Bank of America joins Wells Fargo, Citi and Goldman Sachs on the list of banks reporting better than expected earnings in the first quarter. And like those three, there’s plenty of ugliness underlying the otherwise cheery numbers.

Chairman and CEO Ken Lewis simultaneously cheered and downplayed the firm’s $4.2 billion in profit for Q1. “The fact that were able to post strong, positive net income for the quarter is extremely welcome news in this environment,” he said. But, Lewis added, BofA still faces a long uphill climb. “We understand that we continue to face extremely difficult challenges primarily from deteriorating credit quality driven by weakness in the economy and growing unemployment.”

Much of the quarter’s success came from Merrill Lynch—$3.7 billion, most of which was attributable to the trading business, as was the case with Goldman and Citi. That said, some accounting maneuvers related to Merrill also helped the quarter’s earnings (like the other banks …), including BofA’s ability to book gains on deteriorations in company debt. As a result, non-interest income in the quarter included “$2.2 billion in gains related to mark-to-market adjustments on certain Merrill Lynch structured notes as a result of credit spreads widening."

On the earnings call today, Joe Price, BofA’s CFO, said that retention of financial advisors was going well and that 95 percent of the firm’s top producers have been retained since Merrill was acquired; of those FAs who left, Price said 50 percent were either lower-end producers or trainees. According to the company’s report, a total of 2,000 advisors left the combined firm in the quarter.

Another positive sign: Average retail deposits in the quarter increased $140.0 billion, or 27 percent, from a year earlier, including $107.3 billion in balances from Countrywide and Merrill Lynch. Excluding Countrywide and Merrill Lynch, Bank of America grew retail deposits $32.7 billion, or 6 percent, from the year-ago quarter.

Other figures from the earnings report that didn’t exactly project health: The company’s net charge-off rate rose to 2.85 percent from 1.25 percent, and credit-card losses were 8.62 percent, up from 5.19 percent a year ago. The company set aside $13.4 billion for credit losses and non-performing assets rose to $25.7 billion, a 41 percent increase from Q4.