<PAGE>
BankAmerica Corporation Analytical Review and Form 10-Q
[Logo of BankAmerica Corporation Appears Here]
1994
1st Quarter
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended March 31, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 1-7377
Exact name of registrant as specified in its charter:
BankAmerica Corporation
State or other jurisdiction of incorporation or organization:
Delaware
I.R.S. Employer Identification Number:
94-1681731
Address of principal executive offices:
Bank of America Center
San Francisco, California 94104
Registrant's telephone number, including area code:
415-622-3530
Former name, former address, and former fiscal year,
if changed since last report:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------ ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $1.5625 par value ------ 350,028,862 shares outstanding on
March 31, 1994.*
*In addition, 8,788,337 shares were held in treasury.
- - --------------------------------------------------------------------------------
This document serves both as an analytical review for analysts, shareholders,
and other interested persons, and as the quarterly report on Form 10-Q of
BankAmerica Corporation to the Securities and Exchange Commission, which has
taken no action to approve or disapprove the report or to pass upon its accuracy
or adequacy. Additionally, this document is to be read in conjunction with the
consolidated financial statements and notes thereto included in BankAmerica
Corporation's Annual Report on Form 10-K for the year ended December 31, 1993.
<PAGE>
CONTENTS
<TABLE>
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<S> <C> <C>
Part I Item 1.
Financial Financial Statements:
Information Consolidated Statement of Operations................................. 2
Consolidated Balance Sheet........................................... 3
Consolidated Statement of Cash Flows................................. 4
Consolidated Statement of Changes in Stockholders' Equity............ 5
Notes to Consolidated Financial Statements........................... 6
Item 2.
Management's Discussion and Analysis:
Highlights........................................................... 13
Business Sectors..................................................... 15
Results of Operations:
Net Interest Income................................................ 18
Noninterest Income................................................. 18
Noninterest Expense................................................ 20
Income Taxes....................................................... 20
Balance Sheet Analysis............................................... 21
Overview of Loan Portfolio......................................... 22
Domestic Consumer Loans.......................................... 23
Domestic Commercial Loans........................................ 24
Foreign Loans.................................................... 25
Restructuring Country Debt......................................... 26
Credit Risk Management:
Allowance for Credit Losses........................................ 28
Nonaccrual Assets, Restructured Loans, and
Loans Past Due 90 Days or More and Still Accruing Interest....... 30
Foreign Exchange and Other Derivatives............................... 34
Funding and Capital:
Liquidity.......................................................... 36
Capital............................................................ 36
Interest Rate Risk Management...................................... 38
- - ---------------------------------------------------------------------------------------------
Part II Item 6.
Information Exhibits and Reports on Form 8-K......................................... 40
Signatures............................................................... 41
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</TABLE>
1
<PAGE>
FINANCIAL STATEMENTS
BANKAMERICA CORPORATION AND SUBSIDIARIES
Consolidated Statement of Operations
<TABLE>
<CAPTION>
=====================================================================================
1994 1993
------- ------------------------------------
(dollar amounts in millions, First Fourth Third Second First
except per share data) Quarter Quarter Quarter Quarter Quarter
- - --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest Income
Loans, including fees $2,206 $2,329 $2,345 $2,360 $2,429
Interest-bearing deposits in banks 56 54 49 45 46
Federal funds sold 13 6 12 11 6
Securities purchased under resale
agreements 72 54 51 37 32
Trading account assets 111 102 111 83 76
Available-for-sale and
held-to-maturity securities 355 331 377 345 336
- - --------------------------------------------------------------------------------------
Total interest income 2,813 2,876 2,945 2,881 2,925
Interest Expense
Deposits 697 715 732 737 787
Federal funds purchased 3 4 3 4 5
Securities sold under repurchase
agreements 79 46 55 33 24
Other short-term borrowings 61 56 51 45 49
Long-term debt 169 177 184 180 186
Subordinated capital notes 10 13 39 30 31
- - --------------------------------------------------------------------------------------
Total interest expense 1,019 1,011 1,064 1,029 1,082
- - --------------------------------------------------------------------------------------
Net interest income 1,794 1,865 1,881 1,852 1,843
Provision for credit losses 125 150 178 227 248
- - --------------------------------------------------------------------------------------
Net interest income after
provision for credit losses 1,669 1,715 1,703 1,625 1,595
Noninterest Income
Deposit account fees 294 302 306 301 289
Credit card fees 82 95 88 89 82
Trust fees 67 72 74 77 71
Other fees and commissions 266 268 275 272 268
Trading income 74 101 132 172 164
Net securities gains 20 16 14 13 18
Net gain on sales of assets 45 45 17 17 27
Other income 155 220 101 117 170
- - --------------------------------------------------------------------------------------
Total noninterest income 1,003 1,119 1,007 1,058 1,089
Noninterest Expense
Salaries 710 729 744 703 710
Employee benefits 158 138 140 145 150
Occupancy 165 182 172 167 163
Equipment 146 174 145 151 140
Amortization of intangibles 105 115 100 74 132
Communications 78 81 82 85 82
Regulatory fees and related
expenses 70 74 72 79 84
Professional services 58 73 63 72 60
Other expense 294 408 330 350 314
- - --------------------------------------------------------------------------------------
Total noninterest expense 1,784 1,974 1,848 1,826 1,835
- - --------------------------------------------------------------------------------------
Income before income taxes 888 860 862 857 849
Provision for income taxes 375 364 376 369 365
- - --------------------------------------------------------------------------------------
Net Income $ 513 $ 496 $ 486 $ 488 $ 484
- - -----------------------------------------=============================================
Earnings per common and common
equivalent share $ 1.27 $ 1.21 $ 1.19 $ 1.20 $ 1.19
Earnings per common share-assuming
ful1 dilution $ 1.26 $ 1.21 $ 1.18 $ 1.19 $ 1.19
- - --------------------------------------------------------------------------------------
Dividends declared per common share $ 0.40 $ 0.35 $ 0.35 $ 0.35 $ 0.35
======================================================================================
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
<TABLE>
<CAPTION>
========================================================================================================
1994 1993
-------- -----------------------------------------
(in millions) March 31 Dec. 31 Sept. 30 June 30 March 31
- - --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets
Cash and due from banks $ 10,455 $ 10,482 $ 10,410 $ 10,989 $ 10,788
Interest-bearing deposits in banks 3,978 2,988 2,646 2,446 2,195
Federal funds sold 2,549 2,050 2,036 2,561 1,082
Securities purchased under resale agreements 5,995 3,549 2,393 2,426 742
Trading account assets 6,648 6,866 7,845 5,783 5,126
Available-for-sale securities 9,413 3,282 3,515 3,491 6,228
Held-to-maturity securities 11,979 16,415 16,810 16,207 15,896
Loans 123,406 126,379 125,660 125,621 125,377
Less: Allowance for credit losses 3,445 3,508 3,715 3,781 3,903
- - --------------------------------------------------------------------------------------------------------
Net loans 119,961 122,871 121,945 121,840 121,474
Premises and equipment, net 3,664 3,631 3,584 3,585 3,535
Customers' acceptance liability 801 851 847 699 720
Accrued interest receivable 1,030 982 1,020 1,002 1,064
Other real estate owned 553 517 589 512 522
Assets pending disposition 1,124 1,345 1,606 1,795 2,585
Goodwill, net 3,931 3,973 4,097 4,141 4,285
Identifiable intangibles, net 2,133 2,191 2,249 2,262 2,329
Unrealized gains on off-balance-sheet instruments 7,441 -- -- -- --
Other assets 5,557 4,940 5,517 5,727 5,627
- - --------------------------------------------------------------------------------------------------------
Total Assets $197,212 $186,933 $187,109 $185,466 $184,198
- - ----------------------------------------------------====================================================
Liabilities and Stockholders' Equity
Deposits in domestic offices:
Interest-bearing $ 88,139 $ 89,134 $ 90,774 $ 92,051 $ 95,165
Noninterest-bearing 30,920 31,578 31,560 31,190 28,997
Deposits in foreign offices:
Interest-bearing 22,034 19,608 17,272 16,759 14,734
Noninterest-bearing 1,496 1,298 1,363 1,409 1,384
- - --------------------------------------------------------------------------------------------------------
Total deposits 142,589 141,618 140,969 141,409 140,280
Federal funds purchased 270 220 602 724 336
Securities sold under repurchase agreements 6,910 4,229 3,465 2,206 1,564
Other short-term borrowings 3,628 3,523 3,083 2,539 2,320
Acceptances outstanding 801 851 847 699 720
Accrued interest payable 529 505 548 542 502
Unrealized losses on off-balance-sheet instruments 7,129 -- -- -- --
Other liabilities 4,059 4,728 5,849 5,045 6,033
Long-term debt 13,828 13,508 14,008 14,409 14,310
Subordinated capital notes 606 607 933 1,459 2,071
- - --------------------------------------------------------------------------------------------------------
Total liabilities 180,349 169,789 170,304 169,032 168,136
Stockholders' Equity
Preferred stock 2,979 2,979 2,979 2,979 2,979
Common stock 561 560 559 556 554
Additional paid-in capital 7,130 7,118 7,094 7,025 6,954
Retained earnings 6,807 6,502 6,187 5,888 5,587
Net unrealized losses on available-for-sale
securities (252) -- -- -- --
Common stock in treasury, at cost (362) (15) (14) (14) (12)
- - --------------------------------------------------------------------------------------------------------
Total stockholders' equity 16,863 17,144 16,805 16,434 16,062
- - --------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $197,212 $186,933 $187,109 $185,466 $184,198
- - ---------------------------------------------------=====================================================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
===============================================================================
Three Months Ended March 31
---------------------------
(in millions) 1994 1993
- - -------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 513 $ 484
Adjustments to net income to arrive at net cash provided
by operating activities:
Provision for credit losses 125 248
Net gain on sales of assets (45) (27)
Net amortization of loan fees and discounts (26) (62)
Depreciation and amortization of premises and equipment 120 107
Amortization of intangibles 105 132
Provision for deferred income taxes 140 209
Change in assets and liabilities net
of effects from acquisitions, consolidations,
divestitures, and pending dispositions:
Increase in accrued interest receivable (48) (37)
Increase (decrease) in accrued interest payable 24 (21)
Increase in trading account assets (493) (1,651)
Increase in current income taxes payable 243 140
Deferred fees received from lending activities 36 34
Other, net (673) 1,165
- - -------------------------------------------------------------------------------
Net cash provided by operating activities 21 721
Cash Flows from Investing Activities
Activity in available-for-sale securities:
Sales proceeds 599 647
Maturities, prepayments, and calls 1,424 743
Purchases (1,673) (818)
Activity in held-to-maturity securities:
Maturities, prepayments, and calls 767 1,243
Purchases (646) (2,812)
Proceeds from sales of loans 524 287
Purchases of loans (130) (170)
Purchases of premises and equipment (159) (210)
Proceeds from sales of other real estate owned 90 99
Net cash provided (used) by:
Loan originations and principal collections (162) 1,746
Interest-bearing deposits in banks (992) 1
Federal funds sold (499) 406
Securities purchased under resale agreements (2,446) 2,098
Cash used by acquisitions - (25)
Cash provided by acquisitions - 131
Proceeds from liquidations of assets pending disposition 117 269
Other, net 5 340
- - -------------------------------------------------------------------------------
Net cash provided (used) by
investing activities (3,181) 3,975
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt 873 955
Principal payments and retirements of long-term debt and
subordinated capital notes (898) (947)
Proceeds from issuance of common stock 9 125
Treasury stock acquired (347) (3)
Common stock dividends (143) (124)
Preferred stock dividends (60) (60)
Net cash provided (used) by:
Deposits 968 (5,939)
Federal funds purchased 50 (81)
Securities sold under repurchase agreements 2,681 638
Other short-term borrowings 105 242
Cash used by disposition of liabilities of deconsolidated
subsidiaries and operations (59) (128)
Other, net (50) (431)
- - -------------------------------------------------------------------------------
Net cash provided (used) by financing activities 3,129 (5,753)
Effect of exchange rate changes on cash and due from banks 4 (3)
- - -------------------------------------------------------------------------------
Net decrease in cash and due from banks (27) (1,060)
Cash and due from banks at beginning of period 10,482 11,848
- - -------------------------------------------------------------------------------
Cash and Due from Banks at End of Period $10,455 $10,788
- - -----------------------------------------------------------====================
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
==============================================================================
1994 1993
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First Fourth Third Second First
(in millions) Quarter Quarter Quarter Quarter Quarter
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Preferred Stock
Balance, beginning and end
of quarter $ 2,979 $ 2,979 $ 2,979 $ 2,979 $ 2,979
Common Stock
Balance, beginning of quarter 560 559 556 554 545
Common stock issued 1 1 3 2 9
- - ------------------------------------------------------------------------------
Balance, end of quarter 561 560 559 556 554
Additional Paid-In Capital
Balance, beginning of quarter 7,118 7,094 7,025 6,954 6,690
Common stock issued 12 24 69 71 264
- - ------------------------------------------------------------------------------
Balance, end of quarter 7,130 7,118 7,094 7,025 6,954
Retained Earnings
Balance, beginning of quarter 6,502 6,187 5,888 5,587 5,283
Net income 513 496 486 488 484
Common stock dividends (143) (125) (124) (124) (124)
Preferred stock dividends (60) (60) (61) (60) (60)
Foreign currency translation
adjustments, net of related
income taxes (5) 4 (2) (3) 4
- - ------------------------------------------------------------------------------
Balance, end of quarter 6,807 6,502 6,187 5,888 5,587
Net Unrealized Losses on
Available-for-Sale Securities
Balance, beginning of quarter -- -- -- -- --
Effect of adoption of SFAS No.
115, net of related income
taxes (15) -- -- -- --
Valuation adjustments, net
of related income taxes (237) -- -- -- --
- - ------------------------------------------------------------------------------
Balance, end of quarter (252) -- -- -- --
Common Stock in Treasury, at Cost
Balance, beginning of quarter (15) (14) (14) (12) (9)
Treasury stock transctions (347) (1) -- (2) (3)
- - ------------------------------------------------------------------------------
Balance, end of quarter (362) (15) (14) (14) (12)
- - ------------------------------------------------------------------------------
Total Stockholders' Equity $16,863 $17,144 $16,805 $16,434 $16,062
- - -------------------------------===============================================
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
BANKAMERICA CORPORATION SUBSIDIARIES
Notes to Consolidated Financial Statements
================================================================================
Note 1. The unaudited consolidated financial statements of
Financial BankAmerica Corporation and subsidiaries (the Corporation)
Statement are prepared in conformity with generally accepted accounting
Presentation principles for interim financial information, the
instructions to Form 10-Q, and Rule 10-01 of Regulation S-X.
In the opinion of management, all adjustments necessary for a
fair presentation of the financial position and results of
operations for the periods presented have been included. All
such adjustments are of a normal recurring nature. These
unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial
statements included in BankAmerica Corporation's (the Parent)
Annual Report on Form 10-K for the year ended December 31,
1993.
The unaudited consolidated financial statements of the
Corporation include the accounts of the Parent and companies
in which more than 50 percent of the voting stock is owned
directly or indirectly by the Parent, including Bank of
America NT&SA (the Bank), Seafirst Corporation, and other
banking and nonbanking subsidiaries. The revenues, expenses,
assets, and liabilities of the subsidiaries are included in
the respective line items in the unaudited consolidated
financial statements after elimination of intercompany
accounts and transactions.
Effective January 1, 1994, the Corporation adopted Statement
of Financial Accounting Standards (SFAS) No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," and
Financial Accounting Standards Board Interpretation No. 39
(FIN 39), "Offsetting of Amounts Related to Certain
Contracts." For information on the adoption of this Statement
and Interpretation, refer to Notes 4 and 5 on pages 8 and 9,
respectively, in the Notes to Consolidated Financial
Statements.
Certain amounts in prior periods have been reclassified to
conform to the current presentation.
- - --------------------------------------------------------------------------------
Note 2. Pursuant to the Restated Agreement and Plan of Merger (the
Acquisition of Agreement) dated as of January 27, 1994, Continental Bank
Continental Bank Corporation (Continental) will be merged with and into the
Corporation Parent (the Continental Acquisition.) The purchase price
includes an estimated 21.25 million shares of the Parent's
common stock and $939 million in cash, subject to
adjustment and termination in certain circumstances,
including movements in the Parent's average stock price
beyond certain levels. Based on the Parent's closing stock
price on January 27, 1994, the total value of the common
stock and cash to be issued would be approximately $1.9
billion. Holders of Continental common stock may elect to
receive either cash or the Parent's common stock, subject
to certain limitations.
In addition, each share of Continental's Adjustable Rate
Preferred Stock, Series 1 and 2 that is outstanding
immediately prior to the consummation of the Continental
Acquisition (excluding shares held by holders of the Series 2
stock, if any, exercising appraisal rights), will be
converted, respectively, into one share of Adjustable
Preferred Stock, Series 1 and 2 of the Parent, having
substantially the same terms. Based on January 27, 1994
market value information, the estimated value of the Parent's
preferred stock to be issued in connection with the
Continental Acquisition would have been $415 million if it
had been issued at that date.
6
<PAGE>
================================================================================
The Parent also entered into a stock option agreement with
Continental dated as of January 27, 1994, whereby the Parent
was granted an option to purchase up to 10.2 million shares
of Continental common stock (approximately 19.9 percent of
its outstanding shares) at a price of $37.50 per share. The
option is exercisable in certain circumstances, including the
purchase by a third party of more than 20 percent of
Continental shares or Continental's agreement to an
alternative transaction with a third party. If either of such
events occur within eighteen months after the termination of
the Agreement, Continental would be obligated to pay the
Parent the greater of $60 million or 3 percent of the value
of such alternative transaction.
Continental is a Delaware corporation organized in 1968 and
is registered as a bank holding company under the Bank
Holding Company Act of 1956, as amended. Continental's
principal subsidiary is Continental Bank N.A. Continental
provides an extensive range of commercial banking services,
primarily in the Midwest but also throughout the United
States and in various overseas markets. Through its
subsidiaries, Continental provides business financing,
specialized financial and operating services, and private
banking services. Continental also engages in equity finance
and investing, as both principal and arranger, and
international trading.
The Continental Acquisition will be recorded by the Parent
using the purchase method of accounting in accordance with
Accounting Principles Board Opinion No. 16, "Business
Combinations." Under this method of accounting, the purchase
price will be allocated to assets acquired and liabilities
assumed based on their estimated fair values at consummation
of the Continental Acquisition. The completion of this
transaction is conditioned upon approval by Continental's
shareholders and certain other conditions, including
regulatory approvals. While the precise date of the
Continental Acquisition closing cannot be determined with
certainty, the parties presently anticipate that (assuming
the normal approval process is not impeded) the closing will
take place in the third quarter of 1994.
In February 1994, the Parent began to implement its
previously announced plan to repurchase approximately $500
million of its common stock in connection with the
Continental Acquisition. As of March 31, 1994, the Parent had
repurchased 8.2 million shares of its common stock on the
open market for $345 million.
- - --------------------------------------------------------------------------------
Note 3. During the three-month periods ended March 31, 1994 and 1993,
Supplemental the Corporation made interest payments on deposits and other
Disclosure of Cash interest-bearing liabilities of $995 million and $1,077
Flow Information million, respectively, and received net income tax refunds of
$11 million and made net income tax payments of $16 million,
respectively.
Foreclosures totaled $147 million and $231 million for the
three-month periods ended March 31, 1994 and 1993,
respectively.
During the first quarter of 1993, management determined that
certain subsidiaries that were held for disposition as of
year-end 1992, including Bank of America (Asia) Limited,
formerly Security Pacific Asia Bank, Ltd. (SPABL), a former
subsidiary of Security Pacific Corporation (SPC), would not
be sold. Accordingly, assets and liabilities of these
subsidiaries, including $329 million of available-for-sale
securities, $1,950 million of loans, and $1,249 million of
deposits, were consolidated in the Corporation's financial
statements effective January 1, 1993.
7
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
Notes to Consolidaetd Financial Statements continued
================================================================================
Note 4. SFAS No. 115 was adopted by the Corporation effective January
Certain 1, 1994. SFAS No. 115 requires debt securities for which the
Investments in Corporation has the positive intent and ability to hold to
Debt and maturity to be classified as held-to-maturity securities and
Equity Securities reported at amortized cost. Debt and equity securities that
are bought and held principally for the purpose of selling
them in the near term will continue to be classified as
trading account assets and reported at their fair values with
unrealized gains and losses included in earnings. Other debt
and equity securities for which the Corporation does not have
the positive intent and ability to hold to maturity and that
are not considered to be part of trading-related activities
are classified as available-for-sale securities and reported
at their fair values, with unrealized gains and losses
reported on a net-of-tax basis as a separate component of
stockholders' equity. Prior-period amounts have not been
restated since SFAS No. 115 does not allow retroactive
application.
Upon adoption of SFAS No. 115, $5.6 billion of securities
previously classified as held-to-maturity securities with a
market value of $5.7 billion were transferred to available-
for-sale securities. In addition, certain debt-restructuring
par bonds and other instruments issued by the governments of
certain countries, most notably Mexico and Venezuela, were
reclassified from loans to either available-for-sale or held-
to-maturity securities. Debt-restructuring par bonds and
other instruments with a carrying value of $1.2 billion and a
market value of $1.0 billion at December 31, 1993 were
reclassified to held-to-maturity securities, and debt-
restructuring par bonds and other instruments with a carrying
value of $1.3 billion and a market value of $1.0 billion at
December 31, 1993 were reclassified to available-for-sale
securities.
The fair values and amortized costs of available-for-sale and
held-to-maturity securities are as follows:
<TABLE>
<CAPTION>
Available-for-Sale Held-to-Maturity
Securities Securities
------------------- ---------------------
Fair Amortized Fair Amortized
(in millions) Value Cost Value Cost
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
March 31, 1994 $9,413 $9,849 $11,976 $11,979
December 31, 1993 3,405 3,282 16,802 16,415
September 30, 1993 3,688 3,515 17,357 16,810
June 30, 1993 3,675 3,491 16,730 16,207
March 31, 1993 6,429 6,228 16,383 15,896
</TABLE>
During the three-month period ended March 31, 1994, the
Corporation sold available-for-sale securities for aggregate
proceeds of $599 million resulting in gross realized gains of
$21 million and gross realized losses of $1 million. During
the three-month period ended March 31, 1993, the Corporation
sold available-for-sale securities for aggregate proceeds of
$647 million, resulting in gross realized gains of $18
million and no gross realized losses. There were no sales of
held-to-maturity securities during the three-month periods
ended March 31, 1994 and 1993.
During the three-month period ended March 31, 1994, trading
income included a net unrealized holding loss on trading
securities of $58 million, excluding the net unrealized
trading results of the Parent's securities broker
subsidiaries, which are not subject to the requirements of
SFAS No. 115.
8
<PAGE>
================================================================================
Note 5. FIN 39 was prospectively adopted by the Corporation effective
Offsetting of January 1, 1994. FIN 39 requires unrealized gains on forward,
Amounts Related swap, option, and other conditional or exchange contracts to
to Certain be recorded as assets and unrealized losses on these
Contracts contracts be recorded as liabilities. However, unrealized
gains and losses may be netted where right of set-off
criteria are met or contracts are executed under legally
enforceable master netting agreements with counterparties.
Beginning in the first quarter of 1994, the Corporation
netted unrealized gains and losses to the extent allowed by
FIN 39. Prior to January 1, 1994, unrealized gains and losses
were recorded on the consolidated balance sheet on a net
basis for most products, primarily in trading account assets
and other liabilities. At December 31, 1993, net unrealized
gains and net unrealized losses were $0.9 billion and $0.7
billion, respectively. Upon adoption of FIN 39, the gross
unrealized gains and gross unrealized losses included in
these amounts were reclassified to unrealized gains on off-
balance-sheet instruments and unrealized losses on off-
balance-sheet instruments, respectively.
- - --------------------------------------------------------------------------------
Note 6. The following is a summary of assets pending disposition:
Assets Pending
Disposition
<TABLE>
<CAPTION>
1994 1993
-------- -------------------------------------
(in millions) March 31 Dec. 31 Sept. 30 June 30 March 31
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Merger-related assets pending disposition:/a/
Assets under contract to sell to MSREF/b/ $ - $ - $ - $ - $ 723
Loans held pending disposition:
Domestic commercial:
Commercial and industrial 3 3 3 81 143
Loans secured by real estate 28 28 63 79 74
Construction and development loans secured
by real estate 27 32 91 117 131
Other - - 2 2 2
- - --------------------------------------------------------------------------------------------------------------
Total domestic commercial 58 63 159 279 350
Foreign 57 77 99 181 179
- - --------------------------------------------------------------------------------------------------------------
Total loans held pending disposition/c/ 115 140 258 460 529
Other real estate owned 23 35 118 167 129
Other assets/d/ 180 243 292 369 505
- - --------------------------------------------------------------------------------------------------------------
Total merger-related assets pending
disposition 318 418 668 996 1,886
Restructuring-country-related assets/e/ 181 196 - - -
Loans held for sale in the normal course of business:
Domestic:
Consumer-residential first mortgages 138 177 316 390 313
Commercial and industrial 487 554 622 409 386
- - --------------------------------------------------------------------------------------------------------------
Total loans held for sale in the normal
course of business 625 731 938 799 699
- - --------------------------------------------------------------------------------------------------------------
Total Assets Pending
Disposition $1,124 $1,345 $1,606 $1,795 $2,585
- - ---------------------------------------------------------------===============================================
</TABLE>
/a/Consists primarily of former assets of SPC that were identified for
accelerated disposition as they were not deemed essential to the operating
goals of the Corporation.
/b/This balance includes certain merger-related assets pending disposition at
the following estimated net realizable values at March 31, 1993: commercial
and industrial loans of $13 million, loans secured by real estate of $176
million, construction and development loans secured by real estate of $442
million, other real estate owned of $88 million, and other assets of $4
million. These assets were sold on June 30, 1993 to a partnership controlled
by The Morgan Stanley Real Estate Fund, L.P. (MSREF).
/c/Includes loans of $103 million, $123 million, $192 million, $402 million, and
$457 million at March 31, 1994, December 31, 1993, September 30, 1993, June
30, 1993, and March 31, 1993, respectively, that would have been on
nonaccrual status if they had been included in the Corporation's loan
outstandings.
/d/Includes subsidiaries and operations pending disposition of $96 million, $137
million, $138 million, $175 million, and $300 million at March 31, 1994,
December 31, 1993, September 30, 1993, June 30, 1993, and March 31, 1993,
respectively.
/e/Represents assets that would have been on nonaccrual status if they had been
included in the Corporation's loan outstandings and interest-bearing deposits
in banks.
9
<PAGE>
BANKAMERICA CORPORATION AND SUBSIDIARIES
Notes to Consolidaetd Financial Statements continued
================================================================================
Other noninterest income for the three months ended March 31,
1993 included $38 million of previously unrecognized post-
merger 1992 earnings of SPABL. Prior to January 1, 1993,
SPABL was included in assets pending disposition; however, in
the first quarter of 1993, management decided to retain
SPABL. Accordingly, effective January 1, 1993, this
subsidiary was consolidated in the Corporation's financial
statements.
- - --------------------------------------------------------------------------------
Note 7. The following is a summary of the components of income tax
Income Taxes expense:
<TABLE>
<CAPTION>
1994 1993
------- ----------------------------------
First Fourth Third Second First
(in millions) Quarter Quarter Quarter Quarter Quarter
- - -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PROVISION FOR INCOME TAXES
Federal $269 $260 $261 $251 $251
State and local 72 75 77 77 76
Foreign 34 29 38 41 38
- - -------------------------------------------------------------------------
$375 $364 $376 $369 $365
- - ---------------------------------========================================
</TABLE>
The income tax provision for the first quarter of 1994
reflected the Corporation's estimated annual effective income
tax rate of 42.2 percent, down from the annual effective
income tax rate of 43.0 percent for 1993. The 1994 effective
income tax rate is higher than the combined federal and state
statutory tax rate of 40 percent due principally to the
amortization of nondeductible goodwill.
- - --------------------------------------------------------------------------------
Note 8. Earnings per common share have been computed based on the
Earnings per following:
Common Share
<TABLE>
<CAPTION>
1994 1993
------- ------------------------------------------
(dollar amounts in millions, First Fourth Third Second First
number of shares in thousands) Quarter Quarter Quarter Quarter Quarter
- - --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income applicable to
common stock $453 $436 $425 $428 $424
Average number of common
shares outstanding 355,749 357,629 356,567 354,795 351,436
Average number of common
and common equivalent
shares outstanding 357,569 359,547 358,835 357,315 355,022
Average number of common
shares outstanding-assum-
ing full dilution 363,049 365,360 364,315 362,797 360,504
</TABLE>
- - --------------------------------------------------------------------------------
Note 9. In the ordinary course of business, the Corporation enters
Off-Balance- into various types of transactions that involve contracts and
Sheet financial instruments with off-balance-sheet risk. The
Transactions following table is a summary of the aggregate contractual
amounts for each significant class of credit-related
financial instrument outstanding. The contractual amounts of
these instruments represent the amounts at risk should the
contract be fully drawn upon, the client default, and the
value of any existing collateral become worthless.
<TABLE>
<CAPTION>
1994 1993
-------- ---------------------------------------
(in millions) March 31 Dec. 31 Sept. 30 June 30 March 31
- - ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commitments to extend
credit:
Unutilized credit card
lines $24,110 $23,437 $24,069 $23,337 $23,031
Other commitments to
extend credit/a/ 60,690 57,227 57,233 55,562 55,798
Standby letters of
credit and financial
guarantees/b/ 11,640 13,323 11,605 11,682 12,007
Commercial letters of
credit 3,438 3,124 2,902 2,841 2,223
==================================================================================
</TABLE>
/a/Represents agreements to extend credit to a customer for which the
Corporation may have received fees. These commitments have specified interest
rates, generally have fixed expiration dates, and may be terminated by the
Corporation if certain conditions of the contract are violated.
/b/Net of participations sold of $4,032 million at March 31, 1994, $2,076
million at December 31, 1993, $1,980 million at September 30, 1993, $2,054
million at June 30, 1993, and $2,087 million at March 31, 1993.
10
<PAGE>
===============================================================================
The tables below summarize the credit risk and notional or
contract amounts associated with the Corporation's off-
balance-sheet trading and asset and liability management
activities for each significant class of foreign exchange
contracts and derivative contracts outstanding. The credit
risk amounts represent the Corporation's exposure to
potential loss on these transactions if all counterparties
failed to perform according to the terms of the contract and
the value of any existing collateral became worthless, based
on then-current currency exchange and interest rates at each
respective date. The notional or contract amounts of these
transactions represent the face or principal value upon which
calculations of amounts to be exchanged are based. They do
not represent the potential for gain or loss associated with
the market risk or credit risk of such transactions.
<TABLE>
<CAPTION>
1994 1993
-------- -------------------------------------
(in millions) March 31 Dec. 31 Sept. 30 June 30 March 31
- - -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CREDIT RISK AMOUNTS/a/
Foreign exchange contracts $6,441 $4,633 $6,056 $8,256 $7,625
Interest rate swaps 5,646 6,848 7,270 6,587 6,384
Currency swaps 1,988 1,841 1,987 1,951 1,916
Futures and forward contracts-
commitments to purchase 104 8 12 15 10
Futures and forward contracts-
commitments to sell 40 36 54 73 46
Interest rate options written - - - - -
Interest rate options purchased 307 358 379 295 264
- - -----------------------------------------------------------------------------------
</TABLE>
/a/ Without regard to legally enforceable master netting agreements.
<TABLE>
<CAPTION>
1994 1993
-------- ---------------------------------------
(in millions) March 31 Dec. 31 Sept. 30 June 30 March 31
- - -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NOTIONAL OR CONTRACT AMOUNTS
Foreign exchange contracts $571,849 $443,298 $475,041 $445,813 $409,230
Interest rate swaps 268,390 233,359 232,261 207,179 190,855
Currency swaps 22,859 22,866 24,150 23,962 22,923
Futures and forward contracts-
commitments to purchase 85,891 75,413 83,130 69,902 79,437
Futures and forward contracts-
commitments to sell 97,084 81,986 84,131 85,934 80,640
Interest rate options written 27,528 29,576 26,672 25,707 22,162
Interest rate options purchased 35,327 35,466 39,794 42,502 32,231
</TABLE>
The Corporation conducts securities lending transactions for
certain customers and, at times, indemnifies these customers
against various losses. All securities lending transactions
are collateralized by U.S. government or federal agency
securities, cash, or letters of credit with total market
value equal to or in excess of the market value of the
securities loaned. In the event of customer default combined
with a decline in the value of the associated collateral, the
Corporation may be exposed to risk of loss. The Corporation
was indemnifying securities lending transactions totaling
$6,691 million, $5,133 million, $2,562 million, $2,756
million, and $3,952 million at March 31, 1994, December 31,
1993, September 30, 1993, June 30, 1993, and March 31, 1993,
respectively, and was holding associated collateral totaling
$6,825 million, $5,185 million, $2,604 million, $2,793
million, and $3,985 million, at March 31, 1994, December 31,
1993, September 30, 1993, June 30, 1993, and March 31, 1993,
respectively.
11
<PAGE>
================================================================================
[THIS PAGE INTENTIONALLY LEFT BLANK]
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Highlights
================================================================================
The following is a summary of first-quarter 1994 financial
information for BankAmerica Corporation and subsidiaries (the
Corporation).
. The Corporation reported first-quarter 1994 earnings per
share of $1.27, based on net income of $513 million.
Earnings per share for the first-quarter of 1993 were
$1.19, based on net income of $484 million.
. The Corporation's results of operations reflected its
diverse franchise. The three strongest business-sector
contributors to the Corporation's first-quarter 1994
earnings were Large Corporate and Foreign Banking,
California Consumer Banking, and Seafirst Corporation.
For more information on the Corporation's business
sectors, refer to the Business Sectors section on page
15.
. The Corporation maintained a strong focus on controlling
operating expenses. Total noninterest expense for the
first quarter of 1994 was at its lowest level since the
merger with Security Pacific Corporation (the Merger).
. Average loan outstandings, adjusted for certain
reclassifications, were $0.2 billion higher in the first
quarter of 1994 than in the previous quarter, largely
reflecting growth in the domestic consumer sector.
. The Corporation's credit quality continued to improve.
Total nonaccrual assets decreased $388 million, or 13
percent, from December 31, 1993 to March 31, 1994. In
addition, net credit losses for the first quarter of 1994
decreased $142 million, or 45 percent, from the amount
reported in the first quarter last year. This improvement
in credit quality allowed the Corporation to reduce its
first-quarter 1994 provision for credit losses by $123
million from the amount reported in the same period last
year.
. In connection with the pending acquisition of Continental
Bank Corporation (Continental), BankAmerica Corporation
(the Parent) began to implement its previously announced
plan to repurchase approximately $500 million of its
common stock. As of March 31, 1994, the Parent had
completed approximately 70 percent of its goal by
repurchasing 8.2 million shares of its common stock on
the open market.
Recent moves by the Federal Reserve system to tighten
monetary policy and reduce the likelihood of increased
inflation by pushing up short-term interest rates are
expected to have a moderating effect on domestic economic
expansion for the rest of 1994. However, economic growth is
still expected in the U.S., including areas in which the
Corporation has a substantial retail presence, such as the
Pacific Northwest and the Southwest. In addition, certain
economic indicators in California, the Corporation's most
significant market, have shown signs of improvement which, if
sustained, will indicate the beginning of a recovery. Modest
global economic growth is also anticipated for the remainder
of 1994, which is expected to improve the conditions in
certain foreign regions in which the Corporation does
business, including Europe and Japan.
13
<PAGE>
================================================================================
Financial Highlights
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
------- -------------------------------------------------
(dollar amounts in millions, First Fourth Third Second First
except per share data)/a/ Quarter Quarter Quarter Quarter Quarter
- - ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Interest income $ 2,813 $ 2,876 $ 2,945 $ 2,881 $ 2,925
Interest expense 1,019 1,011 1,064 1,029 1,082
- - ----------------------------------------------------------------------------------------------------
Net interest income 1,794 1,865 1,881 1,852 1,843
Provision for credit losses 125 150 178 227 248
Noninterest income 1,003 1,119 1,007 1,058 1,089
Noninterest expense 1,784 1,974 1,848 1,826 1,835
- - ----------------------------------------------------------------------------------------------------
Income before income taxes 888 860 862 857 849
Provision for income taxes 375 364 376 369 365
- - ----------------------------------------------------------------------------------------------------
Net Income $ 513 $ 496 $ 486 $ 488 $ 484
- - ------------------------------------================================================================
Earnings per Common and Common
Equivalent Share $ 1.27 $ 1.21 $ 1.19 $ 1.20 $ 1.19
Earnings per Common Share--
Assuming Full Dilution $ 1.26 $ 1.21 $ 1.18 $ 1.19 $ 1.19
- - ----------------------------------------------------------------------------------------------------
STOCK DATA
Dividends declared per common
share $ 0.40 $ 0.35 $ 0.35 $ 0.35 $ 0.35
Book value per common share at
period end 39.67 39.58 38.69 37.82 36.95
Common stock price range:
High 48 7/8 47 3/8 49 1/8 53 7/8 55 1/2
Low 38 3/4 40 3/8 43 3/8 40 1/2 43
Closing common stock price 39 3/8 46 3/8 44 45 1/4 50 1/4
Average number of common and common
equivalent shares outstanding
(in thousands) 357,569 359,547 358,835 357,315 355,022
Number of common shares
outstanding at period
end (in thousands) 350,029 357,912 357,343 355,758 354,069
- - ----------------------------------------------------------------------------------------------------
FINANCIAL CONDITION AND CAPITAL
AT PERIOD END
Loans $123,406 $126,379 $125,660 $125,621 $125,377
Total assets 197,212 186,933 187,109 185,466 184,198
Deposits 142,589 141,618 140,969 141,409 140,280
Long-term debt and subordinated
capital notes 14,434 14,115 14,941 15,868 16,381
Common stockholders' equity 13,884 14,165 13,826 13,455 13,083
Total stockholders' equity 16,863 17,144 16,805 16,434 16,062
- - ----------------------------------------------------------------------------------------------------
SELECTED FINANCIAL RATIOS
Rate of return (based on net
income) on:
Average total assets 1.07% 1.06% 1.04% 1.06% 1.06%
Average common stockholders' equity 13.00 12.48 12.46 13.08 13.56
Average total stockholders' equity 12.17 11.69 11.66 12.16 12.54
Ratio of common stockholders'
equity to total assets 7.04 7.58 7.39 7.25 7.10
Ratio of total stockholders'
equity to total assets 8.55 9.17 8.98 8.86 8.72
Ratio of average stockholders'
equity to average total assets 8.78 9.03 8.93 8.73 8.46
Risk-based capital ratios:/b/
Total risk-based capital ratio 12.21 12.00 11.60 11.70 11.22
Tier 1 risk-based capital ratio 7.64 7.61 7.19 6.93 6.55
Tier 1 leverage ratio 6.37 6.64 6.42 6.21 5.91
====================================================================================================
</TABLE>
/a/ Due to the pending acquisition of Continental, certain financial data herein
may not be indicative of the Corporation's future results of operations or
financial position. Refer to Note 2 of the Notes to Consolidated Financial
Statements on pages 6-7.
/b/ Refer to the table on page 37 of the Funding and Capital section for
information on the calculation of risk-based capital ratios.
14
<PAGE>
Business Sectors
================================================================================
The Corporation manages its operations by customer and market
sectors. Since the Corporation's operations are highly
integrated, certain non-sector-specific income, expense,
assets, and liabilities must be allocated to these customer
and market sectors. Domestic sources of funds, equity,
overhead, and federal and state taxes are allocated in this
process. Additionally, the unallocated allowance for credit
losses and related provision for credit losses are allocated
to the business sectors. The information set forth in the
following table reflects the Corporation's net income,
average total assets, and average total deposits by customer
and market sectors and does not necessarily represent their
financial condition and results of operations if managed as
independent entities.
- - --------------------------------------------------------------------------------
Selected Business Sector Data for the Three Months Ended March 31, 1994/a/
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average Average
(in billions, except for net Net Total Total
income which is in millions) Income Assets Deposits
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
Large corporate and foreign banking $185 $ 65 $ 24
California consumer banking 149 55 66
Seafirst Corporation 70 15 12
Commercial real estate 62 9 2
Middle market banking 31 10 5
Private bank 5 2 5
Other non-California banks 2 22 24
Other 9 17 3
- - --------------------------------------------------------------------------------
$513 $195 $141
- - -------------------------------------------------------=========================
</TABLE>
/a/ Amounts reflect any first-quarter 1994 changes in the Corporation's
organizational structure and in its business-sector allocation
methodologies.
15
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
Average Balances, Interest, and Average Rates
- - -----------------------------------------------------------------------------------------------------------------------------------
First Quarter 1994 Fourth Quarter 1993
------------------------------ --------------------------------
(dollar amounts in millions) Balance/a/ Interest/b/ Rate/b/ Balance/a/ Interest/b/ Rate/b/
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-bearing deposits in banks $ 3,727 $ 56 6.08% $ 3,142 $ 54 6.82%
Federal funds sold 1,628 13 3.32 878 6 3.09
Securities purchased under resale agreements 5,910 72 4.92 4,830 54 4.42
Trading account assets 7,379 111 6.10 7,296 103 5.57
Available-for-sale securities/c/ 9,832 146 5.98/d/ 3,388 62 7.30
Held-to-maturity securities/c/ 11,726 213 7.27 16,368 273 6.65
Domestic loans:
Residential first mortgages 30,734 443 5.77 30,108 456 6.06
Consumer-credit card 7,205 286 15.90 7,227 292 16.16
Other consumer 24,235 524 8.76 24,084 532 8.77
Commercial and industrial 20,185 303 6.10 20,197 348 6.84
Commercial loans secured by real estate 9,123 172 7.53 9,317 178 7.62
Construction and development loans
secured by real estate 4,275 71 6.75 4,874 74 5.98
Loans for purchasing or carrying securities 2,480 25 4.06 2,266 22 3.84
Financial institutions 1,820 20 4.36 2,266 20 3.56
Lease financing 1,673 41 10.02 1,737 44 10.08
Agricultural 1,613 29 7.27 1,572 32 7.93
Other 1,287 18 5.59 1,178 14 4.83
--------- ------- ---------- ------
Total domestic loans 104,630 1,932 7.44 104,826 2,012 7.64
Foreign loans 17,562 276 6.38 19,998 318 6.31
--------- ------- ---------- ------
Total loans/e/ 122,192 2,208 7.29 124,824 2,330 7.43
--------- ------- ---------- ------
Total earning assets 162,394 $2,819 7.00 160,726 $2,882 7.16
======= ======
Nonearning assets 35,987 29,670
Less: Allowance for credit losses 3,501 3,690
--------- ----------
TOTAL ASSETS $194,880 $ 186,706
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Domestic interest-bearing deposits:
Transaction $ 13,803 $ 39 1.16% $ 13,684 $ 40 1.16%
Savings 14,266 72 2.03 14,130 72 2.04
Money market 33,673 196 2.37 34,007 203 2.37
Time 26,899 163 2.45 28,349 185 2.59
--------- ------- ---------- ------
Total domestic interest-bearing deposits 88,641 470 2.15 90,170 500 2.20
--------- ------- ---------- ------
Foreign interest-bearing deposits:
Banks located in foreign countries 5,280 75 5.77 4,130 67 6.40
Governments and official institutions 3,812 37 3.99 2,568 26 4.02
Time, savings, and other 10,442 115 4.47 10,343 122 4.70
--------- ------- ---------- ------
Total foreign interest-bearing deposits 19,534 227 4.73 17,041 215 5.01
--------- ------- ---------- ------
Total interest-bearing deposits 108,175 697 2.61 107,211 715 2.65
Federal funds purchased 362 3 2.99 511 4 2.81
Securities sold under repurchase agreements 6,280 79 5.13 3,548 46 5.15
Other short-term borrowings 3,703 61 6.67 3,538 56 6.30
Long-term debt 13,283 169 5.15 13,871 177 5.04
Subordinated capital notes 607 10 6.69 817 13 6.22
--------- ------- ---------- ------
Total interest-bearing liabilities 132,410 $1,019 3.12 129,496 $1,011 3.10
======= ======
Domestic noninterest-bearing deposits 30,994 32,283
Foreign noninterest-bearing deposits 1,469 1,473
Other noninterest-bearing liabilities 12,904 6,602
--------- ----------
Total liabilities 177,777 169,854
Stockholders' equity 17,103 16,852
--------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $194,880 $186,706
========= ==========
Interest income as a percentage of average
earning assets 7.00% 7.16%
Interest expense as a percentage of average
earning assets (2.54) (2.50)
---- ----
NET INTEREST MARGIN 4.46% 4.66%
==== ====
===================================================================================================================================
</TABLE>
/a/ Average balances are obtained from the best available daily, weekly, or
monthly data.
/b/ Interest income and average rates are presented on a taxable-equivalent
basis. The taxable-equivalent adjustments are based on a marginal tax rate
of 35 percent.
/c/ Refer to the table on page 21 of the Balance Sheet Analysis section for more
detail on available-for-sale and held-to-maturity securities.
/d/ Due to the first-quarter 1994 adoption of Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," available-for-sale securities are recorded at their fair
values and accordingly, this rate is based on fair values. Without regard to
net unrealized losses, the rate would have been 5.89%.
/e/ Average balances include nonaccrual assets.
16
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
- - -----------------------------------------------------------------------------------------------------------------------------------
First Quarter 1993
------------------------------
(dollar amounts in millions) Balance/a/ Interest/b/ Rate/b/
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-bearing deposits in banks $ 2,265/e/ $ 46 8.25%
Federal funds sold 814 6 3.16
Securities purchased under resale agreements 2,896 32 4.50
Trading account assets 4,866 76 6.35
Available-for-sale securities/c/ 5,293 79 5.98
Held-to-maturity securities/c/ 14,387 261 7.27
Domestic loans:
Residential first mortgages 28,522 482 6.76
Consumer-credit card 7,893 323 16.38
Other consumer 25,485 586 9.33
Commercial and industrial 21,351 313 5.95
Commercial loans secured by real estate 10,232 188 7.34
Construction and development loans
secured by real estate 6,552 75 4.65
Loans for purchasing or carrying securities 960 10 4.29
Financial institutions 1,813 15 3.24
Lease financing 1,820 61 13.66
Agricultural 1,657 28 6.90
Other 1,131 14 4.93
--------- ------
Total domestic loans 107,416 2,095 7.86
Foreign loans 19,157 335 7.09
--------- ------
Total loans/e/ 126,573 2,430 7.74
--------- ------
Total earning assets 157,094 $2,930 7.52
======
Nonearning assets 32,114
Less: Allowance for credit losses 3,992
---------
TOTAL ASSETS $185,216
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Domestic interest-bearing deposits:
Transaction $ 13,325 $ 52 1.57%
Savings 13,633 83 2.47
Money market 34,329 224 2.65
Time 33,041 207 2.54
--------- ------
Total domestic interest-bearing deposits 94,328 566 2.43
--------- ------
Foreign interest-bearing deposits:
Banks located in foreign countries 2,899 56 7.84
Governments and official institutions 1,542 16 4.25
Time, savings, and other 10,569 149 5.71
--------- ------
Total foreign interest-bearing deposits 15,010 221 5.97
--------- ------
Total interest-bearing deposits 109,338 787 2.92
Federal funds purchased 677 5 2.73
Securities sold under repurchase agreements 1,819 24 5.36
Other short-term borrowings 2,892 49 6.91
Long-term debt 14,094 186 5.34
Subordinated capital notes 2,070 31 6.15
--------- ------
Total interest-bearing liabilities 130,890 $1,082 3.35
======
Domestic noninterest-bearing deposits 29,427
Foreign noninterest-bearing deposits 1,470
Other noninterest-bearing liabilities 7,764
---------
Total liabilities 169,551
Stockholders' equity 15,665
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $185,216
=========
Interest income as a percentage of average
earning assets 7.52%
Interest expense as a percentage of average
earning assets (2.79)
----
NET INTEREST MARGIN 4.73%
====
===================================================================================================================================
</TABLE>
17
<PAGE>
================================================================================
Net Interest Taxable-equivalent net interest income was $1,800 million
Income for the first quarter of 1994, down $48 million from the
amount reported in the first quarter of last year. Although
total average earning assets for the first quarter of 1994
increased 3 percent over the first quarter of 1993, the
Corporation's net interest income decreased, reflecting a
shift in the mix of earning assets from higher-yielding loans
to lower-yielding securities. Although the cost of funding
sources also decreased, there was a larger decline in the
yield on earning assets, and the spread between the yields on
adjustable rate loans and their funding sources narrowed. The
Corporation's net interest margin for the quarter ended March
31, 1994 was 4.46 percent, down 27 basis points from the
first quarter of 1993.
The Corporation's net interest margin includes the results of
hedging with certain off-balance-sheet financial instruments.
Hedging transactions are generally entered into to modify the
interest rate characteristics of assets or liabilities in an
effort to limit the Corporation's sensitivity to interest
rate movements; therefore, management does not consider it
meaningful to separate the results of hedging from the net
interest income arising from the hedged assets and
liabilities. Presently, management accomplishes hedging
primarily through the use of off-balance sheet instruments,
but can also manage interest rate risk using on-balance-sheet
instruments. Since management defines the amounts and nature
of the risks it is willing to assume prior to identifying the
hedging method, it believes the Corporation's net interest
income and results of operations would have been
substantially the same had instruments other than
off-balance-sheet products been used for interest rate risk
management purposes.
In the first quarter of 1994, the Corporation's net
interest income included approximately $145 million
attributable to hedging with derivative instruments,
compared with approximately $190 million in the first
quarter of 1993. These amounts accounted for approximately
35 basis points and approximately 50 basis points,
respectively, of the net interest margins for those
periods.
- - --------------------------------------------------------------------------------
Noninterest Noninterest income for the first quarter of 1994 decreased
Income $86 million, or 8 percent, from the amount reported in the
same period last year. Noninterest income for the first
quarter of 1993 included $38 million of nonrecurring income
representing previously unrecognized post-Merger 1992
earnings of Bank of America (Asia) Limited, formerly Security
Pacific Asia Bank, Ltd. (SPABL). Excluding this nonrecurring
item, the decrease in noninterest income can be primarily
attributed to lower trading income reflecting less favorable
market conditions, partially offset by higher other
noninterest income. Revenues from most categories of fees and
commissions for the first quarter of 1994 were approximately
the same as in the comparable period last year.
To reflect the business purpose and use of the financial
contracts into which the Corporation enters, trading income
and the net interest income associated with such contracts
has been allocated into three broad functional categories:
interest rate trading, foreign exchange trading, and debt
instruments trading.
18
<PAGE>
================================================================================
Trading income, as disclosed in the Corporation's
consolidated statement of operations, does not include the
net interest income associated with trading activities.
However, the net interest income amounts are presented in
the table below as they should be considered in evaluating
the overall profitability of those activities. Net interest
income attributable to trading activities primarily results
from accruals on trading-related positions, as well as from
allocations associated with these trading positions.
- - --------------------------------------------------------------------------------
Trading Income and Net Interest Income by Function for the Three Months Ended
March 31, 1994
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Interest Foreign Debt
(in millions) Rate/a/ Exchange/b/ Instruments/c/ Total
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Trading income $14 $56 $ 4 $74
Net interest income -- -- 16 16
- - --------------------------------------------------------------------------------
$14 $56 $20 $90
- - --------------------------------================================================
</TABLE>
/a/ Includes income from interest rate and currency swaps, interest rate
futures and option contracts, and forward rate agreements.
/b/ Includes income from foreign exchange spot, forward, futures, and option
contracts.
/c/ Includes income from debt securities and debt-related derivatives.
Excluding the nonrecurring income related to SPABL, as
discussed on page 18, other noninterest income for the
first quarter of 1994 increased $43 million from the amount
reported in the first quarter of 1993 largely due to higher
income from assets pending disposition and higher net
gains on sales of assets. These increases were partially
offset by lower other income.
- - --------------------------------------------------------------------------------
Noninterest Income
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
First Quarter
--------------------
(in millions) 1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C>
Fees and commissions
Deposit account fees $ 294 $ 289
Credit card fees 82 82
Trust fees 67 71
Other fees and commissions:
Loan fees and charges 72 84
Off-balance-sheet credit-related instrument fees 61 58
Mutual fund and annuity commissions 22 21
Other 111 105
- - --------------------------------------------------------------------------------
266 268
- - --------------------------------------------------------------------------------
709 710
Trading income 74 164
Other noninterest income
Income from assets pending disposition 67 29
Net gain on sales of assets/a/ 45 27
Venture capital income 31 30
Net securities gains 20 18
Other income 57 111
- - --------------------------------------------------------------------------------
220 215
- - --------------------------------------------------------------------------------
$1,003 $1,089
- - -----------------------------------------------------------=====================
</TABLE>
/a/ Net gain on sales of assets includes gains and losses from the disposition
of loans, premises and equipment, and certain other assets.
19
<PAGE>
================================================================================
Noninterest Noninterest expense for the first quarter of 1994 decreased
Expense $51 million, or 3 percent, from the amount reported in the
comparable period of 1993 to its lowest level since the
Merger in the second quarter of 1992.
Salaries and employee benefits, the largest component of
noninterest expense, increased $8 million from the amount
reported in the same period last year. Although base salary
expense for the first quarter of 1994 decreased slightly from
the same period last year, largely due to reductions in staff
levels, increases in benefits, incentive-based pay, and
contract wages more than offset this decrease. The
Corporation's staff level on a full-time-equivalent basis was
approximately 78,200 in March 1994, compared with
approximately 82,300 in March 1993. The Corporation had
approximately 94,700 employees in March 1994, down from
approximately 99,200 a year earlier.
- - --------------------------------------------------------------------------------
Noninterest Expense
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
First Quarter
--------------------
(in millions) 1994 1993
- - --------------------------------------------------------------------------------
<S> <C> <C>
Salaries $ 710 $ 710
Employee benefits 158 150
Occupancy 165 163
Equipment 146 140
Amortization of intangibles 105 132
Communications 78 82
Regulatory fees and related expenses 70 84
Professional services 58 60
Other expense 294 314
- - --------------------------------------------------------------------------------
$1,784 $1,835
- - -----------------------------------------------------------=====================
</TABLE>
Amortization of intangibles for the quarter ended March 31,
1994 decreased from the amount reported in the first quarter
of 1993 primarily due to a decrease in the amortization of
Merger-related core deposit intangibles (CDI), resulting from
the use of accelerated amortization methods for such
intangibles. In addition, regulatory fees and related
expenses declined, primarily due to lower Federal Deposit
Insurance Corporation assessments, and other noninterest
expense declined primarily due to reductions in various
categories of other expense.
- - --------------------------------------------------------------------------------
Income The provision for income taxes was $375 million and $365
Taxes million for the quarters ended March 31, 1994 and 1993,
respectively, reflecting forecasted annual effective income
tax rates of 42.2 percent and 43.0 percent, respectively.
For further information concerning the Corporation's
provision for federal, state and foreign income taxes for the
most recent five quarters, refer to Note 7 on page 10 in the
Notes to Consolidated Financial Statements.
20
<PAGE>
Balance Sheet Analysis
================================================================================
During the first quarter of 1994, the Corporation adopted
Statement of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities," and Financial Accounting Standards Board
Interpretation No. 39 (FIN 39), "Offsetting of Amounts
Related to Certain Contracts." In connection with the
adoption of SFAS No. 115, the Corporation transferred $5.6
billion of securities, which were previously classified as
held-to-maturity securities, to available-for-sale
securities. In addition, certain debt-restructuring par bonds
and other instruments issued by foreign governments with an
aggregate carrying value of $2.5 billion were reclassified
from loans to either available-for-sale or held-to-maturity
securities. In connection with the adoption of FIN 39, the
Corporation began, in the first quarter of 1994, to record
unrealized gains on forward, swap, option, and other
conditional or exchange contracts as assets and unrealized
losses on these contracts as liabilities. Unrealized gains
and losses were netted where right of set-off criteria were
met or contracts were executed under legally enforceable
master netting agreements with counterparties.
For further information concerning the adoption of SFAS No.
115 and FIN 39, refer to Notes 4 and 5 of the Notes to
Consolidated Financial Statements on pages 8 and 9,
respectively.
Total assets increased between December 31, 1993 and March
31, 1994 by $10.3 billion, primarily as a result of the
first-quarter 1994 adoption of FIN 39, which increased total
assets by $6.5 billion. In addition, interest-bearing
deposits in banks, federal funds sold, and securities
purchased under resale agreements grew in the aggregate by
$3.9 billion. Reclassifications made in connection with the
adoption of SFAS No. 115, as described above, caused a shift
in the Corporation's earning assets, but did not affect the
change in total assets between year-end 1993 and March 31,
1994. Excluding the effects of these reclassifications and
related fair value adjustments, available-for-sale securities
declined slightly between December 31, 1993 and March 31,
1994, primarily due to sales and maturities in excess of
purchases.
- - --------------------------------------------------------------------------------
Available-for-Sale and Held-to-Maturity Securities -- Average Balances,
Interest, and Average Rates
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
First Quarter 1994 Fourth Quarter 1993
-------------------------------------- --------------------------------------
(dollar amounts in millions) Balance/a/ Interest/b/ Rate/b/ Balance/a/ Interest/b/ Rate/b/
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Available-for-sale securities:
U.S. Treasury and other government
agency securities $ 3,547 $ 49 5.54% $ 752 $ 15 7.78%
Mortgage-backed securities 4,255 58 5.41 1,797 27 6.09
State, county, and municipal securities 7 -- 8.43 -- -- --
Other domestic securities 316 3 4.06 54 1 5.41
Foreign securities 1,707 36 8.65 785 19 9.72
------- ---- ------- ----
Total Available-for-Sale Securities $ 9,832 $146 5.98/c/ $ 3,388 $ 62 7.30
======= ==== ======= ====
Held-to-maturity securities:
U.S. Treasury and other government
agency securities $ 821 $ 13 6.37% $ 3,527 $ 49 5.56%
Mortgage-backed securities 8,142 147 7.23 11,506 198 6.87
State, county, and municipal securities 501 10 7.98 524 10 7.55
Other domestic securities 252 5 7.75 557 11 7.51
Foreign securities 2,010 38 7.67 254 5 7.98
------- ---- ------- ----
Total Held-to-Maturity Securities $11,726 $213 7.27 $16,368 $273 6.65
======= ==== ======= ====
- - ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
First Quarter 1993
--------------------------------------
(dollar amounts in millions) Balance/a/ Interest/b/ Rate/b/
- - ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Available-for-sale securities:
U.S. Treasury and other government
agency securities $ 3,091 $ 32 4.14%
Mortgage-backed securities 1,270 29 9.17
State, county, and municipal securities -- -- --
Other domestic securities 29 1 6.25
Foreign securities 903 17 7.79
------- ----
Total Available-for-Sale Securities $ 5,293 $ 79 5.98
======= ====
Held-to-maturity securities:
U.S. Treasury and other government
agency securities $ 3,688 $ 47 5.14%
Mortgage-backed securities 9,143 179 7.80
State, county, and municipal securities 581 12 8.19
Other domestic securities 895 22 9.90
Foreign securities 80 1 7.42
------- ----
Total Held-to-Maturity Securities $14,387 $261 7.27
======= ====
- - --------------------------------------------------------------------------------
</TABLE>
/a/ Average balances are obtained from the best available daily, weekly, or
monthly data.
/b/ Interest income and average rates are presented on a taxable-equivalent
basis. The taxable-equivalent adjustments are based on a marginal tax rate
of 35 percent.
/c/ Due to the first-quarter 1994 adoption of SFAS No. 115, available-for-sale
securities are recorded at their fair values. Without regard to net
unrealized losses, the rate would have been 5.89%.
21
<PAGE>
================================================================================
Earning assets totaled $164.0 billion at March 31, 1994, up
$2.5 billion from $161.5 billion at year-end 1993. The
increase in total earning assets reflected increases in
interest-bearing deposits in banks, federal funds sold, and
securities purchased under resale agreements. The largest
source of growth in securities purchased under resale
agreements came from the Corporation's European operations,
primarily in connection with trading strategies in Spain and
Italy, where the Corporation is classified as a "primary
market maker" by the governments of both countries. Growth in
earning assets during the first quarter of 1994 was funded
primarily by increases in foreign deposits and short-term
liabilities, most notably securities sold under repurchase
agreements. Although earning assets increased during the
quarter, they decreased as a percentage of total assets from
86 percent at year-end 1993 to 83 percent at March 31, 1994,
primarily due to the first-quarter 1994 adoption of FIN 39.
For information regarding liquid assets, refer to the
Liquidity section of this report on page 36.
During the first quarter of 1994, interest-bearing deposits
in foreign offices increased $2.4 billion, while total
deposits in domestic offices decreased $1.7 billion,
partially reflecting a continued shift toward funding foreign
needs with foreign sources of funds. In addition, securities
sold under repurchase agreements increased $2.7 billion
during the first quarter of 1994. This increase in securities
sold under repurchase agreements was primarily used to fund
the Corporation's first-quarter 1994 trading strategies in
Spain and Italy.
- - --------------------------------------------------------------------------------
Overview of Total loans at March 31, 1994 were lower than the amount
Loan Portfolio reported at December 31, 1993, primarily due to the
previously discussed reclassification of $2.5 billion of
debt-restructuring par bonds and other instruments from
foreign loans to the securities portfolios. In addition,
outstandings in the domestic commercial portfolio decreased
in all categories other than commercial and industrial loans,
which grew $0.5 billion between December 31, 1993 and March
31, 1994. Total consumer loans increased $0.5 billion during
the first quarter of 1994.
On an average basis, domestic consumer loans grew $0.8
billion between fourth-quarter 1993 and first-quarter 1994,
reflecting growth in residential first mortgages. This growth
in average residential first mortgages was partially offset
by the effect of a sale of $0.6 billion of residential first
mortgages that occurred late in December 1993. This portfolio
of loans was included in the average balance for
substantially all of the fourth quarter of 1993, but did not
affect the average balance during the first quarter of 1994.
Average domestic commercial loans decreased $1.0 billion,
primarily reflecting declines in construction and development
loans and loans to financial institutions. Excluding the
effect of the reclassifications made in connection with the
adoption of SFAS No. 115, average foreign loans were
approximately the same for both periods.
At both March 31, 1994 and December 31, 1993, domestic
consumer loans represented the largest component of the
Corporation's total loan portfolio, accounting for 51 percent
and 49 percent of total loans, respectively. At both March
31, 1994 and December 31, 1993, domestic commercial loans
accounted for 35 percent of total loan outstandings. Foreign
loans accounted for 14 percent of total loan outstandings at
March 31, 1994, down from 16 percent at year-end 1993.
22
<PAGE>
================================================================================
Loan Outstandings
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
-------- -------------------------------------
(in millions) March 31 Dec. 31 Sept. 30 June 30 March 31
- - ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Domestic
Consumer:
Residential first mortgages $ 30,855 $ 30,306 $ 29,705 $ 28,877 $ 28,621
Installment/a/ 15,809 15,332 15,115 15,568 16,812
Credit card 7,162 7,474 7,334 7,468 7,641
Individual lines of credit/a/ 8,268 8,486 8,749 8,573 8,198
Other/a/ 289 274 278 297 304
- - ----------------------------------------------------------------------------------------
62,383 61,872 61,181 60,783 61,576
Commercial:
Commercial and industrial 20,954 20,486 20,124 20,533 21,086
Loans secured by real estate 9,050 9,251 9,381 9,560 9,873
Construction and development loans
secured by real estate 3,991 4,418 5,085 5,775 6,222
Loans for purchasing or
carrying securities 2,934 3,090 3,308 2,322 1,070
Financial institutions 1,751 2,170 2,099 1,945 1,876
Lease financing 1,665 1,715 1,753 1,772 1,780
Agricultural 1,614 1,679 1,625 1,620 1,584
Other 1,332 1,478 1,361 1,184 1,198
- - ----------------------------------------------------------------------------------------
43,291 44,287 44,736 44,711 44,689
- - ----------------------------------------------------------------------------------------
105,674 106,159 105,917 105,494 106,265
Foreign
Commercial and industrial 11,748 11,448 11,395 11,555 10,923
Governments and official
institutions 787 3,429 3,527 3,539 3,654
Banks and other financial
institutions 1,955 2,279 1,902 2,135 1,762
Other 3,242 3,064 2,919 2,898 2,773
- - ----------------------------------------------------------------------------------------
17,732 20,220 19,743 20,127 19,112
- - ----------------------------------------------------------------------------------------
Total loans 123,406 126,379 125,660 125,621 125,377
Less: Allowance for credit losses 3,445 3,508 3,715 3,781 3,903
- - ----------------------------------------------------------------------------------------
$119,961 $122,871 $121,945 $121,840 $121,474
- - ----------------------------------------================================================
</TABLE>
/a/ Installment loans, individual lines of credit, and other consumer loans
included the following aggregate amounts that were collateralized by junior
mortgages on residential real estate: $12,927 million at March 31, 1994,
$12,847 million at December 31, 1993, $13,117 million at September 30, 1993,
$13,313 million at June 30, 1993, and $13,763 million at March 31, 1993.
Domestic Consumer Loans -- The growth in domestic consumer
loans during the first quarter of 1994 primarily reflected
increases in residential first mortgages and installment
loans of $0.5 billion each. As interest rates began to rise
during the first quarter, the demand for refinancing
residential first mortgages dropped below that of the
previous quarter. As a result, originations of residential
first mortgages and installment loans that are junior
mortgages declined. However, paydowns declined more than
originations, thereby increasing the amount of loans
outstanding at March 31, 1994 from that at December 31, 1993,
and stabilizing the turnover rates of the portfolios.
Partially offsetting the growth in residential first
mortgages and installment loans, were declines in other
categories of consumer loans, including credit card loans and
individual lines of credit, between year-end 1993 and March
31, 1994, primarily due to paydowns in excess of
originations.
23
<PAGE>
===============================================================================
During the first quarter of 1994, the Corporation's
delinquency ratios (the percentage of loan outstandings in
each portfolio that are past due 60 days or more) decreased
in every category of consumer loans. The delinquency ratio
on residential first mortgages has declined each quarter
since September 30, 1993, and fell to 2.18 percent at March
31, 1994 from 2.26 percent at December 31, 1993. In
addition, the delinquency ratio on credit card loans has
decreased during each quarter since December 31, 1992,
declining to 2.35 percent at March 31, 1994 from 2.39
percent at December 31, 1993. Based on current economic and
credit quality indicators, management expects that consumer
delinquency ratios will continue to improve in the near
term.
Domestic Commercial Loans -- The decrease in domestic
commercial loans during the first quarter of 1994 primarily
reflected continued reductions in the Corporation's
commercial real estate portfolio. Loans secured by commercial
real estate and construction and development loans together
decreased $0.6 billion during the first quarter of 1994 as a
result of higher paydowns of existing loans, combined with
lower originations. In addition, most other categories of
domestic commercial loans decreased between year-end 1993 and
March 31, 1994. The largest of these decreases was in loans
to financial institutions, which declined $0.4 billion,
primarily as the result of a payoff of a sizeable loan
originated during the fourth quarter of 1993 and other
paydowns. Partially offsetting these decreases was a $0.5
billion increase in commercial and industrial loans,
primarily as the result of two large originations during
the first quarter of 1994.
For information regarding the geographic concentrations
included in the Corporation's portfolio of domestic
commercial loans secured by real estate, as well as the
geographic concentrations and project types included in the
construction and development loan portfolio, refer to the
tables on page 25.
For information on nonaccrual assets and credit losses in the
commercial and construction and development real estate loan
portfolios, refer to the Credit Risk Management section of
this report on pages 28-33.
24
<PAGE>
================================================================================
Domestic Commercial Loans Secured by Real Estate by Geographic Area
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
-------- ------------------------------------
(in millions) March 31 Dec. 31 Sept. 30 June 30 March 31
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
California/a/ $4,971 $5,117 $5,131 $5,260 $5,609
Washington 2,037 2,061 2,077 2,061 2,081
Nevada 364 394 385 391 413
Arizona 340 334 347 401 379
Oregon 295 281 295 294 297
Other/b/ 1,043 1,064 1,146 1,153 1,094
- - --------------------------------------------------------------------------------
$9,050 $9,251 $9,381 $9,560 $9,873
- - ------------------------------------============================================
</TABLE>
/a/ Approximately 55 percent of domestic commercial loans secured by real estate
in California at March 31, 1994 and December 31, 1993, and 50 percent at
September 30, 1993, June 30, 1993, and March 31, 1993 were secured by
properties in the following Southern California counties: Los Angeles,
Orange, San Bernardino, San Diego, Riverside, and Ventura.
/b/ For each period presented, no other state individually exceeded 2 percent
of total domestic commercial loans secured by real estate.
================================================================================
Domestic Construction and Development Loans by Geographic Area and Project Type
at March 31, 1994
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Apartment & Light
(in millions) Office Subdivision Retail Condominium Hotel Industry Other Total
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California $ 671 $628 $367 $199 $149 $ 94 $136 $2,244/a/
Washington 228 168 229 99 32 44 41 841
Pennsylvania 201 -- -- 3 -- -- -- 204
Arizona 4 47 64 7 2 1 10 135
Other/b/ 176 62 136 74 17 23 79 567
- - ----------------------------------------------------------------------------------------------------------------
$1,280 $905 $796 $382 $200 $162 $266 $3,991
- - ----------------------------------==============================================================================
</TABLE>
/a/ Approximately 70 percent of domestic construction and development loans in
California at March 31, 1994 were secured by properties in the following
Southern California counties: Los Angeles, Orange, San Bernardino, San
Diego, Riverside, and Ventura.
/b/ No other state individually exceeded 2 percent of total domestic
construction and development loans.
Foreign Loans -- Foreign loans decreased $2.5 billion between
December 31, 1993 and March 31, 1994 primarily due to the
previously discussed reclassification of par bonds and other
instruments to the securities portfolio in connection with
the first-quarter adoption of SFAS No. 115.
25
<PAGE>
===============================================================================
Restructuring At March 31, 1994, total public and private sector cross-
Country Debt border outstandings owed to the Corporation by borrowers
in restructuring countries amounted to $817 million. Of
this amount, $178 million was medium-and long-term debt
and $19 million was local currency outstandings which were
neither hedged nor funded by local currency borrowings. In
addition, cross-border outstandings with an aggregate
carrying value of $181 million were included in assets
pending disposition at March 31, 1994.
Total cross-border outstandings exclude $1,092 million in
par bonds and other instruments issued by certain
restructuring countries that are collateralized by zero-
coupon U.S. Treasury securities, which, at maturity, will
have redemption values equal to the aggregate face amounts
of the related par bonds and other instruments. In
connection with the adoption of SFAS No. 115,
substantially all of these par bonds and other instruments
were classified as either available-for-sale securities or
held-to-maturity securities at March 31, 1994.
At March 31, 1994, cross-border outstandings owed to the
Corporation by borrowers in Brazil totaled $488 million.
Brazilian medium- and long-term obligations were $40
million at March 31, 1994, of which $30 million was on
nonaccrual status. Included in assets pending disposition
at March 31, 1994 were cross-border outstandings related
to Brazil with an aggregate carrying value of $153
million. During the first quarter of 1994, the Corporation
received $12 million of cash payments from the government
of Brazil on its medium- and long-term outstandings. The
majority of these payments were recorded in income, since
the recorded investment of the related debt is considered
to be realizable.
On April 15, 1994, the government of Brazil initiated a debt
exchange in connection with a plan to restructure its
medium- and long-term debt. The Corporation exchanged cross-
border outstandings that were included in assets pending
disposition at March 31, 1994 with an aggregate carrying
value of $139 million and an aggregate face value of $692
million. The Corporation received bonds with an aggregate
face value of $727 million, the majority of which were
collateralized and mature in 30 years, in exchange for the
previously uncollateralized debt and past due accrued
interest. Upon receipt, these bonds were recorded in
available-for-sale securities at their market value.
26
<PAGE>
===============================================================================
<TABLE>
Cross-Border Outstandings Exceeding One Percent of Total Assets
- - ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Cross-Border
Total Outstandings
(dollar amounts in Public Private Cross-Border as a Percentage
millions)/abcd/ Date Reported Sector/e/ Banks/e/ Sector/e/ Outstandings of Total Assets
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Japan March 31, 1994 $ 17 $1,596 $1,712 $3,325 1.69%
December 31, 1993 10 1,490 2,054 3,554 1.90
September 30, 1993 10 1,466 1,807 3,283 1.75
June 30, 1993 9 1,849 1,892 3,750 2.02
March 31, 1993 7 821 1,658 2,486 1.35
Spain March 31, 1994 117 85 3,045 3,247 1.65
December 31, 1993 56 105 1,941 2,102 1.12
September 30, 1993 47 29 1,603 1,679 0.90
June 30, 1993 47 102 1,341 1,490 0.80
March 31, 1993 38 46 793 877 0.48
Hong Kong March 31, 1994 -- 106 2,202 2,308 1.17
December 31, 1993 -- 110 2,181 2,291 1.23
September 30, 1993 -- 84 2,008 2,092 1.12
June 30, 1993 5 82 2,108 2,195 1.18
March 31, 1993 10 149 2,042 2,201 1.19
United Kingdom March 31, 1994 241 310 577 1,128 0.57
December 31, 1993 272 177 815 1,264 0.68
September 30, 1993 351 211 927 1,489 0.80
June 30, 1993 244 239 1,544 2,027 1.09
March 31, 1993 158 191 1,898 2,247 1.22
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/Cross-border outstandings include the following assets, primarily in U.S.
dollars, with borrowers or customers in a foreign country: loans, accrued
interest, acceptances, interest-bearing deposits with other banks, trading
account assets, available-for-sale securities, held-to-maturity securities,
other interest-earning investments, and other monetary assets. Local currency
outstandings which are neither hedged nor funded by local currency borrowings
are included in cross-border outstandings. Guarantees of outstandings of
borrowers of other countries are considered outstandings of the guarantor.
Loans made to, or deposits placed with, a branch of a foreign bank located
outside the foreign bank's home country are considered loans or deposits with
the country in which the foreign bank is headquartered. Outstandings of a
country do not include amounts of principal or interest which are supported
by written, legally enforceable guarantees by guarantors from other countries
or the amount of outstandings to the extent that they are secured by
tangible, liquid collateral held and realizable by the Corporation outside
the country.
/b/At March 31, 1994, total unfunded commitments of the above countries, whose
unfunded commitments exceeded 10 percent of their respective cross-border
outstandings, were as follows: Japan, $1,239 million; Hong Kong, $261
million; and the United Kingdom, $1,497 million.
/c/Included in the cross-border outstandings of the countries listed are loans
and other interest-bearing assets on nonaccrual status at March 31, 1994,
December 31, 1993, September 30, 1993, June 30, 1993, and March 31, 1993,
respectively, as follows: $16 million, $16 million, $17 million, $16 million,
and $15 million for Japan; $6 million, $7 million, $5 million, $1 million,
and $1 million for Hong Kong; $53 million, $52 million, $59 million, $39
million, and $50 million for the United Kingdom; and $6 million for Spain at
March 31, 1994 and December 31, 1993. Also included in cross-border
outstandings are restructured loans of $2 million for Hong Kong at June 30,
1993 and loans past due 90 days or more and still accruing interest of $1
million for Hong Kong at December 31, 1993, and $9 million for the United
Kingdom at September 30, 1993.
/d/No country excluded from this table had cross-border outstandings between
0.75 percent and 1.00 percent of total assets for any of the periods
presented.
Not included in cross-border outstandings with Mexico were par bonds issued
by the government of Mexico with face values of $1,341 million at March 31,
1994, December 31, 1993, September 30, 1993, June 30, 1993, and March
31,1993. The par bonds had a carrying value of $1,178 million at March 31,
1994 and $1,297 million at December 31, 1993, September 30, 1993, June 30,
1993, and March 31, 1993. At March 31, 1994, the par bonds had a total fair
value of approximately $950 million. Due to the first-quarter 1994 adoption
of SFAS No. 115, certain of these par bonds were recorded in available-for-
sale securities and carried at their fair value of $321 million at March 31,
1994, while the remainder of these par bonds were recorded in held-to-
maturity securities at their amortized cost. Principal repayment of these par
bonds is collateralized by zero-coupon U.S. Treasury securities which, at
maturity in 2008 and 2019, will have a redemption value equal to the face
value of the par bonds. At March 31, 1994, this collateral had a fair value
of approximately $225 million. Future interest payments for a rolling
eighteen-month period are also collateralized by additional U.S. dollar-
denominated securities permitted by the agreement. The details of the
transaction in which the majority of these par bonds were acquired were
reported in the Parent's Annual Report on Form 10-K for the year ended
December 31, 1990. Mexico's cross-border outstandings also excluded
additional loans of $45 million at March 31, 1994, December 31, 1993,
September 30, 1993, June 30, 1993, and March 31, 1993, which are fully
collateralized at maturity by separate zero-coupon U.S. Treasury securities.
/e/Sector definitions are based on Federal Financial Institutions Examination
Council Instructions for preparing the Country Exposure Report.
27
<PAGE>
Credit Risk Management
===============================================================================
Allowance for The allowance for credit losses at March 31, 1994 was 2.79
Credit Losses percent of loan outstandings, compared with 2.78 percent
at December 31, 1993. Excluding outstandings in the
residential first mortgage portfolio and the portion of the
allowance associated with these outstandings, the ratios
were 3.63 percent and 3.59 percent of loans at March 31,
1994 and December 31, 1993, respectively. In addition, the
Corporation's ratio of the allowance for credit losses to
total nonaccrual assets was 138 percent, up from 122
percent at December 31, 1993.
Although the allowance is general in nature and is available
for the credit portfolio in its entirety, management
develops the allowance using a "building block approach" for
various portfolio segments. The allowance is established by
credit officers for each portfolio segment. Significant
credits, particularly those classified as "doubtful," are
individually analyzed, while other credits are analyzed by
portfolio segment. In establishing the allowance for the
portfolio segments, credit officers initially employ results
obtained from statistical models using historical loan
performance data. These models have been developed and
refined for various portfolio segments over the last nine
years. In addition to the allowance amounts that would be
required based on historical loss experience, the credit
officer responsible for each portfolio segment makes
adjustments based on qualitative evaluations of individual
classified assets, knowledge of portfolio segment
conditions, or on the officer's judgment of factors that are
expected to influence the future performance of the
portfolio. These factors include geographic and portfolio
concentrations, new products or markets, evaluations of the
changes in the historical loss experience component, and
projections of this component into the current and future
periods. The Composition of Allowance for Credit Losses
table below displays how the allowance for credit losses
related to special mention and classified assets is
determined by combining the historical loss experience
component with the credit management allocated component.
After an allowance has been established for the portfolio
segments, the final step in this building block approach
occurs. Credit management establishes an unallocated portion
of the allowance for credit losses, which is attributable to
factors that cannot be associated with a particular
portfolio segment. These factors include general economic
conditions, recognition of specific regional and
international geographic concerns, trends in portfolio
growth, new business volume, and the level of the allowance
in relation to total loans and nonaccrual assets.
================================================================================
Composition of Allowance for Credit Losses
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
-------- ----------------------------------------
(in millions) March 31 Dec. 31 Sept. 30 June 30 March 31
- - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Special mention and classified:/a/
Historical loss experience component $ 401 $ 475 $ 590 $ 796 $1,141
Credit management allocated component 653 770 777 804 672
- - ------------------------------------------------------------------------------------------------------------
Total special mention and classified 1,054 1,245 1,367 1,600 1,813
- - ------------------------------------------------------------------------------------------------------------
Domestic consumer 1,079 1,072 1,099 1,114 1,130
Domestic commercial 148 151 160 163 208
Foreign 144 165 297 286 296
- - ------------------------------------------------------------------------------------------------------------
Total Allocated 2,425 2,633 2,923 3,163 3,447
Unallocated 1,020 875 792 618 456
- - ------------------------------------------------------------------------------------------------------------
$3,445 $ 3,508 $3,715 $3,781 $3,903
- - ----------------------------------------------------------==================================================
</TABLE>
/a/Includes all loans regardless of type that have been internally risk rated as
"special mention," "substandard," or "doubtful." The Corporation's actual
historical loss experience indicates ultimate loss rates for all periods
presented for "special mention," "substandard," and "doubtful" loans of
approximately 2 percent, 6 percent, and 37 percent, respectively.
28
<PAGE>
================================================================================
Quarterly Credit Loss Experience
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
------- ---------------------------------------
First Fourth Third Second First
(dollar amounts in millions) Quarter Quarter Quarter Quarter Quarter
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for Credit Losses
Balance, beginning of period $3,508 $3,715 $3,781 $3,903 $3,921
Credit losses
Domestic consumer:
Residential first mortgages 7 10 6 7 --
Credit card 102 108 115 129 136
Other consumer 90 94 96 102 112
Domestic commercial:
Commercial and industrial 11 54 49 89 38
Loans secured by real estate 15 23 29 20 19
Construction and development loans secured by real estate 23 65 61 80 85
Loans for purchasing or carrying securities -- -- -- -- 2
Financial institutions -- -- 10 8 --
Lease financing -- 1 1 2 5
Agricultural 1 2 1 2 2
Foreign 24 13 10 7 6
- - -------------------------------------------------------------------------------------------------------------------------------
Total credit losses 273 370 378 446 405
Credit loss recoveries
Domestic consumer:
Residential first mortgages -- -- 1 -- --
Credit card 12 13 13 13 14
Other consumer 25 27 30 30 27
Domestic commercial:
Commercial and industrial 20 45 24 14 28
Loans secured by real estate 4 16 8 6 4
Construction and development loans secured by real estate 24 45 21 13 8
Loans for purchasing or carrying securities -- -- -- -- --
Financial institutions 2 -- 1 1 --
Lease financing 2 2 1 2 1
Agricultural 2 1 2 5 2
Foreign 8 9 41 11 5
- - -------------------------------------------------------------------------------------------------------------------------------
Total credit loss recoveries 99 158 142 95 89
- - -------------------------------------------------------------------------------------------------------------------------------
Total net credit losses 174 212 236 351 316
Net losses on the sale or swap of loans to restructuring countries -- -- (3) -- --
Provision for credit losses 125 150 178 227 248
Allowance relaated to acquisition -- -- -- -- 12/a/
Other net additions (deductions) (14)/b/ (145)/c/ (5) 2 38/d/
- - -------------------------------------------------------------------------------------------------------------------------------
Balance, End of Period/e/ $3,445 $3,508 $3,715 $3,781 $3,903
- - -------------------------------------------------------------------------------------------------------------------------------
Annualized Ratio of Net Credit Losses (Recoveries) to
Average Loan Outstandings
Domestic consumer:
Residential first mortgages 0.10% 0.12% 0.07% 0.11% --%
Credit card 5.07 5.23 5.50 6.17 6.30
Other consumer 1.08 1.12 1.09 1.15 1.35
Domestic commercial:
Commercial and industrial (0.19) 0.20 0.50 1.41 0.20
Loans secured by real estate 0.50 0.29 0.84 0.58 0.64
Construction and development loans secured by real estate (0.14) 1.64 2.93 4.48 4.73
Loans for purchasing or carrying securities -- -- -- -- 0.76
Financial institutions (0.47) -- 1.71 1.69 --
Lease financing (0.31) (0.19) -- -- 0.90
Agricultural (0.33) 0.09 (0.23) (0.71) --
Total 0.61 0.79 1.02 1.35 1.19
Foreign 0.37 0.06 (0.62) (0.08) 0.01
Total 0.58 0.67 0.76 1.13 1.01
Ratio of Allowance to Loans at Quarter End 2.79 2.78 2.96 3.01 3.11
Earnings Coverage of Net Credit Losses/f/ 5.83x 4.77x 4.41x 3.09x 3.47x
===============================================================================================================================
</TABLE>
/a/Represents the addition of consummation date allowance for credit losses of
First Gibraltar Bank, FSB.
/b/Primarily represents a reduction of the allowance due to the transfer of
certain debt-restructuring par bonds and other instruments issued by foreign
governments net of their related allowance to available-for-sale securities.
/c/Due to the transfer of certain assets net of their related allowance to
assets pending disposition, the allowance for credit losses was reduced by
$128 million, which included $88 million of regulatory-related allocated
transfer risk reserve (ATRR). This amount also includes $16 million related
to the sale of commercial real estate loans net of their allowance to a
partnership controlled by Goldman Sachs & Co.
/d/Includes $36 million related to the consolidation of subsidiaries and
operations that were held for disposition at December 31, 1992.
/e/Includes ATRR of $81 million, $80 million, and $75 million at September 30,
1993, June 30, 1993, and March 31, 1993, respectively. Due to the transfer of
certain assets net of their related allowance to assets pending dispostion
during the fourth quarter of 1993, the allowance for credit losses does not
include any ATRR subsequent to the transfer.
/f/Earnings coverage of net credit losses is calculated as income before
income taxes plus the provision for credit losses as a multiple of net
credit losses.
29
<PAGE>
===============================================================================
Net credit losses for the first quarter of 1994 declined
$142 million from the amount reported in the same period
last year. This decline reflected continued improvement in
various sectors of the Corporation's credit portfolio, most
notably in construction and development loans secured by
real estate, where net credit recoveries of $1 million were
recorded in the first quarter of 1994, compared with net
credit losses of $77 million in the same quarter of last
year. Also contributing to the reduction in total net credit
losses was a $45 million decrease in net credit losses in
the domestic consumer loan portfolio. These decreases in net
credit losses were partially offset by higher charge-offs in
the foreign loan portfolio.
- - -------------------------------------------------------------------------------
Nonaccrual Total nonaccrual assets decreased $388 million, or 13
Assets, Restruc- percent, between year-end 1993 and March 31, 1994. This
tured Loans, and decrease was largely the result of paydowns and loans
Loans Past Due restored to accrual status, reflecting improvements in most
90 Days or More segments of the credit portfolio, particularly in the
and Still Accruing construction and development and commercial and industrial
Interest loan portfolios. Also contributing to the decline in
nonaccrual assets was a reduction in the amount of loans
placed on nonaccrual status during the first quarter of 1994
compared to the previous quarter. These decreases were
partially offset by an increase in nonaccrual residential
first mortgages, which primarily resulted from slow economic
recovery in certain Southern California counties. However,
management expects that nonaccrual residential first
mortgages will also begin to decline as recent improvements
in delinquency trends in most markets are expected to
continue.
The improvement in the Corporation's credit quality during
the first quarter of 1994 was also reflected in the
Corporation's nonperforming asset ratios. At March 31, 1994,
the ratio of nonaccrual loans to total loans was 2.02
percent, down from 2.28 percent at December 31, 1993. In
addition, the ratio of total nonperforming assets (comprised
of nonaccrual assets and other real estate owned) to total
assets declined 27 basis points since year-end 1993 to 1.55
percent.
================================================================================
Analysis of Change in Nonaccrual Assets
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
------- ---------------------------------------
First Fourth Third Second First
(in millions) Quarter Quarter Quarter Quarter Quarter
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, beginning of quarter $2,886 $3,928 $4,618 $5,033 $5,235
Additions
Loans placed on nonaccrual status 227 284 256 360 540
Deductions
Restored to accrual status (195) (317) (326) (253) (92)
Foreclosures (72) (100) (196) (176) (217)
Charge-offs (40) (123) (99) (135) (76)
Restructuring-country-related assets
transferred to assets pending disposition -- (310) -- -- --
Other, primarily payments (308) (476) (325) (211) (357)
- - ----------------------------------------------------------------------------------------------------------
Balance, End of Quarter $2,498 $2,886 $3,928 $4,618 $5,033
- - ----------------------------------------------------------================================================
</TABLE>
30
<PAGE>
===============================================================================
Nonaccrual Assets, Restructured Loans, and Loans Past Due 90 Days or More and
Still Accruing Interest
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
-------- ---------------------------------------
(in millions) March 31 Dec. 31 Sept. 30 June 30 March 31
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual Assets
Domestic consumer loans:
Residential first mortgages $ 426 $ 406 $ 359 $ 346 $ 321
Other consumer 45 53 52 82 91
Domestic commercial loans:
Commercial and industrial 372 457 539 661 786
Loans secured by real estate 553 570 742 771 737
Construction and development loans secured by real estate 819 1,037 1,545 2,028 2,332
Financial institutions 22 64 59 55 39
Lease financing 13 18 22 1 2
Agricultural 41 49 56 81 91
- - --------------------------------------------------------------------------------------------------------------------------------
2,291 2,654 3,374 4,025 4,399
Foreign loans:
Commercial and industrial 119 139 356 360 391
Governments and official institutions 43 42 45 61 55
Banks and other financial institutions 9 11 64 41 43
Other 36 40 77 99 117
- - --------------------------------------------------------------------------------------------------------------------------------
207 232 542 561 606
Other interest-bearing assets -- -- 12 32 28
- - --------------------------------------------------------------------------------------------------------------------------------
$2,498 $2,886 $3,928 $4,618 $5,033
- - --------------------------------------------------------------------------------================================================
Restructured Loans
Domestic commercial:
Commercial and industrial $ 86 $ 66 $ 79 $ 20 $ 26
Loans secured by real estate 12 21 6 5 8
Construction and development loans secured by real estate 6 10 16 16 15
Lease financing 1 1 1 -- --
Agricultural 1 -- -- 1 1
- - --------------------------------------------------------------------------------------------------------------------------------
106 98 102 42 50
Foreign/a/ 36 36 36 37 40
- - --------------------------------------------------------------------------------------------------------------------------------
$ 142 $ 134 $ 138 $ 79 $ 90
- - --------------------------------------------------------------------------------================================================
Loans Past Due 90 Days or More and Still Accruing Interest
Domestic consumer:
Residential first mortgages $ 121 $ 153 $ 220 $ 179 $ 196
Other consumer 169 175 185 222 268
Domestic commercial:
Commercial and industrial 3 20 51 32 23
Loans secured by real estate 64 138 125 89 83
Construction and development loans secured by real estate 113 86 67 76 71
Financial institutions -- -- -- -- 4
Agricultural 7 -- -- -- --
- - --------------------------------------------------------------------------------------------------------------------------------
477 572 648 598 645
Foreign 5 6 13 -- --
- - --------------------------------------------------------------------------------------------------------------------------------
$ 482 $ 578 $ 661 $ 598 $ 645
- - --------------------------------------------------------------------------------================================================
</TABLE>
/a/Excludes debt restructurings with countries that have experienced
liquidity problems of $2.4 billion at March 31, 1994 and December 31, 1993,
and $2.3 billion at September 30, 1993, June 30, 1993, and March 31, 1993.
Beginning in the first quarter of 1994, the majority of these instruments
were classified as either available-for-sale or held-to-maturity securities.
Prior to January 1, 1994, these instruments were classified as loans.
31
<PAGE>
================================================================================
Interest Income Foregone on Nonaccrual Assets
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
(in millions) March 31, 1994
- - --------------------------------------------------------------------------------
<S> <C>
Domestic
Interest income that would have been recognized had the assets
performed in accordance with their original terms $52
Less: Interest income included in the results of
operations/a/ 13
- - --------------------------------------------------------------------------------
Domestic interest income foregone 39
Foreign
Interest income that would have been recognized had the assets
performed in accordance with their original terms 5
Less: Interest income included in the results of
operations/b/ 3
- - --------------------------------------------------------------------------------
Foreign interest income foregone 2
- - --------------------------------------------------------------------------------
$41
- - -----------------------------------------------------------------------------===
</TABLE>
/a/Interest income included in the results of domestic operations represents
interest payments recognized in interest income that related to domestic
nonaccrual assets with carrying values totaling $595 million at March 31,
1994. Not included in interest income for the three months ended March 31,
1994 were interest payments of $15 million which, for accounting purposes,
were used to offset the principal balance of domestic nonaccrual assets with
carrying values totaling $780 million at March 31, 1994.
/b/Interest income included in the results of foreign operations represents
interest payments recognized in interest income that related to foreign
nonaccrual assets with carrying values totaling $36 million at March 31,
1994. Not included in interest income for the three months ended March 31,
1994 were interest payments of $2 million which, for accounting purposes,
were used to offset the principal balance of foreign nonaccrual assets with
carrying values totaling $76 million at March 31, 1994.
32
<PAGE>
===============================================================================
Cash Interest Payments on Nonaccrual Assets by Loan Type
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1994 March 31, 1994
------------------------------------------------------------------ ---------------------------------
Cumulative Cash Interest
Cash Book as a Payments Applied
Contractual Interest Nonaccrual Percentage ---------------------------------
Principal Cumulative Applied Book of As Interest As Reduction
(in millions) Balance Charge-offs to Principal Balance/a/ Contractual Income of Principal Total
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Domestic
Consumer:
Residential first mortgages $ 426 $ -- $ -- $ 426 100% $ 2 $ -- $ 2
Other consumer 46 1 -- 45 98 -- -- --
Commercial:
Commercial and industrial 546 138 36 372 68 2 3 5
Loans secured by real estate 709 116 40 553 78 5 4 9
Construction and development
loans secured by real estate 1,242 277 146 819 66 3 8 11
Financial institutions 42 16 4 22 52 -- -- --
Lease financing 21 7 1 13 62 -- -- --
Agricultural 59 15 3 41 69 1 -- 1
- - -----------------------------------------------------------------------------------------------------------------------------------
3,091 570 230 2,291 74 13 15 28
Foreign, excluding restructuring-
country-related assets
Commercial and industrial 176 39 18 119 68 1 2 3
Governments and official
institutions 16 -- -- 16 100 -- -- --
Banks and other financial
institutions 1 -- -- 1 100 -- -- --
Other 64 25 3 36 56 -- -- --
- - -----------------------------------------------------------------------------------------------------------------------------------
257 64 21 172 67 1 2 3
- - -----------------------------------------------------------------------------------------------------------------------------------
Total, excluding restructuring-
country-related assets 3,348 634 251 2,463 74 14 17 31
Restructuring-country-related assets 91 49 7 35 38 2 -- 2
- - -----------------------------------------------------------------------------------------------------------------------------------
$3,439 $683 $258 $2,498 73% $16 $17 $33
- - ------------------------------------===============================================================================================
Cash yield on total nonaccrual assets 5.36%
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/a/ Nonaccrual book balance is equal to the contractual principal balance
less charge-offs and cash interest payments applied as a reduction of
principal since inception of the loan.
33
<PAGE>
Foreign Exchange and Other Derivatives
================================================================================
In the ordinary course of business, the Corporation enters into
various types of transactions that involve foreign exchange and
other derivative products with off-balance-sheet risk. Foreign
exchange and other derivative products include futures, forwards,
swaps, and option contracts, and are principally linked to
interest rates, foreign exchange rates, or the prices of
securities. Foreign exchange and other derivative transactions
are conducted with various types of counterparties, including
U.S. and foreign banks, nonbank financial institutions,
corporations, and middle market customers. The following table is
a summary of the notional or contract amounts, credit exposure
amounts, and fair value amounts associated with the Corporation's
off-balance-sheet trading and asset and liability management
activities at March 31, 1994. As illustrated below, the
Corporation's off-balance-sheet credit exposure with regard to
foreign exchange and other derivative products is a small
fraction of the respective notional or contract amounts.
================================================================================
Foreign Exchange and Other Derivative Products at March 31, 1994
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Notional Credit Fair
or Contract Exposure Value
(in billions) Amount Amount Amount/a/
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
TRADING:
Foreign exchange contracts/b/ $ 595.9/c/ $ 4.6/d/ $(0.4)
Interest rate swaps 265.3/c/ 2.4/d/e/ 0.5
Interest rate futures and forward
contracts 156.8 /c/ 0.1/d/ --
Interest rate options 55.3 /c/ 0.2/d/ --
- - --------------------------------------------------------------------------------
$1,073.3/f/ $ 7.3 $ 0.1
- - ------------------------------------------======================================
ASSET AND LIABILITY MANAGEMENT:
Interest rate swaps $ 27.7/c/ $ -- $(0.1)
Interest rate futures and forward
contracts 30.4/c/ -- --/g/
Interest rate options 8.6/c/ -- 0.2/g/
Other/h/ 1.6/c/ -- 0.1
- - --------------------------------------------------------------------------------
$ 68.3/f/ $ -- $ 0.2
- - ------------------------------------------======================================
</TABLE>
/a/ Fair value amounts consist of net unrealized gains and losses, accrued
interest receivable or payable, and premiums paid or received. Such amounts
represent the net fair value of contracts with all counterparties.
/b/ Includes amounts related to foreign exchange spot, forward, future, and
option contracts and currency swaps.
/c/ Interest rate swaps, interest rate futures and forward contracts, and
interest rate options in both the trading and asset and liability management
portfolios include $12.3 billion, $2.1 billion, and $0.5 billion,
respectively, of intercompany hedging-related contracts. Both trading
foreign exchange contracts and other asset and liability management
contracts include $1.4 billion of intercompany hedging-related foreign
exchange forward contracts and currency swaps.
/d/ Amounts represent net unrealized gains on contracts with counterparties for
whom legally enforceable master netting agreements were in place and
effective at March 31, 1994 and gross unrealized gains on contracts with
other counterparties. Credit risk amounts in Note 9 of the Notes to
Consolidated Financial Statements on pages 10 and 11 do not give effect to
netting under legally enforceable master netting agreements. Accordingly,
these credit risk amounts differ from the credit exposure amounts detailed
above.
/e/ Includes the results of cross product netting of certain interest rate
derivatives and currency swaps.
/f/ Including intercompany hedging-related contracts of $18.3 billion in both
the trading and asset and liability management portfolios, the aggregate
notional or contract amounts of foreign exchange and other derivative
contracts outstanding at December 31, 1993 were $894.1 billion for the
trading portfolio and $64.5 billion for the asset and liability management
portfolio.
/g/ The fair value amounts for interest rate futures and forward contracts
and interest rate options in the asset and liability management portfolio
include gross unrealized gains of $10.6 million and $173.9 million,
respectively, and gross unrealized losses of $11.1 million and $3.5
million, respectively.
/h/ Includes amounts related to foreign exchange forward contracts and
currency swaps.
The table on page 35 summarizes expected maturities and weighted
average interest rates associated with amounts to be received or
paid on asset and liability management interest rate swaps at March
31, 1994. These swaps are designated as accounting hedges and are
used to modify the interest rate characteristics of assets and
liabilities. Expected maturities and weighted average interest
rates associated with the Corporation's asset and liability
management interest rate swap portfolio at December 31, 1993 were
not significantly different from those at March 31, 1994.
34
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================================
Asset and Liability Management Interest Rate Swaps/a/
- - --------------------------------------------------------------------------------------------------------------------------
Greater Greater Greater Greater Greater Greater
than than than than than than
0-1 1 up to 2 2 up to 3 3 up to 4 4 up to 5 5 up to 10 10
(in billions) year years years years years years years Total
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Receive fixed swaps:/b/
Notional amount $ 5.4 $ 0.5 $ 0.3 $ 0.4 $ 0.7 $ 7.8 $ 1.5 $16.6
Weighted average receive rate 7.41% 7.64% 7.75% 7.31% 7.48% 6.57% 6.51% 6.94%
Pay fixed swaps:/b/
Notional amount $ 0.5 $ 2.6 $ 3.4 $ 1.5 $ 0.2 $ 0.6 $ 0.3 $ 9.1
Weighted average pay rate 9.42% 5.27% 4.94% 5.88% 5.97% 6.31% 6.75% 5.56%
Forward swaps:/c/
Notional amount -- -- -- $ 0.5 -- $ 0.7 $ 0.2 $ 1.4
Weighted average receive rate -- -- -- 6.14% -- 7.00% 6.66% 6.65%
Basis swaps:/d/
Notional amount $ 0.1 $ 0.1 $ 0.1 -- -- $ 0.3 -- $ 0.6
- - --------------------------------------------------------------------------------------------------------------------------
Total Notional Amount $27.7
- - ---------------------------------------------------------------------------------------------------------------------=====
</TABLE>
/a/ Includes intercompany hedging swaps.
/b/ The floating side of substantially all receive fixed and pay fixed swaps is
based on the one-, three-, or six-month London InterBank Offered Rate
(LIBOR). At March 31, 1994, the one-, three-, and six-months LIBOR rates
were 3.69 percent, 3.88 percent, and 4.19 percent, respectively.
/c/ Accrual of interest on forward swaps starts at a predetermined future date.
The majority of the forward swaps start accruing interest one to three years
after March 31, 1994.
/d/ Basis swaps are interest rate swaps in which both amounts paid and received
are based on floating rates. The Corporation's pay rates are primarily based
on the 11th District Cost of Funds or a commercial paper index and its
receive rates are primarily based on LIBOR.
Substantially all of the Corporation's hedging-related futures and
forward contracts outstanding at March 31, 1994 mature within one
year, while 90 percent of its hedging-related option contracts
mature within 3 years. All of the Corporation's hedging-related
foreign exchange forward contracts outstanding at March 31, 1994
mature within 60 days. At December 31, 1993, the maturity
distributions of the Corporation's hedging-related futures and
forward contracts, option contracts, and foreign exchange forward
contracts were substantially the same as at March 31, 1994. At both
March 31, 1994 and December 31, 1993, the Corporation's hedging-
related foreign exchange forward contracts were denominated in
various currencies, most notably Hong Kong dollars and Spanish
pesetas. The Corporation's hedging-related currency swaps were not
significant at either March 31, 1994 or December 31, 1993.
For additional information concerning derivative and foreign
exchange transactions and their associated credit risk amounts,
refer to Note 9 of the Notes to Consolidated Financial Statements
on pages 10-11.
35
<PAGE>
Funding and Capital
================================================================================
Liquidity Liquid assets consist of cash and due from banks, interest-
bearing deposits in banks, federal funds sold, securities
purchased under resale agreements, trading account assets,
and available-for-sale securities. At March 31, 1994, liquid
assets totaled $39.0 billion, up $9.8 billion from $29.2
billion at December 31, 1993. This growth in liquid assets
can be primarily attributed to a $6.1 billion increase in
available-for-sale-securities, largely as a result of the
first-quarter adoption of SFAS No. 115. In addition,
securities purchased under resale agreements and interest-
bearing deposits in banks grew $2.4 billion and $1.0
billion, respectively, funded primarily by deposits and
short-term liabilities.
- - --------------------------------------------------------------------------------
Capital At March 31, 1994, total stockholders' equity was $16.9
billion, down from $17.1 billion at December 31, 1993. This
decrease in total stockholders' equity was largely
attributable to the stock repurchase discussed below and the
recording of $252 million in net unrealized losses on
available-for-sale securities (net of related income taxes)
in connection with the adoption of SFAS No. 115. These
decreases were partially offset by first-quarter earnings
net of preferred and common dividends.
In connection with the pending acquisition of Continental,
the Parent began to implement its previously announced
plan to repurchase approximately $500 million of its common
stock. As of March 31, 1994, the Parent had completed
approximately 70 percent of its goal by repurchasing 8.2
million shares of its common stock on the open market. These
shares were repurchased for $345 million, thereby reducing
total stockholders' equity by that amount.
The Corporation's total and Tier 1 risk-based capital ratios
increased 21 basis points and 3 basis points, respectively,
between December 31, 1993 and March 31, 1994. The increase
in the Corporation's total risk-based capital ratio can be
primarily attributed to growth in Tier 2 capital, resulting
from the issuance of subordinated debt. The Corporation's
Tier 1 leverage ratio decreased 27 basis points between
year-end 1993 and March 31, 1994 primarily due to the
increase in average total assets in connection with the
adoption of FIN 39 on January 1, 1994.
36
<PAGE>
================================================================================
Risk-Based Capital and Risk-Based Capital Ratios
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
-------- ----------------------------------------------------------------
(dollar amounts in millions)/a/ March 31 Dec. 31 Sept. 30 June 30 March 31
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Risk-Based Capital
Common stockholders' equity $14,136/b/ $14,165 $13,826 $13,455 $13,083
Perpetual preferred stock 2,979 2,979 2,979 2,979 2,979
Less: Goodwill, nongrandfathered
core deposit and other identifiable
intangibles, and other deductions/c/ (5,060) (5,125) (5,291) (5,327) (5,513)
- - ------------------------------------------------------------------------------------------------------------------------------------
Tier 1 capital 12,055 12,019 11,514 11,107 10,549
Eligible portion of the allowance for
credit losses (exclusive of allocated
transfer risk reserve)/d/ 1,990 1,995 2,022 2,025 2,037
Hybrid capital instruments/e/ 562 568 582 1,059 1,478
Subordinated notes and debentures/f/ 4,699 4,422 4,477 4,591 4,097
Less: Other deductions (47) (37) (24) (23) (78)
- - ------------------------------------------------------------------------------------------------------------------------------------
Tier 2 capital 7,204 6,948 7,057 7,652 7,534
- - ------------------------------------------------------------------------------------------------------------------------------------
Total Risk-Based Capital $19,259 $18,967 $18,571 $18,759 $18,083
- - --------------------------------------------------==================================================================================
Risk-Based Capital Ratios
Tier 1 capital 7.64% 7.61% 7.19% 6.93% 6.55%
Tier 2 capital 4.57 4.39 4.41 4.77 4.67
- - ------------------------------------------------------------------------------------------------------------------------------------
Total Risk-Based Capital Ratio 12.21% 12.00% 11.60% 11.70% 11.22%
- - --------------------------------------------------==================================================================================
Tier 1 Leverage Ratio/g/ 6.37% 6.64% 6.42% 6.21% 5.91%
====================================================================================================================================
</TABLE>
/a/ Due to the first-quarter 1993 adoption of SFAS No. 109, "Accounting for
Income Taxes," CDI and other identifiable intangibles that are normally
deducted from Tier 1 capital under the current guidelines of the federal
banking regulators were $500 million, $510 million, $516 million, $535
million, and $554 million higher at March 31, 1994, December 31, 1993,
September 30, 1993, June 30, 1993, and March 31, 1993, respectively, with
corresponding increases in deferred taxes. The federal banking regulators
have not issued final capital regulations on the adoption of SFAS No. 109
and are currently considering whether such increased intangibles should be
deducted from capital. Management believes that the increased amounts of CDI
and other identifiable intangibles resulting from the adoption of SFAS No.
109 do not pose a risk to the Corporation's capital and should not be
deducted from capital in determining capital ratios. Pending final
resolution of this issue by the banking regulators, such amounts have not
been deducted from capital in determining the capital ratios shown above.
/b/ Excludes net unrealized losses on available-for-sale securities of $252
million resulting from the adoption of SFAS No. 115.
/c/ Includes nongrandfathered CDI and other identifiable intangibles acquired
after February 19, 1992 of $985 million and $67 million, respectively, at
March 31, 1994, $1,008 million and $71 million, respectively, at December
31, 1993, $1,034 million and $84 million, respectively, at September 30,
1993, $1,045 million and $84 million, respectively, at June 30, 1993, and
$1,041 million and $81 million, respectively, at March 31, 1993, excluding
tax gross-ups due to the adoption of SFAS No. 109. Also includes $30
million, $35 million, $51 million, $33 million, and $27 million at March 31,
1994, December 31, 1993, September 30, 1993, June 30, 1993, and March 31,
1993, respectively, of the excess of the net book value over 90 percent of
the fair value of purchased mortgage servicing rights and credit card
intangibles.
/d/ Limited to 1.25% of risk-weighted assets.
/e/ Represents subordinated capital notes adjusted for certain limitations.
/f/ Limited to 50% of core capital, and reduced by 20% per year during an
instrument's last five years before maturity.
/g/ Based on Tier 1 capital before other deductions of $47 million at March 31,
1994, $37 million at December 31, 1993, $25 million at September 30, 1993,
$24 million at June 30, 1993, and $79 million at March 31, 1993.
37
<PAGE>
================================================================================
Interest Because of the interest rate sensitivity of financial
Rate Risk products, fluctuations in interest rates expose the
Management Corporation to potential gains and losses. In an effort to
limit its loss exposure, the Corporation strives to manage
the repricing characteristics of its assets and liabilities
accounted for on an accrual basis. The Corporation evaluates
its interest rate risk exposure by analyzing the repricing
characteristics of its on- and off-balance-sheet positions.
A summary of these characteristics is shown on page 39 in
the Accrual Book Risk Positions table at March 31, 1994.
The table shows that, at March 31, 1994, in the one-year-or-
less categories, U.S. dollar-denominated assets exceeded
liabilities by $2 billion. While the Corporation strives to
limit current earnings sensitivity to interest rate
movements, managers are allowed, within approved limits, to
take tactical positions for purposes of generating earnings
that can result from the relative repricing positions of
primarily short-term assets and liabilities.
In the over-one-year categories at March 31, 1994, U.S.
dollar-denominated liabilities and equity exceeded assets by
$2 billion. The Corporation manages this term risk to
preserve ongoing earnings competitiveness and promote market
price stability of its common equity.
The Corporation also attempts to maintain an approximately
neutral strategic position to possible interest rate
movements while recognizing common equity as a long term
source of funds. Both on-balance-sheet securities and off-
balance-sheet instruments are used to manage exposure to
interest rate risk. Selected off-balance-sheet instruments,
including futures, forward rate agreements, and swaps, are
designated as hedges by the Corporation to manage
repricing mismatches. At March 31, 1994, off-balance-sheet
instruments acquired for hedging purposes containing a
short embedded option component were insignificant. At
March 31, 1994, the Corporation held interest rate swap
contracts with a gross notional value of $28 billion in
support of these accrual book risk management activities.
The amount of receive fixed indexed amortizing swaps held
at March 31, 1994 was insignificant.
At March 31, 1994, an imbalance in customer business,
primarily more deposit balances than loan assets, caused
liabilities and equity to exceed customer-related assets by
$18 billion. This structural imbalance and its related
repricing mismatch effects were mitigated by the
Corporation's risk management activities. As shown in the
table on page 39, under-one-year securities and off-balance-
sheet risk management positions modified a $(2) billion
structural gap mismatch exposure to $2 billion. Over-one-
year risk management positions reduced the structural gap
mismatch of $(16) billion by $14 billion.
While the Accrual Book Risk Positions table on page 39
provides an indication of the potential impact on the
Corporation of a change in interest rates, it does not fully
depict the Corporation's exposure to risks resulting from
interest rate fluctuations. Certain assets and liabilities
have option-like characteristics that can affect the
Corporation's income through the exercise of these options
as interest rates change. The Corporation's exposure from
these option-like characteristics is separately evaluated
and contained with net purchased interest rate options in
order to manage the magnitude of potential gains or losses
from changes in interest rates.
38
<PAGE>
================================================================================
Accrual Book Risk Positions at March 31, 1994/a/
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
greater greater Subtotal greater greater Subtotal
than than less than than greater
0-3 3-6 6-12 than 1-5 5 than
(in billions) months months months 1 year years years 1 year Total
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STRUCTURAL GAP POSITION/b/ $ 10 $ -- $(12) $(2) $(3) $(13) $(16) $(18)
RISK MANAGEMENT POSITIONS:/c/
Securities/d/ 2 2 3 7 5 6 11 18
Off-balance-sheet hedging instruments (16) 3 10 (3) (6) 9 3 --
- - ------------------------------------------------------------------------------------------------------------------------------------
Total risk management positions (14) 5 13 4 (1) 15 14 18
- - ------------------------------------------------------------------------------------------------------------------------------------
TOTAL GAP POSITION $ (4) $ 5 $ 1 $ 2 $(4) $ 2 $ (2) $ --
- - -------------------------------------------=========================================================================================
</TABLE>
/a/ Net U.S. dollar-denominated interest-rate-sensitive financial instruments.
/b/ Gap positions primarily attributable to loan assets and deposit liabilities.
/c/ Excludes trading-related products and restructuring-country-related par
bonds.
/d/ Includes available-for-sale and held-to-maturity securities.
Gap positions with maturities less than one year are
actively managed, and as such, vary continuously and
appreciably. As a consequence, positions in place at
quarter-end are not necessarily indicative of positions held
throughout a quarter. Gap mismatches with maturities in
excess of one year (Term Book gaps) are more stable.
Management of these positions is focused on reducing
structural gap mismatches. At no time are off-balance sheet
transactions initiated that extend structural mismatch
positions. Occasionally, new customer business reduces
longer maturity structural mismatches, leaving an excess of
previously executed hedge contracts in a particular maturity
range. These management positions may be reversed depending
on the overall risk characteristics of the Term Book.
Shorter maturity gap mismatch positions reflect management's
view at a specific point in time on the speed of future
interest rate movements, not necessarily the direction of
future rate movements. For example, a negative gap in the 0-
3 months maturity indicates a view that future interest
rates will run beneath implied forward rates. As the current
yield curve is steeply upward sloping, a negative 0-3 month
gap, if maintained, would be profitable if interest rates
rose at a speed less than that implied by the yield curve.
39
<PAGE>
Other Information
================================================================================
Item 6. (a) Exhibits:
Exhibits and
Reports on Not applicable.
Form 8-K
(b) Reports on Form 8-K:
During the first quarter of 1994, the Parent filed reports
on Form 8-K dated January 19, 1994, January 27, 1994, March
11, 1994, March 21, 1994, and March 29, 1994. The January
19, 1994 report filed, pursuant to Items 5 and 7 of the
report, a copy of the Parent's press release titled
"BankAmerica Fourth Quarter Earnings." The January 27, 1994
report disclosed, pursuant to Items 5 and 7 of the report,
Continental's agreement to merge with and into the Parent
and a related stock option agreement to purchase Continental
common stock dated as of January 27, 1994. The March 11,
1994 report disclosed, pursuant to Items 5 and 7 of the
report, certain information regarding the pending
Continental acquisition. The March 21, 1994 report filed,
pursuant to Items 5 and 7 of the report, certain historical
and unaudited historical and pro forma combined financial
information for the Corporation and Continental and
subsidiaries. The March 29, 1994 report provided
information, pursuant to Item 5 of the report, concerning
the pending Continental acquisition. After the first quarter
of 1994, the Parent filed reports on Form 8-K dated April
20, 1994 and May 12, 1994. The April 20, 1994 report filed,
pursuant to Items 5 and 7 of the report, a copy of the
Parent's press release titled "BankAmerica First Quarter
Earnings." The May 12, 1994 report filed, pursuant to Items
5 and 7 of the report, certain historical and unaudited
historical and pro forma combined financial information for
the Corporation and Continental and subsidiaries.
40
<PAGE>
Signatures
================================================================================
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
BANKAMERICA CORPORATION
Registrant
By Principal Financial Officer and
Duly Authorized Signatory:
/s/ Lewis W. Coleman
LEWIS W. COLEMAN
Vice Chairman of the Board and
Chief Financial Officer
May 12, 1994
By Principal Accounting Officer and
Duly Authorized Signatory:
/s/ Paul R. Ogorzelec
PAUL R. OGORZELEC
Executive Vice President
May 12, 1994
41
<PAGE>
[BankAmerica Corporation Logo Appears Here]
Other information about BankAmerica
Corporation may be found in its Quarterly
Report to Shareholders and its Annual
Report to Shareholders. These reports, as
well as additional copies of this Analytical
Review and Form 10-Q, may be
obtained from:
Corporate Public Relations #3124
Bank of America
P.O. Box 37000
San Francisco, CA 94137
(Recycled paper logo appears here.)
