Bank of America : 2022 Dodd-Frank Act Annual Stress Test Results

Bank of America

2022 Dodd-Frank Act Annual Stress Test Results

Supervisory Severely Adverse Scenario

June 27, 2022

Important Presentation Information

The 2022 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 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 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, 2021.

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.

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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 all 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.

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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") athttps://www.federalreserve.gov/publications/2022-Stress-Test-Scenarios.htm
• 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 6.2% o Peak unemployment rate of 10.0%
  o Maximum home price index ("HPI") decline of 28.6%
  o Maximum commercial real estate price index decline ("CREPI") of 39.6% o Maximum equity market decline of 55.0%
  o Trough U.S. 10-year Treasury yield of 0.7% 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, 2022 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 2022 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, 2021. Instantaneous global market shocks are applied as of October 8, 2021 as prescribed by the FRB.
• 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.

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Bank of America Corporation