Bank of America Reports Q4-15 Net Income of $3.3B, EPS of $0.28

Bank of America (NYSE: BAC):

Consumer Banking

• Revenue, net of interest expense, (FTE basis) up 4% to $19.8B(A)

• Net interest income (NII) (FTE basis) up 2% to $10.0B(A)

– Excluding market-related NII and other adjustments(A), NII was $10.5B, compared to $10.3B in Q3-15 and $10.4B in Q4-14

• Noninterest income up 7% to $9.7B

• Provision for credit losses $0.8B, compared to $0.8B in Q3-15 and $0.2B in Q4-14

• Noninterest expense declined 2% to $13.9B; excluding litigation, noninterest expense declined 3% to $13.4B(B)

• Net income up 9% to $3.3B; earnings per diluted share $0.28, compared to $0.25

Previously Disclosed Q4-15 Items

• ($0.03) per share for reduction to NII for certain trust preferred securities

• ($0.03) per share for negative impact of U.K. tax law changes

Balance Sheet, Capital and Liquidity

• Common equity tier 1 capital (transition) of $163.0B; Common equity tier 1 capital (fully phased-in) of $154.1B(C)

• Global Excess Liquidity Sources increased $65B to record $504B; time to required funding at 39 months(D)

• Total deposit balances up $78B to $1.2T

• Return on average assets 0.61%; return on average common equity 5.1%; return on average tangible common equity 7.3%(E)

• Tangible book value per share(F) increased 8% to $15.62; book value per share increased 6% to $22.54

• Returned $4.5B in capital to shareholders in 2015 through common stock repurchases and dividends

• Loans up $12B, deposits up $48B2

• Brokerage assets up 8%

• Total mortgage production up 13%

• Total U.S. credit card spending up 5%

Global Wealth and Investment Management

• Total client balances of nearly $2.5T

• Long-term assets under management flows of $7B in Q4-15

• Loans up $12B, deposits up $16B2

Global Banking

• Loans up $37B, deposits up $16B2

• No. 3 in Global Investment Banking fees(G)

• Participated in 8 of top 10 debt deals and 7 of top 10 equity deals(G)

Global Markets

• Excluding net DVA, sales and trading revenue up 11%(H)

 – Fixed income up 20%(H)

 – Equities down 3%(H)

Legacy Assets and Servicing

• Noninterest expense down 16% to $1.1B; noninterest expense, excluding litigation, down 28% to $795MM(I)

• Number of 60+ days delinquent first mortgage loans down 46% to 103,000 units

1 2015 results include early adoption of new accounting guidance on the recognition and measurement of financial instruments. See endnote H for more information.
2 Financial Highlights and Business Highlights comparison to year-ago quarter unless noted. Loan and deposit balances are shown on an end-of-period basis. Fully taxable-equivalent (FTE) basis for the corporation is a non-GAAP financial measure. See endnote A for more information. Total revenue, net of interest expense, on a GAAP basis was $19.5B for Q4-15, and net interest income on a GAAP basis was $9.8B for Q4-15. Earnings per share on a fully diluted basis.

CEO Commentary

Highest Annual Net Income in Nearly a Decade

"The 2015 results were our highest earnings in nearly a decade, reflecting the work we’ve done to develop a straightforward operating model focused on responsible growth and doing more business with each customer and client. We saw solid customer activity in loan growth, deposits, and wealth management asset flows, and we returned more capital to our shareholders. As we build on this progress, we will continue to invest in the future and manage expenses."

– Brian Moynihan, Chief Executive Officer

"Our results this quarter reflect our ongoing efforts to improve operating leverage while continuing to invest in our business. We increased net interest income, managed expenses tightly, and returned $1.3 billion in capital to our shareholders this quarter through common stock repurchases and dividends."

– Paul Donofrio, Chief Financial Officer

• Revenue up $33MM to $7.8B

 – NII benefited from higher deposits and loans

 – Noninterest income down, due primarily to lower mortgage banking income

• Noninterest expense down $76MM, due primarily to lower operating expenses;

efficiency ratio improved to 56% from 57%

• Net income up 9% to $1.8B

1 Comparisons are to the year-ago quarter unless noted. Revenue and net interest income are on an FTE basis.

2 Revenue, net of interest expense.

• Average deposit balances grew $40B, or 8%

• Average loan balances grew $12B, or 6%

• Total mortgage and home equity production4 grew $2B, or 13%, to $17B

• Client brokerage assets grew $9B, or 8% to $123B

• Approximately 1.3MM new U.S. consumer credit cards issued

• 18.7MM mobile banking active users, up 13%

• 4,726 financial centers, including 9 new openings during the quarter

• Combined credit/debit spending up $4B to $130B

1 Comparisons are to the year-ago quarter unless noted. Efficiency ratio is on an FTE basis.

2 The U.S. card portfolio includes Consumer Banking and GWIM.

3 Source: SNL branch data, U.S. retail deposit market share based on June 2015 FDIC deposit data, adjusted to remove commercial balances.

4 Total mortgage production includes first mortgage and home equity originations in Consumer Banking and GWIM.
Amounts represent the unpaid principal balance of loans and in the case of home equity, the principal amount of the total line of credit.

• Revenue down $160MM to $4.4B

 – NII relatively flat, as the benefits from loan and deposit growth were mostly offset
by the impact of the firm´s allocation of asset liability management (ALM) activities

 – Noninterest income down, due to lower transactional activity and lower market valuations

• Noninterest expense up $36MM, due primarily to higher amortization of previously issued
stock awards and investments in client-facing professionals, partially offset by lower
revenue-related incentives

• Net income down 13% to $614MM

1 Comparisons are to the year-ago quarter unless noted. Revenue and net interest income are on an FTE basis.

2 Revenue, net of interest expense.

• Average deposit balances grew $12.5B, or 5%

• Average loans and leases grew $12.3B, or 10%

• Total client balances relatively unchanged at

nearly $2.5T

• Long-term assets under management (AUM) flows

of $7B were the 26th consecutive quarter of

positive flows

• Number of wealth advisors increased 5% to

18,167

1 Comparisons are to the year-ago quarter unless noted. Efficiency ratio is on an FTE basis.

• Revenue up $39MM to $4.4B

 – NII benefited from increased loan and deposit balances, partially offset by the impact of the
firm’s allocation of ALM activities, including liquidity costs, as well as loan spread
compression

 – Noninterest income increased, driven by improvements in leasing and treasury services,
as well as a gain on the sale of a foreclosed property, partially offset by lower investment
banking fees

• Provision for credit losses increased $264MM, driven by higher energy-related charge-offs, as
well as reserve builds for loan growth and energy exposure

• Noninterest expense decreased, driven by lower litigation and incentive compensation costs,
partially offset by investments in client-facing professionals

• Net income down 9% to $1.4B, driven mostly by higher provision for credit losses

1 Comparisons are to the year-ago quarter unless noted. Revenue and net interest income are on an FTE basis.

2 Global Banking shares with Global Markets in certain deal economics from investment banking and loan origination activities.

3 Revenue, net of interest expense.

• Average deposit balances grew $15.7B, or 5%

• Average loans and leases grew $33.3B, or 12%

• Corporation-wide investment banking fees of $1.3B (excluding self-led deals) declined 17%,
driven by lower leveraged finance and equity issuance, partly offset by higher advisory fees

 – Ranked No. 3 globally in net investment banking fees(G)

 – Second-highest quarter in advisory fees since merger

 – Participated in 8 of top 10 debt deals and 7 of top 10 equity deals(G)

1 Comparisons are to the year-ago quarter unless noted. Efficiency ratio is on an FTE basis.

2 Global Banking shares with Global Markets in certain deal economics from investment banking and loan origination activities.

• Revenue up $741MM to $3.1B; excluding net DVA4, revenue up $313MM to $3.3B, driven primarily by improved sales and trading results and a gain on an equity investment, partially offset by lower investment banking fees

• Noninterest expense increased $232MM, due primarily to higher revenue-related expenses

• Net income of $185MM, compared to a loss of $75MM; excluding DVA, net income was $308MM, compared to $316MM4

(excl. net DVA) (FTE)2,3,4(H)

1 Comparisons are to the year-ago quarter unless noted. Revenue and net interest income are on an FTE basis.

2 Global Banking shares with Global Markets in certain deal economics from investment banking and loan origination activities.

3 Revenue, net of interest expense.

4 Revenue excluding net DVA is a non-GAAP financial measure. In Q4-14, a funding valuation adjustment (FVA) charge of $497MM was recorded and included in net DVA. In Q4-15, the Corporation early adopted new accounting guidance on recognition and measurement of financial instruments. See endnote H for additional information.

• Sales and trading revenue up $0.7B to $2.4B

• Excluding net DVA, sales and trading revenue up 11% to $2.6B(H)

 – FICC increased 20%, reflecting improvement across most products, notably in rates and credit-related products(H)

 – Equities down 3%, due to lower levels of client activity(H)

• No. 1 global research firm for 5th consecutive year2