-term debt~~



~~230~~200 Bank of America ~~2015~~2016



Level 3 – Fair Value Measurements ⁽¹⁾	Level 3 – Fair Value Measurements ⁽¹⁾																													Level 3 – Fair Value Measurements ⁽¹⁾

	2014																													2015
										Gross																													Gross
(Dollars in millions)	Balance January 1 2014			Gains (Losses) in Earnings			Gains (Losses) in OCI			Purchases		Sales			Issuances			Settlements			Gross Transfers into Level 3			Gross Transfers out of Level 3			Balance December 31 2014			Balance January 1 2015			Total Realized/Unrealized Gains/(Losses) ⁽²⁾			Gains (Losses) in OCI ⁽³⁾			Purchases		Sales			Issuances			Settlements			Gross Transfers into Level 3			Gross Transfers out of Level 3			Balance December 31 2015			Change in Unrealized Gains/(Losses) Related to Financial Instruments Still Held ⁽²⁾
Trading account assets:
U.S. government and agency securities	$	—		$	—		$	—		$	87	$	(87	)	$	—		$	—		$	—		$	—		$	—
Corporate securities, trading loans and other	3,559			180			—			1,675		(857		)	—			(938		)	1,275			(1,624		)	3,270			$	3,270		$	(31	)	$	(11	)	$	1,540	$	(1,616	)	$	—		$	(1,122	)	$	1,570		$	(762	)	$	2,838		$	(123	)
Equity securities	386			—			—			104		(86		)	—			(16		)	146			(182		)	352			352			9			—			49		(11		)	—			(11		)	41			(22		)	407			3
Non-U.S. sovereign debt	468			30			—			120		(34		)	—			(19		)	11			(2		)	574			574			114			(179		)	185		(1		)	—			(145		)	—			(27		)	521			74
Mortgage trading loans and ABS	4,631			199			—			1,643		(1,259		)	—			(585		)	39			(2,605		)	2,063
Mortgage trading loans, ABS and other MBS																														2,063			154			1			1,250		(1,117		)	—			(493		)	50			(40		)	1,868			(93		)
Total trading account assets	9,044			409			—			3,629		(2,323		)	—			(1,558		)	1,471			(4,413		)	6,259			6,259			246			(189		)	3,024		(2,745		)	—			(1,771		)	1,661			(851		)	5,634			(139		)
Net derivative assets ⁽²⁾	(224		)	463			—			823		(1,738		)	—			(432		)	28			160			(920		)
Net derivative assets ⁽⁴⁾																														(920		)	1,335			(7		)	273		(863		)	—			(261		)	(40		)	42			(441		)	605
AFS debt securities:
Non-agency residential MBS	—			(2		)	—			11		—			—			—			270			—			279			279			(12		)	—			134		—			—			(425		)	167			(37		)	106
Non-U.S. securities	107			(7		)	(11		)	241		—			—			(147		)	—			(173		)	10			10			—			—			—		—			—			(10		)	—			—			—			—
Corporate/Agency bonds	—			—			—			—		—			—			—			93			(93		)	—
Other taxable securities	3,847			9			(8		)	154		—			—			(1,381		)	—			(954		)	1,667			1,667			—			—			189		—			—			(160		)	—			(939		)	757			—
Tax-exempt securities	806			8			—			—		(16		)	—			(235		)	36			—			599			599			—			—			—		—			—			(30		)	—			—			569			—
Total AFS debt securities	4,760			8			(19		)	406		(16		)	—			(1,763		)	399			(1,220		)	2,555			2,555			(12		)	—			323		—			—			(625		)	167			(976		)	1,432			—
Loans and leases ^{(3, 4)}	3,057			69			—			—		(3		)	699			(1,591		)	25			(273		)	1,983
Mortgage servicing rights ⁽⁴⁾	5,042			(1,231		)	—			—		(61		)	707			(927		)	—			—			3,530
Loans held-for-sale ⁽⁴⁾	929			45			—			59		(725		)	23			(216		)	83			(25		)	173
Other assets ⁽⁵⁾	1,669			(98		)	—			—		(430		)	—			(245		)	39			(24		)	911
Other debt securities carried at fair value – Non-agency residential MBS																														—			(3		)	—			33		—			—			—			—			—			30			—
Loans and leases ^{(5, 6)}																														1,983			(23		)	—			—		(4		)	57			(237		)	144			(300		)	1,620			13
Mortgage servicing rights ⁽⁶⁾																														3,530			187			—			—		(393		)	637			(874		)	—			—			3,087			(85		)
Loans held-for-sale ⁽⁵⁾																														173			(51		)	(8		)	771		(203		)	61			(61		)	203			(98		)	787			(39		)
Other assets																														911			(55		)	—			11		(130		)	—			(51		)	10			(322		)	374			(61		)
Federal funds purchased and securities loaned or sold under agreements to repurchase ⁽⁵⁾																														—			(11		)	—			—		—			(131		)	217			(411		)	1			(335		)	—
Trading account liabilities – Corporate securities and other	(35		)	1			—			10		(13		)	—			—			(9		)	10			(36		)	(36		)	19			—			30		(34		)	—			—			—			—			(21		)	(3		)
Accrued expenses and other liabilities	(10		)	2			—			—		—			(3		)	—			—			1			(10		)
Long-term debt ⁽³⁾	(1,990		)	49			—			169		—			(615		)	540			(1,581		)	1,066			(2,362		)
Short-term borrowings ⁽⁵⁾																														—			17			—			—		—			(52		)	10			(24		)	19			(30		)	1
Accrued expenses and other liabilities ⁽⁵⁾																														(10		)	1			—			—		—			—			—			—			—			(9		)	1
Long-term debt ⁽⁵⁾																														(2,362		)	287			19			616		—			(188		)	273			(1,592		)	1,434			(1,513		)	255


⁽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 - trading account profits (losses); Net derivative assets - primarily trading account profits (losses) and mortgage banking income (loss); Mortgage servicing rights - primarily mortgage banking income (loss); Long-term debt - primarily trading account profits (losses).


⁽³⁾	Includes gains/losses in OCI related to unrealized gains/losses 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 derivatives include derivative assets of $~~6.9~~5.1 billion and derivative liabilities of $~~7.8~~5.6 billion.


⁽³⁾⁽⁵⁾	Amounts represent instruments that are accounted for under the fair value option.


⁽⁴⁾⁽⁶⁾	Issuances represent loan originations and MSRs retained following securitizations or whole-loan sales.


⁽⁵⁾	~~Other assets is primarily comprised of certain long-term fixed-rate margin loans that are accounted for under the fair value option and certain private equity investments.~~

Significant transfers into Level 3, primarily due to decreased price observability, during ~~2014 included:~~2015 included $1.7 billion of trading account assets, $167 million of AFS debt securities, $144 million of loans and leases, $203 million of LHFS, $411 million of federal funds purchased and securities loaned or sold under agreements to repurchase and $1.6 billion of long-term debt. Transfers occur on a regular basis for these long-term debt instruments due to changes in the impact of unobservable inputs on the value of the embedded derivative in relation to the instrument as a whole.


Ÿ	~~$1.5 billion of trading account assets~~


Ÿ	~~$399 million of AFS debt securities~~


Ÿ	$1.6 billion of long-term debt. Transfers occur on a regular basis for these long-term debt instruments due to changes in the impact of unobservable inputs on the value of the embedded derivative in relation to the instrument as a whole.

Significant transfers out of Level 3, primarily due to increased price observability, unless otherwise noted, during ~~2014 included:~~2015 included $851 million of trading account assets, as a result of increased market liquidity, $976 million of AFS debt securities, $300 million of loans and leases, $322 million of other assets and $1.4 billion of long-term debt.


Ÿ	~~$4.4 billion of trading account assets, primarily the result of increased market liquidity~~


Ÿ	~~$160 million of net derivative assets~~


Ÿ	~~$1.2 billion of AFS debt securities~~


Ÿ	~~$273 million of loans and leases~~


Ÿ	~~$1.1 billion of long-term debt~~



		Bank of America ~~2015~~2016 ~~231~~201



Level 3 – Fair Value Measurements ⁽¹⁾	Level 3 – Fair Value Measurements ⁽¹⁾																												Level 3 – Fair Value Measurements ⁽¹⁾

	2013																												2014
									Gross																													Gross
(Dollars in millions)	Balance January 1 2013			Gains (Losses) in Earnings			Gains (Losses) in OCI		Purchases		Sales			Issuances			Settlements			Gross Transfers into Level 3			Gross Transfers out of Level 3			Balance December 31 2013			Balance January 1 2014			Total Realized/Unrealized Gains/(Losses) ⁽²⁾			Gains (Losses) in OCI ⁽³⁾			Purchases		Sales			Issuances			Settlements			Gross Transfers into Level 3			Gross Transfers out of Level 3			Balance December 31 2014			Change in Unrealized Gains/(Losses) Related to Financial Instruments Still Held ⁽²⁾
Trading account assets:
U.S. government and agency securities																													$	—		$	—		$	—		$	87	$	(87	)	$	—		$	—		$	—		$	—		$	—		$	—
Corporate securities, trading loans and other	$	3,726		$	242		$	—	$	3,848	$	(3,110	)	$	59		$	(651	)	$	890		$	(1,445	)	$	3,559		3,559			180			—			1,675		(857		)	—			(938		)	1,275			(1,624		)	3,270			69
Equity securities	545			74			—		96		(175		)	—			(100		)	70			(124		)	386			386			—			—			104		(86		)	—			(16		)	146			(182		)	352			(8		)
Non-U.S. sovereign debt	353			50			—		122		(18		)	—			(36		)	2			(5		)	468			468			30			—			120		(34		)	—			(19		)	11			(2		)	574			31
Mortgage trading loans and ABS	4,935			53			—		2,514		(1,993		)	—			(868		)	20			(30		)	4,631
Mortgage trading loans, ABS and other MBS																													4,631			199			—			1,643		(1,259		)	—			(585		)	39			(2,605		)	2,063			79
Total trading account assets	9,559			419			—		6,580		(5,296		)	59			(1,655		)	982			(1,604		)	9,044			9,044			409			—			3,629		(2,323		)	—			(1,558		)	1,471			(4,413		)	6,259			171
Net derivative assets ⁽²⁾	1,468			(304		)	—		824		(1,467		)	—			(1,362		)	(10		)	627			(224		)
Net derivative assets ⁽⁴⁾																													(224		)	463			—			823		(1,738		)	—			(432		)	28			160			(920		)	(87		)
AFS debt securities:
Commercial MBS	10			—			—		—		—			—			(10		)	—			—			—
Non-agency residential MBS																													—			(2		)	—			11		—			—			—			270			—			279			—
Non-U.S. securities	—			5			2		1		(1		)	—			—			100			—			107			107			(7		)	(11		)	241		—			—			(147		)	—			(173		)	10			—
Corporate/Agency bonds	92			—			4		—		—			—			—			—			(96		)	—
Other taxable securities	3,928			9			15		1,055		—			—			(1,155		)	—			(5		)	3,847			3,847			9			(8		)	154		—			—			(1,381		)	93			(1,047		)	1,667			—
Tax-exempt securities	1,061			3			19		—		—			—			(109		)	—			(168		)	806			806			8			—			—		(16		)	—			(235		)	36			—			599			—
Total AFS debt securities	5,091			17			40		1,056		(1		)	—			(1,274		)	100			(269		)	4,760			4,760			8			(19		)	406		(16		)	—			(1,763		)	399			(1,220		)	2,555			—
Loans and leases ^{(3, 4)}	2,287			98			—		310		(128		)	1,252			(757		)	19			(24		)	3,057
Loans and leases ^{(5, 6)}																													3,057			69			—			—		(3		)	699			(1,591		)	25			(273		)	1,983			76
Mortgage servicing rights ⁽⁴⁾⁽⁶⁾	5,716			1,941			—		—		(2,044		)	472			(1,043		)	—			—			5,042			5,042			(1,231		)	—			—		(61		)	707			(927		)	—			—			3,530			(1,753		)
Loans held-for-sale ⁽³⁾⁽⁵⁾	2,733			62			—		8		(402		)	4			(1,507		)	34			(3		)	929			929			45			—			59		(725		)	23			(216		)	83			(25		)	173			(4		)
Other assets ⁽⁵⁾	3,129			(288		)	—		46		(383		)	—			(1,019		)	239			(55		)	1,669			1,669			(98		)	—			—		(430		)	—			(245		)	39			(24		)	911			52
Trading account liabilities – Corporate securities and other	(64		)	10			—		43		(54		)	(5		)	—			(9		)	44			(35		)	(35		)	1			—			10		(13		)	—			—			(9		)	10			(36		)	1
Accrued expenses and other liabilities ⁽³⁾⁽⁵⁾	(15		)	30			—		—		—			(751		)	724			(1		)	3			(10		)	(10		)	2			—			—		—			(3		)	—			—			1			(10		)	1
Long-term debt ⁽³⁾⁽⁵⁾	(2,301		)	13			—		358		(4		)	(172		)	258			(1,331		)	1,189			(1,990		)	(1,990		)	49			—			169		—			(615		)	540			(1,581		)	1,066			(2,362		)	(8		)


⁽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 - trading account profits (losses); Net derivative assets - trading account profits (losses), mortgage banking income (loss) and other income (loss); Mortgage servicing rights - primarily mortgage banking income (loss); Long-term debt - trading account profits (losses) and other income (loss).


⁽³⁾	Includes gains/losses in OCI related to unrealized gains/losses on AFS debt securities.


⁽⁴⁾	Net derivatives include derivative assets of $~~7.3~~6.9 billion and derivative liabilities of $~~7.5~~7.8 billion.


⁽³⁾⁽⁵⁾	Amounts represent instruments that are accounted for under the fair value option.


⁽⁴⁾⁽⁶⁾	Issuances represent loan originations and MSRs retained following securitizations or whole-loan sales.


⁽⁵⁾	~~Other assets is primarily comprised of certain long-term fixed-rate margin loans that are accounted for under the fair value option and certain private equity investments.~~

Significant transfers into Level 3, primarily due to decreased price observability, during ~~2013 included:~~2014 included $1.5 billion of trading account assets, $399 million of AFS debt securities and $1.6 billion of long-term debt. Transfers occur on a regular basis for these long-term debt instruments due to changes in the impact of unobservable inputs on the value of the embedded derivative in relation to the instrument as a whole.


Ÿ	~~$982 million of trading account assets~~


Ÿ	~~$100 million of AFS debt securities~~


Ÿ	~~$239 million of other assets~~


Ÿ	$1.3 billion of long-term debt. Transfers occur on a regular basis for these long-term debt instruments due to changes in the impact of unobservable inputs on the value of the embedded derivative in relation to the instrument as a whole.

Significant transfers out of Level 3, primarily due to increased price observability unless otherwise noted, during ~~2013 included:~~2014 included $4.4 billion of trading account assets, as a result of increased market liquidity, $160 million of net derivative assets, $1.2 billion of AFS debt securities, $273 million of loans and leases and $1.1 billion of long-term debt.


Ÿ	~~$1.6 billion of trading account assets~~


Ÿ	~~$627 million of net derivative assets~~


Ÿ	~~$269 million of AFS debt securities, primarily due to increased market liquidity~~


Ÿ	~~$1.2 billion of long-term debt~~



~~232~~202 Bank of America ~~2015~~2016

~~The following tables summarize gains (losses) due to changes in fair value, including both realized and unrealized gains (losses), recorded in earnings for Level 3 assets and liabilities during~~ ~~2015~~, ~~2014~~ ~~and~~ ~~2013. These amounts include gains (losses) on loans, LHFS, loan commitments and structured liabilities that are accounted for under the fair value option.~~

Level 3 – Total Realized and Unrealized Gains (Losses) Included in Earnings

2015
(Dollars in millions)
Trading
Account
Profits
(Losses)

Mortgage
Banking
Income
(Loss) ⁽¹⁾
Other Total
Trading account assets:

Corporate securities, trading loans and other $ (31 ) $ —
$ —
$ (31 )
Equity securities 9
—
—
9
Non-U.S. sovereign debt 114
—
—
114
Mortgage trading loans and ABS 154
—
—
154
Total trading account assets 246
—
—
246
Net derivative assets 508
765
62
1,335
AFS debt securities – Non-agency residential MBS —
—
(12 ) (12 )
Other debt securities carried at fair value – Non-agency residential MBS —
—
(3 ) (3 )
Loans and leases ⁽²⁾
(8 ) —
(15 ) (23 )
Mortgage servicing rights 73
114
—
187
Loans held-for-sale ⁽²⁾
(58 ) —
7
(51 )
Other assets —
(66 ) 11
(55 )
Federal funds purchased and securities loaned or sold under agreements to repurchase ⁽²⁾
(11 ) —
—
(11 )
Trading account liabilities – Corporate securities and other 19
—
—
19
Short-term borrowings ⁽²⁾
17
—
—
17
Accrued expenses and other liabilities —
—
1
1
Long-term debt ⁽²⁾
339
—
(52 ) 287
Total $ 1,125
$ 813
$ (1 ) $ 1,937

2014
Trading account assets:

Corporate securities, trading loans and other $ 180
$ —
$ —
$ 180
Non-U.S. sovereign debt 30
—
—
30
Mortgage trading loans and ABS 199
—
—
199
Total trading account assets 409
—
—
409
Net derivative assets (475 ) 834
104
463
AFS debt securities:

Non-agency residential MBS —
—
(2 ) (2 )
Non-U.S. securities —
—
(7 ) (7 )
Other taxable securities —
—
9
9
Tax-exempt securities —
—
8
8
Total AFS debt securities —
—
8
8
Loans and leases ⁽²⁾
—
—
69
69
Mortgage servicing rights (6 ) (1,225 ) —
(1,231 )
Loans held-for-sale ⁽²⁾
(14 ) —
59
45
Other assets —
(79 ) (19 ) (98 )
Trading account liabilities – Corporate securities and other 1
—
—
1
Accrued expenses and other liabilities —
—
2
2
Long-term debt⁽²⁾
78
—
(29 ) 49
Total $ (7 ) $ (470 ) $ 194
$ (283 )


⁽¹⁾	~~Mortgage banking income (loss) does not reflect the impact of Level 1 and Level 2 hedges on MSRs.~~


⁽²⁾	~~Amounts represent instruments that are accounted for under the fair value option.~~



		~~Bank of America 2015233~~

Level 3 – Total Realized and Unrealized Gains (Losses) Included in Earnings (continued)

2013
(Dollars in millions)
Trading
Account
Profits
(Losses)

Mortgage
Banking
Income
(Loss) ⁽¹⁾
Other Total
Trading account assets:

Corporate securities, trading loans and other $ 242
$ —
$ —
$ 242
Equity securities 74
—
—
74
Non-U.S. sovereign debt 50
—
—
50
Mortgage trading loans and ABS 53
—
—
53
Total trading account assets 419
—
—
419
Net derivative assets (1,224 ) 927
(7 ) (304 )
AFS debt securities:

Non-U.S. securities —
—
5
5
Other taxable securities —
—
9
9
Tax-exempt securities —
—
3
3
Total AFS debt securities —
—
17
17
Loans and leases ⁽²⁾
—
(38 ) 136
98
Mortgage servicing rights —
1,941
—
1,941
Loans held-for-sale ⁽²⁾
—
2
60
62
Other assets —
122
(410 ) (288 )
Trading account liabilities – Corporate securities and other 10
—
—
10
Accrued expenses and other liabilities —
30
—
30
Long-term debt⁽²⁾
45
—
(32 ) 13
Total $ (750 ) $ 2,984
$ (236 ) $ 1,998


⁽¹⁾	~~Mortgage banking income (loss) does not reflect the impact of Level 1 and Level 2 hedges on MSRs.~~


⁽²⁾	~~Amounts represent instruments that are accounted for under the fair value option.~~



~~234~~ ~~Bank of America 2015~~

~~The table below summarizes changes in unrealized gains (losses) recorded in earnings during~~ ~~2015~~, ~~2014~~ ~~and~~ ~~2013~~ ~~for Level 3 assets and liabilities that were still held at~~ ~~December 31, 2015~~, ~~2014~~ ~~and~~ ~~2013. These amounts include changes in fair value on loans, LHFS, loan commitments and structured liabilities that are accounted for under the fair value option.~~

Level 3 – Changes in Unrealized Gains (Losses) Relating to Assets and Liabilities Still Held at Reporting Date

2015
(Dollars in millions)
Trading
Account
Profits
(Losses)

Mortgage
Banking
Income
(Loss) ⁽¹⁾
Other Total
Trading account assets:

Corporate securities, trading loans and other $ (123 ) $ —
$ —
$ (123 )
Equity securities 3
—
—
3
Non-U.S. sovereign debt 74
—
—
74
Mortgage trading loans and ABS (93 ) —
—
(93 )
Total trading account assets (139 ) —
—
(139 )
Net derivative assets 507
36
62
605
Loans and leases ⁽²⁾
(3 ) —
16
13
Mortgage servicing rights 73
(158 ) —
(85 )
Loans held-for-sale ⁽²⁾
(1 ) —
(38 ) (39 )
Other assets —
(41 ) (20 ) (61 )
Trading account liabilities – Corporate securities and other (3 ) —
—
(3 )
Short-term borrowings ⁽²⁾
1
—
—
1
Accrued expenses and other liabilities —
—
1
1
Long-term debt ⁽²⁾
277
—
(22 ) 255
Total $ 712
$ (163 ) $ (1 ) $ 548

2014
Trading account assets:

Corporate securities, trading loans and other $ 69
$ —
$ —
$ 69
Equity securities (8 ) —
—
(8 )
Non-U.S. sovereign debt 31
—
—
31
Mortgage trading loans and ABS 79
—
—
79
Total trading account assets 171
—
—
171
Net derivative assets (276 ) 85
104
(87 )
Loans and leases ⁽²⁾
—
—
76
76
Mortgage servicing rights (6 ) (1,747 ) —
(1,753 )
Loans held-for-sale ⁽²⁾
(14 ) —
10
(4 )
Other assets —
(50 ) 102
52
Trading account liabilities – Corporate securities and other 1
—
—
1
Accrued expenses and other liabilities —
—
1
1
Long-term debt ⁽²⁾
29
—
(37 ) (8 )
Total $ (95 ) $ (1,712 ) $ 256
$ (1,551 )

2013
Trading account assets:
Corporate securities, trading loans and other $ (130 ) $ —
$ —
$ (130 )
Equity securities 40
—
—
40
Non-U.S. sovereign debt 80
—
—
80
Mortgage trading loans and ABS (174 ) —
—
(174 )
Total trading account assets (184 ) —
—
(184 )
Net derivative assets (1,375 ) 42
(7 ) (1,340 )
Loans and leases ⁽²⁾
—
(34 ) 152
118
Mortgage servicing rights —
1,541
—
1,541
Loans held-for-sale ⁽²⁾
—
6
57
63
Other assets —
166
14
180
Long-term debt ⁽²⁾
(4 ) —
(32 ) (36 )
Total $ (1,563 ) $ 1,721
$ 184
$ 342


⁽¹⁾	~~Mortgage banking income (loss) does not reflect the impact of Level 1 and Level 2 hedges on MSRs.~~


⁽²⁾	~~Amounts represent instruments that are accounted for under the fair value option.~~



		~~Bank of America 2015235~~

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, ~~2015~~2016 and ~~2014.~~2015.



Quantitative Information about Level 3 Fair Value Measurements at December 31, 2015
Quantitative Information about Level 3 Fair Value Measurements at December 31, 2016									Quantitative Information about Level 3 Fair Value Measurements at December 31, 2016

(Dollars in millions)					Inputs								Inputs
Financial Instrument	Fair Value			Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted Average		Fair Value			Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs		Weighted Average
Loans and Securities ⁽¹⁾
Instruments backed by residential real estate assets	$	2,017		Discounted cash flow, Market comparables	Yield	0% to 25%	6	%	$	1,066		Discounted cash flow, Market comparables	Yield	0% to 50%		7	%
Trading account assets – Mortgage trading loans and ABS	400				Prepayment speed	0% to 27% CPR	11	%
Trading account assets – Mortgage trading loans, ABS and other MBS								337			Prepayment speed		0% to 27% CPR		14	%
Loans and leases	1,520				Default rate	0% to 10% CDR	4	%	718				Default rate	0% to 3% CDR		2	%
Loans held-for-sale	97				Discounted cash flow, Market comparables	Loss severity	0% to 90%	40	%	11				Discounted cash flow, Market comparables	Loss severity	0% to 54%		18	%
Instruments backed by commercial real estate assets	$	852		Yield		0% to 25%	8	%	$	317		Yield	0% to 39%			11	%
Trading account assets – Mortgage trading loans and ABS	162			Price		$0 to td00	$73
Trading account assets – Corporate securities, trading loans and other								178			Price	$0 to td00			$65
Trading account assets – Mortgage trading loans, ABS and other MBS									53			Discounted cash flow, Market comparables
Loans held-for-sale	690			Discounted cash flow, Market comparables						86
Commercial loans, debt securities and other	$	4,558			Yield	0% to 37%	13	%	$	4,486			Yield	1% to 37%		14	%
Trading account assets – Corporate securities, trading loans and other	2,503				Prepayment speed	5% to 20%	16	%	2,565				Prepayment speed	5% to 20%		19	%
Trading account assets – Non-U.S. sovereign debt	521			Discounted cash flow, Market comparables	Default rate	2% to 5%	4	%	510			Discounted cash flow, Market comparables	Default rate	3% to 4%		4	%
Trading account assets – Mortgage trading loans and ABS	1,306				Loss severity	25% to 50%	37	%
Trading account assets – Mortgage trading loans, ABS and other MBS								821			Loss severity		0% to 50%		19	%
AFS debt securities – Other taxable securities	128				Duration	0 to 5 years	3 years		29				Price	$0 to td92		$68
Loans and leases	100				Price	$0 to td58	$64		2				Duration	0 to 5 years		3 years
Loans held-for-sale								559			Enterprise value/EBITDA multiple		34x		n/a
Auction rate securities	$	1,533			Discounted cash flow, Market comparables	Price	td0 to td00	$94		$	1,141			Price	td0 to td00		$94
Trading account assets – Corporate securities, trading loans and other	335									34				Discounted cash flow, Market comparables
AFS debt securities – Other taxable securities	629								565
AFS debt securities – Tax-exempt securities	569								542
MSRs									$	2,747		Weighted-average life, fixed rate ⁽⁴⁾	0 to 15 years			6 years
												Discounted cash flow, Market comparables	Weighted-average life, variable rate ⁽⁴⁾		0 to 14 years		4 years
													Option Adjusted Spread, fixed rate		9% to 14%		10	%
													Option Adjusted Spread, variable rate	9% to 15%		12	%
Structured liabilities
Long-term debt	$	(1,513	)	Industry standard derivative pricing ^{(2, 3)}	Equity correlation	25% to 100%	67	%	$	(1,514	)	Discounted cash flow, Market comparables, Industry standard derivative pricing ⁽²⁾	Equity correlation	13% to 100%		68	%
											Long-dated equity volatilities		4% to 76%		26	%
													Yield	6% to 37%		20	%
													Price	td2 to $87		$73
				Industry standard derivative pricing ^{(2, 3)}	Industry standard derivative pricing ^{(2, 3)}	Long-dated equity volatilities	4% to 101%	28	%				Duration	0 to 5 years		3 years
Net derivative assets					Industry standard derivative pricing ^{(2, 3)}
Credit derivatives	$	(75	)	Discounted cash flow, Stochastic recovery correlation model	Yield	6% to 25%	16	%	$	(129	)	Discounted cash flow, Stochastic recovery correlation model	Yield	0% to 24%		13	%
					Upfront points	0 to 100 points	60 points						Upfront points	0 points to 100 points		72 points
					Credit spreads	0 bps to 447 bps	111 bps						Credit spreads	17 bps to 814 bps		248 bps
					Credit correlation	31% to 99%	38	%					Credit correlation	21% to 80%		44	%
					Prepayment speed	10% to 20% CPR	19	%					Prepayment speed	10% to 20% CPR		18	%
					Default rate	1% to 4% CDR	3	%					Default rate	1% to 4% CDR		3	%
					Loss severity	35% to 40%	35	%					Loss severity	35	%	n/a
Equity derivatives	$	(1,037	)	Industry standard derivative pricing ⁽²⁾	Equity correlation	25% to 100%	67	%	$	(1,690	)	Industry standard derivative pricing ⁽²⁾	Equity correlation	13% to 100%		68	%
				Industry standard derivative pricing ⁽²⁾	Long-dated equity volatilities	4% to 101%	28	%				Industry standard derivative pricing ⁽²⁾	Long-dated equity volatilities	4% to 76%		26	%
Commodity derivatives	$	169		Discounted cash flow, Industry standard derivative pricing ⁽²⁾	Natural gas forward price	td/MMBtu to $6/MMBtu	$4/MMBtu		$	6		Discounted cash flow, Industry standard derivative pricing ⁽²⁾	Natural gas forward price	td/MMBtu to $6/MMBtu		$4/MMBtu
					Propane forward price	$0/Gallon to td/Gallon	td/Gallon						Correlation	66% to 95%		85	%
					Correlation	66% to 93%	84	%					Volatilities	23% to 96%		36	%
					Volatilities	18% to 125%	39	%
Interest rate derivatives	$	502		Industry standard derivative pricing ⁽³⁾	Correlation (IR/IR)	17% to 99%	48	%	$	500		Industry standard derivative pricing ⁽³⁾	Correlation (IR/IR)	15% to 99%		56	%
					Correlation (FX/IR)	-15% to 40%	-9	%					Correlation (FX/IR)	0% to 40%		2	%
					Long-dated inflation rates	0% to 7%	3	%					Illiquid IR and long-dated inflation rates	-12% to 35%		5	%
					Long-dated inflation volatilities	0% to 2%	1	%					Long-dated inflation volatilities	0% to 2%		1	%
Total net derivative assets	$	(441	)						$	(1,313	)

⁽¹⁾

The categories are aggregated based upon product type which differs from financial statement classification. The following is a reconciliation to the line items in the table on page ~~230:~~200: Trading account assets – Corporate securities, trading loans and other of $2.8 billion, Trading account assets – Non-U.S. sovereign debt of $510 million, Trading account assets – Mortgage trading loans, ABS and other MBS of $1.2 billion, AFS debt securities – Other taxable securities of $594 million, AFS debt securities – Tax-exempt securities of $542 million, Loans and leases of $720 million and LHFS of $656 million.


⁽²⁾	Includes models such as Monte Carlo simulation and Black-Scholes.


⁽³⁾	Includes models such as Monte Carlo simulation, Black-Scholes and other methods that model the joint dynamics of interest, inflation and foreign exchange rates.


⁽⁴⁾	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

EBITDA = Earnings before interest, taxes, depreciation and amortization

MMBtu = Million British thermal units

IR = Interest Rate

FX = Foreign Exchange

n/a = not applicable



		Bank of America 2016203




Quantitative Information about Level 3 Fair Value Measurements at December 31, 2015

(Dollars in millions)					Inputs
Financial Instrument	Fair Value			Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted Average
Loans and Securities ⁽¹⁾
Instruments backed by residential real estate assets	$	2,017		Discounted cash flow, Market comparables	Yield	0% to 25%	6	%
Trading account assets – Mortgage trading loans, ABS and other MBS	400				Prepayment speed	0% to 27% CPR	11	%
Loans and leases	1,520				Default rate	0% to 10% CDR	4	%
Loans held-for-sale	97				Loss severity	0% to 90%	40	%
Instruments backed by commercial real estate assets	$	852		Discounted cash flow, Market comparables	Yield	0% to 25%	8	%
Trading account assets – Mortgage trading loans, ABS and other MBS	162				Price	$0 to $100	$73
Loans held-for-sale	690
Commercial loans, debt securities and other	$	4,558		Discounted cash flow, Market comparables	Yield	0% to 37%	13	%
Trading account assets – Corporate securities, trading loans and other	2,503				Prepayment speed	5% to 20%	16	%
Trading account assets – Non-U.S. sovereign debt	521				Default rate	2% to 5%	4	%
Trading account assets – Mortgage trading loans, ABS and other MBS	1,306				Loss severity	25% to 50%	37	%
AFS debt securities – Other taxable securities	128				Duration	0 to 5 years	3 years
Loans and leases	100				Price	$0 to $258	$64
Auction rate securities	$	1,533		Discounted cash flow, Market comparables	Price	$10 to $100	$94
Trading account assets – Corporate securities, trading loans and other	335				Price
AFS debt securities – Other taxable securities	629
AFS debt securities – Tax-exempt securities	569
MSRs	$	3,087		Discounted cash flow, Market comparables	Weighted-average life, fixed rate ⁽⁴⁾	0 to 15 years	4 years
					Weighted-average life, variable rate ⁽⁴⁾	0 to 16 years	3 years
					Option Adjusted Spread, fixed rate	3% to 11%	5	%
					Option Adjusted Spread, variable rate	3% to 11%	8	%
Structured liabilities
Long-term debt	$	(1,513	)	Industry standard derivative pricing ⁽³⁾	Equity correlation	25% to 100%	67	%
				Industry standard derivative pricing ⁽³⁾	Long-dated equity volatilities	4% to 101%	28	%
Net derivative assets
Credit derivatives	$	(75	)	Discounted cash flow, Stochastic recovery correlation model	Yield	6% to 25%	16	%
					Upfront points	0 to 100 points	60 points
					Credit spreads	0 bps to 447 bps	111 bps
					Credit correlation	31% to 99%	38	%
					Prepayment speed	10% to 20% CPR	19	%
					Default rate	1% to 4% CDR	3	%
					Loss severity	35% to 40%	35	%
Equity derivatives	$	(1,037	)	Industry standard derivative pricing ⁽²⁾	Equity correlation	25% to 100%	67	%
				Industry standard derivative pricing ⁽²⁾	Long-dated equity volatilities	4% to 101%	28	%
Commodity derivatives	$	169		Discounted cash flow, Industry standard derivative pricing ⁽²⁾	Natural gas forward price	$1/MMBtu to $6/MMBtu	$4/MMBtu
					Propane forward price	$0/Gallon to $1/Gallon	$1/Gallon
					Correlation	66% to 93%	84	%
					Volatilities	18% to 125%	39	%
Interest rate derivatives	$	502		Industry standard derivative pricing⁽³⁾	Correlation (IR/IR)	17% to 99%	48	%
					Correlation (FX/IR)	-15% to 40%	-9	%
					Long-dated inflation rates	0% to 7%	3	%
					Long-dated inflation volatilities	0% to 2%	1	%
Total net derivative assets	$	(441	)

⁽¹⁾

The categories are aggregated based upon product type which differs from financial statement classification. The following is a reconciliation to the line items in the table on page 201: Trading account assets – Corporate securities, trading loans and other of $2.8 billion, Trading account assets – Non-U.S. sovereign debt of $521 million, Trading account assets – Mortgage trading loans, ABS and ~~ABS~~other MBS of $1.9 billion, AFS debt securities – Other taxable securities of $757 million, AFS debt securities – Tax-exempt securities of $569 million, Loans and leases of $1.6 billion and LHFS of $787 million.


⁽²⁾	Includes models such as Monte Carlo simulation and Black-Scholes.


⁽³⁾	Includes models such as Monte Carlo simulation, Black-Scholes and other methods that model the joint dynamics of interest, inflation and foreign exchange rates.


⁽⁴⁾	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



~~236~~204 Bank of America ~~2015~~2016

Quantitative Information about Level 3 Fair Value Measurements at December 31, 2014

(Dollars in millions) Inputs
Financial Instrument Fair
Value Valuation
Technique Significant Unobservable
Inputs Ranges of
Inputs Weighted Average
Loans and Securities ⁽¹⁾

Instruments backed by residential real estate assets $ 2,030
Discounted cash flow, Market comparables Yield 0% to 25%
6 %
Trading account assets – Mortgage trading loans and ABS 483
Prepayment speed 0% to 35% CPR
14 %
Loans and leases 1,374
Default rate 2% to 15% CDR
7 %
Loans held-for-sale 173
Loss severity 26% to 100%
34 %
Commercial loans, debt securities and other $ 7,203
Discounted cash flow, Market comparables Yield 0% to 40%
9 %
Trading account assets – Corporate securities, trading loans and other 3,224
Enterprise value/EBITDA multiple 0x to 30x
6x
Trading account assets – Non-U.S. sovereign debt 574
Prepayment speed 1% to 30%
12 %
Trading account assets – Mortgage trading loans and ABS 1,580
Default rate 1% to 5%
4 %
AFS debt securities – Other taxable securities 1,216
Loss severity 25% to 40%
38 %
Loans and leases 609
Duration 0 to 5 years
3 years
Price $0 to $107
$76
Auction rate securities $ 1,096
Discounted cash flow, Market comparables Price $60 to $100
$95
Trading account assets – Corporate securities, trading loans and other 46

AFS debt securities – Other taxable securities 451

AFS debt securities – Tax-exempt securities 599

Structured liabilities
Long-term debt $ (2,362 )
Industry standard derivative pricing ^{(2, 3)}
Equity correlation 20% to 98%
65 %
Long-dated equity volatilities 6% to 69%
24 %
Long-dated volatilities (IR) 0% to 2%
1 %
Net derivative assets
Credit derivatives $ 22
Discounted cash flow, Stochastic recovery correlation model Yield 0% to 25%
14 %
Upfront points 0 to 100 points
65 points
Spread to index 25 bps to 450 bps
119 bps
Credit correlation 24% to 99%
51 %
Prepayment speed 3% to 20% CPR
11 %
Default rate 4% CDR
n/a
Loss severity 35 % n/a
Equity derivatives $ (1,560 )
Industry standard derivative pricing ⁽²⁾
Equity correlation 20% to 98%
65 %
Long-dated equity volatilities 6% to 69%
24 %
Commodity derivatives $ 141
Discounted cash flow, Industry standard derivative pricing ⁽²⁾
Natural gas forward price $2/MMBtu to $7/MMBtu
$5/MMBtu
Correlation 82% to 93%
90 %
Volatilities 16% to 98%
35 %
Interest rate derivatives $ 477
Industry standard derivative pricing⁽³⁾
Correlation (IR/IR) 11% to 99%
55 %
Correlation (FX/IR) -48% to 40%
-5 %
Long-dated inflation rates 0% to 3%
1 %
Long-dated inflation volatilities 0% to 2%
1 %
Total net derivative assets $ (920 )

⁽¹⁾

The categories are aggregated based upon product type which differs from financial statement classification. The following is a reconciliation to the line items in the table on page 231: Trading account assets – Corporate securities, trading loans and other of $3.3 billion, Trading account assets – Non-U.S. sovereign debt of $574 million, Trading account assets – Mortgage trading loans and ABS of $2.1 billion, AFS debt securities – Other taxable securities of $1.7 billion, AFS debt securities – Tax-exempt securities of $599 million, Loans and leases of $2.0 billion and LHFS of $173 million.


⁽²⁾	~~Includes models such as Monte Carlo simulation and Black-Scholes.~~


⁽³⁾	~~Includes models such as Monte Carlo simulation, Black-Scholes and other methods that model the joint dynamics of interest, inflation and foreign exchange rates.~~

~~CPR = Constant Prepayment Rate~~

~~CDR = Constant Default Rate~~

~~EBITDA = Earnings before interest, taxes, depreciation and amortization~~

~~MMBtu = Million British thermal units~~

~~IR = Interest Rate~~

~~FX = Foreign Exchange~~

~~n/a = not applicable~~



		~~Bank of America 2015237~~

In the tables above, instruments backed by residential and commercial real estate assets include RMBS, commercial ~~mortgage-backed securities,~~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. Therefore, 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.

~~For more information on the inputs and techniques used in the valuation of MSRs, see~~ ~~Note 23 – Mortgage Servicing Rights~~.

Sensitivity of Fair Value Measurements to Changes in Unobservable Inputs

Loans and Securities

~~For instruments backed by residential real estate assets, commercial real estate assets and commercial loans, debt securities and other, a~~A significant increase in market yields, default rates, loss severities or duration would result in a significantly lower fair value for long positions. Short positions would be impacted in a directionally opposite way. The impact of changes in prepayment speeds would have differing impacts depending on the seniority of the instrument and, in the case of CLOs, whether prepayments can be reinvested.

~~For auction rate securities, a~~ A significant increase in price would result in a significantly higher fair ~~value.~~value for long positions and short positions would be impacted in a directionally opposite way.

Mortgage Servicing Rights

The weighted-average lives and fair value of MSRs are sensitive to changes in modeled assumptions. The weighted-average life is a product of changes in market rates of interest, prepayment rates and other model and cash flow assumptions. The weighted-average life represents the average period of time that the MSRs' cash flows are expected to be received. Absent other changes, an increase (decrease) to the weighted-average life would generally result in an increase (decrease) in the fair value of the MSRs. For example, a 10 percent or 20 percent decrease in prepayment rates, which impact the weighted-average life, could result in an increase in fair value of $101 million or $210 million, while a 10 percent or 20 percent increase in prepayment rates could result in a decrease in fair value of $93 million or $180 million. A 100 bp or 200 bp decrease in OAS levels could result in an increase in fair

value of $95 million or $197 million, while a 100 bp or 200 bp increase in OAS levels could result in a decrease in fair value of $88 million or $171 million. These sensitivities are hypothetical and actual amounts may vary materially. As the amounts indicate, changes in fair value based on variations in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of MSRs that continue to be held by the Corporation is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another, which might magnify or counteract the sensitivities. In addition, these sensitivities do not reflect any hedge strategies that may be undertaken to mitigate such risk.

Structured Liabilities and Derivatives

For credit derivatives, a significant increase in market yield, ~~including spreads to indices,~~ upfront points (i.e., a single upfront payment made by a protection buyer at inception), credit spreads, default rates or loss severities would result 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 differing impacts depending on the seniority of the instrument and, in the case of CLOs, whether prepayments can be reinvested.

Structured credit derivatives ~~which include tranched portfolio CDS and derivatives with derivative product company (DPC) and monoline counterparties,~~ are impacted by credit ~~correlation, including default and wrong-way~~ correlation. Default correlation is a parameter that describes the degree of dependence among credit default rates within 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 result in a significantly higher fair value. Net short protection positions would be impacted in a directionally opposite way. Wrong-way correlation is a parameter that describes the probability that as exposure to a counterparty increases, the credit quality of the counterparty decreases. A significantly higher degree of wrong-way correlation between a DPC counterparty and underlying derivative exposure would result in a significantly lower fair value.

For equity derivatives, commodity derivatives, interest rate derivatives and structured liabilities, a significant change in long-dated rates and volatilities and correlation inputs (e.g., 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 rates) would result in a significant impact to the fair value; however, the magnitude and direction of the impact depends on whether the Corporation is long or short the exposure. For structured liabilities, a significant increase in yield or decrease in price would result in a significantly lower fair value. A significant decrease in duration may result in a significantly higher fair value.



		~~238~~Bank of America ~~2015~~2016205

Nonrecurring Fair Value

The Corporation holds certain assets that are measured at fair value, but only in certain situations (e.g., impairment) 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 2016, 2015 ~~2014~~ and ~~2013.~~2014.



Assets Measured at Fair Value on a Nonrecurring Basis

	December 31											December 31
	2015					2014						2016					2015
(Dollars in millions)	Level 2		Level 3			Level 2			Level 3			Level 2		Level 3			Level 2			Level 3
Assets
Loans held-for-sale	$	9	$	33		$	156		$	30		$	193	$	44		$	9		$	33
Loans and leases ⁽¹⁾	—		2,739			5			4,636			—		1,416			34			2,739
Foreclosed properties ^{(2, 3)}	—		172			—			208			—		77			—			172
Other assets	54		—			13			—			358		—			88			—

			Gains (Losses)											Gains (Losses)
			2015			2014			2013					2016			2015			2014
Assets
Loans held-for-sale			$	(8	)	$	(19	)	$	(71	)			$	(54	)	$	(8	)	$	(19	)
Loans and leases ⁽¹⁾			(980		)	(1,132		)	(1,104		)			(458		)	(993		)	(1,152		)
Foreclosed properties ^{(2, 3)}			(57		)	(66		)	(63		)
Foreclosed properties														(41		)	(57		)	(66		)
Other assets			(15		)	(6		)	(20		)			(74		)	(28		)	(26		)


⁽¹⁾	Includes $~~174~~150 million of losses on loans that were written down to a collateral value of zero during ~~2015~~2016 compared to losses of $~~370~~174 million and $~~365~~370 million in ~~2014~~2015 and ~~2013~~2014.


⁽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 taken during the first 90 days after transfer of a loan to foreclosed properties.


⁽³⁾	Excludes $~~1.4~~1.2 billion and $~~1.1~~1.4 billion of properties acquired upon foreclosure of certain government-guaranteed loans (principally FHA-insured loans) as of December 31, ~~2015~~2016 and ~~2014~~2015.

The table below presents information about significant unobservable inputs related to the Corporation’s nonrecurring Level 3 financial assets and liabilities at December 31, ~~2015~~2016 and ~~2014.~~2015. Instruments backed by residential real estate assets represent residential mortgages where the loan has been written down to the fair value of the underlying collateral.

Quantitative Information about Nonrecurring Level 3 Fair Value Measurements

December 31, 2015

December 31, 2016

(Dollars in millions)

Inputs

Financial Instrument

Fair Value

Valuation

Technique

Significant Unobservable

Inputs

Ranges of

Inputs

Weighted Average

Fair Value

Valuation

Technique

Significant Unobservable

Inputs

Ranges of

Inputs

Weighted Average

Loans and leases backed by residential real estate assets

2,739

Market comparables

OREO discount

7% to 55%

1,416

Market comparables

OREO discount

8% to 56%

Cost to sell

8% to 45%

Cost to sell

7% to 45%

December 31, 2014
Loans and leases backed by residential real estate assets $ 4,636
Market comparables OREO discount 0% to 28% 8 %
Cost to sell 7% to 14% 8 %



	December 31, 2015
Loans and leases backed by residential real estate assets	$	2,739	Market comparables	OREO discount	7% to 55%	20	%
				Cost to sell	8% to 45%	10	%



		206Bank of America ~~2015239~~2016

NOTE 21 Fair Value Option

Loans and Loan Commitments

The Corporation elects to account for certain consumer and commercial loans and loan commitments that exceed the Corporation’s 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 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 with changes in fair value recorded in other income (loss). Electing 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, 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 financial instruments at historical cost and the credit derivatives at fair value. The Corporation also elected the fair value option for certain loans held in consolidated VIEs.

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 with interest income on these LHFS recorded in other interest income. 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 Corporation has elected not to designate the derivatives as qualifying accounting hedges and therefore they are carried at fair value with changes in fair value recorded in other income (loss). The changes in fair value of the loans are largely offset by changes in the fair value of the derivatives. 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 financial instruments 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 private equity investments that are not in an investment company under the fair value option as this measurement basis is consistent with applicable accounting guidance for similar investments that are in an investment company. The Corporation also 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 financial 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 collateralized 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. 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 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 ~~were~~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 to 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.

Long-term Debt

The Corporation elects to account for certain long-term debt, primarily structured liabilities, under the fair value option. This long-term debt is either risk-managed on a fair value basis or the related hedges do not qualify for hedge accounting.



		~~240~~Bank of America ~~2015~~2016207

The table below provides information about the fair value carrying amount and the contractual principal outstanding of assets and liabilities accounted for under the fair value option at December 31, ~~2015~~2016 and ~~2014.~~2015.



Fair Value Option Elections

	December 31														December 31
	2015							2014							2016							2015
(Dollars in millions)	Fair Value Carrying Amount		Contractual Principal Outstanding		Fair Value Carrying Amount Less Unpaid Principal			Fair Value Carrying Amount		Contractual Principal Outstanding		Fair Value Carrying Amount Less Unpaid Principal			Fair Value Carrying Amount		Contractual Principal Outstanding		Fair Value Carrying Amount Less Unpaid Principal			Fair Value Carrying Amount		Contractual Principal Outstanding		Fair Value Carrying Amount Less Unpaid Principal
Federal funds sold and securities borrowed or purchased under agreements to resell	$	55,143	$	54,999	$	144		$	62,182	$	61,902	$	280		$	49,750	$	49,615	$	135		$	55,143	$	54,999	$	144
Loans reported as trading account assets ⁽¹⁾	4,995		9,214		(4,219		)	4,607		8,487		(3,880		)	6,215		11,557		(5,342		)	4,995		9,214		(4,219		)
Trading inventory – other	8,149		n/a		n/a			6,865		n/a		n/a			8,206		n/a		n/a			8,149		n/a		n/a
Consumer and commercial loans	6,938		7,293		(355		)	8,681		8,925		(244		)	7,085		7,190		(105		)	6,938		7,293		(355		)
Loans held-for-sale	4,818		6,157		(1,339		)	6,801		8,072		(1,271		)	4,026		5,595		(1,569		)	4,818		6,157		(1,339		)
Other assets	275		270		5			253		270		(17		)	253		250		3			275		270		5
Long-term deposits	1,116		1,021		95			1,469		1,361		108			731		672		59			1,116		1,021		95
Federal funds purchased and securities loaned or sold under agreements to repurchase	24,574		24,718		(144		)	35,357		35,332		25			35,766		35,929		(163		)	24,574		24,718		(144		)
Short-term borrowings	1,325		1,325		—			2,697		2,697		—			2,024		2,024		—			1,325		1,325		—
Unfunded loan commitments	658		n/a		n/a			405		n/a		n/a			173		n/a		n/a			658		n/a		n/a
Long-term debt ⁽²⁾	30,097		30,593		(496		)	36,404		35,815		589			30,037		29,862		175			30,097		30,593		(496		)


⁽¹⁾	A significant portion of the loans reported as trading account assets are distressed loans which trade and 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 $~~29.0~~29.7 billion and $~~35.3~~29.0 billion, and contractual principal outstanding of $~~29.4~~29.5 billion and $~~34.6~~29.4 billion at December 31, ~~2015~~2016 and ~~2014~~2015.

n/a = not applicable



		208Bank of America ~~2015241~~2016

The following tables provide information about where changes in the fair value of assets and liabilities accounted for under the fair value option are included in the Consolidated Statement of Income for ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014.



Gains (Losses) Relating to Assets and Liabilities Accounted for Under the Fair Value Option

	2015												2016
(Dollars in millions)	Trading Account Profits (Losses)			Mortgage Banking Income (Loss)			Other Income (Loss)			Total			Trading Account Profits (Losses)			Mortgage Banking Income (Loss)		Other Income (Loss)			Total
Federal funds sold and securities borrowed or purchased under agreements to resell													$	(64	)	$	—	$	1		$	(63	)
Loans reported as trading account assets													301			—		—			301
Trading inventory – other ⁽¹⁾													57			—		—			57
Consumer and commercial loans													49			—		(37		)	12
Loans held-for-sale ⁽²⁾													11			518		6			535
Other assets													—			—		20			20
Long-term deposits													1			—		32			33
Federal funds purchased and securities loaned or sold under agreements to repurchase													(22		)	—		—			(22		)
Unfunded loan commitments													—			—		487			487
Long-term debt ^{(3, 4)}													(489		)	—		(97		)	(586		)
Total													$	(156	)	$	518	$	412		$	774

													2015
Federal funds sold and securities borrowed or purchased under agreements to resell	$	(195	)	$	—		$	—		$	(195	)	$	(195	)	$	—	$	—		$	(195	)
Loans reported as trading account assets	(199		)	—			—			(199		)	(199		)	—		—			(199		)
Trading inventory – other ⁽¹⁾	1,284			—			—			1,284			1,284			—		—			1,284
Consumer and commercial loans	52			—			(295		)	(243		)	52			—		(295		)	(243		)
Loans held-for-sale ⁽²⁾	(36		)	673			63			700			(36		)	673		63			700
Other assets	—			—			10			10			—			—		10			10
Long-term deposits	1			—			13			14			1			—		13			14
Federal funds purchased and securities loaned or sold under agreements to repurchase	33			—			—			33			33			—		—			33
Short-term borrowings	3			—			—			3			3			—		—			3
Unfunded loan commitments	—			—			(210		)	(210		)	—			—		(210		)	(210		)
Long-term debt ^{(3, 4)}	2,107			—			(633		)	1,474			2,107			—		(633		)	1,474
Total	$	3,050		$	673		$	(1,052	)	$	2,671		$	3,050		$	673	$	(1,052	)	$	2,671

	2014												2014
Federal funds sold and securities borrowed or purchased under agreements to resell	$	(114	)	$	—		$	—		$	(114	)	$	(114	)	$	—	$	—		$	(114	)
Loans reported as trading account assets	(87		)	—			—			(87		)	(87		)	—		—			(87		)
Trading inventory – other ⁽¹⁾	1,091			—			—			1,091			1,091			—		—			1,091
Consumer and commercial loans	(24		)	—			69			45			(24		)	—		69			45
Loans held-for-sale ⁽²⁾	(56		)	798			83			825			(56		)	798		83			825
Long-term deposits	23			—			(26		)	(3		)	23			—		(26		)	(3		)
Federal funds purchased and securities loaned or sold under agreements to repurchase	4			—			—			4			4			—		—			4
Short-term borrowings	52			—			—			52			52			—		—			52
Unfunded loan commitments	—			—			(64		)	(64		)	—			—		(64		)	(64		)
Long-term debt ⁽³⁾	239			—			407			646			239			—		407			646
Total	$	1,128		$	798		$	469		$	2,395		$	1,128		$	798	$	469		$	2,395

	2013
Federal funds sold and securities borrowed or purchased under agreements to resell	$	(44	)	$	—		$	—		$	(44	)
Loans reported as trading account assets	83			—			—			83
Trading inventory – other ⁽¹⁾	1,355			—			—			1,355
Consumer and commercial loans	(28		)	(38		)	240			174
Loans held-for-sale ⁽²⁾	7			966			75			1,048
Other assets	—			—			(77		)	(77		)
Long-term deposits	30			—			84			114
Federal funds purchased and securities loaned or sold under agreements to repurchase	(36		)	—			—			(36		)
Asset-backed secured financings	—			(91		)	—			(91		)
Short-term borrowings	(70		)	—			—			(70		)
Unfunded loan commitments	—			—			180			180
Long-term debt ⁽³⁾	(602		)	—			(649		)	(1,251		)
Total	$	695		$	837		$	(147	)	$	1,385


⁽¹⁾	The gains (losses) in trading account profits (losses) are primarily offset by gains (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 majority of the net gains (losses) in trading account profits relate to the embedded derivative in structured liabilities and are offset by gains (losses) on derivatives and securities that hedge these liabilities. In connection with the implementation of new accounting guidance in 2015 relating to DVA on structured liabilities accounted for ~~at fair value~~ under the fair value option, unrealized DVA gains (losses) in 2016 and 2015 are recorded in accumulated OCI while realized gains (losses) are recorded in other income (loss); for ~~years prior to 2015,~~2014, the realized and unrealized gains (losses) are reflected in other income (loss). For more information on the implementation of new accounting guidance, see Note 1 – Summary of Significant Accounting Principles.


⁽⁴⁾	For the cumulative impact of changes in the Corporation’s own credit spreads and the amount recognized in OCI, see Note 14 – Accumulated Other Comprehensive Income (Loss). For more information on how the Corporation’s own credit spread is determined, see Note 20 – Fair Value Measurements.



Gains (Losses) Related to Borrower-specific Credit Risk for Assets Accounted for Under the Fair Value Option

	December 31							December 31
(Dollars in millions)	2015			2014		2013		2016			2015			2014
Loans reported as trading account assets	$	37		$	28	$	56	$	7		$	37		$	28
Consumer and commercial loans	(200		)	32		148		(53		)	(200		)	32
Loans held-for-sale	37			84		225		(34		)	37			84



		~~242~~Bank of America ~~2015~~2016209

NOTE 22 Fair Value of Financial Instruments

Financial instruments are classified within the fair value hierarchy using the methodologies described in Note 20 – Fair Value Measurements. The following disclosures include financial instruments ~~where~~that are not carried at fair value or only a portion of the ending balance ~~at December 31, 2015 and 2014 was~~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, time deposits placed and other short-term investments, federal funds sold and purchased, certain resale and repurchase agreements, customer and other receivables, customer payables (within accrued expenses and other liabilities on the Consolidated Balance Sheet), 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 elected to account 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 and 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. Customer and other receivables primarily consist of margin loans, servicing advances and other accounts receivable and are classified as Level 2 and Level 3. Customer payables and short-term borrowings are classified as Level 2.

Held-to-maturity Debt Securities

HTM debt securities, which consist primarily of U.S. agency debt securities, are classified as Level 2 using the same methodologies as AFS U.S. agency debt securities. For more information on HTM debt securities, see Note 3 – Securities.

Loans

The fair values for commercial and consumer loans are generally determined by discounting both principal and interest cash flows expected to be collected using a discount rate for similar instruments with adjustments that the Corporation believes a market participant would consider in determining fair value. The Corporation estimates the cash flows expected to be collected using internal credit risk, interest rate and prepayment risk models that incorporate the Corporation’s best estimate of current key assumptions, such as default rates, loss severity and prepayment speeds for the life of the loan. The carrying value of loans is presented net of the applicable allowance for loan losses and excludes leases. The Corporation accounts for certain commercial loans and residential mortgage loans under the fair value option.

Deposits

The fair value for certain deposits with stated maturities was determined by discounting contractual cash flows using current market rates for instruments with similar maturities. The carrying

value of non-U.S. time deposits approximates fair value. For

deposits with no stated maturities, the carrying value was considered to approximate fair value and does not take into account the significant value of the cost advantage and stability of the Corporation’s long-term relationships with depositors. The Corporation accounts for certain long-term fixed-rate deposits under the fair value option.

Long-term Debt

The Corporation uses quoted market prices, when available, to estimate fair value for its long-term debt. When quoted market prices are not available, fair value is estimated based on current market interest rates and credit spreads for debt with similar terms and maturities. The Corporation accounts for certain structured liabilities under the fair value option.

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, ~~2015~~2016 and ~~2014~~2015 are presented in the table below.



Fair Value of Financial Instruments

	December 31, 2015								December 31, 2016
			Fair Value								Fair Value
(Dollars in millions)	Carrying Value		Level 2		Level 3		Total		Carrying Value		Level 2		Level 3		Total
Financial assets
Loans	$	863,561	$	70,223	$	805,371	$	875,594	$	873,209	$	71,793	$	815,329	$	887,122
Loans held-for-sale	7,453		5,347		2,106		7,453		9,066		8,082		984		9,066
Financial liabilities
Deposits	1,197,259		1,197,577		—		1,197,577		1,260,934		1,261,086		—		1,261,086
Long-term debt	236,764		239,596		1,513		241,109		216,823		220,071		1,514		221,585

	December 31, 2014								December 31, 2015
Financial assets
Loans	$	842,259	$	87,174	$	776,370	$	863,544	$	863,561	$	70,223	$	805,371	$	875,594
Loans held-for-sale	12,836		12,236		618		12,854		7,453		5,347		2,106		7,453
Financial liabilities
Deposits	1,118,936		1,119,427		—		1,119,427		1,197,259		1,197,577		—		1,197,577
Long-term debt	243,139		249,692		2,362		252,054		236,764		239,596		1,513		241,109

Commercial Unfunded Lending Commitments

Fair values were generally determined using a discounted cash flow valuation approach which is applied using market-based CDS or internally developed benchmark credit curves. The Corporation accounts for certain loan commitments under the fair value option.

The carrying values and fair values of the Corporation’s commercial unfunded lending commitments were $937 million and $4.9 billion at December 31, 2016, and $1.3 billion and $6.3 billion at December 31, 2015~~, and~~ ~~$932 million~~ ~~and~~ ~~$3.8 billion~~ at ~~December 31, 2014~~. Commercial unfunded lending commitments are primarily classified as Level 3. The carrying value of these commitments is classified in accrued expenses and other liabilities.

The Corporation does not estimate the fair values 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 12 – Commitments and Contingencies.



		210Bank of America ~~2015243~~2016

NOTE 23 Mortgage Servicing Rights

The Corporation accounts for consumer MSRs at fair value, with changes in fair value primarily recorded in mortgage banking income in the Consolidated Statement of Income. The Corporation manages the risk in these MSRs with derivatives such as options and interest rate swaps, which are not designated as accounting hedges, as well as securities including MBS and U.S. Treasury

securities. The securities used to manage the risk in the MSRs are classified in other assets, with changes in the fair value of the securities and the related interest income recorded in mortgage banking income.

The table below presents activity for residential mortgage and home equity MSRs for ~~2015~~2016 and ~~2014.~~2015.



Rollforward of Mortgage Servicing Rights

(Dollars in millions)	2015			2014			2016			2015
Balance, January 1	$	3,530		$	5,042		$	3,087		$	3,530
Additions	637			707			411			637
Sales	(393		)	(61		)	(80		)	(393		)
Amortization of expected cash flows ⁽¹⁾	(874		)	(927		)	(820		)	(874		)
Impact of changes in interest rates and other market factors ⁽²⁾	41			(1,191		)
Model and other cash flow assumption changes: ⁽³⁾
Projected cash flows, including changes in costs to service loans	100			(163		)
Impact of changes in the Home Price Index	(13		)	(25		)
Impact of changes to the prepayment model	(10		)	243
Other model changes ⁽⁴⁾	69			(95		)
Balance, December 31 ⁽⁵⁾	$	3,087		$	3,530
Changes in fair value due to changes in inputs and assumptions ⁽²⁾							149			187
Balance, December 31 ⁽³⁾							$	2,747		$	3,087
Mortgage loans serviced for investors (in billions)	$	394		$	490		$	326		$	394


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


⁽²⁾	These amounts reflect the changes in modeled MSR fair value ~~primarily~~ due to observed changes in interest rates, volatility, spreads, and the shape of the forward swap ~~curve and~~curve; periodic adjustments to valuation based on third-party ~~discovery.~~price discovery; and periodic adjustments to the valuation model and other cash flow assumptions.


⁽³⁾	~~These amounts reflect periodic adjustments to~~ At December 31, 2016, includes the ~~valuation model to reflect changes~~$2.1 billion core MSR portfolio held in Consumer Banking, the ~~modeled relationship between inputs and their impact on projected cash flows as well as changes in certain cash flow assumptions such as cost to service and ancillary income per loan.~~

⁽⁴⁾

These amounts include the impact of periodic recalibrations of the model to reflect changes in the relationship between market interest rate spreads and projected cash flows. Also included is a decrease of $~~127~~212 million ~~for 2014 due~~non-core MSR portfolio held in All Other and the $469 million non-U.S. MSR portfolio held in Global Markets compared to ~~changes in option-adjusted spread rate assumptions.~~


⁽⁵⁾$2.3 billion	At, $355 million and $407 million at December 31, 2015, ~~includes~~ ~~$2.7 billion~~ ~~of U.S. and~~ ~~$407 million~~ ~~of non-U.S. consumer MSR balances compared to~~ ~~$3.3 billion~~ ~~and~~ ~~$259 million~~ at ~~December 31, 2014~~.respectively.

The Corporation revised certain MSR valuation assumptions during 2016, resulting in a net $306 million increase in fair value, which is included within “Changes in fair value due to changes in inputs and assumptions” in the table above. The increase was primarily ~~uses an option-adjusted spread (OAS) valuation approach which factors~~driven by changes 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. In addition to updating the valuation model for interest, discount and prepayment rates, periodic adjustments are made to recalibrate the valuation model for factors used to project cash flows. The changes to the factors capture the effect of variances related to actual versus estimated servicing proceeds.assumptions based on

~~Significant economic assumptions in estimating~~recent observed differences between modeled and actual prepayment behavior, which had the ~~fair value~~impact of ~~MSRs at~~ ~~December 31, 2015 and 2014~~ ~~are presented below. The change in fair value as a result~~slowing the weighted-average rate of changes in OAS rates is included within “Model and other cash flow assumption changes” in the Rollforward of Mortgage Servicing Rights table. The weighted-average life is not an input in the valuation model but is a product ofprojected prepayments, thus increasing both changes in market rates of interest and changes in model and other cash flow assumptions. The weighted-average life represents the average period of time that the MSRs’ cash flows are expected to be received. Absent other changes, an increase (decrease) to the weighted-average life ~~would generally result in an increase (decrease) in the fair value~~ of the ~~MSRs.~~

Significant Economic Assumptions

December 31
2015 2014
Fixed Adjustable Fixed Adjustable
Weighted-average OAS 4.62 % 7.61 % 4.52 % 7.61 %
Weighted-average life, in years 4.46
3.43
4.53
2.95

~~The table below presents~~MSRs and the ~~sensitivity of~~yield that a market participant would require to buy the weighted-average lives and fair value of MSRs to changes in modeled assumptions. These sensitivities are hypothetical and should be used with caution. As the amounts indicate, changes in fair value based on variations in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of MSRs that continue to be held by the Corporation is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another, which might magnify or counteract the sensitivities. The below sensitivities do not reflect any hedge strategies that may be undertaken to mitigate such risk.

Sensitivity Impacts

December 31, 2015

Change in
Weighted-average Lives

(Dollars in millions) Fixed Adjustable Change in Fair Value
Prepayment rates

Impact of 10% decrease 0.30
years 0.26
years $ 183
Impact of 20% decrease 0.64
0.55
389

Impact of 10% increase (0.26 ) (0.23 ) (163 )
Impact of 20% increase (0.50 ) (0.43 ) (310 )
OAS level

Impact of 100 bps decrease $ 124
Impact of 200 bps decrease 259

Impact of 100 bps increase (115 )
Impact of 200 bps increase (221 )

MSR.



		~~244~~Bank of America ~~2015~~2016211

NOTE 24 Business Segment Information

The Corporation reports its results of operations through the following ~~five~~four business segments: Consumer ~~Banking~~Bank,ing, ~~Global Wealth & Investment Management (GWIM)~~GWIM, Global Banking, and Global Markets ~~and~~ ~~Legacy Assets & Servicing (LAS)~~, 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, ~~noninterest- and interest-bearing~~ checking accounts, investment accounts and products, as well as credit and debit cards, residential mortgages and home equity loans, and direct and indirect loans to consumers and small businesses in the U.S. ~~Customers~~ConsumerBanking includes the impact of servicing residential mortgages and ~~clients have access to a franchise network that stretches coast to coast through 33 states and~~home equity loans in the ~~District of Columbia. The franchise network includes approximately~~ ~~4,700~~ ~~financial centers,~~ ~~16,000~~ ~~ATMs, nationwide call centers, and online and mobile platforms.~~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 tailored 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, ~~to clients,~~ and underwriting and advisory services through the Corporation’s network of offices and client relationship teams. Global ~~Banking’s~~Banking ~~lending products and services include commercial loans, leases, commitment facilities, trade finance, real estate lending and asset-based lending.~~ ~~Global Banking’s~~ ~~treasury solutions business includes treasury management, foreign exchange and short-term investing options.~~ ~~Global Banking~~also provides investment banking products to ~~clients such as debt and equity underwriting and distribution, and merger-related and other advisory services.~~clients. The economics of ~~most~~certain investment banking and underwriting activities are shared primarily between Global Banking and Global Markets ~~based on the activities performed by each segment.~~under an internal revenue-sharing arrangement. Global Banking clients generally include middle-market companies, commercial real estate firms,

~~auto dealerships,~~ 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, including research, to institutional clients across fixed-income, credit, currency, commodity and equity businesses.~~Global Markets~~ ~~product coverage includes securities and derivative products in both the primary and secondary markets.~~ Global Markets provides market-making, financing, securities clearing, settlement and custody services globally to institutional investor clients in support of their investing and trading activities. Global Markets also works with commercial and corporate clients to provide risk management ~~products using interest rate, equity, credit, currency and commodity derivatives, foreign exchange, fixed-income and mortgage-related~~ products. As a result of market-making activities, ~~in these products,~~ Global Markets may be required to manage risk in a broad range of financial ~~products including government securities, equity and equity-linked securities, high-grade and high-yield corporate debt securities, syndicated loans, MBS, commodities and ABS.~~products. In addition, the economics of ~~most~~certain investment banking and underwriting activities are shared primarily between Global Markets and Global Banking ~~based on the activities performed by each segment.~~under an internal revenue-sharing arrangement.

~~Legacy Assets & Servicing~~

~~LAS~~ is responsible for mortgage servicing activities related to residential first mortgage and home equity loans serviced for others and loans held by the Corporation, including loans that have been designated as the ~~LAS~~ ~~Portfolios, and manages certain legacy exposures related to mortgage origination, sales and servicing activities (e.g., litigation, representations and warranties).~~ ~~LAS~~ ~~also includes the results of MSR activities, including net hedge results. Home equity loans are held on the balance sheet of~~ ~~LAS, and residential mortgage loans are included as part of~~ ~~All Other. The financial results of the on-balance sheet loans are reported in the segment that owns the loans or in~~ ~~All Other~~.

All Other



		~~Bank of America 2015245~~

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 revenue and cost allocations using an activity-based costing model, funds transfer pricing, and other methodologies and assumptions management believes are appropriate to reflect the results of the business.

Total revenue, net of interest expense, includes net interest income on 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. Further, net interest income on an FTE basis includes market-related adjustments, which are adjustments to net interest income to reflect the impact of changes in long-term interest rates on the estimated lives of mortgage-related debt securities thereby impacting premium amortization. Also included in market-related adjustments is hedge ineffectiveness that impacts net interest income.

In addition, the business segments are impacted by the migration of customers and clients and their deposit, loan and brokerage balances between businesses. Subsequent to the date of migration, the associated net interest income, noninterest income and noninterest expense are recorded in the business to which the customers or clients migrated.

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 a majority of the Corporation’s ALM activities are allocated to the business segments and fluctuate based on the performance of the ALM activities. ALM activities include external product pricing decisions including deposit pricing strategies, the effects of 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 most significant of these expenses include data and item processing costs and certain centralized or shared functions. Data processing costs are allocated to the segments based on equipment usage. Item processing costs are allocated to the segments based on the volume of items processed for each segment. The costs of certain ~~other~~ centralized or shared functions are allocated based on methodologies that reflect utilization.



~~246~~212 Bank of America ~~2015~~2016

The ~~table~~tables below ~~presents~~present net income (loss) and the components thereto (with net interest income on an FTE basis) for 2016, 2015 ~~2014~~ and ~~2013,~~2014, and total assets at December 31, ~~2015~~2016 and ~~2014~~2015 for each business segment, as well as All Other,.including

Results for Business Segments and All Other

At and for the Year Ended December 31
Total Corporation ⁽¹⁾
Consumer Banking
Global Wealth &
Investment Management
(Dollars in millions) 2015 2014 2013 2015 2014 2013 2015 2014 2013
Net interest income (FTE basis) $ 40,160
$ 40,821
$ 43,124
$ 19,844
$ 20,177
$ 20,619
$ 5,499
$ 5,836
$ 6,064
Noninterest income 43,256
44,295
46,677
10,774
10,632
11,313
12,502
12,568
11,726
Total revenue, net of interest expense (FTE basis) 83,416
85,116
89,801
30,618
30,809
31,932
18,001
18,404
17,790
Provision for credit losses 3,161
2,275
3,556
2,524
2,680
3,166
51
14
56
Noninterest expense 57,192
75,117
69,214
17,485
17,865
18,865
13,843
13,654
13,039
Income before income taxes (FTE basis) 23,063
7,724
17,031
10,609
10,264
9,901
4,107
4,736
4,695
Income tax expense (FTE basis) 7,175
2,891
5,600
3,870
3,828
3,630
1,498
1,767
1,722
Net income $ 15,888
$ 4,833
$ 11,431
$ 6,739
$ 6,436
$ 6,271
$ 2,609
$ 2,969
$ 2,973
Year-end total assets $ 2,144,316
$ 2,104,534

$ 636,464
$ 588,878

$ 296,139
$ 274,887

Global Banking Global Markets
2015 2014 2013 2015 2014 2013
Net interest income (FTE basis) $ 9,254
$ 9,810
$ 9,692
$ 4,338
$ 4,004
$ 4,237
Noninterest income 7,665
7,797
7,744
10,729
12,184
11,221
Total revenue, net of interest expense (FTE basis) 16,919
17,607
17,436
15,067
16,188
15,458
Provision for credit losses 685
322
1,142
99
110
140
Noninterest expense 7,888
8,170
8,051
11,310
11,862
12,094
Income before income taxes (FTE basis) 8,346
9,115
8,243
3,658
4,216
3,224
Income tax expense (FTE basis) 3,073
3,346
3,024
1,162
1,511
2,090
Net income $ 5,273
$ 5,769
$ 5,219
$ 2,496
$ 2,705
$ 1,134
Year-end total assets $ 382,043
$ 353,637

$ 551,587
$ 579,594

Legacy Assets & Servicing All Other
2015 2014 2013 2015 2014 2013
Net interest income (FTE basis) $ 1,573
$ 1,520
$ 1,552
$ (348 ) $ (526 ) $ 960
Noninterest income 1,857
1,156
2,872
(271 ) (42 ) 1,801
Total revenue, net of interest expense (FTE basis) 3,430
2,676
4,424
(619 ) (568 ) 2,761
Provision for credit losses 144
127
(283 ) (342 ) (978 ) (665 )
Noninterest expense 4,451
20,633
12,416
2,215
2,933
4,749
Loss before income taxes (FTE basis) (1,165 ) (18,084 ) (7,709 ) (2,492 ) (2,523 ) (1,323 )
Income tax benefit (FTE basis) (425 ) (4,974 ) (2,826 ) (2,003 ) (2,587 ) (2,040 )
Net income (loss) $ (740 ) $ (13,110 ) $ (4,883 ) $ (489 ) $ 64
$ 717
Year-end total assets $ 47,292
$ 45,957

$ 230,791
$ 261,581


⁽¹⁾	~~There were no material intersegment revenues.~~



		~~Bank of America 2015~~a reconciliation ~~247~~

~~The table below presents a reconciliation~~ of the ~~five~~four business segments’ total revenue, net of interest expense, on an FTE basis, and net income to the Consolidated Statement of Income, and total assets to the Consolidated Balance Sheet. ~~The adjustments presented in the table below include consolidated income, expense and asset amounts not specifically allocated to individual business segments.~~



Results of Business Segments and All Other										Results of Business Segments and All Other

At and for the Year Ended December 31											Total Corporation ⁽¹⁾						Consumer Banking
(Dollars in millions)											2016		2015		2014		2016			2015			2014
Net interest income (FTE basis)											$	41,996	$	39,847	$	41,630	$	21,290		$	20,428		$	20,790
Noninterest income											42,605		44,007		45,115		10,441			11,097			11,038
Total revenue, net of interest expense (FTE basis)											84,601		83,854		86,745		31,731			31,525			31,828
Provision for credit losses											3,597		3,161		2,275		2,715			2,346			2,470
Noninterest expense											54,951		57,734		75,656		17,653			18,716			19,390
Income before income taxes (FTE basis)											26,053		22,959		8,814		11,363			10,463			9,968
Income tax expense (FTE basis)											8,147		7,123		3,294		4,190			3,814			3,717
Net income											$	17,906	$	15,836	$	5,520	$	7,173		$	6,649		$	6,251
Year-end total assets											$	2,187,702	$	2,144,287			$	702,339		$	645,427

											Global Wealth & Investment Management						Global Banking
											2016		2015		2014		2016			2015			2014
Net interest income (FTE basis)											$	5,759	$	5,527	$	5,830	$	9,942		$	9,244		$	9,752
Noninterest income											11,891		12,507		12,573		8,488			8,377			8,514
Total revenue, net of interest expense (FTE basis)											17,650		18,034		18,403		18,430			17,621			18,266
Provision for credit losses											68		51		14		883			686			325
Noninterest expense											13,182		13,943		13,836		8,486			8,481			8,806
Income before income taxes (FTE basis)											4,400		4,040		4,553		9,061			8,454			9,135
Income tax expense (FTE basis)											1,629		1,473		1,698		3,341			3,114			3,353
Net income											$	2,771	$	2,567	$	2,855	$	5,720		$	5,340		$	5,782
Year-end total assets											$	298,932	$	296,271			$	408,268		$	386,132

											Global Markets						All Other
											2016		2015		2014		2016			2015			2014
Net interest income (FTE basis)											$	4,558	$	4,191	$	3,851	$	447		$	457		$	1,407
Noninterest income											11,532		10,822		12,279		253			1,204			711
Total revenue, net of interest expense (FTE basis)											16,090		15,013		16,130		700			1,661			2,118
Provision for credit losses											31		99		110		(100		)	(21		)	(644		)
Noninterest expense											10,170		11,374		11,989		5,460			5,220			21,635
Income (loss) before income taxes (FTE basis)											5,889		3,540		4,031		(4,660		)	(3,538		)	(18,873		)
Income tax expense (benefit) (FTE basis)											2,072		1,117		1,441		(3,085		)	(2,395		)	(6,915		)
Net income (loss)											$	3,817	$	2,423	$	2,590	$	(1,575	)	$	(1,143	)	$	(11,958	)
Year-end total assets											$	566,060	$	548,790			$	212,103		$	267,667

Business Segment Reconciliations

(Dollars in millions)	2015			2014			2013
																	2016			2015			2014
Segments’ total revenue, net of interest expense (FTE basis)	$	84,035		$	85,684		$	87,040		Segments’ total revenue, net of interest expense (FTE basis)							$	83,901		$	82,193		$	84,627
Adjustments:
Adjustments ⁽²⁾:										Adjustments ⁽²⁾:
ALM activities	237			(804		)	(545		)	ALM activities							(286		)	(208		)	13
Equity investment income	—			727			2,737
Liquidating businesses and other	(856		)	(491		)	569			Liquidating businesses and other							986			1,869			2,105
FTE basis adjustment	(909		)	(869		)	(859		)	FTE basis adjustment							(900		)	(889		)	(851		)
Consolidated revenue, net of interest expense	$	82,507		$	84,247		$	88,942									$	83,701		$	82,965		$	85,894
Segments’ total net income	$	16,377		$	4,769		$	10,714									19,481			16,979			17,478
Adjustments, net-of-taxes:
Adjustments, net-of-taxes ⁽²⁾:
ALM activities	(305		)	(343		)	(929		)								(642		)	(694		)	(262		)
Equity investment income	—			454			1,724
Liquidating businesses and other	(184		)	(47		)	(78		)								(933		)	(449		)	(11,696		)
Consolidated net income	$	15,888		$	4,833		$	11,431									$	17,906		$	15,836		$	5,520

				December 31																December 31
				2015			2014													2016			2015
Segments’ total assets				$	1,913,525		$	1,842,953												$	1,975,599		$	1,876,620
Adjustments:
Adjustments ⁽²⁾:
ALM activities, including securities portfolio				681,876			658,319													613,058			612,364
Equity investments				4,297			4,871
Liquidating businesses and other				63,465			73,008
Liquidating businesses and other ⁽³⁾																				117,708			144,310
Elimination of segment asset allocations to match liabilities				(518,847		)	(474,617		)	Elimination of segment asset allocations to match liabilities										(518,663		)	(489,007		)
Consolidated total assets				$	2,144,316		$	2,104,534												$	2,187,702		$	2,144,287


⁽¹⁾	There were no material intersegment revenues.


⁽²⁾	Adjustments include consolidated income, expense and asset amounts not specifically allocated to individual business segments.


⁽³⁾	Includes assets of the non-U.S. consumer credit card business which are included in assets of business held for sale on the Consolidated Balance Sheet.



		~~248~~Bank of America ~~2015~~2016213

NOTE 25 Parent Company Information

The following tables present the Parent Company-only financial information. This financial information is presented in accordance with bank regulatory reporting requirements.



Condensed Statement of Income

(Dollars in millions)	2015			2014			2013			2016			2015			2014
Income
Dividends from subsidiaries:
Bank holding companies and related subsidiaries	$	18,970		$	12,400		$	8,532		$	4,127		$	18,970		$	12,400
Nonbank companies and related subsidiaries	53			149			357			77			53			149
Interest from subsidiaries	2,004			1,836			2,087			2,996			2,004			1,836
Other income (loss)	(623		)	72			233			111			(623		)	72
Total income	20,404			14,457			11,209			7,311			20,404			14,457
Expense
Interest on borrowed funds from related subsidiaries	1,169			1,661			1,730			969			1,169			1,661
Other interest expense	5,098			5,552			6,379			5,096			5,098			5,552
Noninterest expense	4,747			4,471			10,938			2,572			4,747			4,471
Total expense	11,014			11,684			19,047			8,637			11,014			11,684
Income (loss) before income taxes and equity in undistributed earnings of subsidiaries	9,390			2,773			(7,838		)	(1,326		)	9,390			2,773
Income tax benefit	(3,574		)	(4,079		)	(7,227		)	(2,263		)	(3,574		)	(4,079		)
Income (loss) before equity in undistributed earnings of subsidiaries	12,964			6,852			(611		)
Income before equity in undistributed earnings of subsidiaries										937			12,964			6,852
Equity in undistributed earnings (losses) of subsidiaries:
Bank holding companies and related subsidiaries	3,120			3,613			14,150			16,817			3,068			4,300
Nonbank companies and related subsidiaries	(196		)	(5,632		)	(2,108		)	152			(196		)	(5,632		)
Total equity in undistributed earnings (losses) of subsidiaries	2,924			(2,019		)	12,042			16,969			2,872			(1,332		)
Net income	$	15,888		$	4,833		$	11,431		$	17,906		$	15,836		$	5,520



Condensed Balance Sheet

	December 31				December 31
(Dollars in millions)	2015		2014		2016		2015
Assets
Cash held at bank subsidiaries ⁽¹⁾	$	98,024	$	100,304	$	20,248	$	98,024
Securities	937		932		909		937
Receivables from subsidiaries:
Bank holding companies and related subsidiaries	23,594		23,356		117,072		23,594
Banks and related subsidiaries	569		2,395		171		569
Nonbank companies and related subsidiaries	56,426		52,251		26,500		56,426
Investments in subsidiaries:
Bank holding companies and related subsidiaries	272,596		270,441		287,416		272,567
Nonbank companies and related subsidiaries	2,402		2,139		6,875		2,402
Other assets	9,360		14,599		10,672		9,360
Total assets(2)	$	463,908	$	466,417	$	469,863	$	463,879
Liabilities and shareholders’ equity
Short-term borrowings	$	15	$	46	$	—	$	15
Accrued expenses and other liabilities	13,900		16,872		13,273		13,900
Payables to subsidiaries:
Banks and related subsidiaries	465		2,559		352		465
Bank holding companies and related subsidiaries					4,013		—
Nonbank companies and related subsidiaries	13,921		17,698		12,010		13,921
Long-term debt	179,402		185,771		173,375		179,402
Total liabilities	207,703		222,946		203,023		207,703
Shareholders’ equity	256,205		243,471		266,840		256,176
Total liabilities and shareholders’ equity	$	463,908	$	466,417	$	469,863	$	463,879


⁽¹⁾	Balance includes third-party cash held of $28342 million and $2928 million at December 31, ~~2015~~2016 and ~~2014~~2015.



		~~Bank of America 2015249~~⁽²⁾	During 2016, the Corporation entered into intercompany arrangements with certain key subsidiaries under which the Corporation transferred certain parent company assets to NB Holdings, Inc.

Condensed Statement of Cash Flows

(Dollars in millions) 2015 2014 2013
Operating activities

Net income $ 15,888
$ 4,833
$ 11,431
Reconciliation of net income to net cash provided by (used in) operating activities:

Equity in undistributed (earnings) losses of subsidiaries (2,924 ) 2,019
(12,042 )
Other operating activities, net (2,509 ) 2,143
(10,422 )
Net cash provided by (used in) operating activities 10,455
8,995
(11,033 )
Investing activities

Net sales (purchases) of securities 15
(142 ) 459
Net payments from (to) subsidiaries (7,944 ) (5,902 ) 39,336
Other investing activities, net 70
19
3
Net cash provided by (used in) investing activities (7,859 ) (6,025 ) 39,798
Financing activities

Net increase (decrease) in short-term borrowings (221 ) (55 ) 178
Net increase (decrease) in other advances (770 ) 1,264
(14,378 )
Proceeds from issuance of long-term debt 26,492
29,324
30,966
Retirement of long-term debt (27,393 ) (33,854 ) (39,320 )
Proceeds from issuance of preferred stock 2,964
5,957
1,008
Redemption of preferred stock —
—
(6,461 )
Common stock repurchased (2,374 ) (1,675 ) (3,220 )
Cash dividends paid (3,574 ) (2,306 ) (1,677 )
Net cash used in financing activities (4,876 ) (1,345 ) (32,904 )
Net increase (decrease) in cash held at bank subsidiaries (2,280 ) 1,625
(4,139 )
Cash held at bank subsidiaries at January 1 100,304
98,679
102,818
Cash held at bank subsidiaries at December 31 $ 98,024
$ 100,304
$ 98,679



~~250~~214 Bank of America ~~2015~~2016




Condensed Statement of Cash Flows

(Dollars in millions)	2016			2015			2014
Operating activities
Net income	$	17,906		$	15,836		$	5,520
Reconciliation of net income to net cash provided by (used in) operating activities:
Equity in undistributed (earnings) losses of subsidiaries	(16,969		)	(2,872		)	1,332
Other operating activities, net	(2,944		)	(2,509		)	2,143
Net cash provided by (used in) operating activities	(2,007		)	10,455			8,995
Investing activities
Net sales (purchases) of securities	—			15			(142		)
Net payments to subsidiaries	(65,481		)	(7,944		)	(5,902		)
Other investing activities, net	(308		)	70			19
Net cash used in investing activities	(65,789		)	(7,859		)	(6,025		)
Financing activities
Net decrease in short-term borrowings	(136		)	(221		)	(55		)
Net increase (decrease) in other advances	(44		)	(770		)	1,264
Proceeds from issuance of long-term debt	27,363			26,492			29,324
Retirement of long-term debt	(30,804		)	(27,393		)	(33,854		)
Proceeds from issuance of preferred stock	2,947			2,964			5,957
Common stock repurchased	(5,112		)	(2,374		)	(1,675		)
Cash dividends paid	(4,194		)	(3,574		)	(2,306		)
Net cash used in financing activities	(9,980		)	(4,876		)	(1,345		)
Net increase (decrease) in cash held at bank subsidiaries	(77,776		)	(2,280		)	1,625
Cash held at bank subsidiaries at January 1	98,024			100,304			98,679
Cash held at bank subsidiaries at December 31	$	20,248		$	98,024		$	100,304

NOTE 26 Performance by Geographical Area

Since the Corporation’s operations are highly integrated, certain asset, liability, income and expense amounts must be allocated to arrive at total assets, total revenue, net of interest expense, income before income taxes and net income ~~(loss)~~ by geographic area. The Corporation identifies its geographic performance based on the business unit structure used to manage the capital or expense deployed in the region as applicable. This requires certain judgments related to the allocation of revenue so that revenue can be appropriately matched with the related capital or expense deployed in the region.



		December 31		Year Ended December 31								December 31		Year Ended December 31
(Dollars in millions)	Year	Total Assets ⁽¹⁾		Total Revenue, Net of Interest Expense ⁽²⁾		Income Before Income Taxes		Net Income (Loss)			Year	Total Assets ⁽¹⁾		Total Revenue, Net of Interest Expense ⁽²⁾		Income Before Income Taxes		Net Income
U.S. ⁽³⁾	2015	$	1,849,128	$	71,659	$	20,148	$	14,689		2016	$	1,900,678	$	72,418	$	22,414	$	16,267
	2014	1,792,719		72,960		4,643		3,305			2015	1,849,099		72,117		20,064		14,637
	2013			76,612		13,221		10,588			2014			74,607		5,751		3,992
Asia ⁽⁴⁾	2015	86,994		3,524		726		457			2016	85,410		3,365		674		488
	2014	92,005		3,605		759		473			2015	86,994		3,524		726		457
	2013			4,442		1,382		887			2014			3,605		759		473
Europe, Middle East and Africa	2015	178,899		6,081		938		516			2016	174,934		6,608		1,705		925
	2014	190,365		6,409		1,098		813			2015	178,899		6,081		938		516
	2013			6,353		1,003		(403		)	2014			6,409		1,098		813
Latin America and the Caribbean	2015	29,295		1,243		342		226			2016	26,680		1,310		360		226
	2014	29,445		1,273		355		242			2015	29,295		1,243		342		226
	2013			1,535		566		359			2014			1,273		355		242
Total Non-U.S.	2015	295,188		10,848		2,006		1,199			2016	287,024		11,283		2,739		1,639
	2014	311,815		11,287		2,212		1,528			2015	295,188		10,848		2,006		1,199
	2013			12,330		2,951		843			2014			11,287		2,212		1,528
Total Consolidated	2015	$	2,144,316	$	82,507	$	22,154	$	15,888		2016	$	2,187,702	$	83,701	$	25,153	$	17,906
	2014	2,104,534		84,247		6,855		4,833			2015	2,144,287		82,965		22,070		15,836
	2013			88,942		16,172		11,431			2014			85,894		7,963		5,520


⁽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.


⁽⁴⁾	~~Amounts include pretax gains of~~ ~~$753 million~~ (~~$474 million~~ ~~net-of-tax) on the sale of common shares of CCB during 2013.~~



		Bank of America ~~2015~~2016 ~~251~~215

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 (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, in recording, processing, summarizing and reporting information required to be disclosed by the Corporation in reports that it files or submits under the Exchange Act, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Report of Management on Internal Control Over Financial Reporting

The Report of Management on Internal Control over Financial Reporting is set forth on page ~~130~~114 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 page ~~131~~115 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, ~~2015~~,2016, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None



~~252~~216 Bank of America ~~2015~~2016

Part III

Bank of America Corporation and Subsidiaries

Item 10. Directors, Executive Officers and Corporate Governance

Executive Officers of The Registrant

The name, age, position and office, and business experience during the last five years of our current executive officers are:

Dean C. Athanasia ~~(49)~~(50) President, Preferred & Small Business Banking, and Co-Head - Consumer Banking, since September 2014; Preferred and Small Business Banking Executive from April 2011 to September 2014; and Head of Global Banking and Merrill Edge from April 2009 to April 2011.

Catherine P. Bessant ~~(55)~~(56) Chief Operations and Technology Officer since July 2015; and Global Technology & Operations Executive from January 2010 to July 2015.

Paul M. Donofrio ~~(55)~~(56) Chief Financial Officer since August 2015; ~~strategic finance~~Strategic Finance Executive from April 2015 to August 2015; Global Head of Corporate Credit and Transaction Banking from January 2012 to April 2015; Co-Head of Global Corporate and Investment Banking from April 2011 to January 2012; and Global Head of Corporate Banking from February 2010 to April 2011.

Geoffrey S. Greener ~~(51)~~(52) Chief Risk Officer since April 2014; Head of Enterprise Capital Management from April 2011 to April 2014; and Head of Global Markets Portfolio Management, Chair of Global Markets Capital Committee and Global Markets Regulatory Reform Executive Committee from April 2010 to March ~~2011;~~2011.

Terrence P. Laughlin ~~(61)~~(62) Vice Chairman, Global Wealth & Investment Management since January 2016; Vice Chairman from July 2015 to January 2016; President of Strategic Initiatives from April 2014 to July 2015; Chief Risk Officer from August 2011 to April 2014; and Legacy Asset Servicing Executive from February 2011 to August 2011.

David G. Leitch ~~(55)~~(56) Global General Counsel since January ~~2016:~~2016; and General Counsel of Ford Motor Company from April 2005 to December 2015.

Thomas K. Montag ~~(59)~~(60) Chief Operating Officer since September 2014; Co-chief Operating Officer from September 2011 to September 2014; and President, Global Banking and Markets from August 2009 to September 2011.

Brian T. Moynihan ~~(56)~~(57) 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 ~~(57)~~(58) President, Retail Banking, and Co-Head – Consumer Banking since September 2014; Retail Banking Executive from April 2014 to September 2014; Retail Strategy, Operations & Digital Banking Executive from September 2012 to April 2014; Global Corporate Strategy, Planning and Development Executive from November 2011 to September 2012; and West Division Executive for U.S. Trust from February 2010 to November ~~2011;~~2011.

Andrea B. Smith ~~(48)~~(50) Chief Administrative Officer since July 2015; and Global Head of Human Resources from January 2010 to July 2015.

Information included under the following captions in the Corporation’s proxy statement relating to its ~~2016~~2017 annual meeting of stockholders, scheduled to be held on April ~~27, 2016~~26, 2017 (the ~~2016~~2017 Proxy Statement), is incorporated herein by reference:


Ÿ●	“Proposal 1: Electing Directors – Our Director Nominees;”


Ÿ●	“Corporate Governance – Additional Information;"


Ÿ●	“– Board Meetings, Committee Membership and Attendance;” and


Ÿ●	“Section 16(a) Beneficial Ownership Reporting Compliance.”

Item 11. Executive Compensation

Information included under the following captions in the ~~2016~~2017 Proxy Statement is incorporated herein by reference:


Ÿ●	“Compensation Discussion and Analysis;”


Ÿ●	“Compensation and Benefits Committee Report;”


Ÿ●	“Executive Compensation;”


Ÿ●	“Corporate Governance;” and


Ÿ●	“Director Compensation.”



		Bank of America ~~2015~~2016 ~~253~~217

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

Information included under the following caption in the ~~2016~~2017 Proxy Statement is incorporated herein by reference:


Ÿ●	“Stock Ownership of Directors, Executive Officers, and Certain Beneficial Owners.”

The table below presents information on equity compensation plans at December 31, ~~2015~~2016:



Plan Category ⁽¹⁾	Number of Shares to be Issued Under Outstanding Options and Rights	Weighted-average Exercise Price of Outstanding Options ⁽²⁾		Number of Shares Remaining for Future Issuance Under Equity Compensation Plans ⁽³⁾	Number of Shares to be Issued Under Outstanding Options and Rights	Weighted-average Exercise Price of Outstanding Options ⁽²⁾		Number of Shares Remaining for Future Issuance Under Equity Compensation Plans ⁽³⁾
Plans approved by shareholders ⁽⁴⁾	76,532,166	$	48.08	472,195,319	191,623,431	$	50.31	339,867,064
Plans not approved by shareholders	—	—		—	—	—		—
Total	76,532,166	$	48.08	472,195,319	191,623,431	$	50.31	339,867,064

⁽¹⁾

This table does not include outstanding options to purchase ~~8,195,107~~7,760,181 shares of the Corporation’s common stock that were assumed by the Corporation in connection with prior acquisitions, under whose plans the options were originally granted. The weighted-average exercise price of these assumed options was ~~$56.64~~$51.74 at December 31, ~~2015~~2016. Also, at December 31, ~~2015~~2016, there were ~~1,631,437 outstanding restricted stock units and 1,066,492~~1,106,557 vested restricted stock units and stock option gain deferrals associated with these plans.


⁽²⁾	Does not reflect restricted stock units included in the first column, which do not have an exercise price.


⁽³⁾	Plans approved by shareholders ~~includes 471,931,012~~include 339,689,305 shares of common stock available for future issuance under the Bank of America Corporation Key Employee Equity Plan and ~~264,307~~177,759 shares of common stock which are available for future issuance under the Corporations ~~Director’~~Director Stock Plan.


⁽⁴⁾	Includes ~~20,851,798~~157,026,330 outstanding restricted stock units.

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

Information included under the following captions in the ~~2016~~2017 Proxy Statement is incorporated herein by reference:


Ÿ●	“Related Person and Certain Other Transactions;” and


Ÿ●	“Corporate Governance – Director Independence.”

Item 14. Principal Accounting Fees and Services

Information included under the following caption in the ~~2016~~2017 Proxy Statement is incorporated herein by reference:


Ÿ●	“Proposal 3:4: Ratifying the Appointment of our Registered

Independent Public Accounting Firm for 2016.”



	Title of each class		Name of each exchange on which registered
	7.25% Non-Cumulative Perpetual Convertible Preferred Stock, Series L		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		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 2		New York Stock Exchange
	Depositary Shares, each representing a 1/1,200th interest in a share of Bank of America Corporation 6.375% Non-Cumulative Preferred Stock, Series 3		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		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		New York Stock Exchange
	~~6.75% Trust Preferred Securities of Countrywide Capital IV (and the guarantees related thereto)~~		~~New York Stock Exchange~~
	7.00% Capital Securities of Countrywide Capital V (and the guarantees ~~related thereto)~~		~~New York Stock Exchange~~
	~~6% Capital Securities of BAC Capital Trust VIII (and the guarantee~~ related thereto)		New York Stock Exchange
	Floating Rate Preferred Hybrid Income Term Securities of BAC Capital Trust XIII (and the guarantee related thereto)		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)		New York Stock Exchange
	MBNA Capital B Floating Rate Capital Securities, Series B (and the guarantee related thereto)		New York Stock Exchange
	Trust Preferred Securities of Merrill Lynch Capital Trust I (and the guarantee of the Registrant with respect thereto)		New York Stock Exchange
	Trust Preferred Securities of Merrill Lynch Capital Trust IIIII (and the guarantee of the Registrant with respect thereto)		New York Stock Exchange
	~~Trust Preferred Securities~~Senior Medium-Term Notes, Series A, Step Up Callable Notes, due November 28, 2031 of ~~Merrill Lynch Capital Trust III~~BofA Finance LLC (and the guarantee of the Registrant with respect thereto)		New York Stock Exchange



Signature	Title	Date

/s/ Brian T. Moynihan	Chief Executive Officer, Chairman and Director (Principal Executive Officer)	February ~~24, 2016~~23, 2017
Brian T. Moynihan		February ~~24, 2016~~23, 2017

*/s/ Paul M. Donofrio	Chief Financial Officer (Principal Financial Officer)	February ~~24, 2016~~23, 2017
Paul M. Donofrio	Chief Financial Officer (Principal Financial Officer)	February ~~24, 2016~~23, 2017

*/s/ Rudolf A. Bless	Chief Accounting Officer (Principal Accounting Officer)	February ~~24, 2016~~23, 2017
Rudolf A. Bless	Chief Accounting Officer (Principal Accounting Officer)	February ~~24, 2016~~23, 2017

*/s/ Sharon L. Allen	Director	February ~~24, 2016~~23, 2017
Sharon L. Allen	Director	February ~~24, 2016~~23, 2017

*/s/ Susan S. Bies	Director	February ~~24, 2016~~23, 2017
Susan S. Bies	Director	February ~~24, 2016~~23, 2017

*/s/ Jack O. Bovender, Jr.	~~Director~~	~~February 24, 2016~~
~~Jack O. Bovender, Jr.~~	~~Director~~	~~February 24, 2016~~

*/s/ Frank P. Bramble, Sr.	~~Director~~	~~February 24, 2016~~
~~Frank P. Bramble, Sr.~~	~~Director~~	~~February 24, 2016~~

*/s/ Pierre de Weck	~~Director~~	~~February 24, 2016~~
~~Pierre de Weck~~	~~Director~~	~~February 24, 2016~~

*/s/ Arnold W. Donald	~~Director~~	~~February 24, 2016~~
~~Arnold W. Donald~~	~~Director~~	~~February 24, 2016~~

*/s/ Charles K. Gifford	~~Director~~	~~February 24, 2016~~
~~Charles K. Gifford~~	~~Director~~	~~February 24, 2016~~

*/s/ Linda P. Hudson	~~Director~~	~~February 24, 2016~~
~~Linda P. Hudson~~	~~Director~~	~~February 24, 2016~~



Exhibit No.		Description
3(a)		Amended and Restated Certificate of Incorporation of the ~~Corporation,~~registrant, as in effect on the date hereof, incorporated by reference to Exhibit 3(a) of the registrant's Quarterly Report on Form 10-Q (File No. 1-6523) for the quarterly period ended March 31, 2016 filed ~~herewith.~~on May 2, 2016.
(b)		Amended and Restated Bylaws of the Corporation, as in effect on the date hereof, incorporated by reference to Exhibit 3.1 of registrant’s Current Report on Form 8-K (File No. 1-6523) filed on March 20, 2015.
4(a)		Indenture dated as of January 1, 1995 between registrant (successor to NationsBank Corporation) and BankAmerica National Trust Company incorporated by reference to Exhibit 4.1 of registrant’s Registration Statement on Form S-3 (Registration No. 33-57533) filed on February 1, 1995; First Supplemental Indenture thereto dated as of September 18, 1998 between registrant and U.S. Bank Trust National Association (successor to BankAmerica National Trust Company), incorporated by reference to Exhibit 4.3 of registrant’s Current Report on Form 8-K (File No. 1-6523) filed on November 18, 1998; Second Supplemental Indenture thereto dated as of May 7, 2001 between registrant, U.S. Bank Trust National Association, as Prior Trustee, and The Bank of New York, as Successor Trustee, incorporated by reference to Exhibit 4.4 of registrant’s Current Report on Form 8-K (File No. 1-6523) filed on June 14, 2001; Third Supplemental Indenture thereto dated as of July 28, 2004 between registrant and The Bank of New York, incorporated by reference to Exhibit 4.2 of registrant’s Current Report on Form 8-K (File No. 1-6523) filed on August 27, 2004; Fourth Supplemental Indenture thereto dated as of April 28, 2006 between the registrant and The Bank of New York, incorporated by reference to Exhibit 4.6 of registrant’s Registration Statement on Form S-3 (Registration No. 333-133852) filed on May 5, 2006; Fifth Supplemental Indenture thereto dated as of December 1, 2008 between registrant and The Bank of New York Mellon Trust Company, N.A. (successor to The Bank of New York), incorporated by reference to Exhibit 4.1 of registrant’s Current Report on Form 8-K (File No. 1-6523) filed on December 5, 2008; ~~and~~ Sixth Supplemental Indenture thereto dated as of February 23, 2011 between registrant and The Bank of New York Mellon Trust Company, N.A., incorporated by reference to Exhibit 4(ee) of registrant’s 2010 Annual Report on Form 10-K (File No. 1-6523) filed on February 20, 2011 (the “2010 10-K”).; Seventh Supplemental Indenture thereto dated as of January 13, 2017 between registrant and The Bank of New York Mellon Trust Company, N.A., incorporated by reference to Exhibit 4.1 of registrant's Current Report on Form 8-K (File No. 1-6523) filed on January 13, 2017; and Eighth Supplemental Indenture thereto dated as of February 23, 2017 between registrant and the Bank of New York Mellon Trust Company, N.A., filed herewith.
(b)		Successor Trustee Agreement effective December 15, 1995 between registrant (successor to NationsBank Corporation) and First Trust of New York, National Association, as successor trustee to BankAmerica National Trust Company, incorporated by reference to Exhibit 4.2 of registrant’s Registration Statement on Form S-3 (Registration No. 333-07229) filed on June 28, 1996.
(c)		Agreement of Appointment and Acceptance dated as of December 29, 2006 between registrant and The Bank of New York Trust Company, N.A., incorporated by reference to Exhibit 4(aaa) of registrant’s 2006 Annual Report on Form 10-K (File No. 1-6523) filed on February 28, 2007 (the “2006 10-K”).
(d)		Form of Senior Registered Note, incorporated by reference to Exhibit 4.12 of registrant’s Pre-Effective Amendment No. 1 to Registration Statement on Form S-3 (Registration No. 333-202354) filed on May 1, 2015.
(e)		Form of Global Senior Medium-Term Note, Series L, incorporated by reference to Exhibit 4.13 of registrant’s Pre-Effective Amendment No. 1 to Registration Statement on Form S-3 (Registration No. ~~333-202534)~~333-202354) filed on May 1, 2015.
(f)		Form of Master Global Senior Medium-Term Note, Series L, incorporated by reference to Exhibit 4.14 of registrant’s Pre-Effective Amendment No. 1 to Registration Statement on Form S-3 (Registration No. 333-202354) filed on May 1, 2015.
(g)		Form of Global Senior Medium-Term Note, Series M, incorporated by reference to Exhibit 4.2 of registrant's Current Report on Form 8-K (File No. 1-6523) filed on January 13, 2017.
(h)		Form of Master Global Senior Medium-Term Note, Series M, incorporated by reference to Exhibit 4.3 of registrant's Current Report on Form 8-K (File No. 1-6523) filed on January 13, 2017.
(i)		Indenture dated as of January 1, 1995 between registrant (successor to NationsBank Corporation) and The Bank of New York, incorporated by reference to Exhibit 4.5 of registrant’s Registration Statement on Form S-3 (Registration No. 33-57533) filed on February 1, 1995; First Supplemental Indenture thereto dated as of August 28, 1998 between registrant and The Bank of New York, incorporated by reference to Exhibit 4.8 of registrant’s Current Report on Form 8-K (File No. 1-6523) filed on November 18, 1998; Second Supplemental Indenture thereto dated as of January 25, 2007 between registrant and The Bank of New York Trust Company, N.A. (successor to The Bank of New York), incorporated by reference to Exhibit 4.3 of registrant’s Registration Statement on Form S-4 (Registration No. 333-141361) filed on March 16, 2007; Third Supplemental Indenture thereto dated as of February 23, 2011 between registrant and The Bank of New York Mellon Trust Company, N.A. (formerly The Bank of New York Trust Company, N.A.), incorporated by reference to Exhibit 4(ff) of registrant’s 2010 10-K; and Fourth Supplemental Indenture thereto dated as of February 23, 2017 between registrant and The Bank of New York Mellon Trust Company, N.A., filed herewith.
		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.
10(a)		Bank of America Pension Restoration Plan, as amended and restated effective January 1, 2009, incorporated by reference to Exhibit 10(c) of registrant’s 2008 Annual Report on Form 10-K (File No. 1-6523) filed on February 27, 2009 (the “2008 10-K”); Amendment thereto dated December 18, 2009, incorporated by reference to Exhibit 10(c) of registrant’s 2009 Annual Report on Form 10-K (File No. 1-6523) filed on February 26, 2010 (the “2009 10-K”); Amendment thereto dated December 16, 2010, incorporated by reference to Exhibit 10(c) of the 2010 10-K; and Amendment thereto dated June 29, 2012, incorporated by reference to Exhibit 10(a) of registrant’s 2012 Annual Report on Form 10-K (File No. 1-6523) filed February 28, 2013 (the “2012 10-K”).*
(b)		NationsBank Corporation Benefit Security Trust dated as of June 27, 1990, incorporated by reference to Exhibit 10(t) of registrant’s 1990 Annual Report on Form 10-K (File No. 1-6523); First Supplement thereto dated as of November 30, 1992, incorporated by reference to Exhibit 10(v) of registrant’s 1992 Annual Report on Form 10-K (File No. 1-6523); Trustee Removal/Appointment Agreement dated as of December 19, 1995, incorporated by reference to Exhibit 10(o) of registrant’s 1995 Annual Report on Form 10-K (File No. 1-6523) filed on March 29, 1996.*
(c)		Bank of America Deferred Compensation Plan (formerly known as the Bank of America 401(k) Restoration Plan) as amended and restated effective January 1, 2015, incorporated by reference to Exhibit 10(c) of registrant’s 2014 Annual Report on Form 10-K (File No. 1-6523) filed on February 25, 2015.*
(d)		Bank of America Executive Incentive Compensation Plan, as amended and restated effective December 10, 2002, incorporated by reference to Exhibit 10(g) of registrant’s 2002 Annual Report on Form 10-K (File No. 1-6523) filed on March 3, 2003; and Amendment thereto dated January 23, 2013, incorporated by reference to Exhibit 10(d) of the 2012 10-K.*
(e)		Bank of America Director Deferral Plan, as amended and restated effective January 1, 2005, incorporated by reference to Exhibit 10(g) of the 2006 10-K.*
(f)		Bank of America Corporation Directors’ Stock Plan as amended and restated effective April 26, 2006, incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on December 14, 2005* and the following forms of award agreements:



~~Exhibit No.~~		~~Description~~
(g)		Bank of America Corporation Key Associate Stock Plan, as amended and restated effective April 28, 2010, incorporated by reference to Exhibit 10.2 of registrant’s Current Report on Form 8-K (File No. 1-6523) filed on May 3, 2010* and the following forms of award agreement under the plan:
		•Form of Stock Option Award Agreement (February 2007 grant), incorporated by reference to Exhibit 10(i) of registrant’s 2007 Annual Report on Form 10-K (File No. 1-6523) filed on February 28, 2008;* •Form of Stock Option Award Agreement for non-executives (February 2008 grant), incorporated by reference to Exhibit 10(i) of the 2009 10-K;* •Form of Performance Contingent Restricted Stock Units Award Agreement, incorporated by reference to Exhibit 10.3 of registrant’s Current Report on Form 8-K (File No. 1-6523) filed on January 31, 2011;* •Form of Performance Contingent Restricted Stock Units Award Agreement (February 2011 grant), incorporated by reference to Exhibit 10(i) of the 2010 10-K;* •Form of Restricted Stock Units Award Agreement (February 2012 and subsequent grants), incorporated by reference to Exhibit 10(i) of registrant’s 2011 Annual Report on Form 10-K (File No. 1-6523) filed on February 25, 2012 (the “2011 10-K”);* •Form of Performance Contingent Restricted Stock Units Award Agreement (February 2012 grant), incorporated by reference to Exhibit 10(i) of the 2011 10-K;* •Form of Restricted Stock Units Award Agreement (February 2013 and subsequent grants), including grants to named executive officers, incorporated by reference to Exhibit 10(a) of registrant’s Quarterly Report on Form 10-Q (File No. 1-6523) for the quarterly period ended March 31, 2013 filed on May 5, 2013 (the “1Q 2013 10-Q”);* and •Form of Performance Restricted Stock Units Award Agreement (February 2013 and subsequent grants), including grants to named executive officers incorporated by reference to Exhibit 10(b) of the 1Q 2013 10-Q.* and •Form of Performance Restricted Stock Units Award Agreement (February 2014 and subsequent grants), including grants to named executive officers, incorporated by reference to Exhibit 10(a) of registrant’s Quarterly Report on Form 10-Q (File No. 1-6523) for the quarterly period ended March 31, 2014 filed on May 1, 2014.*
		Bank of America Corporation Key Employee Equity Plan (formerly known as the Key Associate Stock Plan), as amended and restated effective May 6, 2015, incorporated by reference to Exhibit 10.2 of registrant’s Current Report on Form 8-K (File No. 1-6523) filed on May 7, 2015.* •Form of Cash-settled Restricted Stock Units Award Agreement (February 2016), incorporated by reference to Exhibit 10(a) of registrant’s Quarterly Report on Form 10-Q (File No. 1-6523) for the quarterly period ended March 31, 2016 filed on May 2, 2016;* •Form of of Time-based Restricted Stock Units Award Agreement (February 2016), incorporated by reference to Exhibit 10(b) of registrant’s Quarterly Report on Form 10-Q (File No. 1-6523) for the quarterly period ended March 31, 2016 filed on May 2, 2016;* and •Form of Performance Restricted Stock Units Award Agreement (February 2016), incorporated by reference to Exhibit 10(c) of registrant’s Quarterly Report on Form10-Q (File No. 1-6523) for the quarterly period ended March 31, 2016 filed on May 2, 2016.*
(h)		Amendment to various plans in connection with FleetBoston Financial Corporation merger, incorporated by reference to Exhibit 10(v) of registrant’s 2003 Annual Report on Form 10-K (File No. 1-6523) filed on March 1, 2004.*
(i)		FleetBoston Supplemental Executive Retirement Plan, as amended by Amendment One thereto effective January 1, 1997, Amendment Two thereto effective October 15, 1997, Amendment Three thereto effective July 1, 1998, Amendment Four thereto effective August 15, 1999, Amendment Five thereto effective January 1, 2000, Amendment Six thereto effective October 10, 2001, Amendment Seven thereto effective February 19, 2002, Amendment Eight thereto effective October 15, 2002, Amendment Nine thereto effective January 1, 2003, Amendment Ten thereto effective October 21, 2003, and Amendment Eleven thereto effective December 31, 2004, incorporated by reference to Exhibit 10(r) of the 2004 10-K.*
(j)		FleetBoston Executive Deferred Compensation Plan No. 2, as amended by Amendment One thereto effective February 1, 1999, Amendment Two thereto effective January 1, 2000, Amendment Three thereto effective January 1, 2002, Amendment Four thereto effective October 15, 2002, Amendment Five thereto effective January 1, 2003, and Amendment Six thereto effective December 16, 2003, incorporated by reference to Exhibit 10(u) of the 2004 10-K.*
(k)		FleetBoston Executive Supplemental Plan, as amended by Amendment One thereto effective January 1, 2000, Amendment Two thereto effective January 1, 2002, Amendment Three thereto effective January 1, 2003, Amendment Four thereto effective January 1, 2003, and Amendment Five thereto effective December 31, 2004, incorporated by reference to Exhibit 10(v) of the 2004 10-K.*
(l)		Retirement Income Assurance Plan for Legacy Fleet, as amended and restated effective January 1, 2009, incorporated by reference to Exhibit 10(p) of the 2009 10-K; Amendment thereto dated December 16, 2010, incorporated by reference to Exhibit 10(c) of the 2010 10-K; and Amendment thereto dated June 29, 2012, incorporated by reference to Exhibit 10(l) of the 2012 10-K.*
(m)		Trust Agreement for the FleetBoston Executive Deferred Compensation Plans No. 1 and 2, incorporated by reference to Exhibit 10(x) of the 2004 10-K.*
(n)		Trust Agreement for the FleetBoston Executive Supplemental Plan, incorporated by reference to Exhibit 10(y) of the 2004 10-K.*
(o)		Trust Agreement for the FleetBoston Retirement Income Assurance Plan and the FleetBoston Supplemental Executive Retirement Plan, incorporated by reference to Exhibit 10(z) of the 2004 10-K.*
(p)		FleetBoston Directors Deferred Compensation and Stock Unit Plan, as amended by an amendment thereto effective as of July 1, 2000, a Second Amendment thereto effective as of January 1, 2003, a Third Amendment thereto dated April 14, 2003, and a Fourth Amendment thereto effective January 1, 2004, incorporated by reference to Exhibit 10(aa) of the 2004 10-K.*
(q)		BankBoston Corporation and its Subsidiaries Deferred Compensation Plan, as amended by a First Amendment thereto, a Second Amendment thereto, a Third Amendment thereto, an Instrument thereto (providing for the cessation of accruals effective December 31, 2000) and an Amendment thereto dated December 24, 2001, incorporated by reference to Exhibit 10(cc) of the 2004 10-K.*
(r)		BankBoston, N.A. Bonus Supplemental Employee Retirement Plan, as amended by a First Amendment thereto, a Second Amendment thereto, a Third Amendment thereto and a Fourth Amendment thereto, incorporated by reference to Exhibit 10(dd) of the 2004 10-K.*
(s)		Description of BankBoston Supplemental Life Insurance Plan, incorporated by reference to Exhibit 10(ee) of the 2004 10-K.*
(t)		BankBoston, N.A. Excess Benefit Supplemental Employee Retirement Plan, as amended by a First Amendment thereto, a Second Amendment thereto, a Third Amendment thereto (assumed by FleetBoston on October 1, 1999) and an Instrument thereto, incorporated by reference to Exhibit 10(ff) of the 2004 10-K.*
(u)		Description of BankBoston Supplemental Long-Term Disability Plan, incorporated by reference to Exhibit 10(gg) of the 2004 10-K.*
(v)		BankBoston Director Stock Award Plan, incorporated by reference to Exhibit 10(hh) of the 2004 10-K.*
(w)		BankBoston Corporation Directors’ Deferred Compensation Plan, as amended by a First Amendment thereto and a Second Amendment thereto, incorporated by reference to Exhibit 10(ii) of the 2004 10-K.*



[ü]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, ~~2015~~2016



[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	Title of each class		Name of each exchange on which registered
	Common Stock, par value $0.01 per share		New York Stock Exchange
			London Stock Exchange
			Tokyo Stock Exchange
	Warrants to purchase Common Stock (expiring October 28, 2018)		New York Stock Exchange
	Warrants to purchase Common Stock (expiring January 16, 2019)		New York Stock Exchange
	Depositary Shares, each representing a 1/1,000th interest in a share of 6.204% Non-Cumulative Preferred Stock, Series D		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		New York Stock Exchange
	Depositary Shares, each representing a 1/1,000th interest in a share of 6.625% Non-Cumulative Preferred Stock, Series I		New York Stock Exchange
	Depositary Shares, each representing a 1/1,000th interest in a share of 6.625% Non-Cumulative Preferred Stock, Series W		New York Stock Exchange
	Depositary Shares, each representing a 1/1,000th interest in a share of 6.500% Non-Cumulative Preferred Stock, Series Y		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		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		New York Stock Exchange



Part I		Page

Item 1.	Business	21

Item 1A.	Risk Factors	65

Item 1B.	Unresolved Staff Comments	1817

Item 2.	Properties	1817

Item 3.	Legal Proceedings	1817

Item 4.	Mine Safety Disclosures	1817

Part II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	1918

Item 6.	Selected Financial Data	1918

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2019

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	~~129~~113

Item 8.	Financial Statements and Supplementary Data	~~129~~113

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	~~252~~216

Item 9A.	Controls and Procedures	~~252~~216

Item 9B.	Other Information	~~252~~216

Part III

Item 10.	Directors, Executive Officers and Corporate Governance	~~253~~217

Item 11.	Executive Compensation	~~253~~217

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	~~254~~218

Item 13.	Certain Relationships and Related Transactions, and Director Independence	~~254~~218

Item 14.	Principal Accounting Fees and Services	~~254~~218

Part IV

Item 15.	Exhibits, Financial Statement Schedules	~~255~~219




Table 4	Credit Quality Data

(Dollars in millions)		2015			2014
Provision for credit losses
Consumer		$	2,208		$	1,482
Commercial		953			793
Total provision for credit losses		$	3,161		$	2,275

Net charge-offs ⁽¹⁾		$	4,338		$	4,383
Net charge-off ratio ⁽²⁾		0.50		%	0.49		%



		Item 16. Form 10-K Summary Not applicable. ~~Bank of America 2015255~~



Exhibit No.		Description
		•Form of Restricted Stock Award Agreement, incorporated by reference to Exhibit 10(h) of registrant’s 2004 Annual Report on Form 10-K (File No. 1-6523) filed on March 1, 2005 (the “2004 10-K”);* •Form of Directors Stock Plan Restricted Stock Award Agreement for Non-Employee Chairman, incorporated by reference to Exhibit 10(b) of registrant’s Quarterly Report on Form 10-Q (File No. 1-6523) for the quarterly period ended September 30, 2009 filed on November 6, 2009;* •Form of Directors’ Stock Plan Restricted Stock Award Agreement for Non-U.S. Director, incorporated by reference to Exhibit 10(a) of registrant’s Quarterly Report on Form 10-Q (File No. 1-6523) for the quarterly period ended March 31, 2011 filed on May 5, 2011;* and • Form of Directors’ Stock Plan Conditional Restricted Stock Award Agreement for Non-U.S. Director, incorporated by reference to Exhibit 10(a) of registrant’s Quarterly Report on Form 10-Q (File No. 1-6523) for the quarterly period ended June 30, 2011 filed on August 4, 2011.*



Exhibit No.		Description
(x)		BankBoston, N.A. Directors’ Deferred Compensation Plan, as amended by a First Amendment thereto and a Second Amendment thereto, incorporated by reference to Exhibit 10(jj) of the 2004 10-K.*
(y)		BankBoston 1997 Stock Option Plan for Non-Employee Directors, as amended by an amendment thereto dated as of October 16, 2001, incorporated by reference to Exhibit 10(kk) of the 2004 10-K.*
(z)		Description of BankBoston Director Retirement Benefits Exchange Program, incorporated by reference to Exhibit 10(ll) of the 2004 10-K.*
(aa)		Employment Agreement, dated as of March 14, 1999, between FleetBoston and Charles K. Gifford, as amended by an amendment thereto effective as of February 7, 2000, a Second Amendment thereto effective as of April 22, 2002, and a Third Amendment thereto effective as of October 1, 2002, incorporated by reference to Exhibit 10(mm) of the 2004 10-K.*
~~(bb)~~		Form of Change in Control Agreement entered into with Charles K. Gifford, incorporated by reference to Exhibit 10(nn) of the 2004 10-K.*



~~Exhibit No.~~		~~Description~~
~~(cc)~~		Global amendment to definition of “change in control” or “change of control,” together with a list of plans affected by such amendment, incorporated by reference to Exhibit 10(oo) of the 2004 10-K.*
~~(dd)~~		Retirement Agreement dated January 26, 2005 between registrant and Charles K. Gifford, incorporated by reference to Exhibit 10.1 of registrant’s Current Report on Form 8-K (File No. 1-6523) filed on January 26, 2005.*
~~(ee)~~(bb)		Employment Agreement dated October 27, 2003 between registrant and Brian T. Moynihan, incorporated by reference to Exhibit 10(d) of registrant’s Registration Statement on Form S-4 (Registration No. 333-110924) filed on December 4, 2003.*
~~(ff)~~(cc)		Cancellation Agreement dated October 26, 2005 between registrant and Brian T. Moynihan, incorporated by reference to Exhibit 10.1 of registrant’s Current Report on Form 8-K (File No. 1-6523) filed on October 26, 2005.*
~~(gg)~~(dd)		Agreement Regarding Participation in the Fleet Boston Supplemental Executive Retirement Plan dated October 26, 2005 between registrant and Brian T. Moynihan, incorporated by reference to Exhibit 10.2 of registrant’s Current Report on Form 8-K (File No. 1-6523) filed on October 26, 2005.*
~~(hh)~~(ee)		Bank of America Corporation Equity Incentive Plan amended and restated effective as of January 1, 2008, incorporated by reference to Exhibit 10(zz) of the 2009 10-K.*
~~(ii)~~(ff)		Merrill Lynch & Co., Inc. Long-Term Incentive Compensation Plan amended as of January 1, 2009 and 2008 Restricted Units/Stock Option Grant Document for Thomas K. Montag, incorporated by reference to Exhibit 10(aaa) of the 2009 10-K.*
~~(jj)~~(gg)		Employment Letter dated May 1, 2008 between Merrill Lynch & Co., Inc. and Thomas K. Montag and Summary of Agreement with respect to Post-Employment Medical Coverage, incorporated by reference to Exhibit 10(bbb) of the 2009 10-K.*
~~(kk)~~(hh)		Form of Warrant to purchase common stock (expiring October 28, 2018), incorporated by reference to Exhibit 4.2 of registrant’s Registration Statement on Form 8-A (File No. 1-6523) filed on March 4, 2010.
~~(ll)~~(ii)		Form of Warrant to purchase common stock (expiring January 16, 2019), incorporated by reference to Exhibit 4.2 of registrant’s Registration Statement on Form 8-A (File No. 1-6523) filed on March 4, 2010.
~~(mm)~~(jj)		Retention Award Letter Agreement with Bruce R. Thompson dated January 26, 2009, incorporated by reference to Exhibit 10(ddd) of the 2010 10-K.*
~~(nn)~~(kk)		Aircraft Time Sharing Agreement (Multiple Aircraft) dated February 24, 2011 between Bank of America, N. A. and Brian T. Moynihan, incorporated by reference to Exhibit 10(jjj) of the 2010 10-K.*
~~(oo)~~(ll)		Bank of America Corporation and Designated Subsidiaries Supplemental Executive Retirement Plan for Senior Management Employees effective as of January 1, 1989, reflecting the following amendments: Amendments thereto dated as of June 28, 1989, June 27, 1990, July 21, 1991, December 3, 1992, December 15, 1992, September 28, 1994, March 27, 1996, June 25, 1997, April 10, 1998, June 24, 1998, October 1, 1998, December 14, 1999, and March 28, 2001; and Amendment thereto dated December 10, 2002, incorporated by reference to Exhibit 10(jjj) of the 2011 10-K.*
~~(pp)~~		Settlement Agreement dated as of June 28, 2011, among The Bank of New York Mellon, registrant, BAC Home Loans Servicing, LP, Countrywide Financial Corporation, and Countrywide Home Loans, Inc., incorporated by reference to Exhibit 99.2 of registrant’s Current Report on Form 8-K (File No. 1-6523) filed on June 29, 2011.
~~(qq)~~		Institutional Investor Agreement dated as of June 28, 2011, among The Bank of New York Mellon, registrant, BAC Home Loans Servicing, LP, Countrywide Financial Corporation, Countrywide Home Loans, Inc. and the other parties thereto, incorporated by reference to Exhibit 99.3 of registrant’s Current Report on Form 8-K (File No. 1-6523) filed on June 29, 2011.
~~(rr)~~(mm)		Securities Purchase Agreement dated August 25, 2011 between registrant and Berkshire Hathaway Inc. (including forms of the Certificate of Designations, Warrant and Registration Rights Agreement), incorporated by reference to Exhibit 1.1 of registrant’s Current Report on Form 8-K (File No. 1-6523) filed on August 25, 2011.
~~(ss)~~		Offer Letter between registrant and Gary G. Lynch dated April 14, 2011, incorporated by reference to Exhibit 10(c) of the 1Q 2012 10-Q.*
~~(tt)~~(nn)		First Amendment to Aircraft Time Sharing Agreement dated June 15, 2015 between Bank of America, N.A. and Brian T. Moynihan, incorporated by reference to Exhibit 10 of ~~registrants~~registrant's Quarterly Report on Form 10-Q (File No. 1-6523) for the quarterly period ended June 30, 2015 filed on July 29, 2015.*
~~(uu)~~(oo)		Tax Equalization Program Guidelines, incorporated by reference to Exhibit 10(uu) of registrant's Annual Report on Form 10-K (File No. 1-6523) filed ~~herewith.~~on February 24, 2016.*
~~(vv)~~(pp)		First Amendment to the Bank of America Deferred Compensation Plan (formerly known as the Bank of America 401(k) Restoration Plan), as amended and restated effective January 1, 2015, incorporated by reference to Exhibit 10 (vv) of registrant's Annual Report on Form 10-K (File No. 1-6523) filed on February 24, 2016.*
(qq)		Second Amendment to Aircraft Time Sharing Agreement dated June 8, 2016 between Bank of America, N.A. and Brian T. Moynihan, incorporated by reference to Exhibit 10 of registrant's Quarterly Report on Form 10-Q (File No. 1-6523) for the quarterly period ended June 30, 2016 filed on August 1, 2016.*
(rr)		Form of Waiver of Certain Incremental Payouts from Performance Restricted Stock Units, filed herewith.*
12		Ratio of Earnings to Fixed Charges, filed herewith. Ratio of Earnings to Fixed Charges and Preferred Dividends, filed herewith.
21		List of Subsidiaries, filed herewith.
23		Consent of PricewaterhouseCoopers LLP, filed herewith.
24		Power of Attorney, filed herewith.
31(a)		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
(b)		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
32(a)		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, filed herewith.
(b)		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, filed herewith.



Exhibit No.		Description
Exhibit 101.INS		XBRL Instance Document, filed herewith.
Exhibit 101.SCH		XBRL Taxonomy Extension Schema Document, filed herewith.
Exhibit 101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document, filed herewith.
Exhibit 101.LAB		XBRL Taxonomy Extension Label Linkbase Document, filed herewith.
Exhibit 101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document, filed herewith.
Exhibit 101.DEF		XBRL Taxonomy Extension Definitions Linkbase Document, filed herewith.


^*	Exhibit is a management contract or a compensatory plan or arrangement.


^**	The registrant has received confidential treatment with respect to portions of this exhibit. Those portions have been omitted from this exhibit and filed separately with the U.S. Securities and Exchange Commission.

Large accelerated filer ü

Accelerated filer

Non-accelerated filer

Smaller reporting company

(do not check if a smaller reporting company)