Financial Highlights

Net income was $4.9 billion , or $0.41 per diluted share for the three months ended March 31, 2017 compared to $3.5 billion , or $0.28 per diluted share for the same period in 2016 . The results for the three months ended March 31, 2017 compared to the same period in 2016 were driven by higher revenue and lower provision for credit losses.

Total assets increased $60.0 billion from December 31, 2016 to $2.2 trillion at March 31, 2017 primarily driven by higher cash and cash equivalents from seasonal increases in deposits and higher short-term bank funding as well as seasonal increases in trading account assets due to increased client financing activities and securities borrowed or purchased under agreements to resell. Total liabilities increased $58.7 billion from December 31, 2016 to $2.0 trillion at March 31, 2017 primarily driven by higher securities loaned or sold under agreements to repurchase and short-term borrowings due to increased Federal Home Loan Bank (FHLB) advances for liquidity purposes as well as increases in trading account liabilities and a seasonal increase in deposits. Shareholders' equity increased $1.3 billion from December 31, 2016 primarily due to net income, partially offset by $2.7 billion of common stock repurchases.

		Bank of America       4

Noninterest Income

Noninterest income increased $885 million to $11.2 billion for the three months ended March 31, 2017 compared to the same period in 2016 . The following highlights the more significant changes.

Noninterest Expense

Noninterest expense of $14.8 billion remained relatively unchanged for the three months ended March 31, 2017 compared to the same period in 2016 reflecting broad-based reductions in operating and support costs, offset by higher personnel and FDIC expenses. Personnel expense increased $306 million and included retirement-eligible incentive costs of $964 million compared to $850 million as well as seasonally elevated payroll tax costs. Also impacting the increase were higher incentive costs due to the impact of changes in share price on employee stock awards, and higher revenue-related incentive costs. Other general operating expense decreased $114 million largely driven by lower litigation expense.

The effective tax rates for the three months ended March 31, 2017 and 2016 were driven by the impact of our recurring tax preference benefits. The effective tax rate for the three months ended March 31, 2017 also included a tax benefit of $222 million related to new accounting guidance for the tax impact associated with share-based compensation. For additional information, see Note 11 – Shareholders’ Equity to the Consolidated Financial Statements . We expect our effective tax rate to be approximately 30 percent for the remainder of 2017, absent unusual items.

Supplemental Financial Data

In 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.

We view net interest income and related ratios and analyses on an fully taxable-equivalent (FTE) basis, which when presented on a consolidated basis, are non-GAAP financial measures. 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 35 percent and a representative state tax rate. In addition, certain performance measures including the efficiency ratio and net interest yield utilize net interest income (and thus total revenue) on an FTE basis. The efficiency ratio measures the costs expended to generate a dollar of revenue, and net interest yield measures the bps we earn over the cost of funds. 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)) which result in non-GAAP financial measures. We believe that the presentation of measures that exclude these items are useful because they 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 an adjusted shareholders’ equity or common shareholders’ equity amount which has been reduced by goodwill and certain acquired intangible assets (excluding MSRs), net of related deferred tax liabilities. 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 goals. These ratios are as follows:

We believe that the use of ratios that utilize tangible equity provides additional useful information because they present measures of those assets that can generate income. Tangible book value per 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 6 .

Table 7 presents certain non-GAAP financial measures and performance measurements on an FTE basis.