(Updated with new information, stock prices throughout)

CHARLOTTE, N.C. (

TheStreet

) --

Bank of America

(BAC) - Get Report

is making moves to separate itself from the likes of more troubled competitors -- moves that may be warranted based on capital metrics alone.

The Charlotte, N.C.-based company is one of several financial firms deemed too big to fail by regulators that required more government support than others. Despite its protestations to the contrary, the bank is almost always lumped in with

Citigroup

(CIT) - Get Report

, and occasionally with

American International Group

(AIG) - Get Report

,

Fannie Mae

(FNM)

and

Freddie Mac

(FRE)

as well.

After months of enduring the designation of "most troubled," as well as a government-mandated management shake-up, BofA appears to be fighting back.

The company is in talks with regulators to repay the $20 billion part of its bailout package that relates to

Merrill Lynch

, according to

The Wall Street Journal

. It also has backed down from an earlier stance against paying a fee to exit a loss-share agreement with the government on Merrill assets, and may now pay up to $500 million to do so, the

Journal

said Tuesday.

Earlier, the bank had said it shouldn't have to pay any fees because it never took advantage of the program, and didn't sign any legal documents to solidify the deal. BofA shares recently were down 4.4% at $16.82.

The moves show that BofA prizes independence over any tit-for-tats with regulators, and is softening its stance to exit the bailout program as quickly and smoothly as possible. If successful, BofA will be placed with ordinary Troubled Asset Relief Program recipients like

Wells Fargo

(WFC) - Get Report

rather than "exceptional" aid recipients, bolstering its reputation and perhaps giving the firm the recognition it deserves.

Its intention to repay TARP sooner rather than later also puts competitive pressure on Wells Fargo and Citigroup -- and, to a lesser degree, regional banks like

SunTrust

(STI) - Get Report

,

Regions Financial

(RF) - Get Report

,

Fifth Third

(FITB) - Get Report

,

KeyCorp

(KEY) - Get Report

,

M&T Bank

(MTB) - Get Report

and

Marshall & Ilsley

(MI)

still under government auspices -- to show that they, too, are making headway in returning taxpayer dollars.

"We intend to pay back the government's investment in Wells Fargo on behalf of U.S. taxpayers in a shareholder-friendly way," spokeswoman Richele J. Messick said in response to questions about the firm's repayment time frame. "We will work closely with our regulators to determine the appropriate time to repay the funds while maintaining strong capital levels."

Bank of America is, in fact, less troubled than the likes of Citi, though its name is often uttered in the same breath based on how much bailout loot the two have received. The government has extended $52.5 billion in support to Bank of America, more than Citi's $50 billion or Wells Fargo's $25 billion. The only financial firms that received more of a direct capital infusion than BofA are AIG, Fannie and Freddie.

But it's important to keep in mind that BofA represents two banks in one - Bank of America and Merrill Lynch. Furthermore, a portion of its funds relates to the $7.5 billion worth of guarantees on Merrill's toxic assets that were never used.

When looking at hot-button financial metrics that can make or break investor confidence these days, Bank of America appears to have enough capital to start paying off Uncle Sam. For instance, its risk-based capital ratio stood at 15.99% at June 30, 268 basis points higher than

JPMorgan Chase

(JPM) - Get Report

, which has already repaid TARP and extinguished related warrants.

The only large banking competitor with "healthier" metric was Citi, whose ratios were lifted so high only because of a massive conversion of preferred stock into common equity. As a result, the government now holds a 34% direct ownership stake in the firm.

Of course, that's not to say Bank of America doesn't still have a huge portfolio of loans that stand to go sour. As with other banks, its nonperforming asset ratios have ticked steadily higher as the economy worsened and climbed sharply last quarter.

"Based on the government stress test and the required capital ratios BofA,

Wells Fargo

and Citi are financially 'stable' and should be allowed to pay back TARP funds," says Matthew Ko, an equity analyst at Profit Investment Management. "However, the real question is what will the economy look like in another year or two or three, and, as a result, what will credit trends look like."

Because Bank of America is the largest bank in the country, serving one half of all U.S. households, and because of the tenuous economic recovery, there are big risks to the government pulling out support too early. But that doesn't mean BofA should be prevented from forging ahead, says Frank Bonaventure, chair of the financial institutions group at the law firm Ober|Kaler, and a former banking regulator.

"Financial institutions that have the strength and requisite capital ratios -- they should be able to repay TARP incrementally," says Bonaventure, former counsel to the Comptroller of the Currency and Maryland Bank Commissioner.

The danger, he says, is that a bank will rush to repay federal funds to remove the stigma of being a welfare recipient, only to return to the bread line.

Still, says Bonaventure, "it's a very conservative regulatory environment. You're going to have fairly strict regulatory scrutiny of this and if they do repay it, I think that's a good sign for investors."

-- Written by Lauren Tara LaCapra in New York

.