BofA provided $168.2 billion in lending and investments last year to low- and moderate-income communities and minority customers. Though the economic conditions remain unfavorable, the results came in better than the annual expectations. This implies an average lending of about $667 million per business day over the last year.
The community-development lending and investment goal was initiated in 2009. This is the largest ever goal established by a U.S. financial institution.
The goal primarily focuses on four key categories: affordable housing, small business, consumer lending and economic development. During the first year, BofA has invested $147.0 billion, $12.8 billion, $4.5 billion and $3.8 billion, respectively, for affordable housing, small business, consumer lending and economic development.
The 10-year community development goal also includes $50 billion for underserved rural and Native American communities.
In the first year, BofA invested a total of $1.2 billion in its hometown. North Carolina and South Carolina received $3.4 billion and $1.6 billion, respectively.
BofA has achieved these results by individual loans and investments in nearly every state across the country. These loans and investments include $18 million in construction financing and low-income housing tax credits for Boston’s Olmsted Green, more than $23 million for providing 252 affordable housing accommodations at The Woodmont Apartments in Fort Worth and more than $40 million for constructing a new 60,000-square-foot commercial and residential facility for the YWCA of Greater Los Angeles.
BofA has also lent and invested more than $1 billion to over 120 Community Development Financial Institutions (CDFIs) in 37 states.These institutions include credit unions, investment funds and niche banks that focus on low-income and disadvantaged communities. The CDFIs primarily focus on small and micro businesses, charter schools, childcare centers, primary health care facilities, projects on Native American lands and arranging pre-acquisition and development loans for low-income housing. In the first year, BofA lent $1 million to Valley Economic Development Center .
The company is focused on investing more in community-based institutions, such as small businesses and nonprofit organizations and other local efforts, which are the main sources of jobs and can significantly stimulate economic activity domestically.
BofA’s first quarter 2010 earnings came in at 28 cents per share, substantially ahead of the Zacks Consensus Estimate of 9 cents. However, this compares unfavorably with the earnings of 44 cents in the prior-year quarter.
Strong capital markets activity and lower provision for credit losses were the primary factors that helped BAC bounce back to profitability after incurring significant losses for the last couple of quarters.
The market turmoil was more harmful to BofA than its peers except Citigroup (C). However, BofA has concluded its biggest acquisitions. The company acquired Merrill Lynch almost during the height of the financial crisis last year. It also acquired Countrywide Financial Corporation in July 2008.
We think these deals along with the spin-off benefits of the 10-year community development goal augur well for BofA.
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