Good day, everyone, and welcome to today’s program. (Operator instructions) It is now my pleasure to turn the conference over to Mr. Lee McEntire. Please go ahead sir.

Good morning, thanks everybody on the phone as well as the webcast for joining us this morning for our second quarter results. Before I turn the call over to Brian and Bruce, let me just remind you we may make some forward-looking statements today. For further information on those, please refer to either our earnings release documents, our website or the other SEC filings. So with that I’ll turn it over to Brian Moynihan our CEO for some opening comments before he goes to Bruce.

Thanks, Lee, and good morning everyone, and thank you for joining us. As you look at our results, you can see the storyline for this quarter is much the same as it was for last quarter. You can see that the revenue is showing stability in most of the core businesses. You can see the good core expense control, continued credit improvements, and solid business activity throughout the franchise. You can also see obviously the litigation expense from our legacy mortgage issues continued to affect our earnings this quarter. And you can also see we’ve continued to build our strong balance sheet position and capital and liquidity. So in a minute, Bruce will take you through the details of the results. But I thought it would be good if we spend a couple of minutes at the outset here talking about what our customer and client data is telling us about the economy and what we see in our franchise. As we all know the economy is off to a little bit of a slow start this year, but growth has picked up recently. Most recent jobs data shows nearly 1.4 million are created in the first half of this year. As we have strong positions, leadership positions across consumer and commercial companies in the Americas, we have a view into the key indicators of an improving economy which shows signs everywhere of improvement. Even in advance with the short-term interest rate is changing which would help our rich consumer – our deposit rich consumer and business banking segments, our consumer business had another good quarter. It performed well growing earnings 29% from last year included solid origination activities across the various products. In addition, as we look at our underlying consumers, they have increased their spending. We can see…

Great, thanks, Brian, and good morning everyone. Let’s start on slide 2 and work through the second quarter results. We recorded earnings of $2.3 billion or $0.19 per diluted share this quarter which included pretax litigation expense of $4 billion which equated to roughly $0.22 a share after-tax. $3.8 billion of the litigation expense is associated with the build in reserves for previously disclosed legacy mortgage related matters which also included the AIG settlement that we announced this morning. We are very pleased to have reached the definitive agreement with AIG which resolves all outstanding RMBS litigations between the parties for a settlement amount of $650 million. This agreement is important for two primary reasons. First, we have now resolved 95% of the unpaid balance of all RMBS as to which securities litigation has either been filed or threatened for all Bank of America related entities. It also includes AIG’s agreement to withdraw as an objector to the Bank of New York Mellon private label securities settlement referred to as the Article 77 proceeding. Revenues this quarter, on an FTE basis were $22 billion, relative to the second quarter of 2013 revenue was down $990 million driven by lower net interest income and mortgage banking income. Relative to the first quarter of 2014, it was approximately $800 million lower as higher investment banking fees, higher mortgage banking revenue was more than offset by seasonally lower sales and trading revenue, as well as lower equity investment income. Total non-interest expense for the quarter was $18.5 billion, but included $4 billion of litigation expense. If we back out that litigation expense and compare it to Q2 2013’s expenses, expenses improved by $1 billion or 6%, which was driven by lower LAS non-litigation expenses and to a lesser extent, our new BAC savings.…

(Operator Instructions) And we’ll take our first quarter from Betsy Graseck with Morgan Stanley. Please go ahead. Betsy Graseck – Morgan Stanley: Hey, thanks. Good morning.

Good morning. Betsy Graseck – Morgan Stanley: Hey, a couple questions. One, you had some callouts on some nice gains and I know a couple of other banks reporting here this cycle have done the same thing. I’m wondering how much more in your pipeline do you think you have to extract some value from the mortgage-related portfolio here that you're in the process of selling down (inaudible)?

We took, Betsy, a piece of our non-performing loans out and as non-performing loans and as you know, when you receive it, to the extent that you receive income you write down the basis for those loans and we took those loans out and saw healthy gains. We continue to look at the sale of non-performing loans, but I would not expect anything near the magnitude from the sale of non-performing loans that we saw this quarter. Betsy Graseck – Morgan Stanley: Okay, separately, on just litigation related stuff you highlighted the AIG agreement that – it looks like a great win for you guys. I guess the question is does them pulling out as a dissenter do anything to speed up the timing on that Article 77 case?

I think the – the timing is going to progress on the schedule that it otherwise would have – I think you all know that from an objector perspective that they were probably the strongest and most vocal objector with respect to the case and we’ll just have to see as we move forward what the impacts from them dropping their objection to the cases. I think the other thing that’s important is as it relates to holding of the securities or at least a basis to object, but they were the largest holder that was out there from holding securities as part of the settlement. I think they noted that in the release this morning. Betsy Graseck – Morgan Stanley: Yep, thanks. Okay and then just lastly, it’s been a lot of debate recently about how the Fed could potentially start to exit. Obviously in the [inaudible] they talked about that, and it sounds there were calls recently about how people are thinking about rate betas. I know from the Q you have a relatively positive outlook for what rising rate does to your earnings stream. Could you just remind us what percentage of your deposits are consumer and how you are thinking about rate betas in a rate rise environment relative to asset betas?

Sure, couple of things, if you look at asset sensitivity, you’ll see that the exposure to a 100 basis point parallel shift in rate, that the benefit increased this quarter from about $3.2 billion in the first quarter to $3.4 billion. As you look at the deposit base, a couple of things of note, the first is, north of 70% of the overall deposits that we have throughout the company are within our consumer and wealth management business and as it relates to – I would say overall asset betas that through history given the branch network and the relationships those tend to be very stable. I think you get a sense for that as you look at the continued deposit growth that we’ve seen while at the same time taking rates paid down pretty significantly. If you move to the institutional side, and look at where we are, roughly 75% of the deposits that we have within the institutional business are domiciled here in the U.S. and the predominant mix of that is with our core corporate and commercial customers and if you look at the reason that they are holding those deposits with us is because we tend to be their core relationship bank. We do their cash management, we do their treasury service revenue and have relationships that are beyond just a place for them to put their deposits. So, as we move forward, there is obviously a level of uncertainty to the extent of a Fed withdrawal, but as we look at the overall deposit base, the stability of it and our outlook going forward, we feel like that we’re very well positioned.

I would add on the consumer side also as you look at year-over-year dynamics in terms of deposit growth of $25 billion, also look at this, we are still running off a CD portfolios that was more of a funding portfolios for some of the companies that we acquired. So that I think there is a round number of $10 billion reduction in CDs over that time period and we’ve also obviously sold some deposits not a huge amount. So that growth is over top of all that and net. So, we feel good about the consumer franchise ability to continue to grow deposits even while being very disciplined on price and as rates rise, that value will be recognized and we expect those deposits now are much more core, you have the checking account deposit year-over-year I think were up to 25% to 30% in terms of average balance. Betsy Graseck – Morgan Stanley: Okay. Thanks a lot.

And we’ll go next to Jim Mitchell with Buckingham Research. Please go ahead. Jim Mitchell – Buckingham Research: Yes, hey, good morning. I just wanted to follow-up quickly up on that deposit question. I noticed that non-interest bearing was up 11%; interest-bearing up only 1%. So that speaks to your efforts. Do you think there is more to go there or should we start to see deposit growth more in line with your peers at this point?

I think if you look at the - just on the consumer business, the year-over-year growth was $25 billion and the linked quarter growth was $10 billion so obviously we are growing at a faster rate in the current environment, at the spots so to speak Jim than we have been year-over-year. And so the growth rate of 2% was nominal in a quarter which would be annualized 8% about high 5% to 6% year-over-year. So, it’s accelerating still by the good core activity. Jim Mitchell – Buckingham Research: Right, okay, great, and then on loan growth, you still have – as you mentioned, a couple of asset sales, still some legacy asset run-offs. When do we start to see the inflection point in your view and maybe if you can give us a sense of underlying demand that you are seeing in your customer group?

Sure, let’s go – it’s a very good question Jim and I think we need to break out and discuss – if you look at the declines that we saw in the residential mortgage area, that those are largely due to whole loan repayments of loans that are held within our investment portfolio. And so if you look at the consumer business, I think there are couple of key things that I would note. The first is, on a linked quarter basis, this is the first quarter in some time where we actually saw ending card balances within our domestic card balance increase and those were up as we mentioned roughly $1.3 billion from the first quarter to the second quarter. So we saw growth there and then if you move to what we saw within the wealth management area as I mentioned, we saw very strong growth both in securities based lending as well as within mortgage origination there. Once again on the home equity front, the progress that we are making on the origination front where we saw about $2.6 billion is really being masked by the run-off and the amortization of the home equity book that we have that runs off to the extent of $3 billion to $4 billion a quarter. So, within the consumer businesses, if you look at kind of the core front-end, we are seeing some consumer loan growth that just gets masked by the run-off of some of the consumer real estate. On the overall commercial and corporate side, I did referenced the couple pay-offs. As we look at one of the benchmarks that we look at is the revolver draws that we have within our commercial banking business, that number which had gotten as low as in the low 30s was up almost 100 basis points this quarter, and it’s now in the high 30s. So we are starting to see some greater activity on the revolver space within our commercial banking customers and overall activity with the corporate customers continues to be good but we are seeing – as I reference customers taking advantage of favorable debt capital markets which we obviously benefit from a debt underwriting perspective. Jim Mitchell – Buckingham Research: Right, that's fair. Just one last question on the LCR, did you – maybe I missed it, did you disclose where you are on that front?

We did not, at the parent at this point, we are above 100% at the parent, so we are good from a 2017 compliance there. If we look at the combined BANA and FIA LCR ratios, those two companies or two banks will be put together October 1, that LCR numbers in the high 80s at this point and we’ll continue to build the LCR ratio at the banks to be at least a year ahead of where we need to be. Jim Mitchell – Buckingham Research: Will that put any further pressure on NIM if you are building more liquidity there?

It should not, there – as we look at, there has been a significant build at this point and as we look at the funding and the balance of that between both core consumer deposit growth as well as where we are that should not have an effect. If you look at the build that we talked about in the first quarter and second quarter, at this point I would say we’ve eaten that expense and we now need to get after it and optimize to get the expense knocked back down. Jim Mitchell – Buckingham Research: Okay, great. Thanks.

And we’ll go next to Matt O'Connor with Deutsche Bank. Please go ahead. Matt O'Connor – Deutsche Bank: Hi, good morning.

Good morning Matt. Matt O'Connor – Deutsche Bank: On expenses, it seems like most of the New BAC savings are in the run rate here, yet we still read about – some various expense initiatives that you have underway in terms of branch rationalization and simplification and things like that. So, just wondering is there another New BAC or just ongoing efforts to bring down costs and how meaningful those might be?

I think in the near-term Matt, the number one thing about cost is continue to work down the LAS legacy costs down to a more normalized level on a per loan basis and also keep producing the number of delinquent loans. So, that’s the real expense leverage and what Bruce talked about earlier is we get to make sure we do it the right way especially in connection with sort of finishing up some of the regulatory work there. That’s the real large dollar amount. You are pointing out exactly that situation on the core, you run at about $13 billion a quarter on core expenses, not a bad number if you annualize it and sort of think that through but the real question is how do you hold it there and keep investing in the businesses. And so when we started the New BAC, we never gave a target that said, we are going to save of this money but we are going to reinvest that we gave you a sort of net target and now we are reaching that. And so, what we would challenge our teams too is how to maintain a good operating leverage going forward and so we are more about simplifying the company and continuing to take out expenses. But a lot of that will offset the 1000 people we’ve added in the branches that we sell more products if you are seeing the benefit of the continued adds we make in the wealth management business and training programs. We hired a 30% or 40% more people out of schools this year because we got to keep replenishing our talent base, commercial bankers et cetera. So, as you look forward, the inflationary type things that go on, merit raises and healthcare expenses and stuff like that and investing in the business including the $3 billion plus we put in technology developments every year will need to be offset by hard expense work and so that’s the plan we have and we are putting this, we keep driving those plans in place. So there will be less bottom-line reduction on the core expense base and more how you hold it there in a relatively slow growth environment. Matt O'Connor – Deutsche Bank: Okay, so just to try and summarize, even if there is some modest revenue growth, you would hope to keep that $13 billion relatively stable on a net basis, then?

Yes, if we want accept them, when markets kicks up you are going to have more comp related to that or wealth management comp which is good. So, you got to be careful, because those things kind of come and go and you can see that just the last couple of quarters. But, if you think what David Darnell and the team have done in the retail business, they are still rationalizing the branch structure which will offset putting more people in the branches that are more personal bankers and FSAs. And they’ve done a pretty good job at offsetting that. In addition we are repatriating some jobs to help on the consumer credit – customer delight scores and stuffs from places that legacy enterprises had in other places and bringing them in and that rationalization is going on and that’s adding to our job count in the near term but we’ll rationalize back out. Matt O'Connor – Deutsche Bank: Okay. And then on the LAS cost, obviously making good progress there and I am not sure there is too much concern if it gets pushed out one quarter. But is there still the goal of getting down to $500 million or below $500 million per quarter?

Yes, and that’s going to trail and move with this. We drive down the 60 plus day delinquent loans, but clearly the $1.1 billion that we’ll either have in the fourth quarter or the first quarter of next year is still way too high given the number of 60 plus day delinquent loans that we have as well as the size of the servicing portfolio. Matt O'Connor – Deutsche Bank: Okay, and then just lastly if I can squeeze in on the CCAR capital resubmission process, just remind us when you expect to get an update on that?

Sure. We submitted our materials to the Fed on May 27. They have up to 75 days to respond. I believe the 75th day is August 10 and we continue to see where they come up. Matt O'Connor – Deutsche Bank: Okay, thank you.

And we’ll go to next to Glenn Schorr with ISI. Please go ahead. Glenn Schorr – ISI Group: Thank you. Quick question on the match book was up or at least the Fed funds sold and repurchased on the asset side was up 6.5% quarter-on-quarter. It's the opposite of what we're seeing at a lot of banks and trends in the market. So I am just curious is there an opportunity to get closer to clients? Is this a function of the fact that your SLR is in great shape so why not use it when you can? Just curious on what is underlying that trend?

Yes, I would think, Glenn, probably more than anything if you go back and look at both the notional size of the balance sheet as well as the match book, we were probably a little bit lower at the end of 2014 - the end of the first quarter of 2014 than you would normally see. So, that number will bounce around, but I wouldn’t read anything into the fact that it was up because it was much lower at both the end of 2013 as well as the first quarter of 2014. Glenn Schorr – ISI Group: Anything different on the client usage front? It is bucking a trend though I hear your comments on the year-end. It's just with the changes in SLR, it's changing pricing theoretically, I just don't know if it's more theoretical than actual.

I think the pricing is probably more theoretical because if you look across the industry we continue to see both the banks in Europe as well as the banks in Asia provide at so, I am not sure you’re seeing any meaningful movement in what you are able to charge from a match book perspective. Glenn Schorr – ISI Group: I get that, yes thanks. Okay, switching gears, in wealth management, obviously everything is doing pretty darn good in wealth management. But I’ll pick a little bit and I’ll just ask, expense – negative operating leverage in a quarter when the markets are doing well, meaning revenues were up or expenses are up more. I heard and saw your comments on the additional investments in technology. Is it comp or is it that additional investment technology? In other words, when markets are growing and flows are great you would expect margins to hold their ground, not give it up. Maybe a little more color on what investments to help that business grow would be helpful?

Sure, well you’ve got a couple things, the first is that as you look at the expense growth during the quarter, and you look at the buckets roughly, half of it relates to incentive related comp that is a result of increased revenues. We do have a couple of initiatives that you’d expect to roll off over the next couple quarters within the wealth management business. We obviously have the rollout of Merrill One over the last couple of quarters where you saw some expense there. There we spent some additional money spend as we invest in system related to retirement systems and retirement programs as we continue to see growth there. And so, you do have some of that activity as well as just making sure that the right investment within the various control support functions are appropriate. So – at the same time, as we look forward, you need to see positive operating leverage not negative operating leverage and that’s what we’ll look to work for as we go through the next couple quarters of the year.

You point out, I mean, it’s an obvious point and we – the team is focused on it, but we have made some near term investments including training programs and hiring people into the business working to the branches and stuff to help, but it something that we got to monitor closely and we think it will come back down and more in line with what you would expect. Glenn Schorr – ISI Group: Great, I appreciate that. Last one is, slide 20 shows that the private-label outstanding claims keep going up every quarter. Anything new there? I am not sure what's driving that and if – I know that we have most of this stuff accounts for in the settlements, but just curious?

I think that the notable think that I would call out is that when we get private-label claims that comp, there are two different types of claims that come in, there is the first that our claims where people have had the ability to look at loan files and submit a claim based on a loan file, not being what they’ve thought it be and the second is that, you can have people that at points in time do what we call or throw in what we would characterize as a bulk claim where they are just throwing it in without having done any work whatsoever on the loan file. And what’s important when you look at what we saw during the second quarter of 2014 we saw roughly $1.9 billion of original unpaid balance on the loans not loss, gross of that amount, the amount of bulk claims were no file reviews and went down was $1.9 billion. So, I would not read too much into that number because it’s not for loan files where there has been any work done and I would just say generally if you look at what we’ve seen regarding some of the recent decisions where there seems to be some stickiness at this point on different statutes of limitations as well as a recent ruling that came out of California with respect to RMBS litigation that we do feel like we are moving forward and getting AIG behind us is significant in regards to putting the rest of this behind us. Sure, Glenn Schorr – ISI Group: Okay. I appreciate it. That's it for me. Thanks.

And we’ll go next to Jon McDonald with Sanford Bernstein. Please go ahead. Jonathan McDonald – Sanford Bernstein: Hi, good morning. Bruce, the increase in Tier-1 common of $7 billion was impressive relative to the net income in the quarter. Any more color on the drivers there? You mentioned AOCI. What were the threshold deductions that helped drive the capital expansion so much more than that income?

Sure, so, as we’ve said, given where we are from a disallowed DTA position that we’re at a point where broadly speaking, we accrete capital on a pre-tax as opposed to an after-tax basis and so, as you look at the results we had roughly $3 billion of pre-tax income. We had roughly $3.5 billion of pre-tax OCIs that gets you to above $6.5 billion and then as you look at threshold deductions of roughly 10%, take 10% of that $6.5 billion, it gets you roughly $700 million, that gets you to roughly $7.2 billion of capital build, you back out the common dividend of 100 and that gets you to your $7.1 billion build. Jonathan McDonald – Sanford Bernstein: Okay and that building at a pre-tax due to the DTA, that’s something that should continue on a steady pace, right?

Clearly, at least over the next – I would say, probably two to four quarters it will be a function of the exact earnings but, for the near term that’s correct. Jonathan McDonald – Sanford Bernstein: Okay and can you give us the numbers on what the excluded DTA is today and what it changed in during the quarter?

I believe that the excluded DTA was roughly $15 billion and it was down over – little over $1 billion. Jonathan McDonald – Sanford Bernstein: Okay. On RWA, are there risks that the continued legal settlements would drive up your operational risk metrics or is there a forward-looking component to the op risk calc that already anticipates more settlements coming?

Yes, we are mindful of the fact of settlements, there is obviously a lot of discussion and dialogues around op risk RWA. If you look at and when we noted that the reason risk-weighted assets went up during the quarter under the advanced approach, it was we are doing exactly what you referenced was reflecting an increased amount of operational risk RWA. We don’t give the exact number, but you should assume that that amount is in the 26% to 27% of our total risk-weighted assets number and is in line with our largest peer. Jonathan McDonald – Sanford Bernstein: Okay. On capital, on the last CCAR your binding constraint was the leverage ratio more than the risk-based Tier 1 minimum. I assume the recent preferred issuance and the Buffett conversions will help close that gap and position you better for next year's CCAR minimum. Could you comment on that? Or are there more things you can do to close the gap and have a quantitative cushion that's bigger to that leverage ratio next year as well?

Well, the first John, is jut to manage the notional size of the balance sheet which we continue to do. The second thing that I would note is, when you look at the sale of the re-performing loans that we did, those are the types of assets that in the CCAR at least we believe we don’t have access to the federal reserves’ models, but those are types of assets that tend to get hard. So, we continue to look hard and look to drive down the non-performing consumer real estate piece of what we have and this quarter was a good example of it. And then, you are exactly right, with respect to the leverage ratio that there is a benefit that that preferred stock gives with north of $4 billion this quarter that we generated will continue to look to see if more preferred makes sense and then lastly, we’ll continue to look at and see if sub that makes sense from a total capital perspective as well. The incremental cost of those is very low and we just want to make sure the balance sheet is optimized for those different buckets. Jonathan McDonald – Sanford Bernstein: Okay, thanks and on sales and trading, just in terms of the dynamics of the quarter, did you see a pickup in June as the other banks did? And any sense of what drove that? Have you seen any follow-through on that?

Yes, our activity levels and – if you saw a P&L throughout the quarter, while June was marginally better, I would characterize the activity that we saw within the sales and trading business during the second quarter to be fairly consistent. And if we look out at the third quarter, typically with the summer the third quarter is a little bit seasonally slower than the second quarter. If you look at our results last year, you’ll see that and as we come into the third quarter, there is nothing unusual in our third quarter numbers of last year and how we compare to those numbers is going to be a function of how well we perform this quarter and that’s obviously up to us.

John, if you look at page 19, you can see the second quarter, second quarter, second quarter, across the last three years and it’s remarkably stable in terms of markets revenue lower part of that page. And so, Tom and the team did a – a few years ago we actually reduced the headcount almost 5000 people and that’s allowed us to make $1 billion in this current environment as we did this quarter. So, this ebb and flow as you and I’ve talked about in various occasions, it is a core part of what we do. But we show you the separate P&L, we show that from the first quarter half a good quarter, this quarter had a $1 billion bucks and it may come down as activity moves around the clients but it’s a relatively stable revenue base that we can make money on because of the expense adjustments we made last year – in the last couple of years. Jonathan McDonald – Sanford Bernstein: Okay and last thing for me, Bruce, on the CRES page, in terms of mortgage servicing revenues, is this quarter's core mortgage servicing revenue a stable base as you see it? Or is there further shrinkage in the size of the servicing book from sales that are ongoing that would impact the servicing fee?

Yes, there we’ve got one more sales that we’ll look to wrap up this quarter that’s got fairly high consent of 60 plus day delinquent loans. But beyond that, that one transfer this quarter were largely at the end of servicing sales and we are at a base of what you see should be what we have going forward with the plusses and minuses being what runs off versus what we put on. Jonathan McDonald – Sanford Bernstein: Okay. You're still taking rep and warranty provisions. What are those for? Is that for current originations, or is it still catch-up from past stuff?

As you look at I think, rep and warrant was less than $100 million this quarter. You are going to always have that as you go forward, but we are not seeing much rep and warrant at all on recent originations that’s going to be more legacy related. Jonathan McDonald – Sanford Bernstein: Okay, thank you.

Thank you, John.

And we’ll go next to Guy Moszkowski with Autonomous. Please go ahead. Guy Moszkowski – Autonomous Research: Thanks, good morning. First question I had was just a follow-up on CRES. Is there any sort of immediate benefit in terms of the ability to accelerate LAS legacy servicing cost reductions now because of the bulk sale?

From a number of units perspective, as you look at the bulk sales over the – there is a piece of it that was – that we service and the results of a piece that others service. So in the context of the number of 60 plus day delinquent loans it was not meaningful relative to the total. Guy Moszkowski – Autonomous Research: Got it. So what we're really looking at is more what you were talking about in response to John's question a minute ago, which is the potential for one more sale this quarter and then just normal run-off.

That’s correct. Guy Moszkowski – Autonomous Research: Got it. Question for you while we're on the topic of mortgage stuff. Obviously you had the $4 billion litigation reserve build essentially this quarter. It appears, based on what you gave as an after-tax impact that you take a full tax benefit against that. Of course, what we find with a lot of these things, especially with like the DOJ settlements is that a large amount is not deductible. Do you have any flexibility with respect to being able to use a lower tax rate?

A couple things, we don’t give the exact numbers, but if you go back and look at the first quarter, we look at and try to understand what the tax treatment is for the different settlement. There was a piece of it in the first quarter that we would have assumed was not tax deductible and you are right, the piece that – and the reserves that we took this quarter there was a presumption that it was tax deductible. And the short answer is, until you get to the end, you don’t know the exact mix. But we try to be thoughtful with that and I would just say as it relates to the total number, as we said last quarter, there was $2.4 billion of litigation expense over and above what was for settlement. In this quarter you got in the high threes and I think it gives you a sense as to the magnitude of the reserves that are built over the last two quarters. Guy Moszkowski – Autonomous Research: Got it. Switching topics, you did talk about pricing on commercial loans in the context of not seeing a meaningful increase in commercial loan balances this quarter, and I guess alluded to some discipline that you're exercising. Can you talk a little bit about the conditions that you're seeing in the commercial loan market and where you think there is froth?

Sure, if you look at an embedded under the global banking segment, we’ve got the loans that are done within our corporate investment bank that tend to be for the larger companies and as we look at spreads and yields on a linked quarter basis, within our business, we saw relative stability in the yields in those businesses. And, as we look out at in the marketplace given that those loans that are brought for those customers tend to be broadly syndicated and there tends to be a relationship in the yield between that and where they can access capital in the capital market, that low in pricing over the last quarter has hung in there and like I said it was generally flat, Q1 to Q2. I would say, we tend to see a little bit more of a competitive pressure tends to be within the base commercial bank which is for middle-market companies where that they tend to be more one, two, or three bank deals and we have seen that area continues to be pretty competitive and we are just being disciplined with how we approach that market and given the footprint that we have, we do have the flexibility to not chase things within some of these regional markets. Guy Moszkowski – Autonomous Research: And just to follow-up on that, when you say banks competing for that business, are you using the word bank in a traditional sense or are you actually seeing a lot of the competition for those type of mid-market loans coming from outside of what we would think of as the traditional banking sector?

No, I would – for the core commercial customer, that’s going to be the traditional banking customer as you think of it. Guy Moszkowski – Autonomous Research: Okay and then just a housekeeping question, just to make sure I understand what you were saying. You said there were – maybe $250 million of gains in Global Markets, I guess, probably – not to put words in your mouth, but things like market. And you – but I think you said that you did not include those numbers in the core equities or fixed income segment revenues. Is that right?

Yes, but that’s correct so we had a position that went public during the quarter. There was a gain and it’s reflected in the revenues of the global market segment. But we did not think that was appropriate to include that in the core FICC and equity sales and trading. So if you go to the table on page 13, when you look at that FICC and equity sales and trading number ex DVA that that does not include any benefit from the gain that we saw within the overall segment during the quarter. Guy Moszkowski – Autonomous Research: Got it, perfect. Thanks for the clarification.

Sure.

And we’ll go next to Moshe Orenbuch with Credit Suisse. Please go ahead. Moshe Orenbuch – Credit Suisse: Great, thanks. I was wondering; you've got a little less than $250 billion of residential real estate loans and $90 billion of home equity. How much do you think those decline before those stabilize, because I think you tried to talk about in terms of the overall loan growth. But that's really – those are really the categories that are shrinking. I mean, do you have a sense as to where those categories will level out?

Well, if you start from a home equity perspective, I think that the repayment and run off of those is a god thing and not a bad thing. And so, you’ll continue to see – I would expect over the next couple of years that the amortization of those is going to be greater than the new loans coming on the book. We would not expect though as you look at net interest income given the yields on those versus what you can do with other things that the run off of that book will have a negative impact from an overall net interest income perspective. And as it relates to the whole loans piece, that we have, I would expect that that over time that will continue to run down. We continue to look as we talked about before on the home loans business to put and to originate mortgages for customers where we want to hold those loans during the quarter, we put about $6 billion of home loans that were originated for our customers on our balance sheet. Roughly 75% to 80% of those would have been of the jumbo variety. But I think to be realistic over the next probably couple of years, you are likely to see a little bit more run-off of that then you’ll see new loans coming on and we obviously have the decision at that point of do you want to reinvest those proceeds and other whole loans that you can buy out in the market or invest those in securities and I would say at this point with LCR as well as what we are focused on from a customer perspective, they are much more likely to be invested in securities than new whole loans that are not for our customers. Moshe Orenbuch – Credit Suisse: Got it and secondly, the reserve build for legal, I guess, could you talk about how much you have in reserves in total? Or maybe address as to how you came up with that number? Given the fact that I think, if I'm reading the footnotes correctly, that your possible but not accrued losses kind of have stayed flat from the first quarter?

Yes, couple things, the range of possible loss that you quoted of being flat from the first quarter to the second quarter relates to our representation and warranty reserves not our litigation RTL. So, you are correct that the rep and warrant piece was flat quarter-over-quarter. We do not update and provide a range of possible loss on litigation expense until we file the 10-Q. As it relates to overall litigation reserves, we do not put out an exact or a level of our litigation reserve, what I do think is notable and probably most relevant is the information that I gave you as it relates to the litigation reserve that’s been built over the last two quarters that relates to legacy mortgage related matters and I think you can see and people are aware of what the most significance of those matters are. And obviously each quarter as it relates to the reserving, we go through each quarter and assess where we are and what we think is appropriate from a reserving perspective and we did that again in this quarter just like we do in any quarter. Moshe Orenbuch – Credit Suisse: Okay, great and just a quick follow-up to the first one. You had mentioned kind of investing some of the run-off from the mortgages and home equity portfolio in securities. Is that in the context of keeping those balances kind of stable or would you actually increase that portfolio?

Yes, the first goal is obviously, as we’ve talked about it to find and invest in loans that are for our core customers across the platform and that’s priority one to the extent that there is residual or excess which there has been given the deposit growth that we’ve seen the money does gets invested and it’s been invested primarily in the most recent several quarters in securities. I mentioned OCI risk, the notable thing is that if you look at the OCI risk that we have as a company, even though the securities book has increased significantly over the course of the last twelve months, the overall level of OCI risk based on the different metrics that we look at is not changed and that’s the result of us shortening the portfolio investing in shorter duration treasury securities. Moshe Orenbuch – Credit Suisse: Okay, thanks.

And we’ll go next to Steven Chubak with Nomura. Please go ahead. Steven Chubak – Nomura Securities: Hi, good morning.

Good morning. Steven Chubak – Nomura Securities: So the first question I have pertains to capital and RWA specifically. So over the last five quarters, we have actually seen the RWAs on a flat to upward trajectory; and then effectively the growth has mirrored the balance sheet growth that we've seen over that same period. And I just wanted to get a sense as to whether there were any additional mitigation levers that you guys could potentially pull, or whether those types of opportunities have been largely exhausted, and thus the growth going forward will likely continue to mirror the balance sheet?

Yes, I think as it relates to the risk-weighted assets they can either bifurcate risk-weighted assets under Basel 3 standardized versus those under Basel 3 advance. As you look at the Basel 3 standardized ratios, the benefits that we have there tend to come from the roll-offs of the different consumer loan portfolios both in first mortgage as well as in home equity and we would expect as we talked about throughout the call that you will continue to see a run-off there and given that a lot of the stuff that’s running off is higher loan to value than the new stuff that’s coming on that there is incremental benefit there. So, if you look at over the last five quarters, I think the way that the standardized metric is set up, the standardized metric is going to tend to mere the overall loan growth that you have and I am just – as I mentioned going forward, on average it will probably be a little bit lower mix coming on than what rolls off. On the advanced approach at this point, as we look forward, there will continue to be opportunities and stuff that’s advanced that tends to be heavier risk-weighted that rolls off between now and 2017, it’s not going to be anywhere near material as what we’ve seen and under the advanced approach, the recent increase as you’ve seen has largely been attributable to operational risk as opposed to what we are seeing within the kind of the core loan categories. Steven Chubak – Nomura Securities: Okay, thanks. Now, that's really helpful. And switching over to GWIM for a moment and actually taking a longer-term view on the earnings power within the segment, there is one area where we have struggled from a modeling perspective. It's trying to contemplate exactly how high the operating margin can get in a rising rate scenario, because the operating leverage improvement can be fairly dramatic. But presumably there is that peak margin level where competition is going to intensify to such a degree that effectively there's going to be no more room for improvement beyond, I don't know, let's call it 30%. I didn't know if that was something which you guys had evaluated at least in the context of a rising rate scenario.

I think, you’ve got one of the levers in the business that people often overlook is the lever towards rising rates, because in the business itself the amount of total deposits and loans are significant $250 of deposits and loans. And I think we said on the last call, and as said many times, we can see this margin moving towards 30% and that dynamic yield in that environment. But I think when you get to there, you start to top out a little bit if you just understand the broad base of revenue and the amount that goes through the grid and things like that that become a govern on what you can do beyond that. But as the mix of our business of wealth management with the private banking business and loans and deposits from a general client base and what’s been there, that gets leveraged in the upside as you described. Steven Chubak – Nomura Securities: Okay, great and one final one on credit. At your Analyst Day a number of years ago, you had given some guidance on through the cycle charge-off rates. But clearly since that update your loan mix has changed fairly dramatically and at the same time underwriting standards have tightened meaningfully. From what I recall, I believe the through-the-cycle charge-off rate at that time that was implied was somewhere in the neighborhood of 120 bps. And clearly it's going to be lower than that going forward, but I was hoping you could give us an update, maybe some updated guidance on where you think that through this cycle and net charge-off rate will likely end up?

I think, if you look at the charge-offs, the key is that when you really think about the broad constitution of $1.3 if you remove the recoveries, you got to look at the card business and what changed since that time as we have changed our position the card business fairly dramatically with the sales from international portfolios and even how we’ve approached the U.S. is based on the dynamics of the card business. The good news is the card business is starting to grow in terms of balances and going back to an earlier question we got rid of the non-core aspects and now you are seeing the core start to come through $1.1 to cards. People are using the cards more and the balance is growing. And so I think that if you just think about that, that number is going to be – is today and will be the dominant part of the charge-off questions and you should think that $100-ish billion and balances as you look forward you would expect that to grow but not continue to stop dramatically, it’s not for us to change dramatically in terms of positioning our balance sheet because we need to keep that book balance because there is higher charge-offs and period of unemployment level. So, I’d say, if you went back and look at that that is the biggest core adjustment between the two items and then, the counter to that is, if you look at the appendix page as you see the charge-offs on the mortgage business in the first mortgage business again recoveries, but if you look at home equity side. You still have a charge-off rate which based on the underwriting criteria the stuff going on will be much higher and so we had a couple $100 million before the charge-offs that you can see on page 21. So we’d expect to see improvement in that from where we are, but I’d say the card business is kind of about as good, is getting very strong. If you look at home equity you can reversal from the recoveries on the first mortgage loans. But it is a fundamentally different level because we mix the balance sheet differently on purpose. Steven Chubak – Nomura Securities: Okay, that's great. Thank you for taking my questions.

And we’ll go next to Paul Miller with FBR. Please go ahead. Paul Miller – FBR Capital Markets: Yes, thank you very much. Going back to your LAS costs, excluding litigation, where you mentioned that it's probably – to get to that $1.1 billion target it’s going to take another quarter or two. What should we be watching and how long do you think that LAS expenses are going to move to become non-material, I guess is another way to say it? Can you give us things, what we should be tracking?

Sure. The first thing I want to be clear Paul that the – getting to the $1.1 billion has moved back – maybe moved back one quarter not two. Paul Miller – FBR Capital Markets: I'm sorry.

We are looking at one quarter. The second though that the biggest item that really relates to the trajectory of LAS expenses is your number of 60 plus day delinquent loans, because the cost to service that is many multiples what the cost of servicing a current loan is. So, as you go forward, we have full limitation of the national settlement effective September 30. That will be a big benchmark and then as you go beyond then, as we said, one to two quarter lag you will see expenses trend down as your number of sixty plus day delinquent loans trend down and as those trend down, you need less people as well as a variety of other expenses. So that’s the key metric to watch. And as it relates to just how long that’s going to continue, I would not expect that we get down to the level of what should be a recurring number of 60 plus day delinquents until probably the end of 2015 or the first part of 2016, so as it relates to continued expense leverage, we would expect to see upside in that business probably all the way through the end of 2016 as it relates to driving expense down.

And Paul we’ve got work to do in a sense if we go back I think as we look at, I think at the fourth quarter of 2012 it was about $3.1 billion, the fourth quarter of 2013 I think it was $2.1 billion Bruce, and then, we said 1.1 – originally said higher then we brought down the $1.1 billion announced. I think it is somewhere little higher than that but that’s the broad move and the question is how do you keep going on that and that is really going to be as Bruce said a number of 60 plus delinquent loans, it’s largely where these people. But we are also getting condition as we now got the place stable and that’s behind us so we can start to invest in technology that will add a level of improvement that we haven’t been able to invest in while we just had to get the work done. And so we expect the systems deployment in that business as we move into the middle of 2015 and to 2016 and we expect consolidations of physical plans and things like that which will add to the expense leverage but we haven’t been able to do that as much yet just because of just the mass of the amount of the work that had to take place. So, there is still lot of work ahead of the team but if you put in the context the $2 billion, this first quarter and expense reduction across eight quarters that lot of work has been done too. Paul Miller – FBR Capital Markets: And just a follow-up, you talked about you do have another MSR sale, I don't know how material that is. But right now there has not been a lot of transfer of MSRs due to various – well, Lawsky, up in New York, questioning a lot of the stuff that other companies are doing. Is that – can that interfere with the sale or you think you can sell the MSR without the headline risk of Lawsky?

The MSR sales that I referenced that will happen in the second half of the year. In the context of what we’ve done is relatively small. It’s just that the delinquency content associated with that sale is high. So it’s material from that perspective, but from an overall size perspective it’s not material. Paul Miller – FBR Capital Markets: Okay, guys. Thank you very much.

And we’ll go next to Marty Mosby with Vining Sparks. Please go ahead. Marty Mosby – Vining Sparks: Thanks. I want to ask you a couple questions. First off, you've been harvesting about $400 million worth of gains out of the debt portfolio. Is that in the sense of trying to minimize your AOCI risk when rates do go up, as you're shortening the portfolio or just wanted to think about your strategy; because that's been a pretty consistent flow through over the last year?

As we look at those gains, we are committed to not – as we continue to see liquidity build not taking incremental OCI risk as I referenced. And so over the last year, even as the securities portfolios has grown, we’ve managed to keep the OCI risk from an absolute dollar perspective relatively flat and as you see markets move up and down, obviously selling longer duration securities as you growth in the securities portfolio as part of that strategy. Marty Mosby – Vining Sparks: No I just want to make sure that the gains are just an outflow of that overall strategy that you had talked about.

Yes, you are exactly correct. Marty Mosby – Vining Sparks: Okay, when you look at the kind of the consumer and business bank, you have a considerable amount more in deposits than you really have in loans, which to me seems a little bit more skewed than what you would normally expect. How do you strategically think you can utilize that balance sheet funding over time or what are some of the initiatives that you are doing because you should be able to penetrate that customer base with more lending?

That I think – yes, we should be able to penetrate on more lending. So, that if you look on page 17, you can see the – 18 excuse me, you can see the growth in card originations, the growth in home equity originations, which go on a balance sheet as Bruce talked about early would put about, I’d say half broadly stated of the originations and mortgages are going on the balance sheet. And in the business banking segment which is a small part of our commercial banking segment here to – $50 million on the revenue companies we are actually starting to see net loan growth the first time and a lot of times as it been up for non-core portfolios and so that’s the core opportunity in the franchise as it continued to originate credit to the core customer base and there is lots of opportunities there, but you can see us making progress against each quarter. I think, on a broader context you got to think about these businesses and how they mix together. So in every company’s retail business, it’s an excess deposit generator just by the very nature of it and not only as it fund alone for the consumer customers but also provides the funding for the rest of the franchise. So, I think we have to keep that broader context and that’s why we invest going to your first question on mortgages and securities to – lack of better term get the value out of those deposits for the shareholders.

The other point that I just want to mention is that, historically, if you look at the front-end lending in consumer real estate that we’ve done, from a segment perspective that that consumer real estate lending on a first mortgage basis, it shows up in the balance sheet and all other. So, you should – you can assume that those deposits that you see within page nine, a lot of the loans that they do for our customers are reflected in the all other segments. Marty Mosby – Vining Sparks: And then in the mortgage segment, the CRES, you are still, if you take out the litigation, generating about a $700 million negative loss in the sense of your just pre-tax pre-prevision of between the revenues and expenses. You are talking about bringing down the Legacy Assets & Servicing expenses. But what is the timetable in your mind that would be reasonable to think of closing that $700 million gap?

A couple of things, the first is, within consumer real estate services, if we look at the home loans business on the front-end, we talked about how we saw during the quarter that we increased both front-end originations as well as took down expense. So, Q1 to Q2 we saw about a $100 million improvement on the front-end of the business that’s reflecting the consumer real estate services. And as it relates to the $700 million number that you quoted, we obviously, relative to the guidance have $300 million of expense to get out of that business over the next 90 days and then as we’ve talked about earlier on the call, we’ve got work to do to continue to drive that down significantly in both 2015 and the first part of 2016 and that’s clearly one of the highest priorities we have within the company. Marty Mosby – Vining Sparks: And just lastly, and thanks for letting me ask you a few questions. As if you are looking at valuation of your servicing portfolio, it dropped off to 82 basis points this quarter, which seems relatively low as the duration of that portfolio is extending. I know interest rates came back. So the models force you to write it back down. But when you're looking at the prepayment speeds and the refinancing behavior, it seems like eventually that there is some value as that portfolio lasts a lot longer than the model assumes at this point.

Well, I think your point, the value and the fact that on a basis point basis the came down was reflective of the lower rates that we saw at the end of the second quarter relative to the end of the first quarter and you are right, at a point in time when rates start to move out, you would expect that MSR to extend and for there to be value there, but we do not – I want to emphasize that we look to manage the MSR risk as part of the overall strategy and are mangling that to have it be a plat book. Marty Mosby – Vining Sparks: While from an interest rate standpoint I understand that this seems like the models have assumed a lot faster prepayments than we’ve really actually experience, which eventually has to true up?

At the end of the day it comes down to what the customer does here, exactly right. Marty Mosby – Vining Sparks: All right, thanks.

And we’ll go next to Matt Burnell with Wells Fargo. Please go ahead. Matt Burnell – Wells Fargo Securities: The questions have been asked and answered. Thanks very much.

Thanks, Matt.

And we’ll go next to Mike Mayo with CLSA. Please go ahead. Mike Mayo – CLSA: Hi, a couple follow-ups. First on the deposit betas, I appreciate you giving us the color, for every 100 basis point increase it would help by $3.4 billion. You describe the deposit base. But what is the actual deposit beta that you use to come up with the $3.4 billion benefit?

We did not quote, Mike, the actual deposit data. We obviously go back and look at historical data. Our assumption is as it relates to pass through rates as far as how much of the first 100 basis points that has to get passes along, we are in the 40% area with respect to that. Mike Mayo – CLSA: Okay, 40% for the first 100?

Correct. Mike Mayo – CLSA: All right. So I think that's in the ballpark of one of your large peers, but below some others. And is the reason that would be below others just because it's a lot of branch-based deposits?

You are exactly correct and if we go back and look at what it’s been throughout time, at points where arguably we don’t have the competitive position now, we look at a lot of historical data to come up with that number. Mike Mayo – CLSA: As it relates to expenses, you've achieved 90% of the $8 billion New BAC savings. I see the branches are 5023 and I think you said you wanted to be around 5,000 branches. And so if I heard you right, I think you're going from a period of rightsizing to growth. Is that a fair characterization?

Yes, we’ve been growing underlying activity. If you look at some statistics in the back things were up Mike, but you are right, the – if you go back a couple years ago we started New BAC we were running $59 billion of core expenses, now run at $13 billion. And so we are largely getting there and then question then is now how do you hold at there in the economic and environment which is lower growth and traditionally expected in the United States and that’s been – this vigilance on our part. But during the whole time period we’ve invested literally thousands and thousands of people into the sales side and start to try that growth and we’ll continue to do that. The question is how do you balance that investment grade.

And I’d just, Mike, before – I assume, the – achieving the balance of the $2 billion in quarterly New BAC savings in the fourth quarter is not dependent on future branch sales. So I just want to make sure that there is not an assumed linkage there. Mike Mayo – CLSA: And are you reallocating some of the people assigned to New BAC to other areas? It seems like you could dismantle that project group, so to speak?

It’s not a big project, I mean, this is done by the people run the businesses, with just committed plans that we did this wasn’t – it’s not a huge project group to actually accomplish. It’s done by who have to run each business, each function. Mike Mayo – CLSA: Okay as it relates to loan pay-downs, Bruce, you mentioned that some bank loans declined as customers went to the capital markets. In a way, a type of disintermediation from the bank. But can you elaborate on that? Are you still seeing that this quarter? Do you think that was a one-off event or is that something we should watch out for?

Our sense is from what we saw during the quarter, it was more a one-off event. There were a couple of loans that were for acquisition-related purposes that people then went out and refinanced. So that was just a little bit of an anomaly that we saw in the second quarter and if you look at just the attractiveness that the capital markets have been, you would expect that to largely be over. But every now and then when you deal with large multinational companies where some of the loan holds are little bit higher. You can have those one-time events where that happens and we had a little bit of that in the second quarter. It’s not something we would expect to recur. Mike Mayo – CLSA: What I'm getting to is, do you guys think this is an inflection point for loan growth? I can find one of your large peers who implied that it is; and I can find a large regional bank who says it's not. Where do you fall out on the spectrum? You said, Brian that middle-market utilization was up ever so slightly, can you just give us that utilization number and where you stand?

Bruce, gave it early, but I have to do again.

Sure. The middle market utilization rate was kind of 37 plus percent at the end of the first quarter and was up about almost 1% to mid 38%, which I don’t think in and of itself is not material, but it does seem that that people are a little bit more willing to access the revolving credits. At the same time practically speaking, you are not going to tend to see loan growth that’s dramatically higher than the rate at which the overall economy is growing. So, we clearly, as Brian Alluded to in his opening comments, we did see an economy that improved in the second quarter relative to the first quarter and on the commercial side, our loan growth is going to tend to mere or be a little bit above what we seen in the macro economy. Mike Mayo – CLSA: So do you think this is an inflection point for loan growth? Or is that an answer you would rather not delve into?

We’ve seen – we are seeing signs of improvement, I am not sure I’d go as far as saying it’s an inflection point. Mike Mayo – CLSA: Okay, at the Annual Meeting, the clock ran out on me before I could ask one question, a very simple, what are your financial targets with and without higher interest rates?

We’ve been pretty consistent if we go back, I believe Mike – the third and fourth quarter earnings call, that as we look out to and as we look at and embed in our models of 100 basis point parallel shift in the yield curve that we are looking at that point with a tangible common equity ratio of 7% and return on asset of 1% to be at a 14% return on tangible common equity. As you get into the – you don’t see that rate environment until 2016 and if you look at those metrics and back out what we’ve said a 100 basis points is worth to us on a parallel shift, you get a sense for what we need to get to ex the 100 basis point move. Mike Mayo – CLSA: I'm sorry. So without the 100 basis point shift, the target for ROA and ROTCE is what?

That’s going to be roughly $3.3 billion or $3.4 billion pre-tax and at $0.63 it’s $2 billion less which on roughly $140 billion on tangible common equity is going to be about 20 basis points less on assets at that point. Mike Mayo – CLSA: Okay. And then last question, as it relates to Citigroup's settlement with the DOJ for MBS securitizations and CDOs, you had quite a bit more in MBS securitizations and CDO structuring; and so how can we think about this number and the amount of reserves that you have, I read one press article that you were willing to offer $12 billion and the DOJ wanted $17 billion. I know you can't go into too much detail on this. But can you just give us a framework for how you view resolving this? I mean, on the one hand you could argue maybe you shouldn't pay hardly anything because you bought a lot of these entities that created these deals and you are just punishing the new shareholders. And on the other hand, if you say that you had ten times the level of some of this MBS activity, it could be a huge number. So how should we think about that?

As we said, Mike, I think, we can’t discuss that and you get a rendition of all the different criteria that people written about. I think this quarter we are able to put away the AIG case, which if you remember was back in 2011 lot of the people said it was worth a lot more money for $650 million. So we will continue to figure out where we get behind us a reasonable cost for our shareholders. We just can’t talk about details on this. Mike Mayo – CLSA: All right, well, good job with the AIG. I was one of those people who thought it was going to be more, and it wasn't. But that's fine. I will take any guidance I can get on the legal costs ahead. Thanks a lot.

Okay, thank you.

And we’ll take our last question from David Hilder with Drexel Hamilton, please go ahead. David Hilder – Drexel Hamilton: Thanks. Most of my questions have been answered. Just on the AIG settlement, I actually thought AIG was the only remaining objector, are there others?

There are several other objectors that had not been as vocal and as I said, we’ll have to see where it goes with that dropping out. David Hilder – Drexel Hamilton: And AIG has agreed to dismiss all its claims or its objections, I should say? Okay, great.

That’s correct, it’s part of the settlement agreement. David Hilder – Drexel Hamilton: Great. Thanks very much.

Great, super. Well, I think we are through all the questions. So thanks a lot for joining us and we look forward to talking next quarter.

Thank you.

This does conclude today’s conference. You may now disconnect and have a wonderful day.