Bank of America Earns US$3.2 Billion in Second Quarter (1)

CHARLOTTE, North Carolina, July 17 /PRNewswire/ --

-- Strong Pretax, Pre-provision Income of US$16 Billion

-- Another Good Quarter in Capital Markets and Home Loans

-- Enhanced Capital Strength, Tier 1 Capital Ratio at 11.93 Percent

-- Extends More Than US$211 Billion in Credit in the Second Quarter

-- Adds US$4.7 Billion to Credit Loss Reserves

Bank of America Corporation today reported second-quarter 2009 net income of US$3.2 billion. After deducting preferred dividends of US$805 million, including US$713 million paid to the U.S. government, diluted earnings per share were US$0.33.

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Those results compared with net income of US$3.4 billion, or diluted earnings per share of US$0.72 during the year-ago period.

For the first half of 2009, Bank of America earned US$7.5 billion, or US$0.75 per share.

Results were driven by continued strong revenue performance in the wholesale capital markets businesses as well as in home loans, complemented by the previously announced gains on the sale of China Construction Bank (CCB) shares and the sale of the company's merchant processing business to a joint venture. These positives were somewhat offset by continuing high credit costs, including additions to the reserve for loan and lease losses, as well as significant negative credit valuation adjustments on certain liabilities including the Merrill Lynch structured notes and the impact of a special Federal Deposit Insurance Corp. (FDIC) assessment.

Bank of America finished the second quarter with its strongest capital position in recent memory, with a Tier 1 Capital ratio of 11.93 percent as well as a leading liquidity position among global banks.

"Having positive net income in an extremely challenging environment speaks to the diversity and strength of our business model as well as the extraordinary effort put forth by all of our associates," said Kenneth D. Lewis, chief executive officer and president. "Our goals during this difficult time have been to enhance the strength of our balance sheet and capital position and to continue to improve our earning power while dealing with the credit issues facing our industry due to the recession.

"Difficult challenges lie ahead from continued weakness in the global economy, rising unemployment and deteriorating credit quality that will affect our performance for the rest of the year and into 2010," Lewis said. "However, we are convinced that Bank of America will weather the storm and emerge as an acknowledged leader in financial services in the United States and around the world."

"Most importantly, we continue to serve our customers and clients around the world every day, helping them with their accounts, meeting their financial needs and adding new business," Lewis added.

    
    Second Quarter 2009 Business Highlights
    
    - Bank of America increased its Tier 1 common capital by nearly US$40
      billion through multiple actions during the quarter that included
      issuing shares of common stock, exchanging certain non-government
      preferred stock for common stock, and asset sales.
    - Bank of America Merrill Lynch ranked No. 1 in high-yield debt
      and leveraged loans based on volume, and the firm was No. 2 and No. 3,
      respectively, in U.S. and global investment banking fees for the first
      half of 2009, according to second quarter league tables.
    - Sales and trading revenue, excluding credit valuation adjustments on
      derivative liabilities and market disruption charges, rose to a record
      US$6.7 billion.
    - During the quarter, Bank of America announced the sale of its
      merchant processing business to a joint venture, which included First
      Data Corp. The transaction is expected to deliver next-generation
      payments solutions to merchants.
    - Bank of America funded US$110.6 billion in first mortgages, helping
      nearly 500,000 people either purchase a home or refinance their existing
      mortgage, including US$24.3 billion in mortgages made to 154,000
      low- and moderate-income borrowers. Approximately 29 percent of first
      mortgages were for purchases.
    - Credit extended during the quarter, including commercial renewals of
      US$55 billion, was more than US$211 billion, compared with US$183
      billion in the first quarter. New credit included US$111 billion in
      mortgages, US$78 billion in commercial non-real estate, approximately
      US$9 billion in commercial real estate, US$4 billion in domestic and
      small business card, US$4 billion in home equity products and more than
      US$5 billion in other consumer credit.(1)
    - During the second quarter, Small Business Banking extended more than
      US$580 million in new credit comprised of credit cards, loans and lines
      of credit to more than 35,000 customers.
    - To help homeowners avoid foreclosure, Bank of America has provided rate
      relief or agreed to modifications with approximately 150,000 customers
      for the first six months of 2009, compared with more than 230,000 for
      all of 2008 for Bank of America and Countrywide. In addition,
      approximately 80,000 Bank of America customers are already in a trial
      period modification or were in the process of responding to an offer
      under the Making Home Affordable program through mid-July.
    - Average retail deposits in the quarter increased US$136.3 billion, or
      26 percent, from a year earlier, including US$104.3 billion in balances
      from Merrill Lynch and Countrywide. Excluding Countrywide and
      Merrill Lynch, Bank of America grew retail deposits US$32.0 billion,
      or 6 percent, from the year-ago quarter.
    (1) Preliminary data as of July 17, 2009

Transition Update

The Merrill Lynch integration is on track and meeting expected goals. The company in 2009 expects to achieve in excess of 40 percent of the previously announced goal of approximately US$7 billion in cost savings, ahead of the original goal of 25 percent for the year.

Since June 1, approximately 6,500 affluent banking-only clients in Bank of America have been referred to Merrill Lynch financial advisors. Of that group, approximately 1,400 now have added an investment relationship with the company. Merrill Lynch financial advisors referred more than 1,100 clients to the commercial bank of Bank of America.

The Countrywide transition and related cost savings are on track.

The new Bank of America Home Loans and Insurance brand was introduced to consumers during the quarter as part of the transition.

Second Quarter 2009 Financial Summary

Revenue and Expense

Revenue net of interest expense on a fully taxable-equivalent basis rose 60 percent to US$33.1 billion compared with US$20.7 billion a year ago.

Net interest income on a fully taxable-equivalent basis rose 9 percent to US$11.9 billion from US$10.9 billion in the second quarter of 2008 due to an improved rate environment and the addition of Countrywide and Merrill Lynch. These improvements were partially offset by a shift in loan mix and the sale of securities. Net interest yield narrowed 28 basis points to 2.64 percent due to the addition of lower yielding assets from Countrywide and Merrill Lynch, sales of securities, and a shift in loan mix, partially offset by the favorable rate environment.

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