Bank of America Corporation today reported net income of $2.0 billion, or $0.15 per diluted share, for the fourth quarter of 2011, compared with a net loss of $1.2 billion, or $0.16 per diluted share in the year-ago period. Revenue, net of interest expense, on a fully taxable-equivalent (FTE)1 basis rose 11 percent to $25.1 billion.
For the full year, the company reported net income of $1.4 billion, or $0.01 per diluted share, compared with a net loss of $2.2 billion, or $0.37 per diluted share in 2010. Revenue, net of interest expense, on an FTE basis1 declined 15 percent to $94.4 billion.
"We enter 2012 stronger and more efficient after two years of simplifying and streamlining our company," said Chief Executive Officer Brian Moynihan. "We built our capital ratios to record levels during 2011 on the strength of our core businesses and by shedding those that are not core to serving customers and clients. I am proud of our team and their ability to serve our customers well while transforming the company."
"Our fourth-quarter results reflect the aggressive steps we have been taking to strengthen the balance sheet and position the company for long-term growth," said Chief Financial Officer Bruce Thompson. "During the quarter, we significantly increased capital and liquidity. Our Tier 1 common equity ratio increased to 9.86 percent from 8.65 percent in the third quarter of 2011, and our time-to-required funding increased to 29 months from 27 months. For 2012, our focus is to continue to build capital and liquidity and manage expenses."
"Reflecting a gradually improving economy," continued Moynihan, "we saw solid business activity by companies of all sizes, with commercial and industrial loan balances rising 13 percent from the fourth quarter of 2010, and small business loan originations increasing approximately 20 percent in calendar year 2011."
| Selected Financial Highlights | ||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||
| (Dollars in millions except per share data) | December 31 2011 | December 31 2010 | December 31 2011 | December 31 2010 | ||||||||||||
| Net interest income, FTE basis1 | $ | 10,959 | $ | 12,709 | $ | 45,588 | $ | 52,693 | ||||||||
| Noninterest income | 14,187 | 9,959 | 48,838 | 58,697 | ||||||||||||
| Total revenue, net of interest expense, FTE basis | 25,146 | 22,668 | 94,426 | 111,390 | ||||||||||||
| Provision for credit losses | 2,934 | 5,129 | 13,410 | 28,435 | ||||||||||||
| Noninterest expense2 | 18,941 | 18,864 | 77,090 | 70,708 | ||||||||||||
| Goodwill impairment charges | 581 | 2,000 | 3,184 | 12,400 | ||||||||||||
| Net income (loss) | 1,991 | (1,244 | ) | 1,446 | (2,238 | ) | ||||||||||
| Diluted earnings (loss) per common share | $ | 0.15 | $ | (0.16 | ) | $ | 0.01 | $ | (0.37 | ) | ||||||
| 1 Fully taxable-equivalent (FTE) basis is a non-GAAP financial measure. For reconciliation to GAAP financial measures, refer to pages 25-27 of this press release. Net interest income on a GAAP basis was $10.7 billion and $12.4 billion for the three months ended December 31, 2011 and 2010, and $44.6 billion and $51.5 billion for the years ended December 31, 2011 and 2010. Total revenue, net of interest expense on a GAAP basis, was $24.9 billion and $22.4 billion for the three months ended December 31, 2011 and 2010, and $93.5 billion and $110.2 billion for the years ended December 31, 2011 and 2010. | ||||||||||||||||
| 2 Excludes goodwill impairment charges of $581 million and $2.0 billion in the three months ended December 31, 2011 and 2010, and $3.2 billion and $12.4 billion for the years ended December 31, 2011 and 2010. Noninterest expense, excluding goodwill charges, is a non-GAAP financial measure. | ||||||||||||||||
| The following is a list of selected items that affected fourth-quarter 2011 financial results. | ||||||
| Selected Fourth-Quarter 2011 Items1 | ||||||
| (Dollars in billions) | ||||||
| Gain on sale of China Construction Bank shares | $ | 2.9 | ||||
| Gain on exchange of trust preferred securities | 1.2 | |||||
| Gains on sales of debt securities | 1.2 | |||||
| Representations and warranties provision | (0.3 | ) | ||||
| Debit Valuation Adjustments (DVA) on trading liabilities | (0.5 | ) | ||||
| Goodwill impairment | (0.6 | ) | ||||
| Fair value adjustment on structured liabilities | (0.8 | ) | ||||
| Mortgage-related litigation expense | (1.5 | ) | ||||
| 1 All items pretax. | ||||||
Key Business Highlights
The company made significant progress in 2011 in line with its operating principles, including the following developments:
Focus on customer-driven businesses
- Bank of America extended approximately $557 billion in credit in 2011. This included $317.7 billion in commercial non-real estate loans, $151.8 billion in residential first mortgages, $36.5 billion in commercial real estate loans, $19.4 billion in U.S. consumer and small business card, $4.4 billion in home equity products and $27.5 billion in other consumer credit.
- The $151.8 billion in residential first mortgages funded in 2011 helped more than 695,000 homeowners either purchase a home or refinance an existing mortgage. This included approximately 47,000 first-time homebuyer mortgages originated by retail channels, and more than 237,000 mortgages to low- and moderate-income borrowers. Approximately 40 percent of funded first mortgages were for home purchases and 60 percent were refinances.
- The company originated $6.4 billion in small business loans and commitments in 2011 and hired more than 500 new small business bankers during the year to further support small business customers.
- The company raised $644 billion in capital for clients in 2011 to help support the economy.
- Average deposit balances rose nearly $25 billion to $1.03 trillion in the fourth quarter of 2011 from $1.01 trillion in the fourth quarter of 2010.
- Global Wealth and Investment Management added more than 200 Financial Advisors in the fourth quarter of 2011, bringing the total number of Financial Advisors added in 2011 to nearly 1,700.
- Business activity with corporate banking clients continued to increase with average loans and leases up 29 percent from the fourth quarter of 2010 and average deposit balances up 10 percent from the fourth quarter of 2010.
- Bank of America Merrill Lynch maintained its No. 2 global ranking in net investment banking fees and increased its market share in 2011 to 7.4 percent from 6.8 percent in 2010, excluding self-led deals, as reported by Dealogic. Also, Bank of America Merrill Lynch was named "Top Global Research Firm of 2011" by Institutional Investor.
Building a fortress balance sheet
- Regulatory capital ratios increased significantly, with the Tier 1 common equity ratio increasing to 9.86 percent in the fourth quarter of 2011, up 121 basis points from the third quarter of 2011 and 126 basis points higher than the fourth quarter of 2010. The tangible common equity ratio2 increased to 6.64 percent in the fourth quarter of 2011, up 39 basis points from the third quarter of 2011 and 65 basis points higher than the fourth quarter of 2010.
- The company substantially improved its funding position in 2011 by increasing overall liquidity and reducing debt. Global Excess Liquidity Sources increased to $378 billion at December 31, 2011, up from $363 billion at September 30, 2011 and $336 billion at December 31, 2010. Long-term debt declined to $372 billion at December 31, 2011 from $399 billion at September 30, 2011 and $448 billion at December 31, 2010.
- Time-to-required funding increased to 29 months at the end of 2011 from 27 months at September 30, 2011 and 24 months at December 31, 2010.
- In 2011, Bank of America generated $34 billion in proceeds from the sale of non-core assets and businesses, generating 79 basis points of Tier 1 common equity and reducing risk-weighted assets by $29 billion.
Pursuing operational excellence in efficiency and risk management
- The company continued to focus on strengthening its risk culture in 2011, driving accountability more deeply into the company, and simplifying the organization by selling non-core assets and businesses.
- The provision for credit losses declined 43 percent from the year-ago quarter, reflecting improved credit quality across all major consumer and commercial portfolios and underwriting changes implemented over the past several years.
- The allowance for loan and lease losses to annualized net charge-off coverage ratio increased in the fourth quarter to 2.10 times, compared with 1.74 times in the third quarter of 2011 and 1.56 times in the fourth quarter of 2010. Excluding purchased credit-impaired loans, the allowance to annualized net charge-off coverage ratio was 1.57 times, 1.33 times and 1.32 times for the same periods, respectively.
- The company continued to prudently manage its sovereign and non-sovereign exposures in Europe. Total exposure to Greece, Italy, Ireland, Portugal, and Spain, excluding net credit default protection, declined to $14.4 billion at December 31, 2011, compared to $15.8 billion at December 31, 2010. Since the end of 2009, total exposure to these countries is down 44 percent.
- At December 31, 2011, the number of full-time employees was down to 281,791 from 288,739 at the end of the third quarter of 2011 and 288,128 at December 31, 2010.
- At the center of the company´s pursuit of operational excellence is Project New BAC, a comprehensive two-phase initiative designed to simplify and streamline the company, align expenses and increase revenues. Phase 1 evaluations were completed in the third quarter of 2011. Phase 2 evaluations, which began in the fourth quarter of 2011, are expected to continue into early 2012 and cover the balance of businesses and operations that were not evaluated in Phase 1.
Delivering on the shareholder return model
- The company continued to focus on streamlining the balance sheet by selling non-core assets, addressing legacy issues, reducing debt and implementing its customer-focused strategy while focusing on reducing expenses to position the company for long-term growth.
- Tangible book value per share3 was $12.95 at December 31, 2011, compared to $12.98 at December 31, 2010. Book value per share was $20.09 at December 31, 2011, compared to $20.99 at December 31, 2010.
- The company took significant actions during the fourth quarter to strengthen the balance sheet. In aggregate, these actions increased the Tier 1 common equity ratio by 121 basis points from the third quarter of 2011.
Continuing to address legacy issues
- Since 2008, more than 1 million modifications of first and second lien mortgages have been completed, of which 78 percent were completed using Bank of America proprietary programs, and the remainder were completed through the federal government´s HAMP and 2MP programs.
- The mortgage servicing portfolio declined to $1.8 trillion at the end of 2011 from $1.9 trillion at the end of the third quarter of 2011 and $2.1 trillion at the end of 2010 as the company continued to reduce the size of this portfolio.
- The number of 60+ day delinquent first mortgage loans serviced by Legacy Asset Servicing declined to 1.1 million at the end of the fourth quarter of 2011 from 1.2 million at the end of the third quarter of 2011 and 1.4 million at the end of the fourth quarter of 2010.
- The company ended 2011 with $15.9 billion reserved to address potential representations and warranties mortgage repurchase claims, a significant increase from the year-ago liability of $5.4 billion.
1 Fully taxable-equivalent (FTE) basis is a non-GAAP financial measure. For reconciliation to GAAP financial measures, refer to pages 25-27 of this press release. Total revenue, net of interest expense on a GAAP basis, was $24.9 billion and $22.4 billion for the three months ended December 31, 2011 and 2010, and $93.5 billion and $110.2 billion for the years ended December 31, 2011 and 2010.
2 Tangible common equity ratio is a non-GAAP financial measure. For a reconciliation to GAAP financial measures, refer to pages 25-27 of this press release. The common equity ratio was 9.94 percent at December 31, 2011, 9.50 percent at September 30, 2011 and 9.35 percent at December 31, 2010.
3 Tangible book value per share is a non-GAAP financial measure. For a reconciliation to GAAP financial measures, refer to pages 25-27 of this press release.
| Business Segment Results | ||||||||||||||||
| Deposits | ||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||
| (Dollars in millions) | December 31 2011 | December 31 2010 | December 31 2011 | December 31 2010 | ||||||||||||
| Total revenue, net of interest expense, FTE basis | $ | 3,080 | $ | 3,003 | $ | 12,689 | $ | 13,562 | ||||||||
| Provision for credit losses | 57 | 41 | 173 | 201 | ||||||||||||
| Noninterest expense | 2,798 | 3,270 | 10,633 | 11,196 | ||||||||||||
| Net income (loss) | $ | 141 | $ | (200 | ) | $ | 1,192 | $ | 1,362 | |||||||
| Return on average equity | 2.34 | % | n/m | 5.02 | % | 5.62 | % | |||||||||
| Return on average economic capital1 | 9.51 | % | n/m | 20.66 | % | 21.97 | % | |||||||||
| Average deposits | $ | 417,110 | $ | 413,150 | $ | 421,106 | $ | 414,877 | ||||||||
| At December | At December | |||||||||||||||
| Client brokerage assets | $ | 66,576 | $ | 63,597 | ||||||||||||
| 1 Return on average economic capital is a non-GAAP financial measure. For reconciliation to GAAP financial measures, refer to pages 25-27 of this press release. | ||||||||||||||||
| n/m = not meaningful | ||||||||||||||||
Business Highlights
- Average deposit balances increased $4.0 billion from the year-ago quarter, driven by growth in liquid products in a low-rate environment. The rates paid on deposits declined 12 basis points to 0.23 percent in the fourth quarter of 2011 from 0.35 percent in the year-ago quarter due to pricing discipline and a shift in the mix of deposits.
- The number of mobile banking customers continued to grow in 2011, with total mobile banking customers increasing 45 percent from a year ago to 9.2 million customers.
Financial Overview
Deposits reported net income of $141 million, up $341 million from the year-ago quarter, largely due to lower noninterest expense and higher revenue.
Revenue of $3.1 billion was up $77 million from the year-ago quarter, driven by higher noninterest income. Net interest income of $2.0 billion was relatively flat from the year-ago quarter.
Noninterest expense was down $472 million from the year-ago quarter to $2.8 billion primarily due to litigation expense in the year-ago quarter and a decrease in operating expenses partially offset by elevated FDIC expense.
| Card Services | ||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||
| (Dollars in millions) | December 31 2011 | December 31 2010 | December 31 2011 | December 31 2010 | ||||||||||||
| Total revenue, net of interest expense, FTE basis | $ | 4,060 | $ | 5,357 | $ | 18,143 | $ | 22,340 | ||||||||
| Provision for credit losses | 1,138 | 1,846 | 3,072 | 10,962 | ||||||||||||
| Noninterest expense1 | 1,393 | 1,463 | 6,024 | 16,357 | ||||||||||||
| Net income (loss) | $ | 1,022 | $ | 1,289 | $ | 5,788 | $ | (6,980 | ) | |||||||
| Return on average equity | 19.69 | % | 21.74 | % | 27.40 | % | n/m | |||||||||
| Return on average economic capital2 | 40.48 | % | 40.28 | % | 55.08 | % | 23.62 | % | ||||||||
| Average loans | $ | 121,124 | $ | 136,738 | $ | 126,084 | $ | 145,081 | ||||||||
| At December | At December | |||||||||||||||
| Period-end loans | $ | 120,669 | $ | 137,024 | ||||||||||||
| 1 Includes a goodwill impairment charge of $10.4 billion in the third quarter of 2010. | ||||||||||||||||
| 2 Return on average economic capital is a non-GAAP financial measure. For reconciliation to GAAP financial measures, refer to pages 25-27 of this press release. | ||||||||||||||||
| n/m = not meaningful | ||||||||||||||||
Business Highlights
- New U.S. credit card accounts grew 53 percent in the fourth quarter of 2011 as compared to the year-ago quarter.
- Credit quality continued to improve with the 30+ day delinquency rate declining for the 11th consecutive quarter.
- Return on average equity remained strong at 19.69 percent in the fourth quarter of 2011.
Financial Overview
Card Services reported net income of $1.0 billion, compared to $1.3 billion in the year-ago quarter. The decrease in net income is due to lower revenue, partially offset by lower credit costs.
Revenue declined 24 percent to $4.1 billion from the year-ago quarter, driven by a decrease in net interest income of $647 million from lower average loans and yields. Also contributing to the decline in revenue was lower noninterest income due to the implementation of new interchange fee rules in the fourth quarter of 2011 as a result of the Durbin Amendment, which reduced revenue by $430 million. Average loans declined $15.6 billion from the year-ago quarter due to higher payment volumes, charge-offs, continued non-core portfolio runoff and divestitures.
Provision for credit losses decreased $708 million from the year-ago quarter to $1.1 billion, reflecting improving delinquencies and collections, and fewer bankruptcies as a result of improving economic conditions and lower loan balances.
| Global Wealth and Investment Management | ||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||
| (Dollars in millions) | December 31 2011 | December 31 2010 | December 31 2011 | December 31 2010 | ||||||||||||
| Total revenue, net of interest expense, FTE basis | $ | 4,164 | $ | 4,161 | $ | 17,376 | $ | 16,289 | ||||||||
| Provision for credit losses | 118 | 155 | 398 | 646 | ||||||||||||
| Noninterest expense | 3,649 | 3,489 | 14,395 | 13,227 | ||||||||||||
| Net income | $ | 249 | $ | 319 | $ | 1,635 | $ | 1,340 | ||||||||
| Return on average equity | 5.54 | % | 6.94 | % | 9.19 | % | 7.42 | % | ||||||||
| Return on average economic capital1 | 14.13 | % | 17.97 | % | 23.44 | % | 19.57 | % | ||||||||
| Average loans | $ | 102,708 | $ | 100,306 | $ | 102,143 | $ | 99,269 | ||||||||
| Average deposits | 249,814 | 246,281 | 254,777 | 232,318 | ||||||||||||
| (in billions) | At December | At December | ||||||||||||||
| Assets under management | $ | 647.1 | $ | 643.3 | ||||||||||||
| Total client balances2 | 2,135.8 | 2,181.3 | ||||||||||||||
| 1 Return on average economic capital is a non-GAAP financial measure. For reconciliation to GAAP financial measures, refer to pages 25-27 of this press release. | ||||||||||||||||
| 2 Total client balances are defined as assets under management, assets in custody, client brokerage assets, client deposits and loans. | ||||||||||||||||
Business Highlights
- Asset management fees increased 4 percent from the year-ago quarter to $1.5 billion, driven by strong long-term assets under management flows of $27 billion in 2011, compared to $14 billion in 2010.
- Full-year average deposit balances increased 10 percent from 2010 to $254.8 billion, and full-year average loan balances grew 3 percent to $102.1 billion.
Financial Overview
Global Wealth and Investment Management net income decreased 22 percent from the year-ago quarter. Revenue was flat compared to the year-ago quarter at $4.2 billion as higher net interest income and asset management fees were offset by lower transactional activity.
The provision for credit losses decreased $37 million from the year-ago quarter, reflecting fewer delinquencies and improving portfolio trends within the consumer real estate portfolios, partially offset by increased reserves in the commercial portfolio.
Noninterest expense increased 5 percent from the year-ago quarter to $3.6 billion, due primarily to higher personnel costs associated with the continued build-out of the business, and certain expenses in the fourth quarter of 2011, including elevated FDIC expense, litigation and other related losses and severance costs. These were partially offset by lower revenue-related compensation.
| Consumer Real Estate Services | ||||||||||||||||
| Three Months Ended | Year Ended | |||||||||||||||
| (Dollars in millions) | December 31 2011 | December 31 2010 | December 31 2011 | December 31 2010 | ||||||||||||
| Total revenue, net of interest expense, FTE basis | $ | 3,276 | $ | 480 | $ | (3,154 | ) | $ | 10,329 | |||||||
| Provision for credit losses | 1,001 | 1,198 | 4,524 | 8,490 | ||||||||||||
| Noninterest expense1 | 4,596 | 5,980 | 21,893 | 14,886 | ||||||||||||
| Net loss | $ | (1,459 | ) | $ | (4,937 | ) | $ | (19,529 | ) | $ | (8,947 | ) | ||||
| Average loans | 116,993 | 124,933 | 119,820 | 129,234 | ||||||||||||
| At December | At December | |||||||||||||||
| Period-end loans | $ | 112,359 | $ | 122,933 | ||||||||||||
| 1 Includes goodwill impairment charges of $2.6 billion in the second quarter of 2011 and $2.0 billion in the fourth quarter of 2010. | ||||||||||||||||
Business Highlights
- The company funded $22.4 billion in residential home loans and home equity loans during the fourth quarter of 2011.
- The company continued to make progress on legacy issues. The mortgage servicing portfolio declined to $1.8 trillion at the end of 2011 from $1.9 trillion at the end of the third quarter of 2011 and $2.1 trillion at the end of fourth quarter of 2010. The number of 60+ day delinquent first mortgage loans serviced by Legacy Asset Servicing declined to 1.1 million at the end of the fourth quarter of 2011 from 1.2 million at the end of the third quarter of 2011 and 1.4 million at the end of the fourth quarter of 2010.
Financial Overview
Consumer Real Estate Services reported a net loss of $1.5 billion for the fourth quarter of 2011, compared to a net loss of $4.9 billion for the same period in 2010. Revenue increased from $480 million in the fourth quarter of 2010 to $3.3 billion.
The increase in revenue was primarily driven by a $3.9 billion decrease in representations and warranties provision and a $908 million increase in MSR results, net of hedge, partially offset by a $1.1 billion decline in core production income and lower insurance income due to the sale of Balboa Insurance during the second quarter of 2011. The decrease in core produ
