CHARLOTTE, N.C., Jan 21, 2011 (BUSINESS WIRE) -- Bank of America Corporation today reported a net loss of $1.2 billion, or $0.16 per diluted share, for the fourth quarter of 2010, including the previously announced goodwill impairment charge of $2.0 billion in the Home Loans and Insurance segment. Excluding the goodwill impairment charge, the company earned $756 million, or $ 0.04 per share.

¹ Excluding the goodwill impairment charge from certain financial measures represents a non-GAAP measure. For reconciliation to GAAP measures, refer to page 25 of this press release.

Results for the most recent quarter also include a $4.1 billion provision expense for outstanding and future mortgage repurchase claims, including the previously announced $3.0 billion related to the Government Sponsored Enterprises (GSEs). Also included in the company's fourth-quarter results are $1.5 billion in litigation expenses, excluding fees paid to external legal service providers, primarily in the company's consumer businesses, and lower sales and trading revenues. These factors were partially offset by the continued reduction in credit costs, approximately $360 million in net gains from the sale of non-core assets, and a $1.2 billion income tax benefit from a valuation allowance release.

For the year, Bank of America had goodwill impairment charges of $12.4 billion, which resulted in a net loss of $2.2 billion, or $0.37 per diluted share. Excluding the goodwill impairment charges, the company earned $10.2 billion, or $0.86 per diluted share.

During the year, the company also recorded $2.6 billion in litigation expenses, $6.8 billion in representations and warranties provision and $321 million in gains related to legacy assets as it made significant progress resolving legacy issues.

"Last year was a necessary repair and rebuilding year," said President and Chief Executive Officer Brian Moynihan. "Our results reflect the progress we are making at putting legacy - primarily mortgage-related - issues behind us. We earned $10.2 billion before goodwill impairment charges, rebuilt our capital positions, reduced the risk on our balance sheet, and shed more than $19 billion in assets that didn't directly serve customers and clients.

"We enter 2011 with the best customer franchise in the business against a backdrop of an improving economy. Full economic recovery depends on housing market stability. We will return value to shareholders by focusing on customers and clients, continuing to build capital, and executing our strategy."

2010 Financial Highlights

• The allowance for loan and lease losses to annualized net charge-off coverage ratio improved in the fourth quarter to 1.56 times, versus 1.11 times at year-end 2009.
• Fourth-quarter 2010 net charge-offs were 2.87 percent, down for three straight quarters, or five straight quarters on a managed basis.
• The representations and warranties liability was $5.4 billion at year-end, up from $3.5 billion in 2009. The representations and warranties provision during 2010 was $6.8 billion, including $4.1 billion in the fourth quarter of 2010.
• Global excess liquidity rose to a record $336 billion and time-to-required funding was 24 months at year-end 2010.
• Risk-weighted assets were reduced by $87 billion compared to year-end 2009 through the sale of non-core positions, reductions in legacy positions and balance sheet management.
• The Tier 1 common ratio reached 8.60 percent at December 31, 2010, up from 7.81 percent at the end of 2009.
• Tangible common equity ratio reached 5.99 percent at December 31, 2010, up from 5.56 percent at the end of 2009.
• Ending deposit balances reached a record $1 trillion at December 31, 2010, even with the sales of First Republic and Global Securities Solutions during the year.

Full-Year and Fourth-Quarter Business Highlights

• The company maintained its market-leading positions in key segments, including deposits, payment products, consumer lending, wealth management, small business and middle-market lending, treasury services, investment banking, and sales and trading.
• Global Wealth and Investment Management continued to drive a strong client focus bringing together the investment products and the banking products of legacy entities.
• Record asset management fees were reported in Global Wealth and Investment Management in the fourth quarter of 2010 with $644 billion in assets under management at December 31, 2010.
• Average deposit balances in Global Wealth and Investment Management grew nearly 14 percent in the fourth quarter of 2010 to a record $253.4 billion from $223.1 billion in the fourth quarter of 2009.
• Approximately 281,000 loan and deposit products were sold to customers who had an investment relationship with Merrill Lynch in the past.
• Global Card Services returned to profitability in the fourth quarter of 2010 with net income of $1.5 billion. Excluding the $10.4 billion goodwill impairment charge in the third quarter of 2010, Global Card Services would have been profitable for four straight quarters.
• New U.S. consumer card accounts in the quarter were up 9 percent from the third quarter of 2010.
• Bank of America Merrill Lynch ranked No. 2 in global investment banking revenues for 2010 with a 6.8 percent market share, according to Dealogic. The company ended the year with No. 1 positions in both global and U.S. rankings in leveraged loans and asset-backed securities. Bank of America Merrill Lynch participated in eight of the top 10 investment banking deals of the year by fees and six of the top 10 investment banking deals in the fourth quarter by fees.
• Bank of America continued to support the economic recovery by extending approximately $188 billion in credit in the fourth quarter of 2010, according to preliminary data. Credit extensions included $85 billion in first mortgages, $80 billion in commercial non-real estate, $11 billion in commercial real estate, $4 billion in domestic consumer and small business card, $2 billion in home equity products and $6 billion in other consumer credit.
• The $85 billion in first mortgages funded in the fourth quarter helped nearly 370,000 people either purchase homes or refinance existing mortgages. This included approximately 14,000 first-time homebuyer credit-qualified mortgages and more than 105,000 mortgages to low- and moderate-income borrowers. Approximately 26 percent of funded first mortgages were for home purchases and 74 percent were refinances.
• Bank of America continued to support small business, lending $21 billion to small- and medium-sized businesses in the fourth quarter. For the year, Bank of America provided $92 billion in credit to small- and medium-sized businesses, exceeding its previously announced goal to provide more than $85 billion to these businesses in 2010.
• Since the start of 2008, Bank of America and previously Countrywide have completed nearly 775,000 loan modifications with customers. During the fourth quarter, 76,000 loan modifications were completed, including 25,000 consumers who converted from trial modifications under the U.S. government's Making Home Affordable Program. The fourth-quarter numbers represented a 69 percent increase from total modifications in the fourth quarter a year ago.

Fourth-Quarter 2010 Revenue and Expense
Revenue, net of interest expense, on a fully taxable-equivalent (FTE) basis fell 11 percent from the fourth quarter of 2009. Net interest income on an FTE basis increased 7 percent from a year earlier. Adjusting for the impact of adopting new consolidation guidance on January 1, 2010, revenue for the fourth quarter of 2010 was down 20 percent from the fourth quarter of 2009.

Noninterest income declined 26 percent, or $3.6 billion, from the year-ago quarter due to lower mortgage banking income as a result of a $3.6 billion increase in representations and warranties provision, $720 million lower service charges and a $994 million decline in equity investment income and trading account profits. These factors were partially offset by year-over-year improvements in other income driven by lower losses on structured liabilities and increases in card income due to the adoption of new consolidation guidance.

Noninterest expense was up 27 percent from the year-ago quarter, driven in part by the $2.0 billion goodwill impairment charge. Excluding the goodwill impairment charge, noninterest expense was up 15 percent, or $2.5 billion, from a year ago, due primarily to a $933 million increase in litigation expenses, $1.4 billion in higher personnel costs as the company builds out businesses such as wealth management and international capital markets, and a $113 million rise in professional fees. Pretax merger and restructuring charges declined $163 million from a year earlier to $370 million. Results also reflect a $2.4 billion tax benefit that includes a $1.2 billion income tax asset valuation allowance release.

2010 Revenue and Expense
For the full year 2010, revenue, net of interest expense, on an FTE basis fell 8 percent from the prior year. Net interest income on an FTE basis increased 9 percent from a year earlier, reflecting the impact of the adoption of new consolidation guidance.

Noninterest income declined from the prior year due primarily to lower mortgage banking income, reflecting $6.8 billion in representations and warranties costs. In addition, there were declines in the following areas: equity investment income, gains on sales of debt securities, trading account profits, service charges and insurance income. These factors were partially offset by year-over-year improvements in other income driven largely by essentially flat fair value adjustments on structured liabilities, compared to negative fair value adjustments of $4.9 billion in the year-ago period, and increases in card income due to the adoption of new consolidation guidance.

Noninterest expense was up from the prior year, primarily reflecting the $12.4 billion in goodwill impairment charges. Excluding these charges, noninterest expense was up 6 percent from a year ago attributable largely to an increase in personnel costs of $3.6 billion, reflecting the building out of several businesses including the international capital markets platform and a $1.6 billion increase in litigation expenses. Pretax merger and restructuring charges declined $901 million from a year earlier to $1.8 billion.

Fourth-Quarter 2010 Credit Quality
Credit quality continued to improve during the fourth quarter, with net charge-offs continuing to decline across nearly all portfolios. Credit costs, while still at elevated levels, fell for the sixth consecutive quarter. Additionally, delinquencies 30 days past due or more and still accruing, excluding Federal Housing Administration-insured loans, declined for the seventh consecutive quarter, and reservable criticized utilized levels decreased for the fifth consecutive quarter.

Net charge-offs declined $414 million from the third quarter of 2010, reflecting improvement in both the consumer and commercial portfolios. The decrease was primarily driven by the impact of a continued decline in delinquencies and bankruptcies across the U.S. Global Card Services loan portfolios and a decline in delinquencies in the home equity portfolio.

The allowance for loan and lease losses to annualized net charge-off coverage ratio improved in the fourth quarter to 1.56 times, compared with 1.53 times in the third quarter of 2010 and 1.11 times in the fourth quarter of 2009. Excluding purchased credit-impaired loans, the allowance to annualized net charge-off coverage ratio was 1.32, 1.34 and 1.01 times for the same periods, respectively.

Nonperforming loans, leases and foreclosed properties were $32.7 billion at December 31, 2010, down 5 percent from $34.6 billion at September 30, 2010, and 9 percent from $35.7 billion at December 31, 2009.

The provision for credit losses was $5.1 billion, $267 million lower than the third quarter and $5.0 billion lower than the same period a year earlier. The provision was $1.7 billion lower than net charge-offs, resulting in a reduction in the allowance for loan and lease losses for the quarter. This compares with a $1.8 billion reduction in the third quarter and the addition of $1.7 billion a year earlier.

Improved delinquencies and bankruptcies in the U.S. credit card, small business and consumer lending businesses in the fourth quarter led to a reduction in the allowance for loan and lease losses. Additionally, continuing improvement in economic conditions contributed to an allowance reduction in the core commercial portfolio. These were partially offset by allowance additions of $828 million related to consumer purchased credit-impaired portfolios obtained in prior periods through acquisitions.

2010 Credit Quality
Broad-based improvement across most portfolios drove lower credit costs in 2010, resulting in a reduction in the allowance for loan and lease losses. Full-year provision for credit losses was $28.4 billion compared to $48.6 billion in 2009 or less than half of 2009 managed credit costs of $60 billion. The improving portfolio trends throughout the year were across most of the consumer and commercial businesses, particularly the U.S. credit card, small business and consumer lending businesses, as well as core commercial loan portfolios. The allowance reductions were partially offset by additions related to consumer purchased credit-impaired portfolios obtained in prior periods through acquisitions.

Net charge-offs were $646 million higher than the prior year due to the adoption of new consolidation guidance, partially offset by decreases in charge-offs across most portfolios due to the improving portfolio trends noted above.

Capital and Liquidity Management
The company's liquidity position strengthened during the fourth quarter. The company's total global excess liquidity rose approximately $12 billion from the third quarter of 2010 to $336 billion. At December 31, 2010, the company's time-to-required funding was 24 months.

During the quarter, a cash dividend of $0.01 per common share was paid, and the company declared $321 million in preferred dividends. Period-end common shares issued and outstanding were 10.09 billion for the fourth quarter, 10.03 billion for the third quarter of 2010 and 8.65 billion for the fourth quarter of 2009. The increase in outstanding shares year over year was driven primarily by the conversion of common equivalent shares into common stock in the first quarter of 2010, the issuance of common stock under employee plans during the year and the conversion of the mandatory convertible preferred stock in the fourth quarter of 2010.

Business Segment Results

Deposits full-year 2010 net income of $1.4 billion declined $1.2 billion from a year ago due to decreases in revenue and higher noninterest expense.

The revenue decline was driven by the impact of Regulation E (Reg E), which was effective in the third quarter of 2010 and the overdraft policy changes implemented in the fourth quarter of 2009. These were partially offset by increased net interest income due to a customer shift to more liquid products and continued pricing discipline.

Noninterest expense increased 14 percent from a year ago as a result of a higher proportion of costs associated with banking center sales and service efforts being aligned to Deposits from the other segments and increased litigation expenses in 2010. The prior year included a special FDIC assessment of $362 million.

Average deposits were up 1 percent from a year ago mainly due to the transfer of certain deposits from other client-managed businesses as well as organic growth, partially offset by the expected runoff of higher-cost legacy Countrywide deposits.

Deposits reported a fourth-quarter net loss of $201 million, compared to net income of $610 million during the same period last year, due to a decline in revenue and an increase in noninterest expense. Revenue declined due to the impact of Reg E, partially offset by increased net interest income due to a customer shift to more liquid products and continued pricing discipline. Noninterest expense increased due to the increased litigation expenses and as a result of higher proportion of costs associated with banking center sales and service efforts being aligned to Deposits from other business segments.

Global Card Services reported a full-year net loss of $6.6 billion due to the $10.4 billion goodwill impairment charge in the third quarter. Excluding this charge, Global Card Services net income was $3.8 billion, compared to a net loss of $5.3 billion a year ago as both credit costs and noninterest expense declined. During the year, risk-adjusted margin for consumer credit card increased to 2.92 percent compared to 1.92 percent in 2009, primarily driven by improvement in credit quality.

Revenue decreased $3.4 billion from a year ago driven by lower average loans, reduced interest and fee income primarily resulting from the implementation of the CARD Act, and the impact of recording a provision related to future payment protection insurance claims in the U.K. This decrease was partially offset by the gain on the sale of the MasterCard position in 2010.

Provision for credit losses decreased $16.9 billion from a year ago driven primarily by lower delinquencies and decreasing bankruptcies as a result of the improved economic environment. This resulted in reserve reductions of $7.0 billion in 2010 compared to reserve increases of $3.4 billion in 2009 and $6.5 billion lower net charge-offs. Risk-adjusted margin increased to 2.92 percent compared to 1.92 percent in 2009.

Noninterest expense increased compared to a year ago due to the $10.4 billion goodwill impairment charge. Excluding this impairment charge, noninterest expense decreased 10 percent compared to the year-ago period as a higher proportion of costs associated with banking center sales and service efforts were aligned to Deposits from Global Card Services.

Net income of $1.5 billion in the fourth quarter of 2010 compared to a net loss of $994 million during the same period last year due to lower credit costs as the economy improved. Revenue declined 12 percent during the fourth quarter of 2010 compared with the same period a year ago driven by lower average loans and reduced interest and fee income primarily resulting from the implementation of the CARD Act.

Home Loans andInsurance reported a full-year net loss of $8.9 billion for 2010 primarily due to $6.8 billion in representations and warranties expense and a $2.0 billion goodwill impairment charge.

Revenue declined by $6.3 billion, or 37 percent, driven by an increase of $4.9 billion in representations and warranties expense and a $1.2 billion decline in mortgage production revenue. The decline in production revenue was primarily due to a decline in loan volumes, reflecting a drop in the overall size of the mortgage market.

Provision for credit losses decreased $2.8 billion driven by improving portfolio trends including a lower reserve addition for the Countrywide purchased credit-impaired home equity portfolio. Excluding the goodwill impairment charge, noninterest expense increased $1.5 billion from a year ago due to higher litigation expenses and an increase in default-related servicing expenses, partially offset by lower production expense and insurance losses.

The fourth-quarter 2010 net loss of $5.0 billion compared to a net loss of $1.0 billion in the fourth quarter of 2009. The increase was primarily due to representations and warranties expense of $4.1 billion in the fourth quarter of 2010, which includes $3.0 billion related to the previously announced GSE agreements as well as adjustments to the representations and warranties liability for other loans sold directly to the GSEs and not covered by those agreements. Excluding the $2.0 billion goodwill impairment charge, Home Loans and Insurance net loss was $3.0 billion for the fourth quarter of 2010.

Bank of America believes that it has addressed its remaining exposure to repurchase obligations for residential mortgage loans sold directly to the GSEs through the $3.0 billion increase in representations and warranties provision referred to above. The calculation of the provision incorporates historical experience with the GSEs and certain assumptions regarding home prices and other economic matters, and future provisions for representations and warranties may be affected if the actual results are different.

At December 31, 2010, the company's unresolved repurchase requests totaled approximately $10.7 billion, compared with $12.9 billion on September 30, 2010 and $7.6 billion at the end of 2009. The liability for representations and warranties was $5.4 billion at December 31, 2010, compared with $4.4 billion on September 30, 2010, and $3.5 billion at the end of 2009. The increase in the liability reflects the $6.8 billion in representations and warranties provision expensed during the year, less payments made to various counterparties.

Compared to the same period in the prior year, results in the fourth quarter of 2010 were also impacted by the $2.0 billion goodwill impairment charge, increased default and other loss mitigation servicing expenses, partially offset by more favorable mortgage servicing rights results. Provision for credit losses in the fourth quarter of 2010 decreased as compared to the same period in the prior year driven by lower net charge-offs and improving portfolio trends.

Global Commercial Banking full-year net income increased $3.5 billion from the year-ago loss of $290 million due to lower credit costs.

Revenue decreased $238 million from a year ago primarily due to a lower residual net interest income allocation related to asset and liability management activities and increased costs from an agreement to purchase certain loans. These factors were partially offset by credit pricing discipline, which negated the impact of lower loan volumes, and continued deposit growth from existing clients.

The provision for credit losses decreased $5.8 billion to $2.0 billion for the year compared to 2009. The decrease was driven by improvements primarily in the commercial real estate portfolio, reflecting stabilizing values, and the U.S. commercial portfolio, reflecting improved borrower credit profiles. All other portfolios experienced lower net charge-offs attributable to more stable economic conditions.

Average deposit balances continued to grow, increasing by $18.7 billion, as clients managed to new liquidity levels. Although average loan and lease balances decreased $25.8 billion from a year ago due to client deleveraging and low loan demand, ending commercial and industrial loan balances have grown approximately 2 percent from the third quarter of 2010, showing stability.

Fourth-quarter 2010 net income increased to $1.0 billion compared to a net loss of $31 million in the same period last year. The provision for credit losses decreased $2.0 billion compared to the same period in 2009. Revenues and provision for credit losses declined due to the same factors as described in the full-year discussion above.

Global Banking and Markets full-year net income decreased $3.7 billion compared to the prior year. Revenue decreased primarily due to the weak trading environment and losses on certain market positions. The prior year included a $3.8 billion gain on the contribution of the merchant services business to a joint venture, which was largely offset by market disruption charges. The provision for credit losses declined $2.2 billion due to lower net charge-offs in the corporate portfolio reflecting improvement in borrower credit profiles and lower reservable criticized levels.

Fixed Income, Currency and Commodities sales and trading revenue of $13.2 billion increased $435 million compared to a year ago as a reduction in market activity and increased investor risk aversion in 2010 were offset by significantly lower market disruption charges.

Equities sales and trading revenue declined to $4.1 billion from $4.9 billion a year ago, driven primarily by a decrease in volumes as well as adverse market conditions in the equity derivatives business.

Noninterest expense increased $2.1 billion driven by higher compensation costs, approximately $400 million for the U.K. bonus tax in the second quarter, and the recognition of expense on proportionately larger prior year incentive deferrals. Income tax expense was adversely affected by a charge related to the U.K. tax rate reduction, impacting the carrying value of the deferred tax asset.

Fourth-quarter 2010 net income declined to $724 million, compared with $1.4 billion a year earlier, as revenues remained flat and a benefit in the provision for credit losses due to lower net charge-offs and reserve reductions was offset by higher compensation expense.

Global Wealth and Investment Management full-year 2010 net income decreased $369 million from a year earlier driven by higher noninterest expense and the tax-related effect from the sale of the Columbia long-term business, partially offset by higher noninterest income and lower credit costs.

Revenue increased $534 million from a year earlier to $16.7 billion, driven by higher asset management fees and transactional revenue.

For the year, provision for credit losses decreased $415 million from a year ago to $646 million, driven by lower net charge-offs in the consumer real estate and commercial portfolios, along with the absence of a prior-year single large commercial charge-off. Noninterest expense increased from a year ago due primarily to higher revenue-related expenses, support costs and personnel costs associated with further development of the business.

Fourth-quarter 2010 net income decreased $197 million to $332 million compared with the same period last year, reflecting higher provision for credit losses. Revenue increased to $4.3 billion, compared to $4.0 billion in the year-ago quarter, due in part to increased deposits. Asset management fees rose to $1.4 billion in the fourth quarter, reflecting positive market and long-term client flows.

All Other reported full-year net income of $1.1 billion, down $241 million from $1.3 billion a year ago, as higher revenue reflected an increase in net interest income and positive fair value adjustments related to structured liabilities, compared to negative fair value adjustments of $4.9 billion in the year-ago period. These items were offset by a significantly higher provision for credit losses, lower equity investment gains and lower gains on sales of debt securities in 2010 as compared to 2009.

The provision for credit losses increased to $4.6 billion from a provision benefit of $3.4 billion a year ago, primarily due to the impact of the new consolidation guidance as the prior year included a securitization offset to present Global Card Services on a managed basis. Additionally, the provision for credit losses was adversely impacted by further reserve increases to the Countrywide purchased credit-impaired discontinued real estate portfolio. These items were partially offset by a lower provision for credit losses related to the residential mortgage portfolio due to improving portfolio trends.

Fourth-quarter 2010 net income of $346 million increased $1.1 billion from a $749 million loss a year earlier, primarily driven by lower negative fair value adjustments related to structured liabilities and a significantly lower provision for credit losses compared to the fourth quarter of 2009 primarily due to the impact of the new consolidation guidance.

All Other consists primarily of equity investments, the residential mortgage portfolio associated with asset and liability management (ALM) activities, the residual impact of the cost allocation process, merger and restructuring charges, intersegment eliminations, fair value adjustments related to structured liabilities and the results of certain consumer finance, investment management and commercial lending businesses that are being liquidated. Prior to January 1, 2010, All Other also included the offsetting securitization impact to present Global Card Services on a managed basis. For more information and detailed reconciliation, please refer to the data pages supplied with this press release.