Legal Costs Strangle Third-Quarter Earnings at BofA

Bank of America reported on Wednesday its earnings for the third quarter, revealing that profits tanked under the weight of a massive legal charge stemming from a recent mortgage settlement with the Justice Department.

In its quarterly earnings release, the bank reported a net income of $168 million for Q3, down from $2.5 billion a year ago. After preferred dividends, the results came to a loss of 1 cent per share.

Revenue for the quarter totaled $21.4 billion, down just 1 percent from the same time last year.

BofA's Q3 earnings took a major beating from a record $16.65 billion settlement with the Justice Department and other federal and state agencies to settle charges against the bank related to the sale of toxic mortgage-backed securities. That agreement, announced in August, took a $5.3 billion chunk out of the bank's results.

Factoring in the settlement, BofA's mortgage unit was the only one of its five businesses that didn't see income grow over the last year. The bank reported a loss of $5.2 billion for that segment.

Consumer real estate revenues declined to $1.1 billion, down nearly half a billion dollars from Q3 2013. BofA said the decrease was driven mostly by lower servicing fees due to a smaller portfolio, lower mortgage servicing rights results, and fewer originations—$11.7 billion in first-lien mortgages, a little more than half of last year's volume.

Home equity lending bounced up, meanwhile, coming to $3.2 billion in originations last quarter compared to $1.8 billion last year.