Bank of America has agreed to settle a class-action lawsuit brought by investors who bought mortgage investments from Countrywide Financial, the California-based lender it acquired in 2008. The announcement came as the nation's second biggest bank reported higher net income for the first quarter, but missed analysts' expectations.
Bank of America said Wednesday that it would pay $500 million to settle the lawsuit brought by the Maine State Retirement System and other pension funds who said Countrywide had misled them about the quality of the mortgages they bundled together and sold to investors before the crisis.
The settlement is the latest reminder of the long fallout of Bank of America's decision to buy Countrywide, which was known for making exotic loans. The purchase catapulted the bank into a spot at the top of the nation's mortgage scene, but it's been an albatross ever since, bringing lawsuits, regulatory investigations and quarterly losses.
Bank of America made the settlement announcement while reporting first-quarter results. Its profit soared but analysts described the quarter as noisy because of accounting charges that affected results. Revenue dipped slightly, profits missed expectations and investors sent the stock down 30 cents, or 2.4 percent, to $11.98 in trading 45 minutes ahead of the market opening.
The Charlotte, N.C., bank reported earnings after paying preferred dividends of $2.3 billion in the first quarter. That was up nearly seven times from earnings of $328 million a year ago. However, the 2012 results were also obscured by an accounting rule that forced the bank to record a charge because the value of its debt had risen.
Mortgages and wealth management helped this quarter's results. Loans fell while deposits and credit card spending rose.
The bank funded $25 billion in mortgages, a jump of 56 percent from a year ago. More than 90 percent came from refinancings. The overall mortgage unit continued to lose money, though, weighed down by legal costs.
The bank continued to cut jobs and other expenses. It trimmed nearly 16,000 jobs over the year, or nearly 6 percent of its work force.
"We feel like we made a lot of progress this quarter," Chief Financial Officer Bruce Thompson said on a call with reporters, "and there's a lot more to do."
Earnings per share amounted to 20 cents. That missed the expectations of analysts polled by FactSet, who had expected 22 cents per share.
Revenue was $23.9 billion after stripping out an accounting charge. That was down 8 percent from last year, but it beat analysts' expectations of $23.3 billion.