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Bank of America Third Quarter Earnings Per Share Decline 31% to 82 Cents
Capital Markets Losses Offset Solid Revenue Growth in Most Businesses
CHARLOTTE, Oct. 18 /PRNewswire-FirstCall/ -- Bank of America
Corporation today reported third quarter net income declined 32 percent to
$3.70 billion from $5.42 billion a year earlier. Diluted earnings per share
fell 31 percent to $0.82 from $1.18.
(Logo: http://www.newscom.com/cgi-bin/prnh/20050720/CLW086LOGO-b )
Lower net income resulted from a $1.33 billion decline in earnings in
Global Corporate and Investment Banking given the significant disruption in
the financial markets during the quarter. Provision expense increased $865
million due to consumer and small business credit costs rising from post
bankruptcy reform lows, growth and seasoning in various portfolios and
stress in several portfolios driven by the weakened U.S. housing market.
"While the significant dislocations in the capital markets have hurt
most participants, we are still very disappointed in our third quarter
performance," said Kenneth D. Lewis, chairman and chief executive officer.
"However, the majority of our businesses experienced solid revenue growth
as sales momentum continued, demonstrating the value of our diverse
business mix. We continued to invest in our businesses for the long term
and to introduce innovative products and services to differentiate Bank of
America in the marketplace. While we cannot predict the near term, I am
confident that such innovation and execution combined with the advantages
of scale and reach are the formula for future success."
Impact of Capital Markets on Financial Results
* Unprecedented market disruptions impacted trading results. As a result,
Global Corporate and Investment Banking net income fell 93 percent to
$100 million from $1.43 billion a year earlier.
* Capital Markets and Advisory Services, a business within GCIB which
includes Liquid Products, Credit Products, Structured Products and
Equities, posted a $717 million net loss compared with net income of
$298 million a year earlier. Included in the net loss for the quarter
were $247 million in markdowns, net of fees, on leveraged and non-
leveraged loans and commitments.
- Contributing to the loss in Credit Products was a $607 million
trading revenue loss due principally to the breakdowns in
traditional pricing relationships, which made hedges ineffective,
and the widening of credit spreads.
- Structured Products, which includes asset-backed and residential
mortgage-backed securities, commercial mortgages, collateralized
debt obligations (CDOs) and structured credit trading had a net
revenue loss of $527 million. The loss arose from lower investment
banking fees and trading declines principally due to the same
conditions affecting Credit Products.
Third Quarter 2007 Business Highlights (vs. a year earlier)
* Total sales of retail products rose 12 percent, generated by strong
growth in sales of first mortgages, checking and savings accounts and
online banking activations. Net new retail checking accounts grew to a
record 757,000.
* Retail deposits increased $16.52 billion, or 4 percent. Debit card
purchase volume increased 11 percent and an increase in retail accounts
drove service charge income higher by 8 percent.
* First mortgage originations rose 27 percent helped by the success of No
Fee Mortgage PLUS, which accounted for 21 percent of first mortgage
production in the third quarter.
* Average loans and leases in Business Lending increased 9 percent to
nearly $240 billion.
* Total unit sales to small businesses with less than $2.5 million in
annual sales rose 24 percent, while average deposits grew 9 percent.
* Total assets under management (AUM) in Global Wealth and Investment
Management increased to a record of nearly $710 billion helped by the
addition of U.S. Trust and strong net flows. On a 1-year and 3-year AUM
weighted basis, 63 percent and 96 percent, respectively, of the
Columbia Funds and Excelsior equity funds were in the top 2 performance
quartiles compared with their peer group.(1)
(1) Results shown are defined by Global Wealth and Investment
Management's calculation of the percentage of assets under management in
the top two quartiles of categories based on Morningstar as of August 31,
2007. The category percentile rank was calculated by ranking the three year
net return of share classes within the categories. The assets of the number
of funds within the top 2 quartile results were added and then divided by
Global Wealth and Investment Management's total assets under management.
Past performance is no guarantee of future results. The share class earning
the ranking may have limited eligibility and may not be available to all
investors.
Third Quarter 2007 Financial Summary
Revenue
Revenue net of interest expense on a fully taxable-equivalent basis
declined 12 percent to $16.30 billion from $18.49 billion in the third
quarter 2006.
Noninterest income fell 24 percent to $7.31 billion from $9.60 billion
in the third quarter of 2006. The decrease was mainly due to trading
account losses of $1.46 billion and the absence of a gain on the sale of
the company's operations in Brazil recognized in the third quarter of last
year. The decrease was partially offset by the absence of a $469 million
loss on the sale of debt securities a year earlier and improvements in
investment and brokerage services and equity investment income.
Net interest income on a fully taxable-equivalent basis was $8.99
billion compared with $8.89 billion the previous year. The net interest
yield narrowed 12 basis points to 2.61 percent.
Efficiency
Noninterest expense decreased 4 percent to $8.54 billion from $8.86
billion a year earlier as a result of lower capital markets incentive
compensation and pretax merger and restructuring charges. Pretax merger and
restructuring charges mainly related to the U.S. Trust acquisition were $84
million compared with $269 million a year earlier which were associated
with the MBNA purchase. The efficiency ratio on a fully taxable-equivalent
basis was 52.40 percent.
Credit Quality
Credit costs continued to rise from the unusually low levels
experienced in 2006 post bankruptcy reform. Given weakened housing and
capital markets conditions, certain sectors began to experience some
weakness. However, overall credit quality remained sound as credit card
losses stabilized, declining from the second quarter.
Provision expense in the third quarter rose from a year ago due to
higher net charge-offs and increased reserves from the seasoning of the
small business and home equity portfolios, reflecting growth in these
businesses. The company also added reserves for its home equity and
homebuilder loan portfolios in view of the impact of the weakened U.S.
housing market.
* Provision for credit losses was $2.03 billion, up from $1.81 billion in
the second quarter of 2007, and $1.17 billion in the third quarter of
2006.
* Net charge-offs were $1.57 billion, or 0.80 percent of total average
loans and leases. This compared with $1.50 billion, or 0.81 percent, in
the second quarter of 2007 and $1.28 billion, or 0.75 percent, in the
third quarter of 2006.
* Total managed net losses were $2.84 billion, or 1.27 percent of total
average managed loans and leases compared with $2.77 billion, or 1.31
percent, in the second quarter of 2007 and $2.20 billion, or 1.11
percent, in the third quarter of 2006.
* Nonperforming assets were $3.37 billion, or 0.43 percent of total
loans, leases and foreclosed properties, at September 30 compared with
$2.39 billion, or 0.32 percent, at June 30, 2007 and $1.66 billion, or
0.25 percent at September 30, 2006.
* The allowance for loan and lease losses was $9.54 billion, or 1.21
percent of total loans and leases measured at historical cost at
September 30 compared with $9.06 billion, or 1.20 percent, at June 30
and $8.87 billion, or 1.33 percent, at September 30, 2006.
Capital Management
Total shareholders' equity was $138.51 billion at September 30.
Period-end assets were $1.6 trillion. The Tier 1 capital ratio was 8.22
percent, down from 8.52 percent at June 30, 2007 and 8.48 percent a year
ago due to the impact of the U.S. Trust acquisition.
During the quarter, Bank of America paid a cash dividend of $0.64 per
share. The company also issued 9.5 million common shares related to
employee stock options and ownership plans and repurchased 9.6 million
common shares. Period-ending common shares issued and outstanding were 4.44
billion for the third quarter of 2007, compared with 4.44 billion for the
second quarter of 2007 and 4.50 billion for the third quarter of 2006.
Third Quarter 2007 Business Segment Results
Global Consumer and Small Business Banking(1)
(Dollars in millions) Q3 2007 Q3 2006
Total managed revenue net of
interest expense(2) $11,985 $11,284
Provision for credit losses 3,121 2,049
Noninterest expense 4,971 4,619
Net Income 2,452 2,919
Efficiency ratio 41.48 % 40.94 %
Return on average equity 15.63 18.70
Managed loans and leases(3) $331,656 $291,028
Deposits(3) 321,552 332,500
(1) Managed basis. Managed basis assumes that loans that have been
securitized were not sold and presents earnings on these loans in a
manner similar to the way loans that have not been sold (i.e. held
loans) are presented. For more information and detailed
reconciliation, please refer to the data pages supplied with this
Press Release.
(2) Fully taxable-equivalent basis
(3) Balances averaged for period
Managed net revenue rose 6 percent as higher card income and service
charge income helped generate an 11 percent increase in noninterest income.
Net income decreased 16 percent from a year ago as credit costs rose.
The provision for credit losses increased 52 percent to $3.12 billion.
The increase resulted mainly from portfolio seasoning due to growth in the
businesses and increased losses post bankruptcy reform. The weak housing
market also contributed to adding reserves for the home equity portfolio.
* Deposits net revenue rose 4 percent to $4.42 billion and net income
increased 3 percent to $1.32 billion as service charges and debit card
income rose.
* Card Services managed net revenue rose 6 percent to $6.50 billion while
net income of $1.08 billion declined 25 percent as credit costs
increased. Card losses stabilized and declined from the second quarter.
* Consumer Real Estate had $837 million in net revenue, a 15 percent
increase, as home equity balances rose and first mortgage originations
grew. Net income fell 55 percent to $73 million on higher credit costs.
Global Corporate and Investment Banking
(Dollars in millions) Q3 2007 Q3 2006
Total revenue net of interest
expense(1) $2,885 $5,168
Provision for credit losses 228 36
Noninterest expense 2,486 2,861
Net Income 100 1,433
Efficiency ratio 86.19 % 55.36 %
Return on average equity 0.91 13.82
Loans and leases(2) $267,758 $234,800
Trading-related assets(2) 356,867 339,119
Deposits(2) 217,632 194,806
(1) Fully taxable-equivalent basis
(2) Balances averaged for period
Net revenue fell 44 percent as sales and trading-related revenue
declined, reducing noninterest income by 95 percent. Net income fell 93
percent due to the revenue decrease and higher provision expense (see
Impact of Capital Markets on Financial Results on page 2 for details).
The provision for credit losses increased to $228 million from $36
million a year ago, reflecting the impact of the weak housing market
particularly on the homebuilder sector.
Spread compression continued to dampen results in Business Lending and
Treasury Services, which otherwise continued to deepen client relationships
while recording solid business activity.
* Business Lending net revenue rose 1 percent to $1.39 billion while net
income decreased 27 percent to $379 million because of higher credit
costs and continued spread compression. Average loans and leases
increased 9 percent to nearly $240 billion.
* Capital Markets and Advisory Services had a net revenue loss of
$184 million, reflecting declines in trading associated with the
disruption in the credit markets. The business had a net loss of
$717 million on sales and trading losses, declines in investment banking
fees and markdowns on loans held for sale and unfunded commitments
partially offset by lower incentive compensation. While results in
Credit Products and Structured Products were sharply lower, Liquid
Products registered good gains.
* Treasury Services net revenue declined 8 percent to $1.75 billion, while
net income decreased 12 percent to $558 million reflecting the sale of a
merchant services business a year earlier and spread compression.
Global Wealth and Investment Management
(Dollars in millions) Q3 2007 Q3 2006
Total revenue net of interest
expense(1) $2,200 $1,778
Provision for credit losses (29) 0
Noninterest expense 1,274 965
Net Income 599 513
Efficiency ratio 57.91 % 54.31 %
Return on average equity 19.98 20.95
Loans and leases(2) $77,041 $61,684
Deposits(2) 127,819 100,915
(in billions) At 9/30/07 At 9/30/06
Assets under management $709.9 $517.0
(1) Fully taxable-equivalent basis
(2) Balances averaged for period
In July, Bank of America completed the acquisition of U.S. Trust,
creating U.S. Trust, Bank of America Private Wealth Management, within
Global Wealth and Investment Management to serve wealthy and ultra-wealthy
clients.
Net revenue in Global Wealth and Investment Management increased 24
percent as higher customer activity and improved client asset inflows
resulted in a 34 percent increase in noninterest income. Net income
increased 17 percent from a year ago as fee income increased. The
acquisition of U.S. Trust contributed about 10 percent to net revenue and 5
percent to net income.
Asset management fees increased 42 percent to a record $976 million
driven by higher assets under management helped by nearly $116 billion in
assets added from the acquisition of U.S. Trust, net asset inflows of more
than $44 billion and increased market values of more than $38 billion.
* U.S. Trust, Bank of America Private Wealth Management net revenue rose
48 percent to $674 million and net income rose 55 percent to $143
million due to the acquisition of U.S. Trust, which contributed nearly
30 percent to net revenue and 22 percent to net income, increased
lending and deposits volume and strong customer activity.
* Columbia Management net revenue rose 30 percent to $488 million
supported by strong client inflows, increased market values and the
addition of U.S. Trust, which contributed 6 percent to net revenue. Net
income increased 46 percent to $114 million, with U.S. Trust
contributing 4 percent.
* Premier Banking and Investments net revenue rose 11 percent to
$948 million on record investment and brokerage services results, up 28
percent from a year ago. Net income increased 12 percent to
$325 million.
All Other(1)
(Dollars in millions) Q3 2007 Q3 2006
Total revenue net of interest
expense(2) $(766) $262
Provision for credit losses (1,290) (920)
Noninterest expense (188) 418
Net Income 547 551
Loans and leases(3) $104,061 $85,965
(1) All Other consists primarily of equity investments, the residual
impact of the allowance for credit losses and the cost allocation
processes, Merger and Restructuring Charges, intersegment
eliminations, and the results of certain consumer finance and
commercial lending businesses that are being liquidated. All Other
also includes the offsetting securitization impact to present Global
Consumer and Small Business Banking on a managed basis. For more
information and detailed reconciliation, please refer to the data
pages supplied with this Press Release.
(2) Fully taxable-equivalent basis
(3) Balances averaged for period
All Other net income was $547 million compared with $551 million a year
earlier. Revenue compared with last year was lower without the contribution
from the sale of Brazil operations. This was offset partly by reduced other
expenses from certain liquidating businesses. Equity investments income
rose 24 percent to $852 million from $687 million.
Note: Chief Executive Officer Kenneth D. Lewis and Joe L. Price, chief
financial officer, will discuss third quarter 2007 results in a conference
call at 9:30 a.m. (Eastern Time) today. The call can be accessed via a
webcast available on the Bank of America Investor Relations Web site at
http://investor.bankofamerica.com.
Bank of America
Bank of America is one of the world's largest financial institutions,
serving individual consumers, small and middle market businesses and large
corporations with a full range of banking, investing, asset management and
other financial and risk-management products and services. The company
provides unmatched convenience in the United States, serving more than 57
million consumer and small business relationships with more than 5,700
retail banking offices, more than 17,000 ATMs and award-winning online
banking with more than 23 million active users. Bank of America is the No.
1 overall Small Business Administration (SBA) lender in the United States
and the No. 1 SBA lender to minority-owned small businesses. The company
serves clients in 175 countries and has relationships with 99 percent of
the U.S. Fortune 500 companies and 80 percent of the Fortune Global 500.
Bank of America Corporation stock ( BAC) is listed on the New York
Stock Exchange.
This press release contains forward-looking statements, including
statements about the financial conditions, results of operations and
earnings outlook of Bank of America Corporation. The forward-looking
statements involve certain risks and uncertainties. Factors that may cause
actual results or earnings to differ materially from such forward-looking
statements include, among others, the following: 1) projected business
increases following process changes and other investments are lower than
expected; 2) competitive pressure among financial services companies
increases significantly; 3) general economic conditions are less favorable
than expected; 4) political conditions including the threat of future
terrorist activity and related actions by the United States abroad may
adversely affect the company's businesses and economic conditions as a
whole; 5) changes in the interest rate environment and market liquidity
reduce interest margins, impact funding sources and effect the ability to
originate and distribute financial products in the primary and secondary
markets; 6) changes in foreign exchange rates increases exposure; 7)
changes in market rates and prices may adversely impact the value of
financial products; 8) legislation or regulatory environments, requirements
or changes adversely affect the businesses in which the company is engaged;
9) changes in accounting standards, rules or interpretations, 10)
litigation liabilities, including costs, expenses, settlements and
judgments, may adversely affect the company or its businesses; 11) mergers
and acquisitions and their integration into the company; and 12) decisions
to downsize, sell or close units or otherwise change the business mix of
any of the company. Accordingly, readers are cautioned not to place undue
reliance on forward- looking statements, which speak only as of the date on
which they are made. Bank of America does not undertake to update
forward-looking statements to reflect the impact of circumstances or events
that arise after the date the forward-looking statements are made. For
further information regarding Bank of America Corporation, please read the
Bank of America reports filed with the SEC and available at www.sec.gov.
Columbia Mutual Funds: Please consider the investment objectives,
risks, charges and expenses of Columbia mutual funds carefully before
investing. Contact your financial advisor for a prospectus which contains
this and other important information about the fund. Read it carefully
before you invest.
Columbia Management: Columbia Management is the primary investment
management division of Bank of America Corporation. Columbia Management
entities furnish investment management services and advise institutional
and mutual fund portfolios. Columbia Funds are distributed by Columbia
Management Distributors, Inc., member NASD, SIPC. Columbia Management
Distributors, Inc. is part of Columbia Management and an affiliate of Bank
of America Corporation.
www.bankofamerica.com
Bank of America Corporation
Selected Financial Data
(Dollars in millions, except per share data;
shares in thousands)
Summary Income Three Months Ended Nine Months Ended
Statement September 30 September 30
2007 2006 2007 2006
Net interest income $8,615 $8,586 $25,269 $25,992
Total noninterest
income 7,314 9,598 28,378 28,102
Total revenue, net
of interest
expense 15,929 18,184 53,647 54,094
Provision for credit
losses 2,030 1,165 5,075 3,440
Other noninterest
expense 8,459 8,594 26,463 25,943
Merger and
restructuring
charges 84 269 270 561
Income before
income taxes 5,356 8,156 21,839 24,150
Income tax expense 1,658 2,740 7,125 8,273
Net income $3,698 $5,416 $14,714 $15,877
Earnings per common
share $0.83 $1.20 $3.30 $3.49
Diluted earnings per
common share 0.82 1.18 3.25 3.44
Summary Average Three Months Ended Nine Months Ended
Balance Sheet September 30 September 30
2007 2006 2007 2006
Total loans and
leases $780,516 $673,477 $745,162 $641,909
Debt securities 174,568 236,033 179,589 235,874
Total earning assets 1,375,795 1,302,366 1,352,177 1,258,927
Total assets 1,580,565 1,497,987 1,554,760 1,457,087
Total deposits 702,481 676,851 695,465 670,552
Shareholders' equity 134,487 129,262 133,878 129,256
Common shareholders'
equity 131,606 129,098 131,017 129,021
Performance Ratios Three Months Ended Nine Months Ended
September 30 September 30
2007 2006 2007 2006
Return on average
assets 0.93 % 1.43 % 1.27 % 1.46 %
Return on average
common
shareholders'
equity 11.02 16.64 14.88 16.44
Credit Quality Three Months Ended Nine Months Ended
September 30 September 30
2007 2006 2007 2006
Net charge-offs $1,573 $1,277 $4,495 $3,122
Annualized net
charge-offs as a %
of average loans
and leases
outstanding (1) 0.80 % 0.75 % 0.80 % 0.65 %
Provision for credit
losses $2,030 $1,165 $5,075 $3,440
Managed credit card
net losses 2,024 1,748 6,076 4,468
Managed credit card
net losses as a %
of average managed
credit card
receivables 4.67 % 4.23 % 4.81 % 3.68 %
September 30
2007 2006
Nonperforming assets $3,372 $1,656
Nonperforming assets
as a % of total
loans, leases and
foreclosed
properties (1) 0.43 % 0.25 %
Allowance for loan
and lease losses $9,535 $8,872
Allowance for loan
and lease losses as
a % of total loans
and leases measured at
historical cost (1) 1.21 % 1.33 %
Capital Management September 30
2007 2006
Risk-based capital
ratios:
Tier 1 8.22 %* 8.48 %
Total 11.86 * 11.46
Tier 1 leverage
ratio 6.20 * 6.16
Period-end common
shares issued and
outstanding 4,436,855 4,498,145
Three Months Ended Nine Months Ended
September 30 September 30
2007 2006 2007 2006
Shares issued 9,499 29,704 49,734 98,312 (2)
Shares repurchased (9,580) (59,500) (71,030) (231,000)
Average common
shares issued and
outstanding 4,420,616 4,499,704 4,424,269 4,547,693
Average diluted
common shares
issued and
outstanding 4,475,917 4,570,558 4,483,465 4,614,599
Dividends paid per
common share $0.64 $0.56 $1.76 $1.56
Summary Ending
Balance Sheet September 30
2007 2006
Total loans and
leases $793,537 $669,149
Total debt
securities 177,296 195,152
Total earning assets 1,362,543 1,216,965
Total assets 1,578,763 1,449,211
Total deposits 699,222 665,905
Total shareholders'
equity 138,510 133,597
Common shareholders'
equity 135,109 132,771
Book value per share
of common stock $30.45 $29.52
* Preliminary data
(1) Ratios do not include loans measured at fair value in accordance with
SFAS 159 at and for the three and nine months ended September 30,
2007.
(2) Does not include 631,145 shares issued in conjunction with the merger
with MBNA.
Certain prior period amounts have been reclassified to conform to current
period presentation.
Bank of America Corporation
Business Segment Results
(Dollars in millions)
Global Consumer and Small Three Months Ended Nine Months Ended
Business Banking (1) September 30 September 30
2007 2006 2007 2006
Total revenue, net of
interest expense (FTE)
(2) $11,985 $11,284 $35,168 $33,255
Provision for credit
losses (3) 3,121 2,049 8,626 5,757
Noninterest expense 4,971 4,619 14,567 13,591
Net income 2,452 2,919 7,559 8,784
Efficiency ratio (2) 41.48 % 40.94 % 41.42 % 40.87 %
Return on average equity 15.63 18.70 16.35 18.56
Average - total loans and
leases $331,656 $291,028 $319,089 $284,261
Average - total deposits 321,552 332,500 324,867 333,709
Deposits
Total revenue, net of
interest expense (FTE)(2) $4,423 $4,272 $13,068 $12,371
Net income 1,321 1,287 3,958 3,611
Card Services (1)
Total revenue, net of
interest expense (FTE)(2) 6,505 6,110 18,886 18,190
Net income 1,083 1,439 3,133 4,550
Consumer Real Estate
Total revenue, net of
interest expense (FTE)(2) 837 726 2,521 2,135
Net income 73 162 436 511
Global Corporate and Three Months Ended Nine Months Ended
Investment Banking September 30 September 30
2007 2006 2007 2006
Total revenue, net of
interest expense (FTE)(2) $2,885 $5,168 $14,198 $16,008
Provision for credit
losses 228 36 384 82
Noninterest expense 2,486 2,861 8,566 8,572
Net income 100 1,433 3,300 4,634
Efficiency ratio (2) 86.19 % 55.36 % 60.33 % 53.55 %
Return on average equity 0.91 13.82 10.38 14.59
Average - total loans and
leases $267,758 $234,800 $256,590 $230,345
Average - total deposits 217,632 194,806 215,491 191,773
Business Lending
Total revenue, net of
interest expense (FTE)(2) $1,388 $1,378 $4,242 $4,242
Net income 379 519 1,446 1,657
Capital Markets and
Advisory Services
Total revenue, net of
interest expense (FTE)(2) (184) 1,927 4,853 6,413
Net income (717) 298 453 1,308
Treasury Services
Total revenue, net of
interest expense (FTE)(2) 1,751 1,901 5,250 5,447
Net income 558 634 1,634 1,742
Global Wealth and Three Months Ended Nine Months Ended
Investment Management September 30 September 30
2007 2006 2007 2006
Total revenue, net of
interest expense (FTE)(2) $2,200 $1,778 $6,096 $5,458
Provision for credit
losses (29) - (20) (41)
Noninterest expense 1,274 965 3,317 2,881
Net income 599 513 1,761 1,650
Efficiency ratio (2) 57.91 % 54.31 % 54.42 % 52.79 %
Return on average equity 19.98 20.95 22.18 22.19
Average - total loans and
leases $77,041 $61,684 $70,322 $59,890
Average - total deposits 127,819 100,915 120,387 101,063
U.S. Trust (4)
Total revenue, net of
interest expense (FTE)(2) $674 $454 $1,621 $1,437
Net income 143 92 345 356
Columbia Management
Total revenue, net of
interest expense (FTE)(2) 488 376 1,385 1,119
Net income 114 78 330 240
Premier Banking and
Investments
Total revenue, net of
interest expense (FTE)(2) 948 855 2,818 2,569
Net income 325 291 981 888
All Other (1) Three Months Ended Nine Months Ended
September 30 September 30
2007 2006 2007 2006
Total revenue, net of
interest expense (FTE)
(2) $(766) $262 $(716) $241
Provision for credit
losses (5) (1,290) (920) (3,915) (2,358)
Noninterest expense (188) 418 283 1,460
Net income 547 551 2,094 809
Average - total loans and
leases 104,061 85,965 99,161 67,413
Average - total deposits 35,478 48,630 34,720 44,007
(1) Global Consumer and Small Business Banking is presented on a managed
basis, specifically Card Services, with a corresponding offset
recorded in All Other.
(2) Fully taxable-equivalent (FTE) basis is a performance measure used by
management in operating the business that management believes provides
investors with a more accurate picture of the interest margin for
comparative purposes.
(3) Represents provision for credit losses on held loans combined with
realized credit losses associated with the securitized loan portfolio.
(4) In July 2007, the acquisition of U.S. Trust Corporation was completed
combining with the former Private Bank creating U.S. Trust, Bank of
America Private Wealth Management and results of the combined business
were reported for periods ending after July 1, 2007.
(5) Represents the provision for credit losses in All Other combined with
the Global Consumer and Small Business Banking securitization offset.
Certain prior period amounts have been reclassified to conform to current
period presentation.
Bank of America Corporation
Supplemental Financial Data
(Dollars in millions)
Fully taxable-equivalent Three Months Ended Nine Months Ended
basis data September 30 September 30
2007 2006 2007 2006
Net interest income $8,990 $8,894 $26,368 $26,860
Total revenue, net of interest
expense 16,304 18,492 54,746 54,962
Net interest yield 2.61 % 2.73 % 2.60 % 2.85 %
Efficiency ratio 52.40 47.93 48.83 48.22
Other Data September 30
2007 2006
Full-time equivalent employees 198,000 200,220
Number of banking centers -
domestic 5,748 5,722
Number of branded ATMs -
domestic 17,231 16,846
Certain prior period amounts have been reclassified to conform to current
period presentation.
Bank of America Corporation
Reconciliation - Managed to GAAP
(Dollars in millions)
The Corporation reports its Global Consumer and Small Business Banking's
results, specifically Card Services, on a managed basis. This basis of
presentation excludes the Corporation's securitized mortgage and home
equity portfolios for which the Corporation retains servicing. Reporting
on a managed basis is consistent with the way that management as well as
analysts evaluate the results of Global Consumer and Small Business
Banking. Managed basis assumes that loans that have been securitized were
not sold and presents earnings on these loans in a manner similar to the
way loans that have not been sold (i.e., held loans) are presented. Loan
securitization is an alternative funding process that is used by the
Corporation to diversify funding sources. Loan securitization removes
loans from the Consolidated Balance Sheet through the sale of loans to an
off-balance sheet qualified special purpose entity which is excluded from
the Corporation's Consolidated Financial Statements in accordance with
generally accepted accounting principles (GAAP).
The performance of the managed portfolio is important in understanding
Global Consumer and Small Business Banking's and Card Services' results as
it demonstrates the results of the entire portfolio serviced by the
business. Securitized loans continue to be serviced by the business and
are subject to the same underwriting standards and ongoing monitoring as
held loans. In addition, retained excess servicing income is exposed to
similar credit risk and repricing of interest rates as held loans. Global
Consumer and Small Business Banking's managed income statement line items
differ from a held basis reported as follows:
* Managed net interest income includes Global Consumer and Small Business
Banking's net interest income on held loans and interest income on the
securitized loans less the internal funds transfer pricing allocation
related to securitized loans.
* Managed noninterest income includes Global Consumer and Small Business
Banking's noninterest income on a held basis less the reclassification
of certain components of card income (e.g., excess servicing income) to
record managed net interest income and provision for credit losses.
Noninterest income, both on a held and managed basis, also includes the
impact of adjustments to the interest-only strip that are recorded in
card income as management continues to manage this impact within Global
Consumer and Small Business Banking.
* Provision for credit losses represents the provision for credit losses
on held loans combined with realized credit losses associated with the
securitized loan portfolio.
All of these securitization adjustments relate to the Card Services'
business within Global Consumer and Small Business Banking.
Global Consumer and Small Business Banking
Third Quarter 2007
Managed Securitization
Basis (1) Impact (2) Held Basis
Net interest income (3) $7,265 $(2,085) $5,180
Noninterest income
Card income 2,587 896 3,483
Service charges 1,519 - 1,519
Mortgage banking income 244 - 244
Gains (losses) on sales of debt
securities - - -
All other income 370 (70) 300
Total noninterest income 4,720 826 5,546
Total revenue, net of
interest expense 11,985 (1,259) 10,726
Provision for credit losses 3,121 (1,259) 1,862
Noninterest expense 4,971 - 4,971
Income before income taxes 3,893 - 3,893
Income tax expense (3) 1,441 - 1,441
Net income $2,452 $- $2,452
Average - total loans and leases $331,656 $(104,317) $227,339
Third Quarter 2006
Managed Securitization
Basis (1) Impact (2) Held Basis
Net interest income (3) $7,016 $(1,872) $5,144
Noninterest income
Card income 2,333 1,032 3,365
Service charges 1,410 - 1,410
Mortgage banking income 215 - 215
Gains (losses) on sales of debt
securities - - -
All other income 310 (68) 242
Total noninterest income 4,268 964 5,232
Total revenue, net of
interest expense 11,284 (908) 10,376
Provision for credit losses 2,049 (908) 1,141
Noninterest expense 4,619 - 4,619
Income before income taxes 4,616 - 4,616
Income tax expense (3) 1,697 - 1,697
Net income $2,919 $- $2,919
Average - total loans and leases $291,028 $(97,371) $193,657
All Other
Third Quarter 2007
Reported Securitization As
Basis (4) Offset (2) Adjusted
Net interest income (3) $(2,031) $2,085 $54
Noninterest income
Card income 739 (896) (157)
Equity investment income 852 - 852
Gains (losses) on sales of debt
securities 7 - 7
All other income (333) 70 (263)
Total noninterest income 1,265 (826) 439
Total revenue, net of
interest expense (766) 1,259 493
Provision for credit losses (1,290) 1,259 (31)
Merger and restructuring charges 84 - 84
All other noninterest expense (272) - (272)
Income before income taxes 712 - 712
Income tax expense (3) 165 - 165
Net income $547 $- $547
Average - total loans and leases $104,061 $104,317 $208,378
Third Quarter 2006
Reported Securitization As
Basis (4) Offset (2) Adjusted
Net interest income (3) $(1,418) $1,872 $454
Noninterest income
Card income 841 (1,032) (191)
Equity investment income 687 - 687
Gains (losses) on sales of debt
securities (480) - (480)
All other income 632 68 700
Total noninterest income 1,680 (964) 716
Total revenue, net of
interest expense 262 908 1,170
Provision for credit losses (920) 908 (12)
Merger and restructuring charges 269 - 269
All other noninterest expense 149 - 149
Income before income taxes 764 - 764
Income tax expense (3) 213 - 213
Net income $551 $- $551
Average - total loans and leases $85,965 $97,371 $183,336
(1) Provision for credit losses represents provision for credit losses on
held loans combined with realized credit losses associated with the
securitized loan portfolio.
(2) The securitization impact on net interest income is on a funds
transfer pricing methodology consistent with the way funding costs are
allocated to the businesses.
(3) FTE
(4) Provision for credit losses represents the provision for credit losses
in All Other combined with the Global Consumer and Small Business
Banking securitization offset.
Certain prior period amounts have been reclassified among the segments to
conform to the current period presentation.
SOURCE Bank of America