BANK OF AMERICA CORP DE

Credit risk management for the consumer portfolio begins with initial underwriting and continues throughout a borrower’s credit cycle. Statistical techniques in conjunction with experiential judgment are used in all aspects of portfolio management including underwriting, product pricing, risk appetite, setting

credit limits, and establishing operating processes and metrics to quantify and balance risks and returns. Statistical models are built using detailed behavioral information from external sources, such as credit bureaus, and/or internal historical experience and are a component of our consumer credit risk management process. These models are used in part to assist in making both new and ongoing credit decisions as well as portfolio management strategies, including authorizations and line management, collection practices and strategies, and determination of the allowance for loan and lease losses and allocated capital for credit risk.

Consumer Credit Portfolio

During 2023, the U.S. unemployment rate remained relatively stable and home prices increased compared to 2022. Net charge-offs increased $1.2 billion to $3.1 billion in 2023 primarily due to late-stage delinquent credit card loans that were charged off.

The consumer allowance for loan and lease losses increased $1.3 billion during 2023 to $8.5 billion. For more information, see Allowance for Credit Losses on page 71.

For more information on our accounting policies regarding delinquencies, nonperforming status, charge-offs and loan modifications for the consumer portfolio, see Note 1 – Summary of Significant Accounting Principles and Note 5 – Outstanding Loans and Leases and Allowance for Credit Losses to the Consolidated Financial Statements.

Table 19 presents our outstanding consumer loans and leases, consumer nonperforming loans and accruing consumer loans past due 90 days or more.

(1)Residential mortgage loans accruing past due 90 days or more are fully-insured loans. At December 31, 2023 and 2022, residential mortgage included $156 million and $260 million of loans on which interest had been curtailed by the FHA, and therefore were no longer accruing interest, although principal was still insured, and $96 million and $108 million of loans on which interest was still accruing.

(2)Outstandings primarily includes auto and specialty lending loans and leases of $53.9 billion and $51.8 billion, U.S. securities-based lending loans of $46.0 billion and $50.4 billion at December 31, 2023 and 2022, and non-U.S. consumer loans of $2.8 billion and $3.0 billion at December 31, 2023 and 2022.

(3)For more information on the fair value option, see Note 21 – Fair Value Option to the Consolidated Financial Statements.

(4)Excludes consumer loans accounted for under the fair value option. At December 31, 2023 and 2022, $4 million and $7 million of loans accounted for under the fair value option were past due 90 days or more and not accruing interest.

Table 20 presents net charge-offs and related ratios for consumer loans and leases.

(1)Net charge-off ratios are calculated as net charge-offs divided by average outstanding loans and leases, excluding loans accounted for under the fair value option.

We believe that the presentation of information adjusted to exclude the impact of the fully-insured loan portfolio and loans accounted for under the fair value option is more representative of the ongoing operations and credit quality of the business. As a result, in the following tables and discussions of the residential mortgage and home equity portfolios, we exclude loans accounted for under the fair value option and provide information that excludes the impact of the fully-insured loan portfolio in certain credit quality statistics.

Residential Mortgage

The residential mortgage portfolio made up the largest percentage of our consumer loan portfolio at 50 percent of consumer loans and leases in 2023. Approximately 51 percent of the residential mortgage portfolio was in Consumer Banking,46 percent was in GWIMand the remaining portion was in All Other.

Outstanding balances in the residential mortgage portfolio decreased $1.3 billion in 2023, as paydowns and payoffs outpaced new originations.

At December 31, 2023 and 2022, the residential mortgage portfolio included $11.0 billion and $11.7 billion of outstanding fully-insured loans, of which $2.2 billion for both periods had FHA insurance, with the remainder protected by Fannie Mae long-term standby agreements.

Table 21 presents certain residential mortgage key credit statistics on both a reported basis and excluding the fully-insured loan portfolio. The following discussion presents the residential mortgage portfolio excluding the fully-insured loan portfolio.

(1)Outstandings, accruing past due, nonperforming loans and percentages of portfolio exclude loans accounted for under the fair value option.

(2)Includes loans that are contractually current that have not yet demonstrated a sustained period of payment performance following a modification.

Nonperforming outstanding balances in the residential mortgage portfolio decreased $53 million in 2023 primarily due to payoffs and paydowns, returns to performing and loan sales outpacing new additions. Of the nonperforming residential mortgage loans at December 31, 2023, $1.3 billion, or 62 percent, were current on contractual payments. Excluding fully-insured loans, loans accruing past due 30 days or more increased $142 million.

Of the $217.4 billion in total residential mortgage loans outstanding at December 31, 2023, $63.1 billion, or 29 percent, of loans were originated as interest-only. The outstanding balance of interest-only residential mortgage loans that had entered the amortization period was $3.6 billion, or six percent, at December 31, 2023. Residential mortgage loans that have entered the amortization period generally experience a higher rate of early stage delinquencies and nonperforming status compared to the residential mortgage portfolio as a

whole. At December 31, 2023, $80 million, or two percent, of outstanding interest-only residential mortgages that had entered the amortization period were accruing past due 30 days or more compared to $986 million, or less than one percent, for the entire residential mortgage portfolio. In addition, at December 31, 2023, $180 million, or five percent, of outstanding interest-only residential mortgage loans that had entered the amortization period were nonperforming, of which $61 million were contractually current. Loans that have yet to enter the amortization period in our interest-only residential mortgage portfolio are primarily well-collateralized loans to our wealth management clients and have an interest-only period of three years to 10 years. Substantially all of these loans that have yet to enter the amortization period will not be required to make a fully-amortizing payment until 2025 or later.

59 Bank of America

Table 22 presents outstandings, nonperforming loans and net charge-offs by certain state concentrations for the residential mortgage portfolio. In the New York area, the New York-Northern New Jersey-Long Island Metropolitan Statistical Area (MSA) made up 15 percent of outstandings at both December 31, 2023 and 2022. The Los Angeles-Long Beach-Santa Ana MSA within California represented 14 percent of outstandings at both December 31, 2023 and 2022.

(1)Outstandings and nonperforming loans exclude loans accounted for under the fair value option.

Home Equity

At December 31, 2023, the home equity portfolio made up six percent of the consumer portfolio and was comprised of home equity lines of credit (HELOCs), home equity loans and reverse mortgages. HELOCs generally have an initial draw period of 10 years, and after the initial draw period ends, the loans generally convert to 15- or 20-year amortizing loans. We no longer originate home equity loans or reverse mortgages.

At December 31, 2023, 84 percent of the home equity portfolio was in Consumer Banking, seven percent was in All Other and the remainder of the portfolio was primarily in GWIM. Outstanding balances in the home equity portfolio decreased $1.0 billion in 2023 primarily due to paydowns outpacing draws

on existing lines and new originations. Of the total home equity portfolio at December 31, 2023 and 2022, $10.1 billion and $11.1 billion, or 39 percent and 42 percent, were in first-lien positions. At December 31, 2023, outstanding balances in the home equity portfolio that were in a second-lien or more junior-lien position and where we also held the first-lien loan totaled $4.4 billion, or 17 percent, of our total home equity portfolio.

Unused HELOCs totaled $45.1 billion and $42.4 billion at December 31, 2023 and 2022. The HELOC utilization rate was 35 percent and 38 percent at December 31, 2023 and 2022.

Table 23 presents certain home equity portfolio key credit statistics.

(1)Outstandings, accruing past due, nonperforming loans and percentages of the portfolio exclude loans accounted for under the fair value option.

(2)Includes loans that are contractually current that have not yet demonstrated a sustained period of payment performance following a modification.

Nonperforming outstanding balances in the home equity portfolio decreased $60 million to $450 million at December 31, 2023, primarily driven by loan sales, payoffs and returns to performing status outpacing new additions. Of the nonperforming home equity loans at December 31, 2023, $256 million, or 57 percent, were current on contractual payments. In addition, $113 million, or 25 percent, were 180 days or more past due and had been written down to the estimated fair value of the collateral, less costs to sell. Accruing loans that were 30 days or more past due remained relatively unchanged in 2023 compared to 2022.

Of the $25.5 billion in total home equity portfolio outstandings at December 31, 2023, as shown in Table 23, 11 percent require interest-only payments. The outstanding balance of HELOCs that had reached the end of their draw period and entered the amortization period was $4.0 billion at

December 31, 2023. The HELOCs that have entered the amortization period have experienced a higher percentage of early stage delinquencies and nonperforming status when compared to the HELOC portfolio as a whole. At December 31, 2023, $41 million, or one percent, of outstanding HELOCs that had entered the amortization period were accruing past due 30 days or more. In addition, at December 31, 2023, $283 million, or seven percent, were nonperforming.

For our interest-only HELOC portfolio, we do not actively track how many of our home equity customers pay only the minimum amount due on their home equity loans and lines; however, we can infer some of this information through a review of our HELOC portfolio that we service and is still in its revolving period. During 2023, 13 percent of these customers with an outstanding balance did not pay any principal on their HELOCs.

Table 24 presents outstandings, nonperforming balances and net recoveries by certain state concentrations for the home equity portfolio. In the New York area, the New York-Northern New Jersey-Long Island MSA made up 11 percent and 12 percent of the outstanding home equity portfolio at December 31, 2023 and 2022. The Los Angeles-Long Beach-Santa Ana MSA within California made up 10 percent and 11 percent of the outstanding home equity portfolio at December 31, 2023 and 2022.

(1)Outstandings and nonperforming loans exclude loans accounted for under the fair value option.

Credit Card

At December 31, 2023, 97 percent of the credit card portfolio was managed in Consumer Banking with the remainder in GWIM. Outstandings in the credit card portfolio increased $8.8 billion during 2023 to $102.2 billion as purchase volume and card transfers more than offset payments. Net charge-offs increased $1.2 billion to $2.6 billion in 2023 compared to 2022, primarily due to late-stage delinquent credit card loans that were charged off. Credit card loans 30 days or more past due and still

accruing interest increased $914 million, and 90 days or more past due and still accruing interest increased $507 million at December 31, 2023.

Unused lines of credit for credit card increased to $390.2 billion at December 31, 2023 from $370.1 billion at December 31, 2022.

Table 25 presents certain state concentrations for the credit card portfolio.

Direct/Indirect Consumer

At December 31, 2023, 52 percent of the direct/indirect portfolio was included in Consumer Banking (consumer auto and recreational vehicle lending) and 48 percent was included in GWIM(principally securities-based lending loans). Outstandings in the direct/indirect portfolio decreased $2.8 billion in 2023 to

$103.5 billion driven by declines in securities-based lending stemming from higher paydown activity due to higher interest rates, partially offset by growth in our auto portfolio.

Table 26 presents certain state concentrations for the direct/indirect consumer loan portfolio.

61 Bank of America

Other Consumer

Other consumer primarily consists of deposit overdraft balances. Net charge-offs decreased $41 million in 2023 to $480 million, primarily driven by lower overdraft losses.

Nonperforming Consumer Loans, Leases and Foreclosed Properties Activity

Table 27 presents nonperforming consumer loans, leases and foreclosed properties activity during 2023 and 2022. During 2023, nonperforming consumer loans decreased $42 million to $2.7 billion.

At December 31, 2023, $531 million, or 20 percent, of nonperforming loans were 180 days or more past due and had been written down to their estimated property value less costs to sell. In addition, at December 31, 2023, $1.6 billion, or 60 percent, of nonperforming consumer loans were current and classified as nonperforming loans in accordance with applicable policies.

Foreclosed properties decreased $18 million in 2023 to $103 million.

(1)Consumer loans may be returned to performing status when all principal and interest is current and full repayment of the remaining contractual principal and interest is expected, or when the loan otherwise becomes well-secured and is in the process of collection.

(2)Includes repossessed non-real estate assets of $20 million and $0 at December 31, 2023 and 2022.

(3)Outstanding consumer loans and leases exclude loans accounted for under the fair value option.