Management’s Discussion and Analysis of Financial Condition and Results of Operations Table of Contents – Marketscreener.com

Page Executive Summary 26 Recent Developments 27 Financial Highlights 28 Balance Sheet Overview 30 Supplemental Financial Data 32 Business Segment Operations 37 Consumer Banking 38 Global Wealth & Investment Management 40 Global Banking 42 Global Markets 44 All Other 45 Managing Risk 46 Strategic Risk Management 49 Capital Management 49 Liquidity Risk 54 Credit Risk Management 59 Consumer Portfolio Credit Risk Management 59 Commercial Portfolio Credit Risk Management 64 Non-U.S. Portfolio 70 Loan and Lease Contractual Maturities 71 Allowance for Credit Losses 73 Market Risk Management 75 Trading Risk Management 76 Interest Rate Risk Management for the Banking Book 79 Mortgage Banking Risk Management 80 Compliance and Operational Risk Management 80 Reputational Risk Management 81 Climate Risk Management 81 Complex Accounting Estimates 82 Non-GAAP Reconciliations 85 25 Bank of America 

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

 Bank of America Corporation (the Corporation) and its management may make
certain statements that constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements can be identified by the fact that they do not relate strictly to
historical or current facts. Forward-looking statements often use words such as "anticipates," "targets," "expects," "hopes," "estimates," "intends," "plans," "goals," "believes," "continue" and other similar expressions or future or
conditional verbs such as "will," "may," "might," "should," "would" and "could."
Forward-looking statements represent the Corporation's current expectations,
plans or forecasts of its future results, revenues, provision for credit losses,
expenses, efficiency ratio, capital measures, strategy and future business and
economic conditions more generally, and other future matters. These statements
are not guarantees of future results or performance and involve certain known
and unknown risks, uncertainties and assumptions that are difficult to predict
and are often beyond the Corporation's control. Actual outcomes and results may
differ materially from those expressed in, or implied by, any of these
forward-looking statements.
You should not place undue reliance on any forward-looking statement and should
consider the following uncertainties and risks, as well as the risks and
uncertainties more fully discussed under Item 1A. Risk Factors of this Annual
Report on Form 10-K: and in any of the Corporation's subsequent Securities and
Exchange Commission filings: the Corporation's potential judgments, orders,
settlements, penalties, fines and reputational damage resulting from pending or
future litigation and regulatory investigations, proceedings and enforcement
actions, including as a result of our participation in and execution of
government programs related to the Coronavirus Disease 2019 (COVID-19) pandemic,
such as the processing of unemployment benefits for California and certain other
states; the possibility that the Corporation's future liabilities may be in
excess of its recorded liability and estimated range of possible loss for
litigation, and regulatory and government actions; the possibility that the
Corporation could face increased claims from one or more parties involved in
mortgage securitizations; the Corporation's ability to resolve representations
and warranties repurchase and related claims; the risks related to the
discontinuation of the London Interbank Offered Rate and other reference rates,
including increased expenses and litigation and the effectiveness of hedging
strategies; uncertainties about the financial stability and growth rates of
non-U.S. jurisdictions, the risk that those jurisdictions may face difficulties
servicing their sovereign debt, and related stresses on financial markets,
currencies and trade, and the Corporation's exposures to such risks, including
direct, indirect and operational; the impact of U.S. and global interest rates,
inflation, currency exchange rates, economic conditions, trade policies and
tensions, including tariffs, and potential geopolitical instability; the impact
of the interest rate, inflationary and macroeconomic environment on the
Corporation's business, financial condition and results of operations; the
possibility that future credit losses may be higher than currently expected due
to changes in economic assumptions, customer behavior, adverse developments with
respect to U.S. or global economic conditions and other uncertainties, including
the impact of supply chain disruptions, inflationary pressures and labor
shortages on economic conditions and our business; potential losses related to
the Corporation's concentration of credit risk; the Corporation's ability to
achieve its expense targets and expectations regarding revenue, net interest
income, provision for credit losses, net
charge-offs, effective tax rate, loan growth or other projections; adverse
changes to the Corporation's credit ratings from the major credit rating
agencies; an inability to access capital markets or maintain deposits or
borrowing costs; estimates of the fair value and other accounting values,
subject to impairment assessments, of certain of the Corporation's assets and
liabilities; the estimated or actual impact of changes in accounting standards
or assumptions in applying those standards; uncertainty regarding the content,
timing and impact of regulatory capital and liquidity requirements; the impact
of adverse changes to total loss-absorbing capacity requirements, stress capital
buffer requirements and/or global systemically important bank surcharges; the
potential impact of actions of the Board of Governors of the Federal Reserve
System on the Corporation's capital plans; the effect of changes in or
interpretations of income tax laws and regulations; the impact of implementation
and compliance with U.S. and international laws, regulations and regulatory
interpretations, including, but not limited to, recovery and resolution planning
requirements, Federal Deposit Insurance Corporation assessments, the Volcker
Rule, fiduciary standards, derivatives regulations and the Coronavirus Aid,
Relief, and Economic Security Act and any similar or related rules and
regulations; a failure or disruption in or breach of the Corporation's
operational or security systems or infrastructure, or those of third parties,
including as a result of cyber-attacks or campaigns; the risks related to the
transition and physical impacts of climate change; our ability to achieve
environmental, social and governance goals and commitments or the impact of any
changes in the Corporation's sustainability strategy or commitments generally;
the impact of any future federal government shutdown and uncertainty regarding
the federal government's debt limit or changes in fiscal, monetary or regulatory
policy; the emergence or continuation of widespread health emergencies or
pandemics, including the magnitude and duration of the COVID-19 pandemic and its
impact on U.S. and/or global financial market conditions and our business,
results of operations, financial condition and prospects; the impact of natural
disasters, extreme weather events, military conflict (including the
Russia/Ukraine conflict, the possible expansion of such conflict and potential
geopolitical consequences), terrorism or other geopolitical events; and other
matters.
Forward-looking statements speak only as of the date they are made, and the
Corporation undertakes no obligation to update any forward-looking statement to
reflect the impact of circumstances or events that arise after the date the
forward-looking statement was made.
Notes to the Consolidated Financial Statements referred to in the Management's
Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
are incorporated by reference into the MD&A. Certain prior-year amounts have
been reclassified to conform to current-year presentation. Throughout the MD&A,
the Corporation uses certain acronyms and abbreviations which are defined in the
Glossary. Executive Summary Business Overview
The Corporation is a Delaware corporation, a bank holding company (BHC) and a
financial holding company. When used in this report, "Bank of America," "the
Corporation," "we," "us" and "our" may refer to Bank of America Corporation
individually, Bank of America Corporation and its subsidiaries, or certain of
Bank of America Corporation's subsidiaries or affiliates. Our

Bank of America 26

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 principal executive offices are located in Charlotte, North Carolina. Through
our various bank and nonbank subsidiaries throughout the U.S. and in
international markets, we provide a diversified range of banking and nonbank
financial services and products through four business segments: Consumer
Banking, Global Wealth & Investment Management (GWIM), Global Banking and Global
Markets, with the remaining operations recorded in All Other. We operate our
banking activities primarily under the Bank of America, National Association
(Bank of America, N.A. or BANA) charter. At December 31, 2022, the Corporation
had $3.1 trillion in assets and a headcount of approximately 217,000 employees.
As of December 31, 2022, we served clients through operations across the U.S.,
its territories and more than 35 countries. Our retail banking footprint covers
all major markets in the U.S., and we serve approximately 67 million consumer
and small business clients with approximately 3,900 retail financial centers,
approximately 16,000 ATMs, and leading digital banking platforms
(www.bankofamerica.com) with approximately 44 million active users, including
approximately 35 million active mobile users. We offer industry-leading support
to approximately three million small business households. Our GWIM businesses,
with client balances of $3.4 trillion, provide tailored solutions to meet client
needs through a full set of investment management, brokerage, banking, trust and
retirement products. We are a global leader in corporate and investment banking
and trading across a broad range of asset classes serving corporations,
governments, institutions and individuals around the world. 

Recent Developments

 Capital Management
On February 1, 2023, the Corporation's Board of Directors (the Board) declared a
quarterly common stock dividend of $0.22 per share, payable on March 31, 2023 to
shareholders of record as of March 3, 2023.
For more information on our capital resources, see Capital Management on page
49. Changes in U.S. Tax Law
On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022, which
contained a number of tax-related provisions. The tax changes included the
extension and expansion of renewable energy tax credit programs, the
establishment of a new 15 percent alternative minimum tax (AMT) on adjusted
financial statement income for large corporations and a one percent excise tax
on stock repurchases. For more information, see Financial Highlights - Income
Tax Expense on page 29. Russia/Ukraine Conflict
Due to the Russia/Ukraine conflict, there has been significant volatility in
financial and commodities markets, and multiple jurisdictions have implemented
various economic sanctions. At December 31, 2022 and 2021, our direct net
country exposure to Russia was $443 million and $733 million, primarily
consisting of outstanding loans and leases totaling $391 million and $686
million, and our net country exposure to Ukraine was not significant. While the
Corporation's direct exposure to Russia is limited, the potential duration,
course and impact of the Russia/Ukraine conflict remain uncertain and could
adversely affect macroeconomic and geopolitical conditions, which could
negatively impact the Corporation's businesses, results of operations and
financial position. For more
information on the risks related to the Russia/Ukraine conflict, see the Market,
Credit and Geopolitical sections in Item 1A. Risk Factors on page 8. LIBOR and Other Benchmark Rates
After December 31, 2021, ICE Benchmark Administration (IBA) ceased publishing
British Pound Sterling (GBP), Euro, Swiss Franc, and Japanese Yen (JPY) London
Interbank Offered Rate (LIBOR) settings and one-week and two-month U.S. dollar
(USD) LIBOR settings, subject to the continued publication of certain
non-representative LIBOR settings based on a modified calculation (i.e., on a "synthetic" basis). The remaining USD LIBOR settings (i.e., overnight, one
month, three month, six month and 12 month) will cease or become
non-representative immediately after June 30, 2023, although the Financial
Conduct Authority (FCA) has issued a consultation seeking views on whether to
compel publication of the one-month, three-month and six-month USD LIBOR
settings on a "synthetic" basis for a short time after June 30, 2023 (i.e.,
through September 30, 2024). Separately, the Federal Reserve, the Office of the
Comptroller of the Currency and the Federal Deposit Insurance Corporation (FDIC)
issued supervisory guidance encouraging banks to cease entering into new
contracts that use USD LIBOR as a reference rate by December 31, 2021, subject
to certain regulatory-approved exceptions (USD LIBOR Guidance).
As a result, a major transition has been and continues to be in progress in the
global financial markets with respect to the replacement of Interbank Offered
Rates (IBORs). This has been and continues to be a complex process impacting a
variety of our businesses and operations. IBORs have historically been used in
many of the Corporation's products and contracts, including derivatives,
consumer and commercial loans, mortgages, floating-rate notes and other
adjustable-rate products and financial instruments. In response, the Corporation
established an enterprise-wide IBOR transition program, with active involvement
of senior management and regular reports to the Management Risk Committee (MRC)
and Enterprise Risk Committee (ERC). The program continues to drive the
Corporation's industry and regulatory engagement, client and financial contract
changes, internal and external communications, technology and operations
modifications, including updates to its operational models, systems and
processes, introduction of new products, migration of existing clients, and
program strategy and governance.
As of December 31, 2021, the Corporation transitioned or otherwise addressed
IBOR-based products and contracts referencing the rates that ceased or became
non-representative after December 31, 2021, including LIBOR-linked commercial
loans, LIBOR-based adjustable-rate consumer mortgages, LIBOR-linked derivatives
and interdealer trading of certain USD LIBOR and other interest rate swaps, and
related hedging arrangements. Additionally, in accordance with the USD LIBOR
Guidance, the Corporation has ceased entering into new contracts that use USD
LIBOR as a reference rate, subject to limited exceptions, including those
consistent with supervisory guidance.
The Corporation launched capabilities and services to support the issuance of
and trading in products indexed to various alternative reference rates (ARRs)
and developed employee training programs as well as other internal and external
sources of information on the various challenges and opportunities that the
replacement of IBORs has presented and continues to present. The Corporation
continues to monitor a variety of market scenarios as part of its transition
efforts, including risks associated with insufficient preparation by
27 Bank of America -------------------------------------------------------------------------------- individual market participants or the overall market ecosystem, ability of
market participants to meet regulatory and industry-wide recommended milestones,
and access and demand by clients and market participants to liquidity in certain
products, including LIBOR products.
With respect to the transition of LIBOR products referencing USD LIBOR settings
ceasing or becoming non-representative as of June 30, 2023, a significant
majority of the Corporation's notional contractual exposure to such LIBOR
settings, of which the significant majority is derivatives contracts, have been
remediated (i.e., updated to include fallback provisions to ARRs based on
market-driven protocols, regulatory guidance and industry-recommended fallback
provisions and related mechanisms), and the Corporation is continuing to
remediate the remaining USD LIBOR exposure. For example, during the first half
of 2023, certain central counterparties (CCPs) expect to complete processes to
convert outstanding USD LIBOR-cleared derivatives to ARR positions. The
remaining exposure, a majority of which is made up of derivatives and commercial
loans and which represents a small minority of outstanding USD LIBOR notional
contractual exposure of the Corporation, requires active dialogue with clients
to modify the contracts. For any residual exposures after June 2023 that
continue to have no fallback provisions, the Corporation continues to assess and
plans to leverage relevant contractual and statutory solutions, including the
Adjustable Interest Rate (LIBOR) Act in the U.S. (as implemented by the Federal
Reserve) and "synthetic" USD LIBOR (if the FCA compels such publication), to
transition such exposure.
While there remain risks to the Corporation associated with the transition from
IBORs (as discussed under Item 1A. Risk Factors - Other on page 20), such risks
have been monitored and, where applicable, managed through the Corporation's
efforts and dedicated operational resources to date. In the Corporation's view,
the potential likelihood and/or impact of transition-related risks has lessened
over time, and the Corporation anticipates it has devoted appropriate resources
to remaining transition efforts and will be able to continue to appropriately
monitor and manage such risks as the transition process continues. The
Corporation expects transition-related risks to further diminish as certain
market developments occur prior to June 30, 2023.
The Corporation has implemented regulatory, tax and accounting changes and
continues to monitor current and potential impacts of the transition, including
Internal Revenue Service tax regulations and guidance and Financial Accounting
Standards Board guidance. In addition, the Corporation has engaged impacted
clients in connection with the transition by providing education on ARRs and the
timing of transition events. The Corporation is also working actively with
global regulators, industry working groups and trade associations.
For more information on the expected replacement of LIBOR and other benchmark
rates, see Item 1A. Risk Factors - Other on page 20.
Financial Highlights Table 1 Summary Income Statement and Selected Financial Data (Dollars in millions, except per share information) 2022 2021
Income statement
Net interest income $ 52,462 $ 42,934
Noninterest income 42,488 46,179
Total revenue, net of interest expense 94,950 89,113
Provision for credit losses 2,543 (4,594)
Noninterest expense 61,438 59,731
Income before income taxes 30,969 33,976
Income tax expense 3,441 1,998
Net income 27,528 31,978
Preferred stock dividends and other 1,513 

1,421

Net income applicable to common shareholders $ 26,015 $ 30,557 Per common share information
Earnings $ 3.21 $ 3.60
Diluted earnings 3.19 3.57
Dividends paid 0.86 0.78
Performance ratios
Return on average assets (1) 0.88 % 1.05 %
Return on average common shareholders' equity (1) 10.75 

12.23

Return on average tangible common shareholders' equity (2) 15.15 17.02
Efficiency ratio (1) 64.71 67.03 Balance sheet at year end
Total loans and leases $ 1,045,747 $ 979,124
Total assets 3,051,375 3,169,495
Total deposits 1,930,341 2,064,446
Total liabilities 2,778,178 2,899,429
Total common shareholders' equity 244,800 245,358
Total shareholders' equity 273,197 270,066 (1)For definitions, see Key Metrics on page 167.
(2)Return on average tangible common shareholders' equity is a non-GAAP
financial measure. For more information and a corresponding reconciliation to
the most closely related financial measures defined by accounting principles
generally accepted in the United States of America (GAAP), see Non-GAAP
Reconciliations on page 85. Net income was $27.5 billion, or $3.19 per diluted share in 2022 compared to
$32.0 billion, or $3.57 per diluted share in 2021. The decrease in net income
was primarily due to an increase in provision for credit losses, lower
noninterest income and higher noninterest expense, partially offset by higher
net interest income.
For discussion and analysis of our consolidated and business segment results of
operations for 2021 compared to 2020, see Financial Highlights and Business
Segment Operations sections in the MD&A of the Corporation's 2021 Annual Report
on Form 10-K. Net Interest Income
Net interest income increased $9.5 billion to $52.5 billion in 2022 compared to
2021. Net interest yield on a fully taxable-equivalent (FTE) basis increased 30
basis points (bps) to 1.96 percent for 2022. The increase was primarily driven
by benefits from higher interest rates, including lower premium amortization
expense, and loan growth, partially offset by a lower amount of accelerated net
capitalized loan fees due to Paycheck Protection Program (PPP) loan forgiveness,
which primarily occurred in 2021. For more information on net interest yield and
the FTE basis, see Supplemental Financial Data on page 32, and for

Bank of America 28

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more information on interest rate risk management, see Interest Rate Risk
Management for the Banking Book on page 79.

Noninterest Income

Table 2 Noninterest Income

(Dollars in millions) 2022 2021
Fees and commissions:
Card income $ 6,083 $ 6,218
Service charges 6,405 7,504
Investment and brokerage services 15,901 16,690
Investment banking fees 4,823 8,887
Total fees and commissions 33,212 39,299
Market making and similar activities 12,075 8,691 Other income (2,799) (1,811) Total noninterest income $ 42,488 $ 46,179 

Noninterest income decreased $3.7 billion to $42.5 billion for 2022 compared to
2021. The following highlights the significant changes.

 ? Service charges decreased $1.1 billion primarily driven by the impact of
non-sufficient funds and overdraft policy changes as well as lower treasury
service charges.
? Investment and brokerage services decreased $789 million primarily driven by
lower market valuations and declines in assets under management (AUM) pricing,
partially offset by positive AUM flows.
? Investment banking fees decreased $4.1 billion primarily driven by a decline
in demand resulting in lower equity and debt issuance fees and lower advisory
fees.
? Market making and similar activities increased $3.4 billion primarily driven
by improved performance across macro products in fixed income, currencies and
commodities (FICC) and by the impact of higher interest rates on client
financing activities in Equities.
? Other income decreased $988 million primarily due to certain valuation
adjustments. Provision for Credit Losses
The provision for credit losses increased $7.1 billion to $2.5 billion for 2022
compared to 2021. The provision for credit losses for 2022 was primarily driven
by loan growth and a dampened macroeconomic outlook, partially offset by a
reserve release for reduced COVID-19 pandemic (the pandemic) uncertainties. For
the same period in the prior year, the benefit in the provision for credit
losses was due to an improved macroeconomic outlook. For more information on the
provision for credit losses, see Allowance for Credit Losses on page 73. 

Noninterest Expense

 Table 3 Noninterest Expense (Dollars in millions) 2022 2021
Compensation and benefits $ 36,447 $ 36,140
Occupancy and equipment 7,071 7,138
Information processing and communications 6,279 

5,769

Product delivery and transaction related 3,653 3,881
Marketing 1,825 1,939
Professional fees 2,142 1,775
Other general operating 4,021 3,089
Total noninterest expense $ 61,438 $ 59,731 

Noninterest expense increased $1.7 billion to $61.4 billion in 2022 compared to
2021. The increase was primarily due to higher investments in people and
technology, expense associated with the settlement of the legacy monoline
insurance litigation and expense related to certain regulatory matters,
partially offset by lower net COVID-19 related costs.

Income Tax Expense

Table 4 Income Tax Expense

(Dollars in millions) 2022 2021
Income before income taxes $ 30,969 $ 33,976
Income tax expense 3,441 1,998
Effective tax rate 11.1 % 5.9 % Income tax expense was $3.4 billion for 2022 compared to $2.0 billion in 2021
resulting in an effective tax rate of 11.1 percent compared to 5.9 percent.
The effective tax rates for 2022 and 2021 were primarily driven by our recurring
preference benefits. Also included in the effective tax rate for 2021 was the
impact of the 2021 U.K. tax law change further discussed in this section. For
more information on our recurring tax preference benefits, see Note 19 - Income
Taxes to the Consolidated Financial Statements. Absent environmental, social and
governance (ESG) tax credits and discrete tax benefits, the effective tax rates
would have been approximately 25 percent.
On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022, which
contained a number of tax-related provisions, including the extension and
expansion of renewable energy tax credit programs. In particular, partnerships
are no longer solely limited to an Investment Tax Credit, but can now also elect
a Production Tax Credit for solar energy production facilities placed in service
after December 31, 2021.
Other notable tax law changes include the establishment of a new 15 percent AMT
on adjusted financial statement income for large corporations and a one percent
excise tax on net stock repurchases, both of which were effective for tax years
beginning on or after January 1, 2023. The tax law changes for the new AMT
permit business credits, including those from ESG investments in renewable
energy and affordable housing, to offset potential AMT liability. The
Corporation has assessed the potential impacts of these two U.S. tax law changes
and does not expect the changes to have a significant effect on its future
effective tax rate.
On June 10, 2021, the U.K. enacted the 2021 Finance Act, which increased the
U.K. corporation income tax rate to 25 percent from 19 percent. This change is
effective April 1, 2023 and unfavorably affects income tax expense on future
U.K. earnings. As a result, during the three months ended June 30, 2021, the
Corporation recorded a positive income tax adjustment of approximately $2.0
billion with a corresponding write-up of U.K. net deferred tax assets, which
reflected a reversal of previously recorded write-downs of net deferred tax
assets for prior changes in the U.K. corporation income tax rate.
29 Bank of America -------------------------------------------------------------------------------- Balance Sheet Overview Table 5 Selected Balance Sheet Data December 31
(Dollars in millions) 2022 2021 $ Change % Change
Assets
Cash and cash equivalents $ 230,203 $ 348,221 $ (118,018) (34) %
Federal funds sold and securities borrowed or purchased under
agreements to resell 267,574 250,720 16,854 7
Trading account assets 296,108 247,080 49,028 20
Debt securities 862,819 982,627 (119,808) (12)
Loans and leases 1,045,747 979,124 66,623 7
Allowance for loan and lease losses (12,682) (12,387) (295) 2
All other assets 361,606 374,110 (12,504) (3)
Total assets $ 3,051,375 $ 3,169,495 $ (118,120) (4)
Liabilities
Deposits $ 1,930,341 $ 2,064,446 $ (134,105) (6)
Federal funds purchased and securities loaned or sold under
agreements to repurchase 195,635 192,329 3,306 2
Trading account liabilities 80,399 100,690 (20,291) (20)
Short-term borrowings 26,932 23,753 3,179 13
Long-term debt 275,982 280,117 (4,135) (1)
All other liabilities 268,889 238,094 30,795 13
Total liabilities 2,778,178 2,899,429 (121,251) (4)
Shareholders' equity 273,197 270,066 3,131 1
Total liabilities and shareholders' equity $ 3,051,375 $ 3,169,495 $ (118,120) (4) 

Assets

At December 31, 2022, total assets were approximately $3.1 trillion, down $118.1
billion from December 31, 2021. The decrease in assets was primarily due to
lower debt securities and cash and cash equivalents, partially offset by an
increase in loans and leases, trading account assets and federal funds sold and
securities borrowed or purchased under agreements to resell. Cash and Cash Equivalents
Cash and cash equivalents decreased $118.0 billion primarily driven by lower
deposits and continued loan growth. Federal Funds Sold and Securities Borrowed or Purchased Under Agreements to
Resell
Federal funds transactions involve lending reserve balances on a short-term
basis. Securities borrowed or purchased under agreements to resell are
collateralized lending transactions utilized to accommodate customer
transactions, earn interest rate spreads and obtain securities for settlement
and for collateral. Federal funds sold and securities borrowed or 

purchased under agreements to resell increased $16.9 billion primarily due to
client activity within Global Markets.

Trading Account Assets
Trading account assets consist primarily of long positions in equity and
fixed-income securities including U.S. government and agency securities,
corporate securities and non-U.S. sovereign debt. Trading account assets
increased $49.0 billion primarily due to client activity within Global Markets.

 Debt Securities
Debt securities primarily include U.S. Treasury and agency securities,
mortgage-backed securities (MBS), principally agency MBS, non-U.S. bonds,
corporate bonds and municipal debt. We use the debt securities portfolio
primarily to manage interest rate and liquidity risk and to leverage market
conditions that create economically attractive returns on these investments.
Debt securities decreased $119.8 billion primarily driven by lower deposits and
continued loan growth. For more information on debt securities, see Note 4 -
Securities to the Consolidated Financial Statements. 

Bank of America 30

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 Loans and Leases
Loans and leases increased $66.6 billion primarily driven by growth in
commercial loans, higher credit card spending and higher residential mortgages
due to lower paydowns and continued originations. For more information on the
loan portfolio, see Credit Risk Management on page 59. Allowance for Loan and Lease Losses
The allowance for loan and lease losses increased $295 million primarily driven
by loan growth and a dampened macroeconomic outlook, partially offset by a
reserve release for reduced pandemic uncertainties. For more information, see
Allowance for Credit Losses on page 73. All Other Assets
All other assets decreased $12.5 billion primarily driven by a decline in margin
loans and loans held-for-sale (LHFS). 

Liabilities

At December 31, 2022, total liabilities were approximately $2.8 trillion, down
$121.3 billion from December 31, 2021, primarily due to lower deposits.

Deposits

Deposits decreased $134.1 billion primarily due to an increase in customer
spending and a shift to higher yielding accounts.

 Federal Funds Purchased and Securities Loaned or Sold Under Agreements to
Repurchase
Federal funds transactions involve borrowing reserve balances on a short-term
basis. Securities loaned or sold under agreements to repurchase are
collateralized borrowing transactions utilized to accommodate customer
transactions, earn interest rate spreads and finance assets on the balance
sheet. Federal funds purchased and securities loaned or sold under agreements to
repurchase increased $3.3 billion primarily driven by an increase in repurchase
agreements to support liquidity. Trading Account Liabilities
Trading account liabilities consist primarily of short positions in equity and
fixed-income securities including U.S. Treasury and agency securities, non-U.S.
sovereign debt and corporate securities. Trading account liabilities decreased
$20.3 billion primarily due to lower levels of short positions within Global
Markets. Short-term Borrowings
Short-term borrowings provide an additional funding source and primarily consist
of Federal Home Loan Bank (FHLB) short-term borrowings, notes payable and
various other borrowings that generally have maturities of one year or less.
Short-term borrowings increased $3.2 billion primarily due to an increase in
FHLB advances and commercial paper to manage liquidity needs. For more
information on short-term borrowings, see Note 10 - Securities Financing
Agreements, Short-term Borrowings, Collateral and Restricted Cash to the
Consolidated Financial Statements. Long-term Debt
Long-term debt decreased $4.1 billion primarily due to maturities, redemptions
and valuation adjustments, partially offset by issuances. For more information
on long-term debt, see Note 11 - Long-term Debt to the Consolidated Financial
Statements. All Other Liabilities
All other liabilities increased $30.8 billion primarily driven by Global Markets
client activity. Shareholders' Equity
Shareholders' equity increased $3.1 billion primarily due to net income and the
issuance of preferred stock, partially offset by market value decreases on
derivatives and debt securities, and returns of capital to shareholders through
common and preferred stock dividends and common stock repurchases. Cash Flows Overview
The Corporation's operating assets and liabilities support our global markets
and lending activities. We believe that cash flows from operations, available
cash balances and our ability to generate cash through short- and long-term debt
are sufficient to fund our operating liquidity needs. Our investing activities
primarily include the debt securities portfolio and loans and leases. Our
financing activities reflect cash flows primarily related to customer deposits,
securities financing agreements, long-term debt and common and preferred stock.
For more information on liquidity, see Liquidity Risk on page 54. 

31 Bank of America

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Supplemental Financial Data

 Non-GAAP Financial Measures
In this Form 10-K, we present certain non-GAAP financial measures. Non-GAAP
financial measures exclude certain items or otherwise include components that
differ from the most directly comparable measures calculated in accordance with
GAAP. Non-GAAP financial measures are provided as additional useful information
to assess our financial condition, results of operations (including
period-to-period operating performance) or compliance with prospective
regulatory requirements. These non-GAAP financial measures are not intended as a
substitute for GAAP financial measures and may not be defined or calculated the
same way as non-GAAP financial measures used by other companies.
We view net interest income and related ratios and analyses on an FTE basis,
which when presented on a consolidated basis are non-GAAP financial measures. To
derive the FTE basis, net interest income is adjusted to reflect tax-exempt
income on an equivalent before-tax basis with a corresponding increase in income
tax expense. For purposes of this calculation, we use the federal statutory tax
rate of 21 percent and a representative state tax rate. Net interest yield,
which measures the basis points we earn over the cost of funds, utilizes net
interest income on an FTE basis. We believe that presentation of these items on
an FTE basis allows for comparison of amounts from both taxable and tax-exempt
sources and is consistent with industry practices.
We may present certain key performance indicators and ratios excluding certain
items (e.g., debit valuation adjustment (DVA) gains (losses)), which result in
non-GAAP financial measures. We believe that the presentation of measures that
exclude these items is useful because such measures provide additional
information to assess the underlying operational performance and trends of our
businesses and to allow better comparison of period-to-period operating
performance.
We also evaluate our business based on certain ratios that utilize tangible
equity, a non-GAAP financial measure. Tangible equity represents shareholders'
equity or common shareholders' equity reduced by goodwill and intangible assets
(excluding mortgage servicing rights (MSRs)), net of related deferred tax
liabilities ("adjusted" shareholders' equity or common shareholders' equity).
These measures are used to evaluate our use of equity. In addition,
profitability, relationship and investment models use both return on average
tangible
common shareholders' equity and return on average tangible shareholders' equity
as key measures to support our overall growth objectives. These ratios are:
? Return on average tangible common shareholders' equity measures our net
income applicable to common shareholders as a percentage of adjusted average
common shareholders' equity. The tangible common equity ratio represents
adjusted ending common shareholders' equity divided by total tangible assets.
? Return on average tangible shareholders' equity measures our net income as a
percentage of adjusted average total shareholders' equity. The tangible equity
ratio represents adjusted ending shareholders' equity divided by total tangible
assets.
? Tangible book value per common share represents adjusted ending common
shareholders' equity divided by ending common shares outstanding. We believe ratios utilizing tangible equity provide additional useful
information because they present measures of those assets that can generate
income. Tangible book value per common share provides additional useful
information about the level of tangible assets in relation to outstanding shares
of common stock.
The aforementioned supplemental data and performance measures are presented in
Tables 6 and 7.
For more information on the reconciliation of these non-GAAP financial measures
to the corresponding GAAP financial measures, see Non-GAAP Reconciliations on
page 85. Key Performance Indicators
We present certain key financial and nonfinancial performance indicators (key
performance indicators) that management uses when assessing our consolidated
and/or segment results. We believe they are useful to investors because they
provide additional information about our underlying operational performance and
trends. These key performance indicators (KPIs) may not be defined or calculated
in the same way as similar KPIs used by other companies. For information on how
these metrics are defined, see Key Metrics on page 167.
Our consolidated key performance indicators, which include various equity and
credit metrics, are presented in Table 1 on page 28, Table 6 on page 33 and
Table 7 on page 34.
For information on key segment performance metrics, see Business Segment
Operations on page 37. Bank of America 32 

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Table 6 Selected Annual Financial Data

 (In millions, except per share information) 2022 2021 2020
Income statement
Net interest income $ 52,462 $ 42,934 $ 43,360
Noninterest income 42,488 46,179 42,168
Total revenue, net of interest expense 94,950 89,113 85,528
Provision for credit losses 2,543 (4,594) 11,320
Noninterest expense 61,438 59,731 55,213
Income before income taxes 30,969 33,976 18,995
Income tax expense 3,441 1,998 1,101
Net income 27,528 31,978 17,894
Net income applicable to common shareholders 26,015 30,557 16,473
Average common shares issued and outstanding 8,113.7 8,493.3 8,753.2
Average diluted common shares issued and outstanding 8,167.5 8,558.4 8,796.9
Performance ratios
Return on average assets (1) 0.88 % 1.05 % 0.67 %
Return on average common shareholders' equity (1) 10.75 12.23 6.76
Return on average tangible common shareholders' equity (1, 2) 15.15 17.02 9.48
Return on average shareholders' equity (1) 10.18 11.68 6.69
Return on average tangible shareholders' equity (1, 2) 13.76 15.71 9.07
Total ending equity to total ending assets 8.95 8.52 9.68
Common equity ratio (1) 8.02 7.74 8.81
Total average equity to total average assets 8.62 9.02 9.96
Dividend payout (1) 26.77 21.51 38.18
Per common share data
Earnings $ 3.21 $ 3.60 $ 1.88
Diluted earnings 3.19 3.57 1.87
Dividends paid 0.86 0.78 0.72
Book value (1) 30.61 30.37 28.72
Tangible book value (2) 21.83 21.68 20.60 Market capitalization $ 264,853 $ 359,383 $ 262,206
Average balance sheet
Total loans and leases $

1,016,782 $ 920,401 $ 982,467
Total assets 3,135,894 3,034,623 2,683,122
Total deposits 1,986,158 1,914,286 1,632,998
Long-term debt 246,479 237,703 220,440
Common shareholders' equity 241,981 249,787 243,685
Total shareholders' equity 270,299 273,757 267,309
Asset quality
Allowance for credit losses (3) $ 14,222 $ 13,843 $ 20,680
Nonperforming loans, leases and foreclosed properties (4) 3,978 4,697 5,116

Allowance for loan and lease losses as a percentage of total loans
and leases outstanding (4)

 1.22 % 1.28 % 2.04 %

Allowance for loan and lease losses as a percentage of total
nonperforming loans and leases (4)

 333 271 380 Net charge-offs $ 

2,172 $ 2,243 $ 4,121
Net charge-offs as a percentage of average loans and leases
outstanding (4)

 0.21 % 0.25 % 0.42 % 

Capital ratios at year end (5)

Common equity tier 1 capital 11.2 % 10.6 % 11.9 % Tier 1 capital 13.0 12.1 13.5
Total capital 14.9 14.1 16.1
Tier 1 leverage 7.0 6.4 7.4
Supplementary leverage ratio 5.9 5.5 7.2
Tangible equity (2) 6.8 6.4 7.4
Tangible common equity (2) 5.9 5.7 6.5 (1)For definition, see Key Metrics on page 167.
(2)Tangible equity ratios and tangible book value per share of common stock are
non-GAAP financial measures. For more information on these ratios and
corresponding reconciliations to GAAP financial measures, see Supplemental
Financial Data on page 32 and Non-GAAP Reconciliations on page 85.
(3)Includes the allowance for loan and leases losses and the reserve for
unfunded lending commitments.
(4)Balances and ratios do not include loans accounted for under the fair value
option. For additional exclusions from nonperforming loans, leases and
foreclosed properties, see Consumer Portfolio Credit Risk Management -
Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity on
page 63 and corresponding Table 27 and Commercial Portfolio Credit Risk
Management - Nonperforming Commercial Loans, Leases and Foreclosed Properties
Activity on page 68 and corresponding Table 34.
(5)For more information, including which approach is used to assess capital
adequacy, see Capital Management on page 49. 

33 Bank of America

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Table 7 Selected Quarterly Financial Data 2022 Quarters 2021 Quarters
(In millions, except per share information) Fourth Third Second First Fourth Third Second First
Income statement
Net interest income $ 14,681 $ 13,765 $ 12,444 $ 11,572 $ 11,410 $ 11,094 $ 10,233 $ 10,197
Noninterest income 9,851 10,737 10,244 11,656 10,650 11,672 11,233 12,624
Total revenue, net of interest expense 24,532 24,502 22,688 23,228 22,060 22,766 21,466 22,821
Provision for credit losses 1,092 898 523 30 (489) (624) (1,621) (1,860)
Noninterest expense 15,543 15,303 15,273 15,319 14,731 14,440 15,045 15,515
Income before income taxes 7,897 8,301 6,892 7,879 7,818 8,950 8,042 9,166
Income tax expense 765 1,219 645 812 805 1,259 (1,182) 1,116
Net income 7,132 7,082 6,247 7,067 7,013 7,691 9,224 8,050
Net income applicable to common shareholders 6,904 6,579 5,932 6,600 6,773 7,260 8,964 7,560
Average common shares issued and outstanding 8,088.3 8,107.7 8,121.6 8,136.8 8,226.5 8,430.7 8,620.8 8,700.1
Average diluted common shares issued and
outstanding 8,155.7 8,160.8 8,163.1 8,202.1 8,304.7 8,492.8 8,735.5 8,755.6
Performance ratios
Return on average assets (1) 0.92 % 0.90 % 0.79 % 0.89 % 0.88 % 0.99 % 1.23 % 1.13 %
Four-quarter trailing return on average
assets (2) 0.88 0.87 0.89 0.99 1.05 1.04 0.97 0.79
Return on average common shareholders' equity
(1) 11.24 10.79 9.93 11.02 10.90 11.43 14.33 12.28
Return on average tangible common
shareholders' equity (3) 15.79 15.21 14.05 15.51 15.25 15.85 19.90 17.08
Return on average shareholders' equity (1) 10.38 10.37 9.34 10.64 10.27 11.08 13.47 11.91
Return on average tangible shareholders'
equity (3) 13.98 13.99 12.66 14.40 13.87 14.87 18.11 16.01
Total ending equity to total ending assets 8.95 8.77 8.65 8.23 8.52 8.83 9.15 9.23
Common equity ratio (1) 8.02 7.82 7.71 7.40 7.74 8.07 8.37 8.41
Total average equity to total average assets 8.87 8.73 8.49 8.40 8.56 8.95 9.11 9.52
Dividend payout (1) 25.71 27.06 28.68 25.86 25.33 24.10 17.25 20.68
Per common share data
Earnings $ 0.85 $ 0.81 $ 0.73 $ 0.81 $ 0.82 $ 0.86 $ 1.04 $ 0.87
Diluted earnings 0.85 0.81 0.73 0.80 0.82 0.85 1.03 0.86
Dividends paid 0.22 0.22 0.21 0.21 0.21 0.21 0.18 0.18
Book value (1) 30.61 29.96 29.87 29.70 30.37 30.22 29.89 29.07
Tangible book value (3) 21.83 21.21 21.13 20.99 21.68 21.69 21.61 20.90 Market capitalization $ 264,853 $ 

242,338 $ 250,136 $ 332,320 $ 359,383

 $ 349,841 $ 349,925 $ 332,337
Average balance sheet
Total loans and leases $ 1,039,247 $ 1,034,334 $ 1,014,886 $ 977,793 $ 945,062 $ 920,509 $ 907,900 $ 907,723
Total assets 3,074,289 3,105,546 3,157,885 3,207,702 3,164,118 3,076,452 3,015,113 2,879,221
Total deposits 1,925,544 1,962,775 2,012,079 2,045,811 2,017,223 1,942,705 1,888,834 1,805,747
Long-term debt 243,871 250,204 245,781 246,042 248,525 248,988 232,034 220,836
Common shareholders' equity 243,647 241,882 239,523 242,865 246,519 252,043 250,948 249,648
Total shareholders' equity 272,629 271,017 268,197 269,309 270,883 275,484 274,632 274,047
Asset quality
Allowance for credit losses (4) $ 14,222 $ 

13,817 $ 13,434 $ 13,483 $ 13,843

 $ 14,693 $ 15,782 $ 17,997
Nonperforming loans, leases and foreclosed
properties (5) 3,978 4,156 4,326 4,778 4,697 4,831 5,031 5,299
Allowance for loan and lease losses as a
percentage of total loans and leases
outstanding (5) 1.22 % 1.20 % 1.17 % 1.23 % 1.28 % 1.43 % 1.55 % 1.80 %
Allowance for loan and lease losses as a
percentage of total nonperforming loans and
leases (5) 333 309 288 262 271 279 287 313
Net charge-offs $ 689 $ 520 $ 571 $ 392 $ 362 

$ 463 $ 595 $ 823
Annualized net charge-offs as a percentage of
average loans and leases outstanding (5)

 0.26 % 0.20 % 0.23 % 0.16 % 0.15 % 0.20 % 0.27 % 0.37 %

Capital ratios at period end (6)

 Common equity tier 1 capital 11.2 % 11.0 % 10.5 % 10.4 % 10.6 % 11.1 % 11.5 % 11.8 % Tier 1 capital 13.0 12.8 12.3 12.0 12.1 12.6 13.0 13.3
Total capital 14.9 14.7 14.2 14.0 14.1 14.7 15.1 15.6
Tier 1 leverage 7.0 6.8 6.5 6.3 6.4 6.6 6.9 7.2
Supplementary leverage ratio 5.9 5.8 5.5 5.4 5.5 5.6 5.9 7.0
Tangible equity (3) 6.8 6.6 6.5 6.2 6.4 6.7 7.0 7.0
Tangible common equity (3) 5.9 5.7 5.6 5.3 5.7 5.9 6.2 6.2
Total loss-absorbing capacity and long-term
debt metrics
Total loss-absorbing capacity to risk-weighted
assets 29.0 % 28.9 % 27.8 % 27.2 % 26.9 % 27.7 % 27.7 % 26.8 %
Total loss-absorbing capacity to supplementary
leverage exposure 13.2 13.0 12.6 12.2 12.1 12.4 12.5 14.1
Eligible long-term debt to risk-weighted
assets 15.2 15.2 14.7 14.4 14.1 14.4 14.1 13.0
Eligible long-term debt to supplementary
leverage exposure 6.9 6.8 6.6 6.5 6.3 6.4 6.3 6.8 (1)For definitions, see Key Metrics on page 167.
(2)Calculated as total net income for four consecutive quarters divided by
annualized average assets for four consecutive quarters.
(3)Tangible equity ratios and tangible book value per share of common stock are
non-GAAP financial measures. For more information on these ratios and
corresponding reconciliations to GAAP financial measures, see Supplemental
Financial Data on page 32 and Non-GAAP Reconciliations on page 85.
(4)Includes the allowance for loan and lease losses and the reserve for unfunded
lending commitments.
(5)Balances and ratios do not include loans accounted for under the fair value
option. For additional exclusions from nonperforming loans, leases and
foreclosed properties, see Consumer Portfolio Credit Risk Management -
Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity on
page 64 and corresponding Table 27 and Commercial Portfolio Credit Risk
Management - Nonperforming Commercial Loans, Leases and Foreclosed Properties
Activity on page 68 and corresponding Table 34.
(6)For more information, including which approach is used to assess capital
adequacy, see Capital Management on page 49.

Bank of America 34

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Table 8 Average Balances and Interest Rates - FTE Basis Interest Interest Interest Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ Balance Expense (1) Rate Balance Expense (1) Rate Balance Expense (1) Rate (Dollars in millions) 2022 2021 2020
Earning assets
Interest-bearing deposits with the Federal
Reserve, non-

U.S. central banks and other banks $ 195,564 $ 2,591

 1.32 % $ 255,595 $ 172 0.07 % $ 253,227 $ 359 0.14 

%

Time deposits placed and other short-term
investments 9,209 132 1.44 7,603 15 0.19 8,840 29 0.33
Federal funds sold and securities borrowed or
purchased under agreements to resell (2) 292,799 4,560 1.56 267,257 (90) (0.03) 309,945 903 0.29
Trading account assets 158,102 5,586 3.53 147,891 3,823 2.58 148,076 4,185 2.83
Debt securities 922,730 17,207 1.86 905,169 12,433 1.38 532,266 9,868 1.87
Loans and leases (3)
Residential mortgage 227,604 6,375 2.80 216,983 5,995 2.76 236,719 7,338 3.10
Home equity 27,364 959 3.50 31,014 1,066 3.44 38,251 1,290 3.37
Credit card 83,539 8,408 10.06 75,385 7,772 10.31 85,017 8,759 10.30 Direct/Indirect and other consumer 107,050 3,317 3.10 96,472 2,276 2.36 89,974 2,545 2.83 Total consumer 445,557 19,059 4.28 419,854 17,109 4.08 449,961 19,932 4.43
U.S. commercial 366,748 12,251 3.34 324,795 8,606 2.65 344,095 9,712 2.82
Non-U.S. commercial 125,222 3,702 2.96 99,584 1,752 1.76 106,487 2,208 2.07
Commercial real estate (4) 65,421 2,595 3.97 60,303 1,496 2.48 63,428 1,790 2.82
Commercial lease financing 13,834 473 3.42 15,865 462 2.91 18,496 559 3.02
Total commercial 571,225 19,021 3.33 500,547 12,316 2.46 532,506 14,269 2.68
Total loans and leases 1,016,782 38,080 3.75 920,401 29,425 3.20 982,467 34,201 

3.48

Other earning assets 105,674 4,847 4.59 112,512 2,321 2.06 83,078 2,539 3.06
Total earning assets 2,700,860 73,003 2.70 2,616,428 48,099 1.84 2,317,899 52,084 2.25
Cash and due from banks 28,029 31,214 31,885
Other assets, less allowance for loan and
lease losses 407,005 386,981 333,338
Total assets $ 3,135,894 $ 3,034,623 $ 2,683,122
Interest-bearing liabilities
U.S. interest-bearing deposits Demand and money market deposits $ 987,247 $ 3,145 0.32 % $ 925,970 $ 314 0.03 % $ 829,719 $ 977 0.12 

%

 Time and savings deposits 166,490 818 0.49 161,512 170 0.11 170,750 734 0.43
Total U.S. interest-bearing deposits 1,153,737 3,963 0.34 1,087,482 484 0.04 1,000,469 1,711 0.17 Non-U.S. interest-bearing deposits 80,951 755 0.93 82,769 53 0.06 77,046 232 0.30
Total interest-bearing deposits 1,234,688 4,718 0.38 1,170,251 537 0.05 1,077,515 1,943 0.18
Federal funds purchased and securities loaned
or sold under agreements to repurchase 214,369 4,117 1.92 210,848 461 0.22 188,511 1,229 0.65
Short-term borrowings and other
interest-bearing liabilities (2) 137,277 2,861 2.08 106,975 (819) (0.77) 104,955 (242) (0.23)
Trading account liabilities 51,208 1,538 3.00 54,107 1,128 2.08 41,386 974 2.35
Long-term debt 246,479 6,869 2.79 237,703 3,431 1.44 220,440 4,321 1.96
Total interest-bearing liabilities 1,884,021 20,103 1.07 1,779,884 4,738 0.27 1,632,807 8,225 

0.50

Noninterest-bearing sources
Noninterest-bearing deposits 751,470 744,035 555,483
Other liabilities (5) 230,104 236,947 227,523
Shareholders' equity 270,299 273,757 267,309
Total liabilities and shareholders' equity $ 3,135,894 $ 3,034,623 $ 2,683,122
Net interest spread 1.63 % 1.57 % 1.75 %
Impact of noninterest-bearing sources 0.33 0.09 0.15
Net interest income/yield on earning assets
(6) $ 52,900 1.96 % $ 43,361 1.66 % $ 43,859 1.90 % (1)Includes the impact of interest rate risk management contracts. For more
information, see Interest Rate Risk Management for the Banking Book on page 79.
(2)For more information on negative interest, see Note 1 - Summary of
Significant Accounting Principles to the Consolidated Financial Statements.
(3)Nonperforming loans are included in the respective average loan balances.
Income on these nonperforming loans is generally recognized on a cost recovery
basis.
(4)Includes U.S. commercial real estate loans of $61.1 billion, $56.5 billion
and $59.8 billion, and non-U.S. commercial real estate loans of $4.3 billion,
$3.8 billion and $3.6 billion for 2022, 2021 and 2020, respectively.
(5)Includes $30.7 billion, $30.4 billion and $34.3 billion of structured notes
and liabilities for 2022, 2021 and 2020, respectively.
(6)Net interest income includes FTE adjustments of $438 million, $427 million
and $499 million for 2022, 2021 and 2020, respectively. 35 Bank of America 

——————————————————————————–

 Table 9 Analysis of Changes in Net Interest Income - FTE Basis Due to Change in (1) Due to Change in (1) Volume Rate Net Change Volume Rate Net Change
(Dollars in millions) From 2021 to 2022 From 2020 to 2021

Increase (decrease) in interest income
Interest-bearing deposits with the Federal Reserve,
non-U.S. central banks and other

 banks $ (35) $ 

2,454 $ 2,419 $ (1) $ (186) $

(187)

Time deposits placed and other short-term
investments 2 115 117 (4) (10) 

(14)

Federal funds sold and securities borrowed or
purchased under agreements to resell 2 4,648 4,650 (128) (865) (993)
Trading account assets 256 1,507 1,763 - (362) (362)
Debt securities 301 4,473 4,774 7,059 (4,494) 2,565
Loans and leases
Residential mortgage 287 93 380 (612) (731) (1,343)
Home equity (125) 18 (107) (245) 21 (224)
Credit card 841 (205) 636 (994) 7 (987) Direct/Indirect and other consumer 250 791 1,041 185 (454) (269) Total consumer 1,950 (2,823)
U.S. commercial 1,113 2,532 3,645 (553) (553) (1,106)
Non-U.S. commercial 452 1,498 1,950 (147) (309) (456)
Commercial real estate 126 973 1,099 (89) (205) (294)
Commercial lease financing (59) 70 11 (80) (17) (97)
Total commercial 6,705 (1,953)
Total loans and leases 8,655 (4,776)
Other earning assets (144) 2,670 2,526 904 (1,122) (218)
Net increase (decrease) in interest income $ 24,904 $ 

(3,985)

Increase (decrease) in interest expense
U.S. interest-bearing deposits Demand and money market deposits $ (18) $ 2,849 $ 2,831 $ 134 $ (797) $ (663) Time and savings deposits 13 635 648 (39) (525) (564)
Total U.S. interest-bearing deposits 3,479 

(1,227)

 Non-U.S. interest-bearing deposits (4) 706 702 16 (195) 

(179)

Total interest-bearing deposits 4,181 

(1,406)

Federal funds purchased and securities loaned or
sold under agreements to repurchase 11 3,645 3,656 142 (910) 

(768)

Short-term borrowings and other interest-bearing
liabilities (238) 3,918 3,680 (4) (573) (577)
Trading account liabilities (63) 473 410 298 (144) 154
Long-term debt 118 3,320 3,438 338 (1,228) (890)
Net increase (decrease) in interest expense 15,365 

(3,487)

Net increase (decrease) in net interest income (2) $ 9,539 $ 

(498)

 (1)The changes for each category of interest income and expense are divided
between the portion of change attributable to the variance in volume and the
portion of change attributable to the variance in rate for that category. The
unallocated change in rate or volume variance is allocated between the rate and
volume variances.
(2)Includes an increase (decrease) in FTE basis adjustments of $11 million from
2021 to 2022 and $(72) million from 2020 to 2021.

Bank of America 36

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Business Segment Operations

Segment Description and Basis of Presentation

 We report our results of operations through the following four business
segments: Consumer Banking, GWIM, Global Banking and Global Markets, with the
remaining operations recorded in All Other. We manage our segments and report
their results on an FTE basis. The primary activities, products and businesses
of the business segments and All Other are shown below. [[Image Removed: bac-20221231_g1.jpg]] 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 46. The
capital allocated to the business segments is referred to as allocated capital.
Allocated equity in the reporting units is comprised of allocated capital plus
capital for the portion of goodwill and intangibles specifically assigned to the
reporting unit. For more information, including the definition of a reporting
unit, see Note 7 - Goodwill and Intangible Assets to the Consolidated Financial
Statements.
For more information on our presentation of financial information on an FTE
basis, see Supplemental Financial Data on page 32, and for reconciliations to
consolidated total revenue, net income and year-end total assets, see Note 23 -
Business Segment Information to the Consolidated Financial Statements. Key Performance Indicators
We present certain key financial and nonfinancial performance indicators that
management uses when evaluating segment results. We believe they are useful to
investors because they provide additional information about our segments'
operational performance, customer trends and business growth. 

37 Bank of America

——————————————————————————–

Consumer Banking

 Deposits Consumer Lending Total Consumer Banking (Dollars in millions) 2022 2021 2022 2021 2022 2021 % Change
Net interest income $ 19,254 $ 14,358 $ 10,791 $ 10,571 $ 30,045 $ 24,929 21 %
Noninterest income:
Card income (36) (28) 5,205 5,200 5,169 5,172 -
Service charges 2,703 3,535 3 3 2,706 3,538 (24)
All other income 478 223 237 143 715 366 95
Total noninterest income 3,145 3,730 5,445 5,346 8,590 9,076 (5)
Total revenue, net of interest expense 22,399 18,088 16,236 15,917 38,635 34,005 14 Provision for credit losses 564 240 1,416 (1,275) 1,980 (1,035) n/m
Noninterest expense 12,393 11,650 7,684 7,640 20,077 19,290 4
Income before income taxes 9,442 6,198 7,136 9,552 16,578 15,750 5
Income tax expense 2,314 1,519 1,748 2,340 4,062 3,859 5
Net income $ 7,128 $ 4,679 $ 5,388 $ 7,212 $ 12,516 $ 11,891 5 Effective tax rate (1) 24.5 % 24.5 % Net interest yield 1.82 % 1.48 % 3.72 % 3.77 % 2.73 % 2.45 %
Return on average allocated capital 55 39 20 27 31 31
Efficiency ratio 55.33 64.41 47.32 48.00 51.96 56.73 Balance Sheet Average
Total loans and leases $ 4,161 $ 4,431 $ 288,205 $ 279,630 $ 292,366 $ 284,061 3 %
Total earning assets (2) 1,057,531 973,018 289,719 280,080 1,099,410 1,016,751 8
Total assets (2) 1,090,692 1,009,387 296,499 285,532 1,139,351 1,058,572 8
Total deposits 1,056,783 976,093 5,778 6,934 1,062,561 983,027 8
Allocated capital 13,000 12,000 27,000 26,500 40,000 38,500 4 Year End Total loans and leases $ 4,148 $ 4,206 $ 300,613 $ 282,305 $ 304,761 $ 286,511 6 %
Total earning assets (2) 1,043,049 

1,048,009 300,787 282,850 1,085,079 1,090,331 -
Total assets (2) 1,077,203 1,082,449 308,007 289,220 1,126,453 1,131,142 -
Total deposits 1,043,194 1,049,085 5,605 5,910 1,048,799 1,054,995 (1) (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.
n/m = not meaningful Consumer Banking, comprised of Deposits and Consumer Lending, offers a
diversified range of credit, banking and investment products and services to
consumers and small businesses. 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 businesses. Our customers and clients have access to a
coast-to-coast network including financial centers in 38 states and the District
of Columbia. As of December 31, 2022, our network includes approximately 3,900
financial centers, approximately 16,000 ATMs, nationwide call centers and
leading digital banking platforms with more than 44 million active users,
including approximately 35 million active mobile users. Consumer Banking Results
Net income for Consumer Banking increased $625 million to $12.5 billion due to
higher revenue, partially offset by an increase in provision for credit losses
and higher noninterest expense. Net interest income increased $5.1 billion to
$30.0 billion primarily driven by higher interest rates and the benefits of
higher deposit and loan balances, partially offset by a lower amount of
accelerated net capitalized loan fees due to PPP loan forgiveness, which
primarily occurred in 2021. Noninterest income decreased $486 million to $8.6
billion primarily driven by the impact of non-sufficient funds and overdraft
policy changes, partially offset by a gain on the sale of an affinity card loan
portfolio in the fourth quarter of 2022.
The provision for credit losses increased $3.0 billion to $2.0 billion primarily
driven by loan growth and a dampened
macroeconomic outlook in 2022, compared to a benefit in 2021 due to an improved
macroeconomic outlook. Noninterest expense increased $787 million to $20.1
billion primarily driven by continued investments for business growth, including
marketing, technology and people, as well as increased client activity,
partially offset by an impairment charge for real estate rationalization and the
contribution to the Bank of America Foundation in the prior year.
The return on average allocated capital was 31 percent, unchanged from 2021. For
more information on capital allocated to the business segments, see Business
Segment Operations on page 37. 

Deposits

Deposits includes the results of consumer deposit activities that consist of a
comprehensive range of products provided to consumers and small businesses. Our
deposit products include noninterest- and interest-bearing checking accounts,
money market savings accounts, traditional savings accounts, CDs and IRAs, as
well as investment accounts and products. Net interest income is allocated to
deposit products using our funds transfer pricing process that matches assets
and liabilities with similar interest rate sensitivity and maturity
characteristics. Deposits generates fees such as account service fees and ATM
fees, as well as investment and brokerage fees from Consumer Investment
accounts. Consumer Investments serves investment client relationships through
the Merrill Edge integrated investing and banking service platform, providing
investment advice and guidance, client brokerage asset services, self-directed
online investing and key banking capabilities including access to the

Bank of America 38

——————————————————————————–

 Corporation's network of financial centers and ATMs.
Net income for Deposits increased $2.4 billion to $7.1 billion due to higher
revenue, partially offset by higher noninterest expense and an increase in
provision for credit losses. Net interest income increased $4.9 billion to $19.3
billion primarily due to higher interest rates and the benefit of higher deposit
balances. Noninterest income decreased $585 million to $3.1 billion primarily
driven by the impact of non-sufficient funds and overdraft policy changes,
partially offset by higher other service charges due to increased client
activity.
The provision for credit losses increased $324 million to $564 million primarily
driven by increased overdraft losses due to higher payment activity related to
checking accounts. The benefit in the prior year was due to an improved
macroeconomic outlook. Noninterest expense increased $743 million to $12.4
billion primarily driven by continued investments for business growth and
increased client activity, partially offset by an impairment charge for real
estate rationalization in the prior year.
Average deposits increased $80.7 billion to $1.1 trillion primarily due to net
inflows of $46.8 billion in checking and $34.9 billion in money market savings
largely driven by strong organic growth.
The table below provides key performance indicators for Deposits. Management
uses these metrics, and we believe they are useful to investors because they
provide additional information to evaluate our deposit profitability and
digital/mobile trends. Key Statistics - Deposits 2022 2021
Total deposit spreads (excludes noninterest costs) (1) 1.86% 1.69% Year End
Consumer investment assets (in millions) (2) $ 319,648 $ 368,831
Active digital banking users (in thousands) (3) 44,054 41,365
Active mobile banking users (in thousands) (4) 35,452 32,980
Financial centers 3,913 4,173
ATMs 15,528 16,209 (1)Includes deposits held in Consumer Lending.
(2)Includes client brokerage assets, deposit sweep balances and AUM in Consumer
Banking.
(3)Represents mobile and/or online active users over the past 90 days.
(4)Represents mobile active users over the past 90 days. Consumer investment assets decreased $49.2 billion to $319.6 billion driven by
market performance, partially offset by client flows. Active mobile banking
users increased approximately two million, reflecting continuing changes in our
clients' banking preferences. We had a net decrease of 260 financial centers and
681 ATMs as we continue to optimize our consumer banking network. Consumer Lending
Consumer Lending offers products to consumers and small businesses across the
U.S. The products offered include debit and credit cards, residential mortgages
and home equity loans, and direct and indirect loans such as automotive,
recreational vehicle and consumer personal loans. In addition to earning net
interest spread revenue on its lending activities, Consumer Lending generates
interchange revenue from debit and credit card transactions, late fees, cash
advance fees, annual credit card fees, mortgage banking fee income and other
miscellaneous fees. Consumer Lending products are available to our customers
through our retail network, direct telephone, and online and mobile channels.
Consumer Lending results also include the impact of servicing residential
mortgages and home
equity loans, including loans held on the balance sheet of Consumer Lending and
loans serviced for others.
Net income for Consumer Lending decreased $1.8 billion to $5.4 billion primarily
due to an increase in provision for credit losses. Net interest income increased
$220 million to $10.8 billion primarily due to higher interest rates and loan
balances, largely offset by a lower amount of accelerated net capitalized loan
fees due to PPP loan forgiveness, which primarily occurred in 2021. Noninterest
income increased $99 million to $5.4 billion primarily driven by a gain on the
sale of an affinity card loan portfolio in the fourth quarter of 2022.
The provision for credit losses increased $2.7 billion to $1.4 billion primarily
driven by loan growth and a dampened macroeconomic environment in 2022 compared
to a benefit in 2021 due to an improved macroeconomic outlook. Noninterest
expense increased $44 million to $7.7 billion largely driven by continued
investments for business growth and increased client activity, partially offset
by the contribution to the Bank of America Foundation in the prior year.
Average loans increased $8.6 billion to $288.2 billion primarily driven by an
increase in credit card loans and first mortgage loans, partially offset by a
decline in PPP loans.
The table below provides key performance indicators for Consumer Lending.
Management uses these metrics, and we believe they are useful to investors
because they provide additional information about loan growth and profitability. 

Key Statistics – Consumer Lending

 (Dollars in millions) 2022 2021

Total credit card (1)

 Gross interest yield (2) 

10.42 % 10.17 %

 Risk-adjusted margin (3) 10.06 10.17 New accounts (in thousands) 4,397 3,594 Purchase volumes $ 

356,588 $ 311,571

 Debit card purchase volumes $ 

503,583 $ 473,770

 (1)Includes GWIM's credit card portfolio.
(2)Calculated as the effective annual percentage rate divided by average loans.
(3)Calculated as the difference between total revenue, net of interest expense,
and net credit losses divided by average loans. During 2022, the total risk-adjusted margin decreased 11 bps primarily driven by
lower net interest margin and lower fee income, partially offset by lower net
credit losses. Total credit card purchase volumes increased $45.0 billion to
$356.6 billion and debit card purchase volumes increased $29.8 billion to $503.6
billion, reflecting higher levels of consumer spending. 

Key Statistics – Loan Production (1)

(Dollars in millions) 2022 2021
Consumer Banking:
First mortgage $ 20,981 $ 45,976
Home equity 7,988 3,996
Total (2):
First mortgage $ 44,765 $ 79,692
Home equity 9,591 4,895 (1)The loan production amounts represent the unpaid principal balance of loans
and, in the case of home equity, the principal amount of the total line of
credit.
(2)In addition to loan production in Consumer Banking, there is also first
mortgage and home equity loan production in GWIM. First mortgage loan originations for Consumer Banking and the total Corporation
decreased $25.0 billion and $34.9 billion during 2022 primarily driven by
changes in demand.
Home equity production in Consumer Banking and the total Corporation increased
$4.0 billion and $4.7 billion during 2022 primarily driven by higher demand.
39 Bank of America --------------------------------------------------------------------------------

Global Wealth & Investment Management

(Dollars in millions) 2022 2021 % Change
Net interest income $ 7,466 $ 5,664 32 %
Noninterest income:
Investment and brokerage services 13,561 14,312 (5)
All other income 721 772 (7)
Total noninterest income 14,282 15,084 (5)
Total revenue, net of interest expense 21,748 20,748 5 Provision for credit losses 66 (241) (127)
Noninterest expense 15,490 15,258 2
Income before income taxes 6,192 5,731 8
Income tax expense 1,517 1,404 8
Net income $ 4,675 $ 4,327 8 Effective tax rate 24.5 % 24.5 % Net interest yield 1.95 1.51
Return on average allocated capital 27 26 Efficiency ratio 71.23 73.54 Balance Sheet Average
Total loans and leases $ 219,810 $ 196,899 12 %
Total earning assets 383,352 374,273 2
Total assets 396,167 386,918 2
Total deposits 351,329 340,124 3
Allocated capital 17,500 16,500 6 Year end
Total loans and leases $ 223,910 $ 208,971 7
Total earning assets 355,461 425,112 (16)
Total assets 368,893 438,275 (16)
Total deposits 323,899 390,143 (17) GWIM consists of two primary businesses: Merrill Wealth Management and Bank of
America Private Bank.
Merrill Wealth Management's advisory business provides a high-touch client
experience through a network of financial advisors focused on clients with over
$250,000 in total investable assets. Merrill Wealth Management provides tailored
solutions to meet clients' needs through a full set of investment management,
brokerage, banking and retirement products.
Bank of America Private Bank, together with Merrill Wealth Management's Private
Wealth Management business, provides comprehensive wealth management solutions
targeted to high net worth and ultra high net worth clients, as well as
customized solutions to meet clients' wealth structuring, investment management,
trust and banking needs, including specialty asset management services.
Net income for GWIM increased $348 million to $4.7 billion driven by higher
revenue, partially offset by higher provision for credit losses and noninterest
expense. The operating margin remained unchanged at 28 percent compared to a
year ago.
Net interest income increased $1.8 billion to $7.5 billion due to the impacts of
higher interest rates, as well as the benefits of higher loan and deposit
balances.
Noninterest income, which primarily includes investment and brokerage services
income, decreased $802 million to $14.3 billion primarily due to the impacts of
lower market valuations and declines in AUM pricing, partially offset by the
impact of positive AUM flows.
The provision for credit losses increased $307 million primarily due to a
dampened macroeconomic outlook and loan growth in the current-year period,
compared to a benefit in the prior-year period due to an improved macroeconomic
outlook. Noninterest expense increased $232 million to $15.5 billion primarily
due to continued investments in the business, partially offset by lower
revenue-related incentives.
The return on average allocated capital was 27 percent, up from 26 percent, due
to higher net income, partially offset by an increase in allocated capital. For
more information on capital allocated to the business segments, see Business
Segment Operations on page 37.
Average loans increased $22.9 billion to $219.8 billion primarily due to
residential mortgage, securities-based lending and custom lending. Average
deposits increased $11.2 billion to $351.3 billion primarily driven by inflows
from new and existing accounts.
Merrill Wealth Management revenue of $18.1 billion increased four percent
primarily driven by the benefits of higher interest rates, as well as higher
deposit and loan balances, partially offset by the impact of lower market
valuations and declines in AUM pricing.
Bank of America Private Bank revenue of $3.6 billion increased nine percent
primarily driven by the benefits of higher interest rates, as well as higher
deposit and loan balances, partially offset by the impact of lower market
valuations. Bank of America 40 

——————————————————————————–

Key Indicators and Metrics (Dollars in millions) 2022 2021
Revenue by Business
Merrill Wealth Management $ 18,135 $ 17,448
Bank of America Private Bank 3,613 3,300 Total revenue, net of interest expense $ 

21,748 $ 20,748

 Client Balances by Business, at year end
Merrill Wealth Management $ 2,822,910 $ 3,214,881
Bank of America Private Bank 563,931 625,453 Total client balances $ 3,386,841 $ 3,840,334

Client Balances by Type, at year end

Assets under management $ 1,401,474 $ 1,638,782
Brokerage and other assets 1,482,025 1,655,021 Deposits 323,899 390,143
Loans and leases (1) 226,973 212,251
Less: Managed deposits in assets under management (47,530) (55,863)
Total client balances $ 

3,386,841 $ 3,840,334

 Assets Under Management Rollforward
Assets under management, beginning of year $ 1,638,782 $ 1,408,465 Net client flows 20,785 66,250
Market valuation/other (258,093) 164,067
Total assets under management, end of year $ 

1,401,474 $ 1,638,782

 Total wealth advisors, at year end (2) 19,273 18,846 

(1)Includes margin receivables which are classified in customer and other
receivables on the Consolidated Balance Sheet.
(2)Includes advisors across all wealth management businesses in GWIM and
Consumer Banking.

 Client Balances
Client balances managed under advisory and/or discretion of GWIM are AUM and are
typically held in diversified portfolios. Fees earned on AUM are calculated as a
percentage of clients' AUM balances. The asset management fees charged to
clients per year depend on various factors but are commonly driven by the
breadth of the client's relationship. The net client AUM flows represent the net
change in clients' AUM balances over a
specified period of time, excluding market appreciation/depreciation and other
adjustments.
Client balances decreased $453.5 billion, or 12 percent, to $3.4 trillion at
December 31, 2022 compared to December 31, 2021. The decrease in client balances
was primarily due to the impact of lower market valuations, partially offset by
positive client flows.
41 Bank of America 

-------------------------------------------------------------------------------- Global Banking
(Dollars in millions) 2022 2021 % Change
Net interest income $ 12,184 $ 8,511 43 %
Noninterest income:
Service charges 3,293 3,523 (7)
Investment banking fees 3,004 5,107 (41)
All other income 3,748 3,734 -
Total noninterest income 10,045 12,364 (19)
Total revenue, net of interest expense 22,229 20,875 6 Provision for credit losses 641 (3,201) (120)
Noninterest expense 10,966 10,632 3
Income before income taxes 10,622 13,444 (21)
Income tax expense 2,815 3,630 (22)
Net income $ 7,807 $ 9,814 (20) Effective tax rate 26.5 % 27.0 % Net interest yield 2.26 1.55
Return on average allocated capital 18 23
Efficiency ratio 49.34 50.93 Balance Sheet Average
Total loans and leases $ 375,271 

 $ 329,655 14 %
Total earning assets 539,032 549,749 (2)
Total assets 603,273 611,304 (1)
Total deposits 511,804 522,790 (2)
Allocated capital 44,500 42,500 5 Year end
Total loans and leases $ 379,107 $ 352,933 7 %
Total earning assets 522,539 574,583 (9)
Total assets 588,466 638,131 (8)
Total deposits 498,661 551,752 (10) Global Banking, which includes Global Corporate Banking, Global Commercial
Banking, Business Banking and Global Investment Banking, provides a wide range
of lending-related products and services, integrated working capital management
and treasury solutions, and underwriting and advisory services through our
network of offices and client relationship teams. Our lending products and
services include commercial loans, leases, commitment facilities, trade finance,
commercial real estate lending and asset-based lending. Our treasury solutions
business includes treasury management, foreign exchange, short-term investing
options and merchant services. We also provide investment banking services to
our clients such as debt and equity underwriting and distribution, and
merger-related and other advisory services. Underwriting debt and equity
issuances, fixed-income and equity research, and certain market-based activities
are executed through our global broker-dealer affiliates, which are our primary
dealers in several countries. Within Global Banking, Global Corporate Banking
clients generally include large global corporations, financial institutions and
leasing clients. Global Commercial Banking clients generally include
middle-market companies, commercial real estate firms and not-for-profit
companies. Business Banking clients include mid-sized U.S.-based businesses
requiring customized and integrated financial advice and solutions.
Net income for Global Banking decreased $2.0 billion to $7.8 billion driven by
higher provision for credit losses and noninterest expense, partially offset by
higher revenue.
Net interest income increased $3.7 billion to $12.2 billion primarily due to the
benefits of higher interest rates and loan balances.
Noninterest income decreased $2.3 billion to $10.0 billion driven by lower
investment banking fees and valuation adjustments on leveraged loans, as well as
lower treasury service charges.
The provision for credit losses increased $3.8 billion to $641 million primarily
driven by a dampened macroeconomic outlook and loan growth, compared to a
benefit in the prior year due to an improved macroeconomic outlook.
Noninterest expense increased $334 million to $11.0 billion, primarily due to
continued investments in the business, including strategic hiring and
technology.
The return on average allocated capital was 18 percent, down from 23 percent,
due to lower net income and higher allocated capital. For more information on
capital allocated to the business segments, see Business Segment Operations on
page 37. Global Corporate, Global Commercial and Business Banking
Global Corporate, Global Commercial and Business Banking each include Business
Lending and Global Transaction Services activities. Business Lending includes
various lending-related products and services, and related hedging activities,
including commercial loans, leases, commitment facilities, trade finance, real
estate lending and asset-based lending. Global Transaction Services includes
deposits, treasury management, credit card, foreign exchange and short-term
investment products.
The following table and discussion present a summary of the results, which
exclude certain investment banking and PPP activities in Global Banking. 

Bank of America 42

——————————————————————————–

Global Corporate, Global Commercial and Business Banking

 Global Corporate Banking Global Commercial Banking Business Banking Total (Dollars in millions) 2022 2021 2022 2021 2022 2021 2022 2021
Revenue
Business Lending $ 4,325 $ 3,723 $ 4,316 $ 3,675 $ 251 $ 224 $ 8,892 $ 7,622
Global Transaction Services
(1) 5,002 3,235 4,166 3,341 1,213 941 10,381 7,517
Total revenue, net of
interest expense $ 9,327 $ 6,958 $ 8,482 $ 7,016 $ 1,464 $ 1,165 $ 19,273 $ 15,139 Balance Sheet Average
Total loans and leases $ 174,052 $ 150,159 $ 187,597 $ 161,012 $ 12,743 $ 12,763 $ 374,392 $ 323,934
Total deposits (1) 250,648 252,403 204,893 213,999 56,263 56,354 511,804 522,756 Year end
Total loans and leases $ 174,905 $ 163,027 $ 191,051 $ 175,228 $ 12,683 $ 12,822 $ 378,639 $ 351,077
Total deposits (1) 262,033 260,826 186,112 233,007 50,516 57,886 498,661 551,719 

(1)Prior periods have been revised to conform to current-period presentation.

 Business Lending revenue increased $1.3 billion in 2022 compared to 2021
primarily due to the benefits of higher interest rates and loan balances.
Global Transaction Services revenue increased $2.9 billion in 2022 compared to
2021 driven by higher interest rates, partially offset by lower treasury service
charges.
Average loans and leases increased 16 percent in 2022 compared to 2021 due to
higher client demand. Average deposits decreased two percent due to declines in
domestic 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 table below presents total Corporation
investment banking fees and the portion attributable to Global Banking.

 Investment Banking Fees Global Banking Total Corporation (Dollars in millions) 2022 2021 2022 2021
Products
Advisory $ 1,643 $ 2,139 $ 1,783 $ 2,311
Debt issuance 1,099 1,736 2,523 4,015
Equity issuance 262 1,232 709 2,784
Gross investment banking fees 3,004 5,107 5,015 9,110
Self-led deals (78) (93) (192) 

(223)

Total investment banking fees $ 2,926 $ 5,014 $ 4,823 $ 8,887 Total Corporation investment banking fees, which exclude self-led deals and are
primarily included within Global Banking and Global Markets, decreased 46
percent to $4.8 billion primarily due to lower equity issuance, debt issuance
and advisory fees. 43 Bank of America 

——————————————————————————–

Global Markets
(Dollars in millions) 2022 2021 % Change
Net interest income $ 3,088 $ 4,011 (23) %
Noninterest income:
Investment and brokerage services 2,002 1,979 1
Investment banking fees 1,820 3,616 (50)
Market making and similar activities 11,406 8,760 30
All other income (178) 889 (120)
Total noninterest income 15,050 15,244 (1)
Total revenue, net of interest expense 18,138 19,255 (6) Provision for credit losses 28 65 (57)
Noninterest expense 12,420 13,032 (5)
Income before income taxes 5,690 6,158 (8)
Income tax expense 1,508 1,601 (6)
Net income $ 4,182 $ 4,557 (8) Effective tax rate 26.5 % 26.0 % Return on average allocated capital 10 12
Efficiency ratio 68.48 67.68 Balance Sheet Average
Trading-related assets:
Trading account securities $ 303,587 $ 291,505 4 %
Reverse repurchases 126,324 113,989 11
Securities borrowed 116,764 100,292 16
Derivative assets 54,128 43,582 24
Total trading-related assets 600,803 549,368 9
Total loans and leases 116,652 91,339 28
Total earning assets 602,889 541,391 11
Total assets 857,637 785,998 9
Total deposits 40,382 51,833 (22)
Allocated capital 42,500 38,000 12 Year end
Total trading-related assets $ 564,769 $ 491,160 15 %
Total loans and leases 127,735 114,846 11
Total earning assets 587,772 561,135 5
Total assets 812,489 747,794 9
Total deposits 39,077 46,374 (16) 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. Global Markets
provides market-making, financing, securities clearing, settlement and custody
services globally to our institutional investor clients in support of their
investing and trading activities. We also work with our commercial and corporate
clients to provide risk management products using interest rate, equity, credit,
currency and commodity derivatives, foreign exchange, fixed-income and
mortgage-related products. As a result of our market-making activities in these
products, we may be required to manage risk in a broad range of financial
products including government securities, equity and equity-linked securities,
high-grade and high-yield corporate debt securities, syndicated loans, MBS,
commodities and asset-backed securities. The economics of certain investment
banking and underwriting activities are shared primarily between Global Markets
and Global Banking under an internal revenue-sharing arrangement. Global Banking
originates certain deal-related transactions with our corporate and commercial
clients that are executed and distributed by Global Markets. For information on
investment banking fees on a consolidated basis, see page 43.
The following explanations for year-over-year changes for
Global Markets, including those disclosed under Sales and Trading Revenue, are
the same for amounts including and excluding net DVA. Amounts excluding net DVA
are a non-GAAP financial measure. For more information on net DVA, see
Supplemental Financial Data on page 32.
Net income for Global Markets decreased $375 million to $4.2 billion. Net DVA
gains were $20 million compared to losses of $54 million in 2021. Excluding net
DVA, net income decreased $431 million to $4.2 billion. These decreases were
primarily driven by lower revenue, partially offset by lower noninterest
expense.
Revenue decreased $1.1 billion to $18.1 billion primarily due to lower
investment banking fees, partially offset by higher sales and trading revenue.
Sales and trading revenue increased $1.3 billion, and excluding net DVA, sales
and trading revenue increased $1.2 billion. These increases were driven by
higher revenue in both FICC and Equities.
Noninterest expense decreased $612 million to $12.4 billion primarily driven by
the realignment of a liquidating business activity from Global Markets to All
Other in the fourth quarter of 2021 and an acceleration of expenses from
incentive compensation award changes in the prior year.
Average total assets increased $71.6 billion to $857.6 billion driven by loan
growth and commodities activity in FICC. Period-end total assets increased $64.7
billion to $812.5 billion Bank of America 44 

——————————————————————————–

 driven by loan growth, an increase in commodities activity, and higher
derivative balances due to higher interest rates.
The return on average allocated capital was 10 percent, down from 12 percent,
reflecting lower net income and an increase in allocated capital. For more
information on capital allocated to the business segments, see Business Segment
Operations on page 37. Sales and Trading Revenue
Sales and trading revenue includes unrealized and realized gains and losses on
trading and other assets which are included in market making and similar
activities, net interest income, and fees primarily from commissions on equity
securities. Sales and trading revenue is segregated into fixed-income
(government debt obligations, investment and non-investment grade corporate debt
obligations, commercial MBS, residential mortgage-backed securities,
collateralized loan obligations, interest rate and credit derivative contracts),
currencies (interest rate and foreign exchange contracts), commodities
(primarily futures, forwards, swaps and options) and equities (equity-linked
derivatives and cash equity activity). The following table and related
discussion present sales and trading revenue, substantially all of which is in
Global Markets, with the remainder in Global Banking. In addition, the following
table and related discussion also 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 32. 

Sales and Trading Revenue (1, 2, 3)

 (Dollars in millions) 2022 2021
Sales and trading revenue
Fixed income, currencies and commodities $ 9,917 $ 8,761
Equities 6,572 6,428
Total sales and trading revenue $ 16,489 $ 15,189 Sales and trading revenue, excluding net DVA (4)
Fixed income, currencies and commodities $ 9,898 $ 8,810
Equities 6,571 6,433
Total sales and trading revenue, excluding net DVA $ 16,469 $ 15,243 (1)For more information on sales and trading revenue, see Note 3 - Derivatives
to the Consolidated Financial Statements.
(2)Includes FTE adjustments of $354 million and $421 million for 2022 and 2021.
(3) Includes Global Banking sales and trading revenue of $1.0 billion and $510
million for 2022 and 2021.
(4) FICC and Equities sales and trading revenue, excluding net DVA, is a
non-GAAP financial measure. FICC net DVA gains (losses) were $19 million and
$(49) million for 2022 and 2021. Equities net DVA gains (losses) were $1 million
and $(5) million for 2022 and 2021. Including and excluding net DVA, FICC revenue increased $1.2 billion and $1.1
billion driven by improved trading performance across interest rate and currency
products, partially offset by a weaker trading environment for credit products
in the current-year period and a gain in commodities from a weather-related
event in the prior year. Including and excluding net DVA, Equities revenue
increased $144 million and $138 million driven by strong performances in
derivatives and client financing activities, partially offset by a weaker
performance in cash. All Other
(Dollars in millions) 2022 2021 % Change
Net interest income $ 117 $ 246 (52) % Noninterest income (loss) (5,479) (5,589) (2)
Total revenue, net of interest expense (5,362) (5,343) - Provision for credit losses (172) (182) (5) Noninterest expense 2,485 1,519 64
Loss before income taxes (7,675) (6,680) 15
Income tax benefit (6,023) (8,069) (25)
Net income (loss) $ (1,652) $ 1,389 n/m Balance Sheet Year Ended December 31 Average 2022 2021 % Change
Total loans and leases $ 12,683 $ 18,447 (31) %
Total assets (1) 139,466 191,831 (27)
Total deposits 20,082 16,512 22 December 31 December 31
Year end 2022 2021 % Change Total loans and leases $ 10,234 $ 15,863 (35) % Total assets (1) 155,074 214,153 (28)
Total deposits 19,905 21,182 (6) (1)In segments where the total of liabilities and equity exceeds assets, which
are generally deposit-taking segments, we allocate assets from All Other to
those segments to match liabilities (i.e., deposits) and allocated shareholders'
equity. Average allocated assets were $1.1 trillion for both 2022 and 2021, and
year-end allocated assets were $1.0 trillion and $1.2 trillion at December 31,
2022 and 2021.
n/m = not meaningful All Other primarily consists of asset and liability management (ALM) activities,
liquidating businesses and certain expenses not otherwise allocated to a
business segment. ALM activities encompass interest rate and foreign currency
risk management activities for which substantially all of the results are
allocated to our business segments. For more information on our ALM activities,
see Note 23 - Business Segment Information to the Consolidated Financial
Statements. Net income decreased $3.0 billion to a loss of $1.7 billion primarily due to a
lower income tax benefit and higher noninterest expense.
Noninterest expense increased $966 million primarily driven by the realignment
of a liquidating business activity from Global Markets to All Other in the
fourth quarter of 2021, expense associated with the settlement of the legacy
monoline insurance litigation and expense related to certain regulatory matters,
partially offset by decreases in other expenses.
45 Bank of America -------------------------------------------------------------------------------- The income tax benefit was $6.0 billion in 2022 compared to a benefit of $8.1
billion in 2021. The decrease in the tax benefit was primarily driven by the
impact of the U.K. tax law change in 2021. For more information, see Financial
Highlights - Income Tax Expense on page 29. Both periods included income tax
benefit adjustments to eliminate the FTE treatment of certain tax credits
recorded in Global Banking and Global Markets. Managing Risk
Risk is inherent in all our business activities. Sound risk management enables
us to serve our customers and deliver for our shareholders. If not managed well,
risk can result in financial loss, regulatory sanctions and penalties, and
damage to our reputation, each of which may adversely impact our ability to
execute our business strategies. We take a comprehensive approach to risk
management with a defined Risk Framework and an articulated Risk Appetite
Statement, which are approved annually by the ERC and the Board.
The seven key types of risk faced by the Corporation are strategic, credit,
market, liquidity, compliance, operational and reputational. ? Strategic risk is the risk to current or projected financial condition
arising from incorrect assumptions about external or internal factors,
inappropriate business plans, ineffective business strategy execution or failure
to respond in a timely manner to changes in the regulatory, macroeconomic or
competitive environments in the geographic locations in which we operate.
? Credit risk is the risk of loss arising from the inability or failure of a
borrower or counterparty to meet its obligations.
? Market risk is the risk that changes in market conditions adversely impact
the value of assets or liabilities or otherwise negatively impact earnings.
Market risk is composed of price risk and interest rate risk.
? Liquidity risk is the inability to meet expected or unexpected cash flow and
collateral needs while continuing to support our businesses and customers under
a range of economic conditions.
? Compliance risk is the risk of legal or regulatory sanctions, material
financial loss or damage to the reputation of the Corporation arising from the
failure of the Corporation to comply with the requirements of applicable laws,
rules and regulations and our internal policies and procedures.
? Operational risk is the risk of loss resulting from inadequate or failed
internal processes or systems, people or external events.
? Reputational risk is the risk that negative perception of the Corporation may
adversely impact profitability or operations. The following sections address in more detail the specific procedures, measures
and analyses of the major categories of risk. This discussion of managing risk
focuses on the current Risk Framework that, as part of its annual review
process, was approved by the ERC and the Board.
As set forth in our Risk Framework, a culture of managing risk well is
fundamental to our values and our purpose, and how we drive Responsible Growth.
It requires us to focus on risk in all activities and encourages the necessary
mindset and behavior to enable effective risk management and promote sound
risk-taking within our risk appetite. Sustaining a culture of managing risk well
throughout the organization is critical to the success of the Corporation and is
a clear expectation of our executive management team and the Board.
Our Risk Framework serves as the foundation for the consistent and effective
management of risks facing the Corporation. The Risk Framework sets forth roles
and responsibilities for the management of risk and provides a blueprint for how
the Board, through delegation of authority to committees and executive officers,
establishes risk appetite and associated limits for our activities.
Executive management assesses, with Board oversight, the risk-adjusted returns
of each business. Management reviews and approves the strategic and financial
operating plans, as well as the capital plan and Risk Appetite Statement, and
recommends them annually to the Board for approval. Our strategic plan takes
into consideration return objectives and financial resources, which must align
with risk capacity and risk appetite. Management sets financial objectives for
each business by allocating capital and setting a target for return on capital
for each business. Capital allocations and operating limits are regularly
evaluated as part of our overall governance processes as the businesses and the
economic environment in which we operate continue to evolve. For more
information regarding capital allocations, see Business Segment Operations on
page 37.
The Corporation's risk appetite indicates the amount of capital, earnings or
liquidity we are willing to put at risk to achieve our strategic objectives and
business plans, consistent with applicable regulatory requirements. Our risk
appetite provides a common framework that includes a set of measures to assist
senior management and the Board in assessing the Corporation's risk profile
against our risk appetite and risk capacity. Our risk appetite is formally
articulated in the Risk Appetite Statement, which includes both qualitative
statements and quantitative limits.
Our overall capacity to take risk is limited; therefore, we prioritize the risks
we take in order to maintain a strong and flexible financial position so we can
withstand challenging economic conditions and take advantage of organic growth
opportunities. Therefore, we set objectives and targets for capital and
liquidity that are intended to permit us to continue to operate in a safe and
sound manner at all times, including during periods of stress.
Our lines of business operate with risk limits that align with the Corporation's
risk appetite. Senior management is responsible for tracking and reporting
performance measurements as well as any exceptions to risk appetite limits. The
Board, and its committees when appropriate, oversee financial performance,
execution of the strategic and financial operating plans, adherence to risk
appetite limits and the adequacy of internal controls.
For a more detailed discussion of our risk management activities, see the
discussion below and pages 49 through 82. Risk Management Governance
The Risk Framework describes delegations of authority whereby the Board and its
committees may delegate authority to management-level committees or executive
officers. Such delegations may authorize certain decision-making and approval
functions, which may be evidenced in documents such as committee charters, job
descriptions, meeting minutes and resolutions.
The chart below illustrates the interrelationship among the Board, Board
committees and management committees that have the majority of risk oversight
responsibilities for the Corporation.

Bank of America 46

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 [[Image Removed: bac-20221231_g2.jpg]] Board of Directors and Board Committees
The Board is composed of 15 directors, all but one of whom are independent. The
Board authorizes management to maintain an effective Risk Framework and oversees
compliance with safe and sound banking practices. In addition, the Board or its
committees conduct inquiries of, and receive reports from senior management on,
risk-related matters to assess scope or resource limitations that could impede
the ability of Global Risk Management (GRM) and/or Corporate Audit to execute
its responsibilities. The Board committees discussed below have the principal
responsibility for enterprise-wide oversight of our risk management activities.
Through these activities, the Board and applicable committees are provided with
information on our risk profile and oversee senior management addressing key
risks we face. Other Board committees, as described below, provide additional
oversight of specific risks.
Each of the committees shown on the above chart regularly reports to the Board
on risk-related matters within the committee's responsibilities, which is
intended to collectively provide the Board with integrated insight about our
management of enterprise-wide risks. Audit Committee
The Audit Committee oversees the qualifications, performance and independence of
the Independent Registered Public Accounting Firm, the performance of our
corporate audit function, the integrity of our consolidated financial
statements, our compliance with legal and regulatory requirements, and makes
inquiries of senior management or the Chief Audit Executive (CAE) to determine
whether there are scope or resource limitations that impede the ability of
Corporate Audit to execute its responsibilities. The Audit Committee is also
responsible for overseeing compliance risks pursuant to the New York Stock
Exchange listing standards. Enterprise Risk Committee
The ERC oversees the Corporation's Risk Framework, risk appetite and senior
management's responsibilities for the identification, measurement, monitoring
and control of key risks facing the Corporation. The ERC may consult with other
Board committees on risk-related matters. Other Board Committees
Our Corporate Governance, ESG, and Sustainability Committee oversees our Board's
governance processes, identifies and reviews the qualifications of potential
Board members, leads
Board and committee succession planning and their formal self-evaluation, and
reviews our ESG activities, shareholder input and shareholder engagement
process.
Our Compensation and Human Capital Committee oversees establishing, maintaining
and administering our compensation programs and employee benefit plans,
including approving and recommending our Chief Executive Officer's (CEO)
compensation to our Board for further approval by all independent directors;
reviewing and approving our executive officers' compensation, as well as
compensation for non-management directors; and reviewing certain other human
capital management topics, including pay equity and diversity and inclusion. Management Committees
Management committees receive their authority from the Board, a Board committee,
or another management committee. Our primary management risk committee is the
MRC. Subject to Board oversight, the MRC is responsible for management oversight
of key risks facing the Corporation, including an integrated evaluation of risk,
earnings, capital and liquidity. Lines of Defense
We have clear ownership and accountability for managing risk across three lines
of defense: Front Line Units (FLUs), GRM and Corporate Audit. We also have
control functions outside of FLUs and GRM (e.g., Legal and Global Human
Resources). The three lines of defense are integrated into our management-level
governance structure. Each of these functional roles is further described in
this section. Executive Officers
Executive officers lead various functions representing the functional roles.
Authority for functional roles may be delegated to executive officers from the
Board, Board committees or management-level committees. Executive officers, in
turn, may further delegate responsibilities, as appropriate, to management-level
committees, management routines or individuals. Executive officers review our
activities for consistency with our Risk Framework, risk appetite, and
applicable strategic, capital and financial operating plans, as well as
applicable policies and standards. Executive officers and other employees make
decisions individually on a day-to-day basis, consistent with the authority they
have been delegated. Executive officers and other employees may also serve on
committees and participate in committee decisions. 

47 Bank of America

——————————————————————————–

 Front Line Units
FLUs, which include the lines of business as well as Global Technology and
Global Operations, are responsible for appropriately assessing and effectively
managing all of the risks associated with their activities.
Three organizational units that include FLU activities and control function
activities, but are not part of GRM are first, the Chief Financial Officer
Group; second, the Chief Administrative Officer Group; and third, Global
Strategy and Enterprise Platforms. Global Risk Management
GRM is part of our control functions and operates as our independent risk
management function. GRM, led by the Chief Risk Officer (CRO), is responsible
for independently assessing and overseeing risks within FLUs and other control
functions. GRM establishes written enterprise policies and procedures outlining
how aggregate risks are identified, measured, monitored and controlled.
The CRO has the stature, authority and independence needed to develop and
implement a meaningful risk management framework and practices to guide the
Corporation in managing risk. The CRO has unrestricted access to the Board and
reports directly to both the ERC and the CEO. GRM is organized into horizontal
risk teams that cover a specific risk area and vertical CRO teams that cover a
particular FLU or control function. These teams work collaboratively in
executing their respective duties. Corporate Audit
Corporate Audit and the CAE maintain their independence from the FLUs, GRM and
other control functions by reporting directly to the Audit Committee. The CAE
administratively reports to the CEO. Corporate Audit provides independent
assessment and validation through testing of key processes and controls across
the Corporation. Corporate Audit includes Credit Review, which provides an
independent assessment of credit lending decisions and the effectiveness of
credit processes across the Corporation's credit platform through examinations
and monitoring. Risk Management Processes
The Risk Framework requires that strong risk management practices are integrated
in key strategic, capital and financial planning processes and in day-to-day
business processes across the Corporation, thereby ensuring risks are
appropriately considered, evaluated and responded to in a timely manner. We
employ an effective risk management process, referred to as Identify, Measure,
Monitor and Control, as part of our daily activities. Identify - To be effectively managed, risks must be proactively identified and
well understood. Proper risk identification focuses on recognizing and
understanding key risks inherent in our business activities or key risks that
may arise from external factors. Each employee is expected to identify and
escalate risks promptly. Risk identification is an ongoing process that
incorporates input from FLUs and control functions. It is designed to be
forward-looking and to capture relevant risk factors across all of our lines of
business.
Measure - Once a risk is identified, it must be prioritized and accurately
measured through a systematic process including qualitative statements and
quantitative limits. Risk is measured at various levels, including, but not
limited to, risk type, FLU and legal entity, and also on an aggregate basis.
This risk measurement process helps to capture changes in our risk profile due
to changes in strategic direction,
concentrations, portfolio quality and the overall economic environment. Senior
management considers how risk exposures might evolve under a variety of stress
scenarios.
Monitor - We monitor risk levels regularly to track adherence to risk appetite,
policies and standards. We also regularly update risk assessments and review
risk exposures. Through our monitoring, we know our level of risk relative to
limits and can take action in a timely manner. We also know when risk limits are
breached and have processes to appropriately report and escalate exceptions.
This includes timely requests for approval to managers and alerts to executive
management, management-level committees or the Board (directly or through an
appropriate committee).
Control - We establish and communicate risk limits and controls through
policies, standards, procedures and processes. The limits and controls can be
adjusted by senior management or the Board when conditions or risk tolerances
warrant. These limits may be absolute (e.g., loan amount, trading volume,
operational loss) or relative (e.g., percentage of loan book in higher-risk
categories). Our FLUs are held accountable for performing within the established
limits. The formal processes used to manage risk represent a part of our overall risk
management process. We instill a strong and comprehensive culture of managing
risk well through communications, training, policies, procedures and
organizational roles and responsibilities. Establishing a culture reflective of
our purpose to help make our customers' financial lives better and delivering on
Responsible Growth is also critical to effective risk management. We are
committed to the highest principles of ethical and professional conduct. Conduct
risk is the risk of improper actions, behaviors or practices by the Corporation,
its employees or representatives that are illegal, unethical and/or contrary to
our core values that could result in harm to the Corporation, our shareholders
or our customers, damage the integrity of the financial markets, or negatively
impact our reputation. We have established protocols and structures so that
conduct risk is governed and reported across the Corporation appropriately. All
employees are held accountable for adhering to the Code of Conduct, operating
within our risk appetite and managing risk in their daily business activities.
In addition, our performance management and compensation practices encourage
responsible risk-taking that is consistent with our Risk Framework and risk
appetite. Corporation-wide Stress Testing
Integral to our Capital Planning, Financial Planning and Strategic Planning
processes, we conduct capital scenario management and stress forecasting on a
periodic basis to better understand balance sheet, earnings and capital
sensitivities to certain economic and business scenarios, including economic and
market conditions that are more severe than anticipated. These stress forecasts
provide an understanding of the potential impacts from our risk profile on the
balance sheet, earnings and capital, and serve as a key component of our capital
and risk management practices. The intent of stress testing is to develop a
comprehensive understanding of potential impacts of on- and off-balance sheet
risks at the Corporation and certain subsidiaries and how they impact financial
resiliency, which provides confidence to management, regulators and our
investors. Contingency Planning
We have developed and maintain contingency plans that are designed to prepare us
in advance to respond in the event of

Bank of America 48

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 potential adverse economic, financial or market stress. These contingency plans
include our Capital Contingency Plan and Financial Contingency and Recovery
Plan, which provide monitoring, escalation, actions and routines designed to
enable us to increase capital, access funding sources and reduce risk through
consideration of potential options that include asset sales, business sales,
capital or debt issuances, and other de-risking strategies. We also maintain a
Resolution Plan to limit adverse systemic impacts that could be associated with
a potential resolution of Bank of America. Strategic Risk Management
Strategic risk is embedded in every business and is one of the major risk
categories along with credit, market, liquidity, compliance, operational and
reputational risks. This risk results from incorrect assumptions about external
or internal factors, inappropriate business plans, ineffective business strategy
execution, or failure to respond in a timely manner to changes in the
regulatory, macroeconomic or competitive environments in the geographic
locations in which we operate, such as competitor actions, changing customer
preferences, product obsolescence and technology developments.
An aspect of strategic risk is the risk that the Corporation's capital levels
are not adequate to meet minimum regulatory requirements and support execution
of business activities or absorb losses from risks during normal or adverse
economic and market conditions. As such, capital risk is managed in parallel to
strategic risk.
We manage strategic risk through the Strategic Risk Enterprise Policy and
integration into the strategic planning process, among other activities. Our
strategic plan is consistent with our risk appetite, capital plan and liquidity
requirements, and specifically addresses strategic risks impacting each
business.
On an annual basis, the Board reviews and approves the strategic plan, capital
plan, financial operating plan and Risk Appetite Statement. With oversight by
the Board, senior management directs the lines of business to execute our
strategic plan consistent with our core operating principles and risk appetite.
The executive management team monitors business performance throughout the year
and provides the Board with regular progress reports on whether strategic
objectives and timelines are being met, including reports on strategic risks and
if additional or alternative actions need to be considered or implemented. The
regular executive reviews focus on assessing forecasted earnings and returns on
capital, the current risk profile, current capital and liquidity requirements,
staffing levels and changes required to support the strategic plan, stress
testing results, and other qualitative factors such as market growth rates and
peer analysis.
Significant strategic actions, such as capital actions, material acquisitions or
divestitures, and resolution plans are reviewed and approved by the Board. At
the business level, processes are in place to discuss the strategic risk
implications of new, expanded or modified businesses, products or services and
other strategic initiatives, and to provide formal review and approval where
required. With oversight by the Board and the ERC, executive management performs
similar analyses throughout the year, and evaluates changes to the financial
forecast or the risk, capital or liquidity positions as deemed appropriate to
balance and optimize achieving the targeted risk appetite, shareholder returns
and maintaining the targeted financial strength. Proprietary models are used to
measure the capital requirements for credit, country, market, operational and
strategic risks. The allocated capital assigned to each business
is based on its unique risk profile. With oversight by the Board, executive
management assesses the risk-adjusted returns of each business in approving
strategic and financial operating plans. The businesses use allocated capital to
define business strategies, and price products and transactions. Capital Management
The Corporation manages its capital position so that its capital is more than
adequate to support its business activities and aligns with risk, risk appetite
and strategic planning. Additionally, we seek to maintain safety and soundness
at all times, even under adverse scenarios, take advantage of organic growth
opportunities, meet obligations to creditors and counterparties, maintain ready
access to financial markets, continue to serve as a credit intermediary, remain
a source of strength for our subsidiaries, and satisfy current and future
regulatory capital requirements. Capital management is integrated into our risk
and governance processes, as capital is a key consideration in the development
of our strategic plan, risk appetite and risk limits.
We conduct an Internal Capital Adequacy Assessment Process (ICAAP) on a periodic
basis. The ICAAP is a forward-looking assessment of our projected capital needs
and resources, incorporating earnings, balance sheet and risk forecasts under
baseline and adverse economic and market conditions. We utilize periodic stress
tests to assess the potential impacts to our balance sheet, earnings, regulatory
capital and liquidity under a variety of stress scenarios. We perform
qualitative risk assessments to identify and assess material risks not fully
captured in our forecasts or stress tests. We assess the potential capital
impacts of proposed changes to regulatory capital requirements. Management
assesses ICAAP results and provides documented quarterly assessments of the
adequacy of our capital guidelines and capital position to the Board or its
committees.
We periodically review capital allocated to our businesses and allocate capital
annually during the strategic and capital planning processes. For more
information, see Business Segment Operations on page 37. CCAR and Capital Planning
The Federal Reserve requires BHCs to submit a capital plan and planned capital
actions on an annual basis, consistent with the rules governing the
Comprehensive Capital Analysis and Review (CCAR) capital plan. Based on the
results of our 2022 CCAR stress test, our stress capital buffer (SCB) increased
to 3.4 percent from 2.5 percent, effective October 1, 2022 through September 30,
2023.
In October 2021, the Board authorized the Corporation's $25 billion common stock
repurchase program. Additionally, the Board authorized common stock repurchases
to offset shares awarded under the Corporation's equity-based compensation
plans. Pursuant to the Board's authorizations, during 2022, we repurchased $5.1
billion of common stock, including repurchases to offset shares awarded under
equity-based compensation plans.
The timing and amount of common stock repurchases are subject to various
factors, including the Corporation's capital position, liquidity, financial
performance and alternative uses of capital, stock trading price, regulatory
requirements and general market conditions, and may be suspended at any time.
Such repurchases may be effected through open market purchases or privately
negotiated transactions, including repurchase plans that satisfy the conditions
of Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (Exchange
Act).
49 Bank of America -------------------------------------------------------------------------------- Regulatory Capital
As a financial services holding company, we are subject to regulatory capital
rules, including Basel 3, issued by U.S. banking regulators. Basel 3 established
minimum capital ratios and buffer requirements and outlined two methods of
calculating risk-weighted assets (RWA), the Standardized approach and the
Advanced approaches. The Standardized approach relies primarily on supervisory
risk weights based on exposure type, and the Advanced approaches determine risk
weights based on internal models.
The Corporation's depository institution subsidiaries are also subject to the
Prompt Corrective Action (PCA) framework. The Corporation and its primary
affiliated banking entity, BANA, are Advanced approaches institutions under
Basel 3 and are required to report regulatory risk-based capital ratios and RWA
under both the Standardized and Advanced approaches. The lower of the capital
ratios under Standardized or Advanced approaches compared to their respective
regulatory capital ratio requirements are used to assess capital adequacy,
including under the PCA framework. As of December 31, 2022, the common equity
tier 1 (CET1), Tier 1 capital and Total capital ratios under the Standardized
approach were the binding ratios. Minimum Capital Requirements
In order to avoid restrictions on capital distributions and discretionary bonus
payments, the Corporation must meet risk-based capital ratio requirements that
include a capital conservation buffer of 2.5 percent (under the Advanced
approaches only), an SCB (under the Standardized approach only), plus any
applicable countercyclical capital buffer and a global systemically important
bank (G-SIB) surcharge. The buffers and surcharge must be comprised solely of
CET1 capital. For the period from October 1, 2021 through September 30, 2022,
the Corporation's minimum CET1 capital ratio requirement was 9.5 percent under
both the Standardized and Advanced approaches. Based on the results of our 2022
CCAR stress test, the Corporation's SCB increased to 3.4 percent, resulting in a
minimum CET1 capital ratio requirement of 10.4 percent under the Standardized
approach for the period from October 1, 2022 through September 30, 2023. Our
minimum CET1 capital ratio requirement under the Advanced approaches
remains unchanged at 9.5 percent.
The Corporation is required to calculate its G-SIB surcharge on an annual basis
under two methods and is subject to the higher of the resulting two surcharges.
Method 1 is consistent with the approach prescribed by the Basel Committee's
assessment methodology and is calculated using specified indicators of systemic
importance. Method 2 modifies the Method 1 approach by, among other factors,
including a measure of the Corporation's reliance on short-term wholesale
funding. The Corporation's G-SIB surcharge, which is higher under Method 2, is
expected to increase to 3.0 percent from 2.5 percent on January 1, 2024, which
will increase our minimum CET1 capital ratio requirement. At December 31, 2022,
the Corporation's CET1 capital ratio of 11.2 percent under the Standardized
approach exceeded its current CET1 capital ratio requirement as well as the
minimum requirement expected to be in place as of January 1, 2024 due to an
anticipated increase in our G-SIB surcharge.
The Corporation is also required to maintain a minimum supplementary leverage
ratio (SLR) of 3.0 percent plus a leverage buffer of 2.0 percent in order to
avoid certain restrictions on capital distributions and discretionary bonus
payments. Our insured depository institution subsidiaries are required to
maintain a minimum 6.0 percent SLR to be considered well capitalized under the
PCA framework. The numerator of the SLR is quarter-end Basel 3 Tier 1 capital.
The denominator is total leverage exposure based on the daily average of the sum
of on-balance sheet exposures less permitted deductions, and applicable
temporary exclusions, as well as the simple average of certain off-balance sheet
exposures, as of the end of each month in a quarter. Capital Composition and Ratios
Table 10 presents Bank of America Corporation's capital ratios and related
information in accordance with Basel 3 Standardized and Advanced approaches as
measured at December 31, 2022 and 2021. For the periods presented herein, the
Corporation met the definition of well capitalized under current regulatory
requirements. Bank of America 50 

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Table 10 Bank of America Corporation Regulatory Capital under Basel 3 Standardized Advanced Regulatory Approach (1) Approaches (1) Minimum (2)
(Dollars in millions, except as noted) December 31, 2022
Risk-based capital metrics:
Common equity tier 1 capital $ 180,060 $ 180,060
Tier 1 capital 208,446 208,446
Total capital (3) 238,773 230,916
Risk-weighted assets (in billions) 1,605 

1,411

Common equity tier 1 capital ratio 11.2 % 12.8 % 10.4 %
Tier 1 capital ratio 13.0 14.8 11.9
Total capital ratio 14.9 16.4 13.9 Leverage-based metrics:
Adjusted quarterly average assets (in billions) (4) $ 2,997 $ 2,997
Tier 1 leverage ratio 7.0 % 7.0 % 4.0 Supplementary leverage exposure (in billions) $ 3,523
Supplementary leverage ratio 5.9 % 5.0 December 31, 2021
Risk-based capital metrics:
Common equity tier 1 capital $ 171,759 $ 171,759
Tier 1 capital 196,465 196,465
Total capital (3) 227,592 220,616
Risk-weighted assets (in billions) 1,618 

1,399

Common equity tier 1 capital ratio 10.6 % 12.3 % 9.5 %
Tier 1 capital ratio 12.1 14.0 11.0
Total capital ratio 14.1 15.8 13.0 Leverage-based metrics:
Adjusted quarterly average assets (in billions) (4) $ 3,087 $ 3,087
Tier 1 leverage ratio 6.4 % 6.4 % 4.0 Supplementary leverage exposure (in billions) $ 3,604
Supplementary leverage ratio 5.5 % 5.0 (1)Capital ratios as of December 31, 2022 and 2021 are calculated using the
regulatory capital rule that allows a five-year transition period related to the
adoption of the current expected credit losses (CECL) accounting standard on
January 1, 2020.
(2)The capital conservation buffer and G-SIB surcharge were 2.5 percent at both
December 31, 2022 and 2021. The Corporation's SCB applied in place of the
capital conservation buffer under the Standardized approach was 3.4 percent at
December 31, 2022 and 2.5 percent at December 31, 2021. The countercyclical
capital buffer for both periods was zero. The CET1 capital regulatory minimum is
the sum of the CET1 capital ratio minimum of 4.5 percent, our G-SIB surcharge of
2.5 percent and our capital conservation buffer of 2.5 percent or the SCB, as
applicable, of 3.4 percent at December 31, 2022 and 2.5 percent at December 31,
2021. The SLR regulatory minimum includes a leverage buffer of 2.0 percent.
(3)Total capital under the Advanced approaches differs from the Standardized
approach due to differences in the amount permitted in Tier 2 capital related to
the qualifying allowance for credit losses.
(4)Reflects total average assets adjusted for certain Tier 1 capital deductions. At December 31, 2022, CET1 capital was $180.1 billion, an increase of $8.3
billion from December 31, 2021, due to earnings, partially offset by dividends,
common stock repurchases and higher net unrealized losses on available-for-sale
debt securities included in accumulated other comprehensive income (OCI). Tier 1
capital increased $12.0 billion primarily driven by the same factors as CET1
capital as well as non-cumulative perpetual preferred stock issuances. Total
capital under the Standardized approach increased $11.2 billion primarily due to
the same factors driving the increase in
Tier 1 capital and an increase in the adjusted allowance for credit losses
included in Tier 2 capital, partially offset by a decrease in subordinated debt.
RWA under the Standardized approach, which yielded the lower CET1 capital ratio
at December 31, 2022, decreased $13.0 billion during 2022 to $1,605 billion
primarily due to lower counterparty exposures in Global Markets and a decrease
in debt securities in the Treasury portfolio, partially offset by loan growth.
Supplementary leverage exposure at December 31, 2022 decreased $80.3 billion
primarily due to lower debt securities, driven by lower deposits, partially
offset by loan growth.
51 Bank of America --------------------------------------------------------------------------------

Table 11 shows the capital composition at December 31, 2022 and 2021.

Table 11 Capital Composition under Basel 3

 December 31 (Dollars in millions) 2022 2021
Total common shareholders' equity $ 244,800 $ 245,358
CECL transitional amount (1) 1,881 2,508
Goodwill, net of related deferred tax liabilities (68,644) (68,641)

Deferred tax assets arising from net operating loss and tax credit
carryforwards

 (7,776) (7,743)

Intangibles, other than mortgage servicing rights, net of related deferred
tax liabilities

 (1,554) (1,605)
Defined benefit pension plan net assets (867) (1,261)

Cumulative unrealized net (gain) loss related to changes in fair value of
financial liabilities attributable to own creditworthiness,

 net-of-tax 496 1,400
Accumulated net (gain) loss on certain cash flow hedges (2) 11,925 1,870
Other (201) (127)
Common equity tier 1 capital 180,060 171,759
Qualifying preferred stock, net of issuance cost 28,396 24,707
Other (10) (1)
Tier 1 capital 208,446 196,465
Tier 2 capital instruments 18,751 20,750
Qualifying allowance for credit losses (3) 11,739 10,534
Other (163) (157)
Total capital under the Standardized approach 238,773 227,592

Adjustment in qualifying allowance for credit losses under the Advanced
approaches (3)

 (7,857) (6,976)
Total capital under the Advanced approaches 

$ 230,916 $ 220,616

 (1)Includes the impact of the Corporation's adoption of the CECL accounting
standard on January 1, 2020 and 25 percent of the increase in reserves since the
initial adoption.
(2)Includes amounts in accumulated other comprehensive income related to the
hedging of items that are not recognized at fair value on the Consolidated
Balance Sheet.
(3)Includes the impact of transition provisions related to the CECL accounting
standard. 

Table 12 shows the components of RWA as measured under Basel 3 at December 31,
2022 and 2021.

Table 12 Risk-weighted Assets under Basel 3

 Standardized Advanced Standardized Advanced Approach Approaches Approach Approaches December 31

(Dollars in billions) 2022 2021 Credit risk $ 1,538 $ 939 $ 1,549 $ 913
Market risk 67 67 69 69
Operational risk (1) n/a 364 n/a 378
Risks related to credit valuation adjustments n/a 41 n/a 39
Total risk-weighted assets $ 1,605 $ 1,411 $ 1,618 $ 1,399 (1)December 31, 2022 includes the effects of an update made to our operational
risk RWA model during the fourth quarter of 2022.
n/a = not applicable

Bank of America 52

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 Bank of America, N.A. Regulatory Capital
Table 13 presents regulatory capital information for BANA in accordance with
Basel 3 Standardized and Advanced approaches as measured at December 31, 2022
and 2021. BANA met the definition of well capitalized under the PCA framework
for both periods. Table 13 Bank of America, N.A. Regulatory Capital under Basel 3 Standardized Advanced Regulatory Approach (1) Approaches (1) Minimum (2)
(Dollars in millions, except as noted) December 31, 2022
Risk-based capital metrics:
Common equity tier 1 capital $ 181,089 $ 181,089
Tier 1 capital 181,089 181,089
Total capital (3) 194,254 186,648
Risk-weighted assets (in billions) 1,386 1,087
Common equity tier 1 capital ratio 13.1 % 16.7 % 7.0 %
Tier 1 capital ratio 13.1 16.7 8.5
Total capital ratio 14.0 17.2 10.5 Leverage-based metrics:
Adjusted quarterly average assets (in billions) (4) $ 2,358 $ 2,358
Tier 1 leverage ratio 7.7 % 7.7 % 5.0 Supplementary leverage exposure (in billions) $ 2,785
Supplementary leverage ratio 6.5 % 6.0 December 31, 2021
Risk-based capital metrics:
Common equity tier 1 capital $ 182,526 $ 182,526
Tier 1 capital 182,526 182,526
Total capital (3) 194,773 188,091
Risk-weighted assets (in billions) 1,352 1,048
Common equity tier 1 capital ratio 13.5 % 17.4 % 7.0 %
Tier 1 capital ratio 13.5 17.4 8.5
Total capital ratio 14.4 17.9 10.5 Leverage-based metrics:
Adjusted quarterly average assets (in billions) (4) $ 2,414 $ 2,414
Tier 1 leverage ratio 7.6 % 7.6 % 5.0 Supplementary leverage exposure (in billions) $ 2,824
Supplementary leverage ratio 6.5 % 6.0 (1)Capital ratios as of December 31, 2022 and 2021 are calculated using the
regulatory capital rule that allows a five-year transition period related to the
adoption of the CECL accounting standard on January 1,2020 .
(2)Risk-based capital regulatory minimums at both December 31, 2022 and 2021 are
the minimum ratios under Basel 3 including a capital conservation buffer of 2.5
percent. The regulatory minimums for the leverage ratios as of both period ends
are the percent required to be considered well capitalized under the PCA
framework.
(3)Total capital under the Advanced approaches differs from the Standardized
approach due to differences in the amount permitted in Tier 2 capital related to
the qualifying allowance for credit losses.
(4)Reflects total average assets adjusted for certain Tier 1 capital deductions. Total Loss-Absorbing Capacity Requirements
Total loss-absorbing capacity (TLAC) consists of the Corporation's Tier 1
capital and eligible long-term debt issued directly by the Corporation. Eligible
long-term debt for TLAC ratios is comprised of unsecured debt that has a
remaining maturity of at least one year and satisfies additional requirements as
prescribed in the TLAC final rule. As with the risk-based capital ratios and SLR, the Corporation is required to maintain TLAC
ratios in excess of minimum requirements plus applicable buffers to avoid
restrictions on capital distributions and discretionary bonus payments. Table 14
presents the Corporation's TLAC and long-term debt ratios and related
information as of December 31, 2022 and 2021.
53 Bank of America -------------------------------------------------------------------------------- Table 14 Bank of America Corporation Total Loss-Absorbing Capacity and Long-Term Debt Regulatory Minimum Long-term Regulatory Minimum TLAC (1) (2) Debt (3)
(Dollars in millions) December 31, 2022
Total eligible balance $ 465,451 $ 243,833
Percentage of risk-weighted assets (4) 29.0 % 22.0 % 15.2 % 8.5 %
Percentage of supplementary leverage exposure 13.2 9.5 6.9 4.5 December 31, 2021
Total eligible balance $ 435,904 $ 227,714
Percentage of risk-weighted assets (4) 26.9 % 22.0 % 14.1 % 8.5 %
Percentage of supplementary leverage exposure 12.1 9.5 6.3 4.5 (1)As of December 31, 2022 and 2021, TLAC ratios are calculated using the
regulatory capital rule that allows a five-year transition period related to the
adoption of CECL.
(2)The TLAC RWA regulatory minimum consists of 18.0 percent plus a TLAC RWA
buffer comprised of 2.5 percent plus the Method 1 G-SIB surcharge of 1.5
percent. The countercyclical buffer is zero for both periods. The TLAC
supplementary leverage exposure regulatory minimum consists of 7.5 percent plus
a 2.0 percent TLAC leverage buffer. The TLAC RWA and leverage buffers must be
comprised solely of CET1 capital and Tier 1 capital, respectively.
(3)The long-term debt RWA regulatory minimum is comprised of 6.0 percent plus an
additional 2.5 percent requirement based on the Corporation's Method 2 G-SIB
surcharge. The long-term debt leverage exposure regulatory minimum is 4.5
percent.
(4)The approach that yields the higher RWA is used to calculate TLAC and
long-term debt ratios, which was the Standardized approach as of December 31,
2022 and 2021. Regulatory Capital and Securities Regulation
The Corporation's principal U.S. broker-dealer subsidiaries are BofA Securities,
Inc. (BofAS), Merrill Lynch Professional Clearing Corp. (MLPCC) and Merrill
Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S). The Corporation's principal
European broker-dealer subsidiaries are Merrill Lynch International (MLI) and
BofA Securities Europe SA (BofASE).
The U.S. broker-dealer subsidiaries are subject to the net capital requirements
of Rule 15c3-1 under the Exchange Act. BofAS computes its minimum capital
requirements as an alternative net capital broker-dealer under Rule 15c3-1e, and
MLPCC and MLPF&S compute their minimum capital requirements in accordance with
the alternative standard under Rule 15c3-1. BofAS and MLPCC are also registered
as futures commission merchants and are subject to Commodity Futures Trading
Commission (CFTC) Regulation 1.17. The U.S. broker-dealer subsidiaries are also
registered with the Financial Industry Regulatory Authority, Inc. (FINRA).
Pursuant to FINRA Rule 4110, FINRA may impose higher net capital requirements
than Rule 15c3-1 under the Exchange Act with respect to each of the
broker-dealers.
BofAS provides institutional services, and in accordance with the alternative
net capital requirements, is required to maintain tentative net capital in
excess of $5.0 billion and net capital in excess of the greater of $1.0 billion
or a certain percentage of its reserve requirement in addition to a certain
percentage of securities-based swap risk margin. BofAS must also notify the SEC
in the event its tentative net capital is less than $6.0 billion. BofAS is also
required to hold a certain percentage of its customers' and affiliates'
risk-based margin in order to meet its CFTC minimum net capital requirement. At
December 31, 2022, BofAS had tentative net capital of $20.9 billion. BofAS also
had regulatory net capital of $17.5 billion, which exceeded the minimum
requirement of $4.1 billion.
MLPCC is a fully-guaranteed subsidiary of BofAS and provides clearing and
settlement services as well as prime brokerage and arranged financing services
for institutional clients. At December 31, 2022, MLPCC's regulatory net capital
of $7.5 billion exceeded the minimum requirement of $1.4 billion.
MLPF&S provides retail services. At December 31, 2022, MLPF&S' regulatory net
capital was $6.0 billion, which exceeded the minimum requirement of $137
million.
Our European broker-dealers are subject to requirements from U.S. and 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 December 31, 2022, MLI's capital resources were $33.4 billion,
which exceeded the minimum Pillar 1 requirement of $11.6 billion.
BofASE is an authorized credit institution with its head office located in
France. Previously, BofASE had been authorized as an investment firm, but
following the European Union's adoption of the harmonized Investment Firm
Directive and Investment Firm Regulation prudential regime, it was required to
apply for reauthorization as a credit institution. The application was approved
in November 2022 and became effective on December 8, 2022. BofASE is authorized
and regulated by the Autorité de Contrôle Prudentiel et de Résolution and the
Autorité des Marchés Financiers, and supervised under the Single Supervisory
Mechanism by the European Central Bank. At December 31, 2022, BofASE's capital
resources were $9.0 billion, which exceeded the minimum Pillar 1 requirement of
$3.0 billion.
In addition, MLI and BofASE became conditionally registered with the SEC as
security-based swap dealers in the fourth quarter of 2021, and maintained net
liquid assets at December 31, 2022 that exceeded the applicable minimum
requirements under the Exchange Act. 

Liquidity Risk

 Funding and Liquidity Risk Management
Our primary liquidity risk management objective is to meet expected or
unexpected cash flow and collateral requirements, including payments under
long-term debt agreements, commitments to extend credit and customer deposit
withdrawals, while continuing to support our businesses and customers under a
range of economic conditions. To achieve that objective, we analyze and monitor
our liquidity risk under expected and stressed conditions, maintain liquidity
and access to diverse funding sources, including our stable deposit base, and
seek to align liquidity-related incentives and risks. These liquidity risk
management practices have allowed us to effectively manage the market
fluctuation from the rising interest rate environment, inflationary pressures
and macroeconomic environment.
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 they arise. We manage our
liquidity position through line-of-business and ALM activities, as well as
through our legal entity funding strategy, on both a forward and current

Bank of America 54

——————————————————————————–

 (including intraday) basis under both expected and stressed conditions. We
believe that a centralized approach to funding and liquidity management enhances
our ability to monitor liquidity requirements, maximizes access to funding
sources, minimizes borrowing costs and facilitates timely responses to liquidity
events.
The Board approves our liquidity risk policy and the Financial Contingency and
Recovery Plan. The ERC establishes our liquidity risk tolerance levels. The MRC
is responsible for overseeing liquidity risks and directing management to
maintain exposures within the established tolerance levels. The MRC reviews and
monitors our liquidity position and stress testing results, approves certain
liquidity risk limits and reviews the impact of strategic decisions on our
liquidity. For more information, see Managing Risk on page 46. Under this
governance framework, we developed certain funding and liquidity risk management
practices which include: maintaining liquidity at Bank of America Corporation
(Parent) and selected subsidiaries, including our bank subsidiaries and other
regulated entities; determining what amounts of liquidity are appropriate for
these entities based on analysis of debt maturities and other potential cash
outflows, including those that we may experience during stressed market
conditions; diversifying funding sources, considering our asset profile and
legal entity structure; and performing contingency planning. NB Holdings Corporation
The Parent, which is a separate and distinct legal entity from our bank and
nonbank subsidiaries, has an intercompany arrangement with our wholly-owned
holding company subsidiary, NB Holdings Corporation (NB Holdings). We have
transferred, and agreed to transfer, additional Parent assets not required to
satisfy anticipated near-term expenditures to NB Holdings. The Parent 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 it 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 would be
resolved under the U.S. Bankruptcy Code.
In consideration for the transfer of assets, NB Holdings issued a subordinated
note to the Parent in a principal amount equal to the value of the transferred
assets. The aggregate principal amount of the note will increase by the amount
of any future asset transfers. NB Holdings also provided the Parent with a
committed line of credit that allows the Parent to draw funds necessary to
service near-term cash needs. These arrangements support our preferred single
point of entry resolution strategy, under which only the Parent would be
resolved under the U.S. Bankruptcy Code. These arrangements include provisions
to terminate the line of credit, forgive the subordinated note and require the
Parent to transfer its remaining financial assets to NB Holdings if our
projected liquidity resources deteriorate so severely that resolution of the
Parent becomes imminent. Global Liquidity Sources and Other Unencumbered Assets
We maintain liquidity available to the Corporation, including the Parent and
selected subsidiaries, in the form of cash and high-quality, liquid,
unencumbered securities. Our liquidity buffer, referred to as Global Liquidity
Sources (GLS), is comprised of
assets that are readily available to the Parent and selected subsidiaries,
including holding company, bank and broker-dealer subsidiaries, even during
stressed market conditions. Our cash is primarily on deposit with the Federal
Reserve Bank and, to a lesser extent, central banks outside of the U.S. We limit
the composition of high-quality, liquid, unencumbered securities to U.S.
government securities, U.S. agency securities, U.S. agency MBS and other
investment-grade securities, and a select group of non-U.S. government
securities. We can obtain cash for these securities, even in stressed
conditions, through repurchase agreements or outright sales. We hold our GLS in
legal entities that allow us to meet the liquidity requirements of our global
businesses, and we consider the impact of potential regulatory, tax, legal and
other restrictions that could limit the transferability of funds among entities.
Table 15 presents average GLS for the three months ended December 31, 2022 and
2021. Table 15 Average Global Liquidity Sources Three Months Ended December 31 (Dollars in billions) 2022 2021 Bank entities $ 694 $ 1,006
Nonbank and other entities (1) 174 152
Total Average Global Liquidity Sources $ 868 

$ 1,158

(1) Nonbank includes Parent, NB Holdings and other regulated entities.

 Our bank subsidiaries' liquidity is primarily driven by deposit and lending
activity, as well as securities valuation and net debt activity. Bank
subsidiaries can also generate incremental liquidity by pledging a range of
unencumbered loans and securities to certain FHLBs and the Federal Reserve
Discount Window. The cash we could have obtained by borrowing against this pool
of specifically-identified eligible assets was $348 billion and $322 billion at
December 31, 2022 and 2021. 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 or nonbank subsidiaries may be subject
to prior regulatory approval.
Liquidity is also held in nonbank entities, including the Parent, NB Holdings
and other regulated entities. The Parent and NB Holdings liquidity is typically
in the form of cash deposited at BANA, which is excluded from the liquidity at
bank subsidiaries, and high-quality, liquid, unencumbered securities. Liquidity
held in other regulated entities, comprised primarily of broker-dealer
subsidiaries, is primarily available to meet the obligations of that entity, and
transfers to the Parent 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 16 presents the composition of average GLS for the three months ended
December 31, 2022 and December 31, 2021. 

55 Bank of America

——————————————————————————–

 Table 16 Average Global Liquidity Sources Composition Three Months Ended December 31
(Dollars in billions) 2022 2021 Cash on deposit $ 174 $ 259
U.S. Treasury securities 252 278

U.S. agency securities, mortgage-backed

 securities, and other investment-grade securities 427 606
Non-U.S. government securities 15 15
Total Average Global Liquidity Sources $ 

868 $ 1,158

 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 $605 billion and $617 billion for the
three months ended December 31, 2022 and 2021. For the same periods, the average
consolidated LCR was 120 percent and 115 percent. Our LCR fluctuates due to
normal business flows from customer activity. Liquidity Stress Analysis
We utilize liquidity stress analysis to assist us in determining the appropriate
amounts of liquidity to maintain at the Parent and our subsidiaries to meet
contractual and contingent cash outflows under a range of scenarios. The
scenarios we consider and utilize incorporate market-wide and
Corporation-specific events, including potential credit rating downgrades for
the Parent and our subsidiaries, and more severe events including potential
resolution scenarios. The scenarios are based on our historical experience,
experience of distressed and failed financial institutions, regulatory guidance,
and both expected and unexpected future events.
The types of potential contractual and contingent cash outflows we consider in
our scenarios may include, but are not limited to, upcoming contractual
maturities of unsecured debt and reductions in new debt issuances; diminished
access to secured financing markets; potential deposit withdrawals; increased
draws on loan commitments, liquidity facilities and letters of credit;
additional collateral that counterparties could call if our credit ratings were
downgraded; collateral and margin requirements arising from market value
changes; and potential liquidity required to maintain businesses and finance
customer activities. Changes in certain market factors, including, but not
limited to, credit rating downgrades, could negatively impact potential
contractual and contingent outflows and the related financial instruments, and
in some cases these impacts could be material to our financial results.
We consider all sources of funds that we could access during each stress
scenario and focus particularly on matching available sources with corresponding
liquidity requirements by legal entity. We also use the stress modeling results
to manage our asset and liability profile and establish limits and guidelines on
certain funding sources and businesses. Net Stable Funding Ratio
The Net Stable Funding Ratio (NSFR) is a liquidity requirement for large banks
to maintain a minimum level of stable funding over a one-year period. The
requirement is intended to support the ability of banks to lend to households and businesses in both normal and
adverse economic conditions and is complementary to the LCR, which focuses on
short-term liquidity risks. The U.S. NSFR applies to the Corporation on a
consolidated basis and to our insured depository institutions. At December 31,
2022, the Corporation and its insured depository institutions were in compliance
with this requirement. Diversified Funding Sources
We fund our assets primarily with a mix of deposits, and secured and unsecured
liabilities through a centralized, globally coordinated funding approach
diversified across products, programs, markets, currencies and investor groups.
The primary benefits of our centralized funding approach include greater
control, reduced funding costs, wider name recognition by investors and greater
flexibility to meet the variable funding requirements of subsidiaries. Where
regulations, time zone differences or other business considerations make Parent
funding impractical, certain other subsidiaries may issue their own debt.
We fund a substantial portion of our lending activities through our deposits,
which were $1.93 trillion and $2.1 trillion at December 31, 2022 and 2021.
Deposits are primarily generated by our Consumer Banking, GWIM and Global
Banking segments. These deposits are diversified by clients, product type and
geography, and the majority of our U.S. deposits are insured by the FDIC. We
consider a substantial portion of our deposits to be a stable, low-cost and
consistent source of funding. We believe this deposit funding is generally less
sensitive to interest rate changes, market volatility or changes in our credit
ratings than wholesale funding sources. Our lending activities may also be
financed through secured borrowings, including credit card securitizations and
securitizations with government-sponsored enterprises (GSE), the Federal Housing
Administration (FHA) and private-label investors, as well as FHLB loans.
Our trading activities in other regulated entities are primarily funded on a
secured basis through securities lending and repurchase agreements, and these
amounts will vary based on customer activity and market conditions. We believe
funding these activities in the secured financing markets is more cost-efficient
and less sensitive to changes in our credit ratings than unsecured financing.
Repurchase agreements are generally short-term and often overnight. Disruptions
in secured financing markets for financial institutions have occurred in prior
market cycles which resulted in adverse changes in terms or significant
reductions in the availability of such financing. We manage the liquidity risks
arising from secured funding by sourcing funding globally from a diverse group
of counterparties, providing a range of securities collateral and pursuing
longer durations, when appropriate. For more information on secured financing
agreements, see Note 10 - Securities Financing Agreements, Short-term
Borrowings, Collateral and Restricted Cash to the Consolidated Financial
Statements.
Total long-term debt decreased $4.1 billion to $276.0 billion during 2022
primarily due to debt maturities, redemptions and valuation adjustments,
partially offset by debt issuances. We may, from time to time, purchase
outstanding debt instruments in various transactions, depending on market
conditions, liquidity and other factors. Our other regulated entities may also
make markets in our debt instruments to provide liquidity for investors.
During 2022, we issued $66.0 billion of long-term debt consisting of $44.2
billion of notes issued by Bank of America Corporation, substantially all of
which were TLAC compliant, Bank of America 56 

——————————————————————————–

 $10.0 billion of notes issued by Bank of America, N.A. and $11.8 billion of
other debt. During 2021, we issued $76.7 billion of long-term debt consisting of
$56.2 billion of notes issued by Bank of America Corporation, substantially all
of which were TLAC compliant, $8 billion of notes issued by Bank of America,
N.A. and $12.5 billion of other debt.
During 2022, we had total long-term debt maturities and redemptions in the
aggregate of $33.3 billion consisting of $19.8 billion for Bank of America
Corporation, $9.9 billion for Bank of America, N.A. and $3.6 billion of other
debt. During 2021, we had total long-term debt maturities and redemptions in the
aggregate of $46.4 billion consisting of $24.4 billion for Bank of America
Corporation, $10.4 billion for Bank of America, N.A. and $11.6 billion of other
debt.
At December 31, 2022, Bank of America Corporation's senior notes of $205.9
billion included $179.1 billion of outstanding notes that are both TLAC eligible
and callable at least one year before their stated maturities. Of these senior
notes, $16.6 billion will be callable and become TLAC ineligible during 2023,
and $21.4 billion, $21.3 billion, $16.0 billion and $24.4 billion will do so
during each of 2024 through 2027, respectively, and $79.4 billion thereafter.
We issue long-term unsecured debt in a variety of maturities and currencies to
achieve cost-efficient funding and to maintain an appropriate maturity profile.
While the cost and availability of unsecured funding may be negatively impacted
by general market conditions or by matters specific to the financial services
industry or the Corporation, we seek to mitigate refinancing risk by actively
managing the amount of our borrowings that we anticipate will mature within any
month or quarter. We may issue unsecured debt in the form of structured notes
for client purposes, certain of which qualify as TLAC-eligible debt. During
2022, we issued $12.5 billion of structured notes, which are debt obligations
that pay investors returns linked to other debt or equity securities, indices,
currencies or commodities. We typically hedge the returns we are obligated to
pay on these liabilities with derivatives and/or investments in the underlying
instruments, so that from a funding perspective, the cost is similar to our
other unsecured long-term debt. We could be required to settle certain
structured note obligations for cash or other securities prior to maturity under
certain circumstances, which we consider for liquidity planning purposes. We
believe, however, that a portion of such borrowings will remain outstanding
beyond the earliest put or redemption date.
Substantially all of our senior and subordinated debt obligations contain no
provisions that could trigger a requirement for an early repayment, require
additional collateral support, result in changes to terms, accelerate maturity
or create additional financial obligations upon an adverse change in our credit
ratings, financial ratios, earnings, cash flows or stock price. For more
information on long-term debt funding, including issuances and maturities and
redemptions, see Note 11 - Long-term Debt to the Consolidated Financial
Statements.
We use derivative transactions to manage the duration, interest rate and
currency risks of our borrowings, considering the characteristics of the assets
they are funding. For more information on our ALM activities, see Interest Rate
Risk Management for the Banking Book on page 79. Uninsured Deposits
The FDIC insures the Corporation's U.S. deposits up to $250,000 per depositor,
per insured bank for each account ownership category, and various
country-specific funds insure non-U.S. deposits up to specified limits. Deposits
that exceed
insurance limits are uninsured. At December 31, 2022, the Corporation's deposits
totaled $1.9 trillion, of which total estimated uninsured U.S. and non-U.S.
deposits were $617.6 billion and $102.8 billion. At December 31, 2021, the
Corporation's deposits totaled $2.1 trillion, of which total estimated uninsured
U.S. and non-U.S. deposits were $701.4 billion and $111.9 billion.
Table 17 presents information about the Corporation's total estimated uninsured
time deposits. For more information on our liquidity sources, see Global
Liquidity Sources and Other Unencumbered Assets, and for more information on
deposits, see Diversified Funding Sources in this section. For more information
on contractual time deposit maturities, see Note 9 - Deposits to the
Consolidated Financial Statements. Table 17 Uninsured Time Deposits (1) December 31, 2022
(Dollars in millions) U.S. Non-U.S. Total Uninsured time deposits with a maturity of:
3 months or less $ 3,721 $ 7,023 $ 10,744
Over 3 months through 6 months 2,230 275 

2,505

Over 6 months through 12 months 2,712 86 2,798
Over 12 months 686 1,566 2,252
Total $ 9,349 $ 8,950 $ 18,299 

(1)Amounts are estimated based on the regulatory methodologies defined by each
local jurisdiction.

 Contingency Planning
We maintain contingency funding plans that outline our potential responses to
liquidity stress events at various levels of severity. These policies and plans
are based on stress scenarios and include potential funding strategies and
communication and notification procedures that we would implement in the event
we experienced stressed liquidity conditions. We periodically review and test
the contingency funding plans to validate efficacy and assess readiness.
Our U.S. bank subsidiaries can access contingency funding through the Federal
Reserve Discount Window. Certain non-U.S. subsidiaries have access to central
bank facilities in the jurisdictions in which they operate. While we do not rely
on these sources in our liquidity modeling, we maintain the policies, procedures
and governance processes that would enable us to access these sources if
necessary. Credit Ratings
Our borrowing costs and ability to raise funds are impacted by our credit
ratings. In addition, credit ratings may be important to customers or
counterparties when we compete in certain markets and when we seek to engage in
certain transactions, including over-the-counter (OTC) derivatives. Thus, it is
our objective to maintain high-quality credit ratings, and management maintains
an active dialogue with the major rating agencies.
Credit ratings and outlooks are opinions expressed by rating agencies on our
creditworthiness and that of our obligations or securities, including long-term
debt, short-term borrowings, preferred stock and other securities, including
asset securitizations. Our credit ratings are subject to ongoing review by the
rating agencies, and they consider a number of factors, including our own
financial strength, performance, prospects and operations as well as factors not
under our control. The rating agencies could make adjustments to our ratings at
any
57 Bank of America 

-------------------------------------------------------------------------------- time, and they provide no assurances that they will maintain our ratings at
current levels.
Other factors that influence our credit ratings include changes to the rating
agencies' methodologies for our industry or certain security types; the rating
agencies' assessment of the general operating environment for financial services
companies; our relative positions in the markets in which we compete; our
various risk exposures and risk management policies and activities; pending
litigation and other contingencies or potential tail risks; our reputation; our
liquidity position, diversity of funding sources and funding costs; the current
and expected level and volatility of our earnings; our capital position and
capital management practices; our corporate governance; the sovereign credit
ratings of the U.S. government; current or future regulatory and legislative
initiatives; and the agencies' views on whether the U.S. government would
provide meaningful support to the Corporation or its subsidiaries in a crisis.
On September 19, 2022, Fitch Ratings (Fitch) affirmed the long-term and
short-term senior debt ratings of the Corporation. Fitch also affirmed and
withdrew the long-term and short-term ratings on certain subsidiaries, as they
are no longer considered relevant to the agency's coverage.
On January 23, 2023, Moody's Investors Service (Moody's) placed the long-term
rating of the Corporation as well as the long-term rating of its rated
subsidiaries, including BANA, on review for upgrade. The agency cited the
Corporation's strengthened capital ratios, improved earnings profile and
continued commitment to maintaining a restrained risk appetite as drivers of the
review. A review for upgrade indicates that those ratings are under
consideration for a change in the near term and typically concludes within 90
days. Moody's concurrently affirmed all Prime-1 short-term ratings of the
Corporation and rated subsidiaries.
The current ratings and outlooks for the Corporation and its subsidiaries from
Standard & Poor's Global Ratings (S&P) were not the subject of any rating
actions during 2022 or through February 22, 2023.
Table 18 presents the Corporation's current long-term/short-term senior debt
ratings and outlooks expressed by the rating agencies. 

Table 18 Senior Debt Ratings

 Moody's Investors Service Standard & Poor's Global Ratings Fitch Ratings Long-term Short-term Outlook Long-term Short-term Outlook Long-term Short-term Outlook

Bank of America Corporation A2 P-1 Review for Upgrade A- A-2 Positive AA- F1+ Stable
Bank of America, N.A. Aa2 P-1 Review for Upgrade A+ A-1 Positive AA F1+ Stable
Bank of America Europe Designated
Activity Company NR NR NR A+ A-1 Positive AA F1+ Stable
Merrill Lynch, Pierce, Fenner &
Smith Incorporated NR NR NR A+ A-1 Positive AA F1+ Stable
BofA Securities, Inc. NR NR NR A+ A-1 Positive AA F1+ Stable
Merrill Lynch International NR NR NR A+ A-1 Positive AA F1+ Stable
BofA Securities Europe SA NR NR NR A+ A-1 Positive AA F1+ Stable NR = not rated A reduction in certain of our credit ratings or the ratings of certain
asset-backed securitizations may have a material adverse effect on our
liquidity, potential loss of access to credit markets, the related cost of
funds, our businesses and on certain revenues, particularly in those businesses
where counterparty creditworthiness is critical. In addition, under the terms of
certain OTC derivative contracts and other trading agreements, in the event of
downgrades of our or our rated subsidiaries' credit ratings, the counterparties
to those agreements may require us to provide additional collateral, or to
terminate these contracts or agreements, which could cause us to sustain losses
and/or adversely impact our liquidity. If the short-term credit ratings of our
Parent, bank or broker-dealer subsidiaries were downgraded by one or more
levels, the potential loss of access to short-term funding sources such as repo
financing and the effect on our incremental cost of funds could be material.
While certain potential impacts are contractual and quantifiable, the full scope
of the consequences of a credit rating downgrade to a financial institution is
inherently uncertain, as it depends upon numerous dynamic, complex and
inter-related factors and assumptions, including whether any downgrade of a
company's long-term credit ratings precipitates downgrades to its short-term
credit ratings, and assumptions about the potential behaviors of various
customers, investors and counterparties. For more information on potential
impacts of credit rating downgrades, see Liquidity Risk - Liquidity Stress
Analysis on page 56.
For more information on additional collateral and termination payments that
could be required in connection with certain over-the-counter derivative
contracts and other trading agreements in the event of a credit rating
downgrade, see Note 3 - Derivatives to the Consolidated Financial Statements
herein and Item 1A. Risk Factors. Common Stock Dividends
For a summary of our declared quarterly cash dividends on common stock during
2022 and through February 22, 2023, see Note 13 - Shareholders' Equity to the
Consolidated Financial Statements. Finance Subsidiary Issuers and Parent Guarantor
BofA Finance LLC, a Delaware limited liability company (BofA Finance), is a
consolidated finance subsidiary of the Corporation that has issued and sold, and
is expected to continue to issue and sell, its senior unsecured debt securities
(Guaranteed Notes) that are fully and unconditionally guaranteed by the
Corporation. The Corporation guarantees the due and punctual payment, on demand,
of amounts payable on the Guaranteed Notes if not paid by BofA Finance. In
addition, each of BAC Capital Trust XIII, BAC Capital Trust XIV and BAC Capital
Trust XV, Delaware statutory trusts (collectively, the Trusts), is a 100 percent
owned finance subsidiary of the Corporation that has issued and sold trust
preferred securities (the Trust Preferred

Bank of America 58

——————————————————————————–

 Securities) or capital securities (the Capital Securities and, together with the
Guaranteed Notes and the Trust Preferred Securities, the Guaranteed Securities),
as applicable, that remained outstanding at December 31, 2022. The Corporation
guarantees the payment of amounts and distributions with respect to the Trust
Preferred Securities and Capital Securities if not paid by the Trusts, to the
extent of funds held by the Trusts, and this guarantee, together with the
Corporation's other obligations with respect to the Trust Preferred Securities
and Capital Securities, effectively constitutes a full and unconditional
guarantee of the Trusts' payment obligations on the Trust Preferred Securities
or Capital Securities, as applicable. No other subsidiary of the Corporation
guarantees the Guaranteed Securities.
BofA Finance and each of the Trusts are finance subsidiaries, have no
independent assets, revenues or operations and are dependent upon the
Corporation and/or the Corporation's other subsidiaries to meet their respective
obligations under the Guaranteed Securities in the ordinary course. If holders
of the Guaranteed Securities make claims on their Guaranteed Securities in a
bankruptcy, resolution or similar proceeding, any recoveries on those claims
will be limited to those available under the applicable guarantee by the
Corporation, as described above.
The Corporation is a holding company and depends upon its subsidiaries for
liquidity. Applicable laws and regulations and intercompany arrangements entered
into in connection with the Corporation's resolution plan could restrict the
availability of funds from subsidiaries to the Corporation, which could
adversely affect the Corporation's ability to make payments under its
guarantees. In addition, the obligations of the Corporation under the guarantees
of the Guaranteed Securities will be structurally subordinated to all existing
and future liabilities of its subsidiaries, and claimants should look only to
assets of the Corporation for payments. If the Corporation, as guarantor of the
Guaranteed Notes, transfers all or substantially all of its assets to one or
more direct or indirect majority-owned subsidiaries, under the indenture
governing the Guaranteed Notes, the subsidiary or subsidiaries will not be
required to assume the Corporation's obligations under its guarantee of the
Guaranteed Notes.
For more information on factors that may affect payments to holders of the
Guaranteed Securities, see Liquidity Risk - NB Holdings Corporation in this
section, Item 1. Business - Insolvency and the Orderly Liquidation Authority on
page 6 and Part I. Item 1A. Risk Factors - Liquidity on page 9. Representations and Warranties Obligations
For information on representations and warranties obligations in connection with
the sale of mortgage loans, see Note 12 - Commitments and Contingencies to the
Consolidated Financial Statements. Credit Risk Management
Credit risk is the risk of loss arising from the inability or failure of a
borrower or counterparty to meet its obligations. Credit risk can also arise
from operational failures that result in an erroneous advance, commitment or
investment of funds. We define the credit exposure to a borrower or counterparty
as the loss potential arising from all product classifications including loans
and leases, deposit overdrafts, derivatives, assets held-for-sale and unfunded
lending commitments, which include loan commitments, letters of credit and
financial guarantees. Derivative positions are recorded at fair value, and
assets held-for-sale are recorded at either fair value or the lower of cost or
fair value. Certain loans and unfunded commitments are accounted for under the
fair value option. Credit risk for categories of assets carried at fair value is
not accounted for as part of the allowance for credit losses but as part of the
fair value adjustments recorded in earnings. For derivative positions, our
credit risk is measured as the net cost in the event the counterparties with
contracts in which we are in a gain position fail to perform under the terms of
those contracts. We use the current fair value to represent credit exposure
without giving consideration to future mark-to-market changes. The credit risk
amounts take into consideration the effects of legally enforceable master
netting agreements and cash collateral. Our consumer and commercial credit
extension and review procedures encompass funded and unfunded credit exposures.
For more information on derivatives and credit extension commitments, see Note 3
- Derivatives and Note 12 - Commitments and Contingencies to the Consolidated
Financial Statements.
We manage credit risk based on the risk profile of the borrower or counterparty,
repayment sources, the nature of underlying collateral and other support given
current events, conditions and expectations. We classify our portfolios as
either consumer or commercial and monitor credit risk in each as discussed
below.
We refine our underwriting and credit risk management practices as well as
credit standards to meet the changing economic environment. To mitigate losses
and enhance customer support in our consumer businesses, we have in place
collection programs and loan modification and customer assistance
infrastructures. We utilize a number of actions to mitigate losses in the
commercial businesses including increasing the frequency and intensity of
portfolio monitoring, hedging activity and our practice of transferring
management of deteriorating commercial exposures to independent special asset
officers as credits enter criticized categories.
During 2022, asset quality generally improved compared to 2021. Our 2022 net
charge-off ratio remained near historic lows, and nonperforming loans and
commercial reservable criticized utilized exposure decreased compared to 2021,
which was partially offset by an increase in reservable criticized exposure
associated with our direct exposure to Russia as a result of the Russia/Ukraine
conflict. While uncertainty around the pandemic has diminished, uncertainty
remains regarding broader economic impacts as a result of inflationary
pressures, rising rates and the current geopolitical situation and could lead to
adverse impacts to credit quality metrics in future periods.
For information on our credit risk management activities, see Consumer Portfolio
Credit Risk Management below, Commercial Portfolio Credit Risk Management on
page 64, Non-U.S. Portfolio on page 70, Allowance for Credit Losses on page 73,
and Note 5 - Outstanding Loans and Leases and Allowance for Credit Losses to the
Consolidated Financial Statements. For more information on the factors that may
expose us to credit risk, see Part I. Item 1A. Risk Factors of this Annual
Report on Form 10-K. Consumer Portfolio Credit Risk Management
Credit risk management for the consumer portfolio begins with initial
underwriting and continues throughout a borrower's credit cycle. Statistical
techniques in conjunction with experiential judgment are used in all aspects of
portfolio management including underwriting, product pricing, risk appetite,
setting credit limits, and establishing operating processes and metrics to
quantify and balance risks and returns. Statistical models are built using
detailed behavioral information from external
59 Bank of America -------------------------------------------------------------------------------- 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
During 2022, the U.S. unemployment rate continued to decline and home prices
increased compared to 2021, although they began to decline in the second half of
2022 as inflationary pressures continued to persist. During 2022, net
charge-offs were $1.9 billion, relatively unchanged compared to 2021. During
2022, nonperforming loans declined primarily due to
decreases from consumer real estate loan sales, partially offset by increases
from loans whose prior-period deferrals expired and were modified in troubled
debt restructurings (TDRs) during the first quarter of 2022.
The consumer allowance for loan and lease losses increased $204 million during
2022 to $7.2 billion. For more information, see Allowance for Credit Losses on
page 73.
For more information on our accounting policies regarding delinquencies,
nonperforming status, charge-offs and TDRs for the consumer portfolio, see Note
1 - Summary of Significant Accounting Principles and Note 5 - Outstanding Loans
and Leases and Allowance for Credit Losses to the Consolidated Financial
Statements.
Table 19 presents our outstanding consumer loans and leases, consumer
nonperforming loans and accruing consumer loans past due 90 days or more. Table 19 Consumer Credit Quality Accruing Past Due Outstandings Nonperforming 90 Days or More December 31
(Dollars in millions) 2022 2021 2022 2021 2022 2021 Residential mortgage (1) $ 229,670 $ 221,963 $ 2,167 $ 2,284 $ 368 $ 634
Home equity 26,563 27,935 510 630 - -
Credit card 93,421 81,438 n/a n/a 717 487
Direct/Indirect consumer (2) 106,236 103,560 77 75 2 11
Other consumer 156 190 - - - -
Consumer loans excluding loans accounted for
under the fair value option $ 456,046 $ 435,086 $ 2,754 $ 2,989 $ 1,087 $ 1,132
Loans accounted for under the fair value option
(3) 339 

618

Total consumer loans and leases $ 456,385 $ 

435,704

Percentage of outstanding consumer loans and
leases (4) n/a n/a 0.60 % 0.69 % 0.24 % 0.26 %
Percentage of outstanding consumer loans and
leases, excluding fully-insured loan portfolios
(4) n/a n/a 0.62 0.71 0.16 0.12 (1)Residential mortgage loans accruing past due 90 days or more are
fully-insured loans. At December 31, 2022 and 2021, residential mortgage
included $260 million and $444 million of loans on which interest had been
curtailed by the FHA, and therefore were no longer accruing interest, although
principal was still insured, and $108 million and $190 million of loans on which
interest was still accruing.
(2)Outstandings primarily includes auto and specialty lending loans and leases
of $51.8 billion and $48.5 billion, U.S. securities-based lending loans of $50.4
billion and $51.1 billion at December 31, 2022 and 2021, and non-U.S. consumer
loans of $3.0 billion as of both period ends.
(3)For more information on the fair value option, see Note 21 - Fair Value
Option to the Consolidated Financial Statements.
(4)Excludes consumer loans accounted for under the fair value option. At
December 31, 2022 and 2021, $7 million and $21 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 20 presents net charge-offs and related ratios for consumer loans and
leases. Table 20 Consumer Net Charge-offs and Related Ratios Net Charge-offs Net Charge-off Ratios (1) (Dollars in millions) 2022 2021 2022 2021
Residential mortgage $ 72 $ (28) 0.03 % (0.01) %
Home equity (90) (119) (0.33) (0.39)
Credit card 1,334 1,723 1.60 2.29 Direct/Indirect consumer 18 1 0.02 -
Other consumer 521 270 n/m n/m
Total $ 1,855 $ 1,847 0.42 0.44 (1)Net charge-off ratios are calculated as net charge-offs divided by average
outstanding loans and leases, excluding loans accounted for under the fair value
option.
n/m = not meaningful We believe that the presentation of information adjusted to exclude the impact
of the fully-insured loan portfolio and loans accounted for under the fair value
option is more representative of the ongoing operations and credit quality of
the business. As a result, in the following tables and discussions of the
residential mortgage and home equity portfolios, we exclude loans accounted for
under the fair value option and provide information that excludes the impact of
the fully-insured loan portfolio in certain credit quality statistics. Residential Mortgage
The residential mortgage portfolio made up the largest percentage of our
consumer loan portfolio at 50 percent of consumer loans and leases in 2022.
Approximately 51 percent of the residential mortgage portfolio was in Consumer
Banking and 45 percent was in GWIM. The remaining portion was in All Other.
Outstanding balances in the residential mortgage portfolio increased $7.7
billion in 2022 as originations were partially offset by paydowns and loan
sales. Bank of America 60 

——————————————————————————–

 At December 31, 2022 and 2021, the residential mortgage portfolio included $11.7
billion and $12.7 billion of outstanding fully-insured loans, of which both had
$2.2 billion of FHA insurance, with the remainder protected by Fannie Mae
long-term standby agreements.
Table 21 presents certain residential mortgage key credit
statistics on both a reported basis and excluding the fully-insured loan
portfolio. The following discussion presents the residential mortgage portfolio
excluding the fully-insured loan portfolio. 

Table 21 Residential Mortgage – Key Credit Statistics

 Reported Basis (1) 

Excluding Fully-insured Loans (1)

 December 31
(Dollars in millions) 2022 2021 2022 2021 Outstandings $ 229,670 $ 221,963 $ 217,976 $ 209,259
Accruing past due 30 days or more 1,471 1,753 844 866
Accruing past due 90 days or more 368 634 - -
Nonperforming loans (2) 2,167 2,284 2,167 2,284
Percent of portfolio
Refreshed LTV greater than 90 but less than or equal to 100 1 % 1 % 1 % 1 %
Refreshed LTV greater than 100 - - - -
Refreshed FICO below 620 1 2 1 1 

(1)Outstandings, accruing past due, nonperforming loans and percentages of
portfolio exclude loans accounted for under the fair value option.
(2)Includes loans that are contractually current which primarily consist of
collateral-dependent TDRs, including those that have been discharged in Chapter
7 bankruptcy and loans that have not yet demonstrated a sustained period of
payment performance following a TDR.

 Nonperforming outstanding balances in the residential mortgage portfolio
decreased $117 million in 2022 primarily due to decreases from consumer real
estate loan sales in the second quarter of 2022, partially offset by increases
from loans whose prior-period deferrals expired and were modified in TDRs during
the first quarter of 2022. Of the nonperforming residential mortgage loans at
December 31, 2022, $1.4 billion, or 63 percent, were current on contractual
payments. Loans accruing past due 30 days or more decreased $22 million.
Net charge-offs of $72 million for 2022 increased $100 million compared to 2021
primarily due to loan sales that occurred in the second quarter of 2022.
Of the $218.0 billion in total residential mortgage loans outstanding at
December 31, 2022, 28 percent were originated as interest-only loans. The
outstanding balance of interest-only residential mortgage loans that had entered
the amortization period was $3.4 billion, or six percent, at December 31, 2022.
Residential mortgage loans that have entered the amortization period generally
experience a higher rate of early stage delinquencies and nonperforming status
compared to the residential mortgage portfolio as a whole. At December 31, 2022,
$64 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 $844 million, or less than one percent, for
the entire residential mortgage portfolio. In addition, at December 31, 2022,
$204 million, or six percent, of outstanding interest-only residential mortgage
loans that had entered the amortization period were nonperforming, of which $79
million were contractually current. Loans that have yet to enter the
amortization period in our interest-only residential mortgage portfolio are
primarily well-collateralized loans to our wealth management clients and have an
interest-only period of three to ten years. Approximately 96 percent of these
loans that have yet to enter the amortization period will not be required to
make a fully-amortizing payment until 2025 or later.
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 14 percent and 15 percent of outstandings at December 31,
2022 and 2021. In the New York area, the New York-Northern New Jersey-Long
Island MSA made up 15 percent of outstandings at both December 31, 2022 and
2021. Table 22 Residential Mortgage State Concentrations Outstandings (1) Nonperforming (1) December 31 Net Charge-offs December 31 December 31 December 31 December 31
(Dollars in millions) 2022 2021 2022 2021 2022 2021
California $ 80,878 $ 77,819 $ 656 $ 693 $ 37 $ (14)
New York 26,228 24,975 328 358 7 3
Florida 15,225 13,883 145 158 (2) (8)
Texas 9,399 9,002 88 86 - -
New Jersey 8,810 8,723 96 117 3 -
Other 77,436 74,857 854 872 27 (9)
Residential mortgage loans $ 217,976 $ 209,259 $ 2,167 $ 2,284 $ 72 $ (28)
Fully-insured loan portfolio 11,694 

12,704

 Total residential mortgage loan portfolio $ 229,670 

$ 221,963

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

 Home Equity
At December 31, 2022, the home equity portfolio made up six percent of the
consumer portfolio and was comprised of home equity lines of credit (HELOCs),
home equity loans and reverse mortgages. HELOCs generally have an initial draw
period of 10
years, and after the initial draw period ends, the loans generally convert to
15- or 20-year amortizing loans. We no longer originate home equity loans or
reverse mortgages.
At December 31, 2022, 82 percent of the home equity portfolio was in Consumer
Banking, nine percent was in All Other and the remainder of the portfolio was
primarily in GWIM.
61 Bank of America 

-------------------------------------------------------------------------------- Outstanding balances in the home equity portfolio decreased $1.4 billion in 2022
primarily due to paydowns outpacing draws on existing lines and new
originations. Of the total home equity portfolio at December 31, 2022 and 2021,
$11.1 billion and $12.2 billion, or 42 percent and 44 percent, were in
first-lien positions. At December 31, 2022, outstanding balances in the home
equity portfolio that were in a second-lien or more junior-
lien position and where we also held the first-lien loan totaled $4.5 billion,
or 17 percent of our total home equity portfolio.
Unused HELOCs totaled $42.4 billion and $40.5 billion at December 31, 2022 and
2021. The HELOC utilization rate was 38 percent and 39 percent at December 31,
2022 and 2021.
Table 23 presents certain home equity portfolio key credit statistics. 

Table 23 Home Equity – Key Credit Statistics (1)

 December 31
(Dollars in millions) 2022 2021 Outstandings $ 26,563 $ 27,935
Accruing past due 30 days or more 96 157
Nonperforming loans (2) 510 630
Percent of portfolio
Refreshed CLTV greater than 90 but less than or equal to 100 - % - %
Refreshed CLTV greater than 100 - 1
Refreshed FICO below 620 2 3 (1)Outstandings, accruing past due, nonperforming loans and percentages of the
portfolio exclude loans accounted for under the fair value option.
(2)Includes loans that are contractually current which primarily consist of
collateral-dependent TDRs, including those that have been discharged in Chapter
7 bankruptcy, junior-lien loans where the underlying first lien is 90 days or
more past due, as well as loans that have not yet demonstrated a sustained
period of payment performance following a TDR. Nonperforming outstanding balances in the home equity portfolio decreased $120
million to $510 million at December 31, 2022, primarily driven by loan sales. Of
the nonperforming home equity loans at December 31, 2022, $275 million, or 54
percent, were current on contractual payments. In addition, $167 million, or 33
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 $61 million
in 2022.
Net recoveries decreased $29 million to $90 million in 2022 compared to 2021.
Of the $26.6 billion in total home equity portfolio outstandings at December 31,
2022, as shown in Table 23, 13 percent require interest-only payments. The
outstanding balance of HELOCs that had reached the end of their draw period and
entered the amortization period was $5.2 billion at December 31, 2022. The
HELOCs that have entered the amortization period have experienced a higher
percentage of early stage delinquencies and nonperforming status when compared
to the HELOC portfolio as a whole. At December 31, 2022, $53 million, or one
percent, of outstanding HELOCs that
had entered the amortization period were accruing past due 30 days or more. In
addition, at December 31, 2022, $354 million, or seven percent, were
nonperforming.
For our interest-only HELOC portfolio, 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; however, we can infer some of this information through a review of
our HELOC portfolio that we service and is still in its revolving period. During
2022, 10 percent of these customers with an outstanding balance did not pay any
principal on their HELOCs.
Table 24 presents outstandings, nonperforming balances and net recoveries 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 12 percent and 13
percent of the outstanding home equity portfolio at December 31, 2022 and 2021.
The Los Angeles-Long Beach-Santa Ana MSA within California made up 11 percent
and 10 percent of the outstanding home equity portfolio at December 31, 2022 and
2021. Table 24 Home Equity State Concentrations Outstandings (1) Nonperforming (1) December 31 Net Charge-offs
(Dollars in millions) 2022 2021 2022 2021 2022 2021 California $ 7,406 $ 7,600 $ 119 $ 140 $ (20) $ (40)
Florida 2,743 2,977 63 78 (21) (21)
New Jersey 2,047 2,259 53 69 (3) (4)
New York 1,806 2,072 80 96 (4) (1)
Massachusetts 1,347 1,422 23 32 (2) (3)
Other 11,214 11,605 172 215 (40) (50)
Total home equity loan portfolio $ 26,563 $ 27,935 $ 510 $ 630 $ (90) 

$ (119)

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

 Credit Card
At December 31, 2022, 97 percent of the credit card portfolio was managed in
Consumer Banking with the remainder in GWIM. Outstandings in the credit card
portfolio increased $12.0 billion during 2022 to $93.4 billion primarily driven
by increased purchase volumes, partially offset by the sale of a $1.6 billion
affinity card loan portfolio. Net charge-offs decreased $389
million to $1.3 billion in 2022 compared to 2021, as loss rates remained near
historic lows. In addition, the prior year included charge-offs associated with
deferrals that expired in 2020. Credit card loans 30 days or more past due and
still accruing interest increased $508 million, and 90 days or more past due and
still accruing interest increased $230 million. Unused lines of credit for
credit card increased to $370.1 billion

Bank of America 62

——————————————————————————–

 at December 31, 2022 from $361.2 billion at December 31, 2021.
Table 25 presents certain state concentrations for the credit card portfolio. Table 25 Credit Card State Concentrations Accruing Past Due Outstandings 90 Days or More December 31 Net Charge-offs
(Dollars in millions) 2022 2021 2022 2021 2022 2021 California $ 15,363 $ 13,076 $ 126 $ 82 $ 232 $ 322
Florida 9,512 8,046 100 71 183 245
Texas 8,125 6,894 72 47 123 158
New York 5,381 4,725 56 35 99 135
Washington 4,844 4,080 21 13 36 39
Other 50,196 44,617 342 239 661 824
Total credit card portfolio $ 93,421 $ 81,438 $ 717 $ 487 $ 1,334 $ 1,723 Direct/Indirect Consumer
At December 31, 2022, 49 percent of the direct/indirect portfolio was included
in Consumer Banking (consumer auto and recreational vehicle lending) and 51
percent was included in GWIM (principally securities-based lending loans).
Outstandings
in the direct/indirect portfolio increased $2.7 billion in 2022 to $106.2
billion driven by growth in our auto portfolio.
Table 26 presents certain state concentrations for the direct/indirect consumer
loan portfolio. Table 26 Direct/Indirect State Concentrations Accruing Past Due Outstandings 90 Days or More December 31 Net Charge-offs
(Dollars in millions) 2022 2021 2022 2021 2022 2021 California $ 15,516 $ 15,061 $ 1 $ 2 $ 6 $ 3
Florida 13,783 13,352 - 1 4 1
Texas 9,837 9,505 - 2 3 2
New York 7,891 7,802 - 1 2 3
New Jersey 4,456 4,228 - - 1 (3)
Other 54,753 53,612 1 5 2 (5)
Total direct/indirect loan portfolio $ 106,236 $ 103,560 $ 2 $ 11 $ 18 $ 1 Other Consumer
Other consumer primarily consists of deposit overdraft balances. Net charge-offs
increased $251 million in 2022 to $521 million, primarily driven by overdraft
losses due to higher payment activity related to checking accounts. Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity
Table 27 presents nonperforming consumer loans, leases and foreclosed properties
activity during 2022 and 2021. During 2022, nonperforming consumer loans
decreased $235 million to $2.8 billion primarily due to decreases from loan
sales, partially offset by increases from loans whose prior-period deferrals
expired and were modified in TDRs during the first quarter of 2022.
At December 31, 2022, $605 million, or 22 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 December 31, 2022, $1.7 billion, or 61
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 $20 million in 2022 to $121 million.
Nonperforming loans also include certain loans that have been modified in TDRs
where economic concessions have been granted to borrowers experiencing financial
difficulties.
63 Bank of America 

-------------------------------------------------------------------------------- Nonperforming Consumer Loans, Leases and Foreclosed 

Properties

Table 27 Activity (Dollars in millions) 2022 2021
Nonperforming loans and leases, January 1 $ 2,989 $ 2,725
Additions 1,453 2,006

Reductions:

Paydowns and payoffs (535) (625)
Sales (402) (4)
Returns to performing status (1) (661) (1,037)
Charge-offs (56) (64)
Transfers to foreclosed properties (34) (12) 

Total net additions/(reductions) to nonperforming loans and leases

 (235) 264
Total nonperforming loans and leases, December 31 2,754 2,989
Foreclosed properties, December 31 (2) 121 101

Nonperforming consumer loans, leases and foreclosed properties, December 31

 $ 2,875 $ 3,090

Nonperforming consumer loans and leases as a percentage of outstanding consumer loans
and leases (3)

 0.60 % 0.69 %

Nonperforming consumer loans, leases and foreclosed properties as a percentage of
outstanding consumer loans, leases and foreclosed properties (3)

 0.63 0.71 (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 $60 million and $52
million at December 31, 2022 and 2021.
(3)Outstanding consumer loans and leases exclude loans accounted for under the
fair value option. 

Table 28 presents TDRs for the consumer real estate portfolio. Performing TDR
balances are excluded from nonperforming loans and leases in Table 27.

 Table 28 Consumer Real Estate Troubled Debt Restructurings December 31, 2022 December 31, 2021
(Dollars in millions) Nonperforming Performing Total Nonperforming Performing Total
Residential mortgage (1, 2) $ 1,726 $ 1,548 $ 3,274 $ 1,498 $ 2,278 $ 3,776
Home equity (3) 324 544 868 254 652 906
Total consumer real estate troubled debt
restructurings $ 2,050 $ 2,092 $ 4,142 $ 1,752 $ 2,930 $ 4,682 (1)At December 31, 2022 and 2021, residential mortgage TDRs deemed collateral
dependent totaled $1.8 billion and $1.6 billion, and included $1.6 billion and
$1.4 billion of loans classified as nonperforming and $183 million and $279
million of loans classified as performing.
(2)At December 31, 2022 and 2021, residential mortgage performing TDRs included
$1.1 billion and $1.2 billion of loans that were fully-insured.
(3)At December 31, 2022 and 2021, home equity TDRs deemed collateral dependent
totaled $411 million and $370 million, and included $293 million and $222
million of loans classified as nonperforming and $118 million and $148 million
of loans classified as performing. In addition to modifying consumer real estate loans, we work with customers who
are experiencing financial difficulty by modifying credit card and other
consumer loans. Credit card and other consumer loan modifications generally
involve a reduction in the customer's interest rate on the account and placing
the customer on a fixed payment plan not exceeding 60 months.
Modifications of credit card and other consumer loans are made through programs
utilizing direct customer contact, but may also utilize external programs. At
December 31, 2022 and 2021, our credit card and other consumer TDR portfolio was
$624 million and $672 million, of which $540 million and $599 million were
current or less than 30 days past due under the modified terms. Commercial Portfolio Credit Risk Management
Credit risk management for the commercial portfolio begins with an assessment of
the credit risk profile of the borrower or counterparty based on an analysis of
its financial position. As part of the overall credit risk assessment, our
commercial credit exposures are assigned a risk rating and are subject to
approval based on defined credit approval standards. Subsequent to loan
origination, risk ratings are monitored on an ongoing basis, and if necessary,
adjusted to reflect changes in the financial condition, cash flow, risk profile
or outlook of a borrower or counterparty. In making credit decisions, we
consider risk rating, collateral, country, industry and single-name
concentration limits while also balancing these considerations with the total
borrower or counterparty relationship. We use a variety of tools to continuously
monitor the ability of a borrower or counterparty to perform under its
obligations. We use risk rating aggregations
to measure and evaluate concentrations within portfolios. In addition, risk
ratings are a factor in determining the level of allocated capital and the
allowance for credit losses.
As part of our ongoing risk mitigation initiatives, we attempt to work with
clients experiencing financial difficulty to modify their loans to terms that
better align with their current ability to pay. In situations where an economic
concession has been granted to a borrower experiencing financial difficulty, we
identify these loans as TDRs. For more information on our accounting policies
regarding delinquencies, nonperforming status and net charge-offs for the
commercial portfolio, see Note 1 - Summary of Significant Accounting Principles
to the Consolidated Financial Statements. Management of Commercial Credit Risk Concentrations
Commercial credit risk is evaluated and managed with the goal that
concentrations of credit exposure continue to be aligned with our risk appetite.
We review, measure and manage concentrations of credit exposure by industry,
product, geography, customer relationship and loan size. We also review, measure
and manage commercial real estate loans by geographic location and property
type. In addition, within our non-U.S. portfolio, we evaluate exposures by
region and by country. Tables 33, 36 and 39 summarize our concentrations. We
also utilize syndications of exposure to third parties, loan sales, hedging and
other risk mitigation techniques to manage the size and risk profile of the
commercial credit portfolio. For more information on our industry
concentrations, see Table 36

Bank of America 64

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 and Commercial Portfolio Credit Risk Management - Industry Concentrations on
page 68.
We account for certain large corporate loans and loan commitments, including
issued but unfunded letters of credit which are considered utilized for credit
risk management purposes, that exceed our single-name credit risk concentration
guidelines under the fair value option. Lending commitments, both funded and
unfunded, are actively managed and monitored, and as appropriate, credit risk
for these lending relationships may be mitigated through the use of credit
derivatives, with our credit view and market perspectives determining the size
and timing of the hedging activity. In addition, we purchase credit protection
to cover the funded portion as well as the unfunded portion of certain other
credit exposures. To lessen the cost of obtaining our desired credit protection
levels, credit exposure may be added within an industry, borrower or
counterparty group by selling protection. These credit derivatives do not meet
the requirements for treatment as accounting hedges. They are carried at fair
value with changes in fair value recorded in other income.
In addition, we are a member of various securities and derivative exchanges and
clearinghouses, both in the U.S. and other countries. As a member, we may be
required to pay a pro-rata share of the losses incurred by some of these
organizations as a result of another member default and under other loss
scenarios. For more information, see Note 12 - Commitments and Contingencies to
the Consolidated Financial Statements. Commercial Credit Portfolio
During 2022, commercial credit quality improved as charge-offs, nonperforming
commercial loans and reservable criticized utilized exposure declined. Due to
the ongoing Russia/Ukraine conflict, all direct exposure to Russian
counterparties was downgraded and reported as reservable criticized exposure,
and expected credit losses (ECL) have been incorporated into our estimate of the
allowance for credit losses. Outstanding
commercial loans and leases increased $45.9 billion during 2022 due to growth in
commercial and industrial, primarily in Global Banking. This increase was
partially offset by lower U.S. small business commercial loans due to repayments
of PPP loans by the Small Business Administration (SBA) under the terms of the
program.
Credit quality of commercial real estate borrowers generally improved from 2021
as pandemic-impacted sectors are recovering. However, many commercial real
estate markets, while improving, are still experiencing disruptions in demand,
supply chain challenges, tenant difficulties and challenging capital markets.
Demand for office space continues to be uncertain as companies evaluate space
needs with employment models that utilize a mix of remote and conventional
office use.
The commercial allowance for loan and lease losses remained relatively unchanged
at $5.4 billion at December 31, 2022, as loan growth and a dampened
macroeconomic outlook were offset by asset quality improvement and a reserve
release for reduced pandemic uncertainties. For more information, see Allowance
for Credit Losses on page 73.
Total commercial utilized credit exposure increased $51.3 billion during 2022 to
$704.9 billion primarily driven by higher loans and leases and derivative
assets. The utilization rate for loans and leases, standby letters of credit
(SBLCs) and financial guarantees, and commercial letters of credit, in the
aggregate, was 56 percent at both December 31, 2022 and 2021.
Table 29 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 29 Commercial Credit Exposure by Type Commercial Utilized (1) Commercial Unfunded (2, 3, 4) Total

Commercial Committed December 31 (Dollars in millions) 2022 2021 2022 2021 2022 2021
Loans and leases $ 589,362 $ 543,420 $ 487,772 $ 454,256 $ 1,077,134 $ 997,676
Derivative assets (5) 48,642 35,344 - - 48,642 35,344
Standby letters of credit and financial
guarantees 33,376 34,389 1,266 639 34,642 35,028
Debt securities and other investments 20,195 19,427 2,551 4,638 22,746 24,065
Loans held-for-sale 6,112 13,185 3,729 16,581 9,841 29,766
Operating leases 5,509 5,935 - - 5,509 5,935
Commercial letters of credit 973 1,176 28 247 1,001 1,423
Other 698 652 - - 698 652
Total $ 704,867 $ 653,528 $ 495,346 $ 476,361 $ 1,200,213 $ 1,129,889 (1)Commercial utilized exposure includes loans of $5.4 billion and $7.2 billion
accounted for under the fair value option at December 31, 2022 and 2021.
(2)Commercial unfunded exposure includes commitments accounted for under the
fair value option with a notional amount of $3.0 billion and $4.8 billion at
December 31, 2022 and 2021.
(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 $10.4 billion and $10.7 billion at
December 31, 2022 and 2021.
(5)Derivative assets are carried at fair value, reflect the effects of legally
enforceable master netting agreements and have been reduced by cash collateral
of $33.8 billion and $30.8 billion at December 31, 2022 and 2021. Not reflected
in utilized and committed exposure is additional non-cash derivative collateral
held of $51.6 billion and $44.8 billion at December 31, 2022 and 2021, which
consists primarily of other marketable securities. 

65 Bank of America

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 Nonperforming commercial loans decreased $524 million across all product types.
Table 30 presents our commercial loans and leases portfolio and related credit
quality information at December 31, 2022 and 2021. Table 30 Commercial Credit Quality Accruing Past Due Outstandings Nonperforming 90 Days or More December 31
(Dollars in millions) 2022 2021 2022 2021 2022 2021
Commercial and industrial:
U.S. commercial $ 358,481 $ 325,936 $ 553 $ 825 $ 190 $ 171
Non-U.S. commercial 124,479 113,266 212 268 25 19
Total commercial and industrial 482,960 439,202 765 1,093 215 190
Commercial real estate 69,766 63,009 271 382 46 40
Commercial lease financing 13,644 14,825 4 80 8 8 566,370 517,036 1,040 1,555 269 238
U.S. small business commercial (1) 17,560 19,183 14 23 355 87
Commercial loans excluding loans
accounted for under the fair value option $ 583,930 $ 536,219 

$ 1,054 $ 1,578 $ 624 $ 325
Loans accounted for under the fair value
option (2)

 5,432 7,201

Total commercial loans and leases $ 589,362 $ 543,420

 (1)Includes card-related products.
(2)Commercial loans accounted for under the fair value option includes U.S.
commercial of $2.9 billion and $4.6 billion and non-U.S. commercial of $2.5
billion and $2.6 billion at December 31, 2022 and 2021. For more information on
the fair value option, see Note 21 - Fair Value Option to the Consolidated
Financial Statements. 

Table 31 presents net charge-offs and related ratios for our commercial loans
and leases for 2022 and 2021.

Table 31 Commercial Net Charge-offs and Related Ratios

 Net Charge-offs Net Charge-off Ratios (1) (Dollars in millions) 2022 2021 2022 2021
Commercial and industrial:
U.S. commercial $ 71 $ (23) 0.02 % (0.01 %)
Non-U.S. commercial 21 35 0.02 0.04
Total commercial and industrial 92 12 0.02 -
Commercial real estate 66 34 0.10 0.06
Commercial lease financing 5 (1) 0.03 - 163 45 0.03 0.01
U.S. small business commercial 154 351 0.86 1.19
Total commercial $ 317 $ 396 0.06 0.08 (1)Net charge-off ratios are calculated as net charge-offs divided by average
outstanding loans and leases, excluding loans accounted for under the fair value
option. Table 32 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 $3.1 billion during 2022,
which was broad-based across industries. At December 31, 2022 and 2021, 88
percent and 87 percent of commercial reservable criticized utilized exposure was
secured. Table 32 Commercial Reservable Criticized Utilized Exposure (1, 2) December 31
(Dollars in millions) 2022 2021
Commercial and industrial:
U.S. commercial $ 10,724 2.78 % $ 11,327 3.20 %
Non-U.S. commercial 2,665 2.04 2,582 2.17
Total commercial and industrial 13,389 2.59 13,909 2.94
Commercial real estate 5,201 7.30 7,572 11.72
Commercial lease financing 240 1.76 387 2.61 18,830 3.13 21,868 3.96
U.S. small business commercial 444 2.53 513 2.67
Total commercial reservable criticized utilized
exposure $ 19,274 3.12 $ 22,381 3.91 (1)Total commercial reservable criticized utilized exposure includes loans and
leases of $18.5 billion and $21.2 billion and commercial letters of credit of
$817 million and $1.2 billion at December 31, 2022 and 2021.
(2)Percentages are calculated as commercial reservable criticized utilized
exposure divided by total commercial reservable utilized exposure for each
exposure category. Commercial and Industrial
Commercial and industrial loans include U.S. commercial and non-U.S. commercial
portfolios. U.S. Commercial
At December 31, 2022, 63 percent of the U.S. commercial loan portfolio, excluding small business, was managed in Global Banking, 21 percent
in Global Markets, 15 percent in GWIM (loans that provide financing for asset
purchases, business investments and other liquidity needs for high net worth
clients) and the remainder primarily in Consumer Banking. U.S. commercial loans
increased $32.5 billion, or 10 percent, during 

Bank of America 66

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2022 primarily driven by Global Banking. Reservable criticized utilized exposure
decreased $603 million, or five percent, driven by decreases across a broad
range of industries.

 Non-U.S. Commercial
At December 31, 2022, 64 percent of the non-U.S. commercial loan portfolio was
managed in Global Banking, 35 percent in Global Markets and the remainder in
GWIM. Non-U.S. commercial loans increased $11.2 billion, or 10 percent, during
2022 due to loan growth in Global Markets. Reservable criticized utilized
exposure increased $83 million, or three percent, due to downgrades for direct
exposure to Russian counterparties. For information on the non-U.S. commercial
portfolio, see Non-U.S. Portfolio on page 70. For more information on the
Russia/Ukraine conflict, see Recent Developments on page 27. Commercial Real Estate
Commercial real estate primarily includes commercial loans secured by
non-owner-occupied real estate and is dependent on the sale or lease of the real
estate as the primary source of repayment. Outstanding loans increased $6.8
billion, or 11 percent, during 2022 to $69.8 billion due to new originations
outpacing paydowns and increased utilizations under existing
credit facilities. Reservable criticized utilized exposure decreased $2.4
billion, or 31 percent, primarily driven by Hotels due to improving vacancy
rates and reduced travel restrictions. The portfolio remains diversified across
property types and geographic regions. California represented the largest state
concentration at 19 percent and 21 percent of the commercial real estate
portfolio at December 31, 2022 and 2021. The commercial real estate portfolio is
predominantly managed in Global Banking and consists of loans made primarily to
public and private developers, and commercial real estate firms.
During 2022, we continued to see low default rates and varying degrees of
improvement in certain geographic regions and property types of the portfolio.
We use a number of proactive risk mitigation initiatives to reduce adversely
rated exposure in the commercial real estate portfolio, including transfers of
deteriorating exposures for management by independent special asset officers and
the pursuit of loan restructurings or asset sales to achieve the best results
for our customers and the Corporation.
Table 33 presents outstanding commercial real estate loans by geographic region,
based on the geographic location of the collateral, and by property type. 

Table 33 Outstanding Commercial Real Estate Loans

 December 31
(Dollars in millions) 2022 2021
By Geographic Region
Northeast $ 15,601 $ 14,318
California 13,360 13,145
Southwest 8,723 7,510
Southeast 7,713 6,758
Florida 5,374 4,367
Midwest 3,419 3,221
Illinois 3,327 2,878
Midsouth 2,716 2,289
Northwest 1,959 1,709
Non-U.S. 5,518 4,760
Other 2,056 2,054
Total outstanding commercial real estate loans $ 69,766 $ 63,009
By Property Type
Non-residential
Office $ 18,230 $ 18,309
Industrial / Warehouse 13,775 10,749
Multi-family rental 10,412 8,173
Shopping centers /Retail 5,830 6,502
Hotel / Motels 5,696 5,932
Unsecured 3,195 3,178
Multi-use 2,403 1,835 Other 9,046 7,238
Total non-residential 68,587 61,916
Residential 1,179 1,093

Total outstanding commercial real estate loans $ 69,766 $ 63,009

 U.S. Small Business Commercial
The U.S. small business commercial loan portfolio is comprised of small business
card loans and small business loans primarily managed in Consumer Banking, and
included $1.0 billion and $4.7 billion of PPP loans outstanding at December 31,
2022 and 2021. The decline of $3.7 billion in PPP loans during 2022 was
primarily due to repayment of the loans by the SBA under
the terms of the program. Excluding PPP, credit card-related products were 53
percent and 50 percent of the U.S. small business commercial portfolio at
December 31, 2022 and 2021 and represented all of the net charge-offs in 2022
compared to 95 percent in 2021. The increase of $268 million in accruing past
due 90 days or more in 2022 was driven by PPP loans, which are fully guaranteed
by the SBA. 67 Bank of America 

——————————————————————————–

 Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity
Table 34 presents the nonperforming commercial loans, leases and foreclosed
properties activity during 2022 and 2021. Nonperforming loans do not include
loans accounted for under the fair value option. During 2022, nonperforming
commercial loans and leases decreased $524 million to $1.1 billion. At
December 31, 2022, 97 percent of commercial nonperforming loans, leases and
foreclosed properties were secured, and 65 percent were contractually current.
Commercial nonperforming loans were carried at 85 percent of their unpaid
principal balance, as the carrying value of these loans has been reduced to the
estimated collateral value less costs to sell. 

Table 34 Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity (1, 2)

 (Dollars in millions) 2022 2021
Nonperforming loans and leases, January 1 $ 1,578 $ 2,227
Additions 952 1,622 Reductions:
Paydowns (825) (1,163)
Sales (57) (199)
Returns to performing status (3) (334) (264)
Charge-offs (221) (254) Transfers to loans held-for-sale (39) (391)
Total net reductions to nonperforming loans and leases (524) (649)
Total nonperforming loans and leases, December 31 1,054 1,578 Foreclosed properties, December 31 49 29

Nonperforming commercial loans, leases and foreclosed properties,
December 31

 $ 1,103 $ 1,607

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

 0.18 % 0.29 %

Nonperforming commercial loans, leases and foreclosed properties
as a percentage of outstanding commercial loans, leases and
foreclosed properties (4)

 0.19 0.30 (1)Balances do not include nonperforming loans held-for-sale of $219 million and
$264 million at December 31, 2022 and 2021.
(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 35 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.
Commercial TDRs increased $957 million, or 50 percent, during 2022 primarily due
to commercial real estate loans that were modified as TDRs during the first half
of the year. Table 35 Commercial Troubled Debt Restructurings December 31, 2022 December 31, 2021
(Dollars in millions) Nonperforming Performing Total Nonperforming Performing Total
Commercial and industrial:
U.S. commercial $ 305 $ 985 $ 1,290 $ 359 $ 685 $ 1,044
Non-U.S. commercial 69 238 307 72 8 80
Total commercial and industrial 374 1,223 1,597 431 693 1,124
Commercial real estate 59 1,131 1,190 244 437 681
Commercial lease financing 3 16 19 50 7 57 436 2,370 2,806 725 1,137 1,862
U.S. small business commercial - 51 51 - 38 

38

Total commercial troubled debt
restructurings $ 436 $ 2,421 $ 2,857 $ 725 $ 1,175 $ 1,900 Industry Concentrations
Table 36 presents commercial committed and utilized credit exposure by industry.
Our commercial credit exposure is diversified across a broad range of
industries. Total commercial committed exposure increased $70.3 billion, or six
percent, during 2022 to $1.2 trillion. The increase in commercial committed
exposure was concentrated in Asset managers and funds, Global commercial banks
and Pharmaceuticals and biotechnology.
Industry limits are used internally to manage industry concentrations and are
based on committed exposure that is determined 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.
Asset managers and funds, our largest industry concentration with committed
exposure of $165.1 billion,
increased $28.2 billion, or 21 percent, during 2022 primarily driven by
investment-grade exposures.
Real estate, our second largest industry concentration with committed exposure
of $99.7 billion, increased $3.5 billion, or four percent, during 2022. For more
information on the commercial real estate and related portfolios, see Commercial
Portfolio Credit Risk Management - Commercial Real Estate on page 67.
Capital goods, our third largest industry concentration with committed exposure
of $87.3 billion, increased $3.0 billion, or four percent, during 2022. The
increase in committed exposure occurred primarily as a result of increases in
the Electrical equipment and Trading companies and distributors, partially
offset by a decrease in Building products.
While the U.S. and global economies have shown signs of relief from the
pandemic, uncertainty remains as a result of

Bank of America 68

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 geopolitical and inflationary pressures, and a number of industries will likely
continue to be adversely impacted due to these conditions. We continue to
monitor all industries,
particularly higher risk industries that are experiencing or could experience a
more significant impact to their financial condition. Table 36 Commercial Credit Exposure by Industry (1) Commercial Total Commercial Utilized Committed (2) December 31
(Dollars in millions) 2022 2021 2022 2021
Asset managers & funds $ 106,842 $ 89,786 $ 165,087 $ 136,914
Real estate (3) 72,180 69,384 99,722 96,202
Capital goods 45,580 42,784 87,314 84,293
Finance companies 55,248 59,327 79,546 86,009
Healthcare equipment and services 33,554 32,003 58,761 58,195
Materials 26,304 25,133 55,589 53,652
Retailing 24,785 24,514 53,714 50,816
Government & public education 34,861 37,597 48,134 50,066
Food, beverage and tobacco 23,232 21,584 47,486 45,419
Consumer services 26,980 28,172 47,372 48,052
Individuals and trusts 34,897 29,752 45,572 39,869
Commercial services and supplies 23,628 22,390 41,596 42,451
Utilities 20,292 17,082 40,164 36,855
Energy 15,132 14,217 36,043 34,136
Transportation 22,273 21,079 33,858 32,015
Technology hardware and equipment 11,441 10,159 29,825 26,910
Global commercial banks 27,217 20,062 29,293 21,390
Media 14,781 12,495 28,216 26,318
Pharmaceuticals and biotechnology 7,547 5,608 26,208 19,439
Software and services 12,961 10,663 25,633 27,643
Consumer durables and apparel 10,009 9,740 21,389 21,226
Vehicle dealers 12,909 11,030 20,638 15,678
Insurance 10,224 5,743 19,444 14,323
Telecommunication services 9,679 10,056 17,349 21,270
Automobiles and components 8,774 9,236 16,911 17,052
Food and staples retailing 7,157 6,902 11,908 12,226
Financial markets infrastructure (clearinghouses) 3,913 3,876 8,752 6,076
Religious and social organizations 2,467 3,154 4,689 5,394 Total commercial credit exposure by industry $ 704,867 

$ 653,528 $ 1,200,213 $ 1,129,889

 (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 $10.4 billion and $10.7 billion at
December 31, 2022 and 2021.
(3)Industries are viewed from a variety of perspectives to best isolate the
perceived risks. For purposes of this table, the real estate industry is defined
based on the primary business activity of the borrowers or counterparties using
operating cash flows and primary source of repayment as key factors. Risk Mitigation
We purchase credit protection to cover the funded portion as well as the
unfunded portion of certain credit exposures. To lower the cost of obtaining our
desired credit protection levels, we may add credit exposure within an industry,
borrower or counterparty group by selling protection.
At December 31, 2022 and 2021, net notional credit default protection purchased
in our credit derivatives portfolio to hedge our funded and unfunded exposures
for which we elected the fair value option, as well as certain other credit
exposures, was $9.0 billion and $2.6 billion. We recorded net losses of $37
million in 2022 compared to net losses $91 million in 2021. The gains and losses
on these instruments were largely 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 43. For more information,
see Trading Risk Management on page 76. 

Tables 37 and 38 present the maturity profiles and the credit exposure debt
ratings of the net credit default protection portfolio at December 31, 2022 and
2021.

Table 37 Net Credit Default Protection by Maturity

December 31

 2022 

2021

Less than or equal to one year 14 % 34 %
Greater than one year and less than or equal to five years 85 

62

Greater than five years 1 

4

Total net credit default protection 100 % 100 % 69 Bank of America 

——————————————————————————–

 Table 38 Net Credit Default Protection by Credit Exposure Debt Rating Net Percent of Net Percent of Notional (1) Total Notional (1) Total December 31 (Dollars in millions) 2022 2021
Ratings (2, 3)
AAA $ (379) 4.0 % $ - - %
AA (867) 10.0 - -
A (3,257) 36.0 (350) 13.4
BBB (2,476) 28.0 (710) 27.1
BB (1,049) 12.0 (809) 30.9
B (676) 7.0 (659) 25.2
CCC and below (93) 1.0 (35) 1.3
NR (4) (182) 2.0 (55) 2.1
Total net credit
default protection $ (8,979) 100.0 % $ (2,618) 100.0 % (1)Represents net credit default protection purchased.
(2)Ratings are refreshed on a quarterly basis.
(3)Ratings of BBB- or higher are considered to meet the definition of investment
grade.
(4)NR is comprised of index positions held and any names that have not been
rated. In addition to our net notional credit default protection purchased to cover the
funded and unfunded portion of certain credit exposures, credit derivatives are
used for market-making activities for clients and establishing positions
intended to profit from directional or relative value changes. We execute the
majority of our credit derivative trades in the OTC market with large,
multinational financial institutions, including broker-dealers and, to a lesser
degree, with a variety of other investors. Because these transactions are
executed in the OTC market, we are subject to settlement risk. We are also
subject to credit risk in the event that these counterparties fail to perform
under the terms of these contracts. In order to properly reflect counterparty
credit risk, we record counterparty credit risk valuation adjustments on certain
derivative assets, including our purchased credit default protection. In most
cases, credit derivative transactions are executed on a daily margin basis.
Therefore, events such as a credit downgrade, depending on the ultimate rating
level, or a breach of credit covenants would typically require an increase in
the amount of collateral required by the counterparty, where applicable, and/or
allow us to take additional protective measures such as early termination of all
trades. For more information on credit derivatives and counterparty credit risk
valuation adjustments, see Note 3 - Derivatives to the Consolidated Financial
Statements. Non-U.S. Portfolio
Our non-U.S. credit and trading portfolios are subject to country risk. We
define country risk as the risk of loss from unfavorable economic and political
conditions, currency fluctuations, social instability and changes in government
policies. A risk management framework is in place to measure, monitor and manage
non-U.S. risk and exposures. In addition to the direct risk of doing business in
a country, we also are exposed to indirect country risks (e.g., related to the
collateral received on secured financing transactions or related to client
clearing activities). These indirect exposures are managed in the normal course
of business through credit, market and operational risk governance rather than
through country risk governance.
Table 39 presents our 20 largest non-U.S. country exposures at December 31,
2022. These exposures accounted for 89 percent of our total non-U.S. exposure at
both December 31, 2022 and 2021. Net country exposure for these 20 countries
increased $24.0 billion in 2022 primarily driven by increases in Germany, Japan,
Ireland, India and Switzerland, partially offset by decreases in China, Belgium,
Australia and Singapore.
Non-U.S. exposure is presented on an internal risk management basis and includes
sovereign and non-sovereign credit exposure, securities and other investments
issued by or domiciled in countries other than the U.S.
Funded loans and loan equivalents include loans, leases, and other extensions of
credit and funds, including letters of credit and due from placements. Unfunded
commitments are the undrawn portion of legally binding commitments related to
loans and loan equivalents. Net counterparty exposure includes the fair value of
derivatives, including the counterparty risk associated with credit default
swaps (CDS), and secured financing transactions. Securities and other
investments are carried at fair value and long securities exposures are netted
against short exposures with the same underlying issuer to, but not below, zero.
Net country exposure represents country exposure less hedges and credit default
protection purchased, net of credit default protection sold.

Bank of America 70

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Table 39 Top 20 Non-U.S. Countries Exposure Country Net Country Increase Funded Loans Unfunded Net Securities/ Exposure at Hedges and Credit Exposure at (Decrease) from and Loan Loan Counterparty Other December 31 Default December 31 December 31
(Dollars in millions) Equivalents Commitments Exposure Investments 2022 Protection 2022 2021
United Kingdom $ 29,965 $ 16,601 $ 7,243 $ 2,570 $ 56,379 $ (1,034) $ 55,345 $ 376
Germany 32,248 9,431 2,190 2,742 46,611 (885) 45,726 11,901
France 13,888 8,064 2,023 3,604 27,579 (986) 26,593 1,686
Canada 10,992 10,094 1,472 3,383 25,941 (368) 25,573 (738)
Japan 19,239 1,806 1,366 1,502 23,913 (826) 23,087 5,825
Australia 14,412 4,013 568 1,510 20,503 (286) 20,217 (1,087)
Brazil 6,175 1,413 741 4,199 12,528 (28) 12,500 (250)
China 6,489 294 1,378 2,932 11,093 (285) 10,808 (1,774)
India 6,805 589 614 2,841 10,849 (80) 10,769 2,138
Switzerland 7,039 3,063 469 438 11,009 (321) 10,688 2,113
Singapore 4,017 627 126 4,874 9,644 (37) 9,607 (1,058)
Netherlands 3,169 4,892 617 1,402 10,080 (797) 9,283 (313)
South Korea 6,103 927 504 1,664 9,198 (72) 9,126 974
Ireland 7,678 1,157 151 230 9,216 (126) 9,090 3,551
Mexico 4,444 1,753 514 743 7,454 (62) 7,392 930
Hong Kong 5,123 523 466 1,181 7,293 (22) 7,271 (56)
Spain 2,433 2,170 398 1,067 6,068 (227) 5,841 (79)
Italy 3,883 1,777 184 426 6,270 (602) 5,668 464
Saudi Arabia 2,428 1,465 219 15 4,127 (109) 4,018 545
Belgium 1,433 1,489 184 910 4,016 (153) 3,863 (1,168)
Total top 20 non-U.S.
countries exposure $ 187,963 $ 72,148 $ 21,427 $ 38,233 $ 319,771 $ (7,306) $ 312,465 $ 23,980 Our largest non-U.S. country exposure at December 31, 2022 was the United
Kingdom with net exposure of $55.3 billion, which represents an increase of
$376 million from December 31, 2021. The increase was primarily driven by net
counterparty exposure with financial institutions, partially offset by a
reduction in deposits with the central bank. Our second largest non-U.S. country
exposure was Germany with net exposure of $45.7 billion at December 31, 2022, an
increase of $11.9 billion from December 31, 2021. The increase was driven by
higher deposits with the central bank and increased exposure with financial
institutions and corporates.
Loan and Lease Contractual Maturities
Table 40 disaggregates total outstanding loans and leases by remaining scheduled
principal due dates and interest rates. The amounts provided do not reflect
prepayment assumptions or hedging activities related to the loan portfolio. For
information on the asset sensitivity of our total banking book balance sheet,
see Interest Rate Risk Management for the Banking Book on page 79. 

71 Bank of America

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Table 40 Loan and Lease Contractual Maturities (1) December 31, 2022 Due After One Due After Five Due in One Year

Through Years Through 15 Due After 15
(Dollars in millions)

 Year or Less Five Years Years Years Total
Residential mortgage $ 5,660 $ 32,546 $ 94,544 $ 96,991 $ 229,741
Home equity 251 1,195 5,076 20,309 26,831
Credit card 93,421 - - - 93,421
Direct/Indirect consumer 65,877 35,066 4,464 829 106,236
Other consumer 156 - - - 156
Total consumer loans 165,365 68,807 104,084 118,129 456,385
U.S. commercial 97,153 242,313 20,343 1,584 361,393
Non-U.S. commercial 49,662 52,826 22,436 2,075 126,999
Commercial real estate 19,199 48,051 1,650 866 69,766
Commercial lease financing 2,737 8,214 1,026 1,667 13,644
U.S. small business commercial 10,615 4,474 2,407 64 17,560
Total commercial loans 179,366 355,878 47,862 6,256 589,362
Total loans and leases $ 344,731 $ 424,685 $ 151,946 $ 124,385 $ 1,045,747 Amount due in one year or less at: Amount due after one year at: Variable Fixed Interest Variable Fixed Interest
(Dollars in millions) Interest Rates Rates Interest Rates Rates Total
Residential mortgage $ 1,007 $ 4,653 $ 83,441 $ 140,640 $ 229,741
Home equity 203 48 22,438 4,142 26,831
Credit card 88,113 5,308 - - 93,421
Direct/Indirect consumer 47,240 18,637 2,857 37,502 106,236
Other consumer - 156 - - 156
Total consumer loans 136,563 28,802 108,736 182,284 456,385
U.S. commercial 73,593 23,560 223,099 41,141 361,393
Non-U.S. commercial 42,692 6,970 75,355 1,982 126,999
Commercial real estate 18,361 838 49,247 1,320 69,766
Commercial lease financing 229 2,508 3,696 7,211 13,644
U.S. small business commercial 6,363 4,252 109 6,836 17,560
Total commercial loans 141,238 38,128 351,506 58,490 589,362
Total loans and leases $ 277,801 $ 

66,930 $ 460,242 $ 240,774 $ 1,045,747

(1)Includes loans accounted for under the fair value option.

Bank of America 72

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 Allowance for Credit Losses
The allowance for credit losses increased $379 million from December 31, 2021 to
$14.2 billion at December 31, 2022, which included a $202 million reserve
increase related to the consumer portfolio and a $177 million reserve increase
related to the commercial portfolio. The increase in the allowance was
primarily driven by loan growth and a dampened macroeconomic outlook, partially
offset by a reserve release for reduced pandemic uncertainties.
Table 41 presents an allocation of the allowance for credit losses by product
type at December 31, 2022 and 2021. Table 41 Allocation of the Allowance for Credit Losses by Product Type Percent of Percent of Loans and Loans and Percent of Leases Percent of Leases Amount Total Outstanding (1) Amount Total Outstanding (1)
(Dollars in millions) December 31, 2022 December 31, 2021
Allowance for loan and lease losses
Residential mortgage $ 328 2.59 % 0.14 % $ 351 2.83 % 0.16 %
Home equity 92 0.73 0.35 206 1.66 0.74
Credit card 6,136 48.38 6.57 5,907 47.70 7.25 Direct/Indirect consumer 585 4.61 0.55 523 4.22 0.51
Other consumer 96 0.76 n/m 46 0.37 n/m
Total consumer 7,237 57.07 1.59 7,033 56.78 1.62
U.S. commercial (2) 3,007 23.71 0.80 3,019 24.37 0.87
Non-U.S. commercial 1,194 9.41 0.96 975 7.87 0.86
Commercial real estate 1,192 9.40 1.71 1,292 10.43 2.05
Commercial lease financing 52 0.41 0.38 68 0.55 0.46
Total commercial 5,445 42.93 0.93 5,354 43.22 1.00
Allowance for loan and lease losses 12,682 100.00 % 1.22 12,387 100.00 % 1.28 Reserve for unfunded lending commitments 1,540 1,456
Allowance for credit losses $ 14,222 $ 13,843 (1)Ratios are calculated as allowance for loan and lease losses as a percentage
of loans and leases outstanding excluding loans accounted for under the fair
value option.
(2)Includes allowance for loan and lease losses for U.S. small business
commercial loans of $844 million and $1.2 billion at December 31, 2022 and 2021.
n/m = not meaningful Net charge-offs for both 2022 and 2021 were $2.2 billion as credit card losses,
which remained near historic lows, were partially offset by higher overdrafts
charged off in other consumer due to payment activity related to checking
accounts. The provision for credit losses increased $7.1 billion to an expense
of $2.5 billion during 2022 compared to 2021. The provision for credit losses in
2022 was primarily driven by loan growth and a dampened macroeconomic outlook,
partially offset by a reserve release for reduced pandemic uncertainties. The
provision for credit losses for the consumer portfolio, including unfunded
lending commitments, increased $3.2 billion to an expense of $2.0 billion during
2022 compared to 2021. The
provision for credit losses for the commercial portfolio, including unfunded
lending commitments, increased $3.9 billion to an expense of $495 million for
2022 compared to 2021.
Table 42 presents a rollforward of the allowance for credit losses, including
certain loan and allowance ratios for 2022 and 2021. For more information on the
Corporation's credit loss accounting policies and activity related to the
allowance for credit losses, see Note 1 - Summary of Significant Accounting
Principles and Note 5 - Outstanding Loans and Leases and Allowance for Credit
Losses to the Consolidated Financial Statements.
73 Bank of America --------------------------------------------------------------------------------

Table 42 Allowance for Credit Losses

 (Dollars in millions) 2022 2021 Allowance for loan and lease losses, January 1 $ 12,387 $ 18,802
Loans and leases charged off
Residential mortgage (161) (34)
Home equity (45) (44)
Credit card (1,985) (2,411)
Direct/Indirect consumer (232) (297)
Other consumer (538) (292)
Total consumer charge-offs (2,961) (3,078)
U.S. commercial (1) (354) (626)
Non-U.S. commercial (41) (47)
Commercial real estate (75) (46)
Commercial lease financing (8) -
Total commercial charge-offs (478) (719)
Total loans and leases charged off (3,439) (3,797)
Recoveries of loans and leases previously charged off
Residential mortgage 89 62
Home equity 135 163
Credit card 651 688
Direct/Indirect consumer 214 296
Other consumer 17 22
Total consumer recoveries 1,106 1,231
U.S. commercial (2) 129 298
Non-U.S. commercial 20 12
Commercial real estate 9 12
Commercial lease financing 3 1
Total commercial recoveries 161 323
Total recoveries of loans and leases previously charged off 1,267 1,554
Net charge-offs (2,172) (2,243) Provision for loan and lease losses 2,460 (4,173)
Other 7 1
Allowance for loan and lease losses, December 31 12,682 12,387 Reserve for unfunded lending commitments, January 1 1,456 1,878
Provision for unfunded lending commitments 83 (421)
Other 1 (1)
Reserve for unfunded lending commitments, December 31 1,540 1,456
Allowance for credit losses, December 31 $ 14,222 $ 13,843 Loan and allowance ratios (3) :
Loans and leases outstanding at December 31 $ 1,039,976 $ 971,305

Allowance for loan and lease losses as a percentage of total loans and
leases outstanding at December 31

 1.22 % 1.28 %

Consumer allowance for loan and lease losses as a percentage of total
consumer loans and leases outstanding at December 31

 1.59 1.62

Commercial allowance for loan and lease losses as a percentage of total
commercial loans and leases outstanding at December 31

 0.93 1.00
Average loans and leases outstanding $ 1,010,799 $ 913,354

Net charge-offs as a percentage of average loans and leases outstanding

 0.21 % 0.25 % 

Allowance for loan and lease losses as a percentage of total nonperforming
loans and leases at December 31

 333 271

Ratio of the allowance for loan and lease losses at December 31 to net
charge-offs

 5.84 5.52 

Amounts included in allowance for loan and lease losses for loans and leases
that are excluded from nonperforming loans and leases at December 31 (4)

 $ 6,998 $ 7,027

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
December 31 (4)

 149 % 117 % (1)Includes U.S. small business commercial charge-offs of $203 million in 2022
compared to $425 million in 2021.
(2)Includes U.S. small business commercial recoveries of $49 million in 2022
compared to $74 million in 2021.
(3)Ratios are calculated as allowance for loan and lease losses as a percentage
of loans and leases outstanding excluding loans accounted for under the fair
value option.
(4)Primarily includes amounts related to credit card and unsecured consumer
lending portfolios in Consumer Banking. 

Bank of America 74

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 Market Risk Management
Market risk is the risk that changes in market conditions may adversely impact
the value of assets or liabilities, or otherwise negatively impact earnings.
This risk is inherent in the financial instruments associated with our
operations, primarily within our Global Markets segment. We are also exposed to
these risks in other areas of the Corporation (e.g., our ALM activities). In the
event of market stress, these risks could have a material impact on our results.
For more information, see Interest Rate Risk Management for the Banking Book on
page 79.
Our traditional banking loan and deposit products are non-trading positions and
are generally reported at amortized cost for assets or the amount owed for
liabilities (historical cost). However, these positions are still subject to
changes in economic value based on varying market conditions, with one of the
primary risks being changes in the levels of interest rates. The risk of adverse
changes in the economic value of our non-trading positions arising from changes
in interest rates is managed through our ALM activities. We have elected to
account for certain assets and liabilities under the fair value option.
Our trading positions are reported at fair value with changes reflected in
income. Trading positions are subject to various changes in market-based risk
factors. The majority of this risk is generated by our activities in the
interest rate, foreign exchange, credit, equity and commodities markets. In
addition, the values of assets and liabilities could change due to market
liquidity, correlations across markets and expectations of market volatility. We
seek to manage these risk exposures by using a variety of techniques that
encompass a broad range of financial instruments. The key risk management
techniques are discussed in more detail in the Trading Risk Management section.
GRM is responsible for providing senior management with a clear and
comprehensive understanding of the trading risks to which we are exposed. These
responsibilities include ownership of market risk policy, developing and
maintaining quantitative risk models, calculating aggregated risk measures,
establishing and monitoring position limits consistent with risk appetite,
conducting daily reviews and analysis of trading inventory, approving material
risk exposures and fulfilling regulatory requirements. Market risks that impact
businesses outside of Global Markets are monitored and governed by their
respective governance functions.
Model risk is the potential for adverse consequences from decisions based on
incorrect or misused model outputs and reports. Given that models are used
across the Corporation, model risk impacts all risk types including credit,
market and operational risks. The Enterprise Model Risk Policy defines model
risk standards, consistent with our Risk Framework and risk appetite, prevailing
regulatory guidance and industry best practice. All models, including risk
management, valuation and regulatory capital models, must meet certain
validation criteria, including effective challenge of the conceptual soundness
of the model, independent model testing and ongoing monitoring through outcomes
analysis and benchmarking. The Enterprise Model Risk Committee, a subcommittee
of the MRC, oversees that model standards are consistent with model risk
requirements and monitors the effective challenge in the model validation
process across the Corporation. Interest Rate Risk
Interest rate risk represents exposures to instruments whose values vary with
the level or volatility of interest rates. These instruments include, but are
not limited to, loans, debt
securities, certain trading-related assets and liabilities, deposits, borrowings
and derivatives. Hedging instruments used to mitigate these risks include
derivatives such as options, futures, forwards and swaps. Foreign Exchange Risk
Foreign exchange risk represents exposures to changes in the values of current
holdings and future cash flows denominated in currencies other than the U.S.
dollar. The types of instruments exposed to this risk include investments in
non-U.S. subsidiaries, foreign currency-denominated loans and securities, future
cash flows in foreign currencies arising from foreign exchange transactions,
foreign currency-denominated debt and various foreign exchange derivatives whose
values fluctuate with changes in the level or volatility of currency exchange
rates or non-U.S. interest rates. Hedging instruments used to mitigate this risk
include foreign exchange options, currency swaps, futures, forwards, and foreign
currency-denominated debt and deposits. Mortgage Risk
Mortgage risk represents exposures to changes in the values of mortgage-related
instruments. The values of these instruments are sensitive to prepayment rates,
mortgage rates, agency debt ratings, default, market liquidity, government
participation and interest rate volatility. Our exposure to these instruments
takes several forms. For example, we trade and engage in market-making
activities in a variety of mortgage securities including whole loans,
pass-through certificates, commercial mortgages and collateralized mortgage
obligations including collateralized debt obligations using mortgages as
underlying collateral. In addition, we originate a variety of MBS, which
involves the accumulation of mortgage-related loans in anticipation of eventual
securitization, and we may hold positions in mortgage securities and residential
mortgage loans as part of the ALM portfolio. We also record MSRs as part of our
mortgage origination activities. Hedging instruments used to mitigate this risk
include derivatives such as options, swaps, futures and forwards as well as
securities including MBS and U.S. Treasury securities. For more information, see
Mortgage Banking Risk Management on page 80. Equity Market Risk
Equity market risk represents exposures to securities that represent an
ownership interest in a corporation in the form of domestic and foreign common
stock or other equity-linked instruments. Instruments that would lead to this
exposure include, but are not limited to, the following: common stock,
exchange-traded funds, American Depositary Receipts, convertible bonds, listed
equity options (puts and calls), OTC equity options, equity total return swaps,
equity index futures and other equity derivative products. Hedging instruments
used to mitigate this risk include options, futures, swaps, convertible bonds
and cash positions. Commodity Risk
Commodity risk represents exposures to instruments traded in the petroleum,
natural gas, power and metals markets. These instruments consist primarily of
futures, forwards, swaps and options. Hedging instruments used to mitigate this
risk include options, futures and swaps in the same or similar commodity
product, as well as cash positions. 

75 Bank of America

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 Issuer Credit Risk
Issuer credit risk represents exposures to changes in the creditworthiness of
individual issuers or groups of issuers. Our portfolio is exposed to issuer
credit risk where the value of an asset may be adversely impacted by changes in
the levels of credit spreads, by credit migration or by defaults. Hedging
instruments used to mitigate this risk include bonds, CDS and other credit
fixed-income instruments. Market Liquidity Risk
Market liquidity risk represents the risk that the level of expected market
activity changes dramatically and, in certain cases, may even cease. This
exposes us to the risk that we will not be able to transact business and execute
trades in an orderly manner which may impact our results. This impact could be
further exacerbated if expected hedging or pricing correlations are compromised
by disproportionate demand or lack of demand for certain instruments. We utilize
various risk mitigating techniques as discussed in more detail in Trading Risk
Management. Trading Risk Management
To evaluate risks in our trading activities, we focus on the actual and
potential volatility of revenues generated by individual positions as well as
portfolios of positions. Various techniques and procedures are utilized to
enable the most complete understanding of these risks. Quantitative measures of
market risk are evaluated on a daily basis from a single position to the
portfolio of the Corporation. These measures include sensitivities of positions
to various market risk factors, such as the potential impact on revenue from a
one basis point change in interest rates, and statistical measures utilizing
both actual and hypothetical market moves, such as VaR and stress testing.
Periods of extreme market stress influence the reliability of these techniques
to varying degrees. Qualitative evaluations of market risk utilize the suite of
quantitative risk measures while understanding each of their respective
limitations. Additionally, risk managers independently evaluate the risk of the
portfolios under the current market environment and potential future
environments.
VaR is a common statistic used to measure market risk as it allows the
aggregation of market risk factors, including the effects of portfolio
diversification. A VaR model simulates the value of a portfolio under a range of
scenarios in order to generate a distribution of potential gains and losses. VaR
represents the loss a portfolio is not expected to exceed more than a certain
number of times per period, based on a specified holding period, confidence
level and window of historical data. We use one VaR model consistently across
the trading portfolios and it uses a historical simulation approach based on a
three-year window of historical data. Our primary VaR statistic is equivalent to
a 99 percent confidence level, which means that for a VaR with a one-day holding
period, there should not be losses in excess of VaR, on average, 99 out of 100
trading days.
Within any VaR model, there are significant and numerous assumptions that will
differ from company to company. The accuracy of a VaR model depends on the
availability and quality of historical data for each of the risk factors in the
portfolio. A VaR model may require additional modeling assumptions for new
products that do not have the necessary historical market data or for less
liquid positions for which accurate daily prices are not consistently available.
For positions with insufficient historical data for the VaR calculation, the
process for establishing an appropriate proxy is based on fundamental and
statistical analysis of the new product or less liquid position. This analysis
identifies reasonable alternatives that replicate both the expected volatility
and correlation to other market risk factors that the missing data would be
expected to experience.
VaR may not be indicative of realized revenue volatility as changes in market
conditions or in the composition of the portfolio can have a material impact on
the results. In particular, the historical data used for the VaR calculation
might indicate higher or lower levels of portfolio diversification than will be
experienced. In order for the VaR model to reflect current market conditions, we
update the historical data underlying our VaR model on a weekly basis, or more
frequently during periods of market stress, and regularly review the assumptions
underlying the model. A minor portion of risks related to our trading positions
is not included in VaR. These risks are reviewed as part of our ICAAP. For more
information regarding ICAAP, see Capital Management on page 49.
GRM continually reviews, evaluates and enhances our VaR model so that it
reflects the material risks in our trading portfolio. Changes to the VaR model
are reviewed and approved prior to implementation and any material changes are
reported to management through the appropriate management committees.
Trading limits on quantitative risk measures, including VaR, are independently
set by Global Markets Risk Management and reviewed on a regular basis so that
trading limits remain relevant and within our overall risk appetite for market
risks. Trading limits are reviewed in the context of market liquidity,
volatility and strategic business priorities. Trading limits are set at both a
granular level to allow for extensive coverage of risks as well as at aggregated
portfolios to account for correlations among risk factors. All trading limits
are approved at least annually. Approved trading limits are stored and tracked
in a centralized limits management system. Trading limit excesses are
communicated to management for review. Certain quantitative market risk measures
and corresponding limits have been identified as critical in the Corporation's
Risk Appetite Statement. These risk appetite limits are reported on a daily
basis and are approved at least annually by the ERC and the Board.
In periods of market stress, Global Markets senior leadership communicates daily
to discuss losses, key risk positions and any limit excesses. As a result of
this process, the businesses may selectively reduce risk.
Table 43 presents the total market-based portfolio VaR, which is the combination
of the total covered positions (and less liquid trading positions) portfolio and
the fair value option portfolio. Covered positions are defined by regulatory
standards as trading assets and liabilities, both on- and off-balance sheet,
that meet a defined set of specifications. These specifications identify the
most liquid trading positions which are intended to be held for a short-term
horizon and where we are able to hedge the material risk elements in a two-way
market. Positions in less liquid markets, or where there are restrictions on the
ability to trade the positions, typically do not qualify as covered positions.
Foreign exchange and commodity positions are always considered covered
positions, except for structural foreign currency positions that are excluded
with prior regulatory approval.
In addition, Table 43 presents our fair value option portfolio, which includes
substantially all of the funded and unfunded exposures for which we elect the
fair value option, and their corresponding hedges. Additionally, market risk VaR
for trading activities as presented in Table 43 differs from VaR used for
regulatory capital calculations due to the holding period being

Bank of America 76

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 used. The holding period for VaR used for regulatory capital calculations is 10
days, while for the market risk VaR presented below, it is one day. Both
measures utilize the same process and methodology.
The total market-based portfolio VaR results in Table 43 include market risk to
which we are exposed from all business segments, excluding credit valuation
adjustment (CVA), DVA and related hedges. The majority of this portfolio is
within the Global Markets segment.
Table 43 presents year-end, average, high and low daily trading VaR for 2022 and
2021 using a 99 percent confidence
level. The amounts disclosed in Table 43 and Table 44 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 annual average of total covered positions and less liquid trading positions
portfolio VaR increased for 2022 compared to 2021 driven by heightened market
volatility and reduced diversification across asset classes. Table 43 Market Risk VaR for Trading Activities 2022 2021 Year Year
(Dollars in millions) End Average High (1) Low (1) End Average High (1) Low (1)
Foreign exchange $ 38 $ 21 $ 39 $ 12 $ 11 $ 12 $ 21 $ 5
Interest rate 36 36 56 24 54 40 80 16
Credit 76 71 106 52 73 69 84 53
Equity 18 20 33 12 21 24 35 19
Commodities 8 13 27 7 6 8 28 4
Portfolio diversification (81) (91) n/a n/a (114) (100) n/a n/a
Total covered positions portfolio 95 70 140 42 51 53 85 34
Impact from less liquid exposures (2) 35 38 n/a n/a 8 20 n/a n/a
Total covered positions and less liquid trading
positions portfolio 130 108 236 61 59 73 125 46
Fair value option loans 48 51 65 37 51 50 65 31
Fair value option hedges 16 17 24 13 15 16 20 11
Fair value option portfolio diversification (38) (36) n/a n/a (27) (32) n/a n/a
Total fair value option portfolio 26 32 44 23 39 34 53 23
Portfolio diversification 9 (11) n/a n/a (24) (10) n/a n/a
Total market-based portfolio $ 165 $ 129 287 70 $ 74 $ 97 169 54 (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.
(2)Impact is net of diversification effects between the covered positions and
less liquid trading positions portfolios.
n/a = not applicable 

The following graph presents the daily covered positions and less liquid trading
positions portfolio VaR for 2022, corresponding to the data in Table 43.

 [[Image Removed: bac-20221231_g3.jpg]] Additional VaR statistics produced within our single VaR model are provided in
Table 44 at the same level of detail as in Table 43. 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 44 presents
average trading VaR statistics at 99 percent and 95 percent confidence levels
for 2022 and 2021.
77 Bank of America 

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Table 44 Average Market Risk VaR for Trading Activities – 99 percent and 95 percent VaR Statistics

 2022 2021
(Dollars in millions) 99 percent 95 percent 99 percent 95 percent
Foreign exchange $ 21 $ 12 $ 12 $ 8
Interest rate 36 17 40 20
Credit 71 28 69 21
Equity 20 11 24 12
Commodities 13 7 8 4
Portfolio diversification (91) (46) (100) (39)
Total covered positions portfolio 70 29 53 26
Impact from less liquid exposures 38 7 20 2
Total covered positions and less liquid trading
positions portfolio 108 36 73 28
Fair value option loans 51 14 50 12
Fair value option hedges 17 10 16 9
Fair value option portfolio diversification (36) (13) (32) (9)
Total fair value option portfolio 32 11 34 12
Portfolio diversification (11) (7) (10) (7)
Total market-based portfolio $ 129 $ 40 $ 97 $ 33 Backtesting
The accuracy of the VaR methodology is evaluated by backtesting, which compares
the daily VaR results, utilizing a one-day holding period, against a comparable
subset of trading revenue. A backtesting excess occurs when a trading loss
exceeds the VaR for the corresponding day. These excesses are evaluated to
understand the positions and market moves that produced the trading loss with a
goal to help confirm that the VaR methodology accurately represents those
losses. We expect the frequency of trading losses in excess of VaR to be in line
with the confidence level of the VaR statistic being tested. For example, with a
99 percent confidence level, we expect one trading loss in excess of VaR every
100 days or between two to three trading losses in excess of VaR over the course
of a year. The number of backtesting excesses observed can differ from the
statistically expected number of excesses if the current level of market
volatility is materially different than the level of market volatility that
existed during the three years of historical data used in the VaR calculation.
The trading revenue used for backtesting is defined by regulatory agencies in
order to most closely align with the VaR component of the regulatory capital
calculation. This revenue differs from total trading-related revenue in that it
excludes revenue from trading activities that either do not generate market risk
or the market risk cannot be included in VaR. Some examples of the types of
revenue excluded for backtesting are fees, commissions, reserves, net interest
income and intra-day trading revenues.
We conduct daily backtesting on the VaR results used for regulatory capital
calculations as well as the VaR results for key legal entities, regions and risk
factors. These results are reported to senior market risk management. Senior
management regularly reviews and evaluates the results of these tests.
During 2022, there was one day where this subset of trading revenue had losses
that exceeded our total covered portfolio VaR, utilizing a one-day holding
period. Total Trading-related Revenue
Total trading-related revenue, excluding brokerage fees, and CVA, DVA and
funding valuation adjustment gains (losses), represents the total amount earned
from trading positions, including market-based net interest income, which are
taken in a diverse range of financial instruments and markets. For more
information on fair value, see Note 20 - Fair Value Measurements to the
Consolidated Financial Statements.
Trading-related revenue can be volatile and is largely driven by general market
conditions and customer demand. Also, trading-related revenue is dependent on
the volume and type of transactions, the level of risk assumed, and the
volatility of price and rate movements at any given time within the
ever-changing market environment. Significant daily revenue by business is
monitored and the primary drivers of these are reviewed.
The following histogram is a graphic depiction of trading volatility and
illustrates the daily level of trading-related revenue for 2022 and 2021. During
2022, positive trading-related revenue was recorded for 99 percent of the
trading days, of which 90 percent were daily trading gains of over $25 million,
and the largest loss was $9 million. This compares to 2021 where positive
trading-related revenue was recorded for 97 percent of the trading days, of
which 80 percent were daily trading gains of over $25 million, and the largest
loss was $45 million. [[Image Removed: bac-20221231_g4.jpg]] Trading Portfolio Stress Testing
Because the very nature of a VaR model suggests results can exceed our estimates
and it is dependent on a limited historical window, we also stress test our
portfolio using scenario analysis. This analysis estimates the change in the
value of our trading portfolio that may result from abnormal market movements.
A set of scenarios, categorized as either historical or hypothetical, are
computed daily for the overall trading portfolio and individual businesses.
These scenarios include shocks to underlying market risk factors that may be
well beyond the shocks found in the historical data used to calculate VaR.

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 Historical scenarios simulate the impact of the market moves that occurred
during a period of extended historical market stress. Generally, a multi-week
period representing the most severe point during a crisis is selected for each
historical scenario. Hypothetical scenarios provide estimated portfolio impacts
from potential future market stress events. Scenarios are reviewed and updated
in response to changing positions and new economic or political information. In
addition, new or ad hoc scenarios are developed to address specific potential
market events or particular vulnerabilities in the portfolio. The stress tests
are reviewed on a regular basis and the results are presented to senior
management.
Stress testing for the trading portfolio is integrated with enterprise-wide
stress testing and incorporated into the limits framework. The macroeconomic
scenarios used for enterprise-wide stress testing purposes differ from the
typical trading portfolio scenarios in that they have a longer time horizon and
the results are forecasted over multiple periods for use in consolidated capital
and liquidity planning. For more information, see Managing Risk on page 46. Interest Rate Risk Management for the Banking Book
The following discussion presents net interest income for banking book
activities.
Interest rate risk represents the most significant market risk exposure to our
banking book balance sheet. Interest rate risk is measured as the potential
change in net interest income caused by movements in market interest rates.
Client-facing activities, primarily lending and deposit-taking, create interest
rate sensitive positions on our balance sheet.
We prepare forward-looking forecasts of net interest income. The baseline
forecast takes into consideration expected future business growth, ALM
positioning and the future direction of interest rate movements as implied by
market-based forward curves.
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 banking
book balance sheet position in order to maintain an acceptable level of exposure
to interest rate changes.
The interest rate scenarios that we analyze incorporate balance sheet
assumptions such as loan and deposit growth and pricing, changes in funding mix,
product repricing, maturity characteristics and investment securities premium
amortization. Our overall goal is to manage interest rate risk so that movements
in interest rates do not significantly adversely affect earnings and capital.
Table 45 presents the spot and 12-month forward rates used in developing the
forward curve used in our baseline forecasts at December 31, 2022 and 2021. Table 45 Forward Rates December 31, 2022 Federal Three-month 10-Year Funds LIBOR Swap
Spot rates 4.50 % 4.77 % 3.84 %
12-month forward rates 4.75 4.78 3.62 December 31, 2021
Spot rates 0.25 % 0.21 % 1.58 %
12-month forward rates 1.00 1.07 1.84 Table 46 shows the pretax impact to forecasted net interest income over the next
12 months from December 31, 2022 and 2021 resulting from instantaneous parallel
and non-parallel shocks to the market-based forward curve. Periodically, we
evaluate the scenarios presented so that they are meaningful in the context of
the current rate environment. The interest rate scenarios also assume U.S.
dollar interest rates are floored at zero. Depending on the level of interest
rates, Down-rate scenarios may not receive the full impact of the rate shock,
particularly in low rate environments.
The overall decrease in asset sensitivity, as shown in the following table, to
Up-rate scenarios was primarily due to an increase in long-end and short-end
rates. We continue to be asset sensitive to a parallel upward move in interest
rates with the majority of that impact coming from the short end of the yield
curve. Additionally, higher interest rates negatively impact the fair value of
our debt securities classified as available for sale and 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 would be reduced over time by offsetting positive impacts to net
interest income generated from the banking book activities. For more information
on Basel 3, see Capital Management - Regulatory Capital on page 50. Table 46 Estimated Banking Book Net Interest Income 

Sensitivity to Curve Changes

 Short Long December 31
(Dollars in millions) Rate (bps) Rate (bps) 2022 2021 Parallel Shifts
+100 bps
instantaneous shift +100 +100 $ 3,829 $ 6,542 -100 bps instantaneous shift -100 -100 (4,591) n/m
Flatteners
Short-end
instantaneous change +100 - 3,698 4,982 Long-end
instantaneous change - -100 (157) n/m
Steepeners Short-end
instantaneous change -100 - (4,420) n/m
Long-end
instantaneous change - +100 131 1,646 n/m = not meaningful 79 Bank of America 

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 The sensitivity analysis in Table 46 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 46 assumes no change in
deposit portfolio size or mix from the baseline forecast in alternate rate
environments. In higher rate scenarios, any customer activity resulting in the
replacement of low-cost or noninterest-bearing deposits with higher yielding
deposits or market-based funding would reduce our benefit in those scenarios. Interest Rate and Foreign Exchange Derivative Contracts
We use interest rate and foreign exchange derivative contracts in our ALM
activities to manage our interest rate and foreign exchange risks. Specifically,
we use those derivatives to manage both the variability in cash flows and
changes in fair value of various assets and liabilities arising from those
risks. Our interest rate derivative contracts are generally non-leveraged swaps
tied to various benchmark interest rates and foreign exchange basis swaps,
options, futures and forwards, and our foreign exchange contracts include
cross-currency interest rate swaps, foreign currency futures contracts, foreign
currency forward contracts and options.
The derivatives used in our ALM activities can be split into two broad
categories: designated accounting hedges and other risk management derivatives.
Designated accounting hedges are primarily used to manage our exposure to
interest rates as described in the Interest Rate Risk Management for the Banking
Book section and are included in the sensitivities presented in Table 46. The
Corporation also uses foreign currency derivatives in accounting hedges to
manage substantially all of the foreign exchange risk of our foreign operations.
By hedging the foreign exchange risk of our foreign operations, the
Corporation's market risk exposure in this area is not significant.
Risk management derivatives are predominantly used to hedge foreign exchange
risks related to various foreign currency-denominated assets and liabilities and
eliminate substantially all foreign currency exposures in the cash flows of the
Corporation's non-trading foreign currency-denominated financial instruments.
These foreign exchange derivatives are sensitive to other market risk exposures
such as cross-currency basis spreads and interest rate risk. However, as these
features are not a significant component of these foreign exchange derivatives,
the market risk related to this exposure is not significant. For more
information on the accounting for derivatives, see Note 3 - Derivatives to the
Consolidated Financial Statements. Mortgage Banking Risk Management
We originate, fund and service mortgage loans, which subject us to credit,
liquidity and interest rate risks, among others. We determine whether loans will
be held for investment or held for sale at the time of commitment and manage
credit and liquidity risks by selling or securitizing a portion of the loans we
originate.
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, the value of the MSRs
will increase driven by lower prepayment expectations. Because the interest rate
risks of these hedged items offset, we combine them into one overall hedged item
with one combined economic hedge portfolio consisting of derivative contracts
and securities.
During 2022, 2021 and 2020, we recorded gains of $78 million, $39 million and
$321 million. For more information on MSRs, see Note 20 - Fair Value
Measurements to the Consolidated Financial Statements. Compliance and Operational Risk Management
Compliance risk is the risk of legal or regulatory sanctions, material financial
loss or damage to the reputation of the Corporation arising from the failure of
the Corporation to comply with the requirements of applicable laws, rules,
regulations and our internal policies and procedures (collectively, applicable
laws, rules and regulations). We are subject to comprehensive regulation under
federal and state laws, rules and regulations in the U.S. and the laws of the
various jurisdictions in which we operate, including those related to financial
crimes and anti-money laundering, market conduct, trading activities, fair
lending, privacy, data protection and unfair, deceptive or abusive acts or
practices.
Operational risk is the risk of loss resulting from inadequate or failed
processes or systems, people or external events, and includes legal risk.
Operational risk may occur anywhere in the Corporation, including third-party
business processes, and is not limited to operations functions. The Corporation
faces a number of key operational risks including third-party risk, model risk,
conduct risk, technology risk, information security risk and data risk.
Operational risk can result in financial losses and reputational impacts and is
a component in the calculation of total RWA used in the Basel 3 capital
calculation. For more information on Basel 3 calculations, see Capital
Management on page 49.
FLUs and control functions are first and foremost responsible for managing all
aspects of their businesses, including their compliance and operational risk.
FLUs and control functions are required to understand their business processes
and related risks and controls, including third-party dependencies and the
related regulatory requirements, and monitor and report on the effectiveness of
the control environment. In order to actively monitor and assess the performance
of their processes and controls, they must conduct comprehensive quality
assurance activities and identify issues and risks to remediate control gaps and
weaknesses. FLUs and control functions must also adhere to compliance and
operational risk appetite limits to meet strategic, capital and financial
planning objectives. Finally, FLUs and control functions are responsible for the
proactive identification, management and escalation of compliance and
operational risks across the Corporation. Collectively, these efforts are
important to strengthen their compliance and operational resiliency, which is
the ability to deliver critical operations through disruption.
Global Compliance and Operational Risk teams independently assess compliance and
operational risk, monitor business activities and processes and evaluate FLUs
and control functions for adherence to applicable laws, rules and regulations,
including identifying issues and risks, and reporting

Bank of America 80

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 on the state of the control environment. Corporate Audit provides an independent
assessment and validation through testing of key compliance and operational risk
processes and controls across the Corporation.
The Corporation's Global Compliance - Enterprise Policy and Operational Risk
Management - Enterprise Policy set the requirements for reporting compliance and
operational risk information to executive management as well as the Board or
appropriate Board-level committees and reflect Global Compliance and Operational
Risk's responsibilities for conducting independent oversight of the
Corporation's compliance and operational risk management activities. The Board
provides oversight of compliance risk through its Audit Committee and the ERC,
and operational risk through its ERC.
A key operational risk facing the Corporation is information security, which
includes cybersecurity. Cybersecurity risk includes exposure to failures or
interruptions of service or security breaches resulting from malicious
technological attacks that impact the confidentiality, integrity or availability
of our or third parties' operations, systems or data. The Corporation seeks to
mitigate information security risk and associated reputational and compliance
risk by employing a multi-layered and intelligence-led Global Information
Security Program focused on preparing for, preventing, detecting, mitigating,
responding to and recovering from cyber threats and incidents and effectively
operating the Corporation's processes. Additionally, our business continuity
policy, standards and procedures are designed to maintain the availability of
business functions and enable impacted units within the Corporation and third
parties to achieve strategic objectives in the event of a cybersecurity
incident.
The Global Information Security Program is supported by three lines of defense.
The Global Information Security Team within the first line of defense is
responsible for the day-to-day management of the Global Information Security
Program, which includes defining policies and procedures to safeguard the
Corporation's information systems and data, conducting vulnerability and
third-party information security assessments, information security event
management (e.g., responding to ransomware and distributed denial of service
attacks), evaluation of external cyber intelligence, supporting industry
cybersecurity efforts and working with governmental agencies, and developing
employee training to support adherence to the Corporation's policies and
procedures. As the second line of defense, Global Compliance and Operational
Risk independently assesses, monitors and tests information security risk across
the Corporation, as well as the effectiveness of the Global Information Security
Program. Corporate Audit serves as the third line of defense, conducting
additional independent review and validation of the first-line processes and
functions. As part of our Global Information Security Program, we leverage both
internal and external assessments and partnerships with industry leaders to help
approach information security holistically. Additionally the Corporation
maintains a comprehensive enterprise-wide program that defines standards for the
planning, sourcing, management, and oversight of third-party relationships and
third-party access to its system, facilities, and/or confidential or proprietary
data for a business purpose or supervisory function.
Through established governance structures, we have processes to help facilitate
appropriate and effective oversight of information security risk. These routines
enable our three lines of defense and management to debate information security
risks and monitor control performance to allow for further escalation to
executive management, management and
Board-level committees or to the Board, as appropriate. The Board is actively
engaged in the oversight of Bank of America's Global Information Security
Program and devotes significant time and attention to the oversight of
cybersecurity and information security risk. The Board regularly discusses
cybersecurity and information security risks with the Chief Technology and
Information Officer and the Chief Information Security Officer. Additionally,
the ERC receives regular reporting, and reviews and approves the Information
Security Program and Policy on an annual basis. Reputational Risk Management
Reputational risk is the risk that negative perception of the Corporation may
adversely impact profitability or operations. Reputational risk may result from
many of the Corporation's activities, including those related to the management
of our strategic, operational, compliance and credit risks.
The Corporation manages reputational risk through established policies and
controls embedded throughout its business and risk management processes. We
proactively monitor and identify potential reputational risk events and have
processes established to mitigate reputational risks in a timely manner. If
reputational risk events occur, we focus on remediating the underlying issue and
taking action to minimize damage to the Corporation's reputation. The
Corporation has processes and procedures in place to respond to events that give
rise to reputational risk, including educating individuals and organizations
that influence public opinion, implementing external communication strategies to
mitigate the risk, and informing key stakeholders of potential reputational
risks. The Corporation's organization and governance structure provides
oversight of reputational risks. Reputational risk reporting is provided
regularly and directly to senior management and the ERC, which provides primary
oversight of reputational risk. In addition, each FLU has a committee, which
includes representatives from Legal and Risk, that is responsible for the
oversight of reputational risk, including approval for business activities that
present elevated levels of reputational risks. Climate Risk Management
Climate-related risks are divided into two major categories: (1) risks related
to the physical impacts of climate change, driven by extreme weather events such
as hurricanes and floods, as well as chronic longer-term shifts such as rising
average global temperatures and sea levels, and (2) risks related to the
transition to a low-carbon economy, which may entail extensive policy, legal,
technology and market changes. These changes and events may have broad impacts
on operations, supply chains, distribution networks, customers and markets and
are otherwise referred to, respectively, as physical risk and transition risk.
These risks may impact both financial and nonfinancial risk types. Physical risk
may lead to increased credit risk by diminishing borrowers' repayment capacity
or impacting the value of collateral. Physical risk may also increase
operational risk by impacting the Corporation's facilities, employees, customers
or vendors. Transition risks may amplify credit risk through the financial
impacts of changes in policy, technology or the market on the Corporation or its
counterparties. Unanticipated market changes can lead to sudden price
adjustments and give rise to heightened market risk. In addition, reputational
risk may arise, including from our climate-related practices and disclosures and
if we do not meet our climate-related commitments.
Effective management of climate risk requires coordinated governance, clearly
defined roles and responsibilities and well-
81 Bank of America -------------------------------------------------------------------------------- developed processes to identify, measure, monitor and control risks. As climate
risk spans all key risk types, we have developed and continue to enhance
processes to embed climate risk considerations into our Risk Framework and risk
management programs established for strategic, credit, market, liquidity,
compliance, operational and reputational risks. Our Environmental and Social
Risk Policy Framework aligns with our Risk Framework and provides additional
clarity and transparency regarding our approach to environmental and social
risks, inclusive of climate risk.
Our governance framework establishes oversight of climate risk practices and
strategies by the Board, supported by its ERC, as well as the MRC and the
Responsible Growth Committee, both of which are management-level committees
comprised of senior leaders across every major FLU and control function. The
Responsible Growth Committee is supported by the ESG Disclosure sub-committee,
which is responsible for reviewing and providing oversight of the Corporation's
climate and ESG-related public disclosures.
Our climate risk management efforts are overseen by an executive officer who
reports to the CRO. The Climate Risk Council, which consists of leaders across
risk, FLU and control functions, meets routinely to discuss our approach to
managing climate-related risks in line with our Risk Framework.
In 2021, we publicly announced our commitment to achieve net zero emissions in
our financing activities, operations, and supply chain before 2050 (Net Zero
Goal) and set 2030 emissions targets for our operations and supply chain. In
connection with our Net Zero Goal, in 2022, we announced a target to reduce
emissions by 2030 associated with our financing activities related to auto
manufacturing, energy and power generation (2030 Targets). In our September 2022
Task Force on Climate-related Financial Disclosures Report, we disclosed our
2019 and 2020 financed emissions and emissions intensity metrics for these
sectors, with 2019 serving as the baseline for our 2030 Targets.
We plan to disclose the financed emissions for additional portions of our
business loan portfolio in 2023, and we plan to set financing activity emission
reduction targets for other key sectors by April 2024.
Achieving our climate--related goals and targets, including our Net Zero Goal
and 2030 Targets, may require technological advances, clearly defined roadmaps
for industry sectors, new standards and public policies, including those that
improve the cost of capital for the transition to a low-carbon economy and
better emissions data reporting, as well as ongoing, strong and active
engagement with customers, suppliers, investors, government officials and other
stakeholders.
Given the extended period of these and other climate-related goals we have
established, our initiatives have not resulted in a significant effect on our
results of operations or financial position in the relevant periods presented
herein.
For more information about climate-related matters, including how the
Corporation manages climate risk, and the Corporation's climate-related goals
and commitments, including our plans to achieve our Net Zero Goal and 2030
Targets and progress on our sustainable finance goals, see the Corporation's
website, including our 2022 Task Force on Climate-related Financial Disclosures
Report and the 2022
Annual Report to shareholders available on the Investor Relations portion of our
website in March 2023. The contents of the Corporation's website and 2022 Annual
Report to shareholders are not incorporated by reference into this Annual Report
on Form 10-K. For more information on climate-related risks, see Item 1A. Risk
Factors on page 8.
The foregoing discussion and our discussion in the 2022 Annual Report to
shareholders regarding our goals and commitments with respect to climate risk
management, including environmental transition considerations, include "forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are not guarantees of future
results or performance and involve certain known and unknown risks,
uncertainties and assumptions that are difficult to predict and are often beyond
the Corporation's control. Actual outcomes and results may differ materially
from those expressed in, or implied by, any of these forward-looking statements. Complex Accounting Estimates
Our significant accounting principles, as described in Note 1 - Summary of
Significant Accounting Principles to the Consolidated Financial Statements, are
essential in understanding the MD&A. Many of our significant accounting
principles require complex judgments to estimate the values of assets and
liabilities. We have procedures and processes in place to facilitate making
these judgments.
The more judgmental estimates are summarized in the following discussion. We
have identified and described the development of the variables most important in
the estimation processes that involve mathematical models to derive the
estimates. In many cases, there are numerous alternative judgments that could be
used in the process of determining the inputs to the models. Where alternatives
exist, we have used the factors that we believe represent the most reasonable
value in developing the inputs. Actual performance that differs from our
estimates of the key variables could materially impact our results of
operations. Separate from the possible future impact to our results of
operations from input and model variables, the value of our lending portfolio
and market-sensitive assets and liabilities may change subsequent to the balance
sheet date, often significantly, due to the nature and magnitude of future
credit and market conditions. Such credit and market conditions may change
quickly and in unforeseen ways and the resulting volatility could have a
significant, negative effect on future operating results. These fluctuations
would not be indicative of deficiencies in our models or inputs. Allowance for Credit Losses
The allowance for credit losses includes the allowance for loan and lease losses
and the reserve for unfunded lending commitments. Our process for determining
the allowance for credit losses is discussed in Note 1 - Summary of Significant
Accounting Principles and Note 5 - Outstanding Loans and Leases and Allowance
for Credit Losses to the Consolidated Financial Statements.
The determination of the allowance for credit losses is based on numerous
estimates and assumptions, which require

Bank of America 82

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 a high degree of judgment and are often interrelated. A critical judgment in the
process is the weighting of our forward-looking macroeconomic scenarios that are
incorporated into our quantitative models. As any one economic outlook is
inherently uncertain, the Corporation uses multiple macroeconomic scenarios in
its ECL calculation, which have included a baseline scenario derived from
consensus estimates, an adverse scenario reflecting an extended moderate
recession, a downside scenario reflecting persistent inflation and interest
rates above the baseline scenario, a tail risk scenario similar to the severely
adverse scenario used in stress testing and an upside scenario that considers
the potential for improvement above the baseline scenario. The overall economic
outlook is weighted 95 percent towards a recessionary environment in 2023, with
continued inflationary pressures leading to lower gross domestic product (GDP)
and higher unemployment rate expectations as compared to the prior year.
Generally, as the consensus estimates improve or deteriorate, the allowance for
credit losses will change in a similar direction. There are multiple variables
that drive the macroeconomic scenarios with the key variables including, but not
limited to, U.S. GDP and unemployment rates. As of December 31, 2021, the
weighted macroeconomic outlook for the U.S. average unemployment rate was
forecasted at 5.2 percent, 4.7 percent and 4.3 percent in the fourth quarters of
2022, 2023 and 2024, respectively, and the weighted macroeconomic outlook for
U.S. GDP was forecasted to grow at 2.1 percent, 1.9 percent and 1.9 percent
year-over-year in the fourth quarters of 2022, 2023 and 2024, respectively. As
of December 31, 2022, the latest consensus estimates for the U.S. average
unemployment rate for the fourth quarter of 2022 was 3.7 percent and U.S. GDP
was forecasted to grow 0.4 percent year-over-year in the fourth quarter of 2022,
reflecting a tighter labor market and depressed growth expectations compared to
our macroeconomic outlook as of December 31, 2021, and were factored into our
allowance for credit losses estimate as of December 31, 2022. In addition, as of
December 31, 2022, the weighted macroeconomic outlook for the U.S. average
unemployment rate was forecasted at 5.6 percent and 5.0 percent in the fourth
quarters of 2023 and 2024, and the weighted macroeconomic outlook for U.S. GDP
was forecasted to contract 0.4 percent and grow 1.2 percent year-over-year in
the fourth quarters of 2023 and 2024.
In addition to the above judgments and estimates, the allowance for credit
losses can also be impacted by unanticipated changes in asset quality of the
portfolio, such as increases or decreases in credit and/or internal risk ratings
in our commercial portfolio, improvement or deterioration in borrower
delinquencies or credit scores in our credit card portfolio and increases or
decreases in home prices, which is a primary driver of LTVs, in our consumer
real estate portfolio, all of which have some degree of uncertainty. The
allowance for credit losses increased to $14.2 billion from $13.8 billion at
December 31, 2021, primarily due to loan growth and a dampened macroeconomic
outlook in 2022.
To provide an illustration of the sensitivity of the macroeconomic scenarios and
other assumptions on the estimate of our allowance for credit losses, the
Corporation compared the December 31, 2022 modeled ECL from the baseline
scenario and our adverse scenario. Relative to the baseline scenario, the
adverse scenario assumed a peak U.S. unemployment rate of nearly three
percentage points higher than the baseline scenario, a decline in U.S. GDP
followed by a prolonged recovery and a lower home price outlook with a
difference of approximately eight percent at the trough. This
sensitivity analysis resulted in a hypothetical increase in the allowance for
credit losses of approximately $4 billion.
While the sensitivity analysis may be useful to understand how changes in
macroeconomic assumptions could impact our modeled ECLs, it is not meant to
forecast how our allowance for credit losses is expected to change in a
different macroeconomic outlook. Importantly, the analysis does not incorporate
a variety of factors, including qualitative reserves and the weighting of
alternate scenarios, which could have offsetting effects on the estimate.
Considering the variety of factors contemplated when developing and weighting
macroeconomic outlooks such as recent economic events, leading economic
indicators, views of internal and third-party economists and industry trends, in
addition to other qualitative factors, the Corporation believes the allowance
for credit losses at December 31, 2022 is appropriate. Fair Value of Financial Instruments
Under applicable accounting standards, we are required to maximize the use of
observable inputs and minimize the use of unobservable inputs in measuring fair
value. We classify fair value measurements of financial instruments and MSRs
based on the three-level fair value hierarchy in the accounting standards.
The fair values of assets and liabilities may include adjustments, such as
market liquidity and credit quality, where appropriate. Valuations of products
using models or other techniques are sensitive to assumptions used for the
significant inputs. Where market data is available, the inputs used for
valuation reflect that information as of our valuation date. Inputs to valuation
models are considered unobservable if they are supported by little or no market
activity. In periods of extreme volatility, lessened liquidity or in illiquid
markets, there may be more variability in market pricing or a lack of market
data to use in the valuation process. In keeping with the prudent application of
estimates and management judgment in determining the fair value of assets and
liabilities, we have in place various processes and controls that include: a
model validation policy that requires review and approval of quantitative models
used for deal pricing, financial statement fair value determination and risk
quantification; a trading product valuation policy that requires verification of
all traded product valuations; and a periodic review and substantiation of daily
profit and loss reporting for all traded products. Primarily through validation
controls, we utilize both broker and pricing service inputs which can and do
include both market-observable and internally-modeled values and/or valuation
inputs. Our reliance on this information is affected by our understanding of how
the broker and/or pricing service develops its data with a higher degree of
reliance applied to those that are more directly observable and lesser reliance
applied to those developed through their own internal modeling. For example,
broker quotes in less active markets may only be indicative and therefore less
reliable. These processes and controls are performed independently of the
business. For more information, see Note 20 - Fair Value Measurements and Note
21 - Fair Value Option to the Consolidated Financial Statements. Level 3 Assets and Liabilities
Financial assets and liabilities, and MSRs, where values are based on valuation
techniques that require inputs that are both unobservable and are significant to
the overall fair value measurement are classified as Level 3 under the fair
value hierarchy established in applicable accounting standards. The fair value
of these Level 3 financial assets and liabilities and
83 Bank of America -------------------------------------------------------------------------------- MSRs is determined using pricing models, discounted cash flow methodologies or
similar techniques for which the determination of fair value requires
significant management judgment or estimation.
Level 3 financial instruments may be hedged with derivatives classified as Level
1 or 2; therefore, gains or losses associated with Level 3 financial instruments
may be offset by gains or losses associated with financial instruments
classified in other levels of the fair value hierarchy. The Level 3 gains and
losses recorded in earnings did not have a significant impact on our liquidity
or capital. We conduct a review of our fair value hierarchy classifications on a
quarterly basis. Transfers into or out of Level 3 are made if the significant
inputs used in the financial models measuring the fair values of the assets and
liabilities became unobservable or observable, respectively, in the current
marketplace. For more information on transfers into and out of Level 3 during
2022, 2021 and 2020, see Note 20 - Fair Value Measurements to the Consolidated
Financial Statements. Accrued Income Taxes and Deferred Tax Assets
Accrued income taxes, reported as a component of either other assets or accrued
expenses and other liabilities on the Consolidated Balance Sheet, represent the
net amount of current income taxes we expect to pay to or receive from various
taxing jurisdictions attributable to our operations to date. We currently file
income tax returns in more than 100 jurisdictions and consider many factors,
including statutory, judicial and regulatory guidance, in estimating the
appropriate accrued income taxes for each jurisdiction.
Net deferred tax assets, reported as a component of other assets on the
Consolidated Balance Sheet, represent the net decrease in taxes expected to be
paid in the future because of net operating loss (NOL) and tax credit
carryforwards and
because of future reversals of temporary differences in the bases of assets and
liabilities as measured by tax laws and their bases as reported in the financial
statements. NOL and tax credit carryforwards result in reductions to future tax
liabilities, and many of these attributes can expire if not utilized within
certain periods. We consider the need for valuation allowances to reduce net
deferred tax assets to the amounts that we estimate are more likely than not to
be realized.
Consistent with the applicable accounting guidance, we monitor relevant tax
authorities and change our estimates of accrued income taxes and/or net deferred
tax assets due to changes in income tax laws and their interpretation by the
courts and regulatory authorities. These revisions of our estimates, which also
may result from our income tax planning and from the resolution of income tax
audit matters, may be material to our operating results for any given period.
See Note 19 - Income Taxes to the Consolidated Financial Statements for a table
of significant tax attributes and additional information. For more information,
see page 17 under Item 1A. Risk Factors - Regulatory, Compliance and Legal. Goodwill and Intangible Assets
The nature of and accounting for goodwill and intangible assets are discussed in
Note 1 - Summary of Significant Accounting Principles, and Note 7 - Goodwill and
Intangible Assets to the Consolidated Financial Statements.
We completed our annual goodwill impairment test as of June 30, 2022. Based on
our assessment, we have concluded that goodwill was not impaired. Certain Contingent Liabilities
For more information on the complex judgments associated with certain contingent
liabilities, see Note 12 - Commitments and Contingencies to the Consolidated
Financial Statements. Bank of America 84 

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 Non-GAAP Reconciliations
Tables 47 and 48 provide reconciliations of certain non-GAAP financial measures
to GAAP financial measures. 

Table 47 Annual Reconciliations to GAAP Financial Measures (1)

 (Dollars in millions, shares in thousands) 2022 2021 2020 Reconciliation of average shareholders' equity to average tangible
shareholders' equity and average tangible common shareholders'
equity
Shareholders' equity $ 270,299 $ 273,757 $ 267,309
Goodwill (69,022) (69,005) (68,951)
Intangible assets (excluding MSRs) (2,117) (2,177) (1,862)
Related deferred tax liabilities 922 916 821
Tangible shareholders' equity $ 200,082 $ 203,491 $ 197,317
Preferred stock (28,318) (23,970) (23,624)
Tangible common shareholders' equity $ 

171,764 $ 179,521 $ 173,693

Reconciliation of year-end shareholders’ equity to year-end
tangible shareholders’ equity and year-end tangible common
shareholders’ equity
Shareholders’ equity

 $ 273,197 $ 270,066 $ 272,924
Goodwill (69,022) (69,022) (68,951)
Intangible assets (excluding MSRs) (2,075) (2,153) (2,151)
Related deferred tax liabilities 899 929 920
Tangible shareholders' equity $ 202,999 $ 199,820 $ 202,742
Preferred stock (28,397) (24,708) (24,510)
Tangible common shareholders' equity $ 

174,602 $ 175,112 $ 178,232
Reconciliation of year-end assets to year-end tangible assets
Assets

 $ 

3,051,375 $ 3,169,495 $ 2,819,627
Goodwill

 (69,022) (69,022) (68,951)
Intangible assets (excluding MSRs) (2,075) (2,153) (2,151)
Related deferred tax liabilities 899 929 920
Tangible assets $ 2,981,177 $ 3,099,249 $ 2,749,445 (1)Presents reconciliations of non-GAAP financial measures to GAAP financial
measures. For more information on non-GAAP financial measures and ratios we use
in assessing the results of the Corporation, see Supplemental Financial Data on
page 32. Table 48 Quarterly Reconciliations to GAAP Financial Measures (1) 2022 Quarters 2021 Quarters
(Dollars in millions) Fourth Third Second First Fourth Third Second First Reconciliation of average shareholders'
equity to average tangible shareholders'
equity and average tangible common
shareholders' equity
Shareholders' equity $ 272,629 $ 271,017 

$ 268,197 $ 269,309 $ 270,883 $ 275,484 $ 274,632 $ 274,047
Goodwill

 (69,022) (69,022) (69,022) (69,022) (69,022) (69,023) (69,023) (68,951)
Intangible assets (excluding MSRs) (2,088) (2,107) (2,127) (2,146) (2,166) (2,185) (2,212) (2,146)
Related deferred tax liabilities 914 920 926 929 913 915 915 920
Tangible shareholders' equity $ 202,433 $ 200,808 

$ 197,974 $ 199,070 $ 200,608 $ 205,191 $ 204,312 $ 203,870
Preferred stock

 (28,982) (29,134) (28,674) (26,444) (24,364) (23,441) (23,684) (24,399)

Tangible common shareholders’ equity $ 173,451 $ 171,674

$ 169,300 $ 172,626 $ 176,244 $ 181,750 $ 180,628 $ 179,471

 Reconciliation of period-end
shareholders' equity to period-end
tangible shareholders' equity and
period-end tangible common shareholders'
equity
Shareholders' equity $ 273,197 $ 269,524 

$ 269,118 $ 266,617 $ 270,066 $ 272,464 $ 277,119 $ 274,000
Goodwill

 (69,022) (69,022) (69,022) (69,022) (69,022) (69,023) (69,023) (68,951)
Intangible assets (excluding MSRs) (2,075) (2,094) (2,114) (2,133) (2,153) (2,172) (2,192) (2,134)
Related deferred tax liabilities 899 915 920 926 929 913 915 915
Tangible shareholders' equity $ 202,999 $ 199,323 

$ 198,902 $ 196,388 $ 199,820 $ 202,182 $ 206,819 $ 203,830
Preferred stock

 (28,397) (29,134) (29,134) (27,137) (24,708) (23,441) (23,441) (24,319)

Tangible common shareholders’ equity $ 174,602 $ 170,189

 $ 169,768 $ 169,251 $ 175,112 $ 178,741 $ 183,378 $ 179,511
Reconciliation of period-end assets to
period-end tangible assets
Assets $ 3,051,375 $ 3,072,953 

$ 3,111,606 $ 3,238,223 $ 3,169,495 $ 3,085,446 $ 3,029,894 $ 2,969,992
Goodwill

 (69,022) (69,022) (69,022) (69,022) (69,022) (69,023) (69,023) (68,951)
Intangible assets (excluding MSRs) (2,075) (2,094) (2,114) (2,133) (2,153) (2,172) (2,192) (2,134)
Related deferred tax liabilities 899 915 920 926 929 913 915 915
Tangible assets $ 2,981,177 $ 3,002,752 

$ 3,041,390 $ 3,167,994 $ 3,099,249 $ 3,015,164 $ 2,959,594 $ 2,899,822

 (1)Presents reconciliations of non-GAAP financial measures to GAAP financial
measures. For more information on non-GAAP financial measures and ratios we use
in assessing the results of the Corporation, see Supplemental Financial Data on
page 32.
85 Bank of America 

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Item 7A. Quantitative and Qualitative Disclosures about Market Risk
See Market Risk Management on page 75 in the MD&A and the sections referenced
therein for Quantitative and Qualitative Disclosures about Market Risk.

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