10-KPeriod: FY2013

BANK OF AMERICA CORP /DE/ Annual Report, Year Ended Dec 31, 2013

Filed February 25, 2014For Securities:BACBAC-PBBAC-PKBAC-PLBAC-PMBAC-PNBAC-PSBML-PJBAC-PEBAC-PPBAC-PQBACRPBML-PGBML-PHBML-PLBAC-POMER-PK

Summary

In 2013, Bank of America Corporation (BAC) demonstrated a significant recovery, reporting a net income of $11.4 billion, a substantial increase from $4.2 billion in 2012. This improvement was driven by a combination of stabilizing revenues, cost reductions through initiatives like Project New BAC, and a stronger balance sheet. The company continued to streamline its organizational structure, notably merging its Merrill Lynch subsidiary into the Corporation. Key financial metrics showed positive trends, with revenue increasing to $89.8 billion (FTE basis) and the provision for credit losses decreasing significantly due to improving asset quality. The company repurchased $3.2 billion of its common stock and redeemed $5.5 billion in preferred stock as part of its capital management actions. Despite these positives, the company's risk factors section highlights ongoing concerns related to mortgage and housing market risks, particularly concerning representations and warranties on sold mortgage loans, and the evolving regulatory landscape following the Dodd-Frank Act, which is expected to continue impacting earnings through reduced fees and higher costs.

Financial Highlights

36 data points
Beta

Revenue

$88.94B

Net Income

$11.43B

12.9% Net Margin

EPS (Diluted)

$0.90

Total Assets

$2.10T

Cash & Equivalents

$131.32B

Free Cash Flow

$92.82B

Financial Statements
Beta
Revenue$88.94B
Interest Expense$12.76B
Net Income$11.43B
EPS (Basic)$0.94
EPS (Diluted)$0.90
Shares Outstanding (Basic)10.73B
Shares Outstanding (Diluted)11.49B

Key Highlights

  • 1Net income increased significantly to $11.4 billion in 2013 from $4.2 billion in 2012.
  • 2Total revenue, net of interest expense (FTE basis), rose to $89.8 billion in 2013, up from $84.2 billion in 2012.
  • 3Provision for credit losses decreased by $4.6 billion to $3.6 billion in 2013, reflecting improved credit quality.
  • 4Noninterest expense decreased by $2.9 billion to $69.2 billion, largely due to cost-saving initiatives and lower litigation expenses, although litigation expense itself increased.
  • 5The company repurchased $3.2 billion of common stock and redeemed $5.5 billion of preferred stock during 2013.
  • 6Unresolved repurchase claims related to private-label securitizations increased, while claims related to GSEs decreased significantly due to settlements.
  • 7The company's capital ratios remained strong, with Tier 1 common capital ratio at 11.19% at year-end 2013.

Frequently Asked Questions

In 2013, Bank of America reported a substantial increase in net income to $11.4 billion, a significant improvement from $4.2 billion in 2012. Revenue also increased to $89.8 billion (FTE basis) from $84.2 billion in 2012, driven by higher noninterest income, particularly in investment banking and trading accounts. The provision for credit losses decreased considerably due to improving economic conditions and better asset quality.

Key risks for investors include adverse impacts from general economic and market conditions, particularly related to interest rates and unemployment. Significant risks also stem from mortgage and housing market issues, specifically representations and warranties on sold mortgage loans, which could lead to substantial repurchase obligations and further losses. Additionally, the company faces ongoing regulatory and legal risks, including compliance costs associated with new legislation like the Dodd-Frank Act, and potential penalties and fines from various governmental and regulatory actions, particularly concerning mortgage-related activities.

Bank of America is actively managing its capital and liquidity through various initiatives. This includes executing its capital plan approved by the Federal Reserve under CCAR, which involved repurchasing common stock and redeeming preferred stock. The company also focuses on maintaining strong capital ratios in line with Basel 3 regulatory capital rules and is implementing new liquidity standards like the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). The company also maintains substantial excess liquidity sources, primarily in cash and high-quality, liquid, unencumbered securities, to meet its obligations.

The BNY Mellon Settlement refers to an agreement concerning representations and warranties related to mortgage loans securitized by Countrywide. While the New York Supreme Court issued a decision approving the settlement in January 2014, it remained subject to appeal. The outcome of these appeals could significantly impact future representations and warranties losses, potentially differing from existing accruals and estimates.