BANK OF AMERICA CORP DE

(1)For definitions, see Key Metrics on page 170.

(2)Return on average tangible common shareholders’ equity is a non-GAAP financial measure. For more information and a corresponding reconciliation to the most closely related financial measures defined by accounting principles generally accepted in the United States of America (GAAP), see Non-GAAP Reconciliations on page 85.

Net income was $26.5 billion, or $3.08 per diluted share in 2023 compared to $27.5 billion, or $3.19 per diluted share in 2022. The decrease in net income was primarily due to higher noninterest expense and provision for credit losses, partially offset by higher net interest income.

For discussion and analysis of our consolidated and business segment results of operations for 2022 compared to 2021, see Financial Highlights and Business Segment Operations sections in the MD&A of the Corporation’s 2022 Annual Report on Form 10-K.

Net Interest Income

Net interest income increased $4.5 billion to $56.9 billion in 2023 compared to 2022. Net interest yield on a fully taxable-equivalent (FTE) basis increased 12 basis points (bps) to 2.08 percent for 2023. The increases were primarily driven by benefits from higher interest rates and loan growth, partially offset by higher funding costs, lower deposits and net interest income related to Global Markets activity. For more information on net interest yield and FTE basis, see Supplemental Financial Data on page 29, and for more information on interest rate risk management, see Interest Rate Risk Management for the Banking Book on page 77.

Noninterest Income

Noninterest income decreased $838 million to $41.7 billion in 2023 compared to 2022. The following highlights the significant changes.

●Service charges decreased $721 million primarily driven by the impact of non-sufficient funds and overdraft policy changes, as well as lower treasury service charges.

● Investment and brokerage services decreased $338 million primarily due to lower transactional revenue and asset management fees driven by declines in assets under management (AUM) pricing, as well as lower average market valuations, partially offset by the impact of positive AUM flows.

● Investment banking fees decreased $115 million primarily due to lower advisory and debt issuance fees, partially offset by higher equity issuance fees.

● Market making and similar activities increased $657 million primarily driven by improved trading in mortgage products in Fixed Income, Currencies and Commodities (FICC) and by the impact of higher interest rates on client financing activities in Equities, partially offset by the net $1.6 billion impact of BSBY’s future cessation.

● Other income decreased $292 million primarily due to higher partnership losses on tax-advantaged investments and losses on sales of available-for-sale (AFS) debt securities, partially offset by certain negative valuation adjustments in the prior year.

Provision for Credit Losses

The provision for credit losses increased $1.9 billion to $4.4 billion in 2023 compared to 2022. The provision for credit losses for 2023 was driven by our consumer portfolio primarily due to credit card loan growth and asset quality, partially offset by improved macroeconomic conditions that primarily benefited our commercial portfolio. For the same period in the prior year, the provision for credit losses was primarily driven by loan growth and a dampened macroeconomic outlook, partially offset by a reduction in COVID-19 pandemic uncertainties. For more information on the provision for credit losses, see Allowance for Credit Losses on page 71.

Noninterest Expense

Noninterest expense increased $4.4 billion to $65.8 billion in 2023 compared to 2022 primarily due to higher investments in people and technology and higher FDIC expense, including $2.1 billion for the estimated special assessment amount arising from the closure of Silicon Valley Bank and Signature Bank, partially offset by lower litigation expense and revenue-related compensation.

Income Tax Expense

Income tax expense was $1.8 billion for 2023 compared to $3.4 billion in 2022, resulting in an effective tax rate of 6.4 percent compared to 11.1 percent.

The effective tax rates for 2023 and 2022 were primarily driven by our recurring tax preference benefits, which primarily consisted of tax credits from investments in affordable housing and renewable energy. Also included in the effective tax rate for 2023 were tax impacts from charges recorded in the fourth quarter of 2023 related to the FDIC special assessment and the impact of BSBY’s future cessation. For more information on these charges, see Executive Summary – Recent Developments on page 26. For more information on our recurring tax preference benefits, see Note 19 – Income Taxesto the Consolidated Financial Statements. Absent the tax credits related to tax-advantaged investments and discrete tax benefits, the effective tax rates would have been approximately 25 percent for both periods.

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