<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-6522
BANKBOSTON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 04-2471221
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
100 FEDERAL STREET,
BOSTON, MASSACHUSETTS 02110
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (617) 434-2200
FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT:
BANK OF BOSTON CORPORATION
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of April 30, 1997:
Common Stock, $1.50 par value_____________________________________146,867,354
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<PAGE>
BANKBOSTON CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
CONSOLIDATED SELECTED FINANCIAL DATA.................................... 3
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
BankBoston Corporation and Subsidiaries
Consolidated Balance Sheet..................................... 4
Consolidated Statement of Income............................... 6
Consolidated Statement of Changes in Stockholders' Equity...... 7
Consolidated Statement of Cash Flows........................... 8
Notes to Financial Statements.................................. 9
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 13
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings.............................................. 35
ITEM 4. Submission of Matters to a Vote of Security Holders............ 35
ITEM 6. Exhibits and Reports on Form 8-K............................... 36
SIGNATURES.............................................................. 37
LIST OF TABLES
Consolidated Average Balance Sheet--Nine Quarters.................... 30
Consolidated Statement of Income--Nine Quarters...................... 31
Average Balances and Interest Rates--Quarter......................... 32
Change in Net Interest Revenue--Volume and Rate Analysis............. 34
</TABLE>
2
<PAGE>
BANKBOSTON CORPORATION
CONSOLIDATED SELECTED FINANCIAL DATA
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
QUARTERS ENDED MARCH 31
INCOME STATEMENT DATA(1)
Net interest revenue...... $ 620 $ 566
Provision for credit loss-
es....................... 60 57
Noninterest income........ 330 285
Noninterest expense....... 544 527
Net income................ 207 155
Per common share
Primary................. 1.29 .94
Fully diluted........... 1.27 .93
Market value per common
share
High.................... 78 3/4 50
Low..................... 63 7/8 41 5/8
AT MARCH 31
BALANCE SHEET DATA(1)
Loans and lease financ-
ing...................... $41,019 $39,268
Total assets.............. 64,780 58,015
Deposits.................. 42,307 41,349
Total stockholders' equi-
ty....................... 4,861 4,686
Book value per common
share.................... 28.67 27.14
Regulatory capital ratios
Risk-based capital ratios
Tier 1.................. 9.0% 8.7%
Total................... 13.0 12.9
Leverage ratio........... 7.8 7.4
</TABLE>
- --------
(1) Financial data for 1996 has been restated to give retroactive effect to the
acquisition of BayBanks, Inc., which was completed in July 1996 and
accounted for as a pooling of interests.
3
<PAGE>
BANKBOSTON CORPORATION
CONSOLIDATED BALANCE SHEET
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1997 1996
-------- -----------
<S> <C> <C>
ASSETS
Cash and due from banks................................... $ 3,841 $ 4,273
Interest bearing deposits in other banks.................. 1,968 1,634
Federal funds sold and securities purchased under
agreements to resell..................................... 2,304 1,857
Trading securities........................................ 1,482 1,238
Securities
Available for sale...................................... 9,082 7,804
Held to maturity (fair value of $680 in 1997 and $675 in
1996).................................................. 692 680
Loans and lease financing
United States Operations................................ 31,175 31,175
International Operations................................ 9,844 9,886
-------- --------
Total loans and lease financing (net of unearned income
of $359 in 1997 and $380 in 1996)..................... 41,019 41,061
Reserve for credit losses................................. (864) (883)
-------- --------
Net loans and lease financing........................... 40,155 40,178
Premises and equipment, net............................... 927 894
Due from customers on acceptances......................... 544 438
Accrued interest receivable............................... 561 546
Other assets.............................................. 3,224 2,764
-------- --------
TOTAL ASSETS.............................................. $ 64,780 $ 62,306
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
BANKBOSTON CORPORATION
CONSOLIDATED BALANCE SHEET
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(CONTINUED)
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1997 1996
-------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Domestic offices
Noninterest bearing..................................... $ 7,556 $ 8,340
Interest bearing........................................ 24,404 24,709
Overseas offices
Noninterest bearing..................................... 880 751
Interest bearing........................................ 9,467 9,031
------- -------
Total deposits........................................ 42,307 42,831
Funds borrowed
Federal funds purchased.................................. 2,184 527
Term federal funds purchased............................. 1,416 1,442
Securities sold under agreements to repurchase........... 2,873 2,034
Other funds borrowed..................................... 5,366 5,155
Acceptances outstanding................................... 544 448
Accrued expenses and other liabilities.................... 2,021 1,614
Notes payable............................................. 2,708 2,821
Guaranteed preferred beneficial interest in Corporation's
junior subordinated debt................................. 500 500
------- -------
TOTAL LIABILITIES......................................... 59,919 57,372
------- -------
Commitments and contingencies
Stockholders' equity
Preferred stock without par value
Authorized shares--10,000,000
Issued and outstanding shares--4,593,941................ 508 508
Common stock, par value $1.50
Authorized shares--300,000,000
Issued shares--154,265,361 in 1997 and 153,172,672 in
1996
Outstanding shares--151,806,747 in 1997 and 153,172,672
in 1996................................................ 231 230
Surplus.................................................. 1,259 1,202
Retained earnings........................................ 3,038 2,925
Net unrealized gain on securities available for sale, net
of tax.................................................. 21 76
Treasury stock, at cost (2,458,614 shares in 1997)....... (187)
Cumulative translation adjustments, net of tax........... (9) (7)
------- -------
TOTAL STOCKHOLDERS' EQUITY................................ 4,861 4,934
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................ $64,780 $62,306
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
BANKBOSTON CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
QUARTERS ENDED MARCH 31
INTEREST INCOME
Loans and lease financing, including fees.................. $ 975 $ 978
Securities................................................. 170 137
Trading securities......................................... 28 41
Mortgages held for sale.................................... 17
Federal funds sold and securities purchased under
agreements to resell...................................... 68 43
Deposits in other banks.................................... 34 24
-------- --------
Total interest income.................................... 1,275 1,240
-------- --------
INTEREST EXPENSE
Deposits of domestic offices............................... 229 233
Deposits of overseas offices............................... 171 187
Funds borrowed............................................. 193 211
Notes payable.............................................. 62 43
-------- --------
Total interest expense................................... 655 674
-------- --------
NET INTEREST REVENUE......................................... 620 566
Provision for credit losses................................ 60 57
-------- --------
Net interest revenue after provision for credit losses..... 560 509
-------- --------
NONINTEREST INCOME
Financial service fees..................................... 138 52
Trust and agency fees...................................... 66 57
Trading profits and commissions............................ 19 13
Net securities gains....................................... 9 13
Other income............................................... 98 150
-------- --------
Total noninterest income................................. 330 285
-------- --------
NONINTEREST EXPENSE
Salaries................................................... 258 241
Employee benefits.......................................... 53 52
Occupancy expense.......................................... 51 51
Equipment expense.......................................... 36 34
Other expense.............................................. 146 149
-------- --------
Total noninterest expense................................ 544 527
-------- --------
Income before income taxes................................... 346 267
Provision for income taxes................................... 139 112
-------- --------
NET INCOME................................................... $ 207 $ 155
======== ========
NET INCOME APPLICABLE TO COMMON STOCK........................ $ 198 $ 146
======== ========
PER COMMON SHARE
Net income
Primary.................................................... $ 1.29 $ .94
Fully diluted.............................................. $ 1.27 $ .93
Dividends declared........................................... $ .44 $ .37
AVERAGE NUMBER OF COMMON SHARES (IN THOUSANDS)
Primary.................................................... 153,421 154,988
Fully diluted.............................................. 155,592 156,844
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
BANKBOSTON CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN MILLIONS)
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
QUARTERS ENDED MARCH 31
PREFERRED STOCK
Balance, January 1............................................ $ 508 $ 508
------ ------
Balance, March 31............................................. 508 508
------ ------
COMMON STOCK
Balance, January 1............................................ 230 350
Common stock issued
Exercise of stock options.................................... 1
Restricted stock grants, net of forfeitures.................. 1
------ ------
Balance, March 31............................................. 231 351
------ ------
SURPLUS
Balance, January 1............................................ 1,202 1,240
Dividend reinvestment and common stock purchase plan.......... 4
Exercise of stock options..................................... 10 (11)
Additional purchase price for prior business combination...... 7
Restricted stock grants....................................... 19 2
Other, principally employee benefit plans..................... 17 6
------ ------
Balance, March 31............................................. 1,259 1,237
------ ------
RETAINED EARNINGS
Balance, January 1............................................ 2,925 2,548
Net income.................................................... 207 155
Restricted stock grants....................................... (17) (9)
Payment on ESOP loan.......................................... 3
Cash dividends declared
Preferred stock.............................................. (9) (10)
Common stock................................................. (68) (53)
------ ------
Balance, March 31............................................. 3,038 2,634
------ ------
NET UNREALIZED GAIN ON SECURITIES AVAILABLE FOR SALE
Balance, January 1............................................ 76 82
Change in net unrealized gain on securities available for
sale, net of tax............................................. (55) (32)
------ ------
Balance, March 31............................................. 21 50
------ ------
TREASURY STOCK
Balance, January 1............................................ (22)
Purchases of treasury stock................................... (191) (121)
Treasury stock reissued
Dividend reinvestment and common stock purchase plan......... 10
Exercise of stock options.................................... 3 23
Additional purchase price for prior business combination..... 7
Restricted stock grants...................................... 1 10
Other, principally employee benefit plans.................... 4
------ ------
Balance, March 31............................................. (187) (89)
------ ------
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance, January 1............................................ (7) (4)
Change in translation adjustments, net of tax................. (2) (1)
------ ------
Balance, March 31............................................. (9) (5)
------ ------
TOTAL STOCKHOLDERS' EQUITY, MARCH 31.......................... $4,861 $4,686
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
BANKBOSTON CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
QUARTERS ENDED MARCH 31
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $ 207 $ 155
Reconciliation of net income to net cash provided from (used
for) operating activities
Provision for credit losses............................... 60 57
Depreciation and amortization............................. 39 34
Provision for deferred taxes.............................. 3 50
Net gains on sales of securities and other assets......... (46) (108)
Change in trading securities.............................. (244) (179)
Net change in mortgages held for sale..................... 134
Net change in interest receivables and payables........... (56) 27
Other, net................................................ (45) (24)
------- -------
Net cash provided from (used for) operating activities.. (82) 146
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used for interest bearing deposits in other banks.. (334) (72)
Net cash used for federal funds sold and securities
purchased under agreements to resell....................... (447) (36)
Securities available for sale
Sales..................................................... 331 963
Maturities................................................ 520 1,272
Purchases................................................. (2,268) (1,968)
Securities held to maturity
Maturities................................................ 9 12
Purchases................................................. (22) (46)
Loans and lease financing originated by nonbank entities.... (8,464) (3,378)
Loans and lease financing collected by nonbank entities..... 8,311 3,064
Proceeds from sales of loan portfolios by bank
subsidiaries............................................... 1,295
Net cash used for lending and lease activities of bank
subsidiaries............................................... (1,193) (172)
Proceeds from sales of other real estate owned.............. 5 10
Expenditures for premises and equipment..................... (64) (59)
Proceeds from sales of business units, premises and
equipment.................................................. 7 144
Other, net.................................................. 163 60
------- -------
Net cash used for investing activities.................. (2,151) (206)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash provided from (used for) deposits.................. (524) 171
Net cash provided from (used for) funds borrowed............ 2,681 (753)
Repayments of notes payable................................. (199) (50)
Net proceeds from issuance of notes payable................. 86 360
Net proceeds from issuance of common stock.................. 27 27
Purchases of treasury stock................................. (191) (121)
Dividends paid.............................................. (77) (63)
------- -------
Net cash provided from (used for) financing activities.. 1,803 (429)
Effect of foreign currency translation on cash.............. (2) (6)
------- -------
NET CHANGE IN CASH AND DUE FROM BANKS....................... (432) (495)
CASH AND DUE FROM BANKS AT JANUARY 1........................ 4,273 3,561
------- -------
CASH AND DUE FROM BANKS AT MARCH 31......................... $ 3,841 $ 3,066
======= =======
Interest payments made...................................... $ 696 $ 1,057
Income tax payments made.................................... $ 112 $ 71
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
BANKBOSTON CORPORATION
NOTES TO FINANCIAL STATEMENTS
1.The accompanying interim consolidated financial statements of BankBoston
Corporation (the Corporation) are unaudited. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the information contained herein have been made. Prior
period financial statements have been restated to give retroactive effect to
the acquisition of BayBanks, Inc. (BayBanks) completed in July 1996, which was
accounted for as a pooling of interests. Certain amounts reported in prior
periods have been reclassified for comparative purposes. This information
should be read in conjunction with the Corporation's 1996 Annual Report on
Form 10-K.
2. SECURITIES:
A summary comparison of securities available for sale by type is as follows:
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
--------------- -------------------
CARRYING CARRYING
COST VALUE COST VALUE
------ -------- -------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
U.S. Treasury............................... $2,011 $1,998 $ 1,669 $ 1,675
U.S. government agencies and corporations--
mortgage-backed securities................. 4,651 4,617 3,789 3,801
States and political subdivisions........... 182 182 172 173
Foreign debt securities..................... 1,275 1,308 1,095 1,133
Other debt securities....................... 170 170 250 256
Marketable equity securities................ 167 210 156 217
Other equity securities..................... 597 597 549 549
------ ------ -------- --------
$9,053 $9,082 $ 7,680 $ 7,804
====== ====== ======== ========
</TABLE>
Other equity securities included in securities available for sale are not
traded on established exchanges and are carried at cost.
A summary comparison of securities held to maturity by type is as follows:
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
-------------------- --------------------
AMORTIZED AMORTIZED
COST FAIR VALUE COST FAIR VALUE
--------- ---------- --------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
U.S. Treasury........................ $ 5 $ 5 $ 3 $ 3
U.S. government agencies and
corporations--
mortgage-backed securities.......... 529 517 535 530
States and political subdivisions.... 5 5 6 6
Other debt securities................ 6 6
Foreign debt securities.............. 21 21 11 11
Other equity securities.............. 126 126 125 125
---- ---- ---- ----
$692 $680 $680 $675
==== ==== ==== ====
</TABLE>
Other equity securities included in securities held to maturity represent
securities, such as Federal Reserve Bank and Federal Home Loan Bank stock,
which are not traded on established exchanges and have only redemption
capabilities. Fair values for such securities are considered to approximate
cost.
9
<PAGE>
BANKBOSTON CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. LOANS AND LEASE FINANCING:
The following are the details of loan and lease financing balances:
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1997 1996
-------- -----------
(IN MILLIONS)
<S> <C> <C>
United States Operations
Commercial, industrial and financial..................... $14,203 $13,162
Commercial real estate
Construction............................................ 265 284
Other................................................... 3,129 3,240
Consumer-related loans
Residential mortgages................................... 3,067 3,184
Home equity loans....................................... 2,908 2,878
Credit card loans....................................... 1,404 1,395
Other................................................... 4,708 5,503
Lease financing.......................................... 1,766 1,816
Unearned income.......................................... (275) (287)
------- -------
31,175 31,175
------- -------
International Operations
Loans and lease financing................................ 9,928 9,979
Unearned income.......................................... (84) (93)
------- -------
9,844 9,886
------- -------
$41,019 $41,061
======= =======
</TABLE>
10
<PAGE>
BANKBOSTON CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. RESERVE FOR CREDIT LOSSES:
An analysis of the reserve for credit losses is as follows:
<TABLE>
<CAPTION>
1997 1996
QUARTERS ENDED MARCH 31 ---- ----
(IN
MILLIONS)
<S> <C> <C>
BALANCE, BEGINNING OF PERIOD..................................... $883 $890
Provision........................................................ 60 57
Reserves of entities sold........................................ (12)
Domestic credit losses
Commercial, industrial and financial........................... (20) (8)
Commercial real estate......................................... (1) (13)
Consumer-related loans
Residential mortgages........................................ (2) (6)
Credit card loans............................................ (20) (3)
Home equity loans............................................ (3) (3)
Other........................................................ (43) (30)
International credit losses...................................... (8) (9)
---- ----
Total credit losses........................................ (97) (72)
---- ----
Domestic recoveries
Commercial, industrial and financial........................... 2 5
Commercial real estate......................................... 1 2
Consumer-related loans
Residential mortgages........................................ 1 2
Credit card loans............................................ 1
Home equity loans............................................ 1 1
Other........................................................ 8 7
International recoveries......................................... 4 4
---- ----
Total recoveries........................................... 18 21
---- ----
Net credit losses................................................ (79) (51)
---- ----
BALANCE, END OF PERIOD........................................... $864 $884
==== ====
</TABLE>
At March 31, 1997, loans for which impairment has been recognized in
accordance with Statement of Financial Accounting Standards (SFAS) No. 114,
"Accounting by Creditors for Impairment of a Loan," totaled $231 million, of
which $55 million related to loans with no valuation reserve and $176 million
related to loans with a valuation reserve of $46 million. At March 31, 1996,
impaired loans totaled $264 million, of which $92 million related to loans
with no valuation reserve and $172 million related to loans with a valuation
reserve of $38 million. For the quarters ended March 31, 1997 and 1996,
average impaired loans were approximately $245 million and $253 million,
respectively. Interest recognized on impaired loans during these periods was
not material.
5. GUARANTEED PREFERRED BENEFICIAL INTEREST IN CORPORATION'S JUNIOR
SUBORDINATED DEBT:
In 1996, BankBoston Capital Trust I and BankBoston Capital Trust II (the
Trusts) were formed for the exclusive purpose of issuing capital securities
(Trust Securities) and investing the proceeds from the sale of the Trust
Securities in junior subordinated debentures issued by the Corporation. The
Corporation is the owner of all the beneficial interests of the Trusts
represented by common securities, and has unconditionally guaranteed all of
the Trusts' obligations under the Trust Securities. In November and December
1996, a total of $500 million of Trust Securities were issued, consisting of
$250 million of 8 1/4% Trust Securities issued by BankBoston Capital
11
<PAGE>
BANKBOSTON CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Trust I and $250 million of 7 3/4% Trust Securities issued by BankBoston
Capital Trust II. Both issues of Trust Securities have a liquidation
preference of $1,000 per Trust Security and are scheduled to mature on
December 15, 2026.
6. CONTINGENCIES:
The Corporation and its subsidiaries are defendants in a number of legal
proceedings arising in the normal course of business. Management, after
reviewing all actions and proceedings pending against or involving the
Corporation and its subsidiaries, considers that the aggregate loss, if any,
resulting from the final outcome of these proceedings should not be material
to the Corporation's financial condition or results of operations.
7. RESTRUCTURING AND MERGER-RELATED COSTS:
During 1996, the Corporation recorded $180 million of restructuring and
merger-related costs in connection with its acquisition of BayBanks. Included
in these costs were employee-related severance and property-related costs;
professional fees and other costs of effecting the acquisition; and systems
and other costs incurred during the period.
During the first quarter of 1997, cash outlays charged against the related
reserves amounted to $41 million. These cash outlays primarily consisted of
early retirement benefits and payments to terminated employees. Approximately
400 employees were either terminated or left the Corporation through enhanced
retirement programs during the first quarter of 1997. The remaining reserves
of $56 million at March 31, 1997 consist primarily of expected cash outlays
related to severance and property-related costs, which are expected to occur
throughout the integration process.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL
The Corporation's name was changed from "Bank of Boston Corporation" to
"BankBoston Corporation" effective April 25, 1997. In addition, the name of
the Corporation's principal banking subsidiary, formerly "The First National
Bank of Boston," was changed to "BankBoston, N.A." effective April 24, 1997.
All prior period information included in this report has been restated to give
effect to the Corporation's acquisition of BayBanks, Inc. (BayBanks), which
was completed in July 1996 and accounted for as a pooling of interests.
The Corporation's net income for the first quarter of 1997 was $207 million,
compared to $155 million for the first quarter of 1996. Net income per common
share was $1.29 on a primary basis and $1.27 on a fully diluted basis in 1997,
compared with $.94 on a primary basis and $.93 on a fully diluted basis in
1996. The first quarter of 1996 included a loss of $111 million ($70 million
after-tax) related to contracts entered into to protect the value of the
Corporation's mortgage servicing rights and the economic value of its mortgage
banking subsidiary, offset, in part, by a gain of $60 million ($39 million
after-tax) from the completion of the first phase of the sale of this
subsidiary. Excluding these items, first quarter 1996 net income was $186
million or $1.13 per share on a fully diluted basis.
The Corporation continues to take strategic initiatives focused on
leveraging its core competencies over attractive markets, and continues to
explore, on an ongoing basis, acquisition, divestiture and joint venture
opportunities, as well as analyze each of its businesses in the context of
competitive advantages, industry dynamics and growth potential. In this
connection, in April 1997 the Corporation announced an agreement to sell Ganis
Credit Corporation (Ganis), one of its national consumer lending businesses.
In March 1997 the Corporation sold approximately $950 million of Ganis loans
for a gain of $7.5 million ($4.5 million after-tax). The Corporation is
continuing its strategic review of its other national consumer lending
businesses (Fidelity Acceptance Corporation and the national credit card
portfolio), which have aggregate loans of approximately $2 billion. In
addition, the Corporation is evaluating its Regional Consumer business in
order to enhance its profitability and value to stockholders. In this regard,
the Corporation may take various actions to achieve its goals, which could
include a restructuring of certain components of the business.
13
<PAGE>
NET INTEREST REVENUE--(FULLY TAXABLE EQUIVALENT BASIS)
This discussion of net interest revenue should be read in conjunction with
Average Balances and Interest Rates and Change in Net Interest Revenue--Volume
and Rate Analysis, presented elsewhere in this report. For this review of net
interest revenue, interest income that is either exempt from federal income
taxes or taxed at a preferential rate has been adjusted to a fully taxable
equivalent basis. This adjustment has been calculated using a federal income
tax rate of 35 percent, plus applicable state and local taxes, net of related
federal tax benefits.
The following table presents a summary of net interest revenue, on a fully
taxable equivalent basis, and related average loans and lease financing and
average earning asset balances and net interest margin for United States and
International Operations.
<TABLE>
<CAPTION>
1997 1996 CHANGE
QUARTERS ENDED MARCH 31 ------- ------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
United States Operations
Net interest revenue................................ $ 469 $ 447 $ 22
Average loans and lease financing................... 31,732 30,432 1,300
Average earning assets.............................. 41,950 39,711 2,239
Net interest margin................................. 4.54% 4.53% 0.01%
International Operations
Net interest revenue................................ $ 156 $ 124 $ 32
Average loans and lease financing................... 10,000 8,747 1,253
Average earning assets.............................. 14,691 12,461 2,230
Net interest margin................................. 4.30% 3.99% 0.31%
Consolidated
Net interest revenue................................ $ 625 $ 571 $ 54
Average loans and lease financing................... 41,732 39,179 2,553
Average earning assets.............................. 56,641 52,172 4,469
Net interest margin................................. 4.47% 4.40% 0.07%
</TABLE>
Domestic net interest revenue increased $22 million from the 1996 period
primarily due to an increase in average earning assets of $2.2 billion,
including a $1.3 billion increase in average loan and lease volume.
Contributing to the average loan volume increase was a higher level of
consumer-related loans, reflecting growth in the credit card portfolio of
approximately $800 million and growth in home equity and installment loans of
$700 million. On March 31, 1997, the Corporation sold $950 million of consumer
loans from the Ganis franchise. This sale had no effect on first quarter 1997
net interest revenue. In addition, commercial and industrial loans increased
by $900 million. The increases were partially offset by a $1.1 billion
decrease in domestic residential mortgages resulting from the sale of $500
million of loans in connection with the sale of 20 branches in the fourth
quarter of 1996 and other residential mortgage sales. The increase in average
earning assets also included increases in trading and available for sale
securities of approximately $1.1 billion, an increase of $750 million of
federal funds sold and resale agreements and interest bearing bank deposits,
partially offset by a decrease of $900 million in loans held for sale
resulting from the sale of the Corporation's mortgage banking subsidiary in
the 1996 period.
Domestic net interest margin was relatively unchanged from the 1996 period.
The improvement in credit card spreads resulting from the expiration of
introductory promotional rates during the latter part of 1996 and the first
quarter of 1997, and the above mentioned sale of residential mortgages, had a
positive impact on net interest margin. This positive impact was offset by a
higher level of lower yielding assets, mainly trading and available for sale
securities compared with the first quarter of 1996. Information with respect
to the Corporation's management of interest rate risk is discussed in the
"Market Risk Management" section.
International net interest revenue increased $32 million, primarily due to
increases in average earning assets, reflecting increases in the Corporation's
operations in Latin America, mainly in Brazil and Argentina. The increase in
average earning assets included increases in average loans and leases of $600
million in Brazil and
14
<PAGE>
$175 million in Argentina. In addition, other average earning assets increased
by $265 million and $370 million in Brazil and Argentina, respectively. The
increase in net interest revenue was also due to an increase in net interest
margin, reflecting, in part, increased dividends from equity investments in
the first quarter of 1997.
As compared to the fourth quarter of 1996, consolidated net interest revenue
increased $9 million. A decrease in domestic net interest revenue of $6
million was more than offset by an increase in international net interest
revenue of $15 million. Consolidated net interest margin was unchanged. The
decrease in domestic net interest revenue was primarily due to an 11 basis
point decline in net interest margin, partially offset by an increase in
average earning assets, mainly available for sale securities. The decrease in
domestic net interest margin was due to a decrease in interest bearing
deposits resulting from the sale of 20 branches at the end of the fourth
quarter of 1996, with such deposits replaced with more expensive wholesale
funding. Also contributing to the decrease in net interest margin was a
decrease in loans due to the sale of 20 branches mentioned above, and an
increase in lower yielding available for sale securities. The increase in
international net interest revenue was due to an increase in net interest
margin of 33 basis points, an increase in dividends from equity investments
and an increase in average earning assets of approximately $550 million.
The Corporation expects continued pressure on margin in the future. Future
levels of net interest revenue and margin will be affected by competitive
pricing pressure on retail deposits, loans and other products; the mix and
volume of assets and liabilities; the interest rate environment; the economic
and political conditions in the countries where the Corporation does business;
and other factors such as the Corporation's strategic initiatives.
PROVISION FOR CREDIT LOSSES
The provision for credit losses was $60 million in the first quarter of
1997, compared with $57 million in the first quarter of 1996. The provision
for credit losses in each period reflects management's assessment of the
adequacy of the reserve for credit losses, considering the current risk
characteristics of the loan portfolio and economic conditions. The amount of
future provisions will be a function of the regular quarterly review of the
reserve for credit losses, based upon management's assessment of risk at the
time, and, as such, there can be no assurance as to the level of future
provisions. See the "Reserve for Credit Losses" section for discussion of the
reserve for credit losses and net credit losses.
15
<PAGE>
NONINTEREST INCOME
The following table presents the components of noninterest income.
<TABLE>
<CAPTION>
1997 1996 CHANGE
QUARTERS ENDED MARCH 31 ---- ---- ------
(IN MILLIONS)
<S> <C> <C> <C>
Financial service fees
Deposit and ATM-related fees............................... $ 57 $ 59 $ (2)
Letter of credit and acceptance fees....................... 17 17 0
Syndication and agent fees................................. 14 10 4
Other loan-related fees.................................... 9 11 (2)
Net mortgage servicing fees................................ (89) 89
Other financial service fees............................... 41 44 (3)
---- ---- ----
Total financial service fees............................. 138 52 86
Mutual fund fees............................................. 25 21 4
Personal trust fees.......................................... 34 32 2
Other trust and agency fees.................................. 7 4 3
Trading profits and commissions.............................. 19 13 6
Securities portfolio gains, net.............................. 9 13 (4)
Net equity and mezzanine profits............................. 37 37 0
Net foreign exchange trading profits......................... 19 13 6
Other income................................................. 39 40 (1)
Net gain from decrease in joint venture interest............. 3 3
Gain on sale of business..................................... 60 (60)
---- ---- ----
Total.................................................... $330 $285 $ 45
==== ==== ====
</TABLE>
Excluding net mortgage servicing fees, financial service fees declined $3
million compared with the 1996 period. The $4 million increase in syndication
and agent fees, reflecting a higher volume of transactions generated by the
Corporation's Corporate Finance business, was more than offset by declines in
other fee categories.
The first quarter 1996 net losses from mortgage servicing included $111
million of losses from risk management activities, net of decreased servicing
amortization. These losses resulted from the change in market value of
contracts used to manage prepayment risk in the mortgage servicing portfolio
which, in turn, protected the economic value of the mortgage banking
subsidiary pending the completion of its sale to HomeSide, Inc. (HomeSide).
The value of mortgage servicing rights is affected by the expected level of
prepayments made by mortgage holders as a result of changes in mortgage rates.
The value of the contracts purchased to manage this risk fluctuated inversely
with the value of the mortgage servicing assets. Due to the sharp increase in
long-term interest rates during the first quarter of 1996, the value of these
contracts declined. Concurrently, the value of the mortgage servicing assets
and the amount of gain recognized by the Corporation on the disposition of the
mortgage banking subsidiary increased. As a result, the losses from risk
management activities were substantially offset by the pre-tax gain of $106
million realized on the sale of the mortgage banking subsidiary, of which $60
million was realized in the first quarter of 1996 upon completion of the first
phase of the transaction and is included in gain on sale of business. The
remainder of the gain was realized in the second quarter of 1996 upon
completion of the second phase of the transaction.
Mutual fund fees increased due to higher fees from the Corporation's
Brazilian and Argentine mutual fund businesses, reflecting growth in these
funds. The increase in other trust and agency fees was due to higher custody
fees in 1997. The increase in trading profits and commissions was mainly due
to increases from the Corporation's Brazilian operations, which included
trading international debt securities and local Brazilian equity
16
<PAGE>
securities. The decrease in securities portfolio gains was due to the sale of
certain domestic securities in 1996 in connection with the repositioning of
the available for sale portfolio. The increase in net foreign exchange and
trading profits was due to an increased volume of business coupled with
favorable market conditions in the first quarter of 1997. Other income for
1997 included a $7.5 million gain from the sale of $950 million of Ganis
loans.
The net gain from decrease in joint venture interest reflects a $5 million
gain relating to HomeSide's initial public offering in January 1997, offset by
a $2 million loss from the early extinguishment of outstanding debt, which was
extinguished with the proceeds of the offering. This initial public offering
resulted in a reduction of the Corporation's one-third interest in HomeSide to
approximately 26 percent. Gain on sale of business in 1996 reflected a pre-tax
gain of $60 million on the sale of the Corporation's mortgage banking
subsidiary discussed above.
NONINTEREST EXPENSE
The following table presents the components of noninterest expense.
<TABLE>
<CAPTION>
1997 1996 CHANGE
QUARTERS ENDED MARCH 31 ---- ---- ------
(IN MILLIONS)
<S> <C> <C> <C>
Employee costs................................................. $311 $293 $18
Occupancy and equipment........................................ 87 85 2
Professional fees.............................................. 12 13 (1)
Advertising and public relations............................... 22 27 (5)
Communications................................................. 26 26 0
Amortization of goodwill and other intangibles................. 7 5 2
Other.......................................................... 77 76 1
---- ---- ---
Noninterest expense before OREO.............................. 542 525 17
OREO........................................................... 2 2 0
---- ---- ---
Total........................................................ $544 $527 $17
==== ==== ===
</TABLE>
The increase in noninterest expense before other real estate owned (OREO)
costs primarily reflected increases in employee costs related to merit
increases, higher levels of incentive compensation related to improved
business performance, and costs related to the hiring of sales and trading
professionals in the Global Capital Markets businesses. In addition, employee
costs increased due to branch expansion in Brazil and the acquisition of The
Boston Bancorp in the second quarter of 1996. These increases were partially
offset by reduced employee costs from the integration of BayBanks, including
the sale of 20 branches in the fourth quarter of 1996, and the sale of the
Corporation's mortgage banking subsidiary in the first half of 1996. The
decrease in advertising and public relations was due to a temporary decline in
promotional campaigns pending the completion of the integration of deposit
systems and rollout of new products.
The complex process of the BayBanks integration is well underway and the
major systems and branch conversions are expected to be completed by the
middle of 1997. Costs related to the conversion of systems and various other
integration related activities will be recorded in the future as they are
incurred during the conversion and integration process. In addition, the
Corporation is evaluating its Regional Consumer business in order to enhance
its profitability and value to stockholders. In this regard, the Corporation
may take various actions to achieve its goals, which could include a
restructuring of certain components of the business.
17
<PAGE>
PROVISION FOR INCOME TAXES
The first quarter 1997 income tax provision was $139 million, compared with
$112 million for the first quarter of 1996. The Corporation's effective tax
rate was 40 percent in 1997 compared with 42 percent in 1996. The reduction in
the Corporation's effective tax rate from the 1996 period was largely due to
reductions in the rates of state tax to which the Corporation's operations
were subject and to the low rate of state tax benefit associated with the net
loss on the sale of the mortgage servicing business recorded in the first
quarter of 1996.
FINANCIAL CONDITION
CONSOLIDATED BALANCE SHEET
At March 31, 1997, the Corporation's total assets were $64.8 billion,
compared with $62.3 billion at December 31, 1996. The $2.5 billion increase in
total assets was due to a $1.3 billion increase in available for sale
securities, as well as increases in interest bearing bank deposits and
securities purchased under agreements to resell. In addition, trading account
securities increased $244 million as a result of the continued growth of the
Corporation's trading business. The increase in assets was principally funded
with federal funds purchased and securities sold under agreements to
repurchase. Deposits declined $524 million from December 31, 1996, reflecting
the absence of the unusually high level of noninterest bearing deposits at
year end 1996. Notes payable decreased $113 million from December 31, 1996,
mainly due to the maturity of $125 million of the Corporation's senior medium-
term notes.
CREDIT PROFILE
A discussion of the Corporation's credit risk management policies is
included on page 29 of its 1996 Annual Report to Stockholders, which is
incorporated by reference into its 1996 Annual Report on Form 10-K.
The segments of the lending portfolio are as follows:
<TABLE>
<CAPTION>
MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
1997 1996 1996 1996 1996
-------- ------- -------- ------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
United States Operations
Commercial, industrial and
financial...................... $14,203 $13,162 $13,828 $12,915 $12,677
Commercial real estate
Construction.................. 265 284 323 410 383
Other......................... 3,129 3,240 3,228 3,326 3,242
Consumer-related loans
Residential mortgages......... 3,067 3,184 4,156 4,133 4,218
Home equity loans............. 2,908 2,878 2,842 2,775 2,644
Credit card................... 1,404 1,395 1,320 1,223 810
Other......................... 4,708 5,503 5,349 5,218 5,200
Lease financing................. 1,766 1,816 1,778 1,627 1,565
Unearned income................. (275) (287) (272) (245) (240)
------- ------- ------- ------- -------
31,175 31,175 32,552 31,382 30,499
------- ------- ------- ------- -------
International Operations
Loans and lease financing, net
of unearned income............. 9,844 9,886 9,501 9,271 8,769
------- ------- ------- ------- -------
Total loans and lease
financing...................... $41,019 $41,061 $42,053 $40,653 $39,268
======= ======= ======= ======= =======
</TABLE>
18
<PAGE>
Total loans and lease financing decreased approximately $42 million from
December 31, 1996, reflecting a $1 billion increase in commercial, industrial
and financial loans, an $870 million decrease in consumer-related loans, a
$130 million decrease in commercial real estate loans and a $42 million
decrease in international loans. The increases in commercial, industrial and
financial loans resulted from increases in various loan portfolios, including
New England Corporate Banking, Specialized Industries and Diversified Finance.
Loan levels are also affected by the timing of syndication activity. The
decrease in consumer-related loans was primarily due to the sale of $950
million of Ganis loans during the first quarter of 1997. The decrease in
commercial real estate loans was the result of loan sales which also occurred
in the first quarter of 1997.
At March 31, 1997 approximately 66 percent of domestic commercial real
estate loans were to borrowers domiciled in New England, compared with
approximately 70 percent at December 31, 1996. The portion of domestic
commercial real estate loans located outside of New England was dispersed
among 29 and 30 states at March 31, 1997 and December 31, 1996, respectively.
The Corporation's total loan portfolio at March 31, 1997 and December 31,
1996 included $1.7 billion and $1.3 billion of highly leveraged transaction
(HLT) loans to 124 and 116 customers, respectively. The average HLT loan size
at March 31, 1997 and December 31, 1996 was $14 million and $11 million,
respectively. The amount of unused commitments for HLTs at March 31, 1997 was
$788 million, compared with $677 million at December 31, 1996. The amount of
unused commitments does not necessarily represent the actual future funding
requirements of the Corporation, since a portion can be syndicated or assigned
to others or may expire without being drawn upon. At March 31, 1997 and
December 31, 1996, there were no nonaccrual HLT loans. In addition, there were
no credit losses from HLT loans in the first quarter of 1997.
A discussion of the Corporation's real estate and HLT lending activities,
policies and the effect of these activities on results of operations is
included on page 31 of its 1996 Annual Report to Stockholders, which is
incorporated by reference into its 1996 Annual Report on Form 10-K.
NONACCRUAL LOANS AND OREO
The details of consolidated nonaccrual loans and OREO are as follows:
<TABLE>
<CAPTION>
MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
1997 1996 1996 1996 1996
-------- ------- -------- ------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
United States
Commercial, industrial and
financial......................... $ 72 $ 82 $114 $140 $ 93
Commercial real estate
Construction..................... 4 6 9 10 22
Other............................ 47 67 84 86 102
Consumer-related loans
Residential mortgages............ 65 57 60 45 46
Home equity loans................ 25 23 22 20 16
Credit card...................... 23 17 5 2
Other............................ 41 44 44 38 42
---- ---- ---- ---- ----
277 296 338 341 321
International...................... 119 106 106 57 63
---- ---- ---- ---- ----
Total nonaccrual loans........... 396 402 444 398 384
OREO............................... 49 50 52 62 65
---- ---- ---- ---- ----
Total............................ $445 $452 $496 $460 $449
==== ==== ==== ==== ====
Nonaccrual loans and OREO as a
percent of related asset
categories........................ 1.1% 1.1% 1.2% 1.1% 1.1%
</TABLE>
19
<PAGE>
Total nonaccrual loans and OREO decreased $7 million to $445 million at
March 31, 1997, from $452 million at December 31, 1996. The decrease from
December 31, 1996 reflects decreases in the domestic commercial and industrial
loan portfolio as well as the domestic commercial real estate loan portfolio.
The decreases were partially offset by increases in domestic consumer-related
nonaccrual loans, primarily driven by the credit card and residential mortgage
portfolios, and increases in the international nonaccrual loan portfolio.
Included in the Corporation's nonaccrual loan balance is a $50 million loan
to a large international customer. In addition, the Corporation holds in
available for sale securities approximately $50 million of commercial paper of
this same customer, on which earnings are not being recognized. The customer's
restructuring plan is currently being negotiated and the amount of chargeoff
on the loan and loss on the investment will be dependent upon the outcome of
these negotiations.
The level of nonaccrual loans and leases and OREO is influenced by the
economic environment, interest rates and other internal and external factors.
As such, no assurance can be given as to future levels of nonaccrual loans and
leases and OREO.
RESERVE FOR CREDIT LOSSES
The Corporation determines the level of its reserve for credit losses
considering evaluations of individual credits and concentrations of credit
risks, net losses charged to the reserve, changes in quality of the credit
portfolio, levels of nonaccrual loans and leases, current economic conditions,
cross-border risks, changes in size and character of the credit risks and
other pertinent factors. The credit risk of off-balance-sheet exposures is
managed as part of the overall extension of credit to individual customers and
is considered in assessing the overall adequacy of the reserve for credit
losses. The amount of the reserve for credit losses associated with off-
balance-sheet exposures is not significant. The amount of the reserve for
credit losses is reviewed by management quarterly.
The reserve for credit losses at March 31, 1997 was $864 million, or 2.11
percent of outstanding loans and leases, compared with $883 million, or 2.15
percent, at December 31, 1996. The reserve for credit losses was 218 percent
of nonaccrual loans and leases at March 31, 1997, compared with 220 percent at
December 31, 1996. The future level of the reserve for credit losses will
continue to be a function of management's evaluation of the Corporation's
credit exposures existing at the time. Therefore, no assurance can be given
regarding the future level of the reserve.
Net credit losses were $79 million in the first quarter of 1997, compared
with $51 million in the first quarter of 1996 and $75 million in the fourth
quarter of 1996. The increase of $28 million compared to the quarter ended
March 31, 1996 was principally driven by increases in net credit losses in the
consumer loan portfolio, mainly the Fidelity Acceptance Corporation (FAC) and
credit card portfolios, the latter of which had significant growth in
outstandings from the first quarter of 1996, and increases in commercial,
industrial and financial net credit losses, principally due to a loss on one
large credit. These increases were partially offset by lower net credit losses
in the commercial real estate portfolio. The March 31, 1997 and December 31,
1996 comparison included a $16 million decrease in commercial real estate net
credit losses, reflecting the absence of a $15 million credit loss associated
with the transfer of loans into a held for sale category in the fourth quarter
of 1996, and an increase in commercial, industrial and financial net credit
losses due to the large credit loss mentioned above.
The industry-wide trend toward higher consumer debt levels and stagnant real
wage growth, combined with higher current levels of personal bankruptcy
filings, have led to higher chargeoffs in the consumer portfolios, especially
in the credit card portfolio. The Corporation expects continued pressure on
consumer chargeoffs in the future. As previously mentioned, the Corporation is
performing a strategic review of its national consumer lending businesses
(Fidelity Acceptance Corporation and the national credit card portfolio).
Depending on the results of this review, outstandings in these portfolios
could increase from prior periods.
20
<PAGE>
Net credit losses are as follows:
<TABLE>
<CAPTION>
MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
1997 1996 1996 1996 1996
QUARTERS ENDED -------- ------- -------- ------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
United States Operations
Commercial, industrial and
financial........................ $18 $ 3 $ 2 $ 3
Commercial real estate............ 16 $ 1 3 11
Consumer-related loans
Residential mortgages........... 1 2 2 3 4
Home equity loans............... 2 3 2 2
Credit card..................... 19 13 7 4 3
Other........................... 35 26 35 25 23
--- --- --- --- ---
75 63 45 39 46
International Operations............ 4 12 10 10 5
--- --- --- --- ---
Total........................... $79 $75 $55 $49 $51
=== === === === ===
</TABLE>
CROSS-BORDER OUTSTANDINGS
In accordance with bank regulatory rules, cross-border outstandings are
amounts payable to the Corporation by residents of foreign countries
regardless of the currency in which the claim is denominated, excluding the
following.
. Local country claims that are funded by local country obligations
payable only in the country where issued.
In the first quarter of 1997, the Corporation adopted the new country
exposure reporting rules issued by the Federal Financial Institutions
Examination Council. One of the changes resulting from the new rules is the
exclusion from cross-border outstandings of local country claims funded by
obligations of the local country, regardless of the currency in which the
claim or obligation is denominated. The most significant impact of this
change on the Corporation's cross-border outstandings was the exclusion of
Argendollars. Argendollars are outstandings payable to the Corporation in
U.S. dollars in Argentina which are funded entirely by dollars borrowed
within Argentina.
. Local country assets funded with U.S. dollars or other non-local
currency where the providers of funds agree that, in the event their
claims cannot be repaid in the designated currency due to currency
exchange restrictions in a given country, they may either accept payment
in local currency or wait to receive the non-local currency until such
time as it becomes available in the local market. At March 31, 1997,
such outstandings related to emerging markets countries totaled $2.4
billion, compared with $2.3 billion at December 31, 1996.
. Claims reallocated as a result of external guarantees or cash
collateral.
. Claims reallocated as a result of insurance contracts, issued primarily
by U.S. government agencies.
Cross-border outstandings include deposits in other banks, resale
agreements, trading securities, securities available for sale, securities held
to maturity, loans and lease financing, amounts due from customers on
acceptances and accrued interest receivable.
21
<PAGE>
The following summarizes cross-border outstandings in countries which
individually amounted to 1.0 percent or more of consolidated total assets at
March 31, 1997 and December 31, 1996. Certain amounts at December 31, 1996
have been restated and reflect the above-mentioned changes in the country
exposure reporting rules.
<TABLE>
<CAPTION>
PERCENTAGE OF
PUBLIC BANKS OTHER TOTAL TOTAL ASSETS COMMITMENTS(1)
------ ----- ----- ------ ------------- --------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
March 31, 1997(2)
Argentina............. $585 $ 95 $685 $1,365 2.1% $15
Brazil................ 420 35 580 1,035 1.6 80
Chile................. 75 270 330 675 1.0 30
December 31, 1996(2)
Argentina(3).......... $605 $ 15 $945 $1,565 2.5% $55
Brazil................ 305 30 585 920 1.5 40
Chile................. 60 265 385 710 1.1 30
</TABLE>
- --------
(1) Included within commitments are letters of credit, guarantees and the
undisbursed portions of loan commitments.
(2) There were no cross-border outstandings in countries which totaled between
.75% and 1% of consolidated total assets at March 31, 1997 and December
31, 1996.
(3) Amounts have been restated for comparative purposes to exclude Argendollar
outstandings of approximately $1.3 billion.
In addition to credit risk, cross-border outstandings have the risk that, as
a result of political or economic conditions in a country, borrowers are
unable to meet their contractual repayment obligations of principal and/or
interest when due because of the unavailability of, or restrictions on,
foreign exchange needed by borrowers to repay their obligations.
A discussion of the Corporation's credit risk management policies is
included on page 29 of its 1996 Annual Report to Stockholders, which is
incorporated by reference into its 1996 Annual Report on Form 10-K.
EMERGING MARKETS COUNTRIES
At March 31, 1997 and December 31, 1996, approximately $4.3 billion and $4.5
billion, respectively, of the Corporation's cross-border outstandings were to
emerging markets countries. These cross-border outstandings, of which
approximately 80 percent were loans at March 31, 1997, were mainly composed of
short-term trade credits, non-trade-related loans and leases not subject to
country debt rescheduling agreements, government securities, capital
investments in branches and subsidiaries, and trading positions managed by the
Corporation's Emerging Markets Sales, Trading & Research business. Most cross-
border outstandings to emerging markets countries were to countries in which
the Corporation maintains branch networks and/or subsidiaries.
ARGENTINA AND BRAZIL
The Corporation's Argentine assets amounted to approximately $4.8 billion at
March 31, 1997 and at December 31, 1996. Included in these assets are cross-
border outstandings of $1.4 billion at March 31, 1997 and $1.6 billion at
December 31, 1996. Loans were relatively unchanged at $3.4 billion at March
31, 1997. The Corporation's Argentine securities portfolio, which amounted to
$607 million at March 31, 1997 and $621 million at December 31, 1996, is
utilized for both asset and liability management and trading purposes.
The Corporation's nonaccrual Argentine loans were $94 million and $85
million at March 31, 1997 and December 31, 1996, respectively. Net credit
losses were $4 million during the first quarter of 1997 and $5 million during
the fourth quarter of 1996.
22
<PAGE>
The Corporation's Brazilian assets amounted to approximately $5.6 billion at
March 31, 1997, compared with approximately $5.0 billion at December 31, 1996.
The increase in total assets was primarily due to an increase in resale
agreements of approximately $400 million. Included in total assets are cross-
border outstandings of $1 billion at March 31, 1997 and $900 million at
December 31, 1996. Loans were $2.8 billion at March 31, 1997, compared to $2.7
billion at December 31, 1996. The securities portfolio, consisting of trading
assets and available for sale securities, was $602 million at March 31, 1997
and $565 million at December 31, 1996.
The Corporation's nonaccrual Brazilian loans were $17 million at March 31,
1997, compared with $14 million at December 31, 1996. Net credit losses were
$1 million in the first quarter of 1997 and $3 million in the fourth quarter
of 1996.
The Corporation's Argentine and Brazilian operations maintained currency
positions both at March 31, 1997 and December 31, 1996. For further discussion
of currency positions, see the "Market Risk Management" section.
It is expected that the economic situation in Latin America, including the
effect of world financial markets on these economies, will continue to evolve.
The Corporation has not experienced any collection problems as a result of
currency restrictions or foreign exchange liquidity problems on its current
portfolio of cross-border outstandings to emerging markets countries. However,
if the actions implemented by Latin American governments do not remain
effective over time, the Corporation's operations could experience adverse
effects, including stress on local liquidity, deterioration of credit quality,
a decline in the value of its securities portfolio and declines in loan and
deposit levels. Each emerging markets country is at a different stage of
development with a unique set of economic fundamentals; therefore, it is not
possible to predict what developments will occur and what impact these
developments will ultimately have on the economies of these countries or on
the Corporation's financial statements.
LIQUIDITY RISK MANAGEMENT
The Corporation's liquid assets, which consist primarily of interest bearing
deposits in other banks, federal funds sold and resale agreements, money
market loans and unencumbered U.S. Treasury and government agency securities,
stood at $7.7 billion at March 31, 1997, compared with $7.3 billion at
December 31, 1996. Also, the Corporation has access to additional funding
through the public markets. Management considers overall liquidity at March
31, 1997 to be adequate to meet current obligations, to support expectations
for future changes in asset and liability levels and to carry on normal
operations. For additional information related to the Corporation's liquidity
management, see pages 37 and 38 of the Corporation's 1996 Annual Report to
Stockholders, which is incorporated by reference into its 1996 Annual Report
on Form 10-K.
MARKET RISK MANAGEMENT
Market risk is defined as the risk of loss related to adverse changes in
market prices, such as interest rates and foreign currency exchange rates, of
financial instruments. Market risk is managed within policies and limits
established by the Asset, Liability and Capital Committee (ALCCO) and the
Board of Directors (the Board). Risk limits are allocated by ALCCO to the
Corporation's market risk-taking activities, considering the results of the
risk modeling process as well as other internal and external factors.
The Corporation's trading activities primarily involve providing risk
management services to its customers, including interest rate derivatives and
foreign exchange contracts. In addition, the Corporation takes proprietary
positions in domestic and emerging markets fixed income securities and local
currency debt and equity securities. The risk positions taken by the
Corporation in these financial instruments are subject to ALCCO approved
limits. The Corporation manages the market risk related to its trading
portfolios using a Value-at-Risk (VAR) methodology. VAR is defined as the
statistical estimate of the potential loss amount that the Corporation could
incur from an adverse movement in market prices, given a specified confidence
level, and a defined holding
23
<PAGE>
period. The VAR calculations include the effects of both interest rate and
foreign exchange rate risks. The calculations do not take into account the
potential diversification benefits of the different positions in each of the
trading portfolios. The aggregate VAR limit for the Corporation's trading
portfolios was approximately $50 million at March 31, 1997 and December 31,
1996, and the aggregate VAR exposure was approximately $10 million and $15
million, respectively.
The majority of the Corporation's assets and liabilities are exposed to
interest rate risk. The interest rate risk for U.S. dollar denominated assets
and liabilities, which represent a significant portion of the Corporation's
consolidated balance sheet at March 31, 1997, is evaluated and managed
centrally through the Global Treasury group, utilizing several modeling
methodologies. The two principal methodologies used are market value
sensitivity and net interest revenue at risk. The results of these models are
reviewed monthly with ALCCO and at least quarterly with the Board.
Market value sensitivity is defined as the potential change in market value,
or the economic value, of the institution resulting from changes in interest
rates. Net interest revenue at risk is defined as the exposure of the
Corporation's net interest revenue over the next twelve months to an adverse
movement in interest rates. Both of these methodologies are designed to
isolate the effects of market changes in interest rates on the Corporation's
existing positions, and they exclude other factors such as competitive pricing
considerations, future changes in the asset and liability mix and other
management actions. Therefore, they are not by themselves measures of future
levels of net interest revenue.
These two methodologies provide different but complementary measures of the
level of interest rate risk; the longer-term view is modeled through market
value sensitivity, while the shorter-term view is evaluated through net
interest revenue at risk over the next twelve months. Under current ALCCO
directives, market value sensitivity cannot exceed 3 percent of total risk-
based capital and net interest revenue at risk cannot exceed 2 percent of net
interest revenue over the next twelve-month period.
The following table shows the Corporation's market value sensitivity and net
interest revenue at risk positions at March 31, 1997 and December 31, 1996.
MARKET VALUE SENSITIVITY AND NET INTEREST REVENUE AT RISK POSITIONS
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996
--------------------- ---------------------
QUARTERLY QUARTERLY
QUARTER-END AVERAGE QUARTER-END AVERAGE
----------- --------- ----------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Market value sensitivity(1)(2)..... $188 $181 $162 $162
% of risk-based capital........... 2.6% 2.5% 2.4% 2.4%
Net interest revenue at risk(3).... $ 25 $ 28 $ 30 $ 29
% of net interest revenue......... 1.1% 1.2% 1.3% 1.2%
</TABLE>
- --------
(1) Based on a 100 basis point adverse interest rate shock.
(2) December 31, 1996 amounts have been restated for comparability.
(3) Based on the greater of a 100 basis point adverse interest rate shock or a
200 basis point adverse change in interest rates over the next twelve-
month period. At March 31, 1997 the adverse position was based on a 100
basis point upward interest rate shock and at December 31, 1996 the
adverse position was based on a 200 basis point decline in interest rates
over the next twelve-month period.
At March 31, 1997 and December 31, 1996, the Corporation's adverse market
value sensitivity was to rising interest rates. The increase in the adverse
position since December 31, 1996 was primarily due to a net increase in fixed
rate assets, mainly available for sale securities.
24
<PAGE>
The Corporation's net interest revenue at risk over the next twelve months
was to rising interest rates at March 31, 1997 and to declining interest rates
at December 31, 1996. The change in position primarily reflected growth in
short-term funding. The Corporation considers the level of its net interest
revenue at risk to be a relatively neutral position.
Non-U.S. dollar denominated interest rate risk is managed by the
Corporation's overseas units, with oversight by the Global Treasury group.
ALCCO establishes overall limits for its non-U.S. dollar denominated interest
rate risk using a combination of market value risk analysis and cumulative gap
limits for each country in which the Corporation has local market interest
rate risk. Limits are updated at least annually for current market conditions,
considering business and economic conditions in the country at a particular
point in time. At March 31, 1997, approximately 85 percent of the total
overseas limit was allocated to Argentina and Brazil, and represented
approximately one-third of total domestic limits.
During the first quarter of 1997, the Corporation continued to structure its
balance sheet to take positions in the currencies of emerging markets and
other countries where it operates. These positions are taken when the
Corporation believes that it can maximize its spread from interest operations
by funding local currency assets with U.S. dollars rather than using local
currency liabilities or by funding U.S. dollar assets with local currency
liabilities. The average currency positions, which represent local currency
assets funded by U.S. dollars, for Argentina, Brazil, Chile and South Korea
during the first quarter of 1997 were $123 million, $120 million, $11 million
and $49 million, respectively. This compares with average currency positions
for these same countries during the fourth quarter of 1996 of $107 million,
$100 million, $52 million and $49 million, respectively. Whenever these
positions are taken, they are subject to limits established by ALCCO and are
subject to regular review. To date, these positions have been liquid in nature
and management has been able to close and re-open these positions as
necessary.
The level of U.S. dollar and non-U.S. dollar exposure maintained by the
Corporation is a function of the market environment and may change from period
to period based on interest rate and other economic expectations.
Additional information with respect to the Corporation's management of
market risk is included on pages 39 and 40 of the Corporation's 1996 Annual
Report to Stockholders which is incorporated by reference in its 1996 Annual
Report on Form 10-K.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivatives provide the Corporation with significant flexibility in managing
its interest rate risk and foreign exchange exposures, enabling it to manage
risk efficiently and respond quickly to changing market conditions while
minimizing the impact on balance sheet leverage. The Corporation routinely
uses non-leveraged rate-related derivative instruments, primarily interest
rate swaps and futures, as part of its asset and liability management
practices. Derivatives not used for asset and liability management are
included in the derivatives trading portfolio and relate to providing risk
management products to the Corporation's customers. All derivative activities
are managed on a comprehensive basis, are included in the overall market risk
measures and limits described above, and are subject to credit standards
similar to those for balance sheet exposures.
25
<PAGE>
The following table summarizes the notional amounts and fair values of
interest rate derivatives and foreign exchange contracts included in the
Corporation's trading and asset and liability management (ALM) portfolios.
<TABLE>
<CAPTION>
MARCH 31, 1997
-------------------------------------------------------------------------------
TRADING PORTFOLIO(1) ALM PORTFOLIO(1)
------------------------------- ----------------------------------------------
FAIR VALUE(2)(3)(4) FAIR VALUE(2)(3)
NOTIONAL ---------------------- NOTIONAL -------------------- UNRECOGNIZED(5)
AMOUNT ASSET LIABILITY AMOUNT ASSET LIABILITY GAIN (LOSS)
-------- --------- ----------- -------- -------- ---------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest rate contracts
Futures and forwards.. $50,695 $ 56 $ 55 $ 5,441 $ (37)
Interest rate swaps... 9,778 70 68 9,369 $ 17 $ 96 (80)
Interest rate options
Purchased........... 10,976 22
Written or sold..... 6,668 18
------- --------- --------- ------- -------- -------- -----
Total interest rate
contracts.............. $78,117 $ 148 $ 141 $14,810 $ 17 $ 96 $(117)
======= ========= ========= ======= ======== ======== =====
Foreign exchange
contracts
Spot and forward
contracts............ $23,327 $ 272 $ 277 $ 1,599 $ 15 $ 8 $ 8
Options purchased..... 3,414 53
Options written or
sold................. 3,756 52
------- --------- --------- ------- -------- -------- -----
Total foreign exchange
contracts.............. $30,497 $ 325 $ 329 $ 1,599 $ 15 $ 8 $ 8
======= ========= ========= ======= ======== ======== =====
<CAPTION>
DECEMBER 31, 1996
-------------------------------------------------------------------------------
TRADING PORTFOLIO(1) ALM PORTFOLIO(1)
------------------------------- ----------------------------------------------
FAIR VALUE(2)(3)(4) FAIR VALUE(2)(3)
NOTIONAL ---------------------- NOTIONAL -------------------- UNRECOGNIZED(5)
AMOUNT ASSET LIABILITY AMOUNT ASSET LIABILITY GAIN (LOSS)
-------- --------- ----------- -------- -------- ---------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest rate contracts
Futures and forwards.. $47,927 $ 65 $ 64 $ 3,382 $ (45)
Interest rate swaps... 9,332 58 54 6,975 $ 25 $ 40 (11)
Interest rate options
Purchased........... 6,471 14
Written or sold..... 4,593 13
------- --------- --------- ------- -------- -------- -----
Total interest rate
contracts.............. $68,323 $ 137 $ 131 $10,357 $ 25 $ 40 $ (56)
======= ========= ========= ======= ======== ======== =====
Foreign exchange
contracts
Spot and forward
contracts............ $20,224 $ 313 $ 348 $ 1,755 $ 11 $ 9 $ 2
Options purchased..... 2,529 42
Options written or
sold................. 2,434 37
------- --------- --------- ------- -------- -------- -----
Total foreign exchange
contracts.............. $25,187 $ 355 $ 385 $ 1,755 $ 11 $ 9 $ 2
======= ========= ========= ======= ======== ======== =====
</TABLE>
- --------
(1) Contracts under master netting agreements are shown on a net basis for
both the trading and ALM portfolios.
(2) Fair value represents the amount at which a given instrument could be
exchanged in an arm's length transaction with a third party as of the
balance sheet date. The fair value amounts of the trading portfolio are
included in other assets or other liabilities, as applicable. The majority
of derivatives that are part of the ALM portfolio are accounted for on the
accrual basis, and not carried at fair value. In certain cases, contracts,
such as futures, are subject to daily cash settlements; as such, the fair
value of these instruments is zero.
(3) The credit exposure of interest rate derivatives and foreign exchange
contracts is represented by the fair value of contracts reported in the
"Asset" column.
(4) The average asset and liability fair value amounts for interest rate
contracts included in the trading portfolio for the quarters ended March
31, 1997 and December 31, 1996 were approximately $143 million and $136
million, respectively, and $137 million and $129 million, respectively.
The average asset and liability fair
26
<PAGE>
value amounts for foreign exchange contracts included in the trading
portfolio were approximately $340 million and $357 million, respectively,
for the quarter ended March 31, 1997, and $283 million and $295 million,
respectively, for the quarter ended December 31, 1996.
(5) Unrecognized gain or loss represents the amount of gain or loss, based on
fair value, that has not been recognized in the income statement at the
balance sheet date. This includes amounts related to contracts that have
been terminated. Such amounts are recognized as an adjustment of yield
over the period being managed. At March 31, 1997, there were $13 million
of unrecognized gains and $25 million of unrecognized losses related to
terminated contracts that are being amortized to net interest revenue over
weighted average periods of 23 months and 10 months, respectively. At
December 31, 1996, there were $16 million of unrecognized gains and $33
million of unrecognized losses related to terminated contracts that were
being amortized to net interest revenue over weighted average periods of
26 months and 13 months, respectively.
Net trading gains or losses from interest rate derivatives are recorded in
trading account profits and commissions. The Corporation's interest rate
derivative trading activities primarily include providing risk management
products to its customers. Derivatives are also used to manage risk in other
trading portfolios, such as emerging markets securities. The results of these
derivative activities are combined with the results of the respective trading
portfolio to determine the overall performance of the trading business and, as
such, are not included in the results of derivative trading activities. Net
trading gains from interest rate derivative trading were $5 million for the
quarter ended March 31, 1997 and $2 million for the quarter ended March 31,
1996.
Net trading gains from foreign exchange contracts are recorded in other
income. Net trading gains from foreign exchange activities, which include
foreign exchange spot, forward and options contracts, for the quarters ended
March 31, 1997 and 1996 were $19 million and $13 million, respectively.
The fair value of interest rate derivative contracts included in the ALM
portfolio decreased by $64 million, to a loss of $79 million at March 31,
1997. The decrease in fair value was due to an increase in long-term interest
rates during the first quarter of 1997, which primarily impacted the receive
fixed interest rate swap portfolio, and resulted in a decline in its fair
value.
27
<PAGE>
The following table summarizes the remaining maturity of interest rate
derivative financial instruments entered into for asset and liability
management purposes as of March 31, 1997.
<TABLE>
<CAPTION>
REMAINING MATURITY
------------------------------------------------------------------
MARCH 31 DECEMBER 31
1997 1996
1997 1998 1999 2000 2001 2002+ TOTAL TOTAL
------- ----- ----- ----- ----- ------ -------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST RATE SWAPS
Domestic
Receive fixed rate
swaps(1)
Notional amount........ $ 401 $ 140 $ 105 $ 440 $ 300 $1,800 $ 3,186 $ 2,826
Weighted average re-
ceive rate............ 7.04% 5.89% 6.39% 5.71% 6.10% 6.47% 6.37% 6.38%
Weighted average pay
rate.................. 5.56% 5.63% 5.74% 5.62% 5.55% 5.65% 5.63% 5.67%
Pay fixed rate swaps
Notional amount........ $ 4 $ 23 $ 27 $ 83
Weighted average re-
ceive rate............ 6.33% 5.93% 5.97% 5.88%
Weighted average pay
rate.................. 7.36% 9.12% 8.90% 7.61%
Basis swaps(2)
Notional amount........ $ 75 $ 50 $ 50 $ 175 $ 468
Weighted average re-
ceive rate............ 5.59% 5.56% 6.03% 5.71% 5.90%
Weighted average pay
rate.................. 7.24% 5.98% 5.77% 6.46% 5.64%
Total Domestic Interest
Rate Swaps
Notional amount........ $ 480 $ 213 $ 105 $ 490 $ 300 $1,800 $ 3,388 $ 3,377
Weighted average re-
ceive rate(3)......... 6.81% 5.81% 6.39% 5.74% 6.10% 6.47% 6.34% 6.31%
Weighted average pay
rate(3)............... 5.84% 6.09% 5.74% 5.64% 5.55% 5.65% 5.70% 5.71%
Total International In-
terest Rate Swaps
Notional Amount(4)(6).. $ 5,964 $ 17 $ 5,981 $ 3,598
OTHER DERIVATIVE PROD-
UCTS
Futures and for-
wards(5)(6)............ $ 5,441 $ 5,441 $ 3,382
------- ----- ----- ----- ----- ------ ------- -------
Total Consolidated
Notional Amount........ $11,885 $ 213 $ 105 $ 507 $ 300 $1,800 $14,810 $10,357
======= ===== ===== ===== ===== ====== ======= =======
</TABLE>
- --------
(1) Approximately $1.6 billion of the receive fixed rate swaps are linked to
floating rate loans, and the remainder principally to fixed rate notes
payable. Of the swaps linked to notes payable, approximately $1 billion
are scheduled to mature in 2002 and thereafter.
(2) Basis swaps represent swaps where both the pay rate and receive rate are
floating rates. Most of the basis swaps are linked to bank notes.
(3) The majority of the Corporation's interest rate swaps accrue at LIBOR. In
arriving at the variable weighted average receive and pay rates, LIBOR
rates in effect as of March 31, 1997 have been implicitly assumed to
remain constant throughout the terms of the swaps. Future changes in LIBOR
rates would affect the variable rate information disclosed.
(4) The majority of the international portfolio is comprised of swaps entered
into by the Corporation's Brazilian operations with a weighted average
maturity of less than 1 year. These swaps typically include the exchange
of floating rate indices that are limited to the Brazilian market.
(5) Represent contracts entered into by the Corporation's Brazilian operations
in the local market which are linked to short-term interest bearing assets
and liabilities.
(6) The increase from December 31, 1996 was due to the increased use of swap
and futures and forward contracts to hedge balance sheet positions.
The Corporation routinely reviews its asset and liability derivative
positions to determine whether such instruments continue to function as
effective risk management tools. The utilization of derivative instruments is
modified from time to time in response to changing market conditions, as well
as changes in the characteristics and mix of the Corporation's related assets
and liabilities.
Additional information on the Corporation's derivative products, including
accounting policies, is included on pages 41 and 42 of, and in Notes 1 and 22
to the Financial Statements in, the Corporation's 1996 Annual Report to
Stockholders, which is incorporated by reference in its 1996 Annual Report on
Form 10-K.
28
<PAGE>
CAPITAL MANAGEMENT
In the first quarter of 1997 the Board approved a 12 million share common
stock repurchase program. The Corporation purchased 2.5 million shares in the
first quarter of 1997 and has continued this repurchase program in the second
quarter of 1997.
The Corporation's Tier 1 and total capital ratios were 9.0 percent and 13.0
percent, respectively, at March 31, 1997, compared with 9.2 percent and 13.6
percent, respectively, at December 31, 1996. The Corporation's leverage ratio
at March 31, 1997 was 7.8 percent compared with 8.2 percent at December 31,
1996. The decrease in the Tier 1, total capital and leverage ratios was
primarily due to the above mentioned repurchase of 2.5 million shares of
common stock in the first quarter of 1997.
The Corporation has a capital planning process to ensure that appropriate
regulatory capital levels and ratios are maintained. As of March 31, 1997, the
Corporation and its bank subsidiaries met all capital adequacy requirements to
which they are subject.
In April of 1997, the Board voted to increase the quarterly common stock
dividend from $.44 per share to $.51 per share, payable on May 30, 1997, to
stockholders of record on May 5, 1997. The level of dividends paid on the
Corporation's common stock will continue to be determined by the Board based
on the Corporation's liquidity, asset quality profile, capital adequacy and
recent earnings history, as well as economic conditions and other factors
deemed relevant.
29
<PAGE>
CONSOLIDATED BALANCE SHEET AVERAGES BY QUARTER
LAST NINE QUARTERS
<TABLE>
<CAPTION>
1995 1996 1997
----------------------------------- ----------------------------------- --------
1 2 3 4 1 2 3 4 1
-------- -------- -------- -------- -------- -------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest bearing
deposits in other
banks.................. $ 1,262 $ 1,310 $ 1,332 $ 1,454 $ 1,338 $ 1,313 $ 1,256 $ 1,405 $ 1,961
Federal funds sold and
securities purchased
under agreements to
resell................. 1,482 1,294 1,004 972 1,416 1,532 1,708 2,047 2,189
Trading securities...... 721 815 922 929 1,136 1,624 1,467 1,459 1,498
Loans held for sale..... 258 262 506 760 960 69 21 44
Securities.............. 7,218 7,335 7,468 7,823 8,143 8,065 8,249 8,029 9,261
Loans and lease
financing.............. 36,894 37,811 39,033 39,357 39,179 40,114 41,223 41,835 41,732
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total earning assets... 47,835 48,827 50,265 51,295 52,172 52,717 53,924 54,819 56,641
Other assets............ 5,722 6,034 6,447 6,506 6,415 5,664 6,125 6,237 6,583
-------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL ASSETS........... $ 53,557 $ 54,861 $ 56,712 $ 57,801 $ 58,587 $ 58,381 $ 60,049 $ 61,056 $ 63,224
======== ======== ======== ======== ======== ======== ======== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits:
Domestic offices:
Noninterest bearing.... $ 6,079 $ 6,091 $ 6,285 $ 6,509 $ 6,586 $ 6,420 $ 6,694 $ 6,837 $ 6,951
Interest bearing....... 22,530 23,108 24,190 24,700 24,849 24,931 26,003 25,121 24,622
Overseas offices:
Noninterest bearing.... 415 416 501 492 499 465 491 455 599
Interest bearing....... 8,318 7,967 7,790 8,202 8,698 9,302 9,429 9,618 9,727
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total deposits......... 37,342 37,582 38,766 39,903 40,632 41,118 42,617 42,031 41,899
Federal funds purchased
and repurchase
agreements............. 4,723 4,696 3,959 4,672 3,959 4,561 4,739 5,167 5,923
Other funds borrowed.... 3,684 4,432 5,661 4,683 5,102 3,721 3,562 4,190 4,943
Notes payable........... 2,183 2,112 2,115 2,159 2,421 2,584 2,674 2,983 3,316
Other liabilities....... 1,618 1,818 1,790 1,806 1,767 1,709 1,698 1,860 2,191
Stockholders' equity.... 4,007 4,221 4,421 4,578 4,706 4,688 4,759 4,825 4,952
-------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY... $ 53,557 $ 54,861 $ 56,712 $ 57,801 $ 58,587 $ 58,381 $ 60,049 $ 61,056 $ 63,224
======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
30
<PAGE>
CONSOLIDATED STATEMENT OF INCOME BY QUARTER--TAXABLE EQUIVALENT BASIS
LAST NINE QUARTERS
<TABLE>
<CAPTION>
1995 1996 1997
--------------------------- --------------------------- ------
1 2 3 4 1 2 3 4 1
------ ------ ------ ------ ------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET INTEREST REVENUE: $549.0 $557.3 $569.6 $572.9 $565.5 $571.5 $591.4 $611.2 $620.0
Taxable equivalent
adjustment............. 4.2 4.9 4.4 8.4 5.5 4.7 5.0 5.2 5.0
------ ------ ------ ------ ------ ------ ------ ------ ------
Total net interest
revenue................ 553.2 562.2 574.0 581.3 571.0 576.2 596.4 616.4 625.0
Provision for credit
losses................. 96.5 46.5 51.0 81.0 56.9 57.1 57.0 60.0 60.0
------ ------ ------ ------ ------ ------ ------ ------ ------
Net interest revenue
after provision for
credit losses.......... 456.7 515.7 523.0 500.3 514.1 519.1 539.4 556.4 565.0
------ ------ ------ ------ ------ ------ ------ ------ ------
NONINTEREST INCOME:
Financial service fees.. 146.7 155.9 162.2 230.6 51.6 135.3 140.4 146.6 137.5
Trust and agency fees... 58.3 63.0 64.4 54.8 57.4 61.9 61.6 65.0 66.0
Trading profits and
commissions............ 1.8 6.8 7.2 9.1 12.9 25.0 20.7 17.2 19.3
Net securities gains.... 6.1 .2 .8 1.9 13.4 3.4 7.1 (.8) 8.8
Other income............ 131.6 65.8 71.2 71.3 149.9 157.3 106.7 111.5 98.1
------ ------ ------ ------ ------ ------ ------ ------ ------
Total noninterest
income................ 344.5 291.7 305.8 367.7 285.2 382.9 336.5 339.5 329.7
------ ------ ------ ------ ------ ------ ------ ------ ------
NONINTEREST EXPENSE:
Salaries................ 227.0 230.7 245.9 243.2 240.8 239.9 244.2 254.5 257.7
Employee benefits....... 50.0 51.0 52.2 45.8 52.2 49.0 49.1 44.4 52.7
Occupancy expense....... 47.3 46.8 48.3 48.6 51.1 49.7 51.1 50.6 50.8
Equipment expense....... 32.2 33.6 33.5 33.8 34.3 33.9 34.2 36.2 35.6
Acquisition, divestiture
and restructuring
expense................ 28.2 180.0
Other expense........... 144.2 149.7 138.0 146.1 148.5 159.7 153.8 162.2 147.4
------ ------ ------ ------ ------ ------ ------ ------ ------
Total noninterest
expense............... 500.7 511.8 517.9 545.7 526.9 532.2 712.4 547.9 544.2
------ ------ ------ ------ ------ ------ ------ ------ ------
Income before income
taxes.................. 300.5 295.6 310.9 322.3 272.4 369.8 163.5 348.0 350.5
Provision for income
taxes.................. 140.5 123.0 132.0 133.6 112.0 151.3 78.5 141.3 138.7
Taxable equivalent
adjustment............. 4.2 4.9 4.4 8.4 5.5 4.7 5.0 5.2 5.0
------ ------ ------ ------ ------ ------ ------ ------ ------
144.7 127.9 136.4 142.0 117.5 156.0 83.5 146.5 143.7
------ ------ ------ ------ ------ ------ ------ ------ ------
NET INCOME.............. $155.8 $167.7 $174.5 $180.3 $154.9 $213.8 $ 80.0 $201.5 $206.8
====== ====== ====== ====== ====== ====== ====== ====== ======
PER COMMON SHARE:
Net Income:
Primary................ $ .98 $ 1.03 $ 1.06 $ 1.09 $ .94 $ 1.33 $ .46 $ 1.26 $ 1.29
Fully diluted.......... .95 1.02 1.05 1.08 .93 1.32 .45 1.24 1.27
Cash dividends
declared............... .27 .27 .37 .37 .37 .44 .44 .44 .44
</TABLE>
31
<PAGE>
AVERAGE BALANCES AND INTEREST RATES, TAXABLE EQUIVALENT BASIS
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31,
1997
---------------------------
AVERAGE AVERAGE
VOLUME INTEREST(1) RATE
------- ----------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
ASSETS
Interest Bearing Deposits with Other Banks
U.S.............................................. $ 661 $ 9 5.67%
International.................................... 1,300 25 7.82
------- -----
Total........................................ 1,961 34 7.09
------- ----- -----
Federal Funds Sold and Resale Agreements
U.S.............................................. 680 9 5.05
International.................................... 1,509 59 15.91
------- -----
Total........................................ 2,189 68 12.53
------- ----- -----
Trading Securities
U.S.............................................. 860 12 5.74
International.................................... 638 16 10.18
------- -----
Total........................................ 1,498 28 7.63
------- ----- -----
Securities
U.S.
Available for sale(2).......................... 7,323 116 6.47
Held to maturity............................... 694 10 6.00
International
Available for sale(2).......................... 1,244 48 16.19
------- -----
Total........................................ 9,261 174 7.63
------- ----- -----
Loans and Leases (Net of Unearned Income)
U.S.............................................. 31,732 690 8.81
International.................................... 10,000 286 11.60
------- -----
Total loans and lease financing(3)........... 41,732 976 9.48
------- ----- -----
Earning assets.................................... 56,641 1,280 9.16
----- -----
Nonearning assets................................. 6,583
-------
Total Assets................................. $63,224
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
U.S.
Savings deposits............................... $14,767 $ 98 2.69%
Time deposits.................................. 9,855 134 5.52
International.................................... 9,727 168 7.01
------- -----
Total........................................ 34,349 400 4.73
------- ----- -----
Federal Funds Purchased and Repurchase Agreements
U.S.............................................. 5,833 82 5.74
International.................................... 90 3 13.16
------- -----
Total........................................ 5,923 85 5.85
------- ----- -----
Other Funds Borrowed
U.S.............................................. 3,603 53 5.95
International.................................... 1,340 55 16.49
------- -----
Total........................................ 4,943 108 8.81
------- ----- -----
Notes Payable
U.S.(4).......................................... 2,669 46 6.92
International.................................... 647 16 10.32
------- -----
Total........................................ 3,316 62 7.58
------- ----- -----
Total interest bearing liabilities................ 48,531 655 5.47
----- -----
Demand deposits U.S............................... 6,951
Demand deposits International..................... 599
Other noninterest bearing liabilities............. 2,191
Total stockholders' equity........................ 4,952
-------
Total Liabilities and Stockholders' Equity... $63,224
=======
NET INTEREST REVENUE AS A PERCENTAGE OF AVERAGE
INTEREST EARNING ASSETS
U.S.............................................. $41,950 $ 469 4.54%
International.................................... 14,691 156 4.30%
------- -----
Total........................................ $56,641 $ 625 4.47%
======= =====
</TABLE>
- --------
(1) Income is shown on a fully taxable equivalent basis.
(2) Average rates for securities available for sale are based on the
securities' amortized cost.
(3) Loans and lease financing includes nonaccrual and renegotiated balances.
(4) Amounts include guaranteed beneficial interest in Corporation's junior
subordinated debt.
32
<PAGE>
AVERAGE BALANCES AND INTEREST RATES, TAXABLE EQUIVALENT BASIS
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31,
1996
---------------------------
AVERAGE AVERAGE
VOLUME INTEREST(1) RATE
------- ----------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
ASSETS
Interest Bearing Deposits with Other Banks
U.S. ........................................... $ 227 $ 3 5.76%
International................................... 1,111 21 7.59
------- ------
Total....................................... 1,338 24 7.28
------- ------ -----
Federal Funds Sold and Resale Agreements
U.S. ........................................... 356 5 5.31
International................................... 1,060 38 14.64
------- ------
Total....................................... 1,416 43 12.29
------- ------ -----
Trading Securities
U.S. ........................................... 372 6 5.63
International................................... 764 35 18.81
------- ------
Total....................................... 1,136 41 14.49
------- ------ -----
Loans Held for Sale
U.S. ........................................... 921 16 7.07
International................................... 39 1 6.14
------- ------
Total....................................... 960 17 7.03
------- ------ -----
Securities
U.S.
Available for sale(2)......................... 6,729 107 6.40
Held to maturity.............................. 674 10 6.06
International
Available for sale(2)......................... 646 20 13.15
Held to maturity.............................. 94 4 15.23
------- ------
Total....................................... 8,143 141 6.98
------- ------ -----
Loans and Leases (Net of Unearned Income)
U.S. ........................................... 30,432 658 8.71
International................................... 8,747 321 14.73
------- ------
Total loans and lease financing(3).......... 39,179 979 10.05
------- ------ -----
Earning assets.................................... 52,172 1,245 9.60
------ -----
Nonearning assets................................. 6,415
-------
Total Assets................................ $58,587
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
U.S.
Savings deposits.............................. $15,106 $100 2.68%
Time deposits................................. 9,743 139 5.73
International................................... 8,698 181 8.36
------- ------
Total....................................... 33,547 420 5.04
------- ------ -----
Federal Funds Purchased and Repurchase Agreements
U.S. ........................................... 3,861 56 5.76
International................................... 98 2 10.18
------- ------
Total....................................... 3,959 58 5.87
------- ------ -----
Other Funds Borrowed
U.S. ........................................... 4,032 63 6.25
International................................... 1,070 90 33.96
------- ------
Total....................................... 5,102 153 12.06
------- ------ -----
Notes Payable
U.S. ........................................... 1,955 32 6.62
International................................... 466 11 9.90
------- ------
Total....................................... 2,421 43 7.25
------- ------ -----
Total interest bearing liabilities................ 45,029 674 6.03
------ -----
Demand deposits U.S. ............................. 6,586
Demand deposits International..................... 499
Other noninterest bearing liabilities............. 1,767
Total stockholders' equity........................ 4,706
-------
Total Liabilities and Stockholders' Equity.. $58,587
=======
NET INTEREST REVENUE AS A PERCENTAGE OF AVERAGE
INTEREST EARNING ASSETS
U.S. ........................................... $39,711 $ 447 4.53%
International................................... 12,461 124 3.99%
------- ------
Total....................................... $52,172 $ 571 4.40%
======= ======
</TABLE>
- --------
(1) Income is shown on a fully taxable equivalent basis.
(2) Average rates for securities available for sale are based on the
securities' amortized cost.
(3) Loans and lease financing includes nonaccrual and renegotiated balances.
33
<PAGE>
CHANGE IN NET INTEREST REVENUE -- VOLUME AND RATE ANALYSIS
FIRST QUARTER 1997 COMPARED WITH FIRST QUARTER 1996
The following table presents, on a fully taxable equivalent basis, an
analysis of the effect on net interest revenue of volume and rate changes. The
change due to the volume/rate variance has been allocated to volume, and the
change because of the difference in the number of days in the periods has been
allocated to rate.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
DUE TO CHANGE IN
----------------------
VOLUME RATE NET CHANGE
---------- ---------- ----------
(IN MILLIONS)
<S> <C> <C> <C>
Interest income:
Loans and lease financing
U.S. ....................................... $28 $ 4 $ 32
International .............................. 36 (71) (35)
----
(3)
----
Other earning assets
U.S. ....................................... 14 (5) 9
International .............................. 31 (2) 29
----
38
----
Total interest income......................... 101 (66) 35
Total interest expense........................ 52 (71) (19)
----
Net interest revenue.......................... $ 54
====
</TABLE>
34
<PAGE>
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
As previously reported, in 1990 a class action complaint was filed in U.S.
District Court for the District of Connecticut against Society for Savings
Bancorp, Inc. ("Society"), two of its then senior officers and one former
officer. The complaint, as subsequently amended, alleges that Society's
financial reports for fiscal years 1988, 1989, and the first half of 1990
contained material misstatements or omissions concerning its real estate loan
portfolio and other matters, in violation of Connecticut common law and of
Sections 10(b) and 20 of the Exchange Act. The action was brought by a Society
shareholder, individually and as a class action on behalf of purchasers of
Society's stock from January 19, 1989 through November 30, 1990 and seeks
damages in an unspecified amount. Society and the defendant officers have
denied the allegations of the amended complaint and on July 14, 1995 filed a
motion for summary judgment. That motion was denied in January 1997 and
discovery has therefore resumed.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The Annual Meeting of Stockholders of the Corporation was held on April
24, 1997.
(b) The following matters were submitted to a vote of the Stockholders of
the Corporation:
(1) Election of Directors
<TABLE>
<CAPTION>
NOMINEE TOTAL VOTES FOR TOTAL VOTES WITHHELD
------- --------------- --------------------
<S> <C> <C>
Gary L. Countryman................. 128,076,276 1,577,734
Henrique de Campos Meirelles....... 128,143,961 1,510,049
Thomas R. Piper.................... 128,199,747 1,454,263
Francene S. Rodgers................ 127,992,304 1,661,706
John W. Rowe....................... 128,106,139 1,547,871
William C. Van Fassen.............. 128,043,009 1,611,001
</TABLE>
(2) Selection of Independent Auditors
<TABLE>
<S> <C>
Total Votes For.......................................... 128,977,573
Total Votes Against...................................... 275,187
Total Abstentions........................................ 401,250
</TABLE>
(3) Amendments to Restated Articles of Organization Changing Name of
the Corporation to "BankBoston Corporation"
<TABLE>
<S> <C>
Total Votes For.......................................... 128,311,085
Total Votes Against...................................... 704,857
Total Abstentions........................................ 638,068
</TABLE>
(4) Approval of the Corporation's 1997 Employee Stock Purchase Plan
<TABLE>
<S> <C>
Total Votes For.......................................... 125,947,609
Total Votes Against...................................... 2,774,865
Total Abstentions........................................ 931,536
</TABLE>
(5) Stockholder Proposal A regarding Political Activities
<TABLE>
<S> <C>
Total Votes For........................................... 8,910,681
Total Votes Against....................................... 98,610,928
Total Abstentions......................................... 6,466,263
Total Broker Nonvotes..................................... 15,666,138
</TABLE>
35
<PAGE>
(6) Stockholder Proposal B regarding Director Compensation
<TABLE>
<S> <C>
Total Votes For.......................................... 10,661,314
Total Votes Against...................................... 100,770,352
Total Abstentions........................................ 2,258,729
Total Broker Nonvotes.................................... 15,963,615
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
<TABLE>
<C> <S>
3(a) --Restated Articles of Organization of the Corporation, as amended
through April 26, 1996, incorporated herein by reference to the
Corporation's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996 (File No. 1-6522).
3(b) --Amendment, dated April 25, 1997, to the Corporation's Restated
Articles of Organization.
3(c) --By-Laws of the Corporation, as amended through April 25, 1997.
11 --Computation of Earnings Per Common Share.
12(a) --Computation of the Corporation's Consolidated Ratio of Earnings to
Fixed Charges (excluding interest on deposits).
12(b) --Computation of the Corporation's Consolidated Ratio of Earnings to
Fixed Charges (including interest on deposits).
12(c) --Computation of the Corporation's Consolidated Ratio of Earnings to
Fixed Charges and Preferred Stock Dividend Requirements (excluding
interest on deposits).
12(d) --Computation of the Corporation's Consolidated Ratio of Earnings to
Fixed Charges and Preferred Stock Dividend Requirements (including
interest on deposits).
27.1 --Financial Data Schedule.
27.2 --Restated Financial Data Schedule.
</TABLE>
(b) Current Reports on Form 8-K.
During the first quarter of 1997, the Corporation filed one Current Report
on Form 8-K, dated January 16, 1997, which contained information pursuant to
Items 5 and 7 of Form 8-K. The Corporation also filed a Current Report on Form
8-K, dated April 17, 1997, which contained information pursuant to Items 5 and
7 of Form 8-K.
36
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
BANKBOSTON CORPORATION
/s/ Charles K. Gifford
_____________________________________
Charles K. Gifford
Chief Executive Officer
/s/ William J. Shea
_____________________________________
William J. Shea
Vice Chairman, Chief Financial
Officer and Treasurer
Date: May 14, 1997
37
<PAGE>
Exhibit 3(b)
THE COMMONWEALTH OF MASSACHUSETTS
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL J. CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108
ARTICLES OF AMENDMENT FEDERAL IDENTIFICATION
General Laws, Chapter 156B, Section 72 NO. 04-2471221
We Henrique de Campos Meirelles President, and
Gary A. Spiess Clerk, of
Bank of Boston Corporation
- --------------------------------------------------------------------------------
(EXACT Name of Corporation)
located at: 100 Federal Street, Boston, Massachusetts 02110
-------------------------------------------------------------------
(MASSACHUSETTS Address of Corporation)
do hereby certify that these ARTICLES OF AMENDMENT affecting Articles NUMBERED:
1
------------
- --------------------------------------------------------------------------------
(Number those articles 1, 2, 3, 4, 5 and/or 6 being amended hereby)
of the Articles of Organization were duly adopted at a meeting held on April
-----
24, 1997 by vote of:
--------
Common Stock
128,083,150 shares of Par Value $1.50 per share out of 153,246,385 shares
- --------------- ------------------------- -----------
outstanding,
type, class & series, (if any)
__________ shares of _______________ out of _____________ shares outstanding,
type, class & series, (if any)
__________ shares of _______________ out of _____________ shares outstanding,
type, class & series, (if any)
being at least a majority of each type, class or series outstanding and entitled
to vote thereon:
VOTED: That, effective April 25, 1997 at 5 p.m., Article 1 of the
Corporation's restated Articles of Organization be amended to read in
its entirety as follows:
"The name by which the Corporation shall be known is: BankBoston
Corporation."
<PAGE>
To CHANGE the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
WITHOUT PAR VALUE STOCKS
- --------------------------------
TYPE NUMBER OF SHARES
- --------------------------------
COMMON:
- --------------------------------
PREFERRED:
- --------------------------------
WITH PAR VALUE STOCKS
- --------------------------------------------
TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------
COMMON:
- --------------------------------------------
PREFERRED:
- --------------------------------------------
CHANGE the total authorized to:
WITHOUT PAR VALUE STOCKS
- -----------------------------------
TYPE NUMBER OF SHARES
- -----------------------------------
COMMON:
- -----------------------------------
PREFERRED:
- -----------------------------------
WITH PAR VALUE STOCKS
- --------------------------------------
TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------
COMMON:
- --------------------------------------
PREFERRED:
- --------------------------------------
<PAGE>
The foregoing amendment will become effective when these articles of amendment
are filed in accordance with Chapter 56B, Section 6 of The General Laws unless
these articles specify, in accordance with the vote adopting the amendment, a
later effective date not more than thirty days after such filing, in which event
the amendment will become effective on such later date. EFFECTIVE DATE: April
-----
25, 1997 at 5 p.m.
- ----------------------
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereunto signed
our names this 24th day of April in the year 1997.
/s/ HENRIQUE DE CAMPOS MEIRELLES President
- -------------------------------------------------------
Henrique de Campos Meirelles
/s/ GARY S. SPIESS Clerk
- -------------------------------------------------------
Gary A. Spiess
<PAGE>
Exhibit 3(c)
[LETTERHEAD OF BankBoston appears here]
BANKBOSTON CORPORATION
____________________
BY-LAWS
____________________
REVISED TO APRIL 24, 1997
<PAGE>
BY-LAWS
OF
BANKBOSTON CORPORATION
___________________
TABLE OF CONTENTS
ARTICLE I
MEETINGS OF THE STOCKHOLDERS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1. Place of Meeting; Adjournment............................... 1
SECTION 2. Annual Meeting.............................................. 1
SECTION 3. Special Meetings............................................ 1
SECTION 4. Notices of Meetings......................................... 2
SECTION 5. Quorum...................................................... 3
SECTION 6. Organization................................................ 4
SECTION 7. Voting by Stockholders; Proxies............................. 4
SECTION 8. Inspectors.................................................. 5
SECTION 9. Action without Meeting...................................... 5
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. General Powers; Issue of Stock.............................. 5
SECTION 2. Number, Qualification, Election and Term of Office.......... 5
SECTION 3. Nominations for Director.................................... 6
SECTION 4. Quorum and Manner of Acting................................. 7
SECTION 5. First Meeting............................................... 8
SECTION 6. Regular Meetings............................................ 8
SECTION 7. Special Meetings............................................ 8
SECTION 8. Notices of Meetings......................................... 8
SECTION 9. Organization of Meetings.................................... 9
SECTION 10. Order of Business........................................... 9
SECTION 11. Action by Directors without a Meeting....................... 9
SECTION 12. Resignation................................................. 9
SECTION 13. Removal..................................................... 9
</TABLE>
<PAGE>
ii
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 14. Vacancies................................................... 10
SECTION 15. Fees and Expenses of Directors.............................. 10
SECTION 16. Validity of Acts of Directors............................... 10
SECTION 17. Transactions with the Corporation........................... 10
ARTICLE III
COMMITTEES
SECTION 1. Executive Committee......................................... 11
SECTION 2. Audit Committee............................................. 12
SECTION 3. Compensation Committee...................................... 13
SECTION 4. Board Governance and Nominating Committee................... 14
SECTION 5. Community Investment Committee.............................. 14
SECTION 6. Other Committees............................................ 15
SECTION 7. Changes in Committee Membership; Filling of Vacancies....... 15
SECTION 8. Records of Committee Action and Board
of Directors' Approval..................................... 15
SECTION 9. Committee Proceedings....................................... 15
SECTION 10. Action of Committees without a Meeting...................... 16
SECTION 11. General Authority of Committees............................. 16
ARTICLE IV
OFFICERS
SECTION 1. Titles and Qualifications................................... 16
SECTION 2. Appointment and Terms of Office............................. 17
SECTION 3. Duties; Fidelity Bond....................................... 17
SECTION 4. The Chief Executive Officer.................................
SECTION 5. The Chairman of the Board................................... 17
SECTION 6 The President and Chief Operating Officer................... 18
SECTION 7. The Vice Chairmen........................................... 18
SECTION 8. The Executive Officers...................................... 18
SECTION 9. The Treasurer............................................... 18
SECTION 10. The Comptroller............................................. 18
SECTION 11 The Clerk and the Secretary of the
Board of Directors......................................... 18
SECTION 12. The General Auditor......................................... 19
SECTION 13. The Vice Presidents......................................... 19
SECTION 14. The Assistant Treasurers and Assistant Clerks............... 19
SECTION 15. Resignation................................................. 19
SECTION 16. Vacancies................................................... 19
</TABLE>
<PAGE>
iii
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 17. Compensation of Officers, Employees and Other Agents........ 20
SECTION 18. Designated Officer.......................................... 20
ARTICLE V
STOCK
SECTION 1. Stock Certificates........................................... 20
SECTION 2. Transfer of Stock............................................ 21
SECTION 3. Transfer Agent and Registrar; Regulations.................... 21
SECTION 4. Lost, Mutilated or Destroyed Certificates.................... 21
SECTION 5. Record Date for Determination of Stockholders'
Rights; Close of Transfer Books............................. 21
SECTION 6. Dividends.................................................... 22
SECTION 7. Control Share Acquisitions................................... 22
ARTICLE VI
GENERAL PROVISIONS
SECTION 1. Offices..................................................... 22
SECTION 2. Seal........................................................ 23
SECTION 3. Fiscal Year................................................. 23
SECTION 4. Execution of Instruments.................................... 23
SECTION 5. Voting of Securities........................................ 23
SECTION 6. Powers of Attorney.......................................... 24
SECTION 7. Issue of Debt Securities and Other Obligations.............. 24
SECTION 8. Corporate Records........................................... 24
SECTION 9. Indemnification of Directors, Officers and Others........... 25
ARTICLE VII
AMENDMENTS
SECTION 1. General..................................................... 27
</TABLE>
<PAGE>
iv
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE VIII
EMERGENCY BY-LAWS
SECTION 1. Effective Period............................................ 28
SECTION 2. Meetings of the Board of Directors.......................... 28
SECTION 3. Emergency Location of Head Office........................... 28
SECTION 4. Preservation of Continuity of Management.................... 28
SECTION 5. Immunity.................................................... 28
SECTION 6. Amendment of Emergency By-Laws.............................. 28
</TABLE>
<PAGE>
BANKBOSTON CORPORATION
________________
BY-LAWS
________________
ARTICLE I
MEETINGS OF THE STOCKHOLDERS
SECTION 1. Place of Meeting; Adjournment. Meetings of the stockholders
may be held at the main office of the corporation in the City of Boston, County
of Suffolk, Commonwealth of Massachusetts, or at such places within or without
the Commonwealth of Massachusetts as may be specified in the notices of such
meetings; provided, that, when any meeting is convened, the presiding officer,
if directed by the Board of Directors, may adjourn the meeting for a period of
time not to exceed 30 days if (a) no quorum is present for the transaction of
business or (b) the Board of Directors determines that adjournment is necessary
or appropriate to enable the stockholders (i) to consider fully information
which the Board of Directors determines has not been made sufficiently or timely
available to stockholders or (ii) otherwise to exercise effectively their voting
rights. The presiding officer in such event shall announce the adjournment and
date, time and place of reconvening and shall cause notice thereof to be posted
at the place of meeting designated in the notice which was sent to the
stockholders, and if such date is more than 10 days after the original date of
the meeting the Clerk shall give notice thereof in the manner provided in
Section 4 of this Article I.
SECTION 2. Annual Meeting. The annual meeting of stockholders of the
corporation for the election of directors and the transaction of such other
business as may properly come before the meeting shall be held on such date and
at such time as shall be determined by the Board of Directors each year, which
date and time may subsequently be changed at any time, including the year any
such determination occurs.
SECTION 3. Special Meetings. Except as provided in the Articles of
Organization with respect to the ability of holders of preferred stock to call a
special meeting in certain circumstances, special meetings of the stockholders
may be called by the Chief Executive Officer or the Chairman of the Board or by
a majority of the directors, and shall be called by the Clerk, or in case of the
death, absence, incapacity or refusal of the Clerk, by any other officer upon
the written application of stockholders who hold one hundred percent in interest
of the capital stock of the corporation entitled to be voted at the proposed
meeting. Such request shall state the purpose or purposes of the proposed
meeting and may designate the place, date and hour of such meeting; provided,
however, that no such request shall designate a date not a full business day or
an hour not within normal business hours as the date or hour of such meeting.
<PAGE>
-2-
As used in these By-Laws, the expression business day means a day other
than a day which, at a particular place, is a public holiday or a day other than
a day on which banking institutions at such place are allowed or required, by
law or otherwise, to remain closed.
SECTION 4. Notices of Meetings. A printed notice of the place, date and
hour and stating the purposes of each meeting of the stockholders shall be given
by the Clerk (or other person authorized by law or these By-Laws) at least l0
days before the date fixed for the meeting to each stockholder entitled to vote
at such meeting, and to each other stockholder who, under the Articles of
Organization or these By-Laws, is entitled to such notice, by leaving such
notice with him or her at his or her residence or usual place of business, or by
mailing such notice by mail, postage prepaid and addressed to such stockholder
at his or her address as it appears in the records of the corporation. Such
further notice shall be given by publication or otherwise, as may be required by
law or as may be ordered by the Board of Directors. No notice need be given to
any stockholder if such stockholder, or his or her authorized attorney, waives
such notice by a writing executed before or after the meeting and filed with the
records of the meeting or by his or her presence, in person or by proxy, at the
meeting.
It shall be the duty of every stockholder to furnish to the Clerk of the
corporation or to the transfer agent, if any, of the class of stock owned by
such stockholder, his or her post office address and to notify the Clerk or the
transfer agent of any change therein.
No business may be transacted at a meeting of the stockholders except that
(a) specified in the notice thereof given by or at the direction of the Board of
Directors or in a supplemental notice given by or at the direction of the Board
of Directors and otherwise in compliance with the provisions hereof, (b) brought
before the meeting by or at the direction of the Board of Directors or the
presiding officer or (c) properly brought before the meeting by or on behalf of
any stockholder who shall have been a stockholder of record at the time of
giving of notice by such stockholder provided for in this paragraph and who
shall continue to be entitled at the time of such meeting to vote thereat and
who complies with the notice procedures set forth in this paragraph with respect
to any business sought to be brought before the meeting by or on behalf of such
stockholder other than the election of directors and with the notice provisions
set forth in Section 3 of Article II with respect to the election of directors.
In addition to any other applicable requirements, for business to be properly
brought before a meeting by or on behalf of a stockholder (other than a
stockholder proposal included in the corporation's proxy statement pursuant to
Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), the stockholder must have given timely notice thereof in writing to the
Clerk of the corporation. In order to be timely given, a stockholder's notice
must be delivered to or mailed and received at the principal executive offices
of the corporation (a) not less than 75 nor more than 125 days prior to the
anniversary date of the immediately preceding annual meeting of stockholders of
the corporation or (b) in the case of a special meeting or in the event that the
annual meeting is called for a date (including any change in a date determined
by the Board pursuant to Section 2 of this Article I) more than 75 days prior to
such anniversary date, notice by the stockholder to be timely given must be so
<PAGE>
-3-
received not later than the close of business on the 20th day following the day
on which notice of the date of such meeting was mailed or public disclosure of
the date of such meeting was made, whichever first occurs. Such stockholder's
notice to the Clerk shall set forth as to each matter the stockholder proposes
to bring before the meeting (a) a brief description of the business desired to
be brought before the meeting and the reasons for conducting such business at
the meeting, (b) the name and record address of the stockholder proposing such
business, (c) the class and number of shares of capital stock of the corporation
held of record, owned beneficially and represented by proxy by such stockholder
as of the record date for the meeting (if such date shall then have been made
publicly available) and as of the date of such notice by the stockholder and (d)
all other information which would be required to be included in a proxy
statement or other filings required to be filed with the Securities and Exchange
Commission if, with respect to any such item of business, such stockholder were
a participant in a solicitation subject to Regulation 14A under the Exchange Act
(the "Proxy Rules"). In the event the proposed business to be brought before the
meeting by or on behalf of a stockholder relates or refers to a proposal or
transaction involving the stockholder or a third party which, if it were to have
been consummated at the time of the meeting, would have required of such
stockholder or third party or any of the affiliates of either of them any prior
notification to, filing with, or any orders or other action by, any governmental
authority, then any such notice to the Clerk shall be accompanied by appropriate
evidence of the making of all such notifications or filings and the issuance of
all such orders and the taking of all such actions by all such governmental
authorities.
Notwithstanding anything in these By-Laws to the contrary, no business
shall be conducted at any meeting except in accordance with the procedures set
forth in this Section 4; provided, however, that nothing in this Section 4 shall
be deemed to preclude discussion by any stockholder of any business properly
brought before such meeting.
The presiding officer of the meeting may, if the facts warrant, determine
and declare to the meeting that business was not properly brought before the
meeting in accordance with the foregoing procedures, and if he or she should so
determine, he or she shall so declare to the meeting and that business shall be
disregarded.
SECTION 5. Quorum. At all meetings of the stockholders, the holders of
record of a majority in interest of all stock issued, outstanding and entitled
to vote thereat, or, if two or more classes of stock are issued, outstanding and
entitled to vote as separate classes, a majority in interest of each class,
present in person or represented by proxy, shall constitute a quorum requisite
for the transaction of business, except as otherwise provided by law, by the
Articles of Organization or by these By-Laws. Stock of the corporation owned
directly or indirectly by the corporation, if any, other than shares of stock
held in a fiduciary capacity shall not be deemed outstanding for this purpose.
If a quorum is not present or represented at any meeting of the stockholders,
the stockholders present or represented and entitled to vote thereat, present in
person or represented by proxy, by a majority vote, shall have the power to
adjourn the meeting from time to time without notice other than announcement at
the meeting until the requisite amount of voting stock shall be present or
represented. At any adjourned meeting at which a quorum is present or
represented, any business may be transacted
<PAGE>
-4-
which might have been transacted at the meeting as first convened had there been
a quorum. The stockholders present at a duly organized meeting may continue to
transact business until adjournment notwithstanding the withdrawal of one or
more stockholders or their proxy or proxies so as to leave less than a quorum
present or represented.
SECTION 6. Organization. At every meeting of the stockholders, the Chief
Executive Officer or the Chairman of the Board or, in their absence, the
President, or in the absence of all such officers, a person chosen by majority
vote of the stockholders entitled to vote thereat, present in person or
represented by proxy, shall act as chairman; and the Clerk, or in his or her
absence, any Assistant Clerk, or in the absence of all such officers, any person
present appointed by the chairman shall act as secretary of the meeting. The
secretary of the meeting need not be sworn.
SECTION 7. Voting by Stockholders; Proxies. Except as otherwise
provided by law or the Articles of Organization, at all meetings of
stockholders each stockholder shall have one vote for each share of stock
entitled to vote and registered in his or her name. Any stockholder may vote
in person or by proxy dated not more than six months prior to the meeting and
filed with the secretary of the meeting. Every proxy shall be in writing,
executed by a stockholder or his or her authorized attorney-in-fact, and
dated. A proxy need not be sealed, witnessed or acknowledged. A proxy with
respect to stock held in the name of two or more persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy the
corporation receives a specific written notice to the contrary from any one of
them. No proxy shall be valid after the final adjournment of the meeting.
The attendance at any meeting of a stockholder who has therefore given a
proxy shall not have the effect of revoking the same unless the stockholder so
attending shall, in writing, so notify the secretary of the meeting at any time
prior to the voting of the proxy.
The corporation shall not, directly, or indirectly, vote any of its own
stock other than shares of stock held in a fiduciary capacity. Any shares
disqualified from being voted shall not be counted in determining the proportion
of or the number of shares or votes required to pass or to vote upon or to
consent or assent to any matter.
Prior to each meeting of stockholders, the Clerk shall make or cause to be
made a full, true and complete list, in alphabetical order, of stockholders
entitled to notice of and to vote at the meeting showing the number of shares of
each class having voting rights held of record by each. When a determination of
stockholders entitled to vote at any meeting has been made as provided by law,
such determination shall apply to any adjournment of such meeting, except when
the determination has been made by the closing of the transfer books and the
stated period has expired.
At all meetings of stockholders, all questions, except as otherwise
expressly provided by law or the Articles of Organization or these By-Laws,
shall be determined by a majority vote of the stockholders entitled to vote
thereon who are present in person or represented by proxy, or, if two or more
classes of stock are entitled to vote
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as separate classes, a majority vote of the stockholders of each class, present
in person or represented by proxy. Except as otherwise expressly provided by
law, the Articles of Organization or these By-Laws, at all meetings of
stockholders the voting shall be by show of hands or voice vote, but any
qualified voter may demand a stock vote, by shares of stock, upon any question,
whereupon such stock vote shall be taken by ballot, each of which shall state
the name of the stockholder voting and the number of shares voted by him or her,
and, if such ballot be cast by a proxy, it shall also state the name of the
proxy. All elections shall be decided by plurality vote.
SECTION 8. Inspectors. At each meeting of the stockholders, the polls shall
be opened and closed by the proxies and ballots shall be received and taken in
charge by and all questions touching on the qualifications of voters and the
validity of proxies and the acceptance and rejection of votes shall be decided
by two inspectors. Such inspectors shall be appointed by the Board of Directors
before or at the meeting, or, if no such appointment shall have been made, then
by the presiding officer at the meeting. If for any reason any inspector
previously appointed shall fail to attend or refuse or be unable to serve, an
inspector in place of the one so failing to attend or refusing or unable to
serve shall be appointed, either by the Board of Directors or by the presiding
officer at the meeting. No director or candidate for the office of director
shall be appointed an inspector. The inspectors shall file with the Clerk or
other secretary of the meeting a certificate setting forth the results of each
vote taken by ballot at the meeting.
SECTION 9. Action without Meeting. Any action which may be taken by
stockholders may be taken without a meeting if all stockholders entitled to vote
on the matter consent to the action by a writing filed with the records of the
meetings of stockholders. Any such consent shall be treated for all purposes as
a vote at a meeting and may be described as such in any certificate or other
document filed with or furnished to any public official, governmental agency or
other person having dealings with the corporation.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. General Powers; Issue of Stock. The property and business of
the corporation shall be managed by the Board of Directors which may exercise
all powers of the corporation except such powers as are by law or by the
Articles of Organization or by these By-Laws conferred upon or reserved to the
stockholders. The Board of Directors and the Executive Committee shall have
power to issue and sell or otherwise dispose of such shares of the corporation's
authorized but unissued capital stock to such persons and at such times and for
such consideration and upon such terms as it shall determine from time to time.
SECTION 2. Number, Qualification, Election and Term of Office. The Board
of Directors shall be composed of not less than three nor more than thirty-five
directors. Within the limits specified, the number of directors shall be
determined from time to time by vote of a majority of the entire Board;
provided, however, that no decrease in the
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number of directors constituting the entire Board of Directors made pursuant to
this Section 2 shall shorten the term of any incumbent director. The Board of
Directors shall be divided into three classes, as nearly equal in number as
possible. The Directors need not be stockholders. To be nominated to serve or to
serve as a director, an individual must be eligible to serve as a director both
at the time the Board of Directors votes to nominate such individual or receives
notice in accordance with Section 3 of this Article of a stockholder's intent to
nominate such individual and at the time of such election, and the stockholder
making such nomination (and any party on whose behalf or in concert with whom
such stockholder is acting) must be qualified at the time of making such
nomination to have such individual serve as the nominee of such stockholder (and
any party on whose behalf or in concert with whom such stockholder is acting) if
such individual is elected. At each annual meeting of stockholders, the
successors to the class of directors whose term expires at that meeting shall be
elected to hold office for a term continuing until the annual meeting held in
the third year following the year of their election and until their successors
are duly elected and qualified or until their earlier resignation, death or
removal; provided, that in the event of failure to hold such an annual meeting
or to hold such election at such meeting, the election of directors may be held
at any special meeting of the stockholders called for that purpose. Directors,
except those appointed by the Board of Directors to fill vacancies, shall be
elected by a plurality vote of the stockholders, voting by ballot either in
person or by proxy. As used in these By-Laws, the expression "entire Board"
means the number of directors in office at a particular time.
SECTION 3. Nominations for Director. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors, except as provided in the Articles of Organization with respect to
nominations by holders of preferred stock in certain circumstances. Nominations
of persons for election to the Board of Directors at the annual meeting may be
made at the annual meeting of stockholders (a) by the Board of Directors or at
the direction of the Board of Directors by any nominating committee or person
appointed by the Board or (b) by any stockholder of record at the time of giving
of notice provided for in this Section 3 and who shall continue to be entitled
at the time of the meeting to vote for the election of directors at the meeting
who complies with the notice procedures set forth in this Section 3 rather than
the notice procedures with respect to other business set forth in Section 4 of
Article I. Nominations by stockholders shall be made only after timely notice by
such stockholder in writing to the Clerk of the corporation. In order to be
timely given, a stockholder's notice shall be delivered to or mailed and
received at the principal executive offices of the corporation not less than 75
nor more than 125 days prior to the anniversary date of the immediately
preceding annual meeting of stockholders of the corporation; provided, however,
that in the event that the meeting is called for a date, including any change in
a date determined by the Board pursuant to Section 2 of Article I, more than 75
days prior to such anniversary date, notice by the stockholder to be timely
given must be so received not later than the close of business on the 20th day
following the day on which notice of the date of the meeting was mailed or
public disclosure of the date of the meeting was made, whichever first occurs.
Such stockholder's notice to the Clerk shall set forth (a) as to each person
whom the stockholder proposes to nominate for election or re-election as a
director, (i) the name, age, business address and residence address of the
person, (ii) the principal
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occupation or employment of the person, (iii) the class and number of shares of
capital stock of the corporation, if any, which are beneficially owned by the
person, (iv) any other information regarding the nominee as would be required to
be included in a proxy statement or other filings required to be filed pursuant
to the Proxy Rules, and (v) the consent of each nominee to serve as a director
of the corporation if so elected; and (b) as to the stockholder giving the
notice, (i) the name and record address of the stockholder, (ii) the class and
number of shares of capital stock of the corporation which are beneficially
owned by the stockholder as of the record date for the meeting (if such date
shall then have been made publicly available) and as of the date of such notice,
(iii) a representation that the stockholder intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the notice,
(iv) a representation that the stockholder (and any party on whose behalf or in
concert with whom such stockholder is acting) is qualified at the time of giving
such notice to have such individual serve as the nominee of such stockholder
(and any party on whose behalf or in concert with whom such stockholder is
acting) if such individual is elected, accompanied by copies of any notification
or filings with, or orders or other actions by, any governmental authority which
are required in order for such stockholder (and any party on whose behalf such
stockholder is acting) to be so qualified, (v) a description of all arrangements
or understandings between such stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by such stockholder and (vi) such other information
regarding such stockholder as would be required to be included in a proxy
statement or other filings required to be filed pursuant to the Proxy Rules. The
corporation may require any proposed nominee to furnish such other information
as may reasonably be required by the corporation to determine the eligibility of
such proposed nominee to serve as director. No person shall be eligible for
election as a director unless nominated in accordance with the procedures set
forth herein.
The presiding officer of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance with the
foregoing procedures, and if he or she should so determine, he or she shall so
declare to the meeting and the defective nomination shall be disregarded.
SECTION 4. Quorum and Manner of Acting. One-third of the directors in
office (but in no event fewer than two) shall constitute a quorum for the
transaction of business at any meeting and, except as otherwise provided by law
or these By-Laws, the act of a majority of the directors present at any meeting
at which a quorum is present shall be the act of the Board of Directors.
Directors shall be deemed present at a meeting when present in person or by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other at the same
time. In the absence of a quorum, a majority of the directors present, or if
only two directors are present, either director, or the sole director present,
may adjourn any meeting to a day certain or from time to time until a quorum is
present. At any adjourned meeting at which a quorum is present, any business may
be transacted which might have been transacted if the meeting had been held when
originally called. A director may not vote or otherwise act by proxy.
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SECTION 5. First Meeting. The Board of Directors elected at any annual
meeting of stockholders shall meet at the Head Office of BankBoston, N.A. in the
City of Boston and Commonwealth of Massachusetts, or at such other location as
the Board may determine, promptly after the final adjournment of such meeting or
as soon as practicable (but not more than 30 days) thereafter for purposes of
organization, the election of officers for the succeeding year and the
transaction of other business. No notice of such meeting need be given.
SECTION 6. Regular Meetings. Except for the first meeting of the Board of
Directors to be held immediately following the annual election of directors,
regular meetings of the Board of Directors shall be held on the fourth Thursday
in each month, except the month in which the annual election of directors is
held, at one o'clock in the afternoon in the directors' room at the Head Office
BankBoston, N.A. in the City of Boston, or at such other time or at such other
place, or both, as shall be designated in the notice of meeting given to the
directors as provided in these By-Laws. If the day designated for a regular
meeting of the Board of Directors would not be a business day (as defined in
Section 3 of Article I of these By-Laws) at the place where the meeting is to be
held, then the meeting shall be held on such other business day as the Board of
Directors may have previously designated, or if no such day shall have been
designated, the meeting shall be held on the first business day at such place
preceding the date originally designated for such meeting. Any regular meeting
of the Board of Directors may be dispensed with by an appropriate vote passed by
the Board of Directors at any prior meeting.
SECTION 7. Special Meetings. Special meetings of the Board of Directors
may be called by the Chief Executive Officer and shall be called by the Clerk at
the written request of three or more directors. Special meetings of the Board of
Directors may be held at such place and time as may be designated in the call of
the meeting.
SECTION 8. Notices of Meetings. Notice of the time and place of each
regular or special meeting of the Board of Directors shall be given to each
director at least 48 hours before such meeting if delivered personally or sent
by mail or at least 24 hours before such meeting if given by telephone, telex,
telegraph or other electronic means. Notice by mail shall be deemed to be given
when deposited in the post office or a letter box in postage-paid sealed
wrappers or when transmitted by telegraph or telex, and addressed separately to
each director at his or her address appearing on the records of the corporation.
Notices of meetings of the Board of Directors need not include a statement of
the business to be transacted thereat unless required by law or these By-Laws.
No notice of any adjourned meeting of the Board of Directors need be given other
than by announcement at the session of the meeting which is being adjourned.
Failure to give any such notice of any meeting, or any irregularity in the
notice thereof, shall not invalidate any proceedings taken thereat if a quorum
is present and if all absent directors, either before or after the meeting,
shall sign a waiver of notice or a consent to the holding of such meeting or an
approval of the minutes thereof. All such waivers, consents and approvals shall
be filed with the minutes of the meetings to which they relate.
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SECTION 9. Organization of Meetings. At each meeting of the Board of
Directors, the Chairman of the Board or, in his or her absence, the Chief
Executive Officer or, in their absence, an officer designated by the Chief
Executive Officer, or in the absence of all such officers, a director chosen by
a majority of the directors present shall act as chairman. The Clerk, or, in his
or her absence, any person appointed by the chairman, shall act as secretary of
the meeting and keep minutes of the proceedings. The secretary of the meeting
need not be sworn.
SECTION 10. Order of Business. At all meetings of the Board of Directors,
business shall be transacted in the order determined by the chairman of the
meeting, subject to approval of the directors present thereat.
SECTION 11. Action by Directors without a Meeting. Unless otherwise
restricted by the Articles of Organization or these By-Laws, any action required
or permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if a written consent thereto
is signed by all members of the Board of Directors or of such committee, as the
case may be, and such written consent is filed with the minutes of proceedings
of the Board of Directors or of such committee. Any such consent shall be
treated for all purposes as a vote duly adopted by the Board of Directors or
such committee at a meeting and may be described as such in any certificate or
other document filed with or furnished to any public official, governmental
agency or other person having dealings with the corporation.
SECTION 12. Resignation. Any director may resign at any time by giving
written notice of his or her resignation to the Chairman of the Board or the
Chief Executive Officer or the Clerk. Such resignation shall take effect upon
its receipt or at any later date specified therein; and unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
SECTION 13. Removal. A director may be removed by the affirmative vote of
a majority of the shares outstanding and entitled to vote in the election of
directors only for cause. A director may be removed for cause only after
reasonable notice and opportunity to be heard before the stockholders. For such
time as the corporation is subject to paragraph (a) of Section 50A of Chapter
156B of the Massachusetts General Laws, "cause" with respect to the removal of
any director by the stockholders shall mean only (a) conviction of a felony, (b)
declaration of unsound mind by order of court, (c) gross dereliction of duty,
(d) commission of an action involving moral turpitude, or (e) commission of an
action which constitutes intentional misconduct or a knowing violation of law if
such action in either event results both in an improper substantial personal
benefit and a material injury to the corporation.
If at any time the corporation shall no longer be subject to paragraph (a)
of Section 50A of Chapter 156B of the Massachusetts General Laws, (a) a director
may be removed from office with or without cause by the vote of the holders of a
majority of the shares entitled to vote in the election of directors and may be
removed from office with cause by vote of a majority of the directors then in
office, and (b) a director may be removed for cause only after reasonable notice
and opportunity to be heard before the body proposing to remove him or her.
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SECTION 14. Vacancies. The Board of Directors may act notwithstanding a
vacancy or vacancies in its membership; but if the office of any director shall
become vacant by reason of an increase in size of the Board of Directors, or the
death, resignation, disqualification or removal of a director or otherwise, such
vacancy or vacancies shall be filled solely by the affirmative vote of a
majority of the remaining directors then in office, even though less than a
quorum. Any director elected in accordance with this Section 14 shall hold
office for the remainder of the full term of the class of directors in which the
vacancy occurred or the new directorship was created and until his or her
successor shall have been elected and qualified or until his or her earlier
resignation, death or removal.
SECTION 15. Fees and Expenses of Directors. Each director who is not an
officer or employee of the corporation or any of its affiliates may be paid such
fees for his or her services and for attendance at meetings of the Board of
Directors or of any committee thereof as the Board of Directors may determine
from time to time to be appropriate. Such fees may be payable currently or on a
deferred basis. In addition, each such director shall be entitled to
reimbursement for reasonable expenses incurred by him or her in order to attend
meetings of the Board of Directors and committees thereof or otherwise in
connection with the performance of his or her duties as a director.
SECTION 16. Validity of Acts of Directors. All action taken by any meeting
of the Board of Directors or of a committee of the directors or by any person
acting as a director shall, notwithstanding that it shall afterwards be
discovered that there was some defect in the election or appointment or
continuance in office of any such director or person acting as a director, or
that they or any of them were disqualified, or had vacated office, or were not
entitled to vote in relation to the matter acted upon, be as valid as if such
person had been duly elected or appointed, had continued in office and was
qualified to be a director and entitled to vote on such matter.
SECTION 17. Transactions with the Corporation. No contract or other
transaction between the corporation and one or more of its directors or between
the corporation or any other corporation, partnership, voluntary association,
trust or other organization of which any of its directors is a director or
officer or in which he or she has any financial interest shall be void or
voidable for this reason or because any such director is present at or
participates in the meeting of the Board of Directors or of the committee
thereof which authorizes the contract or transactions or because his or her vote
is counted for such purpose (a) if the material facts as to the contract or
transaction and as to his or her relationship or interest are disclosed to the
Board of Directors or such committee and the Board of Directors or such
committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of disinterested directors even though the
disinterested directors be less than a quorum or (b) if the material facts as to
the contract or transaction and as to his or her relationship or interest are
disclosed or are known to the shareholders entitled to vote thereon and the
contract or transaction is specifically approved in good faith by vote of the
shareholders or (c) if the contract or transaction is fair and reasonable as to
the corporation as of the time it is authorized, approved or ratified by the
Board of Directors, such committee or the shareholders. Common or interested
directors may
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be counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee thereof which authorizes the contract or
transaction.
ARTICLE III
COMMITTEES
SECTION 1. Executive Committee. There shall be an Executive Committee
composed of the Chairman of the Board, the Chief Executive Officer and such
number of other directors as the Board of Directors may appoint from time to
time by resolution passed by the vote of a majority of the entire Board. The
Board of Directors may also, from time to time, by similar resolution, appoint
one or more alternate members of the Executive Committee who may attend and act
in the place of any absent or disqualified member or members of the Executive
Committee at any meeting thereof. Subject to the provisions of Section 6 of this
Article III, the term of office of any appointed member or alternate member of
the Executive Committee shall expire on the date specified in the resolution of
appointment or any earlier date on which he or she ceases to be a director. Any
director who has served as a member or alternate member of the Executive
Committee shall be eligible for reappointment to a new term of office. At all
meetings of the Executive Committee, the Chief Executive Officer or, in his or
her absence, an officer designated by the Chief Executive Officer, or in the
absence of such a designation, a director chosen by a majority of the directors
present shall preside.
During the intervals between meetings of the Board of Directors, the
Executive Committee, unless expressly provided otherwise by law or these By-
Laws, shall have and may exercise all the authority of the Board of Directors,
except that it shall not be entitled to
(i) change the principal office of the corporation;
(ii) amend or repeal these By-Laws or to adopt new by-laws;
(iii) elect officers required by law to be elected by the stockholders
or directors or to fill vacancies in any such offices;
(iv) change the number of the Board of Directors or to fill vacancies
in the Board of Directors;
(v) remove officers or directors from office;
(vi) fix the remuneration of any director for serving on the Board of
Directors or any Committee thereof or for services to the
corporation in any other capacity;
(vii) authorize the payment of any dividend or distribution to
stockholders;
(viii) authorize the reacquisition for value of stock of the
corporation; or
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(ix) authorize a merger of a subsidiary entity into the corporation.
In addition to its other duties, the Executive Committee shall establish
the quarterly provision and reserve for credit losses, make recommendations
concerning dividends and shall be available to the Chief Executive Officer, at
his discretion, to discuss strategic opportunities.
The action taken by the Executive Committee at each meeting shall be
reported to the Board of Directors and shall be subject to alteration or repeal
by the latter, provided that no alteration or repeal by the Board of Directors
of action taken by the Executive Committee shall prejudice the rights or acts of
any third person.
The Executive Committee shall hold meetings at such times and places and
upon such notice as it may from time to time determine. Other meetings of the
Executive Committee may be called at any time by the Chief Executive Officer or
by any two members of the Executive Committee or by the Secretary of the Board
of Directors at the written request of the person or persons entitled to call
such a meeting.
SECTION 2. Audit Committee. There shall be an Audit Committee composed of
such number of directors (not less than three) as the Board of Directors, by
resolution passed by the vote of a majority of the entire Board may appoint,
none of whom shall be an employee of the corporation.
The duties of the Audit Committee shall be
(a) to recommend to the Board of Directors for approval by the
stockholders the appointment of a firm of independent public
accountants ("the Auditors") to audit the accounts of the
corporation and such of its subsidiaries as the Committee may
recommend for the financial year in respect of which such
appointment is made;
(b) to make, or cause to be made by the Auditors, such examinations
or audits of the affairs and operations of the corporation or of
any one or more of its subsidiaries, of such scope, with such
objects, and at such times or intervals as the Committee may
determine in its discretion or as may be ordered by the Board of
Directors or the Executive Committee;
(c) to submit to the Board of Directors as soon as may be convenient
following the conclusion of each examination or audit made by or
at the direction of the Committee, a written report relative
thereto;
(d) to oversee the activities of the General Auditor and his or her
staff. The Committee shall also be responsible for conducting
periodic performance evaluations and establishing the
compensation of the General Auditor; and
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(e) to review matters associated with internal control and the
management of risk.
A notation with respect to each report made to the Board of Directors by
the Audit Committee and of the action taken thereon by the Board of Directors
shall be made in the minutes of the latter.
SECTION 3. Compensation Committee. There shall be a Compensation
Committee composed of such number of directors as the Board of Directors, by
resolution passed by vote of a majority of the entire Board, may appoint, none
of whom shall be an employee of the corporation or any subsidiary.
The duties of the Compensation Committee shall be
(a) to review the corporation's overall executive compensation
strategy;
(b) to review the design and administration of executive compensation
and incentive plans and employee benefit plans, including
ensuring that all plans are consistent with the corporation's
strategy and budget;
(c) to review all new equity-related plans for executive officers and
Directors prior to submission to stockholders;
(d) to make recommendations to the Board of Directors on new
corporate-wide benefit plans or any material changes to existing
plans;
(e) to execute as it sees fit from time to time the powers and to
discharge the duties vested in it from time to time by the terms
of any pension or other benefit plan or arrangement affecting
directors or employees of the corporation;
(f) to review the compensation of the Chief Executive Officer, the
President and the Chairman of the Board and that of other
employee Directors and to make recommendations to the Board of
Directors;
(g) to review and approve the recommendations of the Chief Executive
Officer on compensation for key executive officers;
(h) to review diversity representation at the senior and mid-
management level;
(i) to conduct an annual evaluation of the Chief Executive Officer;
(j) to review succession and development plans for Executive
Management and the Chief Executive Officer;
(k) to review candidate assessment and selection for key executive
officer positions;
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(l) to review major organizational changes proposed by the Chief
Executive Officer, as appropriate; and
(m) to perform such functions as may be assigned to it from time to
time by the Board of Directors.
SECTION 4. Board Governance and Nominating Committee. There shall be a Board
Governance and Nominating Committee composed of such number of directors (no
more than two of which may be members of Executive Management) as the Board of
Directors, by resolution passed by vote of a majority of the entire Board, may
appoint. The Chief Executive Officer shall serve as a member of the Committee.
The duties of this Committee shall be
(a) to review the size and composition of the Board of Directors and
the tenure of directors;
(b) to recommend criteria for qualifications for Board membership,
such as experience, affiliations, and personal characteristics;
(c) to review the qualifications of individual nominees for director
as recommended by the Chief Executive Officer or by a stockholder
and to make recommendations to the Board of Directors;
(d) to review the composition of the committees as recommended by the
Chief Executive Officer;
(e) to review the compensation and benefits of non-employee Directors
and to make recommendations to the Board of Directors; and
(f) to evaluate the effectiveness of the Board of Directors;
(g) to evaluate the responsibilities and effectiveness of Board
Committees and to make recommendations to the Board with respect
thereto;
(h) to perform such other functions as may be assigned to it from
time to time by the Board of Directors.
SECTION 5. Community Investment Committee. The Board of Directors may
from time to time appoint a Community Investment Committee composed of not
less than three nor more than five directors.
The duties of the Committee shall be from time to time to review and
evaluate the policies established by the corporation's subsidiary banks relating
to the discharge by the subsidiary banks of their responsibilities under the
Community Reinvestment Act of 1977, as amended (Section 2901 et seq. of Title 12
of the United States Code) and
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regulations thereunder, or any other applicable Federal or state law or
regulations thereunder relating to substantially the same subject as the
Community Reinvestment Act of 1977, as amended, and oversee the implementation
of such policies by the corporation's subsidiary banks and make reports to the
Board of Directors from time to time of its findings and recommendations.
SECTION 6. Other Committees. The Board of Directors may, from time to
time, by resolution passed by the vote of a majority of the entire Board,
constitute such other standing or special committees as it deems desirable and
may dissolve any such committee by like resolution at its pleasure. Each such
committee shall have such authority and perform such duties not inconsistent
with law and these By-Laws as may be assigned to it by the Board of Directors.
Vacancies in any such committee shall be filled by resolution passed by the vote
of a majority of the entire Board. No such committee shall be granted or shall
exercise any authority which shall have been delegated to another committee by
these By-Laws or by resolution of the Board of Directors or which, in the
absence of such delegation, could not be exercised by the Executive Committee.
SECTION 7. Changes in Committee Membership; Filling of Vacancies. The Board
of Directors by resolution passed by a vote of the majority of the entire Board
may at any time or from time to time
(a) increase or reduce the number of members of any committee, within
any applicable limits imposed by these By-Laws,
(b) remove any member from any committee,
(c) appoint a director to fill a vacancy in, or to be an additional
member of, any committee, and
(d) discharge any committee except a standing committee established
pursuant to this Article III.
SECTION 8. Records of Committee Action and Board of Directors' Approval.
Each committee appointed by the Board of Directors shall keep a record of its
acts and proceedings which shall be open for inspection at any time by any
director. Such record shall be submitted to the Board of Directors at such time
or times as may be required by these By-Laws or as may be requested by the Board
of Directors. Failure to submit such record, or failure of the Board of
Directors to approve any action indicated therein shall not invalidate any
action otherwise lawful, to the extent that it has been carried out by the
corporation prior to the time the record of such action was, or should have
been, submitted to the Board of Directors as herein provided. The action of the
Board of Directors at any meeting with respect to action taken by any standing
committee shall be recorded in the minutes of the meeting.
SECTION 9. Committee Proceedings. In the absence of specific provisions
in these By-Laws or regulations imposed by the Board of Directors, a committee
may meet and adjourn and otherwise regulate its meetings as it thinks fit. A
committee may appoint
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a chairman of its meetings if none has been appointed by the Board of Directors
or is designated elsewhere in this Article III. If no such chairman has been
appointed, or if at any meeting the chairman is not present within five minutes
after the time appointed for the holding of the meeting, the members present may
choose one of their number to be chairman of the meeting. A quorum for the
transaction of business at any meeting of a committee shall be a majority of the
fixed number of members thereof for the time being (whether or not any seat is
vacant) unless a different rule shall have been adopted by a resolution passed
by the vote of a majority of the Board of Directors. A resolution passed by the
vote of a majority of the members present at the time of voting if a quorum is
present shall be the act of the committee. In the case of an equality of votes
the Chairman shall have a second or casting vote. A committee cannot sub-
delegate any of its powers or duties within its membership or to any other
person or persons unless authorized to do so by the Board of Directors or these
By-Laws. Committee members cannot vote by proxy.
SECTION 10. Action of Committees without a Meeting. Any action required or
permitted to be taken by a committee of the Board of Directors may be taken
without a meeting if all members of the committee consent thereto in writing
either before or after the action is taken and the writing or writings
evidencing such consent are filed with the minutes of proceedings of such
committee. For all purposes of these By-Laws, any such consent shall constitute
a resolution duly passed by such committee.
SECTION 11. General Authority of Committees. Any committee appointed by
the Board of Directors pursuant to this Article III shall be at liberty
(a) to meet and confer with employees of the corporation and its
subsidiaries on all matters relating to the work of the committee
which fall within the purview of such employees and to be
informed by any of them as to the policies, practices, and
controls of the division or department of the corporation or of
the subsidiary of the corporation to which he or she is assigned;
and
(b) to examine all reports which are relevant to the work of the
committee (i) made by the corporation or any of its subsidiaries
to regulatory authorities and (ii) of examinations of the
corporation or any of its subsidiaries made by regulatory
authorities.
ARTICLE IV
OFFICERS
SECTION 1. Titles and Qualifications. The officers of the corporation
shall be a Chief Executive Officer, a Chairman of the Board, a President, a
Treasurer, a Comptroller, a Clerk, a General Auditor, one or more Vice
Presidents of any rank and such other officers including one or more Vice
Chairmen as may be appointed from time to time in accordance with these By-
Laws. Except as otherwise provided by law, the duties of any two officers may
be discharged by the same person, but the President
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shall not serve at the same time as Treasurer, Comptroller, or Clerk. The Chief
Executive Officer, the Chairman of the Board and the President must be
directors.
SECTION 2. Appointment and Terms of Office. The Chief Executive Officer,
the Chairman of the Board, the President, any Vice Chairman, any Executive Vice
President, the Treasurer, the Comptroller, the Clerk and the General Auditor
shall be chosen by a majority vote of the entire Board at the first meeting of
the Board of Directors following each annual meeting of stockholders (or special
meeting of stockholders in lieu of such annual meeting) or by the Board of
Directors from time to time and each shall serve at the pleasure of the Board
unless he or she sooner resigns, retires, dies, is removed or becomes
disqualified. Other officers may be appointed from time to time by the Board of
Directors, the Chairman of the Board, the Chief Executive Officer, the
President, any Vice Chairman, any Executive Vice President or any other
Executive Officer. Each other officer shall have such title, exercise such power
and perform such duties and hold office for such term as shall be determined by
the Board or the appointing officer as the case may be.
SECTION 3. Duties; Fidelity Bond. The duties and authority of each
officer of the corporation, other than as set forth in these By-Laws, shall be
prescribed and may be varied from time to time by the Board of Directors, or the
Chief Executive Officer, or the President, as the case may be. The Board of
Directors shall provide for such bond and fidelity insurance covering the
officers of the corporation and for the faithful and honest discharge of their
duties as the Board may determine. Such bonds or insurance may be in individual,
schedule or blanket form and the premiums therefor shall be paid by the
corporation.
SECTION 4. The Chief Executive Officer. The Chief Executive Officer of the
corporation shall have the general control and management of, and shall be
responsible to the Board for the conduct of, its business, affairs and
operations. The Chief Executive Officer shall report to the Board of Directors
on the business, affairs and financial condition of the corporation. The Chief
Executive Officer shall have such powers and shall perform such duties as are
usually incident to the Office of Chief Executive Officer and such additional
duties may be prescribed by law, the Articles of Organization and these By-Laws
or as may be conferred upon or assigned to him or her by the Board of Directors.
In the absence of the Chairman of the Board, the Chief Executive Officer shall
preside at meetings of the Board of Directors. The Chief Executive Officer shall
be a member of the Executive Committee and shall preside at meetings of that
Committee.
SECTION 5. The Chairman of the Board. The Chairman of the Board shall
preside at meetings of the Board of Directors. The Chairman of the Board shall
have such powers and shall perform such duties as may be prescribed by law, the
Articles of Organization and these By-Laws or as may be conferred upon or
assigned to him or her by the Board of Directors. The Chairman of the Board
shall have such additional responsibilities and shall discharge such further
duties as from time to time may be requested of him or her by the Chief
Executive Officer. The Chairman of the Board shall be a member of the Executive
Committee.
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SECTION 6. The President and Chief Operating Officer. The President shall
be the Chief Operating Officer of the corporation and shall have the day to day
responsibility for the control and management of its operations of the
corporation. In the absence of the Chairman of the Board and the Chief Executive
Officer, the President shall preside at all meetings of the Board of Directors.
The President shall be subject to the direction of the Chief Executive Officer
under whose direct supervision he or she shall be. The President shall perform
such duties as may be imposed on him or her by law, the Articles of Organization
and these By-Laws or as may be assigned to him or her by the Chief Executive
Officer. He or she shall have such powers and duties as are usually incident to
the Office of President and Chief Operating Officer.
SECTION 7. The Vice Chairmen. Each Vice Chairman shall perform the duties
imposed upon him or her by these By-Laws or assigned to him or her by the Chief
Executive Officer or the President. The Vice Chairmen shall be senior in rank to
the Vice Presidents of any rank.
Section 8. The Executive Officers. The Chief Executive Officer, the
Chairman of the Board, the President, any Vice Chairman, any Executive Vice
President, the Clerk, and such other Executive Officers as may be so designated
from time to time by the Board of Directors shall be the Executive Officers of
the corporation.
SECTION 9. The Treasurer. The Treasurer shall have custody and control
over all funds and securities of the corporation, maintain full and adequate
accounts of all moneys received and paid by him or her on account of the
corporation and, subject to the control of the Board of Directors shall
discharge all duties incident to the office of Treasurer. The Treasurer shall
have authority, in connection with the normal business of the corporation, to
sign or endorse negotiable instruments, contracts, leases and other documents.
The Treasurer shall render an account of his or her transactions to the Board of
Directors whenever and as often as may be requested.
SECTION 10. The Comptroller. The Comptroller shall be the chief accounting
officer of the corporation. He or she shall establish accounting policy for the
corporation, maintain complete and accurate books and records concerning its
financial transactions, prepare its financial statements and, subject to the
control of the Board of Directors, discharge all duties incident to the office
of the Comptroller. The Comptroller shall have authority, in connection with the
normal business of the corporation, to sign or endorse negotiable instruments,
contracts, leases and other documents.
SECTION 11. The Clerk and the Secretary of the Board of Directors. The
Clerk shall be the principal recording officer of the corporation. He or she
shall be the Secretary of the Board of Directors and of the Executive Committee
and of the Audit Committee. He or she shall attend and keep minutes of all
proceedings at meetings of the stockholders, the Board of Directors, the
Executive Committee and of each committee appointed by the Board of Directors
which shall not have appointed any other person to serve as its secretary. The
Clerk shall have charge of the corporate seal, minute books of the corporation
and of such other corporate records, books and papers as the
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Board of Directors or the Executive Committee may order to be kept in his or her
custody or under his or her control. The Clerk shall have authority to affix the
seal of the corporation to all instruments executed under seal and to attest
thereto. As required by law, these By-Laws or the Board of Directors, the Clerk
shall give or cause to be given notice to the stockholders of each annual and
special meeting and to the directors of each regular and special meeting of the
Board of Directors except the first meeting after their election in each year;
and the Clerk shall perform such other duties as may be imposed upon him or her
by law, these By-Laws, the Board of Directors, the Audit Committee or the Chief
Executive Officer, under whose direct supervision he or she shall be. The Clerk
shall be a resident of the Commonwealth of Massachusetts unless a resident agent
has been appointed by the corporation pursuant to law to accept service of
process.
SECTION 12. The General Auditor. The General Auditor shall direct the
internal audit activities of the corporation and shall provide the Audit
Committee with objective and timely information to aid in measuring and
evaluating the operations of the corporation. In the conduct of this
responsibility, the General Auditor shall perform such duties as may be imposed
upon him or her by these By-Laws, the Board of Directors and the Audit
Committee. To assure the professional independence of the General Auditor, he or
she shall report directly and solely to the Audit Committee. For purposes of
internal administration, the General Auditor shall report to a senior officer of
the corporation other than the Chairman of the Board, the Chief Executive
Officer, or the President.
SECTION 13. The Vice Presidents. Each Vice President of whatever rank
shall perform the duties imposed upon him or her by these By-Laws or assigned to
him or her by the Board of Directors, the Chief Executive Officer or the
President. The Executive Vice President shall be senior in rank to all other
Vice Presidents including Senior Vice Presidents.
SECTION 14. The Assistant Treasurers and Assistant Clerks. Each Assistant
Treasurer shall perform such duties as may be assigned to him or her by the
Board of Directors, the Chief Executive Officer, the President or the Treasurer.
Each Assistant Clerk shall perform such duties as may be assigned to him or her
by the Board of Directors, the Chief Executive Officer or the Clerk, and shall
have the authority to affix the seal of the corporation to all instruments
executed under seal and to attest thereto.
SECTION 15. Resignation. Any officer may resign at any time by giving
written notice to the Chairman of the Board, the Chief Executive Officer, the
President or the Clerk. The resignation of any officer shall take effect upon
its receipt or on any later date specified therein; and unless otherwise
specified therein, the acceptance of such resignation shall not be required to
make it effective.
SECTION 16. Vacancies. Any vacancy occurring in the offices of the
Chairman of the Board, the Chief Executive Officer, the President, the
Treasurer, the Comptroller, the Clerk and the General Auditor shall be promptly
filled by the Board of Directors. Any vacancy occurring in the offices of Vice
Chairmen, Executive Vice Presidents, or
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other Executive Officers not specifically referred to in the preceding sentence
may be filled by the Board of Directors. Except for those offices to be filled
by the Board of Directors, the Chief Executive Officer may fill any vacancy
occurring in any office by reason of death, resignation, retirement or other
cause and may, in his or her discretion, leave offices unfilled for such period
as he or she may determine.
SECTION 17. Compensation of Officers, Employees and Other Agents. The
Board of Directors shall have power to fix, and to vary from time to time, the
compensation of all officers, employees and other agents of the corporation
for their services as such.
SECTION 18. Designated Officer. The term designated officer of the
corporation, whenever it appears in a resolution or vote of the Board of
Directors of the corporation shall refer to any one of the Chief Executive
Officer, Chairman of the Board, the President, any Vice Chairman, the Treasurer,
an Assistant Treasurer, the Comptroller, any Vice President of whatever rank,
the Clerk, an Assistant Clerk, the Secretary of the Board of Directors, the
General Counsel and the General Auditor unless the resolution or vote of the
Board of Directors otherwise provides.
ARTICLE V
STOCK
SECTION 1. Stock Certificates. Each stockholder shall be entitled to a
certificate or certificates of stock of the corporation in such form as the
Board of Directors may from time to time prescribe. Each certificate shall be
numbered and entered in the books of the corporation as it is issued, shall
state the holder's name and the number and the class and the designation of the
series, if any, of his or her shares, shall be signed by the Chairman of the
Board, the Chief Executive Officer, the President or a Vice President of any
rank and by the Treasurer or an Assistant Treasurer and may, but need not, be
sealed with the seal of the corporation. If any stock certificate is signed by a
transfer agent, or by a registrar, other than a director, officer or employee of
the corporation, the signatures of the officers of the corporation may be
facsimiles. In case any officer who has signed or whose facsimile signature has
been placed on any certificate shall have ceased to be such officer before such
certificate is issued, it may nevertheless be issued by the corporation and
delivered with the same effect as if he or she were such officer at the time of
issue. Every certificate of stock which is subject to any restriction on
transfer pursuant to the Articles of Organization, these By-Laws or any
agreement to which the corporation is a party, or which is issued while the
corporation is authorized to issue more than one class or series of stock, shall
have the restriction noted conspicuously on the certificate and shall also set
forth on the face or back the full text of the restriction or the preferences,
voting powers, qualifications and special or relative rights of each class or
series or, alternatively, a statement of the existence of such restriction and
such preferences, powers, qualifications and rights and a statement that the
corporation will furnish a copy of the restriction and such preferences, powers,
qualifications and rights to the holder of such certificate upon written request
and without charge.
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SECTION 2. Transfer of Stock. Subject to any applicable transfer
restrictions at the time in force, shares of stock of the corporation shall be
transferable upon its books by the holders thereof in person or by their duly
authorized attorneys or legal representatives. Such transfer shall be effected
by delivery of the old certificate, together with a duly executed assignment and
power to transfer endorsed thereon or attached thereto and with such proof of
the authenticity of the signature and such proof of authority to make the
transfer as the corporation or its agents may reasonably require, to the person
in charge of the stock and transfer books and ledgers or to such other person as
the Board of Directors may designate, who shall thereupon cancel the old
certificate and issue a new certificate. The corporation may treat the holder of
record of any share or shares of stock as the owner of such stock, and shall not
be bound to recognize any equitable or other claim to or interest in such share
on the part of any other person, whether or not it shall have express or other
notice thereof, or otherwise, save as expressly provided by law.
SECTION 3. Transfer Agent and Registrar; Regulations. The corporation
shall, if and whenever the Board of Directors shall so determine, maintain one
or more transfer offices or agencies, each in charge of a transfer agent
designated by the Board of Directors at which the shares of the capital stock of
the corporation shall be transferable, and also one or more registry offices,
each in charge of a registrar designated by the Board of Directors, where such
shares of stock shall be registered, and no certificate for shares of the
capital stock of the corporation in respect of which a registrar and transfer
agent shall have been designated, shall be valid unless countersigned by such
transfer agent and registered by such registrar. The Board of Directors may also
make such additional rules and regulations as it may deem expedient concerning
the issue, transfer and registration of certificates for shares of the capital
stock of the corporation.
SECTION 4. Lost, Mutilated or Destroyed Certificates. No certificate for
shares of stock of the corporation shall be issued in place of any certificate
alleged to have been lost, mutilated or destroyed, except upon production of
such evidence of the loss, mutilation or destruction and upon indemnification of
the corporation and its agents to such extent and in such manner as the Board of
Directors may prescribe and as permitted by law.
SECTION 5. Record Date for Determination of Stockholders' Rights; Close of
Transfer Books. The Board of Directors may fix in advance a date, not exceeding
60 days preceding the date of any meeting of stockholders, or the date fixed for
the payment of any dividend, or the making of any other distribution to
stockholders, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect, or the
last day on which the consent or dissent of stockholders may be effectively
expressed for any purpose, as the record date for the determination of the
stockholders entitled to notice of, and to vote at, any such meeting and any
adjournment thereof, or entitled to receive payment of any such dividend or
distribution, or receive any such allotment of rights, or as the last day on
which stockholders may effectively exercise rights in respect of any such change
or conversion or exchange of capital stock, or as the last day on which they may
effectively express such consent or dissent, and in such case only stockholders
of
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record on the date so fixed shall be so entitled, notwithstanding any transfer
of stock on the books of the corporation after the date fixed as aforesaid. In
lieu of fixing such a record date or last day, the Board of Directors may close
the transfer books for all or any part of such period.
If no record date is fixed and the transfer books are not closed:
(i) The record date for determining stockholders having the right to
notice of or to vote at a meeting of stockholders shall be at the close
of business on the date next preceding the day on which notice is given.
(ii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board
of Directors acts with respect thereto.
SECTION 6. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the Articles of Organization, may be
declared by the Board of Directors at any regular or special meeting, payable in
cash, in property, or in shares of the capital stock, subject to the
limitations, if any, imposed by law or the Articles of Organization. Before
payment of any dividends, there may be set aside out of any funds of the
corporation available for dividends, such sum or sums as the Board of Directors
from time to time, in its absolute discretion, thinks proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the corporation, or for such other purpose as the
Board of Directors shall think conducive to the interests of the corporation,
and the Board of Directors may modify or abolish any such reserve.
SECTION 7. Control Share Acquisitions. Until such time as this Section
7 shall be repealed or these By-Laws shall be amended to provide otherwise, in
each case in accordance with Article VII of these By-Laws, the provisions of
Chapter 110D of the Massachusetts General Laws shall not apply to "control
share acquisitions" of the corporation within the meaning of said Chapter
110D.
ARTICLE VI
GENERAL PROVISIONS
SECTION 1. Offices. The principal office of the corporation shall be in
the City of Boston, County of Suffolk, Commonwealth of Massachusetts. The
corporation may also have offices at such other place or places within or
without the Commonwealth of Massachusetts as the Board of Directors may from
time to time determine.
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SECTION 2. Seal. The seal of the corporation shall be in the following
form:
When authorized by the Board of Directors and to the extent permitted by law
and these By-Laws, a facsimile of the corporate seal may be affixed or
reproduced.
SECTION 3. Fiscal Year. The fiscal year of the corporation shall be
coincident with the calendar year unless another fiscal year shall have been
fixed by the Board of Directors.
SECTION 4. Execution of Instruments. All contracts, conveyances, promises
or orders for the payment of money or other obligations authorized by the Board
of Directors to be executed or endorsed by an officer of the corporation in its
behalf shall be executed or endorsed by any one of the Chief Executive Officer,
the Chairman of the Board, the President, any Vice Chairman, any Vice President
of whatever rank, the Treasurer and the Clerk, except as the Board of Directors
may generally or in particular cases otherwise determine and except that checks
drawn on any dividend and special accounts may bear the facsimile signature,
affixed thereto by a mechanical device, of such officer or agent as the Board of
Directors shall authorize, and except also that bonds, notes, debentures or
other evidences of indebtedness authenticated by a manual signature on behalf of
a trustee or an authenticating agent appointed by the Board of Directors may
bear such facsimile signature or signatures of such officer or officers of the
corporation as the Board of Directors shall authorize.
SECTION 5. Voting of Securities. Unless otherwise ordered by the Board of
Directors, the Chief Executive Officer, the Chairman of the Board, the
President, each Vice Chairman, the Treasurer, each Executive Officer, each Vice
President of any rank, and the Clerk, each acting alone, shall have authority on
behalf of the corporation (a) to attend and act and vote in person for the
corporation and as its duly appointed agent and attorney-in-fact at any meeting
of the holders of securities or creditors of any person (as hereinafter defined)
any securities of whom are owned or held with power to vote by the corporation
or any indebtedness of whom is owed to the corporation, (b) to appoint, by an
instrument in writing, a proxy or several proxies to attend and act and vote for
the corporation at any such meeting and (c) to execute and deliver in the name
and on behalf of the corporation any consent or waiver by the corporation as a
security holder or creditor of any such person. As used in this Section, the
word "person" includes a natural person, a corporation, a company, a
partnership, a voluntary association, a proprietorship, a trust, an estate, a
government (national, state, regional or local) or a department or agency
thereof, and any other form of legal entity however designated and wherever
formed or existing. Each officer named in this Section and each person
designated by any such officer as a
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proxy for this corporation shall have and may exercise at any such meeting any
and all rights and powers incident to the ownership of such securities or
indebtedness which an owner would have if personally present.
SECTION 6. Powers of Attorney. The Chief Executive Officer, the Chairman
of the Board, the President, each Vice Chairman, any Executive Vice President,
any Executive Officer, or the Clerk may from time to time and at any time by
power of attorney appoint any person (as defined in Section 6 of this Article
VI) or persons to be the attorney or attorneys of the corporation for such
purposes and with such powers, authorities and discretions (not exceeding those
vested in or exercisable by the Board of Directors) and for such period and
subject to such conditions as the officer making such appointment may think fit,
and any such power of attorney may contain such provisions for the protection
and convenience of persons dealing with such attorney or attorneys as the
officer making such appointment may think it and may also authorize any such
attorney to appoint a substitute or substitutes and to delegate all or any of
the powers, authorities and discretions vested in any such attorney or
attorneys, except such power of substitution (without prejudice to the power of
such attorney or attorneys to exercise concurrently any of the powers delegated
and to revoke or vary any such appointment). The Chief Executive Officer, the
Chairman of the Board, the President, each Vice Chairman, any Executive Vice
President, any Executive Officer, or the Clerk may at any time revoke any power
of attorney executed by any of those officers currently or formerly in office,
provided that no such revocation shall invalidate any act performed by the
attorney or attorneys (or any substitute or substitutes appointed thereunder) in
the exercise of the powers conferred thereby between the revocation thereof and
the time such revocation becomes known to the attorney or attorneys, or to any
such substitute or substitutes, and any such power of attorney shall at all
times be conclusively binding on the corporation and its successors in favor of
third parties who have not received notice of the revocation thereof.
SECTION 7. Issue of Debt Securities and Other Obligations. The Board of
Directors shall have the power to authorize and cause to be executed and issued
bonds, notes, debentures, warrants, guaranties or other obligations of the
corporation, secured or not secured, upon such terms, in such manner and upon
such conditions as may be fixed or approved by vote of the Board of Directors or
of the Executive Committee prior to the issue thereof.
SECTION 8. Corporate Records. The original, or attested copies, of the
Articles of Organization, By-Laws and records of all meetings of incorporators
and stockholders, and stock and transfer records, which shall contain the names
of all stockholders and the record address and the amount of stock held by each,
shall be kept in the Commonwealth of Massachusetts at the principal office of
the corporation, or at an office of its Clerk, its resident agent or its
transfer agent. Such copies and records need not all be kept in the same office.
They shall be available at all reasonable times for inspection by any
stockholder for any proper purpose. They shall not be available for inspection
to secure a list of stockholders or other information for the purpose of selling
such list or information or copies thereof or of using the same for a purpose
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other than in the interest of the applicant, as a stockholder, relative to the
affairs of the corporation.
SECTION 9. Indemnification of Directors, Officers and Others. (a) The
corporation shall, to the extent legally permissible, indemnify each of the
directors and officers of the corporation against all liabilities and expenses,
including amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and counsel fees, reasonably incurred by such director or officer
in connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which such director or officer may be
involved or with which such director or officer may be threatened, while in
office or thereafter, by reason of such director or officer being or having been
such a director or officer of the corporation or by reason of such director or
officer serving or having served at the request of the corporation as a
director, officer or trustee of a wholly-owned subsidiary of the corporation or
having served in any capacity with respect to any employee benefit plan
maintained by the corporation or any wholly-owned subsidiary of the corporation,
except with respect to any matter as to which such director or officer shall
have been adjudicated in any proceeding not to have acted in good faith in the
reasonable belief that his or her action was in the best interest of the
corporation or of such subsidiary or, to the extent that such matter relates to
service with respect to any such employee benefit plan, in the best interest of
the participants or beneficiaries of such employee benefit plan; provided,
however, that as to any matter disposed of by a compromise payment by such
director or officer, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall be
provided unless such indemnification shall be ordered by a court or unless such
compromise shall be approved as in the best interest of the corporation, after
notice that it involves such indemnification: (i) by a disinterested majority of
the directors of the corporation then in office; or (ii) by a majority of the
disinterested directors of the corporation then in office, provided that there
has been obtained an opinion in writing of independent legal counsel to the
effect that such director or officer appears to have acted in good faith in the
reasonable belief that his or her action was in the best interest of the
corporation; or (iii) by the holders of a majority of the outstanding stock at
the time entitled to vote for directors, voting as a single class, exclusive of
any stock owned by any interested director or officer. Expenses, including
counsel fees, reasonably incurred by any director or officer of the corporation
in connection with the defense or disposition of any such action, suit or other
proceeding shall be paid from time to time by the corporation in advance of the
final disposition thereof upon receipt of an undertaking by such director or
officer to repay the amounts so paid to the corporation if it is ultimately
determined that indemnification for such expenses is not authorized under this
paragraph (a). If in an action, suit or proceeding brought by or in the right of
the corporation, a director of the corporation is held not liable for monetary
damages, whether because that director is relieved of personal liability under
the provisions of Article 6 of the Articles of Organization of the corporation
or otherwise, that director shall be deemed to have met the standard of conduct
set forth above and to be entitled to indemnification for expenses reasonably
incurred in the defense of such action, suit or proceeding.
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(b) The corporation shall, to the extent legally permissible, indemnify
each person who serves at the request of the corporation as a director of any
wholly-owned subsidiary of the corporation or in any capacity with respect to
any employee benefit plan maintained by the corporation or any such subsidiary,
and the Board of Directors of the corporation may, to the extent legally
permissible, indemnify any person who serves as a trustee, employee or agent of
the corporation or who serves at the request of the corporation as an officer,
trustee, employee or agent of any wholly-owned subsidiary of the corporation,
against all liabilities and expenses, including amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and counsel fees, reasonably
incurred by such person in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, in which such
person may be involved or with which such person may be threatened, while in
office or thereafter, by reason of such person being or having been a trustee,
employee or agent of the corporation or a director, officer, trustee, employee
or agent of such subsidiary or having acted in any such capacity with respect to
any such employee benefit plan, except with respect to any matter as to which
such person shall have been adjudicated in any proceeding not to have acted in
good faith in the reasonable belief that his or her action was in the best
interest of the corporation or of such subsidiary or, to the extent that such
matter relates to service with respect to any such employee benefit plan, in the
best interest of the participants or beneficiaries of such employee benefit
plan. Expenses, including counsel fees, reasonably incurred by any person who
serves at the request of the corporation as a director of a wholly-owned
subsidiary of the corporation or in any capacity with respect to any employee
benefit plan maintained by the corporation or any such subsidiary in connection
with the defense or disposition of any such action, suit or other proceeding
shall, and if incurred by a person who serves as a trustee, employee or agent of
the corporation or who serves at the request of the corporation as an officer,
trustee, employee or agent of a wholly-owned subsidiary of the corporation may,
in each case to the extent legally permissible, be paid from time to time by the
corporation in advance of the final disposition thereof upon receipt of an
undertaking by such person to repay the amounts so paid to the corporation if it
is ultimately determined that indemnification for such expenses is not
authorized under this Section. Except as hereinafter provided in this paragraph
(b), indemnification of persons who serve as a trustee, employee or agent of the
corporation or who serve at the request of the corporation as an officer,
trustee, employee or agent of a wholly-owned subsidiary of the corporation under
this paragraph (b) shall be made by the corporation only as authorized by the
Board of Directors of the corporation in each specific case.
To the extent that any person who serves at the request of the corporation
as an officer or trustee of any wholly-owned subsidiary of the corporation has
been wholly successful in the defense of any action, suit or proceeding referred
to above in this paragraph (b) or of any claim or issue therein, such person
shall, without further authorization of the Board of Directors of the
corporation, be indemnified by the corporation as herein above provided upon
presentation to the Board of Directors of the corporation of a claim for
indemnification and evidence reasonably satisfactory to the Board of Directors
of the corporation of such wholly successful defense. As used in this paragraph
(b) the term "wholly successful" means that the action, suit or proceeding or
the claim or issue has been finally terminated without a finding of
<PAGE>
-27-
liability or guilt against the person seeking indemnification and the time for
taking an appeal or other court or administrative action therein has expired or,
in the case of a threatened proceeding, a reasonable period of time, determined
by independent legal counsel selected by the Board of Directors of the
corporation, has elapsed since the threat was made without the proceeding having
been instituted and, in either case, without any payment or promise having been
made to induce a settlement or compromise.
(c) As used in this Section, the terms "director", "officer", "trustee",
"employee" and "agent" include the relevant individual's heirs, executors and
administrators, an "interested" director or officer is one against whom in such
capacity the proceedings in question or another proceeding on the same or
similar grounds is then pending, and a "wholly-owned subsidiary" means any
corporation, business trust, partnership or other business entity of which the
corporation owns directly or through one or more wholly-owned subsidiaries all
of the outstanding capital stock or other shares of beneficial interest (other
than directors' qualifying shares) entitled to vote generally. All directors,
officers, trustees, employees and agents of wholly-owned subsidiaries of the
corporation and persons who serve in any capacity with respect to any employee
benefit plan maintained by the corporation or any such subsidiary shall be
deemed to serve or to have served in such capacity at the request of the
corporation. The indemnification by the corporation provided for in this Section
9 shall not be exclusive of or affect any other rights to which any director,
officer, trustee, employee, agent or pension plan fiduciary or other person may
be entitled. Nothing contained in this Section shall either limit the power of
the corporation to indemnify corporate personnel other than directors and
officers or affect any rights to indemnification by the corporation to which
corporate personnel other than directors, officers, trustees, employees and
agents of the corporation and persons who serve at the request of the
corporation as directors, officers, trustees, employees or agents of wholly-
owned subsidiaries of the corporation or in any capacity with respect to any
employee benefit plan maintained by the corporation or any such subsidiary may
be entitled by contract or otherwise under law.
ARTICLE VII
AMENDMENTS
SECTION 1. General. These By-Laws may be amended, added to or repealed in
whole or in part (a) by vote of the stockholders at a meeting where the
substance of the proposed amendment is stated in the notice of the meeting, or
(b) by vote of a majority of the entire Board, except that no amendment may be
made by the Board of Directors on matters reserved to the stockholders by law or
the Articles of Organization or which changes the provisions of these By-Laws
relating to the removal of directors or to the requirements for amendment of
these By-Laws. Notice of any amendment, addition or repeal of any By-Law by the
directors stating the substance of such action shall be given to all
stockholders entitled to vote on amending the By-Laws not later than the time
when notice is given of the meeting of
<PAGE>
-28-
stockholders next following such action by the Board of Directors. Any By-Law
adopted by the directors may be amended or repealed by the stockholders.
ARTICLE VIII
EMERGENCY BY-LAWS
SECTION 1. Effective Period. The emergency By-Laws set forth in this
Article VIII shall be effective only during the continuance of a national
emergency proclaimed by the President of the United States of America or by
other governmental authority following an attack on the United States of America
or another catastrophic event as a result of which a regular quorum of the Board
of Directors or of the Executive Committee cannot readily be convened. During
any such emergency, the provisions of this Article VIII shall supersede any
different provisions contained in the preceding Articles of these By-Laws.
SECTION 2. Meetings of the Board of Directors. During any such emergency,
a meeting of the Board of Directors may be called by any director or officer who
deems it necessary. The meeting shall be held at such time or place as the
person calling the meeting may specify in giving notice thereof. Such notice may
be given in writing or orally and by such means of communication (including
announcement by radio) as in the judgment of the person giving the same are then
feasible to reach as many of the directors as it is reasonably possible to reach
under the prevailing circumstances. Two directors shall constitute a quorum for
the transaction of business at any such meeting.
SECTION 3. Emergency Location of Head Office. With effect during any such
emergency, the Board of Directors may change the location of the Head Office of
the corporation or designate one or more alternative locations or authorize one
or more officers to do so.
SECTION 4. Preservation of Continuity of Management. In order to preserve
continuity of management of the corporation during any such emergency, the Board
of Directors may provide and from time to time change lines of succession in
management in the event that during such emergency any or all of the officers
shall die or be missing or for any reason be rendered incapable of discharging
his or her or their respective duties.
SECTION 5. Immunity. No director, officer or employee of the corporation
acting in accordance with these emergency By-Laws shall be liable for any act or
omission except willful misconduct.
SECTION 6. Amendment of Emergency By-Laws. The provisions of this Article
VIII can be amended or repealed during any emergency by resolution of the
directors or the shareholders but no such amendment or repeal shall prejudice
any rights or immunities acquired by any director, officer or employee under
Section 5 of this Article VIII in respect of action taken or omitted by him or
her prior to such amendment or repeal. Any such amendment may make such further
or different
<PAGE>
-29-
provisions as may be deemed to be practical and necessary to deal with the
circumstances of the emergency.
<PAGE>
EXHIBIT 11
----------
BANKBOSTON CORPORATION
Computation of Earnings Per Common Share
<TABLE>
<CAPTION>
Quarters Ended
March 31
EARNINGS (in millions) 1997 1996
-------- ------- -------
<S> <C> <C>
1. Net income $ 207 $ 155
2. Less: preferred dividends 9 9
------- -------
3. Net income applicable to primary and fully diluted
earnings per common share $ 198 $ 146
======= =======
SHARES (in thousands)
------
4. Weighted average number of common shares outstanding 153,421 154,988
5. Incremental shares from assumed exercise
of dilutive stock options as of the beginning
of the period using the treasury stock method 2,171 1,856
------- -------
7. Adjusted number of common shares 155,592 156,844
======= =======
PER SHARE CALCULATION
---------------------
8. Primary net income per common share $ 1.29 $ .94
(Item 3 divided by Item 4)
9. Fully diluted net income per common share $ 1.27 $ .93
(Item 3 divided by Item 7)
</TABLE>
<PAGE>
EXHIBIT 12(A)
BANKBOSTON CORPORATION
COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
(Excluding Interest on Deposits)
The Corporation's ratios of earnings to fixed charges (excluding interest on
deposits) for the three months ended March 31, 1997 and 1996 and for the five
years ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31, Years Ended December 31,
------------------ ---------------------------------------------
(Dollars in millions)
1997 1996 1996 1995 1994 1993 1992
---- ---- ----- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net income $ 207 $ 155 $ 650 $ 678 $ 542 $ 367 $ 338
Extraordinary items, net of tax 7 (73)
Cumulative effect of changes
in accounting principles,
net of tax (24)
Income tax expense 139 112 483 529 422 262 190
---- ---- ----- ----- ----- ----- ----
Pretax earnings 346 267 1,133 1,207 971 605 455
---- ---- ----- ----- ----- ----- ----
Fixed charges:
Portion of rental expense
(net of sublease
rental income) which
approximates the
interest factor 10 10 40 38 35 36 37
Interest on borrowed funds 255 254 873 1,079 1,038 384 352
---- ---- ----- ----- ----- ----- ----
Total fixed charges 265 264 913 1,117 1,073 420 389
---- ---- ----- ----- ----- ----- ----
Earnings (for ratio calculation) $ 611 $ 531 $ 2,046 $ 2,324 $ 2,044 $ 1,025 $ 844
==== ==== ===== ===== ===== ===== ====
Total fixed charges $ 265 $ 264 $ 913 $ 1,117 $ 1,073 $ 420 $ 389
==== ==== ===== ===== ===== ===== ====
Ratio of earnings to fixed
charges 2.31 2.01 2.24 2.08 1.90 2.44 2.17
==== ==== ===== ===== ===== ===== ====
</TABLE>
For purposes of computing the consolidated ratio of earnings to fixed charges
"earnings" represent income before extraordinary items and cumulative effect of
changes in accounting principles plus applicable income taxes and fixed charges.
"Fixed charges" include gross interest expense (excluding interest on deposits)
and the proportion deemed representative of the interest factor of rent expense,
net of income from subleases.
<PAGE>
EXHIBIT 12(B)
BANKBOSTON CORPORATION
COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES
(Including Interest on Deposits)
The Corporation's ratios of earnings to fixed charges (including interest on
deposits) for the three months ended March 31, 1997 and 1996 and for the five
years ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31, Years Ended December 31,
------------------ ----------------------------------------------
(Dollars in millions)
1997 1996 1996 1995 1994 1993 1992
----- ---- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Net income $ 207 $ 155 $ 650 $ 678 $ 542 $ 367 $ 338
Extraordinary items, net of tax 7 (73)
Cumulative effect of changes
in accounting principles, net of tax (24)
Income tax expense 139 112 483 529 422 262 190
----- ---- ----- ----- ----- ----- -----
Pretax earnings 346 267 1,133 1,207 971 605 455
----- ---- ----- ----- ----- ----- -----
Fixed charges:
Portion of rental expense
(net of sublease
rental income) which
approximates the
interest factor 10 10 40 38 35 36 37
Interest on borrowed funds 255 254 873 1,079 1,038 384 352
----- ---- ----- ----- ----- ----- -----
Interest on deposits 400 420 1,680 1,791 1,301 1,177 1,640
----- ---- ----- ----- ----- ----- -----
Total fixed charges 665 684 2,593 2,908 2,374 1,597 2,029
----- ---- ----- ----- ----- ----- -----
Earnings (for ratio calculation) $ 1,011 $ 951 $ 3,726 $ 4,115 $ 3,345 $ 2,202 $ 2,484
===== ==== ===== ===== ===== ===== =====
Total fixed charges $ 665 $ 684 $ 2,593 $ 2,908 $ 2,374 $ 1,597 $ 2,029
===== ==== ===== ===== ===== ===== =====
Ratio of earnings to fixed
charges 1.52 1.39 1.44 1.42 1.41 1.38 1.22
===== ==== ===== ===== ===== ===== =====
</TABLE>
For purposes of computing the consolidated ratio of earnings to fixed charges
"earnings" represent income before extraordinary items and cumulative effect of
changes in accounting principles plus applicable income taxes and fixed charges.
"Fixed charges" include gross interest expense (including interest on deposits)
and the proportion deemed representative of the interest factor of rent expense,
net of income from subleases.
<PAGE>
EXHIBIT 12(C)
BANKBOSTON CORPORATION
COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDEND REQUIREMENTS
(Excluding Interest on Deposits)
The Corporation's ratios of earnings to combined fixed charges and preferred
stock dividend requirements (excluding interest on deposits) for the three
months ended March 31, 1997 and 1996 and for the five years ended December 31,
1996 were as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31, Years Ended December 31,
--------------------- -------------------------------------------------------------
(Dollars in millions)
1997 1996 1996 1995 1994 1993 1992
------- -------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net income $ 207 $ 155 $ 650 $ 678 $ 542 $ 367 $ 338
Extraordinary items, net of tax 7 (73)
Cumulative effect of changes
in accounting principles, net of tax (24)
Income tax expense 139 112 483 529 422 262 190
---- ---- ----- ----- ----- ----- ----
Pretax earnings $ 346 $ 267 $ 1,133 $ 1,207 $ 971 $ 605 $ 455
---- ---- ----- ----- ----- ----- ----
Fixed charges:
Portion of rental expense
(net of sublease
rental income) which
approximates the
interest factor $ 10 $ 10 $ 40 $ 38 $ 35 $ 36 $ 37
Interest on borrowed funds 255 254 873 1,079 1,038 384 352
---- ---- ----- ----- ----- ----- ----
Total fixed charges 265 264 913 1,117 1,073 420 389
Preferred stock dividend
requirements 16 16 65 68 67 61 33
---- ---- ----- ----- ----- ----- ----
Total combined fixed charges
and preferred stock dividend
requirements $ 281 $ 280 $ 978 $ 1,185 $ 1,140 $ 481 $ 422
==== ==== ===== ===== ===== ===== ====
Earnings (for ratio calculation)
(Pretax earnings
plus total fixed charges) $ 611 $ 531 $ 2,046 $ 2,324 $ 2,044 $ 1,025 $ 844
==== ==== ===== ===== ===== ===== ====
Ratio of earnings to combined
fixed charges and preferred
stock dividend requirements 2.17 1.90 2.09 1.96 1.79 2.13 2.00
==== ==== ===== ===== ===== ===== =====
</TABLE>
For purposes of computing the consolidated ratio of earnings to combined fixed
charges and preferred stock dividend requirements "earnings" represent income
before extraordinary items and cumulative effect of changes in accounting
principles plus applicable income taxes and fixed charges. "Fixed charges"
include gross interest expense (excluding interest on deposits) and the
proportion deemed representative of the interest factor of rent expense, net of
income from subleases. Pretax earnings required for preferred stock dividends
were computed using tax rates for the applicable year.
<PAGE>
EXHIBIT 12(D)
BANKBOSTON CORPORATION
COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDEND REQUIREMENTS
(Including Interest on Deposits)
The Corporation's ratios of earnings to combined fixed charges and preferred
stock dividend requirements (including interest on deposits) for the three
months ended March 31, 1997 and 1996 and for the five years ended December 31,
1996 were as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31, Years Ended December 31,
---------------- ----------------------------------------------
(Dollars in millions)
1997 1996 1996 1995 1994 1993 1992
----- ---- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Net income $ 207 $ 155 $ 650 $ 678 $ 542 $ 367 $ 338
Extraordinary items, net of tax 7 (73)
Cumulative effect of changes
in accounting principles, net of tax (24)
Income tax expense 139 112 483 529 422 262 190
----- ---- ----- ----- ----- ----- -----
Pretax earnings $ 346 $ 267 $ 1,133 $ 1,207 $ 971 $ 605 $ 455
----- ---- ----- ----- ----- ----- -----
Fixed charges:
Portion of rental expense
(net of sublease
rental income) which
approximates the
interest factor $ 10 $ 10 $ 40 $ 38 $ 35 $ 36 $ 37
Interest on borrowed funds 255 254 873 1,079 1,038 384 352
Interest on deposits 400 420 1,680 1,791 1,301 1,177 1,640
----- ---- ----- ----- ----- ----- -----
Total fixed charges 665 684 2,593 2,908 2,374 1,597 2,029
Preferred stock dividend
requirements 16 16 65 68 67 61 33
----- ---- ----- ----- ----- ----- -----
Total combined fixed charges
and preferred stock dividend
requirements $ 681 $ 700 $ 2,658 $ 2,976 $ 2,441 $ 1,658 $ 2,062
===== ==== ===== ===== ===== ===== =====
Earnings (for ratio calculation)
(Pretax earnings
plus total fixed charges) $ 1,011 $ 951 $ 3,726 $ 4,115 $ 3,345 $ 2,202 $ 2,484
===== ==== ===== ===== ===== ===== =====
Ratio of earnings to combined
fixed charges and preferred
stock dividend requirements 1.48 1.36 1.40 1.38 1.37 1.33 1.20
===== ==== ===== ===== ===== ===== =====
</TABLE>
For purposes of computing the consolidated ratio of earnings to combined fixed
charges and preferred stock dividend requirements "earnings" represent income
before extraordinary items and cumulative effect of changes in accounting
principles plus applicable income taxes and fixed charges. "Fixed charges"
include gross interest expense (including interest on deposits) and the
proportion deemed representative of the interest factor of rent expense, net of
income from subleases. Pretax earnings required for preferred stock dividends
were computed using tax rates for the applicable year.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY
REPORT ON FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,841
<INT-BEARING-DEPOSITS> 1,968
<FED-FUNDS-SOLD> 2,304
<TRADING-ASSETS> 1,482
<INVESTMENTS-HELD-FOR-SALE> 9,082
<INVESTMENTS-CARRYING> 692
<INVESTMENTS-MARKET> 680
<LOANS> 41,019
<ALLOWANCE> (864)
<TOTAL-ASSETS> 64,780
<DEPOSITS> 42,307
<SHORT-TERM> 10,969
<LIABILITIES-OTHER> 2,021
<LONG-TERM> 3,208<F1>
0
508
<COMMON> 231
<OTHER-SE> 4,122
<TOTAL-LIABILITIES-AND-EQUITY> 64,780
<INTEREST-LOAN> 975
<INTEREST-INVEST> 170
<INTEREST-OTHER> 130
<INTEREST-TOTAL> 1,275
<INTEREST-DEPOSIT> 400
<INTEREST-EXPENSE> 655
<INTEREST-INCOME-NET> 620
<LOAN-LOSSES> 60
<SECURITIES-GAINS> 9
<EXPENSE-OTHER> 146
<INCOME-PRETAX> 346
<INCOME-PRE-EXTRAORDINARY> 207
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 207
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 1.27
<YIELD-ACTUAL> 4.47
<LOANS-NON> 396
<LOANS-PAST> 46
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 883
<CHARGE-OFFS> (97)
<RECOVERIES> 18
<ALLOWANCE-CLOSE> 864
<ALLOWANCE-DOMESTIC> 537
<ALLOWANCE-FOREIGN> 205
<ALLOWANCE-UNALLOCATED> 122
<FN>
<F1>Includes guaranteed preferred beneficial interest in the Corporation's
junior subordinated debt.
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY RESTATED FINANCIAL INFORMATION FOR THE PERIOD
ENDED MARCH 31, 1996 EXTRACTED FROM THE QUARTERLY REPORT ON FORM 10-Q FOR THE
PERIOD ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH QUARTERLY REPORT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,066
<INT-BEARING-DEPOSITS> 1,426
<FED-FUNDS-SOLD> 1,584
<TRADING-ASSETS> 1,338
<INVESTMENTS-HELD-FOR-SALE> 7,280
<INVESTMENTS-CARRYING> 699
<INVESTMENTS-MARKET> 691
<LOANS> 39,268
<ALLOWANCE> (884)
<TOTAL-ASSETS> 58,015
<DEPOSITS> 41,349
<SHORT-TERM> 5,487
<LIABILITIES-OTHER> 1,466
<LONG-TERM> 2,499
0
508
<COMMON> 351
<OTHER-SE> 3,827
<TOTAL-LIABILITIES-AND-EQUITY> 58,015
<INTEREST-LOAN> 978
<INTEREST-INVEST> 137
<INTEREST-OTHER> 125
<INTEREST-TOTAL> 1,240
<INTEREST-DEPOSIT> 420
<INTEREST-EXPENSE> 674
<INTEREST-INCOME-NET> 566
<LOAN-LOSSES> 57
<SECURITIES-GAINS> 13
<EXPENSE-OTHER> 149
<INCOME-PRETAX> 267
<INCOME-PRE-EXTRAORDINARY> 155
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 155
<EPS-PRIMARY> .94
<EPS-DILUTED> .93
<YIELD-ACTUAL> 4.40
<LOANS-NON> 384
<LOANS-PAST> 47
<LOANS-TROUBLED> 28
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 890
<CHARGE-OFFS> (72)
<RECOVERIES> 21
<ALLOWANCE-CLOSE> 884
<ALLOWANCE-DOMESTIC> 542
<ALLOWANCE-FOREIGN> 198
<ALLOWANCE-UNALLOCATED> 144
</TABLE>
