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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1999 - Commission File Number 1-6523
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Bank of America Corporation
(Exact name of registrant as specified in its charter)
Delaware 56-0906609
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(State of incorporation) (IRS Employer Identification No.)
Bank of America Corporate Center
Charlotte, North Carolina 28255
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(Address of principal executive (Zip Code)
offices)
704/386-5000
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(Registrant's telephone number,
including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
<S> <C>
Common Stock New York Stock Exchange
London Stock Exchange
Pacific Stock Exchange
Tokyo Stock Exchange
7 3/4% Debentures, due 2002 American Stock Exchange
9 7/8% Subordinated Notes, due 2001 New York Stock Exchange
8 1/2% Subordinated Notes, due 2007 New York Stock Exchange
10 7/8% Subordinated Notes, due 2003 New York Stock Exchange
.25% Senior Basket-Indexed Notes, due 2006 New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or in any amendment to
this Form 10-K. [ ]
The aggregate market value of the registrant's common stock ("Common Stock")
held by non-affiliates is approximately $73,223,927,000 (based on the March 6,
2000, closing price of Common Stock of $44.50 per share). As of March 6, 2000,
there were 1,664,844,358 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
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<CAPTION>
Document of the Registrant Form 10-K Reference Location
<S> <C>
Portions of the 2000 Proxy Statement PART III
</TABLE>
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<PAGE>
Bank of America Corporation
Form 10-K
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<TABLE>
<CAPTION>
Page
INDEX -----------
<S> <C> <C> <C>
Part I Item 1. Business 2
General 2
Primary Market Areas 2
Acquisition and Disposition Activity 2
Government Supervision and Regulation 2
Competition 5
Employees 6
Business Segment Operations 13-16
Net Interest Income 17-19
Securities 26, 58-59,
67-69
Loans and Leases 20, 26-27,
30-41,
59-60,
71-72
Deposits 27, 72
Short-Term Borrowings and Trading Account Liabilities 28, 70,
73-75
Market Risk Management 42-46
Selected Quarterly Operating Results 47
Item 2. Properties 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 7
Item 4A. Executive Officers of the Registrant 7
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Part II Item 5. Market for Registrant's Common Stock and Related Security Holder
Matters 8
Item 6. Selected Financial Data 9
Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition 9
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 52
Item 8. Consolidated Financial Statements and Supplementary Data 52
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 100
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Part III Item 10. Directors and Executive Officers of the Registrant 100
Item 11. Executive Compensation 100
Item 12. Security Ownership of Certain Beneficial Owners and Management 100
Item 13. Certain Relationships and Related Transactions 100
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Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 101
</TABLE>
<PAGE>
PART I
Item 1. BUSINESS
General
Bank of America Corporation (the "Corporation") is a Delaware corporation,
a bank holding company and, effective March 11, 2000, a financial holding
company under the Gramm-Leach-Bliley Act. The Corporation and its subsidiaries
are subject to supervision by various federal and state banking and other
regulatory authorities. For additional information about the Corporation and
its operations, see Table Two and the narrative comments under the caption
"Management's Discussion and Analysis of Results of Operations and Financial
Condition - Business Segment Operations." For additional information regarding
regulatory matters, see "Government Supervision and Regulation" below.
The principal executive offices of the Corporation are located in the Bank
of America Corporate Center, Charlotte, North Carolina 28255.
Primary Market Areas
Through its banking subsidiaries (the "Banks") and various nonbanking
subsidiaries, the Corporation provides a diversified range of banking and
nonbanking financial services and products, primarily throughout the
Mid-Atlantic (Maryland, Virginia and the District of Columbia), the Midwest
(Illinois, Iowa, Kansas and Missouri), the Southeast (Florida, Georgia, North
Carolina, South Carolina and Tennessee), the Southwest (Arizona, Arkansas, New
Mexico, Oklahoma and Texas), the Northwest (Oregon and Washington) and the West
(California, Idaho and Nevada) regions of the United States and in selected
international markets. The Corporation serves an aggregate of approximately 30
million households and two million businesses in these regions, and management
believes that these are desirable regions in which to be located. Based on the
most recent available data, personal income levels in the states in these
regions as a whole rose 5.9 percent year-to-year through mid-year 1999, a
slight moderation from the six percent year-to-year rate for those states one
year earlier. In addition, the population in these states as a whole rose an
estimated 1.4 percent between 1998 and 1999. The number of housing permits
authorized moderated in the second half of 1999 from record high activity
mid-year. By November 1999, housing permits authorized were on track to end the
year 2.6 percent above year-end 1998. Through December 1999, the average rate
of unemployment in these states was four percent ranging from Iowa's 2.2
percent to the District of Columbia's cyclical low of 6.1 percent. These states
created almost 1.8 million new jobs in 1999, 2.3 percent above year-end 1998,
compared to 1.2 percent job growth in the other states.
The Corporation has the leading bank deposit market share position in
California, Florida, Georgia, Maryland, Nevada, North Carolina, Texas and
Washington. In addition, the Corporation ranks second in terms of bank deposit
market share in Arizona, Arkansas, Kansas, New Mexico, Missouri, Oklahoma,
South Carolina and the District of Columbia; third in Oregon and Virginia;
fourth in Idaho; fifth in Tennessee; seventh in Iowa; and ninth in Illinois.
Acquisition and Disposition Activity
As part of its operations, the Corporation regularly evaluates the
potential acquisition of, and holds discussions with, various financial
institutions and other businesses of a type eligible for bank holding company
or financial holding company ownership or control. In addition, the Corporation
regularly analyzes the values of, and submits bids for, the acquisition of
customer-based funds and other liabilities and assets of such financial
institutions and other businesses. The Corporation also regularly considers the
potential disposition of certain of its assets, branches, subsidiaries or lines
of businesses. As a general rule, the Corporation publicly announces any
material acquisitions or dispositions when a definitive agreement has been
reached.
For additional information regarding the Corporation's acquisition
activity, see Note Two of the consolidated financial statements on page 64.
Government Supervision and Regulation
General
As a registered bank holding company and, effective March 11, 2000, a
financial holding company, the Corporation is subject to the supervision of,
and to regular inspection by, the Board of Governors of the Federal
2
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Reserve System (the "Federal Reserve Board"). The Banks are organized
predominantly as national banking associations, which are subject to
regulation, supervision and examination by the Office of the Comptroller of the
Currency (the "Comptroller" or "OCC"). The Banks are also subject to regulation
by the Federal Deposit Insurance Corporation (the "FDIC") and other federal and
state regulatory agencies. In addition to banking laws, regulations and
regulatory agencies, the Corporation and its subsidiaries and affiliates are
subject to various other laws and regulations and supervision and examination
by other regulatory agencies, all of which directly or indirectly affect the
operations and management of the Corporation and its ability to make
distributions. The following discussion summarizes certain aspects of those
laws and regulations that affect the Corporation.
The Gramm-Leach-Bliley Act amended a number of the federal banking laws
affecting the Corporation and the Banks. In particular, the Gramm-Leach-Bliley
Act permits a bank holding company to elect to become a "financial holding
company" effective March 11, 2000, provided that certain conditions are met.
The Corporation filed such an election on February 1, 2000 and became a
financial holding company effective March 11, 2000.
A financial holding company, and the companies under its control, are
permitted to engage in activities considered "financial in nature" as defined
by the Gramm-Leach-Bliley Act and Federal Reserve Board interpretations
(including, without limitation, insurance and securities activities), and
therefore may engage in a broader range of activities than permitted to bank
holding companies and their subsidiaries. A financial holding company may
directly or indirectly engage in activities considered financial in nature,
either de novo or by acquisition, provided the financial holding company gives
the Federal Reserve Board after-the-fact notice of the new activities. The
Gramm-Leach-Bliley Act also permits national banks, such as the Banks, to
engage in activities considered financial in nature through a financial
subsidiary, subject to certain conditions and limitations and with the prior
approval of the Comptroller.
Bank holding companies (including bank holding companies that are also
financial holding companies) are also required to obtain the prior approval of
the Federal Reserve Board before acquiring more than five percent of any class
of voting stock of any bank which is not already majority-owned by the bank
holding company. Pursuant to the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Banking and Branching Act"), a bank
holding company may acquire banks in states other than its home state without
regard to the permissibility of such acquisitions under state law, but subject
to any state requirement that the bank has been organized and operating for a
minimum period of time, not to exceed five years, and the requirement that the
bank holding company, prior to or following the proposed acquisition, controls
no more than 10 percent of the total amount of deposits of insured depository
institutions in the United States and no more than 30 percent of such deposits
in that state (or such lesser or greater amount set by state law).
Subject to certain restrictions, the Interstate Banking and Branching Act
also authorizes banks to merge across state lines, thereby creating interstate
branches. Furthermore, pursuant to the Interstate Banking and Branching Act, a
bank may open new branches in a state in which it does not already have banking
operations if such state enacts a law permitting such de novo branching. The
Corporation has consolidated its retail subsidiary banks into a single
interstate bank (Bank of America, N.A.) headquartered in Charlotte, North
Carolina, with full service branch offices in Arizona, Arkansas, California,
Florida, Georgia, Idaho, Illinois, Iowa, Kansas, Maryland, Missouri, Nevada,
New Mexico, North Carolina, Oklahoma, Oregon, South Carolina, Tennessee, Texas,
Virginia, Washington and the District of Columbia. In addition, the Corporation
operates a limited purpose nationally chartered credit card bank (Bank of
America, N.A. (USA)) headquartered in Phoenix, Arizona, a nationally chartered
banker's bank (Bank of America Oregon, N.A.) headquartered in Portland, Oregon,
as well as a California-chartered nonmember bank (Bank of America Community
Development Bank) headquartered in Walnut Creek, California. As previously
described, the Corporation regularly evaluates merger and acquisition
opportunities, and it anticipates that it will continue to evaluate such
opportunities.
Proposals to change the laws and regulations governing the banking
industry are frequently introduced in Congress, in the state legislatures and
before the various bank regulatory agencies. The likelihood and timing of any
such proposals or legislation and the impact they might have on the Corporation
and its subsidiaries cannot be determined at this time.
3
<PAGE>
Capital and Operational Requirements
The Federal Reserve Board, the Comptroller and the FDIC have issued
substantially similar risk-based and leverage capital guidelines applicable to
United States banking organizations. In addition, these regulatory agencies may
from time to time require that a banking organization maintain capital above
the minimum levels, whether because of its financial condition or actual or
anticipated growth. The Federal Reserve Board risk-based guidelines define a
three-tier capital framework. Tier 1 capital consists of common and qualifying
preferred shareholders' equity, less certain intangibles and other adjustments.
Tier 2 capital consists of preferred stock not qualifying as Tier 1 capital,
subordinated and other qualifying 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 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 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. Assets and off-balance sheet exposures are assigned to
one of four categories of risk-weights, based primarily on relative credit
risk. The minimum Tier 1 capital ratio is four percent and the minimum total
capital ratio is eight percent. The Corporation's Tier 1 and total risk-based
capital ratios under these guidelines at December 31, 1999 were 7.35 percent
and 10.88 percent, respectively. At December 31, 1999, the Corporation had no
subordinated debt that qualified as Tier 3 capital.
The leverage ratio is determined by dividing Tier 1 capital by adjusted
average total assets. Although the stated minimum ratio is three percent, most
banking organizations are required to maintain ratios of at least 100 to 200
basis points above three percent. The Corporation's leverage ratio at December
31, 1999 was 6.26 percent. The Corporation meets its leverage ratio
requirement.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), among other things, identifies five capital categories for insured
depository institutions (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized) and requires the respective federal regulatory agencies to
implement systems for "prompt corrective action" for insured depository
institutions that do not meet minimum capital requirements within such
categories. FDICIA imposes progressively more restrictive constraints on
operations, management and capital distributions, depending on the category in
which an institution is classified. Failure to meet the capital guidelines
could also subject a banking institution to capital raising requirements. An
"undercapitalized" bank must develop a capital restoration plan and its parent
holding company must guarantee that bank's compliance with the plan. The
liability of the parent holding company under any such guarantee is limited to
the lesser of five percent of the bank's assets at the time it became
"undercapitalized" or the amount needed to comply with the plan. Furthermore,
in the event of the bankruptcy of the parent holding company, such guarantee
would take priority over the parent's general unsecured creditors. In addition,
FDICIA requires the various regulatory agencies to prescribe certain
non-capital standards for safety and soundness relating generally to operations
and management, asset quality and executive compensation and permits regulatory
action against a financial institution that does not meet such standards.
The various regulatory agencies have adopted substantially similar
regulations that define the five capital categories identified by FDICIA, using
the total risk-based capital, Tier 1 risk-based capital and leverage capital
ratios as the relevant capital measures. Such regulations establish various
degrees of corrective action to be taken when an institution is considered
undercapitalized. Under the regulations, a "well capitalized" institution must
have a Tier 1 risk-based capital ratio of at least six percent, a total
risk-based capital ratio of at least 10 percent and a leverage ratio of at
least five percent and not be subject to a capital directive order. Under these
guidelines, each of the Banks is considered well capitalized.
Banking agencies have also adopted final regulations which mandate that
regulators take into consideration (i) concentrations of credit risk; (ii)
interest rate risk (when the interest rate sensitivity of an institution's
assets does not match the sensitivity of its liabilities or its
off-balance-sheet position); and (iii) risks from non-traditional activities,
as well as an institution's ability to manage those risks, when determining the
adequacy of an institution's capital. That evaluation will be made as a part of
the institution's regular safety and soundness examination. In addition, the
banking agencies have amended their regulatory capital guidelines to
incorporate a measure for market risk. In accordance with the amended
guidelines, the Corporation and any Bank with significant trading activity (as
defined in the amendment) must incorporate a measure for market risk in their
4
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regulatory capital calculations effective for reporting periods after January
1, 1998. The revised guidelines did not have a material impact on the
Corporation or the Banks' regulatory capital ratios or their well capitalized
status.
Distributions
The Corporation's funds for cash distributions to its stockholders are
derived from a variety of sources, including cash and temporary investments.
The primary source of such funds, however, is dividends received from the
Banks. Each of the Banks is subject to various regulatory policies and
requirements relating to the payment of dividends, including requirements to
maintain capital above regulatory minimums. The appropriate federal regulatory
authority is authorized to determine under certain circumstances relating to
the financial condition of the bank or bank holding company that the payment of
dividends would be an unsafe or unsound practice and to prohibit payment
thereof.
In addition to the foregoing, the ability of the Corporation and the Banks
to pay dividends may be affected by the various minimum capital requirements
and the capital and non-capital standards established under FDICIA, as
described above. The right of the Corporation, its stockholders and its
creditors to participate in any distribution of the assets or earnings of its
subsidiaries is further subject to the prior claims of creditors of the
respective subsidiaries.
Source of Strength
According to Federal Reserve Board policy, bank holding companies are
expected to act as a source of financial strength to each subsidiary bank and
to commit resources to support each such subsidiary. This support may be
required at times when a bank holding company may not be able to provide such
support. Similarly, under the cross-guarantee provisions of the Federal Deposit
Insurance Act, in the event of a loss suffered or anticipated by the FDIC -
either as a result of default of a banking subsidiary of the Corporation or
related to FDIC assistance provided to a subsidiary in danger of default - the
other Banks may be assessed for the FDIC's loss, subject to certain exceptions.
Competition
The activities in which the Corporation and its four major business
segments (Consumer Banking, Commercial Banking, Global Corporate and Investment
Banking, and Principal Investing and Asset Management) engage are highly
competitive. Generally, the lines of activity and markets served involve
competition with other 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 domestically and
internationally and through alternative delivery channels such as the World
Wide Web. The methods of competition center around various factors, such as
customer services, interest rates on loans and deposits, lending limits and
customer convenience, such as location of offices.
The commercial banking business in the various local markets served by the
Corporation's business segments is highly competitive. The four major business
segments compete with other commercial banks, thrifts, finance companies and
other businesses which provide similar services. The business segments actively
compete in commercial lending activities with local, regional and international
banks and nonbank financial organizations, some of which are larger than
certain of the Corporation's nonbanking subsidiaries and the Banks. In its
consumer lending operations, the competitors of the business segments include
other banks, thrifts, credit unions, regulated small loan companies and other
nonbank organizations offering financial services. In the investment banking,
investment advisory and brokerage business, the Corporation's nonbanking
subsidiaries compete with other banking and investment banking firms,
investment advisory firms, brokerage firms, investment companies and other
organizations offering similar services. The Corporation's mortgage banking
units compete with commercial banks, thrifts, government agencies, mortgage
brokers and other nonbank organizations offering mortgage banking services. In
the trust business, the Banks compete with other banks, investment counselors
and insurance companies in national markets for institutional funds and
corporate pension and profit sharing accounts. The Banks also compete with
other banks, trust companies, insurance agents, thrifts, financial counselors
and other fiduciaries for personal trust business. The Corporation and its four
major business segments also actively compete for funds. A primary source of
funds for the Banks is deposits, and competition for deposits
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includes other deposit-taking organizations, such as commercial banks, thrifts,
and credit unions, as well as money market mutual funds.
The Corporation's ability to expand into additional states remains subject
to various federal and state laws. See "Government Supervision and Regulation -
General" for a more detailed discussion of interstate banking and branching
legislation and certain state legislation.
Employees
As of December 31, 1999, there were 155,906 full-time equivalent employees
within the Corporation and its subsidiaries. Of the foregoing employees, 82,908
were employed within Consumer Banking, 4,597 were employed within Commercial
Banking, 9,068 were employed within Global Corporate and Investment Banking,
and 5,962 were employed within Principal Investing and Asset Management. The
remainder were employed elsewhere within the Corporation.
Approximately 5,000 non-officer employees in the State of Washington are
covered by a collective bargaining agreement. These employees work for the
Washington Division of Bank of America, N.A. None of the other domestic
employees within the Corporation are covered by a collective bargaining
agreement. Management considers its employee relations to be good.
Item 2. PROPERTIES
As of December 31, 1999, the principal offices of the Corporation, and its
Consumer and Commercial Banking business segments, were located in the 60-story
Bank of America Corporate Center in Charlotte, North Carolina, which is owned
by a subsidiary of the Corporation. The Corporation occupies approximately
513,000 square feet and leases approximately 601,000 square feet to third
parties at market rates, which represents substantially all of the space in
this facility. As of December 31, 1999, the principal offices of Global
Corporate and Investment Banking and Principal Investing and Asset Management
were located at 555 California Street in San Francisco, California. A
subsidiary of the Corporation has a 50 percent ownership interest in this
building through a joint venture partnership, and the Corporation leases
approximately 479,000 square feet in this building from the partnership.
The Corporation also leases or owns a significant amount of space
worldwide, in addition to these facilities in Charlotte and San Francisco. As
of December 31, 1999, the Corporation and its subsidiaries owned or leased
approximately 13,200 locations in 47 states, the District of Columbia and 37
foreign countries.
Item 3. LEGAL 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 losses of
the former BankAmerica Corporation ("BankAmerica") 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 (the "Merger") between BankAmerica and
NationsBank Corporation ("NationsBank") 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,
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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 others. 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.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of stockholders during the
quarter ended December 31, 1999.
Item 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to the Instructions to Form 10-K and Item 401(b) of Regulation
S-K, the name, age and position of each current executive officer and the
principal accounting officer of the Corporation are listed below along with
such officer's business experience during the past five years. Officers are
appointed annually by the Board of Directors at the meeting of directors
immediately following the annual meeting of stockholders.
James H. Hance, Jr., age 55, Vice Chairman and Chief Financial Officer.
Mr. Hance was named Chief Financial Officer in August 1988, and was named Vice
Chairman in October 1993. He first became an officer in 1987. He also serves as
a director of the Corporation and as Vice Chairman and a director of Bank of
America, N.A.
Kenneth D. Lewis, age 52, President and Chief Operating Officer. Mr. Lewis
was named President in January 1999 and Chief Operating Officer in October
1999. Prior to that time, he served as President, Consumer and Commercial
Banking, from October 1998 to January 1999, and as President from October 1993
to October 1998. He first became an officer in 1971. Mr. Lewis also serves as a
director of the Corporation and as President and a director of Bank of America,
N.A.
Hugh L. McColl, Jr., age 64, Chairman of the Board and Chief Executive
Officer. Mr. McColl has served as Chairman of the Board for at least five years
except from January 7, 1997 until September 30, 1998. He first became an
officer in 1962. He also serves as a director of the Corporation and as Chief
Executive Officer and a director of Bank of America, N.A.
Michael J. Murray, age 55, President, Global Corporate and Investment
Banking. Mr. Murray first became an officer and was named to his present
position in October 1998. Prior to that time, he served as President, Global
Wholesale Bank of BankAmerica from 1997 to 1998 and as Vice Chairman of
BankAmerica from 1995 to 1997. He also serves as Chairman and a director of
Bank of America, N.A.
Marc D. Oken, age 53, Executive Vice President and Principal Financial
Executive. Mr. Oken was named to his present position in October 1998. From
June 1989 to October 1998, he served as Chief Accounting Officer. He first
became an officer in 1989.
F. William Vandiver, Jr., age 57, Corporate Risk Management Executive. Mr.
Vandiver was named to his present position in October 1998. From June 1997 to
October 1998, he served as Chairman, Corporate Risk Policy. Prior to that time,
from January 1996 to June 1997, he served as President, Global Finance, and
from January 1994 to January 1996 he served as President, Specialized Finance
Group. He first became an officer in 1968. He also serves as Vice Chairman and
a director of Bank of America, N.A.
7
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PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
The principal market on which the Common Stock is traded is the New York
Stock Exchange. The Common Stock is also listed on the London Stock Exchange
and the Pacific Stock Exchange, and certain shares are listed on the Tokyo
Stock Exchange. The following table sets forth the high and low sales prices of
the Common Stock on the New York Stock Exchange Composite Transactions List for
the periods indicated:
<TABLE>
<CAPTION>
Quarter High Low
--------- ----------- -----------
<S> <C> <C> <C>
1998 first $75 1/8 $56 1/4
second 85 72 1/16
third 88 7/16 47 7/8
fourth 66 5/8 44
1999 first 74 1/2 59 1/2
second 76 1/8 61 1/2
third 76 3/8 53 1/4
fourth 67 1/2 47 5/8
</TABLE>
As of March 6, 2000, there were 276,300 record holders of Common Stock.
During 1998 and 1999, the Corporation paid dividends on the Common Stock on a
quarterly basis. The following table sets forth dividends declared per share of
Common Stock for the periods indicated:
<TABLE>
<CAPTION>
Quarter Dividend
--------- ---------
<S> <C> <C>
1998 first $.38
second .38
third .38
fourth .45
1999 first .45
second .45
third .45
fourth .50
</TABLE>
For additional information regarding the Corporation's ability to pay
dividends, see "Government Supervision and Regulation - Distributions" and Note
Twelve of the consolidated financial statements on page 82.
As part of its share repurchase program, during the fourth quarter of
1999, the Corporation sold put options to purchase an aggregate of one million
shares of Common Stock. These put options were sold to two independent third
parties for an aggregate purchase price of $6.0 million. The put option
exercise prices range from $64.20 to $65.30 per share and expire in April 2000.
The put option contracts allow the Corporation to determine the method of
settlement (cash or stock). Each of these transations was exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended.
In accordance with an Agreement and Plan of Reorganization (the
"Agreement") between the Corporation (as the successor of Oxford Resources
Corp.) and the selling stockholders of Electronic Vehicle Remarketing, Inc.
("EVRI"), the Corporation was required to issue shares of Common Stock to the
selling stockholders as additional contingent purchase price consideration in
the event that EVRI achieved the five performance milestones set forth in the
Agreement. Achievement of each milestone entitled the selling stockholders to
receive a certain number of shares of Common Stock calculated in accordance
with the terms of the Agreement. Each of the five milestones was achieved in
1999, and an aggregate of 41,911 shares of Common Stock was issued on four
dates in 1999. Each of these transactions was exempt from registration under
Section 4(2) of the Securities Act of 1933, as amended.
8
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Item 6. SELECTED FINANCIAL DATA
See Table One in Item 7 for Selected Financial Data.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
On September 30, 1998, Bank of America Corporation (the Corporation),
formerly NationsBank Corporation (NationsBank), completed its merger with the
former BankAmerica Corporation (BankAmerica). In addition, on January 9, 1998,
the Corporation completed its merger with Barnett Banks, Inc. (Barnett). The
BankAmerica and Barnett mergers were each accounted for as a pooling of
interests and, accordingly, all financial information has been restated for all
periods presented.
This report on Form 10-K 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-K should not rely solely on the forward-looking statements and should
consider all uncertainties and risks discussed throughout this report. 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. Factors that may cause actual noninterest expense to differ from
estimates include the ability of third parties with whom the Corporation has
business relationships to fully accommodate any uncertainties relating to the
Corporation's Year 2000 efforts, as well as uncertainties relating to the
ability of third parties with whom the Corporation has business relationships
to continue to address Year 2000 issues. 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 OCC, the FDIC, 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.
9
<PAGE>
1999 Compared to 1998
Overview
The Corporation is a bank holding company and, effective March 11, 2000, a
financial holding company, headquartered in Charlotte, North Carolina. The
Corporation provides a diversified range of banking and certain nonbanking
financial services both domestically and internationally through four major
business segments: Consumer Banking, Commercial Banking, Global Corporate and
Investment Banking, and Principal Investing and Asset Management. At December
31, 1999, the Corporation had $633 billion in assets. On September 30, 1998,
the Corporation completed its merger with BankAmerica. In addition, on January
9, 1998, the Corporation merged with Barnett. The Corporation accounted for
each transaction as a pooling of interests and, accordingly, all financial
information has been restated for all periods presented.
On October 1, 1997, the Corporation completed the acquisitions of
Montgomery Securities, Inc. (NationsBanc Montgomery Securities) and Robertson,
Stephens & Company Group, L.L.C. (Robertson Stephens). The Corporation
accounted for both acquisitions as purchases. The Corporation sold the
investment banking operations of Robertson Stephens on August 31, 1998 and sold
the investment management operations on February 26, 1999.
Significant changes in the Corporation's results of operations and
financial position are described in the following sections.
Refer to Table One and Table Twenty for annual and quarterly selected
financial data, respectively.
Key performance highlights for 1999 were:
o Operating net income (net income excluding merger-related charges) totaled
$8.24 billion, or diluted operating earnings of $4.68 per common share
(diluted) in 1999 compared to $6.49 billion, or $3.64 per common share in
1998 (diluted). Excluding merger-related charges, the return on average
common shareholders' equity increased 316 basis points to 17.70 percent in
1999 from 14.54 percent in 1998. The efficiency ratio, excluding
merger-related charges, improved 585 basis points to 55.30 percent in 1999
from 61.15 percent in 1998. Including net merger-related charges, net income
was $7.88 billion or $4.48 per common share (diluted) in 1999 compared to
$5.17 billion or $2.90 per common share (diluted) in 1998, respectively.
o Operating cash basis ratios measure operating performance excluding
merger-related charges, goodwill and other intangible assets and their
related amortization expense. Cash basis diluted earnings per common share
increased to $5.19 in 1999 compared to $4.15 in 1998. Return on average
tangible common shareholders' equity increased to 28.46 percent compared to
25.24 percent in 1998. The cash basis efficiency ratio was 52.57 percent in
1999, an improvement of 563 basis points from 58.20 percent in 1998, due to
a decline in noninterest expense of four percent and an increase in
noninterest income of 15.4 percent.
o Net interest income on a taxable-equivalent basis remained essentially
unchanged at $18.5 billion from 1998. Managed loan growth, particularly in
consumer loan products, and higher core funding levels due to higher levels
of equity and core deposits was primarily offset by the impact of
securitizations, divestitures and asset sales in both years, as well as the
impact of changing rates and spread compression during 1999. The net
interest yield decreased to 3.47 percent in 1999 compared to 3.69 percent in
1998, mainly due to higher levels of lower-yielding investment securities, a
shift in loan mix to lower-yielding residential mortgages, changes in
interest rates and spread compression and the cost of the Corporation's
share repurchase program during 1999.
o The provision for credit losses was $1.8 billion in 1999 compared to $2.9
billion in 1998. The decrease in the provision for credit losses was
primarily due to a significant 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 and foreign to more
consumer residential mortgage loans as well as a $467 million decline in net
charge-offs. Net charge-offs totaled $2.0 billion in 1999 compared to $2.5
billion in 1998, while net charge-offs as a percentage of average loans and
leases outstanding were 0.55 percent in 1999 compared to 0.71 percent in
1998. Commercial - domestic net charge-offs were significantly impacted in
1998 by a partial charge-off of a credit to a trading and investment firm,
D.E. Shaw Securities Group, L.P. and related entities (DE Shaw). In
addition, the decrease in net charge-offs in 1999 was driven by a reduction
in bankcard and consumer finance
10
<PAGE>
losses which was partially offset by an increase in commercial - domestic
charge-offs. The increase in commercial - domestic losses was attributable to
certain troubled industries, including healthcare and sub-prime finance.
o Gains on sales of securities were $240 million in 1999 compared to $1.0
billion in 1998. Securities gains were higher in 1998 as a result of
favorable market conditions for certain debt instruments and higher activity
in connection with the Corporation's overall risk management operations.
o Noninterest income increased 15.4 percent to $14.1 billion in 1999. This
growth was attributable to higher levels of income from most categories,
including service charges on deposit accounts, mortgage servicing income,
investment banking income, trading account profits and fees, and credit card
income. Trading account profits and fees increased $1.3 billion to $1.5
billion in 1999 compared to $171 million in 1998 primarily due to higher
levels of revenue from equities, interest rate contracts and fixed income.
Prior year profits and fees were negatively impacted by a write-down of
Russian securities and losses in corporate bonds and commercial mortgages
due to widening spreads. Partially offsetting these increases was a decline
in other income, which reflected greater revenue from the sale of certain
businesses and higher securitization gains in 1998.
o Merger-related charges totaled $525 million and $1.8 billion in 1999 and
1998, respectively. The total $525 million charge for 1999 was attributable
to the Merger compared to $1.3 billion in 1998. See Note Two of the
consolidated financial statements on page 64 for additional information.
o Other noninterest expense decreased $755 million to $18.0 billion in 1999
compared to $18.7 billion in 1998. This decrease is primarily attributable
to merger-related savings, which lowered personnel, professional fees, other
general operating expense and general administrative and other expense 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
52 through 99.
11
<PAGE>
Table One
Five-Year Summary of Selected Financial Data
<TABLE>
<CAPTION>
(Dollars in millions, except per share information) 1999 1998
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Operating Basis (1)
- -------------------
Income statement
Interest income $ 37,323 $ 38,588
Interest expense 19,086 20,290
Net interest income 18,237 18,298
Net interest income (taxable-equivalent basis) 18,452 18,461
Provision for credit losses 1,820 2,920
Gains on sales of securities 240 1,017
Noninterest income 14,069 12,189
Other noninterest expense 17,986 18,741
Income before income taxes 12,740 9,843
Income tax expense 4,500 3,353
Net income 8,240 6,490
Net income available to common shareholders 8,234 6,465
Performance ratios
Return on average assets 1.34% 1.11%
Return on average common shareholders' equity 17.70 14.54
Efficiency ratio 55.30 61.15
Per common share data
Earnings $ 4.77 $ 3.73
Diluted earnings 4.68 3.64
Cash basis financial data (2)
Earnings per common share 5.28 4.25
Diluted earnings per common share 5.19 4.15
Return on average tangible assets 1.52% 1.30%
Return on average tangible common shareholders' equity 28.46 25.24
Efficiency ratio 52.57 58.20
As Reported
- -----------
Income statement
Merger-related charges, net $ 525 $ 1,795
Income before income taxes 12,215 8,048
Income tax expense 4,333 2,883
Net income 7,882 5,165
Net income available to common shareholders 7,876 5,140
Average common shares issued and outstanding (in thousands) 1,726,006 1,732,057
Performance ratios
Return on average assets 1.28% .88%
Return on average common shareholders' equity 16.93 11.56
Total equity to total assets (at year end) 7.02 7.44
Total average equity to total average assets 7.55 7.67
Dividend payout ratio 40.54 50.18
Per common share data
Earnings $ 4.56 $ 2.97
Diluted earnings 4.48 2.90
Cash dividends paid 1.85 1.59
Book value 26.44 26.60
Cash basis financial data (2)
Earnings per common share 5.08 3.49
Diluted earnings per common share 4.98 3.41
Return on average tangible assets 1.46% 1.07%
Return on average tangible common shareholders' equity 27.34 20.70
Ending tangible equity to tangible assets 4.92 5.18
Balance sheet (at year end)
Total loans and leases $ 370,662 $ 357,328
Total assets 632,574 617,679
Total deposits 347,273 357,260
Long-term debt 55,486 45,888
Common shareholders' equity 44,355 45,866
Total shareholders' equity 44,432 45,938
Risk-based capital ratios (at year end) (3)
Tier 1 capital 7.35% 7.06%
Total capital 10.88 10.94
Leverage ratio 6.26 6.22
Market price per share of common stock
Closing $ 50 3/16 $ 60 1/8
High 76 3/8 88 7/16
Low 47 5/8 44
=========================================================================================
<CAPTION>
(Dollars in millions, except per share information) 1997 1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Basis (1)
- -------------------
Income statement
Interest income $ 37,333 $ 33,636 $ 32,158
Interest expense 18,901 16,682 16,369
Net interest income 18,432 16,954 15,789
Net interest income (taxable-equivalent basis) 18,589 17,082 15,824
Provision for credit losses 1,904 1,645 945
Gains on sales of securities 271 147 68
Noninterest income 11,756 9,604 8,132
Other noninterest expense 17,625 15,351 14,667
Income before income taxes 10,930 9,709 8,377
Income tax expense 4,124 3,651 3,230
Net income 6,806 6,058 5,147
Net income available to common shareholders 6,695 5,856 4,896
Performance ratios
Return on average assets 1.25% 1.25% 1.13%
Return on average common shareholders' equity 15.88 17.04 15.52
Efficiency ratio 58.08 57.52 61.22
Per common share data
Earnings $ 3.86 $ 3.58 $ 3.03
Diluted earnings 3.76 3.51 2.98
Cash basis financial data (2)
Earnings per common share 4.36 3.91 3.38
Diluted earnings per common share 4.24 3.84 3.32
Return on average tangible assets 1.45% 1.39% 1.27%
Return on average tangible common shareholders' equity 27.77 24.60 23.56
Efficiency ratio 55.27 55.49 58.89
As Reported
- -----------
Income statement
Merger-related charges, net $ 374 $ 398 $ --
Income before income taxes 10,556 9,311 8,377
Income tax expense 4,014 3,498 3,230
Net income 6,542 5,813 5,147
Net income available to common shareholders 6,431 5,611 4,896
Average common shares issued and outstanding (in thousands) 1,733,194 1,638,382 1,613,404
Performance ratios
Return on average assets 1.20% 1.20% 1.13%
Return on average common shareholders' equity 15.26 16.32 15.52
Total equity to total assets (at year end) 7.81 7.91 7.86
Total average equity to total average assets 8.02 7.61 7.51
Dividend payout ratio 32.09 30.05 29.13
Per common share data
Earnings $ 3.71 $ 3.42 $ 3.03
Diluted earnings 3.61 3.36 2.98
Cash dividends paid 1.37 1.20 1.04
Book value 25.49 22.10 20.89
Cash basis financial data (2)
Earnings per common share 4.20 3.76 3.38
Diluted earnings per common share 4.09 3.69 3.32
Return on average tangible assets 1.40% 1.34% 1.27%
Return on average tangible common shareholders' equity 26.80 23.65 23.56
Ending tangible equity to tangible assets 5.19 6.31 6.19
Balance sheet (at year end)
Total loans and leases $ 342,140 $ 317,709 $ 302,804
Total assets 570,983 477,702 461,775
Total deposits 346,297 309,100 296,316
Long-term debt 42,887 40,041 34,349
Common shareholders' equity 43,907 35,429 33,532
Total shareholders' equity 44,584 37,793 36,295
Risk-based capital ratios (at year end) (3)
Tier 1 capital 6.50% 7.76% 7.24%
Total capital 10.89 12.66 11.58
Leverage ratio 5.57 7.09 6.27
Market price per share of common stock
Closing $ 60 13/16 $ 48 7/8 $ 34 13/16
High 71 11/16 52 5/8 37 3/8
Low 48 32 3/16 22 5/16
=====================================================================================================
</TABLE>
(1) Operating basis excludes merger-related charges.
(2) Cash basis calculations exclude goodwill and other intangible assets and
their related amortization expense.
(3) Ratios prior to 1998 have not been restated to reflect the impact of the
BankAmerica and Barnett mergers.
12
<PAGE>
Business Segment Operations
The Corporation provides a diversified range of banking and certain
nonbanking financial services and products through its various subsidiaries.
Management reports the results of the Corporation's operations through four
business segments: Consumer Banking, Commercial Banking, Global Corporate and
Investment Banking, and Principal Investing and Asset Management.
The business segments summarized in Table Two are primarily managed with a
focus on various performance objectives including net income, return on average
equity and operating 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. The net interest
income 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 Seventeen of the consolidated financial statements on page 95 for
additional business segment information and reconciliations to consolidated
amounts.
Consumer Banking
The Consumer Banking segment provides comprehensive retail banking
products and services to individuals and small businesses through multiple
delivery channels including approximately 4,500 banking centers and 14,000
automated teller machines (ATMs). These banking centers and ATMs are located
principally throughout the Corporation's franchise and serve approximately 30
million households in 21 states and the District of Columbia. This segment also
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. The consumer finance component provides mortgage, home
equity and automobile loans to consumers, retail finance programs to dealers
and lease financing to purchasers of new and used cars.
Consumer Banking's net income remained essentially unchanged at $3.9
billion in 1999 compared to 1998. Taxable-equivalent net interest income
decreased $283 million to $11.5 billion in 1999 from $11.8 billion in 1998,
reflecting the impact of securitizations, loan sales, divestitures and lower
loan spreads, particularly in consumer finance, partially offset by managed
loan growth and increased core deposit levels. As the Corporation continues to
securitize loans, its role becomes that of a servicer and the servicing income,
as well as the gains on securitizations, are reflected in noninterest income.
Average managed loans and leases increased $25.6 billion to $203.0 billion in
1999 compared to $177.4 billion in 1998. Average total deposits increased
slightly to $229.7 billion from $228.9 billion in 1998, and reflected a
favorable shift toward more core deposits. The net interest yield increased
five basis points during 1999 to 4.93 percent from 4.88 percent in 1998.
Noninterest income in Consumer Banking declined $93 million in 1999 to
$6.5 billion from $6.6 billion in 1998, due to lower other income resulting
from gains realized on the sale of a manufactured housing unit and the sale of
real estate included in premises and equipment during 1998. The decline in
other income was partially offset by increased mortgage servicing and
production fees and credit card income. Mortgage servicing and production fees
increased $145 million to $662 million in 1999 compared to $517 million in
1998, primarily due to benefits from slower prepayments, reductions in the cost
to service loans and higher revenue from portfolio growth.
Other noninterest expense decreased $479 million to $10.5 billion in 1999
from $11.0 billion in 1998 primarily due to reductions in personnel expense,
data processing expense and other general operating expense. These decreases
mainly reflect successful merger-related savings efforts. The efficiency ratio
improved to 58.5 percent in 1999 compared to 59.9 percent in 1998. The cash
basis efficiency ratio improved 160 basis points to 55.0 percent in 1999,
compared to 56.6 percent in 1998. The return on average equity increased to
19.9 percent in 1999 from 19.2 percent in 1998. The return on tangible equity
increased to 30.4 percent in 1999 compared to 29.3 percent in 1998.
13
<PAGE>
Commercial Banking
The Commercial Banking segment provides a wide range of commercial banking
services for businesses with annual revenues of up to $500 million. Services
provided include commercial lending, treasury and cash management services,
asset-backed lending and factoring. Also included in this segment are the
Corporation's commercial finance operations which provide equipment loans and
leases, loans for debt restructuring, mergers and working capital, real estate
and health care financing and inventory financing to manufacturers,
distributors and dealers.
Commercial Banking's net income decreased $75 million to $878 million in
1999 compared to $953 million in 1998 primarily due to increased provision
expense. Taxable-equivalent net interest income remained essentially unchanged
at $2.2 billion for the years ended December 31, 1999 and 1998, primarily
reflecting loan and deposit growth, offset by lower loan spreads due to
competitive pricing and changes in the product composition. Commercial
Banking's average managed loan and lease portfolio during 1999 increased
slightly to $55.4 billion compared to $53.5 billion during 1998.
Noninterest income increased $164 million to $894 million in 1999 from
$730 million in 1998. This increase included higher revenue from investment
banking activities.
Other noninterest expense for the period increased $88 million to $1.5
billion in 1999 from $1.4 billion in 1998, primarily due to an increase in
other general operating expense. The efficiency ratio improved to 47.8 percent
in 1999 from 48.1 percent in 1998. The cash basis efficiency ratio increased
130 basis points to 45.9 percent in 1999 from 44.6 percent in 1998. Return on
average equity increased to 20.7 percent in 1999 from 20.1 percent in 1998. The
return on tangible equity decreased to 24.6 percent in 1999 compared to 27.1
percent in 1998.
Global Corporate and Investment Banking
The Global Corporate and Investment Banking segment 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, cash management, foreign exchange, leasing, leveraged finance,
project finance, real estate finance, senior bank debt, structured finance and
trade services. Through a separate subsidiary, Banc of America Securities LLC,
formerly NationsBanc Montgomery Securities, Global Corporate and Investment
Banking is a primary dealer of U.S. Government securities, underwrites and
makes markets in equity securities, and underwrites and deals in high-grade and
high-yield corporate debt securities, commercial paper, mortgage-backed and
asset-backed securities, federal agencies securities and municipal 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 and provides prime-brokerage services. Debt and
equity securities research, loan syndications, mergers and acquisitions
advisory services and private placements are also provided through Banc of
America Securities LLC. Additionally, Global Corporate and Investment Banking
is a market maker in derivative products which include swap agreements, option
contracts, forward settlement contracts, financial futures, and other
derivative products in certain interest rate, foreign exchange, commodity and
equity markets. In support of these activities, Global Corporate and Investment
Banking takes positions in securities and derivatives to support client demands
and for its own account.
Global Corporate and Investment Banking's net income increased
significantly to $2.3 billion in 1999 compared to $292 million in 1998, an
increase of $2.0 billion. Taxable-equivalent net interest income remained
essentially unchanged at $3.8 billion for the years ended December 31, 1999 and
1998, as slightly higher contributions from trading-related activities were
offset by strategic reductions in both the foreign and commercial real estate
loan portfolios and lower loan spreads. The average managed loan and lease
portfolio increased $1.2 billion to $111.9 billion in 1999 compared to $110.7
billion in 1998.
Noninterest income for 1999 increased $1.4 billion to $4.3 billion in 1999
from $2.9 billion in 1998, reflecting an increase in trading account profits
and fees in 1999 which was driven by strong activities in most areas,
particularly equity and advisory, as well as the write-down of Russian
securities and losses in corporate bonds in 1998.
14
<PAGE>
Other noninterest expense decreased $110 million to $4.6 billion in 1999
from $4.7 billion in 1998, due primarily to decreased personnel expense and
other general operating expense. The efficiency ratio improved to 56.4 percent
in 1999 from 70.6 percent in 1998. The cash basis efficiency ratio improved to
54.5 percent for 1999 compared to 68.1 percent for 1998. Return on average
equity increased to 17.6 percent in 1999 from 2.3 percent in 1998. The return
on tangible equity increased to 21.1 percent in 1999 from 4.1 percent in 1998.
Principal Investing and Asset Management
The Principal Investing and Asset Management segment includes Principal
Investing and the three businesses of Asset Management. Principal Investing
includes direct equity investments in businesses and investments in general
partnership funds. 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
highly-rated brokerage website that provides customers a wide array of market
analyses, investment research and self-help tools, as well as account
information and transaction capabilities.
The Asset Management Group seeks to help all customers and clients
accumulate, grow and preserve their wealth by providing intellectual solutions
for their needs. These businesses continually build on their strong
capabilities and align with other lines of businesses within the Corporation to
strengthen partnerships to better meet the needs of all customers and clients.
Principal Investing and Asset Management's net income increased $350
million to $841 million in 1999 compared to $491 million in 1998.
Taxable-equivalent net interest income in 1999 increased $42 million to $501
million compared to $459 million in 1998, reflecting strong loan growth in
commercial and residential mortgage loans partially offset by spread
compression on loans and deposits. The average managed loan and lease portfolio
in 1999 increased $3.8 billion to $19.0 billion compared to $15.2 billion
during 1998.
Noninterest income for 1999 increased $410 million to $2.3 billion in 1999
compared to $1.9 billion in 1998, primarily attributable to growth in principal
investing income, brokerage income and asset management fees. Principal
investing income reflected continued growth in this business and a gain on the
sale of an investment in a sub-prime mortgage lender in 1999. Brokerage income
and asset management fees had strong core growth during 1999 which was somewhat
offset by the sale of the investment management operations of Robertson
Stephens.
Other noninterest expense decreased $236 million to $1.4 billion in 1999
from $1.6 billion in 1998, due primarily to lower personnel expense,
professional fees, other general operating expense and processing expense. The
efficiency ratio improved to 48.0 percent in 1999 from 67.1 percent in 1998.
The cash basis efficiency ratio improved to 46.7 percent in 1999 from 65.9
percent in 1998. Return on average equity increased to 26.9 percent in 1999
from 20.1 percent in 1998. The return on tangible equity increased to 30.7
percent in 1999 from 22.8 percent in 1998.
15
<PAGE>
Table Two
Business Segment Summary
<TABLE>
<CAPTION>
Consumer Banking Commercial Banking
--------------------- -----------------------
(Dollars in millions) 1999 1998 1999 1998
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 3,899 $ 3,879 $ 878 $ 953
Cash basis earnings (1) 4,537 4,485 935 1,054
Net interest yield 4.93% 4.88% 3.93% 3.97%
Average equity to average assets 7.53 7.59 7.13 7.92
Return on average equity 19.9 19.2 20.7 20.1
Return on tangible equity (1) 30.4 29.3 24.6 27.1
Efficiency ratio 58.5 59.9 47.8 48.1
Cash basis efficiency ratio (1) 55.0 56.6 45.9 44.6
Average:
Total loans and leases $181,278 $169,251 $55,421 $53,887
Total deposits 229,652 228,938 22,124 20,342
Total assets 259,980 265,889 59,392 59,931
Year-end:
Total loans and leases 186,950 171,252 57,508 56,330
Total deposits 228,481 233,317 26,389 23,942
Total assets 255,401 271,695 63,066 61,772
==================================================================================
</TABLE>
<TABLE>
<CAPTION>
Principal Investing
Global Corporate and and
Investment Banking Asset Management
------------------------ ---------------------
(Dollars in millions) 1999 1998 1999 1998
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 2,254 $ 292 $ 841 $ 491
Cash basis earnings (1) 2,412 460 876 518
Net interest yield 2.10% 2.12% 2.57% 2.94%
Average equity to average assets 5.88 5.84 13.30 12.77
Return on average equity 17.6 2.3 26.9 20.1
Return on tangible equity (1) 21.1 4.1 30.7 22.8
Efficiency ratio 56.4 70.6 48.0 67.1
Cash basis efficiency ratio (1) 54.5 68.1 46.7 65.9
Average:
Total loans and leases $107,514 $109,543 $19,034 $15,174
Total deposits 64,702 64,262 11,416 11,784
Total assets 217,409 217,709 23,482 19,173
Year-end:
Total loans and leases 105,315 112,903 21,004 17,810
Total deposits 64,195 67,827 11,179 12,542
Total assets 223,930 229,441 26,004 21,579
=================================================================================
</TABLE>
(1) Cash basis calculations exclude goodwill and other intangible assets and
their related amortization expense.
16
<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 last three years and
most recent five quarters is presented in Tables Three and Twenty-One,
respectively. The changes in net interest income from year to year are analyzed
in Table Four.
As reported, net interest income on a taxable-equivalent basis remained
essentially unchanged at $18.5 billion in 1999 compared to 1998. 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 year ended December 31:
<TABLE>
<CAPTION>
(Dollars in millions) 1999 1998 Change
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net interest income
As reported (1) $ 18,452 $ 18,461 (0.05)%
Less: Trading-related net interest income (662) (608)
Add: Impact of securitizations, asset sales and divestitures 874 313
- -------------------------------------------------------------------------------------------------------
Core net interest income $ 18,664 $ 18,166 2.74%
- -------------------------------------------------------------------------------------------------------
Average earning assets
As reported $ 531,511 $ 499,739 6.36%
Less: Trading-related earning assets (85,772) (71,576)
Add: Earning assets securitized, sold and divested 20,105 5,950
- ------------------------------------------------------------------------------------------------------
Core average earning assets $ 465,844 $ 434,113 7.31%
- ------------------------------------------------------------------------------------------------------
Net yield on earning assets (1,2)
As reported 3.47% 3.69% (22)bp
Add: Impact of trading-related activities 0.52 0.48 4
Impact of securitizations, asset sales and divestitures 0.03 0.02 1
- ------------------------------------------------------------------------------------------------------
Core net interest yield on earning assets 4.02% 4.19% (17)bp
======================================================================================================
</TABLE>
(1) Net interest income is presented on a taxable-equivalent basis.
(2) bp denotes basis points; 100 bp equals 1%.
Core net interest income on a taxable-equivalent basis increased $498
million, or 2.7 percent, to $18.7 billion in 1999 compared to $18.2 billion in
1998. Managed loan growth, particularly in consumer loan products, and higher
levels of core deposits and equity were partially offset by the impact of
changing rates and spread compression during 1999.
Core average earning assets increased $31.7 billion to $465.8 billion in
1999 compared to $434.1 billion in 1998, primarily reflecting managed loan
growth of nine percent and higher levels of investment securities. Managed
consumer loans increased 15 percent, led by growth in residential mortgages and
real-estate secured consumer finance loans of 21 percent and 34 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.
The core net interest yield decreased 17 basis points to 4.02 percent in
1999 compared to 4.19 percent in 1998, mainly due to higher levels of
lower-yielding investment securities, a shift in loan mix to lower-yielding
residential mortgages, changes in interest rates and spread compression and the
cost of the Corporation's share repurchase program during 1999.
17
<PAGE>
Table Three
Average Balances and Interest Rates -- Taxable-Equivalent Basis
<TABLE>
<CAPTION>
1999 1998
--------------------------------- ---------------------------------
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 $ 5,268 $ 295 5.59% $ 7,649 $ 514 6.72%
Federal funds sold and securities purchased under
agreements to resell 32,252 1,666 5.17 27,288 1,828 6.70
Trading account assets 39,206 2,102 5.36 39,774 2,634 6.62
Securities:
Available-for-sale(1) 78,552 4,809 6.12 62,571 4,286 6.85
Held-for-investment 1,575 112 7.16 4,113 282 6.88
- ----------------------------------------------------------------------------------------------------------------------------
Total securities 80,127 4,921 6.14 66,684 4,568 6.85
- ----------------------------------------------------------------------------------------------------------------------------
Loans and leases(2):
Commercial - domestic 138,339 10,112 7.31 130,177 9,988 7.67
Commercial - foreign 29,374 1,897 6.46 31,015 2,246 7.24
Commercial real estate - domestic 25,533 2,115 8.28 28,418 2,503 8.81
Commercial real estate - foreign 294 25 8.76 330 33 10.05
- ----------------------------------------------------------------------------------------------------------------------------
Total commercial 193,540 14,149 7.31 189,940 14,770 7.78
- ----------------------------------------------------------------------------------------------------------------------------
Residential mortgage 78,948 5,667 7.18 70,842 4,880 6.89
Home equity lines 16,152 1,268 7.85 16,129 1,741 10.79
Direct/Indirect consumer 42,274 3,469 8.21 40,204 3,506 8.72
Consumer finance 18,752 1,670 8.91 14,368 1,529 10.64
Bankcard 9,778 1,134 11.59 12,960 1,638 12.64
Foreign consumer 3,339 316 9.45 3,397 357 10.51
- ----------------------------------------------------------------------------------------------------------------------------
Total consumer 169,243 13,524 7.99 157,900 13,651 8.65
- ----------------------------------------------------------------------------------------------------------------------------
Total loans and leases 362,783 27,673 7.63 347,840 28,421 8.17
- ----------------------------------------------------------------------------------------------------------------------------
Other earning assets 11,875 881 7.41 10,504 786 7.49
- ----------------------------------------------------------------------------------------------------------------------------
Total earning assets(3) 531,511 37,538 7.06 499,739 38,751 7.75
- ----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 25,766 24,907
Other assets, less allowance for credit losses 59,561 59,841
- ----------------------------------------------------------------------------------------------------------------------------
Total assets $616,838 $584,487
============================================================================================================================
Interest-bearing liabilities
Domestic interest-bearing deposits:
Savings $ 23,655 300 1.27 $ 22,692 421 1.86
NOW and money market deposit accounts 98,649 2,374 2.41 96,541 2,536 2.63
Consumer CDs and IRAs 74,010 3,534 4.78 74,655 3,915 5.24
Negotiated CDs, public funds and other time deposits 6,646 361 5.44 7,604 414 5.44
- ----------------------------------------------------------------------------------------------------------------------------
Total domestic interest-bearing deposits 202,960 6,569 3.24 201,492 7,286 3.62
- ----------------------------------------------------------------------------------------------------------------------------
Foreign interest-bearing deposits(4):
Banks located in foreign countries 16,301 802 4.92 24,587 1,405 5.72
Governments and official institutions 7,884 400 5.08 10,517 590 5.61
Time, savings and other 25,949 1,231 4.74 24,261 1,530 6.30
- ----------------------------------------------------------------------------------------------------------------------------
Total foreign interest-bearing deposits 50,134 2,433 4.85 59,365 3,525 5.94
- ----------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 253,094 9,002 3.56 260,857 10,811 4.14
- ----------------------------------------------------------------------------------------------------------------------------
Federal funds purchased, securities sold under agreements
to repurchase and other short-term borrowings 116,150 5,826 5.02 90,630 5,239 5.78
Trading account liabilities 15,458 658 4.26 17,472 895 5.12
Long-term debt(5) 57,574 3,600 6.25 49,969 3,345 6.69
- ----------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities(6) 442,276 19,086 4.32 418,928 20,290 4.84
- ----------------------------------------------------------------------------------------------------------------------------
Noninterest-bearing sources:
Noninterest-bearing deposits 88,654 84,628
Other liabilities 39,307 36,102
Shareholders' equity 46,601 44,829
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $616,838 $584,487
============================================================================================================================
Net interest spread 2.74 2.91
Impact of noninterest-bearing sources .73 .78
- ----------------------------------------------------------------------------------------------------------------------------
Net interest income/yield on earning assets $18,452 3.47% $18,461 3.69%
============================================================================================================================
<CAPTION>
1997
--------------------------------
Interest
Average Income/ Yield/
(Dollars in millions) Balance Expense Rate
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Earning assets
Time deposits placed and other short-term investments $ 8,379 $ 541 6.46%
Federal funds sold and securities purchased under
agreements to resell 23,437 1,516 6.47
Trading account assets 38,284 2,588 6.76
Securities:
Available-for-sale(1) 42,867 2,959 6.90
Held-for-investment 5,402 389 7.19
- ------------------------------------------------------------------------------------------
Total securities 48,269 3,348 6.94
- ------------------------------------------------------------------------------------------
Loans and leases(2):
Commercial - domestic 117,465 9,386 7.99
Commercial - foreign 28,295 1,995 7.05
Commercial real estate - domestic 29,468 2,748 9.33
Commercial real estate - foreign 156 30 19.24
- ------------------------------------------------------------------------------------------
Total commercial 175,384 14,159 8.07
- ------------------------------------------------------------------------------------------
Residential mortgage 80,593 5,683 7.05
Home equity lines 14,760 1,813 12.29
Direct/Indirect consumer 39,270 3,464 8.82
Consumer finance 13,845 1,625 11.73
Bankcard 15,920 2,127 13.36
Foreign consumer 3,379 301 8.90
- ------------------------------------------------------------------------------------------
Total consumer 167,767 15,013 8.95
- ------------------------------------------------------------------------------------------
Total loans and leases 343,151 29,172 8.50
- ------------------------------------------------------------------------------------------
Other earning assets 3,442 325 9.46
- ------------------------------------------------------------------------------------------
Total earning assets(3) 464,962 37,490 8.06
- ------------------------------------------------------------------------------------------
Cash and cash equivalents 24,187
Other assets, less allowance for credit losses 54,647
- ------------------------------------------------------------------------------------------
Total assets $543,796
==========================================================================================
Interest-bearing liabilities
Domestic interest-bearing deposits:
Savings $ 24,559 490 2.00
NOW and money market deposit accounts 95,204 2,529 2.66
Consumer CDs and IRAs 77,479 4,101 5.29
Negotiated CDs, public funds and other time deposits 6,412 360 5.62
- ------------------------------------------------------------------------------------------
Total domestic interest-bearing deposits 203,654 7,480 3.67
- ------------------------------------------------------------------------------------------
Foreign interest-bearing deposits(4):
Banks located in foreign countries 22,100 1,274 5.77
Governments and official institutions 10,801 591 5.47
Time, savings and other 22,093 1,339 6.06
- ------------------------------------------------------------------------------------------
Total foreign interest-bearing deposits 54,994 3,204 5.83
- ------------------------------------------------------------------------------------------
Total interest-bearing deposits 258,648 10,684 4.13
- ------------------------------------------------------------------------------------------
Federal funds purchased, securities sold under agreements
to repurchase and other short-term borrowings 70,399 4,105 5.83
Trading account liabilities 15,285 975 6.38
Long-term debt(5) 46,337 3,137 6.77
- ------------------------------------------------------------------------------------------
Total interest-bearing liabilities(6) 390,669 18,901 4.84
- ------------------------------------------------------------------------------------------
Noninterest-bearing sources:
Noninterest-bearing deposits 78,235
Other liabilities 31,282
Shareholders' equity 43,610
- ------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $543,796
==========================================================================================
Net interest spread 3.22
Impact of noninterest-bearing sources .78
- ------------------------------------------------------------------------------------------
Net interest income/yield on earning assets $18,589 4.00%
==========================================================================================
</TABLE>
(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 $215, $163
and $157 in 1999, 1998 and 1997, respectively. Interest income also
includes the impact of risk management interest rate contracts, which
increased interest income on the underlying assets $306, $174 and $159 in
1999, 1998 and 1997, 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 decreased (increased) interest expense on the underlying
liabilities $116, $(45) and $15 in 1999, 1998 and 1997, respectively.
18
<PAGE>
Table Four
Analysis of Changes in Net Interest Income -- Taxable-Equivalent Basis
<TABLE>
<CAPTION>
From 1998 to 1999
---------------------------------------
Due to Change in(1)
-------------------------
Net
(Dollars in millions) Volume Rate Change
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in interest income
Time deposits placed and other short-term investments $(143) $ (76) $ (219)
Federal funds sold and securities purchased under
agreements to resell 299 (461) (162)
Trading account assets (37) (495) (532)
Securities:
Available-for-sale 1,013 (490) 523
Held-for-investment (180) 10 (170)
- -----------------------------------------------------------------------------------------------------
Total securities 353
- -----------------------------------------------------------------------------------------------------
Loans and leases:
Commercial - domestic 609 (485) 124
Commercial - foreign (115) (234) (349)
Commercial real estate - domestic (245) (143) (388)
Commercial real estate - foreign (3) (5) (8)
- -----------------------------------------------------------------------------------------------------
Total commercial (621)
- -----------------------------------------------------------------------------------------------------
Residential mortgage 576 211 787
Home equity lines 2 (475) (473)
Direct/Indirect consumer 176 (213) (37)
Consumer finance 417 (276) 141
Bankcard (377) (127) (504)
Foreign consumer (6) (35) (41)
- -----------------------------------------------------------------------------------------------------
Total consumer (127)
- -----------------------------------------------------------------------------------------------------
Total loans and leases (748)
- -----------------------------------------------------------------------------------------------------
Other earning assets 102 (7) 95
- -----------------------------------------------------------------------------------------------------
Total interest income (1,213)
- -----------------------------------------------------------------------------------------------------
Increase (decrease) in interest expense
Domestic interest-bearing deposits:
Savings 17 (138) (121)
NOW and money market deposit accounts 54 (216) (162)
Consumer CDs and IRAs (34) (347) (381)
Negotiated CDs, public funds and other time deposits (52) (1) (53)
- -----------------------------------------------------------------------------------------------------
Total domestic interest-bearing deposits (717)
- -----------------------------------------------------------------------------------------------------
Foreign interest-bearing deposits:
Banks located in foreign countries (427) (176) (603)
Governments and official institutions (137) (53) (190)
Time, savings and other 101 (400) (299)
- -----------------------------------------------------------------------------------------------------
Total foreign interest-bearing deposits (1,092)
- -----------------------------------------------------------------------------------------------------
Total interest-bearing deposits (1,809)
- -----------------------------------------------------------------------------------------------------
Federal funds purchased, securities sold under agreements to
repurchase and other short-term borrowings 1,342 (755) 587
Trading account liabilities (96) (141) (237)
Long-term debt 486 (231) 255
- -----------------------------------------------------------------------------------------------------
Total interest expense (1,204)
- -----------------------------------------------------------------------------------------------------
Net decrease in net interest income $ (9)
=====================================================================================================
<CAPTION>
From 1997 to 1998
---------------------------------
Due to Change in(1)
-------------------
Net
(Dollars in millions) Volume Rate Change
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Increase (decrease) in interest income
Time deposits placed and other short-term investments $ (48) $ 21 $ (27)
Federal funds sold and securities purchased under
agreements to resell 256 56 312
Trading account assets 99 (53) 46
Securities:
Available-for-sale 1,350 (23) 1,327
Held-for-investment (89) (18) (107)
- -----------------------------------------------------------------------------------------------
Total securities 1,220
- -----------------------------------------------------------------------------------------------
Loans and leases:
Commercial - domestic 986 (384) 602
Commercial - foreign 196 55 251
Commercial real estate - domestic (96) (149) (245)
Commercial real estate - foreign 22 (19) 3
- -----------------------------------------------------------------------------------------------
Total commercial 611
- -----------------------------------------------------------------------------------------------
Residential mortgage (674) (129) (803)
Home equity lines 159 (231) (72)
Direct/Indirect consumer 82 (40) 42
Consumer finance 60 (156) (96)
Bankcard (379) (110) (489)
Foreign consumer 2 54 56
- -----------------------------------------------------------------------------------------------
Total consumer (1,362)
- -----------------------------------------------------------------------------------------------
Total loans and leases (751)
- -----------------------------------------------------------------------------------------------
Other earning assets 541 (80) 461
- -----------------------------------------------------------------------------------------------
Total interest income 1,261
- -----------------------------------------------------------------------------------------------
Increase (decrease) in interest expense
Domestic interest-bearing deposits:
Savings (36) (33) (69)
NOW and money market deposit accounts 35 (28) 7
Consumer CDs and IRAs (148) (38) (186)
Negotiated CDs, public funds and other time deposits 65 (11) 54
- -----------------------------------------------------------------------------------------------
Total domestic interest-bearing deposits (194)
- -----------------------------------------------------------------------------------------------
Foreign interest-bearing deposits:
Banks located in foreign countries 142 (11) 131
Governments and official institutions (16) 15 (1)
Time, savings and other 135 56 191
- -----------------------------------------------------------------------------------------------
Total foreign interest-bearing deposits 321
- -----------------------------------------------------------------------------------------------
Total interest-bearing deposits 127
- -----------------------------------------------------------------------------------------------
Federal funds purchased, securities sold under agreements to
repurchase and other short-term borrowings 1,170 (36) 1,134
Trading account liabilities 128 (208) (80)
Long-term debt 243 (35) 208
- -----------------------------------------------------------------------------------------------
Total interest expense 1,389
- -----------------------------------------------------------------------------------------------
Net decrease in net interest income $ (128)
===============================================================================================
</TABLE>
(1) The changes for each category of interest income and expense are divided
between the portion of change attributable to the variance in volume or
rate for that category. The amount of change that cannot be separated is
allocated to each variance proportionately.
19
<PAGE>
Provision for Credit Losses
The provision for credit losses was $1.8 billion in 1999 compared to $2.9
billion in 1998. The decrease in the provision for credit losses was primarily
due to a significant 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 and foreign to more consumer
residential mortgage loans as well as a $467 million decline in net
charge-offs. 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 on page 30.
Gains on Sales of Securities
Gains on sales of securities were $240 million in 1999 compared to $1.0
billion in 1998. Securities gains were higher in 1998 as a result of favorable
market conditions for certain debt instruments and higher activity in
connection with the Corporation's overall risk management operations.
Noninterest Income
As presented in Table Five, noninterest income increased $1.9 billion to
$14.1 billion in 1999, primarily reflecting higher levels of trading account
profits and fees, mortgage servicing income and credit card income, partially
offset by declines in nondeposit-related service fees and other income.
Table Five
Noninterest Income
<TABLE>
<CAPTION>
Change
----------------------
(Dollars in millions) 1999 1998 Amount Percent
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Service charges on deposit accounts $ 3,645 $ 3,396 $ 249 7.3%
Mortgage servicing income 673 389 284 73.0
Investment banking income 2,244 2,009 235 11.7
Trading account profits and fees 1,495 171 1,324 n/m
Brokerage income 724 728 (4) (.5)
Nondeposit-related service fees 554 652 (98) (15.0)
Asset management and fiduciary service fees 1,023 973 50 5.1
Credit card income 1,791 1,448 343 23.7
Other income 1,920 2,423 (503) (20.8)
- --------------------------------------------------------------------------------------
Total $14,069 $12,189 $1,880 15.4%
======================================================================================
</TABLE>
n/m = not meaningful
o Service charges on deposit accounts include ATM and checkcard, interchange
fees, overdraft fees and other deposit-related fees. Service charges on
deposit accounts increased by $249 million to $3.6 billion in 1999 primarily
due to increases in commercial checking account service charges and
increased debit card activity.
o Mortgage servicing income increased $284 million to $673 million in 1999,
primarily due to lower prepayment speeds as a result of higher interest
rates and a reduction in servicing costs primarily due to service operation
consolidations. The average managed portfolio of loans serviced increased
$36 billion to $273 billion in 1999 compared to $237 billion in 1998. First
mortgage loans originated through the Corporation decreased to $63.2 billion
in 1999 compared to $79.1 billion in 1998, reflecting a slowdown in
refinancings as a result of a general increase in levels of interest rates.
Origination volume in 1999 was composed of approximately $33.2 billion of
retail loans and $30.0 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 $2.7 billion at December 31, 1999 with
associated net unrealized gains of $18 million. At December 31, 1998, the
notional amount of such contracts was $9.8 billion with associated net
unrealized losses of $8 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 December 31, 1999, deferred
20
<PAGE>
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.
At December 31, 1998, by comparison, deferred net gains from mortgage
servicing rights hedging activity were $456 million, comprised of unamortized
realized deferred gains of $266 million and unrealized gains of $190 million
on closed and open positions, respectively. The change in net deferred hedge
results is attributable to the overall change in interest rates which resulted
in slower mortgage prepayment speeds. Notional amounts of hedge instruments
used for mortgage servicing rights hedging activities were $43.4 billion and
$22.4 billion at December 31, 1999 and 1998, respectively. For additional
information on mortgage banking activities, see Note One of the consolidated
financial statements on page 58.
o Investment banking income increased $235 million to $2.2 billion in 1999,
mainly due to increased levels of activity in principal investing,
syndications and other investment banking income. Principal investing income
increased $254 million to $833 million in 1999, primarily reflecting
continued growth in this business and a gain on the sale of an investment in
a sub-prime mortgage lender in 1999. Syndication fees increased $113 million
to $514 million, reflecting the Corporation's strengthened position as lead
arranger on syndication deals during 1999. Other investment banking income
increased $55 million to $172 million in 1999, primarily due to a gain on
the sale of other assets in 1999. The increases in investment banking income
were partially offset by lower levels of securities underwriting fees and
advisory services fees, primarily due to the sale of the investment banking
operations of Robertson Stephens in the third quarter of 1998. Securities
underwriting fees decreased $123 million to $461 million in 1999. Advisory
services fees decreased $64 million to $264 million in 1999. Investment
banking income by major activity follows:
<TABLE>
<CAPTION>
(Dollars in millions) 1999 1998
- ------------------------------------------------
<S> <C> <C>
Investment banking income
Principal investing $ 833 $ 579
Securities underwriting 461 584
Syndications 514 401
Advisory services 264 328
Other 172 117
- ----------------------------------------------
Total $2,244 $2,009
==============================================
</TABLE>
o Trading account profits and fees represent the net amount earned from the
Corporation's trading positions including trading account assets and
liabilities as well as derivative-dealer positions. These transactions
include positions to meet customer demand and positions 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 and fees, 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. Trading account profits and fees, as
well as trading-related net interest income ("trading-related revenue") are
presented in the table on the following page 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, debt and equity securities and derivative
contracts in interest rates, equities, credit and commodities.
Trading-related revenue increased $1.4 billion to $2.2 billion in 1999,
primarily due to higher levels of revenue from equities, interest rate
contracts and fixed income. Income from equities was favorably impacted by
growth in the equity business in 1999. Prior year interest rate contracts
and fixed income were negatively impacted by a write-down of Russian
securities and losses in corporate bonds and commercial mortgages due to
widening spreads.
21
<PAGE>
<TABLE>
<CAPTION>
(Dollars in millions) 1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C>
Trading account profits and fees - as reported $1,495 $ 171
Net interest income 662 608
==============================================================================
Total trading-related revenue $2,157 $ 779
- ------------------------------------------------------------------------------
Trading-related revenue by product
Foreign exchange contracts $ 570 $ 617
Interest rate contracts 533 172
Fixed income 499 (256)
Equities 503 184
Commodities and other 52 62
- ------------------------------------------------------------------------------
Total trading-related revenue $2,157 $ 779
==============================================================================
</TABLE>
o Nondeposit-related fees decreased 15 percent to $554 million in 1999,
primarily due to reduced general banking services and official check and
draft fees.
o Asset management and fiduciary service fees increased $50 million to $1.0
billion in 1999, primarily due to growth in core operations reflecting
increases in market value and new business, partially offset by the sale of
the investment management operations of Robertson Stephens in 1999. An
analysis of asset management and fiduciary service fees by major business
activity follows:
<TABLE>
<CAPTION>
(Dollars in millions) 1999 1998
- ---------------------------------------------------------------------------
<S> <C> <C>
Asset management and fiduciary service fees
Private bank $ 750 $728
Funds and institutional investment management 246 182
Retirement services, corporate trust and other 27 63
- ----------------------------------------------------------------------------
Total $1,023 $973
============================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31
-----------------------
1999 1998
----------- -----------
<S> <C> <C>
Market value of assets
Assets under management $247,458 $233,500
Assets under administration 309,581 300,167
======================================================
</TABLE>
o Credit card income increased $343 million to $1.8 billion in 1999, primarily
due to higher interchange and merchant volumes, as well as higher excess
servicing income, a result of higher levels of securitizations. Credit card
income includes securitization gains of $18 million and $32 million in 1999
and 1998, respectively, and revenue from the securitized portfolio of $226
million and $178 million in 1999 and 1998, respectively.
o Other income totaled $1.9 billion in 1999, a decrease of $503 million from
1998. Other income in 1998 included a $479 million gain on the sale of a
manufactured housing unit, $144 million from securitization gains, a $110
million gain on the sale of a partial ownership interest in a mortgage
company and an $84 million gain on the sale of real estate included in
premises and equipment, partially offset by write-downs associated with an
investment in DE Shaw and other equity investments in 1998. Other income in
1999 included an $89 million gain on the sale of certain businesses, $80
million from securitization gains, a $63 million gain on the sale of
substantially all remaining out-of-franchise credit card loans and a $17
million gain on the sale of certain branches. Other income also includes
certain prepayment fees and other fees, net rental income on automobile
leases classified as operating leases, servicing and related fees from the
consumer finance business, insurance commissions and earnings and bankers'
acceptances and letters of credit fees.
22
<PAGE>
Other Noninterest Expense
As presented in Table Six, the Corporation's other noninterest expense
decreased $755 million to $18.0 billion in 1999. This decrease was attributable
to merger-related savings, resulting in lower levels of personnel, professional
fees, other general operating expense and general administrative and other
expense.
Table Six
Other Noninterest Expense
<TABLE>
<CAPTION>
1999 1998 Change
----------------------- ----------------------- -------------------------
(Dollars in millions) Amount Percent(1) Amount Percent(1) Amount Percent
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Personnel $ 9,308 28.7% $ 9,412 30.7% $(104) ( 1.1)%
Occupancy 1,627 5.0 1,643 5.4 (16) ( 1.0)
Equipment 1,346 4.1 1,404 4.6 (58) ( 4.1)
Marketing 537 1.7 581 1.9 (44) ( 7.6)
Professional fees 630 1.9 843 2.8 (213) (25.3)
Amortization of intangibles 888 2.7 902 2.9 (14) ( 1.6)
Data processing 763 2.3 765 2.5 (2) ( .3)
Telecommunications 549 1.7 563 1.8 (14) ( 2.5)
Other general operating 1,820 5.6 2,044 6.6 (224) (11.0)
General administrative and other 518 1.6 584 1.9 (66) (11.3)
- ------------------------------------------------------------------------------------------------------------
Total $17,986 55.3% $18,741 61.1% $(755) ( 4.0)%
============================================================================================================
</TABLE>
(1) Percent of net interest income on a taxable-equivalent basis and
noninterest income.
o Personnel expense decreased $104 million to $9.3 billion in 1999, primarily
attributable to the merger-related savings in salaries and wages, partially
offset by higher incentive compensation. At December 31, 1999, the
Corporation had approximately 156,000 full-time equivalent employees
compared to approximately 171,000 at December 31, 1998.
o Professional fees decreased $213 million from 1998 to $630 million in 1999,
primarily due to decreases in use of outside legal and other professional
services.
o Other general operating expense decreased $224 million to $1.8 billion in
1999, primarily due to lower loan collection expense and insurance expense,
partially offset by increased credit card processing expense and postage
expense.
o General administrative and other expense decreased $66 million to $518
million in 1999, mainly as a result of decreased travel expense, personal
property taxes and other taxes and licenses.
23
<PAGE>
Year 2000 Project
For the past several years, the Corporation has been taking corrective
measures to ensure that, on January 1, 2000, its computer systems and equipment
that use embedded computer chips would be able to distinguish between "1900"
and "2000." The Corporation also undertook corrective measures to avoid any
business disruptions on February 29, 2000 as a result of the millennium's first
leap year. Due to these efforts, the Corporation has not experienced any
material system errors or failures as a result of Year 2000 issues.
Prior to December 31, 1999, the Corporation designed and implemented an
event management communications center as a single point of coordination and
information about all Year 2000 events, whether internal or external, that
could impact normal business processes. The Corporation will continue to staff
this center as needed through the end of the first quarter of 2000. In
addition, the Corporation will continue its business as usual practices to
monitor its computer systems and infrastructure, as well as the Year 2000
efforts of third parties with which the Corporation does business. Although the
Corporation does not anticipate that any future Year 2000 issues will result in
a material impact on the Corporation, there can be no assurance that this will
be the case.
The Corporation has incurred cumulative Year 2000 costs of approximately
$532 million through December 31, 1999. A significant portion of these costs
was not incremental to the Corporation but instead constituted a reallocation
of existing internal systems technology resources and, accordingly, was funded
from normal operations. Remaining costs are expected to be immaterial and
similarly funded.
Forward-looking statements contained in the foregoing "Year 2000 Project"
section should be read in conjunction with the cautionary statements included
in the introductory paragraphs under "Management's Discussion and Analysis of
Results of Operations and Financial Condition" on page 9.
Income Taxes
The Corporation's income tax expense for 1999 and 1998 was $4.3 billion
and $2.9 billion, respectively. The effective tax rates for 1999 and 1998 were
35.5 percent and 35.8 percent, respectively. Note Fifteen of the consolidated
financial statements on page 91 includes a reconciliation of expected federal
income tax expense computed using the federal statutory rate of 35 percent to
actual income tax expense.
24
<PAGE>
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. The average balances discussed below
can be derived from Table Three.
Average levels of customer-based funds increased $5.5 billion to $291.6
billion in 1999 compared to $286.1 billion in 1998, primarily due to an
increase in demand deposits. As a percentage of total sources, average levels
of customer-based funds decreased to 47 percent in 1999 from 49 percent in
1998.
Average levels of market-based funds increased $14.3 billion in 1999 to
$181.7 billion. In addition, 1999 average levels of long-term debt increased by
$7.6 billion over 1998, mainly the result of borrowings to fund earning asset
growth and business development opportunities, build liquidity, repay maturing
debt and fund share repurchases.
The average securities portfolio in 1999 increased $13.4 billion over 1998
levels, representing 13 percent of total uses of funds in 1999 compared to 11
percent in 1998. See the following "Securities" section for additional
information on the securities portfolio.
Average loans and leases, the Corporation's primary use of funds,
increased $14.9 billion to $362.8 billion in 1999. Average managed loans and
leases increased $32.1 billion, or 9.0 percent, to $388.9 billion in 1999,
reflecting strong loan growth in consumer products throughout the franchise due
to continued strength in consumer product introductions in certain regions.
Average other assets and cash and cash equivalents increased $579 million
to $85.3 billion in 1999, primarily due to increases in the average balances of
cash and cash equivalents, derivative-dealer assets and mortgage servicing
rights, partially offset by a decrease in customers' acceptance liability.
At December 31, 1999, cash and cash equivalents were $27.0 billion, a
decrease of $1.3 billion from December 31, 1998. During 1999, net cash provided
by operating activities was $12.1 billion, net cash used in investing
activities was $31.3 billion and net cash provided by financing activities was
$17.9 billion. For further information on cash flows, see the Consolidated
Statement of Cash Flows on page 56 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 parent company. See Note Twelve of the consolidated financial statements
on page 82 for further details on dividend capabilities of its subsidiary
banks. Management believes that the Corporation's sources of liquidity are more
than adequate to meet its cash requirements.
25
<PAGE>
Securities
The securities portfolio serves a primary role in the Corporation's
balance sheet management. The decision to purchase or sell securities is based
upon the current assessment of economic and financial conditions, including the
interest rate environment, liquidity requirements and on- and off-balance sheet
positions.
The securities portfolio at December 31, 1999 consisted of
available-for-sale securities totaling $81.7 billion and held-for-investment
securities totaling $1.4 billion compared to $78.6 billion and $2.0 billion,
respectively, at December 31, 1998. See Note Three of the consolidated
financial statements on page 67 for further details on securities.
The valuation allowance for available-for-sale securities and marketable
equity securities 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 valuation
allowance included in shareholders' equity at December 31, 1998, reflects
unrealized gains of $303 million, net of related income taxes of $216 million,
primarily reflecting pre-tax net unrealized gains of $354 million on
available-for-sale securities and $165 million on marketable equity securities.
The change in the valuation allowance was primarily attributable to an upward
shift in certain segments of the U.S. Treasury yield curve during 1999.
At December 31, 1999 and 1998, the market value of the Corporation's
held-for-investment securities reflected pre-tax net unrealized losses of $152
million and $144 million, respectively.
The estimated average duration of the available-for-sale securities
portfolio was 4.05 years at December 31, 1999 compared to 4.14 years at
December 31, 1998.
Loans and Leases
Total loans and leases increased four percent to $370.7 billion at
December 31, 1999 compared to $357.3 billion at December 31, 1998. As presented
in Table Three, average total loans and leases increased four percent to $362.8
billion in 1999 compared to $347.8 billion in 1998, primarily due to core loan
growth, partially offset by the impact of securitizations and loan sales of
$24.2 billion in 1999 compared to $22.6 billion in 1998.
Average commercial loans increased to $193.5 billion in 1999 compared to
$189.9 billion in 1998, due largely to core loan growth. Average domestic
commercial real estate loans decreased to $25.5 billion in 1999 compared to
$28.4 billion in 1998, reflecting the impact of $1.6 billion of securitizations
and loan sales in 1999 compared to $2.6 billion in 1998.
Average residential mortgage loans increased 11 percent to $78.9 billion
in 1999 compared to $70.8 billion in 1998, primarily due to core loan growth,
partially offset by the impact of $13.4 billion of securitizations and loan
sales in 1999 and $9.6 billion in 1998.
Average bankcard loans declined $3.2 billion to $9.8 billion in 1999
compared to $13.0 billion in 1998 due to reductions in retail outstandings and
securitizations and loan sales of $2.9 billion in 1999 compared to $2.4 billion
in 1998.
Average other consumer loans, including direct and indirect consumer loans
and home equity loans, increased $6.4 billion to $80.5 billion in 1999 due
primarily to consumer finance loan growth, partially offset by the impact of
$6.3 billion of securitizations and loan sales in 1999 and $8.0 billion in
1998.
A significant source of liquidity for the Corporation is the repayments
and maturities of loans. Table Seven presents the contractual maturity
distribution and interest sensitivity of selected loan categories at December
31, 1999, and indicates that approximately 34 percent of the selected loans had
maturities of one year or less. The securitization and sale of certain loans
and the use of loans as collateral in asset-backed financing arrangements are
also sources of liquidity.
26
<PAGE>
Table Seven
Selected Loan Maturity Data(1,2)
<TABLE>
<CAPTION>
December 31, 1999 Due after
Due in 1 year
1 year through Due after
(Dollars in millions) or less 5 years 5 years Total
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial - domestic $ 47,760 $ 64,394 $ 21,803 $ 133,957
Commercial real estate - domestic 2,818 6,189 6,952 15,959
Construction real estate - domestic 3,990 3,715 362 8,067
Foreign 8,311 14,458 4,298 27,067
- -----------------------------------------------------------------------------------------------------------
Total selected loans $ 62,879 $ 88,756 $ 33,415 $ 185,050
===========================================================================================================
Percent of total 34.0% 48.0% 18.0% 100.0%
Cumulative percent of total 34.0 82.0 100.0
Sensitivity of loans to changes in interest rates for
loans due after one year:
Predetermined interest rates $ 13,723 $ 13,772 $ 27,495
Floating or adjustable interest rates 75,033 19,643 94,676
- -----------------------------------------------------------------------------------------------------------
Total $ 88,756 $ 33,415 $ 122,171
===========================================================================================================
</TABLE>
(1) Loan maturities are based on the remaining maturities under contractual
terms.
(2) Loan maturities exclude residential mortgage, bankcard, home equity lines
and direct/indirect consumer loans.
Deposits
Table Three provides information on the average amounts of deposits and
the rates paid by deposit category. Through the Corporation's diverse retail
banking network, deposits remain a primary source of funds for the Corporation.
Average deposits decreased $3.7 billion in 1999 over 1998 to $341.7 billion,
primarily due to a $9.2 billion decrease in average foreign interest-bearing
deposits due to a strategic reduction in foreign wholesale deposits, which was
partially offset by a $4.0 billion increase in average noninterest-bearing
deposits. See Note Seven of the consolidated financial statements on page 72
for further details on deposits.
27
<PAGE>
Short-Term Borrowings and Trading Account Liabilities
The Corporation uses short-term borrowings as a funding source and in its
management of interest rate risk. Table Eight presents the categories of
short-term borrowings.
During 1999, total average short-term borrowings increased $25.5 billion
to $116.1 billion from $90.6 billion in 1998. This growth was primarily due to
a $16.5 billion increase of securities sold under agreements to repurchase to
fund securities portfolio growth and a $10.2 billion increase in other
short-term borrowings primarily due to a $10.0 billion increase in bank notes
to fund loan growth not funded by deposit growth. Average trading account
liabilities decreased $2.0 billion to $15.5 billion in 1999 from $17.5 billion
in 1998, due to a decline in trading-related short sales. See Note Four of the
consolidated financial statements on page 69 for further details on trading
account liabilities.
Table Eight
Short-Term Borrowings
<TABLE>
<CAPTION>
1999 1998 1997
-------------------- -------------------- ---------------------
(Dollars in millions) Amount Rate Amount Rate Amount Rate
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Federal funds purchased
At December 31 $ 4,806 3.04% $ 7,316 5.25% $10,111 5.80%
Average during year 5,835 5.03 8,201 5.42 6,551 5.54
Maximum month-end balance during year 8,311 -- 11,187 -- 10,111 --
Securities sold under agreements to repurchase
At December 31 69,755 4.12 60,227 5.08 51,303 5.83
Average during year 73,242 4.89 56,710 5.66 45,403 5.58
Maximum month-end balance during year 83,046 -- 71,595 -- 51,820 --
Commercial paper
At December 31 7,331 5.83 6,749 5.19 5,925 5.65
Average during year 7,610 5.17 6,419 5.56 6,184 5.64
Maximum month-end balance during year 8,379 -- 7,913 -- 6,689 --
Other short-term borrowings
At December 31 40,340 5.18 24,742 4.52 12,120 6.52
Average during year 29,463 5.30 19,300 6.35 12,261 7.02
Maximum month-end balance during year 40,340 -- 25,927 -- 13,974 --
==============================================================================================================
</TABLE>
28
<PAGE>
Long-Term Debt and Trust Preferred Securities
Long-term debt increased $9.6 billion to $55.5 billion at December 31,
1999, from $45.9 billion at December 31, 1998, mainly as a result of borrowings
to fund earning asset growth and business development opportunities, build
liquidity, repay maturing debt and fund share repurchases. During 1999, the
Corporation issued, domestically and internationally, $17.6 billion in
long-term senior and subordinated debt, a $5.1 billion increase from $12.5
billion during 1998. In 1999, the Corporation had no issuance of trust
preferred securities compared to $350 million in 1998. See Notes Eight and Nine
of the consolidated financial statements on pages 73 and 75 for further details
on long-term debt and trust preferred securities, respectively.
From January 1, 2000 through March 15, 2000, the Corporation issued $1.4
billion of long-term senior and subordinated debt, with maturities ranging from
2002 to 2023. During this same time period, Bank of America, N.A. issued $6.0
billion of bank notes with maturities ranging from 2001 to 2004 and $1.0
billion of Euro medium-term notes maturing in 2002 and 2003.
Debt Ratings
The financial position of the Corporation and Bank of America, N.A at
December 31, 1999 is reflected in the following debt ratings:
<TABLE>
<CAPTION>
Bank of America,
Bank of America Corporation N.A.
------------------------------------ ---------------
Commercial Senior Subordinated Short- Long-
Paper Debt Debt term term
------------ -------- -------------- -------- ------
<S> <C> <C> <C> <C> <C>
Moody's Investors Service P-1 Aa2 Aa3 P-1 Aa1
Standard & Poor's Corporation A-1 A+ A A-1+ AA-
Duff and Phelps, Inc D-1+ AA- A+ D-1+ AA
Fitch IBCA, Inc F-1+ AA- A+ F-1+ AA
Thomson BankWatch TBW-1 AA- A+ TBW-1 -
======================================================================================
</TABLE>
Capital Resources and Capital Management
Shareholders' equity at December 31, 1999, was $44.4 billion compared to
$45.9 billion at December 31, 1998, a decrease of $1.5 billion. The decrease
was attributable to the repurchase of 78 million shares of common stock for
approximately $4.9 billion combined with a $2.8 billion reduction in
shareholders' equity resulting primarily from the recognition of after-tax net
unrealized losses on available-for-sale securities and marketable equity
securities. Offsetting these decreases are the increases to shareholders'
equity due to net earnings (net income less dividends) of $4.7 billion and the
issuance of approximately 30.5 million shares of common stock under various
employee plans for $1.4 billion.
Under the current repurchase program which was authorized by the
Corporation's Board of Directors in June 1999, the Corporation had remaining
buyback authority of its common stock outstanding of $5.1 billion or 52 million
shares of common stock at December 31, 1999.
The regulatory capital ratios of the Corporation and Bank of America N.A.,
along with a description of the components of risk-based capital, capital
adequacy requirements and prompt corrective action provisions, are included in
Note Twelve of the consolidated financial statements on page 82.
29
<PAGE>
Credit Risk Management and Credit Portfolio Review
In conducting business activities, the Corporation is exposed to the risk
that borrowers or counterparties may default on their obligations to the
Corporation. Credit risk arises through the extension of loans and leases,
certain securities, letters of credit, financial guarantees and through
counterparty exposure on trading and capital markets transactions. To manage
this risk, the Credit Risk Management group establishes policies and procedures
to manage both on- and off-balance sheet credit risk and communicates and
monitors the application of these policies and procedures throughout the
Corporation.
The Corporation's overall objective in managing credit risk is to minimize
the adverse impact of any single event or set of occurrences. To achieve this
objective, the Corporation strives to maintain a credit risk profile that is
diverse in terms of product type, industry concentration, geographic
distribution and borrower or counterparty concentration.
The Credit Risk Management group works with lending officers, trading
personnel and various other line personnel in areas that conduct activities
involving credit risk and is involved in the implementation, refinement and
monitoring of credit policies and procedures.
The Corporation manages credit exposure to individual borrowers and
counterparties on an aggregate basis including loans and leases, securities,
letters of credit, bankers' acceptances, derivatives and unfunded commitments.
In addition, the creditworthiness of individual borrowers or counterparties is
determined by experienced personnel, and limits are established for the total
credit exposure to any one borrower or counterparty. Credit limits are subject
to varying levels of approval by senior line and credit risk management.
The Corporation also manages exposure to a single borrower, industry,
product-type, country or other concentration through syndications of credits,
credit derivatives, participations, loan sales and securitizations. Through the
Global Corporate and Investment Banking segment, the Corporation is a major
participant in the syndications market. In a syndicated facility, each
participating lender funds only its portion of the syndicated facility,
therefore limiting its exposure to the borrower.
In conducting derivatives activities, the Corporation may choose to reduce
credit risk to any one counterparty through the use of legally enforceable
master netting agreements which allow the Corporation to settle positive and
negative positions with the same counterparty on a net basis. For more
information on the Corporation's off-balance sheet credit risk, see Note Eleven
of the consolidated financial statements on page 79.
For commercial lending, the originating credit officer assigns borrowers
or counterparties an initial risk rating which is based primarily on a thorough
analysis of each borrower's financial capacity in conjuction with industry and
economic trends. Approvals are made based upon the amount of inherent credit
risk specific to the transaction and the counterparty and are reviewed for
appropriateness by senior line and credit risk personnel. Credits are monitored
by line and credit risk management personnel for deterioration in a borrower's
or counterparty's financial condition which would impact the ability of the
borrower or counterparty to perform under the contract. Risk ratings are
adjusted as necessary.
For consumer and small business lending, credit scoring systems are
utilized to determine the relative riskiness of new underwritings and provide
standards for extensions of credit. Consumer portfolio credit risk is monitored
primarily using statistical models and regular reviews of actual payment
experience to predict portfolio behavior.
When required, the Corporation obtains collateral to support credit
extensions and commitments. Generally, such collateral is in the form of real
and personal property, cash on deposit or other highly liquid instruments. In
certain circumstances, the Corporation obtains real property as security for
some loans that are made on the general creditworthiness of the borrower and
whose proceeds were not used for real estate-related purposes.
An independent Credit Review group conducts ongoing reviews of credit
activities and portfolios, reexamining on a regular basis risk assessments for
credit exposures and overall compliance with policy.
30
<PAGE>
Loan and Lease Portfolio Review - The Corporation's primary credit
exposure is focused in its loans and leases portfolio, which totaled $370.7
billion and $357.3 billion at December 31, 1999 and 1998, 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 Nine 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 38.
Table Nine
Distribution of Loans and Leases
<TABLE>
<CAPTION>
December 31
-----------------------------------------------
1999 1998
----------------------- -----------------------
<S> <C> <C> <C> <C>
(Dollars in millions) Amount Percent Amount Percent
- --------------------------------------------------------------------------
Commercial - domestic $143,450 38.7% $137,422 38.5%
Commercial - foreign 27,978 7.5 31,495 8.8
Commercial real
estate - domestic 24,026 6.5 26,912 7.5
Commercial real
estate - foreign 325 .1 301 .1
- --------------------------------------------------------------------------
Total commercial 195,779 52.8 196,130 54.9
- --------------------------------------------------------------------------
Residential mortgage 81,860 22.1 73,608 20.6
Home equity lines 17,273 4.7 15,653 4.4
Direct/Indirect consumer 42,161 11.4 40,510 11.3
Consumer finance 22,326 6.0 15,400 4.3
Bankcard 9,019 2.4 12,425 3.5
Foreign consumer 2,244 .6 3,602 1.0
- --------------------------------------------------------------------------
Total consumer 174,883 47.2 161,198 45.1
- --------------------------------------------------------------------------
Total loans and
leases $370,662 100.0% $357,328 100.0%
==========================================================================
<CAPTION>
December 31
----------------------------------------------------------------------
1997 1996 1995
----------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
(Dollars in millions) Amount Percent Amount Percent Amount Percent
- -------------------------------------------------------------------------------------------------
Commercial - domestic $122,463 35.8% $105,737 33.3% $ 99,922 33.1%
Commercial - foreign 30,080 8.8 26,781 8.4 23,395 7.7
Commercial real
estate - domestic 28,567 8.3 25,881 8.1 26,381 8.7
Commercial real
estate - foreign 324 .1 239 .1 361 .1
- -----------------------------------------------------------------------------------------------
Total commercial 181,434 53.0 158,638 49.9 150,059 49.6
- -----------------------------------------------------------------------------------------------
Residential mortgage 71,540 20.9 80,400 25.3 77,078 25.5
Home equity lines 16,536 4.8 12,541 3.9 11,143 3.7
Direct/Indirect consumer 40,058 11.7 33,352 10.6 34,071 11.1
Consumer finance 14,566 4.3 13,081 4.1 10,375 3.4
Bankcard 14,908 4.4 16,561 5.2 17,455 5.8
Foreign consumer 3,098 .9 3,136 1.0 2,623 .9
- -----------------------------------------------------------------------------------------------
Total consumer 160,706 47.0 159,071 50.1 152,745 50.4
- -----------------------------------------------------------------------------------------------
Total loans and
leases $342,140 100.0% $317,709 100.0% $302,804 100.0%
===============================================================================================
</TABLE>
Commercial Portfolio
Commercial - domestic loans outstanding totaled $143.5 billion and $137.4
billion at December 31, 1999 and 1998, respectively, or 39 percent of total
loans and leases for both years. The Corporation had commercial - domestic loan
net charge-offs in 1999 of $711 million, or 0.51 percent of average commercial
- - domestic loans, compared to $617 million, or 0.47 percent of average
commercial - domestic loans, in 1998. Nonperforming commercial - domestic loans
were $1.2 billion, or 0.81 percent of commercial - domestic loans, at December
31, 1999, compared to $812 million, or 0.59 percent, at December 31, 1998. The
increase in charge-offs and nonperforming loans was attributable to a few large
credits and several smaller credits primarily related to certain recently
troubled industries, including healthcare and sub-prime finance. Commercial -
domestic loans past due 90 days or more and still accruing interest remained
essentially unchanged at $135 million, or 0.09 percent and 0.10 percent of
commercial-domestic loans at December 31, 1999 and 1998, respectively. Table
Sixteen presents aggregate loan and lease exposures by certain significant
industries.
Commercial - foreign loans outstanding totaled $28.0 billion and $31.5
billion at December 31, 1999 and 1998, respectively, or eight percent and nine
percent of total loans and leases, respectively. The decrease reflects the
Corporation's strategy to reduce both the size and risk of its emerging market
portfolio in Asia, Latin America and Central and Eastern Europe. The
Corporation had commercial - foreign loan net charge-offs in 1999 of $144
million, or 0.49 percent of average commercial - foreign loans, compared to
$242 million, or 0.78 percent of the average commercial - foreign loans in
1998. Nonperforming commercial - foreign loans were $486 million, or 1.74
percent of commercial - foreign loans, at December 31, 1999, compared to $314
million, or 1.00 percent, at December 31, 1998. The increase was primarily due
to one large credit that was classified as nonperforming in 1999. Commercial -
foreign loans past due 90 days or more and still accruing interest were $58
million, or 0.21 percent of commercial - foreign loans, at December 31, 1999
compared to $23 million, or 0.07 percent, at December 31, 1998. For additional
information see the Regional Foreign Exposure discussion beginning on page 39.
31
<PAGE>
Commercial real estate - domestic loans totaled $24.0 billion and $26.9
billion at December 31, 1999 and 1998, respectively, or seven percent and eight
percent of total loans and leases, respectively. At December 31, 1999,
commercial real estate - domestic loans past due 90 days or more and still
accruing interest were $6 million, or 0.02 percent of total commercial real
estate - domestic loans, compared to $12 million, or 0.04 percent, at December
31, 1998. Table Fifteen 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 December 31, 1999 and 1998, domestic consumer loans outstanding totaled
$172.6 billion and $157.6 billion, respectively, or 47 percent and 44 percent
of total loans and leases, respectively.
Residential mortgage loans increased to $81.9 billion at December 31, 1999
compared to $73.6 billion at December 31, 1998, reflecting originations in
excess of prepayments and sales.
Bankcard receivables decreased to $9.0 billion at December 31, 1999
compared to $12.4 billion at December 31, 1998, reflecting a portfolio sale of
out-of-market receivables and $2.0 billion in securitizations in 1999.
Consumer finance loans outstanding totaled $22.3 billion and $15.4 billion
at December 31, 1999 and 1998, respectively, or six percent and four percent of
total loans and leases, respectively. The increase is primarily attributable to
the growth in the consumer finance - real estate sector. The Corporation had
consumer finance net charge-offs in 1999 of $229 million or 1.22 percent of
average consumer finance loans, compared to $383 million, or 2.67 percent in
1998. The decrease in charge-offs is primarily the result of the sale of a
sub-prime business in 1998.
Other domestic consumer loans, which include direct and indirect consumer
loans and home equity lines of credit increased to $59.4 billion at December
31, 1999 compared to $56.2 billion at December 31, 1998.
Total domestic consumer net charge-offs during 1999 decreased $465 million
to $1.1 billion, or .68 percent of average domestic consumer loans and leases.
The decrease was due mainly to lower bankcard and consumer finance net
charge-offs.
Total consumer nonperforming loans were $1.2 billion, or 0.69 percent of
total consumer loans, at December 31, 1999 compared to $1.1 billion, or 0.65
percent, at December 31, 1998. The increase was due to higher nonperforming
loans in consumer finance driven by portfolio growth and seasoning. This
increase was partially offset by lower residential mortgage nonperforming
loans. Total consumer loans past due 90 days or more and still accruing
interest were $322 million, or 0.18 percent of total consumer loans, at
December 31, 1999 compared to $441 million, or 0.27 percent, at December 31,
1998.
Nonperforming Assets
As presented in Table Ten, nonperforming assets were $3.2 billion, or 0.86
percent of net loans, leases and foreclosed properties at December 31, 1999,
compared to $2.8 billion, or 0.77 percent, at December 31, 1998. Nonperforming
loans increased to $3.0 billion at December 31, 1999 compared to $2.5 billion
at December 31, 1998 primarily due to increased consumer finance and commercial
nonperforming loans, which were offset by continued reductions in residential
mortgage nonperforming loans. The allowance coverage of nonperforming loans was
224 percent at December 31, 1999 compared to 287 percent at December 31, 1998.
At December 31, 1999, there were no material commitments to lend additional
funds with respect to nonperforming loans.
In order to respond when deterioration of a credit occurs, internal loan
workout units are devoted to provide 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 December 31, 1999 and 1998, residential mortgage loans comprised 17
percent and 26 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.
32
<PAGE>
Foreclosed properties decreased to $163 million at December 31, 1999
compared to $282 million at December 31, 1998.
Note Five of the consolidated financial statements on page 71 provides the
reported investment in specific loans considered to be impaired at December 31,
1999 and 1998. The Corporation's investment in specific loans that were
considered to be impaired at December 31, 1999 were $2.1 billion compared to
$1.7 billion at December 31, 1998. Commercial - domestic impaired loans
increased to $1.1 billion at December 31, 1999 from $0.8 billion at December
31, 1998 due to the increases in commercial - domestic nonperforming assets
described previously. Commercial - foreign impaired loans increased to $0.5
billion at December 31, 1999 from $0.3 billion at December 31, 1998 primarily
due to one large credit that was classified as impaired in 1999. Commercial
real estate - domestic impaired loans decreased to $0.4 billion at December 31,
1999 from $0.6 billion at December 31, 1998.
Table Ten
Nonperforming Assets
<TABLE>
<CAPTION>
December 31
-----------------------------------------------------------
(Dollars in millions) 1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonperforming loans
Commercial - domestic $ 1,163 $ 812 $ 563 $ 713 $ 914
Commercial - foreign 486 314 155 110 121
Commercial real estate - domestic 191 299 342 491 1,027
Commercial real estate - foreign 3 4 2 2 22
- ------------------------------------------------------------------------------------------------------
Total commercial 1,843 1,429 1,062 1,316 2,084
- ------------------------------------------------------------------------------------------------------
Residential mortgage 529 722 744 676 464
Home equity lines 46 50 52 36 42
Direct/Indirect consumer 19 21 43 53 57
Consumer finance 598 246 210 116 118
Foreign consumer 7 14 -- 1 2
- ------------------------------------------------------------------------------------------------------
Total consumer 1,199 1,053 1,049 882 683
- ------------------------------------------------------------------------------------------------------
Total nonperforming loans 3,042 2,482 2,111 2,198 2,767
- ------------------------------------------------------------------------------------------------------
Foreclosed properties 163 282 309 511 675
- ------------------------------------------------------------------------------------------------------
Total nonperforming assets $ 3,205 $ 2,764 $ 2,420 $ 2,709 $ 3,442
======================================================================================================
Nonperforming assets as a percentage of:
Total assets .51% .45% .42% .57% .75%
Loans, leases and foreclosed properties .86 .77 .71 .85 1.14
======================================================================================================
</TABLE>
The loss of income associated with nonperforming loans and the cost of
carrying foreclosed properties for the five years ended December 31, 1999 were:
<TABLE>
<CAPTION>
(Dollars in millions) 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income that would have been recorded in accordance
with original terms $ 419 $ 367 $ 349 $ 388 $ 457
Less income actually recorded (123) (130) (130) (130) (135)
- -----------------------------------------------------------------------------------------------------
Loss of income $ 296 $ 237 $ 219 $ 258 $ 322
- -----------------------------------------------------------------------------------------------------
Cost of carrying foreclosed properties $ 13 $ 16 $ 26 $ 35 $ 51
=====================================================================================================
</TABLE>
33
<PAGE>
Loans Past Due 90 Days or More
Table Eleven presents total loans past due 90 days or more and still
accruing interest. At December 31, 1999, loans past due 90 days or more and
still accruing interest were $521 million, or 0.14 percent of loans and leases,
compared to $611 million, or 0.17 percent, at December 31, 1998.
Table Eleven
Loans Past Due 90 Days or More and Still Accruing Interest
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
--------------------- --------------------
(Dollars in millions) Amount Percent(1) Amount Percent(1)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial - domestic $135 .09% $135 .10%
Commercial - foreign 58 .21 23 .07
Commercial real estate - domestic 6 .02 12 .04
- ------------------------------------------------------------------------------
Total commercial 199 .10 170 .09
- ------------------------------------------------------------------------------
Residential mortgage 26 .03 31 .04
Direct/Indirect consumer 136 .32 174 .43
Consumer finance 22 .10 16 .10
Bankcard 138 1.53 214 1.72
Foreign consumer -- -- 6 .17
- ------------------------------------------------------------------------------
Total consumer 322 .18 441 .27
- ------------------------------------------------------------------------------
Total $521 .14% $611 .17%
==============================================================================
</TABLE>
(1) Represents amounts past due 90 days or more and still accruing interest as
a percentage of loans and leases for each loan category.
Net Charge-offs - Net charge-offs by loan category are presented in Table
Twelve.
Table Twelve
Net Charge-offs in Dollars and as a Percentage of Average Loans and Leases
Outstanding(1)
<TABLE>
<CAPTION>
(Dollars in millions) 1999 1998 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Commercial - domestic $ 711 .51% $ 617 .47% $ 102 .09%
Commercial - foreign 144 .49 242 .78 29 .10
Commercial real
estate - domestic (6) n/m -- -- -- --
Commercial real
estate - foreign 1 .39 -- -- -- --
- ------------------------------------------------------------------------------------------
Total commercial 850 .44 859 .45 131 .07
- ------------------------------------------------------------------------------------------
Residential mortgage 28 .04 29 .04 45 .06
Home equity lines 12 .07 17 .11 27 .18
Direct/Indirect consumer 370 .88 405 1.01 436 1.11
Consumer finance 229 1.22 383 2.67 271 1.96
Bankcard 495 5.08 764 6.03 919 5.90
Other consumer - domestic (1) n/m -- -- 12 --
Foreign consumer 17 .52 10 .31 11 .32
- ------------------------------------------------------------------------------------------
Total consumer 1,150 .68 1,608 1.02 1,721 1.03
- ------------------------------------------------------------------------------------------
Total net charge-offs $2,000 .55% $2,467 .71% $1,852 .54%
==========================================================================================
Managed bankcard net
charge-offs and ratios(2) $1,077 5.57% $1,284 6.27% $1,254 6.19%
==========================================================================================
<CAPTION>
(Dollars in millions) 1996 1995
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial - domestic $ 182 .18% $ 32 .03%
Commercial - foreign (11) n/m (53) n/m
Commercial real
estate - domestic 81 .31 52 .19
Commercial real
estate - foreign (5) n/m (5) n/m
- -------------------------------------------------------------------------
Total commercial 247 .16 26 .02
- -------------------------------------------------------------------------
Residential mortgage 57 .07 57 .08
Home equity lines 40 .34 40 .39
Direct/Indirect consumer 349 1.01 263 .79
Consumer finance 237 1.98 172 1.98
Bankcard 730 4.47 572 3.88
Other consumer - domestic 5 -- -- --
Foreign consumer 2 .10 1 .04
- -------------------------------------------------------------------------
Total consumer 1,420 .89 1,105 .77
- -------------------------------------------------------------------------
Total net charge-offs $1,667 .53% $1,131 .39%
=========================================================================
Managed bankcard net
charge-offs and ratios(2) $ 888 4.67% $ 651 4.10%
=========================================================================
</TABLE>
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.
34
<PAGE>
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, as presented on Table
Thirteen, are assigned to cover the estimated probable incurred losses in each
loan and lease category based on the results of the Corporation's detail 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.
Period to period changes in the assigned allowance for credit losses are
driven by portfolio level and product mix changes, specific allowance for
credit loss assignments on impaired loans, as well as any changes in assigned
levels driven by the review process. In the first quarter of 1999, a review of
the Corporation's portfolio and combined loss history resulted in adjustments
to selected loss factors, which in some instances were higher or lower than the
1998 rates. This resulted in a redistribution of the allowance between select
product categories. The allowance assigned to commercial - domestic loans,
commercial real estate - domestic loans and direct/indirect consumer loans at
December 31, 1999 was impacted by this revision of loss factors as well as by
portfolio level changes. The consumer finance loan portfolio experienced a
redistribution of portfolio risk in 1999 as a result of the sale of a sub-prime
business in 1998 and reductions of manufactured housing exposures in 1999.
Changes in the assigned allowance for credit losses in 1999 for all other
product categories were commensurate with portfolio level changes.
The level of the unassigned allowance for credit losses remained stable
from 1998 to 1999, although there was a shift in the mix of the components as
certain industry concentration risks, such as healthcare, sub-prime finance and
textiles and apparel, increased and offshore risk expectations have generally
improved.
35
<PAGE>
Table Thirteen
Allocation of the Allowance for Credit Losses
<TABLE>
<CAPTION>
December 31
-------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------------ ------------------ ------------------ ------------------ -------------------
(Dollars in millions) Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
- -------------------------- -------- --------- -------- --------- -------- --------- -------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial - domestic $1,875 27.4% $1,540 21.6% $1,580 23.4% $1,436 22.7% $1,306 21.1%
Commercial - foreign 930 13.6 1,327 18.6 1,013 14.9 427 6.8 432 6.9
Commercial real
estate - domestic 927 13.6 925 13.0 847 12.5 764 12.1 992 15.9
Commercial real
estate - foreign 11 .2 -- -- -- -- -- -- -- --
- -------------------------- ------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total commercial 3,743 54.8 3,792 53.2 3,440 50.8 2,627 41.6 2,730 43.9
- -------------------------- ------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Residential mortgage 160 2.3 137 1.9 181 2.7 214 3.4 202 3.2
Home equity lines 60 .9 46 .6 84 1.2 87 1.4 74 1.2
Direct/Indirect consumer 416 6.1 527 7.5 608 9.0 618 9.8 604 9.7
Consumer finance 651 9.5 658 9.2 785 11.6 645 10.2 460 7.4
Bankcard 348 5.1 501 7.0 790 11.7 671 10.6 709 11.4
Foreign consumer 11 .2 26 .4 23 .3 21 .3 17 .3
- -------------------------- ------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total consumer 1,646 24.1 1,895 26.6 2,471 36.5 2,256 35.7 2,066 33.2
- -------------------------- ------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Unassigned 1,439 21.1 1,435 20.2 867 12.7 1,433 22.7 1,426 22.9
- -------------------------- ------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total $6,828 100.0% $7,122 100.0% $6,778 100.0% $6,316 100.0% $6,222 100.0%
========================== ====== ===== ====== ===== ====== ===== ====== ===== ====== =====
</TABLE>
36
<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
its analysis of estimated incurred credit losses at December 31, 1999. Table
Fourteen provides the changes in the allowance for credit losses for the five
years ended December 31, 1999.
Table Fourteen
Allowance For Credit Losses
<TABLE>
<CAPTION>
(Dollars in millions) 1999 1998
- ---------------------------------------------------------------- -------------- ------------
<S> <C> <C>
Balance, January 1 $ 7,122 $ 6,778
- ---------------------------------------------------------------- -------- --------
Loans and leases charged off
Commercial - domestic 820 714
Commercial - foreign 161 262
Commercial real estate - domestic 19 21
Commercial real estate - foreign 1 --
- ---------------------------------------------------------------- -------- --------
Total commercial 1,001 997
- ---------------------------------------------------------------- -------- --------
Residential mortgage 35 33
Home equity lines 24 27
Direct/Indirect consumer 545 562
Consumer finance 387 561
Bankcard 571 857
Other consumer domestic (1) --
Foreign consumer 20 13
- ---------------------------------------------------------------- --------- --------
Total consumer 1,581 2,053
- ---------------------------------------------------------------- --------- --------
Total loans and leases charged off 2,582 3,050
- ---------------------------------------------------------------- --------- --------
Recoveries of loans and leases previously charged off
Commercial - domestic 109 97
Commercial - foreign 17 20
Commercial real estate - domestic 25 21
Commercial real estate - foreign -- --
- ---------------------------------------------------------------- --------- --------
Total commercial 151 138
- ---------------------------------------------------------------- --------- --------
Residential mortgage 7 4
Home equity lines 12 10
Direct/Indirect consumer 175 157
Consumer finance 158 178
Bankcard 76 93
Foreign consumer 3 3
- ---------------------------------------------------------------- --------- --------
Total consumer 431 445
- ---------------------------------------------------------------- --------- --------
Total recoveries of loans and leases previously charged off 582 583
- ---------------------------------------------------------------- --------- --------
Net charge-offs 2,000 2,467
- ---------------------------------------------------------------- --------- --------
Provision for credit losses 1,820 2,920
Other, net (114) (109)
- ---------------------------------------------------------------- --------- --------
Balance, December 31 $ 6,828 $ 7,122
================================================================ ========= ========
Loans and leases outstanding at December 31 $370,662 $357,328
Allowance for credit losses as a percentage of loans and leases
outstanding at December 31 1.84% 1.99%
Average loans and leases outstanding during the year $362,783 $347,840
Net charge-offs as a percentage of average loans and leases
outstanding during the year .55% .71%
Ratio of the allowance for credit losses at December 31 to net
charge-offs 3.41 2.89
Allowance for credit losses as a percentage of nonperforming
loans 224.48 287.01
================================================================ ========= ========
<CAPTION>
(Dollars in millions) 1997 1996 1995
- ---------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Balance, January 1 $ 6,316 $ 6,222 $ 6,377
- ---------------------------------------------------------------- --------- --------- ---------
Loans and leases charged off
Commercial - domestic 328 376 329
Commercial - foreign 54 29 11
Commercial real estate - domestic 59 131 105
Commercial real estate - foreign -- -- 2
- ---------------------------------------------------------------- --------- --------- ---------
Total commercial 441 536 447
- ---------------------------------------------------------------- --------- --------- ---------
Residential mortgage 50 61 60
Home equity lines 36 47 47
Direct/Indirect consumer 582 486 374
Consumer finance 426 393 241
Bankcard 1,043 838 648
Other consumer domestic 12 5 --
Foreign consumer 13 3 2
- ---------------------------------------------------------------- --------- --------- ---------
Total consumer 2,162 1,833 1,372
- ---------------------------------------------------------------- --------- --------- ---------
Total loans and leases charged off 2,603 2,369 1,819
- ---------------------------------------------------------------- --------- --------- ---------
Recoveries of loans and leases previously charged off
Commercial - domestic 226 194 297
Commercial - foreign 25 40 64
Commercial real estate - domestic 59 50 53
Commercial real estate - foreign -- 5 7
- ---------------------------------------------------------------- --------- --------- ---------
Total commercial 310 289 421
- ---------------------------------------------------------------- --------- --------- ---------
Residential mortgage 5 4 3
Home equity lines 9 7 7
Direct/Indirect consumer 146 137 111
Consumer finance 155 156 69
Bankcard 124 108 76
Foreign consumer 2 1 1
- ---------------------------------------------------------------- --------- --------- ---------
Total consumer 441 413 267
- ---------------------------------------------------------------- --------- --------- ---------
Total recoveries of loans and leases previously charged off 751 702 688
- ---------------------------------------------------------------- --------- --------- ---------
Net charge-offs 1,852 1,667 1,131
- ---------------------------------------------------------------- --------- --------- ---------
Provision for credit losses 1,904 1,645 945
Other, net 410 116 31
- ---------------------------------------------------------------- --------- --------- ---------
Balance, December 31 $ 6,778 $ 6,316 $ 6,222
================================================================ ========= ========= =========
Loans and leases outstanding at December 31 $ 342,140 $ 317,709 $ 302,804
Allowance for credit losses as a percentage of loans and leases
outstanding at December 31 1.98% 1.99% 2.05%
Average loans and leases outstanding during the year $ 343,151 $ 312,331 $ 286,770
Net charge-offs as a percentage of average loans and leases
outstanding during the year .54% .53% .39%
Ratio of the allowance for credit losses at December 31 to net
charge-offs 3.66 3.79 5.50
Allowance for credit losses as a percentage of nonperforming
loans 321.03 287.35 224.86
================================================================ ========= ========= =========
</TABLE>
37
<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 Fifteen, Sixteen and Seventeen.
The exposures presented in Table Fifteen 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. In addition to the amounts presented
in the table, at December 31, 1999, the Corporation had approximately $15.2
billion of commercial loans which were not real estate dependent but for which
the Corporation had obtained real estate as secondary repayment security.
Table Fifteen
Commercial Real Estate Loans, Foreclosed Properties and Other Real Estate
Credit Exposures
<TABLE>
<CAPTION>
December 31, 1999
Loans Other
----------------------------- Foreclosed Credit
(Dollars in millions) Outstanding Nonperforming Properties(1) Exposures(2)
- ---------------------------- ------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
By Geographic Region(3)
California $ 5,382 $ 15 $ 6 $ 699
Southwest 3,720 20 1 401
Northwest 2,557 5 1 239
Florida 2,395 28 3 458
Midwest 2,334 41 38 105
Mid-Atlantic 1,563 37 1 188
Carolinas 1,175 7 2 36
Midsouth 1,157 4 2 98
Northeast 632 19 -- 128
Other states 630 15 10 59
Non-US 325 3 -- 12
Geographically diversified 2,481 -- -- 264
- ---------------------------- ------- ---- --- ------
Total $24,351 $194 $64 $2,687
============================ ======= ==== === ======
By Property Type
Apartments $ 4,715 $ 32 $ 1 $ 724
Office buildings 4,677 35 2 162
Shopping centers/retail 3,094 29 30 316
Residential 2,836 15 3 292
Industrial/warehouse 2,091 15 2 53
Hotels/motels 1,247 1 -- 125
Land and land development 1,176 12 8 148
Multiple use 790 3 -- 14
Miscellaneous commercial 709 6 6 23
Unsecured 635 5 -- 4
Non-US 325 3 -- 12
Other 2,056 38 12 814
- ---------------------------- ------- ---- --- ------
Total $24,351 $194 $64 $2,687
============================ ======= ==== === ======
</TABLE>
(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.
38
<PAGE>
Table Sixteen below presents aggregate loan and lease exposures by certain
significant industries at December 31, 1999.
Table Sixteen
Significant Industry Loans and Leases(1)
<TABLE>
<CAPTION>
December 31, 1999
(Dollars in millions) Outstanding
- ------------------------------------- ------------
<S> <C>
Transportation $11,133
Media 8,783
Healthcare 8,539
Equipment and general manufacturing 8,183
Business services 8,153
Agribusiness 8,110
Retail 7,040
Oil and gas 6,839
Autos 6,331
Telecommunications 5,298
- ------------------------------------- -------
</TABLE>
(1) Includes only non-real estate commercial loans and leases.
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 Seventeen sets forth
selected regional foreign exposure at December 31, 1999. At December 31, 1999,
the Corporation's total exposure to these select countries was $27.8 billion,
decreases of $8.9 billion from December 31, 1998 and $19.0 billion from
December 31, 1997.
39
<PAGE>
Table Seventeen presents the Corporation's selected regional foreign
exposure at December 31, 1999. 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.
Table Seventeen
Regional Foreign Exposure
<TABLE>
<CAPTION>
Increase Increase
Total Gross Other Total (Decrease) (Decrease)
Cross- Local Cross- Exposure from from
Border Country Border December 31, December 31, December 31,
(Dollars in millions) Loans Claims(1) Claims(2) 1999 1998 1997
- --------------------------- -------- ----------- ----------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Region/Country
Asia
China $ 84 $ 104 $ 168 $ 356 $ (93) $ (409)
Hong Kong 42 4,004 273 4,319 (869) (1,312)
India 592 1,214 178 1,984 (534) (515)
Indonesia 352 110 60 522 (201) (988)
Japan 176 1,128 2,497 3,801 (1,260) (3,169)
Korea (South) 374 672 1,092 2,138 259 (1,666)
Malaysia -- 529 61 590 (138) (664)
Pakistan 12 298 13 323 (29) (227)
Philippines 227 117 159 503 (80) (260)
Singapore 48 1,006 238 1,292 (714) (1,120)
Taiwan 234 591 136 961 (1,329) (1,477)
Thailand 88 438 82 608 (342) (1,349)
Other 4 121 25 150 (3) (47)
- --------------------------- ------ ------- ------ ------- ---------- ---------
Total 2,233 10,332 4,982 17,547 (5,333) (13,203)
- --------------------------- ------ ------- ------ ------- --------- ---------
Central and Eastern Europe
Russian Federation 12 -- 6 18 (42) (429)
Other 256 38 159 453 (251) (245)
- --------------------------- ------ ------- ------ ------- --------- ---------
Total 268 38 165 471 (293) (674)
- --------------------------- ------ ------- ------ ------- --------- ---------
Latin America
Argentina 554 370 214 1,138 (129) (505)
Brazil 1,088 619 801 2,508 (910) (1,122)
Chile 659 219 121 999 (652) (681)
Colombia 330 53 109 492 (306) (293)
Mexico 1,756 215 1,904 3,875 (1,063) (2,237)
Venezuela 133 40 240 413 (144) (210)
Other 191 -- 156 347 (83) (96)
- --------------------------- ------ ------- ------ ------- --------- ---------
Total 4,711 1,516 3,545 9,772 (3,287) (5,144)
- --------------------------- ------ ------- ------ ------- --------- ---------
Total $7,212 $11,886 $8,692 $27,790 $(8,913) $ (19,021)
=========================== ====== ======= ====== ======= ========= =========
</TABLE>
(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 - $1,120,
Venezuela - $168, Philippines - $22, and Latin America Other - $73.
Held-for-investment securities (at cost) amounted to $772 with a fair
value of $607.
40
<PAGE>
Exposure Exceeding One Percent of Total Assets(1,2)
<TABLE>
<CAPTION>
Exposure
Public Private Total as a Percentage
(Dollars in millions) December 31 Sector Banks Sector Exposure of Total Assets
- ----------------------- ------------- -------- -------- --------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Japan 1999 $2,208 $ 573 $1,020 $3,801 .60%
1998 2,452 1,519 1,090 5,061 .82
1997 2,485 1,555 2,930 6,970 1.22
==== ====== ====== ====== ====== ====
</TABLE>
(1) Exposure includes local country and cross-border claims by the
Corporation's foreign offices as follows: loans, accrued interest
receivable, acceptances, time deposits placed, trading account assets,
available-for-sale (at fair value) and held-for-investment (at cost)
securities, other interest-earning investments, and other monetary assets.
Amounts also include derivative-dealer assets, unused commitments, standby
letters of credit, commercial letters of credit, and formal guarantees.
(2) Sector definitions are based on Federal Financial Institutions Examination
Council instructions for preparing the Country Exposure Report.
International Developments
During 1998, and continuing into 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.
More recently, many of the Asian economies are 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 from time to time. 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. The Corporation continued to reduce its exposures in Asia, Latin America
and Central and Eastern Europe throughout 1999. 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.
41
<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 Corporation manages its exposure to market risk resulting from trading
activities through a risk management function which is independent of the
various business units. The Trading Risk Committee (TRC) establishes and
monitors various limits on trading activities. These limits include product
volume, gross and net positions, and value-at-risk (VAR) and stress profit and
loss simulation limits. Product volume limits establish maximum aggregate
amounts of specific types of derivatives, foreign exchange contracts and
securities that the Corporation may hold in its trading account at any point in
time. Position limits restrict the gross and net amount of contracts that can
be held in the trading account in any specific maturity and product grouping.
VAR measures the potential loss in future earnings due to market rate movements
within the trading portfolio using proprietary models that are based on
statistical probability. VAR limits establish the maximum amount of potential
loss, based upon sophisticated modeling techniques, that the Corporation is
willing to assume at any point in time to a certain degree of confidence.
Additionally, the Corporation uses profit and loss simulations to measure the
potential for loss in various segments of the trading portfolio resulting from
specific and extremely adverse scenarios. These scenarios are projected without
regard to the statistical probability of their occurrences. Loss simulation
limits establish the maximum amount of projected loss computed by the
simulation that the Corporation is willing to assume.
The Corporation reduces the market risk to which it is exposed in the
trading account by executing offsetting transactions with other counterparties.
However, the Corporation retains open or uncovered trading account positions in
an effort to generate revenue by correctly anticipating future market
conditions and customer demands or by taking advantage of price differentials
among the various markets in which it operates.
The day-to-day management of interest rate and foreign exchange risks
takes place at a decentralized level within the Corporation's various trading
centers. Limits established by the TRC are assigned to each trading center. In
addition, documented trading policies and procedures define acceptable
boundaries within which traders can execute transactions in their assigned
markets.
The Corporation uses a VAR methodology to measure the interest rate,
foreign exchange, commodity and equity risks inherent in its trading
activities. Under this methodology, management models historical data to
statistically calculate, with 99 percent confidence, the potential loss in
earnings the Corporation might experience if an adverse one-day shift in market
prices was to occur.
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).
42
<PAGE>
Trading Activities Market Risk
<TABLE>
<CAPTION>
1999 1998
-------------------------------- ----------------------------------
Average High Low Average High Low
(US Dollar equivalents in millions) VAR VAR(1) VAR(1) VAR VAR(1) VAR(1)
- -------------------------------------- --------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Based on perfect positive correlation
Interest rate $ 85.6 $ 126.8 $ 66.8 $ 120.2 $ 163.8 $ 92.7
Foreign currency 12.9 23.5 7.9 28.5 46.0 8.3
Commodities 2.1 6.4 0.8 3.6 6.9 1.4
Equity 14.0 28.0 3.0 2.0 5.2 0.5
Based on zero correlation
Interest rate 25.7 41.2 18.6 37.6 49.9 29.3
Foreign currency 10.8 21.7 6.1 24.0 40.0 6.4
Commodities 1.6 5.8 0.6 2.7 5.3 1.1
Equity 13.1 26.8 2.6 1.7 5.2 0.5
====================================== ======= ======== ======= ======== ======== =======
</TABLE>
(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 occurred
on different trading days.
The table above sets forth the calculated VAR amounts for 1999 and 1998.
The amounts are calculated on a pre-tax basis. Interest rate and foreign
exchange risks were generally lower in 1999 than in 1998 due to the decreased
emphasis on proprietary risk-taking and the establishment of the Euro as a
currency. Equity risk was generally higher in 1999 than in 1998 due to growth
in the equity business.
VAR modeling on trading is subject to numerous limitations. In addition,
the Corporation recognizes that there are numerous assumptions and estimates
associated with modeling and actual results could differ from these assumptions
and estimates. The Corporation mitigates these uncertainties through close
monitoring and by examining and updating assumptions on an ongoing basis. The
continual trading risk management process considers the impact of unanticipated
risk exposure and updates assumptions to reduce loss exposure.
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. To effectively measure and manage interest rate
risk, the Corporation uses sophisticated computer simulations which determine
the impact on net interest income of numerous interest rate scenarios, balance
sheet trends and strategies. These simulations cover the following financial
instruments: short-term financial instruments, securities, loans, deposits,
borrowings and off-balance sheet financial instruments. These simulations
incorporate assumptions about balance sheet dynamics, such as loan and deposit
growth and pricing, changes in funding mix and asset and liability repricing
and maturity characteristics. Simulations are run under various interest rate
scenarios to determine the impact on net income and capital. From these
scenarios, interest rate risk is quantified and appropriate strategies are
developed and implemented. The overall interest rate risk position and
strategies are reviewed on an ongoing basis by senior management. Additionally,
duration and market value sensitivity measures are selectively utilized where
they provide added value to the overall interest rate risk management process.
At December 31, 1999, the interest rate risk position of the Corporation
was relatively neutral as the impact of a gradual parallel 100 basis-point rise
or fall in interest rates over the next 12 months was estimated to be less than
one percent of net interest income.
Table Eighteen summarizes the expected maturities, unrealized gains and
losses and weighted average effective yields and rates associated with the
Corporation's significant non-trading on-balance sheet financial instruments.
Cash and cash equivalents, time deposits placed and other short-term
investments, federal funds sold and purchased, resale and repurchase
agreements, commercial paper, other short-term borrowings and foreign deposits,
which are similar in nature to other short-term borrowings, are excluded from
Table Eighteen as their respective carrying values approximate fair values.
These financial instruments generally expose the Corporation to insignificant
market risk as they have either no stated maturities or an average maturity of
less than 30 days and interest rates that approximate market rates. However,
these financial instruments could expose the Corporation to interest rate risk
by requiring more or less reliance on alternative funding sources, such as
long-term debt. Loans held for sale are also excluded as their carrying values
approximate their fair values, generally exposing the Corporation to
insignificant market risk. For further information on the fair value of
financial instruments see Note Sixteen of the consolidated financial statements
on page 93.
43
<PAGE>
Table Eighteen
Non-Trading On-Balance Sheet Financial Instruments
<TABLE>
<CAPTION>
December 31, 1999
Expected Maturity
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unrealized After
(Dollars in millions) Total Gains/(Losses) 2000 2001 2002 2003 2004 2004
- ---------------------------------- ------ ------------- ---- ---- ---- ---- ---- -------
Assets(1)
Available-for-sale securities(2)
Fixed rate
Book value $ 74,873 $(3,777) $ 568 $ 5,884 $ 4,522 $13,849 $10,475 $39,575
Weighted average effective yield 5.86%
Variable rate
Book value $ 10,612 (61) 4 349 3,823 1,690 458 4,288
Weighted average effective yield 7.18%
Held-for-investment securities(2)
Fixed rate
Book value $ 1,344 (152) 124 34 21 31 29 1,105
Weighted average effective yield 7.81%
Variable rate
Book value $ 78 -- 33 13 5 15 7 5
Weighted average effective yield 6.34%
Loans(2, 3)
Fixed rate
Book value $120,445 635 32,359 20,484 15,064 10,451 7,608 34,479
Weighted average effective yield 7.90%
Variable rate
Book value $228,345 2,044 99,595 35,680 25,452 19,532 14,421 33,665
Weighted average effective yield 7.87%
Liabilities(1)
Total deposits(4, 5)
Fixed rate
Book value $215,841 20 70,463 14,144 13,954 11,604 11,615 94,061
Weighted average effective rate 2.52%
Variable rate
Book value $ 87,734 2 17,210 14,369 11,734 9,846 8,297 26,278
Weighted average effective rate 3.10%
Long-term debt(6, 7)
Fixed rate
Book value $ 27,082 579 2,103 2,988 2,837 2,936 4,385 11,833
Weighted average effective rate 7.07%
Variable rate
Book value $ 28,303 (31) 9,507 5,309 4,746 2,521 4,509 1,711
Weighted average effective rate 6.18%
Trust preferred securities(6)
Fixed rate
Book value $ 3,812 352 -- 900 -- 350 -- 2,562
Weighted average effective rate 8.03%
Variable rate
Book value $ 1,143 -- -- -- 400 -- -- 743
Weighted average effective rate 6.93%
=================================== ========
</TABLE>
(1) Fixed and variable rate classifications are based on contractual rates and
are not modified for the impact of asset and liability management
contracts.
(2) Expected maturities reflect the impact of prepayment assumptions.
(3) Excludes leases.
(4) When measuring and managing market risk associated with domestic deposits,
such as savings and demand deposits, the Corporation considers its
long-term relationships with depositors. The unrealized gain on deposits
in this table does not consider these long-term relationships, therefore
only certificates of deposits reflect a change in value.
(5) Excludes foreign time deposits.
(6) Expected maturities of long-term debt and trust preferred securities
reflect the Corporation's ability to redeem such debt prior to contractual
maturities.
(7) Excludes obligations under capital leases.
44
<PAGE>
Interest Rate and Foreign Exchange Contracts
Risk management interest rate contracts and foreign exchange contracts are
utilized in the Corporation's 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. Generic interest rate swaps involve the exchange of fixed-rate and
variable-rate interest payments based on the contractual underlying notional
amount. Basis swaps involve the exchange of interest payments based on the
contractual underlying notional amounts, where both the pay rate and the
receive rate are floating rates based on different indices. Option products
primarily consist of caps and floors. Interest rate caps and floors are
agreements where, for a fee, the purchaser obtains the right to receive
interest payments when a variable interest rate moves above or below a
specified cap or floor rate, respectively. Futures contracts used for ALM
activities are primarily index futures providing for cash payments based upon
the movements of an underlying rate index. 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. Foreign exchange contracts, which include
spot, futures and forward contracts, represent agreements to exchange the
currency of one country for the currency of another country at an agreed-upon
price, on an agreed-upon date.
Table Nineteen shows the notional amount of the Corporation's open
interest rate and foreign exchange contracts. The notional amount of the
Corporation's receive fixed and pay fixed interest rate swaps at December 31,
1999 was $63.0 billion and $25.7 billion, respectively. The receive fixed
interest rate swaps are primarily converting variable-rate commercial loans to
fixed rate. The net receive fixed position at December 31, 1999 was $37.3
billion compared to $34.7 billion notional at December 31, 1998. The
Corporation had $8.0 billion and $7.7 billion notional of basis swaps at
December 31, 1999 and 1998, respectively, linked primarily to loans and
long-term debt. The Corporation had $35.1 billion and $26.8 billion notional of
option products at December 31, 1999 and 1998, respectively. In addition, open
foreign exchange contracts at December 31, 1999 had a notional amount of $6.2
billion compared to $3.3 billion notional at December 31, 1998.
Table Nineteen also summarizes the estimated duration, weighted average
receive and pay rates and the net unrealized gains and losses at December 31,
1999 and 1998 of the Corporation's open ALM interest rate swaps, as well as the
average estimated duration and the net unrealized gains and losses at December
31, 1999 and 1998 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 $1.6 billion at December 31, 1999 and a net unrealized
gain of $942 million at December 31, 1998. The change is primarily attributable
to an increase in interest rates. The ALM option products had a net unrealized
gain of $5 million at December 31, 1999 compared to a net unrealized loss of
$46 million at December 31, 1998. At December 31, 1999 and 1998, open foreign
exchange contracts had a net unrealized loss of $30 million and a net
unrealized gain of $72 million, respectively.
The amount of unamortized net realized deferred gains associated with
closed ALM swaps was $174 million and $294 million at December 31, 1999 and
1998, respectively. The amount of unamortized net realized deferred gains
associated with closed ALM options was $82 million and $26 million at December
31, 1999 and 1998, respectively. The amount of unamortized net realized
deferred losses associated with closed ALM futures and forward rate contracts
was $21 million and $1 million at December 31, 1999 and 1998, respectively.
There were no unamortized net realized deferred gains or losses associated with
closed foreign exchange contracts at December 31, 1999 and 1998.
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 20. See Note Eleven of the consolidated financial statements on
page 79 for information on the Corporation's ALM contracts.
45
<PAGE>
Table Nineteen
Asset and Liability Management Interest Rate and Foreign Exchange Contracts
<TABLE>
<CAPTION>
December 31, 1999
(Dollars in millions, average Fair
estimated duration in years) Value
- -------------------------------------- --------------
<S> <C>
Open interest rate contracts
Total receive fixed swaps $(1,747)
Notional amount
Weighted average receive rate
Total pay fixed swaps 115
Notional amount
Weighted average pay rate
Basis swaps (6)
----------
Notional amount
Total swaps (1,638)
- -------------------------------------- ---------
Option products 5
Notional amount
Futures and forward rate contracts 3
Notional amount
- --------------------------------------
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
- -------------------------------------- ---------
Total ALM contracts $(1,425)
====================================== =========
<CAPTION>
December 31, 1999
Expected Maturity
----------------------------------------------------------------------------------------
(Dollars in millions, average After
estimated duration in years) Total 2000 2001 2002 2003 2004 2004
- -------------------------------------- ------------ ------------ ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Open interest rate contracts
Total receive fixed swaps
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
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
Notional amount $ 7,971 $ 743 $ 601 $ 1,669 $ 4,958 $ -- $ --
Total swaps
- --------------------------------------
Option products
Notional amount $ 35,134 $ 505 $ 2,088 $ 868 $ 1,950 $15,661 $ 14,062
Futures and forward rate contracts
Notional amount $ 931 $ 931 $ -- $ -- $ -- $ -- $ --
- -------------------------------------- -------- -------- -------- ------- -------- ------- --------
Total open interest rate contracts
- --------------------------------------
Closed interest rate contracts(1)
- --------------------------------------
Net interest rate contract
position
- --------------------------------------
Open foreign exchange contracts
Notional amount $ 6,231 $ 273 $ 1,499 $ 2,552 $ 112 $ 623 $ 1,172
- -------------------------------------- -------- -------- -------- ------- -------- ------- --------
Total ALM contracts
======================================
<CAPTION>
December 31, 1999
Average
(Dollars in millions, average Estimated
estimated duration in years) Duration
- -------------------------------------- ----------
<S> <C>
Open interest rate contracts
Total receive fixed swaps 2.75
Notional amount
Weighted average receive rate
Total pay fixed swaps 2.11
Notional amount
Weighted average pay rate
Basis swaps 3.19
Notional amount
Total swaps
- --------------------------------------
Option products
Notional amount
Futures and forward rate contracts
Notional amount
- --------------------------------------
Total open interest rate contracts
- --------------------------------------
Closed interest rate contracts(1)
- --------------------------------------
Net interest rate contract
position
- --------------------------------------
Open foreign exchange contracts
Notional amount
- --------------------------------------
Total ALM contracts
======================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
(Dollars in millions, average Fair
estimated duration in years) Value
- --------------------------------------- ----------
<S> <C>
Open interest rate contracts
Total receive fixed swaps $ 1,958
Notional value
Weighted average receive rate
Total pay fixed swaps (1,006)
Notional value
Weighted average pay rate
Basis swaps (10)
--------
Notional value
Total swaps 942
- --------------------------------------- --------
Option products (46)
Notional amount
Futures and forward rate contracts 2
Notional amount
- --------------------------------------- --------
Total open interest rate contracts 898
- --------------------------------------- --------
Closed interest rate contracts(1) 319
- --------------------------------------- --------
Net interest rate contract position 1,217
- --------------------------------------- --------
Open foreign exchange contracts 72
Notional amount
- --------------------------------------- --------
Total ALM contracts $ 1,289
======================================= ========
<CAPTION>
December 31, 1998
Expected Maturity
----------------------------------------------------------------------------------------
(Dollars in millions, average After
estimated duration in years) Total 1999 2000 2001 2002 2003 2003
- --------------------------------------- ------------ ----------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Open interest rate contracts
Total receive fixed swaps
Notional value $ 60,450 $ 4,492 $ 8,220 $ 12,213 $ 2,599 $ 15,826 $ 17,100
Weighted average receive rate 6.16% 6.16% 6.28% 6.31% 6.93% 5.59% 6.43%
Total pay fixed swaps
Notional value $ 25,770 $ 6,062 $ 6,900 $ 4,356 $ 1,177 $ 2,481 $ 4,794
Weighted average pay rate 6.73% 6.46% 6.89% 6.47% 7.31% 7.14% 6.76%
Basis swaps
Notional value $ 7,736 $ 1,685 $ 743 $ 625 $ 1,669 $ 3,014 $ --
Total swaps
- --------------------------------------- -------- ------- ------- -------- -------- -------- --------
Option products
Notional amount $ 26,836 $ 3,225 $ 543 $ 1,088 $ 938 $ 1,950 $ 19,092
Futures and forward rate contracts
Notional amount $ 6,348 $ 6,348 $ -- $ -- $ -- $ -- $ --
- --------------------------------------- -------- ------- ------- -------- -------- -------- --------
Total open interest rate contracts
- ---------------------------------------
Closed interest rate contracts(1)
- ---------------------------------------
Net interest rate contract position
- ---------------------------------------
Open foreign exchange contracts
Notional amount $ 3,314 $ 300 $ 273 $ 1,084 $ 527 $ 112 $ 1,018
- --------------------------------------- -------- ------- ------- -------- -------- -------- --------
Total ALM contracts
=======================================
<CAPTION>
December 31, 1998
Average
(Dollars in millions, average Estimated
estimated duration in years) Duration
- --------------------------------------- ----------
<S> <C>
Open interest rate contracts
Total receive fixed swaps 4.55
Notional value
Weighted average receive rate
Total pay fixed swaps 3.18
Notional value
Weighted average pay rate
Basis swaps 2.88
Notional value
Total swaps
- ---------------------------------------
Option products
Notional amount
Futures and forward rate contracts
Notional amount
- ---------------------------------------
Total open interest rate contracts
- ---------------------------------------
Closed interest rate contracts(1)
- ---------------------------------------
Net interest rate contract position
- ---------------------------------------
Open foreign exchange contracts
Notional amount
- ---------------------------------------
Total ALM contracts
=======================================
</TABLE>
(1) Represents the unamortized net realized deferred gains associated with
closed contracts. As a result, no notional amount is reflected for
expected maturity.
46
<PAGE>
Table Twenty
Selected Quarterly Operating Results
<TABLE>
<CAPTION>
1999 Quarters
-------------------------------------------------------
(Dollars in millions, except per share information) Fourth Third Second First
- ----------------------------------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Operating Basis (1)
- -------------------
Income statement
Interest income $ 9,622 $ 9,294 $ 9,206 $ 9,201
Interest expense 5,147 4,744 4,594 4,601
Net interest income 4,475 4,550 4,612 4,600
Net interest income (taxable-equivalent basis) 4,541 4,603 4,663 4,645
Provision for credit losses 350 450 510 510
Gains on sales of securities 14 44 52 130
Noninterest income 3,596 3,728 3,522 3,223
Other noninterest expense 4,550 4,526 4,457 4,453
Income before income taxes 3,185 3,346 3,219 2,990
Income tax expense 1,070 1,195 1,159 1,076
Net income 2,115 2,151 2,060 1,914
Performance ratios
Return on average assets 1.33% 1.40% 1.34% 1.27%
Return on average common shareholders' equity 17.95 18.40 17.64 16.78
Per common share data
Earnings $ 1.24 $ 1.25 $ 1.18 $ 1.10
Diluted earnings 1.23 1.23 1.15 1.08
Cash basis financial data (2)
Earnings per common share 1.37 1.38 1.31 1.23
Diluted earnings per common share 1.35 1.35 1.28 1.20
Return on average tangible assets 1.50% 1.58% 1.53% 1.46%
Return on average tangible common
shareholders' equity 28.38 29.48 28.49 27.44
As Reported
- -----------
Income statement
Merger-related charges, net $ 325 $ -- $ 200 $ --
Income before income taxes 2,860 3,346 3,019 2,990
Income tax expense 958 1,195 1,104 1,076
Net income 1,902 2,151 1,915 1,914
Performance ratios
Return on average assets 1.20% 1.40% 1.25% 1.27%
Return on average common shareholders' equity 16.14 18.40 16.40 16.78
Per common share data
Earnings $ 1.12 $ 1.25 $ 1.10 $ 1.10
Diluted earnings 1.10 1.23 1.07 1.08
Cash dividends paid .50 .45 .45 .45
Cash basis financial data (2)
Earnings per common share 1.25 1.38 1.23 1.23
Diluted earnings per common share 1.23 1.35 1.20 1.20
Return on average tangible assets 1.36% 1.58% 1.43% 1.46%
Return on average tangible common
shareholders' equity 25.79 29.48 26.68 27.44
Average balance sheet
Average total assets $ 630,743 $ 611,448 $ 615,364 $ 609,624
Average total deposits 341,913 336,998 342,249 345,931
Average total shareholders' equity 46,792 46,439 46,891 46,279
Yield on average earning assets 7.09% 7.03% 7.00% 7.13%
Rate on average interest-bearing liabilities 4.54 4.30 4.16 4.26
Net interest spread 2.55 2.73 2.84 2.87
Net interest yield 3.32 3.46 3.53 3.58
Risk-based capital ratios (at period end)(3)
Tier 1 capital 7.35 7.71 7.38 7.40
Total capital 10.88 11.39 11.09 11.17
Leverage ratio 6.26 6.59 6.34 6.47
Market price per share of common stock
Closing $ 50 3/16 $55 11/16 $ 73 5/16 $ 70 5/8
High 67 1/2 76 3/8 76 1/8 74 1/2
Low 47 5/8 53 1/4 61 1/2 59 1/2
===================================================== ========= ========= ========= =========
<CAPTION>
1998 Quarters
------------------------------------------------------
(Dollars in millions, except per share information) Fourth Third Second First
- ----------------------------------------------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Operating Basis (1)
- -------------------
Income statement
Interest income $ 9,638 $ 9,608 $ 9,637 $ 9,705
Interest expense 5,029 5,164 5,011 5,086
Net interest income 4,609 4,444 4,626 4,619
Net interest income (taxable-equivalent basis) 4,650 4,484 4,668 4,659
Provision for credit losses 510 1,405 495 510
Gains on sales of securities 404 280 120 213
Noninterest income 2,655 2,405 3,636 3,493
Other noninterest expense 4,687 4,583 4,767 4,704
Income before income taxes 2,471 1,141 3,120 3,111
Income tax expense 868 248 1,099 1,138
Net income 1,603 893 2,021 1,973
Performance ratios
Return on average assets 1.05% .61% 1.41% 1.38%
Return on average common shareholders' equity 14.12 7.73 18.24 18.52
Per common share data
Earnings $ .92 $ .51 $ 1.16 $ 1.14
Diluted earnings .91 .50 1.13 1.11
Cash basis financial data (2)
Earnings per common share 1.05 .64 1.29 1.27
Diluted earnings per common share 1.04 .63 1.25 1.24
Return on average tangible assets 1.22% .79% 1.61% 1.59%
Return on average tangible common
shareholders' equity 23.97 14.51 31.23 32.57
As Reported
- -----------
Income statement
Merger-related charges, net $ 600 $ 725 $ (430) $ 900
Income before income taxes 1,871 416 3,550 2,211
Income tax expense 709 42 1,252 880
Net income 1,162 374 2,298 1,331
Performance ratios
Return on average assets .76% .26% 1.61% .93%
Return on average common shareholders' equity 10.23 3.23 20.76 12.46
Per common share data
Earnings $ .67 $ .21 $ 1.32 $ .77
Diluted earnings .66 .21 1.28 .75
Cash dividends paid .45 .38 .38 .38
Cash basis financial data (2)
Earnings per common share 0.80 .34 1.45 .90
Diluted earnings per common share .79 .34 1.41 .87
Return on average tangible assets .93% .42% 1.81% 1.12%
Return on average tangible common
shareholders' equity 18.18 7.76 35.10 23.02
Average balance sheet
Average total assets $ 606,541 $ 578,353 $ 573,975 $ 578,841
Average total deposits 351,766 347,783 342,369 339,867
Average total shareholders' equity 45,051 45,756 44,857 43,628
Yield on average earning assets 7.44% 7.73% 7.89% 7.98%
Rate on average interest-bearing liabilities 4.60 4.94 4.90 4.93
Net interest spread 2.84 2.79 2.99 3.05
Net interest yield 3.58 3.60 3.80 3.83
Risk-based capital ratios (at period end)(3)
Tier 1 capital 7.06 7.29 7.32 6.80
Total capital 10.94 11.25 11.77 11.19
Leverage ratio 6.22 6.64 6.21 5.64
Market price per share of common stock
Closing $ 60 1/8 $ 53 1/2 $76 11/16 $72 15/16
High 66 5/8 88 7/16 85 75 1/8
Low 44 47 7/8 72 1/16 56 1/4
===================================================== ========= ========= ========= =========
</TABLE>
(1) Operating basis excludes merger-related charges.
(2) Cash basis calculations exclude goodwill and other intangible assets and
their related amortization expense.
(3) Ratios for the first and second quarters of 1998 have not been restated to
reflect the impact of the BankAmerica merger.
47
<PAGE>
Table Twenty-One
Quarterly Average Balances and Interest Rates -- Taxable-Equivalent Basis
<TABLE>
<CAPTION>
Fourth Quarter 1999 Third 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 $ 4,512 $ 73 6.33% $ 5,018 $ 69 5.50%
Federal funds sold and securities purchased under
agreements to resell 39,700 458 4.60 33,074 440 5.30
Trading account assets 38,453 544 5.63 37,453 483 5.14
Securities:
Available-for-sale(1) 85,009 1,301 6.10 78,779 1,208 6.12
Held-for-investment 1,433 25 7.25 1,482 26 7.02
- --------------------- -------- ------ ----- -------- ------ -----
Total securities 86,442 1,326 6.12 80,261 1,234 6.13
- ---------------------------------------------------------- -------- ------ ----- -------- ------ -----
Loans and leases(2)
Commercial - domestic 140,674 2,707 7.64 136,149 2,488 7.25
Commercial - foreign 27,430 453 6.56 28,348 494 6.93
Commercial real estate - domestic 24,345 506 8.23 25,056 517 8.19
Commercial real estate - foreign 306 6 8.96 295 7 8.80
- ---------------------------------------------------------- -------- ------ ----- -------- ------ -----
Total commercial 192,755 3,672 7.56 189,848 3,506 7.33
- ---------------------------------------------------------- -------- ------ ----- -------- ------ -----
Residential mortgage 79,783 1,450 7.26 80,015 1,431 7.14
Home equity lines 16,882 345 8.12 16,316 321 7.79
Direct/Indirect consumer 42,442 888 8.30 42,740 875 8.13
Consumer finance 21,340 440 8.18 19,923 433 8.62
Bankcard 8,578 245 11.32 8,923 256 11.38
Foreign consumer 2,430 54 8.77 3,635 86 9.36
- ---------------------------------------------------------- -------- ------ ----- -------- ------ -----
Total consumer 171,455 3,422 7.94 171,552 3,402 7.89
- ---------------------------------------------------------- -------- ------ ----- -------- ------ -----
Total loans and leases 364,210 7,094 7.74 361,400 6,908 7.59
- ---------------------------------------------------------- -------- ------ ----- -------- ------ -----
Other earning assets 10,247 193 7.51 11,358 213 7.40
- ---------------------------------------------------------- -------- ------ ----- -------- ------ -----
Total earning assets(3) 543,564 9,688 7.09 528,564 9,347 7.03
- ---------------------------------------------------------- -------- ------ ----- -------- ------ -----
Cash and cash equivalents 25,467 25,905
Other assets, less allowance for credit losses 61,712 56,979
- ---------------------------------------------------------- -------- --------
Total assets $630,743 $611,448
========================================================== ======== ========
Interest-bearing liabilities
Domestic interest-bearing deposits:
Savings $ 25,082 80 1.27 $ 26,037 82 1.25
NOW and money market deposit accounts 97,481 639 2.60 96,402 579 2.38
Consumer CDs and IRAs 74,653 932 4.95 73,429 898 4.85
Negotiated CDs, public funds and other time deposits 6,825 98 5.73 6,609 94 5.66
- ---------------------------------------------------------- -------- ------ ----- -------- ------ -----
Total domestic interest-bearing deposits 204,041 1,749 3.40 202,477 1,653 3.24
- ---------------------------------------------------------- -------- ------ ----- -------- ------ -----
Foreign interest-bearing deposits(4)
Banks located in foreign countries 14,305 178 4.93 13,668 160 4.65
Governments and official institutions 7,121 99 5.53 7,185 90 4.99
Time, savings and other 24,993 298 4.72 25,500 295 4.57
- ---------------------------------------------------------- -------- ------ ----- -------- ------ -----
Total foreign interest-bearing deposits 46,419 575 4.91 46,353 545 4.66
- ---------------------------------------------------------- -------- ------ ----- -------- ------ -----
Total interest-bearing deposits 250,460 2,324 3.68 248,830 2,198 3.50
- ---------------------------------------------------------- -------- ------ ----- -------- ------ -----
Federal funds purchased, securities sold under agreements
to repurchase and other short-term borrowings 120,858 1,638 5.38 114,934 1,437 4.96
Trading account liabilities 19,223 190 3.92 15,677 189 4.78
Long-term debt(5) 59,972 995 6.63 59,283 920 6.21
- ---------------------------------------------------------- -------- ------ ----- -------- ------ -----
Total interest-bearing liabilities(6) 450,513 5,147 4.54 438,724 4,744 4.30
- ---------------------------------------------------------- -------- ------ ----- -------- ------ -----
Noninterest-bearing sources
Noninterest-bearing deposits 91,453 88,168
Other liabilities 41,985 38,117
Shareholders' equity 46,792 46,439
- ---------------------------------------------------------- -------- --------
Total liabilities and shareholders' equity $630,743 $611,448
========================================================== ======== ========
Net interest spread 2.55 2.73
Impact of noninterest-bearing sources .77 .73
- ---------------------------------------------------------- ----- -----
Net interest income/yield on earning assets $4,541 3.32% $4,603 3.46%
========================================================== ====== ===== ====== =====
</TABLE>
(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 $66, $53,
$51 and $45 in the fourth, third, second and first quarters of 1999 and
$41 in the fourth quarter of 1998, respectively. Interest income also
includes the impact of risk management interest rate contracts, which
increased interest income on the underlying assets $57, $103, $83 and $63
in the fourth, third, second and first quarters of 1999 and $70 in the
fourth quarter of 1998, 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 $(2), $6, $52 and $60 in the fourth, third, second and first
quarters of 1999 and $27 in the fourth quarter of 1998, respectively.
48
<PAGE>
<TABLE>
<CAPTION>
Second Quarter 1999 First Quarter 1999 Fourth Quarter 1998
- ------------------------------------- ------------------------------------- ------------------------------------
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>
$ 5,159 $ 65 5.03% $ 6,408 $ 88 5.58% $ 6,702 $ 111 6.56%
29,521 387 5.25 26,561 381 5.80 29,564 486 6.53
39,837 528 5.31 41,129 547 5.36 39,391 613 6.19
76,373 1,139 5.97 73,925 1,161 6.31 69,354 1,162 6.68
1,482 28 7.61 1,905 33 6.84 2,948 44 6.09
- -------- ------ ----- -------- ------ ----- -------- ------ -----
77,855 1,167 6.00 75,830 1,194 6.33 72,302 1,206 6.66
- -------- ------ ----- -------- ------ ----- -------- ------ -----
138,257 2,473 7.17 138,272 2,444 7.16 136,629 2,542 7.39
30,209 456 6.05 31,568 494 6.35 32,893 569 6.86
25,938 533 8.25 26,827 559 8.45 28,427 601 8.38
289 6 8.48 286 6 8.79 319 8 9.39
- -------- ------ ----- -------- ------ ----- -------- ------ -----
194,693 3,468 7.14 196,953 3,503 7.21 198,268 3,720 7.45
- -------- ------ ----- -------- ------ ----- -------- ------ -----
80,151 1,430 7.14 75,789 1,356 7.18 73,033 1,336 7.30
15,857 304 7.68 15,537 298 7.79 15,781 326 8.17
42,240 859 8.15 41,652 847 8.24 40,557 876 8.57
17,794 424 9.56 15,880 373 9.53 14,368 338 9.33
10,365 306 11.83 11,287 327 11.76 12,078 366 12.01
3,653 87 9.55 3,648 89 9.90 3,551 94 10.47
- -------- ------ ----- -------- ------ ----- -------- ------ -----
170,060 3,410 8.03 163,793 3,290 8.11 159,368 3,336 8.32
- -------- ------ ----- -------- ------ ----- -------- ------ -----
364,753 6,878 7.56 360,746 6,793 7.62 357,636 7,056 7.84
- -------- ------ ----- -------- ------ ----- -------- ------ -----
12,924 232 7.23 13,008 243 7.53 11,471 207 7.19
- -------- ------ ----- -------- ------ ----- -------- ------ -----
530,049 9,257 7.00 523,682 9,246 7.13 517,066 9,679 7.44
- -------- ------ ----- -------- ------ ----- -------- ------ -----
25,868 25,826 25,834
59,447 60,116 63,641
- -------- -------- --------
$615,364 $609,624 $606,541
======== ======== ========
$ 21,799 67 1.24 $ 21,637 71 1.33 $ 21,702 91 1.67
100,897 581 2.31 99,864 575 2.33 97,589 622 2.53
73,601 847 4.61 74,362 857 4.68 74,923 956 5.06
6,238 80 5.14 6,914 89 5.20 7,388 96 5.16
- -------- ------ ----- -------- ------ ----- -------- ------ -----
202,535 1,575 3.12 202,777 1,592 3.18 201,602 1,765 3.47
- -------- ------ ----- -------- ------ ----- -------- ------ -----
16,947 196 4.62 20,379 268 5.34 24,938 325 5.17
8,089 98 4.81 9,172 113 5.02 10,278 143 5.54
26,354 299 4.56 26,980 339 5.10 26,868 365 5.39
- -------- ------ ----- -------- ------ ----- -------- ------ -----
51,390 593 4.62 56,531 720 5.17 62,084 833 5.32
- -------- ------ ----- -------- ------ ----- -------- ------ -----
253,925 2,168 3.42 259,308 2,312 3.62 263,686 2,598 3.91
- -------- ------ ----- -------- ------ ----- -------- ------ -----
116,339 1,396 4.82 112,384 1,355 4.88 104,416 1,422 5.40
14,178 150 4.25 12,679 129 4.13 14,194 165 4.62
58,302 880 6.03 52,642 805 6.12 51,779 844 6.52
- -------- ------ ----- -------- ------ ----- -------- ------ -----
442,744 4,594 4.16 437,013 4,601 4.26 434,075 5,029 4.60
- -------- ------ ----- -------- ------ ----- -------- ------ -----
88,324 86,623 88,080
37,405 39,709 39,335
46,891 46,279 45,051
- -------- -------- --------
$615,364 $609,624 $606,541
======== ======== ========
2.84 2.87 2.84
.69 .71 .74
- -------- ----- ----- -----
$4,663 3.53% $4,645 3.58% $4,650 3.58%
======== ====== ===== ====== ===== ====== =====
</TABLE>
49
<PAGE>
1998 Compared to 1997
The following discussion and analysis provides a comparison of the
Corporation's results of operations for the years ended December 31, 1998 and
1997. This discussion should be read in conjunction with the consolidated
financial statements and related notes on pages 52 through 99.
Overview
The Corporation's operating net income decreased five percent to $6.49
billion in 1998 from $6.81 billion in 1997. Operating earnings per common share
for 1998 decreased to $3.73 from $3.86 in 1997. Diluted operating earnings per
common share decreased to $3.64 for 1998 compared to $3.76 for 1997. Including
merger-related charges of $1.80 billion ($1.33 billion, net of tax), net income
decreased 21 percent to $5.17 billion in 1998 compared to $6.54 billion in
1997. Earnings per common share and diluted earnings per common share were
$2.97 and $2.90, respectively, in 1998 compared to $3.71 and $3.61,
respectively, in 1997.
Business Segment Operations
Consumer Banking's net income increased 16 percent to $3.9 billion in 1998
compared to $3.4 billion in 1997. Taxable-equivalent net interest income
decreased three percent to $11.8 billion in 1998 compared to $12.2 billion in
1997. Noninterest income increased six percent in 1998 to $6.6 billion compared
to $6.2 billion in 1997. The net interest yield increased 10 basis points from
1997 to 4.88 percent. Return on average equity increased to 19.2 percent in
1998 from 16.3 percent in 1997. Return on tangible equity increased to 29.3
percent in 1998 from 26.2 percent in 1997. Revenue growth and expense control
led to a 190 basis point improvement in the efficiency ratio in 1998 to 59.9
percent from 61.8 percent in 1997. The cash basis efficiency ratio improved to
56.6 percent in 1998 from 58.4 percent in 1997.
Commercial Banking's net income decreased two percent to $953 million in
1998 compared to $977 million in 1997. Taxable-equivalent net interest income
remained essentially flat at $2.2 billion. Noninterest income increased 19
percent in 1998 to $730 million compared to $613 million in 1997. The net
interest yield decreased 36 basis points from 1997 to 3.97 percent. Return on
average equity decreased to 20.1 percent in 1998 from 21.6 percent in 1997.
Return on tangible equity decreased to 27.1 percent in 1998 from 29.9 percent
in 1997. The efficiency ratio increased to 48.1 percent in 1998 from 43.5
percent in 1997. The cash basis efficiency ratio increased to 44.6 percent in
1998 from 40.0 percent in 1997.
Global Corporate and Investment Banking's net income decreased 83 percent
to $292 million in 1998 compared to $1.7 billion in 1997. Taxable-equivalent
net interest income increased seven percent in 1998 to $3.8 billion compared to
$3.6 billion in 1997. Noninterest income decreased seven percent in 1998 to
$2.9 billion compared to $3.1 billion in 1997. The net interest yield decreased
one basis point from 1997 to 2.12 percent. Return on average equity decreased
to 2.3 percent in 1998 from 15.9 percent in 1997. Return on tangible equity
decreased to 4.1 percent in 1998 from 18.8 percent in 1997. The efficiency
ratio increased to 70.6 percent in 1998 from 53.8 percent in 1997. The cash
basis efficiency ratio increased to 68.1 percent in 1998 from 52.1 percent in
1997.
Principal Investing and Asset Management's net income decreased 10 percent
to $491 million in 1998 compared to $544 million in 1997. Taxable-equivalent
net interest income increased 12 percent in 1998 to $459 million compared to
$409 million in 1997. Noninterest income remained essentially flat at $1.9
billion. The net interest yield decreased 36 basis points from 1997 to 2.94
percent. Return on average equity decreased to 20.1 percent in 1998 from 27.0
percent in 1997. Return on tangible equity decreased to 22.8 percent in 1998
from 31.2 percent in 1997. The efficiency ratio increased to 67.1 percent in
1998 compared to 62.0 percent in 1997. The cash basis efficiency ratio
increased to 65.9 percent in 1998 from 61.0 percent in 1997.
50
<PAGE>
Net Interest Income
Net interest income on a taxable-equivalent basis remained essentially
unchanged at $18.5 billion in 1998 compared to $18.6 billion in 1997, primarily
due to a reduction in the net difference between loan and deposit rates and the
impact of securitizations, divestitures and assets sales. The decrease was
partially offset by loan growth and increased core funding.
The net interest yield decreased 31 basis points to 3.69 percent in 1998
compared to 4.00 percent in 1997, primarily reflecting higher levels of
investment securities, which have a lower yield than loans, and a reduction in
the net difference between loan and deposit rates.
Provision for Credit Losses
The provision for credit losses was $2.9 billion in 1998 compared to $1.9
billion in the prior year, reflecting the impact of certain nonrecurring
charges in 1998, including a provision related to weaknesses in global economic
conditions in the third quarter of 1998 and higher net commercial charge-offs.
The provision for credit losses covered net charge-offs, which increased $615
million to $2.5 billion in 1998, primarily due to higher commercial net
charge-offs, partially offset by lower net charge-offs in the consumer loan
portfolio.
The allowance for credit losses was $7.1 billion, or 1.99 percent of loans
and leases, at December 31, 1998 compared to $6.8 billion, or 1.98 percent, at
December 31, 1997. The allowance for credit losses was 287.01 percent of
nonperforming loans at December 31, 1998 compared to 321.03 percent at December
31, 1997.
Gains on Sales of Securities
Gains on sales of securities were $1.0 billion in 1998 compared to $271
million in 1997. Securities gains were higher in 1998 as a result of increased
activity in connection with the Corporation's overall risk management activity
and favorable market conditions for certain debt instruments caused by
turbulence in equity markets.
Noninterest Income
Noninterest income increased four percent to $12.2 billion in 1998,
primarily reflecting higher levels of income from investment banking,
brokerage, and credit card activities, offset by declines in mortgage banking
and trading income.
Other Noninterest Expense
Other noninterest expense increased six percent to $18.7 billion in 1998
compared to $17.6 billion in 1997, primarily due to increases in personnel,
data processing and general administrative and other expenses associated with
the NationsBanc Montgomery Securities, Robertson Stephens and NationsBanc Auto
Leasing, Inc. acquisitions in 1997.
Income Taxes
The Corporation's income tax expense for 1998 and 1997 was $2.9 billion
and $4.0 billion, respectively, for an effective tax rate of 35.8 percent and
38.0 percent, repectively. The reduction in the effective tax rate was due
primarily to the reorganization of certain subsidiaries of the Corporation in
1998.
51
<PAGE>
Item 7A. 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 42 for Quantitative and
Qualitative Disclosures about Market Risk.
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Management
The management of Bank of America Corporation is responsible for the
preparation, integrity and objectivity of the consolidated financial statements
of the Corporation. The consolidated financial statements and notes have been
prepared by the Corporation in accordance with accounting principles generally
accepted in the United States and, in the judgment of management, present
fairly the Corporation's financial position and results of operations. The
financial information contained elsewhere in this report is consistent with
that in the consolidated financial statements. The financial statements and
other financial information in this report include amounts that are based on
management's best estimates and judgments giving due consideration to
materiality.
The Corporation maintains a system of internal accounting controls to
provide reasonable assurance that assets are safe-guarded and that transactions
are executed in accordance with management's authorization and recorded
properly to permit the preparation of consolidated financial statements in
accordance with accounting principles generally accepted in the United States.
Management recognizes that even a highly effective internal control system has
inherent risks, including the possibility of human error and the circumvention
or overriding of controls, and that the effectiveness of an internal control
system can change with circumstances. However, management believes that the
internal control system provides reasonable assurance that errors or
irregularities that could be material to the consolidated financial statements
are prevented or would be detected on a timely basis and corrected through the
normal course of business. As of December 31, 1999, management believes that
the internal controls are in place and operating effectively.
The Internal Audit Division of the Corporation reviews, evaluates,
monitors and makes recommendations on both administrative and accounting
control, which acts as an integral, but independent, part of the system of
internal controls.
The independent accountants were engaged to perform an independent audit
of the consolidated financial statements. In determining the nature and extent
of their auditing procedures, they have evaluated the Corporation's accounting
policies and procedures and the effectiveness of the related internal control
system. An independent audit provides an objective review of management's
responsibility to report operating results and financial condition. Their
report appears on page 53.
The Board of Directors discharges its responsibility for the Corporation's
consolidated financial statements through its Audit Committee. The Audit
Committee meets periodically with the independent accountants, internal
auditors and management. Both the independent accountants and internal auditors
have direct access to the Audit Committee to discuss the scope and results of
their work, the adequacy of internal accounting controls and the quality of
financial reporting.
/s/ HUGH L. MCCOLL, JR.
- -------------------------
Hugh L. McColl, Jr.
Chairman of the Board and
Chief Executive Officer
/s/ JAMES H. HANCE, JR.
- -------------------------
James H. Hance, Jr.
Vice Chairman and
Chief Financial Officer
52
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of Bank of America Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of changes in shareholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Bank of America Corporation and its subsidiaries at December 31, 1999 and 1998,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of the Corporation's management; our responsibility is
to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PRICEWATERHOUSECOOPERS LLP
Charlotte, North Carolina
January 13, 2000
53
<PAGE>
- --------------------------------------------------------------------------------
Bank of America Corporation and Subsidiaries
Consolidated Statement of Income
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------------------
(Dollars in millions, except per share information) 1999 1998 1997
- ------------------------------------------------------------------------ ------------ ------------ ------------
<S> <C> <C> <C>
Interest income
Interest and fees on loans and leases $ 27,569 $ 28,331 $ 29,085
Interest and dividends on securities 4,826 4,502 3,283
Federal funds sold and securities purchased under agreements to resell 1,666 1,828 1,516
Trading account assets 2,087 2,626 2,582
Other interest income 1,175 1,301 867
- ------------------------------------------------------------------------ ---------- ---------- ----------
Total interest income 37,323 38,588 37,333
- ------------------------------------------------------------------------ ---------- ---------- ----------
Interest expense
Deposits 9,002 10,811 10,684
Short-term borrowings 5,826 5,239 4,105
Trading account liabilities 658 895 975
Long-term debt 3,600 3,345 3,137
- ------------------------------------------------------------------------ ---------- ---------- ----------
Total interest expense 19,086 20,290 18,901
- ------------------------------------------------------------------------ ---------- ---------- ----------
Net interest income 18,237 18,298 18,432
Provision for credit losses 1,820 2,920 1,904
- ------------------------------------------------------------------------ ---------- ---------- ----------
Net interest income after provision for credit losses 16,417 15,378 16,528
Gains on sales of securities 240 1,017 271
Noninterest income
Service charges on deposit accounts 3,645 3,396 3,373
Mortgage servicing income 673 389 543
Investment banking income 2,244 2,009 1,476
Trading account profits and fees 1,495 171 976
Brokerage income 724 728 355
Nondeposit-related service fees 554 652 680
Asset management and fiduciary service fees 1,023 973 990
Credit card income 1,791 1,448 1,231
Other income 1,920 2,423 2,132
- ------------------------------------------------------------------------ ---------- ---------- ----------
Total noninterest income 14,069 12,189 11,756
- ------------------------------------------------------------------------ ---------- ---------- ----------
Merger-related charges, net 525 1,795 374
Other noninterest expense
Personnel 9,308 9,412 8,703
Occupancy 1,627 1,643 1,576
Equipment 1,346 1,404 1,408
Marketing 537 581 655
Professional fees 630 843 763
Amortization of intangibles 888 902 855
Data processing 763 765 626
Telecommunications 549 563 491
Other general operating 1,820 2,044 2,059
General administrative and other 518 584 489
- ------------------------------------------------------------------------ ---------- ---------- ----------
Total other noninterest expense 17,986 18,741 17,625
- ------------------------------------------------------------------------ ---------- ---------- ----------
Income before income taxes 12,215 8,048 10,556
Income tax expense 4,333 2,883 4,014
- ------------------------------------------------------------------------ ---------- ---------- ----------
Net income $ 7,882 $ 5,165 $ 6,542
======================================================================== ========== ========== ==========
Net income available to common shareholders $ 7,876 $ 5,140 $ 6,431
======================================================================== ========== ========== ==========
Per share information(1)
Earnings per common share $ 4.56 $ 2.97 $ 3.71
======================================================================== ========== ========== ==========
Diluted earnings per common share $ 4.48 $ 2.90 $ 3.61
======================================================================== ========== ========== ==========
Dividends per common share $ 1.85 $ 1.59 $ 1.37
======================================================================== ========== ========== ==========
Average common shares issued and outstanding (in thousands)(1) 1,726,006 1,732,057 1,733,194
======================================================================== ========== ========== ==========
</TABLE>
(1) Share and per share data reflect a two-for-one stock split on February 27,
1997.
See accompanying notes to consolidated financial statements.
54
<PAGE>
- --------------------------------------------------------------------------------
Bank of America Corporation and Subsidiaries
Consolidated Balance Sheet
<TABLE>
<CAPTION>
December 31
-------------------------
(Dollars in millions) 1999 1998
- ---------------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 26,989 $ 28,277
Time deposits placed and other short-term investments 4,838 6,750
Federal funds sold and securities purchased under agreements to resell 37,928 27,146
Trading account assets 38,460 39,602
Securities:
Available-for-sale 81,647 78,590
Held-for-investment, at cost (market value - $1,270 and $1,853) 1,422 1,997
- ---------------------------------------------------------------------------- -------- --------
Total securities 83,069 80,587
- ---------------------------------------------------------------------------- -------- --------
Loans and leases 370,662 357,328
Allowance for credit losses (6,828) (7,122)
- ---------------------------------------------------------------------------- -------- --------
Loans and leases, net of allowance for credit losses 363,834 350,206
- ---------------------------------------------------------------------------- -------- --------
Premises and equipment, net 6,713 7,289
Customers' acceptance liability 1,869 2,671
Derivative-dealer assets 16,055 16,400
Interest receivable 3,777 3,734
Mortgage servicing rights 4,093 2,376
Goodwill 12,262 12,695
Core deposits and other intangibles 1,730 2,013
Other assets 30,957 37,933
- ---------------------------------------------------------------------------- -------- --------
Total assets $632,574 $617,679
============================================================================ ======== ========
Liabilities
Deposits in domestic offices:
Noninterest-bearing $ 93,476 $ 92,623
Interest-bearing 207,048 203,644
Deposits in foreign offices:
Noninterest-bearing 1,993 1,713
Interest-bearing 44,756 59,280
- ---------------------------------------------------------------------------- -------- --------
Total deposits 347,273 357,260
- ---------------------------------------------------------------------------- -------- --------
Federal funds purchased and securities sold under agreements to repurchase 74,561 67,543
Trading account liabilities 20,958 14,170
Derivative-dealer liabilities 16,200 16,835
Commercial paper 7,331 6,749
Other short-term borrowings 40,340 24,742
Acceptances outstanding 1,869 2,671
Accrued expenses and other liabilities 19,169 30,929
Long-term debt 55,486 45,888
Trust preferred securities 4,955 4,954
- ---------------------------------------------------------------------------- -------- --------
Total liabilities 588,142 571,741
- ---------------------------------------------------------------------------- -------- --------
Commitments and contingencies (Notes Eleven and Thirteen)
Shareholders' equity
Preferred stock, $0.01 par value; authorized-100,000,000 shares; issued and
outstanding - 1,797,702 and 1,952,039 shares 77 83
Common stock, $0.01 par value; authorized-5,000,000,000 shares; issued and
outstanding - 1,677,273,267 and 1,724,484,305 shares 11,671 14,837
Retained earnings 35,681 30,998
Accumulated other comprehensive income (loss) (2,658) 152
Other (339) (132)
- ---------------------------------------------------------------------------- -------- --------
Total shareholders' equity 44,432 45,938
- ---------------------------------------------------------------------------- -------- --------
Total liabilities and shareholders' equity $632,574 $617,679
============================================================================ ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
55
<PAGE>
- --------------------------------------------------------------------------------
Bank of America Corporation and Subsidiaries
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------
(Dollars in millions) 1999 1998 1997
- ---------------------------------------------------------------------------------- ------------ ----------- -----------
<S> <C> <C> <C>
Operating activities
Net income $ 7,882 $ 5,165 $ 6,542
Reconciliation of net income to net cash provided by operating activities:
Provision for credit losses 1,820 2,920 1,904
Gains on sales of securities (240) (1,017) (271)
Merger-related charges, net 525 1,795 374
Depreciation and premises improvements amortization 1,029 1,096 1,108
Amortization of intangibles 888 902 855
Deferred income tax expense 2,098 216 971
Net decrease (increase) in trading instruments 7,640 (1,378) (4,679)
Net increase in interest receivable (51) (157) (542)
Net increase in interest payable 332 94 179
Net decrease (increase) in other assets 2,611 (11,271) (3,797)
Net (decrease) increase in other accrued expenses and other liabilities (12,965) 13,702 1,780
Other operating activities, net 496 1,450 (175)
- ---------------------------------------------------------------------------------- --------- --------- ---------
Net cash provided by operating activities 12,065 13,517 4,249
- ---------------------------------------------------------------------------------- --------- --------- ---------
Investing activities
Net decrease (increase) in time deposits placed and other short-term investments 1,625 1,612 (857)
Net increase in federal funds sold and securities purchased
under agreements to resell (10,782) (7,028) (3,531)
Proceeds from sales and maturities of available-for-sale securities 48,590 81,254 44,268
Purchases of available-for-sale securities (48,917) (93,136) (56,825)
Proceeds from maturities of held-for-investment securities 575 1,162 1,898
Purchases of held-for-investment securities -- (249) (570)
Proceeds from sales and securitizations of loans and leases 44,574 59,297 30,936
Purchases and net originations of loans and leases (63,401) (91,681) (42,218)
Purchases and originations of mortgage servicing rights (2,258) (853) (419)
Net purchases of premises and equipment (465) (437) (888)
Proceeds from sales of foreclosed properties 350 525 610
Sales and acquisitions of business activities, net of cash (1,212) (335) 1,289
- ---------------------------------------------------------------------------------- --------- --------- ---------
Net cash used in investing activities (31,321) (49,869) (26,307)
- ---------------------------------------------------------------------------------- --------- --------- ---------
Financing activities
Net (decrease) increase in deposits (8,299) 16,476 4,774
Net increase in federal funds purchased and securities
sold under agreements to repurchase 7,018 6,137 26,680
Net increase (decrease) in commercial paper and other short-term borrowings 16,214 13,672 (1,440)
Proceeds from issuance of long-term debt 17,630 12,166 7,823
Retirement of long-term debt (7,763) (8,809) (6,740)
Proceeds from issuance of trust preferred securities -- 340 1,613
Proceeds from issuance of common stock 1,158 1,367 1,892
Common stock repurchased (4,858) (1,751) (8,540)
Cash dividends paid (3,199) (2,604) (2,175)
Other financing activities, net 12 (863) (2,036)
- ---------------------------------------------------------------------------------- --------- --------- ---------
Net cash provided by financing activities 17,913 36,131 21,851
- ---------------------------------------------------------------------------------- --------- --------- ---------
Effect of exchange rate changes on cash and cash equivalents 55 32 102
- ---------------------------------------------------------------------------------- --------- --------- ---------
Net decrease in cash and cash equivalents (1,288) (189) (105)
Cash and cash equivalents at January 1 28,277 28,466 28,571
- ---------------------------------------------------------------------------------- --------- --------- ---------
Cash and cash equivalents at December 31 $ 26,989 $ 28,277 $ 28,466
================================================================================== ========= ========= =========
Supplemental cash flow disclosures
Cash paid for interest $ 18,754 $ 20,198 $ 18,585
Cash paid for income taxes 1,595 2,695 1,760
- ---------------------------------------------------------------------------------- --------- --------- ---------
</TABLE>
Loans transferred to foreclosed properties amounted to $305, $353 and $431 in
1999, 1998 and 1997, respectively.
Loans securitized and retained in the trading and available-for-sale
securities portfolios amounted to $6,682, $6,083 and $7,842 in 1999, 1998 and
1997, respectively.
The fair value of noncash assets acquired and liabilities assumed in
acquisitions during 1999 was approximately $1,557 and $74, net of cash
acquired. The fair value of noncash assets acquired in acquisitions during 1998
was approximately $109, net of cash acquired. The fair value of noncash assets
acquired and liabilities assumed in acquisitions during 1997 were approximately
$52,226 and $43,024, respectively, net of cash acquired.
See accompanying notes to consolidated financial statements.
56
<PAGE>
- --------------------------------------------------------------------------------
Bank of America Corporation and Subsidiaries
Consolidated Statement of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
Common Stock
(Dollars in millions, Preferred ------------------------ Retained
shares in thousands) Stock Shares Amount Earnings
- ------------------------------- ------------- ------------- ---------- --------------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 $ 2,413 1,602,764 $ 11,419 $24,071
Net income 6,542
Other comprehensive income,
net of tax
Comprehensive income
Cash dividends:
Common (2,064)
Preferred (111)
Common stock issued under
dividend reinvestment and
employee plans 47,431 1,888
Stock issued in acquisitions 82 219,024 10,320
Common stock repurchased (150,016) (8,540)
Conversion of preferred stock (86) 3,859 86
Redemption of preferred stock (1,701)
Other (524) (33)
- ------------------------------- -------- --------- -------- --------
Balance, December 31, 1997 708 1,722,538 15,140 28,438
=============================== ======== ========= ======== ========
Net income 5,165
Other comprehensive loss, net
of tax
Comprehensive income
Cash dividends:
Common (2,579)
Preferred (25)
Common stock issued under
dividend reinvestment and
employee plans 30,489 1,417
Stock issued in acquisitions 385 15
Common stock repurchased (29,349) (1,751)
Conversion of preferred stock (11) 444 11
Redemption of preferred stock (614)
Other (23) 5 (1)
- ------------------------------- -------- --------- -------- --------
Balance, December 31, 1998 83 1,724,484 14,837 30,998
=============================== ======== ========= ======== ========
Net income 7,882
Other comprehensive loss, net
of tax
Comprehensive income
Cash dividends:
Common (3,193)
Preferred (6)
Common stock issued under
employee plans 30,501 1,423
Common stock repurchased (78,000) (4,858)
Conversion of preferred stock (6) 284 6
Other 4 263
- ------------------------------- -------- --------- -------- --------
Balance, December 31, 1999 $ 77 1,677,273 $ 11,671 $35,681
=============================== ======== ========= ======== ========
<CAPTION>
Accumulated Total
Other Share-
(Dollars in millions, Comprehensive holders' Comprehensive
shares in thousands) Income (Loss)(1,2) Other Equity Income
- ------------------------------- -------------------- ---------- ------------- --------------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 $ 20 $ (130) $37,793
Net income 6,542 $ 6,542
Other comprehensive income,
net of tax 387 387 387
---------
Comprehensive income $ 6,929
=========
Cash dividends:
Common (2,064)
Preferred (111)
Common stock issued under
dividend reinvestment and
employee plans 4 1,892
Stock issued in acquisitions 10,402
Common stock repurchased (8,540)
Conversion of preferred stock
Redemption of preferred stock (1,701)
Other 17 (16)
- ------------------------------- -------- ------ --------
Balance, December 31, 1997 407 (109) 44,584
=============================== ======== ====== ========
Net income 5,165 $ 5,165
Other comprehensive loss, net
of tax (255) (255) (255)
---------
Comprehensive income $ 4,910
=========
Cash dividends:
Common (2,579)
Preferred (25)
Common stock issued under
dividend reinvestment and
employee plans (50) 1,367
Stock issued in acquisitions 15
Common stock repurchased (1,751)
Conversion of preferred stock
Redemption of preferred stock (614)
Other 27 31
- ------------------------------- -------- ------ --------
Balance, December 31, 1998 152 (132) 45,938
=============================== ======== ====== ========
Net income 7,882 $ 7,882
Other comprehensive loss, net
of tax (2,810) (2,810) (2,810)
---------
Comprehensive income $ 5,072
=========
Cash dividends:
Common (3,193)
Preferred (6)
Common stock issued under
employee plans (265) 1,158
Common stock repurchased (4,858)
Conversion of preferred stock
Other 58 321
- ------------------------------- -------- ------ --------
Balance, December 31, 1999 $ (2,658) $ (339) $44,432
=============================== ======== ====== =========
</TABLE>
(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 $(2,773), $(242) and $419 and after-tax
net unrealized losses on foreign currency translation adjustments of
$(37), $(13), and $(32) in 1999, 1998 and 1997, respectively.
(2) Accumulated Other Comprehensive Income (Loss) consists of the after-tax
valuation allowance for available-for-sale securities and marketable
equity securities of $(2,470), $303 and $545 and foreign currency
translation adjustments of $(188), $(151) and $(138) at December 31, 1999,
1998, and 1997, respectively.
See accompanying notes to consolidated financial statements.
57
<PAGE>
Bank of America Corporation and Subsidiaries
Notes to Consolidated Financial Statements
On September 30, 1998, BankAmerica Corporation (BankAmerica) merged (the
Merger) with and into Bank of America Corporation (Corporation), formerly
NationsBank Corporation (NationsBank). On January 9, 1998, the Corporation
completed its merger (the Barnett merger) with Barnett Banks, Inc. (Barnett).
These transactions were accounted for as pooling of interests. The consolidated
financial statements have been restated to present the combined results of the
Corporation as if the Merger and the Barnett merger had been in effect for all
periods presented.
The Corporation is a Delaware corporation, a bank holding company and,
effective March 11, 2000, a financial holding company. Through its banking
subsidiaries 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 - Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of the
Corporation and its majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated. Results of operations of
companies purchased are included from the dates of acquisition. Certain prior
period amounts have been reclassified to conform to current year
classifications. Assets held in an agency or fiduciary capacity are not
included in the consolidated financial statements.
The preparation of the consolidated financial statements in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect reported amounts and
disclosures. Actual results could differ from those estimates. Significant
estimates made by management are discussed in these footnotes as applicable.
On February 27, 1997, the Corporation completed a two-for-one split of its
common stock. Accordingly, the consolidated financial statements for all years
presented reflect the impact of the stock split.
Cash and Cash Equivalents
Cash on hand, cash items in the process of collection and amounts due from
correspondent banks and the Federal Reserve Bank (FRB) are included in cash and
cash equivalents.
Securities Purchased Under Agreements To Resell And
Securities Sold Under Agreements To Repurchase
Securities purchased under agreements to resell and securities sold under
agreements to repurchase are treated as collateralized financing transactions
and are recorded at the amounts at which the securities were acquired or sold
plus accrued interest. The Corporation's policy is to obtain the use of
securities purchased under agreements to resell. The market value of the
underlying securities, which collateralize the related receivable on agreements
to resell, is monitored, including accrued interest, and additional collateral
is requested when deemed appropriate.
Trading Instruments
Instruments utilized in trading activities include securities stated at
fair value. Fair value is generally based on quoted market prices. If quoted
market prices are not available, fair values are estimated based on dealer
quotes, pricing models or quoted prices for instruments with similar
characteristics. Realized and unrealized gains and losses are recognized as
trading account profits and fees.
Securities
Debt securities are classified based on management's intention on the date
of purchase. Debt securities which management has the intent and ability to
hold to maturity are classified as held-for-investment and reported at
amortized cost. Securities that are bought and held principally for the purpose
of resale in the near term are
58
<PAGE>
classified as trading instruments and are stated at fair value. All other debt
securities are classified as available-for-sale and carried at fair value with
net unrealized gains and losses included in shareholders' equity on an
after-tax basis.
Interest and dividends on securities, including amortization of premiums
and accretion of discounts, are included in interest income. Realized gains and
losses from the sales of securities are determined using the specific
identification method.
Marketable equity securities, which are included in other assets, are
carried at fair value with net unrealized gains and losses included in
shareholders' equity, net of tax. Income on marketable equity securities is
included in noninterest income.
Loans and Leases
Loans are reported at their outstanding principal balances net of any
unearned income, charge-offs, unamortized deferred fees and costs on originated
loans and premiums or discounts on purchased loans. Loan origination fees and
certain direct origination costs are deferred and recognized as adjustments to
income over the lives of the related loans. Unearned income, discounts and
premiums are amortized to income using methods that approximate the interest
method.
The Corporation provides equipment financing to its customers through a
variety of lease arrangements. Direct financing leases are carried at the
aggregate of lease payments receivable plus estimated residual value of the
leased property, less unearned income. Leveraged leases, which are a form of
financing lease, are carried net of nonrecourse debt. Unearned income on
leveraged and direct financing leases is amortized over the lease terms by
methods that approximate the interest method.
Allowance for Credit Losses
The allowance for credit losses is available to absorb management's
estimate of incurred credit losses in the loan and lease portfolios. Additions
to the allowance for credit losses are made by charges to the provision for
credit losses. Credit exposures deemed to be uncollectible are charged against
the allowance for credit losses. Recoveries of previously charged off amounts
are credited to the 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. The nature of the process by which
the Corporation determines the appropriate allowance for credit losses requires
the exercise of considerable judgment. As discussed below, 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 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.
Due to their homogeneous nature, consumer loans and certain smaller
business loans and leases, which includes residential mortgages, home equity
lines, direct/indirect consumer, consumer finance, bankcard, and foreign
consumer loans, are generally evaluated as a group, based on individual loan
type. This evaluation is based primarily on historical and current delinquency
and loss trends and provides a basis for establishing an appropriate level of
allowance for credit losses.
Commercial and commercial real estate loans and leases are generally
evaluated individually due to a general lack of uniformity among individual
loans within each loan type and business segment. If necessary, an allowance
for credit losses is established for individual impaired loans. 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
59
<PAGE>
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,
Portions of the allowance for credit losses are assigned to cover the
estimated incurred losses in each loan and lease category based on the results
of the Corporation's detail 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
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.
Nonperforming Loans
Commercial loans and leases that are past due 90 days or more as to
principal or interest, or where reasonable doubt exists as to timely
collection, including loans that are individually identified as being impaired,
are generally classified as nonperforming loans unless well secured and in the
process of collection. Loans whose contractual terms have been restructured in
a manner which grants a concession to a borrower experiencing financial
difficulties are classified as nonperforming until the loan is performing for
an adequate period of time under the restructured agreement. Interest accrued
but not collected is reversed when a commercial loan is classified as
nonperforming. Interest collections on commercial nonperforming loans and
leases for which the ultimate collectibility of principal is uncertain are
applied as principal reductions. Otherwise, such collections are credited to
income when received.
Credit card loans that are 180 days past due are charged off and not
classified as nonperforming. Real estate secured consumer loans are classified
as nonperforming at 90 days past due. The amount deemed to be uncollectible on
real estate secured loans is charged off upon determination. Other consumer
loans are charged off at 120 days past due and not classified as nonperforming.
Interest accrued but not collected is generally written off along with the
principal.
Loans Held for Sale
Loans held for sale include residential mortgage, commercial real estate
and other loans and are carried at the lower of aggregate cost or market value.
Loans originated with the intent to sell are included in other assets.
Foreclosed Properties
Assets are classified as foreclosed properties and included in other
assets upon actual foreclosure or when physical possession of the collateral is
taken regardless of whether foreclosure proceedings have taken place.
Foreclosed properties are carried at the lower of the recorded amount of
the loan or lease for which the property previously served as collateral, or
the fair value of the property less estimated costs to sell. Prior to
foreclosure, any write-downs, if necessary, are charged to the allowance for
credit losses.
Subsequent to foreclosure, gains or losses on the sale of and losses on
the periodic revaluation of foreclosed properties are credited or charged to
expense. Net costs of maintaining and operating foreclosed properties are
expensed as incurred.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation and amortization are recognized principally
using the straight-line method over the estimated useful lives of the assets.
60
<PAGE>
Derivative-Dealer Positions
Derivative-dealer assets and liabilities represent trading positions
including unrealized gains and losses, respectively, on interest rate, foreign
exchange, commodity, equity, credit derivative and other derivative contract
positions included in the Corporation's trading portfolio. Derivative-dealer
positions are reflected at fair value with changes in fair value reflected in
trading account profits and fees. Fair values are estimated based on dealer
quotes, pricing models or quoted prices for instruments with similar
characteristics.
Mortgage Servicing Rights
The total cost of mortgage loans originated for sale or purchased is
allocated between the cost of the loans and the mortgage servicing rights (MSR)
based on the relative fair values of the loans and the MSR. MSR acquired
separately are capitalized at cost. The Corporation capitalized $1.6 billion,
$1.5 billion and $749 million of MSR during 1999, 1998 and 1997, respectively.
The cost of the MSR is amortized in proportion to and over the estimated period
of net servicing revenues. Amortization was $566 million, $476 million and $303
million during 1999, 1998 and 1997, respectively.
The fair value of capitalized MSR was approximately $4.1 billion and $2.4
billion at December 31, 1999 and 1998, respectively. Total loans serviced
approximated $294.6 billion, $249.7 billion and $224.0 billion at December 31,
1999, 1998 and 1997, respectively, including loans serviced on behalf of the
Corporation's banking subsidiaries. The predominant characteristics used as the
basis for stratifying MSR are loan type and interest rate. The MSR strata are
evaluated for impairment by estimating their fair value based on anticipated
future net cash flows, taking into consideration prepayment predictions. If the
carrying value of the MSR, including the results of risk management activities,
exceeds the estimated fair value, a valuation allowance is established for any
decline which is viewed to be temporary. Changes to the valuation allowance are
charged against or credited to mortgage servicing income and fees. The
valuation allowance was $6 million and $180 million at December 31, 1999 and
1998, respectively. To manage risk associated with changes in prepayment rates,
the Corporation uses various financial instruments including purchased options
and swaps. The notional amounts of such contracts at December 31, 1999 and 1998
were $43.4 billion and $22.4 billion, respectively, and the related unrealized
loss was $333 million and unrealized gain was $190 million, respectively.
Goodwill and Other Intangibles
Net assets of companies acquired in purchase transactions are recorded at
fair value at the date of acquisition. Identified intangibles are amortized on
an accelerated or straight-line basis over the period benefited. Goodwill is
amortized on a straight-line basis over a period not to exceed 25 years. The
recoverability of goodwill and other intangibles is evaluated if events or
circumstances indicate a possible impairment. Such evaluation is based on
various analyses, including undiscounted cash flow projections.
Securitizations
The Corporation securitizes, sells and services interests in home equity,
installment, commercial and bankcard loans. When the Corporation sells assets
in securitizations, it may retain interest only strips, one or more
subordinated tranches and, in some cases, a cash reserve account, all of which
are considered retained interests in the securitized assets. Gains upon sale of
the assets depend, in part, on the Corporation's allocation of the previous
carrying amount of the assets to the retained interests. Previous carrying
amounts are allocated in proportion to the relative fair values of the assets
sold and interests retained.
To obtain fair values, quoted market prices are used, if available.
Generally, quoted market prices for retained interests are not available,
therefore the Corporation estimates fair values based upon the present value of
the associated expected future cash flows. This may require management to
estimate credit losses, prepayment speeds, forward yield curves, discount rates
and other factors that impact the value of retained interests.
After the securitization, any of these retained interests that can be
contractually settled in such a way that the Corporation could not recover
substantially all of its recorded investment are adjusted to fair value with
the adjustment reflected as an unrealized gain or loss in shareholders' equity.
If a decline in the fair value is determined to be unrecoverable, it is
expensed.
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<PAGE>
Income Taxes
There are two components of income tax expense: current and deferred.
Current income tax expense approximates taxes to be paid or refunded for the
applicable period. Balance sheet amounts of deferred taxes are recognized on
the temporary differences between the bases of assets and liabilities as
measured by tax laws and their bases as reported in the financial statements.
Deferred tax expense or benefit is then recognized for the change in deferred
tax liabilities or assets between periods.
Recognition of deferred tax assets is based on management's belief that it
is more likely than not that the tax benefit associated with certain temporary
differences, tax operating loss carryforwards and tax credits will be realized.
A valuation allowance is recorded for those deferred tax items for which it is
more likely than not that realization will not occur.
Retirement Benefits
The Corporation has established qualified retirement plans covering
full-time, salaried employees and certain part-time employees. Pension expense
under these plans is charged to current operations and consists of several
components of net pension cost based on various actuarial assumptions regarding
future experience under the plans.
In addition, the Corporation and its subsidiaries have established
unfunded supplemental benefit plans providing any benefits that could not be
paid from a qualified retirement plan because of Internal Revenue Code
restrictions and supplemental executive retirement plans for selected officers
of the Corporation and its subsidiaries. These plans are nonqualified and,
therefore, in general, a participant's or beneficiary's claim to benefits is as
a general creditor.
The Corporation and its subsidiaries have established several unfunded
postretirement medical benefit plans.
Risk Management Instruments
Risk management instruments are utilized to modify the interest rate
characteristics of related assets or liabilities or hedge against fluctuations
in interest rates, currency exchange rates or other such exposures as part of
the Corporation's asset and liability management process. Instruments must be
designated as hedges and must be effective throughout the hedge period. To
qualify as hedges, risk management instruments must be linked to specific
assets or liabilities or pools of similar assets or liabilities. For risk
management instruments that fail to qualify as hedges, the instruments are
recorded at market value with changes in market value reflected in trading
account profits and fees.
Swaps, principally interest rate, used in the asset and liability
management process are accounted for on the accrual basis with revenues or
expenses recognized as adjustments to income or expense on the underlying
linked assets or liabilities.
Gains and losses associated with interest rate futures and forward
contracts used as effective hedges of existing risk positions or anticipated
transactions are deferred as an adjustment to the carrying value of the related
asset or liability and recognized in income over the remaining term of the
related asset or liability.
Risk management instruments used to hedge or modify the interest rate
characteristics of debt securities classified as available-for-sale are carried
at fair value with unrealized gains or losses deferred as a component of
shareholders' equity, net of tax.
To manage interest rate risk, the Corporation also uses interest rate
option products, primarily purchased caps and floors. Interest rate caps and
floors are agreements where, for a fee, the purchaser obtains the right to
receive interest payments when a variable interest rate moves above or below a
specified cap or floor rate, respectively. Such instruments are primarily
linked to long-term debt, short-term borrowings and pools of similar
residential mortgages. The Corporation also purchases options to protect the
value of certain assets, principally MSR, against changes in prepayment rates.
Option premiums are amortized over the option life on a straight-line basis.
Such contracts are designated as hedges, and gains or losses are recorded as
adjustments to the carrying value of the MSR, which are then subjected to
impairment valuations.
The Corporation also utilizes forward delivery contracts and options to
reduce the interest rate risk inherent in mortgage loans held for sale and the
commitments made to borrowers for mortgage loans which have not
62
<PAGE>
been funded. These financial instruments are considered in the Corporation's
lower of cost or market valuation of its mortgage loans held for sale.
The Corporation has made investments in a number of operations in foreign
countries. Certain assets and liabilities of these operations are often
denominated in foreign currencies, which exposes the Corporation to foreign
currency risks. To qualify for hedge accounting, a foreign exchange contract
must reduce risk at the level of the specific transaction. Realized and
unrealized gains and losses on instruments that hedge firm commitments are
deferred and included in the measurement of the subsequent transaction;
however, losses are deferred only to the extent of expected gains on the future
commitment. Realized and unrealized gains and losses on instruments that hedge
net foreign capital exposure are recorded in shareholders' equity as foreign
currency translation adjustments and included in accumulated other
comprehensive income (loss).
Risk management instruments generally are not terminated. When
terminations do occur, gains or losses are recorded as adjustments to the
carrying value of the underlying assets or liabilities and recognized as income
or expense over either the remaining expected lives of such underlying assets
or liabilities or the remaining life of the instrument. In circumstances where
the underlying assets or liabilities are sold, any remaining carrying value
adjustments and the cumulative change in value of any open positions are
recognized immediately as a component of the gain or loss on disposition of
such underlying assets or liabilities. If a forecasted transaction to which a
risk management instrument is linked fails to occur, any deferred gain or loss
on the instrument is recognized immediately in income.
Earnings Per Common Share
Earnings per common share for all periods presented is computed by
dividing net income, reduced by dividends on preferred stock, by the weighted
average number of common shares issued and outstanding. Diluted earnings per
common share is computed by dividing net income available to common
shareholders, adjusted for the effect of assumed conversions, by the weighted
average number of common shares issued and outstanding and dilutive potential
common shares, which include convertible preferred stock and stock options.
Dilutive potential common shares are calculated using the treasury stock
method.
Foreign Currency Translation
Assets, liabilities and operations of foreign branches and subsidiaries
are recorded based on the functional currency of each entity. For the majority
of the foreign operations, the functional currency is the local currency, in
which case the assets, liabilities and operations are translated, for
consolidation purposes, at current exchange rates from the local currency to
the reporting currency, the U.S. dollar. The resulting gains or losses are
reported as a component of accumulated other comprehensive income (loss) within
shareholders' equity on a net-of-tax basis. When the foreign entity is not a
free-standing operation or is in a hyperinflationary economy, the functional
currency used to measure the financial statements of a foreign entity is the
U.S. dollar. In these instances, the resulting gains and losses are included in
income.
Recently Issued Accounting Pronouncements
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.
63
<PAGE>
Note Two - Merger-Related Activity
At December 31, 1999, 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 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, the Corporation completed the Merger. As a result
of the Merger, each outstanding share of BankAmerica common stock was converted
into 1.1316 shares of the Corporation's common stock, resulting in the net
issuance of approximately 779 million shares of the Corporation's common stock
to the former BankAmerica shareholders. Each share of NationsBank common stock
continued as one share in the combined company's common stock. In addition,
approximately 88 million options to purchase the Corporation's common stock
were issued to convert stock options granted to certain BankAmerica employees.
This transaction was accounted for as a pooling of interests. Under this method
of accounting, the recorded assets, liabilities, shareholders' equity, income
and expense of NationsBank and BankAmerica have been combined and reflected at
their historical amounts. NationsBank's total assets, total deposits and total
shareholders' equity on the date of the Merger were approximately $331.9
billion, $166.8 billion and $27.7 billion, respectively. BankAmerica's total
assets, total deposits and total shareholders' equity on the date of the Merger
amounted to approximately $263.4 billion, $179.0 billion and $19.6 billion,
respectively.
In connection with the Merger, the Corporation recorded a $1,325 million
pre-tax merger-related charge ($960 million after-tax) in 1998 of which $725
million ($519 million after-tax) and $600 million ($441 million after-tax) were
recorded in the third and fourth quarters of 1998, respectively. 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).
In 1999, the Corporation also recorded a pre-tax merger-related charge of
$525 million ($358 million after-tax) in connection with the Merger of which
$200 million ($145 million after-tax) and $325 million ($213 million after-tax)
were recorded in the second and fourth quarters of 1999, 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.
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 December 31, 1999,
approximately 12,600 employees had entered the severance process.
Employee-related costs of the Merger were principally in overlapping functions,
operations and businesses of the Corporation. Approximately one-third of the
employee-related merger costs was attributable to the Corporation's staff and
operations areas while the business segments accounted for the remaining
employee-related merger costs.
64
<PAGE>
The following tables summarize the activity in the BankAmerica
merger-related reserve during 1999 and 1998:
<TABLE>
<CAPTION>
BankAmerica Merger-Related Reserve
- -------------------------------------------------
Noncash
Balance, Amount Cash Payments Reductions Balance,
January 1, Included in Applied to Applied to December 31,
(Dollars in millions) 1999 Expense Reserve Reserve 1999
- ----------------------------------- ------------- ----------------- ------------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Severance, change in control
and other employee-related costs $487 $ 219 $(588) $ -- $118
Conversion and related costs 143 187 (62) (133) 135
Exit and related costs 194 128 (183) (93) 46
Other merger costs 18 (9) (8) -- 1
- ----------------------------------- ---- -------- ------- ----- ----
Total $842 $ 525 $(841) $(226) $300
=================================== ==== ======= ====== ===== ====
Noncash
Balance, Amount Cash Payments Reductions Balance,
January 1, Included in Applied to Applied to December 31,
(Dollars in millions) 1998 Expense Reserve Reserve 1998
- ----------------------------------- ---------- ----------- ------------- ---------- ------------
Severance, change in control
and other employee-related costs $ -- $ 740 $(155) $ (98) $487
Conversion and related costs -- 150 (3) (4) 143
Exit and related costs -- 300 (62) (44) 194
Other merger costs -- 135 (117) -- 18
- ----------------------------------- ---- ---------- -------- ------- ----
Total $ -- $1,325 $(337) $(146) $842
=================================== ==== ========== ======== ======= ====
</TABLE>
On January 9, 1998, the Corporation completed the Barnett merger.
Barnett's total assets, total deposits and total shareholders' equity on the
date of the merger were approximately $46.0 billion, $35.4 billion and $3.4
billion, respectively. As a result of the Barnett merger, each outstanding
share of Barnett common stock was converted into 1.1875 shares of the
Corporation's common stock, resulting in the net issuance of approximately 233
million common shares to the former Barnett shareholders. In addition,
approximately 11 million options to purchase the Corporation's common stock
were issued to convert stock options granted to certain Barnett employees. This
transaction was also accounted for as a pooling of interests.
In connection with the Barnett merger, the Corporation incurred a pre-tax
merger-related charge during the first quarter of 1998 of approximately $900
million ($642 million after-tax), which consisted of approximately $375 million
primarily in severance and change in control payments, $300 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), $125 million of exit costs related to contract
terminations and $100 million of other merger costs (including legal,
investment banking and filing fees). In the second quarter of 1998, the
Corporation recognized a $430 million gain resulting from the regulatory
required divestitures of certain Barnett branches. At December 31, 1999,
substantially all of the Barnett merger-related reserves have been utilized.
Through December 31, 1999, approximately 2,400 employees had entered the
severance process as a result of the Barnett merger.
As previously disclosed, NationsBank, BankAmerica and Barnett merged in
separate transactions accounted for as pooling of interests. The following
table summarizes the impact of the BankAmerica and Barnett mergers on the
Corporation's net interest income, noninterest income and net income for 1997,
the period prior to the respective mergers:
65
<PAGE>
<TABLE>
<CAPTION>
(Dollars in millions) 1997
- ----------------------- --------------------------------------
Net Interest Noninterest Net
Income Income Income
-------------- ------------- ---------
<S> <C> <C> <C>
NationsBank $ 7,898 $ 5,002 $3,077
BankAmerica 8,669 6,012 3,210
Barnett 1,840 971 255
- ----------------------- ------- ------- ------
Total $18,407 $11,985 $6,542
======================= ======= ======= ======
</TABLE>
The amounts presented above represent results of operations of the
previously separate companies and do not reflect reclassifications of certain
revenue and expense items which were made to conform to the reporting policies
of the Corporation.
On October 1, 1997, the Corporation completed the acquisition of
Montgomery Securities, Inc., an investment banking and institutional brokerage
firm. The purchase price consisted of $840 million in cash and approximately
5.3 million unregistered shares of the Corporation's common stock for an
aggregate amount of approximately $1.1 billion. The Corporation accounted for
this acquisition as a purchase.
On October 1, 1997, the Corporation also acquired Robertson, Stephens &
Company Group, LLC (Robertson Stephens), an investment banking and investment
management firm. The acquisition was accounted for as a purchase. The
Corporation sold the investment banking operations of Robertson Stephens on
August 31, 1998 and sold the investment management operations on February 26,
1999.
On January 7, 1997, the Corporation completed the acquisition of Boatmen's
Bancshares, Inc. (Boatmen's), headquartered in St. Louis, Missouri, resulting
in the issuance of approximately 195 million shares of the Corporation's common
stock valued at $9.4 billion on the date of the acquisition and aggregate cash
payments of $371 million to Boatmen's shareholders. On the date of the
acquisition, Boatmen's total assets and total deposits were approximately $41.2
billion and $32.0 billion, respectively. The Corporation accounted for this
acquisition as a purchase.
In 1996, the Corporation completed the initial public offering of 16.1
million shares of Class A Common Stock of BA Merchant Services, Inc. (BAMS), a
subsidiary of the Corporation. On December 22, 1998, the Corporation and BAMS
signed a definitive merger agreement on which the Corporation agreed to
purchase the remaining BAMS outstanding shares of Class A Common Stock it did
not own. On April 28, 1999, BAMS became a wholly-owned subsidiary of Bank of
America, N.A. and each outstanding share of BAMS common stock other than the
shares owned by the Corporation was converted into the right to receive a cash
payment equal to $20.50 per share without interest, or $339.2 million.
66
<PAGE>
Note Three - Securities
The amortized cost, gross unrealized gains and losses, and fair value of
available-for-sale securities and held-for-investment securities at December
31, 1999, 1998 and 1997 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
(Dollars in millions) Cost Gains Losses Value
- ------------------------------------------------- ------------ ------------- ------------- ----------
<S> <C> <C> <C> <C>
Available-for-sale securities
1999
U.S. Treasury securities and agency debentures $ 30,085 $ -- $ 1,800 $ 28,285
Mortgage-backed securities 43,673 21 1,709 41,985
Foreign sovereign securities 4,607 16 256 4,367
Other taxable securities 4,985 -- 29 4,956
- ------------------------------------------------- ---------- ----------- ----------- --------
Total taxable 83,350 37 3,794 79,593
Tax-exempt securities 2,135 21 102 2,054
- ------------------------------------------------- ---------- ----------- ----------- --------
Total $ 85,485 $ 58 $ 3,896 $ 81,647
================================================= ========== =========== =========== ========
1998
U.S. Treasury securities and agency debentures $ 17,355 $ 52 $ 157 $ 17,250
Mortgage-backed securities 51,259 567 36 51,790
Foreign sovereign securities 5,693 25 138 5,580
Other taxable securities 2,293 76 32 2,337
- ------------------------------------------------- ---------- ----------- ----------- --------
Total taxable 76,600 720 363 76,957
Tax-exempt securities 1,636 68 71 1,633
- ------------------------------------------------- ---------- ----------- ----------- --------
Total $ 78,236 $ 788 $ 434 $ 78,590
================================================= ========== =========== =========== ========
1997
U.S. Treasury securities and agency debentures $ 10,614 $ 268 $ 6 $ 10,876
Mortgage-backed securities 36,256 363 30 36,589
Foreign sovereign securities 10,797 43 96 10,744
Other taxable securities 2,271 13 3 2,281
- ------------------------------------------------- ---------- ----------- ----------- --------
Total taxable 59,938 687 135 60,490
Tax-exempt securities 1,661 58 -- 1,719
- ------------------------------------------------- ---------- ----------- ----------- --------
Total $ 61,599 $ 745 $ 135 $ 62,209
================================================= ========== =========== =========== ========
Gross Gross
Amortized Unrealized Unrealized Fair
(Dollars in millions) Cost Gains Losses Value
- ------------------------------------------------ ---------- ----------- ----------- --------
Held-for-investment securities
1999
U.S. Treasury securities and agency debentures $ 87 $ -- $ -- $ 87
Mortgage-backed securities 106 -- -- 106
Foreign sovereign securities 902 -- 157 745
Other taxable securities 26 -- 2 24
- ------------------------------------------------- ---------- ----------- ----------- --------
Total taxable 1,121 -- 159 962
Tax-exempt securities 301 11 4 308
- ------------------------------------------------- ---------- ----------- ----------- --------
Total $ 1,422 $ 11 $ 163 $ 1,270
================================================= ========== =========== =========== ========
1998
U.S. Treasury securities and agency debentures $ 478 $ 1 $ -- $ 479
Mortgage-backed securities 203 -- -- 203
Foreign sovereign securities 914 1 168 747
Other taxable securities 29 2 -- 31
- ------------------------------------------------- ---------- ----------- ----------- --------
Total taxable 1,624 4 168 1,460
Tax-exempt securities 373 20 -- 393
- ------------------------------------------------- ---------- ----------- ----------- --------
Total $ 1,997 $ 24 $ 168 $ 1,853
================================================= ========== =========== =========== ========
1997
U.S. Treasury securities and agency debentures $ 516 $ 1 $ 1 $ 516
Mortgage-backed securities 2,408 43 3 2,448
Foreign sovereign securities 1,448 61 39 1,470
Other taxable securities 56 9 4 61
- ------------------------------------------------- ---------- ----------- ----------- --------
Total taxable 4,428 114 47 4,495
Tax-exempt securities 394 17 1 410
- ------------------------------------------------- ---------- ----------- ----------- --------
Total $ 4,822 $ 131 $ 48 $ 4,905
================================================= ========== =========== =========== ========
</TABLE>
67
<PAGE>
The expected maturity distribution and yields (computed on a
taxable-equivalent basis) of the Corporation's securities portfolio at December
31, 1999 are summarized below. Actual maturities may differ from contractual
maturities or maturities shown below since borrowers may have the right to
prepay obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
Due after 1 Due after 5
Due in 1 year through 5 through 10
or less years years
------------------- --------------------- ---------------------
(Dollars in millions) Amount Yield Amount Yield Amount Yield
- ------------------------------------- -------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Fair value of available-for-sale
securities
U.S. Treasury securities and agency
debentures $114 5.56% $19,625 5.06% $ 8,286 5.01%
Mortgage-backed securities 332 6.80 15,086 6.49 21,809 6.17
Foreign sovereign securities 13 4.97 1,876 7.34 310 4.27
Other taxable securities 92 6.74 3,011 9.51 1,499 6.30
- ------------------------------------- ---- ---- ------- ---- ------- ----
Total taxable 551 6.49 39,598 6.05 31,904 5.86
Tax-exempt securities 33 6.83 216 6.93 668 7.29
- ------------------------------------- ---- ---- ------- ---- ------- ----
Total $584 6.51% $39,814 6.06% $32,572 5.88%
===================================== ==== ==== ======= ==== ======= ====
Amortized cost of available-for-sale
securities $572 $41,050 $31,890
===================================== ==== ======= =======
Amortized cost of held-for-
investment securities
U.S. Treasury securities
and agency debentures $ 86 5.60% $ -- --% $ 1 6.61%
Mortgage-backed securities 31 6.20 15 6.38 60 6.23
Foreign sovereign securities 3 7.49 29 6.66 5 5.95
Other taxable securities -- -- -- -- -- --
- ------------------------------------- ---- ---- ------- ---- ------- ----
Total taxable 120 5.80 44 6.56 66 6.21
Tax-exempt securities 37 9.28 111 9.42 78 8.41
- ------------------------------------- ---- ---- ------- ---- ------- ----
Total $157 6.62% $ 155 8.61% $ 144 8.24%
===================================== ==== ==== ======= ==== ======= ====
Fair value of held-for-investment
securities $147 $ 151 $ 93
===================================== ==== ======= =======
<CAPTION>
Due after
10 years Total
--------------------- ---------------------
(Dollars in millions) Amount Yield Amount Yield
- ------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Fair value of available-for-sale
securities
U.S. Treasury securities and agency
debentures $ 260 6.32% $28,285 5.07%
Mortgage-backed securities 4,758 6.24 41,985 6.29
Foreign sovereign securities 2,168 5.39 4,367 6.14
Other taxable securities 354 7.90 4,956 8.37
- ------------------------------------- ------- ---- ------- ----
Total taxable 7,540 6.08 79,593 5.98
Tax-exempt securities 1,137 8.01 2,054 7.68
- ------------------------------------- ------- ---- ------- ----
Total $ 8,677 6.33% $81,647 6.02%
===================================== ======= ==== ======= ====
Amortized cost of available-for-sale
securities $11,973 $85,485
===================================== ======= =======
Amortized cost of held-for-
investment securities
U.S. Treasury securities
and agency debentures $ -- --% $ 87 5.61%
Mortgage-backed securities -- -- 106 6.24
Foreign sovereign securities 865 7.88 902 7.83
Other taxable securities 26 6.62 26 6.62
- ------------------------------------- ------- ---- ------- ----
Total taxable 891 7.84 1,121 7.48
Tax-exempt securities 75 7.38 301 8.63
- ------------------------------------- ------- ---- ------- ----
Total $ 966 7.35% $ 1,422 7.73%
===================================== ======= ==== ======= ====
Fair value of held-for-investment
securities $ 879 $ 1,270
===================================== ======= =======
</TABLE>
The components of gains and losses on sales of securities for the years
ended December 31, 1999, 1998 and 1997 were:
<TABLE>
<CAPTION>
(Dollars in millions) 1999 1998 1997
- ---------------------------------------- ------ --------- -------
<S> <C> <C> <C>
Gross gains on sales of securities $289 $1,039 $289
Gross losses on sales of securities 49 22 18
- ---------------------------------------- ---- ------ ----
Net gains on sales of securities $240 $1,017 $271
======================================== ==== ====== ====
</TABLE>
During 1999 and 1997, the Corporation did not sell any held-for-investment
securities. In 1998, the Corporation sold $19.5 million of held-for-investment
securities, resulting in net gains of approximately $2.0 million included
above. The sale resulted from a realignment of the securities portfolio in
connection with the Barnett merger.
Excluding securities issued by the U.S. government and its agencies and
corporations, there were no investments in securities from one issuer that
exceeded 10 percent of consolidated shareholders' equity at December 31, 1999
or 1998.
The income tax expense attributable to realized net gains on securities
sales was $84 million, $363 million and $101 million in 1999, 1998 and 1997,
respectively.
Securities are pledged or assigned to secure borrowed funds, government
and trust deposits and for other purposes. The carrying value of pledged
securities was $65.8 billion and $65.6 billion at December 31, 1999 and 1998,
respectively.
At December 31, 1999, the valuation allowance for available-for-sale
securities and marketable equity securities included in shareholders' equity
reflects unrealized losses of $2.5 billion, net of related income taxes of
68
<PAGE>
$1.1 billion, primarily reflecting $3.8 billion of pre-tax net unrealized
losses on available-for-sale securities and $248 million of pre-tax net
unrealized gains on marketable equity securities. At December 31, 1998, the
valuation allowance included in shareholders' equity reflects unrealized gains
of $303 million, net of related income taxes of $216 million, primarily
reflecting pre-tax unrealized gains of $354 million on available-for-sale
securities and $165 million on marketable equity securities. The change in the
valuation allowance was primarily attributable to an upward shift in certain
segments of the U.S. Treasury yield curve during 1999.
Note Four - Trading Activities
Trading-Related Income
Trading account profits and fees represent the net amount earned from the
Corporation's trading positions, including trading account assets and
liabilities as well as derivative-dealer positions. These transactions include
positions to meet customer demand and positions 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 and fees, 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. Trading account
profits and fees, 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, debt and equity securities and derivative
contracts in interest rates, equities, credit and commodities.
<TABLE>
<CAPTION>
(Dollars in millions) 1999 1998
- -------------------------------------------------------- --------- ---------
<S> <C> <C>
Trading account profits and fees - as reported $1,495 $ 171
Net interest income 662 608
- -------------------------------------------------------- ------ ------
Total trading-related revenue $2,157 $ 779
- -------------------------------------------------------- ------ ------
Trading-related revenue by product
Foreign exchange contracts $ 570 $ 617
Interest rate contracts 533 172
Fixed income 499 (256)
Equities 503 184
Commodities and other 52 62
- -------------------------------------------------------- ------ ------
Total trading-related revenue $2,157 $ 779
======================================================== ====== ======
</TABLE>
69
<PAGE>
Trading Account Assets and Liabilities
The fair value of the components of trading account assets and liabilities
at December 31, 1999 and 1998 and the average fair value for the years ended
December 31, 1999 and 1998 were:
<TABLE>
<CAPTION>
Fair Value Average Fair Value
-------------------- -------------------
(Dollars in millions) 1999 1998 1999 1998
- -------------------------------------------------------------------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Trading account assets
U.S. Treasury securities $ 6,793 $ 7,854 $ 6,492 $ 9,802
Securities of other U.S. Government agencies and corporations 3,554 524 1,589 841
Certificates of deposit, bankers' acceptances and commercial paper 3,039 2,723 2,637 2,746
Corporate debt 2,993 1,666 2,246 2,428
Foreign sovereign debt 9,532 11,774 11,070 13,241
Mortgage-backed securities 6,748 7,489 8,039 4,802
Equity securities 2,856 4,476 4,599 1,970
Other securities 2,945 3,096 2,534 3,944
- -------------------------------------------------------------------- ------- ------- ------- -------
Total $38,460 $39,602 $39,206 $39,774
==================================================================== ======= ======= ======= =======
Trading account liabilities
U.S. Treasury securities $ 8,414 $ 8,534 $ 5,761 $ 8,538
Corporate debt -- 82 -- 833
Foreign sovereign debt 3,490 3,166 2,679 3,192
Equity securities 7,840 1,481 5,710 459
Other securities 1,214 907 1,308 4,450
- -------------------------------------------------------------------- ------- ------- ------- -------
Total $20,958 $14,170 $15,458 $17,472
==================================================================== ======= ======= ======= =======
</TABLE>
The net change in the valuation allowance for unrealized gains or losses
related to trading account assets held at December 31, 1999 and 1998 was
included in the income statement as trading account profits and fees and
amounted to gains of $2.6 billion and $1.7 billion for 1999 and 1998,
respectively.
See Note Eleven on page 79 for additional information on derivative-dealer
positions, including credit risk.
70
<PAGE>
Note Five - Loans and Leases
Loans and leases at December 31, 1999 and 1998 were:
<TABLE>
<CAPTION>
1999 1998
--------------------- ----------------------
(Dollars in millions) Amount Percent Amount Percent
- ----------------------------------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Commercial - domestic $143,450 38.7% $137,422 38.5%
Commercial - foreign 27,978 7.5 31,495 8.8
Commercial real estate - domestic 24,026 6.5 26,912 7.5
Commercial real estate - foreign 325 .1 301 .1
- ----------------------------------- -------- ----- -------- -----
Total commercial 195,779 52.8 196,130 54.9
- ----------------------------------- -------- ----- -------- -----
Residential mortgage 81,860 22.1 73,608 20.6
Home equity lines 17,273 4.7 15,653 4.4
Direct/Indirect consumer 42,161 11.4 40,510 11.3
Consumer finance 22,326 6.0 15,400 4.3
Bankcard 9,019 2.4 12,425 3.5
Foreign consumer 2,244 .6 3,602 1.0
- ----------------------------------- -------- ----- -------- -----
Total consumer 174,883 47.2 161,198 45.1
- ----------------------------------- -------- ----- -------- -----
Total loans and leases $370,662 100.0% $357,328 100.0%
=================================== ======== ===== ======== =====
</TABLE>
The following table presents the recorded investment in specific loans
that were considered individually impaired in accordance with SFAS 114 at
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
(Dollars in millions) 1999 1998
- ------------------------------------- --------- --------
<S> <C> <C>
Commercial - domestic $1,133 $ 796
Commercial - foreign 503 314
Commercial real estate - domestic 449 554
- ------------------------------------- ------ ------
Total impaired loans $2,085 $1,664
===================================== ====== ======
</TABLE>
The average recorded investment in certain impaired loans for the years
ended December 31, 1999, 1998 and 1997 was approximately $2.0 billion, $1.6
billion and $1.4 billion, respectively. At December 31, 1999 and 1998, the
recorded investment on impaired loans requiring an allowance for credit losses
was $1.1 billion and $876 million, and the related allowance for credit losses
was $370 million and $326 million, respectively. For the years ended December
31, 1999, 1998 and 1997, interest income recognized on impaired loans totaled
$84 million, $50 million and $80 million, respectively, all of which was
recognized on a cash basis.
At December 31, 1999, 1998 and 1997, nonperforming loans, including
certain loans which were considered impaired, totaled $3.0 billion, $2.5
billion and $2.1 billion, respectively. The net amount of interest recorded
during each year on loans that were classified as nonperforming or restructured
at December 31, 1999, 1998 and 1997 was $123 million in 1999 and $130 million
in both 1998 and 1997. If these loans had been accruing interest at their
originally contracted rates, related income would have been $419 million, $367
million and $349 million in 1999, 1998 and 1997, respectively.
Foreclosed properties amounted to $163 million, $282 million and $309
million at December 31, 1999, 1998 and 1997, respectively. The cost of carrying
foreclosed properties amounted to $13 million, $16 million and $26 million in
1999, 1998 and 1997, respectively.
71
<PAGE>
Note Six - Allowance for Credit Losses
The table below summarizes the changes in the allowance for credit losses
on loans and leases for 1999, 1998 and 1997:
<TABLE>
<CAPTION>
(Dollars in millions) 1999 1998 1997
- ------------------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
Balance, January 1 $ 7,122 $ 6,778 $ 6,316
- ------------------------------------------------------------- ------- ------- -------
Loans and leases charged off (2,582) (3,050) (2,603)
Recoveries of loans and leases previously charged off 582 583 751
- ------------------------------------------------------------- ------- ------- -------
Net charge-offs (2,000) (2,467) (1,852)
- ------------------------------------------------------------- ------- ------- -------
Provision for credit losses 1,820 2,920 1,904
Other, net (114) (109) 410
- ------------------------------------------------------------- ------- ------- -------
Balance, December 31 $ 6,828 $ 7,122 $ 6,778
============================================================= ======= ======= =======
</TABLE>
Note Seven - Deposits
At December 31, 1999, the Corporation had domestic certificates of deposit
of $100 thousand or greater totaling $32.7 billion compared to $27.3 billion at
December 31, 1998. The Corporation had $19.6 billion of domestic certificates
of deposit maturing within three months, $5.5 billion maturing within three to
six months, $4.0 billion maturing within six to twelve months and $3.6 billion
maturing after twelve months at December 31, 1999. The Corporation had other
domestic time deposits of $100 thousand or greater totaling $843 million and
$887 million at December 31, 1999 and 1998, respectively. At December 31, 1999,
the Corporation had $197 million of other domestic time deposits maturing
within three months, $103 million maturing within three to six months, $116
million maturing within six to twelve months and $427 million maturing after
twelve months. Foreign office certificates of deposit and other time deposits
of $100 thousand or greater totaled $43.3 billion and $40.8 billion at December
31, 1999 and 1998, respectively.
At December 31, 1999, the scheduled maturities for time deposits were as
follows:
<TABLE>
<CAPTION>
(Dollars in millions)
- -----------------------
<S> <C>
Due in 2000 $111,342
Due in 2001 9,361
Due in 2002 3,636
Due in 2003 933
Due in 2004 934
Thereafter 2,020
- ----------------------- --------
Total $128,226
======================= ========
</TABLE>
72
<PAGE>
Note Eight - Short-Term Borrowings and Long-Term Debt
The contractual maturities of long-term debt at December 31, 1999 and 1998
were:
<TABLE>
<CAPTION>
1999
-----------------------------------------------
Various Various
Fixed-Rate Floating-Rate 1998
Debt Debt Amount Amount
(Dollars in millions) Obligations(1) Obligations(1) Outstanding Outstanding
- ---------------------------------------------------------- ---------------- ---------------- ------------- ------------
<S> <C> <C> <C> <C>
Parent company
Senior debt:
Due in 1999 $ -- $ -- $ -- $ 2,628
Due in 2000 488 1,725 2,213 2,213
Due in 2001 671 3,430 4,101 4,001
Due in 2002 130 2,932 3,062 2,285
Due in 2003 499 2,073 2,572 2,578
Due in 2004 -- 3,822 3,822 1,290
Thereafter 320 4,344 4,664 2,775
- ---------------------------------------------------------- ------- ------- ------- -------
2,108 18,326 20,434 17,770
- ---------------------------------------------------------- ------- ------- ------- -------
Subordinated debt:
Due in 1999 -- -- -- 680
Due in 2000 411 -- 411 411
Due in 2001 1,312 30 1,342 1,342
Due in 2002 2,199 26 2,225 2,225
Due in 2003 1,711 323 2,034 2,034
Due in 2004 800 -- 800 1,000
Thereafter 5,146 3,470 8,616 8,249
- ---------------------------------------------------------- ------- ------- ------- -------
11,579 3,849 15,428 15,941
- ---------------------------------------------------------- ------- ------- ------- -------
Total parent company long-term debt 13,687 22,175 35,862 33,711
- ---------------------------------------------------------- ------- ------- ------- -------
Bank and other subsidiaries
Senior debt:
Due in 1999 -- -- -- 4,011
Due in 2000 47 7,627 7,674 4,558
Due in 2001 48 3,919 3,967 1,297
Due in 2002 96 2,200 2,296 393
Due in 2003 498 253 751 702
Due in 2004 833 3,140 3,973 11
Thereafter 106 94 200 166
- ---------------------------------------------------------- ------- ------- ------- -------
1,628 17,233 18,861 11,138
- ---------------------------------------------------------- ------- ------- ------- -------
Subordinated debt:
Due in 1999 -- -- -- --
Due in 2000 -- -- -- --
Due in 2001 200 -- 200 227
Due in 2002 -- -- -- --
Due in 2003 100 -- 100 104
Due in 2004 300 -- 300 300
Thereafter -- 8 8 8
- ---------------------------------------------------------- ------- ------- ------- -------
600 8 608 639
- ---------------------------------------------------------- ------- ------- ------- -------
Total bank and other subsidiaries long-term debt 2,228 17,241 19,469 11,777
- ---------------------------------------------------------- ------- ------- ------- -------
Total parent company, bank and other
subsidiaries long-term debt $15,915 $39,416 55,331 45,488
- ---------------------------------------------------------- ------- ------- ------- -------
Notes payable to finance the purchase of leased vehicles 54 279
Obligations under capital leases 101 121
- ---------------------------------------------------------- ------- -------
Total long-term debt $55,486 $45,888
========================================================== ======= =======
</TABLE>
(1) Fixed-rate and floating-rate classifications of long-term debt include the
effect of interest rate swap contracts.
73
<PAGE>
The majority of the floating rates are based on three- and six-month
London InterBank Offered Rates (LIBOR). At December 31, 1999, the interest
rates on floating-rate long-term debt, as classified in the table on the
previous page, ranged from 5.38 percent to 8.12 percent compared to 4.75
percent to 7.07 percent at December 31, 1998. These obligations were
denominated primarily in U.S. dollars. The interest rates on fixed-rate
long-term debt ranged from 4.50 percent to 12.50 percent at December 31, 1999
and 1998.
In 1999, all commercial paper back-up lines of credit expired or were
terminated at the option of the Corporation. At December 31, 1998, the
Corporation had commercial paper back-up lines of credit totaling $2.7 billion,
of which there were no amounts outstanding.
The Corporation had the authority to issue approximately $19.3 billion and
$9.4 billion of corporate debt and other securities under its existing shelf
registration statements at December 31, 1999 and 1998, respectively.
The 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 the 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. The Corporation uses foreign
currency contracts to convert certain foreign-denominated debt into U.S.
dollars. The Corporation's notes outstanding under this program totaled $4.5
billion and $3.7 billion at December 31, 1999 and 1998, respectively. At
December 31, 1999 and 1998, $3.3 billion and $3.5 billion, respectively, of
notes were outstanding under the former BankAmerica Euro medium-term note
program, which was terminated in connection with the Merger.
Bank of America, N.A. maintains a program to offer up to $35.0 billion of
bank notes from time to time with fixed- or floating-rates and maturities
ranging from seven days or more from date of issue. Bank of America N.A.'s
long-term debt under the current and former programs totaled $10.1 billion and
$7.9 billion at December 31, 1999 and 1998, respectively. At December 31, 1999,
short-term bank notes outstanding totaled $15.2 billion. At December 31, 1998,
short-term bank notes outstanding under current and former programs totaled
$14.7 billion. 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.
Through a limited purpose subsidiary, the Corporation had $4.0 billion and
$2.5 billion of mortgage-backed bonds outstanding at December 31, 1999 and
1998, respectively. These bonds were collateralized by $6.8 billion and $4.0
billion of mortgage loans and cash at December 31, 1999 and 1998, respectively.
As part of its interest rate risk management activities, the Corporation
enters into interest rate contracts for certain long-term debt issuances. At
December 31, 1999 and 1998, through the use of interest rate swaps, $13.3
billion and $8.8 billion of fixed-rate debt with rates ranging primarily from
5.30 percent to 8.57 percent, had been effectively converted to floating rates
primarily at spreads to LIBOR.
Through the use of interest rate options, the Corporation has the right to
purchase interest rate caps to hedge its risk on floating-rate debt against a
rise in interest rates. At December 31, 1999, the interest rate options had a
notional amount of approximately $1.6 billion compared to $3.4 billion at
December 31, 1998. In addition, the Corporation entered into other interest
rate contracts, primarily futures, with notional amounts of approximately $802
million at December 31, 1998, to reduce its interest rate risk by shortening
the repricing profile on floating-rate debt that reprices within one year.
There were no such other interest rate contracts at December 31, 1999.
Including the effects of interest rate contracts for certain long-term
debt issuances, the weighted average effective interest rates for total
long-term debt, total fixed-rate debt and total floating-rate debt (based on
the rates in effect at December 31, 1999) were 6.60 percent, 7.54 percent and
6.23 percent, respectively, at December 31, 1999 and (based on the rates in
effect at December 31, 1998) were 6.11 percent, 7.73 percent, and 5.24 percent,
respectively, at December 31, 1998. These obligations were denominated
primarily in U.S. dollars.
74
<PAGE>
As described below, certain debt obligations outstanding at December 31,
1999 may be redeemed prior to maturity at the option of the Corporation:
<TABLE>
<CAPTION>
Amount
Outstanding
Year Redeemable Year of Maturities (Dollars in millions)
- ------------------------ -------------------- ----------------------
<S> <C> <C>
Currently Redeemable 2001 - 2027 $ 765
2000 2001 - 2011 1,593
2001 - 2002 2003 - 2028 1,530
2003 - 2008 2005 - 2028 675
======================== ==================== ======
</TABLE>
Note Nine - Trust Preferred Securities
Trust preferred securities are Corporation obligated mandatorily
redeemable preferred securities of subsidiary trusts holding solely junior
subordinated deferrable interest notes of the Corporation.
Since October 1996, the Corporation has formed thirteen wholly-owned
grantor trusts to issue trust preferred securities to the public. The grantor
trusts have invested the proceeds of such trust preferred securities in junior
subordinated notes of the Corporation. Certain of the trust preferred
securities were issued at a discount. Such trust preferred securities may be
redeemed prior to maturity at the option of the Corporation. The sole assets of
each of the grantor trusts are the Junior Subordinated Deferrable Interest
Notes of the Corporation (the Notes) held by such grantor trusts. Each issue of
the Notes has an interest rate equal to the corresponding trust preferred
securities distribution rate. The Corporation has the right to defer payment of
interest on the Notes at any time or from time to time for a period not
exceeding five years provided that no extension period may extend beyond the
stated maturity of the relevant Notes. During any such extension period,
distributions on the trust preferred securities will also be deferred and the
Corporation's ability to pay dividends on its common and preferred stock will
be restricted.
The trust preferred securities are subject to mandatory redemption upon
repayment of the related Notes at their stated maturity dates or their earlier
redemption at a redemption price equal to their liquidation amount plus accrued
distributions to the date fixed for redemption and the premium, if any, paid by
the Corporation upon concurrent repayment of the related Notes.
Payment of periodic cash distributions and payment upon liquidation or
redemption with respect to trust preferred securities are guaranteed by the
Corporation to the extent of funds held by the grantor trusts (the Preferred
Securities Guarantee). The Preferred Securities Guarantee, when taken together
with the Corporation's other obligations, including its obligations under the
Notes, will constitute a full and unconditional guarantee, on a subordinated
basis, by the Corporation of payments due on the trust preferred securities.
The Corporation is required by the FRB to maintain certain levels of
capital for bank regulatory purposes. The FRB has determined that certain
cumulative preferred securities having the characteristics of trust preferred
securities qualify as minority interest, which is included in Tier 1 capital
for bank holding companies. Such Tier 1 capital treatment provides the
Corporation with a more cost-effective means of obtaining capital for bank
regulatory purposes than if the Corporation were to issue preferred stock.
75
<PAGE>
The following table is a summary of the outstanding trust preferred securities
and the Notes at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
Aggregate
Principal
Amount of
Trust Preferred
Securities Aggregate
------------------- Principal
Issuance December 31, 1999 Amount of
(Dollars in millions) Date and 1998 the Notes
- ------------------------- --------------- ------------------- -----------
<S> <C> <C> <C>
NationsBank
Capital Trust I December 1996 $ 600 $ 619
Capital Trust II December 1996 365 376
Capital Trust III February 1997 500 516
Capital Trust IV April 1997 500 516
BankAmerica
Institutional Capital A November 1996 450 464
Institutional Capital B November 1996 300 309
Capital I December 1996 300 309
Capital II December 1996 450 464
Capital III January 1997 400 412
Capital IV February 1998 350 361
Barnett
Capital I November 1996 300 309
Capital II December 1996 200 206
Capital III January 1997 250 258
Total $ 4,965(13) $5,119
========================= =========== ======
<CAPTION>
Per
Annum
Stated Interest Interest
Maturity of Rate of Payment Redemption
(Dollars in millions) the Notes the Notes Dates Period
- ------------------------- ------------------ --------------- ------------- -----------------------
<S> <C> <C> <C> <C>
NationsBank
Capital Trust I December 2026 7.84% 3/31,6/30, On or after
9/30,12/31 12/31/01(1)
Capital Trust II December 2026 7.83 6/15,12/15 On or after
12/15/06(2,4)
Capital Trust III January 2027 3-mo. LIBOR 1/15,4/15, On or after
+55 bps 7/15,10/15 1/15/07(2)
Capital Trust IV April 2027 8.25 4/15,10/15 On or after
4/15/07(2,6)
BankAmerica
Institutional Capital A December 2026 8.07 6/30,12/31 On or after
12/31/06(3,7)
Institutional Capital B December 2026 7.70 6/30,12/31 On or after
12/31/06(3,8)
Capital I December 2026(9) 7.75 3/31,6/30, On or after
9/30,12/31 12/20/01(5)
Capital II December 2026 8.00 6/15,12/15 On or after
12/15/06(3,10)
Capital III January 2027 3-mo. LIBOR 1/15,4/15, On or after
+57 bps 7/15,10/15 1/15/02(3)
Capital IV March 2028 7.00 3/31,6/30, On or after
9/30,12/31 2/24/03(3)
Barnett
Capital I December 2026 8.06 6/1,12/1 On or after
12/1/06(2,11)
Capital II December 2026 7.95 6/1,12/1 On or after
12/1/06(2,12)
Capital III February 2027 3-mo. LIBOR 2/1,5/1, On or after
+62.5 bps 8/1,11/1 2/1/07(2)
--------- ---------- ----------------
Total
=========================
</TABLE>
(1) The Corporation may redeem the Notes prior to the indicated redemption
period upon the occurrence of certain events relating to tax treatment of
the related trust or the Notes, at a redemption price at least equal to
the principal amount of the Notes.
(2) The Corporation may redeem the Notes prior to the indicated redemption
period upon the occurrence of certain events relating to tax treatment of
the related trust or the Notes or relating to capital treatment of the
trust preferred securities or relating to a change in the treatment of the
related trust under the Investment Company Act of 1940, as amended, at a
redemption price at least equal to the principal amount of the Notes.
(3) The Corporation may redeem the Notes prior to the indicated redemption
period upon the occurrence of certain events relating to tax treatment of
the related trust or the Notes or relating to capital treatment of the
trust preferred securities at a redemption price at least equal to the
principal amount of the Notes.
(4) The Notes may be redeemed on or after December 15, 2006 and prior to
December 15, 2007 at 103.915% of the principal amount, and thereafter at
prices declining to 100% on December 15, 2016 and thereafter.
(5) The Corporation may redeem the Notes (i) during the indicated redemption
period or (ii) upon the occurrence of certain events relating to tax
treatment of the trust or the Notes or relating to capital treatment of
the trust preferred securities, prior to the indicated redemption period,
in each case, at a redemption price of 100% of the principal amount.
(6) The Notes may be redeemed on or after April 15, 2007 and prior to April 14,
2008 at 103.85% of the principal amount, and thereafter at prices
declining to 100% on April 15, 2017 and thereafter.
(7) The Notes may be redeemed on or after December 31, 2006 and prior to
December 31, 2007 at 104.0350% of the principal amount, and thereafter at
prices declining to 100% on December 31, 2016 and thereafter.
(8) The Notes may be redeemed on or after December 31, 2006 and prior to
December 31, 2007 at 103.7785% of the principal amount, and thereafter at
prices declining to 100% on December 31, 2016 and thereafter.
(9) At the option of the Corporation, the stated maturity may be shortened to a
date not earlier than December 20, 2001 or extended to a date not later
than December 31, 2045, in each case if certain conditions are met.
(10) The Notes may be redeemed on or after December 15, 2006 and prior to
December 15, 2007 at 103.9690% of the principal amount, and thereafter at
prices declining to 100% on December 15, 2016 and thereafter.
(11) The Notes may be redeemed on or after December 1, 2006 and prior to
December 1, 2007 at 104.030% of the principal amount, and thereafter at
prices declining to 100% on December 1, 2016 and thereafter.
(12) The Notes may be redeemed on or after December 1, 2006 and prior to
December 1, 2007 at 103.975% of the principal amount, and thereafter at
prices declining to 100% on December 1, 2016 and thereafter.
(13) Excludes $10 and $11 of deferred issuance costs and unamortized discount
at December 31, 1999 and 1998, respectively.
76
<PAGE>
Note Ten - 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. In 1999, the Corporation repurchased 78
million shares of its common stock in open market repurchases and under
accelerated share repurchase programs at an average per-share price of $62.28,
which reduced shareholders' equity by $4.9 billion. The remaining buyback
authority for common stock under the current program totaled $5.1 billion or 52
million shares at December 31, 1999. In 1998 and 1997, the Corporation also
repurchased 29 million shares and 150 million shares, respectively, of common
stock under various stock repurchase programs.
In October 1999, the Board of Directors of the Corporation raised the
common dividend for the fourth quarter of 1999 by 11 percent to $0.50 per share
from $0.45 per share.
Other shareholders' equity consisted of restricted stock award plan
deferred compensation of $340 million and $74 million, as well as a loan to the
ESOP trust of $47 million and $58 million at December 31, 1999 and 1998,
respectively. At December 31, 1999, other shareholders' equity reflected $48
million of premiums received on written put options.
On June 29, 1998, BankAmerica redeemed all of its remaining outstanding
nonconvertible preferred shares. The Corporation's Preferred Stock at December
31, 1997, included BankAmerica's outstanding preferred stock of $614 million.
These preferred shares were nonvoting except in certain limited circumstances.
The shares were redeemable at the option of BankAmerica during the redemption
period and at the redemption price per share plus accrued and unpaid dividends
to the redemption date. During 1997, BankAmerica redeemed a portion of its
preferred shares for an aggregate of $1.6 billion.
In April 1988, BankAmerica declared a dividend of one preferred share
purchase right (a Right) for each outstanding share of BankAmerica's common
stock pursuant to the Rights Agreement dated April 11, 1988 between BankAmerica
and Manufacturers Hanover Trust Company of California, as rights agent (the
Rights Agreement). Each Right entitled the holder, upon the occurrence of
certain events, to buy from BankAmerica, until the earlier of April 22, 1998 or
the redemption of the Rights, one two-hundredth of a share of Cumulative
Participating Preferred Stock, Series E, at an exercise price of $25.00 per
Right (subject to adjustment). On April 22, 1998, the Rights Agreement expired
in accordance with its terms.
As of December 31, 1999, the Corporation had 1.8 million shares issued and
outstanding of employee stock ownership plan (ESOP) Convertible Preferred
Stock, Series C (ESOP Preferred Stock). The ESOP Preferred Stock has a stated
and liquidation value of $42.50 per share, provides for an annual cumulative
dividend of $3.30 per share and each share is convertible into 1.68 shares of
the Corporation's common stock. ESOP Preferred Stock in the amounts of $6
million, $11 million and $86 million was converted into the Corporation's
common stock in 1999, 1998 and 1997, respectively.
In November 1989, Barnett incorporated ESOP provisions into its existing
401(k) employee benefit plan (Barnett ESOP). The Barnett ESOP acquired $141
million of common stock using the proceeds of a loan from the Corporation. The
terms of the loan include equal monthly payments of principal and interest
through September 2015. Interest is at 9.75 percent and prepayments of
principal are allowed. The loan is generally being repaid from contributions to
the plan by the Corporation and dividends on unallocated shares held by the
Barnett ESOP. Shares held by the Barnett ESOP are allocated to plan
participants as the loan is repaid. At December 31, 1999, 2.4 million shares of
unallocated common stock remained in the Barnett ESOP. During 1999, 1998 and
1997, the Barnett ESOP released and allocated common stock amounting to $15
million, $6 million and $8 million, respectively.
As consideration in the merger of NationsBank, N.A. (South) and
NationsBank, N.A. during 1997, NationsBank, N.A. exchanged approximately $73
million for preferred stock issued by NationsBank, N.A. (South) in the 1996
acquisition of Citizens Federal Bank, a federal savings bank. Such preferred
stock consisted of approximately 0.5 million shares of NationsBank, N.A.
(South) 8.50% Series H Noncumulative Preferred Stock and approximately 2.4
million shares of NationsBank, N.A. (South) 8.75% Series 1993A Noncumulative
Preferred Stock.
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
77
<PAGE>
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.
The calculation of earnings per common share and diluted earnings per
common share for 1999, 1998 and 1997 is presented below:
<TABLE>
<CAPTION>
(Shares in thousands; dollars in millions, except per share information) 1999 1998 1997
- -------------------------------------------------------------------------- ---------------- ------------- -------------
<S> <C> <C> <C>
Earnings per common share
Net income $ 7,882 $ 5,165 $ 6,542
Preferred stock dividends (6) (25) (111)
- -------------------------------------------------------------------------- ------------ ---------- ----------
Net income available to common shareholders $ 7,876 $ 5,140 $ 6,431
- -------------------------------------------------------------------------- ----------- ---------- ----------
Average common shares issued and outstanding 1,726,006 1,732,057 1,733,194
- -------------------------------------------------------------------------- ----------- ---------- ----------
Earnings per common share $ 4.56 $ 2.97 $ 3.71
========================================================================== =========== ========== ==========
Diluted earnings per common share
Net income available to common shareholders $ 7,876 $ 5,140 $ 6,431
- -------------------------------------------------------------------------- ----------- ---------- ----------
Preferred stock dividends 6 25 111
Preferred stock dividends on nonconvertible stock -- (19) (104)
- -------------------------------------------------------------------------- ----------- ---------- ----------
Effect of assumed conversions 6 6 7
- -------------------------------------------------------------------------- ----------- ---------- ----------
Net income available to common shareholders and assumed
conversions $ 7,882 $ 5,146 $ 6,438
- -------------------------------------------------------------------------- ----------- ---------- ----------
Average common shares issued and outstanding 1,726,006 1,732,057 1,733,194
- -------------------------------------------------------------------------- ----------- ---------- ----------
Incremental shares from assumed conversions:
Convertible preferred stock 3,006 3,290 3,736
Stock options 31,046 40,413 45,242
- -------------------------------------------------------------------------- ----------- ---------- ----------
Dilutive potential common shares 34,052 43,703 48,978
- -------------------------------------------------------------------------- ----------- ---------- ----------
Total dilutive average common shares issued and outstanding 1,760,058 1,775,760 1,782,172
- -------------------------------------------------------------------------- ----------- ---------- ----------
Diluted earnings per common share $ 4.48 $ 2.90 $ 3.61
========================================================================== =========== ========== ==========
</TABLE>
78
<PAGE>
Note Eleven - Commitments and Contingencies
In the normal course of business, the Corporation enters into a number of
off-balance sheet commitments. These commitments expose the Corporation to
varying degrees of credit and market risk and are subject to the same credit
and risk limitation reviews as those recorded on the balance sheet.
Credit Extension Commitments
The Corporation enters into commitments to extend credit, standby letters
of credit (SBLC) 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 summarizes outstanding commitments to extend credit
at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
(Dollars in millions) 1999 1998
- ---------------------------------------------------- ---------- ----------
<S> <C> <C>
Credit card commitments $ 67,394 $ 67,018
Other loan commitments 246,827 234,453
Standby letters of credit and financial guarantees 32,993 33,311
Commercial letters of credit 3,690 3,035
==================================================== ======== ========
</TABLE>
Commitments to extend credit are legally binding, generally have specified
rates and maturities and are for specified purposes. The Corporation manages
the credit risk on these commitments by subjecting these commitments to normal
credit approval and monitoring processes and protecting against deterioration
in the borrowers' ability to pay through adverse-change clauses which require
borrowers to maintain various credit and liquidity measures. At December 31,
1999 and 1998, there were no unfunded commitments to any industry or country
greater than 10 percent of total unfunded commitments to lend. Credit card
lines are unsecured commitments, which are reviewed at least annually by
management. Upon evaluation of the customers' creditworthiness, the Corporation
has the right to terminate or change the terms of the credit card lines. Of the
December 31, 1999 other loan commitments, $94.1 billion is scheduled to expire
in less than one year, $105.2 billion in one to five years and $47.5 billion
after five years.
SBLC and financial guarantees are issued to support the debt obligations
of customers. If an SBLC or financial guarantee is drawn upon, the Corporation
looks to its customer for payment. SBLCs and financial guarantees are subject
to the same approval and collateral policies as other extensions of credit. At
December 31, 1999, substantially all of the SBLCs and financial guarantees are
scheduled to expire in less than one year.
Commercial letters of credit, issued primarily to facilitate customer
trade finance activities, are collateralized by the underlying goods being
shipped by the customer and are generally short-term.
For each of these types of instruments, the Corporation's maximum exposure
to credit loss is represented by the contractual amount of these instruments.
Many of the commitments are collateralized or are expected to expire without
being drawn upon; therefore, the total commitment amounts do not necessarily
represent risk of loss or future cash requirements.
Derivatives
Derivatives utilized by the Corporation include swaps, financial futures
and forward settlement contracts and option contracts. A swap agreement is a
contract between two parties to exchange cash flows based on specified
underlying notional amounts, assets and/or indices. Financial futures and
forward settlement contracts are agreements to buy or sell a quantity of a
financial instrument, index, currency or commodity at a predetermined future
date and rate or price. An option contract is an agreement that conveys to the
purchaser the right, but not the obligation, to buy or sell a quantity of a
financial instrument, index, currency or commodity at a predetermined rate or
price at a time or during a period in the future. These option agreements can
be transacted on organized exchanges or directly between parties.
Credit Risk Associated with Derivative Activities
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. In managing
derivatives credit risk, both
79
<PAGE>
the current exposure, which is the replacement cost of contracts on the
measurement date, as well as an estimate of the potential change in value of
contracts over their remaining lives are considered. In managing credit risk
associated with its derivative activities, the Corporation deals primarily with
U.S. and foreign commercial banks, broker-dealers and corporates.
During 1999, 1998 and 1997, there were no significant credit losses
associated with derivative contracts. At December 31, 1999 and 1998, there were
no nonperforming derivative positions that were material to the Corporation. To
minimize credit risk, the Corporation enters into legally enforceable master
netting agreements, which reduce risk by permitting the close out and netting
of transactions with the same counterparty upon the occurrence of certain
events.
A portion of the derivative-dealer activity involves exchange-traded
instruments. Because exchange-traded instruments conform to standard terms and
are subject to policies set by the exchange involved, including counterparty
approval, margin requirements and security deposit requirements, the credit
risk is minimal.
The following table presents the notional or contract amounts at December
31, 1999 and 1998 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. 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. 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.
Derivative-Dealer Positions
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
------------------------ -----------------------
Contract/ Credit Contract/ Credit
(Dollars in millions) Notional Risk Notional Risk
- --------------------------------------- ------------- ---------- ------------- ---------
<S> <C> <C> <C> <C>
Interest rate contracts
Swaps $2,597,886 $ 5,691 $1,584,317 $ 6,377
Futures and forwards 644,795 58 809,231 290
Written options 560,070 -- 496,570 --
Purchased options 638,517 1,747 640,703 2,492
Foreign exchange contracts
Swaps 55,278 1,058 40,069 1,443
Spot, futures and forwards 537,719 3,298 623,977 5,136
Written options 28,450 -- 56,287 --
Purchased options 26,820 424 53,426 703
Commodity and other contracts
Swaps 13,078 1,232 5,685 370
Futures and forwards 22,496 41 5,292 --
Written options 28,868 -- 22,382 --
Purchased options 32,216 4,890 22,134 989
Credit derivatives 19,028 70 16,943 62
- --------------------------------------- ---------- ------- ---------- -------
Total before cross-product netting 18,509 17,862
Cross-product netting 2,454 1,462
- --------------------------------------- ------- -------
Net replacement cost $16,055 $16,400
======================================= ======= =======
</TABLE>
The table above includes both long and short derivative-dealer positions.
The average fair value of derivative-dealer assets for the years ended December
31, 1999 and 1998 was $16.0 billion and $14.3 billion, respectively. The
average fair value of derivative-dealer liabilities for the years ended
December 31, 1999 and 1998 was $16.5 billion and $13.3 billion, respectively.
The fair value of derivative-dealer assets at December 31, 1999 and 1998 was
$16.1 billion and $16.4 billion, respectively. The fair value of
derivative-dealer liabilities at December 31, 1999 and 1998 was $16.2 billion
and $16.8 billion, respectively. See Note Four on page 69 for a discussion of
trading-related revenue.
80
<PAGE>
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 December 31, 1999 and 1998 consisted of credit default swaps and
total return swaps.
Asset and Liability Management (ALM) Activities
Risk management interest rate contracts and foreign exchange contracts are
utilized in the Corporation's ALM process. Interest rate contracts, which are
generally non-leveraged generic interest rate and basis swaps, options and
futures, allow the Corporation to effectively manage its interest rate risk
position. Generic interest rate swaps involve the exchange of fixed-rate and
variable-rate interest payments based on the contractual underlying notional
amount. Basis swaps involve the exchange of interest payments based on the
contractual underlying notional amounts, where both the pay rate and the
receive rate are floating rates based on different indices. Option products
primarily consist of caps and floors. Interest rate caps and floors are
agreements where, for a fee, the purchaser obtains the right to receive
interest payments when a variable interest rate moves above or below a
specified cap or floor rate, respectively. Futures contracts used for ALM
activities are primarily index futures providing for cash payments based upon
the movements of an underlying rate index.
The Corporation uses foreign currency contracts to manage the foreign
exchange risk associated with certain foreign-denominated assets and
liabilities, as well as the Corporation's equity investments in foreign
subsidiaries. Foreign exchange contracts, which include spot, futures and
forward contracts, represent agreements to exchange the currency of one country
for the currency of another country at an agreed-upon price, on an agreed-upon
settlement date. Foreign exchange option contracts are similar to interest rate
option contracts except that they are based on currencies rather than interest
rates. Exposure to loss on these contracts will increase or decrease over their
respective lives as currency exchange and interest rates fluctuate.
The Corporation's credit risk exposure for exchange-traded instruments is
minimal as these instruments conform to standard terms and are subject to
policies set by the exchange involved, including counterparty approval, margin
requirements and security deposit requirements.
The following table outlines the notional amount and fair value of the
Corporation's open and closed ALM contracts at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
------------------------- ------------------------
Notional Fair Notional Fair
(Dollars in millions) Amount Value Amount Value
- -------------------------------------------- ---------- -------------- ---------- -------------
<S> <C> <C> <C> <C>
Open interest rate contracts
Receive fixed swaps $63,002 $(1,747) $60,450 $ 1,958
Pay fixed swaps 25,701 115 25,770 (1,006)
- -------------------------------------------- ------- ------- ------- -------
Net open receive fixed 37,301 (1,632) 34,680 952
Basis swaps 7,971 (6) 7,736 (10)
- -------------------------------------------- ------- ---------- ------- -------
Total net swap position 45,272 (1,638) 42,416 942
Option products 35,134 5 26,836 (46)
Futures and forwards 931 3 6,348 2
- -------------------------------------------- ------- --------- ------- -------
Total open interest rate contracts(1) (1,630) 898
============================================ ========= =======
Closed interest rate contracts
Swap positions 174 294
Option products 82 26
Futures and forwards (21) (1)
- -------------------------------------------- --------- ----------
Total closed interest rate contracts(2) 235 319
- -------------------------------------------- --------- ---------
Net interest rate contract position (1,395) 1,217
- -------------------------------------------- --------- ---------
Open foreign exchange contracts(1) 6,231 (30) 3,314 72
- -------------------------------------------- ------- --------- ------- ---------
Total ALM contracts $(1,425) $ 1,289
============================================ ========= =========
</TABLE>
(1) Fair value represents the net unrealized gains (losses) on open contracts.
(2) Represents the unamortized net realized deferred gains associated with
closed contracts.
81
<PAGE>
When Issued Securities
When issued securities are commitments to purchase or sell securities
during the time period between the announcement of a securities offering and
the issuance of those securities. 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
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 others. 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 Twelve - Regulatory Requirements and Restrictions
The Corporation's banking subsidiaries are required to maintain average
reserve balances with the FRB based on a percentage of certain deposits.
Average reserve balances held with the FRB to meet these requirements amounted
to $22 million and $288 million for 1999 and 1998, respectively.
The primary source of funds for cash distributions by the Corporation to
its shareholders is dividends received from its banking subsidiaries. The
subsidiary national banks can initiate aggregate dividend payments in 2000,
without prior regulatory approval, of $2.2 billion plus an additional amount
equal to their net profits for 2000, as defined by statute, up to the date of
any such dividend declaration. The amount of dividends that each subsidiary
bank may declare in a calendar year without approval by the Office of the
Comptroller of the Currency (OCC) is the bank's net profits for that year
combined with its net retained profits, as defined, for the preceding two
years.
Regulations also restrict banking subsidiaries in lending funds to
affiliates. At December 31, 1999 and 1998, the total amount which could be
loaned to the Corporation by its banking subsidiaries was approximately $5.6
billion. At December 31, 1999 and 1998, no loans to the Corporation from its
banking subsidiaries were outstanding.
The FRB, the OCC, the Federal Deposit Insurance Corporation and the Office
of Thrift Supervision (collectively, the Agencies) have issued regulatory
capital guidelines for U.S. banking organizations. Failure to meet the capital
requirements can initiate certain mandatory and discretionary actions by
regulators that could have a material effect on the Corporation's financial
statements. At December 31, 1999 and 1998, the Corporation and
82
<PAGE>
each of its banking subsidiaries were well capitalized under this regulatory
framework. There have been no conditions or events since December 31, 1999 that
management believes have changed either the Corporation's or its banking
subsidiaries' capital classifications.
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 FRB 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. At December 31, 1999 and 1998, the Corporation had no
subordinated debt that qualified as Tier 3 capital.
In accordance with the FRB's amendment to its capital adequacy guidelines
effective for periods beginning after December 31, 1997, the Corporation is now
required to include its broker/dealer subsidiary, Banc of America Securities
LLC, when calculating regulatory capital ratios. Previously, the Corporation
had been required to exclude the equity, assets and off-balance sheet exposures
of its broker/dealer subsidiary.
To meet minimum, adequately capitalized regulatory requirements, an
institution must maintain a Tier 1 Capital ratio of four percent and a Total
Capital ratio of eight percent. A well-capitalized institution must maintain a
Tier 1 Capital ratio of six percent and a Total Capital ratio of ten percent.
The risk-based capital rules have been further supplemented by a leverage
ratio, defined as Tier 1 capital divided by average total assets, after certain
adjustments. The leverage ratio guidelines establish a minimum of 100 to 200
basis points above three percent. Banking organizations must maintain a
leverage capital ratio of at least five percent to be classified as well
capitalized.
The valuation allowance for available-for-sale securities and marketable
equity securities included in shareholders' equity at December 31, 1999 and
1998 is excluded in the calculations of Tier 1 capital and Tier 1 leverage
ratios. Effective October 1, 1998, the risk-based capital guidelines were
changed to allow the inclusion of 45% of the pre-tax unrealized gains on equity
securities in the calculation of Tier 2 capital. This change in the risk-based
capital guidelines had an immaterial impact on the Corporation's Tier 2 and
Total Capital ratios.
On September 12, 1996, the Agencies amended their regulatory capital
guidelines to incorporate a measure for market risk. In accordance with the
amended guidelines, the Corporation and any of its banking subsidiaries with
significant trading activity, as defined in the amendment, must incorporate a
measure for market risk in their regulatory capital calculations effective for
reporting periods after January 1, 1998. The revised guidelines have not had a
material impact on the Corporation or its subsidiaries' regulatory capital
ratios or their well-capitalized status.
The following table presents the actual capital ratios and amounts and
minimum required capital amounts for the Corporation and Bank of America, N.A.
at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---------------------------------- ----------------------------------
Actual Actual
--------------------- Minimum --------------------- Minimum
(Dollars in millions) Ratio Amount Required(1) Ratio Amount Required(1)
- ----------------------------- ---------- ---------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Tier 1 Capital
Bank of America Corporation 7.35% $38,651 $21,025 7.06% $36,849 $20,866
Bank of America, N.A.(2) 7.78 38,616 19,844 7.72 19,317 10,007
Total Capital
Bank of America Corporation 10.88 57,192 42,050 10.94 57,055 41,733
Bank of America, N.A.(2) 10.91 54,132 39,688 10.27 25,691 20,014
Leverage
Bank of America Corporation 6.26 38,651 24,687 6.22 36,849 23,697
Bank of America, N.A.(2) 6.74 38,616 22,922 6.55 19,317 11,805
============================= ===== ======= ======= ===== ======= =======
</TABLE>
(1) Dollar amount required to meet the Agencies' guidelines for adequately
capitalized institutions.
(2) Bank of America, N.A.'s ratios and amounts for 1998 have not been restated
to reflect the impact of mergers as discussed in Note 2 of the
consolidated financial statements.
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<PAGE>
Note Thirteen - Employee Benefit Plans
Pension and Postretirement Plans
The Corporation sponsors noncontributory trusteed pension plans that cover
substantially all officers and employees. The plans provide defined benefits
based on an employee's compensation, age and years of service. It is the policy
of the Corporation to fund not less than the minimum funding amount required by
ERISA. Individually, BankAmerica, Barnett Banks and NationsBank each sponsored
defined benefit pension plans prior to each of the respective mergers of these
banks. The BankAmerica plan was a cash balance design plan, providing
participants with compensation credits, based on age and period of service,
applied at each pay period and a defined earnings rate on all participant
account balances in the plan. The NationsBank plan was amended to a cash
balance plan effective July 1, 1998 and provides a similar crediting basis for
all participants. The NationsBank plan allows participants to select from
various earnings measures, which are based on the returns of certain funds
managed by subsidiaries of the Corporation or common stock of the Corporation.
The participant selected earnings measures determine the earnings rate on the
individual participant account balances in the plan. In addition, a one time
opportunity to transfer certain assets from the company's savings plan to the
cash balance plan was extended to NationsBank plan participants. Assets with an
approximate fair value of $1.4 billion were transferred by plan participants.
The Barnett plan was amended to merge into the NationsBank plan and, effective
January 1, 1999, to provide the cash balance plan design feature to those
participants. The opportunity to transfer certain savings plan assets to the
cash balance plan was extended to Barnett participants in 1999. Assets with an
approximate fair value of $133 million, were transferred by plan participants.
The BankAmerica and NationsBank plans were merged effective December 31, 1998.
However, the participants in each plan will retain the cash balance plan design
followed by their predecessor plans until the plan is amended in 2000. The
opportunity to transfer certain savings plan assets to the cash balance plan
will be extended to BankAmerica participants in 2000.
In addition to retirement pension benefits, substantially all employees
may become eligible to continue participation as retirees in health care and/or
life insurance plans sponsored by the Corporation. Based on the other
provisions of the individual plans, certain retirees may also have the cost of
these benefits partially paid by the Corporation.
84
<PAGE>
The following tables summarize the balances and changes in fair value of
plan assets and benefit obligations as of and for the years ended December 31,
1999 and 1998:
<TABLE>
<CAPTION>
Postretirement
Pension Plan Health and Life Plans
------------------------- -------------------------
(Dollars in millions) 1999 1998 1999 1998
- -------------------------------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Change in fair value of plan assets
(Primarily listed stocks, fixed income and real estate)
Fair value at January 1 $7,660 $5,725 $ 187 $ 164
Actual return on plan assets 809 890 16 24
Company contributions -- -- 65 65
Plan participant contributions -- -- 33 28
Acquisition/transfer 141 1,429 -- --
Benefits paid (547) (384) (99) (94)
- -------------------------------------------------------- ------ ------ ----- -----
Fair value at December 31 $8,063 $7,660 $ 202 $ 187
======================================================== ====== ====== ===== =====
Change in benefit obligation
Benefit obligation at January 1 $6,377 $4,692 $ 882 $ 930
Service cost 115 144 12 10
Interest cost 433 371 58 61
Plan participant contributions -- -- 33 28
Plan amendments 106 95 (2) 16
Actuarial loss (gain) (380) (66) (48) (67)
Acquisition/transfer 148 1,539 -- --
Effect of curtailments -- (14) -- (2)
Benefits paid (547) (384) (99) (94)
- -------------------------------------------------------- ------ ------ ------- -------
Benefit obligation at December 31 $6,252 $6,377 $ 836 $ 882
======================================================== ====== ====== ======= =======
Funded status
Overfunded (unfunded) status at December 31 $1,811 $1,283 $(634) $(695)
Unrecognized net actuarial gain (600) (132) (87) (96)
Unrecognized transition obligation (asset) (6) (9) 439 473
Unrecognized prior service cost 195 108 12 13
- -------------------------------------------------------- ------- ------- ------- -------
Prepaid (accrued) benefit cost $1,400 $1,250 $(270) $(305)
======================================================== ======= ======= ======= =======
</TABLE>
Prepaid and accrued benefit costs are reflected in other assets and other
liabilities, respectively, in the consolidated balance sheet.
The following are the weighted average discount rate, expected return on
plan assets and rate of increase in future compensation assumptions used in
determining the actuarial present value of the benefit obligation.
<TABLE>
<CAPTION>
Postretirement
Pension Plan Health and Life Plans
----------------------- ---------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Weighted average assumptions at December 31
Discount rate 7.50% 7.00% 7.50% 7.00%
Expected return on plan assets 10.00 10.00 10.00 10.00
Rate of compensation increase 4.00 4.00 N/A N/A
============================================ ===== ===== ===== =====
</TABLE>
85
<PAGE>
Net periodic pension benefit cost (income) for the years ended December
31, 1999, 1998 and 1997, included the following components:
<TABLE>
<CAPTION>
(Dollars in millions) 1999 1998 1997
- --------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Components of net periodic pension benefit cost (income)
Service cost $ 115 $ 144 $ 122
Interest cost 433 371 320
Expected return on plan assets (713) (552) (434)
Amortization of transition asset (4) (3) (3)
Amortization of prior service cost 20 (2) (10)
Recognized net actuarial loss -- 16 16
Recognized gain due to settlements and curtailments -- (2) --
- --------------------------------------------------------- ------- -------- -------
Net periodic pension benefit cost (income) $(149) $ (28) $ 11
========================================================= ======= ======= =======
</TABLE>
The Corporation uses the market valuation method to recognize pension
plan-related market gains and losses. This method recognizes 60 percent of the
market gains or losses in the first year, with the remaining 40 percent spread
equally over the next four years.
In addition to the trusteed pension plan, the Corporation sponsors a
number of unfunded executive pension plans. The total benefit obligation for
these plans as of December 31, 1999 and 1998 was $535 million and $386 million,
respectively. The net periodic pension expense for these plans in 1999, 1998
and 1997 totaled $58 million, $49 million and $46 million, respectively.
For the years ended December 31, 1999, 1998 and 1997, net periodic
postretirement benefit expense included the following components:
<TABLE>
<CAPTION>
(Dollars in millions) 1999 1998 1997
- ------------------------------------------------------- -------- ----------- ----------
<S> <C> <C> <C>
Components of net periodic postretirement benefit cost
Service cost $ 12 $ 10 $ 9
Interest cost 58 61 62
Expected return on plan assets (19) (14) (12)
Amortization of transition asset 34 34 34
Amortization of prior service cost -- (1) (2)
Recognized net actuarial gain (54) (10) (4)
Recognized gain due to settlements and curtailments -- (2) --
- ------------------------------------------------------- ----- ------- ------
Net periodic postretirement benefit cost $ 31 $ 78 $ 87
======================================================= ===== ====== ======
</TABLE>
Net periodic postretirement health and life expense was determined using
the "projected unit credit" actuarial method. Gains and losses for all benefits
except postretirement health care are recognized in accordance with the minimum
amortization provisions of the applicable accounting standards. For the
postretirement health care plans, 50 percent of the unrecognized gain or loss
at the beginning of the fiscal year (or at subsequent remeasurement) is
recognized on a level basis during the year. Prior to the Merger (and
conformance of accounting methods), BankAmerica used the minimum amortization
method for all plans. Application of the "50 percent" method to cumulative
unrecognized gains in the BankAmerica health care plans at the beginning of the
1999 fiscal year is the primary reason for the reduction in net periodic
postretirement benefit cost from 1998.
Assumed health care cost trend rates affect the postretirement benefit
obligation and benefit cost reported for the health care plan. The assumed
health care cost trend rates for the next year used to measure the expected
cost of benefits covered for the postretirement health and life plans was 6.25
percent and 6.00 percent for pre-65 benefits in 1999 and 1998, respectively,
and 4.75 percent and 4.50 percent for post-65 benefits in 1999 and 1998,
respectively. A one percentage point increase in assumed health care cost trend
rates would have increased the service and interest costs and the benefit
obligation by $7 million and $62 million, respectively, in 1999 and $6 million
and $57 million, respectively, in 1998. A one-percentage point decrease in
assumed health care cost trends would have lowered the service and interest
costs and the benefit obligation by $6 million and $56 million, respectively,
in 1999 and $5 million and $49 million, respectively, in 1998.
86
<PAGE>
Defined Contribution Plans
The Corporation maintains several defined contribution savings and profit
sharing plans and certain nonqualified defined contribution retirement plans.
Two of the savings and profit sharing plans feature leveraged ESOP provisions.
See Note Ten on page 77 for additional information on the two ESOP provisions.
ESOP Plans
The Corporation contributed approximately $20 million, $63 million, and
$68 million for 1999, 1998, and 1997, respectively, in cash and stock which was
utilized primarily to purchase the Corporation's common stock under the terms
of these plans. At December 31, 1999 and 1998, an aggregate of 23,776,820
shares and 22,997,096 shares, respectively, of the Corporation's common stock
and 1,789,230 shares and 1,937,730 shares, respectively, of ESOP preferred
stock were held by the Corporation's various savings and profit sharing plans.
As previously discussed, during 1999, the Corporation offered former
Barnett plan participants a one-time opportunity to transfer certain assets
from the savings plan to the cash balance plan. In 1998, the Corporation
offered the same opportunity to former NationsBank plan participants. This
one-time transfer opportunity will be provided to BankAmerica plan participants
in 2000.
Under the terms of the ESOP Preferred Stock provision, payments to the
plan for dividends on the ESOP Preferred Stock were $3 million, $6 million, and
$7 million, for 1999, 1998, and 1997, respectively. Interest incurred to
service the debt of the ESOP Preferred Stock amounted to $0.3 million, $1
million, and $2 million for 1999, 1998, and 1997, respectively. This loan was
paid off in June 1999.
The Corporation's ESOP and the Barnett ESOP were combined effective at the
close of business at December 31, 1998.
BankAmerica Plans
Aggregate contributions for all former BankAmerica-related defined
contribution plans were $171 million, $175 million, and $169 million, in 1999,
1998, and 1997, respectively. Certain employer and employee contributions to
the plans are used to purchase the Corporation's common stock at prices that
approximate market values. Contributions, including dividends, to the plans
were used to purchase 816,457 shares for $50 million in 1999, 697,741 shares
for $44 million in 1998, and 598,958 shares for $34 million in 1997. Sales by
the plans of the Corporation's common stock were 1,163,489 for $76 million in
1999, 571,058 for $46 million in 1998, and 528,829 shares for $32 million in
1997. The plans held 31,122,254 shares, 33,186,515 shares, and 34,252,005
shares, of the Corporation's common stock at December 31, 1999, 1998, and 1997,
respectively.
The Corporation maintains certain nonqualified defined contribution
retirement plans for certain employees of the former BankAmerica Corporation.
In addition, certain non-U.S. employees within the Corporation are covered
under defined contribution pension plans that are separately administered in
accordance with local laws.
The Corporation and the BankAmerica retirement plans will be combined
effective July 1, 2000.
87
<PAGE>
Note Fourteen - Stock Option Award Plans
At December 31, 1999, the Corporation had certain stock-based compensation
plans (the Plans) which are described below. The Corporation applies the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," in accounting for its stock option and award plans. In
accordance with Statement of Financial Accounting Standards No. 123 (SFAS 123),
"Accounting for Stock Based Compensation," the Corporation has also elected to
provide disclosures as if the Corporation had adopted the fair-value based
method of measuring outstanding employee stock options in 1999, 1998 and 1997
as indicated below:
<TABLE>
<CAPTION>
As Reported Pro Forma
----------------------------------- -----------------------------------
(Dollars in millions, except per share data) 1999 1998 1997 1999 1998 1997
- ---------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net income $ 7,882 $ 5,165 $ 6,542 $ 7,563 $ 4,838 $ 6,254
Net income available to common shareholders 7,876 5,140 6,431 7,557 4,819 6,143
Earnings per common share 4.56 2.97 3.71 4.38 2.78 3.54
Diluted earnings per common share 4.48 2.90 3.61 4.30 2.71 3.46
============================================== ======== ======== ======== ======== ======== ========
</TABLE>
In determining the pro forma disclosures above, the fair value of options
granted was estimated on the date of grant using the Black-Scholes
option-pricing model. The Black-Scholes model was developed to estimate the
fair value of traded options, which have different characteristics than
employee stock options, and changes to the subjective assumptions used in the
model can result in materially different fair value estimates. The weighted
average grant-date fair values of the options granted during 1999, 1998 and
1997 were based on the following assumptions:
<TABLE>
<CAPTION>
Risk-Free Dividend
Interest Rates Yield
-------------------------------- --------------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Key Employee Stock Plan 5.19% 5.64% 6.29% 2.91% 3.50% 3.50%
Take Ownership! 4.73 N/A N/A 3.06 N/A N/A
NationsBank 1996 Associates Stock Option
Award Plan N/A N/A 6.31 N/A N/A 3.50
Barnett 1997 Employee Stock Option Plan N/A N/A 5.60 N/A N/A 3.50
Barnett Long-Term Incentive Plan N/A N/A 6.33 N/A N/A 3.50
BankAmerica Management Stock Plan N/A 5.48 6.23 N/A 2.62 2.96
BankAmerica PEP Plan N/A N/A 6.23 N/A N/A 2.96
BankAmerica Take Ownership! N/A 5.58 6.23 N/A 1.83 2.96
========================================= ===== ======== ======== ===== ======== ========
<CAPTION>
Expected
Lives (Years) Volatility
-------------------- -----------------------------------
1999 1998 1997 1999 1998 1997
------ ------ ------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Key Employee Stock Plan 7 7 7 24.91% 22.94% 27.80%
Take Ownership! 4 N/A N/A 27.67 N/A N/A
NationsBank 1996 Associates Stock Option
Award Plan N/A N/A 3 N/A N/A 21.40
Barnett 1997 Employee Stock Option Plan N/A N/A 1 N/A N/A 24.70
Barnett Long-Term Incentive Plan N/A N/A 6 N/A N/A 34.30
BankAmerica Management Stock Plan N/A 4 4 N/A 28.40 24.50
BankAmerica PEP Plan N/A N/A 7 N/A N/A 24.50
BankAmerica Take Ownership! N/A 1 3 N/A 28.80 24.50
========================================= == == == ====== ========= =========
</TABLE>
Compensation expense under the fair-value based method is recognized over
the vesting period of the related stock options. Accordingly, the pro forma
results of applying SFAS 123 in 1999, 1998 and 1997 may not be indicative of
future amounts.
Key Employee Stock Plan
The Key Employee Stock Plan (KEYSOP), as amended and restated, provides
for different types of awards including stock options, restricted stock and
performance shares (or restricted stock units). Under the KEYSOP, ten-year
options to purchase approximately 42.2 million shares of common stock have been
granted through December 31, 1999 to certain employees at the closing market
price on the respective grant dates. Options granted under the KEYSOP generally
vest in three or four equal annual installments. At December 31, 1999,
approximately 32.8 million options were outstanding under this plan.
Additionally, 10.2 million shares of restricted stock were granted during 1999.
These shares of restricted stock generally vest in two or three equal annual
installments beginning one year from the grant date. Additionally, 1.2 million
shares of restricted stock units were granted during 1999. These units
generally vest three or five years from the grant date and are paid in the year
following retirement in cash or common stock or a combination of cash and
common stock.
On January 3, 2000, ten-year options to purchase approximately 20.1
million shares of common stock at $48.4375 per share were granted to certain
employees. On February 1, 2000, ten-year options to purchase approximately 4.1
million shares of common stock at $48.4375 per share were granted to certain
employees. For both grants, options vest in three equal annual installments
beginning one year from the grant date. Additionally, on January 3, 2000, and
February 1, 2000, approximately 241,000 and 331,000 shares, respectively, of
restricted
88
<PAGE>
stock were granted to certain employees. These shares of restricted stock
generally vest in three equal annual installments beginning one year from the
grant date.
Take Ownership!
On September 23, 1998, the Board of Directors of the Corporation approved
Take Ownership! The Bank of America Global Associate Stock Option Program (Take
Ownership!) which covers all employees below a specified executive grade level.
Under the plan, eligible employees receive an award of a predetermined number
of stock options entitling them to purchase shares of the Corporation's common
stock at the fair market value on the grant date. Options granted on the first
business day of 1999, 2000 and 2001 vest 25% on the first anniversary of the
date of grant, 25% on the second anniversary of the date of grant and 50% on
the third anniversary of the date of grant. These options have a term of five
years after the grant date. On January 4, 1999, options to purchase
approximately 53.1 million shares of common stock at $60.50 per share were
granted under the plan. At December 31, 1999, approximately 41.9 million
options were outstanding under this plan. On January 3, 2000, options to
purchase approximately 24.5 million shares of common stock at $48.4375 per
share were granted under the plan.
Other Plans
Under the NationsBank 1996 Associates Stock Option Award Plan (ASOP), as
amended, the Corporation granted in 1996 and 1997 to certain full- and
part-time associates options to purchase an aggregate of approximately 47
million shares of the Corporation's common stock. All options granted under the
ASOP are vested and expire June 29, 2001. At December 31, 1999, approximately
10.5 million options were outstanding under this plan. No further awards may be
granted under this plan.
Under the Barnett 1997 Employee Stock Option Plan, ten-year options to
purchase an aggregate of approximately 5.7 million shares of the Corporation's
common stock in 1997 were granted to certain full- and part-time associates.
All options granted under this plan are vested. No further awards may be
granted under this plan.
Under the Barnett Long-Term Incentive Plan, ten-year options to purchase
an aggregate of approximately 2.2 million shares of the Corporation's common
stock in 1997 were granted to certain key employees. All options granted under
this plan are vested. No further awards may be granted under this plan.
Under the BankAmerica 1992 Management Stock Plan, ten-year options to
purchase approximately 14.3 million shares of the Corporation's common stock
were granted to certain key employees in 1997 and 1998. Options awarded
generally vest in three equal annual installments beginning one year from the
grant date. At December 31, 1999, approximately 28.6 million options were
outstanding under this plan. Additionally, 2.9 million shares of restricted
stock were granted to certain key employees in 1997 and 1998. These shares
generally vest in four equal annual installments beginning the second year from
the date of grant. No further awards may be granted under this plan.
Under the BankAmerica Performance Equity Program, ten-year options to
purchase approximately 12.3 million shares of the Corporation's common stock
were granted to certain key employees in 1997 and 1998 in the form of market
price options and premium price options. All options issued under this plan to
persons who were employees as of the merger date vested. At December 31, 1999,
approximately 11.8 million options were outstanding under this plan. No further
awards may be granted under this plan.
On October 1, 1996, BankAmerica adopted the BankAmerica Global Stock
Option Program (BankAmerica Take Ownership!) which covered substantially all
associates. Options awarded under this plan vest in three equal installments
beginning one year from the grant date and have a term of five years after the
grant date. Approximately 37.5 million shares were granted in 1997 and 1998. At
December 31, 1999, approximately 25.2 million options were outstanding under
this plan. No further awards may be granted under this plan.
Additional stock options assumed in connection with various acquisitions
remain outstanding and are included in the tables below. No further awards may
be granted under these plans.
89
<PAGE>
The following tables present the status of all plans at December 31, 1999,
1998 and 1997, and changes during the years then ended:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------- ---------------------------- ---------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
(Option) (Option) (Option)
Employee stock options Shares Price Shares Price Shares Price
- ------------------------------- ---------------- ----------- ---------------- ----------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1 126,465,501 $ 51.01 136,409,218 $ 44.08 106,432,319 $ 30.79
Shares due to acquisitions -- -- -- -- 6,688,329 21.99
Granted 68,341,012 61.30 25,744,102 72.10 76,963,367 58.42
Exercised (21,872,532) 38.45 (28,295,737) 33.62 (44,990,054) 33.34
Forfeited (16,728,346) 62.59 (7,392,082) 63.04 (8,684,743) 45.23
- ------------------------------- ----------- -------- ----------- -------- ----------- --------
Outstanding at December 31 156,205,635 $ 56.03 126,465,501 $ 51.01 136,409,218 $ 44.18
=============================== =========== ======== =========== ======== =========== ========
Options exercisable at
December 31 85,753,568 $ 49.97 99,530,313 $ 46.02 63,927,295 $ 30.90
=============================== =========== ======== =========== ======== =========== ========
Weighted-average fair value of
options granted during the
year $ 13.88 $ 15.52 $ 9.35
=============================== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------- --------------------------- --------------------------
Weighted- Weighted- Weighted-
Average Average Average
Restricted stock awards Grant Grant Grant
(include KEYSOP) Shares Price Shares Price Shares Price
- ------------------------------- --------------- ----------- --------------- ----------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding unvested grants at
January 1 3,781,154 $ 61.85 5,180,012 $ 38.94 6,459,158 $ 24.68
Granted 11,413,497 61.99 3,852,739 65.79 2,120,681 57.76
Vested (1,732,513) 57.19 (4,896,614) 41.07 (3,112,871) 22.76
Canceled (434,801) 67.96 (354,983) 56.94 (286,956) 32.43
- ------------------------------- ---------- -------- ---------- -------- ---------- --------
Outstanding unvested grants at
December 31 13,027,337 $ 62.39 3,781,154 $ 61.85 5,180,012 $ 38.94
=============================== ========== ======== ========== ======== ========== ========
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
Outstanding Options Options Exercisable
------------------------------------------------------ ----------------------------------
Number Weighted Average Number
Range of Outstanding Remaining Weighted-Average Exercisable Weighted-Average
Exercise Prices at December 31 Contractual Life Exercise Price at December 31 Exercise Price
- ----------------- ---------------- ------------------ ------------------ ---------------- -----------------
<S> <C> <C> <C> <C> <C>
$0.00 - $30.00 18,114,375 4.1 years $ 21.89 18,114,375 $ 21.89
$30.01 - $46.50 22,305,419 3.5 years 39.20 22,305,419 39.20
$46.51 - $65.50 88,269,836 5.0 years 60.24 31,362,618 59.71
$65.51 - $99.00 27,516,005 6.6 years 78.61 13,971,156 81.70
- ----------------- ---------- --- -------- ---------- --------
Total 156,205,635 4.9 years $ 56.03 85,753,568 $ 49.97
================= =========== === ======== ========== ========
</TABLE>
90
<PAGE>
Note Fifteen - Income Taxes
The components of income tax expense for the years ended December 31,
1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
(Dollars in millions) 1999 1998 1997
- ------------------------------ --------- --------- ------------
<S> <C> <C> <C>
Current expense:
Federal $1,739 $2,163 $2,267
State 169 155 239
Foreign 327 349 537
- ------------------------------ ------ ------ ------
Total current expense 2,235 2,667 3,043
- ------------------------------ ------ ------ ------
Deferred (benefit) expense:
Federal 1,929 274 840
State 168 (68) 132
Foreign 1 10 (1)
- ------------------------------ ------ ------ --------
Total deferred expense 2,098 216 971
- ------------------------------ ------ ------ -------
Total income tax expense $4,333 $2,883 $4,014
============================== ====== ====== =======
</TABLE>
The preceding table does not reflect the tax effects of unrealized gains
and losses on available-for-sale securities and marketable securities that are
included in shareholders' equity and certain tax benefits associated with the
Corporation's employee stock plans. As a result of these tax effects,
shareholders' equity increased by $1,538 million, $418 million and $161 million
in 1999, 1998 and 1997, respectively. The Corporation's current income tax
expense approximates the amounts payable for those years. Deferred income tax
expense represents the change in the deferred tax asset or liability and is
discussed further below.
A reconciliation of the expected federal income tax expense using the
federal statutory rate of 35 percent to the actual income tax expense for the
years ended December 31, 1999, 1998 and 1997 follows:
<TABLE>
<CAPTION>
(Dollars in millions) 1999 1998 1997
- --------------------------------------------- --------- --------- ------------
<S> <C> <C> <C>
Expected federal income tax expense $4,275 $2,817 $3,695
Increase (decrease) in taxes resulting from:
Tax-exempt income (88) (79) (83)
State tax expense, net of federal benefit 278 33 287
Goodwill amortization 211 259 228
Reorganization of certain subsidiaries -- (323) --
Nondeductible merger-related charges 26 183 32
Foreign tax differential (83) 28 (2)
Other (286) (35) (143)
- --------------------------------------------- ------ ------ -------
Total income tax expense $4,333 $2,883 $4,014
============================================= ====== ====== =======
</TABLE>
91
<PAGE>
Significant components of the Corporation's deferred tax (liabilities)
assets at December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
(Dollars in millions) 1999 1998
- ---------------------------------------------------------- ------------ ------------
<S> <C> <C>
Deferred tax liabilities:
Equipment lease financing $ (4,873) $ (3,838)
Intangibles (826) (779)
State taxes (400) (196)
Employee retirement benefits (379) (328)
Investments (368) (340)
Securities valuation (278) --
Depreciation (258) (296)
Deferred gains and losses (49) (65)
Loan fees and expenses (55) (17)
Available-for-sale securities -- (227)
Other (353) (272)
- ---------------------------------------------------------- -------- --------
Gross deferred tax liabilities (7,839) (6,358)
- ---------------------------------------------------------- -------- --------
Deferred tax assets:
Allowance for credit losses 2,167 2,257
Available-for-sale securities 1,121 --
Employee benefits 621 395
Accrued expenses 398 606
Net operating loss carryforwards 151 181
Foreclosed properties 62 63
Securities valuation -- 321
Other 120 137
- ---------------------------------------------------------- -------- --------
Gross deferred tax assets 4,640 3,960
- ---------------------------------------------------------- -------- --------
Valuation allowance (131) (161)
- ---------------------------------------------------------- -------- --------
Gross deferred tax assets, net of valuation allowance 4,509 3,799
- ---------------------------------------------------------- -------- --------
Net deferred tax liabilities $ (3,330) $ (2,559)
========================================================== ======== ========
</TABLE>
The Corporation's deferred tax assets at December 31, 1999 and 1998
included a valuation allowance of $131 million and $161 million, respectively,
primarily representing net operating loss carryforwards for which it is more
likely than not that realization will not occur. The net change in the
valuation allowance for deferred tax assets resulted from a portion of net
operating loss carryforwards of foreign subsidiaries being used to offset
taxable income where realization was not expected to occur.
At December 31, 1999 and 1998, federal income taxes had not been provided
on $676 million and $380 million, respectively, of undistributed earnings of
foreign subsidiaries, earned prior to 1987 and after 1997, that have been
reinvested for an indefinite period of time. If the earnings were distributed,
an additional $148 million and $80 million of tax expense, net of credits for
foreign taxes paid on such earnings and for the related foreign withholding
taxes, would result in 1999 and 1998, respectively.
92
<PAGE>
Note Sixteen - Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments" (SFAS 107), requires the disclosure of the
estimated fair value of financial instruments. The fair value of a financial
instrument is the amount at which the instrument could be exchanged in a
current transaction between willing parties, other than in a forced or
liquidation sale. Quoted market prices, if available, are utilized as estimates
of the fair values of financial instruments. Since no quoted market prices
exist for a significant part of the Corporation's financial instruments, the
fair values of such instruments have been derived based on management's
assumptions, the estimated amount and timing of future cash flows and estimated
discount rates. The estimation methods for individual classifications of
financial instruments are described more fully below. Different assumptions
could significantly affect these estimates. Accordingly, the net realizable
values could be materially different from the estimates presented below. In
addition, the estimates are only indicative of the value of individual
financial instruments and should not be considered an indication of the fair
value of the combined Corporation.
The provisions of SFAS 107 do not require the disclosure of nonfinancial
instruments, including intangible assets such as goodwill, franchise, credit
card and trust relationships and MSR. In addition, the disclosure of fair value
amounts does not include lease financing.
Short-Term Financial Instruments
The carrying value of short-term financial instruments, including cash and
cash equivalents, federal funds sold and purchased, resale and repurchase
agreements, commercial paper and other short-term borrowings, approximates the
fair value of these instruments. These financial instruments generally expose
the Corporation to limited credit risk and have no stated maturities, or have
an average maturity of less than 30 days and carry interest rates which
approximate market.
Financial Instruments Traded in the Secondary Market
Held-for-investment securities, available-for-sale securities, trading
account instruments, long-term debt and trust preferred securities traded
actively in the secondary market have been valued using quoted market prices.
The fair value of securities and trading account instruments is reported in
Notes Three and Four on pages 67 and 69.
Loans
Fair values were estimated for groups of similar loans based upon type of
loan, credit quality and maturity. The fair value of loans was determined by
discounting estimated cash flows using interest rates approximating the
Corporation's December 31 origination rates for similar loans. Where quoted
market prices were available, primarily for certain residential mortgage loans,
such market prices were utilized as estimates for fair values. Contractual cash
flows for residential mortgage loans were adjusted for estimated prepayments
using published industry data. Where credit deterioration has occurred,
estimated cash flows for fixed- and variable-rate loans have been reduced to
incorporate estimated losses.
The fair values of domestic commercial loans that do not reprice or mature
within relatively short time frames were estimated using discounted cash flow
models. The discount rates were based on current market interest rates for
similar types of loans, remaining maturities and credit ratings. For domestic
commercial loans that reprice within relatively short time frames, the carrying
values were assumed to approximate their fair values. Substantially all of the
foreign loans reprice within relatively short time frames. Accordingly, for the
majority of foreign loans, the carrying values were assumed to approximate
their fair values. For purposes of these fair value estimates, the fair values
of nonaccrual loans were computed by deducting an estimated market discount
from their carrying values to reflect the uncertainty of future cash flows. The
fair values of commitments to extend credit were not significant at either
December 31, 1999 or 1998.
93
<PAGE>
Mortgage Servicing Rights
Note One on page 58 discloses the fair value of capitalized MSR as well as
the fair value of ALM contracts associated with capitalized MSR.
Deposits
The fair value for deposits with stated maturities was calculated by
discounting contractual cash flows using current market rates for instruments
with similar maturities. For deposits with no stated maturities, the carrying
amount was considered to approximate fair value and does not take into account
the significant value of the cost advantage and stability of the Corporation's
long-term relationships with depositors.
Derivative Financial Instruments
The fair value of the Corporation's derivative-dealer assets and
liabilities and ALM contracts is presented in Note Eleven on page 79.
The book and fair value of certain financial instruments at December 31,
1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
----------------------- -----------------------
Book Fair Book Fair
(Dollars in millions) Value Value Value Value
- ----------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Financial assets
Loans $348,790 $351,469 $337,303 $342,936
Financial liabilities
Deposits 347,273 347,251 357,260 357,915
Trust preferred securities 4,955 4,603 4,954 5,244
Long-term debt(1) 55,385 54,837 45,767 47,135
============================= ======== ======== ======== ========
</TABLE>
(1) Excludes obligations under capital leases.
For all other financial instruments, book value approximates fair value.
94
<PAGE>
Note Seventeen - Business Segment Information
Management reports the results of operations of the Corporation through
four business segments: Consumer Banking, which provides comprehensive retail
banking products and services to individuals and small businesses through
multiple delivery channels; Commercial Banking, which provides a wide range of
commercial banking services for businesses with annual revenues of up to $500
million; Global Corporate and Investment Banking, which 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; and Principal Investing and Asset Management includes direct equity
investments in businesses and investments in general partnership funds;
customized asset management, advisory and trust services for high-net-worth
clients through its Private Bank; equity, fixed income, cash, and alternative
investments management to individuals, corporations and a wide array of
institutional clients as well as advisory services for the Corporation's
affiliated family of mutual funds; and full service and discount brokerage
services.
The following table includes revenue and net income for the years ended
December 31, 1999, 1998 and 1997 and total assets at December 31, 1999 and 1998
for each business segment:
Business Segments
<TABLE>
<CAPTION>
Total Corporation Consumer Banking(2) Commercial Banking(2)
-------------------------------- -------------------------------- -----------------------------
(Dollars in millions) 1999 1998 1997 1999 1998 1997 1999 1998 1997
- ------------------------------ ---------- ---------- ---------- ---------- ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest income(1) $ 18,452 $ 18,461 $18,589 $ 11,523 $ 11,806 $12,180 $ 2,191 $ 2,152 $2,193
Noninterest income 14,069 12,189 11,756 6,511 6,604 6,210 894 730 613
- ------------------------------ -------- -------- ------- -------- -------- ------- ------- ------- ------
Total revenue 32,521 30,650 30,345 18,034 18,410 18,390 3,085 2,882 2,806
Provision for credit losses 1,820 2,920 1,904 1,327 1,259 1,569 164 64 (16)
Gains on sales of securities 240 1,017 271 42 10 38 -- 4 --
Amortization of intangibles 888 902 855 638 606 612 57 101 101
Depreciation expense 1,028 1,096 1,107 664 678 679 66 74 76
Merger-related charges, net 525 1,795 374 -- -- -- -- -- --
Other noninterest expense 16,070 16,743 15,663 9,247 9,744 10,068 1,351 1,211 1,045
- ------------------------------ -------- -------- ------- -------- -------- ------- ------- ------- ------
Income before income taxes 12,430 8,211 10,713 6,200 6,133 5,500 1,447 1,436 1,600
Income tax expense 4,548 3,046 4,171 2,301 2,254 2,148 569 483 623
- ------------------------------ -------- -------- ------- -------- -------- ------- ------- ------- ------
Net income $ 7,882 $ 5,165 $ 6,542 $ 3,899 $ 3,879 $ 3,352 $ 878 $ 953 $ 977
============================== ======== ======== ======= ======== ======== ======= ======= ======= ======
Period-end total assets $632,574 $617,679 $255,401 $271,695 $63,066 $61,772
============================== ======== ======== ======== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Global Corporate and Principal Investing and
Investment Banking(2) Asset Management(2)
------------------------------------ -------------------------------
(Dollars in millions) 1999 1998 1997 1999 1998 1997
- --------------------------------------- ----------- -------------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net interest income(1) $ 3,830 $ 3,799 $3,554 $ 501 $ 459 $ 409
Noninterest income 4,341 2,887 3,103 2,321 1,911 1,930
- --------------------------------------- -------- ------- ------ ------- ------- -------
Total revenue 8,171 6,686 6,657 2,822 2,370 2,339
Provision for credit losses 205 1,571 344 124 26 7
Gains (losses) on sales of securities 9 (5) 10 -- -- 4
Amortization of intangibles 158 168 118 35 27 24
Depreciation expense 231 280 300 67 64 52
Merger-related charges, net -- -- -- -- -- --
Other noninterest expense 4,220 4,271 3,165 1,252 1,499 1,375
- --------------------------------------- -------- --------- ------ ------- ------- -------
Income before income taxes 3,366 391 2,740 1,344 754 885
Income tax expense (benefit) 1,112 99 1,024 503 263 341
- --------------------------------------- -------- --------- ------ ------- ------- -------
Net income $ 2,254 $ 292 $1,716 $ 841 $ 491 $ 544
======================================= ======== ========= ====== ======= ======= =======
Period-end total assets $223,930 $229,441 $26,004 $21,579
======================================= ======== ========= ======= =======
<CAPTION>
Corporate Other
-------------------------------
(Dollars in millions) 1999 1998 1997
- --------------------------------------- ---------- ---------- ---------
<S> <C> <C> <C>
Net interest income(1) $ 407 $ 245 $ 253
Noninterest income 2 57 (100)
- --------------------------------------- ------- ------- ------
Total revenue 409 302 153
Provision for credit losses -- -- --
Gains (losses) on sales of securities 189 1,008 219
Amortization of intangibles -- -- --
Depreciation expense -- -- --
Merger-related charges, net 525 1,795 374
Other noninterest expense -- 18 10
- --------------------------------------- ------- ------- ------
Income before income taxes 73 (503) (12)
Income tax expense (benefit) 63 (53) 35
- --------------------------------------- ------- ------- ------
Net income $ 10 $ (450) $ (47)
======================================= ======= ======= ======
Period-end total assets $64,173 $33,192
======================================= ======= =======
</TABLE>
(1) Net interest income is presented on a taxable-equivalent basis.
(2) There were no material intersegment revenues among the four business
segments.
95
<PAGE>
Following is a reconciliation of the business segments' revenue and net
income for the years ended December 31, 1999, 1998 and 1997 and total assets at
December 31, 1999 and 1998 to the consolidated totals:
<TABLE>
<CAPTION>
(Dollars in millions) 1999 1998 1997
- -------------------------------------------------- ------------ ------------ ----------
<S> <C> <C> <C>
Segments' revenue $ 32,112 $ 30,348 $30,192
Adjustments:
Earnings associated with unassigned capital 407 245 253
Gains on sales of subsidiary companies -- 57 --
Other 2 -- (100)
- -------------------------------------------------- --------- --------- -------
Consolidated revenue $ 32,521 $ 30,650 $30,345
================================================== ========= ========= =======
Segments' net income $ 7,872 $ 5,615 $ 6,589
Adjustments, net of taxes:
Earnings associated with unassigned capital 251 157 158
Gains on sales of subsidiary companies -- 37 --
Gains on sales of securities 117 649 140
Merger-related charges, net (358) (1,325) (264)
Other -- 32 (81)
- -------------------------------------------------- --------- --------- -------
Consolidated net income $ 7,882 $ 5,165 $ 6,542
================================================== ========= ========= =======
Segments' total assets $ 568,401 $ 584,487
Adjustments:
Investment securities 58,310 63,311
Elimination of excess earning asset allocations (20,612) (52,817)
Other, net 26,475 22,698
- -------------------------------------------------- --------- ---------
Consolidated total assets $ 632,574 $ 617,679
================================================== ========= =========
</TABLE>
The adjustments presented in the table above represent consolidated
income, expense and asset balances not specifically allocated to individual
business segments. In addition, reconciling items also include the effect of
earnings allocations not assigned to specific business segments, as well as the
related earning asset balances.
96
<PAGE>
Note Eighteen - Bank of America Corporation (Parent Company Only)
The following tables present the Parent Company Only financial
information:
Condensed Statement of Income
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------
(Dollars in millions) 1999 1998 1997
- ------------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Income
Dividends from subsidiaries:
Bank subsidiaries $ 7,700 $4,795 $5,730
Other subsidiaries 171 202 728
Interest from subsidiaries 2,197 1,911 1,690
Other income 987 709 647
- ------------------------------------------------------------------------- ------- ------ ------
11,055 7,617 8,795
- ------------------------------------------------------------------------- ------- ------ ------
Expense
Interest on borrowed funds 2,626 2,805 2,529
Noninterest expense 1,155 835 632
- ------------------------------------------------------------------------- ------- ------ ------
3,781 3,640 3,161
- ------------------------------------------------------------------------- ------- ------ ------
Income before income tax benefit and equity in undistributed earnings of
subsidiaries 7,274 3,977 5,634
Income tax benefit 494 461 331
- ------------------------------------------------------------------------- ------- ------ ------
Income before equity in undistributed earnings of subsidiaries 7,768 4,438 5,965
Equity in undistributed earnings of subsidiaries:
Bank subsidiaries 10 553 471
Other subsidiaries 104 174 106
- ------------------------------------------------------------------------- ------- ------ ------
114 727 577
- ------------------------------------------------------------------------- ------- ------ ------
Net income $ 7,882 $5,165 $6,542
========================================================================= ======= ====== ======
Net income available to common shareholders $ 7,876 $5,140 $6,431
========================================================================= ======= ====== ======
</TABLE>
Condensed Balance Sheet
<TABLE>
<CAPTION>
December 31
--------------------
(Dollars in millions) 1999 1998
- --------------------------------------------- ---------- ---------
<S> <C> <C>
Assets
Cash held at bank subsidiaries $15,932 $ 3,069
Temporary investments 1,458 1,525
Receivables from subsidiaries:
Bank subsidiaries 12,292 10,456
Other subsidiaries 9,832 20,321
Investments in subsidiaries:
Bank subsidiaries 49,476 48,984
Other subsidiaries 1,624 5,108
Other assets 3,693 4,190
- --------------------------------------------- ------- -------
Total assets $94,307 $93,653
============================================= ======= =======
Liabilities and shareholders' equity
Commercial paper and other notes payable $ 7,146 $ 5,289
Accrued expenses and other liabilities 2,381 2,711
Payables to subsidiaries 4,486 6,004
Long-term debt 35,862 33,711
Shareholders' equity 44,432 45,938
- --------------------------------------------- ------- -------
Total liabilities and shareholders' equity $94,307 $93,653
============================================= ======= =======
</TABLE>
97
<PAGE>
Condensed Statement of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------
(Dollars in millions) 1999 1998 1997
- --------------------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Operating activities
Net income $ 7,882 $ 5,165 $ 6,542
Reconciliation of net income to net cash provided by operating activities:
Equity in undistributed earnings of subsidiaries (114) (727) (577)
Other operating activities (191) (412) 214
- --------------------------------------------------------------------------- -------- -------- --------
Net cash provided by operating activities 7,577 4,026 6,179
- --------------------------------------------------------------------------- -------- -------- --------
Investing activities
Net (increase) decrease in temporary investments (274) 632 4,037
Net decrease (increase) in receivables from subsidiaries 8,707 (6,145) (2,814)
Additional capital investment in subsidiaries 485 3,752 60
Acquisitions of subsidiaries, net of cash -- (822) (194)
Other investing activities -- (747) 191
- --------------------------------------------------------------------------- -------- -------- --------
Net cash provided by (used in) investing activities 8,918 (3,330) 1,280
- --------------------------------------------------------------------------- -------- -------- --------
Financing activities
Net increase (decrease) in commercial paper and other notes payable 1,600 1,726 (400)
Proceeds from issuance of long-term debt 5,912 7,283 4,887
Retirement of long-term debt (3,760) (4,533) (4,055)
Proceeds from issuance of common stock 1,158 1,367 1,892
Common stock repurchased (4,858) (1,751) (8,540)
Redemption of preferred stock -- (614) (1,701)
Cash dividends paid (3,199) (1,990) (2,175)
Other financing activities (485) (1,633) 182
- --------------------------------------------------------------------------- -------- -------- --------
Net cash used in financing activities (3,632) (145) (9,910)
- --------------------------------------------------------------------------- -------- -------- --------
Net increase (decrease) in cash held at bank subsidiaries 12,863 551 (2,451)
Cash held at bank subsidiaries at January 1 3,069 2,518 4,969
- --------------------------------------------------------------------------- -------- -------- --------
Cash held at bank subsidiaries at December 31 $ 15,932 $ 3,069 $ 2,518
=========================================================================== ======== ======== ========
</TABLE>
On January 1, 1999, NationsCredit Corporation, a nonbank subsidiary,
merged into Bank of America Corporation. In addition, during 1999, Bank of
America, FSB, a nonbank subsidiary, merged into Bank of America, N.A. and
EquiCredit Corporation of America, also a nonbank subsidiary, became an
indirect subsidiary of Bank of America, N.A. Amounts presented above for 1998
and 1997 have not been restated to reflect these transactions.
98
<PAGE>
Note Nineteen - Performance by Geographic Area
Since the Corporation's operations are highly integrated, certain asset,
liability, income and expense amounts must be allocated to arrive at total
assets and total revenue by geographic area. The Corporation identifies its
geographic performance based upon the business unit in which the assets are
recorded and where the income is earned and the expenses are incurred. In
certain circumstances, units may transact business with customers who are out
of their immediate geographic area. For example, a U.S. domiciled unit may have
made a loan to a borrower who resides in Latin America. In this instance, the
loan and related income would be included in domestic activities. Translation
gains, for those units in hyperinflationary economies, net of hedging, totaled
$4 million in 1999, compared to translation losses of $12 million and $27
million in 1998 and 1997, respectively. These amounts, which are reported in
other noninterest income, are included in the table below:
<TABLE>
<CAPTION>
Total
Revenue(2)
for the year
Total Assets(1) ended
(Dollars in millions) Year at December 31 December 31
- --------------------------------- ------ ----------------- -------------
<S> <C> <C> <C>
Domestic (3) 1999 $583,390 $30,156
1998 $551,800 $29,226
1997 $511,085 $28,368
- --------------------------------- ---- -------- -------
Asia 1999 20,923 1,023
1998 22,108 765
1997 26,187 924
Europe, Middle East and Africa 1999 20,152 641
1998 32,590 256
1997 27,220 533
Latin America and the Caribbean 1999 8,109 486
1998 11,181 240
1997 6,491 363
- --------------------------------- ---- -------- -------
Total Foreign 1999 49,184 2,150
1998 65,879 1,261
1997 59,898 1,820
- --------------------------------- ---- -------- -------
Total Consolidated 1999 $632,574 $32,306
1998 $617,679 $30,487
1997 $570,983 $30,188
- --------------------------------- ---- -------- -------
</TABLE>
(1) Total assets includes long-lived assets, primarily all of which were
located in the U.S.
(2) Total revenues includes net interest income plus noninterest income. There
were no material intercompany revenues between geographic regions for any
of the years presented.
(3) Includes the Corporation's Canadian operations, which had total assets of
$1,202, $1,622 and $2,719 and total revenues of $29, $63 and $64 at and
for the years ended December 31, 1999, 1998 and 1997, respectively.
99
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in or disagreements with accountants on accounting
and financial disclosure.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information set forth under the caption "Election of Directors" on pages 2
through 5 of the definitive 2000 Proxy Statement of the registrant furnished to
stockholders in connection with its Annual Meeting to be held on April 25, 2000
(the "2000 Proxy Statement") with respect to the name of each nominee or
director, that person's age, positions and offices with the registrant,
business experience, directorships in other public companies, service on the
registrant's Board and certain family relationships, and information set forth
under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" on
page 8 of the 2000 Proxy Statement with respect to Section 16 matters, is
hereby incorporated by reference. In addition, information set forth under the
caption "Special Compensation Arrangements -- Employment Agreements with
Messrs. Lewis, Hance and Murray" on page 13 of the 2000 Proxy Statement is
hereby incorporated by reference. Additional information required by Item 10
with respect to executive officers is set forth in Part I, Item 4A hereof.
Item 11. EXECUTIVE COMPENSATION
Information with respect to current remuneration of executive officers,
certain proposed remuneration to them, their options and certain indebtedness
and other transactions set forth in the 2000 Proxy Statement (i) under the
caption "Board of Directors' Compensation" on page 9 thereof, (ii) under the
caption "Executive Compensation" on pages 10 and 11 thereof, (iii) under the
caption "Retirement Plans" on page 12 thereof, (iv) under the caption "Deferred
Compensation Plan" on pages 12 and 13 thereof, (v) under the caption "Special
Compensation Arrangements" on page 13 thereof, (vi) under the caption
"Compensation Committee Interlocks and Insider Participation" on page 17
thereof, and (vii) under the caption "Certain Transactions" on page 17 thereof,
is, to the extent such information is required by Item 402 of Regulation S-K,
hereby incorporated by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The security ownership information required by Item 403 of Regulation S-K
relating to persons who beneficially own five percent or more of the
outstanding shares of Common Stock, ESOP Preferred Stock or 7% Cumulative
Redeemable Preferred Stock, Series B, as well as security ownership information
relating to directors, nominees and named executive officers individually and
directors and executive officers as a group, is hereby incorporated by
reference to the ownership information set forth under the caption "Security
Ownership of Certain Beneficial Owners and Management" on pages 6 through 8 of
the 2000 Proxy Statement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to relationships and related transactions between
the registrant and any director, nominee for director, executive officer,
security holder owning five percent or more of the registrant's voting
securities or any member of the immediate family of any of the above, as set
forth in the 2000 Proxy Statement under the caption "Compensation Committee
Interlocks and Insider Participation" on page 17 and under the caption "Certain
Transactions" on page 17 thereof, is, to the extent such information is
required by Item 404 of Regulation S-K, hereby incorporated by reference.
100
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a. The following documents are filed as part of this report:
<TABLE>
<CAPTION>
Page
-----
<S> <C> <C>
(1) Financial Statements:
Report of Independent Accountants 53
Consolidated Statement of Income for the years ended December 31, 1999, 1998 and 1997 54
Consolidated Balance Sheet at December 31, 1999 and 1998 55
Consolidated Statement of Cash Flows for the years ended December 31, 1999, 1998 and
1997 56
Consolidated Statement of Changes in Shareholders' Equity for the years ended
December 31, 1999, 1998 and 1997 57
Notes To Consolidated Financial Statements 58
(2) Schedules:
None
</TABLE>
b. The following report on Form 8-K was filed by the registrant during the
quarter ended December 31, 1999:
Current Report on Form 8-K dated October 18, 1999 and filed October 22,
1999, Items 5 and 7.
c. The exhibits filed as part of this report and exhibits incorporated
herein by reference to other documents are listed in the Index to
Exhibits to this Annual Report on Form 10-K (pages E-1 through E-6,
including executive compensation plans and arrangements which are
identified separately by asterisk).
With the exception of the information herein expressly incorporated by
reference, the 2000 Proxy Statement is not to be deemed filed as part of this
Annual Report on Form 10-K.
101
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 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
Date: March 20, 2000
By: */s/ HUGH L. MCCOLL, JR.
------------------------------------------
Hugh L. McColl, Jr.
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------------ -------------------------------- ---------------
<S> <C> <C>
*/s/HUGH L. McCOLL, JR. Chairman of the Board, Chief March 20, 2000
---------------------------------- Executive Officer and Director
Hugh L. McColl, Jr. (Principal Executive Officer)
*/s/JAMES H. HANCE, JR. Vice Chairman, Chief Financial March 20, 2000
---------------------------------- Officer and Director (Principal
James H. Hance, Jr. Financial Officer)
*/s/MARC D. OKEN Executive Vice President and March 20, 2000
---------------------------------- Principal Financial Executive
Marc D. Oken (Principal Accounting Officer)
*/s/CHARLES W. COKER Director March 20, 2000
----------------------------------
Charles W. Coker
*/s/TIMM F. CRULL Director March 20, 2000
----------------------------------
Timm F. Crull
*/s/ALAN T. DICKSON Director March 20, 2000
----------------------------------
Alan T. Dickson
*/s/KATHLEEN F. FELDSTEIN Director March 20, 2000
----------------------------------
Kathleen F. Feldstein
*/s/PAUL FULTON Director March 20, 2000
----------------------------------
Paul Fulton
*/s/DONALD E. GUINN Director March 20, 2000
----------------------------------
Donald E. Guinn
*/s/RAY HOLMAN Director March 20, 2000
----------------------------------
C. Ray Holman
*/s/W. W. JOHNSON Director March 20, 2000
----------------------------------
W. W. Johnson
</TABLE>
102
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- ----------------------------------------- ------------------------------------ ---------------
<S> <C> <C>
*/s/ KENNETH D. LEWIS President, Chief Operating Officer March 20, 2000
---------------------------------- and Director
Kenneth D. Lewis
*/s/ WALTER E. MASSEY Director March 20, 2000
----------------------------------
Walter E. Massey
*/s/ RICHARD M. ROSENBERG Director March 20, 2000
----------------------------------
Richard M. Rosenberg
Director March , 2000
----------------------------------
O. Temple Sloan, Jr.
*/s/ MEREDITH R. SPANGLER Director March 20, 2000
----------------------------------
Meredith R. Spangler
*/s/ RONALD TOWNSEND Director March 20, 2000
----------------------------------
Ronald Townsend
*/s/ SOLOMON D. TRUJILLO Director March 20, 2000
----------------------------------
Solomon D. Trujillo
*/s/ JACKIE M. WARD Director March 20, 2000
----------------------------------
Jackie M. Ward
*/s/ VIRGIL R. WILLIAMS Director March 20, 2000
----------------------------------
Virgil R. Williams
*/s/ SHIRLEY YOUNG Director March 20, 2000
----------------------------------
Shirley Young
*By:/s/ CHARLES M. BERGER
----------------------------------
Charles M. Berger, Attorney-in-Fact
</TABLE>
103
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ------------- ---------------------------------------------------------------------------------
<S> <C>
3(a) Amended and Restated Certificate of Incorporation of registrant, as in effect
on the date hereof, incorporated by reference to Exhibit 99.1 of registrant's
Current Report on Form 8-K filed May 7, 1999.
(b) Amended and Restated Bylaws of registrant, as in effect on the date hereof,
incorporated by reference to Exhibit 99.2 of registrant's Current Report on
Form 8-K filed May 7, 1999.
4(a) Specimen certificate of registrant's Common Stock, incorporated by reference
to Exhibit 4.13 of registrant's Registration No. 333-83503.
(b) Specimen certificate of registrant's ESOP Convertible Preferred Stock, Series
C, incorporated by reference to Exhibit 4(c) of registrant's Annual Report on
Form 10-K dated March 25, 1992.
(c) Specimen certificate of registrant's 7% Cumulative Redeemable Preferred
Stock, Series B, incorporated by reference to Exhibit 4(c) of registrant's
Annual Report on Form 10-K dated March 22, 1999 (the "1998 Form 10-K").
(d) Indenture dated as of August 1, 1982 between registrant and Morgan
Guaranty Trust Company of New York, pursuant to which registrant issued its
7 3/4% Debentures, due 2002, incorporated by reference to Exhibit 4.2 of
registrant's Registration No. 2-78530; and First Supplemental Indenture
thereto dated as of September 18, 1998, incorporated by reference to
Exhibit 4(e) of the 1998 Form 10-K.
(e) Indenture dated as of September 1, 1989 between registrant and The Bank of
New York, pursuant to which registrant issued its 9 3/8% Subordinated Notes,
due 2009; its 10.20% Subordinated Notes, due 2015; its 9 1/8% Subordinated
Notes, due 2001; and its 8 1/8% Subordinated Notes, due 2002, incorporated by
reference to Exhibit 4.1 of registrant's Registration No. 33-30717; and First
Supplemental Indenture thereto dated as of August 28, 1998, incorporated by
reference to Exhibit 4(f) of the 1998 Form 10-K.
(f) Indenture dated as of January 1, 1992 between registrant and BankAmerica
Trust Company of New York, incorporated by reference to Exhibit 4.1 of
registrant's Registration No. 33-54784; and First Supplemental Indenture
thereto dated as of July 1, 1993 between registrant and BankAmerica National
Trust Company (formerly BankAmerica Trust Company of New York),
pursuant to which registrant issued its Senior Medium-Term Notes, Series A,
B and C; and its 5 3/8% Senior Notes, due 2000, incorporated by reference to
Exhibit 4.1 of registrant's Current Report on Form 8-K dated July 6, 1993; and
Second Supplemental Indenture thereto dated as of September 18, 1998,
incorporated by reference to Exhibit 4(g) of the 1998 Form 10-K.
(g) Indenture dated as of November 1, 1992 between registrant and The Bank of
New York, pursuant to which registrant issued its 6 7/8% Subordinated Notes,
due 2005, incorporated by reference to Exhibit 4.1 of registrant's Amendment
to Application or Report on Form 8 dated March 1, 1993.
(h) First Supplemental Indenture dated as of July 1, 1993 to the Indenture dated
as of November 1, 1992 between registrant and The Bank of New York,
pursuant to which registrant issued its Subordinated Medium-Term Notes,
Series A and B; its 6 1/2% Subordinated Notes, due 2003; and its 7 3/4%
Subordinated Notes, due 2004, incorporated by reference to Exhibit 4.4 of
registrant's Current Report on Form 8-K dated July 6, 1993; and Second
Supplemental Indenture thereto dated as of August 28, 1998, incorporated by
reference to Exhibit 4(i) of the 1998 Form 10-K.
(i) Indenture dated as of January 1, 1995 between registrant and BankAmerica
National Trust Company, pursuant to which registrant issued its 7% Senior
Notes, due 2003; its 7% Senior Notes, due 2001; its 5 3/4% Senior Notes, due
2001; its 6 3/8% Senior Notes, due 2005; its 6 1/8% Senior Notes, due 2004; its
5 7/8% Senior Notes, due 2009; its 6 5/8% Senior Notes, due 2004; and its Senior
Medium-Term Notes, Series D, E, F, G and H, incorporated by reference to
Exhibit 4.1 of registrant's Registration No. 33-57533; and First Supplemental
Indenture thereto dated as of September 18, 1998, incorporated by reference to
Exhibit 4.3 of registrant's Current Report on Form 8-K filed November 18,
1998.
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
- ------------- ---------------------------------------------------------------------------------
<S> <C>
(j) Indenture dated as of January 1, 1995 between registrant and The Bank of
New York, pursuant to which registrant issued its 7 5/8% Subordinated Notes,
due 2005; its 7 3/4% Subordinated Notes, due 2015; its 7 1/4% Subordinated
Notes, due 2025; its 6 1/2% Subordinated Notes, due 2006; its 7.80%
Subordinated Notes, due 2016; its 6 3/8% Subordinated Notes, due 2008; its
6.80% Subordinated Notes, due 2028; its 6.60% Subordinated Notes, due 2010;
its 7.80% Subordinated Notes due 2010; and its Subordinated Medium-Term
Notes, Series D, E, F, G and H, incorporated by reference to Exhibit 4.8 of
registrant's Registration No. 33-57533; and First Supplemental Indenture
thereto dated as of August 28, 1998, incorporated by reference to Exhibit 4.8 of
registrant's Current Report on Form 8-K filed November 18, 1998.
(k) Fiscal and Paying Agency Agreement dated as of July 5, 1995, between
registrant and The Chase Manhattan Bank, N.A. (London Branch), pursuant
to which registrant issued its Floating Rate Senior Notes, due 2000,
incorporated by reference to Exhibit 4(l) of registrant's Annual Report on
Form 10-K dated March 29, 1996 (the "1995 Form 10-K").
(l) Amended and Restated Agency Agreement dated as of July 30, 1999 between
registrant, Bank of America, N.A., The Chase Manhattan Bank (London
Branch) and The Chase Manhattan Bank Luxembourg S.A.
(m) Issuing and Paying Agency Agreement dated as of July 30, 1999 between Bank
of America, N.A., as Issuer, and Bankers Trust Company, as Issuing and Paying
Agent.
(n) Indenture dated as of November 27, 1996 between registrant and The Bank of
New York, incorporated by reference to Exhibit 4.10 of registrant's
Registration No. 333-15375.
(o) First Supplemental Indenture dated as of December 4, 1996 to the Indenture
dated as of November 27, 1996 between registrant and The Bank of New York
pursuant to which registrant issued its 7.84% Junior Subordinated Deferrable
Interest Notes due 2026, incorporated by reference to Exhibit 4.3 of
registrant's Current Report on Form 8-K dated November 27, 1996.
(p) Second Supplemental Indenture dated as of December 17, 1996 to the
Indenture dated as of November 27, 1996 between registrant and The Bank of
New York pursuant to which registrant issued its 7.83% Junior Subordinated
Deferrable Interest Notes due 2026, incorporated by reference to Exhibit 4.3 of
registrant's Current Report on Form 8-K dated December 10, 1996.
(q) Third Supplemental Indenture dated as of February 3, 1997 to the Indenture
dated as of November 27, 1996 between registrant and The Bank of New York
pursuant to which registrant issued its Floating Rate Junior Subordinated
Deferrable Interest Notes due 2027, incorporated by reference to Exhibit 4.3 of
registrant's Current Report on Form 8-K dated January 22, 1997.
(r) Fourth Supplemental Indenture dated as of April 22, 1997 to the Indenture
dated as of November 27, 1996 between registrant and The Bank of New York
pursuant to which registrant issued its 8 1/4% Junior Subordinated Deferrable
Interest Notes, due 2027, incorporated by reference to Exhibit 4.3 of
registrant's Current Report on Form 8-K dated April 15, 1997.
(s) Fifth Supplemental Indenture dated as of August 28, 1998 to the Indenture
dated as of November 27, 1996 between registrant and The Bank of New York,
incorporated by reference to Exhibit 4(t) of the 1998 Form 10-K.
(t) Indenture dated as of November 27, 1996, between Barnett Banks, Inc. and
The First National Bank of Chicago, as Trustee, and First Supplemental
Indenture dated as of January 9, 1998, among registrant, NB Holdings
Corporation, Barnett Banks, Inc. and The First National Bank of Chicago, as
Trustee, pursuant to which registrant (as successor to Barnett Banks, Inc.)
issued its 8.06% Junior Subordinated Debentures, due 2026, incorporated by
reference to Exhibit 4(u) of registrant's Annual Report on Form 10-K dated
March 13, 1998 (the "1997 Form 10-K").
</TABLE>
E-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
- ------------- -------------------------------------------------------------------------------
<S> <C>
(u) Indenture dated as of September 1, 1990 between the former BankAmerica
Corporation and Chase Manhattan Bank and Trust Company, N. A. (formerly
Manufacturers Hanover Trust Company of California), pursuant to which
registrant (as successor to the former BankAmerica Corporation) issued its
Subordinated Medium Term Notes, Series E; its 9.375% Subordinated Notes
due 2001; its 10.00% Subordinated Notes due 2003; its 9.625% Subordinated
Notes due 2001; its 9.50% Subordinated Notes due 2001; and its 9.20%
Subordinated Notes due 2003; and First Supplemental Indenture thereto
dated as of September 15, 1998, incorporated by reference to Exhibit 4(v) of
the 1998 Form 10-K.
(v) Indenture dated as of November 1, 1991 between the former BankAmerica
Corporation and Chase Manhattan Bank and Trust Company, N. A. (formerly
Manufacturers Hanover Trust Company of California), pursuant to which
registrant (as successor to the former BankAmerica Corporation) issued its
8.125% Subordinated Notes due 2002; its 7.75% Subordinated Notes due 2002;
its 8.375% Subordinated Notes due 2002; its 7.50% Subordinated Notes due
2002; its 7.20% Subordinated Notes due 2002; its 7.875% Subordinated Notes
due 2002; its 6.85% Subordinated Notes due 2003; its 6.875% Subordinated
Notes due 2003; its Floating Subordinated Notes due 2003; its 7.20%
Subordinated Notes due 2006; its 7.625% Subordinated Notes due 2004; its
8.125% Subordinated Notes due 2004; its 8.95% Subordinated Notes due 2004;
its 6.75% Subordinated Notes due 2005; its 6.20% Subordinated Notes due
2006; its 7.125% Subordinated Notes due 2006; its 6.625% Subordinated Notes
due 2007; its 6.625% Subordinated Notes due 2007; its 7.125% Subordinated
Notes due 2009; its 7.125% Subordinated Notes due 2011; and its 6.25%
Subordinated Notes due 2008; First Supplemental Indenture thereto dated as
of September 8, 1992; and Second Supplemental Indenture thereto dated as of
September 15, 1998, incorporated by reference to Exhibit 4(w) of the 1998
Form 10-K.
(w) Indenture dated as of November 1, 1991 between the former BankAmerica
Corporation and U.S. Bank Trust, N. A. (successor to Bankers Trust Company
of California, National Association, and First Trust of California, National
Association), pursuant to which registrant (as successor to the former
BankAmerica Corporation) issued its 6.65% Note due 2001; its 6.625% Note
due 2001; and its Senior Medium-Term Notes, Series H and I; First
Supplemental Indenture thereto dated as of August 1, 1994; and Second
Supplemental Indenture thereto dated as of September 30, 1998, incorporated
by reference to Exhibit 4(x) of the 1998 Form 10-K.
(x) Second Amended and Restated Agency Agreement dated as of November 15,
1996 between the former BankAmerica Corporation and First Trust of New
York, National Association, pursuant to which registrant (as successor to the
former BankAmerica Corporation) issued its Senior and Subordinated Euro
Medium-Term Notes; and Amendment thereto dated as of September 30, 1998,
incorporated by reference to Exhibit 4(y) of the 1998 Form 10-K.
(y) Junior Subordinated Indenture dated as of November 27, 1996 between the
former BankAmerica Corporation and Bankers Trust Company, pursuant to
which registrant (as successor to the former BankAmerica Corporation) issued
its 8.07% Series A Preferred Securities due 2026; and its 7.70% Series B
Preferred Securities due 2026; and First Supplemental Indenture thereto
dated as of September 15, 1998, incorporated by reference to Exhibit 4(z) of
the 1998 Form 10-K.
(z) Junior Subordinated Indenture dated as of December 20, 1996 between the
former BankAmerica Corporation and Bankers Trust Company, pursuant to
which registrant (as successor to the former BankAmerica Corporation) issued
its 7.75% Trust Originated Preferred Securities, Series 1 due 2026; its 8.00%
Cumulative Semi-Annual Income Preferred Securities, Series 2 due 2026; its
Floating Rate Capital Securities, Series 3 due 2027; and its 7.00% Trust
Originated Preferred Securities, Series 4 due 2028; and First Supplemental
Indenture thereto dated as of September 15, 1998, incorporated by reference to
Exhibit 4(aa) of the 1998 Form 10-K.
</TABLE>
E-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
- ------------- ---------------------------------------------------------------------------------
<S> <C> <C>
The registrant has other long-term debt agreements, but these are not material in amount. Copies of these
agreements will be furnished to the Commission on request.
10(a) NationsBank Corporation and Designated Subsidiaries Directors' Retirement *
Plan, incorporated by reference to Exhibit 10(f) of registrant's Annual Report
on Form 10-K dated March 27, 1991; Amendment thereto dated as of
September 28, 1994, incorporated by reference to Exhibit 10(i) of registrant's
Annual Report on Form 10-K dated March 30, 1995; and Amendment thereto
dated as of April 24, 1996, incorporated by reference to Exhibit 10(g) of
registrant's Annual Report on Form 10-K dated March 28, 1997 (the "1996
Form 10-K").
(b) NationsBank Corporation and Designated Subsidiaries Supplemental *
Executive Retirement Plan, incorporated by reference to Exhibit 10(j) of
registrant's Annual Report on Form 10-K dated March 30, 1995; Amendment
thereto dated as of June 28, 1989, incorporated by reference to Exhibit 10(g) of
registrant's Annual Report on Form 10-K dated March 28, 1990; Amendment
thereto dated as of June 27, 1990, incorporated by reference to Exhibit 10(g) of
registrant's Annual Report on Form 10-K dated March 27, 1991; Amendment
thereto dated as of July 21, 1991, incorporated by reference to Exhibit 10(bb)
of registrant's Annual Report on Form 10-K dated March 25, 1992;
Amendments thereto dated as of December 3, 1992 and December 15, 1992,
both of which are incorporated by reference to Exhibit 10(l) of registrant's
Annual Report on Form 10-K dated March 24, 1993; Amendment thereto dated
as of September 28, 1994, incorporated by reference to Exhibit 10(j) of
registrant's Annual Report on Form 10-K dated March 30, 1995; Amendments
thereto dated March 27, 1996 and June 25, 1997, incorporated by reference to
Exhibit 10(c) of the 1997 Form 10-K; Amendments thereto dated April 10,
1998, June 24, 1998 and October 1, 1998, incorporated by reference to
Exhibit 10(b) of the 1998 Form 10-K; and Amendment thereto dated
December 14, 1999.
(c) NationsBank Corporation and Designated Subsidiaries Deferred *
Compensation Plan for Key Employees, incorporated by reference to Exhibit
10(k) of registrant's Annual Report on Form 10-K dated March 30, 1995;
Amendment thereto dated as of June 28, 1989, incorporated by reference to
Exhibit 10(h) of registrant's Annual Report on Form 10-K dated March 28,
1990; Amendment thereto dated as of June 27, 1990, incorporated by reference
to Exhibit 10(h) of registrant's Annual Report on Form 10-K dated March 27,
1991; Amendment thereto dated as of July 21, 1991, incorporated by reference
to Exhibit 10(bb) of registrant's Annual Report on Form 10-K dated March 25,
1992; Amendment thereto dated as of December 3, 1992, incorporated by
reference to Exhibit 10(m) of registrant's Annual Report on Form 10-K dated
March 24, 1993; and Amendments thereto dated April 10, 1998 and October 1,
1998 (filed as Exhibit 10(b) hereto).
(d) NationsBank Corporation and Designated Subsidiaries Supplemental *
Retirement Plan, incorporated by reference to Exhibit 10(o) of registrant's
Annual Report on Form 10-K dated March 30, 1994; Amendment thereto dated
as of June 28, 1989, incorporated by reference to Exhibit 10(k) of registrant's
Annual Report on Form 10-K dated March 28, 1990; Amendment thereto dated
as of June 27, 1990, incorporated by reference to Exhibit 10(k) of registrant's
Annual Report on Form 10-K dated March 27, 1991; Amendment thereto dated
as of July 21, 1991, incorporated by reference to Exhibit 10(bb) of registrant's
Annual Report on Form 10-K dated March 25, 1992; Amendments thereto
dated as of December 3, 1992 and December 4, 1992, both of which are
incorporated by reference to Exhibit 10(p) of registrant's Annual Report on
Form 10-K dated March 24, 1993; Amendment thereto dated as of July 5, 1995,
incorporated by reference to Exhibit 10(l) of the 1995 Form 10-K; and
Amendments thereto dated April 10, 1998 and October 1, 1998 (filed as
Exhibit 10(b) hereto).
(e) Split Dollar Agreement dated as of February 1, 1990 between registrant and *
Hugh L. McColl III, as Trustee for the benefit of Hugh L. McColl, Jr. and
Jane S. McColl, incorporated by reference to Exhibit 10(s) of registrant's
Annual Report on Form 10-K dated March 27, 1991.
</TABLE>
E-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
- ------------- --------------------------------------------------------------------------------
<S> <C> <C>
(f) NationsBank Corporation Benefit Security Trust dated as of June 27, 1990, *
incorporated by reference to Exhibit 10(t) of registrant's Annual Report on
Form 10-K dated March 27, 1991; First Supplement thereto dated as of
November 30, 1992, incorporated by reference to Exhibit 10(v) of registrant's
Annual Report on Form 10-K dated March 24, 1993; and Trustee Removal/
Appointment Agreement dated as of December 19, 1995, incorporated by
reference to Exhibit 10(o) of the 1995 Form 10-K.
(g) The NationsBank 401(k) Restoration Plan, as amended and restated effective *
April 1, 1998 and as further amended and restated effective July 1, 1998,
incorporated by reference to Exhibit 10(g) of the 1998 Form 10-K.
(h) Bank of America Executive Incentive Compensation Plan, as amended and *
restated effective April 1, 1998, incorporated by reference to Exhibit 10(h) of
the 1998 Form 10-K.
(i) Bank of America Director Deferral Plan, as amended and restated effective *
January 27, 1999, incorporated by reference to Exhibit 10(i) of the 1998 Form
10-K.
(j) NationsBank Corporation Directors' Stock Plan, incorporated by reference to *
Exhibit 99.1 of registrant's Registration No. 333-02875.
(k) Amendment to Restricted Stock Award Plan Agreements with Hugh L. McColl, *
Jr. dated December 20, 1996, incorporated by reference to Exhibit 10(x) of the
1996 10-K.
(l) Bank of America Corporation Key Employee Stock Plan, as amended and *
restated effective September 24, 1998, incorporated by reference to Exhibit
10(a) of registrant's Quarterly Report on Form 10-Q dated November 16, 1998
(the "Third Quarter 1998 Form 10-Q").
(m) BankAmerica Corporation and Bank of America National Trust and Savings *
Association Deferred Compensation Plan for Directors, as amended and
restated, incorporated by reference to Exhibit 10(b) of the Third Quarter 1998
Form 10-Q.
(n) BankAmerica Deferred Compensation Plan as amended and restated, *
incorporated by reference to Exhibit 10(c) of the Third Quarter 1998 Form
10-Q.
(o) BankAmerica Corporation Senior Management Incentive Plan, as amended, *
incorporated by reference to Exhibit 10(d) of the Third Quarter 1998 Form
10-Q.
(p) BankAmerica Supplemental Retirement Plan, as amended and restated, *
incorporated by reference to Exhibit 10(e) of the Third Quarter 1998 Form
10-Q.
(q) BankAmerica Corporation Performance Equity Program, incorporated by *
reference to Exhibit 99.1 of Post-Effective Amendment No. 3 to registrant's
Registration No. 333-60553.
(r) BankAmerica Corporation 1992 Management Stock Plan, incorporated by *
reference to Exhibit 99.2 of Post-Effective Amendment No. 3 to registrant's
Registration No. 333-60553.
(s) BankAmerica Corporation 1987 Management Stock Plan, incorporated by *
reference to Exhibit 99.3 of Post-Effective Amendment No. 3 to registrant's
Registration No. 333-60553.
(t) Continental Bank Corporation 1991 Equity Performance Incentive Plan, *
incorporated by reference to Exhibit 99.5 of Post-Effective Amendment No. 3
to registrant's Registration No. 333-60553.
(u) Continental Bank Corporation 1982 Performance Restricted Stock and Stock *
Option Plan, incorporated by reference to Exhibit 99.1 of Post-Effective
Amendment No. 4 to registrant's Registration No. 333-60553.
(v) Split Dollar Life Insurance Agreement dated as of October 15, 1998 between *
registrant and NationsBank, N. A., as Trustee under that certain Irrevocable
Trust Agreement dated October 2, 1998, by and between Hugh L. McColl, Jr.,
as Grantor, and NationsBank, N. A., as Trustee, incorporated by reference to
Exhibit 10(cc) of the 1998 Form 10-K.
</TABLE>
E-5
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
- ------------- --------------------------------------------------------------------------------
<S> <C> <C>
(w) Split Dollar Life Insurance Agreement dated as of October 16, 1998 between *
registrant and NationsBank, N. A., as Trustee under that certain Irrevocable
Trust Agreement No. 2 dated October 1, 1998, by and between James H.
Hance, Jr., as Grantor, and NationsBank, N. A., as Trustee, incorporated by
reference to Exhibit 10(dd) of the 1998 Form 10-K.
(x) Split Dollar Life Insurance Agreement dated as of September 28, 1998 between *
registrant and J. Steele Alphin, as Trustee under that certain Irrevocable
Trust Agreement dated June 23, 1998, by and between Kenneth D. Lewis, as
Grantor, and J. Steele Alphin, as Trustee, incorporated by reference to Exhibit
10(ee) of the 1998 Form 10-K.
(y) Employment Agreement dated as of April 10, 1998 between registrant and *
James H. Hance, Jr., incorporated by reference to Exhibit 10.4 of registrant's
Registration No. 333-60553.
(z) Employment Agreement dated as of April 10, 1998 between registrant and *
Kenneth D. Lewis, incorporated by reference to Exhibit 10.5 of registrant's
Registration No. 333-60553.
(aa) Employment Agreement dated as of April 10, 1998 between registrant and *
Michael J. Murray, incorporated by reference to Exhibit 10.2 of registrant's
Registration No. 333-60553.
(bb) Agreement and Plan of Reorganization by and between registrant and the
former BankAmerica Corporation, dated as of April 10, 1998, incorporated by
reference to Exhibit 2.1 of registrant's Registration No. 333-60553.
(cc) Plan of Reincorporation Merger by and between registrant and NationsBank
(DE) Corporation, dated as of August 3, 1998, incorporated by reference to
Exhibit 2.2 of registrant's Registration No. 333-60553.
(dd) Split Dollar Life Insurance Agreement dated as of August, 1999 between *
registrant and Bank of America, N.A., as Trustee under The Vandiver Family
Trust Dated August 12, 1999.
(ee) Split Dollar Life Insurance Agreement dated as of December 31, 1999 between *
registrant and Bank of America, N.A., as Trustee under the Michael J. Murray
and Christine A. Murray 1999 Irrevocable Trust dated December 11, 1999.
11 Earnings per share computation. Included in Note 10 of the consolidated
financial statements.
12 (a) Ratio of Earnings to Fixed Charges.
(b) Ratio of Earnings to Fixed Charges and Preferred Dividends.
21 List of Subsidiaries.
23 Consent of PricewaterhouseCoopers LLP.
24 (a) Power of Attorney.
(b) Corporate Resolution.
27 Financial Data Schedule.
</TABLE>
- ---------
* Denotes executive compensation plan or arrangement.
E-6
Exhibit 4(l)
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
AGENCY AGREEMENT
RELATING TO
BANK OF AMERICA CORPORATION
and
BANK OF AMERICA, N.A.
U.S. $15,000,000,000
Euro Medium-Term Note Program
AMONG
BANK OF AMERICA CORPORATION
and
BANK OF AMERICA, N.A.
as Issuers
and
THE CHASE MANHATTAN BANK, London Branch
as Issuing and Principal Paying Agent
and
CHASE MANHATTAN BANK LUXEMBOURG S.A.
as Paying Agent
Dated as of July 30, 1999
- --------------------------------------------------------------------------------
<PAGE>
INDEX
<TABLE>
<CAPTION>
Clause Page
- ------ ----
<S> <C> <C>
1. Definitions and Interpretation...........................................................................1
2. Appointments of Agent, Paying Agents and Calculation Agents..............................................2
3. Issue of Temporary Global Notes..........................................................................4
4. Determination of Exchange Date, Issue of Permanent Global Notes or Definitive Notes and
Determination of Restricted Period.......................................................................4
5. Issue of Definitive Notes................................................................................5
6. Terms of Issue...........................................................................................6
7. Payments.................................................................................................7
8. Determinations and Notifications in Respect of Notes and Interest Determination..........................8
9. Notice of any Withholding or Deduction..................................................................10
10. Duties of the Agent in Connection with Early Redemption.................................................11
11. Receipt and Publication of Notices; Receipt of Certificates.............................................12
12. Cancellation of Notes, Receipts, Coupons and Talons.....................................................12
13. Issue of Replacement Notes, Receipts, Coupons and Talons................................................13
14. Copies of Documents Available for Inspection............................................................14
15. Meetings of Noteholders.................................................................................14
16. Repayment by the Agent..................................................................................14
17. Conditions of Appointment...............................................................................14
18. Communication Between the Parties.......................................................................15
19. Changes in Agent and Paying Agents......................................................................15
20. Merger and Consolidation................................................................................17
21. Notification of Changes to Paying Agents................................................................17
22. Change of Specified Office..............................................................................17
23. Notices.................................................................................................17
24. Taxes and Stamp Duties..................................................................................19
25. Commissions, Fees and Expenses..........................................................................19
26. Indemnity...............................................................................................19
27. Reporting...............................................................................................20
28. Governing Law...........................................................................................20
29. Amendments..............................................................................................20
30. Descriptive Headings....................................................................................21
31. Counterparts............................................................................................21
</TABLE>
Schedule 1 - Form of Temporary Global Note
- ----------
Schedule 2 - Form of Permanent Global Note
- ----------
Schedule 3 - Form of Definitive Note, Coupon, Receipt and Talon
- ----------
Schedule 4 - Terms and Conditions
- ----------
Schedule 5 - Form of Certificate to be Presented by Euroclear or Cedelbank
- ----------
Schedule 6 - Form of Certificate of Beneficial Owner
- ----------
Schedule 7 - Provision for Meetings of Noteholders
- ----------
Schedule 8 - Form of Put Notice
- ----------
Schedule 9 - Form of Calculation Agency Agreement
- ----------
i
<PAGE>
THIS AMENDED AND RESTATED AGENCY AGREEMENT dated as of July 30, 1999 among:
(i) Bank of America Corporation, a Delaware corporation
(the "Corporation"), and Bank of America, N.A., a
national banking association and the successor in
interest to NationsBank, N.A., (the "Bank"; the Bank
and the Corporation are each an "Issuer" and
collectively, "Issuers");
(ii) The Chase Manhattan Bank, London Branch (the "Agent"
and the "Issuing and Principal Paying Agent"); and
(iii) Chase Manhattan Bank Luxembourg S.A. (the "Paying
Agent").
WHEREAS, the Corporation, the Agent and the Paying Agent wish
to update the arrangements originally agreed among them pursuant to that certain
Agency Agreement dated November 8, 1995, as amended and restated to the date
hereof, including the amendment and restatement dated November 16, 1998 (the
"Original Agency Agreement").
WHEREAS, the Issuers propose to issue up to U.S.
$10,000,000,000 with respect to the Corporation and $5,000,000,000 with respect
to the Bank (or its equivalent in other currencies) in aggregate principal
amount of Euro Medium-Term Notes (the "Notes") outstanding at any one time as
provided in an Amended and Restated Program Agreement of even date among the
Issuers, the Arrangers and the Dealers named therein (the "Program Agreement")
and as described in an Offering Circular of even date (the "Offering Circular");
WHEREAS, Notes will be issued in the denominations specified
in the relevant Pricing Supplement issued in connection with each Series and
each Tranche of Notes;
WHEREAS, beneficial interests in each Tranche of Notes will
initially be represented by a Temporary Global Note, exchangeable, as provided
in such Temporary Global Note, for beneficial interests in a Permanent Global
Note and, only under limited circumstances, beneficial interests in a Global
Note may be exchangeable for Definitive Notes, in each case in accordance with
the terms of the Global Notes; and
NOW, THEREFORE, it is agreed as follows:
1. DEFINITIONS AND INTERPRETATION
(1) Terms and expressions defined in the Program Agreement or
the Notes or used in the applicable Pricing Supplement shall have the same
meanings in this Agreement, except where the context requires otherwise.
(2) Without prejudice to the foregoing in this Agreement:
"outstanding" means, in relation to the Notes, all the Notes
issued other than (a) those which have been redeemed in accordance with the
Terms and Conditions, (b) those in respect of which the date for redemption in
accordance with the Terms and Conditions has occurred and the redemption moneys
(including all interest accrued on such Notes to the date for such redemption
and any interest or other amounts payable under the Terms and Conditions after
such date) have been duly paid to the Agent as provided in this Agreement and
remain available for payment against presentation and surrender of Notes and/or
Receipts and/or Coupons, as the case may be, (c) those which have become void
under Condition 8, (d) those which have been purchased and canceled as provided
in Condition 5 (or as provided in the Global Notes), (e) those mutilated or
defaced Notes which have been surrendered in exchange for replacement Notes
pursuant to Condition 10, (f) (for purposes only of determining how many Notes
are outstanding and without prejudice to their status for any other purpose)
those Notes alleged to have been lost, stolen or destroyed and in respect of
which replacement Notes have been issued pursuant to Condition 10, (g) any
Temporary Global Note to the extent that it shall have been exchanged for a
Permanent Global Note, in each
1
<PAGE>
case pursuant to their respective provisions; provided that for the purposes of
(i) ascertaining the right to attend and vote at any meeting of the Noteholders
and (ii) the determination of how many Notes are outstanding for the purposes of
Schedule 7, those Notes which are beneficially held by, or are held on behalf
of, an Issuer or any of its affiliates shall (unless and until ceasing to be so
held) be deemed not to remain outstanding;
"Paying Agents" means the Issuing and Principal Paying Agent
and the Paying Agent referred to above and such other Paying Agent or Agents as
may be appointed from time to time hereunder; and
(3) The term "Notes" as used in this Agreement shall include
the Permanent Global Note, the Definitive Notes and the Coupons and, as the case
may be, the Temporary Global Note. The term "Global Note" as used in this
Agreement shall include both the Temporary Global Note and the Permanent Global
Note, each of which is a "Global Note." The term "Noteholders" as used in this
Agreement shall mean the several persons who are for the time being the holders
of the Notes, which expression, while the Notes are represented by a Global
Note, shall mean (other than with respect to the payment of principal and
interest on the Notes, the right to which shall be vested as against the
relevant Issuer solely in the bearer of such Global Note in accordance with and
subject to its terms) the persons for the time being shown in the records of
Euroclear (as defined below) or Cedelbank (as defined below) (other than
Cedelbank, if Cedelbank shall be an accountholder of Euroclear, and Euroclear,
if Euroclear shall be an accountholder of Cedelbank) as the Noteholders of
particular principal amounts of Notes (in which regard any certificate or other
document issued by Euroclear or Cedelbank as to the principal amount of Notes
standing to the credit of the account of any person shall be conclusive and
binding for all purposes).
(4) For purposes of this Agreement, the Notes of each Series
shall form a separate series of Notes and the provisions of this Agreement shall
apply MUTATIS MUTANDIS separately and independently to the Notes of each Series
and in such provisions the expressions "Notes", "Noteholders", "Receipts",
"Receiptholders", "Coupons", "Couponholders", "Talons" and "Talonholders" shall
be construed accordingly.
(5) All references in this Agreement to principal and/or
interest or both in respect of the Notes or to any moneys payable by an Issuer
under this Agreement shall have the meaning set out in Condition 4.
(6) All references in this Agreement to the "relevant
currency" shall be construed as references to the currency in which the relevant
Notes and/or Coupons are denominated (or payable in the case of Dual Currency
Notes).
(7) In this Agreement, Clause headings are inserted for
convenience and ease of reference only and shall not affect the interpretation
of this Agreement. All references in this Agreement to the provisions of any
statute shall be deemed to be references to that statute as from time to time
modified, extended, amended or re-enacted or to any statutory instrument, order
or regulation made thereunder or under such re-enactment.
(8) All references in this Agreement to an agreement,
instrument or other document (including, without limitation, this Agreement, the
Program Agreement, the Notes and any Terms and Conditions appertaining thereto)
shall be construed as a reference to that agreement, instrument or document as
the same may be amended, modified, varied or supplemented from time to time.
(9) Any references herein to Euroclear and/or Cedelbank shall
be deemed to include, whenever the context permits, a reference to any
additional or alternative clearance system approved by the Issuers and the
Agent.
2. APPOINTMENTS OF AGENT, PAYING AGENTS AND CALCULATION AGENTS
(1) The Issuers hereby appoint The Chase Manhattan Bank,
London Branch, as agent, and The Chase Manhattan Bank, London Branch, hereby
accepts such appointment as agent of the Issuers, upon the terms and subject to
the conditions set out below, for the purposes of:
2
<PAGE>
(a) completing, authenticating and delivering Global
Notes and (if required) authenticating and delivering
Definitive Notes;
(b) exchanging Temporary Global Notes for Permanent
Global Notes or Definitive Notes, as the case may be, in
accordance with the terms of such Temporary Global Notes;
(c) under limited circumstances, exchanging Permanent
Global Notes for Definitive Notes in accordance with the terms
of such Permanent Global Notes;
(d) paying sums due on Global Notes and Definitive
Notes, Receipts and Coupons;
(e) determining the end of the Restricted Period
applicable to each Tranche;
(f) unless otherwise specified in the applicable
Pricing Supplement, determining the interest and/or other
amounts payable in respect of the Notes in accordance with the
Terms and Conditions;
(g) arranging on behalf of the Issuers for notices to
be communicated to the Noteholders;
(h) preparing and sending any required periodic
reports to the Ministry of Finance of Japan (the "MoF"), the
Bank of England or other appropriate authority and, subject to
confirmation from the relevant Issuer for the need for such
further reporting, ensuring that all necessary action is taken
to comply with any reporting requirements of any competent
authority of any relevant currency as may be in force from
time to time with respect to the Notes to be issued under the
Program;
(i) subject to the Procedures Memorandum, submitting
to the appropriate stock exchange such number of copies of
each Pricing Supplement which relates to Notes which are to be
listed on that stock exchange as it may reasonably require;
(j) receiving notice from Euroclear and/or Cedelbank
relating to the certificates of non-U.S. beneficial ownership
of the Notes; and
(k) performing all other obligations and duties
imposed upon it by the Terms and Conditions and this
Agreement.
(2) The relevant Issuer may, in its discretion, appoint one or
more agents outside the United States and its possessions (each a "Paying
Agent") for the payment (subject to applicable laws and regulations) of the
principal of and any interest and Additional Amounts, if any, (as defined in
Section 6 of the Terms and Conditions) on the Notes. Each Issuer hereby appoints
Chase Manhattan Bank Luxembourg S.A., at its office in Luxembourg at 5 rue
Plaetis, L-2338 Luxembourg-Grund, as its Paying Agent in Luxembourg. Each Paying
Agent shall have the powers and authority granted to and conferred upon it
herein and in the Notes, and such further powers and authority, acceptable to
it, to act on behalf of the relevant Issuer as such Issuer may hereafter grant
to or confer upon it in writing. As used herein, "paying agencies" shall mean
paying agencies maintained by a Paying Agent on behalf of an Issuer as provided
elsewhere herein.
(3) The Issuers will appoint an agent to make certain
calculations with respect to the Notes (the "Calculation Agent") pursuant to the
Terms and Conditions.
3
<PAGE>
3. ISSUE OF TEMPORARY GLOBAL NOTES
(1) Subject to sub-clause (2), following receipt of a
notification from an Issuer in respect of an issue of Notes (such notification
being by receipt of a confirmation (a "Confirmation"), substantially in the
applicable form set out in the Procedures Memorandum) the Agent will take the
steps required of the Agent in the Procedures Memorandum. For this purpose the
Agent is hereby authorized on behalf of such Issuer:
(a) to prepare a Temporary Global Note in accordance
with such Confirmation by attaching a copy of the applicable
Pricing Supplement to a copy of the relevant master Temporary
Global Note;
(b) to authenticate (or cause to be authenticated)
such Temporary Global Note;
(c) to deliver such Temporary Global Note to the
specified common depositary of Euroclear and/or Cedelbank in
accordance with the Confirmation against receipt from the
common depositary of confirmation that such common depositary
is holding the Temporary Global Note in safe custody for the
account of Euroclear and/or Cedelbank and to instruct
Euroclear or Cedelbank or both of them (as the case may be)
unless otherwise agreed in writing between the Agent and the
relevant Issuer (i) in the case of an issue of Notes on a
non-syndicated basis, to credit the Notes represented by such
Temporary Global Note to the Agent's distribution account, and
(ii) in the case of Notes issued on a syndicated basis, to
hold the Notes represented by such Temporary Global Note
pursuant to the relevant Issuer's order; and
(d) to ensure that the Notes of each Tranche are
assigned a Common Code and ISIN by Euroclear and Cedelbank
which are different from the Common Code and ISIN assigned to
Notes of any other Tranche of the same Series until 40 days
after the completion of the distribution of the Notes of such
Tranche as notified by the Agent to the relevant Dealer.
(2) The Agent shall only be required to perform its
obligations under sub-clause (1) if it holds:
(a) master Temporary Global Notes, duly executed by a
person or persons authorized to execute the same on behalf of
the relevant Issuer, which may be used by the Agent for the
purpose of preparing Temporary Global Notes in accordance with
paragraph (a) of that sub-clause; and
(b) master Permanent Global Notes, duly executed by a
person or persons authorized to execute the same on behalf of
the relevant Issuer, which may be used by the Agent for the
purpose of preparing Permanent Global Notes in accordance with
Clause 4 below.
(3) The Agent will provide Euroclear and/or Cedelbank with the
notifications, instructions or other information to be given by the Agent to
Euroclear and/or Cedelbank in accordance with the standard procedures of
Euroclear and/or Cedelbank.
4. DETERMINATION OF EXCHANGE DATE, ISSUE OF PERMANENT
GLOBAL NOTES OR DEFINITIVE NOTES AND DETERMINATION OF
RESTRICTED PERIOD
(1) (a) The Agent shall determine the Exchange Date for each
Temporary Global Note in accordance with the terms thereof.
Forthwith upon determining the Exchange Date in respect of any
Tranche, the Agent shall notify such determination to the
relevant Issuer, the relevant Dealer, Euroclear and Cedelbank.
(b) The Agent shall deliver, upon notice from
Euroclear or Cedelbank, a Permanent Global Note or Definitive
Notes, as the case may be, in accordance with the terms of the
4
<PAGE>
Temporary Global Note. Upon any such exchange of a portion of
a Temporary Global Note for an interest in a Permanent Global
Note the Agent is hereby authorized on behalf of the relevant
Issuer:
(i) for the first Tranche of any Series of
Notes, to prepare and complete a Permanent Global
Note in accordance with the terms of the Temporary
Global Note applicable to such Tranche by attaching a
copy of the applicable Pricing Supplement to a copy
of the relevant master Permanent Global Note;
(ii) for the first Tranche of any Series of
Notes, to authenticate such Permanent Global Note;
(iii) for the first Tranche of any Series of
Notes, to deliver such Permanent Global Note to the
common depositary which is holding the Temporary
Global Note applicable to such Tranche for the time
being on behalf of Euroclear and/or Cedelbank either
in exchange for such Temporary Global Note or, in the
case of a partial exchange, on entering details of
such partial exchange of the Temporary Global Note in
the relevant spaces in Schedule 2 of both the
Temporary Global Note and the Permanent Global Note,
and in either case against receipt from the common
depositary of confirmation that such common
depositary is holding the Permanent Global Note in
safe custody for the account of Euroclear and/or
Cedelbank; and
(iv) in any other case, to attach a copy of
the applicable Pricing Supplement to the Permanent
Global Note applicable to the relevant Series and
enter details of any exchange in whole or part as
aforesaid.
(2) (a) For a Tranche in respect of which there is only one
Dealer, the Agent will determine the end of the Restricted
Period in respect of such Tranche as being the fortieth day
following the date certified by the relevant Dealer to the
Agent as being the date as of which distribution of the Notes
of that Tranche was completed.
(b) For a Tranche in respect of which there is more
than one Dealer but is not issued on a syndicated basis, the
Agent will determine the end of the Restricted Period in
respect of such Tranche as being the fortieth day following
the latest of the dates certified by all the relevant Dealers
to the Agent as being the respective dates as of which
distribution of the Notes of that Tranche purchased by each
such dealer was completed.
(c) For a Tranche issued on a syndicated basis, the
Agent will determine the end of the Restricted Period in
respect of such Tranche as being the fortieth day following
the date certified by the Lead Manager to the Agent as being
the date as of which distribution of the Notes of that Tranche
was completed.
(d) Forthwith upon determining the end of the
Restricted Period in respect of any Tranche, the Agent shall
notify such determination to the relevant Issuer and the
relevant Dealer or the Lead Manager in the case of a
syndicated issue.
5. ISSUE OF DEFINITIVE NOTES
(1) Interests in a Global Note will be exchangeable for
Definitive Notes with Coupons attached only if: (i) an Event of Default (as
defined in the Terms and Conditions) occurs and is continuing, or (ii) the
relevant Issuer is notified that either Euroclear or Cedelbank has been closed
for business for a continuous period of 14 days (other than by reason of
holiday, statutory or otherwise) after the original issuance of the Notes or has
announced an intention permanently to cease business or has in fact done so and
no alternative clearance system approved by the Noteholders is available, or
(iii) the relevant Issuer, after notice to the Agent, determines to issue
5
<PAGE>
Notes in definitive form. Upon the occurrence of these events, the Agent shall
deliver the relevant Definitive Note(s) in accordance with the terms of the
relevant Global Note. For this purpose the Agent is hereby authorized on behalf
of the relevant Issuer:
(a) to authenticate such Definitive Note(s) in
accordance with the provisions of this Agreement; and
(b) to deliver such Definitive Note(s) to or to the
order of Euroclear and/or Cedelbank in exchange for such
Global Note.
The Agent shall notify the relevant Issuer forthwith upon receipt of a request
for issue of (a) Definitive Note(s) in accordance with the provisions of a
Global Note and this Agreement (and the aggregate principal amount of such
Temporary Global Note or Permanent Global Note, as the case may be, to be
exchanged in connection therewith).
(2) The relevant Issuer undertakes to deliver to the Agent
sufficient numbers of executed Definitive Notes with, if applicable, Receipts,
Coupons and Talons attached to enable the Agent to comply with its obligations
under this Clause 5.
6. TERMS OF ISSUE
(1) The Agent shall cause all Temporary Global Notes,
Permanent Global Notes and Definitive Notes delivered to and held by it under
this Agreement to be maintained in safe custody and shall ensure that such Notes
are issued only in accordance with the provisions of this Agreement and the
relevant Global Note and Terms and Conditions.
(2) Subject to the procedures set out in the Procedures
Memorandum, for the purposes of Clause 3(1) the Agent is entitled to treat a
telephone, telex or facsimile communication from a person purporting to be (and
who the Agent believes in good faith to be) the authorized representative of the
relevant Issuer named in the lists referred to in, or notified pursuant to,
Clause 17(7) as sufficient instructions and authority of such Issuer for the
Agent to act in accordance with Clause 3(l).
(3) If a person who has signed on behalf of the relevant
Issuer any Note not yet issued but held by the Agent in accordance with Clause
3(1) ceases to be authorized as described in Clause 17(7), the Agent shall
(unless such Issuer gives notice to the Agent that Notes signed by that person
do not constitute valid and binding obligations of such Issuer or otherwise
until replacements have been provided to the Agent) continue to have authority
to issue any such Notes, and the relevant Issuer hereby warrants to the Agent
that such Notes shall, unless notified as aforesaid, be valid and binding
obligations of such Issuer. Promptly upon such person ceasing to be authorized,
the relevant Issuer shall provide the Agent with replacement Notes and upon
receipt of such replacement Notes the Agent shall cancel and destroy the Notes
held by it which are signed by such person and shall provide to the relevant
Issuer a confirmation of destruction in respect thereof specifying the Notes so
canceled and destroyed.
(4) If the Agent pays an amount (the "Advance") to an Issuer
on the basis that a payment (the "Payment") has been, or will be, received from
a Dealer and if the Payment is not received by the Agent on the date the Agent
pays such Issuer, the Agent shall notify such Issuer by tested telex or
facsimile that the Payment has not been received and such Issuer shall repay to
the Agent the Advance and shall pay interest on the Advance (or the unreimbursed
portion thereof) from (and including) the date such Advance is made to (but
excluding) the earlier of repayment of the Advance and receipt by the Agent of
the Payment (at a rate quoted at that time by the Agent as its cost of funding
the Advance).
(5) Except in the case of issues where the Agent does not act
as receiving bank for the relevant Issuer in respect of the purchase price of
the Notes being issued, if on the relevant Issue Date a Dealer does not pay the
full purchase price due from it in respect of any Note (the "Defaulted Note")
and, as a result, the Defaulted Note remains in the Agent's distribution account
with Euroclear and/or Cedelbank) after such Issue Date,
6
<PAGE>
the Agent will continue to hold the Defaulted Note pursuant to the order of the
relevant Issuer. The Agent shall notify the relevant Issuer forthwith of the
failure of the Dealer to pay the full purchase price due from it in respect of
any Defaulted Note and, subsequently, shall notify such Issuer forthwith upon
receipt from the Dealer of the full purchase price in respect of such Defaulted
Note.
7. PAYMENTS
(1) The Agent shall advise the relevant Issuer, no later than
10 Business Days (as defined below) immediately preceding the date on which any
payment is to be made to the Agent pursuant to this sub-clause (1) of the
payment amount, value date and payment instructions and the relevant Issuer will
before 10:00 a.m. New York time on each date on which any payment in respect of
any Notes issued by it becomes due, transfer to an account specified by the
Agent such amount in the relevant currency as shall be sufficient for the
purposes of such payment in funds settled through such payment system as the
Agent and the relevant Issuer may agree.
(2) The relevant Issuer will ensure that no later than 4:00
p.m. (London time) on the second Business Day (as defined below) immediately
preceding the date on which any payment is to be made to the Agent pursuant to
sub-clause (1), the Agent shall receive from the paying bank of the relevant
Issuer an irrevocable confirmation in the form of a SWIFT message or tested
telex that such payment shall be made. For the purposes of this Clause 7
"Business Day" means a day which is both:
(a) a day (other than a Saturday or a Sunday) on
which commercial banks and foreign exchange markets settle
payments in London and in Charlotte, North Carolina; and
(b) in relation to a payment to be made in a
Specified Currency, a day on which commercial banks and
foreign exchange markets settle payments in the principal
financial center of the country of the relevant Specified
Currency (if other than London).
(3) The Agent shall ensure that payments of both principal and
interest in respect of any Temporary Global Note will be made only to the extent
that certification of non-U.S. beneficial ownership as required by U.S.
securities laws and U.S. Treasury regulations (in the form set out in the
Temporary Global Note) has been received from Euroclear and/or Cedelbank in
accordance with the terms thereof.
(4) Subject to the receipt by the Agent of the payment
confirmation as provided in sub-clause (2) above, the Agent or the relevant
Paying Agent shall pay or cause to be paid all amounts due in respect of the
Notes on behalf of the relevant Issuer in the manner provided in the Terms and
Conditions. If any payment provided for in sub-clause (l) is made late but
otherwise in accordance with the provisions of this Agreement, the Agent and
each Paying Agent shall nevertheless make payments in respect of the Notes as
aforesaid following receipt by it of such payment.
(5) If for any reason the Agent considers in its sole
discretion that the amounts to be received by the Agent pursuant to sub-clause
(1) will be, or the amounts actually received by it pursuant thereto are,
insufficient to satisfy all claims in respect of all payments then falling due
in respect of the Notes, neither the Agent nor any Paying Agent shall be obliged
to pay any such claims until the Agent has received the full amount of all such
payments. Should the Agent or any Paying Agent elect not to make payment of
amounts falling due in respect of the Notes as aforesaid, it shall advise the
relevant Issuer of any such decision as soon as practicable by telephone with
confirmation by telefax.
(6) Without prejudice to sub-clauses (4) and (5), if the Agent
pays any amounts to the holders of Notes, Receipts or Coupons or to any Paying
Agent at a time when it has not received payment in full in respect of the
relevant Notes in accordance with sub-clause (1) (the excess of the amounts so
paid over the amounts so received being the "Shortfall"), the relevant Issuer
will, in addition to paying amounts due under sub-clause (l), pay to the Agent
on demand interest (at a rate which represents the Agent's cost of funding the
Shortfall) on the Shortfall (or the unreimbursed portion thereof) until the
receipt in full by the Agent of the Shortfall.
7
<PAGE>
(7) The Agent shall on demand promptly reimburse each Paying
Agent for payments in respect of Notes properly made by such Paying Agent in
accordance with this Agreement and the Terms and Conditions unless the Agent has
notified the Paying Agent, prior to the opening of business in the location of
the office of the Paying Agent through which payment in respect of the Notes can
be made prior to the day on which such Agent has to give payment instructions in
respect of the due date of a payment in respect of the Notes, that the Agent
does not expect to receive sufficient funds to make payment of all amounts
falling due in respect of such Notes.
(8) If the Agent pays out on or after the due date therefor,
or becomes liable to pay out, funds on the assumption that the corresponding
payment by the relevant Issuer has been or will be made and such payment has in
fact not been so made by such Issuer, then such Issuer shall on demand reimburse
the Agent for the relevant amount, and pay interest to the Agent on such amount
from the date on which it is paid out to the date of reimbursement at a rate per
annum equal to the cost to the Agent of funding the amount paid out, as
certified by the Agent and expressed as a rate per annum. For the avoidance of
doubt, the provisions of the Terms and Conditions as to subordination shall not
apply to the relevant Issuer's obligations under this sub-clause (8).
(9) While any Notes are represented by a Global Note or Global
Notes, all payments due in respect of such Notes shall be made to, or to the
order of, the holder of the Global Note or Global Notes, subject to and in
accordance with the provisions of the Global Note or Global Notes. On the
occasion of any such payment the Paying Agent to which any Global Note was
presented for the purpose of making such payment shall cause the appropriate
Schedule to the relevant Global Note to be annotated so as to evidence the
amounts and dates of such payments of principal and/or interest as applicable.
(10) If the amount of principal and/or interest then due for
payment is not paid in full (otherwise than by reason of a deduction required by
law to be made therefrom), the Paying Agent to which a Note is presented for the
purpose of making such payment shall make a record of such shortfall on the Note
and such record shall, in the absence of manifest error, be prima facie evidence
that the payment in question has not to that extent been made.
8. DETERMINATIONS AND NOTIFICATIONS IN RESPECT OF NOTES
AND INTEREST DETERMINATION
(A) DETERMINATIONS AND NOTIFICATIONS
(1) The Agent shall make all such determinations and
calculations (howsoever described) as it is required to do under the Terms and
Conditions, all subject to and in accordance with the Terms and Conditions,
provided that certain calculations with respect to the Notes, and associated
publication or notification, shall be made by the Calculation Agent in
accordance with the Terms and Conditions.
(2) The Agent or the Calculation Agent, as the case may be,
shall not be responsible to the relevant Issuer or to any third party (except in
the event of gross negligence, default or bad faith of the Agent or the
Calculation Agent) as a result of the Agent or the Calculation Agent having
acted in good faith on any quotation given by any Reference Bank which
subsequently may be found to be incorrect.
(3) The Agent or the Calculation Agent, as the case may be,
shall promptly notify (and confirm in writing to) the relevant Issuer, the other
Paying Agents and (in respect of a Series of Notes listed on a stock exchange)
the relevant stock exchange of, INTER ALIA, each Rate of Interest, Interest
Amount and Interest Payment Date and all other amounts, rates and dates which it
is obliged to determine or calculate under the Terms and Conditions as soon as
practicable after the determination thereof (and in any event no later than the
tenth Business Day as defined in Clause 7(2) immediately preceding the date on
which payment is to be made to the Agent pursuant to Clause 7(l)) and of any
subsequent amendment thereto pursuant to the Terms and Conditions.
(4) The Agent or the Calculation Agent, as the case may be,
shall use its best efforts to cause each Rate of Interest, Interest Amount and
Interest Payment Date and all other amounts, rates and dates which it is
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obliged to determine or calculate under the Terms and Conditions to be published
as required in accordance with the Terms and Conditions as soon as possible
after their determination or calculation.
(5) If the Agent or the Calculation Agent, as the case may be,
does not at any material time for any reason determine and/or calculate and/or
publish the Rate of Interest, Interest Amount and/or Interest Payment Date in
respect of any Interest Period or any other amount, rate or date as provided in
this Clause 8, it shall forthwith notify the relevant Issuer and the Paying
Agents of such fact.
(6) Determinations with regard to Notes (including, without
limitation, Indexed Notes and Dual Currency Notes) shall be made by the
Calculation Agent specified in the applicable Pricing Supplement in the manner
specified in the applicable Pricing Supplement. Unless otherwise agreed between
the relevant Issuer and the relevant Dealer, such determinations shall be made
on the basis of a Calculation Agency Agreement substantially in the form of
Schedule 9 to this Agreement.
(7) For the purposes of monitoring the aggregate principal
amount of Notes issued under the Program, the Agent shall determine the U.S.
Dollar equivalent of the principal amount of each issue of Notes denominated in
another currency, each issue of Dual Currency Notes, each Issue of Partly Paid
Notes and each issue of Indexed Notes as follows:
(A) the U.S. Dollar equivalent of Notes denominated
in a currency other than U.S. Dollars shall be determined as
of the Agreement Date for such Notes on the basis of the spot
rate for the sale of the U.S. Dollar against the purchase of
the relevant currency quoted by a foreign exchange dealer
selected by the relevant Issuer on the relevant day of
calculation; and
(B) the U.S. Dollar equivalent of Dual Currency Notes
and Indexed Notes shall be calculated in the manner specified
above by reference to the original nominal amount of such
Notes; and
(C) the U.S. Dollar equivalent of Zero Coupon Notes
and other Notes issued at a discount shall be calculated in
the manner specified above by reference to the net proceeds
received by the relevant Issuer for the relevant issue; and
(D) the U.S. Dollar equivalent of Partly Paid Notes
shall be determined in the manner specified above by reference
to the original principal amount of such Notes regardless of
the amount paid on the Notes.
(b) INTEREST DETERMINATION, SCREEN RATE DETERMINATION
INCLUDING FALLBACK PROVISIONS
(1) Where screen rate determination ("Screen Rate
Determination") is specified in the applicable Pricing Supplement as the manner
in which the Rate of Interest is to be determined, the Rate of Interest for each
Interest Period, subject as provided below, will be either:
(A) the offered quotation (if there is only one
quotation on the relevant screen page (the "Relevant Screen
Page")); or
(B) the arithmetic mean (rounded if necessary to the
fifth decimal place, with 0.000005 being rounded upwards) of
the offered quotations,
(expressed as a percentage rate per annum), for the reference rate ("Reference
Rate") which appears or appear, as the case may be, on the Relevant Screen Page
at approximately 11:00 a.m. (London time) on the interest determination date
("Interest Determination Date") in question plus or minus (as indicated in the
applicable Pricing Supplement) the Margin (if any), all as determined by the
Calculation Agent. If five or more such offered quotations are available on the
Relevant Screen Page, the highest (or, if there is more than one such highest
quotation, one only of such quotations) and the lowest (or, if there is more
than one such lowest quotation, one only of such quotations)
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shall be disregarded by the Calculation Agent for the purpose of determining the
arithmetic mean (rounded as provided above) of such offered quotations.
(2) If the Relevant Screen Page is not available or if, in the
case of sub-clause (b)(1)(A) above, no such offered quotation appears or, in the
case of sub-clause (b)(1)(B) above, fewer than three such offered quotations
appear, in each case as at the time specified in the preceding paragraph, the
Calculation Agent shall at its sole discretion request the principal London
office of each of the Reference Banks (defined below) to provide the Calculation
Agent with its offered quotation (expressed as a percentage rate per annum) for
deposits in the Specified Currency for the relevant Interest Period to leading
banks in the London inter-bank market at approximately 11:00 a.m. (London time)
on the Interest Determination Date in question. If two or more of the Reference
Banks provide the Calculation Agent with such offered quotations, the Rate of
Interest for such Interest Period shall be the arithmetic mean (rounded if
necessary to the fifth decimal place with 0.000005 being rounded upwards) of
such offered quotations plus or minus (as appropriate) the Margin (if any), all
as determined by the Calculation Agent.
(3) If on any Interest Determination Date one only or none of
the Reference Banks provides the Calculation Agent with such offered quotations
as provided in the preceding paragraph, the Rate of Interest for the relevant
Interest Period shall be the rate per annum which the Calculation Agent
determines as being the arithmetic mean (rounded if necessary to the fifth
decimal place, with 0.000005 being rounded upwards) of the rates, as
communicated to (and at the request of) the Calculation Agent by the Reference
Banks or any two or more of them, at which such banks offered, at approximately
11:00 a.m. (London time) on the relevant Interest Determination Date, deposits
in the Specified Currency for the relevant Interest Period by leading banks in
the London inter-bank market plus or minus (as appropriate) the Margin (if any).
If fewer than two of the Reference Banks provide the Calculation Agent with such
offered quotations, the Rate of Interest shall be the offered quotation for
deposits in the Specified Currency for the relevant Interest Period, or the
arithmetic mean (rounded as provided above) of the offered quotations for
deposits in the Specified Currency for the relevant Interest Period, at which,
at approximately 11:00 a.m. (London time) on the relevant Interest Determination
Date, any one or more banks informs the Calculation Agent it is quoting to
leading banks in the London inter-bank market plus or minus (as appropriate) the
Margin (if any), provided that, if the Rate of Interest cannot be determined in
accordance with the foregoing provisions of this paragraph, the Rate of Interest
shall be determined as at the last preceding Interest Determination Date (though
substituting, where a different Margin is to be applied to the relevant Interest
Period from that which applied to the last preceding Interest Period, the Margin
relating to the relevant Interest Period, in place of the Margin relating to
that last preceding Interest Period).
(4) If the Reference Rate from time to time in respect of
Floating Rate Notes is specified in the applicable Pricing Supplement as being
other than the London inter-bank offered rate, the Rate of Interest in respect
of such Notes will be determined as provided in the applicable Pricing
Supplement.
In this Clause 8, the expression "Reference Banks" means, in
the case of sub-clause (b)(1)(A) above, those banks whose offered rates were
used to determine such quotation when such quotation last appeared on the
Relevant Screen Page and in the case of sub-clause (b)(1)(B) above, those banks
whose offered quotations last appeared on the Relevant Screen Page when no fewer
than three such offered quotations appeared.
9. NOTICE OF ANY WITHHOLDING OR DEDUCTION
If the relevant Issuer, in respect of any payment, is
compelled to withhold or deduct any amount for or on account of taxes, duties,
assessments or governmental charges as specifically contemplated under the Terms
and Conditions, the relevant Issuer shall give notice thereof to the Agent as
soon as it becomes aware of the requirement to make such withholding or
deduction and shall give to the Agent such information as it shall require to
enable it to comply with such requirement.
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10. DUTIES OF THE AGENT IN CONNECTION WITH EARLY REDEMPTION
(1) If the relevant Issuer decides to redeem any outstanding
Notes (in whole or in part) for the time being outstanding prior to their
Maturity Date or the Interest Payment Date falling in the Redemption Month (as
the case may be) in accordance with the Terms and Conditions, such Issuer shall
give notice of such decision to the Agent not less than seven London Business
Days before the date on which such Issuer will give notice to the Noteholders in
accordance with the Terms and Conditions of such redemption in order to enable
the Agent to undertake its obligations herein and in the Terms and Conditions.
(2) If only some of the Notes of like tenor and of the same
Series are to be redeemed on such date, the Agent shall make the required
drawing in accordance with the Terms and Conditions but shall give the relevant
Issuer reasonable notice of the time and place proposed for such drawing. Where
partial redemptions are to be effected when there are Definitive Notes
outstanding, the Issuing and Principal Paying Agent will select by lot the Notes
to be redeemed from the outstanding Notes in compliance with all applicable laws
and stock exchange requirements and deemed by the Agent to be appropriate and
fair; and where partial redemptions are to be effected when there are no
Definitive Notes outstanding, the rights of Noteholders will be governed by the
standard provisions of Euroclear and Cedelbank. Notice of any partial redemption
and, when there are Definitive Notes outstanding, of the serial numbers of the
Notes so drawn, will be given by the Agent to the Noteholders in accordance with
the terms of the Notes and this Agreement.
(3) The Agent shall publish the notice on behalf of and at the
expense of the relevant Issuer required in connection with any such redemption
and shall at the same time also publish a separate list of the serial numbers of
any Notes previously drawn and not presented for redemption. Such notice shall
specify the date fixed for redemption, the redemption amount, the manner in
which redemption will be effected and, in the case of a partial redemption, the
serial numbers of the Notes to be redeemed. Such notice will be published in
accordance with the Terms and Conditions. The Agent will also notify the other
Paying Agents of any date fixed for redemption of any Notes.
(4) Immediately prior to the date on which any notice of
redemption is to be given to the Noteholders, the relevant Issuer shall deliver
to the Agent a certificate stating that such Issuer is entitled to effect such
redemption and setting forth in reasonable detail a statement of facts showing
that all conditions precedent to such redemption have occurred or been satisfied
and shall comply with all notice requirements provided for in the Terms and
Conditions.
(5) Each Paying Agent will keep a stock of notices (each a
"Put Notice") in the form set out in Schedule 8 and will make such notices
available on demand to holders of Notes, the Terms and Conditions of which
provide for redemption at the option of Noteholders. Upon receipt of any Note
deposited in the exercise of such option in accordance with the Terms and
Conditions, the Paying Agent with which such Note is deposited shall hold such
Note (together with any Coupons, if any, relating to it and deposited with it)
on behalf of the depositing Noteholder (but shall not, save as provided below,
release it) until the due date for redemption of the relevant Note consequent
upon the exercise of such option, when, subject as provided below, it shall
present such Note (and any such Coupons, if any) to itself for payment of the
amount due thereon together with any interest due on such date in accordance
with the Terms and Conditions and shall pay such moneys in accordance with the
directions of the Noteholder contained in the Put Notice. If, prior to such due
date for its redemption, such Note becomes immediately due and payable or if
upon due presentation payment of such redemption moneys is improperly withheld
or refused, the Paying Agent concerned shall post such Note (together with any
such Coupons, if any) by uninsured post to, and at the risk of, the relevant
Noteholder unless the Noteholder has otherwise requested and paid the costs of
such insurance to the relevant Paying Agent at the time of depositing the Notes
at such address as may have been given by the Noteholder in the Put Notice. At
the end of each period for the exercise of such option, each Paying Agent shall
promptly notify the Agent of the principal amount of the Notes in respect of
which such option has been exercised with it together with their serial numbers
and the Agent shall promptly notify such details to the relevant Issuer.
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11. RECEIPT AND PUBLICATION OF NOTICES; RECEIPT OF
CERTIFICATES
(1) Upon the receipt by the Agent of a demand or notice from
any Noteholder in accordance with the Terms and Conditions, the Agent shall
forward a copy thereof to the relevant Issuer.
(2) On behalf of and at the request and expense of the
relevant Issuer, the Agent shall cause to be published all notices required to
be given by such Issuer to the Noteholders in accordance with the Terms and
Conditions.
(3) The Agent shall have no responsibility to obtain the
certificate of the relevant Issuer delivered by such Issuer to the Agent
pursuant to Condition 9 if such a certificate is required to be issued, nor
shall the Agent have any responsibility to notify the relevant Issuer that the
Agent has not obtained such a certificate from such Issuer if such a certificate
is required to be issued.
12. CANCELLATION OF NOTES, RECEIPTS, COUPONS AND TALONS
(1) All Notes which are redeemed, all Receipts or Coupons
which are paid and all Talons which are exchanged shall be delivered outside the
United States to the Agent, and shall be canceled by the Agent. In addition, all
Notes which are purchased by or on behalf of the relevant Issuer or any of its
subsidiaries and are surrendered to the Agent for cancellation, together (in the
case of Notes in definitive form) with all unmatured Receipts, Coupons or Talons
(if any) attached thereto or surrendered therewith, shall be canceled by the
Agent.
(2) The relevant Issuer shall have the right to request that
the Agent provide, without limitation, the following information:
(a) the aggregate principal amount of Notes which
have been redeemed and the aggregate amount paid in respect
thereof;
(b) the number of Notes canceled together (in the
case of Definitive Notes, if any) with details of all
unmatured Receipts, Coupons or Talons (if any) attached
thereto or delivered therewith;
(c) the aggregate amount paid in respect of interest
on the Notes;
(d) the total number by maturity date of Receipts,
Coupons and Talons so canceled; and
(e) (in the case of Definitive Notes, if any) the
serial numbers of such Notes,
which shall be given to the relevant Issuer by the Agent as soon as reasonably
practicable and in any event within three months after the date of such
repayment or, as the case may be, payment or exchange.
(3) The Agent shall destroy all canceled Notes, Receipts,
Coupons and Talons.
(4) The Agent shall keep a full and complete record of all
Notes, Receipts, Coupons and Talons (other than serial numbers of Coupons,
except those which have been replaced pursuant to Condition 10) and of all
replacement Notes, Receipts, Coupons or Talons issued in substitution for
mutilated, defaced, destroyed, lost or stolen Notes, Receipts, Coupons or
Talons. The Agent shall at all reasonable times make such record available to
the relevant Issuer and any persons authorized by it for inspection and for the
taking of copies thereof or extracts therefrom.
(5) All records and certificates made or given pursuant to
this Clause 12 and Clause 13 shall make a distinction between Notes, Receipts,
Coupons and Talons of each Series.
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13. ISSUE OF REPLACEMENT NOTES, RECEIPTS, COUPONS AND TALONS
(1) The Issuers will cause a sufficient quantity of additional
forms of Notes, Receipts, Coupons and Talons to be available, upon request to
the Agent in Luxembourg (in such capacity, the "Replacement Agent") at its
specified office for the purpose of issuing replacement Notes, Receipts, Coupons
and Talons as provided below.
(2) The Replacement Agent will, subject to and in accordance
with the Terms and Conditions and the following provisions of this Clause 13,
authenticate and cause to be delivered any replacement Notes, Receipts, Coupons
and Talons which the relevant Issuer may determine to issue in place of Notes,
Receipts, Coupons and Talons which have been lost, stolen, mutilated, defaced or
destroyed.
(3) In the case of a mutilated or defaced Note, the
Replacement Agent shall ensure that (unless otherwise covered by such indemnity
as the relevant Issuer may reasonably require) any replacement Note will only
have attached to it Receipts, Coupons and Talons corresponding to those (if any)
attached to the mutilated or defaced Note which is presented for replacement.
(4) The Replacement Agent shall not issue any replacement
Note, Receipt, Coupon or Talon unless and until the applicant therefor shall
have:
(a) paid such reasonable costs and expenses as may be
incurred in connection therewith, including any tax or other
governmental charge that may be imposed in relation thereto;
(b) furnished it with such evidence and indemnity as
the relevant Issuer may reasonably require; and
(c) in the case of any mutilated or defaced Note,
Receipt, Coupon or Talon, surrendered it to the Replacement
Agent.
(5) The Replacement Agent shall cancel any mutilated or
defaced Notes, Receipts, Coupons and Talons in respect of which replacement
Notes, Receipts, Coupons and Talons have been issued pursuant to this Clause 13
and shall furnish the relevant Issuer with a certificate stating the serial
numbers of the Notes, Receipts, Coupons and Talons so canceled and, unless
otherwise instructed by such Issuer in writing, shall destroy such canceled
Notes, Receipts, Coupons and Talons and furnish such Issuer with a destruction
certificate stating the serial number of the Notes (in the case of Definitive
Notes) and the number by maturity date of Receipts, Coupons and Talons so
destroyed.
(6) The Replacement Agent shall, on issuing any replacement
Note, Receipt, Coupon or Talon, forthwith inform the relevant Issuer, the Agent
and the other Paying Agents of the serial number of such replacement Note,
Receipt, Coupon or Talon issued and (if known) of the serial number of the Note,
Receipt, Coupon or Talon in place of which such replacement Note, Receipt,
Coupon or Talon has been issued. Whenever replacement Receipts, Coupons or
Talons are issued pursuant to the provisions of this Clause 13, the Replacement
Agent shall also notify the Agent and the other Paying Agents of the maturity
dates of the lost, stolen, mutilated, defaced or destroyed Receipts, Coupons or
Talons and of the replacement Receipts, Coupons or Talons issued.
(7) The Agent shall keep a full and complete record of all
replacement Notes, Receipts, Coupons and Talons issued and shall make such
record available at all reasonable times to the relevant Issuer and any persons
authorized by it for inspection and for the taking of copies thereof or extracts
therefrom.
(8) Whenever any Note, Receipt, Coupon or Talon for which a
replacement Note, Receipt, Coupon or Talon has been issued and in respect of
which the serial number is known is presented to the Agent or any of the Paying
Agents for payment, the Agent or, as the case may be, the relevant Paying Agent
shall immediately send notice thereof to the relevant Issuer and the other
Paying Agents and shall not make payment in respect thereto, until instructed by
such Issuer.
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14. COPIES OF DOCUMENTS AVAILABLE FOR INSPECTION
The Agent and the Paying Agents shall hold available for
inspection copies of:
(i) the organizational documents of the Issuers;
(ii) the latest available audited consolidated
financial statements of the Corporation and its consolidated
subsidiaries, beginning with such financial statements for the
fiscal years ended December 31, 1996, December 31, 1997 and
December 31, 1998 and the publicly available portions of the
Call Reports with respect to the Bank beginning with the
period ending December 31, 1998;
(iii) the Program Agreement and this Agreement;
(iv) the Offering Circular; and
(v) any future offering circulars, information
memoranda and supplements (except that a Pricing Supplement
relating to any unlisted Note will only be available for
inspection by a holder of such Note and such holder must
produce evidence satisfactory to the Paying Agent as to
ownership) to the Offering Circular and any other documents
incorporated therein by reference and in the case of a
syndicated issue of listed Notes, the syndication agreement
(or equivalent document).
For this purpose, the Issuers shall furnish the Agent and the
Paying Agents with sufficient copies of each of such documents.
15. MEETINGS OF NOTEHOLDERS
(1) The provisions of Schedule 7 hereto shall apply to
meetings of the Noteholders and shall have effect in the same manner as if set
out in this Agreement.
(2) Without prejudice to sub-clause (l), each of the Agent and
the Paying Agents on the request of any Noteholder shall issue voting
certificates and block voting instructions in accordance with Schedule 7 and
shall forthwith give notice to the relevant Issuer in writing of any revocation
or amendment of a block voting instruction. Each of the Agent and the Paying
Agents will keep a full and complete record of all voting certificates and block
voting instructions issued by it and, not less than 24 hours before the time
appointed for holding a meeting or adjourned meeting, will deposit at such place
as the Agent shall designate or approve, full particulars of all voting
certificates and block voting instructions issued by it in respect of such
meeting or adjourned meeting.
16. REPAYMENT BY THE AGENT
Upon the relevant Issuer being discharged from its obligation
to make payments in respect of any Notes pursuant to the relevant Terms and
Conditions, and provided that there is no outstanding, bona fide and proper
claim in respect of any such payments, the Agent shall forthwith on written
demand pay to the relevant Issuer sums equivalent to any amounts paid to it by
such Issuer for the purposes of such payments.
17. CONDITIONS OF APPOINTMENT
(1) The Agent shall be entitled to deal with money paid to it
by an Issuer for the purpose of this Agreement in the same manner as other money
paid to a banker by its customers except:
(a) that it shall not exercise any right of set-off,
lien or similar claim in respect thereof; and
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(b) as provided in sub-clause (2) below; and
(c) that it shall not be liable to account to the
relevant Issuer for any interest thereon.
(2) In acting hereunder and in connection with the Notes, the
Agent and the Paying Agents shall act solely as agents of the Issuers and will
not thereby assume any obligations towards or relationship of agency or trust
for or with any of the owners or holders of the Notes, Receipts, Coupons or
Talons.
(3) The Agent and the Paying Agents hereby undertake to the
Issuers to perform such obligations and duties, and shall be obliged to perform
such duties and only such duties as are herein, in the Terms and Conditions and
in the Procedures Memorandum specifically set forth and no implied duties or
obligations shall be read into this Agreement or the Notes against the Agent and
the Paying Agents, other than the duty to act honestly and in good faith.
(4) The Agent may consult with legal and other professional
advisers and the opinion of such advisers shall be full and complete protection
in respect of any action taken, omitted or suffered hereunder in good faith and
in accordance with the opinion of such advisers.
(5) Each of the Agent and the Paying Agents shall be protected
and shall incur no liability for or in respect of any action taken, omitted or
suffered in reliance upon any instruction, request or order from the relevant
Issuer or any notice, resolution, direction, consent, certificate, affidavit,
statement, cable, telex or other paper or document which it reasonably believes
to be genuine and to have been delivered, signed or sent by the proper party or
parties or upon written instructions from the relevant Issuer.
(6) Any of the Agent and the Paying Agents and their officers,
directors and employees may become the owner of, or acquire any interest in any
Notes, Receipts, Coupons or Talons with the same rights that it or he would have
if the Agent or the relevant Paying Agent, as the case may be, concerned were
not appointed hereunder, and may engage or be interested in any financial or
other transactions with the relevant Issuer and may act on, or as depositary,
trustee or agent for, any committee or body of Noteholders or Couponholders or
in connection with any other obligations of the relevant Issuer as freely as if
the Agent or the relevant Paying Agent, as the case may be, were not appointed
hereunder.
(7) The relevant Issuer shall provide the Agent with a
certified copy of the list of persons authorized to execute documents and take
action on its behalf in connection with this Agreement and shall notify the
Agent immediately in writing if any of such persons ceases to be so authorized
or if any additional person becomes so authorized together, in the case of an
additional authorized person, with evidence satisfactory to the Agent that such
person has been so authorized, provided, however, that the Agent shall not incur
any liability for any losses, claims or damages resulting from the relevant
Issuer's failure to provide such notification to the Agent.
18. COMMUNICATION BETWEEN THE PARTIES
A copy of all communications relating to the subject matter of
this Agreement between any Issuer and the Noteholders, Receiptholders or
Couponholders and any of the Paying Agents shall be sent to the Agent by the
relevant Paying Agent.
19. CHANGES IN AGENT AND PAYING AGENTS
(1) The Issuers agree that, for so long as any Note is
outstanding, or until moneys for the payment of all amounts in respect of all
outstanding Notes have been made available to the Agent or have been returned to
the relevant Issuer as provided herein:
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(a) so long as any Notes are listed on any stock
exchange, there will at all times be a Paying Agent with a
specified office in such place as may be required by the rules
and regulations of the relevant stock exchange;
(b) there will at all times be a Paying Agent with a
specified office in a city in continental Europe; and
(c) there will at all times be an Agent.
In addition, the Issuers shall appoint a Paying Agent having a
specified office in New York City in the circumstances described in the final
paragraph of Condition 4(b). Any variation, termination, appointment or change
shall only take effect (other than in the case of insolvency (as provided in
sub-clause (5)), when it shall be of immediate effect) after not less than 30
nor more than 45 days' prior notice thereof shall have been given to the
Noteholders in accordance with the Terms and Conditions.
(2) The Agent may (subject as provided in sub-clause (4)) at
any time resign as Agent by giving at least 90 days' written notice to the
Issuers of such intention on its part, specifying the date on which its desired
resignation shall become effective, provided that such date shall never be less
than three months after the receipt of such notice by the Issuers unless the
Issuers agree to accept less notice.
(3) The Agent may (subject as provided in sub-clause (4)) be
removed at any time on at least 45 days' notice by the filing with it of an
instrument in writing signed on behalf of each Issuer specifying such removal
and the date when it shall become effective.
(4) Any resignation under sub-clause (2) or removal under
sub-clause (3) shall only take effect upon the appointment by the Issuers as
hereinafter provided, of a successor Agent and (other than in cases of
insolvency of the Agent) on the expiration of the notice to be given under
Clause 21. The Issuers agree with the Agent that if, by the day falling ten days
before the expiration of any notice under sub-clause (2), the Issuers have not
appointed a successor Agent, then the Agent shall be entitled, on behalf of the
Issuers, to appoint as a successor Agent in its place a reputable financial
institution of good standing as it may reasonably determine to be capable of
performing the duties of the Agent hereunder.
(5) In case at any time the Agent resigns, or is removed, or
becomes incapable of acting or is adjudged bankrupt or insolvent, or files a
voluntary petition in bankruptcy or makes an assignment for the benefit of its
creditors or consents to the appointment of an administrator, liquidator or
administrative or other receiver of all or a substantial part of its property,
or admits in writing its inability to pay or meet its debts as they mature or
suspends payment thereof, or if any order of any court is entered approving any
petition filed by or against it under the provisions of any applicable
bankruptcy or insolvency law or if a receiver of it or of all or a substantial
part of its property is appointed or any officer takes charge or control of it
or of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, a successor Agent, which shall be a reputable financial institution
of good standing, may be appointed by the Issuers by an instrument in writing
filed with the successor Agent. Upon the appointment as aforesaid of a successor
Agent and acceptance by the latter of such appointment and (other than in case
of insolvency of the Agent) upon expiration of the notice to be given under
Clause 21 the Agent so superseded shall cease to be the Agent hereunder.
(6) Subject to sub-clause (l):
(A) the Issuers may, after prior consultation (other
than in the case of insolvency of any Paying Agent) with the
Agent, terminate the appointment of any of the Paying Agents
at any time; and/or
(B) the Issuers may in respect of the Program or the
relevant Issuer may in respect of any Series of Notes, if so
required by the relevant Stock Exchange or regulatory body,
appoint
16
<PAGE>
one or more further Paying Agents by giving to the Agent, and
to the relevant Paying Agent, at least 45 days' notice in
writing to that effect.
(7) Subject to sub-clause (l), all or any of the Paying Agents
may resign their respective appointments hereunder at any time by giving the
Issuers and the Agent at least 45 days' written notice to that effect.
(8) Upon its resignation or removal becoming effective the
Agent or the relevant Paying Agent:
(a) shall, in the case of the Agent, forthwith
transfer all moneys held by it hereunder and the records
referred to in Clause 12(4) to the successor Agent hereunder;
and
(b) shall be entitled to the payment by the Issuers
of its commissions, fees and expenses for the services
theretofore rendered hereunder in accordance with the terms of
Clause 25.
(9) Upon its appointment becoming effective, a successor Agent
and any new Paying Agent, without further act, deed or conveyance, shall become
vested with all the authority, rights, powers, trusts, immunities, duties and
obligations of its predecessor or, as the case may be, a Paying Agent with like
effect as if originally named as Agent or (as the case may be) a Paying Agent
hereunder.
20. MERGER AND CONSOLIDATION
Any corporation into which the Agent or any Paying Agent may
be merged or converted, or any corporation with which the Agent or any of the
Paying Agents may be consolidated or any corporation resulting from any merger,
conversion or consolidation to which the Agent or any of the Paying Agents shall
be a party, or any corporation to which the Agent or any of the Paying Agents
shall sell or otherwise transfer all or substantially all the assets of the
Agent or any Paying Agent shall, on the date when such merger, conversion,
consolidation or transfer becomes effective and to the extent permitted by any
applicable laws, become the successor Agent or, as the case may be, Paying Agent
under this Agreement without the execution or filing of any paper or any further
act on the part of the parties hereto, unless otherwise required by the Issuers,
and after the said effective date all references in this Agreement to the Agent
or, as the case may be, such Paying Agent shall be deemed to be references to
such corporation. Written notice of any such merger, conversion, consolidation
or transfer shall forthwith be given to the Issuers by the relevant Agent or
Paying Agent.
21. NOTIFICATION OF CHANGES TO PAYING AGENTS
Following receipt of notice of resignation from the Agent or
any Paying Agent and forthwith upon appointing a successor Agent or, as the case
may be, other Paying Agents or on giving notice to terminate the appointment of
any Agent or, as the case may be, Paying Agent, the Agent (on behalf of and at
the expense of the Issuers) shall give or cause to be given not more than 60
days' nor less than 30 days' notice thereof to the Noteholders in accordance
with the Terms and Conditions.
22. CHANGE OF SPECIFIED OFFICE
If the Agent or any Paying Agent determines to change its
specified office it shall give to the Issuers and (if applicable) the Agent
written notice of such determination giving the address of the new specified
office which shall be in the same city and stating the date on which such change
is to take effect, which shall not be less than 45 days thereafter. The Agent
(on behalf and at the expense of the Issuers) shall within 15 days of receipt of
such notice (unless the appointment of the Agent or the relevant Paying Agent,
as the case may be, is to terminate pursuant to Clause 19 on or prior to the
date of such change) give or cause to be given not more than 45 days' nor less
than 30 days' notice thereof to the Noteholders in accordance with the Terms and
Conditions.
23. NOTICES
17
<PAGE>
All notices hereunder shall be deemed to have been given when
deposited in the mail as first class mail, registered or certified, return
receipt requested, postage prepaid, addressed to any party hereto as follows:
Address
-------
The Corporation: Bank of America Corporation
Bank of America Corporate Center
100 North Tryon Street
NC1-007-23-01
Charlotte, North Carolina 28255-0065
Attn: John E. Mack
Senior Vice President
Telecopy: (704) 386-0270
with a copy to:
Bank of America Corporation
Bank of America Corporate Center
100 North Tryon Street
Legal Department
NC1-007-56-11
Charlotte, North Carolina 28255
Attn: Paul J. Polking, Esq.
General Counsel
Telecopy: (704) 370-3515
The Bank: Bank of America, N.A.
Bank of America Corporate Center
100 North Tryon Street
NC1-007-06-04
Charlotte, North Carolina 28255
Attn: James T. Houghton
Senior Vice President
Telecopy: (704) 386-9946
The Agent: The Chase Manhattan Bank, London Branch
Trinity Tower
9 Thomas More Street
London E1 9YT
United Kingdom
Attn: Manager, Corporate Trust Operations
Telecopy: 44-1202-347438
The Paying Agent: Chase Manhattan Bank Luxembourg S.A.
5 rue Plaetis
L-2338 Luxembourg - Grund
Attn: Manager, Corporate Trust Operations
Telecopy: 352-462685-380
or at any other address of which any of the foregoing shall have notified the
others in writing.
(a) if delivered in person to the relevant address
specified in the signature pages hereof and if so delivered,
shall be deemed to have been delivered at the time of receipt;
or
18
<PAGE>
(b) if sent by facsimile or telex to the relevant
number specified on the signature pages hereof and, if so
sent, shall be deemed to have been delivered immediately after
transmission provided such transmission is confirmed by the
answerback of the recipient (in the case of telex) or when an
acknowledgment of receipt is received (in the case of
facsimile).
Where a communication is received after business hours it
shall be deemed to be received and become effective on the next business day.
Every communication shall be irrevocable save in respect of any manifest error
therein.
24. TAXES AND STAMP DUTIES
The Issuers agree to pay any and all stamp and other
documentary taxes or duties which may be payable in connection with the
execution, delivery, performance and enforcement of this Agreement.
25. COMMISSIONS, FEES AND EXPENSES
(1) The Issuers undertake to pay in respect of the services of
the Agent and the Paying Agents under this Agreement such fees and expenses as
may be agreed between them from time to time, the initial such fees being set
out in a letter of even date herewith from the Agent to, and countersigned by,
the Issuers.
(2) The Issuers will promptly pay on demand all out-of-pocket
expenses (including legal, advertising, facsimile, telex and postage expenses)
properly incurred by the Agent and the Paying Agents in connection with their
services hereunder, including, without limitation, the expenses contemplated in
Clause 24.
26. INDEMNITY
(1) The relevant Issuer (or Issuers, as the case may be)
undertakes to indemnify and hold harmless each of the Agent and the Paying
Agents against all losses, liabilities, costs (including, without limitation,
legal fees and expenses), expenses, claims, actions or demands which the Agent
or any Paying Agent, as the case may be, may reasonably incur or which may be
made against the Agent or any Paying Agent, as a result of or in connection with
the appointment or the exercise of or performance of the powers, discretions,
authorities and duties of the Agent or any Paying Agent under this Agreement
except such as may result from its own gross negligence, bad faith or failure to
comply with its obligations hereunder or that of its officers, employees or
agents.
(2) Each of the Agent and the Paying Agents shall severally
indemnify and hold harmless the relevant Issuer (or Issuers, as the case may be)
against any loss, liability, costs (including, without limitation, legal fees
and expenses), expense, claim, action or demand which it may reasonably incur or
which may be made against it as a result of such Agent's or Paying Agent's own
negligence, bad faith or material failure to comply with its obligations under
this Agreement or that of its officers, employees or agents.
(3) If, under any applicable law and whether pursuant to a
judgment being made or registered or in the liquidation, insolvency or analogous
process of any party hereto or for any other reason, any payment under or in
connection with this Agreement is made or fails to be satisfied in a currency
(the "Other Currency") other than that in which the relevant payment is
expressed to be due (the "Required Currency") under this Agreement, then, to the
extent that the payment (when converted into the Required Currency at the rate
of exchange on the date of payment or, if it is not practicable for the payee to
purchase the Required Currency with the Other Currency on the date of payment,
at the rate of exchange as soon thereafter as it is practicable for it to do so
or, in the case of a liquidation, insolvency or analogous process, at the rate
of exchange on the latest date permitted by applicable law for the determination
of liabilities in such liquidation, insolvency or analogous process) actually
received by the payee falls short of the amount due under the terms of this
Agreement, the payor shall, as a separate and independent obligation, indemnify
and hold harmless the payee against the amount of such shortfall. For the
purpose of this Clause 26, "rate of exchange" means the rate at which the payee
is able on the relevant date to
19
<PAGE>
purchase the Required Currency with the Other Currency and shall take into
account any premium and other costs of exchange.
27. REPORTING
(1) The Agent shall upon receipt of a written request therefor
from an Issuer and after the payment of any further remuneration agreed between
such Issuers and the Agent (on behalf of such Issuers and on the basis of the
information and documentation the Agent had in its possession) use all
reasonable efforts to submit such reports or information as may be required from
time to time by any applicable law, regulation or guideline promulgated by (i)
any relevant United States governmental regulatory authority in respect of the
issue and purchase of Notes or (ii) any other relevant governmental regulatory
authority in respect of the issue and purchase of Notes denominated in the
applicable currency of such governmental regulatory authority.
(2) The Agent will notify the MoF of such details relating to
Yen Notes and provide such other information about the Program to the MoF as may
be required.
(3) The Agent will notify the German Bundesbank of such
details relating to DM-denominated Notes issued during the month in question and
provide such other information about the Program to the German Bundesbank as may
be required.
(4) The Agent will notify the Bank of England of such details
relating to Sterling Notes and provide such other information about the Program
to the Bank of England as may be required.
28. GOVERNING LAW
(1) This Agreement, the Notes, and any Receipts, Coupons or
Talons appertaining thereto shall be governed by and construed in accordance
with the laws of the State of New York, United States of America, without regard
to principles of conflicts of laws.
(2) The Issuers and the Agent each hereby irrevocably submit
to the non-exclusive jurisdiction of any United States Federal court sitting in
New York City, the Borough of Manhattan over any suit, action or proceeding
arising out of or related to this Agreement, any Note, Receipt, Coupon or Talon,
as the case may be (together, the "Proceedings"). The Issuers and the Agent each
irrevocably waive, to the fullest extent permitted by law, any objection which
it may have to the laying of the venue of the Proceedings brought in such a
court and any claim that the Proceedings have been brought in an inconvenient
forum. The Issuers and the Agent each agree that final judgment in the
Proceedings brought in such a court shall be conclusive and binding upon the
Issuers or the Agent, as the case may be, and may be enforced in any court of
the jurisdiction to which the relevant Issuer (or Issuers, as the case may be)
or the Agent is subject by a suit upon such judgment, PROVIDED that the service
of process is effected upon such Issuers and the Agent in the manner specified
in subsection (3) below or as otherwise permitted by law.
(3) As long as any of the Notes, Receipts, Coupons or Talons
remains outstanding, the relevant Issuer shall at all times either maintain an
office or have an authorized agent in New York City upon whom process may be
served in the Proceedings. Service of process upon either Issuer at its offices
or upon such agent with written notice of such service mailed or delivered to
the relevant Issuer shall, to the fullest extent permitted by law, be deemed in
every respect effective service of process upon such Issuer in the Proceedings.
Each Issuer hereby appoints CT Corporation System located at 1633 Broadway, New
York, New York 10019 as its agent for such purposes, and covenants and agrees
that service of process in the Proceedings may be made upon it at its office or
at the specified offices of such agent (or such other addresses or at the
offices of any other authorized agents which the relevant Issuer may designate
by written notice to the Agent) and prior to any termination of such agencies
for any reason, it will so appoint a successor thereto as agent hereunder.
29. AMENDMENTS
20
<PAGE>
Without the consent of the Noteholders, Receiptholders or
Couponholders, the Agent and the Issuers may agree to modifications of or
amendments to this Agreement, the Notes, the Receipts or the Coupons for any of
the following purposes:
(i) to evidence the succession of another corporation to
an Issuer and the assumption by any such successor of
the covenants of such Issuer in this Agreement, the
Notes, Receipts or Coupons;
(ii) to add to the covenants of an Issuer for the benefit
of the Noteholders, the Receiptholders or the
Couponholders, or to surrender any right or power
herein conferred upon such Issuer;
(iii) to relax or eliminate the restrictions on payment of
principal and interest in respect of the Notes,
Receipts or Coupons in the United States, provided
that such payment is permitted by United States tax
laws and regulations then in effect and provided that
no adverse tax consequences would result to the
Noteholders, the Receiptholders or the Couponholders;
(iv) to cure any ambiguity, to correct or supplement any
defective provision herein or any provision which may
be inconsistent with any other provision herein;
(v) to make any other provisions with respect to matters
or questions arising under the Notes, the Receipts,
the Coupons or this Agreement, provided such action
pursuant to this sub-clause (v) shall not adversely
affect the interests of the Noteholders, the
Receiptholders or the Couponholders; and
(vi) permit further issuances of Notes in accordance with
the terms of the Program Agreement.
Any such modification or amendment shall be binding on the
Noteholders, the Receiptholders and the Couponholders and any such modification
or amendment shall be notified to the Noteholders, the Receiptholders or the
Couponholders in accordance with Condition 13 as soon as practicable thereafter.
30. DESCRIPTIVE HEADINGS
The descriptive headings in this Agreement are for convenience
of reference only and shall not define or limit the provisions hereof.
31. COUNTERPARTS
This Agreement may be executed in any number of counterparts,
all of which shall constitute one and the same instrument. Any party may enter
into this Agreement by signing such a counterpart.
21
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their respective corporate names by their respective
officers thereunder duly authorized as of the date and year first above written.
BANK OF AMERICA CORPORATION
as Issuer
By: /S/ John E. Mack
-----------------
Name: John E. Mack
Title: Senior Vice President
BANK OF AMERICA, N.A.
as Issuer
By /S/ John E. Mack
-----------------
Name: John E. Mack
Title: Senior Vice President
THE CHASE MANHATTAN BANK,
LONDON BRANCH
as Agent and
Principal Paying Agent
By /S/ Kevin Rainbird
------------------
Name: Kevin Rainbird
Title: Vice President
CHASE MANHATTAN BANK LUXEMBOURG S.A.
as Paying Agent
By /S/ Kevin Rainbird
-------------------
Name: Kevin Rainbird
Title: Vice President
22
Exhibit 4(m)
AMENDED AND RESTATED
ISSUING AND PAYING AGENCY AGREEMENT
between
BANK OF AMERICA, N.A.,
as Issuer
and
BANKERS TRUST COMPANY,
as Issuing and Paying Agent,
Dated as of July 30, 1999
---------------------------
SHORT-TERM AND MEDIUM-TERM NOTES
Due 7 Days or More From Date of Issue
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 1. Definitions 1
SECTION 2. Appointment of Agents 6
(a) Issuing and Paying Agent 6
(b) Selling Agents 7
(c) Registrar 7
(d) Transfer Agents 7
(e) Calculation Agents 8
SECTION 3. The Notes 8
(a) Note Form; Signature 8
(b) Denominations 10
(c) Completion of Notes 11
(d) Date 11
(e) Certificate of Authentication 11
(f) Original Issue Discount Notes 11
(g) Custody of Notes 11
(h) Certificated Notes 11
SECTION 4. Authorized Representatives 11
SECTION 5. Completion, Authentication and Delivery of Notes 12
SECTION 6. Procedure Upon Sale of the Notes 15
SECTION 7. Payment of Interest; Actions on Days Other than Business Days 15
SECTION 8. Payment of Principal 16
SECTION 9. Designation of Accounts to Receive Payment 16
SECTION 10. Information Regarding Amounts Due 17
SECTION 11. Specified Currency Notes 17
SECTION 12. Deposit of Funds 17
SECTION 13. Optional Redemption 17
(a) Optional Redemption 17
(b) Optional Repayment 18
(c) Optional Extension of Maturity 18
(d) Optional Renewal 19
<PAGE>
SECTION 14. Events of Default 20
SECTION 15. Registration; Transfer 21
SECTION 16. Persons Deemed Owners 22
SECTION 17. Mutilated, Lost, Stolen or Destroyed Notes 22
SECTION 18. Return of Unclaimed Funds 23
SECTION 19. Amendment or Supplement 23
SECTION 20. Resignation or Removal of Agents; Appointment
of Successors to Agents 24
(a) Resignation or Removal of Agent 24
(b) Appointment of Successor to Agent 25
(c) Successor of Agent 25
(d) Merger, Etc. of Agent 26
(e) Change in Duties of an Agent 26
(f) Additional Agents 26
SECTION 21. Reliance on Instructions 26
SECTION 22. Cancellation of Unissued Notes 26
SECTION 23. Representation and Warranties of the Issuer;
Instructions by Certificate 26
SECTION 24. Fees 27
SECTION 25. Notices 27
SECTION 26. Information Furnished by the Issuing and Paying Agent 28
SECTION 27. Liability 29
SECTION 28. Additional Responsibilities; Attorneys Fees 29
SECTION 29. Transfer of Notes and Moneys 29
SECTION 30. Indemnity 30
SECTION 31. Limitation of Liability; Reliance on Opinions and Certificates 31
SECTION 32. Benefit of Agreement 31
SECTION 33. Governing Law 32
SECTION 34. Headings and Table of Contents 32
<PAGE>
SECTION 35. Counterparts 32
SECTION 36. Termination of Prior Issuing and Paying Agent Agreements 32
EXHIBIT A Forms of DTC Letters of Representations 34
EXHIBIT B Administrative Procedures 35
EXHIBIT C Form of Face of Fixed Rate Note 36
EXHIBIT D Form of Face of Floating Rate Note 37
EXHIBIT E Form of Face of Indexed Note
EXHIBIT F Form of Legend for Original Issue Discount Notes 38
EXHIBIT G Bank of America, N.A. Authorized Representatives 39
EXHIBIT H Form of Issuing and Paying Agent's Officer's
Certificate Referencing Authorized Representatives 40
</TABLE>
<PAGE>
BANK OF AMERICA, N.A.
SHORT-TERM AND MEDIUM-TERM NOTES
AMENDED AND RESTATED
ISSUING AND PAYING AGENCY AGREEMENT
-----------------------------------
AMENDED AND RESTATED ISSUING AND PAYING AGENCY AGREEMENT dated as of
July 30, 1999 between BANK OF AMERICA, N.A., a national banking association
organized under the laws of the United States, as Issuer and as successor to
NationsBank, N.A., and BANKERS TRUST COMPANY, a New York banking corporation, as
Issuing and Paying Agent, amending and restating that certain Issuing and Paying
Agency Agreement dated as of May 19, 1998, between NationsBank, N.A., and
Bankers Trust Company.
SECTION 1 DEFINITIONS. Except as otherwise expressly provided herein or
in the applicable Note or unless the context otherwise requires: (1) the words
and phrases with initial capitals used herein have the meanings specified in
this Section; and (2) the words "herein," "hereof" and "hereunder" and other
words of similar impact refer to this Issuing and Paying Agency Agreement as a
whole and not to any particular section or other subdivision. Capitalized terms
used herein but not otherwise defined herein shall have the same meaning and
intention specified therefor in the applicable Note.
ADDITIONAL RESPONSIBILITIES - Has the meaning given such term in
Section 28.
ADMINISTRATIVE PROCEDURES - The Administrative Procedures applicable to
the Notes, as set forth in Exhibit B hereto.
AGENT OR AGENTS - Any of the Issuing and Paying Agent, any paying agent
or the Registrar, as the context indicates.
AGREEMENT - This Issuing and Paying Agency Agreement, including the
exhibits hereto, as amended or supplemented from time to time.
AMORTIZING NOTE - Any Note the terms of which provide for the payment
of Principal thereof and interest thereon on each Interest Payment Date and the
Stated Maturity thereof.
AUTHORIZED DENOMINATION - Has the meaning given such term in Section 3
(b)
AUTHORIZED REPRESENTATIVE - With respect to the Issuer, any duly
authorized representative of the Issuer as set forth in Exhibit F hereto, and
any other representative of the Issuer as to which the Issuer may hereafter
certify in writing to the Issuing and Paying Agent.
BUSINESS DAY - Unless otherwise specified in a Pricing Supplement
relating to a particular Note, with respect to any Note issued by the Issuer,
any day that is not a Saturday or Sunday and that is not a day on which banking
institutions in The City of New York, New York or Charlotte, North Carolina (or,
if the Issuing and Paying Agent is other than Bankers Trust Company, the city in
which such successor Issuing and Paying Agent's principal office is located) are
generally authorized or obligated by law to close. With respect to LIBOR Notes
(as described herein), "Business Day" means London Business Day. If a particular
Note is
<PAGE>
denominated in or indexed to a Specified Currency other than U.S. dollars,
"Business Day" means any day that is not a Saturday or Sunday and that is not a
day on which banking institutions in The City of New York or Charlotte, North
Carolina and the principal financial center of the country issuing the Specified
Currency are generally authorized or obligated by law or regulation to close and
is a day on which banking institutions in such principal financial center are
carrying out transactions in such Specified Currency and, if such Note is
denominated in euros, is a day on which the Trans-European Automated Real-Time
Gross Settlement Express Transfer (TARGET) System is open.
CALCULATION AGENT - With respect to Notes issued by the Issuer, such
person appointed by the Issuer to calculate the interest rates applicable to
Floating Rate Notes or certain other Notes, and for certain related matters, as
more fully described in Section 2 (e).
CERTIFICATE OF AUTHENTICATION - Has the meaning given such term in
Section 3 (e).
CERTIFICATED NOTES - Any Notes issued in fully registered, certificated
form.
COMPONENTS - Has the meaning given such term in Section 11(d).
DEPOSITARY - With respect to Notes issued in the form of one or more
Global Notes, the Person designated as Depositary by the Issuer thereof pursuant
hereto, which Depositary at all times shall be a trust company validly existing
and in good standing (at the time of its appointment) under the laws of the
United States or any state thereof and shall be a clearing agency duly
registered under the Securities Exchange Act.
DISTRIBUTION AGREEMENT - The Amended and Restated Distribution
Agreement, dated as of July 30, 1999, among the Issuer, Banc of America
Securities LLC, Credit Suisse First Boston Corporation, Lehman Brothers Inc.
(including its affiliate Lehman Commercial Paper Inc.), Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated and Salomon Smith Barney Inc., as amended and supplemented from
time to time.
DTC - The Depository Trust Company or its successors and assigns.
EVENT OF DEFAULT - Has the meaning given such term in Section 14.
EXTENSION NOTICE - The notice to be provided to Holders of Notes the
Stated Maturity of which is extended by the Issuer as provided in Section 13(c)
hereof.
EXTENSION PERIOD(S) - The period or periods, by which the Issuer may
extend the Stated Maturity of Notes which provide for such extension, as
described more fully in Section 13(c) hereof.
FINAL MATURITY DATE - The latest date designated on the face of a Note
which provides for the maturity thereof.
FIXED RATE NOTES - Any Notes bearing interest at fixed rates and
substantially in the form of Exhibit C hereto.
<PAGE>
FLOATING RATE NOTES - Any Notes bearing interest at a variable rate or
rates determined by reference to an interest rate formula, which may be adjusted
by adding or subtracting a number of basis points or "spread" specified by the
Issuer on the related Floating Rate Note as being applicable to such Floating
Rate Note and/or by multiplying a percentage or "spread multiplier" specified by
the Issuer thereof on the related Floating Rate Note as being applicable to such
Floating Rate Note and substantially in the form of Exhibit D.
GLOBAL NOTE - A Note, in the form provided by Section 3(a), issued to
the Depositary or its nominee, and registered in the Register in the name of the
Depositary or its nominee.
HOLDER - Means the person in whose name a Note is registered in the
Register.
INDEXED NOTES- Any Notes pursuant to which the amount of principal,
premium, if any, or interest payable is to be determined with reference to one
or more specified commodities or loans or stocks or other securities, or any
combination or basket of the foregoing, or the exchange rate of one or more
specified currencies (including composite currencies), or another index, formula
or other method and substantially in the form of Exhibit E.
INITIAL MATURITY DATE - Has the meaning given such term in Section
13(d).
INITIAL REDEMPTION DATE - With respect to a Note that is subject to an
Optional Redemption, the date specified as the Initial Redemption Date on such
Note and after which, but prior to the Stated Maturity, an Optional Redemption
of such Note may occur as specified in such Note.
INITIAL RENEWAL DATE - Has the meaning given such term in Section
13(d).
INTEREST PAYMENT DATE - A date for payment of interest on a Note, as
provided in the Note.
ISSUER - Bank of America, N.A., a national banking association, and its
successors and assigns is referred to herein as the "Issuer".
ISSUING AND PAYING AGENT - Bankers Trust Company, or any successor
Issuing and Paying Agent appointed in accordance with this Agreement under
Section 20 that has accepted such appointment hereunder.
LETTERS OF REPRESENTATIONS - The letters from the Issuing and Paying
Agent and Bank, as appropriate, to be furnished to DTC in accordance with
Section 2(a) hereof, substantially in the forms set forth in Exhibit A hereto.
LONDON BUSINESS DAY - Any day on which dealings in deposits in U.S.
dollars are transacted in the London inter-bank market.
NEW MATURITY DATE - Has the meaning given such term in Section 13(d).
<PAGE>
NOTE OR NOTES - Any of the Issuer's Short-Term Notes or Medium-Term
Notes issued, authenticated and delivered under this Agreement.
OFFERING CIRCULAR - The Offering Circular of the Issuer relating to the
Notes dated July 30, 1999 as the same may be amended or supplemented from time
to time.
OFFICER'S CERTIFICATE - With respect to the Issuer, a certificate (i)
signed by the Chairman of the Board, the President, or any Executive Vice
President or Senior Vice President of the Issuer or such other persons as the
Issuer designates in an Officer's Certificate signed by the President or any
Vice President, and (ii) delivered to the Issuing and Paying Agent.
OPTIONAL REDEMPTION - A redemption of a Note on or after the date
designated on such Note as the Initial Redemption Date at the option of the
Issuer as set forth in such Note at a Redemption Price as set forth in such
Note.
ORIGINAL ISSUE DATE - As to any Note, the date on which such Note was
issued and the purchase price therefore was paid by the related Holder.
ORIGINAL ISSUE DISCOUNT NOTE - Any Note issued at an issue price
representing more than a de minimis discount from the principal amount payable
at its Stated Maturity for federal income tax purposes.
ORIGINAL STATED MATURITY - Has the meaning given such term in Section
13(c).
OUTSTANDING - For purposes of the provisions of this Agreement and the
Notes, any Note authenticated and delivered pursuant to this Agreement shall, as
of any date of determination, be deemed to be "Outstanding," except: (i) Notes
theretofore canceled or delivered to the Issuing and Paying Agent for
cancellation; (ii) Notes that have become due and payable on their Principal
Payment Date and with respect to which monies sufficient to pay the Principal or
Redemption Price thereof, as the case may be, and interest thereon shall have
been made available to the Issuing and Paying Agent; or (iii) Notes in lieu of
or in substitution for which other Notes shall have been authenticated and
delivered pursuant to this Agreement.
PAYMENT DATE - A date for payment of Principal of and interest on an
Amortizing Note as provided in the Note.
PERSON - Any legal person, including any individual, corporation,
limited liability company, partnership, joint venture, association, joint stock
company, trust, unincorporated organization or government or any agency,
instrumentality or political subdivision thereof.
PREDECESSOR NOTES - With respect to any particular Note, every previous
Note evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purpose of this definition, any Note authenticated
and delivered under Section 17 or the terms of a Note in lieu of or in exchange
for a mutilated, lost, destroyed, or stolen Note shall be deemed to evidence the
same debt as the mutilated, lost, destroyed or stolen Note, and any Note issued
upon registration of transfer of or in exchange for any other Note shall be
deemed to evidence all or a portion of the same debt evidenced by such other
Note.
<PAGE>
PREPAYMENT OPTION DATES - If specified on the applicable Note, a date
or dates for prepayment of a Note prior to the Stated Maturity thereof at the
option of the Holder.
PREPAYMENT OPTION PRICE - The amount prepayable to a Holder on a
Prepayment Option Date together with any accrued interest to the Prepayment
Option Date, as and if specified above on the applicable Note.
PRICING SUPPLEMENT - A supplement to the Offering Circular for a
particular Note or Notes.
PRINCIPAL - The amount of a Note due and payable on the Stated Maturity
therefor or, in the case of an Amortizing Note, the "Amortized Face Amount" (as
specified in the Note).
PRINCIPAL OFFICE - Subject to the right of each to change its office,
by advance written notice to the Issuer, such term means, (1) for the Issuing
and Paying Agent, its principal corporate trust office at Four Albany Street,
4th floor, New York, New York 10006, Attention: Corporate Trust and Agency
Group; and (2) for any successor or additional Agents, their offices specified
in writing to the Issuer and the Issuing and Paying Agent.
PRINCIPAL PAYMENT DATE - The date provided on the face of the Note on
which the Principal, or Redemption Price of the Note, as the case may be,
becomes due and payable.
REDEMPTION PRICE - With respect to any Note subject to an Optional
Redemption, the amount specified in such Note as payable, when such Note is
redeemed on or after the Initial Redemption Date, pursuant to the related Note.
REGISTER - The register for the registration and transfer of the Notes
maintained by the Issuing and Paying Agent pursuant to Section 15 hereof.
REGISTRAR - Bankers Trust Company, or any successor or successors as
Registrar, appointed in accordance with Section 20 hereof, who shall perform the
duties provided under Section 2(c) hereof.
REGULAR RECORD DATE - With respect to any Note, unless otherwise
specified in such Note, the Regular Record Date with respect to any Interest
Payment Date or Payment Date shall be the date that is the fifteenth calendar
day (whether or not a Business Day) prior to the applicable Interest Payment
Date or Payment Date, as the case may be.
RENEWABLE NOTE - A Note the maturity of which may be renewed at the
option of the Holder in accordance with the terms thereof.
RENEWAL DATE - Has the meaning given such term in Section 13 (d).
SECURITIES EXCHANGE ACT - The Securities Exchange Act of 1934, as
amended.
SELLING AGENT - Any party, other than the Issuer, to the Distribution
Agreement, including any party added to such agreement after its initial date of
execution. The initial Selling Agents are: Banc of America Securities LLC,
Credit Suisse First Boston Corporation, Lehman Brothers Inc. (including its
affiliate, Lehman Commercial Paper Inc.), Merrill Lynch & Co., Merrill,
<PAGE>
Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co., Incorporated
and Salomon Smith Barney Inc.
SPECIAL ELECTION INTERVAL - A period during which, if so specified on
the applicable Renewable Note, on the Interest Payment Date occurring in the
last month of each such Special Election Interval after an Initial Renewal Date,
the term of the Note may be extended to the Interest Payment Date occurring in
the last month in a period equal to twice the Special Election Interval after
the applicable Renewal Date, if the Holder of such Note elects to extend the
term of the Note or any portion thereof as provided in such Note.
SPECIAL ELECTION PERIOD - A period, if specified on the applicable
Note, during which the Holder of such Note may elect to renew the term of the
Note, or if provided in the applicable Note, any portion thereof, by delivering
a notice to such effect to the Issuing and Paying Agent.
SPECIFIED CURRENCY - The currency in which such Note is denominated if
such currency is denominated in a composite currency, currency unit or a
currency other than U.S. dollars.
SPECIFIED CURRENCY NOTE - A Note, which pursuant to the terms specified
thereon, is denominated in a Specified Currency.
STATED MATURITY - As to any Note or any installment of Principal
thereof or interest thereon, the date specified therein as the fixed date on
which the Principal of such Note or such installment of Principal and interest
is due and payable.
TRANSFER AGENT - With respect to any Note issued by the Issuer, any
Person or Persons appointed by the Issuer to exchange or transfer Notes issued
by the Issuer.
SECTION 2. APPOINTMENT OF AGENTS.
(a) ISSUING AND PAYING AGENT. The Issuer hereby appoints
Bankers Trust Company, as Issuing and Paying Agent of the Issuer in
respect to the Notes upon the terms and subject to the conditions
herein set forth, and Bankers Trust Company hereby accepts such
appointment. The Issuing and Paying Agent shall have the powers and
authority granted to and conferred upon it in the Notes and this
Agreement and such further powers and authority to act on behalf of the
Issuer as may be agreed upon by the Issuer and the Issuing and Paying
Agent from time to time. All of the terms and provisions with respect
to such powers and authority contained in the Notes are subject to and
governed by the terms and provisions hereof.
The Issuer, further appoints and authorizes Bankers Trust
Company, as Issuing and Paying Agent, to act as its Issuing and Paying
Agent in executing the Letters of Representations to be delivered to
the Depositary, in substantially the forms set forth in Exhibit A
hereto.
The Issuing and Paying Agent shall at all times be a bank or
trust company organized under the laws of the United States or any
jurisdiction in the United States and authorized and empowered under
such laws to fulfill and perform all the duties and obligations of the
Issuing and Paying Agent hereunder.
<PAGE>
The Issuing and Paying Agent hereby represents that it is a
bank or trust company meeting the foregoing requirements and that it
shall promptly notify the Issuer of any occurrence or event that
renders it unable to continue to make the aforesaid representation.
(b) SELLING AGENTS. The Issuer has appointed Banc of America
Securities LLC, Credit Suisse First Boston Corporation, Lehman Brothers
Inc. (Including its affiliate Lehman Commercial Paper Inc.), Merrill
Lynch & Co., Merrill, Lynch, Pierce, Fenner & Smith Incorporated,
Morgan Stanley & Co., Incorporated and Salomon Smith Barney Inc., as
Selling Agents for the Notes by and under the terms of the Distribution
Agreement, under which the Issuer may, from time to time, appoint other
Selling Agents.
(c) REGISTRAR. The Issuer hereby appoints Bankers Trust
Company as Registrar of the Issuer in respect of the Notes upon the
terms and subject to the conditions herein set forth, and Bankers Trust
Company hereby accepts such appointment. The Registrar will keep the
Register and otherwise act as Registrar in accordance with the terms of
this Agreement.
The Registrar will keep a record of all Notes, at its
Principal Office or at such other location as it may choose and as to
which it will give advance notice to the Issuer. The Registrar will
include in such record a notation as to whether such Notes have been
paid or cancelled or, in the case of mutilated, destroyed, stolen or
lost Notes, whether such Notes have been replaced. In the case of the
replacement of any of the Notes, the Registrar will keep a record of
the Notes so replaced and the Notes issued in replacement thereof.
(d) TRANSFER AGENTS. The Issuer (at its sole cost and expense)
may appoint from time to time one or more Transfer Agents for one or
more of the Notes. The Issuer shall solicit written acceptance of the
appointment from any entity so appointed as Transfer Agent. Such
written acceptance shall be in a form satisfactory to the Issuing and
Paying Agent and state that by the Transfer Agent's acceptance of such
appointment, it agrees to act as a Transfer Agent pursuant to the terms
and conditions of this Agreement. The Issuer hereby appoints Bankers
Trust Company as the initial Transfer Agent for the Notes, and Bankers
Trust Company hereby accepts such appointment.
(e) CALCULATION AGENTS.
1. APPOINTMENT OF CALCULATION AGENT: The Issuer (at
its sole cost and expense) may appoint from time to time one
or more Calculation Agents for one or more of the Notes. The
Issuer shall solicit written acceptance of the appointment
from any entity so appointed as Calculation Agent. Such
written acceptance shall be in a form satisfactory to the
Issuing and Paying Agent and state that by the Calculation
Agent's acceptance of such appointment, it agrees to act as a
Calculation Agent pursuant to the terms and conditions of this
Agreement.
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(a) FLOATING RATE NOTES: Except as otherwise
specified in a Pricing Supplement relating to a
particular Note, the Issuer hereby appoints Bankers
Trust Company as the initial Calculation Agent for
the Floating Rate Notes, and Bankers Trust Company
hereby accepts such appointment.
(b). INDEXED NOTES: Before issuing an
Indexed Note, the Issuer shall appoint a Calculation
Agent for the purpose of calculating the rate of
interest or other amounts payable on the Indexed
Notes, all in accordance with the terms of the
Indexed Notes. With respect to Indexed Notes, at such
times as shall be specified in the Pricing Supplement
and the Indexed Note, the Calculation Agent shall
determine the index (if required), principal,
premium, if any, rate of interest, interest payable
or other amounts payable. Upon the request of the
Holder of any Indexed Note, the Calculation Agent
will provide, if applicable, the current index,
principal, premium, if any, rate of interest,
interest payable or other amounts payable in
connection with such Indexed Note.
2. DUTIES AND RESPONSIBILITIES: The duties and
responsibilities of the Calculation Agent shall be as
specified herein, in the Administrative Procedures attached as
Exhibit B hereto, and in the applicable Note. As promptly as
practicable after each Interest Determination Date for a
Floating Rate Note or an Indexed Note, the Calculation Agent
will notify the Issuer thereof of the interest rate which will
become effective on the next interest Reset Date (as defined
in such Floating Rate Note or Indexed Rate Note). Upon the
request of the Holder of a Floating Rate Note or an Indexed
Rate Note, the Calculation Agent will provide to such Holder
the interest rate then in effect and, if determined, the
interest rate which will become effective on the next Interest
Reset Date with respect to such Floating Rate Note or such
Indexed Note.
SECTION 3. THE NOTES.
(a) NOTE FORM; SIGNATURE. Except as otherwise provided in
Section 3(h) hereof, each Note issued by the Issuer with the same
original issue date and otherwise having identical terms shall be
represented by a single note certificate (each a "Global Note"). Fixed
Rate Notes will be substantially in the form of Exhibit C hereto,
Floating Rate Notes will be substantially in the form of Exhibit D
hereto, and Indexed Notes will be substantially in the form of Exhibit
E hereto, provided that any Specified Currency Notes will be
substantially in any such form with such changes as may be agreed upon
by the Issuer and the Issuing and Paying Agent as provided in Section
11 hereof. The Notes may contain such insertions, omissions,
substitutions, and other variations as the Issuer
<PAGE>
determines to be required or permitted by this Agreement and may have
such letters, numbers, or other marks of identification and such legend
or legends or endorsements placed thereon as any officer of the Issuer
executing such Notes may determine to be necessary or appropriate, as
evidenced by such officer's execution of such Notes by manual or
facsimile signature, including, without limitation, any legends or
endorsements that may be required to comply with any law or with any
rules or regulations pursuant thereto, or with any rules of any
securities exchange on which the Notes may be listed or to conform to
general usage.
Any Global Note issued hereunder shall, in addition to the
provisions contained in Exhibits C, D or E, hereto, as the case may be,
bear a legend in substantially the following form:
"This Note is a Global Note within the meaning of the Issuing
and Paying Agency Agreement hereinafter referred to and is
registered in the name of a Depositary or a nominee of a
Depositary. This Note is exchangeable for Notes registered in
the name of a person other than the Depositary or its nominee
only in the limited circumstances described in the Issuing and
Paying Agency Agreement and may not be transferred except as a
whole by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee
of the Depositary."
Furthermore, each Global Note issued hereunder to DTC or its
nominee shall bear a legend in substantially the following form:
"Unless this Note is presented by an authorized representative
of The Depository Trust Company to the issuer or its agent for
registration of transfer, exchange or payment, and any
certificate issued is registered in the name of CEDE & CO. or
such other name as requested by an authorized representative
of The Depository Trust Company and any payment is made to
CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the
registered owner hereof, CEDE & CO., has an interest herein."
The Issuer will from time to time and upon request furnish the
Issuing and Paying Agent with an adequate supply of Certificated Notes,
without coupons, serially numbered, which will have the Principal
amount, date of issue, Stated Maturity Initial Redemption Date, if any,
rate of interest (in the case of Fixed Rate Notes) or base rate,
initial interest rate, spread and/or spread multiplier, if any,
interest reset dates, index, if any, index maturity, other amounts
payable, and maximum and minimum interest rates, if any (in the case of
Floating Rate Notes or Indexed Notes), and, in each case, the name and
address of the Holder, and other applicable terms which may be
specified with respect to such Notes in accordance with the
Administrative Procedures left blank.
<PAGE>
Each Floating Rate Note will bear interest at a rate
determined by reference to a base rate, which may be adjusted by a
spread or multiplied by a spread multiplier. Each Floating Rate Note
will designate an applicable base rate. Such base rate shall be
calculated by reference to an interest rate formula described in such
Note. The interest rates borne by any particular Notes may vary as
against the rates borne by any other Notes. Any such variations in
interest rates with respect to particular Notes shall not affect the
rates of interest borne by any other Notes issued hereunder.
Each of the principal, premium, if any, interest payable or
other amounts payable, or any combination of the foregoing, may be
determined by reference to one or more indices. each Indexed Note and
the associated Pricing Supplement will designate the applicable
indices. The principal, premium, if any, interest payable or other
amounts payable may vary as against those borne by any other Indexed
Notes. Any such variations in principal, premium, if any, interest
payable or other amounts payable with respect to particular Indexed
Notes shall not necessarily affect the principal, premium, if any,
interest payable or other amounts payable borne by any other Indexed
Notes issued under the Distribution Agreement.
Each Note will be signed manually or by facsimile by an
Authorized Representative included in Group I on Exhibit G hereto. The
Notes will have a Stated Maturity of not less than (7) seven days from
date of issue and will be issued in the respective orders of the serial
numbers imprinted thereon. The Issuing and Paying Agent hereby agrees
to hold such blank Notes in safekeeping in accordance with its
customary practices and procedures.
Notwithstanding the foregoing, any Global Note issued by the
Issuer shall be exchangeable pursuant to this Section for Notes
registered in the name of Persons other than the Depositary for such
Note or its nominee only if (i) such Depositary notifies the Issuing
and Paying Agent that it is unwilling or unable to continue as
Depositary for such Global Note or if at any time such Depositary
ceases to be a clearing agency registered under the Securities Exchange
Act and in either such case a successor Depositary is not appointed by
the Issuer within ninety (90) days, or (ii) the Issuer thereof executes
and delivers to the Issuing and Paying Agent a written notification
that such Global Note shall be so exchangeable or (iii) an Event of
Default occurs with respect to such Global Note. Any Global Note that
is exchangeable pursuant to the preceding sentence shall be
exchangeable for Certificated Notes registered in such names as such
Depositary shall direct. Notwithstanding any other provision in this
Agreement, a Global Note may not be transferred except as a whole by
the Depositary with respect to such Global Note to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or
another nominee of such Depositary.
As of the date hereof, the Issuer has authorized the issuance
and sale of up to not more than $35,000,000,000 aggregate principal
amount of Notes with maturities of 7 days or more. Subject to the last
sentence of this paragraph, the maximum aggregate principal amount of
Notes outstanding at any one time is limited to $35,000,000,000. In
addition, subject to the last sentence of this paragraph, the aggregate
principal amount of Notes having maturities of more than 270 days which
may be issued throughout the term of the Issuing and Paying Agency
Agreement is limited to $35,000,000,000.
<PAGE>
Notwithstanding the foregoing, if the Issuer authorizes the issuance of
additional Notes and, to the extent necessary, registers such Notes
with the Office of the Comptroller of the Currency (the "OCC") such
additional Notes may be sold to or through the Agents pursuant to the
terms of this Agreement, all as though the issuance of such Notes were
authorized as of the date hereof.
(b) DENOMINATIONS. Unless otherwise indicated in the
applicable Notes and the applicable Pricing Supplement except as
provided in Section 3(h) and to the extent that the Issuer elects to
issue Notes in definitive form, the Notes shall be issuable only in
book-entry form, without coupons, in minimum denominations of $250,000
and integral multiples of $1,000 in excess thereof.
(c) COMPLETION OF NOTES. Upon receipt of the information set
forth in Section 5 (a), the Issuing and Paying Agent shall complete and
authenticate each Note.
(d) DATE. The Issuing and Paying Agent will date each Note the
date of its authentication.
(e) CERTIFICATE OF AUTHENTICATION. Only Notes that bear
thereon a certificate of authentication substantially in a form set
forth below (a "Certificate of Authentication"), executed by the
Issuing and Paying Agent by its manual signature, will be valid:
Certificate of Authentication
This is one of the Notes referred to in the
within-mentioned Issuing and Paying Agency Agreement.
Dated:________ BANKERS TRUST COMPANY
as Issuing and Paying Agent
By:
---------------------------------
Authorized Signatory
(f) ORIGINAL ISSUE DISCOUNT NOTES. Each Original Issue
Discount Note shall contain on its face a legend substantially in the
form of Exhibit F hereto.
(g) CUSTODY OF NOTES. The Issuing and Paying Agent shall
maintain in safe custody all blank Notes that the Issuer delivers to it
and that it holds hereunder and shall complete and issue such Notes
only in the terms hereof.
(h) CERTIFICATED NOTES. If at any time the Depositary notifies
the Issuer or the Issuing and Paying Agent that it is unwilling or
unable to continue to act as depositary for any of the Global Notes, or
if at any time such Depositary ceases to be a clearing agency
registered under the Securities Exchange Act and in either such case a
successor Depositary is not appointed by the Issuer within ninety (90)
days, the Issuer will execute and the Issuing and Paying Agent will,
upon the receipt of procedures for certificated securities in form and
substance satisfactory to the Issuer and the Issuing and Paying Agent
and upon receipt of instructions in writing from the Issuer,
authenticate and deliver
<PAGE>
to the Holder or the Holder's designee Notes of like tenor and terms in
definitive form in an aggregate principal amount equal to the Global
Notes then outstanding in exchange for such Global Notes.
SECTION 4. AUTHORIZED REPRESENTATIVES. The Issuer hereby certifies that
each person named in Exhibit F hereto and designated as affiliated with the
Issuer is a duly Authorized Representative of the Issuer and that the signature
set forth opposite such representative's name is his or her true and genuine
signature. The Issuing and Paying Agent shall be entitled to rely on the
information set forth in Exhibit G for purposes of determining an Authorized
Representative until such time as the Issuing and Paying Agent receives a
subsequent certificate from the Issuer deleting or amending any of the
information set forth therein. The Issuing and Paying Agent shall not have any
responsibility to the Issuer to determine whether any signature on a Note
purporting to be that of an Authorized Representative in Group I of Exhibit G
with respect to the Issuer is genuine, so long as such signature resembles the
specimen signature set forth in Group I of Exhibit G or in a subsequent
certificate delivered to the Issuing and Paying Agent by the Issuer. Any Note
bearing the signature of a person who is an Authorized Representative in Group I
of Exhibit G with respect to the Issuer on the date he or she signs such Note
shall be a binding obligation of the Issuer upon the completion and
authentication thereof by the Issuing and Paying Agent, notwithstanding that
such person shall have ceased to be an Authorized Representative on the date
such Note is completed, authenticated or delivered by the Issuing and Paying
Agent.
SECTION 5. COMPLETION, AUTHENTICATION AND DELIVERY OF NOTES.
(a) The Issuing and Paying Agent may rely on such instructions
if they are received by one of the duly Authorized Representatives of
the Issuing and Paying Agent named in Exhibit H hereto or their
successors, which may be named by the Issuing and Paying Agent (of
which the Issuer shall be notified in writing), from time to time
through the use of a facsimile transmission (confirmed by guaranteed
delivery of overnight courier) from any person purporting to be any of
the individuals included in Group II on Exhibit G hereto. Such
instructions shall include the following (each term as used or defined
in the related form of Note attached):
1. Principal Amount of the Note, CUSIP Number and, if
applicable, the Specified Currency.
2. (a) Fixed Rate Notes:
(i) Interest Rate,
(ii) Interest Payment Dates, and
(iii) Regular Record Dates.
(b) Floating Rate Notes:
(i) Base Rate or Rates,
<PAGE>
(ii) Initial Interest Rate,
(iii) Spread and/or Spread Multiplier, if
any,
(iv) Interest Reset Date or Dates,
(v) Interest Reset Period,
(vi) Interest Payment Dates,
(vii) Regular Record Dates,
(viii) Index Maturity,
(ix) Maximum and Minimum Interest Rates, if
any, and
(x) Calculation Agent, if other than the
Issuing and Paying Agent.
(c) Indexed Notes:
(i) Base Rates,
(ii) Initial Interest Rate(s),
(iii) Underlying index, credit or formula,
(iv) Interest (or Other Amounts Payable)
Reset Date(s),
(v) Interest (or Other Amounts Payable)
Reset Period(s),
(vi) Interest (or Other Amounts Payable)
Payment Date(s),
(vii) Regular Record Dates,
(viii) Maximum and Minimum Interest Rates,
if any, and
(ix) Calculation Agent, if other than the
Issuing and Paying Agent.
<PAGE>
3. Price to public, if any, of the Note (or whether
the Note is being offered at varying prices relating to
prevailing market prices at time of resale as determined by
the Selling Agent).
4. Trade date.
5. Original Issue Date.
6. Stated Maturity.
7. Redemption provisions, if any, including Initial
Redemption Date, Initial Redemption Percentage, Annual
Redemption Reduction Percentage, whether partial redemption is
permitted and method of determining Notes to be redeemed.
8. Prepayment Option Date(s) and Prepayment Option
Price(s).
9. Extension provisions, if any, including length of
Extension Period(s), number of Extension Periods and Final
Maturity Date.
10. Renewal terms, if any, including Special Election
Interval and Special Election Period.
11. Net proceeds to the Issuer.
12. The Selling Agent's commission or underwriting
discount and the Selling Agent's participant account at the
Depositary for settlement.
13. Whether such Notes are being sold to the Selling
Agent as principal or to an investor or other purchaser
through the Selling Agent acting as agent for the Issuer, or
through the Issuer itself.
14. Whether such Note is being issued as an Original
Issue Discount Note and the terms thereof.
15. Such other information specified with respect to
the Notes (whether by addendum, text to be included under
"Other Provisions" on the face of such Note, or otherwise),
including, with respect to any Specified Currency Note,
provisions regarding the calculation of any interest or
principal payments under such Note.
(b) Upon receipt of the information set forth in subsection
(a) above, the Issuing and Paying Agent will confirm by facsimile to
the Issuer the principal amount of the Notes of the Issuer issued as of
such date hereunder after giving effect to such
<PAGE>
transaction and to all other transactions of which the Issuer has given
instructions to the Issuing and Paying Agent but which have not yet
been settled.
For purposes of monitoring the aggregate principal amount of
Notes issued and/or outstanding at any time hereunder, the Issuing and
Paying Agent shall determine the U.S. Dollar equivalent of the
principal amount of each Original Issue Discount Note or series of
Original Issue Discount Notes, each Indexed Note the principal of which
is determined by reference to an index or series of such Indexed Notes
and each Specified Currency Note or series of Specified Currency Notes
as follows:
(i) the U.S. Dollar equivalent of Specified
Currency Notes shall be determined by the Issuing and
Paying Agent as of 2:30 P.M., London time, on the
Original Issue Date for such Notes by reference to
the spot rate for U.S. Dollars against the Specified
Currency provided to the Issuing and Paying Agent by
the Issuer or, if such spot rate is not so provided
on a timely basis, by reference to the Issuing and
Paying Agent's middle market spot rate for U.S.
Dollars against the Specified Currency on the London
Business Day immediately preceding the date on which
the Issuing and Paying Agent receives the Issuer's
instruction to issue the Notes.
(ii) the principal amount of Original Issue
Discount Notes and any other Notes issued at a
discount shall be deemed to be (x) the principal
amount received by the Issuer for the relevant issue
or (y) in the case of a Specified Currency Note, the
U.S. Dollar equivalent, determined in the manner
specified in clause (i) above, of the principal
amount received by the Issuer for the relevant issue.
(iii) the principal amount of any Indexed
Notes the principal of which is determined by
reference to an index shall be deemed to be the
principal amount received by the Issuer for the
relevant issue.
The Issuing and Paying Agent shall promptly notify the Issuer
of each determination made as aforesaid.
(c) Upon receipt of such instructions, if such Notes are to be
issued as one or more Global Notes, the Issuing and Paying Agent shall
communicate to the Depositary and the Selling Agent through DTC's
Participant Terminal System, a pending deposit message specifying the
settlement information required in the Administrative Procedures.
(d) Instructions regarding the completion of a Note must be
received by the Issuing and Paying Agent not later than the time and
date specified in the Administrative Procedures.
SECTION 6. PROCEDURE UPON SALE OF THE NOTES. The Issuing and Paying
Agent will upon reasonable written request, promptly deliver copies of such
<PAGE>
Global Notes (with any additional terms provided by the Issuer included thereon)
to the appropriate Selling Agents in accordance with Section 5(c) hereof.
SECTION 7. PAYMENT OF INTEREST; ACTIONS ON DAYS OTHER THAN BUSINESS
DAYS; PAYMENT OF OTHER AMOUNTS.
(a) Subject to the receipt of funds as provided in Section 12
hereof, interest payments will be made on the Notes on each Interest
Payment Date and on the Stated Maturity thereof (or the date of
Optional Redemption, if any) pursuant to the terms stated thereon. All
such interest payments (other than interest due on the Stated Maturity,
or on the date of Optional Redemption, if a Note is redeemed prior to
its Stated Maturity) will be paid to the Holder of such Note at the
close of business on the applicable Regular Record Date.
Notwithstanding the foregoing, if a Note is dated between the Regular
Record Date next preceding an Interest Payment Date and such Interest
Payment Date, the first payment of interest on such Note will be made
on the next succeeding Interest Payment Date following the next
succeeding Regular Record Date, to the Holder on the Regular Record
Date immediately succeeding such first Interest Payment Date, unless
otherwise specified in the applicable Pricing Supplement. Interest will
begin to accrue on the issue date and not from the previous Interest
Payment Date. Unless otherwise specified on the face of the Note and in
an applicable Pricing Supplement, interest on Fixed Rate Notes
(including payments for partial periods) will be calculated on the
basis of a 360-day year consisting of twelve 30-day months; provided,
however, that if the term of such Fixed Rate Note is for a period from
7 days through and including one year, then interest payable on such
Fixed Rate Note, if any, on each Interest Payment Date and on the
Stated Maturity will be calculated on the basis of the actual number of
calendar days from and including the last Interest Payment Date to
which interest has been paid to, but excluding, such Interest Payment
Date or Stated Maturity, as the case may be, divided by 360. Unless
otherwise specified on the face of the Note and in an applicable
Pricing Supplement, in the case of Floating Rate Notes, interest will
be calculated and paid on the basis of the actual number of days since
the preceding Interest Payment Date (or, if none, since the Original
Issue Date) divided by 360 or, if the base rate is the Treasury Rate or
CMT Rate, as defined in the applicable Note, by the actual number of
days since the preceding Interest Payment Date (or, if none, since the
Original Issue Date) . All interest on Certificated Notes (other than
interest payable at Stated Maturity or upon any Optional Redemption)
will be paid by check of the Issuing and Paying Agent mailed by such
Issuing and Paying Agent to the Holder as such Holders address is shown
in the Register referred to in Section 15 on the applicable Regular
Record Date, or to such other address in the United States as such
Holder shall designate to the Issuing and Paying Agent in writing not
later than the relevant Regular Record Date; provided, however, that a
Holder of one million dollars ($1,000,000) or more in aggregate
Principal amount of Certificated Notes (all of which have identical
terms and tenor) shall be entitled to receive payments of interest
(other than interest payable at maturity or upon redemption) by wire
transfer of immediately available funds upon written request to the
Issuing and Paying Agent not later than fifteen (15) calendar days
prior to the applicable Payment Date. All interest payments on any
Global Note (other than Interest due on the Stated Maturity or the
Optional Redemption Date, if any) shall be paid by the transfer of
immediately available funds to the Depositary. The Issuing and Paying
Agent will withhold taxes, if any, on
<PAGE>
interest to the extent that it has been instructed in writing by the
Issuer of the related Note that any taxes should be withheld.
(b) Actions Due on Saturdays, Sundays and Holidays. If any
date on which a payment, notice or other action required by this
Agreement, the Administrative Procedures or the Note falls on any day
other than a Business Day, then that action or payment need not be
taken or made on such date, but may be taken or made on the next
succeeding Business Day on which the Issuing and Paying Agent is open
for business with the same force and effect as if made on such date.
(c) Payment of Other Amounts. With respect to any Indexed Note
which may include the payment of other amounts, the relevant Pricing
Supplement shall provide for determination of, and timing and method of
payment for, such other amounts.
SECTION 8. PAYMENT OF PRINCIPAL. Upon the Stated Maturity (or date of
Optional Redemption, if any) of any Note, or on each Interest Payment Date and
the Stated Maturity, in the case of an Amortizing Note, and upon presentation
and surrender of any Note on or after the Stated Maturity (or the date of
Optional Redemption, if any), the Issuing and Paying Agent shall pay, subject to
the receipt of funds as provided in Section 12 hereof, the Principal amount of
the Note together with accrued interest due on the Stated Maturity (or the date
of Optional Redemption, if any), either (i) by separate wire transfer of
immediately available funds to such account at a bank in The City of New York
(or other bank consented to by the Issuer of the related Note) as the Holder of
such Note shall have designated in writing to the Issuing and Paying Agent at
least 15 days prior to such Principal Payment Date and if such Note is a Global
Note, to the Depositary, or (ii) by check of the Issuing and Paying Agent
payable to the, order of the Holder of the Note or its properly designated
assignee or custodian. Upon payment in full, the Issuing and Paying Agent will
cancel the Note and remit it directly to the Issuer thereof.
SECTION 9. DESIGNATION OF ACCOUNTS TO RECEIVE PAYMENT. In the event
that Notes are issued in certificated form, a bank account to receive payments
due under a certificated Note may be designated to the Issuing and Paying Agent
to receive payments of interest and Principal under Sections 7 and 8 hereof
either (i) by an Authorized Representative of the Issuer included in Group II of
Exhibit G hereto in the authentication instructions given by it to the Issuing
and Paying Agent under Section 5(a) hereof in respect of particular Notes, or
(ii) in the event that the authentication instructions make no designation, or
that the Holder wishes to change a designation previously made, by written
notice from the Holder to the Issuing and Paying Agent. Such written notice must
be provided to the Issuing and Paying Agent not later than fifteen (15) days
prior to any Interest Payment Date, Principal Payment, or Payment Date, as the
case may be.
SECTION 10. INFORMATION REGARDING AMOUNTS DUE. The Issuing and Paying
Agent shall provide to the Issuer, at least five (5) Business Days before each
Interest Payment Date or other payment date, a list of interest payments or
other payments to be made on the following Interest Payment Date or other
payment date for each Note and in total. The Issuing and Paying Agent will
provide to the Issuer by
<PAGE>
the fifteenth day of each month a list of the Principal, premium, if any, and
interest or other amounts to be paid on Notes maturing in the next succeeding
month.
SECTION 11. SPECIFIED CURRENCY NOTES. Prior to the issuance of any
Specified Currency Note, the Issuer thereof shall provide to the Issuing and
Paying Agent a form of such Note, which form shall be in substantially the form
of Exhibit C, D or E hereto unless otherwise provided in the applicable Pricing
Supplement, with such changes and additions as may be reasonably satisfactory to
the Issuing and Paying Agent.
SECTION 12. DEPOSIT OF FUNDS. The Issuer shall, prior to 11:00 a.m.,
New York City time, on each Interest Payment Date or other payment date, pay to
the Issuing and Paying Agent an amount in immediately available funds sufficient
to pay all interest or other payments due on Notes issued by the Issuer on such
Interest Payment Date and shall, prior to 11:00 a.m., New York City time, on the
Stated Maturity (or any date of Optional Redemption, if any) of any Note issued
by the Issuer, pay to the Issuing and Paying Agent an amount in immediately
available funds sufficient to pay the Principal of any such Note, and interest
accrued and/or other amounts due to the Stated Maturity (or the date of Optional
Redemption, as the case may be).
SECTION 13. OPTIONAL REDEMPTION.
(a) OPTIONAL REDEMPTION. In accordance with and subject to the
terms and conditions provided in the applicable Note and Pricing
Supplement, the Issuer may at its option redeem a Note issued by it in
whole or from time to time in part (subject to the requirement that the
principal amount of such Note after such redemption, if such Note is
redeemed in part, (unless otherwise specified in a Pricing Supplement)
be not less than $250,000 or any integral multiple of $1,000 in excess
thereof, such minimum denomination, the "Authorized Denomination") on
or after the date designated in such Note as the Initial Redemption
Date at the applicable Redemption Price, in each case, with accrued and
unpaid interest to the date of redemption. Unless otherwise specified
in an applicable Pricing Supplement and in the Note, the Issuer may
exercise such option by giving to the Holder thereof a notice of such
redemption at least thirty (30) but not more than sixty (60) days prior
to the date of redemption. The Issuer shall notify the Issuing and
Paying Agent of its election to redeem any Note at least forty-five
(45) days prior to the date of redemption (unless a shorter period is
satisfactory to the Issuing and Paying Agent). In the event of
redemption of the Note in part only, a new Note or Notes of like tenor
and terms for the unredeemed portion thereof shall be issued in the
name of the Holder thereof upon the cancellation thereof in accordance
with the terms of this Agreement. Unless otherwise provided in the
applicable Note, if less than all of the Notes with like tenor and
terms to such Note are to be redeemed, the Notes to be redeemed shall
be selected by the Issuing and Paying Agent by pro rata, by lot or by
such method as shall be agreed upon by the Issuing and Paying Agent and
the Issuer as being fair and appropriate.
(b) OPTIONAL REPAYMENT. In accordance with and subject to the
terms and conditions provided in the applicable Note and Pricing
Supplement, such Note will be repayable prior to its Stated Maturity at
the option of the Holder on the Prepayment
<PAGE>
Option Dates and at the Prepayment Option Prices provided in the
applicable Note together with accrued interest to such date. Unless
otherwise provided in the applicable Note and Pricing Supplement, in
order for the Note to be repaid, the Issuer (or the Issuing and Paying
Agent, on behalf of the Issuer) must receive, at least thirty (30) but
not more than forty-five (45) days prior to an Prepayment Option Date,
the Note and the form, entitled "Option to Elect Repayment" included
with such Note at the time of its issue, duly completed. Exercise of
this repayment option shall be irrevocable, except as otherwise
provided under Section 13 (c) below. If so provided in the applicable
Note, the repayment option may be exercised by the Holder of such Note
for less than the aggregate principal amount of the Note then
outstanding provided that the principal amount of the Note remaining
outstanding after repayment is in an Authorized Denomination. Upon such
partial repayment the Note shall be cancelled and a new Note or Notes
of like tenor and terms for the remaining principal amount thereof
shall be issued in the name of the Holder.
(c) OPTIONAL EXTENSION OF MATURITY. If so specified in the
applicable Note and Pricing Supplement, the Stated Maturity of such
Note may be extended at the option of the Issuer, in the manner set
forth below (unless otherwise provided on the face thereof), for that
number of periods each of such length as provided in the applicable
Note (each an "Extension Period") up to but not beyond the Final
Maturity Date set forth in such Note. Unless otherwise specified in the
Applicable Note and Pricing Supplement, the Issuer may exercise such
option by notifying the Issuing and Paying Agent of such exercise at
least fifty (50) but no more than sixty (60) days prior to the Stated
Maturity in effect prior to such exercise (the "Original Stated
Maturity") . If the Issuer exercises such option, the Issuing and
Paying Agent will mail (by first class mail, postage prepaid) to the
Holder of the Note no later than forty (40) days prior to the Original
Stated Maturity a notice (the "Extension Notice") relating to such
Extension Period, setting forth (i) the election of the Issuer to
extend the Original Stated Maturity, (ii) the new Stated Maturity
(which shall then be considered the Stated Maturity for all purposes of
the Note) , (iii) spread or spread multiplier applicable to the
Extension Period, and (iv) the provisions, if any, for redemption
during such Extension Period. Upon the Issuing and Paying Agent's
transmittal of the Extension Notice, the Original Stated Maturity of
the Note shall be extended automatically, and, except as modified by
the Extension Notice and as described in the next paragraph, such Note
will have the same terms as prior to the transmittal of such Extension
Notice.
Notwithstanding the foregoing unless otherwise provided in the
Note and applicable Pricing Supplement, not later than twenty (20) days
prior to the Original Stated Maturity of such Note the Issuer may, at
its option, in the case of a Fixed Rate Note, revoke the interest rate
provided for in the Extension Notice for the Extension Period and
establish an interest rate that is higher than the interest rate
provided for in the Extension Notice for the Extension Period, or in
the case of a Floating Rate Note, revoke the spread or spread
multiplier provided for in the Extension Notice for the Extension
Period, or in the case of an Indexed Note, make such other changes to
the determination of principal, premium, if any, interest payable or
other amounts payable, or any combination of the foregoing, each to the
economic benefit of the Holder, by causing the Issuing and Paying Agent
to transmit notice of such higher interest rate, or higher spread or
spread multiplier, or other change, as the case may be, to the Holder
of such Note.
<PAGE>
Such notice shall be irrevocable. All Notes with respect to which the
Stated Maturity is extended and with respect to which the Holders of
such Notes have not tendered such Notes for repayment (or have validly
revoked any such tender) pursuant to the succeeding paragraph will bear
such higher interest rate, or higher spread or spread multiplier, or
other change, as the case may be, for the Extension Period.
If the Issuer elects to extend the Stated Maturity of the
Note, the Holder thereof will have the option to elect repayment of the
Note by the Issuer thereof on the Original Stated Maturity at a price
equal to the aggregate principal amount thereof outstanding plus
interest accrued to such date. In order to obtain such repayment, the
Holder thereof must follow the procedures set forth in Section 13(b)
for optional repayment except that the period for delivery of the Note
or notification to the Issuing and Paying Agent shall be at least
twenty-five (25) but not more than thirty-five (35) days prior to the
Original Stated Maturity and except that, if the Holder thereof has
tendered the Note for repayment pursuant to an Extension Notice, such
Holder may, by written notice to the Issuing and Paying Agent, revoke
such tender for repayment until the close of business on the tenth day
prior to the Original Stated Maturity.
(d) OPTIONAL RENEWAL. If so provided in the applicable Note
and Pricing Supplement, such Note may be renewed by the Holder of the
Note on an Interest Payment Date (provided in the applicable Note)
occurring in or prior to the twelfth month following the Original Issue
Date (the "Initial Maturity Date") in accordance with the procedures
described below Unless a Special Election Interval is provided in the
applicable Note, on the Interest Payment Date occurring in the sixth
month prior to the Initial Maturity Date (as provided in the applicable
Note) of a Renewable Note (the "Initial Renewal Date") and on the
Interest Payment Date occurring in each sixth month (or in the last
month of each Special Election Interval) after such Initial Renewal
Date (each, together with the Initial Renewal Date, a "Renewal Date"),
the term of the Note may be extended to the Interest Payment Date
occurring in the twelfth month (or, if a Special Election Interval is
specified the last month in a period equal to twice the Special
Election Interval) after such Renewal Date, if the Holder of such Note
elects to extend the term of the Note or any portion thereof as
provided below. If the Holder of the Note does not elect to extend the
term of any portion of the principal amount of such Note during the
specified period prior to any Renewal Date, such portion will become
due and payable on the Interest Payment Date occurring in the sixth
month (or the last month in the Special Election Interval) after such
Renewal Date (the "New Maturity Date").
A Holder of such Note may elect to renew the term of the Note,
or if provided in the applicable Note and Pricing Supplement, any
portion constituting an Authorized Denomination thereof, by delivering
a notice to such effect to the Issuing and Paying Agent not less than
fifteen (15) nor more than thirty (30) days prior to such Renewal Date
(unless a different Special Election Period is provided in the
applicable Note). Such election will be irrevocable and will be binding
upon each subsequent Holder of the Note. An election to renew the term
of such Note may be exercised with respect to less than the entire
principal amount of the Note only if notice is provided as provided in
the applicable Note and only in such principal amount, or any integral
multiple in excess thereof, as specified in such notice.
Notwithstanding the foregoing, the term of such Note may not be
extended beyond the maturity provided in the applicable Note.
<PAGE>
If the Holder of such Note does not elect to renew the term of
the Note, the Note must be presented to the Issuing and Paying Agent
(or any duly appointed paying agent) and, if the Note is issued in
definitive form, as soon as practicable following receipt of the Note,
the Issuing and Paying Agent (or any duly appointed paying agent) shall
issue in exchange herefor in the name of the Holder (i) a Note, in a
principal amount equal to the principal amount of such Note for which
no election to renew the term thereof was exercised, with terms
identical to those specified on the Note (except that such Note shall
have a fixed, nonrenewable maturity on the New Maturity Date) and (ii)
if an election to renew is made with respect to less than the full
principal amount of the Note, a replacement Note, in a principal amount
equal to the principal amount of such exchanged Note for which the
election to renew was made, with terms identical to such exchanged
Note.
SECTION 14. EVENTS OF DEFAULT.
Unless otherwise specified in the applicable Note and Pricing
Supplement, the following will constitute "Events of Default" and the
only Events of Default with respect to each Note: (a) default in the
payment of any interest or other amounts payable upon such Note when
due, which continues for thirty (30) days; (b) default in the payment
of any principal of or premium, if any, upon such Note when due; (c)
default in the performance of any covenant or agreement of the Issuer
thereof contained in such Note which, unless otherwise specified
therein, continues for 90 days; (d) the appointment of a conservator,
receiver, liquidator or similar official for the Issuer thereof or for
all or substantially all of its property, or the taking by the Issuer
of any action to seek relief under any applicable insolvency or
reorganization law.
If an Event of Default with respect to a Global Note shall
occur, the Issuer thereof shall promptly issue Certificated Notes in
exchange for such Global Note and the remedies provided in such Global
Note for any such Event of Default will be exercisable only after such
exchange has occurred, and only by the Holders of such Certificated
Notes. The Holder of each such Certificated Note will itself be solely
and entirely responsible for the exercise of any remedies provided
therein.
If an Event of Default with respect to a Certificated Note
shall occur and be continuing with respect thereto, the Holder thereof
may: (i) by written notice to the Issuing and Paying Agent declare the
entire outstanding principal amount thereof, together with any unpaid
interest, other amounts and premium accrued thereon, to be immediately
due and payable; (ii) institute a judicial proceeding of the
enforcement of the terms thereof including the collection of all sums
due and unpaid thereunder, prosecute such proceeding to judgment or
final decree, and enforce the same against the Issuer thereof and
collect monies adjudged or decreed to be payable in the manner provided
by law out of the property of the Issuer thereof; and (iii) take such
other action at law or in equity as may appear necessary or desirable
to collect and enforce such Certificated Note; provided, however, that
in the event that such Note is an Original Issue Discount Note or
Indexed Note the principal of which is determined by an index, unless
otherwise specified in such Note, the amount of principal that becomes
due and payable upon such declaration shall be equal to (a) with
respect to Original Issue Discount Notes, the
<PAGE>
Amortized Face Amount as defined therein, and (b) with respect to
Indexed Notes the principal of which is determined by an index, as
specified in the relevant Pricing Supplement, and provided further,
that the Holder of a Certificated Note may waive any Event of Default
that occurs with respect thereto.
SECTION 15. REGISTRATION; TRANSFER.
(a) The Registrar shall maintain a Register in which it shall
register the names, addresses and taxpayer identification numbers of
the Holders of the Notes and shall register the transfer of Notes.
(b) Upon surrender for registration of transfer of any Note to
the Registrar or any Transfer Agent, the Issuer shall execute, and the
Issuing and Paying Agent shall complete, authenticate and deliver, in
the name of the designated transferee or transferees, one or more new
Notes, of any Authorized Denominations and having identical terms and
provisions and for a like aggregate principal amount.
(c) At the option of the Holder of a certificated Note,
certificated Notes may be exchanged for other certificated Notes of any
Authorized Denominations and having identical terms and provisions and
for a like aggregate principal amount, upon surrender of the Notes to
be exchanged at the Registrar or any Transfer Agent. Whenever any
certificated Notes are so surrendered for exchange, the Issuer thereof
shall execute, and the Issuing and Paying Agent shall complete,
authenticate and deliver, the certificated Notes which the Holder of
the certificated Note making the exchange is entitled to receive. Each
new Note issued upon presentment of any Note for registration of
transfer or exchange shall be issued as of the date of its
authentication. Except as provided herein or in the applicable Pricing
Supplement and Note, owners of beneficial interests in a Global Note
representing Book Entry Notes registered in their names, will not
receive or be entitled to receive physical delivery of Certificated
Notes and will not be considered the owners or Holders thereof under
this Agreement.
(d) Notwithstanding the foregoing neither the Registrar or any
Transfer Agent shall register the transfer of or exchange (i) any Note
that has been called for redemption in whole or in part, except the
unredeemed portion of Notes being redeemed in part, (ii) any Note
during the period beginning at the opening of business 15 days before
the mailing of a notice of such redemption and ending at the close of
business on the date of such mailing, or (iii) any Global Note in
violation of the legend contained on the face of such Global Note.
(e) All Notes issued upon any registration of transfer or
exchange of Notes shall be the valid obligations of the Issuer,
evidencing the same debt, and entitled to the same benefits as the
Notes surrendered upon such registration of transfer or exchange.
(f) Every Note presented or surrendered for registration of
transfer or for exchange shall be duly endorsed, or be accompanied by a
written instrument of transfer with such evidence of due authorization
and guaranty of signature as may reasonably be required by the
Registrar or any Transfer Agent, as applicable, in form satisfactory to
<PAGE>
either of them, duly executed by the Holder thereof or his attorney
duly authorized in writing.
(g) No service charge shall be made to a Holder of Notes for
any transfer or exchange of Notes, but the Issuer may require the
payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith.
SECTION 16. PERSONS DEEMED OWNERS. Prior to due presentment of a Note
for registration of transfer, the Issuer, the Issuing and Paying Agent and any
agent of the Issuer or the Issuing and Paying Agent may treat the Holder as the
owner of such Note for the purpose of receiving payment of Principal of,
interest and premium, if any, on such Note and for all other purposes
whatsoever, whether or not such Note be overdue, and neither the Issuer, the
Issuing and Paying Agent nor any agent of the Issuer or the Issuing and Paying
Agent shall be affected by notice to the contrary.
SECTION 17. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. In case any
Note shall become mutilated, destroyed, lost or stolen, and upon the
satisfaction by the applicant of the requirements of this Section 17 for a
substituted Note, the Issuer shall execute, and upon its written request the
Issuing and Paying Agent shall authenticate and deliver, a new Note having
identical terms and provisions and having a number not contemporaneously
outstanding, in exchange and substitution for the mutilated Note or in lieu of
any substitution for the Note destroyed, lost or stolen. In the case of loss,
theft or destruction, the applicant for a substituted Note shall furnish to the
Issuer and to the Issuing and Paying Agent such security or indemnity as may be
required by them to save each of them harmless. Such applicant shall also
furnish to the Issuer and to the Issuing and Paying Agent evidence to their
satisfaction of the destruction, loss or theft of such Note and of the ownership
thereof. In the case of mutilation, the applicant for a substituted Note shall
surrender such mutilated Note to the Issuer or to the Issuing and Paying Agent
for cancellation thereof. The Issuing and Paying Agent may authenticate any such
substituted Note and deliver the same upon the written request or authorization
of any Authorized Representative. Upon the issuance of any substituted Note, the
Issuer may require the payment of a sum sufficient to cover any expense
connected therewith. In case any Note which has matured or is about to mature
shall become mutilated or be destroyed, lost or stolen, the Issuer may, instead
of issuing a substituted Note, pay or authorize the payment of the same (without
surrender thereof except in the case of a mutilated Note) if the applicant for
such payment shall furnish the Issuer and the Issuing and Paying Agent with such
security or indemnity as may be required by them to save each of them harmless,
and, in the case of destruction, loss or theft, evidence to the satisfaction of
the Issuer of the destruction, loss or theft of such Note and of the ownership
thereof. All applications under this Section shall be processed by the Issuing
and Paying Agent.
SECTION 18. RETURN OF UNCLAIMED FUNDS. Any money deposited with the
Issuing and Paying Agent and remaining unclaimed for two (2) years after the
date upon which the last payment of principal of or interest on any Note to
which such deposit relates shall have become due and payable, shall be repaid to
the Issuer of such Note by the Issuing and Paying Agent on written demand, and
the Holder of any Note to which such deposit related entitled to receive payment
shall thereafter look
<PAGE>
only to the Issuer for the payment thereof and all liability of the Issuing and
Paying Agent with respect to such money shall thereupon cease.
SECTION 19. AMENDMENT OR SUPPLEMENT. The Issuer and the Issuing and
Paying Agent may modify, amend or supplement this Agreement without the consent
of any Holder. In addition, the Issuer may modify, amend or supplement the terms
and conditions of the Notes, without the consent of any Holder thereof: (i) to
evidence succession of another party to the Issuer, and such party's assumption
of the Issuer's obligations under the Notes, upon the occurrence of a merger or
consolidation, or transfer, sale or lease of assets as described below; (ii) to
add additional covenants, restrictions or conditions for the protection of the
Holder thereof; (iii) to cure ambiguities in the Notes, or correct defects or
inconsistencies in the provisions thereof; (iv) to reflect the replacement of
the Issuing and Paying Agent, or the assumption, by the Issuer or a substitute
Issuing and Paying Agent of some or all of the Issuing and Paying Agent's or
Calculation Agent's responsibilities under this Agreement; (v) to evidence the
replacement or change of address of the Depositary; (vi) in the case of any
extendible, redeemable, prepayable, amortizing or indexed amortizing Note, to
reduce the principal amount thereof to reflect the payment, prepayment and/or
redemption of a portion of the outstanding principal amount thereof; (vii) in
the case of any extendible, renewable or indexed amortizing Note, to reflect any
change in the maturity date thereof in accordance with the terms thereof; or
(viii) to reflect the issuance in exchange therefor, in accordance with the
terms thereof, of one or more Certificated Notes. However, the Notes may not be
modified or amended without the express written consent of the registered Holder
to: (i) change the Stated Maturity, except in the case of an extendible,
renewable or indexed amortizing note as provided therein; (ii) extend the time
of payment for the premium, if any, or interest on the Note, except in the case
of an extendible, renewable or indexed amortizing note as provided therein;
(iii) change the coin or currency in which the principal of, premium, if any, or
interest on the Note is payable; (iv) reduce the principal amount thereof or the
interest rate thereon, except in the case of an extendible, prepayable,
redeemable, amortizing or Indexed Note as provided therein; (v) change the
method of payment to other than wire transfer in immediately available funds;
(vi) impair the right of the Holder thereof to institute suit for the
enforcement of payments of principal of, premium, if any, or interest or other
amounts on the Note; (vii) change any Note's definition of "Event of Default" or
otherwise eliminate or impair any remedy available thereunder upon the
occurrence of any Event of Default (as defined in such Note) ; or (viii) modify
the provisions therein governing the amendment thereof.
Notes authenticated and delivered after the execution of any
agreement modifying, amending or supplementing this Agreement or the
Notes may bear a notation in form approved by the Issuer as to any
matter provided for in such modification, amendment or supplement to
this Agreement or the Notes. New Notes so modified as to conform, in
the opinion of the Issuer, to any provisions contained in any such
modification, amendment or supplement may be prepared by the Issuer,
authenticated by the Issuing and Paying Agent (or any Authenticating
Agent) and delivered in exchange for Outstanding Notes.
The Issuer may not consolidate or merge with or into any other
person, or convey, transfer or lease its properties and assets
substantially as an entirety to any person, unless
<PAGE>
(i) the surviving entity in such consolidation or merger, or the person
that acquires by conveyance or transfer, or that leases, the properties
and assets of the Issuer substantially as an entirety, shall be a bank,
corporation or partnership organized and validly existing under the
laws of the United States, any State thereof or the District of
Columbia, and shall expressly assume the due and punctual payment of
the principal of, premium, if any, and interest or other amounts
payable on the Notes issued by the Issuer, and the performance or
observance of every provision of the Notes on the part of the Issuer to
be performed or observed; and (ii) immediately after giving effect to
such transaction, no Event of Default with respect to the Issuer, and
no event which, after notice or the lapse of time or both, would become
an Event of Default with respect to the Issuer, shall have happened and
be continuing.
If this Agreement is amended or modified pursuant to an
agreement by the parties hereto pursuant to this Section 19, the
Issuing and Paying Agent may require, and shall be fully protected in
relying upon, an opinion of counsel, which opinion may be rendered by
counsel to the Issuer, stating that the execution of such amendment or
modification is authorized or permitted by this Agreement, and that
such amendment or modification constitutes the legal, valid and binding
obligation of the Issuer enforceable in accordance with its terms and
subject to customary exceptions.
SECTION 20. RESIGNATION OR REMOVAL OF AGENTS; APPOINTMENT OF SUCCESSORS
TO AGENTS.
(a) RESIGNATION OR REMOVAL OF AGENT. Any Agent may at any time
resign as such by giving written notice to the Issuer and, except in
the case of the resignation of the Issuing and Paying Agent, to the
Issuing and Paying Agent of such intention on its part, specifying the
date on which its desired resignation shall become effective; provided
that such date shall not be less than thirty (30) days after the date
on which such notice is given unless the Issuer agrees to accept less
notice.
The Issuer may remove any Agent with respect to Notes issued
by the Issuer at any time by filing with it an instrument in writing
signed by or on behalf of the Issuer and specifying such removal and
the date when it shall become effective.
The resignation or removal of an Agent with respect to Notes
issued by the Issuer shall become effective on the date set forth in
the notice thereof and shall only be effective with respect to the
Issuer and Notes issued by the Issuer, except that any resignation or
removal of the Issuing and Paying Agent or the Registrar shall take
effect upon the Issuer's, appointment, as hereinafter provided, of a
successor Issuing and Paying Agent or Registrar, as the case may be,
and such Agent's acceptance of such appointment; provided, that if the
Issuer has not appointed a replacement Agent within 30 days after any
such removal or replacement, the affected Agent (at the expense of the
Issuer) may petition any court of competent jurisdiction for the
appointment of a successor Agent.
(b) APPOINTMENT OF SUCCESSOR TO AGENT. In case at any time the
Issuing and Paying Agent or the Registrar becomes incapable of acting,
or is adjudged bankrupt or insolvent, or files a petition for corporate
reorganization under any applicable federal,
<PAGE>
state, or foreign bankruptcy, insolvency, or similar law or makes an
assignment for the benefit of its creditors, or consents to the
appointment of a receiver, custodian, or other similar official of all
or substantially all of its property, or admits in writing its
inability to pay or meet its debts as they mature, or if a receiver,
custodian, or other similar official of it or of all or substantially
all of its property is appointed, or if an order of any court is
entered for relief against it under the provisions of any applicable
federal, state or foreign bankruptcy, insolvency or similar law, or if
any public officer takes charge or control of any such Agent, or of its
property or affairs, for the purpose of rehabilitation, conservation or
liquidation, such Agent shall promptly notify the Issuer and the
Issuing and Paying Agent, in writing, of the occurrence of such event.
Either (i) following receipt of notice of resignation from,
(ii) upon the Issuer's removal of, or (iii) following the Issuer's
receipt of the notice referred to in the first paragraph of this
Section 20(b) from, the Issuing and Paying Agent or the Registrar, the
Issuer shall appoint a successor to such Agent by an instrument in
writing filed with the Issuing and Paying Agent (or its successor).
Upon the appointment as aforesaid of a successor Issuing and Paying
Agent or Registrar and acceptance by such successor of such
appointment, the Issuing and Paying Agent or Registrar hereunder so
superseded shall cease to be such Issuing and Paying Agent or Registrar
hereunder.
(c) SUCCESSOR OF AGENT. Any successor Issuing and Paying Agent
or Registrar appointed hereunder shall execute, acknowledge, and
deliver to its predecessor and to the Issuer an instrument accepting
such appointment hereunder, and thereupon such successor Issuing and
Paying Agent or Registrar without any further act, deed or conveyance,
shall become vested with all the authority, rights, powers, trusts,
immunities, duties, and obligations of such predecessor, with like
effect as if originally named as such Issuing and Paying Agent or
Registrar hereunder. Such predecessor, upon payment of any amount then
payable to it pursuant to Section 24, shall thereupon become obligated
to transfer, deliver and pay over, and such successor Issuing and
Paying Agent or Registrar shall be entitled to receive, all money,
securities and other property on deposit with or held by such
predecessor as such Issuing and Paying Agent or Registrar hereunder.
(d) MERGER, ETC. OF AGENT. Any corporation into which any
Agent hereunder may be merged, or converted, or any corporation with
which any Agent may be consolidated, or any corporation resulting from
any merger, conversion or consolidation to which any Agent shall be a
party, or a corporation to which any Agent shall sell or otherwise
transfer all or substantially all of the assets and business of such
Agent shall be the successor to such Agent under this Agreement
(provided that it shall be qualified as aforesaid) without the
execution or filing of any paper or any further act on the part of any
of the parties hereto. Each Agent will advise the Issuer promptly after
any public announcement of a proposal by such Agent to enter into any
such transaction.
(e) CHANGE IN DUTIES OF AN AGENT. The Issuer may vary the
appointment of any Agent other than the Issuing and Paying Agent.
(f) ADDITIONAL AGENTS. The Issuer may from time to time
appoint a paying agent for one or more Notes. In the event that (i) the
Issuing and Paying Agent shall be
<PAGE>
removed or resign and any successor thereto shall not be located in The
City of New York or (ii) the Issuing and Paying Agent shall cease to
maintain an office in The City of New York at which amounts due on the
Notes are payable, then in either such case the Issuer, with respect to
Notes issued by it, shall appoint a paying agent with an office in The
City of New York at which such Notes may be paid.
SECTION 21. RELIANCE ON INSTRUCTIONS. The Issuing and Paying Agent
shall incur no liability to the Issuer in acting hereunder upon instructions
contemplated hereby which the Issuing and Paying Agent believed in good faith to
have been properly given. In the event a discrepancy exists between the
instructions as originally received by the Issuing and Paying Agent and any
subsequent written confirmation thereof, such original instructions will be
deemed controlling provided the Issuing and Paying Agent gives notice to the
Issuer of such discrepancy promptly upon receipt of such written confirmation.
SECTION 22. CANCELLATION OF UNISSUED NOTES. Promptly upon the written
request of the Issuer, the Issuing and Paying Agent shall cancel and return to
the Issuer all unissued Notes of the Issuer in its possession.
SECTION 23. REPRESENTATION AND WARRANTIES OF THE ISSUER; INSTRUCTIONS
BY CERTIFICATE.
(a) Each instruction given to the Issuing and Paying Agent in
accordance with Section 5 hereof shall constitute a representation and
warranty to the Issuing and Paying Agent by the Issuer that the
issuance and delivery of the Notes is in accordance with the terms and
conditions described in the Offering Circular and the applicable
Pricing Supplement, have been duly and validly authorized by the Issuer
and, when completed, authenticated and delivered pursuant hereto, the
Notes will constitute the valid and legally binding obligations of the
Issuer enforceable against the Issuer in accordance with its terms.
(b) Any instruction given by the Issuer to the Issuing and
Paying Agent under this Agreement shall be in the form of an Officer's
Certificate. For the purposes of this Agreement, "Officer's
Certificate" means a certificate signed by an Authorized Representative
and delivered to the Issuing and Paying Agent.
SECTION 24. FEES. For their services under this Agreement, the Agents,
including the Issuing and Paying Agent, shall be entitled to compensation, as
shall be mutually agreed upon in writing between each such Agent and the Issuer
from time to time and the Issuer agrees to reimburse the Issuing and Paying
Agent for all reasonable out of pocket disbursements and advances made or
incurred by the Issuing and Paying Agent incurred without negligence or willful
misconduct.
SECTION 25. NOTICES.
<PAGE>
(a) All communications by or on behalf of the Issuer relating
to the completion, delivery or payment of the Notes are to be directed
to the Corporate Trust Agency Group of the Issuing and Paying Agent,
Four Albany Street, 4th floor, New York, New York 10006, Attention:
Corporate Trust and Agency Group (or such other department or division
as the Issuing and Paying Agent shall specify in writing to the
Issuer). The Issuer will send all Notes to be completed and delivered
by the Issuing and Paying Agent to such Corporate Trust and Agency
Group (or such other department or division as the Issuing and Paying
Agent shall specify in writing to the Issuer). The Issuing and Paying
Agent will, upon written request, advise the Issuer from time to time
of the individuals generally responsible for the administration of this
Agreement.
(b) Notices and other communications hereunder shall (except
to the extent otherwise expressly provided) be in writing and shall be
addressed as follows, or to such other address as the party receiving
such notice shall have previously specified:
If to the Issuer:
Bank of America, N.A.
Bank of America Corporate Center
100 North Tryon Street
6th Floor, NC1-007-06-07
Charlotte, North Carolina 28255
Telephone: (704) 388-2375
Telecopier: (704) 386-9946
Attention: James T. Houghton
With copies to:
Bank of America Corporation
Bank of America Corporate Center
Legal Department, 20th Floor, NC1-007-20-01
Charlotte, North Carolina 28255
Telephone: (704) 386-9036
Telecopier: (704) 386-6453
Attention: Jacqueline Jarvis Jones
and
Smith Helms Mulliss & Moore, L.L.P.
201 North Tryon Street
Charlotte, North Carolina 28202
Telephone: (704) 343-2229
Telecopier: (704) 334-8467
Attention: Robert M. Donlon
<PAGE>
If to the Issuing and Paying Agent:
Bankers Trust Company
Four Albany Street,
4th floor,
New York, New York 10006
Telephone: (212) 250-6161
Telecopier: (212) 250-6961/6392
Attention: Corporate Trust and Agency
Group
with a copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Telephone: (212) 715-9392
Telecopies: (212) 715-8000
Attention: Michele D. Ross, Esq.
SECTION 26. INFORMATION FURNISHED BY THE ISSUING AND PAYING AGENT. Upon
the reasonable request of the Issuer and from time to time, the Issuing and
Paying Agent shall promptly provide the Issuer with information with respect to
Notes issued by it hereunder to the extent such information is reasonably
available.
SECTION 27. LIABILITY. Neither the Issuing and Paying Agent nor its
officers or employees shall be liable to the Issuer for any act or omission
hereunder except in the case of negligence or willful misconduct. The duties and
obligations of the Issuing and Paying Agent, its officers and employees shall be
determined by the express provisions of this Agreement and they shall not be
liable except for the negligent performance of such duties and obligations as
are specifically set forth herein and no implied covenants shall be read into
this Agreement against them. Neither the Issuing and Paying Agent nor its
officers shall be required to ascertain whether any issuance or sale of Notes
(or any amendment or termination of this Agreement) is in compliance with any
other agreement to which the Issuer is a party (whether or not any of the Agents
is also a party to such other agreement).
SECTION 28. ADDITIONAL RESPONSIBILITIES; ATTORNEYS FEES.
(a) If the Issuer shall ask the Issuing and Paying Agent to
perform any duties not specifically set forth in the Agreement as
duties of the Issuing and Paying Agent (the "Additional
Responsibilities") and the Issuing and Paying Agent chooses to perform
such Additional Responsibilities, the Issuing and Paying Agent shall be
held to the same standard of care and shall be entitled to all the
protective provisions (including, but not limited to, indemnification)
set forth herein.
(b) In the event the Issuer shall default under any of the
provisions or obligations of this Agreement, the Notes or any
amendment, supplement or modification related hereto, affecting the
rights or duties of the Issuing and Paying Agent, and the Issuing and
Paying Agent shall employ attorneys or incur other expenses for the
enforcement of performance or observance of any such obligation or
agreement, the Issuer agrees that, in the absence of negligence or
willful misconduct on the part of the
<PAGE>
Issuing and Paying Agent, it will on demand therefore pay to the
Issuing and Paying Agent the reasonable fees of such attorneys and such
other expenses incurred by the Issuing and Paying Agent.
SECTION 29. TRANSFER OF NOTES AND MONEYS.
(a) The Issuing and Paying Agent shall hold all Certificated
Notes delivered to it for payment solely for the benefit of the
respective Holders of the Notes which shall have so delivered such
Notes until moneys representing the payment for such Notes shall have
been delivered to or for the account of or to the order of such
Holders.
(b) The Issuing and Paying Agent shall hold all moneys
delivered to it pursuant to this Agreement for the payment of
Certificated Notes in trust solely for the benefit of the person or
entity which shall have so delivered such moneys until such Notes shall
have been delivered to or for the account of such person or entity, but
such moneys need not be segregated from other funds except to the
extent required by law.
(c) The Issuing and Paying Agent shall only make such payments
called for under this Agreement from funds transferred to it for
payment pursuant to this Agreement which funds are immediately
available and on deposit in an appropriate account maintained by the
Issuing and Paying Agent in The City of New York.
(d) Under no circumstances shall the Issuing and Paying Agent
be obligated to expend any of its own funds in connection with the
performance of its duties hereunder.
(e) The Issuing and Paying Agent may become a purchaser,
holder, transferor or otherwise own, hold or transfer any Notes and may
commence or join in any action which a Holder is entitled to take
without any conflict with its responsibilities pursuant to this
Agreement.
(f) The Issuing and Paying Agent shall not be required to
invest any moneys delivered to it.
(g) The Issuing and Paying Agent shall have no liability for
interest on any moneys received from the Issuer hereunder.
(h) The Issuing and Paying Agent shall not be responsible for
the correctness of any recital in the Notes or in any offering
materials and makes no representations as to the validity of the Notes
and shall incur no responsibility in respect thereto.
(i) The Issuing and Paying Agent shall be protected in acting
upon any notice, order, requisition, request, consent, certificate,
order, opinion (including an opinion of counsel), affidavit, letter,
telegram or other paper or document in good faith deemed by it to be
genuine and correct and to have been signed or sent by the proper
person or persons.
<PAGE>
(j) Any action taken by the Issuing and Paying Agent pursuant
to this Agreement upon the request or authority or consent of any
person who at the time of making such request or giving such authority
or consent is the Holder of any Note shall be conclusive and binding
upon all future holders of the same Note and Notes issued in exchange
therefor or in place thereof.
(k) In paying Notes hereunder, the Issuing and Paying Agent
shall be acting as a conduit and shall not be paying Notes for its own
account, and in the absence of written notice from the Issuer to the
contrary and in the absence of gross negligence or wilful misconduct of
the Issuing and Paying Agent, the Issuing and Paying Agent shall be
entitled to assume that any Global Note presented to it, or deemed
presented to it, for payment, is entitled to be so paid.
SECTION 30. INDEMNITY. The Issuer covenants and agrees to
indemnify the Issuing and Paying Agent (including its directors, officers,
attorneys, employees and agents) for, and to hold it harmless against, any loss,
liability or expense (including reasonable attorneys fees and disbursements)
incurred without negligence or willful misconduct on its part, arising out of or
in connection with this Agreement or the Administrative Procedures and/or the
performance of the Issuing and Paying Agent's duties hereunder and the
Administrative Procedures, including the reasonable costs and expenses of
defending it against any claim of liability in the premises. The Issuing and
Paying Agent may refuse to perform any duty or exercise any right or power
unless it receives indemnity satisfactory to it against any related loss,
liability or expense. These indemnification obligations shall survive the
termination of this Agreement including any termination under state or federal
banking law or other insolvency law, to the extent enforceable under applicable
law, and shall survive the resignation or removal of the Issuing and Paying
Agent while remaining applicable to any action taken or omitted by the Issuing
and Paying Agent while acting pursuant to this Agreement.
SECTION 31. LIMITATION OF LIABILITY; RELIANCE ON OPINIONS AND
CERTIFICATES.
(a) THE ISSUING AND PAYING AGENT'S DUTIES ARE MINISTERIAL IN
NATURE AND IN NO EVENT SHALL THE ISSUING AND PAYING AGENT BE LIABLE,
DIRECTLY OR INDIRECTLY, TO ANY PERSON OR ENTITY FOR ANY (a) LOSS,
LIABILITY, DAMAGES OR EXPENSES (OTHER THAN, IN THE CASE OF THE ISSUER
ONLY, THOSE WHICH RESULT DIRECTLY FROM THE ISSUING AND PAYING AGENT'S
NEGLIGENCE OR WILLFUL MISCONDUCT) OR (b) SPECIAL, INCIDENTAL, INDIRECT,
PUNITIVE OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION, LOST
PROFITS) , EVEN IF THE ISSUING AND PAYING AGENT HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. THIS LIMITATION OF LIABILITY WILL APPLY
REGARDLESS OF THE FORM OF ACTION, INCLUDING WITHOUT LIMITATION FOR
BREACH OF THIS CONTRACT OR TORT (INCLUDING NEGLIGENCE).
(b) The Issuing and Paying Agent shall be entitled to consult
with counsel of its choosing and shall have no liability to the Issuer
in respect of an action taken or
<PAGE>
omitted by the Issuing and Paying Agent in good faith in reliance on an
opinion of counsel or an Officer's Certificate, including in-house
counsel.
(c) Notwithstanding anything to the contrary herein, the
Issuing and Paying Agent shall not be responsible for any misconduct or
negligence on the part of any agent, correspondent, attorney or
receiver appointed with due care by it hereunder.
SECTION 32. BENEFIT OF AGREEMENT. This Agreement is solely for the
benefit of the parties hereto and the Holders and their successors and assigns
and no other person shall acquire or have any rights under or by virtue hereof.
SECTION 33. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York applicable to
agreements to be entered into and to be performed in such State.
SECTION 34. HEADINGS AND TABLE OF CONTENTS. The table of contents and
the section and subsection headings herein are for convenience only and shall
not affect the construction hereof.
SECTION 35. COUNTERPARTS. This Agreement may be signed in separate
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute but one and the same instrument.
SECTION 36. TERMINATION OF PRIOR ISSUING AND PAYING AGENT AGREEMENTS.
The Issuer and Bankers Trust Company agree that on the day on which no notes
issued by the Issuer and authenticated and delivered under the Issuing and
Paying Agent Agreement with an April 30, 1993 Effective Date entered into
between Bankers Trust Company and the Issuer remain outstanding, such agreement
shall terminate (other than the provisions contained therein which by their
terms survive termination).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on their behalf by their officers duly
authorized thereunto, as of the day and year first above written.
BANK OF AMERICA, N.A., as Issuer
By: /S/ James T. Houghton
-----------------------------
Name: James T. Houghton
Title: Senior Vice President
BANKERS TRUST COMPANY, as
Issuing and Paying Agent
By: /S/ Ednora G. Linares
-----------------------------
Name: Ednora G. Linares
Title: Assistant Vice President
Exhibit 10(b)
ELEVENTH AMENDMENT TO THE
NATIONSBANK CORPORATION AND DESIGNATED SUBSIDIARIES
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, Bank of America Corporation ("Bank of America") and certain of
its subsidiary corporations (collectively with Bank of America, the
"Participating Employers") maintain the NationsBank Corporation and Designated
Subsidiaries Supplemental Executive Retirement Plan (the "Plan"); and
WHEREAS, Bank of America desires to amend the Plan to (i) permit
participants to elect alternative methods of benefit payment under the Plan and
(ii) meet other current needs; and
WHEREAS, the Compensation Committee of the Board of Directors of Bank
of America has authorized and approved said amendment to the Plan in accordance
with the provisions of Article VI of the Plan;
NOW, THEREFORE, Bank of America does hereby declare that the Plan is
hereby amended effective as of December 14, 1999 as follows:
1. The Plan is amended, effective as of the Effective Time (as defined
below), so that each specific reference in the Plan to NationsBank Corporation
(including without limitation the reference to "NationsBank Corporation" in the
name of the Plan) shall refer (other than as to time or events before the
Effective Time) to (i) BankAmerica Corporation, a Delaware corporation, from the
Effective Time to April 28, 1999 and (ii) Bank of America Corporation, a
Delaware corporation, from and after April 28, 1999. Not in limitation of the
foregoing, each reference in the Plan to the Board of Directors, Compensation
Committee or Management Compensation Committee of NationsBank Corporation shall
refer to the Board of Directors, Compensation Committee or Management
Compensation Committee (as the case may be) of (i) BankAmerica Corporation from
the Effective Time to April 28, 1999 and (ii) Bank of America Corporation from
and after April 28, 1999. The "Effective Time" as used in this Instrument means
the effective time of the said merger of BankAmerica Corporation into
NationsBank Corporation on September 30, 1998. The foregoing amendments to the
Plan (i) do not rename, or change any reference made in the Plan to, any other
employee benefit plan that includes the word "NationsBank" in its name, and (ii)
are not intended to, and shall not, modify, override or otherwise apply to or
affect any provisions of the Plan contained in Addendum 1998-1, which was added
to the Plan by Instrument of BankAmerica Corporation dated October 1, 1998.
<PAGE>
2. Sections 2.1(b)(2) and 2.1(b)(8) of the Plan are amended by deleting
the phrase "Flexible Benefits Plan" each time it appears therein and by
substituting in lieu thereof the phrase "Group Benefits Plan."
3. Section 2.1(b)(11) of the Plan is amended to read as follows:
"(11) DEFERRED COMPENSATION PLAN means any non-qualified
deferred compensation plan maintained by the Corporation for the
benefit of a select group of management or highly compensated
employees."
4. Section 2.1(b)(25) of the Plan is amended to read as follows:
"(25) GROUP BENEFITS PLAN means the NationsBank Group Benefits
Plan, as amended from time to time."
5. Section 2.1(b)(34) of the Plan is amended to read as follows:
"(34) PARTICIPATING EMPLOYER(S) means:
(A) the Corporation; and
(B) those Subsidiary Corporations which adopt and
participate in the Plan."
6. Section 2.1(b)(46) of the Plan is amended to read as follows:
"(46) CHANGE OF CONTROL means, and shall be deemed to have
occurred upon, any of the following events:
(A) The acquisition by any person, individual, entity
or "group" (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (collectively, a "Person") of Beneficial
Ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of twenty-five percent (25%) or more of
either:
(i) The then-outstanding shares of common
stock of the Corporation (the "Outstanding Shares");
or
(ii) The combined voting power of the
then-outstanding voting securities of the Corporation
entitled to vote generally in the election of
directors of the Corporation (the "Outstanding Voting
Securities");
PROVIDED, HOWEVER, that the following acquisitions shall not
constitute a Change of Control for purposes of this
subparagraph (a): (A) any acquisition directly from the
Corporation, (B) any acquisition by the Corporation or any of
its subsidiaries, (C) any acquisition by any
2
<PAGE>
employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any of its subsidiaries, or
(D) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of
subparagraph (C) below; or
(B) Individuals who, as of September 30, 1998,
constitute the Board of Directors of the Corporation (the
"Incumbent Board") cease for any reason to constitute at least
a majority of the Board of Directors of the Corporation;
PROVIDED, HOWEVER, that any individual who becomes a director
subsequent to September 30, 1998 and whose election, or whose
nomination for election by the Corporation's shareholders, to
the Board of Directors of the Corporation was either (i)
approved by a vote of at least a majority of the directors
then comprising the Incumbent Board or (ii) recommended by a
nominating committee comprised entirely of directors who are
then Incumbent Board members shall be considered as though
such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act),
other actual or threatened solicitation of proxies or consents
or an actual or threatened tender offer; or
(C) Approval by the Corporation's shareholders of a
reorganization, merger, or consolidation or sale or other
disposition of all or substantially all of the assets of the
Corporation (a "Business Combination"), in each case, unless
following such Business Combination, (i) all or substantially
all of the Persons who were the Beneficial Owners (within the
meaning of Rule 13d-3 promulgated under the Exchange Act),
respectively, of the Outstanding Shares and Outstanding Voting
Securities immediately prior to such Business Combination own,
directly or indirectly, more than fifty percent (50%) of,
respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting
from the Business Combination (including, without limitation,
a corporation which as a result of such transaction owns the
Corporation or all or substantially all of the Corporation's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the
Outstanding Shares and Outstanding Voting Securities, as the
case may be (provided, however, that for purposes of this
clause (i), any shares of common stock or voting securities of
such resulting corporation received by such Beneficial Owners
in such Business Combination other than as the result of such
Beneficial Owners' ownership of Outstanding Shares or
Outstanding Voting Securities immediately prior to such
Business Combination shall not be considered
3
<PAGE>
to be owned by such Beneficial Owners for the purposes of
calculating their percentage of ownership of the outstanding
common stock and voting power of the resulting corporation),
(ii) no Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or related
trust) of the Corporation or such corporation resulting from
the Business Combination) beneficially owns, directly or
indirectly, twenty-five percent (25%) or more of,
respectively, the then outstanding shares of common stock of
the corporation resulting from the Business Combination or the
combined voting power of the then outstanding voting
securities of such corporation unless such Person owned
twenty-five percent (25%) or more of, respectively, the
Outstanding Shares or Outstanding Voting Securities
immediately prior to the Business Combination and (iii) at
least a majority of the members of the board of directors of
the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of
the initial agreement, or the action of the Board of Directors
of the Corporation, providing for such Business Combination;
or
(D) Approval by the Corporation's shareholders of a
complete liquidation or dissolution of the Corporation.
Notwithstanding the foregoing, a Change of Control shall not be deemed
to have occurred for purposes of this Plan as a result of the
transactions contemplated by that certain Agreement and Plan of
Reorganization between the Corporation and BankAmerica Corporation
dated April 10, 1998."
7. Section 4.10(iii) of the Plan is amended by deleting the
phrase "FAS Rate" and by substituting in lieu thereof the phrase "GATT Rate."
8. Section 4.12 of the Plan is amended to read as follows:
"Section 4.12. ELECTION OF ALTERNATIVE METHOD OF PAYMENT.
(a) ALTERNATIVE METHODS OF PAYMENT. Notwithstanding any
provisions of the Plan to the contrary, a Participant may elect from
time to time pursuant to this Section 4.12 to have the single sum value
(the "Lump Sum Benefit Amount") of the benefits payable under Section
4.2, 4.3 or 4.4 upon the Participant's Retirement or the benefits
payable under Section 4.6 upon the Participant's death while in Service
[or, to the extent provided in Section 4.6(b), while Disabled] paid in
accordance with one of the following methods of payment, in lieu of the
method otherwise applicable under the provisions of this Article IV:
(i) single lump sum payment;
(ii) five (5) annual installments; or
(iii) ten (10) annual installments.
4
<PAGE>
Unless deferred pursuant to the provisions of Section 4.12(c), the
payment(s) to be made to a Participant pursuant to the Participant's
alternative method of payment election under this Section shall
commence immediately upon the Participant's Retirement or death while
in Service.
(b) DETERMINATION OF LUMP SUM BENEFIT AMOUNT AND AMOUNT OF
INSTALLMENT PAYMENTS. The Lump Sum Benefit Amount shall be equal to (i)
in the event of a Participant's Retirement, the Commuted Payment Amount
determined for the Participant as of the date of the Participant's
Retirement or (ii) in the event of a Participant's death while in
Service [or, to the extent provided in Section 4.6(b), while Disabled],
the actuarially equivalent single sum value of the benefits (if any)
provided for in Section 4.6(c) determined as of the date of the
Participant's death using assumptions consistent with those set forth
in EXHIBIT B to the Plan. The amount of each annual installment payment
payable under Section 4.12(a) shall be the amount necessary to amortize
the Participant's Lump Sum Benefit Amount in equal annual installments
over the selected period using the GATT Rate (as defined in EXHIBIT B
hereto) in effect for the calendar year of the Participant's Retirement
or death.
(c) DEFERRAL OF LUMP SUM PAYMENT DATE.
(i) ELECTIVE DEFERRAL. Any Participant who elects
payment of the Participant's benefit in a single lump sum may
also elect to defer receipt of such payment until March 31 of
the year following the Participant's Retirement or death (as
the case may be).
(ii) MANDATORY DEFERRAL. In the event a Participant
has elected payment of the Participant's benefit in a single
lump sum and the Corporate Personnel Executive of the
Corporation determines that the Participant may be a "covered
employee" under Section 162(m) of the Code for the calendar
year of the Participant's Retirement or death while in
Service, the Participant's benefit shall be paid as of March
31 of the year following the Participant's Retirement or death
(as the case may be).
(iii) DEFERRAL PERIOD INTEREST. The amount of any
single lump sum payment that is deferred under this Section
4.12(c) shall be the Participant's Lump Sum Benefit Amount
determined under Section 4.12(b) plus interest at the GATT
Rate (as defined in EXHIBIT B hereto) in effect for the
calendar year of the Participant's Retirement or death
compounded annually to the date of payment.
(d) TIMING OF ELECTIONS AND EFFECTIVE DATE. An alternative
method of payment election under Section 4.12(a) and any deferral
election under Section 4.12(c)(i) may be made at any time and from time
to time after the date the Participant attains age fifty-four (54). Any
such election shall be made on such
5
<PAGE>
form and pursuant to such procedures as are adopted by the Plan
Committee for such purpose and shall become effective upon the first
anniversary of the date such election is made. Any change in such an
election shall not become effective until the first anniversary of the
date the new election is made."
9. Section I.A.(5) of EXHIBIT B to the Plan is amended to read as
follows:
"5. Determine the AESSV by discounting the projected AESSV
obtained in A.(4) above at the "GATT Rate" (as hereinafter
defined) compounded annually from the date the Participant
would have attained age 55 to the Determination Date. For
purposes of this EXHIBIT B, the "GATT Rate" means the
"applicable interest rate" as defined in Section 417(e)(3) of
the Code, as amended by the Retirement Protection Act of 1994.
The "lookback month" (within the meaning of Treasury
Regulation ss. 1.417(e)-IT(d)(4)(iii)) for the determination
of the applicable interest rate for benefit payments
commencing during a calendar year shall be the immediately
preceding September. The "stability period" (within the
meaning of Treasury Regulation ss. 1.417(e)-IT(d)(4)(ii))
during which the applicable interest rate remains constant
shall be the calendar year immediately succeeding the lookback
month."
10. Section III. of EXHIBIT B of the Plan is amended to read as
follows:
"III. Other Assumptions. All AESSVs shall be determined on the basis
of the GATT Rate (as defined in I.A.(5) above) compounded
annually. To the extent that benefits are payable over the
lifetime(s) of one or more individuals, the AESSV shall also
be based on the "applicable mortality table," as defined in
Section 417(e)(3) of the Code, as amended by the Retirement
Protection Act of 1994."
11. Except as expressly or by necessary implication amended hereby, the
Plan shall continue in full force and effect.
IN WITNESS WHEREOF, Bank of America has caused this instrument to be
executed by its duly authorized officer as of the 14th day of December, 1999.
BANK OF AMERICA CORPORATION
By: /s/ Charles J. Cooley
---------------------
Name: Charles J. Cooley
------------------
Title: Executive Vice President
--------------------------
6
Exhibit 10(dd)
SPLIT DOLLAR
LIFE INSURANCE AGREEMENT
THIS SPLIT DOLLAR LIFE INSURANCE AGREEMENT (the "Agreement") is made
and entered into as of the day of August, 1999, by and between BANK OF AMERICA
CORPORATION, a Delaware corporation (the "Corporation"), and BANK OF AMERICA,
N.A., as Trustee under The Vandiver Family Trust dated August 12, 1999 (the
"Owner").
STATEMENT OF PURPOSE
--------------------
F. William Vandiver, Jr. (the "Executive") is employed by the
Corporation as its Corporate Risk Management Executive. The Corporation, the
Owner and Executive desire to insure the lives of Executive and Executive's
spouse, Virginia Rita Eldridge Vandiver (the "Executive's Spouse"), for the
benefit and protection of both the Corporation and the Executive's family under
a Variable Survivorship Life Insurance Policy (the "Policy") to be issued by
John Hancock Variable Life Insurance Company (the "Insurer"). The Corporation,
as the employer of Executive, is willing to pay a portion of the premiums due on
the Policy as an additional employment benefit for Executive on the terms and
conditions hereinafter set forth. The Corporation desires to have the Policy
collaterally assigned to it by the Owner in order to secure repayment of the
portion of the premiums paid by the Corporation on the Policy.
NOW, THEREFORE, in consideration of the Statement of Purpose aforesaid
and of the mutual promises contained herein, the parties hereto agree as
follows:
1. DEFINITIONS. Whenever used in this Agreement, the following terms
shall have the meanings set forth below:
(a) "Beneficial Owner" or "Beneficial Ownership" shall have the meaning
ascribed to such term in Rule 13d-3 of the general rules and regulations under
the Exchange Act.
(b) "Board of Directors" means the Board of Directors of the
Corporation.
(c) "Change in Control" of the Corporation means, and shall be deemed
to have occurred upon, any of the following events:
(i) The acquisition by any Person of Beneficial Ownership of
twenty-five percent (25%) or more of either:
(A) The then-outstanding shares of common stock of
the Corporation (the "Outstanding Shares"); or
(B) The combined voting power of the then-outstanding
voting securities of the Corporation entitled to vote
generally in the election of Directors (the "Outstanding
Voting Securities");
<PAGE>
PROVIDED, HOWEVER, that the following acquisitions shall not constitute
a Change in Control for purposes of this subparagraph (i): (1) any
acquisition directly from the Corporation, (2) any acquisition by the
Corporation or any of its Subsidiaries, (3) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Corporation or any of its Subsidiaries, or (4) any acquisition by any
corporation pursuant to a transaction which complies with clauses (A),
(B) and (C) of subparagraph (iii) below; or
(ii) Individuals who, as of the date of this Agreement,
constitute the Board of Directors (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of Directors;
PROVIDED, HOWEVER, that any individual who becomes a Director
subsequent to the date of this Agreement and whose election, or whose
nomination for election by the Corporation's shareholders, to the Board
of Directors was either (A) approved by a vote of at least a majority
of the Directors then comprising the Incumbent Board or (B) recommended
by a Nominating Committee comprised entirely of Directors who are then
Incumbent Board members shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act), other actual or threatened solicitation of proxies or
consents or an actual or threatened tender offer; or
(iii) Approval by the Corporation's shareholders of a
reorganization, merger, or consolidation or sale or other disposition
of all or substantially all of the assets of the Corporation (a
"Business Combination"), in each case, unless following such Business
Combination, (A) all or substantially all of the Persons who were the
Beneficial Owners, respectively, of the Outstanding Shares and
Outstanding Voting Securities immediately prior to such Business
Combination own, directly or indirectly, more than fifty percent (50%)
of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from the Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Corporation or all or substantially all of the
Corporation's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding
Shares and Outstanding Voting Securities, as the case may be (PROVIDED,
HOWEVER, that for purposes of this clause (A), any shares of common
stock or voting securities of such resulting corporation received by
such Beneficial Owners in such Business Combination other than as the
result of such Beneficial Owners' ownership of Outstanding Shares or
Outstanding Voting Securities immediately prior to such Business
Combination shall not be considered to be owned by such Beneficial
Owners for the purposes of calculating their percentage of ownership of
the outstanding common stock and voting power of the resulting
corporation), (B) no Person (excluding any corporation resulting
2
<PAGE>
from such Business Combination or any employee benefit plan (or related
trust) of the Corporation or such corporation resulting from the
Business Combination) beneficially owns, directly or indirectly,
twenty-five percent (25%) or more of, respectively, the
then-outstanding shares of common stock of the corporation resulting
from the Business Combination or the combined voting power of the then
outstanding voting securities of such corporation unless such Person
owned twenty-five percent (25%) or more of the Outstanding Shares or
Outstanding Voting Securities immediately prior to the Business
Combination and (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the execution of the
initial agreement, or the action of the Board, providing for such
Business Combination; or
(iv) Approval by the Corporation's shareholders of a complete
liquidation or dissolution of the Corporation.
(d) "Director" means any individual who is a member of the Board of
Directors of the Corporation.
(e) "Disability" means "disability" as such term is defined from time
to time under any long-term disability plan of the Corporation covering the
Executive.
(f) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time or any successor act thereto.
(g) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including "group" as defined in Section 13(d) thereof.
(h) "Subsidiary" means any corporation, partnership, joint venture,
affiliate or other entity in which the Corporation owns more than fifty percent
(50%) of the voting stock or voting ownership interest, as applicable, or any
other business entity designated by the Corporation as a Subsidiary for purposes
of this Agreement.
2. PURCHASE OF THE POLICY. The Owner has made application for and has
purchased a Variable Survivorship Life Insurance Policy issued by John Hancock
Variable Life Insurance Company in the initial face amount of Ten Million Four
Hundred Ninety-Six Thousand Four Hundred Fifty-Two Dollars ($10,496,452)
insuring the lives of Executive and Executive's Spouse, a copy of which shall be
attached hereto as EXHIBIT 1 as soon as practicable after issuance by the
Insurer. A complete hypothetical illustration of the Policy assuming an eight
percent (8%) gross rate of return on the premiums over the life of the contract
is attached hereto as EXHIBIT 2.
The parties hereto have taken all necessary action to cause Insurer to
issue the Policy and shall take any further action which may be necessary to
cause the Policy to conform to the provisions of this Agreement. The parties
hereto further agree that the Policy shall be subject to
3
<PAGE>
the terms and conditions of this Agreement and the Collateral Assignment
referred to in Paragraph 5 below.
3. OWNERSHIP OF THE POLICY. Subject to the provisions of this Agreement
and the Collateral Assignment, the Owner shall be the sole and absolute owner of
the Policy and may and shall exercise all ownership rights granted to the owner
thereof by the terms of the Policy. It is the intention of the parties that the
Owner shall retain all rights which the Policy grants to the owner of the
Policy, except the right of the Corporation to recover the amount due to the
Corporation under this Agreement. Specifically, without limitation, the
Corporation shall neither have nor exercise any right as the collateral assignee
of the Policy which could in any way defeat or impair the Owner's right to
receive the cash surrender value or the death proceeds of the Policy in excess
of the Corporation's Interest (as hereinafter defined). All provisions of this
Agreement and the Collateral Assignment shall be construed so as to carry out
such intention.
4. PAYMENT OF PREMIUMS. As a convenience to the parties, the
Corporation shall pay all premiums under the Policy to the Insurer as and when
such premiums become due. During the five (5) year period following the
effective date of the Policy, the Corporation shall pay the full amount of the
premiums to the Insurer as set forth on EXHIBIT 2 attached hereto. Within thirty
(30) days of each such premium payment by the Corporation during the five (5)
year period following the effective date of the Policy and within thirty (30)
days of each anniversary of the effective date of the Policy thereafter, the
Owner shall pay to the Corporation the economic value of the death benefit under
the Policy as determined by the Insurer from time to time while the Policy
remains in effect. A schedule of the premiums to be paid by the Owner based on
the Insurer's current rates is set forth on EXHIBIT 2.
Should actual investment returns vary from those assumed in EXHIBIT 2,
the Corporation's share of the premiums shall continue to be equal to the
amounts set forth on EXHIBIT 2 as if no such variation occurred. Any increase or
decrease in the premiums required to provide the total death benefits described
on EXHIBIT 2 resulting from a variation in investment returns shall affect only
the Owner's share of the premiums.
Upon request by the Owner, the Corporation shall promptly furnish
evidence of timely payment to the Owner. The Corporation shall annually furnish
to the Owner a statement of the amount of income reportable by the Executive for
federal and state income tax purposes, if any, as determined in accordance with
applicable Internal Revenue Service rules and regulations, as a result of the
Corporation's payment of a portion of the premiums hereunder.
5. COLLATERAL ASSIGNMENT. The total amount of the Corporation's share
of the Policy premium payments paid by the Corporation pursuant to this
Agreement, less any amounts previously paid to the Corporation by the Owner
pursuant to this Agreement, shall constitute the total indebtedness of the Owner
to the Corporation, which amount shall accrue no interest (the "Corporation's
Interest"). As security for and to secure the repayment of the Corporation's
Interest, as it may exist from time to time pursuant to the terms of this
Agreement, the Owner has, contemporaneously herewith, executed and delivered to
the Corporation a collateral assignment of the Policy substantially in the form
as set forth in EXHIBIT 3 attached hereto (the "Collateral Assignment").
Repayment of the Corporation's Interest shall be made (i) from the
4
<PAGE>
cash surrender value of the Policy if this Agreement is terminated or the Owner
surrenders or cancels the Policy prior to the death of the survivor of Executive
or Executive's Spouse, or (ii) from the death proceeds of the Policy if
Executive and Executive's Spouse should die while the Policy and this Agreement
remain in effect. The Collateral Assignment shall not be terminated, altered or
amended by the Owner without the express written consent of the Corporation. The
parties hereto agree to take all action necessary to cause the Collateral
Assignment to conform to the provisions of this Agreement.
6. EXERCISE OF OWNER'S RIGHTS WHILE COLLATERAL ASSIGNMENT IS IN EFFECT.
Under the terms of the Policy, the Owner has the right to make certain asset
allocation decisions among various investment funds. While the Collateral
Assignment is in effect, any such asset allocation decisions by the Owner shall
be subject to the approval of the Corporation. Notwithstanding the foregoing,
the Owner shall have the sole right to surrender or cancel the Policy for its
cash surrender value; PROVIDED, HOWEVER, upon such surrender or cancellation of
the Policy the Corporation shall have the unqualified right to receive a portion
of the cash surrender value from the Insurer equal to the Corporation's
Interest.
7. COMPLIANCE WITH INTERNAL REVENUE CODE. Notwithstanding anything in
this Agreement to the contrary, the parties intend for the Policy to be
classified as a "life insurance contract" as defined in Section 7702(a) of the
Internal Revenue Code (the "Code") and not as a "modified endowment contract" as
defined in Section 7702A(a) of the Code. If at any time during the term of this
Agreement either the Corporation or the Owner determines that, based on the
schedule of anticipated premium payments and withdrawals set forth in EXHIBIT 2,
the Policy would not constitute a "life insurance contract" under Section
7702(a) of the Code or would constitute a "modified endowment contract" under
Section 7702A(a) of the Code, the parties agree to restructure the premium
payments and withdrawals to cause the Policy at all times to constitute a "life
insurance contract" under Section 7702(a) of the Code and not a "modified
endowment contract" under Section 7702A(a) of the Code.
8. DEATH OF EXECUTIVE AND EXECUTIVE'S SPOUSE. If this Agreement is
still in effect upon the death of the survivor of Executive and Executive's
Spouse, the Corporation and the Owner shall promptly take all action necessary
to obtain the death benefits provided under the Policy. The Owner agrees that
the Corporation shall have the unqualified right to receive a portion of such
death benefits from the Insurer equal to the Corporation's Interest and that no
beneficiary under the Policy shall have the right to receive any portion of the
Policy proceeds prior to the repayment of the full amount of the Corporation's
Interest. The balance of the death benefits provided under the Policy, if any,
shall be paid directly to the beneficiary or beneficiaries designated by the
Owner in the manner and in the amount or amounts provided in the beneficiary
designation provision of the Policy. In no event shall the amount payable to the
Corporation hereunder exceed the Policy death benefits. The parties hereto agree
that the beneficiary designation provision of the Policy shall conform to the
provisions hereof.
9. TERMINATION OF THE AGREEMENT. This Agreement shall terminate prior
to the death of the survivor of Executive and Executive's Spouse upon the
occurrence of any of the following:
5
<PAGE>
(a) either party may terminate this Agreement effective as of a Policy
anniversary date by providing thirty (30) days' advance written notice of such
election to terminate to the other party;
(b) the total cessation of the business of the Corporation;
(c) the bankruptcy, receivership or dissolution of the Corporation;
(d) the termination of Executive's employment with the Corporation
other than (i) by reason of Executive's death or "Disability" or (ii) following
a "Change in Control;"
(e) if either the Corporation or the Owner fails to comply with any of
the terms and conditions of this Agreement, the other party may elect to
terminate this Agreement by providing written notice of such election to the
other party; PROVIDED, HOWEVER, that any such election must be made within sixty
(60) days after such failure to comply;
(f) payment in full by the Owner to the Corporation of the
Corporation's Interest in the Policy; or
(g) the mutual written agreement of the Owner and the Corporation.
10. DISPOSITION OF THE POLICY UPON TERMINATION OF THE AGREEMENT. If
this Agreement is terminated pursuant to the provisions of Paragraph 9, the
Owner shall be required, within sixty (60) days after such termination, to repay
the Corporation the entire amount of the Corporation's Interest in the Policy.
Upon receipt by the Corporation of the entire amount of the Corporation's
Interest in the Policy, the Corporation shall release the Collateral Assignment.
If the Owner does not repay the entire amount of the Corporation's Interest in
the Policy within such sixty (60) day time period, the Corporation may enforce
its rights under the Collateral Assignment; provided, however, the Owner shall
not be liable for any deficiency realized by the Corporation upon the exercise
of the Corporation's rights under the Collateral Assignment.
11. DISCHARGE OF THE INSURER. The Insurer shall be fully discharged
from its obligations under the Policy by payment of the Policy death benefits to
the beneficiary or beneficiaries named in the Policy subject to the terms and
conditions of the Policy and the Collateral Assignment. In no event shall the
Insurer be considered a party to this Agreement or to any modification or
amendment hereof. No provision of this Agreement, nor any modification or
amendment hereof, shall in any way be construed as enlarging, changing, varying
or in any other way affecting the obligations of the Insurer as expressly
provided in the Policy except insofar as the provisions hereof are made a part
of the Policy by the Collateral Assignment.
12. ERISA INFORMATION. The following provisions are part of this
Agreement and are intended to meet the requirements of the Employee Retirement
Income Security Act of 1974:
(a) The named fiduciary under this Agreement is the Corporation.
6
<PAGE>
(b) The funding policy under this Agreement is that all premiums on the
Policy be remitted to the Insurer when due.
(c) Direct payment by the Insurer is the basis of payment of benefits
under this Agreement, with those benefits in turn being based on the payment of
premiums as provided in this Agreement.
(d) For claims procedure purposes, the "Claims Manager" shall be the
Corporate Personnel Group of the Corporation or its delegee.
(i) If for any reason a claim for benefits under this
Agreement is denied by the Corporation, the Claims Manager shall
deliver to the claimant a written explanation setting forth the
specific reasons for the denial, specific references to the pertinent
Agreement provisions on which the denial is based, such other data as
may be pertinent and information on the procedures to be followed by
the claimant in obtaining a review of his claim, all written in a
manner calculated to be understood by the claimant. For this purpose:
(A) The claimant's claim shall be deemed filed when
presented orally or in writing to the Claims Manager.
(B) The Claims Manager's explanation shall be in
writing delivered to the claimant within ninety (90) days of
the date the claim is filed.
(ii) The claimant shall have sixty (60) days following his
receipt of the denial of the claim to file with the Claims Manager a
written request for review of the denial. For such review, the claimant
or his representative may submit pertinent documents and written issues
and comments.
(iii) The Claims Manager shall decide the issue on review and
furnish the claimant with a copy within sixty (60) days of receipt of
the claimant's request for review of his claim. The decision on review
shall be in writing and shall include specific reasons for the
decision, written in a manner calculated to be understood by the
claimant, as well as specific references to the pertinent Agreement
provisions on which the decision is based. If a copy of the decision is
not so furnished to the claimant within such sixty (60) days, the claim
shall be deemed denied on review.
13. MISCELLANEOUS.
(a) This Agreement may not be amended, altered or modified except by a
written instrument signed by the parties hereto or their respective successors
or assigns and may not be otherwise terminated except as provided herein.
7
<PAGE>
(b) This Agreement shall be binding upon the parties hereto, their
heirs, legal representatives, successors and assigns.
(c) This Agreement and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State of North
Carolina except to the extent (if any) superceded by the laws of the United
States.
(d) Headings in this Agreement are provided for purposes of convenience
only and shall not affect the interpretation of the terms hereof.
(e) All notices and other communications hereunder must be in writing
and shall be deemed to have been duly given when either personally delivered or
placed in the United States mails by Certified Mail, return receipt requested,
postage prepaid, addressed to the party to whom such notice is being given as
follows:
As to the Corporation: Bank of America Corporation
Bank of America Corporate Center
100 N. Tryon Street
Charlotte, North Carolina 28255
Attention: Corporate Personnel
Group Executive
As to the Owner: The Vandiver Family Trust
c/o Bank of America, N.A.
2 Greenville Crossing
4001 Kennett Pike, Suite 214
Greenville, Delaware 19807
Attention: Ms. Susan K. Schaubel
Either party may change its address (or the name of the person to whose
attention communications hereunder shall be directed) from time to time by
serving notice thereof upon the other party as provided herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Bank of America, N.A., Trustee under The
Vandiver Family Trust dated August 12, 1999
By: /s/ Susan K. Schaubel
-----------------------
Susan K. Schaubel, Vice President
"Owner"
BANK OF AMERICA CORPORATION
By: /s/ Kenneth C. Koroknay
-------------------------
Ken Koroknay, Senior Vice President
"Corporation"
9
Exhibit 10(ee)
SPLIT DOLLAR
LIFE INSURANCE AGREEMENT
THIS SPLIT DOLLAR LIFE INSURANCE AGREEMENT (the "Agreement") is made
and entered into as of the 31ST day of December, 1999, by and between BANK OF
AMERICA CORPORATION, a Delaware corporation (the "Corporation"), and BANK OF
AMERICA, N.A., as Trustee under the Michael J. Murray and Christine A. Murray
1999 Irrevocable Trust dated December 11, 1999 (the "Owner").
STATEMENT OF PURPOSE
--------------------
Michael J. Murray (the "Executive") is employed by the Corporation as
its President, Global Corporate and Investment Banking. The Corporation, the
Owner and Executive desire to insure the lives of Executive and Executive's
spouse, Christine A. Murray (the "Executive's Spouse"), for the benefit and
protection of both the Corporation and the Executive's family under a Variable
Survivorship Life Insurance Policy (the "Policy") to be issued by John Hancock
Variable Life Insurance Company (the "Insurer"). The Corporation, as the
employer of Executive, is willing to pay a portion of the premiums due on the
Policy as an additional employment benefit for Executive on the terms and
conditions hereinafter set forth. The Corporation desires to have the Policy
collaterally assigned to it by the Owner in order to secure repayment of the
portion of the premiums paid by the Corporation on the Policy.
NOW, THEREFORE, in consideration of the Statement of Purpose aforesaid
and of the mutual promises contained herein, the parties hereto agree as
follows:
1. DEFINITIONS. Whenever used in this Agreement, the following terms
shall have the meanings set forth below:
(a) "Beneficial Owner" or "Beneficial Ownership" shall have the meaning
ascribed to such term in Rule 13d-3 of the general rules and regulations under
the Exchange Act.
(b) "Board of Directors" means the Board of Directors of the
Corporation.
(c) "Change in Control" of the Corporation means, and shall be deemed
to have occurred upon, any of the following events:
(i) The acquisition by any Person of Beneficial Ownership of
twenty-five percent (25%) or more of either:
(A) The then-outstanding shares of common stock of
the Corporation (the "Outstanding Shares"); or
(B) The combined voting power of the then-outstanding
voting securities of the Corporation entitled to vote
generally in the election of Directors (the "Outstanding
Voting Securities");
<PAGE>
PROVIDED, HOWEVER, that the following acquisitions shall not constitute
a Change in Control for purposes of this subparagraph (i): (1) any
acquisition directly from the Corporation, (2) any acquisition by the
Corporation or any of its Subsidiaries, (3) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Corporation or any of its Subsidiaries, or (4) any acquisition by any
corporation pursuant to a transaction which complies with clauses (A),
(B) and (C) of subparagraph (iii) below; or
(ii) Individuals who, as of the date of this Agreement,
constitute the Board of Directors (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of Directors;
PROVIDED, HOWEVER, that any individual who becomes a Director
subsequent to the date of this Agreement and whose election, or whose
nomination for election by the Corporation's shareholders, to the Board
of Directors was either (A) approved by a vote of at least a majority
of the Directors then comprising the Incumbent Board or (B) recommended
by a Nominating Committee comprised entirely of Directors who are then
Incumbent Board members shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act), other actual or threatened solicitation of proxies or
consents or an actual or threatened tender offer; or
(iii) Approval by the Corporation's shareholders of a
reorganization, merger, or consolidation or sale or other disposition
of all or substantially all of the assets of the Corporation (a
"Business Combination"), in each case, unless following such Business
Combination, (A) all or substantially all of the Persons who were the
Beneficial Owners, respectively, of the Outstanding Shares and
Outstanding Voting Securities immediately prior to such Business
Combination own, directly or indirectly, more than fifty percent (50%)
of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from the Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Corporation or all or substantially all of the
Corporation's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding
Shares and Outstanding Voting Securities, as the case may be (PROVIDED,
HOWEVER, that for purposes of this clause (A), any shares of common
stock or voting securities of such resulting corporation received by
such Beneficial Owners in such Business Combination other than as the
result of such Beneficial Owners' ownership of Outstanding Shares or
Outstanding Voting Securities immediately prior to such Business
Combination shall not be considered to be owned by such Beneficial
Owners for the purposes of calculating their percentage of ownership of
the outstanding common stock and voting power of the resulting
corporation), (B) no Person (excluding any corporation resulting
2
<PAGE>
from such Business Combination or any employee benefit plan (or related
trust) of the Corporation or such corporation resulting from the
Business Combination) beneficially owns, directly or indirectly,
twenty-five percent (25%) or more of, respectively, the
then-outstanding shares of common stock of the corporation resulting
from the Business Combination or the combined voting power of the then
outstanding voting securities of such corporation unless such Person
owned twenty-five percent (25%) or more of the Outstanding Shares or
Outstanding Voting Securities immediately prior to the Business
Combination and (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the execution of the
initial agreement, or the action of the Board, providing for such
Business Combination; or
(iv) Approval by the Corporation's shareholders of a complete
liquidation or dissolution of the Corporation.
(d) "Director" means any individual who is a member of the Board of
Directors of the Corporation.
(e) "Disability" means "disability" as such term is defined from time
to time under any long-term disability plan of the Corporation covering the
Executive.
(f) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time or any successor act thereto.
(g) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including "group" as defined in Section 13(d) thereof.
(h) "Subsidiary" means any corporation, partnership, joint venture,
affiliate or other entity in which the Corporation owns more than fifty percent
(50%) of the voting stock or voting ownership interest, as applicable, or any
other business entity designated by the Corporation as a Subsidiary for purposes
of this Agreement.
2. PURCHASE OF THE POLICY. The Owner has made application for and has
purchased a Variable Survivorship Life Insurance Policy issued by John Hancock
Variable Life Insurance Company in the initial face amount of Ten Million Three
Hundred Seventy-Eight Thousand Two Hundred Seventy-Five Dollars ($10,378,275)
insuring the lives of Executive and Executive's Spouse, a copy of which shall be
attached hereto as EXHIBIT 1 as soon as practicable after issuance by the
Insurer. A complete hypothetical illustration of the Policy assuming an eight
percent (8%) gross rate of return on the premiums over the life of the contract
is attached hereto as EXHIBIT 2.
The parties hereto have taken all necessary action to cause Insurer to
issue the Policy and shall take any further action which may be necessary to
cause the Policy to conform to the provisions of this Agreement. The parties
hereto further agree that the Policy shall be subject to
3
<PAGE>
the terms and conditions of this Agreement and the Collateral Assignment
referred to in Paragraph 5 below.
3. OWNERSHIP OF THE POLICY. Subject to the provisions of this Agreement
and the Collateral Assignment, the Owner shall be the sole and absolute owner of
the Policy and may and shall exercise all ownership rights granted to the owner
thereof by the terms of the Policy. It is the intention of the parties that the
Owner shall retain all rights which the Policy grants to the owner of the
Policy, except the right of the Corporation to recover the amount due to the
Corporation under this Agreement. Specifically, without limitation, the
Corporation shall neither have nor exercise any right as the collateral assignee
of the Policy which could in any way defeat or impair the Owner's right to
receive the cash surrender value or the death proceeds of the Policy in excess
of the Corporation's Interest (as hereinafter defined). All provisions of this
Agreement and the Collateral Assignment shall be construed so as to carry out
such intention.
4. PAYMENT OF PREMIUMS. As a convenience to the parties, the
Corporation shall pay all premiums under the Policy to the Insurer as and when
such premiums become due. During the five (5) year period following the
effective date of the Policy, the Corporation shall pay the full amount of the
premiums to the Insurer as set forth on EXHIBIT 2 attached hereto. Within thirty
(30) days of each such premium payment by the Corporation during the five (5)
year period following the effective date of the Policy and within thirty (30)
days of each anniversary of the effective date of the Policy thereafter, the
Owner shall pay to the Corporation the economic value of the death benefit under
the Policy as determined by the Insurer from time to time while the Policy
remains in effect. A schedule of the premiums to be paid by the Owner based on
the Insurer's current rates is set forth on EXHIBIT 2.
Should actual investment returns vary from those assumed in EXHIBIT 2,
the Corporation's share of the premiums shall continue to be equal to the
amounts set forth on EXHIBIT 2 as if no such variation occurred. Any increase or
decrease in the premiums required to provide the total death benefits described
on EXHIBIT 2 resulting from a variation in investment returns shall affect only
the Owner's share of the premiums.
Upon request by the Owner, the Corporation shall promptly furnish
evidence of timely payment to the Owner. The Corporation shall annually furnish
to the Owner a statement of the amount of income reportable by the Executive for
federal and state income tax purposes, if any, as determined in accordance with
applicable Internal Revenue Service rules and regulations, as a result of the
Corporation's payment of a portion of the premiums hereunder.
5. COLLATERAL ASSIGNMENT. The total amount of the Corporation's share
of the Policy premium payments paid by the Corporation pursuant to this
Agreement, less any amounts previously paid to the Corporation by the Owner
pursuant to this Agreement, shall constitute the total indebtedness of the Owner
to the Corporation, which amount shall accrue no interest (the "Corporation's
Interest"). As security for and to secure the repayment of the Corporation's
Interest, as it may exist from time to time pursuant to the terms of this
Agreement, the Owner has, contemporaneously herewith, executed and delivered to
the Corporation a collateral assignment of the Policy substantially in the form
as set forth in EXHIBIT 3 attached hereto (the "Collateral Assignment").
Repayment of the Corporation's Interest shall be made (i) from the
4
<PAGE>
cash surrender value of the Policy if this Agreement is terminated or the Owner
surrenders or cancels the Policy prior to the death of the survivor of Executive
or Executive's Spouse, or (ii) from the death proceeds of the Policy if
Executive and Executive's Spouse should die while the Policy and this Agreement
remain in effect. The Collateral Assignment shall not be terminated, altered or
amended by the Owner without the express written consent of the Corporation. The
parties hereto agree to take all action necessary to cause the Collateral
Assignment to conform to the provisions of this Agreement.
6. EXERCISE OF OWNER'S RIGHTS WHILE COLLATERAL ASSIGNMENT IS IN EFFECT.
Under the terms of the Policy, the Owner has the right to make certain asset
allocation decisions among various investment funds. While the Collateral
Assignment is in effect, any such asset allocation decisions by the Owner shall
be subject to the approval of the Corporation. Notwithstanding the foregoing,
the Owner shall have the sole right to surrender or cancel the Policy for its
cash surrender value; PROVIDED, HOWEVER, upon such surrender or cancellation of
the Policy the Corporation shall have the unqualified right to receive a portion
of the cash surrender value from the Insurer equal to the Corporation's
Interest.
7. COMPLIANCE WITH INTERNAL REVENUE CODE. Notwithstanding anything in
this Agreement to the contrary, the parties intend for the Policy to be
classified as a "life insurance contract" as defined in Section 7702(a) of the
Internal Revenue Code (the "Code") and not as a "modified endowment contract" as
defined in Section 7702A(a) of the Code. If at any time during the term of this
Agreement either the Corporation or the Owner determines that, based on the
schedule of anticipated premium payments and withdrawals set forth in EXHIBIT 2,
the Policy would not constitute a "life insurance contract" under Section
7702(a) of the Code or would constitute a "modified endowment contract" under
Section 7702A(a) of the Code, the parties agree to restructure the premium
payments and withdrawals to cause the Policy at all times to constitute a "life
insurance contract" under Section 7702(a) of the Code and not a "modified
endowment contract" under Section 7702A(a) of the Code.
8. DEATH OF EXECUTIVE AND EXECUTIVE'S SPOUSE. If this Agreement is
still in effect upon the death of the survivor of Executive and Executive's
Spouse, the Corporation and the Owner shall promptly take all action necessary
to obtain the death benefits provided under the Policy. The Owner agrees that
the Corporation shall have the unqualified right to receive a portion of such
death benefits from the Insurer equal to the Corporation's Interest and that no
beneficiary under the Policy shall have the right to receive any portion of the
Policy proceeds prior to the repayment of the full amount of the Corporation's
Interest. The balance of the death benefits provided under the Policy, if any,
shall be paid directly to the beneficiary or beneficiaries designated by the
Owner in the manner and in the amount or amounts provided in the beneficiary
designation provision of the Policy. In no event shall the amount payable to the
Corporation hereunder exceed the Policy death benefits. The parties hereto agree
that the beneficiary designation provision of the Policy shall conform to the
provisions hereof.
9. TERMINATION OF THE AGREEMENT. This Agreement shall terminate prior
to the death of the survivor of Executive and Executive's Spouse upon the
occurrence of any of the following:
5
<PAGE>
(a) either party may terminate this Agreement effective as of a Policy
anniversary date by providing thirty (30) days' advance written notice of such
election to terminate to the other party;
(b) the total cessation of the business of the Corporation;
(c) the bankruptcy, receivership or dissolution of the Corporation;
(d) the termination of Executive's employment with the Corporation
other than (i) by reason of Executive's death or "Disability" or (ii) following
a "Change in Control;"
(e) if either the Corporation or the Owner fails to comply with any of
the terms and conditions of this Agreement, the other party may elect to
terminate this Agreement by providing written notice of such election to the
other party; PROVIDED, HOWEVER, that any such election must be made within sixty
(60) days after such failure to comply;
(f) payment in full by the Owner to the Corporation of the
Corporation's Interest in the Policy; or
(g) the mutual written agreement of the Owner and the Corporation.
10. DISPOSITION OF THE POLICY UPON TERMINATION OF THE AGREEMENT. If
this Agreement is terminated pursuant to the provisions of Paragraph 9, the
Owner shall be required, within sixty (60) days after such termination, to repay
the Corporation the entire amount of the Corporation's Interest in the Policy.
Upon receipt by the Corporation of the entire amount of the Corporation's
Interest in the Policy, the Corporation shall release the Collateral Assignment.
If the Owner does not repay the entire amount of the Corporation's Interest in
the Policy within such sixty (60) day time period, the Corporation may enforce
its rights under the Collateral Assignment; PROVIDED, HOWEVER, the Owner shall
not be liable for any deficiency realized by the Corporation upon the exercise
of the Corporation's rights under the Collateral Assignment.
11. DISCHARGE OF THE INSURER. The Insurer shall be fully discharged
from its obligations under the Policy by payment of the Policy death benefits to
the beneficiary or beneficiaries named in the Policy subject to the terms and
conditions of the Policy and the Collateral Assignment. In no event shall the
Insurer be considered a party to this Agreement or to any modification or
amendment hereof. No provision of this Agreement, nor any modification or
amendment hereof, shall in any way be construed as enlarging, changing, varying
or in any other way affecting the obligations of the Insurer as expressly
provided in the Policy except insofar as the provisions hereof are made a part
of the Policy by the Collateral Assignment.
12. ERISA INFORMATION. The following provisions are part of this
Agreement and are intended to meet the requirements of the Employee Retirement
Income Security Act of 1974:
(a) The named fiduciary under this Agreement is the Corporation.
6
<PAGE>
(b) The funding policy under this Agreement is that all premiums on the
Policy be remitted to the Insurer when due.
(c) Direct payment by the Insurer is the basis of payment of benefits
under this Agreement, with those benefits in turn being based on the payment of
premiums as provided in this Agreement.
(d) For claims procedure purposes, the "Claims Manager" shall be the
Corporate Personnel Group of the Corporation or its delegee.
(i) If for any reason a claim for benefits under this
Agreement is denied by the Corporation, the Claims Manager shall
deliver to the claimant a written explanation setting forth the
specific reasons for the denial, specific references to the pertinent
Agreement provisions on which the denial is based, such other data as
may be pertinent and information on the procedures to be followed by
the claimant in obtaining a review of his claim, all written in a
manner calculated to be understood by the claimant. For this purpose:
(A) The claimant's claim shall be deemed filed when
presented orally or in writing to the Claims Manager.
(B) The Claims Manager's explanation shall be in
writing delivered to the claimant within ninety (90) days of
the date the claim is filed.
(ii) The claimant shall have sixty (60) days following his
receipt of the denial of the claim to file with the Claims Manager a
written request for review of the denial. For such review, the claimant
or his representative may submit pertinent documents and written issues
and comments.
(iii) The Claims Manager shall decide the issue on review and
furnish the claimant with a copy within sixty (60) days of receipt of
the claimant's request for review of his claim. The decision on review
shall be in writing and shall include specific reasons for the
decision, written in a manner calculated to be understood by the
claimant, as well as specific references to the pertinent Agreement
provisions on which the decision is based. If a copy of the decision is
not so furnished to the claimant within such sixty (60) days, the claim
shall be deemed denied on review.
13. MISCELLANEOUS.
(a) This Agreement may not be amended, altered or modified except by a
written instrument signed by the parties hereto or their respective successors
or assigns and may not be otherwise terminated except as provided herein.
7
<PAGE>
(b) This Agreement shall be binding upon the parties hereto, their
heirs, legal representatives, successors and assigns.
(c) This Agreement and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State of North
Carolina except to the extent (if any) superceded by the laws of the United
States.
(d) Headings in this Agreement are provided for purposes of convenience
only and shall not affect the interpretation of the terms hereof.
(e) All notices and other communications hereunder must be in writing
and shall be deemed to have been duly given when either personally delivered or
placed in the United States mails by Certified Mail, return receipt requested,
postage prepaid, addressed to the party to whom such notice is being given as
follows:
As to the Corporation: Bank of America Corporation
Bank of America Corporate Center
100 N. Tryon Street
Charlotte, North Carolina 28255
Attention: Corporate Personnel
Group Executive
As to the Owner: Michael J. Murray and Christine A. Murray 1999
Irrevocable Trust
c/o Bank of America, N.A.
50 California Street, Suite 2800
CA5-162-28-25
San Francisco, California 94111
Attention: Mr. Michael J. Harrington
Either party may change its address (or the name of the person to whose
attention communications hereunder shall be directed) from time to time by
serving notice thereof upon the other party as provided herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BANK OF AMERICA, N.A., as Trustee under the
Michael J. Murray and Christine A. Murray 1999
Irrevocable Trust dated December 11, 1999
By: /s/ Michael J. Harrington
--------------------------------------------
Michael J. Harrington, Senior Vice President
"Owner"
BANK OF AMERICA CORPORATION
By: /s/ Kenneth C. Koroknay
-----------------------------------------
Kenneth C. Koroknay, Senior Vice President
"Corporation"
9
Bank of America Corporation and Subsidiaries
Ratio of Earnings to Fixed Charges Exhibit 12(a)
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------------------------
(Dollars in millions) 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Excluding interest on deposits
Income before income taxes $12,215 $ 8,048 $10,556 $9,311 $ 8,377
Less: Equity in undistributed losses (earnings)
of unconsolidated subsidiaries (167) 162 (49) (7) (19)
Fixed charges:
Interest expense (including capitalized interest) 10,084 9,479 8,219 7,082 6,354
1/3 of net rent expense 342 335 302 282 275
- ---------------------------------------------------------------------------------------------------------------------
Total fixed charges 10,426 9,814 8,521 7,364 6,629
- ---------------------------------------------------------------------------------------------------------------------
Earnings (excluding capitalized interest) $22,474 $ 18,024 $19,028 $16,668 $14,987
=====================================================================================================================
Fixed charges $10,426 $ 9,814 $ 8,521 $ 7,364 $ 6,629
=====================================================================================================================
Ratio of earnings to fixed charges 2.16 1.84 2.23 2.26 2.26
=====================================================================================================================
Including interest on deposits
Income before income taxes $12,215 $ 8,048 $10,556 $ 9,311 $ 8,377
Less: Equity in undistributed losses (earnings)
of unconsolidated subsidiaries (167) 162 (49) (7) (19)
Fixed charges:
Interest expense (including capitalized interest) 19,086 20,290 18,903 16,682 16,369
1/3 of net rent expense 342 335 302 282 275
- ---------------------------------------------------------------------------------------------------------------------
Total fixed charges 19,428 20,625 19,205 16,964 16,644
- ---------------------------------------------------------------------------------------------------------------------
Earnings (excluding capitalized interest) $31,476 $ 28,835 $29,712 $26,268 $25,002
=====================================================================================================================
Fixed charges $19,428 $ 20,625 $19,205 $16,964 $16,644
=====================================================================================================================
Ratio of earnings to fixed charges 1.62 1.40 1.55 1.55 1.50
=====================================================================================================================
</TABLE>
1
Bank of America Corporation and Subsidiaries
Ratio of Earnings to Fixed Charges and Preferred Dividends Exhibit 12(b)
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------------------------
(Dollars in millions) 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Excluding interest on deposits
Income before income taxes $12,215 $ 8,048 $10,556 $9,311 $ 8,377
Less: Equity in undistributed losses (earnings)
of unconsolidated subsidiaries (167) 162 (49) (7) (19)
Fixed charges:
Interest expense (including capitalized interest) 10,084 9,479 8,219 7,082 6,354
1/3 of net rent expense 342 335 302 282 275
- ---------------------------------------------------------------------------------------------------------------------------
Total fixed charges 10,426 9,814 8,521 7,364 6,629
Preferred dividend requirements 10 40 183 332 426
- ---------------------------------------------------------------------------------------------------------------------------
Earnings (excluding capitalized interest) $22,474 $ 18,024 $19,028 $16,668 $14,987
===========================================================================================================================
Fixed charges and preferred dividends $10,436 $ 9,854 $ 8,704 $7,696 $ 7,055
===========================================================================================================================
Ratio of earnings to fixed charges and preferred dividends 2.15 1.83 2.19 2.17 2.12
===========================================================================================================================
Including interest on deposits
Income before income taxes $12,215 $ 8,048 $10,556 $9,311 $ 8,377
Less: Equity in undistributed losses (earnings)
of unconsolidated subsidiaries (167) 162 (49) (7) (19)
Fixed charges:
Interest expense (including capitalized interest) 19,086 20,290 18,903 16,682 16,369
1/3 of net rent expense 342 335 302 282 275
- ---------------------------------------------------------------------------------------------------------------------------
Total fixed charges 19,428 20,625 19,205 16,964 16,644
Preferred dividend requirements 10 40 183 332 426
- ---------------------------------------------------------------------------------------------------------------------------
Earnings (excluding capitalized interest) $31,476 $ 28,835 $29,712 $26,268 $25,002
===========================================================================================================================
Fixed charges and preferred dividends $19,438 $ 20,665 $19,388 $17,296 $17,070
===========================================================================================================================
Ratio of earnings to fixed charges and preferred dividends 1.62 1.40 1.53 1.52 1.46
===========================================================================================================================
</TABLE>
Exhibit 21
DIRECT AND INDIRECT SUBSIDIARIES OF BANK OF AMERICA CORPORATION AS OF 01/31/2000
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Name Location
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
A
- --------------------------------------------------------------------------------------------------------------------
A/M Properties, Inc. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Abilene Park, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Aegina FSC, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Aegina, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Aerocrane Leasing Ltd. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
AF Funding (1993), Inc. Wilmington, DE
- --------------------------------------------------------------------------------------------------------------------
AF Funding II (1993), Inc. Wilmington, DE
- --------------------------------------------------------------------------------------------------------------------
Air France/KDHF II (NGHGI) (Grantor Trust) Wilmington, DE
- --------------------------------------------------------------------------------------------------------------------
Air France/NationsBank (Grantor Trust) Wilmington, DE
- --------------------------------------------------------------------------------------------------------------------
Airlease Ltd., A California Limited Partnership San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Airlease Management Services, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Alamo Funding II, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Alamo Funding, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Alpargatas S.A.I.C. Buenos Aires, Argentina
- --------------------------------------------------------------------------------------------------------------------
Alpha Dearborn Limited Partnership Lake Forest, IL
- --------------------------------------------------------------------------------------------------------------------
ALS II, Inc. Wilton, CT
- --------------------------------------------------------------------------------------------------------------------
Amadeo, Inc. Las Vegas, NV
- --------------------------------------------------------------------------------------------------------------------
Amadeo Trust Las Vegas, NV
- --------------------------------------------------------------------------------------------------------------------
Amarillo Lane, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
American Financial Service Group, Inc. Greensboro, NC
- --------------------------------------------------------------------------------------------------------------------
Amsalem (QSPE) Limited George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
ANA II (Grantor Trust) Wilmington, DE
- --------------------------------------------------------------------------------------------------------------------
Anaconda Management LLC Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
APL, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Appold Holdings Limited London, U.K.
- --------------------------------------------------------------------------------------------------------------------
Appold Leasing, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Appold Limited London, U.K.
- --------------------------------------------------------------------------------------------------------------------
Arch Reinsurance Company, Ltd. George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
Ariens Credit Corporation Alpharetta, GA
- --------------------------------------------------------------------------------------------------------------------
Arrendadora Bank of America, S.A. Mexico City, Mexico
- --------------------------------------------------------------------------------------------------------------------
Ashburn A Corp. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Asian American Merchant Bank Ltd. Singapore, Singapore
- --------------------------------------------------------------------------------------------------------------------
Asp Funding II, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Asp Funding, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Asset Backed Funding Corporation Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Asset Holding Co. Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Atico Financial Corporation dba Cavalier Properties Miami, FL
- --------------------------------------------------------------------------------------------------------------------
Atlanta Affordable Housing Fund Limited Partnership Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Atlantic Equity Corporation Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Austin Community Development Corporation Austin, TX
- --------------------------------------------------------------------------------------------------------------------
Austin National Realty Corporation Austin, TX
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
B
- --------------------------------------------------------------------------------------------------------------------
B&D Phase III LLC Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
B.A. Insurance (Cayman) Ltd. George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
BA 1998 Partners Associates Fund, L.P. Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BA 1998 Partners Fund I, L.P. Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BA 1998 Partners Fund II, L.P. Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BA 1998 Partners Fund, Limited Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BA 1998 Partners Master Fund I, L.P. Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BA 1998 Partners Master Fund II, L.P. Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BA Agency, Inc. Albuquerque, NM
- --------------------------------------------------------------------------------------------------------------------
BA Asia Limited Hong Kong, PRC
- --------------------------------------------------------------------------------------------------------------------
BA Assets Company George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
BA Australia Limited Sydney, New South Wales, Australia
- --------------------------------------------------------------------------------------------------------------------
BA Capital Company, L.P. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
BA Card Operations, Inc. Dover, DE
- --------------------------------------------------------------------------------------------------------------------
BA Card Services, Inc. Makati, Philippines
- --------------------------------------------------------------------------------------------------------------------
BA Coinvest GP, Inc. Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BA Equity Advisors Sp.zo.o Warsaw, Poland
- --------------------------------------------------------------------------------------------------------------------
BA Equity Holdings, L.P. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
BA Equity Investment Company, L.P. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
BA Equity Investors, Inc. Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BA Finance (Hong Kong) Limited Hong Kong, PRC
- --------------------------------------------------------------------------------------------------------------------
BA Finance Ireland Limited Dublin, Ireland
- --------------------------------------------------------------------------------------------------------------------
BA Finance Lease, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
BA Holding Company S.A. Luxembourg, Luxembourg
- --------------------------------------------------------------------------------------------------------------------
BA Insurance Agency, Inc. San Diego, CA
- --------------------------------------------------------------------------------------------------------------------
BA Interactive Services Holding Company, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
BA International (Netherlands) B.V. Amsterdam, The Netherlands
- --------------------------------------------------------------------------------------------------------------------
BA Investment Leasing Co., Ltd. Tokyo, Japan
- --------------------------------------------------------------------------------------------------------------------
BA LocProc Pty. Limited Sydney, New South Wales, Australia
- --------------------------------------------------------------------------------------------------------------------
BA Merchant Services, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
BA Mortgage, LLC Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
BA Netting Limited London, U.K.
- --------------------------------------------------------------------------------------------------------------------
BA Northwest Community Service Corporation Seattle, WA
- --------------------------------------------------------------------------------------------------------------------
BA Overseas Holdings George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
BA Properties, Inc. Los Angeles, CA
- --------------------------------------------------------------------------------------------------------------------
BA Rescarven Holding Company George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
BA SBIC Sub, Inc. Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BA Securities Australia Limited Sydney, New South Wales, Australia
- --------------------------------------------------------------------------------------------------------------------
BA Securities Investment Advisory Limited Taipei, Taiwan
- --------------------------------------------------------------------------------------------------------------------
BA Service Corp. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
BA Staff Superannuation Limited Sydney, New South Wales, Australia
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
BA Swiss FSC Holdings, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
BA Technology I, LLC Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
BAC Funding Consortium, Inc. Miami, FL
- --------------------------------------------------------------------------------------------------------------------
BAC Realty LLC Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
BAC Services Inc. New York, NY
- --------------------------------------------------------------------------------------------------------------------
BACAN Capital Trust Wilmington, DE
- --------------------------------------------------------------------------------------------------------------------
BACF Corporation Wilton, CT
- --------------------------------------------------------------------------------------------------------------------
BAEC Investments, L.L.C. Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BAEP Asia (Philippines) Limited LLC Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BAEP Asia Limited Curepipe, Mauritius
- --------------------------------------------------------------------------------------------------------------------
BAEP Nord I LLC Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BAEP Nord IA LLC Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BAEP Nord II LLC Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BAEP Nord III LLC Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BAEP Nord IIIA LLC Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BAEP Nord IV LLC Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BAEP Nord V LLC Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BAEP Telecommunications Investments, L.L.C. Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
Balmoral Leasing Ltd. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Baltic M Corp. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
BA-MBS LLC Las Vegas, NV
- --------------------------------------------------------------------------------------------------------------------
Bamerilease, Inc. Phoenix, AZ
- --------------------------------------------------------------------------------------------------------------------
Bamerinvest, C.A. Caracas, Chacao, Venezuela
- --------------------------------------------------------------------------------------------------------------------
Banc of America Advisors, Inc. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Banc of America Agency of Nevada, Inc. Las Vegas, NV
- --------------------------------------------------------------------------------------------------------------------
Banc of America Agency of Texas, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Banc of America Agency, LLC Towson, MD
- --------------------------------------------------------------------------------------------------------------------
Banc of America Auto Finance Corp. Las Vegas, NV
- --------------------------------------------------------------------------------------------------------------------
Banc of America Business Finance Corporation Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
Banc of America Capital Markets-Asia, Inc. Singapore, Singapore
- --------------------------------------------------------------------------------------------------------------------
Banc of America Capital Markets-Japan, Inc. Tokyo, Japan
- --------------------------------------------------------------------------------------------------------------------
Banc of America CDC Special Holding Company, Inc. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Banc of America Commercial Corporation Tucker, GA
- --------------------------------------------------------------------------------------------------------------------
Banc of America Commercial Finance Corporation Wilton, CT
- --------------------------------------------------------------------------------------------------------------------
Banc of America Community Development Corporation Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Banc of America Community Holdings, Inc. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Banc of America Financial Products, Inc. Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
Banc of America FSC Holdings, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Banc of America Funding Corporation Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Banc of America Futures, Incorporated Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
Banc of America Historic Ventures, LLC Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Banc of America Insurance Services, Inc. Mount Airy, MD
- --------------------------------------------------------------------------------------------------------------------
Banc of America Investment Services, Inc. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Banc of America Leasing & Capital, LLC San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Banc of America Management Corporation Wilton, CT
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Banc of America Mortgage Capital Corporation Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Banc of America Neighborhood Services Corporation Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Banc of America Options, Inc. Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
Banc of America SBIC Corporation Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Banc of America Securities Limited London, U.K.
- --------------------------------------------------------------------------------------------------------------------
Banc of America Securities LLC Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Banc of America Specialty Finance, Inc. Alpharetta, GA
- --------------------------------------------------------------------------------------------------------------------
Banc of America Vendor Finance, Inc. San Diego, CA
- --------------------------------------------------------------------------------------------------------------------
BancAmerica Capital Holdings I, L.P. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
BancAmerica Capital Holdings II, L.P. Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BancAmerica Capital Investors I, L.P. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
BancAmerica Capital Investors II, L.P. Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BancAmerica Capital Investors SBIC I, L.P. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
BancAmerica Capital Investors SBIC II, L.P. Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BancAmerica Coinvest Fund, L.P. Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BancAmerica Commercial Corporation San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Banco Liberal S.A. Rio de Janeiro, Brazil
- --------------------------------------------------------------------------------------------------------------------
BancofAmerica Forex (Philippines), Inc. Makati, Philippines
- --------------------------------------------------------------------------------------------------------------------
Bank IV Affordable Housing Corporation Wichita, KS
- --------------------------------------------------------------------------------------------------------------------
Bank IV Community Development Corporation Wichita, KS
- --------------------------------------------------------------------------------------------------------------------
Bank IV Securities, Inc. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Bank Marketing Systems, Inc. Oklahoma City, OK
- --------------------------------------------------------------------------------------------------------------------
Bank of America (Asia) Limited Hong Kong, PRC
- --------------------------------------------------------------------------------------------------------------------
Bank of America (Hawaii) Insurance Agency, Inc. Honolulu, HI
- --------------------------------------------------------------------------------------------------------------------
Bank of America (Jersey) Limited St. Helier, Jersey, Channel Islands
- --------------------------------------------------------------------------------------------------------------------
Bank of America (Macau) Limited Macau
- --------------------------------------------------------------------------------------------------------------------
Bank of America (Polska) S.A. Warsaw, Poland
- --------------------------------------------------------------------------------------------------------------------
Bank of America Canada Toronto, Ontario, Canada
- --------------------------------------------------------------------------------------------------------------------
Bank of America Canada Capital Co. Nova Scotia, Canada
- --------------------------------------------------------------------------------------------------------------------
Bank of America Canada Leasing Corporation Calgary, Alberta, Canada
- --------------------------------------------------------------------------------------------------------------------
Bank of America Canada Leasing III, Inc. Calgary, Alberta, Canada
- --------------------------------------------------------------------------------------------------------------------
Bank of America Canada Leasing IV, Inc. Calgary, Alberta, Canada
- --------------------------------------------------------------------------------------------------------------------
Bank of America Canada Leasing VI, Inc. Calgary, Alberta, Canada
- --------------------------------------------------------------------------------------------------------------------
Bank of America Canada Leasing VIII, Company Calgary, Alberta, Canada
- --------------------------------------------------------------------------------------------------------------------
Bank of America Canada Securities Corporation Toronto, Ontario, Canada
- --------------------------------------------------------------------------------------------------------------------
Bank of America Canada Specialty Group Ltd. Mississauga, Ontario, Canada
- --------------------------------------------------------------------------------------------------------------------
Bank of America Capital Corporation Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
Bank of America Colombia Bogota, Colombia
- --------------------------------------------------------------------------------------------------------------------
Bank of America Community Development Bank Walnut Creek, CA
- --------------------------------------------------------------------------------------------------------------------
Bank of America do Brasil Ltda. Sao Paulo, Brazil
- --------------------------------------------------------------------------------------------------------------------
Bank of America Illinois Community Development Corporation Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
Bank of America International Limited London, U.K.
- --------------------------------------------------------------------------------------------------------------------
Bank of America Leasing Corp. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Bank of America Malaysia Berhad Kuala Lumpur, Malaysia
- --------------------------------------------------------------------------------------------------------------------
Bank of America Mexico, S.A., Institucion de Banca Multiple Mexico City, Mexico
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Bank of America Mortgage Securities, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Bank of America Reinsurance Corporation Burlington, VT
- --------------------------------------------------------------------------------------------------------------------
Bank of America Singapore Limited Singapore, Singapore
- --------------------------------------------------------------------------------------------------------------------
Bank of America Technology and Operations, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Bank of America Trust Company of Delaware, National
Association Greenville, DE
- --------------------------------------------------------------------------------------------------------------------
Bank of America Ventures Foster City, CA
- --------------------------------------------------------------------------------------------------------------------
Bank of America, National Association Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Bank of America, National Association (USA) Phoenix, AZ
- --------------------------------------------------------------------------------------------------------------------
Bank of America, S.A. Madrid, Spain
- --------------------------------------------------------------------------------------------------------------------
Bank of America-Giannini Foundation San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Bank of Canton (Nominees) Limited, The Hong Kong, PRC
- --------------------------------------------------------------------------------------------------------------------
Bank South Home Equity, Inc. Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
BankAmerica Acceptance Corp. San Diego, CA
- --------------------------------------------------------------------------------------------------------------------
BankAmerica Capital Advisors LLC Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BankAmerica Capital I San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
BankAmerica Capital II San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
BankAmerica Capital III San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
BankAmerica Capital IV San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
BankAmerica Community Development Corporation Walnut Creek, CA
- --------------------------------------------------------------------------------------------------------------------
BankAmerica Financial, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
BankAmerica Foundation San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
BankAmerica Fund Management Limited George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
BankAmerica Institutional Capital A San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
BankAmerica Institutional Capital B San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
BankAmerica Insurance Group, Inc. San Diego, CA
- --------------------------------------------------------------------------------------------------------------------
BankAmerica International San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
BankAmerica International Financial Corporation San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
BankAmerica International Investment Corporation Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BankAmerica Investment Corporation Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
BankAmerica Nominees (1993) Pte Ltd. Singapore, Singapore
- --------------------------------------------------------------------------------------------------------------------
BankAmerica Nominees (Hong Kong) Ltd. Hong Kong, PRC
- --------------------------------------------------------------------------------------------------------------------
BankAmerica Nominees (Singapore) Pte. Ltd. Singapore, Singapore
- --------------------------------------------------------------------------------------------------------------------
BankAmerica Nominees Limited (London) London, U.K.
- --------------------------------------------------------------------------------------------------------------------
BankAmerica Realty Finance, Inc. Los Angeles, CA
- --------------------------------------------------------------------------------------------------------------------
BankAmerica Realty Services, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Bankamerica Representacao e Servicos Limitada Sao Paulo, Brazil
- --------------------------------------------------------------------------------------------------------------------
BankAmerica Special Assets Corporation San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
BankAmerica Trust and Banking Corporation (Bahamas) Limited Nassau, Bahamas
- --------------------------------------------------------------------------------------------------------------------
BankAmerica Trust and Banking Corporation (Cayman) Limited George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
BankAmerica Trust Company (Hong Kong) Limited Hong Kong, PRC
- --------------------------------------------------------------------------------------------------------------------
Barnesbury, Ltd. Hamilton, Bermuda
- --------------------------------------------------------------------------------------------------------------------
Barnett Auto Receivables Corp. Reno, NV
- --------------------------------------------------------------------------------------------------------------------
Barnett Bank Premises Company - Brickell Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------
Barnett Capital I Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------
Barnett Capital II Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Barnett Capital III Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------
Barnett Community Development Corporation Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------
Barnett Leasing Company Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------
Barnett Mortgage Company Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Barnett Office Park Condominium Association, Inc. Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------
Barnett Southside Land, Inc. Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------
Bartlett Park Neighborhood Redevelopment, L.C. Tampa, FL
- --------------------------------------------------------------------------------------------------------------------
Barton Apartments, L.P., The St. Louis, MO
- --------------------------------------------------------------------------------------------------------------------
BATCO Nominees Limited Hong Kong, PRC
- --------------------------------------------------------------------------------------------------------------------
Bay 2 Bay Leasing LLC San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Bay Street Limited George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
BBI Merchant Processing Company, LLC Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Becham (QSPE) Limited George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
Beechnut Holdings, Inc. Houston, TX
- --------------------------------------------------------------------------------------------------------------------
Belmont Heights Development Company, L.C. Tampa, FL
- --------------------------------------------------------------------------------------------------------------------
Beta Dearborn Limited Partnership Lake Forest, IL
- --------------------------------------------------------------------------------------------------------------------
BFS Participacoes Ltda. Sao Paulo, Brazil
- --------------------------------------------------------------------------------------------------------------------
Binfield Ltd. Hamilton, Bermuda
- --------------------------------------------------------------------------------------------------------------------
Birch Funding II, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Birch Funding, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
BIRMSON, L.L.C. Wilton, CT
- --------------------------------------------------------------------------------------------------------------------
Biscayne Apartments, Inc. Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
BJ Services Trust 1997-1 Houston, TX
- --------------------------------------------------------------------------------------------------------------------
BJCC, Inc. Wilton, CT
- --------------------------------------------------------------------------------------------------------------------
Blue Ridge Finance Ltd. Hamilton, Bermuda
- --------------------------------------------------------------------------------------------------------------------
Blue Ridge Investments, L.L.C. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
BNB Auto, Inc. St. Louis, MO
- --------------------------------------------------------------------------------------------------------------------
Boatmen's Capital Management, Inc. St. Louis, MO
- --------------------------------------------------------------------------------------------------------------------
Boatmen's Financial Services, Inc. St. Louis, MO
- --------------------------------------------------------------------------------------------------------------------
Boatmen's Insurance Agency, Inc. St. Louis, MO
- --------------------------------------------------------------------------------------------------------------------
BofA Investment Company S.A. Buenos Aires, Argentina
- --------------------------------------------------------------------------------------------------------------------
Brazilian Financial Services, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Brazilian Tourism Holdings, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Broadway Pointe Venture, LLC Campbell, CA
- --------------------------------------------------------------------------------------------------------------------
Bronco Street REIT Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Bunga Jambu Ltd. Hamilton, Bermuda
- --------------------------------------------------------------------------------------------------------------------
Bunga Orkid, Ltd. Hamilton, Bermuda
- --------------------------------------------------------------------------------------------------------------------
Bushton BCP Investment Partnership I, L.P. Wilmington, DE
- --------------------------------------------------------------------------------------------------------------------
Bushton TRG Investment Partnership I, L.P. Wilmington, DE
- --------------------------------------------------------------------------------------------------------------------
Bushton TRG Investment Partnership IV, L.P. Wilmington, DE
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
C
- --------------------------------------------------------------------------------------------------------------------
C&S Premises, Inc. Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
C&S Premises - SPE, Inc. Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
C.I.N.B. Nominees (London) Limited London, U.K.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
C.N. Investments, Inc. George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
Cabot Investments London, U.K.
- --------------------------------------------------------------------------------------------------------------------
California Street Limited George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
CalKearn, LLC Reno, NV
- --------------------------------------------------------------------------------------------------------------------
Canaan Collaborative Limited Partnership, The Houston, TX
- --------------------------------------------------------------------------------------------------------------------
Canea FSC, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Cape Canterbury, Ltd. Hamilton, Bermuda
- --------------------------------------------------------------------------------------------------------------------
Capital Courts Corporation Washington, DC
- --------------------------------------------------------------------------------------------------------------------
Capital Crossing Development Corporation Suitland, MD
- --------------------------------------------------------------------------------------------------------------------
Capitol Information Networks, Inc. Austin, TX
- --------------------------------------------------------------------------------------------------------------------
Carlton Court CDC, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Carlton Court Limited Partnership Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Carolina Investments Limited London, U.K.
- --------------------------------------------------------------------------------------------------------------------
Carolina Leasing Limited London, U.K.
- --------------------------------------------------------------------------------------------------------------------
Carolina Mountain Holding Company Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Cash Flow, Inc. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Castle Bay REIT Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Cathay Pacific/NationsBank Trust I (Grantor Trust) Wilmington, DE
- --------------------------------------------------------------------------------------------------------------------
CBD, L.L.C. St. Louis, MO
- --------------------------------------------------------------------------------------------------------------------
CC Plaza M Corp. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Cedar Mill, LLC Raleigh, NC
- --------------------------------------------------------------------------------------------------------------------
Centrex Capital Automobile Assets (Number Four), Inc. Melville, NY
- --------------------------------------------------------------------------------------------------------------------
Centrex Capital Automobile Assets (Number Three), Inc. Melville, NY
- --------------------------------------------------------------------------------------------------------------------
Centrex Capital Automobile Assets (Number Two), Inc. Melville, NY
- --------------------------------------------------------------------------------------------------------------------
Centrex Capital Automobile Assets, Inc. Melville, NY
- --------------------------------------------------------------------------------------------------------------------
Centrex Capital Corp. Melville, NY
- --------------------------------------------------------------------------------------------------------------------
Centrex Capital Corp. of PA Melville, NY
- --------------------------------------------------------------------------------------------------------------------
Charlotte Affordable Housing LLC, The Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Charlotte Gateway Village, LLC Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Charlotte Transit Center, Inc. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Charter-Colonial Securities, Inc. Houston, TX
- --------------------------------------------------------------------------------------------------------------------
Charter-Houston Securities, Inc. Houston, TX
- --------------------------------------------------------------------------------------------------------------------
Chase Federal Housing Corporation Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Chase I, Inc. Miami, FL
- --------------------------------------------------------------------------------------------------------------------
ChaseFed Insurance Co. Miami, FL
- --------------------------------------------------------------------------------------------------------------------
Chepstow Holding Corporation Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Chepstow Real Estate Investment Trust Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Cherry Affordable Housing Corp. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Chesapeake M Corp. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Chicago Equity Partners Corp. Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
Church Street Crossing Associates, L.P. Washington, DC
- --------------------------------------------------------------------------------------------------------------------
CIC Trading, S.A. Buenos Aires, Argentina
- --------------------------------------------------------------------------------------------------------------------
Citizens Financial Securities Corporation Fort Lauderdale, FL
- --------------------------------------------------------------------------------------------------------------------
Citizens Real Estate, Inc. Jonesboro, AR
- --------------------------------------------------------------------------------------------------------------------
Citizens Travel, Inc. Miami, FL
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
CIVC Fund, L.P. Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
CIVC SBIC Fund, LLC Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
Clark Street Redevelopment Corporation St. Louis, MO
- --------------------------------------------------------------------------------------------------------------------
Clenston Ltd. Hamilton, Bermuda
- --------------------------------------------------------------------------------------------------------------------
Columbia Community Investment Limited Partnership Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Commerce Place Company Nashville, TN
- --------------------------------------------------------------------------------------------------------------------
Commonwealth National Bank Mobile, AL
- --------------------------------------------------------------------------------------------------------------------
Community Reinvestment Group, L.C. Fort Lauderdale, FL
- --------------------------------------------------------------------------------------------------------------------
Companhia Internacional de Participacoes e Empreendimentos Sao Paulo, Brazil
- --------------------------------------------------------------------------------------------------------------------
Concorde Solutions, Inc. Concord, CA
- --------------------------------------------------------------------------------------------------------------------
Conestoga Trail REIT Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Consolidated Asset Management Company Oklahoma City, OK
- --------------------------------------------------------------------------------------------------------------------
Continental Finanziaria S.P.A. Milan, Italy
- --------------------------------------------------------------------------------------------------------------------
Continental Illinois Venture Corporation Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
Continental Information & Technology Services Co. S.A. Buenos Aires, Argentina
- --------------------------------------------------------------------------------------------------------------------
Continental Partners Group, Inc. Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
Continental Servicios Corporativos, S.A. de C.V. Mexico City, Mexico
- --------------------------------------------------------------------------------------------------------------------
Coppell Limited George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
Copperhead Lane Investments GP Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Corpus Christi Community Development Corporation Corpus Christi, TX
- --------------------------------------------------------------------------------------------------------------------
Courtcom M Corp. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Courtyards Apartments II, Inc. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Courtyards Apartments, Inc. Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
Covation LLC Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
Coventry Village Apartments, Inc. Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
CreditQuick Finance Company Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
CreditQuick, Inc. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Crockett Funding II, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Crockett Funding, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
CSC Associates, L.P. Marietta, GA
- --------------------------------------------------------------------------------------------------------------------
CSF Holdings, Inc. Tampa, FL
- --------------------------------------------------------------------------------------------------------------------
CSI Holdings, Inc. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
CSV Apartments LLC Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
Cupples Development, L.L.C. St. Louis, MO
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
D
- --------------------------------------------------------------------------------------------------------------------
Dalespring Corporation Wilton, CT
- --------------------------------------------------------------------------------------------------------------------
Dana Partnership, The Johannesburg, South Africa
- --------------------------------------------------------------------------------------------------------------------
Danville Community Development Corporation Danville, VA
- --------------------------------------------------------------------------------------------------------------------
Dartford River Crossing Limited Dartford, Kent, U.K.
- --------------------------------------------------------------------------------------------------------------------
Davis Street Limited George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
DCRS Corporation Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
Delabarre Place Property Holdings, Inc. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Deportes Sports Holdings Limited George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
DFO Partnership San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Diamond Shoals Finance Ltd. Hamilton, Bermuda
- --------------------------------------------------------------------------------------------------------------------
Diamondback Park, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Dill Avenue Redevelopment Partnership, LLC Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
Dogwood Management LLC Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Down Under Leasing Corporation Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
DPC, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
E
- --------------------------------------------------------------------------------------------------------------------
Electronic Payments Exchange, Inc., The San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Eban Incorporated Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Eban Village I, Ltd. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Eban Village II, Ltd. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
EBS Partnership, The London, U.K.
- --------------------------------------------------------------------------------------------------------------------
Education Financing Services, LLC Winston-Salem, NC
- --------------------------------------------------------------------------------------------------------------------
Eighth Street, LLC Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Electronic Broking Services Limited London, U.K.
- --------------------------------------------------------------------------------------------------------------------
Elko Park, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Elmsleigh Funding, Ltd. George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
E-Loan, Inc. Dublin, CA
- --------------------------------------------------------------------------------------------------------------------
Eloundra FSC, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Eloundra, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Employee Relocation Consultants, Inc. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Epidaurus FSC, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
EQCC Asset Backed Corporation Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------
EQCC Receivables Corporation Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------
EQCC Trans Receivable Corporation Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------
EquiCredit Corporation Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------
EquiCredit Corporation of America Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------
Equitable Deed Company Los Angeles, CA
- --------------------------------------------------------------------------------------------------------------------
Equitable Service Corporation Miami, FL
- --------------------------------------------------------------------------------------------------------------------
Equity/Protect Reinsurance Company Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------
ESP Financial Services LLC San Diego, CA
- --------------------------------------------------------------------------------------------------------------------
Exchange, The Bellevue, WA
- --------------------------------------------------------------------------------------------------------------------
EXHO PROPERTY, INC. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Export Funding Corporation Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
F
- --------------------------------------------------------------------------------------------------------------------
Fallon Lane, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Fallon Lane II, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
FBA Bancorp Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
Federal Properties I, Inc. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Fenchurch Steamship Corporation London, U.K.
- --------------------------------------------------------------------------------------------------------------------
Fiduciary Services Limited Hong Kong, PRC
- --------------------------------------------------------------------------------------------------------------------
Finance Investment Company Springfield, MO
- --------------------------------------------------------------------------------------------------------------------
First Executive Leasing FSC Ltd. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
First Executive Sands Leasing Corp. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
First Executive Sands Leasing Corp. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
First Florida Bank OREO Holding Company Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
First Housing Development Corporation of Florida Tampa, FL
- --------------------------------------------------------------------------------------------------------------------
First in Flight Finance Ltd. Hamilton, Bermuda
- --------------------------------------------------------------------------------------------------------------------
First Land Sales, Inc. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
First Midland Limited Partnership Lake Forest, IL
- --------------------------------------------------------------------------------------------------------------------
First Mortgage Corporation Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
First Revitalization Corp. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
First Shelter Service Corporation Brunswick, GA
- --------------------------------------------------------------------------------------------------------------------
FKF, Inc. Des Moines, IA
- --------------------------------------------------------------------------------------------------------------------
Fleetwood Credit Corp. Alpharetta, GA
- --------------------------------------------------------------------------------------------------------------------
Fleetwood Credit Receivables Corp. Alpharetta, GA
- --------------------------------------------------------------------------------------------------------------------
Florida Affordable Housing 1998, L.L.C. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Florida Housing Tax Credit Fund II, Ltd. Columbia, MD
- --------------------------------------------------------------------------------------------------------------------
Florita Finance Ltd. Hamilton, Bermuda
- --------------------------------------------------------------------------------------------------------------------
Fontana Finance Ltd. Hamilton, Bermuda
- --------------------------------------------------------------------------------------------------------------------
Foppingadreef Investments (No. 2) N.V. Amsterdam, The Netherlands
- --------------------------------------------------------------------------------------------------------------------
Foremost Factors Limited New Delhi, India
- --------------------------------------------------------------------------------------------------------------------
Forty-Six Twenty-Five Lindell Corp. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Founders Bancorporation, Inc. Oklahoma City, OK
- --------------------------------------------------------------------------------------------------------------------
Fountain Square Corporation of Maryland Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Fundo 2000 de Conversao-Capital Estrangeiro Sao Paulo, Brazil
- --------------------------------------------------------------------------------------------------------------------
Fundo 2001 de Conversao-Capital Estrangeiro Sao Paulo, Brazil
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
G
- --------------------------------------------------------------------------------------------------------------------
Galveston Funding, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Galveston Funding, Inc. II Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Gartmore Global Partners Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Gatwick, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
General Fidelity Insurance Company San Diego, CA
- --------------------------------------------------------------------------------------------------------------------
General Fidelity Life Insurance Company San Diego, CA
- --------------------------------------------------------------------------------------------------------------------
Gleneagles Trading LLC Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
GLM Investments, Inc. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
GlobalNet Comunicaciones Financieras, S.A. Santiago, Chile
- --------------------------------------------------------------------------------------------------------------------
Golden Gate Participacoes Ltda. Sao Paulo, Brazil
- --------------------------------------------------------------------------------------------------------------------
Gournia FSC, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Gournia, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Gravely Credit Corporation Alpharetta, GA
- --------------------------------------------------------------------------------------------------------------------
Greater Brownsville Community Development Corporation Brownsville, TX
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
H
- --------------------------------------------------------------------------------------------------------------------
Harbilan Corporation Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Harbour Directors I Limited George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
Harbour Directors II Limited George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Harbour Nominees Ltd. George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
Harbour Secretaries I Limited George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
Harper Farm M Corp. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Hatteras Finance Ltd. Hamilton, Bermuda
- --------------------------------------------------------------------------------------------------------------------
Hays Plaza Apartments, L.P. Hays, KS
- --------------------------------------------------------------------------------------------------------------------
Heathrow, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Heathrow, Inc. II Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Hedges S.A. Buenos, Aires, Argentina
- --------------------------------------------------------------------------------------------------------------------
Het Loo REIT, Co. Reno, NV
- --------------------------------------------------------------------------------------------------------------------
Hickory Park, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
High Point Estates, LLC Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
Historic District Redevelopment Partnership Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
Holly Spring Meadows LLC Forestville, MD
- --------------------------------------------------------------------------------------------------------------------
Honfed Financial Services Corp. Honolulu, HI
- --------------------------------------------------------------------------------------------------------------------
Hong Kong & Shanghai Insurance Company, Limited Hong Kong, PRC
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
I
- --------------------------------------------------------------------------------------------------------------------
Identrus, LLC New York, NY
- --------------------------------------------------------------------------------------------------------------------
Inchroy Credit Corporation Limited Hong Kong, PRC
- --------------------------------------------------------------------------------------------------------------------
Independence Plaza General Partner, Inc. St. Louis, MO
- --------------------------------------------------------------------------------------------------------------------
Independence Plaza, L.P. St. Louis, MO
- --------------------------------------------------------------------------------------------------------------------
Integrion Financial Network, LLC Herndon, VA
- --------------------------------------------------------------------------------------------------------------------
Interfirst (Leasing) Limited London, U.K.
- --------------------------------------------------------------------------------------------------------------------
InverAmerica S.A. Santa Fe de Bogota, Colombia
- --------------------------------------------------------------------------------------------------------------------
Inversiones of America Corredores de Bolsa Limitada Santiago, Chile
- --------------------------------------------------------------------------------------------------------------------
Inversiones y Negocios Fiduciarios S.A. Buenos Aires, Argentina
- --------------------------------------------------------------------------------------------------------------------
InvestAmerica S.A. Santiago, Chile
- --------------------------------------------------------------------------------------------------------------------
Irapetra FSC, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Ironside Property Holdings, Inc. Irving, TX
- --------------------------------------------------------------------------------------------------------------------
Irving Park, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Island Funding, Ltd. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Island Funding, Ltd. II George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
Ismael I, Inc. George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
ITG Secretaries Limited Hong Kong, PRC
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
J
- --------------------------------------------------------------------------------------------------------------------
Jambu Holdings, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Japan Airlines/NCNB 1993-1 (Grantor Trust) Wilmington, DE
- --------------------------------------------------------------------------------------------------------------------
Jawbridge Finance, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
JCCA, Inc. Wilton, CT
- --------------------------------------------------------------------------------------------------------------------
Jefferson, Marion, Washington Community Development
Corporation Corpus Christi, TX
- --------------------------------------------------------------------------------------------------------------------
Joey Trust San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Justin, Inc. George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
K
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Kauai Hotel, L.P. Los Angeles, CA
- --------------------------------------------------------------------------------------------------------------------
Kavala FSC, Inc. Bridgetown, Barbados
- --------------------------------------------------------------------------------------------------------------------
Kenilworth Industrial Park Limited Liability Company Washington, DC
- --------------------------------------------------------------------------------------------------------------------
Kenilworth-Burroughs Limited Partnership Washington, DC
- --------------------------------------------------------------------------------------------------------------------
Kill Devil Hills Finance Limited Partnership Wilmington, Delaware
- --------------------------------------------------------------------------------------------------------------------
Kill Devil Hills II Limited Partnership Wilmington, Delaware
- --------------------------------------------------------------------------------------------------------------------
Kitty Hawk Finance Ltd. Hamilton, Bermuda
- --------------------------------------------------------------------------------------------------------------------
Knossus FSC, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Korg Acceptance Corporation Alpharetta, GA
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
L
- --------------------------------------------------------------------------------------------------------------------
L/G Redevelopment, LLC Nashville, TN
- --------------------------------------------------------------------------------------------------------------------
Laconia FSC, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Laconia, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Laredo Partners Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
LaSalle Street Natural Resources Corporation Houston, TX
- --------------------------------------------------------------------------------------------------------------------
Latin America Funding, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Lease Holding Company II Pte Ltd Singapore, Singapore
- --------------------------------------------------------------------------------------------------------------------
Lease Holding Company III Pte Ltd Singapore, Singapore
- --------------------------------------------------------------------------------------------------------------------
Lease Holding Company Pte Ltd Singapore, Singapore
- --------------------------------------------------------------------------------------------------------------------
Lee County Holdings Company Tampa, FL
- --------------------------------------------------------------------------------------------------------------------
Lee First, Inc. Tampa, FL
- --------------------------------------------------------------------------------------------------------------------
Leon Avenue Redevelopment Company Sarasota, FL
- --------------------------------------------------------------------------------------------------------------------
Liberal Asset Management Administracao Financeira e
Consultoria Riod de Janeiro, Brazil
- --------------------------------------------------------------------------------------------------------------------
Liberal Banking Corporation Ltd. Nassau, Bahamas
- --------------------------------------------------------------------------------------------------------------------
Liberal S.A. Corretora de Cambio e Valores Mobiliarios Rio de Janeiro, Brazil
- --------------------------------------------------------------------------------------------------------------------
Linden Tree Development Corp. Melville, NY
- --------------------------------------------------------------------------------------------------------------------
Lindos FSC, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Lindos, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Locomotive Lease Holding VII, Company Halifax, Nova Scotia
- --------------------------------------------------------------------------------------------------------------------
Lubbock Funding, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Lubbock Funding, Inc. II Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Lyndhurst Properties Corp. Melville, NY
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
M
- --------------------------------------------------------------------------------------------------------------------
"M&M Realty, Inc." St. Louis, MO
- --------------------------------------------------------------------------------------------------------------------
Madison Park A Corp. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Madre Mesa Property Holdings, Inc. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Maguire Partners-Glendale Center, LLC Los Angeles, CA
- --------------------------------------------------------------------------------------------------------------------
Main Place Funding, LLC Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Malia FSC, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Malia, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Mar A Lowe Corp. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
MAR, Inc. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Marco Polo Leasing Ltd. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Marco Properties, Inc. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Marnat Creek Limited Partnership Tucker, GA
- --------------------------------------------------------------------------------------------------------------------
Marsico Capital Management, LLC Denver, CO
- --------------------------------------------------------------------------------------------------------------------
Marsico Management Holdings, L.L.C. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Maryland Housing Equity Fund Limited Partnership Columbia, MD
- --------------------------------------------------------------------------------------------------------------------
Maryland National Community Development Corporation Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Maryland National Realty Investors, Inc. Washington, DC
- --------------------------------------------------------------------------------------------------------------------
Mayfair Partners Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Maywell Mark Corp. Oklahoma City, OK
- --------------------------------------------------------------------------------------------------------------------
MB Deal 97, S.L. Madrid, Spain
- --------------------------------------------------------------------------------------------------------------------
MBHD, LLC Nashville, TN
- --------------------------------------------------------------------------------------------------------------------
MCOG Leasing Corp. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Mecklenburg Park, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Melwood M Corp. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Mercury Marine Acceptance Corporation Alpharetta, GA
- --------------------------------------------------------------------------------------------------------------------
MESBIC Ventures Holding Company Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Metropolitan Commercial Properties Corporation I Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Metropolitan Commercial Properties Corporation VIII Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Metropolitan Commercial Properties Corporation X Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Metropolitan Development, L.L.C. St. Louis, MO
- --------------------------------------------------------------------------------------------------------------------
Middletown Finance, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Midwest Realty & Management, Inc. Buffalo, NY
- --------------------------------------------------------------------------------------------------------------------
Minbanc Capital Corp. Washington, DC
- --------------------------------------------------------------------------------------------------------------------
Misty Waters Apartments, Inc. Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
MN World Trade Corporation Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
MNC Affiliates Group, Inc. Washington, DC
- --------------------------------------------------------------------------------------------------------------------
MNC American Corporation Birmingham, AL
- --------------------------------------------------------------------------------------------------------------------
MNC Capital Corporation Washington, DC
- --------------------------------------------------------------------------------------------------------------------
MNC Consumer Discount Company Washington, DC
- --------------------------------------------------------------------------------------------------------------------
MNC Credit Corp Washington, DC
- --------------------------------------------------------------------------------------------------------------------
MNC Investment Bank, Ltd. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Mobley Park Apartments, L.C. Tampa, FL
- --------------------------------------------------------------------------------------------------------------------
Mohave Partners Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
MOIL Corporation Wilton, CT
- --------------------------------------------------------------------------------------------------------------------
Montana Fundo de Renda Fixa-Capital Estrangeiro Sao Paulo, Brazil
- --------------------------------------------------------------------------------------------------------------------
Montrose & Company, LLC Reno, NV
- --------------------------------------------------------------------------------------------------------------------
Moorpark Holding, Inc. Chicago, IL
- --------------------------------------------------------------------------------------------------------------------
Moraine Ltd. George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
Motift, Inc. Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
MS Spitfire LLC San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Multi Banco S.A. Sao Paulo, Brazil
- --------------------------------------------------------------------------------------------------------------------
Multi-Family Housing Investment Fund I, LLC Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Mycenae FSC, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Mycenae, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
MYM Holdings Corporation Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
N
- --------------------------------------------------------------------------------------------------------------------
N.B. (Bahamas) Ltd. Nassau, Bahamas
- --------------------------------------------------------------------------------------------------------------------
NAPICO/USAA Tax Credit Fund I Beverly Hills, CA
- --------------------------------------------------------------------------------------------------------------------
Nations Argentina, S.A. Buenos Aires, Argentina
- --------------------------------------------------------------------------------------------------------------------
Nations Commercial Corp. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Nations de Colombia Ltda. Santa Fe de Bogota, Colombia
- --------------------------------------------------------------------------------------------------------------------
Nations Finance (Cayman) Limited George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
Nations Finance Company Dublin, Ireland
- --------------------------------------------------------------------------------------------------------------------
Nations International Equity Fund (Offshore) George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
Nations International Value Fund (Offshore) George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
Nations Investment Management Limited London, U.K.
- --------------------------------------------------------------------------------------------------------------------
Nations Marsico Focused Equities Fund (Offshore) George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
Nations Marsico Growth & Income Fund (Offshore) George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
NationsBanc Auto Funding Corporation Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
NationsBanc Business Credit, Inc. Tucker, GA
- --------------------------------------------------------------------------------------------------------------------
NationsBanc Charlotte Center, Inc. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
NationsBanc Energy Group Denver, Inc. Denver, CO
- --------------------------------------------------------------------------------------------------------------------
NationsBanc Equity Mortgage Corporation Richmond, VA
- --------------------------------------------------------------------------------------------------------------------
NationsBanc Health Services, Inc. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
NationsBanc Insurance Agency, Inc. Norfolk, VA
- --------------------------------------------------------------------------------------------------------------------
NationsBanc Insurance Company, Inc. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
NationsBanc Insurance Inc. Mount Airy, MD
- --------------------------------------------------------------------------------------------------------------------
NationsBanc Lease Finance VI Wilmington, Delaware
- --------------------------------------------------------------------------------------------------------------------
NationsBanc Leasing & R.E. Corporation Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
NationsBanc Montgomery Holdings Corporation Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
NationsBanc Mortgage Corporation of Georgia Tucker, GA
- --------------------------------------------------------------------------------------------------------------------
NationsBanc Pacific Corporation Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
NationsBanc Retirement Management, Inc. Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
NationsBank (Export Finance) Limited London, U.K.
- --------------------------------------------------------------------------------------------------------------------
NationsBank Brasil Holdings Ltda. Sao Paulo, Brazil
- --------------------------------------------------------------------------------------------------------------------
NationsBank CLO Corporation Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
NationsBank CLO Funding Corp. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
NationsBank Europe Limited London, U.K.
- --------------------------------------------------------------------------------------------------------------------
NationsBank Housing Fund Investment Corporation Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
NationsBank International Trust (Jersey) Limited Saint Helier, Jersey, Channel Islands
- --------------------------------------------------------------------------------------------------------------------
NationsBank Overseas Corporation Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
NationsBank Trust Company of New York New York, NY
- --------------------------------------------------------------------------------------------------------------------
NationsBridge, L.L.C. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
NationsCredit Financial Acceptance Corporation Irving, TX
- --------------------------------------------------------------------------------------------------------------------
NationsCredit Financial Services Corporation Irving, TX
- --------------------------------------------------------------------------------------------------------------------
NationsCredit Financial Services Corporation of Nevada Irving, TX
- --------------------------------------------------------------------------------------------------------------------
NationsCredit Home Equity ABS Corporation Irving, TX
- --------------------------------------------------------------------------------------------------------------------
NationsCredit Insurance Agency, Inc. Irving, TX
- --------------------------------------------------------------------------------------------------------------------
NationsCredit Insurance Corporation Irving, TX
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
NationsCredit Manufactured Housing Corporation Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------
NationsCredit Marine Funding Corporation Alpharetta, GA
- --------------------------------------------------------------------------------------------------------------------
NationsCredit Securitization Corporation Alpharetta, GA
- --------------------------------------------------------------------------------------------------------------------
Nations-CRT Hong Kong, Limited Hong Kong, PRC
- --------------------------------------------------------------------------------------------------------------------
Nations-CRT U.K. & Co. London, U.K.
- --------------------------------------------------------------------------------------------------------------------
NationsLink Funding Corporation Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Nauplia FSC, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
NB Capital Trust I Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
NB Capital Trust II Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
NB Capital Trust III Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
NB Capital Trust IV Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
NB Finance Lease, Inc. Tucker, GA
- --------------------------------------------------------------------------------------------------------------------
NB Financial Trading (Ireland) Limited Dublin, Ireland
- --------------------------------------------------------------------------------------------------------------------
NB Holdings Corporation Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
NB Insurance Services, Inc. Tucker, GA
- --------------------------------------------------------------------------------------------------------------------
NB International Finance B.V. Amsterdam, The Netherlands
- --------------------------------------------------------------------------------------------------------------------
NB Partner Corp. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
NBCDC Osborne, Inc. Tampa, FL
- --------------------------------------------------------------------------------------------------------------------
NBRE Realty LLC Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
NCNB Corporate Services, Inc. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
NCNB Lease Atlantic, Inc. Wilmington, Delaware
- --------------------------------------------------------------------------------------------------------------------
NCNB Lease Finance Wilmington, Delaware
- --------------------------------------------------------------------------------------------------------------------
NCNB Lease Finance II Wilmington, Delaware
- --------------------------------------------------------------------------------------------------------------------
NCNB Lease Finance III Wilmington, Delaware
- --------------------------------------------------------------------------------------------------------------------
NCNB Lease Finance IV Wilmington, Delaware
- --------------------------------------------------------------------------------------------------------------------
NCNB Lease Finance V Wilmington, Delaware
- --------------------------------------------------------------------------------------------------------------------
NCNB Lease International, Inc. Wilmington, Delaware
- --------------------------------------------------------------------------------------------------------------------
NCNB Lease Offshore, Inc. Wilmington, Delaware
- --------------------------------------------------------------------------------------------------------------------
NCNB Properties, Inc. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Neighborhood Rental Limited Partnership II Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Nevin Rd Associates LLC Raleigh, NC
- --------------------------------------------------------------------------------------------------------------------
New Haven Limited Partnership Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Newington Limited Partnership, The Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
NIMAC Finance Corp. Alpharetta, GA
- --------------------------------------------------------------------------------------------------------------------
NMS Capital, L.P. New York, NY
- --------------------------------------------------------------------------------------------------------------------
NMS Services (Cayman) Inc. George Town Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
NMS Services, Inc. New York, NY
- --------------------------------------------------------------------------------------------------------------------
Nubia Redevelopment Partnership Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
O
- --------------------------------------------------------------------------------------------------------------------
OA Management, Inc. Tampa, Fl
- --------------------------------------------------------------------------------------------------------------------
Oak Park at Nations Ford LLC Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Oakland Trace Redevelopment, L.C. Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------
Odessa Park, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Old Sterling Street REIT Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Olefinas Del Zulia, S.A. Caracas, Chacao, Venezuela
- --------------------------------------------------------------------------------------------------------------------
Orchards Subdivision, LLC, The Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
Osborne Landing, L.P. Tampa, Fl
- --------------------------------------------------------------------------------------------------------------------
Oshkosh/McNeilus Financial Services Partnership Dodge Center, MN
- --------------------------------------------------------------------------------------------------------------------
Outerbanks Finance Ltd. Hamilton, Bermuda
- --------------------------------------------------------------------------------------------------------------------
Overseas Lending Corporation San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Oxford Management Services Corp. Melville, NY
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
P
- --------------------------------------------------------------------------------------------------------------------
Pacific Southwest Realty Company San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Padovano Investments George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
Pan American Mortgage Corp. Miami, FL
- --------------------------------------------------------------------------------------------------------------------
Paradise Funding, Ltd. George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
Park at Hillside, LLC, The Nashville, TN
- --------------------------------------------------------------------------------------------------------------------
Park at Lakewood L.L.C. dba Campbellton Glen Apartments LLC, Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Pasir Mas Ltd. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Patras FSC, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Patras, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
PDE, Inc. George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
PDK Hangar, L.L.C. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Peak Finance Partners I, LP Reno, NV
- --------------------------------------------------------------------------------------------------------------------
Peak Finance Partners II, LP Reno, NV
- --------------------------------------------------------------------------------------------------------------------
Perissa LLC San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Phaestos FSC, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Piccadilly, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Piedmont Finance Ltd. Hamilton, Bermuda
- --------------------------------------------------------------------------------------------------------------------
Pine Hill Investments, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Pine Oaks/Mesquite, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Pinehurst Trading, Inc. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
PJM Office Building, LLC Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
PJM Retail Center, LLC Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Plano Partners Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
PNB Securities Corporation Los Angeles, CA
- --------------------------------------------------------------------------------------------------------------------
Poplar Partners Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Poros FSC I, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Poros FSC II, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Poros FSC III, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Poros FSC IV, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Poros FSC IX, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Poros FSC V, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Poros FSC VI, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Poros FSC VII, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Poros FSC VIII, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Poros FSC X, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Poros FSC XI, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Poros FSC XII, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Poros FSC, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Poros VII, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Pratt Management Company Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Price Auto Outlet of California, Inc. Melville, NY
- --------------------------------------------------------------------------------------------------------------------
Private Export Funding Corporation New York, NY
- --------------------------------------------------------------------------------------------------------------------
Pydna Corporation San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Pylos FSC, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Pylos, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Pyrgos FSC, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Pyrgos, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Python Partners Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Q
- --------------------------------------------------------------------------------------------------------------------
Quality A Corp. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Quatro I, Inc. Tulsa, OK
- --------------------------------------------------------------------------------------------------------------------
Queen City Partnership Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
R
- --------------------------------------------------------------------------------------------------------------------
Raffles Leasing Ltd. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Rainer Mortgage Company Seattle, WA
- --------------------------------------------------------------------------------------------------------------------
Rainier Credit Company Seattle, WA
- --------------------------------------------------------------------------------------------------------------------
Regent Street II, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Related Insured Tax Credit Partners III, L.P. New York, NY
- --------------------------------------------------------------------------------------------------------------------
Renfrew Services Limited Hong Kong, PRC
- --------------------------------------------------------------------------------------------------------------------
Reprise, Inc. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Republic Dallas Ltd. (U.K.) London, U.K.
- --------------------------------------------------------------------------------------------------------------------
RepublicBank Insurance Agency, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Revitalizing Atlanta, Inc. Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
Reynoldstown Rising, LLC Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
Ritchie Court M Corporation Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Rive Gauche A Corp. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
River City Capital Management, Inc. St. Louis, MO
- --------------------------------------------------------------------------------------------------------------------
Roanoke Community Development Corporation Roanoke, VA
- --------------------------------------------------------------------------------------------------------------------
Rockwell Resources, Inc. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Rosedale Terrace Limited Partnership Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Royal Oaks, L.L.C. Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------
Ruby Aircraft Leasing and Trading Limited London, U.K.
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
S
- --------------------------------------------------------------------------------------------------------------------
Safari (QSPE) Limited George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
Sagebrush Holdings, Inc. Las Vegas, NV
- --------------------------------------------------------------------------------------------------------------------
Samedan Leasing Ltd. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
San Antonio Business Development Fund, Inc. San Antonio, TX
- --------------------------------------------------------------------------------------------------------------------
Sandhills Finance Ltd. Hamilton, Bermuda
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Santa Isabela Limitada Sao Paulo, Brazil
- --------------------------------------------------------------------------------------------------------------------
Sardonyx Shipping Pte Ltd Singapore, Singapore
- --------------------------------------------------------------------------------------------------------------------
Savannah at Washington Park, LLC Fayetteville, GA
- --------------------------------------------------------------------------------------------------------------------
Savannah Community Development Corporation dba Savannah Regional Savannah, GA
Small Business Capital Fund
- --------------------------------------------------------------------------------------------------------------------
Savannah International Sales, Inc. Charlotte Amalie, Saint Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Sawgrass Trading LLC Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
SBMB Corporation Wilton, CT
- --------------------------------------------------------------------------------------------------------------------
SCI Holdings Corporation Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
SCIC LMN Springfield, LLC Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
SCIC Riverwalk, LLC Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
SCRC Carrolltowne, Inc. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
SCRC Process Service Corp. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Sea Ray Credit Corporation Alpharetta, GA
- --------------------------------------------------------------------------------------------------------------------
Seabrook Operations, Inc. Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
Seafirst America Corporation Seattle, WA
- --------------------------------------------------------------------------------------------------------------------
Seafirst Insurance Corporation Bellevue, WA
- --------------------------------------------------------------------------------------------------------------------
Seafirst Leasing Company Seattle, WA
- --------------------------------------------------------------------------------------------------------------------
Seafirst Services Corporation Seattle, WA
- --------------------------------------------------------------------------------------------------------------------
Seaview of Seabrook, Inc. Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
Second Land Sales, Inc. Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
Securilease BV Amsterdam, The Netherlands
- --------------------------------------------------------------------------------------------------------------------
Securitization Funding Corporation Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Security Pacific Acceptance Corp. II San Diego, CA
- --------------------------------------------------------------------------------------------------------------------
Security Pacific Australian Assets Limited Sydney, New South Wales, Australia
- --------------------------------------------------------------------------------------------------------------------
Security Pacific Capital Leasing Corporation San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Security Pacific Equipment Finance (Europe) Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Security Pacific EuroFinance Holdings, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Security Pacific EuroFinance, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Security Pacific Financing Services Limited London, U.K.
- --------------------------------------------------------------------------------------------------------------------
Security Pacific Hong Kong Holdings Limited Hong Kong, PRC
- --------------------------------------------------------------------------------------------------------------------
Security Pacific Housing Services, Inc. San Diego, CA
- --------------------------------------------------------------------------------------------------------------------
Security Pacific International Leasfinance, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Security Pacific Lease Finance (Europe) Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Security Pacific Leasing Corporation San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Security Pacific Overseas Investment Corporation San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Security-First COM-I Corporation San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Security-First Company San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Sequoia Lane GP Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Service-Wright Corporation Washington, DC
- --------------------------------------------------------------------------------------------------------------------
Seventh Street Holdings Corporation Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Seventh Street Real Estate Investment Trust Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Shamrock Leasing Limited London, U.K.
- --------------------------------------------------------------------------------------------------------------------
Shanghai Enterprise Ltd. Hong Kong, PRC
- --------------------------------------------------------------------------------------------------------------------
Shannon Company, A California Limited Partnerhsip, The Modesto, CA
- --------------------------------------------------------------------------------------------------------------------
Sherwood Terrace Apartments, Inc. Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Sidewinder Funding II, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Sidewinder Funding, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Sierra Nevada Realty GP Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Siesta Holdings, Inc. Las Vegas, NV
- --------------------------------------------------------------------------------------------------------------------
Signio, Inc. Redwood Shores, CA
- --------------------------------------------------------------------------------------------------------------------
Silver Management Company Las Vegas, NV
- --------------------------------------------------------------------------------------------------------------------
Silver Management Holding Company Las Vegas, NV
- --------------------------------------------------------------------------------------------------------------------
Skyros, Ltd. Hamilton, Bermuda
- --------------------------------------------------------------------------------------------------------------------
Societe Anonyme Immobiliere du 28 Place Vendome Paris, France
- --------------------------------------------------------------------------------------------------------------------
Societe Nouvelle Les Dolomites Francaises, SARL Gresse en Vercors, France
- --------------------------------------------------------------------------------------------------------------------
SOP M Corp. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Sounion FSC, Inc. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
South Charles Investment Corporation Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
South Charles Realty Corp Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Southern California Business Development Corporation Los Angeles, CA
- --------------------------------------------------------------------------------------------------------------------
Southern Dallas Development Fund, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Sovran Capital Management Corporation Richmond, VA
- --------------------------------------------------------------------------------------------------------------------
SPAA Leasing Corporation San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Spitfire Capital Partners LP San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Spotted Horse Holdings, Inc. Cheyenne, WY
- --------------------------------------------------------------------------------------------------------------------
Springfield Finance and Development Corporation Springfield, MO
- --------------------------------------------------------------------------------------------------------------------
Spruce Management LLC Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
SRF Trading, Inc. Miami, FL
- --------------------------------------------------------------------------------------------------------------------
SRV-Highland, Inc. Miami, FL
- --------------------------------------------------------------------------------------------------------------------
St. Johns Place, L.C. Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------
St. Louis Investment Properties, Inc. Tampa, FL
- --------------------------------------------------------------------------------------------------------------------
St. Wenceslaus Limited Partnership Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Stanton Road LLC Washington, DC
- --------------------------------------------------------------------------------------------------------------------
Star Systems, Inc. Maitland, FL
- --------------------------------------------------------------------------------------------------------------------
Statewide Administrative Services, Inc. Tucker, GA
- --------------------------------------------------------------------------------------------------------------------
Steppington/Dallas, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Storey Asset Management Company Reno, NV
- --------------------------------------------------------------------------------------------------------------------
Storey Asset Management Company II Reno, NV
- --------------------------------------------------------------------------------------------------------------------
Storey Asset Management Company III Reno, NV
- --------------------------------------------------------------------------------------------------------------------
Storey Asset Management Company IV Reno, NV
- --------------------------------------------------------------------------------------------------------------------
Suburban Service Corporation Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
SunAmerica Affordable Housing Parners XL, a Nevada Limited Los Angeles, CA
Partnership
- --------------------------------------------------------------------------------------------------------------------
SunAmerica Affordable Housing Partners XXXII, a Nevada Los Angeles, CA
Limited Partnership
- --------------------------------------------------------------------------------------------------------------------
SunAmerica Affordable Housing Partners XXXIII, a Nevada Los Angeles, CA
Limited Partnership
- --------------------------------------------------------------------------------------------------------------------
Suncoast Advertising Company, Inc. Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------
Sunset Hill Corporation Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
SunStar Acceptance Corporation Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
SunStar Acceptance Corporation (Hawaii) Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
Swallowtail Limited St. Helier, Jersey, Channel Islands
- --------------------------------------------------------------------------------------------------------------------
Sweet River Investments, Ltd. George Town, Grand Camyan, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Sweitzer M Corp. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Sycamore Funding II, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Sycamore Funding, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Sykesville M Corp. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
T
- --------------------------------------------------------------------------------------------------------------------
Tabono Joint Venture Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Tabono Partnership II, Ltd. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Tanah Merah Leasing Ltd. Charlotte Amalie, St. Thomas, U.S.V.I.
- --------------------------------------------------------------------------------------------------------------------
Tennessee Nationalease Corporation Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Terry Street Redevelopment Limited Liability Company Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
Thasos FSC, Inc. Bridgetown, Barbados
- --------------------------------------------------------------------------------------------------------------------
Third Coast Community Development Corporation Houston, TX
- --------------------------------------------------------------------------------------------------------------------
Third Ward Committee, LLC Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Third Ward Neighborhood Development Association Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Three Commercial Place Associates Norfolk, VA
- --------------------------------------------------------------------------------------------------------------------
Tidewater Partners Limited Partnership Virginia Beach, VA
- --------------------------------------------------------------------------------------------------------------------
TIM, Inc. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Tiryns FSC, Inc. Charlotte Amalie, St. Thomas, U.S.V.I.
- --------------------------------------------------------------------------------------------------------------------
Titulos Rioplatenses S.A. Montevideo, Uruguay
- --------------------------------------------------------------------------------------------------------------------
TJN Corporation Wilton, CT
- --------------------------------------------------------------------------------------------------------------------
T-Oaks Apartments, Inc. Atlanta, GA
- --------------------------------------------------------------------------------------------------------------------
Tower Commercial Realty, Inc. St. Louis, MO
- --------------------------------------------------------------------------------------------------------------------
Tower Holdings, L.P. St. Louis, MO
- --------------------------------------------------------------------------------------------------------------------
Townsite Plaza Development, Inc. St. Louis, MO
- --------------------------------------------------------------------------------------------------------------------
TradeStreet Investment Associates, Inc. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
TransAlliance LP Bellevue, WA
- --------------------------------------------------------------------------------------------------------------------
Transit Holding, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Transit Leasing Corporation San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Transpacific Finance Limited Partnership Wilmington, Delaware
- --------------------------------------------------------------------------------------------------------------------
Transpacific Funding (1993), Inc. Wilmington, Delaware
- --------------------------------------------------------------------------------------------------------------------
Transtex Management Company Houston, TX
- --------------------------------------------------------------------------------------------------------------------
Trinity Management Pte Ltd George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
Tri-Star Communications, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Tri-Tech, L.P. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Trotwood Property Holdings, Inc. Irving, TX
- --------------------------------------------------------------------------------------------------------------------
Troy Street Limited Liability Company Alexandria, VA
- --------------------------------------------------------------------------------------------------------------------
Trunoms, Limited Nassau, Bahamas
- --------------------------------------------------------------------------------------------------------------------
Tryon Assurance Company, Ltd. Hamilton, Bermuda
- --------------------------------------------------------------------------------------------------------------------
Tryon Investments II, LLC San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Tryon Investments, LLC Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Tyler Development Fund Inc. Tyler, TX
- --------------------------------------------------------------------------------------------------------------------
Tyler International Sales, Inc. Charlotte Amalie, Saint Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Tyler Trading, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
U
- --------------------------------------------------------------------------------------------------------------------
U. N. Service Corp. Little Rock, AR
- --------------------------------------------------------------------------------------------------------------------
Ulysses Beta, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Ulysses Leasing Limited St. Helier, Jersey, Channel Islands
- --------------------------------------------------------------------------------------------------------------------
Ulysses Queensland Corporation San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Union Modern Mortgage Corporation, The Little Rock, AR
- --------------------------------------------------------------------------------------------------------------------
Union Realty and Securities Company St. Louis, MO
- --------------------------------------------------------------------------------------------------------------------
United States Airlease Holding, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
UniTrusco Corporation Jacksonville, FL
- --------------------------------------------------------------------------------------------------------------------
University Fletcher Woods, Inc. Tampa, FL
- --------------------------------------------------------------------------------------------------------------------
University Fletcher Woods, Ltd. Tampa, FL
- --------------------------------------------------------------------------------------------------------------------
University Lofts Associates, L.P. St. Louis, MO
- --------------------------------------------------------------------------------------------------------------------
University Lofts Development, L.L.C. St. Louis, MO
- --------------------------------------------------------------------------------------------------------------------
University Park Shopping Center, LLC Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
USA Auto Mall of Florida, Inc. Melville, NY
- --------------------------------------------------------------------------------------------------------------------
USA Auto Mall of New Jersey, Inc. Melville, NY
- --------------------------------------------------------------------------------------------------------------------
USA Auto Mall of New York, Inc. Melville, NY
- --------------------------------------------------------------------------------------------------------------------
USA Auto Mall, Inc. Melville, NY
- --------------------------------------------------------------------------------------------------------------------
Uwharrie Finance Ltd. Hamilton, Bermuda
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
V
- --------------------------------------------------------------------------------------------------------------------
Vasco da Gama Licenciamentos S.A. Rio de Janeiro, Brazil
- --------------------------------------------------------------------------------------------------------------------
Venco, B.V. George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
Vernon M Corp. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Vernon Park, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Verrington Limited George Town, Grand Cayman, Cayman Is.
- --------------------------------------------------------------------------------------------------------------------
Villages of La Costa Southwest, L.L.C. San Diego, CA
- --------------------------------------------------------------------------------------------------------------------
Viper LLC Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Vision Achievement Limited Hong Kong, PRC
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
W
- --------------------------------------------------------------------------------------------------------------------
WAC One, Inc. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Wallace Terrace Apartments, L.P. Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
Wanda Finance Ltd. Hamilton, Bermuda
- --------------------------------------------------------------------------------------------------------------------
Washington View (H) Corporation Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Washington View (NH) Corporation Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Washoe Asset Management Company Reno, NV
- --------------------------------------------------------------------------------------------------------------------
WCH Limited Partnership Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Wellington Land Company, Inc. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
Wellington Park/Lewisville, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Wellston Homes General Partner, L.L.C. Clayton, MO
- --------------------------------------------------------------------------------------------------------------------
Wellston Homes, L.P. St. Louis, MO
- --------------------------------------------------------------------------------------------------------------------
Wendover Lane II, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
Wendover Lane, Inc. Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
West Trade, LLC Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Westview Terrace Apartments, L.L.C. Miami, FL
- --------------------------------------------------------------------------------------------------------------------
White Sands Leasing Corporation San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Wickliffe A Corp. Baltimore, MD
- --------------------------------------------------------------------------------------------------------------------
William Mann Jr. Community Development Corporation Fort Worth, TX
- --------------------------------------------------------------------------------------------------------------------
Windmill Leasing Ltd. Charlotte Amalie, St. Thomas, U.S. V.I.
- --------------------------------------------------------------------------------------------------------------------
Windmill Sands Leasing Corporation San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Wingtip Finance Ltd. Hamilton, Bermuda
- --------------------------------------------------------------------------------------------------------------------
Winnebago Acceptance Corporation Alpharetta, GA
- --------------------------------------------------------------------------------------------------------------------
Wolnoms, Limited Nassau, Bahamas
- --------------------------------------------------------------------------------------------------------------------
Woods at Addison LLC Capitol Heights, MD
- --------------------------------------------------------------------------------------------------------------------
Worthen Community Development Corporation Little Rock, AR
- --------------------------------------------------------------------------------------------------------------------
Worthen Development Corporation, Inc. Maumelle, AR
- --------------------------------------------------------------------------------------------------------------------
Worthen Mortgage Company Buffalo, NY
- --------------------------------------------------------------------------------------------------------------------
Wrightbrothers Ltd. Hamilton, Bermuda
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Y
- --------------------------------------------------------------------------------------------------------------------
Yellow Rose Investments Company Dallas, TX
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Z
- --------------------------------------------------------------------------------------------------------------------
Zentac Productions, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
Zeus 1999 FSC, Ltd. Hamilton, Bermuda
- --------------------------------------------------------------------------------------------------------------------
Zeus 1999, Inc. San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
200 Madison Avenue Realty Corporation Charlotte, NC
- --------------------------------------------------------------------------------------------------------------------
200 Service Corp. Miami, FL
- --------------------------------------------------------------------------------------------------------------------
555 California Street Partners San Francisco, CA
- --------------------------------------------------------------------------------------------------------------------
724 Solutions, Inc. Toronto, Ontario, Canada
- --------------------------------------------------------------------------------------------------------------------
693327 Ontario Limited Toronto, Ontario, Canada
- --------------------------------------------------------------------------------------------------------------------
IV CB&T Tulsa Holdings, Inc. Tulsa, OK
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
22
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (Nos. 333-83503;
333-07229; 333-15375; 333-18273; 333-43137; 333-13811; 333-51367; 33-54784;
33-49881; 33-57533; 33-63097 and 33-45498); the Registration Statements on Form
S-8 (Nos. 33-45279; 33-60695; 333-02875; 333-07105; 333-20913; 333-24331;
333-58657; 333-65209; 333-69849 and 2-80406); and the Post-Effective Amendments
on Form S-8 to Registration Statements on Form S-4 (Nos. 33-43125; 33-55145;
33-63351; 33-62069; 33-62208; 333-16189; 333-60553; and 333-40515) of Bank of
America Corporation of our report dated January 13, 2000 appearing on page 53 of
this Form 10-K.
/s/ PRICEWATERHOUSECOOPERS LLP
- ------------------------------
PRICEWATERHOUSECOOPERS LLP
Charlotte, North Carolina
March 20, 2000
Exhibit 24(a)
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that each of Bank of America
Corporation and the several undersigned officers and directors whose signatures
appear below, hereby makes, constitutes and appoints Charles M. Berger, James W.
Kiser and Paul J. Polking, and each of them acting individually, its, his and
her true and lawful attorneys with power to act without any other and with full
power of substitution, to prepare, execute, deliver and file in its, his and her
name and on its, his and her behalf, and in each of the undersigned officer's
and director's capacity or capacities as shown below, an Annual Report on Form
10-K for the year ended December 31, 1999, and all exhibits thereto and all
documents in support thereof or supplemental thereto, and any and all amendments
or supplements to the foregoing, hereby ratifying and confirming all acts and
things which said attorneys or attorney might do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, Bank of America Corporation has caused this power
of attorney to be signed on its behalf, and each of the undersigned officers and
directors, in the capacity or capacities noted, has hereunto set his or her hand
as of the date indicated below.
BANK OF AMERICA CORPORATION
By: /S/ Hugh L. McColl, Jr.
------------------------
Hugh L. McColl, Jr.
Chairman of the Board
and Chief Executive Officer
Dated: January 26, 2000
Signature Title Date
- --------- ----- ----
/S/ Hugh L. McColl, Jr. Chairman of the Board, January 26, 2000
- --------------------------- Chief Executive Officer
Hugh L. McColl, Jr. and Director
(Principal Executive Officer)
/S/ James H. Hance, Jr. Vice Chairman, January 26, 2000
- --------------------------- Chief Financial Officer
James H. Hance, Jr. and Director
(Principal Financial Officer)
/S/ Marc D. Oken Executive Vice President and January 26, 2000
- --------------------------- Principal Financial Executive
Marc D. Oken (Principal Accounting Officer)
<PAGE>
/S/ Charles W. Coker Director January 26, 2000
- ---------------------------
Charles W. Coker
/S/ Timm F. Crull Director January 26, 2000
- ---------------------------
Timm F. Crull
/S/ Alan T. Dickson Director January 26, 2000
- ---------------------------
Alan T. Dickson
/S/ Kathleen F. Feldstein Director January 26, 2000
- ---------------------------
Kathleen F. Feldstein
/S/ Paul Fulton Director January 26, 2000
- ---------------------------
Paul Fulton
/S/ Donald E. Guinn Director January 26, 2000
- ---------------------------
Donald E. Guinn
/S/ C. Ray Holman Director January 26, 2000
- ---------------------------
C. Ray Holman
/S/ W.W. Johnson Director January 26, 2000
- ---------------------------
W. W. Johnson
/S/ Kenneth D. Lewis President, January 26, 2000
- --------------------------- Chief Operating Officer
Kenneth D. Lewis and Director
/S/ Walter E. Massey Director January 26, 2000
- ---------------------------
Walter E. Massey
/S/ Richard M. Rosenberg Director January 26, 2000
- ---------------------------
Richard M. Rosenberg
Director January __, 2000
- ---------------------------
O. Temple Sloan, Jr.
2
<PAGE>
/S/ Meredith R. Spangler Director January 26, 2000
- ---------------------------
Meredith R. Spangler
/S/ Ronald Townsend Director January 26, 2000
- ---------------------------
Ronald Townsend
/S/ Solomon D. Trujillo Director January 26, 2000
- ---------------------------
Solomon D. Trujillo
/S/ Jackie M. Ward Director January 26, 2000
- ---------------------------
Jackie M. Ward
/S/ Virgil R. Williams Director January 26, 2000
- ---------------------------
Virgil R. Williams
/S/ Shirley Young Director January 26, 2000
- ---------------------------
Shirley Young
3
Exhibit 24(b)
CERTIFICATE OF SECRETARY
------------------------
I, ALLISON L. GILLIAM, Assistant Secretary of Bank of America
Corporation, a corporation duly organized and existing under the laws of the
State of Delaware, do hereby certify that the attached is a true and correct
copy of resolutions duly adopted by a majority of the entire Board of Directors
of the corporation at a meeting of the Board of Directors held on January 26,
2000, at which meeting a quorum was present and acted throughout and that the
resolutions are in full force and effect and have not been amended or rescinded
as of the date hereof.
IN WITNESS WHEREOF, I have hereupon set my hand and affixed
the seal of the corporation this 29th day of February, 2000.
(CORPORATE SEAL)
/s/Allison L. Gilliam
--------------------------------
Assistant Secretary
<PAGE>
BANK OF AMERICA CORPORATION
Resolutions of the Board of Directors
JANUARY 26, 2000
ANNUAL REPORT ON FORM 10-K
WHEREAS, officers of Bank of America Corporation (the "Corporation") have made
presentations to the Board of Directors regarding the Corporation's financial
results for the year ended December 31, 1999; and
WHEREAS, the Board has had adequate opportunity to review and comment on such
results;
NOW, THEREFORE, BE IT:
RESOLVED, that the proper officers of the Corporation be, and they hereby are,
authorized and empowered on behalf of the Corporation to prepare, execute,
deliver and file the Corporation's Annual Report on Form 10-K"), based upon the
information presented to and considered at this meeting, in such form and with
such content and attachment of exhibits as the signing officers shall approve,
their approval to be conclusively evidenced by their signature thereof; and be
it
FURTHER RESOLVED, that the proper officers of the Corporation be, and they
hereby are, authorized and empowered on behalf of the Corporation to execute the
Form 10-K and file it with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934, as amended, and with such other
governmental agencies or instrumentalities as such officers deem necessary or
desirable, and to prepare, execute, deliver and file any amendment or amendments
to the Form 10-K, as they may deem necessary or appropriate; and be it
FURTHER RESOLVED, that Charles M. Berger, James W. Kiser and Paul J. Polking be,
and each of them with full power to act without the other hereby is, authorized
and empowered to prepare, execute, deliver and file the Form 10-K and any
amendment or amendments thereto on behalf of and as attorneys for the
Corporation and on behalf of and as attorneys for any of the following: the
principal executive officer, the principal financial officer the principal
accounting officer, and any other officer of the Corporation; and be it
<PAGE>
FURTHER RESOLVED, that, for the purposes of these resolutions, the "proper
officers" of the Corporation are the members of the Policy Committee, the
Secretary, any Executive Vice President, and any Senior Vice President, and that
each of these officers is authorized, empowered and directed, in the name and
on behalf of the Corporation to execute and deliver or cause to be executed and
delivered any and all agreements, amendments, certificates, applications,
notices, letters, or other documents and to do or cause to be done any and all
such other acts and things as, in the opinion of any such officer, may be
necessary, appropriate of desirable in order to enable the Corporation fully and
promptly to carry out the intent of the foregoing resolutions, and any such
action taken by such officers shall be conclusive evidence of their authority.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
The schedule contains summary information extracted from the December 31, 1999
Form 10-K for Bank of America Corporation and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000070858
<NAME> Bank of America Corporation and Subsidiaries
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 26,989
<INT-BEARING-DEPOSITS> 4,838
<FED-FUNDS-SOLD> 37,928
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<ALLOWANCE> (6,828)
<TOTAL-ASSETS> 632,574
<DEPOSITS> 347,273
<SHORT-TERM> 143,190
<LIABILITIES-OTHER> 42,193
<LONG-TERM> 55,486
0
77
<COMMON> 11,671
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<EXPENSE-OTHER> 17,986
<INCOME-PRETAX> 12,215
<INCOME-PRE-EXTRAORDINARY> 12,215
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,882
<EPS-BASIC> 4.56
<EPS-DILUTED> 4.48
<YIELD-ACTUAL> 3.47
<LOANS-NON> 3,042
<LOANS-PAST> 521
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<ALLOWANCE-UNALLOCATED> 1,439
<FN>
<F1>MERGER-RELATED CHARGES 525
</FN>
</TABLE>
