UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(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, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 1-6523
Exact name of registrant as specified in its charter:
Bank of America Corporation
State of incorporation:
Delaware
IRS Employer Identification Number:
56-0906609
Address of principal executive offices:
Bank of America Corporate Center
Charlotte, North Carolina 28255
Registrant's telephone number, including area code:
(704) 386-5000
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
On April 30, 2000, there were 1,657,236,996 shares of Bank of America
Corporation Common Stock outstanding.
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<TABLE>
<CAPTION>
Bank of America Corporation
March 31, 2000 Form 10-Q
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<S> <C> <C> <C>
INDEX
Page
----
Part I Item 1. Financial Statements:
Financial Consolidated Statement of Income for the Three 2
Information Months Ended March 31, 2000 and 1999
Consolidated Balance Sheet at March 31, 2000 3
and December 31, 1999
Consolidated Statement of Changes in Share- 4
holders' Equity for the Three Months Ended
March 31, 2000 and 1999
Consolidated Statement of Cash Flows for the 5
Three Months Ended March 31, 2000 and 1999
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Results 19
of Operations and Financial Condition
Item 3. Quantitative and Qualitative Disclosures about 54
Market Risk
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Part II
Other Information Item 1. Legal Proceedings 54
Item 2. Changes in Securities and Use of Proceeds 55
Item 6. Exhibits and Reports on Form 8-K 55
Signature 56
Index to Exhibits 57
</TABLE>
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<TABLE>
Part I. Financial Information
Item 1. Financial Statements
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Bank of America Corporation and Subsidiaries
Consolidated Statement of Income
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Three Months
Ended March 31
---------------------------
(Dollars in millions, except per share information) 2000 1999
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<S> <C> <C>
Interest income
Interest and fees on loans and leases $ 7,394 $ 6,770
Interest and dividends on securities 1,331 1,175
Federal funds sold and securities purchased under agreements to resell 575 381
Trading account assets 536 545
Other interest income 250 330
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Total interest income 10,086 9,201
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Interest expense
Deposits 2,495 2,312
Short-term borrowings 1,802 1,355
Trading account liabilities 181 129
Long-term debt 1,084 805
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Total interest expense 5,562 4,601
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Net interest income 4,524 4,600
Provision for credit losses 420 510
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Net interest income after provision for credit losses 4,104 4,090
Gains on sales of securities 6 130
Noninterest income
Consumer service charges 618 603
Corporate service charges 489 453
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Total service charges 1,107 1,056
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Consumer investment and brokerage services 364 311
Corporate investment and brokerage services 121 115
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Total investment and brokerage services 485 426
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Mortgage servicing income 128 132
Investment banking income 397 233
Equity investment gains 563 155
Card income 484 394
Trading account profits 724 500
Other income 158 327
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Total noninterest income 4,046 3,223
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Other noninterest expense
Personnel 2,534 2,333
Occupancy 418 396
Equipment 301 358
Marketing 119 147
Professional fees 105 126
Amortization of intangibles 217 222
Data processing 159 190
Telecommunications 131 136
Other general operating 515 420
General administrative and other 124 125
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Total other noninterest expense 4,623 4,453
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Income before income taxes 3,533 2,990
Income tax expense 1,293 1,076
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Net income $ 2,240 $1,914
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Net income available to common shareholders $ 2,239 $1,912
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Per share information
Earnings per common share $ 1.34 $ 1.10
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Diluted earnings per common share $ 1.33 $ 1.08
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Dividends per common share $ .50 $ .45
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Average common shares issued and outstanding (in thousands) 1,669,311 1,737,562
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See accompanying notes to consolidated financial statements.
</TABLE>
2
<TABLE>
<CAPTION>
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Bank of America Corporation and Subsidiaries
Consolidated Balance Sheet
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March 31 December 31
(Dollars in millions) 2000 1999
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<S> <C> <C>
Assets
Cash and cash equivalents $ 27,259 $ 26,989
Time deposits placed and other short-term investments 3,250 4,838
Federal funds sold and securities purchased under agreements to resell 39,801 37,928
Trading account assets 47,321 38,460
Securities:
Available-for-sale 82,557 81,647
Held-for-investment, at cost (market value - $1,181 and $1,270) 1,294 1,422
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Total securities 83,851 83,069
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Loans and leases 382,085 370,662
Allowance for credit losses (6,827) (6,828)
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Loans and leases, net of allowance for credit losses 375,258 363,834
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Premises and equipment, net 6,607 6,713
Customers' acceptance liability 2,362 1,869
Derivative-dealer assets 17,877 16,055
Interest receivable 3,870 3,777
Mortgage servicing rights 4,080 4,093
Goodwill 12,121 12,262
Core deposits and other intangibles 1,674 1,730
Other assets 30,782 30,957
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Total assets $656,113 $632,574
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Liabilities
Deposits in domestic offices:
Noninterest-bearing $92,496 $93,476
Interest-bearing 209,427 207,048
Deposits in foreign offices:
Noninterest-bearing 1,986 1,993
Interest-bearing 47,717 44,756
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Total deposits 351,626 347,273
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Federal funds purchased and securities sold under agreements to repurchase 83,775 74,561
Trading account liabilities 23,007 20,958
Derivative-dealer liabilities 17,805 16,200
Commercial paper 9,045 7,331
Other short-term borrowings 37,007 40,340
Acceptances outstanding 2,362 1,869
Accrued expenses and other liabilities 19,173 19,169
Long-term debt 62,059 55,486
Trust preferred securities 4,955 4,955
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Total liabilities 610,814 588,142
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Commitments and contingencies (Note Six)
Shareholders' equity
Preferred stock, $0.01 par value; authorized - 100,000,000 shares; issued and
outstanding - 1,807,349 and 1,797,702 shares 77 77
Common stock, $0.01 par value; authorized - 5,000,000,000 shares; issued and
outstanding - 1,657,753,677 and 1,677,273,267 shares 10,828 11,671
Retained earnings 37,089 35,681
Accumulated other comprehensive loss (2,492) (2,658)
Other (203) (339)
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Total shareholders' equity 45,299 44,432
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Total liabilities and shareholders' equity $656,113 $632,574
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See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
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Bank of America Corporation and Subsidiaries
Consolidated Statement of Changes in Shareholders' Equity
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Accumulated Total
Other Share-
Preferred Common Stock Retained Comprehensive holders' Comprehensive
----------------
(Dollars in millions, shares in thousands) Shares Shares Amount Earnings Income (Loss)(1,2) Other Equity Income
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 $83 1,724,484 $14,837 $30,998 $ 152 $(132) $45,938
Net income 1,914 1,914 $1,914
Other comprehensive loss, net of tax (732) (732) (732)
--------
Comprehensive income $1,182
--------
Cash dividends:
Common (782) (782)
Preferred (2) (2)
Common stock issued under
employee plans 16,302 842 (494) 348
Conversion of preferred stock (2) 84 2
Other 2 147 147
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Balance, March 31, 1999 $81 1,740,872 $15,828 $32,128 $ (580) $(626) $46,831
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Balance, December 31, 1999 $77 1,677,273 $11,671 $35,681 $(2,658) $(339) $44,432
Net income 2,240 2,240 $2,240
Other comprehensive income, net of tax 166 166 166
--------
Comprehensive income $2,406
--------
Cash dividends:
Common (832) (832)
Preferred (1) (1)
Common stock issued under
employee plans 530 (12) 37 25
Common stock repurchased (20,050) (911) (911)
Other 1 80 1 99 180
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Balance, March 31, 2000 $77 1,657,754 $10,828 $37,089 $(2,492) $(203) $45,299
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(1) Changes in Accumulated Other Comprehensive Income (Loss) include after-tax net unrealized gains (losses) on available-for-sale
securities and marketable equity securities of $166 and $(703) for the three months ended March 31, 2000 and 1999, respectively;
and after-tax net unrealized losses on foreign currency translation adjustments of $(29) for the three months ended March 31,
1999. There was no after-tax net unrealized losses on foreign currency translation adjustments for the three months ended March
31, 2000.
(2) Accumulated Other Comprehensive Income (Loss) consists of the after-tax valuation allowance for available-for-sale securities
and marketable equity securities of $(2,304) and $(400) and foreign currency translation adjustments of $(188) and $(180) at
March 31, 2000 and 1999, respectively.
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
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Bank of America Corporation and Subsidiaries
Consolidated Statement of Cash Flows
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Three Months
Ended March 31
----------------------------------
(Dollars in millions) 2000 1999
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<S> <C> <C>
Operating activities
Net income $2,240 $1,914
Reconciliation of net income to net cash used in operating activities:
Provision for credit losses 420 510
Gains on sales of securities (6) (130)
Depreciation and premises improvements amortization 239 271
Amortization of intangibles 217 222
Deferred income tax expense (benefit) 524 (82)
Net increase in trading instruments (7,029) (144)
Net (increase) decrease in interest receivable (93) 114
Net decrease in interest payable (176) (108)
Net (increase) decrease in other assets (1,856) 2,804
Net decrease in other accrued expenses and other liabilities (276) (9,806)
Other operating activities, net 276 276
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (5,520) (4,159)
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Investing activities
Net decrease in time deposits placed and other short-term investments 1,588 1,135
Net (increase) decrease in federal funds sold and securities purchased
under agreements to resell (1,873) 395
Proceeds from sales of available-for-sale securities 8,801 14,396
Proceeds from maturities of available-for-sale securities 1,443 3,138
Purchases of available-for-sale securities (11,085) (16,595)
Proceeds from maturities of held-for-investment securities 128 475
Proceeds from sales and securitizations of loans and leases 5,645 2,661
Purchases and net originations of loans and leases (15,595) (7,727)
Purchases and originations of mortgage servicing rights (126) (786)
Net purchases of premises and equipment (133) (111)
Proceeds from sales of foreclosed properties 46 82
Acquisitions of business activities, net of cash - (1,483)
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Net cash used in investing activities (11,161) (4,420)
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Financing activities
Net increase (decrease) in deposits 4,353 (13,943)
Net increase in federal funds purchased and securities
sold under agreements to repurchase 9,214 7,224
Net (decrease) increase in commercial paper and other short-term borrowings (1,619) 8,254
Proceeds from issuance of long-term debt 10,137 6,009
Retirement of long-term debt (3,718) (929)
Proceeds from issuance of common stock 25 348
Common stock repurchased (911) -
Cash dividends paid (833) (784)
Other financing activities, net 328 39
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Net cash provided by financing activities 16,976 6,218
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Effect of exchange rate changes on cash and cash equivalents (25) 9
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Net increase (decrease) in cash and cash equivalents 270 (2,352)
Cash and cash equivalents at December 31 26,989 28,277
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Cash and cash equivalents at March 31 $27,259 $25,925
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Loans transferred to foreclosed properties amounted to $68 and $74 for the three months ended March 31, 2000 and 1999, respectively.
Loans securitized and retained in the available-for-sale securities portfolio amounted to $224 and $248 for the three months ended
March 31, 2000 and 1999, respectively.
The fair value of noncash assets acquired and liabilities assumed in acquisitions for the three months ended March 31, 1999 were
$1,557 and $74, net of cash acquired.
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE>
Bank of America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
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Bank of America Corporation (the Corporation) is a Delaware corporation, a
bank holding company and a financial holding company. Through its banking and
nonbanking subsidiaries, the Corporation provides a diverse range of financial
services and products throughout the U.S. and in selected international markets.
Note One - Accounting Policies
The consolidated financial statements include the accounts of the
Corporation and its majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
The information contained in the consolidated financial statements is
unaudited. In the opinion of management, all normal recurring adjustments
necessary for a fair statement of the interim period results have been made.
Certain prior period amounts have been reclassified to conform to current period
classifications.
Accounting policies followed in the presentation of interim financial
results are presented on pages 58 to 63 of the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1999.
In 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133). This standard requires all derivative
instruments to be recognized as either assets or liabilities and measured at
their fair values. In addition, SFAS 133 provides special hedge accounting for
fair value, cash flow and foreign currency hedges, provided certain criteria are
met. Pursuant to Statement of Financial Accounting Standards No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of
Effective Date of Financial Accounting Standards Board Statement No. 133", the
Corporation is required to adopt the standard on or before January 1, 2001. Upon
adoption, all hedging relationships must be designated and documented pursuant
to the provisions of the statement. The Corporation is in the process of
evaluating the impact of this statement on its risk management strategies and
processes, information systems and financial statements.
In 1999, the Federal Financial Institutions Examination Council issued The
Uniform Classification and Account Management Policy (the Policy) which updated
and expanded the classification of delinquent retail credits. The Policy
provides guidance for banks on the treatment of delinquent open-end and
close-end loans. The Corporation is required to implement the Policy by December
31, 2000. The Corporation does not expect the adoption of this Policy to have a
material impact on its results of operations or financial condition.
Note Two - Merger-Related Activity
At March 31, 2000, the Corporation operated its banking activities
primarily under two charters: Bank of America, National Association (Bank of
America, N.A.) and Bank of America, N.A. (USA). On March 31, 1999, NationsBank
of Delaware, N.A. merged with and into Bank of America, N.A. (USA), a national
association headquartered in Phoenix, Arizona (formerly known as Bank of America
National Association), which operates the Corporation's credit card business. On
April 1, 1999, the mortgage business of BankAmerica transferred to NationsBanc
Mortgage Corporation. On December 1, 1999, NationsBanc Mortgage Corporation
merged with and into BA Mortgage, LLC, a Delaware limited liability company and
a Bank of America, N.A. subsidiary. On April 8, 1999, the Corporation merged
Bank of America Texas, N.A. into NationsBank, N.A. On July 5, 1999, NationsBank,
N.A. changed its name to
6
<PAGE>
Bank of America, N.A. On July 23, 1999, Bank of America, N.A. merged into
Bank of America National Trust and Savings Association (Bank of America NT&SA),
and the surviving entity of that merger changed its name to Bank of America,
N.A. On December 1, 1999, Bank of America, FSB, a federal savings bank
formerly headquartered in Portland, Oregon, was converted into a national bank
and merged into Bank of America, N.A. On September 30, 1998, BankAmerica
Corporation (BankAmerica) merged (the Merger) with and into the Corporation,
formerly NationsBank Corporation (NationsBank).
In connection with the Merger, the Corporation recorded pre-tax
merger-related charges of $525 million ($358 million after-tax) in 1999 and
$1,325 million ($960 million after-tax) in 1998. Of the $525 million in 1999,
$200 million ($145 million after-tax) and $325 million ($213 million after-tax)
were recorded in the second and fourth quarters, respectively. Of the $1,325
million in 1998, $725 million ($519 million after-tax) and $600 million ($441
million after-tax) were recorded in the third and fourth quarters, respectively.
The total pre-tax charge for 1999 consisted of approximately $219 million
primarily of severance, change in control and other employee-related costs, $187
million of conversion and related costs including occupancy, equipment and
customer communication expenses, $128 million of exit and related costs and a $9
million reduction of other merger costs. The total pre-tax charge for 1998
consisted of approximately $740 million primarily of severance, change in
control and other employee-related costs, $150 million of conversion and related
costs including occupancy and equipment expenses (primarily lease exit costs and
the elimination of duplicate facilities and other capitalized assets) and
customer communication expenses, $300 million of exit and related costs and $135
million of other merger costs (including legal, investment banking and filing
fees).
Total severance, change in control and other employee-related costs included
amounts related to job eliminations of former associates of BankAmerica and
NationsBank impacted by the Merger. Through March 31, 2000, approximately 13,800
employees had entered the severance process. Employee-related costs of the
Merger were principally in overlapping functions, operations and businesses of
the Corporation.
The following table summarizes the activity in the BankAmerica
merger-related reserve during the three months ended March 31, 2000:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Noncash
Balance Cash Payments Reductions Balance
December 31 Applied to Applied to March 31
(Dollars in millions) 1999 Reserve Reserve 2000
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Severance, change in control
and other employee-related costs $118 $(80) $ - $ 38
Conversion and related costs 135 (2) (8) 125
Exit and related costs 46 (11) - 35
Other merger costs 1 - - 1
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Total $300 $(93) $(8) $199
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</TABLE>
For additional information on the Corporation's merger-related activities,
refer to Note Two of the Corporation's 1999 Annual Report on Form 10-K.
7
<PAGE>
Note Three - Trading Activities
Trading-Related Revenue
Trading account profits represent the net amount earned from the
Corporation's trading positions, which include trading account assets and
liabilities as well as derivative-dealer positions. These transactions include
positions to meet customer demand as well as for the Corporation's own trading
account. Trading positions are taken in a diverse range of financial instruments
and markets. The profitability of these trading positions is largely dependent
on the volume and type of transactions, the level of risk assumed, and the
volatility of price and rate movements. Trading account profits, as reported in
the Corporation's Consolidated Statement of Income, includes neither the net
interest recognized on interest-earning and interest-bearing trading positions,
nor the related funding charge or benefit. Trading account profits, as well as
trading-related net interest income ("trading-related revenue") are presented in
the table below as they are both considered in evaluating the overall
profitability of the Corporation's trading positions. Trading-related revenue is
derived from foreign exchange spot, forward and cross-currency contracts, fixed
income and equity securities and derivative contracts in interest rates,
equities, credit and commodities.
<TABLE>
<CAPTION>
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Three Months Ended
March 31
----------------------
(Dollars in millions) 2000 1999
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<S> <C> <C>
Trading account profits - as reported $724 $500
Net interest income 217 167
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Total trading-related revenue $941 $667
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Trading-related revenue by product
Foreign exchange contracts $158 $158
Interest rate contracts 308 214
Fixed income 171 191
Equities 288 87
Commodities and other 16 17
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Total trading-related revenue $941 $667
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</TABLE>
8
<PAGE>
Trading Account Assets and Liabilities
The fair value of the components of trading account assets and
liabilities at March 31, 2000 and December 31,1999 and the average fair value
for the three months ended March 31, 2000 were:
<TABLE>
<CAPTION>
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Fair Value Average Fair Value
-----------------------------------------------------------
March 31 December 31 Three Months Ended
(Dollars in millions) 2000 1999 March 31, 2000
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<S> <C> <C> <C>
Trading account assets
U.S. Treasury securities $9,111 $ 6,793 $7,725
Securities of other U.S. Government agencies and corporations 3,138 3,554 3,045
Certificates of deposit, bankers' acceptances and commercial paper 2,318 3,039 2,381
Corporate debt 3,329 2,993 2,812
Foreign sovereign debt 9,998 9,532 8,938
Mortgage-backed securities 5,944 6,748 6,169
Equity securities 6,276 2,856 2,974
Other 7,207 2,945 5,689
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Total $47,321 $38,460 $39,733
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Trading account liabilities
U.S. Treasury securities $ 7,513 $ 8,414 $ 8,770
Corporate debt 2,048 - 1,076
Foreign sovereign debt 3,172 3,490 3,715
Equity securities 8,802 7,840 7,733
Other 1,472 1,214 1,719
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Total $23,007 $20,958 $23,013
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</TABLE>
See Note Six of the consolidated financial statements on page 12 for
additional information on derivative-dealer positions, including credit risk.
9
<PAGE>
Note Four - Loans and Leases
Loans and leases at March 31, 2000 and December 31, 1999 were:
<TABLE>
<CAPTION>
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March 31, 2000 December 31, 1999
-----------------------------------------------------
(Dollars in millions) Amount Percent Amount Percent
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial - domestic $145,615 38.1 % $143,450 38.7 %
Commercial - foreign 27,926 7.3 27,978 7.5
Commercial real estate - domestic 24,741 6.5 24,026 6.5
Commercial real estate - foreign 359 .1 325 .1
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Total commercial 198,641 52.0 195,779 52.8
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Residential mortgage 89,574 23.4 81,860 22.1
Home equity lines 18,062 4.7 17,273 4.7
Direct/Indirect consumer 41,398 10.8 42,161 11.4
Consumer finance 23,585 6.2 22,326 6.0
Bankcard 8,609 2.3 9,019 2.4
Foreign consumer 2,216 .6 2,244 .6
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Total consumer 183,444 48.0 174,883 47.2
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Total loans and leases $382,085 100.0 % $370,662 100.0 %
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</TABLE>
The table below summarizes the changes in the allowance for credit losses
for the three months ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Three Months
Ended March 31
------------------------------
(Dollars in millions) 2000 1999
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, January 1 $6,828 $ 7,122
- --------------------------------------------------------------------------------------------------------
Loans and leases charged off (570) (666)
Recoveries of loans and leases previously charged off 150 147
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Net charge-offs (420) (519)
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Provision for credit losses 420 510
Other, net (1) 10
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Balance, March 31 $ 6,827 $ 7,123
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</TABLE>
The following table presents the recorded investment in specific loans that
were considered individually impaired at March 31, 2000 and December 31, 1999:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
March 31 December 31
(Dollars in millions) 2000 1999
- --------------------------------------------------------------------------------
<S> <C> <C>
Commercial - domestic $ 1,286 $1,133
Commercial - foreign 495 503
Commercial real estate - domestic 457 449
- --------------------------------------------------------------------------------
Total impaired loans $ 2,238 $2,085
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</TABLE>
10
<PAGE>
A loan is considered impaired when, based on current information and events,
it is probable that the Corporation will be unable to collect all amounts due,
including principal and interest, according to the contractual terms of the
agreement. Once a loan has been identified as impaired, management measures
impairment in accordance with Statement of Financial Accounting Standards No.
114, "Accounting by Creditors for Impairment of a Loan" (SFAS 114). Impaired
loans are measured based on the present value of payments expected to be
received, observable market prices, or for loans that are solely dependent on
the collateral for repayment, the estimated fair value of the collateral. If the
recorded investment in impaired loans exceeds the measure of estimated fair
value, a valuation allowance is established as a component of the allowance for
credit losses.
At March 31, 2000 and December 31, 1999, nonperforming loans, including
certain loans which were considered impaired, totaled $3.3 billion and $3.0
billion, respectively. Foreclosed properties amounted to $179 million and $163
million at March 31, 2000 and December 31, 1999, respectively.
Note Five - Short-Term Borrowings and Long-Term Debt
In the first quarter of 2000, Bank of America Corporation issued $1.5
billion in senior and subordinated long-term debt, domestically and
internationally, with maturities ranging from 2002 to 2015. Of the $1.5 billion
issued, $1.1 billion was converted from fixed rates ranging primarily from 7.50
percent to 8.13 percent to floating rates through interest rate swaps at spreads
ranging from nine to 45 basis points over three-month London InterBank Offered
Rate (LIBOR). The remaining $364 million of debt issued bears interest at
floating rates ranging from 12 to 78 basis points over three-month LIBOR, 90 to
100 basis points over six-month LIBOR and 22 basis points over one-month LIBOR.
In the first quarter of 2000, Bank of America, N.A. issued $7.1 billion in
senior long-term bank notes, with maturities ranging from 2001 to 2013. Of the
$7.1 billion issued, $3.8 billion bears interest at floating rates with spreads
ranging from zero to 14 basis points above three-month LIBOR. Of the remaining
$3.3 billion, $1.1 billion bears interest at spreads ranging from 272 to 287
basis points below the prime rate, $938 million bears interest at spreads
ranging from one to 28 basis points above the Fed Funds rate, $798 million bears
interest at fixed rates ranging from 6.50 percent to 6.75 percent, and $415
million bears interest at spreads ranging from five to six basis points above
one-month LIBOR.
At March 31, 2000, Bank of America Corporation had the authority to issue
approximately $18.0 billion of corporate debt and other securities under its
existing shelf registration statements.
Bank of America, N.A. maintains a domestic program to offer up to a maximum
of $35.0 billion at any one time outstanding of bank notes from time to time
with fixed- or floating-rates and maturities ranging from seven days or more
from date of issue. Short-term bank notes outstanding under this program totaled
$11.1 billion at March 31, 2000 compared to $15.2 billion at December 31, 1999.
These short-term bank notes, along with Treasury tax and loan notes and term
federal funds purchased are reflected in other short-term borrowings in the
Consolidated Balance Sheet. Long-term debt under current and former programs
totaled $15.4 billion at March 31, 2000 compared to $10.1 billion at December
31, 1999.
Bank of America Corporation and Bank of America, N.A. maintain a joint Euro
medium-term note program to offer up to $15.0 billion of senior, or in the case
of Bank of America Corporation, subordinated notes exclusively to non-United
States residents. The notes bear interest at fixed- or floating-rates and may be
denominated in U.S. dollars or foreign currencies. Bank of America Corporation
uses foreign currency contracts to convert certain foreign-denominated debt into
U.S. dollars. Bank of America Corporation's notes outstanding under this program
totaled $4.7 billion at March 31, 2000 compared to $4.5 billion at December 31,
1999. Bank of America, N.A.'s notes outstanding under this program totaled $1.0
billion at March 31, 2000. Bank of America, N.A. had no notes outstanding under
this program at December 31, 1999. Of the $15.0 billion authority, at March 31,
2000, Bank of America Corporation and Bank of America, N.A. had authority to
issue in the aggregate of debt securities under the current program
approximately $5.3 billion and $4.0 billion, respectively. At March 31, 2000 and
December 31, 1999, $3.2 billion and $3.3 billion, respectively, were outstanding
under the former BankAmerica Euro medium-term note program, which was terminated
in connection with the Merger.
11
<PAGE>
From April 1, 2000 through May 8, 2000, Bank of America Corporation issued
$430 million of long-term senior and subordinated debt, with maturities ranging
from 2002 to 2015. During this same time period, Bank of America, N.A. issued
$2.3 billion of bank notes with maturities ranging from 2001 to 2003 and $130
million of Euro medium-term notes maturing in 2003.
Note Six - Commitments and Contingencies
Credit Extension Commitments
The Corporation enters into commitments to extend credit, standby letters of
credit and commercial letters of credit to meet the financing needs of its
customers. The commitments shown below have been reduced by amounts
collateralized by cash and amounts participated to other financial institutions.
The following table summarizes outstanding commitments to extend credit:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
March 31 December 31
(Dollars in millions) 2000 1999
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Credit card commitments $ 66,574 $67,394
Other loan commitments 243,912 246,827
Standby letters of credit and financial guarantees 31,402 32,993
Commercial letters of credit 3,062 3,690
- -------------------------------------------------------------------------------------------
</TABLE>
Derivatives
Credit Risk Associated with Derivative-Dealer Activities
The table on the following page presents the notional or contract amounts
at March 31, 2000 and December 31, 1999 and the credit risk amounts (the net
replacement cost of contracts in a gain position) of the Corporation's
derivative-dealer positions which are primarily executed in the over-the-counter
market for trading purposes. This table should be read in conjunction with the
"Market Risk Management" section on pages 42 through 46 and Note Eleven of the
Corporation's 1999 Annual Report on Form 10-K. The notional or contract amounts
indicate the total volume of transactions and significantly exceed the amount of
the Corporation's credit or market risk associated with these instruments.
Credit risk associated with derivatives is measured as the net replacement cost
should the counterparties with contracts in a gain position to the Corporation
completely fail to perform under the terms of those contracts and any collateral
underlying the contracts proves to be of no value. The credit risk amounts
presented in the following table do not consider the value of any collateral,
but generally take into consideration the effects of legally enforceable master
netting agreements.
12
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Derivative-Dealer Positions
- ----------------------------------------------------------------------------------------------------------------------
March 31, 2000 December 31, 1999
-----------------------------------------------------------------------
Contract/ Credit Contract/ Credit
(Dollars in millions) Notional Risk Notional Risk
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest rate contracts
Swaps $3,013,944 $4,684 $2,597,886 $5,691
Futures and forwards 819,897 107 644,795 58
Written options 439,287 - 560,070 -
Purchased options 538,098 1,472 638,517 1,747
Foreign exchange contracts
Swaps 58,138 1,513 55,278 1,058
Spot, futures and forwards 651,277 4,201 537,719 3,298
Written options 33,563 - 28,450 -
Purchased options 32,349 577 26,820 424
Commodity and other contracts
Swaps 30,866 1,682 13,078 1,232
Futures and forwards 23,177 85 22,496 41
Written options 34,162 - 28,868 -
Purchased options 39,380 4,939 32,216 4,890
Credit derivatives 25,966 124 19,028 70
- ----------------------------------------------------------------------------------------------------------------------
Total before cross-product netting 19,384 18,509
Cross-product netting 1,507 2,454
- ----------------------------------------------------------------------------------------------------------------------
Net replacement cost $17,877 $16,055
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The table above includes both long and short derivative-dealer positions.
The average fair value of derivative-dealer assets for the three months ended
March 31, 2000 and for the year ended December 31, 1999 was $18.9 billion and
$16.0 billion, respectively. The average fair value of derivative-dealer
liabilities for the three months ended March 31, 2000 and for the year ended
December 31, 1999 was $17.6 billion and $16.5 billion, respectively. The fair
value of derivative-dealer assets at March 31, 2000 and December 31, 1999 was
$17.9 billion and $16.1 billion, respectively. The fair value of
derivative-dealer liabilities at March 31, 2000 and December 31, 1999 was $17.8
billion and $16.2 billion, respectively. See Note Three on page 8 for a
discussion of trading-related revenue.
During the three months ended March 31, 2000 and 1999, there were no
significant credit losses associated with derivative contracts. At March 31,
2000 and December 31, 1999, there were no nonperforming derivative positions
that were material to the Corporation.
In addition to credit risk management activities, the Corporation uses
credit derivatives to generate revenue by taking on exposure to underlying
credits. The Corporation also provides credit derivatives to sophisticated
customers who wish to hedge existing credit exposures or take on additional
credit exposure to generate revenue. The Corporation's credit derivative
positions at March 31, 2000 and December 31, 1999 consisted of credit default
swaps and total return swaps.
13
<PAGE>
Asset and Liability Management (ALM) Activities
The table below outlines the status of the Corporation's ALM activity at
March 31, 2000 and December 31, 1999. It presents the notional amount and fair
value of the Corporation's open and closed ALM contracts. This table should be
read in conjunction with the "Market Risk Management" section on pages 42
through 46 and Note Eleven of the Corporation's 1999 Annual Report on Form 10-K.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
March 31, 2000 December 31, 1999
---------------------------------------------------------
Notional Fair Notional Fair
(Dollars in millions) Amount Value Amount Value
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Open interest rate contracts
Receive fixed swaps $61,295 $(1,905) $63,002 $(1,747)
Pay fixed swaps 28,341 228 25,701 115
- -----------------------------------------------------------------------------------------------
Net open receive fixed 32,954 (1,677) 37,301 (1,632)
Basis swaps 7,787 (2) 7,971 (6)
- -----------------------------------------------------------------------------------------------
Total net swap position 40,741 (1,679) 45,272 (1,638)
Option products 37,680 13 35,134 5
Futures and forwards 884 (3) 931 3
- -----------------------------------------------------------------------------------------------
Total open interest rate contracts(1) (1,669) (1,630)
- -----------------------------------------------------------------------------------------------
Closed interest rate contracts
Swap positions 112 174
Option products 72 82
Futures and forwards (20) (21)
- -----------------------------------------------------------------------------------------------
Total closed interest rate contracts(2) 164 235
- -----------------------------------------------------------------------------------------------
Net interest rate contract position (1,505) (1,395)
- -----------------------------------------------------------------------------------------------
Open foreign exchange contracts(1) 5,247 (67) 6,231 (30)
- -----------------------------------------------------------------------------------------------
Total ALM contracts $(1,572) $(1,425)
- -----------------------------------------------------------------------------------------------
(1) Fair value represents the net unrealized losses on open contracts.
(2) Represents the unamortized net realized deferred gains associated with closed contracts.
</TABLE>
When-Issued Securities
At March 31, 2000, the Corporation had commitments to purchase and sell
when-issued securities of $17.4 billion and $26.6 billion, respectively. At
December 31, 1999, the Corporation had commitments to purchase and sell
when-issued securities of $12.0 billion and $16.8 billion, respectively.
Litigation
In the ordinary course of business, the Corporation and its subsidiaries
are routinely defendants in or parties to a number of pending and threatened
legal actions and proceedings, including actions brought on behalf of various
classes of claimants. In certain of these actions and proceedings, substantial
money damages are asserted against the Corporation and its subsidiaries and
certain of these actions and proceedings are based on alleged violations of
consumer protection, securities, environmental, banking and other laws.
The Corporation and certain present and former officers and directors have
been named as defendants in a number of actions filed in several federal courts
that have been consolidated for pretrial purposes before a Missouri federal
court. The amended complaint in the consolidated actions alleges, among other
things, that the defendants failed to disclose material facts about
BankAmerica's losses relating to D.E. Shaw Securities Group, L.P. and related
entities until mid-October 1998, in violation of various provisions of federal
and state laws. The amended complaint also alleges that the proxy
statement-prospectus of August 4, 1998, falsely stated that the Merger would be
one of equals and alleges a scheme to have NationsBank gain control over the
newly merged entity. The Missouri federal court has certified classes consisting
generally of persons who were stockholders of NationsBank or BankAmerica on
September 30, 1998, or were entitled to vote on the Merger, or who purchased or
acquired securities of the Corporation or its predecessors between August 4,
1998 and October 13, 1998. The amended complaint substantially survived a motion
to dismiss, and discovery is underway. Claims
14
<PAGE>
against certain director-defendants were dismissed with leave to replead.
Similar uncertified class actions (including one limited to California
residents raising the claim that the proxy statement-prospectus of August 4,
1998, falsely stated that the Merger would be one of equals) were filed in
California state court, alleging violations of the California Corporations
Code and other state laws. The action on behalf of California residents was
certified, but has since been dismissed and an appeal is pending. Of the
remaining actions, one has been stayed, and a motion for class certification
is pending in the other. The Missouri federal court has recently enjoined
prosecution of that action as a class action. Plaintiffs' appeal of that
order is pending. The Corporation believes the actions lack merit and will
defend them vigorously. The amount of any ultimate exposure cannot be
determined with certainty at this time.
Management believes that the actions and proceedings and the losses, if
any, resulting from the final outcome thereof, will not be material in the
aggregate to the Corporation's financial position or results of operations.
Note Seven - Shareholders' Equity and Earnings Per Common Share
On June 23, 1999, the Corporation's Board of Directors authorized the
repurchase of up to 130 million shares of the Corporation's common stock at an
aggregate cost of up to $10.0 billion. Through March 31, 2000, the Corporation
had repurchased 98 million shares of its common stock in open market repurchases
and under accelerated share repurchase programs at an average per-share price of
$58.81, which reduced shareholders' equity by $5.8 billion. The remaining
buyback authority for common stock under the current program totaled $4.2
billion or 32 million shares at March 31, 2000.
Earnings per common share is computed by dividing net income available to
common shareholders by the weighted average common shares issued and
outstanding. For diluted earnings per common share, net income available to
common shareholders can be affected by the conversion of the registrant's
convertible preferred stock. Where the effect of this conversion would have been
dilutive, net income available to common shareholders is adjusted by the
associated preferred dividends. This adjusted net income is divided by the
weighted average number of common shares issued and outstanding for each period
plus amounts representing the dilutive effect of stock options outstanding and
the dilution resulting from the conversion of the registrant's convertible
preferred stock, if applicable. The effect of convertible preferred stock is
excluded from the computation of diluted earnings per common share in periods in
which the effect would be antidilutive.
15
<PAGE>
The calculation of earnings per common share and diluted earnings per
common share for the three months ended March 31, 2000 and 1999 is presented
below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Three Months Ended
(Shares in thousands; dollars in millions, March 31
-----------------------------
except per share information) 2000 1999
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Earnings per common share
Net income $2,240 $1,914
Preferred stock dividends (1) (2)
- -------------------------------------------------------------------------------------------------
Net income available to common shareholders $2,239 $1,912
- -------------------------------------------------------------------------------------------------
Average common shares issued and outstanding 1,669,311 1,737,562
- -------------------------------------------------------------------------------------------------
Earnings per common share $ 1.34 $ 1.10
- -------------------------------------------------------------------------------------------------
Diluted earnings per common share
Net income available to common shareholders $2,239 $1,912
Preferred stock dividends 1 2
- -------------------------------------------------------------------------------------------------
Net income available to common shareholders and assumed
conversions $2,240 $1,914
- -------------------------------------------------------------------------------------------------
Average common shares issued and outstanding 1,669,311 1,737,562
- -------------------------------------------------------------------------------------------------
Incremental shares from assumed conversions:
Convertible preferred stock 3,006 3,206
Stock options 16,001 38,940
- -------------------------------------------------------------------------------------------------
Dilutive potential common shares 19,007 42,146
- -------------------------------------------------------------------------------------------------
Total dilutive average common shares issued and outstanding 1,688,318 1,779,708
- -------------------------------------------------------------------------------------------------
Diluted earnings per common share $ 1.33 $ 1.08
- -------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
Note Eight - Business Segment Information
During the first quarter of 2000, the Corporation realigned its business
segments to report the results of the Corporation's operations through three
business segments: Consumer and Commercial Banking, Asset Management and Global
Corporate and Investment Banking. Consumer and Commercial Banking provides a
wide array of products and services to individuals and small businesses through
multiple delivery channels; and provides commercial lending and treasury
management services to middle market companies with annual revenue between $10
million and $500 million. Asset Management offers customized asset management
and credit, financial advisory, fiduciary and trust services, and banking
services; management of equity, fixed income, cash and alternative investments
to individuals, corporations and a wide array of institutional clients; and full
service and discount brokerage services. Global Corporate and Investment Banking
provides a broad array of financial products such as investment banking, trade
finance, treasury management, capital markets, leasing and financial advisory
services to domestic and international corporations, financial institutions and
government entities.
The following table includes revenue and net income for the three months
ended March 31, 2000 and 1999, and total assets at March 31, 2000 and 1999 for
each business segment:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Consumer and
Commercial Banking (2) Asset Management (2)
------------------------------------------------------------------------
(Dollars in millions) 2000 1999 2000 1999
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net interest income (1) $ 3,385 $ 3,453 $ 155 $ 135
Noninterest income 1,633 1,576 410 429
- --------------------------------------------------------------------------------------------------------------------
Total revenue 5,018 5,029 565 564
Provision for credit losses 380 352 11 19
Gains on sales of securities - 1 - -
Amortization of intangibles 169 173 6 6
Depreciation expense 172 192 14 17
Other noninterest expense 2,554 2,593 284 280
- --------------------------------------------------------------------------------------------------------------------
Income before income taxes 1,743 1,720 250 242
Income tax expense 683 650 96 91
- --------------------------------------------------------------------------------------------------------------------
Net income $ 1,060 $ 1,070 $ 154 $ 151
- --------------------------------------------------------------------------------------------------------------------
Period-end total assets $306,862 $281,235 $22,949 $20,325
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Global Corporate and
Investment Banking (2) Corporate Other
------------------------------------------------------------------------
(Dollars in millions) 2000 1999 2000 1999
- --------------------------------------------------------------------------------------------------------------------
Net interest income (1) $ 975 $ 956 $ 80 $101
Noninterest income 1,925 1,218 78 -
- --------------------------------------------------------------------------------------------------------------------
Total revenue 2,900 2,174 158 101
Provision for credit losses 29 139 - -
Gains on sales of securities 3 - 3 129
Amortization of intangibles 42 43 - -
Depreciation expense 53 61 - -
Other noninterest expense 1,272 1,090 57 (2)
- --------------------------------------------------------------------------------------------------------------------
Income before income taxes 1,507 841 104 232
Income tax expense 547 295 38 85
- --------------------------------------------------------------------------------------------------------------------
Net income $ 960 $ 546 $ 66 $ 147
- --------------------------------------------------------------------------------------------------------------------
Period-end total assets $234,899 $219,279 $91,403 $93,406
- --------------------------------------------------------------------------------------------------------------------
(1) Net interest income is presented on a taxable-equivalent basis.
(2) There were no material intersegment revenues among the three business segments.
</TABLE>
17
<PAGE>
A reconciliation of the segments' net income to consolidated net income
follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Three Months Ended
March 31
-----------------------------
(Dollars in millions) 2000 1999
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Segments' net income $2,174 $1,767
Adjustments, net of taxes:
Earnings associated with unassigned capital 49 65
Gains on sales of securities 2 82
Other 15 -
- -----------------------------------------------------------------------------------------
Consolidated net income $2,240 $1,914
- -----------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
- --------------------------------------------------------------------------------
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
- --------------------------------------------------------------------------------
This report on Form 10-Q contains certain forward-looking statements that
are subject to risks and uncertainties and include information about possible or
assumed future results of operations. Many possible events or factors could
affect the future financial results and performance of the Corporation. This
could cause results or performance to differ materially from those expressed in
our forward-looking statements. Words such as "expects", "anticipates",
"believes", "estimates", variations of such words and other similar expressions
are intended to identify such forward-looking statements. These statements are
not guarantees of future performance and involve certain risks, uncertainties
and assumptions which are difficult to predict. Therefore, actual outcomes and
results may differ materially from what is expressed or forecasted in, or
implied by, such forward-looking statements. Readers of the Corporation's Form
10-Q should not rely solely on the forward-looking statements and should
consider all uncertainties and risks discussed throughout this report, as well
as those discussed in the Corporation's 1999 Annual Report on Form 10-K. These
statements are representative only on the date hereof, and the Corporation
undertakes no obligation to update any forward-looking statements made.
The possible events or factors include the following: the Corporation's
loan growth is dependent on economic conditions, as well as various
discretionary factors, such as decisions to securitize, sell, or purchase
certain loans or loan portfolios; syndications or participations of loans;
retention of residential mortgage loans; and the management of borrower,
industry, product and geographic concentrations and the mix of the loan
portfolio. The rate of charge-offs and provision expense can be affected by
local, regional and international economic and market conditions, concentrations
of borrowers, industries, products and geographic locations, the mix of the loan
portfolio and management's judgments regarding the collectibility of loans.
Liquidity requirements may change as a result of fluctuations in assets and
liabilities and off-balance sheet exposures, which will impact the capital and
debt financing needs of the Corporation and the mix of funding sources.
Decisions to purchase, hold or sell securities are also dependent on liquidity
requirements and market volatility, as well as on- and off-balance sheet
positions. Factors that may impact interest rate risk include local, regional
and international economic conditions, levels, mix, maturities, yields or rates
of assets and liabilities, utilization and effectiveness of interest rate
contracts and the wholesale and retail funding sources of the Corporation. The
Corporation is also exposed to the potential of losses arising from adverse
changes in market rates and prices which can adversely impact the value of
financial products, including securities, loans, deposits, debt and derivative
financial instruments, such as futures, forwards, swaps, options and other
financial instruments with similar characteristics.
In addition, the banking industry in general is subject to various
monetary and fiscal policies and regulations, which include those determined by
the Federal Reserve Board, the Office of the Comptroller of Currency, the
Federal Deposit Insurance Corporation, state regulators and the Office of Thrift
Supervision, whose policies and regulations could affect the Corporation's
results. Other factors that may cause actual results to differ from the
forward-looking statements include the following: competition with other local,
regional and international banks, thrifts, credit unions and other nonbank
financial institutions, such as investment banking firms, investment advisory
firms, brokerage firms, investment companies and insurance companies, as well as
other entities which offer financial services, located both within and outside
the United States and through alternative delivery channels such as the World
Wide Web; interest rate, market and monetary fluctuations; inflation; market
volatility; general economic conditions and economic conditions in the
geographic regions and industries in which the Corporation operates;
introduction and acceptance of new banking-related products, services and
enhancements; fee pricing strategies, mergers and acquisitions and their
integration into the Corporation and management's ability to manage these and
other risks.
19
<PAGE>
Overview
The Corporation is a bank holding company and a financial holding company,
headquartered in Charlotte, North Carolina. The Corporation provides a
diversified range of banking and nonbanking financial services and products both
domestically and internationally through three major business segments: Consumer
and Commercial Banking, Asset Management and Global Corporate and Investment
Banking. At March 31, 2000, the Corporation had $656 billion in assets and
approximately 153,000 full-time equivalent employees.
Significant changes in the Corporation's results of operations and
financial position are described in the following sections.
Refer to Table One for selected financial data for the three months ended
March 31, 2000 and 1999.
Key performance highlights for the three months ended March 31, 2000 were:
o Net income totaled $2.2 billion, or $1.33 per common share (diluted) for
the three months ended March 31, 2000, an increase of $326 million, or
$0.25 per common share (diluted) from the same period in 1999. Total
revenue for the three months ended March 31, 2000 was $8.64 billion, an
increase of $773 million from the comparable 1999 period.
o The return on average common shareholders' equity was 19.59 percent for the
three months ended March 31, 2000, an increase of 281 basis points compared
to the same period in 1999.
o Cash basis ratios measure performance excluding goodwill and other
intangible assets and their related amortization expense. Cash basis
diluted earnings per common share were $1.46 for the three months ended
March 31, 2000, an increase of $0.26 per share compared to the same period
in 1999. Return on average tangible common shareholders' equity was
30.83 percent for the three months ended March 31, 2000, an increase of 339
basis points from the same period in 1999. The cash basis efficiency
ratio was 50.98 percent for the three months ended March 31, 2000, an
improvement of 278 basis points from the comparable 1999 period, due to
a 26 percent increase in noninterest income combined with a slight
increase in noninterest expense of four percent.
o Net interest income on a taxable-equivalent basis was $4.6 billion for the
three months ended March 31, 2000, a one percent decrease from a year
earlier, but one percent above the three months ended December 31, 1999.
Loan growth and higher levels of core deposits and equity were offset by
the impact of asset securitizations and loan sales during 1999, spread
compression and share repurchases. Average managed loans and leases were
$406 billion, a nine percent increase from the respective 1999 period,
primarily due to a 19 percent increase in consumer loans and leases.
Average domestic deposits grew to $295 billion, a $5.8 billion increase
from the same period in 1999. The net interest yield was 3.27 percent
for the three months ended March 31, 2000, a 31 basis point decline from
the comparable 1999 period. The decrease was primarily due to a higher
level of lower yielding trading-related assets and investment securities
combined with spread compression and the cost of share repurchases.
o The provision for credit losses for the three months ended March 31, 2000
was $420 million, a $90 million decrease from the same 1999 period. Net
charge-offs decreased to $420 million or 0.45 percent of average loans and
leases, for the three months ended March 31, 2000, a decrease of $99
million or 13 basis points from the comparable 1999 period, mainly
reflecting lower bankcard net charge-offs. Nonperforming assets were $3.5
billion or 0.91 percent of loans, leases and foreclosed properties at March
31, 2000, a $361 million or five basis point increase from March 31, 1999.
The allowance for credit losses totaled $6.8 billion at March 31, 2000, a
decrease of $296 million from March 31, 1999.
o Securities gains were $6 million for the three months ended March 31, 2000,
compared to $130 million in the respective 1999 period.
20
<PAGE>
o Noninterest income was $4.0 billion for the three months ended March 31,
2000, an $823 million increase from the comparable 1999 period, primarily
due to the Corporation's strategy to expand customer relationships through
both traditional banking and other financial service products. Trading
profits were $724 million, a $224 million increase from the comparable 1999
period. Investment banking income increased to $397 million, a $164 million
increase from the comparable 1999 period, primarily due to higher levels of
securities underwriting fees. Equity investment gains increased to $563
million for the three months ended March 31, 2000, an increase of $408
million from the same 1999 period.
o Noninterest expense was $4.6 billion for the three months ended March 31,
2000, a $170 million increase from the respective 1999 period, reflecting
higher revenue-related incentive compensation as well as spending on
projects to improve sales and service, which was partially offset by cost
reductions resulting from recent mergers. The efficiency ratio improved to
53.49 percent for the three months ended March 31, 2000, a 310 basis point
improvement from the same period in 1999.
The remainder of management's discussion and analysis of the Corporation's
results of operations and financial condition should be read in conjunction
with the consolidated financial statements and related notes presented on pages
2 through 18.
21
<PAGE>
<TABLE>
<CAPTION>
Table One
Selected Financial Data
- ----------------------------------------------------------------------------------------------------------------
Three Months
Ended March 31
--------------------------------
(Dollars in millions, except per share information) 2000 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income statement
Interest income $ 10,086 $ 9,201
Interest expense 5,562 4,601
Net interest income 4,524 4,600
Net interest income (taxable-equivalent basis) 4,595 4,645
Provision for credit losses 420 510
Gains on sales of securities 6 130
Noninterest income 4,046 3,223
Other noninterest expense 4,623 4,453
Income before income taxes 3,533 2,990
Income tax expense 1,293 1,076
Net income 2,240 1,914
Net income available to common shareholders 2,239 1,912
Average common shares issued and outstanding (in thousands) 1,669,311 1,737,562
Performance ratios
Return on average assets 1.38 % 1.27 %
Return on average common shareholders' equity 19.59 16.78
Total equity to total assets (period-end) 6.90 7.62
Total average equity to total average assets 7.07 7.59
Efficiency ratio 53.49 56.59
Dividend payout ratio 37.16 40.90
Per common share data
Earnings $ 1.34 $ 1.10
Diluted earnings 1.33 1.08
Cash dividends paid .50 .45
Book value 27.28 26.86
Cash basis financial data (1)
Earnings per common share 1.47 1.23
Diluted earnings per common share 1.46 1.20
Return on average tangible assets 1.55 % 1.46 %
Return on average tangible common shareholders' equity 30.83 27.44
Efficiency ratio 50.98 53.76
Ending tangible equity to tangible assets 4.90 5.38
Balance sheet (period-end)
Total loans and leases $382,085 $363,102
Total assets 656,113 614,245
Total deposits 351,626 343,317
Long-term debt 62,059 50,899
Trust preferred securities 4,955 4,954
Common shareholders' equity 45,222 46,761
Total shareholders' equity 45,299 46,831
Risk-based capital ratios (period-end)
Tier 1 capital 7.42 % 7.40 %
Total capital 11.00 11.17
Leverage ratio 6.17 6.47
Market price per share of common stock
Closing $52 7/16 $70 5/8
High 55 3/16 74 1/2
Low 42 5/16 59 1/2
- ----------------------------------------------------------------------------------------------------------------
(1) Cash basis calculations exclude goodwill and other intangible assets and their related amortization expense.
</TABLE>
22
<PAGE>
Business Segment Operations
The Corporation provides a diversified range of banking and nonbanking
financial services and products through its various subsidiaries. During the
first quarter of 2000, the Corporation realigned its business segments to report
the results of the Corporation's operations through three business segments:
Consumer and Commercial Banking, Asset Management, and Global Corporate and
Investment Banking.
The business segments summarized in Table Two are primarily managed with a
focus on various performance objectives including total revenue, net income,
return on average equity and efficiency. These performance objectives are also
presented on a cash basis, which excludes the impact of goodwill and other
intangible assets and their related amortization expense. Total revenue includes
net interest income on a taxable-equivalent basis and noninterest income. The
net interest yield of the business segments reflects the results of a funds
transfer pricing process which derives net interest income by matching assets
and liabilities with similar interest rate sensitivity and maturity
characteristics. Equity capital is allocated to each business segment based on
an assessment of its inherent risk.
See Note Eight of the consolidated financial statements on page 17 for
additional business segment information and reconciliations to consolidated
amounts.
<TABLE>
<CAPTION>
Table Two
Business Segment Summary
- ------------------------------------------------------------------------------------------------------------------------------------
For the Three Months Ended March 31 Consumer and Global Corporate and
Commercial Banking Asset Management Investment Banking
-----------------------------------------------------------------------------------------------
(Dollars in millions) 2000 1999 2000 1999 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total revenue $ 5,018 $ 5,029 $ 565 $ 564 $ 2,900 $ 2,174
Net income 1,060 1,070 154 151 960 546
Cash basis earnings 1,228 1,243 160 158 1,002 589
Net interest yield 5.02 % 5.35 % 2.89 % 2.95 % 2.00 % 2.09 %
Average equity to average assets 8.01 8.14 7.83 8.78 6.25 6.47
Return on average equity 17.8 18.6 35.6 36.1 26.0 15.4
Return on tangible equity 25.9 27.5 41.2 42.3 30.0 18.5
Efficiency ratio 57.7 58.8 53.8 53.6 47.1 54.9
Cash basis efficiency ratio 54.4 55.4 52.7 52.5 45.7 52.9
Average:
Total loans and leases $248,480 $229,958 $ 20,724 $17,744 $107,507 $113,800
Total deposits 253,061 250,631 10,967 12,343 66,463 65,858
Total assets 299,360 287,207 22,264 19,390 237,567 222,657
Period-end:
Total loans and leases 254,363 233,758 21,172 18,298 106,577 111,854
Total deposits 260,439 252,356 11,757 12,487 65,974 65,389
Total assets 306,862 281,235 22,949 20,325 234,899 219,279
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Consumer and Commercial Banking
The major components of this segment are the Banking Regions, Consumer
Products and Commercial Banking.
23
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
For the Three Months Ended March 31 Consumer and
Commercial Banking
---------------------------------
(Dollars in millions) 2000 1999
- ---------------------------------------------------------------------
<S> <C> <C>
Total revenue $5,018 $5,029
Cash basis earnings 1,228 1,243
Cash basis efficiency ratio 54.4 % 55.4 %
- ---------------------------------------------------------------------
</TABLE>
o Total revenue declined $11 million driven by lower taxable-equivalent net
interest income, partially offset by higher noninterest income.
o Taxable-equivalent net interest income declined due to margin
compression, loan sales and securitizations.
o Noninterest income rose led by higher credit card income.
o Cash basis earnings decreased due to lower total revenue and higher
provision expense, partially offset by lower noninterest expense.
o Provision expense increased $28 million primarily driven by
loan growth.
o Noninterest expense decreased $59 million as further merger-related
savings resulted in decreases across most expense categories.
Banking Regions
Banking Regions serve approximately 30 million consumer households in 21
states and the District of Columbia and overseas through its extensive network
of over 4,500 banking centers, 14,000 ATM's, telephone and Internet channels.
Banking Regions provides a wide array of products and services, including
deposit products such as checking, money market savings accounts, time deposits
and IRA's; and credit products such as home equity, personal auto and student
loans and auto leasing. Banking Regions also includes small business banking
providing treasury management, credit services, community investment, card,
e-commerce and brokerage services to over 2 million small business relationships
across the franchise.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
For the Three Months Ended March 31
Banking Regions
----------------------------------
(Dollars in millions) 2000 1999
- --------------------------------------------------------------------------
<S> <C> <C>
Total revenue $2,904 $2,854
Cash basis earnings 683 659
Cash basis efficiency ratio 61.3 % 63.5 %
- --------------------------------------------------------------------------
</TABLE>
o Total revenue rose 2% as an increase in noninterest income was partially
offset by a decrease in taxable-equivalent net interest income.
o Taxable-equivalent net interest income decreased $18 million due to
compression in the net interest margin and loan sales throughout 1999.
o Noninterest income increased $68 million primarily reflecting higher
debit card income.
o Cash basis earnings increased 4%, primarily due to the increase in
revenue and a decrease in noninterest expense of $32 million driven by
merger-related savings.
Consumer Products
Consumer Products provides specialized services such as the origination and
servicing of residential mortgage loans, issuance and servicing of credit and
debit cards, direct banking via telephone and Internet, student lending and
certain insurance services. Consumer Products also provides consumer home equity
and auto loans, retail finance programs to dealerships and lease financing of
new and used cars.
24
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
For the Three Months Ended March 31
Consumer Products
----------------------------------
(Dollars in millions) 2000 1999
- --------------------------------------------------------------------------
<S> <C> <C>
Total revenue $1,328 $1,452
Cash basis earnings 325 372
Cash basis efficiency ratio 44.8 % 44.3 %
- --------------------------------------------------------------------------
</TABLE>
o Total revenue fell 9% due to a $69 million decrease in taxable-equivalent
net interest income, resulting primarily from a shift in the loan portfolio
mix to lower spread products as a result of loan sales and securitizations
in 1999.
o Noninterest income decreased $55 million primarily due to
securitization gains in the first quarter of 1999.
o Cash basis earnings declined 13%, primarily due to the decrease in total
revenue, partially offset by a decrease in noninterest expense related to
lower marketing expense, reflecting timing differences in marketing
efforts across the Corporation, and lower equipment expense.
Commercial Banking
Commercial Banking provides commercial lending and treasury management
services to middle market companies with annual revenue between $10 million and
$500 million. These services are available through relationship manager teams as
well as through alternative channels such as the telephone via the commercial
service center and the Internet by accessing Bank of America Direct.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
For the Three Months Ended March 31
Commercial Banking
----------------------------------
(Dollars in millions) 2000 1999
- --------------------------------------------------------------------------
<S> <C> <C>
Total revenue $786 $723
Cash basis earnings 220 212
Cash basis efficiency ratio 45.0 % 45.8 %
- --------------------------------------------------------------------------
</TABLE>
o Total revenue increased 9% primarily due to an increase of $44 million in
noninterest income reflecting higher investment banking income.
o As a result of loan growth, taxable-equivalent net interest income
increased $19 million.
o Cash basis earnings rose slightly because the increase in revenue was
partially offset by an increase in provision for loan losses of $25
million and a $21 million increase in noninterest expense as a result of
higher investment banking expense.
Asset Management
Asset Management includes the Private Bank, Banc of America Capital
Management and Banc of America Investment Services, Inc. The Private Bank offers
financial solutions to high-net-worth clients and foundations in the U.S. and
internationally by providing customized asset management and credit, financial
advisory, fiduciary and trust services, and banking services. Banc of America
Capital Management, offering management of equity, fixed income, cash, and
alternative investments, manages the assets of individuals, corporations,
municipalities, foundations and universities, and public and private
institutions as well as provides advisory services to the Corporation's
affiliated family of mutual funds. Banc of America Investment Services, Inc.
provides both full-service and discount brokerage services through investment
professionals located throughout the franchise and a brokerage web site that
provides
25
<PAGE>
customers a wide array of market analyses, investment research and
self-help tools, as well as account information and transaction capabilities.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
For the Three Months Ended March 31
Asset Management
----------------------------------
(Dollars in millions) 2000 1999
- --------------------------------------------------------------------------
<S> <C> <C>
Total revenue $565 $564
Cash basis earnings 160 158
Cash basis efficiency ratio 52.7 % 52.5 %
- --------------------------------------------------------------------------
</TABLE>
o Total revenue remained essentially flat at $565 million, due to higher
taxable-equivalent net interest income fully offset by lower noninterest
income.
o Taxable-equivalent net interest income increased $20 million
reflecting strong loan growth in commercial and residential mortgage
loans.
o Noninterest income decreased as 1999 results included gains on
the disposition of certain businesses, partially offset by
significantly increased investment and brokerage services income
which was driven by market growth.
Global Corporate and Investment Banking
Global Corporate and Investment Banking provides a broad array of
financial products such as investment banking, trade finance, treasury
management, capital markets, leasing and financial advisory services to domestic
and international corporations, financial institutions and government entities.
Clients are supported through offices in 37 countries in four distinct
geographic regions: U.S. and Canada; Asia; Europe, Middle East and Africa; and
Latin America. Products and services provided include loan origination, debt
and equity underwriting and trading, cash management, derivatives, foreign
exchange, leasing, leveraged finance, project finance, real estate finance,
senior bank debt, structured finance and trade services.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
For the Three Months Ended March 31 Global Corporate and
Investment Banking
----------------------------------
(Dollars in millions) 2000 1999
- --------------------------------------------------------------------------
<S> <C> <C>
Total revenue $2,900 $2,174
Cash basis earnings 1,002 589
Cash basis efficiency ratio 45.7 % 52.9 %
- --------------------------------------------------------------------------
</TABLE>
o Total revenue rose 33% over 1999 led by higher noninterest income.
o Noninterest income rose 58% as a result of strong trading results
driven by customer flow and market volatility, equity investment gains
driven by appreciation of $189 million and gains on sales, and
investment banking activities.
o Cash basis earnings were up 70% over first quarter 1999 due to an increase
in noninterest income and a decrease in the provision for credit losses
which was partially offset by a 15% increase in noninterest expense.
o Provision expense improved $110 million due primarily to reduction in
the size and risk of the international portfolio.
o Noninterest expense increased reflecting higher revenue-related
incentive compensation.
26
<PAGE>
Global Corporate and Investment Banking offers clients a comprehensive
range of global capabilities through five components: Global Credit Products,
Global Capital Raising, Global Markets, Global Treasury Services and Principal
Investing.
Global Credit Products
Global Credit Products provides credit and lending services and includes the
corporate industry-focused portfolio, real estate, leasing and project finance.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
For the Three Months Ended March 31
Global Credit Products
----------------------------------
(Dollars in millions) 2000 1999
- --------------------------------------------------------------------------
<S> <C> <C>
Total revenue $726 $737
Cash basis earnings 291 279
Cash basis efficiency ratio 23.2 % 25.3 %
- --------------------------------------------------------------------------
</TABLE>
o Total revenue declined 1% primarily as a result of a $20 million decrease
in taxable-equivalent net interest income due to strategic reductions in
foreign and commercial loan portfolios.
o Cash basis earnings increased 4% due to a decrease in noninterest expense
as a result of merger-related savings.
Global Capital Raising
Global Capital Raising houses the Corporation's investment banking
activities. Through a separate subsidiary, Banc of America Securities LLC,
formerly NationsBanc Montgomery Securities LLC, Global Capital Raising
underwrites and makes markets in equity securities, high-grade and high-yield
corporate debt securities, commercial paper, mortgage-backed and asset-backed
securities. Banc of America Securities LLC also provides correspondent clearing
services for other securities broker/dealers, offers traditional brokerage
service to high-net-worth individuals, provides prime-brokerage services and
makes markets in equity derivatives. Debt and equity securities research, loan
syndications, mergers and acquisitions advisory services, private placements
and equity derivatives are also provided through Banc of America Securities LLC.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
For the Three Months Ended March 31
Global Capital Raising
----------------------------------
(Dollars in millions) 2000 1999
- --------------------------------------------------------------------------
<S> <C> <C>
Total revenue $803 $474
Cash basis earnings 189 29
Cash basis efficiency ratio 71.8 % 90.9 %
- --------------------------------------------------------------------------
</TABLE>
o Total revenue rose 69% as a result of a 57% rise in noninterest income led
by investment banking income due to growth in syndications, equity
underwriting and advisory services. In addition, volatility in the equities
markets drove trading account profits higher in both equity securities and
derivatives.
o The growth in revenue was partially offset by increases in
revenue-related incentive compensation yet producing $160 million
return over the prior period in cash basis earnings.
27
<PAGE>
Global Markets
Global Markets provides business solutions for a global customer base
using interest rate derivatives, foreign exchange products, commodity
derivatives and mortgage-related products. In support of these activities the
businesses will take positions in these products and capitalize on
market-making activities. The Global Markets business also takes an active role
in the trading of fixed income securities in all of the regions in which Global
Corporate and Investment Banking transacts business and is a primary dealer in
the U.S. as well as in several international locations.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
For the Three Months Ended March 31
Global Markets
----------------------------------
(Dollars in millions) 2000 1999
- --------------------------------------------------------------------------
<S> <C> <C>
Total revenue $594 $522
Cash basis earnings 191 182
Cash basis efficiency ratio 50.2 % 47.8 %
- --------------------------------------------------------------------------
</TABLE>
o Total revenue increased 14% driven primarily by increases in trading
account profits due to strong customer activity in both the interest rate
and foreign currency markets.
o Cash basis earnings increased 5% as noninterest expense increased 20%
driven primarily by revenue-related incentive compensation.
Global Treasury Services
Global Treasury Services provides the technology, strategies and
integrated solutions to help public and private companies of all sizes,
financial institutions and government agencies manage their operations and cash
flows on a local, regional, national and global level.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
For the Three Months Ended March 31
Global Treasury Services
----------------------------------
(Dollars in millions) 2000 1999
- --------------------------------------------------------------------------
<S> <C> <C>
Total revenue $334 $328
Cash basis earnings 77 44
Cash basis efficiency ratio 76.6 % 80.0 %
- --------------------------------------------------------------------------
</TABLE>
o Total revenue rose 2% due to an increase in noninterest income of $12
million primarily attributable to corporate service charges.
o Cash basis earnings increased 75% as credit upgrades in the international
portfolio resulted in a decrease in the provision for credit losses.
28
<PAGE>
Principal Investing
Principal Investing invests in both direct and indirect equity
investments in a wide variety of transactions. Domestic activities include
investments from early-stage seed capital to mezzanine financing, late-stage and
buyout investments. International investing focuses on established businesses in
Asia, Europe and Latin America delivering strategic and financial guidance,
broad business experience and access to our global resources.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
For the Three Months Ended March 31
Principal Investing
----------------------------------
(Dollars in millions) 2000 1999
- --------------------------------------------------------------------------
<S> <C> <C>
Total revenue $443 $113
Cash basis earnings 254 55
Cash basis efficiency ratio 5.6 % 19.5 %
- --------------------------------------------------------------------------
</TABLE>
o Total revenue and cash basis earnings increased due to higher equity
investment gains, which were driven by appreciation of $189 million,
with the remainder attributable to gains on sales.
29
<PAGE>
Results of Operations
Net Interest Income
An analysis of the Corporation's net interest income on a
taxable-equivalent basis and average balance sheet for the most recent five
quarters is presented in Table Three.
As reported, net interest income on a taxable-equivalent basis was $4.6
billion for the three months ended March 31, 2000, a decrease of $50 million
compared to the same period in 1999. Management also reviews "core net interest
income", which adjusts reported net interest income for the impact of
trading-related activities, securitizations, asset sales and divestitures. For
purposes of internal analysis, management combines trading-related net interest
income with trading revenue, as discussed in the "Noninterest Income" section
below, as trading strategies are typically evaluated on total revenue. The
determination of core net interest income also requires adjustment for the
impact of securitizations (primarily home equity and credit card), asset sales
(primarily residential and commercial real estate loans) and divestitures. Net
interest income associated with assets that have been securitized is
predominantly offset in noninterest income, as the Corporation takes on the role
of servicer and records servicing income and gains on securitizations, where
appropriate.
The table below provides a reconciliation between net interest income on a
taxable-equivalent basis presented in Table Three and core net interest income
for the three months ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Three Months Ended Increase/
March 31 (Decrease)
-------------------------------
(Dollars in millions) 2000 1999
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net interest income
As reported (1) $ 4,595 $ 4,645 (1.08)%
Less: Trading-related net interest income (217) (167)
Add: Impact of securitizations, asset sales and divestitures 103 4
- -----------------------------------------------------------------------------------------------------------------------------
Core net interest income $ 4,481 $ 4,482 (0.02)%
- -----------------------------------------------------------------------------------------------------------------------------
Average earning assets
As reported $ 563,170 $523,682 7.54 %
Less: Trading-related earning assets (112,376) (81,592)
Add: Earning assets securitized, sold and divested 13,345 273
- -----------------------------------------------------------------------------------------------------------------------------
Core average earning assets $ 464,139 $442,363 4.92 %
- -----------------------------------------------------------------------------------------------------------------------------
Net yield on earning assets (1,2)
As reported 3.27 % 3.58 % (31)bp
Add: Impact of trading-related activities 0.60 0.51 9
Impact of securitizations, asset sales and divestitures - - -
- -----------------------------------------------------------------------------------------------------------------------------
Core net interest yield on earning assets 3.87 % 4.09 % (22)bp
- -----------------------------------------------------------------------------------------------------------------------------
(1) Net interest income is presented on a taxable-equivalent basis.
(2) bp denotes basis points; 100 bp equals 1%.
</TABLE>
Core net interest income on a taxable-equivalent basis remained essentially
unchanged at $4.5 billion for the three months ended March 31, 2000 compared to
the respective 1999 period. Managed loan growth, particularly in consumer
products, and higher levels of core deposits and equity did not fully offset
changing rates and spread compression and share repurchases.
Core average earning assets increased $21.8 billion to $464.1 billion for
the three months ended March 31, 2000 compared to the same period in 1999,
primarily reflecting managed loan growth of nine percent and higher levels of
investment securities. Managed consumer loans increased 19 percent, led by
growth in residential first mortgages and real-estate secured loans of 31
percent and 35 percent, respectively. Loan growth is dependent on economic
conditions, as well as various discretionary factors, such as decisions to
securitize certain loan portfolios and the management of borrower, industry,
product and geographic concentrations.
30
<PAGE>
The core net interest yield decreased 22 basis points to 3.87 percent for
the three months ended March 31, 2000 from the respective 1999 period, mainly
due to a higher level of lower yielding investment securities combined with
spread compression and the cost of share repurchases.
Provision for Credit Losses
The provision for credit losses totaled $420 million for the three months
ended March 31, 2000, compared to $510 million for the same period in 1999. The
decrease in the provision for credit losses was primarily due to a reduction in
the inherent risk and size of the Corporation's emerging markets portfolio and a
change in the composition of the loan portfolio from commercial real estate -
domestic, commercial - foreign and credit card to more consumer residential
mortgage loans. Total net charge-offs were $420 million for the three months
ended March 31, 2000. For additional information on the allowance for credit
losses, certain credit quality ratios and credit quality information on specific
loan categories, see the "Credit Risk Management and Credit Portfolio Review"
section beginning on page 41.
Gains on Sales of Securities
Gains on sales of securities were $6 million for the three months ended
March 31, 2000, compared to $130 million for the corresponding period in 1999.
The decrease was the result of continued unfavorable market conditions for
certain debt securities.
31
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Table Three
- ------------------------------------------------------------------------------------------------------------------------
Quarterly Average Balances and Interest Rates - Taxable-Equivalent Basis
- ------------------------------------------------------------------------------------------------------------------------
First Quarter 2000 Fourth Quarter 1999
------------------------------------------------------------
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
(Dollars in millions) Balance Expense Rate Balance Expense Rate
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earning assets
Time deposits placed and other short-term investments $4,504 $ 75 6.65 % $4,512 $ 73 6.33 %
Federal funds sold and securities purchased under
agreements to resell 45,459 575 5.07 39,700 458 4.60
Trading account assets 39,733 542 5.47 38,453 544 5.63
Securities:
Available-for-sale (1) 86,878 1,332 6.15 85,009 1,301 6.10
Held-for-investment 1,333 24 7.19 1,433 25 7.25
- ------------------------------------------------------------------------------------------------------------------------
Total securities 88,211 1,356 6.16 86,442 1,326 6.12
- ------------------------------------------------------------------------------------------------------------------------
Loans and leases (2):
Commercial - domestic 145,362 2,824 7.81 140,674 2,707 7.64
Commercial - foreign 27,927 486 6.99 27,430 453 6.56
Commercial real estate - domestic 24,664 517 8.43 24,345 506 8.23
Commercial real estate - foreign 344 8 9.29 306 6 8.96
- ------------------------------------------------------------------------------------------------------------------------
Total commercial 198,297 3,835 7.78 192,755 3,672 7.56
- ------------------------------------------------------------------------------------------------------------------------
Residential mortgage 85,427 1,566 7.34 79,783 1,450 7.26
Home equity lines 17,573 377 8.62 16,882 345 8.12
Direct/Indirect consumer 41,858 887 8.52 42,442 888 8.30
Consumer finance 22,798 486 8.53 21,340 440 8.18
Bankcard 8,404 234 11.22 8,578 245 11.32
Foreign consumer 2,227 50 9.00 2,430 54 8.77
- ------------------------------------------------------------------------------------------------------------------------
Total consumer 178,287 3,600 8.10 171,455 3,422 7.94
- ------------------------------------------------------------------------------------------------------------------------
Total loans and leases 376,584 7,435 7.93 364,210 7,094 7.74
- ------------------------------------------------------------------------------------------------------------------------
Other earning assets 8,679 174 8.11 10,247 193 7.51
- ------------------------------------------------------------------------------------------------------------------------
Total earning assets (3) 563,170 10,157 7.24 543,564 9,688 7.09
- ------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 25,830 25,467
Other assets, less allowance for credit losses 62,019 61,712
- ------------------------------------------------------------------------------------------------------------------------
Total assets $651,019 $630,743
- ------------------------------------------------------------------------------------------------------------------------
Interest-bearing liabilities
Domestic interest-bearing deposits:
Savings $24,237 78 1.29 $25,082 80 1.27
NOW and money market deposit accounts 98,424 679 2.78 97,481 639 2.60
Consumer CDs and IRAs 76,074 983 5.20 74,653 932 4.95
Negotiated CDs, public funds and other time deposits 6,966 103 5.93 6,825 98 5.73
- ------------------------------------------------------------------------------------------------------------------------
Total domestic interest-bearing deposits 205,701 1,843 3.60 204,041 1,749 3.40
- ------------------------------------------------------------------------------------------------------------------------
Foreign interest-bearing deposits (4):
Banks located in foreign countries 14,180 188 5.33 14,305 178 4.93
Governments and official institutions 8,745 124 5.72 7,121 99 5.53
Time, savings and other 26,382 340 5.17 24,993 298 4.72
- ------------------------------------------------------------------------------------------------------------------------
Total foreign interest-bearing deposits 49,307 652 5.31 46,419 575 4.91
- ------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 255,008 2,495 3.93 250,460 2,324 3.68
- ------------------------------------------------------------------------------------------------------------------------
Federal funds purchased, securities sold under agreements
to repurchase and other short-term borrowings 131,517 1,802 5.51 120,858 1,638 5.38
Trading account liabilities 23,013 181 3.16 19,223 190 3.92
Long-term debt (5) 64,256 1,084 6.75 59,972 995 6.63
- ------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities (6) 473,794 5,562 4.72 450,513 5,147 4.54
- ------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing sources:
Noninterest-bearing deposits 90,366 91,453
Other liabilities 40,829 41,985
Shareholders' equity 46,030 46,792
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $651,019 $630,743
- ------------------------------------------------------------------------------------------------------------------------
Net interest spread 2.52 2.55
Impact of noninterest-bearing sources .75 .77
- ------------------------------------------------------------------------------------------------------------------------
Net interest income/yield on earning assets $4,595 3.27 % $4,541 3.32 %
- ------------------------------------------------------------------------------------------------------------------------
(1) The average balance and yield on available-for-sale securities are based on the average of historical amortized cost
balances.
(2) Nonperforming loans are included in the average loan balances. Income on such nonperforming loans is recognized on a cash
basis.
(3) Interest income includes taxable-equivalent basis adjustments of $71 in the first quarter of 2000 and $66, $53, $51 and $45 in
the fourth, third, second and first quarters of 1999, respectively. Interest income also includes the impact of risk
management interest rate contracts, which increased interest income on the underlying assets $7 in the first
quarter of 2000 and $57, $103, $83 and $63 in the fourth, third, second and first quarters of 1999, respectively.
(4) Primarily consists of time deposits in denominations of $100,000 or more.
(5) Long-term debt includes trust preferred securities.
(6) Interest expense includes the impact of risk management interest rate contracts, which (increased) decreased interest expense
on the underlying liabilities $(8) in the first quarter of 2000 and $(2), $6, $52 and $60 in the fourth, third, second and
first quarters of 1999, respectively.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Third Quarter 1999 Second Quarter 1999 First Quarter 1999
- ------------------------------------------------------------------------------------
Interest Interest Interest
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$5,018 $ 69 5.50 % $ 5,159 $ 65 5.03 % $ 6,408 $ 88 5.58 %
33,074 440 5.30 29,521 387 5.25 26,561 381 5.80
37,453 483 5.14 39,837 528 5.31 41,129 547 5.36
78,779 1,208 6.12 76,373 1,139 5.97 73,925 1,161 6.31
1,482 26 7.02 1,482 28 7.61 1,905 33 6.84
- ------------------------------------------------------------------------------------
80,261 1,234 6.13 77,855 1,167 6.00 75,830 1,194 6.33
- ------------------------------------------------------------------------------------
136,149 2,488 7.25 138,257 2,473 7.17 138,272 2,444 7.16
28,348 494 6.93 30,209 456 6.05 31,568 494 6.35
25,056 517 8.19 25,938 533 8.25 26,827 559 8.45
295 7 8.80 289 6 8.48 286 6 8.79
- ------------------------------------------------------------------------------------
189,848 3,506 7.33 194,693 3,468 7.14 196,953 3,503 7.21
- ------------------------------------------------------------------------------------
80,015 1,431 7.14 80,151 1,430 7.14 75,789 1,356 7.18
16,316 321 7.79 15,857 304 7.68 15,537 298 7.79
42,740 875 8.13 42,240 859 8.15 41,652 847 8.24
19,923 433 8.62 17,794 424 9.56 15,880 373 9.53
8,923 256 11.38 10,365 306 11.83 11,287 327 11.76
3,635 86 9.36 3,653 87 9.55 3,648 89 9.90
- ------------------------------------------------------------------------------------
171,552 3,402 7.89 170,060 3,410 8.03 163,793 3,290 8.11
- ------------------------------------------------------------------------------------
361,400 6,908 7.59 364,753 6,878 7.56 360,746 6,793 7.62
- ------------------------------------------------------------------------------------
11,358 213 7.40 12,924 232 7.23 13,008 243 7.53
- ------------------------------------------------------------------------------------
528,564 9,347 7.03 530,049 9,257 7.00 523,682 9,246 7.13
- ------------------------------------------------------------------------------------
25,905 25,868 25,826
56,979 59,447 60,116
- ------------------------------------------------------------------------------------
$611,448 $615,364 $609,624
- ------------------------------------------------------------------------------------
$26,037 82 1.25 $21,799 67 1.24 $21,637 71 1.33
96,402 579 2.38 100,897 581 2.31 99,864 575 2.33
73,429 898 4.85 73,601 847 4.61 74,362 857 4.68
6,609 94 5.66 6,238 80 5.14 6,914 89 5.20
- ------------------------------------------------------------------------------------
202,477 1,653 3.24 202,535 1,575 3.12 202,777 1,592 3.18
- ------------------------------------------------------------------------------------
13,668 160 4.65 16,947 196 4.62 20,379 268 5.34
7,185 90 4.99 8,089 98 4.81 9,172 113 5.02
25,500 295 4.57 26,354 299 4.56 26,980 339 5.10
- ------------------------------------------------------------------------------------
46,353 545 4.66 51,390 593 4.62 56,531 720 5.17
- ------------------------------------------------------------------------------------
248,830 2,198 3.50 253,925 2,168 3.42 259,308 2,312 3.62
- ------------------------------------------------------------------------------------
114,934 1,437 4.96 116,339 1,396 4.82 112,384 1,355 4.88
15,677 189 4.78 14,178 150 4.25 12,679 129 4.13
59,283 920 6.21 58,302 880 6.03 52,642 805 6.12
- ------------------------------------------------------------------------------------
438,724 4,744 4.30 442,744 4,594 4.16 437,013 4,601 4.26
- ------------------------------------------------------------------------------------
88,168 88,324 86,623
38,117 37,405 39,709
46,439 46,891 46,279
- ------------------------------------------------------------------------------------
$611,448 $615,364 $609,624
- ------------------------------------------------------------------------------------
2.73 2.84 2.87
.73 .69 .71
- ------------------------------------------------------------------------------------
$4,603 3.46 % $4,663 3.53 % $4,645 3.58 %
- ------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
Noninterest Income
As presented in Table Four, noninterest income increased $823 million to
$4.0 billion for the three months ended March 31, 2000 over the comparable 1999
period, primarily reflecting higher levels of equity investment gains, trading
account profits, investment banking income and card income, partially offset by
a decline in other income.
<TABLE>
<CAPTION>
Table Four
Noninterest Income
- --------------------------------------------------------------------------------------------------------------------
Three Months Increase/
Ended March 31 (Decrease)
-----------------------------------------------------
(Dollars in millions) 2000 1999 Amount Percent
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consumer service charges $ 618 $ 603 $15 2.5 %
Corporate service charges 489 453 36 7.9
- --------------------------------------------------------------------------------------------------------------------
Total service charges 1,107 1,056 51 4.8
- --------------------------------------------------------------------------------------------------------------------
Consumer investment and brokerage services 364 311 53 17.0
Corporate investment and brokerage services 121 115 6 5.2
- --------------------------------------------------------------------------------------------------------------------
Total investment and brokerage services 485 426 59 13.8
- --------------------------------------------------------------------------------------------------------------------
Mortgage servicing income 128 132 (4) (3.0)
Investment banking income 397 233 164 70.4
Equity investment gains 563 155 408 n/m
Card income 484 394 90 22.8
Trading account profits 724 500 224 44.8
Other income 158 327 (169) (51.7)
- --------------------------------------------------------------------------------------------------------------------
Total $4,046 $3,223 $ 823 25.5 %
- --------------------------------------------------------------------------------------------------------------------
n/m = not meaningful
</TABLE>
o Service charges include deposit account service charges, non-deposit
service charges and fees, bankers' acceptances and letters of credit fees
and fees on factored accounts receivable. Service charges increased
$51 million to $1.1 billion for the three months ended March 31, 2000
compared to the same period in 1999, primarily due to higher levels of
corporate service charges which increased $36 million to $489 million
compared to the same 1999 period. The increase in corporate service charges
mainly reflected higher revenue from service charge fees on commercial
deposit accounts and treasury management fees. Consumer service charges
increased $15 million to $618 million as lower growth levels compared to
corporate service charges reflected the Corporation's efforts to
strengthen relationships with and reward valued customers by reducing or
waiving certain fees.
o Investment and brokerage services include personal and institutional
asset management fees, and consumer and corporate brokerage fees. Income
from investment and brokerage services was $485 million for the three
months ended March 31, 2000, an increase of $59 million over the same
period in 1999, primarily attributable to higher revenue from consumer
investment and brokerage services. Revenue from consumer investment and
brokerage services totaled $364 million for the three months ended March
31, 2000, an increase of $53 million compared to the respective 1999
period, primarily reflecting new business and market growth. Income from
corporate investment and brokerage services increased $6 million to $121
million for the three months ended March 31, 2000 over the comparable 1999
period.
o Mortgage servicing income decreased $4 million to $128 million for the
three months ended March 31, 2000 over the respective 1999 period,
primarily reflecting the effect of lower origination activity which was
partially offset by higher mortgage servicing fees and slower prepayment
speeds. The average managed portfolio of loans serviced increased $51.4
billion to $320.9 billion for the three months ended March 31, 2000 over
the comparable period in 1999. First mortgage loans originated through
the Corporation decreased $8.9 billion to $13.4 billion for the three
months ended March 31, 2000 compared to the respective period in 1999,
reflecting a slowdown in refinancings as a result of a
34
<PAGE>
general increase in levels of interest rates. Origination volume for the
three months ended March 31, 2000 was composed of approximately $5.0
billion of retail loans and $8.4 billion of correspondent and wholesale
loans.
In conducting its mortgage production activities, the Corporation is
exposed to interest rate risk for the period between the loan commitment
date and the loan funding date. To manage this risk, the Corporation enters
into various financial instruments including forward delivery and option
contracts. The notional amount of such contracts was $2.9 billion at March
31, 2000 with associated net unrealized losses of $12 million. At December
31, 1999, the notional amount of such contracts was $2.7 billion with
associated net unrealized gains of $18 million. These contracts have an
average expected maturity of less than 90 days. To manage risk associated
with changes in prepayment rates and the impact on mortgage servicing
rights, the Corporation uses various financial instruments including
options and certain swap contracts. At March 31, 2000, deferred net gains
from mortgage servicing rights hedging activity were $32 million, comprised
of unamortized realized deferred gains of $239 million and unrealized
losses of $207 million on closed and open positions, respectively. At
December 31, 1999, deferred net losses from mortgage servicing rights
hedging activity were $20 million, comprised of unamortized realized
deferred gains of $313 million and unrealized losses of $333 million on
closed and open positions, respectively. Notional amounts of hedge
instruments used for mortgage servicing rights hedging activities were
$44.7 billion and $43.4 billion at March 31, 2000 and December 31, 1999,
respectively.
o Investment banking income was $397 million for the three months ended
March 31, 2000, an increase of $164 million over the same 1999 period
reflecting the Corporation's continued growth and market share gains in
this business. Securities underwriting fees increased $107 million to
$179 million for the three months ended March 31, 2000, mainly due to
strong growth in equity underwriting which more than offset the slowdown
in the fixed income markets. Syndication fees increased $61 million to
$131 million for the three months ended March 31, 2000 compared to the
respective 1999 period, reflecting the Corporation's continued strong
position as lead arranger on syndications. Advisory services fees
increased $30 million to $72 million for the three months ended March 31,
2000 from the comparable 1999 period, primarily attributable to strong
revenue from a higher volume of large merger and acquisition deals.
Investment banking income by major activity follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Three Months Ended
March 31
--------------------------------
(Dollars in millions) 2000 1999
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Investment banking income
Securities underwriting $179 $72
Syndications 131 70
Advisory services 72 42
Other 15 49
- --------------------------------------------------------------------------------------------
Total $397 $233
- --------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
o Equity investment gains include investments in both principal investing and
strategic technology areas. Equity investment gains were $563 million for
the three months ended March 31, 2000, an increase of $408 million over the
respective 1999 period, reflecting realized returns on equity investments
of $374 million and appreciation in fair value of $189 million. The
realized returns on equity investments included $295 million primarily from
principal investing and a $79 million realized gain from an equity
investment in the strategic technology area.
o Card income includes merchant discount, ATM, checkcard and interchange
fees. Card income increased $90 million to $484 million for the three
months ended March 31, 2000 over the same 1999 period, primarily due to
higher levels of activity in debit cards, interchange fees and merchant
discounts. Card income included revenue of $39 million and $37 million from
the securitized portfolio for the three months ended March 31, 2000 and
1999, respectively.
o Trading account profits represent the net amount earned from the
Corporation's trading positions, which include trading account assets and
liabilities as well as derivative-dealer positions. These transactions
include positions to meet customer demand as well as for the Corporation's
own trading account. Trading positions are taken in a diverse range of
financial instruments and markets. The profitability of these trading
positions is largely dependent on the volume and type of transactions,
the level of risk assumed, and the volatility of price and rate movements.
Trading account profits, as reported in the Corporation's Consolidated
Statement of Income, includes neither the net interest recognized on
interest-earning and interest-bearing trading positions, nor the related
funding charge or benefit. Trading account profits, as well as
trading-related net interest income ("trading-related revenue") are
presented in the table below as they are both considered in evaluating
the overall profitability of the Corporation's trading positions.
Trading-related revenue is derived from foreign exchange spot, forward
and cross-currency contracts, fixed income and equity securities and
derivative contracts in interest rates, equities, credit and commodities.
Trading-related revenue was $941 million for the three months ended March
31, 2000, an increase of $274 million over the comparable period in 1999,
primarily due to higher revenues from interest rate contracts and equities,
partially offset by a decrease in fixed income. Income from interest rate
contracts increased $94 million to $308 million over the same 1999 period,
primarily attributable to market volatility driven by interest rate
uncertainty, coupled with stronger client activity in domestic and European
markets. Revenue from equities totaled $288 million, an increase of $201
million for the three months ended March 31, 2000 over the respective 1999
period, reflecting continued growth of this business through enhanced
client deal activity and volatility in equity markets. Fixed income
decreased $20 million to $171 million for the three months ended March 31,
2000 from the same period in 1999, primarily attributable to the negative
impact of spread widening on real estate trading.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Three Months Ended
March 31
- ---------------------------------------------------------------------------------------------
(Dollars in millions) 2000 1999
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Trading account profits - as reported $724 $500
Net interest income 217 167
- ---------------------------------------------------------------------------------------------
Total trading-related revenue $941 $667
- ---------------------------------------------------------------------------------------------
Trading-related revenue by product
Foreign exchange contracts $158 $158
Interest rate contracts 308 214
Fixed income 171 191
Equities 288 87
Commodities and other 16 17
- ---------------------------------------------------------------------------------------------
Total trading-related revenue $941 $667
- ---------------------------------------------------------------------------------------------
</TABLE>
o Other income was $158 million for the three months ended March 31, 2000, a
decrease of $169 million from the comparable 1999 period, reflecting no
significant items. Other income for the three months ended March 31, 1999
included securitizations gains, lower insurance commissions and gains on
the disposition of certain businesses compared to the same period in 2000.
36
<PAGE>
Other Noninterest Expense
As presented in Table Five, the Corporation's other noninterest expense
increased $170 million to $4.6 billion for the three months ended March 31, 2000
from the comparable 1999 period. This increase was attributable to higher levels
of personnel and other general operating expense, partially offset by declines
in equipment, data processing, marketing and professional fees expense.
<TABLE>
<CAPTION>
Table Five
Other Noninterest Expense
- --------------------------------------------------------------------------------------------
Three Months Increase/
Ended March 31 (Decrease)
- --------------------------------------------------------------------------------------------
(Dollars in millions) 2000 1999 Amount Percent
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Personnel $2,534 $2,333 $201 8.6 %
Occupancy 418 396 22 5.6
Equipment 301 358 (57) (15.9)
Marketing 119 147 (28) (19.0)
Professional fees 105 126 (21) (16.7)
Amortization of intangibles 217 222 (5) (2.3)
Data processing 159 190 (31) (16.3)
Telecommunications 131 136 (5) (3.7)
Other general operating 515 420 95 22.6
General administrative and other 124 125 (1) (.8)
- --------------------------------------------------------------------------------------------
Total $4,623 $4,453 $170 3.8 %
- --------------------------------------------------------------------------------------------
</TABLE>
o Personnel expense increased $201 million to $2.5 billion for the three
months ended March 31, 2000 compared to the same period in 1999, primarily
attributable to higher revenue-related incentive compensation.
o Equipment expense was $301 million for the three months ended March 31,
2000, a decrease of $57 million from the respective 1999 period, reflecting
declines in repairs and maintenance expense and purchases of
non-capitalized equipment.
o Marketing expense decreased $28 million to $119 million for the three
months ended March 31, 2000 compared to the respective 1999 period, due to
timing differences related to the underlying marketing efforts across the
Corporation.
o Professional fees declined $21 million to $105 million for the three months
ended March 31, 2000 from the comparable period in 1999, primarily
reflecting lower consulting fees.
o Data processing expense was $159 million for the three months ended March
31, 2000, a decrease of $31 million from the same 1999 period, mainly
reflecting a decline in expense due to the completion of Year 2000 and
certain transition projects and a decrease in item processing and check
clearing expense.
o Other general operating expense increased $95 million to $515 million for
the three months ended March 31, 2000 over the same period in 1999, mainly
a result of litigation costs related to pre-merger lawsuits and increased
credit card processing expense.
37
<PAGE>
Income Taxes
The Corporation's income tax expense for the three months ended March 31,
2000 was $1.3 billion for an effective tax rate of 36.6 percent compared to $1.1
billion for an effective tax rate of 36.0 percent for the same period in 1999.
Balance Sheet Review and Liquidity Risk Management
The Corporation utilizes an integrated approach in managing its balance
sheet, which includes management of interest rate sensitivity, credit risk,
liquidity risk and its capital position. With the exception of average managed
loans, the average balances discussed below can be derived from Table Three.
Average levels of customer-based funds increased $6.7 billion to $296.1
billion for the three months ended March 31, 2000, compared to $289.4 billion
for the three months ended March 31, 1999, primarily due to an increase in
demand and savings deposits. As a percentage of total sources, average levels of
customer-based funds decreased to 45 percent for the three months ended March
31, 2000 from 47 percent for the three months ended March 31,1999.
Average levels of market-based funds increased $22.2 billion for the three
months ended March 31, 2000 to $203.8 billion compared to $181.6 billion for the
three months ended March 31, 1999. In addition, average levels of long-term debt
increased $11.6 billion to $64.3 billion for the three months ended March 31,
2000 over the same period in 1999, mainly the result of borrowings to fund
earning asset growth, business development opportunities and share repurchases,
and to build liquidity and repay maturing debt.
The average securities portfolio for the three months ended March 31, 2000
increased $12.4 billion over the same period in 1999, representing 14 percent of
total uses of funds for the three months ended March 31, 2000, compared to 12
percent for the same period in 1999. See the following "Securities" section for
additional information on the securities portfolio.
Average loans and leases, the Corporation's primary use of funds, increased
$15.8 billion to $376.6 billion for the three months ended March 31, 2000
compared to $360.7 billion for the same period in 1999. Average managed loans
and leases during the same periods increased $34.2 billion to $405.5 billion in
2000. This increase in average managed loans and leases primarily reflects
growth and retention of residential mortgages and growth in consumer finance
loans due to the impact of the portfolio purchase program currently in place.
Average other assets and cash and cash equivalents increased $1.9 billion
to $87.8 billion for the three months ended March 31, 2000 compared to $85.9
billion for the same period in 1999, due largely to increases in the average
balances of derivative-dealer assets and mortgage servicing rights. These
increases were partially offset by a decrease in secured accounts receivable.
At March 31, 2000, cash and cash equivalents were $27.3 billion, an
increase of $270 million from December 31, 1999. During the three months ended
March 31, 2000, net cash used in operating activities was $5.5 billion, net cash
used in investing activities was $11.2 billion and net cash provided by
financing activities was $17.0 billion. For further information on cash flows,
see the Consolidated Statement of Cash Flows on page 5 of the consolidated
financial statements.
Liquidity is a measure of the Corporation's ability to fulfill its cash
requirements and is managed by the Corporation through its asset and liability
management process. The Corporation monitors its assets and liabilities and
modifies these positions as liquidity requirements change. This process, coupled
with the Corporation's ability to raise capital and debt financing, is designed
to cover the liquidity needs of the Corporation. The Corporation also takes into
consideration the ability of its subsidiary banks to pay dividends to the Bank
of America Corporation. For additional information on the dividend capabilities
of subsidiary banks, see Note Twelve on page 82 of the Corporation's 1999 Annual
Report on Form 10-K.
38
<PAGE>
Management believes that the Corporation's sources of
liquidity are more than adequate to meet its cash requirements.
Securities
The securities portfolio at March 31, 2000 consisted of available-for-sale
securities totaling $82.6 billion and held-for-investment securities totaling
$1.3 billion compared to $81.7 billion and $1.4 billion, respectively, at
December 31, 1999.
The valuation allowance for available-for-sale securities and marketable
equity securities included in shareholders' equity at March 31, 2000, reflects
unrealized losses of $2.3 billion, net of related income taxes of $1.3 billion,
primarily reflecting market valuation adjustments of $4.0 billion pre-tax net
unrealized losses on available-for-sale securities and $355 million pre-tax net
unrealized gains on marketable equity securities. The valuation allowance
included in shareholders' equity at December 31, 1999, reflects unrealized
losses of $2.5 billion, net of related income taxes of $1.1 billion, primarily
reflecting market valuation adjustments of $3.8 billion pre-tax net unrealized
losses on available-for-sale securities and $248 million pre-tax net unrealized
gains on marketable equity securities. The change in the valuation allowance was
primarily attributable to improvement in the equity markets during the first
three months of 2000. Unrealized losses on available-for-sale securities were
virtually unchanged as decreases in the long end of the U.S. Treasury yield
curve were offset by increases in short-term rates.
At March 31, 2000 and December 31, 1999, the market value of the
Corporation's held-for-investment securities reflected pre-tax net unrealized
losses of $113 million and $152 million, respectively.
The estimated average duration of the available-for-sale securities
portfolio was 4.06 years at March 31, 2000 compared to 4.05 years at December
31, 1999.
Capital Resources and Capital Management
Shareholders' equity at March 31, 2000 was $45.3 billion compared to $44.4
billion at December 31, 1999, an increase of $867 million. The increase was
primarily due to net earnings (net income less dividends) of $1.4 billion
combined with the recognition of $166 million after-tax net unrealized gains on
available-for-sale securities and marketable equity securities. The increase was
partially offset by the repurchase of 20 million shares of common stock for
approximately $911 million.
Presented below are the regulatory risk-based capital ratios and capital
amounts for the Corporation and Bank of America, N.A. at March 31, 2000 and
December 31, 1999. The Corporation and Bank of America, N.A. were considered
"well-capitalized" at March 31, 2000.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
March 31, 2000 December 31, 1999
------------------------------------------------------------
(Dollars in millions) Ratio Amount Ratio Amount
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tier 1 Capital
Bank of America Corporation 7.42 % $39,355 7.35 % $38,651
Bank of America, N.A. 7.95 39,687 7.78 38,616
Total Capital
Bank of America Corporation 11.00 58,376 10.88 57,192
Bank of America, N.A. 11.06 55,223 10.91 54,132
Leverage
Bank of America Corporation 6.17 39,355 6.26 38,651
Bank of America, N.A. 7.00 39,687 6.74 38,616
- -------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE>
The regulatory capital guidelines measure capital in relation to the credit
and market risks of both on- and off-balance sheet items using various risk
weights. Under the regulatory capital guidelines, Total Capital consists of
three tiers of capital. Tier 1 Capital includes common shareholders' equity and
qualifying preferred stock, less goodwill and other adjustments. Tier 2 Capital
consists of preferred stock not qualifying as Tier 1 Capital, mandatory
convertible debt, limited amounts of subordinated debt, other qualifying term
debt and the allowance for credit losses up to 1.25 percent of risk-weighted
assets. Tier 3 Capital includes subordinated debt that is unsecured, fully paid,
has an original maturity of at least two years, is not redeemable before
maturity without prior approval by the Federal Reserve Board and includes a
lock-in clause precluding payment of either interest or principal if the payment
would cause the issuing bank's risk-based capital ratio to fall or remain below
the required minimum. The sum of Tier 1 and Tier 2 Capital less investments in
unconsolidated banking and finance subsidiaries represents qualifying total
capital, at least 50 percent of which must consist of Tier 1 Capital. Risk-based
capital ratios are calculated by dividing Tier 1 and Total Capital by
risk-weighted assets. In calculating risk-weighed assets, assets and off-balance
sheet exposures are assigned to one of four categories of risk-weights, based
primarily on relative credit risk. At March 31, 2000, the Corporation had no
subordinated debt that qualified as Tier 3 Capital.
At March 31, 2000, the regulatory risk-based capital ratios of the
Corporation and Bank of America, N.A. exceeded the regulatory minimums of four
percent for Tier 1 risk-based capital ratio, eight percent for total risk-based
capital ratio and the leverage guidelines of 100 to 200 basis points above the
minimum ratio of three percent.
40
<PAGE>
Credit Risk Management and Credit Portfolio Review
The following section discusses credit risk in the loan portfolio. The
Corporation's primary credit exposure is focused in its loans and leases
portfolio, which totaled $382.1 billion and $370.7 billion at March 31, 2000 and
December 31, 1999, respectively. In an effort to minimize the adverse impact of
any single event or set of occurrences, the Corporation strives to maintain a
diverse credit portfolio. Table Six presents the distribution of loans and
leases by category. Additional information on the Corporation's real estate,
industry and foreign exposures can be found in the "Concentrations of Credit
Risk" section beginning on page 47.
<TABLE>
<CAPTION>
Table Six
Distribution of Loans and Leases
- -----------------------------------------------------------------------------------------------------
March 31, 2000 December 31, 1999
-------------------------------------------------------
(Dollars in millions) Amount Percent Amount Percent
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial - domestic $145,615 38.1 % $143,450 38.7 %
Commercial - foreign 27,926 7.3 27,978 7.5
Commercial real estate - domestic 24,741 6.5 24,026 6.5
Commercial real estate - foreign 359 .1 325 .1
- -----------------------------------------------------------------------------------------------------
Total commercial 198,641 52.0 195,779 52.8
- -----------------------------------------------------------------------------------------------------
Residential mortgage 89,574 23.4 81,860 22.1
Home equity lines 18,062 4.7 17,273 4.7
Direct/Indirect consumer 41,398 10.8 42,161 11.4
Consumer finance 23,585 6.2 22,326 6.0
Bankcard 8,609 2.3 9,019 2.4
Foreign consumer 2,216 .6 2,244 .6
- -----------------------------------------------------------------------------------------------------
Total consumer 183,444 48.0 174,883 47.2
- -----------------------------------------------------------------------------------------------------
Total loans and leases $382,085 100.0 % $370,662 100.0 %
- -----------------------------------------------------------------------------------------------------
</TABLE>
Commercial Portfolio
Commercial - domestic loans outstanding totaled $145.6 billion and $143.5
billion at March 31, 2000 and December 31, 1999, respectively, or 38 percent and
39 percent of total loans and leases, respectively. The Corporation had
commercial - domestic loan net charge-offs of $172 million, or 0.47 percent of
average commercial - domestic loans for the three months ended March 31, 2000,
compared to $181 million, or 0.53 percent of average commercial - domestic loans
for the three months ended March 31, 1999. Nonperforming commercial - domestic
loans were $1.3 billion, or 0.89 percent of commercial - domestic loans at March
31, 2000, compared to $1.2 billion, or 0.81 percent of commercial - domestic
loans at December 31, 1999. Commercial - domestic loans past due 90 days or more
and still accruing interest were $136 million at March 31, 2000, compared to
$135 million at December 31, 1999, or 0.09 percent of commercial - domestic
loans for both periods. Table Eleven presents aggregate commercial loan and
lease exposures by certain significant industries.
Commercial - foreign loans outstanding totaled $27.9 billion and $28.0
billion at March 31, 2000 and December 31, 1999, respectively, or seven percent
and eight percent of total loans and leases, respectively. The Corporation had
commercial - foreign loan net charge-offs for the three months ended March 31,
2000 of $5 million, or 0.08 percent of average commercial - foreign loans,
compared to $29 million, or 0.37 percent of average commercial - foreign loans
for the three months ended March 31, 1999. Nonperforming commercial foreign
loans were $500 million, or 1.79 percent of commercial - foreign loans at March
31, 2000, compared to $486 million, or 1.74 percent at December 31, 1999.
Commercial - foreign loans past due 90 days or more and still accruing interest
were $35 million, or 0.13 percent of commercial - foreign loans at March 31,
2000, compared to $58 million, or 0.21
41
<PAGE>
percent of commercial - foreign loans at December 31, 1999. For additional
information see the Regional Foreign Exposure discussion beginning on page 48.
Commercial real estate - domestic loans totaled $24.7 billion and $24.0
billion at March 31, 2000 and December 31, 1999, respectively, or seven percent
of total loans and leases for both period ends. At March 31, 2000, commercial
real estate - domestic loans past due 90 days or more and still accruing
interest were $7 million, or 0.03 percent of total commercial real estate -
domestic loans, compared to $6 million, or 0.02 percent at December 31, 1999.
Table Ten displays commercial real estate loans by geographic region and
property type, including the portion of such loans which are nonperforming, and
other real estate credit exposures.
Consumer Portfolio
At March 31, 2000 and December 31, 1999, total domestic consumer loans
outstanding totaled $181.2 billion and $172.6 billion, respectively, or 47
percent of total loans and leases for both period ends. Additional information
on the Corporation's consumer loan portfolio can be found in the average earning
asset discussion within the "Net Interest Income" section on page 30 and
"Balance Sheet Review and Liquidity Risk Management" section on page 38.
Residential mortgage loans increased to $89.6 billion at March 31, 2000,
compared to $81.9 billion at December 31, 1999. Net charge-offs on residential
mortgage loans remained negligible at $4 million, or 0.02 percent of average
residential mortgage loans for the three months ended March 31, 2000.
Nonperforming residential mortgage loans were $483 million at March 31, 2000,
down $46 million from December 31, 1999.
Bankcard receivables decreased to $8.6 billion at March 31, 2000, compared
to $9.0 billion at December 31, 1999. Net charge-offs on bankcard receivables
for the three months ended March 31, 2000 declined $74 million from the same
period in 1999 to $81 million, or 3.86 percent of average bankcard receivables.
The decline resulted from portfolio sales in 1999 and continued declines in
delinquency levels and bankruptcy filing rates resulting in lower charge-offs.
Bankcard loans past due 90 days and still accruing interest were $131 million,
or 1.53 percent of bankcard receivables at March 31, 2000, compared to $138
million, or 1.53 percent at December 31, 1999.
Consumer finance loans outstanding totaled $23.6 billion and $22.3 billion
at March 31, 2000 and December 31, 1999, respectively, or six percent of total
loans and leases for both period ends. The Corporation had consumer finance net
charge-offs of $57 million or 1.01 percent of average consumer finance loans for
the three months ended March 31, 2000, compared to $48 million, or 1.22 percent
for the three months ended March 31, 1999. Consumer finance nonperforming loans
increased to $737 million at March 31, 2000 from $598 million at December 31,
1999 reflecting continued growth and seasoning in this portfolio.
Other domestic consumer loans, which include direct and indirect consumer
loans and home equity lines of credit increased to $59.5 billion at March 31,
2000, compared to $59.4 billion at December 31, 1999.
Total consumer loans past due 90 days or more and still accruing interest
were $283 million, or 0.15 percent of total consumer loans at March 31, 2000,
compared to $322 million, or 0.18 percent at December 31, 1999.
42
<PAGE>
Nonperforming Assets
As presented in Table Seven, nonperforming assets increased to $3.5
billion, or 0.91 percent of loans, leases and foreclosed properties at March 31,
2000 from $3.2 billion, or 0.86 percent at December 31, 1999. Nonperforming
loans increased to $3.3 billion at March 31, 2000 from $3.0 billion at December
31, 1999, primarily due to several large commercial - domestic loans and higher
consumer finance non-performers due to growth and seasoning in that portfolio.
The allowance coverage of nonperforming loans was 207 percent at March 31, 2000
compared to 224 percent at December 31, 1999.
In order to respond when deterioration of a credit occurs, internal loan
workout units are devoted to providing specialized expertise and full-time
management and/or collection of certain nonperforming assets as well as certain
performing loans. Management believes concerted collection strategies and a
proactive approach to managing overall problem assets have expedited the
disposition, collection and renegotiation of nonperforming and other
lower-quality assets. As part of this process, management routinely evaluates
all reasonable alternatives, including the sale of assets individually or in
groups, and selects the optimal strategy.
At March 31, 2000 and December 31, 1999, residential mortgage loans
comprised 15 percent and 17 percent, respectively, of total nonperforming
assets. Due to the nature of the collateral securing residential mortgage loans
and a history of low losses, the Corporation considers these loans to be low
risk nonperforming assets.
Foreclosed properties increased to $179 million at March 31, 2000
compared to $163 million at December
31, 1999.
Note Four of the consolidated financial statements on page 10 provides the
reported investment in specific loans considered to be impaired at March 31,
2000 and December 31, 1999. The Corporation's investment in specific loans that
were considered to be impaired at March 31, 2000 were $2.2 billion, compared to
$2.1 billion at December 31, 1999. Commercial - domestic impaired loans
increased $153 million to $1.3 billion at March 31, 2000, compared to December
31, 1999, due to several large commercial - domestic loans. Both commercial -
foreign and commercial real estate - domestic impaired loans remained
essentially unchanged at $0.5 billion at March 31, 2000 and December 31, 1999.
<TABLE>
<CAPTION>
Table Seven
Nonperforming Assets
- -------------------------------------------------------------------------------------------------------------------------
March 31 December 31 September 30 June 30 March 31
(Dollars in millions) 2000 1999 1999 1999 1999
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial - domestic $1,301 $1,163 $1,026 $1,085 $1,085
Commercial - foreign 500 486 477 492 434
Commercial real estate - domestic 208 191 174 203 272
Commercial real estate - foreign 3 3 3 3 3
- -------------------------------------------------------------------------------------------------------------------------
Total commercial 2,012 1,843 1,680 1,783 1,794
- -------------------------------------------------------------------------------------------------------------------------
Residential mortgage 483 529 542 565 634
Home equity lines 45 46 44 44 41
Direct/Indirect consumer 18 19 16 17 20
Consumer finance 737 598 519 382 332
Foreign consumer 7 7 9 21 17
- -------------------------------------------------------------------------------------------------------------------------
Total consumer 1,290 1,199 1,130 1,029 1,044
- -------------------------------------------------------------------------------------------------------------------------
Total nonperforming loans 3,302 3,042 2,810 2,812 2,838
- -------------------------------------------------------------------------------------------------------------------------
Foreclosed properties 179 163 228 258 282
- -------------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $3,481 $3,205 $3,038 $3,070 $3,120
- -------------------------------------------------------------------------------------------------------------------------
Nonperforming assets as a percentage of:
Total assets .53 % .51 % .49 % .50 % .51 %
Loans, leases and foreclosed
properties .91 .86 .84 .84 .86
Loans past due 90 days or more and not
classified as nonperforming $ 461 $521 $466 $631 $571
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE>
Net Charge-offs - Net charge-offs by loan category are presented in Table
Eight.
<TABLE>
<CAPTION>
Table Eight
Net Charge-offs in Dollars and as a Percentage of Average Loans and Leases Outstanding (1)
- ------------------------------------------------------------------------------------------------------------------------
Three Months
Ended March 31
------------------------------------------
(Dollars in millions) 2000 1999
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial - domestic $172 .47 % $181 .53 %
Commercial - foreign 5 .08 29 .37
Commercial real estate - domestic 6 .10 (2) n/m
Commercial real estate - foreign (2) n/m - -
- ------------------------------------------------------------------------------------------------------------------------
Total commercial 181 .37 208 .43
- ------------------------------------------------------------------------------------------------------------------------
Residential mortgage 4 .02 5 .03
Home equity lines 3 .07 4 .10
Direct/Indirect consumer 91 .88 95 .93
Consumer finance 57 1.01 48 1.22
Bankcard 81 3.86 155 5.63
Other consumer - domestic 2 - - -
Foreign consumer 1 .12 4 .43
- ------------------------------------------------------------------------------------------------------------------------
Total consumer 239 .54 311 .77
- ------------------------------------------------------------------------------------------------------------------------
Total net charge-offs $420 .45 % $519 .58 %
- ------------------------------------------------------------------------------------------------------------------------
Managed bankcard net charge-offs and ratios (2) $257 5.43 % $294 6.01 %
- ------------------------------------------------------------------------------------------------------------------------
n/m = not meaningful
(1) Percentage amounts are calculated as net charge-offs divided by average outstanding loans and leases for each loan category.
(2) Includes both on-balance sheet and securitized loans.
</TABLE>
Allowance for Credit Losses
The Corporation performs periodic and systematic detailed reviews of its
loan and lease portfolios to identify risks inherent in and to assess the
overall collectibility of those portfolios. Certain homogeneous loan portfolios
are evaluated collectively based on individual loan type, while remaining
portfolios are reviewed on an individual loan basis. These detailed reviews,
combined with historical loss experience and other factors, result in the
identification and quantification of specific allowances for credit losses and
loss factors which are used in determining the amount of the allowance and
related provision for credit losses. The actual amount of incurred credit losses
that may be confirmed may vary from the estimate of incurred losses due to
changing economic conditions or changes in industry or geographic
concentrations. The Corporation has procedures in place to monitor differences
between estimated and actual incurred credit losses, which include detailed
periodic assessments by senior management of both individual loans and credit
portfolios and the models used to estimate incurred credit losses in those
portfolios.
Portions of the allowance for credit losses are assigned to cover the
estimated probable incurred losses in each loan and lease category based on the
results of the Corporation's detailed review process as described above. Further
assignments are made based on general and specific economic conditions, as well
as performance trends within specific portfolio segments and individual
concentrations of credit, including geographic and industry concentrations. The
assigned portion of the allowance for credit losses continues to be weighted
toward the commercial loan portfolio, reflecting a higher level of nonperforming
loans and the potential for higher individual losses. The remaining unassigned
portion of the allowance for credit losses, determined separately from the
procedures outlined above, addresses certain industry and geographic
concentrations, including global economic conditions, thereby minimizing the
risk related to the margin of imprecision inherent in the estimation of the
assigned allowance for credit losses. Due to the subjectivity involved in the
determination of the unassigned portion of the allowance for credit losses, the
relationship of the unassigned component to the total allowance for credit
losses may fluctuate from period to period. Management evaluates the adequacy of
the allowance for credit losses based on the combined total of the assigned and
unassigned components and believes that the allowance for credit losses reflects
management's best estimate of incurred credit losses as of the balance sheet
date.
<PAGE>
The nature of the process by which the Corporation determines the
appropriate allowance for credit losses requires the exercise of considerable
judgment. After review of all relevant matters affecting loan collectibility,
management believes that the allowance for credit losses is appropriate given
44
<PAGE>
its analysis of estimated incurred credit losses at March 31, 2000. Table Nine
provides the changes in the allowance for credit losses for the three months
ended March 31, 2000.
45
<PAGE>
<TABLE>
<CAPTION>
Table Nine
Allowance For Credit Losses
- ------------------------------------------------------------------------------------------------------
Three Months
Ended March 31
-------------------------------
(Dollars in millions) 2000 1999
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance, January 1 $ 6,828 $ 7,122
Loans and leases charged off
Commercial - domestic (202) (206)
Commercial - foreign (12) (30)
Commercial real estate - domestic (8) (2)
- ------------------------------------------------------------------------------------------------------
Total commercial (222) (238)
- ------------------------------------------------------------------------------------------------------
Residential mortgage (7) (7)
Home equity lines (5) (6)
Direct/Indirect consumer (146) (140)
Consumer finance (93) (98)
Bankcard (94) (172)
Other consumer domestic (2) -
Foreign consumer (1) (5)
- ------------------------------------------------------------------------------------------------------
Total consumer (348) (428)
- ------------------------------------------------------------------------------------------------------
Total loans and leases charged off (570) (666)
- ------------------------------------------------------------------------------------------------------
Recoveries of loans and leases previously charged off
Commercial - domestic 30 25
Commercial - foreign 7 1
Commercial real estate - domestic 2 4
Commercial real estate - foreign 2 -
- ------------------------------------------------------------------------------------------------------
Total commercial 41 30
- ------------------------------------------------------------------------------------------------------
Residential mortgage 3 2
Home equity lines 2 2
Direct/Indirect consumer 55 45
Consumer finance 36 50
Bankcard 13 17
Foreign consumer - 1
- ------------------------------------------------------------------------------------------------------
Total consumer 109 117
- ------------------------------------------------------------------------------------------------------
Total recoveries of loans and leases previously charged off 150 147
- ------------------------------------------------------------------------------------------------------
Net charge-offs (420) (519)
- ------------------------------------------------------------------------------------------------------
Provision for credit losses 420 510
Other, net (1) 10
- ------------------------------------------------------------------------------------------------------
Balance, March 31 $ 6,827 $ 7,123
- ------------------------------------------------------------------------------------------------------
Loans and leases outstanding at March 31 $382,085 $363,102
Allowance for credit losses as a percentage of
loans and leases outstanding at March 31 1.79 % 1.96 %
Average loans and leases outstanding during the period $376,584 $360,746
Annualized net charge-offs as a percentage of average loans
and leases outstanding during the period .45 % .58 %
Allowance for credit losses as a percentage of
nonperforming loans at end of period 206.79 250.99
- ------------------------------------------------------------------------------------------------------
</TABLE>
46
<PAGE>
Concentrations of Credit Risk
In an effort to minimize the adverse impact of any single event or set of
occurrences, the Corporation strives to maintain a diverse credit portfolio as
outlined in Tables Ten, Eleven and Twelve.
The exposures presented in Table Ten represent credit extensions for real
estate-related purposes to borrowers or counterparties who are primarily in the
real estate development or investment business and for which the ultimate
repayment of the credit is dependent on the sale, lease, rental or refinancing
of the real estate. The exposures included in the table do not include credit
extensions which were made on the general creditworthiness of the borrower for
which real estate was obtained as security and for which the ultimate repayment
of the credit is not dependent on the sale, lease, rental or refinancing of the
real estate. Accordingly, the exposures presented do not include commercial
loans secured by owner-occupied real estate, except where the borrower is a real
estate developer.
<TABLE>
<CAPTION>
Table Ten
Commercial Real Estate Loans, Foreclosed Properties
and Other Real Estate Credit Exposures
- ----------------------------------------------------------------------------------------------------------------------
March 31, 2000
Other
Loans Foreclosed Credit
--------------------------------------
(Dollars in millions) Outstanding Nonperforming Properties (1) Exposures (2)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
By Geographic Region (3)
California $5,515 $ 8 $13 $641
Southwest 3,783 25 2 476
Northwest 2,763 2 1 102
Florida 2,446 25 3 347
Midwest 2,239 60 31 314
Mid-Atlantic 1,617 28 1 276
Carolinas 1,273 9 3 33
Midsouth 1,190 3 2 118
Northeast 640 17 - 256
Other states 897 31 10 93
Non-US 370 3 - -
Geographically diversified 2,367 - - -
- ------------------------------------------------------------------------------------------------------------------------
Total $25,100 $211 $66 $2,656
- ------------------------------------------------------------------------------------------------------------------------
By Property Type
Apartments $4,857 $46 $1 $ 748
Office buildings 4,792 25 3 208
Shopping centers/retail 3,185 27 25 414
Residential 3,106 27 3 248
Industrial/warehouse 2,110 17 6 57
Land and land development 1,254 11 11 148
Hotels/motels 1,229 17 - 131
Unsecured 734 1 2 3
Miscellaneous commercial 711 4 12 24
Multiple use 664 2 - 44
Non-US 370 - - -
Other 2,088 34 3 631
- ------------------------------------------------------------------------------------------------------------------------
Total $25,100 $211 $66 $2,656
- ------------------------------------------------------------------------------------------------------------------------
(1) Foreclosed properties include commercial real estate loans only.
(2) Other credit exposures include letters of credit and loans held for sale.
(3) Distribution based on geographic location of collateral.
</TABLE>
47
<PAGE>
Table Eleven below presents aggregate commercial loan and lease exposures
by certain significant industries at March 31, 2000.
<TABLE>
<CAPTION>
Table Eleven
Significant Industry Loans and Leases (1)
- ------------------------------------------------------------------------
March 31, 2000
(Dollars in millions) Outstanding
- ------------------------------------------------------------------------
<S> <C>
Transportation $11,486
Media 9,098
Equipment and general manufacturing 8,555
Healthcare 8,467
Business services 8,401
Agribusiness 8,079
Retail 7,119
Autos 6,655
Oil and gas 6,249
Telecommunications 5,232
- ------------------------------------------------------------------------
(1) Includes only non-real estate commercial loans and leases.
</TABLE>
Regional Foreign Exposure
Through its credit and market risk management activities, the Corporation
has been devoting particular attention to those countries that have been
negatively impacted by global economic pressure, including particular attention
to those Asian countries that have experienced currency and other economic
problems, as well as countries within Latin America and Eastern Europe which
have also recently experienced problems.
In connection with its efforts to maintain a diversified portfolio, the
Corporation limits its exposure to any one geographic region or country and
monitors this exposure on a continuous basis. Table Twelve sets forth selected
regional foreign exposure at March 31, 2000. At March 31, 2000, the
Corporation's total exposure to these select countries was $27.5 billion, a
decrease of $272 million from December 31, 1999.
Table Twelve presents the Corporation's selected regional foreign exposure
at March 31, 2000. The following table is based on the Federal Financial
Institutions Examination Council's instructions for periodic reporting of
foreign exposures. The table has been expanded to include "Gross Local Country
Claims" as defined in the table below and may not be consistent with disclosures
by other financial institutions.
48
<PAGE>
<TABLE>
<CAPTION>
Table Twelve
Regional Foreign Exposure
- --------------------------------------------------------------------------------------------------------------------------------
Increase Increase
Total Gross Other Total (Decrease) (Decrease)
Cross- Local Cross- Exposure from from
Border Country Border March 31, December 31, December 31,
(Dollars in millions) Loans Claims (1) Claims (2) 2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Region/Country
Asia
China $ 84 $ 96 $ 335 $ 515 $ 159 $ 66
Hong Kong 57 4,060 292 4,409 90 (779)
India 579 1,238 234 2,051 67 (467)
Indonesia 319 88 65 472 (50) (251)
Japan 168 1,108 2,112 3,388 (413) (1,673)
Korea (South) 326 925 1,039 2,290 152 411
Malaysia - 571 47 618 28 (110)
Pakistan 12 294 21 327 4 (25)
Philippines 185 149 115 449 (54) (134)
Singapore 88 1,084 306 1,478 186 (528)
Taiwan 233 628 137 998 37 (1,292)
Thailand 63 482 85 630 22 (320)
Other 3 116 11 130 (20) (23)
- ---------------------------------------------------------------------------------------------------------------------------------
Total 2,117 10,839 4,799 17,755 208 (5,125)
- ---------------------------------------------------------------------------------------------------------------------------------
Central and Eastern Europe
Russian Federation 7 - 4 11 (7) (49)
Turkey 144 - 103 247 29 (218)
Other 82 46 101 229 (6) (10)
- --------------------------------------------------------------------------------------------------------------------------------
Total 233 46 208 487 16 (277)
- --------------------------------------------------------------------------------------------------------------------------------
Latin America
Argentina 557 258 153 968 (170) (299)
Brazil 985 725 765 2,475 (33) (943)
Chile 751 220 91 1,062 63 (589)
Colombia 333 33 90 456 (36) (342)
Mexico 1,437 200 1,906 3,543 (332) (1,395)
Venezuela 136 18 258 412 (1) (145)
Other 190 - 170 360 13 (70)
- --------------------------------------------------------------------------------------------------------------------------------
Total 4,389 1,454 3,433 9,276 (496) (3,783)
- --------------------------------------------------------------------------------------------------------------------------------
Total $6,739 $12,339 $8,440 $27,518 $(272) $(9,185)
- --------------------------------------------------------------------------------------------------------------------------------
(1) Includes the following claims by the Corporation's foreign offices on local country residents regardless of the currency: loans,
accrued interest receivable, acceptances, time deposits placed, trading account assets, other interest-earning investments,
other short-term monetary assets, unused commitments, standby letters of credit, commercial letters of credit, formal
guarantees, and available-for-sale (at fair value) and held-for-investment (at cost) securities.
(2) All instruments in (1) that are cross-border claims excluding loans but including derivative-dealer assets (at fair value) and
available-for-sale (at fair value) and held-for-investment (at cost) securities that are collateralized by U.S. Treasury
securities as follows: Mexico - $1,149, Venezuela - $174, Philippines - $22 and Latin America Other - $77. Held-for-investment
securities (at cost) amounted to $772 with a fair value of $648.
</TABLE>
International Developments
During 1997, 1998 and part of 1999, a number of countries in Asia, Latin
America and Central and Eastern Europe experienced economic difficulties due to
a combination of structural problems and negative market reaction that resulted
from increased awareness of these problems. While each country's situation is
unique, many share common factors such as: (1) government actions which restrain
normal functioning of free markets in physical goods, capital and/or currencies;
(2) perceived weaknesses of the banking systems; and (3) perceived overvaluation
of local currencies and/or pegged exchange rate systems. These factors resulted
in capital movement out of these countries or in reduced capital inflows, and,
as a result, many of these countries experienced liquidity problems in addition
to the structural problems.
49
<PAGE>
Since 1999 and into the first quarter of 2000, many of the Asian economies
have been showing signs of recovery from prior troubles and are slowly
implementing structural reforms. However, there can be no assurance that this
will continue and setbacks could be expected. Since early 1999, several Latin
American economies have replaced their pegged exchange rate systems with
free-floating currencies. While sustained recovery is not assured, much of Latin
America is showing signs of recovery.
Where appropriate, the Corporation has adjusted its activities (including
its borrower selection) in light of the risks and opportunities discussed above.
Throughout 1999, the Corporation continued to reduce its exposure in Asia, Latin
America and Central and Eastern Europe, adjusting to the changing economic
conditions. During the first quarter of 2000, exposure in Latin America
continued to decrease while exposure in Asia and Central and Eastern Europe
increased slightly. The increases in exposure in Asia were mostly in the
countries experiencing a stronger economic recovery. The Corporation will
continue to monitor and adjust its foreign activities on a country-by-country
basis depending on management's judgment of the likely developments in each
country and will take action as deemed appropriate.
50
<PAGE>
Market Risk Management
In the normal course of conducting its business activities, the Corporation
is exposed to market risks including price and liquidity risk. Market risk is
the potential of loss arising from adverse changes in market rates and prices,
such as interest rates (interest rate risk), foreign currency exchange rates
(foreign exchange risk), commodity prices (commodity risk) and prices of equity
securities (equity risk). Financial products that expose the Corporation to
market risk include securities, loans, deposits, debt and derivative financial
instruments such as futures, forwards, swaps, options and other financial
instruments with similar characteristics. Liquidity risk arises from the
possibility that the Corporation may not be able to satisfy current or future
financial commitments or that the Corporation may be more reliant on alternative
funding sources such as long-term debt.
Market risk is managed by the Corporation's Finance Committee, which
formulates policy based on desirable levels of market risk. In setting desirable
levels of market risk, the Finance Committee considers the impact on both
earnings and capital of the current outlook in market rates, potential changes
in market rates, world and regional economies, liquidity, business strategies
and other factors.
Trading Portfolio
The table below sets forth the calculated value-at-risk (VAR) amounts for
the twelve months ended March 31, 2000 and March 31, 1999. The amounts are
calculated on a pre-tax basis. The Corporation performs the VAR calculation for
each major trading portfolio segment on a daily basis. It then calculates the
combined VAR across these portfolio segments using two different sets of
assumptions. The first calculation assumes that each portfolio segment
experiences adverse price movements at the same time (i.e., the price movements
are perfectly correlated). The second calculation assumes that these adverse
price movements within the major portfolio segments do not occur at the same
time (i.e., they are uncorrelated). Interest rate and foreign exchange risks
were generally lower for the twelve months ended March 31, 2000 than for the
twelve months ended March 31, 1999 due to the decreased emphasis on proprietary
risk-taking and the establishment of the Euro as a currency. Equity risk was
generally higher for the twelve months ended March 31, 2000 than for the twelve
months ended March 31, 1999 due to growth in the equity business. For additional
discussion of market risk associated with the trading portfolio, the VAR model
and how the Corporation manages its exposure to market risk, see pages 42 and 43
of the Corporation's 1999 Annual Report on Form 10-K. The composition of the
trading portfolio and the related fair value are included in Note Three of the
consolidated financial statements on page 8.
<TABLE>
<CAPTION>
Trading Activities Market Risk
- ------------------------------------------------------------------------------------------------------------------------------------
Twelve Months Ended March 31, 2000 Twelve Months Ended March 31, 1999
-------------------------------------------------------------------------------------------
(U.S. dollar equivalents in millions) Average VAR High VAR(1) Low VAR (1) Average VAR High VAR (1) Low VAR (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Based on perfect positive correlation
Interest rate $77.6 $93.6 $66.9 $120.3 $163.8 $91.5
Foreign currency 13.8 23.5 8.5 24.0 45.9 7.9
Commodities 2.0 6.4 0.6 3.3 6.9 0.9
Equity 18.6 36.2 7.6 4.9 10.9 1.0
Based on zero correlation
Interest rate 23.7 27.8 18.6 37.1 49.9 24.8
Foreign currency 11.5 21.7 6.9 20.4 40.0 6.1
Commodities 1.6 5.8 0.5 2.5 5.3 0.6
Equity 17.6 35.1 6.7 3.9 9.5 1.0
- ------------------------------------------------------------------------------------------------------------------------------------
(1) The high and low for the entire trading account may not equal the sum of the individual components as the highs or lows of the
components
</TABLE>
51
<PAGE>
Asset and Liability Management Activities
Non-Trading Portfolio
The Corporation's Asset and Liability Management (ALM) process is used to
manage interest rate risk through the structuring of balance sheet and
off-balance sheet portfolios and identifying and linking such off-balance sheet
positions to specific assets and liabilities. Interest rate risk represents the
only material market risk exposure to the Corporation's non-trading on-balance
sheet financial instruments.
Available-for-sale securities had an unrealized loss of $4.0 billion at
March 31, 2000, compared to an unrealized loss of $3.8 billion at December 31,
1999. The expected maturities, unrealized gains and losses and weighted average
effective yield and rate associated with the Corporation's other significant
non-trading on-balance sheet financial instruments at March 31, 2000 were not
significantly different from those at December 31, 1999. For a discussion of
non-trading on-balance sheet financial instruments, see page 43 and Table
Eighteen on page 44 of the "Market Risk Management" section of the Corporation's
1999 Annual Report on Form 10-K.
Interest Rate and Foreign Exchange Contracts
Risk management interest rate contracts and foreign exchange contracts are
utilized in the ALM process. Interest rate contracts, which are generally
non-leveraged generic interest rate and basis swaps, options, futures and
forwards, allow the Corporation to effectively manage its interest rate risk
position. In addition, the Corporation uses foreign currency contracts to manage
the foreign exchange risk associated with foreign-denominated assets and
liabilities, as well as the Corporation's equity investments in foreign
subsidiaries. As reflected in Table Thirteen, the notional amount of the
Corporation's receive fixed and pay fixed interest rate swaps at March 31, 2000
was $61.3 billion and $28.3 billion, respectively. The receive fixed interest
rate swaps are primarily converting variable-rate commercial loans to
fixed-rate. The net receive fixed position at March 31, 2000 was $33.0 billion
notional compared to $37.3 billion notional at December 31, 1999. The
Corporation had $7.8 billion notional and $8.0 billion notional of basis swaps
at March 31, 2000 and December 31, 1999, respectively, linked primarily to loans
and long-term debt. The Corporation had $37.7 billion notional and $35.1 billion
notional of option products at March 31, 2000 and December 31, 1999,
respectively. In addition, open foreign exchange contracts at March 31, 2000 had
a notional amount of $5.2 billion compared to $6.2 billion at December 31, 1999.
Table Thirteen also summarizes the estimated duration, weighted average
receive and pay rates and the net unrealized gains and losses at March 31, 2000
and December 31, 1999 of the Corporation's open ALM interest rate swaps, as well
as the average estimated duration and net unrealized gains and losses at March
31, 2000 and December 31, 1999 of the Corporation's ALM basis swaps, options,
futures and forward rate and foreign exchange contracts. Unrealized gains and
losses are based on the last repricing and will change in the future primarily
based on movements in one-, three- and six-month LIBOR rates. The ALM swap
portfolio had a net unrealized loss of $1.7 billion and $1.6 billion at March
31, 2000 and December 31, 1999, respectively. The change was primarily
attributable to an increase in interest rates. The ALM option products had a net
unrealized gain of $13 million and $5 million at March 31, 2000 and December 31,
1999, respectively. At March 31, 2000 and December 31, 1999, open foreign
exchange contracts had a net unrealized loss of $67 million and $30 million,
respectively.
The amount of unamortized net realized deferred gains associated with
closed ALM swaps was $112 million and $174 million at March 31, 2000 and
December 31, 1999, respectively. The amount of unamortized net realized deferred
gains associated with closed ALM options was $72 million and $82 million at
March 31, 2000 and December 31, 1999, respectively. The amount of unamortized
net realized deferred losses associated with closed ALM futures and forward
contracts was $20 million and $21 million at March 31, 2000 and December 31,
1999, respectively. There were no unamortized net realized deferred gains or
losses associated with closed foreign exchange contracts at March 31, 2000 and
December 31, 1999.
52
<PAGE>
Management believes the fair value of the ALM interest rate and foreign
exchange portfolios should be viewed in the context of the overall balance
sheet, and the value of any single component of the balance sheet or off-balance
sheet positions should not be viewed in isolation.
For a discussion of the Corporation's management of risk associated with
mortgage production and servicing activities, see the "Noninterest Income"
section on page 34. See Note Six of the consolidated financial statements on
page 12 for information on the Corporation's ALM contracts.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
March 31, 2000
Expected Maturity Average
-----------------------------------------------------------------------
(Dollars in millions, average Fair After Estimated
estimated duration in years) Value Total 2000 2001 2002 2003 2004 2004 Duration
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Open interest rate contracts
Total receive fixed swaps $(1,905) 2.93
Notional value $61,295 $7,846 $11,632 $1,916 $12,944 $ 7,086 $19,871
Weighted average receive rate 6.25 % 6.21 % 6.43 % 6.95 % 5.60 % 6.28 % 6.47 %
Total pay fixed swaps 228 1.97
Notional value $28,341 $4,910 $9,743 $5,925 $2,514 $718 $4,531
Weighted average pay rate 6.76 % 6.71 % 6.60 % 6.91 % 7.10 % 7.46 % 6.67 %
Basis swaps (2)
- ----------------------------------------------------
Notional value $7,787 $463 $ 595 $1,669 $4,913 $ - $ 147
Total swaps (1,679)
- ----------------------------------------------------
Option products 13
Notional amount $37,680 $635 $2,087 $ 868 $1,950 $15,661 $16,479
Futures and forward rate contracts (3)
Notional amount $ 884 $884 $ - $ - $ - $ - $ -
- ----------------------------------------------------
Total open interest rate contracts (1,669)
Closed interest rate contracts(1) 164
- ----------------------------------------------------
Net interest rate contract position (1,505)
- ----------------------------------------------------
Open foreign exchange contracts (67)
Notional amount $5,247 $244 $1,499 $1,464 $ 112 $ 616 $1,312
- ----------------------------------------------------
Total ALM contracts $(1,572)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1999
Expected Maturity Average
-----------------------------------------------------------------------
(Dollars in millions, average Fair After Estimated
estimated duration in years) Value Total 2000 2001 2002 2003 2004 2004 Duration
- ------------------------------------------------------------------------------------------------------------------------------------
Open interest rate contracts
Total receive fixed swaps $(1,747) 2.75
Notional amount $63,002 $13,539 $11,493 $1,637 $12,894 $7,104 $16,335
Weighted average receive rate 6.15 % 5.98 % 6.43 % 6.88 % 5.60 % 6.57 % 6.28 %
Total pay fixed swaps 115 2.11
Notional amount $25,701 $6,893 $8,232 $3,175 $2,475 $ 719 $4,207
Weighted average pay rate 6.68 % 6.84 % 6.57 % 6.23 % 7.10 % 7.46 % 6.61 %
Basis swaps (6)
- ----------------------------------------------------
Notional amount $7,971 $ 743 $ 601 $1,669 $4,958 $ - $ -
Total swaps (1,638)
- ----------------------------------------------------
Option products 5
Notional amount $35,134 $ 505 $2,088 $ 868 $1,950 $15,661 $14,062
Futures and forward rate contracts 3
Notional amount $ 931 $ 931 $ - $ - $ - $ - $ -
- ----------------------------------------------------
Total open interest rate contracts (1,630)
Closed interest rate contracts(1) 235
- ----------------------------------------------------
Net interest rate contract position (1,395)
- ----------------------------------------------------
Open foreign exchange contracts (30)
Notional amount $6,231 $ 273 $1,499 $2,552 $ 112 $ 623 $1,172
- ----------------------------------------------------
Total ALM contracts $(1,425)
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Represents the unamortized net realized deferred gains associated with closed contracts. As a result, no notional amount is
reflected for expected maturity.
</TABLE>
53
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See "Management's Discussion and Analysis of
Results of Operations and Financial Condition -
Market Risk Management" on page 51 and the sections
referenced therein for Quantitative and Qualitative
Disclosures about Market Risk.
Part II. Other Information
Item 1. Legal Litigation
Proceedings
In the ordinary course of business, the
Corporation and its subsidiaries are routinely
defendants in or parties to a number of pending and
threatened legal actions and proceedings, including
actions brought on behalf of various classes of
claimants. In certain of these actions and
proceedings, substantial money damages are asserted
against the Corporation and its subsidiaries and
certain of these actions and proceedings are based on
alleged violations of consumer protection,
securities, environmental, banking and other laws.
The Corporation and certain present and former
officers and directors have been named as defendants
in a number of actions filed in several federal
courts that have been consolidated for pretrial
purposes before a Missouri federal court. The amended
complaint in the consolidated actions alleges, among
other things, that the defendants failed to disclose
material facts about BankAmerica's losses relating to
D.E. Shaw Securities Group, L.P. and related entities
until mid-October 1998, in violation of various
provisions of federal and state laws. The amended
complaint also alleges that the proxy
statement-prospectus of August 4, 1998, falsely
stated that the Merger would be one of equals and
alleges a scheme to have NationsBank gain control
over the newly merged entity. The Missouri federal
court has certified classes consisting generally of
persons who were stockholders of NationsBank or
BankAmerica on September 30, 1998, or were entitled
to vote on the Merger, or who purchased or acquired
securities of the Corporation or its predecessors
between August 4, 1998 and October 13, 1998. The
amended complaint substantially survived a motion to
dismiss, and discovery is underway. Claims against
certain director-defendants were dismissed with leave
to replead. Similar uncertified class actions
(including one limited to California residents
raising the claim that the proxy statement-prospectus
of August 4, 1998, falsely stated that the Merger
would be one of equals) were filed in California
state court, alleging violations of the California
Corporations Code and other state laws. The action on
behalf of California residents was certified, but has
since been dismissed and an appeal is pending. Of the
remaining actions, one has been stayed, and a motion
for class certification is pending in the other. The
Missouri federal court has recently enjoined
prosecution of that action as a class action.
Plaintiffs' appeal of that order is pending. The
Corporation believes the actions lack merit and will
defend them vigorously. The amount of any ultimate
exposure cannot be determined with certainty at this
time.
Management believes that the actions and
proceedings and the losses, if any, resulting from
the final outcome thereof, will not be material in
the aggregate to the Corporation's financial position
or results of operations.
54
<PAGE>
Item 2. Changes in As part of its share repurchase program, during the
Securities and Use first quarter of 2000, the Corporation sold put options
Of Proceeds to purchase an aggregate of two million shares of Common
Stock. These put options were sold to two independent
third parties for an aggregate purchase price of $14.1
million. The put option exercise prices range from $45.22
to $50.37 per share and expire in January 2001. The put
option contracts allow the Corporation to determine the
method of settlement (cash or stock). Each of these
transactions was exempt from registration under
Section 4(2) of the Securities Act of 1933, as
amended.
Item 6. Exhibits a) Exhibits
and Reports on
Form 8-K Exhibit 11- Earnings per share computation - included in
Note 7 of the consolidated financial
statements
Exhibit 12(a) - Ratio of Earnings to Fixed Charges
Exhibit 12(b) - Ratio of Earnings to Fixed Charges and
Preferred Dividends
Exhibit 27- Financial Data Schedule
b) Reports on Form 8-K
The following reports on Form 8-K were filed by the
Corporation during the quarter ended March 31, 2000:
Current Report on Form 8-K dated January 18, 2000 and
filed January 20, 2000, Items 5 and 7.
Current Report on Form 8-K dated January 25, 2000 and
filed February 10, 2000, Items 5 and 7.
Current Report on Form 8-K dated February 8, 2000 and
filed February 14, 2000, Items 5 and 7.
55
<PAGE>
- --------------------------------------------------------------------------------
SIGNATURE
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.
Bank of America Corporation
---------------------------
Registrant
Date: May 15, 2000 /s/ Marc D. Oken
------------ ----------------
MARC D. OKEN
Executive Vice President and
Principal Financial Executive
(Duly Authorized Officer and
Chief Accounting Officer)
56
<PAGE>
Bank of America Corporation
Form 10-Q
Index to Exhibits
Exhibit Description
- ------- -----------
11 Earnings per share computation - included in Note 7 of the
consolidated financial statements
12(a) Ratio of Earnings to Fixed Charges
12(b) Ratio of Earnings to Fixed Charges and Preferred Dividends
27 Financial Data Schedule
57
<TABLE>
<CAPTION>
Bank of America Corporation and Subsidiaries Exhibit 12(a)
Ratio of Earnings to Fixed Charges
- ----------------------------------------------------------------------------------------------------------------------------------
Three Months Year Ended December 31
Ended
(Dollars in millions) March 31, 2000 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
Excluding Interest on Deposits
<S> <C> <C> <C> <C> <C> <C>
Income before income taxes $3,533 $12,215 $ 8,048 $10,556 $ 9,311 $ 8,377
Less: Equity in undistributed earnings of
unconsolidated subsidiaries (7) (167) 162 (49) (7) (19)
Fixed charges:
Interest expense (including capitalized interest) 3,067 10,084 9,479 8,219 7,082 6,354
1/3 of net rent expense 91 342 335 302 282 275
- ----------------------------------------------------------------------------------------------------------------------------------
Total fixed charges 3,158 10,426 9,814 8,521 7,364 6,629
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings (excluding capitalized interest) $6,684 $22,474 $18,024 $19,028 $16,668 $14,987
- ----------------------------------------------------------------------------------------------------------------------------------
Fixed charges $3,158 $10,426 $9,814 $8,521 $7,364 $6,629
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of earnings to fixed charges 2.12 2.16 1.84 2.23 2.26 2.26
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Three Months Year Ended December 31
Ended
(Dollars in millions) March 31, 2000 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
Including Interest on Deposits
Income before income taxes $3,533 $12,215 $ 8,048 $10,556 $ 9,311 $ 8,377
Less: Equity in undistributed earnings of
unconsolidated subsidiaries (7) (167) 162 (49) (7) (19)
Fixed charges:
Interest expense (including capitalized interest) 5,562 19,086 20,290 18,903 16,682 16,369
1/3 of net rent expense 91 342 335 302 282 275
- ----------------------------------------------------------------------------------------------------------------------------------
Total fixed charges 5,653 19,428 20,625 19,205 16,964 16,644
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings (excluding capitalized interest) $9,179 $31,476 $28,835 $29,712 $26,268 $25,002
- ----------------------------------------------------------------------------------------------------------------------------------
Fixed charges $5,653 $19,428 $20,625 $19,205 $16,964 $16,644
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of earnings to fixed charges 1.62 1.62 1.40 1.55 1.55 1.50
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
58
<TABLE>
<CAPTION>
Bank of America Corporation and Subsidiaries Exhibit 12(b)
Ratio of Earnings to Fixed Charges and Preferred Dividends
Three Months Year Ended December 31
Ended
(Dollars in millions) March 31, 2000 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Excluding Interest on Deposits
Income before income taxes $3,533 $12,215 $ 8,048 $10,556 $ 9,311 $ 8,377
Less: Equity in undistributed earnings of
unconsolidated subsidiaries (7) (167) 162 (49) (7) (19)
Fixed charges:
Interest expense (including capitalized interest) 3,067 10,084 9,479 8,219 7,082 6,354
1/3 of net rent expense 91 342 335 302 282 275
- ----------------------------------------------------------------------------------------------------------------------------------
Total fixed charges 3,158 10,426 9,814 8,521 7,364 6,629
Preferred dividend requirements 2 10 40 183 332 426
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings (excluding capitalized interest) $6,684 $22,474 $18,024 $19,028 $16,668 $14,987
- ----------------------------------------------------------------------------------------------------------------------------------
Fixed charges and preferred dividends $3,160 $10,436 $9,854 $8,704 $7,696 $7,055
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of earnings to fixed charges and preferred dividends 2.12 2.15 1.83 2.19 2.17 2.12
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Three Months Year Ended December 31
Ended
(Dollars in millions) March 31, 2000 1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
Including Interest on Deposits
Income before income taxes $3,533 $12,215 $ 8,048 $10,556 $ 9,311 $ 8,377
Less: Equity in undistributed earnings of
unconsolidated subsidiaries (7) (167) 162 (49) (7) (19)
Fixed charges:
Interest expense (including capitalized interest) 5,562 19,086 20,290 18,903 16,682 16,369
1/3 of net rent expense 91 342 335 302 282 275
- ----------------------------------------------------------------------------------------------------------------------------------
Total fixed charges 5,653 19,428 20,625 19,205 16,964 16,644
Preferred dividend requirements 2 10 40 183 332 426
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings (excluding capitalized interest) $9,179 $31,476 $28,835 $29,712 $26,268 $25,002
- ----------------------------------------------------------------------------------------------------------------------------------
Fixed charges and preferred dividends $5,655 $19,438 $20,665 $19,388 $17,296 $17,070
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of earnings to fixed charges and preferred dividends 1.62 1.62 1.40 1.53 1.52 1.46
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
59
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary information extracted from the March 31,
2000 Form 10-Q for Bank of America Corporation and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 27,259
<INT-BEARING-DEPOSITS> 3,250
<FED-FUNDS-SOLD> 39,801
<TRADING-ASSETS> 47,321
<INVESTMENTS-HELD-FOR-SALE> 82,557
<INVESTMENTS-CARRYING> 1,294
<INVESTMENTS-MARKET> 1,181
<LOANS> 382,085
<ALLOWANCE> (6,827)
<TOTAL-ASSETS> 656,113
<DEPOSITS> 351,626
<SHORT-TERM> 152,834
<LIABILITIES-OTHER> 44,295
<LONG-TERM> 62,059
0
77
<COMMON> 10,828
<OTHER-SE> 34,394
<TOTAL-LIABILITIES-AND-EQUITY> 656,113
<INTEREST-LOAN> 7,394
<INTEREST-INVEST> 1,331
<INTEREST-OTHER> 1,361
<INTEREST-TOTAL> 10,086
<INTEREST-DEPOSIT> 2,495
<INTEREST-EXPENSE> 5,562
<INTEREST-INCOME-NET> 4,524
<LOAN-LOSSES> 420
<SECURITIES-GAINS> 6
<EXPENSE-OTHER> 4,623
<INCOME-PRETAX> 3,533
<INCOME-PRE-EXTRAORDINARY> 3,533
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,240
<EPS-BASIC> 1.34
<EPS-DILUTED> 1.33
<YIELD-ACTUAL> 3.27
<LOANS-NON> 3,302
<LOANS-PAST> 461
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,828
<CHARGE-OFFS> 570
<RECOVERIES> 150
<ALLOWANCE-CLOSE> 6,827
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
