Bank of America Corporation today reported net income of $340 million, or $0.00 per diluted share, for the third quarter of 2012, compared to $6.2 billion, or $0.56 per diluted share, in the third quarter of 2011.

As previously reported, the third quarter of 2012 was negatively impacted by $1.9 billion of debit valuation adjustments (DVA) and fair value option (FVO) adjustments related to the improvement in the company's credit spreads, $1.6 billion for total litigation expense, including a charge for the previously announced settlement of the Merrill Lynch class action litigation, and a charge of $0.8 billion related to the repricing of certain deferred tax assets due to a reduction in the U.K. corporate tax rate. Together, these three items totaled a negative $0.28 per share.

The year-ago quarter included $6.2 billion in positive DVA and FVO adjustments, $0.6 billion in total litigation expense and $0.8 billion related to the repricing of certain deferred tax assets due to a reduction in the U.K. corporate tax rate. Together, these three items totaled a positive $0.27 per share in the third quarter of 2011. In addition, the year-ago quarter included, among other significant items, a $3.6 billion pretax gain on the sale of a portion of the company's investment in China Construction Bank (CCB), partially offset by $2.2 billion of net losses related to equity and strategic investments other than CCB.

Relative to the year-ago quarter, the results for the third quarter of 2012 were driven by improved credit quality across most major portfolios, increased sales and trading revenue (excluding impact of DVA), higher mortgage banking income and increased investment banking income.

"We are doing more business with our customers and clients: Deposits are up; mortgage originations are up; we surpassed 11 million in mobile customers; small business lending is up 27 percent year over year; loans to our commercial clients rose for the seventh consecutive quarter; and our corporate clients made us the second-ranked global investment banking firm," said Brian Moynihan, chief executive officer. "Our strategy is taking hold even as we work through a challenging economy and continue to clean up legacy issues."

"Our focus on strengthening the balance sheet continued this quarter," said Chief Financial Officer Bruce Thompson. "We ended the quarter with record Tier 1 common capital ratio of 11.41 percent and an estimated Basel 3 Tier 1 common capital ratio of 8.97 percent, up from 7.95 percent as of the second quarter of 2012¹. With these gains, we have turned our attention to driving core earnings."

¹ Fully taxable-equivalent (FTE) basis is a non-GAAP financial measure. For reconciliation to GAAP financial measures, refer to pages 25-28 of this press release. Net interest income on a GAAP basis was $9.9 billion, $9.5 billion and $10.5 billion for the three months ended September 30, 2012, June 30, 2012 and September 30, 2011. Total revenue, net of interest expense, on a GAAP basis was $20.4 billion, $22.0 billion and $28.5 billion for the three months ended September 30, 2012, June 30, 2012 and September 30, 2011.

² Total revenue, net of interest expense, on an FTE basis excluding DVA and FVO adjustments is a non-GAAP financial measure. DVA gains(losses) were $(583) million, $(158) million and $1.7 billion for the three months ended September 30, 2012, June 30, 2012 and September 30, 2011. Valuation gains (losses) related to FVO were $(1.3) billion, $(62) million and $4.5 billion for the three months ended September 30, 2012, June 30, 2012 and September 30, 2011.

Key Business Highlights

The company made significant progress in the third quarter of 2012 in line with its operating principles, including the following developments:

Be customer-driven

• Bank of America extended approximately $117 billion in credit in the third quarter of 2012. This included $73.7 billion in commercial non-real estate loans, $20.3 billion in residential first mortgages, $10.6 billion in commercial real estate loans, $4.5 billion in U.S. consumer and small business card, $933 million in home equity products and $6.8 billion in other consumer credit.
• The $20.3 billion in residential first mortgages funded in the third quarter helped more than 80,000 homeowners either purchase a home or refinance an existing mortgage. This included more than 4,400 first-time homebuyer mortgages originated by retail channels, and more than 25,000 mortgages to low- and moderate-income borrowers. Approximately 17 percent of funded first mortgages were for home purchases and 83 percent were refinances.
• The company originated approximately $6.2 billion in small business loans and commitments in the first nine months of 2012, up 27 percent from the year-ago period, reflecting its continued focus on supporting small businesses.
• Total client balances in Global Wealth and Investment Management increased 3 percent from the prior quarter to $2.3 trillion, led primarily by market gains, as well as gains in deposit balances, long-term assets under management (AUM) flows and loan balances.

• The company continued to deepen relationships with customers. The number of mobile banking customers rose 30 percent from the year-ago quarter to 11.1 million customers, and the number of new U.S. credit card accounts opened year-to-date grew 8 percent from 2011.
• Merrill Edge brokerage assets increased $13.9 billion from the year-ago quarter to $75.9 billion, driven by market improvement and asset growth from new accounts.
• The company continued to increase the number of Financial Solutions Advisors, mortgage loan officers and small business bankers during the quarter to approximately 5,800 at the end of the third quarter of 2012, approximately 3,200 of whom were deployed in banking centers.
• The company continued to support the economy by:
  • Helping clients raise $145 billion in capital in the third quarter of 2012, up from $125 billion in the prior quarter.
  • Providing incremental credit to businesses with ending loans in the Global Banking business rising 2.5 percent from the prior quarter to $272.1 billion.
• Bank of America Merrill Lynch (BofA Merrill) continued to rank No. 2 globally in net investment banking fees during the first nine months of 2012, as reported by Dealogic.

Continue to build a fortress balance sheet

• Regulatory capital ratios increased with the Tier 1 common capital ratio under Basel 1 increasing to 11.41 percent in the third quarter of 2012, up 17 bps from the second quarter of 2012 and 276 bps higher than the third quarter of 2011.
• The Tier 1 common capital ratio under Basel 3 on a fully phased-in basis was estimated at 8.97 percent as of September 30, 2012, up from 7.95 percent at June 30, 2012.¹
• The company continued to maintain strong liquidity while significantly reducing long-term debt. Global Excess Liquidity Sources totaled $380 billion at the end of the third quarter of 2012, compared to $378 billion at the end of the prior quarter and $363 billion at September 30, 2011. Long-term debt declined to $287 billion at the end of the third quarter of 2012 from $302 billion at the end of the prior quarter and $399 billion at September 30, 2011.

Manage risk well

• The provision for credit losses was flat compared to the second quarter of 2012 but down 48 percent from the year-ago quarter, reflecting improved credit quality across most major consumer and commercial portfolios and the impact of underwriting changes implemented over the past several years.

• Excluding the impact of charge-offs related to the previously disclosed settlement reached in March 2012 with the Department of Justice (DOJ) and 49 state attorneys general regarding mortgage servicing issues (National Mortgage Settlement) and new regulatory guidance for loans discharged in bankruptcies, consumer loan loss rates in the third quarter of 2012 were at their lowest level since the fourth quarter of 2007³.
• Commercial loan loss rates were at their lowest level since the third quarter of 2007.

Deliver for our shareholders

• Tangible book value per share² increased to $13.48 at September 30, 2012, compared to $13.22 at both June 30, 2012 and September 30, 2011. Book value per share was $20.40 at September 30, 2012, compared to $20.16 at June 30, 2012 and $20.80 at September 30, 2011.

Manage efficiency well

• Noninterest expense was relatively flat compared to the year-ago quarter due to an increase in other general operating expenses primarily related to costs associated with the previously announced Merrill Lynch class action settlement and other litigation, and higher mortgage-related and default-related servicing costs. This was partially offset by a decrease in personnel expense as the company continued to streamline processes and achieve cost savings.
• At September 30, 2012, the company had 272,594 full-time employees, down 2,866 from the end of the prior quarter, and 16,145 fewer than September 30, 2011. Excluding full-time equivalent employee increases in Legacy Assets and Servicing to handle increasing government and private programs for housing, the number of full-time equivalent employees was down nearly 21,000 from the year-ago quarter to 230,900.