Bank Bank of America Corporation 2015 Annual Report of Bank of America Corporation America Corporation 2015 Annual Report 2015 Annual Report 2015 To our shareholders, Thank you for investing in Bank of America. In 2015, your company earned nearly $16 billion and returned nearly $4.5 billion in capital. This progress is the result of continued strong business performance, no longer clouded over by heavy mortgage and crisis-related litigation and operating costs. Over the past several years, we’ve followed a strategy to simplify the company, rebuild our capital and liquidity, invest in our company and our capabilities, and pursue a straightforward model focused on responsible growth. At the Core of our strategy is the commitment we made to a clear purpose: to make financial lives better by connecting those we serve to the resources and expertise they need to achieve their goals. © 2016 Bank of America Corporation This is what drives us. 00-04-1373B 3/2016 A Note of Introduction from Lead Independent Director, Jack Bovender To our shareholders: On behalf of the directors of your company, I join our CEO and the management team in thanking you for choosing to invest in Bank of America. I also want to take this opportunity to add to Brian’s letter, which highlights the Board’s independent oversight of management and our focus on building long-term shareholder value. You are represented by a strong independent Board. As a steward of the Responsible Growth company on your behalf, the Board is focused on the active and independent When we look at where we oversight of management. The Board oversees risk management, our stand today, our company is governance, and carries out other important duties in coordination with Board stronger, simpler, and better committees that have strong, experienced chairs and members. To enhance positioned to deliver long- the Board’s effectiveness, we conduct intensive and thoughtful annual self- term value to our shareholders, assessments, regularly evaluate our leadership structure, and review feedback thanks to the straightforward from shareholders. We have strengthened our director recruiting process to way in which we serve our deepen our diversity of thought and experience, broaden our demographic, customers and clients. The and bring on fresh perspectives that invigorate our discourse with management path forward is clearly one and with each other. We are committed to engaging with shareholders, and of responsible growth. we have made enhancements to our corporate governance practices that are informed by the feedback from our engagement. Responsible growth has four pillars: The Board also regularly evaluates the company’s strategy, operating environment, performance, and the progress your company is making Grow and Win in the toward its goals. Over several days each fall, in anticipation of the coming Market — No Excuses year, we engage in a thorough review with management of the company’s Page 4 multi-year strategy. We assess how the company has performed against the prior year’s plan. We examine how well the businesses are delivering for Grow With Our our customers and clients under the strategic plan, as well as the processes Customer-Focused the company has in place to increase revenue, manage risk and expenses, Strategy Page 7 and grow. We also consider the operating environment and management Grow Within Our Risk assumptions about how the environment will affect the company’s results and returns. During our regular meetings throughout the year, we further Framework Page 8 monitor and evaluate shorter-term issues and how they may impact the Grow in a Sustainable company’s execution of its strategy and its progress toward building Manner Page 11 long-term shareholder value. Throughout 2015, I had the pleasure of continuing to meet with our shareholders to discuss our strategic planning process and corporate Investment products: governance practices. Hearing directly from these shareholders, as well as Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value from regulators with whom we regularly visit, provides me and the other independent Board members important perspective. I look forward to more Global Wealth & Investment Management is a division of Bank of America Corporation (“BofA Corp.”). Merrill Lynch, meetings in 2016. Merrill Edge™, and U.S. Trust, are affiliated sub- divisions within Global Wealth & Investment Management. I encourage you to carefully review this report, our 2016 proxy statement, our Merrill Lynch and The Private Banking and Investment Group, make available products and services offered by forthcoming Business Standards Report, and the other materials the company Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”) and other subsidiaries of BofA Corp. Merrill Edge makes available to shareholders to better understand the opportunities and is available through MLPF&S, and consists of the Merrill Edge Advisory Center (investment guidance) and hotography: cover by Joel Plotkin; pages 14-15 by Greg Premru P self- directed online investing. challenges ahead and the company’s work to execute its strategy. We remain committed to building long-term value in the company and returning U.S. Trust, Bank of America Private Wealth Management operates through Bank of America, N.A., and other subsidiaries of BofA Corp. value to you, our shareholders. Banking products are provided by Bank of America, N.A., and affiliated banks, Members FDIC and wholly owned ww.addison.com Sincerely, w subsidiaries of BofA Corp. Jack O. Bovender, Jr. Please recycle. The annual report is printed on 30% post-consumer waste (PCW) recycled paper. Lead Independent Director Design by Addison © 2016 Bank of America Corporation. All rights reserved. (CEO letter continued from cover) Before reviewing our progress, I want to highlight a couple of important points. Our Board of Directors regularly reviews our strategy, the environment in which we are operating, and the progress we are making toward the goals we set. Our Lead Independent Director, Jack Bovender, discusses this in his letter to shareholders on the previous page and in our 2016 proxy statement. You may also read more about our company in our Business Standards Report, which discusses in further detail how we live our purpose and the approach we take to fulfilling our responsibilities in the areas of environmental, social and governance (ESG). In 2015, your investment in the company, measured by tangible book value per share, was at a record $15.62. That Tangible book value figure has increased in each of the past five years and is up per share of common 21 percent in that period — and that is after nearly $12 billion stock is a non-GAAP of stock repurchases and dividends paid. financial measure. Our return on assets (ROA) was 0.74 percent. Our longer-term Book value per share at December 31, 2015 target is 1.00 percent. The gap shows we still have work to do. was $22.54. However, our target is realistic, driven by continued loan growth and good core expense management. Expenses, excluding the large drop in litigation, were down nearly $3 billion last year, and we expect expenses to decline again in 2016. In December, we saw the first increase in short-term interest rates in nearly a decade. And, while interest rates are still a long way from normal, this move reflects a steadily improving U.S. economy, which has continued into early 2016. We see consumers spending and businesses growing, and it’s our job to help them. We will continue to drive the core business growth, even in a below-trend economic environment in the U.S. and around the world. The $16 billion we earned in 2015 reflected progress across a range of measures: loan growth, business activity, capital, liquidity, credit improvement and cost management. Here are just a few examples of how our team supported customers and clients. Your company: • Grew core loan balances by $75 billion and deposit balances by $78 billion. • Issued nearly 5 million new credit cards, and saw consumer spending on credit cards rise 4 percent. • Funded $70 billion in residential home loans, helping more than 260,000 families buy or refinance a home. • Extended more than $10.7 billion in new credit to small business owners. • Increased loans to the midsize companies we serve by 8 percent to $58 billion. • Raised $718 billion of capital to help companies grow. Brian Moynihan Chairman and Chief Executive Officer 1 None of these accomplishments would have been possible without a strong financial foundation. We ended 2015 with record liquidity of more than half-a-trillion dollars. In 2015, we increased What does that mean? In a time of financial stress, we our tangible common could fund our company for more than three years without equity to a record tapping the markets. $162 billion. This is more than double what we had We also have strong capital. At the end of 2015, our common before the financial crisis equity tier 1 ratio, on a Basel 3 fully phased-in basis, was and shows how much 9.8 percent, meaning we are well on our way to meeting the stronger we are now. 10 percent requirement that goes into effect in 2019. Part of that requirement is a buffer, enacted this year, that is equivalent to holding $47 billion of our $162 billion in capital to ensure we make it through any downturn. That is a strong insurance policy. In the meantime, we continue to improve the qualitative and quantitative measures the Federal Reserve evaluates during its annual stress test, which determines the pace at which we can continue increasing the return of capital to shareholders. Another focus has been on managing expenses, which were Excess capital that down $18 billion in 2015, mostly due to lower litigation costs we cannot return to shareholders remains and lower operating costs in Legacy Assets and Servicing on our balance sheet (LAS).