Bank of America : 2024 Dodd-Frank Act Annual Stress Test Results

Bank of America

2024 Dodd-Frank Act Annual Stress Test Results

Supervisory Severely Adverse Scenario

June 28, 2024

Important Presentation Information

The 2024 Dodd-Frank Act Annual Stress Test Results Disclosure (the "Stress Test Results") included herein has not been prepared under accounting principles generally accepted in the United States of America ("GAAP"). The Stress Test Results present certain forward-looking projected financial measures for Bank of America Corporation ("Bank of America", "BAC", or "the Company") and Bank of America, National Association ("BANA") under the hypothetical severely adverse economic and market scenario, and required assumptions described herein. The Stress Test Results are not forecasts of actual financial results for or the financial condition of BAC and BANA. Investors in securities issued by Bank of America or BANA should not rely on the Stress Test Results as being indicative of expected future results or as a measure of the solvency or actual financial performance or condition of BAC or BANA.

Bank of America's financial information, prepared under GAAP, and a discussion of the risks and important factors that could affect Bank of America's future business, results and financial condition are available in reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2023.

Amounts presented are rounded to the nearest significant digit, as indicated or stated. Immaterial differences arising from the effect of rounding are not adjusted.

The stress testing of financial institutions conducted by the Board of Governors of the Federal Reserve System ("FRB") is based on models and methodologies developed or employed by the FRB. The FRB does not disclose all details of its models and methodologies. Therefore, Bank of America may not be able to explain certain variances between the FRB's projections and Bank of America's Stress Test Results included herein.

Bank of America

2

Bank of America's Capital Planning Process

The Company's capital planning process is a robust, proactive, forward-looking capital management exercise that identifies and measures risks and translates them into estimates of potential losses to assess capital adequacy over a planning horizon considering different economic and market environments. Centrally, a committee comprised of senior management from a range of finance and risk backgrounds is responsible for oversight as well as review and challenge of certain aspects of the process. The process is fully integrated with the Company's financial and risk management routines and is subject to well-established internal controls and governance. The Company establishes the following requirements for the capital planning process:

• Identify, measure, and assess material risks;
• Translate risk measures into estimates of potential losses over a range of scenarios and environments, including stress scenarios, and assess capital needs for risks not fully captured in stress testing results through a standalone impact analysis;
• Define available capital resources and estimate sources and uses of capital over the same scenarios and environments;
• Aggregate the sources and uses of capital and assess capital adequacy relative to applicable Capital Management Triggers;
• Establish and maintain a comprehensive capital policy and robust capital planning practices, including capital contingency planning;
• Develop and maintain internal controls and monitoring; and
• Establish and maintain effective oversight and governance to ensure the integrity of the capital planning process.

Bank of America

3

Assumptions

• This document provides internal projections for BAC and BANA under the stressed macroeconomic and market conditions in the Supervisory Severely Adverse scenario as prescribed by the FRB and the Office of the Comptroller of the Currency ("OCC").
• The Supervisory Severely Adverse scenario is characterized by a severe global recession accompanied by a period of heightened stress in commercial real estate and corporate debt markets, and assumes the following key macroeconomic variables over a nine-quarter horizon:
  o Maximum quarterly (annualized) rate of real gross domestic product ("RGDP") decline of 11.6% o Peak unemployment rate of 10.0%
  o Maximum home price index ("HPI") decline of 36.0%
  o Maximum commercial real estate price index ("CREPI") decline of 40.0% o Maximum equity market decline of 55.4%
  o Trough U.S. 10-year Treasury yield of 0.8% o Trough U.S. 3-Month Treasury rate of 0.1%
• Severe instantaneous global market shocks are also applied to the trading book, private equity positions, and counterparty exposures.
• Results presented herein include capital actions as specified under the Dodd-Frank Wall Street Reform and Consumer Protection Act ("DFA") stress testing rules as of the April 5, 2024 submission date of BAC's capital plan. Specified capital action assumptions for BAC are itemized on page 21.
• Results comply with methodologies and instructions provided by the FRB and effective for the 2024 Comprehensive Capital Analysis and Review and Dodd-Frank Act Stress Test.
• Results presented are estimates and may not reflect the actual impacts to Bank of America if such a hypothetical scenario were to occur. Importantly, in certain instances, methodologies required by the FRB and OCC differ from Bank of America's internal practices; therefore, results may not reflect actions Bank of America would likely employ under such stressed conditions.
• The stress test is applied to on- and off-balance sheet exposures as of December 31, 2023. Instantaneous global market shocks are applied as of October 12, 20231.
• Capital, risk-weighted assets ("RWA") and capital ratios are calculated under the Basel 3 Standardized ("B3S") approach.
• Income statement categories in this document conform to the FRB's definition of Pre-Provision Net Revenue ("PPNR"), and classifications of revenue and expense items may differ from reporting under Bank of America's public financial disclosures and preparation of financial statements under GAAP.

__________________________________________________________________________________________________________________________________________________________________________

1 As prescribed by the FRB, the "as-of" date for the global market shock and counterparty default components can be any business day during the week of October 13, 2023.

Bank of America

4

Bank of America Corporation

Supervisory Severely Adverse - BAC Results

• A $45.5B cumulative pre-tax loss is projected over the specified nine-quarter horizon under the Supervisory Severely Adverse scenario.
• Significant items include loan and lease losses ($45.6B), incremental build in allowance through provision expense ($12.5B), trading and counterparty losses ($12.2B), and other losses ($1.4B), partially offset by $26.4B of PPNR.
• The hypothetical pre-tax losses in the scenario generate deferred tax assets (representing future deductions) that are generally disallowed for regulatory capital.
• RWA increases primarily driven by commercial loan draws and trading book RWA in line with stressed market conditions, partially offset by lower consumer loans and unfunded commitments.
• Under B3S, the estimated lowest stress ratios over the nine-quarter horizon for Common Equity Tier 1 Capital, Tier 1 Capital, Total Capital, Tier 1 Leverage and Supplementary Leverage Ratio are 8.6%, 10.2%, 12.1%, 5.6% and 4.8%, respectively.

Bank of America

6

Supervisory Severely Adverse - BAC Capital and Risk-Weighted Assets

Capital Ratios1	Actual Ratios	Hypothetical Stressed	Hypothetical Stressed
at 12/31/23	Ratios at 3/31/26	Minimum Ratios
Common Equity Tier 1 Capital Ratio	11.8%	8.7%	8.6%
Tier 1 Capital Ratio	13.5%	10.4%	10.2%
Total Capital Ratio	15.2%	12.2%	12.1%
Tier 1 Leverage Ratio	7.1%	5.6%	5.6%
Supplementary Leverage Ratio	6.1%	4.8%	4.8%
Capital/Risk-Weighted Assets	Actual Balances	Balances	Balances at Common Equity
Tier 1 Capital Ratio
$ in billions	at 12/31/23	at 3/31/26
Minimum
Common Equity Tier 1 Capital	$195	$147	$147
Basel 3 Risk-Weighted Assets	$1,651	$1,684	$1,714

Note: Hypothetical stressed results presented are BAC's internal projections for the scenario using the rules and conditions set forth by the FRB with capital actions for BAC as required under DFA stress testing rules. See "Required Capital Action Assumptions for Bank Holding Companies" on page 21.

_________________________________________________________________________________________________________________________________________________________________________

1 Capital, risk-weighted assets and capital ratios are calculated under the Basel 3 Standardized approach.

Bank of America

7

Supervisory Severely Adverse - BAC Income Statement and Loan and Lease Losses

Net Income Before Taxes	Cumulative Hypothetical	% of Average Assets5
$ in billions	Results Over 9 Quarters
Pre-Provision Net Revenue1	$26.4	0.8%
Provision for Loan and Lease Losses	58.1
Credit Losses on Investment Securities (AFS / HTM)	0.1
Trading and Counterparty Losses2	12.2
Other Losses3	1.4
Net Income Before Taxes4	($45.5)	-1.4%
Memo Items
Other Comprehensive Income6	($2.6)
Other Effects on Capital	Actual Balance	Hypothetical Stressed
at 12/31/23	Balance at 3/31/26
Accumulated Other Comprehensive Income ("AOCI") Included in Capital	($9.8)	($12.4)
Loan and Lease Losses	Cumulative Hypothetical	Portfolio Loss Rates
$ in billions	Results Over 9 Quarters	Over 9 Quarters8
Estimated Loan Losses7	$45.6	4.4%
First Lien Mortgages, Domestic	2.9	1.3%
Junior Liens and HELOCs, Domestic	0.5	2.0%
Commercial and Industrial	15.7	5.1%
Commercial Real Estate	4.6	6.2%
Credit Cards	14.8	16.8%
Other Consumer	1.1	1.2%
Other Loans	6.0	2.5%

__________________________________________________________________________________________________________________________________________________________________________

1. PPNR includes losses from operational risk events, mortgage repurchase expenses, legal expenses, and other real estate owned costs.
2. Trading and counterparty includes mark-to-market losses, credit valuation adjustments, trading incremental default losses, and counterparty default.
3. Other losses include the projected change in fair value of loans held for sale, loans held for investment measured under the fair-value option, and hedges on loans measured at fair value or amortized cost.
4. Goodwill impairment, which is capital neutral, excluded for disclosure purposes.
5. Calculated by dividing nine-quarter cumulative revenue or earnings by the average of the quarter ending balances over the specified nine-quarter horizon.
6. Other comprehensive income includes net unrealized losses/gains on (i) available-for-sale securities, (ii) foreign currency translation adjustments, (iii) debit valuation adjustments, and (iv) net actuarial losses and prior service costs related to defined benefit pension and other postretirement employee benefit plans. Excludes unrealized losses/gains on cash flow hedges for consistency with AOCI Included in Capital.
7. Commercial and industrial loans include small and medium enterprise loans and corporate cards. Other loans include international real estate loans.
8. Calculated by dividing the nine-quarter cumulative loan and lease losses by the average of the accrual loan and lease balances for each portfolio over the same time period.

Bank of America

8

Supervisory Severely Adverse - BAC Regulatory Capital Ratio Drivers

The key drivers of Bank of America's DFAST pro forma Common Equity Tier 1 and Supplementary Leverage ratios are shown in the figures below.

$195B

$147B

Regulatory Capital

Minimum: 4.5%

$223B

$175B

Regulatory Capital Minimum: 3.0%

__________________________________________________________________________________________________________________________________________________________________________

1 Other adjustments to capital are included for items such as: intangibles, fair value option and capital actions reflective of DFA rules.

Bank of America

9

Bank of America, National Association