Bank of America Corporation today reported full-year 2009 net income of $6.3
billion, compared with net income of $4.0 billion in 2008. Including preferred stock
dividends and the negative impact from the repayment of the U.S. government's $45
billion preferred stock investment in the company under the Troubled Asset Relief
Program (TARP), income applicable to common shareholders was a net loss of $2.2
billion, or $0.29 per diluted share.
Those results compared with 2008 net income applicable to common shareholders of
$2.6 billion, or $0.54 per diluted share.
In the fourth quarter of 2009, the company's net loss narrowed to $194 million from
a loss of $1.8 billion a year earlier. Including dividends on preferred stock and
the one-time $4.0 billion negative impact associated with repaying TARP, income
applicable to common shareholders in the period was a net loss of $5.2 billion, or
$0.60 per diluted share, compared with a net loss of $2.4 billion, or $0.48 per
diluted share, in the year-ago quarter.
Results in the fourth quarter reflected continued elevated credit costs, although
lower than in the third quarter of 2009. While net interest income declined from the
year-ago quarter as a result of lower asset liability management portfolio levels
and reduced loan demand, noninterest income was up sharply due to an improvement in
trading and significantly higher income from investment and brokerage services,
equity investments and investment banking.
"While it's disappointing to report a loss for the fourth quarter, there were a
number of important accomplishments worth noting," said Chief Executive Officer and
President Brian T. Moynihan. "First, we repaid the American taxpayer, with interest,
for the TARP investment. Second, we have taken steps to strengthen our balance sheet
through successful securities offerings. And third, all of our non-credit businesses
recorded positive contributions to our results.
"As we look at 2010, we are encouraged by signs the economy is improving, as we have
seen in the stabilization of our credit costs, particularly in the consumer
businesses. That said, economic conditions remain fragile and we expect high
unemployment levels to continue, creating an ongoing drag on consumer spending and
growth."
Full-Year and Fourth-Quarter 2009 Business Highlights
* During the quarter, Bank of America funded $86.6 billion in first mortgages,
helping more than 400,000 people either purchase homes or refinance their existing
mortgages. This funding included $22.9 billion in mortgages made to 151,000 low- and
moderate-income borrowers. Approximately 42 percent of first mortgages were for home
purchases.
* In 2009, Bank of America has provided home ownership retention opportunities to
approximately 460,000 customers. This includes 260,000 loan modifications with total
unpaid principal balances of approximately $55 billion and approximately 200,000
customers who were in trial-period modifications under the government's Making Home
Affordable program at December 31.
* Bank of America Home Loans expanded its home retention staff to more than 15,000
to help customers experiencing difficulty with their home loans. This represents
more than double the size of the team since Bank of America acquired Countrywide.
* In 2009, Bank of America extended $756 billion in credit, including commercial
renewals of $208 billion, according to preliminary data. New credit included $378
billion in first mortgages, $282 billion in commercial non-real estate, $39 billion
in commercial real estate, $18 billion in domestic consumer and small business card,
$13 billion in home equity products and nearly $26 billion in other consumer credit.
* In 2009, Small Business Lending extended more than $14 billion in credit comprised
of $12 billion in Business Banking and $2 billion to more than 146,000 Small
Business Banking businesses. Bank of America recently announced an initiative to
increase lending to small- and medium-sized businesses in 2010 by at least $5
billion from 2009 levels.
* Average retail deposits during the quarter increased $89.9 billion, or 15 percent,
from a year earlier. Excluding the initial impact of the Merrill Lynch acquisition
and the expected decline in higher-yielding Countrywide deposits, average retail
deposits experienced strong organic growth of $29.1 billion as momentum in the
affluent and mass affluent customer base continued.
* Bank of America introduced the Clarity Commitment(tm) for home mortgages, home
refinancing and credit cards. The Clarity Commitment is a simple, easy-to-read and
understand, one-page summary for customers that includes important information on
payments, interest rates and fees. Bank of America began presenting these improved
materials to more than 40 million of its customers in 2009.
* The integration of Merrill Lynch remained on track with cost savings surpassing
original estimates for the first year.
* Bank of America Merrill Lynch ranked No. 2 in global and U.S. investment banking
fees, according to Dealogic 2009 league tables.
* In Global Wealth and Investment Management, the financial advisor network of more
than 15,000 was up slightly from the third quarter as the retention rate stood at
the highest level in recent years and the company increased hiring, training and
development of new advisors.
* Bank of America agreed to sell the long-term asset management business of Columbia
Management to Ameriprise Financial, Inc. The company also agreed to sell First
Republic Bank to a number of investors, including investment funds managed by Colony
Capital, LLC and General Atlantic LLC, led by First Republic's existing management.
Both sales are expected to close in the second quarter of 2010.
* Bank of America repaid the $45 billion of the U.S. taxpayers' preferred stock
investment in the company as part of TARP. Repayment followed the successful
completion of a securities offering. In 2009, Bank of America raised a total of $57
billion in additional Tier 1 common capital through various measures, further
strengthening its liquidity and capital position.
Fourth-Quarter 2009 Financial Summary
Revenue and Expense
Revenue net of interest expense on a fully taxable-equivalent basis rose 59 percent
to $25.4 billion from $16.0 billion a year ago, reflecting in part the addition of
Merrill Lynch.
Net interest income on a fully taxable-equivalent basis declined 11 percent to $11.9
billion, compared with $13.4 billion a year earlier. The decrease was a result of
lower asset liability management portfolio levels, reduced loan levels and the
unfavorable impact of higher nonperforming loans. This was partially offset by the
addition of Merrill Lynch. The net interest yield narrowed 69 basis points to 2.62
percent.
Noninterest income rose to $13.5 billion from $2.6 billion a year earlier. Higher
trading account profits, investment and brokerage services fees and investment
banking income reflected the addition of Merrill Lynch and significantly lower
market disruption losses. The current quarter also included a $1.1 billion gain on
the company's investment in BlackRock as a result of its purchase of Barclay's asset
management business. These increases were partially offset by $1.6 billion in losses
mostly related to mark-to-market adjustments on the Merrill Lynch structured notes,
as the company's credit spreads improved during the quarter. Card income declined
$1.3 billion mainly due to higher credit losses on securitized credit card loans and
lower fee income.
Noninterest expense increased to $16.4 billion from $10.9 billion a year earlier.
Personnel costs and other general operating expenses rose, driven in part by the
Merrill Lynch acquisition. Pretax merger and restructuring charges rose to $533
million from $306 million a year earlier.
The efficiency ratio on a fully taxable-equivalent basis was 64.47 percent, compared
with 68.51 percent a year earlier.
Pretax, pre-provision income on a fully taxable-equivalent basis was $9.0 billion
compared with $5.0 billion a year earlier. The company had a tax benefit of $1.2
billion in the quarter compared with a benefit of $2.0 billion the same period last
year.
Credit Quality
Credit quality showed signs of improvement in most portfolios compared with the
prior quarter, although credit costs remained high as global economic conditions
remained challenging. Rising unemployment and underemployment kept consumers under
stress and individuals spent longer periods without work. Losses, however, declined
in most consumer portfolios from the prior quarter.
The impact of the weak economy on the commercial portfolios moderated somewhat with
criticized loans decreasing and the growth of nonperforming loans slowing. Losses in
the homebuilder portfolio dropped from the prior quarter and losses in the
commercial domestic portfolio declined across a broad range of borrowers and
industries.
Net charge-offs were $1.2 billion lower than the prior quarter, driven by
improvements across most consumer portfolios. Net charge-offs declined from the
previous quarter for the first time in nearly four years. Nonperforming assets were
$35.7 billion, compared with $33.8 billion at September 30, 2009, reflecting a
slower rate of increase than in recent quarters.
The provision for credit losses was $10.1 billion, $1.6 billion lower than the third
quarter and $1.6 billion higher than the same period a year earlier. The $1.7
billion addition to the reserve for credit losses was lower than the third quarter,
driven by lower additions on the purchased impaired consumer portfolios obtained
through acquisitions and improved delinquencies in certain consumer and small
business portfolios. These decreases were partially offset by additions to increase
reserve coverage on the consumer credit card portfolio.
