CHARLOTTE, N.C. - Bank of America said Wednesday that it swung to a loss in the first quarter, hurt by $6 billion in legal charges.
A LOSS: The Charlotte, N.C., bank reported a loss applicable to common shareholders of $514 million, compared with a profit of $1.11 billion a year earlier. The loss amounted to 5 cents a share. A year earlier, the bank earned 10 cents a share.
STUNG BY LEGAL EXPENSES: BofA's results were lowered by $6 billion, or 40 cents a share, in legal charges, with $3.6 billion of that amount from a previously announced settlement with the Federal Housing Finance Agency, and $2.4 billion from an addition to the bank's legal reserves for other mortgage-related matters. The bank also said it reached a settlement with the Financial Guaranty Insurance Company, as well as separate settlements with The Bank of New York Mellon, over residential mortgage-backed securities.
THE QUOTE: "The cost of resolving more of our mortgage issues hurt our earnings this quarter," said BofA CEO Brian Moynihan in a prepared statement.
BALANCE SHEET: The amount of bad loans and mortgages on Bank of America's balance sheet continued to improve in the first quarter. The bank had $1.4 billion in net charge offs, or loans that the bank considers unlikely to be repaid, down from $2.5 billion a year earlier. Loans that were more than 30 days past due fell to $5.6 billion from $7.9 billion a year earlier.
SLIMMING DOWN: The bank continues to slim down as a result of the financial crisis. The bank had 238,600 full-time employees this quarter, down from 262,800 employees a year earlier. It reduced the number of branches to 5,095, or 5 per cent less than a year earlier.
HOUSING MARKET SLOWNESS: Like its peers, Bank of America has seen a sharp decline in its mortgage business. The bank did $8.9 billion in mortgage originations in the first quarter this year, down from $23.9 billion in the same period a year ago. Interest rates are up from last spring, so the demand to refinance home mortgages has fallen.
BACK TO BASICS: Bank of America's consumer and business banking division, the company's core business, reported a profit of $1.66 billion, up from a profit of $1.45 billion a year earlier. Bank deposits and brokerage account assets all rose, as well as the number of credit card accounts. Credit card net charge-off fell to 3.25 per cent from 4.2 per cent.
STOCK REACTION: Bank of America shares fell 42 cents, or 2.5 per cent, to $15.98 in afternoon Wednesday trading.