Following its top executives’ meeting with President Obama, Bank of America Corporation (BAC) said that it will increase loans to small and mid-sized businesses by at least $5 billion in 2010.

Small-business owners have been hit hard by the market turmoil. As a result, providing more small business loans will be a big key to economic recovery, as small and medium-sized businesses are the lifeblood of the economy. As a leading bank, this will be a critical role for BofA to help regain economic growth.

BofA’s step follows an overall contraction in its commercial and industrial loans, which can include small-business lending, but more widely corporate customers. BofA’s commercial and industrial loans shrank 14.3% year-over-year to $167 billion as of Sept. 30, 2009.

Through the first nine months of 2009, BofA loaned more than $12 billion to small businesses and modified loans for 49,000 small business clients. It also originated more than $215 billion in commercial loans to medium-sized companies during that period.

BofA’s third quarter loss came in at 26 cents per share, substantially worse than the Zacks Consensus estimated loss of 10 cents. This compares unfavorably with earnings of 15 cents per share in the prior-year quarter.

Though earnings benefited by the profit from its wealth management business, the company experienced continued net interest yield compression and credit quality deterioration. Additionally, the company is facing problems over new CEO appointment and litigation issues over the Merrill Lynch acquisition.

However, BofA will be absolutely free from the pay restrictions, as it has recently repaid in full the $45 billion bailout money it had received from the TARP. We anticipate continued synergies from the company’s large scale operation and balance sheet restructuring.

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