10-QPeriod: Q1 FY2011

BANK OF AMERICA CORP /DE/ Quarterly Report for Q1 Ended Mar 31, 2011

Filed May 5, 2011For Securities:BACBAC-PBBAC-PKBAC-PLBAC-PMBAC-PNBAC-PSBML-PJBAC-PEBAC-PPBAC-PQBACRPBML-PGBML-PHBML-PLBAC-POMER-PK

Summary

Bank of America Corporation (BAC) reported a net income of $2.05 billion for the first quarter of 2011, a decrease from $3.18 billion in the same quarter of the prior year. This decline was primarily driven by lower trading revenues, higher legacy mortgage-related costs, and increased litigation expenses, partially offset by lower credit costs and gains from equity investments. Revenue on a fully taxable-equivalent (FTE) basis decreased to $27.1 billion from $32.3 billion year-over-year. Despite the year-over-year decline in net income, the company highlighted improvements in credit quality with net charge-offs decreasing significantly. Management also noted the positive impact of lower credit costs, higher asset management fees, and investment banking fees in the current quarter. However, the company incurred substantial noninterest expense, largely due to mortgage-related assessments and waivers costs, and increased litigation expenses. Capital ratios remained strong, with the Tier 1 common equity ratio at 8.64%.

Financial Highlights

28 data points
Beta

Revenue

$26.88B

Net Income

$2.05B

7.6% Net Margin

EPS (Diluted)

$0.17

Total Assets

$2.27T

Cash & Equivalents

$97.54B

Free Cash Flow

-$576.00M

Financial Statements
Beta
Revenue$26.88B
Interest Expense$5.74B
Net Income$2.05B
EPS (Basic)$0.17
EPS (Diluted)$0.17
Shares Outstanding (Basic)10.08B
Shares Outstanding (Diluted)10.18B

Key Highlights

  • 1Net income declined to $2.05 billion from $3.18 billion in the prior year's quarter, impacted by lower trading revenues and higher expenses.
  • 2Total revenue (FTE basis) decreased to $27.1 billion from $32.3 billion year-over-year.
  • 3Provision for credit losses significantly decreased to $3.81 billion from $9.81 billion year-over-year, reflecting improved credit quality.
  • 4Net charge-offs decreased to $6.03 billion from $10.80 billion year-over-year.
  • 5Noninterest expense increased by $2.5 billion to $20.28 billion, driven by mortgage-related assessments, waivers costs, and litigation expenses.
  • 6Capital ratios remained robust, with Tier 1 common equity ratio at 8.64% and Total capital ratio at 15.98%.
  • 7The company reached a settlement with Assured Guaranty for approximately $1.6 billion to resolve repurchase claims related to residential mortgage-backed securitization trusts.

Frequently Asked Questions

Bank of America reported a net income of $2.05 billion, or $0.17 per diluted common share, for the first quarter of 2011. Total revenue, net of interest expense on a FTE basis, was $27.09 billion.

The decrease in net income was primarily due to lower trading account profits (down $2.5 billion), lower mortgage banking income (down $870 million, including an increase in representations and warranties provision), and a decrease in service charges (down $534 million due to overdraft policy changes). Higher legacy mortgage-related costs and litigation expenses also contributed to the decline, while lower credit costs and gains from equity investments provided some offset.

Credit quality showed improvement. The provision for credit losses decreased significantly to $3.81 billion from $9.81 billion in Q1 2010. Net charge-offs also decreased substantially to $6.03 billion from $10.80 billion year-over-year, indicating better credit performance across most consumer and commercial portfolios.

Bank of America maintained strong capital ratios. The Tier 1 common equity ratio was 8.64%, the Tier 1 capital ratio was 11.32%, and the Total capital ratio was 15.98% at the end of the quarter.

Yes, the filing mentions several key events including entering into consent orders with federal bank regulators regarding mortgage servicing and foreclosure processes, a settlement with Assured Guaranty for approximately $1.6 billion to resolve repurchase claims, and the Federal Reserve's objection to the proposed capital distribution increase in their capital plan submission.