0000070858 us-gaap:CommercialPortfolioSegmentMember us-gaap:FinanceLeasesPortfolioSegmentMember 2018-12-31 0000070858 us-gaap:MunicipalBondsMember us-gaap:SeniorLienMember us-gaap:VariableInterestEntityNotPrimaryBeneficiaryMember 2018-12-31 0000070858 srt:MaximumMember us-gaap:EquityContractMember us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember bac:MeasurementInputEquityCorrelationMember bac:ValuationTechniqueIndustryStandardDerivativePricingMember 2019-09-30
     
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ü] ☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 20182019
or
[   ] ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from          to
Commission file number:
1-6523
Exact name of registrant as specified in its charter:
Bank of America Corporation
State or other jurisdiction of incorporation or organization:
Delaware
IRS Employer Identification No.:
56-0906609
Address of principal executive offices:
Bank of America Corporate Center
100 N. Tryon Street
Charlotte, North Carolina28255
Registrant’s telephone number, including area code:
(704) (704) 386-5681
Former name, former address and former fiscal year, if changed since last report:
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareBACNew York Stock Exchange
Depositary Shares, each representing a 1/1,000th interest in a shareBAC PrENew York Stock Exchange
 of Floating Rate Non-Cumulative Preferred Stock, Series E
Depositary Shares, each representing a 1/1,000th interest in a shareBAC PrYNew York Stock Exchange
of 6.500% Non-Cumulative Preferred Stock, Series Y
Depositary Shares, each representing a 1/1,000th interest in a shareBAC PrCNew York Stock Exchange
of 6.200% Non-Cumulative Preferred Stock, Series CC
Depositary Shares, each representing a 1/1,000th interest in a shareBAC PrANew York Stock Exchange
of 6.000% Non-Cumulative Preferred Stock, Series EE
Depositary Shares, each representing a 1/1,000th interest in a shareBAC PrBNew York Stock Exchange
 of 6.000% Non-Cumulative Preferred Stock, Series GG
Depositary Shares, each representing a 1/1,000th interest in a shareBAC PrKNew York Stock Exchange
 of 5.875% Non-Cumulative Preferred Stock, Series HH
7.25% Non-Cumulative Perpetual Convertible Preferred Stock, Series LBAC PrLNew York Stock Exchange
Depositary Shares, each representing a 1/1,200th interest in a shareBML PrGNew York Stock Exchange
of Bank of America Corporation Floating Rate
Non-Cumulative Preferred Stock, Series 1

1Bank of America





Title of each classTrading Symbol(s)Name of each exchange on which registered
Depositary Shares, each representing a 1/1,200th interest in a shareBML PrHNew York Stock Exchange
 of Bank of America Corporation Floating Rate
Non-Cumulative Preferred Stock, Series 2
Depositary Shares, each representing a 1/1,200th interest in a shareBML PrJNew York Stock Exchange
 of Bank of America Corporation Floating Rate
Non-Cumulative Preferred Stock, Series 4
Depositary Shares, each representing a 1/1,200th interest in a shareBML PrLNew York Stock Exchange
 of Bank of America Corporation Floating Rate
Non-Cumulative Preferred Stock, Series 5
Floating Rate Preferred Hybrid Income Term Securities of BAC CapitalBAC/PFNew York Stock Exchange
 Trust XIII (and the guarantee related thereto)
5.63% Fixed to Floating Rate Preferred Hybrid Income Term SecuritiesBAC/PGNew York Stock Exchange
 of BAC Capital Trust XIV (and the guarantee related thereto)
Income Capital Obligation Notes initially due December 15, 2066 ofMER PrKNew York Stock Exchange
Bank of America Corporation
Senior Medium-Term Notes, Series A, Step Up Callable Notes, dueBAC/31BNew York Stock Exchange
 November 28, 2031 of BofA Finance LLC (and the guarantee
of the Registrant with respect thereto)
Depositary Shares, each representing a 1/1,000th interest in a share of
BAC PrMNew York Stock Exchange
 5.375% Non-Cumulative Preferred Stock, Series KK
Depositary Shares, each representing a 1/1,000th interest in a shareBAC PrNNew York Stock Exchange
5.000% Non-Cumulative Preferred Stock, Series LL
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes☑No o☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes☑No o☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☑ 
Accelerated filero
☐ 
Non-accelerated filero

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



Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).
Yes o☐No ☑
On October 26, 2018,25, 2019, there were 9,814,196,8648,995,107,401 shares of Bank of America Corporation Common Stock outstanding.
     

Bank of America 2


Bank of America Corporation and Subsidiaries
September 30, 20182019
Form 10-Q
INDEX
Part I. Financial Information
Item 1. Financial Statements Page
Consolidated Statement of Income
 
5446
Consolidated Statement of Comprehensive Income
 
5546
Consolidated Balance Sheet
 
5647
Consolidated Statement of Changes in Shareholders’Shareholders’ Equity
 
5848
Consolidated Statement of Cash Flows
49
Notes to Consolidated Financial Statements
50
Note 1 – Summary of Significant Accounting Principles
50
Note 2 – Net Interest Income and Noninterest Income
51
Note 3 – Derivatives
52
Note 4 – Securities
 
59
Notes to Consolidated Financial Statements
60
Note 15 – Summary of Significant Accounting Principles
60
Note 2 – Noninterest IncomeOutstanding Loans and Leases
 
62
Note 36 – DerivativesAllowance for Credit Losses
 
6370
Note 47 – SecuritiesSecuritizations and Other Variable Interest Entities
 
71
Note 5 – Outstanding Loans and Leases
74
Note 6 – Allowance for Credit Losses
85
Note 7 – Securitizations and Other Variable Interest Entities
87
Note 8 – Goodwill and Intangible Assets
 
9175
Note 9 – Leases
75
Note 10 – Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings and Restricted Cash
 
9276
Note 1011 – Commitments and Contingencies
77
Note 12 – Shareholders’ Equity
80
Note 13 – Earnings Per Common Share
80
Note 14 – Accumulated Other Comprehensive Income (Loss)
81
Note 15 – Fair Value Measurements
81
Note 16 – Fair Value Option
89
Note 17 – Fair Value of Financial Instruments
89
Note 18 – Business Segment Information
90
Glossary
 
94
Note 11 – Shareholders’ EquityAcronyms
 
96
Note 12 – Accumulated Other Comprehensive Income (Loss)
97
Note 13 – Earnings Per Common Share
98
Note 14 – Fair Value Measurements
98
Note 15 – Fair Value Option
107
Note 16 – Fair Value of Financial Instruments
108
Note 17 – Business Segment Information
109
Glossary
113
Acronyms
11495
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations  
Executive Summary
 
3
Recent EventsDevelopments
 
3
Financial Highlights
 
34
Supplemental Financial Data
 
6
Business Segment Operations
 
1110
Consumer Banking
 
1110
Global Wealth & Investment Management
13
Global Banking
 
15
Global BankingMarkets
 
17
Global MarketsAll Other
 
19
All Other
21
Off-Balance Sheet Arrangements and Contractual Obligations
 
2220
Managing Risk
 
2220
Capital Management
 
2220
Liquidity Risk
23
Credit Risk Management
 
26
Consumer Portfolio Credit Risk Management
 
2826
ConsumerCommercial Portfolio Credit Risk Management
 
2833
CommercialNon-U.S. Portfolio Credit Risk Management
 
3738
Non-U.S. PortfolioProvision for Credit Losses
39
Allowance for Credit Losses
39
Market Risk Management
41
Trading Risk Management
41
Interest Rate Risk Management for the Banking Book
 
43
Provision for Credit LossesMortgage Banking Risk Management
 
4445
Allowance for Credit LossesComplex Accounting Estimates
 
4445
Market Risk ManagementNon-GAAP Reconciliations
 
47
Trading Risk Management
47
Interest Rate Risk Management for the Banking Book
49
Mortgage Banking Risk Management
51
Complex Accounting Estimates
52
Non-GAAP Reconciliations
5245
   
Item 3. Quantitative and Qualitative Disclosures about Market Risk
 
5345
Item 4. Controls and Procedures
 
5345


1    ��Bank of America


  








Part II. Other Information
Item 1. Legal Proceedings
 
11596
Item 1A. Risk Factors
 
11596
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 
11596
Item 6. Exhibits
 
11697
Signature
 
11697
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Bank of America Corporation (the “Corporation”) and its management may make certain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “anticipates,” “targets,” “expects,” “hopes,” “estimates,” “intends,” “plans,” “goals,” “believes,” “continue” and other similar expressions or future or conditional verbs such as “will,” “may,” “might,” “should,” “would” and “could.” Forward-looking statements represent the Corporation’s current expectations, plans or forecasts of its future results, revenues, expenses, efficiency ratio, capital measures, strategy, and future business and economic conditions more generally, and other future matters. These statements are not guarantees of future results or performance and involve certain known and unknown risks, uncertainties and assumptions that are difficult to predict and are often beyond the Corporation’s control. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements.
You should not place undue reliance on any forward-looking statement and should consider the following uncertainties and risks, as well as the risks and uncertainties more fully discussed under Item 1A. Risk Factors of our 20172018 Annual Report on Form 10-K and in any of the Corporation’sCorporation’s subsequent Securities and Exchange Commission filings: the Corporation’s potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions, including inquiries into our retail sales practices, andactions; the possibility that amountsthe Corporation’s future liabilities may be in excess of the Corporation’sits recorded liability and estimated range of possible loss for litigation, regulatory, and representations and warranties exposures; the possibility that the Corporation could face increased servicing, securities, fraud, indemnity, contribution or other claims from one or more counterparties, including trustees, purchasers of loans, underwriters, issuers, monolines, private-label and other investors, or other parties involved in securitizations; the possibility that future representations and warranties losses may occur in excess of the Corporation’s recorded liability and estimated range of possible loss for its representations and warranties exposures; the Corporation’s ability to resolve representations and warranties repurchase and related claims, including claims brought by investors or trustees seeking to avoid the statute of limitations for repurchase claims; the risks related to the discontinuation of the London InterBank Offered Rate and other reference rates, including increased expenses and litigation and the effectiveness of hedging strategies; uncertainties about the financial stability and growth rates of non-U.S. jurisdictions, the risk that those jurisdictions may face difficulties servicing their sovereign debt, and related stresses on financial markets, currencies and trade, and the Corporation’s exposures to such risks, including direct, indirect and operational;
the impact of U.S. and global interest rates, inflation, currency exchange rates, economic conditions, trade policies and tensions, including tariffs,
and potential geopolitical instability; the impact of the interest rate environment on the Corporation’s business, financial condition and results of operations of a potential higher interest rate environment;operations; the possibility that future credit losses may be higher than currently expected due to changes in economic assumptions, customer behavior, adverse developments with respect to U.S. or global economic conditions and other uncertainties; the Corporation’s ability to achieve its expense targets and expectations regarding net interest income, expectations,net charge-offs, effective tax rate, loan growth or other projections; adverse changes to the Corporation’s credit ratings from the major credit rating agencies; an inability to access capital markets or maintain deposits or borrowing costs; estimates of the fair value and other accounting values, subject to impairment assessments, of certain of the Corporation’s assets and liabilities, which may change;liabilities; the estimated or actual impact of changes in accounting standards or assumptions in applying those standards, including the new credit loss accounting standard; uncertainty regarding the content, timing and impact of regulatory capital and liquidity requirements; the potential impact of adverse changes to total loss-absorbing capacity requirements; potential adverse changes to ourrequirements and/or global systemically important bank surcharge;surcharges; the potential impact of actions of the Board of Governors of the Federal Reserve actionsSystem on the Corporation’s capital plans; the possible impact of the Corporation’s failure to remediate a shortcoming identified by banking regulators in the Corporation’s Resolution Plan; the effect of regulations, other guidance or additional information on our estimatedthe impact offrom the Tax Cuts and Jobs Act; the impact of implementation and compliance with U.S. and international laws, regulations and regulatory interpretations, including, but not limited to, recovery and resolution planning requirements, Federal Deposit Insurance Corporation assessments, the Volcker Rule, fiduciary standards and derivatives regulations; a failure or disruption in or breach of the Corporation’s operational or security systems or infrastructure, or those of third parties, including as a result of cyber attacks;cyber-attacks; the impact on the Corporation’s business, financial condition and results of operations from the planned exit of the United Kingdom from the European Union; the impact of any future federal government shutdown and uncertainty regarding the federal government’s debt limit; and other similar matters.
Forward-looking statements speak only as of the date they are made, and the Corporation undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.
Notes to the Consolidated Financial Statements referred to in the Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) are incorporated by reference into the MD&A. Certain prior-period amounts have been reclassified to conform to current-period presentation. Throughout the MD&A, the Corporation uses certain acronyms and abbreviations which are defined in the Glossary.






  
Bank of America2


Executive Summary
Business Overview
The Corporation is a Delaware corporation, a bank holding company (BHC) and a financial holding company. When used in this report, “the Corporation” may refer to Bank of America Corporation individually, Bank of America Corporation and its subsidiaries, or certain of Bank of America Corporation’s subsidiaries or affiliates. Our principal executive offices are located in Charlotte, North Carolina. Through our banking and various nonbank subsidiaries throughout the U.S. and in international markets, we provide a diversified range of banking and nonbank financial services and products through four business segments: Consumer Banking, Global Wealth & Investment Management (GWIM), Global Banking and Global Markets, with the remaining operations recorded in All Other. We operate our banking activities primarily under the Bank of America, National Association (Bank of America, N.A. or BANA) charter. At September 30, 2018,2019, the Corporation had approximately $2.3$2.4 trillion in assets and a headcount of approximately 205,000209,000 employees.
As of September 30, 2018,2019, we served clients through operations across the United States,U.S., its territories and more thanapproximately 35 countries. Our retail banking footprint covers approximately 8590 percent of the U.S. population, and we serve approximately 6766 million consumer and small business clients with approximately 4,400 4,300 retail financial centers,approximately 16,100 16,600 ATMs, and
leading digital banking platforms (www.bankofamerica.com) with more than 36nearly 38 million active users, including nearly 26approximately 29 million active mobile users. We offer industry-leading support to approximately three million small business owners. Our wealth management businesses, with client balances of approximately $2.8$2.9 trillion, provide tailored solutions to meet client needs through a full set of investment management, brokerage, banking, trust and retirement products. We are a global leader in corporate and investment banking and trading across a broad range of asset classes serving corporations, governments, institutions and individuals around the world.
Recent EventsDevelopments
Capital Management
During the third quarter of 2018,2019, we repurchased $5.0$7.6 billion of common stock pursuant to the Board of Directors’ (the Board) 20182019 repurchase authorization of approximately $20.6$30.9 billion announced on June 28, 2018.27, 2019. For additional information, see Capital Management on page 22.20. On July 26, 2018,25, 2019, the Board declared a quarterly common stock dividend of $0.15$0.18 per share, payable on September 28, 201827, 2019 to shareholders of record as of September 7, 2018.6, 2019. Additionally, on October 24, 2018,22, 2019, the Board declared a quarterly common stock dividend of $0.15$0.18 per share, payable on December 28, 201827, 2019 to shareholders of record as of December 7, 2018.6, 2019.
Merchant Services Joint Venture
As previously disclosed in the Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, a significant portion of our merchant processing activity is performed by a joint venture, formed in 2009, in which we own a 49 percent ownership
interest. The joint venture is accounted for as an equity method investment. On July 29, 2019, we gave notice to the joint venture partner of the termination of the joint venture upon the conclusion of its current term, after which we expect to pursue our own merchant services strategy. In addition, the Corporation and the joint venture partner have an agreement to provide uninterrupted delivery of products and services to the joint venture merchants through at least June 2023. As a result of the above actions, we incurred a non-cash, pretax impairment charge of $2.1 billion included in other general operating expense in the three months ended September 30, 2019. We anticipate accounting for the joint venture as an equity method investment until June 2020. For additional information, see Note 11 – Commitments and Contingencies to the Consolidated Financial Statements.
U.K. Exit from the EU
On October 28, 2019, the EU agreed to extend the deadline for the U.K.’s withdrawal from the EU to January 31, 2020. The final outcome of negotiations between the U.K. and the EU regarding the terms and conditions of the withdrawal of the U.K. from the EU remains uncertain.
We conduct business in Europe, the Middle East and Africa primarily through our subsidiaries in the U.K., Ireland and France. For information on the changes we have implemented to enable us to continue to operate in the region, including establishing a bank and broker-dealer in the EU, see the Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019. While we have taken measures to minimize operational disruption and prepare for various potential outcomes of the U.K.’s withdrawal from the EU, the preparedness of our counterparties and the relevant financial markets infrastructure remain outside our control. The global economic impact of the U.K.’s withdrawal from the EU remains uncertain and could result in regional and global financial market disruptions. In preparation for the withdrawal, we will continue to assess potential risks, including operational, regulatory and legal risks.
LIBOR and Other Benchmark Rates
As previously disclosed, to facilitate an orderly transition from Interbank Offered Rates and other benchmark rates to alternative reference rates (ARRs), the Corporation has established an enterprise-wide initiative led by senior management to identify, assess and monitor risks associated with the expected discontinuation or unavailability of benchmarks, including the London InterBank Offered Rate (LIBOR), achieve operational readiness and engage impacted clients in connection with the transition to ARRs. Additionally, the Corporation continues to monitor the development and usage of ARRs, including the Secured Overnight Financing Rate. For more information on the expected replacement of LIBOR and other benchmark rates, see Executive Summary - Recent Developments - LIBOR and Other Benchmark Rates in the MD&A of the Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30 2019, and Item 1A. Risk Factors - Other and Executive Summary - Recent Developments - LIBOR and Other Benchmark Rates in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.


3Bank of America





Financial Highlights
                
Table 1Summary Income Statement and Selected Financial Data       Summary Income Statement and Selected Financial Data
                
 Three Months Ended
September 30		 Nine Months Ended
September 30		 Three Months Ended
September 30		 Nine Months Ended
September 30
(Dollars in millions, except per share information)(Dollars in millions, except per share information)2018 2017 2018 2017(Dollars in millions, except per share information)2019 2018 2019 2018
Income statementIncome statement 
  
    Income statement 
  
    
Net interest incomeNet interest income$11,870
 $11,161
 $35,128
 $33,205
Net interest income$12,187
 $12,061
 $36,751
 $35,658
Noninterest incomeNoninterest income10,907
 10,678
 33,383
 33,711
Noninterest income10,620
 10,663
 32,144
 32,685
Total revenue, net of interest expenseTotal revenue, net of interest expense22,777

21,839

68,511

66,916
Total revenue, net of interest expense22,807

22,724

68,895

68,343
Provision for credit lossesProvision for credit losses716
 834
 2,377
 2,395
Provision for credit losses779
 716
 2,649
 2,377
Noninterest expenseNoninterest expense13,067
 13,394
 40,248
 41,469
Noninterest expense15,169
 13,014
 41,661
 40,080
Income before income taxesIncome before income taxes8,994

7,611

25,886

23,052
Income before income taxes6,859

8,994

24,585

25,886
Income tax expenseIncome tax expense1,827
 2,187
 5,017
 7,185
Income tax expense1,082
 1,827
 4,149
 5,017
Net incomeNet income7,167

5,424

20,869

15,867
Net income5,777

7,167

20,436

20,869
Preferred stock dividendsPreferred stock dividends466
 465
 1,212
 1,328
Preferred stock dividends505
 466
 1,186
 1,212
Net income applicable to common shareholdersNet income applicable to common shareholders$6,701

$4,959

$19,657

$14,539
Net income applicable to common shareholders$5,272

$6,701

$19,250

$19,657
                
Per common share informationPer common share information       Per common share information       
EarningsEarnings$0.67
 $0.49
 $1.93
 $1.44
Earnings$0.57
 $0.67
 $2.02
 $1.93
Diluted earningsDiluted earnings0.66
 0.46
 1.91
 1.36
Diluted earnings0.56
 0.66
 2.01
 1.91
Dividends paidDividends paid0.15
 0.12
 0.39
 0.27
Dividends paid0.18
 0.15
 0.48
 0.39
Performance ratiosPerformance ratios 
  
    Performance ratios 
  
    
Return on average assetsReturn on average assets1.23% 0.95% 1.20% 0.94%Return on average assets0.95% 1.23% 1.14% 1.20%
Return on average common shareholders’ equityReturn on average common shareholders’ equity10.99
 7.89
 10.86
 7.91
Return on average common shareholders’ equity8.48
 10.99
 10.49
 10.86
Return on average tangible common shareholders’ equity (1)
Return on average tangible common shareholders’ equity (1)
15.48
 10.98
 15.30
 11.10
Return on average tangible common shareholders’ equity (1)
11.84
 15.48
 14.67
 15.30
Efficiency ratioEfficiency ratio57.37
 61.33
 58.75
 61.97
Efficiency ratio66.51
 57.27
 60.47
 58.65
               
    September 30
2018		 December 31
2017		   �� September 30
2019		 December 31
2018
Balance sheetBalance sheet 
  
  
  
Balance sheet     
  
Total loans and leasesTotal loans and leases    $929,801
 $936,749
Total loans and leases    $972,910
 $946,895
Total assetsTotal assets    2,338,833
 2,281,234
Total assets    2,426,330
 2,354,507
Total depositsTotal deposits    1,345,649
 1,309,545
Total deposits    1,392,836
 1,381,476
Total liabilitiesTotal liabilities    2,157,943
 2,089,182
Total common shareholders’ equityTotal common shareholders’ equity    239,832
 244,823
Total common shareholders’ equity    244,781
 242,999
Total shareholders’ equityTotal shareholders’ equity    262,158
 267,146
Total shareholders’ equity    268,387
 265,325
(1)
Return on average tangible common shareholders’ equity is a non-GAAP financial measure. For more information and a corresponding reconciliation to the most closely related financial measures defined by accounting principles generally accepted in the United States of America (GAAP) financial measures,, see Non-GAAP Reconciliations on page 52.
45.

3Bank of America





Net income was $5.8 billion and $20.4 billion, or $0.56 and $2.01 per diluted share, for the three and nine months ended September 30, 2019 compared to $7.2 billion and $20.9 billion, or $0.66 and $1.91 per diluted share, for the three and nine months ended September 30, 2018 compared to $5.4 billion and $15.9 billion, or $0.46 and $1.36 per diluted share for the same periods in 2017.2018. The improvementdecrease in net income for the three and nine months ended September 30, 20182019 was primarily driven by an increase in noninterest expense as a result of a $2.1 billion pretax impairment charge related to the notice of termination of the merchant services joint venture at the conclusion of its current term. Also contributing to the decrease in net income tax expense due to the impacts of the Tax Cutswere higher provision for credit losses and Jobs Act (the Tax Act),lower noninterest income, partially offset by an increase in net interest income, higher noninterest income in the three-month period, lower provision for credit losses and a decline in noninterest expense, partially offset by a decline in noninterest income in the nine-month period. Impacts from the Tax Act include a reduction in the federal tax rate to 21 percent from 35 percent.income.
Total assets increased $57.6$71.8 billion from December 31, 20172018 to $2.3$2.4 trillion at September 30, 2018primarily driven by higher cashtrading account assets in Global Markets due to increased client balances in Equities and cash equivalents from liquidity management actionsincreased levels of inventory in Fixed-Income, Currencies and an increaseCommodities (FICC) to facilitate expected client demand,higher loans and leases primarily due to continued residential mortgage and commercial loan growth, and increases in federal funds sold and securities borrowed or purchased under agreements to resell primarily due todriven by short-term investmentsreinvestments of cash largely resulting from deposit growth.excess cash.
Total liabilities increased $62.6$68.8 billion from December 31, 20172018 to $2.1$2.2 trillion at September 30, 2018driven by higher federal funds purchased and securities loaned or sold under agreements to repurchase primarily driven by funding needs in the FICC businesses within Global Markets, an increase in long-term debt due to valuation adjustments, higher deposits due to organicas a result of continued growth in our Consumer Banking and several large short-term
placements at the end of the quarter, increases in accrued expenses and other liabilities primarily due to trading-related payables, andGlobal Banking businesses, higher trading account liabilities driven byin FICC to facilitate expected client activity
demand, and an increase in Global Markets.other short-term borrowings as a result of higher Federal Home Loan Bank (FHLB) advances. Shareholders’ equity decreased $5.0increased $3.1 billion from December 31, 20172018 primarily due to net income, market value increases on debt securities and issuances of preferred stock, partially offset by returns of capital to shareholders through common stock repurchases and common and preferred stock dividends, market value declines in debt securities and the redemption of preferred stock, partially offset by net income and issuances of preferred stock.
Net Interest Income
Net interest income increased $709$126 million to $11.9$12.2 billion, and $1.9$1.1 billion to $35.1$36.8 billion for the three and nine months ended September 30, 20182019 compared to the same periods in 2017. The net2018. Net interest yield increased eighton a fully taxable-equivalent (FTE) basis decreased 4 basis points (bps) to 2.392.41 percent, and fourincreased 2 bps to 2.362.45 percent for the same periods. These increases wereThe increase in net interest income for both periods was primarily driven by higher interest rates as well as loan and deposit growth, and for the three-month period, partially offset by tightening spreads, and forlower interest rates. The increase in the nine-month period was also due to higher short-end interest rates. Both long- and short-term interest rates have declined during 2019. We expect net interest income for 2019 to grow approximately one percent as compared to 2018. This reflects the impact of the sale of the non-U.S. consumer credit card businessexpectation for another short-end rate cut in the secondfourth quarter of 2017.2019, that long-end interest rates remain flat compared to September 30, 2019 and economic conditions remain stable. For more information regardingon net interest yield and the FTE basis, see Supplemental Financial Data on page 6, and for more information on interest rate risk management, see Interest Rate Risk Management for the Banking Book on page 49.43.

Bank of America 4

Noninterest Income
                
Table 2Noninterest Income       Noninterest Income       
                
 Three Months Ended
September 30		 Nine Months Ended
September 30		 Three Months Ended
September 30		 Nine Months Ended
September 30
(Dollars in millions)(Dollars in millions)2018 2017 2018 2017(Dollars in millions)2019 2018 2019 2018
Fees and commissions:Fees and commissions:       
Card incomeCard income$1,470
 $1,429
 $4,469
 $4,347
Card income$1,465
 $1,417
 $4,286
 $4,302
Service chargesService charges1,961
 1,968
 5,836
 5,863
Service charges1,975
 1,961
 5,717
 5,836
Investment and brokerage servicesInvestment and brokerage services3,494
 3,437
 10,616
 10,314
Investment and brokerage services3,494
 3,494
 10,324
 10,616
Investment banking income1,204
 1,477
 3,979
 4,593
Trading account profits1,893
 1,837
 6,907
 6,124
Investment banking feesInvestment banking fees1,533
 1,204
 4,168
 3,979
Total fees and commissionsTotal fees and commissions8,467
 8,076
 24,495
 24,733
Trading account incomeTrading account income1,707
 1,717
 6,390
 6,421
Other incomeOther income885
 530
 1,576
 2,470
Other income446
 870
 1,259
 1,531
Total noninterest incomeTotal noninterest income$10,907

$10,678

$33,383

$33,711
Total noninterest income$10,620

$10,663

$32,144

$32,685
Noninterest income increased $229decreased $43 million to $10.9$10.6 billion, and decreased $328$541 million to $33.4$32.1 billion for the three and nine months ended September 30, 20182019 compared to the same periods in 2017.2018. The following highlights the significant changes.
●
Card income increased$41Service charges were relatively unchanged for the three-month period and decreased $119 millionand $122 million primarily driven by an increase in credit and debit card spending, as well as increased late fees and annual fees, partially offset by higher rewards costs and lower cash advance fees, and for the nine-month period the sale of the non-U.S. consumer credit card business.primarily driven by lower treasury fees in Global Banking as well as lower fees due to policy changes and lower ATM volume in Consumer Banking.
Investment and brokerage services income increased$57 million and $302 million primarily due to assets under management (AUM) flows and higher market valuations, partially offset by the impact of changing market dynamics on transactional revenue, and AUM pricing.
•
Investment and brokerage services income was unchanged for the three-month period and decreased$292 million for the nine-month period. The decline was primarily due to lower transactional revenue and a decrease in assets under management (AUM) pricing, partially offset by the positive impact of AUM flows.
●Investment banking income decreased $273fees increased $329 million and $614 million primarilyfor the three-month period due to declinesincreases in leveraged financeadvisory and debt underwriting fees, and increased $189 million for the nine-month period due to increases in advisory and equity underwriting fees, partially offset by an increasedecreases in equity underwriting fees.debt underwriting.
 
●Trading account profits increased $56
Other income decreased$424 million and $272 million for the three-month periodthree- and nine-month periods primarily due to increased client activityan equity investment gain in equity financingthe prior-year period and derivatives, partially offset by weakness in rates products and municipal bonds, and increased $783 million forlower gains on sales of debt securities. Also, the prior-year nine-month period primarily due to increased client activity in equity financing and derivatives, and strong trading performance in equity derivatives and macro-related products, partially offset by weakness in credit products.
●Other income increased $355 million for the three-month period primarily due to increased results from economic hedging activities, lower provision for representations and warranties and a gain on the sale of an equity investment. The $894 million decrease for the nine-month period also reflectedincluded a $729 million charge related to the redemption of certain trust preferred securities, partially offset by $656a $572 million of gains ongain from the sale of certain loans, primarily non-core. The nine-month period in 2017 included a $793 million pretax gain recognized in connection with the sale of the non-U.S. consumer credit card business.


Bank of America4non-core mortgage loans.

Provision for Credit Losses
The provision for credit losses decreased $118increased $63 million to $716$779 million, and $272 million to $2.6 billion for the three months ended September 30, 2018 compared to the same period in 2017 primarily due to asset quality improvement in the commercial portfolio including energy exposures and a lower reserve build in the U.S. credit card portfolio. The provision for credit losses decreased $18 million to $2.4 billion for the nine months ended September 30, 2018
2019 compared to the same periodperiods in 20172018. The increases  were driven by commercial, primarily due to asset quality improvementas a result of energy reserve releases in the commercial portfolio including energy exposures andprior-year periods, partially offset by a decrease in consumer, primarily driven by the impact of the salerecoveries recorded in connection with sales of the non-U.S. consumer credit card business during the second quarter of 2017, largely offset by portfolio seasoning and loan growth in the U.S. credit card portfolio and a slower pace of improvement in thepreviously charged-off non-core consumer real estate portfolio.loans. For more information on the provision for credit losses, see Provision for Credit Losses on page 44.39.
Noninterest Expense
                
Table 3Noninterest Expense       Noninterest Expense       
                
 Three Months Ended
September 30		 Nine Months Ended
September 30		 Three Months Ended
September 30		 Nine Months Ended
September 30
(Dollars in millions)(Dollars in millions)2018 2017 2018 2017(Dollars in millions)2019 2018 2019 2018
Personnel$7,721
 $7,811
 $24,145
 $24,326
Occupancy1,015
 999
 3,051
 3,000
Equipment421
 416
 1,278
 1,281
Compensation and benefitsCompensation and benefits$7,779
 $7,721
 $24,000
 $24,145
Occupancy and equipmentOccupancy and equipment1,663
 1,589
 4,908
 4,787
Information processing and communicationsInformation processing and communications1,163
 1,113
 3,484
 3,399
Product delivery and transaction relatedProduct delivery and transaction related696
 687
 2,067
 2,149
MarketingMarketing421
 461
 1,161
 1,235
Marketing440
 421
 1,410
 1,161
Professional feesProfessional fees439
 476
 1,219
 1,417
Professional fees386
 439
 1,155
 1,219
Data processing791
 777
 2,398
 2,344
Telecommunications173
 170
 522
 538
Other general operatingOther general operating2,086
 2,284
 6,474
 7,328
Other general operating3,042
 1,044
 4,637
 3,220
Total noninterest expenseTotal noninterest expense$13,067

$13,394

$40,248

$41,469
Total noninterest expense$15,169

$13,014

$41,661

$40,080
Noninterest expense decreased $327 million to $13.1 billion and $1.2increased $2.2 billion to $40.2$15.2 billionand $1.6 billion to $41.7 billion for the three and nine months ended September 30, 20182019 compared to the same periods in 2017.2018. The decrease forincrease in both periods was primarily due to lower other general operating expense, primarily driven by a declinethe aforementioned impairment charge of $2.1 billion, increased costs associated with investment in the businesses, including brand-related marketing costs, and higher litigation expense, partially offset by efficiency savings, lower Federal Deposit Insurance Corporation (FDIC) expense and for the nine-month period, a $295 million impairment charge recognized in the second quarterlower amortization of 2017 related to certain data centers. Personnel expense also declined for both periods.intangibles expense.

5Bank of America





Income Tax Expense
                
Table 4Income Tax Expense       Income Tax Expense       
                
 Three Months Ended
September 30		 Nine Months Ended
September 30		 Three Months Ended
September 30		 Nine Months Ended
September 30
(Dollars in millions)(Dollars in millions)2018 2017 2018 2017(Dollars in millions)2019 2018 2019 2018
Income before income taxesIncome before income taxes$8,994
 $7,611
 $25,886
 $23,052
Income before income taxes$6,859
 $8,994
 $24,585
 $25,886
Income tax expenseIncome tax expense1,827
 2,187
 5,017
 7,185
Income tax expense1,082
 1,827
 4,149
 5,017
Effective tax rateEffective tax rate20.3%
28.7%
19.4%
31.2%Effective tax rate15.8%
20.3%
16.9%
19.4%
The effective tax rates for the three and nine months ended September 30, 20182019 reflect the 21 percent federal tax rate and the other provisions of the Tax Act, as well as the impact of our recurring tax preference benefits.benefits and discrete tax benefits primarily related to the resolution of various tax matters. The nine-month effective rate also included tax benefits related to stock-based compensation.
The effective tax rates for the three and nine months ended September 30, 2017 were driven by2018 reflect the impact of our recurring
tax preference benefits. The nine-month effective tax rate also included a tax charge related to the sale of the non-U.S. consumer credit card business during the second quarter of 2017, partially offset by tax benefits related to stock-based compensation recognized earlier in the year.compensation.
We expect the effective tax rate for 2018the fourth quarter of 2019 to be approximately 2019 percent, absent unusual items.

5Bank of America





Supplemental Financial Data
In this Form 10-Q, we present certain non-GAAP financial measures. Non-GAAP financial measures exclude certain items or otherwise include components that differ from the most directly comparable measures calculated in accordance with GAAP. Non-GAAP financial measures are provided as additional useful information to assess our financial condition, results of operations (including period-to-period operating performance) or compliance with prospective regulatory requirements. These non-GAAP financial measures are not intended as a substitute for GAAP financial measures and may not be defined or calculated the same way as non-GAAP financial measures used by other companies.
We view net interest income and related ratios and analyses on a fully taxable-equivalent (FTE)an FTE basis, which when presented on a consolidated basis are non-GAAP financial measures. To derive the FTE basis, net interest income is adjusted to reflect tax-exempt income on an equivalent before-tax basis with a corresponding increase in income tax expense. For purposes of this calculation, we use the federal statutory tax rate of 21 percent for 2018 (35 percent for all prior periods) and a representative state tax rate. In addition, certain performance measures, including the efficiency ratio and netNet interest yield, utilizewhich measures the basis points we earn over the cost of funds, utilizes net interest income (and thus total revenue) on an FTE basis. The efficiency ratio measures the costs expended to generate a dollar of revenue, and net interest yield measures the bps we earn over the cost of funds. We believe that presentation of these items on an FTE basis allows for comparison of amounts from both taxable and tax-exempt sources and is consistent with industry practices.
We may present certain key performance indicators and ratios excluding certain items (e.g., debit valuation adjustment (DVA) gains (losses)) which result in non-GAAP financial measures. We believe that the presentation of measures that exclude these items
is useful because such measures provide additional information to assess the underlying operational performance and trends of our businesses and to allow better comparison of period-to-period operating performance.
We also evaluate our business based on certain ratios that utilize tangible equity, a non-GAAP financial measure. Tangible
equity represents an adjusted shareholders’ equity or common shareholders’ equity amount which has been reduced by goodwill and certain acquired intangible assets (excluding mortgage servicing rights (MSRs)), net of related deferred tax liabilities.liabilities ("adjusted" shareholders' equity or common shareholders' equity). These measures are used to evaluate our use of equity. In addition, profitability, relationship and investment models use both return on average tangible common shareholders’ equity and return on average tangible shareholders’ equity as key measures to support our overall growth goals. These ratios are as follows:
●Return on average tangible common shareholders’ equity measures our earnings contributionnet income applicable to common shareholders as a percentage of adjusted average common shareholders’ equity. The tangible common equity ratio represents adjusted ending common shareholders’ equity divided by total assets less goodwill and certain acquired intangible assets (excluding MSRs), net of related deferred tax liabilities.tangible assets.
●Return on average tangible shareholders’shareholders' equity measures our earnings contributionnet income as a percentage of adjusted average total shareholders’ equity. The tangible equity ratio represents adjusted ending shareholders’ equity divided by total assets less goodwill and certain acquired intangible assets (excluding MSRs), net of related deferred tax liabilities.tangible assets.
●Tangible book value per common share represents adjusted ending common shareholders’ equity divided by ending common shares outstanding.
We believe that the use of ratios that utilize tangible equity provides additional useful information because they present measures of those assets that can generate income. Tangible book value per common share provides additional useful information about the level of tangible assets in relation to outstanding shares of common stock.
The aforementioned supplemental data and performance measures are presented in Tables 5 and 6.5.
For more information on the reconciliation of these non-GAAP financial measures to the corresponding GAAP financial measures, see Non-GAAP Reconciliations on page 52.45.




  
Bank of America6


                        
Table 5Selected Quarterly Financial Data         Selected Financial Data          
                        
 2018 Quarters 2017 Quarters 2019 Quarters 2018 Quarters Nine-Month Period
(In millions, except per share information)(In millions, except per share information)Third Second First Fourth Third(In millions, except per share information)Third Second First Fourth Third 2019 2018
Income statementIncome statement     
  
  
Income statement     
    
    
Net interest incomeNet interest income$11,870
 $11,650
 $11,608
 $11,462
 $11,161
Net interest income$12,187
 $12,189
 $12,375
 $12,504
 $12,061
 $36,751
 $35,658
Noninterest income (1)
Noninterest income (1)
10,907
 10,959
 11,517
 8,974
 10,678
Noninterest income (1)
10,620
 10,895
 10,629
 10,173
 10,663
 32,144
 32,685
Total revenue, net of interest expenseTotal revenue, net of interest expense22,777
 22,609
 23,125
 20,436
 21,839
Total revenue, net of interest expense22,807
 23,084
 23,004
 22,677
 22,724
 68,895
 68,343
Provision for credit lossesProvision for credit losses716
 827
 834
 1,001
 834
Provision for credit losses779
 857
 1,013
 905
 716
 2,649
 2,377
Noninterest expenseNoninterest expense13,067
 13,284
 13,897
 13,274
 13,394
Noninterest expense15,169
 13,268
 13,224
 13,074
 13,014
 41,661
 40,080
Income before income taxesIncome before income taxes8,994
 8,498
 8,394
 6,161
 7,611
Income before income taxes6,859
 8,959
 8,767
 8,698
 8,994
 24,585
 25,886
Income tax expense (1)
Income tax expense (1)
1,827
 1,714
 1,476
 3,796
 2,187
Income tax expense (1)
1,082
 1,611
 1,456
 1,420
 1,827
 4,149
 5,017
Net income (1)
Net income (1)
7,167
 6,784
 6,918
 2,365
 5,424
Net income (1)
5,777
 7,348
 7,311
 7,278
 7,167
 20,436
 20,869
Net income applicable to common shareholdersNet income applicable to common shareholders6,701
 6,466
 6,490
 2,079
 4,959
Net income applicable to common shareholders5,272
 7,109
 6,869
 7,039
 6,701
 19,250
 19,657
Average common shares issued and outstandingAverage common shares issued and outstanding10,031.6
 10,181.7
 10,322.4
 10,470.7
 10,197.9
Average common shares issued and outstanding9,303.6
 9,523.2
 9,725.9
 9,855.8
 10,031.6
 9,516.2
 10,177.5
Average diluted common shares issued and outstandingAverage diluted common shares issued and outstanding10,170.8
 10,309.4
 10,472.7
 10,621.8
 10,746.7
Average diluted common shares issued and outstanding9,353.0
 9,559.6
 9,787.3
 9,996.0
 10,170.8
 9,565.7
 10,317.9
Performance ratiosPerformance ratios 
  
  
  
  
Performance ratios 
  
  
  
  
  
  
Return on average assetsReturn on average assets1.23% 1.17% 1.21% 0.41% 0.95%Return on average assets0.95% 1.23% 1.26% 1.24% 1.23% 1.14% 1.20%
Four quarter trailing return on average assets (2)
1.00
 0.93
 0.86
 0.80
 0.91
Four-quarter trailing return on average assets (1)
Four-quarter trailing return on average assets (1)
1.17
 1.24
 1.22
 1.21
 1.00
 n/a
 n/a
Return on average common shareholders’ equityReturn on average common shareholders’ equity10.99
 10.75
 10.85
 3.29
 7.89
Return on average common shareholders’ equity8.48
 11.62
 11.42
 11.57
 10.99
 10.49
 10.86
Return on average tangible common shareholders’ equity (3)(2)
Return on average tangible common shareholders’ equity (3)(2)
15.48
 15.15
 15.26
 4.56
 10.98
Return on average tangible common shareholders’ equity (3)(2)
11.84
 16.24
 16.01
 16.29
 15.48
 14.67
 15.30
Return on average shareholders’ equityReturn on average shareholders’ equity10.74
 10.26
 10.57
 3.43
 7.88
Return on average shareholders’ equity8.48
 11.00
 11.14
 10.95
 10.74
 10.19
 10.52
Return on average tangible shareholders’ equity (3)(2)
Return on average tangible shareholders’ equity (3)(2)
14.61
 13.95
 14.37
 4.62
 10.59
Return on average tangible shareholders’ equity (3)(2)
11.43
 14.88
 15.10
 14.90
 14.61
 13.78
 14.31
Total ending equity to total ending assetsTotal ending equity to total ending assets11.21
 11.53
 11.43
 11.71
 11.91
Total ending equity to total ending assets11.06
 11.33
 11.23
 11.27
 11.21
 11.06
 11.21
Total average equity to total average assetsTotal average equity to total average assets11.42
 11.42
 11.41
 11.87
 12.03
Total average equity to total average assets11.21
 11.17
 11.28
 11.30
 11.42
 11.22
 11.42
Dividend payoutDividend payout22.35
 18.83
 19.06
 60.35
 25.59
Dividend payout31.48
 19.95
 21.20
 20.90
 22.35
 23.56
 20.10
Per common share dataPer common share data 
  
  
  
  
Per common share data 
  
  
  
  
  
  
EarningsEarnings$0.67
 $0.64
 $0.63
 $0.20
 $0.49
Earnings$0.57
 $0.75
 $0.71
 $0.71
 $0.67
 2.02
 1.93
Diluted earningsDiluted earnings0.66
 0.63
 0.62
 0.20
 0.46
Diluted earnings0.56
 0.74
 0.70
 0.70
 0.66
 2.01
 1.91
Dividends paidDividends paid0.15
 0.12
 0.12
 0.12
 0.12
Dividends paid0.18
 0.15
 0.15
 0.15
 0.15
 0.48
 0.39
Book valueBook value24.33
 24.07
 23.74
 23.80
 23.87
Book value26.96
 26.41
 25.57
 25.13
 24.33
 26.96
 24.33
Tangible book value (3)(2)
Tangible book value (3)(2)
17.23
 17.07
 16.84
 16.96
 17.18
Tangible book value (3)(2)
19.26
 18.92
 18.26
 17.91
 17.23
 19.26
 17.23
Market price per share of common stock 
  
      
Closing$29.46
 $28.19
 $29.99
 $29.52
 $25.34
High closing31.80
 31.22
 32.84
 29.88
 25.45
Low closing27.78
 28.19
 29.17
 25.45
 22.89
Market capitalization$290,424
 $282,259
 $305,176
 $303,681
 $264,992
Market capitalization, at period endMarket capitalization, at period end$264,842
 $270,935
 $263,992
 $238,251
 $290,424
 $264,842
 $290,424
Average balance sheetAverage balance sheet 
  
  
  
  
Average balance sheet 
  
  
  
  
    
Total loans and leasesTotal loans and leases$930,736
 $934,818
 $931,915
 $927,790
 $918,129
Total loans and leases$964,733
 $950,525
 $944,020
 $934,721
 $930,736
 

 

Total assetsTotal assets2,317,829
 2,322,678
 2,325,878
 2,301,687
 2,271,104
Total assets2,412,223
 2,399,051
 2,360,992
 2,334,586
 2,317,829
 

 

Total depositsTotal deposits1,316,345
 1,300,659
 1,297,268
 1,293,572
 1,271,711
Total deposits1,375,052
 1,375,450
 1,359,864
 1,344,951
 1,316,345
 

 

Long-term debtLong-term debt233,475
 229,037
 229,603
 227,644
 227,309
Long-term debt202,620
 201,007
 196,726
 201,056
 203,239
 

 

Common shareholders’ equityCommon shareholders’ equity241,812
 241,313
 242,713
 250,838
 249,214
Common shareholders’ equity246,630
 245,438
 243,891
 241,372
 241,812
 

 

Total shareholders’ equityTotal shareholders’ equity264,653
 265,181
 265,480
 273,162
 273,238
Total shareholders’ equity270,430
 267,975
 266,217
 263,698
 264,653
 

 

Asset qualityAsset quality 
  
  
  
  
Asset quality 
  
  
  
  
    
Allowance for credit losses (4)
$10,526
 $10,837
 $11,042
 $11,170
 $11,455
Nonperforming loans, leases and foreclosed properties (5)
5,449
 6,181
 6,694
 6,758
 6,869
Allowance for loan and lease losses as a percentage of total loans and leases outstanding (5)
1.05% 1.08% 1.11% 1.12% 1.16%
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases (5)
189
 170
 161
 161
 163
Net charge-offs (6)
$932
 $996
 $911
 $1,237
 $900
Annualized net charge-offs as a percentage of average loans and leases outstanding (5, 6)
0.40% 0.43% 0.40% 0.53% 0.39%
Capital ratios at period end (7)
 
  
  
  
  
Allowance for credit losses (3)
Allowance for credit losses (3)
$10,242
 $10,333
 $10,379
 $10,398
 $10,526
 

 

Nonperforming loans, leases and foreclosed properties (4)
Nonperforming loans, leases and foreclosed properties (4)
3,723
 4,452
 5,145
 5,244
 5,449
 

 

Allowance for loan and lease losses as a percentage of total loans and leases outstanding (4)
Allowance for loan and lease losses as a percentage of total loans and leases outstanding (4)
0.98% 1.00% 1.02% 1.02% 1.05% 

 

Allowance for loan and lease losses as a percentage of total nonperforming loans and leases (4)
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases (4)
271
 228
 197
 194
 189
 

 

Net charge-offsNet charge-offs$811
 $887
 $991
 $924
 $932
 

 

Annualized net charge-offs as a percentage of average loans and leases outstanding (4)
Annualized net charge-offs as a percentage of average loans and leases outstanding (4)
0.34% 0.38% 0.43% 0.39% 0.40% 

 

Capital ratios at period end (5)
Capital ratios at period end (5)
 
  
  
  
  
    
Common equity tier 1 capitalCommon equity tier 1 capital11.4% 11.4% 11.3% 11.5% 11.9%Common equity tier 1 capital11.4% 11.7% 11.6% 11.6% 11.4% 

 

Tier 1 capitalTier 1 capital12.9
 13.0
 13.0
 13.0
 13.4
Tier 1 capital12.9
 13.3
 13.1
 13.2
 12.9
 

 

Total capitalTotal capital14.7
 14.8
 14.8
 14.8
 15.1
Total capital15.1
 15.4
 15.2
 15.1
 14.7
 

 

Tier 1 leverageTier 1 leverage8.3
 8.4
 8.4
 8.6
 8.9
Tier 1 leverage8.2
 8.4
 8.4
 8.4
 8.3
 

 

Supplementary leverage ratioSupplementary leverage ratio6.7
 6.7
 6.8
 n/a
 n/a
Supplementary leverage ratio6.6
 6.8
 6.8
 6.8
 6.7
 

 

Tangible equity (3)
8.5
 8.7
 8.7
 8.9
 9.1
Tangible common equity (3)
7.5
 7.7
 7.6
 7.9
 8.1
Tangible equity (2)
Tangible equity (2)
8.4
 8.7
 8.5
 8.6
 8.5
 

 

Tangible common equity (2)
Tangible common equity (2)
7.4
 7.6
 7.6
 7.6
 7.5
 

 

Total loss-absorbing capacity and long-term debt metrics (6)
Total loss-absorbing capacity and long-term debt metrics (6)
             
Total loss-absorbing capacity to risk-weighted assetsTotal loss-absorbing capacity to risk-weighted assets24.8% 25.5% 24.8%        
Total loss-absorbing capacity to supplementary leverage exposureTotal loss-absorbing capacity to supplementary leverage exposure12.7
 13.0
 12.8
        
Eligible long-term debt to risk-weighted assetsEligible long-term debt to risk-weighted assets11.4
 11.8
 11.4
        
Eligible long-term debt to supplementary leverage exposureEligible long-term debt to supplementary leverage exposure5.8
 6.0
 5.9
        
(1) 
Net income for the fourth quarter of 2017 included a charge of $2.9 billion related to the Tax Act effects which consisted of $946 million in noninterest income and $1.9 billion in income tax expense.
(2)
Calculated as total net income for four consecutive quarters divided by annualized average assets for four consecutive quarters.
(3)(2) 
Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures. For more information on these ratios, see Supplemental Financial Data on page 6, and for corresponding reconciliations to GAAPthe most closely related financial measures defined by GAAP, see Non-GAAP Reconciliations on page 5245.
(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 3632 and corresponding Table 2827 and Commercial Portfolio Credit Risk Management – Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity on page 4035 and corresponding Table 3534.
(6)(5) 
Net charge-offs exclude $95 million, $36 million, $35 million, $46 million and $73 million of write-offs in the purchased credit-impaired (PCI) loan portfolio in the third, second and first quarters of 2018, and in the fourth and third quarters of 2017, respectively. For more information, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 34.
(7)
Basel 3 transition provisions for regulatory capital adjustments and deductions were fully phased-in as of January 1, 2018. Prior periods are presented on a fully phased-in basis. For moreadditional information, including which approach is used to assess capital adequacy, see Capital Management on page 2220.
(6)
Effective January 1, 2019, the Corporation became subject to minimum total loss-absorbing capacity and long-term debt requirements. For more information, see Capital Management on page 20.
n/a = not applicable




7Bank of America

 
Bank of America7





     
Table 6Selected Year-to-Date Financial Data   
  Nine Months Ended September 30
(In millions, except per share information)2018 2017
Income statement   
Net interest income$35,128
 $33,205
Noninterest income33,383
 33,711
Total revenue, net of interest expense68,511
 66,916
Provision for credit losses2,377
 2,395
Noninterest expense40,248
 41,469
Income before income taxes25,886
 23,052
Income tax expense5,017
 7,185
Net income20,869
 15,867
Net income applicable to common shareholders19,657
 14,539
Average common shares issued and outstanding10,177.5
 10,103.4
Average diluted common shares issued and outstanding10,317.9
 10,832.1
Performance ratios 
  
Return on average assets1.20% 0.94%
Return on average common shareholders’ equity10.86
 7.91
Return on average tangible common shareholders’ equity (1)
15.30
 11.10
Return on average shareholders’ equity10.52
 7.84
Return on average tangible shareholders’ equity (1)
14.31
 10.61
Total ending equity to total ending assets11.21
 11.91
Total average equity to total average assets11.42
 11.99
Dividend payout20.10
 19.08
Per common share data 
  
Earnings$1.93
 $1.44
Diluted earnings1.91
 1.36
Dividends paid0.39
 0.27
Book value24.33
 23.87
Tangible book value (1)
17.23
 17.18
Market price per share of common stock 
  
Closing$29.46
 $25.34
High closing32.84
 25.50
Low closing27.78
 22.05
Market capitalization$290,424
 $264,992
             
Table 6Quarterly Average Balances and Interest Rates - FTE Basis        
             
(Dollars in millions)
Average
Balance
 
Interest
Income/
Expense (1)
 
Yield/
Rate
 Average
Balance		 
Interest
Income/
Expense (1)
 Yield/
Rate
 Third Quarter 2019 Third Quarter 2018
Earning assets 
  
  
  
  
  
Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks$122,033
 $453
 1.47% $144,411
 $523
 1.44%
Time deposits placed and other short-term investments9,863
 47
 1.87
 8,328
 48
 2.26
Federal funds sold and securities borrowed or purchased under agreements to resell269,129
 1,242
 1.83
 241,426
 799
 1.31
Trading account assets157,818
 1,338
 3.37
 128,896
 1,195
 3.68
Debt securities447,126
 2,856
 2.56
 445,813
 3,014
 2.66
Loans and leases (2):
           
Residential mortgage224,084
 1,937
 3.46
 209,460
 1,857
 3.54
Home equity43,616
 552
 5.03
 53,050
 656
 4.91
U.S. credit card94,370
 2,581
 10.85
 94,710
 2,435
 10.20
Direct/Indirect and other consumer (3)
90,813
 824
 3.59
 91,828
 787
 3.40
Total consumer452,883
 5,894
 5.18
 449,048
 5,735
 5.08
U.S. commercial324,436
 3,279
 4.01
 303,680
 3,034
 3.97
Non-U.S. commercial105,003
 905
 3.42
 96,019
 831
 3.43
Commercial real estate (4)
62,185
 687
 4.38
 60,754
 682
 4.45
Commercial lease financing20,226
 182
 3.58
 21,235
 173
 3.25
Total commercial511,850
 5,053
 3.92
 481,688
 4,720
 3.89
Total loans and leases964,733
 10,947
 4.51
 930,736
 10,455
 4.46
Other earning assets68,018
 1,181
 6.90
 72,827
 1,082
 5.91
Total earning assets2,038,720
 18,064
 3.52
 1,972,437
 17,116
 3.45
Cash and due from banks25,588
     25,639
    
Other assets, less allowance for loan and lease losses347,915
     319,753
    
Total assets$2,412,223
     $2,317,829
    
Interest-bearing liabilities 
  
  
  
  
  
U.S. interest-bearing deposits: 
  
  
  
  
  
Savings$51,277
 $1
 0.01% $53,929
 $1
 0.01%
NOW and money market deposit accounts741,602
 1,172
 0.63
 680,285
 737
 0.43
Consumer CDs and IRAs49,811
 136
 1.08
 39,160
 40
 0.41
Negotiable CDs, public funds and other deposits63,936
 354
 2.19
 54,192
 275
 2.01
Total U.S. interest-bearing deposits906,626
 1,663
 0.73
 827,566
 1,053
 0.50
Non-U.S. interest-bearing deposits:           
Banks located in non-U.S. countries1,721
 5
 1.13
 2,353
 12
 2.06
Governments and official institutions188
 —
 0.02
 709
 —
 0.01
Time, savings and other70,234
 212
 1.20
 63,179
 165
 1.04
Total non-U.S. interest-bearing deposits72,143
 217
 1.19
 66,241
 177
 1.07
Total interest-bearing deposits978,769
 1,880
 0.76
 893,807
 1,230
 0.55
Federal funds purchased, securities loaned or sold under agreements to repurchase, short-term borrowings and other interest-bearing liabilities280,123
 1,876
 2.66
 264,168
 1,526
 2.30
Trading account liabilities45,750
 303
 2.63
 50,904
 335
 2.60
Long-term debt202,620
 1,670
 3.28
 203,239
 1,813
 3.55
Total interest-bearing liabilities1,507,262
 5,729
 1.51
 1,412,118
 4,904
 1.38
Noninterest-bearing sources:           
Noninterest-bearing deposits396,283
     422,538
    
Other liabilities (5)
238,248
     218,520
    
Shareholders’ equity270,430
     264,653
    
Total liabilities and shareholders’ equity$2,412,223
     $2,317,829
    
Net interest spread    2.01%     2.07%
Impact of noninterest-bearing sources    0.40
     0.38
Net interest income/yield on earning assets (6)
  $12,335
 2.41%   $12,212
 2.45%
(1) 
Tangible equity ratios and tangible book value per shareIncludes the impact of common stock are non-GAAP financial measures.interest rate risk management contracts. For moreadditional information, on these ratios andsee Interest Rate Risk Management for corresponding reconciliations to GAAP financial measures, see Non-GAAP Reconciliationsthe Banking Book on page 5243.

Bank of America8

             
Table 7Quarterly Average Balances and Interest Rates - FTE Basis        
             
  
Average
Balance
 
Interest
Income/
Expense
 
Yield/
Rate
 Average
Balance		 Interest
Income/
Expense		 Yield/
Rate
(Dollars in millions)Third Quarter 2018 Third Quarter 2017
Earning assets 
  
  
  
  
  
Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks$144,411
 $523
 1.44% $127,835
 $323
 1.00%
Time deposits placed and other short-term investments8,328
 48
 2.26
 12,503
 68
 2.17
Federal funds sold and securities borrowed or purchased under agreements to resell (1)
241,426
 799
 1.31
 223,585
 487
 0.86
Trading account assets128,896
 1,195
 3.68
 124,068
 1,125
 3.60
Debt securities445,813
 3,014
 2.66
 436,886
 2,670
 2.44
Loans and leases (2):
           
Residential mortgage209,460
 1,857
 3.54
 199,240
 1,724
 3.46
Home equity53,050
 656
 4.91
 61,225
 664
 4.31
U.S. credit card94,710
 2,435
 10.20
 91,602
 2,253
 9.76
Direct/Indirect and other consumer (3)
91,828
 787
 3.40
 96,272
 706
 2.91
Total consumer449,048
 5,735
 5.08
 448,339
 5,347
 4.74
U.S. commercial303,680
 3,034
 3.97
 293,203
 2,542
 3.44
Non-U.S. commercial96,019
 831
 3.43
 95,725
 676
 2.80
Commercial real estate (4)
60,754
 682
 4.45
 59,044
 552
 3.71
Commercial lease financing21,235
 173
 3.25
 21,818
 160
 2.92
Total commercial481,688
 4,720
 3.89
 469,790
 3,930
 3.32
Total loans and leases930,736
 10,455
 4.46
 918,129
 9,277
 4.02
Other earning assets (1)
72,827
 1,082
 5.91
 76,496
 849
 4.41
Total earning assets (1,5)
1,972,437
 17,116
 3.45
 1,919,502
 14,799
 3.06
Cash and due from banks25,639
     28,990
    
Other assets, less allowance for loan and lease losses319,753
     322,612
    
Total assets$2,317,829
     $2,271,104
    
Interest-bearing liabilities 
  
  
  
  
  
U.S. interest-bearing deposits: 
  
  
  
  
  
Savings$53,929
 $1
 0.01% $54,328
 $1
 0.01%
NOW and money market deposit accounts680,285
 737
 0.43
 631,270
 333
 0.21
Consumer CDs and IRAs39,160
 40
 0.41
 44,239
 31
 0.27
Negotiable CDs, public funds and other deposits54,192
 275
 2.01
 38,119
 101
 1.05
Total U.S. interest-bearing deposits827,566
 1,053
 0.50
 767,956
 466
 0.24
Non-U.S. interest-bearing deposits:           
Banks located in non-U.S. countries2,353
 12
 2.06
 2,259
 5
 0.97
Governments and official institutions709
 —
 0.01
 1,012
 3
 1.04
Time, savings and other63,179
 165
 1.04
 63,716
 150
 0.93
Total non-U.S. interest-bearing deposits66,241
 177
 1.07
 66,987
 158
 0.93
Total interest-bearing deposits893,807
 1,230
 0.55
 834,943
 624
 0.30
Federal funds purchased, securities loaned or sold under agreements to repurchase, short-term borrowings and other interest-bearing liabilities (1)
264,168
 1,526
 2.30
 270,364
 846
 1.24
Trading account liabilities50,904
 335
 2.60
 48,390
 319
 2.62
Long-term debt233,475
 2,004
 3.42
 227,309
 1,609
 2.82
Total interest-bearing liabilities (1,5)
1,442,354
 5,095
 1.40
 1,381,006
 3,398
 0.98
Noninterest-bearing sources:           
Noninterest-bearing deposits422,538
     436,768
    
Other liabilities (1)
188,284
     180,092
    
Shareholders’ equity264,653
     273,238
    
Total liabilities and shareholders’ equity$2,317,829
     $2,271,104
    
Net interest spread    2.05%     2.08%
Impact of noninterest-bearing sources    0.37
     0.28
Net interest income/yield on earning assets  $12,021
 2.42%   $11,401
 2.36%
(1)
Certain prior-period amounts have been reclassified to conform to current period presentation.
(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 are recorded at fair value upon acquisition and accrete interest income over the estimated life of the loan.
(3) 
Includes non-U.S. consumer loans of $2.9 billion and $2.8 billion and $2.9 billion in for the third quarter of 20182019 and 2017.2018.
(4) 
Includes U.S. commercial real estate loans of $57.6 billion and $56.8 billion and $55.2 billion, and non-U.S. commercial real estate loans of $4.5 billion and $4.0 billion and $3.8 billion in for the third quarter of 20182019 and 2017, respectively.2018.
(5) 
Interest income includesIncludes $38.1 billion and $30.3 billion of structured notes and liabilities for the impact of interest rate risk management contracts, which decreased interest income on the underlying assets by $57 million and $7 million in the third quarter of 20182019 and 20172018. Interest expense
(6)
Net interest income includes FTE adjustments of $148 million and $151 million for the impact of interest rate risk management contracts, which increased (decreased) interest expense on the underlying liabilities by $68 million and $(346) million in the third quarter of 20182019 and 20172018. For more information, see Interest Rate Risk Management for the Banking Book on page 49.


  
Bank of America98


                        
Table 8Year-to-Date Average Balances and Interest Rates - FTE Basis
Table 7Year-to-Date Average Balances and Interest Rates - FTE Basis
                        
Average
Balance		 Interest
Income/
Expense		 Yield/
Rate		 Average
Balance		 Interest
Income/
Expense		 Yield/
Rate		 Average
Balance		 
Interest
Income/
Expense (1)
 Yield/
Rate		 Average
Balance		 
Interest
Income/
Expense (1)
 Yield/
Rate
Nine Months Ended September 30 Nine Months Ended September 30
(Dollars in millions)

(Dollars in millions)

2018 2017
(Dollars in millions)

2019 2018
Earning assetsEarning assets 
  
  
  
  
  
Earning assets 
  
  
  
  
  
Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banksInterest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks$143,229
 $1,432
 1.34% $127,000
 $786
 0.83%Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks$126,416
 $1,454
 1.54% $143,229
 $1,432
 1.34%
Time deposits placed and other short-term investmentsTime deposits placed and other short-term investments9,700
 157
 2.16
 11,820
 173
 1.96
Time deposits placed and other short-term investments9,377
 167
 2.38
 9,700
 157
 2.16
Federal funds sold and securities borrowed or purchased under agreements to resell (1)
Federal funds sold and securities borrowed or purchased under agreements to resell (1)
247,183
 2,130
 1.15
 222,255
 1,278
 0.77
Federal funds sold and securities borrowed or purchased under agreements to resell (1)
274,822
 3,746
 1.82
 247,183
 2,130
 1.15
Trading account assetsTrading account assets130,931
 3,574
 3.65
 128,547
 3,435
 3.57
Trading account assets148,368
 4,016
 3.62
 130,931
 3,574
 3.65
Debt securitiesDebt securities436,080
 8,729
 2.62
 432,775
 7,875
 2.42
Debt securities445,104
 9,051
 2.71
 436,080
 8,729
 2.62
Loans and leases (2):
Loans and leases (2):
 
  
  
  
  
  
Loans and leases (2):
 
  
  
  
  
  
Residential mortgageResidential mortgage206,808
 5,437
 3.51
 196,288
 5,082
 3.45
Residential mortgage216,744
 5,698
 3.51
 206,808
 5,437
 3.51
Home equityHome equity54,941
 1,939
 4.72
 63,339
 1,967
 4.15
Home equity45,735
 1,732
 5.06
 54,941
 1,939
 4.72
U.S. credit cardU.S. credit card94,222
 7,046
 10.00
 90,238
 6,492
 9.62
U.S. credit card94,333
 7,622
 10.80
 94,222
 7,046
 10.00
Non-U.S. credit card (3)
—
 —
 —
 5,253
 358
 9.12
Direct/Indirect and other consumer (4)
93,568
 2,281
 3.26
 95,964
 2,010
 2.80
Direct/Indirect and other consumer (3)
Direct/Indirect and other consumer (3)
90,567
 2,475
 3.65
 93,568
 2,281
 3.26
Total consumerTotal consumer449,539
 16,703
 4.96
 451,082
 15,909
 4.71
Total consumer447,379
 17,527
 5.23
 449,539
 16,703
 4.96
U.S. commercialU.S. commercial302,981
 8,734
 3.85
 290,632
 7,167
 3.30
U.S. commercial319,621
 10,010
 4.19
 302,981
 8,734
 3.85
Non-U.S. commercialNon-U.S. commercial98,246
 2,385
 3.25
 93,762
 1,886
 2.69
Non-U.S. commercial103,625
 2,685
 3.46
 98,246
 2,385
 3.25
Commercial real estate (5)
60,218
 1,915
 4.25
 58,340
 1,545
 3.54
Commercial real estate (4)
Commercial real estate (4)
61,612
 2,109
 4.58
 60,218
 1,915
 4.25
Commercial lease financingCommercial lease financing21,501
 516
 3.20
 21,862
 547
 3.33
Commercial lease financing20,932
 550
 3.50
 21,501
 516
 3.20
Total commercialTotal commercial482,946
 13,550
 3.75
 464,596
 11,145
 3.21
Total commercial505,790
 15,354
 4.06
 482,946
 13,550
 3.75
Total loans and leases (3)
932,485
 30,253
 4.34
 915,678
 27,054
 3.95
Other earning assets (1)
78,431
 3,113
 5.31
 74,554
 2,322
 4.16
Total earning assets (1,6)
1,978,039
 49,388
 3.34
 1,912,629
 42,923
 3.00
Total loans and leasesTotal loans and leases953,169
 32,881
 4.61
 932,485
 30,253
 4.34
Other earning assetsOther earning assets67,431
 3,445
 6.83
 78,431
 3,113
 5.31
Total earning assetsTotal earning assets2,024,687
 54,760
 3.61
 1,978,039
 49,388
 3.34
Cash and due from banksCash and due from banks25,746
    
 27,955
    
Cash and due from banks25,787
    
 25,746
    
Other assets, less allowance for loan and lease lossesOther assets, less allowance for loan and lease losses318,314
  
  
 316,909
  
  
Other assets, less allowance for loan and lease losses340,469
  
  
 318,314
  
  
Total assetsTotal assets$2,322,099
  
  
 $2,257,493
  
  
Total assets$2,390,943
  
  
 $2,322,099
  
  
Interest-bearing liabilitiesInterest-bearing liabilities 
  
  
  
  
  
Interest-bearing liabilities 
  
  
  
  
  
U.S. interest-bearing deposits:U.S. interest-bearing deposits: 
  
  
  
  
  
U.S. interest-bearing deposits: 
  
  
  
  
  
SavingsSavings$54,800
 $4
 0.01% $53,679
 $4
 0.01%Savings$52,604
 $4
 0.01% $54,800
 $4
 0.01%
NOW and money market deposit accountsNOW and money market deposit accounts667,851
 1,679
 0.34
 622,920
 512
 0.11
NOW and money market deposit accounts736,613
 3,557
 0.65
 667,851
 1,679
 0.34
Consumer CDs and IRAsConsumer CDs and IRAs40,134
 109
 0.36
 45,535
 92
 0.27
Consumer CDs and IRAs45,688
 315
 0.92
 40,134
 109
 0.36
Negotiable CDs, public funds and other depositsNegotiable CDs, public funds and other deposits46,507
 629
 1.81
 35,968
 221
 0.82
Negotiable CDs, public funds and other deposits66,618
 1,129
 2.27
 46,507
 629
 1.81
Total U.S. interest-bearing depositsTotal U.S. interest-bearing deposits809,292
 2,421
 0.40
 758,102
 829
 0.15
Total U.S. interest-bearing deposits901,523
 5,005
 0.74
 809,292
 2,421
 0.40
Non-U.S. interest-bearing deposits:Non-U.S. interest-bearing deposits: 
  
  
  
  
  
Non-U.S. interest-bearing deposits: 
  
  
  
  
  
Banks located in non-U.S. countriesBanks located in non-U.S. countries2,309
 32
 1.88
 2,643
 16
 0.82
Banks located in non-U.S. countries2,044
 16
 1.03
 2,309
 32
 1.88
Governments and official institutionsGovernments and official institutions990
 —
 0.01
 1,002
 7
 0.92
Governments and official institutions182
 —
 0.06
 990
 —
 0.01
Time, savings and otherTime, savings and other65,264
 480
 0.98
 60,747
 400
 0.88
Time, savings and other67,740
 619
 1.22
 65,264
 480
 0.98
Total non-U.S. interest-bearing depositsTotal non-U.S. interest-bearing deposits68,563
 512
 1.00
 64,392
 423
 0.88
Total non-U.S. interest-bearing deposits69,966
 635
 1.21
 68,563
 512
 1.00
Total interest-bearing depositsTotal interest-bearing deposits877,855
 2,933
 0.45
 822,494
 1,252
 0.20
Total interest-bearing deposits971,489
 5,640
 0.78
 877,855
 2,933
 0.45
Federal funds purchased, securities loaned or sold under agreements to repurchase, short-term borrowings and other interest-bearing liabilities (1)
272,192
 4,123
 2.03
 275,731
 2,244
 1.09
Federal funds purchased, securities loaned or sold under agreements to repurchase, short-term borrowings and other interest-bearing liabilitiesFederal funds purchased, securities loaned or sold under agreements to repurchase, short-term borrowings and other interest-bearing liabilities274,550
 5,725
 2.79
 272,192
 4,123
 2.03
Trading account liabilitiesTrading account liabilities52,815
 1,040
 2.63
 44,128
 890
 2.70
Trading account liabilities46,122
 967
 2.80
 52,815
 1,040
 2.63
Long-term debtLong-term debt230,719
 5,709
 3.30
 224,287
 4,658
 2.77
Long-term debt200,139
 5,227
 3.49
 200,178
 5,179
 3.45
Total interest-bearing liabilities (1,6)
1,433,581
 13,805
 1.29
 1,366,640
 9,044
 0.88
Total interest-bearing liabilitiesTotal interest-bearing liabilities1,492,300
 17,559
 1.57
 1,403,040
 13,275
 1.26
Noninterest-bearing sources:Noninterest-bearing sources: 
  
  
  
  
  
Noninterest-bearing sources: 
  
  
  
  
  
Noninterest-bearing depositsNoninterest-bearing deposits426,972
  
  
 439,288
  
  
Noninterest-bearing deposits398,689
  
  
 426,972
  
  
Other liabilities (1)
196,444
  
  
 180,907
  
  
Other liabilities (5)
Other liabilities (5)
231,731
  
  
 226,985
  
  
Shareholders’ equityShareholders’ equity265,102
  
  
 270,658
  
  
Shareholders’ equity268,223
  
  
 265,102
  
  
Total liabilities and shareholders’ equityTotal liabilities and shareholders’ equity$2,322,099
  
  
 $2,257,493
  
  
Total liabilities and shareholders’ equity$2,390,943
  
  
 $2,322,099
  
  
Net interest spreadNet interest spread 
  
 2.05%  
  
 2.12%Net interest spread 
  
 2.04%  
  
 2.08%
Impact of noninterest-bearing sourcesImpact of noninterest-bearing sources 
  
 0.34
  
  
 0.24
Impact of noninterest-bearing sources 
  
 0.41
  
  
 0.35
Net interest income/yield on earning assets 
 $35,583
 2.39%  
 $33,879
 2.36%
Net interest income/yield on earning assets (6)
Net interest income/yield on earning assets (6)
 
 $37,201
 2.45%  
 $36,113
 2.43%
(1) 
Certain prior-period amounts have been reclassified to conform to current period presentation.
Includes the impact of interest rate risk management contracts. For additional information, see Interest Rate Risk Management for the Banking Book on page 43.
(2) 
Nonperforming loans are included in the respective average loan balances. Income on these nonperforming loans is generally recognized on a cost recovery basis. PCI loans were recorded at fair value upon acquisition and accrete interest income over the estimated life of the loan.
(3) 
The Includes non-U.S. consumer loans of $2.9 billion for both the nine months ended September 30, 2017 includes assets of the Corporation’s non-U.S. consumer credit card business, which was sold during the second quarter of 2017.2019 and 2018.
(4) 
Includes non-U.S. consumer loans of $2.9 billion in both the nine months ended September 30, 2018 and 2017.
(5)
Includes U.S. commercial real estate loans of $57.0 billion and $56.2 billion and $55.0 billion, and non-U.S. commercial real estate loans of $4.6 billion and $4.0 billion and $3.4 billion for the nine months ended September 30, 20182019 and 2017, respectively.2018.
(6)(5) 
Interest income includes the impactIncludes $34.9 billion and $30.6 billion of interest rate risk management contracts, which decreased interest income on the underlying assets by $113 millionstructured notes and $48 millionliabilities for the nine months ended September 30, 20182019 and 20172018. Interest expense
(6)
Net interest income includes the impactFTE adjustments of interest rate risk management contracts, which decreased interest expense on the underlying liabilities by $103450 million and $1.1 billion455 million for the nine months ended September 30, 20182019 and 20172018. For additional information, see Interest Rate Risk Management for the Banking Book on page 49.




9Bank of America

 
Bank of America10





Business Segment Operations
Segment Description and Basis of Presentation
We report our results of operations through the following four business segments: Consumer Banking,, GWIM,, Global Bankingand Global Markets, with the remaining operations recorded in All Other. We manage our segments and report their results on an FTE basis. We periodically review capital allocated to our businesses and allocate capital annually during the strategic and capital planning processes. We utilize a methodology that considers the effect of regulatory capital requirements in addition to internal risk-based capital models. Our internal risk-based capital models use a risk-adjusted methodology incorporating each segment’s credit,
 
market, interest rate, business and operational risk components. For more information on the nature of these risks, see Managing Risk on page 22.20. The capital allocated to the business segments
is referred to as allocated capital. Allocated equity in the reporting units is comprised of allocated capital plus capital for the portion of goodwill and intangibles specifically assigned to the reporting unit. For more information, see Note 8 – Goodwill and Intangible Assets to the Consolidated Financial Statements.
For more information on theour presentation of financial information on an FTE basis, of presentationsee Supplemental Financial Data on page 6, and for business segments and reconciliations to consolidated total revenue, net income and period-end total assets, seeNote 1718 – Business Segment Information to the Consolidated Financial Statements.
Consumer Banking
                
Deposits Consumer Lending Total Consumer Banking   Deposits Consumer Lending Total Consumer Banking  
Three Months Ended September 30   Three Months Ended September 30  
(Dollars in millions)(Dollars in millions)20182017 20182017 20182017 % Change(Dollars in millions)20192018 20192018 20192018 % Change
Net interest income (FTE basis)$4,068
$3,440
 $2,795
$2,772
 $6,863
$6,212
 10 %
Net interest incomeNet interest income$4,197
$4,052
 $2,834
$2,792
 $7,031
$6,844
 3 %
Noninterest income:Noninterest income:       Noninterest income:       
Card incomeCard income2
1
 1,279
1,242
 1,281
1,243
 3
Card income(11)(10) 1,300
1,247
 1,289
1,237
 4
Service chargesService charges1,097
1,082
 1
—
 1,098
1,082
 1
Service charges1,096
1,098
 1
—
 1,097
1,098
 —
All other incomeAll other income100
97
 61
140
 161
237
 (32)All other income233
189
 74
74
 307
263
 17
Total noninterest incomeTotal noninterest income1,199
1,180
 1,341
1,382
 2,540
2,562
 (1)Total noninterest income1,318
1,277
 1,375
1,321
 2,693
2,598
 4
Total revenue, net of interest expense (FTE basis)5,267
4,620
 4,136
4,154
 9,403
8,774
 7
Total revenue, net of interest expenseTotal revenue, net of interest expense5,515
5,329
 4,209
4,113
 9,724
9,442
 3
               
Provision for credit lossesProvision for credit losses48
47
 822
920
 870
967
 (10)Provision for credit losses84
48
 833
822
 917
870
 5
Noninterest expenseNoninterest expense2,618
2,617
 1,737
1,844
 4,355
4,461
 (2)Noninterest expense2,651
2,620
 1,742
1,705
 4,393
4,325
 2
Income before income taxes (FTE basis)2,601
1,956
 1,577
1,390
 4,178
3,346
 25
Income tax expense (FTE basis)663
737
 402
523
 1,065
1,260
 (15)
Income before income taxesIncome before income taxes2,780
2,661
 1,634
1,586
 4,414
4,247
 4
Income tax expenseIncome tax expense681
678
 400
404
 1,081
1,082
 —
Net incomeNet income$1,938
$1,219
 $1,175
$867
 $3,113
$2,086
 49
Net income$2,099
$1,983
 $1,234
$1,182
 $3,333
$3,165
 5
               
Effective tax rate (FTE basis) (1)
    25.5%37.7%  
Effective tax rate (1)
Effective tax rate (1)
    24.5%25.5%  
               
Net interest yield (FTE basis)2.35%2.08% 3.95%4.16% 3.78
3.56
  
Net interest yieldNet interest yield2.37%2.34% 3.76%3.95% 3.77
3.77
  
Return on average allocated capitalReturn on average allocated capital64
40
 19
14
 33
22
  Return on average allocated capital69
66
 20
19
 36
34
  
Efficiency ratio (FTE basis)49.70
56.65
 41.97
44.40
 46.30
50.85
  
Efficiency ratioEfficiency ratio48.08
49.17
 41.38
41.45
 45.18
45.81
  
                
Balance Sheet                
 Three Months Ended September 30   Three Months Ended September 30  
Average 20182017 20182017 20182017 % Change 20192018 20192018 20192018 % Change
Total loans and leasesTotal loans and leases$5,269
$5,079
 $279,725
$263,731
 $284,994
$268,810
 6%Total loans and leases$5,405
$5,269
 $298,428
$279,725
 $303,833
$284,994
 7 %
Total earning assets (2)
Total earning assets (2)
685,662
657,036
 280,637
264,665
 720,652
692,122
 4
Total earning assets (2)
703,889
685,653
 299,041
280,637
 739,765
720,643
 3
Total assets (2)
Total assets (2)
713,942
684,642
 291,370
276,014
 759,665
731,077
 4
Total assets (2)
735,844
713,942
 308,991
291,370
 781,670
759,665
 3
Total depositsTotal deposits681,726
652,286
 5,804
6,688
 687,530
658,974
 4
Total deposits703,562
681,726
 5,711
5,804
 709,273
687,530
 3
Allocated capitalAllocated capital12,000
12,000
 25,000
25,000
 37,000
37,000
 —
Allocated capital12,000
12,000
 25,000
25,000
 37,000
37,000
 —
(1) 
Estimated at the segment level only.
(2) 
In segments and businesses where the total of liabilities and equity exceeds assets, we allocate assets from All Other to match the segments’ and businesses’ liabilities and allocated shareholders’ equity. As a result, total earning assets and total assets of the businesses may not equal total Consumer Banking.



11Bank of America10






                
 Deposits Consumer Lending Total Consumer Banking   Deposits Consumer Lending Total Consumer Banking  
Nine Months Ended September 30   Nine Months Ended September 30  
(Dollars in millions)(Dollars in millions)20182017 20182017 20182017 % Change(Dollars in millions)20192018 20192018 20192018 % Change
Net interest income (FTE basis)$11,728
$9,804
 $8,265
$8,149
 $19,993
$17,953
 11 %
Net interest incomeNet interest income$12,867
$11,658
 $8,386
$8,256
 $21,253
$19,914
 7 %
Noninterest income:Noninterest income:       Noninterest income:       
Card incomeCard income6
6
 3,896
3,710
 3,902
3,716
 5
Card income(24)(25) 3,778
3,788
 3,754
3,763
 —
Service chargesService charges3,213
3,193
 1
1
 3,214
3,194
 1
Service charges3,162
3,213
 1
1
 3,163
3,214
 (2)
All other incomeAll other income310
294
 227
410
 537
704
 (24)All other income673
510
 230
255
 903
765
 18
Total noninterest incomeTotal noninterest income3,529
3,493
 4,124
4,121
 7,653
7,614
 1
Total noninterest income3,811
3,698
 4,009
4,044
 7,820
7,742
 1
Total revenue, net of interest expense (FTE basis)15,257
13,297
 12,389
12,270
 27,646
25,567
 8
Total revenue, net of interest expenseTotal revenue, net of interest expense16,678
15,356
 12,395
12,300
 29,073
27,656
 5
               
Provision for credit lossesProvision for credit losses135
148
 2,614
2,491
 2,749
2,639
 4
Provision for credit losses173
135
 2,665
2,614
 2,838
2,749
 3
Noninterest expenseNoninterest expense7,907
7,708
 5,324
5,578
 13,231
13,286
 —
Noninterest expense7,956
7,986
 5,201
5,255
 13,157
13,241
 (1)
Income before income taxes (FTE basis)7,215
5,441
 4,451
4,201
 11,666
9,642
 21
Income tax expense (FTE basis)1,840
2,052
 1,135
1,584
 2,975
3,636
 (18)
Income before income taxesIncome before income taxes8,549
7,235
 4,529
4,431
 13,078
11,666
 12
Income tax expenseIncome tax expense2,094
1,845
 1,110
1,130
 3,204
2,975
 8
Net incomeNet income$5,375
$3,389
 $3,316
$2,617
 $8,691
$6,006
 45
Net income$6,455
$5,390
 $3,419
$3,301
 $9,874
$8,691
 14
               
Effective tax rate (FTE basis) (1)
    25.5%37.7%  
Effective tax rate (1)
Effective tax rate (1)
    24.5%25.5%  
               
Net interest yield (FTE basis)2.30%2.02% 3.99%4.21% 3.73
3.52
  
Net interest yieldNet interest yield2.46%2.29% 3.83%3.98% 3.87
3.72
  
Return on average allocated capitalReturn on average allocated capital60
38
 18
14
 31
22
  Return on average allocated capital72
60
 18
18
 36
31
  
Efficiency ratio (FTE basis)51.83
57.97
 42.97
45.46
 47.86
51.96
  
Efficiency ratioEfficiency ratio47.70
52.01
 41.97
42.72
 45.26
47.88
  
                
Balance Sheet                
 Nine Months Ended September 30   Nine Months Ended September 30  
Average 20182017 20182017 20182017 % Change 20192018 20192018 20192018 % Change
Total loans and leasesTotal loans and leases$5,211
$5,025
 $276,556
$257,779
 $281,767
$262,804
 7 %Total loans and leases$5,351
$5,211
 $292,188
$276,556
 $297,539
$281,767
 6 %
Total earning assets (2)
Total earning assets (2)
681,922
647,887
 277,295
258,659
 716,475
682,436
 5
Total earning assets (2)
699,907
681,914
 292,641
277,295
 734,976
716,467
 3
Total assets (2)
Total assets (2)
709,997
675,159
 288,224
270,196
 755,479
721,245
 5
Total assets (2)
731,528
709,997
 302,862
288,224
 776,818
755,479
 3
Total depositsTotal deposits677,684
642,783
 5,595
6,421
 683,279
649,204
 5
Total deposits699,217
677,684
 5,242
5,595
 704,459
683,279
 3
Allocated capitalAllocated capital12,000
12,000
 25,000
25,000
 37,000
37,000
 —
Allocated capital12,000
12,000
 25,000
25,000
 37,000
37,000
 —
                
Period end September 30
2018		December 31
2017		 September 30
2018		December 31
2017		 September 30
2018		December 31
2017		 % Change September 30
2019		December 31
2018		 September 30
2019		December 31
2018		 September 30
2019		December 31
2018		 % Change
Total loans and leasesTotal loans and leases$5,276
$5,143
 $282,001
$275,330
 $287,277
$280,473
 2 %Total loans and leases$5,447
$5,470
 $302,478
$288,865
 $307,925
$294,335
 5 %
Total earning assets (2)
Total earning assets (2)
690,968
675,485
 282,921
275,742
 726,494
709,832
 2
Total earning assets (2)
711,024
694,672
 303,195
289,249
 747,251
728,813
 3
Total assets (2)
Total assets (2)
719,126
703,330
 293,766
287,390
 765,497
749,325
 2
Total assets (2)
742,583
724,019
 313,128
299,970
 788,743
768,881
 3
Total depositsTotal deposits686,723
670,802
 6,047
5,728
 692,770
676,530
 2
Total deposits710,149
691,666
 5,566
4,480
 715,715
696,146
 3
See page 1110 for footnotes.
Consumer Banking, which is comprised of Deposits and Consumer Lending, offers a diversified range of credit, banking and investment products and services to consumers and small businesses. Deposits and Consumer Lending include the net impact of migrating customers and their related deposit, brokerage asset and loan balances between Deposits, Consumer Lending and GWIM, as well as other client-managed business. For more information about Consumer Banking, including our Deposits and Consumer Lending businesses, see Business Segment Operations in the MD&A of the Corporation’s 20172018 Annual Report on Form 10-K.
Consumer Banking Results
Three Months Ended September 30, 2018 Compared to Three Months Ended September 30, 2017Three-Month Comparison
Net income for Consumer Banking increased $1.0 billion$168 million to $3.1$3.3 billion primarily driven by higher pretax income and lower income tax expense from the reduction in the federal income tax rate. The increase in pretax income was drivenrevenue, partially offset by higher net interest income and lower noninterest expense and provision for credit losses.expense. Net interest income increased $651$187 million to $6.9$7.0 billion primarily due to the beneficial impact of an increase in investable assets as a result of higher interest rates and an increasegrowth in deposits as well as pricing discipline and loan growth.loans. Noninterest income decreased modestlyincreased $95 million to $2.5$2.7 billion as lower mortgage banking income was largely offsetdriven by higher results from asset and liability management (ALM) activities and higher card income and service charges.income.
The provision for credit losses decreased $97increased $47 million to $870 million primarily due to a lower reserve build in the U.S. credit card portfolio.$917 million. Noninterest expense decreased $106increased $68 million to $4.4 billion primarily driven by operating efficiencies partially offset by investmentscontinued investment in digital capabilities andthe business, growthincluding increases in primary sales professionals, combined with investments in new and renovated financial centers and renovations.digital capabilities. These increases were largely offset by operating efficiencies and lower FDIC expense.
The return on average allocated capital was 3336 percent, up from 2234 percent, driven by higher net income. For additional information on capital allocations, see Business Segment Operations on page 11.10.
Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017
Nine-Month Comparison
Net income for Consumer Banking increased $1.2 billion to $9.9 billion primarily driven by higher revenue and lower noninterest expense. Net interest income increased $1.3 billion to $21.3 billion primarily due to growth in deposits and loans. Noninterest income increased $78 million to $7.8 billion driven by higher results from ALM activities, largely offset by lower mortgage banking income and lower service charges.
The provision for credit losses increased $89 million to $2.8 billion due primarily to portfolio seasoning in the U.S. credit card portfolio. Noninterest expense decreased $84 million to $13.2 billion primarily driven by lower FDIC expense and operating efficiencies, largely offset by continued investment in the business.
The return on average allocated capital was 36 percent, up from 31 percent, driven by higher net income.
Deposits
Three-Month Comparison
Net income for Deposits increased $116 million to $2.1 billion driven by higher revenue. Net interest income increased $145 million to $4.2 billion primarily due to growth in deposits and pricing discipline. Noninterest income of $1.3 billion increased $41 million driven by higher results from ALM activities.
The provision for credit losses increased $36 million to $84 million. Noninterest expense increased $31 million to $2.7 billion primarily driven by continued investment in the business largely offset by lower FDIC expense and operating efficiencies.

11Bank of America





Average deposits increased $21.8 billion to $8.7$703.6 billion driven by strong organic growth. Growth in checking and time deposits of $27.4 billion was partially offset by a decline in money market savings and traditional savings of $5.4 billion.
Nine-Month Comparison
Net income for Deposits increased $1.1 billion to $6.5 billion driven by higher revenue. Net interest income increased $1.2 billion to $12.9 billion primarily driven by the same factors as described in the three-month discussion. The increase in pretaxNoninterest income wasincreased $113 million to $3.8 billion primarily driven by higher revenue and lower noninterest expense,
results from ALM activities, partially offset by higher provision for credit losses. Net interest income increased $2.0 billion to $20.0 billion primarily due to the same factors as described in the three-month discussion. Noninterest income remained relatively unchanged at $7.7 billion as higher card income and service charges were largely offset by lower mortgage banking income.
The provision for credit losses increased $110 million to $2.7 billion driven by portfolio seasoning and loan growth in the U.S. credit card portfolio. Noninterest expense decreased $55 million to $13.2 billion driven by operating efficiencies and lower litigation

Bank of America12

expense. These decreases were largely offset by investments in digital capabilities and business growth, including increased primary sales professionals, combined with investments in new financial centers and renovations.
The return on average allocated capital was 31 percent, up from 22 percent, driven by higher net income. For additional information on capital allocations, see Business Segment Operations on page 11.
Deposits
Three Months Ended September 30, 2018 Compared to Three Months Ended September 30, 2017
Net income for Deposits increased $719 million to $1.9 billion driven by higher revenue and lower income tax expense. Net interest income increased $628 million to $4.1 billion primarily due to the beneficial impact of an increase in investable assets as a result of higher deposits, and pricing discipline. Noninterest income increased $19 million to $1.2 billion driven by higher service charges.
The provision for credit losses remained relatively unchanged at $48increased $38 million to $173 million. Noninterest expense remained relatively unchanged at $2.6decreased $30 million to $8.0 billion as investments in new financial centers, renovationsprimarily driven by lower FDIC expense and digital capabilities combined with higher personnel expense wereoperating efficiencies, partially offset by lower litigation expense.continued investment in the business.
Average deposits increased $29.4$21.5 billion to $681.7$699.2 billion driven by strong organic growth. Growth in checking and money market savingstime deposits of $34.6$24.6 billion was partially offset by a decline in time depositstraditional savings and money market savings of $4.8$2.9 billion.
Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017
Net income for Deposits increased $2.0 billion to $5.4 billion driven by higher revenue and lower income tax expense, partially offset by higher noninterest expense. Net interest income increased $1.9 billion to $11.7 billion, and noninterest income increased $36 million to $3.5 billion. These increases were primarily driven by the same factors as described in the three-month discussion.
The provision for credit losses decreased $13 million to $135 million. Noninterest expense increased $199 million to $7.9 billion primarily driven by investments in digital capabilities and business growth, including increased primary sales professionals. These increases, combined with investments in new financial centers and renovations, were partially offset by lower litigation expense.
Average deposits increased $34.9 billion to $677.7 billion primarily driven by the same factor as described in the three-month discussion.
              
Key Statistics – Deposits              
              
Three Months Ended September 30 Nine Months Ended September 30Three Months Ended September 30 Nine Months Ended September 30
2018 2017 2018 20172019 2018 2019 2018
Total deposit spreads (excludes noninterest costs) (1)
2.19% 1.88% 2.10% 1.82%2.35% 2.19% 2.38% 2.10%
              
Period end              
Client brokerage assets (in millions)    $203,882
 $167,274
Consumer investment assets (in millions) (2)
    $223,199
 $203,882
Active digital banking users (units in thousands) (2)(3)
    36,174
 34,472
    37,981
 36,174
Active mobile banking users (units in thousands)    25,990
 23,572
    28,703
 25,990
Financial centers    4,385
 4,515
    4,302
 4,385
ATMs    16,089
 15,973
    16,626
 16,089
(1) 
Includes deposits held in Consumer Lending.
(2) 
Digital
Includes client brokerage assets, certain deposit sweep balances and AUM in Consumer Banking.
(3)
Active digital banking users represents mobile and/or online users across consumer businesses.users.
Client brokerageConsumer investment assets increased $36.6$19.3 billion driven by strong client flows, andpartially offset by market performance.declines. Active mobile banking users increased 2.42.7 million reflecting continuing changes in our customers’ banking preferences. The number of financial centers declined by a net 13083 reflecting changes in customer preferences to self-service options as we continue to optimize our consumer banking network and improve our cost-to-serve.cost to serve.
Consumer Lending
Three Months Ended September 30, 2018 Compared to Three Months Ended September 30, 2017Three-Month Comparison
Net income for Consumer Lending increased $308$52 million to $1.2 billion driven by lowerhigher revenue, partially offset by higher noninterest expense. Net interest income tax expense, noninterest expense andincreased $42 million to $2.8 billion driven by loan growth. Noninterest income increased $54 million to $1.4 billion driven by higher card income.
The provision for credit losses increased $11 million to $833 million. Noninterest expense increased $37 million to $1.7 billion primarily driven by continued investment in the business.
Average loans increased $18.7 billion to $298.4 billion primarily driven by an increase in residential mortgages, partially offset by lower home equity loans.
Nine-Month Comparison
Net income for Consumer Lending increased $118 million to $3.4 billion driven by higher net interest income and lower noninterest expense, partially offset by lower noninterest income. Net interest income increased $23$130 million to $2.8$8.4 billion primarily driven by higher interest rates and the impact of an increase in loan balances.growth. Noninterest income decreased $41$35 million to $1.3$4.0 billion primarily driven by lower mortgage banking income partially offset by higherand lower card income.
The provision for credit losses decreased $98increased $51 million to $822 million$2.7 billion primarily due to a lower reserve builddriven by portfolio seasoning in the U.S. credit card portfolio. Noninterest expense decreased $107$54 million to $1.7$5.2 billion primarily driven by operating efficiencies.
Average loans increased $16.0$15.6 billion to $279.7$292.2 billion driven by increases in residential mortgages and U.S credit card loans, partially offset by lower home equity and consumer vehicle loan balances.
Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017
Net income for Consumer Lending increased $699 million to $3.3 billion driven by lower income tax expense and noninterest expense, and higher net interest income, partially offset by higher provision for credit losses. Net interest income increased $116 million to $8.3 billion driven by the same factors as described in the three-month discussion. Noninterest income remained relatively unchanged at $4.1 billion as higher card income was offset by lower mortgage banking income.
The provision for credit losses increased $123 million to $2.6 billion driven by portfolio seasoning and loan growth in the U.S. credit card portfolio. Noninterest expense decreased $254 million to $5.3 billion driven by the same factor as described in the three-month discussion.
Average loans increased $18.8 billion to $276.6 billionprimarily driven by increases in residential mortgages and U.S. credit card, loans, partially offset by lower home equity balances.loans.

13Bank of America





At September 30, 2018, total owned loans in the core portfolio held in Consumer Lending were $125.5 billion, an increase of $13.9 billion from September 30, 2017, primarily driven by higher residential mortgage balances, based on a decision to retain certain loans on the balance sheet, partially offset by a decline in home equity balances. For more information on the core portfolio, see Consumer Portfolio Credit Risk Management on page 28.
              
Key Statistics – Consumer Lending
      
Three Months Ended September 30 Nine Months Ended September 30Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions)2018 2017 2018 20172019 2018 2019 2018
Total U.S. credit card (1)
              
Gross interest yield10.20% 9.76% 10.00% 9.62%10.85% 10.20% 10.80% 10.00%
Risk-adjusted margin8.15
 8.63
 8.18
 8.64
8.46
 8.08
 8.14
 8.09
New accounts (in thousands)1,116
 1,315
 3,496
 3,801
1,172
 1,116
 3,274
 3,496
Purchase volumes$66,490
 $62,244
 $194,658
 $179,230
$71,096
 $66,490
 $204,135
 $194,658
Debit card purchase volumes(2)$79,920
 $74,769
 $236,669
 $220,729
$90,942
 $85,529
 $267,204
 $250,715
(1) 
In addition to the U.S. credit card portfolio in Consumer Banking, the remaining U.S. credit card portfolio is in GWIM.
(2) Historical information has been restated for Original Credit Transaction volume.

During the three and nine months ended September 30, 2018, the2019, total U.S. credit card risk-adjusted margin decreased 48increased 38 bps and 465 bps compared to the same periods in 2017,2018, primarily driven by increased net charge-offs and higher credit card rewards costs.
a portfolio shift away from promotional-rate loans. During the three and nine months ended September 30, 2018,2019, total U.S.
credit card purchase volumes increased $4.2$4.6 billion to $66.5$71.1 billion and $15.4$9.5 billion to $194.7$204.1 billion compared to the same periods in 2017,2018, and debit card purchase volumes increased $5.2$5.4 billion to $79.9$90.9 billion and $15.9$16.5 billion to $236.7$267.2 billion, reflecting higher levels of consumer spending.

Bank of America 12

              
Key Statistics – Loan Production (1)
Key Statistics – Loan Production (1)
Key Statistics – Loan Production (1)
              
Three Months Ended September 30 Nine Months Ended September 30Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions)2018 2017 2018 20172019 2018 2019 2018
Total (2):
              
First mortgage$10,682
 $13,183
 $31,778
 $37,876
$20,664
 $10,682
 $50,353
 $31,778
Home equity3,399
 4,133
 11,229
 12,871
2,539
 3,399
 8,132
 11,229
Consumer Banking:              
First mortgage$7,208
 $9,044
 $21,053
 $25,679
$13,622
 $7,208
 $34,534
 $21,053
Home equity3,053
 3,722
 10,042
 11,604
2,219
 3,053
 7,109
 10,042
(1) 
The loan production amounts represent the unpaid principal balance of loans and, in the case of home equity, the principal amount of the total line of credit.
(2) 
In addition to loan production in Consumer Banking, there is also first mortgage and home equity loan production in GWIM.
First mortgage loan originations in Consumer Banking and for the total Corporation decreased $1.8increased $6.4 billion and $2.5$10.0 billion infor the three months ended September 30, 20182019 compared to the same period in 20172018 primarily driven by a higherlower interest rate environment driving lowerhigher first-lien mortgage refinances. First mortgage loan originations in Consumer Banking and for the total Corporation decreased $4.6increased $13.5 billion and $6.1$18.6 billion infor the nine months ended September 30, 2019 compared to the same period
in 2018 primarily driven by the same factor as described in the three-month discussion.
Home equity production in Consumer Banking and for the total Corporation decreased $669$834 million and $734$860 million for the three months ended September 30, 2018 compared to the same period in 2017 driven by lower demand. Home equity production in Consumer Banking2019 and for the total Corporation each decreased $1.6$2.9 billion and $3.1 billion for the nine months ended September 30, 20182019 primarily driven by the same factor as described in the three-month discussion.

lower demand.

Global Wealth & Investment Management
             
  Three Months Ended September 30   Nine Months Ended September 30  
(Dollars in millions)2019 2018 % Change 2019 2018 % Change
Net interest income$1,609
 $1,531
 5% $4,917
 $4,653
 6 %
Noninterest income:           
Investment and brokerage services3,001
 3,004
 —
 8,805
 8,981
 (2)
All other income294
 282
 4
 902
 780
 16
Total noninterest income3,295
 3,286
 —
 9,707
 9,761
 (1)
Total revenue, net of interest expense4,904
 4,817
 2
 14,624
 14,414
 1
            
Provision for credit losses37
 13
 n/m
 63
 63
 —
Noninterest expense3,413
 3,443
 (1) 10,300
 10,451
 (1)
Income before income taxes1,454

1,361
 7
 4,261
 3,900
 9
Income tax expense356
 347
 3
 1,044
 994
 5
Net income$1,098
 $1,014
 8
 $3,217
 $2,906
 11
            
Effective tax rate24.5% 25.5%   24.5% 25.5%  
            
Net interest yield2.30
 2.37
   2.35
 2.41
  
Return on average allocated capital30
 28
   30
 27
  
Efficiency ratio69.60
 71.48
   70.43
 72.50
  
            
Balance Sheet            
 Three Months Ended September 30   Nine Months Ended September 30  
Average2019 2018 % Change 2019 2018 % Change
Total loans and leases$170,414
 $161,869
 5% $167,069
 $160,609
 4 %
Total earning assets277,349
 256,286
 8
 279,790
 258,046
 8
Total assets289,447
 273,582
 6
 292,102
 275,183
 6
Total deposits254,449
 238,291
 7
 256,708
 239,176
 7
Allocated capital14,500
 14,500
 —
 14,500
 14,500
 —
            
Period end      September 30
2019		 December 31
2018		 % Change
Total loans and leases      $172,677
 $164,854
 5 %
Total earning assets      275,884
 287,199
 (4)
Total assets      288,317
 305,907
 (6)
Total deposits      252,466
 268,700
 (6)
n/m = not meaningful

13Bank of America

 
Bank of America14




Global Wealth & Investment Management
             
  Three Months Ended September 30   Nine Months Ended September 30  
(Dollars in millions)2018 2017 % Change 2018 2017 % Change
Net interest income (FTE basis)$1,536
 $1,496
 3% $4,673
 $4,653
 — %
Noninterest income:           
Investment and brokerage services3,004
 2,854
 5
 8,981
 8,474
 6
All other income243
 270
 (10) 694
 780
 (11)
Total noninterest income3,247
 3,124
 4
 9,675
 9,254
 5
Total revenue, net of interest expense (FTE basis)4,783
 4,620
 4
 14,348
 13,907
 3
            
Provision for credit losses13
 16
 (19) 63
 50
 26
Noninterest expense3,414
 3,369
 1
 10,235
 10,085
 1
Income before income taxes (FTE basis)1,356

1,235
 10
 4,050
 3,772
 7
Income tax expense (FTE basis)346
 465
 (26) 1,033
 1,422
 (27)
Net income$1,010
 $770
 31
 $3,017
 $2,350
 28
            
Effective tax rate (FTE basis)25.5% 37.7%   25.5% 37.7%  
            
Net interest yield (FTE basis)2.38
 2.29
   2.42
 2.32
  
Return on average allocated capital28
 22
   28
 23
  
Efficiency ratio (FTE basis)71.40
 72.91
   71.34
 72.52
  
            
Balance Sheet            
 Three Months Ended September 30   Nine Months Ended September 30  
Average2018 2017 % Change 2018 2017 % Change
Total loans and leases$161,869
 $154,333
 5% $160,609
 $151,205
 6 %
Total earning assets256,285
 259,564
 (1) 258,044
 267,732
 (4)
Total assets273,581
 275,570
 (1) 275,182
 283,324
 (3)
Total deposits238,291
 239,647
 (1) 239,176
 247,389
 (3)
Allocated capital14,500
 14,000
 4
 14,500
 14,000
 4
            
Period end      September 30
2018		 December 31
2017		 % Change
Total loans and leases      $162,191
 $159,378
 2 %
Total earning assets      258,561
 267,026
 (3)
Total assets      276,146
 284,321
 (3)
Total deposits      239,654
 246,994
 (3)

GWIM consists of two primary businesses: Merrill Lynch Global Wealth Management (MLGWM) andU.S. Trust, Bank of America Private Wealth Management (U.S. Trust).Bank. For more information about GWIM,, see Business Segment Operations in the MD&A of the Corporation’s 20172018 Annual Report on Form 10-K.
Three Months Ended September 30, 2018 Compared to Three Months Ended September 30, 2017Three-Month Comparison
Net income for GWIM increased$240 $84 million to $1.0$1.1 billion primarily due to higher revenue and lower income tax expense from the reduction in the federal income tax rate, partially offset by an increase in noninterest expense. The operating margin was 2830 percent compared to 2728 percent a year ago.
Net interest income increased $40$78 million to $1.5$1.6 billion primarily due to higher deposit spreadsgrowth in deposits and average loan balances, partially offset by lower loan spreads.loans.
Noninterest income, which primarily includes investment and brokerage services income, increased $123$9 million to $3.2$3.3 billion. The increase was driven by the impact of positive AUM flows and higher average market valuations partially offset bycompared to the impact of changing market dynamics on transactional revenue and AUM pricing. Noninterest expense of $3.4 billion increased modestly, as higher revenue-related incentive expense and investmentsame period in sales professionals were2018, largely offset by continued expense discipline.
Return on average allocated capital was 28 percent, up from 22 percent, primarily due to higher net income, somewhat offset by an increase in allocated capital.
MLGWM revenue of $3.9 billion increased three percent reflecting higher asset management fees driven by higher net
flows and market valuations and an increase in net interest income, partially offset by lower AUM pricing and transactional revenue. U.S. Trust revenue of $859 million increased five percent reflecting higher asset management fees driven by increased net flows and market valuations, and higher net interest income.
Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017
Net income for GWIM increased $667Noninterest expense decreased $30 million to $3.0$3.4 billion, due to higher revenue and lower income tax expense, partiallyas investments for business growth were more than offset by an increase in noninterestlower amortization of intangibles and FDIC expense. The decrease in tax expense was driven by the reduction in the federal tax rate. The operating margin was 28 percent compared to 27 percent a year ago.
Net interest income increased $20 million to $4.7 billion due to the same factors as described in the three-month discussion. Noninterest income, which primarily includes investment and brokerage services income, increased $421 million to $9.7 billion due to the same factors as described in the three-month discussion. Noninterest expense increased $150 million to $10.2 billion primarily due to higher revenue-related incentive expense and investment in sales professionals, partially offset by expense discipline.
The return on average allocated capital was 2830 percent, up from 2328 percent, asdue to higher net income was partially offset by an increased capital allocation.income. For more information on capital allocated to the business segments, see Business Segment Operations on page 11.
10.

15Bank of America





Revenue from MLGWM revenue of $11.8$4.1 billion increased three percent, reflecting higher net interest income and asset management fees.
Bank of America Private Bank revenue of $851 million decreased two percent primarily due to lower net interest income.
Nine-Month Comparison
Net income for GWIM increased $311 million to $3.2 billion due to higher asset management fees driven by higher AUM flows and market valuations, partially offset by lower AUM pricing, transactional revenue and netlower noninterest expense. The operating margin was 29 percent compared to 27 percent a year ago.
Net interest income. U.S. Trust revenue of $2.6income increased $264 million to $4.9 billion increased five percent due to the same factors as described in the three-month discussion.
Noninterest income, which primarily includes investment and brokerage services income, decreased $54 million to $9.7 billion. The decrease was primarily driven by declines in AUM pricing and transactional revenue, partially offset by the impact of positive AUM flows.
Noninterest expense decreased $151 million to $10.3 billion due to the same factors as described in the three-month section.
The return on average allocated capital was 30 percent, up from 27 percent, due to higher net income.
MLGWM revenue of $12.1 billion increased two percent primarily driven by higher net interest income and the impact of higher AUM flows, partially offset by lower transactional volumes and AUM pricing.
Bank of America Private Bank revenue of $2.6 billiondecreased one percent due to the same factor as described in the three-month section.
               
Key Indicators and Metrics               
               
 Three Months Ended September 30 Nine Months Ended September 30Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions, except as noted) 2018 2017 2018 20172019 2018 2019 2018
Revenue by Business               
Merrill Lynch Global Wealth Management $3,924
 $3,796
 $11,780
 $11,452
$4,053
 $3,951
 $12,065
 $11,834
U.S. Trust 859
 822
 2,567
 2,450
Other —
 2
 1
 5
Total revenue, net of interest expense (FTE basis) $4,783

$4,620

$14,348

$13,907
Bank of America Private Bank851
 866
 2,559
 2,580
Total revenue, net of interest expense$4,904

$4,817

$14,624

$14,414
               
Client Balances by Business, at period end               
Merrill Lynch Global Wealth Management     $2,385,479
 $2,245,499
    $2,443,614
 $2,385,479
U.S. Trust     455,894
 430,684
Bank of America Private Bank    462,347
 455,894
Total client balances     $2,841,373
 $2,676,183
    $2,905,961
 $2,841,373
               
Client Balances by Type, at period end               
Assets under management     $1,144,375
 $1,036,048
Assets under management (1)
    $1,212,120
 $1,182,504
Brokerage and other assets     1,292,219
 1,243,858
    1,305,926
 1,292,219
Deposits     239,654
 237,771
    252,466
 239,654
Loans and leases (1)
     165,125
 158,506
Loans and leases (2)
    175,579
 165,125
Less: Managed deposits in assets under management (1)
    (40,130) (38,129)
Total client balances     $2,841,373
 $2,676,183
    $2,905,961
 $2,841,373
               
Assets Under Management Rollforward(1)               
Assets under management, beginning of period $1,101,001
 $990,709
 $1,080,747
 $886,148
$1,203,783
 $1,138,500
 $1,072,234
 $1,121,383
Net client flows 7,572
 20,749
 42,587
 77,479
5,529
 8,202
 16,721
 40,080
Market valuation/other
 35,802
 24,590
 21,041
 72,421
2,808
 35,802
 123,165
 21,041
Total assets under management, end of period $1,144,375

$1,036,048

$1,144,375

$1,036,048
$1,212,120

$1,182,504

$1,212,120

$1,182,504
               
Associates, at period end (2)
               
Number of financial advisors     17,456
 17,221
    17,657
 17,456
Total wealth advisors, including financial advisors     19,344
 19,108
    19,672
 19,343
Total primary sales professionals, including financial advisors and wealth advisors     20,437
 20,089
    20,775
 20,466
               
Merrill Lynch Global Wealth Management Metric               
Financial advisor productivity (3) (in thousands)
 $1,035
 $994
 $1,030
 $1,009
Financial advisor productivity (in thousands)$1,096
 $1,035
 $1,073
 $1,030
               
U.S. Trust Metric, at period end        
Bank of America Private Bank Metric, at period end       
Primary sales professionals     1,711
 1,696
    1,811
 1,711
(1) 
AUM includes deposits that are managed within investment accounts.
(2)
Includes margin receivables which are classified in customer and other receivables on the Consolidated Balance Sheet.
(2)
Includes financial advisors in the Consumer Banking segment of 2,618 and 2,267 at September 30, 2018 and 2017.
(3)
Financial advisor productivity is defined as annualized MLGWM total revenue, excluding the allocation of certain asset and liability management (ALM) activities, divided by the total average number of financial advisors (excluding financial advisors in the Consumer Banking segment).
Client Balances
Client balances increased $165.2$64.6 billion, or sixtwo percent, to $2.8$2.9 trillion at September 30, 20182019 compared to September 30, 2017.2018. The increase in client balances was due to higher market valuations and positive net flows. Positive net client flows in AUM decreased from the same period a year ago primarily due to a smaller shift from brokerage assets to AUM.positive net flows over the last year and higher market valuations.



  
Bank of America1614


Global Banking
                        
Three Months Ended September 30   Nine Months Ended September 30   Three Months Ended September 30   Nine Months Ended September 30  
(Dollars in millions)(Dollars in millions)2018 2017 % Change 2018 2017 % Change(Dollars in millions)2019 2018 % Change 2019 2018 % Change
Net interest income (FTE basis)$2,706
 $2,642
 2% $8,057
 $7,786
 3 %
Net interest incomeNet interest income$2,617
 $2,726
 (4%) $8,116
 $8,144
 —%
Noninterest income:Noninterest income:           Noninterest income:

          
Service chargesService charges754
 776
 (3) 2,285
 2,351
 (3)Service charges763
 753
 1
 2,225
 2,285
 (3)
Investment banking feesInvestment banking fees643
 806
 (20) 2,130
 2,661
 (20)Investment banking fees902
 644
 40
 2,328
 2,130
 9
All other incomeAll other income635
 763
 (17) 2,122
 2,182
 (3)All other income930
 700
 33
 2,673
 2,273
 18
Total noninterest incomeTotal noninterest income2,032
 2,345
 (13) 6,537
 7,194
 (9)Total noninterest income2,595
 2,097
 24
 7,226
 6,688
 8
Total revenue, net of interest expense (FTE basis)4,738
 4,987
 (5) 14,594
 14,980
 (3)
Total revenue, net of interest expenseTotal revenue, net of interest expense5,212
 4,823
 8
 15,342
 14,832
 3
                       
Provision for credit lossesProvision for credit losses(70) 48
 n/m
 (77) 80
 n/m
Provision for credit losses120
 (70) n/m
 356
 (77) n/m
Noninterest expenseNoninterest expense2,120
 2,119
 —
 6,471
 6,435
 1
Noninterest expense2,220
 2,142
 4
 6,697
 6,618
 1
Income before income taxes (FTE basis)2,688
 2,820
 (5) 8,200
 8,465
 (3)
Income tax expense (FTE basis)699
 1,062
 (34) 2,132
 3,192
 (33)
Income before income taxesIncome before income taxes2,872
 2,751
 4
 8,289
 8,291
 —
Income tax expenseIncome tax expense775
 714
 9
 2,238
 2,154
 4
Net incomeNet income$1,989
 $1,758
 13
 $6,068
 $5,273
 15
Net income$2,097
 $2,037
 3
 $6,051
 $6,137
 (1)
                       
Effective tax rate (FTE basis)26.0% 37.7%   26.0% 37.7%  
Effective tax rateEffective tax rate27.0% 26.0%   27.0% 26.0%  
                       
Net interest yield (FTE basis)2.96
 2.94
   2.97
 2.91
  
Net interest yieldNet interest yield2.69
 2.99
   2.84
 3.00
  
Return on average allocated capitalReturn on average allocated capital19
 17
   20
 18
  Return on average allocated capital20
 20
   20
 20
  
Efficiency ratio (FTE basis)44.79
 42.52
   44.34
 42.97
  
Efficiency ratioEfficiency ratio42.58
 44.42
   43.65
 44.62
  
                       
Balance Sheet                        
Three Months Ended September 30   Nine Months Ended September 30   Three Months Ended September 30   Nine Months Ended September 30  
AverageAverage2018 2017 % Change 2018 2017 % ChangeAverage2019 2018 % Change 2019 2018 % Change
Total loans and leasesTotal loans and leases$352,712
 $346,093
 2% $353,167
 $344,683
 2 %Total loans and leases$377,109
 $352,712
 7% $373,275
 $353,167
 6 %
Total earning assetsTotal earning assets362,316
 357,014
 1
 362,910
 357,999
 1
Total earning assets385,999
 362,316
 7
 382,711
 362,910
 5
Total assetsTotal assets422,255
 414,755
 2
 422,041
 414,867
 2
Total assets441,186
 423,643
 4
 437,570
 423,355
 3
Total depositsTotal deposits337,685
 315,692
 7
 328,484
 307,163
 7
Total deposits360,457
 337,685
 7
 357,413
 328,484
 9
Allocated capitalAllocated capital41,000
 40,000
 3
 41,000
 40,000
 3
Allocated capital41,000
 41,000
 —
 41,000
 41,000
 —
                       
Period endPeriod end      September 30
2018		 December 31
2017		 % ChangePeriod end      September 30
2019		 December 31
2018		 % Change
Total loans and leasesTotal loans and leases      $352,332
 $350,668
 — %Total loans and leases      $377,658
 $365,717
 3 %
Total earning assetsTotal earning assets      369,555
 365,560
 1
Total earning assets      397,589
 377,812
 5
Total assetsTotal assets      430,846
 424,533
 1
Total assets      452,642
 442,330
 2
Total depositsTotal deposits      350,748
 329,273
 7
Total deposits      371,887
 360,248
 3
n/m = not meaningful
Global Banking, which includes Global Corporate Banking, Global Commercial Banking, Business Banking and Global Investment Banking, provides a wide range of lending-related products and services, integrated working capital management and treasury solutions, and underwriting and advisory services through our network of offices and client relationship teams. For more information about Global Banking, see Business Segment Operations in the MD&A of the Corporation’s 20172018 Annual Report on Form 10-K.
Three Months Ended September 30, 2018 Compared to Three Months Ended September 30, 2017Three-Month Comparison
Net income for Global Banking increased $231$60 million to $2.0$2.1 billion primarily driven by lower income tax expense from the reduction in the federal income tax rate,higher revenue partially offset by lower pretax income discussed below.
Pretax results were driven by lower revenue and lowerhigher provision for credit losses withand noninterest expense remaining flat. expense.
Revenue decreased $249increased $389 million to $4.7$5.2 billion driven by lowerhigher noninterest income offset in part by a modest decline in net interest income.Net interest income decreased $109 million to $2.6 billion as the impact of deposit and loan growth was more than offset by the allocation of ALM activities and loan spread compression.
 
income, partially offset by higher net interest income. Net interestNoninterest income increased $64$498 million to $2.7$2.6 billion primarily due to the impact of higher interest rates, as well as deposit growth. Noninterest income decreased $313 million to $2.0 billion primarily due to lowerdriven by growth in investment banking fees and the impact of tax reform on certain tax-advantaged investments, partially offset by higher leasing-related revenues. The provision for credit losses improved $118increased $190 million to a benefit of $70$120 million driven by continued improvementsdue to reserve releases in the prior-year period, primarily from energy sector and broader loan quality.
exposures. Noninterest expense was unchanged at $2.1increased $78 million to $2.2 billion as slightly lower personnel expense was offset by higher operating expense.primarily due to continued investment in the business.
The return on average allocated capital was 1920 percent up from 17 percent, as higher net income was partially offset by an increased capital allocation.for both periods. For more information on capital allocated to the business segments, see Business Segment Operations on page 11.10.
Nine-Month Comparison
Net income for Global Banking decreased $86 million to $6.1 billion primarily driven by higher provision for credit losses and noninterest expense partially offset by higher revenue.
Revenue increased $510 million to $15.3 billion driven by higher noninterest income. Net interest income decreased $28 million to $8.1 billion primarily due to the allocation of ALM activities and loan spread compression more than offsetting the benefit from higher loan and deposit balances.



1715Bank of America


  








Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017
NetNoninterest income for Global Bankingincreased $795$538 million to $6.1 billion primarily driven by lower income tax expense from the reduction in the federal income tax rate, partially offset by lower pretax income.
Pretax results were driven by lower revenue, slightly higher noninterest expense and lower provision for credit losses. Revenue decreased $386 million to $14.6 billion driven by lower noninterest income, partially offset by higher net interest income. Net interest income increased $271 million to $8.1$7.2 billion primarily due to the impact of higher interest rates on increased deposits. Noninterest income decreased $657 million to $6.5 billion primarily due to lowerleasing-related revenue and investment banking fees and the impact of tax reform on certain tax-advantaged investments, partially offset by higher leasing-related revenues.fees. The provision for credit losses improved
$157increased $433 million to a benefit of $77$356 million primarily driven by continued improvementsenergy reserve releases in the energy sector and broader loan quality.
prior-year period. Noninterest expense increased $36$79 million to $6.5 billion
primarily due to higher operatingcontinued investment in the business partially offset by lower FDIC expense.
The return on average allocated capital was 20 percent up from 18 percent, as higher net income was partially offset by an increased capital allocation.for both periods. For more information on capital allocated to the business segments, see Business Segment Operations on page 11.10.
Global Corporate, Global Commercial and Business Banking
The table below and following discussion present a summary of the results, which exclude certain investment banking activities in Global Banking.
                                
Global Corporate, Global Commercial and Business BankingGlobal 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
 Three Months Ended September 30 Three Months Ended September 30
(Dollars in millions)(Dollars in millions)2018 2017 2018
2017 2018 2017 2018 2017(Dollars in millions)2019 2018 2019
2018 2019 2018 2019 2018
Revenue (FTE basis)
               
RevenueRevenue               
Business LendingBusiness Lending$960
 $1,127
 $1,025
 $1,090
 $99
 $101
 $2,084
 $2,318
Business Lending$1,024
 $908
 $1,020
 $1,095
 $91
 $108
 $2,135
 $2,111
Global Transaction ServicesGlobal Transaction Services914
 840
 814
 758
 244
 217
 1,972
 1,815
Global Transaction Services967
 951
 862
 832
 267
 248
 2,096
 2,031
Total revenue, net of interest expenseTotal revenue, net of interest expense$1,874
 $1,967
 $1,839
 $1,848
 $343
 $318
 $4,056
 $4,133
Total revenue, net of interest expense$1,991
 $1,859
 $1,882
 $1,927
 $358
 $356
 $4,231
 $4,142
              
               
Balance Sheet                                
AverageAverage               Average               
Total loans and leasesTotal loans and leases$162,249
 $159,417
 $174,315
 $168,945
 $16,127
 $17,659
 $352,691
 $346,021
Total loans and leases$179,191
 $162,249
 $183,031
 $174,315
 $14,868
 $16,127
 $377,090
 $352,691
Total depositsTotal deposits165,522
 149,564
 134,486
 129,440
 37,703
 36,687
 337,711
 315,691
Total deposits175,914
 165,522
 143,835
 134,486
 40,707
 37,703
 360,456
 337,711
                               
 Global Corporate Banking Global Commercial Banking Business Banking Total Global Corporate Banking Global Commercial Banking Business Banking Total
 Nine Months Ended September 30 Nine Months Ended September 30
2018 2017 2018 2017 2018 2017 2018 2017 2019 2018 2019 2018 2019 2018 2019 2018
Revenue (FTE basis)
               
(Dollars in millions)(Dollars in millions)               
RevenueRevenue               
Business LendingBusiness Lending$3,103
 $3,322
 $2,974
 $3,186
 $297
 $301
 $6,374
 $6,809
Business Lending$2,992
 $2,940
 $3,100
 $3,188
 $275
 $324
 $6,367
 $6,452
Global Transaction ServicesGlobal Transaction Services2,708
 2,470
 2,441
 2,217
 713
 625
 5,862
 5,312
Global Transaction Services2,979
 2,828
 2,642
 2,474
 800
 721
 6,421
 6,023
Total revenue, net of interest expenseTotal revenue, net of interest expense$5,811
 $5,792
 $5,415
 $5,403
 $1,010
 $926
 $12,236
 $12,121
Total revenue, net of interest expense$5,971
 $5,768
 $5,742
 $5,662
 $1,075
 $1,045
 $12,788
 $12,475
              
               
Balance Sheet                                
                                
AverageAverage               Average               
Total loans and leasesTotal loans and leases$162,652
 $157,144
 $173,788
 $169,751
 $16,720
 $17,762
 $353,160
 $344,657
Total loans and leases$177,071
 $162,652
 $181,091
 $173,788
 $15,108
 $16,720
 $373,270
 $353,160
Total depositsTotal deposits159,500
 146,627
 132,115
 124,446
 36,889
 36,092
 328,504
 307,165
Total deposits175,239
 159,500
 142,665
 132,115
 39,522
 36,889
 357,426
 328,504
                               
Period endPeriod end               Period end               
Total loans and leasesTotal loans and leases$162,004
 $161,441
 $174,452
 $170,825
 $15,880
 $17,579
 $352,336
 $349,845
Total loans and leases$179,291
 $162,004
 $183,314
 $174,452
 $14,919
 $15,880
 $377,524
 $352,336
Total depositsTotal deposits174,709
 147,893
 138,425
 135,249
 37,640
 36,402
 350,774
 319,544
Total deposits183,678
 174,709
 147,119
 138,425
 41,089
 37,640
 371,886
 350,774
Business Lending revenue increased $24 million for the three months ended September 30, 2019 compared to the same period in 2018 driven by higher leasing-related revenue partly offset by lower ALM results.  For the nine-month period, revenue decreased $234$85 million as lower ALM results were partly offset by higher leasing-related revenue.
Global Transaction Services revenue increased $65 million and$435 $398 million for the three and nine months ended September 30, 2018 compared to the same periods in 2017. The decreases for both periods were2019 primarily driven by the impact of tax reform on certain tax-advantaged investmentshigher deposit balances and lower leasing-related revenues.rates.
Global Transaction Services revenueAverage loans and leases increased $157 millionseven percent and $550 millionsix percent for the three and nine months ended September 30, 2019 compared to the same periods in 2018 driven by higher short-term ratesgrowth in the commercial and industrial portfolio. Average deposits increased deposit balances.
Average loansseven percent and leases increased twonine percent for both the three and nine months ended September 30, 2018 compared to the same periods in 2017 driven by growth in the commercial and industrial, and commercial real estate portfolios. Average deposits increased seven percent for both the three and nine months ended September 30, 2018. The increase for both periods was2019 due to growth in internationaldomestic and domesticinternational interest-bearing balances.
 
Global Investment Banking
Client teams and product specialists underwrite and distribute debt, equity and loan products, and provide advisory services and tailored risk management solutions. The economics of certain investment banking and underwriting activities are shared primarily between Global Banking and Global Markets under an internal revenue-sharing arrangement. Global Banking originates certain deal-related transactions with our corporate and commercial clients that are executed and distributed by Global Markets. To provide a complete discussion of our consolidated investment banking fees, the following table presents total Corporation investment banking fees and the portion attributable to Global Banking.


  
Bank of America1816


                              
Investment Banking FeesInvestment Banking Fees      Investment Banking Fees      
          
Global Banking Total Corporation Global Banking Total CorporationGlobal Banking Total Corporation Global Banking Total Corporation
Three Months Ended September 30 Nine Months Ended September 30Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions)2018 2017 2018 2017 2018 2017 2018 20172019 2018 2019 2018 2019 2018 2019 2018
Products                              
Advisory$237
 $321
 $262
 $374
 $782
 $1,177
 $861
 $1,262
$427
 $237
 $452
 $262
 $984
 $782
 $1,083
 $861
Debt issuance295
 397
 684
 962
 1,018
 1,170
 2,385
 2,789
356
 295
 816
 684
 1,007
 1,017
 2,310
 2,385
Equity issuance111
 88
 307
 193
 330
 314
 911
 736
119
 112
 308
 307
 337
 331
 937
 911
Gross investment banking fees643
 806
 1,253
 1,529
 2,130
 2,661
 4,157
 4,787
902
 644
 1,576
 1,253
 2,328
 2,130
 4,330
 4,157
Self-led deals(14) (18) (49) (52) (63) (89) (178) (194)(11) (15) (43) (49) (54) (63) (162) (178)
Total investment banking fees$629
 $788
 $1,204
 $1,477
 $2,067
 $2,572
 $3,979
 $4,593
$891
 $629
 $1,533
 $1,204
 $2,274
 $2,067
 $4,168
 $3,979
Total Corporation investment banking fees, excluding self-led deals, of $1.2$1.5 billion and $4.0$4.2 billion, which are primarily included within Global Banking and Global Markets, decreased18increased 27 percent and 13five percent for the three and nine months ended September 30, 20182019 compared to the same periods in 2017 primarily2018 due to declinesincreases in leveraged finance and advisoryAdvisory fees, partially offset by an increase in equity underwriting fees.primarily M&A activity.
Global Markets
                        
 Three Months Ended September 30   Nine Months Ended September 30   Three Months Ended September 30   Nine Months Ended September 30  
(Dollars in millions)(Dollars in millions)2018 2017 % Change 2018 2017 % Change(Dollars in millions)2019 2018 % Change 2019 2018 % Change
Net interest income (FTE basis)$754
 $899
 (16)% $2,425
 $2,812
 (14)%
Net interest incomeNet interest income$1,016
 $933
 9 % $2,780
 $2,922
 (5)%
Noninterest income:Noninterest income:    

     

Noninterest income:    

     

Investment and brokerage servicesInvestment and brokerage services388
 496
 (22) 1,306
 1,548
 (16)Investment and brokerage services419
 388
 8
 1,296
 1,306
 (1)
Investment banking feesInvestment banking fees523
 624
 (16) 1,783
 1,879
 (5)Investment banking fees585
 522
 12
 1,707
 1,783
 (4)
Trading account profits1,727
 1,714
 1
 6,614
 5,634
 17
Trading account incomeTrading account income1,580
 1,551
 2
 5,623
 6,129
 (8)
All other incomeAll other income451
 168
 n/m
 722
 682
 6
All other income264
 479
 (45) 783
 795
 (2)
Total noninterest incomeTotal noninterest income3,089
 3,002
 3
 10,425
 9,743
 7
Total noninterest income2,848
 2,940
 (3) 9,409
 10,013
 (6)
Total revenue, net of interest expense (FTE basis)3,843
 3,901
 (1) 12,850
 12,555
 2
Total revenue, net of interest expenseTotal revenue, net of interest expense3,864
 3,873
 —
 12,189
 12,935
 (6)
    

     

     

     

Provision for credit lossesProvision for credit losses(2) (6) (67) (6) 2
 n/m
Provision for credit losses—
 (2) n/m
 (18) (6) n/m
Noninterest expenseNoninterest expense2,612
 2,711
 (4) 8,145
 8,117
 —
Noninterest expense2,679
 2,633
 2
 8,109
 8,283
 (2)
Income before income taxes (FTE basis)1,233
 1,196
 3
 4,711
 4,436
 6
Income tax expense (FTE basis)321
 440
 (27) 1,225
 1,553
 (21)
Income before income taxesIncome before income taxes1,185
 1,242
 (5) 4,098
 4,658
 (12)
Income tax expenseIncome tax expense338
 323
 5
 1,168
 1,211
 (4)
Net incomeNet income$912
 $756
 21
 $3,486
 $2,883
 21
Net income$847
 $919
 (8) $2,930
 $3,447
 (15)
                       
Effective tax rate (FTE basis)26.0% 36.8%   26.0% 35.0%  
Effective tax rateEffective tax rate28.5% 26.0%   28.5% 26.0%  
                       
Return on average allocated capitalReturn on average allocated capital10
 9
   13
 11
  Return on average allocated capital10
 10
   11
 13
  
Efficiency ratio (FTE basis)67.99
 69.48
   63.39
 64.64
  
Efficiency ratioEfficiency ratio69.32
 68.00
   66.53
 64.04
  
                       
Balance Sheet                        
Three Months Ended September 30   Nine Months Ended September 30   Three Months Ended September 30   Nine Months Ended September 30  
AverageAverage2018 2017 % Change 2018 2017 % ChangeAverage2019 2018 % Change 2019 2018 % Change
Trading-related assets:Trading-related assets:           Trading-related assets:           
Trading account securitiesTrading account securities$215,397
 $216,988
 (1)% $211,668
 $214,190
 (1)%Trading account securities$261,182
 $215,397
 21 % $246,077
 $211,668
 16 %
Reverse repurchasesReverse repurchases124,842
 101,556
 23
 127,019
 99,998
 27
Reverse repurchases110,907
 124,842
 (11) 117,087
 127,019
 (8)
Securities borrowedSecurities borrowed74,648
 81,950
 (9) 80,073
 83,770
 (4)Securities borrowed80,641
 74,648
 8
 82,772
 80,073
 3
Derivative assetsDerivative assets45,392
 41,789
 9
 46,754
 41,184
 14
Derivative assets46,061
 45,392
 1
 43,920
 46,754
 (6)
Total trading-related assetsTotal trading-related assets460,279
 442,283
 4
 465,514
 439,142
 6
Total trading-related assets498,791
 460,279
 8
 489,856
 465,514
 5
Total loans and leasesTotal loans and leases71,231
 72,347
 (2) 73,340
 70,692
 4
Total loans and leases71,589
 71,231
 1
 70,757
 73,340
 (4)
Total earning assetsTotal earning assets459,073
 446,754
 3
 478,455
 444,478
 8
Total earning assets476,919
 459,073
 4
 474,481
 478,455
 (1)
Total assetsTotal assets652,481
 642,428
 2
 669,688
 631,684
 6
Total assets687,393
 652,481
 5
 679,038
 669,684
 1
Total depositsTotal deposits30,721
 32,125
 (4) 31,253
 32,397
 (4)Total deposits30,155
 30,721
 (2) 30,878
 31,253
 (1)
Allocated capitalAllocated capital35,000
 35,000
 —
 35,000
 35,000
 —
Allocated capital35,000
 35,000
 —
 35,000
 35,000
 —
                       
Period endPeriod end  September 30
2018		 December 31
2017		 % ChangePeriod end      September 30
2019		 December 31
2018		 % Change
Total trading-related assetsTotal trading-related assets  $456,643
 $419,375
 9 %Total trading-related assets      $497,206
 $447,998
 11 %
Total loans and leasesTotal loans and leases  73,023
 76,778
 (5)Total loans and leases      74,979
 73,928
 1
Total earning assetsTotal earning assets  447,304
 449,314
 —
Total earning assets      478,303
 457,224
 5
Total assetsTotal assets  646,359
 629,013
 3
Total assets      689,023
 641,923
 7
Total depositsTotal deposits  41,102
 34,029
 21
Total deposits      30,885
 37,841
 (18)
n/m = not meaningful

19Bank of America





Global Markets offers sales and trading services and research services to institutional clients across fixed-income, credit, currency, commodity and equity businesses. Global Markets product coverage includes securities and derivative products in
both the primary and secondary markets. For more information about Global Markets,, see Business Segment Operations in the MD&A of the Corporation’s 20172018 Annual Report on Form 10-K.
Three Months Ended September 30, 2018 Compared to Three Months Ended September 30, 2017
17Bank of America





Three-Month Comparison
Net income for Global Markets increased $156 decreased $72 million to $912$847 million. Net DVA losses were $99$15 million compared to losses of $21 million. Excluding$99 million, and excluding net DVA, net income increased $218decreased $136 million to $987$858 million. These increasesdecreases were primarily driven by lowera decline in revenue and an increase in noninterest expenseexpense.
Revenue declined $9 million to $3.9 billion as higher sales and trading revenue and investment banking fees were more than offset by a decrease in income tax expense fromgain on the reductionsale of an equity investment in the federal income tax rate.
prior-year quarter. Sales and trading revenue increased $217 million, and excluding net DVA, decreased $79increased $133 million primarily due to lower fixed-income, currencies and commodities (FICC)driven by an increase in Equities revenue.
Noninterest expense decreased $99increased $46 million to $2.6 billion driven by lower operating costs.
Average assets increased $10.1 billion to $652.5$2.7 billion primarily driven by increased levels of inventory to facilitate client demand.
The return on average allocated capital was 10 percent, up from nine percent, reflecting higher net income.
Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017
Net income for Global Markets increased $603 million to $3.5 billion. Net DVA losses were $214 million compared to losses of
$310 million. Excluding net DVA, net income increased $574 million to $3.6 billion. These increases were primarily driven by higher revenuerevenue-related expenses and lower income tax expense from the reductioncontinued investment in the federal income tax rate.
Sales and trading revenue, excluding net DVA, increased $172 million due to higher Equities revenue, partially offset by lower FICC revenue. Noninterest expense increased $28 million to $8.1 billion primarily due to continued investments in technology, partially offset by lower operating costs.technology.
Average total assets increased $38.0$34.9 billion to $669.7$687.4 billion primarily driven by increased levels of inventory in FICC to facilitate expected client demand and growthhigher client balances in Equities.
The return on average allocated capital remained unchanged at 10 percent. For more information on capital allocated to the business segments, see Business Segment Operations on page 10.
Nine-Month Comparison
Net income for Global Markets decreased $517 million to $2.9 billion. Net DVA losses were $136 million compared to losses of $214 million. Excluding net DVA, net income decreased $577 million to $3.0 billion, primarily driven by a decrease in revenue, partially offset by lower noninterest expense.
Revenue declined $746 million to $12.2 billion as sales and trading revenue decreased $677 million, and excluding net DVA, decreased $755 million due to declines in both FICC and Equities client financing activities. Total period-endrevenue.
Noninterest expense decreased $174 million to $8.1 billion primarily driven by lower revenue-related expenses.
Average total assets increased $17.3$9.4 billion to $679.0 billion primarily due to increased levels of inventory in FICC to facilitate expected client demand. Period-end total assets increased $47.1 billion from December 31, 20172018 to $646.4$689.0 billion at September 30, 2018 due to growthincreased levels of inventory in EquitiesFICC to facilitate expected client financing activities.demand and higher client balances in Equities.
The return on average allocated capital was 11 percent, down from 13 percent, up from 11 percent, reflecting higherlower net income.
Sales and Trading Revenue
For a description of sales and trading revenue, see Business Segment Operations in the MD&A of the Corporation’s 20172018 Annual Report on Form 10-K. The following table and related discussion present sales and trading revenue, substantially all of which is in Global Markets, with the remainder in Global Banking. In addition, the following table and related discussion present sales and trading revenue, excluding net DVA, which is a non-GAAP financial measure. For more information on net DVA, see Supplemental Financial Data on page 6.
              
Sales and Trading Revenue (1, 2)
Sales and Trading Revenue (1, 2, 3)
Sales and Trading Revenue (1, 2, 3)
          
Three Months Ended September 30 Nine Months Ended September 30Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions)2018 2017 2018 20172019 2018 2019 2018
Sales and trading revenue(2)              
Fixed-income, currencies and commodities$1,982
 $2,152
 $6,702
 $7,068
$2,056
 $1,989
 $6,433
 $6,754
Equities990
 977
 3,804
 3,170
1,148
 998
 3,473
 3,829
Total sales and trading revenue$2,972
 $3,129
 $10,506
 $10,238
$3,204
 $2,987
 $9,906
 $10,583
              
Sales and trading revenue, excluding net DVA (3)(4)
              
Fixed-income, currencies and commodities$2,062
 $2,166
 $6,888
 $7,350
$2,074
 $2,069
 $6,560
 $6,941
Equities1,009
 984
 3,832
 3,198
1,145
 1,017
 3,482
 3,856
Total sales and trading revenue, excluding net DVA$3,071
 $3,150
 $10,720
 $10,548
$3,219
 $3,086
 $10,042
 $10,797
(1) 
Includes FTE adjustments of $53 million and $199 million for the three and nine months ended September 30, 2018 compared to $61 million and $162 million for the same periods in 2017. For more information on sales and trading revenue, see Note 3 – Derivatives to the Consolidated Financial Statements.
(2) 
Includes Global Banking salesFTE adjustments of $52 million and trading revenue of $66132 million and $307 million for the three and nine months ended September 30, 20182019 compared to $6154 million and $175200 million for the same periods in 20172018.
(3) 
Includes Global Banking sales and trading revenue of $147 million and $390 million for the three and nine months ended September 30, 2019 compared to $51 million and $297 million for the same periods in 2018.
(4)
FICC and Equities sales and trading revenue, excluding net DVA, is a non-GAAP financial measure. FICC net DVA losses were $8018 million and $186127 million for the three and nine months ended September 30, 20182019 compared to losses of $1480 million and $282187 million for the same periods in 20172018. Equities net DVA lossesgains were $193 million and losses of $289 million for the three and nine months ended September 30, 20182019 compared to losses of $719 million and $2827 million for the same periods in 20172018.
The following explanations for period-over-period changes insales and trading, FICC and Equities revenue exclude net DVA, but would be the same whetherif net DVA was included or excluded.included.
Three Months Ended September 30, 2018 Compared to Three Months Ended September 30, 2017Three-Month Comparison
FICC revenue increased $5 million primarily driven by an improvement in mortgage and municipal products, largely offset by weaker trading performance in foreign exchange and credit
products. Equities revenue increased $128 million driven by growth in client financing activities.
Nine-Month Comparison
FICC revenue decreased $104 million primarily due to lower client activity in rates products and a weaker environment for municipal bonds. Equities revenue increased $25$381 million due to increased client activity in financing.
Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017
FICCa generally weaker trading environment. Equities revenue decreased $462 million primarily due to lower activity and a less favorable market in credit-related products. The decline in FICC revenue was also impacted by higher funding costs, which were driven by increases in market interest rates. Equities revenue increased $634$374 million driven by increasedunder performance in derivatives compared to a strong prior-year period which benefited from higher client activity in financing and derivatives.elevated market volatility.



  
Bank of America2018


All Other
                        
 Three Months Ended September 30   Nine Months Ended September 30   Three Months Ended September 30   Nine Months Ended September 30  
(Dollars in millions)(Dollars in millions)2018 2017 % Change 2018 2017 % Change(Dollars in millions)2019 2018 % Change 2019 2018 % Change
Net interest income (FTE basis)$162
 $152
 7 % $435
 $675
 (36)%
Net interest incomeNet interest income$62
 $178
 (65)% $135
 $480
 (72)%
Noninterest income (loss)Noninterest income (loss)(1) (355) (100)% (907) (94) n/m
Noninterest income (loss)(811) (258) n/m
 (2,018) (1,519) 33
Total revenue, net of interest expense (FTE basis)161
 (203) n/m
 (472) 581
 n/m
Total revenue, net of interest expenseTotal revenue, net of interest expense(749) (80) n/m
 (1,883) (1,039) 81
                       
Provision for credit lossesProvision for credit losses(95) (191) (50) (352) (376) (6)Provision for credit losses(295) (95) n/m
 (590) (352) 68
Noninterest expenseNoninterest expense566
 734
 (23) 2,166
 3,546
 (39)Noninterest expense2,464
 471
 n/m
 3,398
 1,487
 129
Loss before income taxes (FTE basis)(310) (746) (58) (2,286) (2,589) (12)
Income tax expense (benefit) (FTE basis)(453) (800) (43) (1,893) (1,944) (3)
Loss before income taxesLoss before income taxes(2,918) (456) n/m
 (4,691) (2,174) 116
Income tax benefitIncome tax benefit(1,320) (488) n/m
 (3,055) (1,862) 64
Net income (loss)Net income (loss)$143
 $54
 n/m
 $(393) $(645) (39)Net income (loss)$(1,598) $32
 n/m
 $(1,636) $(312) n/m
                        
Balance Sheet                        
 Three Months Ended September 30   Nine Months Ended September 30   Three Months Ended September 30   Nine Months Ended September 30  
Average 2018 2017 % Change 2018 2017 % Change 2019 2018 % Change 2019 2018 % Change
Total loans and leasesTotal loans and leases$59,930
 $76,546
 (22)% $63,602
 $86,294
 (26)%Total loans and leases$41,788
 $59,930
 (30)% $44,529
 $63,602
 (30)%
Total assets (1)
Total assets (1)
209,847
 207,274
 1
 199,709
 206,373
 (3)
Total assets (1)
212,527
 208,458
 2
 205,415
 198,398
 4
Total depositsTotal deposits22,118
 25,273
 (12) 22,635
 25,629
 (12)Total deposits20,718
 22,118
 (6) 20,720
 22,635
 (8)
                        
Period end       September 30
2018		 December 31
2017		 % Change       September 30
2019		 December 31
2018		 % Change
Total loans and leasesTotal loans and leases      $54,978
 $69,452
 (21)%Total loans and leases      $39,671
 $48,061
 (17)%
Total assets (1)
Total assets (1)
      219,985
 194,042
 13
Total assets (1)
      207,605
 195,466
 6
Total depositsTotal deposits      21,375
 22,719
 (6)Total deposits      21,883
 18,541
 18
(1) 
In segments where the total of liabilities and equity exceeds assets, which are generally deposit-taking segments, we allocate assets from All Other to those segments to match liabilities (i.e., deposits) and allocated shareholders’ equity. Average allocated assets were $516.3536.8 billion and $516.8540.9 billion for the three and nine months ended September 30, 20182019 compared to $510.1516.3 billion and $517.9516.8 billion for the same periods in 2017,2018, and period-end allocated assets were $531.3546.5 billion and $520.4540.8 billion at September 30, 20182019 and December 31, 20172018.
n/m = not meaningful
All Other consists of ALM activities, equity investments, non-core mortgage loans and servicing activities, the net impact of periodic revisions to the MSR valuation model for core and non-core MSRs and the related economic hedge results, liquidating businesses and residual expense allocations.certain expenses not otherwise allocated to a business segment. ALM activities encompass certain residential mortgages, debt securities, and interest rate and foreign currency risk management activities. Substantially all of the results of ALM activities are allocated to our business segments. Equity investments include our merchant services joint venture, as well as a portfolio of equity, real estate and other alternative investments. For moreinformation on our merchant services joint venture, see Note 11 – Commitments and Contingencies to the Consolidated Financial Statements. For additional information about All Other,, see Business Segment Operations in the MD&A of the Corporation’s 20172018 Annual Report on Form 10-K.
The Corporation classifies consumer real estate loans as core or non-core based on loan and customer characteristics. For more information on the core and non-core portfolios, see Consumer Portfolio Credit Risk Management on page 28. Residential mortgage loans that are held for ALM purposes, including interest rate or liquidity risk management, are classified as core and are presented on the balance sheet of All Other. During the nine months ended September 30, 2018,2019, residential mortgage loans held for ALM activities decreased $3.2$2.4 billion to $25.3$22.5 billion at September 30, 2018 primarily as a result of payoffs and paydowns. Non-core residential mortgage and home equity loans, which are principally run-offrunoff portfolios, are also held in All Other. During the nine months ended September 30, 2018,2019, total non-core loans decreased $11.4$6.5 billion to $29.9$17.0 billion at September 30, 2018 due primarily to sales, payoffs and paydowns as well as Federal Housing Administration (FHA) loan salesconveyances, offset by repurchases. For more information on the composition of $5.9 billion.the core and non-core portfolios, see Consumer Portfolio Credit Risk Management on page 26.
Three Months Ended September 30, 2018 Compared to Three Months Ended September 30, 2017Three-Month Comparison
Net incomeThe net loss for All Other increased $89was$1.6 billion compared to net income of $32 million for the prior-year period. The current-year period included a $2.1 billion pretax impairment charge related to $143the notice of termination of the merchant services joint venture at the conclusion of its current term.
Revenue decreased $669 million due to lower net interest income and an increase in the loss in noninterest income. Net
interest income decreased $116 million driven by a lower pretax loss, partially offset by a lower income tax benefitloan balances due to the reduction in the federal income tax rate. Pretax results were driven by higher revenue and lower noninterest expense, partially offset by a decrease in the benefit in provision for credit losses.
Revenue increased $364 million to $161 million primarily due to a lower provision for representations and warranties as well as a gain of $84 million from the sale of a non-core consumer real estate loan portfolio.sales and portfolio run-off. The loss in noninterest income increased $553 million driven by the results of certain ALM and other treasury activities, an increase in the reserve for payment protection insurance and lower gains on sales of debt securities.
The benefit in the provision for credit losses declined $96increased $200 million to $95$295 million primarily due to a slower pacerecoveries from sales of portfolio improvement in thepreviously charged-off non-core consumer real estate portfolio.
loans. Noninterest expense decreased $168 millionincreased $2.0 billion to $566 million$2.5 billion due to lower non-core mortgage coststhe $2.1 billion impairment charge and higher legacy mortgage-related litigation expense.
The income tax benefit was $453 million$1.3 billion compared to $800 million. The decreasean income tax benefit of $488 million in the same period in 2018. The increase in the tax benefit was dueprimarily related to the reduction intax impact of the federal incomeimpairment charge and discrete tax rate andbenefits from the change in the pretax loss.resolution of various tax matters. Both periods included income tax benefit adjustments to eliminate the FTE treatment of certain tax credits recorded in Global Banking.Banking.
Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017Nine-Month Comparison
The net loss for All Other improved $252 million to a loss of $393 million, reflecting lower noninterest expense, partially offset by lower revenue.
Revenue decreased $1.1increased$1.3 billion to a loss of $472$1.6 billion due to the same factor as described in the three-month discussion.
Revenue decreased $844 million due to the same factors as described in the three-month discussion.
The benefit in the provision for credit losses increased $238 million to $590 million primarily driven by the same factor as described in the three-month discussion. Noninterest expense increased $1.9 billion to $3.4 billion due to a prior-year $793 million pretax gain recognized in connection with the sale of the non-U.S. consumer credit card business and,same factors as described in the current-year period, a $729 million charge related to the redemption of certain trust preferred securities, partially offset by gains of $656 million from the sale of primarily non-core mortgage loans.three-month discussion.
Noninterest expense decreased $1.4 billion to $2.2 billion primarily due to lower non-core mortgage costs and reduced operational costs from the sale of the non-U.S. consumer credit card business. Also, the prior-year period included a $295 million impairment charge related to certain data centers.


21Bank of America





The income tax benefit was $3.1 billion compared to a benefit of $1.9 billion in both periods. The current-yearthe same period reflectsin 2018 driven by the lower federal income tax rate, whilesame factors as described in the prior-year period included tax expense related to the sale of the non-U.S. consumer credit card business.three-month discussion. Both periods included income tax benefit adjustments to eliminate the FTE treatment of certain tax credits recorded in Global Banking.

19Bank of America





Off-Balance Sheet Arrangements and Contractual Obligations
We have contractual obligations to make future payments on debt and lease agreements. Additionally, in the normal course of business, we enter into contractual arrangements whereby we commit to future purchases of products or services from unaffiliated parties. For more information on obligations and commitments, see Note 1011 – Commitments and Contingencies to the Consolidated Financial Statements herein, as well as Off-Balance Sheet Arrangements and Contractual Obligations in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K, and Note 11 – Long-term Debt and Note 12 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K.
Representations and Warranties Obligations
For information on representations and warranties obligations in connection with the sale of mortgage loans, see Note 712 – RepresentationsCommitments and Warranties Obligations and Corporate Guarantees Contingenciesto the Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K and Representations and Warranties in Note 10 – Commitments and Contingencies to the Consolidated Financial Statements herein.10-K. For more information related to the sensitivity of the assumptions used to estimate our reserve for representations and warranties, see Complex Accounting Estimates – Representations and Warranties Liability in the MD&A of the Corporation’s 20172018 Annual Report on Form 10-K.
Other Mortgage-related Matters
For more information on other mortgage-related matters, see Off-Balance Sheet Arrangements and Contractual Obligations – Other Mortgage-related Matters in the MD&A of the Corporation’s 2017 Annual Report on Form 10-K.
Managing Risk
Risk is inherent in all our business activities. The seven key types of risk faced by the Corporation are strategic, credit, market, liquidity, compliance, operational and reputational risks.reputational. Sound risk management enables us to serve our customers and deliver for our shareholders. If not managed well, risks can result in financial loss, regulatory sanctions and penalties, and damage to our reputation, each of which may adversely impact our ability to execute our business strategies. The Corporation takes a comprehensive approach to risk management with a defined Risk Framework and an articulated Risk Appetite Statement which are reviewed at leastapproved annually and approved by the Enterprise Risk Committee and the Board.
Our Risk Framework is the foundation for consistent and effective management of risks facing the Corporation. The Risk Framework sets forth clear roles, responsibilities and accountability for the management of risk and provides a blueprint for how the Board, through delegation of authority to committees and executive officers, establishes risk appetite and associated limits for our activities.
Our Risk Appetite Statement is intended to ensure that the Corporation maintains an acceptable risk profile by providing a common framework and a comparable set of measures for senior management and the Board to clearly indicate the level of risk the
Corporation is willing to accept. Risk appetite is set at least annually and is aligned with the Corporation’s strategic, capital and financial operating plans. Our line of business strategies and risk appetite are also similarly aligned.
For more information on our Risk Framework, our risk management activities and the key types of risk faced by the Corporation, see the Managing Risk through Reputational Risk sections in the MD&A of the Corporation’s 20172018 Annual Report on Form 10-K.
Capital Management
The Corporation manages its capital position so that its capital is more than adequate to support its business activities and to ensure capital,aligns with risk, and risk appetite are aligned. 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.strategic planning. For more information
We periodically review
on capital allocated to our businesses and allocate capital annually duringmanagement, including related regulatory requirements, see Capital Management in the strategic and capital planning processes. For additional information, see Business Segment OperationsMD&A of the Corporation’s 2018 Annual Report on page 11.Form 10-K.
CCAR and Capital Planning
The Board of Governors of the Federal Reserve System (Federal Reserve) requires BHCs to submit a capital plan and requests for capital actions on an annual basis, consistent with the rules governing the Comprehensive Capital Analysis and Review (CCAR) capital plan.
On June 28, 2018,27, 2019, following the Federal Reserve’s non-objection to our 20182019 CCAR capital plan, the Board authorized the repurchase of approximately $20.6$30.9 billion in common stock from July 1, 20182019 through June 30, 2019,2020, which includes approximately $600$900 million in repurchases to offset shares awarded under equity-based compensation plans during the same period.
The repurchase program, which covers both During the third quarter of 2019, we repurchased $7.6 billion of common stock and warrants, will bepursuant to the Board's 2019 repurchase authorization.
Our stock repurchases are subject to various factors, including the Corporation’s capital position, liquidity, financial performance and alternative uses of capital, stock trading price and general market conditions, and may be suspended at any time. The repurchases may be effected through open market purchases or privately negotiated transactions, including repurchase plans that satisfy the conditions of Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.amended (Exchange Act). As a “well-capitalized”well-capitalized BHC, we may notify the Federal Reserve of our intention to make additional capital distributions not to exceed 0.25 percent of Tier 1 capital, 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, including Basel 3, issued by U.S. banking regulators including Basel 3.regulators. The Corporation's depository institution subsidiaries are also subject to the Prompt Corrective Action (PCA) framework. The Corporation and its primary affiliated banking entity, BANA, are Basel 3 Advanced approaches institutions under Basel 3 and are required to report regulatory risk-based capital ratios and risk-weighted assets under both the Standardized and Advanced approaches. The approach that yields the lower ratio is used to assess capital adequacy including under the Prompt Corrective Action (PCA)PCA framework. As of September 30, 2018,2019, the Common equity tier 1 (CET1) and Tier 1 capital ratios for the Corporation

Bank of America22

were lower under the Standardized approach whereas the Advanced approaches yielded a lower Total capital ratio. For more information on Basel 3, see Capital Management in the MD&A of the Corporation’s 2017 Annual Report on Form 10-K.
Minimum Capital Requirements
Minimum capital requirements and related buffers are beingwere fully phased in from January 1, 2014 throughas of January 1, 2019. The PCA framework establishes categories of capitalization including well capitalized, basedIn order to avoid restrictions on capital distributions and discretionary bonus payments, the Basel 3 regulatory ratio requirements. U.S. banking regulators are required to take certain mandatory actions depending on the category of capitalization, with no mandatory actions required for well-capitalized banking organizations.
We are subject to a capital conservation buffer, a countercyclical capital buffer and a global systemically important bank (G-SIB) surcharge that are being phased in over a three-year period ending January 1, 2019. Once fully phased-in, the Corporation’sCorporation must meet risk-based capital ratio requirements willthat 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 restrictions on capital distributions and discretionary bonus payments.global systemically important bank (G-SIB) surcharge. The buffers and surcharge must be comprised solely of CET1 capital. Under the phase-in provisions, we are
required to maintain a capital conservation buffer greater than 1.875 percent plus a G-SIB surcharge of 1.875 percent in 2018. The countercyclical capital buffer is currently set at zero. We estimate that our fully phased-in G-SIB surcharge will be 2.5 percent. The G-SIB surcharge may differ from this estimate over time.
Effective January 1, 2018, the Corporation is also required to maintain a minimum supplementary leverage ratio (SLR) of 3.0 percent plus a leverage buffer of 2.0 percent in order to avoid certain restrictions on capital distributions and discretionary bonus payments. Our insured depository institution subsidiaries are required to maintain a minimum 6.0 percent SLR to be considered well capitalized under the PCA framework. For more information on the Corporation’s capital ratios and regulatory requirements, see Table 9.

Bank of America 20

Capital Composition and Ratios
Table 98 presents Bank of America Corporation’s capital ratios and related information in accordance with Basel 3 Standardized and Advanced approaches as measured at September 30, 20182019 and December 31, 2017.2018. As of the periods presented herein, the Corporation met the definition of well capitalized under current regulatory requirements.















Table 9
Bank of America Corporation Regulatory Capital under Basel 3 (1)
    
Table 8Bank of America Corporation Regulatory Capital under Basel 3  
    
Standardized
Approach		 Advanced
Approaches		 
Current Regulatory Minimum (2)
 
2019 Regulatory Minimum (3)
 Standardized
Approach		 Advanced
Approaches		 
Regulatory Minimum (1)
(Dollars in millions, except as noted)(Dollars in millions, except as noted)September 30, 2018(Dollars in millions, except as noted)September 30, 2019
Risk-based capital metrics:Risk-based capital metrics:       Risk-based capital metrics:     
Common equity tier 1 capitalCommon equity tier 1 capital$164,386
 $164,386
    Common equity tier 1 capital$169,203
 $169,203
  
Tier 1 capitalTier 1 capital186,189
 186,189
    Tier 1 capital192,029
 192,029
  
Total capital (4)
218,159
 209,950
    
Total capital (2)
Total capital (2)
225,430
 217,247
  
Risk-weighted assets (in billions)Risk-weighted assets (in billions)1,439
 1,424
    Risk-weighted assets (in billions)1,484
 1,440
  
Common equity tier 1 capital ratioCommon equity tier 1 capital ratio11.4% 11.5% 8.25% 9.5%Common equity tier 1 capital ratio11.4% 11.7% 9.5%
Tier 1 capital ratioTier 1 capital ratio12.9
 13.1
 9.75
 11.0
Tier 1 capital ratio12.9
 13.3
 11.0
Total capital ratioTotal capital ratio15.2
 14.7
 11.75
 13.0
Total capital ratio15.2
 15.1
 13.0
              
Leverage-based metrics:Leverage-based metrics:       Leverage-based metrics:     
Adjusted quarterly average assets (in billions) (5)
$2,240
 $2,240
    
Adjusted quarterly average assets (in billions) (3)
Adjusted quarterly average assets (in billions) (3)
$2,336
 $2,336
  
Tier 1 leverage ratioTier 1 leverage ratio8.3% 8.3% 4.0
 4.0
Tier 1 leverage ratio8.2% 8.2% 4.0
             
SLR leverage exposure (in billions)SLR leverage exposure (in billions)  $2,788
    SLR leverage exposure (in billions)  $2,898
  
SLRSLR  6.7% 5.0
 5.0
SLR  6.6% 5.0
























December 31, 2017
December 31, 2018
Risk-based capital metrics:Risk-based capital metrics:










Risk-based capital metrics:







Common equity tier 1 capitalCommon equity tier 1 capital$168,461

$168,461






Common equity tier 1 capital$167,272

$167,272



Tier 1 capitalTier 1 capital190,189

190,189






Tier 1 capital189,038

189,038



Total capital (4)
224,209

215,311






Total capital (2)
Total capital (2)
221,304

212,878



Risk-weighted assets (in billions)Risk-weighted assets (in billions)1,443

1,459






Risk-weighted assets (in billions)1,437

1,409



Common equity tier 1 capital ratioCommon equity tier 1 capital ratio11.7%
11.5%
7.25%
9.5%Common equity tier 1 capital ratio11.6%
11.9%
8.25%
Tier 1 capital ratioTier 1 capital ratio13.2

13.0

8.75

11.0
Tier 1 capital ratio13.2

13.4

9.75
Total capital ratioTotal capital ratio15.5

14.8

10.75

13.0
Total capital ratio15.4

15.1

11.75






















Leverage-based metrics:Leverage-based metrics:










Leverage-based metrics:







Adjusted quarterly average assets (in billions) (5)
$2,223

$2,223






Adjusted quarterly average assets (in billions) (3)
Adjusted quarterly average assets (in billions) (3)
$2,258

$2,258



Tier 1 leverage ratioTier 1 leverage ratio8.6%
8.6%
4.0

4.0
Tier 1 leverage ratio8.4%
8.4%
4.0
      
SLR leverage exposure (in billions)SLR leverage exposure (in billions)  $2,791
  
SLRSLR  6.8% 5.0
(1) 
Basel 3 transition provisions for regulatory capital adjustments and deductions were fully phased-in as of January 1, 2018. Prior periods are presented on a fully phased-in basis.
(2)
TheSeptember 30, 2018 and December 31, 2017 amounts include a transition capital conservation buffer of 1.875 percentand1.25 percent and a transition G-SIB surcharge of were both 2.5 percent at September 30, 2019 and 1.875 percent and 1.5 percent at December 31, 2018. The countercyclical capital buffer for both periods is was zero.
(3)
The 2019 regulatory minimums include a capital conservation buffer of 2.5 percent and G-SIB surcharge of 2.5 percent. The countercyclical capital buffer is zero. We will be subject to regulatory minimums on January 1, 2019. The SLR minimum includes a leverage buffer of 2.0 percent and was applicable beginning on January 1, 2018.percent.
(4)(2) 
Total capital under the Advanced approaches differs from the Standardized approach due to differences in the amount permitted in Tier 2 capital related to the qualifying allowance for credit losses.
(5)(3) 
Reflects total average assets adjusted average total assets for the three months ended September 30, 2018 and December 31, 2017.
certain Tier 1 capital deductions.

23Bank of America





CET1 capital was $164.4$169.2 billion at September 30, 2018, a decrease2019, an increase of $4.1$1.9 billion from December 31, 2017,2018, driven by common stock repurchases, market value declines inearnings and net unrealized gains on available-for-sale (AFS) debt securities included in accumulated other comprehensive income (OCI) and dividends,, partially offset by earnings.common stock repurchases and dividends. During the nine months ended September 30, 2018,2019, Total capital under the Advanced approaches decreased $5.4
increased $4.4 billion primarily driven by the same factors as CET1 capital and a decreasenet increase in subordinated debt included in Tier 2 capital.
preferred stock. Risk-weighted assets under the Standardized risk-weighted assets,approach, which yielded the lower CET1 capital ratio forat September 30, 2018, remained relatively unchanged from December 31, 2017.2019, increased $46.6 billion during the nine months ended September 30, 2019 to $1,484 billion primarily due to increased client activity in Global Markets and Global Banking and an increase in other assets.
Table 109 shows the capital composition at September 30, 20182019 and December 31, 2017.2018.
        
Table 10
Capital Composition under Basel 3 (1)



Table 9Capital Composition under Basel 3











(Dollars in millions)(Dollars in millions)September 30
2018
December 31
2017		(Dollars in millions)September 30
2019
December 31
2018
Total common shareholders’ equityTotal common shareholders’ equity$239,832

$244,823
Total common shareholders’ equity$244,781

$242,999
Goodwill, net of related deferred tax liabilitiesGoodwill, net of related deferred tax liabilities(68,574)
(68,576)Goodwill, net of related deferred tax liabilities(68,571)
(68,572)
Deferred tax assets arising from net operating loss and tax credit carryforwardsDeferred tax assets arising from net operating loss and tax credit carryforwards(6,166)
(6,555)Deferred tax assets arising from net operating loss and tax credit carryforwards(5,210)
(5,981)
Intangibles, other than mortgage servicing rights and goodwill, net of related deferred tax liabilitiesIntangibles, other than mortgage servicing rights and goodwill, net of related deferred tax liabilities(1,407)
(1,743)Intangibles, other than mortgage servicing rights and goodwill, net of related deferred tax liabilities(1,335)
(1,294)
OtherOther701

512
Other(462)
120
Common equity tier 1 capitalCommon equity tier 1 capital164,386

168,461
Common equity tier 1 capital169,203

167,272
Qualifying preferred stock, net of issuance costQualifying preferred stock, net of issuance cost22,326

22,323
Qualifying preferred stock, net of issuance cost23,400

22,326
OtherOther(523)
(595)Other(574)
(560)
Tier 1 capitalTier 1 capital186,189

190,189
Tier 1 capital192,029

189,038
Tier 2 capital instrumentsTier 2 capital instruments21,444

22,938
Tier 2 capital instruments23,160

21,887
Eligible credit reserves included in Tier 2 capitalEligible credit reserves included in Tier 2 capital2,317

2,272
Eligible credit reserves included in Tier 2 capital2,059

1,972
OtherOther—

(88)Other(1)
(19)
Total capital under the Advanced approachesTotal capital under the Advanced approaches$209,950

$215,311
Total capital under the Advanced approaches$217,247

$212,878

(1)21Bank of America

Basel 3 transition provisions for regulatory capital adjustments and deductions were fully phased-in as of January 1, 2018. Prior periods are presented on a fully phased-in basis.




Table 1110 shows the components of risk-weighted assets as measured under Basel 3 at September 30, 20182019 and December 31, 2017.2018.
                
Table 11
Risk-weighted Assets under Basel 3 (1)
       
Table 10Risk-weighted Assets under Basel 3       
                
Standardized Approach Advanced Approaches Standardized Approach Advanced Approaches Standardized Approach Advanced Approaches Standardized Approach Advanced Approaches
(Dollars in billions)

(Dollars in billions)

September 30, 2018 December 31, 2017
(Dollars in billions)

September 30, 2019 December 31, 2018
Credit riskCredit risk$1,387
 $840
 $1,384
 $867
Credit risk$1,433
 $854
 $1,384
 $827
Market riskMarket risk52
 51
 59
 58
Market risk51
 50
 53
 52
Operational riskOperational riskn/a
 500
 n/a
 500
Operational riskn/a
 500
 n/a
 500
Risks related to credit valuation adjustmentsRisks related to credit valuation adjustmentsn/a
 33
 n/a
 34
Risks related to credit valuation adjustmentsn/a
 36
 n/a
 30
Total risk-weighted assetsTotal risk-weighted assets$1,439
 $1,424
 $1,443
 $1,459
Total risk-weighted assets$1,484
 $1,440
 $1,437
 $1,409
(1)
Basel 3 transition provisions for regulatory capital adjustments and deductions were fully phased-in as of January 1, 2018. Prior periods are presented on a fully phased-in basis.
n/a = not applicable
Bank of America, N.A. Regulatory Capital
Table 1211 presents regulatory capital information for BANA in accordance with Basel 3 Standardized and Advanced approaches as measured at September 30, 20182019 and December 31, 2017.2018. BANA met the definition of well capitalized under the PCA framework for both periods.
           
Table 12Bank of America, N.A. Regulatory Capital under Basel 3  
           
  Standardized Approach Advanced Approaches  
 Ratio Amount Ratio Amount 
Minimum
Required (1)
(Dollars in millions)

September 30, 2018
Common equity tier 1 capital12.2% $146,659
 14.8% $146,659
 6.5%
Tier 1 capital12.2
 146,659
 14.8
 146,659
 8.0
Total capital13.2
 158,657
 15.3
 150,754
 10.0
Tier 1 leverage8.6
 146,659
 8.6
 146,659
 5.0
SLR    7.0
 146,659
 6.0


















December 31, 2017
Common equity tier 1 capital12.5%
$150,552

14.9%
$150,552

6.5%
Tier 1 capital12.5

150,552

14.9

150,552

8.0
Total capital13.6

163,243

15.4

154,675

10.0
Tier 1 leverage9.0

150,552

9.0

150,552

5.0
       
Table 11Bank of America, N.A. Regulatory Capital under Basel 3  
       
  Standardized
Approach		 Advanced
Approaches		 
Regulatory
Minimum (1)
(Dollars in millions, except as noted)

September 30, 2019
Risk-based capital metrics:     
Common equity tier 1 capital$154,045
 $154,045
  
Tier 1 capital154,045
 154,045
  
Total capital (2)
166,062
 158,158
  
Risk-weighted assets (in billions)1,229
 982
  
Common equity tier 1 capital ratio12.5% 15.7% 7.0%
Tier 1 capital ratio12.5
 15.7
 8.5
Total capital ratio13.5
 16.1
 10.5
      
Leverage-based metrics:     
Adjusted quarterly average assets (in billions) (3)
1,741
 1,741
  
Tier 1 leverage ratio8.8% 8.8% 5.0
      
SLR leverage exposure (in billions)  2,137
  
SLR  7.2% 6.0












December 31, 2018
Risk-based capital metrics:     
Common equity tier 1 capital$149,824

$149,824

 
Tier 1 capital149,824

149,824

 
Total capital (2)
161,760
 153,627
  
Risk-weighted assets (in billions)1,195
 959
  
Common equity tier 1 capital ratio12.5% 15.6% 6.5%
Tier 1 capital ratio12.5
 15.6
 8.0
Total capital ratio13.5
 16.0
 10.0
      
Leverage-based metrics:     
Adjusted quarterly average assets (in billions) (3)
1,719
 1,719
  
Tier 1 leverage ratio8.7% 8.7% 5.0
      
SLR leverage exposure (in billions)  2,112
  
SLR  7.1% 6.0
(1) 
Percent
Risk-based capital regulatory minimums at September 30, 2019 are the minimum ratios under Basel 3 including a capital conservation buffer of 2.5 percent. The regulatory minimums for the leverage ratios as of both period ends and risk-based capital ratios as of December 31, 2018 are the percent required to meet guidelines to be considered well capitalized under the PCA framework.
(2)
Total capital under the Advanced approaches differs from the Standardized approach due to differences in the amount permitted in Tier 2 capital related to the qualifying allowance for credit losses.
(3)
Reflects total average assets adjusted for certain Tier 1 capital deductions.

Total Loss-Absorbing Capacity Requirements
Effective January 1, 2019, the Corporation is subject to the Federal Reserve’s final rule requiring G-SIBs to maintain minimum levels of total loss-absorbing capacity (TLAC) and long-term debt. TLAC consists of the Corporation’s Tier 1 capital and eligible long-term debt issued directly by the Corporation. Eligible long-term debt for TLAC ratios is comprised of unsecured debt that has a remaining maturity of at least one year and satisfies additional requirements
as prescribed in the TLAC final rule. As with the risk-based capital ratios and SLR, the Corporation is required to maintain TLAC ratios in excess of minimum requirements plus applicable buffers in order to avoid restrictions on capital distributions and discretionary bonus payments. Table 12 presents the Corporation's TLAC and long-term debt ratios and related information as of September 30, 2019.

  
Bank of America2422


         
Table 12Bank of America Corporation Total Loss-Absorbing Capacity and Long-Term Debt
         
 

TLAC
 
Regulatory Minimum (1)
 
Long-term
Debt
 
Regulatory Minimum (2)
(Dollars in millions)

September 30, 2019
Total eligible balance$368,490
   $168,864
  
Percentage of risk-weighted assets (3)
24.8% 22.0% 11.4% 8.5%
Percentage of SLR leverage exposure12.7
 9.5
 5.8
 4.5
(1)
The TLAC risk-weighted assets regulatory minimum consists of 18.0 percent plus a TLAC risk-weighted assets buffer comprised of 2.5 percent plus the method 1 G-SIB surcharge of 1.5 percent. The countercyclical buffer is zero for this period. The TLAC SLR leverage exposure regulatory minimum consists of 7.5 percent plus a 2.0 percent TLAC leverage buffer. The TLAC risk-weighted assets and leverage buffers must be comprised solely of CET1 capital and Tier 1 capital, respectively.
(2)
The long-term debt risk-weighted assets regulatory minimum is comprised of 6.0 percent plus an additional 2.5 percent requirement based on the Corporation’s method 2 G-SIB surcharge.
(3)
The approach that yields the higher risk-weighted assets is used to calculate TLAC and long-term debt ratios, which was the Standardized approach as of September 30, 2019.
Regulatory Developments
The following supplements the disclosure in Capital Management – Regulatory Developments in the MD&A of the Corporation’s 20172018 Annual Report on Form 10-K.
Minimum Total Loss-Absorbing Capacity
The Federal Reserve’s final rule, which is effective January 1, 2019, includes minimum external total loss-absorbing capacity (TLAC)10-K and long-term debt requirements to improve the resolvability and resiliency of large, interconnected BHCs. As of September 30, 2018,in the Corporation’s TLAC and long-term debt exceeded our estimated 2019 minimum requirements.
Stress Buffer Requirements
On April 10, 2018,Quarterly Report on Form 10-Q for the Federal Reserve announced a proposal to integrate the annual quantitative assessment of the CCAR program with the buffer requirements in the Basel 3 capital rule by introducing stress buffer requirements as a replacement of the CCAR quantitative objection. Under the Standardized approach, the proposal replaces the existing static 2.5 percent capital conservation buffer with a stress capital buffer, calculated as the decrease in the CET1 capital ratio in the supervisory severely adverse scenario of the modified CCAR stress test plus four quarters of planned common stock dividend payments, floored at 2.5 percent. The static 2.5 percent capital conservation buffer would be retained under the Advanced approaches. The proposal also introduces a stress leverage buffer requirement which would be calculated as the decrease in the Tier 1 leverage ratio in the supervisory severely adverse scenario of the modified CCAR stress test plus four quarters of planned common stock dividends, with no floor. The SLR would not incorporate a stress buffer requirement. The proposal also updates the capital distribution assumptions used in the CCAR stress test to better align with a firm’s expected actions in stress, notably removing the assumption that a BHC will carry out all of its planned capital actions under stress.
Enhanced Supplementary Leverage Ratio and TLAC Requirements
On April 11, 2018, the Federal Reserve and OCC announced a proposal to modify the enhanced SLR standards applicable to U.S. G-SIBs and their insured depository institution subsidiaries. The proposal replaces the existing 2.0 percent leverage buffer with a leverage buffer tailored to each G-SIB, set at 50 percent of the applicable G-SIB surcharge. This proposal also replaces the current 6.0 percent threshold at which a G-SIB’s insured depository institution subsidiaries are considered well capitalized under the PCA framework with a threshold set at 3.0 percent plus 50 percent of the G-SIB surcharge applicable to the subsidiary’s G-SIB holding company. Correspondingly, the proposal updates the external TLAC leverage buffer for each G-SIB to 50 percent of the applicable G-SIB surcharge and revises the leverage component of the minimum external long-term debt requirement from 4.5 percent to 2.5 percent plus 50 percent of the applicable G-SIB surcharge.
Revisions to Basel 3 to Address Current Expected Credit Loss Accounting
On April 13, 2018, the U.S. banking regulators announced a proposal to address the regulatory capital impact of using the current expected credit loss methodology to measure credit reserves under a new accounting standard which is effective on January 1, 2020. For more information on this standard, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements. The proposal provides an
option to phase-in the impact to regulatory capital over a three-year period on a straight-line basis. It also updates the existing regulatory capital framework by creating a new defined term, allowance for credit losses, which would include credit losses on all financial instruments measured at amortized cost with the exception of purchased credit-impaired assets. The proposal continues to allow a limited amount of credit losses to be recognized in Tier 2 capital and maintains the existing limits under the Standardized and Advanced approaches.
Single-Counterparty Credit Limits
Onquarter ended June 14, 2018, the Federal Reserve published a final rule establishing single-counterparty credit limits (SCCL) for BHCs with total consolidated assets of $250 billion or more. The SCCL rule is designed to ensure that the maximum possible loss that a BHC could incur due to the default of a single counterparty or a group of connected counterparties would not endanger the BHC’s survival, thereby reducing the probability of future financial crises. Beginning January 1, 2020, G-SIBs must calculate SCCL on a daily basis by dividing the aggregate net credit exposure to a given counterparty by the G-SIB’s Tier 1 capital, ensuring that exposures to other G-SIBs and nonbank financial institutions regulated by the Federal Reserve do not breach 15 percent of Tier 1 capital and exposures to most other counterparties do not breach 25 percent of Tier 1 capital. Certain exposures, including exposures to the U.S. government, U.S. government-sponsored entities and qualifying central counterparties, are exempt from the credit limits.30, 2019.
Broker-dealer Regulatory Capital and Securities Regulation
The Corporation’s principal U.S. broker-dealer subsidiaries are BofA Securities, Inc. (BofAS), Merrill Lynch Professional Clearing Corp (MLPCC) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) and. As previously disclosed in the Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, BofAS was formed as a result of the reorganization of MLPF&S which was completed in May 2019. The Corporation's principal European broker-dealer subsidiaries are Merrill Lynch Professional Clearing Corp (MLPCC). MLPCC is a fully-guaranteed subsidiary of MLPF&SInternational (MLI) and provides clearing and settlement services. Both entitiesBofA Securities Europe SA (BofASE).
The U.S. broker-dealer subsidiaries are subject to the net capital requirements of SecuritiesRule 15c3-1 under the Exchange Act. BofAS computes its minimum capital requirements as an alternative net capital broker-dealer under Rule 15c3-1, and Exchange Commission (SEC)MLPCC and MLPF&S compute their minimum capital requirements in accordance with the alternative standard under Rule 15c3-1. Both entitiesBofAS and MLPCC are also registered as futures commission merchants and are subject to theU.S. Commodity Futures Trading Commission (CFTC) 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 September 30, 2018, MLPF&S’s regulatory net capital as defined by Rule 15c3-1 was $14.1 billionBofAS provides institutional services and exceeded the minimum requirement of $1.9 billion by $12.2 billion. MLPCC’s net capital of $4.6 billion exceeded the minimum requirement of $614 million by $4.0 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 September 30, 2018, MLPF&S had tentative net capital and net capital in excess of the greater of $500 million or a certain percentage of its reserve requirement. BofAS is also required to hold a certain percentage of its risk-based margin in order to meet its CFTC minimum net capital requirement. At September 30, 2019, BofAS had tentative net capital of $13.3 billion. BofAS also had regulatory net capital of $11.1 billion which exceeded the minimum requirement of $2.3 billion by $8.8 billion.
MLPCC is a fully-guaranteed subsidiary of BofAS and notification requirements.provides clearing and settlement services. At September 30, 2019, MLPCC’s regulatory net capital of $4.8 billion exceeded the minimum requirement of $1.2 billion by $3.7 billion.
The current business of MLPF&S is expected to be reorganized into two affiliated broker-dealers: MLPF&S and a newly formed broker-dealer. Under the contemplated reorganization, which is expected to occur duringprovides retail services. At September 30, 2019, the newly formed broker-dealer would become the legal entity for the institutional services that are now provided by MLPF&S. MLPF&S' retail services would remain within MLPF&S. The contemplated reorganization is subject to regulatory approval.
net capital was $3.3 billion which exceeded the minimum requirement of $104 million by $3.2 billion

25Bank of America





Merrill Lynch International (MLI),Our European broker-dealers are regulated by non-U.S. regulators. MLI, a U.K. investment firm, is regulated by the Prudential Regulation Authority and the Financial Conduct Authority, and is subject to certain regulatory capital requirements. At September 30, 2018,2019, MLI’s capital resources were $34.7$35.0 billion, which exceeded the minimum Pillar 1 requirement of $13.9$14.8 billion by $20.2 billion. BofASE, a French investment firm, is regulated by the Autorité de Contrôle Prudentiel et de Résolution and the Autorité des Marchés Financiers, and is subject to certain regulatory capital requirements. At September 30, 2019, BofASE's
capital resources were $5.0 billion which exceeded the minimum Pillar 1 requirement of $1.3 billion by $3.7 billion.
Liquidity Risk
Funding and Liquidity Risk Management
Our primary liquidity risk management objective is to meet expected or unexpected cash flow and collateral needs while continuing to support our businesses and customers under a range of economic conditions. To achieve that objective, we analyze and monitor our liquidity risk under expected and stressed conditions, maintain liquidity and access to diverse funding sources, including our stable deposit base, and seek to align liquidity-related incentives and risks.
We define liquidity as readily available assets, limited to cash and high-quality, liquid, unencumbered securities that we can use to meet our contractual and contingent financial obligations as those obligations arise. We manage our liquidity position through line of business and ALM activities, as well as through our legal entity funding strategy, on both a forward and current (including intraday) basis under both expected and stressed conditions. We believe that a centralized approach to funding and liquidity management enhances our ability to monitor liquidity requirements, maximizes access to funding sources, minimizes borrowing costs and facilitates timely responses to liquidity events. For more information regarding global funding and liquidity risk management, as well as our liquidity sources, liquidity arrangements, contingency planning and credit ratings discussed below, see Liquidity Risk in the MD&A of the Corporation’s 20172018 Annual Report on Form 10-K.
NB Holdings Corporation
We have intercompany arrangements with certain key subsidiaries under which we transferred certain assets of Bank of America Corporation, as the parent company, which is a separate and distinct legal entity from our banking and nonbank subsidiaries, and agreed to transfer certain additional parent company assets not needed to satisfy anticipated near-term expenditures, to NB Holdings Corporation, a wholly-owned holding company subsidiary (NB Holdings). The parent company is expected to continue to have access to the same flow of dividends, interest and other amounts of cash necessary to service its debt, pay dividends and perform other obligations as it would have had if it had not entered into these arrangements and transferred any assets. These arrangements support our preferred single point of entry resolution strategy, under which only the parent company would be resolved under the U.S. Bankruptcy Code.
Global Liquidity Sources and Other Unencumbered Assets
Table 13 showspresents average global liquidity sourcesGlobal Liquidity Sources (GLS) for the three months ended September 30, 20182019 and December 31, 2017.
     
Table 13Average Global Liquidity Sources
     
  Three Months Ended
(Dollars in billions)September 30
2018		 December 31
2017
Parent company and NB Holdings$80
 $79
Bank subsidiaries410
 394
Other regulated entities47
 49
Total Average Global Liquidity Sources$537
 $522
2018.

23Bank of America





     
Table 13Average Global Liquidity Sources
     
  Three Months Ended
(Dollars in billions)September 30
2019		 December 31
2018
Parent company and NB Holdings$65
 $76
Bank subsidiaries426
 420
Other regulated entities61
 48
Total Average Global Liquidity Sources$552
 $544
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. Typically, parent company and NB Holdings liquidity is in the form of cash deposited with BANA.
Our bank subsidiaries’ liquidity is primarily driven by deposit and lending activity, as well as securities valuation and net debt activity. Liquidity at bank subsidiaries excludes the cash deposited by the parent company and NB Holdings. Our bank subsidiaries can also generate incremental liquidity by pledging a range of unencumbered loans and securities to certain 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 $325$356 billion and $308$344 billion at September 30, 20182019 and December 31, 2017.2018. We have established operational procedures to enable us to borrow against these assets, including regularly monitoring our total pool of eligible loans and securities collateral. Eligibility is defined in guidelines from the FHLBs and the Federal Reserve and is subject to change at their discretion. Due to regulatory restrictions, liquidity generated by the bank subsidiaries can generally be used only to fund obligations within the bank subsidiaries, and transfers to the parent company or nonbank subsidiaries may be subject to prior regulatory approval.
Liquidity held in other regulated entities, comprised primarily of broker-dealer subsidiaries, is primarily available to meet the obligations of that entity and transfers to the parent company or to any other subsidiary may be subject to prior regulatory approval due to regulatory restrictions and minimum requirements. Our other regulated entities also hold unencumbered investment-grade securities and equities that we believe could be used to generate additional liquidity.
Table 14 presents the composition of average GLS for the three months ended September 30, 20182019 and December 31, 2017.2018.
     
Table 14Average Global Liquidity Sources Composition
   
  Three Months Ended
(Dollars in billions)September 30
2019		 December 31
2018
Cash on deposit$103
 $113
U.S. Treasury securities81
 81
U.S. agency securities and mortgage-backed securities353
 340
Non-U.S. government securities15
 10
Total Average Global Liquidity Sources$552
 $544
     
Table 14Average Global Liquidity Sources Composition
   
  Three Months Ended
(Dollars in billions)September 30
2018		 December 31
2017
Cash on deposit$130
 $118
U.S. Treasury securities64
 62
U.S. agency securities and mortgage-backed securities334
 330
Non-U.S. government securities9
 12
Total Average Global Liquidity Sources$537
 $522
Our GLS are substantially the same in composition to what qualifies as High Quality Liquid Assets (HQLA) under the final U.S. Liquidity Coverage Ratio (LCR) rules. However, HQLA for purposes of calculating LCR is not reported at market value, but at a lower value that incorporates regulatory deductions and the exclusion of excess liquidity held at certain subsidiaries. The LCR is calculated as the amount of a financial institution’s unencumbered HQLA relative to the estimated net cash outflows the institution could encounter over a 30-day period of significant liquidity stress, expressed as a percentage. Our average consolidated HQLA, on
a net basis, was $440$454 billion and $439$446 billion for the three months ended September 30, 20182019 and December 31, 2017.2018. For the same periods, the average consolidated LCR was 120116 percent and 125118 percent. Our LCR will fluctuate due to normal business flows from customer activity.

Bank of America26

Liquidity Stress Analysis
We utilize liquidity stress analysis to assist us in determining the appropriate amounts of liquidity to maintain at the parent company and our subsidiaries to meet contractual and contingent cash outflows under a range of scenarios. For more information on our liquidity stress analysis, see Liquidity Risk – Liquidity Stress Analysis and Time-to-required Funding in the MD&A of the Corporation’s 20172018 Annual Report on Form 10-K.
Diversified Funding Sources
We fund our assets primarily with a mix of deposits, and secured and unsecured liabilities through a centralized, globally coordinated funding approach diversified across products, programs, markets, currencies and investor groups. We fund a substantial portion of our lending activities through our deposits, which were $1.35$1.39 trillion and $1.31$1.38 trillion at September 30, 20182019 and December 31, 2017.2018.
Our trading activities in other regulated entities are primarily funded on a secured basis through securities lending and repurchase agreements, and these amounts will vary based on customer activity and market conditions.
Long-term Debt
During the nine months ended September 30, 2018,2019, we issued $60.9$45.2 billion of long-term debt consisting of $30.2$24.3 billion for Bank of America Corporation, substantially all of which was TLAC compliant, $18.6eligible, $10.9 billion for Bank of America, N.A. and $12.1$10.0 billion of other debt. Substantially all of the long-term, TLAC-eligible senior notes issued by Bank of America Corporation since late 2016 are callable, at our option, at least one year before each stated maturity date. The call features give us the flexibility to retire long-term notes before their final year outstanding, when they are no longer eligible to count toward TLAC requirements, and replace them with new TLAC-eligible debt, should we choose to do so.
During the nine months ended September 30, 2019, we had total long-term debt maturities and redemptions in the aggregate of $42.8 billion consisting of $16.6 billion for Bank of America Corporation, $19.8 billion for Bank of America, N.A. and $6.4 billion of other debt. Table 15 presents the carrying value of aggregate annual contractual maturities of long-term debt at September 30, 2018. During the nine months ended September 30, 2018, we had total long-term debt contractual and non-contractual maturities of $43.9 billion consisting of $27.2 billion for Bank of America Corporation, $6.5 billion for Bank of America, N.A. and $10.2 billion of other debt.2019.

Bank of America 24

                            
Table 15Long-term Debt by MaturityLong-term Debt by Maturity
                            
(Dollars in millions)(Dollars in millions)Remainder of 2018 2019 2020 2021 2022 Thereafter Total(Dollars in millions)Remainder of 2019 2020 2021 2022 2023 Thereafter Total
Bank of America CorporationBank of America Corporation             Bank of America Corporation             
Senior notes$1,127
 $14,888
 $10,340
 $15,836
 $14,933
 $88,562
 $145,686
Senior notes (1)
Senior notes (1)
$1,739
 $10,191
 $15,826
 $14,733
 $23,077
 $94,266
 $159,832
Senior structured notesSenior structured notes150
 1,401
 866
 495
 1,946
 9,005
 13,863
Senior structured notes1,115
 814
 503
 2,045
 283
 12,628
 17,388
Subordinated notesSubordinated notes—
 1,516
 —
 354
 387
 19,848
 22,105
Subordinated notes—
 —
 336
 378
 —
 22,198
 22,912
Junior subordinated notesJunior subordinated notes—
 —
 —
 —
 —
 740
 740
Junior subordinated notes—
 —
 —
 —
 —
 736
 736
Total Bank of America CorporationTotal Bank of America Corporation1,277

17,805

11,206

16,685

17,266

118,155

182,394
Total Bank of America Corporation2,854
 11,005
 16,665
 17,156
 23,360
 129,828
 200,868
Bank of America, N.A.Bank of America, N.A.             Bank of America, N.A.             
Senior notesSenior notes2,209
 —
 1,740
 —
 —
 20
 3,969
Senior notes—
 3,000
 3,448
 —
 511
 20
 6,979
Subordinated notesSubordinated notes—
 1
 —
 —
 —
 1,576
 1,577
Subordinated notes—
 —
 —
 —
 —
 1,812
 1,812
Advances from Federal Home Loan BanksAdvances from Federal Home Loan Banks2,501
 11,762
 3,010
 2
 3
 105
 17,383
Advances from Federal Home Loan Banks3
 2,510
 2
 3
 1
 99
 2,618
Securitizations and other Bank VIEs (1)(2)
Securitizations and other Bank VIEs (1)(2)
—
 3,200
 3,098
 4,022
 —
 59
 10,379
Securitizations and other Bank VIEs (1)(2)
—
 3,099
 3,957
 1,249
 —
 —
 8,305
OtherOther1
 178
 78
 —
 10
 61
 328
Other235
 40
 78
 —
 134
 99
 586
Total Bank of America, N.A.Total Bank of America, N.A.4,711

15,141

7,926

4,024

13

1,821
 33,636
Total Bank of America, N.A.238
 8,649
 7,485
 1,252
 646
 2,030
 20,300
Other debtOther debt             Other debt             
Structured liabilitiesStructured liabilities1,382
 4,843
 2,061
 1,088
 576
 7,475
 17,425
Structured liabilities1,531
 4,637
 1,662
 905
 1,337
 11,909
 21,981
Nonbank VIEs (1)(2)
Nonbank VIEs (1)(2)
6
 41
 —
 —
 —
 598
 645
Nonbank VIEs (1)(2)
—
 —
 —
 —
 1
 255
 256
Total other debtTotal other debt1,388

4,884

2,061

1,088

576

8,073
 18,070
Total other debt1,531
 4,637
 1,662
 905
 1,338
 12,164
 22,237
Total long-term debtTotal long-term debt$7,376

$37,830

$21,193

$21,797

$17,855

$128,049
 $234,100
Total long-term debt$4,623
 $24,291
 $25,812
 $19,313
 $25,344
 $144,022
 $243,405
(1)  
Total includes $106.0 billion of outstanding notes that are both TLAC eligible and callable at least one year before their stated maturities, including $1.0 billion that will be callable and become TLAC ineligible during the remainder of 2019, and $7.3 billion, $11.6 billion, $14.8 billion and $10.7 billion that will do so during each of 2020 through 2023, respectively, and $60.6 billion thereafter.
(2)
Represents the total long-term debt included in the liabilities of consolidated variable interest entities (VIEs) on the Consolidated Balance Sheet.
Table 16 presents our long-term debt by major currency at September 30, 20182019 and December 31, 2017.2018.
        
Table 16Long-term Debt by Major CurrencyLong-term Debt by Major Currency
    
(Dollars in millions)(Dollars in millions)September 30
2018		 December 31
2017		(Dollars in millions)September 30
2019		 December 31
2018
U.S. dollarU.S. dollar$184,299
 $175,623
U.S. dollar$193,583
 $180,724
EuroEuro34,802
 35,481
Euro32,866
 34,328
British poundBritish pound5,480
 7,016
British pound5,345
 5,450
Japanese yenJapanese yen4,325
 3,038
Canadian dollarCanadian dollar3,044
 1,966
Canadian dollar3,805
 2,936
Japanese yen2,927
 2,993
Australian dollarAustralian dollar2,341
 3,046
Australian dollar1,878
 1,722
OtherOther1,207
 1,277
Other1,603
 1,194
Total long-term debtTotal long-term debt$234,100
 $227,402
Total long-term debt$243,405
 $229,392
Total long-term debt increased $6.7$14.0 billion during the nine months ended September 30, 20182019 primarily due to debt issuances outpacing maturities and redemptions, including the redemption of trust preferred securities,valuation adjustments, partially offset by changes in the fair value of hedged debt.maturities and redemptions. We may, from time to time, purchase outstanding debt instruments in various transactions, depending on market conditions, liquidity and other factors. In addition, ourOur other regulated entities may also make markets in our debt instruments
to provide liquidity for investors. For information on funding and liquidity risk management, see Liquidity Risk – Liquidity Stress Analysis above, and for more information regardingon long-term debt funding, see Note 11 – Long-term Debt to the Consolidated Financial Statementsof the Corporation’s 20172018 Annual Report on Form 10-K.10-K.
We use derivative transactions to manage the duration, interest rate and currency risks of our borrowings, considering the characteristics of the assets they are funding. For more information on our ALM activities, see Interest Rate Risk Management for the Banking Book on page 49.43.
We may also issue unsecured debt in the form of structured notes for client purposes, certain of which qualify as TLAC eligibleTLAC-eligible debt. During the nine months ended September 30, 2018,2019, we issued $5.1$7.4 billion of structured notes, which are debt obligations that pay investors returns linked to other debt or equity securities, indices, currencies or commodities. We typically hedge the returns we are obligated to pay on these liabilities with derivatives and/
or investments in the underlying instruments, so that from a funding perspective, the cost is similar to our other unsecured long-term debt. We could be required to settle certain structured note obligations for cash or other securities prior to maturity under certain circumstances, which we consider for liquidity planning

27Bank of America





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.
Credit Ratings
Credit ratings and outlooks are opinions expressed by rating agencies on our creditworthiness and that of our obligations or securities, including long-term debt, short-term borrowings, preferred stock and other securities, including asset securitizations. Table 17 presents the Corporation’s current long-term/short-term senior debt ratings and outlooks expressed by the rating agencies.
The ratings from Moody’s Investors Service and Fitch Ratings for the Corporation and its subsidiaries have not changed from those disclosed in the Corporation’sCorporation's Quarterly Report on Form 10-Q for the quarter ended June 30, 2018.2019.
The ratings from Standard & Poor’s Global Ratings (S&P) for the Corporation and Moody’s Investors Service haveits subsidiaries did not changedchange from those disclosed in the Corporation’s 20172018 Annual Report on Form 10-K.
The long-term and short-term debt ratings of BofAS and BofASE, which were initially rated by S&P and Fitch during the first quarter of 2019, also remained unchanged for the third quarter of 2019.
For more information on the additional collateral and termination payments that could be required in connection with certain over-the-counter (OTC) derivative contracts and other trading agreements as a result of a credit rating downgrade, see Note 3 – Derivatives to the Consolidated Financial Statements herein and Item 1A. Risk Factors of the Corporation’s 20172018 Annual Report on Form 10-K.

25Bank of America





                   
Table 17Senior 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 CorporationA3        A2 P-2       P-1 Stable A- A-2 Stable A+ F1 Stable
Bank of America, N.A.Aa3       Aa2 P-1 Stable A+ A-1 Stable AA- F1+       Stable
Bank of America Merrill Lynch International Designated Activity Company       NR       NR       NR         A+       A-1      Stable        AA-        F1+Stable
Merrill Lynch, Pierce, Fenner & Smith IncorporatedNR NR NR A+ A-1 Stable AA- F1+       Stable
BofA Securities, Inc.       NR       NR       NR         A+       A-1      Stable        AA-        F1+Stable
Merrill Lynch InternationalNR NR NR A+ A-1 Stable A+ F1       Stable
BofA Securities Europe SA       NR       NR       NR         A+       A-1      Stable         A+        F1Stable
NR = not rated
Credit Risk Management
For information on our credit risk management activities, see Consumer Portfolio Credit Risk Management below, Commercial Portfolio Credit Risk Management on page 3733, Non-U.S. Portfolio on page 4338, Provision for Credit Losses on page 44, 39, Allowance for Credit Losses on page 4439, and Note 5 – Outstanding Loans and Leases and Note 6 – Allowance for Credit Losses to the Consolidated Financial Statements. For information on the new accounting standard on credit losses that is effective on January 1, 2020 and the potential impact on our allowance for credit losses, see Note 1 – Summary of Significant Accounting Principles to 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 and are a component of our consumer credit risk management process. These models are used in part to assist in making both new and ongoing credit decisions, as well as portfolio management strategies, including authorizations and line management, collection practices and strategies, and determination of the allowance for loan and lease losses and allocated capital for credit risk.
Consumer Credit Portfolio
Improvement in home prices continued during the three and nine months ended September 30, 20182019 resulting in improved credit quality andcompared to the same period in 2018. Additionally, lower credit losses in the home equityconsumer real estate portfolio due primarily to non-core loan sales were partially offset by seasoning and loan growth in the U.S. credit card portfolio compared to the same periodsperiod in 2017.2018.
Improved credit quality and continued loan balance run-off and salesrunoff primarily in the non-core consumer real estate portfolio,
partially offset by seasoning within the U.S. credit card portfolio, drove a $403$226 million decrease in the consumer allowance for loan and lease losses during the nine months ended September 30, 20182019 to $5.0 billion at September 30, 2018.$4.6 billion. For additional information, see Allowance for Credit Losses on page 44.39.
For more information on our accounting policies regarding delinquencies, nonperforming status, charge-offs and troubled debt restructurings (TDRs) for the consumer portfolio, see Note 1 – Summary of Significant Accounting Principles and Note 5 – Outstanding Loans and Leases to the Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K.
Table 18 presents our outstanding consumer loans and leases, 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 unsecuredFor more information regarding nonperforming loans and in general,accruing consumer loans not secured by real estate (bankruptcy loans 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 Federal Housing Administration (FHA) or individually insured under long-term standby agreements with Fannie Mae and Freddie Mac (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 withsee the Government National Mortgage Association (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.
For more information on PCI loans, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan PortfolioSection in the MD&A of the Corporation’s 2018 Annual Report on page 34 and Note 5 – Outstanding Loans and Leases to the Consolidated Financial Statements.Form 10-K.


  
Bank of America2826


                        
Table 18Consumer Credit Quality           Consumer Credit Quality           
                        
Outstandings Nonperforming 
Accruing Past Due
90 Days or More
 Outstandings Nonperforming 
Accruing Past Due
90 Days or More
(Dollars in millions)(Dollars in millions)September 30
2018		 December 31
2017		 September 30
2018		 December 31
2017		 September 30
2018		 December 31
2017		(Dollars in millions)September 30
2019		 December 31
2018		 September 30
2019		 December 31
2018		 September 30
2019		 December 31
2018
Residential mortgage (1)
Residential mortgage (1)
$208,186
 $203,811
 $2,034
 $2,476
 $2,161
 $3,230
Residential mortgage (1)
$227,472
 $208,557
 $1,551
 $1,893
 $1,203
 $1,884
Home equity Home equity 51,235
 57,744
 2,226
 2,644
 —
 —
Home equity 41,574
 48,286
 585
 1,893
 —
 —
U.S. credit cardU.S. credit card94,829
 96,285
 n/a
 n/a
 872
 900
U.S. credit card94,946
 98,338
 n/a
 n/a
 960
 994
Direct/Indirect consumer (2)
Direct/Indirect consumer (2)
91,338
 96,342
 46
 46
 35
 40
Direct/Indirect consumer (2)
90,836
 91,166
 53
 56
 29
 38
Other consumer (3)
Other consumer (3)
203
 166
 —
 —
 —
 —
Other consumer (3)
208
 202
 —
 —
 —
 —
Consumer loans excluding loans accounted for under the fair value optionConsumer loans excluding loans accounted for under the fair value option$445,791
 $454,348

$4,306

$5,166

$3,068

$4,170
Consumer loans excluding loans accounted for under the fair value option$455,036
 $446,549

$2,189

$3,842

$2,192

$2,916
Loans accounted for under the fair value option (4)(3)
Loans accounted for under the fair value option (4)(3)
755
 928
        
Loans accounted for under the fair value option (4)(3)
640
 682
        
Total consumer loans and leasesTotal consumer loans and leases$446,546

$455,276
        Total consumer loans and leases$455,676

$447,231
        
Percentage of outstanding consumer loans and leases (5)(4)
Percentage of outstanding consumer loans and leases (5)(4)
n/a
 n/a
 0.97% 1.14% 0.69% 0.92%
Percentage of outstanding consumer loans and leases (5)(4)
n/a
 n/a
 0.48% 0.86% 0.48% 0.65%
Percentage of outstanding consumer loans and leases, excluding PCI and fully-insured loan portfolios (5)
n/a
 n/a
 1.03
 1.23
 0.22
 0.22
Percentage of outstanding consumer loans and leases, excluding fully-insured loan portfolios (4)
Percentage of outstanding consumer loans and leases, excluding fully-insured loan portfolios (4)
n/a
 n/a
 0.50
 0.90
 0.23
 0.24
(1) 
Residential mortgage loans accruing past due 90 days or more are fully-insured loans. At September 30, 20182019 and December 31, 20172018, residential mortgage includes $1.6 billion858 million and $2.21.4 billion of loans on which interest had been curtailed by the FHA, and therefore were no longer accruing interest, although principal was still insured, and $579345 million and $1.0 billion498 million of loans on which interest was still accruing.
(2) 
Outstandings include auto and specialty lending loans and leases of $50.3 billion and $50.1 billion and $52.4 billion, unsecured consumer lending loans of $392328 million and $469383 million, U.S. securities-based lending loans of $37.436.5 billion and $39.837.0 billion, non-U.S. consumer loans of $2.7 billion and $3.0 billion and $2.9 billion and other consumer loans of $756694 million and $684746 million at September 30, 20182019 and December 31, 20172018.
(3) 
Substantially all of other consumer at September 30, 2018 and December 31, 2017 is consumer overdrafts.
(4)
Consumer loans accounted for under the fair value option include residential mortgage loans of $407275 million and $567336 million and home equity loans of $348365 million and $361346 million at September 30, 20182019 and December 31, 20172018. For more information on the fair value option, see Note 1516 – Fair Value Option to the Consolidated Financial Statements.
(5)(4) 
Excludes consumer loans accounted for under the fair value option. At September 30, 20182019 and December 31, 20172018, $167 million and $2612 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 19 presents net charge-offs and related ratios for consumer loans and leases.
                                
Table 19Consumer Net Charge-offs and Related Ratios          Consumer Net Charge-offs and Related Ratios          
                                
 
Net Charge-offs (1)
 
Net Charge-off Ratios (1, 2)
 Net Charge-offs 
Net Charge-off Ratios (1)
 Three Months Ended
September 30		 Nine Months Ended
September 30		 Three Months Ended
September 30		 Nine Months Ended
September 30		 Three Months Ended
September 30		 Nine Months Ended
September 30		 Three Months Ended
September 30		 Nine Months Ended
September 30
(Dollars in millions)(Dollars in millions)2018 2017 2018 2017 2018 2017 2018 2017(Dollars in millions)2019 2018 2019 2018 2019 2018 2019 2018
Residential mortgageResidential mortgage$12
 $(82) $13
 $(84) 0.02 % (0.16)% 0.01% (0.06)%Residential mortgage$(38) $12
 $(51) $13
 (0.07)% 0.02 % (0.03)% 0.01%
Home equityHome equity(20) 83
 13
 197
 (0.15) 0.54
 0.03
 0.42
Home equity(202) (20) (346) 13
 (1.85) (0.15) (1.02) 0.03
U.S. credit cardU.S. credit card698
 612
 2,138
 1,858
 2.92
 2.65
 3.03
 2.75
U.S. credit card717
 698
 2,224
 2,138
 3.01
 2.92
 3.15
 3.03
Non-U.S. credit card (3)
—
 —
 —
 75
 —
 —
 —
 1.91
Direct/Indirect consumerDirect/Indirect consumer42
 68
 142
 149
 0.18
 0.28
 0.20
 0.21
Direct/Indirect consumer76
 42
 170
 142
 0.33
 0.18
 0.25
 0.20
Other consumerOther consumer44
 50
 130
 114
 n/m
 n/m
 n/m
 n/m
Other consumer69
 44
 151
 130
 n/m
 n/m
 n/m
 n/m
TotalTotal$776

$731

$2,436

$2,309
 0.69
 0.65
 0.73
 0.69
Total$622

$776

$2,148

$2,436
 0.55
 0.69
 0.64
 0.73
(1) 
Net charge-offs exclude write-offs in the PCI loan portfolio. For more information, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 34.
(2)
Net charge-off ratios are calculated as annualized net charge-offs divided by average outstanding loans and leases excluding loans accounted for under the fair value option.
(3)
Represents net charge-offs related to the non-U.S. credit card loan portfolio, which was sold during the second quarter of 2017.
n/m = not meaningful
Net charge-offs, as shown in Tables 19 and 20, exclude write-offs in the PCI loan portfolio of $61 million and $92 million in residential mortgage and $34 million and $74 million in home equity for the three and nine months ended September 30, 2018 compared to $62 million and $112 million in residential mortgage and $11 million and $49 million in home equity for the same periods in 2017. Net charge-off (recovery) ratios including the PCI write-offs were 0.14 percent and 0.07 percent for residential mortgage and 0.11 percent and 0.22 percent for home equity for the three and nine months ended September 30, 2018 compared to (0.04) percent and 0.02 percent for residential mortgage and 0.61 percent and 0.52 percent for home equity for the same periods in 2017. For additional information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 34.
Table 20 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 portfolios 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, loan-to-value (LTV), Fair Isaac Corporation (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. All
other loans are generally characterized as non-core loans and represent run-offrunoff portfolios. Core loans as reported in Table 20 include loans held in the Consumer Banking and GWIM segments, as well as loans held for ALM activities in All Other. For more information, see Note 5 – Outstanding Loans and Leases to the Consolidated Financial Statements.
As shown in Table 20, outstanding core consumer real estate loans increased $9.0$18.6 billion during the nine months ended September 30, 20182019 driven by an increase of $12.7$22.5 billion in residential mortgage, partially offset by a $3.6$3.9 billion decrease in home equity.
During the three and nine months ended September 30, 2019, we sold $2.3 billion and $4.2 billion of consumer real estate loans, primarily non-core.


2927Bank of America


  







During the three and nine months ended September 30, 2018, certain consumer real estate loans, primarily non-core, with carrying values of $3.7 billion and $4.9 billion were sold, resulting in gains of $84 million and $656 million recorded in other income in the Consolidated Statement of Income.
                                
Table 20
Consumer Real Estate Portfolio (1)
        
Consumer Real Estate Portfolio (1)
        
                    
 Outstandings Nonperforming 
Net Charge-offs (2)
 Outstandings Nonperforming Net Charge-offs
September 30
2018		 December 31
2017		 September 30
2018		 December 31
2017		 Three Months Ended
September 30		 Nine Months Ended
September 30		 September 30
2019		 December 31
2018		 September 30
2019		 December 31
2018		 Three Months Ended
September 30		 Nine Months Ended
September 30
(Dollars in millions)(Dollars in millions) 2018 2017 2018 2017(Dollars in millions) 2019 2018 2019 2018
Core portfolioCore portfolio 
  
  
  
  
      Core portfolio 
  
  
  
  
      
Residential mortgageResidential mortgage$189,290
 $176,618
 $1,011
 $1,087
 $—
 $(42) $13
 $(40)Residential mortgage$216,223
 $193,695
 $930
 $1,010
 $(6) $—
 $(2) $13
Home equityHome equity40,596
 44,245
 1,056
 1,079
 15
 26
 52
 85
Home equity36,116
 40,010
 380
 955
 8
 15
 39
 52
Total core portfolioTotal core portfolio229,886

220,863

2,067

2,166

15

(16)
65

45
Total core portfolio252,339

233,705

1,310

1,965

2

15

37
 65
Non-core portfolioNon-core portfolio   
  
  
        Non-core portfolio   
  
  
        
Residential mortgageResidential mortgage18,896
 27,193
 1,023
 1,389
 12
 (40) —
 (44)Residential mortgage11,249
 14,862
 621
 883
 (32) 12
 (49) —
Home equityHome equity10,639
 13,499
 1,170
 1,565
 (35) 57
 (39) 112
Home equity5,458
 8,276
 205
 938
 (210) (35) (385) (39)
Total non-core portfolioTotal non-core portfolio29,535

40,692

2,193

2,954

(23)
17

(39)
68
Total non-core portfolio16,707

23,138

826

1,821

(242)
(23)
(434) (39)
Consumer real estate portfolioConsumer real estate portfolio 
  
  
  
  
  
    Consumer real estate portfolio 
  
  
  
  
  
    
Residential mortgageResidential mortgage208,186
 203,811
 2,034
 2,476
 12
 (82) 13
 (84) Residential mortgage227,472
 208,557
 1,551
 1,893
 (38) 12
 (51) 13
Home equityHome equity51,235
 57,744
 2,226
 2,644
 (20) 83
 13
 197
 Home equity41,574
 48,286
 585
 1,893
 (202) (20) (346) 13
Total consumer real estate portfolioTotal consumer real estate portfolio$259,421

$261,555

$4,260

$5,120

$(8)
$1

$26

$113
Total consumer real estate portfolio$269,046

$256,843

$2,136

$3,786

$(240)
$(8)
$(397) $26
                                
     
Allowance for Loan
and Lease Losses
 
Provision for Loan
and Lease Losses
     
Allowance for Loan
and Lease Losses
 Provision for Loan
and Lease Losses
     September 30
2018		 December 31
2017		 Three Months Ended
September 30		 Nine Months Ended
September 30		     September 30
2019		 December 31
2018		 Three Months Ended
September 30		 Nine Months Ended
September 30
      2018 2017 2018 2017      2019 2018 2019 2018
Core portfolioCore portfolio               Core portfolio               
Residential mortgageResidential mortgage    $211
 $218
 $(2) $(49) $7
 $(60)Residential mortgage    $219
 $214
 $(4) $(2) $3
 $7
Home equityHome equity    264
 367
 (27) (10) (51) (19)Home equity    135
 228
 (19) (27) (52) (51)
Total core portfolioTotal core portfolio    475

585

(29)
(59)
(44)
(79)Total core portfolio    354

442

(23)
(29)
(49)
(44)
Non-core portfolioNon-core portfolio     
  
        Non-core portfolio     
  
        
Residential mortgageResidential mortgage    289
 483
 22
 (59) (103) (111)Residential mortgage    122
 208
 (39) 22
 (91) (103)
Home equityHome equity    394
 652
 (112) (86) (221) (255)Home equity    115
 278
 (250) (112) (481) (221)
Total non-core portfolioTotal non-core portfolio    683

1,135

(90)
(145)
(324)
(366)Total non-core portfolio    237

486

(289)
(90)
(572)
(324)
Consumer real estate portfolioConsumer real estate portfolio     
  
  
  
    Consumer real estate portfolio     
  
  
  
    
Residential mortgageResidential mortgage    500
 701
 20
 (108) (96) (171) Residential mortgage    341
 422
 (43) 20
 (88) (96)
Home equityHome equity    658
 1,019
 (139) (96) (272) (274) Home equity    250
 506
 (269) (139) (533) (272)
Total consumer real estate portfolioTotal consumer real estate portfolio    $1,158

$1,720

$(119)
$(204)
$(368)
$(445)Total consumer real estate portfolio    $591

$928

$(312)
$(119)
$(621)
$(368)
(1) 
Outstandings and nonperforming loans exclude loans accounted for under the fair value option. Consumer loans accounted for under the fair value option includedinclude residential mortgage loans of $407275 million and $567336 million and home equity loans of $348365 million and $361346 million at September 30, 20182019 and December 31, 20172018. For moreadditional information, see Note 1516 – Fair Value Option to the Consolidated Financial Statements.
(2)
Net charge-offs exclude write-offs in the PCI loan portfolio. For more information, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 34.
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 tables and discussions of the residential mortgage and home equity portfolios, we exclude loans accounted for under the fair value option and provide information that excludes the impact of the PCI loan portfolio and the fully-insured loan portfolio in certain credit quality statistics. We separately disclose information on the PCI loan portfolio on page 34.
Residential Mortgage
The residential mortgage portfolio made up the largest percentage of our consumer loan portfolio at 4750 percent of consumer loans and leases at September 30, 2018. At September 30, 2018, 432019. Approximately 49 percent of the residential mortgage portfolio was in Consumer Banking and 36 percent was in GWIM. The remaining portion was
in All Other and was comprised of originated loans, purchased loans used in
our overall ALM activities, delinquent FHA loans repurchased pursuant to our servicing agreements with GNMAthe Government National Mortgage Association as well as loans repurchased related to our representations and warranties.
Outstanding balances in the residential mortgage portfolio increased $4.4$18.9 billion during the nine months ended September 30, 20182019 as retention of new originations was partially offset by loan sales of $5.7$2.3 billion and run-off.runoff.
At September 30, 20182019 and December 31, 2017,2018, the residential mortgage portfolio included $20.8$18.7 billion and $23.7$20.1 billion of outstanding fully-insured loans, of which $14.7$11.7 billion and $17.4$14.0 billion had FHA insurance with the remainder protected by long-term standby agreements. At September 30, 2018 and December 31, 2017, $3.9 billion and $5.2 billion of the FHA-insured loan population were repurchases of delinquent FHA loans pursuant to our servicing agreements with GNMA.


Bank of America30

Table 21 presents certain residential mortgage key credit statistics on both a reported basis and excluding the PCI loan portfolio and the fully-insured loan portfolio. Additionally, in the “Reported Basis” columns in the following table, 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, theThe following discussion presents the residential mortgage portfolio excluding the PCI loan portfolio and the fully-insured loan portfolio. For more information on the PCI loan portfolio, see page 34.

Bank of America 28

                        
Table 21Residential Mortgage – Key Credit Statistics        Residential Mortgage – Key Credit Statistics        
                        
         
Reported Basis (1)
 
Excluding Purchased
Credit-impaired and
Fully-insured Loans (1)
 
Reported Basis (1)
 
Excluding Fully-insured Loans (1)
(Dollars in millions)(Dollars in millions)        September 30
2018		 December 31
2017		 September 30
2018		 December 31
2017		(Dollars in millions) September 30
2019		 December 31
2018		 September 30
2019		 December 31
2018
OutstandingsOutstandings       $208,186
 $203,811
 $181,996
 $172,069
Outstandings $227,472
 $208,557
 $208,781
 $188,427
Accruing past due 30 days or moreAccruing past due 30 days or more       4,533
 5,987
 1,350
 1,521
Accruing past due 30 days or more 2,989
 3,945
 1,070
 1,155
Accruing past due 90 days or moreAccruing past due 90 days or more       2,161
 3,230
 —
 —
Accruing past due 90 days or more 1,203
 1,884
 —
 —
Nonperforming loansNonperforming loans       2,034
 2,476
 2,034
 2,476
Nonperforming loans 1,551
 1,893
 1,551
 1,893
Percent of portfolioPercent of portfolio        
  
  
  
Percent of portfolio  
  
  
  
Refreshed LTV greater than 90 but less than or equal to 100Refreshed LTV greater than 90 but less than or equal to 100   2% 3 % 2% 2 %Refreshed LTV greater than 90 but less than or equal to 100 2% 2% 2% 2%
Refreshed LTV greater than 100Refreshed LTV greater than 100       1
 2
 1
 1
Refreshed LTV greater than 100 1
 1
 1
 1
Refreshed FICO below 620Refreshed FICO below 620       4
 6
 2
 3
Refreshed FICO below 620 3
 4
 2
 2
2006 and 2007 vintages (2)
2006 and 2007 vintages (2)
       7
 10
 6
 8
2006 and 2007 vintages (2)
 4
 6
 4
 6
                
 Reported Basis Excluding Purchased Credit-impaired and Fully-insured Loans
 Three Months Ended
September 30		 Nine Months Ended
September 30		 Three Months Ended
September 30		 Nine Months Ended
September 30
 2018 2017 2018 2017 2018 2017 2018 2017
Net charge-off ratio (3)
0.02% (0.16)% 0.01% (0.06)% 0.03% (0.20)% 0.01% (0.07)%
(1) 
Outstandings, accruing past due, nonperforming loans and percentages of portfolio exclude loans accounted for under the fair value option.
(2) 
These vintages of loans accounted for $616396 million, or 3026 percent, and $825536 million, or 3328 percent, of nonperforming residential mortgage loans at September 30, 20182019 and December 31, 20172018.
(3)
Net charge-off ratios are calculated as annualized net charge-offs divided by average outstanding loans excluding loans accounted for under the fair value option.
Nonperforming residential mortgage loans decreased $442$342 million during the nine months ended September 30, 20182019 primarily driven by sales of $377 million.sales. Of the nonperforming residential mortgage loans at September 30, 2018, $7572019, $586 million, or 3738 percent, were current on contractual payments. Loans accruing past due 30 days or more decreased $171$85 million due to continued improvement in credit quality as well as loan sales in the non-core portfolio.
Net charge-offs increased $94decreased $50 million to $12a net recovery of $38 million and $97$64 million to $13a net recovery of $51 million for the three and nine months ended September 30, 20182019 compared to the same periods in 20172018 primarily due to netcontinued improvement in credit quality and recoveries related to loanfrom the sales in the three and nine months ended September 30, 2017.
Loans with a refreshed LTV greater than 100 percent represented one percent of the residential mortgage loan portfolio at both September 30, 2018 and December 31, 2017. Of the loans with a refreshed LTV greater than 100 percent, 99 percent were performing at September 30, 2018 compared to 98 percent at December 31, 2017. 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 due to home price deterioration since 2006, partially offset by subsequent appreciation.previously charged-off loans.
Of the $182.0$208.8 billion in total residential mortgage loans outstanding at September 30, 2018,2019, as shown in Table 21, 30
27 percent were originated as interest-only loans. The outstanding balance of interest-only residential mortgage loans that have entered the amortization period was $9.6$7.9 billion, or 1714 percent, at September 30, 2018.2019. Residential mortgage loans that have entered the amortization period generally have experienced a higher rate of early stage delinquencies and nonperforming status compared to the residential mortgage portfolio as a whole. At September 30, 2018, $2352019, $156 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 $1.4$1.1 billion, or one percent, for the entire residential mortgage portfolio. In addition, at September 30, 2018, $4252019, $301 million, or four percent, of outstanding interest-only residential mortgage loans that had entered the amortization period were nonperforming, of which $162$97 million were contractually current, compared to $2.0$1.6 billion, or one percent, for the entire residential mortgage portfolio, of which $757 million were contractually current.portfolio. Loans that have yet to enter the amortization period in our interest-only residential mortgage portfolio are primarily well-collateralized loans to our wealth management clients and have an interest-only period of three to ten years. More than 90Approximately 93 percent of these loans that have yet to enter the amortization period will not be required to make a fully-amortizing payment until 20202022 or later.


31Bank of America





Table 22 presents outstandings, nonperforming loans and net charge-offs by certain state concentrations for the residential mortgage portfolio. The Los Angeles-Long Beach-Santa Ana Metropolitan Statistical Area (MSA) within California represented 16 percent of outstandings at both September 30, 20182019 and December 31, 2017.2018. In the New York area, the New York-Northern New Jersey-Long Island MSA made up 13 percent of outstandings at both September 30, 20182019 and December 31, 2017.2018.
                                
Table 22Residential Mortgage State Concentrations    Residential Mortgage State Concentrations    
                                
Outstandings (1)
 
Nonperforming (1)
 
Net Charge-offs (2)
Outstandings (1)
 
Nonperforming (1)
 Net Charge-offs
September 30
2018		 December 31
2017		 September 30
2018		 December 31
2017		 Three Months Ended
September 30		 Nine Months Ended
September 30		 September 30
2019		 December 31
2018		 September 30
2019		 December 31
2018		 Three Months Ended
September 30		 Nine Months Ended
September 30
(Dollars in millions)(Dollars in millions) 2018 2017 2018 2017(Dollars in millions) 2019 2018 2019 2018
CaliforniaCalifornia$73,127
 $68,455
 $353
 $433
 $(1) $(59) $(18) $(84)California$85,308
 $76,323
 $294
 $314
 $(12) $(1) $(22) $(18)
New York (3)(2)
New York (3)(2)
18,669
 17,239
 217
 227
 4
 (1) 10
 (2)
New York (3)(2)
21,444
 19,219
 186
 222
 1
 4
 2
 10
Florida (3)(2)
Florida (3)(2)
11,235
 10,880
 249
 280
 (2) (9) (7) (11)
Florida (3)(2)
12,494
 11,624
 157
 221
 (8) (2) (12) (7)
TexasTexas7,658
 7,237
 115
 126
 —
 1
 3
 2
Texas8,593
 7,820
 76
 102
 —
 —
 (1) 3
New Jersey (3)(2)
New Jersey (3)(2)
6,761
 6,099
 100
 130
 —
 (1) 5
 1
New Jersey (3)(2)
8,289
 7,051
 83
 98
 (2) —
 (4) 5
OtherOther64,546
 62,159
 1,000
 1,280
 11
 (13) 20
 10
Other72,653
 66,390
 755
 936
 (17) 11
 (14) 20
Residential mortgage loans (4)(3)
Residential mortgage loans (4)(3)
$181,996

$172,069

$2,034

$2,476

$12

$(82)
$13

$(84)
Residential mortgage loans (4)(3)
$208,781

$188,427

$1,551

$1,893

$(38)
$12

$(51)
$13
Fully-insured loan portfolioFully-insured loan portfolio20,849
 23,741
  
  
  
  
    Fully-insured loan portfolio18,691
 20,130
  
  
  
  
    
Purchased credit-impaired residential mortgage loan portfolio (5)
5,341
 8,001
  
  
  
  
    
Total residential mortgage loan portfolioTotal residential mortgage loan portfolio$208,186
 $203,811
  
  
  
  
    Total residential mortgage loan portfolio$227,472
 $208,557
  
  
  
  
    
(1) 
Outstandings and nonperforming loans exclude loans accounted for under the fair value option.
(2) 
Net charge-offs exclude $61 million and $92 million of write-offs in the residential mortgage PCI loan portfolio for the three and nine months ended September 30, 2018 compared to $62 million and $112 million for the same periods in 2017. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 34.
(3)
In these states, foreclosure requires a court order following a legal proceeding (judicial states).
(4)(3) 
Amounts exclude the PCI residential mortgage and fully-insured loan portfolios.
(5)
At September 30, 2018 and December 31, 2017, 49 percent and 47 percent of PCI residential mortgage loans were in California. There were no other significant single state concentrations.
portfolio.


29Bank of America





Home Equity
At September 30, 2018,2019, the home equity portfolio made up 11nine percent of the consumer portfolio and iswas comprised of home equity lines of credit (HELOCs), home equity loans and reverse mortgages.
At September 30, 2018,2019, our HELOC portfolio had an outstanding balance of $45.9$38.7 billion, or 9093 percent of the total home equity portfolio, compared to $51.2$44.3 billion, or 8992 percent, at December 31, 2017.2018. HELOCs generally have an initial draw period of 10 years, and after the initial draw period ends, the loans generally convert to 15-year15- or 20-year amortizing loans.
At September 30, 2018,2019, our home equity loan portfolio had an outstanding balance of $3.1$1.3 billion, or sixthree percent of the total home equity portfolio, compared to $4.4$1.8 billion, or sevenfour percent, at December 31, 2017.2018. Home equity loans are almost all fixed-rate loans with amortizing payment terms of 10 to 30 years, and of the $3.1$1.3 billion at September 30, 2018, 602019, 71 percent have 25- to 30-year terms. At September 30, 2018,2019, our reverse mortgage portfolio had an outstanding balance of $2.2$1.6 billion, or four percent of the total home equity portfolio, compared to $2.1$2.2 billion, oralso four percent, at December 31, 2017.2018. We no longer originate home equity loans or reverse mortgages.
 

At September 30, 2018, 722019, 79 percent of the home equity portfolio was in Consumer Banking, 2113 percent was in All Other and the remainder of the portfolio was primarily in GWIM. Outstanding balances in the home equity portfolio decreased $6.5$6.7 billion during the nine months ended September 30, 20182019 primarily due to paydowns and loan sales of $859 million$1.9 billion outpacing new originations and draws on existing lines. Of the total home equity portfolio at September 30, 20182019 and December 31, 2017, $17.6 billion and $18.72018, $15.3 billion, or 3437 percent, and 32$17.3 billion, or 36 percent, were in first-lien positions (36 percent and 34 percent excluding the PCI home equity portfolio).positions. At September 30, 2018,2019, outstanding balances in the home equity portfolio that were in a second-lien or more junior-lien position and where we also held the first-lien loan totaled $8.2$7.1 billion, or 17 percent of our total home equity portfolio excluding the PCI loan portfolio.
Unused HELOCs totaled $43.2$43.3 billion at September 30, 20182019 compared to $44.2$43.1 billion at December 31, 2017.2018. The decreaseincrease was primarily due to accounts reachingdriven by the endimpact of their draw period, which automatically eliminateslower utilization of open line exposure,lines and new production partially offset by customers choosing to close accounts. Both of these more than offset the impact of new production. The HELOC utilization rate was 5247 percent and 5451 percent at September 30, 20182019 and December 31, 2017.

Bank of America32

2018.
Table 23 presents certain home equity portfolio key credit statistics on both a reported basis and excluding the PCI loan portfolio. Additionally, in the “Reported Basis” columns in the following table, 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. For more information on the PCI loan portfolio, see page 34.statistics.
                    
Table 23Home Equity – Key Credit Statistics
Home Equity – Key Credit Statistics (1)
                
         
Reported Basis (1)
 
Excluding Purchased
Credit-impaired Loans (1)
    
(Dollars in millions)(Dollars in millions)        September 30
2018		 December 31
2017		 September 30
2018		 December 31
2017		(Dollars in millions) September 30
2019		 December 31
2018
OutstandingsOutstandings        $51,235
 $57,744
 $49,424
 $55,028
Outstandings $41,574
 $48,286
Accruing past due 30 days or more (2)
Accruing past due 30 days or more (2)
     404
 502
 404
 502
Accruing past due 30 days or more (2)
 224
 363
Nonperforming loans (2)
Nonperforming loans (2)
        2,226
 2,644
 2,226
 2,644
Nonperforming loans (2)
 585
 1,893
Percent of portfolioPercent of portfolio               Percent of portfolio    
Refreshed CLTV greater than 90 but less than or equal to 100Refreshed CLTV greater than 90 but less than or equal to 100   3 % 3% 2% 3%Refreshed CLTV greater than 90 but less than or equal to 100 2% 2%
Refreshed CLTV greater than 100Refreshed CLTV greater than 100     4
 5
 3
 4
Refreshed CLTV greater than 100 2
 3
Refreshed FICO below 620Refreshed FICO below 620        6
 6
 6
 6
Refreshed FICO below 620 3
 5
2006 and 2007 vintages (3)
2006 and 2007 vintages (3)
       25
 29
 23
 27
2006 and 2007 vintages (3)
 19
 22
               
Reported Basis Excluding Purchased Credit-impaired Loans
Three Months Ended
September 30		 Nine Months Ended
September 30		 Three Months Ended
September 30		 Nine Months Ended
September 30
2018 2017 2018 2017 2018 2017 2018 2017
Net charge-off ratio (4)
(0.15)% 0.54% 0.03% 0.42% (0.15)% 0.56% 0.03% 0.44%
(1) 
Outstandings, accruing past due, nonperforming loans and percentages of the portfolio exclude loans accounted for under the fair value option.
(2) 
Accruing past due 30 days or more include $5432 million and $6748 million and nonperforming loans include $27061 million and $344218 million of loans where we serviced the underlying first lien at September 30, 20182019 and December 31, 20172018.
(3) 
These vintages of loans have higher refreshed combined loan-to-value (CLTV) ratios and accounted for 5135 percent and 5249 percent of nonperforming home equity loans at September 30, 20182019 and December 31, 2017, and $12 million of net recoveries and $25 million of net charge-offs for the three and nine months ended September 30, 2018, and $67 million and $170 million of net charge-offs for the same periods in 2017..
(4)
Net charge-off ratios are calculated as annualized 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 $418 million$1.3 billion during the nine months ended September 30, 20182019 as outflows, including $154 million ofprimarily sales, outpaced new inflows. Of the nonperforming home equity portfolioloans at September 30, 2018, $1.3 billion,2019, $266 million, or 5645 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. We estimate that approximately $67 million of junior-lien loans had first-lien loans that were 90 days or more past due. In addition, $583$172 million, or 2629 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 $98$139 million during the nine months ended September 30, 2018.
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. 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 loan. At September 30, 2018, we estimate that $690 million of current and $109 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 $149 million of these combined amounts, with the remaining $650 million serviced by third parties. Of the $799 million 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 $225 million had first-lien loans that were 90 days or more past due.2019.
Net charge-offs decreased $103$182 million to a $20 million net recovery of $202 million, and $184$359 million to a $13net recovery of $346 million net charge-off for the three and nine months ended September 30, 20182019 compared to the same periods in 20172018 primarily driven by favorable portfolio trends due in part to improvement in home prices andrecoveries from the U.S. economy.
Outstanding balances with a refreshed CLTV greater than 100 percent comprised three percent and four percentsales of thepreviously charged off non-core home equity portfolio at September 30, 2018 and December 31, 2017. Outstanding balances 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, 96 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 September 30, 2018.loans.
Of the $49.4$41.6 billion in total home equity portfolio outstandings at September 30, 2018,2019, as shown in Table 24, 2123, 17 percent require interest-only payments. The outstanding balance of HELOCs that have reached the end of their draw period and have entered the amortization period was $17.1$12.3 billion at September 30, 2018.2019. The HELOCs that have entered the amortization period have experienced a higher percentage of early stage delinquencies and nonperforming status when compared to the HELOC portfolio as a whole. At September 30, 2018, $3022019, $162 million, or twoone percent, of outstanding HELOCs that had entered the amortization period were accruing past due 30 days or more. In addition, at September 30,

33Bank of America





2018, $1.9 billion, 2019, $518 million, or 11four percent, of outstanding HELOCs that had enteredwere nonperforming. For more information on HELOC amortization, see Consumer Portfolio Credit Risk Management in the amortization period were nonperforming, of which $1.1 billion were contractually current. We communicate to contractually current customers more than a year prior to the end of their draw period to inform themMD&A 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.Corporation’s 2018 Annual Report on Form 10-K.
Although we do not actively track how many of our home equity customers pay only the minimum amount due on their home equity loans and lines, we can infer some of this information through a review of our HELOC portfolio that we service and that is still in its revolving period. During the three months ended September 30, 2018, 272019, 26 percent of these customers with an outstanding balance did not pay any principal on their HELOCs.


Bank of America 30

Table 24 presents outstandings, nonperforming balances and net charge-offs by certain state concentrations for the home equity
portfolio. In the New York area, the New York-Northern New Jersey-Long Island MSA made up 13 percent of the outstanding home
equity portfolio at both September 30, 20182019 and December 31, 2017. For the three and nine months ended September 30, 2018, loans within this MSA contributed $9 million and $25 million of net charge-offs within the home equity portfolio compared to $24 million and $52 million for the same periods in 2017.2018. The Los Angeles-Long Beach-Santa Ana MSA within California made up 11 percent of the outstanding home equity portfolio at both September 30, 20182019 and December 31, 2017. For the three and nine months ended September 30, 2018, loans within this MSA contributed net recoveries of $7 million and $18 million within the home equity portfolio compared to net recoveries of $7 million and $16 million for the same periods in 2017.2018.
                                
Table 24Home Equity State Concentrations    Home Equity State Concentrations    
                                
 
Outstandings (1)
 
Nonperforming (1)
 
Net Charge-offs (2)
 
Outstandings (1)
 
Nonperforming (1)
 Net Charge-offs
 September 30
2018		 December 31
2017		 September 30
2018		 December 31
2017		 Three Months Ended
September 30		 Nine Months Ended
September 30		 September 30
2019		 December 31
2018		 September 30
2019		 December 31
2018		 Three Months Ended
September 30		 Nine Months Ended
September 30
(Dollars in millions)(Dollars in millions) 2018 2017 2018 2017(Dollars in millions) 2019 2018 2019 2018
CaliforniaCalifornia$13,685
 $15,145
 $650
 $766
 $(20) $(9) $(41) $(24)California$11,627
 $13,515
 $110
 $536
 $(54) $(20) $(109) $(41)
Florida (3)(2)
Florida (3)(2)
5,592
 6,308
 366
 411
 (4) 13
 9
 34
Florida (3)(2)
4,487
 5,418
 77
 315
 (30) (4) (72) 9
New Jersey (3)(2)
New Jersey (3)(2)
4,005
 4,546
 168
 191
 6
 16
 20
 37
New Jersey (3)(2)
3,337
 3,871
 64
 150
 (13) 6
 (11) 20
New York (3)(2)
New York (3)(2)
3,732
 4,195
 222
 252
 8
 14
 16
 31
New York (3)(2)
3,018
 3,590
 95
 194
 (10) 8
 (4) 16
MassachusettsMassachusetts2,471
 2,751
 76
 92
 (1) 5
 2
 7
Massachusetts2,102
 2,400
 35
 65
 (6) (1) (6) 2
OtherOther19,939
 22,083
 744
 932
 (9) 44
 7
 112
Other17,003
 19,492
 204
 633
 (89) (9) (144) 7
Home equity loans (4)
$49,424

$55,028

$2,226

$2,644

$(20)
$83

$13

$197
Purchased credit-impaired home equity portfolio (5)
1,811
 2,716
  
  
  
  
    
Total home equity loan portfolioTotal home equity loan portfolio$51,235
 $57,744
  
  
  
  
    Total home equity loan portfolio$41,574

$48,286

$585

$1,893

$(202)
$(20)
$(346)
$13
(1) 
Outstandings and nonperforming loans exclude loans accounted for under the fair value option.
(2) 
Net charge-offs exclude $34 million and $74 million of write-offs in the home equity PCI loan portfolio for the three and nine months ended September 30, 2018 compared to $11 million and $49 million for the same periods in 2017. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio.
(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 September 30, 2018 and December 31, 2017, 30 percent and 28 percent of PCI home equity loans were in California. There were no other significant single state concentrations.
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 standards for PCI loans. For more information, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the
Corporation’s 2017 Annual Report on Form 10-K and Note 5 – Outstanding Loans and Leases to the Consolidated Financial Statements herein.
Table 25 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 25Purchased Credit-impaired Loan Portfolio
           
 Unpaid
Principal
Balance		 
Gross
Carrying
Value
 Related
Valuation
Allowance		 
Carrying Value
Net of Valuation Allowance
 Percent of Unpaid Principal Balance
(Dollars in millions)September 30, 2018
Residential mortgage (1)
$5,454
 $5,341
 $51
 $5,290
 96.99%
Home equity1,872
 1,811
 99
 1,712
 91.45
Total purchased credit-impaired loan portfolio$7,326
 $7,152
 $150
 $7,002
 95.58
           
  December 31, 2017
Residential mortgage (1)
$8,117
 $8,001
 $117
 $7,884
 97.13%
Home equity2,787
 2,716
 172
 2,544
 91.28
Total purchased credit-impaired loan portfolio$10,904

$10,717

$289

$10,428
 95.63
(1)
At September 30, 2018 and December 31, 2017, pay option loans had an unpaid principal balance of $974 million and $1.4 billion and a carrying value of $965 million and $1.4 billion. This includes $852 million and $1.2 billion of loans that were credit-impaired upon acquisition and $87 million and $141 million of loans that were 90 days or more past due at September 30, 2018 and December 31, 2017. The total unpaid principal balance of pay option loans with accumulated negative amortization was $90 million and $160 million, including $5 million and $9 million of negative amortization at September 30, 2018 and December 31, 2017.

Bank of America34

The total PCI unpaid principal balance decreased $3.6 billion, or 33 percent, during the nine months ended September 30, 2018 primarily driven by loan sales with a carrying value of $2.1 billion compared to sales of $742 million for the same period in 2017.
Of the unpaid principal balance of $7.3 billion at September 30, 2018, $6.5 billion, or 89 percent, was current based on the contractual terms, $464 million, or six percent, was in early stage delinquency, and $252 million was 180 days or more past due, including $210 million of first-lien mortgages and $42 million of home equity loans.
The PCI residential mortgage loan and home equity portfolios represented 75 percent and 25 percent of the total PCI loan portfolio at September 30, 2018. Those loans to borrowers with a refreshed FICO score below 620 represented 22 percent and 16 percent of the PCI residential mortgage loan and home equity portfolios at September 30, 2018. Residential mortgage and home equity loans with a refreshed LTV or CLTV greater than 90 percent, after consideration of purchase accounting adjustments and the related valuation allowance, represented 12 percent and 29 percent of their respective PCI loan portfolios and 13 percent and 32 percent based on the unpaid principal balance at September 30, 2018.

U.S. Credit Card
At September 30, 2018,2019, 97 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 decreased $1.5 billion to $94.8$3.4 billion during the nine months ended September 30, 20182019 to $94.9 billion due to paydowns and a seasonal decline in purchase volume, as well as a portfolio transfer of approximately $600 million to held for sale in the first quarter.volumes. Net charge-offs increased $19 million to $717 million and $86 million to $698 million and $280 million to $2.1$2.2 billion forduring the three and nine months ended September 30, 20182019 compared to the same periods in 20172018 due to portfolio seasoning and loan growth.seasoning. U.S. credit card loans 30 days or more past due and still accruing interest decreased $42$52 million during the nine
months ended September 30, 2018 driven by a reduction in 2017 hurricane-related delinquencies,2019 and loans 90 days or more past due and still accruing interest decreased $28 million.$34 million, driven by seasonal declines.
Unused lines of credit for U.S. credit card totaled $337.9$339.7 billion and $326.3$334.8 billion at September 30, 20182019 and December 31, 2017.2018. The increase in unused lines was driven by a seasonal decrease in line utilization due to a decrease in transaction volumeseasonally lower purchase volumes, as well as account growth and lines of credit increases.
Table 2625 presents certain state concentrations for the U.S. credit card portfolio.
                                
Table 26U.S. Credit Card State Concentrations    
Table 25U.S. Credit Card State Concentrations    
                                
 Outstandings 
Accruing Past Due
90 Days or More
 Net Charge-offs Outstandings 
Accruing Past Due
90 Days or More
 Net Charge-offs
 September 30
2018		 December 31
2017		 September 30
2018		 December 31
2017		 Three Months Ended
September 30		 Nine Months Ended
September 30		 September 30
2019		 December 31
2018		 September 30
2019		 December 31
2018		 Three Months Ended
September 30		 Nine Months Ended
September 30
(Dollars in millions)(Dollars in millions) 2018 2017 2018 2017(Dollars in millions) 2019 2018 2019 2018
CaliforniaCalifornia$15,304
 $15,254
 $141
 $136
 $119
 $104
 $357
 $303
California$15,623
 $16,062
 $164
 $163
 $132
 $119
 $398
 $357
FloridaFlorida8,408
 8,359
 102
 94
 80
 58
 248
 195
Florida8,708
 8,840
 121
 119
 90
 80
 272
 248
TexasTexas7,448
 7,451
 75
 76
 54
 46
 169
 143
Texas7,575
 7,730
 84
 84
 58
 54
 180
 169
New YorkNew York5,886
 5,977
 74
 91
 66
 59
 208
 155
New York5,866
 6,066
 79
 81
 63
 66
 183
 208
WashingtonWashington4,329
 4,350
 20
 20
 15
 13
 47
 41
Washington4,504
 4,558
 25
 24
 17
 15
 53
 47
OtherOther53,454
 54,894
 460
 483
 364
 332
 1,109
 1,021
Other52,670
 55,082
 487
 523
 357
 364
 1,138
 1,109
Total U.S. credit card portfolioTotal U.S. credit card portfolio$94,829

$96,285

$872

$900

$698

$612

$2,138

$1,858
Total U.S. credit card portfolio$94,946

$98,338

$960

$994

$717

$698

$2,224

$2,138
Direct/Indirect Consumer
At September 30, 2018, 552019, 56 percent of the direct/indirect portfolio was included in Consumer Banking (consumer auto and specialty lending – automotive, marine, aircraft, recreational vehicle, loansmarine, aircraft and consumer personal loans) and 4544 percent was included in GWIM (principally securities-based lending loans).
Outstandings in the direct/indirect portfolio decreased $5.0 billion to $91.3 billion$330 million during the nine months ended September 30, 20182019 to
$90.8 billion primarily due to declines in securities-based lending due
to higher paydowns,driven by repayments and in our auto portfolio as paydowns outpaced originations.lower draws. Net charge-offs decreased $26increased $34 million to $42$76 million, and $7$28 million to $142$170 million for the three and nine months ended September 30, 20182019 compared to the same periods in 2017 due largely to clarifying regulatory guidance related to bankruptcy and repossession issued during 2017.2018.
Table 2726 presents certain state concentrations for the direct/indirect consumer loan portfolio.
                 
Table 27Direct/Indirect State Concentrations    
                 
  Outstandings Accruing Past Due
90 Days or More		 Net Charge-offs
  September 30
2018		 December 31
2017		 September 30
2018		 December 31
2017		 Three Months Ended
September 30		 Nine Months Ended
September 30
(Dollars in millions)    2018 2017 2018 2017
California$11,868
 $12,897
 $3
 $3
 $5
 $7
 $16
 $14
Florida10,242
 11,184
 4
 5
 9
 15
 28
 31
Texas9,951
 10,676
 6
 5
 6
 13
 22
 29
New York6,403
 6,557
 2
 2
 2
 2
 7
 3
New Jersey3,306
 3,449
 1
 1
 —
 —
 2
 2
Other49,568
 51,579
 19
 24
 20
 31
 67
 70
Total direct/indirect loan portfolio$91,338

$96,342

$35

$40

$42

$68

$142

$149


3531Bank of America


  







                 
Table 26Direct/Indirect State Concentrations    
                 
  Outstandings Accruing Past Due
90 Days or More		 Net Charge-offs
  September 30
2019		 December 31
2018		 September 30
2019		 December 31
2018		 Three Months Ended
September 30		 Nine Months Ended
September 30
(Dollars in millions)    2019 2018 2019 2018
California$11,942
 $11,734
 $3
 $4
 $32
 $5
 $44
 $16
Florida10,099
 10,240
 4
 4
 5
 9
 21
 28
Texas9,600
 9,876
 4
 6
 8
 6
 23
 22
New York6,302
 6,296
 1
 2
 3
 2
 9
 7
New Jersey3,405
 3,308
 1
 1
 1
 —
 3
 2
Other49,488
 49,712
 16
 21
 27
 20
 70
 67
Total direct/indirect loan portfolio$90,836

$91,166

$29

$38

$76

$42

$170

$142

Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity
Table 2827 presents nonperforming consumer loans, leases and foreclosed properties activity for the three and nine months ended September 30, 20182019 and 2017. For more information on nonperforming loans, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2017 Annual Report on Form 10-K and Note 5 – Outstanding Loans and Leases to the Consolidated Financial Statements herein.2018. During the nine months ended September 30, 2018,2019, nonperforming consumer loans declined $860 milliondecreased $1.7 billion to $4.3$2.2 billion primarily driven by loan sales of $531 million.$1.4 billion.
At September 30, 2018, $1.3 billion,2019, $678 million, or 31 percent, of nonperforming loans were 180 days or more past due and had been written down to their estimated property value less costs to sell. In addition, at September 30, 2018, $2.1 billion,2019, $902 million, or 48 41
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 increased $29 million to $265decreased $56 million during the nine months ended September 30, 20182019 to $188 million as additions
liquidations outpaced liquidations. 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. Certain delinquent government-guaranteed loans (principally FHA-insured loans) are excluded 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 accrued during the holding period.
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 September 30, 2018 and December 31, 2017, $225 million and $330 million of such junior-lien home equity loans were included in nonperforming loans and leases.additions.
Nonperforming loans also include certain loans that have been modified in TDRs where economic concessions have been granted to borrowers experiencing financial difficulties. Nonperforming TDRs excluding those modified loans in the PCI loan portfolio, are included in Table 28.27.
                
Table 28Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity    
Table 27Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity    
                
 Three Months Ended
September 30		 Nine Months Ended
September 30		 Three Months Ended
September 30		 Nine Months Ended
September 30
(Dollars in millions)(Dollars in millions)2018 2017 2018 2017(Dollars in millions)2019 2018 2019 2018
Nonperforming loans and leases, beginning of periodNonperforming loans and leases, beginning of period$4,639
 $5,282
 $5,166
 $6,004
Nonperforming loans and leases, beginning of period$3,027
 $4,639
 $3,842
 $5,166
AdditionsAdditions484
 999
 1,895
 2,499
Additions335
 484
 1,116
 1,895
Reductions:Reductions:       Reductions:       
Paydowns and payoffsPaydowns and payoffs(238) (253) (744) (811)Paydowns and payoffs(197) (238) (580) (744)
SalesSales(145) (162) (531) (423)Sales(748) (145) (1,414) (531)
Returns to performing status (1)
Returns to performing status (1)
(309) (347) (1,009) (1,101)
Returns to performing status (1)
(185) (309) (623) (1,009)
Charge-offsCharge-offs(89) (210) (350) (551)Charge-offs(23) (89) (80) (350)
Transfers to foreclosed propertiesTransfers to foreclosed properties(36) (57) (119) (167)Transfers to foreclosed properties(20) (36) (72) (119)
Transfers to loans held-for-saleTransfers to loans held-for-sale—
 —
 (2) (198)Transfers to loans held-for-sale—
 —
 —
 (2)
Total net reductions to nonperforming loans and leasesTotal net reductions to nonperforming loans and leases(333)
(30)
(860)
(752)Total net reductions to nonperforming loans and leases(838)
(333)
(1,653)
(860)
Total nonperforming loans and leases, September 30 Total nonperforming loans and leases, September 30 4,306

5,252

4,306

5,252
Total nonperforming loans and leases, September 302,189

4,306

2,189

4,306
Foreclosed properties, September 30 (2)
Foreclosed properties, September 30 (2)
265
 259
 265
 259
Foreclosed properties, September 30 (2)
188
 265
 188
 265
Nonperforming consumer loans, leases and foreclosed properties, September 30Nonperforming consumer loans, leases and foreclosed properties, September 30$4,571

$5,511

$4,571

$5,511
Nonperforming consumer loans, leases and foreclosed properties, September 30$2,377

$4,571

$2,377

$4,571
Nonperforming consumer loans and leases as a percentage of outstanding consumer loans and leases (3)
Nonperforming consumer loans and leases as a percentage of outstanding consumer loans and leases (3)
0.97% 1.17%    
Nonperforming consumer loans and leases as a percentage of outstanding consumer loans and leases (3)
0.48% 0.97%    
Nonperforming consumer loans, leases and foreclosed properties as a percentage of outstanding consumer loans, leases and foreclosed properties (3)
Nonperforming consumer loans, leases and foreclosed properties as a percentage of outstanding consumer loans, leases and foreclosed properties (3)
1.03
 1.23
    
Nonperforming consumer loans, leases and foreclosed properties as a percentage of outstanding consumer loans, leases and foreclosed properties (3)
0.52
 1.03
    
(1) 
Consumer loans may be returned to performing status when all principal and interest is current and full repayment of the remaining contractual principal and interest is expected, or when the loan otherwise becomes well-secured and is in the process of collection.
(2) 
Foreclosed property balances do not include properties insured by certain government-guaranteed loans, principally FHA-insured, of $275 million and $500 million and $879 million at September 30, 20182019 and 20172018.
(3) 
Outstanding consumer loans and leases exclude loans accounted for under the fair value option.
Table 2928 presents TDRs for the consumer real estate portfolio. Performing TDR balances are excluded from nonperforming loans and leases in Table 28.27.
                        
Table 29Consumer Real Estate Troubled Debt Restructurings
Table 28Consumer Real Estate Troubled Debt Restructurings
                        
 September 30, 2018 December 31, 2017 September 30, 2019 December 31, 2018
(Dollars in millions)(Dollars in millions)Nonperforming Performing Total Nonperforming Performing Total(Dollars in millions)Nonperforming Performing Total Nonperforming Performing Total
Residential mortgage (1, 2)
Residential mortgage (1, 2)
$1,295
 $5,703
 $6,998
 $1,535
 $8,163
 $9,698
Residential mortgage (1, 2)
$956
 $4,066
 $5,022
 $1,209
 $4,988
 $6,197
Home equity (3)
Home equity (3)
1,308
 1,369
 2,677
 1,457
 1,399
 2,856
Home equity (3)
272
 1,023
 1,295
 1,107
 1,252
 2,359
Total consumer real estate troubled debt restructuringsTotal consumer real estate troubled debt restructurings$2,603

$7,072

$9,675

$2,992

$9,562

$12,554
Total consumer real estate troubled debt restructurings$1,228

$5,089

$6,317

$2,316

$6,240

$8,556
(1) 
At September 30, 20182019 and December 31, 20172018, residential mortgage TDRs deemed collateral dependent totaled $1.71.3 billion and $2.81.6 billion, and included $1.0 billion787 million and $1.2 billion960 million of loans classified as nonperforming and $668487 million and $1.6 billion605 million of loans classified as performing.
(2) 
Residential mortgage performing TDRs included include $3.02.2 billion and $3.72.8 billion of loans that were fully-insured at September 30, 20182019 and December 31, 20172018.
(3) 
HomeAt September 30, 2019 and December 31, 2018, home equity TDRs deemed collateral dependent totaled $1.5 billion478 million and $1.6$1.3 billion, and included include $1.1 billion229 million and $1.2 billion961 million of loans classified as nonperforming at September 30, 2018and December 31, 2017,$249 million and $363322 million and $388 million of loans classified as performing.


  
Bank of America3632


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).
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 2827 as substantially all of the loans remain on accrual status until either charged off or paid in full. At September 30, 20182019 and December 31, 2017,2018, our renegotiated TDR portfolio was $541$657 million and $490$566 million, of which $465$558 million and $426$481 million were current or less than 30 days past due under the modified terms. The increase in the renegotiated TDR portfolio was primarily driven by new renegotiated enrollments outpacing the run offrunoff of existing portfolios. For more information on the renegotiated TDR portfolio, see Note 5 – Outstanding Loans and Leases to the Consolidated Financial Statements.
Commercial Portfolio Credit Risk Management
Commercial credit risk is evaluated and managed with the goal that concentrations of credit exposure continue to be aligned with our risk appetite. We review, measure and manage concentrations of credit exposure by industry, product, geography, customer relationship and loan size. We also review, measure and manage commercial real estate loans by geographic location and property type. In addition, within our non-U.S. portfolio, we evaluate exposures by region and by country. Tables 34, 3733, 36 and 4139 summarize our concentrations. We also utilize syndications of exposure to third parties, loan sales, hedging and other risk mitigation techniquestomanagethesizeandriskprofileofthe size and risk profile of the
commercial credit portfolio. For more information on our industry
concentrations, see Commercial Portfolio Credit Risk Management – Industry Concentrations on page 4136 and Table 37.36.
For more information on our accounting policies regarding delinquencies, nonperforming status and net charge-offs and delinquencies for the commercial portfolio, see Note 1 – Summary of Significant Accounting Principlesto the Consolidated Financial Statementsof the Corporation’s 20172018 Annual Report on Form 10-K.10-K.
Commercial Credit Portfolio
During the nine months ended September 30, 2018,2019, credit quality among large corporate and middle-market borrowers was strong,in our commercial and there was continued improvement in the energy portfolio.industrial portfolio remained strong. Credit quality of commercial real estate borrowers in most sectors remained stable with conservative LTV ratios, stable market rentsratios. However, some of the real estate markets experienced slowing tenant demand and vacancy rates that remain low.decelerating rental income.
Total commercial utilized credit exposure decreased $895 millionincreased $16.2 billion during the nine months ended September 30, 2018 primarily2019 to $637.2 billion driven by decreases inhigher loans held-for-sale (LHFS) and debt securities and other investments, partially offset by an increase in derivative assets.leases. The utilization rate for loans and leases, standby letters of credit (SBLCs) and financial guarantees, and commercial letters of credit, in the aggregate, was 58 percent at September 30, 2019 and 59 percent at both September 30, 2018 and December 31, 2017.2018.
Table 3029 presents commercial credit exposure by type for utilized, unfunded and total binding committed credit exposure. Commercial utilized credit exposure includes SBLCs and financial guarantees and commercial letters of credit that have been issued and for which we are legally bound to advance funds under prescribed conditions during a specified time period, and excludes exposure related to trading account assets. Although funds have not yet been advanced, these exposure types are considered utilized for credit risk management purposes.
                        
Table 30Commercial Credit Exposure by Type
Table 29Commercial Credit Exposure by Type
                        
 
Commercial Utilized (1)
 
Commercial Unfunded (2, 3, 4)
 Total Commercial Committed 
Commercial Utilized (1)
 
Commercial Unfunded (2, 3, 4)
 Total Commercial Committed
(Dollars in millions)(Dollars in millions)September 30
2018		 December 31
2017		 September 30
2018		 December 31
2017		 September 30
2018		 December 31
2017		(Dollars in millions)September 30
2019		 December 31
2018		 September 30
2019		 December 31
2018		 September 30
2019		 December 31
2018
Loans and leases (5)
Loans and leases (5)
$489,368
 $487,748
 $369,332
 $364,743
 $858,700
 $852,491
Loans and leases (5)
$517,234
 $499,664
 $393,361
 $369,282
 $910,595
 $868,946
Derivative assets (6)(5)
Derivative assets (6)(5)
45,617
 37,762
 —
 —
 45,617
 37,762
Derivative assets (6)(5)
45,123
 43,725
 —
 —
 45,123
 43,725
Standby letters of credit and financial guaranteesStandby letters of credit and financial guarantees33,271
 34,517
 524
 863
 33,795
 35,380
Standby letters of credit and financial guarantees34,281
 34,941
 593
 491
 34,874
 35,432
Debt securities and other investmentsDebt securities and other investments25,636
 28,161
 4,692
 4,864
 30,328
 33,025
Debt securities and other investments23,897
 25,425
 5,322
 4,250
 29,219
 29,675
Loans held-for-saleLoans held-for-sale3,737
 10,257
 16,171
 9,742
 19,908
 19,999
Loans held-for-sale8,191
 9,090
 11,221
 14,812
 19,412
 23,902
Operating leasesOperating leases6,476
 6,060
 —
 —
 6,476
 6,060
Commercial letters of creditCommercial letters of credit1,336
 1,467
 296
 155
 1,632
 1,622
Commercial letters of credit1,003
 1,210
 408
 168
 1,411
 1,378
OtherOther940
 888
 —
 —
 940
 888
Other965
 898
 —
 —
 965
 898
Total $599,905
 $600,800
 $391,015
 $380,367
 $990,920
 $981,167
Total$637,170
 $621,013
 $410,905
 $389,003
 $1,048,075
 $1,010,016
(1) 
Commercial utilized exposure includes loans of $5.07.0 billion and $4.83.7 billion and issued letters of credit with a notional amount of $55115 million and $232100 million accounted for under the fair value option at September 30, 20182019 and December 31, 20172018.
(2) 
Commercial unfunded exposure includes commitments accounted for under the fair value option with a notional amount of $3.14.7 billion and $4.63.0 billion at September 30, 20182019 and December 31, 20172018.
(3) 
Excludes unused business card lines, which are not legally binding.
(4) 
Includes the notional amount of unfunded legally binding lending commitments net of amounts distributed (i.e., syndicated or participated) to other financial institutions. The distributed amounts were $10.810.9 billion and $11.010.7 billion at September 30, 20182019 and December 31, 20172018.
(5) 
Includes credit risk exposure associated with assets under operating lease arrangements of $6.1 billion and $6.3 billion at September 30, 2018 and December 31, 2017.
(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 $32.040.7 billion and $34.632.4 billion at September 30, 20182019 and December 31, 20172018. Not reflected in utilized and committed exposure is additional non-cash derivative collateral held of $35.735.1 billion and $26.233.0 billion at September 30, 20182019 and December 31, 20172018, which consists primarily of other marketable securities.
Outstanding commercial loans and leases increased $1.8$17.6 billion during the nine months ended September 30, 20182019 primarily in the commercial real estateand industrial portfolio. The allowance for loan and lease losses for the commercial portfolio decreased $256increased $58 million to $4.8$4.9 billion at September 30, 2018.2019. For moreadditional information, see Allowance for Credit Losses on page 44.39. Table 3130 presents our commercial loans and leases portfolio and related credit quality information at September 30, 20182019 and December 31, 2017.2018.


3733Bank of America


  








                        
Table 31Commercial Credit Quality
Table 30Commercial Credit Quality
    
 Outstandings Nonperforming 
Accruing Past Due
90 Days or More
 Outstandings Nonperforming 
Accruing Past Due
90 Days or More
(Dollars in millions)(Dollars in millions)September 30
2018		 December 31
2017		 September 30
2018		 December 31
2017		 September 30
2018		 December 31
2017		(Dollars in millions)September 30
2019		 December 31
2018		 September 30
2019		 December 31
2018		 September 30
2019		 December 31
2018
Commercial and industrial:Commercial and industrial:           Commercial and industrial:           
U.S. commercialU.S. commercial$285,662
 $284,836
 $699
 $814
 $114
 $144
U.S. commercial$310,982
 $299,277
 $966
 $794
 $338
 $197
Non-U.S. commercialNon-U.S. commercial96,002
 97,792
 31
 299
 —
 3
Non-U.S. commercial101,084
 98,776
 51
 80
 10
 —
Total commercial and industrialTotal commercial and industrial381,664
 382,628
 730
 1,113
 114
 147
Total commercial and industrial412,066
 398,053
 1,017
 874
 348
 197
Commercial real estate (1)
Commercial real estate (1)
60,835
 58,298
 46
 112
 1
 4
Commercial real estate (1)
62,798
 60,845
 185
 156
 3
 4
Commercial lease financingCommercial lease financing21,546
 22,116
 14
 24
 33
 19
Commercial lease financing20,107
 22,534
 35
 18
 22
 29
464,045
 463,042
 790
 1,249
 148
 170
 494,971
 481,432
 1,237
 1,048
 373
 230
U.S. small business commercial (2)
U.S. small business commercial (2)
14,234
 13,649
 58
 55
 73
 75
U.S. small business commercial (2)
15,229
 14,565
 50
 54
 94
 84
Commercial loans excluding loans accounted for under the fair value optionCommercial loans excluding loans accounted for under the fair value option478,279
 476,691
 848
 1,304
 221
 245
Commercial loans excluding loans accounted for under the fair value option510,200
 495,997
 1,287
 1,102
 467
 314
Loans accounted for under the fair value option (3)
Loans accounted for under the fair value option (3)
4,976
 4,782
 —
 43
 —
 —
Loans accounted for under the fair value option (3)
7,034
 3,667
 —
 —
 —
 —
Total commercial loans and leasesTotal commercial loans and leases$483,255
 $481,473
 $848
 $1,347
 $221
 $245
Total commercial loans and leases$517,234
 $499,664
 $1,287
 $1,102
 $467
 $314
(1) 
Includes U.S. commercial real estate of $56.958.1 billion and $54.856.6 billion and non-U.S. commercial real estate of $3.94.7 billion and $3.54.2 billion at September 30, 20182019 and December 31, 20172018.
(2) 
Includes card-related products.
(3) 
Commercial loans accounted for under the fair value option include U.S. commercial of $3.64.7 billion and $2.62.5 billion and non-U.S. commercial of $1.42.4 billion and $2.21.1 billion at September 30, 20182019 and December 31, 20172018. For more information on the fair value option, see Note 1516 – Fair Value Option to the Consolidated Financial Statements.
Table 3231 presents net charge-offs and related ratios for our commercial loans and leases for the three and nine months ended September 30, 20182019 and 2017.2018.
                                
Table 32Commercial Net Charge-offs and Related Ratios
Table 31Commercial Net Charge-offs and Related Ratios
                    
 Net Charge-offs 
Net Charge-off Ratios (1)
 Net Charge-offs 
Net Charge-off Ratios (1)
 Three Months Ended
September 30		 Nine Months Ended
September 30		 Three Months Ended
September 30		 Nine Months Ended
September 30		 Three Months Ended
September 30		 Nine Months Ended
September 30		 Three Months Ended
September 30		 Nine Months Ended
September 30
(Dollars in millions)(Dollars in millions)2018 2017 2018 2017 2018 2017 2018 2017(Dollars in millions)2019 2018 2019 2018 2019 2018 2019 2018
Commercial and industrial:Commercial and industrial:               Commercial and industrial:               
U.S. commercialU.S. commercial$70
 $80
 $172
 $176
 0.10% 0.11% 0.08% 0.09%U.S. commercial$53
 $70
 $202
 $172
 0.07% 0.10% 0.09% 0.08%
Non-U.S. commercialNon-U.S. commercial25
 33
 48
 94
 0.10
 0.14
 0.07
 0.14
Non-U.S. commercial67
 25
 115
 48
 0.26
 0.10
 0.15
 0.07
Total commercial and industrialTotal commercial and industrial95
 113
 220
 270
 0.10
 0.12
 0.08
 0.10
Total commercial and industrial120
 95
 317
 220
 0.12
 0.10
 0.11
 0.08
Commercial real estateCommercial real estate2
 2
 3
 3
 0.02
 0.02
 0.01
 0.01
Commercial real estate(1) 2
 8
 3
 —
 0.02
 0.02
 0.01
Commercial lease financingCommercial lease financing—
 (1) —
 —
 —
 (0.02) —
 —
Commercial lease financing1
 —
 14
 —
 0.02
 —
 0.09
 —
 97
 114
 223
 273
 0.08
 0.10
 0.06
 0.08
 120
 97
 339
 223
 0.10
 0.08
 0.09
 0.06
U.S. small business commercialU.S. small business commercial59
 55
 180
 160
 1.67
 1.61
 1.72
 1.60
U.S. small business commercial69
 59
 202
 180
 1.83
 1.67
 1.83
 1.72
Total commercialTotal commercial$156
 $169
 $403
 $433
 0.13
 0.14
 0.11
 0.13
Total commercial$189
 $156
 $541
 $403
 0.15
 0.13
 0.15
 0.11
(1) 
Net charge-off ratios are calculated as annualized net charge-offs divided by average outstanding loans and leases excluding loans accounted for under the fair value option.
Table 3332 presents commercial reservable criticized utilized exposure by loan type. Criticized exposure corresponds to the Special Mention, Substandard and Doubtful asset categories as defined by regulatory authorities. Total commercial reservable criticized utilized exposure decreased $2.0 billion,increased $774 million, or 14seven percent, during the nine months ended September 30, 20182019 driven by broad-based improvements includinga small number of client downgrades across various industries and was not indicative of broader issues in the energy sector.portfolio. At September 30, 20182019 and December 31, 2017, 872018, 90 percent and 8491 percent of commercial reservable criticized utilized exposure was secured.
                
Table 33
Commercial Reservable Criticized Utilized Exposure (1, 2)
Table 32
Commercial Reservable Criticized Utilized Exposure (1, 2)
                
(Dollars in millions)(Dollars in millions)September 30, 2018 December 31, 2017(Dollars in millions)September 30, 2019 December 31, 2018
Commercial and industrial:
U.S. commercialU.S. commercial$8,631
 2.75% $9,891
 3.15%U.S. commercial$8,789
 2.59% $7,986
 2.43%
Non-U.S. commercialNon-U.S. commercial1,298
 1.27
 1,766
 1.70
Non-U.S. commercial1,063
 0.99
 1,013
 0.97
Total commercial and industrialTotal commercial and industrial9,929
 2.39
 11,657
 2.79
Total commercial and industrial9,852
 2.21
 8,999
 2.08
Commercial real estateCommercial real estate565
 0.91
 566
 0.95
Commercial real estate897
 1.39
 936
 1.50
Commercial lease financingCommercial lease financing373
 1.73
 581
 2.63
Commercial lease financing349
 1.74
 366
 1.62
 10,867
 2.18
 12,804
 2.57
 11,098
 2.09
 10,301
 1.99
U.S. small business commercialU.S. small business commercial730
 5.13
 759
 5.56
U.S. small business commercial737
 4.84
 760
 5.22
Total commercial reservable criticized utilized exposure (1)
Total commercial reservable criticized utilized exposure (1)
$11,597
 2.26
 $13,563
 2.65
Total commercial reservable criticized utilized exposure (1)
$11,835
 2.17
 $11,061
 2.08
(1) 
Total commercial reservable criticized utilized exposure includes loans and leases of $10.711.1 billion and $12.510.3 billion and commercial letters of credit of $866763 million and $1.1 billion781 million at September 30, 20182019 and December 31, 20172018.
(2) 
Percentages are calculated as commercial reservable criticized utilized exposure divided by total commercial reservable utilized exposure for each exposure category.


  
Bank of America3834


Commercial and Industrial
Commercial and industrial loans include U.S. commercial and non-U.S. commercial portfolios.
U.S. Commercial
At September 30, 2018,2019, 69 percent of the U.S. commercial loan portfolio, excluding small business, was managed in Global Banking, 16 percent in Global Markets, 1213 percent in GWIM (generally business-purpose loans for high net worth clients) and the remainder primarily in Consumer Banking. U.S. commercial loans remained relatively unchangedincreased $11.7 billion during the nine months ended September 30, 2018. Reservable2019, across lines of business. Nonperforming U.S. commercial loans increased $172 million and reservable criticized utilized exposure decreased $1.3 billion,increased $803 million, or 1310 percent, driven by broad-based improvements including the energy sector.a small number of client downgrades across various industries.
Non-U.S. Commercial
At September 30, 2018, 802019, 84 percent of the non-U.S. commercial loan portfolio was managed in Global Banking and 2016 percent in Global Markets. OutstandingNon-U.S. commercial loans decreased $1.8increased $2.3 billion during the nine months ended September 30, 2018 driven by paydowns2019, primarily in Global MarketsBanking. Reservable criticized utilized exposure decreased $468 million, or 27 percent, and nonperforming loans and leases decreased $268 million, or 90 percent, due primarily to paydowns and sales. For additionalmore information on the non-U.S. commercial portfolio, see Non-U.S. Portfolio on page 43.38.
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. Outstanding loans increased $2.0 billion, or three percent, during the nine months ended September 30, 2019 to $62.8 billion due to new originations slightly outpacing paydowns. The portfolio remains diversified across property types and geographic regions. California represented the largest state concentration at 24 percent and 23 percent of the commercial real estate loans and leases portfolio at both September 30, 20182019 and December 31, 2017.2018. The commercial real estate portfolio is predominantly managed in Global Banking and consists of loans made primarily to public and private developers, and commercial real estate firms. Outstanding loans increased $2.5 billion, or four percent, during the nine months ended September 30, 2018 to $60.8 billion due to new originations, including higher hold levels on syndicated loans, outpacing paydowns.
For the three and nine months ended September 30, 2018,2019, we continued to see low default rates and solid credit quality in both the residential and non-residential portfolios. We use a number of proactive risk mitigation initiatives to reduce adversely rated exposure in the commercial real estate portfolio, including transfers of deteriorating exposures to management by independent special asset officers and the pursuit of loan restructurings or asset sales to achieve the best results for our customers and the Corporation.
Nonperforming commercial real estate loans and foreclosed properties decreased $88 million, or 54 percent, during the nine months ended September 30, 2018 to $76 million at September 30, 2018, primarily due to loan paydowns.
Table 3433 presents outstanding commercial real estate loans by geographic region, based on the geographic location of the collateral, and by property type.
        
Table 34Outstanding Commercial Real Estate Loans
Table 33Outstanding Commercial Real Estate Loans
        
(Dollars in millions)(Dollars in millions)September 30
2018		 December 31
2017		(Dollars in millions)September 30
2019		 December 31
2018
By Geographic Region By Geographic Region  
  
By Geographic Region  
  
CaliforniaCalifornia$14,227
 $13,607
California$15,227
 $14,002
NortheastNortheast10,954
 10,072
Northeast11,558
 10,895
SouthwestSouthwest7,374
 6,970
Southwest7,585
 7,339
SoutheastSoutheast5,718
 5,487
Southeast5,727
 5,726
FloridaFlorida4,075
 3,680
MidsouthMidsouth3,300
 2,919
MidwestMidwest3,916
 3,769
Midwest3,187
 3,772
Florida3,559
 3,170
IllinoisIllinois2,970
 3,263
Illinois2,917
 2,989
Midsouth2,917
 2,962
NorthwestNorthwest2,290
 2,657
Northwest1,847
 2,178
Non-U.S. Non-U.S. 3,937
 3,538
Non-U.S. 4,661
 4,240
Other (1)
Other (1)
2,973
 2,803
Other (1)
2,714
 3,105
Total outstanding commercial real estate loansTotal outstanding commercial real estate loans$60,835
 $58,298
Total outstanding commercial real estate loans$62,798
 $60,845
By Property TypeBy Property Type 
  
By Property Type 
  
Non-residentialNon-residential   Non-residential   
OfficeOffice$17,680
 $16,718
Office$17,470
 $17,246
Shopping centers / RetailShopping centers / Retail8,752
 8,825
Shopping centers / Retail8,418
 8,798
Multi-family rentalMulti-family rental8,180
 8,280
Multi-family rental8,035
 7,762
Industrial / WarehouseIndustrial / Warehouse7,495
 5,379
Hotels / MotelsHotels / Motels6,944
 6,344
Hotels / Motels7,012
 7,248
Industrial / Warehouse5,364
 6,070
UnsecuredUnsecured3,146
 2,187
Unsecured2,937
 2,956
Multi-useMulti-use2,390
 2,771
Multi-use1,973
 2,848
Land and land development140
 160
OtherOther6,642
 5,485
Other7,853
 7,029
Total non-residentialTotal non-residential59,238
 56,840
Total non-residential61,193
 59,266
ResidentialResidential1,597
 1,458
Residential1,605
 1,579
Total outstanding commercial real estate loansTotal outstanding commercial real estate loans$60,835
 $58,298
Total outstanding commercial real estate loans$62,798
 $60,845
(1) 
Includes unsecured loans to real estate investment trusts and national home builders whose portfolios of properties span multiple geographic regions and properties in the states of Colorado, Utah, Hawaii, Wyoming and Montana.
U.S. Small Business Commercial
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 5153 percent and 5051 percent of the U.S. small business commercial portfolio at September 30, 20182019 and December 31, 2017.2018. Of the U.S. small business commercial net charge-offs, 9592 percent and 9495 percent were credit card-related products for the three and nine months ended September 30, 20182019 compared to 9295 percent and 9094 percent for the same periods in 2017.

39Bank of America

2018.




Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity
Table 3534 presents the nonperforming commercial loans, leases and foreclosed properties activity during the three and nine months ended September 30, 20182019 and 2017.2018. Nonperforming loans do not include loans accounted for under the fair value option. During the nine months ended September 30, 2018,2019, nonperforming commercial loans and leases decreased $456increased $185 million to $848
million.$1.3 billion. At September 30, 2018, 962019, 93 percent of commercial nonperforming loans, leases and foreclosed properties were

35Bank of America





secured and 4656 percent were contractually current. Commercial nonperforming loans were carried at 8290 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 collateral value less costs to sell.
                
Table 35
Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity (1, 2)
    
Table 34
Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity (1, 2)
            
 Three Months Ended
September 30		 Nine Months Ended
September 30		 Three Months Ended
September 30		 Nine Months Ended
September 30
(Dollars in millions)(Dollars in millions)2018 2017 2018 2017(Dollars in millions)2019 2018 2019 2018
Nonperforming loans and leases, beginning of periodNonperforming loans and leases, beginning of period$1,258
 $1,520
 $1,304
 $1,703
Nonperforming loans and leases, beginning of period$1,160
 $1,258
 $1,102
 $1,304
AdditionsAdditions235
 412
 915
 1,172
Additions492
 235
 1,521
 915
Reductions:Reductions:   
    
Reductions:   
    
PaydownsPaydowns(287) (270) (649) (803)Paydowns(161) (287) (479) (649)
SalesSales(130) (61) (204) (116)Sales(33) (130) (193) (204)
Returns to performing status (3)
Returns to performing status (3)
(95) (100) (213) (240)
Returns to performing status (3)
(48) (95) (105) (213)
Charge-offsCharge-offs(116) (145) (276) (312)Charge-offs(123) (116) (371) (276)
Transfers to foreclosed propertiesTransfers to foreclosed properties(12) —
 (12) (27)Transfers to foreclosed properties—
 (12) (7) (12)
Transfers to loans held-for-saleTransfers to loans held-for-sale(5) (38) (17) (59)Transfers to loans held-for-sale—
 (5) (181) (17)
Total net reductions to nonperforming loans and leasesTotal net reductions to nonperforming loans and leases(410) (202) (456) (385)Total net reductions to nonperforming loans and leases127
 (410) 185
 (456)
Total nonperforming loans and leases, September 30Total nonperforming loans and leases, September 30848
 1,318
 848
 1,318
Total nonperforming loans and leases, September 301,287
 848
 1,287
 848
Foreclosed properties, September 30Foreclosed properties, September 3030
 40
 30
 40
Foreclosed properties, September 3059
 30
 59
 30
Nonperforming commercial loans, leases and foreclosed properties, September 30Nonperforming commercial loans, leases and foreclosed properties, September 30$878
 $1,358
 $878
 $1,358
Nonperforming commercial loans, leases and foreclosed properties, September 30$1,346
 $878
 $1,346
 $878
Nonperforming commercial loans and leases as a percentage of outstanding commercial loans and leases (4)
Nonperforming commercial loans and leases as a percentage of outstanding commercial loans and leases (4)
0.18% 0.28%    
Nonperforming commercial loans and leases as a percentage of outstanding commercial loans and leases (4)
0.25% 0.18%    
Nonperforming commercial loans, leases and foreclosed properties as a percentage of outstanding commercial loans, leases and foreclosed properties (4)
Nonperforming commercial loans, leases and foreclosed properties as a percentage of outstanding commercial loans, leases and foreclosed properties (4)
0.18
 0.29
    
Nonperforming commercial loans, leases and foreclosed properties as a percentage of outstanding commercial loans, leases and foreclosed properties (4)
0.26
 0.18
    
(1) 
Balances do not include nonperforming LHFSloans held-for-sale of $177$237 million and $322$177 million at September 30, 20182019 and 20172018.
(2) 
Includes U.S. small business commercial activity. Small business card loans are excluded as they are not classified as nonperforming.
(3) 
Commercial loans and leases may be returned to performing status when all principal and interest is current and full repayment of the remaining contractual principal and interest is expected, or when the loan otherwise becomes well-secured and is in the process of collection. TDRs are generally classified as performing after a sustained period of demonstrated payment performance.
(4) 
Outstanding commercial loans exclude loans accounted for under the fair value option.
Table 3635 presents our commercial TDRs by product type and performing status. U.S. small business commercial TDRs are comprised of renegotiated small business card loans and small business loans. The renegotiated small business card loans are not classified as nonperforming as they are charged off no later than the end of the month in which the loan becomes 180 days past due. For more information on TDRs, see Note 5 – Outstanding Loans and Leases to the Consolidated Financial Statements.
             
Table 36Commercial Troubled Debt Restructurings
   
  September 30, 2018 December 31, 2017
(Dollars in millions)Nonperforming Performing Total Nonperforming Performing Total
Commercial and industrial:
U.S. commercial$285
 $1,058
 $1,343
 $370
 $866
 $1,236
Non-U.S. commercial9
 204
 213
 11
 219
 230
Total commercial and industrial294
 1,262
 1,556
 381
 1,085
 1,466
Commercial real estate4
 6
 10
 38
 9
 47
Commercial lease financing2
 72
 74
 5
 13
 18
 300
 1,340
 1,640
 424
 1,107
 1,531
U.S. small business commercial4
 18
 22
 4
 15
 19
Total commercial troubled debt restructurings$304
 $1,358
 $1,662
 $428
 $1,122
 $1,550

Bank of America40

             
Table 35Commercial Troubled Debt Restructurings
   
  September 30, 2019 December 31, 2018
(Dollars in millions)Nonperforming Performing Total Nonperforming Performing Total
Commercial and industrial:
U.S. commercial$379
 $1,135
 $1,514
 $306
 $1,092
 $1,398
Non-U.S. commercial51
 226
 277
 78
 162
 240
Total commercial and industrial430
 1,361
 1,791
 384
 1,254
 1,638
Commercial real estate109
 79
 188
 114
 6
 120
Commercial lease financing17
 35
 52
 3
 68
 71
 556
 1,475
 2,031
 501
 1,328
 1,829
U.S. small business commercial3
 25
 28
 3
 18
 21
Total commercial troubled debt restructurings$559
 $1,500
 $2,059
 $504
 $1,346
 $1,850
Industry Concentrations
Table 3736 presents commercial committed and utilized credit exposure by industry and the total net credit default protection purchased to cover the funded and unfunded portions of certain credit exposures. Our commercial credit exposure is diversified across a broad range of industries. Total commercial committed exposure increased $9.8$38.1 billion, or onefour percent, during the nine months ended September 30, 20182019 to $990.9 billion.$1.0 trillion. The increase in commercial committed exposure was concentrated in the Asset ManagersReal estate, Financial markets infrastructure, and Funds, Real Estate, Capital Goods and Food, Beverage and Tobaccogoods industry sectors. Increases were partially offset by reduceddecreased exposure to the FoodGlobal commercial banks, Insurance, and Staples Retailing, MediaCommercial services and Global Commercial Bankssupplies industry sectors.
Industry limits are used internally to manage industry concentrations and are basedFor information on committed exposure that is allocated on an industry-by-industry basis. A risk management framework is in place to set and approve industry limits, as well as to provide ongoing monitoring. Thesee Commercial Portfolio Credit Risk Management Risk Committee oversees industry limit governance.- Industry Concentrations in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.
Asset Managersmanagers and Funds,funds, our largest industry concentration with committed exposure of $103.1$109.8 billion, increased $12.0$2.0 billion,
or 13two percent, during the nine months ended September 30, 2018. The change reflects an increase in exposure to several counterparties.2019.
Real Estate,estate, our second largest industry concentration with committed exposure of $90.7$93.6 billion, increased $6.9$7.1 billion, or eight percent, during the nine months ended September 30, 2018.2019. This growth occurred primarily in the category of property developers and owners, partially offset by declines in REITs and multiple-use and all other property types.
Capital goods, our third largest industry concentration with committed exposure of $79.3 billion, increased $4.2 billion, or six percent, during the nine months ended September 30, 2019 with the growth largely occurring in the machinery and trading companies and distributors industry categories, partially offset by a decrease in large conglomerates. For more information on the commercial real estate and related portfolios, see Commercial Portfolio Credit Risk Management – Commercial Real Estate on page 39.35.
Capital Goods, our third largest industry concentration with committed exposure of $74.7 billion, increased $4.3 billion, or six percent, during the nine months ended September 30, 2018. The increase in committed exposure occurred primarily as a result of increases in large conglomerates, as well as trading companies and distributors, partially offset by a decrease in machinery companies.
Our energy-related committed exposure decreased $2.3 billion, or six percent, during the nine months ended September 30, 2018 to $34.5 billion. Energy sector net charge-offs were $34 million for the nine months ended September 30, 2018 compared to $131 million for the same period in 2017. Energy sector reservable criticized exposure decreased $745 million during the nine months ended September 30, 2018 to $875 million due to improvement in credit quality of some borrowers coupled with exposure reductions. The energy allowance for credit losses decreased $225 million during the nine months ended September 30, 2018 to $335 million.
Bank of America 36

                
Table 37
Commercial Credit Exposure by Industry (1)
Table 36
Commercial Credit Exposure by Industry (1)
                
 
Commercial
Utilized
 
Total Commercial
Committed (2)
 
Commercial
Utilized
 
Total Commercial
Committed (2)
(Dollars in millions)(Dollars in millions)September 30
2018		 December 31
2017		 September 30
2018		 December 31
2017		(Dollars in millions)September 30
2019		 December 31
2018		 September 30
2019		 December 31
2018
Asset managers and fundsAsset managers and funds$68,733
 $59,190
 $103,066
 $91,092
Asset managers and funds$73,822
 $71,756
 $109,841
 $107,888
Real estate (3)
Real estate (3)
64,460
 61,940
 90,664
 83,773
Real estate (3)
70,643
 65,328
 93,625
 86,514
Capital goodsCapital goods40,327
 36,705
 74,720
 70,417
Capital goods41,651
 39,192
 79,308
 75,080
Finance companiesFinance companies37,502
 36,662
 59,923
 56,659
Healthcare equipment and servicesHealthcare equipment and services34,563
 35,763
 56,649
 56,489
Government and public educationGovernment and public education44,436
 48,684
 55,296
 58,067
Government and public education42,802
 43,675
 54,177
 54,749
Healthcare equipment and services34,943
 37,780
 54,889
 57,256
Finance companies33,549
 34,050
 53,375
 53,107
MaterialsMaterials25,727
 24,001
 49,461
 47,386
Materials27,647
 27,347
 52,293
 51,865
RetailingRetailing25,714
 26,117
 47,823
 48,796
Retailing27,354
 25,333
 48,874
 47,507
Consumer servicesConsumer services25,959
 25,702
 46,335
 43,298
Food, beverage and tobaccoFood, beverage and tobacco23,199
 23,252
 45,166
 42,815
Food, beverage and tobacco23,587
 23,586
 44,609
 42,745
Consumer services24,975
 27,191
 42,276
 43,605
Commercial services and suppliesCommercial services and supplies21,861
 22,100
 37,644
 35,496
Commercial services and supplies22,328
 22,623
 37,855
 39,349
EnergyEnergy16,319
 16,345
 34,462
 36,765
Energy15,660
 13,727
 35,750
 32,279
TransportationTransportation21,887
 21,704
 30,694
 29,946
Transportation25,440
 22,814
 34,638
 31,523
UtilitiesUtilities11,938
 12,035
 28,899
 27,623
Pharmaceuticals and biotechnologyPharmaceuticals and biotechnology6,261
 7,430
 27,051
 23,634
Individuals and trustsIndividuals and trusts18,887
 18,643
 26,303
 25,019
Global commercial banksGlobal commercial banks23,602
 26,583
 25,687
 28,627
Technology hardware and equipmentTechnology hardware and equipment11,287
 13,014
 25,379
 26,228
MediaMedia10,581
 19,155
 28,523
 33,955
Media13,285
 12,132
 23,645
 24,502
Global commercial banks25,471
 29,491
 27,752
 31,764
Utilities11,496
 11,342
 27,495
 27,935
Individuals and trusts18,706
 18,549
 25,332
 25,097
Technology hardware and equipment10,054
 10,728
 21,759
 22,071
Pharmaceuticals and biotechnology7,430
 5,653
 19,396
 18,623
Consumer durables and apparelConsumer durables and apparel10,174
 9,904
 21,459
 20,199
Vehicle dealersVehicle dealers15,930
 16,896
 19,128
 20,361
Vehicle dealers17,332
 17,603
 20,580
 20,446
Consumer durables and apparel9,432
 8,859
 18,129
 17,296
Software and servicesSoftware and services7,489
 8,562
 16,558
 18,202
Software and services10,257
 8,809
 20,098
 19,172
Telecommunication servicesTelecommunication services8,580
 8,686
 15,980
 14,166
Automobiles and componentsAutomobiles and components6,990
 5,988
 14,271
 13,318
Automobiles and components8,033
 7,131
 15,176
 13,893
Financial markets infrastructure (clearinghouses)Financial markets infrastructure (clearinghouses)11,864
 8,317
 14,316
 10,042
InsuranceInsurance5,818
 6,411
 13,785
 12,990
Insurance6,966
 8,674
 13,804
 15,807
Telecommunication services6,837
 6,389
 12,786
 13,108
Food and staples retailingFood and staples retailing4,840
 4,955
 10,100
 15,589
Food and staples retailing5,642
 4,787
 9,871
 9,093
Religious and social organizationsReligious and social organizations3,705
 4,454
 5,586
 6,318
Religious and social organizations4,104
 3,757
 5,950
 5,620
Financial markets infrastructure (clearinghouses)1,111
 688
 2,906
 2,403
Other7,885
 3,621
 7,878
 3,616
Total commercial credit exposure by industryTotal commercial credit exposure by industry$599,905
 $600,800
 $990,920
 $981,167
Total commercial credit exposure by industry$637,170
 $621,013
 $1,048,075
 $1,010,016
Net credit default protection purchased on total commitments (4)
Net credit default protection purchased on total commitments (4)
 
  
 $(2,197) $(2,129)
Net credit default protection purchased on total commitments (4)
 
  
 $(3,858) $(2,663)
(1) 
Includes U.S. small business commercial exposure.
(2) 
Includes the notional amount of unfunded legally binding lending commitments net of amounts distributed (i.e., syndicated or participated) to other financial institutions. The distributed amounts were $10.810.9 billion and $11.010.7 billion at September 30, 20182019 and December 31, 20172018.
(3) 
Industries are viewed from a variety of perspectives to best isolate the perceived risks. For purposes of this table, the real estate industry is defined based on the primary business activity of the borrowers or counterparties using operating cash flows and primary source of repayment as key factors.
(4) 
Represents net notional credit protection purchased.purchased to hedge funded and unfunded exposures for which we elected the fair value option, as well as certain other credit exposures. For moreadditional information, see Commercial Portfolio Credit Risk Management – Risk Mitigation.

41Bank of America





Risk Mitigation
We purchase credit protection to cover the funded portion as well as the unfunded portion of certain credit exposures. To lower the cost of obtaining our desired credit protection levels, we may add credit exposure within an industry, borrower or counterparty group by selling protection.
At September 30, 20182019 and December 31, 2017,2018, net notional credit default protection purchased in our credit derivatives portfolio to hedge ourfundedand unfundedexposures for whichwe elected the fair value option, as well as certain other credit exposures, was $2.2$3.9 billion and $2.1$2.7 billion. We recorded net losses on these positions of $15 million and $93 million for the three and nine months ended September 30, 2019 compared to net losses of $33 million and $43 million for the three and nine months ended September 30, 2018 compared to net losses of $10 million and $57 million for the same periods in 20172018 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 44.42. For moreadditional information, see Trading Risk Management on page 47.41.
Tables 3837 and 3938 present the maturity profiles and the credit exposure debt ratings of the net credit default protection portfolio at September 30, 20182019 and December 31, 2017.2018.
     
Table 37Net Credit Default Protection by Maturity
     
 September 30
2019		 December 31
2018
Less than or equal to one year37% 20%
Greater than one year and less than or equal to five years42
 78
Greater than five years21
 2
Total net credit default protection100% 100%
     
Table 38Net Credit Default Protection by Maturity
     
 September 30
2018		 December 31
2017
Less than or equal to one year33% 42%
Greater than one year and less than or equal to five years61
 58
Greater than five years6
 —
Total net credit default protection100% 100%

37Bank of America

         
Table 39Net Credit Default Protection by Credit Exposure Debt Rating
         
  
Net
Notional (1)
 Percent of
Total		 
Net
Notional (1)
 Percent of
Total
(Dollars in millions)September 30, 2018 December 31, 2017
Ratings (2, 3)
 
  
  
  
A$(546) 24.9% $(280) 13.2%
BBB(259) 11.8
 (459) 21.6
BB(794) 36.1
 (893) 41.9
B(373) 17.0
 (403) 18.9
CCC and below(198) 9.0
 (84) 3.9
NR (4)
(27) 1.2
 (10) 0.5
Total net credit default protection$(2,197) 100.0% $(2,129) 100.0%




         
Table 38Net Credit Default Protection by Credit Exposure Debt Rating
         
  
Net
Notional (1)
 Percent of
Total		 
Net
Notional (1)
 Percent of
Total
(Dollars in millions)September 30, 2019 December 31, 2018
Ratings (2, 3)
 
  
  
  
A$(612) 15.9% $(700) 26.3%
BBB(1,177) 30.5
 (501) 18.8
BB(800) 20.7
 (804) 30.2
B(523) 13.6
 (422) 15.8
CCC and below(85) 2.2
 (205) 7.7
NR (4)
(661) 17.1
 (31) 1.2
Total net credit
default protection
$(3,858) 100.0% $(2,663) 100.0%
(1) 
Represents net credit default protection purchased.
(2) 
Ratings are refreshed on a quarterly basis.
(3) 
Ratings of BBB- or higher are considered to meet the definition of investment grade.
(4) 
NR is comprised of index positions held and any names that have not been rated.
In addition to our net notional credit default protection purchased to cover the funded and unfunded portion of certain credit exposures, credit derivatives are used for market-making activities for clients and establishing positions intended to profit from directional or relative value changes. We execute the majority of our credit derivative trades in the OTC market with large, multinational financial institutions, including broker-dealers and,
to a lesser degree, with a variety of other investors. Because these transactions are executed in the OTC market, we are subject to settlement risk. We are also subject to credit risk in the event that these counterparties fail to perform under the terms of these contracts. In 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 40 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 3 – Derivatives to the Consolidated Financial Statements.
The credit risk amounts discussed above and presented in Table 40 take into consideration the effects of legally enforceable master netting agreements while amounts disclosed in Note 3 – 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 40Credit Derivatives
     
  Contract/
Notional		 Credit Risk
(Dollars in billions)September 30, 2018
Purchased credit derivatives: 
  
Credit default swaps$430.3
 $2.2
Total return swaps/options64.6
 0.5
Total purchased credit derivatives$494.9
 $2.7
Written credit derivatives: 
  
Credit default swaps$398.2
 n/a
Total return swaps/options62.5
 n/a
Total written credit derivatives$460.7
 n/a
     
  December 31, 2017
Purchased credit derivatives: 
  
Credit default swaps$470.9
 $2.4
Total return swaps/options54.1
 0.3
Total purchased credit derivatives$525.0
 $2.7
Written credit derivatives: 
  
Credit default swaps$448.2
 n/a
Total return swaps/options55.2
 n/a
Total written credit derivatives$503.4
 n/a
n/a = not applicable
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. For more information, see Note 3 – Derivativesto the Consolidated Financial Statements herein and Note 23 – Derivatives to the Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K.


Bank of America42

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 4139 presents our 20 largest non-U.S. country exposures at September 30, 2018.2019. These exposures accounted for 90 percent and 8689 percent of our total non-U.S. exposure at both September 30, 20182019 and December 31, 2017.2018. Net country exposure for these 20 countries increased $45.5$10.9 billion in the nine months ended September 30, 2018,2019, primarily driven by increased placements with central banks in the U.K., Japan and Germany.
Non-U.S. exposure is presented on an internal risk management basis and includes sovereign and non-sovereign creditcorporate exposure securities and other investments issued by or domiciled in countries other than the U.S.
Funded loans and loan equivalents include loans, leases, and other extensions of credit and funds, including letters of credit and due from placements. Unfunded commitments are the undrawn portion of legally binding commitments related to loans and loan equivalents. Net counterparty exposure includes the fair value of derivatives, including the counterparty risk associated with credit default swaps, and secured financing transactions. Securities and other investments are carried at fair value and long securities exposures are netted against short exposures with the same underlying issuer to, but not below, zero. Net country exposure represents country exposure less hedges and credit default protection purchased, net of credit default protection sold.across multiple countries. For more information on ourthe top 20 non-U.S. credit and trading portfolios,countries exposure, see Non-U.S. Portfolio in the MD&A of the Corporation’s 20172018 Annual Report on Form 10-K.
                                
Table 41Top 20 Non-U.S. Countries Exposure
Table 39Top 20 Non-U.S. Countries Exposure
                                
(Dollars in millions)(Dollars in millions)Funded Loans and Loan Equivalents Unfunded Loan Commitments Net Counterparty Exposure 
Securities/
Other
Investments
 Country Exposure at September 30
2018		 Hedges and Credit Default Protection Net Country Exposure at September 30
2018		 Increase (Decrease) from December 31
2017		(Dollars in millions)Funded Loans and Loan Equivalents Unfunded Loan Commitments Net Counterparty Exposure 
Securities/
Other
Investments
 Country Exposure at September 30
2019		 Hedges and Credit Default Protection Net Country Exposure at September 30
2019		 Increase (Decrease) from December 31
2018
United KingdomUnited Kingdom$39,114
 $15,034
 $5,601
 $1,111
 $60,860
 $(3,757) $57,103
 $19,508
United Kingdom$32,387
 $16,610
 $7,154
 $2,506
 $58,657
 $(3,107) $55,550
 $696
GermanyGermany26,417
 6,278
 2,428
 789
 35,912
 (3,499) 32,413
 10,910
Germany21,600
 7,190
 1,992
 1,133
 31,915
 (5,826) 26,089
 (2,568)
JapanJapan17,109
 2,280
 1,397
 2,781
 23,567
 (1,418) 22,149
 13,059
Japan18,774
 879
 1,591
 1,441
 22,685
 (1,403) 21,282
 1,259
CanadaCanada7,515
 6,944
 1,669
 2,682
 18,810
 (462) 18,348
 (375)Canada7,774
 7,829
 1,298
 3,336
 20,237
 (680) 19,557
 42
FranceFrance6,654
 5,590
 2,935
 3,347
 18,526
 (3,429) 15,097
 4,554
France7,631
 7,386
 1,255
 2,802
 19,074
 (2,650) 16,424
 3,773
ChinaChina12,307
 377
 1,096
 866
 14,646
 (292) 14,354
 (1,571)China12,167
 495
 1,304
 919
 14,885
 (357) 14,528
 (113)
IndiaIndia7,786
 538
 467
 4,058
 12,849
 (224) 12,625
 1,513
BrazilBrazil7,610
 663
 201
 3,689
 12,163
 (420) 11,743
 1,494
AustraliaAustralia6,031
 3,024
 603
 1,735
 11,393
 (377) 11,016
 1,086
NetherlandsNetherlands7,220
 2,044
 817
 1,306
 11,387
 (922) 10,465
 1,998
Netherlands6,510
 3,435
 498
 1,193
 11,636
 (992) 10,644
 (933)
Australia5,188
 3,524
 589
 1,550
 10,851
 (612) 10,239
 (350)
Brazil6,779
 811
 326
 2,323
 10,239
 (391) 9,848
 (868)
India6,656
 513
 343
 2,205
 9,717
 (104) 9,613
 (884)
SwitzerlandSwitzerland5,627
 3,051
 331
 237
 9,246
 (644) 8,602
 838
South KoreaSouth Korea5,561
 613
 684
 1,554
 8,412
 (284) 8,128
 227
South Korea6,018
 604
 389
 1,762
 8,773
 (196) 8,577
 (593)
Hong KongHong Kong6,144
 216
 475
 1,289
 8,124
 (34) 8,090
 (588)Hong Kong5,645
 257
 327
 1,218
 7,447
 (32) 7,415
 179
Switzerland4,752
 3,128
 331
 199
 8,410
 (1,030) 7,380
 1,583
SingaporeSingapore3,305
 142
 602
 1,739
 5,788
 (71) 5,717
 (546)Singapore4,031
 223
 456
 2,591
 7,301
 (53) 7,248
 1,731
MexicoMexico3,349
 1,450
 99
 684
 5,582
 (151) 5,431
 (56)Mexico4,023
 1,876
 260
 1,041
 7,200
 (185) 7,015
 779
BelgiumBelgium3,444
 1,029
 124
 407
 5,004
 (509) 4,495
 530
Belgium4,556
 1,093
 216
 215
 6,080
 (214) 5,866
 288
SpainSpain4,076
 1,314
 155
 796
 6,341
 (950) 5,391
 741
United Arab EmiratesUnited Arab Emirates2,895
 154
 142
 107
 3,298
 (17) 3,281
 (106)United Arab Emirates3,082
 226
 130
 102
 3,540
 (33) 3,507
 (142)
Spain2,470
 990
 144
 860
 4,464
 (1,379) 3,085
 (23)
Taiwan1,741
 13
 405
 597
 2,756
 —
 2,756
 44
ItalyItaly2,256
 1,007
 615
 527
 4,405
 (1,679) 2,726
 (1,520)Italy2,310
 1,486
 589
 542
 4,927
 (1,450) 3,477
 396
SwedenSweden1,572
 705
 268
 245
 2,790
 (274) 2,516
 476
Total top 20 non-U.S. countries exposureTotal top 20 non-U.S. countries exposure$170,876
 $52,137
 $20,822
 $26,923
 $270,758
 $(20,040) $250,718
 $45,526
Total top 20 non-U.S. countries exposure$169,210
 $58,884
 $19,484
 $31,561
 $279,139
 $(20,067) $259,072
 $10,942
A number of economic conditions and geopolitical events have given rise to risk aversion in certain emerging markets. Additionally, in light of ongoing trade tensions, we continue to closely monitor our exposures to tariff-sensitive regions and industries, particularly to countries that account for a large percentage of U.S. trade, such as China.
Our largest emerging market country exposure at September 30, 20182019 was China, with net exposure of $14.4$14.5 billion, concentrated in large state-owned companies, subsidiaries of multinational corporations and commercial banks.
The outlook for policy direction and therefore economic performance in the EU remains uncertain as a consequence of
reduced political cohesion among EU countries. Additionally, we believe that the uncertainty in the U.K.’s ability to negotiate a favorable exit from the EU will further weigh on economic
performance. For additional information, see Executive Summary – Recent Developments – U.K. Exit from the EU on page 3. Our largest EU country exposure at September 30, 20182019 was the U.K. with net exposure of $57.1$55.6 billion, which represents a $19.5 billion$696 million increase from December 31, 2017.2018. Our second largest EU exposure was Germany with net exposure of $26.1 billion, which represents a $2.6 billion decrease from December 31, 2018. The increasedecrease in Germany was primarily driven by corporate loan growth and increased placements with the central bank as part of liquidity management.
Markets have reacted negatively to the escalating tensions between the U.S. and several key trading partners. We are closely monitoring our exposures to tariff-sensitive industries and our international exposure, particularly to countries that account for a large percentage of U.S. trade.reduction in sovereign exposure.




43Bank of America38






Provision for Credit Losses
The provision for credit losses decreased $118increased $63 million to $716$779 million, and $18$272 million to $2.4$2.6 billion for the three and nine months ended September 30, 20182019 compared to the same periods in 2017.2018. The provision for credit losses was $216$32 million and $462$40 million lower than net charge-offs for the three and nine months ended September 30, 2018,2019, resulting in a decrease in the allowance for credit losses. This compared to a reductiondecrease of $66$216 million and $347$462 million in the allowance for credit losses for the three and nine months ended September 30, 2017.2018.
Net charge-offs for the three and nine months ended September 30, 2019 were $811 million and $2.7 billion compared to $932 million and $2.8 billion for the same periods in 2018.
The provision for credit losses for the consumer portfolio decreased $20$146 million to $710$564 million and increased $107$181 million to $2.2$2.0 billion for the three and nine months ended September 30, 20182019 compared to the same periods in 2017.2018. The decrease in the three-month period was primarily driven by a lower reserve build in the U.S. credit card portfolio. The increase in the nine-month period was primarily driven by portfolio seasoning and loan growth in the U.S. credit card portfolio and a slower pace of improvement in the consumer real estate portfolio, partially offset by the sale of the non-U.S. consumer credit card business in the second quarter of 2017. Included in the provision is an expense of $53 million and $28 million related to the PCI loan portfolio for the three and nine months ended September 30, 2018 compared to an expense of $12 million and $56 million for the same periods in 2017.sales.
The provision for credit losses for the commercial portfolio, including unfunded lending commitments, decreased $98increased $209 million to $6$215 million and $125$453 million to $162$615 million for the three and nine months ended September 30, 20182019 compared to the same periods in 2017.2018. The decrease for both periodsincrease was primarily driven by improvementdue in asset qualitypart to energy releases in the commercial portfolio including energy exposures.prior-year periods.
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. 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. For more information on the allowance for loan and lease losses, see Allowance for Credit Losses in the MD&A of the Corporation’s 2017 Annual Report on Form 10-K.
During the three and nine months ended September 30, 2018,2019, the factors that impacted the allowance for loan and lease losses included improvement in the credit quality of the consumer real estate portfolios driven by continuing improvements in the U.S.
economy and strong labor markets, proactive credit risk management initiatives and the impact of high credit quality originations. Evidencing the improvements in the U.S. economy and strong labor markets are low levels of unemployment and increases in home prices. In addition to these improvements, in the consumer portfolio, nonperforming consumer loans decreased $860 million in$1.7 billion during the nine months ended September 30, 20182019 as loan sales, returns to performing status paydowns, loan sales and charge-offspaydowns continued to outpace new nonaccrual loans. During the nine months ended September 30, 2018, the allowance for loan and lease losses in the commercial portfolio reflected decreased energy reserves primarily driven by improvement in energy exposures including reservable criticized utilized exposures.
The allowance for loan and lease losses for the consumer portfolio, as presented in Table 43,41, was $5.0$4.6 billion at September 30, 2018,2019, a decrease of $403$226 million from December 31, 2017.2018. The decrease was primarily in the consumer real estate portfolio, partially offset by an increase in the U.S. credit card portfolio. The reduction in the allowance for the consumer real estate portfolio was due to improved home prices, lower nonperforming loans and a decrease in loan balances in our non-core portfolio. The increase in the allowance for the U.S. credit card portfolio was driven primarily by continued portfolio seasoning.
The allowance for loan and lease losses for the commercial portfolio, as presented in Table 43,41, was $4.8$4.9 billion at September 30, 2018, a decrease2019, an increase of $256$58 million from December 31, 2017 primarily driven by improvement in energy exposures. 2018.
Commercial reservable criticized utilized exposure decreasedincreased to $11.6$11.8 billion at September 30, 20182019 from $13.6$11.1 billion (to 2.262.17 percent from 2.652.08 percent of total commercial reservable utilized exposure) at December 31, 2017, driven by broad-based improvements including the energy sector. Nonperforming2018, and nonperforming commercial loans decreasedincreased to $848 million$1.3 billion at September 30, 20182019 from $1.3$1.1 billion (to 0.180.25 percent from 0.270.22 percent of outstanding commercial loans excluding loans accounted for under the fair value option) at December 31, 2017.2018 with the increases spread across multiple industries. See Tables 30, 31 32 and 3332 for more details on key commercial credit statistics.
The allowance for loan and lease losses as a percentage of total loans and leases outstanding was 1.050.98 percent at September 30, 20182019 compared to 1.121.02 percent at December 31, 2017.2018. For more information on the allowance for loan and lease losses, see Allowance for Credit Losses in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.
The Financial Accounting Standards Board issued a new accounting standard regarding the measurement of the allowance for credit losses that will be effective for the Corporation on January 1, 2020. Upon adoption of the standard on January 1, 2020, we expect that, based on current expectations of future economic conditions, our allowance for credit losses on loans and leases may increase up to approximately 30 percent from our allowance for credit losses as of September 30, 2019, as disclosed herein, with a large portion of that increase driven by the U.S. credit card portfolio. The increase from the previously disclosed expectation of up to 20 percent was driven by refinements to certain models and methodologies along with the third-quarter 2019 loan sales, which reduced the expected recoveries on previously charged-off loans as the recoveries were realized upon sale. The ultimate impact upon adoption will depend on the characteristics of the Corporation’s portfolios, macroeconomic conditions and forecasts, and the finalized validation of models and methodologies, as well as other management judgments. For additional information regarding this new accounting standard, see Note 1 – Summary of Significant Accounting Principlesto the Consolidated Financial Statements.
Reserve for Unfunded Lending Commitments
In addition to the allowance for loan and lease losses, we also estimate probable losses related to unfunded lending commitments such as letters of credit, financial guarantees, unfunded bankers’ acceptances and binding loan commitments, excluding commitments accounted for under the fair value option. For more information on the reserve for unfunded lending commitments, see Allowance for Credit Losses in the MD&A of the Corporation’s 20172018 Annual Report on Form 10-K.
The reserve for unfunded lending commitments was $792$809 million at September 30, 20182019 compared to $777$797 million at December 31, 2017.


Bank of America44

2018.
Table 4240 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 the three and nine months ended September 30, 20182019 and 2017.2018.
         
Table 42Allowance for Credit Losses       
         
  Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions)2018 2017 2018 2017
Allowance for loan and lease losses, beginning of period$10,050
 $10,875
 $10,393
 $11,237
Loans and leases charged off       
Residential mortgage(45) (51) (137) (157)
Home equity(110) (180) (329) (476)
U.S. credit card(826) (727) (2,515) (2,198)
Non-U.S. credit card (1)
—
 —
 —
 (103)
Direct/Indirect consumer(120) (136) (376) (358)
Other consumer(46) (56) (140) (160)
Total consumer charge-offs(1,147) (1,150) (3,497) (3,452)
U.S. commercial (2)
(161) (171) (437) (449)
Non-U.S. commercial(25) (34) (61) (100)
Commercial real estate(2) (4) (9) (12)
Commercial lease financing(1) (3) (6) (9)
Total commercial charge-offs(189) (212) (513) (570)
Total loans and leases charged off(1,336) (1,362) (4,010) (4,022)
Recoveries of loans and leases previously charged off       
Residential mortgage33
 133
 124
 241
Home equity130
 97
 316
 279
U.S. credit card128
 115
 377
 340
Non-U.S. credit card (1)
—
 —
 —
 28
Direct/Indirect consumer78
 68
 234
 209
Other consumer2
 6
 10
 46
Total consumer recoveries371
 419
 1,061
 1,143
U.S. commercial (3)
32
 36
 85
 113
Non-U.S. commercial—
 1
 13
 6
Commercial real estate—
 2
 6
 9
Commercial lease financing1
 4
 6
 9
Total commercial recoveries33
 43
 110
 137
Total recoveries of loans and leases previously charged off404
 462
 1,171
 1,280
Net charge-offs(932) (900) (2,839) (2,742)
Write-offs of PCI loans(95) (73) (166) (161)
Provision for loan and lease losses711
 829
 2,362
 2,395
Other (4)
—
 (38) (16) (36)
Allowance for loan and lease losses, September 309,734
 10,693
 9,734
 10,693
Reserve for unfunded lending commitments, beginning of period787
 757
 777
 762
Provision for unfunded lending commitments5
 5
 15
 —
Reserve for unfunded lending commitments, September 30792
 762
 792
 762
Allowance for credit losses, September 30$10,526
 $11,455
 $10,526
 $11,455
(1)
Represents net charge-offs related to the non-U.S. credit card loan portfolio, which was sold in the second quarter of 2017.
(2)
Includes U.S. small business commercial charge-offs of $72 million and $215 million for the three and nine months ended September 30, 2018 compared to $65 million and $193 million for the same periods in 2017.
(3)
Includes U.S. small business commercial recoveries of $13 million and $35 million for the three and nine months ended September 30, 2018 compared to $10 million and $33 million for the same periods in 2017.
(4)
Primarily represents the net impact of portfolio sales, consolidations and deconsolidations, foreign currency translation adjustments, transfers to held for sale and certain other reclassifications.


4539Bank of America


  








         
Table 42Allowance for Credit Losses (continued)       
         
  Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions)2018 2017 2018 2017
Loan and allowance ratios:       
Loans and leases outstanding at September 30 (5)
$924,070
 $920,832
 $924,070
 $920,832
Allowance for loan and lease losses as a percentage of total loans and leases outstanding at September 30 (5)
1.05% 1.16% 1.05% 1.16%
Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases outstanding at September 30 (6)
1.12
 1.25
 1.12
 1.25
Commercial allowance for loan and lease losses as a percentage of total commercial loans and leases outstanding at September 30 (7)
0.99
 1.08
 0.99
 1.08
Average loans and leases outstanding (5)
$925,091
 $911,945
 $926,664
 $908,670
Annualized net charge-offs as a percentage of average loans and leases outstanding (5, 8)
0.40% 0.39% 0.41% 0.40%
Annualized net charge-offs and PCI write-offs as a percentage of average loans and leases outstanding (5)
0.44
 0.42
 0.43
 0.43
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases at September 30 (5)
189
 163
 189
 163
Ratio of the allowance for loan and lease losses at September 30 to annualized net charge-offs (8)
2.63
 3.00
 2.56
 2.92
Ratio of the allowance for loan and lease losses at September 30 to annualized net charge-offs and PCI write-offs2.39
 2.77
 2.42
 2.76
Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases at September 30 (9)
$4,027
 $3,880
 $4,027
 $3,880
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases, excluding the allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases at September 30 (5, 9)
111% 104% 111% 104%
         
Table 40Allowance for Credit Losses       
         
  Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions)2019 2018 2019 2018
Allowance for loan and lease losses, beginning of period$9,527
 $10,050
 $9,601
 $10,393
Loans and leases charged off       
Residential mortgage(28) (45) (69) (137)
Home equity(171) (110) (386) (329)
U.S. credit card(865) (826) (2,659) (2,515)
Direct/Indirect consumer(157) (120) (403) (376)
Other consumer(71) (46) (163) (140)
Total consumer charge-offs(1,292) (1,147) (3,680) (3,497)
U.S. commercial (1)
(151) (161) (486) (437)
Non-U.S. commercial(66) (25) (115) (61)
Commercial real estate—
 (2) (10) (9)
Commercial lease financing(3) (1) (19) (6)
Total commercial charge-offs(220) (189) (630) (513)
Total loans and leases charged off(1,512) (1,336) (4,310) (4,010)
Recoveries of loans and leases previously charged off       
Residential mortgage66
 33
 120
 124
Home equity373
 130
 732
 316
U.S. credit card148
 128
 435
 377
Direct/Indirect consumer81
 78
 233
 234
Other consumer2
 2
 12
 10
Total consumer recoveries670
 371
 1,532
 1,061
U.S. commercial (2)
29
 32
 82
 85
Non-U.S. commercial(1) —
 —
 13
Commercial real estate1
 —
 2
 6
Commercial lease financing2
 1
 5
 6
Total commercial recoveries31
 33
 89
 110
Total recoveries of loans and leases previously charged off701
 404
 1,621
 1,171
Net charge-offs(811) (932) (2,689) (2,839)
Provision for loan and lease losses776
 711
 2,637
 2,362
Other (3)
(59) (95) (116) (182)
Allowance for loan and lease losses, September 309,433
 9,734
 9,433
 9,734
Reserve for unfunded lending commitments, beginning of period806
 787
 797
 777
Provision for unfunded lending commitments3
 5
 12
 15
Reserve for unfunded lending commitments, September 30809
 792
 809
 792
Allowance for credit losses, September 30$10,242
 $10,526
 $10,242
 $10,526
         
Loan and allowance ratios:       
Loans and leases outstanding at September 30 (4)
$965,236
 $924,070
 $965,236
 $924,070
Allowance for loan and lease losses as a percentage of total loans and leases outstanding at September 30 (4)
0.98% 1.05% 0.98% 1.05%
Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases outstanding at September 30 (5)
1.01
 1.12
 1.01
 1.12
Commercial allowance for loan and lease losses as a percentage of total commercial loans and leases outstanding at September 30 (6)
0.95
 0.99
 0.95
 0.99
Average loans and leases outstanding (4)
$956,850
 $925,091
 $946,546
 $926,664
Annualized net charge-offs as a percentage of average loans and leases outstanding (4)
0.34% 0.40% 0.38% 0.41%
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases at September 30 (4)
271
 189
 271
 189
Ratio of the allowance for loan and lease losses at September 30 to annualized net charge-offs2.93
 2.63
 2.62
 2.56
Amounts included in allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases at September 30 (7)
$4,144
 $4,027
 $4,144
 $4,027
Allowance for loan and lease losses as a percentage of total nonperforming loans and leases, excluding the allowance for loan and lease losses for loans and leases that are excluded from nonperforming loans and leases at September 30 (4, 7)
152% 111% 152% 111%
(5)(1) 
Includes U.S. small business commercial charge-offs of $79 million and $239 million for the three and nine months ended September 30, 2019 compared to $72 million and $215 million for the same periods in 2018.
(2)
Includes U.S. small business commercial recoveries of $10 million and $37 million for the three and nine months ended September 30, 2019 compared to $13 million and $35 million for the same periods in 2018.
(3)
Primarily represents write-offs of purchased credit-impaired (PCI) loans, the net impact of portfolio sales, and transfers to held for sale.
(4)
Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of $7.7 billion and $5.7 billion and $6.3 billion at September 30, 20182019 and 20172018. Average loans accounted for under the fair value option were $5.67.9 billion and $5.86.6 billion for the three and nine months ended September 30, 20182019 compared to $6.25.6 billion and $7.05.8 billion for the same periods in 2017.2018.
(6)(5) 
Excludes consumer loans accounted for under the fair value option of $640 million and $755 million and $978 million at September 30, 20182019 and 20172018.
(7)(6) 
Excludes commercial loans accounted for under the fair value option of $7.0 billion and $5.0 billion and $5.3 billion at September 30, 20182019 and 20172018.
(8)(7) 
Net charge-offs exclude $95 million and $166 million of write-offs in the PCI loan portfolio for the three and nine months ended September 30, 2018 compared to $73 million and $161 million for the same periods in 2017. For more information on PCI write-offs, see Consumer Portfolio Credit Risk Management – Purchased Credit-impaired Loan Portfolio on page 34.
(9)
Primarily includes amounts allocated to U.S. credit card and unsecured consumer lending portfolios in Consumer Banking and PCI loans in All Other.
For reporting purposes, we allocate the allowance for credit losses across products as presented in Table 43.
Bank of America 40

                        
Table 43Allocation of the Allowance for Credit Losses by Product Type    
Table 41Allocation of the Allowance for Credit Losses by Product Type    
                
Amount 
Percent of
Total
 
Percent of
Loans and
Leases
Outstanding (1)
 Amount 
Percent of
Total
 
Percent of
Loans and
Leases
Outstanding (1)
 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)(Dollars in millions)September 30, 2018 December 31, 2017(Dollars in millions)September 30, 2019 December 31, 2018
Allowance for loan and lease lossesAllowance for loan and lease losses 
  
  
  
  
  
Allowance for loan and lease losses 
  
  
  
  
  
Residential mortgageResidential mortgage$500
 5.14% 0.24% $701
 6.74% 0.34%Residential mortgage$341
 3.61% 0.15% $422
 4.40% 0.20%
Home equityHome equity658
 6.76
 1.28
 1,019
 9.80
 1.76
Home equity250
 2.65
 0.60
 506
 5.27
 1.05
U.S. credit cardU.S. credit card3,530
 36.26
 3.72
 3,368
 32.41
 3.50
U.S. credit card3,709
 39.32
 3.91
 3,597
 37.47
 3.66
Direct/Indirect consumerDirect/Indirect consumer262
 2.69
 0.29
 264
 2.54
 0.27
Direct/Indirect consumer234
 2.48
 0.26
 248
 2.58
 0.27
Other consumerOther consumer30
 0.31
 n/m
 31
 0.30
 n/m
Other consumer42
 0.45
 n/m
 29
 0.30
 n/m
Total consumerTotal consumer4,980
 51.16
 1.12
 5,383
 51.79
 1.18
Total consumer4,576
 48.51
 1.01
 4,802
 50.02
 1.08
U.S. commercial (2)
U.S. commercial (2)
2,974
 30.55
 0.99
 3,113
 29.95
 1.04
U.S. commercial (2)
3,038
 32.21
 0.93
 3,010
 31.35
 0.96
Non-U.S. commercialNon-U.S. commercial687
 7.06
 0.72
 803
 7.73
 0.82
Non-U.S. commercial669
 7.09
 0.66
 677
 7.05
 0.69
Commercial real estateCommercial real estate946
 9.72
 1.56
 935
 9.00
 1.60
Commercial real estate992
 10.52
 1.58
 958
 9.98
 1.57
Commercial lease financingCommercial lease financing147
 1.51
 0.68
 159
 1.53
 0.72
Commercial lease financing158
 1.67
 0.79
 154
 1.60
 0.68
Total commercialTotal commercial4,754
 48.84
 0.99
 5,010
 48.21
 1.05
Total commercial4,857
 51.49
 0.95
 4,799
 49.98
 0.97
Allowance for loan and lease losses (3)
Allowance for loan and lease losses (3)
9,734
 100.00% 1.05
 10,393
 100.00% 1.12
Allowance for loan and lease losses (3)
9,433
 100.00% 0.98
 9,601
 100.00% 1.02
Reserve for unfunded lending commitmentsReserve for unfunded lending commitments792
     777
    
Reserve for unfunded lending commitments809
     797
    
Allowance for credit lossesAllowance for credit losses$10,526
     $11,170
    Allowance for credit losses$10,242
     $10,398
    
(1) 
Ratios are calculated as allowance for loan and lease losses as a percentage of loans and leases outstanding excluding loans accounted for under the fair value option. Consumer loans accounted for under the fair value option includedinclude residential mortgage loans of $407275 million and $567336 million and home equity loans of $348365 million and $361346 million at September 30, 20182019 and December 31, 20172018. Commercial loans accounted for under the fair value option includedinclude U.S. commercial loans of $3.64.7 billion and $2.62.5 billion and non-U.S. commercial loans of $1.42.4 billion and $2.21.1 billion at September 30, 20182019 and December 31, 20172018.
(2) 
Includes allowance for loan and lease losses for U.S. small business commercial loans of $472518 million and $439474 million at September 30, 20182019 and December 31, 20172018.
(3)
Includes $150 million and $289 million of valuation allowance presented with the allowance for loan and lease losses related to PCI loans at September 30, 2018 and December 31, 2017.
n/m = not meaningful

Bank of America46

Market Risk Management
For more information on our market risk management process, see Market Risk Management in the MD&A of the Corporation’s 20172018 Annual Report on Form 10-K.
Trading Risk Management
To evaluate risk arising fromrisks in our trading activities, the Corporation focuseswe focus on the actual and potential volatility of revenues generated by individual positions as well as portfolios of positions.
VaR is a common statistic used to measure market risk 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.risk. Our primary VaR statistic is equivalent to a 99 percent confidence level. Thislevel, which means that for a VaR with a one-day holding period, there should not be losses in excess of VaR, on average, 99 out of 100 trading days.
Table 42 presents the total market-based portfolio VaR which is the combination of the total covered positions (and less liquid trading positions) portfolio and the fair value option portfolio. For more information on our trading risk management process see Trading Risk Management in the MD&A of the Corporation’s 2017 Annual Report on Form 10-K.
Table 44 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. For more information on the market risk VaR for trading activities, see Trading Risk Management in the MD&A of the Corporation’s 20172018 Annual Report on Form 10-K.
The total market-based portfolio VaR results in Table 4442 include market risk to which we are exposed from all business segments, excluding credit valuation adjustment (CVA), DVA and related hedges, to which we are exposed from all business segments.hedges. The majority of this portfolio is within the Global Markets segment.
Table 4442 presents period-end, average, high and low daily trading VaR for the three months ended September 30, 2018,2019, June 30, 20182019 and September 30, 2017,2018, as well as average daily trading VaR for the nine months ended September 30, 20182019 and 2017,2018 using a 99 percent confidence level. The amounts disclosed in Table 4442 and Table 4543 align to the view of covered positions used in the Basel 3 capital calculations. Foreign exchange and commodity positions are always considered covered positions, regardless of trading or banking treatment for the trade, except for structural foreign currency positions that are excluded with prior regulatory approval.
The average total covered positions and less liquid trading positions portfolio VaR decreasedincreased for the three months ended September 30, 20182019 compared to the same period in 2017 primarily2018 due to an increase in portfolio diversification.equity risk, partially offset by a decrease in interest rate risk.
                                                        
Table 44Market Risk VaR for Trading Activities                
Table 42Market Risk VaR for Trading Activities                
            
 Three Months Ended Nine Months Ended September 30 Three Months Ended Nine Months Ended September 30
September 30, 2018 June 30, 2018 September 30, 2017  September 30, 2019 June 30, 2019 September 30, 2018 
(Dollars in millions)(Dollars in millions)Period End Average 
High (1)
 
Low (1)
 Period End Average 
High (1)
 
Low (1)
 Period End Average 
High (1)
 
Low (1)
 2018 Average 2017 Average(Dollars in millions)Period End Average 
High (1)
 
Low (1)
 Period End Average 
High (1)
 
Low (1)
 Period End Average 
High (1)
 
Low (1)
 2019 Average 2018 Average
Foreign exchangeForeign exchange$3
 $7
 $12
 $2
 $8
 $10
 $15
 $7
 $6
 $10
 $15
 $5
 $8
 $12
Foreign exchange$3
 $6
 $11
 $3
 $6
 $5
 $11
 $4
 $3
 $7
 $12
 $2
 $6
 $8
Interest rateInterest rate22
 26
 36
 16
 27
 23
 32
 15
 15
 21
 41
 14
 24
 20
Interest rate22
 20
 26
 14
 20
 26
 38
 18
 22
 26
 36
 16
 25
 24
CreditCredit24
 24
 30
 20
 30
 25
 30
 20
 24
 25
 29
 23
 25
 25
Credit26
 24
 27
 20
 26
 22
 27
 16
 24
 24
 30
 20
 22
 25
EquityEquity17
 18
 27
 13
 24
 16
 26
 11
 17
 17
 33
 12
 18
 18
Equity24
 23
 29
 17
 21
 20
 25
 15
 17
 18
 27
 13
 21
 18
CommoditiesCommodities7
 6
 8
 5
 7
 9
 14
 4
 4
 5
 7
 4
 7
 5
Commodities4
 6
 31
 4
 6
 6
 8
 4
 7
 6
 8
 5
 6
 7
Portfolio diversificationPortfolio diversification(47) (52) —
 —
 (65) (55) —
 —
 (40) (44) —
 —
 (52) (45)Portfolio diversification(50) (48) —
 —
 (45) (48) —
 —
 (47) (52) —
 —
 (48) (52)
Total covered positions portfolioTotal covered positions portfolio26
 29
 36
 21
 31
 28
 38
 20
 26
 34
 51
 24
 30
 35
Total covered positions portfolio29
 31
 36
 24
 34
 31
 37
 28
 26
 29
 36
 21
 32
 30
Impact from less liquid exposuresImpact from less liquid exposures2
 2
 —
 —
 2
 2
 —
 —
 3
 7
 —
 —
 4
 6
Impact from less liquid exposures2
 3
 —
 —
 1
 3
 —
 —
 2
 2
 —
 —
 3
 4
Total covered positions and less liquid trading positions portfolioTotal covered positions and less liquid trading positions portfolio28
 31
 38
 23
 33
 30
 42
 24
 29
 41
 63
 26
 34
 41
Total covered positions and less liquid trading positions portfolio31
 34
 38
 27
 35
 34
 40
 29
 28
 31
 38
 23
 35
 34
Fair value option loansFair value option loans10
 13
 15
 10
 12
 13
 18
 8
 10
 10
 12
 9
 12
 11
Fair value option loans11
 11
 13
 9
 10
 9
 11
 7
 10
 13
 15
 10
 9
 12
Fair value option hedgesFair value option hedges6
 9
 11
 6
 8
 11
 17
 5
 8
 8
 9
 6
 9
 6
Fair value option hedges10
 11
 13
 9
 10
 7
 11
 4
 6
 9
 11
 6
 9
 9
Fair value option portfolio diversificationFair value option portfolio diversification(8) (13) —
 —
 (12) (13) —
 —
 (11) (9) —
 —
 (11) (8)Fair value option portfolio diversification(6) (10) —
 —
 (11) (9) —
 —
 (8) (13) —
 —
 (9) (11)
Total fair value option portfolioTotal fair value option portfolio8
 9
 11
 8
 8
 11
 16
 5
 7
 9
 10
 7
 10
 9
Total fair value option portfolio15

12
 16
 9
 9
 7
 10
 5
 8
 9
 11
 8
 9
 10
Portfolio diversificationPortfolio diversification(6) (6) —
 —
 (5) (7) —
 —
 (4) (3) —
 —
 (6) (4)Portfolio diversification(12) (9) —
 —
 (7) (5) —
 —
 (6) (6) —
 —
 (6) (6)
Total market-based portfolioTotal market-based portfolio$30
 $34
 44
 26
 $36
 $34
 47
 28
 $32
 $47
 69
 29
 $38
 $46
Total market-based portfolio$34

$37
 44
 28
 $37
 $36
 42
 31
 $30
 $34
 44
 26
 $38
 $38
(1) 
The high and low for each portfolio may have occurred on different trading days than the high and low for the components. Therefore the impact from less liquid exposures and the amount of portfolio diversification, which is the difference between the total portfolio and the sum of the individual components, is not relevant.



4741Bank of America


  








The graph below presents the daily covered positions and less liquid trading positions portfolio VaR for the previous five quarters, corresponding to the data in Table 44.42.
var1ba02.jpgvarchartimage.jpg
Additional VaR statistics produced within our single VaR model are provided in Table 4543 at the same level of detail as in Table 44.42. 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 4543 presents average trading VaR statistics at 99 percent and 95 percent confidence levels for the three months ended September 30, 2018,2019, June 30, 20182019 and September 30, 2017.2018.
                        
Table 45Average Market Risk VaR for Trading Activities – 99 percent and 95 percent VaR Statistics
Table 43Average Market Risk VaR for Trading Activities – 99 percent and 95 percent VaR Statistics
     ��                  
 Three Months Ended Three Months Ended
 September 30, 2018 June 30, 2018 September 30, 2017 September 30, 2019 June 30, 2019 September 30, 2018
(Dollars in millions)(Dollars in millions) 99 percent 95 percent 99 percent 95 percent 99 percent 95 percent(Dollars in millions) 99 percent 95 percent 99 percent 95 percent 99 percent 95 percent
Foreign exchangeForeign exchange $7
 $4
 $10
 $6
 $10
 $6
Foreign exchange $6
 $4
 $5
 $3
 $7
 $4
Interest rateInterest rate 26
 16
 23
 14
 21
 14
Interest rate 20
 13
 26
 16
 26
 16
CreditCredit 24
 14
 25
 15
 25
 15
Credit 24
 16
 22
 13
 24
 14
EquityEquity 18
 10
 16
 9
 17
 9
Equity 23
 12
 20
 10
 18
 10
CommoditiesCommodities 6
 3
 9
 5
 5
 3
Commodities 6
 3
 6
 3
 6
 3
Portfolio diversificationPortfolio diversification (52) (31) (55) (34) (44) (30)Portfolio diversification (48) (31) (48) (28) (52) (31)
Total covered positions portfolioTotal covered positions portfolio 29
 16
 28
 15
 34
 17
Total covered positions portfolio 31
 17
 31
 17
 29
 16
Impact from less liquid exposuresImpact from less liquid exposures 2
 1
 2
 2
 7
 2
Impact from less liquid exposures 3
 2
 3
 2
 2
 1
Total covered positions and less liquid trading positions portfolioTotal covered positions and less liquid trading positions portfolio 31
 17
 30
 17
 41
 19
Total covered positions and less liquid trading positions portfolio 34
 19
 34
 19
 31
 17
Fair value option loansFair value option loans 13
 7
 13
 7
 10
 6
Fair value option loans 11
 6
 9
 5
 13
 7
Fair value option hedgesFair value option hedges 9
 6
 11
 8
 8
 6
Fair value option hedges 11
 7
 7
 5
 9
 6
Fair value option portfolio diversificationFair value option portfolio diversification (13) (8) (13) (10) (9) (7)Fair value option portfolio diversification (10) (7) (9) (6) (13) (8)
Total fair value option portfolioTotal fair value option portfolio 9
 5
 11
 5
 9
 5
Total fair value option portfolio 12
 6
 7
 4
 9
 5
Portfolio diversificationPortfolio diversification (6) (4) (7) (3) (3) (3)Portfolio diversification (9) (4) (5) (3) (6) (4)
Total market-based portfolioTotal market-based portfolio $34
 $18
 $34
 $19
 $47
 $21
Total market-based portfolio $37
 $21
 $36
 $20
 $34
 $18
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. For more information on our backtesting process, see Trading Risk Management – Backtesting in the MD&A of the Corporation’s 20172018 Annual Report on Form 10-K.
During the three and nine months ended September 30, 2018,2019, there were no days in which there was a backtesting excess for our total market-basedcovered portfolio VaR, utilizing a one-day holding period.


Bank of America48

Total Trading-related Revenue
Total trading-related revenue, excluding brokerage fees, and CVA, DVA and funding valuation adjustment gains (losses), represents the total amount earned from trading positions, including market-based net interest income, which are taken in a diverse range of
financial instruments and markets. For additional information, see Trading account assets and liabilities are reported at fair value. For more information on fair value, see Note 20Risk Management – Fair Value Measurements toTotal Trading-related Revenue in the Consolidated Financial StatementsMD&A of the Corporation’s 20172018 Annual Report on Form 10-K. Trading-related revenue can be volatile and is largely driven by general market conditions and customer demand. Also, trading-related revenue is dependent on the volume and type of transactions, the level of risk assumed, and the volatility of price and rate movements at any given time within the ever-changing market environment. Significant daily revenue by business is monitored and the primary drivers of these are reviewed.
The following histogram is a graphic depiction of trading volatility and illustrates the daily level of trading-related revenue for the three months ended September 30, 20182019 compared to the three months ended June 30, 20182019 and March 31, 2018.2019. During the three months ended September 30, 2018,2019, positive trading-related revenue was recorded for 10092 percent of the trading days, of which 8670 percent were daily trading gains of over $25 million and the largest loss was $35 million. This compares to the three months ended June 30, 20182019 where positive trading-related revenue was recorded for 98100 percent of the trading days, of which 91 percent were daily trading gains of over $25 million. During the three months ended March 31, 2018,2019, positive trading-related revenue was recorded for 100 percent of the trading days of which 8889 percent were daily trading gains of over $25 million.
histogramfinal.jpg

Bank of America 42

histogram3q19.jpgTrading Portfolio Stress Testing
Because the very nature of a VaR model suggests results can exceed our estimates and it is dependent on a limited historical window, we also stress test our portfolio using scenario analysis. This analysis estimates the change in the value of our trading portfolio that may result from abnormal market movements. For additional information, see Trading Risk Management – Trading Portfolio Stress Testing in the MD&A of the Corporation’s 20172018 Annual Report on Form 10-K.
Interest Rate Risk Management for the Banking Book
The following discussion presents net interest income for banking book activities. For additional information, see Interest Rate Risk Management for the Banking Book in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.
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, maturity characteristics and investment securities premium amortization. Our overall goal is to manage interest rate risk so that movements in interest rates do not significantly adversely affect earnings and capital.

49Bank of America





Table 4644 presents the spot and 12-month forward rates used in our baseline forecasts at September 30, 20182019 and December 31, 2017.2018.
            
Table 46Forward Rates
Table 44Forward Rates
            
 September 30, 2018 September 30, 2019
 
Federal
Funds
 
Three-month
LIBOR
 
10-Year
Swap
 
Federal
Funds
 
Three-month
LIBOR
 
10-Year
Swap
Spot ratesSpot rates2.25% 2.40% 3.12%Spot rates2.00% 2.09% 1.56%
12-month forward rates12-month forward rates3.00
 3.07
 3.16
12-month forward rates1.50
 1.47
 1.56
            
 December 31, 2017 December 31, 2018
Spot ratesSpot rates1.50% 1.69% 2.40%Spot rates2.50% 2.81% 2.71%
12-month forward rates12-month forward rates2.00
 2.14
 2.48
12-month forward rates2.50
 2.64
 2.75
Table 4745 shows the pretax impact to forecasted net interest income over the next 12 months from September 30, 20182019 and December 31, 2017,2018, resulting from instantaneous parallel and non-parallel shocks to the market-based forward curve. Periodically we evaluate the scenarios presented so that they are meaningful in the context of the current rate environment.
In the nine months ended September 30, 2018,2019, the asset sensitivity of our balance sheet to rising rates has declined modestlyincreased primarily due to increasesdecreases in long-endinterest rates. We continue to be asset sensitive to a parallel move in interest rates with the majority of that impact coming from the short end of the yield curve. Additionally, higher interest rates impact the fair value of debt securities and, accordingly, for debt securities classified as AFS, may adversely affect accumulated OCI and thus capital levels under the Basel 3 capital rules. Under instantaneous upward parallel shifts, the near-term adverse impact to Basel 3 capital is reduced over time by offsetting positive impacts to net interest income. For more information on Basel 3, see Capital Management – Regulatory Capital on page 22.
         
Table 47Estimated Banking Book Net Interest Income Sensitivity to Curve Changes
         
  
Short
Rate (bps)
 
Long
Rate (bps)
    
   September 30
2018		 December 31
2017
(Dollars in millions)   
Parallel Shifts       
+100 bps
instantaneous shift
+100 +100 $2,927
 $3,317
-100 bps
instantaneous shift
-100
 -100
 (4,256) (5,183)
Flatteners 
  
 

  
Short-end
instantaneous change
+100 —
 2,316
 2,182
Long-end
instantaneous change
—
 -100
 (1,421) (2,765)
Steepeners 
  
 

  
Short-end
instantaneous change
-100
 —
 (2,798) (2,394)
Long-end
instantaneous change
—
 +100 628
 1,135
20.
 
         
Table 45Estimated Banking Book Net Interest Income Sensitivity to Curve Changes
         
  
Short
Rate (bps)
 
Long
Rate (bps)
    
   September 30 2019 December 31 2018
(Dollars in millions)   
Parallel Shifts       
+100 bps
instantaneous shift
+100 +100 $4,576
 $2,833
-100 bps
instantaneous shift
-100
 -100
 (6,479) (4,280)
Flatteners 
  
    
Short-end
instantaneous change
+100 —
 2,696
 2,158
Long-end
instantaneous change
—
 -100
 (3,050) (1,618)
Steepeners 
  
    
Short-end
instantaneous change
-100
 —
 (3,343) (2,648)
Long-end
instantaneous change
—
 +100 1,917
 675
The sensitivity analysis in Table 4745 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 4745 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-yieldinghigher yielding deposits or market-based funding would reduce our benefit in those scenarios.
Interest Rate and Foreign Exchange Derivative Contracts
Interest rate and foreign exchange derivative contracts are utilized in our ALM activities and serve as an efficient tool to manage our interest rate and foreign exchange risk. We use derivatives to hedge the variability in cash flows or changes in fair value on our balance sheet due to interest rate and foreign exchange components. For more information on our hedging activities, see Note 3 – Derivativesto the Consolidated Financial Statements.Statements. For more information on interest rate contracts and risk management, see Interest Rate Risk Management for the Banking Book in the MD&A of the Corporation’s 20172018 Annual Report on Form 10-K.
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 billion$452 million and $1.3 billion, on a pretax basis, at September 30, 20182019 and December 31, 2017.2018. These net losses are expected to be reclassified into earnings in the same period as the hedged cash flows affect earnings and will decrease income or increase expense on the respective hedged cash flows. Assuming no change in open cash flow derivative hedge positions and no changes in prices or interest rates beyond what is implied in forward yield curves at September 30, 2018,2019, the pretax net losses are expected to be reclassified into earnings as follows: 21 percent within the next year, 6333 percent in years two through five and nine26 percent in years six through 10,ten, with the remaining seven20 percent

43Bank of America





thereafter. For more information on derivatives designated as cash flow hedges, see Note 3 – Derivativesto the Consolidated Financial Statements.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 September 30, 2018.
2019.


Bank of America50

Table 4846 presents derivatives utilized in our ALM activities and shows the notional amount, fair value, weighted-average receive-fixed and pay-fixed rates, expected maturity and average estimated durations of our open ALM derivatives at September 30, 20182019 and December 31, 2017.2018. These amounts do not include derivative hedges on our MSRs. During the nine months ended September 30, 2019, the fair value of receive-fixed interest rate swaps increased while pay-fixed interest rates swaps decreased, driven by lower swap rates.
                                    
Table 48Asset and Liability Management Interest Rate and Foreign Exchange Contracts
Table 46Asset and Liability Management Interest Rate and Foreign Exchange Contracts
            
   September 30, 2018     September 30, 2019  
   Expected Maturity     Expected Maturity  
(Dollars in millions, average estimated duration in years)(Dollars in millions, average estimated duration in years)
Fair
Value
 Total Remainder of 2018 2019 2020 2021 2022 Thereafter 
Average
Estimated
Duration
(Dollars in millions, average estimated duration in years)Fair
Value		 Total Remainder of 2019 2020 2021 2022 2023 Thereafter Average
Estimated
Duration
Receive-fixed interest rate swaps (1)
Receive-fixed interest rate swaps (1)
$(4,571)  
  
  
  
  
  
  
 4.85
Receive-fixed interest rate swaps (1)
$17,416
  
  
  
  
  
  
  
 6.86
Notional amountNotional amount 
 $254,129
 $4,879
 $27,176
 $26,229
 $21,581
 $30,365
 $143,899
  
Notional amount 
 $218,014
 $4,738
 $16,347
 $14,642
 $21,616
 $36,356
 $124,315
  
Weighted-average fixed-rateWeighted-average fixed-rate 
 2.51% 2.57% 1.87% 2.28% 2.85% 2.40% 2.65%  
Weighted-average fixed-rate  2.72% 1.74% 2.68% 3.17% 2.48% 2.36% 2.86%  
Pay-fixed interest rate swaps (1)
Pay-fixed interest rate swaps (1)
1,842
  
  
  
  
  
  
  
 4.62
Pay-fixed interest rate swaps (1)
(5,089)  
  
  
  
  
  
  
 7.45
Notional amountNotional amount 
 $111,131
 $11,247
 $1,210
 $14,226
 $8,949
 $11,245
 $64,254
  
Notional amount 
 $72,949
 $1,210
 $4,344
 $2,117
 $—
 $13,993
 $51,285
  
Weighted-average fixed-rateWeighted-average fixed-rate 
 2.60% 1.70% 2.07% 2.70% 2.80% 2.91% 2.66%  
Weighted-average fixed-rate  2.47% 2.07% 2.16% 2.15% —% 2.52% 2.51%  
Same-currency basis swaps (2)
Same-currency basis swaps (2)
10
  
  
  
  
  
  
  
  
Same-currency basis swaps (2)
21
  
  
  
  
  
  
  
  
Notional amountNotional amount 
 $162,172
 $1,085
 $13,755
 $34,628
 $26,227
 $22,849
 $63,628
  
Notional amount 
 $142,128
 $1,898
 $17,293
 $18,008
 $4,306
 $2,017
 $98,606
  
Foreign exchange basis swaps (1, 3, 4)
Foreign exchange basis swaps (1, 3, 4)
(1,572)  
  
  
  
  
  
  
  
Foreign exchange basis swaps (1, 3, 4)
(1,685)  
              
Notional amountNotional amount 
 110,129
 7,290
 13,326
 21,156
 17,395
 10,377
 40,585
  
Notional amount 
 115,945
 6,552
 22,415
 24,026
 14,461
 7,056
 41,435
  
Option productsOption products—
  
  
  
  
  
  
  
  
Option products1
  
              
Notional amountNotional amount 
 16
 —
 —
 —
 —
 —
 16
  
Notional amount 
 1,176
 1,161
 —
 —
 —
 15
 —
  
Foreign exchange contracts (1, 4, 5)
Foreign exchange contracts (1, 4, 5)
339
  
  
  
  
  
  
  
  
Foreign exchange contracts (1, 4, 5)
2,127
  
              
Notional amount (6)
Notional amount (6)
  (4,571) (24,033) (326) 3
 4,273
 2,826
 12,686
  
Notional amount (6)
  (98,175) (118,122) (4,072) 3,845
 2,608
 2,283
 15,283
  
Net ALM contractsNet ALM contracts$(3,952)  
  
  
  
  
  
  
  
Net ALM contracts$12,791
  
  
  
  
  
  
  
  
      
   December 31, 2017  
   Expected Maturity  
(Dollars in millions, average estimated duration in years)
Fair
Value
 Total 2018 2019 2020 2021 2022 Thereafter 
Average
Estimated
Duration
Receive-fixed interest rate swaps (1)
$2,330
  
  
  
  
  
  
  
 5.38
Notional amount 
 $176,390
 $21,850
 $27,176
 $16,347
 $6,498
 $19,120
 $85,399
  
Weighted-average fixed-rate 
 2.42% 3.20% 1.87% 1.88% 2.99% 2.10% 2.52%  
Pay-fixed interest rate swaps (1)
(37)  
  
  
  
  
  
  
 5.63
Notional amount 
 $45,873
 $11,555
 $1,210
 $4,344
 $1,616
 $—
 $27,148
  
Weighted-average fixed-rate 
 2.15% 1.73% 2.07% 2.16% 2.22% —% 2.32%  
Same-currency basis swaps (2)
(17)  
  
  
  
  
  
  
  
Notional amount 
 $38,622
 $11,028
 $6,789
 $1,180
 $2,807
 $955
 $15,863
  
Foreign exchange basis swaps (1, 3, 4)
(1,616)  
  
  
  
  
  
  
  
Notional amount 
 107,263
 24,886
 11,922
 13,367
 9,301
 6,860
 40,927
  
Option products13
  
  
  
  
  
  
  
  
Notional amount 
 1,218
 1,201
 —
 —
 —
 —
 17
  
Foreign exchange contracts (1, 4, 5)
1,424
  
  
  
  
  
  
  
  
Notional amount (6)
 
 (11,783) (28,689) 2,231
 (24) 2,471
 2,919
 9,309
  
Net ALM contracts$2,097
  
  
  
  
  
  
  
  
    December 31, 2018  
    Expected Maturity  
(Dollars in millions, average estimated duration in years)Fair
Value		 Total 2019 2020 2021 2022 2023 Thereafter Average
Estimated
Duration
Receive-fixed interest rate swaps (1)
$2,128
  
  
  
  
  
  
  
 5.17
Notional amount 
 $198,914
 $27,176
 $16,347
 $14,640
 $19,866
 $36,215
 $84,670
  
Weighted-average fixed-rate 
 2.66% 1.87% 2.68% 3.17% 2.56% 2.37% 2.97%  
Pay-fixed interest rate swaps (1)
295
  
  
  
  
  
  
  
 6.30
Notional amount 
 $49,275
 $1,210
 $4,344
 $1,616
 $—
 $10,801
 $31,304
  
Weighted-average fixed-rate 
 2.50% 2.07% 2.16% 2.22% —% 2.59% 2.55%  
Same-currency basis swaps (2)
21
  
  
  
  
  
  
  
  
Notional amount 
 $101,203
 $7,628
 $15,097
 $15,493
 $2,586
 $2,017
 $58,382
  
Foreign exchange basis swaps (1, 3, 4)
(1,716)  
  
  
  
  
  
  
  
Notional amount 
 106,742
 13,946
 21,448
 19,241
 10,239
 6,260
 35,608
  
Option products2
  
  
  
  
  
  
  
  
Notional amount 
 587
 572
 —
 —
 —
 15
 —
  
Foreign exchange contracts (1, 4, 5)
82
  
  
  
  
  
  
  
  
Notional amount (6)
 
 (8,447) (27,823) 13
 4,196
 2,741
 2,448
 9,978
  
Net ALM contracts$812
  
  
  
  
  
  
  
  
(1) 
Does not include basis adjustments on either fixed-rate debt issued by the Corporation or AFS debt securities, which are hedged using derivatives designated as fair value hedging instruments, that substantially offset the fair values of these derivatives.
(2) 
At September 30, 20182019 and December 31, 20172018, the notional amount of same-currency basis swaps included $162.2$142.1 billion and $38.6$101.2 billion in both foreign currency and U.S. dollar-denominated basis swaps in which both sides of the swap are in the same currency.
(3) 
Foreign exchange basis swaps consisted of cross-currency variable interest rate swaps used separately or in conjunction with receive-fixed interest rate swaps.
(4) 
Does not include foreign currency translation adjustments on certain non-U.S. debt issued by the Corporation that substantially offset the fair values of these derivatives.
(5) 
The notional amount of foreign exchange contracts of $(4.6)$(98.2) billion at September 30, 20182019 was comprised of $34.1$28.6 billion in foreign currency-denominated and cross-currency receive-fixed swaps, $(33.5)$(125.5) billion in net foreign currency forward rate contracts, $(6.0)$(2.0) billion in foreign currency-denominated pay-fixedinterest rate swaps and $831$697 million in net foreign currency futures contracts. Foreign exchange contracts of $(11.8)(8.4) billion at December 31, 20172018 were comprised of $29.125.2 billion in foreign currency-denominated and cross-currency receive-fixed swaps, $(35.6)(32.7) billion in net foreign currency forward rate contracts, $(6.2)(1.8) billion in foreign currency-denominated pay-fixedinterest rate swaps and $940814 million in foreign currency futures contracts.
(6) 
Reflects the net of long and short positions. Amounts shown as negative reflect a net short position.

Bank of America 44

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. Changes in interest rates and other market factors impact the volume of mortgage originations. Changes in interest rates also impact the value of interest rate lock
commitments (IRLCs) and the related residential first mortgage LHFS between the date of the IRLC and the date the loans are sold to the secondary market. An increase in mortgage interest rates typically leads to a decrease in the value of these instruments. Conversely, when there is an increase in interest rates,held for sale (LHFS), as well as the value of the MSRs will increase driven by lower prepayment expectations.MSRs. 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 consisting of derivative contracts and securities.
For more information on IRLCs and the related residential mortgage LHFS, see Mortgage Banking Risk Management in the MD&A of the Corporation’s 2018 Annual Report on Form 10-K.


51Bank of America





ForDuring the three and nine months ended September 30, 2018,2019, we recorded gains of $61$78 million and $190$217 million related to the change in fair value of the MSRs, IRLCs and LHFS, net of gains
and losses on the hedge portfolio, compared to gains of $34$61 million and $100$190 million for the same periods in 2017.2018. For more information on MSRs, see Note 1415 – Fair Value Measurements to the Consolidated Financial Statements.
Complex Accounting Estimates
Our significant accounting principles are essential in understanding the MD&A. Many of our significant accounting principles require complex judgments to estimate the values of assets and liabilities. We have procedures and processes in place to facilitate making these judgments. For additional information, see Complex Accounting Estimates in the MD&A of the Corporation’s 20172018 Annual Report on Form 10-K and Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K.

Non-GAAP Reconciliations
Tables 49 and 50 provideTable 47 provides reconciliations of certain non-GAAP financial measures to the most closely related GAAP financial measures.
             
Table 49Quarterly Supplemental Financial Data and Reconciliations to GAAP Financial Measures
             
  Three Months Ended September 30
 2018 2017
(Dollars in millions)As Reported Fully taxable-equivalent adjustment Fully taxable-equivalent basis As Reported Fully taxable-equivalent adjustment Fully taxable-equivalent basis
Net interest income$11,870
 $151
 $12,021
 $11,161
 $240
 $11,401
Total revenue, net of interest expense22,777
 151
 22,928
 21,839
 240
 22,079
Income tax expense1,827
 151
 1,978
 2,187
 240
 2,427
            
  Nine Months Ended September 30
 2018 2017
Net interest income$35,128
 $455
 $35,583
 $33,205
 $674
 $33,879
Total revenue, net of interest expense68,511
 455
 68,966
 66,916
 674
 67,590
Income tax expense5,017
 455
 5,472
 7,185

674
 7,859
             
Table 47
Period-end and Average Supplemental Financial Data and Reconciliations to GAAP Financial Measures (1)
             
  Period-end Average
 September 30
2019		 December 31
2018		 Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions)  2019 2018 2019 2018
Shareholders’ equity$268,387
 $265,325
 $270,430
 $264,653
 $268,223
 $265,102
Goodwill(68,951) (68,951) (68,951) (68,951) (68,951) (68,951)
Intangible assets (excluding MSRs)(1,690) (1,774) (1,707) (1,992) (1,735) (2,125)
Related deferred tax liabilities734
 858
 752
 896
 787
 917
Tangible shareholders’ equity$198,480
 $195,458
 $200,524
 $194,606
 $198,324
 $194,943
Preferred stock(23,606) (22,326) (23,800) (22,841) (22,894) (23,159)
Tangible common shareholders’ equity$174,874
 $173,132
 $176,724
 $171,765
 $175,430
 $171,784
            
Total assets$2,426,330
 $2,354,507
        
Goodwill(68,951) (68,951)        
Intangible assets (excluding MSRs)(1,690) (1,774)        
Related deferred tax liabilities734
 858
        
Tangible assets$2,356,423
 $2,284,640
     

 

             
Table 50Period-end and Average Supplemental Financial Data and Reconciliations to GAAP Financial Measures
           
 Period-end Average
 September 30
2018		 December 31
2017		 Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions)  2018 2017 2018 2017
Common shareholders’ equity$239,832
 $244,823
 $241,812
 $249,214
 $241,943
 $245,841
Goodwill(68,951) (68,951) (68,951) (68,969) (68,951) (69,398)
Intangible assets (excluding MSRs)(1,908) (2,312) (1,992) (2,549) (2,125) (2,737)
Related deferred tax liabilities878
 943
 896
 1,465
 917
 1,503
Tangible common shareholders’ equity$169,851
 $174,503
 $171,765
 $179,161
 $171,784
 $175,209
            
Shareholders’ equity$262,158
 $267,146
 $264,653
 $273,238
 $265,102
 $270,658
Goodwill(68,951) (68,951) (68,951) (68,969) (68,951) (69,398)
Intangible assets (excluding MSRs)(1,908) (2,312) (1,992) (2,549) (2,125) (2,737)
Related deferred tax liabilities878
 943
 896
 1,465
 917
 1,503
Tangible shareholders’ equity$192,177
 $196,826
 $194,606
 $203,185
 $194,943
 $200,026
            
Total assets$2,338,833
 $2,281,234
        
Goodwill(68,951) (68,951)        
Intangible assets (excluding MSRs)(1,908) (2,312)        
Related deferred tax liabilities878
 943
        
Tangible assets$2,268,852
 $2,210,914
        

(1)
BankPresents reconciliations of America52non-GAAP financial measures to the most closely related GAAP financial measures. 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 6.

Item 3. Quantitative and Qualitative Disclosures about Market Risk
See Market Risk Management on page 4741 in the MD&A and the sections referenced therein for Quantitative and Qualitative Disclosures about Market Risk.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
As of the end of the period covered by this report, the Corporation’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness and design of the Corporation’s disclosure controls and procedures (as that term is defined in Rule 13a-15(e) of the Exchange Act). Based upon that evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures were effective, as of the end of the period covered by this report.
Changes in Internal Control Over Financial Reporting
There have been no changes in the Corporation’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the three months ended September 30, 2018,2019, that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.




5345Bank of America


  








Part I. Financial Information
Item 1. Financial Statements
Bank of America Corporation and Subsidiaries
              
Consolidated Statement of Income
Three Months Ended September 30 Nine Months Ended September 30   
Three Months Ended September 30 Nine Months Ended September 30
(In millions, except per share information)2018 2017 2018 20172019 2018 2019 2018
Net interest income 
  
    
Interest income 
  
    $17,916
 $16,965
 $54,310
 $48,933
Loans and leases$10,401
 $9,203
 $30,095
 $26,877
Debt securities2,986
 2,629
 8,646
 7,764
Federal funds sold and securities borrowed or purchased under agreements to resell799
 659
 2,130
 1,658
Trading account assets1,172
 1,091
 3,506
 3,330
Other interest income1,607
 1,075
 4,556
 2,884
Total interest income16,965
 14,657
 48,933
 42,513
       
Interest expense 
  
    5,729
 4,904
 17,559
 13,275
Deposits1,230
 624
 2,933
 1,252
Short-term borrowings1,526
 944
 4,123
 2,508
Trading account liabilities335
 319
 1,040
 890
Long-term debt2,004
 1,609
 5,709
 4,658
Total interest expense5,095
 3,496
 13,805
 9,308
Net interest income11,870
 11,161
 35,128
 33,205
12,187
 12,061
 36,751
 35,658
              
Noninterest income 
  
     
  
    
Card income1,470
 1,429
 4,469
 4,347
Service charges1,961
 1,968
 5,836
 5,863
Investment and brokerage services3,494
 3,437
 10,616
 10,314
Investment banking income1,204
 1,477
 3,979
 4,593
Trading account profits1,893
 1,837
 6,907
 6,124
Fees and commissions8,467
 8,076
 24,495
 24,733
Trading account income1,707
 1,717
 6,390
 6,421
Other income885
 530
 1,576
 2,470
446
 870
 1,259
 1,531
Total noninterest income10,907
 10,678
 33,383
 33,711
10,620
 10,663
 32,144
 32,685
Total revenue, net of interest expense22,777
 21,839
 68,511
 66,916
22,807
 22,724
 68,895
 68,343
              
Provision for credit losses716
 834
 2,377
 2,395
779
 716
 2,649
 2,377
              
Noninterest expense 
  
     
  
    
Personnel7,721
 7,811
 24,145
 24,326
Occupancy1,015
 999
 3,051
 3,000
Equipment421
 416
 1,278
 1,281
Compensation and benefits7,779
 7,721
 24,000
 24,145
Occupancy and equipment1,663
 1,589
 4,908
 4,787
Information processing and communications1,163
 1,113
 3,484
 3,399
Product delivery and transaction related696
 687
 2,067
 2,149
Marketing421
 461
 1,161
 1,235
440
 421
 1,410
 1,161
Professional fees439
 476
 1,219
 1,417
386
 439
 1,155
 1,219
Data processing791
 777
 2,398
 2,344
Telecommunications173
 170
 522
 538
Other general operating2,086
 2,284
 6,474
 7,328
3,042
 1,044
 4,637
 3,220
Total noninterest expense13,067
 13,394
 40,248
 41,469
15,169
 13,014
 41,661
 40,080
Income before income taxes8,994
 7,611
 25,886
 23,052
6,859
 8,994
 24,585
 25,886
Income tax expense1,827
 2,187
 5,017
 7,185
1,082
 1,827
 4,149
 5,017
Net income$7,167
 $5,424
 $20,869
 $15,867
$5,777
 $7,167
 $20,436
 $20,869
Preferred stock dividends466
 465
 1,212
 1,328
505
 466
 1,186
 1,212
Net income applicable to common shareholders$6,701
 $4,959
 $19,657
 $14,539
$5,272
 $6,701
 $19,250
 $19,657
              
Per common share information 
  
     
  
    
Earnings$0.67
 $0.49
 $1.93
 $1.44
$0.57
 $0.67
 $2.02
 $1.93
Diluted earnings0.66
 0.46
 1.91
 1.36
0.56
 0.66
 2.01
 1.91
Dividends paid0.15
 0.12
 0.39
 0.27
Average common shares issued and outstanding10,031.6
 10,197.9
 10,177.5
 10,103.4
9,303.6
 10,031.6
 9,516.2
 10,177.5
Average diluted common shares issued and outstanding10,170.8
 10,746.7
 10,317.9
 10,832.1
9,353.0
 10,170.8
 9,565.7
 10,317.9
        
Consolidated Statement of Comprehensive Income
        
 Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions)2019 2018 2019 2018
Net income$5,777
 $7,167
 $20,436
 $20,869
Other comprehensive income (loss), net-of-tax:       
Net change in debt securities1,538
 (1,172) 6,231
 (6,166)
Net change in debit valuation adjustments229
 (269) (272) 183
Net change in derivatives118
 21
 651
 (346)
Employee benefit plan adjustments26
 31
 83
 91
Net change in foreign currency translation adjustments(51) (114) (99) (303)
Other comprehensive income (loss)1,860
 (1,503) 6,594
 (6,541)
Comprehensive income$7,637
 $5,664
 $27,030
 $14,328
See accompanying Notes to Consolidated Financial Statements.


  
Bank of America5446


Bank of America Corporation and Subsidiaries
        
Consolidated Statement of Comprehensive Income
        
 Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions)2018 2017 2018 2017
Net income$7,167
 $5,424
 $20,869
 $15,867
Other comprehensive income (loss), net-of-tax:       
Net change in debt and equity securities(1,172) 462
 (6,166) 931
Net change in debit valuation adjustments(269) (80) 183
 (149)
Net change in derivatives21
 24
 (346) 156
Employee benefit plan adjustments31
 26
 91
 80
Net change in foreign currency translation adjustments(114) 5
 (303) 102
Other comprehensive income (loss)(1,503)
437

(6,541)
1,120
Comprehensive income$5,664

$5,861

$14,328

$16,987



     
Consolidated Balance Sheet
  September 30 December 31
(Dollars in millions)2019 2018
Assets 
  
Cash and due from banks$26,939
 $29,063
Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks130,155
 148,341
Cash and cash equivalents157,094
 177,404
Time deposits placed and other short-term investments7,557
 7,494
Federal funds sold and securities borrowed or purchased under agreements to resell
   (includes $50,298 and $56,399 measured at fair value)
271,595
 261,131
Trading account assets (includes $131,008 and $119,363 pledged as collateral)
263,684
 214,348
Derivative assets45,123
 43,725
Debt securities: 
  
Carried at fair value254,342
 238,101
Held-to-maturity, at cost (fair value – $194,274 and $200,435)
190,252
 203,652
Total debt securities444,594

441,753
Loans and leases (includes $7,674 and $4,349 measured at fair value)
972,910
 946,895
Allowance for loan and lease losses(9,433) (9,601)
Loans and leases, net of allowance963,477

937,294
Premises and equipment, net10,493
 9,906
Goodwill68,951
 68,951
Loans held-for-sale (includes $5,011 and $2,942 measured at fair value)
9,811
 10,367
Customer and other receivables52,560
 65,814
Other assets (includes $22,952 and $19,739 measured at fair value)
131,391
 116,320
Total assets$2,426,330

$2,354,507
     
Liabilities 
  
Deposits in U.S. offices: 
  
Noninterest-bearing$394,379
 $412,587
Interest-bearing (includes $626 and $492 measured at fair value)
917,401
 891,636
Deposits in non-U.S. offices:   
Noninterest-bearing13,138
 14,060
Interest-bearing67,918
 63,193
Total deposits1,392,836
 1,381,476
Federal funds purchased and securities loaned or sold under agreements to repurchase
   (includes $21,963 and $28,875 measured at fair value)
202,067
 186,988
Trading account liabilities78,642
 68,220
Derivative liabilities38,025
 37,891
Short-term borrowings (includes $3,458 and $1,648 measured at fair value)
30,682
 20,189
Accrued expenses and other liabilities (includes $23,512 and $20,075 measured at fair value
   and $809 and $797 of reserve for unfunded lending commitments)
172,286
 165,026
Long-term debt (includes $36,773 and $27,689 measured at fair value)
243,405
 229,392
Total liabilities2,157,943
 2,089,182
Commitments and contingencies (Note 7 – Securitizations and Other Variable Interest Entities
   and Note 11 – Commitments and Contingencies)


  
Shareholders’ equity 
  
Preferred stock, $0.01 par value; authorized – 100,000,000 shares; issued and outstanding – 3,895,685 and 3,843,140 shares
23,606
 22,326
Common stock and additional paid-in capital, $0.01 par value; authorized – 12,800,000,000 shares;
   issued and outstanding – 9,079,264,535 and 9,669,286,370 shares
99,215
 118,896
Retained earnings151,183
 136,314
Accumulated other comprehensive income (loss)(5,617) (12,211)
Total shareholders’ equity268,387
 265,325
Total liabilities and shareholders’ equity$2,426,330
 $2,354,507
     
 Assets of consolidated variable interest entities included in total assets above (isolated to settle the liabilities of the variable interest entities)   
 Trading account assets$5,758
 $5,798
 Loans and leases39,387
 43,850
 Allowance for loan and lease losses(835) (912)
 Loans and leases, net of allowance38,552

42,938
 All other assets555
 337
 Total assets of consolidated variable interest entities$44,865
 $49,073
 Liabilities of consolidated variable interest entities included in total liabilities above 
  
 Short-term borrowings$2,274
 $742
 
Long-term debt (includes $8,559 and $10,943 of non-recourse debt)
8,560
 10,944
 
All other liabilities (includes $23 and $27 of non-recourse liabilities)
26
 30
 Total liabilities of consolidated variable interest entities$10,860
 $11,716
See accompanying Notes to Consolidated Financial Statements.


5547Bank of America


  








Bank of America Corporation and Subsidiaries
    
Consolidated Balance Sheet
  
(Dollars in millions)September 30
2018		 December 31
2017
Assets 
  
Cash and due from banks$27,440
 $29,480
Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks157,418
 127,954
Cash and cash equivalents184,858
 157,434
Time deposits placed and other short-term investments7,865
 11,153
Federal funds sold and securities borrowed or purchased under agreements to resell (includes $52,524 and $52,906 measured at fair value)
248,237
 212,747
Trading account assets (includes $110,199 and $106,274 pledged as collateral)
219,118
 209,358
Derivative assets45,617
 37,762
Debt securities: 
  
Carried at fair value251,635
 315,117
Held-to-maturity, at cost (fair value – $187,988 and $123,299)
194,472
 125,013
Total debt securities446,107

440,130
Loans and leases (includes $5,731 and $5,710 measured at fair value)
929,801
 936,749
Allowance for loan and lease losses(9,734) (10,393)
Loans and leases, net of allowance920,067

926,356
Premises and equipment, net9,680
 9,247
Goodwill68,951
 68,951
Loans held-for-sale (includes $3,116 and $2,156 measured at fair value)
5,576
 11,430
Customer and other receivables56,962
 61,623
Other assets (includes $23,738 and $22,581 measured at fair value)
125,795
 135,043
Total assets$2,338,833

$2,281,234
    
Assets of consolidated variable interest entities included in total assets above (isolated to settle the liabilities of the variable interest entities)
Trading account assets$6,145
 $6,521
Loans and leases44,163
 48,929
Allowance for loan and lease losses(920) (1,016)
Loans and leases, net of allowance43,243

47,913
All other assets357
 1,721
Total assets of consolidated variable interest entities$49,745
 $56,155
            
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
(In millions) Shares Amount   
Balance, June 30, 2019$24,689
 9,342.6
 $106,619
 $147,577
 $(7,477) $271,408
Net income 
  
  
 5,777
   5,777
Net change in debt securities 
  
  
  
 1,538
 1,538
Net change in debit valuation adjustments        229
 229
Net change in derivatives 
  
  
  
 118
 118
Employee benefit plan adjustments 
  
  
  
 26
 26
Net change in foreign currency translation adjustments 
  
  
   (51) (51)
Dividends declared: 
  
  
    
 

Common   
   (1,659)  
 (1,659)
Preferred   
  
 (505)  
 (505)
Issuance of preferred stock1,280
         1,280
Redemption of preferred stock(2,363)         (2,363)
Common stock issued under employee plans, net, and other  4.3
 222
 (7)  
 215
Common stock repurchased  (267.6) (7,626)     (7,626)
Balance, September 30, 2019$23,606

9,079.3

$99,215

$151,183

$(5,617)
$268,387
Balance, December 31, 2018$22,326
 9,669.3
 $118,896
 $136,314
 $(12,211) $265,325
Cumulative adjustment for adoption of lease accounting standard      165
   165
Net income      20,436
   20,436
Net change in debt securities        6,231
 6,231
Net change in debit valuation adjustments        (272) (272)
Net change in derivatives        651
 651
Employee benefit plan adjustments        83
 83
Net change in foreign currency translation adjustments        (99) (99)
Dividends declared:          

Common      (4,535)   (4,535)
Preferred      (1,186)   (1,186)
Issuance of preferred stock3,643
         3,643
Redemption of preferred stock(2,363)         (2,363)
Common stock issued under employee plans, net, and other  123.4
 715
 (11)   704
Common stock repurchased  (713.4) (20,396)     (20,396)
Balance, September 30, 2019$23,606

9,079.3

$99,215

$151,183

$(5,617)
$268,387
Balance, June 30, 2018$23,181
 10,012.7
 $128,822
 $125,546
 $(13,333) $264,216
Net income      7,167
   7,167
Net change in debt securities        (1,172) (1,172)
Net change in debit valuation adjustments        (269) (269)
Net change in derivatives        21
 21
Employee benefit plan adjustments        31
 31
Net change in foreign currency translation adjustments        (114) (114)
Dividends declared:          
Common      (1,497)   (1,497)
Preferred      (466)   (466)
Issuance of preferred stock844
         844
Redemption of preferred stock(1,699)         (1,699)
Common stock issued under employee plans, net, and other  9.1
 139
 (3)   136
Common stock repurchased  (163.5) (5,040)     (5,040)
Balance, September 30, 2018$22,326

9,858.3

$123,921

$130,747

$(14,836)
$262,158
Balance, December 31, 2017$22,323
 10,287.3
 $138,089
 $113,816
 $(7,082) $267,146
Cumulative adjustment for adoption of hedge accounting standard      (32) 57
 25
Adoption of accounting standard related to certain tax effects stranded in accumulated other comprehensive income (loss)      1,270
 (1,270) —
Net income      20,869
   20,869
Net change in debt securities        (6,166) (6,166)
Net change in debit valuation adjustments        183
 183
Net change in derivatives        (346) (346)
Employee benefit plan adjustments        91
 91
Net change in foreign currency translation adjustments        (303) (303)
Dividends declared:           
Common      (3,952)   (3,952)
Preferred      (1,212)   (1,212)
Issuance of preferred stock4,515
         4,515
Redemption of preferred stock(4,512)         (4,512)
Common stock issued under employee plans, net, and other  52.8
 695
 (12)   683
Common stock repurchased  (481.8) (14,863)     (14,863)
Balance, September 30, 2018$22,326
 9,858.3
 $123,921
 $130,747
 $(14,836) $262,158
See accompanying Notes to Consolidated Financial Statements.


  
Bank of America5648


Bank of America Corporation and Subsidiaries
    
Consolidated Statement of Cash Flows   
    
 Nine Months Ended September 30
(Dollars in millions)2019 2018
Operating activities   
Net income$20,436
 $20,869
Adjustments to reconcile net income to net cash provided by operating activities:   
Provision for credit losses2,649
 2,377
Gains on sales of debt securities(116) (76)
Depreciation and amortization1,290
 1,539
Net amortization of premium/discount on debt securities1,419
 1,411
Deferred income taxes1,789
 2,845
Stock-based compensation1,495
 1,323
Impairment of equity method investment2,072
 —
Loans held-for-sale:   
Originations and purchases(18,732) (16,830)
Proceeds from sales and paydowns of loans originally classified as held for sale and instruments
from related securitization activities
19,350
 23,221
Net change in:   
Trading and derivative assets/liabilities(30,541) (13,347)
Other assets613
 13,648
Accrued expenses and other liabilities(4,053) 18,266
Other operating activities, net5,003
 (1,804)
Net cash provided by operating activities2,674
 53,442
Investing activities   
Net change in:   
Time deposits placed and other short-term investments(63) 3,288
Federal funds sold and securities borrowed or purchased under agreements to resell(10,464) (35,490)
Debt securities carried at fair value:   
Proceeds from sales43,845
 3,070
Proceeds from paydowns and maturities57,868
 56,458
Purchases(110,658) (54,923)
Held-to-maturity debt securities:   
Proceeds from paydowns and maturities22,832
 13,566
Purchases(9,825) (35,215)
Loans and leases:   
Proceeds from sales of loans originally classified as held for investment and instruments
from related securitization activities
9,757
 13,600
Purchases(4,016) (3,323)
Other changes in loans and leases, net(34,439) (6,432)
Other investing activities, net(2,188) (1,750)
Net cash used in investing activities(37,351) (47,151)
Financing activities   
Net change in:   
Deposits11,360
 36,104
Federal funds purchased and securities loaned or sold under agreements to repurchase15,079
 (5,313)
Short-term borrowings10,493
 (3,631)
Long-term debt:   
Proceeds from issuance45,149
 60,873
Retirement(42,842) (44,817)
Preferred stock:   
Proceeds from issuance3,643
 4,515
Redemption(2,363) (4,512)
Common stock repurchased(20,396) (14,863)
Cash dividends paid(4,086) (5,150)
Other financing activities, net(794) (644)
Net cash provided by financing activities15,243
 22,562
Effect of exchange rate changes on cash and cash equivalents(876) (1,429)
Net increase (decrease) in cash and cash equivalents(20,310) 27,424
Cash and cash equivalents at January 1177,404
 157,434
Cash and cash equivalents at September 30$157,094
 $184,858
    
Consolidated Balance Sheet (continued)
  
(Dollars in millions)September 30
2018		 December 31
2017
Liabilities 
  
Deposits in U.S. offices: 
  
Noninterest-bearing$414,853
 $430,650
Interest-bearing (includes $529 and $449 measured at fair value)
844,204
 796,576
Deposits in non-U.S. offices:   
Noninterest-bearing12,896
 14,024
Interest-bearing73,696
 68,295
Total deposits1,345,649
 1,309,545
Federal funds purchased and securities loaned or sold under agreements to repurchase (includes $34,242 and $36,182 measured at fair value)
171,600
 176,865
Trading account liabilities89,964
 81,187
Derivative liabilities36,189
 34,300
Short-term borrowings (includes $1,789 and $1,494 measured at fair value)
29,035
 32,666
Accrued expenses and other liabilities (includes $24,516 and $22,840 measured at fair value and $792 and $777 of reserve for unfunded lending commitments)
170,138
 152,123
Long-term debt (includes $28,677 and $31,786 measured at fair value)
234,100
 227,402
Total liabilities2,076,675
 2,014,088
Commitments and contingencies (Note 7 – Securitizations and Other Variable Interest Entities and Note 10 – Commitments and Contingencies)


  
Shareholders’ equity 
  
Preferred stock, $0.01 par value; authorized – 100,000,000 shares; issued and outstanding – 3,843,140 and 3,837,683 shares
22,326
 22,323
Common stock and additional paid-in capital, $0.01 par value; authorized – 12,800,000,000 shares; issued and outstanding – 9,858,252,641 and 10,287,302,431 shares
123,921
 138,089
Retained earnings130,747
 113,816
Accumulated other comprehensive income (loss)(14,836) (7,082)
Total shareholders’ equity262,158
 267,146
Total liabilities and shareholders’ equity$2,338,833
 $2,281,234
    
Liabilities of consolidated variable interest entities included in total liabilities above 
  
Short-term borrowings$905
 $312
Long-term debt (includes $11,024 and $9,872 of non-recourse debt)
11,024
 9,873
All other liabilities (includes $37 and $34 of non-recourse liabilities)
39
 37
Total liabilities of consolidated variable interest entities$11,968
 $10,222

See accompanying Notes to Consolidated Financial Statements.


5749Bank of America


  







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
(In millions) Shares Amount   
Balance, December 31, 2016$25,220
 10,052.6
 $147,038
 $101,225
 $(7,288) $266,195
Net income      15,867
   15,867
Net change in debt and equity securities        931
 931
Net change in debit valuation adjustments        (149) (149)
Net change in derivatives        156
 156
Employee benefit plan adjustments        80
 80
Net change in foreign currency translation adjustments        102
 102
Dividends declared:          

Common      (2,768)   (2,768)
Preferred      (1,292)   (1,292)
Common stock issued in connection with exercise of warrants and exchange of preferred stock(2,897) 700.0
 2,933
 (36)   —
Common stock issued under employee plans, net and other  39.5
 792
     792
Common stock repurchased  (334.6) (7,945)     (7,945)
Balance, September 30, 2017$22,323
 10,457.5
 $142,818
 $112,996
 $(6,168) $271,969
            
Balance, December 31, 2017$22,323
 10,287.3
 $138,089
 $113,816
 $(7,082) $267,146
Cumulative adjustment for adoption of hedge accounting standard      (32) 57
 25
Adoption of accounting standard related to certain tax effects stranded in accumulated other comprehensive income (loss)      1,270
 (1,270) —
Net income      20,869
   20,869
Net change in debt and equity securities        (6,166) (6,166)
Net change in debit valuation adjustments        183
 183
Net change in derivatives        (346) (346)
Employee benefit plan adjustments        91
 91
Net change in foreign currency translation adjustments        (303) (303)
Dividends declared:          

Common      (3,952)   (3,952)
Preferred      (1,212)   (1,212)
Issuance of preferred stock4,515
         4,515
Redemption of preferred stock(4,512)     

   (4,512)
Common stock issued under employee plans, net and other  52.8
 695
 (12)   683
Common stock repurchased  (481.8) (14,863)     (14,863)
Balance, September 30, 2018$22,326
 9,858.3
 $123,921
 $130,747
 $(14,836) $262,158








See accompanying Notes to Consolidated Financial Statements.

Bank of America58

Bank of America Corporation and Subsidiaries
    
Consolidated Statement of Cash Flows   
    
 Nine Months Ended September 30
(Dollars in millions)2018 2017
Operating activities   
Net income$20,869
 $15,867
Adjustments to reconcile net income to net cash provided by operating activities:   
Provision for credit losses2,377
 2,395
Gains on sales of debt securities(76) (278)
Depreciation and premises improvements amortization1,135
 1,115
Amortization of intangibles404
 473
Net amortization of premium/discount on debt securities1,411
 1,647
Deferred income taxes2,845
 5,131
Stock-based compensation1,323
 1,222
Loans held-for-sale:   
Originations and purchases(16,830) (31,404)
Proceeds from sales and paydowns of loans originally classified as held for sale and instruments
from related securitization activities
23,221
 27,484
Net change in:   
Trading and derivative instruments(13,347) (12,553)
Other assets13,648
 (9,993)
Accrued expenses and other liabilities18,266
 11,201
Other operating activities, net(1,804) 4,657
Net cash provided by operating activities53,442
 16,964
Investing activities   
Net change in:   
Time deposits placed and other short-term investments3,288
 368
Federal funds sold and securities borrowed or purchased under agreements to resell(35,490) (18,990)
Debt securities carried at fair value:   
Proceeds from sales3,070
 64,597
Proceeds from paydowns and maturities56,458
 71,628
Purchases(54,923) (134,915)
Held-to-maturity debt securities:   
Proceeds from paydowns and maturities13,566
 12,194
Purchases(35,215) (17,850)
Loans and leases:   
Proceeds from sales of loans originally classified as held for investment and instruments
from related securitization activities
13,600
 8,874
Purchases(3,323) (4,511)
Other changes in loans and leases, net(6,432) (29,654)
Other investing activities, net(1,750) 8,635
Net cash used in investing activities(47,151) (39,624)
Financing activities   
Net change in:   
Deposits36,104
 23,483
Federal funds purchased and securities loaned or sold under agreements to repurchase(5,313) 19,987
Short-term borrowings(3,631) 8,583
Long-term debt:   
Proceeds from issuance60,873
 50,702
Retirement(44,817) (44,652)
Preferred stock:   
Proceeds from issuance4,515
 —
Redemption(4,512) —
Common stock repurchased(14,863) (7,945)
Cash dividends paid(5,150) (4,124)
Other financing activities, net(644) (609)
Net cash provided by financing activities22,562
 45,425
Effect of exchange rate changes on cash and cash equivalents(1,429) 1,878
Net increase in cash and cash equivalents27,424
 24,643
Cash and cash equivalents at January 1157,434
 147,738
Cash and cash equivalents at September 30$184,858
 $172,381
See accompanying Notes to Consolidated Financial Statements.

59Bank of America






Bank of America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
NOTE 1 Summary of Significant Accounting Principles
Bank of America Corporation, a bank holding company and a financial holding company, provides a diverse range of financial services and products throughout the U.S. and in certain international markets. The term “the Corporation” as used herein may refer to Bank of America Corporation, individually, Bank of America Corporation and its subsidiaries, or certain of Bank of America Corporation’s subsidiaries or affiliates.
Principles of Consolidation and Basis of Presentation
The Consolidated Financial Statements include the accounts of the Corporation and its majority-owned subsidiaries and those variable interest entities (VIEs) where the Corporation is the primary beneficiary. Intercompany accounts and transactions have been eliminated. Results of operations of acquired companies are included from the dates of acquisition, and for VIEs, from the dates that the Corporation became the primary beneficiary. Assets held in an agency or fiduciary capacity are not included in the Consolidated Financial Statements. The Corporation accounts for investments in companies for which it owns a voting interest and for which it has the ability to exercise significant influence over operating and financing decisions using the equity method of accounting. These investments are included in other assets. Equity method investments are subject to impairment testing, and the Corporation’s proportionate share of income or loss is included in other income.
The preparation of the Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect reported amounts and disclosures. RealizedActual results could materially differ from those estimates and assumptions.
These unaudited Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K.
The nature of the Corporation’s business is such that the results of any interim period are not necessarily indicative of results for a full year. In the opinion of management, all adjustments, which consist of normal recurring adjustments necessary for a fair statement of the interim period results, have been made. The Corporation evaluates subsequent events through the date of filing with the Securities and Exchange Commission (SEC).Commission. Certain prior-period amounts have been reclassified to conform to current period presentation.
Change in Tax Law
On December 22, 2017, the President signed into law the Tax Cuts and Jobs Act (the Tax Act) which made significant changes to federal income tax law including, among other things, reducing the statutory corporate income tax rate to 21 percent from 35 percent and changing the taxation of the Corporation’s non-U.S. business activities. On the same date, the SEC issued Staff Accounting Bulletin No. 118 which specifies, among other things, that reasonable estimates of the income tax effects of the Tax Act should be used, if determinable. The Corporation has accounted for the effects of the Tax Act using reasonable estimates based on currently available information and its interpretations thereof. This accounting may change due to, among other things, changes
in interpretations the Corporation has made and the issuance of new tax or accounting guidance.
Accounting Standards Adopted on January 1, 2018
Effective January 1, 2018, the Corporation adopted the following new accounting standards on a prospective basis. For additional information, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2017 Annual Report on Form 10-K.
●
Revenue Recognition– The new accounting standard addresses the recognition of revenue from contracts with customers. For additional information, see Revenue Recognition Accounting Policies in this Note, Note 2 – Noninterest Income and Note 17 – Business Segment Information.
●
Hedge Accounting– The new accounting standard simplifies and expands the ability to apply hedge accounting to certain risk management activities. For additional information,see Note 3 – Derivatives.
●
Recognition and Measurement of Financial Assets and Liabilities– The new accounting standard relates to the recognition and measurement of financial instruments, including equity investments. For additional information, see Note 4 – Securities and Note 16 – Fair Value of Financial Instruments.
●
Tax Effects in Accumulated Other Comprehensive Income –The new accounting standard addresses certain tax effects stranded in accumulated other comprehensive income (OCI) related to the Tax Act.For additional information, see Note 12 – Accumulated Other Comprehensive Income (Loss).
Effective January 1, 2018, the Corporation adopted the following new accounting standards on a retrospective basis, resulting in restatement of all prior periods presented in the Consolidated Statement of Income and the Consolidated Statement of Cash Flows. The changes in presentation are not material to the individual line items affected.
●
Presentation of Pension Costs–The new accounting standard requires separate presentation of the service cost component of pension expense from all other components of net pension benefit/cost in the Consolidated Statement of Income. As a result, the service cost component continues to be presented in personnel expense while other components of net pension benefit/cost (e.g., interest cost, actual return on plan assets, amortization of prior service cost) are now presented in other general operating expense.
●
Classification of Cash Flows and Restricted Cash–The new accounting standards address the classification of certain cash receipts and cash payments in the statement of cash flows as well as the presentation and disclosure of restricted cash. For more information on restricted cash, see Note 9 – Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings and Restricted Cash.
Accounting Standards Issued and Not Yet Adopted
Lease Accounting for Financial Instruments -- Credit Losses
The Financial Accounting Standards Board (FASB) issued a new accounting standard that will be effective for the Corporation on January 1, 2020. This standard replaces the existing measurement of the allowance for credit losses that is based on management’s best estimate of probable incurred credit losses inherent in the Corporation’s lending activities with management’s best estimate of lifetime expected credit losses inherent in the Corporation’s relevant financial assets. The lifetime expected credit losses will be determined using macroeconomic forecast assumptions and management judgments applicable to and through the expected life of the portfolios and is required to be
determined net of expected recoveries on loans that were previously charged off. The standard will also expand credit quality disclosures. While the standard changes the measurement of the allowance for credit losses, it does not change the Corporation’s credit risk of its lending portfolios or the ultimate losses in those portfolios.
Significant progress has been made in the implementation efforts, which include model development and validation, data acquisition for model estimation and new disclosures, and the establishment of formal policies supporting all aspects of the standard. The Corporation is running parallel processesencompassing the functionality of the models, internal controls over the estimation process and all other governance activities as well as continuing to review and refine its models and methodologies.
Upon adoption of the standard on January 1, 2020, the Corporation expects that, based on current expectations of future economic conditions, its allowance for credit losses on loans and leases may increase up to approximately 30 percent from its allowance for credit losses as of September 30, 2019, as disclosed herein, with a large portion of that requiresincrease driven by the U.S. credit card portfolio. The increase from the previously disclosed expectation of up to 20 percent was driven by refinements to certain models and methodologies along with the third-quarter 2019 loan sales, which reduced the expected recoveries on previously charged-off loans as the recoveries were realized upon sale. The ultimate impact upon adoption will depend on the characteristics of the Corporation’s portfolios, macroeconomic conditions and forecasts, and the finalized validation of models and methodologies, as well as other management judgments.
New Accounting Standards
Lease Accounting
On January 1, 2019, the Corporation adopted the new accounting standards that require lessees to recognize operating leases on the Consolidated Balance Sheetbalance sheet as right-of-use assets and lease liabilities based on the value of the discounted future lease payments. Lessor accounting is largely unchanged. Expanded disclosures about the nature and terms of lease agreements will be required.are required prospectively and are included in Note 9 – Leases. The Corporation intendselected to electretain prior determinations of whether an existing contract contains a lease and how the optional transition method,lease should be classified. The Corporation elected to recognize leases existing on January 1, 2019 through a cumulative-effect adjustment which increased retained earnings by $165 million, with no adjustment to prior periods presented. Upon adoption, the Corporation also recognized right-of-use assets and lease liabilities of $9.7 billion. Adoption of the standards did not have a significant effect on the Corporation’s regulatory capital measures.
Lease Accounting Principles
Lessor Arrangements
The Corporation provides equipment financing to its customers through a variety of lessor arrangements. Direct financing leases and sales-type leases are carried at the aggregate of lease payments receivable plus the estimated residual value of the leased property less unearned income, which is accreted to interest income over the lease terms using methods that approximate the interest method. Operating lease income is recognized on a straight-line basis. Leases generally do not contain non-lease components.



  
Bank of America6050


allows for the recognition of leases at the beginningLessee Arrangements
Substantially all of the period of adoption through a cumulative-effect adjustment in retained earnings, with no adjustment to comparative prior periods presented. The effect of the adoption will depend on the lease portfolio at the time of transition; however, based on current estimates,Corporation’s lessee arrangements are operating leases. Under these arrangements, the Corporation expects to recognizerecords right-of-use assets and lease liabilities within a range of approximately $9 billion to $11 billion. Adoption of the standard is not expected to have a significant effectat lease commencement. Right-of-use assets are reported in other assets on the Corporation’s regulatory capital measures.
AccountingConsolidated Balance Sheet, and the related lease liabilities are reported in accrued expenses and other liabilities. All leases are recorded on the Consolidated Balance Sheet except leases with an initial term less than 12 months for Financial Instruments -- Credit Losseswhich the Corporation made the short-term lease election. Lease expense is recognized on a straight-line basis over the lease term and is recorded in occupancy and equipment expense in the Consolidated Statement of Income.
The FASB issuedCorporation made an accounting policy election not to separate lease and non-lease components of a new accounting standard effectivecontract that is or contains a lease for its real estate and equipment leases. As such, lease payments represent payments on January 1, 2020, with early adoption permitted on January 1, 2019, that will replace the existing measurement of the allowance for credit losses with management’s best estimate of probable credit losses inherent in the Corporation’s lending activities. The new standard will reflect management’s best estimate of all expected credit losses for substantially all of the Corporation’s financial assets thatboth lease and non-lease components. At lease commencement, lease liabilities are recognized at amortized cost. The standard also requires expanded credit quality disclosures. The Corporation is in the process of identifying and implementing required changes to credit loss estimation models and processes and evaluating the impact of this new accounting standard, which at the date of adoption is expected to increase the allowance for credit losses with a resulting negative adjustment to retained earnings. The change will be dependent on the characteristics of the Corporation’s portfolio at adoption date as well as the macroeconomic conditions and forecast as of that date. While a final decision has not been made, the Corporation does not expect to early adopt the standard.
Significant Accounting Principles Update
Revenue Recognition
The following summarizes the Corporation’s revenue recognition accounting policies for certain noninterest income activities.
Card Income
Card income includes annual, late and over-limit fees as well as fees earned from interchange, cash advances and other miscellaneous transactions and is presented net of direct costs. Interchange fees are recognized upon settlement of the credit and debit card payment transactions and are generally determined on a percentage basis for credit cards and fixed rates for debit cards based on the corresponding payment network’s rates. Substantially all card fees are recognized atpresent value of the transaction date, except for certain time-based fees such as annual fees, which are recognized over 12 months. Fees charged to cardholders that are estimated to be uncollectible are reserved in the allowance for loanremaining lease payments and lease losses. Rewards paid to cardholders are related to points earned by the cardholder that can be redeemed for a broad range of rewards including cash, travel and gift cards. Based on past redemption behavior, card product type, account transaction activity and other historical card performance, the Corporation estimates a liability based on the amount of earned reward points that are expected to be redeemed. The Corporation also makes payments to credit card partners. The payments are based on revenue-sharing agreements that are generally driven by cardholder transactions and partner sales volumes.
Service Charges
Service charges include deposit and lending-related fees. Deposit-related fees consist of fees earned on consumer and commercial
deposit activities and are generally recognized when the transactions occur or as the service is performed. Consumer fees are earned on consumer deposit accounts for account maintenance and various transaction-based services, such as ATM transactions, wire transfer activities, check and money order processing and insufficient funds/overdraft transactions. Commercial deposit-related fees are fromdiscounted using the Corporation’s Global Transaction Services businessincremental borrowing rate. Right-of-use assets initially equal the lease liability, adjusted for any lease payments made prior to lease commencement and consist of commercial deposit and treasury management services, including account maintenance and other services, such as payroll, sweep account and other cash management services. Lending-related fees generally represent transactional fees earned from certain loan commitments, financial guarantees and standby letters of credit (SBLCs).
Investment and Brokerage Services
Investment and brokerage services consist of asset management and brokerage fees. Asset management fees are earned from the management of client assets under advisory agreements or the full discretion of the Corporation’s financial advisors (collectively referred to as assets under management (AUM)). Asset management fees are earned as a percentage of the client’s AUM and generally range from 50 basis points (bps) to 150 bps of the AUM. In cases where a third party is used to obtain a client’s investment allocation, the fee remitted to the third party is recorded net and is not reflected in the transaction price, as the Corporation is an agent for those services.
Brokerage fees include income earned from transaction-based services that are performed as part of investment management services and are based on a fixed price per unit or as a percentage of the total transaction amount. Brokerage fees also include distribution fees and sales commissions that are primarily in the Global Wealth & Investment Management (GWIM) segment and are earned over time. In addition, primarily in the Global Markets segment, brokerage fees are earned when the Corporation fills customer orders to buy or sell various financial products or when it acknowledges, affirms, settles and clears transactions and/or submits trade information to the appropriate clearing broker. Certain customers pay brokerage, clearing and/or exchange fees imposed by relevant regulatory bodies or exchanges in order to execute or clear trades. These fees are recorded net and are not reflected in the transaction price, as the Corporation is an agent for those services.
Investment Banking Income
Investment banking income includes underwriting income and financial advisory services income. Underwriting consists of fees earned for the placement of a customer’s debt or equity securities. The revenue is generally earned based on a percentage of the fixed number of shares or principal placed. Once the number of shares or notes is determined and the service is completed, the underwriting fees are recognized. The Corporation incurs certain out-of-pocket expenses, such as legal costs, in performing these services. These expenses are recovered through the revenue the Corporation earns from the customer and are included in operating expenses. Syndication fees represent fees earned as the agent or lead lender responsible for structuring, arranging and administering a loan syndication.
Financial advisory services consist of fees earned for assisting customers with transactions related to mergers and acquisitions and financial restructurings. Revenue varies depending on the size

61Bank of America





and number of services performed for each contract and is generally contingent on successful execution of the transaction. Revenue is typically recognized once the transaction is completed and all services have been rendered. Additionally, the Corporation may earn a fixed fee in merger and acquisition transactions to provide a fairness opinion, with the fees recognized when the opinion is delivered to the customer.
Other Revenue Measurement and Recognition Policies
The Corporation did not disclose the value of any open performance obligations at September 30, 2018, as its contracts with customers generally have a fixed term that is less than one year, an open term with a cancellation period that is less than one year, or provisions that allow the Corporation to recognize revenue at the amount it has the right to invoice.
lease incentives.
NOTE 2Net Interest Income and Noninterest Income
The table below presents the Corporation’s net interest income and noninterest income disaggregated by revenue source for the three and nine months ended September 30, 20182019 and 2017.2018. For more information, see Note 1 – Summary of Significant Accounting Principles. Principles to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K. For a disaggregation of noninterest income by business segment and All Other, see Note 1718 – Business Segment Information.
            
Three Months Ended September 30 Nine Months Ended September 30Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions)2018 2017 2018 20172019 2018 2019 2018
Net interest income       
Interest income       
Loans and leases$10,894
 $10,401
 $32,721
 $30,095
Debt securities2,829
 2,986
 8,965
 8,646
Federal funds sold and securities borrowed or purchased under agreements to resell1,242
 799
 3,746
 2,130
Trading account assets1,319
 1,172
 3,962
 3,506
Other interest income1,632
 1,607
 4,916
 4,556
Total interest income17,916
 16,965

54,310

48,933
       
Interest expense       
Deposits1,880
 1,230
 5,640
 2,933
Short-term borrowings1,876
 1,526
 5,725
 4,123
Trading account liabilities303
 335
 967
 1,040
Long-term debt1,670
 1,813
 5,227
 5,179
Total interest expense5,729

4,904

17,559

13,275
Net interest income$12,187

$12,061

$36,751

$35,658
       
Noninterest income       
Fees and commissions       
Card income              
Interchange fees (1)
$978
 $941
 $3,018
 $2,883
$963
 $925
 $2,827
 $2,850
Other card income492
 488
 1,451
 1,464
502
 492
 1,459
 1,452
Total card income1,470
 1,429
 4,469
 4,347
1,465
 1,417
 4,286

4,302
Service charges              
Deposit-related fees1,682
 1,691
 5,009
 5,040
1,690
 1,682
 4,908
 5,008
Lending-related fees279
 277
 827
 823
285
 279
 809
 828
Total service charges1,961
 1,968
 5,836
 5,863
1,975
 1,961
 5,717

5,836
Investment and brokerage services              
Asset management fees2,576
 2,367
 7,652
 6,855
2,597
 2,576
 7,591
 7,653
Brokerage fees918
 1,070
 2,964
 3,459
897
 918
 2,733
 2,963
Total investment and brokerage services3,494
 3,437
 10,616
 10,314
3,494
 3,494
 10,324

10,616
Investment banking income       
Investment banking fees       
Underwriting income701
 698
 2,160
 2,185
740
 701
 2,198
 2,160
Syndication fees241
 405
 958
 1,146
341
 241
 887
 958
Financial advisory services262
 374
 861
 1,262
452
 262
 1,083
 861
Total investment banking income1,204
 1,477
 3,979
 4,593
Trading account profits1,893
 1,837
 6,907
 6,124
Total investment banking fees1,533
 1,204
 4,168

3,979
Total fees and commissions8,467

8,076

24,495

24,733
Trading account income1,707
 1,717
 6,390
 6,421
Other income885
 530
 1,576
 2,470
446
 870
 1,259
 1,531
Total noninterest income$10,907
 $10,678
 $33,383
 $33,711
$10,620

$10,663
 $32,144

$32,685
(1) 
Gross interchange fees were $2.6 billion and $2.4 billion and $2.2 billion for the three months ended September 30, 20182019 and 20172018, and are presented net of $1.41.6 billion and $1.31.5 billion of expenses for rewards and partner payments. For the nine months ended September 30, 20182019 and 20172018, gross interchange fees were $7.4 billion and $7.0 billion and $6.5 billion and are presented net of $4.04.6 billion and $3.64.2 billion of expenses for rewards and partner payments.


51Bank of America

 
Bank of America62





NOTE 3Derivatives
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
 
Principlesto the Consolidated Financial Statementsof the Corporation’s 20172018 Annual Report on Form 10-K. The following tables present derivative instruments included on the Consolidated Balance Sheet in derivative assets and liabilities at September 30, 20182019 and December 31, 2017.2018. 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 cash collateral received or paid.
                          
  September 30, 2018  September 30, 2019
  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$17,788.7
 $138.9
 $1.3
 $140.2
 $132.7
 $4.5
 $137.2
$19,994.7
 $184.3
 $12.6
 $196.9
 $194.3
 $0.3
 $194.6
Futures and forwards6,270.1
 1.3
 —
 1.3
 1.2
 —
 1.2
5,564.1
 1.4
 —
 1.4
 1.3
 —
 1.3
Written options1,433.4
 —
 —
 —
 26.7
 —
 26.7
1,777.5
 —
 —
 —
 42.1
 —
 42.1
Purchased options1,488.2
 28.7
 —
 28.7
 —
 —
 —
1,841.9
 47.9
 —
 47.9
 —
 —
 —
Foreign exchange contracts      

    
 

      

    
 

Swaps1,904.9
 49.6
 1.6
 51.2
 50.4
 2.4
 52.8
1,821.8
 34.8
 1.3
 36.1
 38.5
 1.8
 40.3
Spot, futures and forwards4,568.7
 42.1
 0.7
 42.8
 41.7
 0.5
 42.2
5,037.1
 41.8
 0.6
 42.4
 42.0
 0.2
 42.2
Written options300.4
 —
 —
 —
 5.1
 —
 5.1
305.5
 —
 —
 —
 4.4
 —
 4.4
Purchased options296.0
 4.4
 —
 4.4
 —
 —
 —
322.0
 4.8
 —
 4.8
 —
 —
 —
Equity contracts      

    
 

      

    
 

Swaps278.2
 4.9
 —
 4.9
 4.7
 —
 4.7
282.4
 5.4
 —
 5.4
 6.0
 —
 6.0
Futures and forwards104.8
 1.0
 —
 1.0
 1.3
 —
 1.3
122.2
 0.3
 —
 0.3
 0.9
 —
 0.9
Written options651.4
 —
 —
 —
 30.0
 —
 30.0
784.4
 —
 —
 —
 32.1
 —
 32.1
Purchased options586.1
 40.0
 —
 40.0
 —
 —
 —
734.5
 39.1
 —
 39.1
 —
 —
 —
Commodity contracts 
     

    
 

 
     

    
 

Swaps48.2
 2.4
 —
 2.4
 5.0
 —
 5.0
41.2
 2.1
 —
 2.1
 4.0
 —
 4.0
Futures and forwards63.5
 3.2
 —
 3.2
 0.5
 —
 0.5
63.3
 3.3
 —
 3.3
 0.6
 —
 0.6
Written options32.5
 —
 —
 —
 2.1
 —
 2.1
36.2
 —
 —
 —
 1.9
 —
 1.9
Purchased options29.5
 2.1
 —
 2.1
 —
 —
 —
36.8
 1.8
 —
 1.8
 —
 —
 —
Credit derivatives (2)
 
    
 

    
 

 
    
 

    
 

Purchased credit derivatives: 
    
 

    
 

 
    
 

    
 

Credit default swaps430.3
 4.9
 —
 4.9
 9.8
 —
 9.8
403.4
 3.5
 —
 3.5
 5.5
 —
 5.5
Total return swaps/options64.6
 0.4
 —
 0.4
 0.9
 —
 0.9
64.2
 0.2
 —
 0.2
 1.7
 —
 1.7
Written credit derivatives:     
 

    
 

     
 

    
 

Credit default swaps398.2
 9.3
 —
 9.3
 4.3
 —
 4.3
363.0
 5.3
 —
 5.3
 2.5
 —
 2.5
Total return swaps/options62.5
 0.5
 —
 0.5
 0.3
 —
 0.3
58.3
 0.9
 —
 0.9
 0.4
 —
 0.4
Gross derivative assets/liabilities  $333.7
 $3.6
 $337.3
 $316.7
 $7.4
 $324.1
  $376.9
 $14.5
 $391.4
 $378.2
 $2.3
 $380.5
Less: Legally enforceable master netting agreements 
 

  
 (259.7)  
  
 (259.7) 
 

  
 (305.6)  
  
 (305.6)
Less: Cash collateral received/paid 
  
  
 (32.0)  
  
 (28.2) 
  
  
 (40.7)  
  
 (36.9)
Total derivative assets/liabilities 
  
  
 $45.6
  
  
 $36.2
 
  
  
 $45.1
  
  
 $38.0
(1) 
Represents the total contract/notional amount of derivative assets and liabilities outstanding.
(2) 
The net derivative asset (liability) and notional amount of written credit derivatives for which the Corporation held purchased credit derivatives with identical underlying referenced names were $4.32.3 billion and $429.2342.9 billion at September 30, 20182019.


63Bank of America52






                          
  December 31, 2017  December 31, 2018
  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$15,416.4
 $175.1
 $2.9
 $178.0
 $172.5
 $1.7
 $174.2
$15,977.9
 $141.0
 $3.2
 $144.2
 $138.9
 $2.0
 $140.9
Futures and forwards4,332.4
 0.5
 —
 0.5
 0.5
 —
 0.5
3,656.6
 4.7
 —
 4.7
 5.0
 —
 5.0
Written options1,170.5
 —
 —
 —
 35.5
 —
 35.5
1,584.9
 —
 —
 —
 28.6
 —
 28.6
Purchased options1,184.5
 37.6
 —
 37.6
 —
 —
 —
1,614.0
 30.8
 —
 30.8
 —
 —
 —
Foreign exchange contracts   
  
  
  
  
  
   
  
  
  
  
  
Swaps2,011.1
 35.6
 2.2
 37.8
 36.1
 2.7
 38.8
1,704.8
 38.8
 1.4
 40.2
 42.2
 2.3
 44.5
Spot, futures and forwards3,543.3
 39.1
 0.7
 39.8
 39.1
 0.8
 39.9
4,276.0
 39.8
 0.4
 40.2
 39.3
 0.3
 39.6
Written options291.8
 —
 —
 —
 5.1
 —
 5.1
256.7
 —
 —
 —
 5.0
 —
 5.0
Purchased options271.9
 4.6
 —
 4.6
 —
 —
 —
240.4
 4.6
 —
 4.6
 —
 —
 —
Equity contracts 
  
  
  
  
  
  
 
  
  
  
  
  
  
Swaps265.6
 4.8
 —
 4.8
 4.4
 —
 4.4
253.6
 7.7
 —
 7.7
 8.4
 —
 8.4
Futures and forwards106.9
 1.5
 —
 1.5
 0.9
 —
 0.9
100.0
 2.1
 —
 2.1
 0.3
 —
 0.3
Written options480.8
 —
 —
 —
 23.9
 —
 23.9
597.1
 —
 —
 —
 27.5
 —
 27.5
Purchased options428.2
 24.7
 —
 24.7
 —
 —
 —
549.4
 36.0
 —
 36.0
 —
 —
 —
Commodity contracts 
  
  
  
  
  
  
 
  
  
  
  
  
  
Swaps46.1
 1.8
 —
 1.8
 4.6
 —
 4.6
43.1
 2.7
 —
 2.7
 4.5
 —
 4.5
Futures and forwards47.1
 3.5
 —
 3.5
 0.6
 —
 0.6
51.7
 3.2
 —
 3.2
 0.5
 —
 0.5
Written options21.7
 —
 —
 —
 1.4
 —
 1.4
27.5
 —
 —
 —
 2.2
 —
 2.2
Purchased options22.9
 1.4
 —
 1.4
 —
 —
 —
23.4
 1.7
 —
 1.7
 —
 —
 —
Credit derivatives (2)
 
  
  
  
  
  
  
 
  
  
  
  
  
  
Purchased credit derivatives: 
  
  
  
  
  
  
 
  
  
  
  
  
  
Credit default swaps470.9
 4.1
 —
 4.1
 11.1
 —
 11.1
408.1
 5.3
 —
 5.3
 4.9
 —
 4.9
Total return swaps/options54.1
 0.1
 —
 0.1
 1.3
 —
 1.3
84.5
 0.4
 —
 0.4
 1.0
 —
 1.0
Written credit derivatives: 
  
  
  
    
  
 
  
  
  
    
  
Credit default swaps448.2
 10.6
 —
 10.6
 3.6
 —
 3.6
371.9
 4.4
 —
 4.4
 4.3
 —
 4.3
Total return swaps/options55.2
 0.8
 —
 0.8
 0.2
 —
 0.2
87.3
 0.6
 —
 0.6
 0.6
 —
 0.6
Gross derivative assets/liabilities 
 $345.8
 $5.8
 $351.6
 $340.8
 $5.2
 $346.0
 
 $323.8
 $5.0
 $328.8
 $313.2
 $4.6
 $317.8
Less: Legally enforceable master netting agreements 
  
  
 (279.2)  
  
 (279.2) 
  
  
 (252.7)  
  
 (252.7)
Less: Cash collateral received/paid 
  
  
 (34.6)  
  
 (32.5) 
  
  
 (32.4)  
  
 (27.2)
Total derivative assets/liabilities 
  
  
 $37.8
  
  
 $34.3
 
  
  
 $43.7
  
  
 $37.9
(1) 
Represents the total contract/notional amount of derivative assets and liabilities outstanding.
(2) 
The net derivative asset (liability) and notional amount of written credit derivatives for which the Corporation held purchased credit derivatives with identical underlying referenced names were $6.4 billion(185) million and $435.1342.8 billion at December 31, 20172018.
Offsetting of Derivatives
The Corporation enters into International Swaps and Derivatives Association, Inc. (ISDA) master netting agreements or similar agreements with substantially all of the Corporation’s derivative counterparties. For additional information, see Note 23 – Derivativesto the Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K.
The following table presents derivative instruments included in derivative assets and liabilities on the Consolidated Balance Sheet at September 30, 20182019 and December 31, 20172018 by primary risk (e.g., interest rate risk) and the platform, where applicable,
 
on which these derivatives are transacted. Balances are presented on a gross basis, prior to the application of counterparty and cash collateral netting. Total gross derivative assets and liabilities are adjusted on an aggregate basis to take into consideration the effects of legally enforceable master netting agreements which include reducing the balance for counterparty netting and cash collateral received or paid.
For more information on offsetting of securities financing agreements, see Note 910 – Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings and Restricted Cash.


53Bank of America

 
Bank of America64





              
Offsetting of Derivatives (1)
              
              
Derivative
Assets
 Derivative Liabilities 
Derivative
Assets
 Derivative Liabilities
Derivative
Assets
 Derivative Liabilities 
Derivative
Assets
 Derivative Liabilities
(Dollars in billions)September 30, 2018 December 31, 2017September 30, 2019 December 31, 2018
Interest rate contracts 
  
  
  
 
  
  
  
Over-the-counter$165.9
 $161.0
 $211.7
 $206.0
$237.1
 $229.7
 $174.2
 $169.4
Exchange-traded—
 0.1
 —
 —
Over-the-counter cleared2.7
 2.5
 1.9
 1.8
7.0
 6.5
 4.8
 4.0
Foreign exchange contracts              
Over-the-counter95.2
 97.1
 78.7
 80.8
80.8
 84.3
 82.5
 86.3
Over-the-counter cleared1.1
 1.0
 0.9
 0.7
0.6
 0.6
 0.9
 0.9
Equity contracts              
Over-the-counter27.2
 17.3
 18.3
 16.2
19.8
 14.6
 24.6
 14.6
Exchange-traded13.5
 12.2
 9.1
 8.5
16.8
 16.7
 16.1
 15.1
Commodity contracts              
Over-the-counter3.6
 5.1
 2.9
 4.4
3.2
 4.4
 3.5
 4.5
Exchange-traded1.0
 1.1
 0.7
 0.8
0.9
 0.8
 1.0
 0.9
Over-the-counter cleared0.1
 0.1
 —
 —
Credit derivatives              
Over-the-counter7.9
 8.4
 9.1
 9.6
6.7
 7.3
 7.7
 8.2
Over-the-counter cleared6.9
 6.6
 6.1
 6.0
2.7
 2.3
 2.5
 2.3
Total gross derivative assets/liabilities, before netting              
Over-the-counter299.8
 288.9
 320.7
 317.0
347.6
 340.3
 292.5
 283.0
Exchange-traded14.5
 13.3
 9.8
 9.3
17.7
 17.6
 17.1
 16.0
Over-the-counter cleared10.7
 10.1
 8.9
 8.5
10.4
 9.5
 8.2
 7.2
Less: Legally enforceable master netting agreements and cash collateral received/paid              
Over-the-counter(270.1) (266.1) (296.9) (294.6)(323.8) (320.3) (264.4) (259.2)
Exchange-traded(11.9) (11.9) (8.6) (8.6)(12.7) (12.7) (13.5) (13.5)
Over-the-counter cleared(9.7) (9.9) (8.3) (8.5)(9.8) (9.5) (7.2) (7.2)
Derivative assets/liabilities, after netting33.3
 24.4
 25.6
 23.1
29.4
 24.9
 32.7
 26.3
Other gross derivative assets/liabilities (2)
12.3
 11.8
 12.2
 11.2
15.7
 13.1
 11.0
 11.6
Total derivative assets/liabilities45.6
 36.2
 37.8
 34.3
45.1
 38.0
 43.7
 37.9
Less: Financial instruments collateral (3)
(18.4) (9.3) (11.2) (10.4)(15.0) (12.7) (16.3) (8.6)
Total net derivative assets/liabilities$27.2
 $26.9
 $26.6
 $23.9
$30.1
 $25.3
 $27.4
 $29.3
(1) 
Over-the-counter (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, and exchange-tradedclearinghouse. Exchange-traded derivatives include listed options transacted on an exchange.
(2) 
Consists of derivatives entered into under master netting agreements where the enforceability of these agreements is uncertain under bankruptcy laws in some countries or industries.
(3) 
Amounts are limited to the derivative asset/liability balance and, accordingly, do not include excess collateral received/pledged. Financial instruments collateral includes securities collateral received or pledged and cash securities held and posted at third-party custodians that are not offset on the Consolidated Balance Sheet but shown as a reduction to derive net derivative assets and liabilities.
Transfers of Financial Assets with Risk Retained through Derivatives
The Corporation enters into certain transactions involving the transfer of financial assets that are accounted for as sales where substantially all of the economic exposure to the transferred financial assets is retained through derivatives (e.g., interest rate and/or credit), but the Corporation does not retain control over the assets transferred. As of September 30, 2019 and December 31, 2018, the Corporation had transferred $5.4 billion and $5.8 billion of non-U.S. government-guaranteed mortgage-backed securities (MBS) to a third-party trust and retained economic exposure to the transferred assets through derivative contracts. In connection with these transfers, the Corporation received gross cash proceeds of $5.4 billion and $5.8 billion at the transfer dates. At September 30, 2019 and December 31, 2018, the fair value of the transferred securities was $5.3 billion and $5.5 billion.
ALM and Risk Management Derivatives
The Corporation’s asset and liability management (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. For additional information, see Note 23 – Derivatives to the Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K.
Derivatives Designated as Accounting Hedges
The Corporation uses various types of interest rate and foreign exchange derivative contracts to protect against changes in the fair value of its assets and liabilities due to fluctuations in interest rates and exchange rates (fair value hedges). The Corporation also
uses these types of contracts 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).
Effective January 1, 2018, the Corporation early adopted the hedge accounting standard on a prospective basis and, accordingly, prior-period hedge accounting disclosures were not conformed to the current-period presentation. For more information, see Note 1 – Summary of Significant Accounting Principles.



65Bank of America54






Fair Value Hedges
The table below summarizes information related to fair value hedges for the three and nine months ended September 30, 20182019 and 2017.2018.
        
Gains and Losses on Derivatives Designated as Fair Value Hedges
        
 Three Months Ended September 30, 2019 Three Months Ended September 30, 2018
(Dollars in millions)Derivative Hedged Item Derivative Hedged Item
Interest rate risk on long-term debt (1)
$3,328
 $(3,342) $(1,129) $1,122
Interest rate and foreign currency risk on long-term debt (2)
(110) 111
 (182) 207
Interest rate risk on available-for-sale securities (3)
(33) 30
 12
 (12)
Total$3,185
 $(3,201) $(1,299)
$1,317
        
 Nine Months Ended September 30, 2019 Nine Months Ended September 30, 2018
 Derivative Hedged Item Derivative Hedged Item
Interest rate risk on long-term debt (1)
$9,373
 $(9,392) $(4,303) $4,179
Interest rate and foreign currency risk on long-term debt (2)
(12) 31
 (927) 795
Interest rate risk on available-for-sale securities (3)
(133) 128
 (20) 19
Total$9,228
 $(9,233) $(5,250)
$4,993
          
Gains and Losses on Derivatives Designated as Fair Value Hedges
          
 Three Months Ended September 30, 2018 Three Months Ended September 30, 2017
(Dollars in millions)Derivative Hedged Item Derivative Hedged Item Hedge Ineffectiveness
Interest rate risk on long-term debt (1)
$(1,129) $1,122
 $(273) $169
 $(104)
Interest rate and foreign currency risk on long-term debt (2, 3)
(182) 207
 607
 (593) 14
Interest rate risk on available-for-sale securities (4)
12
 (12) (8) 7
 (1)
Total$(1,299) $1,317
 $326

$(417)
$(91)
          
 Nine Months Ended September 30, 2018 Nine Months Ended September 30, 2017
 Derivative Hedged Item Derivative Hedged Item Hedge Ineffectiveness
Interest rate risk on long-term debt (1)
$(4,303) $4,179
 $(751) $313
 $(438)
Interest rate and foreign currency risk on long-term debt (2, 3)
(927) 795
 1,631
 (1,603) 28
Interest rate risk on available-for-sale securities (4)
(20) 19
 (71) 40
 (31)
Total$(5,250) $4,993
 $809

$(1,250)
$(441)

(1) 
Amounts are recorded in interest expense in the Consolidated Statement of Income.
(2) 
For the three and nine months ended September 30, 2018, the derivative amount includes losses of $96 million and $672 million in other income and losses of $117 million and $156 million in interest expense. For the same periods in 20172019, the derivative amount includes gains (losses) of $635(59) million and $1.9 billion108 million in interest expense, $(53) million and $(142) million in other income and losses$2 million and $22 million in accumulated other comprehensive income (OCI). For the same periods in 2018, the derivative amount includes gains (losses) of $29(117) million and $310(156) million in interest expense.expense, $(96) million and $(672) million in other income, and $31 million and $(99) million in accumulated OCI. Line item totals are in the Consolidated Statement of Income.Income and in the Consolidated Balance Sheet.
(3) 
For the three and nine months ended September 30, 2018, the derivative amount includes gains of $31 million and losses of $99 million related to certain changes in the fair value of derivatives that were excluded from effectiveness testing and recognized in accumulated OCI. None of the excluded amounts have been reclassified into earnings.
(4)
Amounts are recorded in interest income in the Consolidated Statement of Income.
The table below summarizes the carrying value of hedged assets and liabilities that are designated and qualifying in fair value hedging relationships along with the cumulative amount of fair value hedging adjustments included in the carrying value that have been recorded in the current hedging relationships. These fair value hedging adjustments are open basis adjustments that are not subject to amortization as long as the hedging relationship remains designated.
          
Designated Fair Value Hedged Assets (Liabilities)
          
September 30, 2018September 30, 2019 December 31, 2018
(Dollars in millions)Carrying Value 
Cumulative Fair Value Adjustments (1)
Carrying Value 
Cumulative
Fair Value Adjustments (1)
 Carrying Value 
Cumulative
Fair Value Adjustments (1)
Long-term debt(2)$(137,610) $1,839
$(165,021) $(11,932) $(138,682) $(2,117)
Available-for-sale securities (2)
951
 (61)
Available-for-sale debt securities (2)
1,684
 92
 981
 (29)
(1) 
For assets, increase (decrease) to carrying value and for liabilities, (increase) decrease to carrying value.
(2) 
The amortized cost of available-for-sale securities inAt September 30, 2019 and December 31, 2018, the cumulative fair value adjustments remaining on long-term debt and available-for-sale (AFS) debt securities from discontinued hedging relationships was resulted in a decrease in the related liability of $948 million1.4 billion and is included$1.6 billion and an increase (decrease) in debt securities carried at fair value on the Consolidated Balance Sheet.related asset of $5 million and $(29) million, which are being amortized over the remaining contractual life of the de-designated hedged items.
At September 30, 2018, the cumulative fair value adjustments remaining on long-term debt and available-for-sale (AFS) securities from discontinued hedging relationships were a decrease of $400 million of the related liability, and a decrease of $34 million of the related asset, which are being amortized over the remaining contractual life of the de-designated hedged items.
Cash Flow and Net Investment Hedges
The following table summarizes certain information related to cash flow hedges and net investment hedges for the three and nine months ended September 30, 20182019 and 2017.2018. Of the $1.3 billion
$365 million after-tax net loss ($1.7 billion479 million pretax) on derivatives in accumulated OCI at September 30, 2018, $2802019, $78 million after-tax ($368103 million pretax) 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. For terminated cash flow hedges, the time period over which the majority of the forecasted transactions are hedged is approximately six3 years, with a maximum length of time for certain forecasted transactions of 1816 years.

        
Gains and Losses on Derivatives Designated as Cash Flow and Net Investment Hedges
        
 
Gains (Losses) Recognized in
Accumulated OCI
on Derivatives
 
Gains (Losses)
in Income
Reclassified from Accumulated OCI
 
Gains (Losses) Recognized in
Accumulated OCI
on Derivatives
 
Gains (Losses)
in Income
Reclassified from Accumulated OCI
(Dollars in millions, amounts pretax)Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
Cash flow hedges       
Interest rate risk on variable-rate assets (1)
$125
 $(27) $743
 $(78)
Net investment hedges 
  
    
Foreign exchange risk (2)
$786
 $362
 $590
 $363
        
 Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
Cash flow hedges       
Interest rate risk on variable-rate assets (1)
$(54) $(51) $(553) $(134)
Price risk on certain restricted stock awards (3)
—
 —
 4
 27
Total$(54) $(51)
$(549) $(107)
Net investment hedges       
Foreign exchange risk (2)
$181
 $383
 $860
 $382
Bank of America66

        
Gains and Losses on Derivatives Designated as Cash Flow and Net Investment Hedges
        
 Gains (Losses)
Recognized in
Accumulated OCI on Derivatives		 Gains (Losses)
in Income
Reclassified from
Accumulated OCI		 Gains (Losses)
Recognized in
Accumulated OCI on Derivatives		 Gains (Losses)
in Income
Reclassified from
Accumulated OCI
(Dollars in millions, amounts pretax)Three Months Ended September 30, 2018Nine Months Ended September 30, 2018
Cash flow hedges       
Interest rate risk on variable-rate assets (1)
$(54) $(51) $(553) $(134)
Price risk on certain restricted stock awards (2)
—
 —
 4
 27
Total$(54) $(51) $(549) $(107)
Net investment hedges 
  
    
Foreign exchange risk (3)
$181
 $383
 $860
 $382
        
 Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
Cash flow hedges       
Interest rate risk on variable-rate assets (1)
$11
 $(54) $38
 $(274)
Price risk on certain restricted stock awards (2)
7
 32
 41
 103
Total$18
 $(22)
$79
 $(171)
Net investment hedges 
  
    
Foreign exchange risk (3)
$(427) $(3) $(1,541) $1,811

(1) 
Amounts reclassified from accumulated OCI are recorded in interest income in the Consolidated Statement of Income.
(2) 
Amounts reclassified from accumulated OCI are recorded in personnel expense in the Consolidated Statement of Income.
(3)
Amounts reclassified from accumulated OCI are recorded in other income in the Consolidated Statement of Income. For the three and nine months ended September 30, 20182019, amounts excluded from effectiveness testing and recognized in other income were gains of $3 million and $32 million and $109 million. For the same periods in 20172018, amounts excluded from effectiveness testing and recognized in other income were lossesgains of $333 million and $8232 million.
(3)
Amounts reclassified from accumulated OCI are recorded in compensation and benefits expense in the Consolidated Statement of Income.

55Bank of America





Other Risk Management Derivatives
Other risk management derivatives are used by the Corporation to reduce certain risk exposures by economically hedging various assets and liabilities. The gains and losses on these derivatives are recognized in other income. The table below presents gains (losses) on these derivatives for the three and nine months ended September 30, 20182019 and 2017.2018. These gains (losses) are largely offset by the income or expense that is recorded on the hedged item.
        
Gains and Losses on Other Risk Management Derivatives
        
 Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions)2019 2018 2019 2018
Interest rate risk on mortgage activities (1)
$110
 $(45) $361
 $(206)
Credit risk on loans(8) (2) (48) (7)
Interest rate and foreign currency risk on ALM activities (2)
2,517
 487
 3,337
 1,050
        
Gains and Losses on Other Risk Management Derivatives
        

Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions)2018 2017 2018 2017
Interest rate risk on mortgage activities (1)
$(45) $1
 $(206) $32
Credit risk on loans(2) —
 (7) (3)
Interest rate and foreign currency risk on ALM activities (2)
487
 26
 1,050
 (26)

(1) 
Primarily related to hedges of interest rate risk on mortgage servicing rights (MSRs) and interest rate lock commitments (IRLCs) to originate mortgage loans that will be held for sale. The net gains on IRLCs, which are not included in the table but are considered derivative instruments, were $820 million and $3656 million for the three and nine months ended September 30, 20182019 compared to $768 million and $19236 million for the same periods in 20172018.
(2) 
Primarily related to hedges of debt securities carried at fair value and hedges of foreign currency-denominated debt.
Transfers of Financial Assets with Risk Retained through Derivatives
The Corporation enters into certain transactions involving the transfer of financial assets that are accounted for as sales where substantially all of the economic exposure to the transferred financial assets is retained through derivatives (e.g., interest rate and/or credit), but the Corporation does not retain control over the assets transferred. As of both September 30, 2018 and December 31, 2017, the Corporation had transferred $6.0 billion of non-U.S. government-guaranteed mortgage-backed securities
(MBS) to a third-party trust and retained economic exposure to the transferred assets through derivative contracts. In connection with these transfers, the Corporation received gross cash proceeds of $6.0 billion at the transfer dates. At September 30, 2018 and December 31, 2017, the fair value of the transferred securities was $5.9 billion and $6.1 billion. At September 30, 2018 and December 31, 2017, derivative assets of $58 million and $46 million and liabilities of $1 million and $3 million were recorded and are included in credit derivatives in the derivative instruments table on page 63.


67Bank of America





Sales and Trading Revenue
The Corporation enters into trading derivatives to facilitate client transactions and to manage risk exposures arising from trading account assets and liabilities. It is the Corporation’s policy to include these derivative instruments in its trading activities which include derivatives and non-derivative cash instruments. The resulting risk from these derivatives is managed on a portfolio basis as part of the Corporation’s Global Markets business segment. For more information on sales and trading revenue, see Note 23 – Derivatives to the Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K.
The table below, which includes both derivatives and non-derivative cash instruments, identifies the amounts in the
respective income statement line items attributable to the Corporation’s sales and trading revenue in Global Markets, categorized by primary risk, for the three and nine months ended September 30, 20182019 and 2017.2018. The difference between total trading account profitsincome 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 adjustment (DVA) and funding valuation adjustment (FVA) gains (losses). Global Markets results in Note 1718 – Business Segment Information are presented on a fully taxable-equivalent (FTE) basis. The table below is not presented on an FTE basis.
                              
Sales and Trading Revenue               Sales and Trading Revenue
                              
Trading Account Profits 
Net Interest
Income
 
Other (1)
 Total Trading Account Profits 
Net Interest
Income
 
Other (1)
 TotalTrading Account Income 
Net Interest
Income
 
Other (1)
 Total Trading Account Income 
Net Interest
Income
 
Other (1)
 Total
(Dollars in millions)Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
Interest rate risk$182
 $307
 $134
 $623
 $1,070
 $946
 $203
 $2,219
$5
 $480
 $217
 $702
 $595
 $1,289
 $362
 $2,246
Foreign exchange risk379
 (2) 2
 379
 1,175
 (15) 5
 1,165
325
 14
 9
 348
 965
 42
 19
 1,026
Equity risk853
 (215) 350
 988
 3,105
 (542) 1,196
 3,759
907
 (122) 364
 1,149
 2,886
 (563) 1,159
 3,482
Credit risk266
 465
 106
 837
 1,093
 1,424
 377
 2,894
286
 451
 136
 873
 1,092
 1,341
 400
 2,833
Other risk47
 26
 19
 92
 171
 39
 60
 270
57
 11
 12
 80
 83
 61
 43
 187
Total sales and trading revenue$1,727
 $581
 $611
 $2,919
 $6,614
 $1,852
 $1,841
 $10,307
$1,580

$834

$738

$3,152
 $5,621
 $2,170
 $1,983
 $9,774
                              
Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
Interest rate risk$330
 $365
 $49
 $744
 $833
 $1,182
 $200
 $2,215
$76
 $418
 $141
 $635
 $789
 $1,242
 $228
 $2,259
Foreign exchange risk348
 2
 2
 352
 1,063
 (2) 5
 1,066
373
 3
 3
 379
 1,163
 (2) 10
 1,171
Equity risk639
 (142) 467
 964
 2,088
 (372) 1,427
 3,143
823
 (183) 356
 996
 3,015
 (449) 1,218
 3,784
Credit risk362
 482
 105
 949
 1,482
 1,467
 450
 3,399
268
 458
 113
 839
 1,091
 1,407
 408
 2,906
Other risk35
 8
 16
 59
 168
 18
 67
 253
10
 64
 10
 84
 68
 152
 43
 263
Total sales and trading revenue$1,714
 $715
 $639
 $3,068
 $5,634
 $2,293
 $2,149
 $10,076
$1,550
 $760
 $623
 $2,933
 $6,126
 $2,350

$1,907
 $10,383
(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 $378410 million and $1.3 billion for the three and nine months ended September 30, 20182019 compared to $488378 million and $1.51.3 billion for the same periods in 20172018.

Bank of America68

Credit Derivatives
The Corporation enters into credit derivatives primarily to facilitate client transactions and to manage credit risk exposures. Credit derivatives derive value based on an underlying third-party referenced obligation or a portfolio of referenced obligations and generally require the Corporation, as the seller of credit protection, to make payments to a buyer upon the occurrence of a predefined credit event. Such credit events generally include bankruptcy of the referenced credit entity and failure to pay under the obligation,
as well as acceleration of indebtedness and payment repudiation or moratorium. For credit derivatives based on a portfolio of referenced credits or credit indices, the Corporation may not be required to make payment until a specified amount of loss has occurred and/or may only be required to make payment up to a specified amount.
Credit derivative instruments where the Corporation is the seller of credit protection and their expiration at September 30, 2018 and December 31, 2017 are summarized in the table below.
          
Credit Derivative Instruments         
          
 
Less than
One Year
 
One to
Three Years
 
Three to
Five Years
 
Over Five
Years
 Total
 September 30, 2018
(Dollars in millions)Carrying Value
Credit default swaps: 
  
  
  
  
Investment grade$2
 $38
 $335
 $590
 $965
Non-investment grade61
 492
 1,007
 1,802
 3,362
Total63
 530
 1,342
 2,392
 4,327
Total return swaps/options: 
  
  
  
  
Investment grade22
 —
 —
 —
 22
Non-investment grade263
 28
 —
 —
 291
Total285
 28
 —
 —
 313
Total credit derivatives$348
 $558
 $1,342
 $2,392
 $4,640
Credit-related notes: 
  
  
  
  
Investment grade$—
 $—
 $5
 $602
 $607
Non-investment grade3
 1
 4
 1,455
 1,463
Total credit-related notes$3
 $1
 $9
 $2,057
 $2,070
 Maximum Payout/Notional
Credit default swaps: 
  
  
  
  
Investment grade$61,224
 $93,646
 $82,657
 $30,883
 $268,410
Non-investment grade22,980
 37,907
 47,164
 21,785
 129,836
Total84,204
 131,553
 129,821
 52,668
 398,246
Total return swaps/options: 
  
  
  
  
Investment grade40,115
 1,263
 62
 76
 41,516
Non-investment grade20,648
 207
 39
 72
 20,966
Total60,763
 1,470
 101
 148
 62,482
Total credit derivatives$144,967
 $133,023
 $129,922
 $52,816
 $460,728
          
 December 31, 2017
 Carrying Value
Credit default swaps:         
Investment grade$4
 $3
 $61
 $245
 $313
Non-investment grade203
 453
 484
 2,133
 3,273
Total207
 456
 545
 2,378
 3,586
Total return swaps/options: 
  
  
  
  
Investment grade30
 —
 —
 —
 30
Non-investment grade150
 —
 —
 3
 153
Total180
 —
 —
 3
 183
Total credit derivatives$387
 $456
 $545
 $2,381
 $3,769
Credit-related notes: 
  
  
  
  
Investment grade$—
 $—
 $7
 $689
 $696
Non-investment grade12
 4
 34
 1,548
 1,598
Total credit-related notes$12
 $4
 $41
 $2,237
 $2,294
 Maximum Payout/Notional
Credit default swaps:         
Investment grade$61,388
 $115,480
 $107,081
 $21,579
 $305,528
Non-investment grade39,312
 49,843
 39,098
 14,420
 142,673
Total100,700
 165,323
 146,179
 35,999
 448,201
Total return swaps/options: 
  
  
  
  
Investment grade37,394
 2,581
 —
 143
 40,118
Non-investment grade13,751
 514
 143
 697
 15,105
Total51,145
 3,095
 143
 840
 55,223
Total credit derivatives$151,845
 $168,418
 $146,322
 $36,839
 $503,424

69Bank of America





Credit derivatives are classified as investment and non-investment grade based on the credit quality of the underlying referenced obligation. The Corporation considers ratings of BBB- or higher as investment grade. Non-investment grade includes non-rated credit derivative instruments. The Corporation discloses internal categorizations of investment grade and non-investment grade consistent with how
risk is managed for these instruments. For more information on credit derivatives, see Note 3 – Derivatives to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.
Credit derivative instruments where the Corporation is the seller of credit protection and their expiration at September 30, 2019 and December 31, 2018 are summarized in the following table.

Bank of America 56

          
Credit Derivative Instruments         
          
 
Less than
One Year
 
One to
Three Years
 
Three to
Five Years
 
Over Five
Years
 Total
 September 30, 2019
(Dollars in millions)Carrying Value
Credit default swaps: 
  
  
  
  
Investment grade$—
 $10
 $90
 $249
 $349
Non-investment grade69
 264
 738
 1,086
 2,157
Total69
 274
 828
 1,335
 2,506
Total return swaps/options: 
  
  
  
  
Investment grade20
 —
 —
 —
 20
Non-investment grade365
 12
 —
 —
 377
Total385
 12
 —
 —
 397
Total credit derivatives$454
 $286
 $828
 $1,335
 $2,903
Credit-related notes: 
  
  
  
  
Investment grade$—
 $3
 $—
 $646
 $649
Non-investment grade12
 2
 1
 1,402
 1,417
Total credit-related notes$12
 $5
 $1
 $2,048
 $2,066
 Maximum Payout/Notional
Credit default swaps: 
  
  
  
  
Investment grade$48,416
 $82,184
 $102,206
 $30,639
 $263,445
Non-investment grade17,211
 27,707
 36,737
 17,887
 99,542
Total65,627
 109,891
 138,943
 48,526
 362,987
Total return swaps/options: 
  
  
  
  
Investment grade29,218
 —
 61
 74
 29,353
Non-investment grade28,306
 511
 51
 61
 28,929
Total57,524
 511
 112
 135
 58,282
Total credit derivatives$123,151
 $110,402
 $139,055
 $48,661
 $421,269
          
 December 31, 2018
 Carrying Value
Credit default swaps:         
Investment grade$2
 $44
 $436
 $488
 $970
Non-investment grade132
 636
 914
 1,691
 3,373
Total134
 680
 1,350
 2,179
 4,343
Total return swaps/options: 
  
  
  
  
Investment grade105
 —
 —
 —
 105
Non-investment grade472
 21
 —
 —
 493
Total577
 21
 —
 —
 598
Total credit derivatives$711
 $701
 $1,350
 $2,179
 $4,941
Credit-related notes: 
  
  
  
  
Investment grade$—
 $—
 $4
 $532
 $536
Non-investment grade1
 1
 1
 1,500
 1,503
Total credit-related notes$1
 $1
 $5
 $2,032
 $2,039
 Maximum Payout/Notional
Credit default swaps:         
Investment grade$53,758
 $95,699
 $95,274
 $20,054
 $264,785
Non-investment grade24,297
 33,881
 34,530
 14,426
 107,134
Total78,055
 129,580
 129,804
 34,480
 371,919
Total return swaps/options: 
  
  
  
  
Investment grade60,042
 822
 59
 72
 60,995
Non-investment grade24,524
 1,649
 39
 70
 26,282
Total84,566
 2,471
 98
 142
 87,277
Total credit derivatives$162,621
 $132,051
 $129,902
 $34,622
 $459,196

The notional amount represents the maximum amount payable by the Corporation for most credit derivatives. However, the Corporation does not monitor its exposure to credit derivatives based solely on the notional amount because this measure does not take into consideration the probability of occurrence. As such, the notional amount is not a reliable indicator of the Corporation’s exposure to these contracts. Instead, a risk framework is used to define risk tolerances and establish limits so that certain credit risk-related losses occur within acceptable, predefined limits.
Credit-related notes in the table above include investments in securities issued by collateralized debt obligation (CDO), collateralized loan obligation 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.

57Bank of America





Credit-related Contingent Features and Collateral
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 September 30, 20182019 and December 31, 2017,2018, the Corporation held cash and securities collateral of $83.7$91.0 billion and $77.2$81.6 billion and posted cash and securities collateral of $55.1$73.6 billion and $59.2$56.5 billion in the normal course of business under derivative agreements, excluding cross-product margining agreements where clients are permitted to margin on a net basis for both derivative and secured financing arrangements.
In connection with certain OTC derivative contracts and other trading agreements, the Corporation can be required to provide additional collateral or to terminate transactions with certain counterparties in the event of a downgrade of the senior debt ratings of the Corporation or certain subsidiaries. The amount of
additional collateral required depends on the contract and is usually a fixed incremental amount and/or the market value of the exposure. For more information on credit-related contingent features and collateral, see Note 23 – Derivativesto the Consolidated Financial Statementsof the Corporation’s 20172018 Annual Report on Form 10-K.10-K.
At September 30, 2018,2019, the amount of collateral, calculated based on the terms of the contracts, that the Corporation and certain subsidiaries could be required to post to counterparties but had not yet posted to counterparties was $2.3$2.0 billion, including $1.2$1.0 billion for Bank of America, National Association (Bank of America, N.A. or BANA).Association.
Some counterparties are currently able to unilaterally terminate certain contracts, or the Corporation or certain subsidiaries may be required to take other action such as find a
suitable replacement or obtain a guarantee. At September 30, 20182019 and December 31, 2017,2018, the liability recorded for these derivative contracts was not significant.
The following table below presents the amount of additional collateral that would have been contractually required by derivative contracts and other trading agreements at September 30, 20182019 if the rating agencies had downgraded their long-term senior debt ratings for the Corporation or certain subsidiaries by one incremental notch and by an additional second incremental notch.
    
Additional Collateral Required to be Posted Upon Downgrade at September 30, 2019
    
(Dollars in millions)
One
incremental notch
 
Second
incremental notch
Bank of America Corporation$571
 $510
Bank of America, N.A. and subsidiaries (1)
240
 422
    
Additional Collateral Required to be Posted Upon Downgrade at September 30, 2018
    
(Dollars in millions)
One
incremental notch
 
Second
incremental notch
Bank of America Corporation$554
 $314
Bank of America, N.A. and subsidiaries (1)
212
 264
(1) 
Included in Bank of America Corporation collateral requirements in this table.
The following 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 September 30, 20182019 if the long-term senior debt ratings for the Corporation or certain subsidiaries had been lower by one incremental notch and by an additional second incremental notch.
    
Derivative Liabilities Subject to Unilateral Termination Upon Downgrade at September 30, 2019
    
(Dollars in millions)
One
incremental notch
 
Second
incremental notch
Derivative liabilities$12
 $1,127
Collateral posted4
 785
    
Derivative Liabilities Subject to Unilateral Termination Upon Downgrade at September 30, 2018
    
(Dollars in millions)
One
incremental notch
 
Second
incremental notch
Derivative liabilities$260
 $607
Collateral posted201
 399

Valuation Adjustments on Derivatives
The table below presents credit valuation adjustment (CVA), DVA and FVA gains (losses) on derivatives, which are recorded in trading account profits,income, on a gross and net of hedge basis for the three and nine months ended September 30, 20182019 and 2017.2018. For more information on the valuation adjustments on derivatives, see Note 23 – Derivativesto the Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K.
      
Valuation Adjustments on Derivatives (1)
Valuation Adjustments Gains (Losses) on Derivatives (1)
Valuation Adjustments Gains (Losses) on Derivatives (1)
      
Gains (Losses)Three Months Ended September 30
Three Months Ended September 30
2018 20172019 2018
(Dollars in millions)GrossNet GrossNetGrossNet GrossNet
Derivative assets (CVA)$71
$27
 $23
$15
$(41)$16
 $71
$27
Derivative assets/liabilities (FVA)45
35
 37
43
(60)(4) 45
35
Derivative liabilities (DVA)(69)(79) 29
17
17
8
 (69)(79)
      
Nine Months Ended September 30Nine Months Ended September 30
2018 20172019 2018
Derivative assets (CVA)$186
$172
 $281
$93
$(39)$38
 $186
$172
Derivative assets/liabilities (FVA)36
16
 113
140
(27)35
 36
16
Derivative liabilities (DVA)(112)(132) (249)(201)(56)(64) (112)(132)
(1) 
At September 30, 20182019 and December 31, 20172018, cumulative CVA reduced the derivative assets balance by $491639 million and $677600 million, cumulative FVA reduced the net derivatives balance by $100178 million and $136151 million, and cumulative DVA reduced the derivative liabilities balance by $338376 million and $450432 million, respectively.




  
Bank of America7058


NOTE 4Securities
The table below presents the amortized cost, gross unrealized gains and losses, and fair value of AFS debt securities, other debt securities carried at fair value and held-to-maturity (HTM) debt securities at September 30, 20182019 and December 31, 2017.2018.
              
Debt SecuritiesDebt Securities    Debt Securities    
  
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
(Dollars in millions)September 30, 2018September 30, 2019
Available-for-sale debt securities              
Mortgage-backed securities:       
       
Agency$141,721
 $101
 $(5,710) $136,112
$133,973
 $1,250
 $(274) $134,949
Agency-collateralized mortgage obligations5,878
 9
 (209) 5,678
4,877
 103
 (18) 4,962
Commercial14,138
 2
 (630) 13,510
14,301
 380
 (4) 14,677
Non-agency residential (1)
1,926
 217
 (6) 2,137
1,725
 227
 (9) 1,943
Total mortgage-backed securities163,663
 329
 (6,555) 157,437
154,876
 1,960
 (305) 156,531
U.S. Treasury and agency securities54,664
 8
 (2,366) 52,306
55,746
 1,364
 (163) 56,947
Non-U.S. securities7,076
 5
 (2) 7,079
11,074
 7
 (2) 11,079
Other taxable securities, substantially all asset-backed securities3,806
 77
 (7) 3,876
3,806
 77
 —
 3,883
Total taxable securities229,209
 419
 (8,930) 220,698
225,502
 3,408
 (470) 228,440
Tax-exempt securities18,401
 36
 (87) 18,350
16,263
 203
 (34) 16,432
Total available-for-sale debt securities247,610
 455
 (9,017) 239,048
241,765
 3,611
 (504) 244,872
Other debt securities carried at fair value12,409
 205
 (27) 12,587
Other debt securities carried at fair value (2)
9,284
 205
 (19) 9,470
Total debt securities carried at fair value260,019
 660
 (9,044) 251,635
251,049
 3,816
 (523) 254,342
Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities (2)
194,472
 1
 (6,485) 187,988
Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities190,252
 4,358
 (336) 194,274
Total debt securities (3, 4)
$454,491
 $661
 $(15,529) $439,623
$441,301
 $8,174
 $(859) $448,616
              
December 31, 2017December 31, 2018
Available-for-sale debt securities              
Mortgage-backed securities: 
  
  
  
 
  
  
  
Agency$194,119
 $506
 $(1,696) $192,929
$125,116
 $138
 $(3,428) $121,826
Agency-collateralized mortgage obligations6,846
 39
 (81) 6,804
5,621
 19
 (110) 5,530
Commercial13,864
 28
 (208) 13,684
14,469
 11
 (402) 14,078
Non-agency residential (1)
2,410
 267
 (8) 2,669
1,792
 136
 (11) 1,917
Total mortgage-backed securities217,239
 840
 (1,993) 216,086
146,998
 304
 (3,951) 143,351
U.S. Treasury and agency securities54,523
 18
 (1,018) 53,523
56,239
 62
 (1,378) 54,923
Non-U.S. securities6,669
 9
 (1) 6,677
9,307
 5
 (6) 9,306
Other taxable securities, substantially all asset-backed securities5,699
 73
 (2) 5,770
4,387
 29
 (6) 4,410
Total taxable securities284,130
 940
 (3,014) 282,056
216,931
 400
 (5,341) 211,990
Tax-exempt securities20,541
 138
 (104) 20,575
17,349
 99
 (72) 17,376
Total available-for-sale debt securities304,671
 1,078
 (3,118) 302,631
234,280
 499
 (5,413) 229,366
Other debt securities carried at fair value12,273
 252
 (39) 12,486
Other debt securities carried at fair value (2)
8,595
 172
 (32) 8,735
Total debt securities carried at fair value316,944
 1,330
 (3,157) 315,117
242,875
 671
 (5,445) 238,101
Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities125,013
 111
 (1,825) 123,299
203,652
 747
 (3,964) 200,435
Total debt securities (3, 4)
$441,957
 $1,441
 $(4,982) $438,416
$446,527
 $1,418
 $(9,409) $438,536
Available-for-sale marketable equity securities (5)
$27
 $—
 $(2) $25
(1) 
At September 30, 20182019 and December 31, 20172018, the underlying collateral type included approximately 6566 percent and 6268 percent prime, seven5 percent and 134 percent Alt-A and 29 percent and 28 percent and 25 percent subprime.
(2) 
DuringPrimarily includes non-U.S. securities used to satisfy certain international regulatory requirements. Any changes in value are reported in other income. For detail on the three and nine months ended September 30, 2018, the Corporation transferred $25 billion and $50 billion of available-for-sale debt securities to held to maturity.components, see Note 15 – Fair Value Measurements.
(3) 
Includes securities pledged as collateral of $39.742.8 billion and $35.840.6 billion at September 30, 20182019 and December 31, 20172018.
(4) 
The Corporation hadheld debt securities from Fannie Mae (FNMA) and Freddie Mac (FHLMC) that each exceeded 10 percent of shareholders’ equity, with an amortized cost of $165.3153.2 billion and $53.149.5 billion, and a fair value of $159.3156.6 billion and $51.450.6 billion at September 30, 20182019, and an amortized cost of $163.6161.2 billion and $50.352.2 billion, and a fair value of $162.1158.5 billion and $50.051.4 billion at December 31, 20172018.
(5)
Classified in other assets on the Consolidated Balance Sheet.
At September 30, 2018,2019, the accumulated net unrealized lossgain on AFS debt securities, excluding the amount related to debt securities previously transferred to held to maturity, included in accumulated OCI was $6.4$2.3 billion, net of the related income tax benefitexpense of $2.1 billion.$761 million. The Corporation had nonperforming AFS debt securities of $71 million and $99$11 million at both September 30, 20182019 and December 31, 2017.2018.
Effective January 1, 2018, the Corporation adopted an accounting standard applicable to equity securities. For more information, see Note 1 – Summary of Significant Accounting Principles. At September 30, 2018,2019, the Corporation held equity securities at an aggregate fair value of $947$853 million and other equity securities, as valued under the measurement alternative, at cost of $252$183 million, both of which are included in other assets. At
 
At September 30, 2018,2019, the Corporation also held equity securities at fair value of $1.5$1.4 billion included in time deposits placed and other short-term investments.
The following table presents the componentsSales of otherAFS debt securities carried at fair value where the changes in fair value are reported in other income. Induring the three andmonths ended September 30, 2019 were not significant. In the nine months ended September 30, 2018,2019, the Corporation recorded unrealized mark-to-market netgross realized gains on sales of AFS debt securities of $228 million and gross realized losses of $106$112 million, and $37resulting in net gains of $116 million, andwith $28 million of income taxes attributable to the realized net gains on sales of $114 million and $123 million, compared to unrealized mark-to-market net gains of $124 million and $323 million and realized net losses of $11 million and $129 million forthese AFS debt securities. For the same periods in 2017. These amounts exclude hedge results.2018, gross gains and losses were not significant.


7159Bank of America


  







    
Other Debt Securities Carried at Fair Value
  
(Dollars in millions)September 30
2018		 December 31
2017
Mortgage-backed securities$1,696
 $2,769
Non-U.S. securities (1)
10,888
 9,488
Other taxable securities, substantially all asset-backed securities3
 229
Total$12,587
 $12,486
(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 the three and nine months ended September 30, 2018 and 2017 are presented in the table below.
        
Gains and Losses on Sales of AFS Debt Securities
    
 Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions)2018 2017 2018 2017
Gross gains$83
 $130
 $86
 $286
Gross losses(10) (5) (10) (8)
Net gains on sales of AFS debt securities$73
 $125
 $76
 $278
Income tax expense attributable to realized net gains on sales of AFS debt securities$17
 $48
 $18
 $106

The table below presents the fair value and the associated gross unrealized losses on AFS debt securities and whether these securities have had gross unrealized losses for less than 12 months or for 12 months or longer at September 30, 20182019 and December 31, 2017.2018.
                      
Temporarily Impaired and Other-than-temporarily Impaired AFS Debt SecuritiesTemporarily Impaired and Other-than-temporarily Impaired AFS Debt Securities      Temporarily Impaired and Other-than-temporarily Impaired AFS Debt Securities      
  
Less than Twelve Months Twelve Months or Longer TotalLess than Twelve Months Twelve Months or Longer Total
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
(Dollars in millions)September 30, 2018September 30, 2019
Temporarily impaired AFS debt securities                      
Mortgage-backed securities:                      
Agency$45,433
 $(1,190) $87,214
 $(4,520) $132,647
 $(5,710)$7,409
 $(10) $28,226
 $(264) $35,635
 $(274)
Agency-collateralized mortgage obligations1,959
 (47) 3,344
 (162) 5,303
 (209)64
 —
 1,014
 (18) 1,078
 (18)
Commercial4,923
 (146) 7,962
 (484) 12,885
 (630)928
 (3) 114
 (1) 1,042
 (4)
Non-agency residential23
 (2) 51
 (4) 74
 (6)33
 (1) 1
 —
 34
 (1)
Total mortgage-backed securities52,338
 (1,385) 98,571
 (5,170) 150,909
 (6,555)8,434
 (14) 29,355
 (283) 37,789
 (297)
U.S. Treasury and agency securities10,651
 (409) 40,337
 (1,957) 50,988
 (2,366)4,193
 (18) 18,628
 (145) 22,821
 (163)
Non-U.S. securities706
 (1) 81
 (1) 787
 (2)1,234
 (2) 140
 —
 1,374
 (2)
Other taxable securities, substantially all asset-backed securities208
 (3) 150
 (4) 358
 (7)354
 —
 280
 —
 634
 —
Total taxable securities63,903
 (1,798) 139,139
 (7,132) 203,042
 (8,930)14,215
 (34) 48,403
 (428) 62,618
 (462)
Tax-exempt securities474
 (1) 4,324
 (86) 4,798
 (87)233
 —
 1,039
 (34) 1,272
 (34)
Total temporarily impaired AFS debt securities64,377
 (1,799) 143,463
 (7,218) 207,840
 (9,017)14,448
 (34) 49,442
 (462) 63,890
 (496)
Other-than-temporarily impaired AFS debt securities (1)
                      
Non-agency residential mortgage-backed securities93
 —
 —
 —
 93
 —
118
 (4) 28
 (4) 146
 (8)
Total temporarily impaired and other-than-temporarily impaired
AFS debt securities
$64,470
 $(1,799) $143,463
 $(7,218) $207,933
 $(9,017)$14,566
 $(38) $49,470
 $(466) $64,036
 $(504)
                      
December 31, 2017December 31, 2018
Temporarily impaired AFS debt securities                      
Mortgage-backed securities:                      
Agency$73,535
 $(352) $72,612
 $(1,344) $146,147
 $(1,696)$14,771
 $(49) $99,211
 $(3,379) $113,982
 $(3,428)
Agency-collateralized mortgage obligations2,743
 (29) 1,684
 (52) 4,427
 (81)3
 —
 4,452
 (110) 4,455
 (110)
Commercial5,575
 (50) 4,586
 (158) 10,161
 (208)1,344
 (8) 11,991
 (394) 13,335
 (402)
Non-agency residential335
 (7) —
 —
 335
 (7)106
 (8) 49
 (3) 155
 (11)
Total mortgage-backed securities82,188
 (438) 78,882
 (1,554) 161,070
 (1,992)16,224
 (65) 115,703
 (3,886) 131,927
 (3,951)
U.S. Treasury and agency securities27,537
 (251) 24,035
 (767) 51,572
 (1,018)288
 (1) 51,374
 (1,377) 51,662
 (1,378)
Non-U.S. securities772
 (1) —
 —
 772
 (1)773
 (5) 21
 (1) 794
 (6)
Other taxable securities, substantially all asset-backed securities—
 —
 92
 (2) 92
 (2)183
 (1) 185
 (5) 368
 (6)
Total taxable securities110,497
 (690) 103,009
 (2,323) 213,506
 (3,013)17,468
 (72) 167,283
 (5,269) 184,751
 (5,341)
Tax-exempt securities1,090
 (2) 7,100
 (102) 8,190
 (104)232
 (2) 2,148
 (70) 2,380
 (72)
Total temporarily impaired AFS debt securities111,587
 (692) 110,109
 (2,425) 221,696
 (3,117)17,700
 (74) 169,431
 (5,339) 187,131
 (5,413)
Other-than-temporarily impaired AFS debt securities (1)
                      
Non-agency residential mortgage-backed securities58
 (1) —
 —
 58
 (1)131
 —
 3
 —
 134
 —
Total temporarily impaired and other-than-temporarily impaired
AFS debt securities
$111,645
 $(693) $110,109
 $(2,425) $221,754
 $(3,118)$17,831
 $(74) $169,434
 $(5,339) $187,265
 $(5,413)
(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.

Bank of America72

The Corporation had $12 million and $23 millionof credit-related OTTIother-than-temporary impairment (OTTI) losses on AFS debt securities which were recognized in other income for the three and nine months ended September 30, 2018 compared to $02019 and $33 million for the same periods in 2017.2018. The amount of noncredit-related OTTI losses for these AFS debt securities, which is recognized in OCI, was not significant for allthe periods presented.
The cumulative OTTI credit losses that have been recognized in income on AFS debt securities that the Corporation does not
intend to sell were $135 million and $284 million at both September 30, 20182019 and 2017.2018.
For more information on OTTI losses and significant assumptions used for the Corporation’s underlying collateral, see Note 34 – Securities to the Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K. Significant assumptions used in estimating the expected cash flows for measuring credit losses on non-agency residential mortgage-backed securities (RMBS) were as follows at September 30, 2018.2019.


Bank of America 60

          
Significant Assumptions
      
  
Range (1)
  
Range (1)
Weighted
average		 
10th
Percentile (2)
 
90th
Percentile (2)
Weighted
average		 
10th
Percentile (2)
 
90th
Percentile (2)
Prepayment speed12.0% 3.1% 23.3%16.2% 4.9% 28.1%
Loss severity18.1
 8.4
 31.0
15.5
 8.0
 32.3
Life default rate20.1
 0.7
 73.5
12.6
 0.8
 41.1
(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 16.212.5 percent for prime, 16.411.5 percent for Alt-A and 22.220.2 percent for subprime at September 30, 2018.2019. Default rates are projected by considering collateral characteristics including, but not limited to, LTV, FICO and geographic concentration. Weighted-average life default rates
by collateral type were 16.18.8 percent for prime, 21.911.3 percent for Alt-A and 22.715.4 percent for subprime at September 30, 2018.2019.
The remaining contractual maturity distribution and yields of the Corporation’s debt securities carried at fair value and HTM debt securities at September 30, 20182019 are summarized in the table below. Actual duration and yields may differ as prepayments on the loans underlying the mortgages or other asset-backed securities (ABS) are passed through to the Corporation.





                                      
Maturities of Debt Securities Carried at Fair Value and Held-to-maturity Debt Securities
               ��                      
Due in One
Year or Less
 
Due after One Year
through Five Years
 
Due after Five Years
through Ten Years
 
Due after
Ten Years
 Total
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$—
 —% $24
 4.12% $463
 2.62% $141,234
 3.31% $141,721
 3.31%$—
 —% $120
 2.37% $1,715
 2.42% $132,139
 3.29% $133,974
 3.28%
Agency-collateralized mortgage obligations—
 —
 —
 —
 31
 2.48
 5,847
 3.17
 5,878
 3.17
—
 —
 —
 —
 27
 2.56
 4,850
 3.17
 4,877
 3.17
Commercial314
 1.74
 2,391
 2.36
 10,658
 2.50
 775
 2.97
 14,138
 2.49
—
 —
 3,326
 2.28
 10,100
 2.60
 888
 2.99
 14,314
 2.55
Non-agency residential—
 —
 —
 —
 19
 n/m
 3,439
 9.66
 3,458
 9.61
—
 —
 —
 —
 12
 —
 3,083
 10.49
 3,095
 10.46
Total mortgage-backed securities314
 1.74
 2,415
 2.38
 11,171
 2.50
 151,295
 3.45
 165,195
 3.36
—
 —
 3,446
 2.28
 11,854
 2.57
 140,960
 3.44
 156,260
 3.35
U.S. Treasury and agency securities643
 0.71
 33,567
 1.47
 20,418
 2.27
 36
 2.70
 54,664
 1.76
482
 0.33
 36,446
 1.65
 18,803
 2.50
 18
 2.54
 55,749
 1.92
Non-U.S. securities16,518
 0.77
 1,305
 1.08
 2
 3.56
 128
 6.15
 17,953
 0.83
18,097
 1.07
 762
 1.50
 11
 4.38
 101
 6.24
 18,971
 1.12
Other taxable securities, substantially all asset-backed securities685
 3.88
 2,236
 3.28
 789
 3.47
 96
 4.68
 3,806
 3.46
520
 3.36
 2,175
 3.20
 436
 3.29
 675
 3.61
 3,806
 3.31
Total taxable securities18,160
 0.90
 39,523
 1.61
 32,380
 2.38
 151,555
 3.45
 241,618
 2.82
19,099
 1.12
 42,829
 1.78
 31,104
 2.54
 141,754
 3.44
 234,786
 2.83
Tax-exempt securities1,737
 2.57
 7,234
 2.42
 6,929
 2.38
 2,501
 2.78
 18,401
 2.47
724
 1.98
 7,169
 2.22
 5,483
 2.20
 2,887
 2.33
 16,263
 2.23
Total amortized cost of debt securities carried at fair value$19,897
 1.05
 $46,757
 1.74
 $39,309
 2.38
 $154,056
 3.44
 $260,019
 2.79
$19,823
 1.16
 $49,998
 1.84
 $36,587
 2.49
 $144,641
 3.42
 $251,049
 2.79
Amortized cost of HTM debt securities (2)
$4
 3.36
 $55
 3.62
 $1,484
 2.76
 $192,929
 3.22
 $194,472
 3.22
$354
 3.96
 $50
 3.80
 $1,112
 2.53
 $188,736
 3.24
 $190,252
 3.24
                                      
Debt securities carried at fair value 
  
  
  
  
  
  
  
  
  
 
  
  
  
  
  
  
  
  
  
Mortgage-backed securities: 
  
  
  
  
  
  
  
  
  
 
  
  
  
  
  
  
  
  
  
Agency$—
  
 $25
  
 $452
  
 $135,635
  
 $136,112
  
$—
  
 $120
  
 $1,719
  
 $133,111
  
 $134,950
  
Agency-collateralized mortgage obligations—
  
 —
  
 29
  
 5,649
  
 5,678
  
—
  
 —
  
 28
  
 4,934
  
 4,962
  
Commercial312
  
 2,323
  
 10,138
  
 737
  
 13,510
  
—
  
 3,364
  
 10,395
  
 931
  
 14,690
  
Non-agency residential—
  
 —
  
 36
  
 3,797
  
 3,833
  
—
  
 —
  
 26
  
 3,459
  
 3,485
  
Total mortgage-backed securities312
   2,348
   10,655
   145,818
   159,133
  —
   3,484
   12,168
   142,435
   158,087
  
U.S. Treasury and agency securities642
   32,106
   19,523
   35
   52,306
  483
   36,629
   19,820
   18
   56,950
  
Non-U.S. securities16,519
  
 1,314
  
 2
  
 132
  
 17,967
  
18,099
  
 772
  
 12
  
 104
  
 18,987
  
Other taxable securities, substantially all asset-backed securities681
  
 2,255
  
 829
  
 114
  
 3,879
  
527
  
 2,214
  
 463
  
 682
  
 3,886
  
Total taxable securities18,154
  
 38,023
  
 31,009
  
 146,099
  
 233,285
  
19,109
  
 43,099
  
 32,463
  
 143,239
  
 237,910
  
Tax-exempt securities1,736
  
 7,235
  
 6,897
  
 2,482
  
 18,350
  
724
  
 7,186
  
 5,608
  
 2,914
  
 16,432
  
Total debt securities carried at fair value$19,890
  
 $45,258
  
 $37,906
  
 $148,581
  
 $251,635
  
$19,833
  
 $50,285
  
 $38,071
  
 $146,153
  
 $254,342
  
Fair value of HTM debt securities (2)
$4
   $55
   $1,415
   $186,514
   $187,988
  $354
   $50
   $1,139
   $192,731
   $194,274
  
(1) 
The averageweighted-average yield is computed based on a constant effective interest rate over the contractual life of each security. The average yield considers the contractual coupon and the amortization of premiums and accretion of discounts, excluding the effect of related hedging derivatives.
(2) 
Substantially all U.S. agency MBS.
n/m = not meaningful



7361Bank of America


  








NOTE 5Outstanding 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 September 30, 20182019 and December 31, 2017.2018.
                            
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)
 Loans Accounted for Under the Fair Value Option 
Total
Outstandings
(Dollars in millions)September 30, 2018September 30, 2019
Consumer real estate 
    
  
  
  
  
  
 
    
  
  
  
  
Core portfolio                            
Residential mortgage$1,248
 $253
 $814
 $2,315
 $186,975
     $189,290
$1,156
 $232
 $665
 $2,053
 $214,170
   $216,223
Home equity200
 89
 453
 742
 39,854
     40,596
145
 63
 202
 410
 35,706
   36,116
Non-core portfolio                            
Residential mortgage815
 351
 2,345
 3,511
 10,044
 $5,341
   18,896
491
 211
 1,390
 2,092
 9,157
   11,249
Home equity162
 78
 398
 638
 8,190
 1,811
   10,639
41
 19
 88
 148
 5,310
   5,458
Credit card and other consumer                            
U.S. credit card546
 387
 872
 1,805
 93,024
     94,829
564
 413
 960
 1,937
 93,009
   94,946
Direct/Indirect consumer (5)(4)
297
 84
 37
 418
 90,920
     91,338
271
 80
 31
 382
 90,454
   90,836
Other consumer (6)
—
 —
 —
 —
 203
     203
—
 —
 —
 —
 208
   208
Total consumer3,268
 1,242
 4,919
 9,429
 429,210
 7,152
   445,791
2,668
 1,018
 3,336
 7,022
 448,014
   455,036
Consumer loans accounted for under the fair value option (7)(5)
 
  
  
  
  
  
 $755
 755
 
  
  
  
  
 $640
 640
Total consumer loans and leases3,268
 1,242
 4,919
 9,429
 429,210
 7,152
 755
 446,546
2,668
 1,018
 3,336
 7,022
 448,014
 640
 455,676
Commercial                            
U.S. commercial433
 127
 469
 1,029
 284,633
     285,662
589
 222
 624
 1,435
 309,547
   310,982
Non-U.S. commercial29
 —
 —
 29
 95,973
     96,002
60
 9
 10
 79
 101,005
   101,084
Commercial real estate (8)(6)
20
 33
 10
 63
 60,772
     60,835
135
 12
 23
 170
 62,628
   62,798
Commercial lease financing48
 94
 41
 183
 21,363
     21,546
31
 14
 47
 92
 20,015
   20,107
U.S. small business commercial68
 48
 89
 205
 14,029
     14,234
84
 52
 102
 238
 14,991
   15,229
Total commercial598
 302
 609
 1,509
 476,770
     478,279
899
 309
 806
 2,014
 508,186
   510,200
Commercial loans accounted for under the fair value option (7)(5)
 
  
  
  
  
  
 4,976
 4,976
 
  
  
  
  
 7,034
 7,034
Total commercial loans and leases598
 302
 609
 1,509
 476,770
   4,976
 483,255
899
 309
 806
 2,014
 508,186
 7,034
 517,234
Total loans and leases (9)(7)
$3,866
 $1,544
 $5,528
 $10,938
 $905,980
 $7,152
 $5,731
 $929,801
$3,567
 $1,327
 $4,142
 $9,036
 $956,200
 $7,674
 $972,910
Percentage of outstandings0.42% 0.17% 0.59% 1.18% 97.44% 0.77% 0.61% 100.00%0.37% 0.14% 0.42% 0.93% 98.28% 0.79% 100.00%
(1) 
Consumer real estate loans 30-59 days past due includes fully-insured loans of $714510 million and nonperforming loans of $233149 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $309206 million and nonperforming loans of $175116 million.
(2) 
Consumer real estate includes fully-insured loans of $2.21.2 billion.
(3) 
Consumer real estate includes $2.0 billion852 million and direct/indirect consumer includes $4451 million of nonperforming loans.
(4) 
Purchased credit-impaired (PCI) loan amounts are shown gross of the valuation allowance.
(5)
Total outstandings includes auto and specialty lending loans and leases of $50.150.3 billion, unsecured consumer lending loans of $392328 million, U.S. securities-based lending loans of $37.436.5 billion, non-U.S. consumer loans of $2.73.0 billion and other consumer loans of $756694 million.
(6)(5) 
Substantially all of other consumer is consumer overdrafts.
(7)
Consumer loans accounted for under the fair value option includes residential mortgage loans of $407275 million and home equity loans of $348365 million. Commercial loans accounted for under the fair value option includes U.S. commercial loans of $3.64.7 billion and non-U.S. commercial loans of $1.42.4 billion. For moreadditional information, see Note 14 – Fair Value Measurements and Note 15 – Fair Value Measurements and Note 16 – Fair Value Option.
(8)(6) 
Total outstandings includes U.S. commercial real estate loans of $56.958.1 billion and non-U.S. commercial real estate loans of $3.94.7 billion.
(9)(7) 
Total outstandings includes loans and leases pledged as collateral of $45.629.6 billion. The Corporation also pledged $158.5165.1 billion of loans with no related outstanding borrowings to secure potential borrowing capacity with the Federal Reserve Bank and Federal Home Loan Bank (FHLB).


  
Bank of America7462


              
 
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)
 
Loans
Accounted
for Under
the Fair
Value Option
 Total Outstandings
(Dollars in millions)December 31, 2018
Consumer real estate 
    
  
  
  
  
Core portfolio             
Residential mortgage$1,188
 $249
 $793
 $2,230
 $191,465
  
 $193,695
Home equity200
 85
 387
 672
 39,338
  
 40,010
Non-core portfolio   
  
  
  
  
  
Residential mortgage757
 309
 2,201
 3,267
 11,595
  
 14,862
Home equity139
 69
 339
 547
 7,729
  
 8,276
Credit card and other consumer   
  
  
  
  
  
U.S. credit card577
 418
 994
 1,989
 96,349
  
 98,338
Direct/Indirect consumer (4)
317
 90
 40
 447
 90,719
  
 91,166
Other consumer (5)
—
 —
 —
 —
 202
  
 202
Total consumer3,178
 1,220
 4,754
 9,152
 437,397
  
446,549
Consumer loans accounted for under the fair value option (6)
          $682

682
Total consumer loans and leases3,178
 1,220
 4,754
 9,152
 437,397
 682
 447,231
Commercial   
  
  
  
  
  
U.S. commercial594
 232
 573
 1,399
 297,878
  
 299,277
Non-U.S. commercial1
 49
 —
 50
 98,726
  
 98,776
Commercial real estate (7)
29
 16
 14
 59
 60,786
  
 60,845
Commercial lease financing124
 114
 37
 275
 22,259
  
 22,534
U.S. small business commercial83
 54
 96
 233
 14,332
  
 14,565
Total commercial831
 465
 720
 2,016
 493,981
  
 495,997
Commercial loans accounted for under the fair value option (6)
          3,667
 3,667
Total commercial loans and leases831
 465
 720
 2,016
 493,981
 3,667
 499,664
Total loans and leases (8)
$4,009
 $1,685
 $5,474
 $11,168
 $931,378
 $4,349
 $946,895
Percentage of outstandings0.42% 0.18% 0.58% 1.18% 98.36% 0.46% 100.00%
                
 
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
(Dollars in millions)December 31, 2017
Consumer real estate 
    
  
  
  
  
  
Core portfolio               
Residential mortgage$1,242
 $321
 $1,040
 $2,603
 $174,015
    
 $176,618
Home equity215
 108
 473
 796
 43,449
    
 44,245
Non-core portfolio   
  
  
  
  
  
  
Residential mortgage1,028
 468
 3,535
 5,031
 14,161
 $8,001
  
 27,193
Home equity224
 121
 572
 917
 9,866
 2,716
  
 13,499
Credit card and other consumer   
  
  
  
  
  
  
U.S. credit card542
 405
 900
 1,847
 94,438
    
 96,285
Direct/Indirect consumer (5)
330
 104
 44
 478
 95,864
    
 96,342
Other consumer (6)
—
 —
 —
 —
 166
    
 166
Total consumer3,581
 1,527
 6,564
 11,672
 431,959
 10,717
  
454,348
Consumer loans accounted for under the fair value option (7)
            $928

928
Total consumer loans and leases3,581
 1,527
 6,564
 11,672
 431,959
 10,717
 928
 455,276
Commercial   
  
  
  
  
  
  
U.S. commercial547
 244
 425
 1,216
 283,620
    
 284,836
Non-U.S. commercial52
 1
 3
 56
 97,736
    
 97,792
Commercial real estate (8)
48
 10
 29
 87
 58,211
    
 58,298
Commercial lease financing110
 68
 26
 204
 21,912
    
 22,116
U.S. small business commercial95
 45
 88
 228
 13,421
    
 13,649
Total commercial852
 368
 571
 1,791
 474,900
    
 476,691
Commercial loans accounted for under the fair value option (7)
            4,782
 4,782
Total commercial loans and leases852
 368
 571
 1,791
 474,900
   4,782
 481,473
Total loans and leases (9)
$4,433
 $1,895
 $7,135
 $13,463
 $906,859
 $10,717
 $5,710
 $936,749
Percentage of outstandings0.48% 0.20% 0.76% 1.44% 96.81% 1.14% 0.61% 100.00%

(1) 
Consumer real estate loans 30-59 days past due includes fully-insured loans of $850637 million and nonperforming loans of $253217 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $386269 million and nonperforming loans of $195146 million.
(2) 
Consumer real estate includes fully-insured loans of $3.21.9 billion.
(3) 
Consumer real estate includes $2.31.8 billion and direct/indirect consumer includes $4353 million of nonperforming loans.
(4) 
PCI loan amounts are shown gross of the valuation allowance.
(5)
Total outstandings includes auto and specialty lending loans and leases of $52.450.1 billion, unsecured consumer lending loans of $469383 million, U.S. securities-based lending loans of $39.837.0 billion, non-U.S. consumer loans of $3.02.9 billion and other consumer loans of $684746 million.
(6)(5) 
Substantially all of other consumer is consumer overdrafts.
(7)(6) 
Consumer loans accounted for under the fair value option includes residential mortgage loans of $567336 million and home equity loans of $361346 million. Commercial loans accounted for under the fair value option includes U.S. commercial loans of $2.62.5 billion and non-U.S. commercial loans of $2.21.1 billion. For moreadditional information, see Note 14 – Fair Value Measurements and Note 15 – Fair Value Measurements and Note 16 – Fair Value Option.
(8)(7) 
Total outstandings includes U.S. commercial real estate loans of $54.856.6 billion and non-U.S. commercial real estate loans of $3.54.2 billion.
(9)(8) 
Total outstandings includes loans and leases pledged as collateral of $40.136.7 billion. The Corporation also pledged $160.3166.1 billion of loans with no related outstanding borrowings to secure potential borrowing capacity with the Federal Reserve Bank and FHLB.
The Corporation categorizes consumer real estate loans ascore 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 (GSE) underwriting guidelines, or otherwise met the Corporation’s underwriting guidelines in place in 2015 are characterized as core loans. All other loans are generally characterized as non-core loans and represent run-offrunoff portfolios.
The Corporation has entered into long-term credit protection agreements with FNMA and FHLMC on loans totaling $6.1$7.0 billion and $6.3$6.1 billion at September 30, 20182019 and December 31, 2017,2018, 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.
During the three and nine months ended September 30, 2018, certain2019, the Corporation sold $2.3 billion and $4.2 billion of consumer real estate loans, primarily non-core, with carrying values of $3.7 billion and $4.9 billion were sold, resulting in gains of $84 million and $656 million recorded in other income in the Consolidated Statement of Income.
 
estate compared to $3.9 billion and $6.5 billion for the same periods in 2018.
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 September 30, 2018 and December 31, 2017, $225 million and $330 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 troubled debt restructurings (TDRs), irrespective of payment history or delinquency status, even if the repayment terms for the loanloans have not been otherwise modified. The Corporation continues to have a lien on the underlying collateral. At September 30, 2018,2019, nonperforming loans discharged in Chapter 7 bankruptcy with no change in repayment terms were $220$112 million of which $113$56 million were current on their contractual payments, while $90$46 million were 90 days or more past due. Of the contractually current nonperforming loans, 6661 percent were discharged in Chapter 7 bankruptcy over 12 months ago, and 5850 percent were discharged 24 months or more ago.


7563Bank of America


  








During the three and nine months ended September 30, 2018, the Corporation sold nonperforming and PCI consumer real estate loans with a carrying value of $2.1 billion and $2.7 billion, including $2.0 billion and $2.1 billion of PCI loans, compared to $700 million and $1.2 billion, including $538 million and $742 million of PCI loans, for the same periods in 2017. During the nine months ended September 30, 2018 and 2017, the Corporation transferred consumer nonperforming loans with a net carrying value of $2 million and $198 million to held for sale.
The table below presents the Corporation’s nonperforming loans and leases including nonperforming TDRs, and loans accruing past due 90 days or more at September 30, 20182019 and December 31, 2017.2018. Nonperforming loans held-for-sale (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 to the Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K.
              
Credit QualityCredit Quality  Credit Quality  
              
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)September 30
2018		 December 31
2017		 September 30
2018		 December 31
2017		September 30
2019		 December 31
2018		 September 30
2019		 December 31
2018
Consumer real estate 
  
  
  
 
  
  
  
Core portfolio              
Residential mortgage (1)
$1,011
 $1,087
 $308
 $417
$930
 $1,010
 $186
 $274
Home equity1,056
 1,079
 —
 —
380
 955
 —
 —
Non-core portfolio 
  
  
   
  
  
  
Residential mortgage (1)
1,023
 1,389
 1,853
 2,813
621
 883
 1,017
 1,610
Home equity1,170
 1,565
 —
 —
205
 938
 —
 —
Credit card and other consumer 
  
     
  
    
U.S. credit cardn/a
 n/a
 872
 900
n/a
 n/a
 960
 994
Direct/Indirect consumer46
 46
 35
 40
53
 56
 29
 38
Other consumer—
 —
 —
 —
Total consumer4,306
 5,166
 3,068
 4,170
2,189
 3,842
 2,192
 2,916
Commercial 
  
  
  
 
  
  
  
U.S. commercial699
 814
 114
 144
966
 794
 338
 197
Non-U.S. commercial31
 299
 —
 3
51
 80
 10
 —
Commercial real estate46
 112
 1
 4
185
 156
 3
 4
Commercial lease financing14
 24
 33
 19
35
 18
 22
 29
U.S. small business commercial58
 55
 73
 75
50
 54
 94
 84
Total commercial848
 1,304
 221
 245
1,287
 1,102
 467
 314
Total loans and leases$5,154
 $6,470
 $3,289
 $4,415
$3,476
 $4,944
 $2,659
 $3,230
(1) 
Residential mortgage loans in the core and non-core portfolios accruing past due 90 days or more are fully-insured loans. At September 30, 20182019 and December 31, 20172018, residential mortgage includes $1.6 billion858 million and $2.21.4 billion of loans on which interest has been curtailed by the Federal Housing Administration (FHA), and therefore are no longer accruing interest, although principal is still insured, and $579345 million and $1.0 billion498 million 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 and their related credit quality indicators, see Significant Accounting Principles – Loans and Leases in Note 1 – Summary of Significant Accounting Principles and Credit Quality Indicators in Note 45 – Outstanding Loans and Leases to the
Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K.

Bank of America76

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 September 30, 20182019 and December 31, 2017.2018.
                          
Consumer Real Estate – Credit Quality Indicators (1)
Consumer Real Estate – Credit Quality Indicators (1)
Consumer Real Estate – Credit Quality Indicators (1)
                          
Core Residential
Mortgage (2)
 
Non-core Residential
Mortgage (2)
 
Residential Mortgage
PCI
 
Core Home Equity (2)
 
Non-core Home
Equity (2)
 
Home
Equity PCI
Core Residential Mortgage Non-core Residential Mortgage 
Core
Home Equity
 Non-core Home Equity Core Residential Mortgage Non-core Residential Mortgage 
Core
Home Equity
 Non-core Home Equity
(Dollars in millions)September 30, 2018September 30, 2019 December 31, 2018
Refreshed LTV (3)
 
  
  
  
     
  
  
    
  
  
  
Less than or equal to 90 percent$168,949
 $8,594
 $4,720
 $39,719
 $6,862
 $1,277
$195,967
 $7,952
 $35,548
 $4,415
 $173,911
 $10,272
 $39,246
 $6,478
Greater than 90 percent but less than or equal to 100 percent2,483
 503
 310
 409
 757
 248
3,142
 346
 267
 413
 2,349
 533
 354
 715
Greater than 100 percent923
 544
 311
 468
 1,209
 286
1,041
 333
 301
 630
 817
 545
 410
 1,083
Fully-insured loans (4)
16,935
 3,914
 

 

 

 

Fully-insured loans (2)
16,073
 2,618
     16,618
 3,512
    
Total consumer real estate$189,290
 $13,555
 $5,341
 $40,596
 $8,828
 $1,811
$216,223
 $11,249
 $36,116
 $5,458
 $193,695
 $14,862
 $40,010
 $8,276
Refreshed FICO score                    
  
  
  
Less than 620$2,115
 $1,673
 $1,185
 $1,118
 $1,650
 $290
$2,040
 $1,306
 $782
 $627
 $2,125
 $1,974
 $1,064
 $1,503
Greater than or equal to 620 and less than 6804,379
 1,387
 1,010
 2,096
 1,883
 288
4,716
 1,160
 1,581
 885
 4,538
��1,719
 2,008
 1,720
Greater than or equal to 680 and less than 74022,973
 2,327
 1,574
 7,113
 2,288
 511
25,555
 2,198
 6,157
 1,550
 23,841
 3,042
 7,008
 2,188
Greater than or equal to 740142,888
 4,254
 1,572
 30,269
 3,007
 722
167,839
 3,967
 27,596
 2,396
 146,573
 4,615
 29,930
 2,865
Fully-insured loans (4)
16,935
 3,914
 

 

 

 

Fully-insured loans (2)
16,073
 2,618
     16,618
 3,512
    
Total consumer real estate$189,290
 $13,555
 $5,341
 $40,596
 $8,828
 $1,811
$216,223
 $11,249
 $36,116
 $5,458
 $193,695
 $14,862
 $40,010
 $8,276
(1) 
Excludes $755640 million and $682 million of loans accounted for under the fair value option.option at September 30, 2019 and December 31, 2018.
(2) 
Excludes PCI loans.
(3)
Refreshed LTV percentages for PCI loans are calculated using the carrying value net of the related valuation allowance.
(4)
Credit quality indicators are not reported for fully-insured loans as principal repayment is insured.

Bank of America 64

                
Credit Card and Other Consumer – Credit Quality IndicatorsCredit Card and Other Consumer – Credit Quality Indicators  Credit Card and Other Consumer – Credit Quality Indicators        
                
U.S. Credit
Card
 
Direct/Indirect
Consumer
 Other Consumer
U.S. Credit
Card
 
Direct/Indirect
Consumer
 Other Consumer U.S. Credit
Card		 Direct/Indirect
Consumer		 Other Consumer
(Dollars in millions)September 30, 2018September 30, 2019 December 31, 2018
Refreshed FICO score 
  
   
  
        
Less than 620$4,683
 $1,752
 

$4,970
 $1,470
   $5,016
 $1,719
  
Greater than or equal to 620 and less than 68011,974
 3,260
 

11,908
 2,757
   12,415
 3,124
  
Greater than or equal to 680 and less than 74034,896
 9,090
 

34,652
 8,490
   35,781
 8,921
  
Greater than or equal to 74043,276
 36,351
 

43,416
 37,953
   45,126
 36,709
  
Other internal credit metrics (1, 2)


 40,885
 $203
  40,166
 $208
   40,693
 $202
Total credit card and other consumer$94,829
 $91,338
 $203
$94,946
 $90,836
 $208
 $98,338
 $91,166
 $202
(1) 
Other internal credit metrics may include delinquency status, geography or other factors.
(2) 
Direct/indirect consumer includes $40.139.5 billion and $39.9 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk.risk at September 30, 2019 and December 31, 2018.
          
Commercial – Credit Quality Indicators (1)
    
          
 
U.S.
Commercial
 
Non-U.S.
Commercial
 
Commercial
Real Estate
 
Commercial
Lease
Financing
 
U.S. Small
Business
Commercial (2)
(Dollars in millions)September 30, 2019
Risk ratings 
  
  
  
  
Pass rated$302,826
 $100,152
 $61,901
 $19,757
 $235
Reservable criticized8,156
 932
 897
 350
 21
Refreshed FICO score         
Less than 620 
       293
Greater than or equal to 620 and less than 680        738
Greater than or equal to 680 and less than 740        2,229
Greater than or equal to 740        4,767
Other internal credit metrics (3)
        6,946
Total commercial$310,982
 $101,084
 $62,798
 $20,107
 $15,229
          
 December 31, 2018
Risk ratings         
Pass rated$291,918
 $97,916
 $59,910
 $22,168
 $389
Reservable criticized7,359
 860
 935
 366
 29
Refreshed FICO score         
Less than 620        264
Greater than or equal to 620 and less than 680        684
Greater than or equal to 680 and less than 740        2,072
Greater than or equal to 740        4,254
Other internal credit metrics (3)
        6,873
Total commercial$299,277
 $98,776
 $60,845
 $22,534
 $14,565
          
Commercial – Credit Quality Indicators (1)
    
          
 
U.S.
Commercial
 
Non-U.S.
Commercial
 
Commercial
Real Estate
 
Commercial
Lease
Financing
 
U.S. Small
Business
Commercial (2)
(Dollars in millions)September 30, 2018
Risk ratings 
  
  
  
  
Pass rated$277,732
 $94,868
 $60,271
 $21,173
 $275
Reservable criticized7,930
 1,134
 564
 373
 31
Refreshed FICO score (3)
         
Less than 620 
       242
Greater than or equal to 620 and less than 680        650
Greater than or equal to 680 and less than 740        1,993
Greater than or equal to 740        4,181
Other internal credit metrics (3, 4)
        6,862
Total commercial$285,662
 $96,002
 $60,835
 $21,546
 $14,234

(1) 
Excludes $5.07.0 billion and $3.7 billion of loans accounted for under the fair value option.option at September 30, 2019 and December 31, 2018.
(2) 
At September 30, 2019 and December 31, 2018, U.S. small business commercial includes $699716 million and $731 million of criticized business card and small business loans which are evaluated using refreshed FICO scores or internal credit metrics, including delinquency status, rather than risk ratings. At September 30, 2018, 99 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)(3) 
Other internal credit metrics may include delinquency status, application scores, geography or other factors.

77Bank of America





            
Consumer Real Estate – Credit Quality Indicators (1)
            
 
Core Residential
Mortgage (2)
 
Non-core Residential
Mortgage (2)
 
Residential Mortgage
PCI
 
Core Home Equity (2)
 
Non-core Home
Equity (2)
 
Home
Equity PCI
(Dollars in millions)December 31, 2017
Refreshed LTV (3)
 
  
  
  
    
Less than or equal to 90 percent$153,669
 $12,135
 $6,872
 $43,048
 $7,944
 $1,781
Greater than 90 percent but less than or equal to 100 percent3,082
 850
 559
 549
 1,053
 412
Greater than 100 percent1,322
 1,011
 570
 648
 1,786
 523
Fully-insured loans (4)
18,545
 5,196
 

 

 

 

Total consumer real estate$176,618
 $19,192
 $8,001
 $44,245
 $10,783
 $2,716
Refreshed FICO score 
  
  
  
  
  
Less than 620$2,234
 $2,390
 $1,941
 $1,169
 $2,098
 $452
Greater than or equal to 620 and less than 6804,531
 2,086
 1,657
 2,371
 2,393
 466
Greater than or equal to 680 and less than 74022,934
 3,519
 2,396
 8,115
 2,723
 786
Greater than or equal to 740128,374
 6,001
 2,007
 32,590
 3,569
 1,012
Fully-insured loans (4)
18,545
 5,196
 

 

 

 

Total consumer real estate$176,618
 $19,192
 $8,001
 $44,245
 $10,783
 $2,716
(1)
Excludes $928 million of loans accounted for under the fair value option.
(2)
Excludes PCI loans.
(3)
Refreshed LTV percentages for PCI loans are calculated using the carrying value net of the related valuation allowance.
(4)
Credit quality indicators are not reported for fully-insured loans as principal repayment is insured.
      
Credit Card and Other Consumer – Credit Quality Indicators  
      
 
U.S. Credit
Card
 
Direct/Indirect
Consumer
 Other Consumer
(Dollars in millions)December 31, 2017
Refreshed FICO score 
  
  
Less than 620$4,730
 $2,005
 

Greater than or equal to 620 and less than 68012,422
 4,064
 

Greater than or equal to 680 and less than 74035,656
 10,371
 

Greater than or equal to 74043,477
 36,445
 

Other internal credit metrics (1, 2)


 43,457
 $166
Total credit card and other consumer$96,285
 $96,342
 $166
(1)
Other internal credit metrics may include delinquency status, geography or other factors.
(2)
Direct/indirect consumer includes $42.8 billion of securities-based lending which is overcollateralized At both September 30, 2019 and therefore has minimal credit risk.
          
Commercial – Credit Quality Indicators (1)
    
          
 
U.S.
Commercial
 
Non-U.S.
Commercial
 
Commercial
Real Estate
 
Commercial
Lease
Financing
 
U.S. Small
Business
Commercial (2)
(Dollars in millions)December 31, 2017
Risk ratings 
  
  
  
  
Pass rated$275,904
 $96,199
 $57,732
 $21,535
 $322
Reservable criticized8,932
 1,593
 566
 581
 50
Refreshed FICO score (3)
         
Less than 620        223
Greater than or equal to 620 and less than 680        625
Greater than or equal to 680 and less than 740        1,875
Greater than or equal to 740        3,713
Other internal credit metrics (3, 4)
        6,841
Total commercial$284,836
 $97,792
 $58,298
 $22,116
 $13,649
(1)
Excludes $4.8 billion of loans accounted for under the fair value option.
(2)
U.S. small business commercial includes $709 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, 20172018, 9899 percent of the balances where internal credit metrics are used waswere 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 America78

Impaired Loans and Troubled Debt Restructurings
A loan is considered impaired when, based on current information, it is probable that the Corporation will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. For additional information, on impaired loans, see Note 1 – Summary of Significant Accounting Principles and Note 45 – Outstanding Loans and Leases to the Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K.
Consumer Real Estate
Impaired consumer real estate loans within the Consumer Real Estate portfolio segment consist entirely of TDRs. Excluding PCI loans, mostMost modifications of consumer real estate loans meet the definition of TDRs when a binding offer is extended to a borrower. For more information on impaired consumer real estate loans, see Note 45 – Outstanding Loans and Leases to the Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K.
Consumer real estate loans of $671 million that have been discharged in Chapter 7 bankruptcy with no change in repayment terms and not reaffirmed by the borrower of $951 million were included in TDRs at September 30, 2018,2019, of which $220$112 million were classified as nonperforming and $362$290 million were loans fully-insuredfully insured by the FHA. For more information on loans discharged in Chapter 7 bankruptcy, see Nonperforming Loans and Leases in this Note.
At September 30, 20182019 and December 31, 2017,2018, remaining commitments to lend additional funds to debtors whose terms have been modified in a consumer real estate TDR were not significant. Consumer real estate foreclosed properties totaled $265$188 million and $236$244 million at September 30, 20182019 and December 31, 2017.2018. The carrying value of consumer real estate loans, including fully-insured and PCI loans, for which formal foreclosure proceedings were in process at September 30, 20182019 was $2.7$1.7 billion. During the three and nine months ended September 30, 2018,2019, the Corporation reclassified $186$128 million and $505$427 million of consumer real estate loans to foreclosed properties or, for properties acquired upon foreclosure of certain government-guaranteedgovernment-

65Bank of America





guaranteed loans (principally FHA-insured loans), to other assets. This compared to reclassifications of $198 million and $624 million for the same periods in 2017. The reclassifications represent non-cash investing activities and, accordingly, are not reflected in the Consolidated Statement of Cash Flows.
The following table below provides the unpaid principal balance, carrying value and related allowance at September 30, 20182019 and December 31, 2017,2018 and the average carrying value and interest
income recognized for the three and nine months ended September 30, 20182019 and 20172018 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 EstateImpaired Loans – Consumer Real Estate  Impaired Loans – Consumer Real Estate  
                              
    
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
(Dollars in millions)    September 30, 2018 December 31, 2017    September 30, 2019 December 31, 2018
With no recorded allowance     
  
  
  
  
       
  
  
  
  
  
Residential mortgage    $6,016
 $4,783
 $—
 $8,856
 $6,870
 $—
    $4,436
 $3,534
 $—
 $5,396
 $4,268
 $—
Home equity    3,345
 1,828
 —
 3,622
 1,956
 —
    1,262
 756
 —
 2,948
 1,599
 —
With an allowance recorded         
               
      
Residential mortgage    $2,271
 $2,215
 $134
 $2,908
 $2,828
 $174
    $1,516
 $1,488
 $74
 $1,977
 $1,929
 $114
Home equity    910
 849
 165
 972
 900
 174
    560
 539
 71
 812
 760
 144
Total (1)
     
  
  
      
Total     
  
  
      
Residential mortgage    $8,287
 $6,998
 $134
 $11,764
 $9,698
 $174
    $5,952
 $5,022
 $74
 $7,373
 $6,197
 $114
Home equity    4,255
 2,677
 165
 4,594
 2,856
 174
    1,822
 1,295
 71
 3,760
 2,359
 144
                              
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 (1)
 Average
Carrying
Value		 
Interest
Income
Recognized (1)
 Average
Carrying
Value		 
Interest
Income
Recognized (1)
 Average
Carrying
Value		 
Interest
Income
Recognized (1)
Three Months Ended September 30 Nine Months Ended September 30Three Months Ended September 30 Nine Months Ended September 30
2018 2017 2018 20172019 2018 2019 2018
With no recorded allowance                              
Residential mortgage$5,056
 $52
 $7,498
 $77
 $5,685
 $167
 $7,964
 $237
$3,746
 $37
 $5,056
 $52
 $3,955
 $122
 $5,685
 $167
Home equity1,908
 27
 2,000
 27
 1,937
 79
 2,001
 82
1,041
 16
 1,908
 27
 1,368
 64
 1,937
 79
With an allowance recorded                              
Residential mortgage$2,330
 $22
 $3,254
 $29
 $2,508
 $71
 $3,565
 $97
$1,551
 $13
 $2,330
 $22
 $1,696
 $47
 $2,508
 $71
Home equity864
 7
 873
 6
 879
 19
 850
 18
591
 5
 864
 7
 670
 17
 879
 19
Total (1)
               
Total               
Residential mortgage$7,386
 $74
 $10,752
 $106
 $8,193
 $238
 $11,529
 $334
$5,297
 $50
 $7,386
 $74
 $5,651
 $169
 $8,193
 $238
Home equity2,772
 34
 2,873
 33
 2,816
 98
 2,851
 100
1,632
 21
 2,772
 34
 2,038
 81
 2,816
 98
(1) 
During the nine months ended September 30, 2018, previously impaired consumer real estate loans with a carrying value of $1.6 billion were sold.
(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.

79Bank of America





The table below presents the September 30, 20182019 and 20172018 unpaid principal balance, carrying value, and average pre- and post-modification interest rates onof consumer real estate loans that were modified in TDRs during the three and nine months ended September 30, 20182019 and 2017.2018. 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 the Three and Nine Months Ended September 30, 2018 and 2017
Consumer Real Estate – TDRs Entered into During the Three and Nine Months Ended September 30, 2019 and 2018Consumer Real Estate – TDRs Entered into During the Three and Nine Months Ended September 30, 2019 and 2018
  
Unpaid Principal Balance 
Carrying
Value
 Pre-Modification Interest Rate 
Post-Modification Interest Rate (1)
 Unpaid Principal Balance Carrying
Value		 Pre-Modification Interest Rate 
Post-Modification Interest Rate (1)
Unpaid Principal Balance 
Carrying
Value
 Pre-Modification Interest Rate 
Post-Modification Interest Rate (1)
 Unpaid Principal Balance Carrying
Value		 Pre-Modification Interest Rate 
Post-Modification Interest Rate (1)
(Dollars in millions)Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
Residential mortgage$226
 $195
 4.27% 4.12% $747
 $635
 4.22% 4.03%$148
 $125
 4.29% 4.25% $368
 $301
 4.24% 4.22%
Home equity120
 90
 4.67
 4.60
 482
 356
 4.42
 3.78
34
 27
 5.28
 5.27
 129
 94
 5.19
 4.60
Total (2)
$346
 $285
 4.41
 4.29
 $1,229
 $991
 4.30
 3.94
$182
 $152
 4.48
 4.44
 $497
 $395
 4.49
 4.32
                              
Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
Residential mortgage$294
 $263
 4.42% 4.33% $738
 $657
 4.49% 4.25%$226
 $195
 4.27% 4.12% $747
 $635
 4.22% 4.03%
Home equity212
 172
 4.01
 3.96
 630
 491
 4.16
 3.52
120
 90
 4.67
 4.60
 482
 356
 4.42
 3.78
Total (2)
$506
 $435
 4.25
 4.17
 $1,368
 $1,148
 4.33
 3.90
$346
 $285
 4.41
 4.29
 $1,229
 $991
 4.30
 3.94
(1) 
The post-modification interest rate reflects the interest rate applicable only to permanently completed modifications, which exclude loans that are in a trial modification period.
(2)
Net charge-offs, which include amounts recorded on loans modified during the period that are no longer held by the Corporation at September 30, 2018 and 2017 due to sales and other dispositions, were $9 million and $33 million for the three and nine months ended September 30, 2018 compared to $17 million and $37 million for the same periods in 2017.
The table below presents the September 30, 20182019 and 20172018 carrying value for consumer real estate loans that were modified in a TDR during the three and nine months ended September 30, 20182019 and 2017,2018, by type of modification.

Bank of America 66

        
Consumer Real Estate – Modification Programs      
        
 TDRs Entered into During the
 Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions)2018 2017 2018 2017
Modifications under government programs       
Contractual interest rate reduction$5
 $10
 $19
 $56
Principal and/or interest forbearance—
 1
 —
 4
Other modifications (1)
7
 7
 29
 22
Total modifications under government programs12
 18
 48
 82
Modifications under proprietary programs       
Contractual interest rate reduction7
 15
 159
 178
Capitalization of past due amounts10
 12
 67
 47
Principal and/or interest forbearance2
 2
 25
 28
Other modifications (1)
14
 1
 195
 45
Total modifications under proprietary programs33
 30
 446
 298
Trial modifications201
 329
 376
 605
Loans discharged in Chapter 7 bankruptcy (2)
39
 58
 121
 163
Total modifications$285
 $435
 $991
 $1,148
        
Consumer Real Estate – Modification Programs      
        
 TDRs Entered into During the
 Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions)2019 2018 2019 2018
Modifications under government programs (1)
$8
 $12
 $32
 $48
Modifications under proprietary programs (1)
18
 33
 125
 446
Loans discharged in Chapter 7 bankruptcy (2)
16
 39
 54
 121
Trial modifications110
 201
 184
 376
Total modifications$152
 $285
 $395
 $991
(1) 
Includes other modifications such as term or payment extensions and repayment plans. During the nine months ended September 30, 2018, this included $197 million of modifications that met the definition of a TDR related to the 2017 hurricanes. These modifications had been written down to their net realizable value less costs to sell or were fully insured as of September 30, 2018.2018.
(2) 
Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.
The table below presents the carrying value of consumer real estate loans that entered into payment default during the three and nine months ended September 30, 20182019 and 20172018 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 three3 monthly payments (not necessarily consecutively) since modification.
              
Consumer Real Estate – TDRs Entering Payment Default that were Modified During the Preceding 12 Months
              
Three Months Ended September 30 Nine Months Ended September 30Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions)2018 2017 2018 20172019 2018 2019 2018
Modifications under government programs$8
 $16
 $32
 $62
$7
 $8
 $20
 $32
Modifications under proprietary programs43
 32
 130
 99
19
 43
 68
 130
Loans discharged in Chapter 7 bankruptcy (1)
12
 16
 51
 93
8
 12
 26
 51
Trial modifications (2)
18
 54
 85
 312
13
 18
 40
 85
Total modifications$81
 $118
 $298
 $566
$47
 $81
 $154
 $298
(1) 
Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.
(2) 
Includes trial modification offers to which the customer did not respond.



Bank of America80

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 internationallocal laws and guidelines. Credit card and other consumer loan modifications generally involve reducing the interest rate on the account, placing the customer on a fixed payment plan not exceeding 60 months and canceling the customer’s available line of credit, all of which are considered TDRs. The Corporation makes loan modifications directly with borrowers for debt held only by the Corporation (internal programs).
Additionally, the Corporation makes loan modifications for borrowers working with third-party renegotiation agencies that
provide solutions to customers’ entire unsecured debt structures (external programs). The Corporation classifies other secured consumer loans that have been discharged in Chapter 7 bankruptcy as TDRs which are written down to collateral value and placed on nonaccrual status no later than the time of discharge. For more information on the regulatory guidance on loans discharged in Chapter 7 bankruptcy, see Nonperforming Loans and Leases in this Note.
The following table below provides the unpaid principal balance, carrying value and related allowance at September 30, 20182019 and December 31, 2017,2018 and the average carrying value and interest income recognized for the three and nine months ended September 30, 2019 and 2018 and 2017 onfor TDRs within the Credit Card and Other Consumer portfolio segment.
                           
Impaired Loans – Credit Card and Other ConsumerImpaired Loans – Credit Card and Other Consumer  Impaired Loans – Credit Card and Other Consumer  
            
                
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
 
(Dollars in millions)    September 30, 2018 December 31, 2017 September 30, 2019 December 31, 2018
With no recorded allowance     
  
  
        
  
  
      
Direct/Indirect consumer    $63
 $29
 $—
 $58
 $28
 $—
 $74
 $33
 $—
 $72
 $33
 $—
With an allowance recorded     
  
  
        
  
  
      
U.S. credit card    $501
 $512
 $143
 $454
 $461
 $125
 $610
 $624
 $179
 $522
 $533
 $154
Direct/Indirect consumer    —
 —
 —
 1
 1
 —
Total     
  
  
  
  
    
  
  
  
  
  
U.S. credit card    $501
 $512
 $143
 $454
 $461
 $125
 $610
 $624
 $179
 $522
 $533
 $154
Direct/Indirect consumer    63
 29
 —
 59
 29
 —
 74
 33
 —
 72
 33
 —
                           
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 (2)
Three Months Ended September 30 Nine Months Ended September 30     Three Months Ended September 30 Nine Months Ended September 30
2018 2017 2018 2017    2019 2018 2019 2018
With no recorded allowance                           
Direct/Indirect consumer$30
 $1
 $20
 $—
 $29
 $2
 $19
 $—
     $33
 $30
 $33
 $29
With an allowance recorded 
  
      
  
          
  
    
U.S. credit card$498
 $7
 $457
 $6
 $481
 $19
 $466
 $18
     $609
 $498
 $579
 $481
Non-U.S. credit card (3)
—
 —
 —
 —
 —
 —
 62
 1
Direct/Indirect consumer1
 —
 2
 —
 1
 —
 2
 —
Total 
  
      
  
    
U.S. credit card$498
 $7
 $457
 $6
 $481
 $19
 $466
 $18
Non-U.S. credit card (3)
—
 —
 —
 —
 —
 —
 62
 1
Direct/Indirect consumer31
 1
 22
 —
 30
 2
 21
 —
(1) 
Includes accrued interest and fees.
(2) 
Interest
The related interest income recognized, which includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing impaired loans for which the principal iswas considered collectible.collectible, was not significant for the three and nine months ended September 30, 2019 and 2018.

(3)67Bank of America

In the second quarter of 2017, the Corporation sold its non-U.S. consumer credit card business.




The table below provides information on the Corporation’s primary modification programs for the Credit Card and Other Consumer TDR portfolio at September 30, 20182019 and December 31, 2017.2018.
            
Credit Card and Other Consumer – TDRs by Program Type
      
 U.S. Credit Card Direct/Indirect Consumer Total TDRs by Program Type
(Dollars in millions)September 30
2019		 December 31
2018		 September 30
2019		 December 31
2018		 September 30
2019		 December 31
2018
Internal programs$322
 $259
 $—
 $—
 $322
 $259
External programs301
 273
 —
 —
 301
 273
Other1
 1
 33
 33
 34
 34
Total$624
 $533
 $33
 $33
 $657
 $566
Percent of balances current or less than 30 days past due85% 85% 80% 81% 85% 85%
            
Credit Card and Other Consumer – TDRs by Program Type
      
 U.S. Credit Card Direct/Indirect Consumer Total TDRs by Program Type
(Dollars in millions)September 30
2018		 December 31
2017		 September 30
2018		 December 31
2017		 September 30
2018		 December 31
2017
Internal programs$242
 $203
 $—
 $1
 $242
 $204
External programs269
 257
 —
 —
 269
 257
Other1
 1
 29
 28
 30
 29
Total$512
 $461
 $29
 $29
 $541
 $490
Percent of balances current or less than 30 days past due86% 87% 90% 88% 86% 87%

81Bank of America






The table below provides information on the Corporation’s Credit Card and Other Consumer TDR portfolio including the September 30, 20182019 and 20172018 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of loans that were modified in TDRs during the three and nine months ended September 30, 20182019 and 2017.2018.
                              
Credit Card and Other Consumer – TDRs Entered into During the Three and Nine Months Ended September 30, 2018 and 2017
Credit Card and Other Consumer – TDRs Entered into During the Three and Nine Months Ended September 30, 2019 and 2018Credit Card and Other Consumer – TDRs Entered into During the Three and Nine Months Ended September 30, 2019 and 2018
                              
Unpaid Principal Balance 
Carrying Value (1)
 Pre-Modification Interest Rate Post-Modification Interest Rate Unpaid Principal Balance 
Carrying Value (1)
 Pre-Modification Interest Rate Post-Modification Interest RateUnpaid Principal Balance 
Carrying Value (1)
 Pre-Modification Interest Rate Post-Modification Interest Rate Unpaid Principal Balance 
Carrying
Value (1)
 Pre-Modification Interest Rate Post-Modification Interest Rate
(Dollars in millions)Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
U.S. credit card$84
 $91
 19.45% 5.19% $212
 $224
 19.30% 5.24%$100
 $107
 19.62% 5.36% $267
 $281
 19.50% 5.35%
Direct/Indirect consumer18
 10
 4.61
 4.50
 33
 19
 4.77
 4.58
19
 11
 5.32
 5.32
 35
 19
 5.23
 5.22
Total (2)
$102
 $101
 17.94
 5.12
 $245
 $243
 18.16
 5.19
$119
 $118
 18.36
 5.36
 $302
 $300
 18.62
 5.34
                              
Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
U.S. credit card$60
 $64
 17.96% 5.40% $152
 $161
 17.88% 5.49%$84
 $91
 19.45% 5.19% $212
 $224
 19.30% 5.24%
Direct/Indirect consumer22
 14
 4.92
 4.53
 29
 18
 4.99
 4.37
18
 10
 4.61
 4.50
 33
 19
 4.77
 4.58
Total (2)
$82
 $78
 15.64
 5.25
 $181
 $179
 16.57
 5.37
$102

$101
 17.94
 5.12
 $245
 $243
 18.16
 5.19
(1) 
Includes accrued interest and fees.
(2)
Net charge-offs were $16 million and $38 million for the three and nine months ended September 30, 2018 compared to $14 million and $33 million for the same periods in 2017.
Credit card and other consumer loans are deemed to be in payment default during the quarter in which a borrower misses the second of two2 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 1314 percent of new U.S. credit card TDRs and 16 percent of new direct/indirect consumer TDRs may be in payment default within 12 months after modification. Loans that entered into payment default during the three and nine months ended September 30, 2018 that had been modified in a TDR during the preceding 12 months were $10 million and $26 million for U.S. credit card and $1 million and $6 million for direct/indirect consumer. During the three and nine months ended September 30, 2017, loans that entered into payment default that had been modified in a TDR during the preceding 12
months were $7 million and $19 million for U.S. credit card and $1 million and $3 million for direct/indirect consumer.
Commercial Loans
Impaired commercial loans include nonperforming loans and leases and TDRs (both performing and nonperforming). For more information on impaired commercial loans, see Note 45 – Outstanding Loans and Leases to the Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K.
At September 30, 20182019 and December 31, 2017,2018, remaining commitments to lend additional funds to debtors whose terms have been modified in a commercial loan TDR were $256$425 million and $205$297 million.
Commercial foreclosed properties totaled $30 million and $52 million The balance of commercial TDRs in payment default was not significant at September 30, 20182019 and December 31, 2017.

Bank of America82

2018.
The table below provides information on impaired loans in the Commercial loan portfolio segment including the unpaid principal balance, carrying value and related allowance at September 30, 20182019 and December 31, 2017,2018, and the average carrying value and interest income recognized for the three and nine months ended September 30, 20182019 and 2017.2018. Certain impaired commercial loans do not have a related allowance because the valuation of these impaired loans exceeded the carrying value, which is net of previously recorded charge-offs.

                
Impaired Loans – Commercial  
                
     
Unpaid
Principal
Balance
 
Carrying
Value
 
Related
Allowance
 
Unpaid
Principal
Balance
 
Carrying
Value
 
Related
Allowance
(Dollars in millions)    September 30, 2018 December 31, 2017
With no recorded allowance     
  
  
  
  
  
U.S. commercial    $697
 $684
 $—
 $576
 $571
 $—
Non-U.S. commercial    10
 10
 —
 14
 11
 —
Commercial real estate    42
 32
 —
 83
 80
 —
Commercial lease financing    2
 2
 —
 —
 —
 —
With an allowance recorded               
U.S. commercial    $1,334
 $1,073
 $115
 $1,393
 $1,109
 $98
Non-U.S. commercial    233
 225
 19
 528
 507
 58
Commercial real estate    104
 20
 2
 133
 41
 4
Commercial lease financing    72
 72
 —
 20
 18
 3
U.S. small business commercial (1)
   90
 76
 29
 84
 70
 27
Total     
  
  
      
U.S. commercial    $2,031
 $1,757
 $115
 $1,969
 $1,680
 $98
Non-U.S. commercial    243
 235
 19
 542
 518
 58
Commercial real estate    146
 52
 2
 216
 121
 4
Commercial lease financing    74
 74
 —
 20
 18
 3
U.S. small business commercial (1)
   90
 76
 29
 84
 70
 27
                
 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)
 Three Months Ended September 30 Nine Months Ended September 30
 2018 2017 2018 2017
With no recorded allowance 
  
      
  
    
U.S. commercial$640
 $4
 $726
 $3
 $659
 $12
 $822
 $9
Non-U.S. commercial9
 —
 14
 —
 35
 2
 55
 —
Commercial real estate68
 —
 77
 1
 72
 1
 61
 1
Commercial lease financing3
 —
 —
 —
 4
 —
 —
 —
With an allowance recorded               
U.S. commercial$1,159
 $11
 $1,166
 $9
 $1,168
 $32
 $1,305
 $25
Non-U.S. commercial287
 3
 463
 3
 381
 9
 466
 9
Commercial real estate10
 —
 72
 —
 19
 —
 85
 2
Commercial lease financing58
 1
 10
 —
 32
 1
 6
 —
U.S. small business commercial (1)
74
 —
 72
 —
 74
 —
 74
 —
Total         
  
  
  
U.S. commercial$1,799
 $15
 $1,892
 $12
 $1,827
 $44
 $2,127
 $34
Non-U.S. commercial296
 3
 477
 3
 416
 11
 521
 9
Commercial real estate78
 —
 149
 1
 91
 1
 146
 3
Commercial lease financing61
 1
 10
 —
 36
 1
 6
 —
U.S. small business commercial (1)
74
 —
 72
 —
 74
 —
 74
 —
Bank of America 68

              
Impaired Loans – Commercial  
              
   
Unpaid
Principal
Balance
 
Carrying
Value
 
Related
Allowance
 
Unpaid
Principal
Balance
 
Carrying
Value
 
Related
Allowance
        
(Dollars in millions)  September 30, 2019 December 31, 2018
With no recorded allowance   
  
  
  
  
  
U.S. commercial  $620
 $606
 $—
 $638
 $616
 $—
Non-U.S. commercial  24
 24
 —
 93
 93
 —
Commercial real estate  22
 22
 —
 —
 —
 —
Commercial lease financing  13
 13
 —
 —
 —
 —
With an allowance recorded             
U.S. commercial  $1,659
 $1,495
 $144
 $1,437
 $1,270
 $121
Non-U.S. commercial  254
 253
 10
 155
 149
 30
Commercial real estate  319
 242
 59
 247
 162
 16
Commercial lease financing  58
 57
 3
 71
 71
 —
U.S. small business commercial (1)
 84
 75
 28
 83
 72
 29
Total   
  
  
      
U.S. commercial  $2,279
 $2,101
 $144
 $2,075
 $1,886
 $121
Non-U.S. commercial  278
 277
 10
 248
 242
 30
Commercial real estate  341
 264
 59
 247
 162
 16
Commercial lease financing  71
 70
 3
 71
 71
 —
U.S. small business commercial (1)
 84
 75
 28
 83
 72
 29
              
       
Average Carrying Value (2)
       Three Months Ended September 30 Nine Months Ended September 30
       2019 2018 2019 2018
With no recorded allowance         
    
U.S. commercial      $612
 $640
 $659
 $659
Non-U.S. commercial      57
 9
 81
 35
Commercial real estate      65
 68
 115
 72
Commercial lease financing      7
 3
 2
 4
With an allowance recorded       
  
    
U.S. commercial      $1,296
 $1,159
 $1,242
 $1,168
Non-U.S. commercial      251
 287
 230
 381
Commercial real estate      158
 10
 118
 19
Commercial lease financing      72
 58
 80
 32
U.S. small business commercial (1)
      74
 74
 74
 74
Total         
  
  
U.S. commercial     
$1,908

$1,799

$1,901

$1,827
Non-U.S. commercial     
308

296

311

416
Commercial real estate     
223

78

233

91
Commercial lease financing     
79

61

82

36
U.S. small business commercial (1)
     
74

74

74

74

(1) 
Includes U.S. small business commercial renegotiated TDR loans and related allowance.
(2) 
Interest
The related interest income recognized, which includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing impaired loans for which the principal iswas considered collectible.

83Bank of America





The table below presents the September 30, 2018 and 2017 unpaid principal balance and carrying value of commercial loans that were modified as TDRs during the three and nine months ended September 30, 2018 and 2017. 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 the Three and Nine Months Ended September 30, 2018 and 2017
    
 Unpaid Principal Balance Carrying
Value		 Unpaid Principal Balance Carrying
Value
(Dollars in millions)Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
U.S. commercial$595
 $544
 $1,111
 $1,006
Non-U.S. commercial11
 9
 4
 4
Commercial real estate—
 —
 71
 71
Commercial lease financing29
 29
 92
 91
U.S. small business commercial (1)
3
 2
 8
 6
Total (2)
$638
 $584
 $1,286
 $1,178
        
 Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
U.S. commercial$357
 $322
 $763
 $700
Non-U.S. commercial105
 105
 105
 105
Commercial real estate—
 —
 16
 9
Commercial lease financing12
 12
 12
 12
U.S. small business commercial (1)
3
 3
 11
 12
Total (2)
$477
 $442
 $907
 $838
(1)
U.S. small business commercial TDRs are comprised of renegotiated small business card loans.
(2)
Net charge-offs were $38 million and $64 millioncollectible, was not significant for the three and nine months ended September 30, 2018 compared to $27 million2019 and $89 million for the same periods in 20172018.
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 $174 million and $57 million for
U.S. commercial and $4 million and $32 million for commercial real estate at September 30, 2018 and 2017.
Purchased Credit-impaired Loans
The table below shows activity for the accretable yield on PCI loans. The reclassifications from nonaccretable difference during the three and nine months ended September 30, 2018 were primarily due to an increase in the expected principal and interest cash flows due to lower default estimates and the rising interest rate environment.
  
  
Rollforward of Accretable Yield  
    
(Dollars in millions)Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
Accretable yield, beginning of period$2,558
 $2,789
Accretion(117) (371)
Disposals/transfers(612) (824)
Reclassifications from nonaccretable difference56
 291
Accretable yield, September 30, 2018$1,885
 $1,885
Duringthe three and nine months ended September 30, 2018, the Corporation sold PCI loans with a carrying value of $2.0 billion and $2.1 billion. During the three and nine months ended September 30, 2017, the Corporation sold PCI loans with a carrying value of $538 million and $742 million. 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 of the Corporation’s 2017 Annual Report on Form 10-K, and for the carrying value and valuation allowance for PCI loans, see Note 6 – Allowance for Credit Losses herein.
Loans Held-for-sale
The Corporation had LHFS of $5.6$9.8 billion and $11.4$10.4 billion at September 30, 20182019 and December 31, 2017. For the nine months ended September 30, 2018 and 2017, cash2018. Cash and non-cash proceeds from sales and paydowns of loans originally classified as LHFS were $19.6 billion and $23.4 billion for the nine months ended September 30, 2019 and $28.0 billion, and cash2018. Cash used for originations and purchases of LHFS totaled $18.7 billion and $16.8 billion for the nine months ended September 30, 2019 and $31.4 billion.2018.



69Bank of America

 
Bank of America84





NOTE 6 Allowance for Credit Losses
The table below summarizes the changes in the allowance for credit losses by portfolio segment for the three and nine months ended September 30, 20182019 and 2017.2018.
        
 Consumer
Real Estate		 Credit Card and Other Consumer Commercial Total
(Dollars in millions)Three Months Ended September 30, 2019
Allowance for loan and lease losses, July 1$719
 $3,970
 $4,838
 $9,527
Loans and leases charged off(199) (1,093) (220) (1,512)
Recoveries of loans and leases previously charged off439
 231
 31
 701
Net charge-offs240
 (862) (189) (811)
Provision for loan and lease losses(312) 876
 212
 776
Other (1)
(56) 1
 (4) (59)
Allowance for loan and lease losses, September 30591
 3,985
 4,857
 9,433
Reserve for unfunded lending commitments, July 1—
 —
 806
 806
Provision for unfunded lending commitments—
 —
 3
 3
Reserve for unfunded lending commitments, September 30—
 —
 809
 809
Allowance for credit losses, September 30$591
 $3,985
 $5,666
 $10,242
        
 Three Months Ended September 30, 2018
Allowance for loan and lease losses, July 1$1,366
 $3,774
 $4,910
 $10,050
Loans and leases charged off(155) (992) (189) (1,336)
Recoveries of loans and leases previously charged off163
 208
 33
 404
Net charge-offs8
 (784) (156) (932)
Provision for loan and lease losses(119) 829
 1
 711
Other (1)
(97) 3
 (1) (95)
Allowance for loan and lease losses, September 301,158
 3,822
 4,754
 9,734
Reserve for unfunded lending commitments, July 1—
 —
 787
 787
Provision for unfunded lending commitments—
 —
 5
 5
Reserve for unfunded lending commitments, September 30—
 —
 792
 792
Allowance for credit losses, September 30$1,158
 $3,822
 $5,546
 $10,526
        
(Dollars in millions)Nine Months Ended September 30, 2019
Allowance for loan and lease losses, January 1$928
 $3,874
 $4,799
 $9,601
Loans and leases charged off(455) (3,225) (630) (4,310)
Recoveries of loans and leases previously charged off852
 680
 89
 1,621
Net charge-offs397
 (2,545) (541) (2,689)
Provision for loan and lease losses(621) 2,655
 603
 2,637
Other (1)
(113) 1
 (4) (116)
Allowance for loan and lease losses, September 30591
 3,985
 4,857
 9,433
Reserve for unfunded lending commitments, January 1—
 —
 797
 797
Provision for unfunded lending commitments—
 —
 12
 12
Reserve for unfunded lending commitments, September 30—
 —
 809
 809
Allowance for credit losses, September 30$591
 $3,985
 $5,666
 $10,242
        
 Nine Months Ended September 30, 2018
Allowance for loan and lease losses, January 1$1,720
 $3,663
 $5,010
 $10,393
Loans and leases charged off(466) (3,031) (513) (4,010)
Recoveries of loans and leases previously charged off440
 621
 110
 1,171
Net charge-offs(26) (2,410) (403) (2,839)
Provision for loan and lease losses(368) 2,583
 147
 2,362
Other (1)
(168) (14) —
 (182)
Allowance for loan and lease losses, September 301,158
 3,822
 4,754
 9,734
Reserve for unfunded lending commitments, January 1—
 —
 777
 777
Provision for unfunded lending commitments—
 —
 15
 15
Reserve for unfunded lending commitments, September 30—
 —
 792
 792
Allowance for credit losses, September 30$1,158
 $3,822
 $5,546
 $10,526
        
 
Consumer
Real Estate (1)
 Credit Card and Other Consumer Commercial Total
Allowance
(Dollars in millions)Three Months Ended September 30, 2018
Allowance for loan and lease losses, July 1$1,366
 $3,774
 $4,910
 $10,050
Loans and leases charged off(155) (992) (189) (1,336)
Recoveries of loans and leases previously charged off163
 208
 33
 404
Net charge-offs8
 (784) (156) (932)
Write-offs of PCI loans (2)
(95) —
 —
 (95)
Provision for loan and lease losses (3)
(119) 829
 1
 711
Other (4)
(2) 3
 (1) —
Allowance for loan and lease losses, September 301,158
 3,822
 4,754
 9,734
Reserve for unfunded lending commitments, July 1—
 —
 787
 787
Provision for unfunded lending commitments—
 —
 5
 5
Reserve for unfunded lending commitments, September 30—
 —
 792
 792
Allowance for credit losses, September 30$1,158
 $3,822
 $5,546
 $10,526
        
 Three Months Ended September 30, 2017
Allowance for loan and lease losses, July 1$2,309
 $3,386
 $5,180
 $10,875
Loans and leases charged off(231) (919) (212) (1,362)
Recoveries of loans and leases previously charged off230
 189
 43
 462
Net charge-offs(1) (730) (169) (900)
Write-offs of PCI loans (2)
(73) —
 —
 (73)
Provision for loan and lease losses (3)
(204) 934
 99
 829
Other (4)
1
 (40) 1
 (38)
Allowance for loan and lease losses, September 302,032
 3,550
 5,111
 10,693
Reserve for unfunded lending commitments, July 1—
 —
 757
 757
Provision for unfunded lending commitments—
 —
 5
 5
Reserve for unfunded lending commitments, September 30—
 —
 762
 762
Allowance for credit losses, September 30$2,032
 $3,550
 $5,873
 $11,455
        
 Nine Months Ended September 30, 2018
Allowance for loan and lease losses, January 1$1,720
 $3,663
 $5,010
 $10,393
Loans and leases charged off(466) (3,031) (513) (4,010)
Recoveries of loans and leases previously charged off440
 621
 110
 1,171
Net charge-offs(26) (2,410) (403) (2,839)
Write-offs of PCI loans (2)
(166) —
 —
 (166)
Provision for loan and lease losses (3)
(368) 2,583
 147
 2,362
Other (4)
(2) (14) —
 (16)
Allowance for loan and lease losses, September 301,158
 3,822
 4,754
 9,734
Reserve for unfunded lending commitments, January 1—
 —
 777
 777
Provision for unfunded lending commitments—
 —
 15
 15
Reserve for unfunded lending commitments, September 30—
 —
 792
 792
Allowance for credit losses, September 30$1,158
 $3,822
 $5,546
 $10,526
        
 Nine Months Ended September 30, 2017
Allowance for loan and lease losses, January 1$2,750
 $3,229
 $5,258
 $11,237
Loans and leases charged off(633) (2,819) (570) (4,022)
Recoveries of loans and leases previously charged off520
 623
 137
 1,280
Net charge-offs(113) (2,196) (433) (2,742)
Write-offs of PCI loans (2)
(161) —
 —
 (161)
Provision for loan and lease losses (3)
(445) 2,553
 287
 2,395
Other (4)
1
 (36) (1) (36)
Allowance for loan and lease losses, September 302,032
 3,550
 5,111
 10,693
Reserve for unfunded lending commitments, January 1 and September 30—
 —
 762
 762
Allowance for credit losses, September 30$2,032
 $3,550
 $5,873
 $11,455

(1) 
Includes valuation allowance associated with the PCI loan portfolio.
(2)
Includes write-offs associated with the sale of PCI loans of $71 million and $88 million during the three and nine months ended September 30, 2018 compared to $45 million and $80 million for the same periods in 2017.
(3)
Includes provision expense associated with the PCI loan portfolio of $53 million and $28 million during the three and nine months ended September 30, 2018 compared to $12 million and $56 million for the same periods in 2017.
(4)
Primarily represents write-offs of purchased credit-impaired loans, the net impact of portfolio sales, consolidations and deconsolidations, foreign currency translation adjustments, transfers to held for sale and certain other reclassifications.LHFS.


85Bank of America70






The table below presents the allowance and the carrying value of outstanding loans and leases by portfolio segment at September 30, 20182019 and December 31, 2017.2018.
        
 Consumer
Real Estate		 Credit Card and Other Consumer Commercial Total
(Dollars in millions)September 30, 2019
Impaired loans and troubled debt restructurings (1)
 
  
  
  
Allowance for loan and lease losses$145
 $179
 $244
 $568
Carrying value (2)
6,317
 657
 2,787
 9,761
Allowance as a percentage of carrying value2.30% 27.25% 8.75% 5.82%
Loans collectively evaluated for impairment 
  
  
  
Allowance for loan and lease losses$446
 $3,806
 $4,613
 $8,865
Carrying value (2, 3)
262,729
 185,333
 507,413
 955,475
Allowance as a percentage of carrying value (3)
0.17% 2.05% 0.91% 0.93%
Total 
  
  
  
Allowance for loan and lease losses$591
 $3,985
 $4,857
 $9,433
Carrying value (2, 3)
269,046
 185,990
 510,200
 965,236
Allowance as a percentage of carrying value (3)
0.22% 2.14% 0.95% 0.98%
        
 December 31, 2018
Impaired loans and troubled debt restructurings (1)
 
  
  
  
Allowance for loan and lease losses$258
 $154
 $196
 $608
Carrying value (2)
8,556
 566
 2,433
 11,555
Allowance as a percentage of carrying value3.02% 27.21% 8.06% 5.26%
Loans collectively evaluated for impairment 
  
  
  
Allowance for loan and lease losses$670
 $3,720
 $4,603
 $8,993
Carrying value (2, 3)
248,287
 189,140
 493,564
 930,991
Allowance as a percentage of carrying value (3)
0.27% 1.97% 0.93% 0.97%
Total 
  
  
  
Allowance for loan and lease losses$928
 $3,874
 $4,799
 $9,601
Carrying value (2, 3)
256,843
 189,706
 495,997
 942,546
Allowance as a percentage of carrying value (3)
0.36% 2.04% 0.97% 1.02%
        
Allowance and Carrying Value by Portfolio Segment      
        
 Consumer
Real Estate		 Credit Card and Other Consumer Commercial Total
(Dollars in millions)September 30, 2018
Impaired loans and troubled debt restructurings (1)
 
  
  
  
Allowance for loan and lease losses$299
 $143
 $165
 $607
Carrying value (2)
9,675
 541
 2,194
 12,410
Allowance as a percentage of carrying value3.09% 26.43% 7.52% 4.89%
Loans collectively evaluated for impairment 
  
  
  
Allowance for loan and lease losses$709
 $3,679
 $4,589
 $8,977
Carrying value (2, 3)
242,594
 185,829
 476,085
 904,508
Allowance as a percentage of carrying value (3)
0.29% 1.98% 0.96% 0.99%
Purchased credit-impaired loans 
    
  
Valuation allowance$150
 n/a
 n/a
 $150
Carrying value gross of valuation allowance7,152
 n/a
 n/a
 7,152
Valuation allowance as a percentage of carrying value2.10% n/a
 n/a
 2.10%
Total 
  
  
  
Allowance for loan and lease losses$1,158
 $3,822
 $4,754
 $9,734
Carrying value (2, 3)
259,421
 186,370
 478,279
 924,070
Allowance as a percentage of carrying value (3)
0.45% 2.05% 0.99% 1.05%
        
 December 31, 2017
Impaired loans and troubled debt restructurings (1)
 
  
  
  
Allowance for loan and lease losses$348
 $125
 $190
 $663
Carrying value (2)
12,554
 490
 2,407
 15,451
Allowance as a percentage of carrying value2.77% 25.51% 7.89% 4.29%
Loans collectively evaluated for impairment 
  
  
  
Allowance for loan and lease losses$1,083
 $3,538
 $4,820
 $9,441
Carrying value (2, 3)
238,284
 192,303
 474,284
 904,871
Allowance as a percentage of carrying value (3)
0.45% 1.84% 1.02% 1.04%
Purchased credit-impaired loans 
    
  
Valuation allowance$289
 n/a
 n/a
 $289
Carrying value gross of valuation allowance10,717
 n/a
 n/a
 10,717
Valuation allowance as a percentage of carrying value2.70% n/a
 n/a
 2.70%
Total 
  
  
  
Allowance for loan and lease losses$1,720
 $3,663
 $5,010
 $10,393
Carrying value (2, 3)
261,555
 192,793
 476,691
 931,039
Allowance as a percentage of carrying value (3)
0.66% 1.90% 1.05% 1.12%

(1) 
Impaired loans include nonperforming commercial loans and leases, as well as all TDRs, including both commercial and consumer TDRs. Impaired loans exclude nonperforming consumer loans unless they are TDRs, and all consumer and commercial loans accounted for under the fair value option.
(2) 
Amounts are presented gross of the allowance for loan and lease losses.
(3) 
Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of $5.77.7 billion and $4.3 billion at both September 30, 20182019 and December 31, 20172018.
n/a = not applicable


Bank of America86

NOTE 7Securitizations and Other Variable Interest Entities
The Corporation utilizes VIEs in the ordinary course of business to support its own and its customers’ financing and investing needs. The tables in this Note present the assets, liabilities and maximum loss exposure of consolidated and unconsolidated VIEs at September 30, 20182019 and December 31, 20172018 in situations where the Corporation has continuing involvement with transferred assets or if the Corporation otherwise has a variable interest in the VIE. For additionalmore information on the Corporation’s use of VIEs and related maximum loss exposure, see Note 1 – Summary of Significant Accounting Principles and Note 67 – Securitizations and Other Variable Interest Entities to the Consolidated Financial Statementsof the Corporation’s 20172018 Annual Report on Form 10-K.10-K.
The Corporation invests in ABS issued by third-party VIEs with which it has no other form of involvement and enters into certain commercial lending arrangements that may also incorporate the use of VIEs, for example to hold collateral. These securities and loans are included in Note 4 – Securities or Note 5 – Outstanding Loans and Leases.
 
Except as described below, theThe Corporation did not provide financial support to consolidated or unconsolidated VIEs during the nine months ended September 30, 20182019 or the year ended December 31, 20172018 that it was not previously contractually required to provide, nor does it intend to do so.
The Corporation had liquidity commitments, including written put options and collateral value guarantees, with certain unconsolidated VIEs of $271 million$1.0 billion and $442$218 million at September 30, 20182019 and December 31, 2017.2018.
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. Except as described below and in Note 1011 – Commitments and Contingencies, the Corporation does not provide guarantees or recourse to the securitization trusts other than standard representations and warranties.
The following table below summarizes select information related to first-lien mortgage securitizations for the three and nine months ended September 30, 20182019 and 2017.2018.

71Bank of America





                              
First-lien Mortgage SecuritizationsFirst-lien Mortgage Securitizations              First-lien Mortgage Securitizations              
                              
Residential Mortgage - Agency Commercial MortgageResidential Mortgage - Agency Commercial Mortgage
Three Months Ended September 30 Nine Months Ended September 30 Three Months Ended September 30 Nine Months Ended September 30Three Months Ended September 30 Nine Months Ended September 30 Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions)2018 2017 2018 2017 2018 2017 2018 20172019 2018 2019 2018 2019 2018 2019 2018
Cash proceeds from new securitizations (1)
$1,596
 $3,833
 $4,661
 $11,791
 $1,797
 $1,225
 $3,981
 $2,931
Proceeds from loan sales (1)
$2,718
 $1,650
 $6,020
 $4,800
 $1,360
 $1,868
 $4,541
 $4,146
Gains on securitizations (2)
13
 40
 54
 140
 29
 14
 68
 67
8
 13
 23
 54
 28
 29
 73
 68
Repurchases from securitization trusts (3)
357
 609
 1,215
 2,083
 —
 —
 —
 —
209
 357
 695
 1,215
 —
 —
 —
 —
(1) 
The Corporation transfers residential mortgage loans to securitizations sponsored primarily by the GSEs or Government National Mortgage Association (GNMA) in the normal course of business and primarily receives RMBS in exchange which may then beexchange. Substantially all of these securities are classified as Level 2 within the fair value hierarchy and are sold into the market to third-party investors for cash proceeds.shortly after receipt.
(2) 
A majority of the first-lien residential mortgage loans securitized are initially classified as LHFS and accounted for under the fair value option. Gains recognized on these LHFS prior to securitization, which totaled $1519 million and $6038 million, net of hedges, during the three and nine months ended September 30, 2018,2019 compared to $6315 million and $19560 million for the same periods in 20172018, are not included in the table above.
(3) 
The Corporation may have the option to repurchase delinquent loans out of securitization trusts, which reduces the amount of servicing advances it is required to make. The Corporation may also repurchase loans from securitization trusts to perform modifications. Repurchased loans include FHA-insured mortgages collateralizing GNMA securities.
In addition to cash proceeds as reported in the table above, the Corporation received securities with an initial fair value of $169 million and $566 million in connection with first-lien mortgage securitizations for the three and nine months ended September 30, 2018, compared to $770 million and $1.3 billion for the same periods in 2017. The receipt of these securities represents non-cash operating and investing activities and, accordingly, is not reflected in the Consolidated Statement of Cash Flows. Substantially all of these securities were initially classified as Level 2 assets within the fair value hierarchy. During the three and nine months ended September 30, 2018 and 2017, there were no changes to the initial classification.
The Corporation recognizes consumer MSRs from the sale or securitization of consumer real estate loans. The unpaid principal
balance of loans serviced for investors, including residential mortgage and home equity loans, totaled $234.4$201.3 billion and $289.3$234.4 billion at September 30, 20182019 and 2017.2018. Servicing fee and ancillary fee income on serviced loans was $168$144 million and $546$436 million during the three and nine months ended September 30, 2018,2019 compared to $213$168 million and $691$546 million for the same periods in 2017.2018. Servicing advances on serviced loans, including loans serviced for others and loans held for investment, were $3.5$2.5 billion and $4.5$3.3 billion at September 30, 20182019 and December 31, 2017.
2018. For more information on MSRs, see Note 1415 – Fair Value Measurements.
During the three and nine months ended September 30, 20182019, the Corporation deconsolidated agency residential mortgage securitization trusts with total assets of $65 million and 2017, there$1.2 billion. There were no significant deconsolidations of agency residential mortgage securitizations.


87Bank of America





during the three and nine months ended September 30, 2018.
The following table below summarizes select information related to first-lien mortgage securitization trusts in which the Corporation held a variable interest at September 30, 20182019 and December 31, 2017.2018.
                  
First-lien Mortgage VIEsFirst-lien Mortgage VIEs       First-lien Mortgage VIEs       
   
Residential Mortgage  
 
Residential Mortgage  
 
 
 
 Non-agency  
 
 
 
 Non-agency  
 
Agency Prime Subprime Alt-A Commercial MortgageAgency Prime Subprime Alt-A Commercial Mortgage
(Dollars in millions)Sept 30 2018December 31
2017		 Sept 30 2018December 31
2017		 Sept 30 2018December 31
2017		 Sept 30 2018December 31
2017		 Sept 30 2018December 31
2017		Sept 30 2019December 31
2018		 Sept 30 2019December 31
2018		 Sept 30 2019December 31
2018		 Sept 30 2019December 31
2018		 Sept 30 2019December 31
2018
Unconsolidated VIEs 
 
  
 
  
 
  
 
  
 
 
 
  
 
  
 
  
 
  
 
Maximum loss exposure (1)
$16,461
$19,110
 $458
$689
 $2,063
$2,643
 $218
$403
 $659
$585
$15,446
$16,011
 $362
$448
 $1,825
$1,897
 $150
$217
 $959
$767
On-balance sheet assets 
 
  
 
  
 
  
 
  
 
 
 
  
 
  
 
  
 
  
 
Senior securities: 
 
  
 
  
 
  
 
  
 
 
 
  
 
  
 
  
 
  
 
Trading account assets$509
$716
 $21
$6
 $47
$10
 $71
$50
 $57
$108
$1,221
$460
 $8
$30
 $56
$36
 $30
$90
 $141
$97
Debt securities carried at fair value10,232
15,036
 262
477
 1,592
2,221
 145
351
 —
—
8,608
9,381
 207
246
 1,397
1,470
 118
125
 —
—
Held-to-maturity securities5,720
3,348
 —
—
 —
—
 —
—
 419
274
5,617
6,170
 —
—
 —
—
 —
—
 642
528
All other assets (2)
—
10
 3
5
 66
38
 2
2
 44
88
All other assets—
—
 3
3
 34
37
 2
2
 56
40
Total retained positions$16,461
$19,110
 $286
$488
 $1,705
$2,269
 $218
$403
 $520
$470
$15,446
$16,011
 $218
$279
 $1,487
$1,543
 $150
$217
 $839
$665
Principal balance outstanding (3)
$195,110
$232,761
 $9,448
$10,549
 $9,156
$10,254
 $24,439
$28,129
 $31,251
$26,504
Principal balance outstanding (2)
$167,502
$187,512
 $7,696
$8,954
 $8,512
$8,719
 $20,769
$23,467
 $50,128
$43,593
                  
Consolidated VIEs 
 
  
 
  
 
  
 
  
 
 
 
  
 
  
 
  
 
  
 
Maximum loss exposure (1)
$13,206
$14,502
 $551
$571
 $—
$—
 $—
$—
 $—
$—
$11,321
$13,296
 $5
$7
 $—
$—
 $—
$—
 $—
$76
On-balance sheet assets 
 
  
 
  
 
  
 
  
 
 
 
  
 
  
 
  
 
  
 
Trading account assets$733
$232
 $704
$571
 $—
$—
 $—
$—
 $—
$—
$718
$1,318
 $126
$150
 $—
$—
 $—
$—
 $—
$76
Loans and leases, net12,312
14,030
 —
—
 —
—
 —
—
 —
—
10,426
11,858
 —
—
 —
—
 —
—
 —
—
All other assets162
240
 —
—
 —
—
 —
—
 —
—
178
143
 —
—
 —
—
 —
—
 —
—
Total assets$13,207
$14,502
 $704
$571
 $—
$—
 $—
$—
 $—
$—
$11,322
$13,319
 $126
$150
 $—
$—
 $—
$—
 $—
$76
Total liabilities$3
$3
 $153
$—
 $—
$—
 $—
$—
 $—
$—
$4
$26
 $121
$143
 $—
$—
 $—
$—
 $—
$—
(1) 
Maximum loss exposure includes obligations under loss-sharing reinsurance and other arrangements for non-agency residential mortgage and commercial mortgage securitizations, but excludes the reserve for representations and warranties obligations and corporate guarantees and also excludes servicing advances and other servicing rights and obligations. For moreadditional information, see Note 1011 – Commitments and Contingencies and Note 1415 – Fair Value Measurements.
(2) 
Not included in the table above are all other assets of $12 million and $148 million, representing the unpaid principal balance of mortgage loans eligible for repurchase from unconsolidated residential mortgage securitization VIEs, principally guaranteed by GNMA, and all other liabilities of $12 million and $148 million, representing the principal amount that would be payable to the securitization VIEs if the Corporation was to exercise the repurchase option, at September 30, 2018 and December 31, 2017.
(3)
Principal balance outstanding includes loans where the Corporation was the transferor to securitization VIEs with which it has continuing involvement, which may include servicing the loans.
Other Asset-backed Securitizations
The following table below summarizes select information related to home equity, credit card and other asset-backed VIEs in which the Corporation held a variable interest at September 30, 20182019 and December 31, 2017.2018.

Bank of America 72

              
Home Equity Loan, Credit Card and Other Asset-backed VIEsHome Equity Loan, Credit Card and Other Asset-backed VIEs   Home Equity Loan, Credit Card and Other Asset-backed VIEs   
              
Home Equity (1)
 
Credit Card (2, 3)
 Resecuritization Trusts Municipal Bond Trusts
Home Equity (1)
 
Credit Card (2, 3)
 Resecuritization Trusts Municipal Bond Trusts
(Dollars in millions)Sept 30 2018December 31
2017		 Sept 30 2018December 31
2017		 Sept 30 2018December 31
2017		 Sept 30 2018December 31
2017		Sept 30 2019December 31
2018		 Sept 30 2019December 31
2018		 Sept 30 2019December 31
2018		 Sept 30 2019December 31
2018
Unconsolidated VIEs 
 
    
 
  
 
 
 
    
 
  
 
Maximum loss exposure$1,101
$1,522
 $—
$—
 $8,185
$8,204
 $1,837
$1,631
$661
$908
 $—
$—
 $6,979
$7,647
 $3,424
$2,150
On-balance sheet assets 
 
    
 
  
 
 
 
    
 
  
 
Senior securities (4):
 
 
    
 
  
 
 
 
    
 
  
 
Trading account assets$—
$—
 $—
$—
 $1,757
$869
 $22
$33
$—
$—
 $—
$—
 $1,368
$1,419
 $—
$26
Debt securities carried at fair value29
36
 —
—
 1,380
1,661
 —
—
23
27
 —
—
 1,204
1,337
 —
—
Held-to-maturity securities—
—
 —
—
 5,048
5,644
 —
—
—
—
 —
—
 4,407
4,891
 —
—
All other assets (4)
—
—
 —
—
 —
30
 —
—
Total retained positions$29
$36
 $—
$—
 $8,185
$8,204
 $22
$33
$23
$27
 $—
$—
 $6,979
$7,647
 $—
$26
Total assets of VIEs (5)
$1,944
$2,432
 $—
$—
 $18,469
$19,281
 $2,560
$2,287
$1,102
$1,813
 $—
$—
 $17,713
$16,949
 $4,120
$2,829
              
Consolidated VIEs 
 
    
 
  
 
 
 
    
 
  
 
Maximum loss exposure$91
$112
 $18,600
$24,337
 $109
$628
 $1,726
$1,453
$68
$85
 $17,983
$18,800
 $122
$128
 $2,780
$1,540
On-balance sheet assets 
 
    
 
  
 
 
 
    
 
  
 
Trading account assets$—
$—
 $—
$—
 $376
$1,557
 $1,740
$1,452
$—
$—
 $—
$—
 $141
$366
 $2,603
$1,553
Loans and leases143
177
 29,726
32,554
 —
—
 —
—
130
133
 27,024
29,906
 —
—
 —
—
Allowance for loan and lease losses(6)(9) (907)(988) —
—
 —
—
(1)(5) (829)(901) —
—
 —
—
All other assets4
6
 128
1,385
 —
—
 1
1
4
4
 114
136
 —
—
 177
1
Total assets$141
$174
 $28,947
$32,951
 $376
$1,557
 $1,741
$1,453
$133
$132
 $26,309
$29,141
 $141
$366
 $2,780
$1,554
On-balance sheet liabilities 
 
    
 
  
 
 
 
    
 
  
 
Short-term borrowings$—
$—
 $—
$—
 $—
$—
 $905
$312
$—
$—
 $—
$—
 $—
$—
 $2,274
$742
Long-term debt59
76
 10,320
8,598
 267
929
 12
—
70
55
 8,305
10,321
 19
238
 —
12
All other liabilities—
—
 27
16
 —
—
 —
—
—
—
 21
20
 —
—
 —
—
Total liabilities$59
$76
 $10,347
$8,614
 $267
$929
 $917
$312
$70
$55
 $8,326
$10,341
 $19
$238
 $2,274
$754
(1) 
For unconsolidated home equity loan VIEs, the maximum loss exposure includes outstanding trust certificates issued by trusts in rapid amortization, net of recorded reserves. For both consolidated and unconsolidated home equity loan VIEs, the maximum loss exposure excludes the reserve for representations and warranties obligations and corporate guarantees. For moreadditional information, see Note 1011 – Commitments and Contingencies.
(2) 
At September 30, 20182019 and December 31, 20172018, loans and leases in the consolidated credit card trust included $10.810.5 billion and $15.611.0 billion of seller’s interest.
(3) 
At September 30, 20182019 and December 31, 20172018, all other assets in the consolidated credit card trust included restricted cash, certain short-term investments and unbilled accrued interest and fees.
(4) 
All other assets includes subordinate securities. The retained senior and subordinate securities were valued using quoted market prices or observable market inputs (Level 2 of the fair value hierarchy).
(5) 
Total assets of VIEs includes loans the Corporation transferred with which it has continuing involvement, which may include servicing the loan.

Bank of America88

Home Equity Loans
The Corporation retains interests, primarily senior securities, in home equity securitization trusts to which it transferred home equity loans. These retained interests primarily include senior securities. In addition, the Corporation may be obligated to provide subordinate funding to the trusts during a rapid amortization event. This obligation is included in the maximum loss exposure in the table above. The charges that will ultimately be recorded as a result of the rapid amortization events depend on the undrawn portion of the home equity lines of credit, (HELOCs), performance of the loans, the amount of subsequent draws and the timing of related cash flows.
There were no deconsolidations of HELOC trusts during the nine months ended September 30, 2018 and 2017.
Credit Card Securitizations
The Corporation securitizes originated and purchased credit card loans. The Corporation’s continuing involvement with the securitization trust includes servicing the receivables, retaining an undivided interest (seller’s interest) in the receivables, and holding certain retained interests including subordinate interests in accrued interest and fees on the securitized receivables and cash reserve accounts.
During the nine months ended September 30, 2019 and 2018, there were $1.3 billion and 2017,$4.0 billion of new senior debt securities issued to third-party investors from the credit card securitization trust were $4.0 billion and $3.1 billion.trust.
At September 30, 20182019 and December 31, 2017,2018, the Corporation held subordinate securities issued by the credit card securitization trust with a notional principal amount of $7.7$7.4 billion and $7.4$7.7 billion. These securities serve as a form of credit enhancement to the senior debt securities and have a stated interest rate of zero percent.0 percent. There were $650$202 million and $500$650 million of these subordinate securities issued during the nine months ended September 30, 20182019 and 2017.2018.
Resecuritization Trusts
The Corporation transfers securities, typically MBS, into resecuritization VIEs at the request of customers seeking securities with specific characteristics. Generally, there are no
significant ongoing activities performed in a resecuritization trust, and no single investor has the unilateral ability to liquidate the trust.
The Corporation resecuritized $7.7$5.2 billionand $21.3$13.7 billion of securities during the three and nine months ended September 30, 20182019 compared to $5.0$7.7 billion and $20.1$21.3 billion for the same periods in 2017.2018. Securities transferred into resecuritization VIEs during the three and nine months ended September 30, 2018 and 2017 were measured at fair value with changes in fair value recorded in trading account profitsincome prior to the resecuritization and, accordingly, no gain or loss on sale was recorded. Resecuritization proceeds included securities with an initial fair value of $1.5 billion$750 million and $3.7$3.5 billion during the three and nine months ended September 30, 20182019 compared to $855 million$1.5 billion and $2.7$3.7 billion for the same periods in 2017.2018. Substantially all of 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’s liquidity commitments to unconsolidated municipal bond trusts, including those for which the Corporation was transferor, totaled $1.8$3.4 billion and $1.6$2.1 billion at September 30, 20182019 and December 31, 2017.2018. The weighted-average remaining life of bonds held in the trusts at September 30, 20182019 was 6.310.8 years. There were no materialsignificant write-downs or downgrades of assets or issuers during the nine months ended September 30, 20182019 and 2017.2018.

73Bank of America





Other Variable Interest Entities
The table below summarizes select information related to other VIEs in which the Corporation held a variable interest at September 30, 20182019 and December 31, 2017.
2018.
            
Other VIEs        
    
 Consolidated Unconsolidated Total Consolidated Unconsolidated Total
(Dollars in millions)September 30, 2019 December 31, 2018
Maximum loss exposure$4,009
 $25,706
 $29,715
 $4,177
 $24,498
 $28,675
On-balance sheet assets 
  
  
  
  
  
Trading account assets$2,170
 $715
 $2,885
 $2,335
 $860
 $3,195
Debt securities carried at fair value—
 76
 76
 —
 84
 84
Loans and leases1,804
 3,416
 5,220
 1,949
 3,940
 5,889
Allowance for loan and lease losses(2) (34) (36) (2) (30) (32)
All other assets82
 18,944
 19,026
 53
 18,885
 18,938
Total$4,054
 $23,117
 $27,171
 $4,335
 $23,739
 $28,074
On-balance sheet liabilities 
  
  
  
  
  
Long-term debt$44
 $—
 $44
 $152
 $—
 $152
All other liabilities2
 4,652
 4,654
 7
 4,231
 4,238
Total$46
 $4,652
 $4,698
 $159
 $4,231
 $4,390
Total assets of VIEs$4,054
 $96,045
 $100,099
 $4,335
 $94,746
 $99,081
            
Other VIEs        
    
 Consolidated Unconsolidated Total Consolidated Unconsolidated Total
(Dollars in millions)September 30, 2018 December 31, 2017
Maximum loss exposure$4,407
 $21,188
 $25,595
 $4,660
 $19,785
 $24,445
On-balance sheet assets 
  
  
  
  
  
Trading account assets$2,592
 $331
 $2,923
 $2,709
 $346
 $3,055
Debt securities carried at fair value—
 20
 20
 —
 160
 160
Loans and leases1,977
 4,155
 6,132
 2,152
 3,596
 5,748
Allowance for loan and lease losses(2) (29) (31) (3) (32) (35)
All other assets62
 15,300
 15,362
 89
 15,216
 15,305
Total$4,629
 $19,777
 $24,406
 $4,947
 $19,286
 $24,233
On-balance sheet liabilities 
  
  
  
  
  
Long-term debt$213
 $—
 $213
 $270
 $—
 $270
All other liabilities10
 4,067
 4,077
 18
 3,417
 3,435
Total$223
 $4,067
 $4,290
 $288
 $3,417
 $3,705
Total assets of VIEs$4,629
 $79,564
 $84,193
 $4,947
 $69,746
 $74,693

Customer VIEs
Customer VIEs include credit-linked, equity-linked and commodity-linked note VIEs, repackaging VIEs and asset acquisition VIEs, which are typically created on behalf of customers who wish to obtain market or credit exposure to a specific company, index, commodity or financial instrument.
The Corporation’s maximum loss exposure to consolidated and unconsolidated customer VIEs totaled $2.2 billion and $2.3$2.1 billion at September 30, 20182019 and December 31, 2017,2018, including the notional amount of derivatives to which the Corporation is a counterparty, net of losses previously recorded, and the Corporation’s investment, if any, in securities issued by the VIEs.

89Bank of America





Collateralized Debt Obligation VIEs
The Corporation receives fees for structuring CDO VIEs, which hold diversified pools of fixed-income securities, typically corporate debt or ABS, which the CDO VIEs fund by issuing multiple tranches of debt and equity securities. CDOs are generally managed by third-party portfolio managers. The Corporation typically transfers assets to these CDOs, holds securities issued by the CDOs and may be a derivative counterparty to the CDOs. The Corporation’s maximum loss exposure to consolidated and unconsolidated CDOs totaled $433$275 million and $358$421 million at September 30, 20182019 and December 31, 2017.2018.
Investment VIEs
The Corporation sponsors, invests in or provides financing, which may be in connection with the sale of assets, to a variety of investment VIEs that hold loans, real estate, debt securities or other financial instruments and are designed to provide the desired investment profile to investors or the Corporation. At September 30, 20182019 and December 31, 2017,2018, the Corporation’s consolidated investment VIEs had total assets of $337$105 million and $249270 million. The Corporation also held investments in unconsolidated VIEs with total assets of $29.2$34.5 billion and $20.337.7 billion at September 30, 20182019 and December 31, 2017.2018. The Corporation’s maximum loss exposure associated with both consolidated and unconsolidated investment VIEs totaled $6.2$7.0 billion and $5.7$7.2 billion at September 30, 20182019 and December 31, 20172018 comprised primarily of on-balance sheet assets less non-recourse liabilities.
Leveraged Lease Trusts
The Corporation’s net investment in consolidated leveraged lease trusts totaled $1.8$1.7 billion and $2.0$1.8 billion at September 30, 2018 2019
and December 31, 2017.2018. The trusts hold long-lived equipment such as rail cars, power generation and distribution equipment, and commercial aircraft. The Corporation structures the trusts and holds a significant residual interest. The net investment represents the Corporation’s maximum loss exposure to the trusts in the unlikely event that the leveraged lease investments become worthless. Debt issued by the leveraged lease trusts is non-recourse to the Corporation.
Tax Credit VIEs
The Corporation holds investments in unconsolidated limited partnerships and similar entities that construct, own and operate affordable housing, wind and solar projects. An unrelated third party is typically the general partner or managing member and has control over the significant activities of the VIE. The Corporation earns a return primarily through the receipt of tax credits allocated to the projects. The maximum loss exposure included in the Other VIEs table was $14.7$17.2 billion and $13.8$17.0 billion at September 30, 20182019 and December 31, 2017.2018. The Corporation’s risk of loss is generally mitigated by policies requiring that the project qualify for the expected tax credits prior to making its investment.
The Corporation’s investments in affordable housing partnerships, which are reported in other assets on the Consolidated Balance Sheet, totaled $8.4$9.1 billion and $8.0$8.9 billion, including unfunded commitments to provide capital contributions of $3.6$3.9 billion and $3.1$3.8 billion at September 30, 20182019 and December 31, 2017.2018. The unfunded commitments are expected to be paid over the next five years. The Corporation recognized tax credits and other tax benefits from investments in affordable housing partnerships of $265$276 million and $750$847 million and reported pretax losses in other noninterest income of $215$250 million and $640$732 million for the three and nine months ended September 30, 2018.2019. For the same periods in 2017,2018, the Corporation recognized tax credits and other tax benefits of $293$265 million and $825$750 million and pretax losses in other income of $209$215 million and $612$640 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.



  
Bank of America9074


NOTE 8 Goodwill and Intangible Assets
Goodwill
The table below presents goodwill balances by business segment and All Other at September 30, 20182019 and December 31, 2017.2018. The reporting units utilized for goodwill impairment testing are the operating segments or one level below. For more information, see Note 8 – Goodwill and Intangible Assets to the Consolidated Financial Statements of the Corporation’s 2017 Annual Report on Form 10-K.
    
Goodwill   
    
(Dollars in millions)September 30
2019		 December 31
2018
Consumer Banking$30,123
 $30,123
Global Wealth & Investment Management9,677
 9,677
Global Banking23,923
 23,923
Global Markets5,182
 5,182
All Other46
 46
Total goodwill$68,951
 $68,951
    
Goodwill   
    
(Dollars in millions)September 30
2018		 December 31
2017
Consumer Banking$30,123
 $30,123
Global Wealth & Investment Management9,677
 9,677
Global Banking23,923
 23,923
Global Markets5,182
 5,182
All Other46
 46
Total goodwill$68,951
 $68,951

Intangible Assets
The table below presents the gross and net carrying values and accumulated amortization for intangible assets atAt September 30, 20182019 and December 31, 2017.
            
Intangible Assets (1, 2)
           
            
 Gross
Carrying Value		 Accumulated
Amortization		 Net
Carrying Value		 Gross
Carrying Value		 Accumulated
Amortization		 Net
Carrying Value
(Dollars in millions)September 30, 2018 December 31, 2017
Purchased credit card and affinity relationships$5,919
 $5,721
 $198
 $5,919
 $5,604
 $315
Core deposit and other intangibles (3)
3,835
 2,201
 1,634
 3,835
 2,140
 1,695
Customer relationships3,886
 3,810
 76
 3,886
 3,584
 302
Total intangible assets$13,640

$11,732
 $1,908
 $13,640
 $11,328
 $2,312
(1)
Excludes fully amortized intangible assets.
(2)
At September 30, 2018 and December 31, 2017, none of the intangible assets were impaired.
(3)
Includes $1.6 billion at both September 30, 2018 and December 31, 2017 of intangible assets associated with trade names that have an indefinite life and, accordingly, are not amortized.
2018, the net carrying value of intangible assets was $1.7 billion and $1.8 billion. Both period ends included $1.6 billion of intangible assets associated with trade names, substantially all of which had an indefinite life and, accordingly, is not being amortized. Amortization of intangibles expense was $134$29 million and $404$84 million for the three and nine months ended September 30, 20182019 compared to $151$134 million and $473$404 million for the same periods in 2017. 2018.
NOTE 9 Leases
The Corporation estimates aggregate amortization expense will be $134 millionenters into both lessor and lessee arrangements. For more information on lease accounting, see Note 1 – Summary of Significant Accounting Principles and on lease financing receivables, see Note 5 – Outstanding Loans and Leases.
Lessor Arrangements
The Corporation’s lessor arrangements primarily consist of operating, sales-type and direct financing leases for equipment. Lease agreements may include options to renew and for the remainderlessee to purchase the leased equipment at the end of the lease term.
At September 30, 2019, the total net investment in sales-type and direct financing leases was $22.0 billion, comprised of $19.5 billion in lease receivables and $2.5 billion in unguaranteed residuals. In certain cases, the Corporation obtains third-party residual value insurance to reduce its residual asset risk. The carrying value of residual assets with third-party residual value insurance for at least a portion of the asset value was $5.7 billion.
For the three and nine months ended September 30, 2019, total lease income was $425 million and $1.3 billion, consisting of $198 million and $601 million from sales-type and direct financing leases and $227 million and $663 million from operating leases.
Lessee Arrangements
The Corporation’s lessee arrangements predominantly consist of operating leases for premises and equipment; the Corporation’s financing leases are not significant. Right-of-use assets were $9.8 billion and lease liabilities were $10.1 billion at September 30, 2019. The weighted-average discount rate used to calculate the present value of future minimum lease payments was 4 percent.
Lease terms may contain renewal and extension options and early termination features. Generally, these options do not impact the lease term because the Corporation is not reasonably certain that it will exercise the options. The weighted-average lease term was 8.2 years at September 30, 2019.
The table below provides the components of lease cost and supplemental information for the three and nine months ended September 30, 2019.
    
Lease Cost and Supplemental Information
    
(Dollars in millions)Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
Operating lease cost$522
 $1,561
Variable lease cost (1)
124
 364
Total lease cost (2)
$646

$1,925
    
Right-of-use assets obtained in exchange for new operating lease liabilities (3)
$108
 $756
Operating cash flows from operating leases (4)
507
 1,507
(1)
Primarily consists of payments for common area maintenance and property taxes.
(2)
Amounts are recorded in occupancy and equipment expense in the Consolidated Statement of Income.
(3)
Represents non-cash activity and, accordingly, is not reflected in the Consolidated Statement of Cash Flows.
(4)
Represents cash paid for amounts included in the measurement of lease liabilities.
Maturity Analysis
The maturities of lessor and lessee arrangements outstanding at September 30, 2019 are presented in the table below based on undiscounted cash flows.
      
Maturities of Lessor and Lessee Arrangements
      
 Lessor 
Lessee (1)
 
Operating
Leases
 
Sales-type and
Direct Financing
Leases (2)
 
Operating
Leases
(Dollars in millions)September 30, 2019
Remainder of 2019$204
 $1,540
 $503
2020775
 5,810
 1,944
2021672
 4,858
 1,722
2022578
 3,674
 1,464
2023466
 1,654
 1,202
Thereafter1,369
 3,432
 5,036
Total undiscounted
cash flows
$4,064
 $20,968
 $11,871
Less: Net present
value adjustment
  1,510
 1,741
Total (3)



$19,458

$10,130
(1)
Excludes $1.7 billion in commitments under lessee arrangements that have not yet commenced with lease terms that will begin later in 2019.
(2)
Includes $15.5 billion in commercial lease financing receivables and $4.0 billion in direct/indirect consumer lease financing receivables.
(3)
Represents lease receivables for lessor arrangements and lease liabilities for lessee arrangements.
At December 31, 2018, $105 millionoperating lease commitments under lessee arrangements were $2.4 billion, $2.2 billion, $2.0 billion, $1.7 billion and $1.3 billion for 2019 $53 millionthrough 2023, respectively, and $6.2 billion in the aggregate for 2020all years thereafter. These amounts include variable lease payments and none forcommitments under leases that have not yet commenced, both of which are excluded from the years thereafter.lessee maturity analysis presented in the table above.



9175Bank of America


  








NOTE 9 10 Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings and Restricted Cash
The table below presents federal funds sold or purchased, securities financing agreements (which include securities borrowed or purchased under agreements to resell and securities loaned or sold under agreements to repurchase) and short-term borrowings. The Corporation elects to account for certain securities financing agreements and short-term borrowings under the fair value option. For more information on the fair value option, see Note 1516 – Fair Value Option.
                              
Amount Rate Amount Rate Amount Rate Amount RateAmount Rate Amount Rate Amount Rate Amount Rate
Three Months Ended September 30 Nine Months Ended September 30Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions)2018 2017 2018 20172019 2018 2019 2018
Federal funds sold and securities borrowed or purchased under agreements to resell 
    
  
         
    
  
        
Average during period$241,426
 1.31% $223,585
 0.86% $247,183
 1.15% $222,255
 0.77%$269,129
 1.83% $241,426
 1.31% $274,822
 1.82% $247,183
 1.15%
Maximum month-end balance during period267,989
 n/a
 224,815
 n/a
 267,989
 n/a
 237,064
 n/a
278,514
 n/a
 267,989
 n/a
 280,562
 n/a
 267,989
 n/a
Federal funds purchased and securities loaned or sold under agreements to repurchase 
  
  
  
         
  
  
  
        
Average during period$191,693
 1.88% $197,794
 1.37% $193,854
 1.71% $199,433
 1.18%$203,702
 2.35% $191,693
 1.88% $202,632
 2.43% $193,854
 1.71%
Maximum month-end balance during period189,206
 n/a
 197,604
 n/a
 199,419
 n/a
 218,017
 n/a
202,208
 n/a
 189,206
 n/a
 203,063
 n/a
 199,419
 n/a
Short-term borrowings 
  
  
  
         
  
  
  
        
Average during period33,410
 2.89
 32,153
 2.54
 40,048
 2.49
 38,329
 2.43
26,579
 2.29
 33,410
 2.89
 21,728
 2.62
 40,048
 2.49
Maximum month-end balance during period36,043
 n/a
 32,679
 n/a
 52,480
 n/a
 46,202
 n/a
30,682
 n/a
 36,043
 n/a
 30,682
 n/a
 52,480
 n/a
n/a = not applicable
Offsetting of Securities Financing Agreements
The Corporation enters into securities financing agreements to accommodate customers (also referred to as “matched-book transactions”), obtain securities to cover short positions and to finance inventory positions. Substantially allFor more information on securities financing agreements and the offsetting of securities financing transactions, see Note 10 – Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings and Restricted Cash to the Consolidated Financial Statements of the Corporation’s 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 counterparty2018 Annual Report on the Consolidated Balance Sheet where it has such a legally enforceable masterForm 10-K.
 
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 September 30, 20182019 and December 31, 2017.2018. Balances are presented on a gross basis, prior to the application of counterparty netting. Gross assets and liabilities are adjusted on an aggregate basis to take into consideration the effects of legally enforceable master netting agreements. For more information on the offsetting of derivatives, see Note 3 – Derivatives.
          
Securities Financing Agreements
          
 
Gross Assets/Liabilities (1)
 Amounts Offset Net Balance Sheet Amount 
Financial Instruments (2)
 Net Assets/Liabilities
(Dollars in millions)September 30, 2019
Securities borrowed or purchased under agreements to resell (3)
$436,856
 $(165,261) $271,595
 $(246,906) $24,689
Securities loaned or sold under agreements to repurchase$367,328
 $(165,261) $202,067
 $(180,143) $21,924
Other (4)
23,399
 —
 23,399
 (23,399) —
Total$390,727
 $(165,261) $225,466
 $(203,542) $21,924
          
 December 31, 2018
Securities borrowed or purchased under agreements to resell (3)
$366,274
 $(106,865) $259,409
 $(240,790) $18,619
Securities loaned or sold under agreements to repurchase$293,853
 $(106,865) $186,988
 $(176,740) $10,248
Other (4)
19,906
 —
 19,906
 (19,906) —
Total$313,759
 $(106,865) $206,894
 $(196,646) $10,248
          
Securities Financing Agreements
          
 
Gross Assets/Liabilities (1)
 Amounts Offset Net Balance Sheet Amount 
Financial Instruments (2)
 Net Assets/Liabilities
(Dollars in millions)September 30, 2018
Securities borrowed or purchased under agreements to resell (3)
$373,800
 $(125,563) $248,237
 $(218,291) $29,946
Securities loaned or sold under agreements to repurchase$297,163
 $(125,563) $171,600
 $(151,842) $19,758
Other (4)
24,446
 —
 24,446
 (24,446) —
Total$321,609

$(125,563)
$196,046

$(176,288)
$19,758
          
 December 31, 2017
Securities borrowed or purchased under agreements to resell (3)
$348,472
 $(135,725) $212,747
 $(165,720) $47,027
Securities loaned or sold under agreements to repurchase$312,582
 $(135,725) $176,857
 $(146,205) $30,652
Other (4)
22,711
 —
 22,711
 (22,711) —
Total$335,293

$(135,725)
$199,568

$(168,916)
$30,652

(1) 
Includes activity where uncertainty exists as to the enforceability of certain master netting agreements under bankruptcy laws in some countries or industries.
(2) 
Includes securities collateral received or pledged under repurchase or securities lending agreements where there is a legally enforceable master netting agreement. These amounts are not offset on the Consolidated Balance Sheet, but are shown as a reduction to derive a net asset or liability. Securities collateral received or pledged where the legal enforceability of the master netting agreements is uncertain is excluded from the table.
(3) 
Excludes repurchase activity of $11.114.2 billion and $10.211.5 billion reported in loans and leases on the Consolidated Balance Sheet at September 30, 20182019 and December 31, 20172018.
(4) 
Balance is reported in accrued expenses and other liabilities on the Consolidated Balance Sheet and relates to transactions where the Corporation acts as the lender in a securities lending agreement and receives securities that can be pledged as collateral or sold. In these transactions, the Corporation recognizes an asset at fair value, representing the securities received, and a liability, representing the obligation to return those securities.

Bank of America92

Repurchase Agreements and Securities Loaned Transactions Accounted for as Secured Borrowings
The following tables 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. For more information on collateral requirements, see Note 10 – Federal Funds Sold or Purchased, Securities Financing Agreements, Short-term Borrowings and Restricted Cash to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.

Bank of America 76

                  
Remaining Contractual Maturity
                  
September 30, 2018Overnight and Continuous 30 Days or Less After 30 Days Through 90 Days 
Greater than
90 Days (1)
 Total
(Dollars in millions)Overnight and Continuous 30 Days or Less After 30 Days Through 90 Days 
Greater than
90 Days (1)
 TotalSeptember 30, 2019
Securities sold under agreements to repurchase$128,222
 $68,852
 $22,920
 $58,089
 $278,083
$193,237
 $80,022
 $31,557
 $45,706
 $350,522
Securities loaned13,364
 738
 896
 4,082
 19,080
11,925
 1,212
 364
 3,305
 16,806
Other24,446
 —
 —
 —
 24,446
23,399
 —
 —
 —
 23,399
Total$166,032

$69,590

$23,816

$62,171

$321,609
$228,561
 $81,234
 $31,921
 $49,011
 $390,727
                  
December 31, 2017December 31, 2018
Securities sold under agreements to repurchase$125,956
 $79,913
 $46,091
 $38,935
 $290,895
$139,017
 $81,917
 $34,204
 $21,476
 $276,614
Securities loaned9,853
 5,658
 2,043
 4,133
 21,687
7,753
 4,197
 1,783
 3,506
 17,239
Other22,711
 —
 —
 —
 22,711
19,906
 —
 —
 —
 19,906
Total$158,520

$85,571

$48,134

$43,068

$335,293
$166,676
 $86,114
 $35,987
 $24,982
 $313,759
(1) 
No agreements have maturities greater than three years.
        
Class of Collateral Pledged
        
 Securities Sold Under Agreements to Repurchase 
Securities
Loaned
 Other Total
(Dollars in millions)September 30, 2019
U.S. government and agency securities$207,348
 $31
 $—
 $207,379
Corporate securities, trading loans and other11,976
 3,485
 232
 15,693
Equity securities15,542
 10,313
 23,116
 48,971
Non-U.S. sovereign debt111,371
 2,977
 51
 114,399
Mortgage trading loans and ABS4,285
 —
 —
 4,285
Total$350,522
 $16,806
 $23,399
 $390,727
        
 December 31, 2018
U.S. government and agency securities$164,664
 $—
 $—
 $164,664
Corporate securities, trading loans and other11,400
 2,163
 287
 13,850
Equity securities14,090
 10,869
 19,572
 44,531
Non-U.S. sovereign debt81,329
 4,207
 47
 85,583
Mortgage trading loans and ABS5,131
 —
 —
 5,131
Total$276,614
 $17,239
 $19,906
 $313,759
        
Class of Collateral Pledged
        
 September 30, 2018
(Dollars in millions)Securities Sold Under Agreements to Repurchase 
Securities
Loaned
 Other Total
U.S. government and agency securities$158,567
 $10
 $2
 $158,579
Corporate securities, trading loans and other13,448
 2,656
 363
 16,467
Equity securities17,268
 10,953
 24,028
 52,249
Non-U.S. sovereign debt84,435
 5,461
 53
 89,949
Mortgage trading loans and ABS4,365
 —
 —
 4,365
Total$278,083

$19,080

$24,446

$321,609
        
 December 31, 2017
U.S. government and agency securities$158,299
 $—
 $409
 $158,708
Corporate securities, trading loans and other12,787
 2,669
 624
 16,080
Equity securities23,975
 13,523
 21,628
 59,126
Non-U.S. sovereign debt90,857
 5,495
 50
 96,402
Mortgage trading loans and ABS4,977
 —
 —
 4,977
Total$290,895

$21,687

$22,711

$335,293

Under repurchase agreements, the Corporation is required to post collateral with a market value equal to or in excess of the principal amount borrowed. For securities loaned transactions, the Corporation receives collateral in the form of cash, letters of credit or other securities. To determine whether the market value of 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.
Restricted Cash
At September 30, 20182019 and December 31, 2017,2018, the Corporation held restricted cash included within cash and cash equivalents on the Consolidated Balance Sheet of $18.3$20.4 billion and $18.8$22.6 billion, predominantly related to cash segregated in compliance with securities regulations and cash held on deposit with the Federal Reserve Bank and non-U.S. central banks to meet reserve requirements.requirements and cash segregated in compliance with securities regulations.

93Bank of America





NOTE 10 11Commitments and Contingencies
In the normal course of business, the Corporation enters into a number of off-balance sheet commitments. These commitments expose the Corporation to varying degrees of credit and market risk and are subject to the same credit and market risk limitation reviews as those instruments recorded on the Consolidated Balance Sheet. For more information on commitments and contingencies, see Note 12 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K.
Credit Extension Commitments
The Corporation enters into commitments to extend credit such as loan commitments, SBLCsstandby letters of credit (SBLCs) and commercial letters of credit to meet the financing needs of its customers. The following table includes the notional amount of unfunded legally binding lending commitments net of amounts
distributed (i.e., syndicated or participated) to other financial institutions. The distributed amounts were $10.8$10.9 billion and $11.0$10.7 billion at September 30, 20182019 and December 31, 2017.2018. At September 30, 2018,2019, the carrying value of these commitments, excluding commitments accounted for under the fair value option, was $808$826 million,,
including deferred revenue of $16$17 million and a reserve for unfunded lending commitments of $792$809 million. At December 31, 2017,2018, the comparable amounts were $793$813 million,, $16 $16 million and $777$797 million,, respectively. The carrying value of these commitments is classified in accrued expenses and other liabilities on the Consolidated Balance Sheet.
Legally binding commitments to extend credit generally have specified rates and maturities. Certain of these commitments have adverse change clauses that help to protect the Corporation against deterioration in the borrower’s ability to pay.
The following table below also includes the notional amount of commitments of $3.2$4.8 billion and $4.8$3.1 billion at September 30, 20182019 and December 31, 20172018 that are accounted for under the fair value option. However, the following table excludes cumulative net fair value of $70$116 millionand $120$169 million at September 30, 20182019 and December 31, 20172018 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 1516 – Fair Value Option.

77Bank of America





                  
Credit Extension Commitments                  
  
Expire in One
Year or Less		 Expire After One
Year Through
Three Years		 
Expire After Three Years Through
Five Years
 
Expire After
Five Years
 TotalExpire in One
Year or Less		 Expire After One
Year Through
Three Years		 
Expire After Three Years Through
Five Years
 
Expire After
Five Years
 Total
(Dollars in millions)September 30, 2018September 30, 2019
Notional amount of credit extension commitments 
  
  
  
  
 
  
  
  
  
Loan commitments$86,501
 $142,327
 $154,991
 $22,724
 $406,543
Loan commitments (1)
$90,401
 $150,634
 $166,467
 $20,344
 $427,846
Home equity lines of credit3,203
 2,494
 3,115
 34,411
 43,223
1,379
 1,854
 5,459
 34,601
 43,293
Standby letters of credit and financial guarantees (1)
20,653
 9,838
 2,555
 1,151
 34,197
Letters of credit1,262
 223
 74
 73
 1,632
Standby letters of credit and financial guarantees (2)
20,206
 10,530
 3,365
 1,179
 35,280
Letters of credit (3)
1,060
 246
 60
 45
 1,411
Legally binding commitments111,619
 154,882
 160,735
 58,359
 485,595
113,046
 163,264
 175,351
 56,169
 507,830
Credit card lines (2)
373,295
 —
 —
 —
 373,295
Credit card lines (4)
377,392
 —
 —
 —
 377,392
Total credit extension commitments$484,914
 $154,882
 $160,735
 $58,359
 $858,890
$490,438
 $163,264
 $175,351
 $56,169
 $885,222
                  
December 31, 2017December 31, 2018
Notional amount of credit extension commitments 
  
  
  
  
 
  
  
  
  
Loan commitments$85,804
 $140,942
 $147,043
 $21,342
 $395,131
Loan commitments (1)
$84,910
 $142,271
 $155,298
 $22,683
 $405,162
Home equity lines of credit6,172
 4,457
 2,288
 31,250
 44,167
2,578
 2,249
 3,530
 34,702
 43,059
Standby letters of credit and financial guarantees (1)
19,976
 11,261
 3,420
 1,144
 35,801
Letters of credit1,291
 117
 129
 87
 1,624
Standby letters of credit and financial guarantees (2)
22,571
 9,702
 2,457
 1,074
 35,804
Letters of credit (3)
1,168
 84
 69
 57
 1,378
Legally binding commitments113,243
 156,777
 152,880
 53,823
 476,723
111,227
 154,306
 161,354
 58,516
 485,403
Credit card lines (2)
362,030
 —
 —
 —
 362,030
Credit card lines (4)
371,658
 —
 —
 —
 371,658
Total credit extension commitments$475,273
 $156,777
 $152,880
 $53,823
 $838,753
$482,885
 $154,306
 $161,354
 $58,516
 $857,061
(1)  
At September 30, 2019 andDecember 31, 2018, $5.3 billion and $4.3 billion of these loan commitments are held in the form of a security.
(2)
The notional amounts of SBLCs and financial guarantees classified as investment grade and non-investment grade based on the credit quality of the underlying reference name within the instrument were $26.9$26.6 billion and $6.9$8.3 billion at September 30, 2018,2019, and $27.3$28.3 billion and $8.1$7.1 billion at December 31, 2017.2018. Amounts in the table include consumer SBLCs of $402$406 million and $421$372 million at September 30, 20182019 and December 31, 2017.2018.
(3)
At September 30, 2019 and December 31, 2018, included are letters of credit of $1.1 billion and $422 million related to certain liquidity commitments of VIEs. For additional information, see Note 7 – Securitizations and Other Variable Interest Entities.
(2) (4) 
Includes business card unused lines of credit.
Other Commitments
At September 30, 20182019 and December 31, 2017,2018, the Corporation had commitments to purchase loans (e.g., residential mortgage and commercial real estate) of $341$135 million and $344 million, and commitments to purchase commercial loans of $764 million and $994$329 million, which upon settlement will be included in loans or LHFS.LHFS, and commitments to purchase commercial loans of $464 million and $463 million, which upon settlement will be included in trading account assets.
At September 30, 20182019 and December 31, 2017,2018, the Corporation had commitments to purchase commodities, primarily liquefied natural gas, of $1.7 billion$976 million and $1.5$1.3 billion, which upon settlement will be included in trading account assets.
At September 30, 20182019 and December 31, 2017,2018, the Corporation had commitments to enter into resale and forward-dated resale and securities borrowing agreements of $80.2$119.7 billion and $56.8$59.7 billion, and commitments to enter into forward-dated
repurchase and securities lending agreements of $40.3$64.4 billion and $34.3$21.2 billion. These commitments expire primarily within the next 15 months.
At both September 30, 20182019 and December 31, 2017,2018, the Corporation had a commitment to originate or purchase up to $3.2 billion and $3.0 billion on a rolling 12-month basis, of auto loans and leases from a strategic partner. This commitment extends through November 2022 and can be terminated with 12 months prior notice. In addition, at December 31, 2017, the Corporation had a commitment to purchase a maximum of $345 million of retail automobile loans from certain auto loan originators, which was terminated in the first quarter of 2018.
The Corporation is a party to operating leases for certain of its premises and equipment. Commitments under these leases are approximately $600 million, $2.3 billion, $2.1 billion, $1.9 billion

Bank of America94

and $1.6 billion for the remainder of 2018 and the years through 2022, respectively, and $6.3 billion in the aggregate for all years thereafter.
Other Guarantees
Bank-owned Life Insurance Book Value Protection
The Corporation sells products that offer book value protection to insurance carriers who offer group life insurance policies to corporations, primarily banks. At both September 30, 20182019 and December 31, 2017,2018, the notional amount of these guarantees totaled $10.4$7.2 billion and $9.8 billion. At September 30, 2019 and December 31, 2018, the Corporation’s maximum exposure related to these guarantees totaled $1.6$1.1 billion at both period ends,and $1.5 billion, with estimated maturity dates between 2033 and 2039.
Merchant Services
In accordance with credit and debit card association rules, the Corporation sponsors merchant processing servicers that process credit and debit card transactions on behalf of various merchants. If thea merchant processor fails to meet its obligation to reimburse the cardholder forregarding disputed transactions, then the Corporation as the sponsor, could be held liable for the disputed amount.liable. For the three and nine months ended September 30, 2018 ,2019, the sponsored entities processed $229.4 billion and settled$670.6 billion of transactions and recorded losses of $6 million and $17 million. For the same periods in 2018, the sponsored entities processed $220.0 billion and $646.9 billion of transactions and recorded losses of $6 million and $23 million. For the same periods in 2017, the sponsored entities processed and settled $200.4 billion and $591.8 billion of transactions and recorded losses of $7 million and $22 million. A significant portion of this activity was processed by a joint venture in which the Corporation holds a 49 percent ownership. The carrying value of the Corporation’s investment in the merchant services joint venture was $2.8 billion and $2.9 billion at
At September 30, 20182019 and December 31, 2017, and is recorded in other assets on the Consolidated Balance Sheet and in All Other.
At September 30, 2018, and December 31, 2017, the maximum potential exposure for sponsored transactions totaled $363.0$375.7 billion and $346.4 billion.$348.1 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.
A significant portion of the Corporation's merchant processing activity is performed by a joint venture, formed in 2009, in which the Corporation holds a 49 percent ownership interest. The carrying value of the Corporation’s investment was $652 million and $2.8 billion at September 30, 2019 and December 31, 2018. The joint venture is accounted for as an equity method investment and reported in All Other. On July 29, 2019, the Corporation gave notice to the joint venture partner of the termination of the joint venture upon the conclusion of its current term in June 2020. As a result, the Corporation incurred a non-cash, pretax impairment charge in the three months ended September 30, 2019 of $2.1 billion, included in other general operating expense.
Representations and Warranties Obligations and Corporate Guarantees
For more information on representations and warranties obligations and corporate guarantees, and the related reserve and estimated range of possible loss, see Note 712 – RepresentationsCommitments and Warranties Obligations and Corporate Guarantees

Bank of America 78

Contingenciesto the Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K.
The reserve for representations and warranties obligations and corporate guarantees was $2.0$1.8 billion and $1.9$2.0 billion at September 30, 20182019 and December 31, 20172018 and is included in accrued expenses and other liabilities on the Consolidated Balance Sheet and the related provision is included in other income in the Consolidated Statement of Income. The representations and warranties reserve represents the Corporation’s best estimate of probable incurred losses. It is reasonably possible that future representations and warranties losses may occur in excess of the amounts recorded for these exposures. See Litigation and Regulatory Matters below for the Corporation’s combined range of possible loss in excess of the reserve for representations and warranties and the accrued liability for litigation.
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$8.1 billion and $5.9 billion at September 30, 20182019 and December 31, 2017. The estimated maturity dates of these obligations extend up to 2040.2018. The Corporation has made no material payments under these guarantees. For more information on maximum potential future payments under VIE-related liquidity commitments, see Note 7 – Securitizations and Other Variable Interest Entities.
During the three months ended September 30, 2019, the Corporation recognized a loss of $135 million in other income under its indemnity obligation in connection with the sale of its non-U.S. consumer credit card business (payment protection insurance). For additional information, see Note 12 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.
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
On June 1, 2017, the Corporation sold its non-U.S. consumer credit card business. Included in the calculation of the gain on sale, the Corporation recorded an obligation to indemnify the purchaser for substantially all payment protection insurance exposure above reserves assumed by the purchaser.
Guarantees of Certain Long-term Debt
The Corporation, as the parent company, fully and unconditionally guarantees the securities issued by BofA Finance LLC, a 100 percent owned finance subsidiary of the Corporation, and effectively provides for the full and unconditional guarantee of trust securities issued by certain statutory trust companies that are 100 percent owned finance subsidiaries of the Corporation.
Litigation and Regulatory Matters
The following disclosure supplements the disclosure in Note 12 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K and in Note 10 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s Quarterly Reports on Form 10-Q for the quarters ended June 30, 2018 and March 31, 2018 (the prior commitments and contingencies disclosure).
In the ordinary course of business, the Corporation and its subsidiaries are routinely defendants in or parties to many pending and threatened legal, regulatory and governmental actions and proceedings. In view of the inherent difficulty of predicting the outcome of such matters, particularly where the claimants seek very large or indeterminate damages or where the matters present novel legal theories or involve a large number of parties, the Corporation generally cannot predict what the eventual outcome of the pending or threatened matters, will be, what the timing of the ultimate resolution of these
matters, will be, or what theany eventual loss, fines or penalties related to each matter may be.pending matter.
In accordance with applicable accounting guidance, the Corporation establishes an accrued liability when those matters present loss contingencies that are both probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. Excluding expenses of internal and external legal service providers, litigation-related expense of $90$352 million and $292$539 million was recognized for the three and nine months ended September 30, 20182019 compared to $140$90 million and $606$292 million for the same periods in 2017.2018.
For a limited number of the matters disclosed in this Note, and in the prior commitments and contingencies disclosure, 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. InWith respect to such matters, 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

95Bank of America





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 disclosed matters where an estimate of the range of possible loss is reasonably possible, as well as for representations and warranties exposures, management currently estimates the aggregate range of reasonably possible loss for these exposures is $0 to $1.2$1.8 billion in excess of the accrued liability, if any, related to those matters.any. 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, or in the prior commitments and contingencies disclosure regarding the nature of the litigation 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 hereinbelow, and in the prior commitments and contingencies disclosure, 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.
LIBOR, Other Reference Rates, Foreign Exchange (FX) and BondInvestigations of Precious Metals Trading Matters
In the LIBOR matters, in July 2018,connection with the U.S. CourtCommodity Futures Trading Commission's (CFTC) and U.S. Department of Appeals for the Second Circuit denied plaintiffs’ petition forJustice's (DoJ) investigations of precious metals market trading practices, on June 25, 2019, Merrill Lynch Commodities, Inc. (MLCI), an interlocutory appealindirect wholly-owned subsidiary of the district court’s denial of certification ofCorporation, entered into a class of lending institution plaintiffs,civil settlement with the CFTC and a non-prosecution agreement with the DoJ. Those resolutions resulted in September 2018, denied defendants’ petitionsettlement payments totaling $36.5 million and require MLCI and the Corporation to undertake certain remedial measures and other obligations.

79Bank of America





Mortgage Appraisal Litigation
The District Court has scheduled the cases for an interlocutory appealtrial beginning January 14, 2020.
Mortgage Repurchase Litigation
U.S. Bank - SURF/OWNIT Repurchase Litigation
On July 19, 2019, a settlement regarding one of the district court’s certification of antitrust claims broughtseven securitization trusts (the Trusts) became final. For the remaining six Trusts, the defendants and certain certificate-holders agreed to settle the respective litigations in amounts not material to the Corporation, subject to acceptance by the over-the-counter class of plaintiffs.U.S. Bank.
NOTE 11 12Shareholders’ Equity
Common Stock
       
Declared Quarterly Cash Dividends on Common Stock (1)
       
Declaration Date Record Date Payment Date Dividend Per Share
October 22, 2019 December 6, 2019 December 27, 2019 $0.18
July 25, 2019 September 6, 2019 September 27, 2019 0.18
April 24, 2019 June 7, 2019 June 28, 2019 0.15
January 30, 2019 March 1, 2019 March 29, 2019 0.15
       
Declared Quarterly Cash Dividends on Common Stock (1)
       
Declaration Date Record Date Payment Date Dividend Per Share
October 24, 2018 December 7, 2018 December 28, 2018 $0.15
July 26, 2018 September 7, 2018 September 28, 2018 0.15
April 25, 2018 June 1, 2018 June 29, 2018 0.12
January 31, 2018 March 2, 2018 March 30, 2018 0.12

(1) 
In 20182019, and through October 29, 201828, 2019.
During the three and nine months ended September 30, 2018,2019, the Corporation repurchased and retired 164268 million and 482
713 million shares of common stock, which reduced shareholders’ equity by $5.0$7.6 billion and $14.9$20.4 billion.
At September 30, 2018, the Corporation had unexercised warrants outstanding to purchase 122 million shares of its common stock expiring on October 29, 2018, and warrants outstanding and exercisable to purchase 130 million shares of common stock 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. As a result of the Corporation’s third-quarter 2018 dividend of $0.15 per common share, the exercise price of the warrants expiring on January 16, 2019 was adjusted to $12.609 per share. The unexercised warrants expiring on October 29, 2018 have an exercise price of $30.79 per share.
During the nine months ended September 30, 2018,2019, in connection with employee stock plans, the Corporation issued 7491 million shares of its common stock and, to satisfy tax withholding obligations, repurchased 2935 million shares of its common stock.At September 30, 2018,2019, the Corporation had reserved 787586 million unissued shares of common stock for future issuances under employee stock plans, common stock warrants, convertible notes and preferred stock.
Preferred Stock
During the three months ended March 31, 2018,2019, June 30, 20182019 and September 30, 2018,2019, the Corporation declared $428$442 million, $318$239 millionand $466$505 million of cash dividends on preferred stock, or a total of $1.2 billion for the nine months ended September 30, 2018.
2019. On July 24, 2018,September 17, 2019, the Corporation issued 34,16052,400 shares of 5.875%5.000% Non-Cumulative Preferred Stock, Series HHLL for $844 million, net of deferred fees.$1.3 billion. Dividends are paid quarterly commencing on October 24, 2018.December 17, 2019. The Series HHLL preferred stock has a liquidation preference of $25,000 per share and is subject to certain restrictions in the event the Corporation fails to declare and pay full dividends.
During the three months ended September 30, 2018,2019, the Corporation fully redeemed Series D,W for $1.1 billion, and partially redeemed Series I,V for $1.3 billion. On October 28, 2019, the Corporation redeemed the remaining outstanding shares of Series K and Series 3V preferred stock for a total of $1.7 billion.stock. For additionalmore information on the Corporation’sCorporation's preferred stock, including liquidation preference, dividend requirements and redemption period, see Note 13 – Shareholders’ Equity to the Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K.



Bank of America96

NOTE 12 Accumulated Other Comprehensive Income (Loss)
The table below presents the changes in accumulated OCI after-tax for the nine months ended September 30, 2018 and 2017.
            
(Dollars in millions)
Debt and
Equity Securities
 Debit Valuation Adjustments Derivatives 
Employee
Benefit Plans
 
Foreign
Currency
 Total
Balance, December 31, 2016$(1,267) $(767) $(895) $(3,480) $(879) $(7,288)
Net change931
 (149) 156
 80
 102
 1,120
Balance, September 30, 2017$(336) $(916) $(739) $(3,400) $(777) $(6,168)
            
Balance, December 31, 2017$(1,206) $(1,060) $(831) $(3,192) $(793) $(7,082)
Accounting change related to certain tax effects (1)
(393) (220) (189) (707) 239
 (1,270)
Cumulative adjustment for hedge accounting change (2)
—
 —
 57
 —
 —
 57
Net change(6,166) 183
 (346) 91
 (303) (6,541)
Balance, September 30, 2018$(7,765) $(1,097) $(1,309) $(3,808) $(857) $(14,836)
The table below presents the net change in fair value recorded in accumulated OCI, net realized gains and losses reclassified into earnings and other changes for each component of OCI pre- and after-tax for the nine months ended September 30, 2018 and 2017.
            
Changes in OCI Components Pre- and After-tax        
  
 Pretax 
Tax
effect
 
After-
tax
 Pretax 
Tax
effect
 
After-
tax
 Nine Months Ended September 30
(Dollars in millions)2018 2017
Debt and equity securities:           
Net increase (decrease) in fair value$(8,198) $2,075
 $(6,123) $1,802
 $(674) $1,128
Net realized (gains) reclassified into earnings (3)
(55) 12
 (43) (312) 115
 (197)
Net change(8,253) 2,087
 (6,166) 1,490
 (559) 931
Debit valuation adjustments:           
Net increase (decrease) in fair value220
 (52) 168
 (255) 96
 (159)
Net realized losses reclassified into earnings (3)
20
 (5) 15
 30
 (20) 10
Net change240
 (57) 183
 (225) 76
 (149)
Derivatives:           
Net increase (decrease) in fair value(601) 174
 (427) 79
 (30) 49
Reclassifications into earnings:           
Net interest income134
 (33) 101
 274
 (103) 171
Personnel expense(27) 7
 (20) (103) 39
 (64)
Net realized losses reclassified into earnings107
 (26) 81
 171
 (64) 107
Net change(494) 148
 (346) 250
 (94) 156
Employee benefit plans:           
Reclassifications into earnings:           
Net actuarial losses and other119
 (28) 91
 128
 (48) 80
Net realized losses reclassified into earnings (4)
119
 (28) 91
 128
 (48) 80
Net change119
 (28) 91
 128
 (48) 80
Foreign currency:           
Net increase (decrease) in fair value(87) (165) (252) (454) 462
 8
Net realized (gains) losses reclassified into earnings (3)
(143) 92
 (51) (608) 702
 94
Net change(230) (73) (303) (1,062) 1,164
 102
Total other comprehensive income (loss)$(8,618) $2,077
 $(6,541) $581
 $539
 $1,120
(1)
Effective January 1, 2018, the Corporation adopted the accounting standard on tax effects in accumulated OCI related to the Tax Act. Accordingly, certain tax effects were reclassified from accumulated OCI to retained earnings. For additional information, see Note 1 – Summary of Significant Accounting Principles.
(2)
Reflects the Corporation’s adoption of the hedge accounting standard. For additional information, see Note 1 – Summary of Significant Accounting Principles.
(3)
Reclassifications of pretax debt and equity securities, DVA and foreign currency (gains) losses are recorded in other income in the Consolidated Statement of Income.
(4)
Reclassifications of pretax employee benefit plan costs are recorded in other general operating expense in the Consolidated Statement of Income.

97Bank of America





NOTE 13Earnings Per Common Share
The calculation of earnings per common share (EPS) and diluted EPS for the three and nine months ended September 30, 20182019 and 20172018 is presented below. For more information on the calculation of EPS, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K.
              
Three Months Ended September 30 Nine Months Ended September 30Three Months Ended
September 30		 Nine Months Ended
September 30
(In millions, except per share information)2018 2017 2018 20172019 2018 2019 2018
Earnings per common share 
  
     
  
    
Net income$7,167
 $5,424
 $20,869
 $15,867
$5,777
 $7,167
 $20,436
 $20,869
Preferred stock dividends(466) (465) (1,212) (1,328)(505) (466) (1,186) (1,212)
Net income applicable to common shareholders$6,701
 $4,959
 $19,657
 $14,539
$5,272
 $6,701
 $19,250
 $19,657
Average common shares issued and outstanding10,031.6
 10,197.9
 10,177.5
 10,103.4
9,303.6
 10,031.6
 9,516.2
 10,177.5
Earnings per common share$0.67
 $0.49
 $1.93
 $1.44
$0.57
 $0.67
 $2.02
 $1.93
              
Diluted earnings per common share 
  
     
  
  
  
Net income applicable to common shareholders$6,701
 $4,959
 $19,657
 $14,539
$5,272
 $6,701
 $19,250
 $19,657
Add preferred stock dividends due to assumed conversions (1)
—
 37
 —
 187
Net income allocated to common shareholders$6,701
 $4,996
 $19,657
 $14,726
Average common shares issued and outstanding10,031.6
 10,197.9
 10,177.5
 10,103.4
9,303.6
 10,031.6
 9,516.2
 10,177.5
Dilutive potential common shares (2)
139.2
 548.8
 140.4
 728.7
Dilutive potential common shares (1)
49.4
 139.2
 49.5
 140.4
Total diluted average common shares issued and outstanding10,170.8
 10,746.7
 10,317.9
 10,832.1
9,353.0
 10,170.8
 9,565.7
 10,317.9
Diluted earnings per common share$0.66
 $0.46
 $1.91
 $1.36
$0.56
 $0.66
 $2.01
 $1.91
(1) 
Represents the Series T dividends under the “if-converted” method prior to conversion.
(2)
Includes incremental dilutive shares from restricted stock units, restricted stock and warrants.
The Corporation previously issued warrants to purchase 700 million shares of the Corporation’s common stock to the holders of the Series T 6% Non-cumulative preferred stock (Series T). In the third quarter of 2017, the Series T holders exercised the warrants and acquired the 700 million shares of the Corporation’s common stock. For the three and nine months ended September 30, 2017, the average dilutive impact of the 700 million potential common shares was included in the diluted share count under the “if-converted” method.
For both the three and nine months ended September 30, 20182019 and 2017,2018, 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 the three and nine months ended September 30, 2018, average options to purchase two million2000000 and five5000000 shares of common stock were outstanding but not included in the computation of EPS because the result would have been antidilutive under the treasury stock method. For both the three and nine months ended September
30, 2018, 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 18 million and 22 million for the same periods in 2017.method. These warrants expired on October 29, 2018. For the three and nine months ended September 30, 2018, average warrants to purchase 135 million and 139 million shares of common stock were included in the diluted EPS calculation under the treasury stock method compared to 150 million sharesmethod. Substantially all of common stockthese warrants were exercised on or before their expiration date of January 16, 2019.


Bank of America 80

NOTE 14Accumulated Other Comprehensive Income (Loss)
The table below presents the changes in accumulated OCI after-tax for both periods in 2017. For both the three and nine months ended September 30, 20182019 and 2017, average warrants to purchase 122 million shares2018.
            
(Dollars in millions)Debt Securities Debit Valuation Adjustments Derivatives 
Employee
Benefit Plans
 
Foreign
Currency
 Total
Balance, December 31, 2017$(1,206) $(1,060) $(831) $(3,192) $(793) $(7,082)
Accounting change related to certain tax effects (1)
(393) (220) (189) (707) 239
 (1,270)
Cumulative adjustment for hedge accounting change (2)
—
 —
 57
 —
 —
 57
Net change(6,166) 183
 (346) 91
 (303) (6,541)
Balance, September 30, 2018$(7,765) $(1,097) $(1,309) $(3,808) $(857) $(14,836)
            
Balance, December 31, 2018$(5,552) $(531) $(1,016) $(4,304) $(808) $(12,211)
Net change6,231
 (272) 651
 83
 (99) 6,594
Balance, September 30, 2019$679
 $(803) $(365) $(4,221) $(907) $(5,617)

(1)
Effective January 1, 2018, the Corporation adopted the accounting standard on tax effects in accumulated OCI related to the Tax Act. Accordingly, certain tax effects were reclassified from accumulated OCI to retained earnings.
(2)
Effective January 1, 2018, the Corporation adopted the hedge accounting standard.
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 common stock were outstanding but not included inOCI pre- and after-tax for the computation of EPS because the result would have been antidilutive under the treasury stock method.
nine months ended September 30, 2019 and 2018.
            
 Pretax 
Tax
effect
 
After-
tax
 Pretax 
Tax
effect
 
After-
tax
 Nine Months Ended September 30
(Dollars in millions)2019 2018
Debt securities:           
Net increase (decrease) in fair value$8,388
 $(2,087) $6,301
 $(8,198) $2,075
 $(6,123)
Net realized (gains) losses reclassified into earnings (1)
(93) 23
 (70) (55) 12
 (43)
Net change8,295
 (2,064) 6,231
 (8,253) 2,087
 (6,166)
Debit valuation adjustments:           
Net increase (decrease) in fair value(368) 83
 (285) 220
 (52) 168
Net realized (gains) losses reclassified into earnings (1)
16
 (3) 13
 20
 (5) 15
Net change(352) 80
 (272) 240
 (57) 183
Derivatives:           
Net increase (decrease) in fair value765
 (173) 592
 (601) 174
 (427)
Reclassifications into earnings:           
Net interest income78
 (19) 59
 134
 (33) 101
Compensation and benefits expense—
 —
 —
 (27) 7
 (20)
Net realized (gains) losses reclassified into earnings78
 (19) 59
 107
 (26) 81
Net change843
 (192) 651
 (494) 148
 (346)
Employee benefit plans:           
Net actuarial losses and other reclassified into earnings (2)
109
 (26) 83
 119
 (28) 91
Net change109
 (26) 83
 119
 (28) 91
Foreign currency:           
Net increase (decrease) in fair value114
 (185) (71) (87) (165) (252)
Net realized (gains) losses reclassified into earnings (3)
(117) 89
 (28) (143) 92
 (51)
Net change(3) (96) (99) (230) (73) (303)
Total other comprehensive income (loss)$8,892
 $(2,298) $6,594
 $(8,618) $2,077
 $(6,541)
(1)
Reclassifications of pretax debt securities and DVA are recorded in other income in the Consolidated Statement of Income.
(2)
Reclassifications of pretax employee benefit plan costs are recorded in other general operating expense in the Consolidated Statement of Income.
(3)
Reclassifications of pretax debt securities, DVA and foreign currency (gains) losses are recorded in other income in the Consolidated Statement of Income.
NOTE 14 15Fair Value Measurements
Under applicable accounting standards, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Corporation determines the fair values of its financial instruments under applicable accounting standards and conducts a review of its fair value hierarchy classifications on a quarterly basis. Transfers into or out of fair value hierarchy classifications are considered to be effective asmade if the significant inputs used in the financial models measuring the fair values of the beginning ofassets and liabilities become unobservable or observable in the quarter in which they occur.current marketplace. During the
nine months ended September 30, 2018,2019, there were no changes to valuation approaches or techniques that had, or are expected to have, a material impact on the Corporation’s consolidated financial position or results of operations.
For more information regarding the fair value hierarchy, and how the Corporation measures fair value and valuation processes and techniques, see Note 1 – Summary of Significant Accounting Principles and Note 20 – Fair Value Measurements to the Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K. The Corporation accounts for certain financial instruments under the fair value option. For additional information, see Note 1516 – Fair Value Option.




81Bank of America

 
Bank of America98





Recurring Fair Value
Assets and liabilities carried at fair value on a recurring basis at September 30, 20182019 and December 31, 2017,2018, including financial instruments whichthat the Corporation accounts for under the fair value option, are summarized in the following tables.
                  
September 30, 2018September 30, 2019
Fair Value Measurements    Fair Value Measurements    
(Dollars in millions)Level 1 Level 2 Level 3 
Netting Adjustments (1)
 Assets/Liabilities at Fair ValueLevel 1 Level 2 Level 3 
Netting Adjustments (1)
 Assets/Liabilities at Fair Value
Assets 
  
  
  
  
 
  
  
  
  
Time deposits placed and other short-term investments$1,528
 $—
 $—
 $—
 $1,528
$1,356
 $—
 $—
 $—
 $1,356
Federal funds sold and securities borrowed or purchased under agreements to resell—
 52,524
 —
 —
 52,524
—
 50,298
 —
 —
 50,298
Trading account assets: 
  
  
  
  
 
  
  
  
  
U.S. Treasury and agency securities (2)
39,677
 1,251
 —
 —
 40,928
46,103
 1,952
 —
 —
 48,055
Corporate securities, trading loans and other—
 27,281
 1,534
 —
 28,815
—
 29,625
 1,591
 —
 31,216
Equity securities66,850
 28,049
 290
 —
 95,189
77,822
 31,823
 279
 —
 109,924
Non-U.S. sovereign debt5,667
 19,524
 469
 —
 25,660
11,554
 27,237
 465
 —
 39,256
Mortgage trading loans, MBS and ABS:                  
U.S. government-sponsored agency guaranteed(2)—
 18,697
 —
 —
 18,697
—
 25,268
 —
 —
 25,268
Mortgage trading loans, ABS and other MBS—
 8,350
 1,479
 —
 9,829
—
 8,402
 1,563
 —
 9,965
Total trading account assets (3)
112,194
 103,152
 3,772
 —
 219,118
135,479
 124,307
 3,898
 —
 263,684
Derivative assets9,961
 322,940
 4,380
 (291,664) 45,617
15,501
 372,583
 3,370
 (346,331) 45,123
AFS debt securities: 
  
  
  
  
 
  
  
  
  
U.S. Treasury and agency securities50,900
 1,406
 —
 —
 52,306
55,704
 1,243
 —
 —
 56,947
Mortgage-backed securities: 
  
  
  
  
 
  
  
  
  
Agency—
 136,112
 —
 —
 136,112
—
 134,949
 —
 —
 134,949
Agency-collateralized mortgage obligations—
 5,678
 —
 —
 5,678
—
 4,962
 —
 —
 4,962
Non-agency residential—
 1,593
 544
 —
 2,137
—
 1,435
 508
 —
 1,943
Commercial—
 13,510
 —
 —
 13,510
—
 14,677
 —
 —
 14,677
Non-U.S. securities759
 6,317
 3
 —
 7,079
—
 11,077
 2
 —
 11,079
Other taxable securities—
 3,869
 7
 —
 3,876
—
 3,880
 3
 —
 3,883
Tax-exempt securities—
 18,349
 1
 —
 18,350
—
 16,432
 —
 —
 16,432
Total AFS debt securities51,659
 186,834
 555
 —
 239,048
55,704
 188,655
 513
 —
 244,872
Other debt securities carried at fair value:                  
Mortgage-backed securities:         
Non-agency residential—
 1,400
 296
 —
 1,696
U.S. Treasury and agency securities3
 —
 —
 —
 3
Non-agency residential MBS—
 1,235
 308
 —
 1,543
Commercial—
 13
 —
 —
 13
Non-U.S. securities9,943
 945
 —
 —
 10,888
2,531
 5,377
 —
 —
 7,908
Other taxable securities—
 3
 —
 —
 3
—
 3
 —
 —
 3
Total other debt securities carried at fair value9,943
 2,348
 296
 —
 12,587
2,534
 6,628
 308
 —
 9,470
Loans and leases—
 5,321
 410
 —
 5,731
—
 7,273
 401
 —
 7,674
Loans held-for-sale—
 2,590
 526
 —
 3,116
—
 4,625
 386
 —
 5,011
Other assets (4)
18,858
 1,740
 3,140
 —
 23,738
18,471
 2,081
 2,400
 —
 22,952
Total assets$204,143
 $677,449
 $13,079
 $(291,664) $603,007
Total assets (5)
$229,045
 $756,450
 $11,276
 $(346,331) $650,440
Liabilities 
  
  
  
  
 
  
  
  
  
Interest-bearing deposits in U.S. offices$—
 $529
 $—
 $—
 $529
$—
 $626
 $—
 $—
 $626
Federal funds purchased and securities loaned or sold under agreements to repurchase—
 34,242
 —
 —
 34,242
—
 21,963
 —
 —
 21,963
Trading account liabilities: 
  
  
  
   
  
  
  
  
U.S. Treasury and agency securities15,403
 362
 —
 —
 15,765
13,948
 195
 —
 —
 14,143
Equity securities38,743
 4,673
 —
 —
 43,416
34,161
 3,930
 2
 —
 38,093
Non-U.S. sovereign debt12,496
 9,863
 —
 —
 22,359
9,995
 9,011
 —
 —
 19,006
Corporate securities and other—
 8,407
 17
 —
 8,424
—
 7,387
 13
 —
 7,400
Total trading account liabilities66,642
 23,305
 17
 —
 89,964
58,104
 20,523
 15
 —
 78,642
Derivative liabilities9,142
 309,966
 4,950
 (287,869) 36,189
14,741
 361,185
 4,602
 (342,503) 38,025
Short-term borrowings—
 1,789
 —
 —
 1,789
—
 3,458
 —
 —
 3,458
Accrued expenses and other liabilities22,667
 1,849
 —
 —
 24,516
21,210
 2,302
 —
 —
 23,512
Long-term debt—
 27,754
 923
 —
 28,677
—
 35,909
 864
 —
 36,773
Total liabilities$98,451
 $399,434
 $5,890
 $(287,869) $215,906
Total liabilities (5)
$94,055
 $445,966
 $5,481
 $(342,503) $202,999
(1) 
Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.
(2) 
Includes $19.925.8 billion of GSE obligations.
(3) 
Includes securities with a fair value of $14.214.9 billion that were segregated in compliance with securities regulations or deposited with clearing organizations. This amount is included in the parenthetical disclosure on the Consolidated Balance Sheet.
(4) 
Includes MSRs of $2.21.6 billionwhich are classified as Level 3 assets.
(5)
Total recurring Level 3 assets were 0.46 percent of total consolidated assets, and total recurring Level 3 liabilities were 0.25 percent of total consolidated liabilities.


99Bank of America82






          
 December 31, 2018
 Fair Value Measurements    
(Dollars in millions)Level 1 Level 2 Level 3 
Netting Adjustments (1)
 Assets/Liabilities at Fair Value
Assets 
  
  
  
  
Time deposits placed and other short-term investments$1,214
 $—
 $—
 $—
 $1,214
Federal funds sold and securities borrowed or purchased under agreements to resell—
 56,399
 —
 —
 56,399
Trading account assets: 
  
  
  
  
U.S. Treasury and agency securities (2)
53,131
 1,593
 —
 —
 54,724
Corporate securities, trading loans and other—
 24,630
 1,558
 —
 26,188
Equity securities53,840
 23,163
 276
 —
 77,279
Non-U.S. sovereign debt5,818
 19,210
 465
 —
 25,493
Mortgage trading loans, MBS and ABS:         
U.S. government-sponsored agency guaranteed (2)
—
 19,586
 —
 —
 19,586
Mortgage trading loans, ABS and other MBS—
 9,443
 1,635
 —
 11,078
Total trading account assets (3)
112,789
 97,625
 3,934
 —
 214,348
Derivative assets9,967
 315,413
 3,466
 (285,121) 43,725
AFS debt securities: 
  
  
  
  
U.S. Treasury and agency securities53,663
 1,260
 —
 —
 54,923
Mortgage-backed securities: 
  
  
  
  
Agency—
 121,826
 —
 —
 121,826
Agency-collateralized mortgage obligations—
 5,530
 —
 —
 5,530
Non-agency residential—
 1,320
 597
 —
 1,917
Commercial—
 14,078
 —
 —
 14,078
Non-U.S. securities—
 9,304
 2
 —
 9,306
Other taxable securities—
 4,403
 7
 —
 4,410
Tax-exempt securities—
 17,376
 —
 —
 17,376
Total AFS debt securities53,663
 175,097
 606
 —
 229,366
Other debt securities carried at fair value:         
U.S. Treasury and agency securities1,282
 —
 —
 —
 1,282
Non-agency residential MBS—
 1,434
 172
 —
 1,606
Non-U.S. securities490
 5,354
 —
 —
 5,844
Other taxable securities—
 3
 —
 —
 3
Total other debt securities carried at fair value1,772
 6,791
 172
 —
 8,735
Loans and leases—
 4,011
 338
 —
 4,349
Loans held-for-sale—
 2,400
 542
 —
 2,942
Other assets (4)
15,032
 1,775
 2,932
 —
 19,739
Total assets (5)
$194,437
 $659,511
 $11,990
 $(285,121) $580,817
Liabilities 
  
  
  
  
Interest-bearing deposits in U.S. offices$—
 $492
 $—
 $—
 $492
Federal funds purchased and securities loaned or sold under agreements to repurchase—
 28,875
 —
 —
 28,875
Trading account liabilities: 
  
  
  
  
U.S. Treasury and agency securities7,894
 761
 —
 —
 8,655
Equity securities33,739
 4,070
 —
 —
 37,809
Non-U.S. sovereign debt7,452
 9,182
 —
 —
 16,634
Corporate securities and other—
 5,104
 18
 —
 5,122
Total trading account liabilities49,085
 19,117
 18
 —
 68,220
Derivative liabilities9,931
 303,441
 4,401
 (279,882) 37,891
Short-term borrowings—
 1,648
 —
 —
 1,648
Accrued expenses and other liabilities18,096
 1,979
 —
 —
 20,075
Long-term debt—
 26,872
 817
 —
 27,689
Total liabilities (5)
$77,112
 $382,424
 $5,236
 $(279,882) $184,890
          
 December 31, 2017
 Fair Value Measurements    
(Dollars in millions)Level 1 Level 2 Level 3 
Netting Adjustments (1)
 Assets/Liabilities at Fair Value
Assets 
  
  
  
  
Time deposits placed and other short-term investments$2,234
 $—
 $—
 $—
 $2,234
Federal funds sold and securities borrowed or purchased under agreements to resell—
 52,906
 —
 —
 52,906
Trading account assets: 
  
  
  
  
U.S. Treasury and agency securities (2)
38,720
 1,922
 —
 —
 40,642
Corporate securities, trading loans and other—
 28,714
 1,864
 —
 30,578
Equity securities60,747
 23,958
 235
 —
 84,940
Non-U.S. sovereign debt6,545
 15,839
 556
 —
 22,940
Mortgage trading loans, MBS and ABS:         
U.S. government-sponsored agency guaranteed—
 20,586
 —
 —
 20,586
Mortgage trading loans, ABS and other MBS—
 8,174
 1,498
 —
 9,672
Total trading account assets (3)
106,012
 99,193
 4,153
 —
 209,358
Derivative assets6,305
 341,178
 4,067
 (313,788) 37,762
AFS debt securities: 
  
  
  
  
U.S. Treasury and agency securities51,915
 1,608
 —
 —
 53,523
Mortgage-backed securities: 
  
  
  
  
Agency—
 192,929
 —
 —
 192,929
Agency-collateralized mortgage obligations—
 6,804
 —
 —
 6,804
Non-agency residential—
 2,669
 —
 —
 2,669
Commercial—
 13,684
 —
 —
 13,684
Non-U.S. securities772
 5,880
 25
 —
 6,677
Other taxable securities—
 5,261
 509
 —
 5,770
Tax-exempt securities—
 20,106
 469
 —
 20,575
Total AFS debt securities52,687
 248,941
 1,003
 —
 302,631
Other debt securities carried at fair value:         
Mortgage-backed securities:         
Non-agency residential—
 2,769
 —
 —
 2,769
Non-U.S. securities8,191
 1,297
 —
 —
 9,488
Other taxable securities—
 229
 —
 —
 229
Total other debt securities carried at fair value8,191
 4,295
 —
 —
 12,486
Loans and leases—
 5,139
 571
 —
 5,710
Loans held-for-sale—
 1,466
 690
 —
 2,156
Other assets (4)
19,367
 789
 2,425
 —
 22,581
Total assets$194,796
 $753,907
 $12,909
 $(313,788) $647,824
Liabilities 
  
  
  
  
Interest-bearing deposits in U.S. offices$—
 $449
 $—
 $—
 $449
Federal funds purchased and securities loaned or sold under agreements to repurchase—
 36,182
 —
 —
 36,182
Trading account liabilities: 
  
  
  
  
U.S. Treasury and agency securities17,266
 734
 —
 —
 18,000
Equity securities33,019
 3,885
 —
 —
 36,904
Non-U.S. sovereign debt11,976
 7,382
 —
 —
 19,358
Corporate securities and other—
 6,901
 24
 —
 6,925
Total trading account liabilities62,261
 18,902
 24
 —
 81,187
Derivative liabilities6,029
 334,261
 5,781
 (311,771) 34,300
Short-term borrowings—
 1,494
 —
 —
 1,494
Accrued expenses and other liabilities21,887
 945
 8
 —
 22,840
Long-term debt—
 29,923
 1,863
 —
 31,786
Total liabilities$90,177
 $422,156
 $7,676
 $(311,771) $208,238

(1) 
Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.
(2) 
Includes $21.320.2 billion of GSE obligations.
(3) 
Includes securities with a fair value of $16.816.6 billion that were segregated in compliance with securities regulations or deposited with clearing organizations. This amount is included in the parenthetical disclosure on the Consolidated Balance Sheet.
(4) 
Includes MSRs of $2.32.0 billion which are classified as Level 3 assets.
(5)
Total recurring Level 3 assets were 0.51 percent of total consolidated assets, and total recurring Level 3 liabilities were 0.25 percent of total consolidated liabilities.




83Bank of America

 
Bank of America100





The following tables present a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three and nine months ended September 30, 20182019 and 2017,2018, including net realized and unrealized gains (losses) included in earnings and accumulated OCI. Transfers into Level 3 occur primarily due to
decreased price observability, and transfers out of Level 3 occur primarily due to increased price observability. Transfers occur on a regular basis for long-term debt instruments due to changes in the impact of unobservable inputs on the value of the embedded derivative in relation to the instrument as a whole.
  
Level 3 – Fair Value Measurements for the Three Months Ended September 30, 2018 (1)
Level 3 – Fair Value Measurements (1)
Level 3 – Fair Value Measurements (1)
  
Balance
July 1
2018
Total Realized/Unrealized Gains (Losses) (2)
Gains
(Losses)
in OCI (3)
Gross
Gross
Transfers
into
Level 3 
Gross
Transfers
out of
Level 3 
Balance
September 30
2018
Change in Unrealized Gains (Losses) Related to Financial Instruments Still Held (2)
Balance
July 1
Total Realized/Unrealized Gains (Losses) in Net Income (2)
Gains
(Losses)
in OCI (3)
Gross
Gross
Transfers
into
Level 3 
Gross
Transfers
out of
Level 3 
Balance
September 30
Change in Unrealized Gains (Losses) in Net Income Related to Financial Instruments Still Held (2)
(Dollars in millions)PurchasesSalesIssuancesSettlementsPurchasesSalesIssuancesSettlements
Three Months Ended September 30, 2019 
Trading account assets: 
 
 
 
  
 
 
 
Corporate securities, trading loans and other$1,393
$28
$—
$158
$(153)$—
$(143)$356
$(48)$1,591
$—
Equity securities296
(8)—
17
(81)—
(1)66
(10)279
(31)
Non-U.S. sovereign debt481
9
(28)—
—
—
(36)39
—
465
10
Mortgage trading loans, ABS and other MBS1,389
(8)—
91
(156)—
(48)316
(21)1,563
(24)
Total trading account assets3,559
21
(28)266
(390)—
(228)777
(79)3,898
(45)
Net derivative assets (4)
(1,114)73
—
81
(270)—
(36)—
34
(1,232)52
AFS debt securities: 
 
 
 
 
 
 
 
 
 
 
Non-agency residential MBS568
—
(13)—
—
—
(8)—
(39)508
—
Non-U.S. securities2
—
—
—
—
—
—
—
—
2
—
Other taxable securities3
—
—
—
—
—
—
—
—
3
—
Total AFS debt securities573
—
(13)—
—
—
(8)—
(39)513
—
Other debt securities carried at fair value – Non-agency residential MBS273
(8)—
—
—
—
(5)48
—
308
(8)
Loans and leases (5,6)
355
8
—
27
(17)44
(16)—
—
401
8
Loans held-for-sale (5)
486
5
(11)2
—
—
(96)—
—
386
(7)
Other assets (6, 7)
2,551
(40)(5)—
—
53
(163)4
—
2,400
(82)
Trading account liabilities – Equity securities(2)—
—
—
—
—
—
—
—
(2)—
Trading account liabilities – Corporate securities
and other
(13)1
—
(1)—
—
—
—
—
(13)(1)
Long-term debt (5)
(902)16
1
(27)—
—
49
(1)—
(864)16
 
Three Months Ended September 30, 2018 
Trading account assets: 
 
 
 
  
 
 
  
Corporate securities, trading loans and other$1,638
$14
$—
$54
$(87)$—
$(175)$269
$(179)$1,534
$(14)$1,638
$14
$—
$54
$(87)$—
$(175)$269
$(179)$1,534
$(14)
Equity securities228
8
—
21
—
—
—
43
(10)290
8
228
8
—
21
—
—
—
43
(10)290
8
Non-U.S. sovereign debt368
10
(13)—
—
—
—
109
(5)469
11
368
10
(13)—
—
—
—
109
(5)469
11
Mortgage trading loans, ABS and other MBS1,523
16
(1)75
(184)—
(29)191
(112)1,479
8
1,523
16
(1)75
(184)—
(29)191
(112)1,479
8
Total trading account assets3,757
48
(14)150
(271)—
(204)612
(306)3,772
13
3,757
48
(14)150
(271)—
(204)612
(306)3,772
13
Net derivative assets (4)
(1,588)(53)—
23
(66)—
111
20
983
(570)(51)(1,588)(53)—
23
(66)—
111
20
983
(570)(51)
AFS debt securities: 
 
 
 
 
 
 
 
 
 
  
 
 
  
 
 
 
 
Non-agency residential MBS453
31
(28)—
(72)—
—
235
(75)544
—
453
31
(28)—
(72)—
—
235
(75)544
—
Non-U.S. securities3
—
—
—
—
—
—
—
—
3
—
3
—
—
—
—
—
—
—
—
3
—
Other taxable securities99
(1)(3)—
(22)—
—
—
(66)7
—
99
(1)(3)—
(22)—
—
—
(66)7
—
Tax-exempt securities1
—
—
—
—
—
—
—
—
1
—
1
—
—
—
—
—
—
—
—
1
—
Total AFS debt securities556
30
(31)—
(94)—
—
235
(141)555
—
556
30
(31)—
(94)—
—
235
(141)555
—
Other debt securities carried at fair value – Non-agency residential MBS287
(23)—
—
—
—
—
60
(28)296
(10)287
(23)—
—
—
—
—
60
(28)296
(10)
Loans and leases (5, 6)
493
—
—
—
(62)—
(21)—
—
410
(1)
Loans and leases (5)
493
—
—
—
(62)—
(21)—
—
410
(1)
Loans held-for-sale (5)
577
12
(4)39
—
—
(82)12
(28)526
9
577
12
(4)39
—
—
(82)12
(28)526
9
Other assets (6, 7)
3,184
121
—
—
(22)31
(174)—
—
3,140
55
3,184
121
—
—
(22)31
(174)—
—
3,140
55
Trading account liabilities – Corporate securities and other(35)9
—
9
—
—
—
—
—
(17)(6)(35)9
—
9
—
—
—
—
—
(17)(6)
Long-term debt (5)
(1,225)11
(1)—
—
(11)106
(106)303
(923)13
(1,225)11
(1)—
—
(11)106
(106)303
(923)13
(1) 
Assets (liabilities). For assets, increase (decrease) to Level 3 and for liabilities, (increase) decrease to Level 3.
(2) 
Includes gains (losses) reported in earnings in the following income statement line items: Trading account assets/liabilities - predominantly trading account profits;income; Net derivative assets - primarily trading account profitsincome and other income; Other debt securities carried at fair value - other income; Loans and leases - other income; Loans held-for-sale - other income; Other assets - primarily other income related to MSRs; Long-term debt - primarily trading account profits. For MSRs, the amounts reflect the changes in modeled MSR fair value due to observed changes in interest rates, volatility, spreads and the shape of the forward swap curve, and periodic adjustments to the valuation model to reflect changes in the modeled relationships between inputs and projected cash flows, as well as changes in cash flow assumptions including cost to service.income.
(3) 
Includes unrealized gains (losses) in OCI on AFS debt securities, foreign currency translation adjustments and the impact of changes in the Corporation’s credit spreads on long-term debt accounted for under the fair value option. For additional information, see Note 1 – SummaryTotal gains (losses) in OCI include net unrealized losses of Significant Accounting Principles $53 million related to the Consolidated Financial Statementsof the Corporation’s 2017 Annual Report on Form 10-K.financial instruments still held at September 30, 2019.
(4) 
Net derivative assets include derivative assets of $3.4 billion and $4.4 billion and derivative liabilities of $4.6 billion and $5.0 billion at September 30, 2019 and 2018.
(5) 
Amounts represent instruments that are accounted for under the fair value option.
(6) 
Issuances represent loan originations and MSRs recognized following securitizations or whole-loan sales.
(7) 
Settlements primarily represent the net change in fair value of the MSR asset due to the recognition of modeled cash flows and the passage of time.
Transfers into Level 3, primarily due to decreased price observability, during the three months ended September 30, 2018 included $612 million of trading account assets, $235 million of AFS debt securities, $60 million of other debt securities carried at fair value and $106 million of long-term debt. Transfers occur on a regular basis for long-term debt instruments due to changes in the impact of unobservable inputs on the value of the embedded derivative in relation to the instrument as a whole.


Transfers out of Level 3, primarily due to increased price observability, during the three months ended September 30, 2018 included $306 million of trading account assets, $983 million of net derivative assets, $141 million of AFS debt securities and $303 million of long-term debt.

101Bank of America84






  
Level 3 – Fair Value Measurements for the Three Months Ended September 30, 2017 (1)
Level 3 – Fair Value Measurements (1)
Level 3 – Fair Value Measurements (1)
    
Balance
July 1
2017
Total Realized/Unrealized Gains (Losses) (2)
Gains
(Losses)
in OCI (3)
Gross
Gross
Transfers
into
Level 3 
Gross
Transfers
out of
Level 3 
Balance
September 30
2017
Change in Unrealized Gains (Losses) Related to Financial Instruments Still Held (2)
Balance
January 1
Total Realized/Unrealized Gains (Losses) in Net Income (2)
Gains
(Losses)
in OCI (3)
Gross
Gross
Transfers
into
Level 3 
Gross
Transfers
out of
Level 3 
Balance
September 30
Change in Unrealized Gains (Losses) in Net Income Related to Financial Instruments Still Held (2)
(Dollars in millions)PurchasesSalesIssuancesSettlementsPurchasesSalesIssuancesSettlements
Nine Months Ended September 30, 2019 
Trading account assets: 
 
 
  
  
 
  
 
 
 
  
 
 
 
Corporate securities, trading loans and other$1,777
$77
$—
$35
$(79)$5
$(208)$288
$(153)$1,742
$35
$1,558
$86
$—
$352
$(305)$—
$(349)$602
$(353)$1,591
$33
Equity securities229
8
—
3
(3)—
—
17
(10)244
10
276
14
—
38
(87)—
(4)69
(27)279
(14)
Non-U.S. sovereign debt506
33
18
—
—
—
(5)—
—
552
33
465
36
(24)1
—
—
(47)39
(5)465
37
Mortgage trading loans, ABS and other MBS1,232
10
(1)150
(157)—
(46)83
(19)1,252
(2)1,635
80
(2)488
(817)—
(172)583
(232)1,563
13
Total trading account assets3,744
128
17
188
(239)5
(259)388
(182)3,790
76
3,934
216
(26)879
(1,209)—
(572)1,293
(617)3,898
69
Net derivative assets (4)
(1,803)(252)—
150
(367)—
278
7
(36)(2,023)(283)(935)(43)—
248
(676)—
(124)139
159
(1,232)(110)
AFS debt securities: 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
 
 
 
Non-agency residential MBS597
—
77
—
—
—
(29)206
(343)508
—
Non-U.S. securities2
—
—
—
—
—
—
—
—
2
—
Other taxable securities7
—
—
—
—
—
(4)—
—
3
—
Total AFS debt securities606
—
77
—
—
—
(33)206
(343)513
—
Other debt securities carried at fair value – Non-agency residential MBS172
41
—
—
—
—
(13)155
(47)308
38
Loans and leases (5,6)
338
12
—
27
(32)97
(41)—
—
401
11
Loans held-for-sale (5,6)
542
43
(11)12
(71)11
(199)59
—
386
13
Other assets (6, 7)
2,932
(194)11
—
(10)161
(504)4
—
2,400
(342)
Trading account liabilities – Equity securities—
(2)—
—
—
—
—
—
—
(2)(2)
Trading account liabilities – Corporate securities
and other
(18)8
—
—
(3)—
—
—
—
(13)(1)
Long-term debt (5)
(817)(71)—
(27)—
(13)125
(62)1
(864)(64)
 
Nine Months Ended September 30, 2018 
Trading account assets: 
 
  
  
 
 
Corporate securities, trading loans and other$1,864
$(14)$(1)$328
$(298)$—
$(388)$517
$(474)$1,534
$(88)
Equity securities235
17
—
29
(11)—
(4)73
(49)290
17
Non-U.S. sovereign debt556
39
(55)7
(50)—
(8)117
(137)469
40
Mortgage trading loans, ABS and other MBS1,498
157
2
392
(760)—
(136)541
(215)1,479
92
Total trading account assets4,153
199
(54)756
(1,119)—
(536)1,248
(875)3,772
61
Net derivative assets (4)
(1,714)203
—
371
(919)—
488
87
914
(570)(138)
AFS debt securities: 
 
 
  
 
 
 
 
Non-agency residential MBS—
39
(42)—
(72)—
—
694
(75)544
—
Non-U.S. securities139
1
4
7
—
—
(115)—
—
36
—
25
—
(1)—
(10)—
(14)3
—
3
—
Other taxable securities483
—
1
—
—
—
(1)—
—
483
—
509
1
(5)—
(22)—
(10)60
(526)7
—
Tax-exempt securities518
—
1
—
—
—
(7)—
(45)467
—
469
—
—
—
—
—
—
1
(469)1
—
Total AFS debt securities1,140
1
6
7
—
—
(123)—
(45)986
—
Total AFS debt securities (8)
1,003
40
(48)—
(104)—
(24)758
(1,070)555
—
Other debt securities carried at fair value – Non-agency residential MBS23
—
—
—
—
—
(1)—
—
22
—
—
(27)—
—
(7)—
—
358
(28)296
(5)
Loans and leases (5, 6)
667
2
—
2
(24)—
(29)—
—
618
2
Loans and leases (5)
571
(20)—
—
(71)—
(70)—
—
410
(17)
Loans held-for-sale (5)
766
38
10
—
(4)—
(93)58
—
775
27
690
24
(31)51
—
—
(160)12
(60)526
18
Other assets (6, 7)
2,795
124
(43)—
(80)69
(191)—
—
2,674
8
Federal funds purchased and securities loaned or sold under agreements to repurchase (5)
(135)—
—
—
—
—
135
—
—
—
—
Other assets (6,7,8)
2,425
389
—
2
(68)83
(585)929
(35)3,140
188
Trading account liabilities – Corporate securities and other(22)1
—
—
(3)(1)—
—
—
(25)—
(24)11
—
9
(11)(2)—
—
—
(17)(7)
Accrued expenses and other liabilities (5)
(9)—
—
—
—
—
—
—
—
(9)—
(8)—
—
—
—
—
8
—
—
—
—
Long-term debt (5)
(1,646)(87)(7)63
—
(129)115
(244)45
(1,890)(87)(1,863)97
2
9
—
(131)429
(253)787
(923)87
(1) 
Assets (liabilities). For assets, increase (decrease) to Level 3 and for liabilities, (increase) decrease to Level 3.
(2) 
Includes gains (losses) reported in earnings in the following income statement line items: Trading account assets/liabilities - predominantly trading account profits;income; Net derivative assets - primarily trading account profits and other income; Loans and leases - other income; Loans held-for-sale - other income; Other assets - primarily other income related to MSRs; Long-term debt - trading account profits. For MSRs, the amounts reflect the changes in modeled MSR fair value due to observed changes in interest rates, volatility, spreads and the shape of the forward swap curve, and periodic adjustments to the valuation model to reflect changes in the modeled relationships between inputs and projected cash flows, as well as changes in cash flow assumptions including cost to service.
(3)
Includes unrealized gains (losses) in OCI on AFS debt securities, foreign currency translation adjustments and the impact of changes in the Corporation’s credit spreads on long-term debt accounted for under the fair value option. For additional information, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2017 Annual Report on Form 10-K.
(4)
Net derivative assets include derivative assets of $3.9 billion and derivative liabilities of $5.9 billion.
(5)
Amounts represent instruments that are accounted for under the fair value option.
(6)
Issuances represent loan originations and MSRs recognized following securitizations or whole-loan sales.
(7)
Settlements primarily represent the net change in fair value of the MSR asset due to the recognition of modeled cash flows and the passage of time.
Transfers into Level 3, primarily due to decreased price observability, during the three months ended September 30, 2017 included $388 million of trading account assets and $244 million of long-term debt. Transfers occur on a regular basis for long-term debt instruments due to changes in the impact of unobservable inputs on the value of the embedded derivative in relation to the instrument as a whole.
Transfers out of Level 3, primarily due to increased price observability, during the three months ended September 30, 2017 included $182 million of trading account assets.

Bank of America102

            
Level 3 – Fair Value Measurements for the Nine Months Ended September 30, 2018 (1)
   
(Dollars in millions)
Balance
January 1
2018
Total Realized/Unrealized Gains (Losses) (2)
Gains
(Losses)
in OCI (3)
Gross
Gross
Transfers
into
Level 3 
Gross
Transfers
out of
Level 3 
Balance
September 30
2018
Change in Unrealized Gains (Losses) Related to Financial Instruments Still Held (2)
PurchasesSalesIssuancesSettlements
Trading account assets: 
 
 
 
    
 
 
 
Corporate securities, trading loans and other$1,864
$(14)$(1)$328
$(298)$—
$(388)$517
$(474)$1,534
$(88)
Equity securities235
17
—
29
(11)—
(4)73
(49)290
17
Non-U.S. sovereign debt556
39
(55)7
(50)—
(8)117
(137)469
40
Mortgage trading loans, ABS and other MBS1,498
157
2
392
(760)—
(136)541
(215)1,479
92
Total trading account assets4,153
199
(54)756
(1,119)—
(536)1,248
(875)3,772
61
Net derivative assets (4)
(1,714)203
—
371
(919)—
488
87
914
(570)(138)
AFS debt securities: 
 
 
 
 
 
 
 
 
 
 
Non-agency residential MBS—
39
(42)—
(72)—
—
694
(75)544
—
Non-U.S. securities25
—
(1)—
(10)—
(14)3
—
3
—
Other taxable securities509
1
(5)—
(22)—
(10)60
(526)7
—
Tax-exempt securities469
—
—
—
—
—
—
1
(469)1
—
Total AFS debt securities (5)
1,003
40
(48)—
(104)—
(24)758
(1,070)555
—
Other debt securities carried at fair value – Non-agency residential MBS—
(27)—
—
(7)—
—
358
(28)296
(5)
Loans and leases (6, 7)
571
(20)—
—
(71)—
(70)—
—
410
(17)
Loans held-for-sale (6)
690
24
(31)51
—
—
(160)12
(60)526
18
Other assets (5, 7, 8)
2,425
389
—
2
(68)83
(585)929
(35)3,140
188
Trading account liabilities – Corporate securities and other(24)11
—
9
(11)(2)—
—
—
(17)(7)
Accrued expenses and other liabilities (6)
(8)—
—
—
—
—
8
—
—
—
—
Long-term debt (6)
(1,863)97
2
9
—
(131)429
(253)787
(923)87
(1)
Assets (liabilities). For assets, increase (decrease) to Level 3 and for liabilities, (increase) decrease to Level 3.
(2)
Includes gains (losses) reported in earnings in the following income statement line items: Trading account assets/liabilities - predominantly trading account profits; Net derivative assets - primarily trading account profits and other income; Other debt securities carried at fair value - other income; Loans and leases - other income; Loans held-for-sale - other income; Other assets - primarily other income related to MSRs; Long-term debt - primarily trading account profits. For MSRs, the amounts reflect the changes in modeled MSR fair value due to observed changes in interest rates, volatility, spreads and the shape of the forward swap curve, and periodic adjustments to the valuation model to reflect changes in the modeled relationships between inputs and projected cash flows, as well as changes in cash flow assumptions including cost to service.income.
(3) 
Includes unrealized gains (losses) in OCI on AFS debt securities, foreign currency translation adjustments and the impact of changes in the Corporation’s credit spreads on long-term debt accounted for under the fair value option. For additional information, see Note 1 – SummaryTotal gains (losses) in OCI include net unrealized gains of Significant Accounting Principles $47 million related to the Consolidated Financial Statementsof the Corporation’s 2017 Annual Report on Form 10-K.financial instruments still held at September 30, 2019.
(4) 
Net derivative assets include derivative assets of $3.4 billion and $4.4 billion and derivative liabilities of $4.6 billion and $5.0 billion at September 30, 2019 and 2018.
(5) 
Transfer primarily relates to the reclassification of certain securities.
(6)
Amounts represent instruments that are accounted for under the fair value option.
(7)(6) 
Issuances represent loan originations and MSRs recognized following securitizations or whole-loan sales.
(8)(7) 
Settlements primarily represent the net change in fair value of the MSR asset due to the recognition of modeled cash flows and the passage of time.
(8)
Transfers out of AFS debt securities and into other assets primarily relate to the reclassification of certain securities.
Transfers into Level 3, primarily due to decreased price observability, during the nine months ended September 30, 2018 included $1.2 billion of trading account assets, $758 million of AFS debt securities, $358 million of other debt securities carried at fair value and $253 million of long-term debt. Transfers occur on a regular basis for long-term debt instruments due to changes
in the impact of unobservable inputs on the value of the embedded derivative in relation to the instrument as a whole.
Transfers out of Level 3, primarily due to increased price observability, during the nine months ended September 30, 2018 included $875 million of trading account assets, $914 million of net derivatives assets and $787 million of long-term debt.


10385Bank of America


  







            
Level 3 – Fair Value Measurements for the Nine Months Ended September 30, 2017 (1)
   
 
Balance
January 1
2017
Total Realized/Unrealized Gains (Losses) (2)
Gains
(Losses)
in OCI (3)
Gross
Gross
Transfers
into
Level 3 
Gross
Transfers
out of
Level 3 
Balance
September 30
2017
Change in Unrealized Gains (Losses) Related to Financial Instruments Still Held (2)
(Dollars in millions)PurchasesSalesIssuancesSettlements
Trading account assets: 
 
 
    
  
 
 
Corporate securities, trading loans and other$2,777
$225
$—
$353
$(679)$5
$(443)$506
$(1,002)$1,742
$72
Equity securities281
23
—
45
(67)—
(10)119
(147)244
11
Non-U.S. sovereign debt510
64
12
26
(59)—
(73)72
—
552
60
Mortgage trading loans, ABS and other MBS1,211
195
(2)747
(846)—
(169)187
(71)1,252
107
Total trading account assets4,779
507
10
1,171
(1,651)5
(695)884
(1,220)3,790
250
Net derivative assets (4)
(1,313)(1,098)—
558
(843)—
722
36
(85)(2,023)(561)
AFS debt securities: 
 
 
    
 
 
 
 
Non-U.S. securities229
2
16
49
—
—
(260)—
—
36
—
Other taxable securities594
3
6
5
—
—
(31)—
(94)483
—
Tax-exempt securities542
—
1
—
(56)—
(10)35
(45)467
—
Total AFS debt securities1,365
5
23
54
(56)—
(301)35
(139)986
—
Other debt securities carried at fair value – Non-agency residential MBS25
(1)—
—
—
—
(2)—
—
22
—
Loans and leases (5, 6)
720
20
—
2
(24)—
(93)—
(7)618
18
Loans held-for-sale (5)
656
109
7
2
(159)—
(281)473
(32)775
60
Other assets (6, 7)
2,986
93
(31)2
(74)207
(573)64
—
2,674
(181)
Federal funds purchased and securities loaned or sold under agreements to repurchase (5)
(359)(5)—
—
—
(12)171
(58)263
—
(5)
Trading account liabilities – Corporate securities and other(27)13
—
4
(13)(2)—
—
—
(25)(1)
Accrued expenses and other liabilities (5)
(9)—
—
—
—
—
—
—
—
(9)—
Long-term debt (5)
(1,514)(160)(18)81
—
(279)398
(530)132
(1,890)(158)
(1)
Assets (liabilities). For assets, increase (decrease) to Level 3 and for liabilities, (increase) decrease to Level 3.
(2)
Includes gains (losses) reported in earnings in the following income statement line items: Trading account assets/liabilities - predominantly trading account profits; Net derivative assets - primarily trading account profits and other income; Other debt securities carried at fair value - other income; Loans and leases - other income; Loans held-for-sale - other income; Other assets - primarily other income related to MSRs; Long-term debt - trading account profits. For MSRs, the amounts reflect the changes in modeled MSR fair value due to observed changes in interest rates, volatility, spreads and the shape of the forward swap curve, and periodic adjustments to the valuation model to reflect changes in the modeled relationships between inputs and projected cash flows, as well as changes in cash flow assumptions including cost to service.  
(3)
Includes unrealized gains (losses) in OCI on AFS debt securities, foreign currency translation adjustments and the impact of changes in the Corporation’s credit spreads on long-term debt accounted for under the fair value option. For additional information, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statementsof the Corporation’s 2017 Annual Report on Form 10-K.
(4)
Net derivative assets include derivative assets of $3.9 billion and derivative liabilities of $5.9 billion.
(5)
Amounts represent instruments that are accounted for under the fair value option.
(6)
Issuances represent loan originations and MSRs recognized following securitizations or whole-loan sales.
(7)
Settlements primarily represent the net change in fair value of the MSR asset due to the recognition of modeled cash flows and the passage of time.
Transfers into Level 3, primarily due to decreased price observability, during the nine months ended September 30, 2017 included $884 million of trading account assets, $473 million of LHFS and $530 million of long-term debt. Transfers occur on a regular basis for long-term debt instruments due to changes in the impact of unobservable inputs on the value of the embedded derivative in relation to the instrument as a whole.
Transfers out of Level 3, primarily due to increased price observability, during the nine months ended September 30, 2017 included $1.2 billion of trading account assets, $139 million of AFS debt securities, $263 million of federal funds purchased and securities loaned or sold under agreements to repurchase and $132 million of long-term debt.


Bank of America104


The following tables present information about significant unobservable inputs related to the Corporation’s material categories of Level 3 financial assets and liabilities at September 30, 20182019 and December 31, 2017.2018.
    
Quantitative Information about Level 3 Fair Value Measurements at September 30, 2018 
Quantitative Information about Level 3 Fair Value Measurements at September 30, 2019Quantitative Information about Level 3 Fair Value Measurements at September 30, 2019 
        
(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 (1)
Loans and Securities (1)(2)
         
Instruments backed by residential real estate assets$1,615
Discounted cash flow, Market comparablesYield0% to 25%7%$1,515
Discounted cash flow, Market comparablesYield0% to 25%6%
Trading account assets – Mortgage trading loans, ABS and other MBS353
Prepayment speed0% to 19% CPR11%287
Prepayment speed1% to 28% CPR18% CPR
Loans and leases410
Default rate0% to 3% CDR1%401
Default rate0% to 3% CDR1% CDR
Loans held-for-sale1
Loss severity0% to 51%17%6
Loss severity0% to 48%15%
AFS debt securities, primarily non-agency residential555
Price$0 to td41$75513
Price$0 to $680$92
Other debt securities carried at fair value - Non-agency residential296
  308
   
Instruments backed by commercial real estate assets$361
Discounted cash flowYield0% to 25%7%$183
Discounted cash flowYield0% to 25%18%
Trading account assets – Corporate securities, trading loans and other272
Price$0 to td02$78158
Price$0 to td00$60
Trading account assets – Mortgage trading loans, ABS and other MBS89
  23
  
Loans held-for-sale2
   
Commercial loans, debt securities and other$3,293
Discounted cash flow, Market comparablesYield1% to 46%14%$3,529
Discounted cash flow, Market comparablesYield1% to 15%6%
Trading account assets – Corporate securities, trading loans and other1,262
Prepayment speed10% to 20%14%1,433
Prepayment speed10% to 20%17%
Trading account assets – Non-U.S. sovereign debt469
Default rate3% to 4%4%465
Default rate3% to 4%4%
Trading account assets – Mortgage trading loans, ABS and other MBS1,037
Loss severity35% to 40%38%1,253
Loss severity35% to 40%37%
Loans held-for-sale
525
Price$0 to td41$65378
Price$0 to td58$70
Other assets, primarily auction rate securities$950
Discounted cash flow, Market comparablesPricetd0 to td00$96$844
Discounted cash flow, Market comparablesPricetd0 to td00$96

      

      
MSRs$2,190
Discounted cash flow
Weighted-average life, fixed rate (4)
0 to 14 years6 years$1,556
Discounted cash flow
Weighted-average life, fixed rate (5)
0 to 14 years4 years
 
Weighted-average life, variable rate (4)
0 to 10 years3 years 
Weighted-average life, variable rate (5)
0 to 9 years3 years
 Option-adjusted spread, fixed rate9% to 14%10% Option-adjusted spread, fixed rate9% to 14%9%
 Option-adjusted spread, variable rate9% to 15%12% Option-adjusted spread, variable rate9% to 15%11%
Structured liabilities          
Long-term debt$(923)
Discounted cash flow, Market comparables, Industry standard derivative pricing (2)
Equity correlation9% to 100%61%$(864)
Discounted cash flow, Market comparables, Industry standard derivative pricing (3)
Equity correlation16% to 97%69%
 Long-dated equity volatilities4% to 79%27% Long-dated equity volatilities4% to 80%32%
 Yield7% to 46%18% Price$0 to td13$76
 Price$0 to td00$70   
Net derivative assets          
Credit derivatives$(304)Discounted cash flow, Stochastic recovery correlation modelYield2% to 12%4%$(9)Discounted cash flow, Stochastic recovery correlation modelYield5%n/a
 Upfront points0 points to 100 points69 points Upfront points0 to 100 points69 points
 Credit correlation70%n/a Prepayment speed15% to 100% CPR32% CPR
 Prepayment speed15% to 20% CPR15% Default rate1% to 4% CDR2% CDR
 Default rate1% to 4% CDR2% Loss severity35%n/a
 Loss severity35%n/a Price$0 to td38$81
 Price$0 to td01$77
Equity derivatives$(857)
Industry standard derivative pricing (2)
Equity correlation9% to 100%61%$(1,107)
Industry standard derivative pricing (3)
Equity correlation16% to 97%69%
 Long-dated equity volatilities4% to 79%27% Long-dated equity volatilities4% to 80%32%
Commodity derivatives$11
Discounted cash flow, Industry standard derivative pricing (2)
Natural gas forward pricetd/MMBtu to td1/MMBtu$3/MMBtu$18
Discounted cash flow, Industry standard derivative pricing (3)
Natural gas forward pricetd/MMBtu to $7/MMBtu$3/MMBtu
 Correlation53% to 89%78% Correlation30% to 69%68%
 Volatilities13% to 495%55% Volatilities15% to 62%33%
Interest rate derivatives$580
Industry standard derivative pricing (3)
Correlation (IR/IR)15% to 80%53%$(134)
Industry standard derivative pricing (4)
Correlation (IR/IR)15% to 97%51%
 Correlation (FX/IR)0% to 46%1% Correlation (FX/IR)0% to 46%3%
 Long-dated inflation rates-20% to 38%2% Long-dated inflation rates-15% to 148%84%
 Long-dated inflation volatilities0% to 1%1% Long-dated inflation volatilities0% to 1%1%
Total net derivative assets$(570)    $(1,232)   
(1) 
For loans and securities, structured liabilities and net derivative assets, the weighted average is calculated based upon the absolute fair value of the instruments.
(2)
The categories are aggregated based upon product type which differs from financial statement classification. The following is a reconciliation to the line items in the table on page 99:82: Trading account assets – Corporate securities, trading loans and other of $1.5$1.6 billion, Trading account assets – Non-U.S. sovereign debt of $469$465 million, Trading account assets – Mortgage trading loans, ABS and other MBS of $1.5$1.6 billion, AFS debt securities of $555$513 million, Other debt securities carried at fair value - Non-agency residential of $296$308 million, Other assets, including MSRs, of $3.1$2.4 billion, Loans and leases of $410$401 million and LHFS of $526 million.$386 million.
(2)(3) 
Includes models such as Monte Carlo simulation and Black-Scholes.
(3)(4) 
Includes models such as Monte Carlo simulation, Black-Scholes and other methods that model the joint dynamics of interest, inflation and foreign exchange rates.
(4)(5) 
The weighted-average life is a product of changes in market rates of interest, prepayment rates and other model and cash flow assumptions.
CPR = Constant Prepayment Rate
CDR = Constant Default Rate
MMBtu = Million British thermal units
IR = Interest Rate
FX = Foreign Exchange
n/a = not applicable


105Bank of America86






      
Quantitative Information about Level 3 Fair Value Measurements at December 31, 2018
     
(Dollars in millions)  Inputs
Financial InstrumentFair
Value		Valuation
Technique		Significant Unobservable
Inputs		Ranges of
Inputs
Weighted Average (1)
Loans and Securities (2)
     
Instruments backed by residential real estate assets$1,536
Discounted cash flow, Market comparablesYield0% to 25%8%
Trading account assets – Mortgage trading loans, ABS and other MBS419
Prepayment speed0% to 21% CPR12% CPR
Loans and leases338
Default rate0% to 3% CDR1% CDR
Loans held-for-sale1
Loss severity0% to 51%17%
AFS debt securities, primarily non-agency residential606
Price$0 to $128$72
Other debt securities carried at fair value - Non-agency residential172
   
Instruments backed by commercial real estate assets$291
Discounted cash flowYield0% to 25%7%
Trading account assets – Corporate securities, trading loans and other200
Price$0 to $100$79
Trading account assets – Mortgage trading loans, ABS and other MBS91
   
Commercial loans, debt securities and other$3,489
Discounted cash flow, Market comparablesYield1% to 18%13%
Trading account assets – Corporate securities, trading loans and other1,358
Prepayment speed10% to 20%15%
Trading account assets – Non-U.S. sovereign debt465
Default rate3% to 4%4%
Trading account assets – Mortgage trading loans, ABS and other MBS1,125
Loss severity35% to 40%38%
Loans held-for-sale541
Price$0 to $141$68
Other assets, primarily auction rate securities$890
Discounted cash flow, Market comparablesPrice$10 to $100$95
     
     
MSRs$2,042
Discounted cash flow
Weighted-average life, fixed rate (5)
0 to 14 years5 years
  
Weighted-average life, variable rate (5)
0 to 10 years3 years
  Option-adjusted spread, fixed rate7% to 14%9%
  Option-adjusted spread, variable rate9% to 15%12%
Structured liabilities     
Long-term debt$(817)
Discounted cash flow, Market comparables, Industry standard derivative pricing (3)
Equity correlation11% to 100%67%
  Long-dated equity volatilities4% to 84%32%
  Yield7% to 18%16%
  Price$0 to $100$72
Net derivative assets     
Credit derivatives$(565)Discounted cash flow, Stochastic recovery correlation modelYield0% to 5%4%
  Upfront points0 points to 100 points70 points
  Credit correlation70%n/a
  Prepayment speed15% to 20% CPR15% CPR
  Default rate1% to 4% CDR2% CDR
  Loss severity35%n/a
  Price$0 to $138$93
Equity derivatives$(348)
Industry standard derivative pricing (3)
Equity correlation11% to 100%67%
  Long-dated equity volatilities4% to 84%32%
Commodity derivatives$10
Discounted cash flow, Industry standard derivative pricing (3)
Natural gas forward price$1/MMBtu to $12/MMBtu$3/MMBtu
  Correlation38% to 87%71%
  Volatilities15% to 132%38%
Interest rate derivatives$(32)
Industry standard derivative pricing (4)
Correlation (IR/IR)15% to 70%61%
  Correlation (FX/IR)0% to 46%1%
  Long-dated inflation rates-20% to 38%2%
  Long-dated inflation volatilities0% to 1%1%
Total net derivative assets$(935)    
      
Quantitative Information about Level 3 Fair Value Measurements at December 31, 2017
     
(Dollars in millions)  Inputs
Financial InstrumentFair
Value		Valuation
Technique		Significant Unobservable
Inputs		Ranges of
Inputs		Weighted Average
Loans and Securities (1)
     
Instruments backed by residential real estate assets$871
Discounted cash flowYield0% to 25%6%
Trading account assets – Mortgage trading loans, ABS and other MBS298
Prepayment speed0% to 22% CPR12%
Loans and leases570
Default rate0% to 3% CDR1%
Loans held-for-sale3
Loss severity0% to 53%17%
Instruments backed by commercial real estate assets$286
Discounted cash flowYield0% to 25%9%
Trading account assets – Corporate securities, trading loans and other244
Price$0 to $100$67
Trading account assets – Mortgage trading loans, ABS and other MBS42
   
Commercial loans, debt securities and other$4,023
Discounted cash flow, Market comparablesYield0% to 12%5%
Trading account assets – Corporate securities, trading loans and other1,613
Prepayment speed10% to 20%16%
Trading account assets – Non-U.S. sovereign debt556
Default rate3% to 4%4%
Trading account assets – Mortgage trading loans, ABS and other MBS1,158
Loss severity35% to 40%37%
AFS debt securities – Other taxable securities8
Price$0 to $145$63
Loans and leases1
   
Loans held-for-sale687
   
Auction rate securities$977
Discounted cash flow, Market comparablesPrice$10 to $100$94
Trading account assets – Corporate securities, trading loans and other7
   
AFS debt securities – Other taxable securities501
   
AFS debt securities – Tax-exempt securities469
   
MSRs$2,302
Discounted cash flow
Weighted-average life, fixed rate (4)
0 to 14 years5 years
  
Weighted-average life, variable rate (4)
0 to 10 years3 years
  Option-adjusted spread, fixed rate9% to 14%10%
  Option-adjusted spread, variable rate9% to 15%12%
Structured liabilities     
Long-term debt$(1,863)
Discounted cash flow, Market comparables, Industry standard derivative pricing (2)
Equity correlation15% to 100%63%
  Long-dated equity volatilities4% to 84%22%
  Yield7.5%n/a
  Price$0 to $100$66
Net derivative assets     
Credit derivatives$(282)Discounted cash flow, Stochastic recovery correlation modelYield1% to 5%3%
  Upfront points0 points to 100 points71 points
  Credit correlation35% to 83%42%
  Prepayment speed15% to 20% CPR16%
  Default rate1% to 4% CDR2%
  Loss severity35%n/a
  Price$0 to $102$82
Equity derivatives$(2,059)
Industry standard derivative pricing (2)
Equity correlation15% to 100%63%
  Long-dated equity volatilities4% to 84%22%
Commodity derivatives$(3)
Discounted cash flow, Industry standard derivative pricing (2)
Natural gas forward price$1/MMBtu to $5/MMBtu$3/MMBtu
  Correlation71% to 87%81%
  Volatilities26% to 132%57%
Interest rate derivatives$630
Industry standard derivative pricing (3)
Correlation (IR/IR)15% to 92%50%
  Correlation (FX/IR)0% to 46%1%
  Long-dated inflation rates-14% to 38%4%
  Long-dated inflation volatilities0% to 1%1%
Total net derivative assets$(1,714)    

(1) 
For loans and securities, structured liabilities and net derivative assets, the weighted average is calculated based upon the absolute fair value of the instruments.
(2)
The categories are aggregated based upon product type which differs from financial statement classification. The following is a reconciliation to the line items in the table on page 100:83: Trading account assets – Corporate securities, trading loans and other of $1.9$1.6 billion, Trading account assets – Non-U.S. sovereign debt of $556$465 million, Trading account assets – Mortgage trading loans, ABS and other MBS of $1.5$1.6 billion, AFS debt securities –of $606 million, Other taxable securities of $509 million, AFS debt securities – Tax-exempt securitiescarried at fair value - Non-agency residential of $469$172 million, Other assets, including MSRs, of 2.9 billion, Loans and leases of $571$338 million and LHFS of $690 million.$542 million.
(2)(3) 
Includes models such as Monte Carlo simulation and Black-Scholes.
(3)(4) 
Includes models such as Monte Carlo simulation, Black-Scholes and other methods that model the joint dynamics of interest, inflation and foreign exchange rates.
(4)(5) 
The weighted-average life is a product of changes in market rates of interest, prepayment rates and other model and cash flow assumptions.
CPR = Constant Prepayment Rate
CDR = Constant Default Rate
MMBtu = Million British thermal units
IR = Interest Rate
FX = Foreign Exchange
n/a = not applicable
SensitivityUncertainty of Fair Value Measurements to Changes infrom Unobservable Inputs
For more information on the types of instruments, valuation approaches and the impact of changes in unobservable inputs used in Level 3 measurements, see Note 20 – Fair Value Measurements to the Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K.



87Bank of America

 
Bank of America106





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 impacts the weighted-average life, could result in an increase in fair value of $60 million or $125 million, while a 10 percent or 20 percent increase in prepayment rates could result in a decrease in fair value of $56 million or $109 million. A 100 bp or 200 bp decrease in option-adjusted spread (OAS) levels could result in an increase in fair value of $67 million or $139 million, while a 100
bp or 200 bp increase in OAS levels could result in a decrease in fair value of $63 million or $121 million. These sensitivities are hypothetical and actual amounts may vary materially. For more information on variations in assumptions and sensitivities on MSRs, see Note 20 – Fair Value Measurements to the Consolidated Financial Statements of the Corporation’s 2017 Annual Report on Form 10-K.
Nonrecurring Fair Value
The Corporation holds certain assets that are measured at fair value but only in certain situations (e.g., impairment)the impairment of an asset), and these measurements are referred to herein as nonrecurring. The amounts below represent assets still held as of the reporting date for which a nonrecurring fair value adjustment was recorded during the three and nine months ended September 30, 20182019 and 2017.
2018. In the tables below, other assets includes the measurement of the Corporation's merchant services equity method investment on which the Corporation recorded an impairment charge of $2.1 billion during the three months ended September 30, 2019. For additional information, see Note 11 – Commitments and Contingencies.
              
Assets Measured at Fair Value on a Nonrecurring Basis
  
September 30, 2018 Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018September 30, 2019 Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
(Dollars in millions)
Level 2 Level 3 Gains (Losses)Level 2 Level 3 Gains (Losses)
Assets 
  
     
  
    
Loans held-for-sale$45
 $12
 $(2) $(2)$5
 $111
 $(7) $(18)
Loans and leases (1)
—
 492
 (63) (194)—
 232
 (21) (62)
Foreclosed properties (2, 3)
—
 87
 (8) (22)—
 19
 (7) (10)
Other assets294
 3
 (22) (58)165
 658
 (2,085) (2,104)
              
September 30, 2017 Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017September 30, 2018 Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
Assets 
  
     
  
    
Loans held-for-sale$70
 $16
 $—
 $(4)$45
 $12
 $(2) $(2)
Loans and leases (1)
—
 813
 (152) (307)—
 492
 (63) (194)
Foreclosed properties (2, 3)
—
 79
 (21) (35)—
 87
 (8) (22)
Other assets353
 —
 (1) (121)294
 3
 (22) (58)
(1) 
Includes $248 million and $7625 million of losses on loans that were written down to a collateral value of zero during the three and nine months ended September 30, 2018,2019 compared to losses of $7124 million and $13276 million for the same periods in 2017.2018.
(2) 
Amounts are included in other assets on the Consolidated Balance Sheet and represent the carrying value of foreclosed properties that were written down subsequent to their initial classification as foreclosed properties. Losses on foreclosed properties include losses recorded during the first 90 days after transfer of a loan to foreclosed properties.
(3) 
Excludes $275 million and $500 million and $879 million of properties acquired upon foreclosure of certain government-guaranteed loans (principally FHA-insured loans) at September 30, 20182019 and 20172018.
The table below presents information about significant unobservable inputs related to the Corporation’s nonrecurring Level 3 financial assets and liabilities at September 30, 20182019 and December 31, 2017. Loans and leases backed by residential real estate assets represent residential mortgages where the loan has been written down to the fair value of the underlying collateral.2018.
      
Quantitative Information about Nonrecurring Level 3 Fair Value Measurements
      
   Inputs
Financial InstrumentFair Value
Valuation
Technique
Significant Unobservable
Inputs
Ranges of
Inputs
Weighted
Average (1)
(Dollars in millions)September 30, 2019
Loans held-for-sale$111
Discounted cash flowPrice$77 to $100$86
Loans and leases (2)
232
Market comparablesOREO discount13% to 59%24%
   Costs to sell8% to 26%9%
Other assets (3)
652
Discounted cash flowCustomer attrition0% to 19%5%
   Costs to service11% to 19%15%
 December 31, 2018
Loans and leases (2)
$474
Market comparablesOREO discount13% to 59%25%
   Costs to sell8% to 26%9%

(1)
The weighted average is calculated based upon the fair value of the loans.
(2)
Represents residential mortgages where the loan has been written down to the fair value of the underlying collateral.
(3)
The fair value of the merchant services joint venture was measured using a discounted cash flow method in which the two primary drivers of fair value were the customer attrition rate and certain costs to service the customers. The weighted averages are calculated based on variations of the attrition rates and costs to service the customers.

          
Quantitative Information about Nonrecurring Level 3 Fair Value Measurements
          
     Inputs
Financial InstrumentFair Value 
Valuation
Technique
 
Significant Unobservable
Inputs
 
Ranges of
Inputs
 Weighted Average
(Dollars in millions)

September 30, 2018
Loans and leases backed by residential real estate assets$492
 Market comparables OREO discount 13% to 59% 24%
     Costs to sell 8% to 26% 9%
          
 December 31, 2017
Loans and leases backed by residential real estate assets$894
 Market comparables OREO discount 15% to 58% 23%
     Costs to sell 5% to 49% 7%
Bank of America 88

NOTE 15 16 Fair Value Option
The Corporation elects to account for certain financial instruments under the fair value option. For more information on the primary financial instruments for which the fair value option elections have been made, see Note 21 – Fair Value Option to the Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K.
The following tables provide information about the fair
value carrying amount and the contractual principal outstanding of assets and liabilities accounted for under the fair value option at September 30, 20182019 and December 31, 2017,2018, and 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 the three and nine months ended September 30, 20182019 and 2017.2018.

            
Fair Value Option Elections
            
 September 30, 2019 December 31, 2018
(Dollars in millions)Fair Value Carrying Amount Contractual Principal Outstanding Fair Value Carrying Amount Less Unpaid Principal 
Fair Value
Carrying
Amount
 Contractual Principal Outstanding 
Fair Value Carrying
Amount Less Unpaid Principal
Federal funds sold and securities borrowed or purchased under agreements to resell$50,298
 $50,238
 $60
 $56,399
 $56,376
 $23
Loans reported as trading account assets (1)
5,362
 12,390
 (7,028) 6,195
 13,088
 (6,893)
Trading inventory – other17,989
 n/a
 n/a
 13,778
 n/a
 n/a
Consumer and commercial loans7,674
 7,738
 (64) 4,349
 4,399
 (50)
Loans held-for-sale (1)
5,011
 6,119
 (1,108) 2,942
 4,749
 (1,807)
Other assets1
 n/a
 n/a
 3
 n/a
 n/a
Long-term deposits626
 599
 27
 492
 454
 38
Federal funds purchased and securities loaned or sold under agreements to repurchase21,963
 21,966
 (3) 28,875
 28,881
 (6)
Short-term borrowings3,458
 3,458
 —
 1,648
 1,648
 —
Unfunded loan commitments116
 n/a
 n/a
 169
 n/a
 n/a
Long-term debt (2)
36,773
 36,626
 147
 27,689
 29,198
 (1,509)
107Bank of America





            
Fair Value Option Elections
            
 September 30, 2018 December 31, 2017
(Dollars in millions)Fair Value Carrying Amount Contractual Principal Outstanding Fair Value Carrying Amount Less Unpaid Principal Fair Value Carrying Amount Contractual Principal Outstanding Fair Value Carrying Amount Less Unpaid Principal
Federal funds sold and securities borrowed or purchased under agreements to resell$52,524
 $52,498
 $26
 $52,906
 $52,907
 $(1)
Loans reported as trading account assets (1)
5,538
 12,414
 (6,876) 5,735
 11,804
 (6,069)
Trading inventory – other15,676
 n/a
 n/a
 12,027
 n/a
 n/a
Consumer and commercial loans5,731
 5,776
 (45) 5,710
 5,744
 (34)
Loans held-for-sale (1)
3,116
 4,375
 (1,259) 2,156
 3,717
 (1,561)
Other assets3
 n/a
 n/a
 3
 n/a
 n/a
Long-term deposits529
 496
 33
 449
 421
 28
Federal funds purchased and securities loaned or sold under agreements to repurchase34,242
 34,252
 (10) 36,182
 36,187
 (5)
Short-term borrowings1,789
 1,789
 —
 1,494
 1,494
 —
Unfunded loan commitments70
 n/a
 n/a
 120
 n/a
 n/a
Long-term debt (2)
28,677
 29,265
 (588) 31,786
 31,512
 274

(1) 
A significant portion of the loans reported as trading account assets and loans held-for-saleLHFS are distressed loans that were purchased at a deep discount to par, and the remainder are loans with a fair value near contractual principal outstanding.
(2) 
Includes structured liabilities with a fair value of $28.336.4 billion and $31.427.3 billion, and contractual principal outstanding of $28.936.2 billion and $31.128.8 billion at September 30, 20182019 and December 31, 20172018.
n/a = not applicable
            
Gains (Losses) Relating to Assets and Liabilities Accounted for Under the Fair Value Option
            
 Three Months Ended September 30
 2019 2018
(Dollars in millions)Trading Account Income 
Other
Income
 Total Trading Account Income 
Other
Income
 Total
Loans reported as trading account assets (1)
$4
 $—
 $4
 $74
 $—
 $74
Trading inventory – other (2)
(156) —
 (156) 1,693
 —
 1,693
Consumer and commercial loans (1)
81
 (6) 75
 176
 8
 184
Loans held-for-sale (1)
—
 28
 28
 —
 8
 8
Long-term debt (3, 4)
(127) (20) (147) 143
 (19) 124
Other (5)
(1) (1) (2) 2
 52
 54
Total$(199)
$1

$(198)
$2,088

$49

$2,137
            
 Nine Months Ended September 30
 2019 2018
Loans reported as trading account assets (1)
$167
 $—
 $167
 $145
 $—
 $145
Trading inventory – other (2)
4,211
 —
 4,211
 3,649
 —
 3,649
Consumer and commercial loans (1)
98
 11
 109
 301
 (24) 277
Loans held-for-sale (1)
—
 110
 110
 1
 12
 13
Long-term debt (3, 4)
(1,412) (65) (1,477) 1,497
 (75) 1,422
Other (5)
8
 20
 28
 15
 75
 90
Total$3,072

$76

$3,148

$5,608

$(12)
$5,596
            
Gains (Losses) Relating to Assets and Liabilities Accounted for Under the Fair Value Option
            
 Trading Account Profits Other
Income		 Total Trading Account Profits Other
Income		 Total
 Three Months Ended September 30
(Dollars in millions)2018 2017
Loans reported as trading account assets$74
 $—
 $74
 $75
 $—
 $75
Trading inventory – other (1)
1,693
 —
 1,693
 1,217
 —
 1,217
Consumer and commercial loans176
 8
 184
 10
 (4) 6
Loans held-for-sale (2)
—
 8
 8
 —
 92
 92
Long-term debt (3, 4)
143
 (19) 124
 (416) (38) (454)
Other (5)
2
 52
 54
 (7) 22
 15
Total$2,088

$49

$2,137

$879

$72

$951
            
 Nine Months Ended September 30
 2018 2017
Loans reported as trading account assets$145
 $—
 $145
 $272
 $—
 $272
Trading inventory – other (1)
3,649
 —
 3,649
 2,890
 —
 2,890
Consumer and commercial loans301
 (24) 277
 19
 35
 54
Loans held-for-sale (2)
1
 12
 13
 —
 275
 275
Long-term debt (3, 4)
1,497
 (75) 1,422
 (471) (109) (580)
Other (5)
15
 75
 90
 (60) 64
 4
Total$5,608

$(12)
$5,596

$2,650

$265

$2,915

(1) 
Gains (losses) related to borrower-specific credit risk were not significant.
(2)
The gains (losses) in trading account profitsincome are primarily offset by losses(losses) gains on trading liabilities that hedge these assets.
(2)
Includes the value of IRLCs on funded loans, including those sold during the period.
(3) 
The majority of the net gains (losses) in trading account profitsincome relate to the embedded derivatives in structured liabilities and are typically offset by (losses) gains (losses) on derivatives and securities that hedge these liabilities.
(4) 
For the cumulative impact of changes in the Corporation’s own credit spreads and the amount recognized in accumulated OCI, see Note 1214 – Accumulated Other Comprehensive Income (Loss). For additionalmore information on how the Corporation’s own credit spread is determined, see Note 20 – Fair Value Measurementsto the Consolidated Financial Statementsof the Corporation’s 20172018 Annual Report on Form 10-K.
(5) 
Includes gains (losses) on federal funds sold and securities borrowed or purchased under agreements to resell, long-term deposits, federal funds purchased and securities loaned or sold under agreements to repurchase, short-term borrowings and unfunded loan commitments.
        
Gains (Losses) Related to Borrower-specific Credit Risk for Assets Accounted for Under the Fair Value Option
        
 Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions)2018 2017 2018 2017
Loans reported as trading account assets$36
 $5
 $47
 $25
Consumer and commercial loans8
 (10) (19) 31
Loans held-for-sale5
 (2) 6
 (3)
NOTE 16 17 Fair Value of Financial Instruments
The following disclosures include financial instruments that are not carried at fair value or only a portion of the ending balance at September 30, 2018 and December 31, 2017 is carried at fair value on the Consolidated Balance Sheet. Certain loans, deposits,

Bank of America108

long-term debt and loanunfunded lending commitments are accounted for under the fair value option. For additional information, see Note 21 – Fair Value Optionto the Consolidated Financial Statementsof the Corporation’s 20172018 Annual Report on Form 10-K.10-K.

89Bank of America





Fair Value of Financial Instruments
The carrying values and fair values by fair value hierarchy of certain financial instruments where only a portion of the ending balance was carried at fair value at September 30, 20182019 and December 31, 20172018 are presented in the following table.
        
Fair Value of Financial Instruments
    
   Fair Value
 Carrying Value Level 2 Level 3 Total
(Dollars in millions)September 30, 2019
Financial assets       
Loans$939,548
 $63,448
 $904,921
 $968,369
Loans held-for-sale9,811
 9,028
 783
 9,811
Financial liabilities       
Deposits (1)
1,392,836
 1,392,934
 —
 1,392,934
Long-term debt243,405
 246,781
 864
 247,645
Commercial unfunded lending commitments (2)
925
 116
 4,752
 4,868
        
 December 31, 2018
Financial assets       
Loans$911,520
 $58,228
 $859,160
 $917,388
Loans held-for-sale10,367
 9,592
 775
 10,367
Financial liabilities 
      
Deposits (1)
1,381,476
 1,381,239
 —
 1,381,239
Long-term debt229,392
 230,019
 817
 230,836
Commercial unfunded lending commitments (2)
966
 169
 5,558
 5,727
        
Fair Value of Financial Instruments
    
   Fair Value
 Carrying Value Level 2 Level 3 Total
(Dollars in millions)September 30, 2018
Financial assets       
Loans$895,452
 $59,840
 $839,262
 $899,102
Loans held-for-sale5,576
 4,287
 1,331
 5,618
Financial liabilities 
      
Deposits (1)
1,345,649
 1,345,360
 —
 1,345,360
Long-term debt234,100
 238,908
 923
 239,831
Commercial unfunded lending commitments (2)
862
 70
 4,345
 4,415
        
 December 31, 2017
Financial assets       
Loans$904,399
 $68,586
 $849,576
 $918,162
Loans held-for-sale11,430
 10,521
 909
 11,430
Financial liabilities 
     

Deposits (1)
1,309,545
 1,309,398
 —
 1,309,398
Long-term debt227,402
 235,126
 1,863
 236,989
Commercial unfunded lending commitments (2)
897
 120
 3,908
 4,028

(1) 
Includes demand deposits of $534.4$532.9 billion and $519.6$531.9 billion with no stated maturities at September 30, 20182019 and December 31, 2017.2018.
(2) 
The carrying value of commercial unfunded lending commitments is included in accrued expenses and other liabilities on the Consolidated Balance Sheet. The Corporation does not estimate the fair value of consumer unfunded lending commitments because, in many instances, the Corporation can reduce or cancel these commitments by providing notice to the borrower. For more information on commitments, see Note 1011 – Commitments and Contingencies.Contingencies.
NOTE 1718Business Segment Information
The Corporation reports its results of operations through the following four4 business segments: Consumer Banking, GWIMGlobal Wealth & Investment Management, Global Banking and Global Markets, with the remaining operations recorded in All Other. For additional information, see Note 23 – Business Segment Information to the Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K. The following tables present net income (loss) and the components thereto (with
 
components thereto (with net interest income on an FTE basis)basis for the business segments, All Other and the total Corporation) for the three and nine months ended September 30, 20182019 and 20172018, and total assets at September 30, 20182019 and 20172018 for each business segment, as well as All Other, including a reconciliationof the four business segments’ total revenue, net of interest expense, on an FTE basis, and net income to the Consolidated Statement of Income, and total assets to the Consolidated Balance Sheet.
                       
Results of Business Segments and All Other                       
                       
At and for the three months ended September 30
Total Corporation (1)
 Consumer Banking Global Wealth &
Investment Management		 
Total Corporation (1)
 Consumer Banking Global Wealth & Investment Management
(Dollars in millions)2018 2017 2018 2017 2018 2017 2019 2018 2019 2018 2019 2018
Net interest income (FTE basis)$12,021
 $11,401
 $6,863
 $6,212
 $1,536
 $1,496
Net interest income $12,335
 $12,212
 $7,031
 $6,844
 $1,609
 $1,531
Noninterest income10,907
 10,678
 2,540
 2,562
 3,247
 3,124
 10,620
 10,663
 2,693
 2,598
 3,295
 3,286
Total revenue, net of interest expense (FTE basis)22,928
 22,079
 9,403
 8,774
 4,783
 4,620
Total revenue, net of interest expense 22,955
 22,875
 9,724
 9,442
 4,904

4,817
Provision for credit losses716
 834
 870
 967
 13
 16
 779
 716
 917
 870
 37
 13
Noninterest expense13,067
 13,394
 4,355
 4,461
 3,414
 3,369
 15,169
 13,014
 4,393
 4,325
 3,413
 3,443
Income before income taxes (FTE basis)9,145
 7,851
 4,178
 3,346
 1,356
 1,235
Income tax expense (FTE basis)1,978
 2,427
 1,065
 1,260
 346
 465
Income before income taxes 7,007
 9,145
 4,414
 4,247
 1,454

1,361
Income tax expense 1,230
 1,978
 1,081
 1,082
 356
 347
Net income$7,167
 $5,424
 $3,113
 $2,086
 $1,010
 $770
 $5,777
 $7,167
 $3,333
 $3,165
 $1,098

$1,014
Period-end total assets$2,338,833
 $2,284,174
 $765,497
 $742,513
 $276,146
 $276,187
 $2,426,330
 $2,338,833
 $788,743
 $765,498
 $288,317
 $276,146
                       
Global Banking Global Markets All Other Global Banking Global Markets All Other
2018 2017 2018 2017 2018 2017 2019 2018 2019 2018 2019 2018
Net interest income (FTE basis)$2,706
 $2,642
 $754
 $899
 $162
 $152
Noninterest income (loss)2,032
 2,345
 3,089
 3,002
 (1) (355)
Total revenue, net of interest expense (FTE basis)4,738
 4,987
 3,843
 3,901
 161
 (203)
Net interest income $2,617
 $2,726
 $1,016
 $933
 $62
 $178
Noninterest income 2,595
 2,097
 2,848
 2,940
 (811) (258)
Total revenue, net of interest expense 5,212
 4,823
 3,864
 3,873

(749)
(80)
Provision for credit losses(70) 48
 (2) (6) (95) (191) 120
 (70) —
 (2) (295) (95)
Noninterest expense2,120
 2,119
 2,612
 2,711
 566
 734
 2,220
 2,142
 2,679
 2,633
 2,464
 471
Income (loss) before income taxes (FTE basis)2,688
 2,820
 1,233
 1,196
 (310) (746)
Income tax expense (benefit) (FTE basis)699
 1,062
 321
 440
 (453) (800)
Income before income taxes 2,872
 2,751
 1,185
 1,242

(2,918)
(456)
Income tax expense 775
 714
 338
 323
 (1,320) (488)
Net income$1,989
 $1,758
 $912
 $756
 $143
 $54
 $2,097
 $2,037
 $847
 $919

$(1,598)
$32
Period-end total assets$430,846
 $423,185
 $646,359
 $629,222
 $219,985
 $213,067
 $452,642
 $430,846
 $689,023
 $646,359
 $207,605
 $219,984
(1) 
There were no material intersegment revenues.


109Bank of America90






                       
Results of Business Segments and All Other                       
                       
At and for the nine months ended September 30
Total Corporation (1)
 Consumer Banking Global Wealth &
Investment Management		 
Total Corporation (1)
 Consumer Banking Global Wealth & Investment Management
(Dollars in millions)2018 2017 2018 2017 2018 2017 2019 2018 2019 2018 2019 2018
Net interest income (FTE basis)$35,583
 $33,879
 $19,993
 $17,953
 $4,673
 $4,653
Net interest income $37,201
 $36,113
 $21,253
 $19,914
 $4,917
 $4,653
Noninterest income33,383
 33,711
 7,653
 7,614
 9,675
 9,254
 32,144
 32,685
 7,820
 7,742
 9,707
 9,761
Total revenue, net of interest expense (FTE basis)68,966
 67,590
 27,646
 25,567
 14,348
 13,907
Total revenue, net of interest expense 69,345
 68,798
 29,073
 27,656
 14,624
 14,414
Provision for credit losses2,377
 2,395
 2,749
 2,639
 63
 50
 2,649
 2,377
 2,838
 2,749
 63
 63
Noninterest expense40,248
 41,469
 13,231
 13,286
 10,235
 10,085
 41,661
 40,080
 13,157
 13,241
 10,300
 10,451
Income before income taxes (FTE basis)26,341
 23,726
 11,666
 9,642
 4,050
 3,772
Income tax expense (FTE basis)5,472
 7,859
 2,975
 3,636
 1,033
 1,422
Income before income taxes 25,035
 26,341
 13,078
 11,666
 4,261
 3,900
Income tax expense 4,599
 5,472
 3,204
 2,975
 1,044
 994
Net income$20,869
 $15,867
 $8,691
 $6,006
 $3,017
 $2,350
 $20,436
 $20,869
 $9,874
 $8,691
 $3,217
 $2,906
Period-end total assets$2,338,833
 $2,284,174
 $765,497
 $742,513
 $276,146
 $276,187
 $2,426,330
 $2,338,833
 $788,743
 $765,498
 $288,317
 $276,146
                       
Global Banking Global Markets All Other Global Banking Global Markets All Other
2018 2017 2018 2017 2018 2017 2019 2018 2019 2018 2019 2018
Net interest income (FTE basis)$8,057
 $7,786
 $2,425
 $2,812
 $435
 $675
Noninterest income (loss)6,537
 7,194
 10,425
 9,743
 (907) (94)
Total revenue, net of interest expense (FTE basis)14,594
 14,980
 12,850
 12,555
 (472) 581
Net interest income $8,116
 $8,144
 $2,780
 $2,922
 $135
 $480
Noninterest income 7,226
 6,688
 9,409
 10,013
 (2,018) (1,519)
Total revenue, net of interest expense 15,342
 14,832
 12,189
 12,935
 (1,883) (1,039)
Provision for credit losses(77) 80
 (6) 2
 (352) (376) 356
 (77) (18) (6) (590) (352)
Noninterest expense6,471
 6,435
 8,145
 8,117
 2,166
 3,546
 6,697
 6,618
 8,109
 8,283
 3,398
 1,487
Income (loss) before income taxes (FTE basis)8,200
 8,465
 4,711
 4,436
 (2,286) (2,589)
Income tax expense (benefit) (FTE basis)2,132
 3,192
 1,225
 1,553
 (1,893) (1,944)
Net income (loss)$6,068
 $5,273
 $3,486
 $2,883
 $(393) $(645)
Income before income taxes 8,289
 8,291
 4,098
 4,658
 (4,691) (2,174)
Income tax expense 2,238
 2,154
 1,168
 1,211
 (3,055) (1,862)
Net income $6,051
 $6,137
 $2,930
 $3,447
 $(1,636) $(312)
Period-end total assets$430,846
 $423,185
 $646,359
 $629,222
 $219,985
 $213,067
 $452,642
 $430,846
 $689,023
 $646,359
 $207,605
 $219,984
(1) 
There were no material intersegment revenues.
              
Business Segment Reconciliations              
              
Three Months Ended September 30 Nine Months Ended September 30Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions)2018 2017 2018 20172019 2018 2019 2018
Segments’ total revenue, net of interest expense (FTE basis)$22,767
 $22,282
 $69,438
 $67,009
Segments’ total revenue, net of interest expense$23,704
 $22,955
 $71,228
 $69,837
Adjustments (1):
 
  
     
  
  
  
ALM activities273
 273
 118
 332
(221) 32
 (175) (450)
Liquidating businesses, eliminations and other(112) (476) (590) 249
(528) (112) (1,708) (589)
FTE basis adjustment(151) (240) (455) (674)(148) (151) (450) (455)
Consolidated revenue, net of interest expense$22,777
 $21,839
 $68,511
 $66,916
$22,807
 $22,724
 $68,895
 $68,343
Segments’ total net income7,024
 5,370
 21,262
 16,512
7,375
 7,135
 22,072
 21,181
Adjustments, net-of-taxes (1):
 
  
    
Adjustments, net-of-tax (1):
   
    
ALM activities88
 57
 (294) (208)(158) 29
 (112) (323)
Liquidating businesses, eliminations and other55
 (3) (99) (437)(1,440) 3
 (1,524) 11
Consolidated net income$7,167
 $5,424
 $20,869
 $15,867
$5,777
 $7,167
 $20,436
 $20,869
              
    September 30    September 30
    2018 2017    2019 2018
Segments’ total assets    $2,118,848
 $2,071,107
    $2,218,725
 $2,118,849
Adjustments (1):
     
  
     
  
ALM activities, including securities portfolio    675,886
 635,353
    686,301
 674,426
Elimination of segment asset allocations to match liabilities    (531,297) (515,007)    (546,529) (529,830)
Other    75,396
 92,721
    67,833
 75,388
Consolidated total assets    $2,338,833
 $2,284,174
    $2,426,330
 $2,338,833
(1) 
Adjustments include consolidated income, expense and asset amounts not specifically allocated to individual business segments.


91Bank of America

 
Bank of America110





The tables below present noninterest income and the components thereto for the three and nine months ended September 30, 20182019 and 20172018 for each business segment, as well as All Other.and the total Corporation. For additionalmore information, see Note 1 – Summary of Significant Accounting Principles and Note 2 – Net Interest Income and Noninterest Income.Income.
                      
Noninterest Income by Business Segment and All OtherNoninterest Income by Business Segment and All Other      Noninterest Income by Business Segment and All Other      
                      
Total Corporation Consumer Banking Global Wealth &
Investment Management		Total Corporation Consumer Banking Global Wealth &
Investment Management
Three Months Ended September 30Three Months Ended September 30
(Dollars in millions)2018 2017 2018 2017 2018 20172019 2018 2019 2018 2019 2018
Fees and commissions:           
Card income                      
Interchange fees$978
 $941
 $802
 $768
 $22
 $29
$963
 $925
 $802
 $757
 $15
 $23
Other card income492
 488
 479
 475
 11
 11
502
 492
 487

480

11

11
Total card income1,470
 1,429
 1,281
 1,243
 33
 40
1,465

1,417
 1,289
 1,237
 26
 34
Service charges                      
Deposit-related fees1,682
 1,691
 1,098
 1,082
 19
 19
1,690
 1,682
 1,097
 1,098
 16
 19
Lending-related fees279
 277
 —
 —
 —
 —
285
 279
 —

—

—

—
Total service charges1,961
 1,968
 1,098
 1,082
 19
 19
1,975

1,961
 1,097
 1,098
 16
 19
Investment and brokerage services                      
Asset management fees2,576
 2,367
 38
 34
 2,538
 2,333
2,597
 2,576
 36
 38
 2,572
 2,538
Brokerage fees918
 1,070
 42
 40
 466
 521
897
 918
 39

42

429

466
Total investment and brokerage services3,494
 3,437
 80
 74
 3,004
 2,854
3,494

3,494
 75
 80
 3,001
 3,004
Investment banking income           
Investment banking fees           
Underwriting income701
 698
 —
 —
 87
 100
740
 701
 —
 —
 88
 86
Syndication fees241
 405
 —
 —
 —
 —
341
 241
 —
 —
 —
 —
Financial advisory services262
 374
 —
 —
 1
 —
452
 262
 —

—

1

1
Total investment banking income1,204
 1,477
 —
 —
 88
 100
Trading account profits1,893
 1,837
 2
 1
 24
 29
Total investment banking fees1,533

1,204
 —
 —
 89
 87
Total fees and commissions8,467

8,076

2,461

2,415

3,132

3,144
Trading account income1,707
 1,717
 1
 2
 26
 24
Other income885
 530
 79
 162
 79
 82
446
 870
 231
 181
 137
 118
Total noninterest income$10,907
 $10,678
 $2,540
 $2,562
 $3,247
 $3,124
$10,620

$10,663

$2,693

$2,598

$3,295

$3,286
                      
Global Banking Global Markets 
All Other (1)
Global Banking Global Markets 
All Other (1)
Three Months Ended September 30Three Months Ended September 30
2018 2017 2018 2017 2018 20172019 2018 2019 2018 2019 2018
Fees and commissions:           
Card income                      
Interchange fees$130
 $122
 $24
 $22
 $—
 $—
$129
 $122
 $19
 $21
 $(2) $2
Other card income2
 2
 (1) —
 1
 —
3

2

—

—

1
 (1)
Total card income132
 124
 23
 22
 1
 —
132
 124
 19
 21
 (1) 1
Service charges                   

 

Deposit-related fees520
 546
 41
 38
 4
 6
533
 520
 37
 41
 7
 4
Lending-related fees234
 230
 45
 47
 —
 —
230

233

55

45

—
 1
Total service charges754
 776
 86
 85
 4
 6
763
 753
 92
 86
 7
 5
Investment and brokerage services                   

 

Asset management fees—
 —
 —
 —
 —
 —
—
 —
 —
 —
 (11) —
Brokerage fees28
 18
 388
 496
 (6) (5)10

27

419

388

—
 (5)
Total investment and brokerage services28
 18
 388
 496
 (6) (5)10
 27
 419
 388
 (11) (5)
Investment banking income           
Investment banking fees        

 

Underwriting income189
 105
 474
 545
 (49) (52)312
 289
 383
 374
 (43) (48)
Syndication fees217
 380
 25
 26
 (1) (1)163
 118
 178
 124
 —
 (1)
Financial advisory services237
 321
 24
 53
 —
 —
427

237

24

24

—
 —
Total investment banking income643
 806
 523
 624
 (50) (53)
Trading account profits59
 (5) 1,727
 1,714
 81
 98
Total investment banking fees902
 644
 585
 522
 (43) (49)
Total fees and commissions1,807

1,548

1,115

1,017

(48) (48)
Trading account income84
 60
 1,580
 1,551
 16
 80
Other income416
 626
 342
 61
 (31) (401)704
 489
 153
 372
 (779) (290)
Total noninterest income$2,032
 $2,345
 $3,089
 $3,002
 $(1) $(355)$2,595

$2,097

$2,848

$2,940

$(811) $(258)
(1) 
All Other includes eliminations of intercompany transactions.


111Bank of America





            
Noninterest Income by Business Segment and All Other      
            
 Total Corporation Consumer Banking Global Wealth &
Investment Management
 Nine Months Ended September 30
(Dollars in millions)2018 2017 2018 2017 2018 2017
Card income           
Interchange fees$3,018
 $2,883
 $2,488
 $2,352
 $59
 $79
Other card income1,451
 1,464
 1,414
 1,364
 33
 31
Total card income4,469
 4,347
 3,902
 3,716
 92
 110
Service charges           
Deposit-related fees5,009
 5,040
 3,214
 3,194
 55
 57
Lending-related fees827
 823
 —
 —
 —
 —
Total service charges5,836
 5,863
 3,214
 3,194
 55
 57
Investment and brokerage services           
Asset management fees7,652
 6,855
 111
 98
 7,541
 6,757
Brokerage fees2,964
 3,459
 131
 135
 1,440
 1,717
Total investment and brokerage services10,616
 10,314
 242
 233
 8,981
 8,474
Investment banking income           
Underwriting income2,160
 2,185
 —
 —
 243
 246
Syndication fees958
 1,146
 —
 —
 —
 —
Financial advisory services861
 1,262
 —
 —
 1
 1
Total investment banking income3,979
 4,593
 —
 —
 244
 247
Trading account profits6,907
 6,124
 6
 2
 81
 120
Other income1,576
 2,470
 289
 469
 222
 246
Total noninterest income$33,383
 $33,711
 $7,653
 $7,614
 $9,675
 $9,254
            
 Global Banking Global Markets 
All Other (1)
 Nine Months Ended September 30
 2018 2017 2018 2017 2018 2017
Card income           
Interchange fees$400
 $375
 $71
 $68
 $—
 $9
Other card income5
 8
 (1) (1) —
 62
Total card income405
 383
 70
 67
 —
 71
Service charges           
Deposit-related fees1,598
 1,662
 126
 111
 16
 16
Lending-related fees687
 689
 140
 134
 —
 —
Total service charges2,285
 2,351
 266
 245
 16
 16
Investment and brokerage services           
Asset management fees—
 —
 —
 —
 —
 —
Brokerage fees71
 72
 1,306
 1,548
 16
 (13)
Total investment and brokerage services71
 72
 1,306
 1,548
 16
 (13)
Investment banking income           
Underwriting income458
 404
 1,637
 1,729
 (178) (194)
Syndication fees890
 1,080
 68
 66
 —
 —
Financial advisory services782
 1,177
 78
 84
 —
 —
Total investment banking income2,130
 2,661
 1,783
 1,879
 (178) (194)
Trading account profits184
 82
 6,614
 5,634
 22
 286
Other income1,462
 1,645
 386
 370
 (783) (260)
Total noninterest income$6,537
 $7,194
 $10,425
 $9,743
 $(907) $(94)
(1)
All Other includes eliminations of intercompany transactions.



  
Bank of America11292

            
Noninterest Income by Business Segment and All Other      
            
 Total Corporation Consumer Banking Global Wealth &
Investment Management
 Nine Months Ended September 30
(Dollars in millions)2019 2018 2019 2018 2019 2018
Fees and commissions:           
Card income           
Interchange fees$2,827
 $2,850
 $2,334
 $2,349
 $43
 $59
Other card income1,459
 1,452
 1,420

1,414

30

33
Total card income4,286
 4,302
 3,754
 3,763
 73
 92
Service charges           
Deposit-related fees4,908
 5,008
 3,163
 3,214
 50
 55
Lending-related fees809
 828
 —

—

—

—
Total service charges5,717
 5,836
 3,163
 3,214
 50
 55
Investment and brokerage services           
Asset management fees7,591
 7,653
 107
 111
 7,510
 7,541
Brokerage fees2,733
 2,963
 116

131

1,295

1,440
Total investment and brokerage services10,324
 10,616
 223
 242
 8,805
 8,981
Investment banking fees           
Underwriting income2,198
 2,160
 —
 —
 295
 243
Syndication fees887
 958
 —
 —
 —
 —
Financial advisory services1,083
 861
 —

—

1

1
Total investment banking fees4,168
 3,979
 —
 —
 296
 244
Total fees and commissions24,495
 24,733
 7,140

7,219

9,224

9,372
Trading account income6,390
 6,421
 5
 6
 90
 81
Other income1,259
 1,531
 675
 517
 393
 308
Total noninterest income$32,144
 $32,685
 $7,820
 $7,742
 $9,707
 $9,761
            
 Global Banking Global Markets 
All Other (1)
 Nine Months Ended September 30
 2019 2018 2019 2018 2019 2018
Fees and commissions:           
Card income           
Interchange fees$390
 $377
 $61
 $63
 $(1)
$2
Other card income8

5

—

—

1
 —
Total card income398
 382
 61
 63
 —
 2
Service charges        

 

Deposit-related fees1,557
 1,598
 120
 126
 18
 15
Lending-related fees668

687

141

140

—
 1
Total service charges2,225
 2,285
 261
 266
 18
 16
Investment and brokerage services        

 

Asset management fees—
 —
 —
 —
 (26) 1
Brokerage fees26

71

1,296

1,306

—
 15
Total investment and brokerage services26
 71
 1,296
 1,306
 (26) 16
Investment banking fees        

 

Underwriting income917
 876
 1,147
 1,220
 (161) (179)
Syndication fees427
 472
 461
 486
 (1) —
Financial advisory services984

782

99

77

(1) 1
Total investment banking fees2,328
 2,130
 1,707
 1,783
 (163) (178)
Total fees and commissions4,977

4,868

3,325

3,418

(171) (144)
Trading account income190
 184
 5,623
 6,129
 482
 21
Other income2,059
 1,636
 461
 466
 (2,329) (1,396)
Total noninterest income$7,226
 $6,688
 $9,409
 $10,013

$(2,018) $(1,519)
(1)
All Other includes eliminations of intercompany transactions.


93Bank of America






Glossary
Alt-A Mortgage –A type of U.S. mortgage that is considered riskier than A-paper, or “prime,” and less risky than “subprime,” the riskiest category. Typically, Alt-A mortgages are characterized by borrowers with less than full documentation, lower credit scores and higher LTVs.
Assets Under Management (AUM) – The total market value of assets under the investment advisory and/or discretion of GWIM which generate asset management fees based on a percentage of the assets’ market values. AUM reflects assets that are generally managed for institutional, high net worth and retail clients, and are distributed through various investment products including mutual funds, other commingled vehicles and separate accounts.
Banking Book – All on- and off-balance sheet financial instruments of the Corporation except for those positions that are held for trading purposes.
Brokerage and Other Assets– Non-discretionary client assets which are held in brokerage accounts or held for safekeeping.
Committed Credit Exposure– Any funded portion of a facility plus the unfunded portion of a facility on which the lender is legally bound to advance funds during a specified period under prescribed conditions.
Credit Derivatives – Contractual agreements that provide protection against a specified credit event on one or more referenced obligations.
Credit Valuation Adjustment (CVA) – A portfolio adjustment required to properly reflect the counterparty credit risk exposure as part of the fair value of derivative instruments.
Debit Valuation Adjustment (DVA)– A portfolio adjustment required to properly reflect the Corporation’s own credit risk exposure as part of the fair value of derivative instruments and/or structured liabilities.
Funding Valuation Adjustment (FVA)– A portfolio adjustment required to include funding costs on uncollateralized derivatives and derivatives where the Corporation is not permitted to use the collateral it receives.
Interest Rate Lock Commitment (IRLC)– Commitment with a loan applicant in which the loan terms are guaranteed for a designated period of time subject to credit approval.
Letter of Credit– A document issued on behalf of a customer to a third party promising to pay the third party upon presentation of specified documents. A letter of credit effectively substitutes the issuer’s credit for that of the customer.
Loan-to-value (LTV)– A commonly used credit quality metric. LTV is calculated as the outstanding carrying value of the loan divided by the estimated value of the property securing the loan.
 
Margin Receivable– An extension of credit secured by eligible securities in certain brokerage accounts.
Matched Book – Repurchase and resale agreements or securities borrowed and loaned transactions where the overall asset and liability position is similar in size and/or maturity. Generally, these are entered into to accommodate customers where the Corporation earns the interest rate spread.
Mortgage Servicing Rights (MSR) – The right to service a mortgage loan when the underlying loan is sold or securitized. Servicing includes collections for principal, interest and escrow payments from borrowers and accounting for and remitting principal and interest payments to investors.
Net Interest Yield– Net interest income divided by average total interest-earning assets.
Nonperforming Loans and Leases– Includes loans and leases that have been placed on nonaccrual status, including nonaccruing loans whose contractual terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties.
Operating Margin – Income before income taxes divided by total revenue, net of interest expense.
Prompt Corrective Action (PCA)– A framework established by the U.S. banking regulators requiring banks to maintain certain levels of regulatory capital ratios, comprised of five categories of capitalization: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” Insured depository institutions that fail to meet certain of these capital levels are subject to increasingly strict limits on their activities, including their ability to make capital distributions, pay management compensation, grow assets and take other actions.
Subprime Loans – Although a standard industry definition for subprime loans (including subprime mortgage loans) does not exist, the Corporation defines subprime loans as specific product offerings for higher risk borrowers.
Troubled Debt Restructurings (TDRs)– Loans whose contractual terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties. Certain consumer loans for which a binding offer to restructure has been extended are also classified as TDRs.
Value-at-Risk (VaR)– VaR is a model that simulates the value of a portfolio under a range of hypothetical scenarios in order to generate a distribution of potential gains and losses. VaR represents the loss the portfolio is expected to experience with a given confidence level based on historical data. A VaR model is an effective tool in estimating ranges of potential gains and losses on our trading portfolios.






113Bank of America94


  




Acronyms
ABSAsset-backed securities
AFSAvailable-for-sale
ALMAsset and liability management
ARRAlternative reference rates
AUMAssets under management
BANABank of America, National Association
BHCBank holding company
BofASBofA Securities, Inc.
BofASEBofA Securities Europe SA
bpsbasis points
CCARComprehensive Capital Analysis and Review
CDOCollateralized debt obligation
CET1Common equity tier 1
CFTCCommodity Futures Trading Commission
CLTVCombined loan-to-value
CVACredit valuation adjustment
DVADebit valuation adjustment
EPSEarnings per common share
FASBEUFinancial Accounting Standards BoardEuropean Union
FDICFederal Deposit Insurance Corporation
FHAFederal Housing Administration
FHLBFederal Home Loan Bank
FHLMCFreddie Mac
FICCFixed-income, currencies and commodities
FICOFair Isaac Corporation (credit score)
FNMAFannie Mae
FTEFully taxable-equivalent
FVAFunding valuation adjustment
GAAPAccounting principles generally accepted in the United States of America
GLSGlobal Liquidity Sources
GNMAGovernment National Mortgage Association
GSEGovernment-sponsored enterprise
G-SIBGlobal systemically important bank
GWIMGlobal Wealth & Investment Management
HELOCHome equity line of credit
HQLAHigh Quality Liquid Assets
HTMHeld-to-maturity
IRLCInterest rate lock commitment
ISDAInternational Swaps and Derivatives Association, Inc.
LCRLiquidity Coverage Ratio
LHFSLoans held-for-sale
LIBORLondon InterBank Offered Rate
LTVLoan-to-value
MBSMortgage-backed securities
MD&AManagement’s Discussion and Analysis of Financial Condition and Results of Operations
MLGWMMerrill Lynch Global Wealth Management
MLIMerrill Lynch International
MLPCCMerrill Lynch Professional Clearing Corp
MLPF&SMerrill Lynch, Pierce, Fenner & Smith Incorporated
MSAMetropolitan Statistical Area
MSRMortgage servicing right
OASOption-adjusted spread
OCIOther comprehensive income
OREOOther real estate owned
OTCOver-the-counter
OTTIOther-than-temporary impairment
PCAPrompt Corrective Action
PCIPurchased credit-impaired
RMBSResidential mortgage-backed securities
SBLCStandby letter of credit
SCCLSingle-counterparty credit limits
SECSecurities and Exchange Commission
SLRSupplementary leverage ratio
TDRTroubled debt restructurings
TLACTotal loss-absorbing capacity
VaRValue-at-Risk
VIEVariable interest entity




95Bank of America

 
Bank of America114





Part II. Other Information
Bank of America Corporation and Subsidiaries
Item 1. Legal Proceedings
See Litigation and Regulatory Matters in Note 1011 – Commitments and Contingencies to the Consolidated Financial Statements, which is incorporated by reference in this Item 1, for litigation and regulatory disclosure that supplements the disclosure in Note 12 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s 20172018 Annual Report on Form 10-K and Note 10 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s Quarterly Reports on Form 10-Q for the quarters ended June 30, 2018 and March 31, 2018.10-K.
Item 1A. Risk Factors
There are no material changes from the risk factors set forth under Part 1, Item 1A. Risk Factors of the Corporation’s 20172018 Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The table below presents share repurchase activity for the three months ended September 30, 2018.2019. The primary source of funds for cash distributions by the Corporation to its shareholders is dividends received from its banking subsidiaries. Each of the banking subsidiaries is subject to various regulatory policies and requirements relating to the payment of dividends, including requirements to maintain capital above regulatory minimums. All of the Corporation’s preferred stock outstanding has preference over the Corporation’s common stock with respect to payment of dividends.
        
(Dollars in millions, except per share information; shares in thousands)
Total Common Shares Repurchased (1)
 Weighted-Average Per Share Price 
Total Shares
Purchased as
Part of Publicly
Announced Programs
 
Remaining Buyback
Authority Amounts (2)
July 1 - 31, 201832,160
 $30.32
 32,160
 $19,625
August 1 - 31, 201876,287
 31.07
 72,831
 17,360
September 1 - 30, 201858,578
 30.74
 58,558
 15,560
Three months ended September 30, 2018167,025
 30.81
 163,549
  
        
(Dollars in millions, except per share information; shares in thousands)
Total Common Shares Repurchased (1)
 Weighted-Average Per Share Price 
Total Shares
Purchased as
Part of Publicly
Announced Programs
 
Remaining Buyback
Authority Amounts (2)
July 1 - 31, 201943,183
 $30.34
 43,183
 $29,635
August 1 - 31, 2019129,976
 27.68
 126,469
 26,129
September 1 - 30, 201997,365
 28.89
 97,281
 23,319
Three months ended September 30, 2019270,524
 28.54
 266,933
  
(1) 
Includes shares of the Corporation’s common stock acquired by the Corporation in connection with satisfaction of tax withholding obligations on vested restricted stock or restricted stock units and certain forfeitures and terminations of employment-related awards and for potential re-issuance to certain employees under equity incentive plans.
(2) 
On June 28, 2018,27, 2019, following the Board of Governors of the Federal Reserve’sReserve System's non-objection to our 2018the Corporation's 2019 Comprehensive Capital Analysis and Review (CCAR) capital plan, the Board of Directors (Board) authorized the repurchase of approximately $20.6$30.9 billion in common stock from July 1, 20182019 through June 30, 2019, including2020, which includes approximately $600$900 million to offset the effect ofshares awarded under equity-based compensation plans during the same period. During the three months ended September 30, 20182019, pursuant to the Board’s authorization, the Corporation repurchased $5.07.6 billion of common stock, which included common stock to offset equity-based compensation awards. For additional information, see Capital Management --- CCAR and Capital Planning in the MD&A on page 2220 and Note 1112 – Shareholders’ Equity to the Consolidated Financial Statements.
The Corporation did not have any unregistered sales of equity securities during the three months ended September 30, 2018.2019.



115Bank of America96


Item 6. Exhibits

  
Exhibit No.DescriptionNotes
3(a)
Amended and Restated Certificate of Incorporation as in effect on the date hereof
1
3(b)
Amended Bylaws of the Corporation as in effect on the date hereof
1
31(a)
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
1
31(b)
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
1
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
1
32(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
1
101.INSXBRL Instance Document2
101.SCHXBRL Taxonomy Extension Schema Document1
101.CALXBRL Taxonomy Extension Calculation Linkbase Document1
101.LABXBRL Taxonomy Extension Label Linkbase Document1
101.PREXBRL Taxonomy Extension Presentation Linkbase Document1
101.DEFXBRL Taxonomy Extension Definitions Linkbase Document1
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)




Item 6. Exhibits
   Incorporated by Reference
Exhibit No.DescriptionNotesFormExhibitFiling DateFile No.
3(a)
Amended and Restated Certificate of Incorporation as in effect on the date hereof
 10-Q3(a)7/30/181-6523
       
3(b)
Amended and Restated Bylaws of the Corporation as in effect on the date hereof
 8-K3.13/20/151-6523
       
11
Earnings Per Share Computation – included in Note 13 – Earnings Per Common Share to the Consolidated Financial Statements
1    
       
12
Ratio of Earnings to Fixed Charges
Ratio of Earnings to Fixed Charges and Preferred Dividends
1    
       
31(a)
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
1    
       
31(b)
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
1    
       
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
1    
       
32(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
1    
       
101.INSXBRL Instance Document1    
       
101.SCHXBRL Taxonomy Extension Schema Document1    
       
101.CALXBRL Taxonomy Extension Calculation Linkbase Document1    
       
101.LABXBRL Taxonomy Extension Label Linkbase Document1    
       
101.PREXBRL Taxonomy Extension Presentation Linkbase Document1    
       
101.DEFXBRL Taxonomy Extension Definitions Linkbase Document1    
(1) Filed herewith.

(2) The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.


Signature


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
  
Bank of America Corporation
Registrant
 
     
Date:October 29, 201828, 2019 /s/ Rudolf A. Bless 
   
Rudolf A. Bless 
Chief Accounting Officer
 




97Bank of America

 
Bank of America116