bac - PDF

					                                                                                                            August 11, 2011 | 9 Pages

                       Multinational and Regional Banks                                                  Company Report

                                                                                Bank of America Corp.
 MOYNIHAN SPEAKS, BUT INVESTORS CONTINUE TO                                                                        (NYSE: BAC)
 OFFER COLD SHOULDER                                                                                      RATING: NEUTRAL
                                                                         Todd L. Hagerman                                Robert Greene
     BAC’s unusual hedge-fund coffee klatch seeks to assuage             (212) 338-4744                                  (212) 763-8296
     market fear. CEO Brian Moynihan and CFO Bruce Thompson              thagerman@sterneagee.com                rgreene@sterneagee.com
     participated in an unusual conference call with hedge fund
     principal Bruce Berkowitz of Fairholme Capital, which in turn,                        Fiscal Year Ends Dec
     was open to the public. As expected, it was styled in a
     management friendly format, which provided bank executives          Rating:                                                  Neutral
     with an opportunity to emphasize key strategic priorities and       Price: Close                                              $6.77
     accomplishments without being seriously challenged. Moreover,       Price Target:                                            $11.00
     management did little to improve investor confidence and            52-wk Range:                                      $6.51-$15.31
     defend the share’s rapidly vanishing market value and               Market Capitalization (M):                           $96,961.4
     embarrassing multiple.                                              Shares Outstanding (M):                               10,131.8
     With news of a new mortgage-related lawsuit (AIG claiming           Assets (M):                                         $2,266,972
     $10B in damages), and the FOMC casting fresh doubts on the          Avg. Daily Vol. (000):                               147,255.9
     strength of the economic recovery, BAC’s capital position and       Dividend Yield:                                            0.5%
     earnings power have come under intense scrutiny in recent           Consensus EPS Current Year:                              ($0.17)
     trading sessions. With BAC shares down roughly 49% to date,         Consensus EPS Next Year:                                  $1.60
     including nearly 29% in the last 5 trading days, BAC shares         Last 12 Month's Price Change:                            -49.7%
     have easily been the worst performer in a much-battered group.
                                                                         ROE (TTM):                                                 3.6%
     While management was questioned on each key topic affecting
                                                                         Price/Tangible Book Value:                                 55%
     the company’s performance and outlook, the answers perhaps
     left far more questions than answers. In particular, management
     continues to fall short on assuaging investors’ concerns
     surrounding capital adequacy and any potential hole in the
                                                                                               Earnings Summary
     balance sheet w/additional outsized mortgage repurchase claims
                                                                        FYE Dec        2010A             2011E            2012E
     and legal claims. Bottom line: we continue to avoid the stock
     given the slowing global economy, persistent capital                                  EPS & P/E Summary
     uncertainty, and eroding earnings power.                                                   2010             2011              2012
                                                                        EPS:       2010A        Prior    2011E   Prior    2012E    Prior
 Key Takeaways from conference call                                     Q1         $0.29         --      $0.22    --      $0.30     --
                                                                        Q2         $0.15         --      $0.18    --      $0.35     --
                                                                        Q3         $0.64         --      $0.20    --      $0.40     --
 Strategy unchanged, but likely multi-year transformation of
                                                                        Q4         $0.02         --      $0.20    --      $0.45     --
 company. Management’s key strategic goals continue to press
                                                                        Full Year  $1.12         --      $0.80    --      $1.50     --
 forward: reducing the company risk profile, lowering costs, building
                                                                        P/E Ratio:   --          --        --     --        --      --
 capital, and working to further reduce legacy mortgage issues.
 However, management acknowledged the ongoing transformation
 will likely take years, including meaningfully higher interest rates
 and higher core capital levels before the company can close in on a
 pedestrian ROA of 1%.

 Economic activity hasn’t fallen off a cliff, but far from robust.
 Consumer spend levels (up 5% YoY in July) improved, in part, due
 to higher commodity prices, while credit quality measures and
 deposit trends remained positive in the month. Conversely, the
 margin remains under some pressure early in the quarter. Capital
 markets continue to function relatively normally.


                                                                        Source: Factset

   Important Disclosures regarding Price Target Risks, Valuation Methodology, Regulation Analyst Certification,
Investment Banking, Ratings Definitions, and potential conflicts of interest begin on Page I of the Appendix Section.
          800 Shades Creek Parkway           Suite 700         Birmingham, AL 35209                     205-949-3500
                                Sterne, Agee & Leach Inc. is Member NYSE, FINRA, SIPC
BANK OF AMERICA CORP. (NYSE: BAC)                                                           August 11, 2011

Revenue environment remains challenging and will likely continue to trend below
expectations—normalized EPS continues to get pushed out-2014/2015? With revenues
falling below plan, management is developing a new cost cutting program (“New BAC”),
and expects to release more details in 3Q11. With management ultimately seeking to
reduce quarterly expenses by upwards of $1.5B, the near term levers are likely to center
on branch rationalization and lower FTE associated w/planned (recent) asset sales.
Conversely, it will likely be 2012/2013 before we seen a more meaningful decline in
legal/environmental costs. Moreover, with the ongoing legacy loan run-off and planned
balance sheet reduction, management suggested it’s really a function of meaningfully
higher interest rates (short-rates in 1.25-1.5%) and lower expenses before the company
can come close to $40-$45B of PPNR—or more likely 2014/2015 at the earliest based on
current economic forecasts/rate outlook and meaningful mortgage relief (~$2.00/shr in
EPS).

Modest dividend raise-2013? Management conceded the lack of success in achieving a
dividend increase in 2011 and suggested that it still has work to do on the capital front
before it can likely consider a modest dividend request w/guaranteed regulatory approval.
Our sense is it will likely be a 2013 event at the earliest, assuming management can
handily exceed its self-imposed 6.75-7% pro forma Basel III capital target by year-end
2012.

Management unable to ring-fence off-balance sheet liabilities, legacy Countrywide
exposure and potential capital hole. Management recently disclosed approximately
$17.8B of reserves against its mortgage repurchase exposure for certain agency and non-
agency claims. In June, BAC announced an $8.5B ptx settlement to resolve nearly all of
the legacy CFC RMBS exposure, which applies to roughly 22 institutional investors
representing 530 trusts – total original unpaid principal balance of $424B (or roughly
57% of the $750B par issued to private label investors between 2004-2008). Pursuant to
the settlement, BAC provisioned an additional $5.5B for ongoing non-GSE and, to a
lesser extent, GSE related repurchase exposure. Although management raised its
potential loss estimate by $5B above existing accruals (estm. accruals $3-$4B w/ann.-ex.
Trustee settlement), certain monoline exposures, certain GSE exposure, potential FHA
exposure, potential AG settlement, and certain other potential private/whole loan claims
are excluded from existing accruals. In other words, the existing reserve accruals
continue to exclude meaningful risks attached to other potential claims against the
company. While BAC has accrued well in excess of $2B for certain legal claims in
1H11, management has estimated the potential loss (not probable) associated w/certain
claims at $2.8B above existing accruals. It appears to us that the most recent AIG claim
has not been accrued.

Earnings Power vs. Ongoing Capital Charges – We estimate every $5B of after-tax
earnings to generate roughly 23bps of capital for the company (before capital
deployment). Our 2012 and 2013 EPS estimates imply a TCE ratio of 6.9% and 7.9%,
respectively, with estimated after-tax earnings of $15.4 and $19.3B. Additionally, our
estimates incorporate roughly $25B of cumulative mortgage repurchase losses through
2013 – which include the impact of the June settlement. While the prospect of additional
near-term capital charges remains a concern, our sense is that BAC can weather the storm
without raising additional capital for now. Assuming a $7B attorney general settlement
(mortgage-related) and $5B in “excess” repurchase losses, we still arrive at a 2013 TCE
level of 7.4% - not necessarily robust, but enough to avoid a forced capital raise.
Moreover, the risk of a forced capital raise is now very remote in our view considering
the likely catastrophic contagion that would occur with escalating fears surrounding the
underlying health of the nation’s financial system.




                                                                                                   Page 2
BANK OF AMERICA CORP. (NYSE: BAC)                                                                                                August 11, 2011


Figure 1: BAC Projected Capital Accretion and Potential Capital Charges
Sterne Agee Estimates - Current
                                                   2011E            2012E           2013E
Tangible Assets                                 2,187,482        2,211,797       2,236,380
Tangible Common Equity                            132,090          152,693         176,284

TCE Ratio Estimates
Current                                              6.0%             6.9%            7.9%

Current EPS Estimates                                $1.05           $1.50            $1.85

Net Income Projections ($Bil)                        -$3.3           $15.4            $19.3

Pro-Forma TCE Assuming Capital Charges:
                        1
$7Bil AG Settlement                                  5.7%             6.6%            7.6%
                                         2
$5Bil additional Repurchase loses                    5.8%             6.7%            7.7%
Combined                                            5.5%            6.4%             7.4%

Potential Earnings Accretion to TCE %
$5Bil                                 23 bps                        23 bps          22 bps
$10Bil                                46 bps                        45 bps          45 bps
$15Bil                                69 bps                        68 bps          67 bps
Source: Sterne Agee estimates

Notes:
1. Represents possible (not estimated) settlement liability from 50-state Attorney General foreclosure lawsuit; not currently incorporated in Sterne
Agee forecasts
2. Sterne Agee 2011-2013 EPS estimates currently incorporate cumulative $25B in repurchase losses. $5 in additional losses represents excess of
current Sterne Agee estimates




                                                                                                                                            Page 3
BANK OF AMERICA CORP. (NYSE: BAC)                                                                           August 11, 2011

 Bank of America Corp. Quarterly Income Statement 2010A
Actuals                                  2010        2010         2010        2010      2010A    Y/Y %
                                         Q1A         Q2A          Q3A         Q4A        Year    Change

Earning Assets                      1,933,060   1,910,790    1,863,819   1,883,539   1,897,802       3.7%
Net Interest Margin                     2.93%       2.77%        2.72%       2.69%       2.78%       13bp
Net Interest Income                    14,070      13,197       12,717      12,709      52,693       8.8%
Provision                               9,805       8,105        5,396       5,129      28,435     -41.0%

Card Income                            1,976       2,023        1,982       2,127        8,108      -2.9%
Service Charges                        2,566       2,576        2,212       2,036        9,390     -14.9%
Investment and brokerage services       3,025      2,994        2,724       2,879      11,622       -2.5%
 Investment banking                    1,240       1,319        1,371       1,590        5,520      -0.6%
 Venture Capital                          625      1,714          357       1,512        4,208     145.5%
 Trading Revenues                      5,236       1,227        2,596         995      10,054      -27.7%
Total Market Sensitive                  7,101      4,260        4,324       4,097      19,782       -6.5%
M ortgage banking                      1,500         898        1,755       1,581        5,734     -34.8%
Insurance income                          715        678          667         598        2,658      -3.7%
Other Income                              978        601          623        (214)       1,988    -583.7%
Operating Fee Income                  17,861      14,030       14,287      13,104      59,282       -6.8%
Securities Gains                          133         (89)        760         755        1,559
Non Recurring Gains                       226      2,312         (782)     (3,900)     (2,144)
Reported Fee Income                   18,220      16,253       14,265       9,959      58,697      -19.1%
Total Operating Revenue               31,931      27,227       27,004      25,813     111,975        0.0%
  Operating Fees / Revenues            55.9%       51.5%        52.9%       50.8%       52.9%

Staff Expense                          9,158       8,789        8,402       8,800      35,149       11.5%
Other Expense                          7,650       7,517        7,567       9,274      32,008        9.2%
Amortization Expense                     446         439          426         420       1,731      -12.5%
Operating Expenses                    17,254      16,745       16,395      18,494      68,888        9.6%
Non-Recurring Expenses                   -           -         10,400       2,000      12,400
M erger and restructuring                521         508          421         370       1,820
Nonint Expenses                       17,775      17,253       27,216      20,864      81,288       21.8%

Operating PTPP (adj.)                 14,677      10,482       10,609       7,319      43,087      -17.5%
Operating Pre-Tax                      4,872       2,377        5,213         109      12,571
Reported Pre-Tax                       4,710       4,092       (5,630)     (5,406)     (2,234)
  Tax Rate                              32%         24%         -30%         77%           0%
Net Income                             3,182       3,123       (7,299)     (1,244)     (2,238)    -135.7%
Preferred Div.                           348         340          348         321       1,357
Operating Net Income                   2,943       1,474        6,410         183      11,011     -235.7%
Average Shares                        10,005      10,030        9,976      10,037       9,790
Reported EPS                            0.28        0.27        (0.77)      (0.16)      (0.37)      NMF
Operating GAAP EPS                      0.29        0.15         0.64        0.02        1.12       NMF
Operating Cash EPS                      0.32        0.18         0.70        0.03        1.30       NMF

Dividend                                0.01        0.01         0.01        0.01        0.04
  Dividend Payout Ratio                  4%          4%          -1%         -6%        -11%
Book Value                             21.12       21.45        21.17       20.99       20.99
Tangible Book Value                    11.36       11.82        12.60       12.68       12.68

Proftability Ratios
Reported ROA                           0.45%       0.45%       -1.29%      -0.26%      -0.15%
Reported ROE                            4.9%        4.8%       -13.1%       -2.7%       -1.5%
Operating ROA                          0.47%       0.24%        1.08%       0.03%       0.45%
Operating ROE                           5.1%        2.5%        11.0%        0.3%        4.7%
Operating Efficiency Ratio             54.0%       61.5%        60.7%       71.6%       61.5%


Balance S heet
EOP Loans                             976,042     956,177      933,910     940,440     940,440      4.5%
Average Loans                         991,615     967,054      934,860     940,614     958,331      1.0%
  Loans/Earning Assets                   51%         51%          50%         50%         50%
EOP Assets                          2,333,200   2,363,878    2,327,811   2,264,909   2,264,909       1.9%
Average Assets                      2,509,760   2,489,745    2,371,207   2,370,258   2,439,602       0.1%
EOP Common Equity                     211,859     215,181      212,391     211,686     211,686      -0.8%
  Equity/Assets                          9.9%        9.9%         9.9%       10.1%       10.1%
Average Equity                        229,891     233,461      233,978     235,525     233,231      -4.7%
EOP Goodwill & Core Deposit Int.       97,853      96,597       86,004      83,784      83,784       0.0%
  Tangible Common Equity/Assets          5.1%        5.2%         5.6%        5.9%        5.9%

Credit Quality

Non-Accrual Loans                     35,925      35,701       34,556      32,664      32,664       -2.6%
Restructured Loans                          -           -            -           -           -
OREO                                   2,308       2,501        2,260       1,974        1,974
Held For Sale                          5,000       4,044        3,654       2,540        2,540
Total Non-Performing Assets           43,233      42,246       40,470      37,178      37,178      -13.4%
  NPAs/Total Loans & OREO              4.40%       4.39%        4.31%       3.93%       3.93%
  Reserve/Non Performing Loans           1.30        1.27         1.26        1.28        1.28
 Provision/Average Loans               3.96%       3.35%        2.31%       2.18%       2.97%
 PTPP/Average Loans                    5.92%       4.34%        4.54%       3.11%       4.50%
Net Charge Offs                       10,797       9,557        7,197       6,783      34,334       1.9%
 Net Charge Offs/Average Loans         4.36%       3.95%        3.08%       2.88%       3.58%
Reserve                               46,835      45,383       43,581      41,885      41,885       12.6%
  Reserve/Loans                        4.80%       4.75%        4.67%       4.45%       4.45%


Source: Company reports and Sterne Agee estimates

                                                                                                                   Page 4
BANK OF AMERICA CORP. (NYSE: BAC)                                                                                August 11, 2011

 Bank of America Corp. Quarterly Income Statement 2011E
Estimates                                2011         2011         2011         2011        2011E    Y/Y %
                                         Q1A          Q2A           Q3           Q4          Year    Change

Earning Assets                      1,869,863    1,844,525    1,867,980    1,868,383     1,862,688      -1.9%
Net Interest Margin                     2.67%        2.50%        2.45%        2.43%         2.51%       -27bp
Net Interest Income                    12,397       11,493       11,441       11,350        46,682     -11.4%
Provision                               3,814        3,255        3,200         2,900       13,169     -53.7%

Card Income                            1,828         1,967       1,982         1,652        7,429       -8.4%
Service Charges                        2,032         2,012       2,101         2,036        8,181      -12.9%
Investment and brokerage services       3,101        3,009       3,024         3,081       12,214        5.1%
 Investment banking                    1,578         1,684       1,675         1,785        6,722       21.8%
 Venture Capital                        1,475        1,212         500           500        3,687      -12.4%
 Trading Revenues                      3,122         1,970       2,000         2,100        9,192       -8.6%
Total M arket Sensitive                 6,175        4,866       4,175         4,385       19,601       -0.9%
M ortgage banking                         630          804       1,200         1,100        3,734      -34.9%
Insurance income                          613          400         687           616        2,316      -12.9%
Other Income                              861          505         600           550        2,516       26.6%
Operating Fee Income                  15,240        13,563      13,769        13,419       55,992       -5.6%
Securities Gains                          458          975          -             -         1,433
Non Recurring Gains                   (1,000)      (14,048)         -             -       (15,048)
Reported Fee Income                   14,698           490      13,769        13,419       42,377      -27.8%
Total Operating Revenue               27,637        25,056      25,210        24,770      102,673       -8.3%
  Operating Fees / Revenues            55.1%         54.1%       54.6%         54.2%       54.5%

Staff Expense                         10,168        9,171        8,948         8,800       37,087        5.5%
Other Expense                          9,528       10,541        9,400         9,300       38,769       21.1%
Amortization Expense                     385          382          380           380        1,527      -11.8%
Operating Expenses                    20,081       20,094       18,728        18,480       72,383        5.1%
Non-Recurring Expenses                   -          2,603          -             -          2,603
M erger and restructuring                202          159          -             -            -
Nonint Expenses                       20,283       22,856       18,728        18,480       74,986       -7.8%

Operating PTPP (adj.)                  7,556         4,962       6,482         6,290       25,290      -41.3%
Operating Pre-Tax                      3,742         1,707       3,282         3,390       12,121
Reported Pre-Tax                       2,998       (14,128)      3,282         3,390       (4,458)
  Tax Rate                              32%           38%         30%           30%          53%
Net Income                             2,049        (8,826)      2,298         2,373       (2,106)      -5.9%
Preferred Div.                           310           301         301           301        1,213
Operating Net Income                   2,247         1,826       1,997         2,072        8,142      -26.1%
Average Shares                        10,181        10,095      10,095        10,170       10,135
Reported EPS                            0.17         (0.90)       0.20          0.20        (0.33)       NMF
Operating GAAP EPS                      0.22          0.18        0.20          0.20         0.80      -28.6%
Operating Cash EPS                      0.25          0.20        0.22          0.23         0.87      -32.8%

Dividend                                0.01         0.01         0.01          0.01         0.04
  Dividend Payout Ratio                  6%          -1%           5%            5%         -12%
Book Value                             21.15        20.29        20.48         20.58        20.58
Tangible Book Value                    12.92        12.37        12.60         12.85        12.85

Proftability Ratios
Reported ROA                           0.30%       -1.56%        0.35%        0.36%        -0.14%
Reported ROE                            3.0%       -15.5%         3.6%         3.7%         -1.5%
Operating ROA                          0.38%        0.31%        0.35%        0.36%         0.35%
Operating ROE                           3.9%         3.1%         3.6%         3.7%          3.6%
Operating Efficiency Ratio             72.7%        80.2%        74.3%        74.6%         70.5%


Balance S heet
EOP Loans                             932,425      941,257      936,551      938,892       938,892      -0.2%
Average Loans                         938,966      938,513      938,904      937,721       938,526      -2.1%
  Loans/Earning Assets                   50%          51%          50%          50%            50%
EOP Assets                          2,274,532    2,261,319    2,261,319    2,266,972     2,266,972       0.1%
Average Assets                      2,338,538    2,339,110    2,291,319    2,294,146     2,315,778      -5.1%
EOP Common Equity                     214,314      205,614      207,510      211,580       211,580      -0.1%
  Equity/Assets                         10.2%         9.8%         9.9%        10.1%         10.1%
Average Equity                        230,769      235,067      223,124      226,107       228,767      -1.9%
EOP Goodwill & Core Deposit Int.       83,429       80,250       79,870       79,490        79,490       0.0%
  Tangible Common Equity/Assets          6.0%         5.7%         5.9%         6.0%          6.0%

Credit Quality

Non-Accrual Loans                     29,587       27,583       26,204        22,273       22,273      -28.1%
Restructured Loans                           -            -            -             -           -
OREO                                   2,056        2,475        2,700         2,800         2,800
Held For Sale                           2,421        2,119        2,200         2,400        2,400
Total Non-Performing Assets           34,064       32,177       31,104        27,473       27,473      -22.6%
  NPAs/Total Loans & OREO              3.64%        3.40%        3.30%         2.91%        2.91%
  Reserve/Non Performing Loans            1.35         1.35         1.32          1.44        1.44
 Provision/Average Loans               1.62%        1.39%        1.36%         1.24%        1.40%
 PTPP/Average Loans                    3.22%        2.11%        2.76%         2.68%        2.69%
Net Charge Offs                        6,028        5,665        5,900         5,500       23,093      -32.7%
 Net Charge Offs/Average Loans         2.57%        2.41%        2.51%         2.35%        2.46%
Reserve                               39,843       37,312       34,612        32,012       32,012      -23.6%
  Reserve/Loans                        4.27%        3.96%        3.70%         3.41%       3.41%


Source: Company reports and Sterne Agee estimates



                                                                                                                            Page 5
BANK OF AMERICA CORP. (NYSE: BAC)                                                                                 August 11, 2011

 Bank of America Corp. Quarterly Income Statement 2012E
Estimates                                2012          2012         2012         2012        2012E    Y/Y %
                                          Q1            Q2           Q3           Q4          Year    Change

Earning Assets                      1,866,892     1,867,819    1,872,239    1,874,752    1,870,425        0.4%
Net Interest Margin                     2.50%        2.55%        2.55%        2.65%         2.56%          6bp
Net Interest Income                    11,668        11,907       11,936       12,420       47,931        2.7%
Provision                                2,500        2,300        2,000        2,000         8,800     -33.2%

Card Income                             1,426        1,531        1,681        1,735        6,373       -14.2%
Service Charges                         2,052        2,052        2,143        2,077        8,325         1.8%
Investment and brokerage services       3,380        3,099        3,114        3,296       12,890         5.5%
 Investment banking                     1,799        1,852        2,010        2,300        7,961        18.4%
 Venture Capital                          500          500          500          500        2,000       -45.8%
 Trading Revenues                       3,500        2,500        2,700        3,000       11,700        27.3%
Total M arket Sensitive                 5,799        4,852        5,210        5,800       21,661        10.5%
M ortgage banking                       1,100        1,300        1,200        1,300        4,900        31.2%
Insurance income                          631          412          708          634        2,385         3.0%
Other Income                              800          600          700          700        2,800        11.3%
Operating Fee Income                   15,189       13,847       14,756       15,542       59,334         6.0%
Securities Gains                           -            -            -            -            -
Non Recurring Gains                        -            -            -            -            -
Reported Fee Income                    15,189       13,847       14,756       15,542       59,334        40.0%
Total Operating Revenue                26,857       25,755       26,692       27,962      107,266         4.5%
  Operating Fees / Revenues             56.6%        53.8%        55.3%        55.6%        55.3%

Staff Expense                           9,660        9,171        9,261        9,328        37,420        0.9%
Other Expense                           9,433        8,222        8,648        9,114        35,417       -8.6%
Amortization Expense                      380          380          400          400         1,560        2.2%
Operating Expenses                     19,472       17,773       18,309       18,842        66,397       -8.3%
Non-Recurring Expenses                    -            -            -            -             -
M erger and restructuring                 -            -            -            -             -
Nonint Expenses                        19,472       17,773       18,309       18,842        66,397      -11.5%

Operating PTPP (adj.)                   7,385        7,982        8,383        9,120        32,869       30.0%
Operating Pre-Tax                       4,885        5,682        6,383        7,120        24,069
Reported Pre-Tax                        4,885        5,682        6,383        7,120        24,069
  Tax Rate                               31%          31%          31%          31%           31%
Net Income                              3,370        3,920        4,404        4,913        16,608     -888.4%
Preferred Div.                            301          301          301          301         1,204
Operating Net Income                    3,069        3,619        4,103        4,612        15,404       89.2%
Average Shares                         10,245       10,245       10,245       10,320        10,264
Reported EPS                             0.30         0.35         0.40         0.45          1.50     -558.2%
Operating GAAP EPS                       0.30         0.35         0.40         0.45          1.50       86.8%
Operating Cash EPS                       0.33         0.38         0.43         0.47          1.61       83.6%

Dividend                                 0.01         0.01         0.01         0.01          0.04        0.0%
  Dividend Payout Ratio                   3%           3%           2%           2%            3%
Book Value                              20.77        21.10        21.49        21.79         21.79        5.9%
Tangible Book Value                     13.18        13.56        13.98        14.43         14.43       12.3%

Proftability Ratios
Reported ROA                           0.53%         0.63%        0.71%        0.80%        0.67%
Reported ROE                            5.3%          6.2%         6.9%         7.6%         6.5%
Operating ROA                          0.53%         0.63%        0.71%        0.80%        0.67%
Operating ROE                           5.3%          6.2%         6.9%         7.6%         6.5%
Operating Efficiency Ratio             72.5%         69.0%        68.6%        67.4%        61.9%


Balance S heet
EOP Loans                             935,371       942,387      947,098      954,202      954,202        1.6%
Average Loans                         937,132       938,879      944,742      950,650      942,851        0.5%
  Loans/Earning Assets                   50%           50%          50%          51%           50%
EOP Assets                          2,272,640     2,278,321    2,284,017    2,289,727    2,289,727        1.0%
Average Assets                      2,299,806     2,305,481    2,311,169    2,316,872    2,308,332       -0.3%
EOP Common Equity                     216,647       220,164      224,164      230,623      230,623        9.0%
  Equity/Assets                         10.3%         10.4%        10.5%        10.8%        10.8%
Average Equity                        230,675       234,967      238,726      243,956      237,081        3.6%
EOP Goodwill & Core Deposit Int.       79,110        78,730       78,330       77,930       77,930
  Tangible Common Equity/Assets          6.3%          6.4%         6.6%         6.9%         6.9%

Credit Quality

Non-Accrual Loans                      20,046       18,041       16,598       15,104        15,104      -32.2%
Restructured Loans                            -            -            -            -            -
OREO                                    2,700        2,500        2,300        2,400          2,400
Held For Sale                            2,100        2,100        1,900        1,900         1,900
Total Non-Performing Assets            24,846       22,641       20,798       19,404        19,404      -29.4%
  NPAs/Total Loans & OREO               2.64%        2.39%        2.19%        2.02%         2.02%      -30.4%
  Reserve/Non Performing Loans             1.47         1.51         1.48         1.48         1.48
 Provision/Average Loans                1.07%        0.98%        0.85%        0.84%         0.93%
 PTPP/Average Loans                     3.15%        3.40%        3.55%        3.84%         3.49%
Net Charge Offs                         5,000        4,500        4,800        4,200        18,500      -19.9%
 Net Charge Offs/Average Loans          2.13%        1.92%        2.03%        1.77%         1.96%
Reserve                                29,512       27,312       24,512       22,312        22,312      -30.3%
  Reserve/Loans                         3.16%        2.90%        2.59%        2.34%        2.34%


Source: Company reports and Sterne Agee estimates




                                                                                                                         Page 6
BANK OF AMERICA CORP. (NYSE: BAC)                                                                                        August 11, 2011

                                                      APPENDIX SECTION
Company Description: 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
59 million consumer and small business relationships with more than 6,100 retail banking offices, more than 18,500 ATMs and
award-winning online banking with more than 25 million active users.

IMPORTANT DISCLOSURES:
Price Target Risks & Related Risk Factors:
Investment risks associated with the achievement of the price target include, but are not limited to, a company's failure to achieve
Sterne, Agee & Leach, Inc., earnings and revenue estimates; unforeseen macroeconomic and/or industry events that adversely affect
demand for a company's products or services; product obsolescence; changes in investor sentiment regarding the specific company or
industry; intense and rapidly changing competitive pressures; the continuing development of industry standards; the company's ability
to recruit and retain competent personnel; and adverse market conditions. For a complete discussion of the risk factors that could
affect the market price of a company's shares, refer to the most recent Form 10-Q or 10-K that a company has filed with the Securities
Exchange Commission.

Valuation Methodology:
Methodology for assigning ratings and target prices includes qualitative and quantitative factors including an assessment of industry
size, structure, business trends and overall attractiveness; management effectiveness; competition; visibility; financial condition; and
expected total return, among other factors. These factors are subject to change depending on overall economic conditions or industry
or company-specific occurrences. Stern, Agee & Leach, Inc., analysts base valuations on a combination of forward looking earnings
multiples, price-to-revenue multiples, and enterprise-value-to-revenue ratios. Sterne, Agee & Leach, Inc., believes this accurately
reflects the strong absolute value of earnings, the strong earnings growth rate, the inherent profitability, and adjusted balance sheet
factors. Additional company-specific valuation methodology is available through Sterne, Agee & Leach, Inc. 1-800-922-7739.

Regulation Analyst Certification:
I, Todd L. Hagerman, Robert Greene, hereby certify the views expressed in this research report accurately reflect my personal views
about the subject security(ies) or issuer(s). I further certify that no part of my compensation was, is, or will be, directly or indirectly,
related to the specific recommendations or views expressed by me in this report.

Sterne, Agee & Leach, Inc. Disclosure Legend as of August 11, 2011:

            Company                                                                          Disclosure(s) – See Below
            Bank of America Corp. (BAC - NYSE):                                              1

Disclosure Legend
   1. Sterne, Agee & Leach, Inc. makes a market in the shares of the subject company.
   2. Sterne, Agee & Leach, Inc. has, over the past 12 months, managed or co-managed a public securities offering or
          provided other investment banking services for the subject company.
    3.    Sterne, Agee & Leach, Inc. received compensation for products or services other than investment banking services
          from the subject company in the past 12 months.
    4.    The Sterne Agee analyst who has active coverage on this company owns a position in the subject company.
    5.    Sterne, Agee & Leach, Inc. or its affiliates beneficially own 1% or more of any class of common equity securities of the
          subject company.

Sterne Agee & Leach, Inc. expects to receive or intends to seek compensation for investment banking services from the subject
company in the next three months. Sterne, Agee & Leach, Inc.’s research analysts receive compensation that is based upon various
factors, including Sterne, Agee & Leach, Inc.’s total revenues, a portion of which is generated by investment banking activities.

Definition of Investment Ratings:
BUY:                       We expect this stock to outperform the industry over the next 12 months.
NEUTRAL:                   We expect this stock to perform in line with the industry over the next 12 months.
SELL:                      We expect this stock to underperform the industry over the next 12 months.
RESTRICTED:                Restricted list requirements preclude comment.

Ratings Distribution:
                                                                                                           Appendix Section, Page I
BANK OF AMERICA CORP. (NYSE: BAC)                                                                                      August 11, 2011

Of the securities rated by Sterne, Agee & Leach, Inc., as of June 30, 2011, 50.8% had a BUY rating, 47.6% had a NEUTRAL rating,
1.1% had a SELL rating, and 0% was RESTRICTED. Within those ratings categories, 1.59% of the securities rated BUY, 5.86%
rated NEUTRAL, 0% rated SELL, and 0% rated RESTRICTED received investment banking services from Sterne, Agee & Leach,
Inc., within the 12 months preceding June 30, 2011.
ADDITIONAL INFORMATION AVAILABLE UPON REQUEST: Contact Robert Hoehn at 1-212-338-4731.
Other Disclosures:
Opinions expressed are our present opinions only. This material is based upon information that we consider reliable, but we do not
represent that it is accurate or complete, and it should not be relied upon as such. Sterne, Agee & Leach, Inc., its affiliates, or one or
more of its officers, employees, or consultants may, at times, have long or short or options positions in the securities mentioned herein
and may act as principal or agent to buy or sell such securities.

Copyright © 2011 Sterne, Agee & Leach, Inc. All Rights Reserved.

Sterne, Agee & Leach, Inc. disclosure price charts are updated within the first fifteen days of each new calendar quarter per FINRA
regulations. Price charts for companies initiated upon in the current quarter, and rating and target price changes occurring in the
current quarter, will not be displayed until the following quarter.

Price Chart(s):




To receive price charts or other disclosures on the companies mentioned in this report, please contact Sterne, Agee & Leach, Inc. toll-
free at (800) 240-1438 or (205) 949-3689.




                                                                                                         Appendix Section, Page II
                                                              STERNE, AGEE & LEACH, INC.
                   Founded in 1901, Sterne Agee has been providing investors like you with high-quality investment opportunities for
                   over a century. During the early years, our founders prominently established themselves in the financial securities
                   industry in the southeastern United States. Today, we have expanded to serve all regions of the country. Sterne,
Agee is headquartered in Birmingham, Alabama with offices in 22 states. Sterne Agee is one of the largest independent firms in the
country. Sterne, Agee & Leach, Inc. is a division of Sterne Agee Group, Inc., which also includes The Trust Company of Sterne, Agee
& Leach, Inc.; Sterne Agee Asset Management, Inc.; Sterne Agee Clearing, Inc.; and Sterne Agee Financial Services, Inc.—
www.sterneagee.com
                                                       EQUITY CAPITAL MARKETS
Ryan Medo           Managing Dir., Eq. Cap. Mkts.      (205) 949-3623    William McIlroy            Director, Equity Products          (212) 338-4781
Robert Lake         Vice President                     (205) 949-3624    Paul Garner                Associate                          (212) 338-4799
                                                                         David Lee                  Director, Equity Services          (205) 949-3689
                                                                         Yan Chao                   Associate                          (205) 949-3622

                      INSTITUTIONAL SALES                                                            INSTITUTIONAL TRADING
Steve Pokorny       Head of Institutional Sales        (214) 702-4020          JT Cacciabaudo       Head of Trading                       (212) 763-8288

                                                           EQUITY RESEARCH
                                      Robert Hoehn      Director of Research                     (212) 338-4731

CONSUMER                                                                       FINANCIAL SERVICES (CONT.)
 Apparel Retailing & Toys                                                        Life Insurance
  Margaret Whitfield                SVP, Sr. Analyst   (973) 519-1019            John M. Nadel                      Mng. Dir.             (212) 338-4717
  Jennifer Milan                    VP, Sr. Analyst    (212) 763-8211            Dennis Zavolock                    Analyst               (212) 338-4748
  Jessica Gerberi, CFA              Analyst            (212) 338-4784
                                                                                 Mortgage Finance & Specialty Finance
  Educational Services / Interactive Entertainment
                                                                                 Henry J. Coffey, Jr., CFA          Mng. Dir.             (615) 760-1472
  Arvind Bhatia, CFA                Mng. Dir.          (214) 702-4001
                                                                                 Jason Weaver                       Analyst               (615) 760-1475
  Brett Strauser                    Associate          (214) 702-4009
                                                                                 Calvin Hotrum                      Associate             (615) 760-1476
  Footwear & Apparel
                                                                                 Property/Casualty Insurance
  Sam Poser                         Mng. Dir.          (212) 763-8226
                                                                                 Dan Farrell                        Mng. Dir.             (212) 338-4782
  Kenneth M. Stumphauzer, CFA       Sr. Analyst        (212) 763-8287
                                                                                 Nitin Chhabra                      Analyst               (212) 338-4779
  Jessica Bornn                     Associate          (212) 338-4721

  Leisure & Entertainment                                                      GLOBAL INDUSTRIAL INFRASTRUCTURE (GII)
  David Bain                        Mng. Dir.          (949) 721-6651            ACME &Latin America
  Sherry Yin                        Associate          (949) 721-6651            Ben Elias, CFA                     SVP, Sr. Analyst      (212) 338-4706

  Restaurants                                                                  TECHNOLOGY
  Lynne Collier                     Mng. Dir.          (214) 702-4045            Data Networking and Storage
  Philip May                        Analyst            (214) 702-4004            Alex Kurtz                         Mng. Dir              (415) 402-6015
                                                                                 Amelia Harris                      Analyst               (408) 918-6132
ENERGY
  Exploration & Production                                                       Hardware, Mobile Devices, IT Supply Chain
  Michael J. McAllister             Mng. Dir.          (212) 338-4783
                                                                                 Shaw Wu                            SVP, Sr. Analyst      (415) 362-7431
  Tim Rezvan, CFA                   Analyst            (212) 338-4736
  Ryan Mueller                      Associate          (212) 338-4732            LED Supply Chain
                                                                                 Andrew Huang                       Mng. Dir.             (415) 362-6143
FINANCIAL SERVICES                                                               Semiconductors
  Asset Management                                                               Vijay Rakesh                       Mng. Dir.             (312) 525-8431
  Jason Weyeneth, CFA               SVP, Sr. Analyst   (212) 763-8293            Mark Kelley                        Associate             (312) 525-8430
  Charles Warren                    Analyst            (646) 376-5309
                                                                               TRANSPORTATION, SERVICES & EQUIPMENT
                                                                                 Jeffrey A. Kauffman                Mng. Dir.             (212) 338-4765
  Banks & Thrifts                                                                Sal Vitale                         VP, Analyst           (212) 338-4766
  Matthew Kelley                    Mng. Dir.          (207) 699-5800            Kanchana Pinnapureddy              Associate             (212) 338-4767
  Mike I. Shafir                    SVP, Sr. Analyst   (212) 763-8239
  Matthew Breese                    Analyst            (207) 699-5800          ADMINISTRATION
  Brett Rabatin, CFA                SVP, Sr. Analyst   (877) 457-8625            Carlo Francisco                    Supervisory Analyst   (914) 434-3451
  Kenneth James                     Analyst            (615) 760-1474            Marianne Pence                     Mgr., Res. Admin.     (205) 949-3618
  Peyton Green                      Mng. Dir.          (877) 492-2663            Nathan Mitchell                    Editor                (205) 949-3635
  Zachary Wollam                    Associate          (615) 760-1468            Elizabeth Koch                     Editor                (615) 289-4122
  Todd L. Hagerman                  Mng. Dir           (212) 338-4744
  Robert Greene                     Analyst            (212) 763-8296




Email Address for Sterne Agee Employees: first initial + last name@sterneagee.com (e.g., jsmith@sterneagee.com)

				
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