Bank of America Turns $3.2 Billion Profit in Q1

Posting back-to-back losses in the third and fourth quarters of 2009, the second half of last year was, to say the least, rough for ""Bank of America."":https://www.bankofamerica.com/index.jsp But a new year marks new beginnings, and things seem to be turning around for the nation's biggest bank.

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According to the company's earnings report released Friday, Bank of America earned $3.2 billion, or $0.28 per diluted share, in the first quarter of 2010. That's a huge improvement compared to the net loss of $194 million, or $0.60 per share, reported in the fourth quarter of 2009. However, profits were still down from the bank's net income of $4.2 billion, or $0.44 a share, this time last year.

The notable quarter-to-quarter increase in earnings surprised many, as analysts only expected the bank to earn $0.09 per share, according to ""Thomson Reuters."":http://thomsonreuters.com/

Bank of America said two main factors drove results in the first quarter. First, provision for credit losses fell by $3.6 billion from the same period in 2009, reflecting an improvement in credit quality. And strong capital markets activity, including record sales and trading driven by industry-leading corporate and investment banking positions, helped drive results for global banking and markets.

""With each day that passes, the 2010 story appears to be one of continuing credit recovery, and our results reflect a gradually improving economy,"" said Brian T. Moynihan, CEO and president of the Charlotte, North Carolina-based bank. ""Our customers â€" individuals, companies, and institutional investors â€" increasingly see the value of our integrated capabilities. We are also seeing ample indications that those integrated capabilities hold promise for longer-term shareholder value.""

Revenue, at $32.3 billion, was up 27 percent from the fourth quarter of 2009 but down 11 percent from $36.1 billion a year ago. The bank said the year-over-year decline was due to the absence of a year-earlier credit-related gains on Merrill Lynch structured notes, the sale of an equity investment, and lower mortgage banking volume and income.

Bank of America's net loss in home loans and insurance widened to $2.1 billion as higher credit costs continued to

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negatively impact results. Net revenue decreased 31 percent due to lower mortgage banking income, driven by less favorable mortgage servicing rights results and lower production volume and margins resulting from a decrease in refinance activity.

In addition, the provision for credit losses in the bank's home loans and insurance division rose to $3.6 billion, driven by higher reserve additions amid continued stress in the housing market. Also propelling the increase was the impact of certain modified loans where carrying value is based on the underlying collateral value and higher home equity net charge-offs related to loans that were consolidated in the quarter as a result of new accounting guidance. The bank said these increases were partially offset by lower reserve additions on the Countrywide home equity purchased credit-impaired portfolio, compared with the year-ago period.

During the quarter, Bank of America extended $150 billion in credit, according to preliminary data. Credit extensions included $70 billion in first mortgages, which helped more than 320,000 people either purchase homes or refinance existing mortgages. This funding also included $17.4 billion in mortgage made to nearly 115,000 low- and moderate-income borrowers.

The extension of credit to new borrowers is a vital factor to the bank's success; but the foreclosure crisis is far from over, so the bank is stepping up its efforts to keep customers in their homes.

In an effort to help struggling borrowers, Bank of America continued its ongoing homeownership preservation efforts and even developed a new initiative. ""As DSNews.com previously reported"":http://dsnews.comarticles/bofa-to-offer-principal-forgiveness-some-underwater-homeowners-2010-03-24, the bank introduced an earned principal forgiveness approach to modifying certain types of mortgages that are severely underwater. In addition, Bank of America Home Loans expanded its default management staff by nearly 7 percent to more than 16,000 during the quarter.

Since the start of 2008, Bank of America and previously Countrywide have provided homeownership retention opportunities to customers for approximately 819,000 home loan modification transactions. This includes 569,000 loan modifications and approximately 251,000 consumers who were in trial-period modifications under the government's Making Home Affordable program at March 31, 2010. During the quarter, 77,000 loan modifications were completed with total unpaid principal balances of $17.8 billion, including 33,000 customers who converted from trial-period to permanent modifications under the Making Home Affordable program.

""We will continue to support our customers through these and other initiatives aimed at helping restore their financial health,"" Moynihan said. ""We want to ensure quality relationships with our customers and earn their trust and future business. This will benefit not just our customers, but our company and our shareholders.""