Bank of America Reports First-quarter 2014 Net Loss of $276 Million,or $0.05 per Diluted Share, on Revenue of $22.8 Billion(A) Results Include Litigation Expense of $6.0 Billion (Pretax) orApproximately $0.40 per Share (After Tax)

Bank of America Corporation today reported a net loss of $276 million, or $0.05 per diluted share, for the first quarter of 2014, compared to net income of $1.5 billion, or $0.10 per diluted share, in the year-ago period.

Revenue, net of interest expense, on an FTE basis(A) declined 3 percent from the first quarter of 2013 to $22.8 billion. Excluding the impact of net debit valuation adjustments (DVA) in both periods, revenue was down 4 percent from the year-ago quarter to $22.7 billion(B).

The results for the first quarter of 2014 include $6.0 billion in litigation expense related to the previously announced settlement with the Federal Housing Finance Agency (FHFA), and additional reserves primarily for previously disclosed legacy mortgage-related matters.

"The cost of resolving more of our mortgage issues hurt our earnings this quarter,” said Chief Executive Officer Brian Moynihan. “But the earnings power of our business and customer strategy generated solid results and we continued to return excess capital to our shareholders."

"During the quarter, our Basel 3 standardized capital ratios and our liquidity improved to record levels and credit quality also improved," said Chief Financial Officer Bruce Thompson. "In addition, expenses in our legacy mortgage servicing business, excluding litigation, declined by $1 billion from the year-ago quarter."

Selected Financial Highlights

1 Fully taxable-equivalent (FTE) basis is a non-GAAP financial measure. For reconciliations to GAAP financial measures, refer to pages 21-23 of this press release. Net interest income on a GAAP basis was $10.1 billion, $10.8 billion and $10.7 billion for the three months ended March 31, 2014, December 31, 2013 and March 31, 2013, respectively. Total revenue, net of interest expense, on a GAAP basis was $22.6 billion, $21.5 billion and $23.2 billion for the three months ended March 31, 2014, December 31, 2013 and March 31, 2013, respectively.

2 Total revenue, net of interest expense, on an FTE basis excluding net DVA is a non-GAAP financial measure. Net DVA gains (losses)were $112 million, $(617) million and $(145) million for the three months ended March 31, 2014, December 31, 2013 and March 31, 2013, respectively.

Net interest income, on an FTE basis, fell 5 percent from the year-ago quarter to $10.3 billion(A). The decline was driven by lower yields on debt securities due to an approximate $540 million swing in market-related premium amortization expense. Net interest margin, excluding market-related adjustments, was 2.36 percent in the first quarter of 2014, compared to 2.30 percent in the first quarter of 2013.

Noninterest income was flat compared to the year-ago quarter, as lower mortgage banking income and lower trading account profits were largely offset by year-over-year increases in investment and brokerage income, equity investment income and gains on the sale of debt securities.

The provision for credit losses declined 41 percent from the first quarter of 2013 to $1.0 billion, driven by improved credit quality. Net charge-offs declined 45 percent from the first quarter of 2013 to $1.4 billion, with the net charge-off ratio falling to 0.62 percent in the first quarter of 2014 from 1.14 percent in the year-ago quarter. During the first quarter of 2014, the reserve release was $379 million, compared to a reserve release of $804 million in the first quarter of 2013.

Noninterest expense was $22.2 billion, compared to $19.5 billion in the year-ago quarter, driven by higher mortgage-related litigation expense, partially offset by reduced other expenses in Legacy Assets and Servicing (LAS). Litigation expense, including $3.6 billion for the FHFA settlement, was $6.0 billion in the first quarter of 2014, compared to $2.2 billion in the first quarter of 2013. The first quarter of 2014 included $1.0 billion of expense associated with retirement-eligible incentive compensation costs, compared to $0.9 billion in the first quarter of 2013. Excluding litigation and retirement-eligible incentive compensation costs from both periods, noninterest expense declined $1.2 billion from the year-ago quarter.

The income tax benefit for the first quarter of 2014 was $405 million on $681 million of pretax loss, compared to income tax expense of $501 million on $2.0 billion of pretax income in the prior-year period. At March 31, 2014, the company had 238,560 full-time employees, down 9 percent from the year-ago quarter and 1.5 percent below the fourth quarter of 2013.

Settlement With Financial Guaranty Insurance Co. (FGIC)

Bank of America reached a settlement with FGIC, as well as separate settlements with The Bank of New York Mellon, as trustee, for certain second-lien residential mortgage-backed securities (RMBS) trusts for which FGIC provided financial guarantee insurance. The agreements resolve all outstanding litigation between FGIC and the company, as well as outstanding and potential claims by FGIC and the trustee related to alleged representations and warranties breaches and other claims involving second-lien RMBS trusts for which FGIC provided financial guarantee insurance.

Seven of the trust settlements have already been completed, and the two remaining trust settlements are subject to additional investor approvals in a process that is expected to be completed within the next 45 days. Bank of America has already made payments totaling approximately $900 million under the settlement with FGIC and the completed trust settlements and will pay an additional $50 million if the remaining two trust settlements are completed. The costs of the FGIC and trust settlements are covered by previously established reserves. With this settlement, Bank of America has resolved disputes with four monolines.

Business Segment Results

The company reports results through five business segments: Consumer and Business Banking (CBB), Consumer Real Estate Services (CRES), Global Wealth and Investment Management (GWIM), Global Banking, and Global Markets, with the remaining operations recorded in All Other.

Consumer and Business Banking (CBB)

1 Return on average allocated capital is a non-GAAP financial measure. The company believes the use of this non-GAAP financial measure provides additional clarity in assessing the results of the segments. Other companies may define or calculate this measure differently. For reconciliation to GAAP financial measures, refer to pages 21-23 of this press release.

Business Highlights

• Average deposit balances increased $32.1 billion, or 6 percent, from the year-ago quarter to $534.6 billion. The increase was driven by growth in liquid products in the current low-rate environment and the $11.8 billion average impact of deposit transfers primarily from GWIM.
• The number of mobile banking customers increased 19 percent from the year-ago quarter to 15.0 million, and more than 10 percent of deposit transactions are now being done through mobile devices.
• Total U.S. Consumer Credit Card net credit loss rate for the first quarter of 2014 was 3.25 percent, and remains at historically low levels.
• Return on average allocated capital was 22.8 percent in the first quarter of 2014, compared to 19.6 percent in the first quarter of 2013.

Financial Overview

Consumer and Business Banking reported net income of $1.7 billion, up $210 million, or 15 percent, from the year-ago quarter. Noninterest income of $2.5 billion increased $88 million primarily due to a portfolio divestiture gain.

The provision for credit losses decreased $140 million from the year-ago quarter to $812 million, reflecting continued improvement in credit quality, due in part to lower delinquencies. Noninterest expense decreased 4 percent, or $180 million, from the year-ago quarter to $4.0 billion primarily due to lower operating and personnel expense.

Consumer Real Estate Services (CRES)

1 Noninterest expense includes litigation expense of $5.8 billion, $1.2 billion and $2.0 billion for the three months ended March 31, 2014, December 31, 2013 and March 31, 2013.

Business Highlights

• Bank of America funded $10.8 billion in residential home loans and home equity loans during the first quarter of 2014, helping more than 36,000 homeowners either refinance an existing mortgage or purchase a home through our retail channels. This included more than 3,300 first-time homebuyer mortgages and more than 12,800 mortgages to low- and moderate-income borrowers.
• The pipeline for new mortgages increased 23 percent at the end of the first quarter of 2014 compared to the end of the fourth quarter of 2013.
• The number of 60+ days delinquent first mortgage loans serviced by LAS declined 15 percent during the first quarter of 2014 to 277,000 loans from 325,000 loans at the end of the fourth quarter of 2013, and declined 58 percent from 667,000 loans at the end of the first quarter of 2013.
• Noninterest expense in LAS, excluding litigation, declined to $1.6 billion in the first quarter of 2014 from $2.6 billion in the year-ago quarter.

Financial Overview

Consumer Real Estate Services reported a net loss of $5.0 billion for the first quarter of 2014, compared to a net loss of $2.2 billion for the same period in 2013, reflecting a $3.8 billion increase in litigation expense. Revenue declined $1.1 billion from the first quarter of 2013 to $1.2 billion, driven primarily by a $548 million decline in servicing revenue, reflecting a smaller servicing portfolio and a $542 million decline in core production revenue due to lower loan originations.

CRES first-mortgage originations declined 65 percent in the first quarter of 2014 compared to the same period in 2013, reflecting the decline in the overall market demand for refinance mortgages. Core production revenue decreased in the first quarter of 2014 to $273 million from $815 million in the year-ago quarter due to lower volume and a reduction in margins.

The provision for credit losses decreased $310 million from the year-ago quarter to $25 million, driven primarily by continued improvement in portfolio trends, including home prices.

Noninterest expense increased $2.7 billion from the year-ago quarter to $8.1 billion, due to a $3.8 billion increase in litigation expense, partially offset by lower LAS default-related staffing and other default-related servicing expenses.

Global Wealth and Investment Management (GWIM)

1 Return on average allocated capital is a non-GAAP financial measure. The company believes the use of this non-GAAP financial measure provides additional clarity in assessing the results of the segments. Other companies may define or calculate this measure differently. For reconciliation to GAAP financial measures, refer to pages 21-23 of this press release.

2 Total client balances are defined as assets under management, client brokerage assets, assets in custody, client deposits and loans (including margin receivables).

Business Highlights

• Pretax margin was 25.6 percent in the first quarter of 2014, compared to 25.9 percent in the year-ago quarter, marking the fifth straight quarter of over 25 percent.
• Asset management fees grew to a record $1.9 billion, up 18.4 percent from the year-ago quarter.
• Client balances increased 7 percent to $2.40 trillion, driven by higher market levels and net inflows. First-quarter 2014 long-term assets under management (AUM) flows of $17.4 billion were the 19th consecutive quarter of positive flows.
• Average loan balances increased 9 percent from the year-ago quarter to $115.9 billion.

Financial Overview

Global Wealth and Investment Management reported net income of $729 million, up slightly from the first quarter of 2013, reflecting continued strong revenue performance and low credit costs.

Revenue increased 3 percent from the year-ago quarter to a record $4.5 billion, driven by higher noninterest income related to improved market valuation and long-term AUM flows.

The provision for credit losses was relatively flat compared to the year-ago quarter. Noninterest expense increased 3 percent to $3.4 billion, driven in part by higher revenue-related expenses as well as increased volume-related expenses and additional investments in technology to support the business.

Return on average allocated capital was 24.7 percent in the first quarter of 2014, down from 29.4 percent in the year-ago quarter, reflecting earnings stability coupled with increased capital allocations.

Client balances rose 7 percent from the year-ago quarter to $2.40 trillion, driven largely by higher market levels, long-term AUM flows of $44.8 billion and period-end client loan growth of $9.5 billion. Assets under management rose $96.6 billion, or 13 percent, from the first quarter of 2013 to $841.8 billion, driven by market valuation and long-term AUM flows. Average deposit balances decreased $10.6 billion from the first quarter of 2013 to $242.8 billion as $2.4 billion of organic growth was offset by a $13.0 billion migration to CBB, primarily in the first quarter of 2013.

Global Banking

1 Return on average allocated capital is a non-GAAP financial measure. The company believes the use of this non-GAAP financial measure provides additional clarity in assessing the results of the segments. Other companies may define or calculate this measure differently. For reconciliation to GAAP financial measures, refer to pages 21-23 of this press release.

Business Highlights

• Bank of America Merrill Lynch (BAML) maintained a leadership position in investment banking with firmwide investment banking fees of $1.5 billion, excluding self-led deals.
• BAML ranked among the top three financial institutions globally in leveraged loans, investment-grade corporate debt, asset-backed securities, common stock underwriting, and syndicated loans during the first quarter of 2014(C).
• Average loan and lease balances increased $27.4 billion, or 11 percent, from the year-ago quarter, to $271.5 billion, with growth primarily in the commercial and industrial loan portfolio and the commercial real estate portfolio.

• Average deposits increased $35.1 billion, or 16 percent, from the year-ago quarter to $256.3 billion primarily due to increased client liquidity.

Financial Overview

Global Banking reported net incomeof $1.2 billion in the first quarter of 2014, down $45 million from the year-ago quarter, as an increase in revenue was offset by higher noninterest expense and increased provision for credit losses. Revenue of $4.3 billion was up 6 percent from the first quarter of 2013, reflecting higher net interest income driven by growth in loan balances.

Global Corporate Banking revenue increased to $1.6 billion in the first quarter of 2014, up $127 million from the year-ago quarter, and Global Commercial Banking revenue increased $80 million to $1.8 billion. Included in these results are Business Lending revenue of $1.9 billion, up $116 million from the year-ago quarter, and Global Treasury Services revenue of $1.5 billion, up $91 million from the year-ago period. Global Banking investment banking fees, excluding self-led deals, remained solid versus the year-ago quarter.

The provision for credit losses increased $116 million from the year-ago quarter to $265 million. The reserve increase for the first quarter of 2014 was $282 million, compared to $81 million in the year-ago quarter.

Noninterest expense increased $186 million, or 10 percent, from the year-ago quarter to $2.0 billion, primarily from technology investments in Global Treasury Services and lending platforms, additional client-facing personnel and higher litigation expense.

Return on average allocated capital was 16.2 percent in the first quarter of 2014, down from 22.6 percent in the year-ago quarter, reflecting earnings stability offset by increased capital allocations.

Global Markets

1 During the first quarter of 2014, the management of structured liabilities and the associated DVA were moved into Global Markets from All Other to better align the performance risk of these instruments. As such, net DVA represents the combined total of net DVA on derivatives and structured liabilities. Prior periods have been reclassified to conform to current period presentation.

2 Total revenue, net of interest expense, on an FTE basis excluding net DVA, and net income (loss) excluding net DVA are non-GAAP financial measures. Net DVA gains (losses) were $112 million, $(617) million and $(145) million for the three months ended March 31, 2014, December 31, 2013 and March 31, 2013, respectively.

3 Return on average allocated capital is a non-GAAP financial measure. The company believes the use of this non-GAAP financial measure provides additional clarity in assessing the results of the segments. Other companies may define or calculate this measure differently. For reconciliation to GAAP financial measures, refer to pages 21-23 of this press release.

n/m = not meaningful

Business Highlights

• Sales and trading revenue, excluding net DVA(F), remained relatively flat from the first quarter of 2013 at $4.1 billion.
• Equities sales and trading revenue, excluding net DVA(H) was solid compared to the year-ago period. The company continued to increase market share compared to the year-ago quarter.
• Return on average allocated capital, excluding net DVA(F), was 14.8 percent in the first quarter of 2014, compared to 16.3 percent in the first quarter of 2013, reflecting stable net income combined with an increase in allocated capital compared to the year-ago quarter.

Financial Overview

Global Markets reported net income of $1.3 billion in the first quarter of 2014, compared to $1.1 billion in the year-ago quarter. Excluding net DVA(F), net income was $1.2 billion in the first quarter of 2014, an increase of 3 percent compared to the year-ago quarter.

Global Markets revenue increased $235 million, or 5 percent, from the year-ago quarter to $5.0 billion. Excluding net DVA(F), revenue decreased $22 million to $4.9 billion as declines in Rates and Currencies were partially offset by stronger performance in Credit and Equities.

Fixed Income, Currency and Commodities sales and trading revenue, excluding net DVA(G), was $3.0 billion in the first quarter of 2014, a decrease of $51 million, or 2 percent, from the year-ago quarter, as credit markets remained strong but Rates and Currencies declined on lower market volumes and volatility. The year-ago results included the impact of a $450 million write-down related to the settlement of a legacy matter. Adjusting the year-ago quarter to exclude this negative impact, FICC revenue, excluding net DVA, declined 15 percent from the first quarter of 2013.

Equities sales and trading revenue, excluding net DVA(H), was $1.2 billion, in line with results from the year-ago quarter. The current quarter benefited from continued gains in market share and higher client financing balances.

Noninterest expense of $3.1 billion was flat compared to the year-ago quarter.

All Other1

1 All Other consists of ALM activities, equity investments, the international consumer card business, liquidating businesses and other. ALM activities encompass the whole-loan residential mortgage portfolio and investment securities, interest rate and foreign currency risk management activities including the residual net interest income allocation, the impact of certain allocation methodologies and accounting hedge ineffectiveness.

2 Revenue includes equity investment income of $674 million, $393 million and $520 million for the three months ended March 31, 2014, December 31, 2013 and March 31, 2013, respectively, and gains on sales of debt securities of $357 million, $363 million and $67 million for the three months ended March 31, 2014, December 31, 2013 and March 31, 2013, respectively.

3 During the first quarter of 2014, the management of structured liabilities and the associated DVA were moved into Global Markets from All Other to better align the performance risk of these instruments. Prior periods have been reclassified to conform to current period presentation.

All Other reported a net loss of $182 million in the first quarter of 2014, compared to a net loss of $923 million for the same period a year ago. The improvement was primarily driven by a decrease in the provision for credit losses primarily due to continued improvement in portfolio trends including increased home prices, higher gains on sales of debt securities, and higher equity investment income due to a gain on the sale of the company´s remaining interest in an investment. Impacting the income tax benefit were the resolution of certain tax matters and recurring tax preference items compared to the year-ago.

Credit Quality