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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q(Mark One)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF 1934For the Quarterly Period Ended March31,2023 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF 1934For the transition period fromtoCommission file number:1-6523 Exact name of registrant as specified in its charter:Bank of America Corporation State or other jurisdiction of incorporation or organization:Delaware IRS Employer Identification No.:56-0906609 Address of principal executive offices:Bank of America Corporate Center100 N.Tryon Street Charlotte,North Carolina 28255 Registrants telephone number,including area code:(704)386-5681 Former name,former address and former fiscal year,if changed since last report:Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock,par value$0.01 per shareBACNew York Stock ExchangeDepositary Shares,each representing a 1/1,000th interest in a shareBAC PrENew York Stock Exchange of Floating Rate Non-Cumulative Preferred Stock,Series EDepositary Shares,each representing a 1/1,000th interest in a shareBAC PrBNew York Stock Exchange of 6.000%Non-Cumulative Preferred Stock,Series GGDepositary Shares,each representing a 1/1,000th interest in a shareBAC PrKNew York Stock Exchange of 5.875%Non-Cumulative Preferred Stock,Series HH7.25%Non-Cumulative Perpetual Convertible Preferred Stock,Series LBAC PrLNew York Stock ExchangeDepositary Shares,each representing a 1/1,200th interest in a shareBML PrGNew York Stock Exchangeof Bank of America Corporation Floating RateNon-Cumulative Preferred Stock,Series 1Title of each classTrading Symbol(s)Name of each exchange on which registeredDepositary Shares,each representing a 1/1,200th interest in a shareBML PrHNew York Stock Exchange of Bank of America Corporation Floating RateNon-Cumulative Preferred Stock,Series 2Depositary Shares,each representing a 1/1,200th interest in a shareBML PrJNew York Stock Exchange of Bank of America Corporation Floating RateNon-Cumulative Preferred Stock,Series 4Depositary Shares,each representing a 1/1,200th interest in a shareBML PrLNew York Stock Exchange of Bank of America Corporation Floating RateNon-Cumulative Preferred Stock,Series 5Floating Rate Preferred Hybrid Income Term Securities of BAC CapitalBAC/PFNew York Stock Exchange Trust XIII(and the guarantee related thereto)5.63%Fixed to Floating Rate Preferred Hybrid Income Term SecuritiesBAC/PGNew York Stock Exchange of BAC Capital Trust XIV(and the guarantee related thereto)Income Capital Obligation Notes initially due December 15,2066 ofMER PrKNew York Stock ExchangeBank of America CorporationSenior Medium-Term Notes,Series A,Step Up Callable Notes,dueBAC/31BNew York Stock Exchange November 28,2031 of BofA Finance LLC(and the guaranteeof the Registrant with respect thereto)Depositary Shares,each representing a 1/1,000th interest in a share ofBAC PrMNew York Stock Exchange 5.375%Non-Cumulative Preferred Stock,Series KKDepositary Shares,each representing a 1/1,000th interest in a shareBAC PrNNew York Stock Exchangeof 5.000%Non-Cumulative Preferred Stock,Series LLDepositary Shares,each representing a 1/1,000th interest in a share ofBAC PrONew York Stock Exchange4.375%Non-Cumulative Preferred Stock,Series NNDepositary Shares,each representing a 1/1,000th interest in a share ofBAC PrPNew York Stock Exchange4.125%Non-Cumulative Preferred Stock,Series PPDepositary Shares,each representing a 1/1,000th interest in a share ofBAC PrQNew York Stock Exchange4.250%Non-Cumulative Preferred Stock,Series QQDepositary Shares,each representing a 1/1,000th interest in a shareBAC PrSNew York Stock Exchangeof 4.750%Non-Cumulative Preferred Stock,Series SSIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule12b-2 of the Exchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting company Emerging growth company If an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Exchange Act Rule 12b-2).Yes No On April28,2023,there were 7,969,152,819 shares of Bank of America Corporation Common Stock outstanding.Bank of America Corporation and SubsidiariesMarch31,2023 Form 10-QINDEXPartI.Financial InformationItem 1.Financial StatementsPageConsolidated Statement of Income44Consolidated Statement of Comprehensive Income44Consolidated Balance Sheet45Consolidated Statement of Changes in Shareholders Equity46Consolidated Statement of Cash Flows47Notes to Consolidated Financial Statements48Note 1 Summary of Significant Accounting Principles48Note 2 Net Interest Income and Noninterest Income49Note 3 Derivatives50Note 4 Securities57Note 5 Outstanding Loans and Leases and Allowance for Credit Losses60Note 6 Securitizations and Other Variable Interest Entities71Note 7 Goodwill and Intangible Assets75Note 8 Leases75Note 9 Securities Financing Agreements,Collateral and Restricted Cash76Note 10 Commitments and Contingencies78Note 11 Shareholders Equity80Note 12 Accumulated Other Comprehensive Income(Loss)81Note 13 Earnings Per Common Share82Note 14 Fair Value Measurements82Note 15 Fair Value Option88Note 16 Fair Value of Financial Instruments89Note 17 Business Segment Information90Glossary 93Acronyms95Item 2.Managements Discussion and Analysis of Financial Condition and Results of OperationsExecutive Summary3Recent Developments3Financial Highlights4Supplemental Financial Data6Business Segment Operations9Consumer Banking9Global Wealth&Investment Management11Global Banking13Global Markets15All Other16Managing Risk17Capital Management17Liquidity Risk21Credit Risk Management25Consumer Portfolio Credit Risk Management25Commercial Portfolio Credit Risk Management29Non-U.S.Portfolio35Allowance for Credit Losses36Market Risk Management38Trading Risk Management38Interest Rate Risk Management for the Banking Book40Mortgage Banking Risk Management41Climate Risk Management41Complex Accounting Estimates42Non-GAAP Reconciliations43Item 3.Quantitative and Qualitative Disclosures about Market Risk43Item 4.Controls and Procedures431 Bank of AmericaPartII.Other InformationItem 1.Legal Proceedings96Item 1A.Risk Factors96Item 2.Unregistered Sales of Equity Securities and Use of Proceeds96Item 6.Exhibits97Signature97Item 2.Managements Discussion and Analysis of Financial Condition and Results of OperationsBank of America Corporation(the“Corporation”)and its management may make certain statements that constitute“forward-looking statements”within the meaning of the Private Securities Litigation Reform Act of 1995.These statements can be identified by the fact that they do not relate strictly to historical or current facts.Forward-looking statements often use words such as“anticipates,”“targets,”“expects,”“hopes,”“estimates,”“intends,”“plans,”“goals,”“believes,”“continue”and other similar expressions or future or conditional verbs such as“will,”“may,”“might,”“should,”“would”and“could.”Forward-looking statements represent the Corporations current expectations,plans or forecasts of its future results,revenues,liquidity,provision for credit losses,expenses,efficiency ratio,capital measures,strategy,deposits,assets,and future business and economic conditions more generally,and other future matters.These statements are not guarantees of future results or performance and involve certain known and unknown risks,uncertainties and assumptions that are difficult to predict and are often beyond the Corporations control.Actual outcomes and results may differ materially from those expressed in,or implied by,any of these forward-looking statements.You should not place undue reliance on any forward-looking statement and should consider the following uncertainties and risks,as well as the risks and uncertainties more fully discussed under Item 1A.Risk Factors of the Corporations 2022 Annual Report on Form 10-K and in any of the Corporations subsequent Securities and Exchange Commission filings:the Corporations potential judgments,orders,settlements,penalties,fines and reputational damage resulting from pending or future litigation and regulatory investigations,proceedings and enforcement actions,including as a result of our participation in and execution of government programs related to the Coronavirus Disease 2019(COVID-19)pandemic,such as the processing of unemployment benefits for California and certain other states;the possibility that the Corporations future liabilities may be in excess of its recorded liability and estimated range of possible loss for litigation,and regulatory and government actions;the possibility that the Corporation could face increased claims from one or more parties involved in mortgage securitizations;the Corporations ability to resolve representations and warranties repurchase and related claims;the risks related to the discontinuation of the London Interbank Offered Rate and other reference rates,including increased expenses and litigation and the effectiveness of hedging strategies;uncertainties about the financial stability and growth rates of non-U.S.jurisdictions,the risk that those jurisdictions may face difficulties servicing their sovereign debt,and related stresses on financial markets,currencies and trade,and the Corporations exposures to such risks,including direct,indirect and operational;the impact of U.S.and global interest rates,inflation,currency exchange rates,economic conditions,trade policies and tensions,including tariffs,and potential geopolitical instability;the impact of the interest rate,inflationary,macroeconomic,banking and regulatory environment on the Corporations assets,business,financial condition and results of operations;the impact of adverse developments affecting the U.S.or global banking industry,including bank failures and liquidity concerns,which could cause continued or worsening economic and market volatility,and regulatory responses thereto;the possibility that future credit losses may be higher than currently expected due to changes in economic assumptions,customer behavior,adverse developments with respect to U.S.or global economic conditions and other uncertainties,including the impact of supply chain disruptions,inflationary pressures and labor shortages on economic conditions and our business;potential losses related to the Corporations concentration of credit risk;the Corporations ability to achieve its expense targets and expectations regarding revenue,net interest income,provision for credit losses,net charge-offs,effective tax rate,loan growth or other projections;adverse changes to the Corporations credit ratings from the major credit rating agencies;an inability to access capital markets or maintain deposits or borrowing costs;estimates of the fair value and other accounting values,subject to impairment assessments,of certain of the Corporations assets and liabilities;the estimated or actual impact of changes in accounting standards or assumptions in applying those standards;uncertainty regarding the content,timing and impact of regulatory capital and liquidity requirements;the impact of adverse changes to total loss-absorbing capacity requirements,stress capital buffer requirements and/or global systemically important bank surcharges;the potential impact of actions of the Board of Governors of the Federal Reserve System on the Corporations capital plans;the effect of changes in or interpretations of income tax laws and regulations;the impact of implementation and compliance with U.S.and international laws,regulations and regulatory interpretations,including,but not limited to,recovery and resolution planning requirements,Federal Deposit Insurance Corporation assessments,the Volcker Rule,fiduciary standards,derivatives regulations and the Coronavirus Aid,Relief,and Economic Security Act and any similar or related rules and regulations;a failure or disruption in or breach of the Corporations operational or security systems or infrastructure,or those of third parties,including as a result of cyberattacks or campaigns;the risks related to the transition and physical Bank of America 2impacts of climate change;our ability to achieve environmental,social and governance goals and commitments or the impact of any changes in the Corporations sustainability strategy or commitments generally;the impact of any future federal government shutdown and uncertainty regarding the federal governments debt limit or changes in fiscal,monetary or regulatory policy;the emergence or continuation of widespread health emergencies or pandemics,including the magnitude and duration of the COVID-19 pandemic and its impact on U.S.and/or global financial market conditions and our business,results of operations,financial condition and prospects;the impact of natural disasters,extreme weather events,military conflict(including the Russia/Ukraine conflict,the possible expansion of such conflict and potential geopolitical consequences),terrorism or other geopolitical events;and other matters.Forward-looking statements speak only as of the date they are made,and the Corporation undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.Notes to the Consolidated Financial Statements referred to in Managements Discussion and Analysis of Financial Condition and Results of Operations(MD&A)are incorporated by reference into the MD&A.Certain prior-period amounts have been reclassified to conform to current-period presentation.Throughout the MD&A,the Corporation uses certain acronyms and abbreviations which are defined in the Glossary.Executive SummaryBusiness OverviewThe Corporation is a Delaware corporation,a bank holding company(BHC)and a financial holding company.When used in this report,“Bank of America,”“the Corporation,”“we,”“us”and“our”may refer to Bank of America Corporation individually,Bank of America Corporation and its subsidiaries,or certain of Bank of America Corporations subsidiaries or affiliates.Our principal executive offices are located in Charlotte,North Carolina.Through our various bank and nonbank subsidiaries throughout the U.S.and in international markets,we provide a diversified range of banking and nonbank financial services and products through four business segments:Consumer Banking,Global Wealth&Investment Management(GWIM),Global Banking and Global Markets,with the remaining operations recorded in All Other.We operate our banking activities primarily under the Bank of America,National Association(Bank of America,N.A.or BANA)charter.At March 31,2023,the Corporation had$3.2 trillion in assets and a headcount of approximately 217,000 employees.As of March31,2023,we served clients through operations across the U.S.,its territories and more than 35 countries.Our retail banking footprint covers all major markets in the U.S.,and we serve approximately 68 million consumer and small business clients with approximately 3,900 retail financial centers,approximately 15,000 ATMs,and leading digital banking platforms()with approximately 45 million active users,including approximately 36 million active mobile users.We offer industry-leading support to approximately three million small business households.Our GWIM businesses,with client balances of$3.5 trillion,provide tailored solutions to meet client needs through a full set of investment management,brokerage,banking,trust and retirement products.We are a global leader in corporate and investment banking and trading across a broad range of asset classes serving corporations,governments,institutions and individuals around the world.The Corporations website is ,and the Investor Relations portion of our website is https:/.We use our website to distribute company information,including as a means of disclosing material,non-public information and for complying with our disclosure obligations under Regulation FD.We routinely post and make accessible financial and other information,including environmental,social and governance(ESG)information,regarding the Corporation on our website.Investors should monitor our website,including the Investor Relations portion,in addition to our press releases,U.S.Securities and Exchange Commission(SEC)filings,public conference calls and webcasts.Notwithstanding the foregoing,the information contained on our website as referenced in this paragraph is not incorporated by reference into this Quarterly Report on Form 10-Q.Recent DevelopmentsCapital ManagementOn April 26,2023,the Corporations Board of Directors(the Board)declared a quarterly common stock dividend of$0.22 per share,payable on June 30,2023 to shareholders of record as of June 2,2023.For more information on our capital resources,see Capital Management on page 17.Financial Market EventsIn March 2023,the global financial system experienced increased volatility due to the failure of certain financial institutions.At March 31,2023,Bank of Americas direct exposure to these financial institutions was not significant.To help deploy financial strength and liquidity into the larger banking system,Bank of America and certain other U.S.financial institutions made uninsured deposits totaling$30 billion into First Republic Bank.The amount of Bank of Americas uninsured deposit was$5 billion and is recorded in Time deposits placed and other short-term investments on the Consolidated Balance Sheet.On May 1,2023,the Federal Deposit Insurance Corporation(FDIC)announced that it was appointed as receiver of First Republic Bank and entered into a purchase and assumption agreement with JPMorgan Chase Bank,National Association(JPMorgan Chase Bank)to assume all of the deposits and substantially all of the assets of First Republic Bank.As a result,Bank of America has become a depositor of JPMorgan Chase Bank with regard to its$5 billion uninsured deposit originally deposited into First Republic Bank.The potential impacts of rising interest rates and continued deposit outflows on global markets,financial institutions and macroeconomic conditions,generally,remain uncertain.Episodes of increased economic and market volatility may continue to occur and could worsen if there are additional instances of actual or threatened bank failures,which could adversely affect the Corporations businesses,results of operations and financial condition.For more information on the risks related to rising interest rates,declining asset values and liquidity,see the Market,Liquidity and Credit sections within Item 1A.Risk Factors of the Corporations 2022 Annual Report on Form 10-K.3 Bank of AmericaU.S.Government Debt CeilingIn response to the upcoming U.S.governments deadline to raise the debt ceiling,the Corporation has implemented protocols and processes to prepare for the impacts that could begin in the period leading up to a potential breach of the U.S.governments debt ceiling and increasing in severity if a default occurs.The Corporation is monitoring these potential events through regular routines.For more information on the risks related to a potential U.S.government debt ceiling breach,see the Market and Geopolitical sections within Item 1A.Risk Factors of the Corporations 2022 Annual Report on Form 10-K.LIBOR and Other Benchmark RatesThe Corporation and the global financial markets continue to make progress with respect to the transition away from the London Interbank Offered Rate(LIBOR)and other Interbank Offered Rates(IBORs)to alternative reference rates(ARRs).As previously disclosed,the remaining U.S.dollar(USD)LIBOR settings(i.e.,overnight,one month,three month,six month and 12 month)will cease or become non-representative immediately after June 30,2023,although the Financial Conduct Authority(FCA)announced on April 3,2023 that it will require LIBORs administrator,ICE Benchmark Administration Limited,to continue publication of the one-month,three-month and six-month USD LIBOR settings on a“synthetic”basis(calculated using the relevant CME Term SOFR Reference Rate plus the respective International Swaps and Derivatives Association(ISDA)fixed spread adjustment)for use in legacy contracts and that it intends for such publication to cease on September 30,2024.In April 2023,certain central counterparties(CCPs)completed processes to convert certain outstanding USD LIBOR-cleared derivatives to ARR positions,and the Corporation expects those CCPs will convert remaining USD LIBOR-cleared derivatives to ARR positions in the second quarter of 2023.In March 2023,the Corporation announced that after June 30,2023,the relevant CME Term SOFR Reference Rate,plus the respective ISDA fixed spread adjustment,will be the replacement reference rate for certain outstanding floating rate and fixed-to-floating rate debt securities,preferred stock represented by depositary shares and trust preferred securities issued by the Corporation,BofA Finance LLC and certain other affiliated issuers(USD LIBOR Securities)that use USD LIBOR as the reference rate and are governed by New York and Delaware law.For more information on the Corporations replacement of relevant USD LIBOR rates of certain USD LIBOR Securities,see the Corporations Current Report on Form 8-K filed with the SEC on March 31,2023.Additionally,as the Corporation continues to transition IBOR-based products to various ARRs,including the Secured Overnight Financing Rate(SOFR),it has increased the use of those ARRs in its baseline forecast of net interest income.For more information,see Interest Rate Risk Management for the Banking Book on page 40.For more information on the expected replacement of LIBOR and other benchmark rates,including the Corporations efforts and overall progress with respect to LIBOR transition,see Executive Summary Recent Developments LIBOR and Other Benchmark Rates in the MD&A and Item 1A.Risk Factors Other of the Corporations 2022 Annual Report on Form 10-K.Financial HighlightsTable 1 Summary Income Statement and Selected Financial DataThree Months Ended March 31(Dollars in millions,except per share information)20232022Income statementNet interest income$14,448$11,572 Noninterest income 11,810 11,656 Total revenue,net of interest expense 26,258 23,228 Provision for credit losses 931 30 Noninterest expense 16,238 15,319 Incomebefore income taxes 9,089 7,879 Income tax expense 928 812 Net income 8,161 7,067 Preferred stock dividends 505 467 Net incomeapplicable to common shareholders$7,656$6,600 Per common share informationEarnings$0.95$0.81 Diluted earnings 0.94 0.80 Dividends paid 0.22 0.21 Performance ratiosReturn on average assets(1)1.07%0.89%Return on average common shareholders equity(1)12.48 11.02 Return on average tangible common shareholders equity(2)17.38 15.51 Efficiency ratio(1)61.84 65.95 March 31 2023December 31 2022Balance sheetTotal loans and leases$1,046,406$1,045,747 Total assets 3,194,657 3,051,375 Total deposits 1,910,402 1,930,341 Total liabilities 2,914,461 2,778,178 Total common shareholders equity 251,799 244,800 Total shareholders equity 280,196 273,197(1)For definitions,see Key Metrics on page 94.(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 43.Net income was$8.2 billion,or$0.94 per diluted share,for the three months ended March 31,2023 compared to$7.1 billion,or$0.80 per diluted share,for the same period in 2022.The increase in net income was primarily due to higher net interest income,partially offset by higher noninterest expense and provision for credit losses.Bank of America 4Total assets increased$143.3 billion from December 31,2022 to$3.2 trillion primarily driven by higher cash and cash equivalents due to securities financing activity to support balance sheet and liquidity positioning,as well as higher trading account assets to support Global Markets client activity.Total liabilities increased$136.3 billion from December31,2022 to$2.9 trillion primarily driven by higher securities financing activity and short-term borrowings to support balance sheet and liquidity positioning,partially offset by lower deposits primarily due to customers movement of balances to higher yielding investment alternatives.Shareholders equity increased$7.0 billion from December 31,2022 primarily due to net income and market value increases on derivatives,partially offset by returns of capital to shareholders through common and preferred stock dividends and common stock repurchases.Net Interest IncomeNet interest income increased$2.9 billion to$14.4 billion for the three months ended March 31,2023 compared to the same period in 2022.Net interest yield on a fully taxable-equivalent(FTE)basis increased 51 basis points(bps)to 2.20 percent.The increase was primarily driven by benefits from higher interest rates,including lower premium amortization expense and loan growth,partially offset by lower net interest income related to Global Markets activity,higher rates paid on deposits and lower debt securities.For more information on net interest yield and FTE basis,see Supplemental Financial Data on page 6,and for more information on interest rate risk management,see Interest Rate Risk Management for the Banking Book on page 40.Noninterest IncomeTable 2 Noninterest IncomeThree Months Ended March 31(Dollars in millions)20232022Fees and commissions:Card income$1,469$1,403 Service charges 1,410 1,833 Investment and brokerage services 3,852 4,292 Investment banking fees 1,163 1,457 Total fees and commissions 7,894 8,985 Market making and similar activities 4,712 3,238 Other income(796)(567)Total noninterest income$11,810$11,656 Noninterest income increased$154 million to$11.8 billion for the three months ended March 31,2023 compared to the same period in 2022.The following highlights the significant changes.Service charges decreased$423 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$440 million primarily driven by lower market valuations and declines in assets under management(AUM)pricing,partially offset by the impact of positive AUM flows.Investment banking fees decreased$294 million primarily due to lower debt issuance,advisory and equity issuance fees.Market making and similar activities increased$1.5 billion primarily driven by improved performance in fixed income,currencies and commodities(FICC)and by the impact of higher interest rates on client financing activities in Equities.Other income decreased$229 million primarily due to losses on sales of available-for-sale(AFS)debt securities.Provision for Credit LossesThe provision for credit losses increased$901 million to$931 million for the three months ended March 31,2023 compared to the same period in 2022.The provision for credit losses for the current-year period was driven by our consumer portfolio primarily due to higher-than-expected credit card balances,partially offset by certain improved macroeconomic conditions that primarily benefited our commercial portfolio.The provision for credit losses in the prior-year period was$30 million,as asset quality improvement was offset by a reserve build related to our Russian exposure and loan growth.For more information on the provision for credit losses,see Allowance for Credit Losses on page 36.Noninterest ExpenseTable 3Noninterest ExpenseThree Months Ended March 31(Dollars in millions)20232022Compensation and benefits$9,918$9,482 Occupancy and equipment 1,799 1,760 Information processing and communications 1,697 1,540 Product delivery and transaction related 890 933 Marketing 458 397 Professional fees 537 450 Other general operating 939 757 Total noninterest expense$16,238$15,319 Noninterest expense increased$919 million to$16.2 billion for the three months ended March 31,2023 compared to the same period in 2022.The increase was primarily due to higher investments in people and technology and higher FDIC expense,partially offset by lower revenue-related incentive compensation.Income Tax ExpenseTable 4 Income Tax ExpenseThree Months Ended March 31(Dollars in millions)20232022Income before income taxes$9,089$7,879 Income tax expense 928 812 Effective tax rate 10.2.3%The effective tax rates for the three months ended March 31,2023 and 2022 were primarily driven by our recurring tax preference benefits that mainly consist of tax credits from ESG investments in affordable housing and renewable energy.Absent ESG tax credits and discrete tax benefits,the effective tax rates would have been approximately 26 percent and 25 percent.5 Bank of AmericaSupplemental Financial DataNon-GAAP Financial MeasuresIn this Form 10-Q,we present certain non-GAAP financial measures.Non-GAAP financial measures exclude certain items or otherwise include components that differ from the most directly comparable measures calculated in accordance with GAAP.Non-GAAP financial measures are provided as additional useful information to assess our financial condition,results of operations(including period-to-period operating performance)or compliance with prospective regulatory requirements.These non-GAAP financial measures are not intended as a substitute for GAAP financial measures and may not be defined or calculated the same way as non-GAAP financial measures used by other companies.When presented on a consolidated basis,we view net interest income on an FTE basis as a non-GAAP financial measure.To derive the FTE basis,net interest income is adjusted to reflect tax-exempt income on an equivalent before-tax basis with a corresponding increase in income tax expense.For purposes of this calculation,we use the federal statutory tax rate of 21 percent and a representative state tax rate.Net interest yield,which measures the basis points we earn over the cost of funds,utilizes net interest income on an FTE basis.We believe that presentation of these items on an FTE basis allows for comparison of amounts from both taxable and tax-exempt sources and is consistent with industry practices.We may present certain key performance indicators and ratios excluding certain items(e.g.,debit valuation adjustment(DVA)gains(losses),which result in non-GAAP financial measures.We believe that the presentation of measures that exclude these items is useful because such measures provide additional information to assess the underlying operational performance and trends of our businesses and to allow better comparison of period-to-period operating performance.We also evaluate our business based on certain ratios that utilize tangible equity,a non-GAAP financial measure.Tangible equity represents shareholders equity or common shareholders equity reduced by goodwill and intangible assets(excluding mortgage servicing rights(MSRs),net of related deferred tax liabilities(“adjusted”shareholders equity or common shareholders equity).These measures are used to evaluate our use of equity.In addition,profitability,relationship and investment models use both return on average tangible common shareholders equity and return on average tangible shareholders equity as key measures to support our overall growth objectives.These ratios are:Return on average tangible common shareholders equity measures our net income applicable to common shareholders as a percentage of adjusted average common shareholders equity.The tangible common equity ratio represents adjusted ending common shareholders equity divided by total tangible assets.Return on average tangible shareholders equity measures our net income as a percentage of adjusted average total shareholders equity.The tangible equity ratio represents adjusted ending shareholders equity divided by total tangible assets.Tangible book value per common share represents adjusted ending common shareholders equity divided by ending common shares outstanding.We believe ratios utilizing tangible equity provide additional useful information because they present measures of those assets that can generate income.Tangible book value per common share provides additional useful information about the level of tangible assets in relation to outstanding shares of common stock.The aforementioned supplemental data and performance measures are presented in Table 5 on page 7.For more information on the reconciliation of these non-GAAP financial measures to the corresponding GAAP financial measures,see Non-GAAP Reconciliations on page 43.Key Performance IndicatorsWe present certain key financial and nonfinancial performance indicators(key performance indicators)that management uses when assessing our consolidated and/or segment results.We believe they are useful to investors because they provide additional information about our underlying operational performance and trends.These key performance indicators(KPIs)may not be defined or calculated in the same way as similar KPIs used by other companies.For information on how these metrics are defined,see Key Metrics on page 94.Our consolidated key performance indicators,which include various equity and credit metrics,are presented in Table 1 on page 4 and Table 5 on page 7.For information on key segment performance metrics,see Business Segment Operations on page 9.Bank of America 6Table 5 Selected Quarterly Financial Data2023 Quarter2022 Quarters(In millions,except per share information)FirstFourthThirdSecondFirstIncome statementNet interest income$14,448$14,681$13,765$12,444$11,572 Noninterest income 11,810 9,851 10,737 10,244 11,656 Total revenue,net of interest expense 26,258 24,532 24,502 22,688 23,228 Provision for credit losses 931 1,092 898 523 30 Noninterest expense 16,238 15,543 15,303 15,273 15,319 Income before income taxes 9,089 7,897 8,301 6,892 7,879 Income tax expense 928 765 1,219 645 812 Net income 8,161 7,132 7,082 6,247 7,067 Net income applicable to common shareholders 7,656 6,904 6,579 5,932 6,600 Average common shares issued and outstanding 8,065.9 8,088.3 8,107.7 8,121.6 8,136.8 Average diluted common shares issued and outstanding 8,182.3 8,155.7 8,160.8 8,163.1 8,202.1 Performance ratiosReturn on average assets(1)1.07%0.92%0.90%0.79%0.89%Four-quarter trailing return on average assets(2)0.92 0.88 0.87 0.89 0.99 Return on average common shareholders equity(1)12.48 11.24 10.79 9.93 11.02 Return on average tangible common shareholders equity(3)17.38 15.79 15.21 14.05 15.51 Return on average shareholders equity(1)11.94 10.38 10.37 9.34 10.64 Return on average tangible shareholders equity(3)15.98 13.98 13.99 12.66 14.40 Total ending equity to total ending assets 8.77 8.95 8.77 8.65 8.23 Common equity ratio(1)7.88 8.02 7.82 7.71 7.40 Total average equity to total average assets 8.95 8.87 8.73 8.49 8.40 Dividend payout(1)23.17 25.71 27.06 28.68 25.86 Per common share dataEarnings$0.95$0.85$0.81$0.73$0.81 Diluted earnings 0.94 0.85 0.81 0.73 0.80 Dividends paid 0.22 0.22 0.22 0.21 0.21 Book value(1)31.58 30.61 29.96 29.87 29.70 Tangible book value(3)22.78 21.83 21.21 21.13 20.99 Market capitalization$228,012$264,853$242,338$250,136$332,320 Average balance sheetTotal loans and leases$1,041,352$1,039,247$1,034,334$1,014,886$977,793 Total assets 3,096,058 3,074,289 3,105,546 3,157,885 3,207,702 Total deposits 1,893,649 1,925,544 1,962,775 2,012,079 2,045,811 Long-term debt 244,759 243,871 250,204 245,781 246,042 Common shareholders equity 248,855 243,647 241,882 239,523 242,865 Total shareholders equity 277,252 272,629 271,017 268,197 269,309 Asset quality Allowance for credit losses(4)$13,951$14,222$13,817$13,434$13,483 Nonperforming loans,leases and foreclosed properties(5)4,083 3,978 4,156 4,326 4,778 Allowance for loan and lease losses as a percentage of total loans and leases outstanding(5)1.20%1.22%1.20%1.17%1.23%Allowance for loan and lease losses as a percentage of total nonperforming loans and leases(5)319 333 309 288 262 Net charge-offs$807$689$520$571$392 Annualized net charge-offs as a percentage of average loans and leases outstanding(5)0.32%0.26%0.20%0.23%0.16pital ratios at period end(6)Common equity tier 1 capital 11.4.2.0.5.4%Tier1 capital 13.1 13.0 12.8 12.3 12.0 Total capital 15.0 14.9 14.7 14.2 14.0 Tier1 leverage 7.1 7.0 6.8 6.5 6.3 Supplementary leverage ratio 6.0 5.9 5.8 5.5 5.4 Tangible equity(3)6.7 6.8 6.6 6.5 6.2 Tangible common equity(3)5.8 5.9 5.7 5.6 5.3 Total loss-absorbing capacity and long-term debt metrics Total loss-absorbing capacity to risk-weighted assets 28.8).0(.9.8.2%Total loss-absorbing capacity to supplementary leverage exposure 13.1 13.2 13.0 12.6 12.2 Eligible long-term debt to risk-weighted assets 14.8 15.2 15.2 14.7 14.4 Eligible long-term debt to supplementary leverage exposure 6.7 6.9 6.8 6.6 6.5(1)For definitions,see Key Metrics on page 94.(2)Calculated as total net income for four consecutive quarters divided by annualized average assets for four consecutive quarters.(3)Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures.For more information on these ratios and corresponding reconciliations to GAAP financial measures,see Supplemental Financial Data on page6 and Non-GAAP Reconciliations on page 43.(4)Includes the allowance for loan and lease losses and the reserve for unfunded lending commitments.(5)Balances and ratios do not include loans accounted for under the fair value option.For additional exclusions from nonperforming loans,leases and foreclosed properties,see Consumer Portfolio Credit Risk Management Nonperforming Consumer Loans,Leases and Foreclosed Properties Activity on page29 and corresponding Table 24 and Commercial Portfolio Credit Risk Management Nonperforming Commercial Loans,Leases and Foreclosed Properties Activity on page33 and corresponding Table 30.(6)For more information,including which approach is used to assess capital adequacy,see Capital Management on page 17.7 Bank of AmericaTable 6 Quarterly Average Balances and Interest Rates-FTE BasisAverageBalanceInterestIncome/Expense(1)Yield/RateAverageBalanceInterestIncome/Expense(1)Yield/Rate(Dollars in millions)First Quarter 2023First Quarter 2022Earning assetsInterest-bearing deposits with the Federal Reserve,non-U.S.central banks and other banks$202,700$1,999 4.00%$244,971$86 0.14%Time deposits placed and other short-term investments 10,581 108 4.16 9,253 12 0.52 Federal funds sold and securities borrowed or purchased under agreements to resell(2)287,532 3,712 5.24 299,404 (7)(0.01)Trading account assets 183,657 2,040 4.50 151,969 1,096 2.92 Debt securities 851,177 5,485 2.58 975,656 3,838 1.58 Loans and leases(3)Residential mortgage 229,275 1,684 2.94 223,979 1,525 2.73 Home equity 26,513 317 4.84 27,784 220 3.21 Credit card 91,775 2,426 10.72 78,409 1,940 10.03 Direct/Indirectand other consumer 105,657 1,186 4.55 104,632 579 2.25 Total consumer 453,220 5,613 5.00 434,804 4,264 3.96 U.S.commercial 376,852 4,471 4.81 346,510 2,127 2.49 Non-U.S.commercial 127,003 1,778 5.68 118,767 504 1.72 Commercial real estate(4)70,591 1,144 6.57 63,065 387 2.49 Commercial lease financing 13,686 147 4.33 14,647 106 2.92 Total commercial 588,132 7,540 5.20 542,989 3,124 2.33 Total loans and leases 1,041,352 13,153 5.11 977,793 7,388 3.06 Other earning assets 94,427 2,292 9.82 120,798 587 1.97 Total earning assets 2,671,426 28,789 4.36 2,779,844 13,000 1.89 Cash and due from banks 27,784 28,082 Other assets,less allowance for loan and lease losses 396,848 399,776 Total assets$3,096,058$3,207,702 Interest-bearing liabilitiesU.S.interest-bearing depositsDemand and money market deposits$975,085$2,790 1.16%$1,001,184$80 0.03%Time and savings deposits 196,984 919 1.89 163,981 40 0.10 Total U.S.interest-bearing deposits 1,172,069 3,709 1.28 1,165,165 120 0.04 Non-U.S.interest-bearing deposits 91,603 605 2.68 81,879 44 0.22 Total interest-bearing deposits 1,263,672 4,314 1.38 1,247,044 164 0.05 Federal funds purchased and securities loaned or sold under agreements to repurchase 256,015 3,551 5.63 217,152 79 0.15 Short-term borrowings and other interest-bearing liabilities(2)156,887 2,629 6.79 126,454 (191)(0.61)Trading account liabilities 43,953 504 4.65 64,240 364 2.30 Long-term debt 244,759 3,209 5.28 246,042 906 1.50 Total interest-bearing liabilities 1,965,286 14,207 2.93 1,900,932 1,322 0.28 Noninterest-bearing sourcesNoninterest-bearing deposits 629,977 798,767 Other liabilities(5)223,543 238,694 Shareholders equity 277,252 269,309 Total liabilities and shareholders equity$3,096,058$3,207,702 Net interest spread 1.43%1.61%Impact of noninterest-bearing sources 0.77 0.08 Net interest income/yield on earning assets(6)$14,582 2.20%$11,678 1.69%(1)Includes the impact of interest rate risk management contracts.For more information,see Interest Rate Risk Management for the Banking Book on page40.(2)For more information on negative interest,see Note 1 Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporations 2022 Annual Report on Form 10-K.(3)Nonperforming loans are included in the respective average loan balances.Income on these nonperforming loans is generally recognized on a cost recovery basis.(4)Includes U.S.commercial real estate loans of$65.5 billion and$58.5 billion,and non-U.S.commercial real estate loans of$5.1 billion and$4.5 billion for the first quarter of 2023 and 2022.(5)Includes$37.3 billion and$30.2 billion of structured notes and liabilities for the first quarter of 2023 and 2022.(6)Net interest income includes FTE adjustments of$134 million and$106 million for the first quarter of 2023 and 2022.Bank of America 8Business Segment OperationsSegment Description and Basis of PresentationWe report our results of operations through four business segments:Consumer Banking,GWIM,Global Banking and Global Markets,with the remaining operations recorded in All Other.We manage our segments and report their results on an FTE basis.For more information,see Business Segment Operations in the MD&A of the Corporations 2022 Annual Report on Form 10-K.We periodically review capital allocated to our businesses and allocate capital annually during the strategic and capital planning processes.We utilize a methodology that considers the effect of regulatory capital requirements in addition to internal risk-based capital models.The capital allocated to the business segments is referred to as allocated capital.Allocated equity in the reporting units is comprised of allocated capital plus capital for the portion of goodwill and intangibles specifically assigned to the reporting unit.For more information,including the definition of a reporting unit,see Note 7 Goodwill and Intangible Assets to the Consolidated Financial Statements.For more information on our presentation of financial information on an FTE basis,see Supplemental Financial Data on page6,and for reconciliations to consolidated total revenue,net income and period-end total assets,see Note 17 Business Segment Information to the Consolidated Financial Statements.Key Performance Indicators We present certain key financial and nonfinancial performance indicators that management uses when evaluating segment results.We believe they are useful to investors because they provide additional information about our segments operational performance,customer trends and business growth.Consumer BankingDepositsConsumer LendingTotal Consumer BankingThree Months Ended March 31(Dollars in millions)202320222023202220232022%ChangeNet interest income$5,816$4,052$2,777$2,628$8,593$6,680 29%Noninterest income:Card income(10)(8)1,284 1,193 1,274 1,185 8 Service charges 598 843 1 1 599 844 (29)All other income 197 68 43 36 240 104 131 Total noninterest income 785 903 1,328 1,230 2,113 2,133 (1)Total revenue,net of interest expense 6,601 4,955 4,105 3,858 10,706 8,813 21 Provision for credit losses 183 73 906 (125)1,089 (52)n/mNoninterest expense 3,415 3,008 2,058 1,913 5,473 4,921 11 Income before income taxes 3,003 1,874 1,141 2,070 4,144 3,944 5 Income tax expense 751 459 285 507 1,036 966 7 Net income$2,252$1,415$856$1,563$3,108$2,978 4 Effective tax rate(1)25.0$.5%Net interest yield 2.31%1.56%3.76%3.79%3.27%2.48%Return on average allocated capital 67 44 12 23 30 30 Efficiency ratio 51.76 60.71 50.10 49.58 51.12 55.84 Balance SheetThree Months Ended March 31Average202320222023202220232022%ChangeTotal loans and leases$4,119$4,215$299,653$279,853$303,772$284,068 7%Total earning assets(2)1,022,445 1,050,490 299,794 281,255 1,065,202 1,092,742 (3)Total assets(2)1,056,007 1,084,343 306,275 287,660 1,105,245 1,133,001 (2)Total deposits 1,021,374 1,050,247 4,868 5,853 1,026,242 1,056,100 (3)Allocated capital 13,700 13,000 28,300 27,000 42,000 40,000 5 Period endMarch 31 2023December 312022March 312023December 312022March 312023December 312022%ChangeTotal loans and leases$4,065$4,148$300,415$300,613$304,480$304,761%Total earning assets(2)1,038,545 1,043,049 300,595 300,787 1,081,780 1,085,079 Total assets(2)1,074,571 1,077,203 307,227 308,007 1,124,438 1,126,453 Total deposits 1,039,744 1,043,194 5,024 5,605 1,044,768 1,048,799 (1)Estimated at the segment level only.(2)In segments and businesses where the total of liabilities and equity exceeds assets,we allocate assets from All Other to match the segments and businesses liabilities and allocated shareholders equity.As a result,total earning assets and total assets of the businesses may not equal total Consumer Banking.n/m=not meaningfulConsumer Banking,comprised of Deposits and Consumer Lending,offers a diversified range of credit,banking and investment products and services to consumers and small businesses.For more information about Consumer Banking,see Business Segment Operations in the MD&A of the Corporations 2022 Annual Report on Form 10-K.Consumer Banking ResultsNet income for Consumer Banking increased$130 million to$3.1 billion for the three months ended March 31,2023 compared to the same period in 2022 due to higher revenue,largely offset by an increase in provision for credit losses and higher noninterest expense.Net interest income increased$1.9 billion to$8.6 billion primarily driven by higher interest rates and loan balances.Noninterest income decreased$20 million to$2.1 billion,relatively unchanged from the same period a year ago.9 Bank of AmericaThe provision for credit losses increased$1.1 billion to$1.1 billion primarily driven by higher-than-expected credit card balances in the current-year period.Noninterest expense increased$552 million to$5.5 billion primarily driven by continued investments for business growth,including people and technology.The return on average allocated capital was 30 percent,unchanged from the same period a year ago.For more information on capital allocated to the business segments,see Business Segment Operations on page 9.DepositsNet income for Deposits increased$837 million to$2.3 billion primarily due to higher revenue,partially offset by higher noninterest expense.Net interest income increased$1.8 billion to$5.8 billion primarily due to higher interest rates.Noninterest income decreased$118 million to$785 million primarily driven by the impact of non-sufficient funds and overdraft policy changes.Noninterest expense increased$407 million to$3.4 billion primarily driven by continued investments for business growth,including people and technology.Average deposits decreased$28.9 billion to$1.0 trillion primarily due to net outflows of$15.0 billion in money market savings and$11.5 billion in checking.The decline was largely driven by clients moving deposits to higher yielding investment alternatives and higher levels of consumer spending.The table below provides key performance indicators for Deposits.Management uses these metrics,and we believe they are useful to investors because they provide additional information to evaluate our deposit profitability and digital/mobile trends.Key Statistics DepositsThree Months Ended March 3120232022Total deposit spreads(excludes noninterest costs)(1)2.54%1.65%Period EndConsumer investment assets(in millions)(2)$354,892$357,593 Active digital banking users(in thousands)(3)44,962 42,269 Active mobile banking users(in thousands)(4)36,322 33,589 Financial centers 3,892 4,056 ATMs 15,407 15,959(1)Includes deposits held in Consumer Lending.(2)Includes client brokerage assets,deposit sweep balances and AUM in Consumer Banking.(3)Represents mobile and/or online active users over the past 90 days.(4)Represents mobile active users over the past 90 days.Consumer investment assets decreased$2.7 billion to$354.9 billion driven by market performance,partially offset by client flows.Active mobile banking users increased approximately threemillion,reflecting continuing changes in our clients banking preferences.We had a net decrease of 164 financial centers and 552 ATMs as we continue to optimize our consumer banking network.Consumer LendingNet income for Consumer Lending decreased$707 million to$856 million primarily due to an increase in provision for credit losses.Net interest income increased$149 million to$2.8 billion due to higher interest rates and loan balances.Noninterest income increased$98 million to$1.3 billion primarily driven by card income.The provision for credit losses increased$1.0 billion to$906 million primarily driven by higher-than-expected credit card balances in the current-year period.Noninterest expense increased$145 million to$2.1 billion largely driven by continued investments for business growth,including people and technology.Average loans increased$19.8 billion to$299.7 billion primarily driven by an increase in credit card loans.The table below provides key performance indicators for Consumer Lending.Management uses these metrics,and we believe they are useful to investors because they provide additional information about loan growth and profitability.Key Statistics Consumer LendingThree Months Ended March 31(Dollars in millions)20232022Total credit card(1)Gross interest yield(2)11.85%9.90%Risk-adjusted margin(3)8.69 10.40 New accounts(in thousands)1,187 977 Purchase volumes$85,544$80,914 Debit card purchase volumes$124,376$117,584(1)Includes GWIMs credit card portfolio.(2)Calculated as the effective annual percentage rate divided by average loans.(3)Calculated as the difference between total revenue,net of interest expense,and net credit losses divided by average loans.During the three months ended March 31,2023,the total risk-adjusted margin decreased 171 bps compared to the same period in 2022 driven by lower net interest margin,lower fee income and higher net credit losses.Total credit card purchase volumes increased$4.6 billion to$85.5 billion,and debit card purchase volumes increased$6.8 billion to$124.4 billion,reflecting higher levels of consumer spending.Key Statistics Loan Production(1)Three Months Ended March 31(Dollars in millions)20232022Consumer Banking:First mortgage$1,956$8,116 Home equity 2,183 1,725 Total(2):First mortgage$3,937$16,353 Home equity 2,596 2,040(1)The loan production amounts represent the unpaid principal balance of loans and,in the case of home equity,the principal amount of the total line of credit.(2)In addition to loan production in Consumer Banking,there is also first mortgage and home equity loan production in GWIM.First mortgage loan originations for Consumer Banking and the total Corporation decreased$6.2 billion and$12.4 billion during the three months ended March 31,2023 compared to the same period in 2022 primarily driven by higher interest rates,resulting in lower customer demand.Home equity production in Consumer Banking and the total Corporation increased$458 million and$556 million during the three months ended March 31,2023 primarily driven by higher demand.Bank of America 10Global Wealth&Investment ManagementThree Months Ended March 31(Dollars in millions)20232022%ChangeNet interest income$1,876$1,668 12%Noninterest income:Investment and brokerage services 3,238 3,654 (11)All other income 201 154 31 Total noninterest income 3,439 3,808 (10)Total revenue,net of interest expense 5,315 5,476 (3)Provision for credit losses 25 (41)n/mNoninterest expense 4,067 4,015 1 Income before income taxes 1,223 1,502 (19)Income tax expense 306 368 (17)Net income$917$1,134 (19)Effective tax rate 25.0$.5%Net interest yield 2.20 1.62 Return on average allocated capital 20 26 Efficiency ratio 76.53 73.31 Balance SheetThree Months Ended March 31Average20232022%ChangeTotal loans and leases$221,448$210,937 5%Total earning assets 346,384 418,248 (17)Total assets 359,164 431,040 (17)Total deposits 314,019 384,902 (18)Allocated capital 18,500 17,500 6 Period endMarch 312023December 312022%ChangeTotal loans and leases$217,804$223,910 (3)%Total earning assets 336,560 355,461 (5)Total assets 349,888 368,893 (5)Total deposits 301,471 323,899 (7)n/m=not meaningfulGWIM consists of two primary businesses:Merrill Wealth Management and Bank of America Private Bank.For more information about GWIM,see Business Segment Operations in the MD&A of the Corporations 2022 Annual Report on Form 10-K.Net income for GWIM decreased$217 million to$917 million for the three months ended March 31,2023 compared to the same period in 2022 primarily driven by lower revenue.The operating margin was 23 percent compared to 27 percent a year ago.Net interest income increased$208 million to$1.9 billion due to the impacts of higher interest rates and loan balances,partially offset by lower deposit balances.Noninterest income,which primarily includes investment and brokerage services income,decreased$369 million to$3.4 billion primarily due to the impacts of lower market valuations and declines in AUM pricing,partially offset by the impact of positive AUM flows.Noninterest expense increased$52 million to$4.1 billion primarily due to continued investments in the business,including strategic hiring and technology,largely offset by lower revenue-related incentives.The return on average allocated capital was 20 percent,down from 26 percent,due to lower net income and an increase in allocated capital.For more information on capital allocated to the business segments,see Business Segment Operations on page 9.Average loans increased$10.5 billion to$221.4 billion primarily due to residential mortgages and custom lending,partially offset by securities-based lending.Average deposits decreased$70.9 billion to$314.0 billion primarily driven by clients moving deposits to higher yielding investment alternatives.Merrill Wealth Management revenue of$4.4 billion decreased four percent primarily driven by the impact of lower market valuations and declines in AUM pricing,partially offset by the impact of higher interest rates.Bank of America Private Bank revenue of$918 million increased three percent primarily driven by the benefits of higher interest rates,partially offset by the impact of lower market valuations.11 Bank of AmericaKey Indicators and MetricsThree Months Ended March 31(Dollars in millions)20232022Revenue by BusinessMerrill Wealth Management$4,397$4,589 Bank of America Private Bank 918 887 Total revenue,net of interest expense$5,315$5,476 Client Balances by Business,at period end Merrill Wealth Management$2,952,681$3,116,052 Bank of America Private Bank 568,925 598,100 Total client balances$3,521,606$3,714,152 Client Balances by Type,at period end Assets under management$1,467,242$1,571,605 Brokerage and other assets 1,571,409 1,592,802 Deposits 301,471 385,288 Loans and leases(1)220,633 217,461 Less:Managed deposits in assets under management(39,149)(53,004)Total client balances$3,521,606$3,714,152 Assets Under Management RollforwardAssets under management,beginning of period$1,401,474$1,638,782 Net client flows 15,262 15,537 Market valuation/other 50,506 (82,714)Total assets under management,end of period$1,467,242$1,571,605 Total wealth advisors,at period end(2)19,243 18,571(1)Includes margin receivables which are classified in customer and other receivables on the Consolidated Balance Sheet.(2)Includes advisors across all wealth management businesses in GWIM and Consumer Banking.Client Balances Client balances decreased$192.5 billion,or five percent,to$3.5 trillion at March31,2023 compared to March31,2022.The decrease in client balances was primarily due to the impact of lower market valuations,partially offset by positive client flows.Bank of America 12Global BankingThree Months Ended March 31(Dollars in millions)20232022%ChangeNet interest income$3,907$2,344 67%Noninterest income:Service charges 714 886 (19)Investment banking fees 668 880 (24)All other income 914 1,084 (16)Total noninterest income 2,296 2,850 (19)Total revenue,net of interest expense 6,203 5,194 19 Provision for credit losses(237)165 n/mNoninterest expense 2,940 2,683 10 Income before income taxes 3,500 2,346 49 Income tax expense 945 622 52 Net income$2,555$1,724 48 Effective tax rate 27.0&.5%Net interest yield 3.03 1.68 Return on average allocated capital 21 16 Efficiency ratio 47.41 51.65 Balance SheetThree Months Ended March 31Average20232022%ChangeTotal loans and leases$381,009$358,807 6%Total earning assets 522,374 566,277 (8)Total assets 588,886 630,517 (7)Total deposits 492,577 539,912 (9)Allocated capital 49,250 44,500 11 Period EndMarch 31 2023December 31 2022%ChangeTotal loans and leases$383,491$379,107 1%Total earning assets 524,299 522,539 Total assets 591,231 588,466 Total deposits 495,949 498,661 (1)n/m=not meaningfulGlobal Banking,which includes Global Corporate Banking,Global Commercial Banking,Business Banking and Global Investment Banking,provides a wide range of lending-related products and services,integrated working capital management and treasury solutions,and underwriting and advisory services through our network of offices and client relationship teams.For more information about Global Banking,see Business Segment Operations in the MD&A of the Corporations 2022 Annual Report on Form 10-K.Net income for Global Banking increased$831 million to$2.6 billion for the three months ended March 31,2023 compared to the same period in 2022 driven by higher revenue and lower provision for credit losses,partially offset by higher noninterest expense.Net interest income increased$1.6 billion to$3.9 billion primarily due to the benefit of higher interest rates,partially offset by the impact of lower deposit balances.Noninterest income decreased$554 million to$2.3 billion driven by lower investment banking fees,lower treasury service charges due to higher earnings credit rates and lower revenue from ESG investment activities.The provision for credit losses improved$402 million to a benefit of$237 million primarily driven by certain improved macroeconomic conditions.Noninterest expense increased$257 million to$2.9 billion,primarily due to continued investments in the business,including strategic hiring in 2022.The return on average allocated capital was 21 percent,up from 16 percent,due to higher net income,partially offset by higher allocated capital.For more information on capital allocated to the business segments,see Business Segment Operations on page 9.Global Corporate,Global Commercial and Business Banking The following table and discussion present a summary of the results,which exclude certain investment banking and Paycheck Protection Program(PPP)activities in Global Banking.13 Bank of AmericaGlobal Corporate,Global Commercial and Business BankingGlobal Corporate BankingGlobal Commercial BankingBusiness BankingTotalThree Months Ended March 31(Dollars in millions)20232022202320222023202220232022RevenueBusiness Lending$1,034$1,060$1,233$993$67$58$2,334$2,111 Global Transaction Services 1,549 949 1,129 896 387 243 3,065 2,088 Total revenue,net of interest expense$2,583$2,009$2,362$1,889$454$301$5,399$4,199 Balance SheetAverageTotal loans and leases$175,293$166,994$192,796$177,483$12,618$12,837$380,707$357,314 Total deposits 259,177 257,903 182,614 223,741 50,795 58,268 492,586 539,912 Period endTotal loans and leases$175,777$174,134$194,889$179,253$12,580$12,794$383,246$366,181 Total deposits 263,131 255,694 181,315 219,462 51,511 58,660 495,957 533,816 Business Lending revenue increased$223 million for the three months ended March 31,2023 compared to the same period in 2022 primarily due to the benefits of higher interest rates,partially offset by lower ESG investment activities.Global Transaction Services revenue increased$977 million for the three months ended March 31,2023 driven by higher interest rates,partially offset by the impact of lower deposit balances and treasury service charges.Average loans and leases increased seven percent for the three months ended March 31,2023 due to client demand.Average deposits decreased nine percent due to declines in domestic balances.Global Investment BankingClient teams and product specialists underwrite and distribute debt,equity and loan products,and provide advisory services and tailored risk management solutions.The economics of certain investment banking and underwriting activities are shared primarily between Global Banking and Global Markets under an internal revenue-sharing arrangement.Global Banking originates certain deal-related transactions with our corporate and commercial clients that are executed and distributed by Global Markets.To provide a complete discussion of our consolidated investment banking fees,the table below presents total Corporation investment banking fees and the portion attributable to Global Banking.Investment Banking FeesGlobal BankingTotal CorporationThree Months Ended March 31(Dollars in millions)2023202220232022ProductsAdvisory$313$439$363$473 Debt issuance 290 359 644 831 Equity issuance 65 82 168 225 Gross investment banking fees 668 880 1,175 1,529 Self-led deals(4)(29)(12)(72)Total investment banking fees$664$851$1,163$1,457 Total Corporation investment banking fees of$1.2 billion,which exclude self-led deals and are primarily included within Global Banking and Global Markets,decreased 20 percent for the three months ended March 31,2023 compared to the same period in 2022.The decrease was primarily due to lower debt issuance,advisory and equity issuance fees.Bank of America 14Global MarketsThree Months Ended March 31(Dollars in millions)20232022%ChangeNet interest income$109$993 (89)%Noninterest income:Investment and brokerage services 533 545 (2)Investment banking fees 469 582 (19)Market making and similar activities 4,398 3,190 38 All other income 117 (18)n/mTotal noninterest income 5,517 4,299 28 Total revenue,net of interest expense 5,626 5,292 6 Provision for credit losses(53)5 n/mNoninterest expense 3,351 3,117 8 Income before income taxes 2,328 2,170 7 Income tax expense 640 575 11 Net income$1,688$1,595 6 Effective tax rate 27.5&.5%Return on average allocated capital 15 15 Efficiency ratio 59.56 58.90 Balance SheetThree Months Ended March 3120232022%ChangeAverageTrading-related assets:Trading account securities$339,248$301,285 13%Reverse repurchases 126,760 138,581 (9)Securities borrowed 116,280 114,468 2 Derivative assets 43,747 41,820 5 Total trading-related assets 626,035 596,154 5 Total loans and leases 125,046 108,576 15 Total earning assets 627,935 610,926 3 Total assets 870,038 858,719 1 Total deposits 36,109 44,393 (19)Allocated capital 45,500 42,500 7 Period endMarch 312023December 312022%ChangeTotal trading-related assets$599,841$564,769 6%Total loans and leases 130,804 127,735 2 Total earning assets 632,873 587,772 8 Total assets 861,477 812,489 6 Total deposits 33,624 39,077 (14)n/m=not meaningfulGlobal Markets offers sales and trading services and research services to institutional clients across fixed-income,credit,currency,commodity and equity businesses.Global Markets product coverage includes securities and derivative products in both the primary and secondary markets.For more information about Global Markets,see Business Segment Operations in the MD&A of the Corporations 2022 Annual Report on Form 10-K.The following explanations for current period-over-period changes for Global Markets,including those disclosed under Sales and Trading Revenue,are the same for amounts including and excluding net DVA.Amounts excluding net DVA are a non-GAAP financial measure.For more information on net DVA,see Supplemental Financial Data on page 6.Net income for Global Markets increased$93 million to$1.7 billion for the three months ended March 31,2023 compared to the same period in 2022.Net DVA gains were$14 million compared to$69 million in the same period in 2022.Excluding net DVA,net income increased$134 million to$1.7 billion.These increases were primarily driven by higher revenue,partially offset by higher noninterest expense.Revenue increased$334 million to$5.6 billion primarily due to higher sales and trading revenue.Sales and trading revenue increased$348 million,and excluding net DVA,sales and trading revenue increased$403 million.These increases were driven by higher revenue in FICC,partially offset by lower revenue in Equities.Noninterest expense increased$234 million to$3.4 billion primarily driven by continued investments in the business,including people and technology.Average total assets increased$11.3 billion to$870.0 billion for the three months ended March 31,2023 compared to the same period in 2022 driven by loan growth in FICC.Period-end total assets increased$49.0 billion from December 31,2022 to$861.5 billion driven by increased securities financing activity and higher levels of inventory in FICC to satisfy client demand.The return on average allocated capital was 15 percent,unchanged from the same period a year ago.For more information on capital allocated to the business segments,see Business Segment Operations on page 9.15 Bank of AmericaSales and Trading RevenueFor a description of sales and trading revenue,see Business Segment Operations in the MD&A of the Corporations 2022 Annual Report on Form 10-K.The following table and related discussion present sales and trading revenue,substantially all of which is in Global Markets,with the remainder in Global Banking.In addition,the following table and related discussion also present sales and trading revenue,excluding net DVA,which is a non-GAAP financial measure.For more information on net DVA,see Supplemental Financial Data on page 6.Sales and Trading Revenue(1,2,3)Three Months Ended March 31(Dollars in millions)20232022Sales and trading revenueFixed income,currencies and commodities$3,440$2,708 Equities 1,627 2,011 Total sales and trading revenue$5,067$4,719 Sales and trading revenue,excluding net DVA(4)Fixed income,currencies and commodities$3,429$2,648 Equities 1,624 2,002 Total sales and trading revenue,excluding net DVA$5,053$4,650(1)For more information on sales and trading revenue,see Note 3 Derivatives to the Consolidated Financial Statements.(2)Includes FTE adjustments of$90 million and$93 million for the three months ended March 31,2023 and 2022.(3)Includes Global Banking sales and trading revenue of$177 million and$179 million for the three months ended March 31,2023 and 2022.(4)FICC and Equities sales and trading revenue,excluding net DVA,is a non-GAAP financial measure.FICC net DVA gains were$11 million and$60 million for the three months ended March 31,2023 and 2022.Equities net DVA gains were$3 million and$9 million for the three months ended March 31,2023 and 2022.Including and excluding net DVA,FICC revenue increased$732 million and$781 million for the three months ended March 31,2023 compared to the same period in 2022 primarily driven by improved trading performance across mortgage,credit and municipal products and increased secured financing activity.Including and excluding net DVA,Equities revenue decreased$384 million and$378 million driven by weaker trading performance and lower client activity in derivatives and cash.All OtherThree Months Ended March 31(Dollars in millions)20232022%ChangeNet interest income$97$(7)n/mNoninterest income(loss)(1,555)(1,434)8%Total revenue,net of interest expense(1,458)(1,441)1 Provision for credit losses 107 (47)n/mNoninterest expense 407 583 (30)Loss before income taxes(1,972)(1,977)Income tax benefit(1,865)(1,613)16 Net loss$(107)$(364)(71)Balance SheetThree Months Ended March 31Average20232022%ChangeTotal loans and leases$10,077$15,405 (35)%Total assets(1)172,725 154,425 12 Total deposits 24,702 20,504 20 Period endMarch 312023December 312022%ChangeTotal loans and leases$9,827$10,234 (4)%Total assets(1)267,623 155,074 73 Total deposits 34,590 19,905 74(1)In segments where the total of liabilities and equity exceeds assets,which are generally deposit-taking segments,we allocate assets from All Other to those segments to match liabilities(i.e.,deposits)and allocated shareholders equity.Average allocated assets were$1.0 trillion and$1.2 trillion for the three months ended March 31,2023 and 2022,and period-end allocated assets were$1.0 trillion at both March31,2023 and December31 2022.n/m=not meaningfulAll Other primarily consists of asset and liability management(ALM)activities,liquidating businesses and certain expenses not otherwise allocated to a business segment.ALM activities encompass interest rate and foreign currency risk management activities for which substantially all of the results are allocated to our business segments.For more information on our ALM activities,see Note 17 Business Segment Information to the Consolidated Financial Statements.The net loss in All Other decreased$257 million to a loss of$107 million primarily due to a higher income tax benefit,partially offset by lower noninterest income.Noninterest income decreased$121 million primarily due to$220 million of losses on sales of AFS debt securities,primarily offset by derivative gains related to risk management activities.The income tax benefit increased$252 million reflecting an increase in tax preference benefits primarily driven from income tax credits related to ESG investment activity.Both periods included income tax benefit adjustments to eliminate the FTE treatment of certain tax credits recorded in Global Banking and Global Markets.Bank of America 16Managing RiskRisk is inherent in all our business activities.The seven key types of risk faced by the Corporation are strategic,credit,market,liquidity,compliance,operational and reputational.Sound risk management enables us to serve our customers and deliver for our shareholders.If not managed well,risk can result in financial loss,regulatory sanctions and penalties,and damage to our reputation,each of which may adversely impact our ability to execute our business strategies.We take a comprehensive approach to risk management with a defined Risk Framework and an articulated Risk Appetite Statement,which are approved annually by the Enterprise Risk Committee and the Board.Our Risk Framework serves as the foundation for the consistent and effective management of risks facing the Corporation.The Risk Framework sets forth roles and responsibilities for the management of risk and provides a blueprint for how the Board,through delegation of authority to committees and executive officers,establishes risk appetite and associated limits for our activities.Our risk appetite provides a common framework that includes a set of measures to assist senior management and the Board in assessing the Corporations risk profile against our risk appetite and risk capacity.Our risk appetite is formally articulated in the Risk Appetite Statement,which includes both qualitative statements and quantitative limits.For more information on the Corporations risks,see Item 1A.Risk Factors of the Corporations 2022 Annual Report on Form 10-K.These risks are being managed within our Risk Framework and supporting risk management programs.For more information on our Risk Framework,risk management activities and the key types of risk faced by the Corporation,see the Managing Risk section in the MD&A of the Corporations 2022 Annual Report on Form 10-K.Capital ManagementThe Corporation manages its capital position so that its capital is more than adequate to support its business activities and aligns with risk,risk appetite and strategic planning.For more information,including related regulatory requirements,see Capital Management in the MD&A of the Corporations 2022 Annual Report on Form 10-K.CCAR and Capital PlanningThe Federal Reserve requires BHCs to submit a capital plan and planned capital actions on an annual basis,consistent with the rules governing the Comprehensive Capital Analysis and Review(CCAR)capital plan.Based on the results of our 2022 CCAR stress test,we are subject to a 3.4 percent stress capital buffer(SCB)from October 1,2022 through September 30,2023.In April 2023,we submitted our 2023 CCAR capital plan and related supervisory stress tests.The Federal Reserve has indicated that it will disclose CCAR capital plan supervisory stress test results by June 30,2023.In October 2021,the Board authorized the Corporations$25 billion common stock repurchase program.Additionally,the Board authorized common stock repurchases to offset shares awarded under the Corporations equity-based compensation plans.Pursuant to the Boards authorizations,during the first quarter of 2023,we repurchased$2.2 billion of common stock,including repurchases to offset shares awarded under equity-based compensation plans.The timing and amount of common stock repurchases are subject to various factors,including the Corporations capital position,liquidity,financial performance and alternative uses of capital,stock trading price,regulatory requirements and general market conditions,and may be suspended at any time.Such repurchases may be effected through open market purchases or privately negotiated transactions,including repurchase plans that satisfy the conditions of Rule 10b5-1 of the Securities Exchange Act of 1934,as amended(Exchange Act).Regulatory CapitalAs a financial services holding company,we are subject to regulatory capital rules,including Basel 3,issued by U.S.banking regulators.The Corporations depository institution subsidiaries are also subject to the Prompt Corrective Action(PCA)framework.The Corporation and its primary affiliated banking entity,BANA,are Advanced approaches institutions under Basel 3 and are required to report regulatory risk-based capital ratios and risk-weighted assets(RWA)under both the Standardized and Advanced approaches.The lower of the capital ratios under Standardized or Advanced approaches compared to their respective regulatory capital ratio requirements is used to assess capital adequacy,including under the PCA framework.As of March31,2023,the Common equity tier 1(CET1),Tier 1 capital and Total capital ratios under the Standardized approach were the binding ratios.Minimum Capital RequirementsIn order to avoid restrictions on capital distributions and discretionary bonus payments,the Corporation must meet risk-based capital ratio requirements that include a capital conservation buffer of 2.5 percent(under the Advanced approaches only),an SCB(under the Standardized approach only),plus any applicable countercyclical capital buffer and a global systemically important bank(G-SIB)surcharge.The buffers and surcharge must be comprised solely of CET1 capital.For the period from October 1,2022 through September 30,2023,the Corporations minimum CET1 capital ratio requirements are 10.4 percent under the Standardized approach and 9.5 percent under the Advanced approaches.The Corporation is required to calculate its G-SIB surcharge on an annual basis under two methods and is subject to the higher of the resulting two surcharges.Method 1 is consistent with the approach prescribed by the Basel Committees assessment methodology and is calculated using specified indicators of systemic importance.Method 2 modifies the Method 1 approach by,among other factors,including a measure of the Corporations reliance on short-term wholesale funding.The Corporations G-SIB surcharge,which is higher under Method 2,is expected to increase to 3.0 percent from 2.5 percent on January 1,2024,which will increase our minimum CET1 capital ratio requirement.At March31,2023,the Corporations CET1 capital ratio of 11.4 percent under the Standardized approach exceeded its current CET1 capital ratio requirement as well as the minimum requirement expected to be in place as of January 1,2024 due to the anticipated increase in our G-SIB surcharge.The Corporation is also required to maintain a minimum supplementary leverage ratio(SLR)of 3.0 percent plus a leverage buffer of 2.0 percent in order to avoid certain restrictions on capital distributions and discretionary bonus payments.Our insured depository institution subsidiaries are required to maintain a minimum 6.0 percent SLR to be considered well capitalized under the PCA framework.17 Bank of AmericaCapital Composition and RatiosTable 7 presents Bank of America Corporations capital ratios and related information in accordance with Basel 3 Standardized and Advanced approaches as measured at March31,2023 and December31,2022.For the periods presented herein,the Corporation met the definition of well capitalized under current regulatory requirements.Table 7Bank of America Corporation Regulatory Capital under Basel 3StandardizedApproach(1)AdvancedApproaches(1)RegulatoryMinimum(2)(Dollars in millions,except as noted)March 31,2023Risk-based capital metrics:Common equity tier 1 capital$184,432$184,432 Tier 1 capital 212,825 212,825 Total capital(3)242,743 233,877 Risk-weighted assets(in billions)1,622 1,427 Common equity tier 1 capital ratio 11.4.9.4%Tier 1 capital ratio 13.1 14.9 11.9 Total capital ratio 15.0 16.4 13.9 Leverage-based metrics:Adjusted quarterly average assets(in billions)(4)$3,018$3,018 Tier 1 leverage ratio 7.1%7.1%4.0 Supplementary leverage exposure(in billions)$3,555 Supplementary leverage ratio 6.0%5.0 December 31,2022Risk-based capital metrics:Common equity tier 1 capital$180,060$180,060 Tier 1 capital 208,446 208,446 Total capital(3)238,773 230,916 Risk-weighted assets(in billions)1,605 1,411 Common equity tier 1 capital ratio 11.2.8.4%Tier 1 capital ratio 13.0 14.8 11.9 Total capital ratio 14.9 16.4 13.9 Leverage-based metrics:Adjusted quarterly average assets(in billions)(4)$2,997$2,997 Tier 1 leverage ratio 7.0%7.0%4.0 Supplementary leverage exposure(in billions)$3,523 Supplementary leverage ratio 5.9%5.0(1)Capital ratios as of March31,2023 and December31,2022 are calculated using the regulatory capital rule that allows a five-year transition period related to the adoption of the current expected credit losses(CECL)accounting standard on January 1,2020.(2)The CET1 capital regulatory minimum is the sum of the CET1 capital ratio minimum of 4.5 percent,our G-SIB surcharge of 2.5 percent and our capital conservation buffer of 2.5 percent(under the Advanced approaches)or the SCB of 3.4 percent(under the Standardized approach),as applicable,at both March31,2023 and December31,2022.The Corporations SCB under the Standardized approach was 3.4 percent,the G-SIB surcharge was 2.5 percent and the countercyclical capital buffer was zero for both periods.The SLR regulatory minimum includes a leverage buffer of 2.0 percent.(3)Total capital under the Advanced approaches differs from the Standardized approach due to differences in the amount permitted in Tier 2 capital related to the qualifying allowance for credit losses.(4)Reflects total average assets adjusted for certain Tier 1 capital deductions.At March 31,2023,CET1 capital was$184.4 billion,an increase of$4.4 billion from December31,2022,primarily due to earnings,partially offset by dividends and common stock repurchases.Tier 1 capital increased$4.4 billion primarily driven by the same factors as CET1 capital.Total capital under the Standardized approach increased$4.0 billion primarily due to the same factors driving the increase in Tier 1 capital and an increase in the adjusted allowance for credit losses included in Tier 2 capital,partially offset by a decrease in subordinateddebt.RWA under the Standardized approach,which yielded the lower CET1 capital ratio at March31,2023,increased$17.0 billion during the three months ended March 31,2023 to$1,622 billion primarily due to higher counterparty exposures in Global Markets.Supplementary leverage exposure at March31,2023 increased$31.4 billion primarily due to higher trading assets from increased business activities and higher cash held at central banks,partially offset by lower derivative exposures and debt securities balances.Bank of America 18Table 8 shows the capital composition at March31,2023 and December31,2022.Table 8Capital Composition under Basel 3(Dollars in millions)March 31 2023December 31 2022Total common shareholders equity$251,799$244,800 CECL transitional amount(1)1,254 1,881 Goodwill,net of related deferred tax liabilities(68,644)(68,644)Deferred tax assets arising from net operating loss and tax credit carryforwards(7,835)(7,776)Intangibles,other than mortgage servicing rights,net of related deferred tax liabilities(1,538)(1,554)Defined benefit pension plan net assets(882)(867)Cumulative unrealized net(gain)loss related to changes in fair value of financial liabilities attributable to own creditworthiness,net-of-tax 484 496 Accumulated net(gain)loss on certain cash flow hedges(2)9,886 11,925 Other(92)(201)Common equity tier 1 capital 184,432 180,060 Qualifying preferred stock,net of issuance cost 28,396 28,396 Other(3)(10)Tier 1 capital 212,825 208,446 Tier 2 capital instruments 17,845 18,751 Qualifying allowance for credit losses(3)12,449 11,739 Other(376)(163)Total capital under the Standardized approach 242,743 238,773 Adjustment in qualifying allowance for credit losses under the Advanced approaches(3)(8,866)(7,857)Total capital under the Advanced approaches$233,877$230,916(1)Includes the impact of the Corporations adoption of the CECL accounting standard on January 1,2020 and 25 percent of the increase in reserves since the initial adoption.(2)Includes amounts in accumulated other comprehensive income(OCI)related to the hedging of items that are not recognized at fair value on the Consolidated Balance Sheet.(3)Includes the impact of transition provisions related to the CECL accounting standard.Table 9 shows the components of RWA as measured under Basel 3 at March31,2023 and December31,2022.Table 9Risk-weighted Assets under Basel 3Standardized ApproachAdvanced ApproachesStandardized ApproachAdvanced Approaches(Dollars in billions)March 31,2023December 31,2022Credit risk$1,558$958$1,538$939 Market risk 64 63 67 67 Operational risk n/a 364 n/a 364 Risks related to credit valuation adjustments n/a 42 n/a 41 Total risk-weighted assets$1,622$1,427$1,605$1,411 n/a=not applicable19 Bank of AmericaBank of America,N.A.Regulatory CapitalTable 10 presents regulatory capital information for BANA in accordance with Basel 3 Standardized and Advanced approaches as measured at March31,2023 and December31,2022.BANA met the definition of well capitalized under the PCA framework for both periods.Table 10 Bank of America,N.A.Regulatory Capital under Basel 3StandardizedApproach(1)AdvancedApproaches(1)RegulatoryMinimum(2)(Dollars in millions,except as noted)March 31,2023Risk-based capital metrics:Common equity tier 1 capital$185,410$185,410 Tier 1 capital 185,410 185,410 Total capital(3)199,325 190,730 Risk-weighted assets(in billions)1,389 1,104 Common equity tier 1 capital ratio 13.3.8%7.0%Tier 1 capital ratio 13.3 16.8 8.5 Total capital ratio 14.3 17.3 10.5 Leverage-based metrics:Adjusted quarterly average assets(in billions)(4)$2,365$2,365 Tier 1 leverage ratio 7.8%7.8%5.0 Supplementary leverage exposure(in billions)$2,799 Supplementary leverage ratio 6.6%6.0 December 31,2022Risk-based capital metrics:Common equity tier 1 capital$181,089$181,089 Tier 1 capital 181,089 181,089 Total capital(3)194,254 186,648 Risk-weighted assets(in billions)1,386 1,087 Common equity tier 1 capital ratio 13.1.7%7.0%Tier 1 capital ratio 13.1 16.7 8.5 Total capital ratio 14.0 17.2 10.5 Leverage-based metrics:Adjusted quarterly average assets(in billions)(4)$2,358$2,358 Tier 1 leverage ratio 7.7%7.7%5.0 Supplementary leverage exposure(in billions)$2,785 Supplementary leverage ratio 6.5%6.0(1)Capital ratios as of March31,2023 and December31,2022 are calculated using the regulatory capital rule that allows a five-year transition period related to the adoption of the CECL accounting standard on January 1,2020.(2)Risk-based capital regulatory minimums at both March31,2023 and December31,2022 are the minimum ratios under Basel 3 including a capital conservation buffer of 2.5 percent.The regulatory minimums for the leverage ratios as of both period ends are the percent required to be considered well capitalized under the PCA framework.(3)Total capital under the Advanced approaches differs from the Standardized approach due to differences in the amount permitted in Tier 2 capital related to the qualifying allowance for credit losses.(4)Reflects total average assets adjusted for certain Tier 1 capital deductions.Total Loss-Absorbing Capacity RequirementsTotal loss-absorbing capacity(TLAC)consists of the Corporations Tier 1 capital and eligible long-term debt issued directly by the Corporation.Eligible long-term debt for TLAC ratios is comprised of unsecured debt that has a remaining maturity of at least one year and satisfies additional requirements as prescribed in the TLAC final rule.As with the risk-based capital ratios and SLR,the Corporation is required to maintain TLAC ratios in excess of minimum requirements plus applicable buffers to avoid restrictions on capital distributions and discretionary bonus payments.Table 11 presents the Corporations TLAC and long-term debt ratios and related information as of March31,2023 and December31,2022.Bank of America 20Table 11 Bank of America Corporation Total Loss-Absorbing Capacity and Long-Term DebtTLAC(1)Regulatory Minimum(2)Long-term DebtRegulatory Minimum(3)(Dollars in millions)March 31,2023Total eligible balance$466,319$239,255 Percentage of risk-weighted assets(4)28.8.0.8%8.5%Percentage of supplementary leverage exposure 13.1 9.5 6.7 4.5 December 31,2022Total eligible balance$465,451$243,833 Percentage of risk-weighted assets(4)29.0.0.2%8.5%Percentage of supplementary leverage exposure 13.2 9.5 6.9 4.5(1)As of March31,2023 and December31,2022,TLAC ratios are calculated using the regulatory capital rule that allows a five-year transition period related to the adoption of CECL.(2)The TLAC RWA regulatory minimum consists of 18.0 percent plus a TLAC RWA buffer comprised of 2.5 percent plus the Method 1 G-SIB surcharge of 1.5 percent.The countercyclical buffer is zero for both periods.The TLAC supplementary leverage exposure regulatory minimum consists of 7.5 percent plus a 2.0 percent TLAC leverage buffer.The TLAC RWA and leverage buffers must be comprised solely of CET1 capital and Tier 1 capital,respectively.(3)The long-term debt RWA regulatory minimum is comprised of 6.0 percent plus an additional 2.5 percent requirement based on the Corporations Method 2 G-SIB surcharge.The long-term debt leverage exposure regulatory minimum is 4.5 percent.(4)The approach that yields the higher RWA is used to calculate TLAC and long-term debt ratios,which was the Standardized approach as of March31,2023 and December31,2022.Regulatory Capital and Securities Regulation The Corporations principal U.S.broker-dealer subsidiaries are BofA Securities,Inc.(BofAS),Merrill Lynch Professional Clearing Corp.(MLPCC)and Merrill Lynch,Pierce,Fenner&Smith Incorporated(MLPF&S).The Corporations principal European broker-dealer subsidiaries are Merrill Lynch International(MLI)and BofA Securities Europe SA(BofASE).The U.S.broker-dealer subsidiaries are subject to the net capital requirements of Rule 15c3-1 under the Exchange Act.BofAS computes its minimum capital requirements as an alternative net capital broker-dealer under Rule 15c3-1e,and MLPCC and MLPF&S compute their minimum capital requirements in accordance with the alternative standard under Rule 15c3-1.BofAS and MLPCC are also registered as futures commission merchants and are subject to Commodity Futures Trading Commission(CFTC)Regulation 1.17.The U.S.broker-dealer subsidiaries are also registered with the Financial Industry Regulatory Authority,Inc.(FINRA).Pursuant to FINRA Rule 4110,FINRA may impose higher net capital requirements than Rule 15c3-1 under the Exchange Act with respect to each of the broker-dealers.BofAS provides institutional services,and in accordance with the alternative net capital requirements,is required to maintain tentative net capital in excess of$5.0 billion and net capital in excess of the greater of$1.0 billion or a certain percentage of its reserve requirement in addition to a certain percentage of securities-based swap risk margin.BofAS must also notify the SEC in the event its tentative net capital is less than$6.0 billion.BofAS is also required to hold a certain percentage of its customers and affiliates risk-based margin in order to meet its CFTC minimum net capital requirement.At March 31,2023,BofAS had tentative net capital of$19.3 billion.BofAS also had regulatory net capital of$17.1 billion,which exceeded the minimum requirement of$4.5 billion.MLPCC is a fully-guaranteed subsidiary of BofAS and provides clearing and settlement services as well as prime brokerage and arranged financing services for institutional clients.At March31,2023,MLPCCs regulatory net capital of$7.1 billion exceeded the minimum requirement of$1.5 billion.MLPF&S provides retail services.At March 31,2023,MLPF&S regulatory net capital was$6.3 billion,which exceeded the minimum requirement of$137 million.Our European broker-dealers are subject to requirements from U.S.and non-U.S.regulators.MLI,a U.K.investment firm,is regulated by the Prudential Regulation Authority and the FCA and is subject to certain regulatory capital requirements.At March 31,2023,MLIs capital resources were$33.5 billion,which exceeded the minimum Pillar 1 requirement of$11.7 billion.BofASE,an authorized credit institution with its head office located in France,is regulated by the Autorit de Contrle Prudentiel et de Rsolution and the Autorit des Marchs Financiers,and supervised under the Single Supervisory Mechanism by the European Central Bank.At March31,2023,BofASEs capital resources were$9.1 billion,which exceeded the minimum Pillar 1 requirement of$3.3 billion.In addition,MLI and BofASE became conditionally registered with the SEC as security-based swap dealers in the fourth quarter of 2021,and maintained net liquid assets at March31,2023 that exceeded the applicable minimum requirements under the Exchange Act.Liquidity RiskFunding and Liquidity Risk ManagementOur primary liquidity risk management objective is to meet expected or unexpected cash flow and collateral requirements,including payments under long-term debt agreements,commitments to extend credit and customer deposit withdrawals,while continuing to support our businesses and customers under a range of economic conditions.To achieve that objective,we analyze and monitor our liquidity risk under expected and stressed conditions,maintain liquidity and access to diverse funding sources,including our stable deposit base,and seek to align liquidity-related incentives and risks.These liquidity risk management practices have allowed us to effectively manage the market stress from increased volatility due to the failure of certain financial institutions in March 2023.For more information,see Executive Summary Recent Developments Financial Market Events on page 3.Our practices have also allowed us to effectively manage market fluctuations from the rising interest rate environment,inflationary pressures and changes in the macroeconomic environment.We define liquidity as readily available assets,limited to cash and high-quality,liquid,unencumbered securities that we can use to meet our contractual and contingent financial obligations as they arise.We manage our liquidity position through line-of-business and ALM activities,as well as through our legal entity funding strategy,on both a forward and current(including intraday)basis under both expected and stressed conditions.We believe that a centralized approach to funding and liquidity management enhances our ability to monitor 21 Bank of Americaliquidity requirements,maximizes access to funding sources,minimizes borrowing costs and facilitates timely responses to liquidity events.For more information on the Corporations liquidity risks,see the Liquidity section within Item 1A.Risk Factors of the Corporations 2022 Annual Report on Form 10-K.For more information regarding global funding and liquidity risk management,as well as liquidity sources,liquidity arrangements,contingency planning and credit ratings discussed below,see Liquidity Risk in the MD&A of the Corporations 2022 Annual Report on Form 10-K.NB Holdings CorporationBank of America Corporation,as the parent company(the Parent),which is a separate and distinct legal entity from our bank and nonbank subsidiaries,has an intercompany arrangement with our wholly-owned holding company subsidiary,NB Holdings Corporation(NB Holdings).We have transferred,and agreed to transfer,additional Parent assets not required to satisfy anticipated near-term expenditures to NB Holdings.The Parent is expected to continue to have access to the same flow of dividends,interest and other amounts of cash necessary to service its debt,pay dividends and perform other obligations as it would have had it not entered into these arrangements and transferred any assets.These arrangements support our preferred single point of entry resolution strategy,under which only the Parent would be resolved under the U.S.Bankruptcy Code.Global Liquidity Sources and Other Unencumbered AssetsWe maintain liquidity available to the Corporation,including the Parent and selected subsidiaries,in the form of cash and high-quality,liquid,unencumbered securities.Our liquidity buffer,referred to as Global Liquidity Sources(GLS),is comprised of assets that are readily available to the Parent and selected subsidiaries,including holding company,bank and broker-dealer subsidiaries,even during stressed market conditions.Our cash is primarily on deposit with the Federal Reserve Bank and,to a lesser extent,central banks outside of the U.S.We limit the composition of high-quality,liquid,unencumbered securities to U.S.government securities,U.S.agency securities,U.S.agency mortgage-backed securities and other investment-grade securities,and a select group of non-U.S.government securities.We can obtain cash for these securities,even in stressed conditions,through repurchase agreements or outright sales.We hold our GLS in legal entities that allow us to meet the liquidity requirements of our global businesses,and we consider the impact of potential regulatory,tax,legal and other restrictions that could limit the transferability of funds among entities.Table 12 presents average GLS for the three months ended March 31,2023 and December31,2022.Table 12 Average Global Liquidity SourcesThree Months Ended(Dollars in billions)March 31 2023December 31 2022Bank entities$683$694 Nonbank and other entities(1)171 174 Total Average Global Liquidity Sources$854$868(1)Nonbank includes Parent,NB Holdings and other regulated entities.Our bank subsidiaries liquidity is primarily driven by deposit and lending activity,as well as securities valuation and net debt activity.Bank subsidiaries can also generate incremental liquidity by pledging a range of unencumbered loans and securities to certain Federal Home Loan Banks(FHLBs)and the Federal Reserve Discount Window.The cash we could have obtained by borrowing against this pool of specifically-identified eligible assets was$319 billion and$348 billion at March31,2023 and December 31,2022.We have established operational procedures to enable us to borrow against these assets,including regularly monitoring our total pool of eligible loans and securities collateral.Eligibility is defined in guidelines from the FHLBs and the Federal Reserve and is subject to change at their discretion.Due to regulatory restrictions,liquidity generated by the bank subsidiaries can generally be used only to fund obligations within the bank subsidiaries,and transfers to the Parent or nonbank subsidiaries may be subject to prior regulatory approval.Liquidity is also held in nonbank entities,including the Parent,NB Holdings and other regulated entities.The Parent and NB Holdings liquidity is typically in the form of cash deposited at BANA,which is excluded from the liquidity at bank subsidiaries,and high-quality,liquid,unencumbered securities.Liquidity held in other regulated entities,comprised primarily of broker-dealer subsidiaries,is primarily available to meet the obligations of that entity,and transfers to the Parent or to any other subsidiary may be subject to prior regulatory approval due to regulatory restrictions and minimum requirements.Our other regulated entities also hold unencumbered investment-grade securities and equities that we believe could be used to generate additional liquidity.Table 13 presents the composition of average GLS for the three months ended March 31,2023 and December31,2022.Table 13 Average Global Liquidity Sources CompositionThree Months Ended(Dollars in billions)March 312023December 31 2022Cash on deposit$204$174 U.S.Treasury securities 225 252 U.S.agency securities,mortgage-backed securities,and other investment-grade securities 411 427 Non-U.S.government securities 14 15 Total Average Global Liquidity Sources$854$868 Our GLS are substantially the same in composition to what qualifies as High Quality Liquid Assets(HQLA)under the final U.S.Liquidity Coverage Ratio(LCR)rules.However,HQLA for purposes of calculating LCR is not reported at market value,but at a lower value that incorporates regulatory deductions and the exclusion of excess liquidity held at certain subsidiaries.The LCR is calculated as the amount of a financial institutions unencumbered HQLA relative to the estimated net cash outflows the institution could encounter over a 30-day period of significant liquidity stress,expressed as a percentage.Our average consolidated HQLA,on a net basis,was$591 billion and$605 billion for the three months ended March 31,2023 and December31,2022.For the same periods,the average consolidated
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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q(Mark One)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF 1934For the Quarterly Period Ended June 30,2023or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF 1934For the transition period from toCommission file number:1-6523Exact name of registrant as specified in its charter:Bank of America CorporationState or other jurisdiction of incorporation or organization:DelawareIRS Employer Identification No.:56-0906609Address of principal executive offices:Bank of America Corporate Center100 N.Tryon StreetCharlotte,North Carolina 28255Registrants telephone number,including area code:(704)386-5681Former name,former address and former fiscal year,if changed since last report:Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock,par value$0.01 per shareBACNew York Stock ExchangeDepositary Shares,each representing a 1/1,000th interest in a shareBAC PrENew York Stock Exchange of Floating Rate Non-Cumulative Preferred Stock,Series EDepositary Shares,each representing a 1/1,000th interest in a shareBAC PrBNew York Stock Exchange of 6.000%Non-Cumulative Preferred Stock,Series GGDepositary Shares,each representing a 1/1,000th interest in a shareBAC PrKNew York Stock Exchange of 5.875%Non-Cumulative Preferred Stock,Series HH7.25%Non-Cumulative Perpetual Convertible Preferred Stock,Series LBAC PrLNew York Stock ExchangeDepositary Shares,each representing a 1/1,200th interest in a shareBML PrGNew York Stock Exchangeof Bank of America Corporation Floating RateNon-Cumulative Preferred Stock,Series 1Title of each classTrading Symbol(s)Name of each exchange on which registeredDepositary Shares,each representing a 1/1,200th interest in a shareBML PrHNew York Stock Exchange of Bank of America Corporation Floating RateNon-Cumulative Preferred Stock,Series 2Depositary Shares,each representing a 1/1,200th interest in a shareBML PrJNew York Stock Exchange of Bank of America Corporation Floating RateNon-Cumulative Preferred Stock,Series 4Depositary Shares,each representing a 1/1,200th interest in a shareBML PrLNew York Stock Exchange of Bank of America Corporation Floating RateNon-Cumulative Preferred Stock,Series 5Floating Rate Preferred Hybrid Income Term Securities of BAC CapitalBAC/PFNew York Stock Exchange Trust XIII(and the guarantee related thereto)5.63%Fixed to Floating Rate Preferred Hybrid Income Term SecuritiesBAC/PGNew York Stock Exchange of BAC Capital Trust XIV(and the guarantee related thereto)Income Capital Obligation Notes initially due December 15,2066 ofMER PrKNew York Stock ExchangeBank of America CorporationSenior Medium-Term Notes,Series A,Step Up Callable Notes,dueBAC/31BNew York Stock Exchange November 28,2031 of BofA Finance LLC(and the guaranteeof the Registrant with respect thereto)Depositary Shares,each representing a 1/1,000th interest in a share ofBAC PrMNew York Stock Exchange 5.375%Non-Cumulative Preferred Stock,Series KKDepositary Shares,each representing a 1/1,000th interest in a shareBAC PrNNew York Stock Exchangeof 5.000%Non-Cumulative Preferred Stock,Series LLDepositary Shares,each representing a 1/1,000th interest in a share ofBAC PrONew York Stock Exchange4.375%Non-Cumulative Preferred Stock,Series NNDepositary Shares,each representing a 1/1,000th interest in a share ofBAC PrPNew York Stock Exchange4.125%Non-Cumulative Preferred Stock,Series PPDepositary Shares,each representing a 1/1,000th interest in a share ofBAC PrQNew York Stock Exchange4.250%Non-Cumulative Preferred Stock,Series QQDepositary Shares,each representing a 1/1,000th interest in a shareBAC PrSNew York Stock Exchangeof 4.750%Non-Cumulative Preferred Stock,Series SSIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growthcompany.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting company Emerging growth company If an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Exchange Act Rule 12b-2).Yes No On July 28,2023,there were 7,946,371,758 shares of Bank of America Corporation Common Stock outstanding.Bank of America Corporation and SubsidiariesJune 30,2023Form 10-QINDEXPart I.Financial InformationItem 1.Financial StatementsPageConsolidated Statement of Income49Consolidated Statement of Comprehensive Income49Consolidated Balance Sheet50Consolidated Statement of Changes in Shareholders Equity51Consolidated Statement of Cash Flows52Notes to Consolidated Financial Statements53Note 1 Summary of Significant Accounting Principles53Note 2 Net Interest Income and Noninterest Income54Note 3 Derivatives55Note 4 Securities63Note 5 Outstanding Loans and Leases and Allowance for Credit Losses66Note 6 Securitizations and Other Variable Interest Entities78Note 7 Goodwill and Intangible Assets83Note 8 Leases83Note 9 Securities Financing Agreements,Collateral and Restricted Cash84Note 10 Commitments and Contingencies85Note 11 Shareholders Equity88Note 12 Accumulated Other Comprehensive Income(Loss)89Note 13 Earnings Per Common Share90Note 14 Fair Value Measurements90Note 15 Fair Value Option97Note 16 Fair Value of Financial Instruments99Note 17 Business Segment Information99Glossary104Acronyms106Item 2.Managements Discussion and Analysis of Financial Condition and Results of OperationsExecutive Summary3Recent Developments3Financial Highlights4Supplemental Financial Data7Business Segment Operations11Consumer Banking11Global Wealth&Investment Management15Global Banking17Global Markets19All Other21Managing Risk21Capital Management22Liquidity Risk26Credit Risk Management30Consumer Portfolio Credit Risk Management30Commercial Portfolio Credit Risk Management34Non-U.S.Portfolio40Allowance for Credit Losses41Market Risk Management43Trading Risk Management43Interest Rate Risk Management for the Banking Book45Mortgage Banking Risk Management46Climate Risk Management46Complex Accounting Estimates47Non-GAAP Reconciliations48Item 3.Quantitative and Qualitative Disclosures about Market Risk48Item 4.Controls and Procedures481 Bank of AmericaPart II.Other InformationItem 1.Legal Proceedings107Item 1A.Risk Factors107Item 2.Unregistered Sales of Equity Securities and Use of Proceeds107Item 5.Other Information107Item 6.Exhibits108Signature108Item 2.Managements Discussion and Analysis of Financial Condition and Results of OperationsBank of America Corporation(the“Corporation”)and its management may makecertain statements that constitute“forward-looking statements”within the meaningof the Private Securities Litigation Reform Act of 1995.These statements can beidentified by the fact that they do not relate strictly to historical or current facts.Forward-looking statements often use words such as“anticipates,”“targets,”“expects,”“hopes,”“estimates,”“intends,”“plans,”“goals,”“believes,”“continue”and other similar expressions or future or conditional verbs such as“will,”“may,”“might,”“should,”“would”and“could.”Forward-looking statements represent theCorporations current expectations,plans or forecasts of its future results,revenues,liquidity,net interest income,provision for credit losses,expenses,efficiency ratio,capital measures,strategy,deposits,assets,and future businessand economic conditions more generally,and other future matters.Thesestatements are not guarantees of future results or performance and involve certainknown and unknown risks,uncertainties and assumptions that are difficult to predictand are often beyond the Corporations control.Actual outcomes and results maydiffer materially from those expressed in,or implied by,any of these forward-looking statements.You should not place undue reliance on any forward-looking statement andshould consider the following uncertainties and risks,as well as the risks anduncertainties more fully discussed under Item 1A.Risk Factors of the Corporations2022 Annual Report on Form 10-K and in any of the Corporations subsequentSecurities and Exchange Commission filings:the Corporations potentialjudgments,orders,settlements,penalties,fines and reputational damage resultingfrom pending or future litigation and regulatory investigations,proceedings andenforcement actions,including as a result of our participation in and execution ofgovernment programs related to the Coronavirus Disease 2019(COVID-19)pandemic,such as the processing of unemployment benefits for California andcertain other states;the possibility that the Corporations future liabilities may be inexcess of its recorded liability and estimated range of possible loss for litigation,and regulatory and government actions;the possibility that the Corporation couldface increased claims from one or more parties involved in mortgagesecuritizations;the Corporations ability to resolve representations and warrantiesrepurchase and related claims;the risks related to the discontinuation of theLondon Interbank Offered Rate and other reference rates,including increasedexpenses and litigation and the effectiveness of hedging strategies;uncertaintiesabout the financial stability and growth rates of non-U.S.jurisdictions,the risk thatthose jurisdictions may face difficulties servicing their sovereign debt,and relatedstresses on financial markets,currencies and trade,and the Corporationsexposures to such risks,including direct,indirect and operational;the impact ofU.S.and global interest rates,inflation,currency exchange rates,economicconditions,trade policies and tensions,including tariffs,and potential geopoliticalinstability;the impact of the interest rate,inflationary,macroeconomic,banking andregulatoryenvironment on the Corporations assets,business,financial condition and resultsof operations;the impact of adverse developments affecting the U.S.or globalbanking industry,including bank failures and liquidity concerns,resulting inworsening economic and market volatility,and regulatory responses thereto;thepossibility that future credit losses may be higher than currently expected due tochanges in economic assumptions,customer behavior,adverse developments withrespect to U.S.or global economic conditions and other uncertainties,including theimpact of supply chain disruptions,inflationary pressures and labor shortages oneconomic conditions and our business;potential losses related to the Corporationsconcentration of credit risk;the Corporations ability to achieve its expense targetsand expectations regarding revenue,net interest income,provision for creditlosses,net charge-offs,effective tax rate,loan growth or other projections;adversechanges to the Corporations credit ratings from the major credit rating agencies;an inability to access capital markets or maintain deposits or borrowing costs;estimates of the fair value and other accounting values,subject to impairmentassessments,of certain of the Corporations assets and liabilities;the estimated oractual impact of changes in accounting standards or assumptions in applying thosestandards;uncertainty regarding the content,timing and impact of regulatorycapital and liquidity requirements;the impact of adverse changes to total loss-absorbing capacity requirements,stress capital buffer requirements and/or globalsystemically important bank surcharges;the potential impact of actions of theBoard of Governors of the Federal Reserve System on the Corporations capitalplans;the effect of changes in or interpretations of income tax laws and regulations;the impact of implementation and compliance with U.S.and international laws,regulations and regulatory interpretations,including,but not limited to,recoveryand resolution planning requirements,Federal Deposit Insurance Corporationassessments,the Volcker Rule,fiduciary standards,derivatives regulations andpotential changes to loss allocations between financial institutions and customers,including for losses incurred from the use of our products and services,includingZelle,that were authorized by the customer but induced by fraud;a failure ordisruption in or breach of the Corporations operational or security systems,data orinfrastructure,or those of third parties,including as a result of cyberattacks orcampaigns;the risks related to the transition and physical impacts of climatechange;our ability to achieve environmental,social and governance goals andcommitments or the impact of any changes in the Corporations sustainabilitystrategy or commitments generally;the impact of any future federal governmentshutdown and uncertainty regarding the federal governments debt limit or changesin fiscal,monetary or regulatory policy;the emergence or continuation ofwidespread health emergencies or pandemics;the impact of natural disasters,extreme weather events,military conflict(including the Russia/Ukraine conflict,thepossible expansion of such conflictBank of America 2and potential geopolitical consequences),terrorism or other geopolitical events;and other matters.Forward-looking statements speak only as of the date they are made,and theCorporation undertakes no obligation to update any forward-looking statement toreflect the impact of circumstances or events that arise after the date the forward-looking statement was made.Notes to the Consolidated Financial Statements referred to in ManagementsDiscussion and Analysis of Financial Condition and Results of Operations(MD&A)are incorporated by reference into the MD&A.Certain prior-period amounts havebeen reclassified to conform to current-period presentation.Throughout the MD&A,the Corporation uses certain acronyms and abbreviations which are defined in theGlossary.Executive SummaryBusiness OverviewThe Corporation is a Delaware corporation,a bank holding company(BHC)and afinancial holding company.When used in this report,“Bank of America,”“theCorporation,”“we,”“us”and“our”may refer to Bank of America Corporationindividually,Bank of America Corporation and its subsidiaries,or certain of Bank ofAmerica Corporations subsidiaries or affiliates.Our principal executive offices arelocated in Charlotte,North Carolina.Through our various bank and nonbanksubsidiaries throughout the U.S.and in international markets,we provide adiversified range of banking and nonbank financial services and products throughfour business segments:Consumer Banking,Global Wealth&InvestmentManagement(GWIM),Global Banking and Global Markets,with the remainingoperations recorded in All Other.We operate our banking activities primarily underthe Bank of America,National Association(Bank of America,N.A.or BANA)charter.At June 30,2023,the Corporation had$3.1 trillion in assets and aheadcount of approximately 216,000 employees.As of June 30,2023,we served clients through operations across the U.S.,itsterritories and more than 35 countries.Our retail banking footprint covers all majormarkets in the U.S.,and we serve approximately 68 million consumer and smallbusiness clients with approximately 3,900 retail financial centers,approximately15,000 ATMs,and leading digital banking platforms()with approximately 46 million active users,including approximately 37 million activemobile users.We offer industry-leading support to approximately four million smallbusiness households.Our GWIM businesses,with client balances of$3.6 trillion,provide tailored solutions to meet client needs through a full set of investmentmanagement,brokerage,banking,trust and retirement products.We are a globalleader in corporate and investment banking and trading across a broad range ofasset classes serving corporations,governments,institutions and individualsaround the world.The Corporations website is ,and the InvestorRelations portion of our website is https:/.We use ourwebsite to distribute company information,including as a means of disclosingmaterial,non-public information and for complying with our disclosure obligationsunder Regulation FD.We routinely post and make accessible financial and otherinformation,including environmental,social and governance(ESG)information,regarding the Corporation on our website.Investors should monitor our website,including the Investor Relations portion,in addition to our press releases,U.S.Securities and Exchange Commission(SEC)filings,public conference calls andwebcasts.Notwithstanding the foregoing,the information contained on our website asreferenced in this paragraph is not incorporated by reference into this QuarterlyReport on Form 10-Q.Recent DevelopmentsCapital ManagementThe Board of Governors of the Federal Reserve System(Federal Reserve)requires BHCs to submit a capital plan and planned capital actions on an annualbasis,consistent with the rules governing the Comprehensive Capital Analysis andReview(CCAR)capital plan.On July 27,2023,the Federal Reserve released final2023 CCAR supervisory stress test results for Bank of America.Based on theresults,our stress capital buffer(SCB)will be 2.5 percent,90 basis points(bps)lower than the current level of 3.4 percent,and our Common equity tier 1(CET1)minimum requirement will decline to 9.5 percent effective October 1,2023.Beginning January 1,2024,we expect our minimum CET1 requirement to increase50 bps,aligned with planned growth in the global systemically important bank(G-SIB)surcharge.On July 27,2023,U.S.banking regulators issued proposed rules that wouldupdate future U.S.regulatory capital requirements,including the calculation of risk-weighted assets and the G-SIB surcharge.Under the capital proposal,therequirements would be phased in over three years beginning July 1,2025.TheCorporation is evaluating the impact of the proposed rules on its regulatory capital.On July 19,2023,the Corporations Board of Directors(the Board)declared aquarterly common stock dividend of$0.24 per share,an increase of nine percentcompared to the prior dividend rate,payable on September 29,2023 toshareholders of record as of September 1,2023.For more information on our capital resources,see Capital Management onpage 22.FDIC Special AssessmentOn May 11,2023,the Federal Deposit Insurance Corporation(FDIC)issued aproposed rule that would impose a special assessment to recover the loss to theDeposit Insurance Fund arising from the protection of uninsured depositors ofSilicon Valley Bank and Signature Bank associated with their closures,and thesystemic risk determination announced by the FDIC on March 12,2023.While thetiming and amount of any expense recognition are unknown until the proposed ruleis finalized,if the final rule is issued as proposed,the estimated impact of thespecial assessment on the Corporation would be a noninterest expense ofapproximately$1.9 billion that would be recognized upon finalization of the rule.For more information,see Note 10 Commitments and Contingencies to theConsolidated Financial Statements.LIBOR and Other Benchmark RatesImmediately after June 30,2023,the remaining U.S.dollar(USD)LondonInterbank Offered Rate(LIBOR)settings(i.e.,overnight,one month,three month,six month and 12 month)ceased or became non-representative(LIBORCessation),although the Financial Conduct Authority(FCA)is requiring LIBORsadministrator,ICE Benchmark Administration Limited,to continue publication of theone-month,three-month and six-month USD LIBOR settings on a“synthetic”basis(calculated using the relevant CME Term SOFR Reference Rate plus therespective International Swaps and Derivatives Association fixed spreadadjustment)for use in legacy contracts,which publication the FCA intends willcontinue until September 30,3 Bank of America2024.The Corporation will continue to monitor developments related to ongoingbenchmark reform and the transition to alternative reference rates(ARRs)forexpected impact on the Corporation and financial markets more broadly.In connection with LIBOR Cessation,the Corporation has substantiallycompleted the transition process for its products and contracts referencing USDLIBOR to ARRs,subject to certain remaining notional contractual exposures notsignificant to the Corporation.For the insignificant amount of products and contractsthat have temporarily transitioned to synthetic USD LIBOR,the Corporationexpects to transition these exposures to ARRs consistent with the temporary natureof synthetic USD LIBOR.Additionally,in connection with LIBOR Cessation,certain centralcounterparties completed processes to convert outstanding USD LIBOR-clearedderivatives to ARR positions.In March 2023 and June 2023,the Corporation madeannouncements regarding the transition paths away from either USD LIBOR or theUSD LIBOR ICE Swap Rate,as applicable,for certain outstanding securities issuedby the Corporation,BofAFinance LLC and certain other affiliated issuers.For more information on thoseannouncements,see the Corporations Current Reports on Form 8-K filed with theSEC on March 31,2023 and June 26,2023.As previously disclosed,as a result of the transition of Interbank Offered Rate-based products and contracts to various ARRs,including the Secured OvernightFinancing Rate(SOFR),the Corporation has begun using ARRs in its baselineforecast of net interest income.For more information,see Interest Rate RiskManagement for the Banking Book on page 45.For more information on the replacement of LIBOR and other benchmarkrates,including the Corporations efforts in connection with the replacement ofLIBOR and other benchmark rates,see Executive Summary RecentDevelopments LIBOR and Other Benchmark Rates in the MD&A and Item 1A.Risk Factors Other of the Corporations 2022 Annual Report on Form 10-K,whichdiscusses the Corporations risks related to the replacement of LIBOR and otherbenchmark rates,including risks related to litigation claims or other disputes withrespect to the transition path for a particular product or contract.Financial HighlightsTable 1Summary Income Statement and Selected Financial DataThree Months Ended June 30Six Months Ended June 30(Dollars in millions,except per share information)2023202220232022Income statement Net interest income$14,158$12,444$28,606$24,016 Noninterest income11,039 10,244 22,849 21,900 Total revenue,net of interest expense25,197 22,688 51,455 45,916 Provision for credit losses1,125 523 2,056 553 Noninterest expense16,038 15,273 32,276 30,592 Income before income taxes8,034 6,892 17,123 14,771 Income tax expense626 645 1,554 1,457 Net income7,408 6,247 15,569 13,314 Preferred stock dividends306 315 811 782 Net income applicable to common shareholders$7,102$5,932$14,758$12,532 Per common share information Earnings$0.88$0.73$1.83$1.54 Diluted earnings0.88 0.73 1.82 1.53 Dividends paid0.22 0.21 0.44 0.42 Performance ratios Return on average assets 0.94%0.79%1.00%0.84%Return on average common shareholders equity 11.21 9.93 11.84 10.48 Return on average tangible common shareholders equity 15.49 14.05 16.42 14.78 Efficiency ratio63.65 67.32 62.73 66.63 June 302023December 31 2022Balance sheet Total loans and leases$1,051,224$1,045,747 Total assets3,123,198 3,051,375 Total deposits1,877,209 1,930,341 Total liabilities2,839,879 2,778,178 Total common shareholders equity254,922 244,800 Total shareholders equity283,319 273,197 For definitions,see Key Metrics on page 105.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 theUnited States of America(GAAP),see Non-GAAP Reconciliations on page 48.(1)(1)(2)(1)(1)(2)Bank of America 4Net income was$7.4 billion and$15.6 billion,or$0.88 and$1.82 per diluted share,for the three and six months ended June 30,2023 compared to$6.2 billion and$13.3 billion,or$0.73 and$1.53 per diluted share,for the same periods in 2022.The increase in net income was primarily due to higher net interest income andnoninterest income,partially offset by higher noninterest expense and provision forcredit losses.Total assets increased$71.8 billion from December 31,2022 to$3.1 trillionprimarily driven by higher cash and cash equivalents due to sales and paydowns ofdebt securities to support balance sheet and liquidity positioning and higher tradingaccount assets in Global Markets.Total liabilities increased$61.7 billion from December 31,2022 to$2.8 trillionprimarily driven by higher securities financing activity and short-term borrowings tosupport balance sheet and liquidity positioning,partially offset by lower depositsprimarily due to an increase in customer debt payments,customers movement ofbalances to higher yielding investment alternatives and seasonal outflows.Shareholders equity increased$10.1 billion from December 31,2022 primarilydue to an increase in net income,partially offset by returns of capital toshareholders through common and preferred stock dividends and common stockrepurchases.Net Interest IncomeNet interest income increased$1.7 billion to$14.2 billion,and$4.6 billion to$28.6billion for the three and six months ended June 30,2023 compared to the sameperiods in 2022.Net interest yield on a fully taxable-equivalent(FTE)basisincreased 20 bps to 2.06 percent and 36 bps to 2.13 percent for the three and sixmonths ended June 30,2023.The increases were primarily driven by benefits fromhigher interest rates,including lower premium amortization expense and loangrowth,partially offset by higher funding costs,including increased rates paid ondeposits,and lower net interest income related to Global Markets activity.For moreinformation on net interest yield and FTE basis,see Supplemental Financial Dataon page 7,and for more information on interest rate risk management,see InterestRate Risk Management for the Banking Book on page 45.Noninterest IncomeTable 2Noninterest IncomeThree Months Ended June 30Six Months Ended June 30(Dollars in millions)2023202220232022Fees and commissions:Card income$1,546$1,555$3,015$2,958 Service charges1,364 1,717 2,774 3,550 Investment and brokerage services3,839 4,091 7,691 8,383 Investment banking fees1,212 1,128 2,375 2,585 Total fees and commissions7,961 8,491 15,855 17,476 Market making and similar activities3,697 2,717 8,409 5,955 Other income(619)(964)(1,415)(1,531)Total noninterest income$11,039$10,244$22,849$21,900 Noninterest income increased$795 million to$11.0 billion and$949 million to$22.8billion for the three and six months ended June 30,2023 compared to the sameperiods in 2022.The following highlights the significant changes.Service charges decreased$353 million and$776 million primarily driven by theimpact of non-sufficient funds and overdraft policy changes as well as lowertreasury service charges.Investment and brokerage services decreased$252 million and$692 millionprimarily driven by lower asset management fees and brokerage fees due tolower average equity and fixed income market levels and transactional volumes,partially offset by the impact of positive assets under management(AUM)flows.Investment banking fees increased$84 million for the three-month periodprimarily due to higher equity issuance fees,partially offset by lower debtissuance and advisory fees.The six-month period decreased$210 millionprimarily due to lower debt issuance and advisory fees,partially offset by higherequity issuance fees.Market making and similar activities increased$980 million and$2.5 billionprimarily driven by improved trading in credit and macro products in fixedincome,currencies and commodities(FICC)and by the impact of higher interestrates on client financing activities in Equities.Other income increased$345 million and$116 million primarily due to certainnegative valuation adjustments in the prior-year periods,partially offset by losseson sales of available-for-sale(AFS)debt securities in the current-year periods.Provision for Credit LossesThe provision for credit losses increased$602 million to$1.1 billion and$1.5 billionto$2.1 billion for the three and six months ended June 30,2023 compared to thesame periods in 2022.The provision for credit losses for the current-year periodswas driven by our consumer portfolio primarily due to credit card loan growth andasset quality,partially offset by certain improved macroeconomic conditions thatprimarily benefited our commercial portfolio.For the same periods in the prior year,the provision for credit losses was primarily driven by loan growth and a dampenedmacroeconomic outlook,partially offset by asset quality improvement and reducedCOVID-19 pandemic uncertainties.In addition,the six-month period in the prioryear was also driven by a reserve build related to Russian exposure.For moreinformation on the provision for credit losses,see Allowance for Credit Losses onpage 41.5 Bank of AmericaNoninterest ExpenseTable 3Noninterest ExpenseThree Months Ended June 30Six Months Ended June 30(Dollars in millions)2023202220232022Compensation and benefits$9,401$8,917$19,319$18,399 Occupancy and equipment1,776 1,748 3,575 3,508 Information processing and communications1,644 1,535 3,341 3,075 Product delivery and transaction related956 924 1,846 1,857 Marketing513 463 971 860 Professional fees527 518 1,064 968 Other general operating1,221 1,168 2,160 1,925 Total noninterest expense$16,038$15,273$32,276$30,592 Noninterest expense increased$765 million to$16.0 billion and$1.7 billion to$32.3billion for the three and six months ended June 30,2023 compared to the sameperiods in 2022.The increases were primarily due to higher investments in people and technology,FDIC expense and certain taxes,partially offset by lower revenue-relatedcompensation.Income Tax ExpenseTable 4Income Tax ExpenseThree Months Ended June 30Six Months Ended June 30(Dollars in millions)2023202220232022Income before income taxes$8,034$6,892$17,123$14,771 Income tax expense626 645 1,554 1,457 Effective tax rate7.8%9.4%9.1%9.9%The effective tax rates for the three and six months ended June 30,2023 and 2022were primarily driven by our recurring tax preference benefits that mainly consist oftax credits from ESG investments in affordable housing and renewable energy.Absent the ESG tax credits and discrete tax benefits,the effective tax rates wouldhave been 26 percent for the three months ended June 30,2023 and 2022,and 26percent and 25 percent for the six months ended June 30,2023 and 2022.Bank of America 6Supplemental Financial DataNon-GAAP Financial MeasuresIn this Form 10-Q,we present certain non-GAAP financial measures.Non-GAAPfinancial measures exclude certain items or otherwise include components thatdiffer from the most directly comparable measures calculated in accordance withGAAP.Non-GAAP financial measures are provided as additional useful informationto assess our financial condition,results of operations(including period-to-periodoperating performance)or compliance with prospective regulatory requirements.These non-GAAP financial measures are not intended as a substitute for GAAPfinancial measures and may not be defined or calculated the same way as non-GAAP financial measures used by other companies.When presented on a consolidated basis,we view net interest income on anFTE basis as a non-GAAP financial measure.To derive the FTE basis,net interestincome is adjusted to reflect tax-exempt income on an equivalent before-tax basiswith a corresponding increase in income tax expense.For purposes of thiscalculation,we use the federal statutory tax rate of 21 percent and a representativestate tax rate.Net interest yield,which measures the basis points we earn over thecost of funds,utilizes net interest income on an FTE basis.We believe thatpresentation of these items on an FTE basis allows for comparison of amountsfrom both taxable and tax-exempt sources and is consistent with industry practices.We may present certain key performance indicators and ratios excluding certainitems(e.g.,debit valuation adjustment(DVA)gains(losses),which result in non-GAAP financial measures.We believe that the presentation of measures thatexclude these items is useful because such measures provide additionalinformation to assess the underlying operational performance and trends of ourbusinesses and to allow better comparison of period-to-period operatingperformance.We also evaluate our business based on certain ratios that utilize tangibleequity,a non-GAAP financial measure.Tangible equity represents shareholdersequity or common shareholders equity reduced by goodwill and intangible assets(excluding mortgage servicing rights(MSRs),net of related deferred tax liabilities(“adjusted”shareholders equity or common shareholders equity).These measuresare used to evaluate our use of equity.In addition,profitability,relationship andinvestment models use both return on average tangible common shareholdersequity and return on average tangibleshareholders equity as key measures to support our overall growth objectives.These ratios are:Return on average tangible common shareholders equity measures our netincome applicable to common shareholders as a percentage of adjusted averagecommon shareholders equity.The tangible common equity ratio representsadjusted ending common shareholders equity divided by total tangible assets.Return on average tangible shareholders equity measures our net income as apercentage of adjusted average total shareholders equity.The tangible equityratio represents adjusted ending shareholders equity divided by total tangibleassets.Tangible book value per common share represents adjusted ending commonshareholders equity divided by ending common shares outstanding.We believe ratios utilizing tangible equity provide additional useful informationbecause they present measures of those assets that can generate income.Tangible book value per common share provides additional useful informationabout the level of tangible assets in relation to outstanding shares of commonstock.The aforementioned supplemental data and performance measures arepresented in Table 5 on page 8.For more information on the reconciliation of these non-GAAP financialmeasures to the corresponding GAAP financial measures,see Non-GAAPReconciliations on page 48.Key Performance IndicatorsWe present certain key financial and nonfinancial performance indicators(keyperformance indicators)that management uses when assessing our consolidatedand/or segment results.We believe they are useful to investors because theyprovide additional information about our underlying operational performance andtrends.These key performance indicators(KPIs)may not be defined or calculatedin the same way as similar KPIs used by other companies.For information on howthese metrics are defined,see Key Metrics on page 105.Our consolidated key performance indicators,which include various equity andcredit metrics,are presented in Table 1 on page 4 and Table 5 on page 8.For information on key segment performance metrics,see Business SegmentOperations on page 11.7 Bank of AmericaTable 5Selected Financial DataSix Months Ended2023 Quarters2022 QuartersJune 30(In millions,except per share information)SecondFirstFourthThirdSecond20232022Income statement Net interest income$14,158$14,448$14,681$13,765$12,444$28,606$24,016 Noninterest income11,039 11,810 9,851 10,737 10,244 22,849 21,900 Total revenue,net of interest expense25,197 26,258 24,532 24,502 22,688 51,455 45,916 Provision for credit losses1,125 931 1,092 898 523 2,056 553 Noninterest expense16,038 16,238 15,543 15,303 15,273 32,276 30,592 Income before income taxes8,034 9,089 7,897 8,301 6,892 17,123 14,771 Income tax expense626 928 765 1,219 645 1,554 1,457 Net income7,408 8,161 7,132 7,082 6,247 15,569 13,314 Net income applicable to common shareholders7,102 7,656 6,904 6,579 5,932 14,758 12,532 Average common shares issued and outstanding8,040.9 8,065.9 8,088.3 8,107.7 8,121.6 8,053.5 8,129.3 Average diluted common shares issued and outstanding8,080.7 8,182.3 8,155.7 8,160.8 8,163.1 8,162.6 8,182.2 Performance ratios Return on average assets 0.94%1.07%0.92%0.90%0.79%1.00%0.84%Four-quarter trailing return on average assets0.96 0.92 0.88 0.87 0.89 n/an/aReturn on average common shareholders equity 11.21 12.48 11.24 10.79 9.93 11.84 10.48 Return on average tangible common shareholders equity15.49 17.38 15.79 15.21 14.05 16.42 14.78 Return on average shareholders equity 10.52 11.94 10.38 10.37 9.34 11.22 9.99 Return on average tangible shareholders equity14.00 15.98 13.98 13.99 12.66 14.97 13.52 Total ending equity to total ending assets9.07 8.77 8.95 8.77 8.65 9.07 8.65 Common equity ratio 8.16 7.88 8.02 7.82 7.71 8.16 7.71 Total average equity to total average assets8.89 8.95 8.87 8.73 8.49 8.92 8.44 Dividend payout 24.88 23.17 25.71 27.06 28.68 23.99 27.20 Per common share data Earnings$0.88$0.95$0.85$0.81$0.73$1.83$1.54 Diluted earnings0.88 0.94 0.85 0.81 0.73 1.82 1.53 Dividends paid0.22 0.22 0.22 0.22 0.21 0.44 0.42 Book value 32.05 31.58 30.61 29.96 29.87 32.05 29.87 Tangible book value 23.23 22.78 21.83 21.21 21.13 23.23 21.13 Market capitalization$228,188$228,012$264,853$242,338$250,136$228,188$250,136 Average balance sheet Total loans and leases$1,046,608$1,041,352$1,039,247$1,034,334$1,014,886 Total assets3,175,358 3,096,058 3,074,289 3,105,546 3,157,855 Total deposits1,875,353 1,893,649 1,925,544 1,962,775 2,012,079 Long-term debt248,480 244,759 243,871 250,204 245,781 Common shareholders equity254,028 248,855 243,647 241,882 239,523 Total shareholders equity282,425 277,252 272,629 271,017 268,197 Asset quality Allowance for credit losses$14,338$13,951$14,222$13,817$13,434 Nonperforming loans,leases and foreclosed properties 4,274 4,083 3,978 4,156 4,326 Allowance for loan and lease losses as a percentage of total loans and leases outstanding 1.24%1.20%1.22%1.20%1.17%Allowance for loan and lease losses as a percentage of total nonperforming loans and leases 314 319 333 309 288 Net charge-offs$869$807$689$520$571 Annualized net charge-offs as a percentage of average loans and leases outstanding 0.33%0.32%0.26%0.20%0.23pital ratios at period end Common equity tier 1 capital11.6.4.2.0.5%Tier 1 capital13.3 13.1 13.0 12.8 12.3 Total capital15.1 15.0 14.9 14.7 14.2 Tier 1 leverage7.1 7.1 7.0 6.8 6.5 Supplementary leverage ratio6.0 6.0 5.9 5.8 5.5 Tangible equity7.0 6.7 6.8 6.6 6.5 Tangible common equity 6.1 5.8 5.9 5.7 5.6 Total loss-absorbing capacity and long-term debt metricsTotal loss-absorbing capacity to risk-weighted assets28.8(.8).0(.9.8%Total loss-absorbing capacity to supplementary leverage exposure13.0 13.1 13.2 13.0 12.6 Eligible long-term debt to risk-weighted assets14.6 14.8 15.2 15.2 14.7 Eligible long-term debt to supplementary leverage exposure6.6 6.7 6.9 6.8 6.6 For definitions,see Key Metrics on page 105.Calculated as total net income for four consecutive quarters divided by annualized average assets for four consecutive quarters.Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures.For more information on these ratios and corresponding reconciliations to GAAP financial measures,see Supplemental Financial Data on page 7 andNon-GAAP Reconciliations on page 48.Includes the allowance for loan and lease losses and the reserve for unfunded lending commitments.Balances and ratios do not include loans accounted for under the fair value option.For additional exclusions from nonperforming loans,leases and foreclosed properties,see Consumer Portfolio Credit Risk Management Nonperforming Consumer Loans,Leases and Foreclosed Properties Activity on page 34 and corresponding Table 25 and Commercial Portfolio Credit Risk Management Nonperforming Commercial Loans,Leases and Foreclosed Properties Activity on page 38 and corresponding Table 31.For more information,including which approach is used to assess capital adequacy,see Capital Management on page 22.n/a=not applicable(1)(2)(1)(3)(1)(3)(1)(1)(1)(3)(4)(5)(5)(5)(5)(6)(3)(3)(1)(2)(3)(4)(5)(6)Bank of America 8Table 6Quarterly Average Balances and Interest Rates-FTE BasisAverageBalanceInterestIncome/Expense Yield/RateAverageBalanceInterestIncome/Expense Yield/Rate(Dollars in millions)Second Quarter 2023Second Quarter 2022Earning assets Interest-bearing deposits with the Federal Reserve,non-U.S.central banks and other banks$359,042$4,303 4.81%$178,313$282 0.63%Time deposits placed and other short-term investments11,271 129 4.56 7,658 12 0.62 Federal funds sold and securities borrowed or purchased under agreements to resell294,535 4,955 6.75 304,684 396 0.52 Trading account assets187,420 2,091 4.47 147,442 1,241 3.37 Debt securities771,355 4,717 2.44 945,927 4,067 1.72 Loans and leases Residential mortgage228,758 1,704 2.98 228,529 1,571 2.75 Home equity25,957 353 5.45 27,415 235 3.44 Credit card94,431 2,505 10.64 81,024 1,954 9.68 Direct/Indirect and other consumer104,915 1,274 4.87 108,639 696 2.57 Total consumer454,061 5,836 5.15 445,607 4,456 4.01 U.S.commercial379,027 4,786 5.06 363,978 2,525 2.78 Non-U.S.commercial125,827 1,949 6.21 128,237 696 2.18 Commercial real estate 74,065 1,303 7.06 63,072 476 3.02 Commercial lease financing13,628 149 4.38 13,992 104 2.95 Total commercial592,547 8,187 5.54 569,279 3,801 2.68 Total loans and leases1,046,608 14,023 5.37 1,014,886 8,257 3.26 Other earning assets102,712 2,271 8.88 108,180 823 3.06 Total earning assets2,772,943 32,489 4.70 2,707,090 15,078 2.23 Cash and due from banks26,098 29,025 Other assets,less allowance for loan and lease losses376,317 421,740 Total assets$3,175,358$3,157,855 Interest-bearing liabilities U.S.interest-bearing deposits Demand and money market deposits$951,403$3,565 1.50%$985,983$189 0.08%Time and savings deposits230,008 1,452 2.53 156,824 42 0.11 Total U.S.interest-bearing deposits1,181,411 5,017 1.70 1,142,807 231 0.08 Non-U.S.interest-bearing deposits96,802 768 3.18 79,471 89 0.45 Total interest-bearing deposits1,278,213 5,785 1.82 1,222,278 320 0.11 Federal funds purchased and securities loaned or sold under agreements to repurchase322,728 5,807 7.22 214,777 454 0.85 Short-term borrowings and other interest-bearing liabilities163,739 2,548 6.24 134,790 99 0.30 Trading account liabilities44,944 472 4.22 54,005 370 2.74 Long-term debt248,480 3,584 5.78 245,781 1,288 2.10 Total interest-bearing liabilities2,058,104 18,196 3.55 1,871,631 2,531 0.54 Noninterest-bearing sourcesNoninterest-bearing deposits597,140 789,801 Other liabilities 237,689 228,226 Shareholders equity282,425 268,197 Total liabilities and shareholders equity$3,175,358$3,157,855 Net interest spread1.15%1.69%Impact of noninterest-bearing sources0.91 0.17 Net interest income/yield on earning assets$14,293 2.06%$12,547 1.86%Includes the impact of interest rate risk management contracts.For more information,see Interest Rate Risk Management for the Banking Book on page 45.Nonperforming loans are included in the respective average loan balances.Income on these nonperforming loans is generally recognized on a cost recovery basis.Includes U.S.commercial real estate loans of$68.0 billion and$58.9 billion,and non-U.S.commercial real estate loans of$6.0 billion and$4.1 billion for the second quarter of 2023 and 2022.Includes$39.9 billion and$29.7 billion of structured notes and liabilities for the second quarter of 2023 and 2022.Net interest income includes FTE adjustments of$135 million and$103 million for the second quarter of 2023 and 2022.(1)(1)(2)(3)(4)(5)(1)(2)(3)(4)(5)9 Bank of AmericaTable 7Year-to-Date Average Balances and Interest Rates-FTE BasisAverageBalanceInterestIncome/Expense Yield/RateAverageBalanceInterestIncome/ExpenseYield/RateSix Months Ended June 30(Dollars in millions)20232022Earning assets Interest-bearing deposits with the Federal Reserve,non-U.S.central banks and other banks$281,303$6,302 4.52%$211,458$368 0.35%Time deposits placed and other short-term investments10,928 237 4.37 8,451 24 0.57 Federal funds sold and securities borrowed or purchased under agreements to resell291,053 8,667 6.01 302,059 389 0.26 Trading account assets185,549 4,131 4.49 149,693 2,337 3.14 Debt securities811,046 10,202 2.51 960,709 7,905 1.65 Loans and leases Residential mortgage229,015 3,388 2.96 226,267 3,096 2.74 Home equity26,234 670 5.15 27,599 455 3.33 Credit card93,110 4,931 10.68 79,724 3,894 9.85 Direct/Indirect and other consumer105,284 2,460 4.71 106,645 1,275 2.41 Total consumer453,643 11,449 5.08 440,235 8,720 3.98 U.S.commercial377,945 9,257 4.94 355,293 4,652 2.64 Non-U.S.commercial126,412 3,727 5.95 123,528 1,200 1.96 Commercial real estate 72,337 2,447 6.82 63,069 863 2.76 Commercial lease financing13,657 296 4.35 14,317 210 2.94 Total commercial590,351 15,727 5.37 556,207 6,925 2.51 Total loans and leases1,043,994 27,176 5.24 996,442 15,645 3.16 Other earning assets98,592 4,563 9.33 114,454 1,410 2.48 Total earning assets2,722,465 61,278 4.53 2,743,266 28,078 2.06 Cash and due from banks26,936 28,556 Other assets,less allowance for loan and lease losses386,478 410,818 Total assets$3,135,879$3,182,640 Interest-bearing liabilities U.S.interest-bearing deposits Demand and money market deposits$963,178$6,355 1.33%$993,542$269 0.05%Time and savings deposits213,587 2,371 2.24 160,382 82 0.10 Total U.S.interest-bearing deposits1,176,765 8,726 1.50 1,153,924 351 0.06 Non-U.S.interest-bearing deposits94,218 1,373 2.94 80,669 133 0.33 Total interest-bearing deposits1,270,983 10,099 1.60 1,234,593 484 0.08 Federal funds purchased and securities loaned or sold under agreements to repurchase289,556 9,358 6.52 215,958 533 0.50 Short-term borrowings and other interest-bearing liabilities 160,331 5,177 6.51 130,645(92)(0.14)Trading account liabilities44,451 976 4.43 59,094 734 2.50 Long-term debt246,630 6,793 5.53 245,911 2,194 1.80 Total interest-bearing liabilities2,011,951 32,403 3.24 1,886,201 3,853 0.41 Noninterest-bearing sources Noninterest-bearing deposits613,468 794,259 Other liabilities 230,607 233,430 Shareholders equity279,853 268,750 Total liabilities and shareholders equity$3,135,879$3,182,640 Net interest spread 1.29%1.65%Impact of noninterest-bearing sources 0.84 0.12 Net interest income/yield on earning assets$28,875 2.13%$24,225 1.77%Includes the impact of interest rate risk management contracts.For more information,see Interest Rate Risk Management for the Banking Book on page 45.Nonperforming loans are included in the respective average loan balances.Income on these nonperforming loans is generally recognized on a cost recovery basis.Includes U.S.commercial real estate loans of$66.8 billion and$58.7 billion and non-U.S.commercial real estate loans of$5.5 billion and$4.3 billion for the six months ended June 30,2023 and 2022.For more information on negative interest,see Note 1 Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporations 2022 Annual Report on Form 10-K.Includes$38.6 billion and$29.9 billion of structured notes and liabilities for the six months ended June 30,2023 and 2022.Net interest income includes FTE adjustments of$269 million and$209 million for the six months ended June 30,2023 and 2022.(1)(1)(2)(3)(4)(5)(6)(1)(2)(3)(4)(5)(6)Bank of America 10Business Segment OperationsSegment Description and Basis of PresentationWe report our results of operations through four business segments:ConsumerBanking,GWIM,Global Banking a n d Global Markets,with the remainingoperations recorded in All Other.We manage our segments and report their resultson an FTE basis.For more information,see Business Segment Operations in theMD&A of the Corporations 2022 Annual Report on Form 10-K.We periodically review capital allocated to our businesses and allocate capitalannually during the strategic and capital planning processes.We utilize amethodology that considers the effect of regulatory capital requirements in additionto internal risk-based capital models.The capital allocated to the businesssegments is referred to as allocated capital.Allocated equity in the reporting unitsis comprised of allocated capitalplus capital for the portion of goodwill and intangibles specifically assigned to thereporting unit.For more information,including the definition of a reporting unit,seeNote 7 Goodwill and Intangible Assets to the Consolidated Financial Statements.For more information on our presentation of financial information on an FTEbasis,see Supplemental Financial Data on page 7,and for reconciliations toconsolidated total revenue,net income and period-end total assets,see Note 17 Business Segment Information to the Consolidated Financial Statements.Key Performance IndicatorsWe present certain key financial and nonfinancial performance indicators thatmanagement uses when evaluating segment results.We believe they are useful toinvestors because they provide additional information about our segmentsoperational performance,customer trends and business growth.Consumer BankingDepositsConsumer LendingTotal Consumer BankingThree Months Ended June 30(Dollars in millions)202320222023202220232022%ChangeNet interest income$5,733$4,477$2,704$2,610$8,437$7,087 19%Noninterest income:Card income(10)(9)1,351 1,329 1,341 1,320 2 Service charges524 678 1 1 525 679(23)All other income177 55 44(5)221 50 n/mTotal noninterest income691 724 1,396 1,325 2,087 2,049 2 Total revenue,net of interest expense6,424 5,201 4,100 3,935 10,524 9,136 15 Provision for credit losses103 142 1,164 208 1,267 350 n/mNoninterest expense3,428 3,055 2,025 1,904 5,453 4,959 10 Income before income taxes2,893 2,004 911 1,823 3,804 3,827(1)Income tax expense723 491 228 447 951 938 1 Net income$2,170$1,513$683$1,376$2,853$2,889(1)Effective tax rate 25.0$.5%Net interest yield2.29%1.67%3.58%3.64%3.24%2.55%Return on average allocated capital64 47 10 20 27 29 Efficiency ratio53.33 58.74 49.43 48.38 51.81 54.28 Balance SheetThree Months Ended June 30Average202320222023202220232022%ChangeTotal loans and leases$4,078$4,147$302,584$285,448$306,662$289,595 6%Total earning assets1,002,528 1,072,773 302,944 287,512 1,045,743 1,114,552(6)Total assets 1,035,969 1,106,098 309,228 294,407 1,085,469 1,154,773(6)Total deposits1,001,307 1,072,166 5,030 5,854 1,006,337 1,078,020(7)Allocated capital13,700 13,000 28,300 27,000 42,000 40,000 5 Estimated at the segment level only.In segments and businesses where the total of liabilities and equity exceeds assets,we allocate assets from All Other to match the segments and businesses liabilities and allocated shareholders equity.As a result,total earning assets and total assets of thebusinesses may not equal total Consumer Banking.n/m=not meaningful(1)(2)(2)(1)(2)11 Bank of AmericaDepositsConsumer LendingTotal Consumer BankingSix Months Ended June 30(Dollars in millions)202320222023202220232022%ChangeNet interest income$11,549$8,529$5,481$5,238$17,030$13,767 24%Noninterest income:Card income(20)(17)2,635 2,522 2,615 2,505 4 Service charges1,122 1,521 2 2 1,124 1,523(26)All other income374 123 87 31 461 154 n/mTotal noninterest income1,476 1,627 2,724 2,555 4,200 4,182 Total revenue,net of interest expense13,025 10,156 8,205 7,793 21,230 17,949 18 Provision for credit losses286 215 2,070 83 2,356 298 n/mNoninterest expense6,843 6,063 4,083 3,817 10,926 9,880 11 Income before income taxes5,896 3,878 2,052 3,893 7,948 7,771 2 Income tax expense1,474 950 513 954 1,987 1,904 4 Net income$4,422$2,928$1,539$2,939$5,961$5,867 2 Effective tax rate 25.0$.5%Net interest yield2.30%1.62%3.67%3.71%3.25 2.52 Return on average allocated capital65 45 11 22 29 30 Efficiency ratio52.53 59.70 49.77 48.97 51.46 55.04 Balance SheetSix Months Ended June 30Average202320222023202220232022%ChangeTotal loans and leases$4,099$4,180$301,126$282,666$305,225$286,846 6%Total earning assets1,012,432 1,061,693 301,378 284,400 1,055,419 1,103,707(4)Total assets 1,045,933 1,095,281 307,760 291,052 1,095,302 1,143,947(4)Total deposits1,011,285 1,061,267 4,949 5,853 1,016,234 1,067,120(5)Allocated capital13,700 13,000 28,300 27,000 42,000 40,000 5 Period endJune 302023December 312022June 302023December 312022June 302023December 312022%ChangeTotal loans and leases$4,122$4,148$305,613$300,613$309,735$304,761 2%Total earning assets 999,281 1,043,049 306,121 300,787 1,043,228 1,085,079(4)Total assets1,034,405 1,077,203 312,281 308,007 1,084,512 1,126,453(4)Total deposits999,262 1,043,194 5,220 5,605 1,004,482 1,048,799(4)See page 11 for footnotes.Consumer Banking,comprised of Deposits and Consumer Lending,offers adiversified range of credit,banking and investment products and services toconsumers and small businesses.For more information about Consumer Banking,see Business Segment Operations in the MD&A of the Corporations 2022 AnnualReport on Form 10-K.Consumer Banking ResultsThree-Month ComparisonNet income for Consumer Banking decreased$36 million to$2.9 billion due to anincrease in provision for credit losses and higher noninterest expense,largelyoffset by higher revenue.Net interest income increased$1.4 billion to$8.4 billionprimarily driven by higher interest rates and loan balances.Noninterest incomeincreased$38 million to$2.1 billion,relatively unchanged from the same period ayear ago.The provision for credit losses increased$917 million to$1.3 billion primarilydriven by credit card loan growth and asset quality in the current-year period,whereas the prior-year period benefitted from reduced COVID-19 pandemicuncertainties.Noninterest expense increased$494 million to$5.5 billion primarilydriven by continued investments in employees and higher litigation expense,including consumer regulatory matters.The return on average allocated capital was 27 percent,down from 29 percent,primarily due to an increase in allocated capital.For more information on capitalallocated to the business segments,see Business Segment Operations on page11.Six-Month ComparisonNet income for Consumer Banking increased$94 million to$6.0 billion due tohigher revenue,largely offset by an increase in provision for credit losses andhigher noninterest expense.Net interest income increased$3.3 billion to$17.0billion primarily due to the same factors as described in the three-monthdiscussion.Noninterest income increased$18 million to$4.2 billion,relativelyunchanged from the same period a year ago.The provision for credit losses increased$2.1 billion to$2.4 billion primarily dueto the same factors as described in the three-month discussion.Noninterestexpense increased$1.0 billion to$10.9 billion primarily due to the same factors asdescribed in the three-month discussion.The return on average allocated capital was 29 percent,down from 30 percent,primarily due to the same factor as described in the three-month discussion.(1)(2)(2)(2)(2)Bank of America 12DepositsThree-Month ComparisonNet income for Deposits increased$657 million to$2.2 billion primarily due tohigher revenue,partially offset by higher noninterest expense.Net interest incomeincreased$1.3 billion to$5.7 billion primarily due to higher interest rates.Noninterest income decreased$33 million to$691 million primarily driven by theimpact of non-sufficient funds and overdraft policy changes.Noninterest expense increased$373 million to$3.4 billion primarily driven bycontinued investments in employees and higher litigation expense,includingconsumer regulatory matters.Average deposits decreased$70.9 billion to$1.0 trillion primarily due to netoutflows of$44.8 billion in money market savings and$29.7 billion in checkingprimarily due to higher interest rates and client activity.Six-Month ComparisonNet income for Deposits increased$1.5 billion to$4.4 billion primarily due to higherrevenue,partially offset by higher noninterest expense.Net interest incomeincreased$3.0 billion to$11.5 billion primarily due to the same factor as describedin the three-month discussion.Noninterest income decreased$151 million to$1.5billion primarily due to the same factor as described in the three-month discussion.Average deposits decreased$50.0 billion to$1.0 trillion primarily due to netoutflows of$30.0 billion in money market savings and$20.7 billion in checkingprimarily driven by the same factors as described in the three-month discussion.The table below provides key performance indicators for Deposits.Management uses these metrics,and we believe they are useful to investorsbecause they provide additional information to evaluate our deposit profitability anddigital/mobile trends.Key Statistics DepositsThree Months Ended June 30Six Months Ended June 302023202220232022Total deposit spreads(excludes noninterest costs)2.67%1.70%2.60%1.68%Period endConsumer investment assets(in millions)$386,761$315,243Active digital banking users(in thousands)45,71342,690Active mobile banking users(in thousands)37,32934,167Financial centers3,8873,984ATMs15,33515,730Includes deposits held in Consumer Lending.Includes client brokerage assets,deposit sweep balances,Bank of America,N.A.brokered CDs and AUM in Consumer Banking.Represents mobile and/or online active users over the past 90 days.Represents mobile active users over the past 90 days.Consumer investment assets increased$71.5 billion to$386.8 billion driven byclient flows and market performance.Active mobile banking users increasedapproximately three million,reflecting continuing changes in our clients bankingpreferences.We had a net decrease of 97 financial centers and 395 ATMs as wecontinue to optimize our consumer banking network.Consumer LendingThree-Month ComparisonNet income for Consumer Lending decreased$693 million to$683 million primarilydue to an increase in provision for credit losses.Net interest income increased$94million to$2.7 billion primarily due to higher loan balances.Noninterest incomeincreased$71 million to$1.4 billion primarily driven by higher mortgage bankingincome and card income.The provision for credit losses increased$956 million to$1.2 billion primarilydriven by credit card loan growth and asset quality in the current-year period,whereas the prior-year period benefitted from reduced COVID-19 pandemicuncertainties.Noninterest expense increased$121 million to$2.0 billion largelydriven by continued investments for business growth and client activity.Average loans increased$17.1 billion to$302.6 billion primarily driven by anincrease in credit card loans.Six-Month ComparisonNet income for Consumer Lending decreased$1.4 billion to$1.5 billion primarilydue to an increase in provision for credit losses.Net interest income increased$243 million to$5.5 billion primarily due to the same factor as described in thethree-month discussion.Noninterest income increased$169 million to$2.7 billionprimarily due to higher card income.The provision for credit losses increased$2.0 billion to$2.1 billion primarily dueto the same factors as described in the three-month discussion.Noninterestexpense increased$266 million to$4.1 billion primarily driven by the same factorsas described in the three-month discussion.Average loans increased$18.5 billion to$301.1 billion primarily driven by thesame factor as described in the three-month discussion.The table below provides key performance indicators for Consumer Lending.Management uses these metrics,and we believe they are useful to investorsbecause they provide additional information about loan growth and profitability.(1)(2)(3)(4)(1)(2)(3)(4)13 Bank of AmericaKey Statistics Consumer LendingThree Months Ended June 30Six Months Ended June 30(Dollars in millions)2023202220232022Total credit card Gross interest yield 11.66%9.76.75%9.83%Risk-adjusted margin 7.83 9.95 8.25 10.17 New accounts(in thousands)1,137 1,068 2,324 2,045 Purchase volumes$93,103$91,810$178,647$172,724 Debit card purchase volumes$132,962$128,707$257,338$246,291 Includes GWIMs credit card portfolio.Calculated as the effective annual percentage rate divided by average loans.Calculated as the difference between total revenue,net of interest expense,and net credit losses divided by average loans.During the three and six months ended June 30,2023,the total risk-adjustedmargin decreased 212 bps and 192 bps primarily driven by higher net creditlosses,lower net interest margin and lower fee income.During the three and sixmonthsended June 30,2023 total credit card purchase volumes increased$1.3 billion and$5.9 billion,and debit card purchase volumes increased$4.3 billion and$11.0billion,reflecting higher levels of consumer spending.Key Statistics Loan Production Three Months Ended June 30Six Months Ended June 30(Dollars in millions)2023202220232022Consumer Banking:First mortgage$2,889$6,551$4,845$14,667 Home equity2,171 2,151 4,354 3,876 Total:First mortgage$5,940$14,471$9,877$30,824 Home equity2,542 2,535 5,138 4,575 The loan production amounts represent the unpaid principal balance of loans and,in the case of home equity,the principal amount of the total line of credit.In addition to loan production in Consumer Banking,there is also first mortgage and home equity loan production in GWIM.First mortgage loan originations for Consumer Banking and the totalCorporation decreased$3.7 billion and$8.5 billion during the three months endedJune 30,2023 primarily driven by higher interest rates,resulting in lower customerdemand.During the six months ended June 30,2023,first mortgage loanoriginations for Consumer Banking and the total Corporation decreased$9.8 billionand$20.9 billion primarily driven by changes in demand.Home equity production in Consumer Banking and the total Corporationremained relatively unchanged during the three months ended June 30,2023compared to the same period a year ago.During the six months ended June 30,2023,home equity production in Consumer Banking and the total Corporationincreased$478 million and$563 million primarily driven by higher demand.(1)(2)(3)(1)(2)(3)(1)(2)(1)(2)Bank of America 14Global Wealth&Investment ManagementThree Months Ended June 30Six Months Ended June 30(Dollars in millions)20232022%Change20232022%ChangeNet interest income$1,805$1,802%$3,681$3,470 6%Noninterest income:Investment and brokerage services3,251 3,486(7)6,489 7,140(9)All other income186 145 28 387 299 29 Total noninterest income3,437 3,631(5)6,876 7,439(8)Total revenue,net of interest expense5,242 5,433(4)10,557 10,909(3)Provision for credit losses13 33(61)38(8)n/mNoninterest expense3,925 3,875 1 7,992 7,890 1 Income before income taxes1,304 1,525(14)2,527 3,027(17)Income tax expense326 374(13)632 742(15)Net income$978$1,151(15)$1,895$2,285(17)Effective tax rate25.0$.5%.0$.5%Net interest yield2.21 1.82 2.20 1.72 Return on average allocated capital21 26 21 26 Efficiency ratio74.86 71.34 75.70 72.33 Balance SheetThree Months Ended June 30Six Months Ended June 30Average20232022%Change20232022%ChangeTotal loans and leases$218,604$219,277%$220,018$215,130 2%Total earning assets327,066 396,611(18)336,671 407,369(17)Total assets340,105 409,472(17)349,582 420,196(17)Total deposits295,380 363,943(19)304,648 374,365(19)Allocated capital18,500 17,500 6 18,500 17,500 6 Period endJune 302023December 312022%ChangeTotal loans and leases$219,208$223,910(2)%Total earning assets324,820 355,461(9)Total assets338,184 368,893(8)Total deposits292,526 323,899(10)n/m=not meaningfulGWIM consists of two primary businesses:Merrill Wealth Management and Bank ofAmerica Private Bank.For more information about GWIM,see Business SegmentOperations in the MD&A of the Corporations 2022 Annual Report on Form 10-K.Three-Month ComparisonNet income for GWIM decreased$173 million to$978 million primarily due to lowerrevenue and higher noninterest expense.The operating margin was 25 percentcompared to 28 percent a year ago.Net interest income was$1.8 billion,relatively unchanged from the same perioda year ago.Noninterest income,which primarily includes investment and brokerage servicesincome,decreased$194 million to$3.4 billion.The decline was primarily driven bylower asset management fees and brokerage fees due to lower average equity andfixed income market levels and transactional volumes,partially offset by the impactof positive AUM flows.Noninterest expense increased$50 million to$3.9 billion primarily due tocontinued investments in the business,including strategic hiring,largely offset bylower revenue-related incentives.The return on average allocated capital was 21 percent,down from 26 percent,due to lower net income and,to a lesser extent,a small increase in allocatedcapital.Average loans decreased$673 million to$218.6 billion primarily driven bysecurities based lending,partially offset by residential mortgage and customlending.Average depositsdecreased$68.6 billion to$295.4 billion primarily driven by clients moving depositsto higher yielding investment alternatives,including offerings on our investment andbrokerage platforms.Merrill Wealth Management revenue of$4.3 billion decreased four percentprimarily driven by lower average equity and fixed income market levels andtransactional volumes,partially offset by the impact of positive AUM flows.Bank of America Private Bank revenue of$902 million increased one percentprimarily driven by the benefits of higher interest rates and the impact of positiveAUM flows,partially offset by the impact of lower average market valuations.Six-Month ComparisonNet income for GWIM decreased$390 million to$1.9 billion primarily due to lowerrevenue and higher noninterest expense.The operating margin was 24 percentcompared to 28 percent a year ago.Net interest income increased$211 million to$3.7 billion primarily due to theimpact of higher interest rates,partially offset by the impact of lower depositbalances.Noninterest income,which primarily includes investment and brokerage servicesincome,decreased$563 million to$6.9 billion due to the same factors as describedin the three-month discussion.Noninterest expense increased$102 million to$8.0 billion due to the samefactors as described in the three-month discussion.15 Bank of AmericaThe return on average allocated capital was 21 percent,down from 26 percent,due to lower net income and,to a lesser extent,a small increase in allocatedcapital.Average loans increased$4.9 billion to$220.0 billion primarily driven byresidential mortgage and custom lending,partially offset by securities basedlending.Average deposits decreased$69.7 billion to$304.6 billion due to the samefactors as described in the three-month discussion.Merrill Wealth Management revenue of$8.7 billion decreased four percentprimarily driven by the same factors as described in the three-month discussion,partially offset by the impact of higher interest rates.Bank of America Private Bank revenue of$1.8 billion increased two percentprimarily driven by the same factors as described in the three-month discussion.Key Indicators and MetricsThree Months Ended June 30Six Months Ended June 30(Dollars in millions)2023202220232022Revenue by BusinessMerrill Wealth Management$4,340$4,536$8,737$9,125 Bank of America Private Bank902 897 1,820 1,784 Total revenue,net of interest expense$5,242$5,433$10,557$10,909 Client Balances by Business,at period endMerrill Wealth Management$3,057,680$2,819,998 Bank of America Private Bank577,514 547,116 Total client balances$3,635,194$3,367,114 Client Balances by Type,at period endAssets under management$1,531,042$1,411,344 Brokerage and other assets1,628,294 1,437,562 Deposits292,526 347,991 Loans and leases 222,280 224,847 Less:Managed deposits in assets under management(38,948)(54,630)Total client balances$3,635,194$3,367,114 Assets Under Management RollforwardAssets under management,beginning of period$1,467,242$1,571,605$1,401,474$1,638,782 Net client flows14,296 1,033 29,558 16,570 Market valuation/other49,504(161,294)100,010(244,008)Total assets under management,end of period$1,531,042$1,411,344$1,531,042$1,411,344 Total wealth advisors,at period end 19,099 18,449 Includes margin receivables which are classified in customer and other receivables on the Consolidated Balance Sheet.Includes advisors across all wealth management businesses in GWIM and Consumer Banking.Client BalancesClient balances increased$268.1 billion,or eight percent,to$3.6 trillion at June 30,2023 compared to June 30,2022.The increase in client balances was primarily due tothe impact of higher end-of-period market valuations and positive client flows.(1)(2)(1)(2)Bank of America 16Global BankingThree Months Ended June 30Six Months Ended June 30(Dollars in millions)20232022%Change20232022%ChangeNet interest income$3,690$2,634 40%$7,597$4,978 53%Noninterest income:Service charges735 933(21)1,449 1,819(20)Investment banking fees718 692 4 1,386 1,572(12)All other income1,319 747 77 2,233 1,831 22 Total noninterest income2,772 2,372 17 5,068 5,222(3)Total revenue,net of interest expense6,462 5,006 29 12,665 10,200 24 Provision for credit losses9 157(94)%(228)322 n/mNoninterest expense2,819 2,799 1 5,759 5,482 5 Income before income taxes3,634 2,050 77 7,134 4,396 62 Income tax expense981 543 81 1,926 1,165 65 Net income$2,653$1,507 76$5,208$3,231 61 Effective tax rate27.0&.5.0&.5%Net interest yield2.80 1.97 2.92 1.82 Return on average allocated capital22 14 21 15 Efficiency ratio43.59 55.90 45.46 53.74 Balance SheetThree Months Ended June 30Six Months Ended June 30Average20232022%Change20232022%ChangeTotal loans and leases$383,058$377,248 2%$382,039$368,078 4%Total earning assets527,959 537,660(2)525,181 551,894(5)Total assets595,585 601,945(1)592,254 616,156(4)Total deposits497,533 509,261(2)495,069 524,502(6)Allocated capital49,250 44,500 11 49,250 44,500 11 Period endJune 30 2023December 31 2022%ChangeTotal loans and leases$381,609$379,107 1%Total earning assets518,547 522,539(1)Total assets586,397 588,466 Total deposits492,734 498,661(1)n/m=not meaningfulGlobal Banking,which includes Global Corporate Banking,Global CommercialBanking,Business Banking and Global Investment Banking,provides a wide rangeof lending-related products and services,integrated working capital managementand treasury solutions,and underwriting and advisory services through our networkof offices and client relationship teams.For more information about Global Banking,see Business Segment Operations in the MD&A of the Corporations 2022 AnnualReport on Form 10-K.Three-Month ComparisonNet income for Global Banking increased$1.1 billion to$2.7 billion primarily drivenby higher revenue and lower provision for credit losses.Net interest income increased$1.1 billion to$3.7 billion predominantly due tothe benefit of higher interest rates.Noninterest income increased$400 million to$2.8 billion driven by higherrevenue from ESG investment activities and negative valuation adjustments onleveraged loans in the prior-year period,partially offset by lower treasury servicecharges due to higher earnings credit rates.The provision for credit losses decreased$148 million to$9 million as the prior-year period was impacted by reserve builds for a dampened macroeconomicoutlook and loan growth.Noninterest expense increased$20 million to$2.8 billion,primarily due tocontinued investments in the business,including technology and strategic hiring inthe prior year,largely offset by expenses recognized for certain regulatory mattersin the prior-year period.The return on average allocated capital was 22 percent,up from 14 percent,due to higher net income,partially offset by higher allocated capital.For moreinformation on capital allocated to the business segments,see Business SegmentOperations on page 11.Six-Month ComparisonNet income for Global Banking increased$2.0 billion to$5.2 billion driven by higherrevenue and lower provision for credit losses,partially offset by higher noninterestexpense.Net interest income increased$2.6 billion to$7.6 billion due to the same factoras described in the three-month discussion.Noninterest income decreased$154 million to$5.1 billion driven by lowertreasury service charges and lower investment banking fees,partially offset bynegative valuation adjustments on leveraged loans in the prior-year period andhigher revenue from ESG investment activities.The provision for credit losses improved$550 million to a benefit of$228 millionprimarily due to the same factors as described in the three-month discussion andcertain improved macroeconomic conditions in the current-year period compared toa reserve build related to Russian exposure in the prior-year period.Noninterest expense increased$277 million to$5.8 billion,primarily due to thesame factors as described in the three-month discussion.17 Bank of AmericaThe return on average allocated capital was 21 percent,up from 15 percent,due to higher net income,partially offset by higher allocated capital.Global Corporate,Global Commercial and Business BankingThe following table and discussion present a summary of the results,which excludecertain investment banking and Paycheck Protection Program(PPP)activities inGlobal Banking.Global Corporate,Global Commercial and Business Banking Global Corporate BankingGlobal Commercial BankingBusiness BankingTotalThree Months Ended June 30(Dollars in millions)20232022202320222023202220232022RevenueBusiness Lending$1,359$946$1,270$1,024$63$62$2,692$2,032 Global Transaction Services1,483 1,138 1,045 973 395 270 2,923 2,381 Total revenue,net of interest expense$2,842$2,084$2,315$1,997$458$332$5,615$4,413 Balance SheetAverageTotal loans and leases$174,280$176,949$196,069$186,452$12,508$12,865$382,857$376,266 Total deposits267,949 244,763 177,901 206,805 51,682 57,697 497,532 509,265 Global Corporate BankingGlobal Commercial BankingBusiness BankingTotalSix Months Ended June 30(Dollars in millions)20232022202320222023202220232022RevenueBusiness Lending$2,393$2,006$2,503$2,017$130$120$5,026$4,143 Global Transaction Services3,032 2,087 2,174 1,869 782 513 5,988 4,469 Total revenue,net of interest expense$5,425$4,093$4,677$3,886$912$633$11,014$8,612 Balance SheetAverageTotal loans and leases$174,783$171,999$194,442$181,992$12,563$12,851$381,788$366,842 Total deposits263,587 251,297 180,245 215,226 51,241 57,980 495,073 524,503 Period endTotal loans and leases$173,248$179,638$195,899$191,983$12,324$12,996$381,471$384,617 Total deposits265,104 239,113 177,235 203,934 50,391 56,666 492,730 499,713 Business Lending revenue increased$660 million for the three months endedJune 30,2023 compared to the same period in 2022 primarily due to the benefit ofhigher interest rates and higher ESG investment activities.Business Lendingrevenue increased$883 million for the six months ended June 30,2023 comparedto the same period in 2022 primarily due to the benefits of higher interest rates,loan balances and higher ESG investment activities.Global Transaction Services revenue increased$542 million for the threemonths ended June 30,2023 driven by the benefit of higher interest rates,partiallyoffset by lower treasury service charges.Global Transaction Services revenueincreased$1.5 billion for the six months ended June 30,2023 driven by the benefitof higher interest rates,partially offset by lower treasury service charges and theimpact of lower deposit balances.Average loans and leases increased two percent and four percent for the threeand six months ended June 30,2023 due to client demand.Average depositsdecreased two percent and six percent for the three and six months ended June30,2023 due to declines in domestic balances.Global Investment BankingClient teams and product specialists underwrite and distribute debt,equity and loanproducts,and provide advisory services and tailored risk management solutions.The economics of certain investment banking and underwriting activities are sharedprimarily between Global Banking and Global Markets under an internal revenue-sharing arrangement.Global Banking originates certain deal-related transactionswith our corporate and commercial clients that are executed and distributed byGlobal Markets.To provide a complete discussion of our consolidated investmentbanking fees,the following table presents total Corporation investment bankingfees and the portion attributable to Global Banking.Bank of America 18Investment Banking FeesGlobal BankingTotal CorporationGlobal BankingTotal CorporationThree Months Ended June 30Six Months Ended June 30(Dollars in millions)20232022202320222023202220232022ProductsAdvisory$333$361$375$392$646$800$738$865 Debt issuance263 283 600 662 553 642 1,244 1,493 Equity issuance122 48 287 139 187 130 455 364 Gross investment banking fees718 692 1,262 1,193 1,386 1,572 2,437 2,722 Self-led deals(16)(28)(50)(65)(20)(58)(62)(137)Total investment banking fees$702$664$1,212$1,128$1,366$1,514$2,375$2,585 Total Corporation investment banking fees,which exclude self-led deals and are primarily included within Global Banking and Global Markets,were$1.2 billion and$2.4billion for the three and six months ended June 30,2023.The three-month period increased seven percent compared to the same period in 2022 primarily due to higherequity issuance fees,partially offset by lower debt issuance and advisory fees.The six-month period decreased eight percent compared to the same period in 2022 primarilydue to lower debt issuance and advisory fees,partially offset by higher equity issuance fees.Global MarketsThree Months Ended June 30Six Months Ended June 30(Dollars in millions)20232022%Change20232022%ChangeNet interest income$297$981(70)%$406$1,974(79)%Noninterest income:Investment and brokerage services499 518(4)1,032 1,063(3)Investment banking fees503 461 9 972 1,043(7)Market making and similar activities3,409 2,657 28 7,807 5,847 34 All other income163(115)n/m280(133)n/mTotal noninterest income4,574 3,521 30 10,091 7,820 29 Total revenue,net of interest expense4,871 4,502 8 10,497 9,794 7 Provision for credit losses(4)8(150)(57)13 n/mNoninterest expense3,349 3,109 8 6,700 6,226 8 Income before income taxes1,526 1,385 10 3,854 3,555 8 Income tax expense420 367 14 1,060 942 13 Net income$1,106$1,018 9$2,794$2,613 7 Effective tax rate27.5&.5.5&.5%Return on average allocated capital10 10 12 12 Efficiency ratio68.74 69.07 63.82 63.57 Balance SheetThree Months Ended June 30Six Months Ended June 3020232022%Change20232022%ChangeAverageTrading-related assets:Trading account securities$317,928$295,190 8%$328,529$298,220 10%Reverse repurchases139,480 131,456 6 133,155 134,999(1)Securities borrowed120,481 119,200 1 118,392 116,847 1 Derivative assets43,236 60,289(28)43,490 51,106(15)Total trading-related assets621,125 606,135 2 623,566 601,172 4 Total loans and leases128,539 114,375 12 126,802 111,492 14 Total earning assets657,947 598,832 10 643,024 604,846 6 Total assets877,471 866,742 1 873,727 862,753 1 Total deposits33,222 41,192(19)34,658 42,784(19)Allocated capital45,500 42,500 7 45,500 42,500 7 Period end%ChangeJune 30 2023December 31 2022%ChangeTotal trading-related assets6%$599,787$564,769 6%Total loans and leases3 131,128 127,735 3 Total earning assets9 640,712 587,772 9 Total assets5 851,771 812,489 5 Total deposits(15)33,049 39,077(15)n/m=not meaningful19 Bank of AmericaGlobal Markets offers sales and trading services and research services toinstitutional clients across fixed-income,credit,currency,commodity and equitybusinesses.Global Markets product coverage includes securities and derivativeproducts in both the primary and secondary markets.For more information aboutGlobal Markets,see Business Segment Operations in the MD&A of theCorporations 2022 Annual Report on Form 10-K.The following explanations for current period-over-period changes for GlobalMarkets,including those disclosed under Sales and Trading Revenue,are thesame for amounts including and excluding net DVA.Amounts excluding net DVAare a non-GAAP financial measure.For more information on net DVA,seeSupplemental Financial Data on page 7.Three-Month ComparisonNet income for Global Markets increased$88 million to$1.1 billion.Net DVA losseswere$102 million in the current-year period compared to gains of$158 million inthe prior-year period.Excluding net DVA,net income increased$286 million to$1.2billion.These increases were primarily driven by higher revenue,partially offset byhigher noninterest expense.Revenue increased$369 million to$4.9 billion primarily due to higher sales andtrading revenue and negative valuation adjustments on leveraged loans in theprior-year period.Sales and trading revenue increased$132 million,and excludingnet DVA,sales and trading revenue increased$392 million.These increases weredriven by a strong performance in FICC.Noninterest expense increased$240 million to$3.3 billion primarily driven bycontinued investments in the business,including people and technology,andactivity-related expenses,partially offset by expenses recognized for certainregulatory matters in the prior-year period.Average total assets increased$10.7 billion to$877.5 billion driven by higherlevels of inventory and loan growth in FICC,partially offset by lower levels ofinventory in Equities.The return on average allocated capital was 10 percent,unchanged from thesame period a year ago.For more information on capital allocated to the businesssegments,see Business Segment Operations on page 11.Six-Month ComparisonNet income for Global Markets increased$181 million to$2.8 billion.Net DVAlosses were$88 million compared to gains of$227 million in the prior-year period.Excluding net DVA,net income increased$421 million to$2.9 billion.Theseincreases were primarily driven by higher revenue,partially offset by highernoninterest expense.Revenue increased$703 million to$10.5 billion primarily due to the samefactors as described in the three-month discussion.Sales and trading revenueincreased$480 million,and excluding net DVA,sales and trading revenueincreased$795 million.These increases were driven by higher revenue in FICC,partially offset by lower revenue in Equities.Noninterest expense increased$474 million to$6.7 billion primarily driven bythe same factors as described in the three-month discussion.Average total assets increased$11.0 billion to$873.7 billion driven by higherlevels of inventory and loan growth in FICC,partially offset by lower levels ofinventory in Equities.Period-end total assets increased$39.3 billion fromDecember 31,2022 to$851.8 billion driven by increased securities financingactivity and higher levels of inventory in FICC.The return on average allocated capital was 12 percent,unchanged from thesame period a year ago.Sales and Trading RevenueFor a description of sales and trading revenue,see Business Segment Operationsin the MD&A of the Corporations 2022 Annual Report on Form 10-K.The followingtable and related discussion present sales and trading revenue,substantially all ofwhich is in Global Markets,with the remainder in Global Banking.In addition,thefollowing table and related discussion also present sales and trading revenue,excluding net DVA,which is a non-GAAP financial measure.For more informationon net DVA,see Supplemental Financial Data on page 7.Sales and Trading Revenue Three Months Ended June 30Six Months Ended June 30(Dollars in millions)2023202220232022Sales and trading revenueFixed income,currencies and commodities$2,667$2,500$6,107$5,208 Equities1,618 1,653 3,245 3,664 Total sales and trading revenue$4,285$4,153$9,352$8,872 Sales and trading revenue,excluding net DVA Fixed income,currencies and commodities$2,764$2,340$6,193$4,988 Equities1,623 1,655 3,247 3,657 Total sales and trading revenue,excluding net DVA$4,387$3,995$9,440$8,645 For more information on sales and trading revenue,see Note 3 Derivatives to the Consolidated Financial Statements.Includes FTE adjustments of$85 million and$175 million for the three and six months ended June 30,2023 compared to$102 million and$195 million for the same periods in 2022.Includes Global Banking sales and trading revenue of$154 million and$331 million for the three and six months ended June 30,2023 compared to$319 million and$498 million for the same periods in 2022.FICC and Equities sales and trading revenue,excluding net DVA,is a non-GAAP financial measure.FICC net DVA gains(losses)were$(97)million and$(86)million for the three and six months ended June 30,2023 compared to$160 million and$220million for the same periods in 2022.Equities net DVA gains(losses)were$(5)million and$(2)million for the three and six months ended June 30,2023 compared to$(2)million and$7 million for the same periods in 2022.Three-Month ComparisonIncluding and excluding net DVA,FICC revenue increased$167 million and$424million primarily driven by strong trading performance in currencies,emergingmarkets interest rates,and secured financing,as well as improved trading in creditand mortgage products,partially offset by weaker performance in commodities.Including and excluding net DVA,Equities revenuedecreased$35 million and$32 million driven by weaker trading performance inderivatives,partially offset by an increase in client financing activities.Six-Month ComparisonIncluding and excluding net DVA,FICC revenue increased$899 million and$1.2billion primarily due to the same factors as(1,2,3)(4)(1)(2)(3)(4)Bank of America 20described in the three-month discussion.Including and excluding net DVA,Equitiesrevenue decreased$419 millionand$410 million driven by weaker trading performance in derivatives.All OtherThree Months Ended June 30Six Months Ended June 30(Dollars in millions)20232022%Change20232022%ChangeNet interest income$64$43 49%$161$36 n/mNoninterest income(loss)(1,831)(1,329)38(3,386)(2,763)23%Total revenue,net of interest expense(1,767)(1,286)37(3,225)(2,727)18 Provision for credit losses(160)(25)n/m(53)(72)(26)Noninterest expense492 531(7)899 1,114(19)Loss before income taxes(2,099)(1,792)17(4,071)(3,769)8 Income tax benefit(1,917)(1,474)30(3,782)(3,087)23 Net loss$(182)$(318)(43)$(289)$(682)(58)Balance SheetThree Months Ended June 30Six Months Ended June 30Average20232022%Change20232022%ChangeTotal loans and leases$9,745$14,391(32)%$9,910$14,896(33)%Total assets 276,728 124,923 122 225,014 139,588 61 Total deposits42,881 19,663 118 33,842 20,081 69 Period endJune 302023December 312022%ChangeTotal loans and leases$9,544$10,234(7)%Total assets 262,334 155,074 69 Total deposits54,418 19,905 n/mIn segments where the total of liabilities and equity exceeds assets,which are generally deposit-taking segments,we allocate assets from All Other to those segments to match liabilities(i.e.,deposits)and allocated shareholders equity.Average allocatedassets were$977.8 billion and$995.1 billion for the three and six months ended June 30,2023 compared to$1.1 trillion and$1.2 trillion for the same periods in 2022,and period-end allocated assets were$963.6 billion and$1.0 trillion at June 30,2023 andDecember 31 2022.n/m=not meaningfulAll Other primarily consists of asset and liability management(ALM)activities,liquidating businesses and certain expenses not otherwise allocated to a businesssegment.ALM activities encompass interest rate and foreign currency riskmanagement activities for which substantially all of the results are allocated to ourbusiness segments.For more information on our ALM activities,see Note 17 Business Segment Information to the Consolidated Financial Statements.Three-Month ComparisonThe net loss in All Other decreased$136 million to$182 million primarily due to ahigher income tax benefit,mostly offset by lower noninterest income.Noninterest income decreased$502 million primarily due to higher partnershiplosses for ESG investments and$197 million of losses on sales of AFS debtsecurities.The income tax benefit increased$443 million reflecting an increase in taxpreference benefits primarily driven from income tax credits related to ESGinvestment activity.Both periods included income tax benefit adjustments toeliminate the FTE treatment of certain tax credits recorded in Global Banking andGlobal Markets.Six-Month ComparisonThe net loss in All Other decreased$393 million to$289 million primarily due to ahigher income tax benefit and lower noninterest expense,mostly offset by lowernoninterest income.Noninterest income decreased$623 million primarily due to losses on sales ofAFS debt securities and higher partnership losses for ESG investments,partiallyoffset by derivative gains related to risk management activities.Noninterest expense decreased$215 million primarily due to expensesrecognized for certain regulatory matters in the prior-year period.The income tax benefit increased$695 million reflecting the impact described inthe three-month discussion.Both periods included income tax benefit adjustmentsto eliminate the FTE treatment of certain tax credits recorded in Global Bankingand Global Markets.Managing RiskRisk is inherent in all our business activities.The seven key types of risk faced bythe Corporation are strategic,credit,market,liquidity,compliance,operational andreputational.Sound risk management enables us to serve our customers anddeliver for our shareholders.If not managed well,risk can result in financial loss,regulatory sanctions and penalties,and damage to our reputation,each of whichmay adversely impact our ability to execute our business strategies.We take acomprehensive approach to risk management with a defined Risk Framework andan articulated Risk Appetite Statement,which are approved annually by theEnterprise Risk Committee and the Board.Our Risk Framework serves as the foundation for the consistent and effectivemanagement of risks facing the Corporation.The Risk Framework sets forth rolesand responsibilities for the management of risk and provides a blueprint for how theBoard,through delegation of authority to committees and executive officers,establishes risk appetite and associated limits for our activities.Our risk appetite provides a common framework that includes a set of measuresto assist senior management and the Board in assessing the Corporations riskprofile against our risk appetite and risk capacity.Our risk appetite is formallyarticulated in the Risk Appetite Statement,which includes both qualitativestatements and quantitative limits.For more information on the Corporations risks,see Item 1A.Risk Factors ofthe Corporations 2022 Annual Report on Form 10-K.These risks are beingmanaged within our Risk(1)(1)(1)21 Bank of AmericaFramework and supporting risk management programs.For more information onour Risk Framework,risk management activities and the key types of risk faced bythe Corporation,see the Managing Risk section in the MD&A of the Corporations2022 Annual Report on Form 10-K.Capital ManagementThe Corporation manages its capital position so that its capital is more thanadequate to support its business activities and aligns with risk,risk appetite andstrategic planning.For more information,including related regulatory requirements,see Capital Management in the MD&A of the Corporations 2022 Annual Report onForm 10-K.CCAR and Capital PlanningThe Federal Reserve requires BHCs to submit a capital plan and planned capitalactions on an annual basis,consistent with the rules governing the CCAR capitalplan.We submitted our 2023 CCAR capital plan and related supervisory stresstests in April 2023.On July 27,2023,the Federal Reserve released final 2023CCAR supervisory stress test results for Bank of America.Based on the results,our SCB will be 2.5 percent.For more information,see Executive Summary Recent Developments Capital Management on page 3.In October 2021,the Board authorized the Corporations$25 billion commonstock repurchase program.Additionally,the Board authorized common stockrepurchases to offset shares awarded under the Corporations equity-basedcompensation plans.Pursuant to the Boards authorizations,during the secondquarter of 2023,we repurchased$550 million of common stock,predominantlyoffsetting shares awarded under equity-based compensation plans.The timing and amount of common stock repurchases are subject to variousfactors,including the Corporations capital position,liquidity,financial performanceand alternative uses of capital,stock trading price,regulatory requirements andgeneral market conditions,and may be suspended at any time.Such repurchasesmay be effected through open market purchases or privately negotiatedtransactions,including repurchase plans that satisfy the conditions of Rule 10b5-1of the Securities Exchange Act of 1934,as amended(Exchange Act).Regulatory CapitalAs a bank holding company,we are subject to regulatory capital rules,includingBasel 3,issued by U.S.banking regulators.The Corporations depository institutionsubsidiaries are also subject to the Prompt Corrective Action(PCA)framework.The Corporation and its primary affiliated banking entity,BANA,are Advancedapproaches institutions under Basel 3 and are required to report regulatory risk-based capital ratios and risk-weighted assets(RWA)under both the Standardizedand Advanced approaches.The lower of the capital ratios underStandardized or Advanced approaches compared to their respective regulatorycapital ratio requirements is used to assess capital adequacy,including under thePCA framework.As of June 30,2023,the CET1 capital,Tier 1 capital and Totalcapital ratios under the Standardized approach were the binding ratios.Minimum Capital RequirementsIn order to avoid restrictions on capital distributions and discretionary bonuspayments,the Corporation must meet risk-based capital ratio requirements thatinclude a capital conservation buffer of 2.5 percent(under the Advancedapproaches only),an SCB(under the Standardized approach only),plus anyapplicable countercyclical capital buffer and a G-SIB surcharge.The buffers andsurcharge must be comprised solely of CET1 capital.For the period from October1,2022 through September 30,2023,the Corporations minimum CET1 capitalratio requirements are 10.4 percent under the Standardized approach and 9.5percent under the Advanced approaches.The Corporation is required to calculate its G-SIB surcharge on an annual basisunder two methods and is subject to the higher of the resulting two surcharges.Method 1 is consistent with the approach prescribed by the Basel Committeesassessment methodology and is calculated using specified indicators of systemicimportance.Method 2 modifies the Method 1 approach by,among other factors,including a measure of the Corporations reliance on short-term wholesale funding.The Corporations G-SIB surcharge,which is higher under Method 2,is expected toincrease 50 bps on January 1,2024,which would increase our minimum CET1capital ratio requirement.At June 30,2023,the Corporations CET1 capital ratio of11.6 percent under the Standardized approach exceeded its current CET1 capitalratio requirement as well as the minimum requirement expected to be in place as ofJanuary 1,2024 due to the anticipated increase in our G-SIB surcharge.The Corporation is also required to maintain a minimum supplementaryleverage ratio(SLR)of 3.0 percent plus a leverage buffer of 2.0 percent in order toavoid certain restrictions on capital distributions and discretionary bonus payments.Our insured depository institution subsidiaries are required to maintain a minimum6.0 percent SLR to be considered well capitalized under the PCA framework.Capital Composition and RatiosTable 8 presents Bank of America Corporations capital ratios and relatedinformation in accordance with Basel 3 Standardized and Advanced approaches asmeasured at June 30,2023 and December 31,2022.For the periods presentedherein,the Corporation met the definition of well capitalized under currentregulatory requirements.Bank of America 22Table 8Bank of America Corporation Regulatory Capital under Basel 3StandardizedApproach AdvancedApproaches RegulatoryMinimum(Dollars in millions,except as noted)June 30,2023Risk-based capital metrics:Common equity tier 1 capital$190,113$190,113 Tier 1 capital218,503 218,503 Total capital 248,023 239,279 Risk-weighted assets(in billions)1,639 1,436 Common equity tier 1 capital ratio11.6.2.4%Tier 1 capital ratio13.3 15.2 11.9 Total capital ratio15.1 16.7 13.9 Leverage-based metrics:Adjusted quarterly average assets(in billions)$3,098$3,098 Tier 1 leverage ratio7.1%7.1%4.0 Supplementary leverage exposure(in billions)$3,642 Supplementary leverage ratio6.0%5.0 December 31,2022Risk-based capital metrics:Common equity tier 1 capital$180,060$180,060 Tier 1 capital208,446 208,446 Total capital 238,773 230,916 Risk-weighted assets(in billions)1,605 1,411 Common equity tier 1 capital ratio11.2.8.4%Tier 1 capital ratio13.0 14.8 11.9 Total capital ratio14.9 16.4 13.9 Leverage-based metrics:Adjusted quarterly average assets(in billions)$2,997$2,997 Tier 1 leverage ratio7.0%7.0%4.0 Supplementary leverage exposure(in billions)$3,523 Supplementary leverage ratio5.9%5.0 Capital ratios as of June 30,2023 and December 31,2022 are calculated using the regulatory capital rule that allows a five-year transition period related to the adoption of the current expected credit losses(CECL)accounting standard on January 1,2020.The CET1 capital regulatory minimum is the sum of the CET1 capital ratio minimum of 4.5 percent,our G-SIB surcharge of 2.5 percent and our capital conservation buffer of 2.5 percent(under the Advanced approaches)or the SCB of 3.4 percent(under theStandardized approach),as applicable,at both June 30,2023 and December 31,2022.The countercyclical capital buffer was zero for both periods.The SLR regulatory minimum includes a leverage buffer of 2.0 percent.Total capital under the Advanced approaches differs from the Standardized approach due to differences in the amount permitted in Tier 2 capital related to the qualifying allowance for credit losses.Reflects total average assets adjusted for certain Tier 1 capital deductions.At June 30,2023,CET1 capital was$190.1 billion,an increase of$10.1 billionfrom December 31,2022,primarily due to earnings,partially offset by dividendsand common stock repurchases.Tier 1 capital increased$10.1 billion primarilydriven by the same factors as CET1 capital.Total capital under the Standardizedapproach increased$9.3 billion primarily due to the same factors driving theincrease in Tier 1 capital and an increase in the adjusted allowance for creditlosses included in Tier 2 capital,partially offset by a decrease in subordinateddebt.RWA under the Standardized approach,which yielded the lower CET1 capitalratio at June 30,2023,increased$34.2 billion during the six months ended June30,2023 to$1,639 billion primarily due to higher counterparty exposures in GlobalMarkets and loan growth.Supplementary leverage exposure at June 30,2023increased$118.2 billion primarily due to higher cash held at central banks,partiallyoffset by lower debt securities balances.(1)(1)(2)(3)(4)(3)(4)(1)(2)(3)(4)23 Bank of AmericaTable 9 shows the capital composition at June 30,2023 and December 31,2022.Table 9Capital Composition under Basel 3(Dollars in millions)June 302023December 31 2022Total common shareholders equity$254,922$244,800 CECL transitional amount 1,254 1,881 Goodwill,net of related deferred tax liabilities(68,644)(68,644)Deferred tax asse
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Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON,D.C.20549FORM 10-QQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31,2023orTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from toCommission file number001-38730LINDE PLC(Exact name of registrant as specified in its charter)Ireland98-1448883(State or other jurisdiction of incorporation)(I.R.S.Employer Identification No.)10 Riverview Drive,ForgeDanbury,Connecticut43 Church Street WestUnited States 06810Woking,Surrey GU21 6HTUnited Kingdom(Address of principal executive offices)(Zip Code)(203)837-2000 44 14 83 242200(Registrants telephone number,including area code)N/A(Former name,former address and former fiscal year,if changed since last reportSecurities registered pursuant to Section 12(b)of the Act:Title of each classTrading symbol(s)Name of each exchange on which registeredOrdinary shares(0.001 nominal value per share)LIN New York Stock ExchangeIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for suchshorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit and post such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growth company.See the definitionsof“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and emerging growth company in Rule 12b-2 of the Exchange Act.Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accountingstandards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No At March 31,2023,490,251,988 ordinary shares(0.001 par value)of the Registrant were outstanding.1 Table of Contents INDEXPART I-FINANCIAL INFORMATION Item 1.Financial Statements(unaudited)Consolidated Statements of Income-Quarters Ended March 31,2023 and 20224Consolidated Statements of Comprehensive Income-Quarters Ended March 31,2023 and 20225Condensed Consolidated Balance Sheets-March 31,2023 and December 31,20226Condensed Consolidated Statements of Cash Flows-Three Months Ended March 31,2023 and 20227Notes to Condensed Consolidated Financial Statements8Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations23Item 3.Quantitative and Qualitative Disclosures about Market Risk41Item 4.Controls and Procedures41PART II-OTHER INFORMATIONItem 1.Legal Proceedings42Item 1A.Risk Factors42Item 2.Unregistered Sales of Equity Securities and Use of Proceeds42Item 3.Defaults Upon Senior Securities42Item 4.Mine Safety Disclosures42Item 5.Other Information42Item 6.Exhibits43Signature442 Table of Contents Forward-looking StatementsThis document contains“forward-looking statements”within the meaning of the Private Securities Litigation Reform Act of 1995.These forward-lookingstatements are identified by terms and phrases such as:anticipate,believe,intend,estimate,expect,continue,should,could,may,plan,project,predict,will,potential,forecast,and similar expressions.They are based on managements reasonable expectations and assumptions as of the date the statements are madebut involve risks and uncertainties.These risks and uncertainties include,without limitation:the performance of stock markets generally;developments inworldwide and national economies and other international events and circumstances,including trade conflicts and tariffs;changes in foreign currencies and ininterest rates;the cost and availability of electric power,natural gas and other raw materials;the ability to achieve price increases to offset cost increases;catastrophic events including natural disasters,epidemics,pandemics such as COVID-19,and acts of war and terrorism;the ability to attract,hire,and retainqualified personnel;the impact of changes in financial accounting standards;the impact of changes in pension plan liabilities;the impact of tax,environmental,healthcare and other legislation and government regulation in jurisdictions in which the company operates;the cost and outcomes of investigations,litigationand regulatory proceedings;the impact of potential unusual or non-recurring items;continued timely development and market acceptance of new products andapplications;the impact of competitive products and pricing;future financial and operating performance of major customers and industries served;the impactof information technology system failures,network disruptions and breaches in data security;and the effectiveness and speed of integrating new acquisitionsinto the business.These risks and uncertainties may cause future results or circumstances to differ materially from adjusted projections,estimates or otherforward-looking statements.Linde plc assumes no obligation to update or provide revisions to any forward-looking statement in response to changing circumstances.The above listed risksand uncertainties are further described in Item 1A.Risk Factors in Linde plcs Form 10-K for the fiscal year ended December 31,2022 filed with the SEC onFebruary 28,2023,which should be reviewed carefully.Please consider Linde plcs forward-looking statements in light of those risks.3 Table of Contents LINDE PLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(Millions of dollars,except per share data)(UNAUDITED)Quarter Ended March 31,20232022Sales$8,193$8,211 Cost of sales,exclusive of depreciation and amortization4,431 4,798 Selling,general and administrative822 802 Depreciation and amortization948 1,112 Research and development36 35 Other charges18(4)Other income(expense)-net(5)12 Operating Profit1,933 1,480 Interest expense-net37 9 Net pension and OPEB cost(benefit),excluding service cost(45)(64)Income Before Income Taxes and Equity Investments1,941 1,535 Income taxes430 369 Income Before Equity Investments1,511 1,166 Income from equity investments41 44 Net Income(Including Noncontrolling Interests)1,552 1,210 Less:noncontrolling interests(36)(36)Net Income Linde plc$1,516$1,174 Per Share Data Linde plc ShareholdersBasic earnings per share$3.08$2.31 Diluted earnings per share$3.06$2.30 Weighted Average Shares Outstanding(000s):Basic shares outstanding491,817 507,152 Diluted shares outstanding495,676 511,410 The accompanying notes are an integral part of these financial statements.4 Table of Contents LINDE PLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(Millions of dollars)(UNAUDITED)Quarter Ended March 31,20232022NET INCOME(INCLUDING NONCONTROLLING INTERESTS)$1,552$1,210 OTHER COMPREHENSIVE INCOME(LOSS)Translation adjustments:Foreign currency translation adjustments229 60 Income taxes(12)Translation adjustments229 48 Funded status-retirement obligations(Note 8):Retirement program remeasurements(249)55 Reclassifications to net income(8)19 Income taxes63(21)Funded status-retirement obligations(194)53 Derivative instruments(Note 5):Current unrealized gain(loss)(75)18 Reclassifications to net income(6)(23)Income taxes16 2 Derivative instruments(65)(3)TOTAL OTHER COMPREHENSIVE INCOME(LOSS)(30)98 COMPREHENSIVE INCOME(LOSS)(INCLUDING NONCONTROLLING INTERESTS)1,522 1,308 Less:noncontrolling interests(34)(24)COMPREHENSIVE INCOME(LOSS)-LINDE PLC$1,488$1,284 The accompanying notes are an integral part of these financial statements.5 Table of Contents LINDE PLC AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(Millions of dollars)(UNAUDITED)March 31,2023December 31,2022AssetsCash and cash equivalents$4,962$5,436 Accounts receivable-net4,753 4,559 Contract assets175 124 Inventories2,054 1,978 Prepaid and other current assets960 950 Total Current Assets12,904 13,047 Property,plant and equipment-net23,796 23,548 Goodwill26,418 25,817 Other intangible assets-net12,638 12,420 Other long-term assets4,552 4,826 Total Assets$80,308$79,658 Liabilities and equityAccounts payable$2,941$2,995 Short-term debt5,337 4,117 Current portion of long-term debt1,696 1,599 Contract liabilities3,070 3,073 Other current liabilities4,741 4,695 Total Current Liabilities17,785 16,479 Long-term debt11,744 12,198 Other long-term liabilities9,443 9,594 Total Liabilities38,972 38,271 Redeemable noncontrolling interests13 13 Linde plc Shareholders Equity(Note 11):Ordinary shares,0.001 par value,authorized 1,750,000,000 shares,2023 issued:490,766,972 ordinaryshares;2022 issued:552,012,862 ordinary shares 1 Additional paid-in capital39,859 40,005 Retained earnings6,092 20,541 Accumulated other comprehensive income(loss)(5,810)(5,782)Less:Treasury shares,at cost(2023 514,984 shares and 2022 59,555,235 shares)(171)(14,737)Total Linde plc Shareholders Equity39,970 40,028 Noncontrolling interests1,353 1,346 Total Equity41,323 41,374 Total Liabilities and Equity$80,308$79,658 The accompanying notes are an integral part of these financial statements.6 Table of Contents LINDE PLC AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(Millions of dollars)(UNAUDITED)Three Months Ended March 31,20232022Increase(Decrease)in Cash and Cash EquivalentsOperationsNet income-Linde plc$1,516$1,174 Add:Noncontrolling interests36 36 Net Income(including noncontrolling interests)1,552 1,210 Adjustments to reconcile net income to net cash provided by operating activities:Other charges,net of payments(61)(34)Depreciation and amortization948 1,112 Deferred income taxes4(59)Share-based compensation30 34 Working capital:Accounts receivable(131)(340)Inventory(59)(35)Prepaid and other current assets(5)(107)Payables and accruals(64)51 Contract assets and liabilities,net(66)192 Pension contributions(10)(13)Long-term assets,liabilities and other(230)(11)Net cash provided by(used by)operating activities1,908 2,000 InvestingCapital expenditures(829)(649)Acquisitions,net of cash acquired(808)(43)Divestitures,net of cash divested and asset sales3 27 Net cash provided by(used for)investing activities(1,634)(665)FinancingShort-term debt borrowings(repayments)-net1,199 1,416 Long-term debt borrowings60 2,296 Long-term debt repayments(542)(1,166)Issuances of ordinary shares13 10 Purchases of ordinary shares(859)(1,719)Cash dividends-Linde plc shareholders(623)(592)Noncontrolling interest transactions and other(12)(1)Net cash provided by(used for)financing activities(764)244 Effect of exchange rate changes on cash and cash equivalents16 62 Change in cash and cash equivalents(474)1,641 Cash and cash equivalents,beginning-of-period5,436 2,823 Cash and cash equivalents,end-of-period$4,962$4,464 The accompanying notes are an integral part of these financial statements.7 Table of Contents INDEX TO NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements-Linde plc and Subsidiaries(Unaudited)Note 1.Summary of Significant Accounting Policies9Note 2.Other Charges9Note 3.Supplemental Information10Note 4.Debt11Note 5.Financial Instruments11Note 6.Fair Value Disclosures13Note 7.Earnings Per Share Linde plc Shareholders14Note 8.Retirement Programs15Note 9.Commitments and Contingencies15Note 10.Segments17Note 11.Equity17Note 12.Revenue Recognition19Note 13.Business Acquisition218 Table of Contents 1.Summary of Significant Accounting PoliciesLinde plc(Linde or the company)is an incorporated public limited company formed under the laws of Ireland.Lindes registered office is located at TenEarlsfort Terrace,Dublin 2,D02 T380 Ireland.Lindes principal executive offices are located at Forge,43 Church Street West,Woking,Surrey GU21 6HT,United Kingdom and 10 Riverview Drive,Danbury,Connecticut,06810,United States.On January 18,2023,shareholders approved the companys proposal for an intercompany reorganization that resulted in the delisting of its ordinary sharesfrom the Frankfurt Stock Exchange,on March 1,2023,after the completion of legal and regulatory approvals.In connection with the closing of the intercompany reorganization on March 1,2023,Linde shareholders automatically received one share of the new holdingcompany,listed on the New York Stock Exchange,in exchange for each share of Linde plc that was previously owned.The new holding company is alsonamed“Linde plc”and trades under the existing ticker LIN(see Note 11).Presentation of Condensed Consolidated Financial Statements-In the opinion of Linde management,the accompanying condensed consolidated financialstatements include all adjustments necessary for a fair presentation of the results for the interim periods presented and such adjustments are of a normalrecurring nature.The accompanying condensed consolidated financial statements should be read in conjunction with the notes to the consolidated financialstatements of Linde plc and subsidiaries in Lindes 2022 Annual Report on Form 10-K.There have been no material changes to the companys significantaccounting policies during 2023.Reclassifications Certain prior periods amounts have been reclassified to conform to the current years presentation.2.Other Charges2023 Other ChargesOther charges were$18 million for the three months ended March 31,2023 and primarily related to costs incurred due to the intercompany reorganization.Other charges had an associated net income tax benefit of$45 million primarily comprised of a benefit of$124 million related to the resolution of a U.S.income tax audit,partially offset by an accrual of$85 million for the potential settlement of an international income tax matter.The following table summarizes the activities related to the companys pre-tax Other charges for the three months ended March 31,2023:(millions of dollars)Severance costsOther costreduction chargesTotal cost reductionprogram relatedchargesMerger-related andother chargesTotal other chargesBalance,December 31,2022$281$27$308$12$320 2023 Other charges 18 18 Less:Cash payments/receipts(79)(79)(79)Less:Non-cash charges Foreign currency translation and other(1)1 (2)(2)Balance,March 31,2023$201$28$229$28$257 2022 Other ChargesOther charges were a net benefit of$4 million for the three months ended March 31,2022,($1 million after tax).Total cost reduction program related chargeswere$4 million($4 million after tax),for the three months ended March 31,2022,primarily related to severance in the APAC segment.Merger-related costsand other charges were a benefit of$8 million for the three months ended March 31,2022,(benefit of$5 million after tax),primarily related to a gain on sale ofan interest in a joint venture.Classification in the condensed consolidated financial statementsThe costs are shown within operating profit in a separate line item on the consolidated statements of income.On the condensed consolidated statements of cashflows,the impact of these costs,net of cash payments,is shown as an adjustment to reconcile net income to net cash provided by operating activities.In Note10 Segments,Linde excluded these costs from its management9 Table of Contents definition of segment operating profit;a reconciliation of segment operating profit to consolidated operating profit is shown within the segment operating profittable.3.Supplemental InformationReceivablesLinde applies loss rates that are lifetime expected credit losses at initial recognition of the receivables.These expected loss rates are based on an analysis of theactual historical default rates for each business,taking regional circumstances into account.If necessary,these historical default rates are adjusted to reflect theimpact of current changes in the macroeconomic environment using forward-looking information.The loss rates are also evaluated based on the expectations ofthe responsible management team regarding the collectability of the receivables.Gross trade receivables aged less than one year were$4,691 million and$4,498 million at March 31,2023 and December 31,2022,respectively,and gross receivables aged greater than one year were$333 million and$321 millionat March 31,2023 and December 31,2022,respectively.Other receivables were$155 million and$145 million at March 31,2023 and December 31,2022,respectively.Receivables aged greater than one year are generally fully reserved unless specific circumstances warrant exceptions,such as those backed byfederal governments.Accounts receivable net of reserves were$4,753 million at March 31,2023 and$4,559 million at December 31,2022.Allowances for expected credit losseswere$426 million at March 31,2023 and$405 million at December 31,2022.Provisions for expected credit losses were$53 million and$35 million for thethree months ended March 31,2023 and 2022,respectively.The allowance activity in the three months ended March 31,2023 and 2022 related to write-offs ofuncollectible amounts,net of recoveries and currency movements is not material.InventoriesThe following is a summary of Lindes consolidated inventories:(Millions of dollars)March 31,2023December 31,2022InventoriesRaw materials and supplies$569$567 Work in process391 368 Finished goods1,094 1,043 Total inventories$2,054$1,978 10 Table of Contents 4.DebtThe following is a summary of Lindes outstanding debt at March 31,2023 and December 31,2022:(Millions of dollars)March 31,2023December 31,2022SHORT-TERMCommercial paper$5,063$3,926 Other bank borrowings(primarily non U.S.)274 191 Total short-term debt5,337 4,117 LONG-TERM(a)(U.S.dollar denominated unless otherwise noted)2.70%Notes due 2023(c)501 2.00%Euro denominated notes due 2023(b)706 699 5.875%GBP denominated notes due 2023(b)371 367 1.20%Euro denominated notes due 2024596 588 1.875%Euro denominated notes due 2024(b)327 324 4.800%Notes due 2024299 299 4.700%Notes due 2025598 598 2.65%Notes due 2025399 400 1.625%Euro denominated notes due 2025539 533 0.00%Euro denominated notes due 2026761 751 3.20%Notes due 2026725 724 3.434%Notes due 2026198 198 1.652%Euro denominated notes due 202789 88 0.25%Euro denominated notes due 2027812 802 1.00%Euro denominated notes due 2027543 536 1.00%Euro denominated notes due 2028(b)765 749 1.10%Notes due 2030696 696 1.90%Euro denominated notes due 2030112 111 1.375%Euro denominated notes due 2031814 803 0.55%Euro denominated notes due 2032808 798 0.375%Euro denominated notes due 2033536 529 1.625%Euro denominated notes due 2035860 849 3.55%Notes due 2042664 665 2.00%Notes due 2050296 296 1.00%Euro denominated notes due 2051741 731 Non U.S.borrowings175 152 Other10 10 13,440 13,797 Less:current portion of long-term debt(1,696)(1,599)Total long-term debt11,744 12,198 Total debt$18,777$17,914 (a)Amounts are net of unamortized discounts,premiums and/or debt issuance costs as applicable.(b)March 31,2023 and December 31,2022 included a cumulative$47 million and$56 million adjustment to carrying value,respectively,related to hedgeaccounting of interest rate swaps.Refer to Note 5.(c)In February 2023,Linde repaid$500 million of 2.70%notes that became due.The company maintains a$5 billion and a$1.5 billion unsecured revolving credit agreement with a syndicate of banking institutions that expire December 7,2027 and December 7,2023,respectively.There are no financial maintenance covenants contained within the credit agreements.No borrowings wereoutstanding under the credit agreements as of March 31,2023.5.Financial InstrumentsIn its normal operations,Linde is exposed to market risks relating to fluctuations in interest rates,foreign currency exchange rates,energy and commoditycosts.The objective of financial risk management at Linde is to minimize the negative impact of such fluctuations on the companys earnings and cash flows.To manage these risks,among other strategies,Linde routinely enters into various derivative financial instruments(“derivatives”)including interest-rate swapand treasury rate lock agreements,currency-swap agreements,forward contracts,currency options,and commodity-swap agreements.These instruments arenot entered into for trading purposes and Linde only uses commonly traded and non-leveraged instruments.There are three types of derivatives that the company enters into:(i)those relating to fair-value exposures,(ii)those relating to cash-flow exposures,and(iii)those relating to foreign currency net investment exposures.Fair-value exposures relate to recognized assets or liabilities,and firm commitments;cash-flowexposures relate to the variability of future cash flows associated with recognized assets or liabilities,or forecasted transactions;and net investment exposuresrelate to the impact of foreign currency exchange rate changes on the carrying value of net assets denominated in foreign currencies.When a derivative is executed and hedge accounting is appropriate,it is designated as either a fair-value hedge,cash-flow hedge,or a net investment hedge.Currently,Linde designates all interest-rate and treasury-rate locks as hedges for accounting purposes;however,cross-currency contracts are generally notdesignated as hedges for accounting purposes.Certain currency contracts related to forecasted transactions are designated as hedges for accounting purposes.Whether designated as hedges for accounting purposes or not,all derivatives are linked to an appropriate underlying exposure.On an ongoing basis,thecompany assesses the hedge effectiveness of all derivatives designated as hedges for accounting purposes to determine if they continue to be highly effective inoffsetting changes in fair values or cash flows of the underlying hedged items.If it is determined that the hedge is not highly effective through the use of aqualitative assessment,then hedge accounting will be discontinued prospectively.Counterparties to Lindes derivatives are major banking institutions with credit ratings of investment grade or better.The company has Credit Support Annexes(CSAs)in place for certain entities with their principal counterparties to minimize potential default risk and to mitigate counterparty risk.Under the CSAs,the fair values of derivatives for the purpose of interest rate and currency management are collateralized with cash on a regular basis.As of March 31,2023,theimpact of such collateral posting arrangements on the fair value of derivatives was insignificant.Management believes the risk of incurring losses on derivativecontracts related to credit risk is remote and any losses would be immaterial.The following table is a summary of the notional amount and fair value of derivatives outstanding at March 31,2023 and December 31,2022 for consolidatedsubsidiaries:Fair Value Notional AmountsAssets(a)Liabilities(a)(Millions of dollars)March 31,2023December 31,2022March 31,2023December 31,2022March 31,2023December 31,2022Derivatives Not Designated as HedgingInstruments:Currency contracts:Balance sheet items$3,439$3,056$12$13$2$7 Forecasted transactions366 449 9 9 5 9 Cross-currency swaps11 42 2 1 Total$3,816$3,547$21$22$9$17 Derivatives Designated as Hedging Instruments:Currency contracts:Forecasted transactions$312$323$9$6$3$5 Commodity contractsN/AN/A 1 4 Interest rate swaps867 856 66 70 Total Hedges$1,179$1,179$9$6$70$79 Total Derivatives$4,995$4,726$30$28$79$96(a)Amounts as of March 31,2023 and December 31,2022 included current assets of$27 million and$24 million which are recorded in prepaid and other current assets;long-term assets of$3million and$4 million which are recorded in other long-term assets;current liabilities of$15 million and$2311 million which are recorded in other current liabilities;and long-term liabilities of$64 million and$73 million which are recorded in other long-term liabilities.Balance Sheet ItemsForeign currency contracts related to balance sheet items consist of forward contracts entered into to manage the exposure to fluctuations in foreign-currencyexchange rates on recorded balance sheet assets and liabilities denominated in currencies other than the functional currency of the related operating unit.Certain forward currency contracts are entered into to protect underlying monetary assets and liabilities denominated in foreign currencies from foreignexchange risk and are not designated as hedging instruments.For balance sheet items that are not designated as hedging instruments,the fair value adjustmentson these contracts are offset by the fair value adjustments recorded on the underlying monetary assets and liabilities.Forecasted TransactionsForeign currency contracts related to forecasted transactions consist of forward contracts entered into to manage the exposure to fluctuations in foreign-currency exchange rates on(1)forecasted purchases of capital-related equipment and services,(2)forecasted sales,or(3)other forecasted cash flowsdenominated in currencies other than the functional currency of the related operating units.For forecasted transactions that are designated as cash flow hedges,fair value adjustments are recorded to accumulated other comprehensive income(loss)with deferred amounts reclassified to earnings over the same timeperiod as the income statement impact of the associated purchase.For forecasted transactions that do not qualify for cash flow hedging relationships,fair valueadjustments are recorded directly to earnings.Cross-Currency SwapsCross-currency interest rate swaps are entered into to limit the foreign currency risk of future principal and interest cash flows associated with intercompanyloans,and to a more limited extent bonds,denominated in non-functional currencies.The fair value adjustments on the cross-currency swaps are recorded toearnings,where they are offset by fair value adjustments on the underlying intercompany loan or bond.Commodity ContractsCommodity contracts are entered into to manage the exposure to fluctuations in commodity prices,which arise in the normal course of business from itsprocurement transactions.To reduce the extent of this risk,Linde enters into a limited number of electricity,natural gas,and propane gas derivatives.Forforecasted transactions that are designated as cash flow hedges,fair value adjustments are recorded to accumulated other comprehensive income(loss)withdeferred amounts reclassified to earnings over the same time period as the income statement impact of the associated purchase.Net Investment HedgesAs of March 31,2023,Linde has 8.5 billion($9.1 billion)Euro-denominated notes and intercompany loans and 3.6 billion($0.5 billion)CNY-denominatedintercompany loans that are designated as hedges of the net investment positions in certain foreign operations.Since hedge inception,the deferred gainrecorded within cumulative translation adjustment component of accumulated other comprehensive income(loss)in the consolidated balance sheet and theconsolidated statement of comprehensive income is$265 million(deferred loss of$84 million for the three months ended March 31,2023).As of March 31,2023,exchange rate movements relating to previously designated hedges that remain in accumulated other comprehensive income(loss)is ata gain of$56 million.These movements will remain in accumulated other comprehensive income(loss),until appropriate,such as upon sale or liquidation ofthe related foreign operations at which time amounts will be reclassified to the consolidated statements of income.Interest Rate SwapsLinde uses interest rate swaps to hedge the exposure to changes in the fair value of financial assets and financial liabilities as a result of interest rate changes.These interest rate swaps effectively convert fixed-rate interest exposures to variable rates;fair value adjustments are recognized in earnings along with anequally offsetting charge/benefit to earnings for the changes in the fair value of the underlying financial asset or financial liability(See Note 4).12 Derivatives Impact on Consolidated Statements of IncomeThe following table summarizes the impact of the companys derivatives on the consolidated statements of income:Amount of Pre-Tax Gain(Loss)Recognized in Earnings*Quarter Ended March 31,(Millions of dollars)20232022Derivatives Not Designated as Hedging InstrumentsCurrency contracts:Balance sheet itemsDebt-related$(39)$51 Other balance sheet items(1)(12)Total$(40)$39*The gains(losses)on balance sheet items are offset by gains(losses)recorded on the underlying hedged assets and liabilities.Accordingly,the gains(losses)for the derivatives and the underlyinghedged assets and liabilities related to debt items are recorded in the consolidated statements of income as interest expense-net.Other balance sheet items and anticipated net income gains(losses)are generally recorded in the consolidated statements of income as other income(expenses)-net.The amounts of gain or loss recognized in accumulated other comprehensive income(loss)and reclassified to the consolidated statement of income was notmaterial for the three months ended March 31,2023 and 2022,respectively.Net impacts expected to be reclassified to earnings during the next twelve monthsare also not material.6.Fair Value DisclosuresThe fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows:Level 1 quoted prices in active markets for identical assets or liabilitiesLevel 2 quoted prices for similar assets and liabilities in active markets or inputs that are observableLevel 3 inputs that are unobservable(for example cash flow modeling inputs based on assumptions)Assets and Liabilities Measured at Fair Value on a Recurring BasisThe following table summarizes assets and liabilities measured at fair value on a recurring basis:Fair Value Measurements Using Level 1Level 2Level 3(Millions of dollars)March 31,2023December 31,2022March 31,2023December 31,2022March 31,2023December 31,2022AssetsDerivative assets$30$28$Investments and securities*20 20 12 13 Total$20$20$30$28 12$13 LiabilitiesDerivative liabilities$79$96$*Investments and securities are recorded in prepaid and other current assets and other long-term assets in the companys condensed consolidated balancesheets.Level 1 investments and securities are marketable securities traded on an exchange.Level 2 investments are based on market prices obtained from independentbrokers or determined using quantitative models that use as their basis readily observable market parameters that are actively quoted and can be validatedthrough external sources,including third-party pricing services,brokers and market transactions.Level 3 investments and securities consist of a venture fund.For the valuation,Linde uses the net asset value received as part of the funds quarterly reporting,which for the most part is not based on quoted prices inactive markets.In order to reflect current market conditions,Linde proportionally adjusts by observable market data(stock exchange prices)or currenttransaction prices.13 Table of Contents Changes in level 3 investments and securities were immaterial.The fair value of cash and cash equivalents,short-term debt,accounts receivable-net,and accounts payable approximate carrying value because of the short-term maturities of these instruments.The fair value of long-term debt is estimated based on the quoted market prices for the same or similar issues.Long-term debt is categorized within eitherLevel 1 or Level 2 of the fair value hierarchy depending on the trading volume of the issues and whether or not they are actively quoted in the market asopposed to traded through over-the-counter transactions.At March 31,2023,the estimated fair value of Lindes long-term debt portfolio was$11,774 millionversus a carrying value of$13,440 million.At December 31,2022,the estimated fair value of Lindes long-term debt portfolio was$11,994 million versus acarrying value of$13,797 million.Differences between the carrying value and the fair value are attributable to fluctuations in interest rates subsequent to whenthe debt was issued and relative to stated coupon rates.7.Earnings Per Share Linde plc ShareholdersBasic and diluted earnings per share is computed by dividing Net income Linde plc for the period by the weighted average number of either basic or dilutedshares outstanding,as follows:Quarter Ended March 31,20232022Numerator(Millions of dollars)Net Income Linde plc$1,516$1,174 Denominator(Thousands of shares)Weighted average shares outstanding491,321 506,716 Shares earned and issuable under compensation plans496 436 Weighted average shares used in basic earnings per share491,817 507,152 Effect of dilutive securitiesStock options and awards3,859 4,258 Weighted average shares used in diluted earnings per share495,676 511,410 Basic Earnings Per Share$3.08$2.31 Diluted Earnings Per Share$3.06$2.30 There were no antidilutive shares for any period presented.14 Table of Contents 8.Retirement ProgramsThe components of net pension and postretirement benefits other than pensions(“OPEB”)costs for the three months ended March 31,2023 and 2022 areshown below:Quarter Ended March 31,(Millions of dollars)20232022Amount recognized in Operating ProfitService cost$21$33 Amount recognized in Net pension and OPEB cost(benefit),excluding service costInterest cost92 53 Expected return on plan assets(129)(136)Net amortization and deferral(8)19(45)(64)Net periodic benefit cost(benefit)$(24)$(31)Components of net periodic benefit expense for other post-retirement plans for three months ended March 31,2023 and 2022 were not material.Linde estimates that 2023 required contributions to its pension plans will be in the range of approximately$40 million to$50 million,of which$10 millionhave been made through March 31,2023.9.Commitments and ContingenciesContingent LiabilitiesLinde is subject to various lawsuits and government investigations that arise from time to time in the ordinary course of business.These actions are based uponalleged environmental,tax,antitrust and personal injury claims,among others.Linde has strong defenses in these cases and intends to defend itself vigorously.It is possible that the company may incur losses in connection with some of these actions in excess of accrued liabilities.Management does not anticipate thatin the aggregate such losses would have a material adverse effect on the companys consolidated financial position or liquidity;however,it is possible that thefinal outcomes could have a significant impact on the companys reported results of operations in any given period(see Note 17 to the consolidated financialstatements of Lindes 2022 Annual Report on Form 10-K).Significant matters are:During 2009,the Brazilian government published Law 11941/2009 instituting a new voluntary amnesty program(“Refis Program”)which allowedBrazilian companies to settle certain federal tax disputes at reduced amounts.During 2009,the company decided that it was economically beneficial tosettle many of its outstanding federal tax disputes and such disputes were enrolled in the Refis Program,subject to final calculation and review by theBrazilian federal government.The company recorded estimated liabilities based on the terms of the Refis Program.Since 2009,Linde has been unableto reach final agreement on the calculations and initiated litigation against the government in an attempt to resolve certain items.Open issues relate tothe following matters:(i)application of cash deposits and net operating loss carryforwards to satisfy obligations and(ii)the amount of tax reductionsavailable under the Refis Program.It is difficult to estimate the timing of resolution of legal matters in Brazil.At March 31,2023,the most significant non-income tax claims in Brazil,after enrollment in the Refis Program,relate to state VAT tax matters.Thetotal estimated exposure relating to such claims,including interest and penalties,as appropriate,is approximately$110 million.Linde has not recordedany liabilities related to such claims based on management judgment and opinions of outside counsel.During the first quarter of 2023,the Brazilian Supreme Court issued a decision related to a federal tax matter that the company previously disclosed asa contingency in Note 17 to the consolidated financial statements of Lindes 2022 Annual report on Form 10-K.As a result of this decision,thecompany recorded a reserve based on its best estimate of potential settlement(see Note 2).Because litigation in Brazil historically takes many years toresolve,it is very difficult to estimate the timing of resolution of these matters;however,it is possible that certain of these matters may be resolvedwithin the near term.The company is vigorously defending against the proceedings.15 Table of Contents On September 1,2010,CADE(Brazilian Administrative Council for Economic Defense)announced alleged anticompetitive activity on the part of fiveindustrial gas companies in Brazil and imposed fines.Originally,CADE imposed a civil fine of$2.2 billion Brazilian reais($435 million)on WhiteMartins,the Brazil-based subsidiary of Linde Inc.The fine was reduced to$1.7 billion Brazilian reais($336 million)due to a calculation error made byCADE.The fine against White Martins was overturned by the Ninth Federal Court of Brasilia.CADE appealed this decision,and the Federal Court ofAppeals rejected CADEs appeal and confirmed the decision of the Ninth Federal Court of Brasilia.CADE has filed an appeal with the Superior Courtof Justice and a decision is pending.Similarly,on September 1,2010,CADE imposed a civil fine of$237 million Brazilian reais($47 million)on Linde Gases Ltda.,the former Brazil-basedsubsidiary of Linde AG,which was divested to MG Industries GmbH on March 1,2019 and with respect to which Linde provided a contractualindemnity.The fine was reduced to$188 million Brazilian reais($37 million)due to a calculation error made by CADE.The fine against Linde GasesLtda.was overturned by the Seventh Federal Court in Brasilia.CADE appealed this decision,and the Federal Court of Appeals rejected CADEs appealand confirmed the decision of the Seventh Federal Court of Brasilia.CADE filed an appeal with the Superior Court of Justice which was denied.Inparallel,CADE filed(i)an appeal with the Supreme Court of Justice,which was denied,and(ii)a subsequent appeal to a panel of the Supreme Courtof Justice where a final decision is pending.Linde has strong defenses and is confident that it will prevail on appeal and have the fines overturned.Linde strongly believes that the allegations ofanticompetitive activity against our current and former Brazilian subsidiaries are not supported by valid and sufficient evidence.Linde believes that thisdecision will not stand up to judicial review and deems the possibility of cash outflows to be extremely unlikely.As a result,no reserves have beenrecorded as management does not believe that a loss from this case is probable.On and after April 23,2019 former shareholders of Linde AG filed appraisal proceedings at the District Court(Landgericht)Munich I(Germany),seeking an increase of the cash consideration paid in connection with the previously completed cash merger squeeze-out of all of Linde AGs minorityshareholders for 189.46 per share.Any such increase would apply to all 14,763,113 Linde AG shares that were outstanding on April 8,2019,when thecash merger squeeze-out was completed.The period for plaintiffs to file claims expired on July 9,2019.The company believes the consideration paidwas fair and that the claims lack merit,and no reserve has been established.We cannot estimate the timing of resolution.On December 30,2022,the Russian Arbitration Court of the St.Petersburg and Leningrad Region issued an injunction preventing(i)the sale of anyshares in Lindes subsidiaries and joint ventures in Russia,and(ii)the disposal of any of assets in those entities exceeding 5%of the relevantcompanys overall asset value.The injunction is not expected to have any impact on the operations of Lindes Russian businesses.The injunction wasrequested by RusChemAlliance(RCA)as a preliminary measure to secure payment of an eventual award under an arbitration proceeding RCA intendsto file against Linde Engineering for alleged breach of contract under the agreement to build a gas processing plant in Ust Luga,Russia entered intobetween a consortium of Linde Engineering and Renaissance Heavy Industries LLC,and RCA on July 7,2021.Performance of the agreement waslawfully suspended by Linde Engineering on May 27,2022 in compliance with applicable sanctions and in accordance with a decision by the sanctionsauthority in Germany.On March 1,2023,RCA filed a claim in St.Petersburg against Linde GmbH for recovery of advance payments under theagreement(Russian Claim).On March 4,2023,in accordance with the dispute resolution provisions of the agreement,Linde GmbH filed a notice ofarbitration with the Hong Kong International Arbitration Centre(HKIAC)against RCA to claim that(i)RCA has no entitlement to payment,(ii)RCAs Russian claim is in breach of the arbitration agreement,and(iii)RCA must compensate Linde for the losses and damages caused by theinjunction.Additionally,Linde GmbH filed for and on March 17,2023 obtained an anti-suit injunction from a Hong Kong court against RCA directingRCA to seek a stay of the Russian Claim and ordering it to resolve any disputes in accordance with HKIAC arbitration.As of March 31,2023,Linde had approximately$1.2 billion of advance payments recorded in contract liabilities related to engineering projects withRCA which are subject to sanctions and have been suspended accordingly as of May 27,2022.Contract liabilities are typically recognized as revenueas performance obligations are satisfied under contract terms.Linde deconsolidated its Russian gas and engineering business entities as of June 30,2022,and the remaining investment value of its Russia subsidiaries is immaterial.As such,the obligation to satisfy any residual contract liabilities isnot expected to have an adverse impact on earnings,but may result in net cash outflows.It is difficult to estimate the timing of resolution of this matter.The company intends to vigorously defend its interests in both the injunction andarbitration proceedings.16 Table of Contents 10.SegmentsFor a description of Linde plcs operating segments,refer to Note 18 to the consolidated financial statements on Linde plcs 2022 Annual Report on Form 10-K.The table below presents sales and operating profit information about reportable segments and Other for the three months ended March 31,2023 and 2022.Quarter Ended March 31,(Millions of dollars)20232022SALESAmericas$3,551$3,241 EMEA2,177 2,148 APAC1,598 1,602 Engineering540 728 Other327 492 Total sales$8,193$8,211 Quarter Ended March 31,(Millions of dollars)20232022SEGMENT OPERATING PROFITAmericas$1,025$904 EMEA607 503 APAC423 399 Engineering149 143 Other2(44)Segment operating profit2,206 1,905 Other charges(Note 2)(18)4 Purchase accounting impacts-Linde AG(255)(429)Total operating profit$1,933$1,480(a)Sales reflect external sales only.Intersegment sales,primarily from Engineering to the industrial gases segments,were$294 million for the three months ended March 31,2023 and$231 millionfor the respective 2022 period.11.EquityEquityOn March 1,2023,in connection with the shareholder approved intercompany reorganization that resulted in the delisting of old Linde plc from the New YorkStock Exchange(NYSE)and the Frankfurt Stock Exchange(FSE),and the subsequent relisting of new Linde plc to the NYSE,Linde shareholdersautomatically received one share of the new holding company,listed on the NYSE in exchange for each share of Linde plc that was previously owned.Thecompany issued 490,766,972 new Linde shares.Linde plcs historical treasury shares were immediately canceled which resulted in an approximately$15 billion decrease in treasury shares and retained earnings in Shareholders Equity for the period ended March 31,2023.A summary of the changes in total equity for the three months ended March 31,2023 and 2022 is provided below:(a)17 Table of Contents Quarter Ended March 31,(Millions of dollars)20232022ActivityLinde plcShareholdersEquityNoncontrollingInterestsTotalEquityLinde plcShareholdersEquityNoncontrollingInterestsTotalEquityBalance,beginning of period$40,028$1,346$41,374$44,035$1,393$45,428 Net income(a)1,516 36 1,552 1,174 36 1,210 Other comprehensive income(loss)(28)(2)(30)110(12)98 Noncontrolling interests:Additions(reductions)2 2 4 4 Dividends and other capital changes(29)(29)(7)(7)Dividends to Linde plc ordinary share holders($1.275 per share in 2023 and$1.17 per share in2022)(623)(623)(592)(592)Issuances of ordinary shares:For employee savings and incentiveplans(63)(63)(46)(46)Purchases of ordinary shares(890)(890)(1,752)(1,752)Share-based compensation30 30 34 34 Balance,end of period$39,970$1,353$41,323$42,963$1,414$44,377(a)Net income for noncontrolling interests excludes net income related to redeemable noncontrolling interests which is not significant for the three months ended March 31,2023 and 2022 and whichis not part of total equity.The components of Accumulated other comprehensive income(loss)are as follows:March 31,December 31,(Millions of dollars)20232022Cumulative translation adjustment-net of taxes:Americas$(3,754)$(3,942)EMEA(1,016)(1,249)APAC(881)(835)Engineering(190)(241)Other288 483(5,553)(5,784)Derivatives-net of taxes(3)62 Pension/OPEB(net of$9 million tax benefit and$54 million tax obligation at March 31,2023 and December 31,2022,respectively)(254)(60)$(5,810)$(5,782)18 Table of Contents 12.Revenue RecognitionRevenue is accounted for in accordance with ASC 606.Revenue is recognized as control of goods or services are transferred to customers in an amount thatreflects the consideration to which an entity expects to be entitled to receive in exchange for the goods or services.Contracts with CustomersLinde serves a diverse group of industries including healthcare,chemicals and energy,manufacturing,metals and mining,food and beverage,and electronics.Industrial GasesWithin each of the companys geographic segments for industrial gases,there are three basic distribution methods:(i)on-site or tonnage;(ii)merchant or bulkliquid;and(iii)packaged or cylinder gases.The distribution method used by Linde to supply a customer is determined by many factors,including thecustomers volume requirements and location.The distribution method generally determines the contract terms with the customer and,accordingly,the revenuerecognition accounting practices.Lindes primary products in its industrial gases business are atmospheric gases(oxygen,nitrogen,argon,rare gases)andprocess gases(carbon dioxide,helium,hydrogen,electronic gases,specialty gases,acetylene).These products are generally sold through one of the threedistribution methods.Following is a description of each of the three industrial gases distribution methods and the respective revenue recognition policies:On-site.Customers that require the largest volumes of product and that have a relatively constant demand pattern are supplied by cryogenic and process gas on-site plants.Linde constructs plants on or adjacent to these customers sites and supplies the product directly to customers by pipeline.Where there are largeconcentrations of customers,a single pipeline may be connected to several plants and customers.On-site product supply contracts generally are totalrequirement contracts with terms typically ranging from 10-20 years and contain minimum purchase requirements and price escalation provisions.Many of thecryogenic on-site plants also produce liquid products for the merchant market.Therefore,plants are typically not dedicated to a single customer.Additionally,Linde is responsible for the design,construction,operations and maintenance of the plants and our customers typically have no involvement in these activities.Advanced air separation processes also allow on-site delivery to customers with smaller volume requirements.The companys performance obligations related to on-site customers are satisfied over time as customers receive and obtain control of the product.Linde haselected to apply the practical expedient for measuring progress towards the completion of a performance obligation and recognizes revenue as the company hasthe right to invoice each customer,which generally corresponds with product delivery.Accordingly,revenue is recognized when product is delivered to thecustomer and the company has the right to invoice the customer in accordance with the contract terms.Consideration in these contracts is generally based onpricing which fluctuates with various price indices.Variable components of consideration exist within on-site contracts but are considered constrained.Merchant.Merchant deliveries generally are made from Lindes plants by tanker trucks to storage containers at the customers site.Due to the relatively highdistribution cost,merchant oxygen and nitrogen generally have a relatively small distribution radius from the plants at which they are produced.Merchantargon,hydrogen and helium can be shipped much longer distances.The customer agreements used in the merchant business are usually three-to seven-yearsupply agreements based on the requirements of the customer.These contracts generally do not contain minimum purchase requirements or volumecommitments.The companys performance obligations related to merchant customers are generally satisfied at a point in time as the customers receive and obtain control ofthe product.Revenue is recognized when product is delivered to the customer and the company has the right to invoice the customer in accordance with thecontract terms.Any variable components of consideration within merchant contracts are constrained;however,this consideration is not significant.Packaged Gases.Customers requiring small volumes are supplied products in containers called cylinders,under medium to high pressure.Linde distributesmerchant gases from its production plants to company-owned cylinder filling plants where cylinders are then filled for distribution to customers.Cylinders maybe delivered to the customers site or picked up by the customer at a packaging facility or retail store.Linde invoices the customer for the industrial gases andthe use of the cylinder container(s).The company also sells hardgoods and welding equipment purchased from independent manufacturers.Packaged gases aregenerally sold under one to three-year supply contracts and purchase orders and do not contain minimum purchase requirements or volume commitments.The companys performance obligations related to packaged gases are satisfied at a point in time.Accordingly,revenue is recognized when product is deliveredto the customer or when the customer picks up product from a packaged gas facility or19 Table of Contents retail store and the company has the right to payment from the customer in accordance with the contract terms.Any variable consideration is constrained andwill be recognized when the uncertainty related to the consideration is resolved.EngineeringThe company designs and manufactures equipment for air separation and other industrial gas applications manufactured specifically for end customers.Sale ofequipment contracts are generally comprised of a single performance obligation.Revenue from sale of equipment is generally recognized over time as Lindehas an enforceable right to payment for performance completed to date and performance does not create an asset with alternative use.For contracts recognizedover time,revenue is recognized primarily using a cost incurred input method.Costs incurred to date relative to total estimated costs at completion are used tomeasure progress toward satisfying performance obligations.Costs incurred include material,labor,and overhead costs and represent work contributing andproportionate to the transfer of control to the customer.Changes to cost estimates and contract modifications are typically accounted for as part of the existingcontract and are recognized as cumulative adjustments for the inception-to-date effect of such change.Contract Assets and LiabilitiesContract assets and liabilities result from differences in timing of revenue recognition and customer invoicing.Contract assets primarily relate to sale ofequipment contracts for which revenue is recognized over time.The balance represents unbilled revenue which occurs when revenue recognized under themeasure of progress exceeds amounts invoiced to customers.Customer invoices may be based on the passage of time,the achievement of certain contractualmilestones or a combination of both criteria.Contract liabilities include advance payments or right to consideration prior to performance under the contract.Contract liabilities are recognized as revenue as performance obligations are satisfied under contract terms.Linde has contract assets of$175 million and$124million at March 31,2023 and December 31,2022,respectively.Total contract liabilities are$3,997 million at March 31,2023(current of$3,070 million and$927 million within other long-term liabilities in the condensed consolidated balance sheets).As of March 31,2023,Linde has approximately$1.8 billionrecorded in contract liabilities related to engineering projects in Russia subject to sanctions.Total contract liabilities were$3,986 million at December 31,2022(current contract liabilities of$3,073 million and$913 million within other long-term liabilities in the condensed consolidated balance sheets).Revenuerecognized for the three months ended March 31,2023 that was included in the contract liability at December 31,2022 was$403 million.Contract assets andliabilities primarily relate to the Linde Engineering business.Payment Terms and OtherLinde generally receives payment after performance obligations are satisfied,and customer prepayments are not typical for the industrial gases business.Payment terms vary based on the country where sales originate and local customary payment practices.Linde does not offer extended financing outside ofcustomary payment terms.Amounts billed for sales and use taxes,value-added taxes,and certain excise and other specific transactional taxes imposed onrevenue producing transactions are presented on a net basis and are not included in sales within the consolidated statement of income.Additionally,salesreturns and allowances are not a normal practice in the industry and are not significant.Disaggregated Revenue InformationAs described above and in Note 19 to Linde plcs 2022 Annual Report on Form 10-K,the company manages its industrial gases business on a geographic basis,while the Engineering and Other businesses are generally managed on a global basis.Furthermore,the company believes that reporting sales by distributionmethod by reportable geographic segment best illustrates the nature,timing,type of customer,and contract terms for its revenues,including terms and pricing.The following tables show sales by distribution method at the consolidated level and for each reportable segment and Other for the three months ended March31,2023 and March 31,2022.(Millions of dollars)Quarter Ended March 31,2023SalesAmericasEMEAAPACEngineeringOtherTotal%Merchant$1,043$699$551$55$2,348 29%On-Site804 538 643 1,985 24%Packaged Gas1,638 928 354 20 2,940 36%Other66 12 50 540 252 920 11%Total$3,551$2,177$1,598$540$327$8,193 100 Table of Contents (Millions of dollars)Quarter Ended March 31,2022SalesAmericasEMEAAPACEngineeringOtherTotal%Merchant$874$614$516$39$2,043 25%On-Site883 631 655 2,169 26%Packaged Gas1,432 891 361 7 2,691 33%Other52 12 70 728 446 1,308 16%Total$3,241$2,148$1,602$728$492$8,211 100%Remaining Performance ObligationsAs described above,Lindes contracts with on-site customers are under long-term supply arrangements which generally require the customer to purchase theirrequirements from Linde and also have minimum purchase requirements.Additionally,plant sales from the Linde Engineering business are primarilycontracted on a fixed price basis.The company estimates the consideration related to future minimum purchase requirements and plant sales was approximately$48 billion(excludes Russian projects which are impacted by sanctions).This amount excludes all on-site sales above minimum purchase requirements,whichcan be significant depending on customer needs.In the future,actual amounts will be different due to impacts from several factors,many of which are beyondthe companys control including,but not limited to,timing of newly signed,terminated and renewed contracts,inflationary price escalations,currencyexchange rates,and pass-through costs related to natural gas and electricity.The actual duration of long-term supply contracts ranges up to twenty years.Thecompany estimates that approximately half of the revenue related to minimum purchase requirements will be earned in the next five years and the remainingthereafter.13.Business AcquisitionAcquisition of nexAir,LLCOn January 5,2023,Linde completed the acquisition of nexAir,LLC,a gas distribution and welding supply company in the United States,in order to furtherexpand the companys geographic footprint into different regions.Prior to completion of the acquisition,Linde held a 23%interest in nexAir,LLC.Pursuant toa signed purchase agreement between Linde and nexAir,LLC,Linde purchased the remaining 77%ownership interest in an all cash transaction with a totalpurchase price of$859 million,or$804 million net of cash acquired.The fair value of Lindes equity interest in nexAir,LLC immediately preceding theacquisition date was$183 million,which resulted in a gain on remeasurement of the companys previously held equity interest which was not material;thisgain is recorded within“Other income(expenses)net”on the consolidated statements of income.Preliminary Allocation of Purchase PriceThe acquisition of nexAir,LLC was accounted for as a business combination.Following the acquisition date,100%of nexAir,LLCs results were consolidatedin the Americas business segment.Lindes first quarter 2023 consolidated income statement includes sales of$103 million related to nexAir,LLC.Pro formaresults for 2022 have not been included as the impact of the acquisition is not material to the consolidated statements of income.The company has estimated the preliminary fair value of net assets acquired based on information currently available and will continue to adjust thoseestimates as additional information becomes available.The following table summarizes the fair value of identifiable assets acquired and liabilities assumed inthe acquisition of nexAir,LLC as of the acquisition date.21 Table of Contents (Millions of dollars)January 5,2023Assets:Cash and cash equivalents$55 Other current assets-net48Property,plant and equipment,net241Other intangible assets-net245Other long-term liabilities-net(5)Total identifiable net assets$584 Goodwill$458 Fair value of previously held equity interest$183 Total purchase price$859 nexAir,LLCs assets and liabilities were measured at estimated fair values at January 5,2023.Estimates of fair value represent managements best estimate ofassumptions about future events and uncertainties,including significant judgments related to future cash flows(sales,costs,customer attrition rates,andcontributory asset charges),discount rates,competitive trends,and market comparables.Inputs used were generally obtained from historical data supplementedby current and anticipated market conditions and growth rates.The fair value of the previously held equity interest was based upon a purchase price valuation(excluding debt)multiplied by the companys previously heldownership interest adjusted by a discount for lack of marketability.The fair value of property,plant&equipment,net is based on assumptions that marketparticipants would use in pricing an asset,based on the most advantageous market for the asset(i.e.,its highest and best use).The cost approach,adjusted forthe age and condition of the property,plant and equipment,was used to estimate fair value.Identifiable intangible assets primarily consist of customer relationships of approximately$245 million that will be amortized over their estimated useful life of20 years.The fair value of the customer relationships intangible asset was valued using a multi-period excess earnings method,a form of the income approach,which incorporates the estimated future cash flows to be generated from nexAir,LLCs existing customer base.There were no indefinite-lived intangible assetsidentified in conjunction with the acquisition.The excess of the consideration for the acquisition over the preliminary fair value of net assets acquired was recorded as goodwill.The acquisition resulted in$458 million of goodwill,the majority of which is expected to be deductible for tax purposes.The goodwill balance is primarily attributable to the assembledworkforce and operating synergies expected to result from the acquisition.The goodwill recorded as a result of the acquisition was allocated to the Americasreportable segment,which represents the reportable segment anticipated to experience operating synergies as a result of the acquisition.22 Table of Contents Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations(MD&A)Non-GAAP MeasuresThroughout MD&A,the company provides adjusted operating results exclusive of certain items such as Other charges,net gains or losses on sale ofbusinesses,purchase accounting impacts of the Linde AG merger and pension settlement charges.Adjusted amounts are non-GAAP measures which areintended to supplement investors understanding of the companys financial information by providing measures which investors,financial analysts andmanagement find useful in evaluating the companys operating performance.Items which the company does not believe to be indicative of on-going businessperformance are excluded from these calculations so that investors can better evaluate and analyze historical and future business trends on a consistent basis.Inaddition,operating results,excluding these items,is important to managements development of annual and long-term employee incentive compensation plans.Definitions of these non-GAAP measures may not be comparable to similar definitions used by other companies and are not a substitute for similar GAAPmeasures.The non-GAAP measures and reconciliations are separately included in a later section in the MD&A titled Non-GAAP Measures and Reconciliations.23 Table of Contents Consolidated ResultsThe following table provides summary information for the three months ended March 31,2023 and 2022.The reported amounts are GAAP amounts from theConsolidated Statements of Income.The adjusted amounts are intended to supplement investors understanding of the companys financial information and arenot a substitute for GAAP measures:Quarter Ended March 31,(Millions of dollars,except per share data)20232022VarianceSales$8,193$8,211%Cost of sales,exclusive of depreciation and amortization$4,431$4,798(8)%As a percent of sales54.1X.4%Selling,general and administrative$822$802 2%As a percent of sales10.0%9.8preciation and amortization$948$1,112(15)%Other charges(b)$18$(4)(550)%Other income(expense)-net$(5)$12 142%Operating profit$1,933$1,480 31%Operating margin23.6.0%Interest expense-net$37$9 311%Net pension and OPEB cost(benefit),excluding service cost$(45)$(64)(30)fective tax rate22.2$.0%Income from equity investments$41$44(7)%Noncontrolling interests$(36)$(36)%Net Income Linde plc$1,516$1,174 29%Diluted earnings per share$3.06$2.30 33%Diluted shares outstanding495,676 511,410(3)%Number of employees65,831 72,507(9)justed Amounts(a)Operating profit$2,206$1,905 16%Operating margin26.9#.2fective tax rate24.1$.3%Net Income Linde plc$1,693$1,500 13%Diluted earnings per share$3.42$2.93 17%Other Financial Data(a)EBITDA$2,922$2,636 11%As percent of sales35.72.1justed EBITDA$2,963$2,663 11%As percent of sales36.22.4%(a)Adjusted Amounts and Other Financial Data are non-GAAP performance measures.A reconciliation of reported amounts to adjusted amounts can be found in the Non-GAAP Measures andReconciliations section of this MD&A.(b)See Note 2 to the condensed consolidated financial statements.ReportedIn the first quarter of 2023,Lindes sales were$8,193 million,$18 million below prior year.Currency translation decreased sales by 3%in the quarter.Divestitures,net of acquisitions,decreased sales by 2%in the quarter,primarily due to the divestment of the GIST business,partially offset by the nexAir,LLCacquisition.Engineering decreased sales by 2%in the quarter.Cost pass-through,representing the contractual billing of energy cost variances primarily toonsite customers,decreased sales by 1%in the quarter,with minimal impact on operating profit.Volumes were flat in the quarter versus the 2022 respectiveperiod.The aforementioned drivers were offset by the 8%price attainment in the quarter.Reported operating profit for the first quarter of 2023 of$1,933 million,or 23.6%of sales,was 31ove prior year.The reported year-over-year increase wasprimarily due to higher pricing,productivity initiatives and lower depreciation and amortization driven by merger related intangible assets.The reportedeffective tax rate(ETR)was 22.2%in the first quarter 2023 versus 24.0%in the first quarter 2022 driven by a net decrease in the uncertain tax positions foraudit settlements,partially offset by additional accruals in non-U.S.jurisdictions.Diluted earnings per share(EPS)was$3.06,or 33ove EPS of$2.30 inthe first quarter of 2022 primarily due to higher net income-Linde plc and lower diluted shares outstanding.24 Table of Contents AdjustedIn the first quarter of 2023,adjusted operating profit of$2,206 million,or 26.9%of sales,was 16%higher as compared to 2022,driven by higher pricing andproductivity initiatives,partially offset by inflation.The adjusted ETR was 24.1%in the first quarter 2023 versus 24.3%in the 2022 quarter.On an adjustedbasis,EPS was$3.42,17ove the 2022 adjusted EPS of$2.93,driven by higher adjusted net income-Linde plc and lower diluted shares outstanding.OutlookLinde provides quarterly updates on operating results,material trends that may affect financial performance,and financial guidance via quarterly earningsreleases and investor teleconferences.These updates are available on the companys website,but are not incorporated herein.25 Table of Contents Results of operationsThe changes in consolidated sales compared to the prior year are attributable to the following:Quarter Ended March 31,2023 vs.2022%ChangeFactors Contributing to Changes-SalesVolume%Price/Mix8%Cost pass-through(1)%Currency(3)quisitions/divestitures(2)%Engineering(2)%SalesSales decreased$18 million for the first quarter of 2023 versus the respective 2022 period.Currency translation decreased sales by 3%in the quarter,driven bythe weakening of the Euro,Chinese yuan,British pound and Australian dollar against the U.S.dollar.The impact of divestitures,net of acquisitions decreasedsales by 2%in the quarter.Engineering decreased sales by 2%in the quarter.Cost pass-through decreased sales by 1%in the quarter,with minimal impact onoperating profit.Volumes were flat in the quarter versus the respective 2022 period.Higher pricing across all geographic segments contributed 8%to sales inthe quarter.Cost of sales,exclusive of depreciation and amortizationCost of sales,exclusive of depreciation and amortization decreased$367 million,or 8%,for the first quarter of 2023,primarily due to currency,lower costpass-through,the net impact of acquisitions and divestitures and productivity gains which more than offset inflation.Cost of sales,exclusive of depreciationand amortization was 54.1%for the first quarter of 2023 versus 58.4%for the respective 2022 period.The decrease as a percentage of sales for the first quarterof 2023 was due primarily to higher pricing.Selling,general and administrative expensesSelling,general and administrative expense(SG&A)increased$20 million,or 2%,for the first quarter of 2023.SG&A was 10.0%of first quarter salesversus 9.8%for the respective 2022 period.Currency impacts decreased SG&A by approximately$19 million for the quarter.Excluding currency impacts,underlying SG&A increased in the first quarter of 2023 primarily due to higher costs largely related to the acquisition of nexAir.Depreciation and amortizationReported depreciation and amortization expense decreased$164 million,or 15%,for the first quarter of 2023.The decrease is related primarily to lowerdepreciation and amortization of intangible assets acquired in the merger and currency impacts.On an adjusted basis,depreciation and amortization increased$4 million,for the first quarter of 2023.Currency impacts decreased depreciation andamortization by$21 million for the first quarter of 2023.Excluding currency,underlying depreciation and amortization increased due to the net impact ofacquisitions and new project start ups.Other chargesOther charges were a charge of$18 million and a benefit of$4 million for the first quarter of 2023 and 2022,respectively.The charge for the three monthsended March 31,2023 relates primarily to the intercompany reorganization.2022 benefit of$4 million includes severance of$4 million and an other netbenefit of$8 million related to a gain on sale of an interest in a joint venture(see Note 2 to the condensed consolidated financial statements).On an adjusted basis,these benefits and costs have been excluded in both periods.Operating profitOn a reported basis,operating profit increased$453 million,or 31%,for the first quarter of 2023.The increase was primarily due to higher pricing,savingsfrom productivity initiatives,and lower depreciation and amortization driven by merger related intangible assets.These increases more than offset the adverseimpacts of inflation and currency in the first quarter of 2023.On an adjusted basis,which excludes the impacts of merger-related purchase accounting as well as other charges,operating profit increased$301 million,or16%in the first quarter of 2023.Operating profit growth was driven by higher pricing and26 Table of Contents productivity initiatives,which more than offset the effects of inflation and currency during the periods.A discussion of operating profit by segment is includedin the segment discussion that follows.Interest expense-netReported interest expense-net increased$28 million for the first quarter of 2023.On an adjusted basis,interest expense increased$27 million for the firstquarter of 2023 versus the respective 2022 period.The increase in the quarter is driven primarily by higher borrowing costs on short-term debt.Net pension and OPEB cost(benefit),excluding service costReported net pension and OPEB cost(benefit),excluding service cost were benefits of$45 million for first quarter of 2023 versus$64 million for therespective 2022 period.The decrease in benefit primarily relates to higher interest cost reflective of the higher discount rate environment year-over-year.Effective tax rateThe reported effective tax rate(ETR)for the quarter was 22.2%versus 24.0%for the respective 2022 period.The decrease is primarily related to a netdecrease in uncertain tax positions for audit settlements partially offset by additional accruals in non-U.S.jurisdictions(see Note 2 to the condensedconsolidated financial statements).On an adjusted basis,the ETR for the quarter was 24.1%versus 24.3%for the respective 2022 period.Income from equity investmentsReported income from equity investments for the first quarter of 2023 was$41 million,versus$44 million for the respective 2022 period.On an adjusted basis,income from equity investments for the first quarter of 2023 was$59 million,versus$64 million in the prior year respective period.Noncontrolling interestsAt March 31,2023,noncontrolling interests consisted primarily of non-controlling shareholders investments in APAC(primarily China).Reportednoncontrolling interest was flat for the quarter ended March 31,2023 versus the respective 2022 period.Net Income Linde plcReported net income-Linde plc increased$342 million,or 29%,for the first quarter of 2023 versus the respective 2022 period.On an adjusted basis,whichexcludes the impacts of purchase accounting and other charges,net income-Linde plc increased$193 million,or 13%,for the quarter versus the respective2022 period.On both a reported and adjusted basis,the increase was driven by higher operating profit.Diluted earnings per shareReported diluted earnings per share increased$0.76,or 33%,for the first quarter of 2023 versus the comparable 2022 period.On an adjusted basis,diluted EPSincreased$0.49,or 17%,for the first quarter of 2023 versus the respective 2022 period.The increase on both a reported and adjusted basis is primarily due tohigher net income-Linde plc and lower diluted shares outstanding.EmployeesThe number of employees at March 31,2023 was 65,831,a decrease of 6,676 employees from March 31,2022,driven primarily by the sale of the GISTbusiness,cost reduction initiatives and the deconsolidation of Russian subsidiaries in the EMEA and Engineering segments.Other Financial DataEBITDA was$2,922 million for the first quarter of 2023 as compared to$2,636 million in the respective 2022 period.The increase of$286 million was drivenby higher net income-Linde plc versus prior year.Adjusted EBITDA increased to$2,963 million for the first quarter 2023 from$2,663 million in therespective 2022 period.The higher EBITDA was primarily due to higher net income-Linde plc versus the respective prior period.See the Non-GAAP Measures and Reconciliations section for definitions and reconciliations of these adjusted non-GAAP measures to reported GAAPamounts.Other Comprehensive Income(Loss)Other comprehensive loss for the first quarter of 2023 was$30 million,resulting primarily from$194 million associated with retirement programs and$65million relating to current unrealized loss on derivatives instruments,partially offset by favorable currency translation adjustments of$229 million during thequarter.The translation adjustments reflect the impact of translating local currency foreign subsidiary financial statements to U.S.dollars,and are largelydriven by the movement of the U.S.dollar against major currencies including the Euro,British pound and the Chinese yuan.See the Currency section of theMD&A for exchange rates used for translation purposes and Note 11 to the condensed consolidated financial statements for a summary of the currencytranslation adjustment component of accumulated other comprehensive income(loss)by segment.27 Table of Contents Segment DiscussionThe following summary of sales and operating profit by segment provides a basis for the discussion that follows.Linde plc evaluates the performance of itsreportable segments based on operating profit,excluding items not indicative of ongoing business trends.The reported amounts are GAAP amounts from theConsolidated Statements of Income.Quarter Ended March 31,(Millions of dollars)20232022VarianceSALESAmericas$3,551$3,241 10%EMEA2,177 2,148 1%APAC1,598 1,602%Engineering540 728(26)%Other327 492(34)%Total sales$8,193$8,211%SEGMENT OPERATING PROFITAmericas$1,025$904 13%EMEA607 503 21%APAC423 399 6%Engineering149 143 4%Other2(44)105%Segment operating profit$2,206$1,905 16%Reconciliation to reported operating profit:Other charges(Note 2)(18)4 Purchase accounting impacts-Linde AG(255)(429)Total operating profit$1,933$1,480 28 Table of Contents Americas Quarter Ended March 31,(Millions of dollars)20232022VarianceSales$3,551$3,241 10%Operating profit$1,025$904 13%As a percent of sales28.9.9%Quarter Ended March 31,2023 vs.2022%ChangeFactors Contributing to Changes-SalesVolume1%Price/Mix7%Cost pass-through(1)%Currencyquisitions/divestitures3%The Americas segment includes Lindes industrial gases operations in approximately 20 countries including the United States,Canada,Mexico,and Brazil.SalesSales for the Americas segment increased$310 million,or 10%,in the first quarter versus the respective 2022 period.Higher pricing contributed 7%to sales inthe quarter.Volumes increased sales by 1%for the first quarter,driven by higher demand primarily in the manufacturing and food and beverage end markets.Cost pass-through decreased sales by 1%for the first quarter with minimal impact on operating profit.The impact of net acquisitions increased sales by 3%inthe quarter,primarily due to the acquisition of nexAir,LLC(See Note 13 to the condensed consolidated financial statements).Operating profitOperating profit in the Americas segment increased$121 million,or 13%,in the first quarter versus the respective 2022 period,driven primarily by higherpricing,volumes,acquisitions and continued productivity initiatives which more than offset inflation during the quarter.EMEA Quarter Ended March 31,(Millions of dollars)20232022VarianceSales$2,177$2,148 1%Operating profit$607$503 21%As a percent of sales27.9#.4%Quarter Ended March 31,2023 vs.2022%ChangeFactors Contributing to Changes-SalesVolume(3)%Price/Mix13%Cost pass-through1%Currency(6)quisitions/divestitures(4)%1) Table of Contents The EMEA segment includes Lindes industrial gases operations in approximately 45 European,Middle Eastern and African countries including Germany,United Kingdom,France,the Republic of South Africa and Sweden.SalesEMEA segment sales increased by$29 million,or 1%,in the first quarter as compared to the respective 2022 period.Higher price attainment increased sales by13%in the quarter.Cost pass-through contributed 1%to sales in the quarter,with minimal impact on operating profit.Currency translation decreased sales by6%in the quarter,due largely to the weakening of the Euro and British pound against the U.S.Dollar.Volumes decreased sales by 3%in the quarter.Theimpact of net divestitures decreased sales by 4%in the quarter,primarily due to the deconsolidation of the Russian business in June 2022.Operating ProfitOperating profit for the EMEA segment increased by$104 million,or 21%,in the first quarter as compared to the respective 2022 period.The increase inoperating profit in the quarter was driven primarily by higher pricing and continued productivity initiatives,partially offset by currency translation,lowervolumes and divestitures.APAC Quarter Ended March 31,(Millions of dollars)20232022VarianceSales$1,598$1,602%Operating profit$423$399 6%As a percent of sales26.5$.9%Quarter Ended March 31,2023 vs.2022%ChangeFactors Contributing to Changes-SalesVolume/Equipment1%Price/Mix5%Cost pass-through%Currency(6)quisitions/divestitures%The APAC segment includes Lindes industrial gases operations in approximately 20 Asian and South Pacific countries and regions including China,Australia,India,and South Korea.SalesSales for the APAC segment decreased$4 million,for the first quarter versus the respective 2022 period.Higher pricing contributed 5%to sales in the quarter.Volumes increased 1%in the quarter including project start-ups in the electronics and chemicals and energy end markets.Currency translation decreased salesby 6%in quarter,driven primarily by the weakening of the Australian dollar,Indian rupee and Chinese yuan against the U.S.dollar.Cost pass-through was flatin the quarter versus the respective 2022 period.Operating profitOperating profit in the APAC segment increased$24 million,or 6%,in the first quarter versus the respective 2022 period,driven by higher volumes andpricing and continued productivity initiatives which more than offset the impact of currency and inflation during the quarter.30 Table of Contents Engineering Quarter Ended March 31,(Millions of dollars)20232022VarianceSales$540$728(26)%Operating profit$149$143 4%As a percent of sales27.6.6%Quarter Ended March 31,2023 vs.2022%ChangeFactors Contributing to Changes-SalesCurrency(4)%Other(22)%(26)%SalesEngineering segment sales decreased$188 million in the first quarter as compared to the respective 2022 period.The decrease was driven by project timing andnegative currency translation.Projects for Russia that were sanctioned and have been wound down represented$61 million of the Engineering segment sales during the first quarter of 2023.Operating profitEngineering segment operating profit increased,$6 million in the first quarter as compared to the respective 2022 period.The decline from lower sales wasmore than offset by higher margin on wind down of projects subject to sanctions in Russia.31 Table of Contents Other Quarter Ended March 31,(Millions of dollars)20232022VarianceSales$327$492(34)%Operating profit(loss)$2$(44)105%As a percent of sales0.6%(8.9)%Quarter Ended March 31,2023 vs.2022%ChangeFactors Contributing to Changes-SalesVolume/price6%Currency(1)quisitions/divestitures(39)%(34)%Other consists of corporate costs and a few smaller businesses including Surface Technologies and global helium wholesale,which individually do not meet thequantitative thresholds for separate presentation.SalesSales for Other decreased$165 million for the first quarter versus the respective 2022 period.The impact of net divestitures decreased sales by 39%in thequarter,primarily due to sale of GIST business in third quarter of 2022.Currency translation decreased sales by 1%in the quarter.Underlying sales increased6%in the quarter,driven primarily by price in the global helium business.Operating profitOperating profit in Other increased$46 million,or 105%in the first quarter versus the respective 2022 period,due primarily to higher pricing and lowercorporate costs in the quarter.32 Table of Contents CurrencyThe results of Lindes non-U.S.operations are translated to the companys reporting currency,the U.S.dollar,from the functional currencies.For mostoperations,Linde uses the local currency as its functional currency.There is inherent variability and unpredictability in the relationship of these functionalcurrencies to the U.S.dollar and such currency movements may materially impact Lindes results of operations in any given period.To help understand the reported results,the following is a summary of the significant currencies underlying Lindes consolidated results and the exchange ratesused to translate the financial statements(rates of exchange expressed in units of local currency per U.S.dollar):Percentage of YTD 2023Consolidated SalesExchange Rate forIncome StatementExchange Rate forBalance Sheet Year-To-Date AverageMarch 31,December 31,Currency2023202220232022Euro20%0.93 0.89 0.92 0.93 Chinese yuan8%6.84 6.35 6.87 6.90 British pound5%0.82 0.75 0.81 0.83 Australian dollar4%1.46 1.38 1.50 1.47 Brazilian real4%5.19 5.22 5.06 5.28 Canadian dollar3%1.35 1.27 1.35 1.36 Korean won3%1,275 1,203 1,302 1,266 Mexican peso3.66 20.50 18.05 19.50 Indian rupee2.24 75.21 82.18 82.73 South African rand1.74 15.23 17.80 17.04 Swedish krona1.45 9.34 10.40 10.43 Thailand bhat13.94 33.04 34.20 34.61 33 Table of Contents Liquidity,Capital Resources and Other Financial DataThe following selected cash flow information provides a basis for the discussion that follows:(Millions of dollars)Three months ended March 31,20232022NET CASH PROVIDED BY(USED FOR):OPERATING ACTIVITIESNet income(including noncontrolling interests)$1,552$1,210 Non-cash charges(credits):Add:Depreciation and amortization948 1,112 Add:Deferred income taxes4(59)Add:Share-based compensation30 34 Add:Other charges,net of payments(a)(61)(34)Net income adjusted for non-cash charges2,473 2,263 Less:Working capital(325)(239)Less:Pension contributions(10)(13)Other(230)(11)Net cash provided by(used for)operating activities$1,908$2,000 INVESTING ACTIVITIESCapital expenditures(829)(649)Acquisitions,net of cash acquired(808)(43)Divestitures,net of cash divested and asset sales3 27 Net cash provided by(used for)investing activities$(1,634)$(665)FINANCING ACTIVITIESDebt increase(decrease)-net717 2,546 Issuances(purchases)of common stock-net(846)(1,709)Cash dividends-Linde plc shareholders(623)(592)Noncontrolling interest transactions and other(12)(1)Net cash provided by(used for)financing activities$(764)$244 Effect of exchange rate changes on cash and cash equivalents$16$62 Cash and cash equivalents,end-of-period$4,962$4,464(a)See Note 2 to the condensed consolidated financial statements.Cash Flow from OperationsCash provided by operations of$1,908 million for the three months ended March 31,2023 decreased$92 million,or 5%,versus 2022.The decrease was drivenprimarily by higher working capital requirements,including lower inflows from contract liabilities from engineering customer advanced payments.Othercharges were a charge of$18 million and a benefit of$4 million,for the three months ended March 31,2023 and 2022,respectively.Related cash outflowswere$79 million and$30 million for the same respective periods.Linde estimates that total 2023 required contributions to its pension plans will be in the range of approximately$40 million to$50 million,of which$10million has been made through March 31,2023.As of March 31,2023,Linde has approximately$1.8 billion recorded in contract liabilities within the condensed consolidated balance sheet related toengineering projects in Russia.Any obligation to satisfy the related residual contract liabilities may have an adverse effect on Lindes cash flows.34 Table of Contents InvestingNet cash used for investing of$1,634 million for the three months ended March 31,2023 increased$969 million versus 2022,due to higher acquisitions,net ofcash acquired and higher capital expenditures.Capital expenditures for the three months ended March 31,2023 were$829 million,$180 million higher than the prior year due primarily to investments innew plant and production equipment for operating and growth requirements.At March 31,2023,Lindes sale of gas backlog of large projects under construction was approximately$4.2 billion.This represents the total estimated capitalcost of large plants under construction.Acquisitions,net of cash acquired for the three months ended March 31,2023 and 2022 were$808 million and$43 million,respectively,and related primarilyto the acquisition of nexAir in the Americas(see Note 13 to the condensed consolidated financial statements).Divestitures,net of cash divested and asset sales for the three months ended March 31,2023 and 2022 were$3 million and$27 million,respectively.FinancingCash used for financing activities was$764 million for the three months ended March 31,2023 as compared to cash provided by financing activities of$244million for the three months ended March 31,2022.Cash provided by debt was$717 million versus$2,546 million in 2022 driven primarily by lowercommercial paper borrowings and lower net debt issuances in 2023.In February 2023,Linde repaid$500 million of 2.70%notes that became due.Net purchases of ordinary shares were$846 million in 2023 versus$1,709 million in 2022.On February 28,2022,the companys Board of Directors approvedthe additional repurchase of$10.0 billion of its ordinary shares.For additional information related to the share repurchase programs,see Part II Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.Cash dividends of$623 million increased$31 million from 2022 driven primarily by a 9%increase in quarterly dividends per share from$1.17 per share to$1.275 per share,partially offset by lower shares outstanding.Cash used for Noncontrolling interest transactions and other was$12 million for the threemonths ended March 31,2023 versus cash used of$1 million for the respective 2022 period.The company continues to believe it has sufficient operating flexibility,cash,and funding sources to meet its business needs around the world.The companyhad$5.0 billion of cash as of March 31,2023,and has a$5 billion and a$1.5 billion unsecured and undrawn revolving credit agreement with no associatedfinancial covenants.No borrowings were outstanding under the credit agreement as of March 31,2023.The company does not anticipate any limitations on itsability to access the debt capital markets and/or other external funding sources and remains committed to its strong ratings from Moodys and Standard&Poors.Legal ProceedingsSee Note 9 to the condensed consolidated financial statements.35 Table of Contents NON-GAAP MEASURES AND RECONCILIATIONS(Millions of dollars,except per share data)(UNAUDITED)The following non-GAAP measures are intended to supplement investors understanding of the companys financial information by providing measures whichinvestors,financial analysts and management use to help evaluate the companys operating performance and liquidity.Items which the company does notbelieve to be indicative of on-going business trends are excluded from these calculations so that investors can better evaluate and analyze historical and futurebusiness trends on a consistent basis.Definitions of these non-GAAP measures may not be comparable to similar definitions used by other companies and arenot a substitute for similar GAAP measures.Quarter Ended March 31,20232022Adjusted Operating Profit and Operating MarginReported operating profit1,933$1,480 Add:Other charges18(4)Add:Purchase accounting impacts-Linde AG(c)255 429 Total adjustments273 425 Adjusted operating profit$2,206$1,905 Reported percentage change31justed percentage change16%Reported sales$8,193$8,211 Reported operating margin23.6.0justed operating margin26.9#.2justed Depreciation and amortizationReported depreciation and amortization$948$1,112 Less:Purchase accounting impacts-Linde AG(c)(250)(418)Adjusted depreciation and amortization$698$694 Adjusted Other Income(Expense)-netReported Other Income(Expense)-net$(5)$12 Less:Purchase accounting impacts-Linde AG(c)(5)(11)Adjusted Other Income(Expense)-net$23 Adjusted Net Pension and OPEB Cost(Benefit),Excluding Service CostReported net pension and OPEB cost(benefit),excluding service cost$(45)$(64)Adjusted Net Pension and OPEB cost(benefit),excluding service costs$(45)$(64)Adjusted Interest Expense-NetReported interest expense-net$37$9 Add:Purchase accounting impacts-Linde AG(c)9 10 Adjusted interest expense-net$46$19 36 Table of Contents Adjusted Income Taxes(a)Reported income taxes$430$369 Add:Purchase accounting impacts-Linde AG(c)57 108 Add:Other charges45(3)Total adjustments102 105 Adjusted income taxes$532$474 Adjusted Effective Tax Rate(a)Reported income before income taxes and equity investments$1,941$1,535 Add:Purchase accounting impacts-Linde AG(c)246 419 Add:Other charges18(4)Total adjustments264 415 Adjusted income before income taxes and equity investments$2,205$1,950 Reported Income taxes$430$369 Reported effective tax rate22.2$.0justed income taxes$532$474 Adjusted effective tax rate24.1$.3%Income from Equity InvestmentsReported income from equity investments$41$44 Add:Purchase accounting impacts-Linde AG(c)18 20 Adjusted income from equity investments$59$64 Adjusted Noncontrolling InterestsReported noncontrolling interests$(36)$(36)Add:Purchase accounting impacts-Linde AG(c)(3)(4)Adjusted noncontrolling interests$(39)$(40)Adjusted Net Income-Linde plc(b)Reported net income-Linde plc$1,516$1,174 Add:Other charges(27)(1)Add:Purchase accounting impacts-Linde AG(c)204 327 Total adjustments177 326 Adjusted net income-Linde plc$1,693$1,500 37 Table of Contents Adjusted Diluted EPS(b)Reported diluted EPS$3.06$2.30 Add:Other charges(0.05)Add:Purchase accounting impacts-Linde AG(c)0.41 0.63 Total adjustments0.36 0.63 Adjusted diluted EPS$3.42$2.93 Reported percentage change33$justed percentage change17justed EBITDA and%of SalesNet Income-Linde plc$1,516$1,174 Add:Noncontrolling interests36 36 Add:Net pension and OPEB cost(benefit),excluding service cost(45)(64)Add:Interest expense37 9 Add:Income taxes430 369 Add:Depreciation and amortization948 1,112 EBITDA$2,922$2,636 Add:Other charges18(4)Add:Purchase accounting impacts-Linde AG(c)23 31 Total adjustments41 27 Adjusted EBITDA$2,963$2,663 Reported sales$8,193$8,211%of salesEBITDA35.72.1justed EBITDA36.22.4%(a)The income tax expense(benefit)on the non-GAAP pre-tax adjustments was determined using the applicable tax rates for the jurisdictions that were utilized in calculating the GAAP income taxexpense(benefit)and included both current and deferred income tax amounts.(b)Net of income taxes which are shown separately in“Adjusted Income Taxes and Adjusted Effective Tax Rate”.(c)The company believes that its non-GAAP measures excluding Purchase accounting impacts-Linde AG are useful to investors because:(i)the 2018 business combination was a merger of equalsin an all-stock merger transaction,with no cash consideration,(ii)the company is managed on a geographic basis and the results of certain geographies are more heavily impacted by purchaseaccounting than others,causing results that are not comparable at the reportable segment level,therefore,the impacts of purchase accounting adjustments to each segment vary and are notcomparable within the company and when compared to other companies in similar regions,(iii)business management is evaluated and variable compensation is determined based on resultsexcluding purchase accounting impacts,and;(iv)it is important to investors and analysts to understand the purchase accounting impacts to the financial statements.A summary of each of the adjustments made for Purchase accounting impacts-Linde AG are as follows:Adjusted Operating Profit and Margin:The purchase accounting adjustments for the periods presented relate primarily to depreciation and amortization related to the fair value step up of fixed assetsand intangible assets(primarily customer related)acquired in the merger and the allocation of fair value step-up for ongoing Linde AG asset disposals(reflected in Other Income/(Expense).Adjusted Interest Expense-Net:Relates to the amortization of the fair value of debt acquired in the merger.Adjusted Income Taxes and Effective Tax Rate:Relates to the current and deferred income tax impact on the adjustments discussed above.The income tax expense(benefit)on the non-GAAP pre-taxadjustments was determined using the applicable tax rates for the jurisdictions that were utilized in calculating the GAAP income tax expense(benefit)and included both current and deferred incometax amounts.Adjusted Income from Equity Investments:Represents the amortization of increased fair value on equity investments related to depreciable and amortizable assets.Adjusted Noncontrolling Interests:Represents the noncontrolling interests ownership portion of the adjustments described above determined on an entity by entity basis.38 Table of Contents Net Debt and Adjusted Net DebtNet debt is a financial liquidity measure used by investors,financial analysts and management to evaluate the ability of a company to repay its debt.Purchaseaccounting impacts have been excluded as they are non-cash and do not have an impact on liquidity.March 31,2023December 31,2022(Millions of dollars)Debt$18,777$17,914 Less:cash and cash equivalents(4,962)(5,436)Net debt13,815 12,478 Less:purchase accounting impacts-Linde AG(13)(22)Adjusted net debt$13,802$12,456 39 Table of Contents Supplemental Guarantee InformationOn June 6,2020,the company filed a Form S-3 Registration Statement with the SEC(the Registration Statement).Linde plc may offer debt securities,preferred shares,depositary shares and ordinary shares under the Registration Statement,and debt securities exchangeablefor or convertible into preferred shares,ordinary shares or other debt securities.Debt securities of Linde plc may be guaranteed by Linde Inc and/or LindeGmbH.Linde plc may provide guarantees of debt securities offered by its wholly owned subsidiaries Linde Inc.or Linde Finance under the RegistrationStatement.Linde Inc.is a wholly owned subsidiary of Linde plc.Linde Inc.may offer debt securities under the Registration Statement.Debt securities of Linde Inc.willbe guaranteed by Linde plc,and such guarantees by Linde plc may be guaranteed by Linde GmbH.Linde Inc.may also provide(i)guarantees of debt securitiesoffered by Linde plc under the Registration Statement and(ii)guarantees of the guarantees provided by Linde plc of debt securities of Linde Finance offeredunder the Registration Statement.Linde Finance B.V.is a wholly owned subsidiary of Linde plc.Linde Finance may offer debt securities under the Registration Statement.Linde plc willguarantee debt securities of Linde Finance offered under the Registration Statement.Linde GmbH and Linde Inc.may guarantee Linde plcs obligations underits downstream guarantee.Linde GmbH is a wholly owned subsidiary of Linde plc.Linde GmbH may provide(i)guarantees of debt securities offered by Linde plc under the RegistrationStatement and(ii)upstream guarantees of downstream guarantees provided by Linde plc of debt securities of Linde Inc.or Linde Finance offered under theRegistration Statement.In September 2019,Linde plc provided downstream guarantees of all of the pre-business combination Linde Inc.and Linde Finance notes,and Linde GmbHand Linde Inc.,respectively,provided upstream guarantees of Linde plcs downstream guarantees.For further information about the guarantees of the debt securities registered under the Registration Statement(including the ranking of such guarantees,limitations on enforceability of such guarantees and the circumstances under which such guarantees may be released),see“Description of Debt Securities Guarantees”and“Description of Debt Securities Ranking”in the Registration Statement,which subsections are incorporated herein by reference.The following tables present summarized financial information for Linde plc,Linde Inc.,Linde GmbH and Linde Finance on a combined basis,aftereliminating intercompany transactions and balances between them and excluding investments in and equity in earnings from non-guarantor subsidiaries.40 Table of Contents (Millions of dollars)Statement of Income DataThree Months Ended March 31,2023Twelve Months Ended December 31,2022Sales$2,078$8,850 Operating profit398 1,337 Net income265 675 Transactions with non-guarantor subsidiaries548 2,241 Balance Sheet Data(at period end)Current assets(a)$5,918$11,478 Long-term assets(b)14,158 13,949 Current liabilities(c)13,032 11,767 Long-term liabilities(d)46,488 48,210(a)From current assets above,amount due from non-guarantorsubsidiaries$2,473$7,260(b)From long-term assets above,amount due from non-guarantor subsidiaries1,813 1,982(c)From current liabilities above,amount due to non-guarantorsubsidiaries1,397 1,334(d)From long-term liabilities above,amount due to non-guarantor subsidiaries32,174 33,268 Item 3.Quantitative and Qualitative Disclosures About Market RiskRefer to Item 7A.to Part II of Lindes 2022 Annual Report on Form 10-K for discussion.Item 4.Controls and Procedures(a)Based on an evaluation of the effectiveness of Lindes disclosure controls and procedures,which was made under the supervision and with theparticipation of management,including Lindes principal executive officer and principal financial officer,the principal executive officer and principalfinancial officer have each concluded that,as of the end of the quarterly period covered by this report,such disclosure controls and procedures areeffective in ensuring that information required to be disclosed by Linde in reports that it files under the Exchange Act of 1934 is recorded,processed,summarized and rep
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2023/7/23 17:42vz-20230331https:/ of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashingt.
2023-07-31
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FOR IMMEDIATE RELEASECardinal Health Reports First Quarter Fiscal 2023 ResultsRevenue increased 13%to$49.6 billionGAAP1 operating earnings were$137 million,GAAP diluted EPS were$0.40Non-GAAP operating earnings decreased 20%to$423 million due to a decline in Medical segment profit,partially offset by an increase in Pharmaceutical segment profit;non-GAAP diluted EPS decreased 7%to$1.20Company reaffirmed fiscal year 2023 non-GAAP EPS guidanceDUBLIN,Ohio,November 4,2022-Cardinal Health(NYSE:CAH)today reported first quarter fiscal year 2023 revenues of$49.6 billion,an increase of 13%from the first quarter of last year.First quarter GAAP operating earnings were$137 million,including a non-cash,pre-tax goodwill impairment charge of$154 million in the Medical segment.GAAP diluted earnings per share(EPS)were$0.40.Non-GAAP operating earnings decreased 20%to$423 million in the quarter due to a decline in Medical segment profit,primarily resulting from net inflationary impacts,partially offset by an increase in Pharmaceutical segment profit.Non-GAAP diluted earnings per share decreased 7%to$1.20,reflecting the change in non-GAAP operating earnings,partially offset by lower interest expense and a lower non-GAAP effective tax rate and share count.“Our performance in the first quarter demonstrated stable fundamentals in the Pharmaceutical segment and tangible progress in the Medical segment,”said Jason Hollar,CEO of Cardinal Health.“We are reaffirming our full year non-GAAP EPS guidance as we remain focused on our Medical Improvement Plan initiatives and building upon the growth of our Pharmaceutical business.Across the company,we are operating with urgency to drive our businesses forward and remain committed to creating shareholder value.Q1 FY23 summaryQ1 FY23Q1 FY22Y/YRevenue$49.6 billion$44.0 billion13%Operating earnings$137 million$415 million(67)%Non-GAAP operating earnings$423 million$527 million(20)%Net earnings attributable to Cardinal Health,Inc.$110 million$271 million(59)%Non-GAAP net earnings attributable to Cardinal Health,Inc.$328 million$372 million(12)fective Tax Rate2(0.7%)26.3%Non-GAAP Effective Tax Rate16.9$.2%Diluted EPS attributable to Cardinal Health,Inc.$0.40$0.94(57)%Non-GAAP diluted EPS attributable to Cardinal Health,Inc.$1.20$1.29(7)%Exhibit 99.1Segment resultsPharmaceutical segment Q1 FY23Q1 FY22Y/YRevenue$45.8 billion$39.8 billion15%Segment profit$431 million$406 million6%First-quarter revenue for the Pharmaceutical segment increased 15%to$45.8 billion,driven by branded pharmaceutical sales growth from existing and net new Pharmaceutical Distribution and Specialty customers.Pharmaceutical segment profit increased 6%to$431 million in the first quarter,driven by generics program performance and a higher contribution from brand and specialty products,partially offset by inflationary supply chain costs.Medical segment Q1 FY23Q1 FY22Y/YRevenue$3.8 billion$4.1 billion(9)%Segment profit$(8)million$123 millionN.M.First-quarter revenue for the Medical segment decreased 9%to$3.8 billion,driven by lower Products and Distribution sales,primarily due to PPE pricing and volumes.To a lesser extent,this also reflects the divestiture of the Cordis business,which was mostly offset by sales growth in at-Home Solutions.Medical segment loss of$8 million in the first quarter was primarily due to net inflationary impacts in Products and Distribution and a lower contribution from PPE.The first quarter loss reflects$20 million in total inventory charges related to the previously-announced simplification actions,including the sale of certain disposable gloves primarily utilized in non-healthcare industries.Fiscal year 2023 outlook1The company reaffirmed its fiscal year 2023 guidance range for non-GAAP diluted earnings per share attributable to Cardinal Health,Inc.of$5.05 to$5.40.This guidance includes an update to Medical segment profit outlook to flat to 20cline,from 10%growth to 10cline,which reflects the impact of the previously announced simplification actions.Additionally,the company updated expectations for its fiscal 2023 interest and other to$140 million to$160 million,from$140 million to$170 million;its non-GAAP effective tax rate to 23%to 24%,from 23%to 25%;and its diluted weighted average shares outstanding to 262 million to 264 million,from 262 million to 266 million.The company does not provide forward-looking guidance on a GAAP basis as certain financial information,the probable significance of which cannot be determined,is not available and cannot be reasonably estimated.See Use of Non-GAAP Measures following the attached schedules for additional explanation.Recent highlightsCardinal Health announced initiatives aimed at positioning the company for long-term success,building on Cardinal Healths previously announced growth plans.These initiatives have benefited from input received from Elliott Investment Management L.P and include(1)the appointment of four new independent directors to the Board of Directors(“Board”);(2)the formation of the Business Review Committee of the Board,to support a comprehensive review of the companys strategy,portfolio,capital-allocation framework and operations with the goal of maximizing Cardinal Healths potential for the benefit of all stakeholders;and(3)the companys plan to hold an Investor Day in the first half of calendar 2023 to share the conclusions of the Business Review Committees review and to provide additional guidance.Cardinal Health announced Debbie Weitzman became CEO of the companys Pharmaceutical Segment on September 19,2022,after serving in her prior role of President of Pharmaceutical Distribution.As part of the companys broader simplification efforts,Cardinal Health took actions to further streamline the Pharmaceutical Segment with efforts aimed to strengthen Pharmaceutical Distribution and Specialty,a key growth area,as well as bring together similar services under one team.Cardinal Health announced the exit of its non-healthcare disposable gloves portfolio on September 13,2022.The sale of this product portfolio is part of the companys ongoing simplification actions,which resulted in approximately$20 million in total inventory charges in the first quarter of fiscal year 2023.Cardinal HealthPage 2Cardinal Health was named to Seramounts 2022 Inclusion Index,an honor recognizing companies committed to advancing diversity,equity and inclusion(DE&I)in the workplace.Upcoming webcasted investor eventsEvercore ISI Healthcare Conference at 8:50 a.m.EST,November 30,2022J.P.Morgan Healthcare Conference,January 9-12,2023WebcastCardinal Health will host a webcast today at 8:30 a.m.EST to discuss first quarter results.To access the webcast and corresponding slide presentation,go to the Investor Relations page at .No access code is required.Presentation slides and a webcast replay will be available on the Investor Relations page for 12 months.About Cardinal Health Cardinal Health is a distributor of pharmaceuticals,a global manufacturer and distributor of medical and laboratory products,and a provider of performance and data solutions for health care facilities.With 50 years in business,operations in more than 30 countries and approximately 46,500 employees globally,Cardinal Health is essential to care.Information about Cardinal Health is available at .ContactsMedia:Erich Timmerman,Erich.T and 614.757.8231 Investors:Kevin Moran,Kevin.M and 614.757.79421 GAAP refers to U.S.generally accepted accounting principles.This news release includes GAAP financial measures as well as non-GAAP financial measures,which are financial measures not calculated in accordance with GAAP.See Use of Non-GAAP Measures following the attached schedules for definitions of the non-GAAP financial measures presented in this news release and see the attached schedules for reconciliations of the differences between the non-GAAP financial measures and their most directly comparable GAAP financial measures.2 During the first quarter of fiscal 2023 and 2022,the effective tax rate was(0.7)percent and 26.3 percent,respectively.The decrease in the effective tax rate reflects the impact of certain favorable discrete items.Cardinal Health uses its website as a channel of distribution for material company information.Important information,including news releases,financial information,earnings and analyst presentations,and information about upcoming presentations and events is routinely posted and accessible on the Investor Relations page at .In addition,the website allows investors and other interested persons to sign up automatically to receive email alerts when the company posts news releases,SEC filings and certain other information on its website.Cautions Concerning Forward-Looking Statements This release contains forward-looking statements addressing expectations,prospects,estimates and other matters that are dependent upon future events or developments.These statements may be identified by words such as expect,anticipate,intend,plan,believe,“will,should,could,would,project,continue,”likely,and similar expressions,and include statements reflecting future results or guidance,statements of outlook and various accruals and estimates.These matters are subject to risks and uncertainties that could cause actual results to differ materially from those projected,anticipated or implied.These risks and uncertainties include risks arising from ongoing inflationary pressures and supply chain constraints,including the risk that our plans to mitigate such effects may not be as successful as we anticipate and the possibility that costs to source certain personal protective or other equipment,increased costs for transportation,shipping,freight and commodities,reduced price or demand for certain products may result in additional inventory reserves or disruptions and may negatively impact our ability to meet our long-term guidance;the possibility that our Medical unit goodwill could be further impaired,due to the increase in global interest rates or possible unfavorable changes in the U.S.statutory tax rate;competitive pressures in Cardinal Healths various lines of business;the performance of our generics program,including the amount or rate of generic deflation and our ability to offset generic deflation and maintain other financial and strategic benefits through our generic sourcing venture with CVS Health;ongoing risks associated with the distribution of opioids,including the financial impact associated with the settlements with governmental authorities,the risk that challenges to our plans to take tax deductions for opioid-related losses could adversely impact our financial results;risks arising from the Department of Justice Cardinal HealthPage 3investigation which we believe concerns our anti-diversion program and risks associated with the injunctive relief requirements under the national settlement,including the risk that we may incur higher costs or operational challenges in the implementation and maintenance of the required changes;risks associated with the manufacture and sourcing of certain products,including risks related to our ability and the ability of third-party manufacturers to import or export certain products or component parts and to comply with applicable regulations;our ability to manage uncertainties associated with the pricing of branded pharmaceuticals;and risks associated with our cost savings initiatives or other business initiatives,such as the Medical Improvement Plan,including the possibility that they could fail to achieve the intended results.Cardinal Health is subject to additional risks and uncertainties described in Cardinal Healths Form 10-K,Form 10-Q and Form 8-K reports and exhibits to those reports.This release reflects managements views as of November 4,2022.Except to the extent required by applicable law,Cardinal Health undertakes no obligation to update or revise any forward-looking statement.Forward-looking statements are aspirational and not guarantees or promises that goals,targets or projections will be met,and no assurance can be given that any commitment,expectation,initiative or plan in this report can or will be achieved or completed.Cardinal Health provides definitions and reconciliations of non-GAAP financial measures and their most directly comparable GAAP financial measures at .Cardinal HealthPage 4Schedule 1Cardinal Health,Inc.and Subsidiaries Condensed Consolidated Statements of Earnings(Unaudited)First Quarter(in millions,except per common share amounts)20232022%ChangeRevenue$49,603$43,968 13%Cost of products sold 47,989 42,326 13%Gross margin 1,614 1,642 (2)%Operating expenses:Distribution,selling,general and administrative expenses 1,197 1,114 7%Restructuring and employee severance 29 18 Amortization and other acquisition-related costs 71 79 Impairments and(gain)/loss on disposal of assets,net 1 153 (2)Litigation(recoveries)/charges,net 27 18 Operating earnings 137 415 (67)%Other(income)/expense,net 2 (4)Interest expense,net 25 40 (38)%Loss on early extinguishment of debt 10 Earnings before income taxes 110 369 (70)%Provision for/(benefit from)income taxes 2(1)97 N.M.Net earnings 111 272 (59)%Less:Net earnings attributable to noncontrolling interests(1)(1)Net earnings attributable to Cardinal Health,Inc.$110$271 (59)rnings per common share attributable to Cardinal Health,Inc.:Basic$0.41$0.94 (56)%Diluted 0.40 0.94 (57)%Weighted-average number of common shares outstanding:Basic271287Diluted2732891 For the three months ended September 30,2022,impairments and(gain)/loss on disposals of assets,net includes a pre-tax goodwill impairment charge of$154 million related to the Medical segment.2 For fiscal 2023,the net tax benefit related to the goodwill impairment charge is$12 million and is included in the annual effective tax rate.As a result,the amount of tax benefit for the three months ended September 30,2022 increased approximately by an incremental$22 million and is expected to increase the provision for income taxes during the remainder of the fiscal year.Schedule 2Cardinal Health,Inc.and SubsidiariesCondensed Consolidated Balance Sheets(in millions)September 30,2022June 30,2022(Unaudited)AssetsCurrent assets:Cash and equivalents$3,492$4,717 Trade receivables,net 11,039 10,561 Inventories,net 15,891 15,636 Prepaid expenses and other 2,274 2,021 Total current assets 32,696 32,935 Property and equipment,net 2,339 2,361 Goodwill and other intangibles,net 7,367 7,629 Other assets 985 953 Total assets$43,387$43,878 Liabilities and Shareholders DeficitCurrent liabilities:Accounts payable$28,362$27,128 Current portion of long-term obligations and other short-term borrowings 578 580 Other accrued liabilities 2,619 2,842 Total current liabilities 31,559 30,550 Long-term obligations,less current portion 4,689 4,735 Deferred income taxes and other liabilities 8,919 9,299 Total shareholders deficit(1,780)(706)Total liabilities and shareholders deficit$43,387$43,878 Schedule 3Cardinal Health,Inc.and SubsidiariesCondensed Consolidated Statements of Cash Flows(Unaudited)First Quarter(in millions)20232022Cash flows from operating activities:Net earnings$111$272 Adjustments to reconcile net earnings to net cash provided by/(used in)operating activities:Depreciation and amortization 171 168 Impairments and(gain)/loss on disposal of assets,net 153 (2)Loss on early extinguishment of debt 10 Share-based compensation 23 24 Provision for bad debts 29 12 Change in operating assets and liabilities,net of effects from acquisitions and divestitures:Increase in trade receivables(508)(214)Increase in inventories(264)(129)Increase/(decrease)in accounts payable 1,234 (292)Other accrued liabilities and operating items,net(926)(495)Net cash provided by/(used in)operating activities 23 (646)Cash flows from investing activities:Proceeds from divestitures,net of cash sold 927 Additions to property and equipment(70)(67)Proceeds from disposal of property and equipment 2 Purchases of investments(3)(2)Proceeds from investments 1 4 Net cash provided by/(used in)investing activities(70)862 Cash flows from financing activities:Reduction of long-term obligations(7)(587)Net tax withholdings from share-based compensation(14)(28)Dividends on common shares(142)(149)Purchase of treasury shares(1,000)(500)Net cash used in financing activities(1,163)(1,264)Effect of exchange rates changes on cash and equivalents(15)(5)Cash reclassified from assets held for sale 109 Net decrease in cash and equivalents(1,225)(944)Cash and equivalents at beginning of period 4,717 3,407 Cash and equivalents at end of period$3,492$2,463 Schedule 4Cardinal Health,Inc.and SubsidiariesSegment InformationFirst Quarter(in millions)20232022(in millions)20232022PharmaceuticalMedicalRevenueRevenueAmount$45,828$39,822 Amount$3,778$4,149 Growth rate 15%Growth rate(9)%5%Segment profitSegment profitAmount$431$406 Amount$(8)$123 Growth rate 6%1%Growth rateN.M.(46)%Segment profit margin 0.94%1.02%Segment profit margin(0.21)%2.97%The sum of the components and certain computations may reflect rounding adjustments.Schedule 5Cardinal Health,Inc.and SubsidiariesGAAP/Non-GAAP Reconciliation1GrossOperatingEarningsProvision for/NetDilutedMarginSG&A2EarningsBefore(Benefit from)Earnings3EffectiveEPS3GrossGrowthGrowthOperatingGrowthIncomeIncomeNetGrowthTaxDilutedGrowth(in millions,except per common share amounts)MarginRateSG&A2RateEarningsRateTaxesTaxesEarnings3RateRateEPS3RateFirst Quarter 2023GAAP$1,614 (2)%$1,197 7%$137 (67)%$110$(1)$110 (59)%(0.7)%$0.40 (57)%Shareholder cooperation agreement costs (6)6 6 2 4 0.01 Restructuring and employee severance 29 29 7 22 0.08 Amortization and other acquisition-related costs 71 71 18 53 0.20 Impairments and(gain)/loss on disposal of assets,net 4 153 153 34 119 0.44 Litigation(recoveries)/charges,net 27 27 7 20 0.07 Non-GAAP$1,614 (2)%$1,191 7%$423 (20)%$396$67$328 (12).9%$1.20 (7)%First Quarter 2022GAAP$1,642 (4)%$1,114 (2)%$415 N.M.$369$97$271 N.M.26.3%$0.94 N.M.Restructuring and employee severance 18 18 4 14 0.04 Amortization and other acquisition-related costs 79 79 21 58 0.20 Impairments and(gain)/loss on disposal of assets,net (2)(2)(10)8 0.03 Litigation(recoveries)/charges,net 18 18 4 14 0.05 Loss on early extinguishment of debt 10 3 7 0.03 Non-GAAP$1,642 (4)%$1,114 1%$527 (15)%$491$119$372 (17)$.2%$1.29 (15)or more information on these measures,refer to the Use of Non-GAAP Measures and Definitions schedules.2Distribution,selling,general and administrative expenses.3Attributable to Cardinal Health,Inc.4 For the three months ended September 30,2022,impairments and(gain)/loss on disposals of assets,net includes a pre-tax goodwill impairment charge of$154 million related to the Medical segment.For fiscal 2023,the net tax benefit related to this impairment charge is$12 million and is included in the annual effective tax rate.As a result,the amount of tax benefit for the three months ended September 30,2022 increased approximately by an incremental$22 million and is expected to increase the provision for income taxes during the remainder of the fiscal year.The sum of the components and certain computations may reflect rounding adjustments.We generally apply varying tax rates depending on the items nature and tax jurisdiction where it is incurred.Schedule 6Cardinal Health,Inc.and SubsidiariesGAAP/Non-GAAP Reconciliation-GAAP Cash Flow to Non-GAAP Adjusted Free Cash FlowFirst Quarter(in millions)2023GAAP-Cash Flow CategoriesNet cash provided by operating activities$23 Net cash used in investing activities(70)Net cash used in financing activities(1,163)Effect of exchange rates changes on cash and equivalents(15)Net decrease in cash and equivalents$(1,225)Non-GAAP Adjusted Free Cash FlowNet cash provided by operating activities$23 Additions to property and equipment(70)Payments related to matters included in litigation(recoveries)/charges,net 389 Non-GAAP Adjusted Free Cash Flow$342 For more information on these measures,refer to the Use of Non-GAAP Measures and Definitions schedules.Cardinal Health,Inc.and SubsidiariesUse of Non-GAAP MeasuresThis earnings release contains financial measures that are not calculated in accordance with U.S.generally accepted accounting principles(“GAAP).In addition to analyzing our business based on financial information prepared in accordance with GAAP,we use these non-GAAP financial measures internally to evaluate our performance,engage in financial and operational planning,and determine incentive compensation because we believe that these measures provide additional perspective on and,in some circumstances are more closely correlated to,the performance of our underlying,ongoing business.We provide these non-GAAP financial measures to investors as supplemental metrics to assist readers in assessing the effects of items and events on our financial and operating results on a year-over-year basis and in comparing our performance to that of our competitors.However,the non-GAAP financial measures that we use may be calculated differently from,and therefore may not be comparable to,similarly titled measures used by other companies.The non-GAAP financial measures disclosed by us should not be considered a substitute for,or superior to,financial measures calculated in accordance with GAAP,and the financial results calculated in accordance with GAAP and reconciliations to those financial statements set forth below should be carefully evaluated.Exclusions from Non-GAAP Financial MeasuresManagement believes it is useful to exclude the following items from the non-GAAP measures presented in this report for its own and for investors assessment of the business for the reasons identified below:LIFO charges and credits are excluded because the factors that drive last-in first-out(LIFO)inventory charges or credits,such as pharmaceutical manufacturer price appreciation or deflation and year-end inventory levels(which can be meaningfully influenced by customer buying behavior immediately preceding our fiscal year-end),are largely out of our control and cannot be accurately predicted.The exclusion of LIFO charges and credits from non-GAAP metrics facilitates comparison of our current financial results to our historical financial results and to our peer group companies financial results.We did not recognize any LIFO charges or credits during the periods presented.Surgical gown recall costs or income includes inventory write-offs and certain remediation and supply disruption costs,net of related insurance recoveries,arising from the January 2020 recall of select Association for the Advancement of Medical Instrumentation(AAMI)Level 3 surgical gowns and voluntary field actions(a recall of some packs and a corrective action allowing overlabeling of other packs)for Presource Procedure Packs containing affected gowns.Income from surgical gown recall costs represents insurance recoveries of these certain costs.We have excluded these costs from our non-GAAP metrics to allow investors to better understand the underlying operating results of the business and to facilitate comparison of our current financial results to our historical financial results and to our peer group companies financial results.Shareholder cooperation agreement costs includes costs such as legal,consulting and other expenses incurred in relation to the agreement(the Cooperation Agreement)entered into among Elliott Associates,L.P.,Elliott International,L.P.(together,Elliott)and Cardinal Health,including costs incurred to negotiate and finalize the Cooperation Agreement and costs incurred by the new Business Review Committee of the Board of Directors,which was formed under this Cooperation Agreement.We have excluded these costs from our non-GAAP metrics because they do not occur in or reflect the ordinary course of our ongoing business operations and may obscure analysis of trends and financial performance.State opioid assessments related to prior fiscal years is the portion of state assessments for prescription opioid medications that were sold or distributed in periods prior to the period in which the expense is incurred.This portion is excluded from non-GAAP financial measures because it is retrospectively applied to sales in prior fiscal years and inclusion would obscure analysis of the current fiscal year results of our underlying,ongoing business.Additionally,while states laws may require us to make payments on an ongoing basis,the portion of the assessment related to sales in prior periods are contemplated to be one-time,nonrecurring items.Income from state opioid assessments related to prior fiscal years represents reversals of accruals when the underlying assessments were invalidated by a Court or reimbursed by manufacturers.Restructuring and employee severance costs are excluded because they are not part of the ongoing operations of our underlying business.Amortization and other acquisition-related costs,which include transaction costs,integration costs,and changes in the fair value of contingent consideration obligations,are excluded because they are not part of the ongoing operations of our underlying business and to facilitate comparison of our current financial results to our historical financial results and to our peer group companies financial results.Additionally,costs for amortization of acquisition-related intangible assets are non-cash amounts,which are variable in amount and frequency and are significantly impacted by the timing and size of acquisitions,so their exclusion facilitates comparison of historical,current and forecasted financial results.We also exclude other acquisition-related costs,which are directly related to an acquisition but do not meet the criteria to be recognized on the acquired entitys initial balance sheet as part of the purchase price allocation.These costs are also significantly impacted by the timing,complexity and size of acquisitions.Impairments and gain or loss on disposal of assets,net are excluded because they do not occur in or reflect the ordinary course of our ongoing business operations and are inherently unpredictable in timing and amount,and in the case of impairments,are non-cash amounts,so their exclusion facilitates comparison of historical,current and forecasted financial results.Litigation recoveries or charges,net are excluded because they often relate to events that may have occurred in prior or multiple periods,do not occur in or reflect the ordinary course of our business and are inherently unpredictable in timing and amount.During fiscal 2022,we incurred a one-time contingent attorneys fee of$18 million related to the finalization of the settlement agreement(the“Settlement Agreement”)resulting in the settlement of the vast majority of opioid lawsuits filed by state and local governmental entities.Due to the unique nature and significance of the Settlement Agreement,and the one-time,contingent nature of the fee,this fee was included in litigation recoveries or charges,net.Additionally,during fiscal 2022 our Pharmaceutical segment profit was positively impacted by a$16 million judgment for lost profits.This judgment was the result of an ordinary course intellectual property rights claim and,therefore,is not adjusted in calculating the litigation recoveries or charges,net adjustment.During fiscal 2021,we incurred a tax benefit related to a carryback of a net operating loss.Some pre-tax amounts,which contributed to this loss,relate to litigation charges.As a result,we allocated substantially all of the tax benefit to litigation charges.Loss on early extinguishment of debt is excluded because it does not typically occur in the normal course of business and may obscure analysis of trends and financial performance.Additionally,the amount and frequency of this type of charge is not consistent and is significantly impacted by the timing and size of debt extinguishment transactions.(Gain)/Loss on sale of equity interest in naviHealth was incurred in connection with the sale of our remaining equity interest in naviHealth in fiscal 2020.The equity interest was retained in connection with the initial sale of our majority interest in naviHealth during fiscal 2019.We exclude this significant gain because gains or losses on investments of this magnitude do not typically occur in the normal course of business and are similar in nature to a gain or loss from a divestiture of a majority interest,which we exclude from non-GAAP results.The gain on the initial sale of our majority interest in naviHealth in fiscal 2019 was also excluded from our non-GAAP measures.The tax effect for each of the items listed above is determined using the tax rate and other tax attributes applicable to the item and the jurisdiction(s)in which the item is recorded.The gross,tax and net impact of each item are presented with our GAAP to non-GAAP reconciliations.Non-GAAP adjusted free cash flow:We provide this non-GAAP financial measure as a supplemental metric to assist readers in assessing the effects of items and events on our cash flow on a year-over-year basis and in comparing our performance to that of our peer group companies.In calculating this non-GAAP metric,certain items are excluded from net cash provided by operating activities because they relate to significant and unusual or non-recurring events and are inherently unpredictable in timing and amount.We believe adjusted free cash flow is important to management and useful to investors as a supplemental measure as it indicates the cash flow available for working capital needs,debt repayments,dividend payments,share repurchases,strategic acquisitions,or other strategic uses of cash.A reconciliation of our GAAP financial results to Non-GAAP adjusted free cash flow is provided in Schedule 6 of the financial statement tables included with this release.Forward Looking Non-GAAP MeasuresIn this document,the Company presents certain forward-looking non-GAAP metrics.The Company does not provide outlook on a GAAP basis because the items that the Company excludes from GAAP to calculate the comparable non-GAAP measure can be dependent on future events that are less capable of being controlled or reliably predicted by management and are not part of the Companys routine operating activities.Additionally,management does not forecast many of the excluded items for internal use and therefore cannot create or rely on outlook done on a GAAP basis.The occurrence,timing and amount of any of the items excluded from GAAP to calculate non-GAAP could significantly impact the Companys fiscal 2023 GAAP results.Over the past five fiscal years,the excluded items have impacted the Companys EPS from$0.75 to$18.06,which includes a$17.54 charge related to the opioid litigation we recognized in fiscal 2020.DefinitionsGrowth rate calculation:growth rates in this report are determined by dividing the difference between current-period results and prior-period results by prior-period results.Interest and Other,net:other(income)/expense,net plus interest expense,net.Segment Profit:segment revenue minus(segment cost of products sold and segment distribution,selling,general,and administrative expenses).Segment Profit margin:segment profit divided by segment revenue.Non-GAAP gross margin:gross margin,excluding LIFO charges/(credits)and surgical gown recall costs/(income).Non-GAAP distribution,selling,general and administrative expenses or Non-GAAP SG&A:distribution,selling,general and administrative expenses,excluding surgical gown recall costs/(income),shareholder cooperation agreement costs and state opioid assessment related to prior fiscal years.Non-GAAP operating earnings:operating earnings excluding(1)LIFO charges/(credits),(2)surgical gown recall costs/(income),(3)shareholder cooperation agreement costs,(4)state opioid assessment related to prior fiscal years,(5)restructuring and employee severance,(6)amortization and other acquisition-related costs,(7)impairments and(gain)/loss on disposal of assets,net,and(8)litigation(recoveries)/charges,net.Non-GAAP earnings before income taxes:earnings before income taxes excluding(1)LIFO charges/(credits),(2)surgical gown recall costs/(income),(3)shareholder cooperation agreement costs,(4)state opioid assessment related to prior fiscal years,(5)restructuring and employee severance,(6)amortization and other acquisition-related costs,(7)impairments and(gain)/loss on disposal of assets,net,(8)litigation(recoveries)/charges,net,(9)loss on early extinguishment of debt and(10)(gain)/loss on sale of equity interest in naviHealth.Non-GAAP net earnings attributable to Cardinal Health,Inc.:net earnings attributable to Cardinal Health,Inc.excluding(1)LIFO charges/(credits),(2)surgical gown recall costs/(income),(3)shareholder cooperation agreement costs,(4)state opioid assessment related to prior fiscal years,(5)restructuring and employee severance,(6)amortization and other acquisition-related costs,(7)impairments and(gain)/loss on disposal of assets,net,(8)litigation(recoveries)/charges,net,(9)loss on early extinguishment of debt and(10)(gain)/loss on sale of equity interest in naviHealth,each net of tax.Non-GAAP effective tax rate:provision for/(benefit from)income taxes adjusted for the tax impacts of(1)LIFO charges/(credits),(2)surgical gown recall costs/(income),(3)shareholder cooperation agreement costs,(4)state opioid assessment related to prior fiscal years,(5)restructuring and employee severance,(6)amortization and other acquisition-related costs,(7)impairments and(gain)/loss on disposal of assets,net,(8)litigation(recoveries)/charges,net,(9)loss on early extinguishment of debt and(10)(gain)/loss on sale of equity interest in naviHealth divided by(earnings before income taxes adjusted for the ten items above).Non-GAAP diluted earnings per share attributable to Cardinal Health,Inc.:non-GAAP net earnings attributable to Cardinal Health,Inc.divided by diluted weighted-average shares outstanding.Non-GAAP adjusted free cash flow:net cash provided by operating activities less payments related to additions to property and equipment,excluding settlement payments and receipts related to matters included in litigation(recoveries)/charges,net,as defined above,or other significant and unusual or non-recurring cash payments or receipts.For example,the U.S.federal income tax refund of$966 million for the tax benefit from the net operating loss carryback related to a self-insurance pre-tax loss was excluded from the Companys fiscal 2022 non-GAAP adjusted free cash flow.
2023-07-28
13页
5星级
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