# BANK OF AMERICA CORP /DE/ (BAC) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from BANK OF AMERICA CORP /DE/'s 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/70858/000007085822000062/bac-20211231.htm
Accession: 0000070858-22-000062
Filing date: 2022-02-22
Report date: 2021-12-31
Extracted from a later financial-section MD&A body after the formal Item 7 span was a short reference.
Confidence: high

Company profile: /company/BAC/
All MD&A years: /company/BAC/mda/
Next year: /company/BAC/mda/fy2022/ (FY 2022)

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 and inflationary 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 the economic recovery and our business; 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 cyberattacks or campaigns; 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 of widespread health emergencies or pandemics, including the magnitude and duration of the COVID-19 pandemic and its impact on the 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, 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, “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 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

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[["","","Bank of America 26"]]
[[/GREPCENT_TABLE]]

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, 2021, the Corporation had $3.2 trillion in assets and a headcount of approximately 208,000 employees.

As of December 31, 2021, we served clients through operations across the U.S., its territories and approximately 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 4,200 retail financial centers, approximately 16,000 ATMs, and leading digital banking platforms (www.bankofamerica.com) with approximately 41 million active users, including approximately 33 million active mobile users. We offer industry-leading support to approximately three million small business households. Our GWIM businesses, with client balances of $3.8 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 2, 2022, the Corporation announced that the Board of Directors declared a quarterly cash common stock dividend of $0.21 per share, payable on March 25, 2022 to shareholders of record as of March 4, 2022.

For more information on our capital resources and regulatory developments, see Capital Management on page 49.

COVID-19 Pandemic

The Coronavirus Disease 2019 (COVID-19) pandemic (the pandemic) has impacted the Corporation and may continue to do so, as uncertainty remains about the duration of the pandemic and the timing and strength of the global economic recovery. As the pandemic continues to evolve, we regularly evaluate protocols and processes in place to execute our business continuity plans. In conjunction with our efforts to support clients affected by the pandemic, we have cumulatively originated $35.4 billion in loans under the Paycheck Protection Program (PPP) with amounts outstanding of $4.7 billion and $22.7 billion at December 31, 2021 and 2020. For more information on PPP loans, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements.

The future direct and indirect impact of the pandemic on our businesses, results of operations and financial condition remains uncertain. Should current economic conditions deteriorate or if the pandemic worsens due to various factors,

including through the spread of more easily communicable variants of COVID-19, such conditions could have an adverse effect on our businesses and results of operations and could adversely affect our financial condition.

For more information on how the risks related to the pandemic adversely affect our businesses, results of operations and financial condition, see Part 1. Item 1A. Risk Factors on page 8.

LIBOR and Other Benchmark Rates

Subject to the continued publication of certain non-representative London Interbank Offered Rate (LIBOR) benchmark settings based on a modified calculation (i.e., on a “synthetic” basis), British Pound Sterling, Euro, Swiss Franc and Japanese Yen LIBOR settings and one-week and two-month U.S. dollar (USD) LIBOR settings ceased or became no longer representative of the underlying market the rates seek to measure (i.e., non-representative) immediately after December 31, 2021, and 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. Separately, the Federal Reserve, the Office of the Comptroller of the Currency (OCC) 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 is 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 has 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

27 Bank of America

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 certain regulatory-approved exceptions.

The Corporation launched capabilities and services to support the issuance 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 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 currencies, 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. 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, will require active dialogue with clients to modify the contracts. For any residual exposures after June 2023 that continue to have no fallback provisions, the Corporation is assessing and planning to leverage relevant contractual and statutory solutions, including relevant state legislation and any future federal legislation, to transition such exposure to ARRs.

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 ARRs education 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 21.

Changes to Overdraft Services

In January 2022, the Corporation announced changes to its overdraft services for consumer and small business clients, which include eliminating non-sufficient funds (NSF) fees beginning in February 2022 and reducing overdraft fees from $35 to $10 beginning in May 2022. Fees from overdraft services were approximately $1 billion in 2021 and recorded in Consumer Banking as service charges in the Consolidated Statement of Income. Due to the policy changes, in 2022 the Corporation expects a significant reduction in NSF and overdraft fees.

Financial Highlights

[[GREPCENT_TABLE]]
[["Table 1","Summary Income Statement and Selected Financial Data"],["(Dollars in millions, except per share information)","","","","","2021","","2020"],["Income statement"],["Net interest income","","","","","$","42,934","","","$","43,360"],["Noninterest income","","","","","46,179","","","42,168"],["Total revenue, net of interest expense","","","","","89,113","","","85,528"],["Provision for credit losses","","","","","(4,594)","","","11,320"],["Noninterest expense","","","","","59,731","","","55,213"],["Income before income taxes","","","","","33,976","","","18,995"],["Income tax expense","","","","","1,998","","","1,101"],["Net income","","","","","31,978","","","17,894"],["Preferred stock dividends","","","","","1,421","","","1,421"],["Net income applicable to common shareholders","","","","","$","30,557","","","$","16,473"],["Per common share information"],["Earnings","","","","","$","3.60","","","$","1.88"],["Diluted earnings","","","","","3.57","","","1.87"],["Dividends paid","","","","","0.78","","","0.72"],["Performance ratios"],["Return on average assets (1)","","","","","1.05","%","","0.67","%"],["Return on average common shareholders\u2019 equity (1)","","","","","12.23","","","6.76"],["Return on average tangible common shareholders\u2019 equity (2)","","","","","17.02","","","9.48"],["Efficiency ratio (1)","","","","","67.03","","","64.55"],["Balance sheet at year end"],["Total loans and leases","","","","","$","979,124","","","$","927,861"],["Total assets","","","","","3,169,495","","","2,819,627"],["Total deposits","","","","","2,064,446","","","1,795,480"],["Total liabilities","","","","","2,899,429","","","2,546,703"],["Total common shareholders\u2019 equity","","","","","245,358","","","248,414"],["Total shareholders\u2019 equity","","","","","270,066","","","272,924"]]
[[/GREPCENT_TABLE]]

(1)For definitions, see Key Metrics on page 169.

(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 $32.0 billion or $3.57 per diluted share in 2021 compared to $17.9 billion or $1.87 per diluted share in 2020. The increase in net income was due to improvement in the provision for credit losses and higher revenue, partially offset by higher noninterest expense.

For discussion and analysis of our consolidated and business segment results of operations for 2020 compared to 2019, see the Financial Highlights and Business Segment Operations sections in the MD&A of the Corporation's 2020 Annual Report on Form 10-K.

Net Interest Income

Net interest income decreased $426 million to $42.9 billion in 2021 compared to 2020. Net interest yield on a fully taxable-equivalent (FTE) basis decreased 24 basis points (bps) to 1.66 percent for 2021. The decrease in net interest income was primarily driven by lower interest rates and average loan balances, partially offset by higher average balances of debt securities. For more information on net interest yield and the FTE basis, see Supplemental Financial Data on page 31, and for more information on interest rate risk management, see Interest Rate Risk Management for the Banking Book on page 79.

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Noninterest Income

[[GREPCENT_TABLE]]
[["Table 2","Noninterest Income"],["(Dollars in millions)","","","","","2021","","2020"],["Fees and commissions:"],["Card income","","","","","$","6,218","","","$","5,656"],["Service charges","","","","","7,504","","","7,141"],["Investment and brokerage services","","","","","16,690","","","14,574"],["Investment banking fees","","","","","8,887","","","7,180"],["Total fees and commissions","","","","","39,299","","","34,551"],["Market making and similar activities","","","","","8,691","","","8,355"],["Other income","","","","","(1,811)","","","(738)"],["Total noninterest income","","","","","$","46,179","","","$","42,168"]]
[[/GREPCENT_TABLE]]

Noninterest income increased $4.0 billion to $46.2 billion in 2021 compared to 2020. The following highlights the significant changes.

●    Card income increased $562 million primarily driven by increased client activity and merchant services revenue.

●    Service charges increased $363 million primarily due to higher treasury and credit service charges and increased client activity.

●    Investment and brokerage services increased $2.1 billion primarily driven by higher market valuations and assets under management (AUM) flows, partially offset by declines in AUM pricing.

●    Investment banking fees increased $1.7 billion primarily due to higher advisory fees as well as higher debt and equity issuance fees.

●    Market making and similar activities increased $336 million primarily driven by strong sales and trading performance in Equities, partially offset by a weaker performance in Fixed Income, Currencies and Commodities (FICC), which benefited from a more favorable market environment in 2020.

●    Other income decreased $1.1 billion primarily due to a $704 million gain on sales of certain mortgage loans in the prior year, as well as higher partnership losses on tax credit investments.

Provision for Credit Losses

The provision for credit losses improved $15.9 billion to a benefit of $4.6 billion in 2021 compared to 2020. The benefit was primarily due to improvements in the macroeconomic outlook and credit quality. For more information on the provision for credit losses, see Allowance for Credit Losses on page 73.

Noninterest Expense

[[GREPCENT_TABLE]]
[["Table 3","Noninterest Expense"],["(Dollars in millions)","","","","","2021","","2020"],["Compensation and benefits","","","","","$","36,140","","","$","32,725"],["Occupancy and equipment","","","","","7,138","","","7,141"],["Information processing and communications","","","","","5,769","","","5,222"],["Product delivery and transaction related","","","","","3,881","","","3,433"],["Marketing","","","","","1,939","","","1,701"],["Professional fees","","","","","1,775","","","1,694"],["Other general operating","","","","","3,089","","","3,297"],["Total noninterest expense","","","","","$","59,731","","","$","55,213"]]
[[/GREPCENT_TABLE]]

Noninterest expense increased $4.5 billion to $59.7 billion in 2021 compared to 2020. The increase was primarily due to higher compensation and benefits expense, higher costs associated with processing transactional card claims related to state unemployment benefits, a contribution to the Bank of America Foundation and an impairment charge for real estate rationalization.

Income Tax Expense

[[GREPCENT_TABLE]]
[["Table 4","Income Tax Expense"],["(Dollars in millions)","","","","","2021","","2020"],["Income before income taxes","","","","","$","33,976","","","$","18,995"],["Income tax expense","","","","","1,998","","","1,101"],["Effective tax rate","","","","","5.9","%","","5.8","%"]]
[[/GREPCENT_TABLE]]

Income tax expense was $2.0 billion for 2021 compared to $1.1 billion in 2020, resulting in an effective tax rate of 5.9 percent compared to 5.8 percent.

The effective tax rates for 2021 and 2020 were driven by the impact of our recurring tax preference benefits and positive income tax adjustments from the impact of U.K. tax law changes discussed below. Our recurring tax preference benefits primarily consist of tax credits from environmental, social and governance (ESG) investments in affordable housing and renewable energy, aligning with our responsible growth strategy to address global sustainability challenges. Absent these tax credits, the impact of the U.K. tax law changes and other discrete items, the effective tax rates would have been approximately 25 percent and 26 percent for 2021 and 2020.

In June 2021, the U.K. enacted the 2021 Finance Act, which included an increase in 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. In addition, in July 2020, the U.K. enacted a repeal of the final two percent of scheduled decreases in the U.K. corporation income tax rate. As a result, in 2021 and 2020, the Corporation recorded write-ups of U.K. net deferred tax assets of approximately $2.0 billion and $700 million, with corresponding positive income tax adjustments. These write-ups were reversals 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

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[["Table 5","Selected Balance Sheet Data"],["","","December 31"],["(Dollars in millions)","2021","","2020","","$ Change","","% Change"],["Assets"],["Cash and cash equivalents","$","348,221","","","$","380,463","","","$","(32,242)","","","(8)","%"],["Federal funds sold and securities borrowed or purchased under agreements to resell","250,720","","","304,058","","","(53,338)","","","(18)"],["Trading account assets","247,080","","","198,854","","","48,226","","","24"],["Debt securities","982,627","","","684,850","","","297,777","","","43"],["Loans and leases","979,124","","","927,861","","","51,263","","","6"],["Allowance for loan and lease losses","(12,387)","","","(18,802)","","","6,415","","","(34)"],["All other assets","374,110","","","342,343","","","31,767","","","9"],["Total assets","$","3,169,495","","","$","2,819,627","","","$","349,868","","","12"],["Liabilities"],["Deposits","$","2,064,446","","","$","1,795,480","","","$","268,966","","","15"],["Federal funds purchased and securities loaned or sold under agreements to repurchase","192,329","","","170,323","","","22,006","","","13"],["Trading account liabilities","100,690","","","71,320","","","29,370","","","41"],["Short-term borrowings","23,753","","","19,321","","","4,432","","","23"],["Long-term debt","280,117","","","262,934","","","17,183","","","7"],["All other liabilities","238,094","","","227,325","","","10,769","","","5"],["Total liabilities","2,899,429","","","2,546,703","","","352,726","","","14"],["Shareholders\u2019 equity","270,066","","","272,924","","","(2,858)","","","(1)"],["Total liabilities and shareholders\u2019 equity","$","3,169,495","","","$","2,819,627","","","$","349,868","","","12"]]
[[/GREPCENT_TABLE]]

Assets

At December 31, 2021, total assets were approximately $3.2 trillion, up $349.9 billion from December 31, 2020. The increase in assets was primarily due to higher debt securities that were primarily funded by deposit growth, an increase in loans and leases and higher trading account assets, partially offset by lower federal funds sold and securities borrowed or purchased under agreements to resell and cash and cash equivalents.

Cash and Cash Equivalents

Cash and cash equivalents decreased $32.2 billion primarily driven by higher investments in debt securities.

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 decreased $53.3 billion primarily due to the investment of excess cash into debt securities.

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 $48.2 billion primarily due to an increase in inventory 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 increased $297.8 billion primarily driven by the deployment of deposit inflows. For more information on debt

securities, see Note 4 – Securities to the Consolidated Financial Statements.

Loans and Leases

Loans and leases increased $51.3 billion primarily driven by growth in commercial loans and higher securities-based lending within consumer loans. 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 decreased $6.4 billion primarily due to improvements in the macroeconomic outlook and credit quality. For more information, see Allowance for Credit Losses on page 73.

All Other Assets

All other assets increased $31.8 billion primarily driven by higher margin loans and loans held-for-sale (LHFS).

Liabilities

At December 31, 2021, total liabilities were approximately $2.9 trillion, up $352.7 billion from December 31, 2020, primarily due to deposit growth.

Deposits

Deposits increased $269.0 billion primarily due to an increase in retail and wholesale deposits.

Federal Funds Purchased and Securities Loaned or Sold Under Agreements to Repurchase

Federal funds transactions involve borrowing reserve balances on a short-term basis. Securities loaned or sold under agreements to repurchase are collateralized borrowing transactions utilized to accommodate customer transactions, earn interest rate spreads and finance assets on the balance sheet. Federal funds purchased and securities loaned or sold under agreements to repurchase increased $22.0 billion primarily driven by client activity within Global Markets.

Trading Account Liabilities

Trading account liabilities consist primarily of short positions in equity and fixed-income securities including U.S. Treasury and agency securities, corporate securities and non-U.S. sovereign

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[["","","Bank of America 30"]]
[[/GREPCENT_TABLE]]

debt. Trading account liabilities increased $29.4 billion primarily due to higher 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 $4.4 billion primarily due to an increase in short-term commercial paper issuances to manage liquidity needs. For more information on short-term borrowings, see Note 10 – Securities Financing Agreements, Short-term Borrowings and Restricted Cash to the Consolidated Financial Statements.

Long-term Debt

Long-term debt increased $17.2 billion primarily due to debt issuances, partially offset by maturities, redemptions and valuation adjustments. For more information on long-term debt, see Note 11 – Long-term Debt to the Consolidated Financial Statements.

Shareholders’ Equity

Shareholders’ equity decreased $2.9 billion primarily due to returns of capital to shareholders through common stock repurchases and common and preferred stock dividends, market value decreases on derivatives and debt securities and the redemption of preferred stock, partially offset by net income.

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.

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 as follows:

●    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 169.

Our consolidated key performance indicators, which include various equity and credit metrics, are presented in Table 1 on page 28, Table 6 on page 32 and Table 7 on page 33.

For information on key segment performance metrics, see Business Segment Operations on page 36.

31 Bank of America

[[GREPCENT_TABLE]]
[["Table 6","Selected Annual Financial Data"],["(In millions, except per share information)","2021","","2020","","2019"],["Income statement"],["Net interest income","$","42,934","","","$","43,360","","","$","48,891"],["Noninterest income","46,179","","","42,168","","","42,353"],["Total revenue, net of interest expense","89,113","","","85,528","","","91,244"],["Provision for credit losses","(4,594)","","","11,320","","","3,590"],["Noninterest expense","59,731","","","55,213","","","54,900"],["Income before income taxes","33,976","","","18,995","","","32,754"],["Income tax expense","1,998","","","1,101","","","5,324"],["Net income","31,978","","","17,894","","","27,430"],["Net income applicable to common shareholders","30,557","","","16,473","","","25,998"],["Average common shares issued and outstanding","8,493.3","","","8,753.2","","","9,390.5"],["Average diluted common shares issued and outstanding","8,558.4","","","8,796.9","","","9,442.9"],["Performance ratios"],["Return on average assets (1)","1.05","%","","0.67","%","","1.14","%"],["Return on average common shareholders\u2019 equity (1)","12.23","","","6.76","","","10.62"],["Return on average tangible common shareholders\u2019 equity (1, 2)","17.02","","","9.48","","","14.86"],["Return on average shareholders\u2019 equity (1)","11.68","","","6.69","","","10.24"],["Return on average tangible shareholders\u2019 equity (1, 2)","15.71","","","9.07","","","13.85"],["Total ending equity to total ending assets","8.52","","","9.68","","","10.88"],["Total average equity to total average assets","9.02","","","9.96","","","11.14"],["Dividend payout (1)","21.51","","","38.18","","","23.65"],["Per common share data"],["Earnings","$","3.60","","","$","1.88","","","$","2.77"],["Diluted earnings","3.57","","","1.87","","","2.75"],["Dividends paid","0.78","","","0.72","","","0.66"],["Book value (1)","30.37","","","28.72","","","27.32"],["Tangible book value (2)","21.68","","","20.60","","","19.41"],["Market capitalization","$","359,383","","","$","262,206","","","$","311,209"],["Average balance sheet"],["Total loans and leases","$","920,401","","","$","982,467","","","$","958,416"],["Total assets","3,034,623","","","2,683,122","","","2,405,830"],["Total deposits","1,914,286","","","1,632,998","","","1,380,326"],["Long-term debt","237,703","","","220,440","","","201,623"],["Common shareholders\u2019 equity","249,787","","","243,685","","","244,853"],["Total shareholders\u2019 equity","273,757","","","267,309","","","267,889"],["Asset quality"],["Allowance for credit losses (3)","$","13,843","","","$","20,680","","","$","10,229"],["Nonperforming loans, leases and foreclosed properties (4)","4,697","","","5,116","","","3,837"],["Allowance for loan and lease losses as a percentage of total loans and leases outstanding (4)","1.28","%","","2.04","%","","0.97","%"],["Allowance for loan and lease losses as a percentage of total nonperforming loans and leases (4)","271","","","380","","","265"],["Net charge-offs","$","2,243","","","$","4,121","","","$","3,648"],["Net charge-offs as a percentage of average loans and leases outstanding (4)","0.25","%","","0.42","%","","0.38","%"],["Capital ratios at year end (5)"],["Common equity tier 1 capital","10.6","%","","11.9","%","","11.2","%"],["Tier 1 capital","12.1","","","13.5","","","12.6"],["Total capital","14.1","","","16.1","","","14.7"],["Tier 1 leverage","6.4","","","7.4","","","7.9"],["Supplementary leverage ratio","5.5","","","7.2","","","6.4"],["Tangible equity (2)","6.4","","","7.4","","","8.2"],["Tangible common equity (2)","5.7","","","6.5","","","7.3"]]
[[/GREPCENT_TABLE]]

(1)For definition, see Key Metrics on page 169.

(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 31 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 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.

(5)For more information, including which approach is used to assess capital adequacy, see Capital Management on page 49.

[[GREPCENT_TABLE]]
[["","","Bank of America 32"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Table 7","Selected Quarterly Financial Data"],["","","2021 Quarters","","2020 Quarters"],["(In millions, except per share information)","Fourth","","Third","","Second","","First","","Fourth","","","","","","Third","","Second","","First"],["Income statement"],["Net interest income","$","11,410","","","$","11,094","","","$","10,233","","","$","10,197","","","$","10,253","","","","","","","$","10,129","","","$","10,848","","","$","12,130"],["Noninterest income","10,650","","","11,672","","","11,233","","","12,624","","","9,846","","","","","","","10,207","","","11,478","","","10,637"],["Total revenue, net of interest expense","22,060","","","22,766","","","21,466","","","22,821","","","20,099","","","","","","","20,336","","","22,326","","","22,767"],["Provision for credit losses","(489)","","","(624)","","","(1,621)","","","(1,860)","","","53","","","","","","","1,389","","","5,117","","","4,761"],["Noninterest expense","14,731","","","14,440","","","15,045","","","15,515","","","13,927","","","","","","","14,401","","","13,410","","","13,475"],["Income before income taxes","7,818","","","8,950","","","8,042","","","9,166","","","6,119","","","","","","","4,546","","","3,799","","","4,531"],["Income tax expense","805","","","1,259","","","(1,182)","","","1,116","","","649","","","","","","","(335)","","","266","","","521"],["Net income","7,013","","","7,691","","","9,224","","","8,050","","","5,470","","","","","","","4,881","","","3,533","","","4,010"],["Net income applicable to common shareholders","6,773","","","7,260","","","8,964","","","7,560","","","5,208","","","","","","","4,440","","","3,284","","","3,541"],["Average common shares issued and outstanding","8,226.5","","","8,430.7","","","8,620.8","","","8,700.1","","","8,724.9","","","","","","","8,732.9","","","8,739.9","","","8,815.6"],["Average diluted common shares issued and outstanding","8,304.7","","","8,492.8","","","8,735.5","","","8,755.6","","","8,785.0","","","","","","","8,777.5","","","8,768.1","","","8,862.7"],["Performance ratios"],["Return on average assets (1)","0.88","%","","0.99","%","","1.23","%","","1.13","%","","0.78","%","","","","","","0.71","%","","0.53","%","","0.65","%"],["Four-quarter trailing return on average assets (2)","1.05","","","1.04","","","0.97","","","0.79","","","0.67","","","","","","","0.75","","","0.81","","","0.99"],["Return on average common shareholders\u2019 equity (1)","10.90","","","11.43","","","14.33","","","12.28","","","8.39","","","","","","","7.24","","","5.44","","","5.91"],["Return on average tangible common shareholders\u2019 equity (3)","15.25","","","15.85","","","19.90","","","17.08","","","11.73","","","","","","","10.16","","","7.63","","","8.32"],["Return on average shareholders\u2019 equity (1)","10.27","","","11.08","","","13.47","","","11.91","","","8.03","","","","","","","7.26","","","5.34","","","6.10"],["Return on average tangible shareholders\u2019 equity (3)","13.87","","","14.87","","","18.11","","","16.01","","","10.84","","","","","","","9.84","","","7.23","","","8.29"],["Total ending equity to total ending assets","8.52","","","8.83","","","9.15","","","9.23","","","9.68","","","","","","","9.82","","","9.69","","","10.11"],["Total average equity to total average assets","8.56","","","8.95","","","9.11","","","9.52","","","9.71","","","","","","","9.76","","","9.85","","","10.60"],["Dividend payout (1)","25.33","","","24.10","","","17.25","","","20.68","","","30.11","","","","","","","35.36","","","47.87","","","44.57"],["Per common share data"],["Earnings","$","0.82","","","$","0.86","","","$","1.04","","","$","0.87","","","$","0.60","","","","","","","$","0.51","","","$","0.38","","","$","0.40"],["Diluted earnings","0.82","","","0.85","","","1.03","","","0.86","","","0.59","","","","","","","0.51","","","0.37","","","0.40"],["Dividends paid","0.21","","","0.21","","","0.18","","","0.18","","","0.18","","","","","","","0.18","","","0.18","","","0.18"],["Book value (1)","30.37","","","30.22","","","29.89","","","29.07","","","28.72","","","","","","","28.33","","","27.96","","","27.84"],["Tangible book value (3)","21.68","","","21.69","","","21.61","","","20.90","","","20.60","","","","","","","20.23","","","19.90","","","19.79"],["Market capitalization","$","359,383","","","$","349,841","","","$","349,925","","","$","332,337","","","$","262,206","","","","","","","$","208,656","","","$","205,772","","","$","184,181"],["Average balance sheet"],["Total loans and leases","$","945,062","","","$","920,509","","","$","907,900","","","$","907.723","","","$","934,798","","","","","","","$","974,018","","","$","1,031,387","","","$","990,283"],["Total assets","3,164,118","","","3,076,452","","","3,015,113","","","2,879.221","","","2,791,874","","","","","","","2,739,684","","","2,704,186","","","2,494,928"],["Total deposits","2,017,223","","","1,942,705","","","1,888,834","","","1,805.747","","","1,737,139","","","","","","","1,695,488","","","1,658,197","","","1,439,336"],["Long-term debt","248,525","","","248,988","","","232,034","","","220.836","","","225,423","","","","","","","224,254","","","221,167","","","210,816"],["Common shareholders\u2019 equity","246,519","","","252,043","","","250,948","","","249,648","","","246,840","","","","","","","243,896","","","242,889","","","241,078"],["Total shareholders\u2019 equity","270,883","","","275,484","","","274,632","","","274,047","","","271,020","","","","","","","267,323","","","266,316","","","264,534"],["Asset quality"],["Allowance for credit losses (4)","$","13,843","","","$","14,693","","","$","15,782","","","$","17,997","","","$","20,680","","","","","","","$","21,506","","","$","21,091","","","$","17,126"],["Nonperforming loans, leases and foreclosed properties (5)","4,697","","","4,831","","","5,031","","","5,299","","","5,116","","","","","","","4,730","","","4,611","","","4,331"],["Allowance for loan and lease losses as a percentage of total loans and leases outstanding (5)","1.28","%","","1.43","%","","1.55","%","","1.80","%","","2.04","%","","","","","","2.07","%","","1.96","%","","1.51","%"],["Allowance for loan and lease losses as a percentage of total nonperforming loans and leases (5)","271","","","279","","","287","","","313","","","380","","","","","","","431","","","441","","","389"],["Net charge-offs","$","362","","","$","463","","","$","595","","","$","823","","","$","881","","","","","","","$","972","","","$","1,146","","","$","1,122"],["Annualized net charge-offs as a percentage of average loans and leases outstanding (5)","0.15","%","","0.20","%","","0.27","%","","0.37","%","","0.38","%","","","","","","0.40","%","","0.45","%","","0.46","%"],["Capital ratios at period end (6)"],["Common equity tier 1 capital","10.6","%","","11.1","%","","11.5","%","","11.8","%","","11.9","%","","","","","","11.9","%","","11.4","%","","10.8","%"],["Tier 1 capital","12.1","","","12.6","","","13.0","","","13.3","","","13.5","","","","","","","13.5","","","12.9","","","12.3"],["Total capital","14.1","","","14.7","","","15.1","","","15.6","","","16.1","","","","","","","16.1","","","14.8","","","14.6"],["Tier 1 leverage","6.4","","","6.6","","","6.9","","","7.2","","","7.4","","","","","","","7.4","","","7.4","","","7.9"],["Supplementary leverage ratio","5.5","","","5.6","","","5.9","","","7.0","","","7.2","","","","","","","6.9","","","7.1","","","6.4"],["Tangible equity (3)","6.4","","","6.7","","","7.0","","","7.0","","","7.4","","","","","","","7.4","","","7.3","","","7.7"],["Tangible common equity (3)","5.7","","","5.9","","","6.2","","","6.2","","","6.5","","","","","","","6.6","","","6.5","","","6.7"],["Total loss-absorbing capacity and long-term debt metrics"],["Total loss-absorbing capacity to risk-weighted assets","26.9","%","","27.7","%","","27.7","%","","26.8","%","","27.4","%","","","","","","26.9","%","","26.0","%","","24.6","%"],["Total loss-absorbing capacity to supplementary leverage exposure","12.1","","","12.4","","","12.5","","","14.1","","","14.5","","","","","","","13.7","","","14.2","","","12.8"],["Eligible long-term debt to risk-weighted assets","14.1","","","14.4","","","14.1","","","13.0","","","13.3","","","","","","","12.9","","","12.4","","","11.6"],["Eligible long-term debt to supplementary leverage exposure","6.3","","","6.4","","","6.3","","","6.8","","","7.1","","","","","","","6.6","","","6.7","","","6.1"]]
[[/GREPCENT_TABLE]]

(1)For definitions, see Key Metrics on page 169.

(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 31 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.

33 Bank of America

[[GREPCENT_TABLE]]
[["Table 8","Average Balances and Interest Rates - FTE Basis"],["","","Average Balance","","Interest Income/ Expense (1)","","Yield/ Rate","","Average Balance","","Interest Income/ Expense (1)","","Yield/ Rate","","Average Balance","","Interest Income/ Expense (1)","","Yield/ Rate"],["(Dollars in millions)","2021","","2020","","2019"],["Earning assets"],["Interest-bearing deposits with the Federal Reserve, non- U.S. central banks and other banks","$","255,595","","","$","172","","","0.07","%","","$","253,227","","","$","359","","","0.14","%","","$","125,555","","","$","1,823","","","1.45","%"],["Time deposits placed and other short-term investments","7,603","","","15","","","0.19","","","8,840","","","29","","","0.33","","","9,427","","","207","","","2.19"],["Federal funds sold and securities borrowed or purchased under agreements to resell (2)","267,257","","","(90)","","","(0.03)","","","309,945","","","903","","","0.29","","","279,610","","","4,843","","","1.73"],["Trading account assets","147,891","","","3,823","","","2.58","","","148,076","","","4,185","","","2.83","","","148,076","","","5,269","","","3.56"],["Debt securities","905,169","","","12,433","","","1.38","","","532,266","","","9,868","","","1.87","","","450,090","","","11,917","","","2.65"],["Loans and leases (3)"],["Residential mortgage","216,983","","","5,995","","","2.76","","","236,719","","","7,338","","","3.10","","","220,552","","","7,651","","","3.47"],["Home equity","31,014","","","1,066","","","3.44","","","38,251","","","1,290","","","3.37","","","44,600","","","2,194","","","4.92"],["Credit card","75,385","","","7,772","","","10.31","","","85,017","","","8,759","","","10.30","","","94,488","","","10,166","","","10.76"],["Direct/Indirect and other consumer","96,472","","","2,276","","","2.36","","","89,974","","","2,545","","","2.83","","","90,656","","","3,261","","","3.60"],["Total consumer","419,854","","","17,109","","","4.08","","","449,961","","","19,932","","","4.43","","","450,296","","","23,272","","","5.17"],["U.S. commercial","324,795","","","8,606","","","2.65","","","344,095","","","9,712","","","2.82","","","321,467","","","13,161","","","4.09"],["Non-U.S. commercial","99,584","","","1,752","","","1.76","","","106,487","","","2,208","","","2.07","","","103,918","","","3,402","","","3.27"],["Commercial real estate (4)","60,303","","","1,496","","","2.48","","","63,428","","","1,790","","","2.82","","","62,044","","","2,741","","","4.42"],["Commercial lease financing","15,865","","","462","","","2.91","","","18,496","","","559","","","3.02","","","20,691","","","718","","","3.47"],["Total commercial","500,547","","","12,316","","","2.46","","","532,506","","","14,269","","","2.68","","","508,120","","","20,022","","","3.94"],["Total loans and leases","920,401","","","29,425","","","3.20","","","982,467","","","34,201","","","3.48","","","958,416","","","43,294","","","4.52"],["Other earning assets","112,512","","","2,321","","","2.06","","","83,078","","","2,539","","","3.06","","","69,089","","","4,478","","","6.48"],["Total earning assets","2,616,428","","","48,099","","","1.84","","","2,317,899","","","52,084","","","2.25","","","2,040,263","","","71,831","","","3.52"],["Cash and due from banks","31,214","","","","","","","31,885","","","","","","","26,193"],["Other assets, less allowance for loan and lease losses","386,981","","","","","","","333,338","","","","","","","339,374"],["Total assets","$","3,034,623","","","","","","","$","2,683,122","","","","","","","$","2,405,830"],["Interest-bearing liabilities"],["U.S. interest-bearing deposits"],["Demand and money market deposits","$","925,970","","","$","314","","","0.03","%","","$","829,719","","","$","977","","","0.12","%","","$","741,126","","","$","4,471","","","0.60","%"],["Time and savings deposits","161,512","","","170","","","0.11","","","170,750","","","734","","","0.43","","","166,463","","","1,883","","","1.13"],["Total U.S. interest-bearing deposits","1,087,482","","","484","","","0.04","","","1,000,469","","","1,711","","","0.17","","","907,589","","","6,354","","","0.70"],["Non-U.S. interest-bearing deposits","82,769","","","53","","","0.06","","","77,046","","","232","","","0.30","","","71,468","","","834","","","1.17"],["Total interest-bearing deposits","1,170,251","","","537","","","0.05","","","1,077,515","","","1,943","","","0.18","","","979,057","","","7,188","","","0.73"],["Federal funds purchased and securities loaned or sold under agreements to repurchase (5)","210,848","","","461","","","0.22","","","188,511","","","1,229","","","0.65","","","198,533","","","4,404","","","2.22"],["Short-term borrowings and other interest bearing liabilities (2,5)","106,975","","","(819)","","","(0.77)","","","104,955","","","(242)","","","(0.23)","","","77,899","","","2,804","","","3.60"],["Trading account liabilities","54,107","","","1,128","","","2.08","","","41,386","","","974","","","2.35","","","45,449","","","1,249","","","2.75"],["Long-term debt","237,703","","","3,431","","","1.44","","","220,440","","","4,321","","","1.96","","","201,623","","","6,700","","","3.32"],["Total interest-bearing liabilities","1,779,884","","","4,738","","","0.27","","","1,632,807","","","8,225","","","0.50","","","1,502,561","","","22,345","","","1.49"],["Noninterest-bearing sources"],["Noninterest-bearing deposits","744,035","","","","","","","555,483","","","","","","","401,269"],["Other liabilities (6)","236,947","","","","","","","227,523","","","","","","","234,111"],["Shareholders\u2019 equity","273,757","","","","","","","267,309","","","","","","","267,889"],["Total liabilities and shareholders\u2019 equity","$","3,034,623","","","","","","","$","2,683,122","","","","","","","$","2,405,830"],["Net interest spread","","","","","1.57","%","","","","","","1.75","%","","","","","","2.03","%"],["Impact of noninterest-bearing sources","","","","","0.09","","","","","","","0.15","","","","","","","0.40"],["Net interest income/yield on earning assets (7)","","","$","43,361","","","1.66","%","","","","$","43,859","","","1.90","%","","","","$","49,486","","","2.43","%"]]
[[/GREPCENT_TABLE]]

(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 $56.5 billion, $59.8 billion and $57.3 billion, and non-U.S. commercial real estate loans of $3.8 billion, $3.6 billion and $4.7 billion for 2021, 2020 and 2019, respectively.

(5)Certain prior-period amounts have been reclassified to conform to current period presentation.

(6)Includes $30.4 billion, $34.3 billion and $35.5 billion of structured notes and liabilities for 2021, 2020 and 2019, respectively.

(7)Net interest income includes FTE adjustments of $427 million, $499 million and $595 million for 2021, 2020 and 2019, respectively.

[[GREPCENT_TABLE]]
[["","","Bank of America 34"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Table 9","Analysis of Changes in Net Interest Income - FTE Basis"],["","","Due to Change in (1)","","Net Change","","Due to Change in (1)","","Net Change"],["","Volume","","Rate","","","Volume","","Rate"],["(Dollars in millions)","From 2020 to 2021","","From 2019 to 2020"],["Increase (decrease) in interest income"],["Interest-bearing deposits with the Federal Reserve, non-U.S. central banks and other banks","$","(1)","","","$","(186)","","","$","(187)","","","$","1,849","","","$","(3,313)","","","$","(1,464)"],["Time deposits placed and other short-term investments","(4)","","","(10)","","","(14)","","","(13)","","","(165)","","","(178)"],["Federal funds sold and securities borrowed or purchased under agreements to resell","(128)","","","(865)","","","(993)","","","519","","","(4,459)","","","(3,940)"],["Trading account assets","\u2014","","","(362)","","","(362)","","","3","","","(1,087)","","","(1,084)"],["Debt securities","7,059","","","(4,494)","","","2,565","","","2,188","","","(4,237)","","","(2,049)"],["Loans and leases"],["Residential mortgage","(612)","","","(731)","","","(1,343)","","","563","","","(876)","","","(313)"],["Home equity","(245)","","","21","","","(224)","","","(312)","","","(592)","","","(904)"],["Credit card","(994)","","","7","","","(987)","","","(1,018)","","","(389)","","","(1,407)"],["Direct/Indirect and other consumer","185","","","(454)","","","(269)","","","(22)","","","(694)","","","(716)"],["Total consumer","","","","","(2,823)","","","","","","","(3,340)"],["U.S. commercial","(553)","","","(553)","","","(1,106)","","","912","","","(4,361)","","","(3,449)"],["Non-U.S. commercial","(147)","","","(309)","","","(456)","","","80","","","(1,274)","","","(1,194)"],["Commercial real estate","(89)","","","(205)","","","(294)","","","63","","","(1,014)","","","(951)"],["Commercial lease financing","(80)","","","(17)","","","(97)","","","(76)","","","(83)","","","(159)"],["Total commercial","","","","","(1,953)","","","","","","","(5,753)"],["Total loans and leases","","","","","(4,776)","","","","","","","(9,093)"],["Other earning assets","904","","","(1,122)","","","(218)","","","905","","","(2,844)","","","(1,939)"],["Net decrease in interest income","","","","","$","(3,985)","","","","","","","$","(19,747)"],["Increase (decrease) in interest expense"],["U.S. interest-bearing deposits"],["Demand and money market deposit accounts","$","134","","","$","(797)","","","$","(663)","","","$","507","","","$","(4,001)","","","$","(3,494)"],["Time and savings deposits","(39)","","","(525)","","","(564)","","","46","","","(1,195)","","","(1,149)"],["Total U.S. interest-bearing deposits","","","","","(1,227)","","","","","","","(4,643)"],["Non-U.S. interest-bearing deposits","16","","","(195)","","","(179)","","","67","","","(669)","","","(602)"],["Total interest-bearing deposits","","","","","(1,406)","","","","","","","(5,245)"],["Federal funds purchased and securities loaned or sold under agreements to repurchase (2)","142","","","(910)","","","(768)","","","(219)","","","(2,956)","","","(3,175)"],["Short-term borrowings and other interest bearing liabilities (2)","(4)","","","(573)","","","(577)","","","974","","","(4,020)","","","(3,046)"],["Trading account liabilities","298","","","(144)","","","154","","","(111)","","","(164)","","","(275)"],["Long-term debt","338","","","(1,228)","","","(890)","","","619","","","(2,998)","","","(2,379)"],["Net decrease in interest expense","","","","","(3,487)","","","","","","","(14,120)"],["Net decrease in net interest income (3)","","","","","$","(498)","","","","","","","$","(5,627)"]]
[[/GREPCENT_TABLE]]

(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)Certain prior-period amounts have been reclassified to conform to current-period presentation.

(3)Includes changes in FTE basis adjustments of a $72 million decrease from 2020 to 2021 and a $96 million decrease from 2019 to 2020.

35 Bank of America

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.

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 information on our presentation of financial information on an FTE basis, see Supplemental Financial Data on page 31,

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.

Effective October 1, 2021, a business activity previously included in Global Markets is being reported as a liquidating business in All Other, consistent with a realignment in performance reporting to senior management. The activity was not material to Global Markets’ results of operations and historical results have not been restated. For more information, 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.

[[GREPCENT_TABLE]]
[["","","Bank of America 36"]]
[[/GREPCENT_TABLE]]

Consumer Banking

[[GREPCENT_TABLE]]
[["","","Deposits","","Consumer Lending","","Total Consumer Banking"],["(Dollars in millions)","2021","2020","","2021","2020","","2021","2020","","% Change"],["Net interest income","$","14,358","","$","13,739","","","$","10,571","","$","10,959","","","$","24,929","","$","24,698","","","1","%"],["Noninterest income:"],["Card income","(28)","","(20)","","","5,200","","4,693","","","5,172","","4,673","","","11"],["Service charges","3,535","","3,416","","","3","","1","","","3,538","","3,417","","","4"],["All other income","223","","310","","","143","","164","","","366","","474","","","(23)"],["Total noninterest income","3,730","","3,706","","","5,346","","4,858","","","9,076","","8,564","","","6"],["Total revenue, net of interest expense","18,088","","17,445","","","15,917","","15,817","","","34,005","","33,262","","","2"],["Provision for credit losses","240","","379","","","(1,275)","","5,386","","","(1,035)","","5,765","","","(118)"],["Noninterest expense","11,650","","11,508","","","7,640","","7,374","","","19,290","","18,882","","","2"],["Income before income taxes","6,198","","5,558","","","9,552","","3,057","","","15,750","","8,615","","","83"],["Income tax expense","1,519","","1,362","","","2,340","","749","","","3,859","","2,111","","","83"],["Net income","$","4,679","","$","4,196","","","$","7,212","","$","2,308","","","$","11,891","","$","6,504","","","83"],["Effective tax rate (1)","","","","","","","24.5","%","24.5","%"],["Net interest yield","1.48","%","1.69","%","","3.77","%","3.53","%","","2.45","","2.88"],["Return on average allocated capital","39","","35","","","27","","9","","","31","","17"],["Efficiency ratio","64.41","","65.97","","","48.00","","46.62","","","56.73","","56.77"],["Balance Sheet"],["Average"],["Total loans and leases","$","4,431","","$","5,144","","","$","279,630","","$","310,436","","","$","284,061","","$","315,580","","","(10)","%"],["Total earning assets (2)","973,018","","813,779","","","280,080","","310,862","","","1,016,751","","858,724","","","18"],["Total assets (2)","1,009,387","","849,924","","","285,532","","314,599","","","1,058,572","","898,606","","","18"],["Total deposits","976,093","","816,968","","","6,934","","6,698","","","983,027","","823,666","","","19"],["Allocated capital","12,000","","12,000","","","26,500","","26,500","","","38,500","","38,500","","","\u2014"],["Year end"],["Total loans and leases","$","4,206","","$","4,673","","","$","282,305","","$","295,261","","","$","286,511","","$","299,934","","","(4)","%"],["Total earning assets (2)","1,048,009","","899,951","","","282,850","","295,627","","","1,090,331","","945,343","","","15"],["Total assets (2)","1,082,449","","939,629","","","289,220","","299,185","","","1,131,142","","988,580","","","14"],["Total deposits","1,049,085","","906,092","","","5,910","","6,560","","","1,054,995","","912,652","","","16"]]
[[/GREPCENT_TABLE]]

(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.

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, 2021, our network includes approximately 4,200 financial centers, approximately 16,000 ATMs, nationwide call centers and leading digital banking platforms with more than 41 million active users, including approximately 33 million active mobile users.

Consumer Banking Results

Net income for Consumer Banking increased $5.4 billion to $11.9 billion primarily due to improvement in the provision for credit losses and higher revenue, partially offset by higher noninterest expense. Net interest income increased $231 million to $24.9 billion primarily due to the benefit of higher

deposit balances and the acceleration of net capitalized loan fees due to PPP loan forgiveness, partially offset by lower interest rates and loan balances. Noninterest income increased $512 million to $9.1 billion primarily driven by higher card income and service charges due to increased client activity, partially offset by the allocation of asset and liability management (ALM) results.

The provision for credit losses improved $6.8 billion to a benefit of $1.0 billion primarily driven by reserve releases due to improvements in the macroeconomic outlook and credit quality. Noninterest expense increased $408 million to $19.3 billion primarily driven by an impairment charge for real estate rationalization, the contribution to the Bank of America Foundation, cost of increased client activity and continued investments for business growth, including the merchant services platform, partially offset by lower COVID-19 related costs.

The return on average allocated capital was 31 percent, up from 17 percent, driven by higher net income. For more information on capital allocated to the business segments, see Business Segment Operations on page 36.

37 Bank of America

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 the deposit products using our funds transfer pricing process that matches assets and liabilities with similar interest rate sensitivity and maturity characteristics. Deposits generates fees such as account service fees, non-sufficient funds fees, overdraft charges and ATM fees, as well as investment and brokerage fees from 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 Corporation’s network of financial centers and ATMs.

Net income for Deposits increased $483 million to $4.7 billion due to higher revenue and lower provision for credit losses, partially offset by higher noninterest expense. Net interest income increased $619 million to $14.4 billion primarily due to the benefit of higher deposit balances. Noninterest income increased $24 million to $3.7 billion primarily driven by higher service charges and investment and brokerage fees, largely offset by the allocation of ALM results.

The provision for credit losses decreased $139 million to $240 million due to an improved macroeconomic outlook. Noninterest expense increased $142 million to $11.7 billion primarily driven by an impairment charge for real estate rationalization, and the cost of increased client activity and continued investments for business growth, partially offset by lower COVID-19 related costs.

Average deposits increased $159.1 billion to $976.1 billion primarily due to net inflows of $90.4 billion in checking and time deposits and $68.0 billion in traditional savings and money market savings driven by strong organic growth and government stimulus measures.

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.

[[GREPCENT_TABLE]]
[["Key Statistics \u2013 Deposits"],["","","","","","2021","","2020"],["Total deposit spreads (excludes noninterest costs) (1)","","","","","1.69%","","1.94%"],["Year End"],["Consumer investment assets (in millions) (2)","","","","","$","368,831","","$","306,104"],["Active digital banking users (in thousands) (3)","","","","","41,365","","39,315"],["Active mobile banking users (in thousands) (4)","","","","","32,980","","30,783"],["Financial centers","","","","","4,173","","4,312"],["ATMs","","","","","16,209","","16,904"]]
[[/GREPCENT_TABLE]]

(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 increased $62.7 billion to $368.8 billion driven by market performance and client flows. Active mobile banking users increased approximately two million, reflecting continuing changes in our customers’ banking preferences. We had a net decrease of 139 financial centers 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.

[[GREPCENT_TABLE]]
[["","","Bank of America 38"]]
[[/GREPCENT_TABLE]]

Net income for Consumer Lending was $7.2 billion, an increase of $4.9 billion, primarily due to improvement in the provision for credit losses. Net interest income declined $388 million to $10.6 billion primarily due to lower interest rates and loan balances. Noninterest income increased $488 million to $5.3 billion primarily driven by higher card income due to increased client activity.

The provision for credit losses improved $6.7 billion to a benefit of $1.3 billion primarily driven by reserve releases due to improvements in the macroeconomic outlook and credit quality. Noninterest expense increased $266 million to $7.6 billion primarily driven by continued investments for business growth, partially offset by lower COVID-19 related costs.

Average loans decreased $30.8 billion to $279.6 billion primarily driven by a decline in residential mortgage and credit card 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.

[[GREPCENT_TABLE]]
[["Key Statistics \u2013 Consumer Lending"],["(Dollars in millions)","","","","","2021","","2020"],["Total credit card (1)"],["Gross interest yield (2)","","","","","10.17","%","","10.27","%"],["Risk-adjusted margin (3)","","","","","10.17","","","9.16"],["New accounts (in thousands)","","","","","3,594","","","2,505"],["Purchase volumes","","","","","$","311,571","","","$","251,599"],["Debit card purchase volumes","","","","","$","473,770","","","$","384,503"]]
[[/GREPCENT_TABLE]]

(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 2021, the total risk-adjusted margin increased 101 bps primarily driven by lower net credit losses, higher fee income and higher net interest margin. Total credit card purchase volumes increased $60.0 billion to $311.6 billion as spending continued to recover, with improvements across all categories. Debit card purchase volumes increased $89.3 billion to $473.8 billion due to continued retail growth from the pandemic recovery, as well as the impact of government stimulus measures, and tax refunds.

[[GREPCENT_TABLE]]
[["Key Statistics \u2013 Loan Production (1)"],["(Dollars in millions)","","","","","2021","","2020"],["Consumer Banking:"],["First mortgage","","","","","$","45,976","","","$","43,197"],["Home equity","","","","","3,996","","","6,930"],["Total (2):"],["First mortgage","","","","","$","79,692","","","$","69,086"],["Home equity","","","","","4,895","","","8,160"]]
[[/GREPCENT_TABLE]]

(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 increased $2.8 billion and $10.6 billion during 2021 primarily driven by higher demand.

Home equity production in Consumer Banking and the total Corporation decreased $2.9 billion and $3.3 billion during 2021 primarily driven by lower demand due to increased borrower liquidity.

39 Bank of America

Global Wealth & Investment Management

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","","","","","","2021","","2020","","% Change"],["Net interest income","","","","","","","$","5,664","","","$","5,468","","","4","%"],["Noninterest income:"],["Investment and brokerage services","","","","","","","14,312","","","12,270","","","17"],["All other income","","","","","","","772","","","846","","","(9)"],["Total noninterest income","","","","","","","15,084","","","13,116","","","15"],["Total revenue, net of interest expense","","","","","","","20,748","","","18,584","","","12"],["Provision for credit losses","","","","","","","(241)","","","357","","","n/m"],["Noninterest expense","","","","","","","15,258","","","14,160","","","8"],["Income before income taxes","","","","","","","5,731","","","4,067","","","41"],["Income tax expense","","","","","","","1,404","","","996","","","41"],["Net income","","","","","","","$","4,327","","","$","3,071","","","41"],["Effective tax rate","","","","","","","24.5","%","","24.5","%"],["Net interest yield","","","","","","","1.51","","","1.73"],["Return on average allocated capital","","","","","","","26","","","21"],["Efficiency ratio","","","","","","","73.54","","","76.19"],["Balance Sheet"],["Average"],["Total loans and leases","","","","","","","$","196,899","","","$","183,402","","","7","%"],["Total earning assets","","","","","","","374,273","","","316,008","","","18"],["Total assets","","","","","","","386,918","","","328,384","","","18"],["Total deposits","","","","","","","340,124","","","287,123","","","18"],["Allocated capital","","","","","","","16,500","","","15,000","","","10"],["Year end"],["Total loans and leases","","","","","","","$","208,971","","","$","188,562","","","11","%"],["Total earning assets","","","","","","","425,112","","","356,873","","","19"],["Total assets","","","","","","","438,275","","","369,736","","","19"],["Total deposits","","","","","","","390,143","","","322,157","","","21"]]
[[/GREPCENT_TABLE]]

n/m = not meaningful

GWIM consists of two primary businesses: Merrill Wealth Management (MWM) and Bank of America Private Bank.

MWM'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. MWM 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 MWM'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 $1.3 billion to $4.3 billion driven by higher revenue and improvement in the provision for credit losses, partially offset by higher noninterest expense. The operating margin was 28 percent compared to 22 percent a year ago.

Net interest income increased $196 million to $5.7 billion due to the benefits of loan and deposit growth, partially offset by lower interest rates.

Noninterest income, which primarily includes investment and brokerage services income, increased $2.0 billion to $15.1

billion primarily due to higher market valuations and positive AUM flows, partially offset by declines in AUM pricing.

The provision for credit losses improved $598 million to a benefit of $241 million primarily due to improvements in the macroeconomic outlook and credit quality. Noninterest expense increased $1.1 billion to $15.3 billion primarily driven by higher revenue-related incentives.

The return on average allocated capital was 26 percent, up from 21 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 36.

Average loans increased $13.5 billion to $196.9 billion primarily driven by securities-based lending, custom lending and residential mortgage. Average deposits increased $53.0 billion to $340.1 billion primarily driven by inflows from new accounts and client responses to market volatility.

MWM revenue of $17.4 billion increased 14 percent primarily driven by the benefits of higher market valuations, positive AUM flows and loan and deposit growth.

Bank of America Private Bank revenue of $3.3 billion remained relatively flat with the benefits of higher market valuations, AUM flows, and loan and deposit growth mostly offset by the realignment of certain business results to MWM.

[[GREPCENT_TABLE]]
[["","","Bank of America 40"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Key Indicators and Metrics"],["(Dollars in millions)","","","","","2021","","2020"],["Revenue by Business"],["Merrill Wealth Management","","","","","$","17,448","","","$","15,292"],["Bank of America Private Bank","","","","","3,300","","","3,292"],["Total revenue, net of interest expense","","","","","$","20,748","","","$","18,584"],["Client Balances by Business, at period end"],["Merrill Wealth Management","","","","","$","3,214,881","","","$","2,808,340"],["Bank of America Private Bank","","","","","625,453","","","541,464"],["Total client balances","","","","","$","3,840,334","","","$","3,349,804"],["Client Balances by Type, at period end"],["Assets under management","","","","","$","1,638,782","","","$","1,408,465"],["Brokerage and other assets","","","","","1,655,021","","","1,479,614"],["Deposits","","","","","390,143","","","322,157"],["Loans and leases (1)","","","","","212,251","","","191,124"],["Less: Managed deposits in assets under management","","","","","(55,863)","","","(51,556)"],["Total client balances","","","","","$","3,840,334","","","$","3,349,804"],["Assets Under Management Rollforward"],["Assets under management, beginning of period","","","","","$","1,408,465","","","$","1,275,555"],["Net client flows","","","","","66,250","","","19,596"],["Market valuation/other","","","","","164,067","","","113,314"],["Total assets under management, end of period","","","","","$","1,638,782","","","$","1,408,465"],["Total wealth advisors, at period end (2)","","","","","18,846","","","20,103"]]
[[/GREPCENT_TABLE]]

(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. Prior period has been revised to conform to current-period presentation.

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 increased $490.5 billion, or 15 percent, to $3.8 trillion at December 31, 2021 compared to December 31, 2020. The increase in client balances was primarily due to higher market valuations and positive client flows.

41 Bank of America

Global Banking

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","","","","","","2021","","2020","","% Change"],["Net interest income","","","","","","","$","8,511","","","$","9,013","","","(6)","%"],["Noninterest income:"],["Service charges","","","","","","","3,523","","","3,238","","","9"],["Investment banking fees","","","","","","","5,107","","","4,010","","","27"],["All other income","","","","","","","3,734","","","2,726","","","37"],["Total noninterest income","","","","","","","12,364","","","9,974","","","24"],["Total revenue, net of interest expense","","","","","","","20,875","","","18,987","","","10"],["Provision for credit losses","","","","","","","(3,201)","","","4,897","","","n/m"],["Noninterest expense","","","","","","","10,632","","","9,342","","","14"],["Income before income taxes","","","","","","","13,444","","","4,748","","","n/m"],["Income tax expense","","","","","","","3,630","","","1,282","","","n/m"],["Net income","","","","","","","$","9,814","","","$","3,466","","","n/m"],["Effective tax rate","","","","","","","27.0","%","","27.0","%"],["Net interest yield","","","","","","","1.55","","","1.86"],["Return on average allocated capital","","","","","","","23","","","8"],["Efficiency ratio","","","","","","","50.93","","","49.20"],["Balance Sheet"],["Average"],["Total loans and leases","","","","","","","$","329,655","","","$","382,264","","","(14)","%"],["Total earning assets","","","","","","","549,749","","","485,688","","","13"],["Total assets","","","","","","","611,304","","","542,302","","","13"],["Total deposits","","","","","","","522,790","","","456,562","","","15"],["Allocated capital","","","","","","","42,500","","","42,500","","","\u2014"],["Year end"],["Total loans and leases","","","","","","","$","352,933","","","$","339,649","","","4","%"],["Total earning assets","","","","","","","574,583","","","522,650","","","10"],["Total assets","","","","","","","638,131","","","580,561","","","10"],["Total deposits","","","","","","","551,752","","","493,748","","","12"]]
[[/GREPCENT_TABLE]]

n/m = not meaningful

Global Banking, which includes Global Corporate Banking, Global Commercial Banking, Business Banking and Global Investment Banking, provides a wide range of lending-related products and services, integrated working capital management and treasury solutions, and underwriting and advisory services through our network of offices and client relationship teams. 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 products to our clients such as debt and equity underwriting and distribution, and merger-related and other advisory services. Underwriting debt and equity issuances, fixed-income and equity research, and certain market-based activities are executed through our global broker-dealer affiliates, which are our primary dealers in several countries. Within Global Banking, Global 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 increased $6.3 billion to $9.8 billion driven by improvement in the provision for credit losses and higher revenue, partially offset by higher noninterest expense.

Net interest income decreased $502 million to $8.5 billion

primarily due to the impact of lower average loan balances and deposit spreads, partially offset by the benefits of higher deposit balances and credit spreads.

Noninterest income increased $2.4 billion to $12.4 billion driven by higher investment banking fees, higher valuation-driven adjustments on the fair value loan portfolio, debt securities and leveraged loans, higher income from ESG investment activities, as well as higher treasury and credit service charges.

The provision for credit losses improved $8.1 billion to a benefit of $3.2 billion primarily driven by reserve releases due to improvements in the macroeconomic outlook and credit quality.

Noninterest expense increased $1.3 billion to $10.6 billion, primarily due to higher revenue-related incentives and higher operating costs.

The return on average allocated capital was 23 percent, up from eight percent, due to higher net income. For more information on capital allocated to the business segments, see Business Segment Operations on page 36.

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.

[[GREPCENT_TABLE]]
[["","","Bank of America 42"]]
[[/GREPCENT_TABLE]]

The table below and following discussion present a summary of the results, which exclude certain investment banking, merchant services and PPP activities in Global Banking.

[[GREPCENT_TABLE]]
[["Global Corporate, Global Commercial and Business Banking"],["","","Global Corporate Banking","","Global Commercial Banking","","Business Banking","","Total"],["(Dollars in millions)","2021","","2020","","2021","","2020","","2021","","2020","","2021","","2020"],["Revenue"],["Business Lending","$","3,725","","","$","3,552","","","$","3,676","","","$","3,743","","","$","225","","","$","261","","","$","7,626","","","$","7,556"],["Global Transaction Services","3,127","","","2,986","","","3,209","","","3,169","","","889","","","893","","","7,225","","","7,048"],["Total revenue, net of interest expense","$","6,852","","","$","6,538","","","$","6,885","","","$","6,912","","","$","1,114","","","$","1,154","","","$","14,851","","","$","14,604"],["Balance Sheet"],["Average"],["Total loans and leases","$","150,159","","","$","179,393","","","$","161,012","","","$","182,212","","","$","12,763","","","$","14,410","","","$","323,934","","","$","376,015"],["Total deposits","251,303","","","216,371","","","213,708","","","191,813","","","56,321","","","48,214","","","521,332","","","456,398"],["Year end"],["Total loans and leases","$","163,027","","","$","153,126","","","$","175,228","","","$","164,641","","","$","12,822","","","$","13,242","","","$","351,077","","","$","331,009"],["Total deposits","259,160","","","233,484","","","232,670","","","207,597","","","57,848","","","52,150","","","549,678","","","493,231"]]
[[/GREPCENT_TABLE]]

Business Lending revenue increased $70 million in 2021 compared to 2020 primarily due to higher credit spreads and income from ESG investment activities, partially offset by the impact of lower average loan balances.

Global Transaction Services revenue increased $177 million in 2021 compared to 2020 driven by the benefit of higher deposit balances and treasury service charges, partially offset by lower deposit spreads.

Average loans and leases decreased 14 percent in 2021 compared to 2020 driven by client paydowns and lower demand. Average deposits increased 14 percent primarily driven by elevated balances from prior-year inflows on client responses to market volatility and government stimulus measures.

Global Investment Banking

Client teams and product specialists underwrite and distribute debt, equity and loan products, and provide advisory services and tailored risk management solutions. The economics of certain investment banking and underwriting activities are shared primarily between Global Banking and Global Markets under an internal revenue-sharing arrangement. Global Banking originates certain deal-related transactions with our corporate and commercial clients that are executed and distributed by

Global Markets. To provide a complete discussion of our consolidated investment banking fees, the following table presents total Corporation investment banking fees and the portion attributable to Global Banking.

[[GREPCENT_TABLE]]
[["Investment Banking Fees"],["","","","","","Global Banking","","Total Corporation"],["(Dollars in millions)","","","","","","","","","2021","","2020","","2021","","2020"],["Products"],["Advisory","","","","","","","","","$","2,139","","","$","1,458","","","$","2,311","","","$","1,621"],["Debt issuance","","","","","","","","","1,736","","","1,555","","","4,015","","","3,443"],["Equity issuance","","","","","","","","","1,232","","","997","","","2,784","","","2,328"],["Gross investment banking fees","","","","","","","","","5,107","","","4,010","","","9,110","","","7,392"],["Self-led deals","","","","","","","","","(93)","","","(93)","","","(223)","","","(212)"],["Total investment banking fees","","","","","","","","","$","5,014","","","$","3,917","","","$","8,887","","","$","7,180"]]
[[/GREPCENT_TABLE]]

Total Corporation investment banking fees, excluding self-led deals, of $8.9 billion, which are primarily included within Global Banking and Global Markets, increased 24 percent primarily driven by higher advisory fees as well as higher debt issuance and equity issuance fees.

43 Bank of America

Global Markets

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","","","","","","2021","","2020","","% Change"],["Net interest income","","","","","","","$","4,011","","","$","4,646","","","(14)","%"],["Noninterest income:"],["Investment and brokerage services","","","","","","","1,979","","","1,973","","","\u2014"],["Investment banking fees","","","","","","","3,616","","","2,991","","","21"],["Market making and similar activities","","","","","","","8,760","","","8,471","","","3"],["All other income","","","","","","","889","","","684","","","30"],["Total noninterest income","","","","","","","15,244","","","14,119","","","8"],["Total revenue, net of interest expense","","","","","","","19,255","","","18,765","","","3"],["Provision for credit losses","","","","","","","65","","","251","","","(74)"],["Noninterest expense","","","","","","","13,032","","","11,417","","","14"],["Income before income taxes","","","","","","","6,158","","","7,097","","","(13)"],["Income tax expense","","","","","","","1,601","","","1,845","","","(13)"],["Net income","","","","","","","$","4,557","","","$","5,252","","","(13)"],["Effective tax rate","","","","","","","26.0","%","","26.0","%"],["Return on average allocated capital","","","","","","","12","","","15"],["Efficiency ratio","","","","","","","67.68","","","60.84"],["Balance Sheet"],["Average"],["Trading-related assets:"],["Trading account securities","","","","","","","$","291,505","","","$","243,519","","","20","%"],["Reverse repurchases","","","","","","","113,989","","","104,697","","","9"],["Securities borrowed","","","","","","","100,292","","","87,125","","","15"],["Derivative assets","","","","","","","43,582","","","47,655","","","(9)"],["Total trading-related assets","","","","","","","549,368","","","482,996","","","14"],["Total loans and leases","","","","","","","91,339","","","73,062","","","25"],["Total earning assets","","","","","","","541,391","","","482,171","","","12"],["Total assets","","","","","","","785,998","","","685,047","","","15"],["Total deposits","","","","","","","51,833","","","47,400","","","9"],["Allocated capital","","","","","","","38,000","","","36,000","","","6"],["Year end"],["Total trading-related assets","","","","","","","$","491,160","","","$","421,698","","","16","%"],["Total loans and leases","","","","","","","114,846","","","78,415","","","46"],["Total earning assets","","","","","","","561,135","","","447,350","","","25"],["Total assets","","","","","","","747,794","","","616,609","","","21"],["Total deposits","","","","","","","46,374","","","53,925","","","(14)"]]
[[/GREPCENT_TABLE]]

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 31.

Net income for Global Markets decreased $695 million to $4.6 billion. Net DVA losses were $54 million compared to losses of $133 million in 2020. Excluding net DVA, net income decreased $755 million to $4.6 billion. These decreases were primarily driven by higher noninterest expense, partially offset by higher revenue and lower provision for credit losses.

Revenue increased $490 million to $19.3 billion primarily driven by higher investment banking fees and sales and trading revenue. Sales and trading revenue increased $172 million, and excluding net DVA, increased $93 million. These increases were driven by higher revenue in Equities, partially offset by lower revenue in FICC.

The provision for credit losses decreased $186 million primarily due to an improved macroeconomic outlook.

Noninterest expense increased $1.6 billion to $13.0 billion primarily driven by higher revenue-related expenses for sales and trading as well as costs associated with processing

[[GREPCENT_TABLE]]
[["","","Bank of America 44"]]
[[/GREPCENT_TABLE]]

transactional card claims related to state unemployment benefits.

Average total assets increased $101.0 billion to $786.0 billion. Year-end total assets increased $131.2 billion to $747.8 billion. Both increases were primarily due to higher client balances in Equities and higher levels of inventory and loan growth in FICC.

The return on average allocated capital was 12 percent, down from 15 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 36.

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 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 31.

[[GREPCENT_TABLE]]
[["Sales and Trading Revenue (1, 2, 3)"],["(Dollars in millions)","","","","","2021","","2020"],["Sales and trading revenue"],["Fixed income, currencies and commodities","","","","","$","8,761","","","$","9,595"],["Equities","","","","","6,428","","","5,422"],["Total sales and trading revenue","","","","","$","15,189","","","$","15,017"],["Sales and trading revenue, excluding net DVA (4)"],["Fixed income, currencies and commodities","","","","","$","8,810","","","$","9,725"],["Equities","","","","","6,433","","","5,425"],["Total sales and trading revenue, excluding net DVA","","","","","$","15,243","","","$","15,150"]]
[[/GREPCENT_TABLE]]

(1)For more information on sales and trading revenue, see Note 3 – Derivatives to the Consolidated Financial Statements.

(2)Includes FTE adjustments of $421 million and $196 million for 2021 and 2020.

(3)    Includes Global Banking sales and trading revenue of $510 million and $479 million for 2021 and 2020.

(4)    FICC and Equities sales and trading revenue, excluding net DVA, is a non-GAAP financial measure. FICC net DVA losses were $49 million and $130 million for 2021 and 2020. Equities net DVA losses were $5 million and $3 million for 2021 and 2020.

FICC revenue decreased $915 million driven by reduced activity in macro products, partially offset by stronger performance in credit and municipal products, and gains in commodities (partially offset by related losses in another segment) from market volatility driven by a weather-related event in the first quarter of 2021. Equities revenue increased $1.0 billion driven by growth in client financing activities, a stronger trading performance and increased client activity.

All Other

[[GREPCENT_TABLE]]
[["(Dollars in millions)","","","","","","","2021","","2020","","% Change"],["Net interest income","","","","","","","$","246","","","$","34","","","n/m"],["Noninterest income (loss)","","","","","","","(5,589)","","","(3,605)","","","55","%"],["Total revenue, net of interest expense","","","","","","","(5,343)","","","(3,571)","","","50"],["Provision for credit losses","","","","","","","(182)","","","50","","","n/m"],["Noninterest expense","","","","","","","1,519","","","1,412","","","8"],["Loss before income taxes","","","","","","","(6,680)","","","(5,033)","","","33"],["Income tax benefit","","","","","","","(8,069)","","","(4,634)","","","74"],["Net income (loss)","","","","","","","$","1,389","","","$","(399)","","","n/m"],["Balance Sheet"],["","","","","","","Year Ended December 31"],["Average","","","","","","","2021","","2020","","% Change"],["Total loans and leases","","","","","","","$","18,447","","","$","28,159","","","(34)","%"],["Total assets (1)","","","","","","","191,831","","","228,783","","","(16)"],["Total deposits","","","","","","","16,512","","","18,247","","","(10)"],["Year end","","","","","","","","December 31 2021","","December 31 2020","","% Change"],["Total loans and leases","","","","","","","$","15,863","","","$","21,301","","","(26)","%"],["Total assets (1)","","","","","","","214,153","","","264,141","","","(19)"],["Total deposits","","","","","","","21,182","","","12,998","","","63"]]
[[/GREPCENT_TABLE]]

(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 and $763.1 billion for 2021 and 2020, and year-end allocated assets were $1.2 trillion and $977.7 billion at December 31, 2021 and 2020.

n/m = not meaningful

All Other primarily consists of 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 increased $1.8 billion to $1.4 billion primarily due to a higher income tax benefit and improvement in the provision for credit losses, partially offset by lower revenue.

Revenue decreased $1.8 billion primarily due to higher partnership losses for ESG investments and a $704 million gain on sales of certain mortgage loans in the prior year.

45 Bank of America

The provision for credit losses improved $232 million to a benefit of $182 million primarily due to an improved macroeconomic outlook.

Noninterest expense increased $107 million primarily due to higher technology costs and the realignment of a liquidating business activity from Global Markets to All Other in the fourth quarter of 2021, partially offset by lower litigation expense. For more information on realignment of the business activity, see Note 23 – Business Segment Information to the Consolidated Financial Statements.

The income tax benefit was $8.1 billion in 2021 compared to a benefit of $4.6 billion in 2020. The increase in the tax benefit was primarily driven by the impact of U.K. tax law changes and increased income tax credits in 2021. For more information on U.K. tax law changes, see Financial Highlights – Income Tax Expense on page 29. Both years included income tax benefit adjustments to eliminate the FTE treatment of certain tax credits recorded in Global Banking.

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 36.

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 set of measures for senior management and the Board to clearly indicate the level of risk we are willing to take in alignment with our strategic and capital plans and ensure that the Corporation’s risk profile remains aligned with our risk appetite. Our risk appetite is formally articulated in the Risk Appetite Statement, which includes both qualitative components 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, including during periods of stress.

Our lines of business operate with risk limits (which may include credit, market and/or operational limits, as applicable) that align with the Corporation’s risk appetite. Executive management is responsible for tracking and reporting performance measurements as well as any exceptions to guidelines or limits. The Board, and its committees when appropriate, 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.

For more information about the Corporation's risks related to the pandemic, see Item 1A. Risk Factors on page 8. These

[[GREPCENT_TABLE]]
[["","","Bank of America 46"]]
[[/GREPCENT_TABLE]]

COVID-19 related risks are being managed within our Risk Framework and supporting risk management programs.

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.

Board of Directors and Board Committees

The Board is composed of 16 directors, all but one of whom are independent. The Board authorizes management to maintain an effective Risk Framework and oversees compliance with safe and sound banking practices. In addition, the Board or its committees conduct inquiries of, and receive reports from management on, risk-related matters to assess scope or resource limitations that could impede the ability of 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 executive management addressing key risks we face. Other Board committees, as described below, provide additional oversight of specific risks.

Each of the committees shown on the above chart regularly reports to the Board on risk-related matters within the committee’s responsibilities, which is intended to collectively provide the Board with integrated insight about our management of enterprise-wide risks.

Audit Committee

The Audit Committee oversees the qualifications, performance and independence of the Independent Registered Public Accounting Firm, the performance of our corporate audit function, the integrity of our consolidated financial statements, our compliance with legal and regulatory requirements, and makes inquiries of management or the 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 has primary responsibility for oversight of the Risk Framework and key risks we face and of the Corporation’s

overall risk appetite. It approves the Risk Framework and the Risk Appetite Statement and further recommends these documents to the Board for approval. The ERC oversees senior management’s responsibilities for the identification, measurement, monitoring and control of key risks we face. 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, recommends nominees for election to our Board, recommends committee appointments for Board approval and reviews our ESG and stockholder engagement activities.

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.

Management Committees

Management committees receive their authority from the Board, a Board committee, another management committee or from one or more executive officers. 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

47 Bank of America

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.

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 (CFO) Group; second, the Chief Administrative Officer (CAO) Group; and third, Global Strategy and Enterprise Platforms (GSEP).

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 quantitative and qualitative components. 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 the Board or management 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 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.

[[GREPCENT_TABLE]]
[["","","Bank of America 48"]]
[[/GREPCENT_TABLE]]

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 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, or other de-risking strategies. We also maintain a Resolution Plan to limit adverse systemic impacts that could be associated with a potential resolution of Bank of America.

Strategic Risk Management

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

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

Significant strategic actions, such as capital actions, material acquisitions or divestitures, and resolution plans are reviewed and approved by the Board. At the business level, processes are in place to discuss the strategic risk implications of new, expanded or modified businesses, products or services

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

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 36.

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 2021 CCAR capital plan and related supervisory stress tests, we are subject to a 2.5 percent stress capital buffer (SCB), unchanged from the prior level, effective October 1, 2021 through September 30, 2022. Our Common equity tier 1 (CET1) capital ratio under the Standardized approach must remain above 9.5 percent during this period in order to avoid restrictions on capital distributions and discretionary bonus payments.

Due to uncertainty resulting from the pandemic, the Federal Reserve imposed various restrictions on share repurchase programs and dividends during 2020 and the first half of 2021.

49 Bank of America

In conjunction with its release of 2021 CCAR supervisory stress test results, the Federal Reserve announced those restrictions would end as of July 1, 2021 for large banks, including the Corporation, and large banks would be subject to the normal restrictions under the Federal Reserve's SCB framework. On October 20, 2021, we announced that the Board renewed the Corporation’s $25 billion common stock repurchase program previously announced in April 2021. The Board’s authorization replaced the previous program. As with the April authorization, the Board also authorized common stock repurchases to offset shares awarded under the Corporation’s equity-based compensation plans. Pursuant to the Board’s authorization, during 2021 we repurchased $25.1 billion of common stock, including repurchases to offset shares awarded under equity-based compensation plans.

The timing and amount of common stock repurchases made pursuant to our stock repurchase program 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).

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 approach that yields the lower ratio is used to assess capital adequacy, including under the PCA framework. As of December 31, 2021, the CET1, Tier 1 capital and Total capital ratios for the Corporation were lower under the Standardized approach.

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. Including a regulatory minimum requirement of 4.5 percent, an SCB of 2.5 percent and a G-SIB surcharge of 2.5 percent, the Corporation's CET1 capital ratio must be a minimum of 9.5 percent under both the Standardized and Advanced approaches.

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 on January 1, 2024 unless its surcharge calculated as of December 31, 2022 is lower than 3.0 percent.

The current SCB of 2.5 percent, which remains effective from October 1, 2021 through September 30, 2022, could change based on results of the 2022 CCAR capital plan and related supervisory stress tests to be submitted in the first half of 2022.

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. The temporary exclusions expired after March 31, 2021 and were not applicable for December 31, 2021. For more information, see Capital Management – Regulatory Developments on page 54.

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, 2021 and 2020. For the periods presented herein, the Corporation met the definition of well capitalized under current regulatory requirements.

[[GREPCENT_TABLE]]
[["","","Bank of America 50"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Table 10","Bank of America Corporation Regulatory Capital under Basel 3"],["","","","","","","","Standardized Approach (1)","","Advanced Approaches (1)","","Regulatory Minimum (2)"],["(Dollars in millions, except as noted)","","","","","","","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) (5)","","","","","","","","","$","3,604"],["Supplementary leverage ratio","","","","","","","","","5.5","%","","5.0"],["","","","","","","","","December 31, 2020"],["Risk-based capital metrics:"],["Common equity tier 1 capital","","","","","","","$","176,660","","","$","176,660"],["Tier 1 capital","","","","","","","200,096","","","200,096"],["Total capital (3)","","","","","","","237,936","","","227,685"],["Risk-weighted assets (in billions)","","","","","","","1,480","","","1,371"],["Common equity tier 1 capital ratio","","","","","","","11.9","%","","12.9","%","","9.5","%"],["Tier 1 capital ratio","","","","","","","13.5","","","14.6","","","11.0"],["Total capital ratio","","","","","","","16.1","","","16.6","","","13.0"],["Leverage-based metrics:"],["Adjusted quarterly average assets (in billions) (4)","","","","","","","$","2,719","","","$","2,719"],["Tier 1 leverage ratio","","","","","","","7.4","%","","7.4","%","","4.0"],["Supplementary leverage exposure (in billions) (5)","","","","","","","","","$","2,786"],["Supplementary leverage ratio","","","","","","","","","7.2","%","","5.0"]]
[[/GREPCENT_TABLE]]

(1)Capital ratios as of December 31, 2021 and 2020 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.

(2)The capital conservation buffer and G-SIB surcharge were 2.5 percent at both December 31, 2021 and 2020. At both December 31, 2021 and 2020, the Corporation's SCB of 2.5 percent was applied in place of the capital conservation buffer under the Standardized approach. 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 SCB or the capital conservation buffer, as applicable, of 2.5 percent. 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.

(5)Supplementary leverage exposure at December 31, 2020 reflects the temporary exclusion of U.S. Treasury securities and deposits at Federal Reserve Banks. The temporary relief expired after March 31, 2021 and is not reflected in supplementary leverage exposure at December 31, 2021.

At December 31, 2021, CET1 capital was $171.8 billion, a decrease of $4.9 billion from December 31, 2020, driven by common stock repurchases, dividends and decreases in net unrealized gains on available-for-sale (AFS) debt securities included in accumulated other comprehensive income (OCI), partially offset by earnings. Tier 1 capital decreased $3.6 billion primarily driven by the same factors as CET1 capital, partially offset by non-cumulative perpetual preferred stock issuances. Total capital under the Standardized approach decreased $10.3 billion primarily due to the same factors driving the decrease in CET1 capital, and a decrease in the adjusted allowance for credit losses included in Tier 2 capital. RWA under the

Standardized approach, which yielded the lower CET1 capital

ratio at December 31, 2021, increased $138.1 billion during 2021 to $1,618 billion primarily due to loan growth in Global Banking, strong client activity in Global Markets and an increase in debt securities resulting from the deployment of cash received from deposit inflows. Supplementary leverage exposure at December 31, 2021 increased $818.1 billion during 2021 primarily due to the expiration of the Federal Reserve’s temporary relief to exclude U.S. Treasury securities and deposits at Federal Reserve Banks and an increase in debt securities resulting from the deployment of cash received from deposit inflows.

51 Bank of America

Table 11 shows the capital composition at December 31, 2021 and 2020.

[[GREPCENT_TABLE]]
[["Table 11","Capital Composition under Basel 3"],["","","December 31"],["(Dollars in millions)","2021","","2020"],["Total common shareholders\u2019 equity","$","245,358","","","$","248,414"],["CECL transitional amount (1)","2,508","","","4,213"],["Goodwill, net of related deferred tax liabilities","(68,641)","","","(68,565)"],["Deferred tax assets arising from net operating loss and tax credit carryforwards","(7,743)","","","(5,773)"],["Intangibles, other than mortgage servicing rights, net of related deferred tax liabilities","(1,605)","","","(1,617)"],["Defined benefit pension plan net assets","(1,261)","","","(1,164)"],["Cumulative unrealized net (gain) loss related to changes in fair value of financial liabilities attributable to own creditworthiness, net-of-tax","1,400","","","1,753"],["Accumulated net (gain) loss on certain cash flow hedges (2)","1,870","","","(436)"],["Other","(127)","","","(165)"],["Common equity tier 1 capital","171,759","","","176,660"],["Qualifying preferred stock, net of issuance cost","24,707","","","23,437"],["Other","(1)","","","(1)"],["Tier 1 capital","196,465","","","200,096"],["Tier 2 capital instruments","20,750","","","22,213"],["Qualifying allowance for credit losses (3)","10,534","","","15,649"],["Other","(157)","","","(22)"],["Total capital under the Standardized approach","227,592","","","237,936"],["Adjustment in qualifying allowance for credit losses under the Advanced approaches (3)","(6,976)","","","(10,251)"],["Total capital under the Advanced approaches","$","220,616","","","$","227,685"]]
[[/GREPCENT_TABLE]]

(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, 2021 and 2020.

[[GREPCENT_TABLE]]
[["Table 12","Risk-weighted Assets under Basel 3"],["","Standardized Approach","","Advanced Approaches","","Standardized Approach","","Advanced Approaches"],["","December 31"],["(Dollars in billions)","2021","","2020"],["Credit risk","$","1,549","","","$","913","","","$","1,420","","","$","896"],["Market risk","69","","","69","","","60","","","60"],["Operational risk","n/a","","378","","","n/a","","372"],["Risks related to credit valuation adjustments","n/a","","39","","","n/a","","43"],["Total risk-weighted assets","$","1,618","","","$","1,399","","","$","1,480","","","$","1,371"]]
[[/GREPCENT_TABLE]]

n/a = not applicable

[[GREPCENT_TABLE]]
[["","","Bank of America 52"]]
[[/GREPCENT_TABLE]]

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, 2021 and 2020. BANA met the definition of well capitalized under the PCA framework for both periods.

[[GREPCENT_TABLE]]
[["Table 13","Bank of America, N.A. Regulatory Capital under Basel 3"],["","","Standardized Approach (1)","","","","Advanced Approaches (1)","","Regulatory Minimum (2)"],["(Dollars in millions, except as noted)","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)","","","","","$","2,824"],["Supplementary leverage ratio","","","","","6.5","%","","6.0"],["","","December 31, 2020"],["Risk-based capital metrics:"],["Common equity tier 1 capital","$","164,593","","","","","$","164,593"],["Tier 1 capital","164,593","","","","","164,593"],["Total capital (3)","181,370","","","","","170,922"],["Risk-weighted assets (in billions)","1,221","","","","","1,014"],["Common equity tier 1 capital ratio","13.5","%","","","","16.2","%","","7.0","%"],["Tier 1 capital ratio","13.5","","","","","16.2","","","8.5"],["Total capital ratio","14.9","","","","","16.9","","","10.5"],["Leverage-based metrics:"],["Adjusted quarterly average assets (in billions) (4)","$","2,143","","","","","$","2,143"],["Tier 1 leverage ratio","7.7","%","","","","7.7","%","","5.0"],["Supplementary leverage exposure (in billions)","","","","","$","2,525"],["Supplementary leverage ratio","","","","","6.5","%","","6.0"]]
[[/GREPCENT_TABLE]]

(1)Capital ratios for both December 31, 2021 and 2020 are calculated using the regulatory capital rule that allows a five-year transition period related to the adoption of CECL.

(2)Risk-based capital regulatory minimums at both December 31, 2021 and 2020 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, 2021 and 2020.

53 Bank of America

[[GREPCENT_TABLE]]
[["Table 14","Bank of America Corporation Total Loss-Absorbing Capacity and Long-Term Debt"],["","TLAC (1)","","Regulatory Minimum (2)","","","","Long-term Debt","","Regulatory Minimum (3)"],["(Dollars in millions)","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 (5)","12.1","","","9.5","","","","","6.3","","","4.5"],["","December 31, 2020"],["Total eligible balance","$","405,153","","","","","","","$","196,997"],["Percentage of risk-weighted assets (4)","27.4","%","","22.0","%","","","","13.3","%","","8.5","%"],["Percentage of supplementary leverage exposure (5)","14.5","","","9.5","","","","","7.1","","","4.5"]]
[[/GREPCENT_TABLE]]

(1)As of December 31, 2021 and 2020, 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, 2021 and 2020.

(5)Supplementary leverage exposure at December 31, 2020 reflects the temporary exclusion of U.S. Treasury Securities and deposits at Federal Reserve Banks. The temporary relief expired after March 31, 2021 and is not reflected in supplementary leverage exposure at December 31, 2021.

Regulatory Developments

Supplementary Leverage Ratio

On March 19, 2021, U.S. banking regulators announced that temporary changes issued in 2020 for BHCs and depository institutions would expire as scheduled after March 31, 2021. These temporary changes to the SLR allowed the exclusion of on-balance sheet amounts of U.S. Treasury securities and deposits at Federal Reserve Banks from the calculation of supplementary leverage exposure. While the temporary relief automatically applied to the Corporation, the Corporation’s lead depository institution, Bank of America, N.A., did not opt to take advantage of the SLR relief offered by the OCC. At December 31, 2021, the Corporation’s SLR was 5.5 percent, which exceeds the 5.0 percent minimum required by the Federal Reserve.

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, 2021, BofAS had tentative net capital of $19.4 billion. BofAS also had regulatory net capital of $16.6 billion, which exceeded the minimum requirement of $3.5 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, 2021, MLPCC’s regulatory net capital of $6.2 billion exceeded the minimum requirement of $1.5 billion.

MLPF&S provides retail services. At December 31, 2021, MLPF&S' regulatory net capital was $5.7 billion, which exceeded the minimum requirement of $199 million.

Our European broker-dealers are regulated by non-U.S. regulators. MLI, a U.K. investment firm, is regulated by the Prudential Regulation Authority and the Financial Conduct Authority and is subject to certain regulatory capital requirements. At December 31, 2021, MLI’s capital resources were $33.6 billion, which exceeded the minimum Pillar 1 requirement of $14.0 billion. BofASE, a French investment firm, is regulated by the Autorité de Contrôle Prudentiel et de Résolution and the Autorité des Marchés Financiers, and is subject to certain regulatory capital requirements. At December 31, 2021, BofASE's capital resources were $7.9 billion, which exceeded the minimum Pillar 1 requirement of $2.8 billion.

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 pandemic. For more information on the risks of the pandemic, see Part I. Item 1A. Risk Factors – Coronavirus Disease on page 8 and Executive Summary – Recent Developments – COVID-19

[[GREPCENT_TABLE]]
[["","","Bank of America 54"]]
[[/GREPCENT_TABLE]]

Pandemic on page 27.

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 (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 the parent company and selected subsidiaries, including our bank subsidiaries and other regulated entities; determining what amounts of liquidity are appropriate for these entities based on analysis of debt maturities and other potential cash outflows, including those that we may experience during stressed market conditions; diversifying funding sources, considering our asset profile and legal entity structure; and performing contingency planning.

NB Holdings Corporation

The parent company, 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 company assets not required to satisfy anticipated near-term expenditures to NB Holdings. The parent company is expected to continue to have access to the same flow of dividends, interest and other amounts of cash necessary to service its debt, pay dividends and perform other obligations as it would have had 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 company 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 company in a principal amount equal to the value of the transferred assets. The aggregate principal amount of the note will increase by the amount of any future asset transfers. NB Holdings also provided the parent company with a committed line of credit that allows the parent company to draw funds necessary to service near-term cash needs. These arrangements support our preferred single point of entry resolution strategy, under which only the parent company would be resolved under the U.S. Bankruptcy Code. These arrangements include provisions to terminate the line of credit, forgive the subordinated note and require the parent company to transfer its remaining financial assets to NB Holdings if our projected liquidity resources deteriorate so severely that resolution of the parent company becomes imminent.

Global Liquidity Sources and Other Unencumbered Assets

We maintain liquidity available to the Corporation, including the parent company and selected subsidiaries, in the form of cash and high-quality, liquid, unencumbered securities. Our liquidity buffer, referred to as Global Liquidity Sources (GLS), is comprised of assets that are readily available to the parent company and selected subsidiaries, including holding company, bank and broker-dealer subsidiaries, even during stressed market conditions. Our cash is primarily on deposit with the Federal Reserve 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, 2021 and 2020.

[[GREPCENT_TABLE]]
[["Table 15","Average Global Liquidity Sources"],["","","Three Months Ended December 31"],["(Dollars in billions)","2021","","2020"],["Bank entities","$","1,006","","","$","773"],["Nonbank and other entities (1)","152","","","170"],["Total Average Global Liquidity Sources","$","1,158","","","$","943"]]
[[/GREPCENT_TABLE]]

(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 $322 billion and $306 billion at December 31, 2021 and 2020. We have established operational procedures to enable us to borrow against these assets, including regularly monitoring our total pool of eligible loans and securities collateral. Eligibility is defined in guidelines from the FHLBs and the Federal Reserve and is subject to change at their discretion. Due to regulatory restrictions, liquidity generated by the bank subsidiaries can generally be used only to fund obligations within the bank subsidiaries, and transfers to the parent company or nonbank subsidiaries may be subject to prior regulatory approval.

Liquidity is also held in nonbank entities, including the Parent, NB Holdings and other regulated entities. Parent company 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 company or to any other subsidiary may be subject to prior regulatory approval due to regulatory restrictions and minimum requirements. Our other regulated entities also hold unencumbered investment-grade securities and equities that we believe could be used to generate additional liquidity.

55 Bank of America

Table 16 presents the composition of average GLS for the three months ended December 31, 2021 and 2020.

[[GREPCENT_TABLE]]
[["Table 16","Average Global Liquidity Sources Composition"],["","","Three Months Ended December 31"],["(Dollars in billions)","2021","","2020"],["Cash on deposit","$","259","","","$","322"],["U.S. Treasury securities","278","","","141"],["U.S. agency securities, mortgage-backed securities, and other investment-grade securities","606","","","462"],["Non-U.S. government securities","15","","","18"],["Total Average Global Liquidity Sources","$","1,158","","","$","943"]]
[[/GREPCENT_TABLE]]

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 $617 billion and $584 billion for the three months ended December 31, 2021 and 2020. For the same periods, the average consolidated LCR was 115 percent and 122 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 company 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 company and our subsidiaries, and more severe events including potential resolution scenarios. The scenarios are based on our historical experience, experience of distressed and failed financial institutions, regulatory guidance, and both expected and unexpected future events.

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 Final Rule

On October 20, 2020, U.S. banking regulators finalized the Net Stable Funding Ratio (NSFR), a rule requiring large banks to maintain a minimum level of stable funding over a one-year period. The final rule 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 rule, which focuses on short-term liquidity risks. The final rule was effective July 1, 2021, and the Corporation is in compliance. The U.S. NSFR applies to the Corporation on a consolidated basis and to our insured depository institutions. There have not been any significant impacts to the Corporation.

Diversified Funding Sources

We fund our assets primarily with a mix of deposits, and secured and unsecured liabilities through a centralized, globally coordinated funding approach diversified across products, programs, markets, currencies and investor groups.

The primary benefits of our centralized funding approach include greater control, reduced funding costs, wider name recognition by investors and greater flexibility to meet the variable funding requirements of subsidiaries. Where regulations, time zone differences or other business considerations make parent company funding impractical, certain other subsidiaries may issue their own debt.

We fund a substantial portion of our lending activities through our deposits, which were $2.1 trillion and $1.8 trillion at December 31, 2021 and 2020. 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 and Restricted Cash to the Consolidated Financial Statements.

Total long-term debt increased $17.2 billion to $280.1 billion during 2021, primarily due to debt issuances, partially offset by debt maturities, redemptions and valuation adjustments. We may, from time to time, purchase outstanding debt instruments in various transactions, depending on market conditions, liquidity and other factors. Our other regulated

[[GREPCENT_TABLE]]
[["","","Bank of America 56"]]
[[/GREPCENT_TABLE]]

entities may also make markets in our debt instruments to provide liquidity for investors.

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, $8.0 billion of notes issued by Bank of America, N.A. and $12.5 billion of other debt. During 2020, we issued $56.9 billion of long-term debt consisting of $43.8 billion of notes issued by Bank of America Corporation, substantially all of which were TLAC compliant, $4.8 billion of notes issued by Bank of America, N.A. and $8.3 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. During 2020, we had total long-term debt maturities and redemptions in the aggregate of $47.1 billion consisting of $22.6 billion for Bank of America Corporation, $11.5 billion for Bank of America, N.A. and $13.0 billion of other debt.

At December 31, 2021, Bank of America Corporation's senior notes of $212.9 billion included $179.5 billion of outstanding notes that are both TLAC eligible and callable at least one year before their stated maturities. Of these senior notes, $15.0 billion will be callable and become TLAC ineligible during 2022, and $17.0 billion, $17.8 billion, $15.0 billion and $17.7 billion will do so during each of 2023 through 2026, respectively, and $97.0 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 2021, we issued $7.1 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, 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. At December 31, 2020, the Corporation’s deposits totaled $1.8 trillion, of which total estimated uninsured U.S. and non-U.S. deposits were $597.7 billion and $104.1 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.

[[GREPCENT_TABLE]]
[["Table 17","Uninsured Time Deposits (1)"],["","","December 31, 2021"],["(Dollars in millions)","U.S.","","Non-U.S.","","Total"],["Uninsured time deposits with a maturity of:"],["3 months or less","$","2,337","","","$","7,274","","","$","9,611"],["Over 3 months through 6 months","1,668","","","1,663","","","3,331"],["Over 6 months through 12 months","1,942","","","239","","","2,181"],["Over 12 months","289","","","1,470","","","1,759"],["Total","$","6,236","","","$","10,646","","","$","16,882"]]
[[/GREPCENT_TABLE]]

(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

57 Bank of America

by the rating agencies, and they consider a number of factors, including our own financial strength, performance, prospects and operations as well as factors not under our control. The rating agencies could make adjustments to our ratings at any time, and they provide no assurances that they will maintain our ratings at current levels.

Other factors that influence our credit ratings include changes to the rating agencies’ methodologies for our industry or certain security types; the rating agencies’ assessment of the general operating environment for financial services companies; our relative positions in the markets in which we compete; our various risk exposures and risk management policies and activities; pending litigation and other contingencies or potential tail risks; our reputation; our liquidity position, diversity of funding sources and funding costs; the current and expected level and volatility of our earnings; our capital position and capital management practices; our corporate governance; the sovereign credit ratings of the U.S. government; current or future regulatory and legislative initiatives; and the agencies’ views on whether the U.S. government would provide meaningful support to the Corporation or its subsidiaries in a crisis.

On May 24, 2021, Standard & Poor’s Global Ratings (S&P) affirmed the current ratings of the Corporation and its subsidiaries, while at the same time revising its rating outlook to Positive from Stable.

On June 7, 2021, Fitch Ratings (Fitch) upgraded the long-term senior debt ratings of the Corporation and its rated subsidiaries by one notch, to AA- and AA, respectively. Fitch also upgraded the Corporation’s short-term rating to F1+ which is now aligned with the short-term rating of its subsidiaries, including BANA. Following the upgrade, the rating outlook for the Corporation and its subsidiaries is Stable.

On November 22, 2021, Moody’s Investors Service (Moody’s) affirmed the current ratings of the Corporation and its subsidiaries, while at the same time revising its rating outlook to Positive from Stable.

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

[[GREPCENT_TABLE]]
[["Table 18","Senior Debt Ratings"],["","","Moody\u2019s Investors Service","","Standard & Poor\u2019s 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","","Positive","","A-","","A-2","","Positive","","AA-","","F1+","","Stable"],["Bank of America, N.A.","Aa2","","P-1","","Positive","","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"]]
[[/GREPCENT_TABLE]]

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 company, bank or broker-dealer subsidiaries were downgraded by one or more levels, the potential loss of access to short-term funding sources such as repo financing and the effect on our incremental cost of funds could be material.

While certain potential impacts are contractual and quantifiable, the full scope of the consequences of a credit rating downgrade to a financial institution is inherently uncertain, as it depends upon numerous dynamic, complex and inter-related factors and assumptions, including whether any downgrade of a company’s long-term credit ratings precipitates downgrades to its short-term credit ratings, and assumptions about the potential behaviors of various customers, investors and counterparties. For more information on potential impacts of credit rating downgrades, see Liquidity Risk – Liquidity Stress Analysis on page 56.

For more information on additional collateral and termination

payments that could be required in connection with certain OTC derivative contracts and other trading agreements as a result of such a credit rating downgrade, see Note 3 – Derivatives to the Consolidated Financial Statements and Item 1A. Risk Factors.

Common Stock Dividends

For a summary of our declared quarterly cash dividends on common stock during 2021 and through February 22, 2022, 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 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, 2021. The Corporation guarantees the payment of amounts and distributions with

[[GREPCENT_TABLE]]
[["","","Bank of America 58"]]
[[/GREPCENT_TABLE]]

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 5 and Part I. Item 1A. Risk Factors – Liquidity on page 10.

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.

For information on our credit risk management activities, see Consumer Portfolio Credit Risk Management below, Commercial Portfolio Credit Risk Management on page 65, Non-U.S. Portfolio on page 71, 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 - Credit on page 12.

During 2021, the economy gained momentum as unemployment continued to decline from double-digit highs during 2020 and the economy re-opened as vaccination rates increased and restrictions eased. With the easing of restrictions, we saw increased business openings, a rebound to commercial and consumer spending, higher asset values and increased global GDP, all of which positively impacted our consumer and commercial credit portfolios. Additionally, individuals and businesses in the U.S. benefited from various forms of government support through economic stimulus packages enacted in 2020 and 2021, which contributed to strong asset quality across our credit portfolios.

As a result of the economic recovery experienced in 2021, net charge-offs, nonperforming loans and commercial reservable criticized exposure declined compared to 2020. While there has been significant economic improvement in comparison to 2020, uncertainty remains about the timing and strength of the economy’s recovery, which may also be hampered by supply chain disruptions and inflationary pressures and could lead to adverse impacts to credit quality metrics in future periods. The pandemic and its full impact on the global economy continue to be highly uncertain. While COVID-19 cases eased throughout the majority of 2021, they reached new highs by the end of 2021, and the spread of new, more contagious variants could impact the magnitude and duration of this health crisis. However, ongoing virus containment efforts and vaccination progress, could support the macroeconomic recovery.

59 Bank of America

For more information on how the pandemic may affect our operations, see Executive Summary – Recent Developments – COVID-19 Pandemic on page 27 and Item 1A. Risk Factors – Coronavirus Disease on page 7.

Consumer Portfolio Credit Risk Management

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

Consumer Credit Portfolio

The economic environment improved during 2021, with the U.S. unemployment rate continuing to decline and home prices increasing. During 2021, net charge-offs decreased $805 million to $1.8 billion primarily due to lower credit card losses, as the impact of government stimulus measures were partially offset by charge-offs associated with deferrals that expired in 2020. During 2021, nonperforming loans increased due to deferral activity.

The consumer allowance for loan and lease losses decreased $3.0 billion in 2021 to $7.0 billion primarily due to improvements in the macroeconomic outlook and credit quality. 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 troubled debt restructurings (TDRs) for the consumer portfolio, as well as interest accrual policies and delinquency status for loan modifications related to the pandemic, 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.

[[GREPCENT_TABLE]]
[["Table 19","Consumer Credit Quality"],["","Outstandings","","Nonperforming","","Accruing Past Due 90 Days or More"],["","December 31"],["(Dollars in millions)","2021","","2020","","2021","","2020","","2021","","2020"],["Residential mortgage (1)","$","221,963","","","$","223,555","","","$","2,284","","","$","2,005","","","$","634","","","$","762"],["Home equity","27,935","","","34,311","","","630","","","649","","","\u2014","","","\u2014"],["Credit card","81,438","","","78,708","","","n/a","","n/a","","487","","","903"],["Direct/Indirect consumer (2)","103,560","","","91,363","","","75","","","71","","","11","","","33"],["Other consumer","190","","","124","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Consumer loans excluding loans accounted for under the fair value option","$","435,086","","","$","428,061","","","$","2,989","","","$","2,725","","","$","1,132","","","$","1,698"],["Loans accounted for under the fair value option (3)","618","","","735"],["Total consumer loans and leases","$","435,704","","","$","428,796"],["Percentage of outstanding consumer loans and leases (4)","n/a","","n/a","","0.69","%","","0.64","%","","0.26","%","","0.40","%"],["Percentage of outstanding consumer loans and leases, excluding fully-insured loan portfolios (4)","n/a","","n/a","","0.71","","","0.65","","","0.12","","","0.22"]]
[[/GREPCENT_TABLE]]

(1)Residential mortgage loans accruing past due 90 days or more are fully-insured loans. At December 31, 2021 and 2020, residential mortgage includes $444 million and $537 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 $190 million and $225 million of loans on which interest was still accruing.

(2)Outstandings primarily include auto and specialty lending loans and leases of $48.5 billion and $46.4 billion, U.S. securities-based lending loans of $51.1 billion and $41.1 billion and non-U.S. consumer loans of $3.0 billion and $3.0 billion at December 31, 2021 and 2020.

(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, 2021 and 2020, $21 million and $11 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.

[[GREPCENT_TABLE]]
[["Table 20","Consumer Net Charge-offs and Related Ratios"],["","","","","","","Net Charge-offs","","","","","","Net Charge-off Ratios (1)"],["(Dollars in millions)","","","","","2021","","2020","","","","","","2021","","2020"],["Residential mortgage","","","","","$","(28)","","","$","(30)","","","","","","","(0.01)","%","","(0.01)","%"],["Home equity","","","","","(119)","","","(73)","","","","","","","(0.39)","","","(0.19)"],["Credit card","","","","","1,723","","","2,349","","","","","","","2.29","","","2.76"],["Direct/Indirect consumer","","","","","1","","","122","","","","","","","\u2014","","","0.14"],["Other consumer","","","","","270","","","284","","","","","","","n/m","","n/m"],["Total","","","","","$","1,847","","","$","2,652","","","","","","","0.44","","","0.59"]]
[[/GREPCENT_TABLE]]

(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

[[GREPCENT_TABLE]]
[["","","Bank of America 60"]]
[[/GREPCENT_TABLE]]

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 51 percent of consumer loans and leases in 2021. Approximately 52 percent of the residential mortgage portfolio was in Consumer Banking

and 43 percent was in GWIM. The remaining portion was in All Other.

Outstanding balances in the residential mortgage portfolio decreased $1.6 billion in 2021 as paydowns were partially offset by originations.

At December 31, 2021 and 2020, the residential mortgage portfolio included $12.7 billion and $11.8 billion of outstanding fully-insured loans, of which $2.2 billion and $2.8 billion had 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.

[[GREPCENT_TABLE]]
[["Table 21","Residential Mortgage \u2013 Key Credit Statistics"],["","","","","","","","","","","Reported Basis (1)","","Excluding Fully-insured Loans (1)"],["","","","","","","","","","","December 31"],["(Dollars in millions)","","","","","","","","","2021","","2020","","2021","","2020"],["Outstandings","","","","","","","","$","221,963","","","$","223,555","","","$","209,259","","","$","211,737"],["Accruing past due 30 days or more","","","","","","","","1,753","","","2,314","","","866","","","1,224"],["Accruing past due 90 days or more","","","","","","","","634","","","762","","","\u2014","","","\u2014"],["Nonperforming loans (2)","","","","","","","","2,284","","","2,005","","","2,284","","","2,005"],["Percent of portfolio"],["Refreshed LTV greater than 90 but less than or equal to 100","","","","1","%","","2","%","","1","%","","1","%"],["Refreshed LTV greater than 100","","","","","","","","\u2014","","","1","","","\u2014","","","1"],["Refreshed FICO below 620","","","","","","","","2","","","2","","","1","","","1"]]
[[/GREPCENT_TABLE]]

(1)Outstandings, accruing past due, nonperforming loans and percentages of portfolio exclude loans accounted for under the fair value option. For information on our interest accrual policies and delinquency status for loan modifications related to the pandemic, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements.

(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 increased $279 million in 2021 primarily driven by deferral activity. Of the nonperforming residential mortgage loans at December 31, 2021, $1.2 billion, or 51 percent, were current on contractual payments. Loans accruing past due 30 days or more decreased $358 million driven by continued improvement in credit quality.

Net recoveries of $28 million in 2021 remained relatively unchanged compared to 2020.

Of the $209.3 billion in total residential mortgage loans outstanding at December 31, 2021, 27 percent were originated as interest-only loans. The outstanding balance of interest-only residential mortgage loans that have entered the amortization period was $4.8 billion, or eight percent, at December 31, 2021. Residential mortgage loans that have entered the amortization period generally experienced a higher rate of early stage delinquencies and nonperforming status compared to the residential mortgage portfolio as a whole. At December 31, 2021, $66 million, or one percent, of outstanding interest-only residential mortgages that had entered the amortization period were accruing past due 30 days or more compared to $866 million, or less than one percent, for the entire residential

mortgage portfolio. In addition, at December 31, 2021, $275 million, or six percent, of outstanding interest-only residential mortgage loans that had entered the amortization period were nonperforming, of which $83 million were contractually current compared to $2.3 billion, or one percent, for the entire residential mortgage portfolio. Loans that have yet to enter the amortization period in our interest-only residential mortgage portfolio are primarily well-collateralized loans to our wealth management clients and have an interest-only period of three to ten years. Approximately 91 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 15 percent and 16 percent of outstandings at December 31, 2021 and 2020. In the New York area, the New York-Northern New Jersey-Long Island MSA made up 15 percent and 14 percent of outstandings at December 31, 2021 and 2020.

61 Bank of America

[[GREPCENT_TABLE]]
[["Table 22","Residential Mortgage State Concentrations"],["","Outstandings (1)","","Nonperforming (1)"],["","","December 31","","","","","","Net Charge-offs"],["(Dollars in millions)","December 31 2021","","December 31 2020","","December 31 2021","","December 31 2020","","","","","","2021","","2020"],["California","$","77,819","","","$","83,185","","","$","693","","","$","570","","","","","","","$","(14)","","","$","(18)"],["New York","24,975","","","23,832","","","358","","","272","","","","","","","3","","","3"],["Florida","13,883","","","13,017","","","158","","","175","","","","","","","(8)","","","(5)"],["Texas","9,002","","","8,868","","","86","","","78","","","","","","","\u2014","","","\u2014"],["New Jersey","8,723","","","8,806","","","117","","","98","","","","","","","\u2014","","","(1)"],["Other","74,857","","","74,029","","","872","","","812","","","","","","","(9)","","","(9)"],["Residential mortgage loans","$","209,259","","","$","211,737","","","$","2,284","","","$","2,005","","","","","","","$","(28)","","","$","(30)"],["Fully-insured loan portfolio","12,704","","","11,818"],["Total residential mortgage loan portfolio","$","221,963","","","$","223,555"]]
[[/GREPCENT_TABLE]]

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

Home Equity

At December 31, 2021, 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, 2021, 80 percent of the home equity portfolio was in Consumer Banking, 11 percent was in All Other and the remainder of the portfolio was primarily in GWIM. Outstanding balances in the home equity portfolio decreased $6.4 billion in 2021 primarily due to paydowns outpacing new

originations and draws on existing lines. Of the total home equity portfolio at December 31, 2021 and 2020, $12.2 billion, or 44 percent, and $13.8 billion, or 40 percent, were in first-lien positions. At December 31, 2021, 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 $4.6 billion, or 16 percent of our total home equity portfolio.

Unused HELOCs totaled $40.5 billion and $42.3 billion at December 31, 2021 and 2020. The HELOC utilization rate was 39 percent and 43 percent at December 31, 2021 and 2020.

Table 23 presents certain home equity portfolio key credit statistics.

[[GREPCENT_TABLE]]
[["Table 23","Home Equity \u2013 Key Credit Statistics (1)"],["","","","","","","","","","","December 31"],["(Dollars in millions)","","","","","","","","","2021","","2020"],["Outstandings","","","","","","","","","$","27,935","","","$","34,311"],["Accruing past due 30 days or more","","","","","","157","","","186"],["Nonperforming loans (2)","","","","","","","","","630","","","649"],["Percent of portfolio"],["Refreshed CLTV greater than 90 but less than or equal to 100","","","","\u2014","%","","1","%"],["Refreshed CLTV greater than 100","","","","","","1","","","1"],["Refreshed FICO below 620","","","","","","","","","3","","","3"]]
[[/GREPCENT_TABLE]]

(1)Outstandings, accruing past due, nonperforming loans and percentages of the portfolio exclude loans accounted for under the fair value option. For information on our interest accrual policies and delinquency status for loan modifications related to the pandemic, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements.

(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 remained relatively flat at $630 million at December 31, 2021. Of the nonperforming home equity loans at December 31, 2021, $227 million, or 36 percent, were current on contractual payments. In addition, $273 million, or 43 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 $29 million in 2021.

Net recoveries increased $46 million to $119 million in 2021 compared to the same period in 2020. The increase was driven by favorable portfolio trends due in part to improvement in home prices.

Of the $27.9 billion in total home equity portfolio outstandings at December 31, 2021, as shown in Table 23, 14 percent require interest-only payments. The outstanding balance of HELOCs that have reached the end of their draw period and have entered the amortization period was $6.8 billion at December 31, 2021. 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, 2021, $105 million, or two percent, of outstanding HELOCs that had entered the amortization period were accruing past due 30 days or more. In addition, at December 31, 2021, $455 million, or seven percent, were nonperforming. Loans that have yet to enter the amortization period in our interest-only portfolio are primarily post-2008 vintages and generally have better credit quality than the previous vintages that had entered the amortization period. We communicate to contractually current customers more than a year prior to the end of their draw period to inform them of the potential change to the payment structure before entering the amortization period, and provide payment options to customers prior to the end of the draw period.

Although we do not actively track how many of our home equity customers pay only the minimum amount due on their home equity loans and lines, we can infer some of this information through a review of our HELOC portfolio that we service and that is still in its revolving period. During 2021, nine percent of these customers with an outstanding balance did not pay any principal on their HELOCs.

[[GREPCENT_TABLE]]
[["","","Bank of America 62"]]
[[/GREPCENT_TABLE]]

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 13 percent of the outstanding home equity portfolio at both December 31, 2021

and 2020. The Los Angeles-Long Beach-Santa Ana MSA within California made up 10 percent and 11 percent of the outstanding home equity portfolio at December 31, 2021 and 2020.

[[GREPCENT_TABLE]]
[["Table 24","Home Equity State Concentrations"],["","","Outstandings (1)","","Nonperforming (1)"],["","","December 31","","","","","","Net Recoveries"],["(Dollars in millions)","2021","","2020","","2021","","2020","","","","","","2021","","2020"],["California","$","7,600","","","$","9,488","","","$","140","","","$","143","","","","","","","$","(40)","","","$","(26)"],["Florida","2,977","","","3,715","","","78","","","80","","","","","","","(21)","","","(11)"],["New Jersey","2,259","","","2,749","","","69","","","67","","","","","","","(4)","","","(3)"],["New York","2,072","","","2,495","","","96","","","103","","","","","","","(1)","","","(1)"],["Massachusetts","1,422","","","1,719","","","32","","","32","","","","","","","(3)","","","(1)"],["Other","11,605","","","14,145","","","215","","","224","","","","","","","(50)","","","(31)"],["Total home equity loan portfolio","$","27,935","","","$","34,311","","","$","630","","","$","649","","","","","","","$","(119)","","","$","(73)"]]
[[/GREPCENT_TABLE]]

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

Credit Card

At December 31, 2021, 97 percent of the credit card portfolio was managed in Consumer Banking with the remainder in GWIM. Outstandings in the credit card portfolio increased $2.7 billion in 2021 to $81.4 billion due to higher retail spend. Net charge-offs decreased $626 million to $1.7 billion during 2021 compared to the same period in 2020 due to the impact of government stimulus measures, partially offset by charge-offs of certain loans with deferrals that expired in 2020. Credit card

loans 30 days or more past due and still accruing interest decreased $692 million, and loans 90 days or more past due and still accruing interest decreased $416 million primarily due to charge-offs of certain loans with deferrals that expired in 2020 and the impact of government stimulus measures.

Unused lines of credit for credit card increased to $361.2 billion at December 31, 2021 from $342.4 billion at 2020.

Table 25 presents certain state concentrations for the credit card portfolio.

[[GREPCENT_TABLE]]
[["Table 25","Credit Card State Concentrations"],["","","Outstandings","","Accruing Past Due90 Days or More (1)"],["","","December 31","","","","","","Net Charge-offs"],["(Dollars in millions)","2021","","2020","","2021","","2020","","","","","","2021","","2020"],["California","$","13,076","","","$","12,543","","","$","82","","","$","166","","","","","","","$","322","","","$","419"],["Florida","8,046","","","7,666","","","71","","","135","","","","","","","245","","","306"],["Texas","6,894","","","6,499","","","47","","","87","","","","","","","158","","","202"],["New York","4,725","","","4,654","","","35","","","76","","","","","","","135","","","188"],["Washington","4,080","","","3,685","","","13","","","21","","","","","","","39","","","56"],["Other","44,617","","","43,661","","","239","","","418","","","","","","","824","","","1,178"],["Total credit card portfolio","$","81,438","","","$","78,708","","","$","487","","","$","903","","","","","","","$","1,723","","","$","2,349"]]
[[/GREPCENT_TABLE]]

(1)For information on our interest accrual policies and delinquency status for loan modifications related to the pandemic, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements.

Direct/Indirect Consumer

At December 31, 2021, 47 percent of the direct/indirect portfolio was included in Consumer Banking (consumer auto and recreational vehicle lending) and 53 percent was included in

GWIM (principally securities-based lending loans). Outstandings in the direct/indirect portfolio increased by $12.2 billion in 2021 to $103.6 billion driven by client demand for liquidity and high asset values in the securities-based lending portfolio.

63 Bank of America

Table 26 presents certain state concentrations for the direct/indirect consumer loan portfolio.

[[GREPCENT_TABLE]]
[["Table 26","Direct/Indirect State Concentrations"],["","","Outstandings","","Accruing Past Due 90 Days or More (1)"],["","","December 31","","","","Net Charge-offs"],["(Dollars in millions)","2021","","2020","","2021","","2020","","","","","","2021","","2020"],["California","$","15,061","","","$","12,248","","","$","2","","","$","6","","","","","","","$","3","","","$","20"],["Florida","13,352","","","10,891","","","1","","","4","","","","","","","1","","","20"],["Texas","9,505","","","8,981","","","2","","","6","","","","","","","2","","","20"],["New York","7,802","","","6,609","","","1","","","2","","","","","","","3","","","9"],["New Jersey","4,228","","","3,572","","","\u2014","","","\u2014","","","","","","","(3)","","","2"],["Other","53,612","","","49,062","","","5","","","15","","","","","","","(5)","","","51"],["Total direct/indirect loan portfolio","$","103,560","","","$","91,363","","","$","11","","","$","33","","","","","","","$","1","","","$","122"]]
[[/GREPCENT_TABLE]]

(1)For information on our interest accrual policies and delinquency status for loan modifications related to the pandemic, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements.

Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity

Table 27 presents nonperforming consumer loans, leases and foreclosed properties activity during 2021 and 2020. During 2021, nonperforming consumer loans increased $264 million to $3.0 billion primarily driven by consumer real estate deferral activity.

At December 31, 2021, $888 million, or 30 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, 2021, $1.4 billion, or 48 percent of nonperforming consumer loans were modified and are now current after successful trial periods, or are current loans classified as nonperforming loans in accordance with applicable policies.

Foreclosed properties decreased $22 million in 2021 to $101 million. Nonperforming loans also include certain loans that have been modified in TDRs where economic concessions have been granted to borrowers experiencing financial difficulties.

[[GREPCENT_TABLE]]
[["Table 27","Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity"],["(Dollars in millions)","","","","","2021","","2020"],["Nonperforming loans and leases, January 1","","","","","$","2,725","","","$","2,053"],["Additions","","","","","2,006","","","2,278"],["Reductions:"],["Paydowns and payoffs","","","","","(625)","","","(440)"],["Sales","","","","","(4)","","","(38)"],["Returns to performing status (1)","","","","","(1,037)","","","(1,014)"],["Charge-offs","","","","","(64)","","","(78)"],["Transfers to foreclosed properties","","","","","(12)","","","(36)"],["Total net additions to nonperforming loans and leases","","","","","264","","","672"],["Total nonperforming loans and leases, December 31","","","","","2,989","","","2,725"],["Foreclosed properties, December 31 (2)","","","","","101","","","123"],["Nonperforming consumer loans, leases and foreclosed properties, December 31","","","","","$","3,090","","","$","2,848"],["Nonperforming consumer loans and leases as a percentage of outstanding consumer loans and leases (3)","","","","","0.69","%","","0.64","%"],["Nonperforming consumer loans, leases and foreclosed properties as a percentage of outstanding consumer loans, leases and foreclosed properties (3)","","","","","0.71","","","0.66"]]
[[/GREPCENT_TABLE]]

(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 $52 million and $119 million at December 31, 2021 and 2020.

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

[[GREPCENT_TABLE]]
[["","","Bank of America 64"]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["Table 28","Consumer Real Estate Troubled Debt Restructurings"],["","","December 31, 2021","","December 31, 2020"],["(Dollars in millions)","Nonperforming","","Performing","","Total","","Nonperforming","","Performing","","Total"],["Residential mortgage (1, 2)","$","1,498","","","$","2,278","","","$","3,776","","","$","1,195","","","$","2,899","","","$","4,094"],["Home equity (3)","254","","","652","","","906","","","248","","","836","","","1,084"],["Total consumer real estate troubled debt restructurings","$","1,752","","","$","2,930","","","$","4,682","","","$","1,443","","","$","3,735","","","$","5,178"]]
[[/GREPCENT_TABLE]]

(1)At December 31, 2021 and 2020, residential mortgage TDRs deemed collateral dependent totaled $1.6 billion and $1.4 billion, and included $1.4 billion and $1.0 billion of loans classified as nonperforming and $279 million and $361 million of loans classified as performing.

(2)At December 31, 2021 and 2020, residential mortgage performing TDRs include $1.2 billion and $1.5 billion of loans that were fully-insured.

(3)At December 31, 2021 and 2020, home equity TDRs deemed collateral dependent totaled $370 million and $407 million, and include $222 million and $216 million of loans classified as nonperforming and $148 million and $191 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, 2021 and 2020, our credit card and other consumer TDR portfolio was $672 million and $701 million, of which $599 million and $614 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 Commercial Portfolio Credit Risk Management – Industry Concentrations on page 69 and Table 36.

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 2021, commercial credit quality improved as the economic recovery gained momentum driven in part by increased consumer spending and COVID-19 vaccination progress. Accordingly, charge-offs, nonperforming commercial loans and reservable criticized utilized exposure declined during this period. Outstanding commercial loans and leases increased $44.4 billion during 2021 due to growth in commercial and industrial, primarily in Global Markets with most of the increase in investment grade exposures. 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. For more information on

65 Bank of America

PPP loans, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements.

Credit quality of commercial real estate borrowers has begun to stabilize in many sectors as economies have reopened. However, certain sectors, including hospitality, while showing signs of improvement, continue to be negatively impacted due to the pandemic. Moreover, many real estate markets, while improving, are still experiencing some disruptions in demand, supply chain challenges and tenant difficulties. Current and future office demand is 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 decreased $3.4 billion during 2021 to $5.4 billion driven by improvements in the macroeconomic outlook and credit quality. For more information, see Allowance for Credit Losses on page 73.

Total commercial utilized credit exposure increased $33.2 billion during 2021 to $653.5 billion primarily driven by higher loans and leases. The utilization rate for loans and leases, standby letters of credit (SBLCs) and financial guarantees, and commercial letters of credit, in the aggregate, was 56 percent at December 31, 2021 and 57 percent at December 31, 2020.

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.

[[GREPCENT_TABLE]]
[["Table 29","Commercial Credit Exposure by Type"],["","","Commercial Utilized (1)","","Commercial Unfunded (2, 3, 4)","","Total Commercial Committed"],["","","December 31"],["(Dollars in millions)","2021","","2020","","2021","","2020","","2021","","2020"],["Loans and leases","$","543,420","","","$","499,065","","","$","454,256","","","$","404,740","","","$","997,676","","","$","903,805"],["Derivative assets (5)","35,344","","","47,179","","","\u2014","","","\u2014","","","35,344","","","47,179"],["Standby letters of credit and financial guarantees","34,389","","","34,616","","","639","","","538","","","35,028","","","35,154"],["Debt securities and other investments","19,427","","","22,618","","","4,638","","","4,827","","","24,065","","","27,445"],["Loans held-for-sale","13,185","","","8,378","","","16,581","","","9,556","","","29,766","","","17,934"],["Operating leases","5,935","","","6,424","","","\u2014","","","\u2014","","","5,935","","","6,424"],["Commercial letters of credit","1,176","","","855","","","247","","","280","","","1,423","","","1,135"],["Other","652","","","1,168","","","\u2014","","","\u2014","","","652","","","1,168"],["Total","$","653,528","","","$","620,303","","","$","476,361","","","$","419,941","","","$","1,129,889","","","$","1,040,244"]]
[[/GREPCENT_TABLE]]

(1)Commercial utilized exposure includes loans of $7.2 billion and $5.9 billion accounted for under the fair value option at December 31, 2021 and 2020.

(2)Commercial unfunded exposure includes commitments accounted for under the fair value option with a notional amount of $4.8 billion and $3.9 billion at December 31, 2021 and 2020.

(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 $10.7 billion and $10.5 billion at December 31, 2021 and 2020.

(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 $30.8 billion and $42.5 billion at December 31, 2021 and 2020. Not reflected in utilized and committed exposure is additional non-cash derivative collateral held of $44.8 billion and $39.3 billion at December 31, 2021 and 2020, which consists primarily of other marketable securities.

Nonperforming commercial loans decreased $649 million. Table 30 presents our commercial loans and leases portfolio and related credit quality information at December 31, 2021 and 2020.

[[GREPCENT_TABLE]]
[["Table 30","Commercial Credit Quality"],["","","Outstandings","","Nonperforming","","Accruing Past Due 90 Days or More"],["","","December 31"],["(Dollars in millions)","2021","","2020","","2021","","2020","","2021","","2020"],["Commercial and industrial:"],["U.S. commercial","$","325,936","","","$","288,728","","","$","825","","","$","1,243","","","$","171","","","$","228"],["Non-U.S. commercial","113,266","","","90,460","","","268","","","418","","","19","","","10"],["Total commercial and industrial","439,202","","","379,188","","","1,093","","","1,661","","","190","","","238"],["Commercial real estate","63,009","","","60,364","","","382","","","404","","","40","","","6"],["Commercial lease financing","14,825","","","17,098","","","80","","","87","","","8","","","25"],["","517,036","","","456,650","","","1,555","","","2,152","","","238","","","269"],["U.S. small business commercial (1)","19,183","","","36,469","","","23","","","75","","","87","","","115"],["Commercial loans excluding loans accounted for under the fair value option","$","536,219","","","$","493,119","","","$","1,578","","","$","2,227","","","$","325","","","$","384"],["Loans accounted for under the fair value option (2)","7,201","","","5,946"],["Total commercial loans and leases","$","543,420","","","$","499,065"]]
[[/GREPCENT_TABLE]]

(1)Includes card-related products.

(2)Commercial loans accounted for under the fair value option include U.S. commercial of $4.6 billion and $2.9 billion and non-U.S. commercial of $2.6 billion and $3.0 billion at December 31, 2021 and 2020. For more information on the fair value option, see Note 21 – Fair Value Option to the Consolidated Financial Statements.

[[GREPCENT_TABLE]]
[["","","Bank of America 66"]]
[[/GREPCENT_TABLE]]

Table 31 presents net charge-offs and related ratios for our commercial loans and leases for 2021 and 2020.

[[GREPCENT_TABLE]]
[["Table 31","Commercial Net Charge-offs and Related Ratios"],["","","","","","","Net Charge-offs","","","","","","Net Charge-off Ratios (1)"],["(Dollars in millions)","","","","","2021","","2020","","","","","","2021","","2020"],["Commercial and industrial:"],["U.S. commercial","","","","","$","(23)","","","$","718","","","","","","","(0.01)","%","","0.23","%"],["Non-U.S. commercial","","","","","35","","","155","","","","","","","0.04","","","0.15"],["Total commercial and industrial","","","","","12","","","873","","","","","","","\u2014","","","0.21"],["Commercial real estate","","","","","34","","","270","","","","","","","0.06","","","0.43"],["Commercial lease financing","","","","","(1)","","","59","","","","","","","\u2014","","","0.32"],["","","","","","","45","","","1,202","","","","","","","0.01","","","0.24"],["U.S. small business commercial","","","","","351","","","267","","","","","","","1.19","","","0.86"],["Total commercial","","","","","$","396","","","$","1,469","","","","","","","0.08","","","0.28"]]
[[/GREPCENT_TABLE]]

(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 $16.3 billion during 2021, which was broad-based across industries. At December 31, 2021 and 2020, 87 percent and 79 percent of commercial reservable criticized utilized exposure was secured.

[[GREPCENT_TABLE]]
[["Table 32","Commercial Reservable Criticized Utilized Exposure (1, 2)"],["","","December 31"],["(Dollars in millions)","2021","","2020"],["Commercial and industrial:"],["U.S. commercial","$","11,327","","","3.20","%","","$","21,388","","","6.83","%"],["Non-U.S. commercial","2,582","","","2.17","","","5,051","","","5.03"],["Total commercial and industrial","13,909","","","2.94","","","26,439","","","6.40"],["Commercial real estate","7,572","","","11.72","","","10,213","","","16.42"],["Commercial lease financing","387","","","2.61","","","714","","","4.18"],["","","21,868","","","3.96","","","37,366","","","7.59"],["U.S. small business commercial","513","","","2.67","","","1,300","","","3.56"],["Total commercial reservable criticized utilized exposure","$","22,381","","","3.91","","","$","38,666","","","7.31"]]
[[/GREPCENT_TABLE]]

(1)Total commercial reservable criticized utilized exposure includes loans and leases of $21.2 billion and $36.6 billion and commercial letters of credit of $1.2 billion and $2.1 billion at December 31, 2021 and 2020.

(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, 2021, 62 percent of the U.S. commercial loan portfolio, excluding small business, was managed in Global Banking, 22 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 $37.2 billion, or 13 percent, during 2021 primarily driven by Global Markets and Global Banking. Reservable criticized utilized exposure decreased $10.1 billion, driven by decreases across a broad range of industries.

Non-U.S. Commercial

At December 31, 2021, 69 percent of the non-U.S. commercial loan portfolio was managed in Global Banking, 30 percent in Global Markets and the remainder in GWIM. Non-U.S. commercial loans increased $22.8 billion, or 25 percent, during 2021 primarily in Global Markets. Reservable criticized utilized exposure decreased $2.5 billion, which was broad-based across industries. For information on the non-U.S. commercial portfolio, see Non-U.S. Portfolio on page 71.

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 $2.6 billion, or four percent, during 2021 to $63.0 billion due to new originations outpacing paydowns. The portfolio remains diversified across property types and geographic regions. California represented the largest state concentration at 21 percent and 23 percent of the commercial real estate portfolio at December 31, 2021 and 2020. 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 2021, 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.

67 Bank of America

[[GREPCENT_TABLE]]
[["Table 33","Outstanding Commercial Real Estate Loans"],["","","December 31"],["(Dollars in millions)","2021","","2020"],["By Geographic Region"],["Northeast","$","14,318","","","$","11,628"],["California","13,145","","","14,028"],["Southwest","7,510","","","8,551"],["Southeast","6,758","","","6,588"],["Florida","4,367","","","4,294"],["Midwest","3,221","","","3,483"],["Illinois","2,878","","","2,594"],["Midsouth","2,289","","","2,370"],["Northwest","1,709","","","1,634"],["Non-U.S.","4,760","","","3,187"],["Other","2,054","","","2,007"],["Total outstanding commercial real estate loans","$","63,009","","","$","60,364"],["By Property Type"],["Non-residential"],["Office","$","18,309","","","$","17,667"],["Industrial / Warehouse","10,749","","","8,330"],["Multi-family rental","8,173","","","7,051"],["Shopping centers /Retail","6,502","","","7,931"],["Hotel / Motels","5,932","","","7,226"],["Unsecured","3,178","","","2,336"],["Multi-use","1,835","","","1,460"],["Other","7,238","","","7,146"],["Total non-residential","61,916","","","59,147"],["Residential","1,093","","","1,217"],["Total outstanding commercial real estate loans","$","63,009","","","$","60,364"]]
[[/GREPCENT_TABLE]]

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 includes $4.7 billion and $22.7 billion of PPP loans outstanding at December 31, 2021 and 2020. The decline of $18.0 billion in PPP loans during 2021 was due to repayment of the loans by the SBA under the terms of the program. Excluding PPP, credit card-related products were 50 percent of the U.S. small business commercial portfolio at both December 31, 2021 and 2020 and represented 95 percent of net charge-offs in 2021 compared to 91 percent in 2020.

Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity

Table 34 presents the nonperforming commercial loans, leases and foreclosed properties activity during 2021 and 2020. Nonperforming loans do not include loans accounted for under the fair value option. During 2021, nonperforming commercial loans and leases decreased $649 million to $1.6 billion. At December 31, 2021, 88 percent of commercial nonperforming loans, leases and foreclosed properties were secured and 54 percent were contractually current. Commercial nonperforming loans were carried at 90 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.

[[GREPCENT_TABLE]]
[["Table 34","Nonperforming Commercial Loans, Leases and Foreclosed Properties Activity (1, 2)"],["(Dollars in millions)","","","","","2021","","2020"],["Nonperforming loans and leases, January 1","","","","","$","2,227","","","$","1,499"],["Additions","","","","","1,622","","","3,518"],["Reductions:"],["Paydowns","","","","","(1,163)","","","(1,002)"],["Sales","","","","","(199)","","","(350)"],["Returns to performing status (3)","","","","","(264)","","","(172)"],["Charge-offs","","","","","(254)","","","(1,208)"],["Transfers to foreclosed properties","","","","","\u2014","","","(2)"],["Transfers to loans held-for-sale","","","","","(391)","","","(56)"],["Total net additions (reductions) to nonperforming loans and leases","","","","","(649)","","","728"],["Total nonperforming loans and leases, December 31","","","","","1,578","","","2,227"],["Foreclosed properties, December 31","","","","","29","","","41"],["Nonperforming commercial loans, leases and foreclosed properties, December 31","","","","","$","1,607","","","$","2,268"],["Nonperforming commercial loans and leases as a percentage of outstanding commercial loans and leases (4)","","","","","0.29","%","","0.45","%"],["Nonperforming commercial loans, leases and foreclosed properties as a percentage of outstanding commercial loans, leases and foreclosed properties (4)","","","","","0.30","","","0.46"]]
[[/GREPCENT_TABLE]]

(1)Balances do not include nonperforming loans held-for-sale of $264 million and $359 million at December 31, 2021 and 2020.

(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.

[[GREPCENT_TABLE]]
[["","","Bank of America 68"]]
[[/GREPCENT_TABLE]]

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.

[[GREPCENT_TABLE]]
[["Table 35","Commercial Troubled Debt Restructurings"],["","","December 31, 2021","","December 31, 2020"],["(Dollars in millions)","Nonperforming","","Performing","","Total","","Nonperforming","","Performing","","Total"],["Commercial and industrial:"],["U.S. commercial","$","359","","","$","685","","","$","1,044","","","$","509","","","$","850","","","$","1,359"],["Non-U.S. commercial","72","","","8","","","80","","","49","","","119","","","168"],["Total commercial and industrial","431","","","693","","","1,124","","","558","","","969","","","1,527"],["Commercial real estate","244","","","437","","","681","","","137","","","\u2014","","","137"],["Commercial lease financing","50","","","7","","","57","","","42","","","2","","","44"],["","725","","","1,137","","","1,862","","","737","","","971","","","1,708"],["U.S. small business commercial","\u2014","","","38","","","38","","","\u2014","","","29","","","29"],["Total commercial troubled debt restructurings","$","725","","","$","1,175","","","$","1,900","","","$","737","","","$","1,000","","","$","1,737"]]
[[/GREPCENT_TABLE]]

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 $89.6 billion, or nine percent, during 2021 to $1.1 trillion. The increase in commercial committed exposure was concentrated in the Asset managers and funds, Finance companies and Utilities industry sectors. Increases were partially offset by decreased exposure to the Government and public education and Automobiles and components industry sectors.

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 $136.9 billion, increased $36.6 billion, or 37 percent, during 2021, which was primarily driven by secured investment grade exposures.

Real estate, our second largest industry concentration with committed exposure of $96.2 billion, increased $4.5 billion, or five percent, during 2021. For more information on the commercial real estate and related portfolios, see Commercial Portfolio Credit Risk Management – Commercial Real Estate on page 67.

Finance companies, our third largest industry concentration with committed exposure of $86.0 billion, increased $16.0 billion, or 23 percent during 2021, with the growth largely occurring in Consumer Finance, Thrifts and Mortgage Finance and Diversified Financials.

Given the widespread impact of the pandemic on the U.S. and global economy, a number of industries have been and will likely continue to be adversely impacted. We continue to monitor all industries, particularly higher risk industries that are experiencing or could experience a more significant impact to their financial condition.

69 Bank of America

[[GREPCENT_TABLE]]
[["Table 36","Commercial Credit Exposure by Industry (1)"],["","","Commercial Utilized","","Total Commercial Committed (2)"],["","","December 31"],["(Dollars in millions)","2021","","2020","","2021","","2020"],["Asset managers & funds","$","89,786","","","$","67,360","","","$","136,914","","","$","100,296"],["Real estate (3)","69,384","","","68,967","","","96,202","","","91,730"],["Finance companies","59,327","","","46,948","","","86,009","","","70,004"],["Capital goods","42,784","","","39,807","","","84,293","","","80,815"],["Healthcare equipment and services","32,003","","","33,488","","","58,195","","","57,540"],["Materials","25,133","","","24,516","","","53,652","","","50,757"],["Retailing","24,514","","","23,700","","","50,816","","","48,306"],["Government & public education","37,597","","","41,669","","","50,066","","","56,212"],["Consumer services","28,172","","","31,993","","","48,052","","","47,997"],["Food, beverage and tobacco","21,584","","","22,755","","","45,419","","","44,417"],["Commercial services and supplies","22,390","","","21,107","","","42,451","","","38,092"],["Individuals and trusts","29,752","","","24,727","","","39,869","","","34,036"],["Utilities","17,082","","","12,387","","","36,855","","","29,234"],["Energy","14,217","","","13,930","","","34,136","","","32,974"],["Transportation","21,079","","","23,126","","","32,015","","","33,082"],["Software and services","10,663","","","10,853","","","27,643","","","22,524"],["Technology hardware and equipment","10,159","","","9,935","","","26,910","","","24,196"],["Media","12,495","","","12,632","","","26,318","","","24,120"],["Global commercial banks","20,062","","","20,544","","","21,390","","","22,595"],["Telecommunication services","10,056","","","9,411","","","21,270","","","15,605"],["Consumer durables and apparel","9,740","","","9,232","","","21,226","","","20,223"],["Pharmaceuticals and biotechnology","5,608","","","4,830","","","19,439","","","15,901"],["Automobiles and components","9,236","","","10,792","","","17,052","","","20,575"],["Vehicle dealers","11,030","","","15,028","","","15,678","","","18,696"],["Insurance","5,743","","","5,772","","","14,323","","","13,277"],["Food and staples retailing","6,902","","","5,209","","","12,226","","","11,795"],["Financial markets infrastructure (clearinghouses)","3,876","","","4,939","","","6,076","","","8,648"],["Religious and social organizations","3,154","","","4,646","","","5,394","","","6,597"],["Total commercial credit exposure by industry","$","653,528","","","$","620,303","","","$","1,129,889","","","$","1,040,244"]]
[[/GREPCENT_TABLE]]

(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 $10.7 billion and $10.5 billion at December 31, 2021 and 2020.

(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, 2021 and 2020, 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 $2.6 billion and $4.2 billion. We recorded net losses of $91 million in 2021 compared to net losses of $240 million in 2020. The gains and losses on these instruments were offset by gains and losses on the related exposures. The Value-at-Risk (VaR) results for these exposures are included in the fair value option portfolio information in Table 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, 2021 and 2020.

[[GREPCENT_TABLE]]
[["Table 37","Net Credit Default Protection by Maturity"],["","","December 31"],["","","2021","","2020"],["Less than or equal to one year","34","%","","65","%"],["Greater than one year and less than or equal to five years","62","","","34"],["Greater than five years","4","","","1"],["Total net credit default protection","100","%","","100","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Table 38","Net Credit Default Protection by Credit Exposure Debt Rating"],["","","Net Notional (1)","","Percent of Total","","Net Notional (1)","","Percent of Total"],["","","December 31"],["(Dollars in millions)","2021","","2020"],["Ratings (2, 3)"],["A","$","(350)","","","13.4","%","","$","(250)","","","6.0","%"],["BBB","(710)","","","27.1","","","(1,856)","","","44.5"],["BB","(809)","","","30.9","","","(1,363)","","","32.7"],["B","(659)","","","25.2","","","(465)","","","11.2"],["CCC and below","(35)","","","1.3","","","(182)","","","4.4"],["NR (4)","(55)","","","2.1","","","(54)","","","1.2"],["Total net credit default protection","$","(2,618)","","","100.0","%","","$","(4,170)","","","100.0","%"]]
[[/GREPCENT_TABLE]]

(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.

[[GREPCENT_TABLE]]
[["","","Bank of America 70"]]
[[/GREPCENT_TABLE]]

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, 2021. These exposures accounted for 89 percent and 90 percent of our total non-U.S. exposure at December 31, 2021 and 2020. Net country exposure for these 20 countries increased $10.5 billion in 2021 primarily driven by increases in Australia, Canada and France, partially offset by reductions in Germany and the United Kingdom.

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.

[[GREPCENT_TABLE]]
[["Table 39","Top 20 Non-U.S. Countries Exposure"],["(Dollars in millions)","Funded Loans and Loan Equivalents","","Unfunded Loan Commitments","","Net Counterparty Exposure","","Securities/ Other Investments","","Country Exposure at December 31 2021","","Hedges and Credit Default Protection","","Net Country Exposure at December 31 2021","","Increase (Decrease) from December 31 2020"],["United Kingdom","$","32,062","","","$","15,858","","","$","5,932","","","$","2,399","","","$","56,251","","","$","(1,282)","","","$","54,969","","","$","(4,503)"],["Germany","21,397","","","9,790","","","1,794","","","1,807","","","34,788","","","(963)","","","33,825","","","(11,078)"],["Canada","9,138","","","12,783","","","1,441","","","3,551","","","26,913","","","(602)","","","26,311","","","5,177"],["France","12,393","","","8,234","","","1,391","","","3,710","","","25,728","","","(821)","","","24,907","","","4,116"],["Australia","9,194","","","9,078","","","434","","","2,812","","","21,518","","","(214)","","","21,304","","","8,217"],["Japan","14,812","","","1,528","","","1,308","","","371","","","18,019","","","(757)","","","17,262","","","(234)"],["Brazil","6,814","","","1,382","","","526","","","4,227","","","12,949","","","(199)","","","12,750","","","2,457"],["China","9,941","","","689","","","894","","","1,370","","","12,894","","","(312)","","","12,582","","","(838)"],["Singapore","3,914","","","709","","","249","","","5,850","","","10,722","","","(57)","","","10,665","","","1,383"],["Netherlands","3,839","","","4,780","","","452","","","950","","","10,021","","","(425)","","","9,596","","","(88)"],["India","6,485","","","388","","","470","","","1,454","","","8,797","","","(166)","","","8,631","","","820"],["Switzerland","5,072","","","3,125","","","277","","","338","","","8,812","","","(237)","","","8,575","","","1,680"],["South Korea","5,800","","","771","","","545","","","1,191","","","8,307","","","(155)","","","8,152","","","(399)"],["Hong Kong","5,523","","","315","","","338","","","1,167","","","7,343","","","(16)","","","7,327","","","790"],["Mexico","4,333","","","1,577","","","136","","","629","","j","6,675","","","(213)","","","6,462","","","175"],["Spain","2,482","","","2,126","","","473","","","1,198","","","6,279","","","(359)","","","5,920","","","1,104"],["Ireland","4,037","","","1,019","","","136","","","376","","","5,568","","","(29)","","","5,539","","","1,374"],["Italy","2,843","","","1,098","","","348","","","1,484","","","5,773","","","(569)","","","5,204","","","(488)"],["Belgium","2,548","","","1,516","","","462","","","687","","","5,213","","","(182)","","","5,031","","","64"],["United Arab Emirates","2,942","","","329","","","36","","","234","","","3,541","","","(47)","","","3,494","","","807"],["Total top 20 non-U.S. countries exposure","$","165,569","","","$","77,095","","","$","17,642","","","$","35,805","","","$","296,111","","","$","(7,605)","","","$","288,506","","","$","10,536"]]
[[/GREPCENT_TABLE]]

71 Bank of America

Our largest non-U.S. country exposure at December 31, 2021 was the United Kingdom with net exposure of $55.0 billion, which represents a $4.5 billion decrease from December 31, 2020. Our second largest non-U.S. country exposure was Germany with net exposure of $33.8 billion at December 31, 2021, a $11.1 billion decrease from December 31, 2020. The decrease in both of these countries was primarily driven by a reduction in deposits with central banks.

In light of the global pandemic, we are monitoring our non-U.S. exposure closely, particularly in countries where restrictions on certain activities, in an attempt to contain the spread and impact of the virus, have affected and will likely continue to adversely affect economic activity.

The impact of COVID-19 could have an adverse impact on the global economy for a prolonged period of time. For more information on how the pandemic may affect our operations, see Executive Summary – Recent Developments – COVID-19 Pandemic on page 27 and Part 1. Item 1A. Risk Factors on page 7.

Loan and Lease Contractual Maturities

Table 40 disaggregates total outstanding loans and leases by remaining contractual maturities 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.

[[GREPCENT_TABLE]]
[["Table 40","Loan and Lease Contractual Maturities (1)"],["","","December 31, 2021"],["(Dollars in millions)","Due in One Year or Less","","Due After One Year Through Five Years","","Due After Five Years Through 15 Years","","Due After 15 Years","","Total"],["Residential mortgage","$","175","","","$","702","","","$","48,614","","","$","172,751","","","$","222,242"],["Home equity","","1,596","","","92","","","6,159","","","20,427","","","28,274"],["Credit card","","81,438","","","\u2014","","","\u2014","","","\u2014","","","81,438"],["Direct/Indirect consumer","54,080","","","30,940","","","14,535","","","4,005","","","103,560"],["Other consumer","190","","","\u2014","","","\u2014","","","\u2014","","","190"],["Total consumer loans","$","137,479","","","$","31,734","","","$","69,308","","","$","197,183","","","$","435,704"],["U.S. commercial","$","93,480","","","$","195,157","","","$","39,370","","","$","2,505","","","$","330,512"],["Non-U.S. commercial","42,570","","","50,514","","","21,754","","","1,053","","","115,891"],["Commercial real estate","16,322","","","42,363","","","3,386","","","938","","","63,009"],["Commercial lease financing","1,349","","","8,676","","","3,865","","","935","","","14,825"],["U.S. small business commercial","9,428","","","3,895","","","5,656","","","204","","","19,183"],["Total commercial loans","$","163,149","","","$","300,605","","","$","74,031","","","$","5,635","","","$","543,420"],["Total loans and leases","$","300,628","","","$","332,339","","","$","143,339","","","$","202,818","","","$","979,124"],["","","Amount due in one year or less at:","","Amount due after one year at:"],["(Dollars in millions)","Variable Interest Rates","","Fixed Interest Rates","","Variable Interest Rates","","Fixed Interest Rates","","Total"],["Residential mortgage","$","18","","","$","157","","","$","80,967","","","$","141,100","","","$","222,242"],["Home equity","","98","","","1,498","","","25,982","","","696","","","28,274"],["Credit card","","77,151","","","4,287","","","\u2014","","","\u2014","","","81,438"],["Direct/Indirect consumer","48,424","","","5,656","","","2,551","","","46,929","","","103,560"],["Other consumer","\u2014","","","190","","","\u2014","","","\u2014","","","190"],["Total consumer loans","$","125,691","","","$","11,788","","","$","109,500","","","$","188,725","","","$","435,704"],["U.S. commercial","$","84,398","","","$","9,082","","","$","190,978","","","$","46,054","","","$","330,512"],["Non-U.S. commercial","39,472","","","3,098","","","70,817","","","2,504","","","115,891"],["Commercial real estate","15,673","","","649","","","44,626","","","2,061","","","63,009"],["Commercial lease financing","187","","","1,162","","","1,560","","","11,916","","","14,825"],["U.S. small business commercial","5,150","","","4,278","","","98","","","9,657","","","19,183"],["Total commercial loans","$","144,880","","","$","18,269","","","$","308,079","","","$","72,192","","","$","543,420"],["Total loans and leases","$","270,571","","","$","30,057","","","$","417,579","","","$","260,917","","","$","979,124"]]
[[/GREPCENT_TABLE]]

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

[[GREPCENT_TABLE]]
[["","","Bank of America 72"]]
[[/GREPCENT_TABLE]]

Allowance for Credit Losses

The allowance for credit losses decreased $6.8 billion from December 31, 2020 to $13.8 billion at December 31, 2021, which included a $3.8 billion reserve decrease related to the commercial portfolio and a $3.1 billion reserve decrease related

to the consumer portfolio. The decreases were primarily driven by improvements in the macroeconomic outlook and credit quality.

Table 41 presents an allocation of the allowance for credit losses by product type at December 31, 2021 and 2020.

[[GREPCENT_TABLE]]
[["Table 41","Allocation of the Allowance for Credit Losses by Product Type"],["","Amount","","Percent of Total","","Percent of Loans and LeasesOutstanding (1)","","","","","","","","Amount","","Percent of Total","","Percent of Loans and LeasesOutstanding (1)"],["(Dollars in millions)","December 31, 2021","","","","December 31, 2020"],["Allowance for loan and lease losses"],["Residential mortgage","$","351","","","2.83","%","","0.16","%","","","","","","","","$","459","","","2.44","%","","0.21","%"],["Home equity","206","","","1.66","","","0.74","","","","","","","","","399","","","2.12","","","1.16"],["Credit card","5,907","","","47.70","","","7.25","","","","","","","","","8,420","","","44.79","","","10.70"],["Direct/Indirect consumer","523","","","4.22","","","0.51","","","","","","","","","752","","","4.00","","","0.82"],["Other consumer","46","","","0.37","","","n/m","","","","","","","","41","","","0.22","","","n/m"],["Total consumer","7,033","","","56.78","","","1.62","","","","","","","","","10,071","","","53.57","","","2.35"],["U.S. commercial (2)","3,019","","","24.37","","","0.87","","","","","","","","","5,043","","","26.82","","","1.55"],["Non-U.S. commercial","975","","","7.87","","","0.86","","","","","","","","","1,241","","","6.60","","","1.37"],["Commercial real estate","1,292","","","10.43","","","2.05","","","","","","","","","2,285","","","12.15","","","3.79"],["Commercial lease financing","68","","","0.55","","","0.46","","","","","","","","","162","","","0.86","","","0.95"],["Total commercial","5,354","","","43.22","","","1.00","","","","","","","","","8,731","","","46.43","","","1.77"],["Allowance for loan and lease losses","12,387","","","100.00","%","","1.28","","","","","","","","","18,802","","","100.00","%","","2.04"],["Reserve for unfunded lending commitments","1,456","","","","","","","","","","","","","1,878"],["Allowance for credit losses","$","13,843","","","","","","","","","","","","","$","20,680"]]
[[/GREPCENT_TABLE]]

(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 $1.2 billion and $1.5 billion at December 31, 2021 and 2020.

n/m = not meaningful

Net charge-offs for 2021 were $2.2 billion compared to $4.1 billion in 2020 driven by decreases across most products. The provision for credit losses decreased $15.9 billion to a $4.6 billion benefit during 2021 compared to 2020. The allowance for credit losses had a reserve release of $6.8 billion for 2021, primarily driven by improvements in the macroeconomic outlook and credit quality. The provision for credit losses for the consumer portfolio, including unfunded lending commitments, decreased $6.1 billion to a benefit of $1.2 billion during 2021 compared to 2020. The provision for credit losses for the

commercial portfolio, including unfunded lending commitments, decreased $9.8 billion to a $3.4 billion benefit for 2021 compared to 2020.

Table 42 presents a rollforward of the allowance for credit losses, including certain loan and allowance ratios for 2021 and 2020. 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

[[GREPCENT_TABLE]]
[["Table 42","Allowance for Credit Losses"],["(Dollars in millions)","2021","","","","","","2020"],["Allowance for loan and lease losses, January 1","$","18,802","","","","","","","$","12,358"],["Loans and leases charged off"],["Residential mortgage","(34)","","","","","","","(40)"],["Home equity","(44)","","","","","","","(58)"],["Credit card","(2,411)","","","","","","","(2,967)"],["Direct/Indirect consumer","(297)","","","","","","","(372)"],["Other consumer","(292)","","","","","","","(307)"],["Total consumer charge-offs","(3,078)","","","","","","","(3,744)"],["U.S. commercial (1)","(626)","","","","","","","(1,163)"],["Non-U.S. commercial","(47)","","","","","","","(168)"],["Commercial real estate","(46)","","","","","","","(275)"],["Commercial lease financing","\u2014","","","","","","","(69)"],["Total commercial charge-offs","(719)","","","","","","","(1,675)"],["Total loans and leases charged off","(3,797)","","","","","","","(5,419)"],["Recoveries of loans and leases previously charged off"],["Residential mortgage","62","","","","","","","70"],["Home equity","163","","","","","","","131"],["Credit card","688","","","","","","","618"],["Direct/Indirect consumer","296","","","","","","","250"],["Other consumer","22","","","","","","","23"],["Total consumer recoveries","1,231","","","","","","","1,092"],["U.S. commercial (2)","298","","","","","","","178"],["Non-U.S. commercial","12","","","","","","","13"],["Commercial real estate","12","","","","","","","5"],["Commercial lease financing","1","","","","","","","10"],["Total commercial recoveries","323","","","","","","","206"],["Total recoveries of loans and leases previously charged off","1,554","","","","","","","1,298"],["Net charge-offs","(2,243)","","","","","","","(4,121)"],["Provision for loan and lease losses","(4,173)","","","","","","","10,565"],["Other","1","","","","","","","\u2014"],["Allowance for loan and lease losses, December 31","12,387","","","","","","","18,802"],["Reserve for unfunded lending commitments, January 1","1,878","","","","","","","1,123"],["Provision for unfunded lending commitments","(421)","","","","","","","755"],["Other","(1)","","","","","","","\u2014"],["Reserve for unfunded lending commitments, December 31","1,456","","","","","","","1,878"],["Allowance for credit losses, December 31","$","13,843","","","","","","","$","20,680"],["Loan and allowance ratios (3) :"],["Loans and leases outstanding at December 31","$","971,305","","","","","","","$","921,180"],["Allowance for loan and lease losses as a percentage of total loans and leases outstanding at December 31","1.28","%","","","","","","2.04","%"],["Consumer allowance for loan and lease losses as a percentage of total consumer loans and leases outstanding at December 31","1.62","","","","","","","2.35"],["Commercial allowance for loan and lease losses as a percentage of total commercial loans and leases outstanding at December 31","1.00","","","","","","","1.77"],["Average loans and leases outstanding","$","913,354","","","","","","","$","974,281"],["Annualized net charge-offs as a percentage of average loans and leases outstanding","0.25","%","","","","","","0.42","%"],["Allowance for loan and lease losses as a percentage of total nonperforming loans and leases at December 31","271","","","","","","","380"],["Ratio of the allowance for loan and lease losses at December 31 to net charge-offs","5.52","","","","","","","4.56"],["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)","$","7,027","","","","","","","$","9,854"],["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)","117","%","","","","","","181","%"]]
[[/GREPCENT_TABLE]]

(1)Includes U.S. small business commercial charge-offs of $425 million in 2021 compared to $321 million in 2020.

(2)Includes U.S. small business commercial recoveries of $74 million for 2021 compared to $54 million in 2020.

(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.

[[GREPCENT_TABLE]]
[["","","Bank of America 74"]]
[[/GREPCENT_TABLE]]

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.

We have been affected, and may continue to be affected, by market stress resulting from the pandemic that began in the first quarter of 2020. For more information, see Part 1. Item 1A. Risk Factors – Coronavirus Disease on page 8.

Our traditional banking loan and deposit products are non-trading positions and are generally reported at amortized cost for assets or the amount owed for liabilities (historical cost). However, these positions are still subject to changes in economic value based on varying market conditions, with one of the primary risks being changes in the levels of interest rates. The risk of adverse changes in the economic value of our non-trading positions arising from changes in interest rates is managed through our ALM activities. We have elected to account for certain assets and liabilities under the fair value option.

Our trading positions are reported at fair value with changes reflected in income. Trading positions are subject to various changes in market-based risk factors. The majority of this risk is generated by our activities in the interest rate, foreign exchange, credit, equity and commodities markets. In addition, the values of assets and liabilities could change due to market liquidity, correlations across markets and expectations of market volatility. We seek to manage these risk exposures by using a variety of techniques that encompass a broad range of financial instruments. The key risk management techniques are discussed in more detail in the Trading Risk Management section.

Global Risk Management is responsible for providing senior management with a clear and comprehensive understanding of the trading risks to which we are exposed. These responsibilities include ownership of market risk policy, developing and maintaining quantitative risk models, calculating aggregated risk measures, establishing and monitoring position limits consistent with risk appetite, conducting daily reviews and analysis of trading inventory, approving material risk exposures and fulfilling regulatory requirements. Market risks that impact businesses outside of Global Markets are monitored and governed by their respective governance functions.

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 (EMRC), 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

75 Bank of America

options, futures and swaps in the same or similar commodity product, as well as cash positions.

Issuer Credit Risk

Issuer credit risk represents exposures to changes in the creditworthiness of individual issuers or groups of issuers. Our portfolio is exposed to issuer credit risk where the value of an asset may be adversely impacted by changes in the levels of credit spreads, by credit migration or by defaults. Hedging instruments used to mitigate this risk include bonds, CDS and other credit fixed-income instruments.

Market Liquidity Risk

Market liquidity risk represents the risk that the level of expected market activity changes dramatically and, in certain cases, may even cease. This exposes us to the risk that we will not be able to transact business and execute trades in an orderly manner which may impact our results. This impact could be further exacerbated if expected hedging or pricing correlations are compromised by disproportionate demand or lack of demand for certain instruments. We utilize various risk mitigating techniques as discussed in more detail in Trading Risk Management.

Trading Risk Management

To evaluate 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.

Global Risk Management continually reviews, evaluates and enhances our VaR model so that it reflects the material risks in our trading portfolio. Changes to the VaR model are reviewed and approved prior to implementation and any material changes are reported to management through the appropriate management committees.

Trading limits on quantitative risk measures, including VaR, are independently set by Global Markets Risk Management and reviewed on a regular basis so 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.

[[GREPCENT_TABLE]]
[["","","Bank of America 76"]]
[[/GREPCENT_TABLE]]

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 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 2021 and 2020 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 decreased for 2021 compared to 2020 primarily due to an increase in diversification across asset classes.

[[GREPCENT_TABLE]]
[["Table 43","Market Risk VaR for Trading Activities"],["","2021","","","","2020"],["(Dollars in millions)","Year End","","Average","","High (1)","","Low (1)","","","","","","","","","","Year End","","Average","","High (1)","","Low (1)"],["Foreign exchange","$","11","","","$","12","","","$","21","","","$","5","","","","","","","","","","","$","8","","","$","7","","","$","25","","","$","2"],["Interest rate","54","","","40","","","80","","","16","","","","","","","","","","","30","","","19","","","39","","","7"],["Credit","73","","","69","","","84","","","53","","","","","","","","","","","79","","","58","","","91","","","25"],["Equity","21","","","24","","","35","","","19","","","","","","","","","","","20","","","24","","","162","","","12"],["Commodities","6","","","8","","","28","","","4","","","","","","","","","","","4","","","6","","","12","","","3"],["Portfolio diversification","(114)","","","(100)","","","\u2014","","","\u2014","","","","","","","","","","","(72)","","","(61)","","","\u2014","","","\u2014"],["Total covered positions portfolio","51","","","53","","","85","","","34","","","","","","","","","","","69","","","53","","","171","","","27"],["Impact from less liquid exposures (2)","8","","","20","","","\u2014","","","\u2014","","","","","","","","","","","52","","","27","","","\u2014","","","\u2014"],["Total covered positions and less liquid trading positions portfolio","59","","","73","","","125","","","46","","","","","","","","","","","121","","","80","","","169","","","30"],["Fair value option loans","51","","","50","","","65","","","31","","","","","","","","","","","52","","","52","","","84","","","7"],["Fair value option hedges","15","","","16","","","20","","","11","","","","","","","","","","","11","","","13","","","17","","","9"],["Fair value option portfolio diversification","(27)","","","(32)","","","\u2014","","","\u2014","","","","","","","","","","","(17)","","","(24)","","","\u2014","","","\u2014"],["Total fair value option portfolio","39","","","34","","","53","","","23","","","","","","","","","","","46","","","41","","","86","","","9"],["Portfolio diversification","(24)","","","(10)","","","\u2014","","","\u2014","","","","","","","","","","","(4)","","","(15)","","","\u2014","","","\u2014"],["Total market-based portfolio","$","74","","","$","97","","","169","","","54","","","","","","","","","","","$","163","","","$","106","","","171","","","32"]]
[[/GREPCENT_TABLE]]

(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.

The graph below presents the daily covered positions and less liquid trading positions portfolio VaR for 2021, corresponding to the data in Table 43.

77 Bank of America

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 2021 and 2020.

[[GREPCENT_TABLE]]
[["Table 44","Average Market Risk VaR for Trading Activities \u2013 99 percent and 95 percent VaR Statistics"],["","","","2021","","","","2020"],["(Dollars in millions)","","99 percent","","95 percent","","","","","","99 percent","","95 percent"],["Foreign exchange","","$","12","","","$","8","","","","","","","$","7","","","$","4"],["Interest rate","","40","","","20","","","","","","","19","","","9"],["Credit","","69","","","21","","","","","","","58","","","18"],["Equity","","24","","","12","","","","","","","24","","","13"],["Commodities","","8","","","4","","","","","","","6","","","3"],["Portfolio diversification","","(100)","","","(39)","","","","","","","(61)","","","(26)"],["Total covered positions portfolio","","53","","","26","","","","","","","53","","","21"],["Impact from less liquid exposures","","20","","","2","","","","","","","27","","","2"],["Total covered positions and less liquid trading positions portfolio","","73","","","28","","","","","","","80","","","23"],["Fair value option loans","","50","","","12","","","","","","","52","","","13"],["Fair value option hedges","","16","","","9","","","","","","","13","","","7"],["Fair value option portfolio diversification","","(32)","","","(9)","","","","","","","(24)","","","(8)"],["Total fair value option portfolio","","34","","","12","","","","","","","41","","","12"],["Portfolio diversification","","(10)","","","(7)","","","","","","","(15)","","","(6)"],["Total market-based portfolio","","$","97","","","$","33","","","","","","","$","106","","","$","29"]]
[[/GREPCENT_TABLE]]

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 ensure that the VaR methodology accurately represents those losses. We expect the frequency of trading losses in excess of VaR to be in line with the confidence level of the VaR statistic being tested. For example, with a 99 percent confidence level, we expect one trading loss in excess of VaR every 100 days or between two to three trading losses in excess of VaR over the course of a year. The number of backtesting excesses observed can differ from the statistically expected number of excesses if the current level of market volatility is materially different than the level of market volatility that existed during the three years of historical data used in the VaR calculation.

The trading revenue used for backtesting is defined by regulatory agencies in order to most closely align with the VaR component of the regulatory capital calculation. This revenue differs from total trading-related revenue in that it excludes revenue from trading activities that either do not generate market risk or the market risk cannot be included in VaR. Some examples of the types of revenue excluded for backtesting are fees, commissions, reserves, net interest income and 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 2021, there were two days 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 2021 and 2020. During 2021, 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. This compares to 2020 where positive trading-related revenue was recorded for 98 percent of the trading days, of which 87 percent were daily trading gains of over $25 million, and the largest loss was $90 million.

[[GREPCENT_TABLE]]
[["","","Bank of America 78"]]
[[/GREPCENT_TABLE]]

Trading Portfolio Stress Testing

Because the very nature of a VaR model suggests results can exceed our estimates and it is dependent on a limited historical window, we also stress test our portfolio using scenario analysis. This analysis estimates the change in the value of our trading portfolio that may result from abnormal market movements.

A set of scenarios, categorized as either historical or hypothetical, are computed daily for the overall trading portfolio and individual businesses. These scenarios include shocks to underlying market risk factors that may be well beyond the shocks found in the historical data used to calculate VaR. Historical scenarios simulate the impact of the market moves that occurred during a period of extended historical market stress. Generally, a multi-week period representing the most severe point during a crisis is selected for each historical scenario. Hypothetical scenarios provide estimated portfolio impacts from potential future market stress events. Scenarios are reviewed and updated in response to changing positions and new economic or political information. In addition, new or ad hoc scenarios are developed to address specific potential market events or particular vulnerabilities in the portfolio. The stress tests are reviewed on a regular basis and the results are presented to senior management.

Stress testing for the trading portfolio is integrated with enterprise-wide stress testing and incorporated into the limits framework. The macroeconomic scenarios used for enterprise-wide stress testing purposes differ from the typical trading portfolio scenarios in that they have a longer time horizon and the results are forecasted over multiple periods for use in consolidated capital and liquidity planning. For 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 direction of interest rate movements as implied by the market-based forward curve.

We then measure and evaluate the impact that alternative interest rate scenarios have on the baseline forecast in order to assess interest rate sensitivity under varied conditions. The net interest income forecast is frequently updated for changing assumptions and differing outlooks based on economic trends, market conditions and business strategies. Thus, we continually monitor our balance sheet position in order to maintain an acceptable level of exposure to interest rate changes.

The interest rate scenarios that we analyze incorporate balance sheet assumptions such as loan and deposit growth and pricing, changes in funding mix, product repricing, maturity characteristics and investment securities premium amortization. Our overall goal is to manage interest rate risk so that movements in interest rates do not significantly adversely affect earnings and capital.

Table 45 presents the spot and 12-month forward rates used in our baseline forecasts at December 31, 2021 and 2020.

[[GREPCENT_TABLE]]
[["Table 45","Forward Rates"],["","","December 31, 2021"],["","","Federal Funds","","Three-month LIBOR","","10-Year Swap"],["Spot rates","0.25","%","","0.21","%","","1.58","%"],["12-month forward rates","1.00","","","1.07","","","1.84"],["","","December 31, 2020"],["Spot rates","0.25","%","","0.24","%","","0.93","%"],["12-month forward rates","0.25","","","0.19","","","1.06"]]
[[/GREPCENT_TABLE]]

Table 46 shows the pretax impact to forecasted net interest income over the next 12 months from December 31, 2021 and 2020 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 rates are floored at zero.

During 2021, the overall decrease in asset sensitivity of our balance sheet to Up-rate and Down-rate scenarios was primarily due to ALM activity and an increase in long-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 impact the fair value of debt securities and, accordingly, for debt securities classified as AFS, may adversely affect accumulated OCI and thus capital levels under the Basel 3 capital rules. Under instantaneous upward parallel shifts, the near-term adverse impact to Basel 3 capital is reduced over time by offsetting positive impacts to net interest income. For more information on Basel 3, see Capital Management – Regulatory Capital on page 50.

[[GREPCENT_TABLE]]
[["Table 46","Estimated Banking Book Net Interest Income Sensitivity to Curve Changes"],["","","Short Rate (bps)","","Long Rate (bps)"],["","","","December 31"],["(Dollars in millions)","","","2021","","2020"],["Parallel Shifts"],["+100 bps instantaneous shift","+100","","+100","","$","6,542","","","$","10,468"],["-25 bps instantaneous shift","-25","","","-25","","","(2,092)","","","(2,766)"],["Flatteners"],["Short-end instantaneous change","+100","","\u2014","","","4,982","","","6,321"],["Long-end instantaneous change","\u2014","","","-25","","","(735)","","","(1,686)"],["Steepeners"],["Short-end instantaneous change","-25","","","\u2014","","","(1,344)","","","(1,084)"],["Long-end instantaneous change","\u2014","","","+100","","1,646","","","4,333"]]
[[/GREPCENT_TABLE]]

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 deposits 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

79 Bank of America

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 insignificant.

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 insignificant. 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 2021, 2020 and 2019, we recorded gains of $39 million, $321 million and $291 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.

[[GREPCENT_TABLE]]
[["","","Bank of America 80"]]
[[/GREPCENT_TABLE]]

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, determining and developing tests to be conducted by the Enterprise Independent Testing unit and reporting on the state of the control environment. Enterprise Independent Testing, an independent testing function within GRM, works with Global Compliance and Operational Risk, the FLUs and control functions in the identification of testing needs and test design, and is accountable for test execution, reporting and analysis of results. 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 represents, among other things, exposure to failures or interruptions of service or breaches of security, including as a result of malicious technological attacks, that impact the confidentiality, availability or integrity 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, which is focused on preparing for, preventing, detecting, mitigating, responding to and recovering from cyber threats and incidents and ensuring the Corporation’s processes operate effectively and mitigate the aforementioned risks.

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, as well as 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.

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, primarily through the ERC.

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 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 transition to a low-carbon economy, which may entail extensive policy, legal, technology and market changes, and (2) 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-level rise. These changes and events can have broad impacts on operations, supply chains, distribution networks, customers and markets and are otherwise referred to, respectively, as transition risk and physical risk. These risks can impact both financial and nonfinancial risk types. The impacts of transition risk can lead to and amplify credit risk or market risk by reducing our customers’ operating income or the value of their assets as well as expose us to reputational and/or litigation risk due to increased regulatory scrutiny or negative public sentiment. Physical risk can lead to increased credit risk by diminishing borrowers’ repayment capacity or impacting the value of collateral. In addition, it could pose increased operational risk to our facilities and people.

81 Bank of America

Effective management of climate risk requires coordinated governance, clearly defined roles and responsibilities and well-developed processes to identify, measure, monitor and control risks. We continue to build out and enhance our climate risk management capabilities. As climate risk is interconnected with 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 (ESRPF) 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 Corporate Governance, ESG, and Sustainability Committee and ERC, as well as the MRC and the Global ESG Committee, both of which are management-level committees comprised of senior leaders across every major FLU and control function.

Our climate risk management efforts are overseen by the Global Climate Risk Executive who reports to the CRO. The Global Climate Risk Executive chairs the Climate Risk Steering Council, which meets monthly and shapes our approach to managing climate-related risks in line with our Risk Framework.

As outlined in our ESRPF, we are focused on supporting and financing areas critical to the transition to a low-carbon economy. Accordingly, we have a goal, publicly announced in early 2021, to achieve net zero greenhouse gas emissions in our financing activities, operations and supply chain before 2050 (Net Zero Goal). More broadly, achieving this goal will require technological advances, clearly defined roadmaps for industry sectors, public policies, and better emissions data reporting, as well as ongoing, strong and active engagement with clients, suppliers, investors, government officials and other stakeholders.

Our progress towards achieving our Net Zero Goal is based on establishing the baseline for emissions associated with our financing activities often referred to as financed emissions. Currently, we are using the Partnership for Carbon Accounting Financials methodology to assess our financed emissions. Additionally, given the urgency required to address climate change, we helped to launch the Net Zero Banking Alliance (NZBA) in April 2021, which outlines guidelines for banks to achieve net zero greenhouse gas emissions including requirements for setting interim targets. As a member of NZBA, the Corporation and more than 100 other financial institution members representing more than 40 percent of the world’s banking assets, have committed to set emission reduction targets for 2030. We plan to begin disclosure of financed emissions by 2023, and set 2030 targets for the significant majority of emissions in our portfolio.

In 2021, we also announced a goal to deploy $1 trillion by 2030 to accelerate the transition to a low-carbon, sustainable economy by providing lending, capital raising, advisory and investment services, and by developing other client-driven financial solutions. This commitment anchors a broader $1.5

trillion sustainable finance goal to support both environmental transition and social inclusive development, which spans business activities across the globe. These goals are intended to help drive business opportunities and enhance risk management related to the transition to a low-carbon economy.

For more information about climate risk, see the Bank of America website. For more information about the Corporation’s climate-related goals and commitments, including emissions associated with our operations and supply chain and progress on our sustainable finance goals, see the Corporation’s 2021 Annual Report to shareholders that will be available on the Investor Relations portion of our website in March 2022. The contents of the Corporation’s website and 2021 Annual Report to shareholders are not incorporated by reference into this Annual Report on Form 10-K.

The foregoing discussion and our discussion in the 2021 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.

[[GREPCENT_TABLE]]
[["","","Bank of America 82"]]
[[/GREPCENT_TABLE]]

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 allowance for credit losses is based on numerous estimates and assumptions, which require 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 expected credit losses (ECL) calculation, which have included a baseline scenario, which is derived from consensus estimates, downside scenarios, a tail risk scenario similar to the severely adverse scenario used in stress testing and an upside scenario. Beginning in 2020, the scenarios incorporated the potential impacts of the pandemic and, beginning in the second quarter in 2021, an additional scenario was added to account for inflationary risk and higher interest rates. 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. gross domestic product (GDP) and unemployment rates. As of December 31, 2020, the weighted macroeconomic outlook for U.S. average unemployment rate was forecasted at 6.6 percent, 5.5 percent and 5.0 percent in the fourth quarters of 2021, 2022 and 2023, respectively, and the weighted macroeconomic outlook for U.S. GDP was forecasted to grow at 2.5 percent, 2.4 percent and 2.1 percent year-over-year in the fourth quarters of 2021, 2022 and 2023, respectively. As of December 31, 2021 the latest consensus estimates for the U.S. average unemployment rate for the fourth quarter of 2021 was 4.4 percent and U.S. GDP was forecasted to grow 5.2 percent year-over-year in the fourth quarter of 2021, both of which were meaningfully better than our macroeconomic outlook as of December 31, 2020 and were factored into our December 31, 2021 allowance for credit losses estimate. In addition, as of December 31, 2021, the weighted macroeconomic outlook for the U.S. average unemployment rate was forecasted at 5.2 percent and 4.7 percent in the fourth quarters of 2022 and 2023, and the weighted macroeconomic outlook for U.S. GDP was forecasted to grow 2.1 percent and 1.9 percent year-over-year in the fourth quarters of 2022 and 2023.

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. As the macroeconomic outlook improved in 2021, along with improvements in asset quality, the allowance for credit losses decreased to $13.8 billion from $20.7 billion at December 31, 2020.

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, 2021 modeled ECL from the baseline scenario and our downside scenario. Relative to the baseline scenario, the downside scenario assumed a peak U.S. unemployment rate of approximately three percentage points higher than the consensus outlook, a decline in U.S. GDP followed by a prolonged recovery and a lower home price outlook with a difference of 14 percent at the trough. This sensitivity analysis resulted in a hypothetical increase in the allowance for credit losses of approximately $5 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, 2021 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

83 Bank of America

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 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 2021, 2020 and 2019, 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 18 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, 2021 by using a qualitative assessment to determine whether it was more likely than not that the fair value of each reporting unit was less than its respective carrying value. Factors considered in the qualitative assessment included, among other things, macroeconomic conditions, industry and market considerations, financial performance of the respective reporting unit and other relevant entity- and reporting-unit specific considerations. Based on our qualitative assessment, we have concluded that it was not “more likely than not” that the reporting units’ fair values were less than their carrying values.

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.

[[GREPCENT_TABLE]]
[["","","Bank of America 84"]]
[[/GREPCENT_TABLE]]

Non-GAAP Reconciliations

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

[[GREPCENT_TABLE]]
[["Table 47","Annual Reconciliations to GAAP Financial Measures (1)"],["(Dollars in millions, shares in thousands)","2021","","2020","","2019"],["Reconciliation of average shareholders\u2019 equity to average tangible shareholders\u2019 equity and average tangible common shareholders\u2019 equity"],["Shareholders\u2019 equity","$","273,757","","","$","267,309","","","$","267,889"],["Goodwill","(69,005)","","","(68,951)","","","(68,951)"],["Intangible assets (excluding MSRs)","(2,177)","","","(1,862)","","","(1,721)"],["Related deferred tax liabilities","916","","","821","","","773"],["Tangible shareholders\u2019 equity","$","203,491","","","$","197,317","","","$","197,990"],["Preferred stock","(23,970)","","","(23,624)","","","(23,036)"],["Tangible common shareholders\u2019 equity","$","179,521","","","$","173,693","","","$","174,954"],["Reconciliation of year-end shareholders\u2019 equity to year-end tangible shareholders\u2019 equity and year-end tangible common shareholders\u2019 equity"],["Shareholders\u2019 equity","$","270,066","","","$","272,924","","","$","264,810"],["Goodwill","(69,022)","","","(68,951)","","","(68,951)"],["Intangible assets (excluding MSRs)","(2,153)","","","(2,151)","","","(1,661)"],["Related deferred tax liabilities","929","","","920","","","713"],["Tangible shareholders\u2019 equity","$","199,820","","","$","202,742","","","$","194,911"],["Preferred stock","(24,708)","","","(24,510)","","","(23,401)"],["Tangible common shareholders\u2019 equity","$","175,112","","","$","178,232","","","$","171,510"],["Reconciliation of year-end assets to year-end tangible assets"],["Assets","$","3,169,495","","","$","2,819,627","","","$","2,434,079"],["Goodwill","(69,022)","","","(68,951)","","","(68,951)"],["Intangible assets (excluding MSRs)","(2,153)","","","(2,151)","","","(1,661)"],["Related deferred tax liabilities","929","","","920","","","713"],["Tangible assets","$","3,099,249","","","$","2,749,445","","","$","2,364,180"]]
[[/GREPCENT_TABLE]]

(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 31.

[[GREPCENT_TABLE]]
[["Table 48","Quarterly Reconciliations to GAAP Financial Measures (1)"],["","","2021 Quarters","","2020 Quarters"],["(Dollars in millions)","Fourth","","Third","","Second","","First","","Fourth","","Third","","Second","","First"],["Reconciliation of average shareholders\u2019 equity to average tangible shareholders\u2019 equity and average tangible common shareholders\u2019 equity"],["Shareholders\u2019 equity","$","270,883","","","$","275,484","","","$","274,632","","","$","274,047","","","$","271,020","","","$","267,323","","","$","266,316","","","$","264,534"],["Goodwill","(69,022)","","","(69,023)","","","(69,023)","","","(68,951)","","","(68,951)","","","(68,951)","","","(68,951)","","","(68,951)"],["Intangible assets (excluding MSRs)","(2,166)","","","(2,185)","","","(2,212)","","","(2,146)","","","(2,173)","","","(1,976)","","","(1,640)","","","(1,655)"],["Related deferred tax liabilities","913","","","915","","","915","","","920","","","910","","","855","","","790","","","728"],["Tangible shareholders\u2019 equity","$","200,608","","","$","205,191","","","$","204,312","","","$","203,870","","","$","200,806","","","$","197,251","","","$","196,515","","","$","194,656"],["Preferred stock","(24,364)","","","(23,441)","","","(23,684)","","","(24,399)","","","(24,180)","","","(23,427)","","","(23,427)","","","(23,456)"],["Tangible common shareholders\u2019 equity","$","176,244","","","$","181,750","","","$","180,628","","","$","179,471","","","$","176,626","","","$","173,824","","","$","173,088","","","$","171,200"],["Reconciliation of period-end shareholders\u2019 equity to period-end tangible shareholders\u2019 equity and period-end tangible common shareholders\u2019 equity"],["Shareholders\u2019 equity","$","270,066","","","$","272,464","","","$","277,119","","","$","274,000","","","$","272,924","","","$","268,850","","","$","265,637","","","$","264,918"],["Goodwill","(69,022)","","","(69,023)","","","(69,023)","","","(68,951)","","","(68,951)","","","(68,951)","","","(68,951)","","","(68,951)"],["Intangible assets (excluding MSRs)","(2,153)","","","(2,172)","","","(2,192)","","","(2,134)","","","(2,151)","","","(2,185)","","","(1,630)","","","(1,646)"],["Related deferred tax liabilities","929","","","913","","","915","","","915","","","920","","","910","","","789","","","790"],["Tangible shareholders\u2019 equity","$","199,820","","","$","202,182","","","$","206,819","","","$","203,830","","","$","202,742","","","$","198,624","","","$","195,845","","","$","195,111"],["Preferred stock","(24,708)","","","(23,441)","","","(23,441)","","","(24,319)","","","(24,510)","","","(23,427)","","","(23,427)","","","(23,427)"],["Tangible common shareholders\u2019 equity","$","175,112","","","$","178,741","","","$","183,378","","","$","179,511","","","$","178,232","","","$","175,197","","","$","172,418","","","$","171,684"],["Reconciliation of period-end assets to period-end tangible assets"],["Assets","$","3,169,495","","","$","3,085,446","","","$","3,029,894","","","$","2,969,992","","","$","2,819,627","","","$","2,738,452","","","$","2,741,688","","","$","2,619,954"],["Goodwill","(69,022)","","","(69,023)","","","(69,023)","","","(68,951)","","","(68,951)","","","(68,951)","","","(68,951)","","","(68,951)"],["Intangible assets (excluding MSRs)","(2,153)","","","(2,172)","","","(2,192)","","","(2,134)","","","(2,151)","","","(2,185)","","","(1,630)","","","(1,646)"],["Related deferred tax liabilities","929","","","913","","","915","","","915","","","920","","","910","","","789","","","790"],["Tangible assets","$","3,099,249","","","$","3,015,164","","","$","2,959,594","","","$","2,899,822","","","$","2,749,445","","","$","2,668,226","","","$","2,671,896","","","$","2,550,147"]]
[[/GREPCENT_TABLE]]

(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 31.

85 Bank of America