Bank of America ($8.07 -0.11%) lost $1bn or $0.26 per share during Q309, compared to a profit of $1.2bn during Q308.

But company year-to-date income through Q309 was $6.5bn, compared with $5.8bn during the same period of 2008. BofA paid $1.2bn in preferred dividends for the quarter, including $893m in dividends to the US government.

The company's net loss on the home loans and insurance segment widened to $1.6bn from a $54m net loss in the year-ago quarter.

BofA funded $95.7bn in first mortgages, selling purchase or refinance loans to nearly 450,000 borrowers, including $23.3bn in mortgages to 154,000 low- and moderate-income borrowers during the quarter. About 39% of all the first mortgages were for purchases.

Year-to-date at the end of Q309, BofA modified the mortgages of approximately 215,000 customers, and an additional 98,000 BofA mortgage customers are in the trial stage of a Making Home Affordable Modification Program (HAMP) workout.

BofA increased its provision for credit losses to $2.9bn “driven by continued economic weakness and lower home prices,” and due to further deterioration in the purchased impaired portfolio BofA holds from its acquisition of Countrywide. The company added $2.1bn to the reserve for credit losses -- less than Q209, BofA said, as delinquencies improve in the unsecured consumer portfolios.

All told, BofA reported $9.6bn in net charge-offs in the quarter, $923m higher than in Q209.

“The company's core performance was impacted by a number of non-core items,” said president and CEO Kenneth Lewis. “The market's improved view of Bank of America's credit cost the company due to non-cash marks on liabilities.”

Earnings were also affected by $2.6bn in pretax mark-to-market and credit valuation adjustments on certain liabilities including Merrill Lynch structured notes. BofA reported a $402m pretax charge to pay the US government to terminate its asset-guarantee term sheet.

Write to Austin Kilgore.