CHARLOTTE, N.C., July 21 /PRNewswire-FirstCall/ -- Bank of America Corporation today reported second-quarter 2008 net income of $3.41 billion, down from a record $5.76 billion a year earlier. Diluted earnings per share decreased 44 percent to $0.72 from $1.28 in the same period in 2007. Net revenue rose to a record $20.32 billion. Earnings available to common shareholders totaled $3.22 billion.

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Net income in the period rose from $1.21 billion, or $0.23 per share, in the first quarter of 2008. Second-quarter net income included pretax merger and restructuring costs of $212 million.

"We are pleased with these solid results in a difficult financial environment," said Kenneth D. Lewis, chairman and chief executive officer. "Outside of real estate-related products, our operating results were quite good virtually across all business segments. This performance demonstrates not only the advantages of our company's diversity and scale, but also the ability of our associates to differentiate Bank of America in the eyes of customers and clients."

Second Quarter 2008 Business Highlights (vs. a year earlier)

-- Record quarterly net revenue of $20.32 billion was driven by an expanded net interest yield, loan growth and higher income from service charges, mortgage banking and investment and brokerage services. These results also reflect the addition of LaSalle Bank.

-- Investment banking income in Capital Markets and Advisory Services, a unit in Global Corporate and Investment Banking, was $765 million, the second- highest result ever.

-- Total retail sales increased 4 percent to 13 million products, helped by strong growth in deposits, debit and online banking. Net new checking accounts were 674,000 in the period.

-- Total average retail deposits increased more than $56 billion, or 12 percent, with approximately half coming from organic growth and the balance from the acquisition of LaSalle and U.S. Trust. Debit card purchase volume increased 15 percent.

-- Bank of America surpassed one million active Mobile Banking customers in the quarter. The service allows customers to check balances, pay bills, transfer funds, view posted and pending transactions and locate banking centers and ATMs, accompanied by maps and directions.

-- Business Lending and Treasury Services, both within Global Corporate and Investment Banking, had organic loan and deposit growth of 16 percent and 7 percent, respectively, as client demand for these services rose as a result of recent market disruption.

-- Service level improvements resulted in customer delight (9 or 10 on a 10-point scale) reaching a record 72 percent in the banking centers. Peak day wait times fell 12 percent from the previous quarter resulting in an all-time high in customer delight on this issue.

-- Total assets under management (AUM) in Global Wealth and Investment Management increased to more than $589 billion, including the impact of the U.S. Trust and LaSalle acquisitions and the sale of Marsico Capital Management in the second half of 2007.

-- Bank of America's integration of U.S. Trust was successfully completed in the quarter.

Second Quarter 2008 Financial Summary

Revenue and Expense
Revenue net of interest expense on a fully taxable-equivalent basis rose 3 percent to a record $20.63 billion from $20.02 billion a year earlier and was $3.33 billion higher than the first quarter of 2008.

Net interest income on a fully taxable-equivalent basis rose 25 percent to $10.94 billion from $8.78 billion in the second quarter of 2007 driven by improved margins in the current rate environment combined with loan growth and the acquisition of LaSalle. The net interest yield improved 33 basis points to 2.92 percent.

Noninterest income declined 14 percent to $9.69 billion from $11.24 billion a year earlier. Service charges, mortgage banking income and investment and brokerage services income increased. These increases were offset by writedowns of $1.22 billion related to market disruptions, which compared with $2.81 billion in writedowns during the first quarter, as well as lower equity investment income.

Noninterest expense rose 4 percent to $9.56 billion from a year earlier mainly because of the addition of LaSalle and U.S. Trust partially offset by lower personnel costs. Pretax merger and restructuring charges related to acquisitions were $212 million compared with $75 million a year earlier. The efficiency ratio was 47.08 percent.

Credit Quality

Credit quality continued to weaken, particularly in markets that experienced the most significant home price declines. The slowing economy resulted in credit deterioration concentrated in the domestic consumer, small business and homebuilder portfolios. Both net charge-offs and nonperforming assets continued to increase.

Provision expense rose $4.02 billion from a year ago to $5.83 billion, reflecting net charge-offs of $3.62 billion and additions to the allowance for loan and lease losses of $2.21 billion. The additions were mainly in consumer and commercial portfolios directly tied to housing, including home equity, residential mortgage and homebuilders. The company has added $7.29 billion to the reserve through increased provision over the past 12 months. Amounts shown below for the quarter ended or as of June 30, 2007 do not include LaSalle.

-- Provision for credit losses was $5.83 billion, down from $6.01 billion in the first quarter but up from $1.81 billion in the second quarter of 2007.

-- Net charge-offs were $3.62 billion, or 1.67 percent of total average loans and leases compared with $2.72 billion, or 1.25 percent, in the first quarter and $1.50 billion, or 0.81 percent, in the second quarter of 2007.

-- Total managed net losses were $5.27 billion, or 2.15 percent, of total average managed loans and leases compared with $4.14 billion, or 1.69 percent, in the first quarter and $2.77 billion, or 1.31 percent, in the second quarter of 2007.

-- Nonperforming assets were $9.75 billion or 1.13 percent of total loans, leases and foreclosed properties, compared with $7.83 billion, or 0.90 percent, at March 31 and $2.39 billion, or 0.32 percent, at June 30, 2007.

-- The allowance for loan and lease losses was $17.13 billion, or 1.98 percent of loans and leases measured at historical cost compared with $14.89 billion, or 1.71 percent, at March 31, 2008 and $9.06 billion, or 1.20 percent, at June 30, 2007.

Capital Management

Total shareholders' equity was $162.69 billion at June 30. Period-end assets were $1.72 trillion. The Tier 1 capital ratio was 8.25 percent, up from 7.51 percent at March 31, 2008 after the company raised about $7 billion in capital through the issuance of preferred stock. The Tier 1 ratio was 8.52 percent a year earlier.

Bank of America paid a cash dividend of $0.64 per share in the quarter. The company also issued about 137,000 common shares mostly related to employee stock options and ownership plans and did not repurchase any shares. Period- end common shares issued and outstanding were 4.45 billion for the first and second quarters of 2008 and 4.44 billion in the year ago quarter.

Countrywide Financial Acquisition
(Results are not part of Bank of America second-quarter results)
Countrywide Financial Corporation, which was acquired on July 1, will make Bank of America the leader in providing home financing to American consumers.

Countrywide had a second-quarter net loss of $2.33 billion, including just under $4 billion in credit-related losses. Because purchase accounting records certain assets and liabilities at fair value, which includes an estimate of future credit costs, for those items recorded at fair value such costs would not generally run through future income statements.

The transaction immediately adds to Bank of America profit. It is now expected to be accretive in 2008. When the acquisition was announced in January, Bank of America estimated Countrywide's addition would be neutral toward per-share earnings this year.

The estimated cost savings have been significantly increased from the after-tax $670 million projected in January. Management will provide details on adjustments being made under purchase accounting, the new cost savings targets and other financial issues on a teleconference later today. (See details below).

Bank of America is continuing the trend begun by Countrywide earlier this year to expand loan modification and workout resources to address foreclosure issues. Through June, Countrywide has worked out 119,000 loans, nearly twice the number of its completed foreclosures. Bank of America estimates it will restructure about $40 billion in home loans during the next two years, enabling more than 265,000 families to stay in their homes.

The combined mortgage business will continue to offer conforming loans underwritten to standard guidelines of government-sponsored enterprises, including FHA and VA loans and other loans designed for low-and moderate- income borrowers. Countrywide has discontinued originating subprime and certain other nontraditional home loans, including option-ARMs, and will generally use Bank of America's product suite, which has performed much better in the current credit environment.

2008 Second Quarter Business Segment Results


Global Consumer and Small Business Banking(1)

(Dollars in millions) Q2 2008 Q2 2007

Total managed revenue, net of
interest expense(2) $13,092 $11,821

Provision for credit losses(3) 6,545 3,094
Noninterest expense 5,293 4,910

Net income 812 2,422

Efficiency ratio(2) 40.43 % 41.54 %
Return on average equity 4.89 15.76

Managed loans(4) $368,136 $317,247
Deposits(4) 341,339 326,622


At 06/30/08 At 06/30/07

Period ending deposits $339,098 $326,878


(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) Represents provision for credit losses on held loans combined with
realized credit losses associated with the securitized loan
portfolio
(4) Balances averaged for period



Net income fell 66 percent from a year ago, as credit costs rose.
Managed net revenue rose 11 percent. Net interest income increased 13 percent to $8.02 billion driven by growth in average loans and deposits and margin improvement. Noninterest income rose 8 percent to $5.08 billion on higher mortgage banking income and service charges.

The provision for credit losses increased by $3.45 billion to $6.55 billion compared with a year earlier. Net losses rose $2.06 billion to $4.72 billion, reflecting the impact of housing market deterioration and weakened economic conditions on consumer real estate, small business and other domestic consumer portfolios. Loan loss reserve additions for home equity and deterioration and seasoning of the consumer portfolios also contributed to higher credit costs.

-- Deposits net income fell 22 percent to $1.07 billion. Net revenue decreased 4 percent to $4.23 billion as spread compression impacting certain products more than offset deposit growth. The decline in net interest income was partially offset by growth in service charges and debit card income. Noninterest expense increased $250 million largely due to the acquisition of LaSalle.

-- Card Services net income fell 55 percent to $402 million as credit costs rose by $1.21 billion. Managed net revenue increased 8 percent to $6.85 billion on net interest income growth of 17 percent driven by 14 percent average loan and lease growth, partially offset by a decrease in card income.

-- Consumer Real Estate net income swung to a loss of $982 million compared with net income of $115 million a year earlier as higher net revenue was more than offset by higher credit costs. Net revenue rose 41 percent to $1.20 billion as average loans and leases increased 19 percent and mortgage banking income climbed 38 percent. Provision expense rose to $2.20 billion from $127 million a year earlier.

Global Corporate and Investment Banking

(Dollars in millions) Q2 2008 Q2 2007

Total revenue, net of interest
expense(1) $5,960 $5,943

Provision for credit losses 363 42
Noninterest expense 2,801 3,227

Net income 1,746 1,692

Efficiency ratio(1) 46.99 % 54.31 %
Return on average equity 11.57 16.15

Loans and leases(2) $334,680 $253,895
Trading-related assets(2) 337,059 377,171
Deposits(2) 234,605 220,180

(1) Fully taxable-equivalent basis
(2) Balances averaged for period
Net income rose 3 percent on lower noninterest expense partially offset by higher credit costs.

Net revenue rose slightly on a 47 percent increase in net interest income, offset by a 36 percent decline in noninterest income due mainly to writedowns related to market disruptions of $1.22 billion compared with $2.81 billion in the first quarter. Near-record investment banking income partially offset these writedowns. CDO-related writedowns were $645 million in the quarter, down significantly from $1.47 billion in the first quarter of 2008. Leveraged- loan writedowns were $64 million, lower than the $439 million in the first quarter.

The provision for credit losses increased $321 million to $363 million as deterioration in the housing market drove higher commercial real estate net charge-offs, mainly in homebuilders, and led to reserve additions. A modest increase in commercial domestic net charge-offs from lower levels a year earlier and increased net charge-offs in dealer-related retail portfolios due to deterioration and seasoning also contributed to the increased provision.

-- Business Lending net income increased 12 percent to $651 million despite the impact of higher credit costs. Net revenue increased 36 percent to $2.03 billion driven by organic and merger-related average loan growth of nearly $77 billion.

-- Capital Markets and Advisory Services net income was $449 million compared with $627 million a year earlier. Net revenue declined to $1.95 billion from $2.73 billion a year earlier as favorable sales and trading results in credit and liquid products were more than offset by CDO-related writedowns.

-- Treasury Services net income increased 6 percent to $608 million. Net revenue increased 5 percent to $1.87 billion as favorable pricing and increased volume drove deposits and service charges higher.

Global Wealth and Investment Management

(Dollars in millions) Q2 2008 Q2 2007
Total revenue, net of interest
expense(1) $2,279 $1,889

Provision for credit losses 119 (13)
Noninterest expense 1,241 993

Net income 573 576

Efficiency ratio(1) 54.44 % 52.57 %
Return on average equity 19.58 26.35

Loans(2) $87,572 $67,964
Deposits(2) 157,113 118,254

(in billions) At 06/30/08 At 06/30/07

Assets under management $589.4 $566.2
(1) Fully taxable-equivalent basis
(2) Balances averaged for period


Net income was largely flat at $573 million.
Net revenue increased 21 percent from the addition of U.S. Trust and LaSalle, organic loan and deposit growth and an improving interest rate environment. The increase was partially offset by support to certain cash funds of $36 million, which declined from $220 million in the first quarter of 2008.

Provision for credit losses increased to $119 million compared with a benefit of $13 million a year ago as deterioration in the home equity portfolio from housing market weakness continued.

-- U.S. Trust, Bank of America Private Wealth Management net income rose 25 percent to $152 million. Net revenue rose 43 percent to $706 million driven by the addition of U.S. Trust and LaSalle.

-- Columbia Management net income declined 48 percent to $39 million from a year ago driven mainly by losses related to support for certain cash funds.

-- Premier Banking and Investments net income fell 43 percent to $189 million as credit costs increased by $114 million reflecting higher home equity loan losses. Net revenue decreased 9 percent to $865 million on lower net interest income as spread compression, driven by deposit mix and competitive deposit pricing, more than offset deposit growth.

All Other(1)

(Dollars in millions) Q2 2008 Q2 2007

Total revenue net of interest
expense(2) $(700) $367

Provision for credit losses(3) (1,197) (1,313)
Merger and restructuring
charges 212 75
All other noninterest expense 17 (50)

Net income 279 1,071

Loans and leases(4) $88,251 $101,093

(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, investment
management 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) Represents the provision for credit losses in All Other combined with
the GCSBB securitization offset.
(4) Balances averaged for period
All Other had net income of $279 million compared with $1.07 billion as equity investment income fell because of the absence of the gain recognized a year earlier from the sale of private equity funds to Conversus Capital, higher credit costs in the residential mortgage portfolio and higher merger and restructuring charges related to LaSalle and U.S. Trust. This was partially offset by a gain on the sale of debt securities.

Note: Chief Executive Officer Kenneth D. Lewis and Chief Financial Officer Joe L. Price will discuss second quarter 2008 results in a conference call at 9:30 a.m. EDT today. The presentation and supporting materials can be accessed on the Bank of America Investor Relations Web site at http://investor.bankofamerica.com/. For a listen-only connection to the conference call, dial 800.895.1085 and the conference ID: 79795.