8-KOther Events

BANK OF AMERICA CORP /DE/ 8-K Report, Corporate Update (Feb 8, 2019)

Filed February 8, 2019For Securities:BACBAC-PBBAC-PKBAC-PLBAC-PMBAC-PNBAC-PSBML-PJBAC-PEBAC-PPBAC-PQBACRPBML-PGBML-PHBML-PLBAC-POMER-PK

Summary

This 8-K filing from Bank of America (BAC) reports on the 2018 total compensation approved for Chairman and CEO Brian T. Moynihan. His compensation increased to $26.5 million from $23 million in the prior year. This increase is attributed to the company's strong financial performance in 2018, including record earnings of $28.1 billion, consistent positive operating leverage, disciplined expense management, and investments in employees and clients. The compensation structure remains largely consistent with prior years, with a significant portion tied to performance-based restricted stock units (RSUs) that are contingent on meeting specific financial targets over a three-year period. The company highlighted its commitment to responsible growth, noting significant bonuses to employees, increased philanthropic giving, and strong returns to shareholders. The filing provides further detail on the pay-for-performance design, outlining the specific metrics and targets for Mr. Moynihan's performance RSUs, which include three-year average growth in adjusted tangible book value and return on assets (ROA). The ROA standard has been increased, reflecting the company's improved performance. The structure also includes time-based RSUs and emphasizes stock ownership and retention requirements, as well as clawback policies. Overall, the report aims to provide transparency to investors regarding executive compensation decisions and the performance metrics driving them, underscoring the alignment between executive pay and company results.

Key Highlights

  • 1CEO Brian T. Moynihan's 2018 total compensation increased to $26.5 million from $23 million in 2017.
  • 2Compensation increase is linked to Bank of America's record 2018 earnings of $28.1 billion and strong operational performance.
  • 3A significant portion of CEO compensation is in performance-based RSUs, contingent on achieving specific three-year financial targets.
  • 4The company has increased the performance metric for ROA for the 2019 performance RSUs, reflecting improved company performance.
  • 5Bank of America reported a 54% increase in 2018 earnings compared to 2017.
  • 6Total capital returned to common shareholders in 2018 exceeded $25 billion, a 52% increase from 2017.
  • 7The company continues to emphasize responsible growth, employee investment, and community support, including increased philanthropic giving and employee bonuses.

Frequently Asked Questions

The CEO's total compensation increased to $26.5 million in 2018 from $23 million in 2017 due to Bank of America's strong financial performance, including record earnings of $28.1 billion, consistent positive operating leverage, disciplined expense management, and investments in employees and clients, aligning with the company's 'Responsible Growth' strategy.

Fifty percent of Mr. Moynihan's 2018 equity incentive award is in performance-based restricted stock units (RSUs). These RSUs will only vest if the company meets specific financial performance metrics over a three-year period.

The performance metrics for the 2019 performance RSUs require a three-year average growth of adjusted tangible book value of 8.5% and a three-year average return on assets (ROA) of 1.0%. Meeting or exceeding both standards is necessary for the maximum payout.

The filing indicates that the ROA standard for the 2019 performance RSUs has been increased for the second consecutive year. This reflects the company's strong performance in 2018 and requires higher aggregate net income to achieve the target compared to the previous year's standard.