8-KEarnings & ResultsOther Events

BANK OF AMERICA CORP /DE/ 8-K Report, Financial Results (Jan 8, 2024)

Filed January 8, 2024For 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 Corporation (BAC) discloses a significant one-time, non-cash, pre-tax charge of approximately $1.6 billion recognized in the fourth quarter of 2023. This charge is a result of accounting adjustments related to the transition away from the London Interbank Offered Rate (LIBOR) and its successor, the Bloomberg Short-Term Bank Yield Index (BSBY). The cessation of BSBY necessitated the de-designation of certain interest rate swaps used in cash flow hedges for BSBY-indexed loans, leading to the reclassification of amounts from accumulated other comprehensive income into earnings. While this charge impacts reported earnings for the fourth quarter of 2023 and temporarily reduced the Common Equity Tier 1 (CET1) ratio by eight basis points, the company emphasizes that it is non-cash and that the economics of the underlying loans are not fundamentally altered. The $1.6 billion is expected to be recognized back into interest income over subsequent periods, largely through 2026, as the loans transition to the Secured Overnight Financing Rate (SOFR). Investors should note that the company will officially report its full fourth-quarter 2023 financial results on January 12, 2024.

Key Highlights

  • 1Bank of America recognized a pre-tax, non-cash charge of approximately $1.6 billion in Q4 2023 due to accounting adjustments related to the BSBY rate cessation.
  • 2The charge stems from the de-designation of interest rate swaps hedging BSBY-indexed loans, with related amounts reclassified from accumulated other comprehensive income to earnings.
  • 3This accounting treatment is a consequence of the global transition away from LIBOR and specific reference rates like BSBY.
  • 4The economic impact on the underlying BSBY-indexed loans is expected to be nominal, as they are anticipated to transition to SOFR.
  • 5The charge is expected to reverse and be recognized back into interest income gradually through 2026.
  • 6The charge temporarily reduced Bank of America's CET1 ratio by eight basis points as of December 31, 2023.
  • 7The company's official Q4 2023 earnings report is scheduled for January 12, 2024.

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