Bank of America Corp. (NYSE: BAC) was expected to be the best exposed bank for rising interest rates and less government regulation. In fact, it has been the best performing of the major and money center banks stock year to date (up 3.5%) and also over the past six months (up 45%). Now its earnings showed why.

When Bank of America reported its first quarter earnings for 2017 on Tuesday, the financial giant said that its net income increased by 40% to $4.9 billion, while its earnings per share (EPS) increased by 46% to $0.41. This is versus the year-ago numbers of $3.5 billion and $0.28 per share. Revenue, net of interest expense, also rose by 7% to $22.2 billion from $20.8 billion a year earlier.

The actual breakdown of earnings showed that net interest income rose by 5% to $11.1 billion, reflecting benefits from higher interest rates, as well as growth in loans (up 6% to $819 billion) and growth of deposits (up 5% to $1.26 trillion).  The bank’s noninterest income rose 9% to $11.2 billion, and that growth was said to be driven by higher sales and trading results, along with record first-quarter fees from investment banking.

The cost and management side of the earnings equation also stood up to the test. Despite higher revenue-related compensation expenses, total expenses were flat at $14.8 billion. The provision for credit losses fell by 16% to $835 million, while net charge-offs declined 13% to $934 million. The charge-off ratio declined to 0.42% from 0.48%

Bank of America’s book value rose 5% to $24.36 per share, while its tangible book value rose 6% to $17.23 per share. The banking giant repurchased a net of $2.3 billion in common stock and paid out $0.8 billion in common stock dividends.

Total assets came in at $2.248 trillion at the end of the first quarter, up from $2.188 trillion at the end of 2016 and up from $2.186 trillion a year ago. Then there are the regulatory and other investor numbers, shown as follows:

• Return on average assets 0.88%
• Return on average common equity 7.3%
• Return on average tangible common equity 10.3%
• Common equity Tier 1 ratio was 11.0%

Management commentary was rather positive in the tone. CEO Brian Moynihan said:

Our approach to responsible growth delivered strong results again this quarter. Revenue was up 7 percent and EPS grew 46 percent. We saw good client activity in our balanced portfolio of businesses: consumer spending was up, our wealth management business had strong asset management flows, investment banking fees rebounded nicely, and we continued to provide credit and capital to our corporate and institutional clients to help them drive the economy forward. The U.S. economy continues to show consumer and business optimism, and our results reflect that.

Paul Donofrio, chief financial officer, said:

Each of our businesses reported higher revenue and earnings this quarter, and each recorded solid operating leverage. We grew loans and deposits, while remaining within our risk framework. We also did a good job managing expenses. Despite higher revenue-related expenses in our wealth management and capital markets businesses, we kept overall expenses flat year-over-year as we continued to focus on streamlining and simplifying our company. Our balance sheet remains strong. We grew capital even as we repurchased a net $2.3 billion in stock and paid $0.8 billion in common stock dividends in the quarter.

Shares of Bank of America were last seen trading down 0.3% at $22.74 Tuesday morning, though shares had traded as high as $23.15 right after the opening bell. The 52-week trading range is $12.05 to $25.80, and the consensus analyst target price coming into earnings was $25.45.

At the current price, Bank of America still trades at a discount to its stated book value — about 94.1% of that stated book value. Its reaction to earnings might have been better had it not been for a shadow caused by a Goldman Sachs earnings miss.

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