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Slide 1: Bank of America First Quarter 2009 Results Ken Lewis Chairman, CEO and President Joe Price Chief Financial Officer April 20, 2009
Slide 2: Forward Looking Statements Bank of America 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 are not historical facts, but instead represent Bank of America’s current expectations, plans or forecasts of its future earnings, integration of acquisitions and related cost savings, loan modifications, investment bank rankings, loan and deposit growth, mortgage originations and market share, credit losses, credit reserves and charge-offs, consumer credit card net loss ratios, tax rates, payments on mortgage backed securities, global markets originations and trading and other similar matters. These statements are not guarantees of future results or performance and involve certain risks, uncertainties and assumptions that are difficult to predict and are often beyond Bank of America’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 all of the following uncertainties and risks, as well as those more fully discussed under Item 1A. “Risks Factors” of Bank of America’s 2008 Annual Report on Form 10-K and in any of Bank of America’s subsequent SEC filings: negative economic conditions; the level and volatility of the capital markets, interest rates, currency values and other market indices; changes in consumer, investor and counterparty confidence; Bank of America’s credit ratings and the credit ratings of its securitizations; estimates of fair value of certain of Bank of America’s assets and liabilities; legislative and regulatory actions in the United States and internationally; the impact of litigation and regulatory investigations, including costs, expenses, settlements and judgments; various monetary and fiscal policies and regulations of the U.S. and non-U.S. governments; changes in accounting standards, rules and interpretations; increased globalization of the financial services industry and competition with other U.S. and international financial institutions; Bank of America’s ability to attract new employees and retain and motivate existing employees; mergers and acquisitions and their integration into Bank of America; Bank of America’s reputation; and decisions to downsize, sell or close units or otherwise change the business mix of Bank of America. Forward-looking statements speak only as of the date they are made, and Bank of America 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. 2
Slide 3: Important Presentation Format Information • Certain prior period amounts have been reclassified to conform to current period presentation • This information is preliminary and based on company data available at the time of the presentation 3
Slide 4: Summary • • • • • • • 1Q09 net income of $4.2 billion Diluted EPS of $0.44 after preferred dividends Record revenue and pre-tax pre-provision earnings of $36.1 billion and $19.1 billion on a fully taxableequivalent basis First quarter results include Merrill Lynch Global Markets reported record results including the absorption of $1.7 billion in capital markets disruption charges Mortgage banking income of $3.3 billion driven by Countrywide and favorable interest rate environment – Home loan production of $89 billion increased 79% from 4Q08 and 131% from 1Q08 1Q09 included the following items, all recorded in our corporate treasury/other unit: – $1.9 billion pre-tax gain on sale of partial ownership in China Construction Bank – $2.2 billion pre-tax FVO positive adjustment on Merrill Lynch structured notes – $1.5 billion pre-tax gain on sale of debt securities Given the credit losses resulting from the deteriorating economy the company strengthened reserves for loan losses by $6.4 billion in the quarter, now covers 3% of loans – Allowance for credit losses, including reserve for unfunded lending commitments stands at $30.4 billion – Net charge-offs of $6.9 billion and provision expense of $13.4 billion Global Markets balance sheet reduced $149 billion or 21% in 1Q09 from proforma levels at the end of December Retail deposits showed strong growth momentum at the end of the quarter Credit extended in the quarter totaled $183 billion Tangible common equity ratio improved to 3.13% and a strong Tier 1 ratio at 10.1% Liquidity was enhanced as deposit levels were steady and cash and cash equivalents increased to end the quarter at $173 billion Company continues to successfully operate in a tough economic environment Addition of market sensitive businesses helping to weather the current environment • • • • • • • • 4
Slide 5: Consolidated Highlights - 1Q09 ($ in millions) Increase (decrease) over 1Q09 1Q08 $ 2,528 16,181 18,709 7,370 7,739 3,600 $ $ $ 563 3,037 1,243 1,794 0.21 497 N/M N/M $ $ $ $ 4Q08 (587) 20,687 20,100 4,845 6,055 9,200 3,164 6,036 830 5,206 0.92 398 N/M N/M $ 12,819 23,261 36,080 13,380 17,002 5,698 $ $ $ 1,451 4,247 1,433 2,814 0.44 604 7.10 % 12.41 Net interest income (FTE) Noninterest income Total revenue, net of interest expense (FTE) Provision for credit losses Noninterest expense Pre-tax income Income tax expense (FTE) Net income Preferred stock dividends Net income applicable to common shareholders Diluted EPS After tax effect of merger charge Return on common equity Tangible return on equity • • • • • • 1Q09 reflects $19.1 billion in pre-tax pre-provision earnings 1Q09 results include $10.0 billion in revenue and $4.7 billion in expense from the addition of Merrill Lynch Global Markets reported record results including the absorption of $1.7 billion in capital markets disruption charges Record mortgage banking income of $3.3 billion driven by Countrywide and favorable interest rate environment – Home loan production of $89 billion increased 79% from 4Q08 and 131% from 1Q08 1Q09 included the following items, all recorded in our corporate treasury/other unit: – $1.9 billion pre-tax gain on sale of partial ownership in China Construction Bank – $2.2 billion pre-tax FVO positive adjustment on Merrill Lynch structured notes – $1.5 billion gain on sale of debt securities 1Q09 provision expense of $13.4 billion includes $6.4 billion reserve build – $4.8 billion increase in provision expense over 4Q08 result of $1.4 billion increase in charge-offs and $3.4 billion increase in reserve build 5
Slide 6: Bank of America Addressing Economic Issues • • Remain committed to customers and clients during the economic stress Continue to support government efforts in stabilization – Credit markets – Home ownership – Consumer financial health – Commercial business stability Examples include: – Loan modification program projected to modify $100 billion or more home loans over 3 years and keep 630,000 borrowers in homes – Currently have 6,400 associates working in home retention – During 1Q09 Bank of America completed nearly 119,000 modifications Lending is our business and we are extending credit – $183 billion of credit extensions, including renewals, during the quarter: • $ 85 billion first mortgages • $ 71 billion commercial non-real estate • $ 11 billion commercial real estate • $ 16 billion other consumer and small business loans • • 6
Slide 7: 2009 Segment Reporting Changes 2008 Reporting Segments & Related Businesses Global Consumer & Small Business Banking Deposits and Student Lending Card Services Mortgage, Home Equity and Insurance Debit card 1 results now reported as a payment product in Global Card Services 2009 Reporting Segments Deposits (Liam McGee) Global Card Services (Ric Struthers) Home Loans & Insurance Global Corporate & Investment Banking Business Lending (Barbara Desoer) Investment banking results now recorded in Global Banking and Global Markets based on an internal fee sharing arrangement Treasury Services Capital Markets and Advisory Services Premier Banking and Investments Columbia Management Global Banking (Brian Moynihan) Global Markets Global Wealth & Investment Management (Tom Montag) GWM (Brian Moynihan) US Trust 7 1 Debit Card results are included in Global Card Services and prior period amounts have been reclassified to conform to the current period presentation.
Slide 8: Deposits Highlights - 1Q09 ($ in millions) Net interest income (FTE) Noninterest income Total revenue, net of interest expense (FTE) Noninterest expense Pre-tax pre-provision for credit loss income Provision for credit losses Net income (loss) 1Q09 $ 1,962 1,502 3,464 2,363 $ 1,101 $ $ 311 493 Increase (decrease) over 1Q08 4Q08 $ (610) $ (1,087) (76) (184) (686) (1,271) 147 110 $ (833) $ (1,381) $ $ 65 (567) $ 76 $ (1,015) Key Stats Total retail households Online banking customers Banking stores ATMs (branded) States in footprint Ending retail deposits 1 55 million 30 million 6,145 18,532 32 $ 669 billion • Deposits net income was down $1.0 billion from 4Q08 • Lower net interest income was primarily a result of allocations driven by interest rate risk and liquidity actions related to our ALM activities, and to a smaller extent, spread compression on money market deposits • Continuing to drive deposit growth • New sales initiatives like “Go America Save” and others driving growth • Affinity sales represent 37% of checking sales in 1Q • Noninterest income includes lower service charges from prior periods due to both seasonality and changes in consumer spending behavior 8 1 Retail deposits include GWM deposits and certain deposits from Global Banking and All Other
Slide 9: Retail Deposits Growth Remains Steady Bank of America Retail Deposits Average ($in billions) 1 1Q08 2Q08 3Q08 4Q08 1Q09 1Q09 vs 1Q08 4Q08 6% 0% -17% 13% Retail Legacy Bank of America Legacy Merrill Lynch Legacy Countrywide Total Retail $ 521.8 $ 529.4 $ 537.4 $ 556.2 $ 554.5 81.2 38.7 31.6 26.1 $ 521.8 $ 529.4 $ 576.1 $ 587.8 $ 661.8 27% End of Period ($in billions) 1Q08 2Q08 3Q08 4Q08 1Q09 1Q09 vs 1Q08 4Q08 5% 1% -17% 14% Retail Legacy Bank of America Legacy Merrill Lynch Legacy Countrywide Total Retail $ 534.5 $ 529.9 $ 550.8 $ 559.7 $ 562.8 82.5 35.4 28.6 23.6 $ 534.5 $ 529.9 $ 586.2 $ 588.3 $ 668.9 25% • Average retail deposits are up $140 billion from 1Q08 • Legacy Bank of America deposits grew 6% • Legacy Countrywide balances have been declining, as expected, as pricing strategies are being aligned with Legacy Bank of America • Merrill Lynch retail deposits have increased $4 billion since acquisition date • Period end balances reflect strong momentum entering the second quarter 1 Retail deposits include GWM deposits and certain deposits from Global Banking and All Other 9
Slide 10: Global Card Services Highlights - 1Q09 ($ in millions) Net interest income (FTE) Noninterest income Total revenue, net of interest expense (FTE) Noninterest expense Pre-tax pre-provision for credit loss income Provision for credit losses Net income (loss) 1Q09 $ 5,207 2,250 7,457 2,075 $ 5,382 $ 8,221 $ (1,769) Increase (decrease) over 1Q08 4Q08 $ 680 $ (30) (1,091) (458) (411) (488) (124) (103) $ (287) $ (385) $ $ 3,909 (2,636) $ 2,498 $ (1,795) • Global Card Services recorded a net loss of $1.8 billion driven by higher credit costs in credit card, consumer lending and small business and as well as lower spending levels • Retail volume is down seasonally 9% from 4Q08 and 10% from 1Q08 from the economic effect of lower consumer spending levels • Asset quality continued to deteriorate as unemployment levels rose – Managed losses were up $759 million or 17% from 4Q08 – Reserve build of $2.9 billion in 1Q09 increased $1.7 billion from 4Q08 • Ending loans of $218 billion are down 5% from both periods. The linked quarter decline is driven by seasonality • Unused commitments were reduced over $200 billion or 26% in the quarter, principally on inactive accounts Key Stats ($ in Millions; Accounts in Thousands) Managed Credit Card Data Gross interest yield Risk adjusted margin New account growth Purchase volumes Debit Card Data Debit purchase volumes 1Q09 11.68% 4.65% 1,226 48,056 51,133 4Q08 11.87% 6.47% 1,432 56,585 52,925 10
Slide 11: Home Loans & Insurance Highlights - 1Q09 ($ in millions) Net interest income (FTE) Noninterest income Total revenue, net of interest expense (FTE) Noninterest expense Pre-tax pre-provision for credit loss income Provision for credit losses Net income (loss) Key Stats ($ in billions) 1Q09 Total Corp Home Loan Originations First Mortgage 85.2 Home Equity 4.0 MSR, Ending Balance Capitalized MSR, bps Serviced for Others, EOP 14.1 83 1,699 4Q08 44.6 5.3 12.7 77 1,654 (1) 1Q09 $ 1,180 4,044 5,224 2,650 $ 2,574 $ 3,372 $ (498) Increase (decrease) over 1Q08 4Q08 $ 581 $ 161 3,271 1,797 3,852 1,958 1,928 (84) $ 1,924 $ 2,042 $ $ 1,560 234 $ $ 1,749 189 • Home Loans & Insurance net income improved $189 million to net loss of $498 million, despite an increase in provision for credit losses of $1.7 billion – Mortgage banking income increased $1.8 billion • Production revenue increased $946 million due to favorable volume and margins driven by the reduced interest rate environment • Servicing income increased $854 million primarily due to favorable performance of MSRs Provision expense of $3.4 billion increased $1.7 billion from 4Q08 • Net charge-offs increased $516 million from 4Q08 • Reserve build of $1.9 billion increased $1.2 billion over 4Q08 including an increase in the allowance for impaired loans – 1 Provision expense in this segment only represents home equity provisioning as the majority of residential mortgages utilized by our treasury group in managing the interest rate risk of the company are included in All Other 11
Slide 12: Global Wealth Management Highlights - 1Q09 ($ in millions) Net interest income (FTE) Noninterest income Total revenue, net of interest expense (FTE) Noninterest expense Pre-tax pre-provision for credit loss income Provision for credit losses Net income 1Q09 $ 1,653 2,708 4,361 3,288 $ 1,073 $ $ 254 510 Increase (decrease) over 1Q08 4Q08 $ 635 $ 310 1,784 2,066 2,419 2,376 1,974 2,215 $ 445 $ 161 $ $ 11 268 $ $ 102 1 • GWM reported net income of $510 million as the impact of the acquisition of Merrill Lynch was offset by lower revenue and increased provision expense – Aside from adding Merrill Lynch revenues in the quarter, net interest income was pressured as a result of allocations driven by interest rate risk and liquidity actions related to our ALM activities , and to a lesser extent, spread compression on money market deposits – Investment and brokerage services adversely impacted by lower valuations in the equity markets – Assets under management began the quarter at $769 billion, after adding $246 billion from Merrill Lynch, but declined to $697 billion during the quarter • 1Q09 experienced $43 billion negative net flows and $29 billion from market valuation decline • $43 billion of negative flows was primarily cash as equity and fixed income flows were stable – Financial advisor headcount ended the quarter at just under 16,000 with the addition of Merrill Lynch • 95% of all high producers have been retained • During the quarter the headcount was reduced by roughly 2,000 associates driven by reductions in trainees and lower producing advisors – Support of cash funds of $117 million in 1Q09 was $109 million lower than 4Q08 – Higher expenses driven primarily by the addition of Merrill Lynch – Provision expense driven by home equity reserve build and losses 12
Slide 13: Global Banking Highlights - 1Q09 ($ in millions) Net interest income (FTE) Noninterest income Total revenue, net of interest expense (FTE) Noninterest expense Pre-tax pre-provision for credit loss income Provision for credit losses Net income (loss) 1Q09 $ 2,810 1,831 4,641 2,511 $ 2,130 $ 1,848 $ 175 Increase (decrease) over 1Q08 4Q08 $ 512 $ (279) 273 910 785 631 771 1,395 $ 14 $ (764) $ $ 1,322 (825) $ $ 446 (866) • Global Banking net income of $175 million decreased $866 million compared to 4Q08 – Revenue increase of $631 million includes: • Addition of Merrill Lynch representing approximately $800 million • Net interest income negatively impacted by the current rate environment – Expense increase of $1.4 billion includes: • Addition of Merrill Lynch representing approximately $425 million • Lower incentives in 4Q08 – Provision increased $446 million • Net charge-offs increased $130 million • 1Q09 reserve build of $726 million was up $316 million from 4Q08 (primarily within commercial real estate and retail dealer related portfolios) – Average loans, after adjusting for loans to Merrill Lynch, were down modestly compared to 4Q08 – Deposits, on average, were stable 13
Slide 14: Investment Banking Fees - 1Q09 Investment Banking and Global Markets Investment Banking Fees ($ in millions) Merger & Advisory fees Debt underwriting Investment grade Leveraged finance Other Total Debt underwriting Equity underwriting Total Investment Banking Fees $ 1Q09 290 295 169 180 644 167 1,101 Reported 4Q08 $ 107 135 160 134 429 224 760 "Pooled" 1 4Q08 $ 375 241 193 220 654 545 1,574 Increase (decrease) over "Pooled" 1 Reported $ 183 $ (85) 160 9 46 215 (57) 341 $ 54 (24) (40) (10) (378) (473) $ $ $ $ • Investment banking fees in 1Q09 were up $341 million from 4Q08 as lower market fee pools were offset by the addition of Merrill Lynch • From a “pooled view” versus 4Q08, fees were down primarily in equities as the IPO market and average deal size shrunk • Bank of America Merrill Lynch was No. 2 in global and U.S. investment banking fees during 1Q09 • Bank of America Merrill Lynch was No. 1 based on volume in: • U.S. equity capital markets • U.S. high yield debt, leveraged and syndicated loans • A top-five advisor on mergers and acquisitions globally and in the U.S. • Lead advisor and/or underwriter in many well known deals announced during the quarter Source for rankings – Dealogic 1 “Pooled” represents fees from the two legacy companies in 4Q08 14
Slide 15: Global Markets Highlights - 1Q09 ($ in millions) Net interest income (FTE) Noninterest income Total revenue, net of interest expense (FTE) Noninterest expense Pre-tax pre-provision for credit loss income Provision for credit losses Net income 1Q09 $ 1,787 5,004 6,791 3,059 $ 3,732 $ 51 $ 2,365 Increase (decrease) over 1Q08 4Q08 $ 654 $ 259 6,985 11,115 7,639 11,374 2,333 1,956 $ 5,306 $ 9,418 $ $ 52 3,356 $ $ 38 6,034 • Global Markets experienced a record quarter in earnings driven by the acquisition of Merrill Lynch • Balance sheet reduced $149 billion or 21% on a proforma basis • Global Markets net income increased $6.0 billion to $2.4 billion in 1Q09 compared to a net loss of $3.6 billion in 4Q08 due to favorable trading results and the acquisition of Merrill Lynch, including: – Liquid products benefited from increased market volatility during January and February – The Mortgage trading platform performed favorably as well as the Equity platforms – Decrease in market-based disruption charges, including CDO, CMBS and leveraged financerelated losses as 1Q09 capital market disruption charges were $1.7 billion compared to $4.6 billion in 4Q08 15
Slide 16: Global Markets Sales & Trading Revenue - 1Q09 ($ in millions) 1Q09 Sales & Trading $ 3,555 536 890 (400) 4,581 1,402 5,983 Increase (decrease) over 4Q08 $ 1 Rates and Currencies Commodities Credit Products Structured Products Total Fixed Income Equities Total 2 3,374 490 3,079 3,453 10,396 1,420 11,816 $ $ 1 2 Includes $1.7 billion of market disruption charges in 1Q09 versus $4.6 billion in 4Q08 Excludes $58 million and $35 million margin from FVO loan book for 1Q09 and 4Q08 16
Slide 17: Key Capital Markets Risk Exposures – 1Q09 Leveraged Loans • Funded commitments carried at $4.4 billion or 52% of gross value – 1Q09 markdown of $98 million – Pre-market disruption exposure carried at $3.1 billion or 45% of gross value – On a “pooled basis” total Bank of America and Merrill Lynch exposure in June of 2007 was $85 billion Capital Markets Commercial Mortgage related • Total commitments carried at $7.3 billion with $6.4 billion funded – 1Q09 markdown of $174 million predominantly floating rate positions – Carrying approximately $5.5 billion of acquisition related large floating rate loans at roughly 75% of gross value – 1Q09 markdown of $150 million on equity positions on acquisition related exposures – Additionally, $3.8 billion of loans associated with the Merrill Lynch acquisition were transferred to the accrual book at 82% 17
Slide 18: Key Capital Markets Risk Exposures – 1Q09 Super Senior CDO related ($ in millions) Total Subprime Retained Positions $ $ 1,824 1,824 $ Total Subprime $ 1,174 3,185 4,359 $ Non subprime $ 854 1,950 2,804 $ Super Senior CDO $ 2,028 5,135 7,163 Hedged Unhedged Total • • • • $ $ 1,174 1,361 2,535 1Q09 markdown of $525 million includes monoline insurance marks $3.2 billion unhedged subprime exposure including retained bonds carried at 25% $1.2 billion hedged subprime exposure carried at 15% $1.95 billion unhedged non-subprime exposure carried at 65% Credit Default Swaps with Monoline Financial Guarantors ($ in millions) Notional Mark to market or guarantor receivable Credit Valuation Adjustment Net mark to market of receivable Carry value % 1Q09 writedown Super Senior Other guaranteed CDOs Positions $ 5,592 $ 55,898 4,199 14,731 (2,513) (6,003) 1,686 8,728 60% 41% (259) (960) 18 • Super senior CDO wrap notional of $5.6 billion – $4.2 billion receivable with a 60% reserve – 1Q09 markdown of $259 million • Other guaranteed exposure notional of $56 billion – $14.7 billion receivable with a 41% reserve – 1Q09 markdown of $960 million
Slide 19: Asset Quality – Held Basis* ($ in millions) Residential mortgage Home Equity Credit Card Consumer lending Countrywide impaired Other consumer Total Consumer Small business Commercial Real Estate Other Commercial Total Commercial Unfunded lending commitments Total 1Q09 Net charge-offs Reserve Build Provision $ 1,134 $ 1,919 785 $ 1,681 1,612 921 440 5,439 633 455 415 1,503 6,942 643 1,542 775 853 254 5,201 675 290 244 1,209 28 6,438 2,324 3,154 1,696 853 694 10,640 1,308 745 659 2,712 28 13,380 Increase from 4Q08 in Net charge-offs Reserve Build Provision $ 319 $ 1,120 $ 1,439 568 206 176 (12) 1,257 71 73 144 1,401 59 986 320 103 70 2,658 479 201 72 752 34 3,444 627 1,192 496 103 58 3,915 550 274 72 896 34 4,845 • Credit quality deteriorated further during the quarter as the impacts of the recessionary environment worsened. Consumers continued to experience high levels of stress from depreciating home prices, rising unemployment and underemployment • The commercial portfolio losses were impacted by small business and deterioration in the commercial real estate portfolio. Although losses did not increase outside of commercial real estate, the commercial portfolio did see an increase in criticized exposure and nonperforming loans from the widespread effects of the economy • Held net charge-offs increased to 2.85%, up 49 basis points from 4Q08 • Managed net losses increased to 3.40%, up 56 basis points from 4Q08 • Allowance for loan losses covers 3% of loans and, including the reserve for unfunded commitments, is $30.4 billion 19 * Schedule reflects a held basis. Managed losses would add $2,182 in 1Q09, an increase of $325 million from 4Q08
Slide 20: Consumer Credit Card Asset Quality Ending Managed Balances and Net Loss Ratios $225 ($ in billions) $200 $175 $150 $125 $100 1Q08 2Q08 End bal. 3Q08 4Q08 Net loss ratio 1Q09 5.2% 6.0% 6.4% $183.8 $187.2 $183.4 $182.2 8.6% 7.2% $173.4 10% 8% 5% 3% 0% Unemployment Rates 10.0% 8.0% 6.0% 4.0% 2.0% 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 8.5% 7.2% 4.7% 4.9% 5.1% 5.6% 6.2% 4.6% Consumer Credit Card – Managed Basis 1 • Net losses increased $531 million to $3.8 billion as the loss ratio climbed 146 basis points to 8.62% – – – • • • US credit card portfolio refreshed FICO of 681 while originated average FICO was 761 in 1Q09 California and Florida represent 24% of balances but 34% of managed losses Losses impacted by unemployment and remain higher in geographies of housing stress 30+ delinquencies increased 117 basis points to 7.85% of loans 90+ delinquencies increased 83 basis point to 3.99% of loans Unused commitments were reduced over $200 billion in 1Q09, principally on inactive accounts 1 Credit Card includes U.S. consumer, Europe and Canada credit card 20
Slide 21: Home Loan Asset Quality $300 ($ in billions) Ending Residential Mortgage Balances and Net Charge-off Ratios $266.1 $235.5 $257.1 $248.1 $261.6 1.20% 0.73% 0.24% 0.37% 2% ($ in billions) $200 $150 $100 $50 $0 Ending Home Equity Balances and Net Charge-off Ratios $157.6 $151.8 $152.5 $118.4 $121.4 3.1% 2.5% 1.7% 2.9% 4.3% 5% $200 1% 3% 0.10% $100 1Q08 2Q08 End bal. 3Q08 4Q08 1Q09 0% 0% 1Q08 2Q08 End bal. 3Q08 4Q08 1Q09 Net charge-off ratio Net charge-off ratio Residential Mortgage • Net charge-offs increased $319 million to $785 million as the loss ratio climbed 47 basis points to 1.20% – Adjusted for the expected benefit of Resi Wrap protection, the loss rate would be 0.95% – CRA portfolio still drove a disproportionate share of losses (7% of loans with 4.4% loss rate) – Loans with >90% RLTV represented 25% of the portfolio reflecting home price deterioration – CA and FL represented 43% of the portfolio but 59% of losses Allowance covers 1.09% of loans Nonperforming loans increased $3.8 billion from 4Q08 and now represents 4.13% of loans. The increase was driven by the performance of 2006/2007 vintages 30+ performing past dues were flat compared to 4Q08 but, with loan balance increases, the ratio declined 17 bps to 3.04% of loans Home Equity • Net charge-offs increased $568 million to $1.7 billion as the loss ratio climbed 138 basis points to 4.30% – Loans with >90% RCLTV represent 42% of portfolio reflecting home price deterioration – CA and FL represent 41% of the portfolio but 61% of losses Allowance covers 4.73% of loans Nonperforming loans increased $928 million from 4Q08 and now represents 2.28% of loans 30+ performing past dues declined slightly 1Q09 compared to 4Q08 and the ratio to loans declined 7 bps to 1.68% • • • • • • 21
Slide 22: Direct/Indirect $125 ($ in billions) $100 $75 3.9% $50 $25 $0 1Q08 2Q08 End bal. 3Q08 4Q08 1Q09 2.8% 3.2% 3% 1% 0% Ending Direct/Indirect Balances and Net Charge-off Ratios $83.4 $80.2 $84.9 $82.8 5.0% $99.7 5.0% 6% ($ in billions) $40 $30 $20 $10 Ending Consumer Lending Balances and $26.6 Net Charge-off Ratios $26.2 5.7% $28.4 7.1% $28.6 8.4% 10.4% $28.2 13.5% 15% 13% 10% 8% 5% 3% 5% 4% $0 1Q08 2Q08 End bal. 3Q08 4Q08 1Q09 0% Net charge-off ratio Net charge-off ratio Direct/Indirect Loans • • Ending loans included $17 billion increase from adding Merrill Lynch securities based lending Net charge-offs increased $195 million to $1.2 billion as the loss ratio remained flat at 5.03% (up 100bps excluding Merrill Lynch) – Driven by Consumer Lending and Dealer Financial Services from both borrower and collateral stress Allowance was increased to cover 5.40% of loans Dealer Finance portfolio of $40.1 billion had a 26 basis point increase in loss rate to 2.78% – The auto portfolio of $26.7 billion had a 46bps increase in loss rate to 2.48% – Includes auto originations, auto purchased loan portfolios and marine/RV 30+ delinquencies decreased 61 basis points to 4.16% of loans (up 24bps excluding Merrill Lynch) Consumer Lending (part of Direct/Indirect) • • Consumer Lending portfolio of $26.6 billion had a 316 basis point increase in loss rate to 13.53% Allowance was increased to cover 15.9% of loans • • • 22
Slide 23: Consumer Asset Quality Key Indicators ($ in millions) Residential Mortgage 4Q08 1Q09 Excluding Excluding the SOP the SOP 03-3 03-3 As As Reported Portfolio 1 Reported Portfolio 1 Loans EOP Loans Avg Net losses % of avg loans 2 Allowance for loan losses % of Loans Avg. refreshed (C)LTV 3 Home Equity 4Q08 1Q09 Excluding Excluding the SOP the SOP 03-3 03-3 As As Reported Portfolio 1 Reported Portfolio 1 $ 157,645 158,575 $ 143,754 144,610 $ 152,483 151,943 $ 138,384 137,803 Discontinued Real Estate 4Q08 1Q09 Excluding Excluding the SOP the SOP 03-3 03-3 As As Reported Portfolio 1 Reported Portfolio 1 $ 19,000 19,386 $ 2,222 1,885 $ 19,981 21,324 $ 1,884 2,189 19 3.48 % 74 3.91 73 13 % 697 17 % $ 261,583 265,121 $ $ 251,637 255,389 $ 248,063 253,560 $ 238,049 244,515 785 $ 2 1.20 % $ 785 1.25 % 466 $ 0.73 % 466 $ 1,681 $ 0.76 % 4.30 % 1,382 $ 7,457 $ 0.58 % 4.73 % 71 23 % 729 8% $ 1,681 4.71 % $ 5,862 4.08 % 87 42 % 716 11 % 1,113 $ 1,113 $ 2.92 % 3.22 % 5,385 $ 5,219 3.53 % 3.77 83 37 % 717 10 % $ 15 $ 0.31 % 67 $ 0.35 % $ 15 3.15 % $ 59 2.66 % 74 16 % 687 25 % 19 $ 0.36 % 658 $ 3.29 % $ 2,856 $ 1.09 % $ 1,382 $ 2,856 0.56 % 1.14 % 74 25 % 726 10 % 90%+ refreshed (C)LTV 3 Avg. refreshed FICO % below 620 FICO 1 2 Represents the SOP 03-3 portfolio acquired from Countrywide Adjusting for the benefit of Resi Wrap protection, the residential mortgage as reported loss rate would be 0.95% in 1Q09 and 0.62% in 4Q08 Loan to value (LTV) calculations applied to the residential mortgage and discontinued real estate portfolio. Combined loan to value (CLTV) calculations apply to the home equity portfolio 3 23
Slide 24: Consumer Asset Quality Key Indicators (cont’d) ($ in millions) Credit Card Held 1Q09 Loans EOP Loans Avg Net losses % of avg loans Allowance for loan losses % of Loans $ 67,960 75,818 $ 4Q08 $ 81,274 82,117 Managed 4Q08 1Q09 $173,352 178,490 $182,234 181,233 1Q09 $102,992 104,148 Other 1 4Q08 $ 86,878 86,875 Total Managed Consumer 1Q09 $714,572 725,720 4Q08 $689,639 694,935 6,039 3.46 % $ 1,612 8.62 % $ 5,463 8.04 % 1,406 $ 6.82 % 4,689 5.77 % $ 3,794 8.62 % 3,263 $ 7.16 % $ $ 1,346 5.24 % $ 5,583 5.42 % 1,178 $ 5.39 % $ 7,621 4.26 % $ 4,544 $ 16,658 $ 21,426 5.23 % 2.83 % 3.52 % • The average refreshed FICO for the U.S. Credit Card portfolio was 684 at 4Q08 compared to 681 at 1Q09; the percentage below 620 FICO was 17% at 4Q08 compared to 19% at 1Q09 1 Other primarily consists of the following portfolios of loans: Consumer Lending and Dealer Financial Services 24
Slide 25: Consumer Asset Quality Key Indicators – SOP 03-3 Countrywide Portfolio 1 ($ in millions) Residential Mortgage 4Q08 1Q09 Loans EOP Net losses $ 9,946 264 $ 10,014 202 $ Home Equity 4Q08 1Q09 13,891 890 $ 14,099 722 $ Discontinued Real Estate 4Q08 1Q09 16,778 936 $ 18,097 719 • The net losses shown on this table are not included in the net losses reported by the company as these loans were considered impaired and written down to fair value at acquisition in accordance with SOP 03-3 • 1Q09 includes an increase in the valuation allowance through provision of $853 million compared to $750 million in 4Q08 • The carrying value at 03/31/09 of the impaired loan portfolio is 74% of the outstanding principal balance 1 The table presents outstandings net of purchase accounting adjustments, valuation allowances and net losses 25
Slide 26: Commercial Asset Quality Key Indicators 1 ($ in millions) Commercial 2 4Q08 1Q09 Loans EOP Loans Avg Net charge-offs % of avg loans 90+ Performing DPD % of Loans Nonperforming loans % of Loans Allowance for loan losses % of Loans Reservable Criticized Utilized Exposure 3 % of Total Exposure $244,413 250,411 $ $231,108 234,393 Commercial Real Estate 4Q08 1Q09 $ 75,270 72,022 $ 64,701 64,335 Small Business 4Q08 1Q09 $ 18,772 19,042 $ 19,145 19,329 Commercial Lease Financing 4Q08 1Q09 $ 22,017 22,056 $ 22,400 22,069 Total Commercial 4Q08 1Q09 $360,472 363,531 $337,354 340,126 $ 348 0.56 % $ 505 0.20 % 384 $ 0.65 % 388 $ 0.16 % $ 455 2.56 % $ 86 0.11 % 382 $ 562 $ 633 $ 2.36 % 11.55 % 13.47 % 52 $ 0.08 % $ 797 4.24 % $ 224 1.19 % 640 $ 3.34 % 205 $ 1.07 % $ 67 1.22 % $ 26 0.12 % $ 104 0.47 % $ 238 1.08 % 31 $ 1,359 $ 1,503 0.57 % 1.59 % 1.68 % 23 $ 1,103 $ 1,414 0.10 % 0.33 % 0.39 % 56 $ 6,497 $ 9,312 0.25 % 1.93 % 2.58 % 223 $ 6,413 $ 7,622 1.00 % 1.90 % 2.11 % $ $ 2,330 $ 3,906 $ 3,322 $ 5,662 $ 1.01 % 6.04 % 1.36 % 7.52 % $ 2,333 $ 1,465 $ 2,392 $ 2,561 $ 1,756 $ 3,067 $ 1.01 % 2.26 % 12.49 % 1.05 % 2.33 % 16.34 % $ 20,422 $ 13,830 $ 1,334 $ 1,352 $ 36,937 $ 28,100 $ 17,553 $ 1,533 $ 1,474 $ 48,660 6.73 % 19.73 % 6.94 % 6.03 % 8.90 % 8.90 % 21.81 % 8.14 % 6.70 % 11.13 % 1 2 3 Does not include certain commercial loans measured at fair value in accordance with SFAS 159 Includes Commercial – Domestic and Commercial – Foreign Excludes utilized exposure which is marked to market including Derivatives, Foreclosed Property, Assets Held for Sale and FVO loans 26
Slide 27: Commercial Real Estate Homebuilders • Homebuilder utilized balances at 1Q09, included in commercial real estate, decreased $294 million to $11.4 billion compared to 4Q08. These utilized balances are included in total exposure of $15.2 billion – Reservable criticized utilized exposure increased $103 million to $7.7 billion (44% of reservable criticized utilized commercial real estate exposure) NPAs rose $687 million to $3.7 billion (62% of commercial real estate NPAs) 1Q09 charge-offs were $301 million compared to $355 million in 4Q08 – – • Homebuilder construction and land development utilized balances at 1Q09 decreased $512 million to $8.8 billion compared to 4Q08 – – Reservable criticized utilized exposure increased $251 million to $6.9 billion NPAs rose $615 million to $3.2 billion 27
Slide 28: Net Interest Income ($ in millions) 1Q09 Reported net interest income (FTE) Impact of securitizations Managed net interest income (FTE) Market-based NII Core NII – Managed Basis Average earning assets Impact of securitizations Market-based earning assets Reported net interest yield Managed net interest yield Core net interest yield – Managed Basis $ $ 12,819 2,749 15,568 (1,895) 13,673 $ $ 4Q08 13,406 2,257 15,663 (1,566) 14,097 $ $ $ $ Change (587) 492 (95) (329) (424) 295,810 (1,622) 176,634 (61) bps (52) (39) $ 1,912,483 91,567 488,411 2.70 % 3.13 3.63 $ 1,616,673 93,189 311,777 3.31 % 3.65 4.02 • Merrill Lynch added approximately $750 million to net interest income but negatively impacted the net interest yield by 27 bps from the addition of low margin assets – $375 million to core (11 bps impact on core yield) and $375 million market based • Higher levels of long term debt cost $200 million and approximately 6 bps in yield • Lower levels of assets from deleveraging cost $350 million in net interest income • 2 less days cost $200 million in net interest income and 6 bps in yield • Sold $51 billion of debt securities to manage prepayment risk resulting in $1.5 billion in gains in 1Q09 • Given the low rate environment the balance sheet position continues to be asset sensitive 28
Slide 29: Net Interest Income – Managed Sensitivity ($ in millions) Managed net interest income impact for next 12 months @ 12/31/08 @ 3/31/09 $ 401 (553) $ 144 (186) Forward curve interest rate scenarios +100 bp parallel shift - 100 bp parallel shift Flattening scenario from forward curve + 100 bp flattening on short end - 100 bp flattening on long end Steepening scenario from forward curve + 100 bp steepening on long end - 100 bp steepening on short end (42) (466) (545) (638) 440 (91) 698 453 29
Slide 30: Bank of America NII Sensitivity on a Managed Basis First Rolling 12 Months March 31, 2009 300 Year 1 FF: 2.61% 10-Y: 4.16% NII ∆: 178 200 Curve Flatteners FF: 1.61% 10-Y: 3.16% NII ∆: -42 NII ∆: 481 100 Stable FF: 0.25% 10-Y: 2.88% NII ∆: -2,705 NII ∆: 401 Change in Fed Funds FF: 0.61% 10-Y: 2.16% NII ∆: -466 FF: 0.61% 10-Y: 4.16% NII ∆: 440 0 -300 -200 -100 0 1 Yr Fwd Rates Avg Mar '10 FF: 0.61% 10-Y: 3.16% NII ∆: -553 100 200 300 -100 FF: 0.00% 10-Y: 3.16% NII ∆: -91 NII ∆: -450 -200 FF: 0.00% 10-Y: 2.16% NII ∆: 4 Curve Steepeners -300 Change in 10-yr Swap 30
Slide 31: Bank of America NII Sensitivity on a Managed Basis First Rolling 12 Months December 31, 2008 300 Year 1 200 FF: 2.75% 10-Y: 3.80% NII ∆: -560 Curve Flatteners FF: 1.75% 10-Y: 2.80% NII ∆: -545 NII ∆: 144 NII ∆: -25 100 Stable FF: 0.25% 10-Y: 2.56% NII ∆: -1,709 Change in Fed Funds FF: 0.75% 10-Y: 1.80% NII ∆: -638 FF: 0.75% 10-Y: 3.80% NII ∆: 698 0 -300 -200 -100 0 1 Yr Fwd Rates Avg Dec '09 FF: 0.75% 10-Y: 2.80% NII ∆: -186 100 200 300 -100 FF: 0.00% 10-Y: 2.80% NII ∆: 453 NII ∆: -102 -200 Curve Steepeners FF: 0.00% 10-Y: 1.80% NII ∆: 519 -300 Change in 10-yr Swap 31
Slide 32: Capital Strengthened • Tier 1 Capital Ratio ended the quarter at 10.1% – Tier 1 common as % of RWA ended at 4.49% • Tangible common equity ratio ended at 3.13% – Tangible common equity as percent of RWA is 4.11% Key Capital Ratios 1 3/31/2009 Tier 1 Tier 1 Common / RWA Tangible Common Equity/ RWA Total Equity / Assets Common / Assets Tangible Equity/Assets Tangible Common Equity/ Tang. Assets 10.1% 4.5% 4.1% 10.3% 7.2% 6.4% 3.1% 12/31/2008 9.2% 4.8% 3.8% 9.7% 7.7% 5.1% 2.9% Inc (Dec) 94 bps (31) bps 27 bps 58 bps (50) bps 131 bps 20 bps 1 32 Excludes the government agreement in principle to provide protection against unusually large losses on approximately $118 billion of financial instruments
Slide 33: Liquidity Enhanced • Liquidity position has been strengthened significantly during the quarter through balance sheet management actions as well as utilization of government funding facilities – Cash levels increased $140 billion from 4Q08 level Cash and Cash Equivalents $ 1Q09 173,460 $ 4Q08 32,857 $ Change 140,603 – Time to required funding increased to top of target range at 27 months 1Q09 27 months 4Q08 23 months Change 4 months Time to Required Funding – Deposit levels increased Total Deposits $ 1Q09 953,508 $ 4Q08 882,997 $ Change 70,511 33
Slide 34: Conclusions • Environment remains challenging – Credit costs reflect economic environment • Earnings benefitting from business model changes – Market based business growth benefitting from Merrill Lynch platform – Interest rate environment aiding growth from adding Countrywide platform • Integration of acquisitions is progressing well • Actions taken during first quarter to strengthen balance sheet 34
Slide 35: Appendix 35
Slide 36: Bank of America/Merrill Lynch Consolidated Statement of Income – 1Q09 Bank of America (excluding Merrill) Net interest income Noninterest income Investment and brokerage services Investment banking income Equity investment income (loss) Trading account profits Mortgage banking income Other income Total noninterest income Total revenue, net of interest expense Provision for credit losses Noninterest expense Personnel Other operating Total noninterest expense Income before income taxes Income tax expense Net income $ 839 457 1,474 1,490 3,241 6,545 14,046 25,798 13,362 5,596 6,717 12,313 123 (460) 583 2 Consolidated 1 Merrill Lynch & Co. $ 743 2,124 606 (272) 3,783 73 2,920 9,234 9,977 18 3,172 1,534 4,706 5,253 1,589 $ 3,664 Intercompany Eliminations $ 2 (8) (72) 61 (19) (17) (17) (17) $ - Consolidated $ 12,497 2,963 1,055 1,202 5,201 3,314 9,526 23,261 35,758 13,380 8,768 8,234 17,002 5,376 1,129 $ 4,247 $ 11,752 1 Does not include certain merger related costs, revenue opportunities and cost savings which were realized in Bank of America legal entities 36 2 Includes certain adjustments made in consolidation
Slide 37: Bank of America/Merrill Lynch Balance Sheet – March 31, 2009 (Dollars in billions) Bank of America (excluding Merrill) $ 141 10 81 118 54 232 900 29 871 14 14 82 8 29 175 1,829 Consolidated Merrill Lynch & Co. $ 34 14 103 86 83 31 85 85 2 5 6 11 109 569 Intercompany Eliminations $ (2) Consolidated $ 173 24 153 203 137 263 977 29 948 16 14 87 14 40 250 2,322 Assets Cash Time deposits placed and other short-term investments Federal funds sold and securities purchased or borrowed under agreements to resell Trading account assets Derivative assets Securities Loans and leases Allowance for credit losses Loans and leases, net of allowance for credit losses Premises and equipment, net Mortgage servicing rights Goodwill Intangible assets Loans held for sale Other assets Total assets $ Liabilities Deposits Federal funds purchased and securities sold under agreements to repurchase Trading account liabilities Derivative liabilities Commercial paper and other short-term borrowings Accrued expenses and other liabilities Long-term debt Total liabilities Total shareholders' equity Total liabilities and shareholders' equity $ (31) (1) (8) (8) $ $ (34) (76) $ $ 858 183 35 20 189 33 276 1,594 235 1,829 $ 97 95 18 56 5 93 165 529 40 (2) (31) $ 953 247 53 76 186 126 441 2,082 240 (8) (41) (35) $ (76) $ $ 569 2,322 37
Slide 38: Merrill Lynch Preliminary Purchase Accounting 1 ($ in billions, except per share amounts) Purchase price Total value of Bank of America's common stock and cash exchanged Merrill Lynch preferred stock 2 Fair value of outstanding employee stock awards Total purchase price Preliminary allocation of the purchase price Merrill Lynch shareholders' equity Less: Historical goodwill and intangibles Pre-tax adjustments to reflect assets acquired and liabilities assumed at fair value: Loans Securities and derivatives Identified intangibles Other assets Debt Pre-tax total adjustments Deferred income taxes After tax total adjustments Fair value of net assets acquired Preliminary goodwill resulting from the merger $19.4 8.6 1.1 $29.1 19.9 (2.6) (6.4) (1.1) 5.7 (1.4) 15.5 12.3 (5.5) 6.8 24.1 $5.0 1 The value of shares of common stock exchanged with Merrill Lynch shareholders was based upon the closing price of Bank of America's common stock on December 31, 2008, the last trading day price prior to acquisition. Represents Merrill Lynch preferred stock exchanged for Bank of America preferred stock having substantially identical terms. 2 38