10-QPeriod: Q2 FY2014

BANK OF AMERICA CORP /DE/ Quarterly Report for Q2 Ended Jun 30, 2014

Filed July 29, 2014For Securities:BACBAC-PBBAC-PKBAC-PLBAC-PMBAC-PNBAC-PSBML-PJBAC-PEBAC-PPBAC-PQBACRPBML-PGBML-PHBML-PLBAC-POMER-PK

Summary

Bank of America Corporation (BAC) reported its second quarter 2014 financial results, showing a decrease in net income to $2.3 billion, or $0.19 per diluted share, compared to $4.0 billion, or $0.32 per diluted share, in the second quarter of 2013. This decline was primarily attributed to a significant increase in litigation expense, particularly related to previously disclosed legacy mortgage-related matters. Despite the lower net income, the Corporation highlighted continued improvement in credit quality and strong capital and liquidity levels. The company also announced a settlement with AIG for $650 million to resolve outstanding residential mortgage-backed securities litigation claims. Capital management remains a focus, with the Corporation resubmitting its 2014 Comprehensive Capital Analysis and Review (CCAR) plan to the Federal Reserve after revising certain regulatory capital amounts. While awaiting the Federal Reserve's response, the company secured approval for continued common stock dividends of $0.01 per share and an amendment to its Series T Preferred Stock to qualify as Tier 1 capital, increasing its capital by approximately $2.9 billion. The company also noted progress on its Project New BAC cost savings initiative, expecting to reach its $2 billion quarterly savings target ahead of schedule.

Financial Highlights

35 data points
Beta

Revenue

$21.75B

Net Income

$2.29B

10.5% Net Margin

EPS (Diluted)

$0.19

Total Assets

$2.17T

Cash & Equivalents

$152.90B

Free Cash Flow

$4.78B

Financial Statements
Beta
Revenue$21.75B
Interest Expense$2.93B
Net Income$2.29B
EPS (Basic)$0.19
EPS (Diluted)$0.19
Shares Outstanding (Basic)10.52B
Shares Outstanding (Diluted)11.27B

Key Highlights

  • 1Net income decreased to $2.3 billion ($0.19/share) in Q2 2014 from $4.0 billion ($0.32/share) in Q2 2013, impacted by higher litigation expenses.
  • 2AIG settlement reached for $650 million to resolve RMBS litigation claims.
  • 3Common equity Tier 1 capital ratio stood at 12.0% under Basel 3 Standardized – Transition.
  • 4Successfully amended Series T Preferred Stock to qualify as Tier 1 capital, increasing it by $2.9 billion.
  • 5Project New BAC cost savings program is ahead of schedule, with a revised target of $2 billion quarterly savings by Q4 2014.
  • 6Net interest income (FTE basis) decreased to $10.2 billion from $10.8 billion year-over-year.
  • 7Mortgage banking income significantly decreased due to lower core production revenue and servicing income.

Frequently Asked Questions

The decrease in net income was primarily driven by a significant increase in litigation expense, notably related to previously disclosed legacy mortgage-related matters, which negatively impacted earnings by approximately $3.5 billion for the quarter.

Bank of America resubmitted its 2014 CCAR capital plan after revising certain regulatory capital amounts. The Federal Reserve has until August 10, 2014, to respond to the resubmitted plan, which includes requested capital actions.

The Corporation reached a settlement agreement with AIG for $650 million to resolve all outstanding residential mortgage-backed securities litigation claims between the parties. This settlement also includes AIG's withdrawal of its objection in the Bank of New York Mellon Settlement court approval proceeding.

Consumer & Business Banking (CBB) saw net income increase to $1.8 billion, driven by lower provision for credit losses and noninterest expense. Global Wealth & Investment Management (GWIM) net income decreased to $724 million due to higher noninterest expense. Global Markets reported a net income increase to $1.1 billion, driven by higher equity investment gains and investment banking fees. Consumer Real Estate Services (CRES) reported a net loss of $2.8 billion, significantly impacted by higher litigation expense.