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48 LEGAL EXPENSES PLAGUE BANK OF AMERICA EARNINGS Bank of America reported a nearly 43 percent decline in second-quarter profits compared to last year, thanks to a significant litigation charge. BofA posted second-quarter net income of $2.3 billion on revenue of $22 billion. A year ago, the megabank reported bringing $4 billion. BofA CEO Brian Moynihan downplayed the decline, insisting the bank is "well positioned for further progress." "e economy continues to strengthen, and our customers and clients are doing more busi- ness with us," Moynihan said. "Among other positive indicators, consumers are spending more, brokerage assets are up by double digits, and our corporate clients are increasingly turn- ing to us to help finance business expansion and merger activity." e bulk of the year-over-year drop in profits stemmed from a $4 billion litigation expense, "substantially all" of which was related to legacy mortgage-related matters, the bank said. Part of that charge included a $650 million settlement with AIG, which sued BofA in 2011 for $10 billion in damages, alleging misrepresen- tation in the sale of residential mortgage-backed securities (RMBS) that tanked the company after the packaged loans went bad. With that matter handled, BofA said it "has now resolved approximately 95 percent of the unpaid principal balance of all RMBS as to which RMBS securities litigation has been filed or threatened for all Bank of America-related entities." Still remaining, however, is a major settle- ment with the Justice Department that insiders say has stalled in recent weeks as representatives from both sides struggle to find middle ground. While details on a final deal still have not emerged, the Wall Street Journal reports BofA has boosted its settlement offer to $13 billion, which would be level with what JPMorgan Chase paid last year in its own agreement. In its Consumer Real Estate Services seg- ment, BofA reported a net loss of $2.8 billion in Q2 compared to a loss of $930 million last year. Revenues in that segment declined $725 million to $1.4 billion, driven mostly by lower originations and lower servicing income. e bank reported that first-mortgage originations were down 59 percent compared to a year ago, largely reflecting a decline in demand for refinances. While production was down, BofA did benefit from ongoing improvements in credit quality. e provision for credit losses was $411 million in the second quarter, a decline from $1.2 billion in Q2 2013, "driven by lower levels of delinquencies across the consumer lending port- folio, as well as improvement in the consumer real estate portfolios, primarily due to increased home prices." The median foreclosure sale price nationwide was $124,000 in June 2014, according to RealtyTrac. KNOW THIS

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