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™ 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. The 2008 coverage ratios and amounts shown in the following table do not include Merrill Lynch, which was acquired on January 1, 2009.
